Midterm 2 Study Guide

Indicate the answer choice that best completes the statement or answers the question. For a firm that’s operating in a perfectly competitive market, marginal revenue always equals

• average revenue, but not necessarily the price for all levels of output.
• both average revenue and the price, for all levels of output
• the price, but not necessarily average revenue for all levels of output.
• neither average revenue nor the price for all levels of output.

Indicate the answer choice that best completes the statement or answers the question. Suppose that a new government is elected in Eurnesia. The new government takes steps toward improving the court system and reducing government corruption. The citizens of Eurnesia find these efforts credible and outsiders believe these changes will be effective and long lasting. These changes will probably raise

• real GDP per person but not productivity in Eurnesia.
• productivity but not real GDP per person in Eurnesia.
• real GDP per person and productivity in Eurnesia.
• neither productivity nor real GDP per person in Eurnesia.

Indicate the answer choice that best completes the statement or answers the question. If the owner of a firm observes that, over the long run, increases in production results in decreased average cost per unit, we would say that the firm is experiencing

• economies of scale.
• diseconomies of scale.
• constant returns to scale.
• none of the above.

Indicate the answer choice that best completes the statement or answers the question. John (a US citizen) buys a new electric car manufactured in Japan. This transaction

• Increases GDP in Japan, does not affect GDP in the US
• Decreases GDP in the US, and increases GDP in Japan
• Increases GDP in both the US and Japan
• Does not affect GDP in either country

Indicate the answer choice that best completes the statement or answers the question. In the long run, supply in a competitive industry is ___ elastic compared to the short run.

• Equally
• Less
• More
• Not enough information

Indicate the answer choice that best completes the statement or answers the question. Which of the following is not a characteristic of a competitive market?

• Each firm tries to maximize profits.
• Each firm sells a virtually identical product
• No new firms are able to enter or exit.
• Buyers and sellers are price takers.

Refer to Table 13-3. The marginal product of the second worker is

• 90 units.
• 85 units.
• 80 units.
• 20 units.

Assume a firm in a competitive industry is producing 800 units of output, and it sells each unit for $6. Its average total cost is $4. Its total revenue is

• $4,800.
• $1,600.
• $3,200.
• $8,000.

International studies of the relationship between GDP per person and quality of life measures such as life expectancy and literacy rates show that larger GDP per person is associated with

• longer life expectancy and a lower percentage of the population that is literate.
• longer life expectancy and a higher percentage of the population that is literate.
• very nearly the same life expectancy and a lower percentage of the population that is literate.
• very nearly the same life expectancy and a higher percentage of the population that is literate.

The main way economists compare standard of living in different countries is

• the overall level of net exports in a country.
• the overall level of real GDP in a country.
• The level of real GDP per person in a country.
• The overall level of nominal GDP in a country.