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Ag Econ Final Review

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Which of the following goods is likely to have the most elastic demand over the relevant range of prices?

Pepsi Cola

If the market price is $50, then what is consumer surplus?

3675

For the monopolist in Figure below, Which point corresponds to the profit-maximizing level of output?

Given the graph below, which of the following statements is false?

Consumers are dis-saving by $300 at a disposable income of $3,000.

Flora's Flowers operates in a perfectly competitive market. At the point where marginal cost equals marginal revenue, ATC = $10, AVC = $5, and the price per unit is $15. In this situation,

Flora earns positive profits in the short run

Given the graph below, what effect would expansionary monetary policy shifting the aggregate demand curve from AD1 to AD2 have on the economy?

GDP in the economy would increase and unemployment would decline.

Which of the following statements is (are) true?

In imperfect competition, P=MR.

Given the graph below, which monetary policy actions by the Federal Reserve would lower the interest rate from the current 10 percent level?

Lower the fractional required reserve ratio.

Suppose that the own price elasticity for Schwepps ginger ale is -1.25. In order for Cadbury Schwepps to increase total revenue, at least in the short run, it would be advisable to?

Lower the price of ginger ale

Which of the following is the best example of physical capital used to produce a textbook?

The printing press

Suppose a local bookstore notices that a 2 percent increase in book prices leads to a 2 percent decrease in the number of books sold. Which of the following is true?

The store's sales revenue did not change.

For which of the following categories of goods is demand likely to be the most price elastic?

a BMW sports car

Procter & Gamble Co. is a major soap producer. All of the following, except one, would shift its supply curve of liquid soap to left. Which is the exception?

a decrease in the price of liquid soap

Given the figure below, Consumers would be worse off economically under this form of supply control by area 4 plus area 6.

false

Given the figure below, Producers are better off, gaining area 6 while giving up areas 2 and 3.

false

A decrease in demand, with supply constant, results in a(n)

decrease in equilibrium price and a decrease in equilibrium quantity

A substitute good is one that

can be used in place of another good, fulfilling the same basic purpose

Network externalities

can explain the dominance of existing firms in some industries

Indifference curves may intersect.

false

Federal subsidies to higher education have the effect of

increasing the demand for higher education

The national debt:

is equal to the debt at the beginning of the year plus the deficit during the year.

An excess supply of rice in a competitive market would indicate that

the current price exceeds the equilibrium price

Figure below shows the supply and demand for socks. If a price floor of $10 per pair is imposed by the government

there will be a surplus of 6 pairs of socks

Figure above illustrates the trade-off for a particular student between time spent studying per week and income per week from working part-time. What is the opportunity cost for this person of moving from point a to point b?

$10 of income per week

Figure below illustrates the trade-off for a particular student between time spent studying per week and income per week from working part-time. What is the opportunity cost for this person of moving from point a to point b?

$10 of income per week

Given the graph below Total economic surplus is $100 $110 $550 Can't tell

$100

Figure below shows the payoff matrix for the only two auto dealerships in a community, Jim's Autos and Tim's Autos. The matrix shows the profits that each firm would earn from choosing either a low price or a high price. The equilibrium level of profit for Jim's Autos would be

$100,000

Given the environment illustrated in Figure below, At the profit-maximizing, or loss-minimizing, level of output in Figure above, the firm's total cost is approximately

$14,000

Given the environment illustrated in Figure below The profit-maximizing price for the firm in Figure above is

$150

Given the environment illustrated in Figure below, The profit-maximizing price for the firm in Figure above is

$150

In Figure below, using the supply and demand curves denoted S1 and D2, respectively, the equilibrium price and quantity are

$150 and 75,000

Nominal per capita GDP is equal to:

$2,700.

Assume that for John Paxton, a soybean producer from Iowa, the only source of farm income is from the production of soybeans. Paxton produced 100,000 bushels of soybeans in 2012, receiving $12 per bushel. Assuming this producer had production expenses of $800,000, and assuming the CPI for 2012 was 2.00, his real farm income for 2012 was:

$200,000

When the market price is $2 per pound, the consumer surplus is:

$24.500.

The firm in Figure below does not practice price discrimination. Its price and output will be

$250 and 125

The maximum profit under imperfect competition is:

$4,500

A consultant who earns $100 per hour takes four hours off work to go to the movies. The out-of-pocket cost for the cab and the movie ticket are $12. The total cost of the movie to the consultant is

$412

The following information supposedly collected on a particular country by the CIA. Nominal GDP is equal to:

$5,200 million

Given the following equation where DPI represents disposable personal income: C = 1,500 + 0.85(DPI) If disposable personal income is $5,000, consumer spending would be equal to:

$5,750.

A family on a trip budgets $800 for sit-down restaurant meals and fast food. The family can buy 16 restaurant meals if they don't buy any fast food. What is the price of a restaurant meal for the family?

$50

Consider the firm in Figure below. If the firm sells five units of output, then the price must equal

$50

Given figure below, Assuming no price discrimination, the firm represented by Figure above will have a per unit profit of

$50

Use the following table to answer the question: Net farm income for this operation is: $600,000 $1 million $7 million $25 million

$600,000

Use the following table to answer the question: The equity for this operation is: $600,000 $1 million $7 million $ 25 million

$7 million

Carl is considering attending a concert with a ticket price of $35. He estimates that the cost of driving to the concert and parking there will total an additional $20. In order to attend the concert, Carl will have to take time off from his part-time job. He estimates that he will lose 5 hours of work, at a wage of $6 per hour. Carl's opportunity cost of attending the concert equals

$85

Carl is considering attending a concert with a ticket price of $35. He estimates that the cost of driving to the concert and parking there will total an additional $20. In order to attend the concert, Carl will have to take time off from his part-time job or forgo studying for an exam scheduled for the next morning. He estimates that he will lose 5 hours of work, at a wage of $6 per hour or 5 hours of study time. If Carl considers studying the best alternative use of his time, his opportunity cost of attending the concert equals

$85 plus the value of the highest exam grade he could earn by studying for 5 hours

Suppose that a firm produces 9 units at a price of $13 and 12 units at a price of $12. Then marginal revenue is:

When Better Beds produces 40 beds per day, its average variable cost is $600 and its average total cost is $800. The marginal cost of producing the 40th bed is $700. Based on this information, what is the Better Beds' average fixed cost (AFC) for quantities of 20 and 40 beds per day?

(20, 400) and (40, 200)

This question pertains to the following table that gives the output produced (in bushels) and price of corn received ($/bushel) for Farmer Smith over the period 2008 to 2010. Assume that the only source of income for Farmer Smith is from the production of corn. Also assume that all production costs are zero. You are to compute output indices for 2008 and 2010 for Farmer Smith with the base year of 2009. Which of the following statement(s) is (are) true? The output index for 2008 is 0.75. The output index for 2009 is 0.80. The output index for 2010 is 1.25. (a) and (c)

(a) and (c)

The MIS (marginal interest sensitivity) is equal to:

-$15,000.

For the monopolist in Figure below, the marginal revenue from producing the 7th unit is

-$20

The MIS for Argentina between points A and B is equal to:

-$30 billion.

Suppose that Trey spends all of his income on vacation trips and textbooks. If the price of a trip is $200 and the price of a textbook is $50, then the slope of his budget line (assuming vacation trips are measured on the vertical axis) would be

-0.25

Suppose that Trey spends all of his income on vacation trips and textbooks. If the price of a trip is $250 and the price of a textbook is $75, then the slope of his budget line (assuming vacation trips are measured on the vertical axis) would be

-0.30

If the price of food falls by 10 percent and the quantity sold increases by 5 percent, then the price elasticity of demand equals

-0.5, and demand is inelastic

The marginal rate of substitution between points C and D is: -1.5 -4 -6 -0.67

-1.5

If the price of Good X increases by 10% and that causes the quantity demanded of Good Y to decrease by 15%, then the cross-price elasticity between Good X and Good Y is _____, and the two goods are _____.

-1.50; complements

The change in domestic consumer surplus is given by area(s):

-2

The following graph depicts a leftward shift in the supply curve. Each letter represents the area of the shape. The change in consumer surplus is given by (Hint: New Surplus-Old Surplus):

-B - C

The following graph depicts a leftward shift in the supply curve. Each letter represents the area of the shape. The net effect on society is given by:

-C - E

If the market price reduces from $7 to $5 what is the loss in consumer surplus?

On the basis of this graph, the MPS in Mexico between points A and B is equal to:

0.1

The marginal rate of substitution between points C and D is

0.4

Figure below shows the demand curve for chicken. Between points L and M, the price elasticity of demand is

0.44, and demand is inelastic

If the price of food falls by 10 percent and the quantity sold increases by 5 percent, then the price elasticity of demand in that range equals

0.5, and demand is inelastic

Data for Wilson's Lamb Slaughtering Plant are given below: Let the base year be 1.0 in 1998. What is the output index for 1999?

0.75

On the basis of this graph, the MPC in Mexico between points A and B is equal to:

0.9

Stanley receives the following marginal utilities from the first four car washes that he buys each year, respectively: 20, 15, 10, and 5. If each car wash sells for $10, then the marginal utility per dollar spent on the third car wash is

The percentage of disposable income currently spend on food in the United States is about

10%

In the following table, "I" stands for the amount of a particular variable input. Assume the model of perfect competition. 100 200 300 can't say; insufficient information

100

If the price elasticity of demand for Cheer detergent is 3.0, then a

12 percent drop in price leads to a 36 percent rise in the quantity demanded

If the market price is $7, then what is consumer surplus? 700 1300 1500 1000 2600

1300

Use the following graph to answer the question. Note that this graph is not drawn to scale. What is the slope at point A?

15/10

Anita consumes both pizza and Pepsi. The following tables show the amount of utility she obtained from different amounts of these two goods. Suppose Pepsi costs $0.5 per can, pizza costs $1 per slice and Anita has $10 to spend on food and drinks. Find Marginal Utility (MU) of the 8th slice of pizza?

Anita consumes both pizza and Pepsi. The following tables show the amount of utility she obtained from different amounts of these two goods. Suppose Pepsi costs $0.5 per can, pizza costs $1 per slice and Anita has $10 to spend on food and drinks. What is the marginal Utility per dollar (MU/P) spent on the 8th slice of pizza?

Anita consumes both pizza and Pepsi. The following tables show the amount of utility she obtained from different amounts of these two goods. Suppose Pepsi costs $0.5 per can, pizza costs $1 per slice and Anita has $9 to spend on food and drinks. MU is Marginal Utility and MU/P is Marginal Utility per dollar.

If the market price reduces from $7 to $5, then what is the consumer surplus? 320 1500 1725 1925 3450

1725

Daniel's consumption of pizzas drops from 6 per week to 4 per week when the price rises from $9 to $11. His price elasticity of demand for pizza equals

Figure below shows the supply and demand for socks. If a price floor of $10 per pair is imposed by the government, the number of pairs actually purchased will be

2 pairs

The change in producer surplus is given by:

2+3

If the price of a certain brand of sneakers falls from $27.50 to $22.50, and the quantity demanded by consumers increases from 15 to 25 pairs per week, then the price elasticity of demand is

2.50

If the market price is $10, then what is consumer surplus?

2000

If the market price reduces from $50 to $20 what is the gain in consumer surplus? 6075 2400 3675 1000 5425

2400

The Dixie Chicken sells 2000 Freddie Burger platters per month at $3.50 each. The own price elasticity for this platter is estimated to be -1.30. If the Chicken reduces the price of the platter by 50 cents how many platters will the Chicken sell?

2400

Individual demand schedules for three customers from the local H-E-B store in the purchase of ice cream are given below: What is the quantity demanded of ice cream at a price of $1.60 assuming that the only consumers in this market are customers A, B, and C?

Suppose Walmart sells 3,000 pounds of hamburger meat a week at $5.00 per pound and is considering raising its prices by 15 percent. The own prices elasticity of hamburger meat is -0.62. How many pounds of hamburger meat will Walmart sell if it raises the price?

2721

The table below shows the marginal utility Kate receives from buying tacos and pizzas, assuming she buys only these two goods. Each taco sells for $5 and each pizza sells for $4. What is the marginal utility per dollar spent on the fourth taco?

Given the Table below, What is the profit-maximizing level of output for the non-discriminating monopolist in Figure below?

3 units

Figure below shows the supply and demand for socks. If a price ceiling of $4 per pair is imposed by the government, the number of pairs actually purchased will be

4 pairs

A family on a trip budgets $800 for sit-down restaurant meals and fast food. If the price of a fast food meal for the family is $20, how many such meals can the family buy if they do not eat at restaurants?

If the market price reduces to $8 what is the gain in consumer surplus?

420

The marginal utility associated with drinking one more soda is: 1/5 5 15 3

Use the following graph to answer the question. Note that this graph is not drawn to scale. What is the y-intercept of line iii?

Anita consumes both pizza and Pepsi. The following tables show the amount of utility she obtained from different amounts of these two goods. Suppose Pepsi costs $0.5 per can, pizza costs $1 per slice and Anita has $9 to spend on food and drinks. MU is Marginal Utility and MU/P is Marginal Utility per dollar. What combination of pizza and Pepsi will maximize Anita's utility?

5 slices and 8 cans

Based on the graph, which of the following is true?

5 units of environmental quality and 8 units of power offer the same level of satisfaction as 4 units of environmental quality and 10 units of power.

In one hour, George can fix 4 flat tires or type 200 words. His opportunity cost of fixing a flat tire is

50 words

Anita consumes both pizza and Pepsi. The following tables show the amount of utility she obtained from different amounts of these two goods. Suppose Pepsi costs $0.5 per can, pizza costs $1 per slice and Anita has $10 to spend on food and drinks. What combination of pizza and Pepsi will maximize Anita's utility?

6 slices and 8 cans

Given the environment illustrated in Figure below, The profit-maximizing, or loss-minimizing, output for the firm in Figure above is

70 units

If bread costs $1 and meat costs $4 per pound, a consumer whose marginal utility of meat equals to 80 utils per pound is maximized only if the marginal utility per pound of bread equals

80 utils

Figure below shows cost curves for Penny's Parasols, a perfectly competitive firm. At which of the points would Penny's Parasols be certain to close down?

"Senior citizens deserve an income that will allow them to live in comfort for their remaining years." This is

A normative statement

The problem of scarcity occurs under

All economic systems

According to the graph below, which of the following statement(s) is (are) true? (Note: D0 is the original relationship and D1 is the new relationship) New medical research indicates that eating macaroni and cheese leads to a degenerate nervous disorder. Assuming macaroni and cheese is an inferior good, income available to the consumer rose. There is a change in demand for macaroni and cheese. All of the above

All of the above

Given the equation C = $1,500 + .70($3,000): consumption is equal to $3,600. marginal propensity to save is .30. autonomous consumption is $1,500. All of the above

All of the above

Of the following, which is true of the relationship between the quantity of a good supplied and its price?

As price increases, the quantity supplied usually increases

Figure below shows the cost curves for a perfectly competitive firm. This firm's short run supply curve is the section of the MC curve between points

B and D

The following graph depicts a leftward shift in the supply curve. Each letter represents the area of the shape. The change in producer surplus is given by (Hint: New Surplus-Old Surplus):

B-E

The diagram above describes what kind of agricultural program?

Expanding Export Demand

U.S. farms tend to be diversified rather than specialized.

False

Even though households may have unlimited wants, they have to allocate their spending carefully because they

Have limited income

Use the table below to answer question dealing with the output and price of corn for 2011 and 2012. Relative to 2011, the price of corn for 2012 was:

Higher by 25%

Use the table below to answer questions 47 and 48 dealing with the output and price of corn for 2011 and 2012. Relative to 2011, the price of corn for 2012 was:

Higher by 25%

The Dixie Chicken sells 2000 Freddie Burger platters per month at $3.50 each. The own price elasticity for this platter is estimated to be -1.30. What will happen to the Chicken's monthly revenue

Increase by $200

All combinations of Coca-Cola and potato chips that make Jose equally well off lie along a particular curve

Indifference curve

A monopolist that does not price discriminate will set the output level where

MR = MC

If a consumer allocates her income between two goods, x and y, then she will be happies when

MUx/Px = MUy/Py and all of her income is spent

Brian and Matt own the only two bicycle repair shops in town. Each must choose between a low price for repair work and a high price. The yearly economic profits from each strategy are indicated in Figure bellow. The upper right side of each rectangle shows Brian's profits; the lower left side shows Matt's profits. Which of the following statements is correct?

Matt's dominant strategy is to charge a low price

The study of how consumers and producers interact in individual markets is

Microeconomics

In Promaine Flats, Nevada there are two restaurants: Sal Monella and Road Kill Café. Current profit is $7,000 each. Cleaning will attract more customers, but profit will reduce to $5,000 each. If Sal Monella cleans up and Road Kill Café doesn't then profit will be $4,500 for Sal Monella and $3,000 Road Kill, and if Road Kill Café cleans up and Sal Monella doesn't then profit will be $4,500 and $3,000, respectively. For the figure above which of the following statements is correct?

Neither Sal Monella nor Road Kill Café has a dominant strategy.

If the government were to impose a lump-sum tax on a monopolist, what is likely to happen to the quantity produced of a commodity and the price charged relative to the situation where there is no lump-sum tax imposed?

No change in price or quantity produced would occur, only a reduction in profit.

Suppose the government imposes a price ceiling of $3. Now what is the price charged and the output produced?

P = $3, Q = 4,000

What is the price charged and the output produced by the firm in order to maximize profits?

P = $4, Q = 3,000

Figure below depicts a monopoly that does not price discriminate. What are the equilibrium price and output?

P' and Q'

Which of the following formulas represents total profit for a perfectly competitive firm?

Q x (P - ATC)

Figure below shows the cost and demand curves facing a monopolist whose marginal cost is constant. The firm has no fixed costs. If it does not discriminate, it will produce

Q* units and charge price P

Given the figure below, The quantity producers would have supplied at the target price is

The law of diminishing marginal utility

Says that marginal utility decreases as more of a good is consumed

Economics is the study of choice under conditions of

Scarcity

Given the diagram depicted to the right, which of the following statements is true?

The MRS from point A to point B must be greater (in absolute value) than the MRS from point B to point C.

A consumer's budget line shows

The combination of two goods that an individual is able to purchase, given prices and income

Microeconomics is the study of

The economic behavior of individual decision makers

Given the graph below, which of the following statements is false?

The economy is experiencing a recessionary gap

A single-price monopolist is producing 8,000 units of output. At that level, price equals $10, average total cost equals $12, and average variable cost equals $8. In addition, both marginal cost and marginal revenue equal $6. Which of the following statements is correct in the short run?

The firm is minimizing its economic loss at $16,000.

After graduating from high school, Steve had three choices, listed in order of preference: (1) matriculate at our campus, (2) work in a printing circuit board company, or (3) attend a rival college. His opportunity cost of going to college here includes which of the following?

The income he could have earned at the printed circuit board factory plus the direct cost of attending college here (tuition, textbooks, etc.)

Consider the diagram provided below. At point C, which of the following statement(s) is (are) true?

The marginal rate of substitution is 3/4 and without taking the absolute value is -3/4.

The market equilibrium price is the low price.

Use the table below to answer questions 47 and 48 dealing with the output and price of corn for 2011 and 2012. Which of the following statements is true? (Let 2011 be the base year.)

The output index for 2012 is 1.20.

Assume the curves depict the aggregate demand (AD) and aggregate supply (AS) curves for a particular economy. Let $14 trillion correspond to the full employment level of aggregate output (the targeted or desired level) for this particular economy.

The potential GDP for the country is $20 trillion.

Suppose that a consumer's original budget line was AB in Figure above, but it has now changed to line AC. Which of the following must have occurred?

The price of good X must have fallen.

Suppose that a consumer's original budget line was AB in Figure below, but it has now changed to line AC. Which of the following must have occurred?

The price of good X must have fallen.

Suppose a local bookstore notices that a 3 percent decrease in book prices leads to a 3 percent increase in the number of books sold. Which of the following is true?

The store's sales revenue did not change.

Which of the following is not true?

The supply curve for a firm is its MC curve.

For which of the following items is demand likely to be the most price elastic?

Tide liquid laundry detergent

Portugal is experiencing:

a deficit.

A decrease in the price of a particular good, with all other variables constant, causes

a movement along a given demand curve to a higher quantity demanded

In the arena of international trade, Portugal is:

a net importer.

Monopolies are characterized by all of the following, except one. Which is the exception?

a perfectly elastic demand curve

The leftward shift in the planned investment function from I0 to I1 may be attributed to:

a pessimistic view of profit expectations.

An inflationary gap occurs in the economy when:

aggregate demand is greater than full employment output.

Assume the curves depict the aggregate demand (AD) and aggregate supply (AS) curves for a particular economy. Let $15 trillion correspond to the full employment level of aggregate output (the targeted or desired level) for this particular economy, and let $12 trillion correspond to the equilibrium level of GDP. Which of the following statements is (are) true? The depression range of the aggregate supply curve is given by AB. The potential GDP for the country is $20 trillion. The classical range of the aggregate supply curve is given by CD. All of the above

all of the above

Based on the graph below, which of the following statement(s) is (are) true The MRS from point A to point B is -1, and if we take the absolute value then it is 1. We cannot compute the MRS from point A to point E. The curves depicted in in the graph are indifference or iso-utility curves. All of the above.

all of the above

Consumption expenditures includes: purchases of airline tickets. purchases of new automobiles. purchases of food. all of the above.

all of the above

If the budget for the consumer is $48, then at point C, the consumer is said to be in equilibrium. the price per glass of Kool-Aid is $4. the price per glass of tea is $3. all of the above.

all of the above

The functions of money include: a medium of exchange. a store of value. a unit of accounting. all of the above

all of the above

The rationale for government intervention into the agricultural sector includes: providing for environmental quality providing for national food security providing for consumer health and safety all of the above

all of the above

Which of the following is true? MPP = APP, when APP is a maximum MC = AVC, when AVC is a minimum MC = ATC, when ATC is a minimum all of the above

all of the above

Which of the following programs is (are) examples of demand expansion programs? National School Lunch Program School Breakfast Program Supplemental Nutrition Assistance Program (SNAP) all of the above

all of the above

Which of the following statements is (are) true? when DPI = $75,000, taxes = $25,000. the MPC = 2/3. when DPI =$105,000, savings = $25,000. all of the above.

all of the above

The economy's aggregate supply curve includes: a classical range. a normal range. a Keynesian or depression range. all of the above.

all of the above.

If buyers' tastes and preferences shift in favor of a good, the result is

an increase in demand

Which of the following would not cause the demand curve for college football tickets to shift?

an increase in the price of college football tickets

Which of the following would cause a leftward shift of the supply curve for computers?

an increase in the price of printed circuit boards used to build computers

If the income elasticity of demand is negative, this means that the good is

an inferior good

Figure below shows the cost and demand curves facing a monopolist whose marginal cost is constant. The firm has no fixed costs. If it does not discriminate what will it's profit be?

area PP'BA

If the budget for this consumer is $96, then

at point A, the consumer is said to be in equilibrium

Betsy graduates from college, where she earned $3,000 a year working part-time, and takes a job as a third grade teacher, where she now earns $30,000 per year. About the same time she received her first paycheck, her bicycle was stolen. With her old income she would have purchased a new bike but with her new income she purchased a new car. Therefore,

automobiles are a normal good for Betsy

A monopoly exists because of

barriers to entry

Sam graduates from college, where he earned $2,000 a year working part-time, and takes a job as an accountant, where he now earns $25,000 per year. After receiving his first paycheck, he gave away his bicycle and purchased a new car. Therefore,

bicycles are not a normal good for Sam and are likely to be inferior

Which of the following does this graph illustrate? monopoly in the short run monopolistic competition in the short run perfect competition both (a) and (b)

both (a) and (b)

both firms would be best off if they charged a high price, which is not the outcome of the game

Which of the following items is most likely to be an inferior good?

bus tickets

The fact that travel on buses fell as incomes increased in many cities suggests that

bus travel is an inferior good

Real GDP is equal to:

can't say; insufficient information.

The following information supposedly collected on a particular country by the CIA. Real per capita GDP is equal to:

can't tell; insufficient information

X is exactly equals to:

can't tell; insufficient information.

What is the slope of the curve above at point A? 4 -0.25 -4 0.25 Cannot identify

cannot identify

The monopoly that does not practice price discrimination

charges the same price for every unit of output it sells

Investment expenditures consists of:

construction of office buildings.

When the market price rises from $2 to $3 per pound:

consumers are worse off by $12,000.

Price ceilings are primarily targeted to help __________, while price floors generally benefit __________.

consumers; producers

A price floor on corn would have the effect of

creating a surplus supply when the floor is above the equilibrium price

The effect of a change in the price of tea on the quantity of coffee demanded is measured by the

cross-price elasticity of demand

High-income people will sometimes pay higher prices at convenience stores for goods that are available at discount stores. They do this because

crowded and understaffed discount stores impose higher time costs

Suppose the consumption function for Mexico shifts upward from C0 to C1. Which of the following statements is (are) a reason(s) for this upward shift?

decrease in Mexican interest rates

An increase in the price of a good results in a(n)

decrease in quantity demanded

If the demand curve is a horizontal line,

demand is perfectly elastic

If the demand curve is a vertical line, then

demand is perfectly inelastic

If the percentage change in quantity demanded divided by the percentage change in price equals 1, then

demand is unit elastic

Given the environment illustrated in Figure below, The best outcome the firm illustrated in Figure above can achieve is a(n)

economic loss of $3,500

The sensitivity of one economic variable to changes in another variable is known as

elasticity

Which of the following goods would be most likely to be produced by a monopoly?

electricity

experiencing an recessionary gap of $2 trillion.

experiencing an recessionary gap of $3 trillion.

A government-imposed price ceiling set below the market's equilibrium price will create an excess demand for a product. As a result of the excess demand, either the demand curve will tend to shift to the left or the supply curve will shift to the right-or both.

false

A price elasticity of demand of 2 for a specific cola means that if the price increases 10 percent, the quantity demanded of the cola will decrease by 2 percent.

false

An inferior good is defined by an income elasticity less than 1.

false

Charging different customers different prices is always illegal in the United States.

false

Given the figure below, Consumer s would be worse off economically under this form of supply control by area 4 plus area 6.

false

If a 10 percent rise in the price of bananas leads to a 20 percent reduction in the quantity of bananas demanded, then the price elasticity of demand is 0.50.

false

If the price of a good increases from $20 to $25 and the quantity demanded declines from 15 to 10 units of the good, the price elasticity of demand is 5.

false

Marginal revenue, average revenue, and price are all equal for a monopolist.

false

Normal goods are goods for which consumption falls (rises) when income increases (decreases).

false

The U.S. Postal Service

has its monopoly status guaranteed by government franchise

If the quantity of higher education demanded rises by 5 percent when incomes rise by 10 percent,

higher education is a normal good

Positive economics deals with

how the economy does work

Rent control is an example of a price ceiling. Which of the following problems must be addressed under a rent control program?

how to allocate scarce rental units

Use the following graph to answer the question. Note that this graph is not drawn to scale. Which line is drawn tangent to the curve i at point B?

If a market has more than one seller, but fewer sellers than under perfect competition, it is referred to as

imperfect competition

Whether an excise tax is imposed on a demander or supplier is irrelevant because

in either case the price that the demander has to pay will increase; while the price the supplier receives will decrease

Sarah and Marisa are the only two baby-sitters available in a small town. Figure below indicates different combinations of hourly rates charged by the two teenagers, along with their weekly net earnings. If Sarah and Marisa do not collude, then

in equilibrium, both will charge $4 per hour

Figure below shows the marginal cost and average total cost curves for a perfectly competitive firm. The perfectly competitive firm shown in Figure 9-6 is currently producing 80 units of output. To maximize profit (or minimize loss), the firm should

increase output to 140 units

Suppose that when the price of aspirin rises from $2 to $3 per bottle, the quantity demanded falls from 800 bottles per day to 700 bottles per day. Over this range, the demand for aspirin is

inelastic

interest rates should be lowered. and the tax rate should be lowered.

If the percentage change in quantity demanded is greater (in absolute value) than the percentage change in price, then demand

is elastic

The demand curve that a monopolist faces

is the same as the market demand curve

If Carol's Crayon Factory's price exceeds its average total cost in the short run, then

it is earning a profit

If the numerical value of the price elasticity of demand is 3, then a one-percent change in price will cause a(n)

larger percentage change in quantity demanded, so demand is elastic

The demand for a necessity tends to be

less elastic than the demand for a luxury

Intellectual property includes

literary, artistic and musical works, and scientific inventions

A public university knows that demand from potential students is elastic. If the university wants to increase tuition revenue, it should

lower its tuition rate

The change in total revenue obtained by selling an additional unit of output is

marginal revenue

To maximize profit, a monopolist should produce the level of output at which

marginal revenue equals marginal cost

The change in total utility arising from a one-unit increase in consumption of a good is referred to as

marginal utility

When individuals come together to buy and sell goods and services, they form a(n)

market

When there are many buyers and sellers, no significant barriers to entry, and a differentiated product, the market structure is called

monopolistic competition

If government spending is $1,000 and tax revenue collected by the government is $900, the nation's national debt would be equal to:

need more information

Suppose that a monopoly is earning economic profits in the short run. As a result,

no new firms will enter the industry because of barriers to entry

A decrease in the fractional reserve requirement ratio will: shift the money supply curve to the left. alter the slope of the money supply curve. will decrease the money multiplier. none of the above

none of the above

Aggregate demand in the economy is equal to: consumption, investment and net exports. full employment output. consumption, investment and government spending. none of the above

none of the above

Contractionary fiscal policy actions: would likely decrease farmers' fixed liabilities. would likely increase farmers' total assets. would likely increase farmers' operating expenses. none of the above

none of the above

Contractionary open market operations by the Federal Reserve System includes: purchasing government securities from banks and other depository institutions. buying or selling of government bonds by the BMOC. selling bonds to banks to expand their lending capacity. none of the above

none of the above

Given the graph below, which of the following statements is true? The labor market is at full employment. The wage rate would increase if the income tax rate was increased. The economy is experiencing an inflationary gap. None of the above.

none of the above

The fact that travel on buses fell as incomes increased in many cities suggests that bus travel is a luxury the law of demand does not apply to bus travel bus travel is a normal good bus travel is a necessity none of the above

none of the above

Which budget constraint panel in Figure below shows the combined effects of an increase in the price of oranges and a decrease in the price of apples?

none of the above

Which of the following is true about oligopoly? There are many sellers There are few buyers There is no ability to set price none of the above

none of the above

The marginal propensity to save is equal to:

one minus the marginal propensity to consume.

A single-price monopolist is

one that charges the same price for all units of output

Which budget constraint panel in Figure below shows the effect of an increase in the price of apples, other things constant?

panel a

Which budget constraint panel in Figure below shows the effect of an increase in income, other things constant?

panel e

The cross-price elasticity of demand is measured by the

percentage change in quantity demanded of one good divided by the percentage change in price of another good

Disposable income in the economy reflects:

personal income after taxes.

Among points A, B, C and D, which combination of goods yields the lowest level of satisfaction?

point B

Among points A, B, C and D, which combination of goods yields the highest level of satisfaction

point D

The cross-price elasticity of demand between butter and margarine is most likely

positive, since the goods are substitutes

A patent

prevents anyone else from selling the same discovery or product for twenty years

For a monopoly,

price and output are closely-linked choices

"Supply curves are upward sloping" is a graphical way of saying

price and quantity supplied are directly related

A monopolist earns a profit whenever

price exceeds average total cost

Which of the following will decrease the amount of a good that is traded in the market?

price floors, price ceilings, and excise taxes

In the short run, a monopoly should shut down whenever

price is less than average variable cost everywhere

For a monopoly, profit per unit of output is

price minus average total cost

If the supply of coffee falls due to bad weather conditions in coffee-exporting countries, then the

price will rise and quantity will fall

Which of the following is true?

product differentiation is the key difference between monopolistic competition and perfect competition.

If a firm is producing the level of output at which the total cost curve intersects the total revenue curve

profit is zero

Figure above shows the market demand schedule for compact disks. If the price per disk rises from $10 to $12, the

quantity demanded will decrease by 2.2 million disks

Figure below shows the market demand schedule for compact disks. If the price per disk rises from $10 to $12, the

quantity demanded will decrease by 2.2 million disks

Figure below shows the market demand schedule for compact disks. If the price per disk falls from $12 to $10, the

quantity demanded will increase by 2.1 million disks

If demand is price inelastic, a decrease in price

reduces total revenue to the seller

Suppose the index of prices received by farmers for 2000 was 1.02 and the base year of this index was 1995. Then:

relative to 1995, farm prices were 2% higher in 2000

Given the graph below, one historical approach to supporting major crop prices involved the Commodity Credit Corporation (CCC):

required the CCC to acquire the excess supply that would occur at the desired price PG.

When a firm incurs losses in the short run, the most important consideration in determining whether to continue producing is whether

revenues cover some of its fixed costs and all of its variable cost

A record level of crop production can lead to:

sharp declines in farm product prices and cash receipts from sale of production.

In Figure below, using the supply and demand curves denoted S1 and D1, respectively, if demand were to increase to D2 and the equilibrium price stayed the same there would be

shortage

A monopoly is a

single seller of a product that typically has no close substitutes

The Jones family is going to Disney World and has set a budget of $2000 for food and souvenirs. If Mr. Jones finds a $50 bill on the ground during their trip and uses it to purchase additional souvenirs, then

souvenirs are a normal good

The stage of production where the total physical product curve begins to decline corresponds to:

stage 3

Patents grant

temporary monopoly status to creators of scientific inventions

At point A, which of the following statements is (are) false?

the MRS = -4/3 or 4/3 after taking the absolute value.

Because price and quantity demanded are inversely related,

the demand curve is usually downward-sloping

If demand is perfectly inelastic,

the percent change in quantity demanded divided by the percent change in price is zero

Monopolies charge

the price associated with the quantity at which marginal revenue equals marginal cost

Each point along the market demand curve shows

the quantity of the good that consumers would be willing and able to purchase at a specific price

A $10,000 federal subsidy per student in higher education would benefit

the student and the university in such a way that they would split the $10,000.

Economics is

the study of choice under conditions of scarcity

If an excise tax is imposed on a good or service,

the supply curve shifts upward

If the cross-price elasticity of demand between two goods is negative, then

the two goods are complements

Most firms are not monopolies in the real world because

there are substitutes for most goods

If the market for a good is initially in equilibrium and there is a rightward shift of the demand curve, then

there will be a rightward movement along the supply curve

Figure below shows the supply and demand for socks. If a price ceiling of $4 per pair is imposed by the government

there will be a shortage of 10 pairs of socks

A firm that engages in perfect price discrimination produces more output to maximize its profits than it would if it charged only one price.

true

A major difference between monopolistic competition and perfect competition is the degree of product differentiation. Pure competition has none and differentiation always exists in monopolistic competition

true

A price elasticity of demand of 2 for a specific cola means that if the price increases 1 percent, the quantity demanded of the cola will decrease by 2 percent.

true

A profit-maximizing, single-price monopoly must lower its price in order to sell more output.

true

Alwite is a perfectly competitive firm that produces white t-shirts. The market for white t-shirts is perfectly competitive and the market price of a t-shirt is $10.True or False: Alwite's marginal revenue is the same for all levels of production.

true

For a monopolist, there is no difference between the market demand curve and the demand curve the monopolist uses when making output decisions.

true

Given the figure below, The graph above illustrates the use of set asides to remove land from production for specific commodities.

true

If both the demand and supply curves for computers shift to the right, the price of computers may rise, fall, or remain unchanged.

true

If the government wants to manipulate the equilibrium price, it will normally create a price floor or price ceiling; if the government want to manipulate the equilibrium quantity, it will normally impose taxes or award subsidies.

true

If the price of film increases, the demand for film processing would decrease; moreover, the equilibrium price and quantity of film processing should also decrease.

true

Marginal propensity to consume is the slope of the aggregate consumption function and tells us how much consumption will change if consumer disposable income changes.

true

Suppose your friends take you out for dinner on your birthday and you have a much better time than you would have had doing anything else. There is still an opportunity cost, even though they will not let you pay for anything.

true

The combination of two goods at which total utility is maximized lie somewhere on the consumer's budget line

true

The consumer is at equilibrium when the marginal rate of substitution is equal to the slope of the budget line

true

The law of demand says that as the price of a good rises, the quantity demanded of the good tends to fall.

true

The own-price elasticity of demand measures the responsiveness of quantity demanded to changes in price.

true

The price of the product and marginal revenue are identical under conditions of perfect competition.

true

The value of any index for the reference or base year is always 1.

true

Expansionary fiscal policy actions:

typically result in an increase in the national debt.

Celia buys 24 gallons of gasoline per month when the price is $2 per gallon, but only 16 gallons if the price rises to $3 per gallon. Within this range, her demand for gasoline is

unitary elastic

Price floors and price ceilings

usually result from government intervention

The extent to which a firm is viewed by consumers as being a monopoly depends primarily on

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