MICRO Final

Exhibit 2-6B Refer to Exhibit 2-6B. Which graph depicts a technological breakthrough in the production of good X only?

(3)

Suppose that when the price of good Y falls from $10 to $8, the quantity demanded of good X rises from 20 units to 25 units. Using the midpoint method, the cross-price elasticity of demand is

-1.0, and X and Y are complements.

Tyler purchases 5 pounds of hot dogs per month when his monthly income is $2,000 and 4 pounds of hot dogs per month when his monthly income is $2,200. Tyler's income elasticity of demand for hot dogs is

-2.33, and hot dogs are an inferior good

If the price elasticity of demand for a good is 5, then a 10 percent increase in price results in a __________ decrease in the quantity demanded.

50 percent

Why must profits be zero in long-run competitive equilibrium?

If profits are not zero, firms will enter or exit the industry.

How would a decrease in the price of the feed grains used to feed cattle affect the market for beef?

Price decreases, quantity increases

When comparing a perfectly competitive market and a single-price monopolist, we will generally find that the competitive market produces

a greater output and charges a lower price than the monopolist

A movie theater can increase its profits through price discrimination by charging a higher price to adults and a lower price to children if it

can prevent children from buying the lower-priced tickets and selling them to adults. has some degree of pricing power. can easily distinguish between the two groups of customers.

According to the law of supply, a increase in the price of ice cream would lead to

decrease quantity demanded

In the long run a company that produces and sells popcorn incurs total costs of $1,050 when output is 90 canisters and $1,200 when output is 120 canisters. The popcorn company exhibits _______.

diminishing marginal product.

If all a government is interested in is raising tax revenue, then it should tax a good that is

inelastic.

Exhibit 6-8 Bea's total utility of 3-minute Refer to Exhibit 6-8. Diminishing marginal utility is first observed at the

second unit.

If a monopolistically competitive firm can increase its level of production and lower its average total cost of production at the same time then

the firm has excess capacity

Brady Industries has average variable costs of $1 and average total costs of $3 when it produces 500 units of output. The firm's total fixed costs equal

$1,000

Figure 14-3 Suppose a firm operating in a perfectly competitive market has the following cost curves: Refer to Figure 14-3. If the market price is $10, what is this perfectly competitive firm's short-run economic profit?

$15

The Wacky Widget company has total fixed costs of $100,000 per year. The firm's average variable cost is $5 for 10,000 widgets. At that level of output, the firm's average total costs equal

$15

Situation 22-4 Joe is the owner-operator of Joe's Haircuts Unlimited. Last year he earned $200,000 in total revenues and paid $125,000 to his employees and suppliers. During the course of the year, he received three offers to work for other barbers, with the highest offer being $50,000 per year. Refer to Situation 22-4. What are Joe's economic profits?

$25,000

Anya has decided to start her own hair-styling salon. To purchase the necessary equipment, Anya withdrew $10,000 from her savings account, which was earning 3% interest, and borrowed an additional $5,000 from the bank at an interest rate of 8%. What is Anya's annual opportunity cost of the financial capital that has been invested in the business?

$700

Figure 2-6 Refer to Figure 2-6. The opportunity cost of this economy moving from point I to point H is

120 blankets

Jose has one evening in which to prepare for two exams and can employ one of two possible strategies: Strategy - A B Score in Economics - 94 77 Score in Statistics - 79 90 The opportunity cost of receiving a 90 on the statistics exam is _______ points on the economics exam.

17

Figure 15-19 Refer to Figure 15-19. If this monopolist charges a single price to all customers its profits will equal

3,125

Suppose the marginal utility (MU) of a paperback books is 40 utils and each costs $5 while the MU of a hamburger is 20 utils and each costs $4. If you consume one paperback and one hamburger per week, are you attaining consumer equilibrium?

No. You need to buy more books and fewer hamburgers.

"The second glass of Evian water was very good. May I have another?" Which of the following is necessarily true regarding this statement?

The marginal utility of the second glass is positive.

Which of the following examples illustrates an oligopoly market?

a city with two firms who are licensed to sell school uniforms for the local schools

According to the law of supply, a decrease in the price of ice cream would lead to

a decrease in quantity supplied of ice cream

Which of the following would be most likely to have monopoly power?

a municipal water company

Figure 6-4 Refer to Figure 6-4. A government-imposed price ceiling of $6 in this market results in

a shortage of 8 units.

Figure 6-4 Refer to Figure 6-4. A government-imposed price floor of $12 in this market results in

a surplus of 4 units.

Which of the following firms is the closest to being a perfectly competitive firm?

a wheat farmer in Kansas

The fundamental cause of monopoly is

barriers to entry

Mrs. Smith operates a business in a perfectly competitive market. The current market price is $8.10. At her profit-maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should

continue to operate in the short run but shut down in the long run

Figure 8-12 Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The tax causes the price received by sellers to

decrease by $1.

The fundamental reason that marginal cost eventually rises as output increase is because of

diseconomies of scale

An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 boxes per minute. Using the midpoint method, supply is

elastic, and the price elasticity of supply is 1.74.

In general, game theory is the study of

how people behave in strategic situations.

Figure 8-12 Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The tax causes the price paid by buyers to

increase by $2.

Which of the following goods are likely to be sold in a monopolistically competitive market?

jeans

Figure 2-6 Refer to Figure 2-6. Unemployment could cause this economy to produce at which point(s)?

k

Laura is a gourmet chef who runs a small catering business in a perfectly competitive industry. Laura specializes in making wedding cakes. Laura sells 20 wedding cakes per month. Her monthly total revenue is $5,000. The marginal cost of making a wedding cake is $200. In order to maximize profits, Laura should

make more than 20 wedding cakes per month

When a market is monopolistically competitive, the typical firm in the market is likely to experience a

positive or negative profit in the short run and a zero profit in the long run

Which of the following conditions distinguishes monopolistic competition from perfect competition?

product differentiation

The local bakery makes such great cinnamon rolls that price elasticity of demand for cinnamon rolls is 0.7. If the owner is only interested in increasing revenue, she should

raise the price of the cinnamon rolls.

The overriding reason why households and societies face many decisions is that

resources are scarce

Table 4-11 Refer to Table 4-11. If the price were $4, a

shortage of 25 units would exist, and price would tend to rise

Table 4-11 Refer to Table 4-11. If the price were $8, a

surplus of 25 units would exist, and price would tend to fall