MICROECONOMICS F201X
"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:
$44
Marginal thinking is best demonstrated by:
choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.
a diagram that views the economy as consisting of households and firms interacting in a goods and services market and a labor market
circular flow diagram
an economy where economic decisions are passed down from government authority and where the government owns the resources
command economy
When __________________, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right.
costs of production fall
A 10 percent decrease in the price of potato chips leads to a 30 percent increase in the quantity of soda demanded. It appears that:
cross-price elasticity of demand for soda is -3.
the trend in which buying and selling in markets have increasingly crossed national borders
globalization
a market in which firms are sellers of what they produce and households are buyers
goods and services market
measure of the size of total production in an economy
gross domestic product (GDP)
Which of the following would reduce the supply of microcomputers?
higher wage rates for the workers that assemble the computers
________________ are opportunity costs of resources already owned by the firm and used in business.
implicit costs
products (goods and services) made abroad and then sold domestically
imports
The term ______________________ describes a situation where a _______________________ causes a reduction in the buying power of income, even though actual income has not changed.
income effect; higher price
When economists are sketching examples of demand and supply, it is common to sketch a demand or supply curve that is close to vertical, and then to refer to that curve as ________________.
inelastic
Taxes on goods with __________ demand curves will tend to raise more tax revenue for the government than taxes on goods with __________ demand curves.
inelastic; elastic
A monopolist's demand curve ___________________________.
is the same as the market demand curve
the market in which households sell their labor as workers to business firms or other employers
labor market
An _____________________ is given an exclusive right to sell a good buy the government.
legal monopoly
the branch of economics that focuses on broad issues such as growth, unemployment, inflation, and trade balance
macroeconomics
Most real-world choices aren't about getting all of one thing or another, instead, most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.
marginal analysis
_________________ is the additional cost of producing one more unit.
marginal cost
interaction between potential buyers and sellers; a combination of demand and supply
market
an economy where economic decisions are decentralized, private individuals own resources, and businesses supply goods and services based on demand
market economy
The perceived demand curve for a group of competing oligopoly firms will appear kinked as a result of their commitment to
match price cuts, but not price increases
the branch of economics that focuses on actions of particular agents within the economy, like households, workers, and business firms
microeconomics
The basic difference between macroeconomics and microeconomics is:
microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.
Which of the following is considered to be a tell-tale signal that the point with the highest total utility has been found?
the marginal utility per dollar is the same for both goods
When entry occurs in a monopolistically competitive industry,
the perceived demand and marginal revenue curves for each firm will shift to the left.
a representation of an object or situation that is simplified while including enough of the key features to help us understand the object or situation
theory
All of the following conditions occur when firms are in perfect competition expect:
there are many barriers to entry and exit
A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result:
total revenue will decrease
The typical pattern revealed in a budget constraint model shows that as the quantity consumed rises,
total utility rises, but marginal utility falls.
typically an agricultural economy where things are done the same as they have always been done
traditional economy
a market where the buyers and sellers make transactions in violation of one or more government regulations
underground economy
Scarcity exists because of:
unlimited wants and limited resources
The general pattern that consumption of the first few units of any good tends to bring a higher level of ______________ to a person than consumption of later units is a common pattern.
utility
In the long run, all inputs are ______________.
variable
In a free market economy, firms operating in a perfectly competitive industry are said to have only one major choice to make. which of the following correctly sets out that choice?
what quantity to produce
Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect:
Andy's demand for beer to increase.
economic policies that involve government spending and taxes
fiscal policy
in the short run, firms cannot alter _______________.
fixed costs
The circular flow diagram of economic activity is a model of the:
flow of goods, services, and payments between households and firms.
Which of the following occurs simultaneously with an income effect?
substitution effect
Economists are able to determine total utility by:
summing up the marginal utilities of each unit consumed.
Firms in a perfectly competitive market are said to be
Price takers
If the demand curve for a life - savings medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to:
Rise and the equilibrium quantity to stay the same.
If a firm cannot cover any of it its variable costs, then that firm should __________________.
Shut down
The lesson of _______________ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options.
Sunk costs
In the long-run, seller profits for a firm in a perfectly competitive industry _________________.
are driven to zero
____________________ prevent potential competitors from entering a market.
barriers to entry
In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of:
buyers and sellers
The nature of demand indicates that as the price of a good increases:
buyers desire to purchase less of it.
The _______________ is the only price where quantity demanded is equal to quantity supplied.
equilibrium price
products (goods and services) made domestically and sold abroad
exports
Economies of scale refers to a situation where as the level of output increase, the average cost _____________.
decreases
All of the following legal mechanisms protect intellectual property except for ____________________.
deregulation
The term ______________________________ is used to describe the common pattern whereby each marginal unit of a consumed good provides less of an addition to utility than the previous unit.
diminishing marginal utility
the way in which different workers divide required tasks to produce a good or service
division of labor
the study of how humans make choices under conditions of scarcity
economics
when the average cost of producing each individual unit declines as total output increases
economies of scale
see theory
model
policy that involves altering the level of interest rates, the availability of credit in the economy, and the extent of borrowing
monetary policy
When retailers compete to sell similar but not identical products, they engage in what economists call ___________________________.
monopolistic competition
____________________ often arise in industries where the marginal cost of adding an additional customer is very low, once the fixed costs of the overall system are in place.
natural monopolies
In monopolistic competition, the end result of entry and exist is that firms end up with a price that lies
on the downward-sloping portion of the average cost curve.
____________________________ occurs when a firm dramatically lowers prices and takes a loss in order to drive competitors out of business, and then increases prices again once their competition is gone.
predatory pricing
The elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in _______________________.
price
______________________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling.
price floors
Monopolists are said to be ______________________.
price makers
system where private individuals or groups of private individuals own and operate the means of production (resources and businesses)
private enterprise
_____________________ refers to the total number of units that are purchased at that price.
quantity demanded
when human wants for goods and services exceed the available supply
scarcity
The first step to be undertaken by a profit-maximizing monopolistic competitor wanting to decide what price to charge is to
select the profit maximizing quantity to produce
when workers or firms focus on particular tasks for which they are well-suited within the overall production process
specialization
If the supply curve for aspirin is perfectly elastic, then a reduction in demand will cause the equilibrium price to:
stay the same and the equilibrium quantity to fall.