Final Micro Econ Exam

In maximizing profit a firm will always produce that output where total revenues are at a maximum

After all long-run adjustments have been completed, a firm in a competitive industry will produce that level of output where average total cost is at a minimum.

A competitive firm will produce in the short run so long as its price exceeds its average fixed cost

Price and marginal revenue are identical for an individual purely competitive seller

Because the equilibrium position of a purely competitive seller entails an equality of price and marginal costs, competition produces up to an efficient allocation of economic resources

The total revenue curve of competitive seller graphs as a straight, up-sloping line.

Marginal revenue is the addition to total revenue resulting from the sale of one more unit of output.

In the long run a pure monopolist must produce at that output where average total cost is at a minimum

In the short run a pure monopolist will charge the highest price the market will bear for its product.

Pure monopolists always earn economic profits

If the XYZ Company can sell 4 units per week at $10 per unit and 5 units per week at $9 per unit, the marginal revenue of the fifth unit is $5

Because of the ability to influence price, a pure monopolist can increase price and increase volume of sales simultaneously

In the long run monopolistically competitive firms make normal profits because they are forced to operate at the minimum point on their average total cost curve.

The monopolistically competitive seller maximizes profits by equating price and marginal cost

The demand curve of a monopolistically competitive producer is less elastic than that of a purely competitive producer.

The economic profits earned by monopolistically competitive sellers are zero in the long run.

If three or four homogeneous oligopolists collude, the resulting price and production outcomes will be similar to those of pure monopoly.

Generally speaking, the larger the number of firms in an ologpolistic industry, the more difficult it is for those firms to collude.

In a purely competitive industry competition centers more on advertising and sales promotion than price

Although individual purely competitive firms can influence the price of their product, these firms as a group cannot influence market price.

The demand curve for a purely competitive industry is perfectly elastic, but the demand curves faced by individual firms in such an industry are downsloping.

Marginal cost is a measure of the alternative goods which society forgoes in using resources to produce an additional unit of some specific product.

Because of their large-scale level of production, pure monopolists overallocate resources to their industry by producing beyond the P=MC output.

Price discrimination occurs every time a firm sells a good for two different prices.

Price discrimination is illegal in the United States under antitrust regulations.

The marginal revenue product curve of a purely competitive seller declines solely because of the law of diminishing returns.

It will be profitable for a firm to hire additional units of any resource up to the point at which its MRP is equal to its MRC.

The demand for a resource depends on its productivity and the market value of the product it is producing

Elasticity of resources demand is measured by dividing "percentage change in resource price" by "percentage change in resource quantity."

A monopolistic employer may sell its product in a competitive market

Critics of the minimum wage contend that higher minimums cause employers to move up their labor demand curves, reducing employment of low-wage workers.

Human capital investment refers to spending on education and worker training.

The supply of loanable funds is perfectly elastic

Demand is active and supply the passive determinant of land rent

Cost-benefit analysis is frequently difficult to apply because it is difficult to quantify the full benefits of a public good or service.

An improvement in the technology of pollution control is likely to increase society's optimal amount of pollution abatement.

The optimal (economically-efficient) level of air pollution is zero emissions.

The benefits-received principal of taxation is used to support corporate and personal income taxes

The benefits-received principle of taxation supports the case for highly progressive taxation

Sales taxes are proportional in relation to income because the same tax rate applies regardless of the size of purchase

If you pay $1,000 tax on $10,000 of taxable income and a $3,000 tax on a taxable income of $16,000, the tax is progressive.

A highly progressive tax takes relatively more from the rich than it does from the poor

Majority voting assures that government will provide a public good if it yields total benefits in excess of total costs

The regulation of natural monopolies has been criticized because it creates a tendency for regulated firms to use too much labor and too little capital in the production process

The top 20 percent of US income earners receive nearly 80% of total US income.

The closer the Lorenz curve is to the diagonal, the greater is the degree of income inequality

The US poverty rate was considerably lower in 2004 than in 1960

Technological progress in the health care industry has typically reduced costs and increased supply

Labor market discrimination increases the size of the nation's Gross Domestic Product.

Taxes and/or mandatory fees can solve the free rider problem.

in the short run a competitive firm will always choose to shut down if product price is less than the lowest attainable average total cost

monopolistically competitive sellers produce efficiently because they obtain only normal profits in the long run

mutual interdependence means that oligopolistic producers rely on price competition in determining their shares of the total market for their product

An economic model is an ideal or utopian type of economy that society should strive to obtain through economic policy

Because economic generalizations are simplifications from reality, they are impractical and useless.

Normative statements are expressions of facts

Positive statements are expressions of value judgment

Marginal analysis means that decision-makers compare the extra benefits with the extra costs of a specific choice

Certain inherently desirable products such as education and health care should be produced so long as resources are available

Rational individuals may make different choices because their preferences and circumstances differ

Choices entail marginal costs because resources are scarce

The production possibilities curve shows various combinations of two products that an economy can produce when achieving full employment

Products and services are scarce because resources are scarce.

An economy cannot produce at a point outside of its production possibilities curve because human economic wants are insatiable.

Although sleeping in on a work day or school day has an opportunity cost, sleeping late on the weekend does not

Surpluses drive market prices up; shortages drive them down

If demand increases and supply simultaneously decreases, equilibrium price will rise.

An increase in quantity supplied might be caused by an increase in production costs

Supply refers to the amount of a product that a producer will offer in the market at some particular price

An increase in demand accompanied by an increase in supply will increase the equilibrium quantity but the effect on equilibrium price will be indeterminate

A government subsidy per unit of output increases supply

Consumers buy more of normal goods as their incomes rise

Toothpaste and toothbrushes are substitute goods

A government tax per unit of output reduces supply

If market demand increases and market supply decreases, the change in equilibrium price is unpredictable without first the exact magnitudes of the demand and supply changes

A decrease in supply of X increases the equilibrium price of X, which reduces the demand for X and automatically returns the price of X to its initial level.

A price floor in a competitive market will result in persistent shortages of a product

A ceiling price in a competitive market will result in persistent surpluses of a product

The smaller the number of good substitutes for a product, the greater will be the price elasticity of demand for it

Generally speaking, the demand for luxury goods is more price elastic than is the demand for necessities

If price and total revenue are directly related, demand is inelastic

If price changes and total revenue changes in the opposite direction, demand is relatively elastic

If the demand for wheat is highly price inelastic, and extraordinarily large crop may reduce farm incomes

The real opportunity cost of producing product X is the amounts of products Y, Z, and so forth, that might have been produced if resources had not been used to produce X

The short run is a period of time during which all costs are fixed costs

Variable costs are costs that vary directly with output

The law of diminishing returns explains why the long-run average total cost curve is U-shaped

Diseconomies of scale stem primarily from the difficulties in managing and coordinating a large-scale business enterprise

At zero units of output a firm's variable costs are zero

Average fixed costs diminish continuously as output increases

The law of diminishing returns explains diseconomies of scale

The law of diminishing returns explains why short-run marginal cost curves are upward sloping

Economic profit is found by subtracting accounting costs from total revenue

if economics theories are solidly based on relevant facts, then appropriate economic policy becomes obvious and uncontroversial

the rationing function of prices refers to the fact that government must distribute any surplus goods that may be left in a competitive market

a linear demand curve has a constant elasticity over the full range of the curve

if the marginal cost curve lies below the average variable cost curve, the average variable cost curve must be falling

a firms economic profit is usually higher than its accounting costs from total revenue

in economics a firms earns a normal profit when its total revenue equals its total economics

in the long run there are no fixed costs

used clothing is a good example of an inferior good

if 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 then a price of A of $6 and a price of B of $4 would be consistent with consumer equilibrium

price elasticity of demand measures the slope of the demand curve

marginal product is the total product divided by the number of workers employed

BMW constructing a new assembly plant in South Carolina is an example of a long run adjustment

when a firm decides to produce no output in the short run its costs will be zero

given a downsloping demand curve and upsloping supply curve for a product, an increase in the price of a substitute good will increase equilibrium price and quantity

a local bakery hiring two additional workers is an example of a short run adjustment

income and substitution effects account for an upward sloping supply curve