Microeconomics Midterm
A ceiling price in a competitive market will result in persistent surpluses of a product.
False
A price floor in a competitive market will result in persistent shortages of a product.
False
Although sleeping in on a work day or school day has an opportunity cost, sleeping in on the weekend does not.
False
An economic model is an ideal or utopian type of economy that society should strive too obtain through economic policy.
False
An increase in quantity supplied might be caused by an increase in production costs.
False
Certain inherently desirable products such as education and health care should be produced so long as resources are available.
False
If market demand increases and market supply decreases, the change in equilibrium price in unpredictable without first knowing the exact magnitudes of the demand and supply changes.
False
Normative statements are expressions of facts.
False
Surpluses drive market prices up; shortages drive them down.
False
The law of diminishing returns explains diseconomies of scale.
False
The law of diminishing returns explains why the long run average total cost curve is U-shaped.
False
The short run is a period of time during which all costs are fixed costs.
False
The smaller the number of good substitutes for a product, the greater will be the price elasticity of demand for it.
False
Toothpaste and toothbrushes are substitute goods.
False
Water has greater marginal utility than diamonds, yet diamonds have greater total utility than water.
False
When a consumer shifts purchases from X to Y, the marginal utility of X falls and the marginal utility of Y rises.
False
A government subsidy per unit of output increases supply.
True
An increase in demand accompanied by an increase in supply will increase the equilibrium quantity but the effect on equilibrium price will be indeterminate.
True
At zero units of output a firm's variable costs are zero.
True
Average fixed costs diminish continuously as output increases.
True
Consumers buy more of normal goods as their incomes rise.
True
Diseconomies of scale stem primarily from the difficulties in managing and coordinating a large-scale business enterprise.
True
If price changes and total revenue changes in the opposite direction, demand is relatively elastic.
True
If the marginal-cost curve lies below the average-variable-cost curve, the average-variable-cost curve must be falling.
True
In economics, a firm earns a normal profit when its total revenue equals its total economic costs.
True
Products and services are scarce because resources are scarce.
True
The production possibilities curve shows various combinations of two products that an economy can produce when achieving full employment.
True
The real opportunity cost of producing product X is the amounts of products Y, Z, and so forth, that might have been produced if resources had not been used to produce X.
True
When a consumer is maximizing total utility, he or she cannot increase total utility by reallocating expenditures among different products.
True