ECO Final

Supposed that a store sells candy bar for $0.89 for one and $1.50 for two. The marginal cost of the second candy bar is

$0.61

Zhen left a job as an accountant making $80,000 a year to open his own business. Zhen now owns his own accounting firm and employs three bookkeepers to help manage his accounts. His total revenue this year was $525,000. Because he is well known for his estate planning and expertise, he is also paid $16,000 per year by a local news station to answer tax questions on their weekly Ask the Accountant segment. His explicit costs for payroll, insurance, taxes, mortgage, and utilities are $390,000. Zhen's economic profit is

$71,000

Jen-Chi's Tea House produces 500 packets of tea per week. Jen-Chi's average variable cost is $14.10 per packet and his fix cost per week is $1,775. Jen-Chi's total cost per week is

$8,825 (Hint: $14.10 per packet)

Which of the following words BEST describes what economics is about

Choices

Which statement about incentives is TRUE?

Each person is motivated by different incentives

Formula of economic profit

Economic profit = (total) revenue - explicit costs - opportunity costs

Total variable cost

It is equal to variable cost. (VC). VC = Total cost (TC) - Fixed cost (FC)

Common property resource

It is natural resources owned and managed collectively by a community or society rather than by individuals.

Allocative efficiency

It occurs when individuals who desire a product the most (as measured by their willingness to pay) get those goods and Services.

contestable market

Markets that look monopolistic but where entry costs are low and the sheer threat of entry keeps prices low.

In the long run, which statement is TRUE for a monopolistically competitive firm?

Price equals average total cost (ATC), and MR = MC.

Which statement is TRUE for a monopolistically competitive firm operating in the long run?

Price is greater than marginal cost.

Barriers to entry allow

some monopolists to earn economic profits in the long run

All of these are used when positive externalities exist EXCEPT

tax

A characteristic that distinguishes monopoly from oligopoly is

the lack of close substitutes.

Thinking at the margin involves

Weighing the impact of one additional activity

Which is a NOT part of a basic setup to a "game"?

a judge

The law of diminishing marginal utility states that

as a consumer consumes more of a given product, the added utility from consuming additional unit declines.

In the short run

at least one factor of production is fixed

Which oligopolies act jointly as a monopoly, they are acting as a

cartel

Which of these is an example of third-degree price discrimination?

charging airline business passengers and leisure travelers different prices.

A Nash equilibrium occurs when

each player takes the best possible action, given the action of the other players.

Profits that are calculated factoring both implicit and explicit costs are called ________ profits.

economic

An important difference between perfect competition and a monopoly is that a monopoly

faces a downward-sloping demand curve, while the perfect competitor faces a horizontal demand curve

If negative externalities are taken into account in the market, then output will _________, and price will _________.

fall, rise

Which event would be an example of a common property resource market failure?

highway congestion

Efficiency within economics focus on

how well resources are used and allocated

Which of these is the BEST example of a common property resource?

lobsters in the ocean off the cost of Maine

Compared with firms in competition, firms in monopolistic competition in the long run

produce less output and sell at a higher price

All of these are barriers to entry into an industry EXCEPT

relatively high marginal tax rates

Joni received 8 units from drinking her first glass of water and 5 units from watching her favorite television show. Which statement is TRUE?

All else constant, Joni would prefer to drink a glass of water than watch TV.

_____ in an industry can be so large that demand is able to support only one firm.

Economies of scale

For purposes of utility analysis, marginal means

additional

Economic profit is accounting profit

minus implicit costs

Which industry is MOST likely to be an oligopoly?

steel

Bob loves to eat blue jellybeans. He gets 50 units of utility for the first jellybeans, 40 units of utility for the second, 30 units of utility for the third, 20 units of utility for the fourth, and 10 units of utility for the fifth. For the first jellybeans, the marginal utility is _________, and the total utility for eating five jellybeans is _______.

50, 150

Rent seeking

Firms hire lawyers or professionals to extent patent(特許) or a monopoly position. Using useless money.

x-inefficiency

Protected from competitive pressures, monopolies do not have to act efficiency. Ex. spending on luxury corporate jets.

__________ theorem states that if transaction costs are minimal (near zero), bargain struck between beneficiaries and victims of externalities will be efficient from a resource allocation perspective.

Ronald Coase's

Which statements does NOT deal with microeconomics?

The unemployment rate in the United States rose to 10% in 2009

Which act made monopolization or an attempt to monopolize a felony?

Sherman Act

Why is MR < P for a monopolist?

The monopolist is constrained by market demand, so in order to sell even one more unit of output, it must lower the price.

Which of these BEST describes second-degree price discrimination?

You upgrade your monthly data plan from 5GB to 10GB for an additional $10/month.

In using a marginal cost pricing rule to regulate a natural monopolist, losses would be sustained by the firm because the price is ________ cost.

below the average total

If a producer can have access a common property resource, marginal

cost is reduced

As abatement efforts increase (pollution is reduced), the marginal benefit from abatement ________, marginal cost of abatement _________.

decline, rise

Under monopolistic competition, entry of new firms typically causes price to _______ and profits to_________.

decrease, decrease

Monopolistically competitive markets and perfect competitive markets do NOT share which characteristic?

differentiated products

According to the utility-maximizing rule, a consumer maximizes utility when marginal utility per dollar spent is

equal for all goods.

A regulatory agency has imposed marginal cost pricing on a natural monopolist. We would expect that the natural monopolist will

eventually go out of business.

If firms in a monopolistically competitive industry are experiencing economic losses in the short run, some firms will _______ the industry, _________ demand for each individual firm until each firm earns a normal profit.

exit, increasing

The opportunity costs of attending college do NOT include

food expenditures

Which industry is MOST likely to be monopolistically competitive?

hair salon service

Monopolistic competition is like perfect competition in that they both

have numerous competitors.

The key difference between microeconomics and macroeconomics is microeconomics focuses on __________ while macroeconomics focuses on __________.

individual decisions, aggregate issues

The prisoner's dilemma has all of these characteristics EXCEPT

it is a sequential game

Perfect competitive firm charges a price that is ________ and produces _________ than a monopolist.

lower, more

It is easy to enter into and exit from which of these industrial structures?

monopolistic competition

Compared to a competitive industry, a monopolist is likely to achieve __________ producer surplus while generating __________ deadweight loss.

more, more

Spraying for mosquito control in a local community is an example of a public good because it is

nonrival and exhibit nonexcludability

A question whose answer is based on societal beliefs is a ________ question.

normative

To be effective, an environment policy must do all of these EXCEPT

reduce pollution to zero

Let MU equal marginal utility and P equal price. If the MU of root beer per dollar spent on a unit of root beer is greater than the MU of candy bars per dollar spent on a candy bar, the consumer

should spend more on root beer and less on candy bars.

Which of these is characteristic shared by both oligopolies and monopolies?

significant barrier to entry into the market

Which sequence describes the long-run adjustment process in a competitive market when firms experience short-run economic losses?

some firms exit, industry supply decreases, market price rises

As a person consumes more of a good or service, the person's _____________ will increase. At the same time, this person's __________ will decrease with each additional unit.

total utility, marginal utility

Profits are equal to the difference between _____ revenue and _____ cost.

total, total

Scarcity is BEST defined as when

unlimited wants exceed limited source

Marginal cost is equal to the change in

variable cost divided by the change in total output (VC/△Total output)