Final Exam - Econ 102

Oligopoly firms acting individually may seek to gain profits ___________.

By expanding levels of output and cutting prices

Those firms in the oil refining industry that can reduce pollution _____ will do so __________.

Cheaply and easily; to minimize their pollution taxes

What term is used to describe the branch of economics that focuses on the economy as a whole, including issues like growth, unemployment, inflation and the balance of trade?

Macroeconomics

What term is used to describe a game in which if both players pursue the own self-interest, they both end up worse off than if they cooperate?

Prisoner's dilemma

In economics, the demand for a good refers to the amount of the good that people:

Will buy at various prices

_______ include both the private costs incurred by first and also costs incurred by third parties outside the production process.

Social Costs

What is meant by normative statements?

Statements that describe how the world should be.

If a solar panel manufacturer wants to look at its total costs of production in the short run, which of the following would provide a useful starting point?

divide total costs into two categories: fixed costs that can't be changed in the short run and variable costs that can be

The economies-of-scale curve is a long-run average cost curve, because

it allows all factors of production to change

Idaho farmers can sell as large a quantity of their potato crop as they wish,

provided each is willing to accept the prevailing market price.

If it was possible for one company to gain ownership control all of the uranium processing plants in the US, then

that firm could set up barriers to entry to discourage competition

If the _____, if profits are not possible, there perfectly competitive firm will seek out the quantity of output where ____.

short run; losses are smallest

Economists are able to determine total utility by:

summing up the marginal utilities of each unit consumed.

If a monopolistic competitor raises its price, it ___ customers than a perfectly competitive firm, but ____ customers compared to the number that a monopoly that raised its prices would.

will lose fewer; it will lose more

A farmer has 20 acres of land. He decides he will raise corn on part of it and hogs on the other part. He debates how much to allocate to each product. His choice of two products is which of the following?

A trade off

General Motors, Ford, and Honda all manufacture automobiles and exemplify which of the following?

An oligopoly

Specialization:

Can lead to an increase in overall production

A situation known as ____ occurs when all production inputs are allowed to expand but that expansions does not result in a change in the average cost of production.

Constant returns to scale

What name is given to dividing the work required to produce a good or service into tasks performed by different workers?

Division of Labor

Demand is said _____ when the quantity demand is not very responsive to changes in price.

Inelastic

Figure 2.1 The most inefficient point depicted is:

Point G (In the middle of the graph, not on the line anywhere).

The downward slope of the demand curve again illustrates the pattern that as ___ rises, ____ decreases.

price, quantity demanded

A monopolist is able to maximize its profits by

producing output where MR = MC and charging a price along the demand curve.

If the state you live in sets a minimum wage higher than the federal minimum a probable outcome would be what?

There will be surplus of labor

Interpret the following statement: "An increase in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market."

This statement is correct.

_____ include all of the costs of production that increase with the quantity produced.

Variable costs

_____ occur when the marginal gain in output diminishes as each additional unit of input is added.

diminishing marginal productivity

If a firm holds a pure monopoly in the market and is able to sell 4 units of output at $2.00 per unit and 5 units of output at $1.75 per unit, it will produce and sell the fifth unit if its marginal cost is

$0.75 or less

Marginal utility can:

be positive, negative or zero

As depicted in _____, it is necessary to give up some of one good to gain more of the other good.

The production possibilities frontier

Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect:

Andy's demand for beer to increase.

I'MaPizzaCo. produces and sells speciality pizzas. Last year, it produced 8,000 mushroom, sausage and spinach pizzas and sold each one for $8. To produce these 8,00 specialty pizzas, the company incurred variable costs of $24,000 and a total cost of $40,0000/ I'MaPizzaCo's average fixed cost to produce 8,000 specialty pizzas was:

$2.00

"If I didn't have class tonight, I would save the $4 campus parking dee and spend four house at work where I earn $10 per hour" The opportunity cost of attending class this evening is:

$44

What is meant by income effect?

A change in price affects the buying power of income, with a higher price meaning that the buying power of income has been reduced, so that there is usually an incentive to buy less, and a lower price meaning that the buying power of income has been increased so that there is usually an incentive to buy more.

Which of the following best describes the consumption of a non-rival good?

A consumer may obtain the good without preventing simultaneous consumption by another consumer.

If demand is elastic, then

A price rise decreases revenue.

A business operating in a perfectly competitive marker qualifies as which of the following

A price taker

After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is:

A shift of the demand curve for beef to the left.

Economic theory offers ___ about the full range of possible events and responses, which can prevent ___ about how households will respond to changes in prices or incomes.

A systematic way of thinking, misguided conclusions

An ______ is calculated by subtracting that firm's costs from its total revenues, _____.

Accounting profit; excluding opportunity cost

Which of the following statements most likely lies within the realm of microeconomics?

An increase in labor costs will increase the additional cost of producing another bus.

____ occurs when circumstances have allowed serval large firms to have all or most of the sales in an industry

An oligopoly

If the price that a firm charges is higher than its ________________ cost of production for that quantity produced, then the firm will earn profits.

Average total

A 10 percent decrease in the price of potato chips leads to a 30 percent increase in the quantity of soda demanded. It appears that:

Cross-price elasticity of demand for soda is -3.

See chart A above. Suppose line De represents the current demand for Ford F-150 pickup trucks. If petroleum fell from $80 to %50 per barrel, which line would represent the demand for Ford F-150 trucks?

D2

The ____ is the quantity where quantity demanded and quantity supplied are equal at a certain price.

Equillibrium Quantity

If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ___________________

Excess demand

George, Jerry, Elaine and Cosmo are seated in a restaurant figuring out what to order. Carrot Cake $2 and pickles $1. For a rational consumer choice,

George should heed to Elaine's advice and get that amount for which the marginal utility divided by the price is equal for the carrot cake and the pickle.

If the demand curve is perfectly elastic, then an increase in supply will:

Increase the quantity exchanged but result in no change in the price.

Economists refer to the relationship that a higher price leads to a lower quantity demanded as the _______.

Law of demand

A natural monopoly occurs when the quantity demanded is ____ the minimum quantity it takes to be at the bottom of the long-run average cost curve.

Less than or equal to

_______ describes a situation where a third party, outside the transaction suffers from a market transaction by others.

Negative externality

A perfection competition market structure features how many barriers to entry?

No Barriers

A public good is a good that is _____ and thus is difficult for market pricers to sell to individual consumers.

Nonexludable and nonrivalrous

Following the assumption that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency?

Output will be too small and its price too high

A _______ would lead a large greenhouse gas emitter to reduce emissions by less.

Pollution tax

The ___ arises when a price changes because consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price.

Substitution effect

If the state of Georgia had an exceptionally large crop of peanuts, what would happen to the demand for jelly?

The demand for jelly would increase.

A beekeeper decides to locate her business on a plot of land that is between an apple orchard and an elementary school. A negative externality that can result is

The possibilities of the bees stinging the students at the school.

Macroeconomic topics do not usually include:

The profit maximizing decisions of an individual manufacturer.

_______ include all spending on labor, machinery, tools, and supplies purchased for other firms.

Total costs

Exports are goods and services that are produced domestically and solid in another country. T/F

True

Model is a simplified representation of an object or situation that includes enough of the key features to be useful. T/F

True

Model is simplifies representation of an object or situation that includes enough of the key features to be useful. T/F

True

The term market describes an institution that brings together buyers and sellers of goods and services. T/F

True

Demand is said to be ____ when the quantity demanded changes at the same proportion as the price.

Unit Elastic

In microeconomics terms, the ability of a good or a service to satisfy wants is called:

Utility

What is meant by nonexcludable?

When it is costly or impossible to exclude someone from using the good, and thus hard to charge for it

If a comparison between average cost and price reveals whether a firm is earning profits, then a comparison between average variable cost and price reveals

Whether the firm should operate at a loss or shut down in the short run.

A positive externality arises in a situation where a third party, outside the transaction,

benefits from a market transaction by others

in a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of:

buyers and sellers

The form of legal protection intended to prevent reproduction of original works is referred to as ______________ law.

copyright

If a perfectly competitive firms raises its price, the quantity demanded of its product ______

falls to zero

A firm's ____ consist of expenditures that must be made before production starts that typically, over the short run, ____ regardless of the level of production.

fixed costs, do not change

An individual who wants others to pay for public goods, but plans to use those goods for their own purposes is often referred to as a __________

free rider

I'mAComputerCo. would likely be more willing to undertake an innovative research project to reduce the amount of electricity required to run its computers if there were some form of guarantee that if it succeeded,

it could sell the new computers as a monopoly for at least a few years

Kate's 24-Hour Breakfast Diner menu offers one item, a $5.00 breakfast special. Kate's costs for servers, cooks, electricity, food, etc. average out to $3.95 per meal. Her costs for rent, insurance cleaning supplies and business license average out to $1.25 per meal. Since the market is highly competitive, Kate should

keep the business open in the short-run, but plan to exit the industry in the long-run.

If a monopolist increases quantity by one unit, but sells the increased output at a slightly lower price,

marginal revenue is affected by adding one additional unit sold at the new price

As a general rule, utility-maximizing choices between consumption goods occur where the:

marginal utility to price ratio of two goods is equal

The basic difference between macroeconomics and microeconomics is that:

microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

A few gas stations usually serve the local market, and are therefore usually

oligopolies

The marginal cost curve is generally _____ because diminishing marginal productivity implies that addition units are _______.

upward sloping; more costly to produce