ECON 202 Exam 2

False

A buyer is willing to buy a product at a price greater than or equal to his willingness to pay , but would refuse to buy a product at a price less than his willingness to pay. True False

a common resource when it is congested, but it is a public good when it is not congested

A city street is a public good when it is congested, but it is a common resource when it is not congested a common resource when it is congested, but it is a public good when it is not congested always a public good , whether or not it is congested always a common resource, whether or not it is congested

False

A free rider is a person who pays for a good but does not receive the benefit of it. True False

True

A good that is excludable is one that someone can be prevented from using if she did not pay for it. True False

True

A study that compares the costs and benefits to society of providing a public good is called externality analysis. True False

buyers to demand a smaller quantity at every price

A tax on the buyers of cameras encourages buyers to demand a larger quantity at every price sellers to supply a smaller quantity at every price sellers to supply a larger quantity at every price buyers to demand a smaller quantity at every price

-$3,875

Billy's Bean Bag Emporium produced 300 bean bag chairs but sold only 275 of the units it produced. The average cost of production for each unit of output produced was $100. The price for each of the 275 units sold was $95. Total profit for Billy's Bean Bag Emporium would be $26,125 $28,500 $30,000 -$3,875

$1,000

Brady Industries has average variable costs of $ 1 and average total costs of $ 3 when it produces 500 units of output The firm's total fixed costs equal $ 2,000 $ 4 $ 1,000 $ 2

True

Depending on congestion, national parks can be either a common resource or a public good. True False

large management structures are bureaucratic and inefficient.

Firms may experience diseconomies of scale when large management structures are bureaucratic and inefficient. there are too few employees , and managers do not have enough to do. average fixed costs begin to rise again. they are too small to take advantage of specialization.

prices guide the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources

For private goods allocated in markets, the government guides the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources prices guide the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources prices guide the decisions of buyers and sellers and these decisions lead to an inefficient allocation of resources the government guides the decisions of buyers and sellers and these decisions lead to an inefficient allocation of resources

common resources

Goods that are rival in consumption but not excludable would be considered common resources private goods club goods public goods

True

Governments that chose to make endangered elephants private goods have met with more success protecting elephants than governments that chose to make killing elephants illegal. True False

the equilibrium price is above the price floor

If a price floor is not binding then the equilibrium price is above the price floor there will be a surplus in the market there will be a shortage in the market the equilibrium price is below the price floor

economies of scale

If long-run average total cost decreases as the quantity of output increases, the firm is experiencing diseconomies of scale fixed costs greatly exceeding variable costs economies of scale coordination problems arising from the large size of the firm

average total costs are minimized

If marginal costs equal average total costs, average total costs are falling average total costs are maximized average cost are rising average total costs are minimized

average total costs are minimized

If marginal costs equal average total costs, average total costs are rising average total costs are falling average total costs are minimized average total costs are maximized

Q3

If the price is P4 , a competitive firm will maximize profits if it produces Q1 Q2 Q3 Q4 Q5

$2 per unit

In a competitive market the price is $8. A typical firm in the market has ATC=$6, AVC=$5, and MC=$8. How much economic profit is the firm earning in the short run? $2 per unit $0 per unit $3 per unit $1 per unit

all of the above

In long-run equilibrium in a competitive market firms are operating at the minimum of their average-total cost curves the intersection of marginal cost and marginal revenue their efficient scale. zero economic profit. all of the above

an increase in the number of firms in the market but no increase in the price of the good

In the long-run market supply curve for a good is perfectly elastic, an increase in the demand for that good will, in the long run, cause an increase in the price of the good and an increase in the number of firms in the market an increase in the price of the good but no increase in the number of firms in the market no impact on either the price of the good or the number of firms in the market an increase in the number of firms in the market but no increase in the price of the good

True

One benefit of the patent system is that it encourages the production of technical knowledge. True False

Q3

Refer to Figure 10-2 . Without government intervention , the equilibrium quantity would be Q2 Q3 Q4 Q1

Q5

Refer to Figure 10-4 Graph ( b ) and Graph ( c ) . The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack Therefore , the socially optimal quantity of smokestack scrubbers is represented by point Q2 Q4 Q3 Q5

A

Refer to Figure 13-2 Which of the curves is most likely to represent average fixed cost ? A B C D

Figure 2

Refer to Figure 13-4 . Which of the figures represents the total cost curve for a typical firm? Figure 3 Figure 4 Figure 1 Figure 2

constant returns to scale

Refer to Figure 13-6 At levels of output between M and N, the firm experiences both the benefits of specialization and diminishing marginal productivity. diseconomies of scale. economies of scale. constant returns to scale.

Above $13

Refer to Figure 14-1- The firm will earn a positive economic profit in the short run if the market price is less than $13 but more than $6 . exactly $13 less than $6 above $13

Have zero economic profit

Refer to Figure 14-7. When the market is in long run equilibrium at point W in graph ( b ) , the firm represented in graph ( a ) will exit the market have a negative accounting profit have a zero economic profit choose to increase production to increase profit

D+H+F

Refer to Figure 7-9 . At equilibrium , producer surplus is represented by the area D+H+F F F+G D+H+F+G+I

False

Refer to Table 11-2 Suppose the cost to clean the lake is $12 per hour and that the residents have agreed to split the cost of cleaning the lake equally. The number of cleaning hours that maximizes total surplus of Widgeapolis is 7 hours. True False

3

Refer to Table 13-12 Firm 4's efficient scale occurs at what quantity? 3 2 5 4

$100

Refer to Table 13-7 . What is the value of C? $100 $25 $50 $200

$150

Refer to Table 13-7 What is the value of F? $200 $100 $150 $50

$18,000

Scenario 13-1 Korie wants to start her own business making custom furniture . She can purchase a factory that costs $ 400,000 . Korie currently has $ 500,000 in the bank earning 3 percent interest per year. Refer to Scenario 13-1- Suppose Korie purchases the factory using $200,000 of her own money and $200,000 borrowed from a bank at an interest rate of 6 percent . What is Korie's annual opportunity cost of purchasing the factory ? $15,000 $3,000 $6,000 $18,000

$130

Scenario 13-3 Ziva is an organic lettuce farmer , but she also spends part of her day as a professional organizing consultant . As a consultant , Ziva helps people organize their houses. Due to the popularity of her home-organization services, Farmer Ziva has more clients requesting her services than she has time to help if she maintains her farming business. Farmer Ziva charges $25 an hour for her home-organization services. One spring day , Ziva spends 10 hours in her fields planting $ 130 worth of seeds on her farm . She expects that the seeds she planted will yield $300 worth of lettuce . Refer to Scenario 13-3- Ziva's accountant would calculate the total cost for the day of farming to equal $130 $380 $25 $300

$1,000

Scenario 14-1 Assume a certain firm in a competitive market is producing Q = 1,000 units of output . At Q = 1,000 , the firm's marginal cost equals $ 15 and its average total cost equals $ 11 . The firm sells its output for $ 12 per unit . Refer to Scenario 14-1- At Q = 1,000 the firm's profits equal $1,000 -$200 $3,000 $4,000

False

Studies by economists have found that a 10 percent increase in the minimum wage decreases teenage employment 10 percent True False

16 units of output

Suppose a certain firm is able to produce 165 units of output per day when 15 workers are hired. The firm is able to produce 181 units of output per day when 16 workers are hired, holding other inputs fixed. The marginal product of the 16th worker is 181 units of output 16 units of output 10 units of output 11 units of output

$10 and 100 units

Suppose a firm in a competitive market earned $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold? $10 and 100 units $5 and 50 units $5 and 100 units $10 and 50 units

Corn and satellite radio

Suppose a firm in each of the two markets listed below were to increase its price by 25 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed might not? Corn and satellite radio Restaurants and smartphones Rice and soybeans Electricity and natural gas

$250

Suppose a tax of $5 per unit is imposed on a good , and units . The tax decreases consumer surplus by $450 and decreases producer surplus the tax causes the equilibrium quantity of the good to decrease from 200 units to 100 by $300 The deadweight loss from the tax is $500 $750 $250 $1,000

Is more elastic than the short run market supply curve

The long run market supply curve is less elastic than the short run market supply curve has the same elasticity as the short run market supply curve is always perfectly elastic is more elastic than the short run market supply curve

the Tragedy of the Commons

The overuse of a common resource relative to its economically efficient use is called the free-rider problem cost-benefit analysis the Tragedy of the Commons a public good

clean air and clean water

The parable called the Tragedy of the Commons applies to goods such as tornado sirens and basic research antipoverty programs and national defense clean air and clean water fire protection and cable TV

The sixth worker

The sixth worker Refer to Table 13-5 . The Wooden Chair Factory experiences diminishing marginal product of labor with the addition of which worker? The third worker The fifth worker The sixth worker The fourth worker

$110

Tom's Tent Company has total fixed costs of $300,000 per year. The firm's average variable cost is $80 for 10,000 tents. At that level of output, the firm's average total costs equal $90 $100 $80 $110

$30,000

Use the following information to answer question. Madelyn owns a small pottery factory. She can make 1,000 pieces of pottery per year and Osell them for $100 each It costs Madelyn $20,000 for the raw materials to produce the 1,000 pieces of pottery. She has invested $100,000 in her factory and equipment : $50,000 from her savings and $50,000 borrowed at 10 percent ( assume that she could have loaned her money out at 10 percent too ). Madelyn can work at a competing pottery factory for $40,000 per year. The economic profit at Madelyn's pottery factory is $70,000 $75,000 $80,000 $35,000 $30,000

regardless of how the tax is levied

When a tax is levied on a good , the buyers and sellers of the good share the burden, provided the tax is levied on the buyers regardless of how the tax is levied provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers provided the tax is levied on the sellers

regardless of how the tax is levied

When a tax is levied on a good the buyers and sellers of the good share the burden, provided the tax is levied on the sellers provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers regardless of how the tax is levied provided the tax is levied on the buyers

A grain farmer in Illinois

Which of the following firms is the closest to being a perfectly competitive firm? Microsoft Corporation The campus bookstore Ford Motor Company A grain farmer in Illinois

a national park

Which of the following is an example of a common resource? a national park iron ore fireworks display national defense

The number of satellites increases to the point where they begin running into each other.

Which of the following is an example of the Tragedy of the Commons? The number of satellites increases to the point where they begin running into each other. The number of professional football teams increases to the point where the quality of the games decreases as does television viewership. Disney World becomes so crowded that it institutes a lottery for admissions. A tiger breeding program becomes so successful that local zoos have to build additional exhibits so that visitors can view the cats.

Some buyers exit the market

Which of the following is true when the price of a good or service rises? The total consumer surplus in the market increases The total value of purchases before and after the price change is the same Buyers who were already buying the good or service are better off Some buyers exit the market

People do not have to pay an explicit fee to enjoy these goods

Which of the following is usually true about government-provided goods? These goods are not scarce These goods have a zero opportunity cost The invisible hand is at work to ensure these goods are provided in the market People do not have to pay an explicit fee to enjoy these goods