Micro Review

Which of the following is a defining characteristic of a market economy?

• Private ownership of resources

• Equitable distribution of income

• Reliance on public goods

• Government-guided resource allocation

An increase in the supply of good X resulted in an increase in the price and quantity of good Y. It can be concluded that good Y is

• an inferior good
• a luxury good
• a normal good
• a substitute for good X
• a complement for good X

The table above shows the maximum possible output combinations of good X and good Y that Microland can produce by using all of its available resources and technology. As the production of good X increases, what happens to the opportunity cost of producing good X?

• It decreases, because the production of good Y decreases by greater amounts.
• It decreases, because the production of good Y increases by smaller amounts.
• It remains constant, because the production of good X increases by the same amount.
• It increases, because the production of good Y decreases by greater amounts.
• It increases, because the production of good Y increases by smaller amounts.

Which of the following will shift the supply curve for apples to the right?

• An increase in consumers’ income
• An increase in the price of apples
• An increase in the wages of apple pickers
• A decrease in the rental price for apple harvesting equipment
• A decrease in the demand for oranges, a substitute in consumption

Which of the following best describes how a consumer maximizes total utility from the consumption of a bundle of goods and services?

• By choosing the quantity of each good such that the quantity demanded of each good is equal to the quantity supplied

• By choosing the quantity of each good such that the marginal utility from each good is equal to zero

• By choosing the quantity of each good such that the price is equal to the marginal revenue

• By choosing the level of output where marginal revenue is equal to marginal cost
• By choosing the combination of goods such that the marginal utility per dollar spent on the last unit of each good is equal

The marginal benefit of consuming a good is

• the change in average utility that results from consuming one more unit of the good
• the same as the total benefit
• equal to the marginal cost of the good
• the change in total expenditures as a result of buying one more unit of the good
• the maximum amount a consumer is willing to pay for one more unit of the good

The economic concept of total consumer surplus refers to which of the following?

• The difference between the quantity of a good or service that people purchase and the amount that they actually consume
• The difference between the quantity of a good or service that people purchase and the amount that they actually consume
• The difference between the quantity of a good or service that people purchase and the amount that they actually consume
• The difference between the quantity of a good or service that people purchase and the amount that they actually consume
• The difference between the quantity of a good or service that people purchase and the amount that they actually consume

The table to the left is partially filled in with the different types of costs for a firm. Based on the information in the table, what is the marginal cost of producing the second unit?

• $50

• $60

• $70

• $90

• $180

How many units of output should a firm with the cost and demand curves shown above produce to maximize profit?

• 0
• Q1
• Q2
• Q3
• Q4

If the four largest firms in a market produce 88 percent of total industry output, the market is

• perfectly competitive
• a pure monopoly
• a natural monopoly
• an oligopoly
• a monopsony