Economics Midterm

Mikki decides to work five hours the night before her economics exam. She earns an extra $75, but her exam score is 10 points lower than it would have been had she stayed home and studied. Her opportunity cost is the:

10 points she lost on her exam.

Which of the following would decrease the price of packaged hot dogs?

All of the above.

When economists want to hold a number of factors constant, they are demonstrating which of the following expressions?

Ceteris Paribus

How would a decrease in consumer income affect the market for new automobiles?

Demand would decrease, leading to a reduction in price and a reduction in quantity sold.

In exhibit 4-3, an increase in quantity supplied would cause a movement from which equilibrium point to another, other things being equal?

E1 to E4.

Which of the following is the best definition of economics?

Economics is the study of how society chooses to allocate it scarce resources.

Using exhibit 5-3, in general, whose demand for orange juice is the most elastic?

Edward.

If the percentage change in quantity the demanded of a good is greater than the percentage change in price, price elasticity of demand is:

Elastic.

If you were a government official that wanted to raise the equilibrium price of milk, which of the following actions would you take?

Encourage farmers to produce less milk.

Which of the following is an implication of the law of diminishing returns?

In the short run, expansion of output will eventually lead to increases in marginal cost and average total cost.

A perfectly elastic demand curve has a price elasticity of demand coefficient of:

Infinity.

The principle that the opportunity cost increases as the production of one output expands along the production possibilities curve is the:

Law of increasing opportunity costs.

Implicit costs are best thought of as:

Opportunity costs.

The production possibilities curve depicts the various combinations of two goods that can be:

Produced with a given technology.

Another word for elasticity is:

Responsiveness.

Diseconomies of scale exist over the range of output for which the long-run average cost curve is:

Rising.

Paul's Plumbing is a small business that employs 12 people. Which of the following is the best example of an implicit cost incurred by this firm?

The accounting services provided free of charge to the firm by Paul's wife, who is an accountant.

Which of the following is true of a pure monopolist?

The demand curve is above the MR curve.

Which of the following is an example of a positive economic statement?

The economy's real output increased at about 3% last year and the unemployment rate decreased.

Which of the following is true of a perfectly competitive firm?

The firm will not earn an economic profit in the long run.

The production possibilities curve demonstrates the basic economic principle that:

To produce more of any one thing, assuming full employment, the economy must produce less of something else.

If the value of the price elasticity of demand is 0.2, this means that:

a 5% decrease in price causes a 1% increase in quantity demanded.

The purpose of a cartel is to:

act like a monopoly

Which of the following statements are false?

b and d.

Assuming that chicken and beef are substitutes, a decrease in the price of beef, other things being equal, will:

decrease the demand for chicken.

A decrease in demand leads to an:

decreased equilibrium price and a decreased equilibrium quantity.

Two goods, X and Y, are complementary goods if the demand for X:

decreases when the price of Y increases.

The law of increasing opportunity costs causes the production possibilities curve to:

have a bowed-out shape.

In a perfectly competitive industry, assume the short-run average total cost increases as the output of the industry expands. In the long-run, the industry supply curve will:

have a positive slope.

One source of economic growth is:

increasing capital.

If a firm is operating at a loss in the short run and finds that its price is greater than AVC, then in the short run:

it should produce where MR=MC

A point inside a production possibilities curve reflects:

less than full use of technology and resources.

A perfectly competitive firm sells its output for $100 per unit and marginal cost is $100 per unit. To maximize short-run profit, the firm should:

maintain its current output.

If ABC Printing is producing an output level of 100, where MR is $5 and MC is $3, then the firm is:

making an unknown amount of profit or loss

In exhibit 2-13, point H is:

not achievable today because of inadequate production capacity; because of technology.

The law of increasing costs holds that the opportunity cost:

of a good increases as more of the good is produced.

The amount of a good that is given up to produce another good is:

opportunity cost.

Other things constant, the price elasticity of demand for a product will be smaller (more inelastic) if:

people spend an insignificant share of their income on the product.

A monopolist will maximize profit by:

producing the output where MR=MC.

Opportunity Cost:

represents the best alternative sacrificed for a chosen alternative.

In the long run, the demand curve for the monopolistic competitive firm shown in 9-1:

shifts leftward.

If an economy is producing at full employment, it means that:

the economy is producing along its production possibilities curve.

Total fixed costs are costs that are fixed with respect to:

the rate of output.