micro ch. 5, 7, 8, and 9

if the price of a good increases by %10 and the quantity demanded falls by 5% what is the elasticity of demand? answer in absolute terms. a. 0.5 b. 2 c. 5 d. 10

a. 0.5

a firms that holds a monopoly position in the market place is a. a price maker b. a price taker c. monopolistically competitive d. subject to infinite market forces

a. a price maker

If the price that a firm charges is lower than its ____________ of production, the firm will suffer losses. a. average costs b. marginal cost c. fixed cost d. variable cost

a. average cost

Demand is said to be ___________ when the quantity demanded is very responsive to changes in price. a. elastic b. unit elastic c. inelastic d. independent

a. elastic

Following the assumption that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency? a. outputs will be too small and its price too high. b. outputs will be too large and its price too high. c. outputs will be too small and its price too low. d. outputs will be too large and its price too low.

a. outputs will be too small and its price too high.

is elasticity of demand calculated by absolute changes or percentage changes? a. percentage changes b. absolute changes c. either one works

a. percentage changes

If a perfectly competitive firm is a price taker, then_________________. a. pressure form competing firms will force acceptance of the prevailing market price. b. it must be a relatively small player compared to its competitors in the overall marker. c. it can increase or decrease its output without affecting overall quantity supplied in the market. d. quality differences will be very perceptible and will play a major role in purchasers' decisions.

a. pressure form competing firms will force acceptance of the prevailing market price.

if the quality differences of similar products are mostly imperceptible to the average consumer's eyes, which of the following will most likely play a major role in influencing the decisions of purchasers? a. price of competing products b. size of competing products c. purchaser's opportunity cost d. geographic origin of products

a. price of competing products

revenue is equal to: a. price times quantity (P*Q) b. price divided by quantity (P/Q) c. quantity divided by quantity (Q/Q) d. price minus quantity (P-Q)

a. price times quantity (P*Q)

_____________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price. a. total revenue b. total profits c. average profit margin d. total cost

a. total revenue

economist usually refer to elasticity of demand in absolute terms. a. true b. false

a. true

elasticity of demand is percentage change in quantity demanded divided by percentage change in price. a. true b. false

a. true

If a paper mill shuts down its operations for three months so that it produces nothing, its __________________ will be reduced to zero? a. variable costs b. fixed costs c. opportunity costs d. total cost

a. variable costs

in a free market economy, firms operating in a perfectly competitive industry are aid to have only one major choice to make. which of the following correctly sets out that choice? a. what quantity to produce b. what price to charge c. what quantity of labor is needed d. what quality to produce

a. what quantity to produce

the marginal revenue curve for a monopolist __________________ the market demand curve. a. always rises above b. always lies beneath c. always runs parallel d. always is the same

b. always lies beneath

Temperatures have persisted below freezing levels in Florida throughout the months of December and January. As a result, demand for electricity sharply increased and the price of electricity rose sharply. The price of coal also rose. In these circumstances, any resulting shifts in the supply curves for coal miners and electricity producers: a. will determine what price to produce at given the market demand. b. at all levels of output shifts marginal costs to the right. c. can also be interpreted as shifts of their respective marginal cost curves. d. shifts marginal costs to the right enabling both to produce more at ant given market price.

b. at all levels of output shifts marginal costs to the right.

economic profit can be derived form calculating total revenues minus all of the firm's costs, a. excluding its opportunity costs. b. including its opportunity costs. c. including its marginal revenue. d. excluding its marginal revenue.

b. including its opportunity costs.

in microeconomics, the term ______________ is synonymous with economies of scale. a. diminishing marginal returns b. increasing returns to scale c. decreasing returns to scale d. constant returns to scale

b. increasing returns to scale

which of the following is most likely to be a monopoly? a. local fast-food restaurant b. local electricity distributor c. local bathroom fixtures shop d. local television broadcaster

b. local electricity distributor

Deregulation occurs when a government eliminates or scales back rules relating to all but one of the following. Which one is it? a. prices that can be charged b. natural monopoly c. conditions of entry in a certain industry d. qualities that can be produced

b. natural monopoly

which of the following should typically be ignored because spending has already been made and cannot be changed? a. variable costs b. sunk costs c. marginal costs d. average marginal costs

b. sunk costs

If it was possible for one company to gain ownership control all of the uranium processing plants in the US, then: a. they will strive to reach efficiencies on they know how to make. b. that firm could set up barriers to entry to discourage competition. c. government will deregulate to ensure the company's monopoly. d. the factors of market demand and supply will set the price.

b. that firm could set up barriers to entry to discourage competition.

in order to determine the average variable cost, the firm's variable costs are divided by ___________. a. its fixed costs b. the quantity of output c. its average costs d. diminishing marginal costs

b. the quantity of output

__________________ include all of the costs of production that increase with the quantity produced. a. fixed costs b. variable costs c. average costs d. average variable costs

b. variable costs

suppose that Mimi plays gold 5 times per month when the price is $40 and 4 times per month when the price is $50. What is the price elasticity of Mimi's demand curve? a. 0.1 b. 0.8 c. 1 d. 10

c. 1

the demand for a product is unit elastic. at a price of $20, 10 units of a product are sold. if the price increases to $40, then one wold expect sales to equal: a. 20 units b. 10 units c. 5 units d. 0 units

c. 5 units

A manufacturer would likely make an entry in a market following the long-run process of beginning and expanding production in response to ________________ . a. a strategy to grow profits b. an incentive for profit c. a sustained pattern of profits d. an incentive to add to profits

c. a sustained pattern of profits

A situation known as ____ occurs when all production inputs are allowed to expand, but that expansion does not result in much of a change in the average cost of production. a. returns to scale b. economies of scale c. constant returns to scale d. diminishing marginal returns

c. constant returns to scale

it is said that in a perfectly competitive market, raising the price of a firm's product form the prevailing market price of $179.00 to $199.00 ____________. a. will likely cause the firm to reach its shutdown point immediately b. will cause the firm to recover some of its opportunity costs c. could likely result in a notable loss of sales to competitors d. is a sure sign the firm is raising the given price in the market

c. could likely result in a notable loss of sales to competitors

Idaho farmers can sell as large a quantity of their potato crop as they wish, a. if they set their own price in the short run, but in the long run, the market sets the price. b. provided each is willing to accept the prevailing market price. c. if they set their own price in the long run, but in the short run, the market sets the price. d. provided quality is perceptible and determines the market price.

c. if they set their own price in the long run, but in the short run, the market sets the price.

_______________ arises where many firms are competing in a market to sell similar but differentiated products. a. oligopolistic competition b. perfect competition c. monopolistic competition d. monogopolised competition

c. monopolistic competition

the largest cattle rancher in a given region will be unable to have a _________ when sufficient number of smaller cattle ranchers provide sources of competition. a. oligopoly b. patent c. monopoly d. monopolistic competition

c. monopoly

the use of star, temporal price cute as a form of ___________ would enable traditional U.S. automakers to discourage new competition from smaller electric car manufacturers. a. natural monopoly b. monopolistic competition c. predatory pricing d. oligopolistic competition

c. predatory pricing

the term ____________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product. a. price setter b. business entity c. price taker d. trend setter

c. price taker

the price elasticity of demand measures the: a. responsiveness of quantity demanded to a change in quantity supplied. b. responsiveness of price to a change in quantity demanded. c. responsiveness of quantity demanded to a change in price.

c. responsiveness of quantity demanded to a change in price.

in order to determine _______________, the firm's total costs must be divided by the quantity of its output. a. diminishing marginal returns b. fixed costs c. variable cost d. average costs

d. average costs

the slope of the demand curve for a monopoly firm is a. horizontal, parallel to the x-axis b. vertical, parallel to the y-axis c. upward sloping d. downward sloping

d. downward sloping

If monopolists are able to produce fewer goods and sell them at a higher price than they could under perfect competition, the result will be a. elimination of barriers to entry b. irregularly high unsustainable profits. c. government deregulation. d. high sustained profits

d. high sustained profits

Why would labor be treated as a variable cost? a. they are costs incurred in the act of producing that will decrease with quantity produced. b. they are made before production starts and vary according to the specific line of business. c. labor costs are an input cost that firms are unable to change in the short run. d. producing larger quantities of a good or service generally requires more workers.

d. producing larger quantities of a good or service generally requires more workers.

price elasticity of demand is defined as: a. the slope of the demand curve. b. the slope of the demand curve divided by the price. c. the percentage change in price divided by the percentage change in quantity demanded. d. the percentage change in quantity demanded divided by the percentage change in price.

d. the percentage change in quantity demanded divided by the percentage change in price.