Practice Final Exam

a decrease in quantity supplied. (If the points are on the same line is it quantity supplied)

(Figure: Graph) In the graph, the movement from point E to point F represents

Why are supply curves typically upward-sloping?

They slope upward because higher prices lead individual businesses to supply a larger quantity and more businesses are willing to supply goods and services.

Which of the following is an example of a negative externality?

When Fazio parks his big truck at the grocery store, people in the cars on each side of his parking space have a hard time opening their car doors.

The deadweight loss in an inefficient market is calculated by first identifying the:

actual quantity produced and sold

Efficient outcomes in markets are NOT dependent on:

advanced technology

Market failure occurs when market forces lead to:

an inefficient outcome

The term "gains from trade" means the

benefits that come from reallocating resources, goods, and services to better uses

Markets allocate goods to those with the:

highest marginal benefit

When you get hired for a well-paying job, you will most likely view older used cars as

inferior goods

A characteristic of perfect competition that is not present in any other market structure is that there are...

many sellers that produce identical products.

Marginal private cost plus marginal external cost equals _____ cost

marginal social

Analysis based on value judgments is called _____ analysis

normative

An equilibrium price is a price where the

quantity supplied equals the quantity demanded.

If a firm produces a product that has easily available variable inputs, its supply curve will be:

relatively flat

A downward-sloping demand curve implies:

there is an inverse relationship between price and quantity demanded

Economic surplus measures the value of a decision's:

total benefits minus its total costs

A characteristic of monopolistic competition that is not present in any other market structure is that there are...

are many sellers and each produces its own version of the product

In the long run, a company can remain profitable only if:

barriers to entry are present

The statutory burden of a tax:

does not change the incidence of the tax

When negative externalities occur as a result of a product market's activity, the market will _____ than is desirable

produce more

If income rises by 20% and the quantity demanded of an item falls by 20%, the income elasticity of demand for this item is:

-1

Which of the following lists only factors that would cause a decrease in the demand for a good?

A decrease in popularity of a good; a rise in income (if the good is an inferior good); a fall in the price of a substitute good.

(Figure: Market for Leather Wallets) Producers of hand-made leather wallets have made manufacturing changes that have improved quality but reduced efficiency. Which graph shows this change in the market?

Graph C

(Figure: Market for Tropicana Juices) Tropicana produces both orange juice and lemonade. What will happen to the supply of Tropicana orange juice when the price of lemonade rises in the market and the price of orange juice stays the same?

Graph C

(Figure: Market for Apple Computers) Dell and Apple are competitors in the computer market. Which graph illustrates the effect of a rise in the price of Dell computers on the demand for Apple computers?

Graph D

Pedro attends a university that provides antivirus software to all students, faculty, and staff for their personal computers as well as all university-owned computers. Why would the university pay for the protection of the personal computers of students, faculty, and staff?

It reduces the number of viruses on university-owned computers by reducing the probability that viruses will spread through files transferred from personal computers to university-owned computers and systems

A company is the only one producing its type of product. The company's owner is able to set price at the most profitable level. This company is in what type of market?

Monopoly

A new study discovers the health benefits of eating fish regularly. At the same time, some consumers decide to become vegetarians. What is the effect of these events on the equilibrium price and quantity in the fish market?

The change in both the equilibrium price and quantity is ambiguous.

A tax designed to induce people to take account of the negative externalities that they cause is referred to as _____ tax

a corrective

Efficient production occurs when:

a given level of output is produced at the lowest possible cost

A negative externality is:

a side effect of an activity when the side effect harms bystanders

In an oligopolistic market, the impact on a seller of the _____ is greater than in other types of market structures

actions of other market sellers

A Korean-made washing machine purchased by a Chinese citizen is an example of a Korean _____, and a Chinese-made washing machine purchased by a Korean citizen is an example of a Korean _____.

export; import

When an individual's best choice may depend on what other people choose and other people's best choices may depend on what the individual chooses, then _____ is the science that is useful to help the decision makers analyze their options

game theory

(Figure: Supply Curves) The figure shows four different supply curves for four products: A, B, C and D. Which one of the supply curves probably belongs to a seller who has a large stock of product available for sale?

product D

Graphically, the equilibrium quantity can be identified as the:

quantity corresponding to the intersection of the demand and supply curves.

Two products have a cross-price elasticity of demand of 1.5. Based on this value of cross-price elasticity, which of the following products are they most likely to be?

two competing brands of soft drinks

When market power is a significant force in a product market, the market tends to _____ compared to a market where there is no market power

underproduce

The percent change in insulin demanded for any price change is zero. The demand curve for insulin is _____, and the price elasticity of demand is _____

vertical; perfectly inelastic