Mirco final

Which of the following is not a factor of production?

$1,000 in cash

If a firm produces 20 units of output and incurs a total cost of $1,000 and a variable cost is $700, calculate the firm's average fixed cost of production if it expands output to 25 units.

$12 Variable cost is $(1000-700)=$300. Divide it by quantity]

The cost of ingredients (pita, meat, spices, etc.) to make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a fixed cost of $120 per day. Calculate Vipsana's average fixed cost per day when she produces 50 gyros using two workers?

$2.40 Total fixed cost divided by output, so, $120/50]

Suppose the value of the price elasticity of supply is 4. What does this mean?

A 1 percent increase in the price of the good causes quantity supplied to increase by 4 percent.

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

A wide variety of substitutes are available for the good.

Which of the following equations is correct?

AFC + AVC = ATC

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.

What happens in the market for walnuts if the Centers for Disease Control and Prevention announces that consuming a half cup of walnuts each week helps to lower bad levels of cholesterol?

D increases, S no change, P and Q increase

A decrease in population shifts the production possibility frontier outwards over time.

FALSE

A decrease in the unemployment rate may be represented as a movement from a point on the production possibilities frontier to a point outside the frontier.

FALSE

Any output combination outside a production possibility frontier is associated with unused or underutilized resources.

FALSE

As output increases, the distance between average total cost and average variable cost increases.

FALSE

Average total cost is equal to average variable cost minus average fixed cost.

FALSE

Suppose the absolute value of the price elasticity of demand for basketball game tickets on your campus is greater than 1. Increasing ticket prices will increase the total revenue from ticket sales.

FALSE

Which of the following statements about a simple circular flow model is false?

Households are neither buyers nor sellers in the input market.

Which of the following is NOT a direct determinant of supply of corn?

People's Tastes

Which of the following is NOT a direct determinant of demand for ice-cream?

Price of milk

A surplus occurs when the actual selling price is above the market equilibrium price.

TRUE

If consumers believe the price of iPads will decrease in the future, this will cause the demand for iPads to decrease now.

TRUE

If the demand for a product is elastic, the quantity demanded changes by a larger percentage than the percentage change in price.

TRUE

The basis for trade is comparative advantage, not absolute advantage.

TRUE

The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases.

TRUE

When there are few substitutes available for a good, demand tends to be relatively inelastic.

TRUE

In January, buyers of gold expect that the price of gold will rise in February. What happens in the gold market in January, holding all else constant?

The demand curve shifts to the right.

The production possibilities frontier model assumes which of the following?

The economy produces only two products.

Which of the following is evidence of a shortage of walnuts?

The quantity demanded of walnuts is greater than the quantity supplied.

In October, market analysts predict that the price of platinum will fall in November. What happens in the platinum market in October, holding everything else constant?

The supply curve shifts to the right.

An increase in the quantity of a product supplied is caused by an increase in the price of the product.

True

Supply curve shifts to the left if any one of the determinants of supply (except its own price) falls.

True

A movement along the demand curve for toothpaste would be caused by

a change in the price of toothpaste.

Which of the following will shift the demand curve for a good?

a decrease in the price of a complementary good

Holding everything else constant, an increase in the price of MP3 players will result in

a decrease in the quantity of MP3 players demanded.

Which of the following items is likely to have the highest income elasticity of demand?

a vacation home in the Swiss Alps

Which of the following products comes closest to having a perfectly inelastic demand?

cholesterol medication in general

When a firm's long-run average cost curve is horizontal for a range of output, then that range of production displays

constant returns to scale.

Which of the following is a fixed cost?

contractual payment to hire a security worker

In order to prove that Motrin and Ibuprofen are substitutes, one should measure the ________ and get a ________.

cross-price elasticity; positive number

If tablet computers are considered substitutes for e-readers, the decline in the price of tablet computers would, all else equal

decrease the demand for e-readers.

If, when a firm doubles all its inputs, its average cost of production increases, then production displays

diseconomies of scale.

Marginal cost is calculated for a particular increase in output by

dividing the change in total cost by the change in output.

when production displays economies of scale, the long-run average cost curve is

downward-sloping.

An outward shift of a nation's production possibilities frontier represents

economic growth.

If an 8 percent decrease in the price of lobster leads to a 15 percent decrease in the quantity supplied of lobster, then the supply of lobster is

elastic.

The average total cost of production

equals total cost of production divided by the level of output.

The natural resources used in production are made available in the

factor market.

Average fixed costs of production

fall as long as output is increased.

If the quantity demanded for a good rises as income rises then the income elasticity of demand for this good is ________ than 0, and the good is ________ good.

greater; a normal

Suppose that when the price of hamburgers decreases, the Ruiz family increases their purchases of ketchup. To the Ruiz family,

hamburgers and ketchup are complements.

The demand curve for an individual seller's product in perfect competition is

horizontal.

Income elasticity measures

how a good's quantity demanded responds to change in buyers' incomes.

The Price Elasticity of Demand and Its Measurement

how responsive quantity demanded is to a change in price.

The production possibilities frontier model shows that

if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.

The ________ effect refers to the change in quantity demanded for a good that results from the effect of a change in the good's price on consumer's purchasing power/real income.

income

A production possibilities frontier with a bowed outward shape indicates

increasing opportunity costs as more and more of one good is produced.

In a production possibilities frontier model, a point ________ the frontier is productively inefficient

inside

The price a perfectly competitive firm receives for its output

is determined by the interaction of all sellers and all buyers in the firm's market.

Opera Estate Girls' School is considering increasing its tuition to raise revenue. If the school believes that raising tuition will increase revenue

it is assuming that the demand for attending the school is inelastic.

The resource income earned by those who supply ________ is called wages.

labor

If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced.

linear

The demand by all the consumers of a given good or service is the ________ for the good or service.

market demand

The production possibilities frontier shows the ________ combinations of two products that may be produced in a particular time period with available resources.

maximum attainable

Long-run cost curves are U-shaped because

of economies and diseconomies of scale.

Which of the following pairs of goods is likely to have a negative cross-price elasticity of demand?

pancakes and syrup

At a price of $8 per dozen, Chuy sells 40 dozen homemade tamales per week. When he raised her price to $12 per dozen, he still sold 40 dozen per week. Based on this information, the demand for his tamales is

perfectly inelastic.

A change in which variable will directly change the market demand for a product?

population

Total revenue equals

price per unit times quantity sold.

Suppose a decrease in the supply of wheat results in an increase in revenue. This indicates that

the resulting increase in price is proportionately greater than decrease in quantity sold.

Average total cost is equal to

total cost divided by the level of output.

The points outside the production possibilities frontier are

unattainable.

If demand is perfectly inelastic, the absolute value of the price elasticity of demand is

zero.

A characteristic of the long run is

all inputs can be varied.

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 fishermen trapping lobster, will result in

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

Vineyards can grow either red wine grapes or white wine grapes on their land. Which of the following would cause the supply of red wine grapes to decrease?

an increase in the price of white wine grapes

Which of the following is a factor of production?

an oven in a bakery

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

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

The law of supply implies, holding everything else constant, that

as the price of bagels increases, the quantity of bagels supplied will increase.

Marginal cost is equal to the

change in total cost divided by the change in output.

The cost of ingredients (pita, meat, spices, etc.) to make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a fixed cost of $120 per day. Calculate Vipsana's total variable cost per day when she produces 50 gyros using two workers?

$220 [Hint: total Variable cost is the cost of ingredients for making 50 Gyros plus cost of hiring 2 workers for that = $(2 time 50 + 60 times 2) = $220]

The cost of ingredients (pita, meat, spices, etc.) to make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a fixed cost of $120 per day. Calculate Vipsana's total cost per day when she produces 50 gyros using two workers?

$340 [Hint: Total cost =total variable cost +total fixed cost. Total variable cost is $220 from above. Total fixed cost is $120. So add them up. ]

If average total cost is $50 and average fixed cost is $15 when output is 20 units, then the firm's total variable cost at that level of output is

$700. [Hint: average variable cost = $50-$15=$35. So the total variable cost for 20 units is 20 times $35].

Suppose Tinsel Town Videos lowers the price of its movie club membership by 10 percent and as a result, CineArts Videos experienced a 16 percent decline in its movie club membership. What is the value of the cross-price elasticity between the two movie club memberships?

1.6

If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand? Use the midpoint formula

1.62

Pierre can produce either a combination of 20 bow ties and 30 neckties or a combination of 35 bow ties and 15 neckties. If he now produces 35 bow ties and 15 neckties, what is the opportunity cost of producing an additional 15 neckties?

15 bow ties

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

At equilibrium, quantity demanded equals quantity supplied.

Households ________ final goods and services in the ________ market.

purchase; product

If, for a product, the quantity supplied exceeds the quantity demanded, the market price will fall until

quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.

The price elasticity of supply is usually a positive number because

quantity supplied increases in response to price increases.

If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded, then the demand for golf balls is

relatively elastic.

Households

sell resources in the factor market.

Economic decline (negative growth) is represented on a production possibilities frontier model by the production possibility frontier

shifting inward.

Scarcity

stems from the incompatibility between limited resources and unlimited wants.

The smart phones introduced to compete with the iPhone would be considered

substitutes for the iPhone.

All of the following cost curves are U-shaped except one. Which curve is not U-shaped?

the average fixed cost curve

If the absolute value of the price elasticity of demand for aspirin equals 0.8 then

the demand for aspirin is inelastic.

If the price of automobiles was to increase, then

the demand for gasoline would decrease.

The principle of opportunity cost is that

the economic cost of using a factor of production is the alternative use of that factor that is given up.

Which of the following is a flow in the circular flow model?

the flow of revenue received by firms and the flow of payments to resource owners

The production function shows

the maximum output that can be produced from each possible quantity of inputs.

The price elasticity of demand is equal to

the percentage change in quantity demanded divided by the percentage change in price.

The attainable production points on a production possibility curve are

the points along and inside the production possibility frontier.