Micro quiz questions ch 6-14 - Assignment Essays

question

Suppose that the price of product X rises by 20 percent and the quantity supplied of X increases by 15 percent. The coefficient of price elasticity of supply for good X is

answer

less than 1, and therefore supply is inelastic.

question

Which of the following is not characteristic of the demand for a commodity that is elastic?

answer

Total revenue increases if price is increased.

question

An antidrug policy that reduces the supply of heroin might

answer

increase street crime because the addict's demand for heroin is highly inelastic.

question

The elasticity of demand for a product is likely to be greater,

answer

the greater the amount of time over which buyers adjust to a price change.

question

It takes a considerable amount of time to increase the production of pork. This implies that

answer

the short-run supply curve for pork is less elastic than the long-run supply curve for pork.

question

For which one of the following goods would we need to sum individual demand curves vertically to obtain the total demand curve?

answer

courts of law

question

The special-interest effect is one that yields

answer

large economic gains to a small number of people and small economic losses to a large number of people.

question

A perfectly inelastic demand schedule

answer

can be represented by a line parallel to the vertical axis.

question

The supply of product X is elastic if the price of X rises by

answer

5 percent and quantity supplied rises by 7 percent

question

The narrower the definition of a product,

answer

the larger the number of substitutes and the greater the price elasticity of demand.

question

The price elasticity of demand is generally

answer

negative, but the minus sign is ignored.

question

The pursuit through government for special benefits at someone else's expense refers to

answer

rent-seeking behavior.

question

The price elasticity of demand of a straight-line demand curve is

answer

elastic in high-price ranges and inelastic in low-price ranges.

question

Suppose that as the price of Y falls from $2.00 to $1.90, the quantity of Y demanded increases from 110 to 118. Then the absolute value of the price elasticity (using the midpoint formula) is approximately

answer

1.37.

question

Refer to the total revenue graph above. An increase in the quantity of product X demanded from 14,000 to 16,000 units implies that the price of product X was

answer

reduced and the demand is inelastic.

question

A leftward shift in the supply curve of product X will increase equilibrium price to a greater extent the

answer

more inelastic the demand for the product.

question

We would expect

answer

the demand for Coca-Cola to be more price elastic than the demand for soft drinks in general.

question

The law of diminishing returns results in

answer

a total product curve that eventually increases at a decreasing rate.

question

The law of diminishing marginal utility states that

answer

beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer.

question

The substitution effect

answer

refers to the change in the quantity demanded of a good due to a change in its relative price.

question

Diseconomies of scale occur mainly because

answer

of the inherent difficulties involved in managing and coordinating a large business enterprise.

question

Harvey quit his job at State University, where he earned $45,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.The economic profits of Harvey's firm in the first year were

answer

$160,000.

question

An industry is expected to expand if firms in the industry are earning positive

answer

economic profits.

question

The basic difference between the short run and the long run is that

answer

at least one resource is fixed in the short run, while all resources are variable in the long run.

question

Assume that a consumer purchases a combination of product A and product B such that the MUa/Pa = 8 and MUb/Pb = 6. To maximize utility without spending more money, the consumer should

answer

purchase more of product A and less of product B.

question

Suppose that you could either prepare your own tax return in 5 hours or hire a tax specialist to prepare it for you in 1 hours. You value your time at $22.00 an hour; the tax specialist will charge you $65 an hour. The opportunity cost of preparing your own tax return is

answer

$110.

question

Where total utility is at a maximum, marginal utility is

answer

zero.

question

Accounting profits are typically

answer

greater than economic profits because the former do not take implicit costs into account.

question

What do the income effect, the substitution effect, and diminishing marginal utility have in common?

answer

They all help explain the downsloping demand curve.

question

The long run is a period of time, or a time frame, in which

answer

the amount of all resources can be varied.

question

Which of the following is most likely to be an implicit cost for Company X?

answer

forgone rent from the building owned and used by Company X

question

Suppose you have a limited money income and you are purchasing products A and B, whose prices happen to be the same. To maximize your utility, you should purchase A and B in such amounts that

answer

their marginal utilities are the same.

question

The long-run average total cost curve

answer

indicates the lowest unit costs achievable when a firm has had sufficient time to alter plant size.

question

A firm reaches a break-even point (normal profit position) where

answer

total revenue and total cost are equal.

question

If a purely competitive decreasing-cost industry is realizing economic losses, we can expect industry supply to

answer

decrease, output to fall, price to rise, and profits to rise.

question

A purely competitive firm is precluded from making economic profits in the long run because

answer

of unimpeded entry to the industry.

question

Farmer Jones is producing wheat and must accept the market price of $8.50 per bushel. At this time, her average total costs and her marginal costs both equal $8.50 per bushel. Her minimum average variable costs are $6.25 per bushel. In order to maximize profits or minimize losses in the short run, farmer Jones should

answer

continue producing the same level of output.

question

We would expect an industry to expand if firms in that industry are

answer

earning economic profits.

question

A firm is producing an output such that the benefit from one more unit is more than the cost of producing that additional unit. This means the firm is

answer

producing less output than allocative efficiency requires.

question

Augi's Art Shack sells art supplies in a perfectly competitive market. The firm is currently realizing economic profits of $150,000 in the short run. In the long run we would expect Augi's to

answer

realize economic profits of $0.

question

In long-run equilibrium under pure competition, all firms will produce at minimum

answer

average total cost.

question

Price is constant to the individual firm selling in a purely competitive market because

answer

each seller supplies a negligible fraction of total supply.

question

If the price of product Y is $18 and its marginal cost is $25,

answer

resources are being overallocated to Y.

question

If the price of bottled water is $2.00 and the marginal cost of producing it is $1.50,

answer

resources are being underallocated to bottled water.

question

A perfectly elastic demand curve implies that the firm

answer

can sell as much output as it chooses at the existing price.

question

Suppose that Joe sells pork in a purely competitive market. The market price of pork is $4 per pound. Joe's marginal revenue from selling the 21st pound of pork would be

answer

$4.

question

A purely competitive seller should produce (rather than shut down) in the short run

answer

if total revenue exceeds total cost or if total cost exceeds total revenue by some amount less than total fixed cost.

question

In long-run equilibrium, purely competitive markets

answer

maximize the sum of consumer surplus and producer surplus.

question

In the long run, the price charged by a monopolistically competitive firm seeking to maximize profit will

answer

exceed MC but equal ATC.

question

If a pure monopolist is operating in a range of output where demand is elastic,

answer

marginal revenue will be positive but declining.

question

In the long run, a profit-maximizing monopolistically competitive firm sets it price

answer

above marginal cost.

question

Which of the following characteristics provide a monopolistically competitive firm some monopoly power?

answer

product differentiation

question

The demand curve confronting a nondiscriminating pure monopolist is

answer

the same as the industry's demand curve.

question

The nondiscriminating pure monopolist must decrease price on all units of a product sold in order to sell more units. This explains why

answer

marginal revenue is less than average revenue.

question

If the four-firm concentration ratio for industry X is 80,

answer

the four largest firms account for 80 percent of total sales.

question

Suppose that total sales in an industry in a particular year are $120 million and sales by the top four sellers are $30 million, $20 million, $15 million, and $10 million, respectively. We can conclude that

answer

this industry is an oligopoly.

question

Which of the following statements is correct?

answer

In the long run, purely competitive firms and monopolistically competitive firms earn zero economic profits, while pure monopolies may or may not earn economic profits.

question

At the profit-maximizing level of output for a monopolist,

answer

price is greater than marginal cost.

question

A monopolistically competitive firm has a

answer

highly elastic demand curve.

question

Refer to the diagram. In short-run equilibrium, the monopolistically competitive firm shown will set its price

answer

above ATC.

question

Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from

answer

relatively easy entry.

question

In the short-run equilibrium, a monopolist's profits

answer

may be positive, negative, or zero.

question

(Consider This) "Variety is the spice of life" is best applied to which market structure?

answer

monopolistic competition

question

The Herfindahl index

answer

gives much greater weight to larger firms than to smaller firms in an industry.

question

Economic analysis of a monopolistically competitive industry is more complicated than that of pure competition because

answer

of product differentiation and consequent product promotion activities.

question

One feature of pure monopoly is that the demand curve

answer

slopes downward.

question

An industry having a four-firm concentration ratio of 75 percent

answer

is an oligopoly.

1 of 67

question

Suppose that the price of product X rises by 20 percent and the quantity supplied of X increases by 15 percent. The coefficient of price elasticity of supply for good X is

answer

less than 1, and therefore supply is inelastic.

question

Which of the following is not characteristic of the demand for a commodity that is elastic?

answer

Total revenue increases if price is increased.

question

An antidrug policy that reduces the supply of heroin might

answer

increase street crime because the addict's demand for heroin is highly inelastic.

question

The elasticity of demand for a product is likely to be greater,

answer

the greater the amount of time over which buyers adjust to a price change.

question

It takes a considerable amount of time to increase the production of pork. This implies that

answer

the short-run supply curve for pork is less elastic than the long-run supply curve for pork.

question

For which one of the following goods would we need to sum individual demand curves vertically to obtain the total demand curve?

answer

courts of law

question

The special-interest effect is one that yields

answer

large economic gains to a small number of people and small economic losses to a large number of people.

question

A perfectly inelastic demand schedule

answer

can be represented by a line parallel to the vertical axis.

question

The supply of product X is elastic if the price of X rises by

answer

5 percent and quantity supplied rises by 7 percent

question

The narrower the definition of a product,

answer

the larger the number of substitutes and the greater the price elasticity of demand.

question

The price elasticity of demand is generally

answer

negative, but the minus sign is ignored.

question

The pursuit through government for special benefits at someone else's expense refers to

answer

rent-seeking behavior.

question

The price elasticity of demand of a straight-line demand curve is

answer

elastic in high-price ranges and inelastic in low-price ranges.

question

answer

1.37.

question

Refer to the total revenue graph above. An increase in the quantity of product X demanded from 14,000 to 16,000 units implies that the price of product X was

answer

reduced and the demand is inelastic.

question

A leftward shift in the supply curve of product X will increase equilibrium price to a greater extent the

answer

more inelastic the demand for the product.

question

We would expect

answer

the demand for Coca-Cola to be more price elastic than the demand for soft drinks in general.

question

The law of diminishing returns results in

answer

a total product curve that eventually increases at a decreasing rate.

question

The law of diminishing marginal utility states that

answer

beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer.

question

The substitution effect

answer

refers to the change in the quantity demanded of a good due to a change in its relative price.

question

Diseconomies of scale occur mainly because

answer

of the inherent difficulties involved in managing and coordinating a large business enterprise.

question

answer

$160,000.

question

An industry is expected to expand if firms in the industry are earning positive

answer

economic profits.

question

The basic difference between the short run and the long run is that

answer

at least one resource is fixed in the short run, while all resources are variable in the long run.

question

Assume that a consumer purchases a combination of product A and product B such that the MUa/Pa = 8 and MUb/Pb = 6. To maximize utility without spending more money, the consumer should

answer

purchase more of product A and less of product B.

question

answer

$110.

question

Where total utility is at a maximum, marginal utility is

answer

zero.

question

Accounting profits are typically

answer

greater than economic profits because the former do not take implicit costs into account.

question

What do the income effect, the substitution effect, and diminishing marginal utility have in common?

answer

They all help explain the downsloping demand curve.

question

The long run is a period of time, or a time frame, in which

answer

the amount of all resources can be varied.

question

Which of the following is most likely to be an implicit cost for Company X?

answer

forgone rent from the building owned and used by Company X

question

Suppose you have a limited money income and you are purchasing products A and B, whose prices happen to be the same. To maximize your utility, you should purchase A and B in such amounts that

answer

their marginal utilities are the same.

question

The long-run average total cost curve

answer

indicates the lowest unit costs achievable when a firm has had sufficient time to alter plant size.

question

A firm reaches a break-even point (normal profit position) where

answer

total revenue and total cost are equal.

question

If a purely competitive decreasing-cost industry is realizing economic losses, we can expect industry supply to

answer

decrease, output to fall, price to rise, and profits to rise.

question

A purely competitive firm is precluded from making economic profits in the long run because

answer

of unimpeded entry to the industry.

question

answer

continue producing the same level of output.

question

We would expect an industry to expand if firms in that industry are

answer

earning economic profits.

question

A firm is producing an output such that the benefit from one more unit is more than the cost of producing that additional unit. This means the firm is

answer

producing less output than allocative efficiency requires.

question

Augi's Art Shack sells art supplies in a perfectly competitive market. The firm is currently realizing economic profits of $150,000 in the short run. In the long run we would expect Augi's to

answer

realize economic profits of $0.

question

In long-run equilibrium under pure competition, all firms will produce at minimum

answer

average total cost.

question

Price is constant to the individual firm selling in a purely competitive market because

answer

each seller supplies a negligible fraction of total supply.

question

If the price of product Y is $18 and its marginal cost is $25,

answer

resources are being overallocated to Y.

question

If the price of bottled water is $2.00 and the marginal cost of producing it is $1.50,

answer

resources are being underallocated to bottled water.

question

A perfectly elastic demand curve implies that the firm

answer

can sell as much output as it chooses at the existing price.

question

Suppose that Joe sells pork in a purely competitive market. The market price of pork is $4 per pound. Joe's marginal revenue from selling the 21st pound of pork would be

answer

$4.

question

A purely competitive seller should produce (rather than shut down) in the short run

answer

if total revenue exceeds total cost or if total cost exceeds total revenue by some amount less than total fixed cost.

question

In long-run equilibrium, purely competitive markets

answer

maximize the sum of consumer surplus and producer surplus.

question

In the long run, the price charged by a monopolistically competitive firm seeking to maximize profit will

answer

exceed MC but equal ATC.

question

If a pure monopolist is operating in a range of output where demand is elastic,

answer

marginal revenue will be positive but declining.

question

In the long run, a profit-maximizing monopolistically competitive firm sets it price

answer

above marginal cost.

question

Which of the following characteristics provide a monopolistically competitive firm some monopoly power?

answer

product differentiation

question

The demand curve confronting a nondiscriminating pure monopolist is

answer

the same as the industry's demand curve.

question

The nondiscriminating pure monopolist must decrease price on all units of a product sold in order to sell more units. This explains why

answer

marginal revenue is less than average revenue.

question

If the four-firm concentration ratio for industry X is 80,

answer

the four largest firms account for 80 percent of total sales.

question

answer

this industry is an oligopoly.

question

Which of the following statements is correct?

answer

In the long run, purely competitive firms and monopolistically competitive firms earn zero economic profits, while pure monopolies may or may not earn economic profits.

question

At the profit-maximizing level of output for a monopolist,

answer

price is greater than marginal cost.

question

A monopolistically competitive firm has a

answer

highly elastic demand curve.

question

Refer to the diagram. In short-run equilibrium, the monopolistically competitive firm shown will set its price

answer

above ATC.

question

Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from

answer

relatively easy entry.

question

In the short-run equilibrium, a monopolist's profits

answer

may be positive, negative, or zero.

question

(Consider This) "Variety is the spice of life" is best applied to which market structure?

answer

monopolistic competition

question

The Herfindahl index

answer

gives much greater weight to larger firms than to smaller firms in an industry.

question

Economic analysis of a monopolistically competitive industry is more complicated than that of pure competition because

answer

of product differentiation and consequent product promotion activities.

question

One feature of pure monopoly is that the demand curve

answer

slopes downward.

question

An industry having a four-firm concentration ratio of 75 percent

answer

is an oligopoly.

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