AGEC 105 Final

TC=

TFC + TVC

AFC=

TFC/Q

The prisoner's dilemma demonstrates:

The dominant strategies followed by two players may lead to an equilibrium that is less not optimal for both players together

Jim's Shoe Shine Shop operates in a perfectly competitive market. If its marginal revenue is $5 per shine, then

The market price per shine is $5.

For a given supply curve, the more inelastic the demand for a good,

The more of an exile tax that is paid by buyers.

Which of the following factors would be the most useful in determining the structure of a market?

The number of firms in the market.

The US Postal Service is an example of a monopoly created by

government franchise

What an economic decision maker must give up when choosing one economic activity over others is known as the

opportunity cost

The law of supply says that

price and quantity supplied are directly related

A monopoly is a

price setter

Perfect planting and harvesting weather results in a record high crop of wheat. If wheat growers experience an increase in total sales revenue, then the demand for wheat must be

price-inelastic

Patents and copyrights

provide incentives for firms to engage in research and development

What are characteristics of monopolistic competition?

-There is a large number of sellers. -There are no significant barriers to entry or exit. -Sellers produce differentiated products. -There is a large number of buyers.

An agribusiness firm may undertake three alternatives: -buy cane sugar and manufacture various sugars and sweets, making a profit of $12 million or -buy corn and produce ethanol, making a profit of $16 million or -Buy wheat and produce breads, rolls, and pastries making a profit of $13 million The opportunity cost associated with the 3 choices is:

$13 million

Brittany provides manicures at the only salon in town. Her marginal cost is constant at $5 per client, her fixed cost is $25 per day, and she is able to do 8 manicures per day. On a given day, half of her clients are willing to pay $15 for a manicure; half are willing to pay only $10. If she charges $15 for those willing to pay a higher price and $10 to her other clients, then her maximum daily profits equal:

$35

Suppose that a firm sells 10 units at a price of $12 and 15 units at a price of $20. The marginal revenue is equal to:

$36

Suppose that Trey spends all of his income on vacation trips and textbooks. If the price of a trip is $200 and the price of a textbook is $50 , then the slope of his budget line (assuming vacation trips are measured on the vertical axis) would be

-0.25

If the price of food falls by 10 percent and the quantity sold increases by 5 percent, then the price elasticity of demand equals

-0.5, and demand is inelastic

If the price of Good X increases by 10% and that causes the quantity demanded of Good Y to decrease by 15%, then the cross-price elasticity between Good X and Good Y is ____, and the two good are ____.

-1.50; complements

Daniel's consumption of pizzas drops from 6 per week to 4 per week when the price rises from $9 to $11. His price elasticity of demand for pizza equals

-2.

Which of the following is a legal entry barrier established by government?

-Patents -Copyrights -Government franchises

If the price elasticity of demand for Cheer detergent is 3.0, then a

12 percent drop in price leads to a 36 percent rise in the quantity demanded.

The Dixie Chicken sells 2000 Freddie Burger platters per month at $3.50 each. The own price elasticity for this platter is estimated to be -1.30. If the Chicken increases the price of the platter by $1 how many platters will the Chicken sell?

1350

If bread costs $1 and meat costs $4 per pound, a consumer whose marginal utility of meat equals to 80 utils per pound is maximized only if the marginal utility per pound of bread equals

20 utils

Which of the following sets of goods are most likely to be complementary goods?

Baseballs and baseball gloves.

A family on a trip budgets $800 for sit-down restaurant meals and fast food. If the price of a fast food meal for the family is $20, how many such meals can the family buy if they do not eat at restaurants?

40

MC= ATC, when _____.

ATC= minimum

ATC=

AVC + (TFC/Q)

TVC=

AVC x Q

MC= AVC, when _____.

AVC= minimum

If buyers tastes and preferences shift in favor of a good, the result is:

An increase in demand

Which of the following would cause a leftward shift of the supply curve for computers?

An increase in the price of printed circuit boards used to build computers.

If the income elasticity of demand for a product is negative, then the good is labeled ______.

An inferior good.

We can predict the outcome of a two-player game as long as

At least one of the players has a dominant strategy.

Sam graduates from college, where he earned $2000 a year working part-time, and takes a job as an accountant, where he now earns $25,000 per year. After receiving his first paycheck, he gave away his bicycle and purchased a new car. Therefore:

Bicycles are not a normal good for Sam and are likely to be inferior.

The concept of network externalities is most relevant to purchasers of

Computer software

Price ceilings are primarily targets to help ____, while price floors generally benefit ____.

Consumers; producers

The Dixie Chicken sells 2000 Freddie Burger platters per month at $3.50 each. The own price elasticity for this platter is estimated to be -1.30. What will happen to the Chicken's monthly revenue?

Decrease by $925

The players in a two-person game are choosing between Strategy X and Strategy Y. If the second player chooses Strategy X, the first player's best outcome is also to select X. If the second player chooses Strategy Y, the first player's best outcome is to select X. For the first player, Strategy X is called a

Dominant strategy

For desert Mac has the choice between cheesecake and apple pie. The cheesecake has a marginal utility of 50 and a price of $5 and the apple pie has a marginal utility of 30 and a price of $3. Therefore, Mac should buy.

Either the apple pie or cheesecake, it makes no difference.

A nash equilibrium

Exists when each player in a game is taking its best action (dominant strategy) -- given the actions taken by the other players.

True or false: Marginal revenue, average revenue, and price are all equal for a monopolist

False

True or false: Price discrimination benefits monopoly and at the same time it hurts all consumers.

False.

What characteristic is common to perfect competition, monopolistic competition, and monopoly?

Firms maximize profits by producing where MR=MC.

Total cost is

Fixed cost plus variable cost.

All combinations of Coca-Cola and pototao chips that make Jose equally well off lie along a particular curve

Indifference curve

Joe's Garage operates in a perfectly competitive market. At the point where marginal cost equals marginal revenue, ATC= $20, AVC= $15, and the price per unit is $10. In this situation

Joe's Garage will shut down immediately.

If steel manufacturers expected that the price of steel was going to rise in the next six months, this would

Lead to a decreased supply of steel

The demand for necessity tends to be

Less elastic than the demand for a luxury

Intellectual property includes

Literary, artistic and musical works, and scientific inventions

A monopolist that does not price discriminate will set the output level where:

MR=MC

Economists assume that the goal of the firm is to

Maximize profits

In which market structure do firms consider the actions of their rivals when setting prices and output?

Oligopoly

What form of imperfect competition on the selling side is associated with automobile manufacturers?

Oligopoly

Charging different prices to different customers for the same good or service is known as

Price discrimination

_____ ______ is the key difference between monopolistic competition and perfect competition.

Product differentiation

What formula represents total profit for a perfectly competitive firm?

Q x (P - ATC)

Colleges and universities:

Regularly engage in price discrimination

The law of diminishing marginal utility

Says that marginal utility decreases as more of a good is consumed.

Suppose a local bookstore notices that a 3 percent decrease in book prices leads to a 3 percent increase in the number of books sold. Which of the following is true?

The store's sales revenue did not change.

Movie theaters charge lower prices to children and senior citizens because

Their elasticity of demand for movie tickets is higher.

What do supply and demand curves have in common?

They both show a relationship between quantity and price

True or False: Oligopolistic firms are the only ones that consider their rivals' actions when making decisions.

True

True or false: Externalities most often lead to market failures since socially efficient level of production cannot be achieved.

True

True or false: If the government wants to manipulate the equilibrium price, it will normally create a price floor or price ceiling; if the government wants to manipulate the equilibrium quantity, it will normally impose taxes or award subsidies.

True

True or false: When market is in equilibrium then both prices of goods and quantities bought and sold have settled into a state of rest.

True

True or false: A subsidy on abatement is an incentive-based approach to pollution control that helps to correct market failure and creates economic efficiency.

True.

True or false: If both the demand and supply curves for computers shift to the right, the price of computers may rise, fall, or remain unchanged.

True.

Which of the following is the best example of a variable cost?

Wages for hourly workers.

The vertical distance between ATC and AVC as output expands

average fixed cost

The fact that travel on buses fell as incomes increased in many cities suggests that

bus travel is an inferior good.

When the demand for a monopolistic output falls, the monopolistic will

charge a lower price

Economics is the study of

choice under conditions of scarcity

If the cross-price elasticity of demand between two good is negative, then the two goods are _____.

complements

High-income people will sometimes pay higher prices at convenience stores for goods that are available at discount stores. They do this because

crowded and understaffed discount stores impose higher time costs

An increase in the price of a good results in a

decrease in quantity demanded.

If the demand curve is a vertical line, then

demand is perfectly inelastic

An oligopoly is a market

dominated by a smaller number of strategically interacting firms

When individuals come together to buy and sell goods and services, they form a

market

The statement that "at 10 percent, the interest rate is too high for families to buy the home they deserve," is a

normative statement

If p > ATC for a perfectly competitive firm, then

the firm is making a profit

Most firms are not monopolies in the real world because

there are substitutes for most goods.

When there is a change in demand,

there is a shift of the demand curve