cumulative micro
Suppose that the market equilibrium price for a good is $1. A nonbinding price ceiling in this market will result in a price set at
$1
The table below lists costs for producing Big Macs, a product of McDonald's. Based on the table, what are total fixed costs associated with Big Mac production?
$100
A pizza business has the cost structure described below. The firm's fixed costs are $20 per day. What are the firm's average total costs at an output of 10 pizzas?
$12
Using the following table, calculate total consumer surplus for Beanie, Mitch, and Frank if the price of the textbook is $110.
$130
A production possibilities frontier with constant opportunity cost is
a straight downward-sloping line.
Refer to the figure. At a price floor of $6, this market is experiencing
a surplus
Refer to the following figure. At a price of $15, this market is experiencing
a surplus.
Which of the following statements is normative?
d. Microeconomics is a great class.
The cost of a firm's inputs increased by 40%. As a result, output increased by 25%. This firm experienced
diseconomies of scale.
Firms producing an identical product in a competitive market are producing at a level of output that maximizes profit. The current market price is $4.50 per unit and the firms are producing at a long-run average cost of $3.50 per unit. Over the long-run one should expect
entry of new firms into this market
Examine the graph. Sellers who are unable to sell their good at a price floor of $6 may still be able to sell their good on the black market at a price of
less than $6
When a supplier has a limited ability to make quick adjustments to quantity supplied, the elasticity of supply is
less than 1
In which time period is demand most elastic?
long run
A price floor is a legally imposed ___________ price.
minimum
Copyright laws make the digital music you buy
nonrival and excludable.
If the cross-price elasticity of demand for two goods is zero, the two goods are
not related.
A firm is experiencing a loss of $5,000 per year when operating. The firm has fixed costs of $8,000 per year. The firm should _________ in the short run and should _________ in the long run.
operate; shut down
Price elasticity of supply is always positive except when supply is
perfectly inelastic.
Which of the following is an example of a private good?
pizza
Which of the following is NOT an example of a public good?
pools
Laws that prohibit price gouging are often politically
popular because consumers do not like having to pay more for a good in times of emergency, but result in product shortages
Refer to the graph below. The supply curve is upward sloping because
prices and quantity supplied move in the same direction.
The graph below illustrates the effect on the production possibilities frontier if the population grows, making more workers available. This new production possibilities frontier reflects the ability of society to
produce more wings and more pizza
The difference between the willingness to sell a good and the price that the seller receives for it is
producer surplus
Which of the following is incentivized by private property rights?
property maintenance
Cost-benefit analysis is used to determine whether the benefits of providing a ______________ outweigh the costs.
public good
Over a longer period of time, supply becomes
relatively more elastic.
In a competitive market, the price of the product is
set by market supply and demand
In a perfectly competitive market, the price of the product is
set by market supply and demand
Externalities are
sometimes negative and sometimes positive
For which of the following goods would you expect demand to be the most responsive to a rise in price?
spaghetti
The limiting of one's work to a particular area is referred to as
specialization.
Converse, an apparel company, has been fairly successful selling denim-colored college sportswear. Lydia sees an opportunity for profit and enters the market. After producing her profit maximizing level of output, she finds that her average total cost per unit is $40, her average variable cost per unit is $30, and the market price is $35. In the short run, Lydia should
stay in business even though she is suffering a loss
Which of the following is a solution to negative externalities?
taxes
Deadweight loss may occur in a market because
taxes increase the purchase price of a good, causing consumers to buy less and producers to supply less.
Based on the Coase theorem, private solutions to externalities will be impossible if
the number of parties involved is large.
The law of increasing opportunity costs states that
the opportunity costs rise as more of the good is produced
Which of the following is an example of the tragedy of the commons?
the overgrazing of common pastures shared by herders in pastoral communities
Public goods are ___________ in the market.
underproduced
In the long run, costs are
variable only.
Andrew paid $30 to buy a potato cannon, a cylinder that shoots potatoes hundreds of feet. He was willing to pay $45. When Andrew's friend Nick learns that Andrew bought a potato cannon, he asks Andrew if he will sell it for $60, and Andrew agrees, since he would have sold it for $45. Nick is thrilled, since he would have paid Andrew up to $80 for the cannon. Andrew is also delighted. What is Andrew's producer surplus from the resale?
$15
The cookie company in the mall hires workers to produce cookies. The workers are paid $75 per day, and the cost of renting the space in the mall is $250 per day. If two workers are hired, the variable costs are
$150
Andrew paid $30 to buy a potato cannon, a cylinder that shoots potatoes hundreds of feet. He was willing to pay $45. When Andrew's friend Nick learns that Andrew bought a potato cannon, he asks Andrew if he will sell it for $60, and Andrew agrees, since he would have sold it for $45. Nick is thrilled, since he would have paid Andrew up to $80 for the cannon. Andrew is also delighted. What is Nick's consumer surplus from the resale?
$20
Suppose the government decides the Big Mac is an American tradition. To recognize the value of the Big Mac, the government passes legislation making it illegal to sell a Big Mac for less than $8. The equilibrium price of a Big Mac is $4. As a result of the government legislation, and in the absence of a black market, the price of a Big Mac will be
$8
The table below shows the willingness of three people to sell their tutoring services. Calculate the producer surplus for Frank if the price of the tutoring is $18 per hour.
$8/hr
Billy Bob runs a seafood restaurant. Last year he earned $50,000 in revenue. He had explicit costs of $20,000. Billy Bob could have made $30,000 working for the county and could have received an additional $20,000 if he rented out his building and equipment. Calculate Billy Bob's economic profit.
-$20,000
At a price of $150, a cell phone company manufactures 200,000 units. At a price of $250, the company manufactures 400,000 units. What is the price elasticity of supply?
1.33
Suppose the firm whose demand and cost curves are represented in the table above operates in a perfectly competitive market. What is the profit-maximizing output?
25
A competitive firm maximizes profit at an output level of 500 units, market price is $24, and ATC is $24.50. At what range of AVC values for an output level of 500 would the firm choose not to shut down?
AVC < $24
Which of the following will cause a shift rightward in the supply curve for tobacco?
An improvement in the technology used in the production of tobacco
Look at the provided figure. What area(s) represent the tax revenue after the tax?
B + C
To maximize profits, firms expand output until
MR = MC
Suppose that the equilibrium price of a bike is $250. The government passes a law setting a maximum price of $150 for a bike. As a result of the legislation, there will be
a smaller number of mountain bikes sold than before the legislation
The marginal cost curve
intersects the ATC at its minimum point.
A pizza business has the cost structure described below. The firm's fixed costs are $20 per day. What are the firm's average fixed costs at an output of five pizzas?
$4
Billy Bob runs a seafood restaurant. Last year he earned $50,000 in revenue. He had explicit costs of $20,000. Billy Bob could have made $30,000 working for the county and could have received an additional $20,000 if he rented out his building and equipment. Calculate Billy Bob's implicit costs.
$50,000
Austin and Erin are willing to pay $10 and $9, respectively, for a ticket to a screening of a new movie. What is the total consumer surplus for both Austin and Erin if the market price of a ticket is $6?
$7
The price of peanut butter increases from $2.50 to $3.00 and the quantity of jelly demanded falls from 30 jars to 24 jars. Calculate the cross-price elasticity of demand.
-11/9
Suppose the price of IBM computers falls from $2,500 to $2,000 and the quantity demanded increases from 10,000 to 20,000. Calculate the price elasticity of demand.
. -3
Suppose that demand for automobiles increases by 25% when consumers' income increases by 20%. What is the income elasticity of demand for automobiles?
. 1.25
A local snow cone business sells snow cones in one size for $5. It has the following cost and output structure per hour. To maximize profit, the firm should produce how many snow cones per hour?
40
A semiprofessional baseball team near your town plays two home games each month at the local baseball park. They split the concessions 50/50 with the city, but keep revenue from ticket sales for themselves. The city charges the team $100 each month for the three-month season. The team pays the players and manager a total of $1,000 a month. The team charges $10 for each ticket, and the average customer spends $7 at the concession stand. Attendance averages 30 people at each home game. In order to break even, how many tickets does the team need to sell for each game?
41
Based on the figure below, what is the opportunity cost in terms of wings when producing 20 more pizzas if the economy is efficiently producing 150 wings and 50 pizzas?
60 wings
Look at the provided figure. What area(s) represent consumer surplus after the tax?
A
Which of the following firms participates in a competitive market?
A corn farmer at a farmer's market
Which of the following firms operates as a monopoly?
A local cable company
Look at the provided figure. What area(s) represent producer surplus after the tax?
D
The table below shows the daily production potential of two workers if they devote all their time to making either pizza or wings. Who has the absolute advantage at producing pizzas?
Debra Winger
The table below shows the daily production potential of two workers if they devote all their time to making either pizza or wings. Who has the absolute advantage at producing wings?
Debra Winger
According to the law of supply, what is the relationship between price and quantity supplied?
Direct
Look at the provided figure. What area(s) represent the deadweight loss after the tax?
E + F
Examine the two figures below. Which of these figures will experience a higher long-run growth rate, assuming their ratio of consumer goods to capital goods produced is constant over time?
Economy B, because it produces more capital goods relative to consumer goods.
Suppose that Coca Cola and Pepsi are substitutes in consumption. If the price of Coca Cola decreases, then which of the following graphs would be relevant for Pepsi?
Graph C
As a waiter you earn $60,000 per year, including tips. Someone offers you a new job as an economic consultant, which pays $100,000 per year. In order to be a consultant, you'll need to rent an office and purchase supplies and new computer equipment. We can conclude which of the following?
If the explicit cost for the consulting job is $25,000 per year, your economic profit is equal to $15,000.
According to the law of demand, what is the relationship between price and quantity demanded?
Inverse
Flour is a factor of production of cupcakes. How will an increase in the price of flour affect the market for cupcakes?
Overall supply will decrease.
Use the graph to answer the questions below. At what price is the firm experiencing an economic loss?
P3
Which of the new stadiums has seen the biggest increase in attendance?
Philadelphia
Which of the following statements is correct?
Price floors and price ceilings are typically imposed by the government
What must happen to the market price in order for a shortage to be eliminated?
Price must rise.
Refer to the following image. When a market is in equilibrium, which of the following is true?
Quantity supplied is equal to quantity demanded.
Assume that all fast-food restaurants employ many minimum wage workers. Suppose 20,000 people in Pennsylvania work in fast-food restaurants for the federal minimum wage of $7.25/hour. If the state of Pennsylvania increases its minimum wage to $9.00/hour, who will be better off? Who will be worse off?
Some minimum wage workers will be better off, some minimum wage workers will be worse off, and all fast-food restaurant owners will be worse off
Which of the following statements is true?
The AFC curve can never rise.
Which of the following is a common solution to the free-rider problem?
The government provides the good and then pays for its production through taxation.
A change in which of the following will cause a change in the quantity demanded of coffee?
The price of coffee
Based on the table below, which of the following statements is true?
The terms of trade will be less than 0.5 but greater than 0.33.
The term market failure refers to
a market that fails to allocate resources efficiently.
Rent control is an example of
a price ceiling
Examine the graph. Many consumers will be unable to buy the good at a price ceiling of $0.50 because of a shortage. However, black market purchases of the good will occur at a price of
above $0.50
In order for a price floor to be binding, it must be set
above the equilibrium price
Dasenbrock and Gauss farms are able to achieve huge cost savings as they increase their acreage. This would be referred to in economics as
achieving economies of scale.
Suppose that the equilibrium price of a bike is $250. The government passes a law setting a maximum price of $150 for a bike. As a result of the legislation, there will be
an excess demand for bikes.
Suppose the government decides the Big Mac is an American tradition. To recognize the value of the Big Mac, the government passes legislation making it illegal to sell a Big Mac for less than $8. The equilibrium price of a Big Mac is $4. As a result of the government legislation, there will be
an excess supply of Big Macs.
Which of the following would lead to the situation shown in the figure above?
an improvement in technology for production of both pizza and wings
If income increases by 10% and the demand for tuna decreases by 20%, tuna is a(n)
an inferior good
In an imperfect market, individual firms
are able to influence the price of their product
In the market portrayed in this graph, a nonbinding price floor of $2 will result in a price set
at $3.
A producer would decide to produce in a competitive market in which she will earn zero profit in the long run because
at zero profit, her revenue will cover all her costs, both explicit and implicit (opportunity cost).
Which of the following is a decision an Italian restaurant owner makes in the long run?
b. The decision to stay in business
Austin, Jensen, Matthew, and Walker can all produce matches, brushes, cans, and shirts. The table below identifies how many of each good they can make in a day if they devote themselves to producing only that good.
b. Walker
Based on the graph below, at a price of ___/hr neither Frank, Mitch, nor Beanie will tutor, but at a price of ___ /hr, all three of them will tutor.
below $10; above $30
Which of the following types of firm most closely fits the description of a competitive firm?
corn farmers
Economists use the concept of ceteris paribus to examine a change in ____________ in a model, while assuming that all other variables remain constant
c. one variable
Which of the following is a factor of production?
capital
Demand for a good is elastic if quantity demanded ________________ in response to a small price change.
changes significantly
If you were willing to pay $3.05 for a gallon of milk purchased at the grocery store but bought the milk for only $2.05, you have gained
consumer surplus amounting to $1.00.
The difference between the willingness to pay for a good and the price that is paid to get it is
consumer surplus.
Which of the following is an assumption that underlies the construction of a production possibilities frontier?
d. that the technology available for use in production remains constant
If competitive firms experience a loss, over the long run there will be a(n)
decrease in market supply to increase the market price
For a perfectly competitive firm, marginal revenue is
equal to price
A supply curve that has a __________ slope represents a more elastic supply curve.
flatter
In the example presented by this graph, at what number of workers does the point of diminishing marginal product occur?
fourth worker
In the case of negative externalities, social costs are ____________ internal costs.
greater than
The income elasticity of demand is _____________ for normal goods.
greater than zero
For a firm to have market power, it must
have some control over price.
The graph below portrays a market for a good whose consumption causes a positive externality. The curve marked Dinternal shows the market demand when consumers pay attention to only their internal benefits; the curve marked Dsocial shows demand when consumers observe social benefits. The socially optimal price is ______ than the market equilibrium price, and the socially optimal output level is _____ than the market equilibrium output level.
higher; higher
The graph below portrays a market for a good whose production causes a negative externality. The curve marked Sinternal shows the market supply when producers pay only their internal costs; the curve marked Ssocial shows supply when producers pay social costs. The socially optimal price is ______ than the market equilibrium price, and the socially optimal output level is _____ than the market equilibrium output level.
higher; lower
In a perfectly competitive market, the long-run market supply curve is
horizontal at the market price
For which of the following goods is supply the most responsive to a change in price?
hot dog vendor
Suppose that government officials in Arkansas decide to repeal the Tattoo Tax described below. If this tax is eliminated, we would expect total consumer surplus in the tattoo market to ___________________ because the deadweight loss in the tattoo market _________________________.
increase; decreases
