Microeconomics Exam 11/14

In a perfectly competitive market, which of the following shifts in the supply and demand curves will definitely cause both the equilibrium and price and quantity to decrease?

supply curve: no shift; demand curve: shifts to the left

Which of the following must be true if the revenues of wheat farmers increase when the price of wheat increases?

the demand for wheat is price inelastic

Which of the following statements is true for a perfectly competitive firm but not true for a monopoly?

the firm cannot affect the market price for its good

If marginal revenue is equal to P1, all of the following statements are true EXCEPT:

the firm will increase production in the long run

Assume that a competitive industry producing a normal good is in long-run equilibrium. If average consumer income decreases, which of the following changes will occur?

short-run price: decrease; short-run industry output: decrease; movement: of firms: exit

The demand curve for a normal good slopes down for which of the following reasons? I. An increase in the price of the good induces consumers to purchase substitute products. II. An increase in the price of the good reduces consumers' purchasing power. III. An increase int he price of the good increases consumers' utility from consuming that good.

I and II only

In a competitive equilibrium, consumer surplus is the area of

WYZ

If bologna is an inferior good, which of the following must be true?

an increase in consumer income will decrease the demand for bologna

Which of the following events will cause the demand curve for hamburgers to shift to the right?

and increase in the price of pizza, a substitute for hamburgers

Monopolies are inefficient compared to perfectly competitive firms because monopolies

charge a price greater than marginal cost

When a perfectly competitive firm sells additional units of output, its total revenue will

increase at a constant rate

A profit-maximizing form will hire

labor until its wage rate equals its marginal revenue product

If a normal good is produced in a competitive market, which of the following combinations of events could cause the price of the good to increase and the quantity to decrease?

an increase in the average income of consumers and an increase in the price of a variable input

The vertical distance CF represents the

average fixed cost of producing Q1, units of output

If a price floor is set at X, the quantity demanded will

decrease from 0S to 0R

In a perfectly competitive industry, the market price of the product is $12. A firm produces at a level of output where average total cost is $16, marginal cost is $16, and average variable cost is $8. To maximize its profit, the firm should

decrease output but keep producing

The relationship in the graph above best illustrates the economic concept of

diminishing marginal returns in production

An individual's labor supply curve is derived from that person's preferences about the trade-off between income and

leisure

The basic economic problem of all countries is the existence of

limited resources and unlimited wants

Which of the following best describes a perfectly competitive market?

many small firms producing a homogeneous product and facing no significant barriers to entry

A chemical plant pollutes a river that serves as the water supply for a nearby town. From an economist's point of view, pollution from the plant should be reduced until the

marginal benefit from cleaner water is equal tot he marginal cost of making the water cleaner

All of the following are included in computing the opportunity cost of attending college EXCEPT

money spent on clothing expenses

Which of the following statements is true for a monopolist at the profit-maximizing output level?

price exceeds marginal revenue

If a perfectly competitive industry were monopolized without any changes in cost conditions, the price and quantity produced would change in which of the following ways?

price: increase; quantity: decrease

Assume that popcorn and movie attendance are complements and that Salty Concession grows corn suitable for popping. Mr. Concession will most likely sell a greater quantity of popping corn at a higher price if which of the following occurs?

the release of three summer movies sets records for movie attendance

A country can consume beyond its present production possibilities curve when it

trades with other countries, thus taking advantage of different opportunity costs