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Microeconomics Final
Final Exam Spring 2014
| Question | Answer |
|---|---|
| A reoccurring theme in economics is that people: | Have unlimited wants but limited resources. |
| What is the OPPORTUNITY COST if Tammy takes off 2 days of work with pay $150 a day. Cost of transportation is $250 and the Concert ticket is $50? | $600 300+250+50=600. |
| One major assumption of the economic perspective is what? | Individuals behaviors reflect rational self interest. |
| What does ceteris paribus mean? | Other things equal. |
| The economizing problem for society is due to what? | Due to the fact that productive resources are scarce relative to economic wants. |
| The market system is an economic system that: | Gives private individuals the right to own resources used in production. |
| Which is not a characteristic of a capitalist economy? | Government ownership of most factors of production. A capitalist economy is the PRIVATE OWNERSHIP |
| What is barter and an example? | Barter is the exchange of goods or services for goods or services. An example would be a person trades a desk for box of tools. |
| What is necessary to make a trade in a barter economy? | A coincidence of wants. |
| How do you find which technique would be the most efficient way of producing? | Which is the cheapest. |
| What does the circular flow model illustrate? | Illustrates the interdependence of businesses and cutovers. |
| Memorize the flow model. | |
| The rationale for the law of demand can be best understood on the basis of what? | Diminishing marginal utility. |
| How would you calculate the market demand for a product? | Sum together the quantity demanded for all the buyers for a certain price. |
| And increase in demand for computers would indicate that? | More will be purchased even if the prices stayed the same. |
| And increase in customer incomes would shift the demand curve which direction? | To the right. |
| Which would not cause a change in the demand for product a? | Change in price of a. |
| And increase in quantity demanded would be illustrated by a change from? | Two points. Such as Point 4 to Point 1 |
| The development of a more effective insecticide for corn root worm would shirt the supply curve how? | Increase supply, so the supply curve would shift to the right. |
| What is a surplus? | When there is more supplied than demanded. |
| In the market for leather coats, when leather coats become more fashionable among young cutovers what would the demand curve look like? | The demand curve would be shifted to the right. |
| In the market for beef, if newspaper report numerous stories of confirmed cases of mad cow disease, and cattle producers reduce their herd because of the high cost of cattle feed. How would the graph look? | The demand curve would stay the same, and the supply curve would shift to the left due to the lesser supply. |
| The price elasticity of demand is a measure of the? | Responsiveness of quantity demanded to a change in price. |
| If the price elasticity of demand for a product is equal to 0.5, then a 10 percent decrease in price will increase the quantity demanded by? | .05 percent .5 * .10 = .05 |
| How can you tell which demand curve is relatively most elastic between two points? | Elastic is straight across, inelastic is straight up and down. Unit elastic is curved. |
| How do you calculate the price elasticity of demand? | Change in quantity/sum of quantity/2 ______________________________________ Change in price/sum of price/2 |
| A customer surplus would be represented in which area? | The top. |
| What is it called when users are willing to pay more for a public good than it costs to produce it? | Customer suplus |
| A monopolistic competitive industry is like a purely competitive industry due to the fact that? | Neither industry has significant barriers to entry. |
| In which industry is monopolistic competition most likely to be found? | Retain trade. |
| The goal of product differentiation and advertising in monopolistic competition is to make? | Price less of a factor and product differences more of a factor in consumer purchases. |
| Which industry would be considered to be monopolistically competitive? | Air conditioning maintenance because there are MANY PRODUCERS that are DIFFERENTIATED |
| In the long run, a firm in a monopolistically competitive industry will end up earning what kind of profit? | Earning a normal profit but not and economic profit. |
| In the long run, the representative form in monopolistic competition tend to have? | Excess capacity. |
| At long run equilibrium in monopolistic competition there is? | Neither allocative or productive efficiency. |
| Compared to a purely competitive firm in the long run equilibrium, the monopolistic competitor has what kind of price and output? | Higher price and lower output. |
| The characteristic most closely associated with oligopoly is? | FEW large producers. |
| What is and example of differentiated oligopoly? | Beer industry. |
| Mergers of firms in and industry tend to? | Transform monopolistic competition to oligopoly. |
| A high concentration ration indicated that? | Few firms produce the most output in the industry. |
| Collusion refers to what? | Agree with each other to set prices and output. |
| A prediction from the kinked demand curve model of oligopoly is that, for and individual firm, small changes in marginal cost will what? | Not lead to changes in prices or output. |
| The strength of the demand for a resource depends on the following factors, except? | Supply of the resource. |
| The demand for a productive resource is said to be "derived" because the demand for the factor Depends on what? | Depends on the demand for the product it helps to produce. |
| The marginal revenue product of an input in a competitive market decreases as a firm incases the quantity of the input employed because of the: | Law of marginal diminishing returns. |
| Marginal resource cost is: | The increase in a firm's total cost causing by hiring one additional unit of an input. |
| If marginal revenue product of labor is less than wage rate what should happen? | Less labor should be employed. |
| If the price of a resource is greater than its marginal revenue product, the firm should do what? | Decrease the units of the resource used in order to increase profits. |
| In a competitive resource market, a decrease in demand for a product resource, ceteris paribus will cause all of the following except? | increase the price of the other resource. |
| If two inputs are complementary and employed in fixed proportions, and increase in the price of one input will? | Decrease the demand for the other input. |
| Suppose capital is readily substitutable for labor and that the price of capital falls. we can conclude that which effect will happen? | The substitution effect will tend to reproduce the demand for labor. |
| A change in a facts price will have a greater effect on the quantity of the factor demanded the: | More elastic is the demand for the product the factor helps to make. |
| Which will not be a determinant of the price of elasticity of demand for and input? | The price of the input. |
| If a factor of production has many close substituted, we would expect that its price elasticity of demand would be? | Elastic, greater than one. |
| How do you find total utility? | Summation of marginal utility. |
| After eating 4 slices of pizza you turn down the fifth one because? | Marginal utility is positive for the first 4 slices and negative for the 5th slice. |
| The downward slope of the demand curve for a product shows the implications of ? | Diminishing marginal utility. |
| If marginal utility is 10 for $5 for X and Y has marginal utility of 8 for $1. What should happen? | Increase consumption of Y and less of X. |
| What are implicit costs? | "payments" for self employed resources. |
| What would be and example of implicit costs for a firm? | The cost of wages forgone by the owner of the firm. |
| If a firm's revenues just cover all of its opportunity costs, then? | The economic profit is ZERO |
| Normal profits are? | Considered an implicit cost by economists. |
| According to the law of diminishing returns (What happens?) | The additional output generated by additional units will diminish. |
| The marginal product of labor curve graphically shows the change in total product resulting from a: | One unit increase in the quantity of a particular resource used, holding constant other resources. |
| When a bakery manager reports at the her bakery, productivity of her 15 workers last month was 1800 loaves per worker, she is referring to what? | Average product of labor. |
| Fixed costs are the costs that are ? | Independent of the rate of output. |
| Which idea is inconsistent with pure competition? | Product differentiation. |
| One major barrier to entry under the pure monopoly arises from? | Ownership of essential resources. |
Created by:
KatieShanks