Microeconomics Midterm - Assignment Essays

question

The slope of a budget line reflect the

answer

price ratio of the two products

question

Which of the following is not a main functikon of the entrepreneur

answer

make routine pricing decisions

question

The market system

answer

effectively harnesses the incentives of workers and entrepreneurs

question

The safest way for an individual to leave a burning theater is to run for the nearest exit; it is therefore also the best means of escape for a large audience. This assertion illustrates the

answer

fallacy of composition

question

Allocative efficiency is concerned with

answer

producing the combination of goods most desired by society

question

A shift to the right in the demand curve for product A can be most reasonably explained by saying that

answer

consumer preferences have changed in favor of A so that they now want to buy more at each possible price

question

With a downward sloping demand curve and an upsloping supply curve for a product, a decrease in resource prices will

answer

decrease equilibrium price and increase equilibrium quantity

question

When an economist says that the demand for a product has increased, this means that

answer

consumers are now willing to purchase more of this product at each possible price

question

If the demand for bacon is relatively elastic, a 10 percent declince in the price of bacon will

answer

increase the amount demanded by more than 10%

question

The elasticity of supply of product X is unitary if the price of product X rises by

answer

8 percent and quantity supplied rises by 8 percent

question

Price elasticity of demand is generally

answer

greater in the long run than in the short run

question

Assume that a 3 percent increase in income across the economy produces a 1 percent decline in the demand of good X. The coefficient of income elasticity for good X is

answer

negative and therefore X is an inferior good

question

Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired. GSU is assuming that the demand for education at GSU is

answer

relatively inelastic

question

If a good that generates positive externalities were produced and priced to take into account these spillover benefits, then its

answer

price and output would increase

question

What two conditions must hold for a competitive market to produce efficient outcomes?

answer

supply curves must reflect all costs of production, and demand curves must reflect consumers' full willingness to pay

question

According to the marginal-cost-marginal-benefit rule

answer

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

question

In developing prospect theory, which of the following did behavioral economists not discover about people's reaction to goods and bads?

answer

people feel equivalent losses and gains in equal measure, supporting the assumption that consumers behave rationally

question

The hedonic treadmill refers to a phenomenon where

answer

increasing our level of consumption doesn't make us any happier in the long run

question

Which of the following is correct?

answer

If marginal utility is diminishing and is a positive amount, total utility will increase

question

How did Apple overcome consumers' diminishing marginal utility for iPods?

answer

Apple introduced new features to entice previous buyers to purchase new models

question

Marginal cost

answer

equals both average variable cost and average total cost at their respective minimums

question

Average fixed costs can be determined graphically by

answer

the vertical distance between ATC and AVC

question

Which of the following is most likely to be a variable cost?

answer

fuel and power payments

question

Because the marginal product of a variable resource at first increases and then decreases as the output of the firm is increased

answer

total cost at first increases at a decreasing rate and then increases at in increasing rate

question

Which of the following statements is correct?

answer

Economic profits induce firms to enter an industry; losses encourage firms to leave

question

In which of the following market structures is there clear-cut mutual interdependence with respect to price-output policies?

answer

oligopoly

question

Which of the following industries most closely approximates pure competition?

answer

Agriculture

question

In the short run the individual competitive firm's supply curve is that segment of the

answer

marginal cost curve lying above the average variable cost curve

question

A production possibilities curve shows

answer

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

question

Specialization in production is important primarily because it

answer

results in grater total output

question

A production possibilites curve illustrates

answer

scarcity

question

The relationship between quantity supplied and price is _______ and the relationship between quantity demanded and price is ________

answer

direct; inverse

question

If the demand curve for product B shifts to the right as far as the price of product A declines, then

answer

A and B are complementary goods

question

In presenting the idea of a demand curve, economists presume the most important variable in determining the quantity demanded is

answer

the price of the product itself

question

Suppose the tacos and pizza are substitutes, and that soda and pizza are complements. We would expect an increase in the price of pizza to

answer

reduce the demand for soda and increase the demand for tacos

question

A shift to the right in the demand curve for product A can be most reasonably explained by saying that

answer

consumer preferences have changed in favor of A so that they now want to buy more at each possible price

question

Elasticity can be thought of as degree of relative

answer

quantity stretch

question

The formula for cross elasticty of demand is percentage change in

answer

quantity demanded of X/percentage change in price of Y

question

A public good

answer

is available to all and cannot be denied to anyone

question

A demand curve for a public good is determined by

answer

summing vertically the individual demand curves for the public good

question

Marginal utility can be

answer

positive, negative,or zero

question

"Essential" water is cheaper than "nonessential" diamonds because

answer

the supply of water is great relative to demand and the supply of diamonds is small relative to demand

question

The first Pepsi yields Craig 18 units of utility and the second yields him an additional 12 units of utility. His total utility from three Pepsis is 38 units of utility. the marginal utility of the third Pepsi is

answer

8 units of utility

question

Which of the following types of firms are least likely to have their MC, AVC, and ATC curves affected by fluctuations in gasoline prices?

answer

firms like iTunes that distribute their product over the internet

question

When diseconomies of scale occur

answer

the long-run average total cost curve rises

question

In a purely competitive industry

answer

there may be economic profits in the short run, but not in the long run

question

The primary force encouraging the entry of new firms into a purely competitive industry is

answer

economic profits earned by firms already in the industry

question

For a purely competitive seller, price equals

answer

average revenue; marginal revenue; total revenue dividided by output

1 of 48

question

The slope of a budget line reflect the

answer

price ratio of the two products

question

Which of the following is not a main functikon of the entrepreneur

answer

make routine pricing decisions

question

The market system

answer

effectively harnesses the incentives of workers and entrepreneurs

question

The safest way for an individual to leave a burning theater is to run for the nearest exit; it is therefore also the best means of escape for a large audience. This assertion illustrates the

answer

fallacy of composition

question

Allocative efficiency is concerned with

answer

producing the combination of goods most desired by society

question

A shift to the right in the demand curve for product A can be most reasonably explained by saying that

answer

consumer preferences have changed in favor of A so that they now want to buy more at each possible price

question

With a downward sloping demand curve and an upsloping supply curve for a product, a decrease in resource prices will

answer

decrease equilibrium price and increase equilibrium quantity

question

When an economist says that the demand for a product has increased, this means that

answer

consumers are now willing to purchase more of this product at each possible price

question

If the demand for bacon is relatively elastic, a 10 percent declince in the price of bacon will

answer

increase the amount demanded by more than 10%

question

The elasticity of supply of product X is unitary if the price of product X rises by

answer

8 percent and quantity supplied rises by 8 percent

question

Price elasticity of demand is generally

answer

greater in the long run than in the short run

question

Assume that a 3 percent increase in income across the economy produces a 1 percent decline in the demand of good X. The coefficient of income elasticity for good X is

answer

negative and therefore X is an inferior good

question

Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired. GSU is assuming that the demand for education at GSU is

answer

relatively inelastic

question

If a good that generates positive externalities were produced and priced to take into account these spillover benefits, then its

answer

price and output would increase

question

What two conditions must hold for a competitive market to produce efficient outcomes?

answer

supply curves must reflect all costs of production, and demand curves must reflect consumers' full willingness to pay

question

According to the marginal-cost-marginal-benefit rule

answer

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

question

In developing prospect theory, which of the following did behavioral economists not discover about people's reaction to goods and bads?

answer

people feel equivalent losses and gains in equal measure, supporting the assumption that consumers behave rationally

question

The hedonic treadmill refers to a phenomenon where

answer

increasing our level of consumption doesn't make us any happier in the long run

question

Which of the following is correct?

answer

If marginal utility is diminishing and is a positive amount, total utility will increase

question

How did Apple overcome consumers' diminishing marginal utility for iPods?

answer

Apple introduced new features to entice previous buyers to purchase new models

question

Marginal cost

answer

equals both average variable cost and average total cost at their respective minimums

question

Average fixed costs can be determined graphically by

answer

the vertical distance between ATC and AVC

question

Which of the following is most likely to be a variable cost?

answer

fuel and power payments

question

Because the marginal product of a variable resource at first increases and then decreases as the output of the firm is increased

answer

total cost at first increases at a decreasing rate and then increases at in increasing rate

question

Which of the following statements is correct?

answer

Economic profits induce firms to enter an industry; losses encourage firms to leave

question

In which of the following market structures is there clear-cut mutual interdependence with respect to price-output policies?

answer

oligopoly

question

Which of the following industries most closely approximates pure competition?

answer

Agriculture

question

In the short run the individual competitive firm's supply curve is that segment of the

answer

marginal cost curve lying above the average variable cost curve

question

A production possibilities curve shows

answer

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

question

Specialization in production is important primarily because it

answer

results in grater total output

question

A production possibilites curve illustrates

answer

scarcity

question

The relationship between quantity supplied and price is _______ and the relationship between quantity demanded and price is ________

answer

direct; inverse

question

If the demand curve for product B shifts to the right as far as the price of product A declines, then

answer

A and B are complementary goods

question

In presenting the idea of a demand curve, economists presume the most important variable in determining the quantity demanded is

answer

the price of the product itself

question

Suppose the tacos and pizza are substitutes, and that soda and pizza are complements. We would expect an increase in the price of pizza to

answer

reduce the demand for soda and increase the demand for tacos

question

A shift to the right in the demand curve for product A can be most reasonably explained by saying that

answer

consumer preferences have changed in favor of A so that they now want to buy more at each possible price

question

Elasticity can be thought of as degree of relative

answer

quantity stretch

question

The formula for cross elasticty of demand is percentage change in

answer

quantity demanded of X/percentage change in price of Y

question

A public good

answer

is available to all and cannot be denied to anyone

question

A demand curve for a public good is determined by

answer

summing vertically the individual demand curves for the public good

question

Marginal utility can be

answer

positive, negative,or zero

question

"Essential" water is cheaper than "nonessential" diamonds because

answer

the supply of water is great relative to demand and the supply of diamonds is small relative to demand

question

answer

8 units of utility

question

Which of the following types of firms are least likely to have their MC, AVC, and ATC curves affected by fluctuations in gasoline prices?

answer

firms like iTunes that distribute their product over the internet

question

When diseconomies of scale occur

answer

the long-run average total cost curve rises

question

In a purely competitive industry

answer

there may be economic profits in the short run, but not in the long run

question

The primary force encouraging the entry of new firms into a purely competitive industry is

answer

economic profits earned by firms already in the industry

question

For a purely competitive seller, price equals

answer

average revenue; marginal revenue; total revenue dividided by output

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