Microeconomics Final Exam Study Guide

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Allocative efficiency is concerned with

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producing the combination of goods most desired by society.

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Refer to the diagram. Flow 1 represents

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wage, rent, interest, and profit income.

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The budget line shows

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all possible combinations of two goods that can be purchased, given money income and the prices of the goods.

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Refer to the diagram. Points A, B, C, D, and E show

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combinations of bicycles and computers that society can produce by using its resources efficiently.

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In moving along a given budget line,

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the prices of both products and money income are assumed to be constant.

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A production possibilities curve shows

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the maximum amounts of two goods that can be produced, assuming the full use of available resources.

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The law of demand states that, other things equal,

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price and quantity demanded are inversely related.

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Refer to the diagram. A decrease in demand is depicted by a

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shift from D2 to D1.

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For economists, the word "utility" means

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pleasure or satisfaction.

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Refer to the budget line shown in the diagram. Which of the following combinations of goods is unattainable for this consumer?

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4 units of C and 6 units of D

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Refer to the table. Suppose that demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5). If the price were artificially set at $9,

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a surplus of 20 units would occur.

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Refer to the table. Suppose that demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5). If the price were artificially set at $6,

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a shortage of 40 units would occur.

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The law of increasing opportunity costs states that

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if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of another good to do so.

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Refer to the table. In relation to column (3), a change from column (2) to column (1) would indicate a/an

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increase in demand.

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Refer to the diagram. The combination of computers and bicycles shown by point G is

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unattainable given currently available resources and technology.

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Refer to the diagram. An effective government-set price floor is best illustrated by

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price C.

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College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are

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inferior goods.

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Refer to the diagram. Flow 4 represents

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consumer expenditures and business revenue.

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The relationship between quantity supplied and price is ________, and the relationship between quantity demanded and price is ________.

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direct; inverse

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Refer to the diagram. A shortage of 160 units would be encountered if price was

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$0.50.

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Refer to the diagram. Flow 3 represents

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goods and services.

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The four factors of production are

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land, labor, capital, and knowledge/risk.

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If government set a minimum price of $50 in the market, a

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surplus of 21 units would occur.

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Refer to the table. In relation to column (3), a change from column (4) to column (5) would most likely be caused by

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an improvement in production technology.

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Refer to the table. If demand is represented by columns (3) and (1) and supply is represented by columns (3) and (4), equilibrium price and quantity will be

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$9 and 60 units.

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Because successive units of a good produce less and less additional satisfaction, the price must fall to encourage a buyer to purchase more units of the good. This statement is most consistent with which explanation for the law of demand?

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diminishing marginal utility

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The upward slope of the supply curve reflects the

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law of supply.

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Refer to the diagram. The equilibrium price and quantity in this market will be

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$1.00 and 200.

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The law of supply indicates that, other things equal,

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producers will offer more of a product at high prices than at low prices.

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Refer to the diagram. A surplus of 160 units would be encountered if the price was

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$1.60.

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An increase in money income

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shifts the consumer's budget line to the right.

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Productive efficiency refers to

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the use of the least-cost method of production.

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Refer to the diagram. A decrease in quantity demanded is depicted by a

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move from point y to point x.

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The term "quantity demanded"

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refers to the amount of a product that will be purchased at some specific price.

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Refer to the diagram. Flow 2 represents

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land, labor, capital, and entrepreneurial ability.

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Refer to the diagram. A decrease in supply is depicted by a

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shift from S2 to S1.

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Black markets are associated with

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ceiling prices and the resulting product shortages.

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Microeconomics is concerned with

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a detailed examination of specific economic units that make up the economic system.

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Refer to the diagram. The movement down the production possibilities curve from point A to point E suggests that the production of

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both bicycles and computers is subject to increasing opportunity costs.

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The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q. The equilibrium quantity is

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20.

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Refer to the table. In relation to column (3), a change from column (1) to column (2) would mostly likely be caused by

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reduced taste for the good.

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Refer to the diagram. If society is currently producing 9 units of bicycles and 4 units of computers and it now decides to increase computer output to 6, the cost

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will be 4 units of bicycles.

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A price floor means that

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government is imposing a minimum legal price that is typically above the equilibrium price.

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Refer to the table. If the economy is producing at production alternative C, the opportunity cost of the 10th unit of consumer goods will be

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⅓ of a unit of capital goods.

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Refer to the diagram. An increase in quantity supplied is depicted by a

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move from point y to point x.

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The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q. The equilibrium price for X is

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$6.

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Refer to the diagram. The combination of computers and bicycles shown by point F

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is attainable but implies that the economy is not using all its resources.

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The demand curve shows the relationship between

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price and quantity demanded.

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Refer to the table. In relation to column (3), a change from column (5) to column (4) would indicate a/an

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decrease in supply.

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A price ceiling means that

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government is imposing a legal price that is typically below the equilibrium price.

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Refer to the diagram. An effective government-set price ceiling is best illustrated by

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price A.

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Steve went to his favorite hamburger restaurant with $3, expecting to buy a $2 hamburger and a $1 soda. When he arrived, he discovered that hamburgers were on sale for $1 each, so Steve bought two hamburgers and a soda. Steve's response to the decrease in the price of hamburgers is best explained by

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the income effect.

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Macroeconomics approaches the study of economics from the viewpoint of

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the entire economy.

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The shift of the budget line from cd to ab in the figure is consistent with

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a decrease in money income.

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Refer to the budget line shown in the diagram. If the consumer's money income is $50, the

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price of C is $10 and the price of D is $5.

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According to the marginal-cost-marginal-benefit rule,

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the optimal project size is the one for which MB = MC.

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Refer to the diagram, where xy is the relevant budget line and I1, I2, and I3 are indifference curves. The equilibrium position for the consumer is at

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point K.

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Which of the following is an example of market failure?

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all of these

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In the diagram, S is the before-tax supply curve and St is the supply curve after an excise tax is imposed. The total amount of the tax paid by consumers is shown by areas

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A + B.

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The table contains five tax schedules for an economy. All figures are in billions of dollars. Which of the schedules represent(s) a progressive tax?

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III and V

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If the consumer has money income of $52 and the prices of J and K are $8 and $4 respectively, the consumer will maximize her utility by purchasing

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4 units of J and 5 units of K.

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Refer to the data. The value for Z is

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−5.

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In the diagram, S is the before-tax supply curve and St is the supply curve after an excise tax is imposed. The total tax payment to government is shown by area(s)

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A + B + C.

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The ability-to-pay principle of taxation

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suggests that taxes should vary directly with people's income and wealth.

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If one person's consumption of a good does not preclude another's consumption, the good is said to be

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nonrival in consumption.

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In the diagram, S is the before-tax supply curve and St is the supply curve after an excise tax is imposed. The total amount of the tax paid by producers is shown by area(s)

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C only.

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The utility of a good or service

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is the satisfaction or pleasure one gets from consuming it.

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To maximize utility, a consumer should allocate money income so that the

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marginal utility obtained from the last dollar spent on each product is the same.

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A negative externality or spillover cost occurs when

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the total cost of producing a good exceeds the costs borne by the producer.

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Market failure is said to occur whenever

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private markets do not allocate resources in the most economically desirable way.

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Non excludability describes a condition where

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there is no effective way to keep people from using a good once it comes into being.

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A positive externality or spillover benefit occurs when

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the benefits associated with a product exceed those accruing to people who consume it.

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A progressive tax is such that

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tax rates are higher the greater one's income.

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Marginal utility is the

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change in total utility obtained by consuming one more unit of a good.

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Entry fees at national parks and monuments are an example of

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the benefits-received principle of taxation.

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The average tax rate is

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the ratio of total taxes paid to total taxable income.

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Refer to the diagram. Assuming equilibrium price P1, consumer surplus is represented by areas

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a + b.

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Refer to the diagram. Assuming equilibrium price P1, producer surplus is represented by areas

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c + d.

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Producer surplus is the difference between

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the minimum prices producers are willing to accept for a product and the higher equilibrium price.

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If taxes are $2,000 when income is $15,000 and they are $3,000 when income is $19,000, then the marginal tax rate is

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25 percent.

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A consumer is maximizing her utility with a particular money income when

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MUa/Pa = MUb/Pb = MUc/Pc = . . . = MUn/Pn.

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Consumer surplus

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is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price.

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The law of diminishing marginal utility states that

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

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The marginal tax rate is

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equal to the change in taxes/change in taxable income.

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An efficiency loss (or deadweight loss)

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is measured as the combined loss of consumer surplus and producer surplus from over- or underproducing.

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With a tax of $4,000 on $24,000 taxable income, the average tax rate is

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16.67 percent.

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The theory of consumer behavior assumes that

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consumers behave rationally, attempting to maximize their satisfaction.

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Nonrivalry and nonexcludability are the main characteristics of

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public goods.

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Refer to the diagram. If actual production and consumption occur at Q1,

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an efficiency loss (or deadweight loss) of b + d occurs.

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In the diagram, S is the before-tax supply curve and St is the supply curve after an excise tax is imposed. The efficiency loss of the tax is shown by areas

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E + F.

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Ben is exhausting his money income consuming products A and B in such quantities that MUa/Pa = 5 and MUb/Pb = 8. Ben should purchase

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more of B and less of A.

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Cost-benefit analysis attempts to

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compare the benefits and costs associated with any economic project or activity.

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Allocative and productive efficiency is achieved under the market structure of:

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Perfect Competition

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This law made contracts or combinations in restraint of trade or commerce or attempts to monopolize illegal.

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Sherman Act

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A price discriminating pure monopolist will attempt to charge each buyer (or group of buyers):

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The maximum price each would be willing to pay.

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In a purely competitive industry, an optimal allocation of scarce resources occurs when:

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MR = MC

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To practice long-run price discrimination, a monopolist must:

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Be able to separate buyers into different markets and prevent the resale of goods or services between the different markets.

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A unique feature of an oligopolistic industry is:

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Mutual interdependence.

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In pure competition, the elasticity of demand for the product of a single firm is:

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Perfectly elastic

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In the long run, a representative firm in a monopolistically competitive industry will typically:

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Earn a normal profit, but not an economic profit.

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Refer to Chart 1. The data in the chart below relate to a pure monopolist and the product it produces. What is the profit-maximizing output and price for this monopolist?

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P = $14; Q = 4

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This law bans certain discriminatory prices, services, trying contracts, and allowances in dealings between merchants.

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Robinson-Patman Act

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Natural monopolies result from:

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Extensive economies of scale in production.

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The incentive to cheat is strong in a cartel because:

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Each firm can increase its output and thus its profits by cutting price.

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Agency(ies) responsible for enforcement of federal antitrust laws:

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Both Department of Justice and Federal Trade Commission

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The demand curve faced by a monopolistically competitive firm:

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Is more elastic than the monopolist's demand curve.

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This law made interlocking directorates illegal.

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Clayton Act

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The difference between the maximum price a consumer is willing to pay for a produce and the actual price the consumer pays is:

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Consumer Surplus.

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This law made one competing firm's purchase of the assets of another competing firm illegal.

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Celler-Kefauver Act

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Price is constant or "given" to the individual firm selling in a purely competitive market because:

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Each seller supplies a negligible fraction of total supply.

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The pure monopolist who is non-discriminating must decease price on all units of a product sold in order to sell additional units. This explains why:

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Marginal revenue is less than demand (average revenue).

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The difference between the actual price that a producer receives and the minimum acceptable price a producer will willing to accept (costs) is:

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Producer Surplus.

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The organization created to oversee the provisions of multilateral trade agreements, resolve disputes under the international trade rules, and meet periodically to consider further trade liberalization is called the

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World Trade Organization (WTO).

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The Gini ratio

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is a numerical measure of the overall dispersion of income in a nation.

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According to the purchasing power parity theory of exchange rates,

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a dollar, when converted to other currencies at the prevailing floating exchange rate, has the same purchasing power in various countries.

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Of the countries listed below, income is most unequally distributed in country

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The Lorenz curve

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plots graphically the distribution of income.

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Which of the following Gini ratios indicates the highest degree of income inequality?

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0.78

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If a U.S. importer can purchase 10,000 British pounds for $20,000, the rate of exchange is

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$2 = 1 British pound in the United States.

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A market in which the money of one nation is exchanged for the money of another nation is a

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foreign exchange market.

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The purely competitive employer of resource A will maximize the profits from A by equating the

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price of A with the MRP of A.

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The MRP curve for labor

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is the firm's labor demand curve.

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When economists say that the demand for labor is a derived demand, they mean that it is

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related to the demand for the product or service labor is producing.

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A firm will find it profitable to hire workers up to the point at which their

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marginal resource cost is equal to their MRP.

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"NAFTA" stands for

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North American Free Trade Agreement.

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Depreciation of the dollar will

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increase the prices of U.S. imports but decrease the prices to foreigners of U.S. exports.

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Assume labor is the only variable input and that an additional input of labor increases total output from 72 to 80 units. If the product sells for $6 per unit in a purely competitive market, the MRP of this additional worker is

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$48.

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The greater the area between the Lorenz curve and the diagonal in the Lorenz curve diagram, the

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larger is the Gini ratio and the greater is the degree of income inequality.

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Suppose the members of population A, consisting of Al, Bob, Curt, Doris, and Ellie, receive annual incomes of $5,000, $2,500, $1,250, $750, and $500, respectively. What percentage of total income is received by the richest quintile?

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50%

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A tariff can best be described as

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an excise tax on an imported good.

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Marginal product is

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the amount an additional worker adds to the firm's total output.

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The Gini ratio of income inequality ranges between

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0 and 1.

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The equality-efficiency trade-off refers to

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possible conflicts between the goals of economic efficiency and greater income equality.

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Elasticity of resource demand is measured by the

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percentage change in resource quantity demanded divided by the percentage change in resource price.

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Marginal revenue product measures the

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amount by which the addition of one more worker increases a firm's total revenue.

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"International trade" refers to

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purchasing or selling currently produced goods or services across an international border.

1 of 136

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Allocative efficiency is concerned with

answer

producing the combination of goods most desired by society.

question

Refer to the diagram. Flow 1 represents

answer

wage, rent, interest, and profit income.

question

The budget line shows

answer

all possible combinations of two goods that can be purchased, given money income and the prices of the goods.

question

Refer to the diagram. Points A, B, C, D, and E show

answer

combinations of bicycles and computers that society can produce by using its resources efficiently.

question

In moving along a given budget line,

answer

the prices of both products and money income are assumed to be constant.

question

A production possibilities curve shows

answer

the maximum amounts of two goods that can be produced, assuming the full use of available resources.

question

The law of demand states that, other things equal,

answer

price and quantity demanded are inversely related.

question

Refer to the diagram. A decrease in demand is depicted by a

answer

shift from D2 to D1.

question

For economists, the word "utility" means

answer

pleasure or satisfaction.

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Refer to the budget line shown in the diagram. Which of the following combinations of goods is unattainable for this consumer?

answer

4 units of C and 6 units of D

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Refer to the table. Suppose that demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5). If the price were artificially set at $9,

answer

a surplus of 20 units would occur.

question

Refer to the table. Suppose that demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5). If the price were artificially set at $6,

answer

a shortage of 40 units would occur.

question

The law of increasing opportunity costs states that

answer

if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of another good to do so.

question

Refer to the table. In relation to column (3), a change from column (2) to column (1) would indicate a/an

answer

increase in demand.

question

Refer to the diagram. The combination of computers and bicycles shown by point G is

answer

unattainable given currently available resources and technology.

question

Refer to the diagram. An effective government-set price floor is best illustrated by

answer

price C.

question

answer

inferior goods.

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Refer to the diagram. Flow 4 represents

answer

consumer expenditures and business revenue.

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The relationship between quantity supplied and price is ________, and the relationship between quantity demanded and price is ________.

answer

direct; inverse

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Refer to the diagram. A shortage of 160 units would be encountered if price was

answer

$0.50.

question

Refer to the diagram. Flow 3 represents

answer

goods and services.

question

The four factors of production are

answer

land, labor, capital, and knowledge/risk.

question

If government set a minimum price of $50 in the market, a

answer

surplus of 21 units would occur.

question

Refer to the table. In relation to column (3), a change from column (4) to column (5) would most likely be caused by

answer

an improvement in production technology.

question

Refer to the table. If demand is represented by columns (3) and (1) and supply is represented by columns (3) and (4), equilibrium price and quantity will be

answer

$9 and 60 units.

question

answer

diminishing marginal utility

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The upward slope of the supply curve reflects the

answer

law of supply.

question

Refer to the diagram. The equilibrium price and quantity in this market will be

answer

$1.00 and 200.

question

The law of supply indicates that, other things equal,

answer

producers will offer more of a product at high prices than at low prices.

question

Refer to the diagram. A surplus of 160 units would be encountered if the price was

answer

$1.60.

question

An increase in money income

answer

shifts the consumer's budget line to the right.

question

Productive efficiency refers to

answer

the use of the least-cost method of production.

question

Refer to the diagram. A decrease in quantity demanded is depicted by a

answer

move from point y to point x.

question

The term "quantity demanded"

answer

refers to the amount of a product that will be purchased at some specific price.

question

Refer to the diagram. Flow 2 represents

answer

land, labor, capital, and entrepreneurial ability.

question

Refer to the diagram. A decrease in supply is depicted by a

answer

shift from S2 to S1.

question

Black markets are associated with

answer

ceiling prices and the resulting product shortages.

question

Microeconomics is concerned with

answer

a detailed examination of specific economic units that make up the economic system.

question

Refer to the diagram. The movement down the production possibilities curve from point A to point E suggests that the production of

answer

both bicycles and computers is subject to increasing opportunity costs.

question

The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q. The equilibrium quantity is

answer

20.

question

Refer to the table. In relation to column (3), a change from column (1) to column (2) would mostly likely be caused by

answer

reduced taste for the good.

question

Refer to the diagram. If society is currently producing 9 units of bicycles and 4 units of computers and it now decides to increase computer output to 6, the cost

answer

will be 4 units of bicycles.

question

A price floor means that

answer

government is imposing a minimum legal price that is typically above the equilibrium price.

question

Refer to the table. If the economy is producing at production alternative C, the opportunity cost of the 10th unit of consumer goods will be

answer

⅓ of a unit of capital goods.

question

Refer to the diagram. An increase in quantity supplied is depicted by a

answer

move from point y to point x.

question

The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q. The equilibrium price for X is

answer

$6.

question

Refer to the diagram. The combination of computers and bicycles shown by point F

answer

is attainable but implies that the economy is not using all its resources.

question

The demand curve shows the relationship between

answer

price and quantity demanded.

question

Refer to the table. In relation to column (3), a change from column (5) to column (4) would indicate a/an

answer

decrease in supply.

question

A price ceiling means that

answer

government is imposing a legal price that is typically below the equilibrium price.

question

Refer to the diagram. An effective government-set price ceiling is best illustrated by

answer

price A.

question

answer

the income effect.

question

Macroeconomics approaches the study of economics from the viewpoint of

answer

the entire economy.

question

The shift of the budget line from cd to ab in the figure is consistent with

answer

a decrease in money income.

question

Refer to the budget line shown in the diagram. If the consumer's money income is $50, the

answer

price of C is $10 and the price of D is $5.

question

According to the marginal-cost-marginal-benefit rule,

answer

the optimal project size is the one for which MB = MC.

question

Refer to the diagram, where xy is the relevant budget line and I1, I2, and I3 are indifference curves. The equilibrium position for the consumer is at

answer

point K.

question

Which of the following is an example of market failure?

answer

all of these

question

In the diagram, S is the before-tax supply curve and St is the supply curve after an excise tax is imposed. The total amount of the tax paid by consumers is shown by areas

answer

A + B.

question

The table contains five tax schedules for an economy. All figures are in billions of dollars. Which of the schedules represent(s) a progressive tax?

answer

III and V

question

If the consumer has money income of $52 and the prices of J and K are $8 and $4 respectively, the consumer will maximize her utility by purchasing

answer

4 units of J and 5 units of K.

question

Refer to the data. The value for Z is

answer

−5.

question

In the diagram, S is the before-tax supply curve and St is the supply curve after an excise tax is imposed. The total tax payment to government is shown by area(s)

answer

A + B + C.

question

The ability-to-pay principle of taxation

answer

suggests that taxes should vary directly with people's income and wealth.

question

If one person's consumption of a good does not preclude another's consumption, the good is said to be

answer

nonrival in consumption.

question

In the diagram, S is the before-tax supply curve and St is the supply curve after an excise tax is imposed. The total amount of the tax paid by producers is shown by area(s)

answer

C only.

question

The utility of a good or service

answer

is the satisfaction or pleasure one gets from consuming it.

question

To maximize utility, a consumer should allocate money income so that the

answer

marginal utility obtained from the last dollar spent on each product is the same.

question

A negative externality or spillover cost occurs when

answer

the total cost of producing a good exceeds the costs borne by the producer.

question

Market failure is said to occur whenever

answer

private markets do not allocate resources in the most economically desirable way.

question

Non excludability describes a condition where

answer

there is no effective way to keep people from using a good once it comes into being.

question

A positive externality or spillover benefit occurs when

answer

the benefits associated with a product exceed those accruing to people who consume it.

question

A progressive tax is such that

answer

tax rates are higher the greater one's income.

question

Marginal utility is the

answer

change in total utility obtained by consuming one more unit of a good.

question

Entry fees at national parks and monuments are an example of

answer

the benefits-received principle of taxation.

question

The average tax rate is

answer

the ratio of total taxes paid to total taxable income.

question

Refer to the diagram. Assuming equilibrium price P1, consumer surplus is represented by areas

answer

a + b.

question

Refer to the diagram. Assuming equilibrium price P1, producer surplus is represented by areas

answer

c + d.

question

Producer surplus is the difference between

answer

the minimum prices producers are willing to accept for a product and the higher equilibrium price.

question

If taxes are $2,000 when income is $15,000 and they are $3,000 when income is $19,000, then the marginal tax rate is

answer

25 percent.

question

A consumer is maximizing her utility with a particular money income when

answer

MUa/Pa = MUb/Pb = MUc/Pc = . . . = MUn/Pn.

question

Consumer surplus

answer

is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price.

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 marginal tax rate is

answer

equal to the change in taxes/change in taxable income.

question

An efficiency loss (or deadweight loss)

answer

is measured as the combined loss of consumer surplus and producer surplus from over- or underproducing.

question

With a tax of $4,000 on $24,000 taxable income, the average tax rate is

answer

16.67 percent.

question

The theory of consumer behavior assumes that

answer

consumers behave rationally, attempting to maximize their satisfaction.

question

Nonrivalry and nonexcludability are the main characteristics of

answer

public goods.

question

Refer to the diagram. If actual production and consumption occur at Q1,

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an efficiency loss (or deadweight loss) of b + d occurs.

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In the diagram, S is the before-tax supply curve and St is the supply curve after an excise tax is imposed. The efficiency loss of the tax is shown by areas

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E + F.

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Ben is exhausting his money income consuming products A and B in such quantities that MUa/Pa = 5 and MUb/Pb = 8. Ben should purchase

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more of B and less of A.

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Cost-benefit analysis attempts to

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compare the benefits and costs associated with any economic project or activity.

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Allocative and productive efficiency is achieved under the market structure of:

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Perfect Competition

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This law made contracts or combinations in restraint of trade or commerce or attempts to monopolize illegal.

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Sherman Act

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A price discriminating pure monopolist will attempt to charge each buyer (or group of buyers):

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The maximum price each would be willing to pay.

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In a purely competitive industry, an optimal allocation of scarce resources occurs when:

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MR = MC

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To practice long-run price discrimination, a monopolist must:

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Be able to separate buyers into different markets and prevent the resale of goods or services between the different markets.

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A unique feature of an oligopolistic industry is:

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Mutual interdependence.

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In pure competition, the elasticity of demand for the product of a single firm is:

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Perfectly elastic

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In the long run, a representative firm in a monopolistically competitive industry will typically:

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Earn a normal profit, but not an economic profit.

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Refer to Chart 1. The data in the chart below relate to a pure monopolist and the product it produces. What is the profit-maximizing output and price for this monopolist?

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P = $14; Q = 4

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This law bans certain discriminatory prices, services, trying contracts, and allowances in dealings between merchants.

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Robinson-Patman Act

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Natural monopolies result from:

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Extensive economies of scale in production.

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The incentive to cheat is strong in a cartel because:

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Each firm can increase its output and thus its profits by cutting price.

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Agency(ies) responsible for enforcement of federal antitrust laws:

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Both Department of Justice and Federal Trade Commission

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The demand curve faced by a monopolistically competitive firm:

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Is more elastic than the monopolist's demand curve.

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This law made interlocking directorates illegal.

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Clayton Act

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The difference between the maximum price a consumer is willing to pay for a produce and the actual price the consumer pays is:

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Consumer Surplus.

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This law made one competing firm's purchase of the assets of another competing firm illegal.

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Celler-Kefauver Act

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Price is constant or "given" to the individual firm selling in a purely competitive market because:

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Each seller supplies a negligible fraction of total supply.

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The pure monopolist who is non-discriminating must decease price on all units of a product sold in order to sell additional units. This explains why:

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Marginal revenue is less than demand (average revenue).

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The difference between the actual price that a producer receives and the minimum acceptable price a producer will willing to accept (costs) is:

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Producer Surplus.

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World Trade Organization (WTO).

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The Gini ratio

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is a numerical measure of the overall dispersion of income in a nation.

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According to the purchasing power parity theory of exchange rates,

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a dollar, when converted to other currencies at the prevailing floating exchange rate, has the same purchasing power in various countries.

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Of the countries listed below, income is most unequally distributed in country

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The Lorenz curve

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plots graphically the distribution of income.

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Which of the following Gini ratios indicates the highest degree of income inequality?

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0.78

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If a U.S. importer can purchase 10,000 British pounds for $20,000, the rate of exchange is

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$2 = 1 British pound in the United States.

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A market in which the money of one nation is exchanged for the money of another nation is a

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foreign exchange market.

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The purely competitive employer of resource A will maximize the profits from A by equating the

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price of A with the MRP of A.

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The MRP curve for labor

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is the firm's labor demand curve.

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When economists say that the demand for labor is a derived demand, they mean that it is

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related to the demand for the product or service labor is producing.

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A firm will find it profitable to hire workers up to the point at which their

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marginal resource cost is equal to their MRP.

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"NAFTA" stands for

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North American Free Trade Agreement.

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Depreciation of the dollar will

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increase the prices of U.S. imports but decrease the prices to foreigners of U.S. exports.

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$48.

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The greater the area between the Lorenz curve and the diagonal in the Lorenz curve diagram, the

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larger is the Gini ratio and the greater is the degree of income inequality.

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50%

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A tariff can best be described as

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an excise tax on an imported good.

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Marginal product is

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the amount an additional worker adds to the firm's total output.

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The Gini ratio of income inequality ranges between

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0 and 1.

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The equality-efficiency trade-off refers to

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possible conflicts between the goals of economic efficiency and greater income equality.

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Elasticity of resource demand is measured by the

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percentage change in resource quantity demanded divided by the percentage change in resource price.

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Marginal revenue product measures the

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amount by which the addition of one more worker increases a firm's total revenue.

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"International trade" refers to

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purchasing or selling currently produced goods or services across an international border.

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