ECON 102 Final
The ________ curve continually declines as more output is produced in the short run.
average fixed cost
An extreme case of oligopoly in which firms collude to raise joint profits is known as a:
cartel.
Which of the following goods is likely to be the most income inelastic?
cigarettes
Imposing a Pigouvian tax on a good, creating a system of tradable licenses, and assigning property rights are methods to alleviate the problems associated with:
common resources
If your farm had the only known source of a rare cocoa bean needed to make chocolate-covered peanuts, your monopoly would result from:
control of a scarce resource or input.
If a production possibility frontier is a straight line, it tells us that the opportunity cost of producing one more unit of good X:
is a constant amount of good Y.
National defense and ebooks are similar in that both are ________, but they differ in that national defense is ________ while ebooks are not.
nonrival in consumption; nonexcludable
When Joe watched a television movie, his viewing was ________ in consumption because other people ________ able to view the movie at the same time Joe did.
nonrival; were
If an increase in income leads to an increase in the demand for opera tickets, then opera concerts are a(n):
normal good
If your income increases and your consumption of bagels increases, other things equal, bagels are considered a(n)
normal good
If your purchases of shoes increase from 9 pairs per year to 11 pairs per year when your income increases from $19,000 to $21,000 a year, other things equal, then, for you, shoes are considered a(n):
normal good
If your income increases and your consumption of bagels increases, other things equal, bagels are considered a(n):
normal good.
Kayla and Jada are roommates in New York City. Both Kayla and Jada recently received raises. Kayla now buys more CDs than before, but Jada buys fewer. Kayla behaves as if CDs are ________ goods and Jada's income elasticity of demand for CDs is ________.
normal; negative
Water is considered a scarce good because:
not enough of it is available for all needs. Correct
If you calculate the cross elasticity of demand is zero, or near zero, you are correct to assume those two goods are
not related
If the price of gasoline increases from $4 to $4.50,
people will buy less gasoline.
Although most citizens have access to police protection, they also take measures, such as putting locks on their doors, to protect themselves. We can explain this because police protection is a(n) ________ good, while self-protection is a(n) ________ good.
public; private
Alice goes to the local supermarket to purchase one package of her favorite taco shells. She often pays $1.50 for a package, but she finds they are on sale for $1 each. According to the law of demand, one can expect Alice to:
purchase more than one package of taco shells.
If the marginal benefit received from a good is equal to the marginal opportunity cost of production, then:
society's well-being cannot be improved by changing production
The market price of airline flights increased recently. Some economists suggest that the price increased because jet fuel is much more expensive than before. They believe that in the market for flights:
supply decreased
You notice that the price of DVD players falls and the quantity of DVD players sold increases. This set of observations can be the result of the:
supply of DVD players shifting to the right
Which of the following would increase demand for a given good?
the expectation that the price will increase in the near future
A decrease in buyers' income in the market for second hand clothing will _______ the market price and ________ the market quantity of second hand clothing, an inferior good.
Increase; increase
Cindy operates Birds-R-Us, a small store manufacturing and selling 200 bird feeders per month. Cindy's monthly total fixed costs are $700, and her monthly total variable costs are $2,000. If for some reason Cindy's fixed cost increased to $1,000, then her:
average fixed costs would increase.
Assume the demand schedule for smart phones is downward sloping. If the price of smart phones increases from $200 to $600
a decrease in quantity demanded of smart phones will occur
A decrease in the price of on-demand video-streaming services such as Netflix leads to
a decrease in the demand for DVDs.
Which of the following will cause a movement down along a demand curve?
a decrease in the product price
Because Casey can type reports faster and more accurately than Ahmet, Casey has ________ in typing reports.
an absolute advantage
Given a supply curve that is positively sloped and a demand curve for a normal good that is negatively sloped, an increase in income will most likely result in:
an increase in equilibrium price and quantity
When comparing the characteristics of common resources and artificially scarce goods, we find that:
artificially scarce goods are nonrival in consumption (while common resources are not), and common resources are nonexcludable (while artificially scarce goods are not).
An economy is said to have a comparative advantage in the production of a good if it can produce that good
at a lower opportunity cost than another economy.
If resources are scarce it means that they:
cannot provide enough goods or services to satisfy all human material wants and needs.
If resources are scarce it means that they:
cannot provide enough goods or services to satisfy all human material wants and needs. Correct
Suppose that Bob leaves a job that pays $50,000 per year in order to open a new sponge business. His insurance cost is $5,000, his material cost is $25,000, his lease payments are $10,000 and his sales revenue is $90,000. Bob's economic profit is:
$0
If a perfectly competitive gardening shop sells 30 evergreen bushes at a price of $10 per bush, its marginal revenue is
$10
Bread Talk is currently producing 10 cakes per day. The marginal cost of the tenth cake is $4, the average variable cost of 10 cakes is $11, and the total fixed cost of 10 cakes is 20. What is the average total cost of 9 cakes？
$14
A perfectly competitive firm is selling a product at the market price of $11. It produces and sells the profit-maximizing quantity of 50 units, and at this level of output, its average total cost is $8 and its average variable cost is $7. What is the firm's level of profit?
$150
You are deciding whether to stay home to do your laundry rather than work at your job and make $60. If you are willing to pay $100 to have someone else do your laundry, what would be the opportunity cost of a third option: going out drinking with your friends?
$160
We would say that apples are an inferior good if the ___________ for apples is __________ .
income elasticity of demand; negative
A decrease in the price of gasoline will _________ the demand for cars, a complement of gasoline
Increase
A supply shortage in the market for lettuce will _______ the equlibrium price of lettuce.
Increase
An increase in buyers' income will _________ the demand for cars, a normal good.
Increase
Flora, Adam, and Christina are all looking to buy book packages for their French class. Flora is willing to pay $30, Adam is willing to pay $52, and Christina is willing to pay $48. If the actual price for a book package is $40. What is the total consumer surplus for these three shoppers?
$20
You want to buy a Math textbook. A new textbook will cost you $160 but you are only willing to pay $110 at most. You find a seller who offers $90 for a used book. Suppose new book and second-hand book make no difference to you, in this transaction, you will receive ______ in consumer surplus.
$20
Austin's total fixed cost is $4,000. Austin employs 25 workers and pays each worker $110. The average product of labor is 4, and the marginal product of the last worker hired is 5. What is the marginal cost of the last unit produced by the last worker Austin hired?
$22
Say Sarah was choosing between three alternatives: working on her job that pays her $20; writing a term paper which she values at $10; or going out with a friend, which she values at $30. The opportunity cost of writing the term paper is:
$30
Austin's total fixed cost is $3,600. Austin employs 20 workers and pays each worker $60. If labor is his only variable cost, what is Austin's total cost?
$4,800
Darren runs a barbershop with fixed costs equal to $80 per day and a total output of 70 haircuts per day. What is his weekly total fixed cost if he is open 6 days per week?
$480
Austin's total fixed cost is $3,600. Austin employs 20 workers and pays each worker $60. The average product of labor is 30, and the marginal product of the twentieth worker is 12. What is the marginal cost of the last unit produced by the last worker Austin hired?
$5
Say Sarah was choosing between three alternatives: working on her job that pays her $20; writing a term paper which she values at $40; or going out with a friend, which she values at $50. The opportunity costs of writing the term paper is:
$50
A friend comes up to you and offers to give you a free ticket to the local professional team's baseball game that night. You decide to attend the game. The game takes 5 hours and costs you $15 for transportation. If you had not attended the game, you would have worked at your part-time job for $8 an hour. What is the cost to you of attending the game?
$55
Mikail's perfectly competitive camera memory card-producing factory is making positive economic profits. If the price of memory cards is $9, Mikail's output is 3,000 cards a month, and his monthly average total cost is $7, what are his monthly profits?
$6,000
A perfectly competitive firm is selling a product at the market price of $30. It produces and sells the profit-maximizing quantity of 60 units, and at this level of output, its average total cost is $20 and its average variable cost is $8. What is the firm's level of profit?
$600
A college student is faced with a difficult decision of how to spend one hour tonight. She could babysit her professor's child at an hourly wage of $7, she could work at the college library at a wage of $6, or she could finish her economics homework assignment. If she chooses to complete her homework assignment, she has incurred an opportunity cost equal to:
$7
Say John was choosing between three alternatives: going to the beach, which he values at $50; washing his car, which he values at $100; or going out with a friend, which he values at $80. The costs of washing his car is:
$80
At 500 units of output, total cost is $50,000 and total variable cost is $5,000. What does average fixed costs equal at 500 units?
$90
If a 12 percent increase in the price of lodging at a ski resort causes a 10 percent decrease in the quantity of skis rented, then the cross-price elasticity of demand between lodging and ski rentals is:
-0.83
If a 10 percent increase in the price of lodging at a ski resort causes a 12 percent decrease in the quantity of skis rented, then the cross-price elasticity of demand between lodging and ski rentals is:
-1.20
A major application of the Sherman Antitrust Act was in ________ against ________.
1911; Standard Oil
Say Sarah was choosing between three alternatives: working on her job that pays her $50; writing a term paper which she values at $40; or going out with a friend, which she values at $20. The opportunity cost of writing the term paper is:
. $50
Each month Jessica buys exactly 15 Big Macs regardless of the price. Jessica's price elasticity of demand for Big Macs is
0
Gas prices recently increased by 25%. In response, purchases of gasoline decreased by 5%. Based on this data, the price elasticity of demand for gas is:
0.2
If the price of a good is increased by 20% and the quantity demanded changes by 15%, then the price elasticity of demand is equal to
0.75
Which of the following would be most likely to reflect the cross elasticity of demand between honey and sugar?
2
If Farmer Sam MacDonald can produce 200 pounds of cabbages and no potatoes or no cabbages and 100 pounds of potatoes and if he faces a linear production possibility frontier for his farm, the opportunity cost of producing an additional pound of cabbage is ________ pound(s) of potatoe
1/2
Refer to the above payoff matrix for profits (in millions) of Orange Inc. and Grape Inc. and their two strategies. If Grape Inc. charge a low price and Orange Inc. charge a high price, then Grapr Inc. will gain profit of ______ million and Orange Inc. will gain profit of ______ million.
1000; 300
A group of dairy farmers are trying to raise milk prices by 10%. If the price elasticity of demand for milk is 0.75, and the price elasticity of supply for milk is 0, then by how much should farmers reduce their milk production to obtain the 10% increase?
7.5%
Say Sarah was choosing between 3 alternatives: working on her job that pays her $50; writing a term paper which she values at $60; or going out with a friend, which she values at $80. The opportunity cost of writing the term paper is:
80
Smallville has a linear production possibility frontier in the production of good X and good Y. It can produce 6 of X per hour or 8 of Y per hour. Suppose it has 240 hours of labor and divides labor hours equally between good X production and good Y production. What is the maximum amount of good Y it can produce?
960 Y
If one person has the only old version of Harry Potter written by J.K Rowling, which of the following would illustrate this situation?
A perfectly vertical supply curve
Which of the following best describes the law of demand
As the price of a DVD rental rises, fewer DVDs are rented.
There are several close substitutes for Bayer aspirin but fewer substitutes for a complete medical examination. Therefore, you would expect the demand for
Bayer aspirin to be more price-elastic
Refer to the above payoff matrix (in years of sentence) for two people (A and B) charged for robbery. Which of the following is the outcome of the dominant strategy without cooperation?
Both A and B confess.
Refer to the above payoff matrix for profits (in millions) of Orange Inc. and Grape Inc. and their two strategies. Which of the following is true regarding the game?
Both companies have a dominant strategy
Two students, Nikos and Camila, are working on a team project for a course. The project will receive one grade that will affect both students equally. Although they have done a great job, they have not kept track of their bibliography sources very well. They both have all the information, but neither has done the bibliography. Camila knows that Nikos will eventually do the bibliography, since Nikos does not like to turn in incomplete work. As a result:
Camila will end up free-riding on Nikos's labor.
Which of the following scenarios best describes an oligopolistic industry?
Coca-Cola and Pepsi sell most of the soft drinks consumed around the world.
Assume that Colombia gives up three motorcycles for each ton of coffee it produces, while Bolivia gives up seven motorcycles for each ton of coffee it produces.
Colombia has a comparative advantage in coffee production and should specialize in coffee production.
McDonald is known as ______, as it can clone their operations in other areas without putting undue pressure on resource price.
Constant cost industry
The demand for gasoline is rising. Which of the following statements describes a possible cause?
Consumers expect prices to rise in the near future.
A decrease in buyers' income will _________ the demand for cars, a normal good.
Decrease
A decrease in the price of butter will _________ the demand for margarine, a substitute for butter.
Decrease
An increase in buyers' income will _________ the demand for public transportation, an inferior good.
Decrease
The income elasticity of demand for eggs has been estimated to be 0.57. If income grows by 5% in a period, how will that affect demand for eggs in that period, all other things unchanged?
Demand will increase by about 2.9%
The absolute value of the price elasticity of demand for gasoline in the short run has been estimated to be 0.1. If a war in the Middle East causes the price of oil (from which gasoline is made) to increase, how will that affect total expenditures on gasoline in the short run, all other things equal? (Hint: Consider the change in gasoline prices.)
Demand will not change much, but total expenditures will rise
An increase in the price of sugar (an ingredient for soft drinks) and an increased concern about tooth decay caused by the consumption of soft drinks will result in which of the following in the soft drink market?
Equilibrium quantity will decrease, but equilibrium price may decrease, increase, or stay the same.
The only two firms in a market are trying to decide what price to charge. The payoff matrix for this duopoly game is shown above. The payoffs are thousands of dollars of economic profit. In the above game, in the Nash equilibrium,
Firm A and Firm B are both making $40,000 in economic profit.
Which of the following is not the reason why cartels are unstable?
Firms cannot foresee the price, which will lead to make wrong decision and low the profit.
Which of the following is a necessary condition for perfect competition?
Firms produce a standardized product
Which of the following examples represents the short run?
Ford asks its workers to work overtime
If they bake only cakes, in a single day George can bake 10 cakes and Greta can bake 5 cakes. If they make only pies, in a single day George can bake 10 pies while Greta can bake 4 pies. We know that:
George has an absolute advantage and a comparative advantage in making pies
Which of the following is true?
If the price elasticity of supply is less than 1, then supply is price-inelastic.
Assume that Colombia gives up three motorcycles for each ton of coffee it produces, while Bolivia gives up seven motorcycles for each ton of coffee it produces
In terms of the production possibility frontier, inefficient use of available resources is shown by
Say you took an average of 20 minutes to answer an ECON problem, and 40 minutes to answer a MATH problem. If you had a limited time left to study, your best strategy would be to solve:
It depends
Say you took an average of 40 minutes to answer an ECON problem, and 20 minutes to answer a MATH problem. If you had a limited time left to study, your best strategy would be to solve:
It depends
Which of the following statements is correct for a firm that can price-discriminate?
It should adjust prices so that customers with price-elastic demand pay lower prices than those with inelastic demand.
If they spend all night writing computer programs, Laurence can write 10 programs while Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 while Carrie Anne can make 4. We know that
Laurence's opportunity cost of writing programs is less than that of Carrie Anne.
Assume that the owner of a firm decides to shut down its plant and stop production. This would occur when _____.
Losses > FC
A cartel will maximize profit when
MC=MR
Mark and Julie are going to sell brownies and cookies for their third annual fundraiser bake sale. In one day, Mark can make 40 brownies or 20 cookies, and Julie can make 15 brownies or 15 cookies. Based on this information, ________ has the comparative advantage in making brownies and ________ has the comparative advantage in making cookies.
Mark; Julie
Two neighbors, Molly and Sandy, are separated by a white picket fence. Each neighbor has a garden that grows tomatoes and peppers. How could Molly and Sandy gain from trade?
Molly could trade peppers to Sandy in exchange for tomatoes if Molly was the more efficient grower of peppers.
Which of the following is true regarding monopolies?
Monopolies produce too little and charge too much from the standpoint of efficiency.
Godrickporter and Star Connections are the only two airport shuttle and limousine rental service companies in the mid-sized town of Godrick Hollow. Each firm must decide on whether to increase its advertising spending to compete for customers. Table 14-1 shows the payoff matrix for this advertising game.
No, its outcome depends on what Godrickporter does.
If the production possibility frontier is a straight line, which of the following is true?
Opportunity costs are constant
Other things being equal, the price elasticity of demand for a product will be lower:
Other things being equal, the price elasticity of demand for a product will be lower:
Which of the following is not a characteristic of monopolistic competition in the long run?
P = MC
Provided that there are no external benefits or costs, resources are efficiently allocated when:
P = MC.
A key theme fundamental to all of economics is:
People have unlimited wants facing limited means to satisfy them.
If they produce only hamburgers, in a single day Sarah can produce 10 hamburgers while Abe can produce 5 hamburgers. If they make milkshakes only, in a single day Sarah can produce 10 milkshakes while Abe can produce 4 milkshakes. We know that:
Sarah has an absolute advantage and a comparative advantage in making milkshakes
An increase in buyers' income will cause the demand for cars, a normal good, to: ________.
Shift to the right
If buyers' value for bicycles increase, the demand curve for bicycles will ______.
Shift to the right
When the price of wine decreases, the demand curve for wine:
Stay the same
You notice that the price of DVD players falls and the quantity of DVD players sold increases. Which of the following may cause this change?
Supply of DVD players shifts to the right.
The market for lemonade is in equilibrium and the price of lemons rises. How will this affect the lemonade market?
Supply will decrease, increasing the price and decreasing the quantity.
Suppose that, as incomes in your community increase, the demand for taxi service increases and the demand for bus service decreases. From this, we can conclude that
Taxi service is a normal good; bus service is an inferior good
Lauren has 11 people working in her tangerine grove. The marginal product of the eleventh worker equals 13 bushels of tangerines. If she hires a twelfth worker, the marginal product of that worker will equal:
The answer cannot be determined with the information available.
The demand for textbooks is price inelastic. Which of the following would explain this
The good is a necessity
The demand for textbooks is price inelastic. Which of the following would explain this?
The good is a necessity
The demand for textbooks is price inelastic. Which of the following would explain this?
The good is a necessity.
Which of the following is right about monopolistic competition?
The monopolistically competitive firm faces a downward sloping marginal revenue curve.
Suppose Indiana produces only steel and corn, with fixed amounts of land, labor, and capital resources. Which of the following best creates potential economic growth?
The percentage of Indiana residents with a college degree rises from 25% to 30%.
Which of the following is likely to make supply more inelastic?
The time period under consideration is very short and the inputs necessary for production cannot readily be increased.
The table above gives the production function for Andrew's Garage. If labor is the variable input and number of cars serviced is the output, which of the following statements is true?
There are diminishing returns to labor
One parent picks up the child from day care while the other parent goes to the grocery store and begins to make dinner. This is an example of which principle at work?
There are gains from trade
Which of the following statements about the provision of public goods is correct?
They should be provided to the point at which the marginal cost of production equals the sum of the individual marginal benefits from all consumers of that unit.
Price times quantity measures:
Total revenue
Which of the following statements is true?
Very untalented people have a comparative advantage in something they do
Refer to Figure e. Brandon and Allie want to go on a date one summer evening. Allie is a Red Sox fan, while Brandon is a Mets fan. Both teams are playing that evening, but not against each other. Each would rather watch their team, neither can force the other to watch a particular game and each is willing to suffer through the other's game if it means time together. Figure e illustrates both Allie and Brandon's payoffs for each choice, with Allie's payoff in the southwest corner of each cell and Brandon's in the northwest corner. If Brandon watch the Mets, what is Allie's best response?
Watch the Mets
Scarcity in economics means
We do not have sufficient resources to produce all of the goods and services we want.
In a monopolist firm, if price falls below AVC, the firm ______.
Will minimize its losses at its fixed costs by shutting down its plant.
Bluefin tuna travel in schools throughout the world's oceans. Fishing boats from many nations harvest bluefin tuna as the schools migrate through their national waters. The schools of bluefin tuna are best described as:
a common resource
In perfect competition
a firm's total revenue is found by multiplying the market price by the firm's quantity of output
Which of the following goods best fits the characteristics of a private good?
a pizza
A dominant strategy occurs when:
a player choose the same strategy regardless of what the opponent chooses
In terms of the production possibility frontier, inefficient use of available resources is shown by:
a point inside the production possibility frontier
Many public utilities burn oil to generate electricity. If the price of oil increases, we would expect there to be:
a shift to the left in the supply curve of electricity and a higher price for electricity.
Consider two competing motorcycle manufacturers, Harley-Davidson and Honda. If Harley-Davidson raises the price of its motorcycles, we can expect:
a shift to the right in the demand curve for Hondas and higher prices for Hondas.
The free-rider problem refers to:
a situation in which consumers have no incentive to pay for a nonexcludable good.
A new wonder diet that results in a dramatic weight loss sweeps through America. The key to the diet is to eat unlimited amounts of red meat (beef) but no poultry or carbohydrate-rich foods. As millions of Americans switch to the new diet, we can expect:
an increase in the demand for beef, leading to a shift to the right in the demand curve for beef and higher beef prices
In the market for tacos, you observe that the equilibrium price and quantity have increased. This can be caused only by:
an increase in the incomes of people who eat tacos
Suppose the input costs associated with manufacturing hair replacement treatments decreases over time. This would lead to:
an increase in the supply of such treatments, lower prices, and an increase in the equilibrium quantity.
An increase in supply, with no change in demand, will lead to ________ in equilibrium quantity and ________ in equilibrium price.
an increase; a decrease
The effect of a tremendous natural disaster can be shown by
an inward shift of the production possibility frontier.
The effect of an increase in productive inputs such as labor and capital can be shown by:
an outward shift of the production possibility frontier.
When the United States and Mexico trade
both Mexico and the United States will be better off.
When marginal cost is rising
both average variable cost and average total cost may be rising or falling.
Jessica experienced an increase in her income by 10% this year. In the same year, Jessica's quantity demanded of milk increased by 10% and her quantity demanded for bread increased by 5%. This means that for Jessica:
both milk and bread are normal goods.
If an economy has to sacrifice increasing amounts of good X for each unit of good Y produced, then its production possibility frontier is:
bowed out from the origin.
If a perfectly competitive firm is producing a quantity where MC > MR, then profit:
can be increased by decreasing production.
Gary's Gas and Frank's Fuel are the only two providers of gasoline in Smalltown. The large barriers to entry in the Smalltown gas industry explain why Gary and Frank:
can earn an economic profit in the long run.
The long-run average total cost of producing 100 units of output is $4, while the long-run average cost of producing 110 units of output is $4. These numbers suggest that the firm producing this output is experiencing:
constant returns to scale
Which of the following is the best example of a commodity in a perfectly competitive industry?
corn
Suppose the price of cereal rose by 25% and the quantity of milk sold decreased by 50%. Then we know that the
cross-price elasticity between cereal and milk is -2
If a perfectly competitive firm can sell a bushel of soybeans for $25 and it has an average variable cost of $26 per bushel and the marginal cost is $26 per bushel, the firm should:
cut output to zero.
An inefficient allocation of resources will occur when
decision makers are not faced with the full benefits and costs of their choices.
As you move down a linear demand curve, the price elasticity of demand will:
decrease
Along a given demand curve, an increase in price of the product will
decrease the quantity demanded
Along a given demand curve, an increase in price of the product will
decrease the quantity demanded.
As you move down a linear demand curve, the price elasticity of demand will
decrease.
In the market for local coffee, the price will ________ and the quantity will ________ if new coffee shops open and consumers' incomes decrease due to a recession.
decrease; be indeterminate
The market price of airline flights increased recently. Some economists suggest that the price increased because there has been an increase in the number of business travelers. They believe that in the market for flights:
demand increased
The market price of airline flights increased recently. Some economists suggest that the price increased because there has been an increase in the number of business travelers. They believe that in the market for flights:
demand increased.
The De Beers company is described as a monopolist in the production of:
diamonds
A restaurant manager sees that when he has too many servers on the floor, the servers get in each other's way and fewer people are served. This shows the concept of
diminishing marginal product
Suppose a firm can charge a relatively low price to try to compete actively with its rivals, or it can charge a relatively high, collusive price. If its strategy is to charge the low price regardless of the other firms' decisions, this low-price is the firm's
dominant strategy
A price-setter faces a demand curve.
downward-sloping
At 47 units of labor, a firm finds that average product of labor equals 39.6 and marginal product of labor equals 32.9. We can conclude that the average product curve at 47 units of labor is
downward-sloping
The process observed when an economy's production possibility frontier is shifted outward is:
economic growth
A decrease in production costs for firms in a perfectly competitive market will cause a(n):
economic profit for firms in the short run
If a firm produces a quantity at which total revenue equals total cost, then:economic profit is zero
economic profit is zero
Buffalo Aircraft doubles the amount of all the inputs it uses—the factory doubles in size and twice as many workers are hired. After this expansion, the number of aircraft produced triples. This means that Buffalo Aircraft is experiencing:
economies of scale
In general, we would predict the price elasticity of demand for Gala apples would be:
elastic.
If the price elasticity of demand for concert tickets is 2.12, then the demand is _____ and total revenue will ______ if the price of concert tickets increases
elastic; decrease
If the price elasticity of demand for concert tickets is 2.12, then the demand is _____ and total revenue will ______ if the price of concert tickets increases.
elastic; decrease
Economic profits in a perfectly competitive industry encourage firms to ________ the industry, and losses encourage firms to ________the industry.
enter; exit
In a monopoly in the long run
entry by other firms will not occur
Marginal revenue:
equals the market price in perfect competition
If the opportunity cost of manufacturing automobiles is higher in the United States than in Britain and the opportunity cost of manufacturing airplanes is lower in the United States than in Britain, then the United States will:
export airplanes to Britain and import automobiles from Britain.
If the opportunity cost of manufacturing machinery is higher in the United States than in Britain and the opportunity cost of manufacturing sweaters is lower in the United States than in Britain, then the United States will:
export sweaters to Britain and import machinery from Britain.
If firms are experiencing economic losses in the short run, firms will leave the industry, industry output will ________, and economic losses will ________ in the long run.
fall; fall
Suppose the local real estate market is in equilibrium. A recession causes local household incomes to decline. At the same time, construction of a large subdivision of new homes has just been completed. Given these two changes, we can predict the price of real estate will ________ and the quantity of real estate bought and sold will ________.
fall; rise or fall
Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is $0.10. Now suppose that the price of sugar rises, increasing the marginal and average total cost of producing candy canes by $0.05; there are no other changes in production costs. Based on the information given, we can conclude that in the long run we will observe:
firms leaving the industry
If firms are making positive economic profits in the short run, then in the long run:
firms will enter the industry
Which of the following is a common resource?
fish, forests, and a dorm kitchen
If a competitive firm shuts down for a holiday, it must still pay its:
fixed cost
The tendency of people to avoid paying for a good's benefits when the benefits can be obtained free is called the
free-rider problem
For which of the following is the cross-price elasticity of demand most likely a large positive number?
french fries and onion rings
In perfect competition:
goods are standardized and all market participants are price-takers.
To say that two goods are substitutes, their cross-price elasticities of demand should be:
greater than 0
The cross-price elasticity of demand of substitute goods is
greater than 0.
Price-takers are individuals in a market who
have no ability to affect the price of a good in a market.
At 36 units of labor, a firm finds that both average product of labor and marginal product of labor equal 42. We can conclude that the average product curve at 36 units of labor is:
horizontal
The pair of items that is most likely to have a negative cross-price elasticity of demand is:
hot dogs and mustard.
If the opportunity cost of manufacturing automobiles is lower in the United States than in Britain and the opportunity cost of manufacturing airplanes is higher in the United States than in Britain, then the United States will
import airplanes from Britain and export automobiles to Britain
If the opportunity cost of manufacturing automobiles is lower in the United States than in Britain and the opportunity cost of manufacturing airplanes is higher in the United States than in Britain, then the United States will:
import airplanes from Britain and export automobiles to Britain.
If the opportunity cost of manufacturing machinery is lower in the United States than in Britain and the opportunity cost of manufacturing sweaters is higher in the United States than in Britain, then the United States wil
import sweaters from Britain and export machinery to Britain
If chicken and fish are substitutes with a cross elasticity of demand of 0.8, then a 20% increase in the price of chicken will cause the quantity demanded for fish to:
increase by 16%
The production possibility frontier of computer will shift out for all of the following reasons except an:
increase in unemployment rate
If the marginal revenue for the next unit being produced is $50, but the marginal cost is $45, the firm should
increase production.
n the market for computers, if the demand curve is elastic and the price of a computer decreases, we would expect total revenue to ________. If the demand curve is inelastic and the price of a computer decreases, we would expect total revenue to ________.
increase; decrease
The price elasticity of demand along a demand curve with a constant slope:
increases in absolute value as the price rises
Suppose a combination of population growth and rising incomes increases both the demand for and the price of housing. In response, existing builders and new entrants construct more new housing. As the usage of timber outstrips the ability of forests to regrow, the price of timber rises. Consequently, the price of new housing rises. This scenario describes a(n):
increasing cost industry
No individual is willing to pay to provide the efficient level of a public good, since the:
individual's marginal benefit is less than the marginal social benefit
Herfindahl-Hirschman Index (HHI) is a way of measuring:
industry concentration
All points inside the production possibility frontier represent
inefficient production points.
The persistent unwanted surplus that results from a price floor creates inefficiencies that include all of the following except:
inefficiently low quality.
Suppose your income falls from $35,000 to $33,000 and that your quantity demanded of a good that you buy increases in response from 40 to 55. The good is said to be a(n)
inferior good
If your purchases of shoes decrease from 11 pairs per year to 9 pairs per year when your income increases from $19,000 to $21,000 a year, other things equal, then, for you, shoes are considered a(n):
inferior good.
us tickets are often considered _____ because _____:
inferior goods; as income rises, demand for bus tickets falls
Consider a production possibility frontier for Iraq. If in 2014 Iraq's resources are not being fully utilized, Iraq will be somewhere ________ of its production possibility frontier
inside
If a production possibility frontier is a straight line, it tells us that the opportunity cost of producing one more unit of good X
is a constant amount of good Y.
n the game in Scenario 13.3, the equilibrium outcome:
is for Moto to offer a CD changer and Zport to offer low-profile tires.
When Aishe's Bar-B-Que produces 10 pork sandwiches, the total cost is $5.00. When 11 pork sandwiches are produced, the total cost rises to $6.00. From this we know that the marginal cost of the eleventh pork sandwich
is greater than the average cost of 11 pork sandwiches.
If a perfectly competitive firm is producing a quantity where P = MC, then profit
is maximized
A good is most likely to be artificially scarce if
it is excludable but nonrival
The municipal swimming pool charges lower entrance fees to local residents than to nonresidents. Assuming that this pricing strategy increases the profits of the pool, we can conclude that nonresidents must have a ________ for swimming at the pool than residents.
less elastic demand
If hot dogs and relish are complements, their cross elasticity of demand is:
less than 0
If hot dogs and relish are complements, their cross elasticity of demand is
less than 0.
Demand is inelastic when the absolute value of the price elasticity of demand is
less than 1
Demand is inelastic when the absolute value of the price elasticity of demand is:
less than 1.
A market produces too much of a good when the price of the good is:
less than the marginal cost of providing it.
Every few months, public radio announces a call for pledge support. During this time, it asks listeners to contribute to their local public radio station. Although they raise money during this time, it often falls short of the amount they wish to raise because:
listeners know they will be able to hear public radio even if they don't contribute.
Economic policy is an example of a good that is
nonrival in consumption and nonexcludable.
Gary's Gas and Frank's Fuel are the only two providers of gasoline in Smalltown. Gary believes he faces a kinked demand curve. This means Gary thinks if he lowers his price, then Frank will ________, and if he raises his price, Frank will ________.
lower his price; not raise his price
Oligopolies are industries
made up of few firms, each with some market power and therefore aware of their interdependence with the other firms.
An assumption of the model of perfect competition is
many buyers and sellers
The curve that shows the additional cost of each additional unit of output is called the
marginal cost curve
The curve that shows the additional cost of each additional unit of output is called the:
marginal cost curve.
The profit-maximizing level of output for a perfectly competitive firm in the short run occurs where:
marginal cost equals price.
Suppose a firm is producing at the profit-maximizing level of output. At that level of output:
marginal revenue equals marginal cost
For a firm in a perfectly competitive market
marginal revenue equals market price.
Suppose a perfectly competitive firm can increase its profits by increasing its output. Then it must be true that the firm's
marginal revenue exceeds its marginal cost
When the market does not result in an efficient allocation of scarce resources, economists say there has been ________.
market failure.
The cost of sensors used in making digital cameras falls, while a successful ad campaign makes digital cameras more fashionable. As a result, the equilibrium relative price of digital cameras ________ and the equilibrium quantity ________.
may increase, decrease, or stay the same; increases
The encouragement to voluntarily contribute to the provision of goods:
may lead to the provision of public goods
If the state government allocates additional spending on education, the opportunity cost is:
measured in terms of the best alternative uses for that money.
Suppose a fast-food restaurant currently serves lunch and dinner, and is trying to determine if it should open for breakfast. Which of the following costs is a sunk cost for this business?
monthly rent
Trade can be beneficial to an economy because:
more goods and services can be obtained at lower opportunity cost
Trade can be beneficial to an economy because:
more goods and services can be obtained at lower opportunity cost.
Rebecca knows that Becca Furniture's marginal cost curve is above the average total cost curve. This means Becca Furniture's average total cost curve:
must be rising
Assume an economy is operating on its production possibility frontier, which shows the production of military and civilian goods. If the output of military goods is increased, the output of civilian goods
must decrease.
Which of the following would you expect to have highly price elastic demand curves
name brand cereals
The best example of a good whose consumption is not excludable is
national defense
Suppose that each of two firms has the independent choice of advertising its product or not advertising. If neither advertises, each gets $10 million in profit; if both advertise, their profits will be $5 million each; and if one advertises while the other does not, the advertiser gets profit of $15 million while the other gets profit of $2 million. According to game theory, if the firms could collude to maximize profit:
neither will advertise
If an economy is producing a level of output that is on its production possibility frontier, the economy has
no idle resources and is using resources efficiently
Whenever a species is threatened with extinction, it is likely that
no one has exclusive property rights to it.
In a perfectly competitive market
no one market participant will be able to influence price
An individual is more likely to be a free rider when a good is
non-excludable
A common resource is a good that is
nonexcludable and rival in consumption
Suppose you and your roommate have the following agreement when it comes to cleaning your apartment: each person washes her or his own dishes after each meal. The principle of trade you just learned tells you that it would be more efficient if:
one of you wash all the dishes while the other did a different chore.
Efficient production exists when the economy is:
operating on its production possibility frontier
As long as people have different ________, everyone has a comparative advantage in something.
opportunity costs
When a firm produces at an output level at which MR = MC, it is operating at the:
optimal output level
A perfectly competitive industry with constant costs initially operates in long-run equilibrium. When demand increases, one will observe that in the long and short runs:
output will increase
Suppose the Alaskan king crab harvest is unregulated and any person with a boat can go offshore, lower a crab pot, and harvest king crab. This common resource will likely be ________ because the marginal social cost of harvesting crabs ________.
overharvested; exceeds the market price of crab
In a Nash equilibrium
players may or may not have dominant strategies.
The slope of a long-run average total cost curve exhibiting diseconomies of scale is:
positive
If 2 goods are substitutes, then the cross-price elasticity of demand between them is
positive.
In your college town, real estate developers are building thousands of new student-friendly apartments close to campus. After the increase in new apartments, when would the equilibrium rent will end up being higher; if demand was price elastic, unitary or inelastic?
price elastic
All of the following are characteristic of oligopoly EXCEPT
price taking
In the United Kingdom, most television programming is paid for by a yearly license fee assessed on every television owner. "Television detection vans" go through neighborhoods to detect unlicensed households and keep them from viewing without paying. This is a good example of the ________ provision of ________.
private; goods that are nonexcludable in consumption
Suppose that more police and security workers become aware that wearing bulletproof vests can protect them from injury and decide to start wearing bulletproof vests. At the same time, the price of ceramics used to produce the vests falls. The equilibrium relative price of bulletproof vests ________ and the equilibrium quantity produced ________.
probably changes, but in an ambiguous direction; increases
If the price is greater than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:
produce at a profit.
Markets work because they allocate sales to the potential sellers who most value the right to sell a good, as indicated by their ability to produce the good at the lowest cost. This statement illustrates
producer surplus
Compared to a perfectly competitive industry, a monopolist:
produces a small quantity
One of the key differences the makers of the iPhones and the Samsung smartphones utilize as a part of a monopolistic competition is
product differentiation
Wenqin is a farmer, and in the short run she produces 100 bushels of wheat. Her average total cost per bushel is $1.75, total revenue is $450, and (total) fixed costs are equal to $100. Wenqin's:
profit per bushel is equal to $2.75
One consequence of equilibrium is that when trying to figure out which checkout line at the college bookstore is the fastest:
randomly choose a line; if one line were truly faster, everyone would move to it and it would no longer be faster.
One consequence of equilibrium is that when trying to figure out which checkout line at the college bookstore is the fastest:
randomly choose a line; if one line were truly faster, everyone would move to it and it would no longer be faster. Correct
A Nash equilibrium is
reached when each player chooses the best strategy for himself, given the other strategies chosen by the other players in the group.
An action is a dominant strategy when it is a player's best action:
regardless of the actions by other players.
The concept of comparative advantage is based upon:
relative opportunity costs
The concept of comparative advantage is based upon
relative opportunity costs.
For a perfectly competitive firm, the short-run supply curve is the:
rising part of the MC curve beginning at the shut-down point.
When we are forced to make choices, we are facing the concept of:
scarcity
The U.S. production possibility frontier would ________ if all computers using Microsoft operating systems contracted a virus that deleted all information on those computers
shift in
The U.S. production possibility frontier would ________ if all computers using Microsoft operating systems contracted a virus that deleted all information on those computers.
shift in
Increases in resources or improvements in technology will tend to cause a society's production possibility frontier to
shift outward to the right
Technological improvements will:
shift the production possibility frontier outward
Gains from trade arise because of:
specialization in production. Correct
If you know the cross-price elasticity between two goods is positive, then you know the two goods are
substitutes
Costs that cannot be recovered are:
sunk costs
In one hour, the United States can produce 25 tons of steel or 250 automobiles. In one hour, Japan can produce 30 tons of steel or 275 automobiles. This information implies that:
the United States has a comparative advantage in the production of automobiles.
Which of the following curves is not affected by the existence of diminishing returns?
the average fixed cost curve
Whenever a choice is made
the cost of that choice could be referred to as opportunity cost.
Economists generally believe that a country should specialize in the production of a good or service if
the country can produce the product while forgoing fewer alternative products than any other country.
If the price of JoBob's Beef Jerky increases in price and JoBob, Inc. makes tens of millions more dollars, then we can safely conclude that:
the demand for JoBob's Beef Jerky is price inelastic.
Increases in total output realized when individuals specialize in particular tasks and trade are known as:
the gains from trade.
A good is likely to have an inelastic demand curve if
the good has few available substitutes
Suppose that some firms in a perfectly competitive industry earn negative economic profits. In the long run:
the industry supply curve will shift to the left
The economy's factors of production are not equally suitable for producing different types of goods. This principle generates:
the law of increasing opportunity cost.
The problem with common resources is similar to the problem with negative externalities because:
the marginal social cost of producing another unit exceeds the individual's marginal cost.
The production possibility frontier illustrates
the maximum quantity of one good that can be produced given the quantity of the other good produced.
The shut-down price is:
the minimum of the AVC curve
If a change in fixed cost raises average total cost above the demand curve:
the monopoly will go out of business.
The opportunity cost of something is
the next best alternative given up to acquire it.
During the summer, Alex runs a lawn-mowing service, and lawn-mowing is a perfectly competitive industry. In the short run, Alex will shut down his lawn-mowing service rather than continue mowing grass if:
the total revenues can't cover the total variable costs
In the short run, a firm will continue to sell its product as long as
the price is greater than average variable costs
The price elasticity of demand for a good such as water is likely to be very low because:
the price is very low
If there is a surplus of wheat on the market,
the price of wheat will fall.
The price elasticity of supply measures
the responsiveness of quantity supplied to changes in prices
The price elasticity of supply measures:
the responsiveness of quantity supplied to changes in prices.
Sadia wants to practice price discrimination in her bakery. Which of the following techniques should Sadia not use?
the same price for all consumers for freshly baked goods
If a firm has $9,000 of fixed costs and $21,500 of variable costs, then the time period referred to is:
the short run
It is certain that the equilibrium quantity will rise when:
the supply curve and the demand curve both shift to the right
Which factor is the most important in determining the price elasticity of supply?
the time period the producer has to adjust inputs and outputs
An oligopoly is characterized as an industry in which:
there are few firms, each producing a differentiated or similar product
Which of the following is a form of strategic behavior defined as behavior intended to influence the future actions of other players?
tit-for-tat strategy
Refer to the above payoff matrix for profits (in millions) of Orange Inc. and Grape Inc. and their two strategies. Orange Inc's dominant strategy is:
to charge a low price
The marginal product of labor is the CHANGE in
total output divided by the change in the quantity of labor
Total revenue is a firm's
total output times the price at which it sells that output
Suppose coffee is considered inelastic. If the price of coffee increases:
total revenue increases
In the long run, all costs are
variable
Average variable cost is the ratio of
variable cost to the quantity of output
Average variable cost is the ratio of:
variable cost to the quantity of output.
For an economist, the cost of something is:
what you gave up to get it. Correct
John spends $40,000 on one year's college tuition. The opportunity cost of spending one year in college for John is
whatever he would have purchased with the $40,000 and whatever he would have earned had he not been in college.
A new fast-food restaurant offered a free meal (valued at $5) a week for a year to its first 100 customers. Ramona camped out for 48 hours before the opening to be one of the first 100 customers. The cost of the free meal a week for a year for Ramona was:
whatever she would have done with those 48 hours.
A public good is a good
whose consumption is nonexcludable and nonrival.
A perfectly competitive firm will produce:
with a loss in the short run if its price is greater than AVC but less than ATC.
The student center on campus has burritos, bagels, or burgers for lunch, and they all cost the same. You decide to have a burger today, but if they were out of burgers, you would have bought a bagel. Your opportunity cost is:
your enjoyment of the bagel.
You can spend $1,000 on either a new computer or a new TV. If you choose to buy the computer, the opportunity cost is:
your enjoyment of the new TV.
You can spend $200 on either a new tablet computer or a new smartphone. If you choose to buy the tablet computer, the opportunity cost is:
your enjoyment of the new smartphone.