review of paper

Question 1

economics when should a firm reduce output?

Answer 1

If the firm is producing at a quantity where MC > MR, like 90 or 100 packs

Question 2

economics when should a firm increase output

Answer 2

As long as marginal revenue exceeds marginal cost,

Question 3

In the language of economics, rent is

Answer 3

income over and above what would be necessary to incentivize someone to do the job (or
perform the task) he or she is being paid to do.

Question 4

The highly successful American investor, Warren Buffet, is often concerned about whether or not a firm has
a “moat” around it (what Mr. Elzinga called a “BTE”). Why is a “moat” (or BTE) of economic relevance to
a firm?

Answer 4

It deters new entry, allowing a firm to earn larger economic profits.

Question 5

unionized market

Answer 5

governs the distribution of income between workers and firms and the unemployment rate,

Question 6

sherman antitrust law

Answer 6

The Sherman Antitrust Act of 1890 is a United States antitrust law which prescribes the rule of free competition among those engaged in commerce. It was passed by Congress and is named for Senator John Sherman

Question 7

37. If a monopolist must lower the price on all units in order to sell an additional unit,

Answer 7

. price will always be greater than marginal revenue.

Question 8

. Suppose, as a result of a long-run adjustment in a perfectly competitive industry to a change in demand, price
and output both rose. Therefore, demand must have ________ in this ______ industry

Answer 8

increased; increasing cost.

Question 9

59. Which of the following is not one of the channels through which a labor union in the U.S. may raise wages

Answer 9

c. Promoting free trade between the U.S. and other countries

Question 10

What are the ways that the labour union in the US may raise wages?

Answer 10

d. Restricting immigration of labor into the U.S.
e. Supporting “union shops” as opposed to “right to work” laws
a. Restricting the supply of non-union labor
b. Increasing the demand for union labor

Question 11

In the theory of monopolistic competition

Answer 11

a. the seller picks its optimal output the same way a monopoly would.
b. in long-run equilibrium, economic profits for a seller are zero.
c. entry is relatively easy in such markets.

Question 12

65. What is the relationship between marginal cost and marginal product?

Answer 12

When marginal product increases, marginal cost falls.

Question 13

To say that people make decisions at the margin suggests that

Answer 13

they weigh the additional costs and benefits of various activities before they make
a purchase.

Question 14

. At various points along the production possibilities frontier

Answer 14

the maximum output from available resources is obtained

Question 15

The production possibilities frontier can be used to show all of the following except

Answer 15

the best combination of goods and services for an economy.

Question 16

In a market economy, a surplus of shoes will cause

Answer 16

a decrease in the price of shoes

Question 17

If New York City expects that an increase in bus fares will raise mass transit revenues,
it must think that the demand for bus travel is

Answer 17

c. inelastic.

Question 18

If fixed cost at Q = 100 is $130, then

Answer 18

d. fixed cost at Q = 200 is $130
Fixed cost don’t vary with output

Question 19

Ron Martin advertises stereos on late-night television with the following line: “We
don’t have to worry about high overhead because our volume is so great.” Ron Martin
can make this statement because of his declining

Answer 19

d. average fixed cost.

Question 20

The long-run average cost curve is the locus of

Answer 20

the least-cost segments of the short-run average total cost curves for each output
level

Question 21

Which of the following is true of marginal revenue for a monopolist that charges a
single price?

Answer 21

P > MR, because the monopolist must decrease price on all units sold in order to
sell an additional unit

Question 22

Suppose a single firm supplies all the ceramic windlasses in the U.S. The demand curve
that firm faces is

Answer 22

d. elastic at the profit-maximizing quantity.

Question 23

A monopolist’s short-run supply curve is

Answer 23

d. nonexistent.

Question 24

If the price of air conditioners falls, in the short-run there will be

Answer 24

. an increase in the quantity of air conditioners demanded.

Question 25

You’re scheduling your weekend plans and trying to figure out what to do Friday night.
You have three options: Option 1) staying in your dorm and reading, which you value at
$100, Option 2) going to the basketball game, which you value at $80, and Option 3)
going to a concert, which you value at $50. What is the opportunity cost of each event?

Answer 25

d. Option 1) = $80, Option 2) = $100, Option 3) = $100

Question 26

When a union sets a wage above the market equilibrium, each firm hiring from the union
faces

Answer 26

. a perfectly elastic supply curve for labor.

Question 27

When all of the returns to a resource are in the form of economic rent,

Answer 27

the supply curve for that resource must be vertical.

Question 28

If a perfectly competitive industry is in long-run equilibrium, the price of the product equals the minimum of:

Answer 28

*average total cost.

Question 29

Which of the following statements is true about a downward-sloping demand curve that is a straight line?

Answer 29

*The slope remains the same, but elasticity falls as you move down the demand curve.

Question 30

If the total utility curve is a straight line, the marginal utility curve would be a:

Answer 30

*a flat line with a slope of zero.

Question 31

The U shape of the average total cost curve is because:

Answer 31

*average productivity rises and then falls.

Question 32

If a monopolist engages in perfect price discrimination

Answer 32

b. the demand curve becomes the firm’s marginal revenue curve.

Question 33

Which of the following is correct regarding the labor supply curve?

Answer 33

As the wage rate increases, the income effect can overcome the substitution effect after a certain
wage rate is reached, causing the labor supply curve to “bend backwards.”

Question 34

what determines the price of a stock

Answer 34

The future stream of profits is what determines the price of a stock and the value of a company

Question 35

Semi-strong Form:

Answer 35

All public information about publicly traded corporate stocks will be reflected in their current share prices.