Microeconomics exams and quizzes

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Serena Haley Bracelets 8 9 Necklaces 16 12 Refer to Table above. What is Haley's opportunity cost of making a necklace?

3/4 of a bracelet

Hours Open Total Revenue 1 $70 2 120 3 160 4 184 5 200 6 210 Santiago runs a comic book store in the town of East Arbor. He is debating whether he should extend his hours of operation. Santiago figures that his sales revenue will depend of the number of hours the store is open as shown in the table. He would have to hire a worker for those hours at a wage rate of $18 per hour. Using marginal analysis, determine how many hours should Santiago extend his store's hours of operations?

4 hours

Trina's Tropical Fish Store sells goldfish for $2 each and angelfish for $10 each. What is the opportunity cost of buying a goldfish?

5 angelfish

When two goods are substitutes, then the cross-price elasticity of demand between them is ___________.

<0

For a normal luxury good, the income elasticity of demand is __________.

>1

Quota is a tax on imports. T or F

False

When MR < Price, then the firm guarantees positive profit. T or F

False

Serena Haley Bracelets 8 9 Necklaces 16 12 Refer to Table above. Which of the following statements is true?

Haley has a comparative advantage in making bracelets and Serena in making necklaces

One Motorcycle One Guitar Ireland 20 hours 4 hours Scotland 8 hours 2 hours Refer to Table above. If the two countries specialize and trade, who should export guitars?

Ireland

Consider the following statements: a. Consumers buy more MP3 players from an electronics store that sells MP3 players at a lower price than other rival electronics stores in the area. b. Schools take steps to increase security since they believe it is more costly to allow vandalism than to hire additional security guards. c. Citrus growers produce more oranges when the selling price of oranges falls. Which of the above statements demonstrates that economic agents responds to incentives?

a and b

A decrease in the demand for soft drinks due to changes in consumer tastes, accompanied by an increase in the supply of soft drinks as a result of reductions in input prices, will result in

a decrease in the equilibrium price of soft drinks; the equilibrium quantity may increase or decrease

The main reason for the existence of monopoly is ________.

barriers to entry

For any firm that faces downward sloping demand curve, the MR falls _________ of the demand curve.

below

Perfect competition firm is __________ allocative and productive efficient.

both

Firms in monopolistic competitive market use __________ to maintain differentiation of their products.

brand management

The production possibilities frontier model shows that

if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.

A tariff is tax imposed by government on ___________.

imports

Terms of trade is the ratio at which a country can trade its ________ for goods from other countries.

imports

One of the explanations of the negative slope of the demand curve is the ___________ effect.

income

Voluntary exchange ________ economic efficiency because neither the buyer nor the seller would agree to a trade unless ________.

increases; they both benefit

On the PPF point A is beneath the line. Point A is

inefficient in that not all resources are being used.

An advantage of imposing a tax on the producer that generates pollution is that

it forces the polluting producer to internalize the external cost of the pollution

Inferior good is a good that when the income increase people buy ___________ amount of it.

less

The cost borne by a producer in the production of a good or service is called

private cost

When people use all the resources and information they have to make decisions they are considered __________.

rational

Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave ___________, meaning they make the best decisions given their knowledge of the costs and benefits.

rationally

In order to raise revenue, a firm that sells elastic good should __________ the price.

reduce

One benefit of merger could be shifting the MC curve to the __________.

right

Tariffs will work to protect domestic _________.

sellers

Dumping refers to _________.

selling product below its cost

Collusion means __________.

setting prices

The opportunity cost of the good on the x-axis is the __________ of the PPF.

slope

For monopolistic competition firm, the MR is __________ than the demand curve.

steeper

When the price of a good falls, consumers buy a larger quantity because of the ________ effect and the ________ effect.

substitution; income

The case where Qd<Qs is called ___________.

surplus

By definition, economics is the study of

the choices people make to attain their goals, given their scarce resources

Prices of California Merlot wine (assume that this is a normal good) have risen steadily in recent years. Over this same period, prices for French oak barrels used for wine storage have dropped and consumer incomes have risen. Which of the following best explains the rising prices of California Merlots?

the demand curve for merlot has shifted to the right more than the supply curve has shifted to the right

A positive externality causes

the marginal social benefit to exceed the marginal private cost of the last unit produced.

One would speak of a change in the quantity of a good supplied, rather than a change in supply, if

the price of the good changes

Linear Demand curve is crossed by lines S2(left)(Q2) and S1(right)(Q1) Figure above shows the market for Atlantic salmon, a common resource. The current market equilibrium output of Q1 is not the economically efficient output. The economically efficient output is Q2. Refer to Figure above. The current market equilibrium output is partly the result of overfishing. In that case, what does S1 represent?

the private marginal cost of harvesting salmon

What is a "social cost" of production?

the sum of all costs to individuals in society, regardless of whether the costs are borne by those who produce the products or consume the product

Figure: graph, Linear demand and supply curves, intersect at 4 Demand Supply $20 0 15 2 10 4 5 6 0 8 Refer to Figure above. At a price of $15

there would be a surplus of 4 units

Profit is defined as __________.

(P-ATC)*Q

A perfectly inelastic demand curve has elasticity of ___________.

0

Figure: x-axis 160lbs vegetables y-axis 120lbs meat If Mendonca chooses to produce 160 pounds of vegetables, how much meat can it produce to maximize production

0 pounds

What is the difference between an "increase in demand" and an "increase in quantity demanded"?

An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.

Linear demand curve(D1) with A(closer to price) and B(closer to quantity) and shifted line to right D2 Refer to Figure above. A decrease in the price of a substitute good would be represented by a movement from

D2 to D1

The government makes all economic decisions in a market economy. T o F

F

Absolute advantage is when the producer produces the item at lower opportunity cost. T or F

False

What is a market failure

It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost

Economic Agents(M), to(Wages and salaries), Market(K), to(labor services), Economic Agents(J) Refer to Figure above. One segment of the circular flow diagram in the figure shows the flow of labor services from market K to economic agents J. What is market K and who are economic agents J?

K = factor markets J = firms

That claim that as the price increases, the quantity demanded decreases; citrus paribus is ____________.

Law of Demand

Marginal analysis involves comparing __________.

MB and MC

When the ___________, then the firm is producing at less than efficiency

MR<Price

Natural monopoly on its own will produce at __________.

MR=MC

The profit maximizing condition for all types of firms is __________.

MR=MC

The use of trade barriers to shield domestic industries from foreign competition is called _________.

Protectionism

Linear Demand curve is crossed by Marginal social cost and marginal private cost Refer to Figure above. The efficient output level is

Qa marginal social cost crosses demand curve

Which of the following would cause both the equilibrium price and equilibrium quantity of cotton (assume that cotton is a normal good) to increase?

an increase in consumer income

Which of the following would cause an increase in the supply of peanut butter?

an increase in the number of firms that produce peanut butter

Building models using the scientific method is based on the crucial step of making __________.

assumptions

The case in which a country doesn't trade with other countries.

autarky

Microeconomics field of study is concerned with how __________ make decisions.

households and firms

The change of price of a good causes ___________.

change in quantity demanded

Comparative advantage is determined by _________.

climate and natural resources

Trade is based on ___________ advantage.

comparative

Markets promote

competition and voluntary exchange

The market that has almost identical goods and many buyers and sellers is called ___________.

competitive market

Natural monopoly is characterized by _________.

decreasing ATC

Population and demographics are determinants of ___________.

demand

What would happen in the market for laser eye surgery if insurance companies started to cover a portion of the price of voluntary procedures?

demand will increase, but this will not shift the supply curve

Vertical merger happens when two firms from __________ levels of production of the good or services become one firm.

different

In the monopolistic competitive market, firms sell __________ products.

differentiated

The demand curve that faces a monopolistic competitive is __________.

downward sloping

On the linear demand curve, if we go downward the curve, then the value of the elasticity goes as __________.

elastic-unit elastic-inelastic

When the supply curve of a good or service is elastic, then it is more ___________.

flat

If the marginal benefit of reducing emissions of some air pollutant is less than the marginal cost

further reduction will make society worse off

If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced.

linear

In monopoly case, consumers ___________ while producer __________ when compared to perfect competition.

loss, gain

The broader the definition of the market, the __________ the elasticity of demand will be.

lower

A grocery store sells a bag of potatoes at a fixed price of $2.30. Which of the following is a term used by economists to describe the money received from the sale of an additional bag of potatoes?

marginal revenue

The other name of equilibrium point is ___________ point.

market clearance

All of the following is counted as "capital" in economics except

money

As time passes, the __________ elasticity of demand for the product becomes.

more

Trade allows the producer to producer to produce _____________ than what is produced.

more

Figures: Graph A, same on x-axis splits E-F going to y-axis Graph B, parallel lines G-H(different lines) H-J (same line) Graph C, one line K-L (not on line) Mercedes Benz recently decided to introduce its B-class automobile in the U.S. market, an electric car that is has designed and developed in a partnership with Tesla Motors. Assume Mercedes Benz chooses to produce both electric-engine vehicles and gasoline-engine vehicles. Figure 2-7 shows changes to its production possibilities frontier in response to new developments and different strategic production decisions. Refer to Figure above. Assume a technological advancement greatly reduces the cost to produce electric-engine vehicles. This is best represented by the

movement from E to F in Graph A

Transaction cost refers to ____________cost.

negotiating and agreement

Monopolistic competitive firm is __________ allocative and productive efficient.

neither

We should privatize the Medicare system in Kansas is a __________ statement.

normative

Externality refers to the benefit or cost that affects someone ___________ in the market of the production or consumption of the good or service.

not involved

In economics, the term "free rider" refers to

one who waits for others to produce a good and then enjoys its benefits without paying for it.

The mechanism of the free market is ___________.

price

WTO is the international organization that oversees international _________.

trade

Scarcity is the base of __________ every society faces.

trade-off

One reason that we don't see the complete specialization in production by countries is that not all goods and services are _________.

traded

A point outside the PPF is considered to be ___________.

unattainable

A successful market economy requires

well-defined property rights and an independent court system to adjudicate disputes based on the law.

The distribution of income primarily determines which of the fundamental economic questions?

who will receive the goods and services produced?

One difference between the demand for a private good and that for a public good is that

with a private good, each consumer chooses the quantity she wants to consume but with a public good, everyone consumes the same quantity.

In the long run, the monopolistic competitive firm make __________ profit.

zero


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