ECON Test 2 Micro

After subsistence levels of food, shelter, and clothing have been provided, economists refer to all other goods and services as:

"Wants"

The term marginal utility denotes the amount by which ________ changes when consumption changes by ________ unit(s).

total utility; 1

Individual supply curves generally slope ________ because ________.

upward; of increasing opportunity costs.

Suppose Ben owns a small company that makes kites. The market for kites is perfectly competitive, and kites sell for $25 each. Ben's total production costs vary depending on the number of kites he makes each day, as shown in the accompanying table.

$13

Pat used to work as an aerobics instructor at the local gym earning $35,000 a year. Pat quit that job and started working as a personal trainer. Pat makes $50,000 in total annual revenue. Pat's only out-of-pocket costs are $12,000 per year for rent and utilities, $1,000 per year for advertising and $3,000 per year for equipment. Pat's explicit costs are ________, and Pat's implicit costs are ________.

$16,000; $35,000

Refer to the figure below. If a price ceiling were imposed at $4, total economic surplus would be ________, which is ________ less than when the market is unregulated market.

$24; $8

If an individual producer is willing to produce one unit of a good for $2.50 but is able to sell it for $7.50, then his or her producer surplus from the sale of that unit would be:

$5

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the accompanying table.

$7

For two goods, A and B, the rational spending rule is expressed as:

(MUA/PA) = (MUB/PB)

Refer to the accompanying graph. If this firm is a price taker, then when the price of each unit if output is $15, what is this firm's profit-maximizing level of output?

60

Which of the following is NOT a characteristic of a perfectly competitive market?

Each firm in the market sells a somewhat different variant of the good.

Sven likes to water ski, but can only water ski during the one week each year when he is on vacation. Therefore, he plans to ski every day, for eight hours a day. The first day, Sven skied for eight hours and enjoyed every hour. The second day, Sven slept in and then skied for seven hours, which was fun but not as much fun as the first day. The third day, Sven skied for six hours, but was starting to get a bit bored by the end. The fourth day, Sven skied for four hours and then took a nap. On the fifth day of Sven's vacation, Sven went blueberry picking all day. Sven's total utility ________ with each hour that he skied.

Increased

Suppose that at Miles's current level of consumption, his marginal utility from a pizza is 10 utils, and his marginal utility from a pint of ice cream is 16 utils. If the price of a pizza is $8, and the price of a pint of ice cream is $5, is Miles maximizing his utility?

No. He should shift his spending away from frozen pizza and towards ice cream.

The figure below depicts the short-run market equilibrium in a perfectly competitive market and the cost curves for a representative firm in that market. Assume that all firms in this market have identical cost curves. Given that the current equilibrium price is $8, what will happen to the number of firms in this market in the long run?

The number of firms in the market will rise as firms enter the market in response to positive economic profit.

Which of the following statements about implicit costs is true?

They measure the forgone opportunities of the firm's owners.

If crude oil is a variable factor of production for a firm, then an increase in the price of crude oil will lead to:

a decrease in the firm's supply

Suppose farmers in a given market can either grow soy beans or corn on their land. In addition, suppose an increase in the demand for corn causes the price of corn to increase. As a result of the increase in the price of corn, farmers who were already growing corn will earn an:

economic profit in the short run.

A market equilibrium is only efficient if:

all relevant costs and benefits are reflected in the market supply and demand curves.

Jenny sells lemonade in front of her house in the summer. Several other kids in Jenny's neighborhood also run lemonade stands in the summer. The lemonade market in Jenny's neighborhood is more likely to be perfectly competitive if:

each lemonade stand sells the same kind of lemonade.

Refer to the accompanying figure. If Laura and Chris are the only two consumers in this market, then when the price of hamburger decreases from $2.50 to $2.00 per pound, the quantity demanded in the market will ________ by ________ pound(s) per week.

increase; 1.5

Adam Smith coined the term "invisible hand" to describe the process by which the actions of independent, self-interested buyers and sellers will:

often lead to the most efficient allocation of resources.

Refer to the accompanying figure. If the market for doughnuts is perfectly competitive, and the price of a doughnut is 25 cents, then this firm should:

produce 80 doughnuts

Total revenue minus both explicit and implicit costs defines a firm's:

profit

The figure below shows the supply and demand curves for jeans in Smallville. At a price of $60 per pair, there will be an excess ________ of ________ pairs of jeans per day.

supply; 16

Marginal cost is calculated as:

the change in total cost divided by the change in output.