Econ mid term

Overvaluing the present relative to the future is illustrated in which statement?

A parent spends money on elaborate Christmas gifts rather than her child's savings for college.

An industry made up of three firms with market shares of 50%, 40%, and 10%, respectively, has a Herfindahl-Hirschman Index of:

4,200.

Perfectly competitive markets are efficient in the long run because:

P = MR = MC = SRATCmin = LRATCmin.

Assume that a monopolistically competitive firm faces the following situation: P = $16, output = 9,000 units, MC = $11, ATC = $10, AVC = $7, and MR = $14. Which statement is correct regarding profit maximization?

The firm would earn more profits by increasing output

In Virginia, people buy more strawberries in May than in December. Which explanation for this is consistent with utility theory?

The lower price in May, due to seasonal production, leads to higher MU/P in May than in December.

Why is it more difficult for an oligopoly to apply the profit-maximization rule than firms in other market structures?

The oligopoly's demand curve depends on the decisions of rival firms in the market.

Which of these could occur in the short run?

Walmart hires five new workers.

Which game does NOT describe a Prisoner's Dilemma outcome?

a game of chicken in which one player backs down while the other player does not

Which firm is MOST likely to operate in a perfectly competitive market?

a maple syrup company

When regulating a natural monopoly, average cost pricing is more effectively used than marginal cost pricing because average cost pricing:

allows the firm to earn a normal rate of return on investment, while marginal cost pricing will lead to economic losses.

A monopolistic competitor is like a perfectly competitive firm in the long run because:

both firms will earn a normal profit

The _____ graphically illustrates the possible combinations of two goods a consumer can purchase with a given income, given the prices of both products.

budget line

(Figure: Determining Marginal Returns) Based on both the table and the figure, adding a fifth worker leads to:

diminishing marginal returns.

Coupons in the Sunday newspaper circular segment the market by:

elasticity of demand, because the more price-sensitive buyers will use coupons.

Contestable markets are markets in which:

entry costs are so low that the threat of entry keeps prices low.

According to the utility-maximizing rule, a consumer maximizes utility when marginal utility per dollar spent is:

equal for all goods

Money that a firm spends on health care for employees is a(n

explicit cost.

Which type of price discrimination results in the monopolist obtaining the entire consumer surplus?

first-degree price discrimination

If a monopoly firm sells more than one unit, marginal revenue will then be:

less than the price.

The change in total costs arising from the production of additional output is:

marginal cost

(Table) If the toy-making firm in the table faces a market price of $25 in the short run, it will:

minimize its losses by producing 76 toys.

When hiring additional workers reduces total output, the firm faces:

negative marginal returns.

Explicit costs are called _____ costs and implicit costs are _____ costs.

out-of-pocket; opportunity

A perfectly competitive firm is a:

price taker; it must accept the market equilibrium price

Assume that at a given level of output, a monopoly firm has marginal revenue of $9, its average total cost is $9, and marginal cost is $7. If this firm were to continually increase its output, then:

profits will increase.

Which cost is a fixed cost for the first year of production?

property taxes on a storage facility

When Ford Motor Company offers a car rental agency lower prices if it buys a fleet of Ford's new vehicles, it is practicing:

second-degree price discrimination.

If the United States experiences an inflationary episode in which prices of goods and services go up faster than incomes, budget lines for U.S. consumers will:

shift inward.

Allocative efficiency means that:

the market is allocating the production of various goods according to consumer wants.

When perfectly competitive firms are earning short-run economic profits, all of these happen, EXCEPT:

the number of firms in the industry will fall.

For both the monopolist and the perfectly competitive firm:

the profit-maximizing output occurs where MR = MC.

If you feel full but eat the rest of the food on your plate so as not to waste it, you are subject to:

the sunk cost fallacy.

Repeated games tend to lead to _____ strategies.

trigger

Which of these is a type of strategy used in a repeated game?

trigger strategies

Tena has $50 per week to spend on lunches. Egg rolls cost $2 each and a plate of Chow Mein costs $7. Tena wants to buy five plates of Chow Mein and ten egg rolls per week. This combination of Chow Mein and egg rolls each week is

unobtainable.

Which industry/market BEST illustrates a perfectly competitive market?

wheat market

If consumer expectations of a branded product are met:

consumers are willing to pay more for the product.