Micro finals
A network good is one with which the benefits to the user rises if there is a small number of other users of the good.
False
An increase in price will cause a decrease in demand. This is the law of demand.
False
If price exceeds marginal cost at a competitive firm's current level of output, then the firm can increase profit if it increases the price it charges.
False
In a market economy, most economic decisions are made by central governments.
False
A customer leaving a network imposes a cost on users of the network.
True
A fire that destroys a food processing facility will likely result in shortages, thus causing an increase in thevprice of those food products.
True
A firm should (at least temporarily) shut down its production facility if variable costs are greater than revenues.
True
A positive externality is an external benefit that accrues to others outside of the market, while a negative externality is external costs that accrues to others outside of the market.
True
An increase in consumer income will increase the demand for products and services that are income normal.
True
At an all-you-can eat buffet, a person will stop eating when marginal utility is equal to zero.
True
If a market generates a negative externality, then an appropriately designed tax can move the market toward a more efficient outcome.
True
If a shortage exists in a market, then the market is in disequilibrium, and the price must increase to reach equilibrium in the market.
True
If the government sets a price ceiling below the equilibrium market price, then we can expect that there will be shortages of the good.
True
If there is an improvement of technology, then we would initially expect an increase in supply, causing a surplus of goods in the market. Eventually, the surplus with cause prices to decline.
True
In perfectly competitive markets, no firm has the ability to affect the market price.
True
In the long run, a typical firm in a monopolistically competitive industry will likely earn little to no economic profit.
True
One characteristics of oligopoly is that firms in an industry will usually have to consider the reactions of competitors when they formulate strategy.
True
Positive externalities lead to too little production at market prices that are too high.
True
Private goods are characterized by the ability to exclude non-payers and the fact that consumption of the good precludes other from consuming it.
True
Product differentiation gives a firm control over prices.
True
Providing government subsidies for higher education could be both economically efficient and socially equitable if higher education results in positive externalities.
True
Suppose medical studies reveal that long distance running reduces the chance of having a heart attack. We can expect that the equilibrium price of running shoes would increase and the equilibrium quantity of running shoes sold would also increase.
True
Suppose the price of raw materials and other inputs used to produce computers increases. We should expect that the equilibrium market price of computers will increase and the quantity of computers sold will decrease.
True
Suppose vast new oil reserves are discovered. We can expect that the equilibrium price of oil would decrease and the equilibrium quantity of oil sold would increase.
True
The prisoners' dilemma refers to a situation in which players face strong incentives not to cooperate with each other.
True
The social cost curve lies above the private supply curve for the producer in cases of negative externalities.
True
To maximize utility when consuming two or more goods, a consumer should consume goods so that the marginal utility per dollar of each good is the same.
True
Universities are engaging in price discrimination when they charge different levels of tuition to in-state and out-state students.
True
When demand is downward sloping, consumers who buy a good at the market equilibrium price will receive consumer surplus from the purchase of the good.
True
When the price elasticity of demand for a product is inelastic, that product is likely to have few close substitutes.
True
If you were not studying economics, you could be doing one of the following: sleeping in (which you value at $5), playing cards with your friends (which you value at $10), or working (you would have earned an extra $8). The opportunity cost of studying economics is therefore
$10.
Consider the market for wool sweaters. Which of the following will cause higher prices and a lower quantity of wool sweaters exchanged?
A disease significantly reduces the sheep population (wool comes from sheep).
Price ceiling
A legally mandated maximum price.
Perfect competition
A market structure characterized by many buyers and sellers, no barriers to entry, and producers offering identical products.
Oligopoly
A market structure characterized by only a few sellers with significant barriers to market entry.
Monopolistic competition
A market structure in which barriers to entry are low and many firms compete by selling similar, but not identical, products.
Consider the market for breakfast cereal. Which of the following will cause lower prices and a lower quantity of breakfast cereal exchanged?
A medical report raises concerns about the health risks of consuming processed cereal products.
Consider the market for breakfast cereal. Which of the following will cause higher prices and a greater quantity of breakfast cereal exchanged?
A medical report shows the added health benefits of eating breakfast every morning.
Public good
A product characterized by non-excludability and non-depletability.
Externality
A side effect from market activity on individuals or entities outside of the market.
To say a firm is earning normal profits means
Accounting profits are large enough to cover opportunity cots.
For cost
Add all money
Sunk cost
An expenditure that has already been incurred and cannot be recovered.
Nash equilibrium
An outcome where every firm in an industry chooses a strategy that is optimal given the strategies chosen by its competitors.
A dominant strategy is a strategy that always makes both players as well-off collectively as possible.
False
Suppose the government could stimulate spending in one of the following expenditure categories. In which category would the spending increase contribute most to an expansion of the country's production possibilities frontier?
Capital goods.
Demand
Consumers
Consider the market for wool sweaters. Which of the following will cause higher prices and a greater quantity of wool sweaters exchanged?
Consumers expect the weather to be colder than normal during the next several weeks.
Price discrimination means charging
Different prices to different costumers when production costs are the same.
Suppose a new government report indicates that eating broccoli reduces the incidence of facial acne. We can expect that the equilibrium price of broccoli would increase and the equilibrium quantity of broccoli sold would decrease.
False
Suppose coal mining produces a negative externality in the form of polluted streams. One can deduce that the unregulated price of coal is too high.
False
The demand for gasoline is rising. A possible cause is that commuters are switching from driving to public transportation.
False
The free rider problem typically results in a production of output that is greater than the social optimal quantity.
False
Complementary goods
Goods that are commonly used together.
Which statement is TRUE regarding the Coase theorem?
If transactions costs are small, the outcome is efficient regardless of how property rights are distributed.
Which of these is a policy idea that the government could use to correct a negative externality?
Imposing a fee on waste from the production of goods that create negative externalities.
Which of these is an example of consumers creating a negative externality?
Littering.
Economic profit
Net revenue after subtracting out explicit costs and opportunity costs.
Supply
Producers
Absolute advantage
The ability to produce more than someone else.
Marginal revenue
The amount by which revenue changes when output changes by one unit.
Consumer surplus
The difference between the maximum amount a person is willing to pay for a good and its current market price.
Price elasticity
The percentage change in quantity demanded when there is a one percentage change in the product price.
One way to think about public goods is that they are characterized by being collectively consumed. This implies that
The private sector may not provide them because producers cannot exclude those who do not pay.
Consider the market for tablet computers. Which of the following will cause lower prices and a greater quantity of breakfast cereal exchanged?
There is a decrease in the cost of liquid crystal displays.
Consider the market for tablet computers. Which of the following will cause higher prices and a lower quantity of breakfast cereal exchanged?
There is a government-mandated increase in the wages of workers who assemble tablet computers.
Consider the market for new cars.Which of the following will cause lower prices and a lower quantity of new cars exchanged?
There is a significant increase in the perceived quality of used cars by potential car buyers.
Consider the market for breakfast cereal. Which of the following will cause lower prices and a greater quantity of breakfast cereal exchanged?
There is an increase in the number of firms selling breakfast cereal.
A firm seeking to maximize profits will increase the amount of output it produces when marginal revenue is greater than marginal cost.
This is true for all firms regardless of market structure.
A basic characteristic of monopoly industries is that barriers to entry are extensive.
True
A country's comparative advantage is determined by an assessment of its opportunity costs of production relative to the opportunity costs of other countries.
True
The live band that plays nearby makes it difficult for patrons of a restaurant to hold a conversation. This is an example of
a negative externality.
AT&T offers high-speed Internet service to new subscribers for $29.99 per month for the first six months and then raises the price to $49.99 per month. This offer is an example of
a teaser strategy.
Movies are typically only shown in theaters for months before they are released on online streaming sites at a lower price. This is an example of
an intertemporal pricing strategy.
A price-discriminating firm will charge less to the customers who
are the most elastic in demand for a product.
The "dilemma"in the Prisoner's Dilemma is that
both players would be better off by cooperating, but not cooperating is a dominant strategy.
The reason monopolistic competitive firms have difficulty maintaining a profit in the long run is that
ease of entry into the market encourages new firms to enter and force down the price.
Club goods
excludable, non-rival
Private goods
excludable, rival
Production efficiency is described as
goods and services that are produced using the fewest resources possible.
Public goods
non-excludable, non-rival
Common property goods
non-excludable, rival
Target executives believe that if they raise prices, then customers will switch to shopping at Walmart across the street. However, if they decrease their prices, then Walmart will respond by decreasing their own prices, with no customers switching from Walmart to Target. This scenario implies that
prices charged by both retailers will be relatively stable.
The reason economists often consider monopoly socially undesirable is because the monopolist
produces less than the socially efficient amount.
What characteristic does monopolistic competition not have in common with perfect competition
products of individual firms are different.
Which methods can help in obtaining welfare improvement if negative externalities exist
regulation, appropriately designed taxes, assigning property rights and permitting bargaining.
Consider the market for new cars.Which of the following will cause lower prices and a greater quantity of new cars exchanged?
technology improves the production efficiency of automobile manufacturers.
Opportunity costs exist because
using resources for one activity means that their use elsewhere must be given up.
