Microeconomics Midterm 1 (pt.2)
In a competitive labor market, the profit-maximizing number of workers that a firm will hire occurs where the ____________.
value of marginal product of labor is equal to the market wage.
Assume that a perfectly competitive market in long-run equilibrium with firms earning zero profit experiences a sudden decrease in demand for its good. As a result, in the long run, the ____ in marginal revenue will cause firms to ____ the market.
drop, exit
Suppose the university is trying to determine the most efficient way to allocate the rooms such that those who value the rooms the most get them. Which is most efficient
Auctioning the rooms to the highest bidders.
A decreasing production pattern where successive increases in inputs lead to a decrease in marginal product is called the Law of:
Diminishing Returns.
The government of a certain country decides that all its citizens should be equally well off. It decides to redistribute money so that each person has a roughly equal share of the total income. How would this policy affect economic activity in the country?
It would be adversely affected since incentives to work or seek profits would be greatly diminished.
Town B is considering imposing a $1 tax on each hamburger sold; the tax is to be paid by the hamburger stands in the town.
It would change a hamburger stand's short-run profit-maximizing choice of the number of hamburgers to produce. Your answer is correct. The tax would shift a hamburger stand's marginal cost curve. Your answer is correct. The tax would shift a hamburger stand's short-run average variable cost curve.
How would the introduction of legal or technical barriers to entry affect the long-run equilibrium in a perfectly competitive market?
It would reduce any downward pressure on prices from entry and allow economic profits in the long run.
Does price gouging have the same effect as setting prices above equilibrium level?
No, price gouging is actually an equilibrium outcome, while the setting of prices above equilibrium is not.
Town A is considering imposing a lump-sum tax of $300 on each hamburger stand in the town. Assuming that the market for hamburgers is perfectly competitive, which of the following would occur?
The tax would shift a hamburger stand's short-run average fixed cost curve.
Which of the following expressions correctly describes economic profits?
Total revenue −implicit costs−explicit costs.
In a_____ economy, a central authority determines the goods and services produced while a ________ economy is based on price signals and strong economic incentives.
command, market
In a competitive market equilibrium, the allocation of the social surplus is such that ___________
no individual can be made better off without making someone else worse off.
A difficult problem for central planners is bringing together those economic agents whose interests coincide in order to trade. This is known as the ____________ problem.
coordination
economics of scale
factors that cause a producer's average cost per unit to fall as output rises
At this point of production the average fixed cost (AFC) would be
falling
Once planners have successfully brought economic agents together, a second problem of aligning the interests of the economic agents must be solved. This is known as the ___________ problem.
incentive
All firms in a perfectly competitive market are said to be __________
price takers
In a market economy, the alignment of interests is accomplished through the use of
prices
The goal of a business in a perfectly competitive market is to maximize:
profit
Suppose a new off-campus university apartment complex could rent its rooms on the open market for $900 a month. If, instead, the university chooses to cap the price of rooms to $500 a month for students, the result would be that ____________.
quantity demanded would exceed the quantity supplied, resulting in a shortage.
When one of the five major factors changes, causing an increase in demand, the demand curve shifts
rightward
When one of the four major factors changes, causing an increase in supply, the supply curve shifts
rightward
The Law of Supply states that, in most cases, the quantity supplied of a good ___________ when the price of the good rises. This means we would expect a typical supply curve to be___________.
rises; upward-sloping.
Question content area Part 1 If marginal cost (MC) is greater than average total cost (ATC), then ATC is
rising
Which of the following is not one of the four major factors that shifts the supply curve when it changes?
the income of consumers
Which of the following is not one of the five major factors that shifts the demand curve when it changes?
the price of a good itself
Diseconomics of Scale
the property whereby long-run average total cost rises as the quantity of output increases
constant returns to scale
the property whereby long-run average total cost stays the same as the quantity of output changes