Microeconomics Pre-Test

What is a scarce resource?

Given the option of two activities, an individual chooses a football game over going to a movie. Which type of cost is the activity that is sacrificed called?

An individual decides not to work one year and instead will give up the apartment and go away to college. This person has carefully calculated expenses for the entire year and considered the implicit cost. What should constitute an implicit cost for this individual?

Which kind of economy can readily adjust to change?

In one hour, Person A can bake 10 apple pies and wash no cars, or wash 20 cars and bake no apple pies. During the same hour, Person B can bake 20 apple pies and wash no cars, or bake no apple pies and wash 16 cars. Currently, Person A is spending half of the time baking pies and half of the time washing cars. Therefore, this person is baking 5 pies and washing 10 cars. Person B is also splitting the time, thus baking 10 pies and washing 8 cars. What is the total of pies and car washes that could be produced if each individual specialized and then engaged in trade?

What will a country that specializes in one form of production and engages in trade be able to consume?

What will sellers do when the price of their good rises, according to the law of supply?

What does a rightward shirt of a line on a market graph indicate?

What is true if a good is calculated to be a luxury good?

Which kind of good does a seller sell if pleased when an economic downturn is predicted?

A seller expects that when the price is raised by 15%, sales will drop by 13%. What is the price elasticity of demand, and what will happen to the total revenues?

How do economists explain consumer behavior?

How can consumer surplus be described?

A movement along a consumer's indifference curve shows different combinations of goods that give the consumer equal utility. This move from one combination of goods to another forces the consumer to give up some goods to get more of the other. What is this phenomenon called?

A factory that manufactures tires produces a pollutant that it emits into the air. The air pollution affects the surrounding neighborhoods, causing illness and property damage. What do economists call this type of activity?

National defense, street lighting, and law enforcement are examples of public goods. What is a trait of these public goods?

A factory that manufactures tires emits a pollutant into the air that jeopardizes the health and well-being of people living nearby. How can the government correct this negative externality?

How does the spillover effect from education improve the economy?

Which activity suffers from a free-rider problem?

A firm uses 8 workers, 6 units of capital, and 1 unit of land to produce its profit maximizing output. Each worker earns $20,000 per year, each unit of capital costs $6,000 per year to operate, and the land rents for $24,000 per year. What is the firm's annual total cost?

A firm employs three workers. Adding a fourth worker causes output to increase but by a smaller amount than for the third worker. What is happening to the marginal product of labor?

A firm's capital costs $4 per unit per day, labor costs $2 per unit per day, and the firm has a budget of $32 per day. The firm needs 10 workers and 3 units of capital to maximize output. The marginal product of labor (MPL) is 6. What is the marginal product to capital (MPC)?

A firm hired three new workers this year. The first new worker increased production to 1,000 units, the second new worker increased production to 1,100 units, and the third new worker kept production at 1,100 units. What is the marginal product of labor for the second new worker?

Dolores, who does not work, contemplated investing her savings of $100,000 into a CD yielding 5% annually. Instead, she bought a business that grossed $120,000 in the first year, with $90,000 in total expenses. What was Dolores's accounting profit?

Dolores, Who does not work, contemplated investing her savings of $100,000 into a CD yielding 5% annually. Instead, she bought a business that grossed $120,000 in the first year, with $90,000 in total expenses. What was Dolores's explicit cost?

Dolores, who does not work, contemplated investing her savings of $100,000 in a CD yielding 5% annually. Instead, she bought a business that grossed $120,000 in the first year, with $90,000 in total expenses. What was Dolores's implicit cost?

A plastics manufacturer produces 100,000 products in one year. Its total costs for the year are $150,000. What is the manufacturer's total average cost?

A company's yearly expenses consists of rent of $60,000, utilities of $50,000, and payroll of $140,000. IT will produce 20,000 units this year. What is this company's total average cost?

A firm produces 10,000 units of a good with a total cost of $100,000. Its fixed coasts are $20,000. What is this firm's average variable cost?

What would economists call a situation in which a firm's average costs begin to increase due to management failures?

Which two terms are used by economists to refer to the decrease and then increase of long-run average costs for a firm?

In which type of market structure must buyers have complete information about the product and price?

How does a perfectly competitive firm adjust it's output to price changes in the short run?

What is an assumption behind a short-run production function?

Which two effects will happen in the short term if production ceases?

What is a characteristic of a good or service produced by a monopolist?

What will cause total revenue to decline when demand is inelastic for a monopolist?

What protects a monopoly from competition

What is consumer surplus?

Which type of market has many products and a high level of advertising-supported branding?

Which types of products do firms operating in an oligopolistic market produce, depending on the industry?

What characterizes an oligopoly's market share?

What is the relationship of products and consumers in a perfectly competitive market?

What is a characteristic of monopolistic competition from the view of consumers?

What should monopolists do to maintain barriers to entry?

Which function does advertising perform in a monopolistic competition market?

What is the term for when a game theory scenario has a stable saddle point?