ECON Exam 2 (CH 6,7,8)
Which of the following could be a graph of a complete AVC curve?
The AVC curve will first decrease and then increase, creating a U or bowl shape.
The most common pattern for marginal utility is ____________________.
diminishing marginal utility
When ___exist, doubling of all inputs will result in more than doubling output, which means ___.
economies of scale; a larger factory can produce at a lower average cost than a smaller company.
If the average firm in a perfectly competitive industry is currently generating an economic loss, which of the following would be expected to occur?
existing firms will exit the market increasing price and profits
Which of the following industries most resembles perfect competition?
farming
In the ___, the perfectly competitive firm will seek out ___.
short run; the quantity of output where profits are highest
Which of the following is not a characteristic of a perfectly competitive market?
small number of sellers
Economic profits equals
total revenue minus both implicit and explicit costs.
Jay and Jen are married with two children. They are preparing a household budget for the coming year. Based on statistical information for American households from the 2020 Consumer Expenditures Survey, approximately what portion of this family's annual consumption will most likely be budgeted for food and vehicle expenses?
one-fifth
Idaho farmers can sell as large a quantity of their potato crop as they wish,
provided each is willing to accept the prevailing market price.
In terms of microeconomic analysis, what is the function of "utils"?
a measurement of utility
Which of the following falls outside of the classification of business expenses that fall into the category of fixed costs?
costs incurred in the act of producing
Which of the following falls outside of the classification of business expenditures that fall into the category of variable costs?
costs related to physical inputs
It is said that in a perfectly competitive market, raising the price of a firm's product from the prevailing market price of $179.00 to $199.00...
could likely result in a notable loss of sales to competitors
The term _________________ refers to the additional utility provided by one additional unit of consumption.
marginal utility
The key assumption that accompanies the use of numbers for measuring utility is that:
individuals choose based on their preferences.
Substitution and income effects of a change in price of a good may be used to explain the:
inverse relationship between price and quantity demanded.
If a perfectly competitive firm is a price taker, then
pressure from competing firms will force acceptance of the prevailing market price.
As a general rule, utility-maximizing choices between two consumption goods occur where the:
price ratio and marginal utilities ratio of two goods is equal.
Refer to the diagram above. In this instance, the marginal revenue curve
reflects each of the above
The typical pattern revealed in a budget constraint model shows that as the quantity consumed rises,
total utility rises, but marginal utility falls.
At any point in time for any one firm, economic profit will always be less than or equal to accounting profit.
true
MC intersects ATC at the lowest point on the MC curve.
true
MC intersects AVC at the lowest point on the AVC curve.
true
In a free market economy, firms operating in a perfectly competitive industry are said to have only one major choice to make. Which of the following correctly sets out that choice?
what quantity to produce
Which of the following is considered to be a tell-tale signal that the point with the highest total utility has been found?
the marginal utility per dollar is the same for both goods
In order to determine the average variable cost, the firm's variable costs are divided by:
the quantity of output
In economics, the term "shutdown point" refers to the point where the
marginal cost curve crosses the average variable cost curve.
Under perfect competition, any profit-maximizing producer faces a market price equal to its
marginal costs
If a solar panel manufacturer wants to look at its total costs of production in the short run, which of the following would provide a useful starting point?
divide total costs into two categories: fixed costs that can't be changed in the short run and variable costs that can be
The term _____________ describes a situation where a ________________ causes a reduction in the buying power of income, even though actual income has not changed.
income effect; higher price
When economists attempt to predict the spending patterns of U.S. households, they will typically view the ___ as a primary determining factor that influences the individual consumption choices that each will make.
income level of each household
The economies-of-scale curve is a long-run average cost curve, because
it allows all factors of production to change.
Which of the following is a characteristic of a perfectly competitive market?
no barriers to entry
During the COVID recession, the government issued checks to a large number of families. The budget line graph shows food on the horizontal axis and everything else on the vertical axis. The government expects that disbursing these checks will cause each family's budget constraint line to:
shift to the right.
Which of the following occurs simultaneously with an income effect?
substitution effect
Economists are able to determine total utility by:
summing up the marginal utilities of each unit consumed.
Marcella operates a small, but very successful art gallery. All but one of the following can be classified as a variable cost arising from the physical inputs Marcella requires to operate her business. Which is it?
the cost to rent the physical space for the gallery
___ include all spending on labor, machinery, tools, and supplies purchased from other firms.
total costs
In microeconomic terms, the ability of a good or a service to satisfy wants is called:
utility
If a paper mill shuts down its operations for three months so that it produces nothing, its ___ will be reduced to zero.
variable costs