Micro Exam 2

GRAPHS

3, 5, 16, 23, 29, 33, 35, 37, 38

If 11 workers can produce a total of 54 units of a product and a 12th worker has a marginal product of 6 units, then the average product of 12 workers is

5 units

When the average total cost is $16 and the total cost is $800, then the number of units the firm is producing is

50

Studies show that the income elasticity of demand for wine is approximately five. What does this mean?

A 1 percent increase in income leads to a 5 percent increase in wine consumption

Which of the following could explain why the demand for table salt is inelastic?

Households devote a very small portion of their income to salt purchases.

Which of the following is the best example of a quota?

a limit on the quantity of tires that can be imported from a foreign country

The demand for gasoline in the short run is

inelastic because there are no good substitutes for gasoline.

If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost, the firm

is incurring a loss

If demand is inelastic, the absolute value of the price elasticity of demand is

less than one.

The main purpose of most tariffs and quotas is to

reduce the foreign competition that domestic firms face

If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded, then the demand for golf balls is

relatively elastic

In the long run, a perfectly competitive market will

supply whatever amount consumers demand at a price determined by the minimum point on the typical firm's average total cost curve.

Absolute advantage is

the ability to produce more of a good or service than competitors when using the same amount of resources

When a firm produces 50,000 units of output, its total cost equals $6.5 million. When it increases its production to 70,000 units of output, its total cost increases to $9.4 million. Within this range, the marginal cost of an additional unit of output is

$145.

Following the tariff imposed on Chinese tires, some businesspeople correctly argued that the U.S. tariff would result in

China retaliating by raising tariffs on some U.S. exports

Firms in perfect competition produce the productively efficient output level in the short run and in the long run.

FALSE

The absolute value of the price elasticity of demand for telescopes is 1.5. Therefore, telescopes can be classified as a luxury.

FALSE

The price elasticity of supply is calculated as the change in supply divided by the change in price

FALSE

A firm would decide to shut down if its production resulted in

MR<AVC

Many economists criticize protectionism because it causes losses to consumers and eliminates jobs in domestic industries that use protected products. Why, then, do some people support protectionism?

Supporters of protectionism in high-income countries believe that wages will fall as a result of competition with firms from developing countries.

A perfectly competitive firm in long-run equilibrium produces output at the lowest possible average total cost.

TRUE

Demand for staples such as dairy products and bread is likely to be both income and price inelastic

TRUE

Firms in perfect competition produce the allocatively efficient output in the short run and in the long run.

TRUE

If a firm's total variable cost exceeds its total revenue, the firm should stop production by shutting down temporarily.

TRUE

If the cross-price elasticity of demand for goods A and B is zero, this means the two goods are unrelated

TRUE

Protectionism refers to the use of trade barriers to shield domestic firms from foreign competition.

TRUE

The process a firm uses to turn inputs into outputs of goods and services is called technology.

TRUE

Which of the following is a characteristic of an oligopolistic market structure?

There are few dominant sellers.

If, as a perfectly competitive industry expands, it can supply larger quantities only at a higher long-run equilibrium price, it is

an increasing-cost industry.

Which of the following products comes closest to having a perfectly inelastic demand?

cholesterol medication in general

The United States is a leading exporter of wheat. What explains the comparative advantage of the United States in wheat production?

climate and soil conditions in the United States which are well-suited for wheat production

When a firm's long-run average cost curve is horizontal for a range of output, then that range of production displays

constant returns to scale

If a firm's long-run average total curve shows that it can produce 5,000 DVDs at an average cost of $2.00 and 15,000 DVDs at an average cost of $1.50 this is evidence of

economies of scale

As a firm hires more labor in the short run, the

extra output of another worker may rise at first, but eventually must fall

The perfectly competitive market structure benefits consumers because

firms are forced by competitive pressure to be as efficient as possible.

If total revenue exceeds fixed cost, a firm

may or may not produce in the short run, depending on whether total revenue covers variable cost.

If a typical firm in a perfectly competitive industry is earning profits, then

new firms will enter in the long run causing market supply to increase, market price to fall and profits to decrease.

If a producer is not able to expand its plant capacity immediately, it is

operating in the short run

Which of the following is not a source of technological advancement for a producer?

outsourcing some aspect of production

the basic activity of a firm is

to use inputs to produce outputs of goods and services

If a firm lowered the price of the product it sells and found that total revenue did not change, then the demand for its product is

unit-elastic

If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -3, then quantity demanded

will decrease by 45 percent.