Micro Final

​Firms in an oligopoly market can potentially earn economic profits. ​ a. In the short run, but not the long run. ​ b. In the long run, but not the short run. ​ c. In both the short run and long run ​ d. In neither the short run nor the long run

c. In both the short run and long run

the importance of the ceteris paribus assumption is that it a. allows one to separate subjective issues from objective ones b. allows one to generalize from the whole to the individual c. allows one to analyze the relationship between two variables apart from the influence of other variables d. allows one to hold all variables constant so that the economy can be carefully observed in a suspended state

c. allows one to analyze the relationship between two variables apart from the influence of other variables

If the supply curve for housing has the positive slope, rent controls are likely to: a. increase the quantity of available housing. b. improve the quality of available housing c. create a larger shortage than if the supply curve were vertical. d. help low-income families find suitable housing.

c. create a larger shortage than if the supply curve were vertical.

when economists assume that people act rationally, it means they a. always make decisions based on complete and accurate behavior b. make decisions that will not be regretted later c. do the best they can based on their values and information under current and future circumstances d. make decisions solely based on what is best for society

c. do the best they can based on their values and information under current and future circumstances

If both market demand and supply increase simultaneously, then equilibrium quantity will (be) ____ and equilibrium price will (be) ____. a. indeterminate; decrease​ b. increase; increase​ c. increase; indeterminate​ d. decrease; decrease

c. increase; indeterminate​

​The law of demand refers to the: ​ a. negative relationship between the price of a good and the willingness of producers to sell it. b. ​price increase that results from an increase in demand. ​ c. inverse relationship between the price of a good and the quantity demanded. d. ​increase in the quantity of a good made available when its price increases.

c. inverse relationship between the price of a good and the quantity demanded

Which of the following would not cause an increase in the demand for cheese? ​ a. a decrease in the price of crackers, which are consumed with cheese b. ​an increase in the income of cheese consumers, assuming that cheese is a normal good c. ​an increase in the population ​ d. a technological advance that makes it cheaper to produce cheese

d. a technological advance that makes it cheaper to produce cheese

Introducing a tariff on vitamin E would: a. reduce imports of vitamin E.​ b. increase U.S. consumption of domestically produced vitamin E.​ c. decrease total U.S. consumption of vitamin E.​ d. all of the above.

d. all of the above

Scarcity exists for those with ​ a. lower incomes. ​ b. average incomes. ​ c. higher incomes. ​ d. all of the above.

d. all of the above

economics is concerned with a. the choices people make because resources are scarce b. human decision makers and the factors that influence their choices c. the allocation of limited resources to satisfy unlimited wants d. all of the above

d. all of the above

rational self interest can include the welfare of a. our family b. our friends c. the poor people of the world d. all of the above

d. all of the above

which of the following would reflect self-interested behavior to an economist? a. worker perusing a higher-paying job and better working conditions b. consumer seeking a higher-level of satisfaction with her current income c. Mother Teresa using her Nobel prize money to help the poor d. all of the above

d. all of the above

​Which of the following is an example of an individual motivated by self-interest? a. ​a student volunteering at a soup kitchen ​b. an attorney providing free legal service to low income families ​c. a man buying a new Camaro ​d. all of the above

d. all of the above

If scarcity were not a fact a. people could have all the goods and services they wanted for free b. it would no longer be necessary to make choices c. poverty would also be eliminated d. all of the above are true

d. all of the above are true

positive statements a. are testable b. are attempts to describe what happens and why c. do not have to be a true statement d. all of the above are true

d. all of the above are true

Which of the following is characteristic of firms operating in an oligopoly market? a. ​either homogeneous or differentiated products b. ​mutual interdependence among firms ​ c. significant barriers to entry ​ d. All of the above characterize oligopoly firms.

d. all of the above characterize oligopoly firms

Which of the following is a statement of positive economics? ​ a. New tax laws are needed to help the poor. ​b. Teenage unemployment should be reduced. c. ​We should increase Social Security payments to the elderly. ​d. An increase in tax rates will reduce unemployment.

d. an increase in tax rates will reduce unemployment

Which of the following would cause the quantity of wheat bread demanded to increase, but not the demand for wheat? a. ​a reduction in the price of rye, used to produce rye bread​ b. a new scientific study demonstrating that wheat bread reduces the risk of colon cancer c. ​a decrease in the price of rye bread​ d. an increase in the number of farmers growing wheat

d. an increase in the number of farmers growing wheat

​Cartels are difficult to maintain because: ​ a. there are generally few barriers to entry in oligopoly markets. ​ b. firms have a strong private incentive to cheat on agreements. ​ c. it is difficult to enforce a cartel agreement. d. ​both (b) and (c).

d. both b and c

For equilibrium quantity to decrease, but the price to rise, there must have been a(n) a. increase in demand. b. decrease in demand. c. increase in supply d. decrease in supply.

d. decrease in supply

economists use theories and models to a. abstract from the complexities of the world b. understand economic behavior c. explain and help protect human behavior d. do all of the above

d. do all of the above

A shortage exists in the market for corn at the current price. The shortage will be eliminated by a price: a. increase, increasing the supply and decreasing the demand. b. decrease, increasing the supply and decreasing the demand. c. decrease, increasing the quantity supplied and decreasing the quantity demanded. d. increase, increasing the quantity supplied and decreasing the quantity demanded.

d. increase, increasing the quantity supplied and decreasing the quantity demanded.

rational self interest means that a. people never make mistakes b. our concerns for others do no involve costs c. we are materialistic and selfish d. people make decisions with some desired outcome in mind

d. people make decisions with some desired outcome in mind

​A monopoly firm is charging the price the market will bear at a level of output where MC equals $22 and is increasing, MR equals $20, and average variable cost equals $17. To maximize profits, the firm should:

decrease output and increase price

Necessary conditions for price discrimination include:

differences in willingness to pay among customers.

​A natural monopoly is likely to arise when:

economies of scale exist over the relevant range of demand.

​If a monopolist's marginal revenue is less than zero over a range of output, then price elasticity of demand must be:

less than one

rational behavior

making choices to achieve goals in the most effective way possible

PYNTE

price of related goods, income, number of demanders, taste, expectations

fallacy of composition

the incorrect belief that what is true for the individual, or part, must necessarily be true for the group, or the whole

Law of Demand

the law stating that the quantity of a good or service demanded varies inversely with its price

Macroeconomics

the study of economy-wide phenomena, including inflation, unemployment, and economic growth

Microeconomics

the study of how households and firms make decisions and how they interact in markets

Which of the following is true for a monopolist but not for a perfectly competitive firm?

​(a) and (b) are true for a monopolist but not for a perfectly competitive firm.

normative statement

a subjective, contestable statement that attempts to describe what should be done

Which of the following best illustrates the fallacy of composition? ​ a. If I have more money, I will be better off; therefore if we all had more money, we all would be better off. b. ​If I buy more gas each week, my gas consumption increases; therefore, if all gas consumers buy more gas each week, total gas consumption will increase. c. ​If I spend more time studying, I will learn more; therefore, if all students spend more time studying, they will learn more. ​ d. If women's hemlines are higher this year, the Dow Jones Industrials average will fall.

a. If I have more money, I will be better off; therefore if we all had more money, we all would be better off.

​In the short run, a perfectly competitive firm will maximize profit by producing where: ​ a. MC = MR. ​ b. MC = ATC. ​ c. ATC = MR. ​ d. AVC = MC.

a. MC=MR

​When the supply of a good decreases and its demand increases by the same amount: a. Price will change in the same direction as the shift in demand.​ b. Price will change in the same direction as the shift in supply.​ c. Quantity exchanged will change in the same direction as the shift in supply.​ d. Quantity exchanged will change in the same direction as the shift in demand.

a. Price will change in the same direction as the shift in demand.​

Whenever the price of Good A decreases, the demand for Good B increases. Good A and B appear to be: a. complements b. substitutes c. inferior goods d. normal goods e. inverse goods

a. complements

​In economic terms, religious and spiritual services are treated as: ​ a. goods that people desire. ​ b. resources or inputs. ​ c. marginal benefits. ​ d. priceless commodities.

a. goods that people desire

An increase in quantity demanded ​ a. illustrated by a movement downward and to the right along a demand curve. ​ b. illustrated by a movement upward and to the left along a demand curve. c. ​shifts the demand curve to the left. ​ d. shifts the demand curve to the right.

a. illustrated by a movement downward and to the right along a demand curve.

Under which one of the following market structures are sellers most likely to consider the reaction of rival sellers when they set the price of their product? a. ​oligopoly ​ b. perfect competition ​ c. pure monopoly d. ​monopolistic competition

a. oligopoly

Colin consumes both corned beef sandwiches and steak sandwiches. Corned beef is priced at $5.00 per sandwich and steak sandwiches are priced at $8.00. Which of the following marginal utility pairs is consistent with Colin's consumer equilibrium at these prices? ​ a. MU of corned beef sandwich = 1; MU of steak sandwich = 1 b. ​MU of corned beef sandwich = 1; MU of steak sandwich = 1.6 ​ c. MU of corned beef sandwich = 1.6; MU of steak sandwich = 1 ​ d. MU of corned beef sandwich = 1; MU of steak sandwich = 5

b. ​MU of corned beef sandwich = 1; MU of steak sandwich = 1.6

​Refer to Exhibit 13-1. The profit-maximizing firm's total revenue is indicated in the diagram as area:

0ADQ1

Which of the following is generally true of monopoly?

All of the above are generally true of monopoly.

​Refer to Exhibit 13-6. What price will the monopolist charge?

D

​Refer to Exhibit 13-5. What area measures the monopolist's profit?

DEGA

​Refer to Exhibit 13-6. Identify the area that represents total revenue for a profit-maximizing monopolist

P4DQ10

​The difference between a change in quantity demanded and a change in demand is that a change in: ​ a. quantity demanded is caused by a change in a good's own current price, while a change in demand is caused by a change in some other variable, such as income, tastes, or expectations. b. ​demand is caused by a change in a good's own current price, while a change in quantity demanded is caused by a change in some other variable, such as income, tastes, or expectations. c. ​quantity demanded is a change in the amount people actually buy, while a change in demand is a change in the amount they want to buy. ​ d. A change in demand and a change in quantity demanded are the same thing.

a. quantity demanded is caused by a change in a good's own current price, while a change in demand is caused by a change in some other variable, such as income, tastes, or expectations.

When society can not produce all the goods and services people want, it is faced with ​a. scarcity. b. ​surpluses. c. ​inefficiencies. d. ​inequalities.

a. scarcity

If opening up international trade resulted in the U.S. importing ballpoint pens, what would tend to happen to the U.S. price of ballpoint pens? a. ​The domestic price will fall.​ b. The domestic price will rise.​ c. The domestic price will remain constant.​ d. It is impossible to predict the impact.

a. the domestic price will fall

Microeconomic topics do not usually include: a. ​the impact of large government budget deficits on private investment spending. ​ b. the determinants of the supply of wheat by farmers. ​ c. the determinants of the demand for DVD players by consumers. ​ d. the impact of a change in the price of leather used to manufacture shoes.

a. ​the impact of large government budget deficits on private investment spending.

Which of the following is likely in a monopolized market?

all of the above

​​Which of the following types of firms practices price discrimination?

all of the above

positive statement

an objective, testable statement that describes what happens and why it happens

A deadweight loss occurs as a result of a per-unit tax because: a. the government spends tax dollars less efficiently than do private citizens. b. the tax decreases quantity produced/consumed. c. taxes cause an overproduction of output relative to the socially efficient level or production. d. a surplus is created.

b .the tax decreases quantity produced/ consumed

​____ occurs when a consumer's quantity demanded for a good increases because a ____ number of consumers purchase the same good. a. ​A negative network externality; greater ​ b. A positive network externality; greater ​ c. Bandwagon effect; fewer ​ d. A positive network externality; fewer

b. A positive network externality; greater

When the supply of a good increases and its demand decreases by the same amount: a. ​Price will change in the same direction as the shift in supply.​ b. Price will change in the same direction as the shift in demand.​ c. Quantity exchanged will change in the same direction as the shift in supply. d. ​Quantity exchanged will change in the same direction as the shift in demand.

b. Price will change in the same direction as the shift in demand.​

If the size of the external costs in an industry increased a. The supply curve including external costs would increase b. The efficient price would increase c. The free market price would increase d. Both a and b are true

b. The efficient price would increase

if incomes are rising, in the market for an inferior good, a. demand will rise b. demand will fall c. supply will rise d. supply will fall

b. demand will fall

​Positive statements are: ​ a. prescriptive, making claims about how the world ought to be. ​ b. descriptive, making claims about how the world is. ​c. optimistic, putting the best possible interpretation on things. d. ​affirmative, justifying existing economic policy.

b. descriptive, making claims about how the world is.

when we look at a particular segment of the economy, such as a given industry, we are studying, a. macroeconomics b. microeconomics c. normative economics d. positive economics

b. microeconomics

Each of the following is a determinant of demand except a. ​tastes. ​ b. production technology. ​ c. expectations. ​ d. the prices of related goods.

b. production technology

Ceteris paribus, as the market price of a good falls, consumer surplus: a. falls. b. rises. c. does not change. d. can either fall, rise, or stay the same.

b. rises

Cartel agreements are more likely to succeed if: a. ​there are a large number of firms in the industry producing identical products. ​ b. there are few firms in the industry producing identical products. c. ​there are a large number of firms in the industry producing differentiated products. d. ​there are a few firms in the industry producing differentiated products.

b. there are few firms in the industry producing identical products

which of the following is true of resources? a. their availability is unlimited b. they are the inputs used to produce goods and services c. increasing the number of resources available could eliminate scarcity d. both B and C

b. they are the inputs used to produce goods and services

A decrease in demand and an increase in supply are indicated by ​ a. Upward shifts in both curves. b. ​Downward shifts in both curves. ​ c. Rightward shifts in both curves. d. ​Leftward shifts in both curves.

b. ​Downward shifts in both curves.

When the price of a good is lower than the equilibrium price, a. ​a surplus will exist. b. ​buyers desire to purchase more than is produced. ​ c. sellers desire to produce and sell more than buyers wish to purchase. d. ​quantity supplied exceeds quantity demanded.

b. ​buyers desire to purchase more than is produced.

When a surplus exists in a market, sellers a. ​raise price, which increases quantity demanded and decreases quantity supplied, until the surplus is eliminated. b. ​raise price, which decreases quantity demanded and increases quantity supplied, until the surplus is eliminated. ​ c. lower price, which increases quantity demanded and decreases quantity supplied, until the surplus is eliminated. d. ​lower price, which decreases quantity demanded and increases quantity supplied, until the surplus is eliminated.

c. lower price, which increases quantity demanded and decreases quantity supplied, until the surplus is eliminated.

If the firms in an oligopoly collude, the results will approximate what other type of industry? a. ​perfect competition b. ​monopolistic competition ​ c. monopoly ​ d. none of the above

c. monopoly

A dominant strategy is: a. one that maximizes the social welfare. b. one that jointly maximizes profit. c. one that maximizes a player's welfare, regardless of the behavior of a competitor. d. one that maximizes a player's welfare, given the actions of a competitor.

c. one that maximized a player's welfare, regardless of the behavior of a competitor

if a good is scarce, a. it only needs to be limited b. it is not possible to produce any more of the good c. our unlimited wants exceeds our limited resources d. our limited wants exceed our unlimited resources

c. our unlimited wants exceeds our limited resources

When the price of a good is higher than the equilibrium price, ​ a. a shortage will exist. ​ b. buyers desire to purchase more than is produced. ​ c. sellers desire to produce and sell more than buyers wish to purchase. ​ d. quantity demanded exceeds quantity supplied.

c. sellers desire to produce and sell more than buyers wish to purchase.

As a result of the imposition of a tax on a product:​ a. ​some consumer surplus is transferred from buyers to producers. ​ b. some producer surplus is transferred from sellers to consumers. ​ c. some consumer and producer surplus is transferred from buyers and sellers to the government. ​ d. there is no change in either consumer or producer surplus.

c. some consumer and producer surplus is transferred from buyers and sellers to the government.

Which of the following is not a determinant of supply? ​ a. input prices ​ b. technology ​ c. tastes ​ d. expectations

c. tastes

Other things equal, for a given tax, if the demand curve is more elastic, ​ a. the greater the tax revenue raised and the greater the deadweight cost of the tax. ​ b. the greater the tax revenue raised and the smaller the deadweight cost of the tax. ​ c. the less the tax revenue raised and the greater the deadweight cost of the tax. ​ d. the less the tax revenue raised and the smaller the deadweight cost of the tax.

c. the less the tax revenue raised and the greater the deadweight cost of the tax

​The basic difference between macroeconomics and microeconomics is that: ​a. microeconomics looks at aggregate markets while macroeconomics is concerned with individual markets. b. ​macroeconomics is concerned with policy decisions while microeconomics applies only to theory. c. ​microeconomics is concerned with individual markets while macroeconomics is concerned with aggregate markets. d. ​macroeconomics is concerned with positive economics while microeconomics is concerned with normative economics.

c. ​microeconomics is concerned with individual markets while macroeconomics is concerned with aggregate markets.

SPENT

change in input price, change in price of related goods, changes in expectations, change in number of sellers, change in technology

​Refer to Exhibit 13-7. In perfect competition, producer surplus is area:

d + E

​Bill says: "The imposition of a tax on tequila will increase its price." Bob says: "Taxes should be imposed on tequila because college students drink too much." ​ a. Both statements are normative. ​ b. Both statements are positive. ​ c. Bill's statement is normative, and Bob's statement is positive. ​ d. Bill's statement is positive, and Bob's statement is normative.

d. Bill's statement is positive, and Bob's statement is normative.

When the demand and supply of grapes both increase by the same magnitude, we can predict that the: a. price of grapes will not change.​ b. quantity of grapes exchanged will fall.​ c. quantity of grapes exchanged will rise.​ d. Both a. and c. are correct.

d. Both a and c are correct

which of the following is most likely a topic of discussion in macroeconomics a. an increase in the price of pizza b. a decrease in the production of stereos by a consumer electronics company c. an increase in wages of automobile workers d. a decrease in the unemployment rate

d. a decrease in the unemployment rate

"The minimum wage should be increased so that low-income workers can afford to feed their families." This is an example of: ​ a. a positive economic statement. b. ​a negative economic statement. ​ c. the fallacy of composition. ​ d. a normative economic statement.

d. a normative economic statement

A price-discriminating monopolist will tend to charge a lower price to students if it believes that students:

​have a lower willingness to pay than other demanders.

​A monopolist would charge ____ prices and produce ____ output than would exist under perfect competition.

​higher; less.

​Under marginal cost pricing by a natural monopoly,

​price is less than average cost.

If the average total cost curve is always above the demand curve of a monopolist:

​that monopolist will suffer economic losses.