Microeconomics Final Exam Study Guide

Refer to the Table above. Assume that fruit baskets are sold in a perfectly competitive market. The market price of a fruit basket is $15. Exotic Fruit's maximum profit (or minimum loss) is ________.

-$21

In December 2014, the average price of gasoline in the United States was $2.50 per gallon and consumers bought 18 percent more gasoline than they had during April 2014, when the average price was $3.60 per gallon. Based on these numbers, what was the price elasticity of demand for gasoline from April 2014 to December 2014?

-0.5

Refer to the Figure above. If the price of a hamburger is increased from $8 to $10, the price elasticity of demand equals ________. Use the midpoint formula.

-3.00

When the price of fresh fish increases 10%, quantity demanded is unchanged. This means that the absolute value of the price elasticity of demand for fresh fish is ___________

0.00

Jaycee Jeans sold 40 pairs of jeans at a price of $40. When it lowered its price to $20, the quantity sold increased to 60 pairs. Calculate the absolute value of the price elasticity of demand. Use the midpoint formula.

0.6

At a price of $100, Beachside Canoe Rentals rented 11 canoes. When it increased its rental price to $125, 9 canoes were rented. Calculate the absolute value of the price elasticity of demand for canoe rentals using the midpoint formula.

0.9

Table 11-1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May. What is the average product of labor when the farm hires 5 workers?

10.8 pounds

Refer to the Figure above. The fixed cost of production is $_____

100

Refer to the Table above. The marginal utility of the third soda per day is

12

Refer to the above table. How much is total product when 4 units of labor are used?

1328

If the firm increases output from 15 to 20 units, the marginal cost of output is $_____.

14

Refer to the Figure above: The marginal utility of the first movie rental is

15

Refer to the Figure above. The average variable cost of production when the firm produces 20 units of output is $_____

17.5

Refer to the Table above. What is the absolute value of price elasticity of demand when price increases from $6.0 to $8? [Hint: use the midpoint method]

2.0.

Suppose that when the price per ream of recycled printer paper rises from $4 to $4.50, the quantity demanded falls from 800 to 600 reams per day. Using the midpoint formula, what is the price elasticity of demand (in absolute value) over this range?

2.43

Suppose an assistant professor of economics is earning a salary of $75,000 per year. One day, she quits her job, sells $100,000 worth of bonds that had been earning her 3 percent per year, and uses the funds to open a bookstore. At the end of the year, she shows an accounting profit of $80,000. Her economic profit is $_____.

2000

Suppose that one worker can produce 15 cookies, two workers can produce 35 cookies together, and three workers can produce 63 cookies together. What is the average product of the three workers?

21 cookies

Refer to the Table above: The marginal utility of the second hamburger is

22

Refer to the Figure above. The average total cost of production when the firm produces 20 units of output is $_____

22.5

(Refer to the Table). What is the market quantity demanded of DVDs at a price of $12?

24

Suppose that one worker can produce 15 cookies, two workers can produce 35 cookies together, and three workers can produce 63 cookies together. What is the marginal product of the 3rd worker?

28 cookies

Refer to the Figure above: The marginal utility of the third movie rental is

3

Refer to the Table above: The total utility of one hamburger per day is

30

Table 11-1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May. Diminishing marginal returns sets in when the ________ worker is hired.

3rd

Which of the following would be best classified as a private good?

Clothing

If, as an entrepreneur, I am earning accounting profits of $75,000 per year and the opportunity cost of my time is $60,000, ________.

I am earning economic profits of $15,000.

If Argyle expects to produce 5,000 sweaters per month, should he build a smaller factory or a larger factory? ______________

Larger

Which one of the following is FALSE?

MC = TC divided by Q

Which of the following describes a barrier to entry?

anything that protects a firm from the arrival of new competitors

In the above figure, if the market quantity is restricted to 500,000 and the price is allowed to rise to set the quantity demanded equal to the quantity supplied, then the producer surplus is equal to ___________.

area B + area D + area F.

The total of consumer plus producer surplus is greatest

at the market equilibrium

Although patents are a ________, they also provide ________.

barrier to entry; an incentive for invention and innovation

Over the past several years, consumer tastes for tattoos have increased. This means that the ________ for tattoos has ________.

demand; increased

The payment for a factor of production that is perfectly inelastic in supply is __________.

economic rent.

The figure above represents the competitive market for slices of key lime pie. When 60 slices are produced, the marginal cost

equals the marginal benefit.

In the long run, a firm in a perfectly competitive industry will supply output only if its total revenue covers its

explicit costs plus its implicit costs.

Suppose a firm doubles its output in the long run. At the same time the unit cost of production remains unchanged. We can conclude that the firm is

facing constant returns to scale

In the above table, diminishing marginal product sets in when the ________ worker is employed.

first

Refer to the Table above: Diminishing marginal utility sets in after consuming the ________ soda per day.

first

The typical supply curve illustrates that:

other things equal, the quantity supplied is positively related to the price of a good.

The price elasticity of demand measures the ________ that results from a ________.

percentage change in the quantity demanded; percentage change in price

If we add successive laborers to work a given amount of land on a wheat farm, eventually

the increases in wheat harvested will get smaller and smaller.

(Refer to the Figure: Demand for DVDs) A decrease in the price of movie tickets (a substitute) would result in a change illustrated by:

the move from f to g in panel A.

(Refer to the Figure: Demand for DVDs): A decrease in the price of DVD players (a complement) would result in a change illustrated by:

the move from j to k in panel C.

(Refer to the Figure: The Supply of DVD rentals): A decrease in the price of DVDs sold by movie producers to rental stores would result in a change illustrated by:

the move from n to o in panel A.

When an entrepreneur invests his own financial capital in order to start a business __________

the opportunity cost of capital should be included in the economic cost of doing business.

If a firm is producing where MR < MC,

the revenue gained by producing one more unit of output is less than the cost incurred by doing so.

Efficiency occurs in a market when _____________.

the sum of consumer surplus and producer surplus is maximized.

One of the requirements for a monopoly is that

there is a product with no close substitutes.

Suppose that demand and supply functions in the market for laundry detergent are given by the following equations: Qd = 40 - 2.5P (Qd is quantity demanded in millions of ounces; P is the price in dollars) Qs = 2.5P (Qs is quantity supplied millions of ounces; P is the price in dollars) At a price of $4 per million ounces of laundry detergent, ______

there is a shortage of 20 million ounces

A positive, but decreasing, value for the marginal product would indicate that

total output is increasing at a decreasing rate

Accounting profit can be calculated as __________.

total revenue - explicit costs.

In the above figure, the market is at its equilibrium. Area A + area B is equal to ____________

total surplus

(Refer to the Table: The Demand for Chocolate-Covered Peanuts) If Barbara is only able to purchase 20 bags of chocolate-covered peanuts, the maximum price she is willing and able to pay for the 20th bag is ________.

$0.70

(Refer to the Table: The Market for Chocolate-Covered Peanuts): A surplus of 210 bags of chocolate-covered peanuts exists if the price is ________ per bag.

$0.90

Refer to the above table. When output rises from 2 units to 3 units, marginal costs are

$10

When output is 100 units, the firm's total fixed cost is $1,000. What will this firm's total fixed cost be if output doubles to 200 units?

$1000

Suppose that Rihanna sells 1,000 tickets to a concerts at $480 each. If the equilibrium price is $600 per ticket for a fixed supply of 1,000 tickets, what is the value of the additional economic rent that Rihanna could earn if she charged the market clearing price?

$120,000

Assume it takes 10 units of labor to produce 4 units of output. When the price of labor is $6 per unit (of labor) and fixed costs equal $65, what is the total cost of those 4 units of output? (Assume labor cost is the only variable cost)

$125

When Super Stuff Corporation produces 5,000 units, total costs equal $150,000 and total variable costs equal $70,000. At this level of output, what is Super Stuff's average fixed cost?

$16

Suppose the best investment you could make with $200,000 in cash is to purchase a government bond that pays 10 percent interest per year. If you decide to invest the money in your own business instead of buying the government bond, the opportunity cost of this financial capital is _________.

$20,000 per year.

In the figure above, if the market price is $12, then the total consumer surplus is ________

$240

Suppose that when the level of output for the firm increases from 100 to 110 units, its variable costs increase from $500 to $750. What is the firm's marginal cost?

$25

A firm in a perfectly competitive industry is producing 55 units, its profit-maximizing quantity. Industry price is $2, total fixed costs are $25, and total variable costs are $40. The firm's economic profit is

$35

Refer to the above graph: If government set a price floor at $4, the deadweight loss created would be equal to _____.

$40

In the above table, when output is 2 units, average variable costs are

$5.50

Refer to the Figure above. If Buffy gives 17 perms per day, her daily profit is

$51

Suppose that demand and supply functions in the market for laundry detergent are given by the following equations: Qd = 40 - 2.5P (Qd is quantity demanded in millions of ounces; P is the price in dollars) Qs = 2.5P (Qs is quantity supplied in millions of ounces; P is the price in dollars) The market equilibrium price is ________ and equilibrium quantity is _______.

$8; 20 ounces

Refer to the Table above: If the price of a soda is $2, the price of a hamburger is $6, and George has $14 of income, George's utility maximizing combination of sodas and hamburgers per day is

4 sodas and 1 hamburger

Refer to the above Table: Diminishing marginal product of labor sets in when the _____ worker is employed

4th

Refer to the Figure above. The average fixed cost of production when the firm produces 20 units of output is $_____

5

Table 11-1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May. What is the marginal product of the 4th worker?

5 pounds

Refer to the Figure above. The average fixed cost of production when the firm produces 15 units of output is $_____

6.67

Jane has $500 a week to spend on clothing and food. The price of clothing is $25 and the price of food is $10. The clothing and food pairs in Jane's choice set include ________ units of clothing and ________ units of food.

8; 30

Which one of the following about a monopoly is false?

A monopoly must have some kind of government privilege or government-imposed barrier to maintain its monopoly.

(Refer to the Figure: Demand for Coconuts) If fish is a substitute good for coconuts and the price of fish increases, then the movement that would take place in the model could be:

A to C

(Refer to the Figure: Supply of Coconuts) If there is an improvement in the technology used to harvest coconuts (e.g., a faster, less expensive coconut picker), then the movement in the model could be:

A to C

Refer to the figure above: At equilibrium, consumer surplus is equal to area ________.

A+B+C

Refer to the figure above: If price is P1, consumer surplus is equal to area ________.

A+B+E

If your tuition is $25,000 this semester, your books cost $1,500, you can only work 20 rather than 40 hours per week during the 15 weeks you are taking classes and you make $15 per hour, and your room and board is $7,500 this semester (same as if not attending college), then your opportunity cost of attending college this semester is equal to the value of _______.

A. $26,500. B. $26,800 C. $31,000. D. $38,500 C. $31,000.

Using the production Possibilities Table above, the average opportunity cost of producing one ton of bananas as we go from producing 20 tons of bananas to 21 tons of bananas is ________

A. 1/5 tons of bananas B. 5 tons of bananas C. 5 tons of apples D. 1/5 tons of apples C. 5 tons of apples

(Table: Comparative Advantage I) The opportunity cost of producing 1 unit of cellphones for Sweden is:

A. 10 units of herring. B. 5 units of herring. C. 1/5 unit of herring. D. 1/10 unit of herring. A. 10 units of herring.

Refer to the graph above. If the marginal cost of each weekend trip this year is $899 no matter how many trips Rodney takes, then assuming he is rational, Rodney will take _________. [Note: The height of each bar represents the marginal benefit obtained from each of the trips 1 through 4]

A. 3 trips this year. B. 2 trips this year. C. 1 trip this year. D. 0 trips this year. D. 0 trips this year.

Output of Apples (tons) Output of Bananas (tons) 30, 0 25, 6 20, 11 15, 15 10, 18 5, 20 0, 21 Using the production Possibilities Table above, the average opportunity cost of producing one ton of bananas as we go from producing zero bananas to 6 tons of bananas is ________

A. 5/6 tons of apples B. 5/6 tons of bananas C. 6/5 tons of bananas D. 6/5 tons of apples A. 5/6 tons of apples

Refer to the Table above: If the economy is producing at alternative X, the opportunity cost of producing at Y instead of X is ________ units of consumer goods per period.

A. 8 B. 0 C. 6 D. 14 C. 6

Refer to the PPC above. Points ______, _______, _______, and _______, represent full and efficient use of resources and technology.

A. A, B, D, and E B. A, B, D, and F C. A, B, C, and D D. E, F, C, and D A. A, B, D, and E

Refer to the above PPC. Which of the following statements is false?

A. An increase in the resources available to produce motorcycles and hybrid cars would shift the PPC outward B. The slope of the PPC at any point is equal to the opportunity cost of producing a motorcycle C. Point E represents inefficient production because no hybrid cars are produced D. Both points A and E represent efficient production C. Point E represents inefficient production because no hybrid cars are produced

Refer to the above Production Possibilities Curve (PPC). An economy experiencing a high rate of unemployment will likely produce at a point such as ________.

A. C B. E C. A D. F A. C

In the above production possibilities Table, as the production of bananas increases, the cost of producing an additional ton of bananas _______

A. Decreases B. remains constant C. cannot be determined D. increases D. increases

Refer to the PPF above. Point ______ represents a desirable but unattainable output of motorcycles and hybrid cars.

A. E B. F C. D D. A B. F

(Table: Comparative Advantage I): Based on comparative advantage, __________ should specialize in the production of cell phones.

A. Finland B. Sweden C. Neither Sweden nor Finland D. Both Sweden and Finland

Suppose that you purchased a ticket to a jazz festival for $100 from an online ticket broker. Once you arrived at the festival, you discovered that parking costs you an additional $15. In this situation, the additional $15 you pay for parking is an example of

A. Opportunity cost B. Economic cost C. Marginal cost D. An efficient cost C. Marginal Cost

The production possibility frontier will shift outward for which of the following reasons?

A. a decrease in the labor force B. a decrease in the unemployment rate C. better technology that improves worker productivity D. a better use of the available capital C. better technology that improves worker

If an economy has to sacrifice increasing amounts of good X for each unit of good Y produced, then its production possibility frontier is:

A. a vertical line B. a straight line C. bowed in toward the origin D. bowed out from the origin D. bowed out from the origin

The government should extend the duration of unemployment benefits to those workers who lost their jobs due to outsourcing. This statement is best described as

A. an example of irrationality B. a positive statement. C. a normative statement. D. an example of marginalism. C. a normative statement

An economic system is

A. an organization that generates profits. B. the universe of all resources. C. a mechanism to allocate scarce resources. D. a way to create new resources. C. a mechanism to allocate scarce resources.

Inflation and unemployment

A. are a focus of macroeconomics. B. are a focus of positive economics. C. are the focus of normative economics. D. are a focus of microeconomics. A. are a focus of macroeconomics.

Normative economic statements

A. are easily testable. B. are always factual statements C. contain value judgments. D. are usually irrational. C. contain value judgments.

(Table: Comparative Advantage I) Finland has an absolute advantage in producing:

A. cell phones only. B. herring only. C. both cell phones and herring. D. neither cell phones nor herring. D. neither cell phones nor herring.

(Table: Comparative Advantage I) Sweden has an absolute advantage in producing:

A. cellphones only B. nether cellphones nor herring C. herring only D. both cellphones and herring C. herring only

A mixed economic system is best described an economy with a mix of

A. free markets and government control. B. state and federal governments. C. domestic and foreign buyers. D. for-profit organizations and not-for-profit organizations. A. free markets and government control.

Economics deals with

A. how to profit from the stock market. B. how to satisfy limited human wants. C. how society allocates unlimited resources. D. how individuals and societies allocate scarce resources to satisfy unlimited human wants. D. how individuals and societies allocate scarce resources to satisfy unlimited human wants.

Economists usually make the assumption that production is subject to increasing opportunity costs because:

A. individuals desire constantly increasing opportunities to make themselves better off. B. if production is efficient, it is not possible to increase the production of all goods simultaneously. C. higher production usually results in more inflation. D. all resources are not equally suited to producing every good. D. all resources are not equally suited to producing every good.

You own the Star Wars six DVD set. The opportunity cost of watching these DVDs for the second time

A. is zero. B. is the value of the alternative use of the time you spend watching the DVDs. C. is one-half the cost of the DVDs, as this is the second time you have watched it. D. cannot be calculated B. is the value of the alternative use of the time you spend watching the DVDs.

The branch of economics that examines the functioning of individual industries and the behavior of individual decision-making units is

A. positive economics. B. microeconomics. C. normative economics. D. institutional economics. B. microeconomics.

Capital, as economists use the term,

A. refers to things that have already been produced that are in turn used to produce other goods and services. B. is the money the firm spends to hire resources. C. is money the firm raises from selling stock. D. refers to the process by which resources are transformed into useful forms. A. refers to things that have already been produced that are in turn used to produce other goods and services.

Self-interest

A. relates strictly to material well-being, such as a person's stock of wealth at a point in time. B. can involve any action that makes a person feel better off, such as charitable contributions. C. is inconsistent with economic analysis, which suggests that self-interest is irrational. D. is measured entirely based on an individual's income, whether earned from labor or inherited. B. can involve any action that makes a person feel better off, such as charitable contributions.

Refer to the Table above: The production of 14 units of consumer goods and 1 unit of capital goods per period would:

A. result in some unused or inefficiently used resources B. result in full employment C. increase economic growth D. shift the economy's PPC inward A. result in some unused or inefficiently used resources

Suppose the sunk cost of obtaining your college degree is $50,000, the marginal cost is $175,000, and the marginal benefit is $200,000. Marginal analysis implies that you:

A. should complete your degree. B. should not complete your degree. C. should complete your degree only if the marginal cost is equal to or less than $150,000 D. obtain more information before making a decision. A. should complete your degree.

Which of the following would most likely NOT be taught in a microeconomics course?

A. the unemployment rate B. changes in prices of automobiles C. the effect of an increase in wheat prices on farmers' behavior D. the effects of a gas tax on gas purchases A. the unemployment rate

Economics can be described as the study of how people use ________ resources to satisfy ________ wants.

A. unlimited; limited B. limited; limited C. unlimited; unlimited D. limited; unlimited D. limited; unlimited

(Refer to the Figure: Demand for Coconuts) If a coconut is a normal good and the price of coconuts increases, then the movement that would take place in the model could be

B to A

(Refer to the Figure: Supply of Coconuts): If the prices of inputs (e.g., labor, fertilizer, and fuel) used to produce and transport coconuts are increasing, then the movement in the model could be:

C to A.

Dane decides to give up a job earning $200,000 per year as a corporate lawyer and converts a duplex he owns into a UFO museum. The market rent for a similar duplex is $20,000 a year. He pays wages of $75,000 a year to his assistants and $10,000 a year for utilities. Fans flock to the museum to see his collection of extraterrestrial paraphernalia. Over the course of the year, the museum brings in revenues of $200,000.

Dane's accounting profit is $ 115000 Dane's economic profit is $-105000

Refer to the above figure: At equilibrium, producer surplus is equal to area _______.

E+F+G

The Hawaiian island of Lana'i is privately owned by Castle & Cooke and for generations most of its land was used to grow pineapples. Now, many of the pineapple fields have been replaced by tourist accommodations, including a pair of world-class hotels and a top-rated golf course. What would an economist say about this change in land-use patterns?

Economic rent has allocated the island's resources to their highest valued use: tourism.

Refer to the figure above: If price is P1, producer surplus is equal to area _______

G

A utility-maximizing consumer buys so as to make ________ for all pairs of goods. [Hint: One of the choices below is equivalent to the utility maximizing condition discussed in class, but written differently]

MUx/MUy = Px/Py

Dane decides to give up a job earning $200,000 per year as a corporate lawyer and converts a duplex he owns into a UFO museum. The market rent for a similar duplex is $20,000 a year. He pays wages of $75,000 a year to his assistants and $10,000 a year for utilities. Fans flock to the museum to see his collection of extraterrestrial paraphernalia. Over the course of the year, the museum brings in revenues of $200,000. Based on the performance of the museum in this one year, should Dane have quit his job as a corporate lawyer? Briefly explain why or why not. [Hint: State "Yes" or "No" and briefly explain your answer]

No because when he was a lawyer, he was earning $200,000 and he could've earned the additional $20,000 if he rented the duplex, so in total he would have been earning more, but now we see he is earning an economic loss.

If a firm's demand curve is perfectly elastic, then at the profit maximizing level of output

P = MR = MC.

Suppose Argyle Sachs has to choose between building a smaller sweater factory and a larger sweater factory. In the following graph, the relationship between costs and output for the smaller factory is represented by the curve ATC1, and the relationship between costs and output for the larger factory is represented by the curve ATC2. If Argyle expects to produce 3,600 sweaters per month, should he build a smaller factory or a larger factory? ___________ [Hint: State "Smaller" or "Larger"]

Smaller

A primary difference between a change in demand and a change in the quantity demanded is:

a change in quantity demanded causes a movement along the demand curve and a change in demand causes a shift in the demand curve.

In much of the country, homeowners choose to heat their houses with either natural gas or home heating oil. Which of the following could cause the demand for natural gas to change?

a change in the price of home heating oil

Which of the following displays these two characteristics: rivalry in consumption and nonexcludable?

a common pool resource

A public good is

a good that is nonrivalrous in consumption and nonexcludable.

Mylan Pharmaceuticals holds a patent on the EpiPen - designed to inject epinephrine into shock victims. In 2016, Mylan received criticism for charging $600 for this life-saving drug. The market for EpiPens is considered ________ which means that the price of an Epipen ________ its marginal cost.

a monopoly; is greater than

Economic rent is _________________.

a payment for the use of any resource above its opportunity cost.

A monopoly is an industry with

a single firm in which the entry of new firms is blocked.

(Refer to the Table: The Market for Chocolate-Covered Peanuts): If the price of chocolate-covered peanuts is $0.80, there is:

a surplus of 140 bags per month.

Marginal utility is the ________ satisfaction gained by consuming ________ of a good.

additional; one more unit

Refer to the Table above: Assume that a store is giving hamburgers and sodas away for free. Consumers can have as many sodas and hamburgers as they want, but the food has to be consumed one unit at a time. If George has already had one soda and two hamburgers, then George should

be indifferent between consuming the second soda or the third hamburger.

(Refer to the Figure: Demand and Supply of Gasoline) A factor that may have changed supply from S1 to S2 is:

better technology in the production of gasoline.

When efficiency is attained, the consumer surplus ________.

can be smaller than, equal to, or larger than the producer surplus.

In the above figure, if the market is in equilibrium, area A + area B + area C equals __________.

consumer surplus

In the above figure, if the quantity is restricted to 500,000 and the price is allowed to rise to set the quantity demanded equal to the quantity supplied, then area A is equal to

consumer surplus

In the above figure, the market is at its equilibrium. Area A is equal to

consumer surplus

In the above figure, if the quantity is restricted to 500,000 and the price is allowed to rise to set the quantity demanded equal to the quantity supplied, then area C + area E is equal to _______.

deadweight loss

The price elasticity of demand for beef is estimated to be 3.0 (in absolute value). This means that a 20 percent increase in the price of beef, holding everything else constant, will cause the quantity of beef demanded to

decrease by 60 percent

The ABC Computer Company wants to increase the quantity of computers it sells by 5%. If the price elasticity of demand is -2.5, the company must _________

decrease price by 2.0%.

If goods A and Z are complements, an increase in the price of good Z will:

decrease the demand for good A.

Wheat is produced in a perfectly competitive market. Market demand for wheat decreases. This will cause the individual wheat farmer's marginal revenue to ________ and their profit maximizing level of output to ________.

decrease; decrease

Refer to the Table above. Assume that fruit baskets are sold in a perfectly competitive market. The market price of a fruit basket is $15. To maximize profits, Exotic Fruit should sell ________ fruit baskets.

five

Ben's Peanut Shoppe suffers a short-run loss. Ben will not choose to shut down if

his Shoppe's total revenue exceeds his variable cost.

If the demand curve is the same as the marginal benefit curve and the supply curve is the same as the marginal cost curve, then the quantity at which they cross is i. the equilibrium quantity. ii. the allocatively efficient quantity. iii. the quantity with no deadweight loss.

i, ii, and iii.

If the firm can vary all factors of production, it is operating

in the long run

Strawberries, a normal good, are produced in a perfectly competitive market. Average consumer incomes increase. This will cause the individual strawberry farmer's marginal revenue to ________ and their profit maximizing level of output to ________.

increase; increase

Mylan Pharmaceuticals holds a patent on the EpiPen - designed to inject epinephrine into shock victims. In 2016, Mylan received criticism for charging $600 for this life-saving drug. Mylan's patent is a ________ Mylan to charge a price ________.

legal barrier to entry and allows; greater than marginal cost

A perfectly competitive firm's supply curve is its

marginal cost curve above its minimum average variable cost.

When total product is decreasing,

marginal product must be negative.

Kathy eats five slices of pizza on a Saturday night but admits each slice of pizza doesn't taste as good as the previous one. This suggests that for Kathy the

marginal utility of a slice of pizza is positive but decreasing.

The figure above represents the competitive market for slices of key lime pie. If the production is 80 slices per day, the cost of the 80th slice is___________.

more than anyone is willing to pay for it.

NOTE: If the image does not load automatically, click HERE The figure above shows the competitive market for slices of key lime pie. If the production is 40 slices per day, someone is willing to buy another slice of pie for

more than it costs to produce the slice.

An efficient quantity of a public good is unlikely to be provided by the private sector because

no one can be excluded from the consumption of the good.

When a perfectly competitive firm finds that its market price is below its minimum average variable cost, it will sell

nothing at all; the firm shuts down.

In the above figure, the market is at its equilibrium. Area B is equal to _______.

producer surplus

As a firm decreases the level of output that it produces, short-run average fixed cost

rises

The less sensitive quantity demanded is to a change in price, the

smaller the absolute price elasticity of demand.

If a typical firm in a perfectly competitive industry is incurring losses, then

some firms will exit in the long run, causing market supply to decrease and market price to rise increasing profits for the remaining firms.

The free-rider problem is encountered when

someone benefits from the consumption of a public good without paying his or her full share.