Microeconomics Midterm 1 (pt.2)

In a competitive labor​ market, the​ profit-maximizing number of workers that a firm will hire occurs where the​ ____________.

value of marginal product of labor is equal to the market wage.

Assume that a perfectly competitive market in​ long-run equilibrium with firms earning zero profit experiences a sudden decrease in demand for its good. As a​ result, in the long​ run, the ____ in marginal revenue will cause firms to ____ the market.

drop, exit

Suppose the university is trying to determine the most efficient way to allocate the rooms such that those who value the rooms the most get them. Which is most efficient

Auctioning the rooms to the highest bidders.

A decreasing production pattern where successive increases in inputs lead to a decrease in marginal product is called the Law​ of:

Diminishing Returns.

The government of a certain country decides that all its citizens should be equally well off. It decides to redistribute money so that each person has a roughly equal share of the total income. How would this policy affect economic activity in the​ country?

It would be adversely affected since incentives to work or seek profits would be greatly diminished.

Town B is considering imposing a​ $1 tax on each hamburger​ sold; the tax is to be paid by the hamburger stands in the town.

It would change a hamburger​ stand's short-run​ profit-maximizing choice of the number of hamburgers to produce. Your answer is correct. The tax would shift a hamburger​ stand's marginal cost curve. Your answer is correct. The tax would shift a hamburger​ stand's short-run average variable cost curve.

How would the introduction of legal or technical barriers to entry affect the​ long-run equilibrium in a perfectly competitive​ market?

It would reduce any downward pressure on prices from entry and allow economic profits in the long run.

Does price gouging have the same effect as setting prices above equilibrium​ level?

No, price gouging is actually an equilibrium​ outcome, while the setting of prices above equilibrium is not.

Town A is considering imposing a​ lump-sum tax of​ $300 on each hamburger stand in the town. Assuming that the market for hamburgers is perfectly​ competitive, which of the following would​ occur?

The tax would shift a hamburger​ stand's short-run average fixed cost curve.

Which of the following expressions correctly describes economic​ profits?

Total revenue −implicit costs−explicit costs.

In a_____ ​economy, a central authority determines the goods and services produced while a ________ economy is based on price signals and strong economic incentives.

command, market

In a competitive market​ equilibrium, the allocation of the social surplus is such that​ ___________

no individual can be made better off without making someone else worse off.

A difficult problem for central planners is bringing together those economic agents whose interests coincide in order to trade. This is known as the​ ____________ problem.

coordination

economics of scale

factors that cause a producer's average cost per unit to fall as output rises

At this point of production the average fixed cost​ (AFC) would be

falling

Once planners have successfully brought economic agents​ together, a second problem of aligning the interests of the economic agents must be solved. This is known as the​ ___________ problem.

incentive

All firms in a perfectly competitive market are said to be​ __________

price takers

In a market​ economy, the alignment of interests is accomplished through the use of

prices

The goal of a business in a perfectly competitive market is to​ maximize:

profit

Suppose a new​ off-campus university apartment complex could rent its rooms on the open market for​ $900 a month. ​If, instead, the university chooses to cap the price of rooms to​ $500 a month for​ students, the result would be that​ ____________.

quantity demanded would exceed the quantity​ supplied, resulting in a shortage.

When one of the five major factors​ changes, causing an increase in​ demand, the demand curve shifts

rightward

When one of the four major factors​ changes, causing an increase in​ supply, the supply curve shifts

rightward

The Law of Supply states​ that, in most​ cases, the quantity supplied of a good​ ___________ when the price of the good rises. This means we would expect a typical supply curve to​ be___________.

rises; upward-sloping.

Question content area Part 1 If marginal cost​ (MC) is greater than average total cost​ (ATC), then ATC is

rising

Which of the following is not one of the four major factors that shifts the supply curve when it​ changes?

the income of consumers

Which of the following is not one of the five major factors that shifts the demand curve when it​ changes?

the price of a good itself

Diseconomics of Scale

the property whereby long-run average total cost rises as the quantity of output increases

constant returns to scale

the property whereby long-run average total cost stays the same as the quantity of output changes