ECON 202 Final Exam - Assignment Essays

question

The __________ the opportunity cost of doing something, the ___________ likely it will be done.

answer

higher, less

question

An arrangement that allows buyers and sellers to exchange things is called

answer

a market

question

The principle that the cost of something is equal to what is sacrificed to get it is known as the

answer

principle of opportunity cost

question

Increasing opportunity cost while moving along a production possibility frontier is due to

answer

the fact that resources are not equally productive in alternative uses

question

To think at the margin means to consider

answer

how a small change in one variable affects another variable

question

The "coincidence of wants" problem associated with barter refers to the fact that

answer

for exchange to occur each transactor must have a product which the other transactor wants

question

Customarily, economists classify resources into these major groups

answer

land, labor, capital, and entrepreneurship

question

When economists assume that people are rational and respond to incentives, they mean

answer

people act in their own self-interest

question

The above graph depicts the mythical country of Sandwichia's production possibility frontier. Sandwichia would have to experience significant technological progress or massive saving and investment before it could feasibly choose to produce at

answer

point e

question

From above graph, the opportunity cost of producing an extra jar of jelly in Sandwichia is highest at

answer

point b

question

Which of the following might be considered to be a characteristic of a planned economy?

answer

there is no incentive for people to work hard

question

The opportunity cost of going to college

answer

includes wages you lose by going to school instead of working

question

Does voluntary exchange create wealth (value)?

answer

yes, trade generally permits the trading partners to gain more of what they value; this is why they agree to the terms of the exchange

question

Which of the following will most likely occur under a system of clearly defined and enforced private property rights?

answer

resource owners will gain by discovering and employing their resources in ways that are highly valued by others

question

Economic capital refers to

answer

buildings, machinery, and equipment

question

The 3 key economic questions include all of the following EXCEPT

answer

"where should these products be produced?"

question

The additionalterm-15 cost resulting from a small increase in some activity is called the

answer

marginal cost

question

Because resources are limited

answer

people must make choices

question

If an economy is operating at a point inside the production possibilities curve,

answer

its resources are being wasted

question

A response to a price change would be described as a:

answer

movement along an existing demand curve

question

The general relationship of economic freedom and the share of income of the poorest 10% of a country's citizens is

answer

consistent -- the poorest 1-% receive the same share of income regardless of the level of economic freedom

question

When there is a change in the quantity demanded it means that

answer

the quantity a consumer is willingly to buy changes when the price changes

question

If two countries are producing the same two products it is mutually beneficial if the countries specialize then trade. How is it determined who specializes in the production of which product?

answer

by the lowest opportunity cost of production, comparative advantage

question

Specialization and trade exploit differences in productivity of workers and

answer

make everyone better off

question

A change in quantity supplied of a product is the result of a change in

answer

the price of the product

question

Consider two individuals, Celia and Sondra, who produce bracelets and pendants. The above table shows how much of each good Celia and Sondra can produce in one hour. Celia's opportunity cost of one bracelet is

answer

1/5 of a pendant

question

When a market is in equilibrium,

answer

there is no shortage and no surplus at the equilibrium price

question

The Law of Demand can be explained as

answer

the higher the price, the smaller the quantity demanded, ceteris paribus

question

When producers are willing to sell more than consumers are willing to buy,

answer

there is a surplus of the product in the market

question

According to the law of increasing opportunity costs,

answer

the risk involved in producing a good increases as more of the good is produced

question

The money payment made to owners of land, labor, capital, and entrepreneurial ability are

answer

rent, wages, interest, and profits respectively

question

Which of the following was NOT in the top 10 countries in terms of Economic Freedom according to the Heritage Foundation (as shown and discussed in class)

answer

United States

question

In a market system, what provides individuals the information needed to make decisions?

answer

prices

question

In a market economy, what provides potential investors with reliable information about the financial performance of a firm?

answer

accounting rules

question

The law of supply indicates that

answer

producers will offer more of a product at high prices than they will at low prices

question

The general relationship between economic freedom and per capita income is

answer

positive --- higher economic freedom leads to a higher per capita income

question

If the actual price of t-shirts is $7, there is

answer

shortage of 8 t-shirts

question

If the actual price of t-shirts is $10, we would expect that

answer

there will be no change since the market is in equilibrium

question

In the figure above, the increase in demand results in

answer

higher rents and increase in the equilibrium quantity

question

In the figure above, the demand curve shifts rightward from D0 to D1 so that D1 is the relevant demand curve. Suppose the government imposes a rent ceiling of $300 per month. In the short run there will be

answer

a shortage of 200,000 apartments

question

If the equilibrium price of a good increases and the equilibrium quantity of the good decreases, we can conclude

answer

supply decreased

question

The "law of demand" states that, with other things constant, changes in

answer

the quantity demanded of a good are inversely related to changes in its price

question

The battery packs used in electric cars and hybrid automobiles are one of the largest cost components for manufacturing these cars. As the price of these batteries decline, we expect that the:

answer

supply curve for electric and hybrid autos will increase

question

In order to have an effect, a price ceiling must be set

answer

below the equilibrium price

question

When a market is in equilibrium,

answer

there is no shortage and no surplus at the equilibrium price

question

Which of the following increases the supply curve for gasoline?

answer

a decrease in the price of a resource used to produce gasoline, such as crude oil

question

Which of the following explains why supply curves slope upward?

answer

law of increasing opportunity cost

question

A minimum wage set above the equilibrium wage rate for low-skilled workers

answer

creates unemployment among low-skilled workers

question

Which of the following will NOT cause an increase in the demand curve for beer?

answer

a change in the price of beer

question

The quantity demanded of a good or service is the amount that

answer

consumers plan to buy during a given time period at a given price

question

From 1970 to 2017, the real price of eggs decreased. Which of the following would cause an unambiguous decrease in the real price of eggs?

answer

an increase in the supply for eggs and a decrease in the demand for eggs

question

A legal price ceiling of $0 means

answer

the product is legal to give away but not to sell

question

Which of the following increases the demand for an inferior good?

answer

a decrease in income

question

The above figures show the market for hamburger meat. Which figure shows the effect of a nation-wide strike by butchers and meat-packers?

answer

Figure C

question

An important determinant of the amount of grains harvested next year by Ethiopian farmers is the amount of seeds planted this year. Given that Western nations have guaranteed to donated five hundred tons of grain next year, this year the Ethiopian farmers will

answer

plant less seeds as the price of grain will be lower with the food aid

question

Bacon and eggs are complements. If the price of bacon rises, the demand for eggs will

answer

decrease and the demand curve for eggs will shift leftward

question

A supply curve is defined as the relationship between

answer

the price of a good and the quantity that producers are willing to sell

question

A firm experiences diminishing marginal returns becaue

answer

at lease one factor of production is fixed and becomes constraining to production

question

If the demand curve is a vertical line, it means that

answer

regardless of price, the quantity demanded is a constant amount

question

Suppose that the elasticity of demand for a product is 2.0. What will happen to total revenue as a firm decreases the price?

answer

Total revenue will increase

question

Average variable cost is defined as

answer

total variable cost divided by quantity

question

Which of the following is not a benefit from the existence of firms?

answer

principle-agent relationships

question

Suppose that Wilson Beer Brewer faces a linear demand curve and that the current price for its beer is set at a point where the price elasticity is 1.6. If Wilson Beer Brewer increases the product price,

answer

the demand becomes more elastic and total revenue decreases

question

In the short run, the firm's total cost equals:

answer

fixed costs + variable costs

question

The price elasticity of demand is calculated by

answer

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

question

_____________ are costs that do not require a monetary payment.

answer

implicit costs

question

The primary objective of a firm in a market economy is to

answer

maximize profits

question

Which of the following is an example of something that economists would consider a cost but accountants would not?

answer

the interest income forgone by the firm's owner invested funds into the firm

question

Marginal product in the short run:

answer

may initially increase, then eventually decrease

question

The marginal product of the second worker is

answer

2 units

question

When at least one factor of production is fixed, firms require more and more workers to produce each additional unit of output. This describes:

answer

diminishing marginal returns

question

Which of the following factors would indicate less elastic demand?

answer

there are few substitutes

question

If Juan purchases the same number of gallons of gasoline per week regardless of changes in gasoline price, Juan's demand for gasoline is:

answer

perfectly inelastic

question

If the price elasticity of demand is 2, this means that a __________ increase in price causes a ________ decrease in quantity demanded.

answer

20%, 40%

question

In the short run:

answer

firms are able to alter some, but not all, of their factors of production

question

Curve A is the __________ curve.

answer

marginal cost

question

A price taker is a buyer or a seller who

answer

takes the market price as given

question

You notice that the price of butter falls and then rises. The best explanation for this is that

answer

demand for butter decreased causing price to fall, which induced other firms to exit the market causing supply to decrease, which caused the price to go back up

question

From the above graph, if price is P1 then a competitive industry will

answer

contract

question

For a profit maximizing competitive firm

answer

price always equals marginal cost

question

If a firm in a perfectly competitive market is currently producing the output where price = marginal cost = average total cost, the firm is

answer

earning a normal rate of return

question

Marginal revenue is equal to

answer

the change in total revenue from selling one more unit of a good

question

If the firm is incurring losses in the short run, then which of the following is true at its profit maximizing level of production?

answer

P < ATC

question

If average total cost > average variable cost > price, a profit maximizing firm in a competitive market should

answer

shut down in the short run

question

In a competitive constant cost industry, an increase in price causes

answer

more firms to enter the industry

question

Marginal revenue is equal to price for a competitive firm because

answer

total revenue increases by the price of the good when an additional unit is sold

question

A market where individual firms cannot affect the market price of their good is most likely

answer

a competitive market

question

From the above graph, in a competitive market with a properly run profit maximizing firm, if the market price is $3 its profit is

answer

-$900

question

From the above graph, in a competitive market, which listed prices will generate positive economic profits?

answer

$15

question

Suppose that Gigantic Company is increasing in size. As Gigantic Company grows, they are able to buy inputs in bulk, resulting in lower input prices. It is likely that continued growth will result in:

answer

economies of scale

question

If a firm suffers an economic loss, its

answer

price is less than its average total cost

question

A firm's marginal cost curve above the minimum of the average variable cost curve is also

answer

the firm's short-run supply curve

question

Which of the following is NOT a characteristic of a monopolistically competitive market?

answer

there are substantial barriers to entry

question

Market power is the power to

answer

control prices

question

A monopolist maximizes profits by setting the quantity where

answer

marginal revenue equal to marginal cost

question

Gasoline stations carrying the same fuel brand are able to charge different prices in San Francisco because

answer

gasoline stations are perfect price discriminators

question

Under the conditions of monopolistic competition

answer

economic profit is zero in the long run

question

You notice that the price of butter, a competitive product, falls and then rises. The best explanation for this is that

answer

demand for butter decreased causing price to fall, which induced other firms to exit the market causing supply to decrease, which caused the price to go back up

question

Price fixing is an arrangement whereby firms agree to

answer

coordinate their pricing decisions

question

Which of the following is NOT a barrier to entry for monopoly?

answer

a large number of existing firms in a market

question

The demand curve that a monopolist faces is

answer

the market demand curve

question

Cartels engage in price fixing in order to

answer

increase profits

question

The word "monopolistic" in the label "monopolistic competition" refers to the fact that:

answer

each firm produces a slightly different version of the product

question

Price discrimination is related to elasticity because

answer

the firm can increase revenues by charging customers with elastic demands, lower prices, and charging customers with inelastic demands higher prices

question

The more product differentiation in the market, the _______ the firm specific demand curve. The less product differentiation in the market, the ________ the firm specific demand curve.

answer

steeper, flatter

question

Oligopoly differs from monopoly and perfect competition in that

answer

all of the above

question

In order to practice price discrimination a firm must

answer

be able to divide consumers into groups with different demands for their product

question

Given that a monopolist is acting in a profit maximizing manner, the above illustrates a monopolist:

answer

suffer a loss

question

The deadweight loss associated with the monopoly would be represented by the area

answer

ade

question

The merits of a patent system is

answer

all of the above

question

When firms cooperate with each other rather than compete

answer

the firms will end up better off

question

At low levels of production, the firm

answer

all of the above

question

If the market price is $6.30, the firm will earn

answer

zero economic profits in the short run

1 of 113

question

The __________ the opportunity cost of doing something, the ___________ likely it will be done.

answer

higher, less

question

An arrangement that allows buyers and sellers to exchange things is called

answer

a market

question

The principle that the cost of something is equal to what is sacrificed to get it is known as the

answer

principle of opportunity cost

question

Increasing opportunity cost while moving along a production possibility frontier is due to

answer

the fact that resources are not equally productive in alternative uses

question

To think at the margin means to consider

answer

how a small change in one variable affects another variable

question

The "coincidence of wants" problem associated with barter refers to the fact that

answer

for exchange to occur each transactor must have a product which the other transactor wants

question

Customarily, economists classify resources into these major groups

answer

land, labor, capital, and entrepreneurship

question

When economists assume that people are rational and respond to incentives, they mean

answer

people act in their own self-interest

question

answer

point e

question

From above graph, the opportunity cost of producing an extra jar of jelly in Sandwichia is highest at

answer

point b

question

Which of the following might be considered to be a characteristic of a planned economy?

answer

there is no incentive for people to work hard

question

The opportunity cost of going to college

answer

includes wages you lose by going to school instead of working

question

Does voluntary exchange create wealth (value)?

answer

yes, trade generally permits the trading partners to gain more of what they value; this is why they agree to the terms of the exchange

question

Which of the following will most likely occur under a system of clearly defined and enforced private property rights?

answer

resource owners will gain by discovering and employing their resources in ways that are highly valued by others

question

Economic capital refers to

answer

buildings, machinery, and equipment

question

The 3 key economic questions include all of the following EXCEPT

answer

"where should these products be produced?"

question

The additionalterm-15 cost resulting from a small increase in some activity is called the

answer

marginal cost

question

Because resources are limited

answer

people must make choices

question

If an economy is operating at a point inside the production possibilities curve,

answer

its resources are being wasted

question

A response to a price change would be described as a:

answer

movement along an existing demand curve

question

The general relationship of economic freedom and the share of income of the poorest 10% of a country's citizens is

answer

consistent -- the poorest 1-% receive the same share of income regardless of the level of economic freedom

question

When there is a change in the quantity demanded it means that

answer

the quantity a consumer is willingly to buy changes when the price changes

question

If two countries are producing the same two products it is mutually beneficial if the countries specialize then trade. How is it determined who specializes in the production of which product?

answer

by the lowest opportunity cost of production, comparative advantage

question

Specialization and trade exploit differences in productivity of workers and

answer

make everyone better off

question

A change in quantity supplied of a product is the result of a change in

answer

the price of the product

question

answer

1/5 of a pendant

question

When a market is in equilibrium,

answer

there is no shortage and no surplus at the equilibrium price

question

The Law of Demand can be explained as

answer

the higher the price, the smaller the quantity demanded, ceteris paribus

question

When producers are willing to sell more than consumers are willing to buy,

answer

there is a surplus of the product in the market

question

According to the law of increasing opportunity costs,

answer

the risk involved in producing a good increases as more of the good is produced

question

The money payment made to owners of land, labor, capital, and entrepreneurial ability are

answer

rent, wages, interest, and profits respectively

question

Which of the following was NOT in the top 10 countries in terms of Economic Freedom according to the Heritage Foundation (as shown and discussed in class)

answer

United States

question

In a market system, what provides individuals the information needed to make decisions?

answer

prices

question

In a market economy, what provides potential investors with reliable information about the financial performance of a firm?

answer

accounting rules

question

The law of supply indicates that

answer

producers will offer more of a product at high prices than they will at low prices

question

The general relationship between economic freedom and per capita income is

answer

positive --- higher economic freedom leads to a higher per capita income

question

If the actual price of t-shirts is $7, there is

answer

shortage of 8 t-shirts

question

If the actual price of t-shirts is $10, we would expect that

answer

there will be no change since the market is in equilibrium

question

In the figure above, the increase in demand results in

answer

higher rents and increase in the equilibrium quantity

question

answer

a shortage of 200,000 apartments

question

If the equilibrium price of a good increases and the equilibrium quantity of the good decreases, we can conclude

answer

supply decreased

question

The "law of demand" states that, with other things constant, changes in

answer

the quantity demanded of a good are inversely related to changes in its price

question

The battery packs used in electric cars and hybrid automobiles are one of the largest cost components for manufacturing these cars. As the price of these batteries decline, we expect that the:

answer

supply curve for electric and hybrid autos will increase

question

In order to have an effect, a price ceiling must be set

answer

below the equilibrium price

question

When a market is in equilibrium,

answer

there is no shortage and no surplus at the equilibrium price

question

Which of the following increases the supply curve for gasoline?

answer

a decrease in the price of a resource used to produce gasoline, such as crude oil

question

Which of the following explains why supply curves slope upward?

answer

law of increasing opportunity cost

question

A minimum wage set above the equilibrium wage rate for low-skilled workers

answer

creates unemployment among low-skilled workers

question

Which of the following will NOT cause an increase in the demand curve for beer?

answer

a change in the price of beer

question

The quantity demanded of a good or service is the amount that

answer

consumers plan to buy during a given time period at a given price

question

From 1970 to 2017, the real price of eggs decreased. Which of the following would cause an unambiguous decrease in the real price of eggs?

answer

an increase in the supply for eggs and a decrease in the demand for eggs

question

A legal price ceiling of $0 means

answer

the product is legal to give away but not to sell

question

Which of the following increases the demand for an inferior good?

answer

a decrease in income

question

The above figures show the market for hamburger meat. Which figure shows the effect of a nation-wide strike by butchers and meat-packers?

answer

Figure C

question

answer

plant less seeds as the price of grain will be lower with the food aid

question

Bacon and eggs are complements. If the price of bacon rises, the demand for eggs will

answer

decrease and the demand curve for eggs will shift leftward

question

A supply curve is defined as the relationship between

answer

the price of a good and the quantity that producers are willing to sell

question

A firm experiences diminishing marginal returns becaue

answer

at lease one factor of production is fixed and becomes constraining to production

question

If the demand curve is a vertical line, it means that

answer

regardless of price, the quantity demanded is a constant amount

question

Suppose that the elasticity of demand for a product is 2.0. What will happen to total revenue as a firm decreases the price?

answer

Total revenue will increase

question

Average variable cost is defined as

answer

total variable cost divided by quantity

question

Which of the following is not a benefit from the existence of firms?

answer

principle-agent relationships

question

answer

the demand becomes more elastic and total revenue decreases

question

In the short run, the firm's total cost equals:

answer

fixed costs + variable costs

question

The price elasticity of demand is calculated by

answer

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

question

_____________ are costs that do not require a monetary payment.

answer

implicit costs

question

The primary objective of a firm in a market economy is to

answer

maximize profits

question

Which of the following is an example of something that economists would consider a cost but accountants would not?

answer

the interest income forgone by the firm's owner invested funds into the firm

question

Marginal product in the short run:

answer

may initially increase, then eventually decrease

question

The marginal product of the second worker is

answer

2 units

question

When at least one factor of production is fixed, firms require more and more workers to produce each additional unit of output. This describes:

answer

diminishing marginal returns

question

Which of the following factors would indicate less elastic demand?

answer

there are few substitutes

question

If Juan purchases the same number of gallons of gasoline per week regardless of changes in gasoline price, Juan's demand for gasoline is:

answer

perfectly inelastic

question

If the price elasticity of demand is 2, this means that a __________ increase in price causes a ________ decrease in quantity demanded.

answer

20%, 40%

question

In the short run:

answer

firms are able to alter some, but not all, of their factors of production

question

Curve A is the __________ curve.

answer

marginal cost

question

A price taker is a buyer or a seller who

answer

takes the market price as given

question

You notice that the price of butter falls and then rises. The best explanation for this is that

answer

demand for butter decreased causing price to fall, which induced other firms to exit the market causing supply to decrease, which caused the price to go back up

question

From the above graph, if price is P1 then a competitive industry will

answer

contract

question

For a profit maximizing competitive firm

answer

price always equals marginal cost

question

If a firm in a perfectly competitive market is currently producing the output where price = marginal cost = average total cost, the firm is

answer

earning a normal rate of return

question

Marginal revenue is equal to

answer

the change in total revenue from selling one more unit of a good

question

If the firm is incurring losses in the short run, then which of the following is true at its profit maximizing level of production?

answer

P < ATC

question

If average total cost > average variable cost > price, a profit maximizing firm in a competitive market should

answer

shut down in the short run

question

In a competitive constant cost industry, an increase in price causes

answer

more firms to enter the industry

question

Marginal revenue is equal to price for a competitive firm because

answer

total revenue increases by the price of the good when an additional unit is sold

question

A market where individual firms cannot affect the market price of their good is most likely

answer

a competitive market

question

From the above graph, in a competitive market with a properly run profit maximizing firm, if the market price is $3 its profit is

answer

-$900

question

From the above graph, in a competitive market, which listed prices will generate positive economic profits?

answer

$15

question

answer

economies of scale

question

If a firm suffers an economic loss, its

answer

price is less than its average total cost

question

A firm's marginal cost curve above the minimum of the average variable cost curve is also

answer

the firm's short-run supply curve

question

Which of the following is NOT a characteristic of a monopolistically competitive market?

answer

there are substantial barriers to entry

question

Market power is the power to

answer

control prices

question

A monopolist maximizes profits by setting the quantity where

answer

marginal revenue equal to marginal cost

question

Gasoline stations carrying the same fuel brand are able to charge different prices in San Francisco because

answer

gasoline stations are perfect price discriminators

question

Under the conditions of monopolistic competition

answer

economic profit is zero in the long run

question

You notice that the price of butter, a competitive product, falls and then rises. The best explanation for this is that

answer

demand for butter decreased causing price to fall, which induced other firms to exit the market causing supply to decrease, which caused the price to go back up

question

Price fixing is an arrangement whereby firms agree to

answer

coordinate their pricing decisions

question

Which of the following is NOT a barrier to entry for monopoly?

answer

a large number of existing firms in a market

question

The demand curve that a monopolist faces is

answer

the market demand curve

question

Cartels engage in price fixing in order to

answer

increase profits

question

The word "monopolistic" in the label "monopolistic competition" refers to the fact that:

answer

each firm produces a slightly different version of the product

question

Price discrimination is related to elasticity because

answer

the firm can increase revenues by charging customers with elastic demands, lower prices, and charging customers with inelastic demands higher prices

question

The more product differentiation in the market, the _______ the firm specific demand curve. The less product differentiation in the market, the ________ the firm specific demand curve.

answer

steeper, flatter

question

Oligopoly differs from monopoly and perfect competition in that

answer

all of the above

question

In order to practice price discrimination a firm must

answer

be able to divide consumers into groups with different demands for their product

question

Given that a monopolist is acting in a profit maximizing manner, the above illustrates a monopolist:

answer

suffer a loss

question

The deadweight loss associated with the monopoly would be represented by the area

answer

ade

question

The merits of a patent system is

answer

all of the above

question

When firms cooperate with each other rather than compete

answer

the firms will end up better off

question

At low levels of production, the firm

answer

all of the above

question

If the market price is $6.30, the firm will earn

answer

zero economic profits in the short run

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