Micro Final

Ceteris paribus, if the price of a good decreases from $32 to $24 and the quantity demanded of the good increases from 80 units sold to 100 units sold, the price elasticity of demand (using the midpoint method) for that good is:

0.78.

Which of these will cause a shift in the labor demand curve?

All of the answers are correct.

Which statement concerning possible changes in productivity is TRUE?

As MPPL rises, the demand for the marginal worker rises because the firm is willing to pay higher wages.

A local kayak outfitter has been looking over the latest data from the Census, which reported that income in the area where the outfitter is based has increased by 20%. If the outfitter then tells you that her sales increased by 10%, what would be the income elasticity of demand and how would you interpret it?

EY = 0.5; for a 1% increase in income, the outfitter can expect to see a 0.5% increase in her sales.

Consumers try to maximize their consumption, given a limited budget, by buying the one commodity that gives them the most satisfaction.

False

Current economic theory has no explanation for why people volunteer at homeless shelters and contribute to disaster relief when doing so reduces their ability to consume goods and services.

False

A monopolist will shut down when _________in the long run and _________in the short run.

P < ATC; P < AVC

Which statement is true for a monopolistically competitive firm operating in the long run?

Price is greater than marginal cost.

A tax on a product:

creates a difference between the price paid by the buyer and the price received by the seller.

As the price of bananas fell from $0.60 to $0.40 a pound, the quantity demanded rose from 300 pounds of bananas consumed to 500 pounds of bananas consumed. In this example, demand is:

elastic

Marginal revenue is:

equal to the change in total revenue derived from the sale of one additional unit.

All of these are included in implicit costs, EXCEPT:

expenditures for raw materials.

Average fixed costs (AFC):

falls continuously as output increases.

For a perfectly competitive firm, if MR > AVC and MR > MC, then the firm should:

increase production.

Which of these is NOT a potential benefit provided by monopolies?

increased consumer surplus as a result of a smaller scale of operations

A typical total product curve goes through four stages. What is the correct order for these stages?

increases at an increasing rate, increases at a decreasing rate, reaches a maximum, decreases

In competitive labor markets, we assume that:

information in the industry is widely available and accurate.

A deadweight loss:

is the same as welfare loss.

Suppose Alcoa, Inc. is a monopsonist employer in the town of Alcoa, TN. Using the concept of marginal factor cost, each time Alcoa increases the number of workers it hires, it will:

pay a higher wage, resulting in an even higher marginal factor cost.

All of these are examples of rent-seeking behavior, EXCEPT:

product differentiation.

The key characteristic of monopolistic competition is:

product differentiation.

A decrease in the price of a good causes the:

purchasing power of a person's money to increase.

Product differentiation:

reduces price elasticity of demand.

A normal profit exists when:

total revenue equals total costs.

Assume coffee is considered inelastic. If the price of coffee increases:

total revenue increases.

If an oligopolistic firm attempts to decrease its price:

total revenue will decrease.

A gas station owner in a large city learned in his microeconomics class that buyers are relatively unresponsive to changes in the price of gasoline. If, based on that assumption, he increases the price of gas at his station:

total revenue will increase.

An increase in the _____ will NOT increase the supply of labor.

wage rate for a job

The idea that monopolies do not have to act efficiently because they are protected from competition is known as:

x-inefficiency.

When oligopolies act jointly as a monopoly, they are acting as a:

cartel

Assume that the fixed input is rent and the variable input is labor. Then marginal cost would be equal to:

change in labor costs/change in output.

If Annie has sold forty apples in a perfectly competitive market and her total revenue is $80, when she sells her forty-first apple, her marginal revenue will be:

$2.

Elastic supply could be indicated by a value of:

1.7.

Union membership in the United States rose significantly during the _____.

1940s

Factors that affect the elasticity of demand for labor include all of these EXCEPT:

demographics.

In a cartel:

firms collude to maximize their joint profits.

Marginal revenue product of labor is equal to:

marginal physical product times marginal revenue.

Which of these is a downside of monopolistic competition and oligopolies?

market power

Which of these describes a labor market in which most of a small town's workers are employed by one large company?

monopsony

Which of these is a characteristic of an oligopoly market structure?

mutual interdependence

A constantly declining long-run average cost curve is a characteristic of what type of industrial structure?

natural monopoly

Which condition will NOT contribute to a cartel's stability?

nonprice discounts

If a competitive firm can sell steel for $500 a ton, has an average variable cost of $400 a ton, and a marginal cost of $600 a ton, the firm should:

reduce output.

A poultry rancher discovered what when she increased the price of organic eggs from $0.75 to $1.00 per dozen, the sales of her eggs fell from 300 dozen per week to 200 dozen per week. If she wants to increase her total revenue from egg sales, she should:

reduce the price of eggs back to $0.75.

Janice has just graduated from college and is seeking her first job. If she cannot find a job that pays at least $40,000 per year, she will instead travel to Africa to volunteer for a wildlife conservation organization. For Janice, $40,000 is her:

reservation wage.

Assume that Bethany optimized today's production with a sale of one hundred bushels of corn. If her total variable cost is $200, her total fixed cost is $100, and her marginal revenue is $3, then:

she has earned a normal profit.

A customer slipped and fell on a wet floor at Melvin's T-Shirt Emporium. Melvin was found liable for the customer's injuries and had to pay $30,000 in medical bills for the customer out of his own pocket. Melvin's T-Shirt Emporium is a:

sole proprietorship.

A firm in a perfectly competitive industry is a price:

taker

A consumer is in equilibrium when:

the addition to total utility per dollar is the same for every commodity.

All else held constant, by changing the price of one product and observing how consumers reallocate spending, we can construct:

the demand curve.

All of these are explicit costs, EXCEPT:

the salary an entrepreneur could have earned in a corporate job.

Which of these is a characteristic that may be subjected to economic discrimination? I. Age II. Disability III. Human Capital

I and II

______ are more numerous, but ______ sell more goods and services.

Sole proprietorships; corporations

Arlene makes earrings in the shape of the mascot of a local university. Last year, Arlene made 250 pairs of earrings, which she sold to the university bookstore for $10 each. Arlene works out of her home; her only cost is $3 per pair for materials and $85 for tax help. If Arlene did not produce earrings, she would spend her time watching television. Based on this information, Arlene does not have any implicit costs.

True

Garret sells grapes in a perfectly competitive market. The market price for one ton of grapes is $1,000. Garret has seven tons of grapes to sell. If his total variable cost is $5,600 and his total fixed cost is $1,500, then Garret should continue producing grapes to minimize his loss.

True

For a competitive industry:

VMP = MRP.

Astrid currently consumes only milk and honey. She drinks four quarts of milk priced at $3 per quart and gets 30 utils for the last quart. She consumes thirteen jars of honey at a price of $0.75 per jar and gets 7.5 utils for the last jar. Is Astrid maximizing her utility?

Yes.

All of these would explain a change in labor supply, EXCEPT:

a decrease in productivity.

A monopoly firm exhibits all of the following characteristics except:

a marginal revenue curve that equals price at all quantities.

Which factor would shift the market labor supply curve to the right?

a reduction in nonwage income

Which characteristic is NOT typical of a monopoly?

There is low demand for the product.

Blast-Off owns a nuclear power plant in northern Utah that suffers a nuclear accident, with $50 billion in damages. Blast-Off declares bankruptcy and pays out $5 billion in damages, but it is no longer liable for any further damages. From this information, it is clear that, before the bankruptcy, the nuclear power plant was a:

corporation

Compared with a competitive market, a cartel as a whole will produce:

less output in order to increase prices.

If a monopoly firm sells more than one unit, marginal revenue will then be:

less than the price.

The elasticity of demand for labor will be more elastic in the _____ if labor's share of total production costs is _____.

long run; large

For a monopolistically competitive firm, profit is maximized when:

MC = MR.

At 500 units of output, total cost is $50,000 and variable cost is $5,000. What does fixed cost equal at 500 units?

45,000

Calvin is a college student who has identified the need his fellow students have for transportation to and from a nearby store. He owns a van that can carry four people in addition to himself; he pays $50 insurance costs per month. He has calculated that his cost of transporting his fellow students will be $2.50 per student per round-trip ride, assuming he has a full van. Given this information, which statement is correct, assuming Calvin has a full van? I. Calvin's average variable costs will be $15. II. Calvin's marginal cost is constant at $2.50. III. Calvin's average variable cost is constant at $2.50

II and III

Which statement about monopolies is NOT correct?

In the short run, monopolies never shut down.

Farmer Jean sells corn in a perfectly competitive market. The market price for a bushel of corn is $6. Jean has six hundred bushels of corn to sell. If her total variable cost is $3,300 and her total fixed cost is $300, then:

Jean is earning a normal profit.

Average total cost can be found by:

adding average fixed cost and average variable cost together.

Which strategy makes price discrimination more difficult for a firm?

allowing unwanted concert tickets to be sold on StubHub

An indifference map is:

an infinite set of indifference curves.

Although the owners of a theme park want to sell tickets for $80, they announce a general admission price of $100 per day. However, the owners of the theme park make available tickets that have a $20 discount on tickets available online, in grocery stores, and in banks. Thus very few people pay the full general admission price. The field of behavioral economics would call this pricing an effort to sell more due to:

framing bias.

An inferior good is a good that:

has a negative income elasticity.

A demand curve that is inelastic:

has an elasticity value less than 1.

Market power means the ability to:

have some control over price.

Which of these is a characteristic of a natural monopoly?

high economies of scale

The income effect means that:

if wages increase, hours of work decrease.

The substitution effect means that:

if wages increase, hours of work increase.

Which change in the labor market has led to more women entering the workforce?

improved telecommuting technologies

If a firm is producing an output level greater than the equilibrium output level in a perfectly competitive industry, which statement is false?

Marginal cost will equal price.

A firm that can unilaterally raise its price and still sell its product cannot be in a perfectly competitive industry.

True

Constant cost industries can expand operations without experiencing higher or lower prices.

True

Which of these does not describe the trend of labor markets over the past 50 years?

an increase in trade protectionism policies to restrict outsourcing of jobs

Because of the law of diminishing marginal utility, indifference curves:

are bowed inward.

A Nash equilibrium:

assumes that each player chooses his or her best strategy.

All of these are characteristic of monopolistic competition, EXCEPT:

barriers to entry.

The "dilemma" in a Prisoner's Dilemma refers to the fact that:

both players would be better off by cooperating, but not cooperating is a dominant strategy.

A right that gives individuals or firms certain types of intellectual property for a period of time is called a:

copyright.

In competitive labor markets, the going wage is:

determined by the intersection of the market supply and market demand curves for labor.

A characteristic that distinguishes monopolistic competition from perfect competition is:

differentiated products.

A criticism of marginal utility analysis is that it is:

difficult to measure utility.

Corn is a perfectly competitive commodity. In the marketplace, the demand curve for corn is:

downward sloping.

A local business earned total revenue of $100,000 against economic costs of $85,000, with the difference going to investors. If investors put in $200,000 and expect a 5% return on their investment, this business is:

earning a positive economic profit.

A bicycle factory finds that it can lower costs if it also produces tricycles and unicycles. This is an example of:

economies of scope.

A lumber company that specializes in making pine boards finds it can lower costs by also making particleboard and paper pulp. This is an example of:

economies of scope.

By producing a number of products that are interdependent, firms are able to produce and market these goods at lower costs. This is known as:

economies of scope.