Microeconomics units 5-8

Limited liability is a feature of partnerships T/F

False

T/F the market fails when positive externalities exist, because society produces goods with positive externalities

False

Total cost are a combination of:

Fixed cost plus variable costs.

In a ". " economy, individuals and firms own most resources, and in a ". " economy, the government controls most resources

Market;planned

One of the major difficulties in determining the costs and benefits of big public projects is:

Measuring the non market aspects of the projects

Using the utility maximization rule, if Vicky's marginal utility of the last orange consumed is 20 and her marginal utility of the last pineapple consumed is 80, what is the price of pineapples if the price of oranges is $1 and Vicky has maximized her utility?

$4

Which discount rate would result in society devoting the most resources to long run environmental management?

1%

Assume that you have $50 a week to spend on bottled water and chips. A bottle of water costs $1 and a bag of chips costs $3. If you buy 20 bottles of water, how many bags of chips can you purchase?

10

Staci's Sign Shoppe make signs for businesses. Staci is currently producing 210 signs per week with three employees. She hires an additional worker and total output per week rises to 328 signs. The marginal product of the last worker is ". " signs.

118

Jaslyn saw a dress she liked in her favorite department store a month ago. At that time the dress was on sale for 50% off. Jaslyn did not buy the dress at that time, but she bought it when the store had a "Buy One, Get One Free!" sale. Jaslyn's behavior can be explained by:

A framing bias

Ramiro has been an accounting major for three years, but he is not doing very well in his courses. He has, however, done very well in his law courses, but he doesn't want to change his major to law because he has already spent three years as an accounting major. He does not want to feel like he wasted those three years. Ramiro is subject to:

A sunk cost fallacy

To derive the market demand for public goods, individual demand must be

Added vertically

People contribute to disaster relief even when they do not personally know anyone who has been affected by the disaster. What psychological factor associated with behavioral economics explains this behavior

Altruism

Suppose that the twenty third worker generates a marginal product equal to eight boxes of output and that the average product of the twenty third worker employed is five boxes per worker. We can conclude that:

Average product is rising

Marginal cost (MC) will equal average total cost (ATC) at the point where the:

Average total cost is the lowest

In the short run, if the output is zero, the the total costs are:

Equal to fixed costs

The formula for average total cost is:

FC/Q + VC/Q

The Coase theorem states that, under certain conditions, the efficient allocation of resources among parties can be attained through:

Bargaining

The study of how human psychology enters into economic behavior as a way to explain why individuals sometimes act in predictable ways counter to economic models is known as:

Behavioral economics

Imagine two countries with identical endowments of resources. Using all its resources, Broland can produce 5,000 books or 8,000 forks. Using the same resources, Nomia can produce 4,000 books or 7,000 forks. Which country has a comparative advantage producing books?

Bro land, because it gives up 1,6 forks for each book produced.

If a nation sledge a product mix focused on ". " goods, the production possibilities frontier will expand at a greater rate than if the nation produced mostly ". " goods.

Capital; consumption

An increase in the price of one product but not the other:

Changes the slope of the budget line

International trade can increase:

Consumption possibilities

Suppose that Costa Rica is able to produce 50,000 pounds of coffee or 10,000 medical devices per day; Vietnam is able to produce 40,000 pounds of coffee or 5,000 medical devices per day. Which statement is true?

Costa Rica has a comparative advantage in the production of medical devices, while Vietnam has a comparative advantage in coffee production.

The range of output where long-run average costs tend to increase as production is increased are:

Diseconomies of sale

The way an economy allocates output to consumers is called

Distribution

Profits that are calculated using both implicit and explicit costs are called:

Economic profits

Which economist proposed that resources be managed by users rather then governments?

Elinor Ostrom

Because of the non exclusive characteristic of public goods, the ". " problem develops and the ". " must provide public goods.

Free rider; government or special interest groups

Who's theorem states that if transactions costs are near zero, a bargain struck between beneficiaries and victims of externalities will be efficient from a resource allocation perspective?

George Stigler's

Which is not considered a basic economic question?

How will the system accommodate change?

The cost incurred by a firm through the foregone earnings on capital invested is a

Implicit cost

Government restrictions on common property resources can

Improve allocative efficiency

When a new worker hired adds more to total output than the previous worker hired, you have:

Increasing marginal returns

Xiao has a budget of $150 to spend on T-shirts and jeans. The jeans she likes cost $56, and T-shirts cost $10. The combination of one pair of jeans and three T-shirts would fall:

Inside the budget line

The fact that you cannot measure the utility associated with reading an economics textbook:

Is a criticism of the use of marginal utility analysis to explain consumer behavior

The total product curve:

Is a relationship between total output and input

Which is NOT a characteristic of a public good?

It is a good, like a park pass, that a government entity sells to those who want the good

What statement describes a public good?

It is nonrival in consumption and nonexcludable

Which of these is a clear example of the law of diminishing marginal utility?

Julia eats three cookies. She takes 20 seconds to eat the first one, one minute to eat the second and 3 minutes to eat the third

Normal profits are

Just sufficient to keep a firm in business over the long run

Natural resources in the production process are called ". " , and their payment is called ". "

Land; rent

Which factor of production is usually assumed to be a variable in the short run?

Length of workers shifts

In general, air pollution is ". ", and greenhouse gases are ". ".

Localized; not localized

A big box store can sell identical items at a lower price than a local boutique because if the big box stores:

Lower average foxed costs

The main difference between marginal utility and total utility is that:

Marginal utility looks at the satisfaction of an additional unit, white total utility looks at the satisfaction from the total quantity consumed.

Global warming is an example of:

Market failure

Carbon dioxide emissions are considered to be a negative public good because:

No nobody can have less of them because somebody else has more; and nobody can be excluded from their destructive consequences

Astrid currently consumes only milk and honey. She drinks four quarts of milk priced at $3 per quart and gets 40 utils for the last quart. She consumes thirteen jars of honey at a price of $0.75 per jar and gets 7.5 utils for the last jar. Is Astrid maximizing her utility?

No she should consume more milk

Increasing opportunity cost occur along the production possibility frontier because:

Not all resources are equally well suited to produce all goods

The introduction of the tablet computer to the U.S. economy would best be represented with a production possibilities frontier as a:

Outward shift of the ppf

The Lake Wobegon effect refers to the tendency of people to think that they are above average in some capacity relative to others. The expression comes from Garrison Keillor's assertion that all of the children in the fictional town of Lake Wobegon are above average. This type of thinking is an example of:

Overconfidence

While walking home, you find a $20 bill on the street. This being your lucky day, you immediately treat yourself to dinner at PF Chang's rather than eating old leftover pizza from your fridge. This type of spontaneous behavior is best described as:

Overvaluing the present relative to the future.

In the theory of utilitarianism, economists assume that:

People will spend their income as to maximize their happiness

Hannah has $60 to spend on breadsticks and salad. If the price of salad decreases while the price of breadsticks stays the same, the budget line will:

Pivot outward

Free trade is known as a ". " game because ". "

Positive-sum; both parties to a transaction can achieve positive gains

Demand curves for products can be derived from marginal utility analysis by changing the _____ and plotting the resulting _____.

Price of one good; changes in consumption

Market-based environmental policies do not include:

Regulations

The tragedy of the commons applies to goods that are

Rival and nonexcludable

What is one of the risks involved in complete specialization?

Specialization in agricultural products can lead to devastation due to rapid fluctuations in the weather.

Costs that cannot be recovered are

Sunk costs

What is a key issue in explaining what appears to be irrational economic behavior in the field known as behavioral economics?

The behavior is predictable

Marginal product is

The change in total output, given a change in labor input

Which of these is NOT a benefit to a country that comes from trade based upon comparative advantage

The country reduces its risk of being dependent on trading partners for certain goods.

When people place a high value on ensuring a cleaner environment for future generations, what statement is true?

The future is discounted at a relatively low rate

Human capital is:

The improvement of labor capabilities from training, education, and apprenticeship programs.

A point on a nations production possibilities frontier indicates:

The resources are fully utilized in producing the given combinations of goods and services.

Which is an example of capital in the production process of an amusement park?

The roller coaster

Negative marginal returns are encountered when:

Total product falls as a firm hires more workers.

The socially optimal point of radiation pollution is:

When the marginal damage is equal to the marginal abatement costs

The socially optimal pollution level is:

Where the marginal benefits of pollution abatement equal its marginal costs

To gain from trade, a country should;

specialize in the commodity in which it has a comparative advantage.