Econ 40: Final Review

In Exhibit 0155, the price that the monopolistic competitor will charge at the profit-maximizing level of output is

$10

Optimal output and price or the nondiscriminating in Exhibit 0142 are

$1100 and $28

If you will receive $5000 two years from today, and the interest rate is 5 percent, what is it's present value?

$4535

In Exhibit 0155, the monopolistic competitor's total economic profit at the profit-maximizing level of output is

$750

If the marginal product of a worker is 14 units and his contribution to revenue and this product is $7, the MRP is:

$98

In Exhibit 0188, if a union raises the market wage to $4, employment by the firm will be

10 workers

If the market in Exhibit 0188 is allowed to operate freely , employment by the typical employer will be

12 workers

In Exhibit 0155, the monopolistic competitor's profit-maximizing level of output is

125 units

In Exhibit 0103; the total product of four workers is

140

In Exhibit 0103, diminishing marginal returns set in with the addition of the

4th worker

In Exhibit, 0103, marginal product of the third worker is

60

An executive used to be a teacher, his old pay was $50,000 and his new salary is $300,000

Economic rent is $250,000; opportunity costs are $50,000

A firm is experiencing diminishing marginal returns, its marginal product is negative

False

Marginal revenue is the addition to total revenue from using one more unit of an input in the short run.

False

Firms A and B are in a perfectly competitive industry, at equilibrium. A firm A earns marginal revenue of $17,

Firm B earns an average revenue of $17

In the allotted work time, John can iron 6 shirts and type 5 papers; Harry can iron 5 shirts and type 2 papers.

Harry has a comparative advantage in typing

The nondiscriminating monopolist in Exhibit 0142 will produce where

MR=MC

Suppose the equilibrium price in a perfectly competitive industry is $100 and a firm in the industry wants $112.

The firm will not sell any of its output

A tax collects $3000 per year from a family $25000 and $4000 from a family earning $50000

The tax is regressive

Which of the following would an economist classify as capital?

a bauxite mine in Jamaica

Which of the following will not change the demand for movie tickets

a change in the price of movie tickets

Which of the following causes the supply of leather jackets to decrease?

an increase in the price of leather

Unlike implicit costs, explicit costs

are actual cash payments

Opportunity cost is defined:

as the difference between the the value of alternative chosen and the next best alternative

Because people's wants are unlimited but resources are scarce,

choices must be made

Economics can best be defined as the study of how

decisions are made how to use scarce resources in an attempt to satisfy unlimited wants

If average revenue equals average total cost

economic profit is zero

If the Pet Store earns a normal profit this year, its

economic profit is zero

A temporary price differential is resource markets is

eliminated by resource movements

If the labor cost per worker is below the marginal revenue product, then a profit-maximizing firm will

employ more workers

A person maximizes utility by allocating time along leisure, market work, and nonmarket work so that

expected marginal utility per hour is equal among all three

If fixed cost at Q=100 is $130, then

fixed cost at Q=200 is $130

Special interest legislation usually

has concentrated benefits and costs

The law of comparative advantage says that a person should produce a good if they

have the lowest comparative advantage

Larger quantities of any good will be supplied at higher prices because

higher prices will attract resources from other resources

The opportunity cost of a resource

includes both explicit and implicit costs

As resources move from a lower paying industry to a higher paying industry, prices in the lower paying use will

increase

If the wage rate increases, an individual's labor supply will

increase if the substitution effect dominates the income effect

Suppose, at its present rate of output, a perfectly competitive firm's marginal revenue exceeds both its marginal cost and average variable cost. To maximize profit, the firm should

increase output

Given a demand curve, a decrease in supply will typically

increase price and decrease quantity

If people believe that prices are going to be higher in the future then they are today, they will

increase their current levels of demand

Resource owners (households) supply additional units of their resources so as to

increase their utility

If good B is a complement of good A, then a drop in the price of good B

increases the demand for A

Points inside the Production Possibilities Frontier represent

inefficiency or unemployement

A firms marginal rate of return on investment curve shows the amount

invested by the firm at each alternative interest rate

A market

is often a physical place, facilitates exchanges between buyers and sellers, typically involves monetary transactions, and might not have well-defined geographical limits

A profit maximizing firm will employ a resource up to the point where

its marginal resource cost equals its marginal revenue product

Monopolistically competitive industries consist of

many firms, each selling a slightly different product

Which best explains why marginal cost eventually increases as output increases?

marginal product decreases

A firm hiring a resource is a perfectly competitive resource market, its demand curve for the resource is

marginal revenue product curve

Suppose Adam's Apples, a small firm supplying in a perfectly competitive market, decides to cut its production in half this year. As a result, the

market price will not be affected

In the resource market, firms demand resources in order to

maximize profit

Perfectly competitive firms respond to changing market conditions by varying their

output

The difference between a positive economic statement and a normative statement is that

positive statements can be verified; normative ones cannot

A shortage occurs whenever

price is less than equilibrium

If a monopolistic competitor must lower the price to sell additional units,

price will always be greater than marginal revenue

Compared to a firm in perfect competition, the monopolistic competitive firm tends to

produce less and charge a higher price

Which of the following is not a function of government?

providing the economy with private goods

When an industrial union negotiates a wage above the market clearing level, wage gains come at the cost of

reduced total employment

The market interest rate

represents the opportunity costs of funds

An increase in income will, for normal goods

shift the demand curve for the good to the right

The monopolistic competitor in Exhibit 0155 is in

short run equilibrium because it is earning a positive economic prfit

If the price of the good described in Exhibit 0023 is $1.20, then there is a

shortage of 60 units

The substitution effect in the personal labor supply decision refers to

substituting market work for leisure or non-market work as the wage rate rises

If the price of the good described in Exhibit 0023 is $1.60, then there is a

surplus of 30 units

Marginal revenue product is defined as

the additional revenue to the firm generated by the use of one additional unit of resource

The demand for labor is likely to increase when

the demand for the good it produces rises

Microeconomics is best described as the study of

the economic behavior of individual decision makers

Rational economic decision makers will make change only if

the expected marginal benefit exceeds expected marginal cost

The higher the interest rate on your savings account,

the higher the opportunity cost of present consumption

If the price of gloves increases, the substitution effect says that

the quantity of gloves demanded will increase

In Exhibit B, the marginal revenue product of the

third machine is $144

In exhibit B, if the rental price of each machine is $140, how many machines should be used?

three

The present value of a promise to pay $100 one year from now will be greater if the interest rate were greater

true

if one person can has an absolute advantage of both of two goods, that person

will have a comparative in only one good