Microeconomics Final

Lisette owns a bakery. Her total costs are $150,000 per year, and her variable costs are $85,000. This means that her fixed costs are A)$65,000 B)$150,000 C)$85,000 D)$235,000

$65,000

can be reached using the HHI? 100 1,000 10,000 100,000

10,000

____________ arises when firms act together to reduce output and keep prices high. Collusion A cartel A monopoly An oligopoly

A Cartel

Which would most likely shift the production possibilities curve inward?

A decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time

____________ refers to the additional revenue gained from selling one more unit. A) Marginal revenue B) Total revenue C) Economic profit D) Accounting profit

A) Marginal revenue

Marcy owns a photography business in Mobile, Alabama. The market for photography is perfectly competitive. At Marcy's current production level, her marginal cost is $15 and her marginal revenue is $12. In order to maximize profits, Marcy should A) decrease production. B) keep production the same. C) increase production. D) increase the price

A) decrease production

Assume a certain firm regards the number of workers it employs as variable but regards the size of its factory as fixed. This assumption is often realistic A) in the short run but not in the long run. B) in the long run but not in the short run. C) both in the short run and in the long run. D) neither in the short run nor in the long run.

A) in the short run but not in the long run.

If a firm uses only labor to produce output, the firm's production function depicts the relationship between A) the number of workers and the quantity of output. B) marginal product and marginal cost. C) the maximum quantity that the firm can produce as it adds more capital to a fixed quantity of labor. D) fixed inputs and variable inputs in the short run.

A) the number of workers and the quantity of output.

Which of the following events could cause an increase in the supply of ceiling fans? A- A government subsidy for the production of ceiling fans B-There is an increase in the price of air conditioners, and consumers regard air conditioners and ceiling fans as substitutes. C- There is an increase in the price of the motor that powers ceiling fans. D- All of the above are correct.

A- A government subsidy for the production of ceiling fans

The term "constant returns to scale" describes a situation where A- expanding all inputs does not change the average cost of production. B- a larger-scale firm can produce at a lower cost than a smaller-scale firm. C- expanding all inputs changes the average cost of production. D- the quantity of output rises and the average cost of production falls.

A- expanding all inputs does not change the average cost of production.

If corn is an input into the production of ethanol, we would expect the supply curve for ethanol to A- shift rightward. B- shift leftward. C- become flatter. D- remain unchanged.

A- shift rightward.

Marcella operates a small, but very successful art gallery. All but one of the following can be classified as a variable cost arising from the physical inputs Marcella requires to operate her business. Which is it? A-physical space for the gallery B-costs of purchasing art work to sell in the gallery C-wages paid to three part-time employees D-accountants fees for preparing tax returns

A-physical space for the gallery

Monopolistic competitors can make a __________ in the short-run, but in the long run, ___________ will drive these firms toward ____________. A. profit or loss; entry and exit; a zero-profit outcome B. loss; exit; losses on their earnings C. profit or loss; exit; economic profits D. profit; entry; a price that lies at the very bottom of the AC curve

A. profit or loss; entry and exit; a zero-profit outcome

_________________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry. Collusion A monopoly An oligopoly A cartel

An Oligopy

Karolina owns a small diner, where she works full-time in the kitchen. Her total revenue last year was $100,000, and her rent was $3,000 per month. She pays her one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Karolina could earn $35,000 per year as the manager of a competing diner nearby. Her total economic profit last year was A) $34,000 B) -$1,000 C) $20,000 D) $65,000

B) -$1,000

The marginal revenue curve for a monopolist _________ the market demand curve. A) always rises above B) always lies beneath C) always runs parallel D) always is the same

B) always lies beneath

A company produces at an output level where marginal cost is equal to marginal revenue and has the following revenue and cost levels: Total revenue = $1,450 Total cost = $1,500 Total variable cost = $1,300 What would you suggest in the short run? A) shut down B) continue to produce because the loss is less than the total fixed cost C) increase production to lower the marginal cost D) decrease production to lower the marginal cost

B) continue to produce because the loss is less than the total fixed cost

When the regulator sets a price that a firm cannot exceed over the next few years, the regulator is enforcing A) deregulation. B) price cap regulation. C) cost-plus regulation D) regulatory capture rules.

B) price cap regulation

A total-cost curve shows the relationship between the A) quantity of an input used and the total cost of production. B) quantity of output produced and the total cost of production. C) total cost of production and profit. D) total cost of production and total revenue.

B) quantity of output produced and the total cost of production.

Which of the following statements is correct? A- Buyers determine supply, and sellers determine demand. B- Buyers determine demand, and sellers determine supply. C- Buyers determine both demand and supply. D- Sellers determine both demand and supply.

B- Buyers determine demand, and sellers determine supply.

Fixed costs are important because, at least in the ___________, the firm _______________. A-long run; cannot alter them B-short run; cannot alter them C-long run; can alter them D-short run; can alter them

B-short run; cannot alter them

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.

Budget constraint

A shoe factory produces 20 units of output. Its average fixed cost (AFC) = $25, average total cost (ATC) = $35, and marginal cost (MC) = $15. The shoe factory's total variable cost is ________. a)$500 b)$10 c)$200 d)$50

C) $200

Fathima owns a car shop that repairs, among other things, spoilers. She currently has 6 employees; with 6 employees, her repair shop can repair 9 spoilers per day. If she hired a seventh employee, she'd be able to repair 12 spoilers per day. Therefore, the marginal product of the seventh employee is ________ car spoiler(s). A) 9 B) 7 C) 3 D) 5

C) 3

Which one of the following is the most accurate description of a monopolist? A) a sole producer of a narrowly defined product class, such as brown, Grade A eggs produced in Eagle County, Colorado B) a firm that is very large relative to all its competitors within a narrow product class C) a sole producer of a product for which good substitutes are lacking in a market with high barriers to entry D) a large, multinational firm that produces a single product in a narrow product class

C) a sole producer of a product for which good substitutes are lacking in a market with high barriers to entry

When adding another unit of labor leads to an increase in output that is smaller than the increases in output that resulted from adding previous units of labor, the firm is experiencing A) diminishing labor. B) diminishing output. C) diminishing marginal product. D) negative marginal product.

C) diminishing marginal product.

Salary payments are ________. a) Fixed costs b) hidden costs. c) explicit costs d) implicit costs.

C) explicit

When the average total cost curve is at its minimum, we know that the A) average variable cost curve intersects the average total cost curve B) average variable cost curve is above the average total cost curve C) marginal cost curve intersects the average total cost curve D) marginal cost curve is above the average total cost curve

C) marginal cost curve intersects the average total cost curve

The Herfindahl-hirschman index is calculated by taking ___________, squaring it, and adding them up to get a total. A) concentration ratio of each firm in the industry B) total revenues of each firm in the industry C) market share of each firm in the industry D) market capitalization of each firm in the industry

C) market share of each firm in the industry

The term _______________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product. A) price setter B) business entity C) price taker D) trend setter

C) price taker

If a firm generates $240,000 in revenue, earns $120,000 in economic profit, and its explicit costs are $80,000, how much are its implicit costs? A- $160,000 B- $80,000 C- $40,000 D- $60,000

C- $40,000

If Kindle e-readers and Nook e-readers are substitutes, a higher price for Nooks would result in a(n) A- increase in the demand for Nooks. B- decrease in the demand for Nooks. C- increase in the demand for Kindles. D- decrease in the demand for Kindles.

C- increase in the demand for Kindles

Recent forest fires in the western states are expected to cause the price of lumber to rise in the next six months. As a result, we can expect the supply of lumber to A-fall in six months but not now. B-increase in six months when the price goes up. C-fall now. D-increase now to meet as much demand as possible.

C-fall now

In countries like _________ the command economies predominate.

Cuba and North Korea

Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. William can arrange 18 bouquets per day. What would be the total daily output of Kate's firm if she hired her husband? A) 18 bouquets B) 19 bouquets C) 20 bouquets D) 38 bouquets

D) 38 bouquets

The slope of the demand curve for a monopoly firm is A) horizontal, parallel to the x-axis B) vertical, parallel to the y-axis C) upward sloping D) downward sloping

D) downward sloping

When a natural monopoly exists in a given industry, the per-unit costs of production will be A) lowest when there are a large number of producers in the industry. B) lower for the smaller firms than for larger firms. C) minimized at the output that maximizes the industry's profitability. D) lowest when a single firm generates the entire output of the industry.

D) lowest when a single firm generates the entire output of the industry

Which of the following is an example of a market? A- a gas station B- a garage sale C- a barber shop D- All of the above are examples of markets.

D- All of the above are examples of markets

Kara receives a promotion at work, which increases her income. We would expect Kara's demand for A- each good she purchases to remain unchanged. B- normal goods to decrease. C- substitute goods to increase. D- inferior goods to decrease.

D- inferior goods to decrease

A perfectly competitive market is a market in which A- an auctioneer helps set prices and arrange sales. B- there are only a few sellers. C- the forces of supply and demand do not apply. D- no individual buyer or seller has any significant impact on the market price.

D- no individual buyer or seller has any significant impact on the market price

The demand curve as perceived by a perfectly competitive firm is _______________. horizontal downward sloping upward sloping hump shaped

Horizontal

Scarcity implies that...

It is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available

In a _______, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers.

Market-oriented economy

Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be.

Normative statements

Which of the following conditions will result in the firm making an economic profit? P>ATC P<ATC P=ATC P>AVC

P>ATC

The downward slope of the demand curve again illustrates the pattern that as _____________ rises, ______________ decreases.

Prices; demand

A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and _________________, shown on the horizontal axis.

Quantity

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

Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is:

The benefit to his grades from studying for an hour.

The opportunity cost of working rather than going to school is

The higher wages that come with additional education

Macroeconomic topics usually do not include

The profit maximizing decisions of an individual manufacturer

In economics, the demand for a good refers to the amount of the good that people

Will buy at various prices

What is an example of an indirect incentive created by unemployment insurance programs?

Workers have a reduced incentive to find a new job until the insurance runs out

A change in price of a good or service typically causes ________________ for that specific good or service

a change along the supply curve

Firms in a perfectly competitive market are said to be "price takers"—that is, once the market determines an equilibrium price for the product, firms must accept this price. If you sell a product in a perfectly competitive market, but you are not happy with its price, would you raise the price, even by a cent? a) No, you would not raise the price, because you would lose all your customers. b) Yes, you would raise the price enough to meet your target pricing. c) Yes, but you would convince your competitors to raise their price as well. d) Yes, you would raise the price slightly, so you could make a little more than your competitors.

a) No, you would not raise the price, because you would lose all your customers.

In the framework of an oligopoly, what strategy can work like a silent form of cooperation? always match other cartel firms; price cuts, but don't match price increases always match other cartel firms; price increases, but don't match price cuts immediately match price increases legally enforceable agreements

always match other cartel firms; price cuts, but don't match price increases

Which of the following statements is true about accounting profit? a) Because economic cost includes explicit and implicit costs, accounting profit is lower than economic profit. b) Because economic cost includes implicit and explicit costs, accounting profit is higher than economic profit. c) Because economic cost includes only implicit costs, accounting profit is lower than economic profit. d) Because economic cost includes only implicit costs, accounting profit is higher than economic profit.

b) Because economic cost includes implicit and explicit costs, accounting profit is higher than economic profit.

Who can influence the market price in perfect competition? a) Any individual seller. b) No individual buyer or seller. c)Any individual buyer. d) The most powerful seller

b) No individual buyer or seller.

In long-run equilibrium, firms ________. a) earn negative economic profit b) neither enter nor exit the industry c) Will look for new markets d) earn positive economic profit

b) neither enter nor exit the industry

A firm has a positive profit margin if a) average revenue is greater than average variable cost. b) price is greater than average total cost. c) price is greater than marginal cost. d) marginal revenue is greater than marginal cost.

b) price is greater than average total cost.

What does it mean in a monopolistically competitive market, when the rule for maximizing profit is to set MR = MC? a) Price is equal to marginal revenue. b) Price is equal to marginal cost. c) Price is higher than marginal revenue. d) Price is lower than marginal revenue.

c) Price is higher than marginal revenue.

Diego wants to expand his business to build a warehouse and office building for $2 million. He'll use the 5 acre property he owns and currently rents to a local cattle rancher for $5,000. What are the implicit costs of of this expansion? a) the cost of the warehouse and office building b) all costs as reported by Dan's accountant c) the foregone rent from the cattle rancher d) the foregone rent and the cost of the warehouse and office building

c) the foregone rent from the cattle rancher

Which of the following statements accurately describes a monopolistically competitive firm? a) Its market is dominated by a small number of firms. b) It is protected by high barriers to entry. c) It will try to blend in its product so it is indistinguishable from other firms' products. d) It competes against a large number of firms selling slightly different products.

d) It competes against a large number of firms selling slightly different products.

Monopolistic competitors in the food industry will often include a recyclable symbol on packaging used for their product as a means to be socially responsible. be environmentally responsible. differentiate their product. be perceived more favorably.

differentiate their product

If firms in a competitive market are incurring economic losses, we would expect firms to ________ the market, causing the ________ curve to shift to the ________. leave; demand; right enter; supply; right enter; demand; left leave; supply; left

leave; supply; left

A firm's short-run supply curve is equal to the firm's marginal revenue curve demand curve marginal cost curve above the minimum average total cost marginal cost curve above the minimum average variable cost

marginal cost curve above the minimum average variable cost

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should

sell the ticket because the marginal benefit exceeds the marginal cost.

A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the _________________________.

supply curve to the right

In a perfectly competitive market, if one firm raises its price relative to the other firms in the market, consumers are willing to go to another firm because there are many sellers in the market selling identical products there are many sellers in the market selling products that are different consumers can set the price they want to pay consumers have market power

there are many sellers in the market selling identical products

When quantity demanded decreases in response to a change in price:

there is a movement up along the demand curve.

If oligopolists compete hard against each other, they end up acting very much like imperfect competitors. costs for all are driven up. zero profits result for all. they end up acting very much like monopolistic competitors.

zero profits result for all.