Econ Final
Refer to Scenario 9.1. Amy's total fixed costs equal
$10,000
Refer to figure 8.3. The margianl cost of the 10th basketball is
$2
Refer to Table 11.1. If the interest rate is 20%, Nashbar Bicycle should
fund only the purchase of new notebook computers for its sales staff.
Monopolistic competition is an industry market structure with
many firms each able to differentiate their product.
he government uses ________ figures contained in the Herfindahl-Hirschman Index (HHI) to help determine whether or not it will challenge a proposed merger.
market share
Monopolistic competition differs from perfect competition primarily because in
monopolistic competition, firms can differentiate their products.
The demand facing a monopolistically competitive firm is ________ a monopolistic firm and ________ a perfectly competitive firm.
more elastic than; less elastic than
Relative to a monopolized industry, a competitively organized industry is more likely to produce
more output, charges lower prices, and earns only a normal profit.
The demand for Ben & Jerry's ice cream will likely be ________ the demand for dessert.
more price elastic than
The airline industry is an example of a(n) ________ industry.
oligopolistic
A form of industry structure characterized by a few firms each large enough to influence market price is
oligopoly
Refer to Figure 18.4. Suppose that the Lorenz curve ran along the horizontal axis to 100% of families, then became vertical to 100% of income. This would mean that
only one family earned all the income.
If TR > TC, a firm would ________ in the short run and ________ in the long run.
operate, expand
Which one of the following is NOT a source of market failure?
price ceilings
If an individual perfectly competitive firm charges a price below the industry equilibrium price, it will
sell all that it produces but gain LESS revenue than competing firms will
Marginal private cost is the
the amount that a consumer pays to consume an additional unit of a particular good.
Refer to Figure 18.4. Suppose that the Lorenz curve were the same as the 45-degree line OB. This would mean that
the distribution of income is equal.
Total cost is calculated as
the sum of total fixed cost and total variable cost
Refer to Table 14.2. Firm Aʹs dominant strategy is
to advertise
Profit-maximizing firms want to maximize the differences between...
total revenue and total cost
If the interest rate is 5%, the current market value of $1 to be delivered in one year is
$0.95
Refer to Table 11.1. If the interest rate is 9%, Nashbar Bicycle's total investment would be
$1,100,000.
Refer to Table 10.1. The marginal revenue product of the fourth worker is
$100
Refer to Scenario 9.1. Amy's profit is
$20,000
Refer to Figure 8.8. If this farmer is producing the profit-maximizing level of output, her profit is
$3,000
Refer to Scenario 9.1. Amy's total costs equal
$40,000
Refer to Figure 16.1. The marginal damage cost imposed as a result of producing fertilizer is
$5.00 per bag of fertilizer.
Refer to Figure 16.1. To force this firm to produce the efficient level of output, the government should impose a tax of
$5.00 per bag of fertilizer.
Refer to Table 16.4. Suppose the government wants to reduce the total amount of pollution from the current level of 10 to 4. To do this, the government caps each firm's emissions at 2 units and issues 2 permits to each firm. If firms are allowed to trade permits, what is the total cost of the pollution reduction?
$52
You use $2,000 of your own money to start a dog-sitting service. During the first year you earn a 10% return on your investment. If the current interest rate is 7%, you earn an economic profit of
$60
Refer to figure 8.3. If the total fixed cost is $50, then average total cost of producing 10 basketballs is
$8
Refer to Figure 8.8. What is the total cost of producing the profit maximizing level of output?
$9,000
Refer to Figure 8.8. This farmer's profit-maximizing level of output is ________ units of output.
1,000
A new technology is developed for producing microwave ovens that reduces production costs by 10%. Which of the following is the most likely consequence of this technological change?
Firms must adopt this new technology to remain efficient.
A condition in which no change is possible that will make some members of society better off without making some other members of society worse off is called
Pareto optimality.
The Taste Freeze Ice Cream Company is a perfectly competitive firm producing where MR = MC. The current market price of an ice cream sandwich is $5.00. Taste Freeze sells 200 ice cream sandwiches. Its AVC is $8.00 and its AFC is $3.00. What should Taste Freeze do?
Shut down and produce zero sandwiches because price is less than AVC.
You value your economics textbook at $10. Someone else values it at $25, and that person is willing to pay you $20 for your textbook. Would selling your textbook to this person for $20 be Pareto efficient?
Yes, because both of you are better off as a result of the trade
In an imperfectly competitive industry,
a single firm has some control over the price of its output.
An oligopoly is an industry market structure with
a small number of firms each large enough to impact the market price of its output.
An example of intangible capital is
a trained apprenticeship program.
Which of the following is LEAST likely to be considered a firm in an imperfectly competitive industry?
a wheat farmer in Kansas
The feature that distinguishes monopolistic competition from perfect competition is that monopolistically competitive firms are
able to differentiate their products.
A technological change in the production of cars will
affect input and output markets in the automobile industry and other related industries.
Of the following, ________ is the best example of an oligopolistic industry.
automobiles production
Which of the following is NOT an example of price discrimination?
back-to-school sales
Although patents are a ________, they also provide ________.
barrier to entry; an incentive for invention and innovation
For the efficient level of output to be produced, marginal
benefit must equal marginal social cost
Oligopolists must ________ to their strategy in order to determine their optimal strategy.
both A and B are correct.
In monopolistic competition, firms can have some market power
by producing differentiated products.
The market in which households supply their savings to firms that demand funds in order to buy capital goods is the ________ market.
capital
Goods produced by the economic system that are used as inputs in the production of future goods and services are
capital goods.
The idea that the demand for auto workers stems from the demand for automobiles is
derived demand.
Firms gain control over price in monopolistic competition by
differentiating their products.
It is essential to establish specific criteria to judge the performance of any economic system. Two such criteria are
efficiency and equity.
You cause an automobile liability insurance company to face a moral hazard problem when you take ________ driving precautions ________ you buy automobile liability insurance from the company.
fewer; after
Refer to Table 10.1. If the payment to labor per day is $100, this T-shirt manufacturer is maximizing profits if he will hire ________ employee(s).
four
Monopolies, oligopolies, and monopolistic competitive industries all
have market power.
If the wage rate is less than the marginal revenue product of labor, the firm should ________ to maximize profits.
hire more labor and produce more output
Assume dell computer company operates in a perfectly competitive market producing 5,000 computers per day. At this output level, price exceEDS this firm's marginal cost. To maximize profits, Dell should...
increase their output
For most people, as their income increases, their utility from that income ________ at a(n) ________ rate.
increases; decreasing
Suppose a policy change will generate $100,000 of benefits for low-income families and $120,000 of costs for high-income families. This change can best be described as
inefficient
Assume dell computer company operates in a perfectly competitive market producing 5,000 computers per day. At this output level, price eQUALs this firm's marginal cost. To maximize profits, dell should...
make no adjustments as they are already maximizing their profits
The restaurant industry is an example of a(n) ________ industry.
monopolistically competitive
An economist has estimated that the maintenance of a public park costs $25,000 a year and that the public park generates $30,000 a year in revenue for merchants near the park. From society's point of view, the maintenance of this park is
potentially efficient because the value of the gains exceed the value of the costs.
Preferences have just shifted away from beef and into lamb. If you are a sheep rancher, the best profit-maximizing strategy is to
produce as much as possible to earn profits in the short run.
Billy Bob's Fertilizer Engineers, a perfectly competitive firm, is incurring a loss, but the price is still above minimum average variable cost. Then in the short run this firm should ________, and in the long run, if there is no change in economic conditions, this firm should ________.
produce where MR = MC; exit the industry
derived demand.
related to the additional revenues team owners expect to enjoy as a result of having them on the team roster.
There is a bill pending before the Kansas State Legislature that would prohibit private companies from selling health insurance and would make the state the single payer of health care bills. Private health insurance companies that have made above normal profits have spent large sums of money trying to prevent this bill from being passed into law. This is an example of
rent-seeking behavior.
Refer to Table 10.1. The marginal revenue product of the ________ worker is $150.
second
Which of the following would NOT be considered an act of investing in capital?
the Postal Service delivering the mail
A decrease in the wage rate will change
the amount of labor employed, and it may also change the amount of other inputs employed
In making labor supply decisions, households weigh
the market wage against the value of leisure and time spent in unpaid household production.
For a monopolist to sell more units of output,
the price must be reduced.
If a firm is producing where MR>MC,
the revenue gained by priducing one more unit of output EXCEEDS the cost incurred by doing so
Refer to Figure 18.4. The wealthiest fifth of families earned ________% of income in Outland.
40
Refer to Table 17.2. Sue earns $40,000 annually. She has the opportunity to bet her entire salary on the upcoming super bowl. If Sue takes the bet, she will pick the Patriots. She believes that the Patriots have a 50-50 chance of winning the game. If the Patriots win, Sue will double her money ($80,000) but if they lose she loses her entire salary ($0). Sue's utility if she does not take the bet is ________ and her expected utility from the bet is ________.
40; 40
Refer to Figure 18.4. The second poorest fifth of families earned ________% of income in Outland.
7
Refer to Figure 8.8. If the market price of soybeans falls to $8, then to maximize profits this farmer should produce
700 bushels of soybeans
Perfectly competitive firms
All of the above are correct.
The Taste Freeze Ice Cream Company is a perfectly competitive firm producing where MR = MC. The current market price of an ice cream sandwich is $5.00. Taste Freeze sells 200 ice cream sandwiches. Its AVC is $4.00 and its AFC is $3.00. What should Taste Freeze do?
Continue to produce because price exceeds AVC.
Which of the following would be the most likely result if high-speed rail service were introduced to an area and made commuting from that area easier?
The cost of living far from one's workplace would drop, and the value of land would increase.
