question
The
utilityminus−maximizing
rule says that consumers must
utilityminus−maximizing
rule says that consumers must
answer
allocate the entire available budget and make the marginal utility per dollar the same for all goods.
question
When one person's opportunity cost of producing a good is lower than another person's opportunity cost of producing the same good, it is called
answer
a comparative advantage
question
In the
longminus−run,
a firm in monopolistic competition produces at an output level where
longminus−run,
a firm in monopolistic competition produces at an output level where
answer
P = ATC and MR =
MC.
MC.
question
If the wheat industry is perfectly competitive with a market price of $4 per bushel and Farmer Brown charged $5 per bushel, how many bushels would Farmer Brown sell?
answer
none
question
Tickets to a Beyonce concert increase from $90 to $110. As a result, ticket sales fall from 100,000 to 80,000. Using the midpoint formula, the percentage change in _______, which means that the elasticity of demand is ______.
answer
quantity demanded is greater than the percentage change in price; elastic
question
Using Gabriel's budget line and his indifference curves between horseback riding lessons and baseball lessons, and then changing the prices of each activity holding his income constant, which of the following can be derived?
answer
Gabriel's demand curve for each activity
question
If a monopolistically competitive seller's marginal cost is $3.56, the firm will decrease its output if
answer
its marginal revenue is less than $3.56.
question
Neither the demand for gasoline nor the supply of gasoline is perfectly elastic or inelastic. If the federal government eliminated the 18.4 cents per gallon gasoline tax, the price paid by buyers would
answer
decrease by less than 18.4 cents.
question
Mark loves ice cream. At any point in time, he will buy an additional ice cream cone if
answer
the marginal benefit from it exceeds the price.
question
A perfectly competitive firm will maximize profit when the quantity produced is such that the
answer
firm's marginal revenue is equal to its marginal cost.
question
If a product has an external benefit, how does its marginal private benefit compare to its marginal social benefit?
answer
Marginal private benefit is less than marginal social benefit.
question
A
single −price
monopoly transfers
single −price
monopoly transfers
answer
consumer surplus to producers.
question
Tax incidence is the
answer
division of a tax burden between the buyer and seller
question
If consumers buy a large number of
plug−in
electric cars, the equilibrium price of electricity will ________ and the equilibrium quantity of electricity will ________.
plug−in
electric cars, the equilibrium price of electricity will ________ and the equilibrium quantity of electricity will ________.
answer
rise; increase
question
A monopoly will never operate on the _____ portion of its demand curve because an increase in price _____ total revenue and ____ total cost, thereby increasing the firm's total profit.
answer
inelastic; increases; decreases
question
The marginal product of labor is
answer
the change in total product divided by the increase in labor.
question
When marginal revenue is positive, total revenue ________ when output increases and demand is ________.
answer
increases; elastic
question
The negative slope of the production possibilities frontier represents the idea
answer
of tradeoffs, that in order to produce more of one good, the nation must produce less of another.
question
In Great Britain, raising taxes on gasoline has increased the costs of supplying gasoline. As a result, the equilibrium quantity of gasoline ________ and the equilibrium price of gasoline ________.
answer
decreases; rises
question
Suppose two neighborhoods with 10 homes each in Buffalo, New York are identical except one of them is near a toxic waste dump. If homes near the dump sell for an average of $40,000 and the other homes sell for $90,000, the external cost of the dump is
answer
$500,000.
question
The opportunity cost of producing one more unit of a good is calculated by dividing the
answer
decrease in the quantity of the other good by the increase in the quantity of the good whose opportunity cost we're calculating.
question
Suppose that Jen receives 400 units of utility from her last soda and 200 units of utility from her last slice of pizza. What can we conclude about Jen's choices if the price of a soda is $1 and the price of a slice of pizza is $2?
answer
Jen should buy more soda to maximize her utility.
question
Why do some workers lose their job when the minimum wage is increased?
answer
The increase in the minimum wage decreases the quantity of labor demanded.
question
When a firm maximizes its profit, which of the following is correct for firms in monopolistic competition and perfect competition?
answer
P = MR = MC for firms in perfect competition and P > MR = MC for firms in monopolistic competition.
question
For a perfectly competitive firm, the price of its good is equal to the firm's marginal revenue because
answer
individual perfectly competitive firms cannot influence the market price by changing their output.
question
Crest toothpaste, produced by Proctor & Gamble, is produced in a _______ market. This means that Proctor & Gamble must advertise in order to _____.
answer
monopolistically competitive; differentiate their product
question
In a competitive market with no externalities,
answer
at the equilibrium price, marginal benefit equals marginal cost.
question
If the cross elasticity of demand between car insurance and new cars is
minus−0.41,
then car insurance and new cars are
minus−0.41,
then car insurance and new cars are
answer
complements
question
Which of the following statements is correct?
answer
The slope of the budget line shows the opportunity cost of the good measured along the
x−axis.
x−axis.
question
When there is a surplus of snowboards, the
answer
quantity of snowboards supplied is greater than the quantity of snowboards demanded.
question
Suppose a
single−price
monopoly sells 3 units of a good at $20 per unit. If the monopoly sells 4 units, the total revenue increases to $72. What is the marginal revenue of the fourth unit?
single−price
monopoly sells 3 units of a good at $20 per unit. If the monopoly sells 4 units, the total revenue increases to $72. What is the marginal revenue of the fourth unit?
answer
$12
question
In the long run, a perfectly competitive firm
answer
makes zero economic profit
question
If a substitute good is easy to find, then demand for a good is
answer
elastic
question
A firm that is a natural monopoly
answer
can supply the entire market at a lower cost than two or more firms.
question
A perfectly competitive firm can
answer
sell all of its output at the prevailing market price
question
When the percentage change in the quantity demanded exceeds the percentage change in price, then demand is
answer
elastic
question
If a firm produces five chairs with marginal costs of $25, $30, $40, $55, and $75, respectively, and sells them for $80 each, what is the firm's total producer surplus?
answer
$175
question
Decreasing marginal returns occur in the short run as more labor is hired to work in a fixed sized plant because
answer
adding more workers exhausts the possible gains from specialization
question
A quantity less than the equilibrium quantity in a competitive market is inefficient because
answer
the marginal benefit of another unit is greater than its marginal cost.
question
A differentiated product has
answer
close but has not perfect substitutes
question
The price elasticity of demand is a measure of
answer
buyers' responsiveness to changes in the price of a product.
question
If the marginal social cost of generating a kilowatt of electricity is $0.10 and the marginal private cost is $0.08, what is the marginal external cost?
answer
$.02 BECAUSE
MSC=MPC+MEC
MSC=MPC+MEC
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