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92 terms

Microeconomics Homework

Microeconomics final exam study
As the number of firms in a market decreases, the supply curve will shift to the left and the equilibrium price will rise.... True False
If the demand curve for a product shifts to the left and the supply curve for the product shifts to the left, the equilibrium quantity will decrease.... true false
if the demand for a product increases and the supply of the same product increase, the equilibrium price will increase... true false
if the number of firms producing mouthwash increase and consumer preference for mouthwash increase, the equilibrium price of mouthwash will definitely increase... true false
in 2004, hurricanes damaged a large portion of florida orange crop. as a result of this , many orange growers were not able to supply fruit to the market. at the pre hurricane equilibrium price we would expect to see
a shortage of oranges
in 2011, a tsunami destroyed a large portion of japans manufacturing and industrial production industries, in these markets
the supply curve shifted to the left resulting in an increase in equilibrium prices.
in recent years the cost of producing organic produce in the U.S. has decrease largely due technological advancement. at the same time, more and more Americans prefer organic produce over conventional produce. which of the following best explains the effect of these events in the organic produce market?
both supply and demand curves have shifted to the right. as a result there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
market equilibrium occurs where supply equals demand... true false
new technology developed in 1999 resulted in a reduction in the cost of manufacturing flat screen televisions that used liquid crystal displays. how did the change in technology affect the market for flat screen televisions.
the new technology cause an increase in the supply of flat screen televisions and a decrease in price of flat screen televisions.
olive oil produces want to sell more olive oil at a higher price. which of the following events would have this effect?
research finds the consumption of olive oil reduces the risk of heart disease.
prices of california merlot wine have risen steadily in recent years. over this same period, prices of french oak barrels used for wine storage have dropped and consumer income have risen. which of the following best explains the rising prices of California merlots?
the demand curve for merlot has shifted to the right more than the supply curve has shifted to the right.
The demand for lobster is higher in the summer than in the spring. if the price of lobster is lower in summer than in spring then
the supply of lobster is lower in the spring than in summer.
which of the following is the correct way to describe equilibrium in a market?
at equilibrium, quantity demanded equals quantity supplied.
which of the following would cause a decrease in equilibrium price and an increase in the equilibrium quantity of salmon?
an increase in the supply
which of the following would cause both the equilibrium price and equilibrium quantity of cotton to increase?
an increase in consumer income
which of the following would cause the equilibrium price of white bread to decrease the equilibrium quantity of white bread to increase?
a decrease in the price of flour.
deadweight loss refers to
the reduction in economic surplus resulting form not being in competitive equilibrium
economic efficiency is defined as a market outcome in which the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production, and in which
the sum of consumer surplus and producer surplus is at a maximum.
economic surplus is equal to
the sum of consumer surplus and producer surplus.
economic surplus is maximized in a competitive market when
marginal benefit equals marginal cost.
economist refer a to a market where buying and selling take place at prices that violate government price relations as
a black market
marginal benefit is equal to the ______ benefit to a consumer receive form consuming one more unit of a good or service
marginal cost is
the additional cost to a firm of producing on more unit of a good or service
paul goes to sport-mart to buy a new tennis racquet. he is willing to pay $200 for a new racquet, but buys on on sale for $125. Paul's consumer surplus form the purchase is
the area______ the market supply curve and _____ the market price is equal to the total amount of producer surplus in a market.
above: below
the difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called
consumer surplus
which of the following is not a result of government price controls
a price controls benefit poor consumer but harm producers and wealthy consumers.
which term refers to a legally established minimum price that firms may charge?
a price floor.
a negative externality exist if
the marginal social cost of procuing a good or service exceeds the private cost
a postive externality causes
the marginal social benefit to exceed the marginal private cost of the last units produced.
a product is ocnsidered to be rivalrous if
your consumption of the product reduces the quantity available for other to consume
a tragedy of commons occurs when a resource is
rival and non excludable
an externality is
a benefit or cost experienced by someone who isnot a producer or consumer of a good or service
anyone can purchase sulfur dioxide emissions allowances of the chicago mercantile exchange. severs environmental groups have raised money to buy allowances. as part of their fund raising, these have urged contributor to buy the allowances as gifts. as one newspaper story put it "for the environmentalist in your life, heres a gift that is sold by the the ton, fits in an envelope and will last forever"
the price rises.
if the paint on your house was eaten away by the fumes from a factory nearby and you hired a lawyer to sure the polluting firm, your legal fees would be considered
transaction cost.
in economics, the term "free rider" refers to
one who waits for other to produce a good and then enjoys it benefits without paying for it.
the "tragedy of the commons" refers to the phenomenon where
people overuse a common resource.
what are property rights?
the rights individuals or firms have to exclusive use of their property, including the right to buy or sell it.
what does the phrase "internalizing an external cost" mean?
forcing producers to factor into their production costs the cost of the externalities created in the production of their output.
which of the following displays rivalry and excludability in consumption?
private goods
which of the following is a source of market failure
incomplete property rights or inability to enforce property rights
a characteristic of the long run is
all inputs can be varied
a decrease in the price of inputs used to produce flat panel televisions causes
the average cost curve and the marginal cost curve to shift downwards.
a production function shows
the maximum output that can be produced from the inputs employed by a firm.
average fixed cost of production
falls as output is increased
average total cost is equal to
total cost divided by the quantity of output produced.
if average total cost is $50 and average fixed cost is $15 when output is 20 units , then the firms total variable cost at that level of out is
if when a firm doubles all its inputs, its average cost of production decrease, then production displays
economies of scale.
if when a firm doubles all its inputs, its average cost production increase then production displays
diseconomies of scale
implicit costs can be defined as
the non monetary opportunity costs of using the firms owen resources.
long run cost curves are U shaped because
on economies and diseconomies of scale
marginal cost is equal to the
change in total cost divided by the change in output
marginal cost is the
change in the price of inputs if a firm buys more inputs to produce an additional unit of output
minimum efficient scale is
the level of output at which all economies of scale are exhausted.
the average total cost of production
equals total cost of production divided by the level of output.
the economic cost of production differs form accounting cost in that
accounting cost includes expenditure for hired resource while economic cost does not
which of the following costs will not change as output changes
total fixed cost
which of the following is a factor of production that generally is fixed in the short run
a factory building
which of the following is a fixed cost?
lease payments for a factory warehouse.
if the market price of each camera case is #8 what is the profit maximizing quantity?
400 units
a perfectly competitive firm earns an profit when price is
above minimum average total cost
a perfectly competitive firms supply curve is its
marginal cost curve above t minimum average variable cost curve.
assume that the tuna fishing industry is perfectly competitive. which of the following best characterized he industry if, as demand for tuna increase, fishing boats have to go farther into the ocean to harvest tuna?
an increasing cost industry
if a perfectly competitive firms price is above it average total cost, the firm is
earning a profit
if a perfectly competitive firms price is less than its average total cost but great than its average variable cost, the firm
is incurring a loss
if the market price is $25 in a perfectly competitive market, the marginal revenue form selling the fifth unit is
if for a given output level, a perfectly competitive firms price is less than its average variable cost, the firm
should shut down
perfect competition is characterized by all of the following except
heavy advertising by individual sellers
the demand for each sellers product in perfect competition is horizontal at the market price because
each seller is to small to affect market price
which of the following is a characteristic of an oligopoly market structure.
there are few firms
which of the following is not a characteristic of monopoly
it is easy for new firms to enter the market
which of the following is not a characteristic of monopolistically competitive market structure
each firm must react to the actions of other firms.
which of the following is not a characteristic of perfectly competitive market structure
there are restrictions on the exit of firms.
The monopolistically competitive firm represented in the diagram
in long run equilibrium
a monopolistically competitive firm will
have some control over its price because it product is differentiated.
a monopolistically competitive industry that earns economic profits in the short run will
experience the entry of new rival firms into the industry in the long run
consumers benefit from monopolistic competition by
being able to choose form products more closely suited to their tastes.
economists agree that monopolistically competitive market structure
benefits consumers because firms produce products that appeal to a wide range of consumer tastes
How does the long run equilibrium of a monopolistically competitive industry differ form that of a perfectly competitive industry
a perfectly competitive firm produces at minimum average total cost but a monopolistically competitive firm does not.
if a firm faces a downward sloping demand curve
it must reduce its price to sell more output.
in a monopolistically competitive firm breaks even the firm
is earning zero accounting and zero economic profit.
if a typical monopolistically competitive firm is making short run losses then
as some firms leave, the remaining firms will experience an increase in the demand for their products.
In 1984 when Apple Computer introduced the Macintosh it was able to sell the product at a hefty premium while comparable personal computers were priced at less than half the price of a Macintosh. Despite its much higher price, Apple was able to achieve a 15 percent market share. Which of the following contributed to Apple's initial success?
apple had successfully introduce a person computer that was strongly differentiated form its competitors.
in monopolistic competition there
are many sellers who each face a downward sloping demand curve.
in the united states the average person motley patronizes firms that operate in
monopolistically competitive markets
in the short run a profit maximizing firms decision to produce should be guided by whether
its total revenue covers it variable cost
in the short run if prices is less than average cost
there is an incentive for firms to exit a market
in theory, monopolistically competitive firms earn zero profits in the long run. in reality there are way a firm can continue to earn profits in the long run. one way a firm can continue to earn profits is to
identify new markets and develop products precisely for those markets.
is a monopolistically competitive firm productively efficient?
no, because it does not produce at minimum average total cost
they key characteristics of a monopolistically competitive market structure include
many sellers of similar but not identical products.
what is the profit maximizing rule for a monopolistically completive firm?
to produce a quantity such that marginal revenue equal marginal cost.
which of the following characteristics is not common to monopolistic competition and perfect competition?
all firms sell identical products.