Micro Final Exam – Flashcards

Unlock all answers in this set

Unlock answers
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.
Get an explanation on any task
Get unstuck with the help of our AI assistant in seconds
New