ECON 2302

For a good to be efficiently provided by the private market, it must be:

rival in consumption and excludable.

(Figure: Marginal Benefit Curves) Use the accompanying graph, which shows Becca and Marcella's marginal benefit curves for slices of cheesecake, to answer the question. How many slices will Becca and Marcella purchase if the market price is $3? *Lines intersect at $1, 6 Quantity*

six

Table: Demand and Total Cost for Asgard Quantity (Megawatts) 1$550 $1,000 2 500 1,075 3 450 1,200 4 400 1,375 5 350 1,600 6 300 1,875 7 250 2,200 8 200 2,575 (Table: Demand and Total Cost for Asgard) Use Table: Demand and Total Cost for Asgard. Valkyrie runs a natural monopoly that produces electricity for a small mountain village near Asgard. The table shows the demand facing Valkyrie and Valkyrie's total costs. The marginal revenue of the fifth unit of output is:

$150.

(Figure: Wireless Keyboard Market) Use the graph to calculate the consumer surplus when the market is in equilibrium. * $10, 100 Quantity, $15, 150 Quantity, $20, 200 Quantity*

$2,000

Pedro attends a university that provides antivirus software to all students, faculty, and staff for their personal computers as well as all university-owned computers. Why would the university pay for the protection of the personal computers of students, faculty, and staff?

It reduces the number of viruses on university-owned computers by reducing the probability that viruses will spread through files transferred from personal computers to university-owned computers and systems.

As the price of scanners with high-resolution cameras falls, Ford begins using them instead of human inspectors to check the quality of the painted surfaces of its cars. What is the relationship between capital and labor in this example?

Labor and capital are substitutes in production.

What impact does price discrimination have on the quantity a company sells?

The quantity increases.

Which statement makes use of positive analysis?

The rate of inflation is 4%.

If a new company enters a product market, what will happen to the existing companies in the market?

Their demand curves will shift to the left.

What happens in the labor market for biologists when wages in other occupations fall?

There is a rightward shift of the supply curve.

Which will give the owners of Jenning's Java, a coffee roasting factory, an incentive to hire more workers?

an increase in the market labor supply of workers with the skills Jenning's requires

(Figure: Price Discrimination 2) The following figure shows a business that price discriminates. The business will produce at output level C. What range of buyers will be given a discount so that they are induced to buy the good?

between B and C

Alex and Marilyn started Ono Yo, an organic and fresh fruit frozen yogurt truck. As the demand for organic and healthier desserts rises, the demand for Ono Yo's products grows. Because of the growth in demand for Ono Yo's products, Alex's and Marilyn's:

demand for workers increases.

(Figure: Supply Curve 2) Use the supply curve for bottles of dish soap in the graph to answer the question. If 15 bottles are sold at a price of $8, what is the total producer surplus? *$8, 15 Quantity* Red Supply line

$45

Marginal Social Cost = $2 Price, 0 Quantity) Demand Blue Line $6 Price, 0 Quantity) (Figure: Market 3) The graph shows the marginal social cost, demand, and supply curves in the cinnamon roll market. A corrective tax of $_____ per unit will move the cinnamon roll market to the socially optimal output of _____ units.

2; 8

Which statement is an accepted insight into imperfect competition?

A seller's best choice depends on the actions that other businesses take.

What level of market power exists for sellers in a perfectly competitive market?

All sellers lack market power.

Which statement is TRUE?

If MR = MC, then the firm is at the profit-maximizing level of output.

In what two ways can a company's reputation be a barrier to other companies entering its market?

It can keep customers loyal and intimidate rivals with the threat of being crushed.

What is the impact of higher wages on the labor supply, according to the income effect?

Leisure is more attractive.

The Rational Rule for Society is to produce that amount of a good where the marginal social benefit of pollution is _____ the marginal social cost of pollution.

equal to

When a company owner practices perfect price discrimination, the marginal revenue of an extra unit sold:

equals its price.

A cost imposed on bystanders is a(n) _____ cost.

external

When a good is nonrival and nonexcludable, it suffers from the _____ problem.

free-rider

Sellers in _____ markets face a less stark trade-off between higher prices and higher quantity than sellers in perfectly competitive markets. As a result, they can _____.

imperfectly competitive; earn higher profits

Perfect price discrimination could be referred to as:

individual pricing.

Which is NOT an outcome of a market where sellers have market power?

lower costs

The options for rideshare transportation in your city are Uber and Lyft. The market structure is:

oligopoly.

The Rational Rule for Entry says that a seller should enter a market when:

price exceeds average cost.

Producer surplus for an individual seller of a good is the:

price received for selling the good minus the marginal cost of the good.

Volvo invented the three-point safety seatbelt in 1959, but rather than keeping its design a secret or charging a licensing fee, Volvo made the patent public so that other car manufacturers could produce safer vehicles. The three-point safety belt has since saved hundreds of thousands of lives. Volvo chose to gift their design patent because they recognized that scientific research is a _____ and therefore usually _____ by the free market.

public good; underproduced

What type of good is nonrival and nonexcludable?

public goods

Adele wants to take some online classes this summer. Her marginal benefit is $1,000 from the first class, $800 from the second, $700 from the third, and $500 from the fourth. If online classes cost $750, Adele will take _____ online classes, and her consumer surplus will be _____.

two; $300

In which product line is perfect price discrimination MOST feasible?

used car sales

If the market output is not efficient, which statement must be TRUE?

Economic surplus is not maximized.

When government policies lead to outcomes that are worse than those that would occur in unregulated markets:

there is government failure.

When setting prices for different groups of customers, a manager should charge higher prices for groups that:

value the product more.

The Rational Rule for Sellers is that sellers should choose the quantity _____ and choose the price _____.

where marginal revenue equals marginal cost; that is on the seller's demand curve for that quantity

Several years ago, a group of former undergraduates sued 16 prestigious universities, alleging that they engaged in price fixing by agreeing to limit financial aid, thereby raising the price of attendance. If the accusation were deemed true, the universities would be guilty of:

collusion

If wages fall for surgeons but not for family practice doctors, there will be a(n) _____ in the market for surgeons and a(n) _____ in the market for family practice doctors.

decrease in quantity supplied; rightward shift in labor supply