EC 110 Final Review

figure 4-5 shows the market for apartments in springfield. recently, the government imposed a rent ceiling of $1,000 per month refer to figure 4-5. what is the value of the portion of producer surplus transferred to consumers as a result of the rent ceiling? -$40,000 -$100,000 -$125,000 -$140,000

$100,000

figure 4-5 shows the market for apartments in springfield. recently, the government imposed a rent ceiling of $1,000 per month refer to figure 4-5. with rent control, the quantity supplied is 200 apartments. suppose apartment owners ignore the law and rent this quantity for the highest rent they can get. what is the highest rent they can get per month? -$1,000 -$1,500 -$2,000 -$2,300

$2,000

figure 4-5 shows the market for apartments in springfield. recently, the government imposed a rent ceiling of $1,000 per month refer to figure 4-5. what is the value of consumer surplus after the imposition of the ceiling? -$120,000 -$230,000 -$270,000 -$430,000

$230,000

figure 4-5 shows the market for apartments in springfield. recently, the government imposed a rent ceiling of $1,000 per month refer to figure 4-5. what is the value of producer surplus after the imposition of the ceiling? -$40,000 -$100,000 -$300,000 -$430,000

$40,000

figure 4-5 shows the market for apartments in springfield. recently, the government imposed a rent ceiling of $1,000 per month refer to figure 4-5. what is the value of the deadweight loss after the imposition of the ceiling? -$50,000 -$125,000 -$175,000 -$260,000

$50,000

table 11-1 shows the technology of production at the matsuko's mushroom farm for the month of may. refer to table 11-1. what is the average product of labor when the farm hires 5 workers? -4 pounds -10.8 pounds -38.2 pounds -54 pounds

10.8 pounds

table 11-1 shows the technology of production at the matsuko's mushroom farm for the month of may. refer to table 11-1. diminishing marginal returns set in when the ______ worker is hired -2nd -3rd -4th -none of the above; the production function displays increasing marginal returns

3rd

figure 15-3 above shows the demand and cost curves facing a monopolist. refer to figure 15-3. suppose the monopolist represented in the diagram above produces positive output. what is the profit-maximizing/loss minimizing output level? -630 units -800 units -850 units -880 units

630 units

refer to figure 12-3. suppose the prevailing price is P1 and the firm is currently producing its loss-minimizing quantity. identify the area that represents the loss -P2deP1 -P3cbP1 -P3caP0 -0P1bQ1

P3cbP1

eco energy is a monopolistically competitive producer of a sports beverage called power on. table 13-2 shows the firm's demand and cost schedules. refer to table 13-2. what is the output (Q) that maximizes profit and what is the price (P) charged? -P=$55; Q=5 cases -P=$50; Q=6 cases -P=$45; Q=7 cases -P=$40; Q=8 cases

P=$50; Q=6 cases

figure 5-2 shows a market with a negative externality refer to figure 5-2. the efficient output level is -Qd -Qb -Qa -Qb -Qd

Qa

figure 5-2 shows a market with a negative externality refer to figure 5-2. the private profit maximizing quantity for the firm is -Qa -Qb -Qb - Qd -Qd

Qb

which of the following would cause a decrease in the supply of milk? -an increase in the price of cookies (assuming that milk and cookies are complements) -a decrease in the price of milk -an increase in the price of a product that producers sell instead of milk -an increase in the number of firms that produce milk

a decrease in the price of milk

which of the following is an example of positive technological change? -a firm offers workers a higher wage to work on weekends and at night. as a result, the firm is able to increase its weekly production of surf boards -a firms buys an additional machine that it uses to make surf boards. as a result, the firm is able to increase its weekly production of surf boards -a firm conducts a new advertising campaign. as a result, the demand for the firm's surf boards increases -a firm's workers participate in a training program designed to increase the number of surf boards they can produce a day

a firm's workers participate in a training program designed to increase the number of surf boards they can produce per day

compared to a monopolistic competitor, a monopolist faces -a more elastic demand curve -a more inelastic demand curve -a more elastic demand curve at a higher prices and a more inelastic demand curve at lower prices -a demand curve that has a price elasticity coefficient of zero

a more inelastic demand curve

the value of the four-firm concentration ratio that many economists consider indicative of the existence of an oligopoly in a particular industry is -anything greater than 10 percent -anything greater than 20 percent -anything greater than 30 percent -anything greater than 40 percent

anything greater than 40 percent

marginal revenue for an oligopolist is -identical to the demand for the firm's product -difficult to determine because the firm's demand curve is typically unknown -downward sloping beneath the firm's demand curve -horizontal on a price-quantity diagram

difficult to determine because the firm's demand curve is typically unknown

figure 13-8 shows cost and demand curves for a monopolistically competitive producer of iced tea. refer to figure 13-8. at the profit maximizing output level the firm will -earn a profit of $176 -break even -earn a profit of $88 -earn a profit of $60

earn a profit of $88

which of the following characteristics is not common to monopolistic competition and perfect competition? -firms act to maximize profit -entry barriers into the industry are low -the market demand curve is downward sloping -firms take market prices as given

firms take market prices as given

economies of scale can lead to an oligopolistic market structure because -if larger firms have lower costs, new small entrants will not be able to produce at the low costs achieved by the big established firms -if economies of scale are insignificant, only a few firms are able to produce at the low costs achieved by the big established firms -a few firms can force rivals to produce at low levels of output -a few firms can use high profits to keep out new entrants

if larget firms have lower costs, new small entrants will not be able to produce at the low costs achieved by the big established firms

a monopoly differs from monopolistic competition in that -a monopoly has market power while a firm in monopolistic competition does not have any market power -a monopoly can never make a loss but a firm in monopolistic competition can -in a monopoly there are significant entry barriers but there are low barriers to entry in a monopolistically competitive market structure -a monopoly faces a perfectly inelastic demand curve while a monopolistic competitor faces an elastic demand curve

in a monopoly there are significant entry barriers but there are low barriers to entry in a monopolistically competitive market structure

refer to figure 11-10. suppose that for the past 8 years the firm has been producing Qd units per period using plant size ATC4. now, following a permanent change in demand, it plans to cut production to Qc units. what will happen to its average cost of production? -in the short run, its average cost falls from $47 to $41, and in the long run, average cost falls even further to $37. -in the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $41 -in the short run, its average cost falls from $47 to $37, and in the long run, average cost rises to $41 -in the short run, the average cost rises from $47 to 455, and in the long run, average cost falls to $37

in the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $37

the demand for gasoline in the short run is -elastic because people can easily switch to public transportation -perfectly inelastic because people have no choice but to buy gasoline -unit-elastic because people tend to consume a stable amount of gasoline per period -inelastic because there are no good substitutes for gasoline

inelastic because there are no good substitutes for gasoline

when there is a negative externality, the private cost of production ________ the social cost of production -is greater than -is equal to -eliminates -is less than

is less than

if society decides it wants more of one good and all resources are fully utilized, then -it is unable to do this unless technology advances -additional resource supplies will need to be found -it has to give up some of another good and incur some opportunity costs -more unemployment will occur

it has to give up some of another good and incur some opportunity costs

refer to figure 12-1. if the firm is producing 700 units -it is making a profit -it is making a loss -it should cut back its output to maximize profit -it should increase its output to maximize profit

it should cut back its output to maximize profit

figure 13-8 shows cost and demand curves for a monopolistically competitive producer of iced tea. refer to figure 13-8. based on the diagram, one can conclude that -some existing firms will exit the market -new firms will enter the market -the industry is in long-run equilibrium -firms achieve productive efficiency

new firms will enter the market

refer to figure 13-5. the candy store represented in the diagram is currently selling Qa units of candy at a price of Pa. is this candy store maximizing its profit and if it is not, what would you recommend to the firm? -yes, it is maximizing its profit by charging the highest price possible -no, it is not; since its marginal cost is constant, it should produce and sell as much candy as it can. it should sell Qd units at a price of Pd -no, it is not; it should lower its price to Pd and sell Qc units -no; it is not; it should lower its price to Pb and sell Qb units

no; it is not; it should lower its price to Pb and sell Qb units

figure 15-6 shows the cost and demand curves for a monopolist. refers to 15-6. the profit maximizing output and price for the monopolist are -output=62; price=$24 -output=62; price=$18 -output=83; price=$22 -output=104; price=$20.80

output=62; price $24

refer to table 4-3. the table above lists the marginal cost of cowboy hats by the Waco kid, a firm that specializes in producing western wear. if the market price of the Waco kid's cowboys hats is $40 -the Waco kid will produce four hats -producer surplus from the first hat is $40 -producer surplus will equal $28 -there will be a surplus; as a result, the price will fall to $24

producer surplus will equal $28

refer to table 4-3. the table above lists the marginal cost of cowboy hats by the Waco kid, a firm that specializes in producing western wear. if the price of cowboy hats increases from $38 to $46 -consumers will buy no cowboy hats -the marginal cost of producing the third hat will increase to $46 -producer surplus will rise from $22 to $46 -there will be a surplus of cowboy hats

producer surplus will rise from $22 to $46

which of the following is an implicit cost of production? -interest paid on a loan to a bank -wages paid to labor plus the cost of carrying benefits for workers -the utility bill paid to water, electricity, and natural gas companies -rent that could have been earned on a building owned and used by the firm

rent that could have been earned on a building owned and used by the firm

which of the following offers the best reason why restaurants are not considered to be perfectly competitive firms? -restaurants do not sell identical products -restaurants compete in small market areas - neighborhoods and cities - rather than in regional or national markets. therefore, restaurants are not small relative to their market size -restaurants usually have entry barriers in the form of zoning restrictions and health regulations -restaurants have significant liability costs that perfectly competitive firms do not have; for example, customers may sue if they suffer from food poisoning

restaurants do not sell identical products

the law of one price states -federal state statutes that prohibit price discrimination -that all customers should pay the same price -that identical products should sell for the same price everywhere -government regulation of prices for all firms

that identical products should sell for the same price everywhere

the total amount of producer surplus in a market is equal to -the difference between quantity supplied and quantity demanded -the area above the market supply curve and below the market price -the area above the market supply curve -the area between the demand curve and the supply curve below the market price

the area above the market supply curve and below the market price

consumer surplus in a market for a product would be equal to ______ if the market price was zero. -zero -the area between the supply curve and the demand curve -the area above the supply curve -the area under the demand curve

the area under the demand curve

if the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots, then -the price elasticity of demand for teapots is greater than 1 in absolute value -the demand for teapots is unit-elastic -the price elasticity of demand for teapots is equal to zero -the price elasticity of demand for teapots is less than 1 in absolute value

the price elasticity of demand for teapots is greater than 1 in absolute value

lou buys a star wars: the force awakens poster from evan for $30 and resells it on eBay for $60. which of the following statements is false? -lou has earned some arbitrage profits, assuming that transactions costs are negligible -the transaction has made evan worse off because he undersold the poster -lou has probably incurred some costs in connect with this sale -it is possible that evan has earned some producer surplus from this transaction

the transaction has made evan worse off because he undersold the poster

firms price discriminate -to reduce the quantity sold so as to reduce production costs -to increase profits -to take advantage of customers -to increase total economic surplus

to increase profits

the law of one price holds exactly only if -antitrust laws are being enforced -buyers have complete information -transactions costs are zero -it is impossible for buyers to resell the good

transactions costs are zero

which of the following statements is false? -when marginal cost equals average total cost, average total cost is at its highest value -the marginal cost curve intersects the average variable cost curve and the average total cost curve at their minimum points -the difference between average total cost and average fixed cost is average variable cost -firms often refer to the process of lowering average fixed costs as "spreading the overhead"

when marginal cost equals average total cost, average total cost is at its highest value

a monopolist's profit maximizing price and output correspond to the point on a graph -where average total cost is minimized -where total costs are the smallest relative to price -where marginal revenue equals marginal cost and charging the price on the market demand curve for that output -where price is as high as possible

where marginal revenue equals marginal cost and charging the price on the market demand curve for that output