Micro Exam 2

Which of the following statements is not true regarding the production function and the production possibilities curve? Both the production function and the production possibilities curve maximize the amount of output attainable. The production function describes the capacity of a single firm, whereas the production function summarizes the output capacity of the entire economy. A production function tells us the maximum amount of output attainable from the use of all resources. The production possibilities curve expresses the ability to produce various combinations of goods given the use of all resources.

A production function tells us the maximum amount of output attainable from the use of all resources.

Do believe that there should be a cap on CEO payments? Why? Explain with the help of a diagram to show the effect of such cap on market for CEOs.

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Draw a well labeled diagram to show MC, MR and ATC for a perfectly competitive firm. Indicate the profit maximizing output and price for the firm.

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What is an oligopoly? Use a typical payoff matrix discussed in class to illustrate and explain the strategic nature of decision making in Oligopoly.

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The marginal cost curve intersects the minimum of the curve representing

ATC

Which of the following statements about the relationship between economic costs and accounting costs is true? Accounting costs are always less than or equal to economic costs. Accounting costs must always equal economic costs. Accounting costs are always greater than economic costs. Accounting costs are equal to or greater than economic costs.

Accounting costs are always less than or equal to economic costs.

Labor productivity will increase in response to

An increase in the amount of physical capital per worker.

If wages are relatively high, the individual labor supply curve may Become horizontal. Bend backward. Bend outward. Become vertical.

Bend backward.

For a minimum wage to have any impact on a labor market, it must be set at a level Higher than the equilibrium wage. Higher than MPP. Higher than MRP. Consistent with economic growth.

Higher than the equilibrium wage.

The concentration ratio measures the Number of plants owned by an oligopoly. Percentage of total profits made by a firm in a specific market. Proportion of total output produced by the four largest producers in a specific market. Relative size of a firm compared to other industries.

Proportion of total output produced by the four largest producers in a specific market.

When U.S. government regulations that prevent goods from being imported are relaxed, this Causes oligopoly profits to increase. Causes U.S. cartels to become even stronger. Reduces the barriers to entry into U.S. markets. Creates an environment conducive to predatory pricing.

Reduces the barriers to entry into U.S. markets.

A monopolistically competitive industry is characterized by ________ concentration ratios and ________ entry barriers. high; high high; low low; high low; low

low; low

If Janella increases her supply of labor by 6 percent in response to a 5 percent increase in the wage rate, her elasticity of labor supply must be 5.0. 6.0. 1.2. 0.83.

1.2.

If the price of the output produced by a particular type of labor decreases, which of the following shifts should occur in the labor market for the particular type of labor? Demand for labor should shift to the left. Supply of labor should shift to the left. Demand for labor should shift to the right. Supply of labor should shift to the right.

Demand for labor should shift to the left.

The primary purpose of antitrust policy in the United States is to Issue patents. Limit foreign competition. Encourage competition. Regulate monopolies.

Encourage competition.

As we work fewer hours and our leisure time increases, the opportunity cost of labor Falls and the marginal utility of income falls. Rises and the marginal utility of income falls. Falls and the marginal utility of income rises. Rises and the marginal utility of income rises.

Falls and the marginal utility of income rises.

In the short run, when a firm produces zero output, total cost equals

Fixed costs.

Assume a monopoly confronts the same costs and demand as a competitive industry. In this case, the monopolist produces The same output and charges the same price as the competitive industry. More output and charges a higher price than the competitive industry. Less output and charges a lower price than the competitive industry. Less output and charges a higher price than the competitive industry.

Less output and charges a higher price than the competitive industry.

Which of the following rules is satisfied when a monopoly maximizes profits? Price = AVC. Price < MC. MR = MC. MR > MC.

MR = MC.

Which of the following may not characterize an oligopoly? A few firms. No market power. High barriers to entry. Substantial control over price.

No market power.

A perfectly competitive firm should expand output when

P > MC.

A monopoly occurs when

There is only one producer of a good or service.