Exam III Review ECON 130

When a price changes, consumers are inclined to consume less of the good that has become relatively more expensive and more of the good that is now relatively cheaper. What is this effect called?

• substitution effect

• income effect

• backward-bending supply curve

• preferences effect

Saving money is a(n) __, because it involves choice between present and future consumption.

• budget constraint

• intertemporal choice

• risk premium

• opportunity cost

The typical pattern revealed in a budget constraint model shows that as

• marginal utility increases.

• total utility decreases, but marginal utility rises.

• total utility decreases.

• total utility rises, but marginal utility falls.

Refer to the budget line shown in the diagram below. At point U, _______.

• P1/P2 = MU1/MU2

• MU1/P2=MU2/P1

• pizza is an inferior product

• roses are an inferior product

The typical pattern revealed in a budget constraint model shows that as _______.

• marginal utility increases

• total utility rises, but marginal utility falls

• total utility decreases, but marginal utility rises

• total utility decreases

__________ is calculated by taking the quantity of everything that is sold and multiplying it by the price at which it is sold.

• Total profits

• Average profit margin

• Total revenue

• Total cost

__________ tells a firm whether it can earn profits given the price in the market.

• Total cost

• Average cost

• Marginal cost

• Average marginal cost

In microeconomics, the term _______ is synonymous with economies of scale.

• diminishing marginal returns

• decreasing returns to scale

• increasing returns to scale
• constant returns to scale

In order to calculate marginal cost, the change in ______ is divided by the change in quantity.

• either total cost or average cost
• increasing marginal returns

• either total cost or variable cost

• decreasing marginal returns

In economics, a firm that faces no competitors is referred to as .

• an oligopoly

• a monopoly
• an oligopolizor

• a perfect competitor