question
The additional cost over and above the costs already incurred is called
answer
Marginal cost
question
The marginal benefit of going to a movie during the week is currently $6 for you. Assume that the $4 price of going to the movies measures its marginal cost. Following the economic decision rule, you will:
answer
Continue going to the movies until the marginal benefit of doing so falls below $4.
question
The net benefit forgone by not undertaking the next best alternative
answer
Opportunity cost
question
Brooke and Sandy both attend the same college and have the same expenses for both tuition, books, and supplies. However, Brooke is a famous actress who could earn $2 million per year if she were not attending college whereas Sandy could want $10,000 a year serving hamburgers if he were not attending college. It follows that the opportunity cost of attending college:
answer
Is greater for Brooke than for Sandy.
question
Which of the following statements about urban sprawl and traffic congestion is the best illustration of normative statement?
answer
Because Urban Sprawl is the result of individual choice, it is okay. (Opinion based, not factual)
question
The price mechanism that guides people's actions is called the:
answer
Invisible hand
question
Marginal analysis suggests that you will engage in more of an activity if the:
answer
Additional benefit from the activity exceeds the additional cost
question
"Government should not use price controls" is an example of:
answer
Normative economics
question
Private property rights:
answer
Are essential elements of a market economy
question
Which is not a characteristics of capitalism?
-freedom of enterprise
-private ownership of land
-worker freedom
-government ownership of capital
-freedom of enterprise
-private ownership of land
-worker freedom
-government ownership of capital
answer
Government ownership of capital
question
What refers to the control a private individual or firm has over an asset?
answer
Private property rights
question
Suppose that at the current price producers of CDs offer 5 million CDs for sale but consumers want to buy 6 million. When the market coordinates the demand and supply for CDs, the price of CDs will:
answer
Rise
question
In practice, distribution under socialism is primarily determined by:
answer
Central planners within the government
question
Which of the following occur in the real world?
-market failures but not government failures
-both market failures and government failures
-government failures but not market failures
-neither market failures nor government failures
-market failures but not government failures
-both market failures and government failures
-government failures but not market failures
-neither market failures nor government failures
answer
Both market failures and government failures
question
Jason is faced with two options: A BMW costing $40,000 gives him an additional 800 units of utility, and a laser printer costing $1,000 gives him an additional 25 units of utility. Rational choice theory would predict that he would choose:
answer
To purchase the laser printer
question
The supply and demand for thingamajigs is as follows:
Price; Quantity demanded; Quantity supplied
$10; 3; 7
$8; 4; 6
$6; 5; 5
$4; 6; 4
$2; 7; 3
-What is equilibrium price and quantity?
-At $10 there will be a (shortage/surplus) of ? units.
-Suppose the government places a price floor of $4 on the market. There would be a (surplus/shortage/no effect).
-Suppose the government places a price floor of $8 on the market. There would be a (surplus/shortage/no effect).
-Suppose a new technology is introduced that encourages sellers to produce a further two more units at each price. This would shift the (demand/supply) curve to the (right/left). The new equilibrium price is (?) and quantity is (?) units.
Price; Quantity demanded; Quantity supplied
$10; 3; 7
$8; 4; 6
$6; 5; 5
$4; 6; 4
$2; 7; 3
-What is equilibrium price and quantity?
-At $10 there will be a (shortage/surplus) of ? units.
-Suppose the government places a price floor of $4 on the market. There would be a (surplus/shortage/no effect).
-Suppose the government places a price floor of $8 on the market. There would be a (surplus/shortage/no effect).
-Suppose a new technology is introduced that encourages sellers to produce a further two more units at each price. This would shift the (demand/supply) curve to the (right/left). The new equilibrium price is (?) and quantity is (?) units.
answer
-$6; 5 units
-surplus of 4 units
-no effect
-surplus
-supply; right
-$4; 6 units
-surplus of 4 units
-no effect
-surplus
-supply; right
-$4; 6 units
question
Review the effects of different events on the supply/demand curve
answer
Exam 1 Q 18
question
Review the marginal utility chart
answer
Exam 1 Q19
question
A graphic representation of the relationship between price and quantity demanded is known as the
answer
Demand curve
question
A(n) _______________________________ is a government-imposed limit on how high a price can be charged. In other words, a government-set price below the market equilibrium price.
answer
Price ceiling
question
The rule that utility is maximized when the ratios of the marginal utility to price of two goods are equal is called the ____________________ rule.
answer
Utility maximizing
question
People can reasonably expect that an economic system will decide all of the following except:
answer
How to assign initial property rights
question
Scarcity exists because
answer
New wants continue to develop and willingness to meet them is limited
question
Alexandra has determined that studying an hour for her economics quiz will improve her grade on the quiz from 75 to 100. She also determines that this improvement is worth $20. To study for an hour for her economics quiz, however, she will have to work one fewer hour at her part-time job. Alexandra should:
answer
study for the quiz as long as her hourly wage rate is less than $20.
question
Mary buys cell-phone services from a company that charges $30 per month. For that $30 she is allowed 600 minutes of free calls and then pays 10 cents per minute for any calls above 600 minutes. Mary has used 600 minutes this month so far. What is her marginal cost per minute of making additional calls?
answer
10 cents
question
If the percentage change in quantity is greater than the percentage change in price (E > 1) then the demand or supply curve is said to be ____________________.
answer
Elastic
question
Assuming government's goal is to benefit society as much as possible:
answer
actions with negative externalities should be restricted and actions with positive externalities should be encouraged.
question
What do economists mean when they say there is "market failure"?
answer
Free markets yield results that economists do not consider socially optimal.
question
Alex is playing his music at full volume in his dorm room. The other people living on his floor find this to be nuisance, but Alex does not care. Alex's music playing is an example of a:
answer
Negative externality
question
The cost of running an electrical utility includes costs for fuel, labor, and capital. In addition, there are sometimes costs associated with pollution from the utility, such an increased health-care costs for people living near the utility. To an economist, the costs associated with the pollution resulting from additional electricity are:
answer
The difference between marginal social costs and marginal private costs
question
The best example of a public good is:
-competition
-pollution
-government-subsidized lunches
-national defense
-competition
-pollution
-government-subsidized lunches
-national defense
answer
National defense
question
Specialization according to comparative advantage means that a country is producing the goods:
answer
For which it has a relatively low opportunity cost
question
Assume that in Canada the opportunity cost of producing one television set is two bushels of wheat. Assume that in the United States the opportunity cost of producing one bushel of wheat is two television sets. If these two countries specialize according to comparative advantage and then trade with each other:
answer
The United States will import wheat and export TVs
question
Which of the following statements correctly summarizes a difference between the layperson's and the economist's views of the net benefits of trade?
answer
Economists often argue that the gains from trade in the form of low consumer prices tend to be widespread and not easily recognizable while the costs in jobs lost tend to be concentrated and readily identifiable.
question
The foreign exchange market is the market in which:
answer
Currencies of different countries and bought and sold
question
Economic profit is:
answer
implicit and explicit revenues minus implicit and explicit costs
question
____________________ is the difference between what consumers would have been willing to pay and what they actually pay. Also, the value the consumer gets from buying a product less its price.
answer
Consumer surplus
question
Which of the following is the best example of a long-run decision?
answer
An automobile manufacturing company considering whether to invest in robotic equipment to develop a more cost-effective production technique.
question
Fixed costs plus variable costs equal:
answer
Total costs
question
Refer to the table shown. Marginal cost is minimized when how many units of output are produced?
Units of Output; Total Cost
0;5
1;11
2;16
3;20
4;23
5;25
6;26
Units of Output; Total Cost
0;5
1;11
2;16
3;20
4;23
5;25
6;26
answer
6
question
Know what a correct set of cost curves graph looks like
answer
Exam 2 Q16
question
Know how to internet a supply v demand graph in relation to consumer/producer surplus; taxes; deadweight loss
answer
Exam 2 Q17
question
Suppose the current exchange rate between Japanese yen and U.S. dollars is: ¥50 = $1. You import widgets to the United States for resale. Ignore costs such as transportation and warehousing. The price of a Japanese widget (in Japan) is ¥100.
-The Price of a widget in US dollars is (?)
-Suppose the exchange rate changes to ¥25 = $1. The new price in US dollars is (?)
-At the new exchange rate the yen (appreciates/depreciates)
-At the new exchange rate sales of Japanese widgets in the US (increase/decrease)
-At the new exchange rate sales of US goods in Japan (increase/decrease)
-The Price of a widget in US dollars is (?)
-Suppose the exchange rate changes to ¥25 = $1. The new price in US dollars is (?)
-At the new exchange rate the yen (appreciates/depreciates)
-At the new exchange rate sales of Japanese widgets in the US (increase/decrease)
-At the new exchange rate sales of US goods in Japan (increase/decrease)
answer
$2
$4
appreciates
decrease
increase
$4
appreciates
decrease
increase
question
Labor vs Total product
0;0
1;4
2;9
3;13
4;16
-The marginal product of the 1st worker is
-The marginal product of the 2nd worker is
-The marginal product of the 3rd worker is
-Diminishing marginal utility starts after worker #
-Average product at the 4th worker is (?) units
0;0
1;4
2;9
3;13
4;16
-The marginal product of the 1st worker is
-The marginal product of the 2nd worker is
-The marginal product of the 3rd worker is
-Diminishing marginal utility starts after worker #
-Average product at the 4th worker is (?) units
answer
-4
-5
-4
-2
-4 units
-5
-4
-2
-4 units
question
A(n) ____________________ refers to the effect of a decision on a third party not taken into account by the decision maker.
answer
Externality
question
The ____________________ is a change in the exchange rate so that one currency buys fewer units of a foreign currency.
answer
Currency depreciation
question
Costs that change as output changes are called ____________________.
answer
Variable costs
question
An economist estimates the elasticity of demand for baseball tickets to be 0.23. Using this information, a club that wants to raise revenues should:
answer
Increase ticket prices
question
If elasticity of demand is greater than 1:
answer
A rise in price lowers total revenue
question
If average movie ticket prices rise by about 5 percent and attendance falls by about 2 percent, other things being equal, the elasticity of demand for movie tickets is about:
answer
0.4
question
If the minimum that the Smith family would be willing to sell their house for is $185,000, but they in fact sell it for $210,000, they will receive:
answer
Producer surplus in the amount of $25,000
question
____________________ costs are costs that are spent and cannot be changed in the period of time under consideration.
answer
Fixed
question
Economies of scale are associated with:
answer
Indivisible setup costs
question
Constant returns to scale mean that in the long run:
answer
ATC does not change as output increases
question
Which of the following is necessary conditions for perfect competition?
-indivisible setup costs
-differentiated products
-no barriers to entry
-diminishing utility
-indivisible setup costs
-differentiated products
-no barriers to entry
-diminishing utility
answer
No barriers to entry
question
Perfectly competitive firms:
answer
are price takers, since they are not large enough to influence the market price
question
Know how to read a graph as it relates to a competitive firm
answer
Exam 3 Q6
question
A perfectly competitive firm in the long run:
answer
Makes zero economic profit
question
The existence of positive economic profits in a competitive market induces firms to:
answer
enter an industry, which shifts the market supply curve to the right and decreases market price
question
A monopoly firm is different from a competitive firm in that:
answer
a monopolist can influence market price whereas a competitive firm cannot
question
A monopolist:
answer
Can earn profits or incur a loss in the short run
question
Under monopolistic competition, a firm's ability to influence the price of the product it sells arises because:
answer
The product of each seller is differentiated from that of others
question
____________________ refers to a situation when long-run average total costs decrease as output increases.
answer
Economies of scale
question
Strategic decision making is most likely to occur in which market structure?
answer
Oligopoly
question
A market structure in which there are a few interdependent firms is called:
answer
Oligopoly
question
Cartels are organizations that:
answer
coordinate the output and pricing decisions of a group of firms
question
According to the kinked demand curve theory of sticky prices, in an oligopolistic market:
answer
the kinked demand curve is elastic in the upper portion and inelastic in the lower portion of the curve
question
In the long run, a transportation company can own either 1, 2, 3, or 4 trucks. An accountant estimates the short-run average cost curve at each choice of trucks owned. In the graph, SATC1 is the short run average cost curve if the firm had one truck, SACT2 with two trucks, and so forth.
answer
Look at Exam 3 Q17
question
Know how to read profit maximizing-type graphs
answer
Exam 3 Q18
question
Use the following data on revenue by firm:
Company
Revenue ($ mil.)
A;70
B;50
C;30
D;20
E;20
F;10
-The 4-firm concentration ratio is (?)%
-Based on this ratio, the industry appears to be (?)
Company
Revenue ($ mil.)
A;70
B;50
C;30
D;20
E;20
F;10
-The 4-firm concentration ratio is (?)%
-Based on this ratio, the industry appears to be (?)
answer
85%
an oligopoly
an oligopoly
question
Here is data on companies' revenue in an industry:
Firm; Revenue ($ mil.)
A; 50
B; 25
C; 25
-The Herfindahl-Hirschman Index for this industry is
-This industry is (highly/lightly) concentrated.
-Pricing decisions made in this industry are likely to be (independent/interdependent).
Firm; Revenue ($ mil.)
A; 50
B; 25
C; 25
-The Herfindahl-Hirschman Index for this industry is
-This industry is (highly/lightly) concentrated.
-Pricing decisions made in this industry are likely to be (independent/interdependent).
answer
-3750
-highly
-interdependent
-highly
-interdependent
question
____________________ is the change in total revenue associated with a change in quantity.
answer
Marginal revenue
question
The ____________________ point is the point below which the firm will be better off if it temporarily shuts down than it will if it stays in business.
answer
Shutdown
question
A(n) ____________________ is a market structure in which one firm makes up the entire market.
answer
Monopoly
question
Total fixed costs:
answer
Are positive even when no output is produces
question
If marginal cost is less than average total cost:
answer
average total cost is decreasing with output
question
The long-run average cost of producing 12 units of output is $54; the long-run average cost of producing 13 units is $56. These numbers illustrate:
answer
Diseconomies of scale
question
The law of diminishing marginal productivity does not apply in the long run because:
answer
No inputs are fixed in the long run
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