Microeconomics Final Exam Review

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:

4

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.

118

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?

3

The price of automobiles is rising because more people want to purchase cars. As a result,

Quantity supplied increases

Most economists assume that firms behave _____ and that their objective is _____.

Rationally; profit maximization

Which question is NOT an example involving marginal analysis?

Should K-Mart rebrand its store's names to Sears?

Which characteristic is found in a perfectly competitive market?

Similar products Little or no barriers of entry Many buyers and sellers

A shift to the right of the supply curve could be caused by a(n):

Technological advances in production

Marginal product is defined as the:

The change in total output given a change in labor and input

(Table) Based on the table, diminishing returns occur when hiring the _____ worker.

Third worker

A firm increases its price for a good and total revenues increase. From this, we can conclude that its demand:

is price inelastic

Economics is a social science that involves the study of how individuals, firms, and societies:

make decisions with limited resources

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:

50%

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).

7

A shift to the right of the demand curve could be caused by a(n):

A rise in income

Marginal analysis would put an emphasis on:

Additional costs and benefits

What economic term is the fairness of various issues and policies?

Equity

If the cross elasticity of demand for two goods is negative, that means that they are:

Complements

A decrease in demand causes the equilibrium price to _____ and the equilibrium quantity to _____.

Fall; fall

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 _____.

Decrease; increase

What economic term is how well resources are used and allocated?

Efficiency

Total costs are a combination of:

Fixed costs + variable costs

Paying a salesperson more for increased sales is an example of:

Incentive

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:

Inelastic

If hot dogs and relish are complements, their cross elasticity of demand is:

Less than 0

_____ is the change in total revenue that results from the sale of one added unit of product.

Marginal revenue

A market situation in which large numbers of firms produce similar but not identical products is:

Monopoly

There is a(n) _____ relationship between price and quantity demanded.

Negative

If the income elasticity of demand for tea is 0.50, tea is a:

Normal good

A(n) _____ market is a market in which just a few firms control a large market share.

Oligopoly

The highest valued alternative that is forgone when you choose an action is called its:

Opportunity cost

When quantity demanded in a market equals quantity supplied, then the:

The market is in equilibrium

The opportunity cost of undertaking an activity is defined as the:

The next best alternative to that activity

The calculation for economic profit is total revenue minus:

Total costs

Price per unit times the total quantity sold is:

Total revenue

If the percentage change in quantity demanded is equal to the percentage change in price, then demand is:

Unitary Elastic

Scarcity is BEST defined as when:

Unlimited wants exceed limited resources

For all firms, regardless of the market structure, the profit-maximizing rule is to produce at the point at which marginal revenue:

equals marginal cost; MR = MC

The greater the percentage of the budget spent on a good, the:

higher is the elasticity of demand

Economic costs are the sum of _____ and _____.

implicit + explicit costs

In general, the flatter the supply curve is, the:

more elastic is supply

Thinking at the margin involves:

weighing the impact of one additional activity

Which of the following is a characteristic of a monopoly firm?

Bigger barriers to entry Market dominated by a few firms Price discrimination

Money that a firm spends on health care for employees is a(n):

Explicit cost

The law of supply states that as prices _____, the quantity _____.

Rises; supplied rises

Which of these would result in a higher price elasticity?

a longer time period