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If a household's income doubles, its budget constraint will ______________.

Shift out parallel to the old one

A utility-maximizing consumer buys so as to make _________ for all pairs of goods.

MUx/MUy=Px/Py

A price change would have the largest income effect on a ______________.

Car

A negative marginal utility implies negative total utility.
True or False

False

If MUx/Px < MUy/Py, then ____________________.

Spending a dollar less on X and a dollar more on Y increases utility.

We can state the utility-maximizing rule in words in the following way: A person maximizes utility when she equalizes the _______ across products.

Marginal utility per dollar spent

Assume leisure is an inferior good instead of a normal good. The income effect of a wage increase will lead to a _______ demand for leisure and a _______ labor supply.

lower; higher

A rise in the price of Pepsi that causes a household to shift its purchasing pattern toward Coke and away from Pepsi is the _________ effect of a price change.

Substitution

Assume leisure is a normal good. The substitution effect of a wage decrease implies a ________ demand for leisure and a ________ labor supply.

higher; lower

Ellen is spending her entire income on goods X and Y. Her marginal utility from the last units of X and Y that she consumes is 25. Ellen's utility is only maximized if __________________.

The prices of X and Y are the same

The law of diminishing marginal utility refers to _____________________.

A consumer's decrease in additional satisfaction as she consumes more and more units of a good.

Jane has $500 a week to spend on clothing and food. The price of clothing is $25 and the price of food is $10. The clothing and food pairs in Jane's choice set include _________ units of clothing and ________ units of food.

8; 30

Jane has $500 a week to spend on clothing and food. The price of clothing is $25 and the price of food is $10. What is the equation for Jane's budget constraint?

$25 x Clothing + $10 x Food= $500

Marginal utility is the _________ satisfaction gained by consuming __________ of a good.

Additional; one more unit

Assume the total product of three workers is 120 and the total product of four workers is 160. The fourth worker's average product is ________ while her marginal product is _________.

40; 40

A firm will begin to experience diminishing returns all the output where marginal _________________.

cost increases

An___________ in a firm's scale of production leads to ____________ average total cost when there are economies of scale.

increase; lower

As output decreases, average fixed costs ____________.

increase

An economist is studying the price behavior of Atlanta's 100 dog kennels. She says she will limit her analysis to a time period that allows for neither new kennels to enter the market nor existing ones to leave it. The economist is referring to the ___________ time period.

short run

Economists usually assume that __________ is a fixed input in the ____________ run.

capital; short

Both Kate and Kyle own saltwater taffy factories. Kate's factory has low fixed costs and high variable costs. Kyle's factory has high costs and low variable costs. Currently each factory is producing 1,000 boxes of taffy at the same total cost. If each produces ___________________________________.

more, the costs of Kate's factory will exceed those of Kyle's factory

Average variable and average total costs get closer together as output increases because _______________ as output increases.

average fixed costs decrease

Diminishing marginal returns implies _______________.

increasing marginal costs

A firm is experiencing ____________ on the downward sloping portion of a firm's long run average cost curve.

increasing returns to scale

Economic profit is ________________.

(P-ATC)q

As long as existing firms earn economic losses in an industry, new firms will __________ the industry and the industry supply curve will shift to the the ______________.

exit; left

An industry is in ____________ if firms have an incentive to enter or exit in the _____________ run

disequilibrium; long

A firm is better off operating than shutting down when price adequately covers _____________.

average variable cost

Any firm's total revenue equals __________.

P x q

A short run total cost schedule is a __________ cost schedule shifted upward by the amount of __________ cost.

total variable; total fixed

A firm's marginal cost curve above the AVC is also its short run supply curve.

True or False

True

Assume Dell Computer Company operates a perfectly competitive market producing 5,000 computers per day. At this output level, price exceeds the firm's marginal and average variable costs. It follows that producing one more computer will cause this firm's _______________.

profits to increase

A perfect competitive firm breaks even at the level of output where ______________.

P = ATC

A firm facing a perfectly price elastic demand curve, ceteris paribus ______________________.

will have zero quantity demanded if it raises its price above the market price.

A firm _________ if it earns zero economic profit.

earns exactly a normal rate of return

A firm's long run average cost curve represents the minimum cost of producing each level of output when the scale of production can be adjusted.

True or False

True

If marginal cost is below average total cost, average total cost will ___________.

decrease

An individual wheat farmer produces wheat in a perfectly competitive market. An increase in the market demand for wheat will cause the farmer's marginal revenue to _________ and his profit maximizing level of output to _________.

increase; increase

The marginal revenue product of labor curve will always shift to the right if _______________.

product demand increases and product price increases

A decrease in the wage rate will change _____________________.

the amount of labor employed, and it may also change the amount of other inputs employed.

Complements and substitutes exist for outputs, but not for inputs.

True or False

False

Because a famous painting is fixed in supply, its price is ____________.

demand determined

The price of any factor of a production in a competitive market depends on the value of the final product it is used to produce.

True or False

True

The formula for marginal revenue product of labor (L is for labor, X is the output) is ______________.

(MPL)(MRX)

A firm's marginal cost curve in a perfectly competitive product market is the same as its ________ curve. Similarly, a firm's marginal revenue product curve in a perfectly competitive labor market is the same as its _________ curve.

supply; demand

A firm will continue hiring labor as along as the MRP of labor _________ the market wage rate.

is greater than or equal to

A firm hires labor, capital, and land to produce tomatoes. Currently the marginal product of the last unit of labor input is 20, the marginal product of the last unit of capital input is 30, and the marginal product of the last unit of land input is 100. The market wage is $10 and the market price for capital is $15. If the firm is using the optimal combination of inputs, then the price of land is ___________.

$50

A technological change would case movement along the demand curve for inputs.

True or False

False

A decrease in the productivity of a factor of production will ____________.

shift is marginal revenue product curve to the left

The law of ________ explains why a marginal revenue product schedule eventually declines.

diminishing marginal returns

A car manufacturing company adopts a new technology that, ceteris paribus, increases the productivity of capital. At the same time, workers unionize and demand higher wages. Assume that for this firm capital and labor are substitutable. What is most likely to occur?

capital will be substituted for labor

When a large amount of output is produced per unit of the input, the input is said to exhibit __________.

higher productivity

The marginal revenue product of labor is _________.

the additional revenue a firm earns by employing one additional unit of labor.

The marginal cost of a unit of labor in perfectly competitive labor market is ______________.

the market wage rate

A soybean farmer sells soybeans in a perfectly competitive market and hires labor in a perfectly competitive market.The market price of soybeans is $1 a bushel, the wage rate is $12, the farmer employs six workers and the marginal product of the sixth worker is 10. What wold you advise this farmer to do?

reduce employment because the wage paid is greater than the marginal revenue product

Assume that automobiles are a normal good. An increase in income will ___________________.

shift the marginal revenue product curve of auto workers to the right

The number of seats available in a stadium is fixed at 80,000. The equilibrium price for a ticket to a football game at a stadium is $30. The equilibrium price for a ticket to a baseball game at the stadium is $20. What would be true?

the demand for each baseball game must be lower than the demand for each football game

The marginal revenue product ____________________________________.

both is the product of the marginal product of labor and the price of the output and measures the benefit to the firm form hiring an additional unit of labor are correct

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