ECON 202 FINAL WILSON

The "coincidence of wants" problem associated with barter refers to the fact that

For exchange to occur each transactor must have a product which the other transactor wants

Which of the assumptions in the theory of perfect competition assures us that economic profit will be zero in the long run

Free entry and exit of firms in the market

Which of the following conditions would prevent a firm from being able to price discriminate

The inability to identify those customers willing to pay more

The general relationship between economic freedom and per capita income is

positive- higher economic freedom leads to a higher per capita income

When economists assume that people are rational and respond to incentives, they mean:

People act in their own self interest

A firm that has market power has the ability

To affect the price of its own product

Which of the following was NOT in the top 10 countries in terms of economic freedom according to the heritage foundation

U.S.

In the above figure,the firm's total economic profit is equal to

$60

Suppose that the quantity of newspapers demanded declines from 100,000 gallons per week as a consequence of a 10% increase in the price of beer. The price elasticity of demand is

0.60

The short run is a period of time in which

At least one factor of production is fixed

At equilibrium price there is

None of the above

To think at the margin means to consider

how a small change in one variable affects another variable

In the above figure, the firm will produce

20 units

In the figure above, the demand curve shifts rightward from D0 to D1 so that D1 is the relevant demand curve. Suppose the government imposes a rent ceiling of $300 per month. In the short run there will be

A shortage of 200,000 apartments

Which of the following best illustrates the concept of consumer surplus

A thirsty athlete pays $0.85 for a cold drink when she would have gladly paid $1.50 for the drink

When people develop expertise by dividing up the tasks encountered in major productive activities such as manufacturing a plane or making a movie, one of the most likely results are:

Broadly distributed gains from specialized production and trade

What area represents consumer surplus if a monopoly exercises market power in this market

A

Which of the following will NOT cause an increase in the demand curve for beer

A change in the price of beer

Along a production possibilities frontier, a society can produce more of a good only if

All resources are efficiently used

From 1970 to 2017, the real price of eggs decreased. Which of the following would cause an unambiguous decrease in the real price of eggs

An increase in the supply of eggs and a decrease in the demand for eggs

When marginal cost is greater than average total cost, the

Average total cost increases as output increases

In a market based economy

Buyers and sellers gain from voluntary exchange

If two countries are producing the same two products it is mutually beneficial if the countries specialize and trade. How is it determined who specializes in the production of which product?

By the lowest opportunity cost of production, comparative advantage

What are represents deadweight loss if a monopoly exercises market power in this market

C+E

In competition, an individual firm

Can not affect its price nor determine the quantity it sells in the marketplace

When a firm is considered to be a "price taker" that means that the firm

Cannot influence the market price of the good that it sells

The expression, "there's no such thing as a free lunch" implies that

Costs are incurred when resources are used to produce goods and services

A minimum wage set above the equilibrium wage rate for low skilled workers

Creates unemployment among low skilled workers

The economic inefficiency of a monopolist can be be measured by

Deadweight loss

You notice that the price of butter rises and then falls. The best explanation for this is that

Demand for butter increased causing prices to rise, which attracted other firms to enter the market causing supply to increase, which caused the price to go back down

Price discrimination is when a firm charges

Different prices for the same goods to different consumers

In the short run, monopolistic competition can

Earn an economic profit

Dan sells newspapers. Dan says that a 4% increase in the price of a newspaper will decrease the quantity of newspapers demanded by 8%. According to Dan, the demand for newspapers is

Elastic

The air route from dallas to mexico city is served by more than one airline. The demand for tickets from american airlines for that route is probably

Elastic and more elastic than the demand for all tickets for that route regardless of carrier

The perfectly competitive firm charges a price __ while the monopolistic competitive firm charges a price __

Equal to marginal cost, greater than marginal cost

In competition, the marginal revenue of an individual firm

Equals the price of the product

The monopolistic competitive firm

Faces downward-sloping demand curve and therefore is a price seeker

When a market has barriers to entry it refers to

Factors that prevent other firms from challenging a firm with market power

The __ the opportunity cost of doing something, the __ likely it will be done

Higher, less

A monopolistically competitive firm maximizes profits by producing at the point where

Marginal revenue equals marginal cost

The opportunity cost of going to college

Includes wages you lose by going to school instead of working

The marginal product of labor is equal to the

Increase in the total product that results from hiring one more unit of labor with all other inputs remaining the same

If demand is inelastic, an increase in the price will

Increase total revenue

Technological advancement in oil exploration will, ceteris paribus, __ the supply of oil, shifting the supply curve

Increase, to the right

Consumer buys a good we know that her willingness to pay

Is equal to its price

If an economy is operating at a point inside the production possibilities curve

Its resources are being wasted or under used

Which of the following explains why supply curves slope upward

Law of increasing opportunity cost

In a competitive market that is in long run equilibrium, a permanent decrease in demand

Lowers the price at first then raises it as firms leave the market

A single price monopolist will set its profit maximizing level of production where

MR=MC

Given that a monopolist acts in a profit maximizing manner, the above illustrates a monopolist

Make a positive economic profit

Specialization and trade exploit differences in productivity of workers and on net

Make everyone better off

An arrangement that allows buyers and sellers to exchange things is called a

Market

A firm's primary objective is best described as

Maximizing profits

In the short run, a competitive firm's economic profits

Might be positive, negative (an economic loss) or zero (normal profit)

Economic capital refers to

Money and other financial assets

Which market structure is characterized by several firms competing for small portions of the market through product differentiation?

Monopolistic competition

In bg there are many pizza restaurants, each offering similar types of pizza but each restaurant located in a different place around the city. It is likely a pizza restaurant in bg operates in a

Monopolistically competitive market

The USDA maintains ethanol has an impact on food prices "higher ethanol production definitely and directly raises the price of corn," said USDA economist Ephraim Leibtag in the long run in the corn market, what is true if the production of ethanol increases

New corn farmers will enter the market and decrease the market price

The best example of decision making at the margin would be

Observing the effect that a small change in income has on the amount of income tax owed and therefore upon after tax income

The money payment made to owners of land, labor, capital, and entrepreneurial ability

Rent, wages, interest, and profits respectively

The firms in a competition market structure are making an economic profit when new firms enter. The entry shifts the the short run market supply curve __ the market place __ and each firms economic profit ___

Rightward, rises, increases

The fundamental fact of scarcity implies that every decision involves

Opportunity costs

If the firm is incurring losses in the short run, then which of the following is true

P<ATC

The price elasticity of demand is calculated as the absolute value of the

Percentage change in quantity demanded divided by the percentage change in price

From figure one, the opportunity cost of producing an extra jar of peanut butter sandwich is highest at

Point d

The graph in figure one depicts the mythical country of sanwichas production possibility curve. Sandwicha would have to experience significant technological progress or massive saving and investment before it could feasibly choose to produce at

Point e

The income elasticity of demand is

Positive for a normal good and negative for an inferior good

The government sometimes creates a shortage for a product by setting a maximum price at which the product may be sold to consumers. This sometimes is called

Price ceiling

For a profit maximizing competitive firm

Price equals marginal cost

A firm will shut down if

Price is less than average variable

Emilio demands more prime rib as his income increases. From this, we can conclude that, for emilio

Prime rib is an inferior good

The difference between the price a producer receives for a product and the minimum amount a producer is willing to accept for that product is

Producer surplus

In a market system, a firm's self interest motivates most people to

Provide products for other people

Economics is an area of study broadly focuses on

Scarcity and decision making

A response to a price change would be described as a

Shift in demand curves

A market demand curve

Shows the relationship between the price of a good and the quantity that all consumers together are willing to buy

Marginal revenue is equal to

The change in total revenue divided by total output

Suppose that a product benefits from a successful advertising campaign. The result is that

The demand of the product increases

When the price of bananas falls, and a technological advance in apple production occurs at the same time

The equilibrium price of apples rise and the equilibrium quantity of apples rise

Increasing opportunity costs while moving along a production possibility frontier is due to

The fact that resources are not equally productive in alternative uses

Price discrimination is related to elasticity because

The firm can increase revenues by charging customers with elastic demands lower prices and charging customers with inelastic demands higher prices

A supply curve is defined as the relationship between

The price of a good and the quantity that all consumers are willing to buy

A change in the quantity demanded of a product is the result of a change in

The price of a product

Suppose that the quantity demanded for cars exceeds the quantity supplied of cars. We would expect that

The price of cars will decrease

A change in quantity demanded of a product is the result of a change in

The price of product and related goods

Suppose that in October, the price of a cup of caffe latte was $1.50 and 400 lattes were consumed. In november that price of a latte was $2 and 200 lattes were consumed. What might have caused this change

The price of tea fell

The law of supply states

There is a positive relationship between price and quantity supplied, ceteris paribus

If firms in a competitive industry are making zero economic profit, then

There is no incentive for either entry or exit

When a market is in equilibrium

There is no shortage and no surplus at the equilibrium price

A legal price ceiling of $0 means

The product is legal to give away but not sell

The implicit cost for capital includes the

The total value of piece of capital equipment

In the long run, the main reason that a monopolist can earn positive economic profits while a perfectly competitive firm cannot is

There are no barriers to entry in a perfectly competitive market

A monopolistic firm is producing at an output level in the short run where ATC is $3.50, price is $3, MR is $1.50 and MC is $1.50. The firm is operating

With an economic loss in the short run

Does voluntary exchange create wealth (value)?

Yes, trade generally permits the trading partners to gain more of what they value; this is why they agree to the terms of exchange

customarily , economists classify resources into these major groups

land , labor, capital, and entrepreneurship

If your city imposes a tax of $100 per apartment

consumers pay $60 and landlords pay $40 tax per apartment

The simple circular flow model shows that

households are on the supply side of the resource market and the demand side of the product market

A firm's total product curve shows

how the amount of output changes when the quantity of labor changes.

A market that involves only one seller of a non-substitutable good or service is known as

monopoly

Demand is perfectly inelastic when

shifts of the supply curve result in no change in in price but large changes in quantity demanded

In the event of excess demand in the coffee market

the price of coffee will increase

In the event of shortage in the coffee market

the price of coffee will increase

What is the total surplus of a market

the sum of consumer surplus and producer surplus