ECON 202- OSEI- FINAL - Assignment Essays

question

Knowledge that is patented is a

answer

club good, whereas knowledge that is not patented is a public good.

question

The Tragedy of the Commons occurs because

answer

common resources are rival in consumption.

question

A view of a spectacular sunset along a private beach is an example of a

answer

nonrival but excludable good.

question

Residents of Hong Kong are able to find restaurants that advertise a dish that contains grizzly bear paws. Since it is unlikely that grizzly bear paws are purchased from a private producer of animal paws, we can likely conclude that

answer

allowing individuals to own and raise grizzly bears for meat would likely reduce the threat of extinction to grizzly bear populations.

question

Which of the following goods is rival in consumption and excludable?

answer

a DVD

question

The Tragedy of the Commons results when a good is

answer

rival in consumption and not excludable

question

Which of the following statements is true of the tax on gasoline?

answer

It discourages driving on noncongested roads, even though there is no congestion externality for these roads.

question

It is commonly argued that national defense is a public good. Nevertheless, the weapons used by the U.S. military are produced by private firms. We can conclude that

answer

weapons are rival in consumption and excludable, but national defense is not rival in consumption and not excludable.

question

Which of the following statements about private goods and public goods is correct?

answer

Private goods are rival in consumption and public goods are not excludable

question

People cannot be prevented from using a good if the good is

answer

a public good or a common resource

question

At the local park there is a playground that anyone may use. There is rarely anyone using the playground, so children who use the playground receive full enjoyment from its use. The playground is

answer

not rival in consumption nor is it excludable

question

The free-rider problem

answer

explains why many local governments supply public goods.

question

Why is the commercial value of ivory a threat to the elephant, while the commercial value of beef is the cow's guardian?

answer

Elephants are a common resource.

question

Private companies will invest in medical research if

answer

they will produce a specific product for which they may receive a patent.

question

Which of the following is an example of general knowledge, as opposed to specific knowledge that can be patented?

answer

a mathematical theorem

question

Neither public goods nor common resources are

answer

excludable, but only public goods are not rival in consumption.

question

Which of the following is not a common resource?

answer

national defense

question

A local park filled with picnickers is

answer

not excludable and rival in consumption

question

When something of value has no price attached to it,

answer

externalities will be present.

question

A traffic light at an intersection is

answer

not rival and not excludable in consumption

question

Which of the following is an example of an implicit cost?

answer

foregone rent on office space owned and used by the firm

question

Economists normally assume that the goal of a firm is to

answer

maximize profit.

question

As a firm moves along its long-run average cost curve, it is adjusting the size of its factory to the quantity of production

answer

true

question

In the long run the local coffee shop incurs total costs of $625 when output is 1,250 cups of coffee and $750 when output is 1,500 cups of coffee. For this range of output, the coffee shop exhibits

answer

constant returns to scale (when long-run average total cost does not vary with level of output)

question

For a firm, the relationship between the quantity of inputs and quantity of output is called the

answer

production function

question

In the long run a company that produces and sells laundry detergent incurs total costs of $2,500 when output is 1,250 units and $2,750 when output is 1,500 units. For this range of output, the laundry detergent company exhibits

answer

economies of scale (when the long-run average total cost declines as output increases)

question

The marginal cost curve crosses the average total cost curve at

answer

-the efficient scale
-the minimum point on the average total cost curve.
-a point where the marginal cost curve is rising

question

If marginal cost is greater than average total cost, then

answer

average total cost is increasing

question

If a firm uses labor to produce output, the firm's production function depicts the relationship between

answer

the number of workers and the quantity of output

question

Stick Storage manufactures and sells computer flash drives. Last year it sold 2 million flash drives at a price of $10 each. For last year, the firm's

answer

total revenue was $20 million

question

Larry's Lunchcart is a small street vendor business. If Larry makes 15 pretzels in his first hour of business and incurs a total cost of $16.50, his average total cost per pretzel is

answer

$1.10

question

Bubba is a shrimp fisherman who could earn $5,000 as a fishing tour guide. Instead, he is a full-time shrimp fisherman. In calculating the economic profit of his shrimp business, the $5,000 that Bubba gave up is counted as part of the shrimp business's

answer

implicit costs

question

The U-shaped average-total-cost curve reflects the U-shaped average-fixed-cost curve.

answer

false

question

Accounting profit is greater than or equal to economic profit.

answer

true

question

When a firm experiences diseconomies of scale,

answer

long-run average total cost increases as output increases

question

For a construction company that builds houses, which of the following costs would be a fixed cost?

answer

-the $50,000 per year salary paid to a construction foreman
-the $30,000 per year salary paid to the company's bookkeeper
-the $10,000 per year premium paid to an insurance company

question

A difference between explicit and implicit costs is that

answer

implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.

question

Fixed costs are those costs that remain fixed no matter how long the time horizon is.

answer

false

question

A production function is a relationship between inputs and

answer

quantity of output

question

Which of the following explains why long-run average cost at first decreases as output increases?

answer

gains from specialization of inputs

question

Which of the following expressions is correct?

answer

accounting profit = total revenue - explicit costs

question

The marginal-cost curve intersects the average-fixed-cost curve at the minimum of marginal cost

answer

false

question

The shape of the total-cost curve is inversely related to the shape of the production function

answer

true

question

The things that must be forgone to acquire a good are called

answer

opportunity costs

question

Chloe's Café sells gourmet cinnamon rolls. In the long run, the café incurs a total cost of $500 to produce 1,000 cinnamon rolls. If Chloe's Café exhibits constant returns to scale between 1,000 and 1,500 cinnamon rolls, the long-run average total cost for 1,250 cinnamon rolls is

answer

equal to $0.50

question

In a competitive market,

answer

no single buyer or seller can influence the price of the product.

question

In a competitive market, no single producer can influence the market price because

answer

many other sellers are offering a product that is essentially identical

question

The assumption of a fixed number of firms is appropriate for analysis of

answer

the short run but not the long run.

question

A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as

answer

marginal cost is greater than average total cost

question

In a perfectly competitive market, the horizontal sum of all the individual firms' supply curves is

answer

the market supply curve.

question

Land of Many Lakes (LML) sells butter to a broker in Albert Lea, Minnesota. Because the market for butter is generally considered to be competitive, LML

answer

can choose quantity of butter that it produces but not the price at which it sells its butter.

question

Which of the following characteristics of competitive markets is necessary for firms to be price takers?

answer

-There are many sellers.

-Firms can freely enter or exit the market.

question

Who is a price taker in a competitive market?

answer

both buyers and sellers

question

Suppose that a firm operating in perfectly competitive market sells 100 units of output. Its total revenues from the sale are $500. Which of the following statements is correct?

answer

-Marginal revenue equals $5.
-Average revenue equals $5.
-Price equals $5.

question

If all existing firms and all potential firms have the same cost curves, there are no inputs in limited quantities, and the market is characterized by free entry and exit, then the long-run market supply curve

answer

is horizontal and equal to the minimum of long-run average cost for each firm

question

In a long-run equilibrium, the marginal firm has

answer

total revenue equal to total cost.

question

A firm has market power if it can

answer

influence the market price of the good it sells.

question

Which of the following statements is correct?

answer

Only for competitive firms does average revenue equal marginal revenue.

question

In a competitive market, the actions of any single buyer or seller will

answer

have a negligible impact on the market price.

question

In a long-run equilibrium, the marginal firm has

answer

-price equal to average total cost
-total revenue equal to total cost.
-economic profit equal to zero.

question

If a profit-maximizing firm in a competitive market discovers that, at its current level of production, price is greater than marginal cost, it should

answer

increase its output

question

Which of the following statements is not correct?

answer

To maximize profit, firms should produce at a level of output where price equals average variable cost

question

Roger owns a small health store that sells vitamins in a perfectly competitive market. If vitamins sell for $12 per bottle and the average total cost per bottle is $12.50 at the profit-maximizing output level, then in the long run

answer

some firms will exit from the market

question

Which of the following statements regarding a competitive market is not correct?

answer

Because of firm location or product differences, some firms can charge a higher price than other firms and still maintain their sales volume

question

Consider a firm that operates in a perfectly competitive market. Currently the firm is producing 300 units of output and the price is $20. If marginal cost at 300 units is $22, the firm

answer

could increase profits by reducing output from 300 units

question

Suppose a profit-maximizing firm in a competitive market produces rubber bands. When the market price for rubber bands falls below the minimum of its average total cost, but still lies above the minimum of average variable cost, in the short run the firm will

answer

experience losses but will continue to produce rubber bands.

question

The analysis of competitive firms sheds light on the decisions that lie behind the

answer

supply curve

question

A firm will shut down in the short run if the total revenue that it would get from producing and selling its output is less than its

answer

variable costs

question

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

answer

decreasing output would increase the firm's profit

question

Which of the following is not a characteristic of a perfectly competitive market?

answer

Firms have difficulty entering the market.

question

If all firms have the same costs of production, then in long-run equilibrium

answer

all firms have zero economic profits and just cover their opportunity costs.

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

Firms that operate in perfectly competitive markets try to

answer

maximize profits

question

Drug companies are allowed to be monopolists in the drugs they discover in order to

answer

-increase the availability of expensive but useful medications.
-increase the overall welfare of society through better health because drug companies continually produce better medications
-encourage research.

question

Consider a local, privately-owned electrical cooperative named Poweshiek Power Company (PPCo). PPCo has just completed a clean-coal-burning electrical power plant in Iowa. Currently, PPCo can meet the electricity needs of all residents in the county. In fact, its capacity far exceeds the needs of the county. After just a few years of operation, the shareholders of PPCo experienced incredibly high rates of return on their investment due to the profitability of the corporation.

answer

-New entrants to the market know they will have a smaller market share than PPCo currently has.
-PPCo is a natural monopoly.

question

Which of the following strategies is not an effective strategy to reduce monopoly inefficiency

answer

breaking up a natural monopoly into more than one firm

question

How does a competitive market compare to a monopoly that engages in perfect price discrimination?

answer

In both cases, total social welfare is the same

question

A patent gives the inventor monopoly control over the patented good. Patents also

answer

create incentives to develop new products

question

Patents, copyrights, and trademarks

answer

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

question

A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. The firm's profit-maximizing price is

answer

$60

question

Which of the following is not an example of price discrimination?

answer

An ice cream parlor charges a higher price for ice cream than for sherbet.

question

Suppose marginal cost is constant at $8 per unit. The monopolist's marginal revenue is

answer

always less than the price of its good, beyond the first unit.

question

One method used to control the ability of firms to capture monopoly profit in the United States is through

answer

enforcement of antitrust laws.

question

Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly

answer

is often not in the best interest of society

question

A monopolist's profits with price discrimination will be

answer

higher than if the firm charged just one price because the firm will capture more consumer surplus.

question

Which of the following statements is not correct?

answer

Antitrust laws automatically prevent mergers between companies that produce similar products

question

Price discrimination is the business practice of

answer

selling the same good at different prices to different customers.

question

In order to sell more of its product, a monopolist must

answer

lower its price

question

Which of the following is an example of public ownership of a monopoly?

answer

U.S. Postal Service

question

A monopolist maximizes profits by

answer

producing an output level where marginal revenue equals marginal cost.

question

Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealized, mutually beneficial trades are

answer

a deadweight loss to society

1 of 91

question

Knowledge that is patented is a

answer

club good, whereas knowledge that is not patented is a public good.

question

The Tragedy of the Commons occurs because

answer

common resources are rival in consumption.

question

A view of a spectacular sunset along a private beach is an example of a

answer

nonrival but excludable good.

question

answer

allowing individuals to own and raise grizzly bears for meat would likely reduce the threat of extinction to grizzly bear populations.

question

Which of the following goods is rival in consumption and excludable?

answer

a DVD

question

The Tragedy of the Commons results when a good is

answer

rival in consumption and not excludable

question

Which of the following statements is true of the tax on gasoline?

answer

It discourages driving on noncongested roads, even though there is no congestion externality for these roads.

question

It is commonly argued that national defense is a public good. Nevertheless, the weapons used by the U.S. military are produced by private firms. We can conclude that

answer

weapons are rival in consumption and excludable, but national defense is not rival in consumption and not excludable.

question

Which of the following statements about private goods and public goods is correct?

answer

Private goods are rival in consumption and public goods are not excludable

question

People cannot be prevented from using a good if the good is

answer

a public good or a common resource

question

At the local park there is a playground that anyone may use. There is rarely anyone using the playground, so children who use the playground receive full enjoyment from its use. The playground is

answer

not rival in consumption nor is it excludable

question

The free-rider problem

answer

explains why many local governments supply public goods.

question

Why is the commercial value of ivory a threat to the elephant, while the commercial value of beef is the cow's guardian?

answer

Elephants are a common resource.

question

Private companies will invest in medical research if

answer

they will produce a specific product for which they may receive a patent.

question

Which of the following is an example of general knowledge, as opposed to specific knowledge that can be patented?

answer

a mathematical theorem

question

Neither public goods nor common resources are

answer

excludable, but only public goods are not rival in consumption.

question

Which of the following is not a common resource?

answer

national defense

question

A local park filled with picnickers is

answer

not excludable and rival in consumption

question

When something of value has no price attached to it,

answer

externalities will be present.

question

A traffic light at an intersection is

answer

not rival and not excludable in consumption

question

Which of the following is an example of an implicit cost?

answer

foregone rent on office space owned and used by the firm

question

Economists normally assume that the goal of a firm is to

answer

maximize profit.

question

As a firm moves along its long-run average cost curve, it is adjusting the size of its factory to the quantity of production

answer

true

question

In the long run the local coffee shop incurs total costs of $625 when output is 1,250 cups of coffee and $750 when output is 1,500 cups of coffee. For this range of output, the coffee shop exhibits

answer

constant returns to scale (when long-run average total cost does not vary with level of output)

question

For a firm, the relationship between the quantity of inputs and quantity of output is called the

answer

production function

question

answer

economies of scale (when the long-run average total cost declines as output increases)

question

The marginal cost curve crosses the average total cost curve at

answer

-the efficient scale
-the minimum point on the average total cost curve.
-a point where the marginal cost curve is rising

question

If marginal cost is greater than average total cost, then

answer

average total cost is increasing

question

If a firm uses labor to produce output, the firm's production function depicts the relationship between

answer

the number of workers and the quantity of output

question

Stick Storage manufactures and sells computer flash drives. Last year it sold 2 million flash drives at a price of $10 each. For last year, the firm's

answer

total revenue was $20 million

question

Larry's Lunchcart is a small street vendor business. If Larry makes 15 pretzels in his first hour of business and incurs a total cost of $16.50, his average total cost per pretzel is

answer

$1.10

question

answer

implicit costs

question

The U-shaped average-total-cost curve reflects the U-shaped average-fixed-cost curve.

answer

false

question

Accounting profit is greater than or equal to economic profit.

answer

true

question

When a firm experiences diseconomies of scale,

answer

long-run average total cost increases as output increases

question

For a construction company that builds houses, which of the following costs would be a fixed cost?

answer

-the $50,000 per year salary paid to a construction foreman
-the $30,000 per year salary paid to the company's bookkeeper
-the $10,000 per year premium paid to an insurance company

question

A difference between explicit and implicit costs is that

answer

implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.

question

Fixed costs are those costs that remain fixed no matter how long the time horizon is.

answer

false

question

A production function is a relationship between inputs and

answer

quantity of output

question

Which of the following explains why long-run average cost at first decreases as output increases?

answer

gains from specialization of inputs

question

Which of the following expressions is correct?

answer

accounting profit = total revenue - explicit costs

question

The marginal-cost curve intersects the average-fixed-cost curve at the minimum of marginal cost

answer

false

question

The shape of the total-cost curve is inversely related to the shape of the production function

answer

true

question

The things that must be forgone to acquire a good are called

answer

opportunity costs

question

answer

equal to $0.50

question

In a competitive market,

answer

no single buyer or seller can influence the price of the product.

question

In a competitive market, no single producer can influence the market price because

answer

many other sellers are offering a product that is essentially identical

question

The assumption of a fixed number of firms is appropriate for analysis of

answer

the short run but not the long run.

question

A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as

answer

marginal cost is greater than average total cost

question

In a perfectly competitive market, the horizontal sum of all the individual firms' supply curves is

answer

the market supply curve.

question

Land of Many Lakes (LML) sells butter to a broker in Albert Lea, Minnesota. Because the market for butter is generally considered to be competitive, LML

answer

can choose quantity of butter that it produces but not the price at which it sells its butter.

question

Which of the following characteristics of competitive markets is necessary for firms to be price takers?

answer

-There are many sellers.

-Firms can freely enter or exit the market.

question

Who is a price taker in a competitive market?

answer

both buyers and sellers

question

Suppose that a firm operating in perfectly competitive market sells 100 units of output. Its total revenues from the sale are $500. Which of the following statements is correct?

answer

-Marginal revenue equals $5.
-Average revenue equals $5.
-Price equals $5.

question

answer

is horizontal and equal to the minimum of long-run average cost for each firm

question

In a long-run equilibrium, the marginal firm has

answer

total revenue equal to total cost.

question

A firm has market power if it can

answer

influence the market price of the good it sells.

question

Which of the following statements is correct?

answer

Only for competitive firms does average revenue equal marginal revenue.

question

In a competitive market, the actions of any single buyer or seller will

answer

have a negligible impact on the market price.

question

In a long-run equilibrium, the marginal firm has

answer

-price equal to average total cost
-total revenue equal to total cost.
-economic profit equal to zero.

question

If a profit-maximizing firm in a competitive market discovers that, at its current level of production, price is greater than marginal cost, it should

answer

increase its output

question

Which of the following statements is not correct?

answer

To maximize profit, firms should produce at a level of output where price equals average variable cost

question

answer

some firms will exit from the market

question

Which of the following statements regarding a competitive market is not correct?

answer

Because of firm location or product differences, some firms can charge a higher price than other firms and still maintain their sales volume

question

Consider a firm that operates in a perfectly competitive market. Currently the firm is producing 300 units of output and the price is $20. If marginal cost at 300 units is $22, the firm

answer

could increase profits by reducing output from 300 units

question

answer

experience losses but will continue to produce rubber bands.

question

The analysis of competitive firms sheds light on the decisions that lie behind the

answer

supply curve

question

A firm will shut down in the short run if the total revenue that it would get from producing and selling its output is less than its

answer

variable costs

question

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

answer

decreasing output would increase the firm's profit

question

Which of the following is not a characteristic of a perfectly competitive market?

answer

Firms have difficulty entering the market.

question

If all firms have the same costs of production, then in long-run equilibrium

answer

all firms have zero economic profits and just cover their opportunity costs.

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

Firms that operate in perfectly competitive markets try to

answer

maximize profits

question

Drug companies are allowed to be monopolists in the drugs they discover in order to

answer

question

answer

-New entrants to the market know they will have a smaller market share than PPCo currently has.
-PPCo is a natural monopoly.

question

Which of the following strategies is not an effective strategy to reduce monopoly inefficiency

answer

breaking up a natural monopoly into more than one firm

question

How does a competitive market compare to a monopoly that engages in perfect price discrimination?

answer

In both cases, total social welfare is the same

question

A patent gives the inventor monopoly control over the patented good. Patents also

answer

create incentives to develop new products

question

Patents, copyrights, and trademarks

answer

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

question

answer

$60

question

Which of the following is not an example of price discrimination?

answer

An ice cream parlor charges a higher price for ice cream than for sherbet.

question

Suppose marginal cost is constant at $8 per unit. The monopolist's marginal revenue is

answer

always less than the price of its good, beyond the first unit.

question

One method used to control the ability of firms to capture monopoly profit in the United States is through

answer

enforcement of antitrust laws.

question

Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly

answer

is often not in the best interest of society

question

A monopolist's profits with price discrimination will be

answer

higher than if the firm charged just one price because the firm will capture more consumer surplus.

question

Which of the following statements is not correct?

answer

Antitrust laws automatically prevent mergers between companies that produce similar products

question

Price discrimination is the business practice of

answer

selling the same good at different prices to different customers.

question

In order to sell more of its product, a monopolist must

answer

lower its price

question

Which of the following is an example of public ownership of a monopoly?

answer

U.S. Postal Service

question

A monopolist maximizes profits by

answer

producing an output level where marginal revenue equals marginal cost.

question

Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealized, mutually beneficial trades are

answer

a deadweight loss to society

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