Microeconomics final exam

A demand curve that is perfectly inelastic is: 1) downward sloping 2) upward sloping 3) vertical 4) horizontal

vertical

Each month, Evelyn spends exactly $50 on frappuccinos, regardless of the price. Evelyns price elasticity of demmand for frappuccinos is: 1) 1 2) 0 3) greater than 1 4) less than 1 but greater than 0

0

If you pay a price exactly equal to your willingness to pay, then your consumer surplus is: 1) $0 2) impossible to determine 3) less than the producer surplus 4) greater than the opportunity cost of the good

0

Which factor does NOT determine the price elasticity of demand? 1) the slope of the supply curve 2) the time available to adjust to price changes 3) the proportion of the budget spent on the item 4) the number of available substitutes

the slope of the supply curve

You run a business producing painting. This month, your total cost of production is $10,000, your variable cost is $6,000, and you produce 3,000 paintings. It follows that your average ___________ cost is _________. 1) variable, $2 2) total, $3 3) total, $1 4) fixed, $1

variable, 2

Amy and Mark each consume 2 loaves of bread at the current price. If Amy values each loaf of bread less than Mark values each loaf of bread, then: 1) Amys consumer surplus is greater than Marks 2) Amys consumer surplus is equal to Marks 3) Amys consumer surplus is less than Marks 4) Amys willingness to pay for the last loaf of bread is greater than Marks

Amys consumer surplus is less than Marks

(True/False) A normative statement is a statement regarding the forecast of a model.

False

(True/False) According to the circular flow model, firms are suppliers in factor markets.

False

(True/False) Price controls set below the market equilibrium quantity causes a surplus of the good.

False

(True/False) Quality controls have no undesirable side effects.

False

(True/False) Rationality and efficiency is the two assumptions that allow us to understand the incentive power of price.

False

(True/False) The law of demand states that, other things equal, as the price decreases, the demand curve will shift to the right.

False

An increase in price and an ambiguous change in quantity are MOST likely caused by: 1) a shift to the left of the supply curve and a shift to the right of the demand curve 2) a shift to the left of the supply curve and no shift of the demand curve. 3) a shift to the right of the supply curve and a shift to the left in demand 4) a shift to the left of the demand curve and no shift of the supply curve

a shift to the left of the supply curve and a shift to the right of the demand curve

As discussed in class, which of the following is NOT one of the tools that economists use to understand the world? 1 Theory 2 Statistical Analysis 3 Laboratory Experiments 4 Simulation

Laboratory Experiments

Consider the market for snow shovels. Suppose that the price of snow shovels decreases. How would this affect the supply or demand curves for snow shovels? 1) The demand curve and supply curves will both shift right 2) The demand curve will shift left and the supply curve will shift right 3) The demand curve will shift right and the supply curve will shift left 4) Neither curve will shift

Neither curve will shift

In the short run, a perfectly competitive firm produces output and earns ZERO economic profit if: 1) P<ATC 2) P<MC 3) P>ATC 4) P=ATC

P=ATC

Under monopoly, the firm produces the output where ________, and in perfect competition, the firm produces the output where __________. 1) P<MR=MC , P=MR=MC 2) P>MR=MC , P=MR=MC 3) P=MR=MC , P>MR=MC 4) P=MR=MC , P=MR=MC

P>MR=MC , P=MR=MC

Suppose Pennsylvania produces only steel and barley, with fixed amounts of land, labor, and capitol resources. Which scenario BEST sets the stage for economic growth? 1) The percentage of Pennsylvania residents with a university degree rises from 15% to 23% 2) The state experiences a devastating drought. 3) The unemployment rate in Pennsylvania rises from 5% to 6% 4) The united states imports more and more low-cost steel from Canada

The percentage of Pennsylvania residents with a university degree rises from 15% to 16%

Which factor is most likely to shift the supply curve for milk to the left? 1) a tax on each gallon of milk produced 2) an increase in household income, milk being a normal good 3) a decrease in the price of feed given to dairy cows 4) new dairy farms entering the market

a tax on each gallon of milk produced

(True/False) Market equilibrium occurs when there is no incentive for prices to change in the market, and quantity supplied.

True

(True/False) The input price for good X falls and the demand for good Y increases. We can conclude that X and Y compliments.

True

(True/False) Trade can be beneficial to an economy because it enables more goods and services to be obtained at a lower opportunity cost.

True

(True/False) A binding minimum wage will MOST likely lead to a situation where some unskilled workers have a difficult time finding a job.

True

A monopoly is an industry structure characterized by: 1) many sellers of a product with few close substitutes 2) diseconomies of scale 3) many sellers of a similar product 4) barriers to entry exist

barriers to entry exist

If the cross elasticity of demand between cheese and yogurt is positive, then: 1) cheese and yogurt are compliments 2) the demand for cheese and the demand for yogurt are both price inelastic 3) the demmand for cheese and the demand for yogurt are both price elastic 4) cheese and yogurt are substitutes

cheese and yogurt are substitutes

Suppose the GoLogos logo monopoly is broken up and the logo industry becomes perfectly competitive. We would expect _________ surplus to increase and _________ surplus to decrease after the breakup. 1) consumer and total , producer 2) consumer , producer and total 3) producer , consumer and total 4) producer and total , consumer

consumer and total , producer

If the government levies an excise tax in a market whose supply curve is perfectly elastic, and demand curve is elastic the burden of the tax will fall completely on the: 1) consumers 2) producers 3) none of consumers or producers 4) both

consumers

The eventual increase in AVC as output increases is the __________ effect 1) diminishing returns 2) spreading 3) constant cost 4) increasing returns

diminishing returns

If income elasticity of electric cars is positive: 1) there are few substitutes for electric cars 2) there are many substitutes for electric cars 3) electric cars are an inferior good 4) electric cars are a normal good

electric cars are a normal good

An economic model: 1) is a simplified version of reality used to understand real-world economic conditions 2) often leads to faulty conclusions because of the "all things equal" assumption. 3) allows noting to change in the economic situation that is being described. 4) is useful in proposing the most equitable economic outcomes.

is a simplified version of reality used to understand real-world economic conditions.

the marginal cost curve intersects the average total cost curve (ATC) at: 1) its maximum 2) its endpoint 3) its lowest point 4) no point; the curves don't intersect

its lowest point

Spaghetti and lasagna are substitutes. Holding all other things constant, this means that if the price of spaghetti increases, the demand for....... 1) lasagna will increase 2) spaghetti will increase 3) both spaghetti and lasagna will increase 4) lasagna will decrease

lasagna will increase

For the texas beef industry to be considered perfectly competitive, ranchers in texas must have ________ on prices, and beef must be a ________ product. 1) a huge effect, standardized 2) a huge effect, differentiated 3) no noticeable effect, standardized 4) no noticeable effect, differentiated

no noticeable effect, standardized

Generally, when preferences for a good rise, demand for the good rises. If a perfectly competitive market starts in long run equilibrium, holding all else constant, this will result in a higher market price, which will lead to ___________ in the industry and __________ the market. This causes price to ___________. 1) positive economic profits; causes some firms to leave; rise further 2) positive economic profits; attracts new firms into; fall 3) economic loses; attracts new firms into; fall 4) economic losses; causes some firms to leave; rise further

positive economic profits, attracts new firms into, fall

Consider the market for pencils. Suppose that the price of lumber (an input for the pencil production) increases. How would this increase in the price of lumber affect the market equilibrium and quantity sold of pencils. 1) price increases, quantity increases 2) price increases, quantity decreases 3) price decreases, quantity increases 4) price decreases, quantity decreases

price increases, quantity decreases

The incidence of a tax: 1) refers to who really bears the burden of the tax 2) refers to who writes the check to the government 3) refers to who writes the check to the government 4) is a measure of the deadweight loss generated by the tax

refers to who really bears the burden of the tax

An excise tax that the government collects from the producers of a good: 1) shifts the supply curve upward 2) decreases tax revenue for the government 3) increase tax revenue for the government 4) shifts the demand curve upward

shifts the supply curve upward

The larger the output, the more output over which the fixed costs is distributed. Called the __________ effect, this leads to a __________ average fixed cost as output rises. 1) spreading; higher 2) spreading; lower 3) diminishing returns; lower 4) diminishing returns; higher

spreading, lower

A shift of the demand curve for friend chicken would NOT be caused by a change in: 1) The price in fried chicken 2) income 3) the price of pizza 4) the popularity of fried chicken

the price of fried chicken