AGEC Final Exam - Assignment Essays

question

Which of the following would be strictly a microeconomic topic?

answer

An increase in the price of the Ford Taurus

question

Which of the following is the study of "what should be" rather than the study of "what is"?

answer

Normative economics

question

Even though households may have unlimited wants, they have to allocate their spending carefully because they

answer

Have limited income

question

Suppose that the following headlines appeared in a newspaper. Which would most clearly represent a macroeconomic issue?

answer

"Central Bank Raises Interest Rates"

question

The three groups of decision makers in the economy are

answer

Households, business firms and government

question

Carl is considering attending a concert with a ticket price of $35. He estimates that the cost of driving to the concert and parking there will total an additional $20. In order to attend the concert, Carl will have to take time off from his part-time job or forgo studying for an exam scheduled for the next morning. He estimates that he will lose 5 hours of work, at a wage of $6 per hour or 5 hours of study time. If Carl considers studying the best alternative use of his time, his opportunity cost of attending the concert equals

answer

$85 minus the value of the highest exam grade he could earn by studying for 5 hours

question

High-income people will sometimes pay higher prices at convenience stores for goods that are available at discount stores. They do this because

answer

crowded and understaffed discount stores impose higher time costs

question

If a market has more than one seller, but fewer sellers than under perfect competition, it is referred to as

answer

imperfect competition

question

The extent to which a firm is viewed by consumers as being a monopoly depends primarily on

answer

whether they believe there are close substitutes for the good it produces

question

A single-price monopolist is

answer

one that charges the same price for all units of output

question

The U.S. Postal Service

answer

has its monopoly status guaranteed by government franchise

question

A monopolist earns a profit whenever

answer

price exceeds average total cost

question

Which of the following goods would be most likely to be produced by a monopoly?

answer

electricity

question

In the short run, a monopoly should shut down whenever

answer

price is less than average variable cost everywhere

question

Absent an ability to price discriminate, if a monopoly wants to sell more output, it must

answer

lower its price

question

For a monopolist, there is no difference between the market demand curve and the demand curve the monopolist uses when making output decisions.

answer

True

question

Suppose that for a monopolist, MR = MC = $10 and P = $15 at the profit-maximizing level of output. At this level of output, the firm

answer

will shut down if AVC > $15

question

A record level of crop production can lead to:

answer

sharp declines in farm product prices and cash receipts from sale of production.

question

Marginal propensity to consume is the slope of the aggregate consumption function and tells us how much consumption will change if consumer disposable income changes.

answer

True

question

An inflationary gap occurs in the economy when

answer

aggregate demand is greater than full employment output.

question

Given the following equation where DPI represents disposable personal income: C = 1,500 + 0.85(DPI) If disposable personal income is $5,000, consumer spending would be equal to:

answer

$5,750.

question

Consumption expenditures includes:

answer

purchases of airline tickets.
purchases of new automobiles.
purchases of food.
all of the above. >>>

question

The economy's aggregate supply curve includes

answer

a classical range.
a normal range.
a Keynesian or depression range.
all of the above. >>>

question

Automatic fiscal policy instruments include:

answer

unemployment compensation.

question

The Federal Open Market Committee, or FOMC, sets the policy for

answer

Buying government bonds and selling government bonds

question

The functions of the Federal Reserve System include:

answer

regulating the money supply.

question

Contractionary fiscal policy actions:

answer

would likely decrease farmers' fixed liabilities.
would likely increase farmers' total assets.
would likely increase farmers' operating expenses.
none of the above>>>

question

The national debt:

answer

is equal to the debt at the beginning of the year plus the deficit during the year.

question

A price elasticity of demand of 2 for a specific cola means that if the price increases 1 percent, the quantity demanded of the cola will decrease by 2 percent.

answer

True

question

The sensitivity of one economic variable to changes in another variable is known as

answer

elasticity

question

If the cross-price elasticity of demand is positive, then the

answer

two goods are substitutes

question

If the demand curve is a horizontal line,

answer

demand is perfectly elastic

question

If the percentage change in quantity demanded is smaller (in absolute value) than the percentage change in price, then demand is

answer

inelastic

question

For which of the following goods is the income elasticity of demand likely to be largest?

answer

meals at restaurants

question

The cross-price elasticity of demand between butter and margarine is most likely

answer

positive, since the goods are substitutes

question

The cross-price elasticity of demand between Texaco gasoline and Mobil gasoline sold at the same intersection would be

answer

positive

question

As a result of heavy spring rains in the Midwest, the corn crop declined sharply. If corn growers experienced an increase in sales revenue, the demand for corn must be

answer

price inelastic

question

If the income elasticity of demand for a good is -2.5, then

answer

it is an inferior good, and its demand curve will shift to the left if buyers' incomes increase

question

If the price of food falls by 10 percent and the quantity sold increases by 5 percent, then the price elasticity of demand in that range equals

answer

0.5, and demand is inelastic

question

Suppose a local bookstore notices that a 2 percent increase in book prices leads to a 2 percent decrease in the number of books sold. Which of the following is true?

answer

The store's sales revenue did not change.

question

A public university knows that demand from potential students is elastic. If the university wants to increase tuition revenue, it should

answer

lower its tuition rate

question

For which of the following medical services is the income elasticity of demand likely to be the smallest?

answer

emergency services after a car accident

question

If the numerical value of the price elasticity of demand is 3, then a one-percent change in price will cause a(n)

answer

larger percentage change in quantity demanded, so demand is elastic

question

The marginal value product for labor is equal to the marginal physical product for labor times the product price

answer

True

question

When a firm incurs losses in the short run, the most important consideration in determining whether to continue producing is whether

answer

revenues cover some of its fixed costs and all of its variable cost

question

Which of the following is true?

answer

product differentiation is the key difference between monopolistic competition and perfect competition.

question

Jim's Shoe Shine Shop operates in a perfectly competitive market. If it's marginal revenue is $5 per shine, then

answer

the market price per shine is $5

question

If MR were $12 per unit, and if MC = $10 per unit, then:

answer

the firm should increase production

question

When Better Beds produces 40 beds per day, its average variable cost is $600 and its average total cost is $800. The marginal cost of producing the 40th bed is $700. Based on this information, what is the Better Beds' average fixed cost (AFC) for quantities of 20 and 40 beds per day?

answer

(20, 400) and (40, 200)

question

If Carol's Crayon Factory's price exceeds its average total cost in the short run, then

answer

it is earning a profit

question

Which of the following is true?

answer

MPP = APP, when APP is a maximum
all of the above >>>
MC = ATC, when ATC is a minimum
MC = AVC, when AVC is a minimum

question

Flora's Flowers operates in a perfectly competitive market. At the point where marginal cost equals marginal revenue, ATC = $10, AVC = $5, and the price per unit is $15. In this situation,

answer

Flora earns positive profits in the short run

question

A decrease in demand, with supply constant, results in a(n)

answer

decrease in equilibrium price and a decrease in equilibrium quantity

question

Rent control is an example of a price ceiling. Which of the following problems must be addressed under a rent control program?

answer

how to allocate scarce rental units

question

An increase in demand causes

answer

an increase in equilibrium price and equilibrium quantity

question

A $10,000 federal subsidy per student in higher education would benefit

answer

the student and the university in such a way that they would split the $10,000.

question

When the minimum wage is set above the equilibrium market wage,

answer

the unemployment rate will rise

question

If the government wants to manipulate the equilibrium price, it will normally create a price floor or price ceiling; if the government want to manipulate the equilibrium quantity, it will normally impose taxes or award subsidies.

answer

True

question

breakeven output

answer

level of output at which average total costs equal average revenue or market price

question

average variable cost

answer

the variable costs incurred by the business in the current period per unit of output

question

marginal physical product

answer

the change in output or total product the business would achieve in the current period by expanding the use of an input by another unit

question

marginal value product

answer

the change in revenue earned by the business as it employees an additional unit of an input holding other resource use constant

question

shutdown output

answer

level of output at which average variable costs equal average revenue or the market price

question

fixed costs

answer

specific form of current production costs that do not vary with the level of output or input use

question

marginal cost

answer

the change in total cost of production as the output or total product of the business is expanded

question

Total Variable Cost (TVC)

answer

the sum of all individual categories of production costs that do vary with the level of production

question

stage 1

answer

is the point at which the marginal physical product curve for a particular input is rising but still lies above the average physical product curve

question

marginal rate of product transformation

answer

the rate at which the business is willing to substitute between two products in the current period

question

profit maximizing level of output

answer

level of output at which average total costs equal average revenue or market price

question

profit maximizing level of input use

answer

level of input use where the marginal value product equals the marginal input cost

question

perfect competition

answer

market structure characterized by large number of producers selling a homogeneous product each with perfect information and no barriers to entry or exit

question

law of diminishing marginal returns

answer

as successive units of a variable input are added to a production process with the other inputs held constant the marginal physical product eventually decreases

1 of 72

question

Which of the following would be strictly a microeconomic topic?

answer

An increase in the price of the Ford Taurus

question

Which of the following is the study of "what should be" rather than the study of "what is"?

answer

Normative economics

question

Even though households may have unlimited wants, they have to allocate their spending carefully because they

answer

Have limited income

question

Suppose that the following headlines appeared in a newspaper. Which would most clearly represent a macroeconomic issue?

answer

"Central Bank Raises Interest Rates"

question

The three groups of decision makers in the economy are

answer

Households, business firms and government

question

answer

$85 minus the value of the highest exam grade he could earn by studying for 5 hours

question

High-income people will sometimes pay higher prices at convenience stores for goods that are available at discount stores. They do this because

answer

crowded and understaffed discount stores impose higher time costs

question

If a market has more than one seller, but fewer sellers than under perfect competition, it is referred to as

answer

imperfect competition

question

The extent to which a firm is viewed by consumers as being a monopoly depends primarily on

answer

whether they believe there are close substitutes for the good it produces

question

A single-price monopolist is

answer

one that charges the same price for all units of output

question

The U.S. Postal Service

answer

has its monopoly status guaranteed by government franchise

question

A monopolist earns a profit whenever

answer

price exceeds average total cost

question

Which of the following goods would be most likely to be produced by a monopoly?

answer

electricity

question

In the short run, a monopoly should shut down whenever

answer

price is less than average variable cost everywhere

question

Absent an ability to price discriminate, if a monopoly wants to sell more output, it must

answer

lower its price

question

For a monopolist, there is no difference between the market demand curve and the demand curve the monopolist uses when making output decisions.

answer

True

question

Suppose that for a monopolist, MR = MC = $10 and P = $15 at the profit-maximizing level of output. At this level of output, the firm

answer

will shut down if AVC > $15

question

A record level of crop production can lead to:

answer

sharp declines in farm product prices and cash receipts from sale of production.

question

Marginal propensity to consume is the slope of the aggregate consumption function and tells us how much consumption will change if consumer disposable income changes.

answer

True

question

An inflationary gap occurs in the economy when

answer

aggregate demand is greater than full employment output.

question

Given the following equation where DPI represents disposable personal income: C = 1,500 + 0.85(DPI) If disposable personal income is $5,000, consumer spending would be equal to:

answer

$5,750.

question

Consumption expenditures includes:

answer

purchases of airline tickets.
purchases of new automobiles.
purchases of food.
all of the above. >>>

question

The economy's aggregate supply curve includes

answer

a classical range.
a normal range.
a Keynesian or depression range.
all of the above. >>>

question

Automatic fiscal policy instruments include:

answer

unemployment compensation.

question

The Federal Open Market Committee, or FOMC, sets the policy for

answer

Buying government bonds and selling government bonds

question

The functions of the Federal Reserve System include:

answer

regulating the money supply.

question

Contractionary fiscal policy actions:

answer

would likely decrease farmers' fixed liabilities.
would likely increase farmers' total assets.
would likely increase farmers' operating expenses.
none of the above>>>

question

The national debt:

answer

is equal to the debt at the beginning of the year plus the deficit during the year.

question

A price elasticity of demand of 2 for a specific cola means that if the price increases 1 percent, the quantity demanded of the cola will decrease by 2 percent.

answer

True

question

The sensitivity of one economic variable to changes in another variable is known as

answer

elasticity

question

If the cross-price elasticity of demand is positive, then the

answer

two goods are substitutes

question

If the demand curve is a horizontal line,

answer

demand is perfectly elastic

question

If the percentage change in quantity demanded is smaller (in absolute value) than the percentage change in price, then demand is

answer

inelastic

question

For which of the following goods is the income elasticity of demand likely to be largest?

answer

meals at restaurants

question

The cross-price elasticity of demand between butter and margarine is most likely

answer

positive, since the goods are substitutes

question

The cross-price elasticity of demand between Texaco gasoline and Mobil gasoline sold at the same intersection would be

answer

positive

question

As a result of heavy spring rains in the Midwest, the corn crop declined sharply. If corn growers experienced an increase in sales revenue, the demand for corn must be

answer

price inelastic

question

If the income elasticity of demand for a good is -2.5, then

answer

it is an inferior good, and its demand curve will shift to the left if buyers' incomes increase

question

If the price of food falls by 10 percent and the quantity sold increases by 5 percent, then the price elasticity of demand in that range equals

answer

0.5, and demand is inelastic

question

Suppose a local bookstore notices that a 2 percent increase in book prices leads to a 2 percent decrease in the number of books sold. Which of the following is true?

answer

The store's sales revenue did not change.

question

A public university knows that demand from potential students is elastic. If the university wants to increase tuition revenue, it should

answer

lower its tuition rate

question

For which of the following medical services is the income elasticity of demand likely to be the smallest?

answer

emergency services after a car accident

question

If the numerical value of the price elasticity of demand is 3, then a one-percent change in price will cause a(n)

answer

larger percentage change in quantity demanded, so demand is elastic

question

The marginal value product for labor is equal to the marginal physical product for labor times the product price

answer

True

question

When a firm incurs losses in the short run, the most important consideration in determining whether to continue producing is whether

answer

revenues cover some of its fixed costs and all of its variable cost

question

Which of the following is true?

answer

product differentiation is the key difference between monopolistic competition and perfect competition.

question

Jim's Shoe Shine Shop operates in a perfectly competitive market. If it's marginal revenue is $5 per shine, then

answer

the market price per shine is $5

question

If MR were $12 per unit, and if MC = $10 per unit, then:

answer

the firm should increase production

question

answer

(20, 400) and (40, 200)

question

If Carol's Crayon Factory's price exceeds its average total cost in the short run, then

answer

it is earning a profit

question

Which of the following is true?

answer

MPP = APP, when APP is a maximum
all of the above >>>
MC = ATC, when ATC is a minimum
MC = AVC, when AVC is a minimum

question

Flora's Flowers operates in a perfectly competitive market. At the point where marginal cost equals marginal revenue, ATC = $10, AVC = $5, and the price per unit is $15. In this situation,

answer

Flora earns positive profits in the short run

question

A decrease in demand, with supply constant, results in a(n)

answer

decrease in equilibrium price and a decrease in equilibrium quantity

question

Rent control is an example of a price ceiling. Which of the following problems must be addressed under a rent control program?

answer

how to allocate scarce rental units

question

An increase in demand causes

answer

an increase in equilibrium price and equilibrium quantity

question

A $10,000 federal subsidy per student in higher education would benefit

answer

the student and the university in such a way that they would split the $10,000.

question

When the minimum wage is set above the equilibrium market wage,

answer

the unemployment rate will rise

question

answer

True

question

breakeven output

answer

level of output at which average total costs equal average revenue or market price

question

average variable cost

answer

the variable costs incurred by the business in the current period per unit of output

question

marginal physical product

answer

the change in output or total product the business would achieve in the current period by expanding the use of an input by another unit

question

marginal value product

answer

the change in revenue earned by the business as it employees an additional unit of an input holding other resource use constant

question

shutdown output

answer

level of output at which average variable costs equal average revenue or the market price

question

fixed costs

answer

specific form of current production costs that do not vary with the level of output or input use

question

marginal cost

answer

the change in total cost of production as the output or total product of the business is expanded

question

Total Variable Cost (TVC)

answer

the sum of all individual categories of production costs that do vary with the level of production

question

stage 1

answer

is the point at which the marginal physical product curve for a particular input is rising but still lies above the average physical product curve

question

marginal rate of product transformation

answer

the rate at which the business is willing to substitute between two products in the current period

question

profit maximizing level of output

answer

level of output at which average total costs equal average revenue or market price

question

profit maximizing level of input use

answer

level of input use where the marginal value product equals the marginal input cost

question

perfect competition

answer

market structure characterized by large number of producers selling a homogeneous product each with perfect information and no barriers to entry or exit

question

law of diminishing marginal returns

answer

as successive units of a variable input are added to a production process with the other inputs held constant the marginal physical product eventually decreases

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