Micro Final

The following data shows the relationship between total costs and output in the short run. The firm's marginal costs are equal to average total cost somewhere between units:

3 and 4

In the U.S. market economy, the government performs the following prominent roles, except:

Set prices for most resources

The short run is a time period in which:

Some resources are fixed and others are variable

Rent-seeking behavior in public choice theory refers to:

Specific groups appealing to government for special benefits at someone else's expense

Which of the following if an example of a market failure?

Successful public schools provide benefits to the students who attend them, as well as to the community as a whole including those who don't go to those public schools

Economists distinguish among the immediate market period, the short run, and the long run by noting that:

Supply is most elastic in the long run, and least elastic in the immediate market period

The difference between the actual price that a producer receives and the minimum acceptable price the producer is willing to accept is called the producer:

Surplus

Which is a reason why there is no advertising by individual firms under pure competition?

Firms produce a homogeneous product

If the price-elasticity coefficient for a good is .17, the demand for that good is described as:

Inelastic

A price increase from $43 to $49 results in an increase in quantity supplied from 220 units to 240 units. The price elasticity of supply in this price range is:

0.67

A nondiscriminating monopolist will find that marginal revenue:

Is less than average revenue or price

Which statement best describes a special-interest issue?

It is a program or policy in which a large number of people will suffer small cost and a small number of people will receive large gains

Deadweight losses occur when the quantity of an output produced is:

Less than or greater than the competitive equilibrium quantity

In the short run, total product begins to decrease at the point where the:

Marginal product of labor is zero

The range of diminishing marginal productivity begins when:

Marginal product reaches its maximum

Total revenue for producing 8 units of output is $48. Total revenue for producing 9 units of output is $63. Given this information, the:

Marginal revenue for producing the ninth unit is $15

Which is not a basic market model?

Free enterprise

With a natural monopoly, the fair return price:

Is allocatively inefficient; the socially optimal price is allocatively efficient

One argument for requiring the government to regulate natural monopolies is that:

Without regulation these monopolies produce at a level where marginal benefit is greater than marginal cost

If you know that when a firm produces 10 units of output, total costs are $1,030 and average fixed costs are $10, then total fixed costs are:

$100

Which is most characteristic of a purely competitive monopoly?

The firm produces a good or a service for which there are no close substitutes

Blossom, Inc. sells 500 bottles of perfume a month when the price is $7. A huge increase in resource costs forces Blossom to raise price to $9, and the firm only manages to sell 460 bottles of perfume. The price elasticity of demand is:

0.33 and inelastic

When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. The price-elasticity of demand coefficient for this product is:

1.5

Suppose you are given the following data on demand for a product. The price elasticity of demand (based on the midpoint formula) when price decrease from $9 to $7 is:

1.60

The following cost data are for a firm operating in the short run. Other things equal, diminishing returns begin to set in with the production of which unit of output?

4

Assume the price of a product sold by a purely competitive firm is $5. Given the data in the accompanying table, at which output is total profit highest in the short run?

40

If the price elasticity of demand for a product is equal to 0.5, then a 10 percent decrease in price will increase quantity demanded by:

5 percent

Suppose a consumer has an income of $16, the price of A is $2, and the price of B is $1. Which combination is on the consumer's budget line?

5A and 6B

Assume that the only variable resource used to produce output is labor. Refer to the above table. When the firm hires four units of labor the average product of labor is:

7.50 units of output

With fixed costs of $400, a firm has average total costs of $3 and average variable costs of $2.50. Its output is:

800 units

An indifference curve shows:

All combinations of two products from which the consumer derives the same total utility

A profit-maximizing firm should shut down in the short run if the price it receives is less than:

Average variable cost

If marginal cost is below average variable cost:

Both average total cost and average variable cost are decreasing

A nondiscriminating pure monopolist is generally viewed as:

Both productively and allocatively inefficient

A decrease in money income cause the consumer's:

Budget line to shift inward to the origin

Decreases in the price of a product causes the consumer's:

Budget line to shift outward from the origin

The information-aggregation problem faced by the top layers of government can make it hard for the high-level officials to:

Comprehensively assess the marginal costs and benefits of specific programs

Normal profits are:

Considered an implicit cost by economists

A leftward shift of a consumer's budget line to a position parallel with the original one could indicate that the:

Consumer's money income has increased but the prices of both products have increased proportionately more

In the graph above, a decrease in the price of television sets will lead the consumer shown to:

Decrease her demand for lasagna

If many people in a community get flu shots, the whole community benefits including those that did not get flu shots. Therefore, not enough people may decide to get the shots. This is one illustration of:

Demand-side market failure

Government in a market system can increase economic efficiency by collecting taxes in order to subsidize the production of:

Goods with positive externalities

One key is difference between government activities and private transactions is that:

Government can enforce involuntary transactions, whereas private transactions are mostly voluntary

The marginal rate of substitution of good A for good B defines:

How many units of good B a consumer is willing to give up when he receives one extra unit of good A, holding his total utility constant.

Under pure monopoly, a profit-maximizing firm will produce:

In the elastic range of its demand curve

Assume there is no way to prevent someone from using an interstate highway, regardless of whether or not he or she pays for it. This characteristic is called:

Nonexcludability

When producers do not have to pay the full cost of producing a product, they tend to:

Over-produce the product because of a supply-side market failure.

Which is a barrier to entry?

Patents

In the immediate market period for a highly-perishable crop like tomatoes, the individual farmer's supply curve tends to be:

Perfectly inelastic

Which characteristic would best be associated with pure competition?

Price taker

To derive the demand curve of a product in indifference curve analysis, the:

Prices of other products are varied

The situation where politicians make decisions that will raise their chances of reelection, even if those decisions are detrimental to the general public, is referred to as the:

Principal-agent problem

Which idea is inconsistent with pure competition?

Product differentiation

According to the law of diminishing marginal returns, eventually:

The additional output generated by additional units of an input will diminish

The difficulties in managing government in a market economy include the following, except:

The close resemblance of government to the "invisible hand"

When a competitive market achieves allocative efficiency, it implies that:

The combined consumer and producer surplus is maximized

The law of diminishing returns explains:

The increases in short-run marginal costs

Even in democratic governments, we tend to have a problem with accountability due to the following reasons, except:

There is the markets' self correcting mechanism in government

At what point does marginal product equal average product?

Where average product is equal to its maximum value