BE 301 FINAL EXAM (official)

which of the following changes would not shift the demand curve for a good or service

a change in the price of the good or service

economies of scope

a firm can produce two products more cheaply together

economies of scale

a firms long-run average costs get lower when it produces higher quantities

if you lose your job and as a result, you buy fewer iTunes music downloads. this shows that you consider iTunes music downloads to be

a normal good

learning by doing

a reduction in costs accompanying higher cumulative volume of production

agglomeration economies

a reduction in costs when firms in one industry locate close to one another

If textbooks and study guides are complements, then an increase in the price of textbooks will result in

fewer study guides being sold

a long run supply curve is flatter than short run supply curve because

firms can enter and exit a market more easily in the long run than in the short run

for a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $7 and a marginal cost of $10. it follows that the

firms profit maximizing level of output is less than 100 units

if the price of gasoline falls to $1/gallon, how will this affect the market for automobiles?

gas and autos are complements, so car prices will increase but more cars will be sold

patent and copyright laws are major sources of

government created monopolies

which of the following statements is correct?

if the monopolists marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling more units at a lower price

scotch whisky is matured in oak casks for three or more years. this suggest that other things equal, an increase in interest rates will

increase the cost of producing scotch

suppose the long run supply curve for a good is upward sloping. the upward slope could be explained by

increases in production costs resulting from more firms coming into the market

suppose the long-run supply curve for a good is upward-sloping. the upward slop could be explained by

increases in production costs resulting from more firms coming into the market

the competitive firms short run supply curve is that portion of the

marginal cost curve that lies above average variable cost

diminishing marginal product suggests that

marginal cost is upward sloping

which of the following statements about models is correct?

models assume away irrelevant details

the term that describes a situation where there are increasing returns to scale at the level of output that serves the entire market for a good is

natural monopoly

the wacky widget company has a total fixed costs of $100,000 per year. the firms average variable cost is $5 for 10,000 widgets. at that level of output, the firms average total costs equal

$15

we can measure the profits earned by a firm in a competitive industry as

(P-ATC) X Q

midpoint method

(Q2-Q1)/[(Q2+Q1)/2] / (P2-P1)/[(P2+P1)/2]

average total cost equals

(fixed costs + variable costs) divided by quantity produced

if monopolist can sell 7 units when the price is $4 and 8 units when the price is $3, then the marginal revenue of selling the eighth unit is equal to

-$4

marginal cost equals

1) change in total cost divided by change in quantity produced 2) change in variable cost divided by change in quantity produced

patents, copyrights, and trademarks

1) examples of government created monopolies 2) examples of barriers to entry 3) allow their owners to charge higher prices

in a market economy

1) household decide which firms to work for and what to buy with their incomes 2) firms decide whom to hire and what to make

which of the following situations will total revenue increase?

1) price elasticity of demand is 0.5, and the price of the good increases 2) price elasticity of demand is 1.2, and the price of the good decreases 3) price elasticity of demand is 3.0, and the price of the good decreases

suppose a firm operates in the short run at a price above its average total cost of production. in the long run the firm should expect

1)its profits to fall 2)the market price to fall 3)new firms to enter the market

if the price elasticity of demand for a good is 2, then a 10 percent increase in price results in a

20 percent decrease in quantity demanded

the term "invisible hand" was coined by

Adam Smith

which of the following is an example of an externality?

Antonio's dog barks loudly during the night, waking his neighbors

which of the following is an example of a barrier to entry?

John obtained a copyright for the song he wrote and recorded

wanda's widgets can sell 5 widgets at a price of a $5 or 6 widgets when she lowers the price to $4. if producing the 6th widget costs $4

Wanda should produce less than 6 widgets

which of the following might cause the demand curve for an inferior good to shift to the left?

an increase the price of a complement

when a firm is experiencing economies of scale, long run

average total cost is greater than long run marginal cost

if marginal cost is equal to average total cost, then

average total cost is minimized

a fundamental source of monopoly market power arises from

barriers to entry

the fundamental cause of monopoly is

barriers to entry

Tom produces baseball gloves and baseball bats. Steve also produces baseball gloves and baseball bats, but Tom is better at producing both goods. In this case, trade could

benefit both Steve and tom

One reason that airlines offered excellent in-flight food and other amenities in the 1960s & 1970s could be:

binding price floors for plane flights.

which of the following is a characteristic of a perfectly competitive market?

buyers and sellers are price takers

demand is said to be price elastic if

buyers respond substantially to changes in the price of the good

when firms are said to be price takers, it implies that if a firm raises its price,

buyers will go elsewhere

any point on a country's production possibilities frontier represents a combination of two goods that an economy

can produce using all available resources and technology

a binding price ceiling

causes a shortage; is set at a price below the equilibrium price

marginal cost is equal to

change in total cost divided by change in quantity

if the cross-price elasticity between widgets and thingamabobs is negative, then widgets and thingamabobs are

complements

when a firms long-run average total costs do not vary as output increases, the firm exhibits

contact returns to scale

suppose the equilibrium wholesale price of milk is $1/gal, but the government prohibits sales at less than $2/gal. which of the following is not a likely consequence of this price floor?

dairy farmers sell more milk

if a good is inferior, then an increase in income will result in a

decrease in the demand for the good

tom produces commemorative t-shirts in a perfectly competitive market. if tom decides to decrease his output, this will

decrease revenue, since his output has decreases, and the price remains the same

two goods are substitutes when a decrease in the price of one good

decreases the demand for the other good

if the number of buyers in a market decrease, then

demand will decrease

As Bubba's Bubble Gum Company adds workers while using the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Bubba's Bubble Gum Company encounters

diminishing marginal product

in the short run, the size of a widget factory is fixed. as more workers are tried, output increases, but each additional worker adds less to output. the term that describes this situation is

diminishing marginal returns to labor

A monopolist faces a

downward-sloping demand curve

when new firms have an incentive to enter a competitive market, their entry will

drive down profits of existing firms in the market

total revenue minus both explicit and implicit costs is called

economic profit

demand is said to have unit elasticity if the price elasticity of demand is

equal to 1

an increase in wages for cooks won't decrease the supply of restaurant meals because restaurants are able to substitute capital and/or other inputs for some of the cooks' labor

false

because of diminishing marginal returns, the long-run market supply curve always slopes upward

false

the consumer price index typically understates price inflation in the United States?

false

when there are economies of scale over the relevant range of output for a monopoly, the monopoly

is a natural monopoly

sizable economic profits can persist over time under monopoly if th monopolist

is protected by barriers to entry

when a firm experiences diseconomy of scale,

long-run average total cost increases as output increases

economies of scale occur when

long-run average total costs fall as output increases

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

many firms have market power

the minimum points of the average variable costs and average total cost curves occur where the

marginal cost curve intersects those curves

when existing firms in a competitive market are profitable, an incentive exists for

new firms to enter the market, even without government subsidies

if the demand for peanut butter decreases as consumer incomes fall , then peanut butter is what type of good?

normal

"ensuring that social security is financially sound for future generations is an important use of taxpayer dollars" is an example of a

normative economic statement

economics typically models decision-makers as purposive (or rational. which statement best captures the meaning of this term?

people have goals and make decisions that, given the available information, they believe will best achieve them

normative statements are

prescriptive, whereas positive statements are descriptive

which of the following is not held constant in a demand schedule?

price

Raiman's shoe repair produces custom-made shoes. when mr. railman produces 12 Paris per week, the marginal cost of the 12th pair is $84, and the marginal revenue of the 12th pair is $70. what would you advise mr. raiman to do?

produce fewer custom-made shoes

the intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

profit is maximized

when firms have an incentive to exit a competitive market, their exit will

raise the profits of the firms that remain in the market

total revenue

remains unchanged as price increases when demand is unit elastic

if the government imposes (and enforces) a binding price ceiling on the market for apples, but doesn't provide a formal rationing mechanism

resources will be wasted as buyers jockey to obtain the good

which of the following is not an assumption of the perfect competition model?

sellers produce differentiated goods

when the price of a subway ride increases, Alice buys more taxi rides. for Alice, subway rides and taxi rides are

substitutes

when economists refer to a production cost that has already been committed and cannot be recovers, they use the term

sunk cost

costs that are ignored because they are irrelevant to a business's production decision are called

sunk costs

which of the following changes would increase the supply of widgets?

technological innovation

which concept below refers to the idea that markets are a way to "organize" economic activity without central direction?

the invisible hand

a non-binding price ceiling occurs when

the legal maximum price is above the market-clearing price

when quantity demanded has increased at every price, it might be because

the price of a complementary good has decreased

suppose one change leads to an increase in the demand for widgets while at the sometime another increase leads to a decrease in the supply of widgets

the price of widgets will increase, but the effect on quantity is indeterminate

when new firms enter a perfectly competitive market,

the short-run market supply curve shifts right

marginal cost equals

the slope of the total cost curve

in the long run, a profit maximizing firm will choose to exit a market when

total revenue is less than total cost

a government intervention necessarily creates winners and losers, while under free trade both parties expect to become better off as a result of a trade

true

if a producer can produce an additional widget at a cost of $4 and a consumer values an additional widget at $6, allowing the two parties to trade will result in a Pareto improvement

true

specializing and trading according to comparative advantage can allow two people (or countries) to both consume outside (further from the the origin) their respective production possibilities frontiers?

true

when some resources used in production are only available in limited quantity, it is like that the long run supply curve in a competitive market is

upward sloping

when some resources used in production are only available in limits quantities, it is likely that the long run supply curve in a competitive market is

upward sloping

when remain is perfectly inelastic, the demand curve will be

vertical, because buyers purchase the same amount as before whenever the price rises or falls

which of the following is an example of an externality?

when Alice gets a flu shot, it also reduces bobs chances of getting the flu