ECON 202 FINAL WILSON
The "coincidence of wants" problem associated with barter refers to the fact that
For exchange to occur each transactor must have a product which the other transactor wants
Which of the assumptions in the theory of perfect competition assures us that economic profit will be zero in the long run
Free entry and exit of firms in the market
Which of the following conditions would prevent a firm from being able to price discriminate
The inability to identify those customers willing to pay more
The general relationship between economic freedom and per capita income is
positive- higher economic freedom leads to a higher per capita income
When economists assume that people are rational and respond to incentives, they mean:
People act in their own self interest
A firm that has market power has the ability
To affect the price of its own product
Which of the following was NOT in the top 10 countries in terms of economic freedom according to the heritage foundation
U.S.
In the above figure,the firm's total economic profit is equal to
$60
Suppose that the quantity of newspapers demanded declines from 100,000 gallons per week as a consequence of a 10% increase in the price of beer. The price elasticity of demand is
0.60
The short run is a period of time in which
At least one factor of production is fixed
At equilibrium price there is
None of the above
To think at the margin means to consider
how a small change in one variable affects another variable
In the above figure, the firm will produce
20 units
In the figure above, the demand curve shifts rightward from D0 to D1 so that D1 is the relevant demand curve. Suppose the government imposes a rent ceiling of $300 per month. In the short run there will be
A shortage of 200,000 apartments
Which of the following best illustrates the concept of consumer surplus
A thirsty athlete pays $0.85 for a cold drink when she would have gladly paid $1.50 for the drink
When people develop expertise by dividing up the tasks encountered in major productive activities such as manufacturing a plane or making a movie, one of the most likely results are:
Broadly distributed gains from specialized production and trade
What area represents consumer surplus if a monopoly exercises market power in this market
A
Which of the following will NOT cause an increase in the demand curve for beer
A change in the price of beer
Along a production possibilities frontier, a society can produce more of a good only if
All resources are efficiently used
From 1970 to 2017, the real price of eggs decreased. Which of the following would cause an unambiguous decrease in the real price of eggs
An increase in the supply of eggs and a decrease in the demand for eggs
When marginal cost is greater than average total cost, the
Average total cost increases as output increases
In a market based economy
Buyers and sellers gain from voluntary exchange
If two countries are producing the same two products it is mutually beneficial if the countries specialize and trade. How is it determined who specializes in the production of which product?
By the lowest opportunity cost of production, comparative advantage
What are represents deadweight loss if a monopoly exercises market power in this market
C+E
In competition, an individual firm
Can not affect its price nor determine the quantity it sells in the marketplace
When a firm is considered to be a "price taker" that means that the firm
Cannot influence the market price of the good that it sells
The expression, "there's no such thing as a free lunch" implies that
Costs are incurred when resources are used to produce goods and services
A minimum wage set above the equilibrium wage rate for low skilled workers
Creates unemployment among low skilled workers
The economic inefficiency of a monopolist can be be measured by
Deadweight loss
You notice that the price of butter rises and then falls. The best explanation for this is that
Demand for butter increased causing prices to rise, which attracted other firms to enter the market causing supply to increase, which caused the price to go back down
Price discrimination is when a firm charges
Different prices for the same goods to different consumers
In the short run, monopolistic competition can
Earn an economic profit
Dan sells newspapers. Dan says that a 4% increase in the price of a newspaper will decrease the quantity of newspapers demanded by 8%. According to Dan, the demand for newspapers is
Elastic
The air route from dallas to mexico city is served by more than one airline. The demand for tickets from american airlines for that route is probably
Elastic and more elastic than the demand for all tickets for that route regardless of carrier
The perfectly competitive firm charges a price __ while the monopolistic competitive firm charges a price __
Equal to marginal cost, greater than marginal cost
In competition, the marginal revenue of an individual firm
Equals the price of the product
The monopolistic competitive firm
Faces downward-sloping demand curve and therefore is a price seeker
When a market has barriers to entry it refers to
Factors that prevent other firms from challenging a firm with market power
The __ the opportunity cost of doing something, the __ likely it will be done
Higher, less
A monopolistically competitive firm maximizes profits by producing at the point where
Marginal revenue equals marginal cost
The opportunity cost of going to college
Includes wages you lose by going to school instead of working
The marginal product of labor is equal to the
Increase in the total product that results from hiring one more unit of labor with all other inputs remaining the same
If demand is inelastic, an increase in the price will
Increase total revenue
Technological advancement in oil exploration will, ceteris paribus, __ the supply of oil, shifting the supply curve
Increase, to the right
Consumer buys a good we know that her willingness to pay
Is equal to its price
If an economy is operating at a point inside the production possibilities curve
Its resources are being wasted or under used
Which of the following explains why supply curves slope upward
Law of increasing opportunity cost
In a competitive market that is in long run equilibrium, a permanent decrease in demand
Lowers the price at first then raises it as firms leave the market
A single price monopolist will set its profit maximizing level of production where
MR=MC
Given that a monopolist acts in a profit maximizing manner, the above illustrates a monopolist
Make a positive economic profit
Specialization and trade exploit differences in productivity of workers and on net
Make everyone better off
An arrangement that allows buyers and sellers to exchange things is called a
Market
A firm's primary objective is best described as
Maximizing profits
In the short run, a competitive firm's economic profits
Might be positive, negative (an economic loss) or zero (normal profit)
Economic capital refers to
Money and other financial assets
Which market structure is characterized by several firms competing for small portions of the market through product differentiation?
Monopolistic competition
In bg there are many pizza restaurants, each offering similar types of pizza but each restaurant located in a different place around the city. It is likely a pizza restaurant in bg operates in a
Monopolistically competitive market
The USDA maintains ethanol has an impact on food prices "higher ethanol production definitely and directly raises the price of corn," said USDA economist Ephraim Leibtag in the long run in the corn market, what is true if the production of ethanol increases
New corn farmers will enter the market and decrease the market price
The best example of decision making at the margin would be
Observing the effect that a small change in income has on the amount of income tax owed and therefore upon after tax income
The money payment made to owners of land, labor, capital, and entrepreneurial ability
Rent, wages, interest, and profits respectively
The firms in a competition market structure are making an economic profit when new firms enter. The entry shifts the the short run market supply curve __ the market place __ and each firms economic profit ___
Rightward, rises, increases
The fundamental fact of scarcity implies that every decision involves
Opportunity costs
If the firm is incurring losses in the short run, then which of the following is true
P<ATC
The price elasticity of demand is calculated as the absolute value of the
Percentage change in quantity demanded divided by the percentage change in price
From figure one, the opportunity cost of producing an extra jar of peanut butter sandwich is highest at
Point d
The graph in figure one depicts the mythical country of sanwichas production possibility curve. Sandwicha would have to experience significant technological progress or massive saving and investment before it could feasibly choose to produce at
Point e
The income elasticity of demand is
Positive for a normal good and negative for an inferior good
The government sometimes creates a shortage for a product by setting a maximum price at which the product may be sold to consumers. This sometimes is called
Price ceiling
For a profit maximizing competitive firm
Price equals marginal cost
A firm will shut down if
Price is less than average variable
Emilio demands more prime rib as his income increases. From this, we can conclude that, for emilio
Prime rib is an inferior good
The difference between the price a producer receives for a product and the minimum amount a producer is willing to accept for that product is
Producer surplus
In a market system, a firm's self interest motivates most people to
Provide products for other people
Economics is an area of study broadly focuses on
Scarcity and decision making
A response to a price change would be described as a
Shift in demand curves
A market demand curve
Shows the relationship between the price of a good and the quantity that all consumers together are willing to buy
Marginal revenue is equal to
The change in total revenue divided by total output
Suppose that a product benefits from a successful advertising campaign. The result is that
The demand of the product increases
When the price of bananas falls, and a technological advance in apple production occurs at the same time
The equilibrium price of apples rise and the equilibrium quantity of apples rise
Increasing opportunity costs while moving along a production possibility frontier is due to
The fact that resources are not equally productive in alternative uses
Price discrimination is related to elasticity because
The firm can increase revenues by charging customers with elastic demands lower prices and charging customers with inelastic demands higher prices
A supply curve is defined as the relationship between
The price of a good and the quantity that all consumers are willing to buy
A change in the quantity demanded of a product is the result of a change in
The price of a product
Suppose that the quantity demanded for cars exceeds the quantity supplied of cars. We would expect that
The price of cars will decrease
A change in quantity demanded of a product is the result of a change in
The price of product and related goods
Suppose that in October, the price of a cup of caffe latte was $1.50 and 400 lattes were consumed. In november that price of a latte was $2 and 200 lattes were consumed. What might have caused this change
The price of tea fell
The law of supply states
There is a positive relationship between price and quantity supplied, ceteris paribus
If firms in a competitive industry are making zero economic profit, then
There is no incentive for either entry or exit
When a market is in equilibrium
There is no shortage and no surplus at the equilibrium price
A legal price ceiling of $0 means
The product is legal to give away but not sell
The implicit cost for capital includes the
The total value of piece of capital equipment
In the long run, the main reason that a monopolist can earn positive economic profits while a perfectly competitive firm cannot is
There are no barriers to entry in a perfectly competitive market
A monopolistic firm is producing at an output level in the short run where ATC is $3.50, price is $3, MR is $1.50 and MC is $1.50. The firm is operating
With an economic loss in the short run
Does voluntary exchange create wealth (value)?
Yes, trade generally permits the trading partners to gain more of what they value; this is why they agree to the terms of exchange
customarily , economists classify resources into these major groups
land , labor, capital, and entrepreneurship
If your city imposes a tax of $100 per apartment
consumers pay $60 and landlords pay $40 tax per apartment
The simple circular flow model shows that
households are on the supply side of the resource market and the demand side of the product market
A firm's total product curve shows
how the amount of output changes when the quantity of labor changes.
A market that involves only one seller of a non-substitutable good or service is known as
monopoly
Demand is perfectly inelastic when
shifts of the supply curve result in no change in in price but large changes in quantity demanded
In the event of excess demand in the coffee market
the price of coffee will increase
In the event of shortage in the coffee market
the price of coffee will increase
What is the total surplus of a market
the sum of consumer surplus and producer surplus
