micro 2314 Joni Charles Final review

Given linear demand curves, if demand and supply increase by identical amounts, then:

the equilibrium price stays the same and the equilibrium quantity rises.

Given linear demand curves, if demand increases and supply decreases, then

the equilibrium price will increase but the effect on the equilibrium quantity will be ambiguous

If the number of people in a publishing company does not go up or down with the quantity of books it publishes, then how should we categorize the salaries and benefits paid to these employees?

as part of a fixed cost

Increases in the price of a firm's output cause the demand for labor curve to __________, which leads to __________ in the equilibrium wage and __________ in the equilibrium number of workers employed.

increase, an increase, an increase

Which of the following will cause an outward (rightward) shift in supply?

A technological improvement.

Let MP = marginal product, P = output price, and W = wage, then the equation that represents the condition where a competitive firm would hire another worker is A. P × MP > W. B. P × W > MP. C. P × MP = W. D. P × MP W.

A. P × MP > W.

A firm's demand for labor increases and its demand curve for labor shifts rightward if A. an advance in technology increases the marginal product of labor. B. the wage rate falls. C. the price of its product falls. D. its value of marginal product decreases.

A. an advance in technology increases the marginal product of labor.

A decrease in the wage rate causes: A. an increase in the quantity of labor demanded. B. a leftward shift of the firm's labor demand curve. C. a rightward shift of the firm's labor demand curve. D. a decrease in labor's productivity.

A. an increase in the quantity of labor demanded.

For a firm in a perfectly competitive market, price is A. equal to both average revenue and marginal revenue. B. less than both average revenue and marginal revenue. C. equal to average revenue but greater than marginal revenue. D. greater than marginal revenue but less than average revenue.

A. equal to both average revenue and marginal revenue.

Relative to a competitively organized industry, a monopoly A. less output, charges higher prices and, earns economic profits. B. more output, charges higher prices and, earns economic profits. C. less output, charges lower prices and, earns only a normal profit. D. less output, charges lower prices and, earns economic profits.

A. less output, charges higher prices and, earns economic profits.

Relative to a perfectly competitive market with the same cost and demand, a single-price monopolist produces ________ output and has a ________ price. A. less; higher B. more; lower C. more; higher D. less; lower

A. less; higher

DeBeers' diamond monopoly results from A. ownership of a scarce factor of production. B. economies of scale. C. a government franchise. D. a patent.

A. ownership of a scarce factor of production.

Marginal revenue is A. the change in total revenue divided by the change in the quantity of output. B. the change in total revenue divided by the change in total cost. C. the change in profit divided by the change in the quantity of output. D. total revenue divided by the total quantity of output.

A. the change in total revenue divided by the change in the quantity of output.

Willingness to pay measures A. the maximum price that a buyer is willing to pay for a good. B. the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept for the good. C. the maximum price a buyer is willing to pay minus the minimum price a seller is willing to accept. D. the maximum price a buyer is willing to pay for a product minus the amount the buyer actually pays for it.

A. the maximum price that a buyer is willing to pay for a good.

In a monopoly, the market demand curve is A. the same as the demand curve facing the firm. B. nonexistent. C. the summation of all the individual firmʹs cost curves. D. the marginal cost curve above minimum average variable cost.

A. the same as the demand curve facing the firm.

You would be willing to pay a maximum of $50 to attend a concert, and you can buy a ticket for $30. Your consumer surplus is A. $10. B. $20 C. $30. D. $50.

B. $20

The ________ effect means that, other things remaining the same, the higher the wage rate, the less time people will spend working and the more time people will spend at leisure. A. substitution B. income C. price D. labor

B. Income

The fundamental force that drives international trade is A. absolute advantage. B. comparative advantage. C. importation duties and tariffs. D. export licenses.

B. comparative advantage.

A president of the United States promises to produce more defense goods without any decreases in the production of other goods. This promise can be valid A. if the United States is producing at a point on its production possibilities frontier. B. if the United States is producing at a point inside its production possibilities frontier. C. if the United States is producing at a point beyond its production possibilities frontier. D. only if the production possibilities frontier shifts rightward.

B. if the United States is producing at a point inside its production possibilities frontier.

Peter's monthly income increases from $1,500 to $1,600. As a result, he increases the number of DVDs he buys per month from 2 to 3. Peter's demand for DVDs is A. price elastic. B. income elastic. C. income inelastic. D. price inelastic.

B. income elastic.

Relative to a competitively organized industry, a monopoly is more likely to produce A. more output, charges higher prices, and earns economic profits. B. less output, charges higher price, and earns economic profits. C. less output, charges lower prices, and earns economic profits. D. less output, charges lower prices, and earns only a normal profit.

B. less output, charges higher price, and earns economic profits.

A profit-maximizing monopolist will produce the level of output where A. marginal revenue is zero. B. marginal revenue equals marginal cost. C. price equals marginal cost. D. marginal cost is minimized.

B. marginal revenue equals marginal cost.

Compared to a single-price monopoly, a perfectly competitive market with the same costs produces ________ output and has a ________ price. A. more; higher B. more; lower C. less; lower D. less; higher

B. more; lower

Harry produces 2 balloon rides and 4 boat rides an hour. Harry could produce more balloon rides but to do so he must produce fewer boat rides. Harry is ________ his production possibilities frontier. A. producing inside B. producing on C. producing outside D. producing either inside or on

B. producing on

For a monopolist to sell more units of output, A. the other competing firms must sell fewer units. B. the price must be reduced. C. the price must be increased. D. demand must become more elastic.

B. the price must be reduced.

In a graph that illustrates a perfectly competitive firm, marginal revenue is A. a line that intersects the firm's average total cost curve from below at its lowest point. B. the same as the firm's demand curve. C. a diagonal line that lies below the firm's demand curve. D. a line that intersects the firm's demand curve from below at its lowest point.

B. the same as the firm's demand curve.

Suppose market demand and supply curves are linear and the market price settles to the equilibrium level. We can calculate the cumulative consumer surplus as the area of a ________. A. square B. triangle C. rectangle D. circle

B. triangle

If the market price is $25, the average revenue of selling five units is A. $5. B. $12.50. C. $25. D. $125.

C. $25.

If the market price is $40 in a perfectly competitive market, the marginal revenue from selling the fifth unit is A. $8. B. $20. C. $40. D. $200.

C. $40

If the market price is $40, the average revenue of selling five units is A. $8. B. $20. C. $40. D. $200.

C. $40

The total of consumer plus producer surplus is ________ at the market equilibrium. A. zero B. smallest C. greatest D. negative

C. Greatest

Mark Frost grows apples in a perfectly competitive market. If we drew a line in a graph that illustrates Mark's total revenue from selling apples, it would be A. a horizontal line. B. a curve that is negatively sloped at low levels of output and positively sloped at higher levels of output. C. a straight, upward-sloping line. D. a straight, downward-sloping line.

C. a straight, upward-sloping line.

The area ________ the market supply curve and ________ the market price is equal to the total amount of producer surplus in a market. A. below; above B. below; below C. above; below D. above; above

C. above; below

An increase in the demand for orthodontic services leads to A. lower prices for orthodontic care. B. a rise in the rates of dental insurance C. an increase in the demand for orthodontists. D. an increase in the supply of orthodontists.

C. an increase in the demand for orthodontists.

Because leisure is a normal good, an increase in the wage rate will result in A. a decrease in the quantity of labor supplied because of the substitution effect and an increase in the quantity of labor supplied because of the income effect. B. an increase in the quantity of labor supplied because of the substitution effect. At low wages the income effect causes an increase in the quantity of labor supplied, but at high wages the income effect causes a decrease in the quantity of labor supplied as the wage rises. C. an increase in the quantity of labor supplied because of the substitution effect and a decrease in the quantity of labor supplied because of the income effect. D. an increase in the quantity of labor supplied because of both the substitution effect and the income effect.

C. an increase in the quantity of labor supplied because of the substitution effect and a decrease in the quantity of labor supplied because of the income effect.

Why does a monopoly cause a deadweight loss? A. because it increases producer surplus at the expense of consumer surplus B. because it does not produce some output for which demand exceeds supply C. because it does not produce some output for which marginal benefit exceeds marginal cost D. because it appropriates a portion of consumer surplus for itself

C. because it does not produce some output for which marginal benefit exceeds marginal cost

International trade arises from A. absolute advantage. B. the advantage of execution. C. comparative advantage. D. importation duties.

C. comparative advantage.

The difference between the maximum amount a person is willing to pay for a good and its current market price is known as A. producer surplus B. profits. C. consumer surplus. D. revealed preferences.

C. consumer surplus.

For a monopolist, price A. is less than marginal revenue. B. can be greater than or less than marginal revenue. C. is greater than marginal revenue. D. equals marginal revenue at all output levels.

C. is greater than marginal revenue.

The marginal revenue curve for a perfectly competitive firm A. is downward-sloping. B. is perfectly inelastic. C. is the same as its demand curve. D. is the same as its marginal cost curve.

C. is the same as its demand curve.

The wage rate is the opportunity cost of A. consumption. B. working. C. leisure. D. working overtime.

C. leisure.

One difference between perfectly competitive markets and single-price monopoly markets is that A. marginal cost equals average variable cost for perfectly competitive firms but not for monopolists. B. marginal revenue equals marginal cost for perfectly competitive firms, but not for monopolists. C. marginal revenue equals price for perfectly competitive firms, but not for single-price monopolists D. All the above answers are correct.

C. marginal revenue equals price for perfectly competitive firms, but not for single-price monopolists

Paul goes to Sportsmart to buy a new tennis racquet. He is willing to pay $200 for a new racquet, but buys one on sale for $125. Paul's consumer surplus from the purchase is A. $325 B. $200 C. $125 D. $75

D. $75

At one point along a PPF, 10 pizzas and 7 sandwiches can be produced. At another point along the same PPF, 9 pizzas and 10 sandwiches can be produced. The opportunity cost of a pizza between these points is ________ per pizza. A. 7/10 of a sandwich B. 10/7 of a sandwich C. 1/3 of a sandwich D. 3 sandwiches

D. 3 sandwiches

While producing on the production possibilities frontier, if additional units of a good could be produced at a constant opportunity cost, the production possibilities frontier would be A. bowed outward. B. bowed inward. C. positively sloped. D. a straight line.

D. a straight line.

Comparative advantage means the ability to produce a good or service A. at a lower selling price than any other producer. B. at a higher profit level than any other producer. C. of a higher quality than any other producer. D. at a lower opportunity cost than any other producer.

D. at a lower opportunity cost than any other producer.

A ________ prevents new firms from entering and competing in a monopolistic industry. A. market power sharing agreement B. cartel agreement C. collusive agreement D. barrier to entry

D. barrier to entry

The market supply curve for labor is A. perfectly inelastic if leisure is an inferior good. B. derived from the market supply curve for the output produced with labor. C. determined by adding up the wages each worker is willing to work for at a given quantity supplied, holding constant all other variables that affect the willingness of workers to supply labor. D. determined by adding up the quantity of labor supplied by each worker at each wage, holding constant all other variables that affect the willingness of workers to supply labor.

D. determined by adding up the quantity of labor supplied by each worker at each wage, holding constant all other variables that affect the willingness of workers to supply labor.

Comparative advantage implies that a country will A. find it difficult to conclude free trade agreements with other nations. B. export goods produced by domestic industries with low wages relative to its trading partners. C. import those goods in which the country has a comparative advantage. D. export those goods in which the country has a comparative advantage.

D. export those goods in which the country has a comparative advantage.

Compared to perfect competition, the consumer surplus in a monopoly A. is unchanged because price and output are the same. B. is higher because price is higher and output is the same. C. is eliminated. D. is lower because price is higher and output is lower

D. is lower because price is higher and output is lower

The price elasticity of demand for oil is estimated at 0.05. This value means a 10 percent increase in the A. quantity of oil demanded will result from a 0.5 percent increase in the price of oil. B. price of oil will increase the quantity of oil demanded by 0.5 percent. C. quantity of oil demanded will result from a 0.5 percent decrease in the price of oil. D. price of oil will decrease the quantity of oil demanded by 0.5 percent.

D. price of oil will decrease the quantity of oil demanded by 0.5 percent.

The difference between the minimum amount a firm is willing to accept for a good and its current market price is known as A. the paradox of value. B. consumer surplus. C. profits. D. producer surplus.

D. producer surplus.

For a perfectly competitive firm, average revenue is equal to A. total revenue. B. marginal cost. C. average fixed cost. D. the market price.

D. the market price

Which of the following best describes how the product differentiation of monopolistically competitive firms may benefit consumers?

Product differentiation can locate firms more conveniently to consumers and offer versions of a product or service that better fits their needs.

Minimum efficient scale is the level of output at which:

all economies of scale have been exhausted

If the labor demand is unchanged, an increase in the labor supply will __________ the equilibrium wage and __________ the number of workers employed.

decrease, increase

In a price system:

relative prices change constantly to reflect changes in supply and demand.

Because the monopolist faces a downward sloping demand curve

there will be dead-weight loss