Micro

Which always increase(s) as output increases?

Total Cost and Variable Cost

Suppose there is currently a surplus of wheat on the world market. The problem of excess supply may be removed from the market by:

a)lowering the market price b)shifting the supply curve up (leftward). c)shifting the demand curve down (leftward). d)Both a) and b).

A newly-certified medical doctor who accepts a job in private practice will earn $250,000 with probability 0.20 and $30,000 with probability 0.80. The doctor's expected utility from income is:

0.2∗U(250,000) + 0.8∗U(30,000)

A newly-certified medical doctor who accepts a job with an HMO will earn $100,000 with probability 0.95 and $60,000 with probability 0.05. The doctor's expected income is:

$98,000

. When the income-consumption curve has a positive slope throughout its entire length, we can conclude that

both goods are normal.

From 1970 to 2010, the real price of a college education increased, and total enrollment increased. Which of the following could have caused this increase in price and enrollment?

A shift to the left in the supply curve for college education and a shift to the right in the demand curve for college education.

Which of the following would shift the market demand curve for new textbooks "out," or to the right?

An increase in the number of students attending college

Which of the following costs always declines as output increases?

Average fixed cost

Which of the following is true concerning the income effect of a decrease in price?

It will lead to an increase in consumption only for a normal good.

Suppose Congress passes a law that states the price of gasoline may not exceed $6 per gallon (but may be lower). If the current price of gasoline is less than $6, what impact does this law have on the current price and quantity of gasoline in the US market?

The law currently has no impact, and the market clears at the equilibrium price

In recent years, the world demand curve for copper shifted rightward due to continued economic growth in China and other emerging economies. Also, the costs of extracting the copper increased due to higher energy prices. As a result, we observed:

higher equilibrium copper prices and either higher or lower quantities.

Consider a graph in which good Y is on the vertical axis and good X is on the horizontal axis. On this graph, the income-consumption curve has a positive slope for low incomes, then it takes a zero slope for a higher income, and then it takes a negative slope for even higher incomes (the curve looks like an arc, first rising and then falling as income increases). This curve illustrates that, for all income levels,

only X is normal.

The marginal rate of technical substitution is equal to the

ratio of the marginal products of the inputs.

The concept of a risk premium applies to someone who is

risk averse.

An individual with a constant marginal utility of income will be

risk neutral.

A production function assumes a given

technology.

The marginal product of an input is

the addition to total output due to the addition of the last unit of an input, holding all other inputs constant.

Blanca would prefer a certain income of $20,000 to a gamble with a 0.5 probability of $10,000 and a 0.5 probability of $30,000. Based on this information:

we can infer that Blanca is risk averse.

Suppose the major soft drink companies develop vending machines for canned and bottled drinks that can determine your maximum willingness-to-pay for a drink, and the machine charges you that price when you purchase a drink. If this were possible, the consumer surplus in the vended soft drink market would be:

zero because all surplus value is captured by the seller.

As long as the actual market price exceeds the equilibrium market price, there will be:

downward pressure on the market price

The price elasticity of gasoline supply in the U.S. is 0.4. If the price of gasoline rises by 8%, what is the expected change in the quantity of gasoline supplied in the U.S.?

+3.2%

A firm's short-run average total cost (ATC) curve is U-shaped. Which of these conclusions can be reached regarding the firm's returns to scale?

The short-run average total cost curve reveals nothing regarding returns to scale.

Assume that yogurt is a normal good. If the price of yogurt rises, then the substitution effect results in the person buying ________ of the good and the income effect results in the person buying ________ of the good.

less, less

A production function in which the inputs are perfectly substitutable would have isoquants that are

linear.

For any given level of output:

marginal cost must be greater than average cost. average variable cost must be greater than average fixed cost. average fixed cost must be greater than average variable cost. fixed cost must be greater than variable cost. Correct! None of the above is necessarily correct.

The cross-price elasticity between a pair of complementary goods will be

negative.

When an isocost line is just tangent to an isoquant, we know that

output is being produced at minimum cost.

The change in the quantity demanded of a good resulting from a change in relative price with the level of utility held constant is called the ________ effect.

substitution

The battery packs used in electric and hybrid automobiles are important components for manufacturing these cars. As the price of these batteries decline, we expect that the:

supply curve for electric and hybrid autos will shift down (rightward).

A risk-averse individual would always

take a sure $10 rather than a 10% chance at $100.

When labor usage is at 12 units, output is 36 units. From this we may infer that

the average product of labor is 3.

According to the law of diminishing returns

the marginal product of an input will eventually decline.

As we move downward along a demand curve for apples,

the marginal utility of apples decreases.

A market supply curve reveals:

the quantity of output that producers are willing to produce and sell at each possible market price.

A price floor policy establishes a minimum price for a market. Which of the following results from a binding price floor?

Excess supply

Many mining and mineral extraction processes tend to exhibit increasing returns to scale. Suppose copper mines have increasing returns, and the existing copper mines reduce their capital and labor inputs by 25 percent in response to a global recession. What is the expected impact on copper output?

Output decreases by more than 25 percent

Which of the following situations is NOT possible?

Short run ATC and LRAC are both increasing for some output levels. SR ATC is increasing but LRAC is decreasing for some output levels. SR ATC is decreasing but LRAC is increasing for some output levels. SR ATC and LRAC are both decreasing for some output levels. Correct! All of the above are possible.

A firm's (long run) output expansion path is

a curve that shows the least-cost combination of inputs needed to produce each level of output for given input prices.

If we take the production function and hold the level of output constant, allowing the amounts of capital and labor to vary, the curve that is traced out is called:

a production isoquant.

The short run is

a time period in which at least one input is fixed.

When the price of wood (which is an input in the production of furniture) falls, the consumer surplus associated with the consumption of furniture

increases.

The difference between what a consumer is willing to pay for a unit of a good and what must be paid when actually buying it is called

consumer surplus.

Recently, Skooterville has experienced a large growth in population. As a result, the market demand curve for housing in Skooterville:

has shifted to the right.

. An isocost line reveals the

input combinations that can be purchased with a given outlay of funds.

Suppose the price of rice increases and you view rice as an inferior good. The substitution effect results in a ________ change in rice consumption, and the income effect leads to a ________ change in rice consumption.

negative, positive

The change in the price of one good has no effect on the quantity demanded of another good. These goods are:

none of the above.

If a firm is using the optimal, long run combination of labor and capital,

the slopes of the production isoquant and isocost curves are equal. costs are minimized for the production of a given output. the marginal rate of technical substitution equals the ratio of input prices. Correct Answer all of the above

. At every output level, a firm's short run average total cost (SR ATC) equals or exceeds its long run average cost (LRAC) because

there are at least as many possibilities for substitution between factors of production in the long run as in the short run.

The market demand for sirloin steak is probably more elastic than the market demand for all meat because

there are more substitutes for sirloin steak than for all meats.

Assuming a standard S-shaped production function, marginal product crosses the horizontal axis (is equal to zero) at the point where

total product is maximized.