Micro true and false

A change in the price of a good leads to a change in the demand of the good. True False

F

A decrease in demand for a product will cause the price of the product to fall and supply of the product to decrease. True False

F

A demand curve with constant slope over all quantity values will always have a price elasticity of demand equal to -1. True False

F

A firm must earn an economic profit in order to receive a normal rate of return. True False

F

A negative marginal utility implies negative total utility. True False

F

A retail sales tax is a proportional tax with respect to income. True False

F

A surplus exists when there is excess demand in a market. True False

F

A tax that exacts a higher proportion of income from​ higher-income people than it does from​ lower-income households is a regressive tax. True False

F

An industry in which there are five firms each accounting for 20 percent of the market has an HHI of 100. True False

F

At an output level of​ zero, total cost is zero. True False

F

Because the monopolist is the sole producer of a​ good, it can never incur a loss. True False

F

Demand is determined by how much suppliers are willing and able to produce. True False

F

Demand is more elastic for an item for which few substitutes are available. True False

F

Economists consider the long run as a period of more than one year. True False

F

Factors of production are traded in the product market. True False

F

For a monopolistically competitive​ firm, its demand curve is the same as its marginal revenue curve. True False

F

For a​ firm, its economic profit is usually greater than its accounting profit. True False

F

For economic​ analysis, the short run is considered less than one year. True False

F

If MUx​/Px exceeds MUy​/Py​, then a household can increase its utility by spending more on Y and less on X. True False

F

If demand in a perfectly competitive market​ increases, then an individual firm in that industry will see its profits fall. True False

F

If iPods and iTunes are​ complements, then a decrease in the price of iPods will result in a decrease in the demand for iTunes. True False

F

If there are no​ externalities, producing where price is greater than marginal cost is inefficient because for every unit​ produced, consumers derive benefits that are less than the cost of the resources needed to produce it. True False

F

In most oligopolistic​ industries, positive profits attract new firms and thus increase production. True False

F

Inferior goods are also known as substitute goods. True False

F

Price elasticity of demand is calculated as the ratio of the change in quantity demanded to the change in price. True False

F

The law of diminishing marginal utility implies that total utility never reaches a maximum. True False

F

The long run equilibrium for a monopolistically competitive firm is efficient because its profits equal zero in the long run. True False

F

When demand is unit​ elastic, an increase in price will result in an increase in total revenue. True False

F

When marginal utility is​ zero, total utility is at a minimum. True False

F

When the slope of a demand curve is​ constant, price elasticity of demand is constant as well. True False

F

​If, at the output where marginal revenue equals marginal​ cost, price is between average total cost and average variable​ cost, a firm will continue to produce in the short run. True False

T

An increase in the wage rate of diamond cutters will increase the supply of cut diamonds. True False

f

Labor is demanded by firms in an output market. True False

f

The price elasticity of demand is generally negative to reflect the indirect relationship between the quantity demanded of a good and its price. True False

T

The law of diminishing marginal utility implies that as a household consumes more of a​ product, its total utility will increase by smaller amounts - assuming marginal utility remains positive. True False

T

The marginal cost curve intersects the average total cost curve at its minimum point. True False

T

The​ profit-maximizing level of output for a monopolist is the one at which marginal revenue equals marginal cost. True False

T

Total utility can be positive even when marginal utility is negative. True False

T

When consumers maximize​ utility, they are equating the ratio of marginal utility to price across all goods consumed. True False

T

When demand is​ elastic, a decrease in price will result in an increase in total revenue. True False

T

With an effective price​ ceiling, quantity demanded exceeds quantity supplied. True False

T

The demand for gasoline is likely to be more inelastic than the demand for sushi. True False

T

The income distribution has become more unequal in the United States over the last 30 years. True False

T

A Gini coefficient of 0.25 represents less inequality in income distribution than a Gini coefficient of 0.4. True False

T

A monopolistically competitive firm maximizes profit by producing where marginal revenue equals marginal cost. True False

T

A negative externality exists when the actions of one party impose costs on a second party. True False

T

A positive​ cross-price elasticity between two goods implies that the two goods are substitutes. True False

T

A profit-maximizing monopolist will always raise output if marginal revenue exceeds marginal cost. True False

T

A simultaneous decrease in both the supply of and the demand for silk boxer shorts would cause a decrease in the equilibrium quantity of silk boxer shorts. True False

T

A tax that exacts a lower proportion of income from higher-income people than it does from lower-income households is a regressive tax. True False

T

A technological advance in the production of digital video recorders will cause them to become less expensive. True False

T

Acid rain is an example of a negative externality. True False

T

Air pollution is an example of a negative externality. True False

T

An externality exists when the cost or benefit resulting from some activity or transaction is experienced by parties external to the activity or transaction. True False

T

An increase in the wage rate of steel workers will reduce the supply of steel. True False

T

A​ firm's long run average cost curve represents the minimum cost of producing each level of output when the scale of production can be adjusted. True False

T

Because the marginal revenue curve for a monopolist lies below its demand​ curve, the​ profit-maximizing price of the monopolist will be above marginal cost. True False

T

Ceteris paribus​, for a monopoly to sell more​ output, it must lower its price. True False

T

Economists would classify the Boston Symphony Orchestra as a firm. True False

T

Firms in perfectly competitive industries that are earning short-run profits will likely break even in the long run. True False

T

Firms maximize their profits by producing the output level where MR​ = MC. True False

T

For economic​ analysis, the long run is any period in which all inputs are variable​ (regardless of the length of time​ involved). True False

T

Households are paid income for the resources they supply in an input market. True False

T

If a monopolistically competitive industry is earning short-run ​profits, new competitors will enter the industry in the long run and compete away those profits. True False

T

If price is above the​ equilibrium, then quantity supplied will be greater than quantity demanded putting downward pressure on price. True False

T

Market failure results in an inefficient allocation of resources. True False

T

Taxes can be used to internalize negative externalities. True False

T