Micro-Economics Final MC - Assignment Essays

question

Indifference Curve

answer

All of the alternative combinations of two consumption goods that yield the same total of utility.

question

Prices constant, an increase in income results in

answer

an increase in the intercept of the budget line -\-\

question

the substitution effect

answer

the change in quantity demanded resulting from a change in relative prices, holding the level of satisfaction constant

question

The income effect of a price change

answer

May be positive or negative

question

Inferior Good

answer

when the substitution effect of a lowered price is counteracted by the income effect, the good in question is

question

Price Elasticity of Demand

answer

the percentage change in quantity demanded resulting from a 1 percent change in price

question

if the demand for gasoline is relatively but not completely price inelastic, then it follows that

answer

a decrease in the amount of gasoline would reduce the total amount spent on gasoline

question

If price is initially above the equilibrium level,

answer

excess supply exists

question

The substitution effect due to the decrease in price is

answer

always positive.

question

Engel curve is downward sloping when

answer

the good is an inferior good.

question

When good x and good y are perfect complements,

answer

consumers must consume both goods simultaneously at a certain ratio.

question

Marginal Rate of Substitution is shown as

answer

(a) the slope of the indifference curves.
(b) the ratio of marginal utilities.
(c) ∆y. ∆x
(d) All of the above.

question

Convexity of indifference curves implies that consumers are willing to

answer

give up more y to get an extra x the less x they have.

question

There is an indifference curve through every bundle because of the assumption of

answer

completeness

question

Suppose the demand curve for a good is expressed as Q = 100 − 4p. If the good currently sells for $10, then the price elasticity of demand equals

answer

????

question

The marginal rate of technical substitution always equals

answer

the ratio of the marginal products of inputs.

question

If an isocost line crosses the isoquant twice, a cost minimizing firm will

answer

use a different isocost line to select the bundle of inputs.

question

If there are diseconomies of scale within a given range of output, which of following is (are) TRUE?

answer

The long-run average cost curve must be upward sloping within that range of output.

question

Suppose that capital and labor must be kept in a fixed proportion to produce a particular good. For example, digging a trench requires one worker who has one shovel. What does this imply about returns to scale?

answer

There are constant returns to scale.

question

A profit-maximizing firm in a perfectly competitive market will shut down in the short-run if

answer

(a) the revenue does not cover the variable costs.
(b) the loss from staying is bigger than the fixed cost.
(c) the price is lower than the average variable cost. (d) All of the above.

question

Individually rational allocations are

answer

feasible and preferred to the initial endowment by both consumers.

question

In Cournot model, firms

answer

decide the quantities simultaneously.

question

In a typical cartel agreement, the cartel maximizes profit when it

answer

behaves like a monopoly.

question

A horizontal demand curve for a good could arise because consumers

answer

view this good as identical to another good.

question

Which of the following is most likely to be true?

answer

Income elasticity of demand for fur coats exceeds that of oatmeal.

question

Indifference curves that are thick violate the assumption of

answer

more is better.

question

If two indifferent curves were to intersect at a point, this would violate the assump- tion of

answer

transitivity.

question

If the price of one good increases while the price of the other good and the consumer's income remain unchanged, what will happen to the budget line?

answer

The budget line rotates inward from the intercept on the axis of the good that did not change in price.

question

If the prices of both goods and income increase by the same percentage, what will happen to the budget line?

answer

Nothing

question

An isoquant represents levels of capital and labor that

answer

yield the same level of output.

question

To say that isoquants are convex is to say that

answer

the marginal rate of technical substitution falls as labor increases.

question

The MRTS for the production function f(L,K) = min{L,2K}

answer

does not exist.

question

If the average cost of producing a good is increasing as a firm produces more of the good, then which of the following must be TRUE?

answer

AFC is falling. (b) AV C is rising.
(c) MC>AVC. (d) All of the above.

question

A firm with production function f(L, K) = L2 K 3 has

answer

economies of scale.

question

The result that perfectly competitive firms produce at the lowest per-unit cost in the long-run is derived from the assumptions of

answer

free entry and exit

question

If the inverse demand curve a monopoly faces is p = 100 − 2Q, then profit maxi- mization

answer

cannot be determined solely from the information provided.

question

If a monopoly can produce a good at zero marginal cost, then its Lerner Index is

answer

one

question

The existence of a deadweight loss associated with a monopoly can be seen because

answer

consumers are willing to pay more for the last unit of output than it cost to produce.

question

At a Nash equilibrium,

answer

(a) players have no incentive to deviate.
(b) each player is maximizing the payoff given other players are choosing the equi- librium strategies.
(c) players' strategies are best responses to each other.
(d) All of the above.

question

Diminishing marginal rate of substitution means that

answer

The indifference curves are convex to the origin

question

If good x and y are imperfect substitutes

answer

The indifference curves are convex curves

question

As long as the principle of diminishing returns marginal utility is operating , any increased consumption of a good

answer

lowers marginal utility, but may raise total utility.

question

An indifference curve shows all the alternative combinations of two consumption goods that

answer

yield the same total utility

question

As long as all prices remain constant, an increase in income results in

answer

an increase in the intercept of the budget line

question

The substitution effect refers to

answer

the change in quantity demanded resulting from a change in relative prices, holding the level of satisfaction constant

question

The income effect of a price change

answer

may be positive or negative

question

If a good is normal, then the demand curve for that good must be

answer

downward sloping

question

When the substitution effect of a lowered price is counteracted by the income effect, the good in question is

answer

an inferior good

question

Price elasticity of demand is defined as

answer

the percentage change in quantity demanded resulting from a 1 percent change in price

question

If the demand for gasoline is relatively but not completely price inelastic, then it follows that

answer

a decrease in the price of gasoline would reduce the total amount spent on gasoline.

question

The income elasticity of demand

answer

equals the percentage change in demand for a good divided by the percentage change in the income of consumers, all else being equal

question

An isoquant curve shows

answer

all the alternative combinations of two inputs that yield the same maximum total product

question

The marginal rate of technical substitution is

answer

the rate at which a producer is able to exchange, without affecting the quantity of output produced, a little bit of one input for a little bit of another input

question

The expansion path identifies

answer

the least costly combination of inputs required to produce various levels of output

question

Which of the following statements about the relationship between marginal cost and average cost is correct?

answer

When MC is falling, AC is falling

question

The slope of the variable cost curve equals

answer

marginal cost

question

Being a price taker in a market means that the seller

answer

has no choice but to charge the equilibrium price that results from the market supply and demand curves

question

In perfect competition in the short run, if price falls, the firm will respond by

answer

reducing output along its marginal cost curve as long as marginal revenue exceeds average variable cost

question

All of the following are true about a monopolist except

answer

marginal revenue is greater than price

question

At a typical cournot equilibrium,

answer

total output level is above the monopoly and below the perfectly competitive market.

1 of 60

question

Indifference Curve

answer

All of the alternative combinations of two consumption goods that yield the same total of utility.

question

Prices constant, an increase in income results in

answer

an increase in the intercept of the budget line -\-\

question

the substitution effect

answer

the change in quantity demanded resulting from a change in relative prices, holding the level of satisfaction constant

question

The income effect of a price change

answer

May be positive or negative

question

Inferior Good

answer

when the substitution effect of a lowered price is counteracted by the income effect, the good in question is

question

Price Elasticity of Demand

answer

the percentage change in quantity demanded resulting from a 1 percent change in price

question

if the demand for gasoline is relatively but not completely price inelastic, then it follows that

answer

a decrease in the amount of gasoline would reduce the total amount spent on gasoline

question

If price is initially above the equilibrium level,

answer

excess supply exists

question

The substitution effect due to the decrease in price is

answer

always positive.

question

Engel curve is downward sloping when

answer

the good is an inferior good.

question

When good x and good y are perfect complements,

answer

consumers must consume both goods simultaneously at a certain ratio.

question

Marginal Rate of Substitution is shown as

answer

(a) the slope of the indifference curves.
(b) the ratio of marginal utilities.
(c) ∆y. ∆x
(d) All of the above.

question

Convexity of indifference curves implies that consumers are willing to

answer

give up more y to get an extra x the less x they have.

question

There is an indifference curve through every bundle because of the assumption of

answer

completeness

question

Suppose the demand curve for a good is expressed as Q = 100 − 4p. If the good currently sells for $10, then the price elasticity of demand equals

answer

????

question

The marginal rate of technical substitution always equals

answer

the ratio of the marginal products of inputs.

question

If an isocost line crosses the isoquant twice, a cost minimizing firm will

answer

use a different isocost line to select the bundle of inputs.

question

If there are diseconomies of scale within a given range of output, which of following is (are) TRUE?

answer

The long-run average cost curve must be upward sloping within that range of output.

question

answer

There are constant returns to scale.

question

A profit-maximizing firm in a perfectly competitive market will shut down in the short-run if

answer

(a) the revenue does not cover the variable costs.
(b) the loss from staying is bigger than the fixed cost.
(c) the price is lower than the average variable cost. (d) All of the above.

question

Individually rational allocations are

answer

feasible and preferred to the initial endowment by both consumers.

question

In Cournot model, firms

answer

decide the quantities simultaneously.

question

In a typical cartel agreement, the cartel maximizes profit when it

answer

behaves like a monopoly.

question

A horizontal demand curve for a good could arise because consumers

answer

view this good as identical to another good.

question

Which of the following is most likely to be true?

answer

Income elasticity of demand for fur coats exceeds that of oatmeal.

question

Indifference curves that are thick violate the assumption of

answer

more is better.

question

If two indifferent curves were to intersect at a point, this would violate the assump- tion of

answer

transitivity.

question

If the price of one good increases while the price of the other good and the consumer's income remain unchanged, what will happen to the budget line?

answer

The budget line rotates inward from the intercept on the axis of the good that did not change in price.

question

If the prices of both goods and income increase by the same percentage, what will happen to the budget line?

answer

Nothing

question

An isoquant represents levels of capital and labor that

answer

yield the same level of output.

question

To say that isoquants are convex is to say that

answer

the marginal rate of technical substitution falls as labor increases.

question

The MRTS for the production function f(L,K) = min{L,2K}

answer

does not exist.

question

If the average cost of producing a good is increasing as a firm produces more of the good, then which of the following must be TRUE?

answer

AFC is falling. (b) AV C is rising.
(c) MC>AVC. (d) All of the above.

question

A firm with production function f(L, K) = L2 K 3 has

answer

economies of scale.

question

The result that perfectly competitive firms produce at the lowest per-unit cost in the long-run is derived from the assumptions of

answer

free entry and exit

question

If the inverse demand curve a monopoly faces is p = 100 − 2Q, then profit maxi- mization

answer

cannot be determined solely from the information provided.

question

If a monopoly can produce a good at zero marginal cost, then its Lerner Index is

answer

one

question

The existence of a deadweight loss associated with a monopoly can be seen because

answer

consumers are willing to pay more for the last unit of output than it cost to produce.

question

At a Nash equilibrium,

answer

question

Diminishing marginal rate of substitution means that

answer

The indifference curves are convex to the origin

question

If good x and y are imperfect substitutes

answer

The indifference curves are convex curves

question

As long as the principle of diminishing returns marginal utility is operating , any increased consumption of a good

answer

lowers marginal utility, but may raise total utility.

question

An indifference curve shows all the alternative combinations of two consumption goods that

answer

yield the same total utility

question

As long as all prices remain constant, an increase in income results in

answer

an increase in the intercept of the budget line

question

The substitution effect refers to

answer

the change in quantity demanded resulting from a change in relative prices, holding the level of satisfaction constant

question

The income effect of a price change

answer

may be positive or negative

question

If a good is normal, then the demand curve for that good must be

answer

downward sloping

question

When the substitution effect of a lowered price is counteracted by the income effect, the good in question is

answer

an inferior good

question

Price elasticity of demand is defined as

answer

the percentage change in quantity demanded resulting from a 1 percent change in price

question

If the demand for gasoline is relatively but not completely price inelastic, then it follows that

answer

a decrease in the price of gasoline would reduce the total amount spent on gasoline.

question

The income elasticity of demand

answer

equals the percentage change in demand for a good divided by the percentage change in the income of consumers, all else being equal

question

An isoquant curve shows

answer

all the alternative combinations of two inputs that yield the same maximum total product

question

The marginal rate of technical substitution is

answer

the rate at which a producer is able to exchange, without affecting the quantity of output produced, a little bit of one input for a little bit of another input

question

The expansion path identifies

answer

the least costly combination of inputs required to produce various levels of output

question

Which of the following statements about the relationship between marginal cost and average cost is correct?

answer

When MC is falling, AC is falling

question

The slope of the variable cost curve equals

answer

marginal cost

question

Being a price taker in a market means that the seller

answer

has no choice but to charge the equilibrium price that results from the market supply and demand curves

question

In perfect competition in the short run, if price falls, the firm will respond by

answer

reducing output along its marginal cost curve as long as marginal revenue exceeds average variable cost

question

All of the following are true about a monopolist except

answer

marginal revenue is greater than price

question

At a typical cournot equilibrium,

answer

total output level is above the monopoly and below the perfectly competitive market.

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