Final Exam of Microeconomics.docx

1、Final Exam of MicroeconomicsFINAL EXAMThe Power of Microeconomics: Economic Principles in the Real World1. The Production Possibilities Frontier or PPF:Shows the maximum amounts of production that can be obtained given its technological knowledge and quantity of inputs available.2. Common shift fact

2、ors used in the analysis of demand include:1. Income and tastes2. The prices of other productsBoth 1 and 23.Suppose you go to the store and see that the price of bread has doubled. Has the demand for bread risen or has bread become more expensive to produce?Need more information to determine why the

3、 price doubled4.Suppose a drought in Brazil significantly reduces the coffee crop in Brazil? What is likely to happen to the price of coffee and Starbucks and what is likely to happen to the profits for the Starbucks company?Prices rise because of an increase in costs and profits fall because of a d

4、ecrease in the quantity demanded.5.The face value of what we have in our pocket or bank account is referred to:Nominal income6.During years of bumper crops when food prices fall substantially, many farmers often go bankrupt. This is because:Demand is highly inelastic7.The ATC, AVC, and MC curves all

5、 slope first down and then up because of:The law of diminishing returns8.Which graph in this illustration depicts the cost curve of a natural monopoly?Lower right9.When there are numerous buyers and sellers in a market:Any one firms output is miniscule compared to market outputNo firm has influence

6、over what other firms doFirms are price takers rather than price makersAll of the above10.The demand curve accurately measures:1. The benefits of consumption to society11.The existence of a wide range of government activities and agencies from the Pentagon and the Federal Trade Commission to the Env

7、ironmental Protection Agency and the National Institutes of Health may be explained by:The theory of market failure12.In a perfectly competitive market, the demand curve reflects:1. The willingness of consumers to pay for a product2. Social benefitsBoth 1 and 213.With a monopoly industry:There is on

8、ly one seller14.Dynamic efficiency measures:1. The rate of profit growth in an industry2. The rate of technological change and innovation in an industryBoth 1 and 215.Monopolistic competition is sometimes called:Non-collusive oligopoly16.Barriers to entry to an oligopolistic industry may include:The

9、 established reputations of firms in the industryLarge capital requirementsPatents and trade secretsAll of the above17.Market power:1. Signifies the degree of control that a firm or a small number of firms has over the price and production decisions in an industry2. Is commonly measured by the four-

10、firm concentration ratioBoth 1 and 218.Consider a four-firm industry in which each firm has grown tired of ruinous price wars and the CEOS have a chance to meet in secret (risking a jail sentence). What price will likely be set?MR = MC19.The guiding philosophy of game theory is that:You will pick yo

11、ur strategy by asking what makes most sense assuming that your rival is analyzing your strategy and acting in his or her own best interest.20.During the “Corn Wars” in England, in the 19th century, landlords were raising the rent they were charging farmers for the use of their land, thereby forcing

12、farmers to pass on the increase in land costs to consumers. According to the Ricardian Theory of rent, which is true?Rent is high because the price of corn is high.21.A tax on pure economic rent will:Result in no allocative inefficiencies22.Rent seeking is:1. The name given to restricting supply to

13、increase the price suppliers receive2. An attempt to create either ownership rights or institutional structures that favor youBoth 1 and 223.Suppose you are the CEO of a domestic firm and your foreign rival is offering lower prices to your consumers because of a production cost advantage. One way to

14、 beat your rival is to:1. Lobby congress to impose tariffs2. Produce more efficientlyBoth 1 and 224.The wage rate will fall as:2. Product price falls25.A monopsonist is:A wage maker26.Financial capital includes:2. Stocks and bonds27.Depreciation is a:1. Flow concept28.Private goods are:1. Divisible.

15、29.The economic difference between public goods and private goods rests on:2. Technical considerations30.In the presence of positive externalities, the free market tends to lead to:1. The underconsumption of goods that yield positive externalities31.The economic rationale for the provision of roads,

16、 bridges, lighthouses, and other “public goods” is based on a theory of:Market failure32.Suppose the government imposes new water quality regulations on an industry. Whats likely to happen?The supply curve shifts inward and price rises33.Suppose toxic soil pollution in China significantly reduces th

17、e soy bean harvest. Which of these companies is likely to see its profits rise and be the best stock market investment?A shipping company that transports soy beans from Brazil to China34.Leslie is the CEO of a company facing a revenue shortfall and she decides to raise prices in order to make up for

18、 that shortfall. To her chagrin, revenues fall further. Demand for Leslies product is:Elastic35.Which has a lower elasticity? Coffee or Starbucks coffee?Coffee36.The CEO of a company engineers a merger with its biggest rival and is surprised that over time, the merger fails to reduce costs. What is

19、the industry likely characterized by?Constant returns to scale over a broad spectrum of output37.You work in an industry that is characterized by brand proliferation. You likely work in a:Monopolistically competitive industry38.Given a market structure of perfect competition, what kind of conduct wi

20、th respect to pricing can we expect?1. P = MC2. MR = MCBoth 1 and 239.Your company is losing money and you are trying to decide whether or not you should shut down your production. Your best “shutdown point” is when price falls below the level where:Revenues just cover variable costs40.Suppose you g

21、o into business and you have to forego a $60,000 a year, after-tax salary and a $20,000 housing allowance. If you wind up at the end of the year with accounting profits of $80,000, what are your economic profits?$041.In the accompanying figure, at the given perfectly competitive equilibrium, what is

22、 the deadweight loss?Zero42.In the monopoly outcome, relative to the perfect competition outcome:Price is higher, quantity is lower43.Which type of efficiency might monopolies enjoy to justify their negative effects?Dynamic efficiency44.Which demand curve is that of a differentiated product relative

23、 to an undifferentiated product in the accompanying figure?D145.Firms in an oligopolistic industry that recognize their mutual interdependence are:More likely to collude46.Prices in small convenience stores are generally higher than in supermarkets - yet people still shop in such stores. What accoun

24、ts for this?Location47.Suppose the firm ends its fiscal year with a capital stock of $2,000,000. Over the course of the current year, the firm invests $200,000 in a new plant and equipment. At the same time, it incurs depreciation of $250,000.The capital stock has decreased48.Relative to taxable bon

25、ds with similar risks, tax-exempt state and municipal bonds typically offer:Lower interest rates49.Your government votes to impose a tax on the air pollution emitted by large, coal-fired power plants in your country. Which economic concept has the government likely endorsed?Pigouvian view of internalizing externalities