Microeconomics

other things constant, which of the following is inversely related to inflation?

real wage only

the downward-sloping demand curve of a monopolistic competitor

reflects some level of control over it's own price

Suppose that a consumer purchases just two goods, X and Y. The ratio of the price of good X to the price of good Y is the

slope of the budget line.

Economics may best be defined as the

social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.

Refer to the diagram for athletic shoes. If the current output of shoes is Q3, then

society would consider additional units of shoes to be less valuable than alternative products.

A society can consume a combination of goods outside its production possibilities if there is

specialization in production and International trade.

Creative destruction is most often associated with

technological advance.

The production possibilities curve tells us

the combinations of two goods that can be produced with society's available resources.

The basic characteristic of the short run is that

the firm does not have sufficient time to change the size of its plant.

Economists

are somewhat arbitrary in assigning independent and dependent variables to the horizontal and vertical axes.

When a firm is on the inelastic segment of its demand curve, it can:

increase profits by increasing price

Refer to the table, in which the values for columns (2) through (5) are in acres. Positive land rent will occur if the relevant columns are

(1), (2), and (3) and (1), (2), and (4).

A constant-cost industry is one in which

100 units can be produced for $100, then 150 can be produced for $150, 200 for $200, and so forth.

Refer to the above graphs. A short-run equilibrium that would produce profits for a monopolistically competitive firm would be represented by graph

A

the nondiscriminating monopolist's demand curve

A. is less elastic than a purely competitive firm's demand curve.

Carlos and Darla are playing the dictator game. Carlos is assigned the role of dictator and given $20 to split between the two of them. Based on previous experiments with this game by behavioral economists, which is the least likely outcome?

Carlos will give all of the money to Darla.

Refer to the provided graph. Which point in the graph would allow a simultaneous increase in the production of both investment and consumer goods?

D

Which of the following statements about a competitive firm is correct?

In long-run equilibrium, a competitive firm will produce at the point of minimum average total costs.

Which would indicate that a firm is operating under conditions of pure competition and is being productively efficient?

It produces at the minimum average total cost.

Which of the following statements is true?

Microeconomics focuses on specific decision-making units of the economy; macroeconomics examines the economy as a whole.

In developing prospect theory, which of the following did behavioral economists not discover about people's reaction to goods and bads?

People feel equivalent losses and gains in equal measure, supporting the assumption that consumers behave rationally.

Which of the following is characteristic of a purely competitive seller's demand curve?

Price and marginal revenue are equal at all levels of output.

"Loss aversion" helps explain why people buy insurance policies with lower deductibles even though the policies are more expensive.

True

Firms would rather shrink package sizes than raise prices because consumers will feel less of a loss from the change in package size.

True

Which of the following exemplifies a microeconomic question?

Will a new type of electronic reader or tablet increase the number of buyers?

In progress and poverty 1879 Henry George argued for

a heavy tax on land rent income

Other things equal, which of the following would shift an economy's production possibilities curve to the left?

a law requiring mandatory retirement from the labor force at age 55

Opponents of land nationalization argue that private ownership

allows rent to function as an efficient allocation mechanism

For all practical purposes, the supply of land is:

almost perfectly inelastic

The concept of "wages" includes the following items, except

amounts spent by workers

Refer to the provided production possibilities curves. Curve (a) is the initial curve for the economy, and the nation is initially producing combination P. A shift from curve (a) to curve (b) suggests that the economy can then increase its production of capital goods

and consumer goods simultaneously.

Under pure competition, in the long run

both allocative efficiency and productive efficiency are achieved.

Many economists believe that the neoclassical theories of human behavior and the insights being accumulated in behavioral economics are basically

complementary to one another.

In which of the following industries are economies of scale exhausted at relatively low levels of output?

concrete mixing

Product differentiation in monopolistic competition involves a trade-off between

consumer choice and productive efficiency.

The basic difference between consumer goods and capital goods is that

consumer goods satisfy wants directly, while capital goods satisfy wants indirectly.

Economists have difficulty applying the scientific method because

controlled laboratory experiments in economics are often not feasible.

Kara was out jogging and, despite being tired, decided to run one more mile. Based on her actions, economists would conclude that Kara

decided that the marginal benefit of running one more mile would outweigh the cost of the additional mile.

On a production possibilities curve, the single optimal or best combination of output for any society

depends upon the preferences of society.

Refer to the diagrams, which pertain to monopolistically competitive firms. Long-run equilibrium is shown by

diagram a only

Some economists advocate taxes on land because such taxes

do not affect the supply of land

the demand for land is

downsloping

The primary force encouraging the entry of new firms into a purely competitive industry is

economic profits earned by firms already in the industry.

The individual who brings together economic resources and assumes the risk of business ventures in a capitalist economy is called the

entrepreneur.

Which of the following is most likely to be an implicit cost for Company X?

forgone rent from the building owned and used by Company X

A firm that hires labor and sells its product both in purely competitive markets will:

have a downward-sloping demand curve for labor

The graph shows a firm that buys its inputs and sells its output in competitive markets. If the firm develops a new technology that increases labor productivity, the equilibrium level of employment for this firm is expected to be

higher than L0

a monopolistically competitive firm has a

highly elastic demand curve

You should decide to go to a movie

if the marginal benefit of the movie exceeds its marginal cost.

Refer to the diagram. Which one of the following would shift the production possibilities curve from PP1 to PP2?

immigration of skilled workers into the economy

Refer to the above graph for a representative firm in monopolistic competition in a constant-cost industry. This firm is

in short run equilibrium, but no long-run equilibrium

The prices of raw materials increase in a purely competitive industry. This change will result in a(n)

increase (upward shift) in the marginal cost curve for firms in the industry.

If the nation produces more and more tanks, the opportunity cost of each additional tank in terms of autos....

increases

refer to the diagrams. The profit-maximizing firm's total revenue.

is 0abc.

Refer to the diagrams. At the profit-maximizing level of employment for this firm, the amount available to pay to nonlabor resources

is Wab

Henry George advocated a single tax on

land

Scientists studying human behavior have found that people tend to

make systematic errors in their decisions.

From an economic perspective, when a consumer decides to buy more life insurance, the consumer has most likely concluded that the

marginal benefit of more insurance coverage is greater than the marginal cost.

Pure competition produces a socially optimal allocation of resources in the long run because

marginal cost equals price.

Allocative efficiency occurs when the

marginal cost equals the marginal benefit to society.

If the wage rate in a purely competitive labor market increases, it will cause the:

marginal revenue cost curve for a single competitive firm in the industry to shift up

If a purely competitive firm is producing at some output level less than the profit-maximizing output, then

marginal revenue exceeds marginal cost.

Which of the following is not considered by economists to be an economic resource?

money

under monopolistic competition, entry to the industry is

more difficult than under pure competition but not nearly as difficult as under pure monopoly.

if the payment to an input is pure economic rent, then reducing that payment will

not influence the availability of the input

The Latin term "ceteris paribus" means

other things equal.

An exclusive legal right as sole producer for 20 years granted to an inventor of a product is called a

patent

Resources are efficiently allocated when production occurs where

price is equal to marginal cost.

If the long-run supply curve is upward sloping, it indicates that resource prices fall when

production in the industry decreases in the long run.

The production possibilities curve is a graph of

the maximum combinations of products that can be produced with the available resources.

Creative destruction is

the process by which new firms and new products replace existing dominant firms and products.

The term allocative efficiency refers to

the production of the product mix most desired by consumers.

Which of the following is not a main function of the entrepreneur?

to make routine pricing decisions

A competitive firm will maximize profits at that output at which

total revenue exceeds total cost by the greatest amount.

Refer to the table. A total output of 3 units of capital goods and 4 units of consumer goods

would involve an inefficient use of the economy's scarce resources.