Econ 101 Exam #2 - Wright

Examine the figure The Market for MP3 Players. Assume that Sd represents the domestic supply curve and Dd represents the domestic demand curve. In the market for MP3 players, if the world price equals $100 and there is free trade, what is the gain in consumer surplus?

$1.75 million

Examine the figure The Market for MP3 Players. Assume that Sd represents the domestic supply curve and Dd represents the domestic demand curve. In the market for MP3 players, the autarky price equals _____.

$110

Examine the figure The Marginal Cost Curve. According to the marginal cost curve, the approximate total cost of mowing seven lawns is:

$113

Sasha buys a warm soda and a slice of cold pizza. The marginal utility from a soda is 40, and the price of the soda is $1. The marginal utility from a slice of pizza is 80. Because Sasha always chooses the utility-maximizing choice, the price of a slice of pizza must be:

$2

Examine the figure The Marginal Cost Curve. According to the marginal cost curve, the total cost of mowing four lawns is

$50

Examine the table Marginal Utility per Dollar of M&Ms. Andy's total utility from eating snack-size bags of M&Ms is given in the table. The price of M&Ms is $2 per bag. Andy's marginal utility per dollar of the fifth bag of M&Ms is:

0.5.

Faruq spends all of his income on two goods: tacos and milkshakes. His income is $100, the price of tacos is $10, and the price of milkshakes is $2. Put tacos on the horizontal axis and milkshakes on the vertical axis. The horizontal intercept for Faruq's budget line is equal to _____ tacos.

10

Faruq spends all of his income on two goods: tacos and milkshakes. His income is $100, the price of tacos is $10, and the price of milkshakes is $2. Put tacos on the horizontal axis and milkshakes on the vertical axis. If Faruq spends all of his income, the opportunity cost of one taco equals _____ milkshakes

5

Examine the figure Income Tax Payments. Which panel or panels best represent the effects of a proportional income tax?

Constant percentage relative to income

Marginal cost can be calculated as:

Delta TC/ Delta Q, where TC is total cost and Q is output; Delta VC/ Delta Q, where VC is variable cost and Q is output; and as the slope of the total cost curve.

Which statement is true of the relationship between accounting profit and economic profit?

Economic profit is less than accounting profit if implicit costs exist

Examine the figure Income Tax Payments. Which panel or panels best represent the effects of a regressive income tax?

Income Tax flattens out as income increases

Examine the figure Income Tax Payments. Which panel or panels best represent the effects of a progressive income tax?

Income tax increases as income increases

Examine the figure The Market for MP3 Players. Assume that Sd represents the domestic supply curve and Dd represents the domestic demand curve. In the market for MP3 players, if the world price equals $100 and there is free trade, which outcome occurs?

Producer surplus is reduced

When total utility is at a maximum, marginal utility is:

Zero

A price control is

a legal restriction on how high or low a price in a market may go

The costs economists use in the concept of economic profit are:

accounting costs and implicit costs (that is, the value of the best opportunity forgone).

The average total cost of producing cell phones in a factory is $20 at the current output level of 100 units per week. If fixed cost is $1,200 per week:

average variable cost is $8.

Suppose the Jamaican government sets coffee prices at $1 per pound, when the market price is $10. The government's actions will:

cause coffee shortages even in a coffee-rich country

. When the government imposes an excise tax in a market with a downward-sloping demand curve and an upward-sloping supply curve:

consumer surplus falls, producer surplus falls, and a deadweight loss is created.

The government decides to impose a price ceiling on a good because it thinks the market-determined price is "too high." If the government imposes the price ceiling

consumers will respond to the lower price and wish to purchase more of the good than at the equilibrium price.

The term diminishing returns refers to a:

decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant.

Examine the table Marginal Utility per Dollar of M&Ms. Andy's total utility from eating snack-size bags of M&Ms is given in the table. The price of M&Ms is $2 per bag. If the price of M&Ms increases to $3 per bag, Andy's marginal utility per dollar for each bag of M&Ms will:

decrease.

If an excise tax is imposed on wine and collected from the consumers, the _____ curve will shift _____ by the amount of the tax.

demand; downward

Accounting profit differs from economic profit because:

economic costs are generally higher than accounting costs because economic costs include all opportunity costs, whereas accounting costs include explicit costs only.

A cost that does not depend on the quantity of output produced is called a(n):

fixed cost.

An input whose quantity is fixed for a period of time is known as a:

fixed input.

Suppose the government sets a price floor below the current price of the good. This price floor will:

have no effect on the price of the good

The fixed cost curve is:

horizontal.

Examine the figure The Market for MP3 Players. Assume that Sd represents the domestic supply curve and Dd represents the domestic demand curve. In the market for MP3 players, if the world price equals $100 and there is free trade, consumer surplus _____ and producer surplus _____ compared to autarky.

increases; decreases

Marginal benefit:

is the addition to total benefit due to undertaking one more unit of an activity

An individual gets 5 units of utility from one slice of pizza and 9 units of utility from two slices of pizza. The principle of diminishing marginal utility implies that the total utility from three slices of pizza will be:

less than 13 units of utility.

The long run is a period that is:

long enough to vary the quantities of all factors of production.

The law of diminishing marginal utility indicates that the slope of the marginal utility curve eventually becomes:

negative.

If the government imposes a $5 excise tax on leather shoes and the price of leather shoes does not change:

producers are paying all of the tax

Rent controls set a price ceiling below the equilibrium price and therefore:

quantity demanded exceeds the quantity supplied.

In economic analysis, the principle of marginal analysis refers to the:

result that the optimal quantity of an activity is that at which marginal benefit is equal to marginal cost

An excise tax that the government collects from the producers of a good

shifts the supply curve upward.

In the short run:

some inputs are fixed and some inputs are variable.

One of Jessuina's New Year's resolutions was to exercise more, so she bought an annual membership to the local gym that allows unlimited visits with no additional cost per visit. Unfortunately, the gym is so crowded and noisy that Jessuina leaves every day with a headache without working out at all. According to marginal analysis, Jessuina should:

stop using the gym.

The likely result of a price floor is a:

surplus of the good at a price above the market equilibrium price

A persistent shortage may occur if

the government imposes a price ceiling.

The market for apples is in equilibrium at a price of $0.50 per pound. If the government imposes a price floor in the market at a price of $0.40 per pound, then:

the price floor will not affect the market price or output.

Jacquelyn is a student at a major state university. Which is NOT an example of an explicit cost of her attending college?

the salary that she could have earned working full-time

The sum of fixed and variable costs is _____ cost.

total

Average variable cost is

total variable cost divided by output.

An input whose quantity the firm can vary at any point in time is known as a:

variable input.

Diminishing returns to an input occur:

when some inputs are fixed and some are variable

Tax incidence refers to:

who really pays the tax

Examine the figure The Market for MP3 Players. Assume that Sd represents the domestic supply curve and Dd represents the domestic demand curve. In the market for MP3 players, if the world price equals $100 and there is free trade, this country:

will import 150,000 MP3 players