Clarke Micro Economics
We can say that the allocation of resources is efficient if
total surplus is maximized
PRODUCER SURPLUS IS
ALWAYS A NEGATIVE NUMBER FOR SELLERS IN A COMPETITVE MARKET
In practice, monopolistically competitive markets are
very common
Because each oligopolist cares about its own profit rather than the collective profit of all the oligopolists together,
they are unable to maintain the same degree of monopoly power enjoyed by a monopolist
According to Hazlitt in "minimum wage laws" the best way to raise wages is
to allow companies to set fair minimum wages
Questions 15-17 are referring to a table, and will not be available on this flashcard deck.
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Questions 28-32 are referring to a table, and will not be available on this flashcard deck.
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Questions 40-42 are referring to a graph and will be unavailable on this flashcard deck.
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Questions 45-47 are referring to a graph and will be unavailable on this flashcard deck.
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Questions 52-55 are referring to a graph and will be unavailable on this flashcard deck.
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Questions 8-13 are referring to a table, and will not be available on the flashcard deck.
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Barb's Bakery earned $200 in total revenue last moth when it sold 100 loaves of bread. This month it earned $300 in total revenue when it sold 60 l0aves of bread. The price elasticity of demand for Barb's bread is
0.27
If a 20% increase in price for a good results in a 15% decrease in quantity demanded, the price elasticity of demand is
0.75
Which of the following is not a characteristic of a monopoly? a. Barriers to entry b. One seller c. One buyer d. A product without close substitutes
C. One buyer
A monopoly:
Can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits.
The social cost of a monopoly is equal to its:
Dead weight loss
In the long run Firm A incurs total costs of $1,050 when output is 30 units and $1,200 when output is 4o units. Firm A exhibits:
Economies of scale because average total cost is falling as output rises.
WELFARE ECONOMICS IS THE STUDY OF
HOW THE ALLOCATION OF RESOURCES AFFECTS ECONOMIC WELL BEING
CONSUMER SURPLUS
IS THE AMO9UNT A CONSUMER IS WILLING TO PAY MINUS THE AMOUNT THAT THE CONSUMER ACTUALLY PAYS
The amount of money that a wheat farmer could have earned if he had planted barley instead of wheat is the _______.
Implicit Cost
THE BURDEN OF A LUXURY TAX FALLS
MORE ON THE MIDDLE CLASS THAN ON THE RICH
The amount by which total cost rises when the firm produces one additional unit of output is called _______.
Marginal Cost
THE MAXIMUM PRICE THAT A BUYER WILL PAY FOR A GOOD IS CALLED THE
WILLINGNESS TO PAY
THE MARGINAL SELLER IS THE SELLER WHO
WOULD LEAVD THE MARKET FIRST IF THE PRICE WERE ANY LOWER
For Susie, a 7% increase in income results in a 12 % increase in the quantity demanded for pizza. For susie, the income elasticity of demand for pizza is
Positive, pizza is a normal good
When a local grocery story offers discount coupons in the Sunday paper it is most likely trying to:
Price discriminate
When a monopolist is able to sell its product at different prices, it is engaging in _______.
Price discrimination
A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as:
Price is above or below marginal cost.
Economists assume that the goal of the firm is to maximize total _____.
Profits
According to Hazlitt in Who's Protected by Tariffs, who actually benefits from tariffs?
Protected producers at the expense of all other American producers
When economists refer to a production cost that has already been committed and cannot be recovered, they use the term ______.
Sunk Cost
Given the market for illegal drugs, when the government is successful in reducing the flow of drugs in the United States,
Supply decreases, demand is unaffected, and price increases
IN HAZLITT'S CHAPTER MINIMUM WAGE LAWS, ALL THE GROUPS OF PEOPLE LISTED BELOW WOJULD BE HARMED BY RAISING THE MINIMUM WAGE EXCEPT FOR
TEENAGERS
ACCORDING TO HAZLITT THE MAIN REASON THAT POLITICIANS ENFORCE RENT CONTROL IS THAT
THERE ARE MORE RENTERS THAN LANDLORDS
One a 100 acre farm a farmer is able to produce 3,000 bushels of wheat when he hires two workers. He is able to produce 4,400 bushels of wheat when he hires three workers. Which of the following possibilities is consistent with the property of diminishing marginal product?
The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers.
Which is the most accurate statement about trade?
Trade can make every nation better off
In he long run, each firm in a competitive industry earns:
Zero economic profits.
A market is defined as
a place where buyers and sellers meet and exchange property rights
Suppose the government has imposed a price ceiling on cellular phones. Which of the following events could transform the price ceiling from one that is binding to one that is not binding
a technological advance makes cellular phone production less expensive
Which of the following statements is correct? a. Assuming that explicit costs are positive, economic profit is greater than accounting profit. b. Assuming that implicit costs are positive, accounting profit is greater than economic profit. c. Assuming that explicit costs are positive, accounting profit is equal to economic profit. d. Assuming that implicit costs are positive, economic profit is positive.
b. Assuming that implicit costs are positive, accounting profit is greater than economic profit.
Which of the following statements is not correct? a. The government may use antitrust laws to break up an existing company to improve competition. b. The government may break up a natural monopoly to lower the price charged to customers. c. Private ownership is typically preferred to public ownership. d. Sometimes the best strategy is for the government to do nothing about monopoly inefficiency because the "fix" may be worse than the problem.
b. The government may break up a natural monopoly to lower the price charged to customers.
Which of the following is correct? a. the word economy comes from the Greek word for "rational thinker" b. economists study the management of scarce resources c. because economists believe that people pursue their best interests, they are not interested in how people interact. d. all of the above are correct
b. economists study the management of scarce resources
A price ceiling is binding when it is set
below the equilibrium price, causing a surplus
The price elasticity of demand measures
buyers responsiveness to a change in the price of a good
Which of the following is not a characteristic of a competitive market? a. Buyers and sellers are priced takers. b. Each firm sells a virtually identical product. c. Free entry is limited. d. Each firm chooses an output level that maximizes profits.
c. Free entry is limited.
A legal maximum on the price at which a good can be sold is called a price
ceiling
Making rational decisions "at the margin" means that people
compare the marginal costs and marginal benefits of each decision
Perfect price discrimination a. increases profits to the firm b. increases total surplus c. decreases consumer surplus d. all of the above are correct
d. all of the above are correct
If the demand for textbooks is inelastic, then a decrease in the price of textbooks will
decrease total revenue of textbook sellers
Demand is said to have unit elasticity if elasticity is
equal to 1
The terms equality and efficiency are similar in that they both refer to benefits to society. However, they are different in that
equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources
The prisoners' dilemma game
has no Nash equilibrium since players, after agreeing to play their dominant strategy, will have an incentive to switch to another strategy
Which two groups of decision makers are included in the simple circular-flow diagram?
households and firms
If the demand for donuts is elastic, then a decrease in the price of donuts will
increase total revenue of donut sellers
A person who takes a prescription drug to control high cholesterol most likely has a demand for the drug that is
inelastic
Economists like mathematicians, physicists, and biologists,
make use of the scientific method, try to address their subject with scientist's objectivity, devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories
The two types of market structures that are imperfectly competitive are:
monopolistic competition and oligopoly
A legal minimum on price at which a good can be sold is called a
price floor
Total surplus in a market will increase when the govrnment
removes a binding price ceiling from that market
For a good that is a luxury, demand
tends to be elastic
If a country allows trade and, for a certain good, the domestic price without trade is lower than the world price,
the country will be an exporter of the good
the term tax incidence refers to
the distribution of the tax burden between buyers and sellers
If a price floor is not binding, then
the equilibrium price is above the price floor and it has no legal enforcement mechanism
The two loops in the circular flow diagram represent
the flow of goods and the flow of services
Oligopolists may well be able to reach their preferred, cooperative outcome if
the game they play is repeated a sufficient number of times
An example of a price floor is
the minimum wage
From society's standpoint, cooperation amount oligopolists is
undesirable because it leads to output levels that are too low and prices that are too high.
When demand is perfectly inelastic, the demand curve will be
vertical because buyers purchase the same amount as before whenever the price rises or falls
The price o a good that prevails in a world market is called the
world price
