Micro final exam review

A competitive firm will produce in the short run so long as its price exceeds its average fixed cost

False

Although individual purely competitive firms can influence the price of their proudct, these firms as a group cannot influence market price

False

Because of the ability to influence price, a pure monopolist can increase price and increase volume of sales simultaneously

False

Because of their large scale level of production, pure monopolists overallocate resources to their industry by produing beyond the P=MC output

False

Elasticity of resource demand is measured by dividing "percentage change in resource price" by "percentage change in resource quantity"

False

In a purely competitive industry competiiton centers more on advertising and sales promotion than on price

False

In maximizing a profit a firm will always produce that ouput where total revenues are at a maximum

False

In the long run a pure monopolist must produce at that output where average total cost is at a minimum

False

In the long run monopolistically competitive firms make normal profits becaus they are forced to operate at the minimum point on their avergae total cost curve

False

In the short run a pure monopolist wil charge the highest price the market will bear for its product

False

Labor market discrimination increases the size of the nation's Gross Domestic Product

False

Majority voting assures that government will provide a public good if it yields totak benefits in excess of total costs

False

Price discrimation occurs every time a firms sells a good for two different prices

False

Price discrimination is illegal in the US under antitrust regulations

False

Pure monopolists always earn economic profits

False

Sales taxes are proportional in relation to income because the same tax rate applies regardless of the size of a purchase

False

Technological progress in the health care industry has typically reduced costs and increased supply

False

Tghe top 20 percent of US income earners recieve nearly 80% of total US income

False

The benefits recieved principle of taxation supports the case for highly progressive taxation

False

The benefits recieved priniciple of taxation is used to support corporate and personal income taxes

False

The closer the Lorenz curve is to the diagonal, the greater is the degree of income equality

False

The demand curve for a purely competitive industry is perfectly elastiic, but the demand curves faced by individual firms in such an industry are downsloping

False

The economic profits earned by a monopolistically competitive seller are zero in the long run

False

The monopolistically competitive seller maximizes profits by equating price and marginal cost

False

The optimal (economicallly-efficient_ level of air pollution is zero emissions

False

The regulation of natural monopoloes has been criticized because it creates a tendency for regulated firms to use too much labor and too little capital in the production process

False

The supply of loanable funds is perfectly elastic

False

The short run is characterized by:

Fixed plant capacity

Which of the following is most likely to be a variable cost?

Fuel and power payments

Which of the following is most likely to be a fixed cost?

Property insurance premiums

An improvement in production technology will

Shift the supply curve to the right

In 2007, the price of oil increased, which in turn caused the price of natural gas to rise. This can be explained by saying that old and natural gas are:

Substitute googs and the higher price for oil increased the demand for natural gas

Price and marginal revenue are identitcal for an individual purely competitive seller

True

Taxes and/ or mandatory fees can solve the free rider problem

True

The US poverty rate was considerably lower in 2004 than in 1960

True

The demand curve of a monopolistically competitive producer is less elastic than that of a purely competitive producer

True

The marginal revenue product curve of a purely competitive seller declines solely ebcause of the law of diminishing returns

True

The total revenue curve of a competitive sellers graphs as a striaght upsloping line

True

You should decide to go to a movie:

if the marginal cost of the movie exceeds its marginal benefit

To economists, the main difference between the short run and the long run is that:

in the long run all resources are variable, while in the short run at least one resources is fixed

If the demand and supply curves for product X are stable, a government mandated increase in the price of X will:

increase the quantity supplied and decrease the quantity demanded of X

The long run average total cost curve

indicates the lowest unit costs achievable when a firm has had sufficient time to alter plant size

Marginal cost is the:

change in total cost that results from producing one more unit of input

Command systems are also known as:

communism

The utility of a good or service

is the satisfaction or pleasure one gets from consuming it

The first, second, and third workers employed by a firm add 24, 18, and 9 units to total product respectively. Therefore, we can conclude that:

marginal product of the third worker is 9

Economics involves marginal analysis because:

most decisions involve changes from the present situation

Diseconomies of scale arise primarily because:

of the difficulties involved in managing and coordinating a large business enterprise

The law of demand states that, other things equal:

price and quanitity demanded are inversly related

An increase in the quantity demanded means that:

price has declines and consumers therefore want to purchase more of the product

Assume that in the short run a firm is producing 100 units of output, has average total costs of $200, and average variable costs of $150. The firm's total fixed costs are:

$5000

The law of diminishing returns results in:

A total product curve that eventually increases at a decreasing rate.

While eating at Alex's "Pizza by the slice" restaurant, Kara experiences diminishing marginal utility. She gained 10 units of satisfaction from her first slice of pizza consumed, and would only recieve 5 units of satisfaction from consuming a second slice. Based on this information we can conclude that:

Alex may have to lower the price to convince Kara to buy a second slice

Which of the following statements concerning the relationships between total product (TP), average product (AP), and marginal profit (MP) is NOT correct?

Average Product continues to rise so long as Total Product is rising

The price elasticity of demand coefficient measures

Buyer responsiveness to price changes

If a firm decided to produce no output in the short run, its costs will be:

Its fixed costs

Which of the following is CORRECT as it relates to cost curves?

Marginal cost intersects average total cost at the latter's minimum point.

Mary says, "You would have to pay me $50 to attend that pro wrestling event." For Mary, the marginal utility of the event is:

Negative

Joe sold gold coins for $1000 that he bought a year ago for $1000. He says "at least i didnt lose any money on my financial investment" His economist friend points out that in effect he did lose money, because he could have recieved 3 percent return on the $1000 if he had bought a bank certificate of deposit instead of the coins. The economists analysis in this case incorporates the idea of:

Opportunity costs

The demand curve shows the relationship between:

Price and quanitity demanded

The supply curve shows the relationship between:

Price and quantity supplied

Marginal revenue is the addition to total revenue resulting from the sale of one more unit of output

True

The income and subsititiuion effects account for:

The downward sloping demand curve

When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of a product. This statement describes:

The income effect

At the equilibrium price

There are no pressures on price to either rise or fall

The demand for a resource depends on its productivity and the market value of the product it is producing

Tire

A highly progressive tax takes relatively more from the rich than it does from the poor

True

A monopsonoitic employer may sell its pduct in a competitive marjet

True

After all long run adjustments have been completed, a firm in a competitive industry will produce that level of output where average total cost is at a minimum

True

An improvement in the technology of pollution control is likely to increase society's optimal amount of pollution abatement

True

Because of the equilibrium position of a purely competitive seller entails an equality of price and marginal costs, competition produces up to an efficient allocation of economic resources

True

Cost benefit analysis is frequently difficult to apply because it is difficult to quantify the full benefits of a public good or service

True

Critics of the minimum wage contend that higher minimums cause employers to move up their labor demand curves, reducing employment of low wage workers

True

Demand is the active and supply the passive determinant of land rent

True

Generally speaking, the larger the number of firms in an oligopolistic industry, the more difficult it is for those firms to collide

True

Human capital investment refers to spending on eductaion and worker training

True

If XYZ Company can sell 4 units per week at $10 per unit and 5 units per week at $9 per unit, the marginal revenue of the fifth unit is $5

True

If three or four homogeneous oligopolists collide, the resulting price and production outcomes will be similar to these of pure monopoly

True

If you pay a $1000 tax on $10,000 of taxable income and a $3000 tax on a taxable income of $16,000 the tax is progressive

True

It will be profitable for a firm to hire additional units of any resource up to the point at which its Marginal Revenue Profit is equal to its Marginal Revenue Cost

True

Marginal cost is a measure of the alternative goods which society forgoes in using resources to produce an additional unit of some specific product

True

Which of the following represents a long-run adjustment?

Unable to meet foreign competition, a U.S. watch manufacturer sells one of its branch plants

Economic systems differ according to which two main charactertistics?

Who owns the factors of production, and the methods used to coordinate economic activity.

The law of diminishing returns indicates that:

as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point

A person should consume more of something when its marginal:

benefit exceeds its marginal cost

Average fixed cost:

declines continually as output increases

If the demand for product X is inelastic, a 4 percent increase in the price of X will:

decrease the quantity of X demanded by less than 4 percent

If a firm doubles its output in the long run and its unit costs of production decline, we can conclude that:

economies of scale are being realized

Economic profits are calculated by subtracting:

explicit and implicit costs from total revenue

To the economist, total cost includes:

explicit and implicit costs, including a normal profit

Economics may be best defined as the:

social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity

Economies of scale are indicated by

the declining segment of the long-run average total cost curve

The basic characteristic of the short run is that:

the firm does not have sufficient time to change the size of its plant

Graphically, the market demand curve is:

the horizontal sum of individual demand curves

When diseconomies of scale occur:

the long run average total cost curve rises

Normal profit is:

the return to the entrepreneur when economic profits are zero

Competition means that:

there are independently-acting buyers and sellers in each market

Accounting profits equal total revenue minus:

total explicit costs

Which of the following is most likely to be an inferior good:

used clothing

Economies and diseconomies of scale explain:

why the firms long-run average total cost curve is U-shaped