Micro Test #1

The market for agricultural products such as wheat or corn would best be described by which market model?

• monopolistic competition

• pure competition

• pure monopoly

• oligopoly

Local electric or gas utility companies mostly operate in which market structure?

• monopolistic competition

• pure competition

• pure monopoly

• oligopoly

A constant-cost industry is one in which

• resource prices fall as output is increased.

• resource prices rise as output is increased.

• resource prices remain unchanged as output is increased.

• small and large levels of output entail the same total costs.

A purely competitive firm

• must earn a normal profit in the short run.

• cannot earn economic profit in the long run.

• may realize either economic profit or losses in the long run.

• cannot earn economic profit in the short run.

Economic cost can best be defined as

• any contractual obligation that results in a flow of money expenditures from an enterprise to resource suppliers.

• any contractual obligation to labor or material suppliers.

• a payment that must be made to obtain and retain the services of a resource.

• all costs exclusive of payments to fixed factors of production.

An explicit cost is

• omitted when accounting profits are calculated.

• a money payment made for resources not owned by the firm itself.

• an implicit cost to the resource owner who receives that payment.

• always in excess of a resource's opportunity cost.

A product has utility if it

• takes more and more resources to produce successive units of it.

• violates the law of demand.

• satisfies consumer wants.

• is useful.

The law of diminishing marginal utility suggests that the total utility that a consumer derives from a product will increase slower and slower as more of the product is consumed.

• True

• False

Price elasticity of demand tends to be low for goods with few close substitutes.

• True

• False

The demand for Cheerios cereal is more price-elastic than the demand for cereals as a whole. This is best explained by the fact that

• Cheerios are a luxury.

• Cereals are a necessity.

• there are more substitutes for Cheerios than for cereals as a whole.

• consumption of cereals as a whole is greater than consumption of Cheerios.