Microeconomics 202-Test 3

If marginal utility is positive then as consumption increases:

Total utility increases

According to economists the satisfaction people get from their consumption activities is called:

Utility

Suppose all firms in a perfectly competitive industry are earning an economic profit one would expect that over time the number of firms in the industry will ___ and the market price will ___.

Rise, Fall

You're a farmer and you can grow either soybeans or corn and the price of one of the products changes (the amount you can sell it for changes) what action are you likely to take?

Stop growing the crop that costs more and grow more of the crop that costs less

Why are you more likely to see a poor person picking up aluminum cans than a wealthy person?

Wealthy people have higher opportunity costs for their time

Economies of scale exists when:

a firm's long-run average costs fall as it increases output

A pure monopoly exists when:

a single firm is the sole producer of a product for which there are no close substitutes

A rational seller will sell another unit of output:

if the cost of making another unit is less than (or = to) the revenue gained from selling another unit.

One implication of the shape of the demand curve facing a perfectly competitive firm is that:

if the firm increases its price above the market price, it will earn zero revenue.

The goal of utility maximization is to allocate your ___ in order to maximize your ___.

income, satisfaction

Debeers accounts for approximately 80% of diamond sales worldwide the source of its market power is:

its exclusive ownership of South African diamond mines

You're an entrepreneur and there is a formula and the formula is total cost equals 300 + 10q, where q represents the number of units so the total cost equals fixed cost (plus the number of units you produce times the variable cost) plus variable costs times the number of units you produce. As you increase your production your average fixed cost and your marginal cost will be what?

(check book)

In general when the price of a variable factor of production increases:

Marginal costs rise

The additional utility gained from consuming an additional unit of a good is called:

Marginal utility

Economic theory assumes that a firm's goal is to do what?

Maximize profit

A monopoly that results from economies of scale is called:

Natural monopoly

If a natural monopoly increases the quantity of output, it produces then what?

Both price and marginal revenue decrease, but marginal revenue falls faster than price

Which of the following statements is true for both Microsoft and a locally own restaurant?

Both seek to maximize profits

If the market for butter is perfectly competitive then the demand curve facing a firm that produces butter will be:

Constant

In a perfectly competitive market what is the most important challenge?

Deciding how much to produce

Accounting profit=revenues - expenses

Economic profit= accounting profit - opportunity cost

A fixed factor of production:

Is fixed only in the short run

The tendency for marginal utility to decline as consumption increases beyond some point is called:

Law of diminishing marginal utility

In general when the price of a fixed factor of production increases:

Marginal costs are unchanged

To produce 150 units of output a firm must use 3 employees per day to produce 300 units of output the firm must use 8 employees per day apparently the firm is:

experiencing diminishing return

If all firms in a perfectly competitive industry are experiencing economic losses then:

firms will exit the market and the price will increase

If a production process exhibits diminishing returns then as output rises:

marginal cost will eventually increase

As the market price of a service increases more potential sellers will decide to perform that service because:

more potential sellers will find that the market price exceeds their reservation price

Which of the following is a defining characteristic of a perfectly competitive market?

the firm is a price taker and can influence only the quantity it produces, not price.

Your neighbors have offered to pay you to look after their dog while they are on vacation. It will take you one hour per day to feed, walk, and care for the dog, which you can do either before or after you go to work. Your regular job pays $10 per hour, and you can work up to eight hours per day. The smallest amount of money you would accept to look after your neighbor's dog each day is equal to:

the value you place on one hour of leisure.