Espey Econ 3140 Final - Assignment Essays

question

Utility is a measure of

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satisfaction

question

Which of the following statements is true about utility?

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inputs into a utility function may include socks, haircuts, and asparagus

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an inferior good

answer

has a negative income elasticity of demand

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an indifference curve is

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a collection of market baskets that are equally desirable to the consumer

question

an underlying assumption in development of indifference curves is that consumers

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can rank alternative consumption bundles

question

a consumer's budget constraint shows

answer

how consumers must trade off two goods given prices and income

question

all points on or below a budget constraint

answer

are attainable with the given income

question

the additional utility obtained from consuming an extra unit of a good is called

answer

marginal utility

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Frank buys less hamburger meat as his income increases. This implies that, for Frank, hamburger meat is......

answer

an inferior good

question

for the typical person left and right shoes are

answer

perfect complements

question

the marginal rate of substitution is

answer

the rate at which consumers substitute one good for another while maintaining the same level of utility

question

a normal good can be defined as one which consumers purchase more of as

answer

income rises

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if consumption of good B decreases as the price of good A falls

answer

goods A and B must be substitutes

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the income effect of a price change

answer

may be positive or negative

question

which explains the substitution effect of a price change

answer

consumers will consume less of a good whose relative price has risen and more of the good whose relative price has fallen

question

a basic assumption of the long run is that a firm

answer

can adjust the amount of both labor and capital

question

the total output of a firm divided by the total amount of variable input used is defined as

answer

average product of the input

question

input combinations outside a given isocost line are

answer

more expensive than those on the line

question

if marginal product of a variable input is less than the average product of the inputs

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average product is decreasing

question

a firm's production function shows the relationship between

answer

inputs and output

question

which situation will likely give rise to diminishing marginal product of labor

answer

Betty's Grits, which has enough cooking space for three cooks per shift, decides to hire a fourth cook per shift

question

which of the following is NOT true about isoquants

answer

diminishing marginal product implies that isoquants are negatively shaped

question

suppose a community health center finds that it is able to replace one family practice physician with two nurse practitioners without affecting the quantity or quality of patient office visits, regardless of the initial overall level of employment of health care providers. This implies that

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physicians and nurse practitioners are perfect substitutes in production

question

the slope of isocost lines are the same for the entire isocost line because

answer

firms can hire more or less of each input without changing wages or rental rates

question

if labor is graphed on the x-axis and capital on the y-axis, the isocost line will rotate outward on the x-axis (with the same y-intercept) if

answer

wages decrease

question

an isoquant shows combinations of inputs that

answer

enable a producer to produce the same level of output

question

a basic assumption of the isocost/isoquant model is that the firm

answer

can buy as much labor and capital as it desires at fixed prices

question

increasing returns to scale implies

answer

as use of all inputs increases by a certain amount, output expands proportionately more

question

the idea of cost minimization refers to

answer

the goal of firms once the quantity of output is chosen

question

a firm's expansion path shows how

answer

its input choices change with output

question

economic profit is equal to

answer

total revenue minus total cost, including opportunity cost, of producing goods and services

question

fixed costs

answer

are the difference between a firm's total cost and its total variable cost

question

a variable cost is a cost that

answer

changes in relation to the level of the firm's output

question

a parallel shift down of the total cost curve (indicating lower TC for each level of output with a lower y-intercept) could be caused by

answer

a decrease in the firm's fixed costs of production

question

a perfectly competitive firm's marginal cost is

answer

the change in total cost as output changes

question

a firm should ___________ output wherever MR>MC because

answer

increase; revenues will rise by more than costs thus increase the firm's profit

question

fertilizer is a key input in the production of corn. If the price of fertilizer rises, corn producers will experience a(n) __________ shift of their marginal cost curve and a(n)____________ shift of their average variable cost

answer

upward;upward

question

the demand faced by a perfectly competitive firm is

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perfectly elastic at market price

question

a perfectly competitive industry is

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one in which consumers cannot distinguish one firm's product from another's

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in a short run equilibrium

answer

the number of firms is fixed

question

what happens to the long-run equilibrium price in a perfectly competitive industry when there is an increase in product demand?

answer

LR price will rise to reflect higher long run ATC if it is an increasing cost industry

question

the perfectly competitive firm's short run supply curve is the portion of its

answer

marginal cost curve that lies above average variable cost

question

the shutdown point is

answer

where price equals minimum average variable cost

question

suppose the market for lettuce is in long run equilibrium. In the short run, what will happen if there is an E. coli outbreak that causes a decrease in the demand for lettuce

answer

market price of lettuce will fall and each firm will sell less lettuce

question

diseconomies of scale occurs when ATC _________ as output __________

answer

rises;rises

question

Other things equal, the demand for a good tends to be more elastic when:

A. a shorter period of time is considered
B. The overall market demand is smaller
C. There are more available substitutes
D. Good is in large supply

answer

C. There are more available substitutes

question

The more elastic the demand for a good is, the______ is the deadweight loss of a tax and the ______ is the revenue collected by the government:

A. Larger, Larger
B. Larger, Smaller
C. Smaller, Larger
D. Smaller, Smaller

answer

B. Larger, Smaller

question

A decrease in demand will _____ consumer surplus and ______ producer surplus:

A. increase, increase
B. increase, decrease
C. decrease, increase
D. decrease, decrease

answer

D. Decrease, decrease

question

Justin purchased a new pair of soccer shoes for $125 and received a consumer surplus of $95. What was Justin's Willing to pay for the train set?

answer

$220

question

All else constant, producer surplus will increase when:

A. taxes are imposed on goods with an elastic demand
B. taxes are imposed on goods with an inelastic demand
C. taxes are reduced
D. when consumer surplus decreases

answer

C. taxes are reduced

question

Suppose we observe an increase in the price of sunscreen and more people buying sunscreen. What could have caused this change?

A. A violation in the law of demand
B. Tax on sunscreen manufacturers
C. A new study linking sunscreen usage to a decreased risk of a dangerous form of skin cancer
D.A new production process that reduces that cost of making sunscreen

answer

C. A new study linking sunscreen usage to a decreased risk of a dangerous form of skin cancer

question

A quota set below the market equilibrium quantity will:

A. Cause consumer surplus to increase
B. Cause consumer surplus to decrease
C. Cause producer surplus to increase
D. Cause producer surplus to decrease

answer

B. Cause consumer surplus to decrease

question

If, for given demand, a decrease in the price of potato chips causes a decrease in the total revenue of potato chip manufacturers, the price elasticity of demand for potato chips is:

A. Positive and elastic
B. Inelastic
C. Elastic
D. Positive and inelastic

answer

B. Inelastic

question

If goods X and Y have a cross price elasticity of demand of 0.45, the two goods:

A. Both normal goods
B. Both inelastic
C. Complements
D. Substitutes

answer

D. Substitutes

question

All else being constant, as a consumer's income increases:

A. The slope of the budget constraint will decrease
B. The slope of the indifference curve will decrease
C. The budget constraint will shift outward
D. The consumer's feasible set will decrease

answer

C. The budget constraint will shift outward

question

The marginal rate of substitution is

answer

The rate at which consumers substitute one good for another while maintaining utility

question

If a consumer's marginal rate of substitution of X for Y is 5 and the price is $18 per unit and the price of Y is $3 per unit, this consumer:

A. is maximizing utility
B. could increase utility by consuming more of Y and less X
C. could increase utility by consuming more of X and less Y
D. Could increase utility by increasing price of Y

answer

B. B. could increase utility by consuming more of Y and less X

question

Market Power refers to a firm's ability to:

answer

Influence the price of its product

question

A market structure in which there are many firms selling differentiated products is called:

answer

Monopolistic Competition

question

True or False:
Monopolies always earn positive profit

answer

False

question

As firms enter a monopolistically competitive industry, the existing firms' demand curves will

answer

Shift downward and become more elastic

question

which of the following is a barrier to entry into a market

answer

patents

question

what kind of demand curve does a firm with the ability to affect the price of its product face

answer

faces a downward sloping demand curve

question

market power can arise from

answer

barriers to entry

question

True or False:

if marginal revenue exceeds marginal cost, the firm should expand output to increase profits

answer

True

question

natural monopolies can arise from

answer

from economies of scale that exist for all levels of output

question

price discrimination is the practice of charging

answer

different prices to different customers for the same product

question

which of the following is necessary to practice price discrimination

answer

the firm must have market power

question

if firms in a monopolistically competitive industry are making profits in the short run

answer

new firms will enter the market

question

in monopolistic competition firms produce where marginal revenue...

answer

equals marginal cost

question

collusion occurs when

answer

firm's agree to avoid certain competitive tactics, particularly price reduction

question

rent seeking refers to

answer

the actions that firms undertake in their attempt to receive monopoly privilege from the government

1 of 72

question

Utility is a measure of

answer

satisfaction

question

Which of the following statements is true about utility?

answer

inputs into a utility function may include socks, haircuts, and asparagus

question

an inferior good

answer

has a negative income elasticity of demand

question

an indifference curve is

answer

a collection of market baskets that are equally desirable to the consumer

question

an underlying assumption in development of indifference curves is that consumers

answer

can rank alternative consumption bundles

question

a consumer's budget constraint shows

answer

how consumers must trade off two goods given prices and income

question

all points on or below a budget constraint

answer

are attainable with the given income

question

the additional utility obtained from consuming an extra unit of a good is called

answer

marginal utility

question

Frank buys less hamburger meat as his income increases. This implies that, for Frank, hamburger meat is......

answer

an inferior good

question

for the typical person left and right shoes are

answer

perfect complements

question

the marginal rate of substitution is

answer

the rate at which consumers substitute one good for another while maintaining the same level of utility

question

a normal good can be defined as one which consumers purchase more of as

answer

income rises

question

if consumption of good B decreases as the price of good A falls

answer

goods A and B must be substitutes

question

the income effect of a price change

answer

may be positive or negative

question

which explains the substitution effect of a price change

answer

consumers will consume less of a good whose relative price has risen and more of the good whose relative price has fallen

question

a basic assumption of the long run is that a firm

answer

can adjust the amount of both labor and capital

question

the total output of a firm divided by the total amount of variable input used is defined as

answer

average product of the input

question

input combinations outside a given isocost line are

answer

more expensive than those on the line

question

if marginal product of a variable input is less than the average product of the inputs

answer

average product is decreasing

question

a firm's production function shows the relationship between

answer

inputs and output

question

which situation will likely give rise to diminishing marginal product of labor

answer

Betty's Grits, which has enough cooking space for three cooks per shift, decides to hire a fourth cook per shift

question

which of the following is NOT true about isoquants

answer

diminishing marginal product implies that isoquants are negatively shaped

question

answer

physicians and nurse practitioners are perfect substitutes in production

question

the slope of isocost lines are the same for the entire isocost line because

answer

firms can hire more or less of each input without changing wages or rental rates

question

if labor is graphed on the x-axis and capital on the y-axis, the isocost line will rotate outward on the x-axis (with the same y-intercept) if

answer

wages decrease

question

an isoquant shows combinations of inputs that

answer

enable a producer to produce the same level of output

question

a basic assumption of the isocost/isoquant model is that the firm

answer

can buy as much labor and capital as it desires at fixed prices

question

increasing returns to scale implies

answer

as use of all inputs increases by a certain amount, output expands proportionately more

question

the idea of cost minimization refers to

answer

the goal of firms once the quantity of output is chosen

question

a firm's expansion path shows how

answer

its input choices change with output

question

economic profit is equal to

answer

total revenue minus total cost, including opportunity cost, of producing goods and services

question

fixed costs

answer

are the difference between a firm's total cost and its total variable cost

question

a variable cost is a cost that

answer

changes in relation to the level of the firm's output

question

a parallel shift down of the total cost curve (indicating lower TC for each level of output with a lower y-intercept) could be caused by

answer

a decrease in the firm's fixed costs of production

question

a perfectly competitive firm's marginal cost is

answer

the change in total cost as output changes

question

a firm should ___________ output wherever MR>MC because

answer

increase; revenues will rise by more than costs thus increase the firm's profit

question

answer

upward;upward

question

the demand faced by a perfectly competitive firm is

answer

perfectly elastic at market price

question

a perfectly competitive industry is

answer

one in which consumers cannot distinguish one firm's product from another's

question

in a short run equilibrium

answer

the number of firms is fixed

question

what happens to the long-run equilibrium price in a perfectly competitive industry when there is an increase in product demand?

answer

LR price will rise to reflect higher long run ATC if it is an increasing cost industry

question

the perfectly competitive firm's short run supply curve is the portion of its

answer

marginal cost curve that lies above average variable cost

question

the shutdown point is

answer

where price equals minimum average variable cost

question

suppose the market for lettuce is in long run equilibrium. In the short run, what will happen if there is an E. coli outbreak that causes a decrease in the demand for lettuce

answer

market price of lettuce will fall and each firm will sell less lettuce

question

diseconomies of scale occurs when ATC _________ as output __________

answer

rises;rises

question

answer

C. There are more available substitutes

question

answer

B. Larger, Smaller

question

A decrease in demand will _____ consumer surplus and ______ producer surplus:

A. increase, increase
B. increase, decrease
C. decrease, increase
D. decrease, decrease

answer

D. Decrease, decrease

question

Justin purchased a new pair of soccer shoes for $125 and received a consumer surplus of $95. What was Justin's Willing to pay for the train set?

answer

$220

question

answer

C. taxes are reduced

question

answer

C. A new study linking sunscreen usage to a decreased risk of a dangerous form of skin cancer

question

answer

B. Cause consumer surplus to decrease

question

answer

B. Inelastic

question

If goods X and Y have a cross price elasticity of demand of 0.45, the two goods:

A. Both normal goods
B. Both inelastic
C. Complements
D. Substitutes

answer

D. Substitutes

question

answer

C. The budget constraint will shift outward

question

The marginal rate of substitution is

answer

The rate at which consumers substitute one good for another while maintaining utility

question

answer

B. B. could increase utility by consuming more of Y and less X

question

Market Power refers to a firm's ability to:

answer

Influence the price of its product

question

A market structure in which there are many firms selling differentiated products is called:

answer

Monopolistic Competition

question

True or False:
Monopolies always earn positive profit

answer

False

question

As firms enter a monopolistically competitive industry, the existing firms' demand curves will

answer

Shift downward and become more elastic

question

which of the following is a barrier to entry into a market

answer

patents

question

what kind of demand curve does a firm with the ability to affect the price of its product face

answer

faces a downward sloping demand curve

question

market power can arise from

answer

barriers to entry

question

True or False:

if marginal revenue exceeds marginal cost, the firm should expand output to increase profits

answer

True

question

natural monopolies can arise from

answer

from economies of scale that exist for all levels of output

question

price discrimination is the practice of charging

answer

different prices to different customers for the same product

question

which of the following is necessary to practice price discrimination

answer

the firm must have market power

question

if firms in a monopolistically competitive industry are making profits in the short run

answer

new firms will enter the market

question

in monopolistic competition firms produce where marginal revenue...

answer

equals marginal cost

question

collusion occurs when

answer

firm's agree to avoid certain competitive tactics, particularly price reduction

question

rent seeking refers to

answer

the actions that firms undertake in their attempt to receive monopoly privilege from the government

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