Econ test part 2

calculated the income elasticity if an 8 percent increase in income leads to a 4 percent increase quantity demand for organic produce

.04/.08 = .5

Suppose the value of the price elasticity of supply is 4. What does this mean

A 1 percent increase in the price of the good causees quantity supplied to increase by 4 percent

What area represents producer surplus at a price of P2

A B C

Marginal

Means extra

Whats the difference between physical capital and human capital

Physical is manufactured goods, human capital is educational goods

the formula for total fixed cost is

TFC = TC - TVC

Suppose hte firm produces 4,000 units. What does the shaded area labeled A represent

Total fixed cost

Scarcity

Wants are unlimited but resources are limited

which of the followign is a fixed cost

payment of hire a security worker to guard the gae to the factory around the clock

to maximize profit, a perfectly competitive firm

should product the quantity of output that resutls in the greatest difference between total revenue and total cost

A firm will make a profit when

P > ATC

if the market price is $40 in a perfectly competitive market, the marginal revenue from selling the fifth unit is

$40

what area represents the increase in producer surplsu when the market price rises from P1 to P2

A + B

if four workers can produce 18 chairs a day and five can produce 20 chairs a day, the marginal product of the fifth worker is

2 chairs

If 11 workers can produce a total of 54 units of a product and a 12th worker has a marginal product of 6 untis, then the average product of 12 workers is

5 units. 56+6 / 12

The phrase "demand has increased" means taht

A demand curve has shifted to the right

which of the following would cause an increase in the supply of cheese

An increase in the number of firms that produce cheese

Economic efficiency in a competitive market is achieved when

Economic surplus is equal to consumer surplus

How does the construction of a market demand curve for a private good differ from that for a public good?

The market demand curve for a private good is determined by adding up the quantities demanded by each consumer at each price but the market demand curve for a public good is determined by adding up the price each consumer is willing to pay for each quantity of the good.

Shrimp is an increasingly popular part of the American diet. Louisiana shrimpers who represent the bulk of the U.S. industry were almost all put out of business by Hurricane Katrina.ȱȱHow did this affect the equilibrium price and quantity of shrimp?

The supply curve for shrimp shifted to the left resulting in a higher equilibrium price and lower equilibrium quantity.

Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6. What does this mean?

a 1 percent decrease in the price of grapefruit juice leads to a 6 percent increase in orange juice consumptions

farmers can plant either corn or soybeans in their fields. Which of the following would cause the supply of soybeans to increase

a decrease in the price of corn

which fo the following is an example of a nonexcludable prodcut

a public library

perfectly competitive firms produce up to the point where the price of the good equals the marginal cost of producing the last unit. This condition is referred to as

allocative efficiency

If the marginal cost is below the average variable cost curve, then

average variable cost is decreasing

Oligopoly differs from perfect competition and monopolistic competition in that

because oligopoly firms often react when other firms in their industry change their prices

which of the following goods would have the most inelastic demand

bread

A monopolgy is a firm that is the only seller of a good or service that does not have a

close substitute

if the corss price elasticity of demand for goods X and Y is negative, this means the two goods are

complemtns

IF when a firm doubles all its inputs, its average cost of production increases then production displays

diseconomies of scale

which of the following is not an assumption of perfectly competitive markets

each firm produces a similar but not identical product

the average total cost of production

equals total cost of production divided by the level of output

as a firm hires more labor in the short run, the

extra output of another worker may rise at first, but eventually must fall.

which of the followign is not a charactersitic of monopolostic competition

firms are price takers

the fraction of an industry sales that are accounted for by the largest firms is called the

four firm concentration ratio

When the governemnt wants to give an exclusive right to one firm to produce a product, it

grants a patent

If demand is price elastic, the absolute value of the price elasticity of demand is

greater than one

if demand is price elastic, the absoltue value of the price elasticiy of demand is

greater than one

A perfectly competitive firm faces a demand curve that is

horizontal

income elasticiy measures

how a goods quantity demanded responds to buyers income

price elasticiy of supply is used to gauge

how responsive suppleirs are to price changes

a price maker

is a firm that has some control over the price of the product it sells

The income effect of a price change results in a

movement along the demand curve due to a change in purchasing power brought about by the price change

when a firm faces a downward sloping demand curve, marginal revenue

is less than price because a firm must lower its price to sell more

The marginal revenue curve for a perfectly competitive firm

is the same as its demand curve

A monopoly firms demand curve

is the same as the market demand curve

which of the following statements is true about the price elasticity of demand along a downward sloping lienar demand curve

it is elastic at high prices and inelastic at low prices

if a perfectly competitive firm achieves product efficiency then

iti is producing the good it sells a thte lowest possible cost

which of the following activites create a negative externality

keeping a junked car parked on your front lawn

Increase in the price of an input

left

increase in the price of substitute in production

left

If a firm is a natural monopoly, competition from other firms cannot be counted on to force price down to the level where the company earns zero economic profit. How are prices usually set in natural monopoly markets in the United States?

local or state

which of the following is not a characteristic of oligopoly

low barriers to entry

in long run equilibirum compared to a perfectly competitive market, a monopolostically comeptitive industry produces a

lower and higher price

economics surplus is maximized ina competitive market when

marginal benefit equals marginal cost

for a perfectly compettive firm, at profit maximization

marginal revenue equals marginal cost

decrease in the future price of a product

move to the right

Last year, Sefton purchased 60 pounds of potatoes to feed his family of five when his household income was $30,000. This year, his household income fell to $20,000 and Sefton purchased 80 pounds of potatoes. All else constant, Sefton's income elasticity of demand for potatoes is

negative, so sefton considers potatoes to be an inferior good

Tony's Italian Ice is a monopolistically competitive firm. If Tony's earns a profit in the short run, which of the following is most likely to occur?

new firms that sell itialian ice will enter the market and tonys demand curve will shift to the left

decrease in the current price of the product

no shift

the elasticity of demand is alwasy a negative value because

of the law of demand

if firms do not increase their quantity supplied when price changes then supply is

perfectly price inelastic

At market equlibrium

quantity demanded equals quantity supplied

if a firm raised its price and idsovered that its total revnue fell, then the demand for its product is

relatively elastic

when there are many good substitues avaiable for a good, demand tends to be

relatively elastic

increase in productivity

right

which of the follow is not a result of imposing a rent celing

some consumer surplus is converted to producer surplus

if an externality exists it will be experienced by

some people not directly involvedi n the production or consumption of the product

A monopolistically competitive firm is producing an output level where marginal revenue is greater than marginal cost. What shoudl this firm do to increase its profit or reduce its losses

the firm should lower its price

Marginal cost is

the additional cost to afirm of producing one more unit of a good or service

the total amount of producer surplus in a market is equal to

the area above the market supply curve and below the market price

The substitution effect of a price change refers to

the change in quantity demanded tha results from a change in price making a good more or less expensive relative to other goods that are substitues

The substitution effect of a price change refers to

the change in quantity demanded that results from a change in price making a good more or less expensive to other goods that are substitutes

suppose a decrease in the supply of bottled water resulted in a decrease in revenue this indicates that

the demand for bottled water is price elastic in the price range considered

Which of the followign statements is true above the price elasticiy of demand

the elastic portion of straight line downward sloping demand curve corresponds to the segment above the midpoint

when demand is price elastic, a fallin price causes total revenue to rise because t

the increase in quantity sold is large enough to offset the lower price

A consumer is willing to purchase a product up to the point where

the marginal benefit is equal to the price of the product

The average product of labor declines after L2 because

the marginal product of labor is below the average product of labor

A positive externality causes

the marginal social benefit to exceed the marginal private cost of the last unit produced

a negative externality existst if

the marginal social cost of producing a good or service exceeds the private cost

By drawing a demand curve with price on the vertical axis and quantity on the horizontal axis, economists assume taht the most improtant determinant of the demand for agood is

the price of a the good

According to a study of the US demand for alcoholic beverages, the pirce elasticiy of demand for beer is -0.23. Which of the following could explain why the price elasticity of demand for beer is low

the price of beer is relatively low and for many people it is a habit forming product

By drawing a demand curve with price on the vertical axis and quantity on the horizontal axis, economists assume that the most important determinant of the demand for a good is

the price of the good

One would speak of a movement along a supply change curve fora good, rather than a change in supply

the price of the good changes

the demand for lobster is lower in the spring than in the summer. If the price of lobster is higher in the spring than in the summer the n

the supply of lobster is greater in summer than in spring

whenever a firm can charge a pirce greater than the marginal cost

there is some loss of economic efficiency

In the short run, a firm that is operating at a loss has two options. These options are

to shut down temporarily or continue to produce

which of the following cost will not change as output changes

total fixed cost

which of the followign is an example of a long run adjustment

walmart builds another supercenter