35 terms

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The imposition of price ceilings on a market often results in
a. an increase in investment in the industry
b. a persistent surplus in the market
c. the diversion of income toward black-market suppliers
d. lower prices being offered on the black market
c. the diversion of income toward black-market suppliers
Which of the following characteristics of a PPF indicates that tradeoffs must be made?
a. the downward slope
b. the upward slope
c. the constant slope
the curvature
a. the downward slope
How will a decrease in price tend to affect supply?
a. Supply will increase.
b. Supply will decrease.
c. Supply will not change.
d. Uncertain.
b. Supply will decrease.
The payments to owners of capital include
a. interest and profits.
b. debt and taxes
c. wages and salaries
d. expenses and bonuses
e. All of the above
a. interest and profits
Who tends to benefit from the sugar price supports?
a. users of sugar in other products
b. individual users of sugar
c. producers of other agricultural products
d. producers of sugar
e. All of the above
d. producers of sugar
The price of one good produced by a multiproduct industry rises. For another good produced by that industry
a. the supply curve will shift to the left
b. the supply curve will remain constant
c. the supply curve will shift to the right
d. the demand curve will shift to the right
a. the supply curve will shift to the left
When government defines and enforces property rights, this is an example of government as
a. referee
b. regulator of business
c. buys of goods and services
d. tax collector
e. redistributor
a. referee
Professional baseball teams in the US use only wooden bats. If aluminum bats were permitted, the likely result would be a
a. shift in the supply curve for aluminum bats
b. shift in the supply curve for wooden bats
c. change in the quantity supplied of aluminum bats
d. persistent shortage of aluminum bats
a. shift in the supply curve for aluminum bats
question about rent control
quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage
question about price ceilings
quantity demanded exceed quantity supplied but price cannot rise to remove the shortage
Marginal revenue product is essentially the additional revenue generating from selling one additional unit of output.
True
False
False
A firm that sells at a price below average cost is losing money.
True
False
True
Demand is said to be elastic when percentage changes in quantity demanded are
a. less than the percentage changes in price
b. higher than the percentage changes in price
c. equal to the percentage changes in price
d. zero when price changes
a. less than the percentage changes in price
Total profit is maximized
where the difference between total revenue and total cost is greatest
If a firm has increasing returns to scale at all levels of output, the
a. slope of its long-run total cost curve is always negative
b. slopes of its short-run average cost curves are always negative
c. slope of its long-run average cost curve is always negative
d. slope of its production function is always negative
c. slope of its long-run average cost curve is always negative
The rule for the optimal use of any input says that
a. when MRP is less than price, it pays to expand resource use
b. when MRP is greater than price, it pays to expand resource use
c. when MRP equals price, resource us should be cut back
d. resources should be used only if MRP exceeds price
b. when MRP is greater than price, it pays to expand resource use
For a consumer to maximize utility, he will choose the
point where the slope of the budget line equals the slope of the indifference curve
The demand curve facing Company ABC is perfectly elastic. What is its marginal revenue?
equal to the average revenue
If the price of a good falls, the consumer will purchase ___________ of the good in order to maximize ____________ utility.
more, total
In cases of natural monopolies, society would be better off with many firms competing with each other.
True
False
False
Excess capacity and inefficiency result under monopolistic competition.
True
False
True
The demand curve of the monopoly firm is always the
a. average revenue curve
b. marginal revenue curve
c. total revenue curve
d. marginal cost curve above average variable cost
a. average revenue curve
A perfectly competitive firm will always maximize profits by producing where
a. per-unit costs are lowest
b. total costs and total revenue are equal
c. P = MC
d. P = AC
c. P = MC
The demand curve facing a monopolist is
a. horizontal at the market price
b. identical to the market demand curve for the good
c. exactly twice as steep as the market demand curve for the good
d. vertical because there are no competitors
b. identical to the market demand curve for the good
The entry of new firms into a perfectly competitive market shifts the demand curve outward.
True
False
False
The key difference between monopolistic competition and perfect competition is that in monopolistic competition the tangency of
AC and the demand curve occurs along the negatively sloped part of AC
At a given output level, a monopolist earns a profit only if the
height of its demand curve exceeds the height of his ATC curve
Which requirement for perfect competition rules out trade associations or other collusive arrangements in which firms work together to influence prices?
a. freedom of entry and exit
b. homogeneity of product
c. perfect information
d. numerous small firms and customers
d. numerous small firms and customers
Firms that engage in price discrimination
will earn more profit than those that do not discriminate
A firm earns a profit of exactly zero at its optimal output level only if
a. P = MR
b. P = MC
c. P = AC
d. P = SR AVC
c. P = AC
The distribution of income in a market economy is determined by the minimum wage laws.
True
False
False
The economic rent analysis does not apply to any factor.
a. except land
b. whose supply curve is vertical
c. whose supply curve is horizontal
d. whose quantity supplied is fixed
c. whose supply curve is horizontal
Capital is appropriately classified as a
a. flow
b. process
c. stock
d. growth rate
c. stock
Firms will borrow to finance capital expansion until the MRP of the investment equals the
a. MRP of labor
b. marginal cost of the finished good
c. marginal physical product of capital
d. interest payment charged for borrowing
d. interest payment charged for borrowing
The only circumstance under which a factor will earn no rent is when the factor's supply curve is
a. vertical
b. upward sloping
c. perfectly horizontal
d. kinked
c. perfectly horizontal
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