Micro Final- Exam 3, Exam 2, Exam 1, Exam 4
For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $7 and a marginal cost of $10. It follow that the
firm's profit maximizing level of output is less than 100 units
The long-run average total cost curve is always
flatter than the short-run average total cost curve, but not necessarily horizontal
If an externality is present in a market, economic efficiency may be enhanced by
government intervention.
A minimum wage that is set below a market's equilibrium wage will
have no impact on employment
Which of the following is not an assumption of the productions possibilities frontier?
there is a fixed quantity of money
Refer to Table 13-9. The average. total cost of producing 240 units is
$0.32
Refer to table 13-4. Charles's math tutoring company experiences diminishing marginal productivity with the addition of the
third worker
Economists typically measure efficiency using
total surplus
A decrease in quantity demanded
results in a movement upward and to the left along the demand curve
Refer to table 3-34. For which good(s) does Indonesia have a comparative advantage
rice but not bananas
Refer to Figure 5-3. Which demand curve is perfectly elastic
D
A tax imposed on the sellers of a good will
raise the price buyers pay and lower the effective price sellers receive
Total surplus in a market will increase when the government
removes a binding price ceiling from the market
Refer to Figure 21-2. A consumer who chooses to spend all of her income could be at which point(s) on the figure?
W, X, or Y only
Suppose that in a particular market, the demand curve is highly elastic, and the supply curve is highly inelastic. If a tax is imposed in this market, then the
sellers will bear a greater burden of the tax than the buyers
In a market economy, supply and demand are important because they
all of the above are correct
A binding price floor will reduce a firm's total revenue
when demand is elastic
Price controls are usually enacted
when policymakers believe that the market price of a good or service is unfair to buyers or sellers
When marginal cost is less than average total cost,
average total cost is falling
Refer to Table 4-13. Suppose Harry, Darby, and Jack are the only demanders of sandwiches. Also suppose the following: x=2 the current price of a sandwich is $5.00 The market quantity supplied of sandwiches is 10 The law of supply applies to the supply of sandwiches Then there is a
shortage of 5 sandwiches, and the price would be expected to rise from its current level of $5.00
In markets, the invisible hand allocates resources efficiently
when the buyers and sellers are the only interested parties.
Suppose the US and Japan both produce airplanes and televisions and the US has a comparative advantage in the production of airplanes while Japan has a comparative advantages in the production of televisions. If the US exports airplanes to Japan and imports televisions from Japan,
both countries, as a whole will be better off
Since air pollution creates a negative externality,
social welfare will be enhanced when some, but not all air pollution is eliminated.
Ashley bakes bread that she sells at the local farmer's market. If she purchases as new convection oven that reduces the costs of baking bread, the
supply curve for Ashley's bread will increase
Matthew bakes apple pies that he sells at the local farmer's market. If the price of apples increases, the
supply curve for Matthew's pies will decrease
Suppose the United States has a comparative advantage over Mexico in producing pork. The principle of comparative advantage asserts that
the United States should produce more pork than what it requires and export some of it to Mexico
A tax levied on the sellers of blueberries
increases sellers' costs, reduces profits, and shifts the supply curve up
Economists assume that the goal of the firm is to maximize total
profits
Refer to figure 4-22. At a price of $8, there is a
shortage of 8 units
If the government passes a law requiring buyers of college textbooks to send $5 to the government for every textbook they buy, then
the demand curve for textbooks shifts downward by $5
Refer to table 13-14. What is the variable cost of producing 5 units of output
$100
Refer to Figure 5-5. At a price of $70 per unit, sellers' total revenue equals
$1050
Refer to Table 14-3. For this firm, the marginal revenue is
$13
Refer to figure 7-19. If the government imposes a price ceiling of $55 in this market, then total surplus will be
$250
Refer to table 7-1. If the price of the product is $122, then the total consumer surplus is
$41
A market demand curve shows
how much of a good all buyers are willing and able to buy at each possible price
Refer to Figure 7-14. If the market price increases to $130 due to an increase demand, then producer surplus is
$900
Suppose the price of good X falls and the consumption of good X increases. From this we can infer that X is a(n) i) normal good ii) inferior good iii) Giffen good
i) & ii) only
Today's demand curve or gasoline could shift in response to a change in
the expected future price of gasoline
Refer to Table 3-7. Which of the following combinations of meat and potatoes could the farmer produce in 24 hours?
2 pound of meat and 2 pounds of potatoes
If the price elasticity of demand form aluminum foil is 1.45, then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by
3.48%, and aluminum foil sellers' total revenue will increase as a result
Refer to table 3-24. The opportunity cost of 1 unit of bread for England is
4 units of cheese
Refer to Table 3-6. Assume that Zimbabwe and Portugal each has 180 machine minutes available. If each country divides its time equally between the production of toothbrushes and hairbrushes, then the total production is
48 toothbrushes and 24 hairbrushes
Refer to table 14-14. At what quantity will Bob maximize his profit?
6 units
Which of the following illustrates the concept of a negative externality?
A college student plays loud music on his new stereo system at 2:00 a.m.
Refer to Figure 7-24. If the government imposes a price floor at $18, then consumer surplus is
AGH
Refer to Figure 21-14. Which of the following statements is correct?
All of the above are correct.
Which of the following characteristics is required for a perfectly competitive market?
Both a and b are correct
Suppose that firms in a competitive industry are earning positive economic profits. All else equal, in the long run, we would expect the number of firms in the industry to
increase
Which of the following events must result in a lower price in the market for Snickers?
Demand for Snickers decreases, and supply of Snickers increases
Although regulation and corrective taxes are both capable of reducing pollution, regulation accomplishes this goal more efficiently. T or F
False
If the marginal cost of producing the tenth unit of output is $2.50, and if the average total cost of producing the tenth unit of output is $3, then at ten units of output, average total cost is rising. T or F
False
If the marginal-cost curve is rising, then so is the average-total-cost curve. T or F
False
The cross-price elasticity of garlic salt and onion salt is -2, which indicates that garlic salt and onion salt are substitutes. T or F
False
The marginal rate of substitution of the slope of the budget constraint. T or F
False
Suppose an increase in price of rubber coincides with an advance in the technology of tire production. As a result of these two events, the demand for tires
None of the above is necessarily correct
Which of the following is an example of a positive, as opposed to normative, statement?
Prices rise when the government prints too much money
When Monique drives to work every morning, she drives on a congested highway. What Monique does not realize is that when she enters the highway each morning she increases the travel time of all other drivers on the highway. In this case, the external cost of Monique's highway trip
increases the social cost above the private cost.
Economists represent a consumer's preferences using
indifference curves
Saddle shoes are not popular right now, so very few are being produced. If saddle shoes become popular, then how will this affect the market for saddle shoes?
The demand curve for saddle shoes will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity.
When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is
inelastic
University researchers create a positive externality because what they discover in their research labs can easily be learned by others who haven't contributed to the research costs. If there are no subsidies, what is the relationship between the equilibrium quantity of university research and the optimal quantity of university research produced?
The equilibrium quantity is less than the socially optimal quantity.
What would happen to the equilibrium price and quantity of lattes if coffee shops began using a machine that reduced the amount of labor necessary to produce steamed milk, which is used to make lattes, and scientists discovered that coffee prevents heart attacks?
The equilibrium quantity would increase, and the effect on equilibrium price would be ambiguous
Refer to Figure 21-5. Assume that a consumer faces the budget constraint shown in graph (a) in January and the budget constraint shown in graph (b) in February. If the consumer's income has remained constant, then what has happened to prices between January and February?
The price of X has fallen, and the price of Y had risen
If the cross-price elasticity of demand for two goods is negative, then the two goods are compliments. T or F
True
If we observe that when the price of ice cream rises by 10%, ice cream manufacturers increase the quantity supplied of ice cream by 20%, then the price elasticity of supply is 2. T of F
True
The housing shortages caused by rent control are larger in the long run than in the short run because both the supply of housing and the demand for housing are more elastic in the long run. T or F
True
The slope of a consumer's budget constraint is unaffected by a change in income. T or F
True
If an increase in income decreases the demand for a good, then the good is a(n)
inferior good
Which of the following demonstrates the law of supply?
When the price of leather belts rose, leather belt sellers increase their quantity supplied of leather belts.
Refer to Figure 2-14. If this society moves from point to U to point V
it gives up 80 sweaters to get 40 bushels of apples
How is the burden of a tax divided? i) When the tax is levied on the sellers, the sellers bear a higher proportion of the tax burden. ii) When the tax is levied on the buyers, the buyers bear a higher proportion of the tax burden. iii) Regardless of whether the tax is levied on the buyers or the sellers, the buyers and sellers bear an equal proportion of the tax burden. iv) Regardless of whether the tax is levied on the buyers or the sellers, the buyers and sellers bear some proportion of the tax burden.
iv only
A price floor will be binding only if it is set
above the equilibrium price
If a surplus exists in a market, then we know that the actual price is
above the equilibrium price, and quantity supplied is greater than quantity demanded
Negative externalities occur when one person's actions
adversely affect the well-being of a bystander who is not a party to the action.
Consumer surplus is
all of the above
For a large firm that produces and sells automobiles, which of the following costs would be a variable cost?
all of the above
Assume that a college student purchases only Ramen noodles and textbooks. If Ramen noodles and textbooks. If Ramen noodles are an inferior good and textbooks are a normal good, then the income effect associated with a decrease in the price of a textbook will result in
an increase in the consumption of textbooks and a decrease in the consumption of Ramen Noodles
Which of the following events would unambiguously cause an increase in equilibrium price of cotton shirts?
an increase in the price of wool shirts and an increase in the price of raw cotton
Laura is a gourmet chef who runs a small catering business in a competitive industry. Laura specializes in making wedding cakes. Laura sells 20 wedding cakes per month. Her monthly total revenue is $5000. The marginal cost of making a wedding cake is $300. In order to maximize profits, Laura should
make fewer than 20 wedding cakes per month
Mr. Rogers sells colored pencils. The colored-pencil industry is competitive. Mr. Rogers hires a business consultant to analyze his company's financial records. The consultant recommends that Mr. Rogers increase his production. The consultant must have concluded that Mr. Roger's
marginal revenue exceeds his marginal cost
Suppose that the demand for light bulbs is inelastic, and the supply of light bulbs is elastic. A tax of $2 per bulb levied on light bulbs will increase the price paid by buyers of light bulbs by
between $1 and $2
The price elasticity of demand measures
buyer's responsiveness to a change in the price of a good
When marginal revenue equals marginal cost, the firm
may be minimizing its losses rather than maximizing its profit
In a market economy, government intervention
may improve market outcomes in the presence of externalities
Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6, produces surplus
might increase or decrease
Corrective taxes are typically advocated to correct for the effects of
negative externalities.
A likely example of complementary goods for most people would be
chips and salsa
Refer to Table 14-7. If the firm is currently producing 14 units, what would you advise the owners?
continue to operate at 14 units
A consumer has preferences over two goods, X and Y. Suppose we graph this consumer's preferences (which satisfy the usual properties of indifference curves) and budget constraint on a diagram with X on the horizontal axis and Y on the vertical axis. At the consumer's current consumption bundle, the consumer is spending all available income, and the marginal rate of substitution is less than the slope of the budget constraint. We can conclude that consumer
could increase satisfaction by consuming less X and more Y
You lose your job and, as a result, you buy fewer iTunes music downloads. This shows that you consider iTunes music downloads to be a(n)
normal good
Beth pays all her workers the same wage, and labor is her only variable cost. From this information we can conclude that Beth's marginal cost
declines as output increases from 0 to 33, but increases after that
The value of the price elasticity of demand for a good will be relatively large when
the good is a luxury rather than a necessity
In perfectly competitive market, the market supply curve is
the horizontal sum of all the individual firms' supply curves
When the price of an inferior good increases,
the income effect encourages the consumer to purchase more of the good, and the substitution effect encourages the consumer to purchase less of the good
If something happens to alter the quantity supplied at any given price, then
the supply curve shifts
Suppose that gasoline prices increase dramatically this month. Lola commutes 100 miles to work each weekday. Over the next few months, Lola drives less on the weekends to try to save money. Within the year, she sells her home and purchases one only 10 miles from her place of employment. These examples illustrate the importance of
the time horizon in determining the price elasticity of demand
In the long run a company that produces and sells covers for cell phones incurs total costs of $2500 when output is 1,250 covers and $4000 when output is 1500 covers. For this range of output, the cell phone cover company exhibits
diseconomies of scale
When society gets the most it can from its scare resources, then the outcome is called
efficient
Holding all other factors constant and using the midpoint method, if a tractor manufacturer increase production from 80 to 100 units when price increases by 15 percent, then supply is
elastic, since the price elasticity of supply is equal to 1.48
