Econ

21. If a new tax on capital increases a firm's fixed cost of production, which of the following will Occur in the short run

Average total cost will increase.

The difference between what consumers are willing to pay for units of a good and the price consumers actually pay for units of the good is called

consumer surplus

Short-run marginal costs eventually increase because of the effects of

diminishing marginal product

The quantity of peanuts supplied increased from 40 tons per week to 60 tons per week when the price of peanuts increased from $4 per ton to $5 per ton. The price elasticity of supply for peanuts over this price range iS

elastic

23. At 100 units of output, a firm's total cost is §10.000. If the firm's total fixed cost is $4,000, its average variable cost is equal to

$60

A city transit authority increases the price of sub way and bus tickets from $1.25 to $1.50. If the demand for these tickets 1S Drice inelastic, the number or people riding buses and subways and the city S revenues will most likely change IN which of the following ways!

# of people decrease, city revenues increase

12. Which of the following will tend to make the demand for a product more elastic?

(A) New firms which produce similar products enter the industry.

Monopolistically competitive firms are considered inefficient in allocating society's resources for which of the following reasons?

(B) In equilibrium, the marginal benefit exceeds the marginal cost of production

For the firm shown in the graph above, the shor. run, profit- maximizing strategy would be to set Output a

(B) Q, price at Pg, and earn an economic profit

28. The demand curve for labor for a monopolist that faces a perfectly competitive factor market is called the

(D) marginal revenue product curve

22. Given the information above, which of the following is true for a firm buying its labor and capital inputs in a perfectly competitive market?

(E) The firm can reduce the cost of its current level of output by laying off workers and employing more capital.

33. The diagram above depicts demand and supply curves in a city's rental housing market. If a price ceiling of $1,000 is imposed on the market, which of the following will occur?

(E) The quantity of rental housing demanded will increase.

31. As a factor of production, capital refers to the

(E) tools and machinery used to produce goods and services

The table above describes the production function of an auto parts manufacturer. Assume that the firm can hire as many workers as it wants at the market wage rate of $600 per week per worker and sell as many auto parts as it wants at the price of $10 per part. To maximize profits, the firm should hire

5 workers

Which of the following will cause the supply curve for shoes to shift to the right

An increase in the number of firms producing shoes

For consumers, assume that fish sticks and taco, are substitutes. Which of the following graphs illustrates the effect on the taco market if the price of fish sticks increases?

Demand will shift right

24. Which of the following statements correctly identifies a difference between perfect competition and monopolistic competition?

In perfect competition the firms all sell products that are exactly the same, but in monopolistic competition each firm sells a slightly differentiated product.

Which of the following must be true if a firm is experiencing economies of scale?

Long-run average total cost decreases as the firm's output increases.

25. The most profitable level of output for any firm operating in the short run is the level of output at which

MR = MC

39. Which of the following market structures results in allocative efficiency?

Perfect competition

Compared to a perfectly competitive indusuy with the same demand and cost curves, à monopoly's price and output will be which of the following

Price - high, output - low

Which of the following is true in a capitalist economv

Prices serve as incentives for factors of production to move to the market where they are most Valued

Which of the following tax contributes most to decreasing inequality in the distribution of income

Progressive income taxes

According to the production possibilities curve above, which of the following is true?

The opportunity cost of producing another unit of either good remains constant as the production of the other good increases.

Which of the following is true if consuming one unit of a good vields 100 utils and consuming the second unit of the good increases satisfaction by 20 nils?

The total utility of consuming twO unitS is iZu.

Which of the following best describes the law of demand?

When the price of a good decreases, its quantity demanded increases.

Improvements in technology for producing all goods must resutin

an outward shift in the production posSibilities curve

The characteristic of oligopolistic firms that makes them different from all other types of firms is that oligopolistic firms

consider each other's decisions

In a perfectly competitive labor market, an increase in an effective minimum wage will result in

fewer workers being hired

For an unregulated monopolist, the profit- maximizing quantity will always be

in the elastic region of the demand curve

If a per-unit tax is imposed on a monopolist, how will the monopolist's marginal cost curve, output, and the price paid by consumers be affected?

mc = shifts up, output = decrease, price = increase

A free-rider problem arises when a good is

nonexcludable

If the demand for a good is perfectly price inelastic in the short run and the supply curve is upward sloping, imposing a sales tax on the good will

not change the after-tax revenues received by suppliers

Assume that ice cream is a normal good. If the price of ice cream decreases, the substitution effect and the income effect will lead to which of the following changes In 1Ce Cream consumption?

substitution & income effect increases

If a government eliminated an effective price floor in a market, all of the following would occur EXCEPT:

supply of the good would increase.