ECON
Some producers are chatting. Which one of the following quotations refers to a rightward shift of the supply curve?
"Our new, sophisticated equipment will enable us to undercut our competitors."
Which statement by a restaurant owner refers to the law of diminishing returns?
"We can increase the number of meals we serve by just adding more kitchen staff, but each additional worker adds less meals than the previous worker because traffic in the kitchen will get worse."
A firm's total fixed cost is $100. If total cost is $200 for one unit of output and $310 for two units what is the marginal cost of the second unit?
$110
Gerald is a freelance writer who could work for a newspaper at $25,000 a year but instead runs his own business making revenue of $40,000 a year. His only business expenses are $1,000 for writing materials and $12,000 for rent. What is Gerald's economic profit from working as a freelance writer?
$2,000
The demand curve for knobs is P = 75 - 6QD and the supply curve for knobs is P = 35 + 2QS. What is the equilibrium price of a knob?
$45
In general, 1. opportunity cost is greater than accounting cost. 2. opportunity cost is less than accounting cost. 3. economic profit is greater than accounting profit. 4. economic profit is less than accounting profit
1. opportunity cost is greater than accounting cost. 4. economic profit is less than accounting profit
David has an income of $60 to buy movie tickets and bus tickets. The price of a movie ticket is $12 and the price of a bus ticket is $4. What is the relative price of a bus ticket in terms of movie tickets?
1/3 movie ticket
If the cross elasticity of demand between goods A and B is negative, then
A and B are complements.
Which one of the following statements is false ?
A minimum wage is a price ceiling in the labour market.
An efficient allocation is achieved when
A) consumers are selecting points on their demand curves. B) the sum of consumer surplus and producer surplus is maximized. C) producers are selecting points on their supply curves. D) all of the above E) none of the above
A new minimum wage law best helps the working poor when
A) demand for unskilled labour is inelastic. B) gains from workers who remain employed are greater than the lost income of workers who lose their jobs. C) businesses have few substitutes for unskilled labour. D) all of the above are true.
A new minimum wage law best helps the working poor when
A) demand for unskilled labour is inelastic. B) gains from workers who remain employed are greater than the lost income of workers who lose their jobs. C) businesses have few substitutes for unskilled labour. all of the above are true.
Which one of the following correctly describes how price adjustment eliminates a surplus?
As the price falls, the quantity demanded increases and the quantity supplied decreases.
Which of the following is a positive statement?
Low rents restrict the supply of housing.
Ron starts out in consumer equilibrium, consuming two goods, X and Y. The price of X rises. Immediately after the rise in price
MUX/PX < MUY/PY, and then Ron decreases his consumption of X.
In Portugal, the opportunity cost of a bale of wool is 3 bottles of wine. In England, the opportunity cost of 1 bottle of wine is 3 bales of wool. Given this information,
Portugal has a comparative advantage in wine production.
The initial budget equation for pop (p) and movies (m) is Qp = 20 - 4Qm, and the price of a pop is $5. If the price of a pop falls to $4, what is the new budget equation?
Qp = 25 - 5Qm
At the best affordable point, what is the relationship between the indifference curve and the budget line?
The slope of the indifference curve equals the slope of the budget line.
If Hamburger Helper is an inferior good, then, ceteris paribus, a decrease in income will lead to
a rightward shift of the demand curve for Hamburger Helper.
If a turnip is an inferior good, then
an increase in income decreases the quantity demanded at the current price.
Suppose the marginal product of energy equals the average product of energy. This implies that
average product is at its maximum value.
The range over which average variable cost is decreasing is the same as the range over which
average product is increasing.
If the price of the good measured on the vertical axis increases, the budget line
becomes flatter.
A firm shuts down if price is
below minimum average variable cost.
A behavioural economist will explain Tom's donation to charity by saying that Tom is displaying
bounded self-interest.
The market for coffee is initially in equilibrium. Pepsi is a substitute for coffee; cream is a complement of coffee. Consider the market for coffee. Assume that all ceteris paribus assumptions continue to hold except for the event listed. Refer to Fact 3.5.1. If there is an increase in the wages of farm workers who harvest coffee beans, the equilibrium quantity of coffee
decreases.
The price of pizza increases. Everything else remaining the same, the consumer surplus from pizza
decreases.
A rise in the price of good A shifts the
demand curve for good B rightward if the cross elasticity of demand between A and B is positive.
A shortage is the amount by which quantity
demanded exceeds quantity supplied.
A consumer considers Coke and Pepsi to be perfect substitutes for each other. What would the consumer's indifference curves for these two goods look like?
downward sloping with a constant slope
A price ceiling set below the equilibrium price will result in
excess demand.
An idea of fairness that emphasizes equality of opportunity is
fair rules.
In general, the greater the proportion of resources devoted to technological research in an economy, the
faster the production possibilities frontier shifts outward.
The marginal cost curve slopes downward at low outputs because of ________. The marginal cost curve eventually slopes upward because of ________.
greater specialization and division of labour; the law of diminishing returns
If a rise in price results in a decrease in total revenue, then the price elasticity of demand is
greater than 1.
Luxury goods tend to have income elasticities of demand that are
greater than 1.
A decrease in tuition fees decreases the university's total revenue if the price elasticity of demand for university education is
greater than zero but less than 1.
The long run refers to a time period
in which all factors of production are variable.
The short run refers to a time period
in which some factors of production are variable, but at least one factor of production is fixed.
Fred's income increases from $1,950 per week to $2,050 per week. As a result, he decides to increase the number of movies he attends each month by 10 percent. Fred's demand for movies is
income elastic.
The market for coffee is initially in equilibrium. Pepsi is a substitute for coffee; cream is a complement of coffee. Consider the market for coffee. Assume that all ceteris paribus assumptions continue to hold except for the event listed. Refer to Fact 3.5.1. An increase in the price of Pepsi, a substitute for coffee will
increase the price and the quantity supplied of coffee.
Sally and Eric are the only people in an economy. Sally buys 3 bottles of water when the price is $2 a bottle and 4 bottles of water when the price is $1 a bottle. Eric buys 10 bottles of water when the price is $0.50 a bottle and 5 bottles of water when the price is $1 a bottle. In the market for water, the quantity demanded
increases as the price falls.
Beverly is currently in consumer equilibrium. An increase in her income
increases her total utility.
The bowed-out (concave) shape of a production possibilities frontier illustrates
increasing opportunity cost.
If a firm faces a perfectly elastic demand for its product, then
its marginal revenue curve is horizontal at the market price.
For perfect competition to arise, market demand must be
large relative to the minimum efficient scale of a single firm.
Demand will be more elastic the
longer the passage of time after a price increase.
According to the law of diminishing returns, 1. marginal product eventually rises. 2. marginal product eventually falls. 3. marginal cost eventually rises. 4. marginal cost eventually falls
marginal product eventually falls. marginal cost eventually rises.
As more of a good is consumed, its
marginal utility decreases.
Short-run supply is
more elastic than momentary supply but less elastic than long-run supply.
A price-taking firm faces a
perfectly elastic demand curve.
A sudden, end-of-summer heat wave increases the demand for air conditioners and catches suppliers with no reserve inventories. The momentary supply for air conditioners is
perfectly inelastic.
If the price elasticity of demand is zero, then demand is
perfectly inelastic.
The demand for corn increases. As a result, the price of corn ________, and the less elastic the supply of corn, the ________ will be the effect on the price.
rises; greater
If price falls below minimum average variable cost, the best a firm can do is
stop production and incur a loss equal to total fixed cost.
If firms in a perfectly competitive market are making an economic profit, new firms will enter. This entry shifts the market
supply curve rightward, and the market price falls.
In a perfectly competitive market, a technological advance brings ________ economic profit for producers and ________ lower prices for consumers.
temporary; permanent
If there are constant returns to scale,
the LRAC curve is horizontal.
Economic depreciation is
the change in the market value of capital over a given period.
In a perfectly competitive market, the short-run market supply curve is
the horizontal sum of the supply curves of all the individual firms.
The minimum efficient scale is the smallest quantity of output at which
the long-run average cost curve reaches its lowest level.
Sergio is maximizing utility in his consumption of beer and bubble gum. If the price of beer is greater than the price of bubble gum, then we know
the marginal utility from the last purchased beer is greater than the marginal utility from the last purchased bubble gum.
The high price of diamonds relative to the price of water reflects the fact that, at typical levels of consumption,
the marginal utility of diamonds is greater than the marginal utility of water.
In the price range above minimum average variable cost, a perfectly competitive firm's supply curve is
the same as its marginal cost curve.
In the price range above minimum average variable cost, a perfectly competitive firm's supply curve is
the same as its marginal cost curve.
A change in the price of the good measured on the horizontal axis changes ________ of the budget line.
the slope and x-intercept
Marginal utility equals
the slope of the total utility curve.
Total utility equals
the sum of the marginal utilities of each unit consumed.
the sum of the marginal utilities of each unit consumed.
total utility is maximized.
The quantity of apples demanded decreases by 8 percent when the price rises by 8 percent. The demand for apples is
unit elastic
If a perfectly competitive firm is producing a quantity where marginal revenue is less than its marginal cost, the firm
will decrease its output to increase economic profit.
