Microeconomics final

If the interest rate is 5%, the current market value of $1 to be delivered in one year is

$0.95.

Refer to Table 11.1. If the interest rate is 9%, Nashbar Bicycle's total investment would be

$1,100,000.

Refer to Scenario 9.1. Amy's total fixed costs equal

$10,000.

Refer to Table 10.1. The marginal revenue product of the fourth worker is

$100.

Amy's profit is

$20,000.

Amy's total costs equal

$40,000.

You use $2,000 of your own money to start a dog-sitting service. During the first year you earn a 10% return on your investment. If the current interest rate is 7%, you earn an economic profit of

$60.

Perfectly competitive firms

A) sell homogeneous products. B) are price takers. C) are small relative to the size of the market.

The Taste Freeze Ice Cream Company is a perfectly competitive firm producing where MR = MC. The current market price of an ice cream sandwich is $5.00. Taste Freeze sells 200 ice cream sandwiches. Its AVC is $4.00 and its AFC is $3.00. What should Taste Freeze do?

Continue to produce because price exceeds AVC.

A new technology is developed for producing microwave ovens that reduces production costs by 10%. Which of the following is the most likely consequence of this technological change?

Firms must adopt this new technology to remain efficient.

A condition in which no change is possible that will make some members of society better off without making some other members of society worse off is called

Pareto optimality.

The Taste Freeze Ice Cream Company is a perfectly competitive firm producing where MR = MC. The current market price of an ice cream sandwich is $5.00. Taste Freeze sells 200 ice cream sandwiches. Its AVC is $8.00 and its AFC is $3.00. What should Taste Freeze do?

Shut down and produce zero sandwiches because price is less than AVC.

Which of the following would be the most likely result if high-speed rail service were introduced to an area and made commuting from that area easier?

The cost of living far from one's workplace would drop, and the value of land would increase.

You value your economics textbook at $10. Someone else values it at $25, and that person is willing to pay you $20 for your textbook. Would selling your textbook to this person for $20 be Pareto efficient?

Yes, because both of you are better off as a result of the trade.

In an imperfectly competitive industry,

a single firm has some control over the price of its output.

An oligopoly is an industry market structure with

a small number of firms each large enough to impact the market price of its output.

An example of intangible capital is

a trained apprenticeship program.

Which of the following is LEAST likely to be considered a firm in an imperfectly competitive industry?

a wheat farmer in Kansas

A technological change in the production of cars will

affect input and output markets in the automobile industry and other related industries.

Although patents are a ________, they also provide ________.

barrier to entry; an incentive for invention and innovation

Oligopolists must ________ to their strategy in order to determine their optimal strategy.

both A and B are correct.

The market in which households supply their savings to firms that demand funds in order to buy capital goods is the ________ market.

capital

Goods produced by the economic system that are used as inputs in the production of future goods and services are

capital goods.

The idea that the demand for auto workers stems from the demand for automobiles is

derived demand

Firms gain control over price in monopolistic competition by

differentiating their products.

It is essential to establish specific criteria to judge the performance of any economic system. Two such criteria are

efficiency and equity.

You cause an automobile liability insurance company to face a moral hazard problem when you take ________ driving precautions ________ you buy automobile liability insurance from the company.

fewer; after

Refer to Table 10.1. If the payment to labor per day is $100, this T-shirt manufacturer is maximizing profits if he will hire ________ employee(s).

four

Refer to Table 11.1. If the interest rate is 20%, Nashbar Bicycle should

fund only the purchase of new notebook computers for its sales staff.

Monopolies, oligopolies, and monopolistic competitive industries all

have market power.

If a firm is producing where MR > MC,

he revenue gained by producing one more unit of output exceeds the cost incurred by doing so.

If the wage rate is less than the marginal revenue product of labor, the firm should ________ to maximize profits.

hire more labor and produce more output

Assume Dell Computer Company operates in a perfectly competitive market producing 5,000 computers per day. At this output level, price exceeds this firm's marginal cost. To maximize profits, Dell should

increase their output.

74) For most people, as their income increases, their utility from that income ________ at a(n) ________ rate.

increases; decreasing

suppose a policy change will generate $100,000 of benefits for low-income families and $120,000 of costs for high-income families. This change can best be described as

inefficient.

Assume Dell Computer Company operates in a perfectly competitive market producing 5,000 computers per day. At this output level, price equals this firm's marginal cost. To maximize profits, Dell should

make no adjustments as they are already maximizing their profits.

Monopolistic competition is an industry market structure with

many firms each able to differentiate their product.

Relative to a monopolized industry, a competitively organized industry is more likely to produce

more output, charges lower prices, and earns only a normal profit.

The demand for Ben & Jerry's ice cream will likely be ________ the demand for dessert.

more price elastic than

The airline industry is an example of a(n) ________ industry.

oligopolistic

If TR > TC, a firm would ________ in the short run and ________ in the long run.

operate; expand

An economist has estimated that the maintenance of a public park costs $25,000 a year and that the public park generates $30,000 a year in revenue for merchants near the park. From society's point of view, the maintenance of this park is

potentially efficient because the value of the gains exceed the value of the costs.

Which one of the following is NOT a source of market failure?

price ceilings

Preferences have just shifted away from beef and into lamb. If you are a sheep rancher, the best profit-maximizing strategy is to

produce as much as possible to earn profits in the short run.

Billy Bob's Fertilizer Engineers, a perfectly competitive firm, is incurring a loss, but the price is still above minimum average variable cost. Then in the short run this firm should ________, and in the long run, if there is no change in economic conditions, this firm should ________.

produce where MR = MC; exit the industry

Salaries of NFL quarterbacks, like Tom Brady, are

related to the additional revenues team owners expect to enjoy as a result of having them on the team roster.

Refer to Table 10.1. The marginal revenue product of the ________ worker is $150.

second

If an individual perfectly competitive firm charges a price below the industry equilibrium price, it will

sell all that it produces but gain less revenue than competing firms will.

Which of the following would NOT be considered an act of investing in capital?

the Postal Service delivering the mail

A decrease in the wage rate will change

the amount of labor employed, and it may also change the amount of other inputs employed.

In making labor supply decisions, households weigh

the market wage against the value of leisure and time spent in unpaid household production.

For a monopolist to sell more units of output,

the price must be reduced.

Total cost is calculated as

the sum of total fixed cost and total variable cost

Profit-maximizing firms want to maximize the difference between

total revenue and total cost.