Econ Exam: Final May 13 ( tests 3 & 4)

Question 1

the law of demand:

Answer 1

tells us that demand curves slope down to the right

Question 2

when the slope of a curve is negative, this means

Answer 2

a decrease in the independent variable will cause an increase in the dependent variable

Question 3

when marginal cost is increasing:

Answer 3

total cost must be increasing

Question 4

as output increases, average fixed costs

Answer 4

decrease

Question 5

in the short run a perfectly competitive firm’s supply curve is that segment of the

Answer 5

marginal cost curve lying above the average variable cost curve

Question 6

the reason the marginal cost curve eventually increases as output increases for the typical firm is because

Answer 6

the law of diminishing returns

Question 7

which characteristic would best be associated with perfect competition?

Answer 7

price taker

Question 8

which characteristic would best be associated with perfect competition?

Answer 8

many sellers

Question 9

for a perfectly competitive business, price equals

Answer 9

average revenue, marginal revenue, total revenue divided by output

Question 10

if the average variable cost of production for a firm is decreasing, then if follows that

Answer 10

marginal cost must be below average variable cost

Question 11

a business firm should produce

Answer 11

the number of units of the product in which the marginal cost of producing is equal to the marginal revenue

Question 12

a business firm is earning profits if at the profit maximizing quantity

Answer 12

price>average total cost

Question 13

if a business is earning losses at the profit maximizing quantity, it should stay open if

Answer 13

price>average variable cost

Question 14

for a perfectly competitive business, total revenue:

Answer 14

is price multiplied times quantity sold, increases by a constant absolute amount as output expands, graphs as a straight upsloping line from the origin

Question 15

if production is occurring where marginal cost exceeds price, the perfectly competitive firm will

Answer 15

fail to maximize profit and resources will be over allocated to the product

Question 16

if production is occurring where marginal cost is less that the price, the perfectly competitive firm will

Answer 16

fail to maximize profits and resources will be under allocated to the product

Question 17

a consumer with a fixed income will maximize utility when each good is purchased in amounts such that the

Answer 17

marginal utility per dollar spent is the same for all goods

Question 18

for a graph showing a perfectly competitive firm earning a loss but should stay open, at the profit maximizing quantity, the marginal cost will be:

Answer 18

greater than the average variable cost

Question 19

for a graph showing a simple monopolist earning a loss but should stay open, at the profit maximizing quantity, the marginal cost:

Answer 19

may be greater than the average variable cost

Question 20

for a graph showing a simple monopolist earning a loss and should shut down at the profit maximizing quantity, the marginal cost will be

Answer 20

none of the above

Question 21

are perfectly competitive firms allocatively efficient?

Answer 21

yes, because price equals marginal cost

Question 22

are simple monopolies allocatively efficient?

Answer 22

no, because price does not equal marginal cost

Question 23

for a perfectly competitive firm the demand curve facing the firm will be

Answer 23

a horizontal line on the graph

Question 24

for a simple monopolist the dff will be

Answer 24

the same as the industry’s demand curve

Question 25

in the long run equilibrium for perfectly competitive firms, the price will settle at the lowest point of the average total cost curve

Answer 25

true

Question 26

profits are determined by subtracting total costs from total revenue

Answer 26

true

Question 27

the solution to the consumer maximization problem given in class is to find the point in which the budget line is just tangent to one indifference curve

Answer 27

true

Question 28

if you were to graph typical cost curves, the margin cost curve would cross the average variable cost curve at the lowest point of the average variable cost curve

Answer 28

true

Question 29

if you were to graph typical cost curves, the marginal cost curve would cross the average fixed cost curve at the lowest loin of the AFC

Answer 29

false

Question 30

in economics it is assumed that the primary goal of the firm is to make a profit, however large or small that amount may be

Answer 30

false, want to maximize profits!

Question 31

for perfectly competitive firms the marginal revenue curve is the same as the average revenue curve

Answer 31

true

Question 32

for a simple monopolist the marginal revenue curve is the same as the average revenue curve

Answer 32

false

Question 33

if the four largest producers in an industry produce 60% of the entire industry output, this industry would be an example of which model?

Answer 33

oligopoly

Question 34

the reason marginal cost curve eventually increases as output increases for the typical firm is because

Answer 34

of the law of diminishing returns

Question 35

if firms exit monopolistic competition market, the demand curve facing the firm for these firms will

Answer 35

shift to the right

Question 36

if firms enter a monopolistic competition market, the demand curve facing the firm for these firms will

Answer 36

shift to the left

Question 37

if the four largest producers in an industry produce 20% of the entire industry output this industry would be an example of which model?

Answer 37

monopolistic competition

Question 38

the industry for women's dresses would be an example of

Answer 38

monopolistic competition

Question 39

the auto industry would be an example of

Answer 39

oligopoly

Question 40

the beer industry would be an example of

Answer 40

oligopoly

Question 41

in the prisoners dilemma scenario the very best possible outcome for miley would be

Answer 41

for miley to confess and justin to stay quiet

Question 42

in a similar fashion to the prisoners dilemma, as traced out in class, the best outcome for both of two resort owners on an island with only two resorts would be

Answer 42

for both to charge high prices

Question 43

which characteristic would best be associated with monopolistic competition?

Answer 43

product differentiation

Question 44

which characteristics would NOT be associated with oligopoly?

Answer 44

``` many sellers (oligopoly = few sellers, control over price, product differentiation) ```

Question 45

a business firm is earning profits if, at the profit maximizing quantity

Answer 45

price > ATC

Question 46

if a business firm is earning losses at the profit maximizing quantity, it should stay open if

Answer 46

price > AVC

Question 47

the law of diminishing marginal utility means that as a typical consumer consumes units of a product

Answer 47

total utility increases and marginal utility decreases

Question 48

a business firm should produce

Answer 48

the number of units of the product in which the marginal cost of producing is equal to the marginal revenue

Question 49

for a simple monopolist the demand curve facing the firm will be

Answer 49

the same as the industry's demand curve

Question 50

for a discriminating monopolist the demand curve facing the firm will be

Answer 50

the same as the industry's demand curve

Question 51

for a firm in monopolistic competition the dff will be

Answer 51

more elastic than the industry's demand curve

Question 52

for a firm in oligopoly industry the dff will be

Answer 52

a kinked line o the graph

Question 53

the law of diminishing returns is a short run concept because capital can be changed in the long run

Answer 53

true

Question 54

collusion is a very likely problem in oligopoly industries

Answer 54

true

Question 55

collusion is a very likely problem in monopolistic competition

Answer 55

false

Question 56

advertising tends to be a great necessity for firms in monopolistic competition

Answer 56

true

Question 57

for firms in monopolistic competiion the marginal revenue curve is the same as the dff

Answer 57

false

Question 58

for firms in oligopoly markets the marginal revenue curve is the same as the demand curve facing the firm

Answer 58

true

Question 59

in the monopolistic competition model are firms allocatively efficient

Answer 59

no

Question 60

in the oligopoly model are firms allocatively efficient

Answer 60

no

Question 61

in the discrimination monopoly model is the industry allocatively efficient

Answer 61

yes

Question 62

in the monopolistic competition model do consumers receive the lowest price?

Answer 62

no

Question 63

in the discriminating monopoly model do consumers receive the lowest price

Answer 63

no

Question 64

in the oligopoly model do consumers receive the lowest price

Answer 64

no