micro 3

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• Adam Smith taught that individual buyers and sellers who act in their own self-interest frequently promote society's interest. What assumption is needed for society's interest to be promoted? ll of the above, There are no external benefits or costs., Markets are perfectly competitive., Buyers and sellers can make informed decisions.
• Within the supply and demand model, a tax collected from the sellers of the good shifts the supply curve upward by the size of the tax per unit., supply curve downward by the size of the tax per unit., supply curve outward by the size of the tax per unit., demand curve upward by the size of the tax per unit
• Positive cross-elasticities suggest that goods are _________ and negative cross-elasticities that goods are __________ substitutes; complements, substitutes; inferior, normal; complements, normal; inferior
• When Mary's income increases, she purchases fewer hamburgers. We can conclude that for Mary, hamburger is a(n) ________ good. inferior, normal, substitute, inelastic
• If the demand for a product is perfectly inelastic, then which of the following is most likely to be true? The product is extremely important or necessary to those who buy it., The product has many substitutes., The demand curve for the good is horizontal., The price elasticity of demand for that product is equal to one.
• The difference between the maximum amount that a consumer is willing to pay for a product and the price that is paid for the product describes: consumer surplus., excess demand, marginal utility., producer surplus.
• The indifference curves illustrating preferences for perfect complements will be L-shaped, downward sloping and convex, Linear and downward sloping, Vertical lines
• Suppose that the supply of a good increases. Price will ________ and consumer surplus will ________. decrease; increase, increase; increase, increase; decrease, decrease; decrease
• Suppose that Kelly has a monthly fixed income of $ 1000 and has $200 of her income allocated to buy cookies and movies. Suppose that there is an increase in the price for movies but not in the price for cookies. This will: change the slope of the budget line., shift the budget line parallel to the left., shift the budget line parallel to the right., not affect the budget line because income remains constant.
• A firm produces its product using both capital and labor. When it does not change its capital usage, but doubles its labor input, its output increases by less than 50%. Which of the following is the most likely explanation of this finding? the principle of diminishing returns, the principle of opportunity cost, the marginal principle, the spillover principle
• Which of the following is NOT a characteristic of a monopolistically competitive market? Firms must take the market price as given., There are many firms., Firms sell products that are similar but not identical., There are no artificial barriers to entry
• Which of the following is an example of limit pricing? Prices are set low enough to prevent other firms from entering the market., In order to buy Microsoft Windows, you must also purchase Internet Explorer., Bus rides are cheaper for senior citizens than for other people., Prices are set low enough to drive other firms out of a market.
• Which of the following is NOT an example of natural monopoly? farm products, local telephone services, electricity transmission, water systems
• Moral hazard is more likely to arise when one side of an economic relationship cannot observe the behavior of those on the other side., adverse selection is present., insurance policies have high deductibles., people are uninsured.

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