question
The value of the best thing you give up to get something is...
answer
opportunity cost
question
Suppose I buy a nice dinner for $15. I was willing to pay $25 for it, and the restaurant would have been willing to sell it for as little as $11. What is the total gain to both sides?
answer
14
question
A country with a comparative advantage in producing a good...
answer
has the highest opportunity cost of production.
question
If the opportunity cost of watching one episode of your favorite show on Netflix is the $5 you would have earned from working for half an hour, then the opportunity cost of working for an hour is watching __ episodes of your favorite show on Netflix.
answer
2
question
The opportunity cost for you to prepare a decent meal is one hour of work, which would earn you $10. The opportunity cost for Chef Enzo to prepare a decent meal is five minutes of work, which would earn him $2. Which of the following terms of trade would benefit you and Chef Enzo?
answer
Chef Enzo prepares a meal for you for $8
question
Qualcomm and Crucial are two companies making computing components: memory and processors. According to their production possibilities frontiers above, which of the following is correct?
answer
Crucial has a comparative advantage in processors.
question
Suppose the price of tomato sauce is $4 per jar, but then rises to $7 per jar. The Law of Demand states that...
answer
quantity demanded will fall.
question
Suppose the administration of FSU decides to fire all advisors and administrators, leaving only faculty, cleaning staff, and support staff, and by doing so it manages to cut costs significantly. The price of one year's tuition at FSU falls from $6,500 to $4,000. Which of the following will occur, ceteris paribus?
answer
The quantity of students who choose to attend FSU will rise.
question
Consider the supply curve for sour cream. If the price of sour cream falls, then...
answer
the quantity supplied will fall.
question
Consumer Surplus is...
answer
The difference between what consumers are willing to pay and what they actually pay.
question
Producer Surplus is...
answer
The area above the supply curve and below the price.
question
When is equilibrium efficient?
answer
In a perfectly competitive market
question
You are operating a house painting business (because you got so good at it from painting your own house). You currently have yourself and two other employees, and you can paint a total of 2 rooms per day. Adding a fourth worker will allow you to paint an additional 0.5 rooms per day. What does adding the fourth worker do to your average product?
answer
average product falls
question
Suppose your company has $1 million in explicit costs, and could rent out its buildings to earn a revenue of $0.5 million. Its equipment could be rented out for another $0.25 million. What is your economic cost?
answer
$1.75 million
question
Which of the following companies is not likely to be able to benefit from significant economies of scale?
answer
Taylor's Tailors, a company that makes unique bespoke (i.e., custom) suits for men.
question
Your company produces 5000 doodads at a total cost of $2 million. It sells them for $600 each. What is your company's profit?
answer
1 mil
question
Which of the following goods best fits the assumptions underlying perfect competition?
answer
common wheat
question
In the long run in a perfectly competitive market, economic profit will tend to converge toward, and stay around,
answer
zero economic profit.
question
Here's a question straight off of an old exam: In a decreasing cost industry, as firms exit the industry and industry output decreases, costs will...
answer
rise
question
Suppose the market for onions is perfectly competitive, and it's an increasing cost industry. Also suppose that right now, firms are making positive economic profits. When this market reaches a long run equilibrium, will the price be higher or lower than it is right now?
answer
The price will be lower
question
What is the rule for profit maximizing
answer
MC=MR
question
The efficient amount of output is where the marginal cost to society is equal to the marginal benefit to society. Is this where the monopolist produces?
answer
No, the efficient output is where MC = D, because Demand represents the marginal benefits to society.
question
Which of these answers correctly ranks the markets from most competitive to least competitive?
answer
Wheat, Cable providers
question
First Degree Price Discrimination
answer
occurs when a business charges the maximum possible price for each unit consumed
question
2nd degree price discrimination
answer
Quantity based pricing (non-linear)
question
3rd degree price discrimination
answer
charging different prices to people with differing observable characteristics
question
Price Discriminations are only possible if:
answer
different consumers have different own-price elasticity of demand
Consumers cannot easily resell products
Firms face downward sloping demand (not perfectly competitive industry)
Consumers cannot easily resell products
Firms face downward sloping demand (not perfectly competitive industry)
question
Is a monopoly efficient?
answer
NO
question
Increasing-Cost Industry
Version A
Version A
answer
When firms enter, and industry output increases, costs rise
question
Increasing-Cost Industry
Version B
Version B
answer
When firms exit, and industry output decreases, costs fall
question
constant cost industry
version a and b
version a and b
answer
When firms enter/exit and industry output increases/decreases, costs stay the same
question
Decreasing Cost Industry
Version a
Version a
answer
When firms enter and industry output increases, costs fall
question
Decreasing Cost Industry
Version B
Version B
answer
When firms exit and industry output decreases, costs rise
question
binding price ceiling creates
answer
shortage due to supply being less than demand
question
binding price floors create
answer
surpluses
question
Are price discriminations efficient?
answer
generally efficient, increases output
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