question
normal good
answer
a good for which an increase in income raises the quantity demanded (direct relationship)
question
inferior good
answer
a good for which an increase in income reduces the quantity demanded (inverse relationship)
question
substitutes
answer
two goods for which an increase in the price of one leads to an increase in demand for the other (direct relationship)
question
complements
answer
two goods for which an increase in the price of one leads to the decrease in the demand for the other (inverse relationship
question
welfare economics
answer
the study of how the allocation of resources affects economic well-being
question
willingness to pay
answer
the maximum amount that a buyer will pay for a good
question
consumer surplus
answer
the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it
question
cost
answer
the value of everything a seller must give up to produce a good
question
producer surplus
answer
the amount a seller is paid for a good minus the seller's cost of providing it
question
efficiency
answer
the property of a resource allocation of maximizing the total surplus received by all members of society
question
equality
answer
the property of distributing economic prosperity uniformly among the members of society
question
total revenue
answer
the amount a firm receives for the sale of its outputs
question
total cost
answer
the market value of the inputs a firm uses in production
question
profit
answer
total revenue minus total cost
question
explicit costs
answer
input costs that require an outlay of money by the firm
question
implicit costs
answer
input costs that do not require an outlay of money by the firm
question
economic profit
answer
total revenue minus total cost, including both explicit and implicit costs
EP = AP - IC
EP = TR - ExC - IC
EP = TR - Economic costs
EP = AP - IC
EP = TR - ExC - IC
EP = TR - Economic costs
question
accounting profit
answer
total revenue minus total explicit cost
AP = TR - ExC
AP = TR - ExC
question
production function
answer
the relationship between the quantity of inputs used to make a good minus the sellers cost of providing it (quantity and labor)
question
marginal product
answer
the increase of output that arises from an additional unit of input
MPl = ΔQ / ΔL
MPl = ΔQ / ΔL
question
diminishing marginal product
answer
the property whereby the marginal product of an input declines as the quantity of the input increases
question
fixed costs
answer
costs that do not vary with the quantity of output produced
question
variable costs
answer
costs that vary with the quantity of output produced
question
average total cost
answer
total cost divided by the quantity of output
ATC = TC/Q
ATC = TC/Q
question
average fixed cost
answer
fixed cost divided by the quantity of output
AFC = FC/Q
AFC = FC/Q
question
average variable cost
answer
variable cost divided by the quantity of output
AVC = VC/Q
AVC = VC/Q
question
marginal cost
answer
the increase in total cost that arises from an extra unit of production
MC = ΔTC/ΔQ
MC = ΔTC/ΔQ
question
efficient scale
answer
the quantity of output that minimizes average total cost
question
economies of scale
answer
the property where-by long-run average total cost falls as the quantity of outputs increases
question
diseconomies of scale
answer
the property whereby long-run average total cost rises as the quantity of output increases
question
constant returns to scale
answer
the property whereby long-run average total cost stays the same as the quantity of output changes
question
competitive market
answer
a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker
question
average revenue
answer
total revenue divided by quantity sold
question
marginal revenue
answer
the change in total revenue from an additional unit sold
MR = ΔTR/ΔQ
MR = ΔTR/ΔQ
question
sunk cost
answer
a cost that has already been committed and cannot be recovered
question
b) the consumer surplus is $60
answer
If a consumer is willing and able to pay $200 for a particular good but actually pays $140:
a) the consumer surplus is $340
b) the consumer surplus is $60
c) the consumer surplus is $140
d) the consumer surplus is -$60
a) the consumer surplus is $340
b) the consumer surplus is $60
c) the consumer surplus is $140
d) the consumer surplus is -$60
question
a) it decreases
answer
Suppose there is an early freeze in California that ruins the lemon crop. What happens to consumer surplus in the market for lemons?
a) it decreases
b) it increases
c) it is not affected by this change in market forces
d) it increase briefly then decreases
a) it decreases
b) it increases
c) it is not affected by this change in market forces
d) it increase briefly then decreases
question
d) all of the above
answer
A demand curve reflects:
a) the willingness to pay of all buyers in the market
b) the value each buyer in the market places on a good
c) the highest price buyers are willing to pay for each quantity
d) all of the above
a) the willingness to pay of all buyers in the market
b) the value each buyer in the market places on a good
c) the highest price buyers are willing to pay for each quantity
d) all of the above
question
b) $750
answer
If the market price is $1,000, the producer surplus in the market would be:
a) $700
b) $750
c) $2,250
d) $3,700
a) $700
b) $750
c) $2,250
d) $3,700
question
c) Richard and Chris only
answer
If the market price is $900, which sellers will be in the market?
a) Richard, Chris, and Carla only
b) Hillary, Doug, Carla only
c) Richard and Chris only
d) Chris only
a) Richard, Chris, and Carla only
b) Hillary, Doug, Carla only
c) Richard and Chris only
d) Chris only
question
b) when the market price is $1,500 each supplier would have a positive producer surplus
answer
Which of the following is NOT true?
a) the table can be used to derive the supply curve for the product
b) when the market price is $1,500 each supplier would have a positive producer surplus
c) the height of the supply curve at a particular output level measures cost of the marginal supplier
d) at a market price of $750, two suppliers will be in the market
a) the table can be used to derive the supply curve for the product
b) when the market price is $1,500 each supplier would have a positive producer surplus
c) the height of the supply curve at a particular output level measures cost of the marginal supplier
d) at a market price of $750, two suppliers will be in the market
question
d) decreases; decreases; decreases
answer
Assume Pepsi and Coke are substitutes. The price of Pepsi falls sharply. As a result, the equilibrium market price of Coke ____________, the equilibrium market quantity of Coke sold ____________, and producer surplus in the Coke market _____________.
a) increases; increases; increases
b) increases; increases; decreases
c) increases; decreases; decreases
d) decreases; decreases; decreases
a) increases; increases; increases
b) increases; increases; decreases
c) increases; decreases; decreases
d) decreases; decreases; decreases
question
c) total surplus is maximized
answer
We can say that the allocation of resources is efficient if:
a) producer surplus is maximized
b) consumer surplus is maximized
c) total surplus is maximized
d) none of the above
a) producer surplus is maximized
b) consumer surplus is maximized
c) total surplus is maximized
d) none of the above
question
a) the good is not being consumed by the buyers who value it the most
answer
The allocation of resources is said to be inefficient if:
a) the good is not being consumed by the buyers who value it the most
b) the good is being produced by the sellers with the lowest cost
c) the quantity being bought and sold in the market is the free-market equilibrium quantity
d) all of the above
a) the good is not being consumed by the buyers who value it the most
b) the good is being produced by the sellers with the lowest cost
c) the quantity being bought and sold in the market is the free-market equilibrium quantity
d) all of the above
question
d) all of the above
answer
We can assume that markets are efficient only if:
a) markets are sufficiently competitive
b) there are no externalities
c) there is no market power by one firm or a small group of firms
d) all of the above
a) markets are sufficiently competitive
b) there are no externalities
c) there is no market power by one firm or a small group of firms
d) all of the above
question
d) $350; $150
answer
If Fred is willing to pay $350 for a new suit, but is able to buy the suit for $200, Fred values the suit at _________ and his consumer surplus is ___________
a) $500; $350
b) $350; $500
c) $500; $150
d) $350; $150
a) $500; $350
b) $350; $500
c) $500; $150
d) $350; $150
question
b) cost
answer
The height of the supply curve at a particular quantity measures:
a) willingness to pay
b) cost
c) consumer surplus
d) producer surplus
a) willingness to pay
b) cost
c) consumer surplus
d) producer surplus
question
a) it decreases
answer
Suppose that the supply of automobiles decreases. What happens to consumer surplus in the market for automobiles?
a) it decreases
b) it increases
c) it is not affected by this change
d) it increases briefly then decreases
a) it decreases
b) it increases
c) it is not affected by this change
d) it increases briefly then decreases
question
b) $1,250
answer
If the market price is $1,000, the total producer surplus in the market would be:
a) $2,250
b) $1,250
c) $1,000
d) $750
a) $2,250
b) $1,250
c) $1,000
d) $750
question
a) Nadine, Karen, Beverly, and Grace only
answer
If the market price is $1,750, which sellers will be in the market?
a) Nadine, Karen, Beverly, and Grace only
b) Nadine, Karen, and Beverly only
c) Amanda and Grace only
d) Amanda only
a) Nadine, Karen, Beverly, and Grace only
b) Nadine, Karen, and Beverly only
c) Amanda and Grace only
d) Amanda only
question
d) $80,500
answer
Samantha's annual implicit costs will equal
a) $55,200
b) $75,200
c) $80,000
d) $80,500
e) $165,700
a) $55,200
b) $75,200
c) $80,000
d) $80,500
e) $165,700
question
a) $55,200
answer
Samantha's annual accounting costs will equal
a) $55,200
b) $75,200
c) $80,000
d) $80,500
e) $165,700
a) $55,200
b) $75,200
c) $80,000
d) $80,500
e) $165,700
question
e) $135,700
answer
Samantha's annual economic costs will equal:
a) $55,200
b) $75,200
c) $80,000
d) $80,500
e) $135,700
a) $55,200
b) $75,200
c) $80,000
d) $80,500
e) $135,700
question
b) $105,200
answer
According to Samantha's accountant, which of the following revenue totals will yield her business $50,000 in accounting profits?
a) $55,200
b) $105,200
c) $130,000
d) $132,500
e) $185,700
a) $55,200
b) $105,200
c) $130,000
d) $132,500
e) $185,700
question
e) $185,700
answer
According to an economist, which of the following revenue totals will yield her business $50,000 in economic profits?
a) $55,200
b) $105,200
c) $130,000
d) $132,500
e) $185,700
a) $55,200
b) $105,200
c) $130,000
d) $132,500
e) $185,700
question
c) diminishing marginal product
answer
When adding another unit fo labor leads to an increase in output that is smaller than the increases in output that resulted from adding previous units of labor, the firm is experiencing
a) diminishing labor
b) diminishing output
c) diminishing marginal product
d) negative marginal product
e) negative returns to scale
a) diminishing labor
b) diminishing output
c) diminishing marginal product
d) negative marginal product
e) negative returns to scale
question
c) marginal product must be falling
answer
If marginal cost is rising,
a) average variable cost must be falling
b) average fixed cost must be rising
c) marginal product must be falling
d) marginal product must be rising
e) marginal product could be rising, falling, or constant
a) average variable cost must be falling
b) average fixed cost must be rising
c) marginal product must be falling
d) marginal product must be rising
e) marginal product could be rising, falling, or constant
question
a) A
answer
Which of the curves is most likely to represent average fixed cost?
a) A
b) B
c) C
d) D
e) none of the curves drawn represents average fixed costs
a) A
b) B
c) C
d) D
e) none of the curves drawn represents average fixed costs
question
c) C
answer
Which of the curves is most likely to represent average total cost?
a) A
b) B
c) C
d) D
e) none of the curves drawn represents average fixed costs
a) A
b) B
c) C
d) D
e) none of the curves drawn represents average fixed costs
question
d) D
answer
Which of the curves is most likely to represent marginal cost?
a) A
b) B
c) C
d) D
e) none of the curves drawn represents average fixed costs
a) A
b) B
c) C
d) D
e) none of the curves drawn represents average fixed costs
question
a) (i), (ii), and (iii)
answer
Firms can have
(i) accounting profits and economic losses
(ii) accounting profits and economic profits
(iii) accounting losses and economic losses
(iv) accounting losses and economic profits
a) (i), (ii), and (iii)
b) only (i) and (iv)
c) only (ii) and (iii)
d) (i), (ii), (iii), (iv)
(i) accounting profits and economic losses
(ii) accounting profits and economic profits
(iii) accounting losses and economic losses
(iv) accounting losses and economic profits
a) (i), (ii), and (iii)
b) only (i) and (iv)
c) only (ii) and (iii)
d) (i), (ii), (iii), (iv)
question
b) decreases
answer
as marginal product increases, marginal cost _________
a) increases
b) decreases
c) stays the same
d) none of the above
a) increases
b) decreases
c) stays the same
d) none of the above
question
a) average variable cost must be rising
answer
when marginal cost exceeds average variable cost
a) average variable cost must be rising
b) marginal cost must be falling
c) average variable cost must be falling
d) average total cost must be falling
a) average variable cost must be rising
b) marginal cost must be falling
c) average variable cost must be falling
d) average total cost must be falling
question
c) government tends to regulate most business activity fairly strictly, to insure that buyers are treated fairly
answer
Competition is often listed as an important characteristic of a market economy. Competitive markets have all of the following characteristics EXCEPT:
a) buyers and sellers act independently of each other
b) new sellers can enter the market for a product relatively easily, should they choose to do so
c) government tends to regulate most business activity fairly strictly, to insure that buyers are treated fairly
d) firms (producers) tend to be small relative to their markets (to have relatively small shares of their markets)
a) buyers and sellers act independently of each other
b) new sellers can enter the market for a product relatively easily, should they choose to do so
c) government tends to regulate most business activity fairly strictly, to insure that buyers are treated fairly
d) firms (producers) tend to be small relative to their markets (to have relatively small shares of their markets)
question
d) horizontal at the prevailing market price
answer
the demand curve facing a firm in a competitive market is
a) downward-sloping
b) upward-sloping
c) vertical at the profit-maximizing output
d) horizontal at the prevailing market price
a) downward-sloping
b) upward-sloping
c) vertical at the profit-maximizing output
d) horizontal at the prevailing market price
question
c) the existence of a large number of small firms means that buyers have alternatives, and will buy from the lowest-priced seller; this forces all firms to charge the same, lowest price
answer
why does an individual firm in a competitive market have no control over price?
a) the government sets the prices of products sold in competitive markets
b) competitive markets are dominated by a large firm which is able to force smaller firms to charge the prices it picks
c) the existence of a large number of small firms means that buyers have alternatives, and will buy from the lowest-priced seller; this forces all firms to charge the same, lowest price
d) small firms have incomplete information about market demand and supply, so they do not have enough information to make pricing decisions on their own, and rely on industry associations to do it for them
a) the government sets the prices of products sold in competitive markets
b) competitive markets are dominated by a large firm which is able to force smaller firms to charge the prices it picks
c) the existence of a large number of small firms means that buyers have alternatives, and will buy from the lowest-priced seller; this forces all firms to charge the same, lowest price
d) small firms have incomplete information about market demand and supply, so they do not have enough information to make pricing decisions on their own, and rely on industry associations to do it for them
question
b) equal to $8.75 per additional pound
answer
Mike's Mushrooms is a firm producing and selling mushrooms in a competitive market. Suppose the prevailing market price for mushrooms is $8.75 per pound. Mike's Marginal Revenue from selling a little more will be
a) less than $8.75 per additional pound
b) equal to $8.75 per additional pound
c) more than $8.75 per additional pound
d) indeterminate
a) less than $8.75 per additional pound
b) equal to $8.75 per additional pound
c) more than $8.75 per additional pound
d) indeterminate
question
c) sawmills
answer
This table some basic information on the characteristics of the supply side of several product markets. Which of these seems MOST LIKELY to be a competitive product market?
a) beer breweries
b) hand tool manufacturing
c) sawmills
d) small arms manufacturing
a) beer breweries
b) hand tool manufacturing
c) sawmills
d) small arms manufacturing
question
c) at the prevailing market price
answer
suppose we have reason to believe that the market for 2" diameter cold-rolled hexagonal steel rods is a competitive market. Suppose we also know that the price for 1 ton of 7-foot long such steel rods is $4,350. Then we would conclude that a seller of these steel rods could sell a little more of them
a) only if it lowered its price
b) even if it raised its price
c) at the prevailing market price
d) only by undertaking an effective advertising campaign
a) only if it lowered its price
b) even if it raised its price
c) at the prevailing market price
d) only by undertaking an effective advertising campaign
question
c) increase output until MC is equal to the market price (which is also the farm's MR)
answer
suppose a wheat farmer is currently producing 60,000 bushels of wheat per year, with the following costs:
AVC = $3.75 per bushel
ATC = $5.85 per bushel
MC = $6.15 per bushel
The prevailing market price of wheat is $6.37 per bushel and is expected to remain at $6.37 per bushel. If this farmer wants to maximize profits, the farmer can be expected to
a) leave output unchanged
b) decrease output until MC is $1.00 less than price
c) increase output until MC is equal to the market price (which is also the farm's MR)
d) shut down immediately and get out of the wheat farming business in the long run, because wheat farming is clearly not profitable
AVC = $3.75 per bushel
ATC = $5.85 per bushel
MC = $6.15 per bushel
The prevailing market price of wheat is $6.37 per bushel and is expected to remain at $6.37 per bushel. If this farmer wants to maximize profits, the farmer can be expected to
a) leave output unchanged
b) decrease output until MC is $1.00 less than price
c) increase output until MC is equal to the market price (which is also the farm's MR)
d) shut down immediately and get out of the wheat farming business in the long run, because wheat farming is clearly not profitable
question
a) P=$10 per pound; Q=about 15,000 pounds per month
answer
What is this firm's profit-maximizing price? What is its profit-maximizing output?
a) P=$10 per pound; Q=about 15,000 pounds per month
b) P should be greater than $10 per pound; will be about 23,000 pounds
c) P will be less than $10 per pound; Q will be about 7,500 pounds per month
d) P=$10 per pound; Q will be slightly more than 20,000 pounds per month
e) P=$10 per pound; Q = about 13,500 pounds per month
a) P=$10 per pound; Q=about 15,000 pounds per month
b) P should be greater than $10 per pound; will be about 23,000 pounds
c) P will be less than $10 per pound; Q will be about 7,500 pounds per month
d) P=$10 per pound; Q will be slightly more than 20,000 pounds per month
e) P=$10 per pound; Q = about 13,500 pounds per month
question
c) about 875,000 tons per year (where marginal revenue equals marginal cost)
answer
This figure shows the cost curves for a typical producer of low-sulfur bituminous coal; we have reason to believe that this market is a competitive market. If the current market price of coal is $65 per ton, and is expected to remain at $65 per ton for the foreseeable future, what is the firm's profit-maximizing output?
a) about 300,000 tons per year (where marginal cost is at its minimum)
b) slightly more than 500,000 tons per year (where average variable cost is at its minimum)
c) about 875,000 tons per year (where marginal revenue equals marginal cost)
d) slightly more than 800,000 tons per year (where average total cost is at its minimum)
a) about 300,000 tons per year (where marginal cost is at its minimum)
b) slightly more than 500,000 tons per year (where average variable cost is at its minimum)
c) about 875,000 tons per year (where marginal revenue equals marginal cost)
d) slightly more than 800,000 tons per year (where average total cost is at its minimum)
question
d) firms should produce 0 in the short run
answer
This figure shows the cost curves for a typical producer of low-sulfur bituminous coal; we have reason to believe that this market is a competitive market. If the current market price of coal is $35 per ton, and is expected to remain at $35 per ton for the foreseeable future, what is the firm's profit-maximizing output?
a) about 300,000 tons per year (where marginal cost is at its minimum)
b) slightly more than 500,000 tons per year (where average variable cost is at its minimum)
c) about 450,000 tons per year (where marginal revenue equals marginal cost)
d) firms should produce 0 in the short run
a) about 300,000 tons per year (where marginal cost is at its minimum)
b) slightly more than 500,000 tons per year (where average variable cost is at its minimum)
c) about 450,000 tons per year (where marginal revenue equals marginal cost)
d) firms should produce 0 in the short run
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
