micro economics

If the government levies a $500 tax per car on sellers of cars, then the price received by sellers of cars would

decrease by less than $500.

A leftward shift of a supply curve is called a(n)

decrease in supply.

As a monopolist increases the quantity of output it sells, the price consumers are willing to pay for the good

decreases.

Total surplus is represented by the area below the

demand curve and above the supply curve, up to the equilibrium quantity.

Which of the following is not an example of a public policy?

equilibrium laws

Suppose the US and Mexico both produce semiconductors and auto parts and the US has a comparative advantage in semiconductors while Mexico has a comparative advantage in auto parts. Also suppose the US has an absolute advantage in the production of both semiconductors and auto parts. The US should

export semiconductors to Mexico and import auto parts from Mexico.

The long-run average total cost curve is always

flatter than the short-run average total cost curve, but not necessarily horizontal.

When firms are faced with making strategic choices in order to maximize profit, economists typically use

game theory to model their behavior.

The producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers to produce the same amount of that good,

has an absolute advantage in the production of that good.

If the government removes a binding price ceiling from a market, then the price paid by buyers will

increase, and the quantity sold in the market will increase.

Equilibrium quantity must increase when demand

increases and supply does not change, when demand does not change and supply increases, and when both demand and supply increase.

Externalities tend to cause markets to be

inefficient.

A dominant strategy is one that

is best for the player, regardless of what strategies other players follow.

An economy's production of two goods is efficient if

it is impossible to produce more of one good without producing less of the other.

The slope of a steep upward-sloping line will be a

large positive number.

When quantity demanded decreases at every possible price, the demand curve has

shifted to the left.

Which of the following would be the most likely result of a binding price ceiling imposed on the market for rental cars?

slow replacement of old rental cars with newer ones

An example of a perfectly competitive market would be the market for

soybeans.

The forces that make market economies work are

supply and demand.

A tariff is a

tax on an imported good.

If a country allows trade and, for a certain good, the domestic price without trade is lower than the world price,

the country will be an exporter of the good.

A surplus exists in a market if

the current price is above its equilibrium price.

If a price ceiling is not binding, then

the equilibrium price is below the price ceiling.

A downward-sloping demand curve illustrates

the law of demand.

Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that

the nation is not using all available resources or is using inferior technology or both.

Honey producers provide a positive externality to orchards because

the orchard owner does not have to purchase bees to pollinate his flowers.

If the demand for a product increases, then we would expect equilibrium price

to decrease and equilibrium quantity to increase.

Governments can grant private property rights over resources that were previously viewed as public, such as fish or elephants. Why would governments want to do so?

to prevent overuse

For a monopoly, the level of output at which marginal revenue equals zero is also the level of output at which

total revenue is maximized.

Taxes on labor have the effect of encouraging

unscrupulous people to take part in the underground economy.

If a tax is levied on the sellers of a product, then there will be a(n)

upward shift of the supply curve.

When two variables move in the same direction, the curve relating them is

upward sloping, and we say the variables are positively related.

To measure the gains and losses from a tax on a good, economists use the tools of

welfare economics.

An economy's production possibilities frontier is also its consumption possibilities frontier

when the economy is self-sufficient.

A cost-benefit analysis of a highway is difficult to conduct because analysts

will have difficulty estimating the value of the highway.

The maximum price that a buyer will pay for a good is called the

willingness to pay.

Economists, like mathematicians, physicists, and biologists,

- make use of the scientific method. - try to address their subject with a scientist's objectivity. - devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories.

Which of the following is not an assumption of the productions possibilities frontier?

There is a fixed quantity of money.

Assume a firm in a competitive industry is producing 800 units of output, and it sells each unit for $6. Its average total cost is $4. Its profit is

$1,600.

Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 5 bushels of corn or 50 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. If the two countries do not trade, Cornland will produce and consume 400 bushels of corn and 100 bushels of oats, while Oatland will produce and consume 60 bushels of corn and 400 bushels of oats. If each country made the decision to specialize in producing the good in which it has a comparative advantage, then the combined yearly output of the two countries would increase by

340 bushels of corn and 500 bushels of oats.

Which of the following statements is not correct?

Average fixed costs are constant.

Which of the following statements is correct?

Buyers determine demand, and sellers determine supply.

The commercial value of ivory is a threat to the elephant, but the commercial value of beef is a guardian of the cow. This is because

cows are private goods, while elephants tend to roam freely without owners.

Suppose Jim and Tom can both produce baseball bats. If Jim's opportunity cost of producing baseball bats is lower than Tom's opportunity cost of producing baseball bats, then

Jim has a comparative advantage in the production of baseball bats.

Which of these statements about economic models is correct?

For economists, economic models provide insights about the world. Economic models are built with assumptions. Economic models are often composed of equations and diagrams.

Which of the following is not an example of a market?

In the United States, a sick person cannot legally purchase a kidney.

Which of the following equations is valid?

Producer surplus = Total surplus - Consumer surplus

Consumer surplus is equal to the

Value to buyers - Amount paid by buyers.

If a tax shifts the supply curve downward (or to the right), we can infer that the tax was levied on

We cannot infer anything because the shift described is not consistent with a tax.

The market for corn in Wheatland consists solely of domestic buyers of corn and domestic sellers of corn if

Wheatland forbids international trade in corn.

Which of the following statements is correct?

When oligopoly firms collude, they are behaving as a cartel.

A situation in which firms choose their best strategy given the strategies chosen by the other firms in the market is called

a Nash equilibrium.

Rent-control laws dictate

a maximum rent that landlords may charge tenants.

Trade can make everybody better off because it

allows people to specialize according to comparative advantage.

A law that encourages market competition by prohibiting firms from gaining or exercising excessive market power is

an antitrust law.

A competitive market is one in which there

are so many buyers and so many sellers that each has a negligible impact on the price of the product.

Economic models are built with

assumptions.

For a monopoly,

average revenue exceeds marginal revenue.

Suppose you make jewelry. If the price of gold falls, then we would expect you to

be willing and able to produce more jewelry than before at each possible price.

A price ceiling will be binding only if it is set

below the equilibrium price.

When a good is taxed,

both buyers and sellers of the good are made worse off.

When a buyer's willingness to pay for a good is equal to the price of the good, the

buyer is indifferent between buying the good and not buying it.

Price controls

can generate inequities of their own.

The production possibilities frontier is a graph that shows the various combinations of output that an economy

can produce.

A binding minimum wage tends to

cause a labor surplus. cause unemployment. have the greatest impact in the market for teenage labor.

A legal maximum on the price at which a good can be sold is called a price

ceiling

Specialization and trade are closely linked to

comparative advantage.

When describing the opportunity cost of two producers, economists use the term

comparative advantage.

Economies of scale occur when

long-run average total costs fall as output increases.

A tax imposed on the sellers of a good will

lower both the price buyers pay and the effective price sellers receive.

Economists build economic models by

making assumptions.

Willingness to pay

measures the value that a buyer places on a good.

For a monopolist, when does marginal revenue exceed average revenue?

never

A competitive market is a market in which

no individual buyer or seller has any significant impact on the market price.

In a market economy, supply and demand are important because they

play a critical role in the allocation of the economy's scarce resources. determine how much of each good gets produced. can be used to predict the impact on the economy of various events and policies.

A demand schedule is a table that shows the relationship between

price and quantity demanded.

Property rights are well established for

private goods.

Unemployment would cause an economy to

produce inside its production possibilities frontier.

The benefit to sellers of participating in a market is measured by the

producer surplus.

Markets do not ensure that the air we breathe is clean because

property rights are not well established for clean air.

The slope of a line is equal to

rise divided by run.