Test- 5,6,7,8 Flashcards
(92 cards)
0
Q
2.The transformation of resources into economic goods and services is called
A
Production
1
Q
1.Labor, land, and capital used in production are:
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Resources
2
Q
3.Economic goods and services produced by business firms are
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Outputs
3
Q
4.Average total cost is calculated by dividing
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Total cost by total output
4
Q
5.The average total cost curve indicates that
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as output rises in the short run, per unit costs initially fall but eventually rise.
5
Q
Average total cost is
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the per-unit cost and is derived by dividing total cost by the quantity of output.
6
Q
Marginal cost is calculated by dividing
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the change in total cost by the change in the quantity of output produced.
7
Q
As output rises unit by unit, costs ____ relatively ____ at first, but then ____ more ____.
A
rise; slowly; increase; rapidly
8
Q
After hiring three new employees, a manager sees that total output increases. If the manager hires two additional employees and discovers total output has fallen, the result is due to
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diminishing marginal returns.
9
Q
Which of the following does not refer to diminishing marginal returns?
A
Increasing the number of assistant vice presidents as the size of the firm increases
10
Q
The law stating that added quantities of a variable resource will eventually result in less additional output is called the
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law of diminishing marginal returns.
11
Q
If the total cost of producing 6 units is $228 and the total cost of producing 7 units is $245, what is the marginal cost of producing the seventh unit?
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$17
12
Q
Total cost is the cost of
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land, labor, and capital.
13
Q
Average total cost is the
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cost of all resources divided by the quantity of output.
14
Q
Marginal total cost is the
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change in the cost of all resources divided by the change in the quantity of output.
15
Q
The “Short run” is a
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period of time when plant size cannot be changed.
16
Q
Marginal cost (MC) is equal to average total cost (ATC) at
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the minimum point of the ATC.
17
Q
Which of the following sayings illustrates diminishing returns in the short run?
A
Too many cooks spoil the broth
18
Q
The law of diminishing returns causes the shape of the average-total-cost curve to be
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U-Shaped
19
Q
When diminishing marginal returns occurs, the
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marginal cost starts to rise.
20
Q
Which of the following does not change with the level of output?
A
Total fixed cost
21
Q
The results of competition will be different depending on
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whether rivals can enter the business.
22
Q
A perfectly competitive market is characterized by
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large numbers of producers of commodities with ease of entry.
23
Q
Which of the following is the closest to being a perfectly competitive market in the United States?
A
Freshly brewed coffee
24
More competitors will increase the market supply, thus
resulting in lower prices.
25
Most economists like perfect competition because
it results in economic efficiency.
26
When perfectly competitive firms produce at a quantity where marginal revenue equals marginal costs, they are
employing resources until the extra cost of producing the last unit just equals the price of that unit.
27
A product is turned into a commodity when
there is no more incentive for new businesses to enter
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Monopoly is a market structure characterized by
one producer and entry by other firms is not possible.
29
Which of the following is most likely to be a monopoly market in the United States?
Patented pharmaceuticals
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Which of the following is least likely to be a monopolistically competitive market in the United States?
Patented pharmaceuticals
31
A monopolist will earn
positive economic profit as long as entry is blocked.
32
All of the following are characteristics of the market for a commodity product except
a. economic profit is zero
b. price is driven down to just equal opportunity costs.
c.
consumers perceive the goods to be identical no matter who supplies them.
d.
entry by new firms is easy.
e.
All of these are characteristics of a market for a commodity product.
33
Competition is exemplified by
a. Walmart offers lower prices due to its economies of scale.
b. Nordstrom focuses on superior customer service.
c. Sharper Image attempts to be the first to offer a product.
d. Apple focuses on innovation and offers products that others do not have.
34
Competition benefits individuals because
a. Firms must continually work to improve their products.
b. Technology continually improves.
c. Consumers get the goods and services at the lowest possible price.
d. Resources are allocated to their highest-valued use.
35
A brand new store, Billy's Boards, opens and business takes off. We would expect:
new firms will enter the board business.
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Creative destruction is
the process of competition where the inefficient producers are driven out of business
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A price taker is
an individual seller in a commodity market
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As competitors enter a market, demand becomes more ____, meaning the demand curve shifts ____ and becomes ____.
elastic; in; flatter
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The demand curve facing a perfectly competitive firm is
Horizontal
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A monopolistically competitive firm will maximize profits where
MR=MC
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If, at the current level of output, the extra revenue received from producing and selling the last unit of output is less than the extra cost of producing that output, the firm should
reduce output to the point where the extra revenue just equals the extra cost.
42
Economic profits are earned
when price exceeds average total cost.
43
One reason government intervenes in the market process is to enhance competition, often referred to as
"creating a level playing field."
44
Government does:
a. build highways
b. decide which airline can fly to which city
c. provide medical insurance
d. tell power companies what prices they can charge for electricity
45
the following are examples of a first-come, first-served system of allocation:
a. medical care
b. classes at school
c. access to highways
d. tickets to concerts
46
Some people do not like market allocation because
a. some people lose their jobs as their skills are no longer needed.
b. people who are not willing and able to pay for something do not get that something.
c. people who need certain goods and services (e.g., medical care) are not able to obtain them.
d. some people experience a loss of income as their resources become replaced.
47
According to the survey reported in the text, most people believe that health-related goods and services should be allocated by the ____ allocation mechanism.
government
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According to the survey reported in the text, the least number of people believe that health-related goods and services should be allocated by the ____ allocation mechanism
Price
49
Antitrust policy is the term used to describe government policies and programs designed to
control the growth of monopoly and enhance competition.
50
Antitrust laws are designed to
prevent monopolization of a market.
51
Which of the following is an antitrust question?
a. Is an agreement by FedEx Kinko's to use only Kodak paper anticompetitive?
b. Does Walmart use unfair practices to compete against small local firms?
c. Is Apple competing unfairly by making iPods incompatible with MP3 systems?
d. Would the merger of AT&T and T-Mobile USA significantly reduce competition?
52
The goal of a business is to
a. earn a profit
b. restrict competition
c. limit entry
d. charge consumers higher prices
53
Government action has not resulted in
IBM controlling its higher price on peripheralsdisk drives, programs, and other components
54
A firm charges a lower price in another country than it does for the same product in its home country may be a simple case of price discrimination. (For example, "international editions" of textbooks are much lower than the American edition.) To prove dumping, it must be shown that
the cost of production is higher than the price the firm charges for the good.
55
The international agency involved in business behavior, and studies cases in which an industry in one country accuses competitors in another country of dumping is the
WTO
56
In the case of a natural monopoly where cost conditions lead to a sole supplier, regulation is used to ensure that
price and output are more beneficial for consumers than would be the case without government interference.
57
Which of the following is not in the category of economic regulation?
Setting output and job standards that apply across several industries
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Monopoly regulation occurs primarily because
by comparison with competitive firms, monopolies tend to restrict output and raise prices.
59
The immediate cause of the 2006-2010 economic crisis was:
the bursting of the U.S. housing bubble
60
A subprime loan is a loan ____, while an ARM is a loan ____.
made to individuals with high risk of default; that has a low initial interest rate, but the interest rate adjusts according to market conditions.
61
Between 1997 and 2006, the price of the typical American house increased by ____, a rate significantly higher than at any other time during the previous decades.
124%
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By September 2008, ____ of all U.S., mortgages outstanding were either delinquent or in foreclosure
14%
63
Too big to fail" is a term used to describe a firm
whose failure would cause a major ripple effect throughout the economy, causing other firms to fail.
64
Situations where the market does not work efficiently or does not allocate resources to their highest valued uses are called
Market failures
65
To reduce road congestion in Singapore, cars traveling into certain districts at specified times pay a toll. This attempts to address a(n)
Market failures
66
An externality is a cost or benefit created by a transaction that
is not paid for or enjoyed by those involved directly in the transaction.
67
Which of the following is not one of the classifications of current economic thinking?
Reaganomists
68
Who believes that unfettered markets will work best for society?
Milton Friedman
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The market system is ____ the most efficient allocation system
Generally
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When economic profit is ____, the firm will ____.
positive; face new competition
71
What is the main reason many economists do not believe in or trust the free market?
the speed with which a free market adjusts to changes
72
In a market system, those who own the most highly valued resources
Have the highest incomes
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Free market economists argue that
markets will adjust to a demand shock without government intervention
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When competition is limited, i.e., entry restricted, consumers pay ____ prices and have ____ quantity of the product
higher; less
75
Many people claim that the free market fails regarding all of the following except:
fast food restaurants
76
Health economics is important to study for all of the following reasons except:
The elderly are the smallest users of health care, and the young are the major users.
77
Supporters of the current U.S. health care system do not argue that
even though per capita spending on health care in the U.S. exceeds that of every other nation, U.S. health care is not as good as that found in other nations.
78
In a free market system for health care, which would not occur?
Those who need health care would receive health care in the Emergency Room.
79
Much of the debate between free market economists and non-free market economists over health care lies with the idea that
Health care is right
80
The third-party payment system for health care creates
a higher demand, and therefore higher prices for health care.
81
All of the following are reasons for health care expenditures in the U.S. rising except:
the federal government has had such a small role in health care.
82
What proportion of the United States' current GDP do health care expenditures represent?
More than 16 percent
83
Which of the following statements best describes the government's role in health care?
Government spending on health care constitutes about 45 percent of the total.
84
The largest publicly sponsored health care program is
Medicare
85
With regard to health care spending patterns, we can say that
only a few people (less than 5 percent) consume more than half of all health care expenditures.
86
Which of the following statements about the senior citizen population in the United States is true?
The highest expenditures on health care per capita occur with the older segment of the population.
87
Medicaid is a joint
state-federal program that provides health care based on need.
88
The demand for a good or service rises if at every price people are willing and able to purchase more than they did previously. The reason that the demand for health care has risen is that
the third-party payment system has increased people's ability to purchase more.
89
The aging of the population stimulates the demand for
Healthcare
90
Which of the following is the most significant reason for the increased demand for medical care?
Medicare and Medicaid programs have increased individuals' ability to pay for medical services.
91
Which of the following is not a consequence of Medicare and Medicaid?
Reduced demand for health care
