Micro Final - Old Test

implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do

A difference between explicit and implicit costs is that?

Both a and b are correct

A monopolist maximizes profits by? - producing an output level where marginal revenue equals marginal cost - charging a price that is greater than marginal revenue - earning a profit of (P-MC) x Q - both a and b are correct

price is above or below marginal cost

A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as?

It depends on the nature of the firm

How long does it take a firm to go from the short run to the long run?

becomes flatter

As price elasticity of supply increase, the supply curve?

private markets tend to undersupply public goods

Because of the free-rider problem,

area below the demand curve and above the price

Consumer surplus in a market can be represented by the?

- profits as large as possible, even if it means reducing output - profits as large as possible, even if it means incurring a higher total cost

Economists normally assume that the goal of a firm is to earn? - profits as large as possible, even if it means reducing output - Profits as large as possible, even if it means incurring a higher total cost - Revenues as large as possible, even if it reduces profits

both public goods and common resources

Governments can improve market outcomes for?

variable cost

If a firm produces nothing, which of the following costs will be zero?

complements

If the cross-price elasticity of two goods is negative, then those two goods are?

increase total revenue of textbook sellers

If the demand for textbooks is inelastic, then an increase in the price of textbooks will?

the two goods are substitutes

If, for two goods, the cross-price elasticity of demand is 1.25, then?

sum of the quantities supplied by each of the 1,000 individual firms at each price

In a market with 1,000 identical firms, the short-run market supply is the?

opportunity costs that do not involve an outflow of money

In calculating accounting profit, accountants typically don't include?

a deadweight loss to society

Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealizes mutually beneficial trades are?

separate customers according to their willingness to pay

Price discrimination requires the firm to?

total revenue minus total cost

Profit is defines as?

All of the above are correct

Suppose a firm operates in the short run at a price above its average total cost of production. In the long run the firm should expect... - new firms to enter the market - the market price to fall - its profits to fall - all of the above are correct

Less than $0.50

Suppose that the demand for picture frames is elastic and the supply of picture frames is inelastic. A tax of $1 per frame levied on picture frames will increase the price paid by buyers of picture frames by?

to shift leftward

Suppose there is an increase in the price of steel. We would expect the supply curve for steel beams?

decrease market supply and increase market price

The exit of existing firms from a competitive market will?

barriers to entry

The fundamental source of monopoly power is?

positively related

The size of a tax and the deadweight loss that results from the tax are?

opportunity cost

Those things that must be foregone to acquire a good are called?

causes quantity demanded to exceed quantity supplied

To say that a price ceiling is binding is to say that the price ceiling?

(P-ATC) x Q

We can measure the profits earned by a firm in a competitive industry as?

Max owns Fido, a large dog who barks whenever anyone walks near his house. Sally lives next to Max, and Fido's barking can be heard whenever anyone walks near her house, too. Thus, Sally receives free protection from burglars because of Fido's barking.

What is an example of the free-rider problem?

people can be prevented from using the good

When a good is excludable?

Elastic, and the demand curve will be horizontal

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly?

price may increase, decrease, or remain unchanged

When supply and demand both increase, equilibrium?

Average fixed costs are constant

Which of the follow statement is NOT correct? - fixed costs are constant - variable costs change as output changes - average fixed costs are constant - average total costs are typically U-shaped

-The firm is the sole seller of its product -The firm's product does not have close substitutes

Which of the following are necessary characteristics of a monopoly? - the firm is the sole seller of its product - the firm's product does not have close substitutes - the firm generates a large economic profit - the firm is located in a small geographic market

gains from specialization of inputs

Which of the following explains why long-run average cost at first decreases as output increases?

average total cost = (total cost)/(quantity of output)

Which of the following expressions is correct?

All of the above are correct

Which of the following is a characteristic of a natural monopoly? - average cost exceeds marginal cost over large regions - increasing the number of firms increases each firm's average total cost - one firm can supply output at a lower cost than two firms - All the above

An improvement in production technology that makes the production of the good more profitable

Which of the following might cause the supply curve for an inferior good to shift to the right?

The size of the deadweight loss increases, but the tax revenue first increases, then decreases

Which of the following statements correctly describes the relationship between the size of the deadweight loss and the amount of tax revenue as the size of a tax increase from a small tax and finally to a large tax?

To maximize profit, firms should produce at a level of output where price equals average variable cost

Which of the following statements is NOT correct? - In a long run equilibrium, marginal firms make zero economic profit - To maximize profit, firms should produce at a level of output where price equals average variable cost - The amount of gold in the world is limited. Therefore, the gold in jewelry market probably has a long run supply curve that is upward sloping - Long run supply curves are typically more elastic than short run supply curves

underproduced and common resources tend to be over consumed

Without government intervention, public goods tend to be?