ECO 201 Microeconomics Final Prep

Recently, Shandra purchased 5 movie DVDs and 12 three ring binders. What if the price of DVDs rose by $3 and the price of three ring binders declined by $2. With Shandra's income unchanged and prices for other goods remaining the same, what actions would Shandra most likely take?

Buy more binders and fewer DVDs.

Which of the following examples is consistent with short term production decisions?

FreshFood supermarket orders more chocolate and candies in anticipation of Halloween.

The production function describes how

GamesVirtual uses computers, servers, programmers, graphic designers and other inputs to produce video games.

What is a key difference between the short run and the long run?

In the long run, all resources are variable; in the short run, at least one resource is fixed.

When a product price increases, why does the substitution effect encourage a consumer to buy less of a product?

It works because the product is now relatively more expensive than it was before.

Consider peanut butter as a normal good and answer the questions of what would happen if a decrease in income occured?

It would cause the quantity consumed of peanut butter to decrease.

Which of the following statements are true for a perfectly competitive firm that is seeking to maximize profits?

Price is the same as marginal revenue.

Given the information presented in the following graph, which of the following is an accurate statement?

Profits will be reduced by expanding production to the zone where MC exceeds MR.

Read over the following scenarios. Which one best represents how a behavioral economist might view a situation?

Ted sat down on a park bench and found $200 on the bench. He is more likely to spend that $200 more freely than if he withdrew that $200 from his checking account.

Which of the following are forms of labor?

The natural ability of a worker.

Which of the following statements is true about total utility and consumer behavior?

Total utility will increase with each additional purchase, but at a decreasing rate.

________ is the satisfaction or value people extract from consumed services or goods and those derived from pursued activities.

Utility

Select the statement that is most accurate.

When marginal revenue is greater than marginal cost profit is not maximized.

In order to reduce the cost per unit over the long run, companies would

add more capital to increase production

When an owner uses resources they own in a business, that usage should be considered ________.

an implicit cost

If the price that a firm charges is lower than its ________ of production, the firm will suffer losses.

average cost

A competitive firm earning economic profits will produce output where ________.

average costs are below marginal revenue

Juan's marginal utility from strawberries is 200 and his marginal utility from cream is 100. Juan spends all of his budget. The price of strawberries is $5 per pound and the price of cream is $5 per pint. To maximize his utility, Juan should

buy less cream and more strawberries.

If you consume pasta every day of the week, the marginal utility of pasta is likely to ________ at the end of the week, ceteris paribus, and this demonstrates the law of ________.

decline; diminishing marginal utility

Suppose a computer manufacturer is producing in the short run when capital is fixed and the only variable factor of production is labor. The firm's production data is given in the table below. What does the production function given illustrate?

decreasing marginal product

Suppose you own a profitable tailoring company that hires two workers. The combined production of the two workers is ten shirts per day. You decide to double the amount of capital and labor and see that the total number of shirts produced each day has increased to 22. This implies that your company is exhibiting ________.

economies of scale

When it comes to producing and selling goods, compared with a rival firms' goods, a perfectly competitive firm's goods are ________.

exactly identical

The production function describes how

firms combine inputs or factors of production to produce finished products.

A firm's ________ consist of expenditures that must be made before production starts that typically, over the short run, ________, regardless of the level of production.

fixed costs; do not change

If there are substantial economies of scale in a market,

large firm will have lower average cost than a smaller one.

Which of the following is an example of capital as a factor of production?

manufacturer's machines

The cost information in the table below shows that

marginal cost eventually increase.

________ refers to the extra revenue added from one more unit sold.

marginal revenue

The demand curve for a firm in a perfectly competitive industry is ________.

perfectly elastic

The term "technology," when used in economics, means

specific processes used to produce a product.

The utility an individual will receive from consuming a good is determined by

that individual's own preferences.

A firm's ________ consist of fluctuating expenditures during production that typically, over the short run, ________, as the quantity produced increases.

variable costs; are constantly changing

In comparison with behavioral economist, traditional economists operate with the assumption that ________.

when people make decisions, they think rationally

Given the cost information below, determine the profit margin when this firm produces 3 units per day and sells its product for $2,500 per unit.

$1,400

Given the data provided in the table below, how much profit will be earned for producing 7 units of output?

$10.00

Jodie's chicken-on-a-stick food truck sells about $500 various chicken combo platters per day with an average price of $8. On average, each chicken platter cost $5 (this includes labor, materials and miscellaneous). Jodie's profit margin is ________.

$3 per chicken platter

In October and November, Annabelle purchased winter sweaters and tights and spent all her clothing budge on those items. Each sweater was $100. At Annabelle's optimal choice, her marginal utility from the last sweater purchased is 400 and her marginal utility from the last pair of tights purchased is 200. This means that each pair of tights must cost ________.

$50

Where is the point where the marginal cost curve and the average total cost curve intersect in the following graph?

$6.50; 75 output units

See the cost information in the table below. When this firm produces 5 units, the average variable and average total cost respectively are

$80, $60

According to the following cost information, marginal cost and average total cost are equal when the firm produces

4 units