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econ 202
| Question | Answer |
|---|---|
| Refer to the diagram and assume a single good. If the price of the good decreased from $6.30 to $5.70 along D2, the price elasticity of demand along this portion of the demand curve would be | 0.8 |
| The price elasticity of demand coefficient measures | buyer responsiveness to price changes. |
| If the price elasticity of demand for a product is 0.5, then a price cut from $3.00 to $2.70 will | increase the quantity demanded by about 5 percent. |
| Suppose that as the price of Y falls from $12 to $10, the quantity of Y demanded increases from 500 to 600. Then the absolute value of the price elasticity (using the midpoint formula) is approximately | 1. |
| The demand for a product is inelastic with respect to price if | consumers are largely unresponsive to a per unit price change. |
| Suppose that as the price of Y falls from $3.00 to $2.80, the quantity of Y demanded increases from 200 to 210. Then the absolute value of the price elasticity (using the midpoint formula) is approximately | 0.71. |
| Suppose the total-revenue curve is derived from a particular linear demand curve. That demand curve must be | unit elastic for price increases that reduce quantity demanded from 5 units to 4 units. |
| A firm can sell as much as it wants at a constant price. Demand is thus | perfectly elastic. |
| If a firm can sell 3,000 units of product A at $10 per unit and 5,000 at $8, then | the price elasticity of demand is approximately 2.25. |
| Suppose that the total-revenue curve is derived from a particular linear demand curve. That demand curve must be | inelastic for price declines that increase quantity demanded from 6 units to 7 units. |
| We use the midpoint formula in computing the price elasticity of demand coefficient in order to | make the coefficient value become independent of whether price goes up or down. |
| Suppose that as the price of Y falls from $20 to $18, the quantity of Y demanded increases from 300 to 350. Then the absolute value of the price elasticity (using the midpoint formula) is approximately | 1.46 |
| A perfectly inelastic demand schedule | can be represented by a line parallel to the vertical axis. |
| The basic formula for the price elasticity of demand coefficient is | percentage change in quantity demanded/percentage change in price. |
| Suppose we find that the price elasticity of demand for a product is 3.5 when its price is increased by 2 percent. We can conclude that quantity demanded | decreased by 7 percent. |
| The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. Therefore, demand for X in this price range | is elastic. |
| If the demand for product X is inelastic, a 4 percent decrease in the price of X will | increase the quantity of X demanded by less than 4 percent. |
| If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will | increase the amount demanded by more than 10 percent. |
| Refer to the diagram and assume a single good. If the price of the good decreases from $6.30 to $5.70, consumer expenditure would | decrease if demand were D2 only. |
| Suppose Aiyanna's Pizzeria currently faces a linear demand curve and is charging | demand will become less price elastic. |
| If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will | increase the quantity demanded by about 25 percent. |
| Suppose that as the price of Y falls from $2.00 to $1.90, the quantity of Y demanded increases from 110 to 118. Then the absolute value of the price elasticity (using the midpoint formula) is approximately | 1.37. |
| Refer to the diagram. Between prices of $5.70 and $6.30, | D1 is more elastic than D2. |
| The diagram shows two product demand curves. On the basis of this diagram, we can say that | over range P1P2, price elasticity of demand is greater for D1 than for D2. |
| If the demand for product X is inelastic, a 10 percent decrease in the price of X will | increase the quantity of X demanded by less than 10 percent. |
| The first, second, and third workers employed by a firm add 24, 18, and 9 units to total product, respectively. Therefore, we can conclude that | marginal product of the third worker is 9. |
| Marginal product is | the change in total output attributable to the employment of one more worker. |
| Creamy Crisp's implicit costs, including a normal profit, are | $136,000. |
| Implicit and explicit costs are different in that | the former refer to nonexpenditure costs and the latter to monetary payments. |
| Average fixed cost | declines continually as output increases. |
| In the short run, total output in an industry | can vary as the result of using a fixed amount of plant and equipment more or less intensively. |
| Creamy Crisp's explicit costs are | $150,000. |
| If economic profits in an industry are zero and implicit costs are greater than zero, then | accounting profits are greater than zero. |
| In the diagram, curves 1, 2, and 3 represent the | marginal, average, and total product curves respectively. |
| What do wages paid to factory workers, interest paid on a bank loan, forgone interest, and the purchase of component parts have in common? | All are opportunity costs. |
| Production costs to an economist | reflect opportunity costs. |
| Total fixed cost (TFC) | does not change as total output increases or decreases. |
| If a firm increases all of its inputs by 8 percent and its output increases by 8 percent, then | it is encountering constant returns to scale. |
| Creamy Crisp's explicit costs are | $138,000. |
| Economic cost can best be defined as | a payment that must be made to obtain and retain the services of a resource. |
| Suppose that a business incurred implicit costs of $400,000 and explicit costs of $4 million in a specific year. If the firm sold 100,000 units of its output at $48 per unit, its accounting | profits were $800,000 and its economic profits were $400,000. |
| Fixed cost is | any cost that does not change when the firm changes its output. |
| Creamy Crisp's implicit costs, including a normal profit, are | $141,000. |
| To the economist, total cost includes | explicit and implicit costs. |
| Which plant size would produce at the least cost for the 3,000-4,000 range of output? | ATC-2 |
| The diagram of product curves suggests that | when marginal product lies above average product, average product is rising. |
| The law of diminishing returns indicates that | as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point. |
| If a variable input is added to some fixed input, beyond some point the resulting extra output will decline. This statement describes | the law of diminishing returns. |
| Accounting profits equal total revenue minus | total explicit costs. |
| The basic difference between the short run and the long run is that | at least one resource is fixed in the short run, while all resources are variable in the long run. |
| The demand schedule or curve confronted by the individual, purely competitive firm is | perfectly elastic. |
| Price is taken to be a "given" by an individual firm selling in a purely competitive market because | each seller supplies a negligible fraction of the total market. |
| Refer to the diagram, which pertains to a purely competitive firm. Curve A represents | total revenue only. |
| Price is constant to the individual firm selling in a purely competitive market because | each seller supplies a negligible fraction of total supply. |
| Refer to the accompanying diagram. The firm's supply curve is the segment of the | MC curve above its intersection with the AVC curve. |
| The lowest point on a purely competitive firm's short-run supply curve corresponds to | the minimum point on its AVC curve. |
| Which market model assumes the least number of firms in an industry? | pure monopoly |
| The total revenue of a purely competitive firm from selling 50 units of output is $300. Based on this information, the unit price of the output must be | $6. |
| The demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is ______. | downsloping; perfectly elastic |
| Economists use the term imperfect competition to describe | those markets that are not purely competitive. |
| For a purely competitive seller, price equals | All of these. (Average revenue, Marginal revenue, Total revenue divided by output) |
| A firm sells a product in a purely competitive market. output of 1,500 units is $6.50. The miniable cost is $5.00. The market price of the product is $4.50. To maximize profits or minimize losses, the firm should | shut down. |
| Which idea is inconsistent with pure competition? | product differentiation |
| For a purely competitive firm, total revenue | has all of these characteristics. |
| The marginal revenue curve of a purely competitive firm | is horizontal at the market price. |
| In the short run, a purely competitive seller will shut down if | price is less than average variable cost at all outputs. |
| Refer to the accompanying diagram. The firm will shut down at any price less than | P1. |
| Refer to the diagram, which pertains to a purely competitive firm. Curve C represents | average revenue and marginal revenue. |
| The market for agricultural products such as wheat or corn would best be described by which market model? | pure competition |
| An industry comprising 100 firms, each with about 1 percent of the total market for a standardized product, is an example of | pure competition. |
| If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue | will also be $5. |
| A purely competitive seller is | a "price taker." |
| A purely competitive firm currently producing 10 units of output earns marginal revenues of $15 from each extra unit of output it sells. If it sells 20 units, then its total revenues would be | $300. |
| Suppose that Joe sells pork in a purely competitive market. The market price of pork is $4 per pound. Joe's marginal revenue from selling the 21st pound of pork would be | $4. |
| If at the MC = MR output, AVC exceeds price, | some firms should shut down in the short run. |
| If the long-run supply curve of a purely competitive industry slopes upward, this implies that the prices of relevant resources | rise as the industry expands. |
| In pure competition, if the market price of the product is lower than the minimum average total cost of the firms, then | other firms will exit the industry and the industry supply will decrease. |
| Under what conditions would an increase in demand lead to a lower long-run equilibrium price? | The firms in the market are part of a decreasing-cost industry. |
| If a purely competitive constant-cost industry is realizing economic profits, we can expect industry supply to | increase, output to rise, price to fall, and profits to fall. |
| Assume that the market for soybeans is purely competitive. Currently, firms growing soybeans are earning positive economic profits. In the long run, we can expect | new firms to enter, causing the market price of soybeans to fall. |
| If the entry or exit of firms does not affect the resource prices in an industry, we refer to it as a | constant-cost industry. |
| The graphs are for a purely competitive market in the short run. The graphs suggest that in the long run, assuming no changes in the given information, | new firms will be attracted into the industry. |
| Long-run adjustments in purely competitive markets primarily take the form of | entry or exit of firms in the market. |
| The representative firm in a purely competitive industry | will earn zero economic profit in the long run. |
| Assume a purely competitive decreasing-cost industrytially in long-run equilibrium, producing 6 million units at a marice of $25.00. Suppose that an in. After all economic adjustmencompleted, which output and price combination is most likely to occur? | 7 units at a price of $23.50. |
| The primary force encouraging the entry of new firms into a purely competitive industry is | economic profits earned by firms already in the industry. |
| Long-run competitive equilibrium | results in zero economic profits. |
| Suppose that the corn market is purely competitive. If the corn farmers are currently earning negative economic profits, then we would expect that in the long run the market | supply will decrease. |
| If firms are losing money in a purely competitive industry, then the long-run adjustments in this situation will cause the market supply to | decrease, and consequently the representative firm's profits will increase. |
| When LCD televisions first came on the market, they sold for at least $1,000, and some for much more. Now many units can be purchased for under $400. These facts imply that | the LCD television industry is a decreasing-cost industry. |
| The accompanying graphs are for a purely competitive market in the short run. The graphs suggest that in the long run, as automatic market adjustments occur, the demand curve facing the individual firm will | shift down. |
| If the price of bottled water is $2.00 and the marginal cost of producing it is $1.50, | resources are being underallocated to bottled water. |
| A constant-cost industry is one in which | 100 units can be produced for $100, then 150 can be produced for $150, 200 for $200, and so forth. |
| If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then | new firms will enter this market. |
| Which of the following distinguishes the short run from the long run in pure competition? | Firms can enter and exit the market in the long run but not in the short run. |
| The MR = MC rule applies | in both the short run and the long run. |
| Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everywhere below ATC. Given this, the firm | should continue producing in the short run but leave the industry in the long run if the situation persists. |
| We would expect an industry to expand if firms in that industry are | earning economic profits. |
| In pure competition, if the market price of the product is higher than the minimum average total cost of the firms, then | other firms will enter the industry and the industry supply will increase. |
| What happens in a decreasing-cost industry when some firms leave and the industry's output contracts? | The average cost will increase. |
Created by:
cohen.early