Microeconomics ALL Chapters

Market failure is a term used to describe what happens whenever governments intervene into markets (e.g., the imposition of a price control).

Since it is possible to grow coffee in the United States, we should clearly create a U.S. coffee industry and no longer import coffee from Brazil.

Microeconomics is the branch of economics in which you study inflation and unemployment in the economy.

An entrepreneur organizes the other factors of production and bears the business risk.

One topic that microeconomics explores is how prices are determined in individual markets, while macroeconomics is concerned with issues such as the economy's overall rate of inflation, economic growth and unemployment.

A testable proposition that predicts how people will react to changed circumstances is called a hypothesis.

Normative analysis focuses on statements that can be tested against real-world data.

Economists believe that the stiff penalties for drug trafficking in Singapore do not affect the decision making of those who traffic in drugs

Human capital consists of computers, tools, and equipment owned by private individuals.

Most disagreements among economists stem from normative issues.

A technological advance that reduces the cost of producing computers will shift the supply curve of computers to the right.

If the "nominal price" of a good has risen by 10 percent over a period of time, its relative price must also have risen.

If the price of pizza falls, the demand for pizza will rise.

Ceteris paribus, if doctors were to discover that eating spinach reduces a person's cholesterol (a major cause of heart disease), the demand curve for spinach will shift to the right.

When both the supply and demand curves shift in the same direction, the change in equilibrium quantity will be in the same direction as the shifting curves.

When the relative price of steak falls, we would expect people to buy a greater quantity of steak.

Price "floors" get their name from the fact that they represent a minimum price below which the legal price cannot fall.

If watermelons are normal goods, the demand for them will rise as the income of consumers rises.

With knowledge about the direction (but not magnitude) of simultaneous supply and demand curves shifts, one can always determine the direction of changes in both equilibrium price and quantity.

The main purpose of government price controls is to keep prices at equilibrium levels.

Inoculation against communicable diseases is an example of an activity that generates positive externalities.

Economists do not think it is possible to compare the relative satisfaction derived from consumption across individuals.

An example of a public good is a flood control project that protects all the homes and properties near a river.

If the world supply of diamonds increases, the market price of diamonds decreases, and the consumer surplus derived by diamond consumers increases.

The law of diminishing marginal utility is consistent with the consumer behavior that produces a negatively sloped demand curve.

An externality is present whenever an activity has a physical impact (costs or benefits) on individuals not directly involved in the activity.

If Baxter is willing to pay $10 for a haircut and actually pays $10 for a haircut, his consumer surplus is $20.

Admission to Disney World is an example of a private good from which nonpaying individuals can be excluded.

Information supplied to consumers by the government sometimes helps better decisions to be made.

Consumers should purchase quantities of a good to the point where the marginal utility from consumption is equal across all goods.

At consumer equilibrium income is allocated to purchases so that the ratio of marginal utility to price is equal for different goods.

Utility theory is an efficient tool in making interpersonal utility comparisons

The total utility from consuming five muffins is 14, 24, 35, 43, and 50 utils, respectively. Marginal utility begins to diminish after consuming the first muffin.

If a university cafeteria changes from selling each food item separately to offering all-you-can-eat meals for one low price, one would expect that the marginal utility of the last food item consumed in the cafeteria by the typical student would decrease since more food is now likely to be consumed by students who eat a meal in the cafeteria.

If total utility from consuming five cups of coffee is 10, 22, 32, 41, and 49 utils, respectively, the marginal utility of the fourth cup of coffee is 9.

When a person's income doubles, her consumption of each good will double in order for her to stay in consumer equilibrium.

If two commodities are perfect complements, the indifference curve is a straight line.

If the indifference curve is steep, the marginal rate of substitution is high.

Higher indifference curves represent lesser satisfaction.

As long as a person had to pay a positive price for a good, he would never consume to the point where his total utility was falling with additional consumption.

In the long run, firms can vary all inputs in the production process.

Ray Tucker has run his company, Tucker's Towing and Wrecking, for two years and has made an accounting profit of $34,000 each year. As long as Tucker's Towing continues to make accounting profits, it is rational to remain in the towing business.

When marginal cost exceeds the average variable cost, average variable cost must be increasing.

The law of diminishing marginal product provides an explanation for why average total cost eventually increases as output is expanded in the short run.

An increase in the price of raw materials will shift both the MC and the ATC curves upward.

One would expect to observe a diminishing marginal product of labor when crowded office space reduces the productivity of new workers.

In the short run, all costs are variable.

The total fixed cost of operating a lumberyard equals $12,000 this year. The average fixed cost of the lumberyard will not be affected by the quantity of lumber that is sold.

Total cost equals total variable cost plus marginal cost.

In the short run, some costs are fixed.

In a perfectly competitive market, marginal revenue is the same as the market price.

Whenever marginal revenue is greater than marginal cost, a profit-maximizing firm should reduce its output.

As an industry's output increases, the industry's demand for the inputs that it uses will also increase.

The demand curve faced by a perfectly competitive firm is vertical.

A perfectly competitive firm faces a perfectly elastic demand curve.

In order to maximize profits, a firm should produce the level of output at which total revenue is maximized.

In a constant cost industry, the cost curves of individual firms will shift upward as the industry output expands.

Monopolies will tend to produce a greater quantity and charge higher prices than perfectly competitive industries.

The market demand curve in a perfectly competitive industry is horizontal, while the demand curve faced by an individual perfectly competitive firm is downward sloping.

In long-run equilibrium, a perfectly competitive firm produces the output level that minimizes average total cost.

Suppose society is producing a perfectly competitive good or service at the lowest possible cost in the long run. Which one of the following is false?

A monopolist will shut down in the short run if:

In the long run a perfectly competitive firm operates ____ and a monopolistically competitive firm operates ____.

The key characteristic of oligopoly markets is "interdependence among firms." This means that:

Other things being equal, the less elastic demand is:

Scarcity

Economics

A theory asserts that consumers will purchase less of a good at higher prices than they will at lower prices. However, when the average prices of cars increased throughout the 1990s, more cars purchased. Which of the following best explains the apparent conflict between theory and data

The fallacy of composition is

"The government should levy higher taxes on the rich and use the additional revenues to provide better housing for the poor." This statement illustrates

The opportunity cost of going to college includes

Consider a production possibilities curve for an economy producing bicycles and video game players. It is possible to increase the production of bicycles without sacrificing video game players if:

What would cause the quantity of wheat bread demanded to increase, but not the demanded?

Which is most likely to be an example of a normal good?
a. lottery tickets
b. generic peanut butter
c. public transportation
d. a large SUV

On a graph, decrease in demand and an increase in supply are indicated by

Coca-cola bottlers increased their prices as the price of sugar (an important ingredient in producing Coke) rose sharply in the late 1980s. Under these circumstances, the increase in the price of Coke occurs as a result of a decrease in:
a. supply
b. demand
c. both demand and supply

In general, an increase in price could be caused by either:

At the current price of good Y, there is a shortage. As a result, what would we expect to happen to price, quantity demanded, and quantity supplied?

Bailey's Barber Shop knows that a 15% increase in the price of their haircuts results in a 5% decrease in the number of haircuts purchased. What is the elasticity of demand facing Bailey's Barber Shop?

Certain good are related such that an increase in the price of one good decreases the demand for the other. These goods are called:

For a given reduction in demand for a product, the decrease in price will be greater the more _____ the supply is

(True or False) For perfectly elastic supply, an increase in price will not change the quantity supplied.