microeconomics final exam

suppose when the price of calculators is 10, the quantity demanded is 100, and when the price is 12, the quantity demanded drops to 80. using the mid-point method, the price elasticity of demand is:

-1.22

suppose when the price is 1, the quantity demanded is 250, and when the price is 2, the quantity demanded i 100. using the mid-point method, the price elasticity of demand is:

-1.29

utility is:

-at the heart of all microeconomics thinking -a way of describing the value that a person places on something -what drives decision making in individuals -all of these are true ****

total costs:

-include explicit and implicit costs -are total fixed costs plus total variable costs -rise as output rises -all of these are true****

for firms that sell one product in a perfectly competitive market, the market price:

-is equal to marginal revenue for a firm -is equal to average revenue for a firm -is constant, regardless of quantity sold -all of these are true ****

the marginal cost curve:

-is j shaped -crosses AVC at the average variable cost curves low point -rises when marginal product falls, and falls when marginal product rises - all of these are true ***

when accounting profits are positive, economic profits could be:

-postive -negative -zero - all of the above is true ***

if a firm increases production, then it's ?

-total fixed costs stay the same - total variable costs rise - total costs increase - all of the above is true***

if dafydds maximum willingness to pay a snowboard is 250, how many snowboards would he buy if the market price of snowboards is 500?

0

given this information in the table shown, what is the marginal revenue when 25 units are produced?

10

according to the graph shown, the equilibrium price is ___ and equilibrium quantity is ____.

10,20

refer if the market price is $30 and if the firm is producing output, what is the amount of its total variable cost?

3,960

assume the table is for a hat factory, and shows the total production of hats given various numbers of employees. what is the marginal product of the fifth worker?

40

according to the graph shown, consumer surplus is area:

A

a horizontal demand curve implies:

quantity demanded will drop to zero if the price changes by any amount

when graphing the demand curve:

quantity goes on the horizontal axis and price goes on the vertical axis

a nash equilibrium is

reached when each player chooses the best strategy for himself, given the other strategies chosen by other players in the group

you decide to buy your friend lunch after she helped you study for your exam. this is an example of the economic concept of:

reciprocity

implicit costs are costs that:

represent forgone opportunities

olive oil producers want to sell more olive oil at a higher price. which of the following events would have this effect?

research finds that consumption of olive oil reduces the risk of heart disease

the basic economic problem of ____ has always existed and will continue to exist.

scarcity

the subgame perfect equilibrium is where:

starbucks will expand and dunkin donuts will not

refer to the table. if a minimum wage of 11.50 is imposed, there will be a

surplus of 40,00 units of labor

david card and alan kruger conducted a study of fast-food restaurants in new jersey and Pennsylvania. the study found that

increases in the minimum wage had a very small impact on employment

if quantity demanded falls by 25 percent when price rises by 50 percent, demand is said to be:

inelastic

in a production possibilites frontier model, a point _____ the frontier is productively inefficient.

inside

the total fixed cost curve :

is a constant, flat line.

the demand curve

is a downward sloping line that reflects the inverse relationship between price and quantity

the short run:

is defined by the presence of a fixed input for a firm

total surplus

is producer and consumer surplus combined

the concept of diminishing marginal utility:

is the principle that the additional utility gained from consuming successive units of a good or service tends to be smaller than the utility gained from the previous unit

if a country possesses the absolute advantage in the production of one good:

it can produce more of that good given the same resources

for a firm in a perfectly competitive market, if it is producing at a level of output where marginal costs are less than marginal revenue:

it should increase production to increase profits

the nash equilibrium of the game in the figure shown will be:

joe and sarah both put forth low effort

effective rent control leads to quantity supplied being____ quantity demanded

less than

the demand for all soft drinks is likely to be ___ the demand for Dr.Pepper

less than a

in general, economic profits are:

less than accounting profits

scarcity reflects our inability to satisfy wants due to:

limited resources

according to the graph shown, the profits at point a are:

lower than those at point b

in economics, the term ___ means "additional" or "extra"

marginal

in the short run, if marginal product of labor is at its maximum, then :

marginal cost is at its maximum

the increase in output that is generated by an additional unit of input is called the:

marginal product

firms in perfectly competitive markets who wish to maximize profits should produce where:

marginal revenue and marginal cost are equal

games:

may have several nash equilibria

a perfectly inelastic demand:

means people will not respond to any change in price

a firm that is sole producer of a good or service with no close substitutes is called a:

monopolist

when a good has a lot of close substitutes available, it is likely to be:

more price elastic than goods without close substitutes available

an effective price floor:

must be above the equilibrium price, and will likely cause a surplus

an effective price ceiling:

must be set below the equilibrium price, and will likely cause a shortage

if a typical firm in a perfectly competitive industry is earning profits, then

new firms will enter in the long run causing market supply to increase, market price to fall and profits to decrease

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assuming elasticity is reported in absolute value, an inelastic demand has a measured elasticity:

of less than one

consider figure 12.5. if player b confesses and player a does not, then:

player a spends 8 years in jail, and player b spends 0 years in jail

marginal utility can be

postive, negative, or zero

refer to table a. what is the average total cost of production when the firm produces 120 lanterns?

$14

if the total cost of producing 20 units of output is 1,000 and the average variable cost is $35, what is the firms average fixed cost at that level of output?

$15

if the price of a good increases by 10 percent, its quantity demanded drops by 50 percent. the price elasticity of demand is:

-0.2

their options are to confess or not to confess. the payoffs represent the number of years each will spend in jail. the nash equilibrium for the pay off matrix shown is:

A:20 years, b: 20 years

according to the graph shown, producer surplus is area:

B

the marginal benefit of another t shirt this month to elizabeth is 15. if the 10 price of a tshirt reflects its marginal cost to elizabeth and elizabeth uses economic reasoning, she :

will buy another t shirt this month

ranchers can raise either cattle or sheep on their land. which of the following would cause the supply of sheep to increase?

a decrease in the price of cattle feed

a strategy that is preferred by an individual regardless of an opponents decision is called:

a dominant strategy

altruism describes:

a motive for action in which a persons utility is increased when anothers utility increases

a set of strategies in which no player can improve his or her payoff by changing his or her own action is called:

a nash equilibrium

a good that has a positive income elasticity:

a normal good

rent control is an example of:

a price ceiling

refer to figure 3-4. if the current market price is 10, the market will achieve equilibrium by

a price increase, increasing the quantity supplied and decreasing the quantity demanded.

the game in the figure shown is a version of:

a sequential game

a change in a non price factor of demand will cause :

a shift of the demand curve

if a good has a highly elastic demand, then:

a small percentage change in price will cause a large percentage change in quantity demanded

average fixed costs:

always trend downward as output increases

what is the difference between an " increase in demand" and an " increase in quantity demanded"?

an " increase in demand" is represented by a right ward shift on the demand curve while an " increase in quantity demanded" is represented by a movement along a given demand curve

what is the difference between an "increase in demand" and an "increase in quantity demanded"?

an "increase in demand" is represented by a rightward shift of the demand curve while an "increase an increase in quantity demanded " is represented by a movement along a given demand curve

what is the difference between an "increase in supply" and an "increase in quantity supplied"?

an "increase in supply" means the supply curve has shifted to the right while an " increase in quantity supplied" refers to a movement along a given supply curve in response to an increase in price

an increase in the demand for lobster due to changes in consumer tastes, accompanied by a decrease in the supply of lobster as a result bad weather reducing the number of fisherman trapping lobster, will result in:

an increase in the equilibrium price of lobster, the equilibrium quantity may increase or decrease

economies of scale refers to returns that occur when:

an increase in the quantity of output decreases average total cost in the long run

if an increase in income leads to a decrease in the demand for popcorn, then popcorn is:

an inferior good

in a perfectly competitive market, producers:

are able to sell as much as they want without affecting the market price

the law of demand implies, holding everything else constant, that

as the price of bagels increases, the quantity of bagels demanded will decrease

comparative advantage means the ability to produce a good or service

at a lower opportunity cost than any other producer

which of the following is the correct way to describe equilibrium in a market?

at equilibrium, quantity demanded equals quantity supplied

of the curves displayed in the graph shown, what does curve b most likely represent?

average total cost

if the marginal cost curve is below the average variable cost curve. then :

average variable cost is decreasing

when two goods are substitutes, we expect their cross-price elasticity of demand to:

be positive

one reason the supply of cell phones has increased is:

better technology allows them to be produced more cheaply

their options are to confess or not to confess. given this information:

both a and b have dominant strategies

increasing opportunity cost is represented by a _____ production possibilities frontier

bowed out

the graph indicates that with the resources and technology it has available, ricardia:

can produce either 40 units of rye or 20 units of eggs

a natural monopoly is a market in which a single firm:

can produce, at a lower cost than multiple firms, the entire quantity of output demanded

some nonprice determinants of demand are:

consumer preferences, expectations of future prices, and the number of buyers in the market

the difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called:

consumer surplus

total fixed costs are?

costs that don't depend on the quantity of output produced

a firm realizes that the market price has fallen below its average total costs, and it is now earning a loss. what is the best action for the firm to take in the short run?

definitely stay open if price is greater than average variable costs

if total revenue increases as a result of a price increase:

demand for the good is price inelastic

if a demand curve shifts to the right, then:

demand has increased

making "how much " decisions involve:

determining the additional benefits and the additional costs of that activity

utility is:

difficult to measure because it is very subjective

when a strategy is the best one to follow no matter what strategy other players choose, it is called a :

dominant strategy

an outward shift of a nations production possibilities frontier represents

economic growth

maximize profit

economists assumer the central goal of any business is to?

marginal utility:

extra satisfaction received from consuming one more unit of a product

an essential characteristic of a perfectly competitive market is:

goods are standardized (not differentiated)

an example of a standardized ( non- differentiated) good is:

grain

refer to table 2-3. which of the following statements is true?

haley has an absolute advantage in making bracelets and serena in making necklaces

an essential characteristic of a perfectly competitive market is that producers:

have so much competition that they have no ability at all to set their own price

how long is the long run?

however long it would take a firm to vary all of its costs

marginal cost is:

the additional cost a firm will incur by producing one additional unit of output

consumer surplus in a market for a product would be equal to _____ if the market price was zero.

the area under the demand curve

in general, the more elastic a demand curve is:

the flatter it will be

revealed preference is:

the idea that peoples preferences can be determined by observing their choices and behavior

a minimum wage law dictates

the lowest wage that firms may pay for labor

the principle of diminishing marginal product states:

the marginal product of an input decreases as the quantity of the input increases

the longer people have to adjust to a price change:

the more elastic their demand will be

demand for shell gasoline will increase if:

the price of BP gasoline increases

at a products equilibrium price

the products demand curve crosses the products supply curve

total revenue is ?

the quantity sold multiplied by the price paid for each unit

marginal product is represented by:

the slope of the total production curve

if in the market for oranges, the supply has increased then

the supply curve for oranges has shifted to the right

in 2004, hurricanes destroyed a large portion of floridas orange and grape fruit crops. in the market for citrus fruit?

the supply curve shifted to the left resulting in an increase in the equilibrium price

one of the reasons why monopolies exist is:

there are barriers to entry into the market

refer to figure 3-4. if the price is 10,

there would be a shortage of 600 units

refer to figure 3-5. at a price of $15

there would be a surplus of 4 units

assume the table shown is for a hat factory, and shows the total production of hats given various numbers of employees. diminishing marginal product sets in after the:

third worker

economic profits are calculated as:

total revenue minus all opportunity costs, explicit and implicit

refer to figure 2-1. point c is

unattainable with current resources

if the price of a cup of coffee increases by 50 percent, the quantity demanded decreases by 50 percent. the price elasticity of demand is:

unit elastic

individuals will make choices to maximize their:

utility