Econ Final

Which of the statements is not true?

Costs that are small and unimportant with little impact on profits are called marginal costs.

Based on this information, which of the following market demand schedules accurately portrays this market?

Price Quantity Demanded 1 372 302 25

Which of the following would most likely be a microeconomic question?

Should I go to business school or take a job?

Profit-maximizing principle of marginal analysis states:

That the optimal amount of an activity is the level at which marginal benefit equals marginal cost.

Use the "Demand and Supply of Gasoline" Figure 7-1. What might cause the supply curve to shift from S2back to the initial supply curve S1?

The Organization of Petroleum Exporting Countries (OPEC. restricts the production of crude oil.

You're writing a term paper for one of your courses. Which is the most fixed input in your production of a good grade on the paper?

The amount of time you have to write the paper.

If the marginal cost of production is greater than the average cost, in what direction must the average cost be changing, if any?

The average cost must be rising.

Consider the market for corn. What happens if there is an increased demand for corn tortillas and, at the same time, a new corn seed becomes available that increased the per-acre yield dramatically?

The change in price is uncertain, quantity increases.

Marginal Revenue

The change in total revenue generated by an additional unit of output.MR = ∆TR / ∆Q

If an oligopolist's demand curve is kinked at the going price:

The loss in revenue from reducing output by one unit exceeds the gain in revenue from expanding output by one unit

Suppose that the average score in a class before the final exam was 80%. The average score on the final exam was 85%. How does the marginal score (final exam average) affect overall grades?

The marginal score lies above the average and overall grades rise.

Which of the following expenses would be a fixed cost for a party cruise ship?

The port docking fee.

Which of the following measures is typically used as an indicator of the conditions in the labor market?

The unemployment rate

There is generally a trade-off between _____ fixed cost and _____ variable cost for any output level.

There is a trade-off between higher fixed cost and lower variable cost for any output level.

Short Run

Variable Cost + Fixed cost = Total Cost

Long Run

Variable Cost = Total Cost

Candice is a jewelry shop owner, specializing in beaded necklaces. For each of the following inputs, indicate which items are variable inputs as opposed to fixed inputs in the long run.

Variable inputs - upper management salaries, hourly labour, chairs, computer, beads, two year lease on office and shipping, retail space.

When does an industry have free entry and exit?

When new producers can easily enter into an industry and existing producers can easily leave that industry.

A price control is:

a legal restriction on how high or low a price in a market may go.

An increase in price and an ambiguous change in quantity is most likely caused by:

a shift to the left in supply and a shift to the right in demand.

The likely result of a price floor is:

a surplus of the good at a price above the market equilibrium price.

Which of the following is most likely a macroeconomic question rather than a microeconomic question?

"Is the national unemployment rate rising or falling?"

The production possibility curve will shift outward for which of the following reasons?

better technology that improves worker productivity

A firm experiencing increasing returns to scale will see long-run average total cost _____ as output increases.

decrease

The total cost curve gets steeper as output increases because of:

decreasing returns to the variable input

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. If the economists are correct, it must be the case that:

demand increased.

With a small number of workers and a low quantity of output, employing additional workers allows the workers to specialize and causes the marginal cost curve to slope:

downward.

The long run is best defined as a time period

during which all inputs can be varied.

An economy has achieved ________ if it ________ pass up any opportunities to make some people better off without making others worse off.

efficiency; does not

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.

Compared to a competitive firm, a monopolistically competitive firm:

faces a less elastic demand curve

The market for gasoline is in equilibrium. You have heard that the price of crude oil is falling because of new oil discoveries. You are also aware that the number of car and truck drivers is steadily rising. Knowing this, you predict that the price of gasoline will ________ and the quantity of gasoline bought and sold will________.

fall if the supply increase is larger than the demand increase; rise

In an oligopolistic industry:

firms behave strategically

According to the spreading effect, as output increases, average ________ cost decreases.

fixed

A firm's ___________________ are costs that are incurred even if there is no output. In the short run, these costs ___________________ as production increases.

fixed costs; do not change

Most competitive markets are also characterized as what?

free entry and exit

When a firm is experiencing constant returns to scale, the long-run average total cost curve is

horizontal

A shift of a demand curve to the right, all other things unchanged, will:

increase equilibrium price and quantity.

If long-run average total cost declines when output is increasing, then the cost curves exhibit _____ returns to scale.

increasing

Price ceilings that lead to shortages will impose costs on society because they:A. will eliminate long waiting lines.

lead to a smaller quantity offered on the market.

If the state government allocates additional spending on education, the opportunity cost is:

measured in terms of the alternative uses for that money.

Suppose several firms in a purely competitive industry begin to experiment slightly with their product designs. This product differentiation allows them to modestly increase their prices and increase their short-run profits. The industry now more closely resembles:

monopolistic competition

In the short-run, a change in output will cause a firm to:

move along their current short-run average total cost curve.

All points outside the production possibility curve represent:

nonfeasible production points.

Economic models are:

often useful in forming economic policy.

An industry whose Herfindahl index is 5300, producing a standardized product, is most likely an example of:

oligopoly

A maximum price set below the equilibrium price is a:

price ceiling

Use "Shrimp Market" Figure 8-8. If the government wants to limit shrimp sales to 500 pounds, it could impose a:

price floor of $15 or a price ceiling of $10.

If a country removes a tariff on imported shoes, we expect the domestic price of shoes to ________ and the quantity of shoes consumed in the domestic market to ________ .

rise; fall

Corner offices in high-rise office buildings usually cost more to rent than other offices. This fact best illustrates the economic principle of:

scarce resources.

A monopoly is a market:That produces a good or service for which no close_________ existsIn which there is one supplier that is protected from ________ by a barrier preventing the entry of new firms.

substitute; competition

Suppose you are the owner of a small t-shirt printing business. While conducting a cost analysis of your business, you find that at current production levels, your average total cost (ATC) is $10. You also know that if you increase production by one more unit, the marginal cost of that unit will be $5. If you produce another t-shirt:

the average total cost of production will decrease.

On a production possibility curve, opportunity cost is:

the decrease in the output of one good when the output of the other good is increased.

An inverse relationship between price and quantity is represented by:

the demand curve.

In economics, the short run is defined as:

the period in which some inputs are considered to be fixed in quantity

When average _____ cost is equal to marginal cost, average total cost is minimized.

total

Average variable cost equals all of the following except:

variable cost times output

Sal owns a bakery in a building with a fixed amount of space. Sal buys baking ingredients and hires workers to help bake. In the short run, Sal's bakery:

will eventually experience diminishing marginal returns to labor if Sal hires more and more workers.

The long-run average total cost curve shows the relationship between output and the average total cost when fixed cost has been chosen to minimize _____ for each level of output.

average total cost

If the average variable cost of producing 5 costumes in Kira's Costume Shop is $50 per costume, and the fixed cost of the shop is $100, what is the total cost for 5 costumes?

350

At the point at which it is currently producing, Britain must give up the production of 75 hats to produce 25additional sweaters. The opportunity cost of producing 4 sweaters is ________ hats.

4

Which is the best example of a firm adding a variable input?

A pottery studio purchases clay for making vases.

Which of the following cost concepts are correctly defined?

ATC = AVC + AFC

An input whose quantity the firm can change at any point in time is known as a:

An input whose quantity the firm can change at any point in time is known as a:

The problem of scarcity is confronted by:

all societies.

Raclette is a popular wintertime dish in Switzerland. It is essentially melted Raclette cheese over boiled new potatoes. If the price of this cheese decreased, we would expect:

an increase in demand for new potatoes.

A decrease in the price of a good will result in:

an increase in the quantity demanded.

Suppose the input costs associated with manufacturing hair-replacement medication decreases over time. Thiswould lead to:

an increase in the supply of such treatments, lower prices, and an increase in theequilibrium quantity.

As more high-speed trains are built, each additional engineer hired to manage construction is likely to increase production

at a slower pace, due to diminishing returns.

The long-run average total cost curve is made up of a series of short-run _____ cost curves.

average total

When the price of gas goes down and the demand for tires goes up, this means tires and gas are:

complements.

If long-run average total cost is constant when output is increasing, then the cost curves exhibit _____ returns to scale.

constant