Econ exam 3

Economic profit is less than accounting profit because

Economic costs are greater than accounting costs as economic costs including opportunity cost

A firm earning profit will always stay open

False

The marginal productivity of labor is defied as the amount of output produced by a particular level of an input

False

ordinal utility

ranks goods relative to one another

We define ____________________ doing only those things that we believe will not make us worse off

rationality

Has at least one fixed cost

short run

If a firm is able to change the amount of capital it employees, but is unable to change the amount of labor due to union contracts the firm is making _________ decisions

short run

What are marginal costs?

the additional cost of the next unit produced

If demand for this good was inelastic relative to supply we would expect

the burden of the tax to fall more on consumers

In Economics we prefer to _____________________ measure of utility over ______________________ measure because _____________________________.

Ordinal, Cardinal, our utility functions are imprecise as we make them up.

For a perfectly competitive firm

P = MC at at the profit-maximizing quantity only

If we consider ordinal utility, if person A has Utility of 3 for good X and person B has utility 12 for good X we can say

Person B likes X more than person A

Perfectly competitive firms are price takers

True; this means they must accept the market price and this sets their demand equal to their marginal revenue

A firm earning positive accounting profit will operate

Uncertain

When we receive less utility from each additional good we consume is

decreasing marginal utility

I get more enjoyment out of the first piece of candy I eat than the last piece I eat because of

diminishing marginal utlity

Marginal costs are sloped upwards because the marginal productivity of labor is increasing

false

Accounting Profit is always ______________ Economic Profit because Economic Profit ____________________-

greater than, Includes opportunity cost

Suppose a professor gives up her teaching job to devote her time to writing textbooks. If salaries of professors rise,

her economic profit from textbooks will rise

When a worker produces more units of output than the work hired before her we have

increasing marginal productivity of labor

If we observe decreasing marginal productivity or labor what must be true of total output

it is positive

Doesn't have any fixed costs

long run

In Economics, the motivation of all firms is to:

maximize profits

We will consume until marginal utility is 0

none of these

If bundle one has utility of 30 and bundle two has utility of 60, if we use a _________________ measure of utility we can only say bundle two has more utility than bundle one.

ordinal

The more inelastic in relation to the other ....

the more tax burden falls on them

A firm earning positive accounting profit will choose to operate

uncertain, to operate a firm must cover all its accounting costs plus the opportunity costs

In a world without prices and income we will consume until

we are full and our marginal utility is 0

If an economic agent is rational it means he or she

will never do something that will make them worse off

It is possible to be concerned about and want to help others while still being sef-interested.

True

Assume an economic agent is following the rational spending rule and consuming Application and Raspberries. Assume at the optimal bundle the price of apples is $1, the price of raspberries is $2 and marginal utility of apples is 50, what is the marginal utility of raspberries,

100

If at q units of output, AC = $200, AFC = $10 and total Cost = $21,000, what must the level of output for the firm be?

100

If Total cost for 10 units is $120 and fixed costs are $10, what is Average Variable Cost is

11

What is the area of tax revenue?

2 rectangles in the middle

If Chis is maximizing utility under the Rational Spending Rule, the marginal Utility of the last unity of Good 1 is 20, the marginal utility of the last unit of Good 2 is 160, and the price of good 1 is 5, what is the price of Good 2 (do not use a dollar sign)

40

If a firm has labor contracts that are in place for 7 years and the lease on the building where the business operates is 4- years long the short run is defined ________ years

7

ATC=

AFC+AVC

What is included in Economic costs?

Accounting costs plus the opportunity cost of capital and time

The assumption of perfect information means

All buyers know the prices of all sellers

which is the best example of a homogenous good?

Bottled Water

If elasticity of supply is elastic we know that a 1% change in price leads to a ________ change in quantity supplied

Greater than 1%

If the next worker we hire adds more to production than the worker we hired before we can say

Marginal productivity of labor is increasing

Assume marginal productivity of labor is FALLING. If output changed from 10 to 15 when the firm hired Pat, what do we know about total output when they next hire Chris?

Must be less than 20

The negative slope of the demand curve is caused in part by decreasing marginal utility

True

Given the information in lecture, would you be comfortable in saying that because bundle one gives Hal 10 units of utility and bundle two gives Hal 30 units of utility that Hal prefers bundle two to bundle one?

True

A firm in a perfectly competitive market

accepts the market price for its product

Marginal Utility is the

additional satisfaction obtained from consuming one more unit of the good

If income increases and the equilibrium price of the good decreases the good is called:

an inferior good

What is the area of a consumer surplus after tax?

area above price below demand curve (A)

What is the area of a producer surplus before tax?

below the market price and above the supply curve (D+F+E)

What areas represent the loss to society due to less than socially optimal output being produced?

deadweight (C + F)

If marginal cost is less than average total cost, average total cost will

decrease

cardinal utility

the size of the utility difference between two bundles of goods is supposed to have some sort of significance

considering the graph for long run costs we do not have to include a graph for fixed costs as

there are no fixed costs in the long run

Assume bananas cost $1.00 a bunch and pretzels cost $2 a bag. If Pat's marginal utility for the last bunch of bananas is 5 and marginal utility of the last bag of pretzels consumed is 10 can we say that Pat is maximizing utility?

true