Microeconomics

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An elasticity that would be considered only slightly inelastic would be

0.9

Theoretically, the highest possible Herfindahl Index is

10,000

A firm's demand of labor is its

MRP schedule

The "rule of reason" originated in the

Standard Oil case of 1911

When oil was deregulated in the late 1970's, the number of wells pumping oil more than doubled

This reflect an increase in supply

In 1991, the base year, you were earning $350/week. Your wages rose to $450 in 2000, the current year, when the Consumer Price Index stood at 135

Your real wages fell over this period

A union composed of members with the same trade or occupation is called

a craft union

In the long run the monopolistic competitor always charges

a price that is above the minimum point of its ATC curve

If Germany can make compact cars more efficiently than Russia, it enjoys an

absolute advantage

Poverty is both an

absolute and relative concept

Monopolies are usually viewed with concern from an economic standpoint since resources may be

allocated in an inefficient manner

If a tariff is imposed, domestic producers of the good win, domestic workers in the protected industry win, domestic suppliers in the protected industry win

and domestic consumers of the good lose

The firm will rent more and more land until the rent and marginal revenue product of the last unit of land hired

are equal

We say that a business is operating at peak efficiency when its

average cost is held to a minimum

As output rises

average fixed cost falls

Inclusive union strategy involves organizing all workers in a particular craft or industry and

bargaining for a wage

According to official statistics in the United States, a person is classified as poor if a person's money income is

below the poverty income threshold

The law of demand holds for

both individuals and for markets

Charles Murray believed that the antipoverty programs of the 1960s and 1970s

caused more poverty

Changes in demand are caused by

changes in income, changes in the prices of related goods and services, and changes in tastes and preferences

A cartel is a group of firms acting under

collusion to control output and maximize group profits

If nation A can produce at a lower opportunity cost per unit than nation B, nation A has a

comparative advantage

Corporate concentration can be measured by both the

concentration ratio and the Herfindahl-Hirschman Index

Fixed costs are best defined as

costs that will not vary with the firm's output level over some period of time

Union membership has been hurt in recent decades by the

decline in manufacturing

When MC > MR, the profit maximizing firm should

decrease production

Price is determined equally by

demand and supply

Advertising is likely to shift the firm's average total cost curve upward and make

demand more inelastic

The demand for goods and services is called final demand, while the demand for resources is called

derived demand

A monopolistically competitive industry has many firms producing a

differentiated product

The Clayton Act of 1914 outlawed specific business practices that

discouraged competition

As a firm grows larger economies of scale set in, then

diseconomies of scale

Marginal utility and consumer surplus are

distinctly different concepts

The Lorenz curve shows the

distribution of income

Prices are rigid at the kink of an oligoplist's demand curve because changes in marginal cost in the discontinuous section of the marginal revenue curve

do not alter the profit-maximizing price and output

An increase in supply means a shift in the supply curve

downward and to the right

Firms taking advantage of economics of scale accounts for the

downward slope in the long-run average cost curve

Unlike a perfectly competitive firm, a profit-maximizing monopolist can choose a price and output combination from a

downward-sloping demand curve

Exit from a competitive industry will occur until economic losses are

driven to zero

Adam Smith's pin factory illustrated the advantages of

economics of scale

In general, the more the substitutes available for a good the more

elastic the demand for the good

The law of diminishing returns states that as output rises

eventually marginal output will decline

A balance-of-trade surplus exists is the dollar value of exports

exceeds the dollar value of imports

The Sherman Act of 1890 outlawed unfair business practices to

exclude rivals from selling in markets

A fall in demand for the final product brings about a

fall in derived demand

We will keep buying digital music downloads from the internet until the marginal utility of the music downloads

falls to the price of the download

When a monopolistically competitive industry is in long-run equilibrium

firms earn zero economic profit

Increases in the productivity of labor tend to increase the marginal revenue product of labor and the wages employers are willing to pay

for any given amount of labor

One company has 90% of the market for cola soft drinks. An antitrust action against this company is likely to be defended (by the company) by the argument that the relevant market is not that

for cola soft drinks but for all soft drinks

Legal barriers to entry into an industry include

government licensing, patents and government franchising

An auto service station has four mechanics. If the marginal revenue product of the fourth worker is $375 per day and the mechanics are paid $150 per day, the firm can make a higher profit by

hiring more mechanics

An import quota is a limit on the quantity of foreign goods that can be sold

in a nations's domestic market

All workers must join the union within 30 days after employment

in a union shop

The substitution effect and the output effect work

in opposite directions

A technological advance that increases the marginal product of labor will

increase the demand for labor

If a monopolistic competitor is producing an output for which marginal revenue is $40 and marginal cost is $32 to maximize profits the firm should

increase the level output

An elasticity of .1 would be

inelastic

As income rises the demand for

inferior goods falls

Frank Knight's theory of profit focuses on risk bearing and Joseph Schumpeter's theory of profit focuses on

innovation

Usury laws, minimum wages laws and farm price supports or price floors

interfere with the price mechanism

A monopolistic competitor will not make an economic profit unless its price is greater than

its average total cost

Cut throat competition is

legal in the United states

As foreign imports become a greater percentage of sales in oligoplized industries, the concentration ratio becomes

less accurate a measure of concentration

Since 1960 the distribution of income in the United States has become

less equal

In general we could say that the decade of the 1980's was a time of

less regualtion

The Great Society program was designed in the 1960s to

lift people out of poverty

The most important factor affecting rent is

location

Deregulation of the airlines, trucking, and long-distance phone calling industries has led to

lower prices for consumers

"Right-to-work" laws

make it harder for unions to organize

Advertisers try to raise the demand for their product and

make it less elastic

One reason unions have declined as a percent of the workforce is that workers have shifted from

manufacturing to service industries, which are harder to organize

The definition of monopolistic competition includes

many firms and ease of entry and exit

Perfectly competitive markets are characterized by

many small potential buyers, many small potential sellers, identical products and the absence of non-price competition

A profit maximizing firm will always produce at that output at which

marginal cost = marginal revenue

If the average variable cost of production falls as output grows

marginal cost must be below average variable cost

The extra revenue that results from hiring another worker is the

marginal revenue product of labor

When you are maximizing your utility for product A

marginal utility of A = price of A

An oligopolist must be very sensitive to its rivals because there are so few that their behavior

may well have consequences for their firm

A rightward shift of the entire supply curve is an increase in supply

might be due to a positive change in technology, might be due to a decrease in the cost of labor, and might be due to an increase in the number of sellers

The dual labor market theory supports the contention that there are

non-competing groups in the labor market

If the legal minimum wage is set below the equilibrium wage rate the level of employment will

not be affected

It is true that protection makes a nation worse off because it induces the firms in that nation to product more of the goods that are costly to make and; it is false that one nation can gain from international trade

only at the expense of other nations

Productivity is

output per unit of input

Our oil imports and our trade defect with Japan and China together account for the majority of our

overall trade deficit

Demand is inelastic when the

percentage change in price is greater than percentage change in quantity

A demand curve that is perfectly horizontal is

perfectly elastic

The perfect competitor's demand curve is

perfectly elastic

The supply of land is

perfectly elastic

The airlines often engage in

price discrimination

Usury laws prevent banks from charging higher credit card interest rates than the

price mechanism would allow

Rents are high because

prices are high

In order for real wages to grow

productivity must grow

If a monopolist's marginal cost equals its marginal revenue

profits are maximized or losses are minimized

The Wagner Act supported union organizing while the Taft-Hartley Act

protected "employers' rights"

A car dealership estimates that the elasticity of demand for its top model is 0.5. If it raises its prices by 10%

quantity demanded will decrease by 5% and total revenue will increase

As price falls

quantity supplied falls

When marginal cost is greater than marginal revenue, the monopolist can increase its profit or minimize its loss by

reducing ouput

Lorenz curves tell us about the

relative distribution of income

One thing we can do to reduce trade imbalance in the United States would be to push down the value of the dollar

relative to other currencies

Although the Chinese market is open to American producers, the Chinese people have very little income to purchase

relatively expensive imported goods

Under perfect competition there must be perfect mobility of

resources and perfect knowledge

Examples of a monopolistically competitive industry include

restaurants and fast food chains, grocery stores, gas stations and hardware stores

There is a strong relationship between the

rise in real wages and the rise in productivity

If variable cost is $15 million, fixed cost is $14 million, and total revenues are $13 million, in the short run the firm will

shut down and in the long run will go out of business

Suppose that land and labor are substitute resources. If the wage rate rose, the employment of land would rise only if the

substitution effect outweighed the output effect

Wage rates, interest rates, and rent are all determined by

supply and demand

The wage rate is determined by the interaction of

supply and demand in the market

Patents function to

temporarily protect monopoly power

In the short run

the ATC curve is always above the AVC curve

The decision to bring suit in an antitrust case is usually made by

the Department of Justice

The establishment of "right-to-work" laws came about with the passage of

the Taft-Hartley Act

The lowest point on the firm's long-run supply curve is

the break-even point

Marginal cost may be defined as

the change in total cost that results from producing one more unit of output

As the price of a good falls

the consumer surplus rises

The principle of comparative advantage states that total output is greatest when each product is made by

the country that has the lowest opportunity cost

Unions try to raise wages mainly by

the decline in manufacturing

The phrase "spreading the overhead" refers to

the decrease in average fixed cost that occurs as a firm increases its output

A change in rent will be brought about by a change in

the demand for land

In the long run if the price is below average total cost

the firm will go out of business

The concentration ratio is the percentage of sales earned by

the four largest firms in the industry

Even with the big three textbook publishers (McGraw-Hill, Pearson, and Sage-Reuters) having a large market share, the textbook industry is still considered a cut throat competitor model because of

the high level of competition that exists

A normal good is defined as a good for which demand increases as

the income of consumers increases

If total utility is decreasing

the marginal utility is less than zero

If water became very scare and diamonds become very plentiful

the marginal utility of water would rise and the marginal utility of diamonds would fall

International trade will occur if a nation has a comparative advantage in

the production of a good

The market supply consists of

the quantities supplied at all prices

Price discrimination occurs when a seller charges two or more prices for

the same good or service

As a person buys increasing amounts of a good

their marginal utility decreases and their consumer surplus increases

If your marginal utility from your last session with your personal trainer is equal to the price they charged you

then you have had exactly the right number of sessions

Oligopolists have more control over prices than monopolistic competitors because with fewer competitors

they are able to monitor and determine their own prices much easier

The monopolist and the perfect competitor differ in that

they face different demand curves

The job of an arbitrator is

to impose a settlement

Medicaid goes exclusively

to the poor

If demand is inelastic and price is lowered

total revenue will fall

When marginal utility is zero

total utility is maximized

The substitution effect means that you

trade away leisure time for more money

The income effect means that you

trade away some money for more leisure time

A natural monopoly occurs when a single firm can supply the entire market demand for a product at a lower average cost than would be possible if

two or more firms supplied the market

A minimum wage rate increase will increase the number of

unemployed people

An elasticity of 1 would be considered

unit elastic

A conglomerate merger takes place when a firm buys another firm

unrelated to the original firm's business

A perfectly inelastic demand curve is a

vertical line

A merger of a firm and its supplier is called a

vertical merger

Monopolistic competitors have

very elastic demand curves

A family of four with one wage earner who earns the minimum hourly wage would be

well below the poverty line

The Sherman Antitrust Act stated that attempts to monopolize, conspiracies in restraint of trade, and conspiracies to monopolize

were illegal

Utility is simply a measure of

what they buyer is willing to pay for a good or service

A monopoly firm is different from a perfectly competitive firm in that the monopolist can influence price in the market

whereas the perfectly competitive firm is the price taker

The minimum wage is a price floor

which tends to decrease the employment of unskilled workers

Henry George advocated that the government

will raise all its tax revenue from a single tax on land, all rents should be taxed away, and, since land did not really belong to the landlords, rent was an unearned surplus

If firms are making profits under perfect competition, in the long run the industry supply

will rise and price will fall

If the value of non-cash assistance to the poor were included in their income, the official number of persons classified as poor

would be lower

If the marginal utility you derived from the first "steak burger" you ate was $4.00 and yet the cost of the "steak burger" was $2.00

your marginal utility was definitely positive


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