Econ midterm

The only two firms in a market are trying to decide what price to charge. The payoff matrix for this game is shown above. The payoffs are thousands of dollars of economic profit. If Firm A sets its price at $10 what price will Firm B likely charge? $20 $10 Something, but more information is needed to determine Firm B's price

$10

Suppose a monopolist can sell 3 units of a good at $20 per unit. If the monopolist want to increases the quantity it sells to 4 units it would have to reduce the price to $18 per unit. What is the marginal revenue of the fourth unit? $52 $60 $20 $18 $12

$12

Using the figure above, what is the profit that the firm can earn? $1200 $5600 $1000 $4400

$1200

Paulette owns a pizza parlor. Her total cost schedule is in the above table. Her average total cost for producing 5 pizzas is $8.00. $6.00. $79.00. $15.80.

$15.80.

The Jerry-Berry Ice Cream Shoppe's total cost schedule is in the above table. Based on the table, the marginal cost of producing the fourth gallon of ice cream is $3. $2. $32. $8. $5.

$3.

Suppose the Busy Bee Caf is the monopoly producer of hamburgers in Hugo, Oklahoma. The above figure represents the demand, marginal revenue, and marginal cost curves for this establishment. What price will the Busy Bee charge to maximize its profit? $5.00 for a hamburger $3.00 for a hamburger $2.00 for a hamburger $4.00 for a hamburger $1.00 for a hamburger

$3.00 for a hamburger

Suppose MCI and AT&T can each charge either 3¢ or 4¢ a minute for a long distance call. The above table illustrates the payoffs, in millions of dollars, from each of the four possible outcomes that could occur. If MCI charges 4¢ a minute and AT&T charges 4¢ a minute, then MCI's profit will be ________ million and AT&T's profit will be ________ million. $320; $320 $200; $500 $450; $450 $320; $500 $500; $200

$320; $320

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is: $0 $4 $40 $44

$44

Using the figure above, what is the total cost? $5600 $4000 $4800 $4400

$4400

Using the figure above, what is the total revenue? $4000 $5600 $5200 $4800

$5600

the only two firms in a market are trying to decide what price to charge. The payoff matrix for this game is shown above. The payoffs are thousands of dollars of economic profit. If Firm A will sets its price at $20 what profit will Firm B likely earn? $35,000 $60,000 $40,000 $55,000

$60,000

Paulette owns a pizza parlor. Her total cost schedule is in the above table. Her marginal cost of producing a fifth pizza is $8. $6. $71. $79.

$8

If a 4 percent change in the price of a good leads to a 3 percent change in quantity demanded, the price elasticity of demand equals 1.33. 4.00. 0.75. 3.44. None of the above answers are correct.

0.75.

Suppose that Mimi plays golf 5 times per month when the price is $40 and 4 times per month when the price is $50. What is Mimi's price elasticity of demand? 0.1 0.8 1.0 10.0

1.0

During January of 2007, the average price of regular unleaded gasoline in Oakland, California increased 11.0 percent. If the price elasticity of demand for gasoline was 0.13, the price hike means that the quantity demanded decreased by 6.46 percent. 8.46 percent. 1.43 percent. 4.31 percent. 0.16 percent.

1.43 percent.

Suppose the current price of barley is $7 per bushel and at that price 100,000 bushels are demanded. If the price of barley rises 14% and quantity demanded decreases by 23% what is the price elasticity of demand for barley? 0.61. 1.64. 0.14. 0.23.

1.64.

In the above figure, the monopolistic competitor's profit-maximizing level of output is 100 150 125 175 200

125

If a firm hires 15 additional works and their additional labor allows the firms to increase production from 5000 units per year to 7000 units per year, what is the marginal product of these works? 15 133.3 2000 7000

133.3

Suppose the Busy Bee Caf is the monopoly producer of hamburgers in Hugo, Oklahoma. The above figure represents the demand, marginal revenue, and marginal cost curves for this establishment. How many hamburgers will Busy Bee Caf make and sell per hour? 10 hamburgers 30 hamburgers 20 hamburgers 40 hamburgers

20 hamburgers

Suppose the Busy Bee Caf is the monopoly producer of hamburgers in Hugo, Oklahoma. The above figure represents the demand, marginal revenue, and marginal cost curves for this establishment. What quantity will the Busy Bee produce to maximize its profit? 30 hamburgers per hour 10 hamburgers per hour 20 hamburgers per hour 50 hamburgers per hour 0 hamburgers per hour.

20 hamburgers per hour

The table above shows a nation's production possibilities curve. The opportunity cost of a robot between combination D and E is 34 pizzas. 1/4 of a pizza. 4 pizzas. 30 pizzas. undefined because neither point is production efficient.

4 pizzas.

In the above figure, the monopolistic competitor's profit-maximizing total cost is 1250 500 250 750

500

In the above figure, the monopolistic competitor's profit-maximizing total cost is 1250 500 750 250

500

Using the figure above, what is the price that would lead to a maximization of profit (P*)? B A C H

A

The table below sets out cost information for the production of volley balls. Some values are missing. Which of the following statements is correct? A = 42; E = 40 A = 70; E = 40 A = 42, E = 12 A = 70; E = 12

A = 42, E = 12

Which of the following is most likely a topic of discussion in microeconomics? Unemployment rises during a recession and falls during an expansion. An increase in government spending will increase the aggregate demand for goods and services in the economy. A rapid acceleration of the supply of money may create inflation. An increase in labor costs will increase the additional cost of producing another bus.

An increase in labor costs will increase the additional cost of producing another bus.

Why is there scarcity? Because the opportunity set determines this. Because our unlimited wants exceed our limited resources. Because human wants are limited. Because theory dictates it.

Because our unlimited wants exceed our limited resources.

_____________ - a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines. Skill Specialization Economies of scale Division of labor

Economies of scale

Using the figure above, what is the quantity that would lead to a maximization of profit (Q*)? N M Q R

M

Using the figure above, what is the total cost? Q x B C x M M x B M x A

M x B

To maximize its profit, a perfectly competitive firm sets quantity produced (Q*) where ________ and a monopolist sets quantity produced (Q*) where ________. MR = MC; MR > MC MR > MC; MR > MC MR = MC; MR = MC MR > MC; MR = MC P = ATC; P = ATC

MR = MC; MR = MC

Suppose that the equilibrium price and quantity of new houses both increase. Which of the following could be a cause of this change? More home buyers might have moved into the area. The rent for nearby apartments might have fallen. A technological advance in framing a new house might have occurred. The wage paid carpenters who build new houses might have risen. The cost of wood framing used to build houses might have fallen.

More home buyers might have moved into the area.

__________________ are minimum prices that sellers can charge for products. Rent controls Price ceilings Price floors Subsidies

Price floors

_____________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price.. Total revenue Total profits Average profit margin Total cost

Total revenue

Gasoline prices increase by 50 percent and other things remain the same. As a result, there is no change in the quantity of gasoline demanded. an increase in the demand for gasoline. a decrease in the quantity of gasoline demanded. a decrease in the demand for gasoline. More information is needed to determine if the demand for gasoline increases or decrease

a decrease in the quantity of gasoline demanded.

Which of the following is most likely a topic of discussion in macroeconomics? an increase in the price of a hamburger a decrease in the production of DVD players by a consumer electronics company an increase in the wage rate paid to automobile workers a decrease in the unemployment rate

a decrease in the unemployment rate

What does monopolistic competition have in common with perfect competition? product differentiation a standardized product a large number of firms and freedom of entry and exit the ability to earn an economic profit in the long run

a large number of firms and freedom of entry and exit

The term "ceteris paribus" means that: everything is variable. all variables except those specified are constant. no one knows which variables will change and which will remain constant. what is true for the individual is not necessarily true for the whole.

all variables except those specified are constant.

The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display allocative efficiency the production possibilities frontier trade-offs scarcity

allocative efficiency

A cost incurred in the production of a good or service and for which the firm does not make a monetary payment, is referred to as ________ cost. an explicit a minimized an invisible a maximized an implicit

an implicit

Oil refiners can refine a barrel of petroleum so that it yields either more home heating oil or more diesel fuel (i.e., they are related goods). If the price of diesel fuel falls, there is an increase in the quantity of home heating oil supplied. an increase in the supply of home heating oil. an increase in the demand for home heating oil. a decrease in the quantity of home heating oil supplied. a decrease in the supply of home heating oil.

an increase in the supply of home heating oil.

If the price that a firm charges is lower than its __________ of production, the firm will suffer losses. average cost marginal cost fixed cost variable cost

average cost

In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of: all consumers. buyers and sellers. producers and input suppliers. producers and government planning committees.

buyers and sellers

The price elasticity of demand is a measure of the equilibrium price of a product. buyers' responsiveness to changes in the price of a product. whether a product is a substitute or a complement. how much a change in demand affects the equilibrium price. the amount of a product purchased when income increases

buyers' responsiveness to changes in the price of a product.

Specialization: leads to greater self-sufficiency. can lead to an increase in overall production. allows workers to develop skills by working on a large number of tasks is always the result of an inefficient use of resources

can lead to an increase in overall production.

Consumers regard Dell computers and Apple computers as substitutes. If the price of a Dell computer decreases, the demand for Apple computers increases. demand for Dell computers decreases. demand for Apple computers decreases. supply of Dell computers increases. demand for Dell computers increases

demand for Apple computers decreases

Suppose the New Orleans Saints lowers ticket prices by 13 percent and as a result the quantity of tickets demanded increases by 21 percent. This response means that the price elasticity of demand for Saints tickets is elastic. perfectly elastic. perfectly inelastic. inelastic. unit elastic.

elastic.

When the percentage change in the quantity demanded is greater than the percentage change in price, then price elasticity of demand is irrelevant. inelastic. unit elastic. elastic. undefined.

elastic.

For a perfectly competitive firm, marginal revenue is equal to the price. less than the price. undefined because the firm's demand curve is horizontal. greater than the price. equal to the change in profit from selling one more unit.

equal to the price.

Collusion occurs when a firm chooses a level of output to maximize its own profit. firms work together to maximize joint profits. firms refuse to follow their price leaders. firms petition their U.S. senators for favors. two firms' price and output decisions come into conflict.

firms work together to maximize joint profits.

An insurance agent rents a building and has a three-year lease. An increase in the rent for the building increases the agent's variable cost and total cost. fixed cost and variable cost. variable cost and average variable cost. fixed cost and average fixed cost. total cost and average variable cost.

fixed cost and average fixed cost.

A firm's ___________ consist of expenditures that must be made before production starts that typically, over the short run, _______________ regardless of the level of production. fixed costs; do not change variable costs; are constantly changing fixed costs; are consistently changing variable costs; do not change

fixed costs; do not change

The circular flow diagram of economic activity is a model of the: flow of goods, services, and payments between households and firms. influence of government on business behaviour. role of unions and government in the economy. interaction among taxes, prices, and profits.

flow of goods, services, and payments between households and firms.

In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made. government market firm business sector

government

Why are firms in perfectly competitive markets forced to sell their products at the prevailing market price? price takers find market analysis is too costly they are very small players in the overall market high degree of similarity to competitor's products they can increase output without affecting quality

high degree of similarity to competitor's products

The law of supply states that, other things constent, if the price of a good increases, firms buy less of it. demand increases when supply increases. if the price of a good increases, the supply increases. if the price of a good increases, the quantity supplied increases. as people's income increase, the supply of goods increases.

if the price of a good increases, the quantity supplied increases.

A demand schedule shows how the demand changes when the supply changes. is a graph showing a relationship between the quantity demanded and the price of a good. shows the quantity demanded at one price. shows that demand is on schedule. is a list of the quantities demanded at each different price when all other influences on buying plans remain the same.

is a list of the quantities demanded at each different price when all other influences on buying plans remain the same.

The above figure shows a perfectly competitive firm. If the market price is $15, the firm is earning an economic profit. might shut down but more information is needed about the AVC. will immediately shut down. is incurring an economic loss. is earning a normal profit.

is earning an economic profit.

In the ____________, households work and receive payment from firms. financial investment market financial capital market labor market savings market

labor market

If a monopoly wants to sell a greater quantity of output, it must lower its price. tell consumers to buy more because it's a monopolist. raise its marginal cost. raise its price. change its fixed costs.

lower its price.

A 10 percent increase in income leads to a 15% decrease in the quantity of macaroni and cheese demanded but no change in the price of macaroni and cheese. From this information, we can assume: macaroni is a normal good and price elasticity of demand is greater than 1. macaroni is an inferior good and price elasticity of supply is equal to zero. macaroni is an inferior good and price elasticity of supply is infinite. macaroni is an inferior good and price elasticity of demand is less than 1.

macaroni is an inferior good and price elasticity of supply is infinite.

Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good. utility marginal analysis the budget constraint consumption

marginal analysis

A firm maximizes its profit by producing an amount of output where marginal cost is minimized. marginal revenue equals marginal cost. marginal revenue exceeds marginal cost by the maximum amount possible. marginal revenue exceeds marginal cost by some amount. marginal revenue is maximized.

marginal revenue equals marginal cost.

As a person receives more of a good, the _______________ from each additional unit of the good declines. utility sunk costs marginal utility budget constraint

marginal utility

In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers. macroeconomy market-oriented economy microeconomy command economy

market-oriented economy

The basic difference between macroeconomics and microeconomics is: microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade. microeconomics concentrates on the behavior of individual consumers while macroeconomics focuses on the behavior of firms. microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy. microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment.

microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

If a firms average total cost curve is never below the demand curve, can the firm make a positive economic profit? no yes

no

A cartel is most likely to occur in perfect competition as firms compete by reducing cost. monopoly because it faces no competition. monopolistic competition where firms collude to increase profits. oligopoly as firms act together to raise prices and increase profits. oligopoly as firms compete to lower price and increase their own profits.

oligopoly as firms act together to raise prices and increase profits.

The figure above shows the production possibilities curve for a country. What is the opportunity cost of shifting production from point B to point C? one compact car one SUV two SUVs four compact cars None of the above answers are correct because it is not possible to produce at point D.

one SUV

The figure above shows the supply curve for a good with a unit elastic supply. perfectly inelastic supply. inelastic supply. perfectly elastic supply. elastic supply.

perfectly elastic supply.

Total revenue equals price. profit - cost. quantity sold - cost. cost × price. price × quantity sold.

price × quantity sold.

The lesson of __________ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options. marginal utility sunk costs marginal analysis budget constraints

sunk costs

Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is: nothing, because he enjoys playing basketball more than studying. the increase in skill he obtains from playing basketball for that hour. the benefit to his grades from studying for an hour. nothing, because he had a free pass into the sports complex to play basketball.

the benefit to his grades from studying for an hour.

Marginal cost equals total fixed cost divided by total output. total cost minus total variable cost. total variable cost divided by total output. the change in total cost divided by the change in output. the change in fixed cost that results from a one-unit increase in output.

the change in total cost divided by the change in output.

Marginal revenue is equal to the price of the product. the change in total revenue divided by the change in quantity sold. the amount people buy at a given price. the amount people buy between two prices. the price multiplied by the quantity sold.

the change in total revenue divided by the change in quantity sold.

Marginal revenue is the economic profit from producing an additional unit of output. the change in total revenue from a one-unit increase in the quantity sold. another name for total revenue. the change in total cost from producing an additional unit of output.

the change in total revenue from a one-unit increase in the quantity sold.

As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good. the production possibilities frontier allocative efficiency scarcity utility

the production possibilities frontier

Market equilibrium occurs when demand and supply move in opposite direction. the quantity demanded equals the quantity supplied. all markets become equal. demand and supply change so that are equal at all possible prices. opposing forces pull demand and supply apart.

the quantity demanded equals the quantity supplied. all markets become equal.

The "law of demand" refers to the fact that, other things remaining constent, when the price of a good rises, the demand curve shifts rightward. the demand curve shifts leftward. the demand curve shifts rightward and there is a movement up along the demand curve to a smaller quantity demanded. there is a movement up along the demand curve to a smaller quantity demanded. there is a movement down along the demand curve to a larger quantity demanded.

there is a movement up along the demand curve to a smaller quantity demanded.

If a few oil-producing countries in the Middle East decide to jointly limit the production of oil, they would like the price of oil to be the same as if the market were perfectly competitive. game theory does not apply to their actions because they are nations, not firms. they are forming a cartel. they will agree to lower the price of oil in order to increase their profits. they will try to operate as a large, monopolistically competitive firm.

they are forming a cartel.