Microeconomics
If the cost of a unit of labor is $20 and total fixed cost is $100, the average total cost of producing 20 units of output is
$7
The marginal product of labor is constant at 1 unit for every additional unit of labor. The monopolist hires labor in a perfectly competitive market at the wage rate of $5 per hour. What is the marginal revenue product of labor when the firm produces the third unit of output
$7
$7 so then how many units of labor should the firm employ to maximize profits
4
The student has $10 and spends it all on pizza and pens. If the price of a unit of pizza is $2 and the price of a unit of pens is $1, the student will maximize utility by purchasing which of the following combinations of pizza and pens
4 pizzas, 2 pens
If the student purchases 2 units of pizza and 2 units of pens, the student's total utility will be
53 Utils
Which of the following is true for a perfectly competitive firm in long-run equilibrium
It is allocatively efficient
Which of the following is true about the marginal revenue of a firm in a perfectly competitive industry
It is constant
In the short run, which is the following is true of a firm's average total cost of production
It is equal to average fixed cost plus average variable cost
Which of the following is true of the cross price elasticity of demand
It is greater than zero for two goods that are substitutes.
In the short run, a profit maximizing firm should should shut down if which of the following is true
It's product price is less than it's average variable cost
In which of the following cases would a firm's total revenue increase
Price decreases and demand is elastic
A decrease in raw materials prices will change the equilibrium price and quantity in a market in which of the following ways
Price: decrease, quantity: increase
Difference between a market and command economy
Property rights and protection of private property
According to the production possibilities curve below which of the following is true
The opportunity cost of producing another unit of eigher good remains constant as the production of the other good increases
Assume that demand for bottled water is relatively price elastic. An increase in supply of bottled water will result in which of the following?
A decrease in price, leading to an increase in total revenue
A perfectly competitive profit maximizing firm will continue to hire additional units of an input as long as the
Value of the marginal product of the input exceeds the price of the input
The firm shown in the diagram above qualifies as a natural monopoly because
the average total cost is decreasing in the relevant range of market demand
Which of the following is most likely to occur if a single-price monopolist is replaced by a perfectly competitive market
the deadweight loss will decrease
Assume that the market for tomatoes is in equilibrium at a price of $35 per bushel if the demand for tomatoes decreases which of the following will occur
A surplus at $35, leading to a decrease in price and in quantity supplied
At 100 units of a firm's output, average total cost is $10, average variable cost is $8, average fixed costs is $2, and marginal cost is $12. How will each of the following change as the firm's output further increases
ATC: Increase AVC:increase AFC: decrease
A leftward shift in the supply curve of watches could be caused by
An increase in wages paid to workers who produce watches
Improvements in technology for producing all goods must result in
An outward shift in the production possibilities curve
Last year 17 million tons of beans were sold for $300 per ton. This year 17 million tons of beans were sold for $285 per ton. Which of the following changes in demand and supply could have caused this outcome
Demand: decrease, supply:increase
Suppose that a firm is producing the profit maximizing output under conditions of diminishing returns. It's output price is $25 and it's marginal cost of production at its current level or output level is $25. Based on this information, it can be concluded that this firm must
Be a perfectly competitive firm
The table below shows the amount of labor required to produce a unit of corn and a unit of shoes in Brazil and Spain. If both countries have equal number of workers what pattern of international trade between Brazil and Spain is most likely to emerge
Brazil will export corn and import shoes
If a price ceiling is set at P1, which of the following areas represent teh resulting consumer surplus, producer surplus, and deadweight loss
CS: f + g + i. PS: k. DWL: h+ j
Antitrust policy seeks to prevent or eliminate which of the following practices
Collusion and price fixing
If a firm's long run average total cost increases as output increases, the firm is experiencing
Diseconomies of scale
Which of the following will be true if the firm is in perfectly competitive market and the price is P1
In the long run, existing firms in the industry will produce an output level greater than Q1
The graph below shows the market demand for Good X a movement from point A to point B would most likely be caused by
Decrease in production costs for good x
A firm with market power engages in price discrimination to
Earn a higher profit
Economists argue that most professional athletes earn economic rent because they
Earn far more as professional athletes than they could earn in the next-best occupation
The long run average cost curve will be sloping downward if a firm experiences
Economies of scale
If the government regulates a natural monopolist to produce the allocatively efficient level of output, it will require the monopolist to set a price that is
Equal to its marginal cost and grant a subsidy to cover the loss
Which of the following can give a firm market power
Having economies of scale in production over the range of market output
In the diagram above the deadweight loss from a profit maximizing monopolist is represented by area
IJK
A production possibilities curve is bowed out, indicating increasing opportunity costs because of
Imperfect adaptability of resources to alternative uses
using the same amount of time and resources, Jack can assemble either 10 bikes or 5 computers, whereas Sam can assemble either 5 bikes or 5 computers. Based on the data, which of the following statements is correct?
Jack has a comparative advantage in assembling bikes
Jane spends all her weekly allowance to buy only two goods: soda and apples. According to the table above, if her preferences are characterized by the law of diminishing marginal utility, then which of the following statements is correct?
Jane can buy more apples and less soda to maximize her utility.
If a firm's average total cost decreases as the firm increases its output, the firm's marginal cost must be
Less than the average total cost
At the current output level, a firm finds that is has the potential to increase its profit by expanding output. If P=price, and MR = marginal revenue, and MC = Marginal cost, which of the following must hold at the current output for this firm
MR > MC
Antitrust policy is designed to
Maintain a competitive business environment
Which of the following is necessarily true at a monopolist's profit maximizing level of output
Marginal revenue is equal to marginal cost but less than price
Additional satisfaction received from consuming an additional unit of a good
Marginal utility
If a good is available free of charge an individual will consume it until
Marginal utility is zero
After graduating from high school, Maria chose to go to college while Omar chose to
Maria's opportunity cost includes the salary she could have earned if she had gone to work
Anti trust policies are put in place to limit
Monopoly power
RTV so if the government regulates the monopolist to price equal to average total cost, it will establish the price at
P2
If the monopolist could engage in perfect price discrimination, the monopolist's total output and price charged for the last unit of output sold would be
Q2 and P3
If the government regulated the natural monopoly to produce the output resulting in zero economic profit then the output would be
Q4
If the monopolist is unregulated, it's profit-maximizing price and output level would lead to a deadweight loss equal to area
RTV
Suppose that in one week Sam can knit 5 sweaters of make 4 blankets and Rob can knit 10 sweaters or make 6 blankets, which of the following is true
Sam had a comparative advantage in making blankets
Assume that a firm that produces a good in a constant-cost perfectly competitive industry is in long-run equilibrium. If the demand for the good increases, the profit maximizing output by the firm will change in which of the following ways in the short run and long run
Short run: increase long run:return to original level
Portugal and Spain, which country has an absolute advantage in sugar production
Spain, because it requires fewer total labor hours than Portugal to produce a unit of sugar
If a severe drought destroys a significant portion of the peanut crop and peanut farmers' revenues increase, which of the following is true over the observed range of prices?
The demand for peanuts must be price inelastic
A perfectly competitive firm is currently in long-run equilibrium, it's total revenue is $100,000 and the average total cost of production is $100. Which of the following can be concluded from this information
The firm's output is 1000 units and it's profit is zero
An increase in which of the following will cause a firm's marginal cost curve to shift upward
The price of a variable input
Which of the following is a necessary condition for price discrimination
The seller can separate consumers according to their elasticities of demand
Suppose that the demand for soft drinks is price elastic and the supply is price inelastic. If the government imposes a sales tax on soft drinks, which of the following will occur in the short run
The tax burden will fall more on producers
Which of the following is true if consuming one unit of a good yields 100 utils and consuming the second unit of the good increases satisfaction by 20 utils
The total utility of consuming two units is 120
As a factor of production capital refers to the
Tools and machinery used to produce goods and services
The graph below shows the cost curves for a competitive firm that produces 20 units of output. What are the total cost and the total fixed cost of producing 20 units of output
Total cost : $120 Total Fixed Cost: $20
Which of the following best describes the law of demand
When the price of a good decreases, its quantity demanded increases
If the income elasticity of demand for good X is negative and the price elasticity of demand between good X and good Y is negative
X is an inferior good and a complement to Y
XYZ graph, which of the given points is demand most elastic
Z
In microeconomics, the short run is defined as which of the following
a period during which some inputs in a firm's production process cannot be changed
Assume that an economy produces televisions and shoes, which of the following would cause the production possibilities curve for this economy to shift outward
an increase in the labor force
Beyond a certain level of output, the short-run marginal cost will rise because
at least one input is fixed and eventually diminishing returns will occur
If the goal of government regulators of a natural monopoly is to reduce deadweight loss without subsidizing the monopolist, government regulators would set a price equal to
average total cost
Assume that Clark spends his entire income on the purchase of two goods, X and Y. If his income and the prices of good X and Y all double, Clark will
buy the same amount of goods X and Y
The difference between the price a consumer would be willing to pay for a cone of ice cream and the actual market price that she pays gives a measure of her
consumer surplus
The difference between what consumers are willing to pay for units of a good and the price consumers actually pay for units of the good is called
consumer surplus
After the government imposed a $0.20 per gallon tax on gasoline, the price of a gallon of gasoline increased from $1.00 to $1.15, which of the following statements is true
consumers bear most, but not all, of the tax burden
Assume that people like onions on their hamburgers. If the supply of hamburgers decreases, the demand for onions will most likely
decrease because hamburgers and onions are complements
Assuming a linear downward-sloping demand curve, as a monopoly firm sells additional units of output, its marginal revenue will
decrease continuously
Compared with a perfectly competitive market, a single-price monopoly with the same market demand and cost curves will
decrease output and increase price
Assume that the price of good X decreases from $10 to $9 per unit and that the quantity demanded of good X increases from 25 to 30 units. In this price range, the demand for good X is
elastic
A farmer in Country A can harvest 20 bushels of wheat or 10 bushels of corn in a day, while a farmer in Country B can harvest 8 bushels of wheat or 8 bushels of corn in a day. If Country A and Country B specialize and trade, Country A will
export wheat and import corn
when th market is in equilibrium, the total economic surplus is equal to area
f + g + h + i + j +k
A single price monopolist is currently producing in the inelastic portion of its demand curve. In order to maximize profits, the monopolist should change the price and output in which of the following ways
increase price and decrease output
F&D Manufacturing Company increases all its inputs by 50 percent each. If F&D's output increases by 100 percent, then F&D is experiencing
increasing returns to scale
Which of the following must be true for a firm that is a natural monopoly
it can produce and supply its product to an entire market at a lower cost than could a number of smaller firms
The short-run supply curve for a firm in a perfectly competitive market is
its marginal cost curve above average variable cost
Garcia is currently spending his entire lunch budget on 3 sodas and 4 hot dogs. At his current level of consumption, Garcia's marginal utility for sodas is 5 utils and his marginal utility for hot dogs is 10 utils. In order to maximize his total utility, Garcia should
maintain his current level of consumption if the price of soda is $1 and the price of a hot dog is $2
A firm is producing the allocatively efficient level of output if
price is equal to marginal cost
An increase in the effective minimum wage will have less of an impact on employment if the demand for labor is
relatively inelastic
If the firm produces Q1 units of output with two inputs, the firm will be experiencing which of the following in the short run and long run
short run- diminishing marginal returns long run- economies of scale
A change in which of the following will cause a change in the supply of personal computers in the short run
technology
A monopolist's demand curve is necessarily
the same as the market demand curve
Opportunity cost
the value of the next best alternative that is forgone when an activity is pursued
Businesses employ workers from city neighborhoods and rural areas. These workers are perfect substitutes and cannot relocate in the short run. The government offers businesses a wage subsidy if they hire workers from city neighborhoods. What is the effect of the subsidy on the wage rate of rural workers and on the total hours they work
wage rate of rural workers: decrease, total hours worked by rural workers: decrease
