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Microeconomics Review
Microeconomics Review
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#bicemicro #microeconomics
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Answers
1
In a highly competitive market with many sellers offering the same product for sale,
sellers usually collude to reduce output and raise prices.
all of these answer are correct.
each seller has substantial market power.
the price is determined by the interaction of supply and demand.
2
The minimum wage is an example of a price floor in the market for low skilled labor
and creates a surplus of labor in that market
and increases employment and earnings of low skilled workers
and creates a shortage of labor in that market
and is responsible for most of the unemployment in the U.S.
3
If the demand for a good increase, the equilibrium
quantity decreases and the equilibrium price increases.
quantity and price both increase.
quantity increases and the equilibrium price decreases.
quantity and price both decrease.
4
If the supply of a good decreases, then the price is likely to
rise and then fall in a wave-like pattern.
increase
decrease.
stay the same.
5
Please identify: "it is non-rival and non-excludable"
private good
common resource
club good
public good
6
Everything else constant, an increase in the supply of gadgets will
increase the demand for gadgets.
result in a higher equilibrium price for gadgets.
result in a lower equilibrium price for gadgets.
reduce the quantity of gadgets bought and sold.
7
The
equilibrium condition
in the supply and demand model is
consumer surplus equals producer surplus.
price equals marginal revenue.
price equals marginal cost.
quantity demanded equals quantity supplied.
8
At a price higher than the equilibrium price,
the mpemba effect occurs.
the quantity supplied is greater than the quantity demanded.
the muted correspondence is revealed.
the quantity demanded is greater than the quantity supplied.
9
A schedule that lists the amount that buyers are willing and able to buy at every price
incidence
quantity demanded
demand
shopping list
10
If the government subsidizes the production of a good, then
the quantity bought and sold does not change.
the quantity bought and sold tends to rise.
the quantity bought and sold tends to fall.
11
In the model of monopoly, the marginal revenue that the firm earns from selling one more unit
is iess than the price that the firm charges.
is the same as the price that the firm charges.
increases as the firm sells more.
is more than the price that the firm charges.
12
If the price elasticity of demand for Dr. Pepper soda is -3.0, then the price elasticity
of demand for sodas in general might be -1.5.
of supply for Dr. Pepper probably is 3.0.
of demand for sodas in general might be - 6.
of demand for Dr. Pepper is inelastic.
13
A price ceiling that is lower than the equilibrium price will result in
lines or queues.
all of the above.
the development of black markets.
shortages.
14
If the
price elasticity of demand
for widgets is -0.5, then a 10% increase in the price
will lower the quantity demanded by 5 percent.
will increase the quantity demanded by 5 percent.
will increase the quantity demanded by 10 percent.
will lower the quantity demanded by 10 percent.
15
Private parties can negotiate remedies for apparent externalities when
the market equilibrium already is efficient.
transactions costs are low and property rights are assigned.
pigs can fly.
the government sets appropriate taxes and grants subsidies.
16
As the size of a tax increases, the deadweight loss created by the tax increases.
False
True
17
If there is an external cost associated with the use of fossil fuels, then
a tax on carbon may increase economic efficiency.
buyers probably pay too much for fossil fuels.
the market equilibrium is efficient.
sellers will work hard to internalize that cost.
18
In the model of perfect competition, the marginal revenue that a typical firm will earn from selling one more unit
decreases as the firm sells more.
increases as the firm sells more.
equals the market price.
is always greater than marginal cost.
19
If demand is highly elastic and supply is inelastic, then the burden of a tax in this market
will fall mostly on the sellers.
is determined by who sends the tax to the government.
will be evenly split between the buyers and sellers.
will fall mostly on the buyers.
20
What is the relationship between the price and marginal cost for a profit-maximizing firm with market power?
Price is greater than marginal cost.
Price is less than marginal cost.
Price is equal to marginal cost.
21
In most cases, tariffs and quotas intended to save some jobs
reduce employment in other areas of the economy.
increase overall employment.
increase technological innovation and economic growth.
are very efficient public policy.
22
Hot dogs and hot dog buns are related. An increase in the price of hot dogs is predicted to
increase the supply of hot dog buns.
decrease the demand for hot dogs.
increase the supply of hot dogs.
decrease the demand for hot dog buns.
23
Imagine a PPF. An improvement in production can be shown by
making the PPF horizontal.
shifting the PPF in to the left.
making the PPF vertical.
shifting the PPF out to the right.
24
If the supply of a good is very inelastic, then a tax on the good will
fall mostly on the buyers of the good.
create a small deadweight loss.
not raise any tax revenue for the government.
have very little impact on the price recieved by sellers.
25
A tax on soda will create a larger deadweight loss
in the long run than in the short run.
in the short run than in the long run.
26
A
public good
is
non-excludable and non-rival
non-excludable but rival.
excludable but non-rival.
excludable and rival.
27
When we look at the incidence of a tax with the supply and demand model we see that the price
that buyers pay almost always rises by the whole tax.
can be split into what buyers pay and what sellers retain.
is not altered by the tax.
that sellers retain almost always falls by the whole tax.
28
Which aspect of perfect competition explains why the price equals average cost in the long-run?
Choose q so that MR = MC
Easy entry and exit
Many sellers selling the same thing
Price-taking behavior
29
Identify:
As a tax increases in size, tax revenue intially rises but then eventually falls.
Laffer Curve
Euler's Rule
Say's Law
Gresham's Law
30
If the production of a good produces an external cost, then economists worry that
the price of the good results in economic efficiency.
the free market will tend to produce too little of the good.
the free market will tend to produce too much of the good.
the ghost of Ronald Coase will appear to fix the situation.
31
Identify: An equation that represents how markets tend to work.
Price > Value (to buyer) > Cost (of seller)
Cost (of Seller) > Price > Value (to buyer)
Value (to buyer) > Cost (of seller) > Price
Value (to buyer) > Price > Cost (of seller)
32
What is the relationship between the
price
and
marginal cost
when many sellers offer identical products?
P > MC
MC < P < AC
P = MC
P < MC
33
If
economic profits
are zero, then the firm is going out of business.
False
True
34
If the
price elasticity of demand
for gizmos is -3, then
there must be few substitutes for gizmos.
gizmos probably are a necessity.
the demand for gizmos is elastic.
the demand for gizmos is inelastic.
35
Which equation can be interpreted as
the profit maximization condition
?
(Price - Marginal Revenue) = Average Cost
Marginal Revenue = Average Revenue
Average Revenue = Average Cost
Marginal Revenue = Marginal Cost
36
If the price of a good falls, then either ______________ or __________________.
supply decreased; demand decreased
supply increased; demand increased
supply increased; demand decreased
supply decreased; demand increased
37
The
Circular Flow Diagram
shows that
the flow of money, resources, and goods are all connected.
an increase in the money supply increase prices.
taxation is necessary for the provision of public goods.
the movement of the unemployed into the paid labor force is good.
38
Market Power
: For both gadgets and widgets, marginal cost is $10. The PED for gadgets is -2 and -5 for widgets.
They will sell for the same price.
Widgets will sell for the lower price.
Gadgets will sell for the lower price.
39
As trade increases, ________________ increases, which increases _________________.
specialization; productivity
unemployment; productivity
inflation; wages
40
Identify: opportunity cost
the value of the opportunity lost as the result of making a choice
bad money drives out good money.
identical goods must sell for the same price
supply creates its own demand
41
To maximize profits: do everything
that adds more to revenues than it adds to costs.
that you can get away with.
that reduces costs.
that increases revenues.
