SS 4. Economics: Microeconomic Analysis Flashcards
In indifference curve analysis, when the price of one of the goods under consideration decreases, then the:
slope of the budget-constraint line will change.
Assume economic activity is accelerating, inflation is increasing modestly, and unemployment is low. The economy is most likely in which phase of the business cycle?
Late expansion
Under conditions of perfect competition, in the long run companies will most likely earn:
normal profit and zero economic profit.
‘The division of tax between buyers and sellers’ is a definition of:
Tax incidence
Which curve is the same as the short-run supply curve for a firm in a perfectly competitive market?
The marginal cost curve
The excess burden that results from an excise tax is also called:
A deadweight loss
The firm elasticity in a perfectly competitive market is:
Infinite
Substitute goods have _______ cross price elasticity of demand
Positive
Another name for a competitive price searcher market is:
Monopolistic competition
A firm receives a producer surplus when:
Market price exceeds marginal cost
According to the concept of money neutrality, over the long term, the money supply is least likely to affect:
the real rate of interest.
Within the framework of the purely competitive model, the seller will always produce the quantity of output that:
maximises the firm’s profit (or minimizes its loss)
How is price decided in monopolistic competition?
On the basis of the quantity produced which is derived at a point where MC=MR.
When demand is elastic, a lower price will:
always increase total revenue
In a decreasing-cost industry, the long-run supply curve will most likely be:
negatively sloped.
A decrease in the price of a good will most likely be reflected in a:
downward movement along the supply curve.
Complementary goods have _______ cross price elasticity of demand
Negative
Suppose that inflation increases due to higher capacity utilization. Such inflation is best described as:
Demand-pull inflation
A monopolistically competitive firm maximises profit by producing where:
MR = MC
What is the difference between Scarcity and Shortage?
Scarcity is always present, but a shortage would be eliminated if the price of the product were permitted to rise.
Introducing regulation to a natural monopoly should:
Increase quantity sold and reduce the price
Assume that a central bank has decided to lower interest rates in the economy. To carry out this policy, the central bank will most likely:
increase required reserve requirements.
In implementing monetary policy, central banks have three primary tools available to them: open market operations, setting the official policy rate, and reserve requirements. When the central bank purchases securities (open market operations), it increases the reserves held by private sector banks. These increased reserves lead to a reduction in interest rates on money market securities and, ultimately, to a reduction in other interest rates in the economy
A four-firm concentration ratio that exceeds __% is highly concentrated and dominated by a few firms in an oligopoly
60%
For a country to gain from trade, it must have:
a comparative advantage.
The long-run supply curve for a product differs from the short-run supply curve in that the long-run supply curve is usually:
more elastic
With respect to the relationship between output and costs in the short run, a decline in the marginal cost per unit most likely occurs at what level of production?
Low output
Marginal cost per unit, in the short run, decreases at low levels of output as a result of economies from greater specialization. At higher levels of output, however, it eventually increases because of the law of diminishing returns.
Name 4 characteristics of Monopolistic Competition:
A large number of firms
Each firm produces a differentiated product
Firms are free to enter and exit
Firms compete on quality, price and marketing
With respect to the relationship between output and costs in the short run, a decline in the marginal cost per unit occurs at what level of production?
Low output
N-firm concentration ratio is:
Used to identify the market structure of an industry
Under imperfect competition, maximum profit is best described as occurring at the output level at which:
Maximum profit occurs at the output level at which the difference between total revenue and total costs is greatest.
Regarding the Herfindahl-Hirschmann Index, the U.S. government considers values above ____ as moderately uncompetitive.
1,800
sum of the squares of the market shares for the largest firms in the industry
A firm in a perfectly competitive environment has its total costs equal to total revenue and marginal costs greater than marginal revenue. Given this, the firm should:
decrease its level of production to enter profit territory.
From the standpoint of economic efficiency, an unregulated private economy tends to allocate:
too many resources into producing goods which generate substantial external costs.
Collusion among oligopolistic firms is more likely when demand is:
Stable
