micro econ
d. long-run average total cost curve.
When a plant is still in the blueprint stage, the expected per-unit cost of producing alternative rates of output is reflected by the firm's a. short-run total cost curve. b. short-run marginal cost curve. c. long-run variable cost curve. d. long-run average total cost curve.
b. elastic
Krispy Kreme doughnut shop reduced the price of its doughnuts from $4 per dozen to $3.50 per dozen, and as a result , the daily sales increased from 300 dozen to 400 dozen. this indicates that the price of the dozen was b. elastic
a. diminishing marginal returns
What concept implies that a firm's marginal revenue product curve for labor will slope downward in the short run? a. diminishing marginal returns b. the price equalization principle c. the law of supply d. the law of decreasing cost
b. zero economic profits.
When a competitive price-searcher market is in long-run equilibrium, the firms in the market will earn a. significant economic losses. b. zero economic profits. c. an above-normal accounting rate of return.
d. shift to the left.
When a new firm enters a competitive price-searcher market, the demand curves faced by all existing firms in that market will a. shift to the right. b. shift in a direction that is unpredictable without further information. c. remain unchanged. It is the supply curve that will shift. d. shift to the left.
d. an opportunity cost is always present when scarce resources are used to produce a good.
"There is no such thing as a free lunch." This statement best reflects the fact that a. the value of a good to consumers will decrease as they have more of it. b. it generally requires enormous effort to search out the best place to eat lunch. c. consumers are unwilling to pay for a good unless it provides them with value. d. an opportunity cost is always present when scarce resources are used to produce a good.
b. 4 units
(table) Average cost is at a minimum when output is a. 3 units b. 4 units c. 5 units d. 2 units
a. spend more on sugar
A 10 percent increase in the price of sugar reduces sugar consumption by about 5 percent. The increase causes households to a. spend more on sugar b. spend the same amount on sugar c. consume more goods like coffee or tea d. spend less on sugar
d. Increase output.
A firm is currently operating where the MC of the last unit produced is $64, and the MR of this unit is $70. Which of the following would increase profit? a. Shut down. b. Decrease price. c. Decrease output. d. Increase output. e. Stay at current output.
b. $6,000
A foreign exchange student bought a used car for $10,000 and resold it one year later for $6,500. Insurance, license, and operating costs for the year were $1,500. What was his economic cost of owning and operating the car for the year if the market rate of interest was 10 percent? a. $5,000 b. $6,000 c. $3,500 d. $8,500
a. her marginal value of the food has fallen to zero
A local restaurant offers an all you can eat brunch for $12. Susan eats four servings, but leaves half a fifth helping uneaten. Why? a. her marginal value of the food has fallen to zero
b. selling at the price on the demand curve at the output rate where marginal revenue equals marginal cost
A monopolist will maximize profits by a. producing at the output where marginal revenue equals total cost and charging a price along the demand curve. b. selling at the price on the demand curve at the output rate where marginal revenue equals marginal cost c. producing at the output rate where price equals marginal cost d. setting the price at the level that will maximize per-unit cost.
a. ATC in an industry will be set at a minimum if output is produced by a single firm
A natural monopoly exists when a. ATC in an industry will be set at a minimum if output is produced by a single firm b. entering the industry is barred by governmental authorities c. a single firm has control over a natural resource, such as timber d. a firm has exclusive patent or license to produce a product granted by the government
a. the earnings of workers are closely tied to the worker's output.
An activity known as shirking is least likely to occur when a. the earnings of workers are closely tied to the worker's output. b. the firm is organized as a corporation. c. workers are not monitored. d. all workers are paid the same wage rate.
d. negative income elasticity of demand.
An inferior good is distinguished by a a. negative price elasticity of demand. b. positive income elasticity of demand. c. positive price elasticity of demand. d. negative income elasticity of demand.
d. $0 minus the opportunity cost of the $40,000 of capital invested in the store.
Anne Teek works full time as the manager of her used furniture store in which she has invested $40,000. Last year, her total revenues were $90,000 and her costs were $60,000 for merchandise, gas, electricity, and other explicit-cost items. Ms. Teek pays herself a "competitive" salary of $30,000 per year. An economist would consider her profits for the year to be a. $30,000. b. -$40,000. c. $0. d. $0 minus the opportunity cost of the $40,000 of capital invested in the store.
c. rise and product diversity in the market decreases.
As firms exit a competitive price-searcher market, profits of remaining firms a. decline and product diversity in the market increases. b. decline and product diversity in the market decreases. c. rise and product diversity in the market decreases. d. rise and product diversity in the market increases.
e. profits of existing firms will decrease
As new firms enter a competitive price searcher market, it can be expected that e. profits of existing firms will decrease
d. profits of existing firms will increase.
As new firms enter a competitive price-searcher market, it can be expected that a. market demand should decrease. b. the output of existing firms will increase. c. profits of existing firms will decrease d. profits of existing firms will increase. e. market price will increase.
a. a leftward shift in the demand curve for bus travel
Assuming that bus travel is an inferior good, an increase in consumer income, other things being equal, will cause a. a leftward shift in the demand curve for bus travel. b. a rightward shift in the demand curve for bus travel. c. a downward movement along the demand curve for bus travel. d. an upward movement along the demand curve for bus travel.
c. zero.
Ben quit his job as an economics professor to become a golf professional. He gave up his $30,000 salary and invested his retirement fund of $50,000 (which was earning 10 percent interest) in this venture. After all expenses, his net winnings were $35,000. Ben's economic profits were a. $35,000. b. $2,000. c. zero. d. $5,000.
b. shut down b. shut down
Claude's Copper Clappers sells clappers for $40 each in a competitive price-taker market. At its present rate of output, Claude's marginal cost is $40, average variable cost is $45, and average total cost is $60. Claude should a. raise the price b. shut down c. maintain the present rate of output d. increase output e. reduce output but not to zero
d. retail selling.
Competitive price-searcher markets are common in a. electric power generation. b. farming. c. basic manufacturing. d. retail selling.
a. $200.
Dr. Jones, a dentist, is choosing between driving and flying from Pittsburgh to New York City. If Jones drove, she would have to close her office four hours earlier than if she flew by airplane. Her expected income (after taxes) from her practice is $50 per hour. Assuming all other factors are equal, if Jones was a rational decision maker, she would drive if the price differential (air cost minus driving) was greater than a. $200. b. $150. c. $100. d. $50
a. able to vary only some of its factors of production
During the short run period of the production process a firm will be a. able to vary only some of its factors of production
d. able to vary only some of its factors of production.
During the short-run period of the production process, a firm will be a. unable to vary any of its factors of production. b. able to vary all of its factors of production. c. able to vary the size of its plant. d. able to vary only some of its factors of production.
d. making decisions requires trading off one goal against another.
Economists use the phrase "There is no such thing as a free lunch," to illustrate the principle that a. nothing is free in a market economy. b. inflation almost always results in higher prices over time. c. if something looks too good to be true, it probably is not worth pursuing. d. making decisions requires trading off one goal against another.
a. it all depends on the nature of the firm
How long does it take a firm to go from the short run to the long run? a. it all depends on the nature of the firm b. two years c. six months d. one year
d. of unitary elasticity.
If a Krispy Kreme doughnut shop near campus increases its prices by 5 percent, but revenues from its sales are unchanged, the price elasticity of demand for the services offered by the doughnut shop must be a. elastic. b. inelastic. c. equal to 0.5. d. of unitary elasticity.
a. inelastic.
If a Pizza Hut restaurant near campus increases its prices by 10 percent, and as a result, its sales revenue increases by 3 percent, the price elasticity of demand for the services offered by the restaurant must be a. inelastic. b. equal to 2. c. elastic. d. equal to 0.5. e. of unitary elasticity.
a. shut down during the winter, but continue operating during the summer as long as the summer profits exceed the losses (fixed costs) during the winter shutdown period.
If a restaurant in a summer tourist area is highly profitable during the summer months but unable to cover even its variable costs during the winter months, the restaurant should a. shut down during the winter, but continue operating during the summer as long as the summer profits exceed the losses (fixed costs) during the winter shutdown period. b. go out of business as soon as the summer is over; losses should never be tolerated. c. operate during all months of the year as long as its profits during the summer exceed its losses during the winter. d. go out of business immediately, because no firm should continue to operate if it is losing money; doing so is contrary to the idea of profit maximization.
a. $6,000.
If average fixed costs equal $60 and average total costs equal $120 when output is 100, the total variable cost must be a. $6,000. b. $40. c. $8,000. d. $60.
c. buy 2 percent more of the product in response to a 1 percent drop in price.
If demand price elasticity measures 2, this implies that consumers would a. require a 2 percent drop in price to increase their purchases by 1 percent. b. require at least a $2 increase in price before showing any response to the price increase. c. buy 2 percent more of the product in response to a 1 percent drop in price. d. buy twice as much of the product if the price drops 1 percent. e. buy twice as much of the product if the price drops 10 percent.
d. all of the above are true.
If scarcity were eliminated, a. all goods would be free. b. no one would have to make any choices. c. everyone could have all they want at no cost. d. all of the above are true.
c. a normal good.
If the income elasticity of a good is positive, we can conclude that the good is a. a luxury good. b. an inferior good. c. a normal good. d. a necessity.
b. the income effect
If the price of gasoline goes up, and Dan now buys fewer candy bars because he has to spend more on gas, this would be best explained by b. the income effect
d. -0.9
If the quantity demanded of a product fell from 11,000 to 10,000 when price rose from $9 to $10 , the price elasticity of demand is a. -0.05 b. -0.1 c. -1.1 d. -0.9
c. the entry of additional firms into the market and the eventual restoration of zero long-run economic profits.
In both price-taker and competitive price-searcher markets, short-run economic profits will lead to a. the exit of firms from the market and the eventual restoration of zero long-run economic profits. b. long-run economic profits. c. the entry of additional firms into the market and the eventual restoration of zero long-run economic profits. d. the entry of additional firms into the market, which increases the demand for the product of each firm in the market.
c. the firm will lose revenues because other firms will not follow
In competitive price-taker market, if one firm raises its price, a. the market demand curve will shift b. the firm will increase it revenues c. the firm will lose revenues because other firms will not follow d. others will follow
a. competition among suppliers will force prices down to the level of production costs.
In the long run, neither price takers nor competitive price searchers will earn economic profits because a. competition among suppliers will force prices down to the level of production costs. b. the government will dictate moderate prices for these firms c. barriers to entry are high d. marginal revenue must be less than marginal costs
b. $2,500.
In the short run, if average variable cost equals $50, average total cost equals $75, and output equals 100, the total fixed cost must be a. $7,500. b. $2,500. c. $5,000. d. $25.
c. $1,000.
In the short run, if average variable costs equal $60, average total costs equal $70, and output equals 100, the total fixed costs should equal a. $5,000. b. $10. c. $1,000. d. $13,000.
d. $1.
Joe and Ed go to a diner that sells hamburgers for $5 and hot dogs for $3. They agree to split the lunch bill evenly. Ed chooses a hot dog. The marginal cost to Joe then of ordering a hamburger instead of a hot dog is a. $2.50. b. $2. c. $3. d. $1.
b. the decisions of one seller often influence the price of products, the outputs and the profits of
One key characteristic that is distinctive of an oligopoly market is that a. the demand curve facing each firm is downward sloping , with a marginal revenue curve that lies between b. the decisions of one seller often influence the price of products, the outputs and the profits of c. short run total costs d. long run variable costs
b. increasing your education.
One way to invest in human capital is by a. avoiding on-the-job training programs. b. increasing your education. c. doing nothing; it is impossible to improve your human capital. Human capital is solely determined by the abilities that you are born with. d. investing in physical capital.
d. the tax and insurance payments on the property owned by the firm
Paul's plumbing is a business that employs 12 people. which of the following is most likely to be a fixed cost d. the tax and insurance payments on the property owned by the firm
c. $4,000
Sally leaves her $34,000 secretarial position and invests her savings of $15,000 (on which she was earning 6% interest) to start a. -$10,000 b. $18,000 c. $4,000 d. $4,900 e. zero
c. 3.
Sarah recently got a 10 percent raise. She now purchases 30 percent more in groceries on a weekly basis. Sarah's income elasticity for groceries is a. 1. b. 0.33. c. 3. d. 0.5.
a. the desire for goods and services exceeds our ability to produce them with the limited resources available.
Scarcity occurs when a. the desire for goods and services exceeds our ability to produce them with the limited resources available. b. people own too many resources. c. consumers are too poor to afford the goods and services available. d. the prices of goods are set too low.
d. her economic profit from textbooks will fall
Suppose a professor gives up her original teaching job to devote her time to writing textbooks. If salaries of professors rise, a. her accounting profit will fall b. her accounting profit will rise c. her explicit costs will rise d. her economic profit from textbooks will fall e. her economic profit from textbooks will rise
c. The firm will make less profit than it could at the $10 price.
Suppose the equilibrium price in a competitive price-taker market is $10 and a firm in the industry charges $9. Which of the following is true? a. The firm will sell less output than its competitors. b. The firm will not be able to sell any output. c. The firm will make less profit than it could at the $10 price. d. The firm will make more profit than it could at the $10 price.
c. $9
Table 11-2 The demand and total cost schedules of a monopolist are presented in Table 11-2. What price should a profit-maximizing monopolist charge? a. $7 b. $10 c. $9 d. $8
a. legal barriers limiting entry.
The U.S. Postal Service has a monopoly on the delivery of first-class mail due to a. legal barriers limiting entry. b. a lack of initiative on the part of competing firms. c. economies of scale. d. control over an essential resource.
b. indicates the quantities of the good that people will buy at various prices
The demand schedule for a good a. illustrates the quantity producers will provide at alternative prices b. indicates the quantities of the good that people will buy at various prices c. is determined primarily by the cost of producing the good d. indicates the relationship between the price of the good and the price of other goods
b. labor's marginal revenue product
The derived demand and, consequently, the demand curve for labor are determined by b. labor's marginal revenue product
d. consumer surplus.
The difference between the amount consumers would be willing to pay and the amount they actually pay for a good is called a. the substitution effect. b. income elasticity of demand. c. price elasticity of demand. d. consumer surplus.
d. economists include opportunity cost in zero economic profit, while accountants do not include opportunity cost in zero accounting profit.
The difference between zero accounting profit and zero economic profit is a. economists do not include opportunity cost in zero economic profit, while accountants do include opportunity cost in zero accounting profit. b. economists include opportunity cost in zero accounting profit, while accountants do not include opportunity cost in zero economic profit. c. economists do not include opportunity cost in zero accounting profit, while accountants do include opportunity cost in zero economic profit. d. economists include opportunity cost in zero economic profit, while accountants do not include opportunity cost in zero accounting profit.
d. all of the above
The earnings all employees in a competitive economy would be equal if a. all individuals were homogeneous b. all jobs were equally attractive c. worker were perfectly mobile among jobs d. all of the above are true
d. resource market.
The market where firms purchase factors of production is referred to as the a. product market. b. foreign exchange market. c. capital market. d. resource market.
c. the value of the best opportunity a student gives up to attend a college.
The opportunity cost of going to college is c. the value of the best opportunity a student gives up to attend a college.
b. Groups with the lower elasticity of demand will pay higher prices.
The practice of price discrimination has which of the following effects? a. With price discrimination, total output and allocative efficiency will fall. b. Groups with the lower elasticity of demand will pay higher prices. c. Groups with the higher elasticity of demand will pay higher prices. d. Groups will pay identical prices that are exactly equal to the firm's marginal cost.
a. marginal cost equals marginal revenue
To maximize profits, a firm should always produce the level of output where a. marginal cost equals marginal revenue b. average total cost equals price c. marginal revenue equals price d. marginal cost equals average total cost
b. There are many firms in the industry and these firms have different costs.
Under which of the following market conditions is it most difficult to maintain a cartel agreement? a. There are many firms in the industry and these firms have similar costs. b. There are many firms in the industry and these firms have different costs. c. There are few firms in the industry and these firms have similar costs. d. There are few firms in the industry and these firms have different costs.
c. a factor that makes it difficult for potential competitors to enter a market.
When economists talk about a barrier to entry, they are referring to a. the declining output experienced as additional units of a variable input are used with a given amount of a fixed input. b. the downward-sloping portion of the long-run average total cost curve. c. a factor that makes it difficult for potential competitors to enter a market. d. the opportunity cost of equity capital that is incurred by a firm producing at minimum total cost.
b. reduce output
When the marginal cost of a price taker firm is more than the market of its product, the firm should b. reduce output
d. all of the above
Which of the following are scarce? a. pleasant working conditions b. low-cost housing c. free time for recreation d. all of the above
c. there are reasonable substitutes for most goods
Which of the following explains why monopoly is uncommon in the real world? a. firms usually face downward sloping demand curves b. price is usually set equal to marginal cost by firms c. there are reasonable substitutes for most goods d. supply curves slope upward
b. It must be easy to distinguish consumer groups with differing responses to higher prices.
Which of the following is a necessary condition for price discrimination to be profitable? a. All consumers must have identical preferences. b. It must be easy to distinguish consumer groups with differing responses to higher prices. c. The seller must face a horizontal demand curve for its product in at least one part of the market. d. Both b and c are correct.
b. The firm produces a differentiated product.
Which of the following is characteristic of a firm that is a competitive price searcher? a. The firm faces a horizontal demand curve. b. The firm produces a differentiated product. c. The firm faces an upward-sloping demand curve. d. The firm faces an inelastic demand curve.
b. interest income foregone on funds invested in the firm by the owners
Which of the following is most likely to be an implicit cost of production? a. transportation costs paid to a trucking supplier b. interest income foregone on funds invested in the firm by the owners c. property taxes on a building owned by the firm d. rental payments for a building utilized by the company and rented from another party
b. man-made resources used to produce other goods
Which of the following is the best definition of "physical capital"? a. natural resources in their original state b. man-made resources used to produce other goods c. the labor utilized in the production process d. the ownership of stock shares issued by a corporation
d. a decrease in the employment of unskilled workers
Which of the following is the most likely result of an increase in the minimum wage? a. a decrease in the number of workers seeking minimum wage jobs b. an increase in the employment of unskilled workers c. an increase in the demand for unskilled workers d. a decrease in the employment of unskilled workers
d. It is identical with the industry demand curve for the product.
Which of the following is true of a monopolist's demand curve? a. It indicates that the monopolist will be able to sell more units at a higher price. b. It is perfectly inelastic. c. It is perfectly elastic. d. It is identical with the industry demand curve for the product.
c. it is identical with the industry demand curve for the product.
Which of the following is true of a monopolist's demand curve? a. it's perfectly elastic b. it indicates that the monopolist will be able to sell more of its units at a higher price c. it is identical with the industry demand curve for the product. d. its perfectly elastic.
b. retail cashiers
Which of the following labor resources will likely have the most elastic supply schedule in the short run? b. retail cashiers
b. It is too hot in this room
Which of the following represents a normative statement? a. The temperature in this room is 120 degrees. b. It is too hot in this room c. people will buy less butter at $1.50 per pound than they will at $1.00 per pound d. Incentives matter