Econ Final
Natural barriers to entry ________.
most commonly arise through economies of scale
If Doug prefers hot dogs to hamburgers and hamburgers to pizza then if his preferences are consistent he
must prefer hot dogs to pizza
If firms in a monopolistically competitive industry are making profits in the short run then
new firms will enter market
If the paint on your house was eaten away by the fumes from a factory nearby and you hired a lawyer to sue the polluting firm, your legal fees would be considered
transaction costs
As output increases, AFC becomes smaller and smaller
true
Assume that a combination of 10 bottles of wine and 5 cartons of milk lies on a consumer's budget constraint. If the price of one bottle of wine is $20 and the price of one carton of milk is $3.00, what is the consumer's budget?
$215
If the market price of a basketball is $40 and the full cost of producing it is $15 then a bball producing firm gets producer surplus of
$25
If the price of orange juice was $2.00 per 64-oz carton and it is now $3.00 per 64-oz carton what is the percentage change in price
%50
Midpoint formula
(Q2-Q1)/[(Q2+Q1)/2] / (P2-P1)/[(P2+P1)/2]
using the midpoint formula if the price of a garden burger increased from $8 to $12 and the number of garden burgers consumed decreased from 10 to 6 the price elasticity of demand equals
-1.25
If a consumer receives 35 units of utility from consuming one cup of chai, and 45 units of utility from consuming 2 cups of chai, the Marginal utility of the second cup is
10
there are two people in a small society: Carrie and Doug. Carrie is willing to pay $60 to have one unit of a public good produced; Doug is willing to pay $50, and he is willing to pay $40 to have a 2nd unit produced. Given this info for 1 unit of this public good society would be willing to pay a price of
110
Mary is willing to pay $50 for a Christmas tree, John is willing to pay $45 and Jeff is willing to pay $40. The price of a tree is $45. The total consumer surplus for Mary, John and Jeff taken together is
5
suppose the value of the price elasticity of demand is -4 what does this mean
A 1 percent increase in price of the good causes QD to decrease by 4%
Offering to pay the passenger in front of you to keep her from reclining her airplane seat is an example of
A Coasian solution to an externality
Which of the following would cause an unambiguous increase in the equilibrium quantity of DVD players?
A downward shift of the supply curve and an upward shift of the demand curve.
The graph above shows the market for jackets. The demand curve is plotted in blue, the supply curve for jackets is plotted in red. The demand curve is given by Q(P) = 30- 1*P and the supply curve is given by Q(P)= −6+ 1*P.
At a price of $21, there is a surplus of 6 jackets.
Computer chips are a normal good. Suppose the economy slips into a recession so that income falls. As a result, the demand for computer chips ________ so that the price of a computer chip ________.
Decreases; falls
________ goods are excludable but non-rival in consumption.
Club
which of the following is a positive economic statement
If the price of iPhones falls, a larger quantity of iPhones will be purchased
Economists have shown that the burden of a tax is the same whether the tax is collected from the buyer or seller. Why, then are gas and cigarette taxes imposed on sellers?
It is more difficult for buyers to keep track of their purchases, and for the government to verify that the right amount of tax revenue is collected
What is a market failure?
It refers the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost.
Consider the United States' production of soy beans and running shoes. If the United States has an absolute advantage in the production of both goods compared to China,
both countries can gain from trade
The tragedy of the commons arises because _______ exceeds ________ when the resources is used.
Marginal social cost; marginal private cost
When there is a shortage of parking spaces at your college the
Quantity of parking sports demanded is greater than the quantity of parking spaces supplied
A tax on a good or service _________ the price that buyers pay and ________ the price that sellers receive
Raises; Lowers
Which of the following individuals is likely to have the most inelastic demand for air travel
a business traveler
In the long run, what happens to the demand curve facing a monopolistically competitive firm that is earning profits in the short run?
The demand curve will shift to the left and become more elastic throughout the relevant range of prices.
If a consumer obtains 30 units of utility for the first unit consumed, 39 units of utility when she consumes two units, and 46 units of utility when she consumes three units, what is the marginal utility of consuming the second unit?
The marginal utility of the second unit equals 9.
When the price of pizzas rises 6.9 percent, the quantity demanded decreases 8.8 percent. What is the price elasticity of demand for pizzas?
The price elasticity of demand for pizzas equals -1.28
Which of the following would provide economic evidence that there are many subsitutes to Google's search engine app that smartphone owners can use instead.
The cross-price elasticity between Google's app and other search engines is positive and fairly large
If the price elasticity of demand for a good is −0.77, then this means that
a 10 percent increase in price results in a 7.7 percent decrease in quantity demanded.
Gasoline prices increase by 50 percent and other things remain the same. As a result, there is
a decrease in the quantity of gas demanded
if a 10% increases in income leads to a 5% increase in QD for travel by rail then travel by rail is
a necessity
An article in the Wall Street Journal on the market for traditional canned tuna stated the following two facts: i. Firms selling traditional canned tuna are struggling to connect with millennial and generation Z consumers, "who favor fresher, less-processed options" in the food they eat. ii. Firms selling traditional canned tuna are facing competition from firms that offer tuna for sale in "pouches and kits with trendy flavors or as a healthy snack." Source: Jesse Newman and Annie Gasparro, "The Trouble With with Tuna: 'A Lot of Millennials Don't Even Own Can Openers,'" Wall Street Journal, December 2, 2018. a. From this information, can we conclude that falling sales of traditional cans of tuna is likely the result of a movement along the demand curve for traditional cans of tuna or a shift in the demand curve? The falling sales of traditional cans of tuna are the result of
a shift in the demand curve for tuna to the left.
what is a network externality?
a situation in which the usefulness of a product increases with the number of consumers who use it
A perfectly competitive firm earns a positive profit when price is
above minimum average total cost.
specializations and trade
allows nations to consume combinations of products that are outside their individual production possibilities frontier
If Aaron obtains 15 units of utility per $ spent on nectarines and 11 units of utility per z$ spent on bananas than Aaron should
buy more nectarines and fewer bananas
suppose the demand curve for a product is downward sloping and the supply curve is horizontal. If a unit tax is imposed in the market for this product _______
buyers bear the entire burden of the tax
A differentiated product has
close but not perfect substitutes.
Elvira decreased her consumption of bananas when the price of peanut butter increased. For Elvira, peanut butter and bananas are
complements
If the cross price elasticity of demand for notebooks and handheld devices is negative this means the two goods are
complements
The production of electricity creates pollution. In an unregulated market, when deciding how much electricity to buy, customers typically ________ the cost of pollution, and producers typically ________ the cost of pollution.
do not take into account; do not take into account
The demand for each seller's product in perfect competition is perfectly elastic at the market price because
each seller is too small to affect the market price
An outward shift of a nation's production possibilities frontier represents
economic growth
A local electricity-distribution company has a monopoly that is protected by an entry barrier that takes the form of
economies of scale
Which of the following statements is true about a competitive market
has so many buyers and sellers that no one can influence the price.
A bike manufacturer spends a lot of money to promote its brand name. This promotion ________ consumers because ________.
helps; it provides a signal and information about the products the bike manufacture makes
A merger between BMW and Mercedes would be an example of
horizontal merger
In class we learned that, in the long run, monopolistically competitive firm earns zero profits. However, in reality there are some strategies by which a firm can avoid losing profits. Which of the following is an example for such a strategy?
identify new markets and develop products precisely for those new markets
A monopoly differs from monopolistic competition in that
in a monopoly there are significant entry barriers but there are low barriers to entry in a monopolistically competitive market
Consider a market with a downward sloping demand curve and an upward sloping supply curve. A $20 tax levied on the producer of the good will cause the market price to
increase by less than $20
A production possibilities frontier with a bowed-out shape indicates
increasing opportunity costs as more and more of one good is produced
If the price elasticity of demand for toilet paper is −0.3, the demand for toilet paper is
inelastic.
If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost, the firm
is incurring a loss.
for a monopolistically competitive firm, marginal revenue
is less than the price
Kyra is consuming 2 pizzas and 4 energy drinks. If a pizza costs twice as much as an energy drink than Kyra
is maximizing her utility if she derives twice as much utility form the last pizza as from the last energy drink
If there is pollution in producing a product, then the market equilibrium price
is too low and equilibrium quantity is too high
which of the following increases the supply of a product
lower prices for the resources used to produce the product
One key characteristic of monopolistic competition is that it has
many firms producing a slightly differentiated product
The supply curve is also the
marginal cost curve
The production possibilities frontier shows the _____ combinations of two products that can be produced with current technology and available resources
maximum attainable
The demand for Mercedes cars is likely to be _______ the demand for any cars
more elastic than
Suppose that the equilibrium price and quantity of new houses both increases. Which of the following could be a cause pf this change
more home buyers might have moved into the area
public goods create a free-rider problem because
people can enjoy the good or service no matter whether or not they pay for it
The demand curve for an individuals seller's product in perfect competition is
perfectly elastic
Most municipalities and states in the northeastern United States use rock salt to "produce" ice−free roadways in the face of winter snowstorms. But using rock salt has several drawbacks: it speeds up corrosion of bridges and cars; it can choke vegetation; as runoff, it is harmful to creeks and rivers; and it is not very effective in de−icing roads at low temperatures.If the marginal private cost of rock salt is $40 per ton and the marginal social cost of rock salt is $55
per ton, the optimal corrective tax is $15 per ton of rock salt.
When a monopolistically competitive firm cuts its price to increase its sales it experiences a loss in revenue due to the
price effect
The difference between the market price and the minimum a person is willing to accept is called
producer surplus
Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave ________, meaning they make the best decisions given their knowledge of the costs and benefits.
rationally
If, for a given percentage increase in price, quantity demanded falls by a proportionately smaller percentage then demand is
relatively inelastic
A rent ceiling set below the equilibrium rent
results in the QD of housing to exceed the QS
In the long run, a perfectly competitive market will
supply whatever amount consumers demand at a price determined by the minimum point on the typical firm's average total cost curve.
Suppose that Edward receives 400 units of additional utility from his last soda and 900 units of additonal utility from his last slice of pizza. What can we conclude about Edward's choices if the price of a soda is $1.50 and the price of a slice of pizza is $2?
should buy more pizza to maximize his utility
When economists use the term marginal they usually refer to
small incremental change
If a typical firm in a perfectly competitive industry is incurring loses then
some firms will exit in the long run, causing market supply to decrease and market price to rise increasing profit for remaining firms
Governments often _____ activities that generate external ________
subsidize; benefits
A major difference between monopolistic competition and perfect competition is
that products are not identical in monopolistic competition unlike in perfect competition
Nora has a fixed income per month to spend on food and clothing. To allocate her limited income, she should purchase food and clothing such that
the MU per $ spent on food equals the MU per $ spent on clothing
The term property rights refers to
the ability to exercise control over ones own resources within the confines of the law
if a decrease in the price of bottled water results in a decrease in revenue then
the demand for bottled water is inelastic in the price range considered
law of diminishing marginal utility
the extra satisfaction from consuming a good decreases as more of a good is consumed, other things constant
When demand is price elastic, an increase in price causes total revenue to decrease because
the increase in revenue from raising the price of all units is not large enough to offset the decrease in revenue from selling fewer units.
The production function shows
the maximum output that can be produced from each possible quantity of inputs.
In order to derive an individual's demand curve for muffins, we would observe what happens to the utility maximizing bundle when we change
the price of muffins and hold everything else constant
When the government reviews a proposed merger between two companies the relevant market is defined by
whether or not there are close substitutes for the products of the two firms
At the optimum, the marginal social benefit from pollution emissions
will equal the marginal social cost of pollution emitted
a product is considered to be non-excludable if
you can not keep those who did not pay for the item from enjoying its benefits