quiz two

Marginal utility refers to the:

Additional utility from consuming the last unit of a good Marginal utility is the extra utility that a consumer derives from one more unit.

Demand is defined as the:

Ability and willingness to buy specific quantities of a good or service at various prices in a given time period, ceteris paribus Demand may be broken into two parts in that you must want a good or service and you must have the ability to pay for it.

An industry in which a few large firms supply most or all of a product is known as:

An oligopoly Oligopolies are noted for the strategic interdependence of firms' pricing policies.

Which of the following is not characteristic of a perfectly competitive market?

Brand loyalty Brand loyalty is a characteristic of a monopolistically competitive market.

Suppose the price elasticity of demand for tacos is 0.80. If the price of tacos increases by 10 percent, then the quantity demanded of tacos should, ceteris paribus:

Decrease by 8% Since elasticity is measured in terms of percentages, a coefficient of 0.80 would cause the quantity demanded to fall by 80% of the increase in price (80% X 10% = 8%).

A profit-maximizing competitive firm wants to _____ the rate of output when price _____ marginal cost.

Expands; exceeds If price is greater than marginal cost an increase in output will add more additional revenue than additional cost.

The factors of production include:

Land, labor, capital, and entrepreneurship The four factors of production are land, labor, capital, and entrepreneurship.

Which of the following is an example of perfect competition?

Many small firms all produce the same good In a competitive market the type of product is standardized.

The change in total output that results from one additional unit of input is the:

Marginal physical product Marginal physical product is equal to the change in total product divided by the change in the quantity of resource applied.

Which of the following is an example of a monopoly?

One large firm supplies the entire product to the market A true monopoly market has but one supplier.

The price elasticity of demand is defined as the:

Percentage change in quantity demanded divided by the percentage change in price Using percentages rather then absolute amounts to measure price elasticity, allows us to compare different products with different prices.

In the short run, a manufacturer should produce the next unit of output as long as:

Price is greater than marginal cost For a manufacturer if the price is greater than the marginal cost then the total profit will increase or a loss will decrease.

If price is greater than marginal cost for the last unit produced:

Profit is increasing If the additional revenue (price) added is greater than the additional cost, profits will increase or the loss will decrease.

When producing jeans, which of the following are not a variable cost in the short run?

Rent for the factory Factory rent would not normally be related to production volume and would be defined as fixed costs.

In economic theory, utility refers to the:

Satisfaction obtained from a good or service Marginal utility refers to the additional satisfaction obtained from one more unit where as utility is a measure of satisfaction.

The market demand curve is calculated by:

Summing the quantities demanded from individual demand curves The market demand curve is defined as the sum of the individual demand curves.

The MC curve is a competitive firm's short-run _____ curve.

Supply The marginal cost curve is a competitive firm's short-run supply curve.

Which of the following is not a determinant of demand for a good?

Technological advances All of them are determinants of demand for a good except technological advances which is a determinate of supply.

If the first, second, third and fourth worker employed by the firm add 15, 21, 12 and 8 units of total product respectively, we can conclude that:

That after the second worker marginal product declines At first marginal physical product increases but eventually the law of diminishing returns will cause marginal physical product to decline.

Which of the following is not a determinant of demand?

The cost of factors of production While income, tastes, and expectation about future prices are determinants of demand the cost of factors of production is a determinate of supply.

Assume a toy company hires an additional worker to assemble toys, and the size of the factory and amount of equipment remain constant. As a result, the level of output increases but by a smaller amount than when the previous additional worker was hired. This is an example of:

The law of diminishing returns The fixed factors of production must be used with more and more units of the variable factor and beyond some point additional amounts of input will yield less and less output.

Which of the following causes the market demand curve for a good to shift?

The number of buyers in the market A change in the number of buyers in a market would shift the demand curve, while the other determinants would affect the supply curve.

The maximum output that can be produced from a set of inputs is measured by:

The production function A production function gives the maximum amount of output with a given amount of inputs.

The law of diminishing returns means that:

The total product production function will eventually increase at a decreasing rate. Total production will at first increase at an increasing rate but because of the law of diminishing returns, will eventually increase at a decreasing rate until it turns negative.

Competitive firms cannot individually affect market price because:

Their individual production is insignificant relative to the production of the industry In a competitive market a firms relative output is so small that it will have no effect on the market price.

Average total cost is defined as:

Total cost divided by the quantity produced Average total cost is found at any point of the total cost curve by dividing total cost by units of output.

The amount of utility obtained from the entire consumption of a good is known as:

Total utility The total amount of satisfaction derived from the consumption of a single product or service.

The average total cost curve is:

U-shaped The average total costs curve falls at first because both the average variable cost curve and the average fixed cost curve are falling but since the average variable cost curve will start to rise beyond some point in production volume (because of the law of diminishing returns), average total cost curve will also rise.

The pleasure or satisfaction obtained from goods and services is known as:

Utility Utility is a measure of the satisfaction received from the consumption of a good or service

If a firm increases output, total costs will rise because of a change in:

Variable costs Since variable costs are related to changes in volume and total costs is the sum of both fixed and variable costs, total costs will increase with increased volume.