Microecon

Efficient outcomes in markets are NOT dependent on:

advanced technology.

Market failure occurs when market forces lead to:

an inefficient outcome.

The higher the level of market power among the sellers in a market, the _____ when the Rational Rule for Sellers is applied.

lower the market output

A characteristic of monopolistic competition that is not present in any other market structure is that there

are many sellers and each produces its own version of the product.

A characteristic of perfect competition that is not present in any other market structure is that there

are many sellers that produce identical products.

In the long run, a company can remain profitable only if:

barriers to entry are present.

The term "gains from trade" means the

benefits that come from reallocating resources, goods, and services to better uses.

Price ceilings tend to create shortages when used to

bring down price in a competitive market.

(Figure: Tax on Sellers of Soft Drinks) In the graph of the soft drink market shown here, the original equilibrium price is $2.50 per bottle. A tax is then placed on the sellers of soft drinks. The incidence of the tax on the buyer is ____ % and the incidence of the tax on the seller is _____ %.

check graph 50, 50

According to the Rational Rule for Sellers, a seller should choose the output level where _____ and the price level _____.

marginal cost equals marginal revenue; that is on the seller's demand curve at that output level

When a company has market power, it is _____ in its market.

not a price-taker

What type of relationship exists between the level of a company's market power and the price that its owner is able to charge for its product?

positive

When negative externalities occur as a result of a product market's activity, the market will _____ than is desirable.

produce more

(Figure: Market) A quota of 25 units is placed on the market that is shown in the figure. The equilibrium quantity sold in the market before the implementation of the quota was _____ units.

(check graph) 50

Figure: Graph) In the graph, the movement from point E to point F represents

(check graph) a decrease in quantity supplied.

(Figure: Market for Sustainable Furniture) The graph depicts the market for furniture made from sustainable, man-made forests. The government wants to encourage buyers to buy such furniture and imposes a price ceiling of $250. What occurs as a result of the price ceiling?

(check graph) a shortage of 400,000 pieces of furniture.

If income rises by 20% and the quantity demanded of an item falls by 20%, the income elasticity of demand for this item is:

-1

Which of the following lists only factors that would cause a decrease in the demand for a good?

A decrease in popularity of a good; a rise in income (if the good is an inferior good); a fall in the price of a substitute good.

What is collusion?

Agreements between sellers to increase their market power

(Figure: Market) Refer to the graph. Suppose that a binding price ceiling of $25 is removed. The actual number of items sold in this market will:

Check graph idiot [increase from 40 to 50.]

Pedro attends a university that provides antivirus software to all students, faculty, and staff for their personal computers as well as all university-owned computers. Why would the university pay for the protection of the personal computers of students, faculty, and staff?

It reduces the number of viruses on university-owned computers by reducing the probability that viruses will spread through files transferred from personal computers to university-owned computers and systems.

Why does the demand curve slope downwards?

It slopes downward due to the law of demand.

Patents on drugs to treat AIDS were removed in South Africa. How would the market for these drugs have been different if there had never been patents on drugs?

Larger quantities of the drugs would have been produced.

(Table: Maia and Juanita's opportunity cost) The table provides data on how long it takes Maia and Juanita to mow the lawn and weed the flower beds. Who has a comparative advantage in weeding the flower beds?

Maia because she has a lower opportunity cost.

_____ using specific business practices that increase a seller's market power and excludes other sellers is illegal under U.S. law.

Monopolizing

A company is the only one producing its type of product. The company's owner is able to set price at the most profitable level. This company is in what type of market?

Monopoly

In which market structure do the actions of a rival have a significant impact on your operations?

Oligopoly

Which of the following markets is an example of a perfectly competitive market?

Shares of McDonald's stock

A new study discovers the health benefits of eating fish regularly. At the same time, some consumers decide to become vegetarians. What is the effect of these events on the equilibrium price and quantity in the fish market?

The change in both the equilibrium price and quantity is ambiguous.

How would the discount effect on marginal revenue differ for a seller increasing sales from 100 units to 101 units compared to an increase in sales from 1,000 units to 1,001 units?

The discount effect would be smaller for a change from 100 to 101 units than 1,000 to 1,001 units.

Which of the following is a characteristic of monopoly that is not present in other market structures?

There is only one seller.

Why are supply curves typically upward-sloping?

They slope upward because higher prices lead individual businesses to supply a larger quantity and more businesses are willing to supply goods and services.

Which of the following is an example of a negative externality?

When Fazio parks his big truck at the grocery store, people in the cars on each side of his parking space have a hard time opening their car doors.

The deadweight loss in an inefficient market is calculated by first identifying the:

actual quantity produced and sold.

A tax designed to induce people to take account of the negative externalities that they cause is referred to as _____ tax.

a corrective

Efficient production occurs when:

a given level of output is produced at the lowest possible cost.

A market with a large number of sellers and a high level of product differentiation is known as

a monopolistically competitive market.

Walmart has a large aisle that displays many different kinds of toothpastes. This observation indicates that the toothpaste market is

a monopolistically competitive market.

A negative externality is:

a side effect of an activity when the side effect harms bystanders.

In an oligopolistic market, the impact on a seller of the _____ is greater than in other types of market structures.

actions of other market sellers

A Korean-made washing machine purchased by a Chinese citizen is an example of a Korean _____, and a Chinese-made washing machine purchased by a Korean citizen is an example of a Korean _____.

export; import

(Figure: Market Power) Based on the demand curves for four sellers, which of the following sellers has the most market power?

graph straight up and down

(Figure: Market for Tropicana Juices) Tropicana produces both orange juice and lemonade. What will happen to the supply of Tropicana orange juice when the price of lemonade rises in the market and the price of orange juice stays the same?

graph where supply curve shifts leftward

(Figure: Supply Curves) The figure shows four different supply curves for four products: A, B, C and D. Which one of the supply curves probably belongs to a seller who has a large stock of product available for sale?

graph with SLIGHT upward angle, NOT the steep angled one

(Figure: Market for Apple Computers) Dell and Apple are competitors in the computer market. Which graph illustrates the effect of a rise in the price of Dell computers on the demand for Apple computers?

graph with demand curve shifting rightward

Markets allocate goods to those with the:

highest marginal benefit.

When you get hired for a well-paying job, you will most likely view older used cars as

inferior goods.

The most efficient outcome in a set of options is the one with the:

largest economic surplus.

When buyers in a market have market power, then the

product price is lower.

Graphically, the equilibrium quantity can be identified as the:

quantity corresponding to the intersection of the demand and supply curves.

An equilibrium price is a price where the

quantity supplied equals the quantity demanded.

If a firm produces a product that has easily available variable inputs, its supply curve will be:

relatively flat.

Figure: Market for Avocados) The figure shows the market for avocados. If the seller changes the price per avocado from $1.50 to $1.75, the change in total revenue is:

see graph $12,750

(Figure: Market for Engines) According to the figure, if there is international trade in this market, and the world price of engines is $1,000, domestic consumers will purchase _____ units from domestic producers and _____ units from foreign producers.

see graph 400; 0

(Figure: Market 3) Use the graph for the watermelon market to answer the question. What is the economically efficient quantity of watermelons?

see graph 5

(Figure: Market for Electrical Components) Refer to the figure which shows the market for electrical components. Which of the following statements is correct?

see graph The economic burden of this tax is greater on the buyer.

(Figure: Market for TVs 2) According to the figure, if there is international trade in this market, and the world price of televisions is $500:

see graph domestic consumers will import 30,000 units.

(Figure: Output Level) According to the rational rule, what output and price should the firm in the following example choose?

see graph quantity = 4; price = $4.00

(Table: Four persons) The table lists the minutes that it will take four persons to wash a car and to sort and fold a load of laundry. Use the data to answer the question.

see table 2.4 loads of laundry will not be sorted and folded.

According to the Rational Rule for Sellers, the manager of this company should choose to produce _____ of output and charge a price of _____.

see table two units; $450

(Figure: Market for Leather Wallets) Producers of hand-made leather wallets have made manufacturing changes that have improved quality but reduced efficiency. Which graph shows this change in the market?

the graph with supply curve shifting leftward

The law of demand refers to

the inverse relationship between price and quantity demanded.

Economic surplus measures the value of a decision's:

total benefits minus its total costs.

Two products have a cross-price elasticity of demand of 1.5. Based on this value of cross-price elasticity, which of the following products are they most likely to be?

two competing brands of soft drinks

When market power is a significant force in a product market, the market tends to _____ compared to a market where there is no market power.

underproduce

One of the market failures caused by market power is

underproduction

The percent change in insulin demanded for any price change is zero. The demand curve for insulin is _____, and the price elasticity of demand is _____.

vertical; perfectly inelastic

To avoid harm to society, the government often becomes the supplier of a good or service when the respective market

would be a natural monopoly, and the good or service is considered essential.