Microecon Exam 3
Outsourcing is being practiced by
overseas firms hiring in the U.S. labor market and by U.S. firms hiring in foreign labor markets with lower wages.
The perfectly competitive firm is said to be a
price taker long dash— it takes the price given by the market.
As compared to a perfectly competitive industry, a monopoly industry with identical cost curves will
produce less and set a higher price.
A monopolist's demand curve is
the industry demand curve.
The shape of the short-run cost curves are the result of
the law of diminishing returns.
Which of the following statements best explains how utility usually changes with the quantity of a good consumed?
As the quantity consumed increases, total utility increases but marginal utility decreases.
The Lorenz curve accounts for differences in the size of households and the number of wage earners they contain False
False
Which of the following characteristics applies to a monopolistically competitive industry?
Firms act independently of each other.
Which of the following characteristics applies to an oligopoly market?
Firms are interdependent.
Which of the following is NOT true of an oligopoly? A) The firms recognize their interdependence. B) A few firm account for a large portion of the total output. C)They advertise their product. D)Firms are price takers.
Firms are price takers.
Which of the following markets has a barrier to entry?
Joe's Bar owns the only liquor liscense issued by the town
Which of the following strategies would be likely to increase wages over time by restricting the supply of union labor?
Limiting membership to the size of the current workforce.
Which of the following is NOT a characteristics of a monopolistically competitive market? -No barriers to entry -Differentiated products -Many sellers -Long-run profits likely to be positive
Long-run profits likely to be positive
Which one of the following statements is FALSE? A.MC = TC divided by Q B.TC = TFC + TVC C.ATC = AFC + AVC D.AFC = TFC divided by Q
MC = TC divided by Q
All of the following are key characteristics of a monopolistically competitive industry except
a homogeneous product.
Which of the following is NOT a characteristic of monopolistic competition?
a large number of entry barriers
Suppose that jeans that were fashionable in the 1990s become unfashionable today. If other factors were held constant, then there would be in the market of jeans
a leftward shift in the demand curve.
If a consumer faces the possibility of having less of both products represented by an indifference curve graph, this would be represented by
a new indifference curve below and to the left of the original curve.
In a perfectly competitive industry, an individual firm faces
a perfectly elastic labor supply curve.
"From each according to his ability; to each according to what he or she produces," is an example of
a productivity standard toward income distribution.
In oligopoly, any action by one firm to change price, output, or quality causes
a reaction by other firms.
Which of the following would be a fixed input for an amusement park?
a roller coaster
When the qualities of a good are relatively easy to assess in advance of their purchase, the good is known as
a search good.
A monopsonist is
a single buyer.
A monopolist is defined as
a single supplier of a good or service for which there is no close substitute.
If Apple, a company that produces smartphones, purchases a company that specializes in developing phone apps, we would have an example of
a vertical merger.
All of the following are income in kind EXCEPT (a. tips received by a waitress b. goods produced in the home c. government provided housing d. government provided education)
a. tips received by a waitress
The marginal factor cost curve is ________ whenever the supply curve is upward sloping.
above the supply curve
The Herfindahl-Hirschman index is measured by
adding the squares of the market shares of all firms in an industry.
The practice of outsourcing has been given a boost by
advances in telecommunications and computer networking.
In the long run
all factors of production are variable.
The Lorenz curve has been criticized as a measure of the distribution of income because
all of the above
Which of these are government programs designed to reduce poverty?
all of the above
Compared to the time period from 1945 until 1990, the number of annual union strikes in the United States has , on average,------
almost doubled
The MRP curve of the monopolist is
always less elastic than the MRP curve of the perfect competitor.
"To each according to his need," is an example of
an egalitarian principle toward income distribution.
The age-earning cycle shows an individual typically earning
an income that increases with age, peaks, and then falls as retirement approaches.
Originally, the threshold income level used to determine official poverty statistics was based on
an income three times the amount of money needed to purchase a nutritionally adequate diet.
Which of the following would cause the labor demand curve to shift to the right?
an increase in labor productivity
The price of labor in the agricultural industry has just increased. For agricultural products, this will lead to
an increase in price and a decrease in quantity.
Which of the following will cause a rightward shift of the demand curve?
an increase in the expected future price of the good
All of the following will cause the supply curve of good A to shift rightward EXCEPT
an increase in the market price of good A.
All of the following can cause the demand curve for labor to shift to the right except
an increase in the supply of labor.
Suppose that milk producers expect that the price of milk is going to drop next week. This would cause
an increase in the supply of milk today.
The United Auto Workers is an example of
an industrial union.
A decrease in the price of a substitute good Y will lead to
an inward shift in the demand for good X.
The Knights of Labor was
an organization of both unskilled and skilled workers that pushed for an eight hour workday and equal pay for men and women.
Managers in oligopoly firms must
anticipate the reaction of rival firms.
The percentage of U.S. workers in the private sector who belong to unions is currently
approximately 11 percent.
Total revenues are maximized
at the point of unit-elasticity on the demand curve.
A price ceiling is
a government-imposed maximum price that may be charged for a good or service, which can lead to shortages.
A monopoly is socially inefficient because it
charges a price greater than marginal cost.
Bargaining between the management of a company and the management of a union is
collective bargaining.
The measurement of industry concentration which calculates the percentage of all sales contributed by a specific number of leading firms is called the
concentration ratio.
Which of the following is a determinant of consumer demand?
consumers' expectation of the future relative price of a product
firm in a competitive industry faces the following short−run cost and revenue conditions: ATC = $16; AVC = $8; and MR = MC = $12. This firm should
continue to operate at the same price and output level in the short run.
The ATC curve measures the ________ and the price measures the _______
cost per unit; revenue per unit
The ATC curve measures the ________ and the price measures the ________
cost per unit; revenue per unit
Labor unions composed of workers who engage in a particular trade or skill, such as carpentry, are called
craft unions.
The first labor unions in the United States were
craft unions.
if a firm increases the price of their product in the elastic portion of the demand curve, total revenues will
decrease
If the MRP of labor is less than the wage rate, the perfectly competitive firm will
decrease employment.
Firms providing wireless (an alternative to cable) Internet access services reduce their prices. This will cause a(n)
decrease in demand.
There is a decrease in the incomes earned by consumers ofcable-based Internet access services. This will causea(n)
decrease in demand.
Suppose a perfectly competitive firm faces the following short−run cost and revenue conditions: ATC = $8.00; AVC = $5.00; MC = $8.00; MR = $7.00. The firm should
decrease output.
If total product is increasing at a decreasing rate, then marginal product is
decreasing.
If the market price of a product falls and as a result total revenue of firms falls, we can conclude that
demand is inelastic in this price range.
Total revenues reach a maximum when
demand is unit-elastic.
The inverse relationship between quantity demanded and price of a good or service can be explained, in part, by
diminishing marginal utility and the rule of equal marginal utilities per dollar.
Oligopolies can result from any of the following EXCEPT
diseconomies of scale.
Government-enforced prices such as price ceilings
disrupt the rationing function performed by prices in a market system.
The price elasticity of demand for gizmos is known to be 5.0 (in absolute value). Therefore, the demand for gizmos can be described as
elastic
If total revenue falls when the market price increases, demand is
elastic.
In a perfectly competitive market, if P > ATC in the short run, there is apt to be
entry of new firms into the market.
A product has perfectly inelastic demand when the price elasticity of demand is
equal to 0.
For a perfectly competitive firm, price
equals both average revenue and marginal revenue.
When the perfect competitor earns less than normal profits in the long run, the firm will
exit the industry.
In order to price discriminate, a firm must
face a downward-sloping demand curve.
The price elasticity of demand for gizmos is known to be 3.0 (disregarding the negative sign). If sellers of gizmos increase their prices, total revenue from gizmo sales will
fall
Unions face a trade-off between higher wages and
fewer available positions.
Which of the following is a short-run decision for a firm?
firing workers
The longer any price change persists, the
greater is the price elasticity of demand.
For a monopolist, price is ________ marginal revenue.
greater than
The better the substitutes for a monopoly firm's product, the
greater the price elasticity of demand.
The demand curve faced by the monopolist
has greater price elasticity of demand as close substitutes for the monopoly product are developed.
The monopolist hires fewer workers than the perfect competitor because
he monopolist produces less than the perfect competitor and needs less labor, other things being equal.
Which of the following has been proposed by Congress as an alternative to changing the American health care industry?
health savings account program
Information products use information-intensive inputs and are characterized by
high fixed costs but low marginal costs.
Other things equal, an increase in the productivity of labor will lead to
higher wages.
Firms providing cable-based Internet access services reduce their prices. This will cause a(n)
increase in quantity demanded.
Suppose a monopolist's costs and revenues are as follows: ATC = $50; MC = $40; MR = $45; P = $55. The firm should
increase output and decrease price.
While the slope of the perfectly inelastic supply curve ________, the slope of the perfectly elastic supply curve ______
is zero, approaches infinity
When a group of workers forms a union, they introduce an element of
monopoly into the labor market.
A perfectly competitive firm faces the marginal product schedule shown above. The price of the product is $20 and the wage rate is $320 per worker. The marginal revenue product of the 14th worker is
$120
According to the table at right, the marginal factor cost of the fifth worker is
$30.00
According to the table, the marginal factor cost of the eighth worker is
$48.00 (Difference of first and second products)
Consider the diagram at the right depicting the revenue and cost conditions faced by a monopolistically competitive firm. What are the total revenues experienced by this firm? (1) What are the total costs experienced by this firm? (2) What are the economic profits experienced by this firm? (3) This firm is more likely in (4) -run equilibrium because (5)
(1) $2800 (2) $2800 (3) $0 (4) long (5)normal profits will not stimulate entry (which is a long-run change).
A new education program administered by the company increases labor's marginal product. -The demand for labor would (1). The firm completes a new plant with a larger workspace and new machinery that workers can utilize and that does not substitute for the functions provided by workers' labor. -The demand for labor would (2).
(1)increase (2) increase
If the quantity of tacos is measured along the horizontal axis and the quantity of movies is measured along the vertical axis, and the price of a taco is $2.00 while the price of a movie is $12, then the slope of the budget line is
-1/6
When unions set wage rates ---above--- market clearing prices, they face the problem of---rationing-- a restricted number of jobs to workers who desire to earn the higher wages. Unions may pursue any one of three goals: (1) to employ ---all--- union members, (2) to maximize total ---income--- of the union's members, or (3) to ---maximize--- wages for certain, usually high-seniority, workers. Unions can increase the wage rate of members by engaging in practices that shift the union labor supply curve ---inward--- or shift the demand curve for union labor ---outward-- (or both).
-above -rationing -all -income -maximize -inward -outward
Demand curves are drawn with determinants other than the price of the good held constant. These other determinants, called ceteris paribus conditions, are (1) --income--, (2)-- tastes and preferences--, (3) --prices of related goods--, (4) --expectations about future prices and incomes--, and (5) --the number of potential buyers-- in the market at any given price. If any one of these determinants changes, the demand curve will shift to the right or to the left. A change in demand comes about only because of a change in the --ceteris paribus-- conditions of demand. This change in demand is a shift in the demand curve to the left or to the right. A change in the quantity demanded comes about when there is a change in the price of the good (other things held constant). Such a change in quantity demanded involves a --movement along-- a given demand curve.
..
1) If foreign firms outsource jobs to U.S. markets, 2)The net effect of outsourcing on U.S. markets
1) U.S. employment and wages will rise. 2)may increase or decrease U.S. wages and employment.
In a monopolistically competitive industry, a relatively ----- number of firms interact in a ------ competitive market. Because monopolistically competitive firms sell -------- products, sales promotion and advertising are common features of a monopolistically competitive industry. There is ---- entry (or exit) of new firms in a monopolistically competitive industry.
1) large 2)highly 3)differentiated 4)easy
If poverty is defined in ---absolute--- terms, economic growth eventually decreases the number of officially defined poor. If poverty is defined in ---relative---- terms, however, we will never eliminate it. The percentage of people officially in poverty exhibits ---little--- apparent change over time because the official U.S. poverty measure is ----relative---. Major attacks on poverty have been made through social insurance programs, including ---Social--- Security, ---Supplemental--- Security Income (SSI), Temporary Assistance to Needy Families, the ----earned income--- tax credit, and the Supplemental ----Nutrition--- Assistance Program.
1. absolute 2. relative 3. little 4. relative 5. Social 6. Supplemental 7. Earned income 8. tax credit 9. Nutrition
A firm changes the price of its product and its sales revenues don't change. The absolute value of the price elasticity of demand for its product must be
1.0
Remembering that the price elasticity of demand is evaluated in terms of absolute values, which of the following is an example of an elastic demand?
1.5
If the price of hotdogs increases by 10 percent and the quantity supplied by meat packing companies increases by 15 percent, what is the price elasticity of supply?
1.50
A movie theater finds that when it prices tickets at $9,the theater sells 250 per week. When the price is reduced to $8, the theater sells 300 per week. Based on this information, use the average-values formula to find the price elasticity of demand for tickets. Provide the absolute value of the price elasticity of demand.
1.55
Dan's Chair Factory currently employs 50 workers, who produce 700 chairs. If DanDan hires a 51st worker, output will rise to 800. What is the marginal product of the 5151st worker?
100
The table above gives some data from the production function of a firm that is a perfect competitor in both the product and labor markets. The wage rate in the industry is $300 and the price of the good produced is $15. The profit-maximizing quantity of labor to hire is
103 workers.
At a consumer optimum involving goods X and Y, the marginal utility of good X equals 4 utils. The price of good Y is four times the price of good X. What is the marginal utility of good Y?
16
Suppose that one worker can produce 15 cookies, two workers can produce 35 cookies together, and three workers can produce 60 cookies together. What is the average product of the first two workers?
17.5 cookies
Dan's Chair Factory currently employs 50 workers, who produce 800 chairs. If Dan hires a 51st worker, output will rise to 925. What is the average product of the 5151st worker?
18.14
When the Gizmo Company could sell a gizmo for $10, it produced 2,500 per month. More recently, the price of a gizmo has fallen to $9 and so Gizmo is only producing 2,000 units per month. What is the price elasticity of supply for gizmos?
2.11
Suppose that one worker can produce 15 cookies, two workers can produce 40 cookies together, and three workers can produce 75 cookies together. What is the marginal product of the 2nd worker?
25 cookies
The price of good X is $5 and the price of good Y is $15. If the marginal utility of good X is 20 then the marginal utility of good Y must be ________ to have an optimum combination of goods purchased.
60
Suppose an industry has total sales of $25 million per year. The two largest firms have sales of $6 million each, the third largest firm has sales of $2 million, and the fourth largest firm has sales of $1 million. The four-firm concentration ratio for this industry is
60 percent.
Suppose a ten firm industry has total sales of $35 million per year. The largest firm have sales of $10 million, the third largest firm has sales of $4 million, and the fourth largest firm has sales of $2 million. If fifth through tenth largest firms combined have annual sales of $12 million, the four−firm concentration ratio for this industry is
65.7 percent.
How does a change in quantity supplied differ from a change in supply?
A change in the price affects quantity supplied, not supply.
Which of the following best explains the Earned Income Tax Credit (EITC) ?
A federal tax rebate for low-income workers.
The short-run break-even price for the perfectly competitive firm occurs where price equals
ATC.
Which of the following describes monopolistic competition?
Advertising plays a key role.
Profits are maximized for the perfectly competitive firm when the firm produces the quantity where A. MC = MR. B. total revenue exceeds total cost by the greatest amount. C. P = MC. D. All of the above.
All of the above
total utility (A. is at a maximum when marginal utility is zero. B.falls as long as marginal utility is negative. C.rises as long as marginal utility is positive. D.All of the above.)
All of the above
Which of the following would increase the demand for union labor?
All of the above (Increasing worker productivity, ....., Decreasing the demand for non-union-manufactured goods, ....., Increasing the demand for union made goods)
A natural monopoly: A.has economies of scale over a very large range of output. B.has decreasing long-run marginal costs over a very large range of output. C.has decreasing long-run average total costs over a very large range of output. D.All of the above.
All of the above.
If a perfectly competitive firm sells the product for a profit-maximizing price of $4.76 and has average total cost per unit of $5.16, in the short run A.this firm should shut down if $4.76 is less than minimum AVC. B.this firm must hope the market price rises soon or exit the industry. C.this firm is losing money. D.All of the above.
All of the above.
Monopoly has social costs because: A.too few resources are being used in the monopoly industry and too many are used elsewhere. B.a monopoly produces less and charges a higher price than a perfectly competitive firm would producing the same product or service. C.P is greater than MC and this implies economic inefficiency. D.All of the above.
All of the above.
Price ceilings, such as rent controls a. discourage the construction of new housing. B.lead to the deterioration of existing housing. C.reduce tenant mobility as people may be reluctant to change apartments. D.All of the above.
All of the above.
Total utility: A.is at a maximum when marginal utility is zero. B.falls as long as marginal utility is negative. C.rises as long as marginal utility is positive. D.All of the above.
All of the above.
When the total product function begins to increase at a decreasing rate, A. marginal product is falling. B. the law of diminishing returns has set in. C. marginal cost is rising. D. All of the above.
All of the above.
Which of the following are explanations for income differences? (-Discrimination. -The age-earnings cycle. -Inheritance. -Different marginal productivity between individuals.)
All of the above.
Which of these are government programs designed to reduce poverty? (-Food stamps. -Social Security. -The earned income tax credit. -Temporary Assistance to Needy Families. -Supplemental Security Income.)
All of the above.
Oligopolies may emerge in an industry because of
All of the above. (mergers, barriers to entry, economies of scale.)
Which of the following is an example of outsourcing?
All the above are examples of outsourcing. (A German firm hires an accountant in the U.S. to manage its payrolls.; A U.S. firm moves a manufacturing plant from the U.S. to Thailand where the firm can hire cheaper labor.)
Which of the following statements is FALSE about the demand curve?
An increase in demand shifts the demand curve to the left, closer to the price axis.
Which of the following is not one of the assumptions of a perfectly competitive market?
Better information for producers than consumers.
Rational economic agents would resist consuming any good where A. the marginal utility of that good was negative since this would make you worse off. B. the marginal utility of that good was positive since this would make you worse off. C. the total utility of that good was falling since this would make you worse off. D. Both A and C. E. Both B and C.
Both A and C.
Why are brand names and advertising important features of monopolistic competition?
Both of these techniques can be used to increase the demand for the product.
Which of the following is not true of both firms in monopolistic competition and firms in perfect competition?
Both types of firms produce at minimum ATC.
Why does marginal factor cost increase as a monopsonistic firm utilizes more labor but remains unchanged as a perfectly competitive firm employs additional labor?
Both (a) and (b) are true. (-The monopsonist needs to pay a higher wage rate to attract an additional worker and since the higher wage rate is paid to all workers the marginal factor cost increases, but a competitive firm needs to pay the same wage rate to hire additional workers, thus its marginal factor cost remains the same. -The monopsonist faces an upward rising supply curve for labor but a competitive firm faces a perfectly elastic, horizontal supply curve.)
Carly is maximizing her utility buying fish and chicken. This week, the price of fish has increased. Carly considers these goods to be close substitutes. Which of the following best describes what Carly would be expected to do?
Buy less fish and more chicken
Which of the following would most likely exhibit the highest price elasticity of demand?
Colgate toothpaste
A natural monopoly A.has decreasing long-run average total costs over a very large range of output. B.has decreasing long-run marginal costs over a very large range of output. C.has economies of scale over a very large range of output. D.All of the above.
D.All of the above.
A natural monopoly A.has decreasing long-run marginal costs over a very large range of output. B.has decreasing long-run average total costs over a very large range of output. C.has economies of scale over a very large range of output. D.All of the above.
D.All of the above.
Profits are maximized for the perfectly competitive firm when the firm produces the quantity where A.MC = MR. B.total revenue exceeds total cost by the greatest amount. C.P = MC. D.All of the above.
D.All of the above.
When the total product function begins to increase at a decreasing rate, A. marginal cost is rising. B.the law of diminishing returns has set in. C.marginal product is falling. D.All of the above.
D.All of the above.
Refer to the above figure. Which panel represents what happens in the U.S. job market in the short run when U.S. firms decide to use more labor from outside of the U.S. instead of labor from inside the U.S.?
D2 underneath (left of) D1
Which of the following is NOT a necessary condition for oligopoly?
Differentiated products
Which of the following is not a barrier to entry into a market?
Diseconomies of scale.
How do economies of scale contribute to the development of an oligopoly?
Economies of scale make small-scale producers inefficient.
Which of the following statements is true when considering the philosophies of income distribution?
Evidence indicates that economic growth rates are higher under a productivity standard of income distribution compared to the egalitarian principle.
Which of the following is not a characteristic of a monopoly?
Free entry and exit.
Which of the following is not a characteristic of a monopoly? A.Free entry and exit. B.Barriers to entry. C.A product with no close substitutes. D.A single firm in the market.
Free entry and exit.
Which of the following combinations would constitute a vertical merger?
General Motors and Bridgestone Tire Company
Which of the following is a correct statement about the economic effects of labor unions?
In recent years, union members have earned average incomes similar to nonunion workers.
From the perspective of the firm, what is the difference between the short run and the long run?
In the short run, at least one input is fixed, while in the long run all inputs are variable.
Which of the following violates the properties of indifference curves?
Indifference curves are upward-sloping.
Suppose Isaac's marginal utility from attending his 10th San Antonio Spurs game was 50 and the marginal utility from attending his 1st Rihanna concert was 200. Assume that the price of a Spurs ticket is $30 and the price of a Rihanna ticket is $100. Which of the following would be TRUE?
Isaac would attend more Rihanna concerts and less Spurs games.
If a firm is an oligopolist, which is NOT true?
It can sell all the units it wants at the going market price.
For a firm facing a perfectly elastic supply of labor, the employment of workers will continue until
MRP = wage rate.
In a perfectly competitive industry in the short run, if more firms enter the industry, which of the following will occur?
Marginal costs will not change, but the industry supply curve will increase
The campus pizzeria sells a large pizza for $14. When you buy a second large pizza, however, its price is only $10. How does this relate to marginal utility?
Marginal utility is the additional satisfaction from additional units of the good.
Which of the following statements about the way the government measures poverty is correct?
Measures are based on pre-tax income and do not include transfer payments.
The current market wage rate is $10, the rental rate of land is $100 per unit and the rental rate of capital is $400. production managers at the firm find that under their allocation of factors of production, the marginal revenue product of labor is $160, the marginal revenue product of land is $1600 and the marginal revenue product of capital is $1500. Is the firm maximizing profit?
No, the marginal revenue product per dollar spent on each input is not equal.
The current market wage rate is $10, the rental rate of land is $100 per unit, and the rental rate of capital is $400. Production managers at the firm find that under their current allocation of factors of production, the marginal revenue product of labor is $200, the marginal revenue product of land is $2,000, and the marginal revenue product of capital is $2,000. Is the firm maximizing profit?
No. The marginal revenue product per dollar spent on each input is not equal.
Strategic behavior and game theory are features of which market structure?
Oligopoly
Which of the following is a characteristic of oligopoly?
Only a few firms in the industry
Which of these nations has the highest rate of union membership (as a share of total employment)?
Sweden
A firm will continue to operate in the short run, even at an economic loss, as long as
P is greater than minimum AVC.
Which of the following is probably the most significant reason why people have different marginal productivities?
People have different investment in human capital.
Which of the following is NOT a characteristic of oligopoly firms?
Perfectly elastic demand curves
Which of the following characteristics applies to a monopolistically competitive industry?
Products are similar, but not identical, to competitors' products.
Which of the following factors does not explain differences in marginal productivity between workers? (A. Experience. B.Racial discrimination. C.On-the-job training. D.Talent.)
Racial discrimination.
Which of the following is not a method for unions to seek higher wages?
Reducing the amount of training workers obtain.
An increase in overall productivity of the workforce will
Shift age-earnings profiles upward
Which of the following is a characteristic of an oligopoly?
Strategic interdependence
Which of the following is correct? A. TC = TFC − TVC B. TC = TFC×TVC C.TC = TFC + TVC D. TC = TFC / TVC
TC = TFC + TVC
Which of the following is a determinant of supply?
Technology
Which of the following is not a key factor that influences the elasticity of demand for labor?
The availability of labor in the market.
How is a Lorenz curve used to represent a nation's income distribution?
The closer the Lorenz curve is to a straight line, the more equal the distribution of income.
What are the short-run economic effects when U.S. firms substitute labor outside of the U.S. for labor inside the U.S.?
The demand curve for labor in the U.S. decreases, and the demand curve in the foreign country will increase.
Suppose a college increases the wages paid to student employees. Which of the following options is the best description of the most likely effect of the increase in wage earnings on the demand curve for school sweatshirts in the bookstore?
The demand curve shifts to the right.
Suppose that you are investigating the market for aluminumaluminum. The price of steelsteel, a substitute good, has decreased. Which of the following would best describe the market reaction to this event?
The demand for aluminumaluminum decreases, which creates a surplus of aluminumaluminum, causing the price of aluminumaluminum to decrease.
Which of the following statements is not true for a perfectly competitive firm?
The firm can influence its demand curve by advertising its product.
Suppose that at the current level of output, price = $10, MC = $4, AVC = $7, and ATC = $11. Which of the following is true?
The firm should increase output.
In a perfectly competitive market, price equals marginal cost, but this condition is not satisfied for the firm with the revenue and cost conditions depicted in the figure on the right. In the long run, what would happen if the government decided to require the firm in the figure to charge a price equal to marginal cost at the firm's long-run output rate?
The firm will incur a loss of $8 per unit and this and other firms will leave the industry.
Why does the marginal product of labor eventually decline as more labor is used with another fixed input?
The labor will have, on average, fewer units of the other inputs to combine with and the increases to total output obtained from more labor will decrease.
What is a firm's minimum efficient scale?
The lowest rate of output at which the firm achieves minimum long-run average cost.
Which of the following statements is correct about the demand curve of the perfectly competitive industry?
The market demand curve of the perfectly competitive industry is downward-sloping while the demand curve facing an individual firm is horizontal.
What does the long-run price equal for an informational product?
The price equals average total cost.
What is the major difference between the productivity standard and the egalitarian principle?
The productivity standard bases income according to the contribution to society's total output while the egalitarian principle bases income on the ideal of equality for everyone.
What does the price elasticity of demand measure?
The responsiveness of quantity demanded to a change in the price of a good.
Which of the following is not a correct statement about the distribution of income and wealth in the United States? (A. The share of money income received by the lowest quintile has increased significantly since World War II.The share of money income received by the lowest quintile has increased significantly since World War II. B.The share of total income received by the lowest quintile has not changed significantly since World War II.The share of total income received by the lowest quintile has not changed significantly since World War II. C.If pension plans are added to measures of wealth comma it is clear that the majority of households have middle levelsIf pension plans are added to measures of wealth, it is clear that the majority of households have middle levels of wealth.of wealth. D.The United States is not close to perfect income equality comma as measured by the Lorenz cuve.The United States is not close to perfect income equality, as measured by the Lorenz cuve. E.All of the above answers are incorrect.)
The share of total income received by the lowest quintile has not changed significantly since World War II.
Which of the following statements is FALSE?
Typically there are numerous very close substitutes for the product of a monopolist.
Which of the following is true of an oligopoly?
They engage in nonprice competition.
There are 30 firms in an industry. What happens to that industry's four-firm concentration when the third and fourth-largest firms merge?
The industry's concentration ratio will increase.
Suppose that the demand for movie tickets is price inelastic for the range of prices between $10 and $12. If a movie theater raises the price of tickets from $10 to $12, what will happen to total revenues?
Total revenues will increase.
What is the difference between total utility and marginal utility?
Total utility is the total amount of satisfaction derived from consuming a certain amount of a good while marginal utility is the additional satisfaction gained from consuming an additional unit of the good.
Which of the following correctly describes the trend in U.S. union membership?
Union membership peaked in the 1960s and has been decreasing steadily since.
Look at the figure at right. A union wishes to maximize wage income for employed union members, so it should aim for a wage rate ________ and a number of employed members equal to
W2,Q2 (middle point)
Which of the following describes an inferior good?
When consumer income increases, the demand for eggs decreases.
A perfectly competitive firm is charging $6 and selling 1525 units a month. The firm lowers its price by a nickel below the market price. Its profit
Will decrease
The value of cross price elasticity of demand between goods X and Y is 0.53, while the cross price elasticity of demand between goods X and Z is −2.00. Which of the following are true?
X and Y are substitutes and X and Z are complements.
Why do younger workers make less than workers who are older?
Younger workers earn less because their productivity is lower than that of older workers.
Which of the following goods would most likely be advertised using largely informative advertising?
a car
All of the following determine the price elasticity of demand except
a change in the price of resources used to produce the good.
The Lorenz curve shows what portion of total money income is accounted for by a. only the wealthiest citizens b. different proportions of a country's households c. taxpaying citizens only d. only poor people
b. different proportions of a country's households
Since 1975, the income distribution in the U.S. has ----become less---- equitable.
become less
The price of a video is $3 and the price of a dinner is $9. From this we know that a consumer who is maximizing utility will
buy enough of the two goods such that the marginal utility from the last dinner consumed is three times greater than the marginal utility from the last video
An industry's equilibrium wage rate is established
by the intersection of the industry supply and demand curves for labor.
Absolute poverty
can be eliminated by economic growth.
The individual firm operating in a perfectly competitive labor market
can buy all the labor it wants at the going market wage rate.
According to the same example in the book, medical research has shown that grapefruit juice can reduce the effectiveness of certain medications. However, there is also evidence that grapefruit consumption can lower cholesterol in young people. The net effect on demand from these two findings
cannot be determined because they have opposite effects on demand.
Social Security is a pure transfer program because
current payroll taxes are used to pay the eligible retirees
The decision making process for the perfectly competitive firm boils down to
deciding how much to produce.
the decision making process for the perfectly competitive firm boils down to
deciding how much to produce.
Deregulation has contributed to
declines in union membership.
Marginal revenue for a monopolist is
downward sloping and always less than price.
The demand curve for the perfectly competitive industry is
downward sloping.
In a perfectly competitive labor market, the industry demand curve is ________ and the industry supply curve is ________
downward sloping; upward sloping
If we include cash benefits and in-kind benefits available to low-income people, the share of the U.S population in poverty
drops dramatically
According to the productivity standard,
each person in society should receive what he or she produces.
According to the egalitarian principle
each person should receive exactly the same amount of income
In the short run, if a firm continues to add workers, marginal product must begin to diminish because
each worker has less capital to work with.
A firm that produces an information product will
earn zero economic profits in the long run.
The monopolistically competitive firm in the diagram is
earning positive economic profits.
At the short-run break-even point, the perfectly competitive firm is
earning zero economic profits.
As opposed to other types of monopoly, a natural monopoly typically owes its monopoly position to
economies of scale.
The most common reason for the existence of oligopolies is
economies of scale.
Compared to the market clearing wage and its corresponding equilibrium quantity of labor, the typical union-negotiated wage rate will be _______ and the quantity of labor hired will be ________.
higher; lower
Other things being equal, the monopolist will
hire fewer workers than if the industry were perfectly competitive.
A perfectly competitive firm determines that its MRP of labor divided the wage equals 1.2. This firm should
hire more labor.
Compared to the firm in perfect competition, the monopsonist
hires fewer workers and pays lower wages.
A merger between firms that are in the same industry is called a
horizontal merger.
The marginal revenue curve for a perfectly competitive firm is _________ while the marginal revenue curve of the monopolist is _________
horizontal, downward sloping
If we assume competitive labor markets, the supply curve of labor when the firm is a monopoly is
horizontal.
In a perfectly competitive labor market, the labor supply curve facing the firm will be
horizontal.
Monopolistic competition is similar to perfect competition because
in both industry structures, there are no barriers to entry
Monopolistic competition is similar to perfect competition because
in both industry structures, there are no barriers to entry
For the United States, the distribution of income would be more equal if
income in-kind was counted as income.
Consumers' tastes shift away from using wireless Internet access in favor of cable-based Internet access services.
increase in demand.
Suppose a perfectly competitive firm faces the following short−run cost and revenue conditions: ATC = $12; AVC = $10; MC = $15; MR = $16. The firm should
increase output.
With a given level of money income, when the price of a product that a consumer buys declines, the purchasing power of your money income
increases.
Unions can increase wages by increasing the demand for labor. The demand for union labor can be increased by all of the following except
increasing the demand for additional non-wage benefits for union workers.
A union can achieve higher wages without accepting lower levels of employment of members by
increasing the productivity of its members.
All of the following are reasons for an oligopoly to occur EXCEPT
independence among firms.
Economies of scale in production
indicate that as a firm expands, its long-run per-unit costs fall.
The productivity standard fails to yield an equal distribution of income because
individuals have different abilities and skills.
Labor unions that consist of workers from a particular industry, such as automobile manufacturing, are called
industrial unions.
The law of diminishing marginal returns shows the relationship between
inputs and outputs for a firm in the short run.
The increase in third-party financing of health care has contributed to the rise in health care costs because
insured patients increase their demand for medical services and thus drive up prices.
The monopolistically competitive firm at a level of output of Q1 in the diagram is
in long-run equilibrium.
The first slice of pizza yields Jeffrey 18 units of utility and the second slice yields him an additional 12 units of utility. His total utility from three slices of pizza is 36 units of utility. The marginal utility of the third slice of pizza
is 6 units of utility.
The price elasticity of demand for an input
is larger the longer the time period being considered.
The demand curve of the monopolist
is the same as the industry demand curve.
In a monopoly market structure, the firm (the monopolist)
is the whole industry.
In a perfectly competitive industry, the industry demand curve
is downward-sloping.
The Big Box Company is a firm in a perfectly competitive industry. The average rate of return on capital in this industry is 5%. Thus, if the Big Box Company earns a 5% rate of return,
it earns zero economic profit
The perfectly competitive firm maximizes profits when
it produces and sells the quantity at which marginal revenue and marginal cost are equal.
A major problem with using the egalitarian principle to distribute income is that
it would eliminate the incentives that rewards provide in an economic system
When a firm is operating at an output rate at which total revenue equal total costs, this is called
its breakeven point.
A firm that employs labor located outside the country in which it is located engages in
labor outsourcing.
A government may seek to limit the power of a union because
labor strikes, especially those affecting several industries, have an adverse effect on the economy
A short-run increase in the price of a firm's output will typically
lead to more employment in the competitive firm.
One method unions use to ration available jobs among excess workers is
lengthy apprenticeships.
In order to raise wages above the market level for its workers, a union must
limit the supply of labor in an industry.
To sell one more unit of a good, a monopolist must
lower the price on all units.
Advertising by monopolistically competitive firms can do all of the following EXCEPT
lower the consumer's purchase price.
In the long run, monopolistically competitive firms
make zero economic profits.
Which of the following is NOT a common characteristic of oligopoly?
marginal cost pricing.
If total costs are $50,000 when 1000 units are produced, and total costs are $50,100 when 1,001 units are produced, we can conclude that
marginal costs are $100.
For the perfectly competitive firm, the marginal revenue product is
marginal physical product times the product price.
If a firm hires an additional worker and discovers that its total output has fallen, then it must be true that
marginal product is negative.
When marginal cost is falling
marginal product must be rising.
The perfect competitor should produce the quantity where
marginal revenue equals marginal cost.
The monopolist's input demand curve is equal to its
marginal revenue product curve.
The market price people are willing to pay for a unit of a particular commodity is determined by
marginal utility.
The water-diamond paradox was solved by realizing the price people are willing to pay for a unit of a particular commodity is determined by
marginal utility.
The net short-run effects of outsourcing on U.S. wages and employment are
mixed.
An individual with no deductible on his or her health insurance policy will tend to engage in a lifestyle that is less healthy than a person with a $2,000 insurance deductible. This is said to be a problem of
moral hazard
Individuals who pay less of their own health care costs may have an incentive to use health care resources more frequently and to engage in riskier behaviors. This problem is known as
moral hazard.
the absolute value of the short-run elasticity of demand for bread has been estimated to be 0.15. Its long-run elasticity of demand is
more than 0.15.
As the wage rate falls, other things constant, perfectly competitive firms will employ
more workers.
Tania spends her income on donuts and coffee. If Tania is at her consumer optimum and the price of donuts decreases, she will spend ________ on donuts, which will cause the marginal utility from consuming donuts to _____
more; fall
According to the Lorenz curve of income distribution, overall between 1929 and 2005 the U.S. distribution of income has
moved slightly toward becoming more equal.
The slope of an indifference curve
must be negative.
In an oligopolistic market, each firm
must consider the reaction of rival firms when making a pricing or output decision.
One would expect that the cross price elasticity of ski poles and skis would be
negative since they are complements.
The slope of the budget line is
negative since to purchase more of one good means that some of the other good must be given up.
Collective bargaining refers to
negotiations between management of a company and a labor union.
New technologies increase health care costs for all the following reasons except (A. new technologies are expensive. B.new technologies tend to be ineffective. C.new technologies help people live longer, so the people need health care for more years. D.insurance companies often pay for the services of the new technologies)
new technologies tend to be ineffective.
All of the following are possible reasons for the occurrence of oligopolies EXCEPT
no impediments to enter or exit the market.
Which of the following will cause a movement along the demand curve instead of a shift of the demand curve? A.Income B.Expectations of the future price of a good C.Tastes and preferences D.none of the above
none of the above
If your income rises by one percent and, as a result, you buy more steak, then steak is a(n)
normal good.
A perfectly competitive firm wants higher profits and has decided to raise the price of its product. As an economic consultant you would advise them to
not do this since they would lose all of their sales to competitors.
If a union sets the wage rate to maximize the total wage receipts of its members, the price elasticity of demand for labor would be
numerically equal to 1.
One major difference between oligopoly and perfect competition is that
oligopolistic firms act interdependently while competitive firms operate independently.
If we were to compare the amount produced by firms in a competitive industry to the output produced by a monopoly, the monopolist will produce
on the elastic portion of the demand curve and charge a higher price.
Union membership, in terms of percentage of the U.S. civilian labor force,
peaked about 1960 and has since declined.
One problem with third-party financing of health care is that
people have more incentive to utilize health care
According to the example in the book, medical research has shown that grapefruit juice can adversely affect the effectiveness of certain medications. This is likely to affect the demand for grapefruit because
people will buy less grapefruit because their tastes and preferences have changed.
The industry concentration ratio measures the
percentage of industry sales accounted for by the top four or eight firms.
If there is no product differentiation at all, then the individual firm has a demand curve that is
perfectly elastic and identical to the firm in perfect competition.
The demand curve for the perfectly competitive firm is
perfectly elastic.
A supply curve that is parallel to the price axis is
perfectly inelastic.
If total utility is increasing at a decreasing rate, marginal utility is
positive and decreasing.
We should expect the cross price elasticity of butter and margarine to be
positive since they are substitutes.
Usually, price elasticities of supply are
positive, because higher prices yield larger quantities supplied.
The income elasticity of a normal good is
positive.
Charging different prices for similar products that have different marginal costs is called
price differentiation.
When grocery stores issue special discount membership cards for shoppers effectively offering different prices based on quantities consumed, this is an example of
price discrimination.
The greater the monopolistically competitive firm's success at product differentiation the lower is (are) the firm's
price elasticity of demand.
Critics argue that monopolistically competitive markets are wasteful because
price exceeds marginal cost and minimum average cost
When demand decreases and the (upward sloping) supply curve remains in the same position,
price falls and equilibrium quantity falls.
The monopolist sets price by
producing the quantity where marginal cost equals marginal revenue and charging the price that corresponds to that quantity.
The fact that a monopolistically competitive firm does not produce at the minimum ATC can be viewed as the cost of generating
product differentiation and variety.
In a monopolistically competitive market, the consumer receives the benefit of
product differentiation.
Which of the following does NOT help explain why oligopolies exist?
product homogeneity
The perfect competitor should produce the quantity where
profits are maximized.
Suppose that a consumer is at an optimum consuming A and B. If the price of A falls, then to get to a new equilibrium the consumer must
purchase more A.
A decrease in the price of a good causes
purchasing power of a person's income to increase.
The equilibrium or market clearing price occurs at the point at which
quantity demanded equals quantity supplied.
If a price floor is set below the current market clearing price, then
quantity demanded will remain equal to quantity supplied at the current market clearing price.
Average variable cost ________ when average product ________.
reaches its minimum; reaches its maximum
People often complain about price gouging after a natural disaster. Suppose the government imposed limitations on price increases in the aftermath of a disaster. One would expect
reconstruction to take longer because the quantity supplied of new materials would increase more slowly.
In the short-run, labor outsourcing by U.S. firms tends to
reduce both U.S. wages and employment.
When MR < MC for a firm, the firm should
reduce its level of output.
A benefit of deductibles and health savings accounts is that they
reduce the moral hazard problem associated with third-party payers
Given a price elasticity of demand of −0.8, a decrease in price will
reduce total revenue.
Other things equal, granting unemployment benefits or welfare benefits to striking workers
reduces the costs of a strike to workers and will increase their willingness to strike.
Unions can increase labor productivity by
reducing conflicts between workers and management.
Which of the following CANNOT be eliminated in a growing economy such as the U.S economy?
relative poverty
In a rent controlled market, we would expect to observe
renters moving into the market to take advantage of the lower rents.
A primary objective of labor unions is to
seek better pay and improved work conditions.
In the short run, a monopolistically competitive firm will
select the rate of output where marginal revenue equals marginal cost.
Price discrimination refers to
selling a product at different prices, with the price difference being unrelated to differences in marginal cost.
An increase in consumer income will
shift out the budget constraint and increase the consumption of both goods, if they are normal goods.
If more buyers came into the market for a good, we would expect to see the market demand curve
shift outward and to the right.
Suppose a perfectly competitive firm faces the following short−run cost and revenue conditions: ATC = $6.00; AVC = $4.00; MC = $3.50; MR = $3.50. The firm should
shut down.
The role of profits in the model of perfect competition is to
signal entrepreneurs to enter the industry.
A monopolist's demand curve for labor
slopes down because of the law of diminishing marginal returns and because the monopolist must lower prices to sell additional units of the good.
The demand curve faced by the monopolist
slopes downward
The downward slope of the demand curve of a monopolistically competitive firm implies that the firm has
some monopoly power over price, and therefore advertising may increase profits.
if a college student stays home and watches a Netflix movie for $2 rather than going out to a $15 movie, this is an example of the
substitution effect.
A union can induce a rise in equilibrium wages in a unionized industry by
successfully increasing the demand for union labor.
A profit maximizing firm will hire inputs in combinations
such that the marginal physical product per last dollar spent on each factor of production is equalized.
Which of the following statements is correct?
supply is more elastic in the long run than in short run.
Which one of the following industries could be classified as an oligopoly?
textbook publishers
Other things remaining equal, as the relative price of a good falls, people consume more of that good because
that particular good now has a higher marginal utility per dollar than other goods.
All of the following are criticisms of the Lorenz curve as a measure of income inequality except
the Lorenz curve includes income in-kind and it should only include money income.
A firm wanting to maximize profits should operate in such a way that
the MRP of each input is equal to or greater than its MFC.
If a firm sells its product in a monopolistic market, even though the firm operates in a perfectly competitive labor market, the firm will employ workers up to the point where
the MRP = the wage rate.
In a monopolistically competitive market, a firm should advertise to the point at which
the additional revenue generated by one more dollar of advertising just equals the extra dollar cost of advertising.
Under monopsony, the marginal factor cost of a worker is equal to
the additional worker's wage rate plus the increase in the wages of all other existing workers.
The total gains from trade within a price system is
the area beneath the market demand curve and above the market clearing price plus the area above the market supply curve and beneath the market clearing price.
Marginal factor cost is
the change in total costs due to a one-unit increase in the variable input.
The main difference between a monopsonist and a competitive buyer of labor is that
the competitor can hire as many workers as it wants at the going wage while a monopsonist must raise wages to hire additional workers.
If a firm is a perfect competitor, then
the demand curve for its product is perfectly elastic.
A profit-maximizing monopolist earns an economic loss whenever
the demand curve lies completely below the ATC curve.
The government raises gasoline taxes as part of the price of gasoline and receives more tax revenues. However, after five years, the government discovers that revenues from the gasoline tax have declined. This situation would be most likely to occur if
the demand for gasoline was inelastic in the short run, but elastic in the long run.
The prices of certain goods, such as ice and gasoline, often increase after a natural disaster such as a hurricane. The economic explanation for this observation is that
the disaster temporarily reduces the supply of the goods and increases the demand for the goods.
If the government places a $0.50 tax on an item for which demand is perfectly elastic
the entire tax will be paid by the producer.
The law of diminishing marginal returns is caused by
the existence of a fixed input that must be combined with increasing amounts of the variable input.
When the long-run average cost curve is falling
the firm is experiencing economies of scale.
In order to maximize utility, a consumer should allocate money income so that
the marginal utility obtained from the last dollar spent on each product is the same.
As people consume more and more of a particular good or service, we can predict that
the marginal utility of each additional good consumed will fall and total utility will increase, but more slowly than before.
The demand curve for the perfect competitor is horizontal because
the market dictates each firm's price.
For a perfect competitor, marginal revenue equals
the market price.
If the average total costs are the same for a perfectly competitive firm and a monopolistically competitive firm, then we know that
the monopolistically competitive firm will produce fewer units than the perfectly competitive firm.
Absolute poverty is defined as
the number of people who fall below some threshold level of income.
The price elasticity of supply is higher when
the number of producers in the market increases over time.
Price elasticity of demand is defined as
the percentage change in quantity demanded divided by the percentage change in price.
A concentration ratio gives
the percentage of all sales contributed by the four or eight largest firms in the industry.
The short run is defined as
the period of time in which at least one factor of production is fixed.
For a monopolist, the marginal revenue gained when one more unit of output is sold is
the price at which the extra unit is sold minus the loss in revenue that results from cutting the price on units sold previously.
If a demand curve shifts, we know that
the price of the good itself is not a factor.
Scalping and other black market activities arise when
the prices of goods are restricted to levels below equilibrium prices.
For a perfectly competitive firm, when MC is less than MR,
the producer has an incentive to expand output.
The principle that suggests that the distribution of income should be based on the contribution made by individuals to society's total output is known as
the productivity standard.
All of the following are characteristics of perfect competition except
the products sold by the firms in the industry are differentiated.
The change in people's purchasing power that occurs when the price of a good they purchase changes, assuming all else is held constant is known as
the real income effect.
A good example of a monopolistic competitive industry is
the restaurant industry.
For a firm in a perfectly competitive industry, the demand curve for its own product is
the same as the marginal revenue curve.
Basket of goods A is on an indifference curve that lies further from the origin than basket B. From this we know that
the satisfaction from consuming A is more than the satisfaction from consuming B.
Other things being equal, demand is less elastic
the smaller the percentage of a total budget that a family spends on a good.
The ultimate threat of a union is
the strike.
Consumer surplus is
the total difference between the total amount that consumers would have been willing to pay for an item and the total amount that they actually pay.
If the marginal product curve is increasing from workers 1-89 and then decreases steadily, crossing the horizontal axis at 190 workers, we know that
the total output curve is increasing at an increasing rate from workers 1-89, then increases at a decreasing rate until the 190th worker, after which it decreases.
The law of diminishing marginal utility insures that
the total utility curve will eventually increase at a decreasing rate.
Suppose that U.S. firms outsource computer manufacturing jobs to China, it is expected that
the wage rate for workers manufacturing computers will decrease in the U.S. but increase in China.
A firm can be the sole supplier of a good and still not be considered a monopoly if
there are very close substitutes for the good.
An oligopoly is a market situation in which
there are very few sellers and they recognize their strategic dependence on one another.
If unions are successful in establishing a wage rate above the competitive market equilibrium wage, then
there will be an excess of labor supplied.
A major difference between a monopolist and a perfectly competitive firm is that
the monopolist's marginal revenue curve lies below its demand curve.
All of the following are true regarding the relationship between price elasticity of demand and total revenues EXCEPT
when market demand is inelastic, if the market price rises, then total revenues will decrease.
In consumer theory, utility is
the want-satisfying power of a good or service.
The purpose of a strike is
to force management to accept the union's proposed contract terms.
The purpose of the Temporary Assistance to Needy Families program is
to provide cash assistance and supportive services to assist the family, helping them achieve economic self-sufficiency.
Why is there a social cost of monopoly?
too few resources are being used in a monopoly.
Labor unions are organizations that
try to secure economic improvements for their members.
When total revenue remain unchanged when there is a change in price, demand is
unit−elastic.
If a firm is selling a search good it is more likely to
use informational advertising.
When a firm is selling an experience good it is more likely to
use persuasive advertising.
To derive the demand curve from the indifference map
vary the price of one good while holding the price of the other good and income constant.
A merger between firms in which one firm purchases an input from the other is called a
vertical merger.
The age-earnings profile shows that, on average,
wages rise with age, peak around age 50, and then fall.
All of the following pairs of goods are substitutes except
we observe the price of bacon increases and the demand for eggs decreases.
All of the following pairs of goods are complements except
we observe the price of coffee decreases and the demand for tea decreases.
Key determinants of marginal physical product include all of the following except (A. experience. B.wealth. C.training. D.talent )
wealth.
For a monopsonist, marginal factor cost exceeds the wage rate since
when new workers are hired the wage rate must be increased for all workers and not just for the additional workers.
Goods A and B are substitutes. If the price of good A falls, the marginal revenue product of good B
will shift in.
The doctrine of comparable worth suggests that
workers with similar skills, education, and responsibilities should receive the same wage.
The most competitive industry of those presented in the table at right is likely to be industry
x (the lowest value)
The most oligopolistic industry of those presented in the table at right is likely to be industry
y(the highest value)
In long-run equilibrium, the perfectly competitive firm makes
zero economic profits.
If a union sets the wage rate to maximize the total wage receipts of its members, the marginal revenue would be
zero.
Assume it takes 10 units of labor to produce 4 units of output. When the price of labor is $6 per unit and fixed costs equal $60, what is the total cost of those 4 units of output?
$120
Suppose that a firm is currently producing 500 units of output. At this level of output, TVC = $10,000 and TFC = $25,000. What is the firms ATC?
$70
Which of the following would have the most elastic demand?
Coca-Cola.
Suppose that a firm in a perfectly competitive industry finds that at its current output rate, marginal revenue exceeds the minimum average total cost of producing any feasible rate of output. Furthermore, the firm is producing an output rate at which marginal cost is less than the average total cost at that rate of output. Is the firm maximizing its economic profits?
No, if the firm was maximizing its economic profits the marginal cost would not be less than the average total cost at that rate of output.
The marginal revenue curve for a perfectly competitive firm is _________ while the marginal revenue curve of the monopolist is _________.
horizontal, downward sloping
A manager of a monopoly firm notices that the firm is producing output at a rate at which average total cost is falling but is not at its minimum feasible point. The manager argues that surely the firm must not be maximizing its economic profits. The manager's argument is
incorrect, since profit maximization requires that marginal revenue equals marginal cost but does not require the average total cost to be at any particular level.
Marginal cost ________ when marginal product ________.
increases; decreases
If the price elasticity of supply is equal to 1, we would say the supply of the item is
unit-elastic.