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72 Cards in this Set
- Front
- Back
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Labor, land, and capital used in production are
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resources.
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Average total cost is calculated by dividing
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total cost by total output.
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Marginal cost is calculated by dividing
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the change in total cost by the change in the quantity of output produced
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Which of the following does not refer to diminishing marginal returns?
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Increasing the number of assistant vice presidents as the size of the firm increases
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The short run is a
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period of time when plant size cannot be changed
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The law of diminishing returns causes the shape of the average-total-cost curve to be
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U-shaped.
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Suppose a mechanic uses $150,000 of his own money to start a business. The rate of interest he could earn in a savings account is 1 percent, and the rate of interest he could earn by investing in bonds is 3 percent. What is the opportunity cost of capital when the mechanic uses his money to start his own business?
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$4,500 per year
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Which of the following is not a variable cost at the sandwich shop?
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Cost of rent
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Normal profits refer to
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the accounting profit that would correspond to zero economic profit.
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A firm maximizes profit when
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marginal revenue equals marginal cost.
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Assume that marginal revenue equals rising marginal cost at 100 units of output. At this output level, a profit-maximizing firm's total fixed cost is $600 and its total variable cost is $400. If the price of the product is $5 per unit, the firm should produce
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c. 100 units of output.
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At a firm's profit-maximizing level of output,
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marginal revenue equals marginal cost
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In the short run,
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at least one of the firm's resources cannot be varied.
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The long run is a
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period long enough to allow firms to change plant size and capacity.
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The results of competition will be different depending on
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whether rivals can enter the business.
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A perfectly competitive market is characterized by
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large numbers of producers of commodities with ease of entry.
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Which of the following is the closest to being a perfectly competitive market in the United States?
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Freshly brewed coffee
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Which of the following is most likely to be a monopoly market in the United States?
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Patented pharmaceuticals
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In general, a monopolist will earn
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positive economic profit as long as entry is blocked.
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A price taker is
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an individual seller in a commodity market
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The demand curve facing a perfectly competitive firm is
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horizontal
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A monopolistically competitive firm will maximize profits where
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MR = MC.
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In the long run, if a perfectly competitive firm is incurring an economic loss, the firm
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will leave the industry.
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One could argue that advertising
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creates barriers to entry.
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Barriers to entry take the form of
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a. Creating a brand name
b. Sunk costs c. Unique Resources d. Economies of scale e. All of these are barriers to entry |
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Creative destruction is the process by which
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old, inefficient products are driven out of business
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What is an assumption of the model of monopolistic competition?
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a. There are only a few firms in the industry.
b. Each firm sells an identical product. c. There are significant barriers to entry in the market. d. Consumers lack adequate information about the prices and qualities of products. e. None of these choices. |
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What characteristic is unique to oligopolistic firms?
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Interdependence of firms
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In an oligopoly market,
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a few firms dominate market.
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A Nash equilibrium occurs
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when a unilateral move by a participant does not make the participant better off.
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A typical convention is
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the person who called originally calls again.
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A cartel is
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explicit collusion.
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A household is defined as
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one or more persons who occupy a unit of housing.
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The largest percentage of households in the United States consist of
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two persons.
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Which of the following does not constitute a consumption item?
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A tractor
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The largest component of total spending in the U.S. economy is
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consumption spending.
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The three basic types of businesses in the United States are
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corporations, proprietorships, and partnerships.
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A sole proprietorship is a business form in which
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the owner enjoys unlimited liability and unlimited rights to all the profits.
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Partnerships differ from proprietorships because partnerships
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consist of two or more partners sharing the responsibilities of the firm and proprietorships do not
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A corporation differs from a partnership because the corporation
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is owned by people who enjoy limited liability.
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Multinational firms
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possess production facilities in more than one country.
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When the value of imports exceeds the value of exports for a given economy, the economy
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has an international trade deficit.
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The main trading partners of the United States are
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industrial countries.
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Macroeconomic policy
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consists of monetary and fiscal policies.
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Monetary policy would not include
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increasing tax rates in an effort to control inflation.
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The central bank of the United States is the
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Federal Reserve System.
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In the United States, fiscal policy is determined by
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Congress and the president.
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A budget surplus is
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the excess that results when government spending is less than revenue.
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Financial intermediaries are best described as
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institutions that accept deposits and make loans.
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The circular flow model
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focuses on aggregate economic activity.
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The complete circular flow model does not include
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barter exchanges among consumers.
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National income accounting can best be characterized as a
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set of rules to summarize economic activity over a given period of time.
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Gross domestic product constitutes the
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current market value of all final goods and services produced in a given year within a country's borders.
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Which of the following economic activities is not be counted as part of GDP?
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A gang member selling illegal drugs
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Which of the following will count in this year's GDP?
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The real estate broker's fee on the sale of the house this year
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Changes in inventory
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count in GDP.
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A reduction in the value of capital goods over time due to their use in production is called
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depreciation.
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What is an indirect business tax?
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A tax that is collected by businesses for a government agency
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Net national product is defined as
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national income plus statistical discrepancy.
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Nominal GDP
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measures national output on the basis of the current year's prices.
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Real GDP measures
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national output adjusted for price-level changes.
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What is a consumer price index?
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A measure of the average price level of goods and services purchased by consumers
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What is a COLA?
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An increase in wages to match consumer price increases
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Given an exchange rate of 80 yen = $1, what is the U.S. dollar price of 1 yen?
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$0.0125
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If the U.S. dollar appreciated against the British pound, other things being equal, we would expect
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the U.S. demand for British products to increase.
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If the exchange rate moves from $.08 = 1 peso to $.12 = 1 peso, then
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the prices of U.S. imports from Mexico are more expensive.
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The balance of payments is a record divided into categories, or accounts, including all of the following categories except
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profits.
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A negative balance in the merchandise account would be indicated by
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imports that exceed exports.
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What is a unilateral transfer?
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A retirement pension sent to another country
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The financial account is
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the record in the balance of payments of the flow of financial assets into and out of a country.
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If there is a current account surplus in the U.S. balance of payments, then
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the net balance of the balance of payments will equal zero.
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A country that is a net creditor
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lends more funds to foreigners than it borrows.
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