Micro Final
A production possibilities frontier is bowed outward when the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good.
False
A production possibilities frontier is bowed outward when the rate of tradeoff between the two goods being produced is constant.
False
An oligopoly would tend to restrict output and drive up price if barriers to entering the industry are negligible.
False
Because monopolists charge a price in excess of marginal cost, it must be the case that monopolists earn a positive economic profit
False
Cartel agreements break down because parties cannot agree on the price that a monopolist would charge.
False
In the prisoners' dilemma game, self-interest juxtaposes the payoffs earned at the Nash equilibrium.
False
It is impossible for total utility to be positive when marginal utility is negative
False
Reaching an efficient bargain is difficult when the externality is large.
False
The Coase Theorem suggests that taxes should be enacted to alleviate the effects of negative externalities.
False
Utility is always an increasing function of quantity
False
The value of a worker's marginal product of labor is higher for workers with more human capital.
True
The value of a worker's marginal product of labor is higher if the net price of the good/service he produces is higher.
True
When a perfectly competitive firm sells additional units of output, total revenue always rises, and when a monopolist sells additional units of output, total revenue could rise, fall, or remain unchanged .
True
Coase Theorem
if people can negotiate the right to perform the activities that cause externalities, they can always arrive at efficient solutions to problems caused by externalities
cross-price elasticity
the % by which the quantity demanded of the first good changes in response to a 1% change in the price of the second good
Prisoners' dilemma is a game in which both players have a dominant strategy.
True
The marginal product of the 14th worker is 8 and the firm sells its output for $4 per unit. If labor is the only variable cost, then the value of the 14th worker's marginal product is...
$32
A production possibilities frontier is bowed outward when an economy is self-sufficient instead of interdependent and engaged in trade.
False
In the prisoners' dilemma game, self-interest leads each prisoner to confess.
True
It is impossible for total utility to be decreasing when marginal utility is positive.
True
A natural monopoly is a monopoly that arises from having an exclusive right to operate in a national park.
False
Monopoly outcome is not socially efficient because monopoly price is greater than marginal cost.
True
What might cause a decrease in supply today?
Sellers' expectations that the product's price will rise in the future.
Industries in which firms have high fixed costs and low marginal costs are likely to have a small number of large firms.
True
A production possibilities frontier is bowed outward when the rate of tradeoff between the two goods being produced depends on how much each good is being produced.
True
A reduction in workers' marginal productivity would result in a reduction in the equilibrium wage rate
True
As the number of firms in an oligopoly decreases, individual firms' profits increase.
True
Buyers and sellers neglect the negative effects of their actions when deciding how much to demand or supply.
True
If a firm faces a downward-sloping demand curve, then the firm's marginal revenue from selling an additional unit of output is less than price.
True
If a monopolist's marginal revenue exceeds its marginal cost at its current level of output, then to maximize its profit the monopolist should increase output until marginal revenue equals marginal cost.
True
If the demand curve facing a monopolist shifts, then the monopolist's marginal revenue curve and profit-maximizing level of output will change
True
In competitive labor markets, firms demand labor and workers supply labor.
True
market power
a firm's ability to raise the price of a good without losing all its sales
externality
activities that generate costs or benefits that affect people not directly involved in those activities
cost-benefit principle
an individual should only take action if the extra benefits from taking the action are equal to or greater than the extra costs
Nash Equilibrium
any combination of strategy choices in which each player's choice is his or her best choice, given the other players' choices
Human capital
factors such as education, experience, training, intelligence, energy, work habits, trustworthiness, and initiative; affect VMP (value of marginal product of labor)
The benefits to specialization are even greater when two trading partners have...
large differences in opportunity costs
The additional output a firm gets from hiring an additional unit of labor is the...
marginal product of labor
The value of marginal product of labor equals the...
marginal product of labor times the net price for which each unit of output sells.
law of demand
people do less of what they want to do as cost rises
rational spending rule
spending should be allocated across goods so the marginal utility per dollar is the same for each good MU of Good 1/P of good 1=MU of good 2/P of good 2
dominant strategy
strategy that yields the highest payoff no matter what the other players in a game choose
microeconomics
study of individual choice under scarcity and its implications for the behavior of prices and quantities in individual markets
utility
the satisfaction people derive from their consumption activities
In a competitive labor market, if a firm pays a worker less than that worker's VMP...
then in the long run competing firms will hire the worker away
comparative advantage
when one person has a lower opportunity cost of performing a task than another