Micro Final Exam - Hannah B

Which Gini coefficient represents the highest level of income equality?

0.21

Which of these is a characteristic of a natural monopoly?

high economies of scale

______ is when once a good or service is provided, it is not feasible to exclude other from enjoying that good or service.

nonexcludability

Suppose that a major drought causes a 30 percent reduction in the peanut harvest. If there is no change in demand, this event would cause a ___ at the original equilibrium price, and the equilibrium price will therefore ___ and the equilibrium quantity will ____.

shortages; rise; fall

When quantity supplied exceeds quantity demanded, a ___ occurs and prices are pushed ____ toward equilibrium.

surplus ; down

A consumer is in equilibrium when:

the addition to total utility per dollar is the same for every commodity

in the short run, the perfectly competitive firm will continue to produce even though it might experience an economic loss if:

the market price exceeds the average variable cost

If a market is NOT at equilibrium:

the price will change and, in response, market participants will move along the existing supply and demand curves until the market reaches equilibrium

T/F A country's comparative advantage is determined by an assessment of its opportunity cost of production relative to the opportunity costs of other countries.

true

T/F An important lesson from the prisoner's dilemma game is that the interests of individuals will not always align with the collective interests of people.

true

T/F Consumer loyalty to existing brands may be a formidable barrier to entry for new companies.

true

T/F Economies of scale in an industry can be so large that demand is able to support only one firm.

true

Consumers of public goods will:

have an incentive to consume without regard to the cost of production

When quantity demanded exceeds quantity supplied, a ___ occurs and prices are pushed ___ toward equilibrium.

shortage ; up

In a perfectly competitive industry, long-run economic profits cannot be sustained because:

there are no barriers to entry

What is the difference between a change in quantity supplied and a change in supply?

a change in the market price affects the quantity supplied, but not the supply

Which statement is descriptive of the long run rather than the short run?

a firm is deciding how much of its equipment to sell so that it can reduce its monthly loan payments for equipment

If the price elasticity of demand for airline tickets is 3.0 for a vacation traveler and 0.4 for a business traveler, then a monopolist interested in price discrimination would charge:

a higher price for the business traveler and a lower price for the vacation traveler

Which of these BEST represents a barrier to entry?

a research patent awarded to an inventor of a product

Which of these is an example of a lock-in strategy?

an extermination company giving customers a 10% discount if they pay for one years worth of service in advance rather than paying after each quarterly extermination service

When there is a positive network externality to a network good, a larger network is associated with:

an increase in demand

It can be cost-effective to pursue economies of scale only if:

demand is large

A college student can create a negative externality by:

leaving a coffee cup in a classroom

Perfectly competitive firms and monopoly firms should increase production when:

marginal revenue is greater than marginal cost

Large cities typically have many grocery stores and most sell familiar products of various brands and quality. The grocery store market in a big city an be BEST classified as:

monopolistic competition

Kellogg, General Mills, Post and Quaker Oats dominate the cereal market. This industry which has consistently displayed profits in the long run is also difficult to enter due to brand recognition. The cereal industry is an example of what type of market structure?

oligopoly

in the short run, once a market has reached equilibrium:

price and quantity will be stable

An effective price ceiling occurs at a price ___ the equilibrium price and causes a _____.

below; shortage

The reason a monopoly imposes a deadweight loss on society is that:

consumers are denied output for which they are willing to pay more than the cost of producing it

The development of solar panels for home installation has improved due to technological advances and subsidies. These factors shit the supply curve to the ____ and result in the equilibrium price of solar panel installations to ____.

right;fall

Wheat is the main input in the production of flour. If the price of wheat increases, all else equal, we would expect the:

supply of flour to decrease

Sun's Pizza lowered its price on one topping pizza. Taylor Pizzeria lowered its price on a one-topping pizza. Sun created a secret sauce for its combination pizza. Taylor created a secret sauce for its combination pizza. The strategy used by Taylor Pizzeria is known as:

tit-for-tat

According to the law of comparative advantage, when one country sells goods for which it has the comparative advantage in production and buys goods for which it does not have the comparative advantage in production:

total output to each person can be expanded

T/F If Kim's marginal utility per dollar for hot dogs is less than her marginal utility per dollar for French Fries, she should buy more French Fries and fewer hot dogs to maximize her total utility.

true

T/F If firms in a monopolistically competitive industry are experiencing economic losses in the short run, some firms will exit the industry, increasing demand until each firm earns a normal profit.

true

T/F If price exceeds marginal cost at a competitive firm's current level of output, then the firm can increase profit if it increases the quantity it produces and sells.

true

T/F Price discrimination is more likely in the case of services than in the case of goods because it is more difficult to prevent resell of services than of goods.

true

T/F The free rider problem typically results in a production of output that is less than the social optimal quantity.

true

Opportunity costs exist because:

Using resources for one activity means that their use elsewhere must be given up

Consider the market for breakfast cereal. Which of the following will cause lower prices and a greater quantity of breakfast cereal exchanged?

There is an increase in the number of firms selling breakfast cereal

T/F A network good is one with which the benefit to the user rises if there is a small number of other users of the good.

false

T/F An increase in price will cause a decrease in demand. This is the law of demand.

false

T/F Many entrepreneurs are moving into the food truck industry in major cities. This movement into the industry suggest existing firms are earning normal profits.

false

T/F Public goods are characterized by the ability to exclude non-players and the fact that consumption of the good does not prelude other from consuming it.

false

T/F When negative externalities exist, an unregulated market will produce too little of the good and the price will be too high when compared to the socially optimal production.

false

T/F When the price elasticity of demand for a product is inelastic, that product is likely to have many good substitutes.

false

T/F If the government sets a price ceiling below the equilibrium market price, then we can expect that there will be shortages of the good (i.e., quantity demanded will exceed quantity supplied).

true

T/F The income distribution in the United States is generally less equally distributed than in European countries and is more equally distributed than in many South American countries.

true

T/F The speed by which a network good can enter into a virtuous or vicious cycle is generally faster than of a network good.

true

T/F a firm should (at least temporarily) shut down its production facility if variable costs are greater than revenues.

true

T/F network goods differ from other types of markets studied in economies because the demand curve is different.

true

Positive externalities result in ___ of a good.

underproduction

Which is the BETTER purchase: a new top-quality motorcycle or an old, used motorcycle?

we cannot tell which is the better buy without knowing their prices or the utility derived from each

The socially optimal pollution is:

where the marginal benefits of pollution abatement equal its marginal cost

Consider the market for wool sweaters. Which of the following will cause higher prices and a lower quantity of wool sweaters exchanged?

A disease significantly reduces the sheep population (wool comes from sheep)

Which statement is NOT an illustration of opportunity cost?

The more a person works at her job. the more leisure time she has

Which factor would increase elasticity the most?

an increase in the number of tablet brands being offered

Jessica lists her faulty treadmill for sale on craigslist but does not disclose the problems with it. If Blake buys the treadmill believing that it's problem-free, this is an example of market failure due to:

asymmetric information

For a frim price discriminate, it must:

be able to prevent the resale of its product

The "dilemma" in the prisoner's dilemma is that:

both players would be better off by cooperating, but not cooperating is a dominant strategy

The success rate of cartels is low because:

cheating is likely to occur due to profitability

Assume that this Friday you would like to go to the club. You ask your friends to go with you, but they all want to go to the movies. Despite your friends not wanting to go with you, you decide to go to the club anyway because you really want to go dancing. This type of thinking BEST resembles a:

dominant strategy

Which of the following products is likely to be the MOST differentiated?

garments sold to a retail customer

Compared with competitive markets, monopolies charge ___ prices and produce a ____ output

higher; lower

Which of these is NOT a network good?

hospital services

In which situation can a prisoners dilemma outcome most likely be avoided?

if the game is repeated over and over under the same conditions

Suppose it is discovered that consuming Greek yogurt leads to a longer life. This information would lead to a(n):

increase in demand

Which statement describes a basic difference between a teaser strategy and a lock-in strategy?

lock-on strategies try to keep current customers, while teaser strategies aim to gain new customers

Sam's club can sell identical items at lower price than Macy's because of Sam's Club's:

lower average fixed costs

Suppose the marginal utility for the last pencil you buy is 36 and each costs $1, whereas the marginal utility of the last pad of paper you buy is 300 and costs $2. are you maximizing utility?

no you need to buy more paper and fewer pencils

A new website that can be accessed by many paid subscribers simultaneously is MOST likely:

nonrival (non-depletable) and excludable