AGB 144 Final Exam Sudbrock

The amount of calendar time associated with the long run is?

Different from industry to industry

National income accountants can avoid multiple counting by?

Only counting final goods

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

Positive because they are substitute goods

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

Price war

A market failure is said to occur when:

Private markets do not allocate their resources in the most economically desirable way leading to inefficiencies

Economics may best be defined as a:

Social science concerned wit how individuals, institutions, and society make optimal choices under conditions of scarcity

If intermediate goods and services were included in GDP:

The GDP would be overstated

Demand side market failures occur when?

The demand and supply curves don't reflect consumers full willingness to pay for a good or service

The free rider problem causes what?

The demand for a public good to be non-existent

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

What is macro-economics 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 capacity

Why is the demand curve sloped downward?

The law of diminishing marginal utility

Which of the follow is a final good?

The purchase of the book for this class by a student

A dilemma in regulating monopolies is:

The regulated price that achieves allocative efficiency is also likely to result in a loss

Which of the following is an example of a public good?

Weather warning system

What 2 characteristics make economic system differ?

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

Are positive and negative externalities examples of market failures?

Yes

Is a public good an example of market failure?

Yes

The pruce elasticity of demand coefficient measures:

a buyers responsiveness to price changes

Fixed cost is:

any cost which does not change when the firm changes its output

law of diminishing marginal utility states that:

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

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

bicycles are a normal good

What does a market do?

bring together buyers and sellers

The demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is ______.

downsloping, perfectly elastic

What is an example of a quasi-public good?

education

The MR=MC rules applies to:

firms in all industries

If 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.

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

increase demand for tacos and lower demand for soda

Entrepreneurs in purely competitive industries do what?

innovate to lower operating costs and generate short run economic profits

Monopolistic competition is characterized by:

large number of firms and low entry barriers

An anti drug policy which reduces the supply of heroin might:

might increase street crime because the addicts demand for heroin is price inelastic

We would expect the cross elasticity of demand between dress shirts and ties to be what? why?

negative because they are complementary goods

The price elasticity of demand is generally:

negative, but the minus sign is ignored

At a monopolies profit maximizing output, a pure non discriminating monopolist achieves

neither productive efficiency or allocative efficiency

The 2 main characteristics of a public good are:

non rivalry and non-excludability

Marginal utility can be?

positive, negative, or zero

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

Which of the following instances will total revenue decline?

price rises and demand is elastic

What is not a characteristic of pure competition?

price strategies by firms

The law of supply indicates that, other things equal:

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

What would be considered a fixed cost?

property insurance premiums

Copyrights and trademarks are examples of:

property rights

Which of the following is an intermediate good or service?

purchase of the paper used to print the book for this course

Econimists contend that most economic decisions are:

purposeful

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

relatively price inelastic

An increase in income will shift the budget line to the:

right

Another word for utility is:

satisfaction, happiness

The economic purpose of profits and losses is to:

signal how resources should be used

A leftward shift of a production supply curve might be caused by what?

some firms leaving an industry

A nation's gross domestic product (GDP) can be found by?

summing up C+Ig+G+Xn-

A market is in equilibrium when:

the amount of quantity demanded = the amount of quantity supplied

What is game theory?

the analysis of how people behave in strategic situations

Marginal cost is defined as:

the change in total cost that results from producing one or more unit of output

Marginal revenue is

the change in total revenue associated with producing one more unit of output

Supply side failures occur when?

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

The 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 individuals operating freely throughout markets

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:

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

Cross elasticity of demand measures how sensitive purchases of a specific produce are changes in

the price of some other product

The Illinois railroad once asked the commerce commission for permission to increase its commuter rates by 20%. The railroad argued that declining revenues made this rate increase essential while opponents of the rate increase contended that the railroads revenue would fall because of the rate hike. It can be concluded that:

the railroad felt the demanded for passenger service was inelastic

Utility is defined as:

the satisfaction from consuming a good

Account profits equal total revenue minus:

total explicit cost

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

used clothing

People watching outdoor holiday light shows, and would pay to see the light shows, but can't be made to pay is an example of?

A demand side market failure

Unemployment is defined as?

A person who is willing to work, actively seeking to work, but cannot find a job

A purely competitive seller is:

A price taker

For a purely competitive seller, price equals:

AR, MR, TR

What industry most closely approximates pure competition?

Agriculture

The main determinant of elasticity of supply is the:

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

OPEC is an example of?

An international, legal, cartel

A pure monopoly will maximize profits by producing at output where

MR=MC

A purely competitive firm cannot do what in the long run?

Make economic profit

You should decide to buy a laptop

Marginal benefit is greater than marginal cost

GDP is the?

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

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

Inflation is defined as?

Increase in the overall level of prices

What are the 4 factors of production?

Land, labor, capital, and entrepreneurial ability

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

% change in quantity demand / % change in price

Why can pure monopolies obtain economic profits in the long run?

Barriers to entry

If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then:

More firms will enter into the market

Suppose that corn prices rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect: A. the supply of ethanol, a corn-based product, to increase. B. consumer demand for wheat to fall. C. the supply to increase as farmers plant more corn. D. the supply to fall as farmers plant more of other crops.

C. The supply to increase as farmers plant more corn

What is another word for market systems?

Capitalism

What is a distinguished feature of a command system?

Central planning

Government ownership of resources and major industries is a central characteristic of what economic system?

Command System

Another word for a command system is?

Communism

The creation of DVDs has virtually removed the market for videocassettes. This is an example of?

Creative destruction

The process where new firms and new products replace existing dominant firms or products is called?

Creative destruction

What are examples of command economies?

Cuba, North Korea, China

What is a unique feature of an oligopoly?

Mutual interdependance

Marginal utility is the:

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

What strategy is unlikely to lead to long term profits for oligopolies?

competing solely on price

The kinked demand curve of an oligopoly is based on the assumption that?

competitors will follow a price cut but ignore a price increase

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

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 in the price of X will:

decrease the quantity of x demanded by less than 4%

The relationship between quantity supplied and price is _________ and the relationship between quantity demanded and price is _______ ?

direct, inverse