question

The English word that comes from the Greek word for "one who manages a household" is

answer

Economy

question

Economics deals primarily with the concept of

answer

Scarcity

question

Efficiency

answer

refers to how much a society can produce with its resources. Equality refers to how evenly the benefits from using resources are distributed among members of society.

question

Consider Frank's decision to go to college. If he goes to college, he will spend $21,000 on tuition, $11,000 on room and board, and $1,800 on books. If he does not go to college, he will earn $16,000 working in a store and spend $7,200 on room and board. Frank's cost of going to college is

answer

$42,600

question

The basic principles of economics suggest that

answer

government should become involved in markets when those markets fail to produce efficient or fair outcomes.

question

The term "market failure" refers to

answer

a situation in which the market on its own fails to allocate resources efficiently.

question

An example of an externality is the impact of

answer

pollution from a factory on the health of people in the vicinity of the factory.

question

Market power refers to

answer

power of a single person or small group to influence market prices

question

Productivity is defined as

answer

the amount of goods and services produced from each unit of labor input

question

Factors of production are

answer

inputs into the production process.

question

Any point on a country's production possibilities frontier represents a combination of two goods that an economy

answer

can produce using all available resources and technology.

question

(Refer to Figure 2 on Test 1) It is possible for this economy to produce

answer

60 dryers and 50 washers

question

(Refer to Figure 3 on Test 1) Which of the following events would explain the shift of the production possibilities frontier from A to B?

answer

The economy experienced a technological advance in the production of books.

question

(Refer to Table 3 on Test 1) Assume that Aruba and Iceland each has 80 labor hours available. If each country divides its time equally between the production of coolers and radios, then total production is

answer

60 coolers and 18 radios

question

(Refer to Table 4 on Test 1) Assume that Max and Min can switch between producing mittens and producing hats at a constant rate. Assume that Max and Min each has 36 labor hours available. If each person divides his/her time equally between the production of mittens and hats, then total production is

answer

18 mittens and 7.5 hats

question

(Refer to Figure 12 on Test 1) The opportunity cost of 1 bowl for Ben is

answer

4 cups

question

(Refer to Figure 12 on Test 1) The opportunity cost of 1 bowl for June is

answer

3/2 cups

question

A group of buyers and sellers of a particular good or service is called a(n)

answer

market

question

Which of the following statements is correct about buyers and sellers determining supply/demand?

answer

Buyers determine demand, and sellers determine supply.

question

A movement downward and to the right along a demand curve is called a(n)

answer

increase in quantity demanded.

question

The market demand curve

answer

represents the sum of the quantities demanded by all the buyers at each price of the good.

question

(Refer to Table 4-2 on Test 2) Whose demand does not obey the law of demand?

answer

Carrie's.

question

(Refer to Table 4-4 on Test 2) Suppose the market consists of Adam, Barb, and Carl. If the price falls by $2, the quantity demanded in the market increases by

answer

10 units.

question

You lose your job and, as a result, you buy more frozen pizzas. For you, frozen pizzas are a(n)

answer

inferior good.

question

A likely example of substitute goods for most people would be

answer

pencils and pens.

question

A likely example of complementary goods for most people would be

answer

chips and salsa.

question

Which of the following might cause the demand curve for an inferior good to shift to the left?

answer

an increase in the price of a complement.

question

(Refer to Figure 4-6 on Test 2) Suppose that the federal government is concerned about obesity in the United States. Congress is considering two plans. One would require "junk food" producers to include warning labels on all junk food. The other would impose a tax on all products considered to be junk food. If the warning labels are successful, we could illustrate the plan as producing a movement from

answer

Point A to Point B in Panel 1.

question

(Refer to Figure 4-8 on Test 2) Suppose the figure shows the market demand for laptop computers. Suppose the price of wireless printers, a complementary good, decreases. Which of the following changes would occur?

answer

A shift from D2 to D1.

question

A supply curve slopes upward because

answer

an increase in price gives producers an incentive to supply a larger quantity.

question

(Refer to Figure 4-17 on Test 2) At a price of

answer

$7, there is a surplus of 4 units.

question

Elasticity is

answer

a measure of how much buyers and sellers respond to changes in market conditions.

question

When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is

answer

inelastic.

question

If the price elasticity of demand for a good is 1, then a 3 percent decrease in price results in a

answer

3 percent increase in the quantity demanded.

question

(Refer to Table 5-4 on Test 2) Using the midpoint method, what is the price elasticity of demand when price rises from $12 to $16?

answer

2.33

question

(Refer to Figure 5-5 on Test 2) Using the midpoint method, between the prices of $50 and $60, price elasticity of demand is about

answer

1.22

question

(Refer to Figure 5-5 on Test 2) The maximum value of total revenue corresponds to a price of

answer

$50

question

You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. Your roommate still enjoys Ramen noodles very much and buys even more, but you plan to buy fewer Ramen noodles in favor of foods you prefer more. When looking at income elasticity of demand for Ramen noodles, yours would

answer

be negative and your roommate's would be positive.

question

(Refer to Figure 5-11 on Test 2) If price increases from $10 to $20, total revenue will

answer

increase by $120, so demand must be inelastic in this price range.

question

Price controls are usually enacted

answer

when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

question

If a binding price ceiling is imposed on the baby formula market, then

answer

all of the above are correct: the quantity of baby formula demanded will increase, the quantity of baby formula supplied will decrease, and a shortage of baby formula will develop.

question

A binding price floor

answer

causes a surplus AND is set at a price above the equilibrium price (one of those i and iii only questions).

question

(Refer to Figure 6-17 on Test 3) A government-imposed price of $24 in this market is an example of a

answer

binding price floor that creates a surplus.

question

(Refer to Figure 6-9 on Test 3) A price ceiling set at

answer

$4 will be binding and will result in a shortage of 16 units.

question

(Refer to Figure 6-12 on Test 3) When the price ceiling applies in this market and the supply curve for gasoline shifts from S1 to S2,

answer

a shortage will occur at the new market price of P2.

question

(Refer to Figure 6-12 on Test 3) When the price ceiling applies in this market, and the supply curve for gasoline shifts from S1 to S2, the resulting quantity of gasoline that is bought and sold is

answer

less than Q3.

question

(Refer to Figure 6-21 on Test 3) What is the amount of the tax per unit?

answer

$4

question

Welfare economics is the study of how

answer

the allocation of resources affects economic well-being

question

Suppose Larry, Moe, and Curly are bidding in an auction for a mint-condition video of Charlie Chaplin's first movie. Each has in mind a maximum amount that he will bid. This maximum is called

answer

willingness to pay.

question

(Refer to Table 7-1 on Test 3) If the price of the product is $110, then who would be willing to purchase the product?

answer

Calvin, Sam, and Andrew.

question

(Refer to Figure 7-4 on Test 3) Which area represents consumer surplus at a price of P1?

answer

BDF

question

Caroline sharpens knives in her spare time for extra income. Buyers of her service are willing to pay $2.95 per knife for as may knives as Caroline is willing to sharpen. On a particular day, she is willing to sharpen the first knife for $2.00, the second knife for $2.25, the third knife for $2.75, and the fourth knife for $3.50. Assume Caroline is rational is deciding how many knives to sharpen. Her producer surplus is

answer

$1.85

question

(Refer to Figure 7-12 on Test 3) Producer surplus is the area

answer

below the price and above the supply curve.

question

(Refer to Figure 7-12 on Test 3) If the equilibrium price is $200, what is the producer surplus?

answer

$7,500

question

(Refer to Figure 7-12 on Test 3) If the equilibrium price rises from $200 to $350, what is the producer surplus to NEW producers?

answer

$7,500

question

Total surplus is

answer

the total value of the goods to buyers minus the cost to sellers of providing the good.

question

If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price,

answer

the country will be an importer of the good.

question

A country has a comparative advantage in a product if the world price is

answer

higher than that country's domestic price without trade.

question

(Refer to Figure 9-1 on Test 3) From the figure it is apparent that

answer

Guatemala has a comparative advantage in producing coffee, relative to the rest of the world.

question

(Refer to Figure 9-1 on Test 3) When trade in coffee is allowed, consumer surplus in Guatemala

answer

decreases by the area B + D

question

(Refer to Figure 9-12 on Test 3) Equilibrium price and equilibrium quantity without trade are

answer

$42 and 1,200

question

The term market failure refers to

answer

a market that fails to allocate resources efficiently

question

An externality is

answer

the uncompensated impact of one person's actions on the well-being of a bystander.

question

Since restored historic buildings convey a positive externality, local governments may choose to

answer

Both of these answers: regulate the demolition of them AND provide tax breaks to owners who restore them.

question

A negative externality will cause a private market to produce

answer

more than what is socially desirable.

question

(Refer to Figure 10-8 on Test 4) What is the equilibrium price in this market?

answer

$8

question

(Refer to Figure 10-8 on Test 4) What is the socially-optimal quantity of output in this market?

answer

10 units

question

(Refer to Figure 10-11 on Test 4) The graph represents a market in which

answer

there is a positive externality.

question

Which of the following goods is rival and excludable?

answer

a congested toll road

question

(Refer to Figure 11-1 on Test 4) A tornado siren in a small town is an example of the type of good represented by Box

answer

D

question

Neither public goods nor common resources are

answer

excludable, but only public goods are not rival in consumption.

question

The largest source of revenue for the federal government is the

answer

individual income tax

question

The two types of taxes that are most important to state and local governments as sources of revenue are

answer

sales taxes and property taxes.

question

(Refer to Table 12-6 on Test 4) For this tax schedule, what is the marginal tax rate for an individual with $72,000 in taxable income?

answer

40%

question

(Refer to Table 12-9 on Test 4) Bill is a single person whose taxable income is $35,000 a year. What is his average tax rate in 2012?

answer

17.6%

question

Economists in the field of industrial organization study how

answer

firms' decisions about prices and quantities depend on markets conditions.

question

An entrepreneur's motivation to start a business arises from

answer

all of the above: an innate love for the type of business that he or she starts, a desire to earn a profit, and an altruistic desire to provide the world with a good product.

question

A difference between explicit and implicit costs is that

answer

implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.

question

For a firm, the relationship between the quantity of inputs and quantity of output is called the

answer

production function.

question

(Refer to Table 13-2 on Test 4) What is the marginal product of the third worker?

answer

100 units

question

(Refer to Table 13-3 on Test 4) The marginal product of the fourth worker is

answer

10 units

question

When the marginal product of an input declines as the quantity of that input increases, the production function exhibits

answer

diminishing marginal product.

question

Since the 1980's, Wal-Mart stores have appeared in almost every community in America. Wal-Mart buys its goods in large quantities and, therefore, at cheaper prices. Wal-Mart also locates its stores where land prices are low, usually outside of the community business district. Many customers shop at Wal-Mart because of low prices. Local retailers, like the neighborhood drug store, often go out of business because they lose customers. This story demonstrates that

answer

there are economies of scale in retail sales.

question

Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. Together Kate and William can arrange 35 bouquets per day. What is William's marginal product?

answer

15 bouquets

question

Economies of scale occur when a firm's

answer

long-run average total costs are decreasing as output increases.

question

If your local gasoline station raised its price by 20 percent, its sales of gasoline would decrease substantially because your local gas station

answer

all of the above: has little or no market power, is small relative to the size of the gasoline market, and is a competitive firm.

question

A firm has market power if it can

answer

influence the market price of the good it sells

question

In a perfectly competitive market,

answer

no one seller can influence the price of the product.

question

When buyers in a competitive market take the selling price as given, they are said to be

answer

price takers.

question

(Refer to Table 14-8 on Test 5) The firm should not produce an output level beyond

answer

5 units

question

Profit-maximizing firms in a competitive market produce an output level where

answer

marginal cost equals marginal revenue

question

(Refer to Table 14-5 on Test 5) For this firm, the price of a product is

answer

$11

question

The information below applies to a competitive firm that sells its output for $40 per unit: 1. When the firm produces and sells 150 units of output, its average total cost is $24.50, 2. When the firm produces and sells 151 units of output, its average total cost is $24.55. When the firm produces 150 units of output its total cost is

answer

$3,675.00

question

The information below applies to a competitive firm that sells its output for $40 per unit: 1. When the firm produces and sells 150 units of output, its average total cost is $24.50, 2. When the firm produces and sells 151 units of output, its average total cost is $24.55. When the firm produces 150 units of output, its profit is

answer

$2,325.00

question

Which of these types of costs can be ignored when an individual or a firm is making decisions?

answer

sunk costs

question

Which of the following is an example of a barrier to entry?

answer

All answers (i, ii, and iii question): A key resource is owned by a single firm, the costs of production make a single producer more efficient than a large number of producers, and the government has given the existing monopolies the exclusive right to produce the good.

question

Because a monopolist does not face competition from other firms, the outcome in a market with a monopoly

answer

is often not in the best interest of society.

question

For a monopoly,

answer

average revenue exceeds marginal revenue.

question

(Refer to Figure 15-4 on Test 5) The demand curve for a monopoly firm is depicted by curve

answer

B

question

(Refer to Figure 15-4 on Test 5) The average total cost for a monopoly firm is depicted by curve

answer

C

question

The socially efficient level of production occurs where the marginal cost curve intersects

answer

demand.

question

A monopolistically competitive industry is characterized by

answer

many firms, differentiated products, and free entry.

question

(Refer to Figure 16-10 on Test 5) In order to maximize its profit, the firm will choose to produce

answer

100 units of output, and its profit will be negative

question

(Refer to Figure 16-10 on Test 5) The firm's maximum profit is

answer

-$2,000

question

(Refer to Figure 16-9 on Test 5) In response to the situation represented by the figure, we would expect

answer

None of the above (new firms to enter the market, some of the firms that are currently in the market to exit, or this firm's profit to move from its current value toward a positive value.)

question

(Refer to Table 17-13 on Test 5) Pursuing its own best interest, Lopes will

answer

increase the size of its store and parking lot regardless of the decision made by HomeMax.

question

(Refer to Table 17-13 on Test 5) If both stores follow a dominant strategy, Lopes's annual profit will grow by

answer

$1.0 million

question

(Refer to Figure 17-2 on Test 5) The dominant strategy for Acme is to

answer

produce a good quality product, and the dominant strategy for Pinnacle is to produce a good quality product.

question

(Refer to Figure 17-2 on Test 5) The dominant strategy for Acme is to

answer

produce a good quality product, and the dominant strategy for Pinnacle is to produce a good quality product.

Micro Final Exam – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards