Microeconomics Final Exam Review (University of Tennessee)

As wages rise, if an employee works the same number of hours as before, the the:

Substitution effect and the income effect are of equal magnitude

Marginal product is:

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

A perfectly competitive firm is a:

Price taker; it must accept the market equilibrium price

The gap between the supply curve and the market price is called:

Producer surplus

If, due to externalities, marginal social costs exceed marginal private costs at a particular quantity in the production of a good, then:

Production of the good is greater than the socially efficient amount

If the state government charges an 8% tax rate on the first $50,000 in income earned, and then a 6% tax rate on all income above $50,000, this tax structure would be described as:

Regressive

The fish shack is the only seafood restaurant in a remote village. It charges $15 for a bowl of fish soup and sells 10 bowls of it a day. In order to increase sales to 11 bowls a day, it must reduce the price to $14. What is the marginal revenue of the 11th bowl?1

$4

At an amusement park, Sue achieves an enjoyment value of 10 on her first roller coaster ride and an enjoyment value of 6 on her second ride. Her marginal benefit from her second ride is:

6

The live band that plays nearby makes it difficult for patrons of a restaurant to hold a conversation. This is an example of:

A negative externality

Which of these is a policy idea that the government could use to correct a negative externality? (a) imposing a fee on waste from the production of goods that create negative externalities (b) encouraging the over-allocation of resources of production that create negative externalities (c) providing government subsidies to producers of goods that create negative externalities (d) providing financing of the additional production of goods that create negative externalities

A

Which statement describes a public good? (a) it is non rivial in consumption and non excludable (b) it is rival in consumption and excludable (c) it is non rival in consumption and excludable (d) it is rival in computation and non excludable

A

For a country to have a comparative advantage in a good, it must have:

A lower opportunist cost of producing that good

In which situation would consumers bear the highest incidence of a tax?

An inelastic demand with an elastic supply

In the short run:

At least one cost is fixed

All of these determine price elasticity of demand, EXCEPT: (a) the availability of substitutes (b) a change in the price of the resources used to produce the product (c) the adjustment time for buyers (d) the proportion of a buyers budget spend of the good

B

Which factor would shift the market labor supply cure to the right? (a) a more stringent immigration policy (b) a reduction in nonage income (c) an increase in the market wage rate (d) an increase in wages in alternative jobs using the same skills

B

Which of the following is a characteristic of a monopoly firm? (a) easy entry and exit (b) barriers to entry (c) a vertical, individual demand curve (d) many buyers and sellers

B

An individual's supply of labor is:

Backward bending with relation to the wage rate

In which situation can a Prisoner's Dilemma outcome most likely be avoided? (a) if the game is repeated over and over and under the same conditions (b) if the players involved choose not to cooperate with one another (c) if each player plays its best-response strategy (d) if the game is only played once with no opportunity for retaliation

C

Which factor does NOT cause the market labor supply curve to shift? (a) demographic changes (b) non-wage income (c) changes in the MRP of workers (d) non-money aspects of jobs

C

Which sequence of market structures ranks the barriers to entry from the fewer to the most? (a) monopolistic competition, monopoly, oligopoly (b) oligopoly, monopolistic competition, monopoly (c) perfect competition, oligopoly, monopoly (d) oligopoly, perfect competition, monopoly

C

Reasons for market failure include: (a) common property resources (b) public goods (c) products or services that create externalities (d) all of these are reasons for market failure

D

Which of these is NOT a significant barrier to entry? (a) patents (b) government franchises (c) large economies of scale (d) opportunity costs

D

Which of these is non excludable but rival? (a) a pure public good (b) a pure private good (c) a public good with exclusion (d) a common property resource

D

Which of these would NOT be considered a factor of production? (a) mineral deposits (b) a large copy machine at the office (c) college graduates seeking a job (d) a bank loan used to start a new business

D

_____ is a market in which there is no close substitute for the product, the potential for long-run economic profit, and nearly impossible barriers to entry. (a) perfect competition (b) monopolistic competition (c) oligopoly (d) monopoly

D

The reason monopolistic competitive firms have difficulty maintaining a profit in the long run is that:

Ease of entry into the market encourages new firms to enter and force down the price

Economists understand that people respond to:

Incentives

Externalities are the impacts:

On third parties

Which market structure does no exhibit a downward-sloping demand curve for the firm?

Perfect competition

At a price of $8, the marginal revenue of a monopolistically competitive firm is $5. If the marginal cost is $7 and average total cost is $4, what should the firm do to maximize profits?

The firm should reduce output and increase price

If a firm employs an extra unit of labor, the additional product generated by employing the extra unit of labor can be described as:

The marginal physical product of labor

Using the utility maximization rule, if Vicky's marginal utility of the last apple consumed is 20 and her marginal utility of the last pineapple consumed is 80, what is the price of pineapples if the price of apples is $1 and Vicky has maximized her utility?

$4

If a monopoly firm sells more than one unit, marginal revenue will then be:

Less than the price

_____ possess out of the legal rights of individuals and can issue stock to raise capital.

Corporations

Immunizations for children against infections diseases:

Creates an external benefit

Which statement is true regarding the total product and marginal product curves? (a) the total product curve reaches its peak when marginal product is zero (b) the totally product curve begins to fall when marginal product begins to fall (c) the marginal product curve is upward sloping whenever total product is rising (d) the total product and marginal product curves both reach their maximum point at the same level of labor

A

To an economist, utility is:

A measurement of consumer satisfaction

Scarcity refers to the fact that:

A person must make choices given the resource limitations he or she faces

Which of these is an example of a decreasing cost industry? (a) auto insurance market (b) fast-food franchises (c) memory chips for tablets (d) lumber for home construction

C

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

Choose among alternatives to satisfy their unlimited wants

When an individual labor supply curve bends backward, this means that the:

Income effect is stronger than the substitution effect

What are the two types of advertising?

Informational and persuasive

The market supply curve:

Is a horizontal summation of the supply curves of individual sellers

The _____ shows the amount of time an individual is willing to work at various wage rates.

Labor supply curve

What does the term "laissez-faire" mean in economics?

The role of government should be as minimal as possible

At equilibrium price:

The sum of consumer surplus and producer surplus is maximized

The Prisoner's Dilemma is an example of a:

Noncooperative game

The resource known as "labor" includes:

Physical and mental skills and talents

If the wages of Nike employees increase by 25% and the quantity of labor demanded decreases by 10%, the elasticity of demand for labor is:

0.4

If a farmer can grow 100 tubs of grapefruit or 250 tubs of oranges per acre of land, what is the opportunity cost of growing an orange?

0.4 of a grapefruit

If the price of electricity falls by 10% per kilowatt hour, and the quantity demanded for electricity subsequently increase by 8%, the price elasticity of demand for electricity is _____ and would be classified as an _____ good.

0.8; inelastic

Suppose the price of a bag of jelly beans rises from $1.60 to $2.00, with the result that sales of jelly beans falls from 120 bags to 80 bags a day. Using the midpoint method, what is the elasticity of demand for jelly beans?

1.80

Dan's car wash product %150,000 in revenues and incurs $120,000 in labor wages, materials, rent, and other explicit costs. Moreover, Dan gave up a $40,000-a-year job as a hotel valet to start his car wash business. Dan's economic profit is _____, and he _____ earning a normal profit.

10,000; is not

The basic setup of a "game" requires which set of components?

Players, information, strategies, outcomes, and payoffs

Getting a flu shot reduces the chances of spreading the illness to one's classmates and friends. Why, then, is this considered a market failure due to external benefits?

Because the number of people who obtain flu shots is less than the socially optimal quantity

Another way or referring to a market economy is as a:

Price system

A monopoly firm exhibits all of the following characteristics EXCEPT: (a) the ability to earn economic profits in the long run (b) signifiant barriers to entry (c) an individual demand curve that is the same as the market demand curve (d) a marginal revenue curve that equals price at all quantities

D

Suppose that the government eases restrictions on the immigration of scientist and engineers. What would happen in the labor market for those professions, all else equal?

Equilibrium wages would fall and labor quantity would rise

At the end of the term, Vicky wants to sell her economics textbook for at least $25, otherwise she would keep it. George is looking to buy a textbook because he's taking the class next term, and he is willing to pay at most $60. If Vicky agrees to sell the textbook to George for $45:

George's consumer surplus is $15 and Vicky's producer surplus is $20

If an unregulated industry generates pollution, the market price is _____ than the socially optimal price, and the market quantity is _____ than the socially optimal quantity.

Less; greater

A monopolistic competitive firm will continue to expand output until:

MC=MR

The field of economics that is concerned about the broader issues in the economy, such as inflations, unemployment, and national output of goods and services is called:

Macroeconomics

In economics, the term "capital" refers to:

Manufactured buildings and equipment used to produce other goods and services

The marginal revenue product of labor is equal to:

Marginal physical product times marginal revenue

_____ is the satisfaction received from consuming one additional unit of a good or service.

Marginal utility

Institutions that bring buyers and sellers together so they can interact and transact with each other are called:

Markets

The field of economics that focuses on decision making by individuals, businesses, industries, and governments is called:

Microeconomics

The supply curve represents the _____ price at which a firm is willing to _____.

Minimum; sell various quantities of a good

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

Monopolistic competition

Compared to a competitive industry, a monopolist is likely to achieve _____ producer surplus while generating _____ deadweight loss.

More; more

The development of solar panels for home installation has improved due to technological advances and subsidies. These factors shift the supply curve to the _____ and result in the equilibrium price of solar panel installations to _____.

Right; fall

Suppose that a law passes that causes working conditions throughout the economy to improve. The labor supply curve should shift _____ and the number of workers available at any given wage rate will _____.

Right; increase

Suppose that a major drought causes a 30 percent reduction in the peanut harvest. If there is no change in demand, this event would cause a _____ at the original equilibrium price, and the equilibrium price will therefore _____ and the equilibrium quantity will _____.

Shortage; rise; fall

If a positive externality exists in a market, the marginal:

Social benefit exceeds the marginal private benefit

The _____ explains why individuals would prefer work to leisure when wags rise.

Substitution effect

When negative externalities exist, an unregulated market will produce _____ of the good and the price will be _____ when compared to the socially optimal production.

Too much; too low