Microeconomics ECON201

(Exhibit: Production Possibilities Schedule) If an economy is producing at alternative W, the opportunity cost to it of producing at X is _______ unit(s) of consumer goods per period.

4

An industry dominated by a few firms, where each of those firms recognizes that its own choices will affect the choices of its rivals and that its rivals' choices will affect it, is a(n):

oligopoly

(Exhibit: Costs of Producing Bagels) The average total cost of producing six bagels is:

$0.15.

(Exhibit: Costs of Producing Bagels) The marginal cost of producing the sixth bagel is:

$0.20.

(Exhibit: Costs of Producing Bagels) The total cost of producing two bagels is:

$0.40.

(Exhibit: Costs of Producing Bagels) The total cost of producing six bagels is:

$0.90.

(Exhibit: Profit Maximization for a Firm in Monopolistic Competition) Suppose that an innovation reduces a firm's fixed costs and reduces cost from ATC to ATC' Suppose further that after the innovation reduced the cost to ATC?, it costs a total of $18 per unit to produce 170 units per day. If the firm charges a price equal to marginal cost, total net profit will be:

$1,190.

(Exhibit: Profit Maximization for a Firm in Monopolistic Competition.) Suppose that an innovation reduces a firm's fixed costs and reduces cost from ATC to ATC' After the innovation reduced the cost, the firm's maximum economic profit is:

$1,500.

(Exhibit: Demand and Supply Schedules for a Good) The equilibrium price is ________ and the equilibrium quantity is ________.

$3.00; 240 units

(Exhibit: Demand and Supply Schedules for a Good.) If there were an increase in demand by 50 units at each price, the equilibrium price and quantity would be ________ and ________ units, respectively.

$3.50; 250

If a firm produces 10 units of output and incurs $30 in average variable cost and $5 in average fixed cost, average total cost is:

$35.

(Exhibit: Supply and Demand Schedules for a Good) If there were a decrease in supply by 100 units at each price, the equilibrium price and quantity would be ________ and ________ units, respectively.

$4.00; 160

(Exhibit: A Perfectly Competitive Firm in the Short Run) The firm's total cost of producing its most profitable level of output is:

0FKD.

(Exhibit: A Perfectly Competitive Firm in the Short Run) The firm's total revenue from the sale of its most profitable level of output is:

0GLD.

(Exhibit: A Perfectly Competitive Firm in the Short Run) The firm will shut down in the short run if the price falls below:

0P.

Which statement best describes a capitalist economy?

The production and allocation of goods and services is determined primarily through markets.

Which of the following is not a central focus of the "economic perspective"?

The scientific method.

Economic growth is shown by a shift of the production possibilities curve outward and to the right.

True

If demand increases and supply simultaneously decreases, equilibrium price will rise.

True

In the price range where demand is inelastic, a decrease in price will result in a decrease in total revenue.

True

Property rights have a positive effect in a market economy because they encourage owners to maintain their property.

True

Which of the following is true?

When a firm is operating under perfectly competitive market conditions, price and marginal cost will always be equal if the firm is maximizing profits.

The primary difference between a change in demand and a change in the quantity demanded is:

a change in quantity demanded is a movement along the demand curve, and a change in demand is a shift in the demand curve.

If two goods are complements:

a decrease in the price of one will increase the demand for the other.

Imperfect competition is:

a market structure where firms have a degree of monopoly power.

The private ownership of property resources and use of prices to direct and coordinate economic activity is characteristic of:

a market system.

An industry that contains a firm that is the only producer of a good or service for which there are no close substitutes and for which entry by potential rivals is prohibitively difficult is:

a monopoly.

(Exhibit: Supply and Demand in Agriculture) To help farmers:

a price floor would be set at P4, causing a surplus of Q3 - Q0.

Demand can be said to be inelastic when:

a reduction in price results in a decrease in total revenue.

Demand is defined as:

a schedule that shows how much will be purchased at various prices during a particular period, all other things unchanged.

A decrease in supply means:

a shift to the left of the entire supply curve.

An oligopoly knows that its _______ affect(s) its _______ and that the _______ of its rivals will affect it.

actions; rivals; reactions

In the long run:

all inputs are variable.

(Exhibit: Markets and Efficiency) In panel (a):

all of the above are true.

The price elasticity of demand is:

always negative.

It is true that the equilibrium quantity will always go up if supply:

and demand both increase.

(Exhibit: Short-Run Costs) Curve A crosses the average total cost curve at:

approximately 2.8 units of output.

(Exhibit: Short-Run Costs) Curve A crosses the average variable cost curve at:

approximately 2.8 units of output.

(Exhibit: Short-Run Costs) Curve B is the _______ cost curve.

average total

(Exhibit: Short-Run Costs) At 7 units of output, average fixed cost is approximately _______ , and average variable cost is approximately _______ .

$40; $ 100

(Exhibit: Computing Monopoly Profit) Total economic profit at the profit-maximizing level of output is:

described by B and C.

(Exhibit: Profit Maximization for a Firm in Monopolistic Competition) Suppose that an innovation reduces a firm's fixed costs and reduces cost from ATC to ATC' Before the innovation reduced the cost, the firm's maximum economic profit was:

$0.

(Exhibit: Demand and Price Elasticity 1) What is the price elasticity of demand between $1.75 and $1.50?

-1.86

(Exhibit: Demand for Shirts) The price elasticity of demand for the segment AB is:

-11

(Exhibit: Demand and Price Elasticity 1) What is the price elasticity of demand between $2.50 and $2.25?

-19

(Exhibit: Demand for Shirts) The price elasticity of demand for the segment BC is:

-3.

(Exhibit: Demand and Price Elasticity 1) What is the price elasticity of demand between $2.25 and $2.00?

-5.67

(Exhibit: Production Possibilities Schedule) If the economy is producing at alternative X, the opportunity cost to it of producing at Y instead of X is _______ units of consumer goods per period.

6

For a restaurant:

A and B are correct.

Which of the following is (are) correct?

All of the above are correct.

Question 1310 / 10 points (Exhibit: A Perfectly Competitive Firm in the Short Run) The firm's total economic profit at its most profitable level of output is:

FGLK.

A government-set price ceiling will lower equilibrium price and quantity in a market.

False

Price elasticity of supply decreases the longer the time period.

False

The four factors of production are land, labor, capital, and government services.

False

Toothpaste and toothbrushes are substitute goods.

False

(Exhibit: Computing Monopoly Profit) In order to obtain maximum profits, the monopoly should produce the output determined by point _______ .

G

(Exhibit: Markets and Efficiency) What is the marginal benefit to a producer of an extra pound of apples in Panel (a)?

It is the price the producer receives.

(Exhibit: Markets and Efficiency) What is the marginal cost of an extra pound of apples to a producer in Panel(a)?

It is the value that must be given up to produce an extra pound of apples.

A firm in monopolistic competition maximizes its profit by producing at the level at which:

MC = MR.

Which of the following is (are) true?

MR = MC is a profit-maximizing rule for any firm.

(Exhibit: Markets and Efficiency) In Panel (b) demand shifted from D1 to D2, reflecting a change in consumer preferences. The price of apples will change to the new equilibrium price:

NOT of $0.70.

Which of the following is true in a perfectly competitive market?

One unit of a good or service cannot be differentiated from any other on any basis.

(Exhibit: Computing Monopoly Profit) The profit-maximizing price is _______ and will generate total economic profit of _______ .

P3; the rectangle P2P3EF

The assumptions of perfect competition imply that:

individuals in the market accept the market price as given.

(Exhibit: Demand and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose consumer incomes increase. Which panel best describes how this will affect the market for dress ties, a normal good?

Panel (b)

(Exhibit: Demand and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose half the people in San Diego move to Colorado Springs. Which panel best describes how this will affect the market for houses in Colorado Springs?

Panel (b)

(Exhibit: Demand and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose the Surgeon General announces that eating chocolate prevents heart disease. Which panel best describes how this will affect the market for chocolate?

Panel (b)

(Exhibit: Demand and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose half the people in San Diego pack up and move to Colorado Springs. Which panel best describes how this will affect the supply of houses in San Diego?

Panel (c)

(Exhibit: Demand and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose the technology for producing handheld calculators improves. Which panel best describes how this will affect the market for handheld calculators?

Panel (c)

(Exhibit: Demand and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose oil becomes more expensive. Which panel best describes how this will affect the market for gasoline, which is made from oil?

Panel (d)

(Exhibit: Supply and Demand in Agriculture) If a price floor at P4 is set to help farmers in terms of income and government wants to assure farmers that their output will be purchased, the government would have to purchase an amount of output equal to:

Q3 - Q0.

(Exhibit: Supply and Demand in Agriculture) If the government set an effective price floor at one of the prices shown on the vertical axis:

Q3 bushels of wheat would be supplied.

A natural monopoly exists whenever a single firm:

confronts economies of scale over the entire range of production that is relevant to its market.

(Exhibit: Production Possibilities Schedule) A move from alternative Y to alternative X would:

decrease potential growth.

A negative relationship between the quantity demanded and price is called the law of ______.

demand

Given constant quantities of all other factors of production, when additional units of a variable factor of production add less and less to total output, then the firm is experiencing:

diminishing marginal returns.

Diminishing marginal returns means that:

each additional unit of an input used will increase output, but by smaller and smaller amounts.

When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. In this range of prices, demand for this product is:

elastic

The ratio of the percentage change in a dependent variable to the percentage change in an independent variable, all other things unchanged, is:

elasticity.

In a market system, well-defined property rights are important because they:

encourage economic activity.

(Exhibit: Markets and Efficiency) The equilibrium price in Panel (a) tells us that the marginal cost of a pound of apples is:

equal to $0.80.

A men's tie store sold an average of 30 ties per day when the price was $5 per tie but sold 50 of the same ties per day when the price was $3 per tie. Hence, the absolute value of the price elasticity of demand is:

equal to 1.

Marginal revenue:

equals the market price in perfect competition.

In a market capitalist economy:

factors of production are owned privately and decisions about their use are basically made by individuals.

When marginal cost is below average variable cost, average variable cost must be:

falling.

(Exhibit: Demand for Shirts) The price elasticity of demand for the segment CD is:

greater than 1 (absolute value).

Price for a firm under monopolistic competition is:

greater than marginal revenue.

An economic system is the set of rules that define _______ and _______ .

how an economy's resources are to be owned; how decisions about the resources are to be made

Economics is the study of:

how people, institutions, and society make choices under conditions of scarcity.

A shift of a demand curve to the right, all other things unchanged, will:

increase equilibrium price and quantity.

(Exhibit: Short-Run Costs) Curve A declines from a cost of about $50 and a quantity of 1 to a cost of about $40 and a quantity of 2 (point F) at which time it rises again. The declining segment is due to ________ marginal returns, and the rising segment is due to _______ marginal returns.

increasing; diminishing

Scarcity in economics means:

not having sufficient resources to produce all the goods and services we want

Perfect competition is important to study because it:

is a theoretical extreme used for analysis.

Monopolistic competition is an industry characterized by a:

large number of firms producing similar products, with relatively easy entry for firms.

The branch of economics that examines the impact of choices on aggregates in the economy is:

macroeconomics

(Exhibit: Short-Run Costs) Curve A is the _______ cost curve.

marginal

A concentration ratio is used to measure:

market dominance.

The branch of economics that examines the choices of consumers and firms is:

microeconomics

Imperfect competition includes:

monopolistic competition and oligopoly.

An industry characterized by many firms, producing similar but differentiated products, in a market with easy entry and exit is called:

monopolistic competition.

Economics is different from other social sciences because it gives special emphasis to the study of ______; it is similar to other social sciences because they are all concerned with the study of _______.

opportunity costs; choices

(Exhibit: Production Possibilities Curve-Military and Civilian Goods) If the economy is represented by Curve 1, then:

point E is unattainable at the present time.

If the absolute value of price elasticity is greater than 1, this means the demand curve in that region is:

price elastic.

If total revenue goes up when price falls, the price elasticity of demand is said to be:

price elastic.

Which of the following will lead to a decrease in total revenue?

price increases and demand is price elastic

Capitalism is an economic system that:

private individuals and corporations the right to own productive resources.

Price elasticity of demand measures the responsiveness of the change in:

quantity demanded to a change in price.

If the current price is above the equilibrium price, we would expect:

quantity supplied to exceed quantity demanded.

(Exhibit: Production Possibilities Curve-Military and Civilian Goods) A movement from point G to H on Curve 1 would:

require giving up military goods in order to get more civilian goods.

A price below the equilibrium price will:

result in pressure for price to rise.

When we are forced to make choices we are facing the concept of:

scarcity

The relationship between the quantity of a good or service sellers are willing and able to offer for sale and the independent variables that determine quantity is:

supply.

Unwritten or unspoken understandings through which firms collude to restrict competition are called:

tacit collusion.

The intersection of the supply and demand curves indicates:

the equilibrium solution in the market

If a firm possesses monopoly power, it means that:

the firm can set its own price based on its output decision.

Perfect competition is characterized by:

the inability of any one firm to influence price.

The price elasticity of a good will tend to be greater:

the longer the relevant time period.

(Exhibit: Markets and Efficiency) The price and marginal cost in Panel(a) are equal because of:

the marginal decision rule.

Whenever a choice is made:

the opportunity cost of that choice is value of the next best alternative

Demand is price inelastic if:

the percentage change in quantity demanded is relatively small in response to a relatively large percentage change in price.

(Exhibit: Production Possibilities Curve-Military and Civilian Goods) If an economy is at point U, and its production possibilities curve is Curve 1, this would indicate that:

there is inefficiency and/or unemployment.

The basic concern of economics is:

to study the choices people make.

The sum of fixed and variable costs is:

total cost.

Average variable cost is:

total variable cost divided by quantity.

If the total revenue received by a firm does not change when it raises its price, this indicates that the demand for the firm's product is:

unit price elastic.

The satisfaction or pleasure one gets from consuming a good or service is:

utility

A factor of production whose quantity can be changed during a particular period is a:

variable factor of production.