Game theory is most useful in describing outcomes in markets where

products are identical for all firms

Which of the following is a characteristic of firms in a perfectly competitive industry?

Facing significant barriers to entry

Earning positive long-run economic profit

A perfectly competitive firm’s short-run supply curve is the portion of the marginal cost curve that is

above the average variable cost curve

above the average total cost curve

above the minimum average fixed cost curve

Which of the following is a necessary condition for price discrimination?

The seller can separate consumers according to their elasticities of demand.

Resale of the product or service is possible.

Buyers have identical elasticities of demand.

The seller is a perfectly competitive firm.

Buyers are aware of prices charged to other buyers

Which of the following would cause the wage for computer programmers to increase?

An improvement in the education of computer programmers

A decrease in the amount of physical capital per computer programmer

An increase in the social prestige associated with being a computer programmer

A decrease in the value that computer programmers place on leisure

A minimum wage set below the equilibrium wage in the market for computer programmers

The socially optimal quantity of a public good is provided when

marginal social cost equals marginal social benefit

marginal private cost equals marginal private benefit

total private cost equals total social benefit

total social cost equals total social benefit

marginal social benefit minus marginal social cost is at a maximum

Command economies differ from capitalist economies mainly because of which of the following?

Command economies have higher degree of government ownership of resources.

Command economies have higher prices for oil.

Capitalist economies have higher prices for oil.

Capitalist economies have higher degree of government ownership of resources.

Command economies rely on prices to allocate resources.

In the rental housing market, what would be the effect of a rent control that was set at the market equilibrium rental price?

It would have no impact on the number of housing units available.

It would increase the number of housing units available, creating a surplus.

It would decrease the number of housing units available, creating a shortage.

It would increase the consumer surplus and decrease the producer surplus.

It would decrease the consumer surplus and increase the producer surplus.

If the demand for product X is perfectly elastic and the supply of product X decreases, which of the following will occur in the market for X ?

Total revenue will remain the same.

Quantity demanded will exceed quantity supplied

Quantity demanded will exceed quantity demanded

All of the following cause a rightward shift in the demand schedule for a normal good EXCEPT

a decrease in the price of the good

a decrease in the price of a complementary good

an increase in the price of a substitute good

an increase in consumers’ income

If a firm’s production function exhibits diminishing marginal product of the variable input in the short run, which of the following about the firm’s short-run marginal cost (MC) curve must be true?

As output increases, the MC curve slopes upward.

As output increases, the MC curve slopes downward and becomes flatter.

As output increases, the MC curve slopes downward and becomes steeper.

Catering, Inc., which provides catering services in a perfectly competitive market, was maximizing profits at the market price of $22 per meal. The market price has recently increased to $28 per meal. Which of the following short-run adjustments will increase profits for Catering, Inc.?

Increasing output until the marginal cost equals the new price

Increasing output until the average total cost equals the new price

Decreasing output because of the increase in market price

Increasing the wage rate paid to its workers

Increasing advertising to increase demand for the meals

Monopolistically competitive product markets are inefficient because

price is greater than marginal cost

price equals the marginal value to the buyer of the last item produced

excessive competition prevents other firms from entering the market

homogeneous goods are usually overpriced

short-run economic profit-making

If the two firms do not cooperate, which of the following represents the payoff North Springs and South Springs receive in the dominant-strategy equilibrium and the Nash equilibrium?

Dominant Strategy: ($27,$28) Nash Equilibrium: ($27, $28)

Dominant Strategy: None Nash Equilibrium: ($27, $28)

Dominant Strategy: ($27,$28) Nash Equilibrium: ($15, $45)

Dominant Strategy: ($30,$26) Nash Equilibrium: ($15, $45)

Dominant Strategy: ($30,$26) Nash Equilibrium: ($27, $28)

A monopolist’s demand curve is necessarily

the same as the market demand curve

the same as its marginal revenue curve

A profit-maximizing, perfectly competitive firm is currently in long-run equilibrium. It is earning $15,000 of total revenue from a sale of 1,000 units. Its total fixed cost of production is $2,500. Which of the following can correctly be inferred from the information provided?

Its marginal cost is $15.00, and its average variable cost is $12.50.

Its marginal cost is $12.50, and its average total cost is $12.50.

Its marginal cost is $12.50, and its average variable cost is $12.50.

Its marginal cost is $15.00, and its average total cost is $12.50.

Its marginal cost is $15.00, and its average fixed cost is $12.50.

When the demand for new homes decreases, the demand for construction workers who build homes decreases. This relationship illustrates the concept of

diminishing marginal productivity of labor

Which of the following is likely to shift an industry’s labor supply curve to the left?

An increase in preference for leisure

A decrease in immigration restrictions

A decrease in the cost of child care

An increase in the number of remote-working jobs

Which of the following describes the type of externality generated by the unregulated private market and the resulting deadweight loss?

Type of Externality: Negative Deadweight Loss: egh

Type of Externality: Positive Deadweight Loss: egh

Type of Externality: Positive Deadweight Loss: ehf

Type of Externality: Negative Deadweight Loss: ehf

Type of Externality: Negative Deadweight Loss: P4 gh P2

The government can attempt to correct the externality by setting a

per-unit tax equal to (P4 − P2)

per-unit tax equal to (P4 − P1)

per-unit subsidy equal to (P4 − P2)

per-unit tax equal to (P3 − P2)

Both Amy and Brad produce and consume apple pie and ice cream. In one hour, Brad makes five apple pies or ten gallons of ice cream while Amy makes fifteen apple pies or fifteen gallons of ice cream. Based on the above information, one can correctly conclude that

Brad has a comparative advantage in making ice cream and will sell ice cream to Amy

Brad has an absolute advantage in making ice cream and will sell ice cream to Amy

Brad does not have a comparative advantage in making either good and will not trade with Amy

Brad has an absolute advantage in making apple pies but a comparative advantage in making ice cream

Brad’s opportunity cost of making ice cream is higher than Amy’s

If the government imposes a per-unit tax on personal computers, consumer surplus in the personal computer market will

decrease, because the price paid by consumers for personal computers will have increased

decrease, because there will be more personal computers on the market

increase, because personal computer manufacturers will pass the tax on to consumers

increase, because consumers will buy more imported personal computers

not change because the demand is unit elastic

Assume that the supply of corn is relatively price inelastic, while the demand for corn is relatively price elastic. If the government imposes a per-unit excise tax on the production of corn, the incidence of the tax will fall

equally on both buyers and sellers

Economies of scale can be illustrated by

a decreasing long-run average total cost curve as a firm produces more output

an increasing short-run marginal cost curve as a firm produces more output

a decreasing short-run average total cost curve as a firm produces more output

a downward-sloping long-run supply curve for an industry

an increasing long-run average total cost curve as a firm produces more output

In a monopsonistic labor market, a firm will continue to hire workers until the marginal revenueproductoflabor

equals marginal factor (resource) cost, resulting in fewer workers being hired at a lower wage compared with a perfectly competitive labor market

equals marginal factor (resource) cost, resulting in more workers being hired at a lower wage compared with a perfectly competitive labor market

equals marginal factor (resource) cost, resulting in fewer workers being hired atahigherwagecomparedwithaperfectly competitive labor market

is less than marginal factor (resource) cost, resulting in more workers being hired at a lower wage compared with a perfectly competitive labor market

is less than marginal factor (resource) cost, resulting in fewer workers being hired at a lower wage compared with a perfectly competitive labor market

Assume that a monopolistically competitive firm is currently maximizing profit with an output of 100 units and a price of $50. Which of the following is true?

Marginal cost is greater than marginal revenue when the firm produces 150 units of output.

Total revenue is maximized when the firm produces 100 units of output.

Marginal revenue equals $50 when the firm produces 100 units of output.

Marginal cost is minimized when the firm produces 100 units of output.

Average total cost is minimized when the firm produces 100 units of output.

There are four firms in an oligopolistic industry. The four firms agree to collude and act like a monopoly. If one of the firms violates the agreement and charges a lower price or sells a larger quantity than what was agreed to, what will happen in the short run?

The firm that cheats will earn higher profits, and industry profits will be lower.

The firm that cheats will earn higher profits, andindustryprofitswillbehigher.

The firm that cheats will earn lower profits, and industry profits will be lower.

The firm that cheats will earn lower profits, and industry profits will be higher.

The firms that do not cheat will earn higher profits.

Which of the following can give a firm market power?

Having economies of scale in production over the range of market output

Having access to common information

Producing a standardized or homogeneous product

Lacking barriers to entry or exit

Having a large number of competitors in the market

In monopolistic competition, a goal of advertising is to

make a firm’s demand curve less elastic

reduce a firm’s short-run average total cost

minimize a firm’s long-run average total cost

make a firm’s demand curve more elastic

shiftafirm’sdemandcurvetotheleft

In a perfectly competitive market for a good with a downward sloping demand curve and an upward sloping supply curve, the marginal social benefit is greater than the marginal social cost at the market equilibrium quantity. The government imposition of a new per-unit tax on the production of the good would

have no effect on the price of the good

increase the quantity sold of the good

The Lorenz curves in the graph above show the effects of a tax system on income inequality. Which of the following statements must be true?

Before the tax, 20% of families lived below the poverty level, and after the tax, none did.

The tax redistributed income only from the top 20% of families to the lowest 20%.

The tax system is proportional.

Movement along a production possibilities curve shows which of the following?

The total amount of available resources

The combination of inputs required for a given output

The relationship between the price of an input and the quantity demanded

Assume that the market for beef is perfectly competitive and in equilibrium. Which of the following would most likely result in an increase in both the equilibrium price and the equilibrium quantity of beef?

An increase in the supply of potatoes, a complementary good

An increase in the supply of chicken, a substitute good

A decrease in consumers’ income, assuming that beef is a normal good

An increase in the price of corn, an input in the production of beef

Anannouncementbythemedicalcommunity that consumption of beef increases the risk of heart disease

Assume that more corn is used to produce ethanol. Simultaneously, more effective control of pests and weeds occurs in farming. Which of the following will definitely occur in the corn market?

The quantity of corn will increase

The price of corn will increase

The quantity of corn will decrease

The price of corn will decrease

The supply of corn will decrease

The absolute value of the price elasticity of demand for a good increases when

consumers spend greater portion of their budget on the good

the price of an input used to produce the good increases

the good must be purchased immediately

Mickey has a $20 gift card that she is planning to use to download 10 songs and 5 games. The download price for each song is $1 and the download price for each game is $2. Her marginal utility from the tenth song is 30, and her marginal utility from the fifth game is 70. Based on this information, which of the following statements is true?

Mickey can increase utility by buying more games and fewer songs

Mickey’s plan will maximize her utility.

Mickey can increase utility by buying more songs and fewer games

Since games are twice as expensive as songs, Mickey should buy twice as many songs.

Since games are twice as expensive as songs, Mickey should buy twice as many games.

Max Company produces electronic gadgets using labor and capital. If Max increases labor and decreases capital to produce the same quantity of gadgets, what will happen to the marginal product (MP) of labor and the MP of capital?

MP of Labor: Decrease MP of Capital: Increase

MP of Labor: Decrease MP of Capital: No change

MP of Labor: Increase MP of Capital: Increase

MP of Labor: Increase MP of Capital: Decrease

MP of Labor: No change MP of Capital: Increase

Microeconomics Exam #2

Authored by Matthew McGehee

Social Studies

University

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59 questions

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MULTIPLE CHOICE QUESTION

3 mins • 1 pt

The study of economics exists because people are confronted with the basic problem of

elasticity

negative externality

scarcity

overabundance

monopoly

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

The table shows the total benefit associated with reducing different levels of pollution on a small island. The cost of eliminating one ton of pollution is $150. Which of the following is the optimal quantity of pollution to eliminate?

5 tons

4 tons

3 tons

2 tons

1 ton

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

If a hurricane reduced the crab population, the price of crabs and quantity sold would change in which of the following ways?

Price: Increase Quantity: Increase

Price: Increase Quantity: Decrease

Price: Decrease Quantity: Increase

Price: Decrease Quantity: Decrease

Price: No change Quantity: Decrease

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

To determine whether two goods are complements, one would calculate the

price elasticity of demand

price elasticity of supply

income elasticity of demand

cross-price elasticity of demand

input-price elasticity of supply

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

For a normal good, the income effect of a price change refers to the change in the consumption of the good that occurs because of the change in

consumers’ purchasing power

the demand for a substitute good

the supply of the good

relative price

marginal utility

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

The average fixed cost of producing four units of output is equal to

120

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

In the short run, the lowest price at which the firm will continue to produce is

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