ECO 201 Microeconomics Final

The concept of derived demand of labor means that

demand for labor is created from a demand for a good or service

In the investment industry, the principle of _______________ supports investing in a wide range of companies to reduce the level of risk.

diversification

Monopolistic competition is different from perfect competition in that monopolistically competitive markets

involves non-price competition in the form of differentiated products

Technology and entrepreneurship are two factors of what?

production

Which of the following is a non excludable product?

radio broadcasting

If a perfectly competitive firm is producing output at a point where marginal revenue is equal to marginal cost, then it should

stick with that level of production in order to maximize profits.

Which of the following is a public good?

street lighting

Because of our limited money, time, and effort, we are best off when we allocate things

by constantly assessing the opportunity costs of our choices.

Assuming that the monopolistic competitor faces the demand and costs depicted below and finds the profit maximizing level of output, what will be the firm's revenue?

$144

Refer to the figure below. If the firm is producing the level of output that maximizes profit, its total variable cost of production is ________.

$360

The new "Hungry for Apples?" campaign has been a resounding success, so that the quantity demanded is now 100% than before the ad campaign. If the curve above represents demand after the campaign, what was the original quantity demanded when price was $4.60?

20`

Analyze the following diagram:If the price was $2.90 per kilogram of oranges, and the price fell by $2.50, how does the quantity of oranges demanded change?

255 thousand kilograms to 275 thousand kilograms

A government decides to set a price ceiling on eggs so that eggs are affordable to the poor. The conditions of demand and supply are given in the table below. What will the excess supply or the shortage be if the price ceiling is set at $2.00?

3,000 shortage

Using the graph below, if Q = 5, Total Cost =

30

At a price of $16, quantity demanded is ________, quantity supplied is ________; therefore excess ________ has occurred.

5, 35; supply

If market share for five cleaning service companies are 8%, 13%, 6%, 25%, and 48%, the four firm concentration ratio would be ________.

94

Which of the following is an example of negative externalities for Ari?

A power company builds a dam downstream from Ari's property which causes Ari's property to flood in case of heavy rain.

Why would businesses choose to reduce pollution?

Because their marginal cost is lower or equal to the marginal benefit of the reduction.

What are the main differences between traditional economics and behavioral economics?

Behavioral economics does not take as a given that decision makers are rational.

Which of the following statements is true based on what we know about the properties of utility?

Brooklyn receives 10 utility from drinking one coffee and 15 utility from eating a burger. Therefore, Brooklyn enjoys burger more than coffee.

Consider the Production Possibility Frontier for country X producing 2 groups of goods, MP3 players and watches. The opportunity cost of one additional watch is

Greater at B than at C

As the consumption of a good increases, what happens to utility?

Increased consumption lowers marginal utility, but may raise total utility.

What do antitrust laws help guard against?

Mergers that have the potential to hurt consumers.

In the United States, the official definition of the poverty line traces back to a single person: ________, whose idea was to ________.

Mollie Orshansky; define a poverty line based on the cost of a healthy diet

As the Corner Coffee Shop becomes more popular and sells more coffee, which of the following cost is more likely to increase?

Spending on coffee beans and sugar because they are variable costs.

Yani just graduated from college and moved back to his hometown in Connecticut. He is offered a job at the large insurance firm that employs most of the town. The salary they offer him is much lower than he hoped. Since the insurance firm is a monopsony in his town, when Yani writes a counter wage offer, what will most likely happen?

The firm will reject Yani's counter salary number and hire someone else.

Treasury bonds are issued by the federal government through the _____________________ .

U.S. Department of the Treasury

If the price elasticity of supply was calculated as 0.40 for a product and the price increases by 12%, what would happen to the quantity supplied?

WRONG: Quantity supplied would increase by 8%.

What happens to total revenue (TR) if the price decreases on a product with demand that is price elastic?

WRONG: Total revenue will fall.

Recall that in perfect competition a firm's demand curve is a horizontal line drawn at the market price level and that P=MR=D. Assuming the firm chooses the level of output that maximizes profit, what is total profit at that output level?

WRONG: $288

How is the total revenue calculated in a perfectly competitive firm?

WRONG: Quantity of goods sold minus the production costs.

When firms exit a perfectly competitive market, what is the impact on prices?

WRONG: There is no impact on prices.

If a market situation arises where the externality is so dangerous in even small quantities, which of the following strategies would be the most efficient?

WRONG: pollution tax

An Uber driver faces costs for driving that include sunk costs like insurance that contribute to the average cost per mile of $.50. Yet when a rider offers to pay less than that for a ride, the driver agrees because

WRONG: the driver needs to cover all sunk costs to be better off by accepting the offer.

A Lorenz curve shows

WRONG: what percentage of a population has incomes below the poverty line.

Which of the following are examples of how patents are not always a perfect way to encourage innovation

WRONG:patents in the U.S. do not last very long.

What is the environment under which externalities exist?

When private benefits are estranged from social benefits.

Firms in an oligopoly typically act more like ________.

competitors

Say the town of Manchester has regulated its water utility so that it covers the cost of its production for its water and also adds a 20% profit to the price it charges its customer. What would this regulation example be considered?

cost-plus regulation

A monopoly sees the demand curve as ________ while a perfectly competitive firm perceives its demand curve as ________.

downward-sloping; horizontal

Market economies are based on private enterprise, which means

economic decision-making happens through markets.

The term ________ describes a situation where as the quantity of output rises, but the average cost of production falls.

economies of scale

Demand is ________ if a large change in price causes a small change in demand.

inelastic

An individual who wants others to pay for public goods, but plans to use those goods without paying for them, is referred to as a ________.

free rider

One argument against government intervention is if society wishes a ________ level of economic output it must also accept a ________ degree of inequality.

high:high

George consumes only two goods, pizza and compact discs. Both are normal goods for George. Suppose the price of pizzas decreases. George's consumption of compact discs will

increase due to the income effect.

Microeconomics

is concerned with

In the ____________, households work and receive payment from firms.

labor market

When workers organize themselves so they can collectively negotiates with employers as a group over wages and working conditions it is known as a(n) ________.

labor union

Which of the following is most likely to be a monopoly?

local electricity distributor

Perfect competition displays allocative efficiency because the social benefits of additional production, as measured by the price that people are willing to pay, are in balance with the ________ to society of that production.

marginal costs

When there is less quantity demanded in market than the quantity at the bottom of the long-run average cost curve, a ________ occurs.

natural monopoly

The ownership in a company is represented by ________________ and those who are legally recognized as having ownership in a company are called _____________.

ownership of shares in the company's stock; shareholders

Firms operating in a ________ market, sell their product in a market with other firms who produce identical or extremely similar products.

perfectly competitive

Demand "A" represents a demand curve that is (horizontal)

perfectly elastic.

A new skateboard company, "Sk8ters" opens its doors across the street from the town's existing skateboard company "Skate House". Skate House has a big clearance sale that lasts for four month and drastically undercuts its prices. After four months of dismal sales Sk8ters closes its doors unable to sell its products or compete with Skate House's prices. In the fifth month Skate House raises its prices back to regular prices. This is an example of what type of restrictive practice?

predatory pricing

Considering the graph for microchips, if prices increase from $150 to $200, suppliers will want to

produce almost 70 more microchips.

Danielle owns 10 acres of property, and rents it to a local sheep rancher for $10,000/year. She intends to use this money to expand her own business by building a mall for $4 million. Danielle's implicit costs are

the foregone rent and the cost of the mall.

Countries or individuals will keep trading computers for phones until

the value of each additional phone and computer is equal for both countries or individuals.

The ________ takes place when the the price of the firm's output is multiplied by the marginal product of an added worker.

value of the marginal product of labor