ECON MIDTERM 1
Quantity increases proportionally more than the price declines.
A company has a policy of frequently cutting prices to increase sales. Product demand is significantly elastic. What impact would this have on the company's situation?
Lead to surpluses.
A government price support program, which sets a price higher than the market price, will
The firms sell a homogeneous product.
All of the following are characteristics of monopolistic competition except that
The equilibrium price of milk will increase.
An advertising campaign is informing buyers about the health benefits of drinking milk. At the same time, the price of forage used to feed cattles increases. Which one of the following will occur with certainty?
an increase in the price of orange juice and a decrease in the price of vodka
Assume vodka and orange juice are complements. A freeze that destroys a significant portion of the crop of oranges in Florida will lead to:
an increase in the price of both oranges and grapefruits.
Assuming consumers see grapefruit and oranges as substitutes, a late season freeze in Florida that destroys a big portion of the orange crops will result in
The market will reach an equilibrium price higher than $3 per unit.
At the current market price of $3 per unit, the quantity demanded is 70 units and the quantity supplied is 55 units. You can clearly predict that
The short-run average cost of production decreases.
Because of economies of scale, as output from production expands,
the consumer's maximum willingness to pay minus the price actually paid.
Consumer Surplus is defined as
Substitutes
Demand for one item increases when the price of another item increases. These items must be:
Market prices will increase
Everything else equal, if perfectly competitive firms realize an economic profit, you can predict that in the long run:
Q = 20
For the demand an supply curves P = 100 - 2Q and P = 40 + Q, the equilibrium quantity will be:
The law has no effect on the rental market.
If a rent control law in a competitive housing market establishes a maximum or ceiling rent that is above the market or equilibrium rent,
200
If demand is given by P=270-Q and supply is given by P=60+2Q, what is the equilibrium price?
the demand curve will shift to the right.
If the average household income increases and there is relatively little change in the price of a normal good, then
there is currently a surplus of potatoes on the market and the price will decrease in the future
If the equilibrium price of potatoes is 80 cents per pound, but currently potatoes sell for 95 cents per pound, what can you say about the potato market?
the marginal cost will equal the average variable cost.
If the marginal cost of production is constant,
50
If the total cost function is TC = 150 + 2Q + Q^2, what will be the average fixed cost of producing 3 units
hurt domestic consumers, help domestic producers, and decrease market efficiency.
Import tariffs
The firm's revenue will decrease.
Knowing that the total revenue of a firm equals Price multiplied by Quantity Sold, and understanding the law of demand, what can you say about the revenue of a firm that increases its prices when faced with an elastic demand?
This suggests the demand of organic food clearly has increased over time.
Over the past 10 years, both the price and the quantity purchased of organic food have increased. Which of the following is true?
Price increases; Quantity is uncertain
Product demand increases and product supply decreases. Which of the following statements is correct regarding resulting market changes?
as prices fall, quantity demanded increases
The "law of demand" implies that
oligopoly market.
The auto manufacturer Ford operates on a
downward sloping.
The demand curve for a normal good is
Strategic interdependence of firm pricing and output decisions.
The distinguishing characteristic of oligopolistic markets is
will not change the market outcome.
The equilibrium price on the market for widgets is $50, when a price floor of $35 is introduced. This price floor
$38
The introduction of an excise tax of $10 per unit increases the price paid by consumers from $45 to $48. What will be the price received by producers?
average variable cost function
The shut-down point is the minimum of the
45
The total cost function of a firm is TC=250+45Q. What is the average variable cost of producing 10 units of the product?
They both have very inelastic demand.
What does heroin have in common (economically speaking) with life saving drugs such as epinephrine?
the price of wheat will increase in response.
Wheat and corn are both substitutes in consumption and substitutes in production. If the price of corn increases,
The item has many similar substitutes.
Which of the following characteristics would indicate that an item sold would have a relatively high price elasticity of demand?
Antibiotic Medicine
Which of the following goods has the lowest price elasticity of demand
If the marginal cost of production is constant,
Which one of the following correctly characterizes the relationship between marginal cost and average total cost?
The rental costs that a firm pays for its office space.
Which one of the following is a fixed cost?
Strong Entry Barriers
Which one of the following is not a characteristic of monopolistic competition?
Each firm can price its product above the industry price.
Which one of the following is not a key assumption of perfect competition?
The market for gold.
Which one of the following markets is likely a perfectly competitive market?
Total tax revenue increases.
Which one the following is NOT a certain effect of excise taxes being raised on a market?
