Microeconomics - final exam review (Chapters 10-12)

question

Microeconomics can best be defined as the study of

answer

The economic behavior of individual decision makers

question

Which of the following is an example of a positive statement

answer

An increase in the price of gas will cause a reduction in the amount purchased

question

The higher the opportunity cost of attending college

answer

the less likely an individual will go to college

question

A production possibilities frontier is bowed out from the origin because

answer

in general resources are not perfect substitutes

question

In a pure capitalist economy, what to produce is primarily decided by

answer

consumers

question

Which of the following is true about the sole proprietorship in the United States?

answer

It is the most prevalent form of business organization

question

The main source of revenue for the U.S. federal government is

answer

personal income taxes

question

If the quantity demanded of a good exceeds the quantity supplied then

answer

the market place price will rise

question

Assume the market for the inferior good X is in equilibrium. A simultaneous decrease in consumer incomes and the number of firms producing good X would definitely

answer

increase the equilibrium price

question

Assume that beef is $2.50 per pound and that pork is $3.00 per pound. If an increase in the supply of beef causes its price to fall to $2.00 per pound then

answer

the demand for pork will decrease

question

Assume that over the period 1981 to 1984 bicycle prices rose 25% and the quantity sold more than doubled. Which of the following statements can explain this event?

answer

Supply remained unchanged and demand increased during the 1981 to 1984 period.

question

If refinery workers receive an increase in their hourly wage, ceteris paribus, then one should expect

answer

a decrease in the supply of refined petroleum products

question

Suppose the equilibrium price for bread is $0.80 a loaf. If the government imposes a price ceiling of $1.20,

answer

the market will remain in equilibrium as the quantity sold will remain the same.

question

The price elasticity of supply

answer

is greater in the long run than in the short run

question

The more rapidly the costs of production rise as output is expanded

answer

the smaller is the price elasticity of supply

question

If supply is perfectly price elastic, the supply curve is

answer

horizontal

question

When the demand for a good is perfectly price inelastic

answer

the price of the good will rise by the full amount of any sales tax placed on the good

question

The transportation authority of a major city decided to lower fares on buses from $1 to $0.75. As a result ridership increased from 10,000 per week to 16,000 per week. It can be concluded that

answer

the demand for the bus rides is price elastic

question

If total utility is at a maximum then marginal utility must be

answer

zero

question

If the price good X falls, then the resulting increase in the amount consumed will

answer

increase the total utility from consumption of the good

question

In the long run

answer

all of the firm's resources are available

question

Economic profit is defined as

answer

total revenue minus the opportunity cost of production

question

If average total cost is rising

answer

marginal cost must be greater than average total cost

question

An increase in market demand will result in perfectly competitive firm

answer

producing more output and receiving a higher price for its output

question

A perfectly competitive firm's short run supply curve is

answer

its marginal cost curve above the minimum point of the average variable cost curve

question

Assume a perfectly competitive constant cost industry is in long run equilibrium. Now assume an increase in demand occurs. In the long run

answer

the new equilibrium price will be the same but the number of firms and industrial output will be greater

question

If marginal cost equals marginal revenue at a point greater than average total cost, the perfectly competitive firm will

answer

make a positive economic profit

question

In the long run a monopolist

answer

can earn a positive level of economic profit as long as there are barriers to entry

question

For a monopolist, marginal revenue is less than price becasue

answer

the demand curve the monopolist faces is downward sloping

question

A monopolist

answer

is constrained by the market demand curve in setting the price of its output

question

The demand curve a monopolist faces

answer

is the market demand curve

question

The solution in the prisoner's dilemma is called the

answer

dominant strategy equilibrium

question

If in the short run firms in a moralistically competitive industry are earning positive economic profits, then in the long-run

answer

the demand curve of the typical firm will shift to the left

question

Regardless of the class of oligopoly, if positive economic profits are to exist in the long run oligopolistic firms must

answer

prevent entry into the industry

question

Which of the following statements concerning monopolistic competition in the long run is incorrect?

answer

The firm will operate at the minimum point of the average total cost curve.

question

A cartel is

answer

a group of oligopolistic firms that engage in formal collusion

question

If costs are the same under both perfect competition and monopolistic competition, then in long run equilibrium prices will be

answer

higher under monopolistic competition

question

A firm's demand for a resource is a

answer

derived demand

question

We tend to see permanent price differentials in land because

answer

location is the inherent quality that often determines its value

question

When all of the returns to a resource are in the form of economic rent

answer

the price of that resource is determined exclusively by demand

question

People who can earn higher market wages, other things constant, will

answer

be more inclined to supply their labor to market work than to nonmarket work

question

Because leisure is a normal good, an increase in income

answer

increases your demand for leisure time and reduces your allocation of time to market work and/or nonmarket work

question

The income and substitution effects of a change in the wage rate

answer

always work in the opposite directions

question

In order to be successful, an inclusive union must

answer

organize most workers in the industry

question

The United Auto Workers union is an example of

answer

an inclusive union

question

One way a union can increase wages in a competitive labor market is by

answer

doing any of the above

question

Winning the $100 million top prize in a state lottery will tend to, ceteris paribus

answer

decrease an individual's supply of labor

question

Two workers are employed in the same job by the same firm, however, they are paid different wage rates. This could be explained by differences in

answer

their ability

question

Monopolistic competition is similar to

answer

monopoly in that the firms face downward-sloping demand curves and similar to perfect competition in that the firms can only earn zero economic profit in the long run

question

Monopolistic competition is distinguished from perfect competition in that monopolistic competitors produce

answer

differentiated products

question

As new monopolistically competitive firms enter the market, the demand facing each firm in the market ____, causing the price charged by each firm to eventually ______. In the long run, each firm will earn a _____ economic profit.

answer

falls; fall; zero

question

Which of the following characteristics distinguishes oligopoly from all other market structures?

answer

interdependence among firms in the industry

question

In both monopolistic competition and oligopoly,

answer

the marginal revenue curve lies below the demand curve

question

The dominant-strategy solution implies that each firm

answer

ignores the decisions of the other firms

question

Because the demand for labor is based on the demand for products, the demand for labor is called

answer

a derived demand

question

Economic rent can be defined as

answer

the payment to a resource above its opportunity cost

question

The marginal revenue product of land indicates

answer

the additional revenue the firm earns when it employs an additional unit of land, other things constant

question

Monopolistically competitive industries consist of

answer

many firms, each selling a slightly different product

question

A monopolistically competitive firm can raise price somewhat due to

answer

product differentiation

question

It is difficult to explain the behavior of firms in an oligopoly because in oligopoly

answer

there is interdependent behavior

question

A monopolistically competitive firm's demand curve is

answer

more price elastic than a monopolist's, but less price elastic than a perfectly competitive firm's

question

Oligopolistic industries consist of

answer

a few interdependent parts

question

Derived demand refers to

answer

demand for a resource derived from the demand for the product produced by that resource

question

As resources move from low-valued uses in a resource market to highly-valued uses in another resource market, the price paid to the resource in the highly-valued market will

answer

decrease

question

When resources are free to adjust and resources are mobile then temporary price differentials will cause

answer

1) No change in the allocation of resources
2) over time the equalization of payments for the same resources in different uses assuming the non monetary benefits are the same

question

The payment made to an owner of a resource in excess of the opportunity cost of the resource is

answer

economic rent

question

A resource price taker's resource demand curve is

answer

the same as its marginal revenue product curve

1 of 67

question

Microeconomics can best be defined as the study of

answer

The economic behavior of individual decision makers

question

Which of the following is an example of a positive statement

answer

An increase in the price of gas will cause a reduction in the amount purchased

question

The higher the opportunity cost of attending college

answer

the less likely an individual will go to college

question

A production possibilities frontier is bowed out from the origin because

answer

in general resources are not perfect substitutes

question

In a pure capitalist economy, what to produce is primarily decided by

answer

consumers

question

Which of the following is true about the sole proprietorship in the United States?

answer

It is the most prevalent form of business organization

question

The main source of revenue for the U.S. federal government is

answer

personal income taxes

question

If the quantity demanded of a good exceeds the quantity supplied then

answer

the market place price will rise

question

Assume the market for the inferior good X is in equilibrium. A simultaneous decrease in consumer incomes and the number of firms producing good X would definitely

answer

increase the equilibrium price

question

Assume that beef is $2.50 per pound and that pork is $3.00 per pound. If an increase in the supply of beef causes its price to fall to $2.00 per pound then

answer

the demand for pork will decrease

question

Assume that over the period 1981 to 1984 bicycle prices rose 25% and the quantity sold more than doubled. Which of the following statements can explain this event?

answer

Supply remained unchanged and demand increased during the 1981 to 1984 period.

question

If refinery workers receive an increase in their hourly wage, ceteris paribus, then one should expect

answer

a decrease in the supply of refined petroleum products

question

Suppose the equilibrium price for bread is $0.80 a loaf. If the government imposes a price ceiling of $1.20,

answer

the market will remain in equilibrium as the quantity sold will remain the same.

question

The price elasticity of supply

answer

is greater in the long run than in the short run

question

The more rapidly the costs of production rise as output is expanded

answer

the smaller is the price elasticity of supply

question

If supply is perfectly price elastic, the supply curve is

answer

horizontal

question

When the demand for a good is perfectly price inelastic

answer

the price of the good will rise by the full amount of any sales tax placed on the good

question

The transportation authority of a major city decided to lower fares on buses from $1 to $0.75. As a result ridership increased from 10,000 per week to 16,000 per week. It can be concluded that

answer

the demand for the bus rides is price elastic

question

If total utility is at a maximum then marginal utility must be

answer

zero

question

If the price good X falls, then the resulting increase in the amount consumed will

answer

increase the total utility from consumption of the good

question

In the long run

answer

all of the firm's resources are available

question

Economic profit is defined as

answer

total revenue minus the opportunity cost of production

question

If average total cost is rising

answer

marginal cost must be greater than average total cost

question

An increase in market demand will result in perfectly competitive firm

answer

producing more output and receiving a higher price for its output

question

A perfectly competitive firm's short run supply curve is

answer

its marginal cost curve above the minimum point of the average variable cost curve

question

Assume a perfectly competitive constant cost industry is in long run equilibrium. Now assume an increase in demand occurs. In the long run

answer

the new equilibrium price will be the same but the number of firms and industrial output will be greater

question

If marginal cost equals marginal revenue at a point greater than average total cost, the perfectly competitive firm will

answer

make a positive economic profit

question

In the long run a monopolist

answer

can earn a positive level of economic profit as long as there are barriers to entry

question

For a monopolist, marginal revenue is less than price becasue

answer

the demand curve the monopolist faces is downward sloping

question

A monopolist

answer

is constrained by the market demand curve in setting the price of its output

question

The demand curve a monopolist faces

answer

is the market demand curve

question

The solution in the prisoner's dilemma is called the

answer

dominant strategy equilibrium

question

If in the short run firms in a moralistically competitive industry are earning positive economic profits, then in the long-run

answer

the demand curve of the typical firm will shift to the left

question

Regardless of the class of oligopoly, if positive economic profits are to exist in the long run oligopolistic firms must

answer

prevent entry into the industry

question

Which of the following statements concerning monopolistic competition in the long run is incorrect?

answer

The firm will operate at the minimum point of the average total cost curve.

question

A cartel is

answer

a group of oligopolistic firms that engage in formal collusion

question

If costs are the same under both perfect competition and monopolistic competition, then in long run equilibrium prices will be

answer

higher under monopolistic competition

question

A firm's demand for a resource is a

answer

derived demand

question

We tend to see permanent price differentials in land because

answer

location is the inherent quality that often determines its value

question

When all of the returns to a resource are in the form of economic rent

answer

the price of that resource is determined exclusively by demand

question

People who can earn higher market wages, other things constant, will

answer

be more inclined to supply their labor to market work than to nonmarket work

question

Because leisure is a normal good, an increase in income

answer

increases your demand for leisure time and reduces your allocation of time to market work and/or nonmarket work

question

The income and substitution effects of a change in the wage rate

answer

always work in the opposite directions

question

In order to be successful, an inclusive union must

answer

organize most workers in the industry

question

The United Auto Workers union is an example of

answer

an inclusive union

question

One way a union can increase wages in a competitive labor market is by

answer

doing any of the above

question

Winning the $100 million top prize in a state lottery will tend to, ceteris paribus

answer

decrease an individual's supply of labor

question

Two workers are employed in the same job by the same firm, however, they are paid different wage rates. This could be explained by differences in

answer

their ability

question

Monopolistic competition is similar to

answer

monopoly in that the firms face downward-sloping demand curves and similar to perfect competition in that the firms can only earn zero economic profit in the long run

question

Monopolistic competition is distinguished from perfect competition in that monopolistic competitors produce

answer

differentiated products

question

answer

falls; fall; zero

question

Which of the following characteristics distinguishes oligopoly from all other market structures?

answer

interdependence among firms in the industry

question

In both monopolistic competition and oligopoly,

answer

the marginal revenue curve lies below the demand curve

question

The dominant-strategy solution implies that each firm

answer

ignores the decisions of the other firms

question

Because the demand for labor is based on the demand for products, the demand for labor is called

answer

a derived demand

question

Economic rent can be defined as

answer

the payment to a resource above its opportunity cost

question

The marginal revenue product of land indicates

answer

the additional revenue the firm earns when it employs an additional unit of land, other things constant

question

Monopolistically competitive industries consist of

answer

many firms, each selling a slightly different product

question

A monopolistically competitive firm can raise price somewhat due to

answer

product differentiation

question

It is difficult to explain the behavior of firms in an oligopoly because in oligopoly

answer

there is interdependent behavior

question

A monopolistically competitive firm's demand curve is

answer

more price elastic than a monopolist's, but less price elastic than a perfectly competitive firm's

question

Oligopolistic industries consist of

answer

a few interdependent parts

question

Derived demand refers to

answer

demand for a resource derived from the demand for the product produced by that resource

question

As resources move from low-valued uses in a resource market to highly-valued uses in another resource market, the price paid to the resource in the highly-valued market will

answer

decrease

question

When resources are free to adjust and resources are mobile then temporary price differentials will cause

answer

1) No change in the allocation of resources
2) over time the equalization of payments for the same resources in different uses assuming the non monetary benefits are the same

question

The payment made to an owner of a resource in excess of the opportunity cost of the resource is

answer

economic rent

question

A resource price taker's resource demand curve is

answer

the same as its marginal revenue product curve

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Microeconomics – final exam review (Chapters 10-12)

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