ECON FINAL

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If a firm collects $90 in revenue when it sells 4 units, $100 in revenue when it sells 5 units, and $105 in revenue when it sells 6 units, then one can infer the firm is a:

monopolist

if a firm collects $90 in revenue when it sells 4 units. $100 in revenue when it sells 5 units, and $105 is revenue when it sells 6 units, then one can infer the firm is a

monopolists

in many cities in the united states, a single firm provides electricity. those firms are

monopolists

a profit-maximizing perfectly competitive firm must decide:

only how much to produce, taking price as fixed

the percentage change in quantity supplied that results from a 1 percent change in price is known as the

price elasticity of supply

the cost benefit principle tells us that a firm should continue to expand production as a long as

price of a good is greater than its marginal cost

if a 5 percent increase in the price of oranges leaders to a one percent increase in the quantity supplied, the price elasticity of supply for oranges is

1/5

at what output level or levels are this firms owners doing as well as or better than they could do with the next best use of their resources

10, 15, and 20 units

Fran runs a doughnut shop in a tiny 3-person town. the table below shows the quantity demand by the three townspeople at various prices

16 doughnuts

How many hours a day should john spend cleaning windows?

A firm's total cost is represented by the following equation: TC=300+ 10Q, where Q represents the firm's output. Which of the following statements applies to this firm:

This firm benefits from economies of scale

One implication of the shape of the demand curve facing a perfectly competitive curve firm is that

if the firm increases its price above the market price, it will earn zero revenue

a benefit of an activity received by people not participating in the activity is called an:

positive externality

since the cost of using more of any resource is ________ viewing any resource's price as zero leads to ______

positive; overutilization

For the Fall semester, you had to pay a nonrefundable fee of $600 for your meal plan, which gives you up to 150 meals. If you eat all of the meals, your average cost for a meal is:

when the price of hot dogs is $1.50, 500 hot dogs are sold everyday. after the price falls to $1.35 each, 510 hot dogs are sold every day. At the original price, what is the price elasticity of demand for hot dogs?

0.2

Consider two restaurants located next door to each other: Quick Burger and The Sunshine Café. If Quick Burger opens a drive-through window, the increased traffic and noise will bother customers seated outside at The Sunshine Café. The table below shows the monthly payoffs to Quick Burger and The Sunshine Café when Quick Burger does and does not operate a drive-through window. If Quick Burger has the legal right to operate a drive-through window, then the Sunshine Café would have to pay Quick Burger as much as ______ per month to NOT operate a drive-through window.

$12,000

Pat earns $25,000 per year (after taxes), and Pat's spouse, Chris, earns $35,000 (after taxes). They have two pre-school -aged children. Childcare for their children costs $12,000 per year. Given that Chris doesn't want to stay home with the kids, regardless of what Pat does, Pat should stay home with the kids if, and only if, the value of Pat spending more time with the kids is greater than:

$13,000

John's benefit from his first hour cleaning windows is:

$14

What is the lowest price per window that john would be willing to accept to spend 4 hours per day cleaning windows?

$3.50

Pat used to work as an aerobics instructor at the local gym earning $35,000 a year. Pat quit that job and started working as a personal trainer. Pat makes $50,000 in total annual revenue. Pat's only out-of-pocket costs are $12,000 per year for rent and utilities, $1,000 per year for advertising and $3,000 per year for equipment. Pat's accounting profit is _______, and Pat's economic profit is _______. $50,000; $15,000 $34,000; -$1,000 $34,000; $15,000 $15,000; -$1,000

$34,000; -$1,000

Suppose that Tom bought a bile from Helen for $195. If Helen's reservation price was $185, and Tom's reservation price was $225, the total economic surplus from this transaction was:

$40

Suppose Island Bikes knows that customers whose reservation prices are at least $10 always rent bikes before noon, while those whose reservation prices are below $10 never do so. if island bikes charges a different price in the morning and in the afternoon, then what will be the total economic surplus

$49

Suppose island bikes knows that customers whose reservation prices are at least $10 always rent bikes before noon, while those who reservation prices are below $10 never do so. If island bikes charges a different price in the morning and in the afternoon, then what will be the total economic surplus?

$49

There would be an excess of supply of 25 at a price of ______

$50

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day. when the firm uses 4 employee hours, its total labor cost each day is:

$56

$64

The monopolist' s fixed cost is:

$64

in equilibrium price is ______ and equilibrium quantity is______.

$6; 4

suppose chris is potter who makes mugs. his total costs depend on the number of mugs he makes each day, as shown in the table the marginal cost if the 4th mug er day is _____

Suppose the most you would be willing to pay for a plane ticket home is $250. If you buy for $175, then your economic surplus is:

$75

if the quantity demanded of a good is Q when the price for the good is P, the price elasticity of demand for that good at that point is:

(P/Q)x (1/slope)

the slope of the demand curve (ignoring the negative sign) is:

0.5

Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College cost $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $15,000 per year. larrys opportunity cost of attending NoName U is:

20,000

Suppose Island Bikes, a profit-maximizing firm, is the only bike rental company in a small resort town. The marginal cost to Island Bikes of renting out a bike is $3, and Island Bikes has no fixed costs. Each day Island Bikes has six potential customers, whose reservations prices are listed below.

2; $6

If the price of cheese falls by 1 percent and the quantity demanded rises by 3 percent, then the price elasticity of demand for cheese is equal to:

if island bikes charges a single price to all of its customers, then how many bikes will it rent out each day?

if the monoploists marginal cost is constant and equal to $10, its profit maximizing level of output is

30 units

3; $12

This monopolist maximizes its profit by producing _____ units per day and charging a price of ______ per unit.

4; $18

If the marginal cost of production is constant at $3, the monopolist will maximize profit by producing ______ units, and charging a price of _________.

4; $7

if each villager is purely self-interested, how many goats will be sent onto the commons

suppose chris is potter who makes mugs. his total costs depend on the number of mugs he makes each day, as shown in the table if the market for mugs is perfectly competitive, and teh mugs sell for $8.50 each, then chris should make_______ mugs per day

price elasticity of demand at point A is:

5/2

Kate and Ali can live together a two-bedroom apartment for $600 per month, or they can each rent a one-bedroom apartment for $400 per month. Apart from the rent, they are indifferent between living together and living apart, except for one problem: Kate hates Ali's taste in music. Kate would be willing to pay up to $100 a month to avoid hearing Ali's music. Ali would give up listening to her music for no less than $300 per month. Which, if any, of the following ways of splitting the total monthly rent would induce them to live together?

Kate pays $250 per month and Ali pays $350 per month

Should john spend a third hour cleaning windows

No because the additional amount he would earn is $6, which is less than his opportunity cost of $7

No, because total payoffs are higher when Quick Burger does not operate a drive-through window.

Curly told Larry about his new business venture: Curly pays Acme International $1,000 per month for supplies, works out of his apartment on his own computer and earns a monthly revenue of $1,500. Should Larry quit his job and do what Curly is doing?

Not if Larry is earning more than $500 per month at his current job.

Yes, because Quick Burger's payoff is higher when it operates a drive-through.

relative to column C, column D represents

a decrease in supply

the long run is best defined as

a period of time sufficiently long that all factors of production are variable

given that most people like the smell of baking cinnamon rolls and dislike the smell of burning tires, baking cinnamon rolls generates _________ externality, and burning ties generates ________ externality

a positive; a negative

the suppler of a factor of production has a reservation price of $100. there are numerous potential buyers for this factor of production. the buyer with the highest reservation price is willing to pay at most $200 for this factor of production. if this factor of production is unique, then:

a transaction will occur and the price paid for the factor of production will be $200

on saturday, stan goes to the park to play with his saxophone. some of the people in the park love listening to stan play, while others find his music really annoying. in this case, stan's saxophone playing generates

both positive and negative externalities

the coase theorem states that if a private parties can negotiate the purchase and sale of the right to perform activities that cause externalities, then they

can always arrive at efficient solutions to the problems caused by externalities

one way for the government to increase economic efficiency would be for it to:

charge a toll to use the highway during rush hour

The responsiveness for the quantity demanded of one good to a change in the price of a different good is measured by the:

cross-price elasticity of demand

a decrease in supply is represented by a shift from:

curve B to curve A

the allocative functions of price is to

direct resources away from markets that are overcrowded and toward markets that are underserved

an imperfectly competitive firm faces a demand curve that is

downward sloping

accounting profit minus implicit costs equals

economic profit

if a firms production process exhibits increasing returns to scale, then reducing all the firms input by one-half will lead output to

fall by more than one-half

in perfectly competitive markets, an implication of entry and exit in response to economic profit and loss is that

firm will earn zero economic profit in the long run

Suppose that the market price for hot dogs sold by street vendors has just risen from $4.50 to $5.00, and that in response Curly has now begun operating a hot dog cart. We can assume that Curly's reservation price for hot dogs is:

greater than $4.50 but no more than $5.00

If the local slaughterhouse gives off an unpleasant stench, then the equilibrium quantity of meat will be ______ the quantity that maximizes total economic surplus.

higher than

If your income elasticity of demand for hot dogs is negative, then:

hot dogs are an inferior good for you

Economics is best defined as the study of:

how people make choices in the ace of scarcity and the implications of those choices for society as a whole

Tony notes that an electronics store is offering a flat $20 off all prices in the store. Tony reasons that if he wants to buy something with a price of $50, then it is a good offer, but if he wants to buy something with a price of $500, then it is not a good offer. This is an example of:

inconsistent reasoning; saving $20 is saving $20

relative to a monopolist charging a single price to all consumers, price discrimination ______ total economic surplus

increases

At this monopolist's profit-making level of output, it:

incurs an economic loss of $16 per day

if it is possible to make a change that will help some people without harming others, then the solution is

inefficient

Suppose the production of cotton causes substantial environmental damage because the pesticides used by cotton farmers often make their way into nearby rivers and streams, and are very harmful to fish and other wildlife. If cotton farmers do not have to pay for the environmental damage caused by the pesticides used to grow cotton, then the market equilibrium price will be ______ and the market equilibrium quantity will be ______.

inefficiently low; inefficiently high

The primary objective of most private firms is to

maximize profit

if the price of textbooks increases by one percent and the quantity demanded falls by one-half percent, then demand for textbooks is

inelastic

If demand is ______ with respect to price, a price increase will ______ total revenue.

inelastic; increase

if an increase in income leads to a decrease in the demand for ground beef, then ground beef is an

inferior good

both a perfectly competitive firm and a monopolist find that

it is best to expand production until the benefit and the cost of the last unit produced are equal.

Which of the following is NOT true of a demand curve?

it reflects sellers' reservation prices

which of the following is NOT true of a perfectly competitive firm?

it seeks to maximize revenue

which of the following is NOT true of a perfectly competitive firm?

it seeks to maximize revenue.

according to the law of diminishing returns, when some factors of production are fixed, in order to increase production by a given amount, a firm will eventually need to add successively:

larger and larger quantities of the variable factors of production

If individuals are rational, they should choose actions that yield the:

largest economic surplus

Suppose two demand curves intersect and so have a point in common. At that point, demand shown by the steeper curve will be ________ the flatter curve

less elastic than

if a production process exhibits diminishing returns, then as output rises:

marginal cost will eventually increase

for all firms, the additional revenue collected from the sale of one additional unit of output is termed

marginal revenue

if there is no charge to use the highway, then one would expect that __________ the socially optimal number of drivers will leave at 8 am because

more; each driver's use of the highway imposes an external cost on other drivers by increasing the commute time

suppose all firms in this industry have identical costs to this firm and are producing 15 units of output. one can predict that

new firms will enter the industry

Suppose Erie Textiles can dispose of its waste "for free" by dumping it into a nearby river. While the firm benefits from dumping waste into the river, the waste reduces the fish and bird reproduction. This causes damage to local fishermen and bird watchers. At a cost, Erie Textiles can filter out the toxins, in which case local fishermen and bird watchers will not suffer any damage. The relevant gains (in thousands of dollars) and losses for the three parties are listed below. Local fishermen and bird watchers would be willing to compensate Erie Textiles ______ for operating with a filter.

no more than $235 thousand dollars

Your classmates are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfares are $600, but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare. All other costs for the vacation are exactly $900. The most you would be willing to pay for the trip is $1400. Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation, whcih your parents are forcing you to attend. The round-trip airfares for Atlanta are $450. You should use the frequent flyer coupon to go to Miami?

no, your benefit is less than your cost

If the demand for a good decreases as income decreases, then the good is a(n):

normal good

a monopolistically competitive firm is one:

of many firms that sell products that are close but not perfect substitutes

adam smith coined the term "invisible hand" to describe the process by which the actions of independent, self- interested buyers and sellers will:

often lead to the most efficient allocation of resources

profit; $46

If the supply curve and the demand curve both shift to the left, then the new equilibrium:

quantity will be lower, but the direction of the price change is uncertain

The role that prices play in distributing scarce goods and services to those consumers who value them the most highly is known as the ___________ function of price

rationing

the role that prices play in distributing scarce goods and services to those consumers who value them the most highly is known as the ________ function of price

rationing

suppose all firms in a perfectly competitive industry are earning an economic profit. one would expect that, over time, the number of firms in the industry will ______ and the market price will ______

rise and fall

state college

if an activity generates a positive externality, the government can increase total economic surplus by ____- the activity, and if an activity generates a negative externality, the government can increase total economic surplus by _______ the activity

subsidizing; taxing

if the firm is earning zero economic profit then

the firms accounting profit is equal to the firms implicit clost

economies of scale exist when:

the average cost of production falls as output rises

According to the Cost-Benefit Principle, you should spend an additional hour studying for an exam if, and only if:

the benefits of studying for an additional hour exceeds the costs of studying for an additional hour

The price elasticity of demand is a measure of:

the change in quantity demanded of a good that results from a change in its price

Suppose there are ten people playing cards in a room. One of them wants to smoke a cigar; nine of them dislike the smell of cigar smoke. The smoker values the privilege of smoking at $5, and each of the other nine occupants of the room would be willing to pay fifty cents for clean air in the room. The rules governing use of the room state that smoking is not allowed unless everyone agrees to allow smoking. if all ten people can negotiate with each other at no cost, then which of the following outcomes is consistent with the coase theorem?

the cigar smoker will pay each of the other night people fifty-five cents, and they will agree to allow smoking

If one fails to account for implicit costs in decision making, then applying the Cost-Benefit rule will be flawed because:

the costs will be understated

The economic surplus of an action is:

the difference between the benefit and the cost of taking an action

Economic rent is:

the difference between the payment made to the owner of a factor of production and the owner's reservation price.

suppose a perfectly competitive firm and a monopolists are both charging $5 for their respective products. from this, one can infer that

the marginal benefit from selling an additional unit of output is $5 for the competitive firm and less $5 for the monopolists

the optimal quantity of a negative externality is zero if

the marginal cost of reducing the externality is zero.

The entire group of buyers and sellers of a particular good or service makes up:

the market

The opportunity cost of an activity includes the value of

the next-best alternative that must be forgone

in general, when the price of a fixed factor of production increases:

the profit-maximizing level of output does not change

As coffee becomes more expensive, Joe starts drinking tea instead of coffee. This is called:

the substitution effect of a price change

the tendency for a resource that has no price to be used until its marginal benefit falls to zero is referred to as

the tragedy of the commons

efficiency is an important goal because when markets are efficient

there are more resources available to achieve other goals

if the market equilibrium quantity is less than the social optimal quantity, one can infer that:

there is a positive externality associated with this good

if there is excess demand in a market, then this suggests that:

there is an opportunity for mutually beneficial trades

if all firms in a perfectly competitive industry are earning a normal profit, then

there is no incentive for firms to enter or exit the industry

Janie must choose to either mow the lawn or wash clothes. If she mows the lawn, she will earn $30, and if she washes clother, she will earn $45. She dislikes both tasks equally and they both take the same amount of time. Janie will therefore choose to ______ because it generates a ______ economic surplus.

wash clothes; bigger

your ecomonic profit last month was positive $600 then it must be true that

your implicit costs are $200 per month

an output level of 25 units, this firms accounting profit is ________ ad its economic profit is _____.

zero; -$8

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