ECO2023 Practice Quiz Questions Pt 2

Use the table below to answer the following question. Units of Output Total Fixed Cost Total Variable (dollars) (dollars) Cost 1 150 50 2 150 96 3 150 140 4 150 180 What is the marginal cost of producing the third unit of output?

-$44

If fixed costs are $200,000 and variable costs are $30 per unit over the relevant range of output, when 10,000 units are produced, the average total cost will be?

-$50.

Which of the following best explains why making air travel completely safe is not efficient?

-After some level of safety is reached, making airplanes even safer is not worth the opportunity cost that would be incurred.

Which of the following is a true statement regarding why the government produces public goods?

-Because it is difficult to exclude those who do not pay for public goods

Which of the following must be true if average total costs are declining?

-Marginal cost is less than average total cost

If Mason's marginal benefit derived from the consumption of another candy bar is greater than the price of the candy bar,?

-Mason will increase his total satisfaction by purchasing the candy bar.

Which of the following would be the best example of consumer surplus?

-Monty pays $8 for a haircut that is worth $10 to him.

Which of the following correctly describes the external benefit resulting from an individual's purchase of a winter flu shot?

-The flu shot reduces the likelihood others will catch the flu.

Suppose paper pulp mills are permitted to emit harmful pollutants, free of charge, into the air. How will the price and output of paper in a competitive market compare with their values under conditions of ideal economic efficiency?

-The price will be too low, and the output will be too large.

A good with a high income elasticity is generally considered to be?

-a luxury good.

If the income elasticity of a good is positive, we can conclude that the good is?

-a normal good.

In the short run, the firm's average fixed costs?

-always decline as output increases.

The imposition of price ceilings on a market often results in?

-an increase in expenditures in the black market.

In the supply and demand model, a subsidy granted to buyers is illustrated by?

-an upward shift in the demand curve, by the per unit amount of the subsidy.

Diminishing marginal utility means that?

-as you consume more of a good, other things constant, the additional satisfaction you obtain from each additional unit of the good tends to fall.

When government gives a subsidy to buyers of good X, the benefits of the subsidy flow to?

-both the buyers and sellers of good x, and the distribution of the benefits will be dependent on the elasticity of demand and the elasticity of supply.

The more elastic the supply of a product, the more likely it is that the?

-burden of a tax on the product will fall on buyers.

Which of the following is most likely to reduce the incidence of employee shirking?

-closely relating the pay of workers to their productive contribution

If a 10 percent rise in price leads to a reduction in quantity demanded of more than 10 percent?

-demand is elastic.

When total revenue minus total economic cost is equal to zero, the firm is?

-earning the normal profit rate.

If people spend 30 percent less on baseball tickets when movie prices decline 15 percent, the price elasticity of demand for baseball tickets at these prices must be?

-elastic

If people buy less flowers at every price when their incomes fall, then?

-flowers are a normal good.

The more elastic the supply of a product, the more likely that the actual benefit of a subsidy granted of the product will?

-go to buyers

A tax on the buyers of coffee will?

-increase the price of coffee paid by buyers, decrease the net price of coffee received by sellers, and decrease the equilibrium quantity of coffee.

Larger firms will often have lower minimum per-unit costs than smaller firms because?

-large-scale output allows greater specialization for both labor and machines in the production process.

Which of the following would be a protective function of government?

-legal enforcement of contracts and rules against fraud

The market pricing system corrects an excess supply by?

-lowering the product price and decreasing producer profits.

When the marginal product of labor diminishes,?

-marginal cost rises.

A local doughnut shop produces about 600 dozen doughnuts daily. If flour prices increase 20 percent?

-marginal cost, average variable cost, and average total cost will shift up.

Studies indicate that the demand for fresh tomatoes is much more elastic than the demand for salt. These findings reflect that?

-more good substitutes exist for fresh tomatoes than for salt.

When a shortage of a good is present due to a price ceiling?

-non-price factors, such as discrimination or waiting in line, will play a greater role in the allocation of the good

If Faye experiences a decrease in her income, we would expect that Faye's demand for?

-normal goods will decrease.

There is substantial agreement among scholars that at least two functions of government are legitimate. These two functions are the?

-protection of the rights of individuals to their person and property -provision of goods that cannot easily be provided through markets.

If an economic action generates more costs than benefits, the action?

-should not be undertaken from an efficiency standpoint.

Suppose that a tax is placed on a particular good. If the sellers end up bearing most of the tax burden, this indicates that the?

-supply is more inelastic than demand.

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Marginal cost is best defined as?

-the amount added to total cost when one more unit of output is produced

As more and more resources are dedicated to an activity?

-the benefits will become smaller and smaller while the costs will rise.

The short run is a time period such that?

-the existing firms in the market do not have sufficient time to increase the size of their existing plant or builda new factory.

When a government subsidy is granted to the sellers of a product, buyers can end up capturing some of the benefit because?

-the market price of the product will fall in response to the subsidy

When the free-rider problem exists,?

-the market will devote too few resources to the production of the good

A disadvantage of team production compared to contracting out is that?

-the problem of shirking must be more carefully addressed with team production.

Black markets that operate outside the legal system are often characterized by?

-the use of violence as a means of settling disputes.

An income tax is defined as regressive if?

-those with higher incomes pay a lower percentage of their incomes in taxes than those with low incomes.

Economic profit is?

-total revenues minus total costs.

The statutory incidence (or burden) of a tax refers to?

-who the tax is legally imposed on.

Suppose that the federal government levies a 50 cent excise tax on gasoline and that the demand for gasoline is highly inelastic while the supply is highly elastic. Under these circumstances, the actual burden of the tax?

-will fall primarily on consumers.