Micro Econ 1123- Midterm 2 Study Set- Pallab Ghosh (Spring 2022)
A firm sells 20 units of a good at a price of $5 per unit. If the average cost of production of the good equals $3 per unit, the firm's revenue is:
$100
The total cost of a firm is $50, the average variable cost is $2, and the average fixed cost is $3. How may units of the output does the firm produce?
10 units
Assume that a consumer can spend $20 on two goods, pens and pencils. If the price of one pen is $5 and the price of one pencil is $2, which of the following combinations of the two goods represents a point on the consumers budget constraint?
2 pens and 5 pencils
Assume that a consumer can spend $20 on two goods-pens and pencils. If the price of one pen is $5 and the price of one pencil is $2, which of the following combinations of the two goods represents a point on the consumers budget constraint?
2 pens and 5 pencils
A firm produced 376 units with 10 workers. When the eleventh worker was hired, the output increased to 398 units. The marginal product of the eleventh worker is:
22 units
A firm produces 200 units of a good when it employs 7 workers. The marginal product of the eighth worker is 46 units. If the eighth worker is hired, the firm's total product will increase to:
246 units
A firm earns $600 of total revenue from selling its product at $200 per unit. If the per-unit cost of producing the good is $150, the firm sells _______ units(s) of the good Group of answer choices
3
A firm earns $600 of total revenue from selling its product at $200 per unit. If the per-unit cost of producing the good is $150, the firm sells _______ units(s) of the good.
3
Sharon consumes 10 chocolates when the price of one chocolate is $2. If her elasticity of demand for chocolates is -1, she consumes ________ chocolates when the price increases to $4.
5
Sharon consumes 10 chocolates when the price of one chocolate is $2. If her elasticity of demand for chocolates is -1, she consumes _________ chocolates when the price increases to $4.
5
Helium is lighter than air and thus can be used to make party balloons float. Helium is also an inert gas that is vital for many industrial applications (such as medical imaging technology) that require achieving super low temperatures. This relatively new industrial application for helium has caused the demand for helium to ____. This has resulted in a/an ____ in the price of party balloons since helium is a/an _____ for these balloons. Correct!
increase: increase: input
In a perfectly competitive market, situations of surplus or shortage of a good:
are self-corrected due to the competitive nature of the market
In a perfectly competitive market, situations of surplus or shortage of a good:
are self-corrected due to the competitive nature of the market.
Consider a market where there are many firms with different cost structures. When determining which firms enter the market first, we look at ____________.
average total cost
The long-run average cost curve connects the lower part of the short-run cost curves because:
in the long run, firms have more flexibility to change input combinations.
If the marginal cost of a perfectly competitive firm producing a good is $50 and the market price of the good is $100, the firm should:
increase its output
The following table shows the total benefit that Jenny derives from consuming different quantities of chocolate. Quantity of Chocolate Consumed Total Benefit ($) 0- 0 1- 10 2- 18 3- 24 4- 29 5- 30 Refer to the table above. What is the marginal benefit that Jenny derives from the second unit of chocolate?
$8
A firm producing 10 units of output incurs a total cost of $800. When it produces 11 units, the total cost increases to $890. What is the marginal cost of producing the eleventh unit?
$90
When the price of a good increases by 300%, the quantity supplied of the good increases from 200 units to 900 units. The price elasticity of supply of the good is:
1.17
Assume that a combination of 10 bottles of wine and 2 cartons of milk lies on a consumer's budget constraint. If the price of one bottle of wine is $10, and one carton of milk is $1, what is the consumer's income?
$102
John is ready to pay $5 for an extra loaf of bread. Due to an ongoing discount in the store, he gets a loaf for $2. John's consumer surplus from the purchase is
$3
John is ready to pay $5 for an extra loaf of bread. Due to an ongoing discount in the store, he gets a loaf for $2. John's consumer surplus from the purchase is ________.
$3
Refer to the figure above. What is the market-wide consumer surplus when the market price of wine is $18?
$3,000
A firm sells 30 units of its product at a price of $5 per unit. It incurs a fixed cost of $100 and a variable cost of $20. The firm's profit is:
$30
A firm sells 30 units of its product at a price of $5 per unit. It incurs a fixed cost of $100 and a variable cost of $20. The firm's profit is: Group of answer choices
$30
A firm with a fixed cost of $300 every month and variable cost of $200 every month decides to shut down. In such a situation it would lose:
$300 every month
Refer to the figure above. What is the loss in the market-wide consumer surplus when the price of wine changes from $9 to $18?
$57,000
Refer to the figure above. What is the market-wide consumer surplus when the market price of wine is $9?
$60,000
A firm has an average total cost of $50. If it sells 20 units of its product at $80 each, what is its profit?
$600
When the price of wine is $10 per bottle, Thomas purchases 30 bottles every month. Later, the government introduces a 50% tax on all alcoholic beverages, which is to be completely borne by consumers. This reduces Thomas's consumption to 20 bottles of wine a month.
-1
Refer to the table above. What is the market demand for wine when the price is $3?
50 units
The following table shows the total output produced by different numbers of workers in a shoe factory. Output per Day (pairs) Number of Workers 0- 0 50- 1 112- 2 180- 3 225- 4 260- 5 280- 6 Refer to the table above. What is the marginal product of the third worker?
68 pairs of shoes
Refer to the table above. What is the market demand for wine when the price is $1?
76 units
A firm is experiencing economies of scale when its average total cost declines as more output is produced. The table below shows the long-run total costs of three different firms. Do firms 1 and 2 experience economies of scale? Or do they experience diseconomies of scale?
???? NOT Both firms are experiencing economies of scale. ?????
A firm is experiencing economies of scale when its average total cost declines as more output is produced. The table below shows the long-run total costs of three different firms. Minimum efficient scale is the lowest level of output where long-run average total cost is minimized. Firm 3's minimum efficient scale occurs when the output is ______ unit(s).
????? NOT 4 ?????
Months ago you spent $30 on a ticket to see your favorite musician. However, you start having doubts the day of the show because you do not feel prepared for an exam the following day. Which of the following bits of information should (according to the ideas about sunk costs discussed in the chapter) influence your final decision? You learn there will be free pizza at the concert; thus, you will no longer have to spend $10 on dinner.
????? NOT This does not impact your decision since it is still a sunk cost that will not impact your decision. ?????
Months ago you spent $30 on a ticket to see your favorite musician. However, you start having doubts the day of the show because you do not feel prepared for an exam the following day. Which of the following bits of information should (according to the ideas about sunk costs discussed in the chapter) influence your final decision? You notice a mistake on your credit card statement! You paid $20 for the ticket, not $30.
????? NOT This lower cost will make you more likely to attend the show. ??????
Refer to the figure above. If the price of a sweater is $3 and the budget constraint of the consumer is B3, his income is:
??????
When the price of milk is $3 per bottle, Steve purchases 20 bottles of milk. When the price increases to $6, Steve's consumption falls to 15 bottles. Steve's elasticity of demand for milk is:
??????
When the price of milk is $3 per bottle, Steve purchases 20 bottles of milk. When the price increases to $6, Steve's consumption falls to 15 bottles. Steve's elasticity of demand for milk is:
???????
The following table shows the total output produced by different numbers of workers in a shoe factory. Output per Day (pairs) Number of Workers 0- 0 50- 1 112- 2 180- 3 225- 4 260- 5 280- 6 Refer to the table above. What is the marginal product of the sixth worker?
??????? NOT 46.7 ????
Which of the following pairs of goods is likely to be considered substitutes?
A Ford car and public transportation
Which of the following statement is true?
A binding price ceiling will always cause the quantity demanded to exceed the quantity supplied.
Which of the following is NOT an example of a market?
A city requires homeowners to pay $500 for putting in a sidewalk on their street
Which of the following factors is likely to lead to an increase in the quantity demanded of pens?
A fall in the price of pens
Which of the following will lead to a change in the opportunity cost of buying a pen and a pencil?
A twofold increase in the price of pens and a threefold increase in the price of pencils
Which of the following is likely to lead to a rightward shift in the supply curve of cotton?
An increase in labor productivity due to training programs
The price elasticity of demand for a good is likely to be less elastic __________.
All of the above. - the shorter the available time during which consumers can adjust. - the lower the budget share spent on the good. - the smaller the number of close substitutes for the good.
Which of the following are necessary ingredients to the buyer's problem?
All of the given choices. - Consumer's tastes and preferences. - Amount of money the consumer has to spend. - Prices of goods and services.
Which of the following statements correctly describes a perfectly competitive market?
All participants in a perfectly competitive market are price-takers
If an individual only consumes goods X and Y and is currently maximizing her total benefits, which of the following must be true?
All the given choices. - The "equal bang for the buck" rule is adhered to. - MBx/Px = MBy/py - The marginal benefits per dollar spent are the same for both goods.
At a price of $5 per table, the quantity supplied of tables is 500 units whereas the quantity demanded is 660 units. Given this information, which of the following statements is true?
At $5 per table, there is a shortage in the market.
At a price of $1 per table, the quantity supplied of tables is 100 units, whereas the quantity demanded is 70 units. Given this information, which of the following statements is true?
At a price of $1 per table, there is a surplus in the market
At a price of $1 per table, the quantity supplied of tables is 100 units, whereas the quantity demanded is 70 units. Given this information, which of the following statements is true?
At a price of $1 per table, there is a surplus in the market.
(Continue to Q7) Suppose the university is trying to determine the most efficient way to allocate the rooms such that those who value the rooms the most get them. Which of the following would you suggest as the most efficient?
Auctioning the rooms to the highest bidders.
Which of the following is NOT a direct determining factor of consumers' purchase decisions?
Cost of factor inputs
Which of the following examples best describes the concept of free entry?
Jack has an old cell phone that he wants to sell. He opens an account on eBay and auctions it off.
The automobile market in the United States is often said to be highly competitive. But it is not perfectly competitive. What makes this market not perfectly competitive? Correct!
Different car companies make different vehicles with different features
The automobile market in the United States is often said to be highly competitive. But it is not perfectly competitive. What makes this market not perfectly competitive?
Different car companies make different vehicles with different features.
What is the difference between accounting profit and economic profit?
Economic profit subtracts both explicit and implicit costs from total revenue, while accounting profit only subtracts explicit costs.
Assume that the market for chocolates is perfectly competitive. Which of the following statements would be true in this case?
Jill starts to produce chocolates today, but the addition of her supply into the market does not decrease the market price.
Which of the following inputs can be changed in the short run?
Labor Employed
A consumer's budget constraint refers to the collection of all possible bundles that ___________.
Exactly exhausted a consumer's entire budget.
Which of the following is NOT a required characteristic of a market?
Government setting the price of the good or service
Which of the following statements is true of the concept of willingness to pay?
If a consumer is consuming 10 units of a commodity and she is ready to pay $2 for the eleventh unit, her willingness to pay for the eleventh unit is $2
Which of the following inputs can be changed in the short run?
Labor employed
Which of the following is an example of specialization? Group of answer choices
Instead of a worker making an entire shoe, the total productivity increased when different workers were allotted different jobs in the production process
Which of the following is an example of specialization?
Instead of a worker making an entire shoe, the total productivity increased when different workers were allotted different jobs in the production process.
Consider the following statement: Given that burgers and fries are complementary goods, if the price of fries decreases the demand for both goods will rise.
It is somewhat inaccurate. The decrease in the price of fries will increase the quantity demanded (not the demand) for fries. It will, however, as the statement claims, increase the demand for burgers.
Which of the following examples best describes the concept of free entry?
Jack has an old cell phone that he wants to sell. He opens an account on eBay and auctions it off
An optimizing consumer has to choose between two goods Good A priced at
MBA/PA = MBB/PB
An optimizing consumer has to choose between two goods-Good A priced at P_{A} and Good B priced at P_{B}. Given that MB_{A} is the marginal benefit from consuming Good A and MB_{B} is the marginal benefit from consuming Good B, the consumer's well-being will be maximized at the point where:
MB_{A}/P_{A} = MB_{B}/P_{B}
Suppose ventilator manufacturers are profit-maximizing firms with costs outlined in this chapter (large fixed cost and increasing marginal costs). These firms typically operate in a competitive market, though the government is considering the following policies to boost production. For each policy, explain whether production will in fact increase. If the government gives each firm a large sum of money with no strings attached, will ventilator production increase?
No, a no strings attached payment does not impact marginal revenue or marginal cost so production will remain unchanged.
Charley spends all of his income on soft drinks and pizza. Suppose he is currently buying these products in amounts such that his marginal benefit from an additional soft drink is $70 and his marginal benefit from an additional slice of pizza is $130. If the price of a soft drink is $3 and the price of a slice of pizza is $5, is Charley maximizing his total benefits?
No, he should shift consumption toward pizza and away from soft drinks to maximize total benefits.
Charley spends all of his income on soft drinks and pizza. Suppose he is currently buying these products in amounts such that his marginal benefit from an additional soft drink is $170 and his marginal benefit from an additional slice of pizza is $30. If the price of a soft drink is $4 and the price of a slice of pizza is $4, is Charley maximizing his total benefits?
No, he should shift consumption toward soft drinks and away from pizza to maximize total benefits.
Does the shape of the market demand curve differ from the shape of an individual demand curve?
No, they both tend to be downward-sloping curves.
Which of the following statements is true of the short run?
Only some of a firm's input can be varied
Which of the following factors is likely to lead to an increase in the quantity demanded of pens?
Pens and writing pads
Which of the following is true of a market?
Price acts as a selection device for buyers and sellers in every market
In a marketplace, prices_________.
are a trade-off
Z is a normal good. The equilibrium price and equilibrium quantity of Z in the year 2019 was $25 and 60 units, respectively. In 2020, the equilibrium price of Z had decreased to $15 and the equilibrium quantity had also decreased to 50 units. Other things remaining the same, which of the following could explain this change?
Shift of the demand curve for Z to the left
Z is a normal good. The equilibrium price and quantity of Z in the year 2019 was $25 and 60 units, respectively. In 2020, the equilibrium price of Z had increased to $35 but the equilibrium quantity had decreased to 50 units. Other things remaining the same, which of the following could explain this change?
Shift of the supply curve of Z to the left
Z is a normal good. The equilibrium price and equilibrium quantity of Z in the year 2011 was $25 and 60 units, respectively. It was seen that, in 2014, the equilibrium price of Z had decreased to $15, but the equilibrium quantity had increased to 70 units. Other things remaining the same, which of the following could explain this change?
Shift of the supply curve of Z to the right
Months ago you spent $30 on a ticket to see your favorite musician. However, you start having doubts the day of the show because you do not feel prepared for an exam the following day. Which of the following bits of information should (according to the ideas about sunk costs discussed in the chapter) influence your final decision? You thought there was no hope of reselling the ticket, though your roommate just offered to buy it for $10.
The ability to resell the ticket means it is no longer a sunk cost and skipping the show brings you an additional $10 in benefit, making you more likely to skip the show.
Which of the following refers to diminishing marginal returns?
The additional output produced in a firm decreased as more workers were hired
Which of the following situations depicts diseconomies of scale?
The average total cost of a firm increases from $50 to $55 when it increases its production from 10 units to 20 units
Which of the following situations depicts diseconomies of scale?
The average total cost of a firm increases from $50 to $55 when it increases its production from 10 units to 20 units.
Suppose the market for cement is such that the output of all sellers is identical in composition and quality. While there are a large number of buyers and sellers, everyone conducts transactions at a common market price. Which of the following statements is true about the structure of the cement market?
The cement market is perfectly competitive
Firm A and Firm B produce the same goods but with different inputs. If the inputs used by firm A are more easily available than the inputs used by firm B, then which of the following statements is true?
The elasticity of supply of firm A will be higher than the elasticity of supply of firm B
A firm uses workers, land, and machinery for its production process. Which of the following statements is then true?
The firm can change its output level in the long run by changing any or all of its three inputs.
Which of the following examples best approximates a competitive market?
The market for soybeans in the United States
Which of the following is NOT an element of a seller's decision-making process in a perfectly competitive market?
The number of buyers
Suppose the prices of a pair of jeans, a shirt, and a tie are $30, $20, and $10 respectively. Which of the following statements is true in this context?
The opportunity cost of buying a shirt is 2 ties
Suppose the prices of a pair of jeans, a shirt, and a tie are $30, $20, and $10 respectively. Which of the following statements is true in this context?
The opportunity cost of buying a shirt is 2 ties.
The following figure displays John's budget constraint when he spends his income on tables and chairs. Refer to the figure above. Which of the following statements is true?
The opportunity cost of buying one chair is 5 tables.
Which of the following statements is true of the long run?
There are no fixed inputs in the long run
Months ago you spent $30 on a ticket to see your favorite musician. However, you start having doubts the day of the show because you do not feel prepared for an exam the following day. Which of the following bits of information should (according to the ideas about sunk costs discussed in the chapter) influence your final decision? Earlier in the day you found a $10 bill on the ground, which makes you feel less guilty about wasting $30.
This does not impact your decision since it is still a sunk cost that will not impact your decision.
Suppose ventilator manufacturers are profit-maximizing firms with costs outlined in this chapter (large fixed cost and increasing marginal costs). These firms typically operate in a competitive market, though the government is considering the following policies to boost production. For each policy, explain whether production will in fact increase. Via tax subsidies, the government reduces the cost of labor and parts. Does this increase ventilator production?
Yes, the subsidy will lower cost and encourage entry into the market causing production to increase.
Is it possible for accounting profit to be positive and economic profit to be negative?
Yes, this could occur if explicit costs were modest and implicit costs were high
The following figure illustrates the budget constraint of a consumer of jeans and sweaters. Refer to the figure above. A change in the budget constraint from B1 to B2 indicates:
a decrease in the price of sweaters.
If the demand and supply curves for a commodity both shift to the left and the shift in demand is less than the shift in supply, then in comparison to the initial equilibrium, the new equilibrium will be characterized by:
a higher price and a lower quantity
If the demand and supply curves for a commodity shift to the right and the shift in demand is greater than the shift in supply, then in comparison to the initial equilibrium, the new equilibrium will be characterized by:
a higher price and quantity
Assume that the supply curve for a commodity shifts to the left and the demand curve shifts to the right, and the shift in demand is greater than the shift in supply. Then, in comparison to the initial equilibrium, the new equilibrium will be characterized by:
a higher price and quantity.
If the demand and supply curves for a commodity shift to the right by the same amount, then in comparison to the initial equilibrium, the new equilibrium will be characterized by:
a higher quantity and the same price
If the demand and supply curves for a commodity shift to the right by the same amount, then in comparison to the initial equilibrium, the new equilibrium will be characterized by:
a higher quantity and the same price.
In the long run:
all factors of production can be changed
The gasoline market in the United States is often said to be highly competitive. It is not perfectly competitive, but it has features and results that are similar to those of a perfectly competitive market, such as _______.
all of the above - gas stations located near each other tend to charge the same or very similar prices - an individual gas station cannot influence the market price by itself - an individual buyer cannot influence the market price of gasoline by himself
In a perfectly competitive market, ______.
all sellers sell an identical good or a service
Refer to the figure above. A change in the budget constraint from B2 to B3 indicates
an increase in the consumer's income.
Other things remaining same, a right shift in the demand curve will lead to:
an increase in the equilibrium price and the equilibrium quantity
If a consumer purchases any combination of goods and services on his ________, he will exhaust his income completely.
budget constraint
A price ceiling imposed by the government:
can create situations of excess demand
A buyer is said to be a price taker if she:
can purchase any amount of a good at a fixed price provided she has the money to pay for it.
In a perfectly competitive market, sellers _________ and buyers _________.
cannot charge more than the market price; cannot pay less than the market price.
The demand curve for most goods is normally ______.
downward sloping
Consider a market where there are many firms with different cost structures. If demand shifts to the left (decreases), the last firm that entered ____________.
earns negative economic profits and so exits the market.
Market demand is derived by __________.
fixing the price and adding up the quantities that each buyer demands.
A good is said to have a relatively elastic demand if the value of price elasticity is:
greater than 1.
At all the points above the midpoint on a linear demand curve, the value of price elasticity of demand is:
greater than one.
The buyers of a good will want to purchase it as long as their willingness to pay for the good is ______.
greater than or equal to the price
The buyers of a good will want to purchase it as long as their willingness to pay for the good is__________.
greater than or equal to the price
While making a purchase decision using marginal thinking, a buyer should buy the good that yields the:
highest marginal benefit per dollar spent
While making a purchase decision using marginal thinking, a buyer should buy the good that yields the:
highest marginal benefit per dollar spent.
In a perfectly competitive market, because an individual seller tends to sell only a fraction of the total amount of the good produced:
his individual choices do not affect market outcomes
The demand curve shows ___________.
how the quantity demanded responds to changes in the price of the good.
The long-run average cost curve connects the lower part of the short-run cost curves because:
in the long run, firms have more flexibility to change input combinations
If the percentage change in the quantity supplied of a good is less than the percentage change in price of the good, the good is said to have a(n):
inelastic supply
Willingness to pay:
is the highest price that a buyer is willing and able to pay for a unit of good
Willingness to pay:
is the highest price that a buyer is willing and able to pay for a unit of good.
The graph below shows the short-run cost curves and three possible marginal revenue curves for a perfectly competitive firm. If the firm were facing MR2, then we know that this firm should __________.
keep producing, even though it is incurring a loss it is less than the fixed costs that must be paid if it shuts down.
The graph below shows the short-run cost curves and three possible marginal revenue curves for a perfectly competitive firm. If the firm were facing MR1, then we know that this firm should __________.
keep producing, since it is making a profit at the profit-maximizing output
Two goods are said to be complements when a fall in the price of one good ______.
leads to a leftward shift in the demand for the other good
In a perfectly competitive market, if one seller chooses to charge a price for its good that is slightly higher than the market price, then it will _________.
lose all or almost all of its customers.
Assume that a seller in a perfectly competitive market charges more than the equilibrium price. It is likely that this seller will _______.
lose almost all of his buyers
A seller's willingness to accept is the same as his ________ cost of production.
marginal
If with a small decrease in the price of a good, the quantity supplied falls to zero, the supply of the good is said to be:
perfectly elastic
If quantity of tea is measured on the horizontal axis and quantity of coffee is measured on the vertical axis, an increase in the price of coffee will cause the budget constraint to:
pivot leftward along the vertical axis
If quantity of tea is measured on the horizontal axis and quantity of coffee is measured on the vertical axis, an increase in the price of coffee will cause the budget constraint to:
pivot leftward along the vertical axis.
If the price of the good measured along the vertical axis increases without a change in the price of the good measured along the horizontal axis, the consumer's budget constraint:
pivots leftward without a change in the intercept on the horizontal axis.
The percentage change in the quantity demanded of a good due to a percentage change in its price is referred to as the:
price elasticity of demand.
A surplus occurs in a market when:
price is higher than the equilibrium price
In a perfectly competitive market, a seller cannot choose to raise the price of its good since all sellers in the market produce identical goods, so raising the price would result in losing all its customers. All firms in a perfectly competitive market are said to be __________.
price takers.
At the competitive equilibrium, the ______.
quantity demanded is equal to the quantity supplied of a good
Suppose a new off-campus university apartment complex could rent its rooms on the open market for $900 a month. If, instead, the university chooses to cap the price of rooms to $500 a month for students, the result would be that ____________.
quantity demanded would exceed the quantity supplied, resulting in a shortage.
Increases in the marginal product of labor can be attributed to:
specialization of workers
The graph on the bottom shows the long-run average cost curve and marginal cost curve for a firm in a perfectly competitive market. Based on the graph to the bottom, the long-run supply curve is __________.
segment BC, since at prices below B the firm would shut down in the long run.
A firm is said to be a price taker if it:
sells as much of any good as it wants at the prevailing market price
The following table shows the total output of bread produced by different numbers of workers in a bakery. Number of Loaves Number of Workers 0- 0 12- 1 26- 2 40- 3 50- 4 58- 5 60- 6 59- 7 Refer to the table above. The marginal product of workers falls below zero when the ________ worker is hired. Group of answer choices
seventh
An expected increase in the market price of oil in the coming year is likely to __________ in the current year.
shift the supply curve of oil to the left
The graph below shows the short-run cost curves and three possible marginal revenue curves for a perfectly competitive firm. If the firm were facing MR3, then we know that this firm should __________.
shut down, since it is incurring a loss that is greater than the fixed costs that must be paid if it shuts down.
The market demand is the ________ of the individual demand of all the potential buyers.
sum
Negative values of the price elasticity of demand of a good can be attributed to:
the Law of Demand
The quantity demanded of a good is___________.
the amount of the good that buyers are willing to purchase at a given market price
The quantity supplied of a good is _______.
the amount of the good that sellers are ready to supply at a given price
When the marginal cost curve lies below the average cost curve,
the average cost curve slopes downward
If the price of a good increases,
the consumer surplus decreases
The following table shows the total output of bread produced by different numbers of workers in a bakery. Number of Loaves Number of Workers 0- 0 12- 1 26- 2 40- 3 50- 4 58- 5 60- 6 59- 7 Refer to the table above. Diminishing marginal returns sets in when:
the fourth worker is hired.
Utility measures ____________.
the happiness or satisfaction that comes from consuming a good.
In a perfectly competitive market:
the long-run market price is equal to the minimum average cost of the industry because of free entry and exit of firms
A seller who is a price-taker charges ______.
the market price
The supply curve represents ___________.
the minimum price sellers are willing to accept to sell an extra unit of a good
Assume that an individual spends his income on sweaters and shirts. If the price of a sweater increases:
the opportunity cost of buying sweaters increases.
The slope of a budget constraint represents:
the opportunity cost of one good in terms of another
A surplus occurs in a market when ___________.
the price is lower than the equilibrium price
If a good has a price elasticity of demand equal to 0, ___________.
the quantity demanded is completely unaffected by a change in its price
The Law of Demand states that _______.
the quantity demanded of a commodity varies inversely with the price of the commodity, all other things remaining constant
A production function establishes the relationship between:
the quantity of inputs used and the quantity of output produced
A production function establishes the relationship between:
the quantity of inputs used and the quantity of output produced.
The Law of Supply states that ______.
the quantity supplied of a good rises when the price rises, all other things remaining constant
The general rule for benefit maximization suggests that in personal equilibrium:
the ratio of marginal benefits to price should be identical across all goods.
Elasticity is:
the ratio of the percentage change in two variables
The general rule for benefit maximization suggests that in personal equilibrium:
the ratio of total benefits to income should be identical across all goods
Consider a market where there are many firms with different cost structures. The last firm to enter earns ___________.
zero economic profits.
