Microeconomics 1041 James Mizzou- Final
Based on the table, as long as marginal product is greater than average product:
(figure out how to calculate average product)
Based on the table, the marginal product for the fourth worker is:
(just figure out what marginal product is calculated as)
Based on the graph, what is the equilibrium output for this monopolist?
(where marginal cost and marginal revenue collide) -12
in an industry can be so large that demand is able to support only one firm.
-->Economies of scale diseconomies of scale none economies of scope
If price increases by 100% and quantity demanded decreases by 50%, then the price elasticity of demand will equal
0.5
If a product's price rises by 6% and its quantity demanded falls by 8%, then its elasticity is equal to
1.33
Staci's Sign Shoppe makes signs for businesses. Staci is currently producing 210 signs per week with three employees. She hires an additional worker and total output per week rises to 328 signs. The marginal product of the last worker is _____ signs.
118
Jeremy's level of satisfaction from consuming the first cookie was 25 utils. The second cookie increased the level of satisfaction by 20 utils. Jeremy's total level of satisfaction after three cookies was 60. Thus, the marginal utility for the third cookie is
15.
Referring to the table, which shows the total utility and marginal utility for ice cream consumption, the value for C will be TU MU 0 -- 25 A B 5 53 C D 10 71 E
23
A monopolist has four distinct groups of customers: group A has an elasticity of demand of 0.2, group B has an elasticity of demand of 0.8, group C has an elasticity of demand of 1.0, and group D has an elasticity of demand of 2.0. The group paying the highest price for the product will be group:
A
Which of the following examples represents the short run?
A university builds two classroom buildings. --Ford asks its workers to work overtime. Sea-Land increases the size of its cargo fleet by 20%. Walmart builds another store.
Calculating AFC
AFC = ATC - AVC
Which of the following is equivalent to average variable cost (AVC)
ATC - AFC
Calculating ATC
ATC = AFC + AVC TC/Q = VC/Q + FC/Q
Calculating AVC
AVC = ATC - AFC
Calculating FC
FC = TC - VC
oligopoly
Fewer firms (such as the auto industry) Mutually interdependent decisions Substantial barriers to market entry Potential for long-run economic profit Shared market power and considerable control over price
The price of gold increases by 200%. If the price elasticity of demand for gold is 0.4, what will happen in the market?
Gold sales will decrease by 80%.
monopolistic competition
Many buyers and sellers Differentiated products Little to no barriers to market entry or exit No long-run economic profit Some control over price (limited market power
Based on the table, diminishing marginal returns begin with the
based on the marginal product, i think?
If demand is inelastic, the tax burden falls primarily on the _____ and deadweight loss is _____
buyer; small
monopoly
One firm No close substitutes for product Nearly insuperable barriers to entry Potential for long-run economic profit Substantial market power and control over price
______ are more numerous, but ______ sell more goods and services
Sole proprietorships; corporations
how and why firms maximize profit
Step 1: Find the point at which marginal revenue (MR) equals marginal cost (MC). Remember that in a perfectly competitive market, MR equals price. Step 2: At the point at which MR = MC, find the corresponding point on the horizontal axis; this is the profit-maximizing output. Step 3: At the profit-maximizing output, draw a line straight up to the demand curve (which is equal to MR in a perfectly competitive market) and then to the vertical axis. This is the profit-maximizing price. Step 4: Again using the profit-maximizing output, draw a line straight up to the average total cost curve, and then to the vertical axis. This is the average total cost per unit. Step 5: Find the profit, which is the rectangle formed between the profit-maximizing price and average total cost on the vertical axis, and the profit-maximizing output on the horizontal axis.
normal profit
Suppose instead that you produce 84 sails. The revenue from selling the 84th unit (MR) is $200. This is precisely equal to the added cost (MC) of producing this unit, $200 (point e). Therefore, your firm earns zero economic profit by producing and selling the 84th sail. Zero economic profit, or normal profits, mean that your firm is earning a normal return on its capital by selling this 84th sail.
calculating TC (define and use)
TC = FC + VC all of the costs incurred
Elasticity v. Revenue
TR = Q x P knowing how valuable a product is to consumers and how they consume--continuing to purchase an item even if price increases v. sales dropping dramatically because of a price increase
cost information from graph
The average variable cost (AVC), average total cost (ATC), and marginal cost (MC) curves are shown. The bowl shape of the AVC and ATC curves demonstrates the law of diminishing returns: Beyond a certain level of output, average costs increase. Marginal costs represent the added cost of producing one more unit of output. Note that the marginal cost curve passes through the minimum points on both the AVC and ATC curves.
Which of these is NOT a condition necessary for price discrimination?
The price elasticities of demand are different for each group of consumers. The seller must have some market power. --> The product must be a durable good. The product cannot be resold to another customer
law of diminishing marginal utility
There will be a point of consumption where the consumer is sated and will not have any further satisfaction from another product
If a store sells a good that has a unitary elastic demand, what would be the net result on their total revenue from an increase in price?
There would be no change in total revenue
Which statement about the relationship between a firm's demand curve under perfect competition and a monopoly is TRUE?
Under a monopoly, the demand curve is perfectly elastic; under perfect competition, the demand curve has elastic, unit-elastic, and inelastic portions. --> Under perfect competition, the demand curve is perfectly elastic; under a monopoly, the demand curve has elastic, unit-elastic, and inelastic portions. A demand curve can be defined under perfect competition but not under a monopoly. The demand curves for a monopoly and perfect competition are always inelastic.
Calculating VC
VC = TC - FC
Bayram had the opportunity to choose between two investments. The first investment was described as having a 30% chance of succeeding, while the second investment was described as having a 70% chance of failing. Bayram opted for the first investment, because he thought it sounded less risky than the second investment. The chances of succeeding and failing are the same for the two investments, however, which implies that Bayram is subject to:
a framing bias
elasticity
a measure of how responsive quantity demanded is to change in price
All of these are barriers to entry into an industry, EXCEPT:
a patent. -->relatively low marginal tax rates. economies of scale. governmental restrictions.
The demand curve for a monopolist is:
a perfectly inelastic demand curve. -->the industry demand curve. always a unit-elastic demand curve. the same as the demand curve for a perfectly competitive firm.
Parami volunteers at a homeless shelter. It takes a lot of her time, and thus she sometimes takes off time from her job to do the volunteer work. Parami's behavior can be explained by
altruism
An example of x-inefficiency is:
an executive paying a manager a bonus for increasing profits by 20%. money spent on advertising. an executive cutting the wages of workers during an economic downtown. --> an executive, at the corporation's expense, hiring a limousine to drive him one block whenever it is raining.
When the Keep On Calling Cell Phone Company is at full capacity, it incurs costs of $230,000. During the December shutdown period, when no cell phones are produced, it incurs costs of $76,000. One can conclude that
at full capacity, variable costs are $154,000.
If the public utility commission allows a water company to earn a normal profit, then it is enforcing a(n):
average cost pricing rule
Regarding the short-run cost model, the vertical distance between the average total cost (ATC) curve and the average variable cost (AVC) curve is
average fixed cost (AFC)
Elastic v. Inelastic
demand curve that responds to price changes (absolute value greater than 1) v. shows no response to change in price (coefficients less than 1)
Marginal utility analysis and indifference curve analysis are both used to:
derive demand curves.
If a firm increases its inputs by 80% and its output increases by 60%, then this would be an example of:
diseconomies of scale
A bicycle factory finds that it can lower costs if it also produces tricycles and unicycles. This is an example of
economies of scope
If the price of a product falls by 15% and the quantity supplied falls by 25%, we can say that the elasticity of supply is:
elastic.
Alvaro pays $40 in tax on a $120 item. Nurul pays $80 in tax on a $240 item. We can conclude that this tax is a:
flat tax.
Firms moving in and out of industry and profits
gets to stressful and people move out prices go up because supply is down while if things are going well and people go in prices go down because supply goes up
utility
hypothetical measure of consumer satisfaction
The cost incurred by a firm through the foregone earnings on capital invested is a(n)
implicit cost.
shutdown rule
in the short run a firm should continue to operate if price exceeds average variable costs
law of diminishing marginal product and why
increasing one input may initially increase output but it will be limited if you continue down that line
Home heating gas tends to have _____ demand because _____.
inelastic; people do not have time to adjust their consumption patterns
types of firms
institution that transforms inputs into outputs sole proprietors, partnerships, and corporations
Total utility:
is the total satisfaction derived from the consumption of given quantity of a good.
In which period can firms decide to leave an industry?
long run
Based on both the table and the figure, adding a third worker leads to
look at the various tables and graphs i guess
At movie theaters, lower prices are charged for matinees than for evening shows of the same film. The customers attending the matinees have:
lower elasticities of demand than customers attending the evening shows. perfectly inelastic demand curves. --> higher elasticities of demand than customers attending the evening shows. highly inelastic demand curves.
The price of a mango is $2 and a farmer sells 2,000 mangos. However, the costs to the farmer are $400 for labor, $1,600 for rent, and $2,000 for advertising. Based on the above information, the farmer:
makes $4,000 in total revenue.
perfect competition and characteristics
many buyers and sellers homogeneous products no barriers for entry and exit No long-run economic profit No control over price (no market power)
At an all-you-can eat buffet, a person will stop eating when:
marginal utility is equal to zero.
A utility-maximizing consumer will always choose to
maximize total utility
economic v. accounting profit
monetary costs and opportunity costs a firm pays and the revenue a firm receives v. the monetary costs a firm pays out and the revenue it receives
In general, the flatter the supply curve is, the
more elastic is supply
When hiring additional workers reduces total output, the firm faces
negative marginal returns.
A deadweight loss:
occurs when the monopoly charges a price that is below the marginal revenue. results from a monopoly failing to protect its patent or government franchise. --> is the same as welfare loss. occurs when the monopoly charges a price that is below the market price.
Which of the following is an implicit cost?
opportunity cost
Because they are so sure of their ability to pick winners, some people hang on to a stock even in the face of overwhelming evidence that its price is going to drop. These people are subject to:
overconfidence
Ryan stayed out late last night and is very tired. He plans to skip his 8 A.M. economics class, even though he knows his professor will cover material that will be on the final exam. Ryan is subject to
overvaluing the present relative to the future
Calculating elasticity
percent change in quantity demanded / percent change in price -price increases by 5% and sales fall by 10% = -10%/5% =-2
How would you describe supply as shown in the graph? (the line is completely horizontal on the graph)
perfectly elastic
Assume that at a given level of output, a monopoly firm has marginal revenue of $9, its average total cost is $9, and marginal cost is $7. If this firm were to continually increase its output, then:
prices will equal marginal revenue. prices will increase. -->profits will increase. profits will decrease.
A tax in which the percentage of income tax rises as income falls is known as a:
regressive tax.
Suppose the demand for toxic waste disposal is very elastic. The government imposes an excise tax on waste disposal. The deadweight loss associated with the production of toxic waste disposal will be
relatively large.
Indifference curves:
represent a set of product bundles to which a consumer is indifferent.
Suppose a water utility company charges a residential customer $1.50 per 1,000 gallons for the first 30,000 gallons of water used and $1.00 per 1,000 gallons for any amounts used in excess of 30,000 gallons of water. The water utility is practicing:
second degree price discrimination
When a business offers its customers bulk discounts, they are practicing:
second degree price discrimination
If the United States experiences an inflationary episode in which prices of goods and services go up faster than incomes, budget lines for U.S. consumers will:
shift inward.
Elasticity and decision making
short run v. long run??
If the cross elasticity of demand for good A with respect to good B is 2.3, then good A is a(n)
substitute for good B
A consumer is in equilibrium when
the addition to total utility per dollar is the same for every commodity.
marginal utility
the additional satisfaction derived from consuming one more unit of a given product or service
Which curve is NOT bowl-shaped?
the average fixed cost curve
If the prices of the two goods the consumer buys increase
the budget line shifts closer to the origin.
When moving down along a straight-line demand curve
the elasticity of demand changes from elastic to inelastic
consumer tendencies given income, price and utility information
the higher the utility the the more resources there will be allocations to the more satisfying thing and using as much of the budgeted income as possible sometimes irrational; overconfidence, sunk cost fallacy, overvaluing the present relative tot he future, and framing bias, altruism
P = MC rule
the principle that a purely competitive firm will maximize its profit or minimize its loss by producing that output at which the price of the product is equal to marginal cost, provided that price is equal to or greater than average variable cost in the short run and equal to or greater than average total cost in the long run.
Indifference curves cannot be concave to the origin because
the satisfaction consumers get from consuming additional units of a good declines
After Rachene bought a magazine subscription, she does not enjoy the articles in the magazine. However, she dutifully reads the entire magazine every month because she had already paid for the subscription, and she feels the money will be wasted if she does not read it. What psychological factor associated with behavioral economics explains Rachene's behavior?
the sunk cost fallacy.
The local school district wants to close down a neighborhood high school because its outdated heating and cooling systems make it too expensive to operate compared to the new high school being built nearby. Parents who are against closing the neighborhood school argue that the $2 million dollars spent refurbishing the school over the last few years will be wasted if the school is shut down. This argument is an example of:
the sunk cost fallacy.
The primary determinant of the elasticity of supply is:
time.
If a firm sells a product that has a perfectly inelastic demand curve, then, if price doubles, it can be expected
total revenue will double.
A gas station owner in a large city learned in his microeconomics class that buyers are relatively unresponsive to changes in the price of gasoline. If, based on that assumption, he increases the price of gas at his station
total revenue will increase
short run v. long run
capacity and number of firms cannot change or one factor of production is fixed v. firms can alter their plant capacity and number of firms can change; anything is possible
Calculating MC
change in TC from one quantity to the next highest one
calculate marginal product
change in total product/ change in labor
utility maximization (MU/$)
comparing marginal utilities until all resources are used up (pizza v. wall climbing example) MU/P compared to MU/P of another thing
Jim Delaney sold his pizza firm to an investor who then sold stock to the public. Jim now earns a salary of $5,000 a month and all the profits are distributed to the stockholders. This firm is an example of a:
corporation.
difference of sunk, variable, fixed cost
costs that do not change as a firms output expands or contracts; costs that change as a firm changes; unrecoverable costs incurred by all individuals and businesses