Micro

Kelly is willing to pay $3.10 for a gallon of gasoline. The price of gasoline at her local gas station is $2.90. If she purchases ten gallons of gasoline, then Kelly's consumer surplus is

$ 2.00 3.10 - 2.90=.20 .20 * 10= 2.00

Suppose a monopolist charges a price of $50 for its product and sells 100 units at that price. At 100 units of production the firm has average fixed cost equal to $10 and average variable cost equal to $25. How much total profit is the firm earning at this price?

$15 10+25=35 50-35=15

Refer to a firm's production function given in the table below. Assume that the firm uses labor as the only variable input to produce its output. If the total fixed cost is $50 and each worker receives a wage of $100 per day, then the total cost and the average variable cost of producing 50 units of output are which of the following? Total Cost; Average Variable Cost

$450; $ 8 4*100=400 400+50=450 400/50=8

Suppose that when the price of good X increases from $700 to $750, the quantity demanded of good Y increases from 400 to 430. Using the midpoint method, the cross price elasticity of demand is about

(750-700)/700= 7.14 (430-400)/400= 7.5 7.5/7.14=1.06

midpoint method formula

(Q2-Q1)/[(Q2+Q1)/2] / (P2-P1)/[(P2+P1)/2]

In the long run, compared with a perfectly competitive firm, a monopolistically competitive firm with the same costs will have A. a higher price and higher output B. A higher price and lower output C. A lower price and higher output D. A lower price and lower output E. The same price and lower putput

A higher price and lower output

If a decrease in the price of good X causes a decrease in demand for good Y, good Y is A. A substitute for good X B. A complement for good X C. An inferior good D. A normal good

A substitute for good X

What is a market economy?

A system where decisions are made by interactions between buyers and sellers. It is not controlled by the government and is used by most countries today.

Which of the following examples illustrates an oligopoly market?

A) a local farmers' market with many farmers selling vegetables B) a town with one firm that plows the roads when it snows *C) a town with two firms that supply school lunches correct D) a town with many independently-owned cafes

Last year Firm A sold 3 million computer chips at a price of $11 per chip. For last year, the firm's

A) accounting profit was $33 million. B) economic profit was $33 million. *C) total revenue was $33 million. D) explicit costs were $33 million.

Which of the following statements is true of perfectly competitive firms in long-run equilibrium? A. Firm revenues will decrease if production is increased B. Total firm revenues are at a maximum C. Average fixed cost equals marginal cost D. Average total cost is at a minimum E. Average variable cost is greater than marginal cost

Average total cost is at a minimum

Which of the following causes an increase in the demand for labor?

A. An increase in the wage rate *B. An increase in the price of the good that labor is producing C. A decrease in the marginal product of labor D. A decrease in the demand for the good that labor is producing E. A decrease in the price of capital, a substitute for labor

Differences in which of the following are NOT used to explain wage differentials among workers?

A. Talent B. Experience C. Human capital *D. Consumer spending E. Discrimination in the job market

Assume that both input and product markets are competitive. If capital is fixed and the product price increases, in the short run firms will increase production by increasing A. capital until marginal revenue equals the product price B. capital until the average product of capital equals the price of capital *C. labor until the value of the marginal product of labor equals the wage rate D. labor until the marginal product of labor equals the wage rate

A. capital until marginal revenue equals the product price B. capital until the average product of capital equals the price of capital *C. labor until the value of the marginal product of labor equals the wage rate D. labor until the marginal product of labor equals the wage rate

If hiring an additional worker would increase a firm's total cost by less than it would increase its total revenue, the firm should

A. not hire that worker *B. hire that worker C. hire that worker only if another worker leaves or is fired D. hire that worker only if the worker can raise the firm's productivity incorrect E. reduce the number of workers employed by that firm

ATC is equal to the sum of A. TFC and TVC B. MC and AFC C. AFC and AVC D. MC and AVC E. MC, AFC, and AVC

AFC and AVC

Which of the following will cause supply of chocolate to increase? A. An increase in the price of cocoa butter, a by-product of the production of chocolate B. An increase in the price of chocolate C. An increase in the price of cocoa beans, a major input in the production of chocolate D. A decrease in the price of butterscotch, a substitute for chocolate

An increase in the price of cocoa butter, a by-product of the production of chocolate

Which of the following causes an increase in the demand for labor? A. An increase in the wage rate B. An increase in the price of the good that labor is producing C. A decrease in the marginal product of labor D. A decrease in the demand for the good that labor is producing E. A decrease in the price of capital, a substitute for labor

An increase in the price of the good that labor is producing

The demand curve is downward sloping because A. As the price of a good rises, people will want to buy more of it B. As the price of the good falls, people will want to buy more of it C. As the price of a good rises, firms want to supply more of it to the market D. As the price of the good falls, firms want to supply more of it to the market E. Supply dictates the quantity demanded and price

As the price of the good falls, people will want to buy more of it

Which of the following costs continuously decrease as a firm's output increases?

Average fixed cost

Which of the following costs continuously decrease as a firm's output increases? A. Short-run average total cost B. Long-run average total cost C. Average variable cost D. Average fixed cost E. Marginal cost incorrect

Average fixed cost

If hiring an additional worker would increase a firm's total cost by less than it would increase its total revenue, the firm should A. not hire that worker B. hire that worker C. hire that worker only if another worker leaves or is fired D. hire that worker only if the worker can raise the firm's productivity E. reduce the number of workers employed by that firm

hire that worker

To reduce the amount of negative externality arising from the production of some goods, the government can A) impose a tariff on imports. B) impose a price floor below the equilibrium price. C) impose a price ceiling above the equilibrium price. D) impose a corrective tax on producers to decrease production.

impose a corrective tax on producers to decrease production.

A firm is currently producing at a level of output where MC is increasing and greater than AVC, and MR is greater than MC. To maximize profits, this firm should A. decrease output B. increase output C. Amaintain its current output level D. shut down E. increase its price

increase output

In the short run, if the product price of a perfectly competitive firm is less than the minimum average variable costs, the firm will

incur larger losses by continuing to produce than by shutting down.

The factors of production are best defined as the

inputs used to produce goods and services

A production possibilities curve is typically bowed outward because of the A. law of demand B. law of increasing opportunity costs C. substitution effect D. income effect E. principle of comparative advantage

law of increasing opportunity costs

Which of the following is true if total utility is maximized? A. marginal utility is equal to 0 B. marginal utility is positive C. marginal utility is negative D. average utility is maximized E. average utility is minimized

marginal utility is equal to 0

What will happen to market price and quantity if firms in an oligopolistic market form a cartel?

market price will increase quantity will decrease

income effect

the change in consumption resulting from a change in real income

Sara decides to spend five hours working overtime rather than going to the movies with her friends. She earns $15 per hour for overtime work. Her opportunity cost of working is

the enjoyment she would have received had she gone to the movies.

What is a command economy?

Government makes all economic decisions

A consumer will consume more of good X and less of good Y A. If the price of good X falls and the substitution effect is strong B. If the price of good X rises and then income effect is strong C. If the price of good Y rises and the inferior goods effect is strong D. If the price of good Y rises and the income effect is strong E. If the price of good Z changes and neither is income or substitution effect are present

If the price of good X falls and the substitution effect is strong

If the government levies a $500 tax per car on sellers of cars, then the price paid by buyers of cars would do what? A. Increase by more than $500 B. Increase by exactly $500 C. Increase by less than $500 D. Decrease by an indeterminate amount

Increase by less than $500

Using the same amount of resources, Island X can produce 75 lb of apples or 15 lb of strawberries and Island Y can produce 30 lb of apples or 18 lb of strawberries. Which statement is consistent with this information? - Island X has an absolute advantage in apples and Island Y in strawberries - Island X has an comparative advantage in apples and Island Y has an absolute advantage in apples - Island X has an absolute advantage in strawberries and Island Y in apples - Island X has a comparative advantage in apples and Island Y in strawberries - Island X has a comparative advantage in strawberries and Island Y in apples

Island X has an absolute advantage in apples and Island Y in strawberries

Which of the following is true of the marginal factor cost for a firm hiring labor in a perfectly competitive labor market?

It is constant and equal to the market wage rate.

When the price of a product increases, a consumer's real income decreases, causing the consumer to decrease the quantity of the product demanded. This is known as A) the substitution effect. B) the income effect. C) income elasticity. D) cross-price elasticity. E) diminishing marginal utility.

the income effect.

budget constraint

the limited amount of income available to consumers to spend on goods and services

Which of the following is true about a pure public good? A) The government provides it at zero cost. B) Nonpaying users can be excluded from consuming it. C) People willingly reveal their true preferences for it. D) It is difficult to determine a person's marginal valuation of it.

It is difficult to determine a person's marginal valuation of it.

Suppose that oranges and apples are close substitutes. If the price of apples decreases, the equilibrium price and quantity of oranges are expected to change in which of the following ways? A. Price of oranges increases; quantity of oranges increases B. Price of oranges increases; quantity of oranges decreases C. No change in price of oranges; quantity of oranges decreases D. Price of oranges decreases; quantity of oranges increases incorrect E. Price of oranges decreases; quantity of oranges decreases

Price of oranges decreases; quantity of oranges decreases

Which of the following is an important attribute of a market economy? A. Equal distribution of income B. Collective ownership of resources C. Centralized economic decision making D. Protection of property rights correct

Protection of property rights correct

Jenna spends all of her weekly income on food and entertainment. If the marginal utility of the last dollar Jenna spends on food is greater than the marginal utility of the last dollar she spends on entertainment, what should Jenna do to maximize utility? A. She should do nothing; utility is already maximized. B. She should purchase more food and less entertainment. C. She should purchase less food and more entertainment. D. She should purchase more of both food and entertainment. E. She should purchase less of both food and entertainment.

She should purchase more food and less entertainment.

explicit costs

The actual payments a firm makes to its factors of production and other suppliers.

Given the information in the table above, what are the average fixed cost and average variable cost for 4 units of output? 0 1 2 3 4 5 6 200 300 410 530 660 800 950

The average fixed cost is 50 and the average variable cost is 115.

Assume that a consumer finds that her total expenditure on compact discs stays the same after the price of compact discs declines. Which of the following is true for this consumer over the price range? A. Compact discs are inferior goods. B. The consumer's demand for compact discs increased. C. The consumer's demand for compact discs is perfectly price elastic. D. The consumer's demand for compact discs is perfectly price inelastic. E. The consumer's demand for compact discs is unit price elastic.

The consumer's demand for compact discs is unit price elastic.

Which of the following is true if a country currently produces a combination of two goods inside its production possibilities curve?

The country can produce more of both goods with its existing resources.

Which of the following is true for two products that are complements? - Both products have inelastic demand curves - The cross price elasticity of demand is greater than zero - Both products have elastic demand curves - The cross price elasticity of demand is zero

The cross price elasticity of demand is less than zero

A production possibilities curve can be used to show which of the following? A. absence of trade- offs in the production of goods B. the limits on production due to scarcity of resources C. the amount of investment spending necessary to reach full employment D. the labor- force participation rate E. the average productivity of resources

the limits on production due to scarcity of resources

Economists call a firm's demand for labor a derived demand because

the number of workers hired depends mainly on the demand for the product the workers produce.

accounting profit

total revenue minus total explicit cost

Competitive outcome...

will be where marginal revenue = marginal cost

In long- run equilibrium, the price charged by a monopolistically competitive firm is A. greater than its ATC but equal to its marginal cost B. less than its ATC but equal to its MC C. equal to its ATC but less than its MC D. equal to its AR but less than its ATC E. equal to its ATC but greater than its MC

equal to its ATC but greater than its MC

Suppose a firm in a perfectly competitive market produces 500 units of output and earns $60,000 in total revenue from sales. If the firm increase its output to 550 units, the average revenue of the 550th unit will be

exactly $120.

If a firm experiences economies of scale in production, its long-run average total cost curve

falls as output increases

If a firm experiences economies of scale in production, its long-run average total cost curve A. rises as output increases B. falls as output increases C. is horizontal D. is the same as its marginal cost curve E. lies above the short-run average total cost curve

falls as output increases

If a firm experiences economies of scale in production, its long run average total cost curve

falls as output increases.

Which of the following is true about accounting and economic profits?

A firm that earns an economic profit necessarily earns an accounting profit

Suppose that when the price of good X increases from $800 to $1000, the quantity demanded of good Y decreases from 500 to 400. Using the midpoint method, the cross price elasticity of demand is about A. -0.22, and X and Y are complements. B. 0.22, and X and Y are substitutes. C. 1.00, and X and Y are substitutes. D. -1.00 and X and Y are complement.

-1.00 and X and Y are complement.

Suppose when John's income rises from $25,000 to $28,000, his consumption of Lean Cuisine falls from 10 to 3, what is his income elasticity of demand? A. -9.51, the good is inferior B. -0.105, the good is inferior C. -0.105, the good is elastic D. -9.51, the good is inelastic E. 5.46, the good is normal

-9.51, the good is inferior (solved using midpoint method formula)

Assume that both input and product markets are competitive. If capital is fixed and the product price increases, in the short run firms will increase production by increasing A. capital until marginal revenue equals the product price B. capital until the average product of capital equals the price of capital C. labor until the value of the marginal product of labor equals the wage rate D. labor until the marginal product of labor equals the wage rate E. labor until the ratio of product price to the marginal product of labor equals the wage rate

. labor until the value of the marginal product of labor equals the wage rate

bushels: 0 1 2 3 4 5 total cost: 0 5 12 21 32 45 The table above shows ABC Farming's total cost of producing various quantities of corn. The market for corn is perfectly competitive, and the market price for corn is $10 per bushel. What is ABC Farming's profit-maximizing quantity?

3 bushels

Suppose that when a consumer's income increases from $25,000 to $35,000, the quantity demanded of good Y increases from 10 to 30. Using the midpoint method, the income elasticity of demand is about A. -3, and Y is a inferior good. B. -0.33, and Y is an inferior good. C. 3, and Y is a normal good. D. 0.33, and Y is an normal good.

3, and Y is a normal good.

output: 0 0 QTY. of labor 10 1 19 2 27 3 34 4 40 5 The table above shows output levels and corresponding quantities of labor for a perfectly competitive firm. What is the marginal physical product of the fifth worker?

6 △Q/△L 40-34=6 / 5-4=1 6/1=6

Which of the following would necessarily cause a decrease in the price of a product? A. An increase in the number of buyers and a decrease in the price of an input B. An increase in the number of buyers and a decrease in the number of firms producing the product C. An increase in average income and an improvement in production technology D. A decrease in the price of a substitute product and an improvement in production technology E. A decrease in the price of a substitute product and an increase in the price of an input

A decrease in the price of a substitute product and an improvement in production technology

If the demand for a product is price elastic, which of the following is true? A. An increase in the product price will have no effect on the firm's total revenue. B. An increase in the product price will increase the firm's total revenue. C. A decrease in the product price will increase the firm's total revenue. D. A decrease in the product price will decrease the firm's rate of inventory turnover. E. A decrease in the product price will decrease the total cost of goods sold.

A decrease in the product price will increase the firm's total revenue.

Suppose Jan and Tom want to trade sweaters for potatoes. Both have the resources to produce each of the goods. Under which scenarios can they gain from trade? Jan can produce 5 sweaters or 10 potatoes in one hour, Tom can produce 2 sweaters or 4 potatoes in one hour B. Jan can produce 6 sweaters or 12 potatoes in one hour, Tom can produce 12 sweaters of 6 potatoes in one hour C. Jan can produce 4 sweaters or 8 potatoes in one hour, Tom can produce 3 sweaters or 9 potatoes in one hour D. Both A and B E. Both B and C

Both B and C

Which of the following statements is not correct? A) Soap is likely to be produced in a monopolistically competitive industry. B) Cable television is likely to be produced in a monopoly industry. C) Eggs are likely to be produced in a monopolistically competitive industry. D) Cigarettes are likely to be produced in an oligopoly industry.

C) Eggs are likely to be produced in a monopolistically competitive industry.

The typical firm in a monopolistically competitive industry earns zero economic profit in the long run because A) advertising costs make monopolistic competition a high-cost market structure rather than a low-cost market structure. B) there are no close substitutions for each firm's product. C) there are no significant restrictions or barriers on entering or existing the industry. D) the firms in the industry are unable to engage in product differentiation.

C) there are no significant restrictions or barriers on entering or existing the industry.

Consider the demand for waffles. Which of the following scenarios would cause a shift in demand in or to the left? A. Eggs become more expensive, and people view eggs and waffles as substitute goods. B. Coffee becomes more expensive, and people view coffee and waffles as complementary goods. C. Eggs become more expensive, and eggs are an input in the production of waffles D. Coffee becomes cheaper, and people view coffee and waffles as complementary goods

Coffee becomes more expensive, and people view coffee and waffles as complementary goods.

Which of the following goods could be considered price inelastic when using the midpoint method to calculate price elasticity of demand? A. Food, Medicine, Shelter B. Ice cream, Designer Jeans, Vacations C. Food, Designer Jeans, Roller Blades D. Medicine, Roller Blades, Ice Cream E. All of the above

Food, Medicine, Shelter

Using equal amounts of resources, Country A can produce either 30 tons of mangoes or 10 tons of bananas, and Country B can produce either 10 tons of mangoes or 6 tons of bananas. Which of the following is consistent with the information above? Country A; Country B A. Comparative advantage in mango production; Comparative advantage in banana production B. Comparative advantage in banana production; Comparative advantage in mango production C. Absolute advantage in mango production; Absolute advantage in banana production D. Absolute advantage in banana production; Absolute advantage in mango production E. Comparative advantage in banana production; Absolute advantage in mango production

Comparative advantage in mango production; Comparative advantage in banana production

Differences in which of the following are NOT used to explain wage differentials among workers? A. Talent B. Experience C. Human capital D. Consumer spending E. Discrimination in the job market

Consumer spending

Imperfectly competitive firms may be allocatively inefficient because they produce at a level of output such that A) average cost is at a minimum. B) marginal revenue is greater than marginal cost. C) price equals marginal revenue. D) price is greater than marginal cost.

D) price is greater than marginal cost.

Consider the market for microchips that is currently in equilibrium. What would be the impact on the market if there was an invention of a new robotics tool that could produce microchips faster and with less resources than currently is possible? A. Increase in price of microchips, supply would shift> B. Decrease in the price of microchips, supply would shift C. Increase in the price of microchips, demand would shift D. Decrease in the price of microchips, demand would shift E. No change in the price of microchips, demand and supply both shift

Decrease in the price of microchips, supply would shift

Suppose that the price elasticity of demand for gasoline is -0.1 in the short run and -0.6 in the long run. If the price of gasoline increases by 60 percent, which of the following shows the percentage change in the quantity demanded of gasoline in the short run and in the long run? In the Short Run; In the Long Run A. Increases by 10%; Increases by 60% B. Increases by 6%; Decreases by 36% C. Decreases by 6%; Decreases by 6% D. Decreases by 6%; Decreases by 36% E. Decreases by 10%; Decreases by 60%

Decreases by 6%; Decreases by 36%

A consumer will decide how much of a particular good to consume A. When the income effect is maximized B. When the substitution effect is maximized C. Depending on the quantity that yields the highest marginal utility per dollar spent D. Depending on the quantity that yields the highest total utility per dollar spent E. When they spend their entire budget on the one good

Depending on the quantity that yields the highest marginal utility per dollar spent

inelastic

Describes demand that is not very sensitive to a change in price or income

Which of the following best states the law of comparative advantage?

Difference in relative costs of production are key to determining patterns of trade

If Jan produce can produce 4 sweaters or 8 potatoes in one hour, and Tom can produce 3 sweaters or 9 potatoes in one hour: A. Jan has an absolute advantage in sweaters and a comparative advantage in potatoes B. Jan has an absolute advantage in sweaters and a comparative advantage in sweaters C. Tom has a comparative advantage in potatoes and no absolute advantage in either good D. Tom has a comparative advantage in sweaters and an absolute advantage in potatoes E. None of the above

Jan has an absolute advantage in sweaters and a comparative advantage in sweaters

Which of the following is an example of an externality? A) Jenna purchases new shoes. B) John's dog digs holes in the grass in the playground near John's home. C) Gina sells a book to Sara, who reads the book and then gives it to James as a gift. D) Gloria runs in the park with lots of other runners.

John's dog digs holes in the grass in the playground near John's home.

Lilly bakes cookies and James grows tomatoes. In which of the following cases is it impossible for both Lilly and James to benefit from trade? A. Lilly does not like tomatoes and James does not like cookies. correct B. Lilly is better than James at baking cookies and Liam is better than Abby at growing tomatoes. C. James is better than Lilly at baking cookies and at growing tomatoes. D. Both Lilly and James can benefit from trade in all of the above cases.

Lilly does not like tomatoes and James does not like cookies.

Which of the following is true if total utility is maximized? A. Marginal utility is equal to zero. B. Marginal utility is positive. C. Marginal utility is negative. D. Average utility is maximized. E. Average utility is minimized.

Marginal utility is equal to zero.

Oligopoly outcome equation

N/N+1 * Competitive Outcome N = Number of firms

Suppose that a worker in Tunsia can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Orlandia can grow either 20 bushels of corn or 5 bushels of oats per year. There are 20 workers in Tunsia and 20 workers in Orlandia. Which of the following statements is true? Both countries could gain from trade with each other. B. Neither country could gain from trade with each other because Tunsia has an absolute advantage in both goods. C. Neither country could gain from trade with each other because neither one has a comparative advantage. D. Orlandia could gain from trade between the two countries, but Tunsia definitively would lose. E. None of the above

Neither country could gain from trade with each other because neither one has a comparative advantage.

Suppose that each business needs a license to operate in a city. The license fee increases from $400 per year to $500 per year. What effect will this increase have on a firm's short-run costs? Marginal Cost; Average Total Cost; Average Variable Cost

No effect; Increase; No effect

Suppose that each business needs a license to operate in a city. The license fee increases from $400 per year to $500 per year. What effect will this increase have on a firm's short-run costs? Marginal Cost; Average Total Cost; Average Variable Cost A. Increase; Increase; Increase incorrect B. Increase; Increase; No effect C. No effect; No effect; No effect D. No effect; Increase; Increase E. No effect; Increase; No effect

No effect; Increase; No effect

What would happen to the equilibrium price and quantity of lattés if coffee shops began using a machine that reduced the amount of labor necessary to produce them? A. Both the equilibrium price and quantity would increase. B. Both the equilibrium price and quantity would decrease. C. The equilibrium price would increase, and the equilibrium quantity would decrease. D. The equilibrium price would decrease, and the equilibrium quantity would increase.

The equilibrium price would decrease, and the equilibrium quantity would increase.

An increase in the price of a good decreases purchasing power, causing a decrease in the quantity of the good demanded. The decrease in quantity demanded is due to A. The income effect B. The substitution effect C. A decrease in consumer surplus D. A decrease in supply

The income effect

A production possibilities curve can be used to show which of the following?

The limits on production due to scarcity of resources correct

Which of the following best explains the reason for a downward sloping demand curve for a good? A. The income substitution effects are equal B. Total utility eventually falls below marginal utility as additional units of the good are consumed C. The average utility falls below the marginal utility as additional units of the good are consumed D. The marginal utility decreases as additional units of the good are consumed

The marginal utility decreases as additional units of the good are consumed

Which of the following best explains the reason for a downward-sloping demand curve for a product? A. The income and substitution effects are equal and opposite. B. Total utility eventually falls below marginal utility as additional units of the product are consumed. C. The average utility falls below the marginal utility as additional units of the product are consumed. D. The marginal utility decreases as additional units of the product are consumed. E. Average utility is always decreasing.

The marginal utility decreases as additional units of the product are consumed.

Which of the following events would cause a movement upward and to the left along the demand curve for olives? A. The number of people who purchase olives decreases. B. The number of farms producing olives increases C. Consumer income decreases, and olives are a normal good. D. The price of pickles decreases, and pickles are a substitute for olives. E. The price of olives rises.

The price of olives rises.

For a particular good, a 5 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good? The relevant time horizon is short, and therefore it is inelastic. B. The good is a necessity, and therefore it is inelastic. C. The market for the good is broadly defined and therefore it is elastic. D. There are many close substitutes for this good, and therefore it is elastic.

There are many close substitutes for this good, and therefore it is elastic.

If an increase in the price of good X causes a decrease in demand for good Y, good Y is

a complement for good X.

economic profit

a firm's revenues minus all its costs, implicit and explicit

production possibilities curve

a graph that shows alternative ways to use an economy's productive resources

Compared to a perfectly competitive industry, a profit - maximizing monopoly with identical costs of production will produce A. a lower quantity of output and charge a higher price B. a higher quantity of output and charge a lower price C. a lower quantity of output and charge a lower price D. a higher quantity of output and charge a higher price E. the same quantity of output and charge a higher price

a lower quantity of output and charge a higher price

monopolistic competition

a market structure in which many companies sell products that are similar but not identical

oligopoly

a type of market structure that has slightly more competition than a monopoly but slightly less competition than perfect competition

Average total cost is equal to the sum of

average fixed cost and average variable cost

Average total cost is equal to the sum of A. total fixed cost and total variable cost B. marginal cost and average fixed cost C. average fixed cost and average variable cost D. marginal cost and average variable cost E. marginal cost, average fixed cost, and average variable cost

average fixed cost and average variable cost

At Sara's Bakery, the total cost of producing 100 pies is $670. The marginal cost of producing the 101 pie $5.30. We can conclude that the

average total cost of 101 pies is $6.68. 670+5.30=675.3 675.3/101=6.68

marginal revenue equation

change in TR/change in Q

At the local park there is a pool for children to use. While anyone is allowed to use the pool, it is often very busy, reducing the enjoyment of many of the people who use it. The pool is a A) private good. B) club good. C) common resource. D) public good.

common resource.

Rational people make decisions at the margin by A. following marginal propensity to consume. B. making decisions based on random expectations. C. thinking only about future income. D. comparing marginal costs and marginal benefits. correct

comparing marginal costs and marginal benefits. correct

If the cross- price elasticity of demand between good A and good B is negative, then good A and B are A. substitutes B. complements C. unrelated D. in high demand E. in low demand

complements

Last year, Gina bought 6 hand bags when her income was $50,000. This year, her income is $55,000, and she purchased 10 hand bags. Holding other factors constant, it follows that Gina

considers hand bags to be a normal good.

IMAGE: wide U - shaped The long run average total cost curve above shows

constant returns to scale from point B to point C.

Assume that a firm in a certain industry hires its workers in a perfectly competitive labor market. As the firms hires additional workers, the marginal factor cost is

constant.

The most obvious benefit of specialization and trade is that they allow us to A. work more hours per week than we otherwise would be able to work. B. consume more goods than we otherwise would be able to consume. C. spend more money on goods that are beneficial to society, and less money on goods that are harmful to society. D. consume more goods by forcing people in other countries to consume fewer goods.

consume more goods than we otherwise would be able to consume.

The supply curve for stand up paddle boards A. shifts when the price of stand up paddle boards changes because the price of stand up paddle boards is measured on the vertical axis of the graph. B. shifts when the price of stand up paddle boards changes because the quantity supplied of stand up paddle boards is measured on the horizontal axis of the graph. C. does not shift when the price of stand up paddle boards changes because the price of stand up paddle boards is measured on the vertical axis of the graph. D. does not shift when the price of stand up paddle boards changes because the price of stand up paddle boards is measured on the horizontal axis of the graph.

does not shift when the price of stand up paddle boards changes because the price of stand up paddle boards is measured on the vertical axis of the graph.

The allocation of resources through decentralized decisions of buyers and seller is A) efficient but not equal. B) both equal and efficient. C) equal but not in the best interest of producers. D) neither equal nor efficient. incorrect

efficient but not equal.

In a competitive market, when a negative externality exists, the private market produces A) more than the socially optimum level because the marginal social cost is less than the marginal private cost. B) more than the socially optimum level because the marginal social cost is greater than the marginal private cost. C) less than the socially optimum level because the marginal social benefit is less than the marginal private benefit. incorrect D) less than the socially optimum level because the marginal private benefit is greater than the marginal external cost. E) the optimal level of output because marginal private benefits equal marginal social costs.

more than the socially optimum level because the marginal social cost is greater than the marginal private cost.

It is possible for an economy to increase its production of both goods if the economy

moves from a situation of inefficient production to a situation of efficient production.

Which of the following shifts in the curves would cause an increase the price of a good, but an ambiguous change in the quantity sold? A. Decrease in demand, and increase in supply B. Decrease in demand, and decrease in supply C. Increase in demand, and increase in supply D. Increase in demand, and decrease in supply E. Decrease in supply, no change in demand

ncrease in demand, and decrease in supply

returns to scale

occurs when the output increases by a larger proportion than the increase in inputs during the production process. For example, if input is increased by 3 times, but output increases by 3.75 times, then the firm or economy has experienced an increasing returns to scale

implicit costs

opportunity costs

Marginal revenue is the change in revenue that results from a one-unit increase in the

output level

A profit-maximizing firm will shut down in the short run if

price is less than average variable cost

The US government uses antitrust laws to regulate private markets to

promote a competitive market environment.

The slope of the budget constraint is determined by the

relative price of Good X in terms of Good Y.

Refer to a firm's production function given in the table below. Assume that the firm uses labor as the only variable input to produce its output. # workers hired/output per day 0 1 2 3 4 5 0 15 32 42 50 55 If the market wage rate is constant no matter how many workers are hired, the marginal cost of the firm is minimized with the hiring of the

second worker

Suppose that the price elasticity of demand for gasoline is -0.1 in the short- run and -0.6 in the long run. If the price of gasoline increases by 60%, what is the % change in the quantity demanded of gasoline in the short and long-run?

short -run will decrease by 6% and long- run will decrease by 36%

The primary distinction between the short run and the long run is that in the short run

some costs of production are fixed but in the long run all costs are variable.

An effective price floor will most likely result in

surpluses of products if the price floor is above the equilibrium price.