Microeconomics Practice Final (Study Guide)

In which of the following situations will both market clearing price and the equilibrium quantity decrease?

a decrease in demand with no change in supply.

If Ford Motor Company and General Motors Corporation were to merge, this would represent

a horizontal merger

For years, your neighbor insisted she had no desire to own a computer. Recently, however, she purchased one and says she did so because all her relatives have computers and she wants to exchange e-mail with them. Your neighbor's behavior is an example of

a network effect

A tariff is

a tax on imported goods

One role of the interest rate is to

allocate capital to its most efficient uses

The results of the calculation of the price elasticity of demand is

always negative

A dominant strategy is one that

always yields the highest benefit regardless of what the other players do.

As John's income has increased, he has purchased fewer hamburgers. Hamburgers are

an inferior good for John

When hiring additional workers, a firm operating in a perfectly competitive labor market will

be able to hire additional workers without offering higher wages

If the price of coffee rises relative to all other prices, consumers are likely to

buy more tea.

Economies of scale will lead to only one firm in the industry because

by increasing output a firm is able to lower cost per unit and change lower prices driving smaller firms out of business.

Your local grocery store reduces transaction costs to the consumer

by reducing the consumer's need to travel from food producer to food producer (or manufacturer to manufacturer) to purchase the food staples that the consumer desires.

Economies of scale occur when there are

decreases in long-run average costs resulting from increases in output

Because the products of firms in a monopolistically competitive market are not homogeneous the

demand curve is downward sloping

The market demand for labor will be

downward sloping

When demand is perfectly elastic, marginal revenue is

equal to price

Suppose the short-run supply curve is a straight line of slope +1 that intersects the origin. The long-run supply curve will be

flatter and intersect the vertical axis.

Economic bads are goods

for which desired quantity is less than what nature provides at a zero price.

Current account transactions are all payments that are related to the purchase or sale of

goods and services only

Owner-provided capital and owner-provided labor are examples of

implicit costs

Father says "Earn a B-average on your next report card and I'll help you buy a car" An economist would say that this parent is providing his child a(n)

incentive

Market clearing price

is where quantity demanded equals quantity supplied

The fact that when the price of a good goes up, people buy less of it is known as the

law of demand

When marginal costs are rising

marginal physical product is falling

The monopolist's input demand curve is the

marginal revenue product curve

long-run equilibrium is characterized by zero profits in

market structures in which there is easy entry

Which of the following would likely result as a consequence of rent controls?

unimproved buildings and apartment complexes, limits on tenant mobility, a reduction of construction of rental housing units. (all correct)

All of the following are true regarding the relationship between price elasticity of demand and total revenues EXCEPT

when the firm is facing demand that is inelastic, if it raises price, total revenues will go down.

Your annual review is given to you at your place of employment, and you get a raise of 3 percent for the next year. On the subway home though, you read an article stating the price of homes in the area you are looking to buy will increase by 6 percent during the coming year. You determine from the article that if you buy in your favorite neighborhood

your purchasing power declines

Which of the following is the closest to a perfectly competitive market structure?

radishes (correct answer) laundry detergent electricity personal computers

Economists criticize monopolies because monopolies

restrict output and raise prices compared to a competitive situation.

The U.S. government suspended the convertibility of the dollar into gold in

the 1970s

Economics is the study of

the allocation of scarce resources to satisfy unlimited wants.

According to the random walk theory,

the best forecast of tomorrow's price is today's price

External costs can be defined as

the cost associated with private production, but partially borne by society.

The law of increasing additional costs is due to

the fact that resources are not perfectly adaptable for alternative uses. scarcity.

Suppose the price of an item in the perfectly competitive market is $3. For a firm in this market, MC=MR at an output of 100 units. The average total cost at this output level is $4 per unit, and TVC is $80. We may conclude that

the firm should continue to produce because P > AVC

It has been argued that a monopolistically competitive industry involves "waste" because

the firms do not produce at the minimum of the average total cost curve and price is above marginal cost.

Governments sometimes subsidize industries. When this occurs,

the subsidized industries have an advantage on international markets relative to non-subsidized firms. For this reason, other countries often impose tariffs on the subsidized imports.

The value of a model is determined by

the usefulness of its predictions in the real world

The total utility from consuming 8 units of a good is 155. The marginal utility of the 8th unit is 7 and the marginal utility of the 7th unit is 11. The total utility from consuming 6 units of the good is..

137

If the Japanese yen appreciates against the U.S. dollar

Japanese exports will become more expensive in the United States

Economics is the study of how

People make choices.

As a price searcher, a monopoly firm

must determine its optimal price-output combination.

The free-rider problem plagues public goods because

once public goods are produced it is not possible to exclude any one.

Market failures

prevent the price system from attaining economic efficiency