Microeconomics

If a firm charges more than the market price, it loses all its customers to other firms. If the firms charges the market price, it can sell as many units of output as it wants. If a firm charges less than the market price, it loses potential revenue.

Why does a firm in a competitive industry charge the market rice

Eliminates deadweight loss

With perfect price discrimination the monopoly

Efficiency

means that society is utilizing its scarce resources to attain the maximum possible benefits

Elasticity

means that those benefits are distributed evenly among all members of society

implicit costs

no exchange of cash; opportunity cost

the CPA to supply less expert tax advice now than she was supplying previously

A CPA recently has come to expect higher prices for expert tax advice in the near future. we would expect

causes a shortage and is set at a price below the equilibrium price

A binding price ceiling

influence the market price of the good it sells

A firm has market power if it can

maker and has no supply curve

A monopoly firm is a price

Law of Supply

producers offer more of a good as its price increases and less as its price falls

relatively smaller shortages in the short run than in the long run because supply and demand tends to be more inelastic in the short run than in the long run

rent control policies tend to cause

total explicit cost

Accounting profit is equal to total revenue minus the

a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms

An industry is a natural monopoly when

Tax revenue increases at first, but it eventually peaks and then decreases

As the tax on a good increases from $1 per unit to 2$ per unit to $3 per unit and so on, the

Positive, and the good is a normal good

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Most of the burden of the tax to fall on buyers of cigarettes, regardless of whether buyer or sellers of cigs are required to pay the tax to the government

Assume the demand for cigarettes is relatively inelastic, and the supply of cigarettes is relatively elastic. When cigarettes are taxed, we would expect.

normative statement

statement which describes how the world should be

All of the above are correct

suppose buyers of vodka are required to send 5 dollars to the government for every bottle of vodka they buy. Further, suppose this tax causes the effective price received by sellers of vodka to fall by 3 dollars er bottle. Which of the following statements is correct.

comparative advantage

the ability to produce a good at a lower opportunity cost than another producer

Marginal Cost

Change in Total cost/change in Q=

The amount a buyer is willing to pay for a good plus the price of the good

Consumer surplus is

Manipulate people's tastes, impedes competition, fosters brand loyalty

Critique of advertising

inferior good

Currently you purchase ten frozen pizzas per month. You will graduate from college in december and you will start a new job in January. You have no plans to purchase frozen pizzas in January. For you, frozen pizzas are a

Equilibrium quantity must increase when demand

Decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease, and when both demand and supply decrease

Provides useful information, promotes competition

Defense of advertising

explicit and implicit cost of producing goods and services

Economic profit is equal to total revenue minus the

maximize profit

Economist normally assume that the goal of a firm is to

total surplus is maximized

Efficiency is attained when

a price always exceeds marginal revenue

For a monolopy firm

Total Profit

For a monopoly (Price - Avg. Total Cost)x Q=

the relevant time period is long rather short

Generally, a firm is more willing and able to increase the quantity supplied in response to a price change when

1.60 and supply is elastic

If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of supply is about

A one unit decrease in output will increase the firms profit

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal reveue then

above the equilibrium price, and quantity supplied is greater than quantity demanded

If a surplus exists in a market, then we know that the actual price is

buyers do not respond much to a change in price

If demand is price inelastic, then

both the equilibrium price and quantity would decrease

If mac and cheese is an inferior good, what would happen to the equilibrium price and quantity of mac and cheese if consumers income rise

Supply is perfectly inelastic

If sellers do not adjust their quantities supplied at all in response to a change in price

20 percent decrease in the quantity demanded

If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a

both buyers and sellers

In a competitive market, the quantity of a product produced and the price of the product are determined by

of how much buyers and sellers respond to change in market conditions

In general, elasticity is a measure of

marginal cost equals marginal revenue

In order to maximize profits in the short run, a firm should produce the quantity where

how society manages its scarce resources

In the broadest sense, economics is the study of

Dollars spent on goods and services

In the circular flow diagram, which of the following items flows from households to firms through the markets for goods and services

WILL earn zero economic profits but positive accounting profits

In the long run, assuming that the owner of a firm in a competitive industry has positive opportunity cost, she

false

Is a free entry and exit a characteristic of a monopoly

opportunity cost

what must be given up in order to obtain it

an increase in the price of mp3 players

which of the following would not shift the supply cure for mp3 players?

Implicit cost

Jamar used to work as an office manager, earning 40k per year. He gave up that job to start a life-coaching business. In calulating the economic profit of his life-coaching business, the 40k income that he gave up is counted as part of the life coaching business's

Jose's restaurant should shut down immediately

Jose's restaurants operates in a perfectly competitive market. At the point where marginal cost equals marginal revenue, ATC=$20, AVC=$15 and the price per unit is $10 in this situation,

15 bouquets

Katie is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. Together kate and william can arrange 35 bouquets per day. What is William marginal Product

Least on the studio and insurance required by the landlord

Sonia opened a yoga studio where she teaches classes and sells yoga clothings. Fixed costs for sonias yoga studio include the cost of the

be shared by the buyers and sellers of fast food french fries but not necessarily equally

Suppose a tax is imposed on sellers of fast food french fries. The burden of the tax will

A decrease in the demand for energy drinks

Suppose scientist provide evidence that people who drink energy drinks are more likely to have a heart attack than people who do not drink energy drinks. We would expect to see

diseconomies of scale

Suppose that a firms long run avg total cost of producing small commuter jet airplanes increases as it produces between 2000 and 4000 airplanes. For this range of output, the firm is experiencing

supply is more inelastic than the demand

Suppose that a tax is placed on books. if the sellers pay the majority of the tax, then we know that the

The united states should produce more pork than what it requires and export some of it to Mexico

Suppose the U.S has a comparative advantage over Mexico in producing pork. The principle of a comparative advantage asserts that

fall by 40 percent

Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00. This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to

Quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases

Suppose the equilibrium price of a tube of toothpaste is 2 dollars and the government imposes a price floor of 3 dollars per tube. As result of the price floor the

increase by more then 20 percent

Suppose the government increases the size of a tax by 20 percent. The deadweight loss from the tax

Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous

Suppose the income of buyers in a market for a particular normal good decreases and there is also a reduction in input prices. What would we expect to occur in this market?

The monopolist is currently maximizing profits and it is total profit is 250

Suppose when a mnopoloist produces 50 units, the price is 8$ per unit, its marginal revenue is $4 per unit, its marginal cost $4per unit and its average total cost is $3 per unit. What can we conclude about this monopolist?

elastic supply and elastic demand

The deadweight loss from a 3$ tax will be largest in a market with

deadweight loss

The decrease in total surplus that results from a market distortion, such as a tax, is called a

20 percent decrease in quantity demanded

The demand for chicken wings is more elastic than the demand for razor blades. Suppose the government levies an equivalent tax on chicken wings and razor blades. the deadweight loss would be larger in the marker for.

a decrease in total revenue of wheat farmers since the demand for wheat is inelastic

The development of a new, more productive hybrid wheat increases the supply of wheat, which reduces the price of wheat. As a result, there would be

rises, the quantity supplied of the good rises.

The law of supply states that, other things equal, when the price of a good

decreases the demand for the other good

Two goods are substitutes when a decrease in the price of one good

AFC+AVC=ATC VC/Q=AVC FC/Q=AFC

Whats the formula for ATC, AFC, and AVC

regulate the monopoly

Which of the following governmental actions would eliminate some or all of the inefficiency that result from monopoly pricing? the government could

Haagen Dazs vanilla bean ice cream

Which of the following is likely to have the most price elastic demand

the elasticity of supply approaches infinity

Which of the following statements is valid when supply is perfectly elastic at a price of 4 dollars?

both buyer and seller

Who is a price taker in a competitive market

postive statements

claims that attempt to describe the world as it is

Law of Demand

consumers buy more of a good when its price decreases and less when its price increases

Resources are limited

The phenomenon of scarcity stems from the fact that

decreases by more than 20 percent and the demand curve is elastic

The price of a good increased by 20 percent which caused a 10 percent decrease in total revenue, the quantity demanded

fixed cost and variable cost

Total cost can be divided into two types of costs

is inefficient

because the monopolist is the sole seller of a good, then the outcome of a monopoly market

no individual buyer or seller has any significant impact on the market price

a competitive market is a market in which

supply curve to the right

a improvement in production technology will shift the

increase in the supply of wine, decreasing price

exceptionally favorable growing conditions in the vineyards of napa valley would cause a

explicit cost

exchange of cash

150 dollars (TR=Price * quantity)

if Danielle sells 300 wrist bands for 50 cents each and her total revenue is what

both the equilibrium price and quantity would decrease

if consumers often purchase muffins to eat while they drink their lattes at a local coffee shop, what would happen to the equilibrium price and quantity of lattes if the price of muffins rises

To increase and equilibrium quantity to decrease

if the supply of a product decreases, then we would expect equilibrium price...

both the quantity of each good produced and the price at which it is sold

in a market economy, supply and demand determine