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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.

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