ECON202 - Exam 1 - Review Flashcards
The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is _____.
direct, inverse
If average income increases, all else equal, then there will be:
a shift of the demand curve.
The law of supply indicates that:
producers will offer more of a product at high prices than they will at low Pric e prices.
A fall in the price of milk, used in the production of ice cream, will:
increase the supply of ice cream, causing the supply curve of ice cream to shift to the right.
A market for a product is in equilibrium when:
quantity supplied equals quantity demanded.
If the supply and demand curves for a product both decrease, then equilibrium:
quantity must decline, but equilibrium price may either rise, fall, or remain unchanged.
The price elasticity of demand coefficient indicates:
buyer responsiveness to price changes.
The basic formula for the price elasticity of demand coefficient is:
percentage change in quantity demanded/percentage change in price.
The demand for a product is inelastic with respect to price if:
consumers are largely unresponsive to a per unit price change.
The larger the coefficient of price elasticity of demand for a product, the:
smaller the resulting price change for an increase in supply.
Utility refers to the:
satisfaction that a consumer derives from a good or service.
To maximize utility a consumer should allocate money income so that the:
marginal utility obtained from the last dollar spent on each product is the same.
Which of the following statements is correct?
A product may yield utility, but not be functionally useful.
Total utility may be determined by:
summing the marginal utilities of each unit consumed.
Marginal utility can be:
positive, negative, or zero.
The law of diminishing marginal utility states that:
beyond some point additional units of a product will yield less and less extra satisfaction to a consumer.
Suppose that MUx/Px exceeds MUy/Py. To maximize utility the consumer who is spending all her money income should buy:
more of X and less of Y.
To the economist total cost includes:
explicit and implicit costs, including a normal profit.
Which of the following definitions is correct?
Economic profit = accounting profit - implicit costs.
To economists the main difference between the short run and the long run is that:
in the long run all resources are variable, while in the short run at least one resource is fixed.
Which of the following best expresses the law of diminishing marginal returns?
As successive amounts of one resource (labor) are added to fixed amounts of other resources (property), beyond some point the resulting extra output will decline.
A fixed cost is:
any cost which a firm would incur even if output was zero.
Marginal cost is the:
change in total cost that results from producing one more unit of output.
Which of the following is correct as it relates to cost curves?
Marginal cost intersects average total cost at the latter’s minimum point.
Which of the following is not a basic characteristic of pure competition?
considerable nonprice competition
The demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is ______.
downsloping, perfectly elastic
Which of the following is characteristic of a purely competitive seller’s demand curve?
Price and marginal revenue are equal at all levels of output.
In the short run a purely competitive firm that seeks to maximize profit will produce:
where total revenue exceeds total cost by the maximum amount.
The MR = MC rule can be restated for a purely competitive seller as P = MC because:
each additional unit of output adds exactly its price to total revenue.
In the short run a purely competitive firm will always make an economic profit if:
P > ATC.
Suppose you find that the price of your product is less than minimum AVC. You should:
close down because, by producing, your losses will exceed your total fixed costs.
If a purely competitive firm shuts down in the short run:
it will realize a loss equal to its total fixed costs.
A purely competitive firm’s short-run supply curve is:
upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve.
Which of the following conditions is true for a purely competitive firm in long-run equilibrium?
P = MC = minimum ATC.
What do economies of scale, the ownership of essential raw materials, and patents have in common?
They are all barriers to entry.
A pure monopolist is:
a one-firm industry.
A decrease in quantity demanded (as distinct from a decrease in demand) is depicted by a:
move from point y to point x.
A decrease in demand is depicted by a:
shift from D2 to D1.
If the price of X and Y are $2 and $4 per unit, respectively, and this consumer has $10 in income to spend, to maximize total utility this consumer should buy:
1 units of X and 2 units of Y.
The total cost of four units of output is:
$310.
If the firm closed down and produced zero units of output, its total cost would be:
$50.
By producing output level Q:
both productive and allocative efficiency are achieved.
The above diagram implies that whenever a firm’s demand curve is downsloping:
marginal revenue is less than price.
To maximize profits or minimize losses this firm should produce:
E units and charge price A.
Refer to the above diagram for a pure monopolist. If a regulatory commission seeks to achieve the most efficient allocation of resources to this line of production, it will set a price of:
P2.
If columns (1) and (3) of the demand data shown above are this firm’s demand schedule, the profit-maximizing level of output will be:
8units.
Suppose that entry into the industry changes this firm’s demand schedule from columns (1) and (3) shown above to columns (2) and (3). Economic profit will:
decline to zero.
Which of the above diagrams correctly portray a nondiscriminating pure monopolist’s demand (D) and marginal revenue (MR) curves?
B
Refer to the above data for a nondiscriminating monopolist. This firm will maximize its profit by producing:
4 units.
Refer to the above data for a nondiscriminating monopolist. At its profit-maximizing output, this firm’s total profit will be:
$82
Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. Other things equal, a shift of the supply curve from S0 to S1 might be caused by a(n):
increase in the wage rates paid to laborers employed in the production of X.
If government set a minimum price of $50 in the above market, a:
surplus of 21 units would occur.
Refer to the above data. Total fixed cost is:
$50.00.
Refer to the above data. The average total cost of five units of output is:
$78.
Refer to the above data. The total cost of four units of output is:
$310.
Refer to the above data. If the firm closed down and produced zero units of output, its total cost would be:
$50.
Refer to the above data. The marginal cost of the fifth unit of output is:
$80.
Refer to the above data. If the firm decided to increase its output from 6 to 7 units, its total costs would rise by:
$120.00.
Refer to the above data. This firm is selling its output in a(n):
purely competitive market.
Refer to the above data. If the firm’s minimum average variable cost is $10, the firm’s profit- maximizing level of output would be:
3.
Refer to the above data. At the profit-maximizing output the firm’s total revenue is:
$48.
Refer to the above data. At the profit-maximizing output the firm’s total cost is:
$32.
Refer to the above data. The firm’s:
economic profit is $16.
Refer to the above data. If there were 1,000 identical firms in this industry and total or market demand is as shown below, equilibrium price will be:
$36.
Refer to the above diagram. The firm will realize an economic profit if price is:
P4.
Refer to the above diagrams. Firm A is a:
pure competitor and Firm B is a pure monopoly.
Refer to the above diagram. At the profit-maximizing level of output, the firm will realize:
an economic profit of ABHJ.
