Final Exam
Refer to Figure 10-3. At a price of ________, there is a shortage of tickets.
$0
Refer to Figure 4-1. If the market price is $1.00, what is the consumer surplus on the third burrito?
$0.50
Refer to Figure 4-1. Arnold's marginal benefit from consuming the third burrito is
$1.50.
Refer to Figure 13-11. The firm represented in the diagram
makes zero economic profit.
Monopolistic competition means
many firms producing differentiated products.
An office supply store sells a ream of printer paper at a fixed price of $4.50. Which of the following is a term used by economists to describe the money received from the sale of an additional ream of paper?
marginal revenue
A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating
marginal revenue and marginal cost.
A firm's demand for labor curve is also called its
marginal revenue product of labor curve.
Refer to Figure 11-7. When output level is 100, what is the total cost of production?
$2,000
Refer to Figure 10-3. At a price of ________, there is a surplus of tickets.
$25
Refer to Figure 12-10. The total cost at the profit-maximizing output level equals
$3,300.
Refer to Figure 4-1. If the market price is $1.00, what is Arnold's consumer surplus?
$3.00
Refer to Table 13-1. What is the marginal revenue of the 3rd unit?
$5.50
Refer to Figure 12-10. Total revenue at the profit-maximizing level of output is
$6,000.
Refer to Figure 11-7. When the output level is 100 units average fixed cost is
$8.
Calculate the income elasticity if an 8 percent increase in income leads to a 4 percent increase in quantity demanded for organic produce.
0.5
Refer to Figure 10-5. What is the marginal rate of substitution for one bar of chocolate between g and h?
1/2 of a cookie.
Refer to Figure 17-1. If Dale can sell her doilies at $2 each, what is the marginal product of the 5th worker?
14 doilies
The economists at the New York Fed estimate that the return the typical person receives from an investment in a college education is
15 percent per year.
Refer to Figure 11-1. The marginal product of the 3rd worker is
15.
A United States government patent lasts
20 years.
Bella can produce either a combination of 60 silk roses and 80 silk leaves or a combination of 70 silk roses and 55 silk leaves. If she now produces 60 silk roses and 80 silk leaves, what is the opportunity cost of producing an additional 10 silk roses?
25 silk leaves
Refer to Figure 17-1. If the wage rate is $40, how many workers should Dale hire?
3
Refer to Table 10-2. If Keira maximizes her utility, how many units of each good should she buy?
3 cups of soup and 4 sandwiches
Refer to Table 4-7. If a minimum wage of $11.50 an hour is mandated, what is the quantity of labor demanded?
570,000
Refer to Table 10-2. What is Keira's marginal utility per dollar spent on the third cup of soup?
6 utils
Refer to Table 17-1. The marginal product of the fourth unit of labor is
60.
Refer to Table 4-7. If a minimum wage of $11.50 an hour is mandated, what is the quantity of labor supplied?
610,000
The first Pepsi yields Craig 18 units of utility and the second yields him an additional 12 units of utility. His total utility from three Pepsis is 38 units of utility. The marginal utility of the third Pepsi is
8 units of utility
Refer to Figure 4-6. What area represents consumer surplus at P2?
A
Which of the following equations is correct?
AFC + AVC = ATC
Refer to Table 14-1. What is the Nash equilibrium in this game?
AirPorter offers the discount, but LimoZeenz does not.
What is the difference between an "increase in demand" and an "increase in quantity demanded"?
An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.
Which of the following statements is correct?
An increase in the price of C will decrease the demand for complementary product D.
Economic growth can be portrayed as
An outward shift of the production possibilities curve.
Which of the following statements is true?
As output increases, average fixed cost becomes smaller and smaller.
Which of the following is a reason why a firm would experience diseconomies of scale?
As the size of the firm increases it becomes more difficult to coordinate the operations of its manufacturing plants.
Refer to Figure 4-6. What area represents producer surplus at P2?
B+D
Refer to Figure 14-2. If the government delays Gigacom's entry and Xenophone moves first, what is the likely outcome in the market?
Both offer DSL internet service; Xenophone earns a profit of $8 million and Gigacom earns a profit of $7 million.
Refer to Figure 4-6. What area represents the deadweight loss at P2?
C+E
Let D= demand, S = supply, P = equilibrium price, and Q= equilibrium quantity. What happens in the market for walnuts if the Centers for Disease Control and Prevention announces that consuming a half cup of walnuts each week helps to lower levels of bad cholesterol?
D increases, S no change, P and Q increase.
Refer to Figure 6-6. As price falls from PA to PB, the quantity demanded increases the most along D1; therefore
D1 is more elastic than D2 or D3.
________ refers to the reduction in economic surplus resulting from not being in competitive equilibrium.
Deadweight loss
Because successive units of a good produce less and less additional satisfaction, the price must fall to encourage a buyer to purchase more units of the good. This statement is most consistent with which explanation for the law of demand?
Diminishing marginal utility
Which of the following statements explains the difference between diminishing returns and diseconomies of scale?
Diminishing returns apply only to the short run; diseconomies of scale apply only in the long run.
Refer to Figure 11-5. Identify the curves in the diagram.
E = marginal cost curve; F = average total cost curve; G = average variable cost curve; H = average fixed cost curve.
Goods with upward sloping demand curves are referred to as
Giffen goods.
The simple circular flow model shows that
Households are on the selling side of the resource market and on the buying side of the product market.
Suppose that tacos and pizza are substitutes, and that soda and pizza are complements. We would expect an increase in the price of pizza to
Increase the demand for tacos and decrease the demand for soda
How are the fundamental economic decisions determined in Canada?
Individuals, firms, and the government interact in a market to make these economic decisions.
What is an indifference curve?
It is a curve that shows the combinations of consumption bundles that give the consumer the same utility.
What is a factor market?
It is a market where resources used to produce final goods are traded.
Refer to Figure 12-2. What is the amount of profit if the firm produces Q2 units?
It is equal to the vertical distance c to g.
What is allocative efficiency?
It refers to a situation in which resources are allocated such that the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it.
How will an increase in population affect the labor market?
It will shift the market supply curve.
Refer to Figure 14-2. If the government delays Gigacom's entry and Xenophone moves first, is a threat by Gigacom that it will provide DSL service if Xenophone provides cable service a credible threat?
No, because Gigacom will lose $4.5 million in profits if it carries out its threat.
Refer to Table 14-1. Is there a dominant strategy for AirPorter and if so, what is it?
No, its outcome depends on what LimoZeenz does.
Joe sold gold coins for $1,000 that he bought a year ago for $1,000. He says, at least I didn't lose any money on my financial investment. His economist friend points out that in effect he did lose money because he could have received a 3 percent return on the $1,000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of
Opportunity costs
Refer to Table 13-2. What is the output (Q) that maximizes profit and what is the price (P) charged?
P = $50; Q = 6 cases
Refer to Figure 15-2. The firm's profit-maximizing price is
P3.
Refer to Figure 13-11. What is the monopolistic competitor's profit maximizing price?
P4
Refer to Figure 12-14. Consider a typical firm in a perfectly competitive industry which is incurring short-run losses. Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?
Panel A
Refer to Figure 12-12. Consider a typical firm in a perfectly competitive industry that makes short-run profits. Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?
Panel B
One reason some manufacturing companies have moved production from overseas locations back to the United States is rising foreign labor costs. Assuming that managers at these companies used all available information, including the rising cost of foreign labor, when making the decision to move production back to the United States exemplifies which key economic idea?
People are rational.
The law of demand states that, other things equal
Price and quantity demanded are inversely relate
Which of the following statements is true about profit?
Profit is the difference between revenue and cost.
Which of the following is a fundamental characteristic of the market system?
Property rights
Refer to Figure 13-11. What is the monopolistic competitor's profit maximizing output?
Q2 units
Refer to Figure 10-1. Which of the following statements is true?
Quantities Q0 and Q1 are the utility-maximizing quantities of hoagies at two different prices of hoagies.
Which of the following statements is true about revenue?
Revenue is the total amount received for selling a good or service.
Let D= demand, S = supply, P = equilibrium price, and Q= equilibrium quantity. What happens in the market for tropical hardwood trees if the governments restrict the amount of forest lands that can be logged?
S decreases, D no change, P increases, Q decreases.
Suppose you pre-ordered a non-refundable movie ticket to Avengers: Infinity War. On the day of the movie you decide that you would rather not go to the movie. According to economists, what is the rational thing to do?
Since you do not want to go to the movie and the cost of the movie ticket is a sunk cost, how much you paid for the ticket should not influence your decision.
What is always true at the quantity where a firm's average total cost equals average revenue?
The firm breaks even.
Refer to Figure 17-1. Suppose the market price of doilies rises to $3. What happens to the curve given in the diagram?
The curve shifts to the right.
The Internet has created a new category in the book selling market, namely, the "barely used" book. How does the availability of barely used books affect the market for new books?
The demand curve for new books shifts to the left.
In September, buyers of silver expect that the price of silver will rise in October. What happens in the silver market in September, holding all else constant?
The demand curve shifts to the right.
Which of the following would cause an increase in the equilibrium wage?
The demand for labor increases faster than the supply of labor.
Macroeconomics is mostly focused on
The economy as a whole.
Producer surplus is the difference between
The minimum prices producers are willing to accept for a product and the higher equilibrium price.
Which of the following is a microeconomic statement?
The price of smartphones declined 2.8 percent last year.
Which of the following is a characteristic of an oligopolistic market structure?
There are few dominant sellers.
Competition means that
There are independently acting buyers and sellers in each market.
Which of the following best describes an assumption economists make about human behavior?
They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time.
Which of the following summarizes the impact of immigration growth on the labor market?
This will increase the labor supply, reduce the equilibrium wage and increase the quantity of labor demanded.
Which of the following statements is true?
Total cost = fixed cost + variable cost.
In economics, the pleasure, happiness, or satisfaction received from a product is called
Utility
Refer to Table 4-7. What is the equilibrium hourly wage (W*) and the equilibrium quantity of labor (Q*)?
W* = $10.50; Q* = 590,000
Refer to Table 14-1. Is there a dominant strategy for LimoZeenz and if so, what is it?
Yes, LimoZeenz should not offer the mid-week discount.
The town of Harmonia gives away all 500 tickets to its annual Founder's Day Free Concert-in-the-Park to local residents. Each year, more than 500 people wish to attend the concert, so some of the residents who receive the free tickets sell them for as much as $75 each. Is a transaction where someone pays a resident $75 for a "free ticket" economically efficient?
Yes, it was a voluntary exchange that benefited both parties.
Economists refer to a market where buying and selling take place at prices that violate government price regulations as
a black market.
Which of the following will not shift the demand curve for labor?
a change in the wage rate
Which of the following statements best illustrates the concept of derived demand?
a decline in the demand for shoes will cause the demand for leather to decline
Which of the following would shift the supply curve for smartphones to the right?
a decrease in the price of an input used to produce smartphones
Which of the following would cause the equilibrium price of white bread to decrease and the equilibrium quantity of white bread to increase?
a decrease in the price of flour
If the price of beef jerky rises, then the substitution effect due to the price change will cause
a decrease in the quantity of beef jerky demanded.
The term oligopoly indicates
a few firms producing either a differentiated or a homogeneous product.
Rent control is an example of
a price ceiling.
The minimum wage is an example of
a price floor.
The price elasticity of demand coefficient measures
buyer responsiveness to price changes.
If the firms in an oligopolistic industry can establish an effective cartel, the resulting output and price will approximate those of
a pure monopoly.
Pure monopoly refers to
a single firm producing a product for which there are no close substitutes.
What is productive efficiency?
a situation in which resources are allocated such that goods can be produced at their lowest possible average cost
The Law of Diminishing Returns results in
a total product curve that eventually increases at a decreasing rate.
Until the early 1980s, The Walt Disney Company used a pricing strategy in which visitors to its theme parks paid a low admission fee and also paid for rides. This pricing strategy is an example of
a two-part tariff.
Which of the following items is likely to have the highest income elasticity of demand?
a vacation home in the Swiss Alps
Marginal cost is the
additional cost of producing an additional unit of output.
A decrease in the wage rate causes
an increase in the quantity of labor demanded.
A curve that shows all the combinations of two inputs, such as labor and capital, that will produce the same level of output is called
an isoquant.
Economists would describe the U.S. automobile industry as
an oligopoly.
Other things equal, in which of the following cases would economic profit be the greatest?
an unregulated monopolist that is able to engage in price discrimination.
Comparative advantage means the ability to produce a good or service
at a lower opportunity cost than any other producer.
To have a monopoly in an industry there must be
barriers to entry so high that no other firms can enter the industry.
In the financial crisis that precipitated the 2007-2009 recession, people systematically overestimated their prospects for financial gain. Which branch of economics would most likely have expected to predict this?
behavioral economics
In the long run, the entry of new firms in an industry
benefits consumers by forcing prices down to the level of average cost.
The collection and analysis of massive amounts of data, with the goal of measuring aspects of people's behavior is referred to as
big data.
If the price of lattes, a normal good you enjoy, falls, then
both the income and substitution effects lead you to buy more lattes.
Which of the following goods would have the most inelastic demand?
bread
One reason why airlines charge business travelers and leisure travelers different prices is
business travelers often have inflexible schedules and have to travel on a particular day. The opposite is true for leisure travelers.
Suppose you have worked at a local sandwich shop for six months and now you plan to ask your manager for a raise. How can you convince your manager that you are worth more money than you are currently being paid?
by showing your manager that your marginal revenue product has increased since your last wage increase
You have an absolute advantage whenever you
can produce more of something than others with the same resources.
Economics is the study of the ________ people make to attain their goals, given their ________ resources.
choices; scarce
Which of the following products comes closest to having a perfectly inelastic demand?
cholesterol medication in general
The demand for a product is inelastic with respect to price if
consumers are largely unresponsive to a per unit price change.
The economic model of consumer behavior predicts that
consumers will choose to buy the combination of goods and services that make them as well off as possible from those combinations that their budgets allow them to buy.
When firms price their products by adding a percentage markup to their average costs of production, this is called
cost-plus pricing.
A(n) ________ is represented by a leftward shift of the demand curve while a(n) ________ is represented by a movement along a given demand curve.
decrease in demand; increase in quantity demanded
Consumers who will pay high prices to be among the first to own certain new products are called
early adopters.
Which of the following products allows the seller to identify different groups of consumers (segment the market) at virtually no cost?
early bird dinner specials
What characteristic of a competitive market has made the "long run pretty short" in the market for iPhone apps?
ease of entry
The primary force encouraging the entry of new firms into a purely competitive industry is
economic profits earned by firms already in the industry.
If, when a firm doubles all its inputs, its average cost of production decreases, then production displays
economies of scale.
The observation that people tend to value something more highly when they own it than when they don't is called the
endowment effect.
To the economist, total cost includes
explicit and implicit costs
Which of the following is most likely to be an implicit cost for Company X?
forgone rental income from building owned by Company X, that is vacant
The most profitable price for a monopolist is
found where the profit-maximizing quantity hits the demand curve.
Suppose James and Katherine are successful in establishing a profitable market for their "ghost restaurants" in what is a monopolistically competitive industry. In the long run, James and Katherine will most likely find it ________ to remain profitable as they face ________ competition in the "ghost restaurant" market.
harder; more
To be a natural monopoly, a firm must
have economies of scale that are so large that it can supply the entire market at a lower cost than two or more firms.
Both individual buyers and sellers in perfect competition
have to take the market price as a given.
A perfectly elastic demand curve is
horizontal
A merger between the Ford Motor Company and General Motors would be an example of a
horizontal merger.
In economics, the accumulated skills and training that workers have is known as
human capital.
The production possibilities frontier model shows that
if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.
Increases in the productivity of labor result partly from
improvements in technology
If the amount of carbonated sodas consumed continues to decline as consumers continue to choose to buy healthier products, this will likely
increase the demand for premium water, because premium water and carbonated sodas are considered substitutes.
When the price of tortilla chips rose by 10 percent, the quantity of tortilla chips sold fell 4 percent. This indicates that the demand for tortilla chips is
inelastic
If demand is perfectly elastic, the absolute value of the price elasticity coefficient is
infinity
Refer to Figure 11-1. The average product of the 4th worker
is 17.
The long-run supply curve for a perfectly competitive, constant-cost industry
is horizontal.
Arbitrage
is the act of buying an item at a low price and reselling the item at a higher price.
Price discrimination
is the practice of charging different prices to different customers when the price differences cannot be attributed to variations in cost.
Refer to Figure 12-1. If the firm is charging a price of $12 per unit
it is not selling any output.
To affect the market outcome, a price ceiling
must be set below the equilibrium price.
Which of the following is used to explain why a consumer's willingness to buy Microsoft Office increases as the number of other people who use Microsoft Office increases?
network externalities
When a firm charges $4.95 instead of $5.00, what do economists call this pricing strategy?
odd pricing
Cross-price elasticity of demand is calculated as the
percentage change in quantity demanded of one good divided by percentage change in price of a different good.
Concentration ratios measure the
percentage of total industry sales accounted for by the largest firms in the industry.
At a price of $8 per dozen, Chuy sells 40 dozen homemade tamales per week. When he raised his price to $12 per dozen, he still sold 40 dozen per week. Based on this information, the demand for his tamales is
perfectly inelastic.
For which of the following firms is patent protection of vital importance?
pharmaceutical firms
Which of the following supermarket strategies to increase sales would be most consistent with a behavioral economics (versus neoclassical economics) approach?
positioning frequently purchased items at the back of the store.
We would expect the cross elasticity of demand between Papsi and Coke to be
positive, indicating substitute goods.
Total revenue equals
price per unit times quantity sold.
The reason that the "fast-casual" restaurant market is monopolistically competitive rather than perfectly competitive is because
products are differentiated.
If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded, then the demand for golf balls is
relatively elastic.
When there few close substitutes available for a good, demand tends to be
relatively inelastic.
For which of the following products is social influence likely to have the greatest impact?
restaurants
In many business situations one firm will act first, and then other firms will respond. To help analyze these types of situations economists use
sequential games.
If a firm shuts down in the short run it will
suffer a loss equal to its fixed costs.
Households ________ factors of production and ________ goods and services.
supply; demand
Refer to Table 4-7. If a minimum wage of $11.50 is mandated, there will be a
surplus of 40,000 units of labor.
The law of one price states
that identical products should sell for the same price everywhere.
Refer to Figure 11-1. Diminishing marginal productivity sets in after
the 2nd worker is hired.
The network of devices directly communicating data to a computer without a person having to enter the data is known as
the Internet of Things.
Marginal cost is
the additional cost to a firm of producing one more unit of a good or service
Major League Baseball teams are similar to other firms in that they use factors of production to produce a product (baseball games). An example of capital used by teams to produce their products is
the ballparks where the games are played.
The marginal product of labor is defined as
the change in output that a firm produces as a result of hiring one more worker.
Marginal revenue is
the change in total revenue divided by the change in the quantity of output.
Increases in the marginal product of labor result from
the division of labor and specialization.
The law of diminishing marginal utility states that
the extra satisfaction from consuming a good decreases as more of a good is consumed, other things constant.
Refer to Figure 10-1. When the price of hoagies increases from $5.00 to $5.75, quantity demanded decreases from Q1 to Q0. This change in quantity demanded is due to
the income and substitution effects.
For a demand curve to be upward sloping, the good would have to be an inferior good, and
the income effect would have to be larger than the substitution effect.
In a competitive market equilibrium
the marginal benefit equals the marginal cost of the last unit sold.
The larger the number of firms in an industry
the more intense the rivalry among firms.
If the demand for a steak is unit elastic, then
the percentage change in quantity demanded is equal to the percentage change in price.
The income effect of a price change refers to the impact of a change in
the price of a good on a consumer's purchasing power.
A firm has an incentive to decrease supply now and increase supply in the future if it expects that
the price of its product will be higher in the future than it is today.
Economic rent, or pure rent, is
the price paid for the use of land and other nonreproducible goods
Suppliers will be willing to supply a product only if
the price received is at least equal to the additional cost of producing the product.
Technology is defined as
the processes used to produce goods and services.
The minimum point on the average variable cost curve is called
the shutdown point.
The minimum efficient scale is
the smallest level of operation where long-run average costs are lowest.
Which of the following is an experiment which tests whether fairness is important in consumer decision making?
the ultimatum game
In monopsony,
the wage rate paid by the employer varies directly with the number of workers employed
Profit is the difference between
total revenue and total cost.
The expenses you encounter when you buy in one market and sell in a distant market are known as
transactions costs.
With creation and growth of the internet,vacationers can now book their own flights, hotels, rental cars, and other travel logistics online. If this capability resulted in creative destruction, which if the following industries would have expected to decline the most as a result?
travel agencies
The points outside the production possibilities frontier are
unattainable.
If the price elasticity of demand for insulin is equal to zero then the demand curve for insulin is
vertical
Perfectly inelastic demand is represented by a demand curve which is ________, and relatively inelastic demand is represented by a demand curve which is ________.
vertical; downward sloping
Refer to Figure 12-11. Suppose the prevailing price is $20 and the firm is currently producing 1,350 units. In the long-run equilibrium, the firm represented in the diagram
will reduce its output to 1,100 units.