MICRO ECON FINAL

Steps to maximizing profit

- Find MR = MC - Find optimal Q - Find optimal P - Find ATC - Find Profit

Partnership

- more than one owner - can divide tasks across partners (division of labor) - Personal assets of all owners subject to unlimited liability

Competitive firm earning profit

Profit = (P - ATC) x Q

Average product

Quantity / Labor

Framing Bias

Techniques used to steer individuals to making one decision over another EX- buy one get one 50% off vs. 25% off entire purchase

MC > MR

produce less because we lost money

Sole Proprietorship

- one owner - easy to start - limited access to financial capital - owner's personal assets are subject to unlimited liability

Corporations

- owners are called stockholders - have legal rights ( much like an individual) - can raise money by issuing stocks and bonds - owners a re protected by limited liability

If a competitive firm can increase its profits by increasing its output, then the firm's: A) P > MC. B) MR < MC. C) MC > P. D) P > MR.

A) P > MC

The calculation for economic profit is total revenue minus: A) implicit and explicit costs. B) explicit costs. C) normal profits. D) implicit costs.

A) implicit and explicit costs.

Resources are: A. limited, but wants are unlimited. B. unlimited, but wants are limited. C. limited, but efficiency is unlimited. D. unlimited, but efficiency is limited

A. limited, but wants are unlimited.

When quantity demanded in a market equals quantity supplied, then the: A. market is in equilibrium. B. market is in temporary disequilibrium. C. market will not clear without further price adjustments. D. equilibrium price is less than expected by buyers.

A. market is in equilibrium.

Most income taxes are: A. progressive. B. regressive. C. lump sum. D. flat.

A. progressive.

If the cross price elasticity of demand for good A with respect to good B is 2.3, then good A is a(n): A. substitute for good B. B. normal good. C. complement for good B. D. inferior good.

A. substitute for good B.

A surplus exists: A. when quantity supplied exceeds the quantity demanded. B. when quantity supplied is less than quantity demanded. C. at the market clearing price. D. any time the market is out of equilibrium.

A. when quantity supplied exceeds the quantity

Marginal Utility

An additional amount of satisfaction from consuming one more unit of a good or service

Because of scarcity: A. choices are unlimited. B. we face tradeoffs in nearly every choice we make. C. wants are limited. D. resources are limitless.

B. we face tradeoffs in nearly every choice we make.

In the market for cable television, fewer people are subscribing to cable while the cost of providing cable television has increased. As a result, we can expect a(n): A. unknown change in the equilibrium quantity but a decrease in the equilibrium price of cable television. B. increase in the equilibrium price and quantity of cable television. C. unknown change in the equilibrium price but a decrease in the equilibrium quantity of cable television. D. decrease in the equilibrium price and quantity of cable television.

C. unknown change in the equilibrium price but a decrease in the equilibrium quantity of cable television.

Marginal product

Change in Quantity / Change in Labor

Marginal analysis would put an emphasis on: A. total tangible costs and benefits. B. total monetary costs and benefits. C. total opportunity costs and benefits. D. additional costs and benefits.

D. additional costs and benefits.

Sunk Cost Fallacy

Decisions are influenced by costs already incurred instead of how the decision affects current well-being EX- refusing to drop a class because tuition is already paid

Monopoly

EX- NFL

Oligopoly

EX- Walmart vs Target

Prefect Competition

EX- corn and wheat industry

Overvaluing the present relative to the future

EX- not saving enough for retirement and spending it now

Monopolistic Competition

EX- restaurants

Altruism

EX- why leave a generous tip if it won't affect your service already provided?

Average fixed cost

Fixed cost / Quantity

Total Cost

Fixed costs + Variable costs

Total Utility

The total amount of satisfaction obtained from consumption of a good or service

Average total cost

Total Cost / Quantity

Accounting Profit

Total Revenue - Explicit Costs

Economic Proft

Total Revenue - Explicit Costs - Implicit Costs

Average variable cost

Variable cost / Quantity

Long Run

all factors of production are variable, firms enter in response to profits and exit in response to losses

Short Run

at least one factor of production is fixed ( Such as plant size)

explicit costs

expenses paid directly to some entity ( wages, lease payments, raw materials, taxes, etc.)

Firm demand curve

horizontal line and perfectly elastic

Overconfidence

the tendency to be more confident than correct EX- buying a gym membership and not going

implicit costs

the opportunity costs of using resources (depreciation, asset depletion, forgone wages)

MC = MR

where profit is maximized

Which question is NOT an example involving marginal analysis? A. Should K-Mart rebrand all its stores to using the Sears name? B. Should Boeing hire another assembly-line worker? C. Should a restaurant stay open another hour? D. Should a university offer another section of a class?

A. Should K-Mart rebrand all its stores to using the Sears name?

One of the most important ingredients in bubble tea is the tapioca pearls that are added to the tea. If the price of tapioca flour increases, what will happen to the supply of bubble tea, all else being equal? A. The supply of bubble tea will decrease. B. The supply of bubble tea will increase dramatically. C. The supply of bubble tea will increase modestly. D. The supply of bubble tea will not change.

A. The supply of bubble tea will decrease.

Marginal utility: A) is the change in total satisfaction derived from consuming one more unit of a good. B) is the total satisfaction derived from the consumption of a given quantity of a good. C) increases with the consumption of each additional good. D) is the change in marginal satisfaction derived from consuming one more unit of a good.

A) is the change in total satisfaction derived from consuming one more unit of a good.

As an individual consumes slices of pizza, the _____ is the amount of satisfaction that he receives from each additional piece of pizza. A) marginal utility B) absolute utility C) consumption availability D) total utility

A) marginal utility

Which characteristic is found in a perfectly competitive market? A) no barriers to market entry or exit B) mutually interdependent decisions C) no close substitutes for the product D) potential for long-run economic profit

A) no barriers to market entry or exit

What market structure has many relatively small buyers and sellers, a standardized product, good information to both buyers and sellers, and no barriers to entry or exit? A) perfect competition B) monopoly C) monopolistic competition D) oligopoly

A) perfect competition

The demand curve for an individual perfectly competitive firm is: A) perfectly elastic. B) identical to the market demand curve. C) perfectly inelastic. D) equal to the firm's average variable cost curve

A) perfectly elastic

The reason price equals marginal revenue in a perfectly competitive market is that: A) since price is constant, the added revenue from selling one more unit is the price. B) the law prohibits marginal revenue from diverging from market price. C) marginal revenue is always equal to marginal cost. D) consumer advocacy groups maintain a steady price

A) since price is constant, the added revenue from selling one more unit is the price

A consumer is in equilibrium when: A) the addition to total utility per dollar is the same for every commodity. B) marginal utilities are equal. C) an equal amount is spent on every commodity. D) the same total utility is derived from each commodity.

A) the addition to total utility per dollar is the same for every commodity.

All of these are explicit costs, EXCEPT: A) the salary an entrepreneur could have earned in a corporate job. B) business taxes paid by an entrepreneur. C) money paid for raw materials. D) salaries paid to employees.

A) the salary an entrepreneur could have earned in a corporate job.

Marginal utility is NOT: A) the same for all units of a commodity consumed. B) measured in utils. C) a measure of satisfaction. D) used to explain how consumers make decisions.

A) the same for all units of a commodity consumed.

A normal profit exists when: A) total revenue equals total costs. B) marginal revenue equals average marginal costs. C) marginal revenue equals average variable costs. D) marginal revenue is decreasing

A) total revenue equals total costs

Profits are equal to the difference between _____ and _____. A) total revenue; total costs B) total revenue; explicit costs C) marginal revenue; marginal costs D) total revenue; marginal costs

A) total revenue; total costs

Normal profits are equal to: A) zero economic profits B) marginal revenue C) negative economic profits D) marginal cost

A) zero economic profits

Walmart is thinking about offering a 25% discount on a brand of shoes. If the elasticity of demand is two, then the discount would increase sales by: A. 50%. B. 200%. C. 2%. D. 25%

A. 50%.

In the market for Chinese take-out, suppose that the price of Sushi take-out, a substitute, decreases in price. What will happen to the demand for Chinese take-out? A. Demand for Chinese take-out will decrease. B. Demand for Chinese take-out will increase. C. Demand for Chinese take-out will not change. D. Demand for Chinese take-out will be eliminated.

A. Demand for Chinese take-out will decrease.

As a person consumes more of a particular good or service, the total level of utility derived from that consumption will: A) increase at an increasing rate. B) increase at a decreasing rate. C) remain constant. D) increase at a constant rate

B) increase at a decreasing rate.

The profit-maximizing rule states that a perfectly competitive firm A) should stop production as soon as it experiences diminishing marginal returns B) should produce that level of output at which MR = MC C) produces too much if MR = MC D) should not produce a unit if its MC < MR

B) should produce that level of output at which MR = MC

In economic terms, the short run is: A) no more than two years. B) the time over which at least one factor of production is fixed. C) the time period in which factors of production are variable. D) no more than six months.

B) the time over which at least one factor of production is fixed.

A normal profit is equal to: A) explicit cost minus implicit cost. B) zero economic profit. C) revenue minus opportunity cost. D) revenue minus explicit cost.

B) zero economic profit.

Suppose that the quantity demanded for a product falls by 9% as people's incomes fall by 3%. What is the income elasticity for this good? A. 0.33 B. 3.00 C. -3.00 D. -0.33

B. 3.00

At 500 units of output, total cost is $50,000 and variable cost is $5,000. What does fixed cost equal at 500 units? A) $9,000 B) $5,000 C) $45,000 D) $50,000

C) $45,000

Among perfectly competitive firms, profit maximizing will always operate where: A) MC > MR. B) It will vary across different firms. C) MC = MR. D) MC < MR.

C) MC = MR

Marginal product is defined as the: A) total output divided by the number of workers hired. B) change in the number of workers divided by the change in output. C) change in output from hiring an extra worker. D) number of workers hired divided by the total output.

C) change in output from hiring an extra worker

Money that a firm spends on health care for employees is a(n): A) implicit cost. B) opportunity cost. C) explicit cost. D) surplus cost.

C) explicit cost.

When a large factory closed in the town of Greenville, income fell for many residents. As a result, demand for normal goods would _____ and demand for inferior goods would _____. A. increase; increase B. decrease; decrease C. decrease; increase D. increase; decrease

C. decrease; increase

If a product's price rises by 6% and its quantity demanded falls by 8%, then we can say that demand for this product is: A. unitary elastic. B. perfectly inelastic. C. elastic. D. inelastic.

C. elastic.

Suppose the price elasticity of demand is 3.0 and the price elasticity of supply is 0.08. The burden of an excise tax: A. falls entirely on producers. B. falls primarily on consumers. C. falls primarily on producers. D. is shared evenly by consumers and producers.

C. falls primarily on producers.

Which of these would NOT yield an external cost? A. building an airport next to a library B. partying on the front lawn until four in the morning C. helping an elderly person across the street D. smoking cigarettes in a restaurant

C. helping an elderly person across the street

The greater the percentage of the budget spent on a good, the: A. less responsive is quantity demanded to a change in price. B. greater is the inelasticity of demand. C. higher is the elasticity of demand. D. lower is the elasticity of demand.

C. higher is the elasticity of demand.

Gasoline is produced from crude oil. Ceteris paribus, if the supply of crude oil falls, the equilibrium price of gasoline will _____ and the equilibrium quantity will _____. A. increase; increase B. decrease; increase C. increase; decrease D. decrease; decrease

C. increase; decrease

Assume a good is considered elastic. If the price of the good decreases, then total revenue: A. remains constant. B. is negative. C. increases. D. decreases.

C. increases.

The supply curve represents the _____ price at which a firm is willing to _____. A. minimum; pay for inputs B. maximum; sell various quantities of a good C. minimum; sell various quantities of a good D. maximum; pay for inputs

C. minimum; sell various quantities of a good

The government often strictly regulates noise and chemical pollution by industry to overcome which market failure? A. positive externality (external benefits) B. asymmetric information C. negative externality (external costs) D. public goods

C. negative externality (external costs)

If the income elasticity of demand for tea is 0.50, tea is a: A. complement of coffee. B. substitute for coffee. C. normal good. D. luxury good.

C. normal good.

Which enterprise is NOT an example of a market? A. ticket scalping B. a neighborhood lemonade stand C. painting one's house D. the New York Stock Exchange

C. painting one's house

In the market for gasoline, more consumers will begin driving at the onset of nicer weather, while the price of public transportation, a substitute, rises. The demand for gasoline should: A. shift left. B. stay the same since demand is not affected by price changes. C. shift right. D. stay the same since the effects will cancel each other out.

C. shift right.

The law of demand states that: A. higher prices will lead producers to offer less of their products for sale during a given period. B. higher prices will lead producers to offer more of their products for sale during a given period. C. the lower a product's price, the more of that product consumers will purchase during a given period. D. the lower a product's price, the less of that product consumers will purchase during a given period.

C. the lower a product's price, the more of that product consumers will purchase during a given period.

Tim woke up this morning with a stomachache and decided to skip class in order to get more rest. What is the opportunity cost of Tim's decision to sleep in? A.the actual enjoyment of lying in bed instead of sitting in class B. the level of pain he endured from the stomachache C. the value of attending the class he decided to miss D. the improvement in how he feels by getting more rest

C. the value of attending the class he decided to miss

Hitting your snooze alarm before you get out of bed is an example of: A. equity. B. efficiency. C. thinking at the margin. D. market equilibrium.

C. thinking at the margin.

Markets tend to produce: A. the right amount of a good exhibiting external costs. B. too much of a good exhibiting external benefits. C. too much of a good exhibiting external costs. D. the right amount of a good exhibiting external benefits

C. too much of a good exhibiting external costs.

If the percentage change in quantity demanded is equal to the percentage change in price, then demand is: A. inelastic. B. elastic C. unitary elastic. D. a perfect substitute.

C. unitary elastic.

Thinking at the margin involves: A. influencing how individuals make decisions. B. making wiser decisions given limited information. C. weighing the impact of one additional activity. D. maximizing a firm's or individual's well-being.

C. weighing the impact of one additional activity.

Marginal Cost

Change in total cost / change in quantity

Which characteristic is an assumption i a perfectly competitive market structure? A) significant barriers to entry and exit B) products with labels C) a few large buyers and a few large sellers D) perfect information about the markets

D) perfect information about the markets

Marginal product is: A) the change in total costs, given a change in labor input. B) total output divided by total input. C) input divided by output. D) the change in total output, given a change in labor input.

D) the change in total output, given a change in labor

When perfectly competitive firms are earning short-run economic profits, all of these happen, EXCEPT: A) supply increases. B) firms are attracted to the industry by the profits. C) market prices fall. D) the number of firms in the industry will fall

D) the number of firms in the industry will fall

Suppose that a store sells candy bars for $0.89 for one and $1.50 for two. The marginal cost of the second candy bar is: A. $1.50. B. $0.89. C. $0.75. D. $0.61.

D. $0.61.

If you were not studying economics, you could be doing one of the following: sleeping in (which you value at $5), playing cards with your friends (which you value at $10), or working (you would have earned an extra $8). The opportunity cost of studying economics is therefore: A. $8. B. $5. C. $23. D. $10.

D. $10.

_____ people are forced to make tradeoffs. A. Only middle-class B. Only poor C. Only wealthy D. All

D. All

Suppose the equilibrium price of carrots is $1. The price floor instituted by the government is $1.50. Based on this information, which of the following would you expect to take place in the market? A. We would expect to see a surplus of carrots. B. There would be a shortage of carrots. C. Farmers would switch from growing carrots to growing potatoes. D. The price floor would have no impact on the market because it is higher than equilibrium price.

A. We would expect to see a surplus of carrots

Which factor would NOT change the demand for sea kayak tours? A. a decrease in the price of a sea kayak tour B. news reports of whales in the harbor C. the onset of sunny, summer beach weather D. an increase in the price of bicycle tours, a substitute activity

A. a decrease in the price of a sea kayak tour

Which item would be considered a complementary good for a kayak? A. a life jacket B. a canoe C. a jet ski D. good weather

A. a life jacket

When economists assume people make rational decisions, it means that: A. a rational person will respond to the benefits and costs associated with incentives. B. people are always selfish. C. a rational person can never appear to make irrational decisions. D. people never make mistakes.

A. a rational person will respond to the benefits and costs associated with incentives.

Which event would shift the supply curve for gasoline to the right? A. a technological innovation in the oil-drilling industry that dramatically lowers the cost of exploration B. an explosion in a major refinery C. an increase in property taxes D. a technological innovation in the solar power energy industry

A. a technological innovation in the oil-drilling industry that dramatically lowers the cost of exploration

If demand is inelastic, the tax burden falls primarily on the _____ and deadweight loss is _____. A. buyer; small B. seller; small C. seller; large D. buyer; large

A. buyer; small

A price ceiling is _____ if it is set _____ the market price. A. effective; below B. effective; above C. efficient; below D. efficient; above

A. effective; below

A decrease in demand causes the equilibrium price to _____ and the equilibrium quantity to _____. A. fall; fall B. rise; rise C. rise; fall D. fall; rise

A. fall; fall

Opportunity costs: A. influence all economic decisions. B. are generally the same from individual to individual. C. involve monetary rather than non-monetary costs. D. decrease as individuals become wealthier.

A. influence all economic decisions.

Driving your car in a large city during rush hour causes externalities because: A. it adds to road congestion and pollution. B. your actions will benefit others, but you will be unable to charge them for the service. C. gasoline is a public good. D. gasoline is scarce, and you must pay for it.

A. it adds to road congestion and pollution.

If a perfectly competitive firm has total revenue that is equal to $400 when it produces one hundred units, and if its total revenue rises to $404 when it produces one hundred and one units, the marginal revenue of the one hundred and first unit is: A) $404. B) $4. C) $1. D) $0.25

B) $4

The Wonderful Gadget Company produces 500 gadgets per week with 50 employees. It hires an additional worker and output rises to 507 gadgets. The marginal product of the last worker hired is _____ gadget(s). A) 500 B) 7 C) 1 D) 507

B) 7

If the variable cost for five shoes is $50 and the variable cost of six shoes is $80, which statement is true? A) The marginal cost for the sixth shoe is $80. B) Average variable cost for the fifth shoe is $10. C) Total costs for the sixth shoe is $130. D) Average variable cost of the sixth shoe is $10.

B) Average variable cost for the fifth shoe is $80.

_____ is the change in total revenue that results from the sale of one added unit of product. A) Total output B) Marginal revenue C) Total revenue D) Marginal product

B) Marginal Revenue

Astrid currently consumes only milk and honey. She drinks four quarts of milk priced at $3 per quart and gets 30 utils for the last quart. She consumes thirteen jars of honey at a price of $0.75 per jar and gets 7.5 utils for the last jar. Is Astrid maximizing her utility? A) No. She should consume more milk. B) Yes. C) No. She should consume more honey. D) No. She should consume less milk.

B) Yes.

Which firm is MOST likely to operate in a perfectly competitive market? A) a cable TV company B) a maple syrup company C) an automobile company D) an electric utility company

B) a maple syrup company

Marginal cost (MC) will equal average total cost (ATC) at the point where the: A) average variable cost is the lowest. B) average total cost is the lowest. C) marginal cost is the lowest. D) fixed cost is the lowest.

B) average total cost is the lowest

All of these are necessary for perfect competition, EXCEPT: A) no control over price. B) differentiated products. C) many buyers and sellers. D) no barriers to market entry or exit

B) differentiate products

Mary started out in a consumer equilibrium. Later Mary discovers that her marginal utility per dollar spent on root beer is more than the marginal utility per dollar spent on gasoline. She knows then that the price of: A) root beer must have increased. B) gasoline must have increased or the price of root beer must have decreased. C) gasoline must have decreased. D) gasoline must have decreased or the price of root beer must have increased.

B) gasoline must have increased or the price of root beer must have decreased.

A leather company produces shoes and belts. What will the company do if it expects the price of shoes to rise in the near future? A. It will enter into a new product line, such as jackets. B. It will move resources from belt production to shoe production, thereby decreasing the supply of belts. C. It will move resources from shoe to belt production, thereby decreasing the supply of shoes. D. It will do nothing and continually evaluate the situation.

B. It will move resources from belt production to shoe production, thereby decreasing the supply of belts.

Which question would be considered a normative question? A. How many people participated in obstacle course racing last year? B. Should obstacle races be regulated to ensure the safety of its participants? C. When and where are the major obstacle races held? D. How much does an entry into an obstacle course race cost?

B. Should obstacle races be regulated to ensure the safety of its participants?

Which factor would NOT cause the demand curve for green tea to shift to the right? A. new research showing that drinking green tea reduces the risk of illnesses B. a decrease in the price of green tea C. a decrease in the price of lemons, a complement to green tea D. All of these will shift the demand for green tea to the right.

B. a decrease in the price of green tea

Which factor would cause a decrease in the demand for coffee? A. a decrease in the price of coffee B. a decrease in the price of tea (a substitute for coffee) C. an increase in the price of tea (a substitute for coffee) D. an increase in the price of coffee

B. a decrease in the price of tea (a substitute for coffee)

Which factor would shift the demand curve for gasoline to the right? A. a decrease in the price of alternative forms of energy B. an increase in national income C. a decrease in the number of consumers D. an increase in the price of gasoline

B. an increase in national income

Getting a flu shot reduces the chances of spreading the illness to one's classmates and friends. Why, then, is this considered a market failure due to external benefits? A. because flu shots are not 100% effective B. because the number of people who obtain flu shots is less than the socially optimal quantity C. because too many people actually get the flu shot D. because flu shots are priced too high relative to the cost of producing them

B. because the number of people who obtain flu shots is less than the socially optimal quantity

The opportunity cost of undertaking an activity is defined as the: A. cost forgone by not undertaking another activity. B. benefit forgone by not undertaking the next-best activity. C. monetary benefit of undertaking that activity. D. monetary cost of undertaking that activity.

B. benefit forgone by not undertaking the next-best activity.

Jessica lists her faulty treadmill for sale on craigslist but does not disclose the problems with it. If Blake buys the treadmill believing that it's problem-free, this is an example of market failure due to: A. the existence of external costs B. lack of information C. the existence of public goods D. the lack of competition

B. lack of information

When economists use the word "additional," they generally mean: A. economics. B. marginal. C. rational. D. opportunity cost.

B. marginal.

There is a(n) _____ relationship between price and quantity demanded. A. positive B. negative C. indeterminate D. indeterminate, positive, and negative

B. negative

If a price ceiling is set above the equilibrium price: A. quantity supplied exceeds quantity demanded. B. no impact is felt in the market. C. a surplus results in the market. D. a shortage occurs in the market.

B. no impact is felt in the market.

If the demand for iPhones rises as incomes increase, then the iPhone is a(n) _____ good. A. supply B. normal C. inferior D. abnormal

B. normal

The highest valued alternative that is forgone when you choose an action is called its: A. utility. B. opportunity cost. C. benefit. D. scarcity.

B. opportunity cost.

A vertical demand curve represents demand that is: A. elastic. B. perfectly inelastic. C. unitary elastic. D. inelastic.

B. perfectly inelastic.

If the price of kayaks rises, the: A. supply of kayaks increases. B. quantity supplied of kayaks increases. C. quantity supplied of kayaks decreases. D. supply of kayaks decreases.

B. quantity supplied of kayaks increases.

The best definition of externalities is: A. accurate information. B. the economic effects of individual actions on third parties. C. the cost associated with consumption of one more unit. D. the right to own private property.

B. the economic effects of individual actions on third parties.

Scarcity is BEST defined as when: A. unlimited resources exceed limited wants. B. unlimited wants exceed limited resources. C. the quantity demanded exceeds the quantity supplied. D. the quantity supplied exceeds the quantity demanded.

B. unlimited wants exceed limited resources.

A typical total product curve goes through four stages. What is the correct order for these stages? A) increases at a decreasing rate, increases at an increasing rate, reaches a maximum, decreases B) increases at an increasing rate, reaches a maximum, increases at a decreasing rate, decreases C) increases at an increasing rate, increases at a decreasing rate, reaches a maximum, decreases D) increases at an increasing rate, increases at a decreasing rate, decreases, reaches a maximum

C) increase at an increasing rate, increases at a decreasing rate, reaches a maximum, decreases

The marginal cost curve: A) intersects the average fixed cost curve at its minimum point. B) always declines. C) intersects the average total cost curve at its minimum point. D) disappears in the long run.

C) intersects the average total cost curve at its minimum point.

In a competitive market, price is always equal to: A) marginal product. B) marginal cost. C) marginal revenue. D) Many factors go into determining price

C) marginal revenue

A perfectly competitive firm is a: A) price maker; it has the freedom to set the selling price. B) price participant; it can coordinate its pricing decisions with other firms. C) price taker; it must accept the market equilibrium price. D) price leader; it can change its price and other firms will adjust.

C) price taker; it must accept the market equilibrium price

The law of diminishing marginal utility states: A) average utility increases as more of a product is consumed. B) total utility increases at an increasing rate as more of a product is consumed. C) that as a consumer consumes more of a given product, the added utility from consuming an additional unit declines. D) total utility falls as consumption of a good increases.

C) that as a consumer consumes more of a given product, the added utility from consuming an additional unit declines.

Which curve is NOT bowl-shaped? A) the average variable cost curve B) the short-run average cost curve C) the average fixed cost curve D) the long-run average cost curve

C) the average fixed cost curve

Price per unit times the total quantity sold is: A) price per unit. B) average total revenue. C) total revenue. D) marginal revenue

C) total revenue

Which of the following price floors for milk would not cause a surplus in the market if the equilibrium price for milk is $3.60? A. All price floors cause a surplus. B. $3.90 C. $3.50 D. $3.80

C. $3.50

Using the midpoint method, what is the price elasticity of demand for a product whose price increased from $2 to $4 and whose quantity demanded decreased from 10 units to 5 units? A. 0.4 B. 0.5 C. 1.0 D. -0.5

C. 1.0

A grocery store announced a 50% decrease in the price of local honey. Sales increased by 200%. Based on the information, the price elasticity of honey is: A. 0.04. B. 0.25. C. 4. D. 0.4.

C. 4

_____ is how well resources are used and allocated. A. Equity B. Choice C. Efficiency D. Scarcity

C. Efficiency

Which statement does NOT involve thinking at the margin? A. If I work another hour, I will beat traffic. B. My supervisor asked me to work an extra four hours this week. C. I worked eight hours today. D. If I work on my day off, I will make an additional $300.

C. I worked eight hours today.

Which is one of the reasons why markets fail? A. private ownership of resources B. too much competition C. a mismatch of information D. no externalities

C. a mismatch of information

If a government imposes a $2 maximum price on a gallon of gasoline in the petroleum market, this would be an example of: A. rent control. B. laissez-faire. C. a price ceiling. D. a price floor.

C. a price ceiling.

Suppose Mike has three hours of time to spend so he ranks the following activities in order of priority: (1) see a movie, (2) attend a ball game, (3) study economics. Assume that each activity takes three hours. What is Mike's opportunity cost of seeing the movie? A. attending a ball game and studying economics B. studying economics C. attending a ball game D. either attending a ball game or studying economics

C. attending a ball game

Economics is a social science that involves the study of how individuals, firms, and societies: A. develop their tastes and preferences. B. maximize incomes. C. choose among alternatives to satisfy their unlimited wants. D. maximize happiness.

C. choose among alternatives to satisfy their unlimited wants.

Staci's Sign Shoppe makes signs for businesses. Staci is currently producing 210 signs per week with three employees. She hires an additional worker and total output per week rises to 328 signs. The marginal product of the last worker is _____ signs. A) 82 B) 210 C) 378 D) 118

D) 118

Jeremy's level of satisfaction from consuming the first cookie was 25 utils. The second cookie increased the level of satisfaction by 20 utils. Jeremy's total level of satisfaction after three cookies was 60. Thus, the marginal utility for the third cookie is: A) 45. B) 60. C) 25. D) 15.

D) 15.

_____ is found by dividing total output by the number of workers employed to produce that output. A) Average cost B) Marginal cost C) Marginal product D) Average product

D) Average product

The main characteristic of the perfectly competitive market that causes economic profits and losses to go zero in the long run is A) homogeneous products B) many buyers and sellers C) known prices D) free entry and exit

D) Free entry and exit

Suppose the marginal utility for the last pencil you buy is 36 and each costs $1, whereas the marginal utility of the last pad of paper you buy is 300 and costs $2. Are you maximizing utility? A) Yes. B) No. You need to buy less paper and fewer pencils. C) No. You need to buy more pencils and less paper. D) No. You need to buy more paper and fewer pencils.

D) No. You need to buy more paper and fewer pencils.

Marginal utility: A) is the sum of all the total utilities. B) is always positive. C) is the same for all units of a commodity consumed. D) declines with each additional unit consumed.

D) declines with each additional unit consumed.

Utility measures: A) the market value of a product. B) the productive efficiency of a good or service. C) how easy it is for one good to substitute for another. D) how much satisfaction is gained from the consumption of a good or service.

D) how much satisfaction is gained from the consumption of a good or service.

When new firms enter a perfectly competitive market, it will cause a(n): A) decrease in supply. B) decrease in demand. C) increase in demand. D) increase in supply

D) increase in supply

Suppose the MU/P for bottled water is greater than the MU/P for bags of chips. To maximize total utility, the consumer should buy: A) more of both goods. B) more bags of chips and less bottled water. C) less of both goods. D) more bottled water and fewer bags of chips.

D) more bottled water and fewer bags of chips.

Rational behavior requires thinking at the margin. Which example represents this type of thinking? A. deciding whether a second burger is worth the extra $2 B. deciding whether to pay a fine for polluting the local harbor or installing antipollution machinery C. deciding whether the overtime pay is worth working on your day off D. All of these examples represent thinking at the margin.

D. All of these examples represent thinking at the margin.

_____ is the fairness of various issues and policies. A. Efficiency B. Scarcity C. Choice D. Equity

D. Equity

_____ costs include the time and money that could have been spent on another highly valued activity. A. Total B. Social C. Marginal D. Opportunity

D. Opportunity

Which event will NOT cause the supply curve for kayaks to shift to the left? A. an increase in the taxes on kayaks B. an increase in the costs of materials to build a kayak C. a decrease in the number of sellers of kayaks D. a decrease in the price of a kayak

D. a decrease in the price of a kayak

Which factor would shift the supply of skateboards to the right? A. a new rule banning all skateboards on college campuses B. a decrease in the price of skateboards C. an increase in incomes among skateboard enthusiasts D. a large reduction in the price of wheels used to produce skateboards

D. a large reduction in the price of wheels used to produce skateboards

Which of these would result in a higher price elasticity? A. fewer substitutes B. a shorter period of time C. a good becoming a necessity D. a longer time period

D. a longer time period

Implementing a price ceiling can cause: A. a surplus. B. scarcity. C. poverty. D. a shortage.

D. a shortage

Paying a salesperson more for increased sales is an example of: A. efficiency. B. an opportunity cost. C. equity. D. an incentive.

D. an incentive.

An effective price ceiling occurs at a price _____ the equilibrium price and causes a _____. A. below; surplus B. above; shortage C. above; surplus D. below; shortage

D. below; shortage

Butter is a substitute for margarine. If the price of margarine drops, we would expect to see: A. the price of butter rise and the quantity of butter fall. B. the price of butter fall and the quantity of butter rise. C. both the price of butter and the quantity of butter rise. D. both the price of butter and quantity of butter fall.

D. both the price of butter and quantity of butter fall.

Students who never miss class and study hard generally earn higher grades than those who do not. This is an example of: A. market failure. B. specialization. C. marginal cost. D. incentives.

D. incentives.

The study of economics: A. states that efficiency and equity do not conflict. B. does not apply to decisions made by businesses. C. primarily considers the stock market. D. is about people making decisions regarding their use of scarce resources.

D. is about people making decisions regarding their use of scarce resources.

If hot dogs and relish are complements, their cross elasticity of demand is: A. 0. B. greater than 0. C. greater than 0, but less than 1. D. less than 0.

D. less than 0.

You will take the day off work if: A. marginal costs exceed marginal benefits. B. you can make up the missed work tomorrow. C. you have additional sick days to spare. D. marginal costs are less than marginal benefits.

D. marginal costs are less than marginal benefits.

In general, the flatter the supply curve is, the: A. shorter the period. B. less elastic is supply. C. fewer the adjustments to price changes that firms can make. D. more elastic is supply.

D. more elastic is supply.

Which of these would be considered a public good? A. a toll bridge B. a private office building C. a football stadium D. national defense

D. national defense

In the market for cable television, fewer people are subscribing to cable while the cost of providing cable television has increased. If the magnitude of the corresponding demand and supply shifts are the same for both events, we can expect: A. an unknown change in the equilibrium price but a decrease in the equilibrium quantity of cable television. B. an increase in the equilibrium price and quantity of cable television. C. a decrease in the equilibrium price and quantity of cable television. D. no change in the equilibrium price but a decrease in the equilibrium quantity of cable television.

D. no change in the equilibrium price but a decrease in the equilibrium quantity of cable television

Public goods are difficult to provide in the private market because they have the characteristics of: A. rivalry and excludability B. non-rivalry and excludability C. rivalry and non-excludability D. non-rivalry and non-excludability

D. non-rivalry and non-excludability

Employers give stock options to full-time employees who have been on the job more than three years. This is an example of: A. opportunity costs. B. irrational behavior. C. thinking on the margin. D. people following incentives.

D. people following incentives.

A tax in which the percentage of income tax rises as income falls is known as a: A. lump-sum tax. B. flat tax. C. progressive tax. D. regressive tax.

D. regressive tax.

The development of solar panels for home installation has improved due to technological advances and subsidies. These factors shift the supply curve to the _____ and result in the equilibrium price of solar panel installations to _____. A. left; fall B. left; rise C. right; rise D. right; fall

D. right; fall

The law of supply states that as prices _____, the quantity _____. A. rise; demanded falls B. fall; demanded rises C. fall; supplied rises D. rise; supplied rises

D. rise; supplied rises

A price ceiling usually results in a: A. surplus and no misallocation of resources. B. shortage and no misallocation of resources. C. surplus and a misallocation of resources. D. shortage and a misallocation of resources.

D. shortage and a misallocation of resources.

Over the last 10 years, laptop computer prices have moved down while their quantity has increased. This indicates that: A. demand and supply have increased proportionately. B. increased demand has created a market incentive to reduce the price. C. demand has increased more than supply. D. supply has increased more than demand.

D. supply has increased more than demand.

A good is a normal good if: A. the demand curve shifts only when the GDP changes. B. normal people buy it when the price increases. C. the demand curve shifts back inward if income increases. D. the demand curve shifts outward if income increases.

D. the demand curve shifts outward if income increases.

One practical reason that economists use percentages to measure elasticity is: A. to convert units to the metric system. B. to convert elasticities to dollar units. C. that more complicated calculations tend to be more accurate. D. to be able to compare characteristics of unrelated products

D. to be able to compare characteristics of unrelated products

Flu vaccination shots provide external benefits. Thus: A. the private market collapses. B. the private market provides the socially desirable output of shots. C. too many flu vaccination shots are given. D. too few flu vaccination shots are given.

D. too few flu vaccination shots are given.

Public goods tend to be _____ because the provider of the good cannot prevent someone from enjoying the good without paying for it, which means the good is _____. A. overproduced; nonrival B. underproduced; nonrival C. overproduced; nonexcludable D. underproduced; nonexcludable

D. underproduced; nonexcludable

MC < MR

produce more b/c we are making money