Micro final exam review
A competitive firm will produce in the short run so long as its price exceeds its average fixed cost
False
Although individual purely competitive firms can influence the price of their proudct, these firms as a group cannot influence market price
False
Because of the ability to influence price, a pure monopolist can increase price and increase volume of sales simultaneously
False
Because of their large scale level of production, pure monopolists overallocate resources to their industry by produing beyond the P=MC output
False
Elasticity of resource demand is measured by dividing "percentage change in resource price" by "percentage change in resource quantity"
False
In a purely competitive industry competiiton centers more on advertising and sales promotion than on price
False
In maximizing a profit a firm will always produce that ouput where total revenues are at a maximum
False
In the long run a pure monopolist must produce at that output where average total cost is at a minimum
False
In the long run monopolistically competitive firms make normal profits becaus they are forced to operate at the minimum point on their avergae total cost curve
False
In the short run a pure monopolist wil charge the highest price the market will bear for its product
False
Labor market discrimination increases the size of the nation's Gross Domestic Product
False
Majority voting assures that government will provide a public good if it yields totak benefits in excess of total costs
False
Price discrimation occurs every time a firms sells a good for two different prices
False
Price discrimination is illegal in the US under antitrust regulations
False
Pure monopolists always earn economic profits
False
Sales taxes are proportional in relation to income because the same tax rate applies regardless of the size of a purchase
False
Technological progress in the health care industry has typically reduced costs and increased supply
False
Tghe top 20 percent of US income earners recieve nearly 80% of total US income
False
The benefits recieved principle of taxation supports the case for highly progressive taxation
False
The benefits recieved priniciple of taxation is used to support corporate and personal income taxes
False
The closer the Lorenz curve is to the diagonal, the greater is the degree of income equality
False
The demand curve for a purely competitive industry is perfectly elastiic, but the demand curves faced by individual firms in such an industry are downsloping
False
The economic profits earned by a monopolistically competitive seller are zero in the long run
False
The monopolistically competitive seller maximizes profits by equating price and marginal cost
False
The optimal (economicallly-efficient_ level of air pollution is zero emissions
False
The regulation of natural monopoloes has been criticized because it creates a tendency for regulated firms to use too much labor and too little capital in the production process
False
The supply of loanable funds is perfectly elastic
False
The short run is characterized by:
Fixed plant capacity
Which of the following is most likely to be a variable cost?
Fuel and power payments
Which of the following is most likely to be a fixed cost?
Property insurance premiums
An improvement in production technology will
Shift the supply curve to the right
In 2007, the price of oil increased, which in turn caused the price of natural gas to rise. This can be explained by saying that old and natural gas are:
Substitute googs and the higher price for oil increased the demand for natural gas
Price and marginal revenue are identitcal for an individual purely competitive seller
True
Taxes and/ or mandatory fees can solve the free rider problem
True
The US poverty rate was considerably lower in 2004 than in 1960
True
The demand curve of a monopolistically competitive producer is less elastic than that of a purely competitive producer
True
The marginal revenue product curve of a purely competitive seller declines solely ebcause of the law of diminishing returns
True
The total revenue curve of a competitive sellers graphs as a striaght upsloping line
True
You should decide to go to a movie:
if the marginal cost of the movie exceeds its marginal benefit
To economists, the main difference between the short run and the long run is that:
in the long run all resources are variable, while in the short run at least one resources is fixed
If the demand and supply curves for product X are stable, a government mandated increase in the price of X will:
increase the quantity supplied and decrease the quantity demanded of X
The long run average total cost curve
indicates the lowest unit costs achievable when a firm has had sufficient time to alter plant size
Marginal cost is the:
change in total cost that results from producing one more unit of input
Command systems are also known as:
communism
The utility of a good or service
is the satisfaction or pleasure one gets from consuming it
The first, second, and third workers employed by a firm add 24, 18, and 9 units to total product respectively. Therefore, we can conclude that:
marginal product of the third worker is 9
Economics involves marginal analysis because:
most decisions involve changes from the present situation
Diseconomies of scale arise primarily because:
of the difficulties involved in managing and coordinating a large business enterprise
The law of demand states that, other things equal:
price and quanitity demanded are inversly related
An increase in the quantity demanded means that:
price has declines and consumers therefore want to purchase more of the product
Assume that in the short run a firm is producing 100 units of output, has average total costs of $200, and average variable costs of $150. The firm's total fixed costs are:
$5000
The law of diminishing returns results in:
A total product curve that eventually increases at a decreasing rate.
While eating at Alex's "Pizza by the slice" restaurant, Kara experiences diminishing marginal utility. She gained 10 units of satisfaction from her first slice of pizza consumed, and would only recieve 5 units of satisfaction from consuming a second slice. Based on this information we can conclude that:
Alex may have to lower the price to convince Kara to buy a second slice
Which of the following statements concerning the relationships between total product (TP), average product (AP), and marginal profit (MP) is NOT correct?
Average Product continues to rise so long as Total Product is rising
The price elasticity of demand coefficient measures
Buyer responsiveness to price changes
If a firm decided to produce no output in the short run, its costs will be:
Its fixed costs
Which of the following is CORRECT as it relates to cost curves?
Marginal cost intersects average total cost at the latter's minimum point.
Mary says, "You would have to pay me $50 to attend that pro wrestling event." For Mary, the marginal utility of the event is:
Negative
Joe sold gold coins for $1000 that he bought a year ago for $1000. He says "at least i didnt lose any money on my financial investment" His economist friend points out that in effect he did lose money, because he could have recieved 3 percent return on the $1000 if he had bought a bank certificate of deposit instead of the coins. The economists analysis in this case incorporates the idea of:
Opportunity costs
The demand curve shows the relationship between:
Price and quanitity demanded
The supply curve shows the relationship between:
Price and quantity supplied
Marginal revenue is the addition to total revenue resulting from the sale of one more unit of output
True
The income and subsititiuion effects account for:
The downward sloping demand curve
When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of a product. This statement describes:
The income effect
At the equilibrium price
There are no pressures on price to either rise or fall
The demand for a resource depends on its productivity and the market value of the product it is producing
Tire
A highly progressive tax takes relatively more from the rich than it does from the poor
True
A monopsonoitic employer may sell its pduct in a competitive marjet
True
After all long run adjustments have been completed, a firm in a competitive industry will produce that level of output where average total cost is at a minimum
True
An improvement in the technology of pollution control is likely to increase society's optimal amount of pollution abatement
True
Because of the equilibrium position of a purely competitive seller entails an equality of price and marginal costs, competition produces up to an efficient allocation of economic resources
True
Cost benefit analysis is frequently difficult to apply because it is difficult to quantify the full benefits of a public good or service
True
Critics of the minimum wage contend that higher minimums cause employers to move up their labor demand curves, reducing employment of low wage workers
True
Demand is the active and supply the passive determinant of land rent
True
Generally speaking, the larger the number of firms in an oligopolistic industry, the more difficult it is for those firms to collide
True
Human capital investment refers to spending on eductaion and worker training
True
If XYZ Company can sell 4 units per week at $10 per unit and 5 units per week at $9 per unit, the marginal revenue of the fifth unit is $5
True
If three or four homogeneous oligopolists collide, the resulting price and production outcomes will be similar to these of pure monopoly
True
If you pay a $1000 tax on $10,000 of taxable income and a $3000 tax on a taxable income of $16,000 the tax is progressive
True
It will be profitable for a firm to hire additional units of any resource up to the point at which its Marginal Revenue Profit is equal to its Marginal Revenue Cost
True
Marginal cost is a measure of the alternative goods which society forgoes in using resources to produce an additional unit of some specific product
True
Which of the following represents a long-run adjustment?
Unable to meet foreign competition, a U.S. watch manufacturer sells one of its branch plants
Economic systems differ according to which two main charactertistics?
Who owns the factors of production, and the methods used to coordinate economic activity.
The law of diminishing returns indicates that:
as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point
A person should consume more of something when its marginal:
benefit exceeds its marginal cost
Average fixed cost:
declines continually as output increases
If the demand for product X is inelastic, a 4 percent increase in the price of X will:
decrease the quantity of X demanded by less than 4 percent
If a firm doubles its output in the long run and its unit costs of production decline, we can conclude that:
economies of scale are being realized
Economic profits are calculated by subtracting:
explicit and implicit costs from total revenue
To the economist, total cost includes:
explicit and implicit costs, including a normal profit
Economics may be best defined as the:
social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity
Economies of scale are indicated by
the declining segment of the long-run average total cost curve
The basic characteristic of the short run is that:
the firm does not have sufficient time to change the size of its plant
Graphically, the market demand curve is:
the horizontal sum of individual demand curves
When diseconomies of scale occur:
the long run average total cost curve rises
Normal profit is:
the return to the entrepreneur when economic profits are zero
Competition means that:
there are independently-acting buyers and sellers in each market
Accounting profits equal total revenue minus:
total explicit costs
Which of the following is most likely to be an inferior good:
used clothing
Economies and diseconomies of scale explain:
why the firms long-run average total cost curve is U-shaped