Econ Midterm 2

In the above table, what is Kim's total utility maximizing point? a. 0 movies, 8 yoga classes b. 1 movie, 5 yoga classes c. 2 movies, 2 yoga classes d. 3 movies, 0 yoga classes

b. 1 movie, 5 yoga classes

Consider a budget constraint model with two goods X and Y. Suppose X is an inferior good, and the price of Y decreases. The substitution effect says we'll demand _____ of good X, while the income effect says we'll demand ____ of good X. a. more; more b. less; less c. more; less d. less; more

b. less; less

Under perfect competition, any profit-maximizing producer faces a market price equal to its a. average costs b. marginal costs c. total costs d. variable costs

b. marginal costs

The term ____ refers to the additional utility provided by one additional unit of consumption. a. total utility b. marginal utility c. marginal revenue d. budget constraint

b. marginal utility

The ____ arises when a price changes because consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price. a. income effect b. substitution effect c. backward-bending supply curve d. budget constraint

b. substitution effect

The price elasticity of demand measures the: a. responsiveness of quantity demanded to a change in quantity supplied b. responsiveness of price to a change in quantity demanded c. responsiveness of quantity demanded to a change in price d. responsiveness of quantity demanded to a change in income

d. long run; increasing its production; fall

Which of the following is true with regard to a firm whose profit maximizing price lies below its average variable costs? a. the firm is making profit b. the firm is incurring losses but stays in the market to recuperate losses from fixed costs c. in the long run they stay in the market in anticipation of prices falling d. the firm leaves the market immediately

d. the firm leaves the market immediately

The term _____ describes a situation where a _____ causes a reduction in the consumer's buying power. a. substitution effect, lower price b. substitution effect, higher price c. income effect, higher price d. income effect; lower price

c. income effect, higher price

Even with wage increases, the supply curve of labor is most often inelastic for which of the following? a. part-time workers b. full-time workers c. lawyers d. massage therapists

c. lawyers

_______ arises where many firms are competing in a market to sell similar but differentiated products. a. oligopolistic competition b. perfect competition c. monopolistic competition d. a monopoly

c. monopolistic competition

Which of the following is true for a perfectly competitive firm in the market above? a. the firm sets price above marginal cost b. the firm makes economic profit c. the firm will shut down and leave the market immediately d. the firm has no fixed costs

b. the firm makes economic profit

Kim has $24 per week in her entertainment budget. She splits her time between going to the movies and yoga classes. Each movie costs $8 while each yoga class costs $3. The total utility from each of these activities is set out in the table below. What is Kim's marginal utility from moving from 6 yoga classes to 7 yoga classes? a. 114 b. 116 c. 1 d. 2

d. 2

Todd is a cattle rancher. In June and July, he spent his clothing budget on jeans and cowboy hats. Each pair of jeans cost $50 and each hat cost $100. At Todd's optimal choice, his marginal utility from the last pair of jeans purchased is 200. This means that his marginal utility from the last cowboy hat purchased is: a. 550 b. 500 c. 450d . 400

d. 400

In order to determine _______ , the firm's total costs must be divided by the quantity of its output. a. diminishing marginal returns b. fixed costs c. variable cost d. average cost

d. average cost

The term _________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product. a. price maker b. marginal revenue c. price taker d. marginal cost

c. price taker

Refer to the diagram above. What is the significance of the point marked L1 at the bottom upward-sloping portion of the individual labor supply (2) curve? a. as wages increase over this range, the quantity of hours worked also increases b. as wages increase over this range, the quantity of hours worked changes very little c. as wages increase over this range, the quantity of hours worked actually decreases d. as wages increase of this rage, the quantity of hours worked is inelastic

a. as wages increase over this range, the quantity of hours worked also increases

A firm's ___________ consist of expenditures that must be made before production starts that typically, over the short run, _______________ regardless of the level of production. a. fixed costs; do not change b. variable costs; are constantly changing c. fixed costs; are consistently changing d. variable costs; do not change

a. fixed costs; do not change

Which of the following is considered to be a tell-tale signal that the point with the highest total utility has been found? a. the marginal utility per dollar is the same for both goods b. total utility exceeds 100 units c. marginal revenue is equal to marginal cost d. the demand curves are relatively elastic

a. the marginal utility per dollar is the same for both goods

________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price .a. total revenue b. total profits c. average profit margin d. total cost

a. total revenue

The typical pattern revealed in a budget constraint model shows that as the quantity consumed rises, a. total utility rises, but marginal utility approaches zero b. marginal utility approaches marginal cost c. total utility decreases, but marginal utility rises d. total utility rises at an increasing rate

a. total utility rises, but marginal utility approaches zero

In economics, a firm that faces no competitors is referred to as ______ a. an oligopoly b. a monopoly c. a perfect competitor d. monopolized competitor

b. a monopoly

Consider the budget constraint mode with two goods X and Y. A(n) ________ leads to a shift of the budget constraint inward: a. increase in income b. decrease in income c. increase in price of X and/or decrease in price of Y d. increase in price of Y and/or decrease in price of X

b. decrease in income

Economic profit can be derived from calculating total revenues minus all of the firm's costs. a. excluding its opportunity costs b. including its opportunity costs c. including its marginal revenue d. excluding its marginal revenue

b. including its opportunity costs

Which of the following market structures will likely exist if market demand is less than the bottom of the long run average cost curve? a. perfect competition b. monopoly c. monopolistic competition d. command economy

b. monopoly

The marginal cost curve is generally _________, because diminishing marginal returns implies that additional units are ________ a. downward-sloping; more costly to produce b. upward-sloping; more costly to produce c. downward-sloping; less costly to produce d. upward-sloping; less costly to produce

b. upward-sloping; more costly to produce

Which of the following is not true with regard to perfectly competitive markets in the long run? a. long run average costs are minimized b. price intersects marginal cost at the same point that marginal cost intersects average cost c. variable costs exceed fixed costs d. firms make zero accounting profit

d. firms make zero accounting profit