Econ-211 final exam

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1. 
whne firms in a price taker market are temporarily able to charge prices that exceed their production costs
 
additional firms will be attracted into the market until the price falss to the level of per-unit production costs
 
2. 
suppose a restraurant that is highly profitable during the summer months is unable to cover its local cost during the winter months. if it wants to max profits the restaurant shouold
 
continue to operate during hte winter months if it isable to cover its variable costs
 
3. 
the main difference between a firm that is a price search er and a firm that is a price taker is that a
 
price searcher will still be able to sell some of its product if it increases it prices
 
4. 
in a competitive price-taker market
 
many other sellers are offering a product that is essentially identical
 
5. 
in short-run equiliibrium, a competitive price-taker firm
 
may earn a profit or a loss
 
6. 
competitive price-taker firms respond to changing market conditions by varying their
 
output
 
7. 
the marginal revenue of a price taker is
 
equal to price
 
8. 
in general, firms will produce at a rate of outpout such that marginal revenue equials marginal cost becuase this output rate will
 
maximize the firms profit
 
9. 
suppose that price is below the minimum average total cost (ATC) but above the minimumn average variable cost(AVC)_ and that the market price is expected to rise at leasst to ATC in the near future. in the short run, a firm that is a price taker would
 
continue to produce a quantitiy such that marginal revenue equals marginal cost
 
10. 
if a firm is making zero economic profit, it
 
will be forced to shutdown and leve the market
 
11. 
compared to the outcome when the firms are price takers, competitive price-seracher markets will result in
 
a wider variety of products and higher prices
 
12. 
which of the following is the genertal distinction between price takers and price searchers
 
price takers confront a perfectly elastic demand curve; price searchers face a downward-sloping demand curve.
 
13. 
if a firm in a competitive price-searcher mareket raised its price it will
 
loose only some of its sales
 
14. 
which of the following would be most likely if firms in a competitive price-searcher market were earning economic profit
 
new firms would enter hte market, resulting in fewer sales by existing firms
 
15. 
a picture frame company operates in a competitive price-searcher market. its short-run equilibrium price is $80 and its ATC is $65. It sells 100 picture frames a week. from this we can conclude
 
economic profits are $1500
 
16. 
which of the following is true for firms that produce in markets where there are no barriers to entry
 
the firms will always make sero economic profits in the long run
 
17. 
when economic losses are present in a market, firms will tend to
 
exit from the market
 
18. 
in both price-taker and competitive price-searcher markets, short-run economic profits will lead to
 
the entry of additional firms into the market and the eventual restoration of zero long-run economicprofits.
 
19. 
in long-run equilibrium, output is expanded to the minimum long-run average total cost by
 
price takers but no by competitve price searchers.
 
20. 
in order for effective price discrimination to occur, a seller must
 
have at least two distinguishable groups of consumers
 
21. 
if a movie theater is going to gain by charging students a dollar less than the other customers
 
the demand of students must be more elastic than that of other customers
 
22. 
when natural monobpoly is present in an industry, the per-unit costs of production will be
 
lowest when a single firm generates the entire output of the industry
 
23. 
which of hte following is most likely to contribute to the presence of monoply industry
 
economies of scale
 
24. 
a firm that is a pure monopoly is
 
the only seller of a good for which there are no good substitutes in a market with high barriers to entry
 
25. 
which of hte following is true of marginal revenue for a monopolist that charges a single price
 
P>MR becuase the monopilist must decrease price on all units sold in order to sell and addtional unit
 
26. 
which of the following industries most closely approximates the oligopoly model
 
automobile industry
 
27. 
uner which one of the following market structures are firms most likley to enter in a price-fixing agreement desgined to maximikse their joint profit
 
oligopoly
 
28. 
market power is an expression used to indicate that a firm has
 
some freedom from the rigors of intense competition
 
29. 
which of the following is true of pure monoply
 
monopolly results in allocateive inefficiency
 
30. 
if government officials break a natural monopoly up into several smaller firms, then
 
the average costs of production will increase
 
31. 
which one of the following labor resources will likely have the most inelastic supply schedule in teh short run
 
dentists
 
32. 
as the price of a resouce descreases
 
producers are more willing and able to hire that resource
 
33. 
when the price of steel rises, ford use more aluminum inthe production of its cars. this is an example of
 
substituion in production
 
34. 
if a firm is suing a resource hired in a perfectly competitive market, and if the marginal resource cost is less than its marginal revenue product
 
more of the resource should be used
 
35. 
a profit-maximizing restaurant owner will hire more busboys to keep more tables clean and quickly available to new customers as long as the
 
marginal revenue product of busboys exceeds their wage rate
 
36. 
if the demand for computer scientists increases relative to their supply
 
a computer science major will be more attractive to college students
 
37. 
proved reserves of petrolem are
 
the verified quantity of petrolem that can be recovered at current prices and levels of technology.
 
38. 
if proved resources of a mineral amount to twelve years fo use at the current rate of consumption
 
if the good becomes more scarce relative to supply in the future, its price will riise and thereby encorage both convervation and exploration
 
39. 
"doomsday" predictions about the imminent depletion of one or more of our vital natural rewsources usually are
 
overstated because they disregard human responses to relative price changes
 
40. 
what hapens to a resource as it becomes scarcer
 
the price rises and this increases the future supply relative to demand
 
41. 
the idea that an action should be undertaken if and only if the benfits exceed the costs is known as the concept of
 
economic proficiency
 
42. 
which of hte folllowing is most consistent with the idea that if it's worth doing its worth doing imperfectly
 
when cleaning a house, people only generally clean the most visible areas
 
43. 
there is substantial agreement among scholars that at least two functions of government are legitmitate. these two functions are teh
 
protection of the rights of individuals to their person and property and the provision of goods that cannot easilyu be provided through markets
 
44. 
externalitites
 
cause the price system to misallocate resources
 
45. 
if pollutuants emitted by firms in teh stell industry incrase, but there is no increase in the costs borne by these firms, yhou could conclude that
 
pollution is an externality in this market, since producers and purchasers of stell do not bear the full costs of the pullution
 
46. 
A good is considered to be a public good if it
 
is both nonrival-in-consumption and nonexcludable
 
47. 
which of the follwing is an example of a public good
 
an effective antimisslie system that defends a country against a nuclear attack
 
48. 
a car sells at different prices at different dealerships in a local market. if a consumer has imperfect information about the price of a car at each dealership, he should
 
gather information about prices until the expected marginal benefit of more information equals the marginal cost of gathering it
 
49. 
figure 5-3 illustrates the market for a product that gerates an external benefit. d1 is the priveate market demand curve, while d2 is the deamd curve including the external benefit. whcich of hte following is true
 
relative to economic efficiency, output of the good will be too small and the price too low.
 
50. 
the inefficient equilibrium price and quantity are
 
1.60 and 42 units, respectively
 
51. 
the english philosper John Locke argued that
 
people own themselves as well as the fruits of their labor and thus the role of government is to protect these natural rights of individuals
 
52. 
when voters pay taxes in proportion to the benfits they receive from governmetn projects
 
projects that are efficient wil ltend to be favored by an overwhelming majority of voters
 
53. 
which of hte following explains why mangers of governmnet agencies have little incentive to achieve operational efficiency
 
all of the above explain why government agencies have little incentive to be efficient
 
54. 
transfer paymests are
 
transfers of income from taxpayers to reciptients who do not provide current goods and services for payments
 
55. 
economists refer to the lack of incentive that voters have to search for and obtain information to help make better political choices at the
 
rational-ignorance effect
 
56. 
public choice theory indicates competitve forces provide a politician with a strong incentive to offer voters a bundle of political goods that she believies
 
will increase her chances of winning elections
 
57. 
which of hte following is a distinguishing characteristic of a user charge
 
persons pay roughly in proportion to the extent that they use the good or service
 
58. 
for activities in which the benefits are concentrated and the costs widespread, governments are likly to undertake
 
too much of these activities relative to what would be efficient
 
59. 
which of hte following explains why elected officials wil find borrwoing to be an attractive method of financing current government programs
 
the shortsightedness effect
 
60. 
in 2006, AARP spent over 70 million on lobbying-related expense in an attempt to get policies enacted that would benefit retirees. in economics, the term used to describe such activity is
 
rent seeking
 
61. 
public choice theory suggest that politicians will be most likely to favor redistribution of income from
 
unorganized taxpayers to well-organized interest groups
 
62. 
when voters pay in porpotion to the benefits received from an economic action of the government, if the government activity is productive
 
all voters will gain
 
63. 
studies indicate that the demand for fresh tomatoes is much more elastic than the demand for salt. these findings relect that
 
more good substitutes exist for fresh tomatoes than for salt
 
64. 
suppose that the quantivey of divd players sold increased from 200 to 400 when the price fell from 225 to 175, over this price range, the absolute value fo the price elasticity of demand for dvde players is
 
2.67
 
65. 
if janes marginal benefit as a consumer in the jeans market is larger than the price of a pair of jeans,
 
jane can benefit by purchasing more jeans
 
66. 
if the prices increase from 1.00 to 1.50,
 
the quantity demanded in teh market decreases by 7 units
 
67. 
when the price of a good falls, consumers buy more of the good because its cheaper relative to competing goods. thsi statement indicates
 
substitution effect
 
68. 
if the price elasticity of demand is computed for two products, and product A meausers .79 and product B meausre 1.6, then
 
product B is more price elastic than product A
 
69. 
if an increase in the excise tax imposed on cigarettes pushes the price per pack up by 20 percent and the quantity sold declines by 8 percent as a result, the price elasticity of demand for cigarettes is equal to
 
-0.4
 
70. 
if the quantity demanded increase by 20 percent in response to a 10 percent decrease in price, demand is classified as
 
relatively elastice
 
71. 
if the demand for cigarettes is highly inelastic this indicates that
 
the quantity of cigarettes purchased by consumers is not very responsive to a change in the price of cigarettes
 
72. 
members of alpha fraternity have developed a stong likning for coca-cola, beta fratenerity members buy the same amount of coke but believe pepsi is just as good. from this we can infer that
 
compared to alpha members, betas will have a larger price elasticity of demand for coke
 
73. 
when the price of pepsi-cola increases from 50 to 60 cents per cant he quantity demanded decreases from 100 cans to 50 cans. over this price range the demand for pepsi-cola is
 
elastic
 
74. 
which of hte following describes a situation in which demand mujst be elastic
 
total revenue decreases by more than 15 percent when the price of corndogs rises by 15 percent.
 
75. 
suppose a city that operates local electric and natureal gas companies wants to raise revenuse by increasing its rates fro electricity and natural gas. the price rise wil increase city revenues fi the elasticity of demand for the electricity and nature gas is
 
inelastic
 
76. 
if a 30 percent deline in the price of gasoline leads to a 15 percent rise in expdenditures on gasoline, the price elasticity of demand for gasoline in this range must be
 
elastic
 
77. 
if the price of a good falls by 5 percent, and as a result, total revenue increased by 5 percent, the good's price elasticity of demand is
 
elastic
 
78. 
goods that consumers regard as luxuries generally have
 
an income elasticity greater than 1
 
79. 
the law of diminishing returns
 
explains whiy marginal cost eventually increases as output expands
 
80. 
since it is costly for stockholders to monitor corporate managers, managers may be able to achieve personal perks and pursue other policies that conflict with profit maximization this is an example of
 
the principal-agent problem
 
81. 
when total revenue minus total economic cost is equal to zero, the firm is
 
earning the normal profit rate
 
82. 
maureen left her teacing job, which paid 30,000 per year, and invested 20,000 of her retirement fund (which was earning 10 %) in a new real estate business. Her accountant projected 50,000 net revenue the first year, her husband forecast her economic profit to be
 
18,000
 
83. 
which of the following is not an advantage of the corporate structure over proprietorship and partnershipo forms of business organization
 
corporations are less likely to suffer from the principal-agent problem
 
84. 
the short run is a time period such that
 
the existing firms in the market do not have sufficient time to increase the size of their existing plant or build a new factory
 
85. 
which of hte following is most likely to be a fixed cost for a business
 
property taxes on the firms buildings
 
86. 
mr. hudson notes that if he produces 10 pairs of shoes per day, his average fixed costs (AFC) is $14 and his marginal cost is $8; if he produces 20 pairs of shoes per day, his MC is $15. What is his AFC when output is 20 pairs of shoes per day
 
$7
 
87. 
beyond 110,000 units the per unit marginal cost of producing an additional 10,000o pencils is
 
7 cents
 
88. 
in the short run, the firms average fixed costs
 
always decline as output increases
 
89. 
measured as a share of the economy, government expenditures on blank have declined during the last four decades
 
national defense
 
90. 
at the federal level which of the following accounts for almost half of all revenue
 
personal income taxes
 
91. 
according to adam smith, individual self-interest
 
is a powerful force for economic progress when it is directed by competitive markets
 
92. 
which of the following is the best definition of economics
 
an analysis of how individuals and soceities dela with the problem of scarcity
 
93. 
when economists say goods are scarce, they mean
 
teh desire for goods and services exceeds our ability to produce them with the limited resources available
 
94. 
capital is a term ecnomists use to refer to
 
man-made resources used to produce other goods and services
 
95. 
if income weredistributed in favore of the poor, we would eliminate scarcity. the preceding statement is
 
incorrect; if confuses the elimination of pverty with the elimination fo the constraint imposed by scarcity
 
96. 
the economic way of thinking is
 
a set of basic concepts that helps one understand human chioces
 
97. 
which of the following statements is correct
 
oppurtunity costs will always be incurred when scarce resources are sude to produce a good
 
98. 
the highest valued alternative that must be given up in order to choose an option is called
 
oppurtunity cost
 
99. 
if the government provides free schooling for all students an economists would say education is
 
scarce even though it's cost is paid by taxpayers rather than by students
 
100. 
if a motorists is stranded in front of a pay phone and has only dollar bills, and he ends up buying a quarter from a passerby for $1.
 
teh stranded motorist valued the quarter more than he valude the dollar bill and made an economical sound decision; both people are better off.
 
101. 
middlemen are individuals who
 
provide services that reduce the cost of transactions and help achieve additional gains from trade.
 
102. 
when property rights are clearly defined and enforced, private owners wil
 
develop and direct their property toward uses that others value higly because the market will generally reward them for doing so.
 
103. 
the reason theat the production possibilities curve is usually a bow-shaped curve instead of a straight line is that
 
resources are not perfectly adaptable to the production of all goods
 
104. 
which of hte following is true of a production possibilities curve
 
reveals the maximum amount of any two goods that cab be produced from a fixed quantity of resources
 
105. 
which of hte following is true
 
over time, teh output of goods and services can be increased through human ingenuity and discovery of betterways of doing things
 
106. 
according to the law of comparative advantage
 
individuals and nations gain when they specialize in productin those items for which they are the low opportunity cost producers and exchanges for other desired goods they can't produce as cheaply
 
107. 
which of hte following is true of exchange
 
exchange makes it possible for trading partners to produce more goods through division of labor and adoption of mass production methods
 
108. 
three basic decisions must be made by all economies
 
what goods will be produced, how will goods be produced, for whom will goods be produced
 
109. 
if cursoe and friday want to maximize their consumption possibilities,
 
crusoe should specialize in producing good Y and Friday in producing good X; trade should occur to maximize joint consumption
 
110. 
which of the following is least likely to increase the demand for new tires
 
a decrease in the price of tires
 
111. 
two goods are considered substitutes if
 
an increase in the price of one leads to an increase in teh demaind of the other
 
112. 
if salsa and nacho chips are complements, an increase in teh price of nacho chips would
 
decrease the demand for salsa
 
113. 
which of the following is most likely to shift the demand curve for electricity to the left
 
consumers becoming more energy conscious
 
114. 
if the market price is 1,000 the producer surplus in the market is
 
$750
 
115. 
farmers can choose to produce eggs or milk. if there is an increase in teh price of milk then what will be the effect in teh egg market
 
egg supply will decrease
 
116. 
in the orange market, what impact would an increase in teh price of oil that orange growers burn to keep oranges from freezing in the winter have on the market
 
it would shift the supply curve to the left
 
117. 
which of hte following would decrease teh suply of sugar
 
the tariff(tax) on imported sugar increases
 
118. 
when there is excess demand for a product in a market
 
price must be below the equilibrium price
 
119. 
last year 1000 cases of bottled water were sold at $5, this year, 1200 cases were sold at $7. these data could be explained by
 
demand curve shifting to the right, with no change in supply
 
120. 
an increase in supply will cause
 
an increase in quantity demanded
 
121. 
the laffer curve indicates that
 
when taxes are high, an increase in tax rates is likely to decrease in tax revenues
 
122. 
if the government imposes a price floor of $25 for compact discs, which of the following will be true
 
consumers will wish to purchase 1,000 cds
producers will wish to sell 5,000 cds
there would be a surplus of 4,000 cds
all of the above will be true
 
123. 
given the demand and supply conditions show in figure 4-4, what will happen as the result of imposing a price ceiling of a
 
there will be a shortage of the product
 
124. 
the deadweight loss of the tax illustrated in figure 4-6
 
ekg
 
125. 
teh supply curve S1 and the demand curve D indicate initial conditions in teh market for gasoline. A $.60 per gallon excise tax on gasoline is leveid. which shifts the supply curve from S1 to S2. which of the following states teh actual burden of the tax
 
$.50 for buyers and $.10 for sellers
 
126. 
teh supply curve S1 and the demand curve D indicate initial conditions in teh market for gasoline. A $.60 per gallon excies tax on gasoline is levied. How much revenue does the $.60 per gallon tax generate for the government
 
$48 billion
 
127. 
The author of the textbook "Money, greed and god"
 
Jay Richards
 
128. 
According to the textbook "Money, greed and god", the only way to alleviate poverty is to
 
with the creaton of wealth and that capitalism is the best engine for creating this wealth
 
129. 
in the textbook, money greed, and god, the author discusses a trading game that he did in elementary school that we also played. Which one was not the game
 
oppurtunity costs: when theres scarcity theres tradeoffs
the game is win-win
normally when trading freely the more trading partners there are, the better off
trading freely does not add value sicne the traded items remain physically unchanged
economic value is in the eye of the beholder
 
130. 
according to economist Thomas Sowell, the minimum wage (price control) does not help the section of the population that it was designed to help. in fact, only about blank percent of american workers over the age of 24 earn the minimum wage
 
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