micro chapters 5,6,7,9
If the price of good increases by 10% and the quantity demanded falls by 5% what is the elasticity of demand? Answer in absolute terms.
0.5
Suppose that Bobo purchases 1 pizza per month when the price is $19 and 3 pizzas per month when the price is $15. What is the price elasticity of Bobo�s demand curve?
4.25
The demand for a product is unit elastic. At a price of $20, 10 units of a product are sold. If the price is increased to $40, then one would expect sales to equal
5 units
When a business wants to increase it's revenue should it raise it's price?
It depends on the elasticity of demand.
Revenue is equal to:
Price times quantity (P*Q)
Elasticity of demand is percentage change in quantity demanded divided by percentage change in price
True
______________ include all of the costs of production that increase with the quantity produced.
Variable costs
A manufacturer would likely make an entry in a market following the long-run process of beginning and expanding production in response to ________________ .
a sustained pattern of profits
If the price that a firm charges is lower than its ____________ of production, the firm will suffer losses.
average cost
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.
constant returns to scale
If a firm is experiencing _____________________, then as the quantity of output rises, the average cost of production rises.
decreasing returns to scale
Which of the following is most unlikely to present a barrier to entry into a market?
deregulation
According to the definition of profit, if a profit-maximizing firm will always attempt to produce its desired level of output at the lowest possible cost, then it will
do so regardless of what type of competition exists in a market.
The slope of the demand curve for a monopoly firm is
downward sloping
The term __________________ describes a situation where the quantity of output rises, but the average cost of production falls.
economies of scale
A price cut will increase the total revenue a firm receives if the demand for its product is:
elastic
Demand is said to be ___________ when the quantity demanded is very responsive to changes in price.
elastic
If the North American newsprint paper market has barriers to entry, then
entry will be blocked even if firms are earning high profits.
The term "constant returns to scale" describes a situation where
expanding all inputs does not change the average cost of production.
Demand is said to be _____________ when the quantity demanded is not very responsive to changes in price.
inelastic
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
When a natural monopoly exists in a given industry, the per-unit costs of production will be
lowest when a single firm generates the entire output of the industry.
Under perfect competition, any profit-maximizing producer faces a market price equal to its
marginal costs
The largest cattle rancher in a given region will be unable to have a __________ when sufficient numbers of smaller cattle ranchers provide sources of competition.
monopoly
Deregulation occurs when a government eliminates or scales back rules relating to all but one of the following. Which one is it?
natural monopoly
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.
Firms operating in a market situation that creates ___________________, sell their product in a market with other firms who produce identical or extremely similar products.
perfect competition
The use of sharp, temporary price cuts as a form of _________________ would enable traditional US automakers to discourage new competition from smaller electric car manufacturers.
predatory pricing
If a perfectly competitive firm is a price taker, then
pressure from 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?
price of competing products
Why would labor be treated as a variable cost?
producing larger quantities of a good or service generally requires more workers
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.
Which of the following should typically be ignored because spending has already been made and cannot be changed?
sunk costs
For a perfectly competitive firm, the marginal cost curve is identical to the firm�s ________________ .
supply curve
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.
In order to determine the average variable cost, the firm's variable costs are divided by _______________________
the quantity of output
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 and coal rose sharply. This can be interpreted using supply and demand by saying it was a shift in the demand for electricity and coal, but what can be said about the supply curve?
there is a movement along the marginal costs curves
If elasticity of demand is greater than one economist say that the demand is elastic
true
If a paper mill shuts down its operations for three months so that it produces nothing, its __________________ will be reduced to zero?
variable costs
In a free market economy, firms operating in a perfectly competitive industry are said to have only one major choice to make. Which of the following correctly sets out that choice?
what quantity to produce