Microeconomics test 2

Which of the following is likely to lead to a right shift in the supply curve of cotten

An increase in labor productivity due to training programs

An increase in the demand for a good is represented by

a right shift to a new demand curve

Which of the following pairs of goods are likely to be considered substitutes.

A ford car and public transportation

At competitive equilibrium

the quantity demanded is equal to the quantity supplied of a good

Sharon consumes 10 chocolates when the price of one chocolate is $2. If her arc elasticity of demand for chocolates is -1, she consumes ________ chocolates when the price increases to $4.

5

In a perfectly competitive​ market, a seller cannot choose to raise the price of its good since all sellers in the market produce identical goods, so raising the price would result in losing all its customers. All firms in a perfectly competitive market are said to be​ __________. A. price takers. B. price leaders. C. price neutral. D. profitable in the long run.

A

Months ago you spent​ $30 on a ticket to see your favorite musician.​ However, you start having doubts the day of the show because you do not feel prepared for an exam the following day. Which of the following bits of information should​ (according to the ideas about sunk costs discussed in the​ chapter) influence your final​ decision? You learn there will be free pizza at the​ concert; thus, you will no longer have to spend​ $10 on dinner. A. This lowers the cost of attending the concert and will make you more likely to attend the show. B. This does not impact your decision since it is still a sunk cost that will not impact your decision. C. None of the above. D. This lowers the opportunity cost of studying making you more likely to skip the show.

A

Months ago you spent​ $30 on a ticket to see your favorite musician.​ However, you start having doubts the day of the show because you do not feel prepared for an exam the following day. Which of the following bits of information should​ (according to the ideas about sunk costs discussed in the​ chapter) influence your final​ decision? You notice a mistake on your credit card​ statement! You paid​ $20 for the​ ticket, not​ $30. A. This does not impact your decision since it is still a sunk cost that will not impact your decision. B. None of the above. C. This lower cost decreases the opportunity cost of studying making you more likely to skip the show. D. This lower cost will make you more likely to attend the show.

A

Months ago you spent​ $30 on a ticket to see your favorite musician.​ However, you start having doubts the day of the show because you do not feel prepared for an exam the following day. Which of the following bits of information should​ (according to the ideas about sunk costs discussed in the​ chapter) influence your final​ decision? Earlier in the day you found a​ $10 bill on the​ ground, which makes you feel less guilty about wasting​ $30. A. This extra money will make you more likely to attend the show. B. This does not impact your decision since it is still a sunk cost that will not impact your decision. C. This extra money decreases the opportunity cost of studying making you more likely to skip the show. D. None of the above.

B

Months ago you spent​ $30 on a ticket to see your favorite musician.​ However, you start having doubts the day of the show because you do not feel prepared for an exam the following day. Which of the following bits of information should​ (according to the ideas about sunk costs discussed in the​ chapter) influence your final​ decision? You thought there was no hope of reselling the​ ticket, though your roommate just offered to buy it for​ $10. A. None of the above B. The ability to resell the ticket means it is no longer a sunk cost and skipping the show brings you an additional​ $10 in​ benefit, making you more likely to skip the show. C. The ability to resell the ticket means it is no longer a sunk cost and skipping the show only brings you an additional​ $10 so you are more likely to attend the show. D. This does not impact your decision since it is still a sunk cost that will not impact your decision.

B

The graph below shows the​ short-run cost curves and three possible marginal revenue curves for a perfectly competitive firm. If the firm were facing MR2, then we know that this firm should​ __________. A. keep​ producing, even though it is incurring a loss it is less than the fixed costs that must be paid if it shuts down. B. shut​ down, since it is incurring a loss that is greater than the fixed costs that must be paid if it shuts down. C. keep​ producing, since it is making a profit at the​ profit-maximizing D. shut​ down, since it is incurring a loss and when a firm earns less than zero​ profit, it should shut down.

B

Consider a market where there are many firms with different cost structures. When determining which firms enter the market​ first, we look at​ ____________ A. fixed costs. B. average variable cost. C. average total cost. D. marginal cost.

C

The graph on the bottom shows the​ long-run average cost curve and marginal cost curve for a firm in a perfectly competitive market. Based on the graph to the​ bottom, the​ long-run supply curve is​ __________. A. segment​ AB, since it is the lowest cost segment of the marginal cost curve. B. segment​ AC, since the​ long-run supply curve includes all segments of the marginal cost curve above average variable cost. C. segment​ BC, since at prices below B the firm would shut down in the long run. D. the same as the average total cost​ curve, since it represents the lowest costs in the long run.

C

Assume that the market for chocolates is perfectly competitive. Which of the following statements would be true in this​ case? A. Terry uses soy milk for producing his​ chocolates, while Donna uses almond milk for producing hers. B. Jessica, a chocolate​ seller, sometimes sets her price lower or higher than the price at which other sellers sell their chocolates. C. Pam wants to produce chocolates, but she is unable to as Roy controls all the cocoa farms in the region. D. Jill starts to produce chocolates​ today, but the addition of her supply into the market does not decrease the market price.

D

Consider a market where there are many firms with different cost structures. The last firm to enter earns​ ___________. A. positive economic profits. B. average economic profits. C. the greatest economic profits. D. zero economic profits.

D

Is it possible for accounting profit to be positive and economic profit to be​ negative? A. No, economic profit must always be larger than accounting profit. B. No, economic profit and accounting profit will always end up being the same. C. Yes, this could occur if implicit costs were modest and explicit costs were high. D. Yes, this could occur if explicit costs were modest and implicit costs were high.

D

Suppose ventilator manufacturers are profit-maximizing firms with costs outlined in this chapter​ (large fixed cost and increasing marginal​ costs). These firms typically operate in a competitive​ market, though the government is considering the following policies to boost production. For each​ policy, explain whether production will in fact increase. If the government gives each firm a large sum of money with no strings​ attached, will ventilator production​ increase? A. Yes, the large sum will induce all firms to increase production. B. None of the above. C. No, the large sum will increase marginal revenue making it profitable for firms to decrease production. D. No, a no strings attached payment does not impact marginal revenue or marginal cost so production will remain unchanged.

D

Which of the following refers too diminishing marginal returns

The additional output produced in a firm decreased as more workers were hired

The quantity demanded of a food is

The amount of a good that buyers are willing to purchase to a given market price

Suppose ventilator manufacturers are​ profit-maximizing firms with costs outlined in this chapter​ (large fixed cost and increasing marginal​ costs). These firms typically operate in a competitive​ market, though the government is considering the following policies to boost production. For each​ policy, explain whether production will in fact increase. Via tax​ subsidies, the government reduces the cost of labor and parts. Does this increase ventilator​ production? A. None of the above. B. No, if the government subsidizes production it incentives firms to save money and cut production. C. No, the subsidy will change how many units consumers demand but does not impact production. D. Yes, the subsidy will lower cost and encourage entry into the market causing production to increase.

D

The table below shows the​ long-run total costs of three different firms. Do firms 1 and 2 experience economies of​ scale? Or do they experience diseconomies of​ scale? A. Both firms are experiencing diseconomies of scale. B. Both firms are experiencing economies of scale. C. Firm 1 is experiencing diseconomies of​ scale, while firm 2 is experiencing economies of scale. D. Firm 1 is experiencing economies of​ scale, while firm 2 is experiencing diseconomies of scale.

D

What is the difference between accounting profit and economic​ profit? A. Economic profit only subtracts implicit costs from total​ revenue, while accounting profit only subtracts explicit costs. B. Accounting profit only subtracts implicit costs from total​ revenue, while economic profit only subtracts explicit costs. C. Accounting profit subtracts both explicit and implicit costs from total​ revenue, while economic profit only subtracts explicit costs. D. Economic profit subtracts both explicit and implicit costs from total​ revenue, while accounting profit only subtracts explicit costs.

D

Which of the following is a feature of a perfectly competitive market

Each seller is too small to influence the market price

If the price of a good increases, ________.

consumer surplus decreases

The willingness to pay for a commodity

decreases as consumption of the commodity increases.

A supply schedule is a table that reports

different quantities of a good that producers are willing to sell at different prices

If a 1% change in the price of a good causes a 1% change in the quantity demanded, the good has an elasticity of demand

equal to 1

In the long run, under perfect competition

firms earn zero economic profit because of free entry and exit of firms

In case of a linear negatively sloped demand curve, the price elasticity of demand

is different at different points on the curve

The quantity supplies of a good

is the amount of the good that sellers are ready to supple at a given price

In a competitive market there are ------ number of buyers are a ------ number if sellers

large; large

two goods are said to be compliments when a fall in the price of one good

leads to a right shift in the demand for the other good

Assume that the economy is in recession and consumers are experiencing a fall in their income levels. this will cause a

left shift in the market demand for all goods

The slope of budget constraint represents

the opportunity cost of one good in terms of another

A decrease in the price of either good will cause a consumer's budget constraint to

pivot rightward

The percentage change in the quantity demanded of a good due to a percentage change in its price is referred to as the

price elasticity of demand

In the long run, a firm should exit when

price is less than average total cost

As the ----- increases -------

price of a good; its quantity demanded decreases

Sandra consumes two goods-tea and coffee. Her demand for tea is inelastic while her demand for coffee is elastic. If there is an increase in the price of both tea and coffee, ________.

sandra's expenditure on tea will increase and her expenditure on coffee will decrease

The market demand is the ------ of the individual demand of all potential buyers

sum

----- are costs that once committed can never be recovered and should not affect current anf future production costs

sunk costs

In a perfectly competitive market

the long run market is equal to the minimum average cost of industry because of free entry and exit firms.

The graph below shows the​ short-run cost curves and three possible marginal revenue curves for a perfectly competitive firm. If the firm were facing MR1, then we know that this firm should​ __________. A. keep​ producing, since it is making a profit at the​ profit-maximizing output B. shut​ down, since it is incurring a loss and when a firm earns less than zero​ profit, it should shut down. C. keep​ producing, even though it is incurring a loss it is less than the fixed costs that must be paid if it shuts down. D shut​ down, since it is incurring a loss that is greater than the fixed costs that must be paid if it shuts down.

A

The graph below shows the​ short-run cost curves and three possible marginal revenue curves for a perfectly competitive firm. If the firm were facing MR3, then we know that this firm should​ __________. A. shut​ down, since it is incurring a loss that is greater than the fixed costs that must be paid if it shuts down. B. shut​ down, since it is incurring a loss and when a firm earns less than zero​ profit, it should shut down. C. keep​ producing, since it is making a profit at the​ profit-maximizing output D. keep​ producing, even though it is incurring a loss it is less than the fixed costs that must be paid if it shuts down.

A

Consider a market where there are many firms with different cost structures. If demand shifts to the left​ (decreases), the last firm that entered​ ____________. A. is indifferent between producing or exiting the market and so the outcome is indeterminate. B. earns negative economic profits and so exits the market. C. earns positive economic​ profits, leading to new firms entering the market. D. earns negative economic profits and thus undertakes​ cost-cutting measures to return to profitability.

B

The table below shows the​ long-run total costs of three different firms.Minimum efficient scale is the lowest level of output where​ long-run average total cost is minimized. Firm​ 3's minimum efficient scale occurs when the output is​ ______ unit(s). A. 2 B. 4 C. 3 D. 1

C

Which of the following is true of the long run

There are no fixed inputs in the long run

Which of the following examples best describes the law of supply

When the market price of pens increased, sellers started supplying more pens

A change in slope of budget constraint indicates

a change in the price of eithergood that causes a change in the opportunity cost.

Other things remaining the same a right shift in the supply curve will lead to

a decrease in the equilibrium and an increase in the equilibrium quantity

Entry of new firms into an existing market causes

a rightward shift in the market supply curve

A consumer's budget refers to the

amount of money she can spend on various goods and services

which of the following best describes a good with perfectly elastic supple

any increase in price of the good will induce the firm to supply an infinite quantity of a good