Econ 102 Vasquez Final
Quantity of Kiwifruit (kg) Price ($) Total Cost ($) 1 7 7 2 7 13 3 7 18 4 7 21 5 7 25 6 7 31 7 7 40 8 7 52 The table above gives the total cost information for Lucy's kiwifruit farm. She sell the kiwifruits in a perfectly competitive market, where the price is $7.00 per kg. If Lucy produces and sells 5 kg of kiwifruits, what is her profit?
$10
Sara is willing to mow lawns for $30 each, Boris is willing to mow lawns for $20 each, and Chelsea is willing to mow lawns for $10 each. If the going rate for lawn mowing is $20, what is the total producer surplus received by the 3 of them for mowing 1 lawn?
$10
You are deciding whether to stay home to do your laundry rather than work at your job and make $60. If you are willing to pay $100 to have someone else do your laundry, what would be the opportunity cost of a third option: going out drinking with your friends?
$100 Correct
You want to buy a Math textbook. A new textbook will cost you $160 but you are only willing to pay $110 at most. You find a seller who offers $90 for a used book. Suppose new book and second-hand book make no difference to you, in this transaction, you will receive ______ in consumer surplus.
$20
You are deciding whether to stay home to do your laundry rather than work at your job and make $60. If you are willing to pay $40 to have someone else do your laundry, what would be the opportunity cost of a third option: going out drinking with your friends?
$60 Correct
Quantity of Kiwifruit (kg) Price ($) Total Cost ($) 1 7 7 2 7 13 3 7 18 4 7 21 5 7 25 6 7 31 7 7 40 8 7 52 The table above gives the total cost information for Lucy's kiwifruit farm. She sell the kiwifruits in a perfectly competitive market, where the price is $7.00 per kg. If Lucy produces and sells 7 kg of kiwifruits, what is her profit?
$9 Correct
Refer to the above payoff matrix for profits (in millions) of Orange Inc. and Grape Inc. and their two strategies. If Grape Inc. charge a low price and Orange Inc. charge a high price, then Grapr Inc. will gain profit of ______ million and Orange Inc. will gain profit of ______ million.
1000; 300
The table below show the production possibilities for two countries: Greece and Germany. If these two countries traded based on comparative advantage then the following would be a trade beneficial to both regions: Sweaters Skirts Germany 6 12 Greece 4 20
12 skirts for 4 sweaters
If one person has the only old version of Harry Potter written by J.K Rowling, which of the following would illustrate this situation?
A perfectly vertical supply curve Correct
The lowest point on a perfectly competitive firm's short-run supply curve corresponds to the minimum point on the ________ curve.
A. AVC Correct
Assume that in the short run a perfectly competitive firm does not produce output and has economic losses. This would occur if:
A. P < AVC and FC > 0. Correct
A perfectly competitive industry is in a state of long-run equilibrium. Which of the following must be true?
A. P = MR = MC = ATC. Correct
When a good is nonexcludable:
A. a free-rider problem will exist. Correct
Consider gas stations where customers pay inside before they pump gasoline. If they introduce a new technology where customers pay at the pump, thus decreasing production costs, there will be:
A. a shift to the right in the supply curve and lower gas prices. Correct
The marginal cost of pollution ________ as the quantity of pollution emissions ________.
A. decreases; decreases Correct
The De Beers company is described as a monopolist in the production of:
A. diamonds. Correct
If the state government gave you the exclusive right to sell cement to municipalities, your monopoly would result from:
A. government restrictions. Correct
Suppose the production of roses generates a positive externality in that travelers enjoy the scenic rural vistas. Then the market price of roses:
A. is less than the marginal social benefit of roses. Correct
Marginal revenue for a monopolist is:
A. less than price. Correct
A(n) ________ is excludable and rival in consumption.
A. private good Correct
In a perfectly competitive industry, each firm:
A. produces a standardized product. Correct
The horizontal sum of individual firms' MC curves at and above the shut-down price is the:
A. short-run industry supply curve. Correct
The short-run industry supply curve:
A. shows the total quantity supplied by all firms in an industry for each possible price when the number of producers is given. Correct
A monopoly can be temporary because of:
A. technological change. Correct
Public policies toward monopoly in the United States often consist of:
A. the regulation of natural monopolies. Correct
Which of the following will not cause a market failure?
Adequate competition
An increase in the price of bagels will _______ the market price and ________ the market quantity of cream cheese, a complement of bagels.
An increase in the price of bagels will _______ the market price and ________ the market quantity of cream cheese, a complement of bagels.
The point A which is on the left of production possibilities frontier is considered:
Attainable but inefficien Correct
Wendy has a monopoly in the retailing of motor homes. She can sell five per week at $21,000 each. If she wants to sell six, she can charge only $20,000 each. The quantity effect of selling the sixth motor home is:
B. $20,000. Correct
If a perfectly competitive firm increases production from 10 units to 11 units and the market price is $20 per unit, total revenue for 11 units is:
B. $220. Correct
Which of the following statements about monopoly equilibrium and perfectly competitive equilibrium is incorrect?
B. In the long run, economic profits are driven to zero in both a monopoly and a perfectly competitive market. Correct
Provided that there are no external benefits or costs, resources are efficiently allocated when:
B. P = MC. Correct
A downward-sloping demand curve will ensure that:
B. P > MR. Correct
Which of the following is true?
B. The long-run industry supply curve relates the price of a good or service to the quantity produced after all adjustments to a price change have been made. Correct
Which of the following is an environmental policy based on tradable pollution permits?
B. allowing automobile drivers to buy and sell the right to a certain level of automobile emissions Correct
An increase in supply, with no change in demand, will lead to ________ in equilibrium quantity and ________ in equilibrium price.
B. an increase; a decrease Correct
Price discrimination is the practice of:
B. charging different prices to buyers of the same good. Correct
In the market for local coffee, the price will ________ and the quantity will ________ if new coffee shops open and consumers' incomes decrease due to a recession.
B. decrease; be indeterminate Correct
A monopoly responds to a decrease in marginal cost by ________ price and ________ output.
B. decreasing; increasing Correct
Marginal revenue:
B. equals the market price in perfect competition. Correct
A software program is similar to an apple in that it is ________, but it is also similar to public safety in that it is ________.
B. excludable; nonrival in consumption Correct
Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is $0.10. Now suppose that the price of sugar rises, increasing the marginal and average total cost of producing candy canes by $0.05; there are no other changes in production costs. Based on the information given, we can conclude that in the long run we will observe:
B. firms leaving the industry. Correct
The monopoly firm's profit-maximizing price is:
B. given by the point on the demand curve for the profit-maximizing quantity.
Because of monopoly, consumers experience ________ than with perfect competition.
B. higher prices Correct
The addition to the total revenue from selling one more unit of the good is:
B. marginal revenue. Correct
In perfect competition:
B. some goods are standardized and consumers are price-takers. Incorrect
A statement that best reflects an evaluation of monopoly firms is that:
B. they are economically inefficient. Correct
Refer to the above payoff matrix for profits (in millions) of Orange Inc. and Grape Inc. and their two strategies. Which of the following is the outcome of the dominant strategy without cooperation?
Both Orange Inc. and Grape Inc. choose the low price.
The matrix represents profits for two oligopolists, firm X and Firm Y, under different pricing strategies. Which of the following is correct?
Both firm X and firm Y have a dominant strategy. Correct
If a perfectly competitive gardening shop sells 30 evergreen bushes at a price of $10 per bush, its marginal revenue is:
C. $10. Correct
The market for beef is in long-run equilibrium at a price of $3.25 per pound. The announcement that mad cow disease has been discovered in the United States reduces the demand for beef sharply, and the price falls to $2.00 per pound. If the long-run supply curve is horizontal, then when the long-run equilibrium is reestablished, the price will be:
C. $3.25 per pound. Correct
Diamond rings are relatively scarce because:
C. De Beers limits the quantity of diamonds supplied to the market. Correct
Which of the following is a necessary condition for perfect competition?
C. Firms produce a standardized product. Correct
You notice that the price of DVD players falls and the quantity of DVD players sold increases. Which of the following may cause this change?
C. Supply of DVD players shifts to the right. Correct
Which of the following is most likely to cause firms to exit a perfectly competitive industry?
C. The price of a key variable input falls. Incorrect
In perfect competition:
C. a firm's total revenue is found by multiplying the market price by the firm's quantity of output. Correct
Which of the following always results in an increase in price and quantity?
C. an increase in demand with no change in supply Correct
Pollution has ________ and ________.
C. benefits; costs Correct
If a perfectly competitive firm is producing a quantity where MC > MR, then profit:
C. can be increased by decreasing production. Correct
Price discrimination is the practice of:
C. charging different prices to buyers of the same good. Correct
The demand curve facing a monopolist is:
C. downward sloping, unlike the horizontal demand curve facing a perfectly competitive firm.
The demand curve facing a monopolist is:
C. downward sloping. Correct
If firms are making positive economic profits in the short run, then in the long run:
C. firms will enter the industry. Correct
A perfectly competitive firm will earn a profit and will continue producing the profit-maximizing quantity of output in the short run if the price is:
C. greater than average total cost. Correct
A natural monopoly exists whenever a single firm:
C. has economies of scale over the entire range of production that is relevant to its market. Correct
A curve that shows the quantity of a good or service supplied at various prices after all long-run adjustments to a price change have been completed is a long-run:
C. industry supply curve. Correct
Consider a perfectly competitive firm in the short run. Assume that it is sustaining economic losses but continues to produce. At the profit-maximizing (loss-minimizing) output, all of the following statements are correct except:
C. marginal cost is less than average variable cost. Correct
The ability of a monopolist to raise the price of a product above the competitive level by reducing the output is known as:
C. market power. Correct
Because business travelers' demand for airline flights is relatively ________, small DECREASES in price will result in relatively ________ in additional business travelers.
C. price-inelastic; small increases Correct
In the short run, if AVC < P < ATC, a perfectly competitive firm:
C. produces output and incurs an economic loss. Correct
Suppose the market for gasoline is in equilibrium. You have heard that the price of crude oil is falling because of new oil discoveries. You are also aware that the number of car and truck drivers is steadily rising. Knowing this, you predict that the price of gasoline will ________ and the quantity of gasoline bought and sold will ________.
C. rise or fall; rise Correct
Price-takers are individuals in a market who:
C. select the lowest price available in a competitive market. Incorrect
A perfectly competitive firm's marginal cost curve above the average variable cost curve is its:
C. short-run supply curve. Correct
You notice that the price of DVD players falls and the quantity of DVD players sold increases. This set of observations can be the result of the:
C. supply of DVD players shifting to the right. Correct
If the market supply and demand curves for a common resource include all costs, then:
C. the common resource will be used at the socially optimal level. Correct
If a firm wants to achieve maximum profit under perfect competition condition, it needs to _____.
Continue to produce and sell output until marginal revenue equals marginal cost.
The proposition that if bargaining is costless, then the market can achieve an efficient outcome is the:
D. Coase theorem. Correct
Suppose you manage a corner grocery store. If peanut butter is an inferior good, what do you suppose would happen to the price and quantity sold of peanut butter as incomes fall during an economic recession?
D. The price and quantity would both increase. Correct
A decrease in the price of eggs will result in:
D. a movement along the demand curve for eggs. Correct
A beneficial technological change enhances the production of cranberries. At the same time, scientists discover the health benefits of cranberries. This will result in:
D. an increase in the equilibrium quantity and an uncertain impact on the equilibrium price of cranberries. Correct
A decrease in the price of eggs will result in:
D. an increase in the quantity of eggs demanded. Correct
An increase in demand with no change in supply will lead to ________ in equilibrium quantity and ________ in equilibrium price.
D. an increase; an increase Correct
If your farm had the only known source of a rare cocoa bean needed to make chocolate-covered peanuts, your monopoly would result from:
D. control of a scarce resource or input. Correct
Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium. Subsequently, an increase in population increases the demand for haircuts. In the short run, we expect that the typical firm is likely to begin:
D. earning an economic profit. Correct
Gasoline, a derivative of oil, is a large part of transportation costs for many producers. If the price of oil increases at the same time that incomes fall for many consumers, one would expect the equilibrium price of many normal goods to ________, while their equilibrium quantities would ________.
D. fall, rise, or stay the same; decrease Correct
If firms are experiencing economic losses in the short run, firms will leave the industry, industry output will ________, and economic losses will ________ in the long run.
D. fall; fall Correct
All of the following are examples of price discrimination except:
D. generally lower prices at Walmart than at Target. Correct
In perfect competition:
D. goods are standardized and all market participants are price-takers. Correct
For a perfectly competitive firm in the short run:
D. if the firm produces the quantity at which P > ATC, then the firm is profitable. Correct
A competitive firm operating in the short run is producing at the output level at which ATC is at a minimum. If ATC = $8 and MR = $9, in order to maximize profits (or minimize losses), this firm should:
D. increase output. Correct
The assumptions of perfect competition imply that:
D. individuals in the market accept the market price as given. Correct
In an industry characterized by extensive economies of scale:
D. large companies are more profitable than small companies. Correct
An increase in the fixed costs of a monopoly firm would ________ price and ________ quantity in the short run.
D. not change; not change Correct
Marginal revenue is a firm's:
D. ratio of the change in total revenue to the change in output. Correct
One way the government of Alaska could prevent an inefficiently large production of crab fishing would be to:
D. sell exclusive licenses for the right to fish. Correct
You notice that the price of DVD players falls and the quantity of DVD players sold increases. This set of observations can be the result of the:
D. supply of DVD players shifting to the right. Correct
The demand curve for a monopoly is:
D. the industry demand curve. Correct
The market demand for singing dolls is initially made up of 50 buyers. Suppose there is a decrease in the number of buyers by 10. Holding everything else constant, one would expect:
D. the quantity supplied to decrease. Correct
The demand curve facing a monopolist is always:
D. the same as the industry's demand curve. Correct
It is certain that the equilibrium price will rise when:
D. the supply curve shifts to the left and the demand curve shifts to the right. Correct
France can produce 400 potatoes or 250 onions while Italy can produce 300 potatoes or 350 onions. Given this information and supposing France and Italy have constant opportunity costs, we know that:
France has a comparative advantage in producing potatoes Correct
The following ways can lead to an economic growth except:
Increasing opportunity costs Correct
Tim bought hot dogs every day when he worked at part-time. After he found a full-time job and earned more than before, he seldom buys hot dogs. For Tim, hot dogs are ______.
Inferior goods Correct
What is true when a firm earns normal profits under perfect competition?
Losses > FC
Which of the following is a characteristic of oligopoly?
Mutual interdependence.
Monopoly dead weight loss is caused by
P>MC
Which of the following about PPF is correct?
PPF represents a maximum output Correct
In the middle of a linear demand curve, the price elasticity of demand will be:
Price unit-elastic Correct
Which of the following is not the condition that is required for successful price discrimination?
Sellers must charge different customers different prices.
Which of the following explains that perfectly competitive firms do not make a profit in the long run?
The arrival of new firms on the market Correct
According to the sale data, the cross elasticity of demand between Coke and Sprite is 1.5. Assume that this year the production of Coke decreased, then we can expect that in the equilibrium market of Sprite, ______
The demand will increase Correct
If a company delas with good A that has a unitary demand, what would be the result of the company's total revenue of a decrease in price?
There would be no change in the total revenue. Correct
Free trade between countries:
Will allow greater consumptions than without trade Correct
Under conditions of third-degree price discrimination, a firm:
Will charge the highest prices to those customers with the least elastic demand. Correct
The only two firms in a market are trying to decide what price to charge. The payoff matrix for this duopoly game is shown above. The payoffs are thousands of dollars of economic profit. In the Nash equilibrium, Firm A will set a price of ________ and Firm B will set a price of ________.
a. $10; $10
Ahmed is willing to mow lawns for $10 each, Boris is willing to mow lawns for $20 each, and Chelsea is willing to mow lawns for $30 each. If the going rate for lawn mowing is $23, what is the total producer surplus received by the three of them?
a. $16 Correct
Say Sarah was choosing between three alternatives: working on her job that pays her $20; writing a term paper which she values at $10; or going out with a friend, which she values at $30. The opportunity cost of writing the term paper is:
a. $30 Correct
Say Sarah was choosing between 3 alternatives: working on her job that pays her $50; writing a term paper which she values at $60; or going out with a friend, which she values at $80. The opportunity cost of writing the term paper is:
a. $80 Correct
Wal-Mart is thinking about offering a 25% discount on a brand of shoes. If the elasticity of demand is two, then the discount would increase sales by:
a. 50%. Correct
Assuming that pretzels are a substitute for popcorn, which of the following would cause a decrease in the demand for pretzels?
a. A lower price of popcorn Correct
Which of the following examples represents the short run?
a. Ford asks its workers to work overtime.
Which of the following is true?
a. Income elasticity of demand measures how much the demand for a good is affected by changes in consumers' incomes. Correct
An increase in the price of corn, an input in the production of ethanol, will _________ the market price and ________ the market quantity of ethanol.
a. Increase; decrease Correct
An increase in buyers' income in the market for radios will _______ the market price and ________ the market quantity of radios, a normal good.
a. Increase; increase Correct
Suppose that the quantity demanded for a product falls by 9 percent as people's incomes rise by 3 percent. What type of good is this product?
a. Inferior good
Say you took an average of 5 minutes to answer an ECON problem, and 2 minutes to answer a MATH problem. If you had a limited time left to study, your best strategy would be to solve:
a. It depends Correct
Which of the following is a characteristic of a perfectly competitive firm?
a. JorDawn cannot tell which farm the peaches came from-they all look alike. Correct
Which of the following does not describe OPEC?
a. OPEC is the name of the free-trade zone encompassing the Middle East and other oil-producing nations. Correct
An increase in buyers' income will cause the demand for cars, a normal good, to: ________.
a. Shift to the right Correct
When the price of wine decreases, the demand for wine:
a. Stays the same Correct
Which of the following will lead to a decrease in total revenue?
a. The price increases and demand is price-elastic. Correct
Which of the following is true if there is a decrease in the supply of ice cream?
a. There is a decrease in consumer surplus. Correct
Suppose OPEC has only two producers, Saudi Arabia and Nigeria. Saudi Arabia has far more oil reserves and is the lower cost producer compared to Nigeria. The payoff matrix in Table 14-3 shows the profits earned per day by each country. "Low output" corresponds to producing the OPEC assigned quota and "high output" corresponds to producing the maximum capacity beyond the assigned quota.
a. Yes, the dominant strategy is to produce a low output. CorrectCorrect
If you drop a course after the refund date, the tuition that you have paid and cannot recover is:
a. a sunk cost.
In the game in Scenario 13.2, the equilibrium strategies
a. are for both firms to offer rebates. CorrectCorrect
The short run is the period of time in which:
a. at least one input is fixed. CorrectCorrect!
If resources are scarce it means that they:
a. cannot provide enough goods or services to satisfy all human material wants and needs. Correct
If the long-run market supply curve for a perfectly competitive market is horizontal, then this industry is one that exhibits:
a. constant costs. Correct
As you move down a linear demand curve, the price elasticity of demand will:
a. decrease. Correct
[Q#k2003] Abe starts exercising regularly, and after a few months he can do twice as much of everything—in a single day Abe can now make 10 hamburgers or 8 milkshakes rather than the 5 hamburgers and 4 milkshakes he made in the past. We now know that Abe's production possibility frontier:
a. has shifted right, but his opportunity costs of making milkshakes are unchanged. Correct
If the price of a good rises while supply remains unchanged, then total producer surplus will ____________.
a. increase CorrectSee Video 2.1.
The fact that a society's production possibility frontier is bowed out or concave to the origin of a graph demonstrates the law of:
a. increasing opportunity cost. Correct
It is very difficult for Julia to find inexpensive and available inputs for her business. Because of this, we would predict that Julia's price elasticity of supply would be:
a. inelastic. Correct
The monopolist's marginal revenue curve:
a. is always below the demand curve. Correct
A price ceiling will have no effect if:
a. it is set above the equilibrium price. Correct
The marginal cost curve intersects the average variable cost curve at:
a. its lowest point. Correct
A Nash equilibrium is
a. reached when each player chooses the best strategy for himself, given the other strategies chosen by the other players in the group. CorrectCorrect
The U.S. production possibility frontier would ________ if all computers using Microsoft operating systems contracted a virus that deleted all information on those computers.
a. shift in Correct
Goods are ________ when the cross-price elasticity of demand is positive and ________ when the cross-price elasticity of demand is negative.
a. substitutes; complements Correct
To calculate the Herfindahl-Hirschman Index (HHI), one must:
a. sum the squared market shares of all firms in the industry. Correct
The University recently inherited a large mansion from a wealthy alumnus. The University plans to use the mansion to host faculty parties and to house distinguished guests. The opportunity cost of the mansion to the University is:
a. the amount the university would receive if it sold the mansion. Correct
The production possibility frontier illustrates:
a. the maximum quantity of one good that can be produced given the quantity of the other good produced. Correct
If the minimum wage is a binding price floor, then:
a. the number of workers who want to work will be greater than the number of jobs available. Correct
If there is a shortage of parking spaces in the downtown business district, ________.
a. the price of parking downtown is below its equilibrium price. Correct
The local Taco Hut charges the same price for everything on its menu: $3 will buy a taco, a burrito, or nachos. You buy the taco and think that if you had not purchased the taco, you would have purchased the burrito. The opportunity cost of the taco is:
a. your enjoyment of the burrito. Correct
Austin's total fixed cost is $4,000. Austin employs 15 workers and pays each worker $100. The average product of labor is 5, and the marginal product of the last worker hired is 8. What is the marginal cost of the last unit produced by the last worker Austin hired?
b. $13 Correct
If a 10 percent increase in the price of lodging at a ski resort causes a 12 percent decrease in the quantity of skis rented, then the cross-price elasticity of demand between lodging and ski rentals is:
b. -1.20 Correct
If the price of a good is increased by 20% and the quantity demanded changes by 15%, then the price elasticity of demand is equal to:
b. 0.75. Correct
Which of the following indicates a possible income elasticity measure for a normal good?
b. 0.8 Correct
If a 10 percent increase in the price of cotton leads to an 8 percent increase in the quantity of cotton supplied, then the price elasticity of supply of cotton is:
b. 0.80 Correct
If a 15 percent decrease in the price of sapphires causes a 20 percent decrease in the quantity of diamonds demanded, then the cross-price elasticity of demand between sapphires and diamonds is:
b. 1.33 Correct
Quantity Price Total Cost 1 $9 $6 2 $9 $11 3 $9 $13 4 $9 $16 5 $9 $20 6 $9 $28 7 $9 $38 The table above gives the total cost information for a perfectly competitive firm. What is the profit-maximizing quantity of output?
b. 6
In one day, Kessy can bake 10 cookies or mix 15 glasses of lemonade. His friend, Ava, can make 10 cookies or 10 glasses of lemonade. His other friend, Ian, can make 10 cookies or 20 glasses of lemonade. Who has the lowest opportunity cost in cookie production?
b. Ava Correct
A decrease in buyers' income will _________ the demand for cars, a normal good.
b. Decrease Correct
Consider the following game in which two firms decide how much of a homogeneous good to produce. The annual profit payoffs for each firm are stated in the cell of the game matrix, and Firm A's payoffs appear first in the payoff pairs: Firm B - low output Firm B - high output Firm A - low output 300, 250 75, 100 Firm A - high output 50, 25 200, 50 What are the dominant strategies in this game?
b. Neither firm has a dominant strategy CorrectIncorrect
The first law designed to curb monopoly power in the United States was the ________ Act.
b. Sherman Antitrust Correct
The demand for textbooks is price inelastic. Which of the following would explain this?
b. The good is a necessity. Correct
Which of the following is true if there is a decrease in the demand for cupcakes?
b. There is a decrease in producer surplus. Correct
Refer to Figure e. If Allie watches the Mets, what is Brandon's best response?
b. Watch the Mets
Refer to Figure 12.7. The numerical data show daily profits for each of the two firms when they choose a specific pricing strategy. If Zeta commits to charging a high price Omega can earn the largest profit by:
b. charging a low price. Correct
A tit-for-tat strategy is one in which oligopolies
b. cooperate as long as other members cooperate, but if anyone cheats, they cut the price until the cheater reverts to cooperation. Correct
If the price of a good falls while supply remains unchanged, then total producer surplus will ____________.
b. decrease CorrectCorrect!
Say the following two events take place at the same time: -Demand for gasoline decreases -Supply for gasoline increases. Then we would expect the price of gasoline to _____ and the market quantity to _______.
b. decrease; increase or decrease
The process observed when an economy's production possibility frontier is shifted outward is:
b. economic growth. Correct
Say the following two events occur at the same time: 1) a decrease in the price of milk, an input in the production of cheese; 2) a decrease in the price of bagels, a complement of cheese. The following two events would lead to a(n) _________ in the market price and a(n) __________ in the market quantity of cheese.
b. indefinite change; increase Correct
All points inside the production possibility frontier represent:
b. inefficient production points. Correct
If the price elasticity of demand for oranges is 0.90, then the demand is _____ and total revenue will ______ if the price of oranges increases.
b. inelastic; increase Correct
Which of the following would result in higher price elasticity?
b. longer time period
Efficient production exists when the economy is:
b. operating on its production possibility frontier. Correct
Suppose that an increase in the price of a good leads to an increase in total revenue. Ignoring other factors (like supply), at its current price the good must be:
b. price-inelastic. Correct
In the short run, as output gets larger and larger:
b. the average variable cost curve gets closer and closer to the average total cost curve. Correct
The percent of the household budget spent on pencils is less than 1%, while that spent on housing expenses is about 40%. If the price of both goods increased by 10%:
b. the elasticity of demand for housing would exceed that for pencils. Correct
The price elasticity of a good will tend to be greater:
b. the longer the relevant time period. Correct
Average total cost is:
b. total cost divided by output. Correct
Average total cost is:
b. total cost divided by quantity. Correct
Oligopoly is a market structure characterized by:
b. uncertainty about the behavior of rival firms. Correct
The Sherman Antitrust Act:
b. was aimed at preventing the creation of more monopolies and was the beginning of antitrust policy. Correct
If there is a decrease in supply, total surplus:
b. will decrease. Correct
If the opportunity costs rises, the production possibilities frontier will:
bowed outward from the origin Correct
Suppose that Bob leaves a job that pays $50,000 per year in order to open a new sponge business. His insurance cost is $5,000, his material cost is $25,000, his lease payments are $10,000 and his sales revenue is $90,000. Bob's economic profit is:
c. $0. Correct
Vonda and Aleiyah are shopping together at the mall for new jeans. Vonda is willing to pay $90 and Aleiyah is willing to pay $50 for a pair of jeans. If the price of jeans is $59, how much total consumer surplus is achieved in this market?
c. $31 Correct
Natasha, Nelson, and Nikolai are all looking to buy flashlights for a camping trip. Natasha is willing to pay $4, Nelson is willing to pay $10, and Nikolai is willing to pay $20. If the actual price of a flashlight turns out to be $12, what is the total consumer surplus for these three shoppers?
c. $8 CorrectCorrect!
If Jakob knows the marginal cost of the first sports jersey is $20, the marginal cost of the second sports jersey is $32, and the marginal cost of the third jersey is $40, what is the total variable cost of producing 3 jerseys?
c. $92 CorrectCorrect!
If the price of a good is increased by 20% and the quantity demanded changes by 15%, then the price elasticity of demand is equal to:
c. 0.75. Correct
Suppose that the first four units of a variable input generate corresponding total outputs per period of 200, 350, 450, and 500, respectively. The marginal product of the second unit of input is:
c. 150. Correct
Suppose that the quantity demanded for a product falls by 9 percent as people's incomes fall by 3 percent. What is the income elasticity for this good?
c. 3.00 Correct
Which of the following most likely occurs in the long run?
c. A new movie theater is built
Refer to the above payoff matrix (in years of sentence) for two people (Bo and Max) charged for robbery. Which of the following is the outcome of the dominant strategy without cooperation?
c. Both Bo and Max confess. Correct
Suppose that a binding price floor is in place in a particular market. If the market is deregulated and the price floor is removed, then which of the following effects could occur?
c. There would be a decrease in the quality of the good supplied. Correct
If a store deals in a good that has a unitary elastic demand, what would be the net results on their total revenue of an increase in price?
c. There would be would be zero, so no change in total revenue. Correct
The absolute value of the price elasticity of demand for ground beef has been estimated to be 1.0. If mad cow disease strikes the United States and a large percentage of the cattle are removed from the market, how will that affect total expenditures on hamburger, all other things equal? (Hint: Consider the change in meat prices.)
c. Total expenditures will remain unchanged. Correct
The long run is a period of time in which:
c. a firm can adjust the quantity of any input. Correct
In the short run, an example of a fixed cost is:
c. a property tax. Correct
The government imposes a price ceiling below the equilibrium price. The price ceiling will cause:
c. a shortage of the good. Correct
Maria has a business printing t-shirts selling 200 t-shirts per month. Her monthly total fixed costs are $400, and her monthly total variable costs are $1,000. If for some reason Maria's fixed cost increased to $1,000, then her:
c. average fixed costs would increase. Correct
An industry is characterized by increasing returns to scale if:
c. average total cost falls as output increases. Correct
Refer to Figure 12.7 The numerical data show daily profits for each of the two firms when they choose a specific pricing strategy.In the Nash equilibrium:
c. both firms would charge a low price. Correct
4. If a consumer buys a set of headphones at the same time as she buys an .mp3 player, these two products are most likely:
c. complementary goods Correct
Suppose the government sets a price floor below the current price of the good. This price floor will:
c. have no effect on the price of the good. Correct
If the price of a good rises while supply remains unchanged, then total producer surplus will ____________.
c. increase CorrectCorrect!
Suppose the price of barley increases by 16.53%. If breweries buy 3.28% less barley after the price increase, the total revenue for barley producers will ________ due to the ________ effect being greater than the ________ effect.
c. increase; price; quantity
Suppose a combination of population growth and rising incomes increases both the demand for and the price of housing. In response, existing builders and new entrants construct more new housing. As the usage of timber outstrips the ability of forests to regrow, the price of timber rises. Consequently, the price of new housing rises. This scenario describes a(n):
c. increasing cost industry. Correct
6. Bus tickets are often considered _____ because _____:
c. inferior goods; as income rises, demand for bus tickets falls Correct
When perfectly competitive firm X sells three units of product Z, its marginal revenue is $4.67. When it sells 100 units, marginal revenue is $4.67. We can conclude that the price:
c. is $4.67. Correct
The change in total cost resulting from a one-unit change in quantity is:
c. marginal cost. Correct
The marginal cost curve is the mirror image of the:
c. marginal product curve. Correct
If demand is perfectly inelastic, then a 5% increase in price will cause:
c. no change in quantity demanded.
The industry characterized by a few interdependent firms where there are barriers to entry is called:
c. oligopoly. Correct
If the price of a good is increased by 15% and the quantity demanded falls by 20%, the price elasticity of demand is:
c. price-elastic. Correct
If the quantity demanded of agricultural output is very unresponsive to a fall in price, the demand for agricultural output is:
c. price-inelastic. Correct
Markets work because they allocate sales to the potential sellers who most value the right to sell a good, as indicated by their ability to produce the good at the lowest cost. This statement illustrates:
c. producer surplus. Correct
Rent controls set a price ceiling below the equilibrium price and therefore:
c. quantity demanded exceeds the quantity supplied. Correct
If a perfectly competitive firm can sell a bushel of soybeans for $60 and it has an average variable cost of $50 per bushel and the marginal cost is $70 per bushel, the firm should:
c. reduce output.
If a competitive firm can sell a ton of steel for $500 a ton and it has an average variable cost of $400 a ton, and the marginal cost is $600 a ton, the firm should:
c. reduce output. CorrectLevel: M
A rightward shift of the demand curve shows that
c. something has happened to cause a higher quantity demanded at every given price. Correct
81. Which of the following would increase demand for a given good?
c. the expectation that the price will increase in the near future Correct
If many firms enter the computer software industry and bid up the price of programmers, then
c. the long-run industry supply curve will slope up. CorrectLevel: M
If an industry initially has an HHI of 1,250, a merger between two of the largest firms in the industry:
c. would not likely be allowed since it most likely would reduce the competitive nature of the industry. Correct
Natasha, Nelson, and Nikolai are all looking to buy flashlights for a camping trip. Natasha is willing to pay $4, Nelson is willing to pay $10, and Nikolai is willing to pay $20. If the actual price of a flashlight turns out to be $9, what is the total consumer surplus for these three shoppers?
d. $12 Correct
Which of the following could be a possible cross elasticity of demand measure for two products such as peanut butter and jelly?
d. -20.8 Correct
An increase in buyers' income will _________ the demand for public transportation, an inferior good.
d. Decrease Correct
Governments continue to impose price controls. Which of the following is not a valid reason for this?
d. Price controls are always effective. Correct
If buyers' value for bicycles increase, the demand curve for bicycles will ______.
d. Shift to the right Correct
Which of the following is likely to make supply more inelastic?
d. The time period under consideration is very short and the inputs necessary for production cannot readily be increased. Correct
Refer to Figure e. Brandon and Allie want to go on a date one summer evening. Allie is a Red Sox fan, while Brandon is a Mets fan. Both teams are playing that evening, but not against each other. Each would rather watch their team, neither can force the other to watch a particular game and each is willing to suffer through the other's game if it means time together. Figure e illustrates both Allie and Brandon's payoffs for each choice, with Allie's payoff in the southwest corner of each cell and Brandon's in the northwest corner. If Brandon watch the Mets, what is Allie's best response?
d. Watch the Mets Correct
If the estimated price elasticity of demand for foreign travel is 4, then:
d. a 20% decrease in the price of foreign travel will increase quantity demanded by 80%. Correct
If the demand for golf is price-inelastic and your local public golf course increases the greens fees for using the course, you would expect:
d. an increase in total revenue received by the course. Correct
Mr. Porter sells 10 bottles of champagne per week at a price of $50 per bottle. He can sell 11 bottles per week if he lowers the price to $45 per bottle. The quantity and the price effects on total revenue would be, respectively:
d. an increase of $45 and a decrease of $50. Correct
The effect of a tremendous natural disaster can be shown by:
d. an inward shift of the production possibility frontier. Correct
If the price of a good is increased by 15% and the quantity demanded changes by 20%, then the absolute value of the price elasticity of demand is equal to:
d. approximately 1.33. Correct
Jessica experienced an increase in her income by 10% this year. In the same year, Jessica's quantity demanded of milk increased by 10% and her quantity demanded for bread increased by 5%. This means that for Jessica:
d. both milk and bread are normal goods. Correct
Suppose two firms are in a game situation, and they each must decide on a strategy regarding whether to select a high price or a low price. Profits for a firm are highest when it selects a low price, while the other selects a high price; profits are lowest if one selects a high price, while the other selects a low price; profits are in between when both select low prices; and profits are slightly higher when both select high prices. In the absence of collusion we expect
d. both to select low prices. Correct
Along a given demand curve, an increase in price of the product will
d. decrease the quantity demanded. Correct
Suppose the state of Oklahoma decides to produce only two goods, oil and football helmets. According to the production possibility frontier, as oil production increases, the production of football helmets will:
d. decrease. Correct
If ice cream has an income elasticity of demand that is greater than one, then ice cream income is:
d. elastic and ice cream is a luxury good. Correct
When marginal cost is above average variable cost, average variable cost must be:
d. greater than average fixed cost. Correct
For a good to be considered a normal good, then _____ must be ________.
d. income elasticity of demand; greater than 0 Correct
If the price of a good rises while supply remains unchanged, then total producer surplus will ____________.
d. increase Correct
Total revenue will increase following a price increase if demand is:
d. inelastic.
If a good is very inexpensive, but it is a necessity, you would predict the price elasticity of demand for the good is:
d. inelastic. Correct
Game theory is commonly used to explain behavior in oligopolies, because oligopolies are characterized by:
d. interdependence. Correct
The curve that shows the additional cost of each additional unit of output is called the:
d. marginal cost curve. Correct
If soda and potato chips are complements, then their cross elasticity of demand is:
d. negative.
If the income elasticity of demand for a good is _______, the good is said to be _________.
d. negative; inferior good Correct
The prisoner's dilemma shows that
d. players would be better off if they cooperated. Correct
If the income elasticity of demand for a good is _______, the good is said to be _________.
d. positive; normal good Correct
The practice of charging different prices to different customers for the same good or service, even though the cost of supplying those customers is the same, is:
d. price discrimination. Correct
Microsoft sets prices for their new line of computers and Dell and HP follow. This practice is known as________.
d. price leadership. Correct
Supply curves tend to be more ________ the greater the time period facing the producer.
d. price-elastic Correct
If the quantity supplied responds substantially to a relatively small change in price, supply would be:
d. price-elastic. Correct
If the price elasticity of demand between two points on a demand curve is 0.75, then demand between those two points is:
d. price-inelastic. Correct
The supply curve for a good will be more elastic if:
d. production inputs are readily available at a relatively low cost. Correct
When price goes down, the quantity demanded goes up. Price elasticity measures how:
d. responsive the quantity change is in relation to the price change. Correct
87. A change in preferences from the MP3 players to the iPod means:
d. the demand curve for iPods will shift to the right. Correct
Maximum total surplus in the market for chocolate occurs when:
d. the market is in equilibrium. Correct
If there is a surplus of wheat on the market,
d. the price of wheat will fall. Correct
Demand for McDonald's hamburgers is more elastic than demand for hamburgers because:
d. there are more close substitutes for McDonald's hamburgers than for hamburgers. Correct
Profits are equal to the difference between _____ and _____.
d. total revenue; total costs Correct
If the price of a good rises, then producer surplus:
d. will increase. Correct
The equilibrium price will increase when:
demand increases and supply decreases Correct
On a linear demand curve:
demand is inelastic at low prices. Correct
A price-setter faces a demand curve.
downward-sloping Correct
A strategy A is "dominant" for a player X if
e. strategy A is the best response to every strategy of the other player. CorrectCorrect
In the long run, monopolistic competitive firms break even due to
entry of new firms into the market
If a perfectly competitive firm can sell a bushel of soybeans for $30 and it has an average variable cost of $20 per bushel and the marginal cost is $20 per bushel, the firm should:
expand output.
At 36 units of labor, a firm finds that both average product of labor and marginal product of labor equal 42. We can conclude that the average product curve at 36 units of labor is:
horizontal
If chicken and fish are substitutes with a cross elasticity of demand of 0.8, then a 20% increase in the price of chicken will cause the quantity demanded for fish to:
increase by 16% Correct
Say the following two events take place at the same time: -Demand for gasoline increases -Supply for gasoline increases. We would expect the price of gasoline to _____ and the market quantity to _______.
increase or decrease; increase
Say the following two events take place at the same time in the market for marijuana: -Income of buyers DECREASE -The costs of inputs increase Assuming marijuana is an inferior good, and that marijuana and cocaine are substitutes, then we would expect the price of cocaine to _____ and the market quantity of cocaine to _______.
increase; increase
Assume that beef and pork are substitutes. Further, assume corn is an input in the production of beef (but not in the production of pork). An increase in the price of corn will __________ the price of beef and _______ the price for pork.
increase; increase Correct
Say the following two events occur at the same time: 1) an increase in the price of orange, an input in the production of orange juice; 2) a decrease in the price of coke, a substitute good of orange juice. The following two events would lead to a(n)_________in the market price and a(n) __________ in the market quantity of orange juice.
indefinite change, decrease Correct
If the price of gasoline increases 10% and quantity demanded decreases by 5%, then the demand curve for gasoline is:
inelastic
The point A in the picture:
is feasible and efficient Correct
The monopolist's demand curve:
is the market demand curve. CorrectCorrect!
When prices fall below equilibrium,
it will result in inefficiency of the market Correct
Refer to the above payoff matrix for profits (in millions) of Orange Inc. and Grape Inc. and their two strategies. In the Nash equilibrium, Grape Inc. will set a ____ price and Orange Inc. will set a _______ price.
low; low Correct
Suppose a firm is producing at the profit-maximizing level of output. At that level of output:
marginal revenue equals marginal cost Correct
The kinked demand curve model of Oligopoly assumes that if a firm raises its price, competitors will ______ their prices; if the firm lowers its price, all of its competitors will _______ their prices, which leads to the kink in the demand curve and relatively stable market prices.
not raise; lower
All of the following are characteristic of oligopoly EXCEPT
price taking
The equilibrium price is established when
the quantity supplied equals the quantity demanded Correct
Refer to the above payoff matrix for profits (in millions) of Orange Inc. and Grape Inc. and their two strategies. Grape Inc's dominant strategy is:
to charge a low price
The student center on campus has burritos, bagels, or burgers for lunch, and they all cost the same. You decide to have a burger today, but if they were out of burgers, you would have bought a bagel. Your opportunity cost of the burger is:
your enjoyment of the bagel Correct
Three girls want to buy hand cream. Amy is willing to pay＄10, Alexis is willing to pay＄8, and Mary is willing to pay＄15. If the hand cream is actually＄13, what is the total consumer surplus received by the three of them?
＄2 Correct