Midterm - Microeconomics

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:

$44

Which of the following best characterizes the circular flow of income?

Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.

How does the U.S. Bureau of Labor Statistics gather information with regard to the typical consumption choices of Americans?

Consumer Expenditure Survey

In which of the following countries will the national government have the greatest influence with respect to the nation's economy?

Cuba

____________________________ occur when the marginal gain in output diminishes as each additional unit of input is added.

Diminishing marginal returns

A change in price of a good or service typically causes ___________________________ for that specific good or service.

a change along the supply curve

Which of the following would most likely shift the production possibilities curve inward?

a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time

After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is:

a shift of the demand curve for beef to the left.

Specialization:

can lead to an increase in overall production.

Which of the following falls outside of the classification of business expenditures that fall into the category of variable costs?

costs of research and development

The fact that a consumer is not required to buy the goods that a given firm produces, as well as the fact that the consumer might want the goods a firm produces, but may choose to buy from other firms instead

are two stark realities any business firm must recognize.

The graph below illustrates the total cost function for GoodieCookie Co. How are the company's fixed costs represented in this graph?

as the point where the total cost curve touches the vertical axis

The _____________________ curve will always lie below the curve for average cost because average cost includes _____________ in the numerator of the calculation.

average variable cost; fixed costs

Refer to the below diagram Fig 6-1. In this instance:

all of the above and the consumer can choose any point on or below the budget constraint line BC.

The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display _____________________.

allocative efficiency

Refer to Figure 3-3. A change from Point A to Point E represents a(n):

decrease in supply.

The term ___________________ is used to describe the common pattern whereby each marginal unit of a consumed good provides less of an addition to utility than the previous unit.

diminishing marginal utility

According to the definition of profit, if a profit-maximizing firm will always attempt to produce its desired level of output at the lowest possible cost, then it will

do so regardless of what type of competition exists in a market.

The future of cities in the United States and in other countries will be determined by their ability to benefit from the _________________ and to minimize or counterbalance the ______________________.

economies of agglomeration; corresponding diseconomies

Supply is said to be ____________ when the quantity supplied is very responsive to changes in price.

elastic

Youth smoking seems to be more __________ than adult smoking-that is, the quantity of youth smoking will fall by a greater percentage than the quantity of adult smoking in response to a given percentage increase in price.

elastic

A price cut will increase the total revenue a firm receives if the demand for its product is:

elastic.

A manufacturer would likely make an ___________ in a market following the long-run process of beginning and expanding production in response to ________________ .

entry; a sustained pattern of profits

Which of the following is generally accepted as a valid criticism of the production of useful goods and services?

environmental pollution

If a competitive firm experiences a shift in costs of production that decreases marginal costs at all levels of output,

expanding output levels at any given price will be profitable.

Refer to Figure 3-3. A change from Point A to Point B represents a(n):

increase in quantity supplied.

In microeconomics, the term _____________________ is synonymous with economies of scale.

increasing returns to scale

Taxes on goods with __________ demand curves will tend to raise more tax revenue for the government than taxes on goods with __________ demand curves.

inelastic; elastic

The opportunity cost of an action:

is a subjective valuation that can be determined only by the individual who chooses the action.

If marginal cost is rising in a competitive firm's short-run production process and its average variable cost is falling as output is increased, then

marginal cost is below average variable cost.

In economic terms, a practical approach to maximizing profits requires an examination of how changes in production affect ________________ and ________________ .

marginal revenue; marginal cost

If new manufacturers enter the computer industry, then (ceteris paribus):

the supply curve shifts to the right.

Whatever the firm's quantity of production, _____________ must exceed total costs if it is to earn a profit.

total revenue

Which of the following should typically be ignored because spending has already been made and cannot be changed?

sunk costs

A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result:

total revenue will decrease.

Demand is said to be __________ when the quantity demanded changes at the same proportion as the price.

unit elastic

Jay and Jen are married with two children. They are preparing a household budget for the coming year. Based on statistical information for American households, approximately what portion of this family's annual consumption will most likely be budgeted for food and vehicle expenses?

one-third

During a severe recession, the government issued food stamps that could only be used to acquire food to a greater number of families. The budget line graph shows food on the horizontal axis and everything else on the vertical axis. The government expects that issuing the food stamps will cause each family's budget constraint line to:

pivot out along the horizontal axis.

If the quality differences of similar products are mostly imperceptible to the average consumer's eyes, which of the following will most likely play a major role in influencing the decisions of purchasers?

price of competing products

As a general rule, utility-maximizing choices between consumption goods occur where the:

price ratio and marginal utilities ratio of two goods is equal.

The downward slope of the demand curve again illustrates the pattern that as _____________ rises, _________________ decreases.

price, quantity demanded

If a graph is used to compare total revenue and total cost of a perfectly competitive firm, then the horizontal axis of the graph will represent the _______________ and the vertical axis will represent ______________________ .

quantity produced; both total revenue and total costs, measured in dollars.

Refer to the diagram below. In this instance, the marginal revenue curve

reflects each of the above

When quantity demanded decreases in response to a change in price:

the demand curve shifts to the right.

Which of the following is considered to be a tell-tale signal that the point with the highest total utility has been found?

the marginal utility per dollar is the same for both goods

Even when competitive firms are unable to calculate marginal revenue product directly, _________________________________________ will push wage rates toward the marginal revenue product of labor.

the pressures of competition in the labor market

_____________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price.

Total revenue

Referring to Table 2-1: A student has only a few hours to prepare for two different exams this afternoon. The below table shows alternative possible exam scores with three alternative uses of the student's time. The opportunity cost of scoring a 94 on the economics exam rather than a 77 is:

15 points on the history exam.

If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to:

rise and the equilibrium quantity to stay the same.