A Packet Continued
If a good is an inferior good then income elasticity of demand is ______.
Greater than one.
Sarah received a raise of 20%. Before, she purchased five pounds of hamburger and one pound of steak a month. After her pay increase, she consumes three pounds of steak and two pounds of hamburger a month. All else remaining constant, we know that
Hamburger is a normal good and steak is an inferior good for Sarah
The marginal cost of making the 100th unit is $50 and the average total cost of the 100th unit is $100. What do we know about the average total cost curve at a quantity of 100?
It is falling (decreasing)
If a monopolistically competitive firm raises its price, then
It should expect to lose some, but not all, of its customers
A concentration ratio indicates the
Percentage of total sales accounted for by the (for example) four larger firms
When a farmer increases the amount of fertilizer used by 10%, the farmer's crop pf corn increases by 3% and the farmer's crop of wheat increases by 5%. Which of the following statements is is TRUE about elasticity with respect to fertilizer.
Wheat has a higher elasticity than corn
A monopolist can sell 15000 units at a price of $100 per unit. Lowering price by $1 raises the quantity demanded by 500 units. What is the change in total revenue resulting from this price change?
$34,500
A farmer has 1,000 acres on which he has previously grown corn. His yield per acre is 100 bushels or corn. If the corn payment rate is $0.43 a bushel, his production flexibility contract payment equals
$36,550
A "quota" is
A legal limit on the amount of a good that can be imported
A normal good is
A good for which the demand rises as income rises
Pete's Burgers has fixed costs of $200. When Pete's Burgers makes 500 hamburgers, their variable costs are $150. When Pete's makes 600 hamburgers their variable costs are $250. The average total cost when they are making 600 hamburgers is ________, and the marginal cost for the range between 500 and 600 hamburgers is ______.
ATC= $0.75; MC= $1.00
Which of the following is an assumption of the theory of oligopoly?
Both A and C- There are barriers to entry and Firms produce and sell either homogeneous or differentiated products
Suppose that you are evaluating the market for baseball bats. Louisville Slugger produces the Barry Bonds bat. Since his record breaking 73 home runs more kids prefer his bat to any other. What will happen in the market for the Bond's bat?
Both the price and quantity will increase
In the theory of perfect competition
Buyers and sellers of the product know everything that there is to know about the product
Economics is a social science that involves the study of how individuals
Choose among alternatives
Concentration ratios are NOT perfect guides to industry concentration, because they
Do not take into account foreign competition and competition from substitute goods
A "price-taker" is a firm that
Does NOT have the ability to control the price of the product it sells
In a monopolistically competitive industry
Each firm in the industry produces a slightly differentiated product
Which of the following is NOT an assumption of the theory of perfect competition?
Each firm produces and sells a differentiated product
A natural monopoly exists when
Economies of scale are so large that only one firm can survive and achieve low unit costs
Markets that quickly and accurately assimilate all available information into market prices are referred to as ____________ markets.
Efficient
Which of the following industries is the best real-world example of monopolistic competition?
Electricity generation
A tariff is a tax on
Imports
If the percentage change in quantity demanded of a good is less than the percentage change in income, then the good is said to be
Income inelastic
If the percentage in quantity demanded of a good is equal to the percentage change in income, then the good is said to be
Income unit elastic
There has been significant freeze in Florida destroying a large portion of the orange crop. The U.S. Surgeon General also reports that drinking fresh squeezed orange juice reduced the chance of having cancer by 50%. Given these two events the price of orange juice will _________ and the output of orange juice will
Increase; be indeterminable
The rule of profit maximization says that firms should produce at the point where
Marginal revenue equals marginal cost
A monopoly may exist because
One firm has the exclusive ownership of a secure resource
Suppose that you are evaluation the apple market. The U.S. Surgeon General confirms that eating apples (one a day) can prevent many chronic diseases. At the same time, many apple trees are infested by an apple weevil. This weevil destroys 1/3 of all apple trees in the U.S. The result of these two events will be that _____ in the apple market.
Price will increase but quantity is indeterminable
Real-world markets that approximate the four assumptions of the theory of perfect competition include
Some agricultural markets and The stock market
The price of eggs will drop when
The number of egg farms increase
In the theory of perfect competition
The single firm's demand curve is horizontal
The N.M. Corporation has exactly the same costs of production as last year except for fixed costs, which are $50,000 this year compared to $30,000 last year. Which of the following statements is FALSE?
The total cost curved will be the same this year as last year
If the wage rate increases, which of the following will NOT happen?
The total fixed cost curve will shift up
Which of the following is an assumption of the theory of monopoly?
There are extremely high barriers to entry
