Ap Micro Review 2015

In a perfectly competitive market, which of the following shifts in supply and demand curves will definitely cause both the equilibrium price and quantity to decrease?

No shift in supply, Demand shifts to the left

Assue that a competitive industry producing a normal good is in long-run equilibrium. If average consumer income decreases, which of the following changes will occur?

Short run price decreases, short run industry output decreases, and firms will exit not enter

in the elastic range of a firm's demand curve, what will happen?

a decrease in price will most likely lead to an increase in total revenue

the concept of derived demand is best described by

a decrease in the demand for theatre tickets will decrease the demand for actresses and actors

If labor is the only variable input and its costs $15 per hour and if the marginal product of labor is 3 units per hour, the short run marginal cost of 1 unit of output is approx.

$5

Assume that total fixed costs are $46 that the average product of labor is 5 units when 10 units of output are produced, and that the wage rate is $12. If labor is the only variable input, what is the average total cost of producing 10 units of output

$7

Which of the following events will cause the demand curve for hamburgers to shift to the right?

An increase in the price of pizza, a substitute for hamburgers

diminishing marginal returns in production begin to occur when additional units of labor increases or decreases additional output?

Decreases

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I. An increase in the price of the good induces consumers to purchase substitute products, II. an increase in the price of the good reduces consumers' purchasing power, III. an increase in the price of the good increases consumers' utility from consuming that good------- the demand curve for a normal good slopes down for which of those reasons?

I and II

Suppose that a consumer purchases two goods X and Y and that the marginal utility of X is MUx, the total utility of X is TUx, the marginal utility of Y is MUy, and the total utility of Y is TUy. If the prices of X and Y are Px and Py, respectively, what expression defines consumer equilibrium?

MUx/Px=MUy/Py

Which of the following best describes a perfectly competitive market?

Many small firms producing a homogenous product and facing no significant barriers to entry

The average fixed cost is represented on a perfectly competitive firm graph by:

The distance between the average variable cost and average total cost curves on the graph

Assume that popcorn and movie attendance are complements and that Salty Concession grows corn suitable for popping. Mr. Concession will most likely sell a greater quantity of popping corn at a higher price if which of the following occurs?

The release of three summer movies sets records for movie attendance.

Antitrust legislation is designed to make it illegal for a firm to monopolize an industry. the economic rationale of this legislation is best described by:

a monopolist produces too little of the good, charging consumers a price that exceeds the marginal cost of production

An increase in what will result in a long run surplus of a product?

a price that is set by law above the equilibrium price

The government's action is appropriate for reducing inefficiency in what circumstance?

a toll on a congested bridge

consumer surplus on a graph of a competitive equilibrium market graph is represents by a triangle ________ the equilibrium price

above

If bologna is an inferior good, which of the following must be true?

an increase in consumer income will decrease demand for bologna

the imposition of an effective minimum wage will result in unemployment, an increase in the marginal product of nurses will increase the demand for nurses and wages, an increase in the supply of nurses will create unemployment and leave wages unchanged, an increase in the demand for health care will increase the demand for nurses and increase wages, revoking work permits for foreign nurses will increase wages of domestic nurses------------ in a perfectly competitive labor market for nurses, all of the following statements are true except:

an increase in the supply of nurses will create unemployment and leave wages unchanged

the supply curve for automobiles will shift to the left in response to

an increase in wages in the automobile industry

In order to be effective, where must the government place a price ceiling?

below the equilibrium/market price and quantity

If the price for a product produced in a competitive market increases, the demand and number of workers hired in that labor market who produce that product will..

both increase

Monopolies are inefficient compared to a perfectly competitive firms because monopolies

charge a price greater than marginal cost

If a price floor is set above the market equilibrium price and quantity, the quantity demanded will...

decrease

In a perfectly competitive industry, the market price of the product is $12. A firm produces at a level of output where average total cost is $16, marginal cost is $16, and average variable cost is $8. To maximize profit, the firm should

decrease output but keep producing

Why is it so difficult to maintain lasting collusive agreements

each firm realizes that its profits would increase if it were the only firm to violate the collusive agreement by increasing its production slightly

The condition for allocative efficiency is violated when

firms are price makers (price searchers)

as real incomes of us citizens have decreased over the past year, the demand for housing has also decreased---recent decreases in the price of imported wine have led to an increase in the consumption of domestic wine--- in the past several months, as the price of compact disc players has decreased, the quantity of compact disc players sold has increased-- the increase in the price of quality health foods has increased the revenues of firms producing these goods--- as the demand for computers has increased, the number of workers in the computer industry had increased------------------------- which of the following situations best illustrates the law of demand

in the past several months, as the price of compact disc players has decreased, the quantity of compact disc players sold has increased

when a perfectly competitive firm sells additional units of output, its total revenue will

increase at a constant rate

If a normal good is produced in a competitive market, which of the following combinations of events could cause the price of the good to increase and the quantity to decrease?

increase in the average income of consumers and an increase in the price of a variable input

in the short run in perfect competition, the industry's demand curve and a firm's demand curve have which of the following slopes?

industry demand curve is downsloping, firms demand curve is horizontal

A profit-maximizing firm will hire

labor until its wage rate equals its marginal revenue product

An individual's labor supply curve is derived from that person's preferences about the trade-off between income and..

leisure

private supply of public goods will most likely result in

less than the efficient level of output, dues to the free rider problem

The basic economic problem of all countries is the existence of

limited resources and unlimited wants

A chemical plant pollutes a river that serves as the water supply for a nearby town. From an economist's point of view, pollution from the plant should be reduced until the

marginal benefit from cleaner water is equal to the marginal cost of making the water cleaner

Interest paid on student loans, wages the student gave up to attend college, money spent on college tuition, money spent on clothing expenses, money spent on books and supplies--- which of the following is not included in computing the opportunity cost of attending college

money spent on clothing expenses

If a price ceiling is placed above not below the market/equilibrium price and quantity, what will happen?

nothing- ineffective price ceiling

a good example of a negative externality would be

oil leakages from drilling platforms in the Gulf of Mexico

interdependence among firms is a characteristic primarily associated with

oligopoly

in the short run, a decrease in production costs of a product will shift..

only the supply curve to the right

A factor of production will not earn economic rent when its supply is

perfectly elastic

Which of the following statements is true for a monopolist at the profit-maximizing output level?

price exceeds marginal revenue

If a perfectly competitive industry were monopolized without any changes in cost conditions, the price and quantity produced would change how?

price would increase, quantity would decrease

monopolistically competitive firms are inefficient because they

produce a lower level of output at a higher average cost than do perfectly competitive firms

if a perfectly competitive firm wishes to maximize profits and is producing where price exceeds both marginal cost and average variable cost, then the firm is

producing too little output

ABC Limited sells its product in a perfectly competitive market for a price of $15 per unit and hires workers at a daily wage rate of $75. Labor is the only factor cost and the firm is currently earning profits. If ABC hires one more worker and output increases by 5 units per day, the firm's profits will

remain unchanged

whenever the production of a good creates negative externalities, and unregulated market will result in...

society's marginal cost being higher than the firm's marginal cost

In the us, the federal government redistributes income primarily by

taxing different income levels at different rates

which of the following must be true if the revenues of wheat farmers increase when the price of wheat increases?

the demand for wheat is price inelastic

The firms' price is equal to its average revenue, the firm cannot affect the market price for its good, it is difficult for other firms to enter the industry, the demand for the firm's product is unit elastic, the firm must lower its price in order to sell more of its product----which of the following statements is true for a perfectly competitive firm but not true for a monopoly?

the firm cannot affect the market price for its good.

a perfectly competitive firm earning economic profits produces and sells 100 units of output at a price of $20 per unit. if its marginal cost of increasing output to a rate of 101 units is $18, how will the total profit differ selling 101 units than 100 units

the total profit from selling 101 units is $2 greater then the total profit from selling 100 units

A perfectly competitive firm will not increase production in the long run if..

total revenue equals total cost, the firm is producing at the efficient level of output, or if the firm is earning normal profits

A country can consume beyond its present production possibilities curve when it

trades with other countries, thus taking advantage of different opportunity costs