ECON 101 Fundamentals of Microeconomics (Exam 2 Guide)

Minimum Wage

A legal floor on the wage rate, which is the market price of labor.

Price Ceiling

A maximum price sellers are allowed to charge for a good or service. It tends to be under the equilibrium price and causes a shortage.

Price Floor

A minimum price buyers are required to pay for a good or service. It tends to be over the equilbrium price and causes a surplus.

Autarky

A situation in which a country does not trade with other countries.

Tariff

A tax levied on imports.

Prior to any taxes, the equilibrium price of gasoline is $3 per gallon. Then a $1 tax is levied on each gallon of gas. As a result, the price of gasoline rises to $3.75 per gallon. The incidence of the $1 tax is: A) $0.75 paid by consumers, $0.25 paid by producers. B) $1.00 paid by producers, $0 paid by consumers. C) $0.25 paid by consumers, $0.75 paid by producers. D) $0.50 paid by consumers, $0.50 paid by producers.

A) $0.75 paid by consumers, $0.25 paid by producers.

Pauli's Pizza offers the following prices: one slice for $2, two slices for $3.50, three slices for $4.50, four slices for $5.00. Sal orders two slices. From this it can be seen that Sal's marginal benefit from the second slice must be at least _____, whereas the marginal benefit from the third slice must be less than _____. A) $1.50; $1.00 B) $3.50; $4.50 C) $1.50; $4.50 D) $3.50; $1.00

A) $1.50; $1.00

Suppose that the price of overnight package delivery service is $18 before a $5 excise tax is imposed. With the tax, the price rises to $20. What is the producer's burden of the tax? A) $2 B) $3 C) $5 D) $13

A) $2

Which of the following is a likely result of a price floor imposed on providers of a particular service? A) The service providers will offer an inefficiently high quality. B) The service providers will offer an inefficiently low quality. C) A shortage will develop. D) The quantity demanded will increase beyond what it would be in the absence of the price floor.

A) The service providers will offer an inefficiently high quality.

If a price ceiling is imposed above the equilibrium price, what is the effect? A) There is no visible effect on the market outcome. B) A shortage results. C) A surplus results. D) The quantity demanded will decrease.

A) There is no visible effect on the market outcome.

Since the marginal product of labor equals the change in the quantity of output divided by the change in the quantity of labor, it stands to reason that: A) a firm would never operate in the range where marginal product is negative. B) a firm would never operate in the range where marginal product is decreasing. C) marginal product will continually increase as the firm produces more. D) there is no predictable relationship between marginal revenue and marginal cost.

A) a firm would never operate in the range where marginal product is negative.

Nadia operates a frame shop. She charges the perfectly competitive price of $65 for the custom framing of a standard-size picture. In order to maximize her profit, Nadia will: A) accept framing orders up until the point at which the marginal cost of doing so is $65. B) seek to produce at the point at which her average variable cost is $65. C) seek to operate at the minimum point on her average variable cost curve. D) seek to operate at the minimum point on her marginal cost curve.

A) accept framing orders up until the point at which the marginal cost of doing so is $65.

There are increasing returns to scale when long-run average total cost ________ as output ________. A) declines; increases B) declines; declines C) increases; declines D) increases; increases

A) declines; increases

Money that must be paid for the use of factors of production such as labor and capital is an: A) explicit cost. B) accounting profit. C) implicit cost. D) economic profit.

A) explicit cost.

Scenario: Betty's Cookie Shop Betty runs a cookie shop where she sells cookies for $1 each. In order to run the business, she employs five people, each of whom worked a total of 500 hours last year; she paid them a wage of $10 per hour. Her costs of equipment and raw materials add up to $75,000. Her business ability is legendary, and other companies have offered to pay Betty $100,000 if she would come to work for them. She also knows she could sell her cookie shop for $150,000. The bank in town currently pays an annual interest rate of 3% on all funds deposited with it. Given the information provided, if Betty is trying to decide at what point she should stop selling cookies and she knows she cannot change the price of a cookie, then she should stop selling cookies if: A) her implicit costs are greater than her accounting profits. B) her economic profit is positive. C) her explicit and implicit costs are less than her revenues. D) her economic profit is equal to her accounting profit.

A) her implicit costs are greater than her accounting profits.

Compared with autarky, international trade leads to: A) higher production in exporting industries and lower production in import-competing industries. B) lower production in exporting industries and higher production in import-competing industries. C) higher production in both exporting and import-competing industries. D) lower production in both import-competing and exporting industries.

A) higher production in exporting industries and lower production in import-competing industries.

If a firm is maximizing profit, then marginal cost: A) is equal to market price. B) is less than market price. C) is greater than market price. D) decreases as the firm increases output.

A) is equal to market price.

An individual gets 5 units of utility from one slice of pizza and 9 units of utility from two slices of pizza. The principle of diminishing marginal utility implies that the total utility from three slices of pizza will be: A) less than 13 units of utility. B) less than 9 units of utility. C) exactly 12 units of utility. D) more than 14 units of utility.

A) less than 13 units of utility.

The profit-maximizing principle of marginal analysis says that firms maximize profits by choosing output such that: A) marginal benefit (or revenue) is greater than or equal to marginal cost. B) total benefit (or revenue) equals total cost. C) price equals the minimum of the average variable cost. D) marginal revenue equals average cost.

A) marginal benefit (or revenue) is greater than or equal to marginal cost.

At the long-run quantity of output, where the long-run average total cost curve is at its lowest point, it is tangent to the _____ of the corresponding short-run average total cost curve. A) minimum B) left of the minimum C) right of the minimum D) maximum

A) minimum

A tax that takes a larger share of the income of high-income taxpayers than of low-income taxpayers is called a: A) progressive tax. B) flat tax. C) regressive tax. D) sales tax.

A) progressive tax.

Paying a tax of $15 on an income of $200, a tax of $10 on an income of $300, and a tax of $8 on an income of $400 is an example of a: A) regressive tax. B) constant-rate tax. C) progressive tax. D) proportional tax.

A) regressive tax.

An excise tax imposed on hotel owners: A) shifts the supply curve for hotel rooms up by the amount of the tax. B) shifts the supply curve for hotel rooms down by the amount of the tax. C) shifts the demand curve for hotel rooms up by the amount of the tax. D) shifts the demand curve for hotel rooms down by the amount of the tax.

A) shifts the supply curve for hotel rooms up by the amount of the tax.

The marginal cost curve shows how: A) the cost of producing one more unit depends on the quantity that has already been produced. B) marginal revenue varies as output varies. C) the revenue earned from selling one more unit varies as output varies D) the cost of producing one more unit depends on marginal revenue.

A) the cost of producing one more unit depends on the quantity that has already been produced.

Under what circumstances does the burden of an excise tax fall mainly on producers? A) when the supply is relatively inelastic and demand is fairly elastic B) when the supply is relatively elastic and demand is fairly inelastic C) when consumers do not have many substitutes for the good D) when it is easy for suppliers to expand production of the good

A) when the supply is relatively inelastic and demand is fairly elastic

Marginal Product

An input is the additional quantity of output produced by using one more unit of that input.

Fixed Input

An input whose quantity is fixed for a period of time and cannot be varied.

Variable Input

An input whose quantity the firm can vary at any time.

Suppose that the rate for a hotel room is $75 before the imposition of an $8 excise tax. With the tax, the rate rises to $80. What is the consumer's burden of the tax? A) $3 B) $5 C) $8 D) $10

B) $5

Scenario: Accounting and Economic Profit Rather than put the $100,000 that his grandmother left him in a mutual fund that earns 5% each year, Tommy Wang quit his job that paid $60,000 per year and started Wang's Wicker Furniture Store. He rented a showroom for $20,000 for the year, purchased $60,000 in wicker furniture, and incurred costs of $40,000 for sales help and advertising. Instead of using the capital for his own business, he could rent it to a rival firm and earn $5,000 a year. In his first year, his revenue was $150,000. What is the opportunity cost of Wang's $100,000 inheritance being used to start his business? A) $10,000 B) $5,000 C) $0 D) $100,000

B) $5,000

Assume that a firm is adding a variable input, such as labor, to a production process where other inputs are fixed. Suppose that it is operating in a range of diminishing marginal returns. Given this information, which of the following statements is NOT true? A) The marginal product curve is downward sloping reflecting diminishing marginal returns to the variable input. B) Each additional worker works more intensively with the fixed inputs and produces more than the previous worker. C) As more and more of the variable input is added, there are diminishing marginal returns to that variable input and workers eventually add less than the previous worker. D) Beyond a certain point, adding additional units of the variable input can lower output, making that variable input counterproductive.

B) Each additional worker works more intensively with the fixed inputs and produces more than the previous worker.

If at a given quantity _____, the decision maker should do _____ of the activity. A) MB < MC; that amount B) MB < MC; less C) MB > MC; none D) MB > MC; less

B) MB < MC; less

Which group would be most likely to benefit from a binding price floor imposed on wheat? A) Buyers of wheat who are seeking lower prices. B) Sellers of wheat who are seeking higher prices. C) Sellers of goods considered complements to wheat, who hope to sell larger quantities of their products. D) Consumer groups hoping to keep overall food prices low.

B) Sellers of wheat who are seeking higher prices.

Sid and Nancy have opened a small shop selling tea and crumpets. Sid takes 1 hour to brew one pitcher of tea, and 3 hours to bake one plate of crumpets. Nancy also takes 1 hour to brew one pitcher of tea, and 2 hours to bake one plate of crumpets. From this information, we know that: A) Sid's opportunity cost of brewing one pitcher of tea is 3 plates of crumpets. B) Sid's opportunity cost of brewing one pitcher of tea is 1/3 of a plate of crumpets. C) Nancy's opportunity cost of brewing one pitcher of tea is 2 plates of crumpets. D) between the two of them, neither Sid nor Nancy has a comparative advantage in brewing tea.

B) Sid's opportunity cost of brewing one pitcher of tea is 1/3 of a plate of crumpets.

When Caroline's dress factory hires two workers, the total product is 50 dresses. When she hires three workers, total product is 48, and when she hires four workers, total product is 45. The marginal product of the third and fourth workers is: A) increasing and negative. B) decreasing and negative. C) increasing and positive. D) decreasing and positive.

B) decreasing and negative.

Which of the following is NOT a predictable result of a price ceiling? A) development of an illegal black market B) exorbitant profits for producers of the good C) a persistent shortage D) an inefficiently low quality of the good provided

B) exorbitant profits for producers of the good

Venezuela is a major producer of oil products, which remain the keystone of Venezuela's economy. Suppose the President of Venezuela enacts a government policy that reduces the customer price of gasoline sold at state-owned gas stations to 50% of the previous price. In theory, assuming a downward-sloping demand curve for gasoline, this policy will result in the quantity of gasoline demanded to be _____ the quantity of gasoline supplied. A) greater than or equal to B) greater than C) less than D) equal to

B) greater than

When the price elasticity of supply is ___________ the price elasticity of demand, an excise tax falls ___________. A) greater than; mainly on producers B) greater than; mainly on consumers C) greater than; only on producers D) less than; mainly on consumers

B) greater than; mainly on consumers

Suppose the government imposes a $4 per month excise tax on cable TV. If the demand for cable TV is perfectly inelastic and the supply curve is elastic (but not perfectly elastic), then the price of cable TV will: A) remain constant. B) increase by less than $4. C) increase by more than $4. D) increase by exactly $4.

B) increase by less than $4.

The average fixed cost curve: A) is flat with zero slope. B) is downward sloping. C) is upward sloping. D) is U-shaped.

B) is downward sloping.

A binding minimum wage is a type of: A) quota. B) price floor. C) price ceiling. D) tax incidence.

B) price floor.

A tax that takes a fixed percentage of income, regardless of the level of income, is a: A) benefits tax. B) proportional tax. C) progressive tax. D) regressive tax.

B) proportional tax.

The graphical result of a price floor is: A) quantity demanded exceeds the amount at the equilibrium price, and quantity supplied is less than the amount at the equilibrium price. B) quantity supplied exceeds the amount at the equilibrium price, and quantity demanded is less than the amount at the equilibrium price. C) quantity demanded and quantity supplied are equal at the equilibrium price. D) quantity demanded is less than the amount at the equilibrium price, and quantity supplied is also less than the amount at the equilibrium price.

B) quantity supplied exceeds the amount at the equilibrium price, and quantity demanded is less than the amount at the equilibrium price.

The principle of diminishing marginal utility: A) refers to the tendency of total utility to increase until an individual's budget is no longer constrained. B) refers to the tendency of marginal utility to decline as the amount of consumption of a good or service increases. C) assumes all goods are normal. D) indicates that if a good is inferior, less of it will be purchased when income falls during a period.

B) refers to the tendency of marginal utility to decline as the amount of consumption of a good or service increases.

Determining who pays the burden of the tax is a question about: A) public interest theory. B) tax incidence. C) externality analysis. D) public choice theory.

B) tax incidence.

In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750 boxes of tulips. From this information, it is know that: A) the Netherlands has a comparative advantage in raising tulips. B) the Netherlands has a comparative advantage in raising beef. C) Belgium has an absolute advantage in raising beef. D) Belgium has a comparative advantage in raising beef.

B) the Netherlands has a comparative advantage in raising beef.

The Supreme Bean is a coffee kiosk that serves coffee to people through a drive up window. It uses coffee, beans, water, milk, flavored syrups, cups, electricity, the labor of a barista and an espresso machine to produce coffee. The fixed inputs of the Supreme Bean are: A) the kiosk and electricity. B) the kiosk and the espresso machine. C) the kiosk, the labor of the barista and the espresso machine. D) the kiosk, the beans, and the espresso machine.

B) the kiosk and the espresso machine.

At the profit-maximizing quantity of output: A) the average variable cost curve crosses the marginal revenue curve. B) the marginal cost curve crosses the marginal revenue curve. C) the average total cost curve crosses the market price. D) the marginal cost curve crosses the average revenue curve.

B) the marginal cost curve crosses the marginal revenue curve.

Policies that limit imports, usually with the goal of protecting domestic producers in import-competing industries from foreign competition, are known as: A) competition protection. B) trade protection. C) import-competing clauses. D) import-reduction acts.

B) trade protection.

A firm is producing 100 units of output at a total cost of $84,000. The firm's fixed cost is $24,000. What is the average variable cost? A) $840 B) $640 C) $600 D) $240

C) $600

The Atlanta Symphony wants to make sure that its concerts are affordable for all residents of Atlanta and therefore prices all its tickets at $25 each. However, outside Symphony Hall, people can sell the same tickets for $75 or more. The true cost to the concertgoer of a ticket to the symphony is at least: A) $100. B) $25. C) $75. D) $50.

C) $75.

If a price floor is imposed above the equilibrium price in a market, what is the effect? A) There is no visible effect on the market outcome. B) A shortage results. C) A surplus results. D) The quantity supplied will decrease.

C) A surplus results.

Which cost concept is correctly defined? A) TC = AVC + AFC B) MC = TC/FC C) ATC = AVC + AFC D) ATC = VC + FC

C) ATC = AVC + AFC

Gabriel operates a tree-trimming business in Maine. He charges the perfectly competitive price of $47 per hour. The marginal cost of working the 36th hour each week is $42; the marginal cost of working the 37th hour is $44; the 38th hour, $46; and the 39th hour, $48. How many hours should he work each week? A) He should work 40 hours per week because he can always earn more revenue by working more. B) He should work 39 hours per week because he would have to lower his price if he wanted to work more than that. C) He should work 38 hours per week because this is the workload that maximizes his net gain. D) He should work 36 hours per week because the marginal cost of working rises after this point.

C) He should work 38 hours per week because this is the workload that maximizes his net gain.

The United States can produce 30 computers for every car it produces, and Japan can produce 15 computers for every car it produces. Based on this information, which statement is incorrect? A) The United States should specialize in computer production. B) Japan has the comparative advantage in car production. C) Japan has an absolute advantage in car production. D) There will be gains from trade if the United States exports computers to Japan.

C) Japan has an absolute advantage in car production.

Annette has maximized her utility by consuming both strawberry shakes and hamburgers. The price of hamburgers exceeds that of strawberry shakes. Which of the following statements necessarily must be correct at her current consumption point? A) The total utility from strawberry shakes exceeds the total utility from hamburgers. B) The total utility from hamburgers exceeds the total utility from strawberry shakes. C) The marginal utility from the last strawberry shake exceeds the marginal utility from the last hamburger. D) The marginal utility from the last hamburger exceeds the marginal utility from the last strawberry shake.

C) The marginal utility from the last strawberry shake exceeds the marginal utility from the last hamburger.

In what way does the spreading effect change average total cost as output rises? A) The spreading effect increases ATC, because it reflects the fact that workers are spread out across more tasks when output rises. B) The spreading effect increases ATC, because it reflects the fact that firms are less efficient when they operate on a larger scale. C) The spreading effect reduces ATC, because a given fixed cost can be spread across more units of output. D) The spreading effect reduces ATC, because a firm's total fixed cost will decline as more is produced.

C) The spreading effect reduces ATC, because a given fixed cost can be spread across more units of output.

A price floor is presented graphically as: A) a price at equilibrium. B) a price below equilibrium. C) a price above equilibrium. D) an inefficiently high quality of the good provided.

C) a price above equilibrium.

The NFL wants to give the "common fan" the opportunity to attend the Super Bowl, so it sets Super Bowl prices "low"—tickets for a regular seat at Super Bowl XXXVII cost just $400. Scalpers, however, sell tickets for $1,500 or more. If there are no transaction costs to selling a ticket, the true cost of a regular ticket to Super Bowl XXXVII is: A) the monetary price paid to obtain the ticket. B) $1,100 less than the opportunity cost of a ticket. C) at least $1,500. D) at most $400.

C) at least $1,500.

Assume that a tariff is imposed on Chinese imports into the United States. This tariff is likely to: A) benefit both U.S. and Chinese producers. B) penalize U.S. producers and benefit Chinese producers. C) benefit U.S. producers and penalize Chinese producers. D) penalize both U.S. and Chinese producers.

C) benefit U.S. producers and penalize Chinese producers.

The term diminishing returns refers to a: A) decrease in total output due to the firm hiring uneducated workers. B) falling interest rate that can be expected as one's investment in a single asset increases. C) decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant. D) reduction in profits caused by increasing output beyond the optimal point.

C) decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant.

If the _____ differ(s) between two countries, this suggests the possibility for mutually advantageous trade. A) level of government spending for defense B) currency C) factor endowments D) exchange rate

C) factor endowments

To say that you can't have too much of a good thing means that for any good that you enjoy (for example, pizza): A) higher consumption will increase utility, but only up to a point; after that utility will start to decrease. B) it is valid to measure utility in utils. C) higher consumption will always lead to higher utility. D) higher consumption will cause utility to decrease at an increasing rate.

C) higher consumption will always lead to higher utility.

If long-run average total cost declines when output is increasing, then the cost curves exhibit: A) decreasing returns to scale. B) constant returns to scale. C) increasing returns to scale. D) zero returns to scale.

C) increasing returns to scale.

An excise tax: A) is a progressive tax on income. B) is a value-added tax. C) is a tax on each unit of a good that is sold. D) is a form of a property-based tax.

C) is a tax on each unit of a good that is sold.

If an excise tax is imposed on hotel consumers, the incidence of the tax: A) falls on consumers of hotel rooms alone. B) falls on producers of hotel rooms alone. C) is shared by producers and consumers of hotel rooms. D) is always shared evenly by both producers and consumers of hotel rooms.

C) is shared by producers and consumers of hotel rooms.

The marginal cost curve intersects the average variable cost curve at: A) its end point. B) its maximum. C) its lowest point. D) no point; the curves don't intersect.

C) its lowest point.

A binding price ceiling is designed to: A) prevent shortages. B) increase the quality of the good. C) keep prices below the equilibrium level. D) increase efficiency.

C) keep prices below the equilibrium level.

A binding price ceiling is designed to: A) increase efficiency. B) raise the price above the equilibrium price. C) keep the price below the equilibrium price. D) generate a surplus.

C) keep the price below the equilibrium price.

The slope of a long-run average total cost curve exhibiting increasing returns to scale is: A) zero. B) infinite. C) positive. D) negative.

C) positive.

An excise tax that the government collects from the producers of a good: A) shifts the supply curve downward. B) causes a loss of revenue for the government. C) shifts the supply curve upward. D) has a similar effect as a tax subsidy.

C) shifts the supply curve upward.

The larger the output, the greater the quantity of output over which fixed cost is spread. Called the _____ effect, this leads to a _____. A) spreading; higher average fixed cost B) diminishing returns; higher average variable cost C) spreading; lower average fixed cost D) diminishing returns; lower average variable cost

C) spreading; lower average fixed cost

According to the Heckscher-Olin model, a country will export those goods: A) for which the world price is below the domestic price. B) in which it does not have a comparative advantage. C) that are intensive in its relatively abundant factors. D) that are produced at a relatively high opportunity cost.

C) that are intensive in its relatively abundant factors.

The amount of the deadweight loss resulting from an excise tax is: A) the amount of tax revenue collected by the government from the tax. B) independent of the elasticity of demand for the taxed good. C) the difference between the reduction in total surplus resulting from the imposition of the excise tax and the government revenue from the tax. D) the difference between the amount of consumer surplus and the amount of producer surplus remaining after the imposition of the tax.

C) the difference between the reduction in total surplus resulting from the imposition of the excise tax and the government revenue from the tax.

Sarah's accountant tells her that she made a profit of $43,002 running a pottery studio in Orlando. Sarah's husband, an economist, claims Sarah lost $43,002 running her pottery studio. This means her husband is claiming that she incurred _____ in _____ costs. A) $43,002; explicit B) $43,002; implicit C) $86,004; explicit D) $86,004; implicit

D) $86,004; implicit

Morgan decided to quit her $60,000 per year job as an information technology specialist and illustrate children's books. At the end of the first year of illustrating, she has earned $20,000. Morgan also spent $5,000 for paint and paper. Her economic profit in the first year as an illustrator is: A) -$40,000. B) $20,000. C) $15,000. D) -$45,000.

D) -$45,000.

Faruq spends all of his income on two goods: tacos and milkshakes. His income is $100, the price of tacos is $10, and the price of milkshakes is $2. Put tacos on the horizontal axis and milkshakes on the vertical axis. The horizontal intercept for Faruq's budget line is equal to _____ tacos. A) 100 B) 50 C) 5 D) 10

D) 10

If 4 workers at Taco Bell can make 200 tacos in an hour and 5 workers can make 240 tacos in an hour, then the marginal product of the fifth worker is: A) 48 tacos. B) 240 tacos. C) 50 tacos. D) 40 tacos.

D) 40 tacos.

All of the following are good examples of how a country may enjoy a comparative advantage for a particular good EXCEPT: A) The climate in Columbia is ideal for growing coffee beans. B) German technological advances produce the most efficient car engines. C) Canada's rich and vast forestland is the source of lumber and paper products. D) All options are correct.

D) All options are correct.

Daisy incurs $7,200 per month in fixed costs operating her floral shop. She pays her employees $9.00 per hour and has three assistants each working 120 hours per month. Her other variable costs are $800 per month. What are Daisy's total variable costs and total costs each month? A) Total variable costs are $800; total costs are $8,000. B) Total variable costs are $800; total costs are $11,240 C) Total variable costs are $3,240; total costs are $11,240. D) Total variable costs are $4,040; total costs are $11,240.

D) Total variable costs are $4,040; total costs are $11,240.

All of the following curves are U-shaped EXCEPT the: A) long-run average total cost. B) average total cost. C) average variable cost. D) average fixed cost.

D) average fixed cost.

When a domestic country exports goods to and imports goods from a foreign country, in the short run: A) domestic consumers of the imported good may be worse off. B) domestic producers in the importing industry are better off. C) domestic consumers of the exported good may be better off. D) domestic producers in the exporting industry may be better off.

D) domestic producers in the exporting industry may be better off.

Black markets may develop with price controls because: A) price controls increase efficiency. B) individuals cannot profit by illegal exchanges. C) quantity demanded equals quantity supplied at the mandated price. D) individuals can profit by illegal exchanges.

D) individuals can profit by illegal exchanges.

The relationship between a firm's inputs and its quantity of output is known as the: A) technology quotient. B) employment function. C) productivity quotient. D) production function.

D) production function.

Brianna and Jess must pay an income tax. Both Brianna and Jess pay $1,000 in taxes each year, but Brianna earns $20,000 and Jess earns $10,000. From this information, you can infer that this tax is: A) equitable. B) progressive. C) proportional. D) regressive.

D) regressive.

The swoosh-shape of the marginal cost curve is caused by the ___________ having a powerful effect at lower levels of output and the ___________ having a powerful effect at high levels of output. A) diminishing returns effect; specialization effect B) diminishing returns effect; spreading effect C) spreading effect; fixed cost effect D) specialization effect; diminishing returns effect

D) specialization effect; diminishing returns effect

What is meant by the "deadweight loss" caused by a tax? A) the shortage that results B) the surplus that results C) the transfer of wealth from taxpayers to the government in the form of tax revenue D) the inefficiency that results from the loss of potentially beneficial transactions

D) the inefficiency that results from the loss of potentially beneficial transactions

What is the set of consumption possibilities for an individual? A) all those goods that could provide some utility B) those goods she would like to have if her income were higher C) those goods that are characterized by increasing marginal utility D) the set of goods that are affordable, given her income and the current prices of the goods

D) the set of goods that are affordable, given her income and the current prices of the goods

For Heidi, the marginal cost of producing one additional photograph equals the change in _____ divided by the change in the _____. A) average cost; number of photographs B) marginal cost; number of photographs C) total cost; marginal product of photographs D) total cost; number of photographs

D) total cost; number of photographs

Imports

Goods and services purchased from other countries.

Exports

Goods and services sold to other countries

Wasted Resources

Inefficiency due to price ceilings. People expend money, effort, and time to cope with the shortages caused by the price ceiling.

Price Controls

Legal restrictions on how high or low a market price may go.

Total Product Curve

Shows how the quantity of output depends on the quantity of the variable input, for a given quantity of the fixed input.

Globalization

The phenomenon of growing economic linkages among countries.

Long Run

The time period in which all inputs can be varied.

Short Run

The time period in which at least one input is fixed.