Chapter 5 & 6- Microeconomics

The long run is best defined as

A period of time sufficiently long that all factors of production are variable.

According to economists, the satisfaction people get from their consumption activities is called

Utility

Suppose Sarah owns a small company that makes wedding cakes. The accompanying table shows how Sarah's total cost varies depending on the number of wedding cakes she makes each day. Sarah's fixed cost is ______ per day.

$100

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The accompanying table describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day. When the firm uses 9 employee-hours per day, its total revenue each day is

$240

Sejal's reservation price for her economics textbook is $100. The week before the semester begins, Sejal finds a copy of her textbook online for $75. Sejal's consumer surplus from buying the textbook online is

$25

For a given seller, the accompanying figure shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. What is this seller's reservation price for the 250th unit?

$4

The accompanying table shows a pizzeria's fixed cost and variable cost at different levels of output. Pizzas sell for $20 each. When the pizzeria makes 100 pizzas a day, its fixed cost is ______ and its total cost is ______.

$500;$1350

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the accompanying table. What is John's opportunity cost of cleaning windows for an hour?

$7

For two goods, A and B, the rational spending rule is expressed as

(MUA/PA) = (MUB/PB)

For two goods, A and B, the rational spending rule is expressed as

(Mua/Pa = Mub/Pb)

Suppose the market for shoes consists of three consumers. The accompanying table shows the quantity demanded at various prices for each consumer: What is the market demand for shoes when the price is $50 a pair?

11 pairs

Refer to the accompanying table. The total utility of consuming two dinners out per week is

175

Refer to the accompanying figure. The marginal utility of the 5th apple is

45

Refer to the accompanying figure. The total utility of consuming 4 pizzas a week is

90

A technological innovation that reduces a firm's cost of producing additional units of output will lead to

An increase in the firm's supply.

Which of the following would be considered a factor of production in the provision of bus service?

Bus drivers

Law of Demand

Directly tied to Cost-Benefit Principle that an activity should be pursued only if its benefits are at least as great as its costs.

Which of the following is NOT a characteristic of a perfectly competitive market?

Each firm in the market sells a somewhat different variant of the good.

When the price of a good rises, marginal utility per dollar spent on that good ______, leading consumers to purchase ______ of that good.

Falls; rises

During Thanksgiving you participated in a pumpkin pie-eating contest. You really enjoyed the first two pies, the third one was okay, but as soon as you ate the fourth one you became ill and lost the contest. Your total utility ______ with the first three pies you ate.

First increased then decreased

Refer to the accompanying figure. When Jeff goes from watching 3 to 4 movies a day, his total utility

Increases

A profit-maximizing firm will only produce a positive amount of output if

Its total revenue is greater than or equal to its variable cost.

Suppose Jamal's marginal utility from the first taco he eats is 15, and his marginal utility from the second taco he eats is 12. One can infer that

Jamal's total utility from eating 2 tacos of 27

The negative relationship between price and quantity demanded is implied by the

Law of Demand

The tendency for consumers to purchase more of a good or service as its price falls is captured by the

Law of Demand

The additional utility gained from consuming an additional unit of a good is called

Marginal Utility

A perfectly competitive firm's supply curve is the portion of its ______ cost curve that lies above its ______ cost curve.

Marginal; average variable

The primary objective of most private firms is to

Maximize profit

During Thanksgiving you participated in a pumpkin pie-eating contest. You really enjoyed the first two pies, the third one was okay, but as soon as you ate the fourth one you became ill and lost the contest. You got ______ utility from eating the first pie than from eating the third pie.

More

As the market price of a service increases, more potential sellers will decide to perform that service because

More potential sellers will find that the market price exceeds their reservation price.

The absolute price of a good in dollar terms is the good's

Nominal Price

Profitable Firm

P>ATC

If a consumer buys two different goods, the rational spending rule requires that the

Ratio of marginal utility to price be equal for the two goods.

The dollar price of a good relative to the average dollar price of all other goods is the good's

Real Price

The goal of utility maximization is to allocate your ______ in order to maximize your ______.

Resources; Satisfaction

Concept of utility

Satisfaction

The price equals marginal cost rule for profit maximization is a specific example of which core principle?

The Cost-Benefit Principle

Marginal cost is calculated as

The change in total cost divided by the change in output.

Consumer surplus measures

The difference between the most a buyer would be willing to pay for a product and the price actually paid.

Which of the following is the most likely to be a fixed factor of production at a farm?

The land on which the farm is located

The tendency for marginal utility to decline as consumption increases beyond some point is called

The law of diminishing marginal utility.

Profit=

Total Revenue-Total Cost (VC+FC)

Sven likes to water ski, but he can only water ski during the one week each year when he is on vacation. Therefore, he plans to ski every day, for eight hours a day. The first day, Sven skied for eight hours and enjoyed every hour. The second day, Sven slept in and then skied for seven hours, which was fun but not as much fun as the first day. The third day, Sven skied for six hours, but was starting to get a bit bored by the end. The fourth day, Sven skied for four hours and then took a nap. On the fifth day of Sven's vacation, Sven went blueberry picking all day. Sven's marginal utility from his first hour of skiing was ______ his marginal utility from his tenth hour of skiing.

Greater than

A seller's supply curve shows the seller's

Opportunity cost of producing an additional unit of output at each quantity.

The difference between the price a seller actually receives for a good and the seller's reservation price is

Producer surplus

Hector wants to maximize his utility. At his current level of consumption, Hector's marginal utility from an additional cup of coffee is 15 utils, and his marginal utility from an additional can of soda is 11 utils. If the price of a cup of coffee is $3 and the price of a can of soda is $2, Hector should

Reallocate his spending away from coffee and towards soda.

Suppose that when a firm produces the level of output at which price equals marginal cost, the firm's total revenue is less than its variable cost. In this case, the firm should

Shut down

Rational Spending Rule

Spending should be allocated across goods so that marginal utility perdollar is the same for each good (Mua/Pa = Mub/Pb)

Four Conditions of Perfectly Competitive markets:

Standardized product, many buyers and sellers, mobile resources of production, well informed buyers and sellers.

Difference in Nominal and Real Price

The nominal value of any economic statistic is measured in terms of actual prices that exist at the time. The real value refers to the same statistic after it has been adjusted for inflation.

Which of the following is the most likely to be a variable factor of production at a university?

The number of librarians.

Average total cost is defined as

Total cost/ Total output

Individual supply curves generally slope ______ because ______.

Upward; of increasing opportunity costs