Microeconomics Practice Final (Study Guide)
In which of the following situations will both market clearing price and the equilibrium quantity decrease?
a decrease in demand with no change in supply.
If Ford Motor Company and General Motors Corporation were to merge, this would represent
a horizontal merger
For years, your neighbor insisted she had no desire to own a computer. Recently, however, she purchased one and says she did so because all her relatives have computers and she wants to exchange e-mail with them. Your neighbor's behavior is an example of
a network effect
A tariff is
a tax on imported goods
One role of the interest rate is to
allocate capital to its most efficient uses
The results of the calculation of the price elasticity of demand is
always negative
A dominant strategy is one that
always yields the highest benefit regardless of what the other players do.
As John's income has increased, he has purchased fewer hamburgers. Hamburgers are
an inferior good for John
When hiring additional workers, a firm operating in a perfectly competitive labor market will
be able to hire additional workers without offering higher wages
If the price of coffee rises relative to all other prices, consumers are likely to
buy more tea.
Economies of scale will lead to only one firm in the industry because
by increasing output a firm is able to lower cost per unit and change lower prices driving smaller firms out of business.
Your local grocery store reduces transaction costs to the consumer
by reducing the consumer's need to travel from food producer to food producer (or manufacturer to manufacturer) to purchase the food staples that the consumer desires.
Economies of scale occur when there are
decreases in long-run average costs resulting from increases in output
Because the products of firms in a monopolistically competitive market are not homogeneous the
demand curve is downward sloping
The market demand for labor will be
downward sloping
When demand is perfectly elastic, marginal revenue is
equal to price
Suppose the short-run supply curve is a straight line of slope +1 that intersects the origin. The long-run supply curve will be
flatter and intersect the vertical axis.
Economic bads are goods
for which desired quantity is less than what nature provides at a zero price.
Current account transactions are all payments that are related to the purchase or sale of
goods and services only
Owner-provided capital and owner-provided labor are examples of
implicit costs
Father says "Earn a B-average on your next report card and I'll help you buy a car" An economist would say that this parent is providing his child a(n)
incentive
Market clearing price
is where quantity demanded equals quantity supplied
The fact that when the price of a good goes up, people buy less of it is known as the
law of demand
When marginal costs are rising
marginal physical product is falling
The monopolist's input demand curve is the
marginal revenue product curve
long-run equilibrium is characterized by zero profits in
market structures in which there is easy entry
Which of the following would likely result as a consequence of rent controls?
unimproved buildings and apartment complexes, limits on tenant mobility, a reduction of construction of rental housing units. (all correct)
All of the following are true regarding the relationship between price elasticity of demand and total revenues EXCEPT
when the firm is facing demand that is inelastic, if it raises price, total revenues will go down.
Your annual review is given to you at your place of employment, and you get a raise of 3 percent for the next year. On the subway home though, you read an article stating the price of homes in the area you are looking to buy will increase by 6 percent during the coming year. You determine from the article that if you buy in your favorite neighborhood
your purchasing power declines
Which of the following is the closest to a perfectly competitive market structure?
radishes (correct answer) laundry detergent electricity personal computers
Economists criticize monopolies because monopolies
restrict output and raise prices compared to a competitive situation.
The U.S. government suspended the convertibility of the dollar into gold in
the 1970s
Economics is the study of
the allocation of scarce resources to satisfy unlimited wants.
According to the random walk theory,
the best forecast of tomorrow's price is today's price
External costs can be defined as
the cost associated with private production, but partially borne by society.
The law of increasing additional costs is due to
the fact that resources are not perfectly adaptable for alternative uses. scarcity.
Suppose the price of an item in the perfectly competitive market is $3. For a firm in this market, MC=MR at an output of 100 units. The average total cost at this output level is $4 per unit, and TVC is $80. We may conclude that
the firm should continue to produce because P > AVC
It has been argued that a monopolistically competitive industry involves "waste" because
the firms do not produce at the minimum of the average total cost curve and price is above marginal cost.
Governments sometimes subsidize industries. When this occurs,
the subsidized industries have an advantage on international markets relative to non-subsidized firms. For this reason, other countries often impose tariffs on the subsidized imports.
The value of a model is determined by
the usefulness of its predictions in the real world
The total utility from consuming 8 units of a good is 155. The marginal utility of the 8th unit is 7 and the marginal utility of the 7th unit is 11. The total utility from consuming 6 units of the good is..
137
If the Japanese yen appreciates against the U.S. dollar
Japanese exports will become more expensive in the United States
Economics is the study of how
People make choices.
As a price searcher, a monopoly firm
must determine its optimal price-output combination.
The free-rider problem plagues public goods because
once public goods are produced it is not possible to exclude any one.
Market failures
prevent the price system from attaining economic efficiency