First Semester Exam Flashcards
When one decision is made, the next best alternative not selected is called
Opportunity cost
The value of the best alternative forgone when a decision is made defines the concept of
Opportunity cost
If the country is currently producing at point c, it can produce more computers by doing which of the following
Moving to point d
How might point e be attained?
If improvements in technology occurred in either the computer sector or the farming sector
The PPC of the country would be most likely to shift to the right if the country were producing at which of the following points?
Point d
According to the theory of comparative advantage, a good should be produced where
It’s opportunity costs are least
“If you want to have anything done correctly, you have to do it yourself.” This quote violates the principle of which of the following economic concepts?
Comparative advantage
Economics is best defined by which of the following?
The science of scarcity
If hotdogs are an inferior good, an increase in income will result in
A decrease in the demand for hotdogs
An increase in the price of gasoline will cause the demand curve for tires to shift in which direction?
To the left, because gasoline and tires are compliments
On the graph above, what area represents consumer surplus when the price is $10?
C
On the graph above, what area represents producer surplus when the price is $10?
B
Producer surplus is the
Amount the seller is paid less the cost of production
Which of the following will occur if a legal price floor is placed on a good below its free market equilibrium?
The equilibrium price will ration the good
Assume that coal is a normal good. If the price of coal increases and the quantity sold increases, which of the following is consistent with these observations?
The price of oil increased, oil and coal being substitutes
Which of the following will not cause the demand curve for Nike shoes to shift?
A decrease in the price of Nike shoes
Economic costs can be defined as
Compensations that must be received by resource owners to insure their continued supply
To the economist total cost includes
Explicit and implicit costs, including normal profit
Implicit costs are
Non expenditure costs
Explicit costs are
A money payment made for resources not owned by firm
The long run is characterized by
The ability of a firm to change its plant size
Marginal product is
The increase in total output attributable to the employment of one more worker
Refer to the data above. Diminishing marginal returns becomes evident with the addition of the
3rd worker
Refer to the data above. The marginal product of the 6th worker is
15 units of output
The basic characteristic of the short run is that
The firm doesn’t have sufficient time to change the size of its plant
At output level Q, total variable cost is
0BEQ
At output level Q, total fixed cost is
BCDE
At output level Q, total cost is
0BEQ plus BCDE
At output level Q, average fixed cost
Is measured by both QF and ED
The crucial problem of economics is
Allocating scarce productive resources to satisfy wants
At output level Q
Marginal product is falling
Economists would describe the us automotive industry as
An oligopoly
Which of the following industries most closely approximates pure competition?
Agriculture
In which of the following industry structures is the entry of new firms the most difficult?
Pure monopoly
An industry comprised of 40 firms, none of which has more than 3% of the market for a differentiated product is an example of
Monopolistic competition
An industry comprised of a very large number of sellers producing a standardized product is known as
Pure competition
An industry comprised of a small number of firms, each of which considers the potential reactions of its rivals in making price out decisions is called
Oligopoly
A purely competitive seller is
A price taker
The firm will earn a normal profit of its product price is
P3
The firm will realize an economic profit if it’s product price is
P4
The firm will shit down at any price less than
P1
The lowest point on a purely competitive firm’s short run supply curve corresponds to
The min point on its ATC curve
Pure monopoly means
A single firm producing a product for which there are no close subs
A purely monopolistic industry
Earns only a normal profit in the LR
The monopoly price will be
C
The monopoly output will be
F
The supply curve for a monopolist
Doesn’t exist because prices aren’t “given” to a monopolist
The game theory
Is the analysis of how people (or firms) behave in strategic situations
The herfindahl index for a pure monopolistic firm is
10,000
If both firms follow a high price policy
Each will realize a $20 million profit
If beta commits to a high price policy, alpha will gain the largest profits by
Adopting a low price policy
With independent pricing the outcome of this duopoly will toward to cell
D
If alpha and beta engage in collusion, the outcome of this game will be at cell
A
The term oligopoly indicates
A few firms producing either a differentiated or standardized product
OPEC provides an example of
An international cartel
A profit maximizing firm employs resources to the point where
MRP=MRC
MRC is
The increase in total resource cost associated with the hire of one more unit of the resource
Real wages in the US are
Relatively high, but not as high as in some other industrial nations
In monopsony
The wage rate paid by the employer varies directly with the number of workers employed
Bilateral monopsony occurs when
A monopolistic employer bargains with an inclusive Union
A monopsonistic labor market is represented by figure
3
The case of bilateral monopoly is represented by figure
5
The economic impact of occupational licensing can best be demonstrated through figure
1
Inclusive unionism is practiced mostly by
Industrial unions
Occupational licensing can be best understood in terms of
The exclusive unionism model
The tactics of exclusive unionism are portrayed in figure
1
