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econ final exam

Terms in this set (76)

which good is most likely to display increasing marginal utility over some range?
A. chicken during the 1920s, when it was considered a luxury good
B. paint, because you need enough to paint at least one entire room
C. lobsters, which are so expensive that you must eat two to get your money's worth
D. peanut butter and jelly sandwiches
B. paint, because you need enough to paint at least one entire room
to say that you can't have too much of a good thing means that, for any good that you enjoy (for example, pizza)
A. higher consumption will always lead to higher utility.
B. higher consumption will cause utility to decrease at an increasing rate.
C. higher consumption will increase utility, but only up to a point; after that, utility will start to decrease.
D. it is valid to measure utility in utils.
A. higher consumption will always lead to higher utility
the principle of diminishing marginal utility means that, when Sarah eats pizza, her satisfaction from the second slice of pizza is probably _________ that from the first
A. greater than
B. equal to
C. less than
D. not comparable to
C. less than
freddy has eaten three corn dogs at the county fair, and if he eats another, he will get sick on the roller coaster. knowing this, and ignoring any impact that price might have on his decision, we can say that, for the fourth corn dog, the:
A. total utility is less than zero.
B. marginal utility is less than zero.
C. total utility curve is still increasing. D. marginal utility curve is still increasing
B. marginal utility is less than zero
adam has a monthly income of $20 that can be spent on books (B) and pencils (P). the price of a book is $5 and the price of a pencil is $0.50. which bundle of books and pencils is affordable for Adam, but does not use all of his income?
A. 1 book and 30 pencils
B. no books and 40 pencils
C. 2 books and 20 pencils
D. 1 book and 22 pencils
D. 1 book and 22 pencils
joe's budget line reflects the _______ available to joe if he spends ________ of his income
A. consumption bundles; all
B. consumption bundles; part
C. utility; all
D. utility; part
A. consumption bundles; all
george has a weekly income (I) of $50, which he uses to purchase doughnuts (D) and coffee (C). the price of a doughnut is $1 and the price of coffee is $2.50. suppose george's income increases to $100 and the prices of both doughnuts and coffee remain unchanged. given this income change, one would expect george's budget line to
A. shift to the right
brad spends all of his income on cameras and coffee. he is purchasing the consumption bundle that maximizes his utility given his budget constraint. at the optimal consumption bundle, which statement is correct?
A. If cameras cost more than coffee, then the marginal utility of cameras is less than that of coffee.
B. If cameras cost less than coffee, then the marginal utility of cameras is more than that of coffee.
C. If cameras cost the same as coffee, then the marginal utility of cameras is equal to that of coffee.
D. The prices of cameras and coffee and their marginal utilities are unrelated.
C. if cameras cost the same as coffee, then the marginal utility of cameras is equal to that of coffee
a giffin good is one in which the _______ curve is ________ sloping
A. supply; downward
B. demand; downward
C. supply; upward
D. demand; upward
D. demand; upward
the income effects of a change in price are most important for goods that:
A. take up a substantial share of a consumer's spending.
B. are very inexpensive.
C. are imported.
D. are normal
A. take up a substantial share of a consumer's spending
a _______ is an organization that produces goods or services for sale
A. production function
B. firm
C. variable input
D. fixed input
B. firm
in the short run:
A. all inputs are fixed.
B. all inputs are variable.
C. some inputs are fixed and some inputs are variable.
D. all costs are variable.
C. some inputs are fixed and some inputs are variable
the term diminishing returns refers to a:
A. falling interest rate that can be expected as one's investment in a single asset increases.
B. reduction in profits caused by increasing output beyond the optimal point.
C. decrease in total output due to the firm hiring uneducated workers. D. decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant.
D. decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant
the long run is a planning period:
A. over which a firm can consider all inputs as variable.
B. of at least five years.
C. of more than six months.
D. of six months to five years.
A. over which a firm can consider all inputs as variable
diminishing marginal returns occur when:
A. each additional unit of a variable factor adds more to total output than the previous unit.
B. each additional unit of a variable factor adds less to total output than the previous unit.
C. the marginal product of a variable factor is increasing at a decreasing rate.
D. total product decreases.
B. each additional unit of a variable factor adds less to total output than the previous unit
which cost concept is correctly defined?
A. MC = ΔTC/ΔFC
B. ATC = VC + FC
C. ATC = AVC + AFC
D. TC = AVC + AFC
C. ATC = AVC + AFC
in the short run, the costs associated with variable inputs are ______, and the costs associated with _________ inputs are __________
A. variable; fixed; fixed
B. fixed; fixed; variable
C. variable; fixed; variable
D. fixed; fixed; fixed
A. variable; fixed; fixed
the larger the output, the more output over which fixed cost is distributed. called the ______ effect, this leads to a ______ average ________ cost as output rises
A. spreading; lower; fixed
B. spreading; higher; fixed
C. diminishing returns; lower; variable
D. diminishing returns; higher; variable
A. spreading; lower; fixed
a cost that does not depend on the quantity of output produced is:
A. marginal.
B. fixed.
C. variable.
D. average
B. fixed
if marie marionettes is operating under conditions of diminishing marginal product, the marginal costs will be:
A. equal to average total cost.
B. decreasing.
C. increasing.
D. constant.
C. increasing
the shape of the marginal cost curve is the mirror image of the shape of the ______ curve
A. total product
B. average product
C. marginal product
D. average total cost
C. marginal product
darren runs a barbershop with average fixed costs of $60 per day and a total output of 50 haircuts per day. darren shuts down every year during the last week of July and the first week of August (meaning it is open 50 weeks a year). what is his annual fixed cost if he is open six days per week?
A. $18,000
B. $3,000
C. $60
D. The answer cannot be determined with the information available
A. $18,000
Krista's dry-cleaning business incurs $900 per month in fixed costs. Last month her total output was 3,000 pounds of clothes. this month her total output fell to 2,700 pounds. this means her average fixed cost ________ by a little more than ________ cents
A. fell; 3.33
B. increased; 3.33
C. fell; 2.50
D. increased; 2.50
B. increased; 3.33
austin's total fixed cost is $3600 a month for making 100,000 cupcakes at his cupcake bakery. austin employs 20 workers and pays each worker $600 a month. if labor is his only variable cost, what is austin's total cost per month for making 100,000 cupcakes?
A. $3,600
B. $1,200
C. $15,600
D. $12,000
C. $15,600
if marginal cost is less than average total cost, then _______ cost is ________
A. average total; increasing
B. average total; decreasing
C. marginal; necessarily increasing
D. marginal; necessarily decreasing
B. average total; decreasing
cindy operates Birds-R-Us, a small store manufacturing and selling bird feeders per month. cindy's monthly total fixed costs are $500 and her monthly total variable costs are $2500. if for some reason cindy's fixed cost fell to $400, then her ______ costs would _______
A. average fixed; increase
B. average total; decrease
C. marginal; decrease
D. average variable; decrease
B. average total; decrease
when marginal cost is above average variable cost, average variable cost must be:
A. at its minimum.
B. at its maximum.
C. falling.
D. rising.
D. rising
the long-run average total cost curve is tangent to an infinite number of short-run _______ cost curves.
A. total
B. marginal
C. average variable
D. average total
D. average total
a university that benefits from lower costs per enrolled student as it builds more buildings and enrolls more students is an example of a service provider with:
A. economies of scale.
B. diseconomies of scale.
C. increasing opportunity costs.
D. scale reduction.
A. economies of scale
it is common in large breweries for the long-run average total cost to decline as output increases. this indicates that many breweries operate with:
A. diseconomies of scale.
B. diminishing marginal returns.
C. economies of scale.
D. constant returns to scale.
C. economies of scale
when an increase in the firm's output reduces its long-run average total cost, it has _________ returns to scale.
A. increasing
B. decreasing
C. constant
D. variable
A. increasing
the long-run average total cost of producing 100 units of output is $4, while the long-run average cost of producing 110 units of output is $4. these numbers suggest that between 100 and 110 units of output, the firm producing this output has:
A. economies of scale.
B. diseconomies of scale.
C. constant returns to scale.
D. diminishing returns
C. constant returns to scale
the slope of a long-run average total cost curve exhibiting decreasing returns to scale is:
A. zero.
B. infinite.
C. positive.
D. negative
C. positive
if ATC is equal to MC, then the firm is operating:
A. at the minimum point of ATC.
B. on the downward-sloping portion of ATC.
C. on the upward-sloping portion of ATC.
D. with increasing returns to scale.
A. at the minimum point of ATC
when a firm cannot affect the market price of the good that it sells, it is said to be a:
A. price taker.
B. natural monopoly.
C. dominant firm.
D. cartel.
A. price taker
which statement is not a characteristic of a perfectly competitive industry?
A. Firms seek to maximize profits.
B. Profits may be positive in the short run.
C. There are many firms.
D. Products are differentiated.
D. products are differentiated
perfect competition is characterized by:
A. rivalry in advertising.
B. fierce quality competition.
C. the inability of any one firm to influence price.
D. widely recognized brands.
C. the inability of any one firm to influence price
the perfectly competitive model does not assume:
A. a great number of buyers.
B. easy entry to and exit from the market.
C. a standardized product.
D. that firms attempt to maximize their total revenue.
D. that firms attempt to maximize their total revenue
the difference between total revenue and total cost is:
A. economic profit or loss.
B. nominal revenue.
C. average revenue.
D. marginal revenue
A. economic profit or loss
marginal revenue:
A. is the slope of the average revenue curve.
B. equals the market price in perfect competition.
C. is the change in quantity divided by the change in total revenue.
D. is the price divided by the change in quantity.
B. equals the market price in perfect competition
for a perfectly competitive firm, marginal revenue:
A. is less than price.
B. is greater than price.
C. decreases as the firm increases output.
D. is equal to price
D. is equal to price
a perfectly competitive firm will maximize profits when the:
A. marginal revenue equals marginal cost.
B. marginal revenue is lower than average variable cost.
C. price is lower than marginal cost. D. price is higher than marginal cost
A. marginal revenue equals marginal cost
for a firm producing at any level of output greater than the most profitable one, a reduction in output decreases total revenue _______ total cost
A. by less than it decreases
B. by more than it decreases
C. by the same amount as it decreases
D. but not
A. by less than it decreases
the profit-maximizing level of output for a perfectly competitive firm in the short run occurs where _______ equals _________
A. marginal cost; price
B. marginal revenue; price
C. total revenue; total cost
D. average revenue; average total cost
A. marginal cost; price
in the short run, a perfectly competitive firm produces output and earns zero economic profit if:
A. P < ATC.
B. P = ATC.
C. P < MC.
D. P > ATC.
B. P = ATC
if the price is greater than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:
A. produce at a loss.
B. produce at a profit.
C. shut down production.
D. produce more than the profit-maximizing quantity
...
if a perfectly competitive firm is producing a quantity where P < MC, then profit:
A. is maximized.
B. can be increased by decreasing the price.
C. can be increased by increasing production.
D. can be increased by decreasing production.
D. can be increased by decreasing production
in perfect competition. a change in fixed cost will:
A. cause a change in the price in the short run.
B. cause a change in output in the short run.
C. encourage entry or exit in the long run such that price will change enough to leave firms earning zero profits.
D. cause a change in variable cost.
C. encourage entry or exit in the long run such that price will change enough to leave firms earning zero profits
suppose that the market for candy canes under conditions of perfect competition, that it is initially in long-run equilibrium, that the price of each candy cane is $0.10, and that the market demand curve is downward sloping. the price of sugar rises, increasing the marginal and average total cost of producing candy canes by $0.05; there are no other changes in production costs. in the long run, we will observe:
A. firms leaving the industry.
B. firms entering the industry.
C. some firms entering and some firms leaving.
D. neither entry to nor exit from the industry
A. firms leaving the industry
a curve that shows the quantity of a good or service supplied at various prices after all long-run adjustments to a price change have been completed is a long-run _______ curve
A. marginal revenue
B. marginal cost
C. industry supply
D. production
C. industry supply
a perfectly competitive industry is in a state of long-run equilibrium. which expression must be true?
A. P = MR = MC > ATC.
B. P = MR = MC < AVC.
C. P = MR = MC = ATC.
D. P > MR = MC = AVC.
C. P = MR = MC = ATC.
which scenario is most likely to cause firms to exit a perfectly competitive industry?
A. Consumer tastes and preferences for this product get stronger, making them more interested in the good.
B. A technological advance allows all firms to produce more efficiently.
C. The price of a key variable input falls.
D. Consumer income falls.
D. consumer income falls
entry barriers:
A. exist in all market structures.
B. exist in perfect competition and monopolistically competitive markets.
C. do not exist in any market structures; otherwise nothing would be produced.
D. exist in monopoly and oligopoly markets.
D. exist in monopoly and oligopoly markets
an oligopoly is characterized as an industry in which:
A. there are few firms, each producing a differentiated or similar product.
B. there are many firms, each producing a similar product.
C. all market participants are price takers.
D. only one firm produces a very differentiated product.
A. there are few firms, each producing a differentiated or similar product
a monopolist is likely to produce _____ and charge ______ than is a comparable perfectly competitive firm
A. more; more
B. less; more
C. more; less
D. less; less
B. less; more
which statement about the differences between monopoly and perfect competition is incorrect?
A. A monopolist has market power, while a perfect competitor does not. B. Unlike a perfectly competitive firm, a monopoly can make positive economic profits in the long run.
C. A monopoly will charge a higher price and produce a smaller quantity than will a competitive market with the same demand and cost structure. D. Monopoly profits can continue in the long run because the monopoly produces more and charges a higher price than does a comparable perfectly competitive industry
D. monopoly profits can continue in the lone run because the monopoly produces more and charges a higher price than does a comparable perfectly competitive industry
if the state government gave you the exclusive right to sell cement to municipalities, your monopoly would result from:
A. sunk costs.
B. government restrictions to entry. C. economies of scale.
D. location
B. government restrictions to entry
most electric, gas, and water companies are examples of ______ monopolies
A. unregulated
B. natural
C. restricted-input
D. sunk-cost
B. natural
conditions that keep new firms out of a monopoly market are:
A. barriers to entry.
B. terms of sale.
C. labor market stipulations.
D. production controls.
A. barriers to entry
a monopoly is most likely to be temporary if the monopoly power is derived from:
A. high barriers to entry.
B. a fundamental lack of substitutes for the monopolist's product.
C. economies of scale.
D. technological change
D. technological change
if a product's usefulness increases with the number of users, it:
A. has network externalities.
B. is a monopoly.
C. is a conglomerate.
D. has an exclusive franchise
A. has network externalities
critics of the ncaa argue that the ncaa monopolizes college athletics and prevents student athletes from earning money while in college. if this is true, what type of entry barrier does the ncaa have?
A. a patent
B. a copyright
C. control of a scarce resource or input
D. economies of scale
C. control of a scarce resource or input
microsoft and its operating system are often cited as an example of a company that grew in to a monopolist through:
A. ownership of a resource.
B. patents.
C. network externalities.
D. large economies of scale.
C. network externalities
a firm that faces a downward-sloping demand curve is a:
A. price setter.
B. quantity minimizer.
C. quantity take
D. price taker
A. price setter
marginal revenue for a monopolist is:
A. equal to price.
B. greater than price.
C. less than price.
D. equal to average revenue.
C. less than price
a monopoly responds to a decrease in marginal cost by _____ price and ________ output
A. increasing; decreasing
B. increasing; increasing
C. decreasing; increasing
D. decreasing; decreasing
C. decreasing; increasing
in a monopoly in the long run:
A. economic profits will be eliminated by the entry of rival firms. B. economic profits will be reduced but not eliminated by the entry of rival firms.
C. entry by other firms will not occur. D. the price will be the same as if the market were perfectly competitive.
C. entry by other firms will not occur
one government policy for dealing with natural monopoly is to:
A. impose a price floor to eliminate the deadweight loss.
B. impose a price ceiling to reduce economic profit.
C. break it up into smaller firms.
D. impose fines on the monopolist.
B. impose a price ceiling to reduce economic profit
public policies toward monopoly in the United States often consist of:
A. laws outlawing all of them.
B. the regulation of natural monopolies.
C. government takeover if monopoly profit exceeds a certain level.
D. forcing monopoly industries to become perfectly competitive.
B. the regulation of natural monopolies
a natural monopoly is one that
A. monopolizes a natural resource such as a mineral spring.
B. is based on control of something occurring in nature (such as diamonds).
C. has increasing returns to scale over the entire relevant range of output.
D. typically has low fixed costs, making it easy and "natural" for it to shut out competitors
C. has increasing returns to scale over the entire relevant range of output
at the profit-maximizing level of production, a perfectly competitive industry will produce an _______ amount of output, and a monopolist produces an _________ amount of output
A. efficient; efficient
B. inefficient; efficient
C. inefficient; inefficient
D. efficient; inefficient
D. efficient; inefficient
goods that are subject to network externalities tend to be ones:
A. for which the value of the good to an individual is lower when more people use it.
B. that are land-intensive.
C. for which the value of the good to an individual is higher when more people use it.
D. for which one person owning the good enhances its value because it's the only one.
C. for which the value of the good to an individual is higher when more people use it
the practice of charging different prices to different customers for the same good or service, even though the cost of supplying those customers is the same, is:
A. privatization.
B. monopolization.
C. output competition.
D. price discrimination.
D. price discrimination
a monopolist or an imperfectly competitive firm practices price discrimination primarily to:
A. increase profits.
B. expand plant size.
C. lower total costs.
D. reduce marginal costs.
A. increase profits
price discrimination leads to a _____ price for consumers with a ______ demand
A. higher; less elastic
B. higher; more elastic
C. higher; perfectly elastic
D. lower; less elastic
A. higher; less elastic
because tourist demand for airline flights is relatively ________, small _________ in ticket price will result in relatively ______ in additional tourists
A. inelastic; reductions; small increases
B. elastic; reductions; large increases C. inelastic; increases; small decreases
D. elastic; increases; small increases
B. elastic; reductions; large increases
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