Econ Final Exam PDF

CH 5. When a firm is a "price taker," the firm? cannot influence the market price of the good that it sells. Refer to the above Figure, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market. In the long run? firms that remain in the market will...

CH 5. When a firm is a "price taker," the firm? cannot influence the market price of the good that it sells. Refer to the above Figure, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market. In the long run? firms that remain in the market will expand production. Refer to the above Figure, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market. In the long run, market? supply will decrease Refer to the above Figure, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market. In the long run? firms that remain in the market will expand production Refer to the above Figure, which shows the cost curves and the marginal revenue curve for a perfectly competitive firm. To maximize profit, the firm produces __30__ units of output and the price is __$40__ a unit. Initially, a perfectly competitive market that has 1,000 firms is in long-run equilibrium. Then 100 firms in the industry adopt a new technology that reduces the average cost of producing the good. In the short run, the price _falls_, firms with the new technology make _positive_ economic profit, and firms with the old technology _incur an economic loss_. Following shutdown, a firm beings to produce again when price is greater than average variable cost. An example of a perfectly competitive industry is the wheat industry The shutdown point occurs at the point of minimum average variable cost. Refer to the above Figure, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry. In the short run, if the market price of the good is $10, the firm produces _less than 10_ units of output and _incurs an economic loss of $20_. If price falls below minimum average variable cost, the best a firm can do is stop production and incur a loss equal to total fixed cost. A firm will shut down temporarily when the price is so low that total revenue is insufficient to cover the total variable cost of production. Long-run equilibrium occurs in a competitive market when economic profit and economic loss have been eliminated. If MR>MC the revenue from selling one more unit exceeds the total cost of producing it. Economic profit equals total revenue minus total cost. In a perfectly competitive market, a firm maximizes its profit by producing the quantity of output at which  market price equals marginal cost. A perfectly competitive firm's supply curve is the same as its marginal cost curve at all prices above minimum average variable cost. Refer to the above Figure, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry, The firm is making an economic profit. Marginal revenue is the change in total revenue that results from a one-unit increase in the quantity sold A firm maximizes profit by producing the output at which marginal cost equals marginal revenue CH.6 In monopolistic competition firms practice product differentiation. Refer to the above Figure. If this firm is in monopolistic competition, it produces output of 40 units. When comparing perfect competition and monopolistic competition, we find that advertising plays a large role in monopolistic competition, unlike in perfect competition. In monopolistic competition each firm has a small market share. Refer to the Figure. This firm in monopolistic competition will make an economic profit in the short run. The real estate industry is monopolistically competitive, so in this industry excess capacity exists in the long run. A firm in a monopolistically competitive market faces a downward-sloping demand curve. A firm has excess capacity if it produces below its efficient scale. Which of the following goods is best described as being sold in a monopolistically competitive market? Fast food In the short-run, the similarity between a monopolist and a monopolistically competitive firm is that they both make the same decisions about the level of output and output price. Refer to the Figure above. This single-price monopoly produces ____20____ units per day and charges a price of $___75_____ per unit. The creation of a monopoly results in gains to producers at the expense of consumers. To increase sales from 7 units to 8 units, a single-price monopolist cuts the price from $7 per unit to $6 per unit. What is marginal revenue from selling the 8th unit? -$1 Refer to the Figure. If this market is a single-price monopoly, then price is greater than the marginal cost and the outcome is inefficient. When the single-price monopoly illustrated in the above Figure is maximizing profit, it produces 3 units and price is $6 a unit. Consider the single-price monopoly illustrated in the above Figure. What is this monopoly's maximum economic profit? $6 Sue's Surfboards is the sole renter of surfboards on Big Wave Island. Sue does not price discriminate. For Sue's Surfboards, the change in total revenue from each additional surfboard rented is her marginal revenue, which is less than the rental price of a surfboard. A single-price monopolist's demand curve is the same as the market demand curve. A natural monopoly exists when one firm can supply the entire market at a lower cost than two or more firms. When Dominant Pizza is willing to sell a pizza to a student who lives on-campus at a lower price than it sells the identical pizza to a student who lives a block away from the campus, Dominant Pizza is practising price discrimination. CH 8 Item 2017 Quantity 2017 Price 2018 Quantity 2018 Price CD players 10 $100 25 $110 bananas 50 bunches $2 100 bunches $3 Refer to the Table. At 2017 prices, the value of production from 2017 to 2018 has increased by 145.5% Southton produces only two goods. Compute Southton's nominal GDP in the current year. $380 A south sea island produces only coconuts. In 2005, the price of a coconut is $2.00 and the quantity produced is 400. In 2017, the price of a coconut is $1.50 and the quantity produced is 350. 2005 is the reference base year. Real GDP in 2017 in terms of base-year prices is $700 Which of the following is not correct? Gross investment is the amount by which the value of capital increases In the figure, a trough is at point ____B____ and a peak is at point ____A____. For the aggregate economy, income equals expenditure equals GDP. The circular flow diagram illustrates the expenditures made by households, firms, governments, and the rest of the world. In the figure, a recession begins at point ____A____ and an expansion begins at point ____B____. A common definition of recession is a period with negative real GDP growth that lasts at least two quarters. Gross domestic product the market value of all the final goods and services produced in a country during a given time period. Stock and bond sales are not included in GDP because they are not goods and services This year, an art collector sold a piece of pottery for $300. He had purchased it for $200 two years earlier. How will the most recent sale affect this year's GDP? GDP is unaffected Southton produces only two goods. Item Price ($) Quantity (# of items) Base year Current year Base year Current year Rubber Ducks 1 2 100 150 Beach Towel 10 8 10 10 Compute Southton's real GDP in the base year. $200 The underground economy is any economic activity that is hidden to avoid taxes and regulations because it is illegal. Which of the following statements is true? Final goods and services produced in Canada by foreigners are part of Canada's GDP In a given year, nominal GDP increases by approximately 7 percent, but real GDP falls by 2 percent. Which one of the following explanations is most likely? Prices increased by 9% Suppose that in 2007 Canada's automobile manufacturers produced 2 million cars priced at $20 000 each. And in 2008 they produced 1 million cars priced at $40 000 each. Ceteris paribus, the change in nominal national income is no change in nominal national income. Of the following items, which one would be considered as investment in the National Income and Expenditure Accounts? The purchase of a new van by a potter who packs it with his wares and travels to art shows on weekends Use the table below to answer the quesiton In 2017 Item Quantity (bunches) Price Bananas 900 $3 a bunch Coconuts 400 $8 a bunch  In 2018 Item Quantity (bunches) Price Bananas 600 $2 a bunch Coconuts 500 $10 a bunch The base year is 2017 and the table gives the quantities produced and the prices in 2017 and 2018. Real GDP in 2018 using the base-year method is $5,800. At full employment, there is no cyclical unemployment. CH 9 The employment rate is the percentage of the working-age population who are employed. Which one of the following people would be counted as unemployed in Canada? Sharon recently began looking for work after staying at home for 10 years to look after her children The price indexes that are alternatives to the CPI include the GDP deflator and the chained price index for consumption. If the CPI was 228 at the end of 2016 and 236 at the end of 2017, what was the inflation rate in 2017? 3.5% In a recession, typically both unemployment and unemployment rate rise. With the exception of the real interest rate, all real variables of macroeconomics are calculated by dividing a nominal variable by the price level. Unemployment caused by permanently decreased demand for horse-drawn carriages is an example of structural unemployment A zero percent unemployment rate is not consistent with the notion of full employment.