Econ-211 Final Exam

Econ-211 Final Exam
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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
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
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
in a competitive price-taker market
many other sellers are offering a product that is essentially identical
in short-run equiliibrium, a competitive price-taker firm
may earn a profit or a loss
competitive price-taker firms respond to changing market conditions by varying their
the marginal revenue of a price taker is
equal to price
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
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
if a firm is making zero economic profit, it
will be forced to shutdown and leve the market
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
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.
if a firm in a competitive price-searcher mareket raised its price it will
loose only some of its sales
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
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
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
when economic losses are present in a market, firms will tend to
exit from the market
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.
in long-run equilibrium, output is expanded to the minimum long-run average total cost by
price takers but no by competitve price searchers.
in order for effective price discrimination to occur, a seller must
have at least two distinguishable groups of consumers
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
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
which of hte following is most likely to contribute to the presence of monoply industry
economies of scale
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
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
which of the following industries most closely approximates the oligopoly model
automobile industry
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
market power is an expression used to indicate that a firm has
some freedom from the rigors of intense competition
which of the following is true of pure monoply
monopolly results in allocateive inefficiency
if government officials break a natural monopoly up into several smaller firms, then
the average costs of production will increase
which one of the following labor resources will likely have the most inelastic supply schedule in teh short run
as the price of a resouce descreases
producers are more willing and able to hire that resource
when the price of steel rises, ford use more aluminum inthe production of its cars. this is an example of
substituion in production
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
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
if the demand for computer scientists increases relative to their supply
a computer science major will be more attractive to college students
proved reserves of petrolem are
the verified quantity of petrolem that can be recovered at current prices and levels of technology.
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
"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
what hapens to a resource as it becomes scarcer
the price rises and this increases the future supply relative to demand
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
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
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
cause the price system to misallocate resources
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
A good is considered to be a public good if it
is both nonrival-in-consumption and nonexcludable
which of the follwing is an example of a public good
an effective antimisslie system that defends a country against a nuclear attack
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
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.
the inefficient equilibrium price and quantity are
1.60 and 42 units, respectively
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
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
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
transfer paymests are
transfers of income from taxpayers to reciptients who do not provide current goods and services for payments
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
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
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
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
which of hte following explains why elected officials wil find borrwoing to be an attractive method of financing current government programs
the shortsightedness effect
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
public choice theory suggest that politicians will be most likely to favor redistribution of income from
unorganized taxpayers to well-organized interest groups
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
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
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
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
if the prices increase from 1.00 to 1.50,
the quantity demanded in teh market decreases by 7 units
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
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
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
if the quantity demanded increase by 20 percent in response to a 10 percent decrease in price, demand is classified as
relatively elastice
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
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
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
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.
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
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
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
goods that consumers regard as luxuries generally have
an income elasticity greater than 1
the law of diminishing returns
explains whiy marginal cost eventually increases as output expands
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
when total revenue minus total economic cost is equal to zero, the firm is
earning the normal profit rate
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
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
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
which of hte following is most likely to be a fixed cost for a business
property taxes on the firms buildings
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
beyond 110,000 units the per unit marginal cost of producing an additional 10,000o pencils is
7 cents
in the short run, the firms average fixed costs
always decline as output increases
measured as a share of the economy, government expenditures on blank have declined during the last four decades
national defense
at the federal level which of the following accounts for almost half of all revenue
personal income taxes
according to adam smith, individual self-interest
is a powerful force for economic progress when it is directed by competitive markets
which of the following is the best definition of economics
an analysis of how individuals and soceities dela with the problem of scarcity
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
capital is a term ecnomists use to refer to
man-made resources used to produce other goods and services
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
the economic way of thinking is
a set of basic concepts that helps one understand human chioces
which of the following statements is correct
oppurtunity costs will always be incurred when scarce resources are sude to produce a good
the highest valued alternative that must be given up in order to choose an option is called
oppurtunity cost
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
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.
middlemen are individuals who
provide services that reduce the cost of transactions and help achieve additional gains from trade.
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.
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
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
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
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
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
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
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
which of the following is least likely to increase the demand for new tires
a decrease in the price of tires
two goods are considered substitutes if
an increase in the price of one leads to an increase in teh demaind of the other
if salsa and nacho chips are complements, an increase in teh price of nacho chips would
decrease the demand for salsa
which of the following is most likely to shift the demand curve for electricity to the left
consumers becoming more energy conscious
if the market price is 1,000 the producer surplus in the market is
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
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
which of hte following would decrease teh suply of sugar
the tariff(tax) on imported sugar increases
when there is excess demand for a product in a market
price must be below the equilibrium price
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
an increase in supply will cause
an increase in quantity demanded
the laffer curve indicates that
when taxes are high, an increase in tax rates is likely to decrease in tax revenues
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
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
the deadweight loss of the tax illustrated in figure 4-6
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
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
The author of the textbook "Money, greed and god"
Jay Richards
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
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
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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