Econ 102 final

You decide whether to eat one more slice of pizza based on how hungry you feel. This statement best represents this economic concept:

"How much" is a decision at the margin.

If a firm produces 10 units of output and incurs $30 in average variable cost and $35 in average total cost, total fixed cost is:

$50

Mountain River Adventures offers whitewater rafting trips down the Colorado River. It costs the firm $100 for the first raft trip per day, $120 for the second, $140 for the third, and $160 for the fourth. If the market price for a raft trip was $120 but has now increased to $150, the gain in producer surplus is equal to:

$70.

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded does not change, then the price elasticity of demand (using the midpoint method) is

0

If Farmer Sam MacDonald can produce 200 pounds of cabbages and no potatoes or no cabbages and 100 pounds of potatoes and if he faces a linear production possibility frontier for his farm, the opportunity cost of producing an additional pound of cabbage is ________ pound(s) of potatoes.

1/2

If Farmer Sam MacDonald can produce 200 pounds of cabbages and no potatoes or no cabbages and 100 pounds of potatoes and if he faces a linear production possibility frontier for his farm, the opportunity cost of producing an additional pound of potatoes is ________ pound(s) of cabbage.

2

If the price of burritos increases from $4 to $6 and customers decrease their consumption from 20 to 10 burritos, what is the price elasticity of demand (using the midpoint method)?

5/3

A popular train station has free parking for commuters who take the train. This often results in many people being unable to find a parking spot and missing their train. Which of the following plans would most likely help to solve this parking problem?

All commuters are required to pay an hourly price for parking.

The "perfect information" assumption of perfect competition includes all of the following except one. Which one?

Consumers can anticipate price changes.

Which of the following is not an assumption that economists make when using the model of perfect competition?

Each firm sets its price equal to its average total cost.

In a single day, George can bake 10 cakes and Greta can bake 5 cakes. We know that:

George has an absolute advantage in baking cakes.

I. Under perfect competition, an upward shift in the marginal cost curve (perhaps due to a higher price for a variable input) also shifts the average variable cost curve upward. II. Under perfect competition., an upward shift in the marginal cost curve (perhaps due to a higher price for a variable input) reduces firm output but may increase firm profits.

I is true and II is false.

In 1992, the Occupational Safety and Health Authority passed the Bloodborne Pathogens Standard (BBP), which regulates dental office procedures. This regulation is designed to minimize the transmission of infectious disease from patient to dental worker. The effect of this regulation was both to increase the cost of providing dental care and to ease the fear of going to the dentist as the risk of contracting an infectious disease. Refer to Scenario 2.2. Under what circumstances will the equilibrium level of output of dental care remain the same?

If both demand and supply shift by the same magnitude.

Which of the following statements is true?

It is possible to have an absolute disadvantage in doing something but still have a comparative advantage in the same thing.

Julie is getting ready for final exams. She has three exams during the first three days of the exam period. To prepare, she has outlined a schedule that includes reviewing for her first exam on one day, her next exam on the following day, and her third exam on the third day. On each day, she has also allocated some time when she can watch TV or basically do nothing. Which is the best explanation for why Julie provides some time for leisure?

Julie realizes that there are benefits to leisure time that outweigh the costs of constant studying.

In a constant-cost industry, price always equals

LRMC and minimum LRAC.

If they spend all night writing computer programs, Laurence can write 10 programs while Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 while Carrie Anne can make 4. Given this information and supposing Laurence and Carrie Anne have constant opportunity costs, we know that:

Laurence has an absolute advantage in both programs and sunglasses.

Which of the following is NOT a necessary condition for long-run equilibrium under perfect competition?

Prices are relatively low.

Which of the following best describes the price elasticity of demand?

The price elasticity of demand measures the responsiveness of the change in the quantity demanded to a change in the price.

If total surplus falls, which of the following must have occurred?

There was a decrease in demand or a decrease in supply.

The price elasticity of demand for milk has been estimated to be somewhere between 0.49 and 0.63. If a new system of feeding and milking cows yields a 15% increase in the production of milk throughout the country, how will that affect total expenditures on milk, all other things equal?

Total expenditures will fall

If the estimated price elasticity of demand for foreign travel is 4, then:

a 20% decrease in the price of foreign travel will increase the quantity demanded by 80%.

If an economy has to sacrifice only one unit of good X for each unit of good Y produced throughout the relevant range, then its production possibility frontier has:

a constant, negative slope.

A price control is:

a legal restriction on how high or low a price in a market may go.

Consider gas stations where customers pay inside before they pump gasoline. If they introduce a new technology where customers pay at the pump, thus decreasing production costs, there will be:

a shift to the right in the supply curve and lower gas prices.

Which of the following would result in a movement along the demand curve?

an increase in the number of suppliers

If Poland decides to increase the production of steel—and decrease the production of vodka—the bowed-out production possibility frontier would suggest that there will be ________ opportunity cost of producing more steel.

an increasing

If all firms in an industry are price-takers, then:

an individual firm cannot alter the market price even if it doubles its output.

Firms often use patent rights as a:

barrier to entry.

Producers may supply a good with an inefficiently low quality if the government imposes a(n):

binding price ceiling.

If a perfectly competitive firm is producing a quantity where P < MC, then profit:

can be increased by decreasing production.

Price controls:

can result in inequitable outcomes.

A Japanese steel firm sells steel in the United States and in Japan. Since the United States buys steel from a number of sources, the U.S. demand for Japanese steel is more price-elastic than the Japanese demand for Japanese steel. If the Japanese steel firm wishes to maximize its profits, it should:

charge a lower price in the United States and a higher price in Japan.

We note that the price of pretzels increases and the demand for tortilla chips decreases, so we can assume that these two goods are:

complementary goods

The long-run average total cost of producing 100 units of output is $4, while the long-run average cost of producing 110 units of output is $4. These numbers suggest that the firm producing this output is experiencing:

constant returns to scale.

Critics of the National Collegiate Athletic Association (NCAA) argue that the NCAA monopolizes college athletics and prevents student-athletes from earning money while in college. If this is true, what type of entry barrier does the NCAA have?

control of a scarce resource or input

A monopoly responds to a decrease in marginal cost by ________ price and ________ output.

decreasing; increasing

The market price of airline flights increased recently. Some economists suggest that the price increased because there has been an increase in the number of business travelers. They believe that in the market for flights:

demand increased

The best example of making a choice at the margin is

eating another slice of pizza.

The process observed when an economy's production possibility frontier is shifted outward is:

economic growth

In long-run competitive equilibrium, a firm that owns factors of production will have an

economic profit = $0 and accounting profit > $0.

Rice and potatoes are substitutes. If the price of rice rises and there is a bumper crop of potatoes, in the market for potatoes one would expect the:

equilibrium price to rise, fall, or stay the same and equilibrium quantity to rise.

If the opportunity cost of manufacturing automobiles is higher in the United States than in Britain and the opportunity cost of manufacturing airplanes is lower in the United States than in Britain, then the United States will:

export airplanes to Britain and import automobiles from Britain

A ________ is an organization that produces goods or services for sale.

firm

When markets fail:

government intervention may help

A shirt manufacturer sold 10 dozen shirts per day when the price was $4 per shirt but sold 15 dozen shirts per day when the price was $3 per shirt. The price elasticity of demand (using the midpoint method) is:

greater than 1 but less than 3.

Roommates Sarah and Zoe are hosting a Halloween party and have to make food for their guests and costumes for themselves. To finish both tasks as quickly as possible, Sarah and Zoe know that each of them should focus on just one task, but they don't know who should do what. To decide which roommate should do the cooking, Sarah and Zoe should determine which roommate:

has the comparative advantage in cooking.

Manny is attending college and majoring in economics. Manny is improving his

human capital

Which of the following methods of reducing pollution is likely to be most effective?

imposing a tax per unit of pollution generated

An increase in which of the following determinants of demand will have an ambiguous (uncertain) effect on price?

income

Suppose the quantity of nursing services demanded exceeds the quantity of nursing services supplied. The nursing wage rate will:

increase

The phrase "gains from trade" refers to the:

increase in total output that is realized when individuals specialize in particular tasks and trade with each other.

If Marie Marionettes is operating under conditions of diminishing marginal product, the marginal costs will be:

increasing

A monopolist responds to an increase in demand by ________ price and ________ output.

increasing; increasing

All points inside the production possibility frontier represent

inefficient production points.

All points outside the production possibility frontier are:

infeasible production points.

Consider a production possibility frontier for Iraq. If in 2014 Iraq's resources are not being fully utilized, Iraq will be somewhere ________ of its production possibility frontier.

inside

In movement along a production possibility frontier, the opportunity cost to society of getting more of one good

is measured by the amount of the other good that must be given up.

If a good is very inexpensive, but it is a necessity, you would predict that demand for the good is:

is price-inelastic.

At the profit-maximizing level of output, marginal profit

is zero

Farmers in developing countries want the United States to reduce the subsidies that it gives to American farmers because subsidized agricultural products from the United States:

lead to global agricultural surpluses and lower prices for developing country farmers.

One characteristic of a perfectly competitive market is that there are ________ sellers of the good or service.

many

For a firm in a perfectly competitive market:

marginal revenue equals market price.

Market failure refers to a situation in which:

markets fail to reach an efficient outcome.

The existence of government intervention often suggests that:

markets may not be able to provide for efficient results all of the time.

If a perfectly competitive firm is producing a quantity where P = MC, then profit:

maximized

The cost of sensors used in making digital cameras falls, while a successful ad campaign makes digital cameras more fashionable. As a result, the equilibrium relative price of digital cameras ________ and the equilibrium quantity ________.

may increase, decrease, or stay the same; increases

At the long-run quantity of output, where the LRATC curve is at its lowest point, it is tangent to the ________ of the corresponding short-run average total cost curve.

minimum

Suppose that the market for haircuts in a community is a perfectly competitive constant-cost industry and that the market is initially in long-run equilibrium. Subsequently, an increase in population increases the demand for haircuts. In the long-run, we expect that:

more firms will enter the market, driving the price of haircuts down and the profits of individual firms back down to zero.

The slope of a typical production possibility frontier is:

negative

According to economists, equilibrium exists when:

no individual has an incentive to change his or her behavior.

In the short run, a perfectly competitive firm earning negative economic profit is

on the downward-sloping portion of its ATC curve.

The slope of a long-run average total cost curve exhibiting decreasing returns to scale is:

positive

The slope of a long-run average total cost curve exhibiting diseconomies of scale is:

positive

In perfect competition:

price and marginal revenue are the same.

Inefficient allocations of goods to consumers often result from:

price ceilings

If a local California avocado stand operates in a perfectly competitive market, that stand owner will be a:

price-taker

The production possibility frontier is bowed out from the origin because:

resources are not equally suited for the production of both goods

Increases in resources or improvements in technology will tend to cause a society's production possibility frontier to:

shift outward to the right

If the absolute value of the price elasticity of demand is greater than 1, then:

small percentage changes in the price will lead to much larger changes in the percentage change in the quantity demanded.

Suppose the cross-price elasticity of demand for butter and margarine is equal to 0.96 but the cross price elasticity for water and lemons is -0.13. This means that butter and margarine are ________ while water and lemons are ________.

substitutes; complements

Equilibrium quantity will always increase if:

supply and demand both increase.

The perfectly competitive model assumes all of the following except:

that firms attempt to maximize their total revenue.

If a monopoly is forced to charge a price equal to marginal cost:

the deadweight loss will decrease.

The market for milk is initially in equilibrium. Milk producers engage in an advertising program to encourage milk drinking, which succeeds in shifting consumer tastes toward drinking milk. More milk producers enter the market. Standard demand and supply analysis tells us that:

the equilibrium quantity of milk will rise, but we can't determine how the equilibrium price will be affected.

Specialization and trade usually lead to:

the exchange of goods and services in markets.

A production possibility frontier that is a straight line sloping down from left to right would suggest that:

the opportunity costs of the products are constant.

If the price of corn is rises, we would expect:

the quantity of corn supplied to rise.

The total surplus generated in a market is:

the sum of consumer surplus and producer surplus.

If equilibrium exists:

there will be no remaining opportunities for individuals to make themselves better off.

If countries engage in international trade:

they will be consuming outside their production possibility frontiers.

Marginal cost is the change in:

total cost resulting from a one-unit change in output.

Average total cost is the ratio of:

total cost to the quantity of output.

In the long-run, all costs are:

variable

Margo spends $10,000 on one year's college tuition. The opportunity cost of spending one year in college for Margo is:

whatever she would have purchased with the $10,000 and whatever she would have earned had she not been in college

The best measure of the opportunity cost of any choice is

whatever you have given up to make that choice, even if no monetary costs are involved.

Economists use the term equilibrium to describe:

when no individual would be better off taking a different action or when no individual has an incentive to change his or her behavior.

When there is a new medical report extolling the health advantages of grapefruit, total producer surplus in the grapefruit market:

will increase.

The student center on campus has burritos, bagels, or burgers for lunch, and they all cost the same. You decide to have a burger today, but if they were out of burgers, you would have bought a bagel. Your opportunity cost of the burger is:

your enjoyment of the bagel.

The local Taco Hut charges the same price for everything on its menu: $3 will buy a taco, a burrito, or nachos. You buy the taco and think that if you had not purchased the taco, you would have purchased the burrito. The opportunity cost of the taco is:

your enjoyment of the burrito.