Microeconomics uark final

A(n) ________ is a group of buyers and sellers who are trading goods and/or services.

market

Which of the following statements correctly describes a competitive market?

The market price is determined by the interaction of demand and supply.

The quantity demanded of a good is:

. the amount of a good that buyers are willing to purchase at a given market price

Which of the following statements correctly describes perfectly competitive market equilibrium?

Any deviation from equilibrium is automatically restored.

Which of the following could explain why there was a stampede at the Richmond International Raceway where 1,000 laptops were being sold at $50 each?

The quantity of laptops demanded at $50 was higher than the quantity supplied.

Which of the following is likely to shift the market demand curve for school textbooks to the right?

An increase in the enrollment rates in high schools

The law of diminishing marginal benefit states that:

the willingness to pay for an additional unit declines as you consume more of a good

Which of the following factors is expected to cause the demand curve for coffee to shift to the right?

A higher tax on the sale of tea, a substitute for coffee

Which of the following examples best describes the law of supply?

When the market price of pens increased, sellers started supplying more pens.

Willingness to accept is:

the lowest price that a producer is willing to receive to sell an extra unit of a good.

A surplus occurs in a market when:

price is higher than the equilibrium price.

Which of the following statements is true?

Tastes and preferences of a consumer determine the satisfaction she receives from consumption.

An optimizing consumer makes her purchase decisions based on:

benefits per dollar spent at the margin

Assume that a consumer can spend $20 on two goods-pens and pencils. If the price of one pen is $5 and the price of one pencil is $2, which of the following combinations of the two goods represents a point on the consumers budget constraint?

2 pens and 5 pencils

If a good has a price elasticity of demand of -3, it implies that:

if the price of the good increases by 1%, the quantity demanded of the good will decrease by 3%.

The set of all possible bundles of goods and services that can be purchased with a consumer's income is referred to as the:

budget set.

Which of the following is the formula to calculate arc elasticity of demand?

Arc elasticity of demand = [(Q2 - Q1) / (Q2+ Q1)/2] / [(P2 - P1) / (P2 + P1)/2]

In a competitive market, there are a ________ number of buyers and a ________ number of sellers.

large; large

Which of the following statements is true?

In the long run, a firm can vary all its inputs.

________ are costs that, once committed, can never be recovered and should not affect current and future production costs.

Sunk costs

A ________ is a payment or a tax break used as an incentive for an agent to complete an activity

subsidy

Producer surplus is the:

difference between a seller's reservation value and the price he finally receives.

If prices are held below the equilibrium price:

there exists a shortage in the market

The total surplus in a market is represented by:

the area between the demand and supply curves and the price axis

. ________ is concerned with the distribution of resources across society

Equity

The decrease in social surplus from a market distortion is referred to as:

deadweight loss.

Social surplus is:

the sum of consumer surplus and producer surplus.

Which of the following statements is true? long one

If the domestic price of a good in a country is lower than the world price, the country will become an exporter of the good.

The ability of an individual, firm, or country to produce a certain good at a lower opportunity cost than other producers is referred to as:

comparative advantage.

A few decades ago, there were hardly any Subway restaurants in India. Now, they are present in almost every big city. This is an outcome of:

globalization.

Which of the following can be a source of comparative advantage?

Resources that are available

Which of the following occurs when an economic activity has a spillover benefit on third parties not engaged in the activity?

A positive externality

The Coase Theorem states that ________.

negotiation between economic agents leads to an efficient allocation of resources

A beach is ________ in consumption.

non-excludable but rival

If positive externalities are present in a free market, ________ at any output level.

the marginal social benefit of production exceeds marginal private benefit

A view of a spectacular sunset on a beach is ________.

a non-rival good

In a regressive tax system, ________.

low income households pay a higher percentage of their income as taxes

The supply of milk in Nexus City is perfectly elastic. If a tax is imposed on each liter of milk sold, ________.

the burden of the tax will fall entirely on the buyers

If a tax is imposed on each unit of a good purchased, ________.

the demand curve shifts to the left

. The second largest component of the federal government revenues is receipts from ________.

social insurance tax

_______ taxes are paid by a buyer as a percentage of the market price of an item.

Sales

The demand curve for pizza in Foodieland is vertical. If a tax is imposed on each pizza bought, ________.

the burden of the tax will fall entirely on the buyers

Property taxes in the U.S. are ________.

regressive

The tax incidence on buyers is higher if ________.

the elasticity of the market supply curve is higher than the elasticity of the market demand curve

Which of the following accounts for the largest portion of federal government spending?

National defense

A price-maker is a firm:

that has the power to affect the price of the product it sells.

A ________ is the privilege granted to an individual or company by the government, which gives them the sole right to produce and sell a good.

patent

Which of the following market structures provides socially efficient outcomes?

Perfect competition

Compared to a firm under perfect competition, a monopolist:

charges more and produces less.

Which of the following is a feature of an oligopoly market?

Each firm's action affects the decisions of its rival.

The market outcome in a duopoly with homogeneous product is similar to that in ________.

a perfectly competitive market

Which of the following markets is likely to be perfectly competitive?

The market for wheat

The quantity produced in a monopolistically competitive market is ________ than the quantity produced in a perfectly competitive market, and the price charged in a monopolistically competitive market is ________ than the price charged in a perfectly competitive market.

lower; higher

If L and M are complementary goods, a decrease in the price of L will result in:

an increase in the sales of M.

Other things equal, which of the following might shift the supply curve for gasoline to the right?

the discovery of vast new oil reserves in Montana

Suppose that both the equilibrium price and quantity of tofu rise. The simplest consistent explanation for these observations is

an increase in demand for tofu with no change in supply.

Which of the following is characteristic of the demand for a commodity that is inelastic?

The elasticity coefficient is less than one.

If elasticity of demand is 3 and the price is increased by 10 percent, then the quantity demanded will:

increase by 30 percent

A perfectly competitive firm will operate and incur an economic loss in the short run (not shutdown) if:

the loss is smaller than its total fixed costs.

Relative to a single-price monopolist with the same cost and demand, a perfectly competitive industry produces:

more output and has a lower price.

A pure monopolist is selling 6 units at a price of $12. If the marginal revenue of the seventh unit is $5, then:

price of the seventh unit is $11.

If a country can produce a product using fewer total resources than another, you know the country has _______________________ in producing the product.

an absolute advantage.