ECON 101 FINAL UDEL BENDER

The market for orthodontic services in most communities is _____ because it offers a large number of similar but not identical options.

monopolistically competitive

If a monopolist produces a quantity that generates MC

can be increased by increasing output

Being open to international trade helps a country foster competition for all the following reasons EXCEPT that there will be:

more bias toward domestic production

if American Airlines purchased all of its competitors to become a monopoly all else equal , price will ________, and output will __________

rise; fall

the demand curve for a monopoly is

above the marginal revenue curve

the output in a market with market power is

inefficient, since the marginal benefit to society of extra output exceeds the marginal cost

marginal revenue is the output effect minus the ________ effect for a given quantity

discount

in contrast to perfect competition, a monopoly

produces less at a higher price

profit-maximizing output

MR=MC

discount effect

to sell one more unit, you have to lower the price on all units sold.

Candice's stand-up paddleboard company will earn profits producing and selling at any output level where the company's:

demand curve is above its average cost curve

David's financial planner tells him that he made a profit of $31,300 running a ballroom dance studio in Sacramento. David's wife, an actuary, claims David lost $31,300 running his ballroom dance studio. This means his wife is claiming that he incurred _____ in _____ costs.

$62,600; implicit opportunity

Suppose a local Home Depot has explicit financial costs of $2 million per year and implicit opportunity costs of $44,000 per year. If the store earned an economic profit of $50,000 last year, its accounting profit was:

$94,000

in the long run, each firm in an industry

earns only enough to cover the opportunity costs of all resources used in production

average cost is

the total cost divided by the quantity produced

Ever since Giselle's company developed its new product ten years ago, Giselle has managed its production with little turnover in workers. During that time, the company's average cost has fallen by 30%, due to the refinement of its production methods, thereby achieving greater efficiency. Other rival companies have not achieved such low costs. The advantage that Giselle's company now has over rivals stems from ____ achieved through ____.

a unique cost advantage; learning by doing

how can price discrimination improve efficiency compared to a situation in which a company must charge a single price?

The company's output is where marginal cost equals the last customers marginal benefit

how is the economic surplus generated by a decision calculated?

It is the total benefits minus total costs arising from the decision

the cost-benefit principle evaluates _________ costs and benefits, and willingness to pay considerations quantify _______ costs and benefits

both monetary and non-monetary; only non-monetary

A friend comes up to you and offers you a free ticket to a professional baseball game that night. You decide to attend the game. The game takes five hours and costs you $25 for transportation. If you had not attended the game, you would have worked at your part-time job for $12 an hour. What is the cost to you of attending the game?

$85

following the rational rule, the maximum economic surplus occurs when

marginal benefits equal marginal costs

diminishing marginal product

the marginal product of an input declines as the quantity of the input increases

diminishing marginal product leads to

rising marginal costs for a seller

the rational rule for sellers says that a seller should sell one more unit of an item if the price is

greater than or equal to the marginal cost

if the price of jet fuel rises the

quantity supplied of jet fuel increases

the _________ is the increase in output that is produced when a business hires an additional worker

marginal product

for normal goods, an increase in income will result in

an increase in the equilibrium price and equilibrium quantity

a movement down the demand curve means

When the price of the commodity falls, the quantity demanded rises

HelloFresh is a service that provides subscribers with recipes and all the necessary ingredients to prepare meals at home, delivered to their door once per week. Holding other things constant, what would happen if the company found a more efficient way to keep food fresh and safe during shipment?

there would be a movement down the demand curve

we expect that price will fall when

quantity supplied is greater than quantity demanded

when there is a shortage of highly skilled workers in a particular region

highly skilled workers can negotiate higher salaries

price elasticity of demand

percentage change in quantity demanded divided by the percentage change in price

income elasticity of demand

% change in quantity demanded / % change in income

if income elasticity of demand is negative

the good is inferior

if income elasticity of demand is positive

the good is a normal good

cross-price elasticity of demand

the percentage change in the quantity demanded of one good divided by the percentage change in the price of another good

firms will choose a grim trigger strategy if they

believe that the firms in the industry will compete with each other for a long time to come.

what advantage might a second-mover gain?

the flexibility to adapt a strategy based on what the first mover did

Connor's Corner Gas and Steven's Super Fuel are the only two providers of gasoline in their small town. Connor summarizes his pricing strategy as, "I'll put a high price on my gas, since that's what Steven is doing. But if he lowers his price, I'll lower mine and keep it there." This is an example of a(n):

grim trigger strategy

____ markets do not necessarily lead to efficient outcomes, whereas ____ markets tend to yield efficient outcomes.

strategic interactions in; competitive

anti-coordination game

when your best response is to take a different (but complementary) action to the other player

coordination game

A type of game in which a Nash equilibrium occurs when each player chooses the same strategy; neither player can do better than matching the other player's strategy

the science that is useful in helping decision makers analyze their options when an individuals best choice may depend on what other people choose, and others peoples best choices may depend on what the individual chooses is, __________.

game theory

The incidence of a tax is

the division of the economic burden of a tax between buyers and sellers

A binding price floor causes

surplus

a binding price ceiling causes

a shortage

producers have an incentive to lower the quality of a good when the government imposes a

binding price ceiling

a price ceiling will have no immediate effect if

its set above the equilibrium price

along a supply curve, a rise in the price of a good will

increase the producer surplus

When the price of the last unit sold equals its marginal cost, a seller will:

earn producer surplus on all units except the last one

Cornell can type reports faster and more accurately than Alice, so Cornell has a(n) _____ in typing reports.

absolute advantage

economists generally believe that a person should specialize in the production of a good or service if

they can produce the product while forgoing fewer alternative products than any other person

As long as people have different ________, everyone has a comparative advantage in something.

opportunity costs

when trade is based on comparative advantage

both trading partners end up better off than when there is no trade

Incentive (economic)

financial rewards provided to people to alter consumption and production patterns in an economy

the marginal social cost of a unit of pollution is

the marginal private cost plus marginal external cost from one extra unit of pollution

marginal external benefit

MEB = MarginalSocialBenefit - MarginalPrivateBenefit

an externality is not

a price change

cap and trade

a method for managing pollution in which a limit is placed on emissions and businesses or countries can buy and sell emissions allowances

framing effect

When a decision is affected by how a choice is described, or framed. You should avoid framing effects altering your own decisions.

What shifts the demand curve?

1. income (inferior/normal goods)

2. preferences (fashion trends+cycles)

3. prices of related goods (subs and complementary)

4. expectations

5. congestion and network effects

6. The type and # of buyers

what shifts the supply curve?

1. input prices

2. productivity and technology

3. prices of related outputs

4. expectations

5. the type and number of sellers

difference between short run and long run for a firm

any cost that was fixed in the short run are variable in the long run

in the long run, whats true about the economic profits of a firm in a perfectly competitive market

zero economic profits

difference between accounting and economic profit

Accounting profit equals total revenues minus explicit costs. Economic profit equals total revenues minus both explicit and implicit costs. Assuming that implicit costs are positive, accounting profit is greater than economic profit.

marginal cost intersects the average total cost

the minimum of the average total cost curve