C 1
A buyer or seller that is unable to affect the market price is called
a price taker
A monopoly is a market structure that is characterized by
a single seller of a good or service that does not have a close substitute
Economics is the study of the choices people make to attain their goals, given their scarce resources.
Economics Definition
Which of the following is part of the economic analysis of discrimination?
Employers who discriminate pay an economic penalty imposed by market competition.
At the equilibrium, the price of capital is equal to
the marginal revenue product of capital
The monopolistically competitive firm sells ___ product and faces _____ demand curve
A DIFFERENTIATED A DOWNWARD SLOPING
Which of the factors listed below does NOT cause the demand curve for labor to shift?
A change in the wage
Which of the following factors shifts the labor supply curve?
All of the above
When the government imposes price floors or price ceilings, which of the following occurs?
All of the above occur Some win some lose there is a loss of economic efficiency
Which of the following terms best describes a state of the economy in which production reflects consumer preferences?
Allocative efficiency
Refer to the graph to the right. Which of the following represents the deadweight loss when the price of tea is $2.20 per cup?
Area C and E (the triangle) see screenshot
All of the following cost measures reach their minimum points when they are equal to the value of marginal cost, except one. What cost measure is the exception?
Average fixed cost
What is the cost measure equal to AFC +AVC?
Average total cost
Which of the following terms corresponds to a market in which buying and selling take place at prices that violate government price regulations?
Black Market
What are the sources of externalities and market failure?
Both A and B Incomplete property rights the difficulty of enforcing property rights in certain countries
What happens if a firm increases the number of workers that it hires?
Both the marginal product of labor and the marginal revenue product of labor decrease.
Trade-offs force society to answer questions such as what goods and services will be produced, how will the goods and services be produced, and who will receive the goods and services produced. Which of the following countries has an economy where the government makes these decisions?
Cuba
Most economists believe that only part of the gap between the wages of white males and the wages of other groups is due to discrimination. Economists believe that some of the gap is explained by which of the following factors?
Diffs of experience, diff prefereces for types of jobs diff ed ALL OF THE ABOVE
Which of the following statements is correct?
Even though the dollar value of the total benefits of reducing SO2 Emmitions was much greater than the costs, the SO2 cap-and-trade system had effectively ended by 2013
Which of the following are sometimes called accounting costs?
Explicit Costs
Consumer surplus and producer surplus measure the total benefit consumers and producers receive from participating in a market.
FALSE
Market failure refers to a situation in which a market ceases to exist.
FALSE
The market *supply curve* of labor is determined by adding up the wages for each worker at each quantity of labor supplied, holding constant all other variables that might affect the willingness of workers to supply labor.
FALSE
The market demand curve for labor is determined by adding up the wages for each worker at each quantity of labor demanded, holding constant all other variables that might affect the willingness of firms to hire workers.
FALSE
A tax is efficient if it imposes a large excess burden relative to the tax revenue it raises
False
In the case where transactions costs are zero, if the victims of pollution could legally enforce the right of their property not to be damaged, the amount of pollution reduction would increase.
False
Refer to the table below. Which of the following costs are implicit costs?
Foregone salary and interest
In a perfectly competitive industry with constant costs, the long-run supply curve will be
HORIZONTAL
When there are many people involved in attempting to reach an agreement, the transactions costs are often _______ than the net benefits from reducing an externality. In such cases, a private solution to an externality problem _______ feasible.
Higher; is not
On the diagram to the right, movement along the curve from points A to B to C illustrates
Increasing marginal opportunity costs
What is allocative efficiency?
It refers to a situation in which resources are allocated such that the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it.
Which of the following statements is correct
Legally enforcing trademarks can be difficult
Which of the following covers the study of topics such as inflation or unemployment?
Macroeconomics
primary reason debeers limited competition due to barriers of entry
Only debeers had access to most of the diamond mines
Discussions of the economic results of rent control and of federal farm programs would be considered ________ analysis, and discussions of whether rent control and the farm programs are good or bad policies would be considered ________ analysis.
POSitive; Normative
The relationship between the inputs employed by a firm and the maximum output it can produce with those inputs is called the
Production function
Which of the following terms best describes the result of the forces of competition driving the market price to the minimum average cost of the typical firm?
Productive efficiency
Productive efficiency occurs when a good or service is produced at the lowest possible cost. Allocative efficiency occurs when production is in accordance with consumer preferences.
Productive, Allocative
Advertising intends to shift demand curve TO THE RIGHT and make it more INELASTIC
RIGHT, INELASTIC
Refer to the graph on the right. After rent control is imposed, area A represents
SEE SCREENSHOT the producer surplus transferred from landlords to renters
One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls
Scarcity
Inefficient use of it
See Screenshot
Refer to the graph to the right. When 15,000 cups of tea are produced and consumed per month, which of the following is true?
See Screenshot. All of the above are true.
Which of the graphs above represents a typical average total cost curve?
See Screenshot. B. Big dipper not starting at Zero
In the diagram to the right, when the price is $45 per player, the amount of the shortage is 14 million players per month.
Shortage at 45
A perfectly competitive firm is losing money in the short run, and its price is less than its average variable cost. In order to minimize its losses in the short run, this firm should
Shut down
Refer to the graph to the right. After the government imposes a price of $3.50 in this market, area A represents
The consumer surplus transferred to producers A is the rectangle next to the triangle. See screenshot.
Refer to the graph to the right. A tax is imposed in the market for cigarettes that shifts the supply curve from S1 to S2. What area corresponds to the revenue collected by the government from the tax?
The dark grey area. See screenshot. CH 4 concept check
Which of the statements below best describes the marginal productivity theory of income distribution?
The distribution of income is determined by the marginal productivity of the factors of production that individuals own.
Refer to the graph to the right of the demand curve facing a firm in the perfectly competitive market for wheat. The fact that the demand curve is horizontal implies which of the following?
The firm can sell any amount of output as long as it accepts the market price of $7 (Horizontal demand curve. set price)
If marginal revenue slopes downward, which of the following is true?
The firm mist decrease its price to sell a larger quantity
If the market demand curve shifts to the right, how will a competitive firm's level of output change?
The firm will increase its output, and its profits will increase
What is the focus of a command-and-control approach to reducing pollution?
The government imposing quantitative limits on the amount of pollution firms are allowed to generate.
If we are considering further reductions in pollution, what rule should we follow to maximize the net benefit to society?
The marginal benefit from reducing another ton of pollution should be equal to the marginal cost.
Critics who claim that tradable emission allowances are equivalent to the government issuing licenses to pollute are ignoring the economic ideas that resources are scarce and trade-offs exist.
True
Economic surplus is the sum of consumer surplus and producer surplus.
True
In a perfectly competitive industry with INCREASING AVERAGE COSTS the long run supply curve will be
UPWARD SLOPING
Which costs are affected by the level of output produced?
Variable Costs
Let MRP equal the marginal revenue product of labor and W equal the wage rate. When should a firm hire more workers to increase profit?
When MRP > W
In perfect competition, long run equilibrium occurs when the economic profit is ZERO
ZERO
When an employer pays higher wages to compensate workers for unpleasant aspects of their jobs, which of the following is the employer offering?
a compensating differential
The primary difference between absolute and comparative advantage is
absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost.
In general, the term "ceteris paribus" means
all else equal.
Which of the following is a reason for choosing a salary system rather than the more profitable commission, or piece-rate system, of compensation?
all of the above.
Long Run Equilibrium in Perfect Competition results in
allocative and productive efficiency
Economies of scale exist as a firm increases its size in the long run because of all EXCEPT
as a firm expands its production its profit margin per unit of output increases.
Why do most firms in monopolistic competition typically make zero profit in the long run?
because the lack of entry barriers would compete away profits
Economists agree that a monopolistically competitive market structure
benefits consumers because firms to produce products that appeal to a wide range of consumers tastes.
The production possibilities frontiers depicted in the diagram to the right illustrate
both the labor force and capital stock increasing
What term describes teh actions of a firm intended to maintain the differentiation of a product over time
brand management
Suppose the price of a substitute to LCD televisions falls . What effect will this have on the market equilibrium for LCD TVs? The equilibrium price of LCD TVs will
decrease and the equilibrium quantity will decrease .
If labor demand is unchanged, an increase in labor supply will ________ the equilibrium wage and ________ the number of workers employed.
decrease;increase
economies of scale happen when the firm's long run average total cost ______ as output increases
decreases
Both buyers and sellers are price takers in a perfectly competitive market because
each buyer and seller is too small relative to others to independently affect the market price
Economic cost of production differ from accounting costs in that
economic cost adds the opportunity cost of a firm using its own resources while accounting cost does not.
A(n) entrepreneur is someone who operates a business, bringing together the factors of productionlong dash labor, capital, and natural resourceslong dash to produce goods and services.
entrepreneur
Which of the following correctly explains the effect of a variable on the labor demand curve?
f human capital increases , then the labor demand curve will shift to the right.
When there is a firm with a monopsony in the labor market, which of the following occurs?
fewer workers, lower wages
The Coase theorem states that
if transactions costs are low, private bargaining will result in an efficient solution to the problem of externalities
hat effect might the government have on oligopolies?
impose barriers to entry with a quota to limit foreign competition .
the law of diminishing returns applies
in the short run. In the long run you can change factors
If labor supply is unchanged, an increase in labor demand will ________ the equilibrium wage and ________ the number of workers employed.
increase; decrease
When the marginal product of labor is greater than the average product of labor, then the average product of labor must be
increasing
In monopolistic competition there is/are many sellers who each face a downward-sloping curve
is/are many sellers who each face a downward-sloping curve
monopolistically competitive firm in a long-run equilibrium produces where
its demand curve is tangent to its average total cost curve
The GPA you earn in a particular semester is your MARGINAL GPA, your cumulative GPA is your AVERAGE GPA
marginal;average
If discrimination makes it difficult for a member of a group to find employment in a particular occupation, his or her incentive to be trained to enter that occupation is reduced. Which of the terms below is most closely associated with this situation?
negative feedback loop
Which type of efficiency does a monopolistically competitive firm achieve in the long run?
neither allocative NOR productive
What trade-offs do consumers face when buying a product from a monopolistically competitive firm?
price GREATER THAN MC bur also have choices more suited to their tastes
A monopolistically competitive firm produces where _________, while a perfectly competitive firm produces where _________.
price is greater than marginal cost; price is equal to marginal cost
By paying college students a subsidy equal to the external benefit from a college education, the government will cause students to internalize the externality. That is, the external benefit from a college education will become a
private benefit received by college students, and the demand curve for college educations will shift up.
Germany has a market economy. As such, Germany 's economy (relative to centrally planned economies) tends to result in
productive efficiency and allocative efficiency but not necessarily equity.
How do externalities in the production of electricity result in market failure
provide too much electricity
As output increases, the vertical distance between average total cost and average variable cost curves gets SMALLER and equals AFC
smaller, average fixed cost
If in a perfectly competitive market, firms are facing a price below their average total cost but above average variable cost at the profit maximizing output then
some existing firms will exit the industry
Factors not under a firms control
such as terrorist attacks affect profitability
The term tax incidence refers to
the actual division of the burden of a tax between buyers and sellers in a market
The private benefit is ________, while the social benefit is ________.
the benefit received by the consumer of a good or service; the total benefits from consuming the good or service
As the wage increases,
the demand for labor curve does not shift, but the quantity demanded of labor decreases
Which of the following is the definition of consumer surplus?
the difference between the highest price a consumer is willing to pay and the price the consumer actually pays
Which of the following is the definition of producer surplus?
the difference between the lowest price a firm would have been willing to accept and the price it actually receives
Opportunity cost is
the highest valued alternative that must be given up to engage in an activity.
Which of the following terms refers to the lowest cost at which a firm is able to produce a given level of output in the long run when no outputs are fixed?
the long run average cost curve
When a competitive market is in equilibrium, what is the economically efficient level of output?
the output level where marginal cost is equal to marginal benefit
Economic rent
the price of a factor of production that is in fixed supply
Property rights are
the rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it.
When a positive technological change occurs,
the same output can be produced with fewer inputs. B. more output can be produced from the same inputs. C. Either (a) or (b).
A positive externality causes
the social benefit from consuming the good to be greater than the private benefit.
According to the law of supply,
there is a positive relationship between price and quantity supplied. as the price of a product increases, firms will supply more of it to the market.
According to the law of demand
there is an inverse relationship between price and quantity demanded.
Refer to the graph to the right. The graph shows the market demand for satellite television service. If the market price is $81, which consumers receive consumer surplus in this market?
those willing to pay more than $81
Which of the following shows a negative nonlinear relationship? (assume values of x greater than 0 )
y=70/x
Is zero economic profit inevitable in the long run for a monopolistically competitive firm?
No, a firm could try to continue making a profit in the long run by reducing production costs and improving its products.