Microeconomics Midterm

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A ceiling price in a competitive market will result in persistent surpluses of a product.

False

A price floor in a competitive market will result in persistent shortages of a product.

False

Although sleeping in on a work day or school day has an opportunity cost, sleeping in on the weekend does not.

False

An economic model is an ideal or utopian type of economy that society should strive too obtain through economic policy.

False

An increase in quantity supplied might be caused by an increase in production costs.

False

Certain inherently desirable products such as education and health care should be produced so long as resources are available.

False

If market demand increases and market supply decreases, the change in equilibrium price in unpredictable without first knowing the exact magnitudes of the demand and supply changes.

False

Normative statements are expressions of facts.

False

Surpluses drive market prices up; shortages drive them down.

False

The law of diminishing returns explains diseconomies of scale.

False

The law of diminishing returns explains why the long run average total cost curve is U-shaped.

False

The short run is a period of time during which all costs are fixed costs.

False

The smaller the number of good substitutes for a product, the greater will be the price elasticity of demand for it.

False

Toothpaste and toothbrushes are substitute goods.

False

Water has greater marginal utility than diamonds, yet diamonds have greater total utility than water.

False

When a consumer shifts purchases from X to Y, the marginal utility of X falls and the marginal utility of Y rises.

False

A government subsidy per unit of output increases supply.

True

An increase in demand accompanied by an increase in supply will increase the equilibrium quantity but the effect on equilibrium price will be indeterminate.

True

At zero units of output a firm's variable costs are zero.

True

Average fixed costs diminish continuously as output increases.

True

Consumers buy more of normal goods as their incomes rise.

True

Diseconomies of scale stem primarily from the difficulties in managing and coordinating a large-scale business enterprise.

True

If price changes and total revenue changes in the opposite direction, demand is relatively elastic.

True

If the marginal-cost curve lies below the average-variable-cost curve, the average-variable-cost curve must be falling.

True

In economics, a firm earns a normal profit when its total revenue equals its total economic costs.

True

Products and services are scarce because resources are scarce.

True

The production possibilities curve shows various combinations of two products that an economy can produce when achieving full employment.

True

The real opportunity cost of producing product X is the amounts of products Y, Z, and so forth, that might have been produced if resources had not been used to produce X.

True

When a consumer is maximizing total utility, he or she cannot increase total utility by reallocating expenditures among different products.

True


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