AG ECON Final

Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of output at $300 per unit, its accounting profits were:

$200,000 and its economic profits were zero

Assume that in the short run a firm is producing 100 units of output, has average total costs of $200, and average variable costs of $150. The firm's total fixed costs are: "

$5,000

Output AFC AVC 1 $50 $100 2 $25 $80 3 $16.67 $66.67 4 $12.50 $65 5 $10 $68 6 $8.37 $73.33 7 $7.14 $80 8 $6.25 $87.50 Refer to the above data. Total fixed cost is:

$50.00

Refer to the above table. If the market price for the firm's product is $12, the competitive firm will produce:

4 units at a loss of $109

Refer to the budget line shown in the diagram above. If the consumer's money income is $20, which of the following combinations of goods is unattainable?

4 units of C, and 6 units of D

Units Consumed Total Utility Marginal Utility 0 0 - 1 W 20 2 35 X 3 Y 10 4 40 Z Refer to the above data. The value for Y is:

45

If south Cantina is producing at production alternative D, the opportunity cost of the third unit of capital goods will be:

6 units

The following is cost information for the Creamy Crisp Donut Company: Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Refer to the above data. Creamy Crisp's economic profit is:

94,000

The relationship between quantity supplied and price is _________ and the relationship between quantity demanded and price is __________.

direct, inverse

Which of the following is a final good or service?

haircut purchased by a father for his 12 year old son

You should decide to go to a movie:

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

In the United States cartels are:

in violation of the antitrust laws.

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the:

income effect

Cartels are difficult to maintain in the long run because:

individual members may find it profitable to cheat on agreements

The marginal product of the fourth worker and the value of Y:

is 5

Game theory:

is the analysis of how people (or firms) behave in strategic situations.

An increase in money income:

shifts the consumer's budget line to the right

The amount of calendar time associated with the long run

varies from industry to industry

Output AFC AVC 1 $50 $100 2 $25 $80 3 $16.67 $66.67 4 $12.50 $65 5 $10 $68 6 $8.37 $73.33 7 $7.14 $80 8 $6.25 $87.50 Refer to the above data. Total cost for producing 7 units is:

$609.98

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. If the initial demand and supply curves are D0 and S0, equilibrium price and quantity will be:

0F and 0C, respectively

Suppose the price of local cable TV service increased from $16.20 to $19.80 and as a result the number of cable subscribers decreased from 224,000 to 176,000. Along this portion of the demand curve, price elasticity of demand is:

1.2

Units Consumed Total Utility Marginal Utility 0 0 - 1 W 20 2 35 X 3 Y 10 4 40 Z Refer to the above data. The value for X is:

15

W

20

The following is cost information for the Creamy Crisp Donut Company: Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Refer to the above data. Creamy Crisp's accounting profit is:

230,000

Suppose the income elasticity of demand for toys is +2.00. This means that:

A 10 percent increase in income will increase the purchase of toys by 20 percent

Unemployment describes the condition where:

A person cannot get a job but is willing to work and is actively seeking work

Suppose an economist says that "Other things equal, the lower the price of bananas, the greater the amount of bananas purchased." This statement indicates that:

All factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant

For a purely competitive seller, price equals

All of these

Which of the following is an example of a market failure?

All of these

The main determinant of elasticity of supply is the

Amount of time the producer has to adjust inputs in response to a price change

Inflation is described as:

An increase in the overall level of prices

OPEC provides an example of:

An international cartel

Fixed cost is

Any cost which does not change when the firm changes output

The law of diminishing returns indicates that:

As extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point

Which is the best example of oilopoy?

Automobile manufactoring

If you operated a small bakery, which of the following would be a variable cost in the short run?

Baking supplies (flour, salt, etc)

The law of diminishing marginal utility states that:

Beyond some point additional units of product will yield less and less extra satisfaction to a consumer

The price elasticity of demand coefficient measures:

Buyer responsiveness to price changes

Which of the following is a distinguishing feature of a command system?

Central Planning

Marginal cost is the

Change in the total cost that result from producing one more unit of output

DVD players and DVDs are

Complementary Goods

Digital cameras and memory cards are:

Complementary goods

When an economist says that the demand for a product has increased, this means that:

Consumers are now willing to purchase more of this product at each possible price

The advent of DVDs has virtually removed the market for videocassettes. This is an example of:

Creative Destruction

Examples of command economies are:

Cuba and North Korea

If the demand for farm products is price inelastic, a good harvest will cause farm revenues to:

Decrease

If the demand for product X is inelastic, a 4 percent increase of price X will:

Decrease the quantity of X demanded by less than 4 percent

Supply-side market failures occur when:

Demand and supply curves don't reflect the full cost of producing a good or service

The demand curve in a purely competitive industry is ______ while the demand curve to a single firm industry is______

Downsloping, perfectly elastic

If intermediate goods and services were included in GDP:

GDP would be overstated

Which of these is not a characteristic of the market system?

Government ownership of major industries

If a demand for a product is elastic, the value of the price elasticity coefficient is:

Greater than 1

Higher rates of unemployment are linked with:

Higher crime rates as the unemployed seek to replace lost income

A market is in equilibrium

If the amount producers want to sell is equal to the amount consumers want to buy

An antidrug policy which reduces the supply of heroin might:

Increase street crime because the addict's demand for heroin is highly inelastic

A market

Is an institution that brings together buyers and sellers

A nation's gross domestic product (GDP):

Is the dollar value of all final output produced within the borders of the nation

The four factors of production are:

Land, Labor, Capital, and entrepreneurial ability

GDP is the:

Monetary value of all final goods and services produced within the borders of a nation in a particular year.

Refer to the above diagram. A decrease in quantity demanded is depicted by a:

Move from point y to point x

The price elasticity of demand is generally:

Negative, but the minus sign is ignored

We would expect the cross elasticity of demand between dress shirts and ties to be:

Negative, indicating complementary goods

The two main characteristics of public goods are:

Nonrivalry and nonexcludability

National income accountants can avoid multiple counting by

Only counting final goods

Refer to the above diagram for a purely competitive producer. The lowest price at which the firm should produce (as opposed to shutting down) is:

P2

The basic formula for the price elasticity of demand coefficient is:

Percentage change in quantity demanded/percentage change in quantity price

Which of the following goods (with their respective income elasticity coefficients in parenthesis) will most likely suffer a decline in demand during a recession?

Plasma screen and LCD TV's

We would expect the cross elasticity of demand between Pepsi and Coke to be

Positive, indicating substitute goods

The demand curve shows the relationship between:

Price and quantity demanded

The law of demand states that, other things equal:

Price and quantity demanded are inversely related

In which of the following instances will total revenue decline?

Price rises and demand is elastic

The law of supply indicates that, other things equal:

Producers will offer more of a product at high prices than at low prices

"Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its accounting: "

Profits were zero and its economic losses were $500,000

Which of the following is most likely to be a fixed cost?

Property insurance premiums

Copyrights and trademarks are examples of

Property rights

In which of these continuums of degrees of competition (highest to lowest) is oligopoly properly placed?

Pure competition, monopolistic competition, oligopoly, pure monopoly.

In the above diagram, the range of diminishing marginal returns is:

Q1Q3

Suppose that tacos and pizza are substitutes, and that soda and pizza are compliments. We would expect and increase in the price of pizza to:

Reduce the demand for soda and increase the demand for tacos

The demand schedules for such products as eggs, bread, and electricity tend to be:

Relatively price inelastic

Refer to the above diagram. A decrease in demand is depicted by a:

Shift from D2 to D1

A leftward shift of a product supply curve might be caused by:

Some firms leaving an industry

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. Given D0, if the supply curve moved from S0 to S1, then:

Supply has decreased and equilibrium quantity has decreased.

Other things equal, which of the following might shift the demand curve for gasoline to the left?

The development of a low-cost electric automobile

A fundamental difference between the command system and the market system is that, in command systems:

The division of output is decided by central planning rather than by individuals opening freely through markets

Macroeconomics is mostly focused on:

The economy as a whole

The basic characteristic of the short run is that:

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

Implicit and Explicit costs are different in that

The former refer to non-expenditure costs and the latter to monetary payments

The elasticity of demand for a product is likely to be greater:

The greater the amount of time over which buyers adjust to a price change

For a purely competitive producer, the short-run supply curve is:

The marginal cost line greater than the average variable cost

A production possibilities curve shows:

The maximum amounts of two goods that can be produced, assuming the full use of available resources

If a firm can sell 3,000 units of product A at $10 per unit and 5,000 at $8, then:

The price elasticity of demand is 2.25

Cross elasticity of demand measures how sensitive purchases of a specific product are to changes in:

The price of some other product

Which of the following is an intermediate good?

The purchase of baseball uniforms by a professional baseball team

The Illinois Central railroad once asked the Illinois Commerse Commission for permission to increase its commuter rates by 20 percent. The railroad argued that declining revenues made this rate increase essential. Opponents of the rate increase contended that the railroad's revenues would fall because of the rate hike. It can be concluded that:

The railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic

Economics may best be defined as the

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

Suppose that corn prices rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect:

The supply to increase as farmers plant more corn.

In a purely competitive industry

There may be economic profits in the short run, but not in the long run

The market system's answer to the fundamental question "Who will get the goods and services?" is essentially:

Those willing to pay for them

The MR=MC rule applies:

To firms in all types of industries

Accounting profits equal total revenue minus

Total explicit cost

Number of workers Total Product Marginal Product 0 0 - 1 8 8 2 W 10 3 25 X 4 30 Y 5 Z 3 6 34 Refer to the above data. When two workers are employed and the value of W:

Total product is 18

Which of the following is most likely to be an inferior good?

Used clothing

Suppose the price elasticity coefficients of demand are 1.43, 0.67, 1.11, and 0.29 for products W, X, Y, and Z respectively. A 1 percent decrease in price will total revenue in the case(s) of:

W and Y

Economic systems differ according to which two main characteristics?

Who owns the factors of production, and the methods used to coordinate economic activity

The term oligopoly indicates:

a few firms producing either a differentiated or a homogeneous product.

In the short run the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm's total costs:

are $1,250

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction assumes that:

bicycles are normal goods

Marginal revenue is the

change in total revenue associated with one more unit of output

Marginal utility is the:

change in total utility obtained by consuming one more unit of a good

Command systems are also known as:

communism

The kinked-demand curve of an oligopolist is based on the assumption that:

competitors will follow a price cut but ignore a price increase

For economists, the words "utility" means:

pleasure of satisfaction

Marginal Utility can be:

positive, negative, or zero

A breakdown in price leadership leading to successive rounds of price cuts is known as:

price war

Economists contend that most economic decisions are:

purposeful