Micro ECO Final

Profits are BEST described as the rewards that are earned for:

Combining resources and assuming the risk to produce products.

Which action can help increase the stability of a cartel?

Increase government protection

If a firm can produce 100 DVDs for $100 or 200 DVDs for $150 what is the marginal cost per DVD of the additional 100 DVDs?

$0.50

If you are willing to sell your old bicycle for $30, but someone offers you $40 for it, the results of the transaction would yield:

$10 worth of producer surplus and an unknown consumer surplus.

Producer surplus is shown graphically as the area:

Above the supply curve and below the market price.

The budget line identifies:

Affordable bundles

Which of these the best example of a framing bias? Stores that advertise a low price for a product but do not have any left in stock. Hotels that offer discounts only if you are members of certain clubs. Airlines that offer low airfare but charge fees for checked bags or seat assignments. Restaurants that add an automatic 18% gratuity for large groups.

Airlines that offer low airfare but charge fees for checked bags or seat assignments.

Helping a friend struggling to pass a history exam despite it taking valuable time away from your own studies is an example of:

Altruism

The marginal product of labor is equal to the:

Increase in the total product that results from hiring one more worker.

If a cartel member is considering cheating in order to earn profits, it should:

Increase the quantity it sells at the quota price.

When production technology improves, supply:

Increases, the equilibrium quantity rises, and the equilibrium price falls.

The long run:

Is a period of time in which all factors of production can be varied.

To say that turnips are inferior goods means that the income elasticity:

Is negative

The government raises sale taxes on shirts. The tax is imposed on sellers. As a result, the:

Supply curve of shirts shifts leftwards.

Over the last 10 years, laptop computer prices have moved down while the quantity has increased. This indicates that:

Supply has increased more than demand.

If a small percentage decrease in the price of chocolate causes a larger decrease in the quantity supplied, the:

Supply of chocolate is elastic.

The state of Florida is experiencing a drought that has caused the price of water used by farmers to grow oranges to rise. This will cause a decrease in the?

Supply of oranges

In an oligopoly, all the firms:

Take their competitors into account when they make pricing decisions

The profits of a partnership are:

Taxed as personal income

If firms in a monopolistically competitive industry are experiencing economic losses in the short run, some firms will _____ the industry, _____ demand until each firm earns a normal profit.

exit; increasing

The stockholders of a corporation have _____ liability and _______ required to pay all of the firm's losses.

limited; are not

The supply curve:

Shows a positive relationship between price and quantity supplied.

What is the present value of $5,000 received in two years if the interest rate is 7%?

$4,367.19

If a 20 percent increase in the price of a used car results in a 10 percent decrease in the quantity of used cars demanded, then the price elasticity of demand equals:

0.5

Suppose that in Japan one worker can produce either four cars or five tons of grain per year. What is the opportunity cost of producing one car in Japan?

1.25 tons of grain

Suppose one worker produces 8 toys, two workers together produce 20 toys, three workers together produce 35 toys. Which is the marginal product of the 2nd worker?

12

Taco​ Bell's economists determine that the price elasticity of demand for their tacos is 2.0.​ So, if Taco Bell raises the price of its tacos by 6.0​ percent, the quantity demanded will decrease by​ ________ percent.

12

Labor Quantity Total Cost AFC AVC ATC 0 0 160 1 8 200 2 12 360 30 What is the Total Fixed Cost?

160

Labor Quantity Total Cost AFC AVC ATC 0 0 160 1 8 200 2 12 360 30 What is the Average Fixed Cost of producing 8 units?

20

Labor Quantity Total Cost AFC AVC ATC 0 0 160 1 8 200 2 12 360 30 What is the Average Total Cost of producing 8 units?

25

Suppose the actual price for good A is $20. John is willing to pay $30, Susie is willing to pay $28, Joseph is willing to pay $25, Jessica is willing to pay $23, and Jeremy is willing to pay $21. What is total consumer surplus?

27

If a fall in the price of good A increases the quantity demanded of good B:

A and B are compliments

Which of the following will cause an increase in the quantity demanded for iPhones? An increase in the number of buyers in the iPhone market. An increase in preferences for iPhones. A decrease in the price of iPhones. An increase in the price of iPhones.

A decrease in the price of iPhones.

Which of the following will cause a decrease in the demand for coffee? A decrease in the price of coffee. An increase in the price of coffee. A decrease in the price of tea (a substitute for coffee). An increase in the price of tea.

A decrease in the price of tea.

Which of the following will not cause an increase in demand? A decrease in the product price. An increase in the price of a complementary good. An increase in the number of buyers in the market. An increase in the price of a substitute good.

A decrease in the product's price.

Which of the following will cause a movement down along the demand curve? An increase in the price of a substitute good. An increase in the product price. A decrease in the product price. An increase in the price of a complementary good.

A decrease in the production price.

To maximize its revenue:

A firm facing inelastic demand should always raise its price.

Which game does NOT describe a Prisoner's Dilemma outcome? A game of chicken in which one player backs down while the other player does not. Rival department stores agreeing to accept each other's coupons and advertised specials. Competing electronics stores attempting to undercut each other's prices. Cartel members attempting to increase profits by cheating on their production quotas.

A game of chicken in which one player backs down while the other player does not.

An advantage of a partnership over a corporation is that:

A partnership's profits are taxed only once, while retained profits of a corporation are taxed twice.

Which type of firm has no control over the price of its product?

A perfectly competitive firm

The market for hot dogs in New York City is an example of:

A perfectly competitive market.

Which of the following is an example of capital in the production process of an amusement park? The ticket-taker There electricity used at the park A roller coaster The mechanics who maintain the equipment

A roller coaster

All of these would be included in on-the-job training, EXCEPT: A product training class. A customer support training class. An economics principles class. An apprentice training class.

An economics principles class.

Before deciding on a pricing strategy, Worldwide Widgets consults with its market intelligence team to understand what discounts the Gargantuan Gizmo Company is offering. The model that BEST fits this industry is:

An oligopoly.

Pablo can walk three dogs or mow two lawns in two hours. Ashanti can walk six dogs or mow three lawns in two hours. One can conclude that:

Ashanti has the absolute advantage in dog walking and Pablo has the comparative advantage in lawn mowing.

A Nash equilibrium:

Assumes that each player chooses his or her best strategy.

The owner will shut down a perfectly competitive firm if the price of its good falls below its minimum:

Average variable cost

Butter is a substitute for margarine. If the price of margarine drops, we would expect to see:

Both the price of butter and the quantity of butter traded to fall.

The theory that suggest that most countries would mutually benefit from trade by specializing in export goods they could produce at a lower opportunity cost than another country is called:

Comparative advantage

A PPF that is a straight line is a result of?

Constant opportunity costs

Total surplus is defined as:

Consumer Surplus + Producer Surplus

Bonds are BEST described as a type of:

Debt capital

Monopolistically competitive markets and perfectly competitive markets do NOT share which characteristic?

Differentiated products

Industrial agglomeration occurs because of which economic phenomenon?

Economies of scale

A price cut increases total revenue if demand is:

Elastic

_______ combine land, labor and capital to produce goods and services and assume the risks associated with running businesses.

Enterpreneures

In general, which is true about the focus of different countries' university educational systems?

European programs focus on a specific field of study, while American programs offer more breadth of topics.

The amount that must be repaid to the bondholder upon the bond's maturity is called the:

Face value

The costs incurred even when no output is produced are called:

Fixed costs

Which of the following products is likely to be the MOST differentiated? Cotton sold to a fabric maker. Fabric sold to a garment maker. Garments sold to a retail customer. Garments sold to a garment distributor.

Garments sold to a retail customer.

If Nintendo lowers the price of its product by $10, Sony responds by lowering the price of its own product by $10 and chooses not to cooperate again. This is an example of what type of game strategy?

Grim trigger

Which of the following would not yield an external benefit? Partying on the front lawn until four in the morning. Building an airport next to a library. Smoking cigarettes in a restaurant. Helping an elderly person across the street.

Helping an elderly person cross the street.

Which is an example of a normative question? How do interest rates influence employment? How do unemployment rates differ among nations? How should a society achieve full employment? What are long-term effects of unemployment?

How should a society achieve full employment?

Which of the following are characteristics of a sole proprietorship? I. Single owner II. Limited liability

I only

The law of supply states that:

If prices fall, producer will offer fewer products to the market.

According to an OECD study of thirty-four advanced nations, where did the United States rank in math proficiency?

In the bottom half

Rent is the payment to owners of which factor of production?

Land

Academic studies have found that the economic returns to education are:

Large and positive.

When economist use the word "additional" they generally mean?

Marginal

Economic profit is maximized at the level of output where:

Marginal Revenue = Marginal Cost

"Diminishing marginal returns" refers to a situation in which the:

Marginal product of the last worker hired is less that the marginal product of the previous worker hired.

The most important goal of the firm is to:

Maximize its profits

Suppose the United States must give up the production of 1 gallon of paint to produce 1 pair of shoes. Mexico must give up 2 gallons of paint to produce 1 pair of shoes. According to the principle of comparative advantage:

Mexico should specialize in producing paint, the United States in producing shoes.

Which market type has characteristics as follows: Large number of firms, differentiated product?

Monopolistic competition

Which market type has characteristics as follows: one firm, good or service produced has no close substitutes, barriers to entry prevent new firms from entering into the industry?

Monopoly

The more inelastic the demand for a good, the:

More a sales tax rises the price paid by buyers.

A change from an inefficient mix to an efficient mix of output would best be represented with a PPF as a:

Movement from inside the PPF onto the PPF

If an increase in income leads to an increase in the demand for opera tickets, than opera tickets are an:

Normal good

Increasing opportunity costs occurs along the PPF because?

Not all resources are equally well suited to produce all goods.

A market structure in which a small number of firms compete is called:

Oligopoly

Forgoing paid employment to obtain a university degree is a(n):

Opportunity cost.

A music teacher who offers lessons for $50 for one week or $200 for 8 weeks a 50% discount is hoping her costumers will experience:

Overconfidence

The profit maximizing condition for a perfectly competitive firm is:

P = MC

A financial services firm might hire a college graduate who majored in something other than finance, because graduating from college shows the employer that the graduate has the discipline to be a good employee. This is an example of:

Signaling

Which of these is a disadvantage of issuing stock relative to bonds? Repayments to stockholders are required. Losses are shared by all shareholders, not just the business's founder. Stocks are riskier than bonds. Partial ownership in the business is given up.

Partial ownership in the business is given up.

Employers give full time employees that have been on the job for more than 3 years employee stock options. This is an example of:

People following incentives

The demand for ______ is more elastic than the demand for ______.

Pepsi; all soft beverages

Blue pens and black pens are close substitutes. The cross elasticity of demand for black pens with respect to the price of blue pens is​:

Positive

If the supply curve shifts rightward and the demand curve also shifts rightward and if demand grows relatively less than supply then:

Price will fall and quantity will rise.

The process of converting factors of production into goods and services is called:

Production

When society produces a mix of goods and services that are most desired and produces them at the lowest possible cost:

Production and allocative efficiency are achieved

A determinate of price elasticity of supply is the extent to which:

Production of the good uses commonly available resources.

The goal of investment in human capital is to increase labor's:

Productivity

Which characteristic does monopolistic competition NOT have in common with perfect competition?

Products of individual firms are different.

In economics, the rewards earned by entrepreneurship are called:

Profits

The income elasticity of demand is a measure of the responsiveness of the:

Quantity of a good demanded to changes in income.

Budget lines are drawn on a diagram with the:

Quantity of one good on the vertical axis and the quantity of another good on the horizontal axis.

If the supply for a good is inelastic, that means that when the price increases:

Quantity supplied will increase by a smaller percentage than the price increased.

A profit maximizing monopolist maximizes profits by:

Reducing where Marginal Cost = Marginal Revenue

Which of the following would create an external benefit? Restoration of a run-down home. Cigar smoke. A slow car on a busy thoroughfare. Livestock in your neighbor's backyard.

Restoration of a run-down home.

If Rosco's Tacos competes with eight other fast-food restaurants in the same neighborhood, and two of those rival firms exit the market, then:

Rosco's demand curve will shift to the right.

Which of the following is an example of a microeconomics topic? The inflation rate in 2009 for the US. The unemployment rate in March 2010 for the US. The price of an iPad sold by Apple Computer. The rate of growth in GDP for the first quarter of 2010 for the US.

The price of an iPad sold by an Apple Computer.

The producer surplus from a good is equal to the:

The price of the good minus its opportunity cost of production.

If a market is not at equilibrium:

The price will change and in response market participates will slide along the existing supply and demand curve until the market reaches equilibrium.

The short run is a period of time in which:

The quantities of some resources the firm uses are fixed.

The price elasticity of demand measures:

The responsiveness of the quantity demanded to changes in price.

Electricity is essential in the production of aluminum. If electricity prices increase:

The supply curve for aluminum shifts leftward.

Suppose one worker produces 8 toys, two workers together produce 20 toys, three workers together produce 30 toys, and four workers together produce 35 toys. At what point does diminishing marginal product of labor begin?

The third worker

The notion that individuals and firms are compelled to retaliate or punish others for engaging in noncooperative actions, but leaving the door open for future reconciliation, is BEST referred to as a(n):

Tit-for-tat strategy.

Average product of labor is equal to _____.

Total product divided by the quantity of labor employed.

Economist assume that consumers try to maximize:

Total utility

A firm's shutdown point is the quantity and price at which the firm's total revenue just equals its:

Total variable cost

If Nintendo lowers the price of its product by $10, Sony waits to see whether Nintendo's price cut was a temporary mistake. This is an example of what type of game strategy?

Trembling hand trigger

There are two sellers in the DVD market, Wen and Ahmed. If the market price were $5 per DVD, Wen would be willing to sell 10 DVDs and Ahmed would want to sell 15 DVDs. If the market price were to rise to $7 then?

We can confidently say that market quantity supplied is at least 25 DVDs.

Which of the following statements is true for any marginal and average? When the marginal is equal to the average, the average falls. When the marginal is greater that the average, average rises. When the marginal is less than the average, the average rises. When the marginal is rising, the average is rising.

When the marginal is greater than the average, the average rises.

Will's marginal utility from the last hot dog consumed is 80 and marginal utility from the last slice of pizza is 200. If hot dogs cost $2 and slices of pizza cost $4, which statement is true according to the utility maximization rule?

Will must consume more slices of pizza and fewer hot dogs to maximize his utility.

If demand is price elastic:

a 1% decrease in the price leads to an increase in the quantity demanded that exceeds 1%.

The principle of increasing marginal cost implies that the:

additional cost of producing one more of a good or service increases as more is produced.

Compared with competitive markets, monopolies charge _______ prices and produce a ________ output.

higher; lower

The discovery of natural gas in the American Midwest should lead to a(n) ____ in the price of land because of a(n) _____ land.

increase; increase in demand for.