Microeconomics True/false Final Exam

a monopolist produces where P=MC=MR

false: a monopolist produces where P > MC =MR

A decrease in the price of creamer will increase the equilibrium price and decrease the equilibrium quantity in the market for coffee

false: equilibrium quantity would increase, not decrease

When the market price is above the equilibrium price, suppliers are unable to sell all they want to sell

true

a monopoly creates a deadweight loss to society because it produces less output than the socially efficient level

true

during the life of a drug patent, the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost

true

If the price of Coca Cola declines the demand for Coca Cola will increase

False: If the price of Coca Cola decline the quantity demanded for Coca Cola will increase

when a good is taxed, the tax revenue collected by the government equals the decrease in the welfare of buyers and sellers caused by the tax

False: also a deadweight loss

Figure 2-14: Point B represents an inefficient outcome for this economy

True

Suppose you sell a kayak for $600 but you were willing to sell it for $450. The buyer was willing to pay $650. Total surplus is $200.

True

for a firm operating in a perfectly competitive industry, total revenue, marginal revenue, and average revenue are all equal

false: for a firm operating in a perfectly competitive industry, PRICE, marginal revenue, and average revenue are all equal

Figure 6-26: a price ceiling at $70 would create a shortage of 40 units

false: no impact

Figure 2-14: It is possible for this economy to produce 80 doghouses

false: ppf limits production to less than 75 doghouses

the lower the price, the lower the consumer surplus, all else equal

false: the lower the price the higher the consumer surplus

Who bears the majority of a tax burden depends on whether the tax is placed on the buyers or the sellers

false: the side that is less elastic bears the majority of the tax burden

in the short run, if a firm produces nothing, total costs are zero

false: there will still be fixed costs

along the elastic portion of a linear demand curve, total revenue rises as price rises

false: total revenue decreases as price rises

A price ceiling set below the equilibrium price causes a shortage in the market

true

suppose hank and tony can both produce corn. If Hank's opportunity cost of producing a bushel of corn is 2 bushels of soybeans and Tony's opportunity cost of producing a bushel of corn is 3 bushels of soybeans, then Hank has the comparative advantage in the production of corn

true

the housing shortages caused by rent control are larger in the long run than in the short run because both the supply of housing and the demand for housing are more elastic in the long run

true