Econ test #2

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a consumer is maximizing her utility with a particular money income when

mua/pa = mub/pb = muc/pc = ... = mun/pn.

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assume that a consumer purchases products a, b, and c in quantities such that the last dollar spent on each yields the same marginal utility and the consumer's income is totally spent. we can conclude that

total utility is being maximized

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if a consumer is initially in equilibrium, an increase in money income will

move him to a new equilibrium on a higher indifference curve

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assume a diagram in which a budget line is imposed on an indifference map. a consumer will maximize her utility

where the budget line is tangent to an indifference curve

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utility

is want-satisfying power

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marginal utility can be

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a product has utility if it

satisfies consumer wants

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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

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the first pepsi yields craig 18 units of utility and the second yields him an additional 12 units of utility. his total utility from three pepsis is 38 units of utility. the marginal utility of the third pepsi is

8 units of utility

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if the price of product x rises, then the resulting decline in the amount purchased will

increase the marginal utility of this good

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total utility may be determined by

summing the marginal utilities of each unit consumed

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where total utility is at a maximum, marginal utility is

zero

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marginal utility

diminishes as more of a product is consumed

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which of the following is correct

if marginal utility is diminishing and is a positive amount, total utility will increase

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the theory of consumer behavior assumes that

consumers behave rationally, maximizing their satisfactions

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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.

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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

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refer to the above data. if the consumer has a money income of $52 and the prices of j and k are $8 and $4 respectively, the consumer will maximize her utility by purchasing

4 units of j and 5 units of k

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refer to the above data. what level of total utility is realized from the equilibrium combination of j and k, if the consumer has a money income of $52 and the prices of j and k are $8 and $4 respectively

276 utils

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the marginal utility of the last unit of a consumed is 12 and the marginal utility of the last unit of b consumed is 8. what set of prices for a and b respectively would be consistent with consumer equilibrium

$6 and $4

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suppose you have a limited money income and you are purchasing products a and b whose prices happen to be the same. to maximize your utility you should purchase a and b in such amounts that

their marginal utilities are the same

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diminishing marginal utility explains why

demand curves are downsloping

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what do the income effect, the substitution effect, and diminishing marginal utility have in common?

they all help explain the downsloping demand curve

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the diamond-water paradox arises because

essential goods may be cheap while nonessential goods may be expensive

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which of the following statements is correct

noncash gift-giving create a value loss, but cash gifts do not

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the budget line shows

all possible combinations of two goods that can be purchased, given money income and the prices of the goods

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any combination of goods lying outside of the budget line

is unobtainable, given the consumer's income

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the indifference curve in the above diagram yields juan 100 units of utility. if juan's money income were to increase by 20 percent, the indifference curve would

not be affected.

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at each point on an indifference curve

total utility is the same

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an indifference curve

is downsloping and convex to the origin

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marginal product is

the increase in total output attributable to the employment of one more worker.

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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

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which of the following statements concerning the relationships between total product (tp), average product (ap), and marginal product (mp) is not correct

ap continues to rise so long as tp is rising

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which of the following best expresses the law of diminishing 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.

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refer to the above data. the marginal product of the sixth worker is

15 units of output

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refer to the above data. average product is at a maximum when

two workers are hired

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marginal product:

may initially increase, then diminish, and ultimately become negative

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the first, second, and third workers employed by a firm add 24, 18, and 9 units to total product respectively. therefore, the

marginal product of the third worker is 9.

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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

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if in the short run a firm's total product is increasing, then its

marginal product could be either increasing or decreasing

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the law of diminishing returns results in

a total product curve that eventually increases at a decreasing rate

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the law of diminishing returns describes the

relationship between resource inputs and product outputs in the short run

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which of the following is correct?

marginal product rises faster than average product and also falls faster than average product.

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which of the following is not correct?

where total product is at a maximum, average product is also at a maximum

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in the above diagram curves 1, 2, and 3 represent the

marginal, average, and total product curves respectively

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the above diagram suggests that

when marginal product lies above average product, average product is rising.

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the total output of a firm will be at a maximum where

mp is zero.

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fixed cost is

any cost which does not change when the firm changes its output

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which of the following is most likely to be a fixed cost?

property insurance premiums

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if you operated a small bakery, which of the following would be a variable cost in the short run?

baking supplies (flour, salt, etc.)

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marginal cost is the

change in total cost that results from producing one more unit of output

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for most producing firms

average total costs decline as output is carried to a certain level, and then begin to rise

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average fixed cost

declines continually as output increases

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which of the following is correct as it relates to cost curves

marginal cost intersects average total cost at the latter's minimum point.

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refer to the above diagram. at output level q total variable cost is

0beq.

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marginal cost:

marginal cost, average variable cost, and average total cost would all fall

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if a firm decides to produce no output in the short run, its costs will be:

its fixed costs.

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the short run is characterized by

at least one fixed resource

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the long run is characterized by:

the ability of the firm to change its plant size

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which of the following industries most closely approximates pure competition?

agriculture

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in which of the following industry structures is the entry of new firms the most difficult?

pure monopoly

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a one-firm industry is known as

pure monopoly

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an industry comprised of a very large number of sellers producing a standardized product is known as:

pure monopoly

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an industry comprised of a very large number of sellers producing a standardized product is known as

pure competition

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which of the following statements applies to a purely competitive producer?

it will not advertise its product

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a purely competitive seller is

a "price taker."

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the demand schedule or curve confronted by the individual purely competitive firm is:

perfectly elastic

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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.

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assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis. for a purely competitive firm, total revenue

graphs as a straight, upsloping line.

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assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis. for a purely competitive firm, marginal revenue

is a straight line, parallel to the horizontal axis.

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if a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue:

will also be $5

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price is constant or given to the individual firm selling in a purely competitive market because

each seller supplies a negligible fraction of total supply

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for a purely competitive seller, price equals:

all of these.

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the marginal revenue curve of a purely competitive firm

is horizontal at the market price.

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the demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is ______.

downsloping, perfectly elastic

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a perfectly elastic demand curve implies that the firm

can sell as much output as it chooses at the existing price

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marginal revenue is the:

change in total revenue associated with the sale of one more unit of output.

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firms seek to maximize:

total profit.

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a competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating

marginal revenue and marginal cost

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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

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refer to the above short-run data, total fixed cost for this firm is:

where total revenue exceeds total cost by the maximum amount.

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refer to the above short-run data, total fixed cost for this firm is:

200

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refer to the above short-run data, the profit-maximizing output for this firm is:

320 units

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firm reaches a break-even point (normal profit position) where

total revenue and total cost are equal

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a purely competitive firm's short-run supply curve is:

its marginal cost curve above average variable cost

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long-run competitive equilibrium

results in zero economic profits.

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which of the following statements is correct

economic profits induce firms to enter an industry; losses encourage firms to leave.

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allocative efficiency is achieved when the production of a good occurs where:

p = mc

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the term productive efficiency refers to

the production of a good at the lowest average total cost.

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under pure competition in the long run:

both allocative efficiency and productive efficiency are achieved

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In the long run, under perfect competition, there is

all of the above

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