BE 301- Exam 1 - Assignment Essays

question

Which of the following changes would increase the supply of widgets?

answer

technological innovations

question

You lose your job and, as a result, you buy fewer iTunes music downloads. This shows that you consider iTunes music downloads to be a(n)

answer

normal good

question

Which of the following changes would NOT shift the demand curve for a good or service?

answer

a change in the price of the good or service

question

The competitive firm's short-run supply curve is that portion of the

answer

marginal cost curve that lies above average variable cost

question

A long-run supply curve is flatter than a short-run supply curve because

answer

firms can enter and exit a market more easily in the long run than in the short run

question

When firms are said to be price takers, it implies that if a firm raises its price,

answer

buyers will go elsewhere

question

Economies of scale occur when

answer

long-run average total costs fall as output increases

question

Average total cost is increasing whenever

answer

marginal cost is greater than average total cost

question

Economists assume that the goal of the firm is to maximize total

answer

profits

question

Diminishing marginal product suggests that

answer

marginal cost is upward sloping

question

If the price elasticity of demand for a good is 5, then a 10 percent increase in price results in a

answer

50 percent decrease in the quantity demanded

question

Demand is said to be price elastic if

answer

buyers respond substantially to changes in the price of the good

question

When demand is perfectly inelastic, the demand curve will be

answer

vertical, because buyers purchase the same amount as before whenever the price rises or falls

question

A binding price ceiling
(i)
causes a surplus.
(ii)
causes a shortage.
(iii)
is set at a price above the equilibrium price.
(iv)
is set at a price below the equilibrium price.

answer

(ii) and (iv) only

question

Suppose the equilibrium wholesale price of milk is $1/gal., but the government prohibits sales at less than $2/gal. Which of the following is not a likely consequences of this price floor?

answer

dairy farmers sell more milk

question

Tom produces baseball gloves and baseball bats. Steve also produces baseball gloves and baseball bats, but Tom is better at producing both goods. In this case, trade could

answer

benefit both Steve and Tom

question

"Ensuring that Social Security is financially sound for future generations is an important use of taxpayer dollars" is an example of a

answer

normative economic statement

question

The term "invisible hand" was coined by

answer

Adam Smith

question

Which of the following statements about models is correct?

answer

Models assume away irrelevant details

question

Normative statements are

answer

prescriptive, whereas positive statements are descriptive

question

Any point on a country's production possibilities frontier represents a combination of two goods that an economy

answer

can produce using all available resources and technology

question

Economists compute the price elasticity of demand as the

answer

percentage change in quantity demanded divided by the percentage change in price

question

Demand is said to have unit elasticity if the price elasticity of demand is

answer

equal to 1

question

Total revenue minus both explicit and implicit costs is called

answer

economic profit

question

Marginal cost is equal to

answer

ΔTC/ΔQ

question

As Bubba's Bubble Gum Company adds workers while using the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Bubba's Bubble Gum Company encounters

answer

diminishing marginal product

question

Constant returns to scale occur when a firm's

answer

long-run average total costs do not vary as output increases

question

When fixed costs are ignored because they are irrelevant to a business's production decision, they are called
Group of answer choices

answer

sunk costs

question

In the long run, each firm in a perfectly-competitive industry earns

answer

zero economic profit

question

We can measure the profits earned by a firm in a competitive industry as

answer

(P - ATC) × Q

question

The entry of new firms into a competitive market will

answer

increase market supply and decrease market price

question

When some resources used in production are only available in limited quantities, it is likely that the long-run supply curve in a competitive market is

answer

upward sloping

question

A monopolist can sell 300 units of output for $45 per unit. Alternatively, it can sell 301 units of output for $44.60 per unit. The marginal revenue of the 301st unit of output is

answer

-$75.40
(300 X $45) - (301 X $44.6)

question

If a monopolist can sell 7 units when the price is $4 and 8 units when the price is $3, then the marginal revenue of selling the eighth unit is equal to

answer

-$4

question

Sizable economic profits can persist over time under monopoly if the monopolist

answer

is protected by barriers to entry

question

What will happen in the market for shotgun-shell ammunition now if buyers expect higher shotgun-shell prices in the near future?

answer

The demand for shotgun-shell ammunition will increase

question

When quantity demanded has increased at every price, it might be because

answer

the price of a complementary good has decreased

question

Which of the following is an example of an externality?

answer

Antonio's dog barks loudly during the night, waking his neighbors

question

If the government imposes (and enforces) a binding price ceiling on the market for apples, but doesn't provide a formal rationing mechanism:

answer

resources will be wasted as buyers jockey to obtain the good

question

Total revenue will be at its largest value on a linear demand curve at the

answer

midpoint of the curve

question

Demand is said to be price elastic if

answer

buyers respond substantially to changes in the price of the good

question

The minimum points of the average variable cost and average total cost curves occur where the
Group of answer choices

answer

marginal cost curve intersects those curves

question

When firms are said to be price takers, it implies that if a firm raises its price,

answer

buyers will go elsewhere

question

Tom produces commemorative t-shirts in a perfectly-competitive market. If Tom decides to decrease his output, this will

answer

decrease his revenue, since his output has decreased and the price remains the same

question

If there is an increase in market demand in a perfectly competitive market, then in the short run

answer

profits will rise

question

Which of the following statements best reflects a price-taking firm?

answer

If the firm were to charge more than the going price, it would sell none of its goods

question

Who is a price taker in a perfectly-competitive market?

answer

both buyers and sellers

question

Patents, copyrights, and trademarks

answer

are examples of government-created monopolies
allow their owners to charge higher prices
are examples of barriers to entry

question

Encouraging firms to invest in research and development and individuals to engage in creative endeavors such as writing novels is one justification for

answer

government-created monopolies

question

You love peanut butter. You hear on the news that 50 percent of the peanut crop in the South has been wiped out by drought and that this will cause the price of peanuts to double by the end of the year. As a result, your demand for peanut butter
Group of answer choices

answer

increases today

question

If textbooks and study guides are complements, then an increase in the price of textbooks will result in

answer

fewer study guides being sold

question

If the number of buyers in a market decreases, then

answer

demand will decrease

question

When a certain monopoly sets its price at $8 it sells 64 units. When the monopoly sets its price at $10 it sells 60 units. The marginal revenue for the firm over this range is

answer

TR(64)=64*8=512
TR(60)=60*10=600
MR(64 to 60)=(512-600)/(64-60)=-22
$22

question

In which of the following situations will total revenue increase?

answer

Price elasticity of demand is 3.0, and the price of the good decreases.
Price elasticity of demand is 1.2, and the price of the good decreases.
Price elasticity of demand is 0.5, and the price of the good increases.

question

If marginal cost is equal to average total cost, then

answer

average total cost is minimized

question

Winona's Fudge Shoppe is maximizing profits by producing 1,000 pounds of fudge per day. If Winona's fixed costs unexpectedly increase and the market price remains constant, then the short run profit-maximizing level of output

answer

is still 1,000 pounds

question

In the long run, a firm will enter a competitive industry if

answer

total revenue exceeds total cost.
the price exceeds average total cost.
the firm can earn economic profits.

question

In the long run, a profit-maximizing firm will choose to exit a market when

answer

total revenue is less than total cost.

question

Which of the following is an example of a barrier to entry?

answer

John obtained a copyright for the song he wrote and recorded.

question

If the price in the market for apples is higher than the equilibrium price:

answer

there is excess supply & we expect the price to fall

question

An increase in quantity demanded

answer

results in a movement downward and to the right along a demand curve

question

In a market economy,

answer

households decide which firms to work for and what to buy with their incomes.
firms decide whom to hire and what to make.

question

Average total cost equals

answer

(fixed costs + variable costs) divided by quantity produced

question

The minimum points of the average variable cost and average total cost curves occur where the

answer

marginal cost curve intersects those curves

question

When a firm's long-run average total costs do not vary as output increases, the firm exhibits

answer

constant returns to scale

question

Profit-maximizing firms in a competitive market produce an output level where

answer

marginal cost equals marginal revenue

question

Suppose a firm operates in the short run at a price above its average total cost of production. In the long run the firm should expect

answer

the market price to fall.
new firms to enter the market.
it's profits to fall.

question

When firms have an incentive to exit a competitive market, their exit will

answer

raise the profits of the firms that remain in the market.

question

When there are economies of scale over the relevant range of output for a monopoly, the monopoly

answer

a natural monopoly

question

Which of the following is not a characteristic of a monopoly?

answer

free entry and exit

question

Suppose that when income rises, the demand curve for doctor's visits shifts to the right. In this case, we know doctor's visits are

answer

normal goods

question

Total Revenue

answer

increases as price increases, as long as demand is elastic.

question

A firm produces 400 units of output at a total cost of $1,200. If fixed costs are $200,

answer

Total Cost = $1200 = Fixed Cost + Variable Cost
$1200 = $200 + Variable Cost
Variable Cost = $1000
Average Variable Cost = $1000 / 400 units = $2.50 per unit.

question

The Wacky Widget company has total fixed costs of $100,000 per year. The firm's average variable cost is $5 for 10,000 widgets. At that level of output, the firm's average total costs equal

answer

TC = FC + VC
= $100,000 + ($10,000 * 5)
= 150,000
ATC= $150,000 / Q (10,000)
= $15

question

When a firm experiences diseconomies of scale,

answer

long-run average total cost increases as output increases.

question

In the long run, each firm in a perfectly-competitive industry earns

answer

zero economic profit

question

Identify the author of this famous quotation: "It is not from the benevolence of the butcher the brewer, or the baker that we expect our dinner, but from their regard to their own interest."

answer

Adam Smith

question

Which of the following economic thinkers was associated with the "Marginal Revolution" of the late 19th century?

answer

William Stanley Jevons
Léon Walras
Carl Menger

question

Suppose you are the owner of Sam's Steakhouse, a casual dining restaurant in the fictional town of Tailing Mountain, PA. After learning that the local mine, which employs most of the town's residents, is about to close, you ask your economist friend Erin for advice. She suggests that you add a $6.99 hamburger steak meal to your menu because:

answer

hamburger is an inferior good.

question

Pizza is a normal good if:

answer

the demand for pizza increases when incomes rise.

question

In the perfect competition model, the horizontal summation of each firm's marginal cost curve for producing the product is:

answer

the total cost curve

question

Which of the following events must cause equilibrium price to fall?

answer

demand decreases and supply increases

question

If an increase in minimum wages forces restaurant owners to pay workers more, we would expect:

answer

restaurant prices to rise & fewer meals to be served

question

True or False? Consumer surplus is the difference between a consumer's valuation of a good and the price they pay to obtain it.

answer

True

question

Suppose a plague of locusts destroys a large portion of this year's wheat crop, causing 20% less wheat to be sold this year at a price that is 40% higher. From this we can conclude that:

answer

Overall, wheat farmers' revenues will be up this year, because demand was inelastic.

1 of 85

question

Which of the following changes would increase the supply of widgets?

answer

technological innovations

question

You lose your job and, as a result, you buy fewer iTunes music downloads. This shows that you consider iTunes music downloads to be a(n)

answer

normal good

question

Which of the following changes would NOT shift the demand curve for a good or service?

answer

a change in the price of the good or service

question

The competitive firm's short-run supply curve is that portion of the

answer

marginal cost curve that lies above average variable cost

question

A long-run supply curve is flatter than a short-run supply curve because

answer

firms can enter and exit a market more easily in the long run than in the short run

question

When firms are said to be price takers, it implies that if a firm raises its price,

answer

buyers will go elsewhere

question

Economies of scale occur when

answer

long-run average total costs fall as output increases

question

Average total cost is increasing whenever

answer

marginal cost is greater than average total cost

question

Economists assume that the goal of the firm is to maximize total

answer

profits

question

Diminishing marginal product suggests that

answer

marginal cost is upward sloping

question

If the price elasticity of demand for a good is 5, then a 10 percent increase in price results in a

answer

50 percent decrease in the quantity demanded

question

Demand is said to be price elastic if

answer

buyers respond substantially to changes in the price of the good

question

When demand is perfectly inelastic, the demand curve will be

answer

vertical, because buyers purchase the same amount as before whenever the price rises or falls

question

A binding price ceiling
(i)
causes a surplus.
(ii)
causes a shortage.
(iii)
is set at a price above the equilibrium price.
(iv)
is set at a price below the equilibrium price.

answer

(ii) and (iv) only

question

Suppose the equilibrium wholesale price of milk is $1/gal., but the government prohibits sales at less than $2/gal. Which of the following is not a likely consequences of this price floor?

answer

dairy farmers sell more milk

question

Tom produces baseball gloves and baseball bats. Steve also produces baseball gloves and baseball bats, but Tom is better at producing both goods. In this case, trade could

answer

benefit both Steve and Tom

question

"Ensuring that Social Security is financially sound for future generations is an important use of taxpayer dollars" is an example of a

answer

normative economic statement

question

The term "invisible hand" was coined by

answer

Adam Smith

question

Which of the following statements about models is correct?

answer

Models assume away irrelevant details

question

Normative statements are

answer

prescriptive, whereas positive statements are descriptive

question

Any point on a country's production possibilities frontier represents a combination of two goods that an economy

answer

can produce using all available resources and technology

question

Economists compute the price elasticity of demand as the

answer

percentage change in quantity demanded divided by the percentage change in price

question

Demand is said to have unit elasticity if the price elasticity of demand is

answer

equal to 1

question

Total revenue minus both explicit and implicit costs is called

answer

economic profit

question

Marginal cost is equal to

answer

ΔTC/ΔQ

question

answer

diminishing marginal product

question

Constant returns to scale occur when a firm's

answer

long-run average total costs do not vary as output increases

question

When fixed costs are ignored because they are irrelevant to a business's production decision, they are called
Group of answer choices

answer

sunk costs

question

In the long run, each firm in a perfectly-competitive industry earns

answer

zero economic profit

question

We can measure the profits earned by a firm in a competitive industry as

answer

(P - ATC) × Q

question

The entry of new firms into a competitive market will

answer

increase market supply and decrease market price

question

When some resources used in production are only available in limited quantities, it is likely that the long-run supply curve in a competitive market is

answer

upward sloping

question

A monopolist can sell 300 units of output for $45 per unit. Alternatively, it can sell 301 units of output for $44.60 per unit. The marginal revenue of the 301st unit of output is

answer

-$75.40
(300 X $45) - (301 X $44.6)

question

If a monopolist can sell 7 units when the price is $4 and 8 units when the price is $3, then the marginal revenue of selling the eighth unit is equal to

answer

-$4

question

Sizable economic profits can persist over time under monopoly if the monopolist

answer

is protected by barriers to entry

question

What will happen in the market for shotgun-shell ammunition now if buyers expect higher shotgun-shell prices in the near future?

answer

The demand for shotgun-shell ammunition will increase

question

When quantity demanded has increased at every price, it might be because

answer

the price of a complementary good has decreased

question

Which of the following is an example of an externality?

answer

Antonio's dog barks loudly during the night, waking his neighbors

question

If the government imposes (and enforces) a binding price ceiling on the market for apples, but doesn't provide a formal rationing mechanism:

answer

resources will be wasted as buyers jockey to obtain the good

question

Total revenue will be at its largest value on a linear demand curve at the

answer

midpoint of the curve

question

Demand is said to be price elastic if

answer

buyers respond substantially to changes in the price of the good

question

The minimum points of the average variable cost and average total cost curves occur where the
Group of answer choices

answer

marginal cost curve intersects those curves

question

When firms are said to be price takers, it implies that if a firm raises its price,

answer

buyers will go elsewhere

question

Tom produces commemorative t-shirts in a perfectly-competitive market. If Tom decides to decrease his output, this will

answer

decrease his revenue, since his output has decreased and the price remains the same

question

If there is an increase in market demand in a perfectly competitive market, then in the short run

answer

profits will rise

question

Which of the following statements best reflects a price-taking firm?

answer

If the firm were to charge more than the going price, it would sell none of its goods

question

Who is a price taker in a perfectly-competitive market?

answer

both buyers and sellers

question

Patents, copyrights, and trademarks

answer

are examples of government-created monopolies
allow their owners to charge higher prices
are examples of barriers to entry

question

Encouraging firms to invest in research and development and individuals to engage in creative endeavors such as writing novels is one justification for

answer

government-created monopolies

question

answer

increases today

question

If textbooks and study guides are complements, then an increase in the price of textbooks will result in

answer

fewer study guides being sold

question

If the number of buyers in a market decreases, then

answer

demand will decrease

question

When a certain monopoly sets its price at $8 it sells 64 units. When the monopoly sets its price at $10 it sells 60 units. The marginal revenue for the firm over this range is

answer

TR(64)=64*8=512
TR(60)=60*10=600
MR(64 to 60)=(512-600)/(64-60)=-22
$22

question

In which of the following situations will total revenue increase?

answer

question

If marginal cost is equal to average total cost, then

answer

average total cost is minimized

question

answer

is still 1,000 pounds

question

In the long run, a firm will enter a competitive industry if

answer

total revenue exceeds total cost.
the price exceeds average total cost.
the firm can earn economic profits.

question

In the long run, a profit-maximizing firm will choose to exit a market when

answer

total revenue is less than total cost.

question

Which of the following is an example of a barrier to entry?

answer

John obtained a copyright for the song he wrote and recorded.

question

If the price in the market for apples is higher than the equilibrium price:

answer

there is excess supply & we expect the price to fall

question

An increase in quantity demanded

answer

results in a movement downward and to the right along a demand curve

question

In a market economy,

answer

households decide which firms to work for and what to buy with their incomes.
firms decide whom to hire and what to make.

question

Average total cost equals

answer

(fixed costs + variable costs) divided by quantity produced

question

The minimum points of the average variable cost and average total cost curves occur where the

answer

marginal cost curve intersects those curves

question

When a firm's long-run average total costs do not vary as output increases, the firm exhibits

answer

constant returns to scale

question

Profit-maximizing firms in a competitive market produce an output level where

answer

marginal cost equals marginal revenue

question

Suppose a firm operates in the short run at a price above its average total cost of production. In the long run the firm should expect

answer

the market price to fall.
new firms to enter the market.
it's profits to fall.

question

When firms have an incentive to exit a competitive market, their exit will

answer

raise the profits of the firms that remain in the market.

question

When there are economies of scale over the relevant range of output for a monopoly, the monopoly

answer

a natural monopoly

question

Which of the following is not a characteristic of a monopoly?

answer

free entry and exit

question

Suppose that when income rises, the demand curve for doctor's visits shifts to the right. In this case, we know doctor's visits are

answer

normal goods

question

Total Revenue

answer

increases as price increases, as long as demand is elastic.

question

A firm produces 400 units of output at a total cost of $1,200. If fixed costs are $200,

answer

Total Cost = $1200 = Fixed Cost + Variable Cost
$1200 = $200 + Variable Cost
Variable Cost = $1000
Average Variable Cost = $1000 / 400 units = $2.50 per unit.

question

The Wacky Widget company has total fixed costs of $100,000 per year. The firm's average variable cost is $5 for 10,000 widgets. At that level of output, the firm's average total costs equal

answer

TC = FC + VC
= $100,000 + ($10,000 * 5)
= 150,000
ATC= $150,000 / Q (10,000)
= $15

question

When a firm experiences diseconomies of scale,

answer

long-run average total cost increases as output increases.

question

In the long run, each firm in a perfectly-competitive industry earns

answer

zero economic profit

question

Identify the author of this famous quotation: "It is not from the benevolence of the butcher the brewer, or the baker that we expect our dinner, but from their regard to their own interest."

answer

Adam Smith

question

Which of the following economic thinkers was associated with the "Marginal Revolution" of the late 19th century?

answer

William Stanley Jevons
Léon Walras
Carl Menger

question

answer

hamburger is an inferior good.

question

Pizza is a normal good if:

answer

the demand for pizza increases when incomes rise.

question

In the perfect competition model, the horizontal summation of each firm's marginal cost curve for producing the product is:

answer

the total cost curve

question

Which of the following events must cause equilibrium price to fall?

answer

demand decreases and supply increases

question

If an increase in minimum wages forces restaurant owners to pay workers more, we would expect:

answer

restaurant prices to rise & fewer meals to be served

question

True or False? Consumer surplus is the difference between a consumer's valuation of a good and the price they pay to obtain it.

answer

True

question

Suppose a plague of locusts destroys a large portion of this year's wheat crop, causing 20% less wheat to be sold this year at a price that is 40% higher. From this we can conclude that:

answer

Overall, wheat farmers' revenues will be up this year, because demand was inelastic.

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