Microeconomic Clep

Scarcity forces choices to be decided about the use of

Land, Labor, and Capital

Zero economic profit in the long run applies only to

Pure competetion markets

The production possibilities curve main purpose4 is to

Make choices. A ppc shows the possible allocation of resources allowing choices to be made in how to use them.

The price for a pizza goes up from 10 dollars to 12 dollars and sales for pizzas decrease. Because the sales for pizza decrease the demand for soda also decreases. If the demand for soda decreases by 12% what is the cross pric elasticity of demand

-0.6

The author of the theory of comparative advantage is

David Ricardo

Which of the following is the correct formula for cross price elasticity of demand between two products

Percent change in the demand for product 2/ Percent change in the price of product 1

Who or what decides how an economy is run in a command economy(communist)

The central government

A cartel would most likely form in a market that is a

Oligopoly

An essential work incentive to the very poor of a given society is

Wage subsidy

Which of the follow is NOT an example of a price ceiling

Price ceiling must be set by the government. setting minimum wage= price floor not price ceiling.

When a surplus exists in the market it means

The price is above the equilibrium.

Which type of market is in a state of Nash equilibrium

Oligopoly (make deicisions based off what others make)/react to each other decisions

The law of supply states that

As prices increase demands decrease

An improvement in production technology for a certain good leads to

An increase in the supply of the good

Taxes cause the supply curve to shift

Left because they increase the price

Which is not one of the six determinants of demand

Consumer profile

Which of the following does not shift the supply curve right or left

Demand.

Over time ATC will

Decrease quickly then increase slowly

What can a government use to create a shortage of a certain good or servce

Price ceiling

In a pure competetion market the companies are called

Price takers

Demand curve slopes

Downward

A pet store doubles the price of dogs. If dogs have a price elasticity of supply equal to -.25 how should they change their supply

Cut it in half.

If the elasticity of deamnd is greater than 1, then a 5% reduction in price will result in

an increase of more than 5% in the quantity demanded

Two items have a negative cross price elasticity of demand. They are

Complements

The industry demand curve has

Less slope than individual demand curves

What does elasticity measure?

Responsiveness of price

Price elasticity is unaffected by which of the following?

Market equilibrium price

Characteristics of public goods

Easily obtainable, free, essentially unlimited, equally availible.

If the result to the cross elasticity equation is a negative number the goods are

complementary

An increased demand for pizza prompts a pizza company to buy a what field so they can get more crust this would happen in an

factor market

An improvment in production technology for a certain good leads to

An increase in supply of the good

Which of the following is not a characteristic of a monopolistic competetion

All companies coordinatie prices for mutual benefits

Between 1980 and 1990 which of the following countries grew the most rapidly

Japan

Which type of market is the standadrd to which markets are compared

Pure competetion

Unemployment is prevalent during a

Depression

Greshams law says that

Bad money drives out the good

In order to be effective a price floor must be

Higher than market equilibrium

What is the most important characteristic of perfect competetion

Price is set by the industry supply and demand

Incomes are determined in the markets primarily for

Factors of production

Subsidies cause the demand curve to shift

right

During the past decade the federal government has

Run a deficity every year

In the long run the average variable cost will

Decrease then increase

The law of diminishing marginal utility tells us that marginal utility

May rise at first but will eventually fall

What is not a characteristic of perfect competetion markets

Several large companies in competitions

The characteristic of fixed costs are

they are fixed only in the short run

BMWs have a cross price elasticity of 2 they are

Normal because normal goods have a positive corss price elasticity greater than one

An industry under perfect competition has

So many buyers and sellers none influence prices

To be effective a perfectly competitive market needs

all benefits of the good to go to its consumers

Which type of market is characterized by the dominance of a few large companies

Oligopoly

A monopoly has

Allocative and technical inefficiency

Which of the following is not a characteristic of private goods

free

Perfect differentiation if the main characteristic of

Monopolistic competition

A person interviews with a company knwoing they they have 100 other applicants this type of market is a

Labor market

If a government prevents a natural monopoly formation it may result in

Curbing benefits of economies of scale

The practice of keeping works who are not needed is referred to as

Feather bedding

Which of the following sets of products most likely has a positive corss price elasticity demand

Energy drinks and soda

In a lorenze curve if the bow is larger it denotes

Inequality of income

To be effective price ceiling must be

lower than market equililibrium otherwise it would have an affect

A public good

Benefits all

What is it called when two prisoners are seperated for questioning and offered deals withr educed sentences

Prisoners dilemma

When a company producers a similar product as a competitor it is called

Monopolistic competetition

The center or middle number is a distribution

Median

When there is only one seller of a product the market is a

monopoly

Scarcity occurs when

Demand is greater than supply

The interest rate that the federal reserve charges to banks is called

Discount rate

Which of the following benefit from inflation

Debtors

Subsidies cause the supply curve to shift

right

A market where there are few companies that fiercly compete for market shar is called

Oligopoly

In the long run the average fixed cost will

Decrease proportional to production

A formal sometimes written agreement between companies or individuals to cap output and prices to control the market

cartel

if two products have a cross price elasticity of .1 they are considered

inelastic.

A companys profit is _________ when marginal revenue equals marginal cost

Perfectly competitive

Which of the following is a elasticity range on the demand curve

Unitary elastic

Taxes cause the demand curve to shift

Left

Minimum wage is an example of

price floor

A decrease in prive levels is called

deflation

When quantity supply exceeds quantity deamnd you have

excess demand

_______ is total cost divideed by quantity

Average total cost

What is the long run economic profit for a pure competition market

Zero