Mirco Midterm

A bond's coupon payment divided by the bond's current price is equal to the bond's

current yield.

Who controls a partnership?

the owners

Which of the following is an example of an implicit cost that a firm might incur?

the rental value of the office space the company owns and uses for itself

Refer to Figure 2-6. If the economy is currently producing at point C, what is the opportunity cost of moving to point B?

10 thousand wrenches

Which of the following is the correct way to describe equilibrium in a market?

At equilibrium, quantity demanded equals quantity supplied.

Which of the following is a normative economic statement?

Farmers should not be allowed to grow and sell genetically-modified crops.

Economists have used the ultimatum game and the dictator game in experiments designed to determine

whether consumers care about fairness when they make decisions.

Which of the following is not an example of an economic trade-off that a firm has to face?

whether or not consumers will buy its products

Economists are reluctant to state that price controls are desirable or undesirable because

whether the gains from the winners exceed the losses from the losers is not strictly an economic question.

Consider a downward-sloping demand curve. When the price of a normal good decreases, the income and substitution effects

work in the same direction to increase quantity demanded

Which of the following is not a factor of production?

$1,000 in cash

Allison's Auto Art is a company that applies pinstripes to vehicles. Allison's cost for a basic 1-color pinstriping job is $35, and she charges $95 for this service. For a total price of $175, Allison will apply a fancier 3-color pinstripe application to an automobile, a service that adds an additional $40 to the total cost of the package. What is Allison's marginal benefit if she sells a basic 1-color job?

$95

DeShawn's Detailing is a service that details cars at the customers' homes or places of work. DeShawn's cost for a basic detailing package is $40, and he charges $75 for this service. For a total price of $90, DeShawn will also detail the car's engine, a service that adds an additional $20 to the total cost of the package. What is the marginal cost of adding the engine detailing to the basic detailing package?

20$

Why do corporations want to keep the price of their stock high?

A higher stock price increases the funds the firm can raise when it sells a given amount of stock.

Refer to Figure 3-1. A decrease in the price of the product would be represented by a movement from

A to B.

Assume that Bulgaria has a comparative advantage in producing sandals and Finland imports sandals from Bulgaria. We can conclude that

Bulgaria has a lower opportunity cost of producing sandals relative to Finland.

Refer to Figure 10-5. Which of the following statements is true?

Bundles r and w are not affordable.

________ refers to the reduction in economic surplus resulting from not being in competitive equilibrium.

Deadweight loss

Refer to Figure 2-13. One segment of the circular flow diagram in the figure shows the flow of funds from economic agents E to market F. Who are economic agents E and what is market F?

E = firms; F = product markets

________ is maximized in a competitive market when marginal benefit equals marginal cost.

Economic surplus

________ refers to reductions in a firm's costs that result from an increase in the size of an industry.

External economies

________ marginal opportunity cost implies that the more resources already devoted to any activity, the payoff from allocating yet more resources to that activity increases by progressively smaller amounts.

Increasing

Adhira buys chocolates and almonds. She has 3 bars of chocolates and 4 bags of almonds. The marginal utility of the third chocolate bar is 18 units of utility and the marginal utility from the fourth bag of almonds is also 18. Is Adhira maximizing her utility?

No, without information on her income and the prices of the two goods, we cannot answer the question.

Refer to Figure 3-2. An increase in the price of substitutes in production would be represented by a movement from

S2 to S1.

Assume there is a shortage in the market for digital music players. Which of the following statements correctly describes this situation?

Some consumers will be unable to obtain digital music players at the market price and will have an incentive to offer to buy the product at a higher price.

Refer to Figure 2-10. Which country has a comparative advantage in the production of milk?

Tahiti

Which of the following is motivated by an efficiency concern?

The United Network for Organ Sharing advocates a system of rationing scarce kidneys that would favor young patients over old in an effort to wring more life out of donated organs.

"The price of compact fluorescent light bulbs fell because of improvements in production technology. As a result, the demand for incandescent light bulbs decreased. This caused the price of incandescent light bulbs to fall; as the price of incandescent light bulbs fell the demand for incandescent light bulbs decreased even further." Evaluate this statement.

The statement is false. A decrease in the price of compact fluorescent light bulbs would decrease the demand for incandescent light bulbs, but a decrease in the price of incandescent light bulbs would not cause the demand for incandescent light bulbs to decrease.

Which of the following correctly describes the relationship between economic efficiency and economic equity?

There is often a trade-off between the two.

Which of the following is a microeconomics question?

What factors determine the price of carrots?

Which of the following is a microeconomics question?

Will the merger of American Airlines and US Airways increase or decrease airfares?

Countries that engage in trade will tend to specialize in the production of goods and services in which they have ________ and will ________ these goods and services.

a comparative advantage; export

An increase in the price of pineapples will result in

a larger quantity of pineapples supplied.

Which of the following is the best example of a quota?

a limit imposed on the number of sport utility vehicles that the United States can import from Japan

When every good or service is produced up to the point where the last unit provides ________, allocative efficiency occurs.

a marginal benefit to society equal to the marginal cost of producing it

Which term refers to a legally established minimum price that firms may charge?

a price floor

An agreement negotiated by two countries that places a numerical limit on the quantity of a good that can be imported by one country from another country is called

a voluntary export restraint.

Which of the following would cause both the equilibrium price and equilibrium quantity of cotton (assume that cotton is a normal good) to increase?

an increase in consumer income

Arlene quits her $125,000-a-year job to take care of her ailing parents. What is the opportunity cost of her decision?

at least $125,000

Which of the movements listed above represents economic growth?

b and c only

An outward shift of a nation's production possibilities frontier represents

economic growth.

A normal rate of return refers to the ________ that investors must earn on the funds they invest in a firm, expressed as a percentage of the amount invested.

minimum amount

By drawing a demand curve with ________ on the vertical axis and ________ on the horizontal axis, economists assume that the most important determinant of the demand for a good is the ________ of the good.

price; quantity; price

A corporation is owned by its

stockholders.

Refer to Figure 2-1. Point B is

technically efficient.

Absolute advantage is

the ability to produce more of a good or service than competitors when using the same amount of resources.

A minimum wage law dictates

the lowest wage that firms may pay for labor.

Refer to Figure 10-6. Which diagram demonstrates a decrease in total utility following an increase in the price of candy?

the movement from k to h in Panel C

A significant downside to network externalities is that

there may be large switching costs to consumers of changing products so that consumers end up using products with inferior technologies.

Without an increase in the supplies of factors of production, how can a nation achieve economic growth?

through technological advancement which enables more output with the same quantity of resources