Micro midterm
produce because the resulting loss is less than its TFC.
A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900, This firm should
product differentiation.
A monopolistically competitive industry combines competition and monopoly. The monopoly element results from
focuses on facts, descriptions, and theoretical relationships.
A positive statement is one that
scarcity.
A production possibilities curve illustrates
a "price taker."
A purely competitive seller is
P= MC.
Allocative efficiency is achieved when the production of a good occurs where
oligopoly.
An industry comprising four firms, each with about 25 percent of the total market for a product, is an example of
that more output could be produced with the available resources.
Any point inside the production possibilities curve indicates
Which of the following best expresses the law of diminishing returns?
As successive amounts of one resource (labor) are added to fixed amounts of other resources (capital), beyond some point the resulting extra or marginal output will decline.
fourth
Diminishing returns begin to occur with the hiring of the _____unit of labor,
factors of production.
Economic resources are also called
most decisions involve changes from the present situation.
Economics involves marginal analysis because
an oligopoly.
Economists would describe the U.S. automobile industry as
innovate to lower operating costs and generate short-run economic profits.
Entrepreneurs in purely competitive industries
relatively inelastic.
Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired. GSU is assuming that the demand for education at GSU is
MC.
If a firm wanted to know how much it would save by producing one less unit of output, it would look to
the law of diminishing returns.
If a variable input is added to some fixed input, beyond some point the resulting extra output will decline. This statement describes
the four-firm concentration ratio to decrease.
If an industry evolves from oligopoly to monopolistic competition, we would expect
greater than one.
If demand for a product is elastic, the value of the price elasticity coefficient is
both allocative efficiency and productive efficiency are being achieved.
If for a firm P= minimum ATC = MC, then
$50.
If the firm closed down in the short run and produced zero units of output, its total cost would be
the four largest firms account for 80 percent of total sales.
If the four-firm concentration ratio for industry X is 80,
product; resource
In terms of the circular flow diagram, businesses obtain revenue through the _____market and make expenditures in the ____market.
2 and 4.
In view of the indicated resource prices, the economically most efficient production technique(s) is (are) technique(s)
Price rises and demand is inelastic.
In which of the following cases will total revenue increase?
pure monopoly
In which one of the following market models is X-inefficiency most likely to be the greatest?
The fact that most medical care purchases are financed through insurance
Increases the amount of health care consumed by reducing the price of additional units of care.
many firms producing differentiated products.
Monopolistic competition means
relatively elastic.
Other things the same, if a price change causes total revenue to change in the opposite direction, demand is
has a higher "marginal utility-to-price ratio" for the hockey game than for the play.
Prashanth decides to buy a $75 ticket to a particular New York professional hockey game rather than a $50 ticket for a particular Broadway play. We can conclude that Prashanth
reflect opportunity costs.
Production costs to an economist
D
Refer to the accompanying graph. If the market price for the product falls, then which of the curves would shift?
4 units.
Refer to the data for a nondiscriminating monopolist. This firm will maximize its profit by producing
$16
Refer to the diagram for a monopolistically competitive film in short-run equilibrium. This firm's profit-maximizing price will be
economic profits will be zero.
Refer to the diagram for a purely competitive producer. If product price is P3,
between P2 and P3.
Refer to the diagram for a purely competitive producer. The firm will produce at a loss at all prices
P2
Refer to the diagram for a purely competitive producer. The lowest price at which the firm should produce (as opposed to shutting down) is
wage, rent, interest, and profit income.
Refer to the diagram. Flow 1 represents
land, labor, capital, and entrepreneurial ability.
Refer to the diagram. Flow 2 represents
goods and services.
Refer to the diagram. Flow 3 represents
producing Q2 units and charging a price of P2.
Refer to the diagram. If this somehow was a costless product (that is, the total cost of any level of output was zero), the firm would maximize profits by
relatively elastic.
Refer to the diagram. In the PP2 price range, demand is
incurring X-inefficiency and is failing to realize all existing economies of scale.
Refer to the long-run cost curve for a firm. If the firm produces output Q at an average total cost of ATC1, then the firm is
a purely competitive firm; an imperfectly competitive firm
Refer to the two diagrams for individual firms. Figure 1 pertains _____to while Figure 2 refers to___________
What does "there is no such thing as a free lunch" mean in economics?
Scarce resources are used up to provide "freebies" and giveaways.
for exchange to occur, each seller must have a product that some buyer wants.
The "coincidence of wants" problem associated with barter refers to the fact that
"let it be."
The French term "laissez-faire" means
the railroad felt that the demand for passenger service was inelastic and opponents of the rate Increase felt it was elastic.
The Illinois Central Railroad once asked the Illinois Commerce Commission for permission to increase its commuter rates by 20 percent. The railroad argued that declining revenues made this rate increase essential. Opponents of the rate increase contended that the railroad's revenues would fall because of the rate hike. It can be concluded that
other things equal.
The Latin term "ceteris paribus" means
creative destruction,
The advent of Netflix movie streaming and Redbox kiosks renting DVD and Blu-ray movies have virtually demolished the market for video rentals from brick and mortar stores such as Blockbuster. This is an example of
relatively price elastic.
The demand for a luxury good whose purchase would exhaust a big portion of one's income is
consumer sovereignty.
The dollar votes of consumers ultimately determine the composition of output and the allocation of resources in a market economy. This statement best describes the concept of
land, labor, capital, and entrepreneurial ability.
The four factors of production are
demand curves slope downward.
The law of diminishing marginal utility explains why
bowed out from the origin.
The law of increasing opportunity costs is reflected in a production possibilities curve that is
the minimum point on its AVC curve.
The lowest point on a purely competitive firm's short-run supply curve corresponds to
amount of time the producer has to adjust inputs in response to a price change.
The main determinant of elasticity of supply is the
competition.
The main mechanism that regulates the market system is
4 units of output.
The marginal cost curve would intersect the average variable cost curve at about
"In ways that minimize the cost per unit of output."
The market system's answer to the fundamental question "How will the goods and services be produced?" is essentially
"Goods and services that are profitable."
The market system's answer to the fundamental question "What will be produced?" is essentially
comparing marginal benefits and marginal costs.
The point on the production possibilities curve that is most desirable can be found by
buyer responsiveness to price changes.
The price elasticity of demand coefficient measures
monopolistic competition.
The restaurant, legal assistance, and clothing industries are each illustrations of
choices that are made in seeking the best use of resources.
The study of economics is primarily concerned with
the production of a good at the lowest average total cost.
The term productive efficiency refers to
is the satisfaction or pleasure one gets from consuming it.
The utility of a good or service
explicit and implicit costs.
To the economist, total cost includes
$50.00.
Total fixed cost is
They are all barriers to entry.
What do economies of scale, the ownership of essential raw materials, and patents have in common?
How will goods and services be produced?
Which is one of the five fundamental questions that need to be dealt with in any economic system?
B
Which of the diagrams correctly portrays a nondiscriminating pure monopolist's demand (D) and marginal revenue (MR) curves?
Buyers with different elasticities must be physically separate from each other.
Which of the following conditions is not required for price discrimination?
use of savings to pay operating expenses instead of generating interest income
Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?
software used by a firm
Which of the following is a capital resource?
central planning
Which of the following is a distinguishing feature of a command system?
minimal government intervention
Which of the following is a distinguishing feature of laissez-faire capitalism?
property rights
Which of the following is a fundamental characteristic of the market system?
a computer programmer
Which of the following is a labor resource?
natural gas
Which of the following is a land resource?
recognized mutual interdependence
Which of the following is not a basic characteristic of monopolistic competition?
Once the all-you-can-eat meal is purchased, consumers view additional trips back to the buffet as having a price of zero.
Why do people tend to eat more at all-you-can-eat buffet restaurants than at restaurants where each item is purchased separately?
Microeconomics is concerned with
a detailed examination of specific economic units that make up the economic system.
An explicit cost is
a money payment made for resources not owned by the firm itself.
The phrase "other things equal" means that
a number of relevant variables are assumed to be constant.
Pure monopoly refers to
a single firm producing a product for which there are no close substitutes.
Nonprice competition refers to
advertising, product promotion, and changes in the real or perceived characteristics of a product.
In the long run,
all costs are variable costs.
Fixed cost is
any cost that does not change when the firm changes its output.
Economic profits and losses
are essential to the reallocation of resources from less desired to more desired goods.
The law of diminishing marginal utility states that
beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer.
A perfectly inelastic demand schedule
can be represented by a line parallel to the vertical axis.
A perfectly elastic demand curve implies that the firm
can sell as much output as it chooses at the existing price.
Marginal cost is the
change in total cost that results from producing one more unit of output.
Marginal utility is the
change in total utility obtained by consuming one more unit of a good.
Refer to the diagram. Flow 4 represents
consumer expenditures and business revenue.
Total fixed cost (TFC)
does not change as total output increases or decreases.
Barter
entails the exchange of goods for goods.
A positive statement is one that
focuses on facts, descriptions, and theoretical relationships.
Accounting profits are typically
greater than economic profits because the former do not take implicit costs into account.
A normative statement is one that
is based on value judgments.
If this demand schedule were graphed, we would find that
its slope is constant throughout.
Refer to the diagram. Flow 2 represents
land, labor, capital, and entrepreneurial ability.
The four factors of production are
land, labor, capital, and entrepreneurial ability.
natural monopoly occurs when
long-run average costs decline continuously through the range of demand.
To maximize profit, a pure monopolist must
maximize the difference between total revenue and total cost.
Marginal product
may initially increase, then diminish, and ultimately become negative.
Supply curves tend to be
more elastic in the long run because there is time for firms to enter or leave the industry.
Long-run competitive equilibrium
results in zero economic profits.
Macroeconomics can best be described as the
study of the large aggregates of the economy or the economy as a whole.
Opportunity costs exist because
the decision to engage in one activity means forgoing some other activity.
The economizing problem is
the need to make choices because economic wants exceed economic means.
Normal profit is
the return to the entrepreneur when economic profits are zero.
Price discrimination refers to
the selling of a given product to different customers at different prices that do not reflect cost differences.
The concept of price elasticity of demand measures
the sensitivity of consumer purchases to price changes.
Competition
there are independently acting buyers and sellers in each market.
Competition means that
there are independently acting buyers and sellers in each market.
Economies and diseconomies of scale explain
why the firm's long-run average total cost curve is U-shaped.
