question

If food is measured on the horizontal axis of a budget line diagram, and clothing is measured on the vertical axis, the slope of the budget line

answer

equal minus the maximum consuption of clothing divided by maximum consupmtion

question

If the price of good X(measured on the horizontal axis of a budget line diagram) increases at the same time that the proce of good Y (measured on the vertical axis) decreases, the budget line

answer

will become steeper

question

Roger spends all of his money on racquetballs and food. What would happen to Roger's budget line if his income increased by 10% holding prices constant?

answer

It would shift outward

question

The term "Utility" in economics refers to the

answer

Satisfaction recieved by individuals from consuming goods and servicces

question

The principle of diminishing marginal utility refers to the fact that total utility falls as consumption rises

answer

False

question

Which of the following most clearly illustrates the law of diminishing marginal utility?

answer

the additional satisfaction from consuming a good falls as more of the good is consumed

question

Which of the following is an assumption economists usually make regarding utility?

answer

Consumers prefer more of a good to less of a good

question

The combination of two good at which total utility is maximized must lie somewhere on the consumer's budget line.

answer

True

question

If MUx/Px is less than MUy/Py, then the consumer should consume more of X and less of Y.

answer

False

question

The marginal utility per dollar spent on a good represents the

answer

satisfaction recieved for each dollar spent on the last unit consumed

question

Among all the combinations of goods attainable by a consumer facing a budget constraint, the one that maximizes total utility is the one that

answer

equates the marginal utilities per dollar spent on each good

question

If bread costs $1 per pound and meat costs $4 per pound, a consumer whose marginal utility of meat equals 80 utils per pound is maximizing utlility only if the marginal utility per pound of bread equals

answer

20 utils

question

Steak is a normal good. If the price of steak increases,

answer

the income effecct on the demand for steak will reinforce the substitution effect

question

If biscuits are an inferior good for Aster, Then if their price falls, she

answer

will buy more biscuits if the substitution effect is larger that the income effect

question

For a normal good the,

answer

income effect and the substitution effect work in the same direction

question

If the physical plant for a corporation is considered to be fixed input, then

answer

It can be change in the long run

question

Consider a firm that needs one day to hire more labor and three months to change the amount of its capital. This firm's long run is

answer

three months

question

The law of diminishing marginal returns suggests that as more of a variable input is combined with a fixed input, total output will increase; however, the increases in the firm's output will become even smaller

answer

True

question

If a firm is experiencing diminishing marginal returns to labor, then

answer

total output rises more slowly as additional workers are added

question

A sunk cost is one that

answer

Was paid in the past and will not change regardless of the present decision

question

If the marginal product of labor is positive and increasing, then the total product of labor is

answer

upward sloping and becoming steeper

question

Which of the following, necessarily, equals zero when the firm's short-run output level is zero?

answer

Variable costs

question

Marginal Cost is:

answer

the increase in total cost from producing one more unit of output

question

The vertical distance between a firm's total cost curve and its total variable cost curve

answer

represents fixed costs

question

If a firm increases its output level in the short run, then

answer

variable costs rise, but fixed costs remain unchanged

question

When the marginal product of labor rises, the marginal cost output

answer

Falls

question

The minimum points of the average variable cost and average total cost curves occur where

answer

the marginal cost curve intersects those curves

question

Along a firm's long-run total cost curve, the firm is producing

answer

each level of output using the input mix that has the lowest cost

question

Accounting Profit is defined as

answer

Total Explicit Costs

question

The demand curve facing a firm

answer

indicates the amount of output that consumers will purchase from a firm, at various prices

question

A firms total Revenue

answer

is found by multiplying price per unit by the number of units produced and sold

question

Under the total revenue and total cost approach to profit maximization,

answer

firms choose the level of output at which total revenue is the greatest distance above total cost when the firm earns an economic profit

question

If a firm's managers inappropriately decide to operate where total revenue is maximized, they will continue to increase ouput

answer

as long as the marginal revenue curve is above the horizontal axis

question

If a firm chooses to produce output at the point where MR equals MC,

answer

Then TR-TC will be maximized if there is a profit

question

Many gift shops along the ocean shut down during the winter because

answer

revenues cannot cover variable costs

question

If a firm shuts down in the short run, then

answer

Total revenue drops to zero, but the firm must still pay its fixed costs

question

When a firm incurs losses in the short run, the most important consideration in determining whether to continue producing is if

answer

revenues cover some of its fixed costs and all of its variable cost

question

The distinguishing characteristics of different market structures include

answer

both the number of sellers and the number of buyers

question

Firms in a perfectly competitive market cannot influence

answer

the price of the product they sell

question

A perfectly competitive firm

answer

Cannot increase sales or total revenue by changing its price

question

In a perfectly competitive market, the

answer

market demand curve slopes dwonward

question

For a perfectly competitive firm,

answer

Marginal revenue is the same as the market price

question

The firm maximizes its profit by producing that quantity of output for which

answer

marginal revenue equals marginal cost

question

Carla's candy store is maximizing profits by producing 1,000 pounds of candy per day. If Carla's fixed costs unexpectedly increase and the market price remains constant, then the profit-maximizing level of output

answer

is still 1,000 pounds

question

A perfectly competitive firm produces in a market where the prevailing price is $25. At its current output level of 10,000 units, its average total cost equals $15. the firm is earning

answer

a total economic profit of $100,000

question

Which of the following expressions equal profit per unit or output?

answer

P-ATC

question

In the long run, market forces each perfectly competitive firm to produce at the lowest point on

answer

both its short-run and long-run average total costs

question

Opportunity cost shown in slope (Equation)

answer

-Px/Py

question

marginal utility (Equation)

answer

change in Total Utlility/change in total quatity

question

Equimarginal Principle (Equation)

answer

MUx/Px = MUy/Py

question

What firm(s) have unlimited liability?

answer

Sole Proprieturship and Partnership

question

Marginal Product of Labor (Equation)

answer

change in quantity/Change in variable

question

Average fixed cost (Equation)

answer

AFC=TFC/Q

question

Average Variable Cost (Equation)

answer

AVC=TVC/Q

question

Marginal Revenue (Equation)

answer

MR=change in Total Revenue/Change in Quantity

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