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Econ Final
Fall 2022 Final
| Question | Answer |
|---|---|
| Economic models are built with: | assumptions |
| When a market is in equilibrium, | there is no shortage and no surplus at the equilibrium price. |
| In a production possibilities frontier graph, the cost of producing more units of a good is measured by the | amount of the other good or service that must be given up (foregone). |
| The fact that there is an increasing opportunity cost when moving on the PPF means that | to increase the production of one product requires larger and larger sacrifices of the other good. |
| Marginal cost is | equal to the opportunity cost of producing one more unit of a good or service |
| Consumer surplus equals | willingness to pay minus price, summed over the quantity consumed. |
| Suppose that the demand curve for desktop computers shifts rightward and at the same time the supply curve shifts leftward. Which of the following could have caused these shifts? | desktop computers are a normal good and incomes increased, while the labor costs of producing personal computers increased |
| Which of the following is NOT one of the factors that could shift the market supply of a product? | number of consumers |
| Economics is best defined as the study of how people, businesses, governments, and societies | make choices to cope with scarcity. |
| A price floor designates: | a minimum price that firms may charge customers |
| Suppose the government imposes a 20-cent tax on the sellers of iced tea. Which of the following is not correct? The tax would: | raise the equilibrium price by 20 cents. |
| Which of the following increases the supply of gasoline? | a decrease in the price of a resource used to produce gasoline, such as crude oil |
| Which of the following is the best way to describe a shortage? | Price is at a point where quantity demanded exceeds quantity supplied. |
| Generally: | there is a tradeoff between fairness and efficiency. |
| Suppose a tax is imposed on the sellers of fast-food hamburgers. The burden of the tax will fall: | On both buyers and sellers, but not necessarily exactly equally |
| Which of the following was NOT one of the principles discussed in this class? | You have to spend money to make money |
| Which of the following is likely to have the least price elastic demand/lowest price elasticity? | Food |
| Which of the following is likely to create the most deadweight loss (Assume the amount of revenue created by each tax would be the same)? | tax on t-bone steaks |
| Which of the following causes a surplus of a good? | a binding price floor |
| Perfectly inelastic demand means that consumers | will buy a certain quantity, regardless of price. |
| All of the following typically will generally cause inefficiency, except: | competition |
| According to estimates by several economists, purchases on the Internet are highly sensitive to price changes. If this is true, then if a tax is imposed on purchases on the Internet, which of the following is true? | producers will face more of the burden of the tax |
| Suppose the marginal consumer is willing to pay $5 for a slice of pizza and the marginal producer is willing to sell a slice of pizza is $3. In order to reach the efficient number of slices of pizza: | more slices of pizza should be produced |
| Taco Bell lowers the price of its tacos. The price elasticity of demand for Taco Bell tacos is 5. What happens to Taco Bell’s total revenue? | it increases |
| A profit maximizing firm in the above graph | earns zero economic profit |
| A firm’s profit is: | equal to total revenue minus total cost |
| If we compare a perfectly competitive market to a single-price monopoly with the same costs, the monopoly sells | a smaller quantity at a higher price. |
| Which of the following is true about marginal revenue for a firm? | marginal revenue is equal to market price, in perfect competition |
| Diminishing marginal returns happens because: | at least one input (capital) is fixed in the short-run |
| In the short-run: | at least one cost is fixed, and cannot be changed |
| if a firm is earning positive economic profit then it must be operating at a quantity where: | P>ATC |
| f a perfectly competitive firm is operating at a quantity where MR>MC then: | it should increase its quantity |
| Which of the following is the best example of perfectly competitive markets? | agricultural markets (ex: corn) |
| Which of the following is a difference between the actions of a perfectly competitive firm and those of a monopoly? | A competitive firm can only choose output while a monopoly can choose output and price. |
| Which of the following market structures best describes OPEC? | oligopoly |
| Which of the following is NOT as assumption of perfect competition, as discussed in class? | zero economic profit |
| he four-firm concentration ratio measures competition using | market shares of firms |
| A key feature of oligopoly is | barriers to entry |
| At profit maximization, the above firm is earning: | zero economic profit. |
| n which firm structure is price regulation common? | natural monopoly |
| Which of the following is true about monopoly? | There is a cost advantage to only having one firm in natural monopoly. |
| Suppose the demand for potato chips increases. What happens to the producer surplus in the market for potato chips? | it increases |
| Which of the following is NOT correct about monopolistic competition? | In the long-run equilibrium, firms produce at the minimum of the average total cost. |
| Which of the following is NOT correct about a perfectly competitive market in equilibrium? | consumer surplus will be exactly equal to producer surplus. |
| Prices rise when the government increases the quantity of money? | Positive – describes a relationship, could use data to confirm or refute. |
| The government should print less money. | Normative – this is a value judgment, cannot be confirmed or refuted. |
| A tax cut is needed to stimulate the economy. | Normative – another value judgment. |
| An increase in the price of burritos will cause an increase in consumer demand for music downloads. | Positive – describes a relationship. |
| Principle #1: People face tradeoffs | All decisions involve trade offs. Here are some examples: |
| Principle #2: The cost of something is what you give up to get it | Making decisions requires comparing the costs and benefits of alternative choices. The opportunity cost of any item is whatever must be given up to obtain it. This is the relevant cost for decision making |
| Principle #3: Rational people think at the margin | Rational people: do the best they can to achieve their objectives. They make decisions by evaluating costs and benefits of marginal changes, incremental adjustments to an existing plan. |
| Principle #4: People respond to incentives | Incentive: something that induces a person to act, i.e. the prospect of a reward or punishment. Rational people respond to incentives. |
| Principle #5: Trade can make everyone better off | Rather than being self-sufficient, people can specialize in producing one good or service and exchange it for other goods. |
| Principle #6: Markets are usually a good way to organize economic activity | Market: a group of buyers and sellers (need not be in a single location) |
Created by:
mfaithking4
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