Microeconomics exams and quizzes
Serena Haley Bracelets 8 9 Necklaces 16 12 Refer to Table above. What is Haley's opportunity cost of making a necklace?
3/4 of a bracelet
Hours Open Total Revenue 1 $70 2 120 3 160 4 184 5 200 6 210 Santiago runs a comic book store in the town of East Arbor. He is debating whether he should extend his hours of operation. Santiago figures that his sales revenue will depend of the number of hours the store is open as shown in the table. He would have to hire a worker for those hours at a wage rate of $18 per hour. Using marginal analysis, determine how many hours should Santiago extend his store's hours of operations?
4 hours
Trina's Tropical Fish Store sells goldfish for $2 each and angelfish for $10 each. What is the opportunity cost of buying a goldfish?
5 angelfish
When two goods are substitutes, then the cross-price elasticity of demand between them is ___________.
<0
For a normal luxury good, the income elasticity of demand is __________.
>1
Quota is a tax on imports. T or F
False
When MR < Price, then the firm guarantees positive profit. T or F
False
Serena Haley Bracelets 8 9 Necklaces 16 12 Refer to Table above. Which of the following statements is true?
Haley has a comparative advantage in making bracelets and Serena in making necklaces
One Motorcycle One Guitar Ireland 20 hours 4 hours Scotland 8 hours 2 hours Refer to Table above. If the two countries specialize and trade, who should export guitars?
Ireland
Consider the following statements: a. Consumers buy more MP3 players from an electronics store that sells MP3 players at a lower price than other rival electronics stores in the area. b. Schools take steps to increase security since they believe it is more costly to allow vandalism than to hire additional security guards. c. Citrus growers produce more oranges when the selling price of oranges falls. Which of the above statements demonstrates that economic agents responds to incentives?
a and b
A decrease in the demand for soft drinks due to changes in consumer tastes, accompanied by an increase in the supply of soft drinks as a result of reductions in input prices, will result in
a decrease in the equilibrium price of soft drinks; the equilibrium quantity may increase or decrease
The main reason for the existence of monopoly is ________.
barriers to entry
For any firm that faces downward sloping demand curve, the MR falls _________ of the demand curve.
below
Perfect competition firm is __________ allocative and productive efficient.
both
Firms in monopolistic competitive market use __________ to maintain differentiation of their products.
brand management
The production possibilities frontier model shows that
if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.
A tariff is tax imposed by government on ___________.
imports
Terms of trade is the ratio at which a country can trade its ________ for goods from other countries.
imports
One of the explanations of the negative slope of the demand curve is the ___________ effect.
income
Voluntary exchange ________ economic efficiency because neither the buyer nor the seller would agree to a trade unless ________.
increases; they both benefit
On the PPF point A is beneath the line. Point A is
inefficient in that not all resources are being used.
An advantage of imposing a tax on the producer that generates pollution is that
it forces the polluting producer to internalize the external cost of the pollution
Inferior good is a good that when the income increase people buy ___________ amount of it.
less
The cost borne by a producer in the production of a good or service is called
private cost
When people use all the resources and information they have to make decisions they are considered __________.
rational
Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave ___________, meaning they make the best decisions given their knowledge of the costs and benefits.
rationally
In order to raise revenue, a firm that sells elastic good should __________ the price.
reduce
One benefit of merger could be shifting the MC curve to the __________.
right
Tariffs will work to protect domestic _________.
sellers
Dumping refers to _________.
selling product below its cost
Collusion means __________.
setting prices
The opportunity cost of the good on the x-axis is the __________ of the PPF.
slope
For monopolistic competition firm, the MR is __________ than the demand curve.
steeper
When the price of a good falls, consumers buy a larger quantity because of the ________ effect and the ________ effect.
substitution; income
The case where Qd<Qs is called ___________.
surplus
By definition, economics is the study of
the choices people make to attain their goals, given their scarce resources
Prices of California Merlot wine (assume that this is a normal good) have risen steadily in recent years. Over this same period, prices for French oak barrels used for wine storage have dropped and consumer incomes have risen. Which of the following best explains the rising prices of California Merlots?
the demand curve for merlot has shifted to the right more than the supply curve has shifted to the right
A positive externality causes
the marginal social benefit to exceed the marginal private cost of the last unit produced.
One would speak of a change in the quantity of a good supplied, rather than a change in supply, if
the price of the good changes
Linear Demand curve is crossed by lines S2(left)(Q2) and S1(right)(Q1) Figure above shows the market for Atlantic salmon, a common resource. The current market equilibrium output of Q1 is not the economically efficient output. The economically efficient output is Q2. Refer to Figure above. The current market equilibrium output is partly the result of overfishing. In that case, what does S1 represent?
the private marginal cost of harvesting salmon
What is a "social cost" of production?
the sum of all costs to individuals in society, regardless of whether the costs are borne by those who produce the products or consume the product
Figure: graph, Linear demand and supply curves, intersect at 4 Demand Supply $20 0 15 2 10 4 5 6 0 8 Refer to Figure above. At a price of $15
there would be a surplus of 4 units
Profit is defined as __________.
(P-ATC)*Q
A perfectly inelastic demand curve has elasticity of ___________.
0
Figure: x-axis 160lbs vegetables y-axis 120lbs meat If Mendonca chooses to produce 160 pounds of vegetables, how much meat can it produce to maximize production
0 pounds
What is the difference between an "increase in demand" and an "increase in quantity demanded"?
An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.
Linear demand curve(D1) with A(closer to price) and B(closer to quantity) and shifted line to right D2 Refer to Figure above. A decrease in the price of a substitute good would be represented by a movement from
D2 to D1
The government makes all economic decisions in a market economy. T o F
F
Absolute advantage is when the producer produces the item at lower opportunity cost. T or F
False
What is a market failure
It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost
Economic Agents(M), to(Wages and salaries), Market(K), to(labor services), Economic Agents(J) Refer to Figure above. One segment of the circular flow diagram in the figure shows the flow of labor services from market K to economic agents J. What is market K and who are economic agents J?
K = factor markets J = firms
That claim that as the price increases, the quantity demanded decreases; citrus paribus is ____________.
Law of Demand
Marginal analysis involves comparing __________.
MB and MC
When the ___________, then the firm is producing at less than efficiency
MR<Price
Natural monopoly on its own will produce at __________.
MR=MC
The profit maximizing condition for all types of firms is __________.
MR=MC
The use of trade barriers to shield domestic industries from foreign competition is called _________.
Protectionism
Linear Demand curve is crossed by Marginal social cost and marginal private cost Refer to Figure above. The efficient output level is
Qa marginal social cost crosses demand curve
Which of the following would cause both the equilibrium price and equilibrium quantity of cotton (assume that cotton is a normal good) to increase?
an increase in consumer income
Which of the following would cause an increase in the supply of peanut butter?
an increase in the number of firms that produce peanut butter
Building models using the scientific method is based on the crucial step of making __________.
assumptions
The case in which a country doesn't trade with other countries.
autarky
Microeconomics field of study is concerned with how __________ make decisions.
households and firms
The change of price of a good causes ___________.
change in quantity demanded
Comparative advantage is determined by _________.
climate and natural resources
Trade is based on ___________ advantage.
comparative
Markets promote
competition and voluntary exchange
The market that has almost identical goods and many buyers and sellers is called ___________.
competitive market
Natural monopoly is characterized by _________.
decreasing ATC
Population and demographics are determinants of ___________.
demand
What would happen in the market for laser eye surgery if insurance companies started to cover a portion of the price of voluntary procedures?
demand will increase, but this will not shift the supply curve
Vertical merger happens when two firms from __________ levels of production of the good or services become one firm.
different
In the monopolistic competitive market, firms sell __________ products.
differentiated
The demand curve that faces a monopolistic competitive is __________.
downward sloping
On the linear demand curve, if we go downward the curve, then the value of the elasticity goes as __________.
elastic-unit elastic-inelastic
When the supply curve of a good or service is elastic, then it is more ___________.
flat
If the marginal benefit of reducing emissions of some air pollutant is less than the marginal cost
further reduction will make society worse off
If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced.
linear
In monopoly case, consumers ___________ while producer __________ when compared to perfect competition.
loss, gain
The broader the definition of the market, the __________ the elasticity of demand will be.
lower
A grocery store sells a bag of potatoes at a fixed price of $2.30. Which of the following is a term used by economists to describe the money received from the sale of an additional bag of potatoes?
marginal revenue
The other name of equilibrium point is ___________ point.
market clearance
All of the following is counted as "capital" in economics except
money
As time passes, the __________ elasticity of demand for the product becomes.
more
Trade allows the producer to producer to produce _____________ than what is produced.
more
Figures: Graph A, same on x-axis splits E-F going to y-axis Graph B, parallel lines G-H(different lines) H-J (same line) Graph C, one line K-L (not on line) Mercedes Benz recently decided to introduce its B-class automobile in the U.S. market, an electric car that is has designed and developed in a partnership with Tesla Motors. Assume Mercedes Benz chooses to produce both electric-engine vehicles and gasoline-engine vehicles. Figure 2-7 shows changes to its production possibilities frontier in response to new developments and different strategic production decisions. Refer to Figure above. Assume a technological advancement greatly reduces the cost to produce electric-engine vehicles. This is best represented by the
movement from E to F in Graph A
Transaction cost refers to ____________cost.
negotiating and agreement
Monopolistic competitive firm is __________ allocative and productive efficient.
neither
We should privatize the Medicare system in Kansas is a __________ statement.
normative
Externality refers to the benefit or cost that affects someone ___________ in the market of the production or consumption of the good or service.
not involved
In economics, the term "free rider" refers to
one who waits for others to produce a good and then enjoys its benefits without paying for it.
The mechanism of the free market is ___________.
price
WTO is the international organization that oversees international _________.
trade
Scarcity is the base of __________ every society faces.
trade-off
One reason that we don't see the complete specialization in production by countries is that not all goods and services are _________.
traded
A point outside the PPF is considered to be ___________.
unattainable
A successful market economy requires
well-defined property rights and an independent court system to adjudicate disputes based on the law.
The distribution of income primarily determines which of the fundamental economic questions?
who will receive the goods and services produced?
One difference between the demand for a private good and that for a public good is that
with a private good, each consumer chooses the quantity she wants to consume but with a public good, everyone consumes the same quantity.
In the long run, the monopolistic competitive firm make __________ profit.
zero
