Econ 204 Exam - Assignment Essays

question

Consumer's surplus equals the total value that the consumer places on his purchases minus the amount he actually paid

answer

true

question

although a sales tax hurts both producers and consumers, their losses are fully offset by the benefits created by the tax revenues

answer

false

question

the price of a good accurately reflects the total value it creates for society

answer

false

question

a $5 per unit sales tax is bad for consumers because it implies that the total amount (price plus tax) that they must pay increases by $5

answer

false

question

the marginal value that a consumer places on the last unit can be read off the

answer

demand curve

question

the area beneath a consumer's demand curve out to the quantity purchased represents

answer

the total value of the consumer's purchases

question

a competitive firm faces a downward-sloping demand for its product

answer

false

question

for a competitive firm, marginal revenue is constant and equal to the market price

answer

true

question

a firm earns a positive economic profit when the market price exceeds its marginal cost

answer

false

question

as long as profits remain positive, a firm will want to increase the quantity produced

answer

false

question

only variable costs are relevant to a firm's decision to shut down

answer

true

question

when a firm has chosen to shutdown it has exited the industry

answer

false

question

when a competitive firm earns zero profit, the market price is equal to both the firm's average and marginal costs

answer

true

question

a technological advance that reduces the firms' variable costs will lead to higher profits in the long run of a perfectly competitive industry

answer

false

question

a firm that is not likely to be competative

answer

aviator alan's nonstop airline service from seattle to nome

question

the demand curve faced by a competitive firm is

answer

perfectly elastic at the established market price

question

any firm, competitive or not, desiring to maximize profits, will choose its quantity according to the rule, produce that quantity at which

answer

marginal revenue=marginal cost

question

the firm is producing a quantity along the upward sloping portion of its marginal cost curve at which marginal cost exceeds price and is earning positive economic profits, it should

answer

decrease the quantity produced because doing so will increase profit

question

a competitive firm will shut down its operations in the short run when the market prices falls below its

answer

average variable cost

question

a competitive firms long-run supply curve is

answer

more elastic than its short-run supply curve

question

a competitive firm will exit an industry in the long run when the market price falls below its

answer

average cost

question

when do new firms tend to enter a competitive industry

answer

when the new entrants can earn positive profits

question

when will an industry's long-run supply curve be horizontal at a firm's break-even price

answer

when firms are identical and there is no factor-price effect

question

the expansion of capital that can occur in the long-run but not, by definition, in the short-run, means that long-run supply is

answer

more elastic than the short-run supply curve

question

in the short-run a competitive firm will

answer

produce a quantity where mc=mr

question

short-run and long-run average cost curves are both U-shaped because the firm must eventually encounter diminishing marginal returns to labor

answer

false

question

the production function describes how much output a firm can generate for various cost levels

answer

false

question

the marginal cost curve crosses both the average cost and variable cost curves at the minima

answer

true

question

if the wage and rental rates are $10 and $50 per hour respectively and an additional worker could produce 100 units of output in an hour, then an extra unit of capital could produce 500 units of output in an hour

answer

true

question

moving down and to the right on an isoquant tells us how much quantity increases as inputs increase

answer

false

question

if a firm can adjust its employment of all inputs, then it is

answer

in the long run

question

the marginal product of labor is defined to be

answer

the additional output attributable to the last unit of labor employed

question

the shapes of the total product and marginal product curves are related because

answer

marginal product gives the slope of total product

question

which of the following is most likely to be a variable cost in the short run

answer

FIXXXX

question

suppose that good X is on the horizontal axis and all other goods (measured in dollars) are on the vertical axis in the consumer-choice diagram.

answer

...

question

if the cross price elasticity of demand is negative, then the two goods under consideration must be compliments

answer

true

question

if an engel curve is downward sloping, then one of the two goods must be inferior

answer

true

question

suppose that good x is on the horizontal axis and all other goods (measured in dollars) are on the vertical axis in the consumer-choice diagram. if the consumer gains $10 in income, then

answer

the budget line shifts up by $10

question

the set of income-quantity pairs showing the amount of a good the consumer buys at various levels on income is called

answer

an engel curve

question

which of the following is not held constant when we use indifference-curve analysis to derive the engel curve for good x

answer

the consumer's income

question

an inferior good is one for which

answer

increases in income result in lower quantities demanded

question

suppose the price of a good rises. when will the resulting substitution effect reduce the quantity demanded of the good

answer

always

question

suppose the price of a good rises. when will the resulting income effect reduce the quantity demanded of the good

answer

only when the good is normal

question

if the relative price of a gallon of water in terms of milk increases from 1 gallon to 1.5 gallons of milk, then the relative price of milk has fallen

answer

true

question

by definition, someone who has a comparative advantage in producing soft drinks must also have an absolute advantage in producing soft drinks

answer

false

question

the difference between an absolute price and a relative price is that:

answer

absolute prices are in terms of currency, relative prices are in terms of another good

question

suppose there are only two goods: bread and wine. in mexico, the absolute prie of wine is 30 pesos per bottle. if the relative price of wine in terms of bread is 5 loaves per bottle, then the absolute price of bread is

answer

6 pesos per loaf

question

suppose there are only two goods: guns and roses. if the relative price of guns falls, then the relative price of roses

answer

must rise

question

an increase in the price of gasoline would shift the demand curve for gasoline to the left

answer

false

question

the supply curve for a commodity will shift to the right when the costs of production rise

answer

false

question

the equilibrium price of a good will rise in response to either a rise in demand or a fall in supply

answer

true

question

when the price of a barrel of crude oil rises, what will be the immediate effect on the market for home heating fuel produced from crude oil

answer

the supply of fuel will fall

question

which of the following would cause the demand curve for rice to shift to the left

answer

a report claiming that the starch in rice causes heart disease

question

a fear that consumption of ice cream may be related to a life threatening disease spreads rapidly through france. the market result will be

answer

the demand falls, price decreases and the quantity supplied therefore falls

question

new safety regulations increase manufacturers' costs of producing insulation. what happens in the market for insulation

answer

the supply falls, resulting in higher equilibrium price and lower equilibrium quantity

question

which of the following could decrease the equilibrium price but increase the equilibrium quantity of apples

answer

many new apple orchards are planted

1 of 56

question

Consumer's surplus equals the total value that the consumer places on his purchases minus the amount he actually paid

answer

true

question

although a sales tax hurts both producers and consumers, their losses are fully offset by the benefits created by the tax revenues

answer

false

question

the price of a good accurately reflects the total value it creates for society

answer

false

question

a $5 per unit sales tax is bad for consumers because it implies that the total amount (price plus tax) that they must pay increases by $5

answer

false

question

the marginal value that a consumer places on the last unit can be read off the

answer

demand curve

question

the area beneath a consumer's demand curve out to the quantity purchased represents

answer

the total value of the consumer's purchases

question

a competitive firm faces a downward-sloping demand for its product

answer

false

question

for a competitive firm, marginal revenue is constant and equal to the market price

answer

true

question

a firm earns a positive economic profit when the market price exceeds its marginal cost

answer

false

question

as long as profits remain positive, a firm will want to increase the quantity produced

answer

false

question

only variable costs are relevant to a firm's decision to shut down

answer

true

question

when a firm has chosen to shutdown it has exited the industry

answer

false

question

when a competitive firm earns zero profit, the market price is equal to both the firm's average and marginal costs

answer

true

question

a technological advance that reduces the firms' variable costs will lead to higher profits in the long run of a perfectly competitive industry

answer

false

question

a firm that is not likely to be competative

answer

aviator alan's nonstop airline service from seattle to nome

question

the demand curve faced by a competitive firm is

answer

perfectly elastic at the established market price

question

any firm, competitive or not, desiring to maximize profits, will choose its quantity according to the rule, produce that quantity at which

answer

marginal revenue=marginal cost

question

the firm is producing a quantity along the upward sloping portion of its marginal cost curve at which marginal cost exceeds price and is earning positive economic profits, it should

answer

decrease the quantity produced because doing so will increase profit

question

a competitive firm will shut down its operations in the short run when the market prices falls below its

answer

average variable cost

question

a competitive firms long-run supply curve is

answer

more elastic than its short-run supply curve

question

a competitive firm will exit an industry in the long run when the market price falls below its

answer

average cost

question

when do new firms tend to enter a competitive industry

answer

when the new entrants can earn positive profits

question

when will an industry's long-run supply curve be horizontal at a firm's break-even price

answer

when firms are identical and there is no factor-price effect

question

the expansion of capital that can occur in the long-run but not, by definition, in the short-run, means that long-run supply is

answer

more elastic than the short-run supply curve

question

in the short-run a competitive firm will

answer

produce a quantity where mc=mr

question

short-run and long-run average cost curves are both U-shaped because the firm must eventually encounter diminishing marginal returns to labor

answer

false

question

the production function describes how much output a firm can generate for various cost levels

answer

false

question

the marginal cost curve crosses both the average cost and variable cost curves at the minima

answer

true

question

answer

true

question

moving down and to the right on an isoquant tells us how much quantity increases as inputs increase

answer

false

question

if a firm can adjust its employment of all inputs, then it is

answer

in the long run

question

the marginal product of labor is defined to be

answer

the additional output attributable to the last unit of labor employed

question

the shapes of the total product and marginal product curves are related because

answer

marginal product gives the slope of total product

question

which of the following is most likely to be a variable cost in the short run

answer

FIXXXX

question

suppose that good X is on the horizontal axis and all other goods (measured in dollars) are on the vertical axis in the consumer-choice diagram.

answer

...

question

if the cross price elasticity of demand is negative, then the two goods under consideration must be compliments

answer

true

question

if an engel curve is downward sloping, then one of the two goods must be inferior

answer

true

question

suppose that good x is on the horizontal axis and all other goods (measured in dollars) are on the vertical axis in the consumer-choice diagram. if the consumer gains $10 in income, then

answer

the budget line shifts up by $10

question

the set of income-quantity pairs showing the amount of a good the consumer buys at various levels on income is called

answer

an engel curve

question

which of the following is not held constant when we use indifference-curve analysis to derive the engel curve for good x

answer

the consumer's income

question

an inferior good is one for which

answer

increases in income result in lower quantities demanded

question

suppose the price of a good rises. when will the resulting substitution effect reduce the quantity demanded of the good

answer

always

question

suppose the price of a good rises. when will the resulting income effect reduce the quantity demanded of the good

answer

only when the good is normal

question

if the relative price of a gallon of water in terms of milk increases from 1 gallon to 1.5 gallons of milk, then the relative price of milk has fallen

answer

true

question

by definition, someone who has a comparative advantage in producing soft drinks must also have an absolute advantage in producing soft drinks

answer

false

question

the difference between an absolute price and a relative price is that:

answer

absolute prices are in terms of currency, relative prices are in terms of another good

question

answer

6 pesos per loaf

question

suppose there are only two goods: guns and roses. if the relative price of guns falls, then the relative price of roses

answer

must rise

question

an increase in the price of gasoline would shift the demand curve for gasoline to the left

answer

false

question

the supply curve for a commodity will shift to the right when the costs of production rise

answer

false

question

the equilibrium price of a good will rise in response to either a rise in demand or a fall in supply

answer

true

question

when the price of a barrel of crude oil rises, what will be the immediate effect on the market for home heating fuel produced from crude oil

answer

the supply of fuel will fall

question

which of the following would cause the demand curve for rice to shift to the left

answer

a report claiming that the starch in rice causes heart disease

question

a fear that consumption of ice cream may be related to a life threatening disease spreads rapidly through france. the market result will be

answer

the demand falls, price decreases and the quantity supplied therefore falls

question

new safety regulations increase manufacturers' costs of producing insulation. what happens in the market for insulation

answer

the supply falls, resulting in higher equilibrium price and lower equilibrium quantity

question

which of the following could decrease the equilibrium price but increase the equilibrium quantity of apples

answer

many new apple orchards are planted

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