Micro exam from old tests

will lose more sales as it raises its price.

The more elastic the demand curve, a monopoly A: will lose more sales as it raises its price. B: will face a lower marginal cost. C: will have a larger Lerner Index. D: will earn more profit.

D.A ten euro bill.

Which of the following is least likely to be considered a capital input? A.A computer. B.A tractor. C.A sewing machine D.A ten euro bill.

views as equally desirable

An indifference curve represents bundles of goods that a consumer A: All of the above B: ranks from most preferred to least preferred C: views as equally desirable D: refers to any other bundle of goods

D: all of the above

An inferior good exhibits: A: a decline in the quantity demanded as income rises. B: a downward sloping Engel curve C: a negative income elasticity D: all of the above

yield the same level of output

An isoquant represents level of capital and labor that A: yield the same level of output B: incur the same total cost C: have constant marginal productivity D: All the answers are correct

includes only one good

An optimum that occurs as a corner solution A: cannot exhaust the budget constraint B: includes the exact same amounts of each good C: includes only one good

D: marginal revenue equal to marginal cost.

The monopoly maximizes profit by setting A:price equal to marginal revenue. B: marginal revenue equal to zero. C: price equal to marginal cost. D: marginal revenue equal to marginal cost.

B: will lose more sales as it raises its price.

The more elastic the demand curve, a monopoly A: will earn more profit. B: will lose more sales as it raises its price. C: will face lower marginal cost. D: will have larger Learner Index.

C. The long run elasticity of demand is higher since steel industry will have more alternatives available. The short-run elasticity is 5%/10%=0,5 which is less than 1.

Electricity accounts for almost 20% of the cost of making steel. A 10% increase in electricity prices results in steel firms decreasing production and thereby demanding 5% less electricity. Over many years, technological innovations can change the way steel firms make steel and reduce the industry's energy requirements. This suggests that the steel industry's short-run elasticity of demand for electricity is probably A.less than its long-run elasticity of demand for electricity. B.less than one in absolute terms in the short run. C.Both A and B above. D.Neither A nor B above.

A: neither buyers nor sellers want to change their behavior

Equilibrium is defined as a situation in which A: neither buyers nor sellers want to change their behavior B: demand curvers are perfectly horizontal C: suppliers will supply any amount that buyers wish to buy D: no government regulations exist

The marginal rate of substitution is a consumer's willingness to trade one good for another based on utility. The marginal rate of transformation is the consumer's ability to trade one good for another based on prices.

Explain the difference between the marginal rate of substitution and the marginal rate of transformation.

In a competitive market, if an individual firm increases its price it will lose all of its customers, as consumers simply buy from another firm. However, if the price of the good increases for all firms some consumers will not continue to buy the good, but for many prices some consumers will continue to purchase the good.

Explain why individual firms in competitive markets face more elastic demand curves than the market as a whole.

False

Firms in all types of market structure pay attention to current rival firms behavior False or True

B: maximize joint profits

A cartel is a group of firms that attempts to A:decrease price B: maximize joint profits C: behave independlty D: increase competition

marginal rate of substitution and indifference curve

A consumer's willingness to trade one good for another can be expressed by the consumer's A: indifference curve B: None of the answers C: marginal rate of substitution and indifference curve D: marginal rate of substitution

C.a shift of the supply curve.rightward

A decrease in production costs will lead to: A.no change of the supply curve. B.a movement upward along the supply curve. C.a shift of the supply curve.rightward D.a rightward shift of the demand curve for this good.

D. a movement down along the supply curve for that good.

A decrease in the price of a good will lead to: A.a rightward shift of the supply curve for that good B.a leftward shift of the supply curve for that good. C.a movement up along the supply curve for that good. D.a movement down along the supply curve for that good.

C. a movement down along the supply curve for that good.

A decrease in the price of a good will lead to: A.a rightward shift of the supply curve for that good. B.a leftward shift of the supply curve for that good. C.a movement down along the supply curve for that good. D.a movement along the supply curve for that good.

B. Oligopoly firms have a common incentive to cooperate (collude) to raise prices and achieve monopoly profits. However, in this situation each firm has an incentive to deviate from the cooperative outcome.

A distinguishing feature of an oligopolistic industry is the tension between A.producing a small amount of output and charging a price above marginal cost. B.cooperation and self interest. C.profit maximization and cost minimization. D.short-run decisions and long-run decisions.

All the answers are correct

A firm can minimize cost by A: picking the bundle of inputs where the last dollar spent on one input gives as much extra output as the last dollar spent on any other input B: picking the bundle of inputs where the isoquant is tangent to the isocost line C: All the answers are correct D: picking the bundle of inputs where the lowest isocost line touches the isoquant

total revenue from operating would not cover variable costs.

A firm will shut down in the short run if A: total revenue from operating would not cover fixed costs. B: total revenue from operating would not cover all costs. C: total fixed costs are too high. D: total revenue from operating would not cover variable costs.

C. total revenue from operating would not cover variable costs.

A firm will shut down in the short run if : A. total revenue from operating would not cover all costs. B. total revenue from operating would not cover fixed costs. C. total revenue from operating would not cover variable costs. D. total fixed costs are too high.

B: a movement up along the demand curve

An increase of price of pork meat will lead to A: a leftward shift of the demand curve B: a movement up along the demand curve C: a rightward shift of the demand curve

B: allows interactions between consumers and firms

A market A: always take place at a physical location B: allows interactions between consumers and firms C: always involves the personal exchange of goods for money D: has no influence on price

d. all of the above

A rightward shift of the demand curve would cause a(n) A: excess of demand at the old equilibrium price B: increase in equilibrium price C: increase in quantity supplied D: All of the above

D: decrease in price but an increase in quantity

A rightward shift of the supply curve would cause a(n) A: increase in price but a decrease in quantity B: decrease in both price and quantity C: increase in both price and quantity D: decrease in price but an increase in quantity

D. firms cannot freely enter and exit the market.

A special license is required to operate a taxi in many cities. The number of licenses is restricted. More drivers want licenses than are issued. This describes a non-perfectly competitive market because: A. taxi services are very different. B. the government generates revenue from the licenses. C. transaction costs are high. D. firms cannot freely enter and exit the market.

D: firms cannot freely enter and exit the market.

A special license is required to operate a taxi in many cities. The number of licenses is restricted. More drivers want licenses than are issued. This describes a non-perfectly competitive market because: A: taxi services are very different. B: the government generates revenue from the licenses. C: transaction costs are high. D: firms cannot freely enter and exit the market.

D. no change in quantity when the supply curve shifts.

A vertical demand curve results in A. no change in price when the supply curve shifts. B. no change in the supply curve being possible. C. no change in quantity when the demand curve shifts. D. no change in quantity when the supply curve shifts.

A: a perfectly inelastic supply curve and a constant elasticty of supply

A vertical supply curve exhibits A: a perfectly inelastic supply curve and a constant elasticty of supply B: a constant elasticty of supply C: none of the answers D: a perfectly inelastic supply curve

slope downwards

According to Law of Demand, the demand curve for a good will

the consumer prefers the second bundle

Adrian's total utilities of two consumption bundles are 50 and 100. This implies that A: the consumer likes the first bundle twice as much B: the consumer prefers the second bundle C: the consumer prefers the first bundle D: the consumer likes the second bundle twice as much.

A. a rightward shift of the demand curve for a normal good.

An increase in consumer's income will lead to: A.a rightward shift of the demand curve for a normal good. B.a movement upward along the demand curve for a normal good. C.no change of the demand curve for a normal good. D.a rightward shift of the supply curve for a normal good.

B. a leftward shift of the supply curve.

An increase in production costs will lead to: A.no change of the supply curve B.a leftward shift of the supply curve. C.a movement upward along the supply curve. D.a rightward shift of the demand curve for this good.

A. a movement up along the demand curve for that good.

An increase in the price of a good will lead to: A.a movement up along the demand curve for that good. B.a leftward shift of the demand curve for that good .C.a rightward shift of the demand curve for that good. D.a movement down along the demand curve for that good.

C. Inelastic demand implies that the percentage change in output on the demand curve is smaller than the percentage change in price. For total revenue, this implies that the quantity effect (lower output) is smaller than the price effect (higher price), so revenue increases when output is lower.

As a result of heavy spring rains in France, the wheat crop declined sharply. If wheat growers experienced an increase in sales revenue, the demand for wheat must be ... A.price elastic. B.unitary elastic. C.price inelastic. D.perfectly inelastic.

B: 5 Beer, 5 Pizza C:

Assume the price of beer is $4, the price of pizza is $10 and the consumer's income is $250. Which consumption bundle will NOT be the consumers choice? A: None of the bundle will be chosen B: 5 Beer, 5 Pizza C: 25 Beer, 15 Pizza D: 0 Beer, 25 Pizza

All of the answers are correct

Assuming a horizontal long-run market supply curve, which of the following statements is (are) TRUE about competitive firms in the long run? profit = 0 p = AC p = MC All of the answers are correct

A. profit=0

Assuming a horizontal long-run market supply curve, which of the following statements is (are) TRUE about competitive firms in the long run? A. profit=0 B. p>MC C. p<AC D. All of the above

A. Nash equilibrium means no firm has an incentive to deviate from the outcome.

Assuming that oligopolists do not have the opportunity to collude, once they have reached the Nash equilibrium, it ... A.is always in their best interest to leave their quantities supplied unchanged. B.is always in their best interest to supply less to the market. C.is always in their best interest to supply more to the market. D.may be in their best interest to do any of the above, depending on market conditions.

it exceeds marginal productivity.

Average productivity will fall as long as A: marginal productivity is falling B: it exceeds marginal productivity. C: the number of workers is increasing D: it is less than marginal productivity

D: it exceeds marginal productivity.

Average productivity will fall as long as A: marginal productivity is falling. B: the number of workers are increasing. C: it is less than marginal productivity. D: it exceeds marginal productivity.

D. it exceeds marginal productivity.

Average productivity will fall as long as A. marginal productivity is falling. B. the number of workers is increasing. C. it is less than marginal productivity. D. it exceeds marginal productivity.

reaching the highest possible indifference curve she can afford

By selecting a bundle where MRS = MRT, the consumer is A: reaching the highest possible indifference curve she can afford B: achieving a corner solution C: not behaving in an optimal way D: All the answers are correct

no entry into its market, prices to remain the same, profits to remain the same.

Consider a monopoly who posts an economic profit of $10,000,000. All else equal, this monopolist should expect A: entry into its market, the need to increase price, profits to remain the same. B: no entry into its market, prices to remain the same, profits to remain the same. C: exit from its market, prices to rise, profits to rise. D: entry into its market, prices to fall, profits to fall.

Supply is perfectly elastic and demand is perfectly inelastic

Consumers will always pay the entire amount of a specific tax whenever A demand is perfectly elastic B Supply is perfectly elastic and demand is perfectly inelastic C demand is unitary elastic D supply is perfectly inelastic

C. may cause coordination difficulties

Decreasing returns to scale may occur as increasing the amount of inputs used? A. increases specialization B. increases efficiency C. may cause coordination difficulties D. always increases the amount of output produced

become flatter as we move down and to the right

Diminishing marginal rate of substitution can be seen when indifference curves A: cross B: are convex C: become flatter as we move down and to the right D: are downward sloping

False. Increasing returns to scale imply economies of scale but the reverse is not true. A firm can experience economies of scale for other reasons (without increasing returns to scale)

Economies of scale and Increasing Returns to Scale are the same thing looked at from either the production or cost perspective. True or false?

their budget constraint

Economists assume consumers select a bundle of goods that maximizes their well-being subject to A: relative prices B: their income C: their budget constraint D: their marginal rate of substitution

C. the real world is too complex to analyze fully.

Economists make many assumptions to simplify their models because: A.they are lazy. B.no one would understand complex models. C.the real world is too complex to analyze fully. D.None of the above.

All of the answers are correct

Efficient production occurs if a firm A: cannot produce its current level of output with fewer inputs B: maximizes profit C: All of the answers are correct D: given the quantity of inputs, cannot produce more output

D: the firm must lower price if it wishes to sell more output.

For a monopoly, MR is less than price because A:the firm is a price taker B: the firm can sell all of its output at any price. C: the demand for the firm's output is perfectly elastic. D: the firm must lower price if it wishes to sell more output.

C. the demand curve for the firm's output is downward sloping.

For a monopoly, marginal revenue is less than price because A. the demand curve for the firm's output is perfectly elastic. B. the firm has no supply curve. C. the demand curve for the firm's output is downward sloping. D. the firm can sell all of its output at any price.

There is a sufficiently large number of sellers.

How can the market demand for a product be inelastic but the demand for a particular firm is elastic? Buyers do not have complete information. There is no advertising. There is only one or two sellers. There is a sufficiently large number of sellers.

C. Calculate the elasticity using the mid-point method: Change in price: (4,50-5,50)/5 = -20%. Change in quantity: (600-400)/500 = +40%. Elasticity: 40/(-20) = -2, which is numerically greater than 1 so the demand is elastic.

If Bob's Burger Bar lowers its price from €5,50 to €4,50 and finds that the weekly demand for burgers rises from 400 to 600, then the demand for its hamburgers within this price range is(hint: midpoint method) A.price inelastic .B.unit elastic. C.price elastic. D.cross elastic.

A. The marginal cost curve crosses the average cost curve at its minimum. When MC<AC, AC must be falling.

If Franco's Pizza Parlor knows that the marginal cost of the 500thpizza is €3.00 and that the average total cost of making 499 pizzas is €3.30, then ... A.average costs are falling at Q = 500. B.total costs are falling at Q = 500. C.average variable costs must be falling. D.average costs are rising at Q = 500.

he would give up 5 salads to get the next pizza

If Fred's marginal utility of pizza equals 10 and his marginal utility of salad equals 2, then A: he will eat five times as much salad as pizza B: he will eat five times as much pizza as salad C: he would give up 5 pizzas to get the next salad D: he would give up 5 salads to get the next pizza

the cartel will fail.

If a cartel is unable to monitor its members and punish those firms that violate the agreement, then the cartel will prosper in the long run. the cartel will fail. the market will become a monopoly. the member firms will each act as price setters.

p < AVC for all levels of output.

If a competitive firm finds that it maximizes short-run profits by shutting down, which of the following must be true? p < AVC only for the level of output at which p = MC. The firm will earn zero profit. p < AVC for all levels of output. p < AVC only if the firm has no fixed costs.

B. p ≥ AVC

If a competitive firm in a competitive market maximizes short-run profits by producing some quantity of output, which of the following must be true at that level of output? A. MR>MC B. p ≥ AVC C. p > MC D. All of the above

All of the answers are possible in the short-run.

If a competitive firm is in short-run equilibrium, then A: All of the answers are possible in the short-run. B: economic profits will be positive. C: profits equal zero. D: economic profits will be negative.

All of the answers are correct

If a competitive firm maximizes short-run profits by producing some quantity of output, which of the following must be true at that level of output? p ≥ AVC MR = MC p = MC All of the answers are correct

Apples to Citrus Fruit

If a consumer prefers Apples to Bananas and prefers Bananas to Citrus Fruit, in order to satisfy assumptions about preferences she has to prefer A: Citrus Fruit to Bananas B: Bananas to Apples C: Citrus Fruit to Apples D: Apples to Citrus Fruit

choose a good with a relatively inelastic demand

If a government wants to maximize revenues from a tax it should A: impose it on sellers B: choose a good with a relatively inelastic demand C: impose it on consumers

B. choose a good with a relatively inelastic demand.

If a government wants to maximize revenues from a tax it should A. choose a good with a relatively elastic demand B. choose a good with a relatively inelastic demand C. impose it on sellers D. impose it on consumers

C: the curves will shift to make a new equilibrium at the regulated price

If a government-imposed price ceiling causes the observed price in a market to be below the equilibrium price A: there will be excess of demand B: none of the above C: the curves will shift to make a new equilibrium at the regulated price D: there will be excess supply

A. will be horizontal.

If consumers view the output of any firm in a market to be identical to the output of any other firm in the market and the market has many firms and transaction costs are low, the demand curve for the output of any given firm A. will be horizontal B. will be identical to the market demand curve. C. will be vertical. D. cannot be determined from the information given.

upward sloping.

If firms in a competitive market are not identical, then the long-run market supply curve will be upward sloping. downward sloping. undetermined. horizontal.

C. Natural monopolies arise when scale economies makes it cheapest for a single firm to produce the output.

If government officials break a natural monopoly up into several smaller firms, then A.the average costs of production will decrease. B.competition will force firms to produce surplus output, which drives up price. C.the average costs of production will increase. D.competition will force firms to attain economic profits rather than accounting profits.

All the answers are correct

If the average cost of producing a good is increasing as a firm produces more of the good, then which of the following must be TRUE? AFC is falling MC > AVC All the answers are correct AVC is rising

the average productivity of labor is at a maximum.

If the average productivity of labor equals the marginal productivity of labor, then A: the average productivity of labor is at a maximum. B: the average productivity of labor is at a maximum and the marginal productivity of labor is at a maximum C: None of them D: the marginal productivity of labor is at a maximum

A. the average productivity of labor is at a maximum.

If the average productivity of labor equals the marginal productivity of labor, then A. the average productivity of labor is at a maximum. B. the marginal productivity of labor is at a maximum. C. Both A and B above. D. Neither A nor B above.

rotate inward around the point where only capital is employed in production

If the cost of labor increases the isocost line will A: shift inward in parallel fashion B: stay the same C: rotate inward around the point where only capital is employed in production D: shift outward in parallel fashion

0

If the demand for a firm's output is perfectly elastic, then the firm's Lerner Index equals 0 Infinity 1 1/2

A: is elastic

If the demand for orange juice is expressed as Q = 2000 - 500p, where Q is measured in gallons and p is measured in dollars, then at the price of $3, the demand curve A: is elastic B: C: D:

$2

If the demand function for orange juice is expressed as Q = 2000 - 500p, where Q is quantity in gallons and p is price per gallon measured in dollars, then the demand for orange juice has a unitary elasticity when price equals A:$1 B:$4 C:$2 D:$0

MPL is falling

If the marginal cost of producing a good is increasing as a firm produces more of the good, then which of the following must be TRUE? MPL is falling MC > AVC AVC is rising AFC is rising

D) MPL is falling.

If the marginal cost of producing a good is increasing as a firm produces more of the good, then which of the following must be TRUE? A) AFC is rising. B) AVC is rising. C) MC > AVC. D) MPL is falling.

0.5

If the marginal rate of technical substitution for a cost minimizing firm is 10, and the wage rate for labor is $5, what is the rental rate for capital in dollars? 10 1 2 0.5

elastic

If the price elasticity of demand for a good is greater than one in absolute value, economists characterize that demand is A: perfectly inelastic B: vertical C: inelastic D: elastic

B. The firm is making a loss but if price is above average variable costit is still better for the firm to continue to produce. If price is below average variable cost, the firm should shut down its production. In the long run, the firm will exit the market.

If the price in a competitive market is below the average total cost of a firm, then A.the firm will shut down production in the short run B.the firm may or may not shut down production in the short run but will eventually exit the market unless conditions improve C.the firm will have an incentive to increase output to lower average fixed cost D.the firm will always continue producing in the short run but exit in the long run

shift leftward

If the price of automobiles were to increase substantially, the demand curve for gasoline would most likely A. shift rightward. B. shift leftward. C. remain unchanged. D. become steeper.

shift leftwards

If the price of cars increased substantially, the demand curve for gasoline would most likely

A. is inelastic

If the price of orange juice rises 10%, and as a result the quantity demanded falls by 10%, then one can conclude that the demand for orange juice A. is inelastic B. has a unitary elasticity C. has a constant elasticity D. is perfectly elastic

C: - 0.80

If the price of orange juice rises 10%, and as a result the quantity demanded falls by 8%, the price elasticity of demand for orange juice is A: -1.25 B: -80 C: - 0.80 D: -10

B: shift leftward.

If the prices of automobiles were to increase substantially, the demand curve for gasoline would most likely A: shift rightward. B: shift leftward. C: remain unchanged D: become steeper

0.09

If the supply curve for orange juice is estimated to be Q = 40 + 2p, then, at a price of p=2, the price elasticity of supply is A.0,01 B.0,09 C. 1 D.11

free entry and exit.

In the long run, profits will equal zero in a competitive market because of A: free entry and exit. B:identical products being produced by all firms. C: constant returns to scale. D: the availability of information.

the consumer derives the same level of utility from each

If two bundles are on the same indifference curve, then A: the consumer derives the same level of utility from each B: the MRS between the two bundles equals one C: the consumer derives the same level of ordinal utility from each but not the same level of cardinal utility D: no comparison can be made between the two bundles since utility cannot really be measured

downward sloping and straight

If two goods are perfect substitutes, then the indifference curves for those two goods would be A: L-shaped B: upward sloping and concave to the origin C: downward sloping and convex to the origin D: downward sloping and straight

D. All three imply zero economic profits for the marginal (least efficient) firm, which is the condition for long-run market equilibrium. (Otherwise, marginal firms would enter or leave the market).

In a long-run equilibrium, the marginal firm has A.its price equal to its average total cost. B.its economic profit equal to zero. C.its total revenue equal to its total cost. D.All of the above are correct.

A: each cartel member has incentive to cheat on the cartel

In a sense, the cartel is self-destructive because A: each cartel member has incentive to cheat on the cartel B: it reduces competition C: it sets price above the marginal cost D: each cartel member earns economic profit

average variable cost.

In deciding whether to operate in the short run, the firm must be concerned with the relationship between price of the output and A: average variable cost. B: total cost. C: total fixed cost. D: the number of buyers.

: its output, assuming that other firms keep their output constant

In the Cournot model, a firm maximizes profit by selecting A: its price, assuming that other firms keep their price constant B: its output, assuming that other firms will retaliate C: its output, assuming that other firms keep their output constant D: its price, assuming that other firms will retaliate

A: its output, assuming that the other firm keeps its output resilient.

In the Cournot model, a firm maximizes profit by selecting: A: its output, assuming that the other firm keeps its output resilient. B: its price, assuming that the other firm will retaliate. C: its price, assuming that the other firm keeps their price constant. D: its output, assuming that the other firm will retaliate.

more is better

Indifference curves are downward sloping because of the assumption of A: more is better B: transitivity C: All of the above D: completeness

B: the assumption of more is better

Indifference curves that are thick violate A: the assumption of completeness B: the assumption of more is better C: the assumption of transitivity D: none of the the assumptions

the assumption that more is better

Indifference curves that are thick violate A: the assumption that more is better B: none of the assumptions C: the assumption of transitivity D: the assumption of completeness

A. Yes, Remodel existing store; Remodel existing store (450,450)

Is there any Nash Equilibrium? If so, which one? A. Yes, Remodel existing store; Remodel existing store (450,450) B. No, in this game is there is no Nash Equilibrium C. Yes, Remodel existing store; Build new store (400,300) D. Yes, Build a new one; Remodel existing store (300, 400)

must be used together in a certain proportion cannot be used together

L-shaped isoquants imply that production requires that the inputs A: must be used together in a certain proportion B: cannot be used together C: are imperfecrt substitute D: are perfect substitute

the number of firms is restricted in the long run.

Long-run market supply curves are upward sloping if A: All of the answers are correct B: input prices fall as the industry expands. C: the number of firms is restricted in the long run. D: firms are identical.

D. When demand is elastic, marginal revenue is positive. However, if marginal revenue is below marginal cost, it is more profitable to reduce output. Only if marginal revenue is above marginal cost should he increase output.

Mark is a monopolist in a market where, at his current output level, demand is elastic. He therefore knows that ... A. if he cuts output, his total revenue will increase, so it is profitable for him to do so. B.if he cuts output, his total revenue will decrease, so it is not profitable for him to do so. C.if he increases output, his total revenue will increase, so it is profitable for him to do so. D.if he increases output, his total revenue will increase, but it is not necessarily profitable for him to do so.

All of the answers are correct

Merger may result in fewer firms in a market more efficient production All of the answers are correct anticompetitive behavior

A: scarse resources

Microeconomics studies the allocation of A: scarse resources B: models C: unlimited resources D: conditions

C. Accounting Costs: $275,000; Economic Costs: 390,000; Economic Profits: $110,000

Morrison's Catering is owned by Jim Morrison. For the past year, Morrison's Catering had the following statement of revenues and costs: Revenues: $500,000 Supplies: $150,000 Electricity and Water: $15,000 Employee salaries: $ 50,000 Jim's salary: $60,000 Jim has always had the option of closing his catering business and renting out his building for $100,000 per year. In addition, Jim currently has job offers from another catering company (offering a salary of $45,000 per year) and high-end restaurant (at a salary of $75,000per year). Jim can only work one job at any time. What is Morrison's catering accounting costs? What is Morrison's catering economic costs? What is Morrison's catering economic profits? A. Accounting Costs: $225,000; Economic Costs: 390,000; Economic Profits: $110,000 B. Accounting Costs: $225,000; Economic Costs: 420,000; Economic Profits: $80,000 C. Accounting Costs: $275,000; Economic Costs: 390,000; Economic Profits: $110,000 D. Accounting Costs: $255,000; Economic Costs: 500,000; Economic Profits: $120,000

C.make themselves as well off as possible.

Most microeconomic models assume that decision makers wish to: A.make others as well off as possible. B.act selfishly. C.make themselves as well off as possible. D.None of the above.

A: in the absence of supply/demand shocks no one applies pressure to change the price.

Once an equilibrium is achieved, it can persist indefinitely because A: in the absence of supply/demand shocks no one applies pressure to change the price. B: the government never intervenes in market equilibrium. C: sticks that shift the demand curve or the supply curve cannot occur. D: shocks to the demand curve are always exactly offset by shocks to the supply curve.

A: non-cooperative behavior leads to lower payoffs than cooperative behavior.

One interesting feature of a prisoner's dilemma game is that A: non-cooperative behavior leads to lower payoffs than cooperative behavior. B: individuals behave irrationally when they behave non-cooperatively. C: it was only valid before the industrial revolution. D: cooperative behavior leads to lower payoffs than non-cooperative behavior.

A. non-cooperative behavior leads to lower payoffs than cooperative behavior.

One interesting feature of a prisoner's dilemma game is that A. non-cooperative behavior leads to lower payoffs than cooperative behavior. B. individuals behave irrationally when they behave non-cooperatively. C. it was only valid before the industrial revolution. D. cooperative behavior leads to lower payoffs than non-cooperative behavior.

D. Developing substitutes are likely to both flatten the demand curve (B) and shift demand down (A), and, as a consequence of B, also reduce any supply shocks or shifts in the supply curve (C).

One reason the EU governments might subsidize research of an alternative to crude-oil based gasoline? A.More substitutes will reduce the price of crude-oil based gasoline for the EU. B.More substitutes will increase the EU's demand elasticity of crude-oil based gasoline. C.More substitutes will reduce the impact of supply shocks on the price of crude-oil based gasoline in the EU. D.Any or all of the above.

A. shut down because avoidable cost is greaterthan revenue

Over the long run, should a firm shut down if its revenue is R = $100,000, and its avoidable costs if it shuts down are $200,000? This firm should A.shut down because avoidable cost is greater than revenue. B.shut down because revenue is declining. C.not shut down because revenue is positive. D.shut down because unavoidable cost is less than revenue. E.not shut down because avoidable cost is not relevent.

D: no barriers to entry.

Perfect competition and monopolistic competition are similar in that both market structures include A: price-taking behavior by firms. B: a homogeneous product. C: very few firms. D: no barriers to entry.

A. no barriers to entry.

Perfect competition and monopolistic competition are similar in that both market structures include A. no barriers to entry. B. a homogeneous product. C. very few firms. D. price-taking behavior by firms.

maximize profit by setting marginal revenue equal to marginal cost.

Regardless of market structure, all firms A: have the ability to set price. B: consider the actions of rivals. C: maximize profit by setting marginal revenue equal to marginal cost. D:produce a differentiated product.

B. probably more elastic since people need time to change automobiles and driving habits.

Relative to the short-run demand for gasoline, the long-run demand for gasoline is A. probably less elastic because people cannot store this good. B. probably more elastic since people need time to change automobiles and driving habits. C. probably less elastic since people need time to change automobiles and driving habits. D. probably more elastic because people can hoard this good.

all inputs increase proportionally

Returns to scale refer to change in output when A: capital equipment is doubled B: specialization improves C: labor increases holding all other input fixed D: all inputs increase proportionally

B. Yes, as long as revenue can cover total variable costs plus any portion of fixed costs.

Should a competitive firm ever produce when it is losing money? Why or why not? A.Yes, as long as revenue can cover some portion of total variable costs. B.Yes, as long as revenue can cover total variable costs plus any portion of fixed costs. C.No, the firm should shutdown if it is making an economic loss. D.No, the firm should shutdown if it is making an accounting loss.

B. shut down because varible cost is greater than revenue.

Should a firm shut down if its revenue is R = $800 per week, its variable cost is VC = $1,200, and its sunk fixed cost is F = $2,400? This firm should A.shut down because total cost is greater than revenue. B.shut down because variable cost is greater than revenue. C.shut down because fixed cost is greater than revenue. D. not shut down because total cost is greater than variable cost. E.not shut down because revenue is positive.

D. not shut down because variable costs is less than revenue.

Should a firm shut down if its revenue is R = $800 per week, its variable cost is VC = $700, and its sunk fixed cost is F = $2,400? This firm should A.shut down because fixed cost is greater than revenue. B.not shut down because revenue is positive. C.shut down because total cost is greater than revenue. D.not shut down because variable costs is less than revenue. E.not shut down because total cost is greater than variable cost.

A: produce, to save $250

Should a firm shut down if its weekly revenue is $850, its variable cost is $100, and its fixed cost is $800, of which $500 is avoidable if it shuts down? Why? The firm should (1) _________________ to save $ ___________ A.produce B.shut down

D. Fixed Cost: 45 ; Variable Costs:15Q2+8Q; Average Total Cost: 15Q+8+(45/Q); Average Variable Cost:15Q+8.

Suppose a firm's total cost curve is TC=15Q2+8Q+45 and MC=30Q+8 What is the firm's fixed cost? What is the firm's variable cost? What is the firm's average total cost? What is the firm's average variable cost? A. Fixed Cost: 68 ; Variable Costs:15Q2+8Q; Average Total Cost: 15Q+(45/Q); Average Variable Cost:15Q+8. B. Fixed Cost: 23 ; Variable Costs:15Q2; Average Total Cost: 15+(45/Q); Average Variable Cost:15Q. C. Fixed Cost: 23 ; Variable Costs:15Q2+8Q; Average Total Cost: 15Q+8+(45/Q); Average Variable Cost:15Q+8+45. D. Fixed Cost: 45 ; Variable Costs:15Q2+8Q; Average Total Cost: 15Q+8+(45/Q); Average Variable Cost:15Q+8.

D. The largest share of the tax falls on the side of the market with the lowest elasticity. Given that neither supply nor demand is completely inelastic or infinitely elastic, they will both pay some of the tax, with the supply side paying more than half, so consumers will pay less than half.

Suppose the demand curve for a good is downward sloping and the supply curve is upward sloping. At the market equilibrium, if demand is more elastic than supply in absolute value, a 1 € specific tax will raise the price to consumers by A. 0,50 €. B. 1 €. C. more than 0,50 €.D. less than 0,50 €.

-2*(3/44)

Suppose the demand curve for a good is expressed as Q=50-2p. If the good currently is sold for a price of 3$, then the price elasticity of demand is: A: -3*(44/2) B: -3*(2/50) C: -2*(3/44) D: -2*(50/3)

B. -0.67

Suppose the demand function for a good is expressed as Q = 100 - 4p. If the good currently sells for $10, then the price elasticity of demand equals A. -4 B. -0.67 C. -1.5 D. -2.5

C.will earn an economic profit.

Suppose the firm faces a price of $39, an average variable cost of $32, and has an average fixed cost of $5. In the short-run, the firm A.will be unable to determine what to do. B.will just cover costs. C.will earn an economic profit. D.None of the above.

2. can cover all its costs, C. and will have a profit per unit of $11 .

Suppose the firm faces a price of $48, an average variable cost of $32, and has an average fixed cost of $5. In the short-run, this firm 1.cannot cover all its costs, 2.can cover all its costs, A.and will have a profit per unit of $16. B.and will have a loss per unit of $16. C.and will have a profit per unit of $11 . D.and will have a loss per unit of $11.

the ratio of output to the number of workers used to produce that output.

The Average Product of Labor is A: the ratio of output to the number of workers used to produce that output. B: the change in total product resulting from an extra unit of labor, holding other factors constant. C: the amount of output that can be produced by a given amount of labor. D: equal to the marginal product of labor when the average product is increasing

A. firms decide what quantity to produce.

The Cournot Model of Oligopoly assumes that A. firms decide what quantity to produce. B. firms cooperate. C. firms make their decisions sequentially D. All of the above.

A. firms decide what quantity to produce.

The Cournot Model of Oligopoly assumes that A. firms decide what quantity to produce. B. firms cooperate. C. firms make their decisions sequentially D. All of the above.

All of the answers are correct

The Lerner Index is equal to (Price - MC)/Price a measure of market power the ratio of the difference between price and marginal cost to price All of the answers are correct

the change in total product resulting from an extra unit of labor, holding other factors constant.

The Marginal Product of Labor is A: the ratio of output to the number of workers used to produce that output. B: the change in total product resulting from an extra unit of labor, holding other factors constant. C: equal to the marginal product of labor when the average product is increasing D: the amount of output that can be produced by a given amount of labor.

True

The absolute value of the slope of an indifference curve equals the ratio of the marginal utilities of the two goods involved True or False ?

A: the demand curve is relatively steep than if the demand curve is relatively flat.

The change in price that results from a leftward shift of the supply curve will be greater if A: the demand curve is relatively steep than if the demand curve is relatively flat. B: the demand curve is horizontal than if the demand curve is vertical. C: the demand curve is relatively flat than if the demand curve is relatively steep. D: the demand curve is horizontal than the demand curve is downward sloping.

D: the budget line is tangent to the indifference curve at the bundle chosen

The consumer is in equilibrium when A: MRS>0 B: MRS is similar to MRT C: MRS=0 D: the budget line is tangent to the indifference curve at the bundle chosen

lies below the demand curve.

The monopolist's marginal revenue curve A: lies below the demand curve. B: doesn't exist. C: is identical to the demand curve. D: lies above the demand curve.

more elastic.

The introduction of satellite television systems would cause the demand curve for cable television to be A: less elastic. B: unchanged. C: perfectly inelastic. D: more elastic.

A: price elasticity of demand

The percentage change in the quantity demanded in response to a percentage change in the price is known as the A: price elasticity of demand B: slope of the demand curve C: excess demand D: all of the above

B) perfectly inelastic

The price elasticity of supply when the supply curve is Q​ = 5 is A. perfectly elastic. B. perfectly inelastic. C. 5 D. cannot be calculated from the information provided.

All of the above

The principle that "More is better" results in indifference curves A: sloping down B: All of the above C: reflecting greater preferences the further they are from the origin D: not intersecting

the decrease in capital necessary to keep output constant when labor increases by one unit

The slope of an isoquant tell us A:the increase when capital increases B: how much output increases when both inputs are increased C: the decrease in capital necessary to keep output constant when labor increases by one unit D: the decrease in capital necessary to keep constant when labor increases by one unit

capital must decrease to keep output constant when labor increases by one unit.

The slope of the isocost line tells the firm how much A. more expensive a unit of capital is relative a unit of labor B. capital must be reduced to keep total cost constant when hiring one more unit of labor C. capital must be increased to keep total cost constant when hiring one more unit of labor D. the isocost curve will shift outward if the firm wishes to produce more

capital must decrease to keep output constant when labor increases by one unit

The slope of the isoquant tells the firm how much A: output increases when labor increases by one unit B: capital must decrease to keep output constant when labor increases by one unit C: output increases when capital and labor are doubled D: a unit of capital costs relative to the cost of labor

D: the greater is the marginal productivity of labor relative to that of capital.

The steeper an isoquant is A: the greater is the level of output. B: the greater is the substitutability between capital and labor. C: the greater is the need to keep capital and labor in fixed proportions. D: the greater is the marginal productivity of labor relative to that of capital.

D. Utility

The substitution effect can be measured holding ________ constant A. the price of all goods B. the price of one good C. income D. utility

slope upwards

The supply curve for a good will

5% of the price

Which of the following is an example of an ad valorem tax? A: 5% of the price B: 0.50$ per unit sold C: 5% of the quantity sold D: government regulation

C: cause the market supply to decline and the price of textiles to rise to restore profitability in the industry.

The textile industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses and many sellers have left the industry. Economic theory suggests that these conditions will ... A.cause firms in the textile industry to suffer long-run economic losses. B.shift the demand curve outward so that price will rise to the level of production cost. C.cause the market supply to decline and the price of textiles to rise to restore profitability in the industry. D.cause the remaining firms to collude so that they can produce more efficiently.

N times the supply of an individual firm.

There are currently N identical firms in a market. If it is a perfectly competitive market, the short-run market supply curve at any given price is N plus the supply of an individual firm. It cannot be determined from the information provided. N - 1 times the supply of an individual firm. N times the supply of an individual firm.

reflects the relative ranking of various bundles of goods

Utility is the set of numerical values that A: describes how much more a consumer prefers one bundle to another B: yields an absolute level of pleasure from a bundle of goods C: reflects the relative ranking of various bundles of goods D: yields a cardinal ranking of bundles

A. Prices

What links the decisions of consumers and firms in a market? A.Prices B.Government C.Microeconomics D.Coordination Officials

C. are held constant

When deriving an Engel curve the prices of both goods A. decrease by the same percentage as income B. can either decrease, increase or stay the same C. are held constant D. increase by the same percentage as income

D: The cross price elasticity of demand for X with respect to the price of Y is negative

When good X and good Y are complementary, we can say the following about elasticities A. Their price elasticity of demand are approximately equal B. They are both normal goods C. The cross price elasticity of demand for X with respect to the price of Y is positive D: The cross price elasticity of demand for X with respect to the price of Y is negative

All the answers are correct

When the isocost line is tangent to the isoquant, then A: MRTS = -w/r B: the last dollar spent on capital yields as much extra output as the last dollar spent on labor C: All the answers are correct D: the firm is producing that level of output at minimum cost

freedom of entry and exit

Which is an important aspect of the perfectly competitive market that leads to long run equilibrium? A: price taking behavior B: homogeneous products C: freedom of entry and exit D: perfect information

There are only one or two sellers.

Which of the following are not characteristics of a competitive market? There is freedom of entry and exit. There are only one or two sellers. There are zero transaction costs. Buyers and sellers have complete information.

All the answers

Which of the following assumptions about the competitive market is true? - All the answers - All consumers have perfect information about all existing alternatives in the market - All firms are price takers - The products are perceived as homogeneous

B. p>MC=AC.

Which of the following characterizes long-run equilibrium in markets with perfect competition? A. p=MC<AC. B. p>MC=AC. C. p=MC>AC. D. None of them

D: p=MC=AC

Which of the following characterizes long-run equilibrium in perfect competition? A: p=MC < AC B: p > MC = AC C: p= MC>AC D: p=MC=AC

There are only a few firms in the market and they all belong to the cartel

Which of the following conditions can help to prolong the life of a cartel? A: There are only a few firms in the market and they all belong to the cartel B: The cartel has no ability to punish members who cheat on the cartel C: it is difficult to know what price any cartel member is actually charging D: There are many firms in the market that are not members of the cartel

D. Nuclear power has very high entry barriers (large investments andrequired expertise). Municipal water and sewer is a natural monopoly. Airport security is likely to require a lot of references and extensive investments in training and setting up systems. Web designing has relatively low entry barriers.

Which of the following industries is most likely to exhibit the characteristic of free entry? A.airport security B.municipal water and sewer C.nuclear power D.web designers

A: Dick obtains a copyright for the new computer game that he invented.

Which of the following is an example of a barrier to entry? A. Dick obtains a copyright for the new computer game that he invented. B. Larry charges a lower price than his competitors for his lawn-mowing services. C. Tom charges a higher price than his competitors for his house-painting services. D. Harry offers free concerts on Sunday afternoons as a form of advertising.

C.A normative statement concerns what somebody believes should happen; a positive statement concerns what will happen.

Which of the following is true? A.A normative economic statement is a testable hypothesis about cause and effect. B.A positive statement concerns what somebody believes should happen; a normative statement concerns what will happen. C.A normative statement concerns what somebody believes should happen; a positive statement concerns what will happen. D.None of the above are true.

In the short run, as more labor hired, output increases at a diminishing rate

Which of the following statements best summarizes the law of diminishing marginal returns? A: In the short run, as more labor hired, output increases at a diminishing rate B: In the short run, the amount of labor a firm will hire diminishes as output increases C: In the short run, as more labor is hired, output diminishes D: As more labor is hired, the lenght of time that defines the short run diminishes

AVC = wage/MPL

Which of the following statements is NOT true? AC = AFC + AVC C = F + VC AFC = AC - AVC AVC = wage/MPL

B. discourage customers from buying from rival firms.

Why would high transaction costs or imperfect information tend to prevent price-taking behavior? High transaction costs and imperfect information would prevent price-taking behavior because they A. make the demand curve more stable. B. discourage customers from buying from rival firms. C. enables firms to enter the market without being detected. D.allows products to seem more homogeneous. E.make the demand curves firms face more horizontal.

in which at least one input is fixed

With respect to production, the short run is best defined as time period A: in which at least one input is fixed B: in which all inputs are fixed C: lasting about 6 months D: lasting about 2 years