Mico 2 - Assignment Essays

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A perfectly elastic demand curve has an elasticity coefficient of

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infinity

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If the percentage change in the quantity demanded of a good is less than the percentage change in price, price elasticity of demand is

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inelastic

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If a decrease in the price of movie tickets increases the total revenue of movie theaters, this is evidence that demand is

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price elastic

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Suppose the president of a college argues that a 25 percent tuition increase will raise revenues for the college. It can be concluded that the president thinks that demand to attend this college is

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inelastic, but not perfectly inelastic

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The president of Tucker Motors says, "Lowering the price won't sell a single additional Tucker car." The president believes that the price elasticity of demand is

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perfectly inelastic

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If Tucker University increases tuition to increase its revenue, it will

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be successful if demand is inelastic

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In Exhibit 12, if the area 0ABC equals the area 0DEF, the demand curve is

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unitary elastic

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In Exhibit 12, the change in total revenue resulting from a change in price from A to D indicates that the demand curve is

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elastic

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If the price elasticity of demand is elastic, then

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there are a large number of substitute products available

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If the quantity of bread demanded rises 2 percent when the price of bread declines 10 percent, then the price elasticity of demand is

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0.2

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Suppose Sally buys exactly five bars of English toffee each week, regardless of whether the toffee bars are regularly priced at $1 or on sale for $0.50. Based on this information, what is Sally's price elasticity of demand for English toffee in this price range?

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Suppose Bill budgets exactly $50 each month for fresh shrimp regardless of whether shrimp is priced at $10 per pound, or is on sale for $4 per pound. Based on this information, Bill's price elasticity of demand is

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What is the price elasticity of demand for a vertical demand curve?

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perfectly inelastic

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A perfectly price-elastic demand is consistent with which of the following?

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a horizontal demand curve

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As shown in Exhibit 11, the price elasticity of demand for good X between points E and B is

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3/7 = 0.43

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Which of the following is true about the price elasticity of demand on the top part of a linear demand curve?

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demand is elastic

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Along a segment of the demand curve where the price elasticity of demand is less than 1, a decrease in price

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will decrease total revenue

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Price elasticity of demand tends to be larger in the long run than in the short run. Which of the following is a reason that this statement is true?

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If price rises, over time, consumers have more opportunities to find suitable substitutes.

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Demand for any product will become more inelastic

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the fewer the number of substitutes available

question

If bus travel is an inferior good, its income elasticity of demand is

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negative

question

If a good is inferior in an economic sense,

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the income elasticity of demand is negative

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If automobiles and gasoline are complements, then their cross-elasticity coefficient is

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negative

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Suppose that when price is $10, quantity supplied is 20 units, and when the price is $6, the quantity supplied is 12 units. What is the price elasticity of supply?

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1.0

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Using supply and demand analysis, which of the following is true, the more elastic the demand curve?

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the smaller the portion of a sales tax that is passed on to the consumer

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Using supply and demand analysis, which of the following is true, the more inelastic the demand curve?

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the larger5 the portion of a sales tax that is passed on to the consumer

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A lower price elasticity of demand coefficient occurs when:

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few substitutes exist

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The more inelastic the demand for a product, the more the actual burden of a tax on the product will:

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falls on buyers

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The long-run price elasticity of demand is usually larger than the short-run price elasticity of demand because:

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people have more time to find substitutes

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Which statement about price elasticity of demand along a linear demand curve is true?

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As the prices of goods increase, the elasticity of demand increases.

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The price elasticity of demand between milk and soda is likely to be:

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positive, because the goods are substitutes

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Using the midpoints formula, what would be price elasticity of demand for a gallbladder operation if the number of operations fell from 6,000 to 4,000 per week after its price increased from $6,000 to $10,000?

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0.80

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Price elasticity of demand refers to the ratio of the:

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percentage change in the quantity demanded of a good to a percentage change in its price

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Suppose you are the manager of a local water company, and you are instructed to get consumers to reduce their water consumption by 10 percent. If the price elasticity of demand for water is 0.25, by how much would you have to raise the price of water?

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40%

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If New York City expects that an increase in bus fares will raise mass transit revenues, it must think that the demand for bus travel is:

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inelastic

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Which of the following pairs is most likely to represent complementary goods?

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bacon and eggs

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The term utility refers to the

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pleasure, or satisfaction , a consumer receives upon consuming a good

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When total utility is at a maximum, marginal utility is

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zero

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The marginal utilities associated with the first 4 units of consumption of good Y are 10, 12, 9, and 7. What is the total utility associated with the third unit?

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Generally speaking, as more of a particular good is purchased, a consumer's marginal utility ________ and total utility ___________.

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decreases, increases

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Marginal utility is defined as the

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extra satisfaction a person derives from consuming an additional unit of a good

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The statement "As more of a good is consumed, the utility a person derives from each additional unit diminishes" is known as the

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law of diminishing marginal utility

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The law of diminishing marginal utility indicates that the marginal utility curve is

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downward sloping

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Refer to Exhibit 4. Clothes and amusements are priced at $10 each. The marginal utility per dollar for the first unit of amusement is

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2.0

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Refer to Exhibit 4. Your budget is $50. The price of amusement goods is $10. If the price of clothes falls to $4, which of the following statements is true?

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The marginal -utility-to-price ratio for clothes will increase

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Refer to Exhibit 4. Clothes and amusements are priced at $10 each. If you had a budget of $50, which of the following combinations of goods would you buy?

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2 units of clothes and 3 units of amusement

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Total utility is maximized in the consumption of two goods by equating the

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ratios of marginal utility to the price of both goods for the last dollar spent on each good.

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The MU/P equalization principle means consumers will exhaust their expenditure budget so that, in the end, the MU/P ratio is

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the same for each good

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If utility is not maximized,

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some change in consumption will increase satisfaction

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A utility-maximizing consumer would never purchase a good if the

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marginal utility were negative

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Diminishing marginal utility means that as you consume more of a good, other things constant, the

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additional satisfaction you obtain from each additional unit of the good falls

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Assume that an individual consumes only hot dogs and colas and that the last hot dog consumed yields 15 utils and the last cola yields 10 utils. If the price of a hot dog is $1.00 and the price of a cola is $0.50, we can conclude that the

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consumer should consume fewer hot dogs and more cola

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As shown in Exhibit 5, assume that the price of both goods is $1 per unit and you consume 3 units of good X and 3 units of good Y. To maximize total utility without a budget, you should consume

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more of both X and Y

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As shown in Exhibit 5, assume that the price of both goods is $1 per unit and your budget is $5. Also assume that you consume 4 units of good X and 1 unit of good Y. To maximize utility, you should consume

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less of X and more of Y

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As shown in Exhibit 5, assume that the price of good X is $2 per unit and the price of good Y is $1 per unit and your budget is $11. If you consume 3 units of good X and 4 units of good Y and maximize utility, you should consume

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more of Y

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When the price of a good falls, consumers may increase the quantity consumed because they have greater total purchasing power. Which of the following does this statement describe?

answer

income effect

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When the price of a good falls, consumers buy more of the good because it is cheaper relative to competing goods. Which of the following does this statement describe?

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substitution effect

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When the price of a normal good falls,

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- both the income and substitution effects combine to cause the quantity demanded to increase.
- the substitution effect will cause people to buy more because the good is relatively less expensive.
- the income effect will cause people to buy more because of the increased purchasing power associated with the lower price.

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Assume the price of Coca-Cola increases. As a result, your real income decreases and you decrease the quantity of Coca-Cola purchased each month. This is an example of the

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income effect

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When the price of a good rises, one effect of this change in price is that some consumers switch to more affordable substitutes, which helps us understand the law of demand. What is this effect called?

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substitution effect

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According to the utility model of consumer demand, the demand curve is downward sloping because of the law of

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diminishing marginal utility

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The slope of an indifference curve is ________, and a movement along the curve causes the loss in marginal utility (MU) of one good to ________ the marginal utility (MU) gained from another good.

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negative; equal

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The is the absolute value of the slope of the indifference curve.

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marginal rate of substitution

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Consumers always ________ indifference curves that are farther from the origin.

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prefer

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An indifference curve consists of quantity combinations of two goods that yield

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the same total satisfaction

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The slope of an indifference curve is equal to the ratio of the ________ of the good on the horizontal axis to the ________ of the good on the vertical axis.

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marginal utility (MU); marginal utility (MU)

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An indifference curve has a negative slope because movement along the curve requires the consumer to give up the

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marginal utility of one good

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The marginal rate of substitution as one moves downward along the indifference curve

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decreases

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As shown in Exhibit A-7, the marginal rate of substitution (MRS) at point B is equal to

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0.5

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Given the prices of two goods, all quantity combinations inside the budget line are

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attainable

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The equation for a budget line for goods X and Y, with Px being the price of X, Py being the price of Y, and B being the budget, can be written as

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PxX + PyY = B

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Assume Px is the price of good X on the horizontal axis and Py is the price of good Y on the vertical axis. The slope of the budget line equals

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Px/Py.

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Consumer equilibrium occurs where the budget line is ________ to the ________ possible indifference curve.

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tangent; highest

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Given the budget line and indifference curves shown in Exhibit A-6, consumer equilibrium occurs at point

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Given the budget line and indifference curves shown in Exhibit A-6, assume the consumer is initially at point C. To maximize total utility, the consumer should

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purchase more of good Y and less of good X

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As shown in Exhibit A-7, movement from consumer equilibrium at point A to point B is caused by a(an)

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decrease in the price of good X.

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As shown in Exhibit A-7, movement from consumer equilibrium at point B to point A is caused by a(an)

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increase in the price of good X

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Which of the following statements is true?

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Consumer equilibrium is a combination of goods and services consumed which maximizes total utility from a given budget.

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The marginal utilities associated with the first 4 units of consumption of good Y are 10, 12, 9, and 7, respectively. What is the total utility associated with the third unit?

answer

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The demand curve is downward-sloping because of the law of

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diminishing marginal utility

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Consumer equilibrium occurs where the budget line is ____ to the ____ possible indifference curve.

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tangent; highest

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As shown in Exhibit 6-3, assume that the price of good X is $1 per unit and the price of good Y is $2 per unit and your budget is $13. If you consume 4 units of good X and 2 units of good Y and maximize utility, you should consume:

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more of X and Y

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Assume the price of Nikes decreases. As a result, consumers increase the quantity of Nikes purchased each year and purchase fewer Reeboks. This is an example of the:

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substitution effect

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Greg spends his entire budget on two goods: he plays video games at the mall arcade and he buys pizza. He discovers that his MU/P of video games is lower than his MU/P of pizza. From this, we know that he would be:

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happier eating more pizza and playing fewer video games

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If marginal utility is positive, then total utility is:

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increasing

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If finding the last stamp to complete your collection makes you happier than finding the first, then:

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marginal utility is not diminishing

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The term utility refers to the

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pleasure or satisfaction a consumer receives upon consuming a good

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A firm has $200 million in total revenue and explicit costs of $190 million. Suppose its owners have invested $100 million in the company at an opportunity cost of 10 percent interest per year. What is the firm's economic profit?

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zero

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A young chef is considering opening his own sushi bar. To do so, he would have to quit his current job, which pays $20,000 a year, and take over a store building that he owns and currently rents to his brother for $6,000 a year. His expenses at the sushi bar would be $50,000 for food and $2,000 for gas and electricity. What are his explicit costs?

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$52k

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An economist left her $100,000-a-year teaching position to work full-time in her own consulting business. In the first year, she had total revenue of $200,000 and business expenses of $150,000. She made an

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economic loss

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The units of variable input in a production process are 1, 2, 3, 4, and 5, and the corresponding total outputs are 30, 34, 37, 39, and 40, respectively. What is the marginal product of the fourth unit?

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The situation in which the marginal product of labor is greater than zero and declining as more labor is hired is called the law of

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diminishing return

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Which of the following is true if the total variable cost curve is rising?

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marginal cost is increasing

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A farm can produce 10,000 bushels of wheat per year with five workers and 13,000 bushels with six workers. What is the marginal product of the sixth worker for this farm?

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3k bushels

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The law of diminishing returns applies to which of the following segments of the marginal product of labor curve?

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the downward-sloping segment only

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Which of the following best describes total fixed cost?

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costs that do not vary as output varies

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Which of the following is considered a fixed cost of operating an automobile?

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registration fees

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Which of the following is an example of a fixed cost for a fishing company?

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monthly loan payment on boat

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By filling in the blanks in Exhibit 10 the total cost of producing zero pizzas is shown to be equal to

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$100

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By filling in the blanks in Exhibit 10 the fixed cost of producing six pizzas is shown to be equal to

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$100

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By filling in the blanks in Exhibit 10 the average variable cost of producing four pizzas is shown to be equal to

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$10

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By filling in the blanks in Exhibit 10 the average total cost of producing 5 pizzas is shown to be equal to

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$32

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By filling in the blanks in Exhibit 10 the marginal cost of the fourth pizza is shown to be equal to

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$17

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Which of the following is true at the point where diminishing returns set in?

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Marginal product is at a maximum, and marginal cost is at a minimum

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Assume both the marginal cost and the average variable cost curves are U-shaped. At the minimum point on the AVC curve, marginal cost must be

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equal to the average variable cost

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Which of the following is true?

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- When marginal cost is equal to average cost then average cost is at its minimum
- When marginal cost is above average cost, average cost rises
- When marginal cost is below average cost, average cost falls

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If the minimum points of all possible short-run average total cost curves become successively lower as quantity of output increases,

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there are economies of scale

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In the long run, total fixed cost

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does not exist

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The decreasing portion of a firm's long-run average cost curve is attributable to

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economies of scale

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Diseconomies of scale exist over the range of output for which the long-run average cost curve is

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rising

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In Exhibit 11 which firm's long-run average cost curve experiences constant returns to scale?

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Firm B

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Which firm in Exhibit 11 displays a long-run average cost curve with diseconomies of scale beginning at 2,000 units of output per week?

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Firm A

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Which firm in Exhibit 11 displays a long-run average cost curve with economies of scale throughout the range of output shown?

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Firm C

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Perfect competition is defined as market structure in which

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- there are many small sellers.
- the product is homogeneous.
- it is very easy for firms to enter or exit the market.

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Perfect competition is characterized as a market structure in which

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firms are price takers.

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As shown in Exhibit 15, suppose the firm's price is OB. The firm's total economic profit at this price is equal to the area of

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zero

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The firm shown in Exhibit 15 will

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- produce where marginal cost equals marginal revenue.
- be a price taker.
- not produce below a price of OA.

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As shown in Exhibit 15, if the price is OD, a perfectly competitive firm maximizes profit at which point on its marginal cost curve?

answer

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As shown in Exhibit 15, if the price is OB, the firm's total cost of producing at its most profitable level of output is

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OYFB

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As shown in Exhibit 15, if the price is OD, the firm's total revenue at its most profitable level of output is

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OZID.

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As shown in Exhibit 15, suppose the firm's price is OD. At this price the firm

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is earning positive economic profits

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As shown in Exhibit 15, if the price is OB, the firm's total revenue of producing at its most profitable level of output is

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OYFB.

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A portrait photographer produces output in packages of 100 photos each. If the output sold increases from 600 to 700 photos, total revenue increases from $1,200 to $1,400. What is the marginal revenue per photo?

answer

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In Exhibit 16, if output is 200 units per week, economic profit for the firm is

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zero

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In Exhibit 16, economic profit for the firm is at a maximum when output per week equals

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250

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The point of maximum profit for a business firm is where

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MR = MC.

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In the short run, a perfectly competitive firm is producing at a price below average total cost. What is its economic profit?

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Negative

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In the short run, if price is below average variable cost (AVC) a firm is

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losing money and should shut down to minimize losses

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A perfectly competitive firm's short-run supply curve is the

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marginal cost curve above the average variable cost curve.

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A perfectly competitive industry's short-run supply curve is the

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horizontal summation of the marginal cost curves of all firms in the industry above the minimum point of each firm's average variable cost curve.

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When there is a permanent increase in market demand in a constant-cost industry, a firm's Short-run Average Total Cost Curve will

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remain the same

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Under perfect competition, which of the following are the same (equal) at all levels of output?

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Price and marginal revenue

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When there is a permanent increase in market demand in a decreasing-cost industry, a firm's Short-run Average Total Cost Curve will

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shift down

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When there is a permanent increase in market demand in an increasing-cost industry, a firm's Short-run Average Total Cost Curve will

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shift up

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In long-run equilibrium, the perfectly competitive firm sets its price equal to which of the following?

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- Long-run average cost
- Short-run marginal cost
- Short-run average total cost

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If there is a permanent increase in demand for the product of a perfectly competitive industry, the process of transition to a new long-run equilibrium will include

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- temporarily higher profits.
- the entry of new firms.

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In Exhibit 8-10, MR is the same as which column?

answer

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A firm operating in a perfectly competitive market is a price taker because:

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setting a price higher than the market price results in zero sales.

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In Exhibit 8-9, product price in this market is fixed at $7. This firm is currently operating where MR = MC. What do you advise this firm to do?

answer

The firm should shut down

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If a firm has no ability to influence the market price of its product, it:

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has a horizontal individual demand curve

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Which of the following is a key characteristic of the long-run competitive equilibrium that distinguishes it from the short-run competitive equilibrium?

answer

Free entry to reduce short-run profits, or free exit to reduce short-run losses.

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In Exhibit 8-13, the firm's short-run supply curve is the marginal cost curve above point

answer

negative

1 of 141

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A perfectly elastic demand curve has an elasticity coefficient of

answer

infinity

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If the percentage change in the quantity demanded of a good is less than the percentage change in price, price elasticity of demand is

answer

inelastic

question

If a decrease in the price of movie tickets increases the total revenue of movie theaters, this is evidence that demand is

answer

price elastic

question

Suppose the president of a college argues that a 25 percent tuition increase will raise revenues for the college. It can be concluded that the president thinks that demand to attend this college is

answer

inelastic, but not perfectly inelastic

question

The president of Tucker Motors says, "Lowering the price won't sell a single additional Tucker car." The president believes that the price elasticity of demand is

answer

perfectly inelastic

question

If Tucker University increases tuition to increase its revenue, it will

answer

be successful if demand is inelastic

question

In Exhibit 12, if the area 0ABC equals the area 0DEF, the demand curve is

answer

unitary elastic

question

In Exhibit 12, the change in total revenue resulting from a change in price from A to D indicates that the demand curve is

answer

elastic

question

If the price elasticity of demand is elastic, then

answer

there are a large number of substitute products available

question

If the quantity of bread demanded rises 2 percent when the price of bread declines 10 percent, then the price elasticity of demand is

answer

0.2

question

answer

question

answer

question

What is the price elasticity of demand for a vertical demand curve?

answer

perfectly inelastic

question

A perfectly price-elastic demand is consistent with which of the following?

answer

a horizontal demand curve

question

As shown in Exhibit 11, the price elasticity of demand for good X between points E and B is

answer

3/7 = 0.43

question

Which of the following is true about the price elasticity of demand on the top part of a linear demand curve?

answer

demand is elastic

question

Along a segment of the demand curve where the price elasticity of demand is less than 1, a decrease in price

answer

will decrease total revenue

question

Price elasticity of demand tends to be larger in the long run than in the short run. Which of the following is a reason that this statement is true?

answer

If price rises, over time, consumers have more opportunities to find suitable substitutes.

question

Demand for any product will become more inelastic

answer

the fewer the number of substitutes available

question

If bus travel is an inferior good, its income elasticity of demand is

answer

negative

question

If a good is inferior in an economic sense,

answer

the income elasticity of demand is negative

question

If automobiles and gasoline are complements, then their cross-elasticity coefficient is

answer

negative

question

Suppose that when price is $10, quantity supplied is 20 units, and when the price is $6, the quantity supplied is 12 units. What is the price elasticity of supply?

answer

1.0

question

Using supply and demand analysis, which of the following is true, the more elastic the demand curve?

answer

the smaller the portion of a sales tax that is passed on to the consumer

question

Using supply and demand analysis, which of the following is true, the more inelastic the demand curve?

answer

the larger5 the portion of a sales tax that is passed on to the consumer

question

A lower price elasticity of demand coefficient occurs when:

answer

few substitutes exist

question

The more inelastic the demand for a product, the more the actual burden of a tax on the product will:

answer

falls on buyers

question

The long-run price elasticity of demand is usually larger than the short-run price elasticity of demand because:

answer

people have more time to find substitutes

question

Which statement about price elasticity of demand along a linear demand curve is true?

answer

As the prices of goods increase, the elasticity of demand increases.

question

The price elasticity of demand between milk and soda is likely to be:

answer

positive, because the goods are substitutes

question

answer

0.80

question

Price elasticity of demand refers to the ratio of the:

answer

percentage change in the quantity demanded of a good to a percentage change in its price

question

answer

40%

question

If New York City expects that an increase in bus fares will raise mass transit revenues, it must think that the demand for bus travel is:

answer

inelastic

question

Which of the following pairs is most likely to represent complementary goods?

answer

bacon and eggs

question

The term utility refers to the

answer

pleasure, or satisfaction , a consumer receives upon consuming a good

question

When total utility is at a maximum, marginal utility is

answer

zero

question

The marginal utilities associated with the first 4 units of consumption of good Y are 10, 12, 9, and 7. What is the total utility associated with the third unit?

answer

question

Generally speaking, as more of a particular good is purchased, a consumer's marginal utility ________ and total utility ___________.

answer

decreases, increases

question

Marginal utility is defined as the

answer

extra satisfaction a person derives from consuming an additional unit of a good

question

The statement "As more of a good is consumed, the utility a person derives from each additional unit diminishes" is known as the

answer

law of diminishing marginal utility

question

The law of diminishing marginal utility indicates that the marginal utility curve is

answer

downward sloping

question

Refer to Exhibit 4. Clothes and amusements are priced at $10 each. The marginal utility per dollar for the first unit of amusement is

answer

2.0

question

Refer to Exhibit 4. Your budget is $50. The price of amusement goods is $10. If the price of clothes falls to $4, which of the following statements is true?

answer

The marginal -utility-to-price ratio for clothes will increase

question

Refer to Exhibit 4. Clothes and amusements are priced at $10 each. If you had a budget of $50, which of the following combinations of goods would you buy?

answer

2 units of clothes and 3 units of amusement

question

Total utility is maximized in the consumption of two goods by equating the

answer

ratios of marginal utility to the price of both goods for the last dollar spent on each good.

question

The MU/P equalization principle means consumers will exhaust their expenditure budget so that, in the end, the MU/P ratio is

answer

the same for each good

question

If utility is not maximized,

answer

some change in consumption will increase satisfaction

question

A utility-maximizing consumer would never purchase a good if the

answer

marginal utility were negative

question

Diminishing marginal utility means that as you consume more of a good, other things constant, the

answer

additional satisfaction you obtain from each additional unit of the good falls

question

answer

consumer should consume fewer hot dogs and more cola

question

As shown in Exhibit 5, assume that the price of both goods is $1 per unit and you consume 3 units of good X and 3 units of good Y. To maximize total utility without a budget, you should consume

answer

more of both X and Y

question

answer

less of X and more of Y

question

answer

more of Y

question

When the price of a good falls, consumers may increase the quantity consumed because they have greater total purchasing power. Which of the following does this statement describe?

answer

income effect

question

When the price of a good falls, consumers buy more of the good because it is cheaper relative to competing goods. Which of the following does this statement describe?

answer

substitution effect

question

When the price of a normal good falls,

answer

question

Assume the price of Coca-Cola increases. As a result, your real income decreases and you decrease the quantity of Coca-Cola purchased each month. This is an example of the

answer

income effect

question

answer

substitution effect

question

According to the utility model of consumer demand, the demand curve is downward sloping because of the law of

answer

diminishing marginal utility

question

The slope of an indifference curve is ________, and a movement along the curve causes the loss in marginal utility (MU) of one good to ________ the marginal utility (MU) gained from another good.

answer

negative; equal

question

The is the absolute value of the slope of the indifference curve.

answer

marginal rate of substitution

question

Consumers always ________ indifference curves that are farther from the origin.

answer

prefer

question

An indifference curve consists of quantity combinations of two goods that yield

answer

the same total satisfaction

question

The slope of an indifference curve is equal to the ratio of the ________ of the good on the horizontal axis to the ________ of the good on the vertical axis.

answer

marginal utility (MU); marginal utility (MU)

question

An indifference curve has a negative slope because movement along the curve requires the consumer to give up the

answer

marginal utility of one good

question

The marginal rate of substitution as one moves downward along the indifference curve

answer

decreases

question

As shown in Exhibit A-7, the marginal rate of substitution (MRS) at point B is equal to

answer

0.5

question

Given the prices of two goods, all quantity combinations inside the budget line are

answer

attainable

question

The equation for a budget line for goods X and Y, with Px being the price of X, Py being the price of Y, and B being the budget, can be written as

answer

PxX + PyY = B

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Assume Px is the price of good X on the horizontal axis and Py is the price of good Y on the vertical axis. The slope of the budget line equals

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Px/Py.

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Consumer equilibrium occurs where the budget line is ________ to the ________ possible indifference curve.

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tangent; highest

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Given the budget line and indifference curves shown in Exhibit A-6, consumer equilibrium occurs at point

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Given the budget line and indifference curves shown in Exhibit A-6, assume the consumer is initially at point C. To maximize total utility, the consumer should

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purchase more of good Y and less of good X

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As shown in Exhibit A-7, movement from consumer equilibrium at point A to point B is caused by a(an)

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decrease in the price of good X.

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As shown in Exhibit A-7, movement from consumer equilibrium at point B to point A is caused by a(an)

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increase in the price of good X

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Which of the following statements is true?

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Consumer equilibrium is a combination of goods and services consumed which maximizes total utility from a given budget.

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The marginal utilities associated with the first 4 units of consumption of good Y are 10, 12, 9, and 7, respectively. What is the total utility associated with the third unit?

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The demand curve is downward-sloping because of the law of

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diminishing marginal utility

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Consumer equilibrium occurs where the budget line is ____ to the ____ possible indifference curve.

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tangent; highest

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more of X and Y

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Assume the price of Nikes decreases. As a result, consumers increase the quantity of Nikes purchased each year and purchase fewer Reeboks. This is an example of the:

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substitution effect

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happier eating more pizza and playing fewer video games

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If marginal utility is positive, then total utility is:

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increasing

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If finding the last stamp to complete your collection makes you happier than finding the first, then:

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marginal utility is not diminishing

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The term utility refers to the

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pleasure or satisfaction a consumer receives upon consuming a good

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answer

zero

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$52k

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economic loss

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answer

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The situation in which the marginal product of labor is greater than zero and declining as more labor is hired is called the law of

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diminishing return

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Which of the following is true if the total variable cost curve is rising?

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marginal cost is increasing

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A farm can produce 10,000 bushels of wheat per year with five workers and 13,000 bushels with six workers. What is the marginal product of the sixth worker for this farm?

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3k bushels

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The law of diminishing returns applies to which of the following segments of the marginal product of labor curve?

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the downward-sloping segment only

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Which of the following best describes total fixed cost?

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costs that do not vary as output varies

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Which of the following is considered a fixed cost of operating an automobile?

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registration fees

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Which of the following is an example of a fixed cost for a fishing company?

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monthly loan payment on boat

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By filling in the blanks in Exhibit 10 the total cost of producing zero pizzas is shown to be equal to

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$100

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By filling in the blanks in Exhibit 10 the fixed cost of producing six pizzas is shown to be equal to

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$100

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By filling in the blanks in Exhibit 10 the average variable cost of producing four pizzas is shown to be equal to

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$10

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By filling in the blanks in Exhibit 10 the average total cost of producing 5 pizzas is shown to be equal to

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$32

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By filling in the blanks in Exhibit 10 the marginal cost of the fourth pizza is shown to be equal to

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$17

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Which of the following is true at the point where diminishing returns set in?

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Marginal product is at a maximum, and marginal cost is at a minimum

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Assume both the marginal cost and the average variable cost curves are U-shaped. At the minimum point on the AVC curve, marginal cost must be

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equal to the average variable cost

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Which of the following is true?

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If the minimum points of all possible short-run average total cost curves become successively lower as quantity of output increases,

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there are economies of scale

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In the long run, total fixed cost

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does not exist

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The decreasing portion of a firm's long-run average cost curve is attributable to

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economies of scale

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Diseconomies of scale exist over the range of output for which the long-run average cost curve is

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rising

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In Exhibit 11 which firm's long-run average cost curve experiences constant returns to scale?

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Firm B

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Which firm in Exhibit 11 displays a long-run average cost curve with diseconomies of scale beginning at 2,000 units of output per week?

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Firm A

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Which firm in Exhibit 11 displays a long-run average cost curve with economies of scale throughout the range of output shown?

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Firm C

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Perfect competition is defined as market structure in which

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- there are many small sellers.
- the product is homogeneous.
- it is very easy for firms to enter or exit the market.

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Perfect competition is characterized as a market structure in which

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firms are price takers.

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As shown in Exhibit 15, suppose the firm's price is OB. The firm's total economic profit at this price is equal to the area of

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zero

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The firm shown in Exhibit 15 will

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- produce where marginal cost equals marginal revenue.
- be a price taker.
- not produce below a price of OA.

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As shown in Exhibit 15, if the price is OD, a perfectly competitive firm maximizes profit at which point on its marginal cost curve?

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As shown in Exhibit 15, if the price is OB, the firm's total cost of producing at its most profitable level of output is

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OYFB

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As shown in Exhibit 15, if the price is OD, the firm's total revenue at its most profitable level of output is

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OZID.

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As shown in Exhibit 15, suppose the firm's price is OD. At this price the firm

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is earning positive economic profits

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As shown in Exhibit 15, if the price is OB, the firm's total revenue of producing at its most profitable level of output is

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OYFB.

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answer

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In Exhibit 16, if output is 200 units per week, economic profit for the firm is

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zero

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In Exhibit 16, economic profit for the firm is at a maximum when output per week equals

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250

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The point of maximum profit for a business firm is where

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MR = MC.

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In the short run, a perfectly competitive firm is producing at a price below average total cost. What is its economic profit?

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Negative

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In the short run, if price is below average variable cost (AVC) a firm is

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losing money and should shut down to minimize losses

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A perfectly competitive firm's short-run supply curve is the

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marginal cost curve above the average variable cost curve.

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A perfectly competitive industry's short-run supply curve is the

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horizontal summation of the marginal cost curves of all firms in the industry above the minimum point of each firm's average variable cost curve.

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When there is a permanent increase in market demand in a constant-cost industry, a firm's Short-run Average Total Cost Curve will

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remain the same

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Under perfect competition, which of the following are the same (equal) at all levels of output?

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Price and marginal revenue

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When there is a permanent increase in market demand in a decreasing-cost industry, a firm's Short-run Average Total Cost Curve will

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shift down

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When there is a permanent increase in market demand in an increasing-cost industry, a firm's Short-run Average Total Cost Curve will

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shift up

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In long-run equilibrium, the perfectly competitive firm sets its price equal to which of the following?

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- Long-run average cost
- Short-run marginal cost
- Short-run average total cost

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If there is a permanent increase in demand for the product of a perfectly competitive industry, the process of transition to a new long-run equilibrium will include

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- temporarily higher profits.
- the entry of new firms.

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In Exhibit 8-10, MR is the same as which column?

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A firm operating in a perfectly competitive market is a price taker because:

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setting a price higher than the market price results in zero sales.

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In Exhibit 8-9, product price in this market is fixed at $7. This firm is currently operating where MR = MC. What do you advise this firm to do?

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The firm should shut down

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If a firm has no ability to influence the market price of its product, it:

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has a horizontal individual demand curve

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Which of the following is a key characteristic of the long-run competitive equilibrium that distinguishes it from the short-run competitive equilibrium?

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Free entry to reduce short-run profits, or free exit to reduce short-run losses.

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In Exhibit 8-13, the firm's short-run supply curve is the marginal cost curve above point

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negative

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