Microeconomics final exam review

The PDV of $60,000 to be received at the end of three years when the interest rate is 10% is closest to

&45,079

Public sector unionization in the US is currently closest to _____ %.

36

Private sector unionization in the US is currently closest to _____ %.

6.9

the argument that concentration of market power enhances research and development efforts may be weak because

A monopoly may have no clear incentive to pursue new research and development.

suppose income falls 5 percent in a year, and as a result, housing construction falls from 10 million to 5 million units annually. Based on this information, housing starts are

A normal good.

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.

Which of the following is most likely to occur because of an increase in the price of electricity in California?

An increase in electricity imported into California.

which of the following real world situations is the result of excess capacity in a monopolistically competitive firm?

Gas stations with infrequently used pumps are located at all four corners of an intersection.

Government failure will likely arise if

Gov't official attempt to maximize their own utility.

A capital-intensive production process is one that

Has a high ratio of capital t labor

If a firm can change market prices by altering its output, then it

Has market power.

monopolistically competitive industries are characterized by all of the following except

Homogenous products

Campbell loves to work. He does not receive any enjoyment from leisure time. The last dollar that he earns each year means just as much to him as the first dollar. Which of the following best describes the shape of Campbell's labor supply curve?

Horizontal

which of the following is a production decision?

How much output the firm should produce in the long run.

if cheating can be identified easily and firms play the same game against one another repeatedly:

Implicit collusion is more likely to occur.

regarding increasing productivity, factor mobility is

Important in that it helps to reallocate resources in a dynamic economy.

market participants are likely to save a portion of current income if they

Place a higher value on future consumption than on current consumption

Suppose that if your income is $100,000, your tax is $20,000, but if your income is $200,000, your tax is $45,000. Such a tax is

Progressive

the optimal mix of output may not be produced by an economy because of the existence of

Public goods

A monopolist that does not practice price discrimination should never produce in the

Segment of its demand curve where the price elasticity of demand is greater than 1.

higher education levels and better management

Shift the long run ATC curve downward

a tax is regressive if it takes a

Smaller fraction of dollars as income rises.

Which of the following is an example of a financial intermediary?

Stock markets

the labor supply curve will be positively sloped if the substitution effect of wages is

Stronger than the income effect of wages

Which of the following is an example of an industrial union?

The United Auto Workers

if the MPP of an additional unit of labor is 4 units per hour, product price is constant at $5 per unit, and the wage rate is $19 per hour, then

The additional unit of labor should be employed

To find the average percentage change in quantity demanded,

The change in quantity demanded is divided by the average quantity.

In a publicly traded corporation, which of the following is responsible for business debts and activities?

The corporation itself

If the expected rate of return decreases

The demand for loanable funds will decrease.

which of the following is an example of a progressive tax?

The federal income tax

which of the following scenarios would support the theory of public choice?

The local police chief fails to give the mayor a speeding ticket because the mayor might fire him

at&t will argue that the merger should be approved by antitrust officials because

The merger will lead to efficiencies because a larger firm can enjoy economies of scale and keep prices low.

In the loanable funds market,

The price is the interest rate.

a perfectly competitive firm is a price taker because

The price of the product is determined by many buyers and sellers.

The value of future payments is affected by

The probability of nonpayment.

If the elasticity of demand is 3, and the price rises by 15%, then

The quantity demanded will fall by 45%.

Suppose both the demand for and supply of salsa increase (although not necessarily by the same amount). What can we conclude about changes in the price and quantity of salsa?

The quantity increases but the change in the price cannot be determined.

If the economy relies entirely on the market mechanism to answer the WHAT, HOW, and FOR WHOM questions, it tends to

Underproduce goods that yield external benefits and overproduce those that generate external costs.

as long as additional workers are attracted into the labor force by higher wages, the market labor supply curve is

Upward-sloping

a union evaluates job offers based on the

Collective interests of its members

The unionization rate in the US has been

Declining for over 40 years

assume peanut butter and jelly are complements. Ceteris paribus, an increase in the price of peanut butter will cause the equilibrium price of jelly to

Decrease and the equilibrium quantity of jelly to decrease.

Assume two goods are substitutes. Ceteris paribus, a decrease in the price of one good will cause the equilibrium price of the other good to

Decrease and the equilibrium quantity of the other good to decrease.

suppose a perfectly competitive firm is experiencing zero economic profits. in an effort to increase profits, the firm decides to initiate an advertising campaign for its product. the most likely short run result of this campaign, ceteris paribus, would be

Economic losses for the firm.

If a firm could hire all the workers it wanted at a zero wage (i.e. the workers are unpaid interns), the firm should hire:

Enough workers to produce where MPP=zero.

Gov't intervention may be appropriate to correct market outcomes because of

Externalities

Unionization rates have

Fallen in the private sector but risen in the public sector.

as we work fewer hours and our leisure time increases, the opportunity cost of labor

Falls and the marginal utility of income rises.

The difference between craft unions and industrial unions is that industrial unions

Include workers in an industry, while craft unions represent workers with a particular skill.

Which of the following properly ranks the size of tax revenues received by the federal gov't from highest to lowest?

Income taxes, SS payroll taxes, corporate taxes, and excise taxes

Assume the price elasticity of demand for JT Chip Co. Chips is 4.0. If the company decreases the price of each bag of chips from $1.89 to $1.49, the number of bags sold will

Increase by 95%

Financial intermediaries

Increase search and information costs for savers and investors.

as a nation's average education level increases, the nation's level of productivity

Increases, and the production possibilities curve shifts to the right.

assume a good has a downward-sloping, linear demand curve. Starting at a price of zero, as the price of the good increases, total revenue

Increases, then decreases

If the United States decides to convert automobile factories to tank production, as it did during World War II, but finds that some auto manufacturing facilities are not well suited to tank production, then

Increasing opportunity costs will occur with greater tank production. Factors of production, including capital, are specialized, meaning they are generally better suited for one use.

students who major in computer science are paid a lot more when they graduate than those who major in philosophy because

Information technology is a growth industry

The quantity of loanable funds available to a corporation depends on the

Interest rate the company is willing to offer

Sky-High Skywriters charges competitive prices for its skywriting services even though it has no competition. This is most likely because

It operates in a contestable market.

The perfectly competitive market structure includes all of the following except

Large advertising budgets

in a perfectly competitive market, the demand curve faced by an individual firm is:

Perfectly elastic

a monopolistically competitive industry is characterized by _____ concentration ratios and _____ entry barriers

Low; low

if a monopolist is producing a level of output where MR is less than MC, then it should

Lower its output

Which of the following characterizes monopolistic competition?

MANY FIRMS PRODUCE A PARTICULAR TYPE OF PRODUCT, BUT EACH MAINTAINS SOME INDEPENDENT CONTROL OVER ITS OWN PRICE.

As the interest rate increases, ceteris paribus, the trade off between present and future consumption

Makes it more appealing to sacrifice current consumption.

In the short run, a monopolistically competitive firm

Makes profits just as it does in the long run because entry is blocked.

If a firm is experiencing diminishing returns, you can conclude that:

Marginal costs are increasing.

Which of the following characterizes the difference between oligopoly and monopolistic competition?

Monopolistically competitive firms experience zero long run economic profit; oligopolists may experience positive long run economic profit.

when a computer firm is producing a level of output at which MC is greater than price, from society's standpoint the firm is producing too

Much because society is giving up more to produce additional computers than the computers are worth.

Which determinant of demand changes in the personal computer market as more individuals become interested in "surfing the Internet"?

Number of buyers

strategic decision making is most likely to occur in which market structure?

Oligopoly

With respect to factors of production, which of the following statements is not true?

Only those resources that are privately owned are counted as factors of production.

A perfectly competitive firm should expand output when

P>MC

assume that steel is used to produce monkey wrenches. Ceteris paribus, if the price of steel rises, then

The supply curve for monkey wrenches will shift to the left.

Which of the following statements is inaccurate?

There is substantial agreement about whether gov't improves market outcomes.

in the short run, if a firm chooses to operate and produce output, it must be the case that:

Total revenues are greater than or equal to the cost of variable factors of production.

from 2000 to 2010, the public sector share of total output

Trended up for state and local governments and up for federal govt.

economic profit is zero when a firm's revenues just cover its economic cost

True

Which of the following is an example of product differentiation?

Two shampoos differ only in their labels, but consumers pay $.20 more for the label they recognize.

from an economic standpoint, government intervention is justified

When market mechanism fails to achieve the optimal mix of output.

producing at a point inside the production possibilities curve

suggests we are forgoing the ability to produce more of both goods.