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Intro to Microeconomics

Deadweight losses occur in markets in which
the government imposes a tax
A tariff on a product
increases the domestic quantity supplied
Which of the following statements is true?
Free trade benefits a country both when it exports and when it imports
An optimal tax on pollution would result in which of the following?
Producers will internalize the cost of the pollution
Economic profit
will never exceed accounting profit
One characteristic of an oligopoly market structure is:
firms in the industry have some degree of market power
A perfectly competitive market
promotes general economic well-being, whereas a monopoly market may not be in the best interests of society
Negative externalities lead markets to produce
greater than efficient output levels and positive externalities lead markets to produce smaller than efficient output levels
If a country is an exporter of a good, then it must be the case that
the world price is greater than its domestic price
An entrepreneur’s motivation to start a business arises from
All of the above could be correct
A tariff on a product makes
domestic sellers better off and domestic buyers worse off
The amount of money that a firm pays to buy inputs is called
total cost
Firms that operate in perfectly competitive markets try to
maximize profits
An agreement among firms in a market about quantities to produce or prices to charge is called
collusion
In a perfectly competitive market
no one seller can influence the price of the product
A seller in a competitive market
All of the above are correct
For a firm in a competitive market, an increase in the quantity produced by the firm will result in
no change in the products market price
The marginal product of labor can be defined as the change in
output divided by the change in labor
Which of the following statements regarding a competitive market is not correct?
Price exceeds marginal revenue
When taxes are imposed on a commodity
some consumers alter their consumption by not purchasing the taxed commodity
The DeBeers company faces very little competition from other firms in the wholesale diamond market. Why isn’t the price of the wholesale diamonds $10,000 per carat?
because the company would sell so few copies that they would earn higher profits by selling at a lower price
The value of a business owner’s time is an example of
an opportunity cost
Which of the following is a characteristic of a monopoly?
barriers to entry
Which of the following statements regarding a competitive market is not correct?
Because of firm location or product differences, some firms can charge a higher price than other firms and still maintain their sales volume
A firm’s opportunity costs of production are equal to its
explicit costs + implicit costs
A positive externality
is a benefit to someone other than the producer and consumer of the good
The fundamental source of monopoly power is
barriers to entry
Within a country, the domestic price of a product will equal the world price if
the country allows free trade
A major difference between tariffs and import quotas is that
tariffs raise revenue for the government, but import quotas create surplus for those who get the licenses to import
Whenever marginal cost is greater than average total cost,
average total cost is rising
An oligopoly is a market in which
there are only a few sellers, each offering a product similar or identical to the products offered by other firms in the market
Diminishing marginal product suggests that
marginal cost is upward sloping
In a competitive market
no single buyer or seller can influence the price of the product
An optimal tax is one that minimizes the
total deadweight loss from the tax
Which of the following statements is correct?
If the monopolist’s marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling more units at a lower price per unit
The simplest type of oligopoly is
duopoly
The average-fixed-cost curve
is always decreasing
Economic profit is equal to total revenue minus the
opportunity cost of producing goods and services
The marginal product of an input in the production process is the increase in
quantity of output obtained from an additional unit of that input
A competitive firm’s short-run supply curve is part of which of the following curves?
marginal cost
Which of the following statements is correct?
Internalizing a negative externality will cause an industry to decrease the quantity it supplies to the market and increase the price of the good produced
In an oligopoly, each firm knows that its profits
depend on both how much output it produces and how much output its rival firms produce
If marginal cost is rising
marginal product must be falling
When negative externalities are present in a market
social costs will be greater than private costs
Microsoft faces very little competition from other firms for its Windows software. Why isn’t the price of the software $1,000 per copy?
because the company would sell so few copies that they would earn higher profits by selling at a lower price
Because a monopolist does not face competition from other firms, the outcome in a market with a monopoly
is often not in the best interest of society
Several arguments for restricting trade have been advanced. Those arguments do not include
the no-deadweight-loss argument
In studying oligopolistic markets, economists assume that
each oligopolist cares only about its own profit
The average-total-cost curve intersects
marginal cost at the minimum of average total cost
When negative externalities are present in a market
producers will supply too much of the product
Deadweight losses are associated with
taxes that distort the incentives that people face
If marginal cost is below average total cost, the average total cost
is falling
A negative externality will cause a private market to produce
more than is socially desirable
Private markets fail to reach a socially optimal equilibrium when negative externalities are present because
social costs exceed private costs at the private market solution
One of the defining characteristics of a perfectly competitive market is
a similar product
Which of the following statements is not correct?
Both monopolistic competition and perfect competition are characterized by product differentiation
Changes in the output of a perfectly competitive firm, without any change in the price of the product, will change the firm’s
total revenue
Which of the following statements is correct?
A competitive firm is a price taker, whereas a monopolist is a price maker
When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy,
producer surplus increases and total surplus decreases in a market for that good
Economists normally assume that the goal of a firm is to earn
(i) and (ii) only
A seller in a competitive market can
sell all he wants at the going price, so he has little reason to charge less
A monopoly
can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits
Taxes create deadweight losses because they
distort incentives
Economist normally assume that the goal of a firm is to
(iii) only
Imperfectly competitive firms are characterized by
price making ability
One difference between a perfectly competitive firms and a monopoly is that a perfectly competitive firm produces where
marginal cost equals price, while a monopolist produces where price exceeds marginal cost
The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?
A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost
Which of the following statements is (are) true of a monopoly?
(i) only
Diminishing marginal product suggest that the marginal
product of an extra worker is less than the previous worker’s marginal product
Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly is often
All of the above are correct
Taxes create deadweight loss when they
distort behavior
A negative externality
is an adverse impact on a bystander
Which of the following is not a characteristic of a monopoly?
one buyer
For a profit-maximizing monopolistically competitive firm, price exceeds marginal cost in
both the short run and long run
A difference between explicit and implicit costs is that
implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do
A distinguishing feature of an oligopolistic industry is the tension between
cooperation and self interest
The marginal product of labor is equal to the
increase in output obtained from a one unit increase in labor
Firms in industries that have competitors but do not face so much competition that they are price takers are operating in either a(n)
oligopoly or monopolistically competitive market
Trade enhances the economic well-being of a nation in the sense that
trade results in an increase in total surplus
A special kind of imperfectly competitive market that has only two firms is called
a duopoly
The difference between accounting profit and economic profit is
implicit costs
Which of the following statements is correct?
All of the above are correct
An oligopoly
is a type of imperfectly competitive market
A production function describes
how a firm turns inputs into output
In a market that is characterized by imperfect competition,
there are at least a few firms that compete with one another
An agreement between two duopolists to function as a monopolist usually breaks down because
each duopolist wants a larger share of the market in order to capture more profit
Marginal cost is equal to average total cost when
average total cost is at its minimum
Deadweight losses represent the
inefficiency that taxes create
Both tariffs and import quotas
decrease the quantity of imports and raise the domestic price of the good
Negative externalities occur when one person’s actions
adversely affect the well-being of a bystander who is not a party to the action
In a perfectly competitive market
no one seller can influence the price of the product
A seller in a competitive market
All of the above are correct
For a firm in a competitive market, an increase in the quantity produced by the firm will result in
In a perfectly competitive market
no one seller can influence the price of the product
A seller in a competitive market
All of the above are correct
In a perfectly competitive market
An entrepreneur’s motivation to start a business arises from
All of the above could be correct

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