ABM 1041 Micro Econ - Harvey James

true

A firm should (at least temporarily) shut down its production facility if variable costs are greater than revenues

true

Universities are engaging in price discrimination when they charge different levels of tuition to in-state and out-state students

goods and services that are produced using the fewest resources possible

"Production efficiency" is described as

true

A country's comparative advantage is determined by an assessment of its opportunity cost of production relative to the opportunity costs of other countries.

true

A customer leaving a network imposes a cost on users of the network

is the same as welfare loss

A deadweight loss

false

A dominant strategy is a strategy that always makes both players as well-off collectively as possible

true

A fire that destroys a food processing facility will likely result in shortages, thus causing an increase in the price of those food products

This is true for all firms regardless of market structure.

A firm seeking to maximize profits will increase the amount of output it produces when marginal revenue is greater than marginal cost

A

A monopolist has four distinct groups of customers: group A has an elasticity of demand of 0.2, group B has an elasticity of demand of 0.8, group C has an elasticity of demand of 1.0, and group D has an elasticity of demand of 2.0. The group paying the highest price for the product will be:

false

A network good is one with which the benefit to the use rises if there is a small number of other users of the good

true

A positive externality is an external benefit that accrues to to others outside of the market, while a negative exterenality is an external cost that accrues to others outside of the market

a teaser strategy

AT&T offers high-speed internet service to new subscribers for $29.99 per month for the firs six months and then raises the price to $49.99 per month. This offer is an example of

relatively low marginal tax rates

All of these are barriers to entry into an industry, EXCEPT: -governmental restrictions - a patent - relatively low marginal tax rates - economies of scale

an executive, at he corporation's expense, hiring a limousine to drive him one block whenever it's raining

An example of x-inefficiency is:

true

An increase in consumer income will decrease the demand for products and services that are income normal

false

An increase in price will cause a decrease in demand. This is the law of demand.

MR = MC

An unregulated monopolist would produce to the point at which:

Yes; the industry is concentrated

Assume that Coca-Cola has a market share of 40% and Pepsi has a market share of 30%. If Pepsi and Coca-Cola attempt to merge, will the Federal Trade Commission challenge that attempt in court?

profits will increase

Assume that a given level of output, a monopoly firm has marginal revenue of $9, its average total cost is $9, and marginal cost is $7. If this firm were to continually increase its output, then

profits will increase

Assume that at a given level of output, a monopoly firm has marginal revenue of $9, its average total cost is $9, and marginal cost is $7. If this firm were to continually increase its output, then:

true

At an all-you-can eat buffet, a person will stop eating when marginal utility is equal to zero.

higher elasticities of demand than customers attending the evening shows

At movie theaters, lower prices are charged or matinees than for evening shows of the same film. The customers attending the matinees have:

a medical report shows the added health benefits of eating breakfast every morning

Consider the market for breakfast cereal. Which of the following will cause higher prices and a greater quantity of breakfast cereal exchanged?

there is an increase in the number of firms selling breakfast cereal

Consider the market for breakfast cereal. Which of the following will cause lower prices and a greater quantity of breakfast cereal exchanged?

new technology improves the production efficiency of automobile manufacturers

Consider the market for new cars. Which of the following will cause lower prices and a greater quantity of new cars exchanged?

there is a significant increase in the perceived quality of used cars by potential car buyers

Consider the market for new cars. Which of the following will cause lower prices and a lower quantity of new cars exchanged?

consumers expect the weather to be colder than normal during the next several weeks

Consider the market for wool sweaters. Which of the following will cause higher prices and a greater quantity of wool sweaters exchanged?

a disease significantly reduces the sheep population (wool comes from sheep)

Consider the market for wool sweaters. Which of the following will cause higher prices and a lower quantity of wool sweaters exchanged?

the 2 hours you waited in the line to pick up a ticket

Home football games at your college are free for students and most of the students like to go to the game. What is the non-monetary cost for you to go to the game?

complementary

If a consumer buys a set of headphones at the same time as she buys an MP3 player, these two products are most likely __________ goods.

true

If a market generates a negative externality, then an appropriately designed tax can move the market toward a more efficient outcome

false

If a price exceeds marginal cost at a competitive firm's current level of output, then the firm can increase profit if it increases the price it charges

Accepting a fun job that pays $40,000 per year over a boring job that pays $60,000 per year

If an individual's primary objective is to maximize his/her salary, then which action would NOT be considered a rational decision?

2,050

If an industry is made up of five firms with market shares of 25%, 20%, 20%, 20%, and 15%, respectively, its Herfindahl-Hirschman Index is:

true

If the government sets a price ceiling below the equilibrium market price, then we can expect that there will be shortages of the good (i.e. quantity demanded will exceed quantity supplied)

average cost pricing rule

If the public utility commission allows a water company to earn a normal profit, then it is enforcing an:

$10

If you were not studying economics, you could be doing one of the following: sleeping in (which you value at $5), playing cards with your friends (which you value at $10), or working (you would have earned an extra $8). The opportunity cost of studying economics is therefore:

a negative externality

The live band that plays nearby makes it difficult for patrons of a restaurant to hold a conversation. This is an example of

false

In a market economy, most economic decision are made by central governments.

true

In perfectly competitive markets, no firm has the ability to affect the market price

true

In the long run, a typical firm in a monopolistically competitive industry will likely earn little to no economic profit

an inter-temporal pricing strategy

Movies are typically only shown in theaters for months before they are released on online streaming sites at a lower price. This is an example of

true

One characteristic of oligopoly is that firms in an industry will usually have to consider the reactions of competitors when they formulate strategy

using resources for one activity means that their use elsewhere must be given up

Opportunity costs exist because

are the most elastic in their demand for a product

Other things being equal, a price-discriminating firm will charge less to the customers who

true

Private goods are characterized by the ability to exclude non-payers and the fact that consumption of the good precludes others from consuming it

false

Suppose a new government report indicates that eating broccoli reduces the incidence of facial acne. We can expect that the equilibrium price of broccoli would increase and the equilibrium quantity of running shoes sold would also increase.

second-degree price discrimination

Suppose a water utility company charges a residential customer $1.50 per 1000 gallons for the first 30,000 gallons of water used and $1.00 per 1000 gallons for any amounts used in excess of 30,000 gallons of water. The water utility is practicing:

true

Suppose medical studies reveal that long distance running reduces the chance of having a heart attack. We can expect that the equilibrium price of running shoes would increase and the equilibrium quantity of running shoes sold would also increase

capital goods

Suppose the government could stimulate spending in one of the following expenditure categories. In which category would the spending increase contribute most to an expansion of the country's production possibilities frontier?

the government has established a price ceiling for water

Suppose the government sets the price for water and the market for water is always experiencing shortages. One can infer that

true

Suppose the price of raw materials and other inputs used to produce computers increases. We should expect that the equilibrium market price of computers will increase and the quantity of computers sold will decrease.

prices charged by both retailers will be relatively stable

Target executives believe that if they raise prices, then customers will switch to shopping at Walmart across the street. However, if they decrease their prices, then Walmart will respond by decreasing their own prices, with no customers switching from Walmart to Target. This scenario implies that

both players would be better off by cooperating, but not cooperating is a dominant strategy

The "dilemma" in the Prisoner's Dilemma is that

unfair competitive practices and deceptive acts

The Federal Trade Commission Act prohibits:

the industry demand curve

The demand curve for a monopolist is:

false

The demand for gasoline is rising. A possible cause is that commutes are switching from driving to pubic transportation

false

The free rider problem typically results in a production of output that is greater than the social optimal quantity

true

The prisoners' dilemma refers to a situation in which players face strong incentives not to cooperate with each other

produces less than the socially efficient amount

The reason economists often consider monopoly socially undesirable is because the monopolist

ease of entry into the market encourages new firms to enter and force down the price

The reason monopolistic competitive firms have difficulty maintaining a profit in the long run is that

true

The social cost curve lies above the private supply curve for the producer in cases of negative externalities

second-degree price discrimination

When a business offers its customers bulk discounts, they are practicing:

true

When demand is downward sloping, consumers who buy a good at the market equilibrium price will receive consumer surplus from the purchase of the good

true

When the price elasticity of demand for a product is inelastic, that product is likely to have few close substitutes.

products of individual firms are different

Which characteristic does monopolistic competition not have in common with perfect competition?

All of the above could work

Which method can help in obtaining a welfare improvement if negative externalities exist? - Regulation - Appropriately designed taxes - Assigning property rights and permitting bargaining

the product must be a durable good

Which of these is NOT a condition necessary for price discrimination? - the seller must have some market power - the product cannot be resold to another customer - the product must be a durable good -the price elasticity's of demand are different for each group of consumers

imposing a fee on waste from the production of goods that create negative externalities

Which of these is a policy idea that the government could use to correct a negative externality?

litter is found in an area around a fast-food industry

Which of these is an example of consumers creating a negative externality?

under perfect competition, a demand curve is perfectly elastic; under a monopoly, the demand curve has elastic, unit-elastic, and inelastic portions

Which statement about the relationship between a firm's demand curve under perfect competition and a monopoly is TRUE? - a demand curve can be defined under perfect competition but not under a monopoly - under a monopoly, the demand curve is perfectly elastic; under perfect competition, the demand curve has elastic, unit-elastic, and inelastic portions -the demand curves for a monopoly and perfect competition are always inelastic - under perfect competition, a demand curve is perfectly elastic; under a monopoly, the demand curve has elastic, unit-elastic, and inelastic portions

It is rival in consumption and nonexcludable

Which statement describes a good that is characterized as a tragedy of the commons?

it is non-rival in consumption and nonexcludable

Which statement describes a public good?

if transaction costs are small, the outcome is efficient regardless of how property rights are distributed

Which statement is TRUE regarding the Coase theorem?

Economies of Scale

________ in an industry can be so large that demand is able to support only one firm

true

product differentiation gives a firm control over prices

true

providing government subsidies for higher education could be both economically efficient and socially equitable if higher education results in positive externalities