ECON 2306 Test 2 Study Guide – Flashcards
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The amount of pleasure or satisfaction derived from consumption of a good is called A. consumer surplus. B. utility. C. elasticity. D. demand.
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B. Utility
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The principle that "as more of a good is consumed, its extra benefit declines" is known as A. the law of demand. B. the law of comparative advantage. C. the law of diminishing marginal product. D. the law of diminishing marginal utility.
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D. the law of diminishing marginal utility.
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According to utility theory, consumer purchase decisions are made such that A. the total utility of the last unit purchased is equal to the price of that unit. B. the difference between the value of the marginal utility of the last unit purchased and the price paid is maximized. C. the value of the ratio of marginal utility to price for the last units purchased and consumed is equal. D. the total utility from consuming the good is less than the marginal utility of the last unit consumed.
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C. the value of the ratio of marginal utility to price for the last units purchased and consumed is equal.
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https://elearn.uta.edu/courses/1/2178-PRINCIPLES-OF-MICROECONOMICS-82906-006/ppg/et18mcbb0124151909/f5g1q54g1.jpg Refer to the above table. If the price of a hamburger is $2, the price of a Broadway Show is $60, and the consumer has $190, what is the consumer optimum? A. 4 hamburgers and 2 Broadway shows B. 0 hamburgers and 6 Broadway shows C. 5 hamburgers and 3 Broadway shows D. 6 hamburgers and 0 Broadway shows
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C. 5 hamburgers and 3 Broadway shows
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If Frank has been consuming 5 hamburgers per week at a consumer optimum, and the price of hamburgers falls, how will Frank respond? A. He will buy more burgers. B. He will save more income. C. He will buy more of everything. D. He will buy more of everything except burgers.
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A. He will buy more burgers.
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The time period during which a firm's capital is fixed but its labor is variable is called A. the very long run. B. the planning horizon. C. the long run. D. the short run.
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D. the short run.
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https://elearn.uta.edu/courses/1/2178-PRINCIPLES-OF-MICROECONOMICS-82906-006/ppg/et18mcbb0124151909/f20g1q67g1.jpg In the above table, the average product for 5 units of labor is A. 20.0. B. 15.0. C. 25.0. D. 22.5.
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C. 25.0.
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At Phil's Hot Dog Stand, we found the following: 4 laborers produced 66 hot dogs 5 laborers produced 76 hot dogs 6 laborers produced 85 hot dogs 7 laborers produced 88 hot dogs What was the marginal product of the sixth laborer? A. 3 hot dogs B. 9 hot dogs C. 6 hot dogs D. 10 hot dogs
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B. 9 hot dogs
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Marginal product and average product are measured in A. dollars. B. units of production. C. profit terms. D. the same units as marginal cost and average total cost.
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B. units of production.
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Marginal costs are defined as A. the change in total costs due to a one-unit change in production. B. costs that represent a change, but one that cannot be measured correctly. C. costs that are viewed as marginal; of little or small importance. D. the change in the decisions that are made by households and firms.
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A. the change in total costs due to a one-unit change in production.
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https://elearn.uta.edu/courses/1/2178-PRINCIPLES-OF-MICROECONOMICS-82906-006/ppg/et18mcbb0124151909/f21g1q119g1.jpg Use the above figure. At an output equal to "Q" the total variable cost for the firm will be the area A. OQEB. B. OQFA. C. OQDC. D. OQAB.
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A. OQEB.
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https://elearn.uta.edu/courses/1/2178-PRINCIPLES-OF-MICROECONOMICS-82906-006/ppg/et18mcbb0124151909/f21g1q113g1.jpg In the above table, what is the average total cost to produce 3 units of output? A. $53.33 B. $33.33 C. $55 D. $20
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A. $53.33
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The long run is defined as a time period during which full adjustment can be made to any change in the economic environment. Thus in the long run, all factors of production are variable. Long-run curves are sometimes called planning curves, and the long run is sometimes called the A. foreseeable future. B. planning horizon. C. non-adjustment period. D. minimum efficient time period.
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B. planning horizon.
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When increasing its output results in falling costs, a firm that can adjust all inputs is experiencing A. capital gains. B. economies of scale. C. diseconomies of scale. D. loss
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B. economies of scale.
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The perfectly competitive firm cannot influence the market price because A. its production is too small to affect the market. B. it has market power. C. it is a price maker. D. its costs are too high.
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A. its production is too small to affect the market.
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https://elearn.uta.edu/courses/1/2178-PRINCIPLES-OF-MICROECONOMICS-82906-006/ppg/et18mcbb0124151909/f24g1q49g1.jpg Refer to the above table. The table represents information on the costs for Ajax Corporation. Ajax operates in a perfectly competitive market and the price of the product is $8. What will be the value of total revenue when quantity sold equals 3? A. $24 B. $9 C. $27 D. $3
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A. $24
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https://elearn.uta.edu/courses/1/2178-PRINCIPLES-OF-MICROECONOMICS-82906-006/ppg/et18mcbb0124151909/f24g1q36g1.jpg In the above figure, at the profit-maximizing rate of production for the perfectly competitive firm profit is A. $130. B. $30. C. $100. D. $70.
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B. $30.
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For a perfect competitor, the marginal revenue curve will be A. vertical. B. negatively sloped. C. horizontal. D. positively sloped.
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C. horizontal.
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A firm that has positive economic profits has accounting profits that are A. zero. B. positive. C. negative. D. indeterminate without more information.
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B. positive.
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https://elearn.uta.edu/courses/1/2178-PRINCIPLES-OF-MICROECONOMICS-82906-006/ppg/et18mcbb0124151909/f25g1q26g1.jpg In the above figure, what is the profit-maximizing output and price? A. 8, $7 B. 12, $10 C. 10, $10 D. 10, $8
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C. 10, $10
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The market demand curve in perfect competition is found by A. the interaction of supply and demand at the individual firm and consumer levels. B. horizontally summing the supply curves of the individual firms in the industry. C. utility maximizing behavior of the "representative consumer." D. horizontally summing the demand curves of the individual consumers.
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D. horizontally summing the demand curves of the individual consumers.
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The value of total output decreases when labor leaves one industry and goes to another and capital leaves the second industry and goes to the first. This indicates that A. price is greater than marginal cost. B. the first situation was not efficient. C. the second situation is efficient. D. it would be efficient to return to the first situation
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D. it would be efficient to return to the first situation
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When economic profits in a perfectly competitive industry are positive A. firms will increase prices while they have the opportunity. B. firms will increase output to earn even higher profits. C. the industry is in equilibrium. D. new firms will be attracted to the industry, and economic profits will decline to zero.
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D. new firms will be attracted to the industry, and economic profits will decline to zero.
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If it is not possible for a pharmaceutical drug maker to sell its generic cholesterol reducing drug along with some name brand cholesterol reducing drugs, we have an example of A. monopoly due to governmental entry restrictions. B. monopoly due to ownership of key resources. C. pure competition. D. monopoly due to economies of scale.
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A. monopoly due to governmental entry restrictions.
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From the date a U.S. patent is granted to a firm, it ceases to be a potential source of monopoly profits after A. 20 years. B. 7 years. C. 10 years. D. 14 years.
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A. 20 years.
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Successive downward movements along the demand curve for the product of a monopolist always generate successive A. decreases in the additional per-unit costs incurred by the monopolist. B. increases in the monopolist's average total costs. C. increases in the monopolist's marginal revenue. D. decreases in the additional per-unit revenues earned by the monopolist.
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D. decreases in the additional per-unit revenues earned by the monopolist.
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If a monopolist were to produce in the inelastic segment of its demand curve A. total revenue would be at a minimum. B. total revenue would be at a maximum. C. a further drop in the price will change quantity demanded less than proportionately. D. the firm would maximize profits.
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C. a further drop in the price will change quantity demanded less than proportionately.
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A monopolist is producing at an output level at which MR = $9 and MC = $8. It could increase profits A. by reducing output and by increasing price. B. by reducing both output and price. C. by increasing output and by reducing price. D. by increasing both output and price.
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C. by increasing output and by reducing price.
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https://elearn.uta.edu/courses/1/2178-PRINCIPLES-OF-MICROECONOMICS-82906-006/ppg/et18mcbb0124151909/f30g1q100g1.jpg In the above figure, the distance between A and B represents this monopoly firm's A. average cost per unit. B. average profit per unit. C. total revenue. D. total profit.
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B. average profit per unit.
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https://elearn.uta.edu/courses/1/2178-PRINCIPLES-OF-MICROECONOMICS-82906-006/ppg/et18mcbb0124151909/f30g1q110g1.jpg For the monopoly in the above figure, if the firm is currently producing 700 units, which of the following is correct? A. It could earn higher profits if it produced more units each day. B. It is maximizing its profits. C. It is incurring a loss. D. It could earn higher profits if it produced fewer units each day.
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D. It could earn higher profits if it produced fewer units each day.
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Which of the following is NOT necessary for price discrimination to occur? A. The firm must be able to separate the market into identifiable groups. B. The firm must have a downward sloping demand curve. C. The firm must be selling a durable good. D. The firm has to be able to prevent resale of the product or service.
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C. The firm must be selling a durable good.
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Which of the following statements about a monopolist is TRUE? A. Monopolies tend to allocate resources in a socially optimal manner. B. All monopolies are unlawful in the United States. C. Monopolies will always make a profit in the long run. D. Monopolies tend to misallocate resources.
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D. Monopolies tend to misallocate resources.
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A monopoly misallocates resources when it A. restricts output so that the marginal benefit of the last unit sold exceeds the marginal social cost of producing the good. B. exploits scale economies. C. sells the same product to different groups of customers at different prices. D. makes an above-normal profit.
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A. restricts output so that the marginal benefit of the last unit sold exceeds the marginal social cost of producing the good.
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On a hot summer day, a construction worker enters a McDonald's fast-food restaurant. He orders the first Big Mac. He consumes it within 3 minutes. He then orders a second Big Mac and consumes it in 10 minutes. He eats only half of the third one in 18 minutes and throws away the rest. The store manager offers him the fourth for free. The construction worker says: "No thanks." For the construction worker described above, we can say that A. the law of diminishing marginal utility only applies to durable goods. B. diminishing marginal utility began as soon as he had eaten the first Big Mac. C. diminishing marginal utility set in only after he had consumed the second Big Mac. D. diminishing marginal utility did not occur, he simply wanted to quit eating.
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B. diminishing marginal utility began as soon as he had eaten the first Big Mac.
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For good A and good B, the consumer maximizes personal satisfaction when A. MUA/MUB = PA/PB. B. MUA/PA = PB/MUB. C. MUA/PA = MUB/PB. D. PA/MUA = PB/MUB.
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C. MUA/PA = MUB/PB.
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A consumer who has chosen the right mix of goods and services to maximize his or her utility is said to have achieved A. consumer equilibrium. B. consumer benefit. C. consumer optimum. D. consumer surplus.
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C. consumer optimum.
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A consumer has been buying 4 magazines and 3 books a month for many months. The price of magazines then decreases, which directly causes the marginal utility per dollar spent on A. magazines to increase, thereby inducing the consumer to purchase fewer magazines and more books. B. books to increase, thereby inducing the consumer to purchase fewer magazines and more books. C. books to decrease, thereby inducing the consumer to purchase fewer magazines and more books. D. magazines to increase, thereby inducing the consumer to purchase more magazines and fewer books.
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D. magazines to increase, thereby inducing the consumer to purchase more magazines and fewer books.
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Which of the following is TRUE about the long run? A. All resources are variable. B. All resources are fixed. C. At least one resource is fixed. D. None of these
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A. All resources are variable.
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https://elearn.uta.edu/courses/1/2178-PRINCIPLES-OF-MICROECONOMICS-82906-006/ppg/et18mcbb0124151909/f20g1q104g1.jpg Refer to the above table. At what quantity of labor does it become obvious that the law of diminishing marginal product has set in? A. worker number 4 B. worker number 3 C. worker number 5 D. worker number 21
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B. worker number 3
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The production function A. shows the maximum level of output for a given set of inputs. B. always shows increasing marginal product of labor. C. shows the relationship between input prices and amount of input used. D. is an economic relationship between revenue and cost
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A. shows the maximum level of output for a given set of inputs.
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https://elearn.uta.edu/courses/1/2178-PRINCIPLES-OF-MICROECONOMICS-82906-006/ppg/et18mcbb0124151909/f20g1q33g1.jpg According to the above table, what is the average product of labor when three laborers are employed? A. 3 B. 4 C. 5 D. 6
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D. 6
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https://elearn.uta.edu/courses/1/2178-PRINCIPLES-OF-MICROECONOMICS-82906-006/ppg/et18mcbb0124151909/f21g1q106g1.jpg In the above table, what is the marginal cost to produce the 4th unit of output? A. $30 B. $55 C. $20 D. $60
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D. $60
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If the marginal product curve is intersecting the average product curve, we know that A. the marginal cost curve is intersecting the average total cost curve. B. the average total cost curve lies above the marginal cost curve. C. the marginal cost curve is intersecting the average fixed cost curve. D. the average variable cost curve is intersecting the average total cost curve.
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A. the marginal cost curve is intersecting the average total cost curve.
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https://elearn.uta.edu/courses/1/2178-PRINCIPLES-OF-MICROECONOMICS-82906-006/ppg/et18mcbb0124151909/f21g1q65g1.jpg Use the above figure. The AFC at output level 20 is A. $0.50. B. $3.00. C. $10.00. D. $1.00.
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A. $0.50.
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https://elearn.uta.edu/courses/1/2178-PRINCIPLES-OF-MICROECONOMICS-82906-006/ppg/et18mcbb0124151909/f22g1q47g1.jpg Refer to the above figure. Economies of scale exist A. over the entire range of output. B. up to output Q2. C. from output Q2 to Q5. D. after output Q5.
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B. up to output Q2.
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https://elearn.uta.edu/courses/1/2178-PRINCIPLES-OF-MICROECONOMICS-82906-006/ppg/et18mcbb0124151909/f22g1q65g1.jpg The minimum efficient scale in the figure below shows that A. point A is the minimum efficient scale (MES) for the firm. B. the long-run average cost curve (LAC) reaches a minimum point at B. C. the minimum efficient scale (MES) illustrates maximum average costs. D. point B is the minimum efficient scale (MES) for the firm.
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A. point A is the minimum efficient scale (MES) for the firm.
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In a perfectly competitive industry A. there is apt to be a shortage of sellers of output. B. no buyer or seller can influence the market price. C. firms can never make an economic profit. D. each firm is a price maker.
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B. no buyer or seller can influence the market price.
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https://elearn.uta.edu/courses/1/2178-PRINCIPLES-OF-MICROECONOMICS-82906-006/ppg/et18mcbb0124151909/f24g1q61g1.jpg Refer to the above figure. Profits for this firm are equal to zero A. for points between B and C. B. for all points less than B and greater than C. C. only for all points less than B. D. only at points B and C.
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D. only at points B and C.
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https://elearn.uta.edu/courses/1/2178-PRINCIPLES-OF-MICROECONOMICS-82906-006/ppg/et18mcbb0124151909/f24g1q32g1.jpg In the above figure, the profit-maximizing rate of production for the perfectly competitive firm is A. 5. B. 10. C. 13. D. None of these.
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B. 10.
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The vertical distance between the horizontal axis and any point on a perfect competitor's demand curve measures A. product price, marginal revenue, and average revenue. B. supply curve for the product. C. total cost. D. total revenues.
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A. product price, marginal revenue, and average revenue.
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A firm will shut down in the short run when A. price is below average variable costs at all possible rates of output. B. price is below average total costs at all possible rates of output. C. price is below marginal cost at all possible rates of output. D. it is making a loss.
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A. price is below average variable costs at all possible rates of output.
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https://elearn.uta.edu/courses/1/2178-PRINCIPLES-OF-MICROECONOMICS-82906-006/ppg/et18mcbb0124151909/f25g1q3g1.jpg Refer to the above table. If the price is $6, the perfectly competitive firm should produce A. 106 units. B. 107 units. C. 104 units. D. 105 units.
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D. 105 units.
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A firm is currently producing at the rate of output at which total revenues just cover its total variable costs. If demand falls, the firm should A. increase its rate of output to make up for the lower price. B. lower both price and its rate of output. C. shut down. D. not change its rate of output because it is still covering its variable costs.
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C. shut down.
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A law that restricts plant closings will A. make the economy more efficient by slowing down the movement of resources to a more optimal rate. B. allow profits and losses to provide a signaling function. C. make the economy more efficient by reducing poor decisions on the part of entrepreneurs. D. prevent resources from flowing to their highest-valued uses.
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D. prevent resources from flowing to their highest-valued uses.
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In a perfectly competitive market, a firm in long-run equilibrium will be operating A. at the minimum of the marginal cost curve. B. to the left of the minimum of the long-run average cost curve. C. to the right of the minimum of the long-run average cost curve. D. at the minimum of the long-run average cost curve.
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D. at the minimum of the long-run average cost curve.
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Which of the following regarding a monopolist is INCORRECT? A. The monopolist constitutes the entire industry. B. There are barriers to entry that allow monopoly. C. Only expensive products are produced by monopolies. D. The monopolist is a single supplier of a good or service.
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C. Only expensive products are produced by monopolies.
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From the date a U.S. patent is granted to a firm, it ceases to be a potential source of monopoly profits after A. 10 years. B. 7 years. C. 14 years. D. 20 years.
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D. 20 years.
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The profit-maximizing monopolist will never operate in a price range over which A. demand is inelastic. B. P > MR. C. P > MC. D. the demand curve slopes downward.
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A. demand is inelastic.
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To sell more units, a monopolist must A. produce the profit maximizing rate of production. B. merely produce more units. C. advertise more. D. lower price.
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D. lower price.
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https://elearn.uta.edu/courses/1/2178-PRINCIPLES-OF-MICROECONOMICS-82906-006/ppg/et18mcbb0124151909/f30g1q35g1.jpg Refer to the above table. Given the demand and cost schedules, what is the profit-maximizing price for this monopolist? A. $11 B. $10 C. $12 D. $13
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A. $11
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https://elearn.uta.edu/courses/1/2178-PRINCIPLES-OF-MICROECONOMICS-82906-006/ppg/et18mcbb0124151909/f30g1q9g1.jpg In the above figure, at the firm's profit maximizing output, total revenue is rectangle A. 0P2BQ1. B. 0P1AQ1. C. 0P5EQ5. D. 0P3FQ3.
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B. 0P1AQ1.
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https://elearn.uta.edu/courses/1/2178-PRINCIPLES-OF-MICROECONOMICS-82906-006/ppg/et18mcbb0124151909/f30g1q114g1.jpg Use the above figure. The profit this monopolist earns is closest to A. $3,000. B. $1,000. C. $4,800. D. $1,600.
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A. $3,000.
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Price discrimination is the A. selling of a given product at more than one price when the price difference is unrelated to cost differences. B. refusal by a firm to sell to all customers. C. pricing of a product so that not everyone can afford it. D. selling of a given product at more than one price when the price differences reflect cost differences.
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A. selling of a given product at more than one price when the price difference is unrelated to cost differences.
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Compared to an efficient perfectly competitive industry, the monopolist will A. produce more output at a higher price and higher profit. B. produce less output at a higher total cost. C. produce more output at a lower price. D. produce less output and charge a higher price.
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D. produce less output and charge a higher price.
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A monopoly misallocates resources when it A. makes an above-normal profit. B. restricts output so that the marginal benefit of the last unit sold exceeds the marginal social cost of producing the good. C. exploits scale economies. D. sells the same product to different groups of customers at different prices.
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B. restricts output so that the marginal benefit of the last unit sold exceeds the marginal social cost of producing the good.
