Micro Final
Block's sells 500 bottles of perfume a month when the price is $7. A huge increase in resource costs causes price tor is to $9 and Block's only manages to sell 460 bottles of perfume. The price elasticity of demand is:
.33 and inelastic
At a price of $20 per unit, 140 units of goods are demanded and 100 units are supplied. When the price is raised to $30 per unit, 100 units are demanded and 140 units are supplied. The price elasticity of supply in this range is:
.834
If price declines from $450 to $350 and, as a result, quantity demanded rises from 1200 to 1500, price elasticity of demand is:
.89
Suppose a consumer has an income of $16, the price of A is $2, and the price of B is $1. Which combination is on the consumer's budget line?
5A and 6B
Successful price discrimination requires that:
Buyers with inelastic demand be chargers higher prices than buyers with elastic demand.
How do worker typically express self-interest?
By seeking jobs with the best combination of wages and benefits.
"Rivalry" in consumption means that:
When one person buys a good, it is not available for another person to buy.
In the circular flow model consisting of the household sector, the business sector, product markets, and resource markets:
businesses are sellers of products
In the circular flow model, households:
buy products and sell resources.
From an economic perspective, when consumers leave a food restaurant because the lines to be served are too long, they have concluded the:
marginal cost of waiting is greater than the marginal benefit of being served.
From an economist's point of view, costs:
may or may not involved monetary outlays
Which is not considered to be an economic resource?
money
Elasticity of supply will increase when:
it becomes easier to substitutes one factor of production for another in a manufacturing process.
The upward slope of the supply curve reflects the:
law of supply
One reason that the quantity demanded of a good increased when its price falls is that the:
lower price increases the real incomes of buyers, enabling them to buy more.
The primary goal of economic activities is to:
make the most efficient use of scarce productive resources.
Other things equal, if the price of a key resource is used to product product x falls, the:
product supply curve of x will shift to the right
The simple circular flow model shows that workers, entrepreneurs, and the owners of land and capital offer their services through:
resource markets
If an economy is producing at a point inside a production possibilities curve:
resources are unemployed.
The price elasticity of demand is a measure of the:
responsiveness of quantity demanded to a change in price.
The purpose of the ceteris paribus assumption used in economic analysis is to:
restrict the analysis to the effect of a single economic factor.
Over half of US consumer expenditures are for what?
services
The market demand curve for a public good:
shows the total value that all individuals place on each unit of the good
Economists distinguish between the short run and the long run by nothing that:
some inputs cannot be varied in the short run.
In 2007 the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are
substitute goods and the higher price for oil increased the demand for natural gas
Market failures occur when:
the competitive market system under-or over-allocates resources to production of goods
Graphically, the market demand curve is:
the horizontal sum of individual demand curves
Microeconomics focuses on;
the individual units that make up the whole of the economy
In presenting the model of a demand curve, economits presume the most important variable in determining the quantity demanded is:
the price of the product itself
If there is a shortage of product X:
the price of the product will rise.
The process of developing hypotheses, testing them against facts, and using the results to construct theories is called:
the scientific method
Competition is more likely to exist when:
there is free entry into and exit out of industries
Macroeconomics focuses on:
total output and the general level of prices in the economy
Which is not one of the four fundamental questions?
what goods and services should be produced by government?
Which is an illustration of a microeconomic question?
will a new type of television set increase the number of buyers?
The principle-agent problem in corporations arises from:
A conflict of interest between corporate executives who manage the firm and stockholders who own the firm.
A rightward shift in the demand curve for product C might be caused by:
A decrease in the price of a product that is complementary to c
A conglomerate is:
A firm that owns plants in different markets and industries.
What is an example of a short-run adjustment?
A local bakery hires two additional bakers
What is an example of price discrimination?
A major airline sells tickets to senior citizens at a lower price than to other passengers.
One feather of a pure monopoly is that the monopolist is:
A price maker
For which of the following good would you most likely observe the characteristic of excludability?
A professional baseball game.
What expresses the law of diminishing returns?
A successive amount of one resource (labor) are added to fixed amounts of other resources (capital), beyond some point the resulting extra output will decline.
A group of three plants that is owned and operated by a single firm and that consists of a farm growing wheat, flour-milling, and a bakery i an example of:
A vertically integrated firm
The law of diminishing returns indicated that:
As extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.
Once a government has provided a public good, everyone:
Can obtain the benefits
Economic cost can best be defined as:
Compensations that must be received by resource owners to ensure their continues supply.
The legal concept of limited liability is important in which of the following types of business organizations?
Corporations
Which is an example of a negative externality?
Decreased property values in a neighborhood where several houses are burglarized.
Suppose that a monopolist calculated that a present output and sales, marginal cost is 1.00 and marginal revenue is 2.00. He could maximize profits by:
Decreasing price and increasing output.
From the economist's perspective, "market failures" basically arises when:
Demand and supply do no accurately reflect all of the benefits and all of the costs of production.
Because of free riders, the demand for a public good:
Does not get expressed in the market, and the good does not get produced by private sellers.
In a pure competition, the demand for the product of a single firm is perfectly:
Elastic because many other firms produce the same product
To the economist, total cost includes:
Explicit and implicit costs, including normal profit.
Marginal product is:
The increase in total output attributed to the employment of one more workers
Which would not be a characteristic of a capitalist economy?
Goverment ownership of the factors of production
Which is assumed to be most limited in scope under a market system?
Government
Accounting profits are typically:
Greater than economic profits because the former do not take implicit costs into account
Economic efficient would be primarily discussed with respect to which of the fundamental questions about a competitive market economy?
How will the goods and service be produced?
Which fundamental question about a completive market system primarily focuses on technological progress and capital accumulation?
How will the system promote progress?
The main difference between the short run and the long run is that:
In the long run all resources are variable, while in the short run at least one resource is fixed.
By free enterprise, we mean that:
Individuals may obtain resources, organize production and sell the resulting output in any legal way they choose.
How does human specializations contribute to an economy's output?
It makes use of differences in abilities.
One major advantage of limited liability is that:
It shields the persona assets of owner from liability claims.
The output level for a profit-maximizing monopoly is determined by:
Marginal cost=Marginal revenue
In pure competition, the average revenue of a firm always equals:
Marginal revenue
Which is true with respect to the demand data confronting a monopolist?
Marginal revenue is less than price
Suppose the people want bike paths throughout town but no private individual or business is willing to build it. This is an example of:
Market failure
The practice of price discrimination is associated with pure monopoly because
Monopolists have the ability to control both output and price.
If an economy that produces capital and consumer goods is operating at a point on its production possibilities curve:
More capital goods can be produced only at the cost of some consumer goods.
Which is true under conditions of pure competition?
No single firm can influence the market price by changing its output
Private firms cannot profitably produce a public good because of:
Nonrivalry and Excludability
One major barrier to entry under pure monopoly arises from:
Ownership of essential resources
Economic systems differ according to what two main characteristics?
Ownership of resources and methods of coordinating economic activity
Which of the following statements is correct about measuring collective demand for public and private goods?
Private good demand is found by horizontally adding individual demand curves; public good demand is found by vertically adding individual demand curves.
In pure competition, the marginal revenue of a firm always equals
Product price
There is no control over price by firms in:
Pure competition
Under which market model are the conditions of entry to the market easiest?
Pure competition
Which market model has the least number of firms?
Pure monopoly.
Private goods are characterized by:
Rivalry and excludability.
"Excludability" means that:
Sellers can restrict the benefits of a good to those who pay for it.
The long run is characterized by:
The ability of the firm to change it's plant size.
Which best describe the "invisible hand" concept?
The desires of producers and resource suppliers to further their own self-interest will tent to promote the social interest.
The basic characteristic of the short run is that:
The firm does not have sufficient time to change the size of it's plant
Which is most characteristic of a pure monopoly?
The firm produces a good or service for which there are no close substitutes.
Which is true for a purely competitive film in short-run equilibrium?
The firm's marginal revenue is equal to its marginal cost.
Implicit and explicit costs are different in that:
The former refer to non-expenditures costs and the latter to out-of-pocket costs.
If there are positive externalities associated with the consumption a good or service:
The private demand curve will underestimate the true demand curve.
Which statement best describes a capitalist economy?
The production and allocation of goods and services is determined primarily through markets
Which statement best describes a command economy?
The productions and allocations of goods and services is determined primarily through government.
Consumer sovereignty and "dollar votes" are most related to which fundamental question about a competitive market system?
What goods and services will be produced?
The alternative combinations of two goods that a consumer can purchase with a given money income is:
a budget line
If two goods are complements:
a decrease in the price of one will increase the demand for the other
The private ownership of property resources and use of prices to direct and coordinate economic activity is characteristic of:
a market system
Decreases in product prices causes the consumer's:
budget line to shift outward from the origin.
Which of the following is correct? a. A person who purchases a corporate stock is buying ownership in the corporation. b. A person who purchases a corporate bond is borrowing money from a corporation. c. A person who purchases a corporate bond is guaranteed to earn dividends from the stock. d. A person who purchases a corporate stock gets the option to buy other shares at a lower price.
a. A person who purchases a corporate stock is buying ownership in the corporation.
Which of the following is correct: a. Economic=Accounting-Implicit b. Accounting+Economic=Normal c. Economic-Accounting=Explicit d. Economic-Implicit=Accounting
a. Economic profit=Accounting Profit - Implicit Costs
Which of the following is not a central focus of the "economic perspective"
a. scarcity and choice b. the scientific method c. purposeful behavior d. marginal analysis
When the price of oil declines significantly, the price of gasoline also declines. The latter occurs because of
an increase in the supply of gasoline.
A shift to the right in the demand curve for product a can be most reasonable explained by saying that
consumer preferences have changed in favor of a so that they now want to buy more at each possible price.
Price is constant or "given" to the individual firm selling in a purely competitive market because:
each seller supplies a negligible fraction of total suppy
A monopoly is most likely to emerge and be sustained when:
economies of scale are large relative to market demand
An increase in the price of a good will cause total revenue to fall if price elasticity of demand is:
elastic
Capitalism is an economic system that:
gives private individuals and corporations the right to own productive resources
Economics can best be described as the study of:
how people, institutions, and society make choices under conditions of scarcity
A demand curve:
indicated the quantity demanded at each price in a series of prices.
As a consequence of the conditions of scarcity:
individuals and communities have to make choices among alternatives.
If the price elasticity of demand for a good is .75, the demand for the good can be described as:
inelastic
The production possibility curve:
is the boundary between attainable and unattainable outputs