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Final Review- Microeconomics
Terms in this set (45)
Suppose that the equilibrium price in the market for widgets is $5. If a law reduced the maximum legal price for widgets to $4,
Any possible increase in consumer surplus would be smaller than the loss of producer surplus
What will happen in the rice market now if buyers expect higher rice pricers in the near future?
The demand for rice will increase
When quantity supplied decrease at every possible price, we know that the supply curve has
Shifted to the left
Minimum- wage laws dictate the
Lowest price employers may pay for labor
The marginal seller is the seller who
Would leave the market first if the price were nay lower
Ina competitive market the price is $8. A typical firm in the market has ATC= $6, AVC= $5, and MC= $8. How much economic profit is the firm earning in the short run?
$2 per unit
If Franco's Pizza Parlor knows that the marginal cost of the 500th pizza is $3.50 and that the average total cost of making 499 pizzas is $3.30, then
Average total costs are rising at Q= 500
Food and clothing tend to have
Small income elasticities because consumers, regardless of their incomes, choose to buy relatively constant quantities of these goods
A tax levied on the buyers of a good shifts the
Demand curve downward (or to the left)
Producer surplus equals
Amount received by sellers- Costs of sellers
A monopoly firm maximizes its profit by producing Q= 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. The firms maximizing price is
Suppose that quantity demand falls by 30% as a result of a 5% increase in price. The price elasticity of demand for this good is
Elastic and equal to 6
Most markets in the economy are
A shortage exists in a market if
The situation is such that the law of supply and demand would predict a decrease in the price of the good from its current level
Remains unchanged as price increases when demand is unit elastic
Lead is an important input production of crystal. If the price of lead decreases, then we would expect the supply of
Crystal to increase
The price received by the sellers in a market will decrease if the government
None of the above is correct
Which of the following is a correct statement about production possibilities frontiers?
An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier
Assume a certain firm is producing Q= 1,000 units of output. At Q= 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit. To maximize its profit, the firm should
increase its output
Which of the following statements is not correct?
To maximize profit, firms should produce at a level of output where price equals average variable cost
Cost is a measure of the
Seller's willingness to sell
Suppose there is currently a tax of $50 per ticket on airline tickets. Buyers of airline tickets are required to pay the tax to the government . If the tax is reduced from $50 per ticket to $30 per ticket, then
The demand curve will shift upward by $20, and the price paid by buyers will decrease by less than $20
The supply curve for the monopolist
Does not exist
When a good is taxed, the burden of the tax
Falls more heavily on the side of the market that is more inelastic
The provision of a public good generates a
Positive externality and the use of a common resource generates a negative externaility
If the demand curve is linear and downward sloping, which of the following statements is not correct?
Demand is more elastic on the lower part of the demand curve than on the upper part
`Which of the following is not correct?
Economists' opposition ton trade restrictions is still based largely on the principle of absolute advantage
Suppose a tax of $5 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 200 units to 100 units. The tax decreases consumer surplus by $800 and decreases producer surplus by $700. The deadweight loss from the tax is
A monopoly's marginal cost will
Be less than the price per unit of its product
The entry of new firms into a competitive market will
Increase market supply and decrease market price
Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a price of $80. Katie's willingness to pay was $100, Kendra's willingness to pay was $95, and Kristen's willingness to pay was $80. Which of the following statements is correct?
For the three individuals together, consumer surplus amounts to $35
Which of the following statements helps to explain why government drug interdiction increases drug- related crime?
Drug addicts will have an even greater need for quick cash to support their habits.
When a firm's average total cost curve continually declines, the firm is a
Other things equal, the deadweight loss of a tax
Decreases as the size of the tax increases
Which of the following is an example of the free- rider problem?
Max owns Fido, a large dog who barks whenever anyone walks near his house. Sally lives next to Max, and Fido's barking can be heard whenever anyone walks near her house, too.
If the price elasticity of demand for a good is 0.8, then which of the following events is consistent with a 4 % decrease in the quantity of the good demanded?]
A 5% increase in the price of the good
Which of the following is not correct?
The gains from specialization and trade are based not on comparative advantage but on absolute advantage
The analysis of competitive firms sheds light on the decisions that lie behind the
A key determinant of the price elasticity of supply is the
Length of the time period
Total surplus in a market will increase when the government
Removes a binding price ceiling from that market
Chad is willing to pay $5 to get his first cup of morning latte; he is willing to pay $4.50 for a second cup. He buys his first cup from the vendor selling latte for 3.75. He returns to that vender later in the morning to find that the vendor has increased her price to $3.90 per cup. Chad buys a second cup. Which of the following statements is correct?
Chad's willingness to pay for his second cup of latte was smaller than his willingness to pay for his first cup of latte
The Ogallalal aquifer is a large underground pool of fresh water under several western states in the US. Any farmer with land above the aquifer can at present pump water out of it. We might expect that
Over time, the aquifer is likely to be overused
A decrease in input costs to firms in a market will result in
A decrease in equilibrium price and an increase in equilibrium quantity
Harry's Barber Shop increased its total monthly revenue from $1,500 to $1,800 when it raised the price of a haircut from $5 to $9. The price elasticity of demand for Harry's Haircuts is
If a tax is levied on the sellers of a product, then there will be a(n)
Upward shift of the supply curve
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