micro final

Diminishing marginal returns occur when:

each additional unit of a variable factor adds less to total output than the previous unit.

Pauli's Pizza offers one slice for $2, two slices for $3.50, three slices for $4.50, and four slices for $5.00. The marginal cost of the third slice is: Correct!

$1

Marginal revenue is a firm's:

increase in total revenue when it sells an additional unit of output.

Jim is being paid $7.25 an hour to work at a restaurant. In the circular flow, this is an example of a:

household selling a resource in the factor market.

(Figure and Table: Variable, Fixed, and Total Costs) Use Figure and Table: Variable, Fixed, and Total Costs. When 51 bushels of wheat is produced, the average fixed cost is _____, average variable cost is _____, and average total cost is _____.

$7.84; $11.76; $19.60

John's accountant tells him that he made a profit of $43,002 running a pottery studio in Orlando. John's wife, an economist, claims John lost $43,002 running his pottery studio. This means his wife is claiming that he incurred _____ in _____ costs.

$86,004; implicit

(Figure: The Market for Oranges in South Africa) Use Figure: The Market for Oranges in South Africa. In autarky, the price of oranges in South Africa is P1. When the economy is opened to trade, the price falls to PW. South Africa will _____ oranges, and the volume of trade will equal _____.

import; CT - QT

The assumptions of perfect competition imply that:

individuals in the market accept the market price as given.

Consider a production possibility frontier for Italy. If in 2016 Italy's resources are not being fully utilized, Italy will be somewhere _____ of its production possibility frontier.

inside

An economic model:

is a simplified version of reality used to understand real-world economic conditions.

When Aishe's Bar-B-Que produces 10 pork sandwiches, the total cost is $5. When 11 pork sandwiches are produced, the total cost rises to $6. From this we know that the marginal cost of the eleventh pork sandwich:

is greater than the average cost of 11 pork sandwiches.

According to the profit-maximizing principle of marginal analysis, if the marginal benefit is _____ the marginal cost, _____.

less than; an activity should be reduced

The relation between an individual's consumption bundle and her satisfaction is called a _____ function.

utility

Suppose you manage a corner grocery store. If peanut butter is an inferior good, what do you suppose would happen to the price and quantity sold of peanut butter as incomes fell during a recession?

The price and quantity would both increase.

(Figure: Marginal Decision Rule) Use Figure: The Marginal Decision Rule. If P1 is the market price and if this firm is maximizing profit, it should produce:

at quantity q2.

In the long run:

all inputs are variable.

Profit is the difference between _____ and _____.

total revenues; total costs

You can spend $100 on either a new economics textbook or a new tablet computer. If you choose to buy the new economics textbook, the opportunity cost is:

your enjoyment of the new tablet computer.

In a long-run equilibrium, economic profits in a perfectly competitive industry are:

zero

(Figure: Payoff Matrix for Jake and Zoe) Use Figure: Payoff Matrix for Jake and Zoe. Jake and Zoe are the only producers of slushies in their tourist town. Every week, each decides whether to price high or price low for the following week. The figure shows the profit per week earned by their two firms. Suppose the firms each decide to price high initially and adopt a tit-for-tat strategy for the following weeks. After a few weeks, Jake's weekly profit would be _____ and Zoe's weekly profit would be _____.

$1,000; $1,000

(Table: Demand Schedule of Gadgets) Use Table: Demand Schedule of Gadgets. The market for gadgets consists of two producers, Margaret and Ray. Each firm can produce gadgets with no marginal cost or fixed cost. Suppose that these two producers have formed a cartel, agreed to split production of output evenly, and are maximizing total industry profits. If Margaret decides to cheat on the agreement and sell 100 more gadgets, Margaret's profit will be _____, and Ray's profit will be _____.

$1,400; $1,000

(Table: Competitive Market for Good Z) Use Table: Competitive Market for Good Z. The equilibrium price and quantity in this market are, respectively:

$10 and 30 units.

(Figure: The Marginal Benefit Curve) Use Figure: The Marginal Benefit Curve. The total benefit of mowing four lawns is approximately:

$114.

(Figure: A Profit-Maximizing Monopoly Firm) Use Figure: A Profit-Maximizing Monopoly Firm. This firm's profit per unit is:

$12.

(Table: Total Cost Data) Use Table: Total Cost Data. What is the total variable cost for this bicycle firm when the firm produces 5 bicycles?

$190

If a perfectly competitive firm increases production from 10 units to 11 units and the market price is $20 per unit, total revenue for 11 units is:

$220

(Table: Demand and Total Cost) Use Table: Demand and Total Cost. Lenoia runs a natural monopoly firm producing electricity for a small mountain village. The table shows Lenoia's demand and total cost of producing electricity. The maximum profit Lenoia can make is:

$225.

(Table: The Utility of Pecan Rolls) Use Table: The Utility of Pecan Rolls. The marginal utility for the fifth roll is:

0.

Mark and Julie are going to sell brownies and cookies for their third annual fundraiser bake sale. In one day, Mark can make 40 brownies or 20 cookies, and Julie can make 15 brownies or 15 cookies. What is Mark's opportunity cost to produce one brownie?

0.5 cookie

(Table: Optimal Choice of Milk and Honey) Use Table: Optimal Choice of Milk and Honey. The price of milk is $2 per gallon, and the price of honey is $4 per jar. Hal's income is $16. Assuming that Hal spends all of his income on honey and milk, the combination of milk and honey that will maximize his total utility is _____ jars of honey and _____ gallons of milk.

2; 4

(Figure: Cost Curves for Corn Producers) Use Figure: Cost Curves for Corn Producers. The market for corn is perfectly competitive. If the price of a bushel of corn is $10, then in the short run the farmer will produce _____ bushels of corn and take an economic loss equal to _____.

3; total fixed costs

(Figure: Payoff Matrix for Ajinomoto and ADM) Use Figure: Payoff Matrix for Ajinomoto and ADM. The Nash equilibrium combination occurs when ADM produces _____ million pounds and Ajinomoto produces _____ million pounds.

40; 40

Faruq spends all of his income on tacos and milkshakes. His income is $100, the price of tacos is $10, and the price of milkshakes is $2. Put tacos on the horizontal axis and milkshakes on the vertical axis. If Faruq spends all of his income, the opportunity cost of one taco equals _____ milkshakes.

5

(Figure: Omar's Production Possibilities) Use Figure: Omar's Production Possibilities. The opportunity cost for Tom to move from point A on the curve to point B is:

5 coconuts.

(Table: Demand Schedule of Gadgets) Use Table: Demand Schedule of Gadgets. The market for gadgets consists of two producers, Margaret and Ray. Each firm can produce gadgets with no marginal cost or fixed cost. If these two producers formed a cartel and acted to maximize total industry profits, total industry output would be _____, and the price would be _____.

500; $5

(Table: Production Possibilities Schedule I) Use Table: Production Possibilities Schedule I. The opportunity cost of producing the fourth unit of consumer goods is _____ units of capital goods.

6

(Figure: The Demand and Supply of Wheat) Use Figure: The Demand and Supply of Wheat. What is the equilibrium quantity in this wheat market each period?

6,000 bushels

(Figure: Omar's Production Possibilities) Use Figure: Omar's Production Possibilities. Which point or points represent(s) a combination of coconuts and fish that is efficient in production?

A and B

Which statement concerning monopoly is TRUE?

A monopoly has no rivals.

(Figure: The Market for iPhones) Use Figure: The Market for iPhones. Assume that PA is the autarky price, PW is the world price, and D and S represent domestic demand and supply, respectively. The loss of producer surplus when the market moves from autarky to free trade equals the area:

B.

Taken collectively, people in nations that engage in international trade are NOT likely to:

Be made worse off

If they spend all night writing computer programs, Laurence can write 10 programs, and Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 pairs, and Carrie Anne can make 4. We know that:

Carrie Anne's opportunity costs of writing programs and of making sunglasses are less than Laurence's.

_____ occurs when the only two firms in an industry agree to fix the price at a given level.

Collusion

(Figure: The Market for Laptops) Use Figure: The Market for Laptops. Assume that S and D are the domestic supply and demand curves and the world price is PW. Identify the area of deadweight loss when a tariff raises the domestic price from the world price to PT.

D + F

In economics, maximization of the total profit of an activity occurs when:

MB = MC.

A perfectly competitive firm maximizes profit in the short run by producing the quantity at which:

MR = MC

(Table: Bongos and Frisbees) Use Table: Bongos and Frisbees. Bill and Mickey make bongos and Frisbees. Who has the comparative advantage in producing Frisbees?

Mickey

(Figure: Shifts in Demand and Supply II) Use Figure: Shifts in Demand and Supply II. The graph shows how supply and demand might shift in response to specific events. Suppose scientists discover that eating pomegranates causes aging. Which panel BEST describes how this will affect the market for pomegranates?

Panel B

(Figure: Shifts in Demand and Supply II) Use Figure: Shifts in Demand and Supply II. The figure shows how supply and demand might shift in response to specific events. Suppose the technology for producing ethanol fuel improves. Which panel BEST describes how this will affect the market for ethanol?

Panel D

If a nation exports a good when the economy is opened to trade, relative to the autarky price, the domestic price of the good will _____ and domestic consumption will _____.

Rise; fall

What is the difference between a shortage and scarcity?

Scarcity will almost always exist, but a shortage will exist only if the price is kept below the equilibrium level.

Which question BEST describes a "how much" decision?

Should I buy a third hot dog?

(Figure: The Market for Roses) Use Figure: The Market for Roses. Assume that PA is the autarky price and PW is the world price. Consumer surplus with international trade would be area:

W + X + Z.

If chicken and beef are substitutes, then a fall in the price of chicken will bring about:

a decrease in the demand for beef.

To be called an oligopoly, an industry must have:

a small number of interdependent firms.

Price discrimination is the practice of

charging different prices to buyers of the same good.

Which factor is NOT a determinant of supply?

consumer tastes

Zoe, the owner of Zoe's Bakery, determines that, at her optimal level of production in the short run, P < ATC and P > AVC. In the short run, Zoe should:

continue to operate, even though she is taking an economic loss.

Economists generally believe that a country should specialize in the production of a good or service if the:

country can produce the product while forgoing fewer alternative products than any other country.

Which factor is NOT a barrier to entry?

diseconomies of scale

(Figure: Pricing Strategy in Cable TV Market I) Use Figure: Pricing Strategy in Cable TV Market I. In the figure, the dominant strategy for CableNorth:

does not exist.

A strategy that is the same, regardless of the action of the other player in a game, is a _____ strategy.

dominant

(Figure: Consumer and Capital Goods) Use Figure: Consumer and Capital Goods. The movement from curve 1 to curve 2 indicates:

economic growth.

A price-discriminating firm will adjust prices so that customers with more _____ demand pay _____ customers with _____ elastic demand.

elastic; less than; less

In a monopoly in the long run:

entry by other firms will not occur.

A factor of production whose quantity CANNOT be changed in the short run is a(n) _____ factor of production.

fixed

An analytical approach through which strategic choices can be assessed is called:

game theory.

Because of monopoly, consumers experience _____ than they do with perfect competition.

higher prices

A consumer's spending is restricted because of:

his or her budget constraint.

The last glass of milk provided Marge with 10 additional utils, and the last cookie provided her with 25 additional utils. The price of a cookie is twice the price of a glass of milk. Assuming that diminishing marginal utility applies to both goods, Marge should consume _____ milk and _____ cookies.

less; more

The market for corn in Kansas is considered to be competitive. This means there are _____ buyers and _____ sellers of corn in Kansas.

many; many

A "how much" decision is BEST made by comparing the _____ of an action to the _____ of that action.

marginal benefits; marginal costs

The _____ curve shows the additional cost of producing each additional unit of output.

marginal cost

The break-even price for a perfectly competitive firm is equal to the:

minimum value of average total cost.

For a firm producing at any level of output LOWER than the most profitable one, an increase in output adds:

more to total revenue than to total cost.

When milk consumption decreased, a survey firm wanted to know what was going on, so they interviewed people and found that people thought that rising milk prices were making it hard to justify their milk purchases. This suggests that what is going on is a:

movement along the demand curve for milk.

(Figure: Pricing Strategy in Cable TV Market I) Use Figure: Pricing Strategy in Cable TV Market I. If the two firms in the cable TV market collude:

neither firm advertises, and each earns $150,000.

A firm that has economies of scale:

over the entire range of output demanded is a natural monopoly.

(Figure: Production Possibilities and Circular-Flow Diagram) Use Figure: Production Possibilities and Circular-Flow Diagram. Assume the two figures represent the same economy. Suppose that in the circular-flow diagram there is a significant decrease in the amount of labor flowing to the firms that produce coconuts. If all other variables remain unchanged, this adjustment in the economy would be BEST represented in the production possibilities figure by a move from point A toward:

point C (a decrease in coconut production).

In a perfectly competitive market, tastes and preferences lead to an increase in the demand for the good. Holding everything else constant, this will lead to an increase in price that will result in _____ in the short run, which will in turn _____, which will _____.

positive economic profits; attract new firms; reduce the price

The _____ apples will decrease when apple prices rise.

quantity demanded of

(Table: Lilly's Apple Orchard) Use Table: Lilly's Apple Orchard. Lilly is the price-taking owner of an apple orchard; the orchard's variable costs are given in the table. Her orchard has fixed costs of $30. If the price of a bushel of apples is $85, we would expect total industry output to _____ and Lilly's output to _____ in the long run.

rise; fall

If a country imposes a tariff on imported shoes, we expect the domestic price of shoes to _____, domestic consumption to _____, and domestic production to _____.

rise; fall; rise

(Table: The Market for Chocolate-Covered Peanuts) Use Table: The Market for Chocolate-Covered Peanuts. If the price of chocolate-covered peanuts is $0.50, there is a:

shortage of 70 bags per month.

The larger the output, the more output over which fixed cost is distributed. Called the _____ effect, this leads to a _____ average _____ cost as output rises.

spreading; lower; fixed

(Figure: The Demand and Supply of Wheat) Use Figure: The Demand and Supply of Wheat. If a price of $10 temporarily exists in this market, a _____ of _____ bushels per period will result.

surplus; 8,000

China, which is labor-abundant, has a comparative advantage in clothing production, which is labor-intensive. Which of the following models explains this pattern of comparative advantage?

the Heckscher-Ohlin model

In one hour, the United States can produce 25 tons of steel or 250 automobiles. In one hour, Japan can produce 30 tons of steel or 275 automobiles. This information implies that:

the United States has a comparative advantage in the production of automobiles.

(Table: Wheat and Aluminum) Use Table: Wheat and Aluminum. The United States and Germany can produce both wheat and aluminum. The table shows the maximum annual output combinations of wheat and aluminum that can be produced. Based on the table:

the United States has a comparative advantage in wheat and an absolute advantage in wheat.

In the short run, if a monopoly is forced to charge a price equal to marginal cost:

the deadweight loss will decrease.

You own a small deli that sells sandwiches, salads, and soup. Which factor is an implicit cost of the business?

the job offer you did not accept at a local catering service

Tacit collusion is difficult to achieve in practice:

the larger the number of firms in the industry.

At the optimal consumption bundle:

the marginal utility per dollar spent is equalized across all goods consumed.

A production possibility frontier that is a straight line sloping down from left to right suggests that:

the opportunity costs of the products are constant.

It is certain that the equilibrium price will fall when:

the supply curve shifts to the right and the demand curve shifts to the left.

Market equilibrium occurs when:

there is no incentive for prices to change in the market, quantity demanded equals quantity supplied, and the market clears.

Although freshwater is very abundant in most places, it is scarce because:

there is not enough of it to meet all needs.

(Table: Long-Run Total Cost) Use Table: Long-Run Total Cost. This soybean grower receives constant returns to scale over the _____ and _____ bushels.

third; fourth

Policies that limit imports, usually to insulate domestic producers from foreign competition, are known as:

trade protection.

A new fast-food restaurant offered a prize—a free meal (valued at $5) each week for a year—to its first 100 customers. Ramona camped out for 48 hours before the opening to be one of the first 100 customers, and she successfully obtained the prize. The cost to Ramona of obtaining the "free meal a week for a year" prize was:

whatever else she would have done with the 48 hours.