Final Micro. Exam

Rent controls can cause

a decline in the quality of housing available for rent, the development of a black market to allocate apartments to renters, longer search times for renters attempting to locate an apartment.

When the government attempts to improve equality in an economy the result is often

a reduction in efficiency

If the government passes a law requiring sellers of mopeds to send $200 to the government for every moped they sell, then a. the supply curve or mopeds shifts downward by $200 b. sellers of mopeds receive $200 less per moped than they were receiving before the tax c. buyers of mopeds are unaffected by the tax d. none of the above

d. none of the above

If the demand for bananas is elastic, then an increase in eh price of bananas will

decrease total revenue of banana sellers.

Which of the following is likely to have the most price inelastic demand?

gasoline in the short run

David's firm experiences diminishing marginal product for all ranges of inputs. The total cost curve associated with David's firm

gets steeper as output increases

The short-run supply curve for a firm in a perfectly competitive market is

horizontal

Normative conclusions

involve value judgments

If the cross-price elasticity of two goods is positive, then the two goods are

substitutes

In an y economic system, scarce resources have to be allocated among competing uses. Market economies harness the forces of

supply and demand to allocate scarce resources.

Suppose that a tax is placed on books. If the sellers pay the majority of the majority of the tax, then we know that the

supply is more inelastic than the demand

Refer to Figure 4-20. If the price is $25, then there would be an excess

supply of 300 units, and price would fall.

If sellers do not adjust their quantity supplied at all in response to a change in price, the price elasticity of supply is

zero, and the supply curve is vertical

If the price elasticity of demand for a good is 0.3, the a 20 percent decrease in price results in a

6 percent increase in the quantity demanded

Refer to Table 4-4. Suppose the market consists of Barb and Carl only. If the price falls by $2, the quantity demanded in the market increase by

8 units

In the long run, each firm in a competitive industry earns

zero economic profits

Suppose that a firm has only one variable input, labor, and firm output is zero when labor is zero. Then the firm hires 6 workers, it produces 90 units of output. Fixed cost of production are $6 and the variable cost per unit of labor is $10. The marginal product of the seventh unit of labor is 4. Given this information, what is the total cost of production when the firm hires 7 workers?

$76

Using the midpoint method, when price rises from $8 to $12, the price elasticity of demand is

1

Refer to Figure 6-29. The buyers and sellers will bear an equal share of the tax burden if the demand is

D1, and the supply is S1

Refer to Figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

D3

If the government places a $2 tax in the market, the buyer pays $4.

False

In a perfectly competitive market, buyers and sellers are price setters.

False

The market demand curve shows how the total quantity demanded of a good varies as the income of buyers varies, while all other factors that affect how much consumers want to buy are held constant.

False

The two characteristics of a competitive market are 1) Many buyers and sellers in the market 2) The goods offered by the various sellers are highly differentiated

False

First Exam

First Exam

GRAPH

GRAPH

Mary and Martha both can make cookies and cakes of the same quality, though Mary can make more of both cookies and cakes per hour than Martha. With the bake-sale quickly approaching, they want to make as many cookies and cakes as possible. In which of the following situation will the most cookies and cakes be made?

Mary and Martha specialize in what they are better at making.

Refer to Figure 4-26. Which of he following movements would illustrate the effect in the market for paper napkins and a result of "go Green" advertising campaign encouraging people to use cloth napkins?

Point C to Point D

Music compact discs are normal goods. What will happen to the equilibrium price and quantity of music compact discs if musicians accept lower royalties, compact disc players become cheaper, more firms start producing music compact discs, and music lovers experience an increase in income?

Quantity will rise, and the effect on price is ambiguous.

TOO LONG

TOO LONG

It once took 90 percent of our population to grow our food. It now takes only 3 percent of the population to grow our food. Which of the following statements is true?

This is progress because freed-up labor is used to produce other goods.

A firm is currently producing 100 units of output per day. The manager reports to the owner that producing the 100th unit costs the firm $5. The firm can sell the 100th unit for $5. The firm should continue to produce 100 units in order to maximize its profits (or minimize its losses)

True

A technological advance in the production of the first good increases the opportunity cost of the first good in terms of the second good

True

Buyers and sellers rarely share the burden of a tax equally.

True

Cocoa and marshmallows are complements, so a decrease in the price of cocoa will cause an increase in the demand for marshmallows.

True

Economists may disagree about the validity of alternative positive theories about how the world works.

True

Refer to Figure 2-14. Point B represents an inefficient outcome for this economy.

True

Regardless of whether a tax is levied on sellers or buyers, taxes discourage market activity.

True

The average-total-cost curve reflects the shape of both the average-fixed-cost and average-variable-cost curves.

True

The government can potentially improve market outcomes if market inequalities or market failure exists.

True

The indifference curves for nickels and dimes are straight lines

True

For a large firm that produces and sells automobiles, which of the following costs would be a variable cost?

a. unemployment insurance premium that the firm pays to the state of Missouri that is calculated based on the number of worker-hours that the firm uses b. the cost of steel that is used in producing automobiles c. the cost of the electricity of running the machines on the factory floor

Refer to Figure 14-1. The firm will earn a positive economic profit in the short run if the market price is

above $6.30

The rate at which a consumer is willing to trade one good for another to maintain the same level of satisfaction is affected by the

amount of each good the consumer is currently consuming

If mayonnaise and Miracle Whip are substitutes, then which of the following would increase the demand for Miracle Whip?

an increase in the price of mayonnaise

Under rent control, bribery is a mechanism to

bring the total price of an apartment (including the bribe) closer to the equilibrium price

Refer to Figure 6-29. Suppose D1 represents the demand curve for paperback novels, D2 represents the demand curve for gasoline, and S1 represents the supply curve for paperback novels and gasoline. After the imposition of the $2 on paperback novels and on gasoline, the

buyers of gasoline bear a higher burden of the $2 tax than buyers of paperback novels.

The price elasticity of demand measures

buyers' responsiveness to a change in the price of a good

Price ceilings and price floors that are binding

cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price.

A legal maximum on the price at which a good can be sold is called a price

ceiling

When a consumer experiences a price decrease for an inferior good, if the income effect is

less than the substitution effect, the demand curve will be downward sloping and greater than the substation effect, the demand curve will be upward sloping

Refer to Figure 6-2. The price ceiling

makes it necessary for sellers to ration the good

In a competitive market, no single producer can influence the market price because

many other sellers are offering a product that is essentially identical

A competitive market is a market in which

no individual buyer or seller has any significant impact on the market price.

Holding the nonprice determinants of supply constant, a change in price would

result in a movement along a stationary supply curve.

Refer to Figure 4-20. If the price is $10, then there would be a

shortage of 600 units, and price would rise

Harry's Hotdogs is a small street vendor business owned by Harry Huggins. Harry is trying to get a better understanding of his costs by categorizing them as fixed or variable. Which of the following costs are most likely to be considered fixed costs?

the cost of bookkeeping services

If there is a shortage of farm laborers, we would expect

the wage of farm laborers to increase

The y-coordinate of an ordered pair specifies the

vertical location of the point

For which of the following goods is the income elasticity of demand likely lowest

water