Econ 2106 Final Study Guide
Econ 2106 Final Study Guide Econ 2106 030
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This 10 page Study Guide was uploaded by Gunawork on Wednesday April 13, 2016. The Study Guide belongs to Econ 2106 030 at Georgia State University taught by Husain in Spring 2016. Since its upload, it has received 199 views. For similar materials see Microeconomics in Economcs at Georgia State University.
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Date Created: 04/13/16
Econ 2106 Final Study Guide Price takers are individuals in a market who: have no ability to affect the price of a good in a market Ø All except one of the following are characteristics of perfect competition. Which is the exception? A) There are many producers; one firm has a 25% market share, and all of the remaining firms have a market share of less than 2% each B) all firms produce the same standardized product C) there are no obstacles to entry into or exit from the industry D) there are many producers, and each has only a small market share The demand curve for a perfectly competitive firm is: perfectly elastic Ø The marginal revenue received by a firm in a perfectly competitive market: is equal to its average revenue In the short run, if P=ATC, a perfectly competitive firm: producers output and earns zero economic profit Ø A perfectly competitive firm is definitely earning an economic profit when: P > ATC Which of the following is true? If price falls below average variable cost, the firm will shut down in the short run. Ø In perfect competition, the profit-maximizing level of output occurs where the: MR = MC above minimum AVC. In the short run, if AVC < P < ATC, a perfectly competitive firm: produces output and incurs an economic loss. Ø Economic profits in a perfectly competitive industry encourage firms to enter the industry, and losses encourage firms to exit the industry. Which of the following is true? MR=MC is a profit maximizing rule for any firm Which of the following statements about the differences between monopoly and perfect competition is incorrect? Monopoly profits can continue to exist in the long run because the monopoly produces more and charges a higher price than a comparable perfectly competitive industry. Ø A monopoly is a market characterized by: a single seller A monopolist is likely to produce less and charge more than a comparable perfectly competitive firm. Ø (Figure: Prices, Cost Curves, and Profits) Look at the figure Prices, Cost Curves, and Profits. If the price is P1and the firm decides to produce at output Q 1 then the firm earns: a loss equal to (ca) x Q1 When a firm experiences diminishing marginal returns: marginal product is falling but is likely to be still positive Ø A decrease in the price of a good will result in: an increase in the quantity demanded A perfectly price-inelastic demand curve is: vertical Ø To be called an oligopoly, an industry must have: a small number of interdependent firms (Table: Total Cost for a Perfectly Competitive Firm) Look at the table Total Cost for a Perfectly Competitive Firm. In the short run, the firm will produce, but at a loss, if the price is: $3.50 Ø A firm that faces a downward-sloping demand curve is a: price-setter Ø The demand curve for a monopoly is: above the marginal revenue curve Suppose a monopoly is producing at the profit-maximizing level of output. At that level of output: marginal revenue equals marginal cost Ø Which of the following is true? The profit-maximizing solution occurs where MR=MC Which of the following statements best characterizes a monopoly? A monopoly: produces a product with no close substitutes Ø Which of the following is true if there is a decrease in the supply of ice cream? There is a decrease in consumer surplus The incidence of a tax: refers to how much of the tax is actually paid by consumers and producers You notice that the price of DVD players falls and the quantity of DVD players sold increases. Which of the following may cause this change? Supply of DVD players shifts to the right Ø The price elasticity of demand is measured by: dividing the percentage change in the quantity demanded by the percentage change in the price An industry with only two firms is generally called: a duopoly Ø Along a given demand curve, a decrease in the price of a good: will increase consumer surplus Producer surplus for an individual seller is equal to: the price of the good minus the marginal cost of producing the good Ø The price received by a firm in a perfectly competitive market: is equal to the market price When marginal cost is rising: both average variable cost and average total cost may be rising or falling Ø The price elasticity of demand measures the responsiveness of the change in the: quantity demanded to a change in the price If an excise tax is imposed on beer and collected from the producers, the supply curve will shift upward by the amount of the tax Ø A tax leads to a decrease in consumer surplus and a decrease in producer surplus Luis is willing to sell his pool table for $600, but if he gets $840, the producer surplus; Luis receives is 240 Ø The law of demand is illustrated by a demand curve that is: downward sloping If marginal cost is greater than average total cost, then: average total cost is increasing Ø A shift to the left of a supply curve is caused by: an increase in the cost of an input Total revenue is: the price of a good time the quantity of the good that is sold Ø As output increases, the total cost curve: gets steeper If, for Adam, the marginal utility of ties is greater than the marginal utility consumer should: not change behavior until more information is available Ø Which of the following is a necessary conditi on for perfect competition? Firms produce a standardized product The demand for food is very inelastic, so if tax is levied on the consumer of food, the tax incidence: is typically on consumers more than producers Ø A binding price ceiling is designed to: keep prices low Rent controls set a price ceiling below the equilibrium price and therefore: quantity demanded exceeds the quantity supplied Ø Suppose that the average cost of a doctor’s visit is $100. If the government imposes a price ceiling of $50 on the cost of a doctor visit, there will be: an excess demand for doctor’s visits Price ceiling is: a maximum price sellers are allowed to charge for a good or service Ø A student organization is formed on your college campus to protest against the high rent prices for apartments near campus. This organization is planning a meeting with the dean and president of the college. Which of the following best describes the policy the student organization will fight for? a price ceiling When the minimum wage increases: unemployment among unskilled worker’s increases Ø If the government feels that the price in the market is too low for the producers, it can impose a price floor Ø Suppose the government sets a price floor below the current price of the good. This price floor will: have no effect on the price of the good A price floor in the market for wheat: increases the price paid by consumers Ø A price floor is a minimum price set above the equilibrium price. One of the consequences of the minimum wage has been: workers offering to work off the books for less than minimum wage Ø Production may supply a good with an inefficiently high quality if the government imposes: a binding price floor The persistent unwanted surplus that results from a price floor creates inefficiencies that include all of the following except: inefficiently low quality Ø Accounting profit differs from economic profit because: Economic costs are generally higher than accounting costs because economic costs include all opportunity costs, while accounting costs include explicit costs only. In economic, the short run is defined as: period in which some inputs are considered to be fixed in quantity Ø In the long run: all inputs are variable Diminishing marginal returns occur when: an additional variable factor adds less to total output than the previous unit Use the following table for the following 2 questions (Table: Utility of Pecan Rolls) Look at the table The Utility of Pecan Rolls. The marginal utility for the fifth roll is: 0 (Table: Utility of Pecan Rolls) Look at the table The Utility of Pecan Rolls. Marginal utility is zero for the fifth roll. Use the following graph for the following question (Figure: Demand for DVDs) Look at the figure Demand for DVDs. A decrease in the price of DVD players (a complement) would result in a change illustrated by: the move from h to i in panel B Use the following graph for the following questions (Figure: Demand, Revenue, and Cost Curves) Look at the figure Demand, Revenue, and Cost Curves. The figure shows the demand, marginal revenue, marginal cost, and average total cost curves for Figglenuts-R-Us, a monopolist in the figglenut market. Figglenuts-R-Us will sell 70 figglenuts and set a price of $65 to maximize profits.
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