Accounting, Supply & Demand
Trade & Comparative Advantage
Elasticity
Price Controls
Costs & Production
Market Structures
Public Choice and Public Goods
Random
100
If a firm has negative economic profit, what can you reasonably conclude about the firm's ability to create/destroy value?
Expenses exceeded revenues so the firm destroyed value rather than creating it.
100
If California has a comparative advantage over Oregon in producing wine, what does this mean in terms of opportunity cost?
The opportunity cost of producing wine in California is lower than in Oregon
100
If the price of gasoline increases by 20% and quantity demanded decreases by only 5%, you would say that demand is what kind of elastic?
Demand is price inelastic
100
If the government sets a price ceiling below the equilibrium price for rent, what is the likely outcome?
A shortage of rental housing
100
If a firm's total cost is $10,000 and it produces 500 units, what conclusion can you make about Average Total Cost (ATC)?
ATC is $20 per unit ($10,000 / 500 units)
100
What market structure is characterized by many firms selling identical products with free entry and exit?
Perfect competition
100
When individuals ignore the external cost of their use of a common resource, this is called...
The tragedy of the commons
100
Fill in the blanks: A high price ___________ consumers to __________ resources.
incentivizes; conserve
200
What would happen to the electricity supply curve if the price of natural gas (an input) suddenly increased from $3 to $6 per unit?
The supply curve would shift to the left, indicating a decrease in supply at every price level
200
If Country A can produce wine at lower opportunity cost than Country B, what should Country A do?
Country A should specialize in wine production and trade for other goods with Country B
200
What would happen to total revenue if a firm raises prices on a product with elastic demand?
Total revenue would decrease
200
What happens to consumer surplus when a binding price floor is imposed on agricultural products?
Consumer surplus decreases as prices rise above equilibrium
200
What happens to average fixed costs as production increases?
Average fixed costs decrease continuously (FC / # of units)
200
What is a key differentiating characteristic of monopolistically competitive markets?
Products are similar but differentiated
200
If voters determine that the cost of acquiring politically related information exceeds the expected benefit, then they are...
Rationally ignorant
200
In the Production Possibilities Frontier chart, what can be said if the economy is producing at a point inside of the PPF?
This economy is not fully utilizing resources efficiently.
300
What reasonable statement could you make about the demand curve for bicycles if the price of bicycle helmets (a complementary good) suddenly increased significantly?
The demand curve for bicycles would shift to the left, indicating decreased demand at every price level
300
If Japan specializes in electronics and trades with Australia for agricultural products, this demonstrates __________ advantage and _________ from trade.
Comparative advantage and gains from trade
300
If a 10% price decrease leads to a 15% increase in quantity demanded, you would conclude that demand is price _____________.
Elastic (elasticity greater than 1)
300
If a price ceiling is set above the equilibrium price, what effect does it have on the market?
No effect; the ceiling is not binding so the market operates at equilibrium
300
If marginal cost is below Average Total Cost, what happens to ATC as output is increased?
Average Total Cost decreases
300
What happens to economic profit in perfect competition in the long run?
Economic profit approaches normal, or zero, as firms enter or exit
300
A tax on a good with external costs is called a...
Pigouvian tax.
300
The marginal product of labor (MPL) is:
The additional output produced by hiring one more worker.
400
If manufacturers receive subsidies for producing solar panels, what would happen to the supply curve?
The supply curve would shift to the right, indicating increased supply at every price level
400
What happens to prices when import quotas restrict the supply of foreign goods?
Domestic prices increase due to reduced supply
400
What can you reasonably conclude about luxury goods versus necessities regarding price elasticity?
Luxury good demand tends to be more price elastic than necessities
400
What is a potential consequence of setting a minimum wage above the equilibrium wage?
Unemployment may increase as quantity of labor supplied exceeds quantity demanded
400
What is the shut-down-immediately point for a firm in the short run?
When price falls below Average Variable Cost
400
If a firm is a price maker rather than a price taker, what types of market structure does it operate in?
Monopoly, oligopoly, monopolistic competition
400
This theory suggests that politicians will converge toward the preferences of the median voter.
The Median Voter Theorem
400
The efficient markets hypothesis implies that:
Asset prices reflect all publicly available information.
500
What can you imply about the retail supply curve in Honolulu if retail worker wages increase substantially?
The supply curve would shift to the left due to increased costs of production
500
What does the term 'absolute advantage' refer to in international trade?
The ability to produce more output with the same resources
500
What is the fundamental determinant of supply price elasticity?
How quickly per-unit costs increase with an increase in production (if increased production requires much higher/same per-unit costs, then supply will be inelastic/elastic)
500
If rent control creates a shortage, what alternative allocation methods might emerge?
Waiting lists, discrimination, or black markets
500
Calculate the profit for this firm.
($50 - $25.75) x 8 = $194
500
What is the primary source of monopoly power?
Barriers to entry that prevent competition
500
This occurs when the production or consumption of a good creates costs or benefits for third parties?
Externalities
500
What is a “buy and hold” investment strategy?
Buying stocks and holding them for the long run despite short‑run price fluctuations.
600
If producers receive subsidies and consumers receive tax credits for electric vehicles, what would happen to price and quantity?
The effect on price is ambiguous, but quantity will definitely increase
600
For Mexico, what does producing 1 computer cost in terms of shirts?
1 computer will cost 6 shirts.
600
What happens to a firm's total revenue when it lowers prices on an inelastic good?
Total revenue decreases
600
What effect does a binding price floor have on producer surplus in the short run?
Producer surplus may increase for sellers who can sell at the higher price
600
Assume a firm is producing at the profit maximizing quantity of 8 units. If MR = $50 and ATC = $25.75 at that quantity, what is the firm's profit?
$194 = (P - ATC) x 8 = ($50 - $25.75) x 8
600
If firms in an oligopoly explicitly join and cooperate to set prices, what economic term describes this arrangement?
Cartel
600
If a good is non-excludable and non-rivalrous, what type of good is it?
Public good
600
Businesses in Kailua were hit with substantial rent increases and higher labor costs. At the same time, the Hawaii Tourism Authority heavily markets Kailua as a retail destination and the campaign is very successful. What happens to supply and demand in this situation and the equilibrium price and quantity?
Higher input costs shifts the retail supply curve to the left and the increase in consumers from the successful marketing shifts the demand curve to the right. Therefore, the equilibrium price would increase but the equilibrium quantity supplied/demanded is indeterminate.