Micro Final (Pt. 2)

Refer to the table below. This information reflects the demand curve and the average cost curve for a firm that is a natural monopoly. What will this firm's profits equal? $2.50 $1.50 $1.25 $0.50

$2.50

If accounting profits for a firm are 20% of output, and the opportunity cost of financial capital is 8% of output, then what do the firm's economic profits equal? 6% of output 10% of output 12% of output 8% of output

12% of output

Bruce works for a large bank. His wage increased from $30 per hour to $40 per hour. He can work up to 50 hours each week. The table below shows her utility from different levels of leisure and income. If Bruce decides to increase his weekly hours of work from 10 to 20 hours after his raise, the marginal utility loss from having less leisure is: 8 27 21 15

15

Josh's weekly budget for lunch is $24. He eats only pizza and burgers. Each pizza costs $6 and each burger costs $3. Josh knows that 2 pizzas and 4 burgers will give him a utility of 8. What is Josh's utility-maximizing point? 0 pizzas, 8 burgers 3 pizzas, 2 burgers 2 pizzas, 4 burgers 4 pizzas, 1 burger

2 pizzas, 4 burgers

If a firm is producing so that the point chosen along the production possibility frontier is socially preferred, then that firm is said to have reached its allocative efficiency productive efficiency utility-maximizing efficiency minimum price efficiency

allocative efficiency

Antitrust regulations would most likely require one of the following in order to determine whether or not a merger may enhance competition. Which one is it? analysis using numerical tools. obvious objective judgments. readily qualified judgments. highly complex analytical tools.

analysis using numerical tools.

Which of the following may be legal and even common practice in a market economy? making the ability to buy one product conditional on also buying another bundling several products together and selling them as a package deterring new market entrants with short term predatory pricing selling product for less than the average variable cost of producing same.

bundling several products together and selling them as a package

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? as wages increase over this range, the quantity of hours worked also increases. as wages increase over this range, the quantity of hours worked changes very little. as wages increase over this range, the quantity of hours worked actually decreases. as wages increase of this range, the quantity of hours worked is inelastic.

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

The concept of restrictive practices in the U.S. market economy is ____________________. set out in law that remains relatively constant continually evolving useful and fair closed to interpretation

continually evolving

If a solar panel manufacturer wants to look at its total costs of production in the short run, which of the following would provide a useful starting point? divide total costs into two categories: variable costs that can't be changed in the short run and fixed costs that can be divide the total costs of production by the quantity of output divide the variable costs of production by the quantity of output divide total costs into two categories: fixed costs that can't be changed in the short run and variable costs that can be

divide total costs into two categories: fixed costs that can't be changed in the short run and variable costs that can be

According to the definition of profit, if a profit-maximizing firm will always attempt to produce its desired level of output at the lowest possible cost, then it will do so regardless of what type of competition exists in a market. take a long-run perspective on costs, when such costs cannot be adjusted. take a short-run perspective on labor costs which cannot be immediately changed. breakdown its cost structure according to short-run adjustments.

do so regardless of what type of competition exists in a market.

If the North American newsprint paper market has barriers to entry, then abnormally high profits will attract the entry of new firms. the entry of new firms will eventually cause price to decline. surviving firms earn only a normal level of profit in the long run. entry will be blocked even if firms are earning high profits.

entry will be blocked even if firms are earning high profits.

A manufacturer would likely make an ___________ in a market following the long-run process of beginning and expanding production in response to ________________ . accounting profit; a strategy to grow profits accounting profit; an incentive for profit entry; a sustained pattern of profits entry; an incentive to add to profits

entry; a sustained pattern of profits

Norway's government nationalized the country's oil resources, and it has been accumulating a massive sovereign wealth fund worth billions of dollars ever since. This sovereign fund is used as a monetary source for government funded national education and healthcare. This is because the wealth generated by nationalized industries is used to serve the citizens of the country. is used to serve the interests of oil industry. always charge high prices and reduce output. never return value to citizens of the country.

is used to serve the citizens of the country.

Refer to the table below. If this information were used to create a total cost graph, the curve should begin at 40 on the vertical axis and slope upward. become steeper as quantity increases. become steeper due to diminishing returns. reflect all of the above.

reflect all of the above.

When a firm uses retained profits to invest in more energy efficient equipment, an economist would calculate the _________________ of investing in physical capital. typical hurdle rate opportunity cost degree of risk hurdle rate premium

opportunity cost

Roughly speaking, patent law covers __________ and __________ law protects an author's original books. original inventive creations; copyright trade secrets; trademark all inventions; trademark original audiovisual creations; copyright

original inventive creations; copyright

Government ______________ regulations specify that inventors will maintain exclusive legal rights to their respective inventions for ______________ . patent; a limited time trademark; an unlimited time copyright; a limited time trade secret; an unlimited time

patent; a limited time

Firms operating in a market situation that creates ___________________, sell their product in a market with other firms who produce identical or extremely similar products. a perfect monopoly perfect competition an oligopoly a free-market

perfect competition

If the quality differences of similar products are mostly imperceptible to the average consumer's eyes, which of the following will most likely play a major role in influencing the decisions of purchasers? price of competing products size of competing products purchaser's opportunity cost geographic origin of products

price of competing products

As a general rule, utility-maximizing choices between consumption goods occur where the: rise in income has created the greatest utility. price ratio and marginal utilities ratio of two goods is equal. higher-income households have the greatest satisfaction. constraints on budget expenditures has fallen substantially.

price ratio and marginal utilities ratio of two goods is equal.

The term _________________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product. price setter business entity price taker trend setter

price taker

Fixed costs are important because, at least in the ___________, the firm _______________. long run; cannot alter them short run; cannot alter them long run; can alter them short run; can alter them

short run; cannot alter them

If a firm's revenues do not cover its average variable costs, then that firm has reached its _________________ . price taking point shutdown point marginal point opportunity margin

shutdown point

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. income effect substitution effect backward-bending supply curve preferences effect

substitution effect

For a perfectly competitive firm, the marginal cost curve is identical to the firm's ________________ . demand curve supply curve average total cost curve average variable cost curve

supply curve

Antitrust law includes specific rules against restrictive practices in particular because they're effective in creating natural monopolies. they're very disruptive and controversial practices. their effects can reduce competition. their specific contracts are complicated.

their effects can reduce competition.

In a free market economy, firms operating in a perfectly competitive industry are said to have only one major choice to make. Which of the following correctly sets out that choice? what quantity to produce what price to charge what quantity of labor is needed what quality to produce

what quantity to produce

The table below shows a monopolist's demand curve and the cost information for the production of its good. What will their profits equal? $1,200 $1,600 $1,000 $600

$1,200

In the United States, a pharmaceutical company's exclusive patent rights last for 20 years. 25 years. 10 years. 70 years.

20 years.

In order to produce 100 oatmeal cookies, GoodieCookieCo incurs an average total cost of $0.25 per cookie. The company's marginal cost is constant at $0.10 for all oatmeal cookies produced. The total cost to produce 50 oatmeal cookies is $25 $20 $50 $60

$20

Approximately what percentage of the US labor force is employed by firms that have fewer than 100 employees? 63% 50% 45% 35%

35%

How does the U.S. Bureau of Labor Statistics gather information with regard to the typical consumption choices of Americans? Consumer Spending Survey Consumer Income Budget Survey Consumer Expenditure Survey Consumer Income Survey

Consumer Expenditure Survey

Which of the following is a true statement? The government approves most proposed mergers. Government regulators agree that few mergers are beneficial to consumers. Government regulators agree that all mergers are beneficial to consumers. The government disapproves most proposed mergers.

The government approves most proposed mergers.

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

average cost

A situation where the level of output, scale and average costs are all rising is called decreasing returns to scale diseconomies of scale diminishing returns to scale both a and b are correct

both a and b are correct

Substitution and income effects of a change in price of a good may be used to explain the: direct relationship between price and quantity purchased. inverse relationship between price and quantity demanded. direct relationship between price and quantity supplied. direct relationship between income and demand.

direct relationship between income and demand.

An agreement between a manufacturer and a distributor stipulating that a dealer will only distribute that manufacturer's products would be classified as a form of predatory pricing. tie-in-sales arrangement. exclusive dealing. price maintenance.

exclusive dealing.

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. fixed costs; do not change, variable costs; are constantly changing, fixed costs; are consistently changing, variable costs; do not change,

fixed costs; do not change,

When Marietta chooses to only purchase a combination of goods that lie within her budget line, she: is decreasing utility. is maximizing utility. likely has negative savings. must reduce the quantity.

is maximizing utility.

When a monopolist increases sales by one unit, it gains some marginal revenue from selling that extra unit. more low priced sales cause negative marginal revenues. every other unit must now be sold at a lower price. it loses some marginal revenue and all of the above.

it loses some marginal revenue and all of the above.

A __________________ exists when the quantity demanded in the market is less than the quantity at the bottom of the long-run average cost curve. natural monopoly monopoly oligopoly monopolistic competition

natural monopoly

The most famous restrictive practices case of the last several decades involved a series of lawsuits by the U.S. government against Microsoft. These particular lawsuits were encouraged by all of Microsoft's competitors. U.S. consumers. some of Microsoft's competitors. U.S. antitrust regulators.

some of Microsoft's competitors.

Which of the following should typically be ignored because spending has already been made and cannot be changed? variable costs sunk costs marginal costs average marginal costs

sunk costs

The marginal cost curve is generally ______________, because diminishing marginal returns implies that additional units are ________________________. downward-sloping; more costly to produce upward-sloping; more costly to produce downward-sloping; less costly to produce upward-sloping; less costly to produce

upward-sloping; more costly to produce

When a business adopts a strategy of reducing and/or discontinuing production in response to a sustained pattern of losses, it is considering opportunity costs. preparing to exit operations. preparing to reach its shutdown point. considering capital investments.

preparing to exit operations.

City Gas is a natural monopoly that supplies natural gas to a particular city. Its cost and demand information are given below. An unregulated monopoly will have a ____ of ____. loss, $24 million loss, $7 million profit, $24 million profit, $7 million

profit, $24 million

The marginal revenue curve for a monopolist ____________________ the market demand curve. always rises above always lies beneath always runs parallel always is the same

always lies beneath

Which of the following is most likely to cause variation in American household spending patterns? differing levels of family income geographical location of households each household's personal preferences each of the above will cause a variation

each of the above will cause a variation

The government wants to make medicare benefits available to more people, but to achieve this goal, it needs to make cuts in the existing medicare budget. The two areas where they are considering cuts are non-essential elective surgery and 6-12 month mental health care programs. Applying the concept of diminishing marginal utility, the budget cuts should be made for spending on: mental health therapy due to its higher marginal return rate. elective surgery due to its lower marginal return rate. both programs, which have the same marginal return rate. neither can be compared by measuring marginal utility.

elective surgery due to its lower marginal return rate.

In competitive settings, profits will lead firms to _________________ and losses will lead firms ___________, so the incentives for producing at low cost and coming up with new ways of pleasing customers are strong. privatize; nationalize enter the market; to exit monopolize; to lower costs reduce output; increase price

enter the market; to exit

When J.K. Rowling exerts copyright ownership of her literary works, she creates a monopoly by restricting the number of inventors. unit production costs. entry into the market. demand for the product.

entry into the market.

An inferior good is a product: for which demand increases as income increases. for which there is no demand. for which demand decreases as income increases. that has an upward sloping demand curve.

for which demand decreases as income increases.

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

full-time workers

Why are some producers forced to sell their products at the prevailing market price? price takers find market analysis is too costly they are very small players in the overall market high degree of similarity to competitor's products they can increase output without affecting quality

high degree of similarity to competitor's products

In the ________, the perfectly competitive firm will react to profits by __________________________ . short run; increasing quality of products long run; tailoring their quality controls short run; reducing its labor inputs long run; increasing its production

long run; increasing its production

The term _________________ refers to the additional utility provided by one additional unit of consumption. utility marginal utility added utility Giffen utility

marginal utility

The term _______________ is used to describe circumstances where government takes over ownership of a business. privatization regulatory capture nationalization deregulation

nationalization

Which of the following completes the argument against deregulation of U.S. banks that began with the phrase: "if banks competed to pay higher rates of interest", they might also compete to make riskier loans, potentially imperiling the safety of the banking system. they might also compete to make less riskier loans, potentially imperiling the U.S. consumers' reliance on credit. they will end up playing a large role in setting the regulations that they will follow. they will send lobbyists to offer well-paid jobs to some of the retiring members of the regulatory board

they might also compete to make riskier loans, potentially imperiling the safety of the banking system.

The typical pattern revealed in a budget constraint model shows that as the quantity consumed rises, total utility rises, but marginal utility falls. marginal utility increases. total utility decreases, but marginal utility rises. total utility decreases.

total utility rises, but marginal utility falls.

______________ give government the power to block certain mergers, and in some cases, to break up large firms into smaller ones. Market regulations Antitrust laws Nationalization policies Restrictive practices

Antitrust laws

_____________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price. Total revenue Total profits Average profit margin Total cost

Total revenue

In economics, a firm that faces no competitors is referred to as _________________. an oligopoly a monopoly a perfect competitor an oligopolizor

a monopoly

Which of the following would a market competition regulator be most likely to assign the maximum HHI valuation to? a perfect competitor a monopoly an oligopoly a monopolistic competitor

a monopoly

Economic theory offers ____________________ about the full range of possible events and responses, which can prevent __________________ about how households will respond to changes in prices or incomes. one budget constraint theory; unrealistic possibilities a systematic way of thinking; misguided conclusions two budget constraint theories; misguided possibilities systematic consumption choices; unrealistic conclusions

a systematic way of thinking; misguided conclusions

The typical pattern of costs for a monopoly can be analyzed by using: I) total cost II) fixed cost III) variable cost IV) marginal cost V) average cost VI) average variable cost I, II, and III I, III and IV I, II, III, IV, and VI all of the above

all of the above

The ______________ of all firms can be broken down into some common underlying patterns. total revenues diminishing short-run costs cost structure diminishing long-run costs

cost structure

Regulations that permit a regulated firm to cover its costs and to make a normal level of profit are commonly referred to as cost-plus regulation. price cap regulations. regulatory capture. profit regulation.

cost-plus regulation.

City Gas is a natural monopoly that supplies natural gas to a particular city. Its cost and demand information are given below. The marginal cost of going from a production of 4 million therms to a production of 5 million therms is $133 million $113 million $23 million $20 million

$20 million

The table below shows a monopolist's demand curve and cost information for the production of its good. What quantity will it produce? 1,400 1,300 1,100 1,000

1,000

Refer to the table below. The information pertains to the demand curve and the average cost curve for a natural monopoly firm. What will the price be in this market? 20 50 35 5

50

The information below sets out the estimated market shares for the cellular phone manufacturing market. If Samsung were to acquire Sanyo, the four-firm concentration ratio would be 70 68 65 73

73

______________ include all of the costs of production that increase with the quantity produced. Fixed costs Variable costs Average costs Average variable costs

Variable costs

A firm that holds a monopoly position in the market place is a price maker a price taker monopolistically competitive subject to infinite market forces

a price maker

An _________________ is calculated by subtracting the firm's costs from its total revenues, _______________________________ . accounting profit; excluding opportunity cost accounting profit; including opportunity cost economic profit; excluding opportunity cost opportunity cost; including economic profit

accounting profit; excluding opportunity cost

For the past two years, a cellphone manufacturer has been selling to a group of distributors, who then sell the products to retailers to sell to the general public. The firm has now informed its distributors that each of them must sell the cellphones for a minimum price the manufacturer has set. In these circumstances, any resulting minimum resale price maintenance agreements will be illegal. the purpose of this contract is to encourage competition between the distributors. any resulting agreement to give dealers exclusive distribution rights is illegal. these tie-in sales encourage competition between the manufacturer's distributors.

any resulting minimum resale price maintenance agreements will be illegal.

In the U.S., the amount in savings contributed to IRAs rose from $239 billion in 1992 to $3,667 billion by 2005, while overall savings actually dropped from low to lower. Evidence suggests that, in the economy as a whole, increased savings in these retirement accounts: are the negative result of a change in wage levels and a higher work effort. the result of personal preferences and intertemporal budget constraints. are being offset by negative savings or less savings in other kinds of accounts. the result of a higher interest rates and preferences about present consumption.

are being offset by negative savings or less savings in other kinds of accounts.

Occasionally, _________________ may lead to pure monopoly; in other market conditions, they may limit competition _________________ . barriers to entry; to a few oligopoly firms barriers to entry; to a natural monopoly deregulation; requiring new patent law deregulation; requiring new copyright law

barriers to entry; to a few oligopoly firms

Intellectual property law is a body of law that includes the right of inventors to produce their inventions the right of inventors to sell their inventions trademark, patent and trade secret legislation copyright legislation, as well as all of the above

copyright legislation, as well as all of the above

Economies of scale may arise from all but one of the following. Which one is it? doubling promotional expenses to expand sale more than proportionately having a larger retail space can expand sales more than proportionately spreading the fixed-costs of administration over more customers holds average costs down government economic subsidies protect firms from competition to avoid losses.

government economic subsidies protect firms from competition to avoid losses.

A perfectly competitive industry is a realistic extreme. hypothetical assumption. hypothetical extreme. realistic assumption.

hypothetical extreme.

he graph above illustrates the electricity market. Consider market competition between firms where price is based on AR and select the most appropriate answer. in the short-run, the demand curve and average revenue shift as other firms enter the market and increase competition in the short-run, the demand curve and average revenue shift as other firms leave the market and decrease competition in the long-run, the demand curve and average revenue shift as other firms enter the market and increase competition in the long-run, the demand curve and average revenue shift as other firms leave the market and decrease competition

in the long-run, the demand curve and average revenue shift as other firms enter the market and increase competition

Saving money is a(n) ____________________, because it involves less consumption in the present, but the ability to consume more in the future. budget constraint intertemporal choice risk premium opportunity cost

intertemporal choice

The _________________ budget constraint shows the tradeoff between present and future consumption. inflation utility-maximizing intertemporal choice time-value of money

intertemporal choice

Kate's 24-Hour Breakfast Diner menu offers one item, a $5.00 breakfast special. Kate's costs for servers, cooks, electricity, food, etc. average out to $3.95 per meal. Her costs for rent, insurance cleaning supplies and business license average out to $1.25 per meal. Since the market is highly competitive, Kate should raise her prices above the perfectly competitive level set by the market. keep the business open in the short-run, but plan to go out of business in the long-run. keep the business open in the short-run, and plan to expand the business in the long-run. lay-off her staff, break her lease, and close the business down immediately.

keep the business open in the short-run, but plan to go out of business in the long-run.

I'maGoldMiner has benefited from a record rise in gold prices in the global commodities market. While the price of its output is highly influenced by market speculation, if it wants to increase production to take advantage of the current profit-maximizing opportunity, the company must accept market price for its physical capital inputs. must reduce what it pays for inputs that make up its costs of production. must reduce production to encourage speculators to drive gold prices higher. must alter the price of its labor inputs to maximize profits.

must accept market price for its physical capital inputs.

Marcella operates a small, but very successful art gallery. All but one of the following can be classified as a variable cost arising from the physical inputs Marcella requires to operate her business. Which is it? physical space for the gallery costs of purchasing art work to sell in the gallery wages paid to three part-time employees accountant's fees for preparing tax returns

physical space for the gallery

Refer to the graph shown above. Based on the information illustrated in the graph, which of the following is correct? marginal cost line must intersect the average cost line at the middle point of the average cost curve marginal cost of production is below the average cost for producing previous units producing one more unit is reducing average costs overall producing a marginal unit is increasing average costs overall

producing a marginal unit is increasing average costs overall

Idaho farmers can sell as large a quantity of their potato crop as they wish, if they set their own price in the short run, but in the long run, the market sets the price. provided each is willing to accept the prevailing market price. if they set their own price in the long run, but in the short run, the market sets the price. provided quality is perceptible and determines the market price.

provided each is willing to accept the prevailing market price.

In the event that Only1Corp. obtains control of all the natural gas producers in the US, it would most likely have a patent giving it exclusive legal rights to make, use, and sell for a limited time. raise prices, cut production, and realize positive economic profits. have legal protection to prevent copying its methods of production for commercial use. acquire rights for its investors to produce and sell their product.

raise prices, cut production, and realize positive economic profits.

Splitting up a the natural monopoly held by a public utility that produces and provides electricity would raise the total cost of production for all and force their profits to zero. raise the average cost of production and force consumers to pay more. evolve the structure of costs and demand to make competition less costly. evolve the structure of costs and demand to make competition more likely.

raise the average cost of production and force consumers to pay more.

The term ______________ refers to a situation where the firms supposedly being regulated end up playing a large role in setting the regulations that they will follow. regulatory tie-in deregulation privatization regulatory capture

regulatory capture

Mark's annual after tax income earnings are $50,000. His $40,000, 3-year CD is maturing in the near future and he is planning to spend the interest on a 6 week holiday after that. His investments can earn a total of 10% before he starts his trip. If Mark's "present consumption" is the time he spends working and his "future consumption" is his trip, his optimal choice from the table below is to: spend $50,000 now and consume nothing in the future spend nothing now and consume $77,000 in the future. spend $10,000 now and consume $44,000 in the future. spend $20,000 now and consume $33,000 in the future

spend $10,000 now and consume $44,000 in the future.

The total revenue curve for a monopolist will start high, rise, and then decline. start low, decline, and then rise. start high, decline, and then rise. start low, rise, and then decline.

start low, rise, and then decline.

The following figure shows the average cost curve, demand curve, and marginal revenue curve for a monopolist. After maximizing profits, what do the firm's costs equal? the area of rectangle ABGH the area of rectangle BDEG the area of rectangle ACFH the area of rectangle ADEH

the area of rectangle ABGH

In order to determine the average variable cost, the firm's variable costs are divided by _______________________. its' fixed costs the quantity of output its' average costs diminishing marginal costs

the quantity of output

The following graph shows the demand curve for a good and the long run average cost curve for a typical firm in this market. If the government does not intervene in the market, then there will be many firms in this market, all of whom will take the market price as given and produce where price equals marginal cost there will only be 1 firm in this market, and they will produce where marginal revenue equals marginal cost there will only be 1 firm in this market, and they will take the price as given and produce where price equals marginal cost no firms will enter this market

there will only be 1 firm in this market, and they will produce where marginal revenue equals marginal cost

Why would a profit-seeking firm need to tailor its decisions about the quantity of labor inputs that it purchases? to produce the highest profitable quantity of output at the lowest possible marginal cost deciding what quantity to produce is one of the major choices a profit-seeking firm makes the quantity of labor is the only variable cost choice a profit-seeking firm can make to produce the profit-maximizing quantity of output at the lowest possible average cost

to produce the profit-maximizing quantity of output at the lowest possible average cost

If a comparison between average cost and price reveals whether a firm is earning profits, then a comparison between average variable cost and price reveals that if the market price exceeds average cost, profits will be positive. that if the market price is below average cost, then profits will be negative. total revenues are the quantity produced multiplied by the price. whether the firm is earning profit if fixed costs are left out of the calculation.

whether the firm is earning profit if fixed costs are left out of the calculation.

The marginal utility of two goods changes ______________. with the quantities consumed for the better, if taxes are imposed if they are intertemporal choices if the mother controls the household budget

with the quantities consumed