Economics Review

Which of the following is not part of the political argument against trade and current trade deficits?

International trade leads to less expensive goods being sold in the US.

Positive or normative? Florida should devote all revenues from its state lottery to improving public education.

Normative

What is the opportunity cost is Molly chooses to enter the doctoral program of Microbiology at the University of Texas after receiving her masters degree?

The time molly could have spent on other activities.

The rate of inflation is a topic of macroeconomics.

True

If there are no externalities or if such costs and benefits are properly internalized, firms _____ weigh social benefits and costs in their production decisions.

Will

Which of the following is not likely to be the basis for a barrier that keeps firm from entering a monopoly?

a high ration of variable costs to fixed costs.

A price ceiling is

a maximum price set by government that sellers may charge for a good.

Government, for many reasons, often intervene in international market, offsetting some of the efficiencies that may be realized with specialization based on comparative advantage and trade. When governments set a limit on the quantity of imports, this is known as

a quota.

Every Friday night, Gustavo pays $29.99 to eat nothing but crab legs at the all-you-can-eat seafood buffet at the M Resort in Las Vegas. On average he consumes 22 crab legs. The average cost of each crab leg to Gustavo is _______ and the marginal cost of an additional crab leg is ________.

$1.36; $0

Government, for many reasons, often intervene in international markets, offsetting some of the efficiencies that may be realized with specialization based on comparative advantage and trade. When a government makes a payment to domestic firms to encourage exports, this is known as

an export subsidy.

If an increase in income results in a decrease in the quantity demanded for a product, the product is _________ and the value of the income elasticity of demand is ________.

an inferior good; negative

Marginal cost intersects the average variable cost and the average total cost

at their lowest, or minimum points.

An example of a price ceiling would be the government setting the price of sugar

below the equilibrium market price.

A perfectly competitive firm _______ at the level of output where P=ATC

breaks even

Demand for one item goes down when the price of another item goes up. These items must be

compliments

With external economies, the long-run industry supply curve _______ with output.

decreases.

A firm will begin to experience diminishing returns at the point where

marginal cost increases

The value of the slope of a society's production possibility frontier is called the

marginal rate of transformation.

Each boat owner hires workers up to the point where

marginal revenue product of labor equals the wage rate.

Suppose you are deciding whether to spend your tax rebate check on a new iPod or a new digital camera. You are dealing with the concept of

opportunity cost

That which we forgo, or give up, when we make a choice or decision is called

opportunity cost

Marginal utility is

the additional satisfaction gained by the consumption or use of one more unit of something.

When the price of coffee decreases 5%, quantity demand increases 5%. The price elasticity of demand for coffee is _______ and total revenue from coffee sales will____________.

unit elastic; not change.

The legal principe that large size and the existence of unexerted power are not in themselves illegal

was generally accepted by the courts until 1945, let most decision rests on firms' conduct, led to a finding that US Steel had not violated any law, and is consistent with the Rule of Reason.

The law of diminishing return occurs:

when additional units of a variable input are added to fixed inputs, after a certain point, the marginal product of the variable input declines.

Economists use the phrase "ceteris paribus" to express the assumption

"all else equal"

The common way of expressing the efficient market concept is

"there's no such thing as a free lunch"

Jessica sells carrots at a small vegetable stand in a weekly​ farmers' market that contains many such stands. On​ average, she produces and sells 150 pounds of carrots at​ $0.50 per pound. Her total cost of producing carrots is​ $75 per week. She needs to decide whether or not to increase the production of carrots. She has been told that the market for carrots demonstrates constant returns to scale. If this is the​ case, what is the average cost to produce each pound of carrots when she increases production to 300 pounds of carrots per​ week?

$0.50 per pound

Suppose a firms pays $2500 per month to operate in the short run. From this amount $1,250 is spent on costs that do not change regardless of the level of the firm's output. What are the total variable costs of this firm?

$1,250

If the opportunity cost of producing one gallon of milk is 1 dozen eggs in France and the opportunity cost of producing one gallon of milk is 4 dozen eggs in​ Sweden, both countries would benefit from trading with each other if the terms of trade were one gallon of milk for​ ________ dozen eggs.

3

What is the opportunity cost if Tiffany goes out for a night of karaoke and sleeps through her Calculus final exam?

A better grade on the exam.

What is the opportunity cost when upgrading to a balcony suite for your cruise around the Mediterranean Sea?

An excursion you could have purchased with the money spent on the upgrade.

When a price ceiling is imposed, the price system is prohibited from rationing the product in the market in which the ceiling was imposed. What other alternative rating methods are available to determine who receives the scarce commodity?

Queuing, favoring customers, and ration coupons.

Which of the following is an example of a normative question?

Should the government provide free prescription drugs to lower-income citizens?

Which of the following is not an opportunity cost of attending college?

The cost of the food that you consume while you are attending college.

Which of the following is an opportunity cost of attending college?

The income you could have earned if you didn't attend college.

Which of the following is most likely to be a variable cost for a firm?

The payroll taxes that are paid on employee wages.

Marginalism is

The process of analyzing the additional costs or benefits arising from a decision.

Many industries lobby for favorable treatment, softer regulation, or antitrust exemption. This is called rent seeking.

True

The public choice field of economics looks at the public sector from the standpoint of the behavior of public officials and potential for inefficient choices and bureaucratic waste.

True

True of False? Three roommates are trying to decide what color to paint their living​ room, and following are their​ preferences: Alice prefers green to blue and prefers blue to purple. Bianca prefers purple to green and prefers green to blue. Cyndi prefers blue to purple and prefers purple to green. The results of their preferences represent a voting paradox.

True

True or False? All else equal, taxes that are neutral with respect to economic decision are usually preferable to taxes that distort economic decisions.

True

True or False? It is possible that government involvement in the economy can lead to markets functioning more efficiently as well as markets functioning less efficiently.

True

True or false? The collection and use of data to test economic theory is called empirical economics.

True

The existence of trade for country that has developed an expertise or reputation for quantity in the production of a particular good is best explained by

acquired comparative advantage.

A tax that causes net income to fall

causes damage on the sources side.

To analyze the relationship between two variable while holding the values of other variables unchanged is a device known as

ceteris paribus

A change in income leads to a _____ that leads to a _______.

change in demand; shift of the demand curve.

the word perfect in the term percent competition means

competition in the market is total or incomplete.

Suppose the demand for lawnmowers goes down when the price of gasoline goes up. We can say that these two goods are

complements

Public goods are _______. In addition _________ can consume them.

consumed collectively; everyone

Fixed costs are best described as

costs that are incurred even if the firm is currently producing nothing.

Two college students share an apartment and split the cost of​ heating, electricity, and rent. They decide to include one more roommate and divide​ heat, electricity, and rent costs three ways instead of two ways. If the third roommate increases the utility bill by more than​ one-third and it increases the amount of money each roommate pays for utilities each​ month, this can be described​ as:

diseconomies of scale.

Freely functioning markets in the the real world _____________ always produce an efficient allocation of resources.

do not

When a firm or industry sells products on the world market at prices below the cost of production, this known as

dumping

With international trade, the availability of less-expensive goods is the result of

each trading country specializing in production where it has a comparative advantage.

Firms that are breaking even are

earning zero economic profits.

The existence of trade for country that produces and sells on a large scale to a global market is best explained by

economies of scale.

When an increase in a firm's scale of production leads to lower average costs, we say that there are

economies of scale.

An approach to economics that applies statistical techniques and data to economic problems is called

empirical economics

The collection and use of the data on automobile emissions and global warming levels is an example of

empirical economics

A person who organizes, manages and assumes the risks of a firm, taking a new idea or a new product and turning it into a successful business is known as an

entrepreneur

The discipline of economics began to take shape during the time of Franklin Roosevelt's New Deal.

False

The rate of unemployment is a topic of microeconomics

False

True or False? In economics, the concept of equity is rarely debated as most people agree as to what is and what is not equitable.

False

True or False? Macroeconomics deals with the functioning of individual industries and the behavior of households.

False

True or false? In a simple, one-person economy, the person does not experience the concepts of scarcity or choice.

False

True or false? The only two fields of economic study are macroeconomics and microeconomics.

False

When a country has an absolute advantage in the production of a product, it means that country can produce the product at a lower opportunity cost than other countries.

False

The cross-price elasticity of demand between good X and good Y is 0.5. Given this information, which of the following statements is true.

Goods X and Y are substitutes.

The existence of trade for country where capital is relatively abundant specializing in capital intensive goods might by explained by

Hecksher-Ohlin theorem.

There are three important properties to remember about demand curves . Describe these properties.

It has a negative slope, which intersects the X, or quantity, axis and intersects the Y or price axis

What two important functions does a market system perform?

It provides an automatic mechanism for distributing scarce goods and services and determines both the allocation of resources among producers and the final mix of outputs.

_______ are likely a fixed cost of a firm

Lease payments for office space.

Regarding social choice, which of the following is not a problem with majority-rule voting?

Legislation that benefits only a small region will often command a majority vote.

If an industry realizes positive economic​ profits, new firms and investment will gravitate toward that industry. Those industries that suffer economic losses will tend to lose firms and investment. At the point where economic profits are neither positive nor negative​ (zero), the industry is said to have​ achieved:

Long-run competitive equilibrium and P=SRMC=SRAC=LRAC

Bubba's Bait and Tackle is maximizing profits, so it must be where

MR=MC

Congress extends the maximum duration for the collection of unemployment benefits from 26 weeks to 52 weeks. This is an example of a ___________ concern.

Macroeconomic

The president has proposed increasing the marginal tax rate for people whose annual earning exceed $275,000 and lowering the marginal tax rate for those who earn less than $275,000. This is an example of a ___________ concern.

Macroeconomics

A resource's ____________ is the additional output that can be produced by adding one more unit of a specific input, ceteris paribus, while __________ is the average amount produced by each unit of a variable factor of production.

Marginal product; average product.

Among the fundamental concepts in economics are:

Marginalism, opportunity cost, efficient markets.

The FAA is considering increasing the number of takeoff and landing slots available at Ronald Reagan Washington National Airport. Is is an example of a _________ concern.

Microeconomics

Walmart has announced that it will increase its starting wage for employees to $10 per hour by February 2016. This is an example of a ________ concern.

Microeconomics

Which of the following is not a resource as the term is used by economists?

Money

You discover that Ohio exports more to Canada and Mexico than all other countries combined. Is this fact surprising?

No, because of NAFTA, you would expect the exports of goods to Canada and Mexico to be substantial.

Positive or normative? As a public safety measure, the state of Texas should not pass legislation that allows people to carry concealed weapons on college campuses.

Normative

Which of the following is not an argument for protectionism in international trade?

Protecting a key source of government revenue

The amount by which the burden of a tax exceeds the revenue collected by the government is called the

excess burden of the tax.

Favored customers are customers who receive special treatments from deals during periods of

excess supply

In a black market

illegal trading at market prices takes place

A firm that is breaking even is

in an industry that is not attracting new firms, earning a normal rate of return, earning zero economic profit.

When P=SRMC=SRAC=LRAC and industry is considered to be

in long-run competitive equilibrium and making zero profits.

Exports represent goods produced __________ and sold _______.

in the US; abroad.

In response to news reports that taking aspirin daily can reduce an individual's risk of a heart attack, there will most likely be an

increase in the demand for aspirin.

The study of economics

is a way of analyzing decision-making processes caused by scarcity.

Two congressmen agree to support each others legislations this

is an example of logrolling and it could result in two pieces of efficient legislation being passes.

For a monopoly, marginal revenue

is less than price, because a monopolist must lower its price in order to sell more.

In the short​ run, firms earning a profit will want to​ ________ their profits while firms suffering losses will want to​ ________ their losses.

maximize; minimize

The income elasticity of demand

measures the responsiveness of quantity demanded changes in income.

If a monopoly is protected by barriers that prevent other firms from selling the same product, then the monopolist

is still constrained by the demand curve for its product.

Producer surplus

is the difference between the current market price and the cost of production for the firm

Consumer surplus

is the difference between the maximum amount a person is willing to pay for a good and its current market price.

Marginal cost

is the increase in total cost resulting from producing one more unit.

You own American Sniper on DVD. The opportunity cost of watching the DVD for the fourth time

is the value of the alternative use of the time you spend watching the DVD.

Because a monopoly is the only firm in its industry,

it can set the industry prices

The branch of economics that examines the functioning of individual industries and the behavior of individual decision-making units is

microeconomics

The marginal cost curve intersects the average variable cost curve at the _____ value of the average variable cost.

minimum

A(n) ______ is a formal statement of a theory

model

A mass transit authority charges bus fares of $1.25 during morning rush hours but only $1.00 during the late morning non-rush hours. Economists explain the fare difference by the fact that the demand for bus rides during the morning rush hours is ______ but during the late morning it is __________.

more inelastic; more elastic.

Firms have ______ over their ________ costs in the short run

no control; fixed

If a profit-maximizing firm is currently producing output where MR=MC in the short run, it should

not change output

A representative firm in a perfectly competitive industry will continue to expand its operation so long as

it is earning positive profits, there are economics of scale to be realized, new firms have incentive to enter the industry.

If a firm shuts down in the short run, then

its losses are equal to its fixed costs.

Viewed as an example of an input market, we can conclude that

labor will be allocated efficiently among the firms.

Sanjay is consuming X and Y so that he is spending his entire income and MUxIpx=8 and MUyIPx=14. To maximize utility, he should consumer

less X and more Y

The ________ is that period of time for which there are no fixed factors of production: firms can increase or decrease the scale of operation, and new firms can enter the industry and/or existing firms can exit the industry.

long run.

The shutdown point for a perfectly competitive firm is the

lowest point on the AVC curve.

In interpreting the Sherman Act, the Supreme Court developed the Rule of Reason, which says that a firm may be found guilty of violating the law

only if its conduct is unreasonable.

The process of deciding what society wants, and then aggregating individual preferences to make a choice for society as a whole is called

social choice.

A government policy that tries to minimize inflation and unemployment can best be described as trying to achieve economic

stability

When the decrease in the price of one good causes the demand for another good to decrease, the goods are

subsitutes

An example of a positive eternality is

the beauty of a home's well-kept lawn.

the financial capital market is

the complex set of institutions in which suppliers of capital (households that save) and the demand for capital (firms wanting to invest) interact.

One of the major characteristics of pure monopoly is

there are several barriers to entering the industry.

One of the major characteristics of pure monopoly is

there is only one firm in the industry.

For a demand curve to be more elastic:

there should be an availability of substitutes.

When a firm engages in perfect price discrimination

they produce the same output level as a competitive firm, consumer surplus is zero and there is no deadweight loss.

When firms earn below normal rates of return

they tend to leave the industry and seek profits elsewhere.

According to the benefits principle:

those who benefit from the tax expenditures should provide the tax revenues.

Which type of cost does spend on a firm's output?

total cost, variable cost, marginal cost.

A firm earns a profit if

total revenue exceeds the total cost of production.

A firm suffers losses if

total revenue is greater than the total variable cost of production but less than total cost.

At an output of zero, ______ is zero.

total variable cost

According to the theory of comparative advantage, _______ raises productivity by lowering opportunity costs

trade and specialization

Since about 1976, the United States has been running a

trade deficit

Prior to 1976, the US was running a

trade surplus

When the price of cheddar cheese increases 15%, quantity demand decreases 15%. The price elasticity is _______ and total revenue will__________

unit elastic; not change

A firm will shut down in the short run if

variable costs exceed revenues.

Among the methods of nonprice rationing are

waiting in line, coupons, favored customers.

If Macroland's economy is at Point A, it could produce more consumer goods

without sacrificing any capital goods.

Assume Cathy's Cupcake Company operates in a perfectly competitive market producing 10,000 cupcakes per day. At his output level, price equals this firm's marginal cost. Assuming price exceeds average variable cost, to maximize profits Cathy's Cupcake Company should

make no adjustments as they are already maximizing their profits.

Assuming that households confine their choices to products that improve their well-being, a decline in the price of any product, ceteris paribus:

makes the household unequivocally better off.

Perfect competition is defined as

many firms, each being small relative to the industry and producing virtually identical products, and in which no firm is large enough to have control over prices.

The process of analyzing the additional costs or benefits which arise from a decision is known as marginalism.

True

Imports represent goods produced _________ and sold _______.

abroad; in the US.

The process by which inputs are combined, transformed and turned into outputs is called

poduction

A firm in a perfectly competitive industry produces its profit-maximizing quantity, 40 units. Industry price is $3, total fixed costs are $45, and total variable costs are $60. The firm's economic profit is

$15

If the market price of a basketball is $35 and the full cost of producing it is $20, then the basketball producing firm gets producer surplus of

$15.

Jane has $500 a week to spend on clothing and food. The price of clothing is $25 and the price of food is $10. What is the equation for Jane's budget constraint?

$25*clothing +$10*food=$500

A firm in a perfectly competitive industry is currently producing 5,000 units of output and the market equilibrium price for the good is $5.00. If the firm chooses to increase output by one additional unit, total revenue is _________. Marginal revenue is ________.

$25,005; $5.00

If a firm's total costs are $100 when 10 units of output are produced and $103 when 11 units are produced, the marginal cost of the 11th unit is

$3

The Lawn Ranger, a landscaping company has total costs of $4000 and total variable costs of $1000. What are their fixed costs?

$3000

If the most someone is willing to pay for a ticket to see their favorite team is $100 and the market price of the ticket is $35, then this buyer will get consumer surplus of

$65.

Which of the following is used to calculate cross-price elasticity of demand?

(% change in quantity of Y demanded)/(% change in price of X)

Which of the following is used to calculate elasticity of labor supply?

(% change in quantity of labor supplied)/(% change in the wage rate)

Which of the following is used to calculate elasticity of supply?

(% change in quantity supplied)/(% change in price)

Which of the following is used to calculate income elasticity of demand?

(%change in quantity demanded)/(% change in income)

Economic profit is

(P-ATC)*q

If the quantity of tea increases by 2% when the price of coffee increases by 6%, the cross-price elasticity of demand between tea and coffee is

0.33

If the quantity demanded of ages decreases by 8% when the price of croissants decreases by 16%, the cross-price elasticity of demand between bagels an croissants is

0.5

is an organization that transforms resources into products

A firm

In order for an economy to be​ successful, there must be some form of organization. Firms produce products that are marketed and sold. There must be people who desire to purchase and consume the products that are produced by the firms. This group of individuals that consumes the products that are produced in a market economy are known as households . Which of the following is true in a market​ economy?

A household demands goods and services from the market and supplies factor inputs

A profit-maximizing strategy becomes a loss minimizing strategy when a firm in a perfectly competitive industry is producing where

AVC<P<ATC

Which of the following is not an additional requirement for efficiency?

All resources must be devoted to the production of a single good.

What is the opportunity cost if the Agrizone Corporation invests $10.5 million in a new inventory tracking system?

Any other projects Agrizone could have invested in.

These​ agents:

Are the primary producing units in a market economy

Once you choose a most important use of time, why do you not spend all your time on that activity?

As more and more time is spent on one activity, the opportunity cost of that activity in terms of other activities rises.

If one country has an absolute advantage in the production of all goods, it is impossible for that country to benefit from trade.

False

If the private sector can provide a service at a lower cost, the public sector should let the private sector take over.

False

Does the richest man in the world face scarcity, or does scarcity only affect those with limited income and lower net worth?

Bill Gates faces scarcity because resources are limited.

When considering the circular flow of economic activity​, households supply resources​ (inputs) such that the resources supplied by the households may be thought of as being provided in individual markets. Which of the following accurately describes this​ statement?

In the labor​ market, households earn wages by supplying labor to firms that demand it.

Why is demand likely to become more elastic, or response, in the long run?

In the long run, households make adjustments over time and producers develop substitute goods.

Related to the Economics in Practice on page 99: which of the following best explains why demand is often less elastic in the short run that it is in the long run?

In the short run, consumers have less access to substitutes.

What is the primary difference between income and​ wealth?

Income is a flow variable; wealth is a stock variable

Two college students share an apartment and split the cost of​ heating, electricity, and rent. They decide to include one more roommate and divide​ heat, electricity, and rent costs three ways instead of two ways. If adding the third roommate reduces the amount of money they each pay for utilities and rent each​ month, this can be described​ as:

Increasing returns to scale

The best alternative given up when you make a decision is called the _________ of that decision.

Opportunity cost

If a perfectly competitive firm is currently producing where ________, then the firm will earn zero profits.

P=MC and MC=ATC

In a perfectly competitive market in the long run, profits are driven to zero due to which of the following relationships?

P=SRMC=SRAC=LRAC

Positive or normative? A devaluation of the US dollar would increase exports from the United States.

Positive

Positive or normative? Eliminating the trade embargo with Cuba will increase the number of Cuban cigars available in the United States.

Positive

Positive or normative? Increasing the federal tax on gasoline would cause shipping costs in the US to increase.

Positive

Total cost is

TFC+TVC

If a firm's profit is $0, then it must be true that

TR equals TC

Economic profit is

TR-TC

Profit is

TR-TC

Total revenue is best characterized by which of the following?

TR=P*q TR=Profit+total cost TR is the total amount that a firm makes in from the sale of its product.

If a perfectly competitive firm operates in the short run but exits the industry in the long run, then the firm's short run condition is

TR>TVC and TR<TC

In 1914 Congress passed the Clayton Act and the Federal Trade Commission Act

The Clayton Act outlaws certain specific behavior and the FTC Act prohibits unfair methods of competition.

In the circular flow of economic​ activity, there are two kinds of markets in which firms and households interact. In the factor​ market

The resources used to produce goods and services are exchanged

Which of the following is the best definition of economics?

The study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided.

Distorting taxes are favored when

There are other distorting taxes that distort economic decision, the purpose is to force decision makers to consider real costs they would otherwise ignore, the tax forces firms to consider the full economic costs of a decision.

If the market price of coffee is $3.00 per pound but the government will not allow coffee growers to change more than $2.00 per pound of coffee, which of the following will happen?

There will be a shortage of coffee.

What is the opportunity cost when going home for Thanksgiving vacation?

Time spent studying

Being an informed citizen requires a basic understanding of economics.

True

Which of the following is true?

Workers bear the bulk of the burden of a payroll tax if labor supplies relatively inelastic. Most of the payroll tax is probably borne by workers. Firms bear the bulk of the burden of a payroll tax if labor supply is relatively elastic. For most of the workforce, the labor supply curve has an elasticity that is nearly zero.

Suppose a competitive industry experiences external economies. If so then:

a firm's long-run average cost curve shift down when the industry output expands.

If a decrease in income results in a decrease in the quantity demanded for a product, the product is________ and the value of the income elasticity of demand is _______.

a normal good; positive

The rate of return on capital that is just sufficient to keep owners and investors satisfied is called

a normal rate of return

Because all workers should be able to earn a living wage, the minimum wage should be raised to $11.50 per hour in the United States. This statement is best described as

a normative statement

A minimum price, set by the government, that sellers may charge for a good is known as

a price floor.

The condition that exists when quantity supplied exceeds quantity demanded at the current price is:

a surplus or excess supply

Governments, for many reasons, often intervene in international markets, offsetting some of the efficiencies that may be realized with specialization based on comparative advantage and trade. When governments imposes a tax on imports, this is knowns as

a tariff.

According to the principle of neutrality

a tax that is neutral with respect to economic decision is preferred to one that distorts economic decisions.

All of the following are criteria frequently applied in judging economic outcomes except

profitability

The Latin phrase "ceteris paribus" means that when a relationship between two variables is being studied

all other variables are held fixed.

The production possibility frontier is a graph that shows

all the combinations of goods and services that can be produced if all of society's resources are used efficiently.

According to the theory of comparative advantage, specialization and free trade will benefit

all trading parties, even when some are absolutely more efficient producers that others.

The term "rent seeking" refers to

any action taken to protect positive profits.

The profit-maximizing level for all firms in _____ is the output level where MC=MC.

any industry

A trade surplus in the US would occur when US exports ________ US imports.

are greater than.

A trade deficit in the US would occur when the US exports _______ US imports

are less than

Someone has a comparative advantage in producing a good is she can produce that good

at a lower opportunity cost

The marginal rate of transformation is the

slope of the production possibility frontier.

In order to maximize its profit, a monopolist

decided price and output simultaneously.

An increase in the price of a good or service leads to a ___________ that leads to a _________.

decrease in quantity demanded; movement along the demand curve.

Assume Cathy's Cupcake Company operates in a perfectly competitive market producing 10,000 cupcakes per day. At output level, marginal cost exceeds this firm's price. Assuming price exceeds average variable cost, to maximize profits they should

decrease their output.

The existence of trade for country that has an abundance of natural resources is best explained by

factor endowments.

Which of the following assumptions about perfect knowledge is true?

firms possess knowledge of all available information concerning wage rates, capital costs and output prices. household possess knowledge of the qualities and price of everything available in the market. Firms and household possess all the information they need to make market choices.

Which type of cost does not depend on a firm's output?

fixed cost

In the circular flow of economic​ activity, there are two kinds of markets in which firms and households interact. In the product​ market:

goods or services are exchanged.

If a tax is based on the ability-to-pay principle

horizontal equity states that people in equal positions should pay the same amount of tax.

All of the following are examples of topics examined in macroeconomics except:

household income

The fundamental decision-making units in a market economy are

households and firms

Rent seeking in the form of lobbying for an increase in import tariffs by domestic producers

increases the deadweight loss.

Total variable cost ______ as output increases, and total fixed cost _______ as output increases.

increases; does not change

Between 1890 and 1920, antitrust legislation was passes in response to the

increasing importance of very large firms and trusts, which were groups of firms that acted like monopolists.

Diminishing marginal return implies

increasing marginal costs

Homogeneous products are

indifferential outputs-- products that are identical to or indistinguishable from one another.

When the price of fresh fish increases 10%, quantity demanded decreases 5%. The price elasticity of demand for fresh fish is _________ and total revenue from fresh fish sales will _______.

inelastic; increase

Total cost is the total ________ costs, the _____________ on capital, and opportunity costs of all factors of production.

out-of-pocket; normal rate of return

The income elasticity of demand is calculated as the

percentage change in quantity demanded divided by the percentage change in income.

A perfectly competitive firm will earn ______ economic profits in the range of output for which the firm's price is above its minimum average total cost.

positive

A firm will choose to operate rather than shut down as long as

price is greater than or equal to AVC

In an industry characterized by imperfect competition

price is higher than marginal cost and output is less that it would be under perfect competition.

According to the law of demand, quantity demanded increases as _____, ceteris paribus.

prices fall

According to the law of demand, quantity demanded decreases as______, ceteris paribus.

prices rise.

You are hired as an economic consultant to The Pampered Pet Shop. The Pampered Pet Shop operates in a perfectly competitive industry. This firm is currently producing at a point where market price equals its marginal cost. The​ Shop's total revenue exceeds its total variable​ cost, but is less than its total cost. You should advise the firm to

produce in the short run to minimize its loss, but exit the industry in the long run.

Total Revenue minus total cost is equal to

profit

If a firm in a perfectly competitive industry lowers its price below the market price, its

profit will decrease

Suppose that when the Jones family has income of ​$48 comma 07248,072​, their tax bill is ​$2 comma 4522,452​; but when their income is ​$50 comma 54850,548​, their tax bill becomes to ​$3 comma 3873,387. The Jones family has income of ​$48 comma 07248,072​, their tax bill is ​$2 comma 4522,452 so their average tax rates is 5.15.1​%; but when their income rises to ​$50 comma 54850,548​, their tax bill becomes to ​$3 comma 3873,387 so their average tax rate is 6.76.7​%. Since the average tax rate increasesincreases as income​ rises, this tax is progressiveprogressive. This illustrates a tax structure that is

progressive.

A tax whose burden is a constant proportion of income for higher-income households is a

proportional income tax.

There are several types of market failure which may prevent an economy from allocating resources efficiently. Indicate which type of market failure describes each of the situations below. Everyone in a neighborhood would benefit from spraying a nearby pond for​ mosquitoes, but some people are not willing to pay. _____________ Charlie parks rusty old cars on his front​ lawn, thus reducing the​ neighbors' property values. __________ Both of the pizza restaurants in a small town agree on a common price. ____________ Consumers use too little legal services since they are unsure of the quality. ____________

public good; externality; noncompetitive behavior; imperfect information

Cross-pricing elasticity of demand measures the response in the

quantity of one good demanded to a change in the price of another good.

The retail sales tax is an example of what type of tax structure?

regressive

Luxury items tend to have _________ demand, and necessities tend to have ________ demand.

relatively elastic; inelastic

Economists do not consider the smartphone industry perfectly competitive because

smartphones are heterogenous.

A firm suffering economic losses decided whether or not to produce in the short run on the basis of whether

revenues cover variable costs.

Total revenue increases if price ________ and demand is ________.

rise; inelastic

Total revenue is the amount received from the _____ of the product (q*P)

sale

The concept of opportunity cost is based on the principle of

scarcity

Perfectly competitive firms

sell identical products

If someone has a comparative advantage in growing pineapples,

she can grow pineapples a a lower opportunity cost that other pineapple growers.

During the Iraq War many of Iraq's oil refineries were destroyed. This would best be represented by a

shift of Iraq's production possibility frontier toward the origin.

As cellular phones have become more​ popular, some families have chosen not to have a​ "land line"​ (wired phone) in their homes. This has led to a reallocation of labor between the labor market for cellular phone manufacturing and the labor market for telephone installers. The new demand curve for workers who install land linesinstall land lines

shifts left

The ____ is the period of time for which two conditions hold: the firm is operating under a fixed scale of production and firms can neither enter nor exit an industry.

short run

If a price floor is set below the equilibrium price

the floor will be ineffective

Marginal costs measures

the increase in total cost that results from producing an additional unit of output.

For a demand curve to be more inelastic

the item should represent a small portion of an individual's total budget.

A firm has no fixed factors of production in

the long run.

Total utility is

the total amount of satisfaction yielded by the consumption of a good or service.

Demand has unitary elasticity if

the percentage change in quantity of a product demanded is the same as the percentage change in price absolute value. (a demand elasticity of 1)

The quantity demanded of Pepsi has decreased. The best explanation for this is that

the price of Pepsi has increased.

Production is

the process by which inputs are combined, transformed, and turned into outputs.

The optimal method of production is

the production method that minimizes cost for a given level of output.

The labor supply curve shows

the quantity of labor supplied at different wage rates. It shape depends on how households react to changes in the wage rate.

Price elasticity of demand is defined as

the ratio of the percentage of change in quantity demanded to the percentage of change in price.

The ultimate burden of the corporate tax appears to depend on

the relative capital/labor intensity of the two sectors, elasticities of demand for products of each sector and the ease with which capital and labor can be substituted in the two sectors.

If wages are uniform in this industry, and all the firms are maximizing profits, then the marginal product of labor will be

the same on all boats.

Utility is

the satisfaction a product yields relative to its alternatives.

A fall in the price of a product might cause a household to shift its purchasing pattern away from substitutes toward that product. This shift is called:

the substitute effect of a price change.

Total cost is calculate as

the sum of total fixed costs and total variable cost