micro 2

Economists estimated that the cross-price elasticity of demand for beer and wine is -0.83 and the income elasticity of wine is 5.03. This means that

beer and wine are complements and wine is a luxury good

Under autarky, consumer surplus is represented by the area

below the demand curve and above the equilibrium price

Which of the following goods would have the most inelastic demand?

bread

Marginal cost is equal to the

change in total cost divided by the change in output

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

The selling of a product for a price below its cost of production is called

dumping

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

economies of scale

Average fixed costs of production

fall as long as output is increased

A tariff is a tax imposed by a government on its own exports.

false

In economics, technology only refers to the development of new products

false

In the alcohol industry, both wine and spirits are considered to be substitutes for beer.

false

The price elasticity of supply is calculated as the change in supply divided by the change in price.

false

The process of countries becoming more open to foreign trade and investment is known as outsourcing.

false

average total cost = average revenue

firm breaks even

Once a country has lost its comparative advantage in producing a good, its income will be ________ and its economy will be ________ if it switches from producing the good to importing it.

higher; more efficient

Price elasticity of supply is used to gauge

how responsive suppliers are to price changes.

if marginal revenue exceeds marginal cost

increase output. marginal cost adds anther unit

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 firm in perfect competition

profit=total rev- total cost, price= av rev, marginal revenue= selling 1 more unit

A numerical limit imposed by a government on the quantity of a good that can be imported into the country is called a

quota

Which of the following is an implicit cost of production?

rent that could have been earned on a building owned and used by the firm

economic profits in the short run

supply curve shifts

The processes a firm uses to turn inputs into outputs of goods and services is called

technology

The law of diminishing marginal returns states

that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline

when a perfectly competative firm finds that its market price is below the minimum average total cost

the firm shuts down

If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots, then

the price elasticity of demand for teapots is greater than 1 in absolute value.

An individual seller in perfect competition will not sell at a price lower than the market price because

the seller can sell any quantity she wants at the prevailing market price

Workers in industries protected by tariffs and quotas are likely to support these trade restrictions because

they believe the restrictions will protect their jobs

If a country has a comparative advantage in producing a product, it may not have an absolute advantage in producing that product

true

If a firm is experiencing diseconomies of scale, its long-run average cost curve is increasing

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

in a decreasing cost industry entry of new firms lowers average cost at each level of output

true

A Federal Reserve publication proclaimed that "Trade is a win-win situation for all countries that participate." This statement is

true because it refers to countries; individuals may be losers as a result of international trade

If another worker adds 9 units of output to a group of workers who had an average product of 7 units, then the average product of labor

will increase

refers to reductions in a firm's costs that result from an increase in the size of an industry.

External economies

Economists believe the most persuasive argument for protectionism is to protect infant industries. But the argument has a drawback. What is this drawback?

Protection lessens the need for firms to become productive enough to compete with foreign firms; this often results in infant industries never "growing up."

Suppose the price of gasoline is $3.50 per gallon, the quantity of gasoline demanded is 150 billion gallons per year, the price elasticity of demand for gasoline is -0.06, and the federal government decides to increase the excise tax on gasoline by $1.00 per gallon, which increases the price of gasoline by $0.75 per gallon. How much revenue does the federal government receive from the tax?

$148.27 billion

If the total cost of producing 20 units of output is $1,000 and the average variable cost is $35, what is the firm's average fixed cost at that level of output?

$15

Vipsana's Gyros House sells gyros. 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 variable cost per day when she produces 50 gyros using two workers?

$220

If four workers can produce 18 chairs a day and five can produce 20 chairs a day, the marginal product of the fifth worker is

2 chairs

Suppose the value of the price elasticity of demand is -3. What does this mean?

A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent.

Linesha, a college student working part-time receives a wage increase. An avid movie buff, she increased her purchases of Blu-ray discs and reduced her purchases of DVDs. Based on this information

Blu-ray discs are normal goods and DVDs are inferior goods

is the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors.

Comparative Advantage

Jonah lives in a small town where there is only one Mexican restaurant. Which of the following is likely to be true about the price elasticity of demand for meals at the Mexican restaurant?

Demand is likely to be relatively inelastic

Assume that the demand curve for sunblock is linear and downward sloping. Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock are true?

The slope is constant, but the price elasticity of demand is not constant at all points along the demand curve for sunblock

characteristic of a perfectly competitive market structure

There are a very large number of firms that are small compared to the market. All firms sell identical products.There are no restrictions to entry by new firms.

In the long run which of the following is true?

There are no fixed costs

a perfectly competative firm ears profit when the price is

above minimum average total cost

A characteristic of the long run is

all inputs can be varied

A situation in which a country does not trade with other countries is called

autarky

explicit cost

involves spending money

A perfectly competitive firm has to charge the same price as every other firm in the market. Therefore, the firm

is a price taker

A firm has successfully adopted a positive technological change when

it can produce more output using the same inputs

if a firm in a perfectly competative industry is incurring losses

it will exit in the long run, causing market supply to decrease and market price to rise for others

a firm can stay alive without earning profit as long as

marginal revenue is greater than average variable cost

The price of a seller's product in perfect competition is determined by

market demand and market supply

The larger the share of a good in a consumer's budget, holding everything else constant, the

more price elastic is a consumer's demand

implicit cost

non-monetary opportunity cost

if a firm sells a product above the prevailing market price

output will increase in the long run

Which of the following is a fixed cost?

payment to hire a security worker to guard the gate to the factory around the clock

Cross-price elasticity of demand is calculated as the

percentage change in quantity demanded of one good divided by percentage change in price of a different good