# Microeconomics Exam 2 WVU

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### the maximum output that can be produced from each possible quantity of inputs.

The production function shows

### It is perfectly inelastic.

Jenna runs a small boutique in Capitola. She tells one of her suppliers that she is willing to pay \$6 for a pair of wool hand warmers and not a dime more. On the basis of this information, what can you conclude about her price elasticity of demand for wool hand warmers?

### rent that could have been earned on a building owned and used by the firm.

Which of the following is an implicit cost of production?

### horizontal

The demand curve for an individual seller's product in perfect competition is

### the law of diminishing marginal utility

If, as a person consumes more and more of a good, each additional unit adds less satisfaction than the previous unit consumed, we are seeing the workings of

### some firms will exit in the long run, causing market supply to decrease and market price to rise increasing profits for the remaining firms

If a typical firm in a perfectly competitive industry is incurring losses, then

### both productive efficiency and allocative efficiency

In the long-run, a perfectly competitive market exhibits

### Negative, so Sefton considers potatoes to be inferior goods.

Last year, Sefton purchased 60 pounds of potatoes to feed his family of five when his household income was \$30,000. This year, his household income fell to \$20,000 and Sefton purchased 80 pounds of potatoes. All else constant, Sefton's income elasticity of demand for potatoes is

### economic costs add the opportunity costs of a firm using its own resources while accounting costs do not.

Economics costs of production differ from accounting costs in that

### how responsive quantity demanded is to a change in price.

Price elasticity of demand measures

### 1.62

If 50 units are sold at a price of \$20 and 80 units are sold at a price of \$15, what is the absolute value of the price elasticity of demand? Use the midpoint formula.

### market demand and market supply.

The price of a seller's product in perfect competition is determined by

### heart surgery

Which of the following products comes closet to having a perfectly inelastic demand?

### The elasticity coefficient is constant along the demand curve.

Which of the following statements is true about the price elasticity of demand?

### is a necessity.

A demand curve that is horizontal indicates that the commodity

### average fixed costs.

The vertical difference between curves ATC and AVC measures

### horizontal; vertical

A demand curve which is ______ represents perfectly inelastic demand, and a demand curve which is _______ represents perfectly elastic demand.

### Negative

For people who live near a bus route, a subway station, or a commuter rail line, public transportation provides a substitute to driving their own cars. So, for these people, the cross-price elasticity of demand between gasoline and public transportation is

### No, because price is greater than marginal cost.

Is a monopolistic competitive firm allocatively efficient?

### \$25

If the market price is \$25 in a perfectively competitive market, the marginal revenue from selling the fifth unit is

### marginal cost curve above its minimum average variable cost.

A perfectly competitive firm's supply curve is its

### the number of sellers in the markets.

A major difference between monopolistic competition and perfect competition is

### There is only one seller in the market.

Which of the following is a characteristic of a monopoly?

### extra satisfaction received from consuming one more unit of a product.

Marginal utility is the

### the increase in quantity sold is large enough to offset the lower price.

When demand is elastic, a fall in price causes total revenue to rise because

### at the minimum of the average total cost curve.

The break-even point for an individual firm occurs

### There are restrictions on exit of firms.

Which of the following is not a characteristic of a perfectly competitive market structure?

### operating in the short run.

If a producer is not able to expand its plant capacity immediately, it is

### that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline.

The law of diminishing marginal returns states

### there will be more firms in the industry and the market price will decrease.

Suppose the prevailing price is \$20 and the firm is currently producing 1,350 units. In the long-run equilibrium,

### all inputs can be varied.

A characteristic of the long run is

### each buyer and seller is too small relative to others to independently affect the market price.

Both buyers and sellers are price takers in a perfectly competitive market because

### 5 pounds

What is the marginal product of the fourth worker?

### 10.8

What is the average product of labor when the farm hires 5 workers?

### Marginal revenue equals marginal cost.

Which of the following is not a characteristic of long-run equilibrium in monopolistically competitive market?

### 0.5; The product is inelastic.

Suppose a 4 percent increase in price results in a 2 percent increase in the quantity supplied of a good. Calculate the price elasticity of supply and characterize the product.

### only one seller who faces a downward-sloping demand curve.

In monopolistic competition there is/are

### \$100

Vipsana's Gyros House sells gyros. The cost of ingredients (pita, meat spices, etc.) to make a gyro is \$2.00. Vispana pays her employees \$60 per day. She also incurs a fixed cost of \$120 per day. Calculate Vispana's variable cost per day when she produces 50 gyros using two workers?

### Po

If the firm represented in the diagram is currently producing and selling Qa units, what is the price charged?

### the area Po a d P3

What is the area that represents the loss made by the firm?

### 3 pita wraps and 3 bubble teas

What is Keegan's optimal consumption bundle?

### 3 pita wraps

If pita wraps were free, how many would Keegan consume?

### P=\$50; Q=6 cases

What is the output (Q) that maximizes profit and what is the price (P) charged?

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