Econ 2010 exam 2
Allocative Efficiency
marginal benefit is equal to the marginal cost
price discrimination
the business practice of selling the same good at different prices to different customers
economic profit
total revenue minus total cost, including both explicit and implicit costs
Arbez: to get 120 Wine, give up 30 Cheese, i.e. for 1 additional wine, give up 1/4 (30/120) cheese.
1 Wine = 1/4 Cheese
What is the Opportunity Cost of wine in Arboc and in Arbez? Arboc: to get 40 Wine, give up 20 Cheese, i.e. for 1 additional wine, give up ½ (20/40) cheese.
1 Wine = ½ Cheese
Refer to the data for a non discriminating monopolist. This firm will maximize its profit by producing A. 3 units B. 4 units C. 5 units D. 6 units Answer:
(B) MR =MC
constant cost
-Entry and exit doesn't affect LR ATC
Short Run shut down vs stay open
-Not shutting down forever -low prices can be temporary -switch on and off production depending on market price
increasing cost industry
-The cost of supplies increases when the industry size increases
decreasing cost
-The decrease in cost may reflect lower input cost as the industry grow due to the economies of scale
Pure Competition Characteristics
-Very large numbers of sellers -Standardized product -"Price takers" -Easy entry and exit
marginal revenue = marginal cost rule
-losses at a minimum MR = MC -Still product because MR > minimum AVC
Arbez: to get 30 Cheese, give up 120 Wine, i.e. for 1 additional Cheese, give up 4 (120/30) cheese.
1 Cheese = 4 Wine
Gini Ratio
A measure of income inequality. As the Gini ratio gets closer to zero, the more equally the income is distributed. As the Gini ratio gets closer to one, the more unequally the income is distributed. A/A+B=[
In 2010, the wealthiest 1 percent of U.S. households held about ____ percent of U.S. household wealth. A) 35. B) 77. C) 23. D) 32.
A) 35.
Suppose the income elasticity of demand for toys is +2.00. This means that: A) a 10 percent increase in income will increase the purchase of toys by 20 percent. B) a 10 percent increase in income will increase the purchase of toys by 2 percent. C)a 10 percent increase in income will decrease the purchase of toys by 2 percent. D) toys are an inferior good.
A) A 10 percent increase in income will increase the purchase of toys by 20 percent.
Which of the following is a short-run adjustment? A) A local bakery hires two additional bakers. B) Six new firms enter the plastics industry. C) The number of farms in the United States declines by 5 percent. D) BMW constructs a new assembly plant in South Carolina.
A) A local bakery hires two additional bakers.
Which of the following statements applies to a purely competitive producer? A) It will not advertise its product. B) In long-run equilibrium it will earn an economic profit. C) Its product will have a brand name. D) Its product is slightly different from those of its competitors.
A) It will not advertise its product.
Which of the following statements applies to a purely competitive producer? A) It will not advertise its product. B) In long-run equilibrium it will earn an economic profit. C) Its product will have a brand name. D) Its product is slightly different from those of its competitors.
A) It will not advertise its product.
Oligopolistic industries are characterized by: A) a few dominant firms and substantial entry barriers. B) a few dominant firms and no barriers to entry. C) a large number of firms and low entry barriers. D) a few dominant firms and low entry barriers.
A) a few dominant firms and substantial entry barriers.
Oligopolistic industries are characterized by: A) a few dominant firms and substantial entry barriers. B) a few dominant firms and no barriers to entry. C) a large number of firms and low entry barriers. D) a few dominant firms and low entry barriers. Answer: (A)
A) a few dominant firms and substantial entry barriers.
Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in revenues in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its: A) accounting profits were $100,000 and its economic profits were zero. B) accounting losses were $500,000 and its economic losses were zero. C) accounting profits were $500,000 and its economic profits were $1 million. D) accounting profits were zero and its economic losses were $500,000.
A) accounting profits were $100,000 and its economic profits were zero.
The law of diminishing returns indicates that: A) as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point. B) because of economies and diseconomies of scale a competitive firm's long-run average total cost curve will be U-shaped. C) the demand for goods produced by purely competitive industries is downsloping. D) beyond some point the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction.
A) as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.
The demand for a product is inelastic with respect to price if: A) consumers are largely unresponsive to a per unit price change. B) the elasticity coefficient is greater than 1. C) a drop in price is accompanied by a decrease in the quantity demanded. D) a drop in price is accompanied by an increase in the quantity demanded.
A) consumers are largely unresponsive to a per unit price change.
According to economists Krueger and Perri: A) despite the fact that income inequality has increased in recent decades, consumption inequality has remained relatively constant. B) increases in income inequality over recent decades understate the growth in consumption C) both income and consumption inequality have increased at approximately the same rate over recent decades. D) both income and consumption are more equally distributed than they were 30 years ago.
A) despite the fact that income inequality has increased in recent decades, consumption inequality has remained relatively constant.
According to economists Krueger and Perri: A) despite the fact that income inequality has increased in recent decades, consumption inequality has remained relatively constant. B) increases in income inequality over recent decades understate the growth in consumption inequality. C) both income and consumption inequality have increased at approximately the same rate over recent decades. D) both income and consumption are more equally distributed than they were 30 years ago.
A) despite the fact that income inequality has increased in recent decades, consumption inequality has remained relatively constant.
A monopsonist pays a wage rate that is: A) less than the MRP of labor. B) equal to the firm's marginal resource (labor) cost. C) equal to the MRP of labor. D) greater than the MRP of labor.
A) less than the MRP of labor.
Summer and Winter resorts will often shut down temporarily because: A) revenues for their output temporarily fall below their variable costs of production. B) fixed costs temporarily rise, making production unprofitable. C) variable costs for pumping oil and operating resorts fluctuate significantly. D) government regulations require seasonal shutdowns for maintenance purposes.
A) revenues for their output temporarily fall below their variable costs of production.
A nation's production possibilities curve might shift to the right as a result of: A) technological advance. B)decreases in the size of the labor force. C) the depletion of its soil fertility due to overplanting and overgrazing. D) investing in fewer capital goods.
A) technological advance.
For which of the following income-maintenance programs is aggregate spending the greatest? A) Medicare. B) Social Security. C) Unemployment compensation. D) TANF.
B) Social Security.
If a regulatory commission wants to provide a natural monopoly with a fair return, it should establish a price that is equal to: A) minimum average fixed cost. B) average total cost. C) marginal cost. D) marginal revenue.
B) average total cost.
The kinked-demand curve model of oligopoly: A) assumes a firm's rivals will ignore a price cut but match a price increase. B) embodies the possibility that changes in unit costs will have no effect on equilibrium price and output. C) assumes a firm's rivals will match any price change it may initiate. D) assumes a firm's rivals will ignore any price change it may initiate.
B) embodies the possibility that changes in unit costs will have no effect on equilibrium price and output.
The kinked-demand curve model of oligopoly: A) assumes a firm's rivals will ignore a price cut but match a price increase. B) embodies the possibility that changes in unit costs will have no effect on equilibrium price and output. C) assumes a firm's rivals will match any price change it may initiate. D) assumes a firm's rivals will ignore any price change it may initiate.
B) embodies the possibility that changes in unit costs will have no effect on equilibrium price and output.
A purely monopolistic industry: A) has no entry barriers. B) has a downward sloping demand curve. C) produces a product or service for which there are many close substitutes D) earns only a normal profit in the long run.
B) has a downward sloping demand curve.
A purely monopolistic industry: A) has no entry barriers. B) has a downward sloping demand curve. C) produces a product or service for which there are many close substitutes. D) earns only a normal profit in the long run.
B) has a downward sloping demand curve.
To economists the main difference between the short run and the long run is A) the law of diminishing returns applies in the long run, but not in the short run. B) in the long run all resources are variable, while in the short run at least one resource is fixed. C) fixed costs are more important to decision making in the long run than they are in the short run. D) in the short run all resources are fixed, while in the long run all resources are variable.
B) in the long run all resources are variable, while in the short run at least one resource is fixed.
To economists the main difference between the short run and the long run is that: A) the law of diminishing returns applies in the long run, but not in the short run. B) in the long run all resources are variable, while in the short run at least one resource is fixed. C) fixed costs are more important to decision making in the long run than they are in the short run. D) in the short run all resources are fixed, while in the long run all resources are variable.
B) in the long run all resources are variable, while in the short run at least one resource is fixed.
Entrepreneurs in purely competitive industries: A) have no incentive to innovate because in the long run, they will earn no economic profits. B) innovate to lower operating costs and generate short-run economic profits. C) utilize pricing strategies to generate short-run economic profits. D) rarely try to innovate because of a lack of financial resources.
B) innovate to lower operating costs and generate short-run economic profits.
The greater the area between the Lorenz curve and the diagonal in the Lorenz curve diagram, the: A) smaller is the Gini ratio and the greater is the degree of income inequality. B) larger is the Gini ratio and the greater is the degree of income inequality. C) smaller is the Gini ratio and the lesser is the degree of income inequality. D) larger is the Gini ratio and the lesser is the degree of income inequality.
B) larger is the Gini ratio and the greater is the degree of income inequality
In the long run a pure monopolist will maximize profits by producing that output at which marginal cost is equal to: A) average total cost. B) marginal revenue. C) average variable cost. D) average cost.
B) marginal revenue.
To maximize utility a consumer should allocate money income so that the: A) elasticity of demand on all products purchased is the same. B) marginal utility obtained from the last dollar spent on each product is the same. C) total utility derived from each product consumed is the same. D) marginal utility of the last unit of each product consumed is the same.
B) marginal utility obtained from the last dollar spent on each product is the same.
Ben is exhausting his money income consuming products A and B in such quantities that MUa/Pa = 5 and MUb/Pb = 8. Ben should purchase: A) more of A and less of B. B) more of B and less of A. C) more of both A and B. D) less of both A and B.
B) more of B and less of A.
The invisible hand refers to the: A) fact that the U.S. tax system redistributes income from rich to poor. B) notion that, under competition, decisions motivated by self-interest promote the social interest. C) tendency of monopolistic sellers to raise prices above competitive levels. D) fact that government controls the functioning of the market system.
B) notion that, under competition, decisions motivated by self-interest promote the social interest.
In the short run a purely competitive seller will shut down if: A) it cannot produce at an economic profit. B) price is less than average variable cost at all outputs. C) price is less than average fixed cost at all outputs. D) there is no point at which marginal revenue and marginal cost are equal.
B) price is less than average variable cost at all outputs.
Non-price competition refers to: A) low barriers to entry. B) product development, advertising, and product packaging. C) the differences in information which consumers have regarding various products. D) an industry or firm in long-run equilibrium.
B) product development, advertising, and product packaging.
Real wages in the United States are: A) the highest in the world. B) relatively high, but not as high as in some other industrially advanced nations. C) much higher than output per worker. D) higher than nominal wages.
B) relatively high, but not as high as in some other industrially advanced nations.
Real wages in the United States are: A) the highest in the world. B) relatively high, but not as high as in some other industrially advanced nations. C) much higher than output per worker. D) higher than nominal wages.
B) relatively high, but not as high as in some other industrially advanced nations.
"Essential" water is cheaper than "nonessential" diamonds because: A) new industrial uses for diamonds have been discovered. B) the supply of water is great relative to demand and the supply of diamonds is small relative to demand. C) although the total utility of diamonds is greater, their marginal utility is small. D) the supply of diamonds is great relative to demand and the supply of water is small relative to demand.
B) the supply of water is great relative to demand and the supply of diamonds is small relative to demand.
In the short run a purely competitive firm that seeks to maximize profit will produce: A) where the demand and the ATC curves intersect. B) where total revenue exceeds total cost by the maximum amount. C) that output where economic profits are zero D) at any point where the total revenue and total cost curves intersect.
B) where total revenue exceeds total cost by the maximum amount.
In the short run a purely competitive firm that seeks to maximize profit will produce: A) where the demand and the ATC curves intersect. B) where total revenue exceeds total cost by the maximum amount. C) that output where economic profits are zero. D) at any point where the total revenue and total cost curves intersect.
B) where total revenue exceeds total cost by the maximum amount.
Economies and diseconomies of scale explain: A) the profit-maximizing level of production. B) why the firm's long-run average total cost curve is U-shaped. C) why the firm's short-run marginal cost curve cuts the short-run average variable cost curve at its minimum point. D) the distinction between fixed and variable costs.
B) why the firm's long-run average total cost curve is U-shaped.
A nondiscriminating profit-maximizing monopolist A. will never produce in the output range where marginal revenue is positive. B. will never produce in the output range where demand is inelastic. C. will never produce in the output range where demand is elastic. D. may produce where demand is either elastic or inelastic, depending on the level of production costs.
B. will never produce in the output range where demand is inelastic.
Which of the following will not cause the demand for Tesla to change? A) a change in the price of substitute B) an increase in consumer incomes C) a change in the price of Tesla D) a change in consumer tastes
C) A change in the price of tesla
The study of economics is primarily concerned with: A) Keeping private businesses from losing money. B) demonstrating that capitalistic economies are superior to socialistic. C) Choices that are made in seeking the best use of resources. D) Determining the most equitable distribution of societys output
C) Choices that are made in seeking the best use of resources.
The assertion by economists that "there is no free lunch": A) is contradicted by the presence of free goods offered by firms B) applies to goods that have prices, not to goods given away free by firms. C) Remains true even for goods given away free by firms D) applies to agricultural goods but not to manufactured goods.
C) Remains true even for goods given away free by firms
Which of the following best explains the significant increases in the equilibrium prices for higher education in the United States since the 1980s? A) The demand for higher education is highly price inelastic and the supply has decreased substantially. B) The demand for higher education is highly price elastic and the supply has decreased substantially. C) The supply of higher education is highly price elastic and demand has increased substantially.
C) The supply of higher education is highly price elastic and demand has increased substantially.
You are exhausting your income by purchasing 10 units of A and 8 units of B at prices of $2 and $4 respectively. The marginal utility of the last units of A and B are 16 and 24 respectively. These data suggest that: A) Your preferences are at odds with the principle of diminishing marginal utility. B) You consider A and B to be complementary goods. C) You should buy less B and more A. D) You should buy less A and more B.
C) You should buy less B and more A.
Unions might support a higher minimum wage because: A) their constitutions obligate them to do so. B) they feel a higher minimum wage will lower labor's tax payments for welfare programs. C) a higher minimum wage makes less-skilled workers less substitutable for union workers. D) the minimum wage is better targeted than are alternative income-maintenance programs.
C) a higher minimum wage makes less-skilled workers less substitutable for union workers.
Unions might support a higher minimum wage because: A) their constitutions obligate them to do so. B) they feel a higher minimum wage will lower labor's tax payments for welfare programs. C) a higher minimum wage makes less-skilled workers less substitutable for union workers. D) the minimum wage is better targeted than are alternative income-maintenance programs.
C) a higher minimum wage makes less-skilled workers less substitutable for union workers.
Economic discrimination puts the economy inside its production possibilities curve because discrimination: A) redistributes income from low-paid to high-paid persons. B) promotes present consumption rather than production of capital goods. C) arbitrarily blocks women and certain minorities from higher-productivity, higher-wage jobs and thus keeps the economy from producing its maximum output. D) often causes inflation, which reduces the nation's real output.
C) arbitrarily blocks women and certain minorities from higher-productivity, higher-wage jobs and thus keeps the economy from producing its maximum output.
A single-price pure monopoly is economically inefficient: A) only because it produces beyond the point of minimum average total cost. B) only because it produces short of the point of minimum average total cost. C) because it produces short of minimum average cost and price is greater than marginal cost. D) because it produces beyond minimum average total cost and marginal cost is greater than price.
C) because it produces short of minimum average cost and price is greater than marginal cost.
A single-price pure monopoly is economically inefficient: A) only because it produces beyond the point of minimum average total cost. B) only because it produces short of the point of minimum average total cost. C) because it produces short of minimum average cost and price is greater than marginal cost. D) because it produces beyond minimum average total cost and marginal cost is greater than price.
C) because it produces short of minimum average cost and price is greater than marginal cost.
The long-run trend of real wages: A) cannot be determined from available data on nominal wages and the price level. B) has been downward because the price level has risen faster than nominal wages. C) has been upward. D) has been downward because labor's share of the domestic income has fallen.
C) has been upward.
Marginal revenue product (MRP) of labor refers to the: A) increase in total revenue resulting from the sale of an additional unit of output. B) amount by which a firm's total resource cost increases when it employs one more unit of labor. C) increase in total revenue resulting from the hire of one more unit of labor. D) price at which additional units of labor can be employed in a monopsonized labor market.
C) increase in total revenue resulting from the hire of one more unit of labor.
If the demand and supply curves for product X are stable, a government-mandated increase in the price of X will: A) increase the supply of X and decrease the demand for X. B) increase the demand for X and decrease the supply of X. C) increase the quantity supplied and decrease the quantity demanded of X. D) decrease the quantity supplied of X and increase the quantity demanded of X.
C) increase the quantity supplied and decrease the quantity demanded of X.
The Gini ratio: A) measures the relative extent of poverty in a nation. B) compares the income of persons, households, or households at the 90th percentile of the income distribution to the income at the 10th percentile. C) is a numerical measure of the overall dispersion of income in a nation. D) is found by dividing the entire area below and to the right of the diagonal in the Lorenz diagram by the area between the diagonal and Lorenz curve.
C) is a numerical measure of the overall dispersion of income in a nation.
Monopolistic competition means: A) a market situation where competition is based entirely on product differentiation and advertising. B) a large number of firms producing a standardized or homogeneous product. C) many firms producing differentiated products. D) a few firms producing a standardized or homogeneous product.
C) many firms producing differentiated products.
Monopolistic competition means: A) a market situation where competition is based entirely on product differentiation and advertising. B) a large number of firms producing a standardized or homogeneous product. C) many firms producing differentiated products. D) a few firms producing a standardized or homogeneous product.
C) many firms producing differentiated products.
For an employer biased against minorioties, the discrimination coefficient d: A) will decrease if the employer becomes more prejudiced against minorities. B) must equal the actual ratio of minority to white wage rates. C) measures the amount an employer is willing to pay to hire a white over hiring a minority worker. D) varies inversely with the actual minority-white wage ratio.
C) measures the amount an employer is willing to pay to hire a white over hiring a minority worker.
For an employer biased against minorities, the discrimination coefficient d: A) will decrease if the employer becomes more prejudiced against minorities. B) must equal the actual ratio of minority to white wage rates. C) measures the amount an employer is willing to pay to hire a white over hiring a minority worker. D) varies inversely with the actual minority-white wage ratio.
C) measures the amount an employer is willing to pay to hire a white over hiring a minority worker.
Monopolistically competitive industries are inefficient because: A) they realize diseconomies of scale. B) advertising costs retard technological advance and product development. C) monopolistically competitive industries are overpopulated with firms whose plants are underutilized. D) monopolistically competitive sellers engage in misleading advertising.
C) monopolistically competitive industries are overpopulated with firms whose plants are underutilized.
Pure monopolists may obtain economic profits in the long run because: A) of advertising. B) marginal revenue is constant as sales increase. C) of barriers to entry. D) of rising average fixed costs.
C) of barriers to entry.
We would expect the cross elasticity of demand between Pepsi and Coke to be: A) positive, indicating normal goods. B) positive, indicating inferior goods. C) positive, indicating substitute goods. D) negative, indicating substitute goods.
C) positive, indicating substitute goods.
The term productive efficiency refers to: A) any short-run equilibrium position of a competitive firm. B) the production of the product-mix most desired by consumers. C) the production of a good at the lowest average total cost. D) fulfilling the condition P = MC.
C) the production of a good at the lowest average total cost.
In monopsony: A) each firm employs a small portion of the total supply of labor. B) the work force is highly mobile. C) the wage rate paid by the employer varies directly with the number of workers employed. D) the employer is a "wage taker."
C) the wage rate paid by the employer varies directly with the number of workers employed.
Which of the following is a distinguishing feature of a market system? A) public ownership of all capital. B) central planning. C) wide-spread private ownership of capital. D) a circular flow of goods, resources, and money.
C) wide-spread private ownership of capital.
Black markets are associated with: A) price floors and the resulting product surpluses. B)price floors and the resulting product shortages. C)ceiling prices and the resulting product shortages. D)ceiling prices and the resulting product surpluses.
C)ceiling prices and the resulting product shortages.
Economic resources (CELL)
Capital goods, Enterpreneurial ability, Land and Labor
Monopoly
Complete control of a product or business by one person or group
The supply of product X is inelastic if the price of X rises by: A) 5 percent and quantity supplied rises by 7 percent. B) 8 percent and quantity supplied rises by 8 percent. C) 10 percent and quantity supplied remains the same. D) 7 percent and quantity supplied rises by 5 percent.
D) 7 percent and quantity supplied rises by 5 percent.
Which of the following is an example of statistical discrimination? A) An employer hires only white workers even though there are otherwise identical African-American workers available at lower pay. B) Women students in college business schools are overrepresented in human resource management courses and underrepresented in finance courses. C) A young woman who plans to work for only five to seven years after graduating college decides that getting an advanced degree "just won't pay off." D) A firm hires a man rather than a woman for a specific job because, on average, women have higher rates of absenteeism than do men.
D) A firm hires a man rather than a woman for a specific job because, on average, women have higher rates of absenteeism than do men.
In a market economy, a change in consumers' preference for product X will: A) alter the profits or losses received by certain firms. B) cause a reallocation of scarce resources. C) cause some industries to expand and others to contract. D) do all of the above.
D) All of the above
Economic profits are calculated by subtracting: A) explicit costs from total revenue. B) implicit costs from total revenue. C) implicit costs from normal profits. D) explicit and implicit costs from total revenue.
D) Explicit and implicit costs from total revenue.
In the past few years, the demand for donuts has greatly decreased. This decrease in demand might best be explained by: A) an increase in the cost of making donuts. B) an increase in the price of coffee. C) consumers expecting donut prices to fall. D) a change in buyer tastes.
D) a change in buyer tastes.
If you operated a small bakery, which of the following would be a variable cost in the short run? A) baking ovens C) fixed interest on business loans B) annual fixed lease payment D) baking supplies (flour, salt, etc.)
D) baking supplies (flour, salt, etc.)
If you operated a small bakery, which of the following would be a variable cost in the short run? A) baking ovens B) interest on business loans C) annual lease payment for use of the building D) baking supplies (flour, salt, etc.) indicates
D) baking supplies (flour, salt, etc.) indicates
Product differentiation is present in: A) purely competitive markets only. B) monopolistically competitive markets only. C) oligopolistic markets only. D) both monopolistically competitive and oligopolistic markets.
D) both monopolistically competitive and oligopolistic markets.
Economic profits are calculated by subtracting: A) explicit costs from total revenue. B) implicit costs from total revenue. C) implicit costs from normal profits. D) explicit and implicit costs from total revenue.
D) explicit and implicit costs from total revenue.
In which of the following instances will total revenue decline? A) price rises and supply is elastic B) price falls and demand is elastic C) price rises and demand is inelastic D) price rises and demand is elastic
D) price rises and demand is elastic
In which of the following instances will total revenue decline? A) price rises and supply is elastic B) price falls and demand is elastic C) price rises and demand is inelastic D) price rises and demand is elastic
D) price rises and demand is elastic
A leftward shift of a product supply curve might be caused by: A) an improvement in the relevant technique of production. B) a decline in the prices of needed inputs. C) an increase in consumer incomes. D) some firms leaving an industry.
D) some firms leaving an industry
A leftward shift of a product supply curve might be caused by: A) an improvement in the relevant technique of production. B) a decline in the prices of needed inputs. C) an increase in consumer incomes. D) some firms leaving an industry.
D) some firms leaving an industry.
When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of the product. This statement describes: A) an inferior good. B) the rationing function of prices. C) the substitution effect. D) the income effect.
D) the income effect.
A price discriminating pure monopolist will attempt to charge each buyer (or group of buyers): A) different prices to compensate for differences in the characteristics of the product. B) the same price if per unit cost is constant for each unit of the product. C) that price which equals the buyer's marginal cost. D) the maximum price each would be willing to pay.
D) the maximum price each would be willing to pay.
A price discriminating pure monopolist will attempt to charge each buyer (or group of buyers): A) different prices to compensate for differences in the characteristics of the product. B) the same price if per unit cost is constant for each unit of the product. C) that price which equals the buyer's marginal cost. D) the maximum price each would be willing to pay.
D) the maximum price each would be willing to pay.
Suppose the MRP of a firm's twelfth worker is $22 and the worker's marginal wage cost is $16. We can say with certainty that the firm: A) is hiring labor in a competitive labor market at a wage rate of $16. B) is hiring labor in a monopsonistic labor market. C) will find it profitable to hire fewer workers. D) will find it profitable to hire more workers.
D) will find it profitable to hire more workers.
Suppose the MRP of a firm's twelfth worker is $22 and the worker's marginal wage cost is $16. We can say with certainty that the firm: A) is hiring labor in a competitive labor market at a wage rate of $16. B) is hiring labor in a monopsonistic labor market. C) will find it profitable to hire fewer workers. D) will find it profitable to hire more workers.
D) will find it profitable to hire more workers.
In the long run, the price charged by the monopolistically competitive firm attempting to maximize profits A. must be less than ATC. B. must be more than ATC. C. may be either equal to ATC, less than ATC, or more than ATC. D. will be equal to ATC.
D. will be equal to ATC.
Barriers to entry into market
Economies of scales (more you make the cheaper the production cost), Legal barriers to entry like patents and licenses,ownership or control of essential resources, price
Shut down in short run
If price is less than average variable cost, a firm shuts down production in the short run
Supply Determinants
P = price R= Resource E= expectation S= subsides T = technology N= number
PPC curve
Production Possibility Curve looks at the what is attainable and unattainable with the product you need to produce and you resources
fair-return price
Set p=ATC (average total cost) to break even and continue in operation
Demand Determinants
T = taste I = Income P = Price E = Expectiation N= Number
pure competition
a broad range of competitors that sell the same product with different prices
price taker
a buyer or seller that is unable to affect the market price
productive efficiency
a situation in which a good or service can't sacrifice one for another and produces things in the lowest cost possible
National Monopoly
a type of monopoly that exists as a result of the high fixed costs or startup costs of operating a business in a specific industry
An economy that has achieved "full production" has achieved: a. both allocative and productive efficiency b. Allocative but not productive efficiency c. Productive but not allocative efficiency d. Neither allocative nor productive efficiency
a. both allocative and productive efficiency
The scarcity problem: a. will persist so long as productive resources are limited b. persists only in the developing countries c. will be eliminated if full employment is achieved d. can be eliminated if all countries adopt laissez-faire capitalism
a. will persist so long as productive
Monopsony
arket with only one buyer
In terms of the circular flow diagram, firms receive revenue in the _____ market and incur costs in the _____ market. a. product; financial b. resource; product c. product; resource d. capital; resource
c. product; resource
Collusion
companies helping each other out
fixed costs
costs that do not vary with production or sales level
variable costs
costs that vary directly with the level of production
The man-made machine type resources used to produce goods and services are called: a. Labor b. Land c. Entrepreneurial ability d. Capital goods
d. Capital goods
The production possibilities curve (PPC): a. shows all combinations of goods that society most desires b. indicates that any combination of goods lying outside the curve is attainable c. shows only those combinations of two goods that reflect "full production" d. indicates the maximum amount of one good achievable for a given amount of the other good.
d. indicates the maximum amount of one good achievable for a given amount of the other good.
Stay open in short run
in the short run a firm should continue to operate if price exceeds average variable costs
Lorenz Curve
income (y axis) over population (x axis)
Break Even point
produce zero profit, TC = TR
productive efficiency allocative
productive is the most efficient way of reducing in allocative is the price of the customer
economizing problem
scarcity and choice, opportunity cost, purposeful behavior to increase utility and marginal analysis
long-run industry supply curve
shows how the quantity supplied responds to the price once producers have had time to enter or exit the industry
Triple Equilibrium
stable, neutral, unstable
short run
the period of time during which at least one of a firm's inputs is fixed
long run
the period of time in which a firm can vary all its inputs, adopt new technology, and increase or decrease the size of its physical plant
pure monopoly
there is no substitution, all one company
real wages
wages adjusted for inflation
