Econ Final (Chapter Tests Questions)

If price of televisions falls by one percent and the quantity demanded rises by 10 percent, then the price elasticity of demand for televisions has a value of:

10

If the price elasticity of demand for a good is 4.0, then a 10 percent increase in price results in a:

40 percent decrease in quantity demanded

If Bill's utility increases by 50 units when he purchases a ticket to a baseball game and the ticket cost $10, what is his marginal utility per dollars worth of baseball ticket:

5

Static inefficiency is:

A condition associated with the welfare loss due to the presence of a monopoly When too little output is sold at too high of a price

Dynamic efficiency is:

A condition summarized in the idea that monopolies may, over time, be more innovative and efficient than competitive firms at developing new production techniques.

Which of the following will cause an increase in equilibrium price and a decrease in equilibrium quantity:

A decrease in supply

Which of the following would not increase the demand for Coke:

A decrease in the price of Coke

Test 3 Perfect competition requires all of the following except:

A differentiated product

One person or country has an _______ over another if they take fewer hours to perform the task than the other person or country:

Absolute advantage

A firms cost curve will shirt upward given each of the following except:

An advance in technology This would decrease costs because of more efficiency

Which of the following scenarios will decrease demand of the good in question:

An increase in income if the good in inferior

Pork and beef are considered to be substitute goods. Which of the following will cause an increase in the demand for pork:

An increase in the price of beef

An increase in quantity supplied would be indicated by:

An upward movement along the supply curve

In economics, capital refers to:

Any manufactured aid in production Machinery and equipment

A market force that can prevent firms from price discriminating is:

Arbitrage

Test 1 A negative or indirect relationship between X and Y means that:

As X increases, Y decreases As X decreases, Y increases

In a perfectly competitive market, which of the following best describes the adjustments that result from a demand increase in the long run:

As a result of higher prices and profits, firms enter the market, forcing prices and profits down

As a business increases its level of production in the short run, which of the following cannot rise:

Average fixed costs (it's always decreasing)

Competitive markets will usually achieve

Both allocative and productive efficiency

In the simple circular flow model:

Businesses are the sellers of final products

A seller in a competitive market:

Can sell all he wants at the going price, so he has little reason to charge less

An alliance of firms that act collusively to reduce completion by either reducing output or increasing price in an industry to increase profits is a:

Cartel

An agreement among firms in a market about quantities to produce or prices to charge is called:

Collusion

Test 2 If the demand is relatively more inelastic then the burden of a tax would fall more on:

Consumers

Price discrimination describes a situation in which:

Different customers are charge different prices for the same product or service, where no cost differences exist

Oligopoly refers to a market structure that is:

Dominated by a few sellers

Which of the following explains why long run competitive type adjustment does NOT take place in a monopoly:

Entry is prohibited

In economics the short run is defined as a period:

In which all factors in production cannot be varied

Other things held equal, an increase in taxes will:

Increase its equilibrium price

Monopolistic competitive firms use advertising as a means to:

Increase the demand curve and decrease its elasticity

A monopolist would never choose to produce in the region of a demand curve where demand is:

Inelastic

The total market demand curve:

Is derived from the horizontal summation of all the individual demands at given prices

The demand curve for an individual seller in a competitive market structure is:

Is equal to its marginal revenue curve

If a firm decides not to produce output in the short run:

It will still have to pay fixed costs

A monopolist will produce _______ than a competitive market and charge a price ________ than a competitive market.

Less; Higher

Diseconomies of scale occur when a firm's:

Long run average total costs are increasing as output and plant size increases

When a consumer chooses to maximize their total utility, then consumer equilibrium is:

MUa/Pa=MUb/Pb

The short-run supply curve for a competitive firm is equal to the firm's:

Marginal cost curve above the minimum average variable cost curve

As an individual chooses to consume more units of a particular good their:

Marginal utility decreases and total utility increases

The long run supply curve for a particular industry under perfect competition:

May be perfectly elastic (horizontal) May be upward sloping May be downward sloping

How is monopolistic competition different than perfect competition:

Monopolistic competition produces differentiated products

Goods with many close substitutes tend to have:

More elastic demands

Ms. Brockway's income increased by 14 % in the last year, as a result, her purchases of home computer equipment and supplies decreased by 6 %. This shows that:

Ms. Brockway's demand for computer equipment and supplies are inferior goods

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

New firms to enter that market

If the income elasticity of demand for movies equals 3.14, then the good is:

Normal and income elastic

If a firm in a perfectly competitive market attempted to charge a price that is above the market price, it would:

Not be able to sell any of its product

Firms can freely enter a market:

Only when the market is monopolistically competitive or perfectly competitive

Productive efficiency can be seen in long run equilibrium where:

P=LRATC=LRMC

Solve for equilibrium price (Pe), equilibrium quantity (Qe) with the given demand and supply equations: Qd=225-30p Qs=125+20p

Pe=$2, Qe=100

As Ms. Jackson's income decreases, she increases her purchases of peanut butter. We conclude that for Ms. Jackson's:

Peanut butter is an inferior good

High end retailers during holiday season place a high price on merchandise on weekends and discount prices during the week. They do this because of shoppers with little free time and bargain hunters. What is this price strategy called:

Price Discrimination

What will happen to the equilibrium price and quantity of traditional camera film if traditional cameras become more expensive, digital cameras become cheaper, the cost of the resource needed to manufacture traditional film rises, and fewer firms decide to manufacture traditional film:

Price is indeterminate and quantity will fall

Which of the following is NOT a characteristic of perfect competition?

Price strategies by firms

Perfectly competitive firms are considered:

Price takers

The law of supply says that _____ and _____ are _____ related, ceteris paribus:

Price, quantity supplied, directly

The degree of responsiveness of a supplier of goods or services to a change in price or wages is known as:

The elasticity of supply

The equilibrium price in a market is the price at which:

The quantity supplied=quantity demanded Sellers and Buyers desires are both satisfied The greatest amount of the product will be exchanged

If the cross elasticity of demand between some good X and different good Y is positive, then:

The two goods are substitutes

Cartels are difficult to maintain because:

There is always an incentive to cheat

Suppose that the surgeon general announced that potatoes increase the risk of cancer. If the industry were perfectly competitive, its long run response would be:

To reduce both output and prices as firms leave the industry and surviving firms cut back production

When you are in the elastic portion of your demand curve and price is decreasing, what is happening to total expenditures and total revenues:

Total expenditures are increasing and total revenues are increasing

All of the following are factors of production except:

Wages

The law of demand says that ____ and _____ are ______ related:

price; quantity demanded; inversely

Comparative advantage occurs when:

A person or country has the lowest opportunity cost of producing the product

Which of the following firms is the closest to being a perfectly competitive firm:

A wheat farmer in Kansas

Advertising:

Provides information about products, including prices and seller location Has been proven to increase competition and reduce prices compared to markets without it Can signal quality to customers because it can be expensive

Which of the following would NOT be considered price discrimination?

Providing quantity discounts to a customer who purchases a large quantity of a particular good

Compact discs are normal goods. What will happen to equilibrium price and quantity of compact discs if musicians accept lower royalties, compact disc players become cheaper, more firms start producing compact discs, and music lovers experience an increase in income:

Quantity will rise, and the effect on price is ambiguous

In the short run, a firm will make an economic profit when:

Selling price is above average total cost

In the short run, a firm will immediately shut down (stop producing output) whenever:

Selling price is less than average variable cost

The marginal rate of substitution is equal to the:

Slope of the indifference curve

Price discrimination examples 1st, 2nd, and 3rd Degree:

Student discounts or ladies night are examples of this type of price discrimination: 3rd Degree Auction markets are considered an example of this type of price discrimination: 1st Degree Charging the same consumer different prices for identical items: 2nd Degree Charging each consumer the most he or she would be willing to pay for each item that is purchased: 1st degree Coupons or 2 for 1 discounts are examples of this type of price discrimination: 2nd degree Charging different prices in different markets is this type of price discrimination: 3rd degree This price discrimination captures the entire amount of consumer surplus as the monopolist profits: 1st degree

Consumer Surplus is:

The difference in what the consumer is wiling to pay and what they actually have to pay for the good or service The area below the demand curve, but above price