Econ Final
an optimal Pigouvian tax of what per ton can move this market to the socially optimal quantity of pollution
$15
in the absence of gov. action, the marginal social cost of pollution in the graph to the right will exceed the marginal benefit of pollution by:
$25 per ton
given an interest rate of 4%, the present value of a future payment of $10,000 to be paid in 5 years is
$8,219
the cozy furniture store estimates that it can sell 20 chairs per day, at $500 per chair, or 30 chairs for $300 per chair. using the midpoint formula, you can calculate that the price elasticity of demand for these chairs is
-0.8
suppose that a video poker game has a 30% chance of paying $1, a 10% chance of paying $2 and a 4% chance of paying $5, and a 1% chance of paying $10. if you have to pay $1 for each chance, the expected return is:
-20%
suppose at a price of $10 the quantity demanded is 100. when the price falls to $8, the quantity demanded increases to 130. the (absolute value of the) price elasticity of demand (using the midpoint formula) between the prices of $10 and $8 is approx:
1.17
if england and portugal each fully specialized according to comparative advantage, then the total production of both would be
1000 mb vegetables & 1600 mb grain
PPF for portugal veggies on y axis grains on x
1000 y 1500 x 7 -2/3 slope
how much is the firms daily fixed cost?
120
what is the average variable cost for producing 6 units?
30
the total demand for gadgets is shown in the table to the right, and supply is dominated by two firms producing at a constant marginal cost of $2 each. as a collusive duopoly, they would supply ___. if they engaged in bertrand competition, they would supply ___. if they engaged in cournot competition, they would supply ____.
400 800 600
what is the marginal cost of producing 6 units?
50
PPF for england veggies on y axis grain on x
800 y axis 1600 x axis 7 -1/2 slope
if england and portugal each put half of their workers into the production of each good, then the total production of both would be
900 mb vegetables & 1550 mb grain
the profit maximizing quantity for the monopolistic to the right is the one indicated by the distance:
J
Assume a small firm's total cost (TC) depend on its quantity (Q) of output as shown in the table Q-TC 0 -$120 2 -$160 4-$200 6-$300 8-$480 graph the firms ATC, AVC & MC curves
MC: starts at 4 straight line (upward), ends at 8 AVC: starts at 2, horizontal line till 4, upward from 4-8 ATC: starts high top of graph at 2, drops from 2-4, horizontal from 4-6, upward from 6-8
when this monopolistic is in equilibrium (that is, maximizing its economic profit), its total profit is the area of the rectangle
SBDP
when labor markets are perfectly competitive, labor unions increase wages, increase unemployment, and make the market inefficient. when there is monopsony, unions can negotiate wages closer to the efficient amount
True
a newspaper story recently reported that the price of new cars has decreased, and the quantities of new cars sold has risen. the price and quantity changes were probably caused by:
a decrease in production cost
in the figure to the right, if the price is P2, a perfectly competitive firm will earn
a profit equal to (de) x Q2
which of the following transactions represents a transfer payment
a senior citizen receives a social security payment
which of the following instances of wage disparity is an example of the existence of compensating differentials?
a window washer working in a suburban residential subdivision gets paid less than one who is washing windows outside of a sky skraper
an efficiency wage describes a wage rate that is:
above the equilibrium wage and is paid in order to provide workers with an incentive to perform efficiently
suppose that abc health is a private health insurance company that offers a "one-size fits all" policy to all customers. each customers pays a premium equal to the average consumer's annual medical expenses. this is a system that has the potential to fail due to the
adverse-selection problem
medicare is health insurance coverage provided to:
all americans age 65 years or older and is not means tested
A free market economy would be perfectly efficient if:
all of the above
the problem of adverse selection:
all of the above
Josh has an ipod and frequently downloads songs from the itunes website. he pays a small fee for each download but downloading a song doesn't remove it from the itunes inventory. other consumers can also pay the fee to download a song that josh might've already accessed. the itunes service is best described as:
an artificially scarce good
consider the market for milkshakes. an increase in the producer surplus may result from:
an increase in the demand for milkshakes
factor demand is said to be derived demand
because it depends on product demand
suppose that a small town estimates the marginal cost of providing one more treatment for mosquito control at $100,00. the town should provide the additional mosquito control only if the marginal
benefit for all individual citizens adds up to at least $100,000
which of the following will not cause a change in demand?
change in the good's own price
with trade, a country may
consume outside its production possibility frontier
suppose that an individual is risk averse. if this individuals utility function is depicted in a graph, with income measured on the horizontal axis and "utils" on the vertical axis, the graph would be an upward sloping:
curve with a steadily decreasing slope (i.e. a curve that is concave from below)
in the figure the the left, a(n) ____ in the price of potatoes would ___ the slope of the budget line ___ the origin
decrease increase away from
if we smooth out the effects of recessions on gross domestic product from 1970-2010 we find that the share of federal, state and local government purchases of goods and services:
decreased
actual wage differentials can be partially explained by which of the following?
differences in talent, differences in amounts of human capital, and by compensating differentials
a public good is a good or service for which
exclusion is not possible and which is nonrival in consumption
under free trade, the price of oranges in the graph to the right is Pw. if imported oranges are banned, the price will rise to P1 and the consumer surplus will ______ by _____.
fall N+O+P
when marginal cost is below average variable cost, average variable cost must be
falling
risk averse individuals are willing to pay a premium that it what to their expected claims?
greater than or equal to
in perfect competition
in the long run all firms in the industry will set price equal to the minimum average cost
a factor demand curve will increase because of a(n)
increase in the price of the good the factor produces
assume the price of gas is $4 per gallon, and the federal gov then imposes a tax of $1 per gallon. if the supply is elastic but the demand is inelastic, then the consumers actual price for gas will be?
increased by more than $0.50 but less then $1
an externality is said to exist when:
individuals impose cost or benefits on others but have no incentive to take these costs and benefits into account
which is not an inefficiency caused by price ceilings?
inefficient allocations of sales among sellers
a tax system achieves tax efficiency when
it minimizes the cost to the economy of tax collection
assume that stan just received a promotion and a raise. in terms of labor supply, the income effect of a higher wage will:
lead him to supply fewer hours of labor
when an activity like education generates a positive externality the
market demand curve is below the marginal social benefit curve
when a welfare program has been provided to those who have incomes that fall below some minimum, economists say this is
means-tested
tv programs are nonrival because
more than one person can consume the same unit of the good at the same time
A common resource is a good or a service that for which exclusion is
not possible and which is rival in consumption
employers may be able to discriminate one the basis of race or gender because
of the existence of higher than equilibrium wages due to market interference or market failure
tradeable pollution permits are a(n)
organized exchange of licenses that enable firms which can cheaply reduce their pollution to benefit by allowing other firms to pay for polluting more
a key theme fundamental to all economics is:
people have unlimited wants facing limited means to satisfy them
the strategy of reducing risks by taking a small share in many independent events or by taking advantage of the predictability associated with large numbers of independent events is known as:
pooling
assume that in 1800, england had 8 million laborers who could produce either 100 bushels of vegetables or 200 bushels of grain, while portugal had 5 million laborers who could each produce either 200 bushels of vegetables or 300 bushels of grain. according to this info:
portugal has the comparative advantage in vegetable production
what will happen to the market price and quantity for an inferior good if technological improvements occur simultaneously with rising incomes?
price will fall, but quantity is indeterminate
Barry's brewpub is considering hiring more brewmasters. a pint of brew sells for $3. the current market wage of a brewmaster is $150 per day. Barry's brewpub will hire a new brewmaster only if they believe the new brewmaster will
produce 50 or more pints per day
insurance companies deal with the problems created by moral hazard by
providing an incentive for insured individuals to take reasonable precautions to avoid losses by always requiring a deductable
suppose the demand elasticity for airplane flights equals 2 for tourists and .5 for business travelers. a successful price discrimination strategy would be to
raise prices for business travelers and lower prices for tourists,as long as the airline could tell them apart and prevent them from reselling tickets to eachother
if we smooth out the effects of recessions on gross domestic product from 1970-2010 we find that the share of federal spending (including production, other purchases and transfers):
remained about the same
when imported oranges are banned, domestic producer surplus will ____ by ____.
rise N
the deadweight loss from a tax will
rise with the tax, at an increasing rate
The insurance industry operates based on the principles of:
risk trading and diversification
in this figure, and increase in income would
shift the budget line to the right
technological improvements will
shift the production possibility frontier outward
after learning about indifference curves, Sandy realizes that her marginal utility for a pound of grapes is half of her marginal utility for a pound of cheese. if the price of cheese is $6, while the price of grapes is $4, Sandy:
should buy more cheese and fewer grapes
in this figure, if the marginal utility of a pound of clams is 3x the marginal utility of a pound of potatoes then the consumer
should consume fewer potatoes and more clams
some nations, like canada, have adopted a health care system in which the government pays the medical bills. this is known as a
single-payer system
since 1973, the poverty rate for americans over 65 has fallen, while it has increased for americans under 18. an important reason for that is
spending on programs that will benefit the elderly has increased while aid to families with children has not kept up with the inflation
the idea that even in the presence of externalities an economy can always reach an efficient solution as long as transaction costs of making a deal are low is known as:
the Coase theorum
the 2 principles of tax fairness are
the benefits principle and the ability to pay principle
Congrats! You've won the lottery and you've been given the choice of either receiving $30 million today or four payment of $10 million: the first now, the second in 5 years, the third in 10 years and the fourth in 15 years. Assume that the safe rate of return you could earn by saving this money remains fixed at 4% per year for the entire period. if this were true you should choose:
the four-part payout, since the net present value of the payments is greater than $30 million
the free-rider problem is a result of
the inability to exclude non-payers
the shut-down price is
the minimum level of AVC
which of the panels in the figure above shows a monopolistic competitor in long-term equilibrium
the one that looks just like the other answer without a dot
which of the panels in the figure below shows a monopolistic competitor earning a profit in the short run
the one where MR & D is downward sloping MC is upward curving and ATC is a smiley face looks like it has a dot
suppose sandy only consumes 2 goods, grapes and cheese, and we graph her budget constraint with cheese on the horizontal axis. if her income and the price of grapes stays the same, but the price of cheese falls, then:
the slope of her budget line changes, and the horizontal intercept increases
compared to the 7 largest economies in the world, US gov. spending as a % of GDP in the 2 decades prior to the great recession was:
the smallest of the 7
people who want to reduce the risk they face may pay other people who are less sensitive to risk to take on some of their risk. We can assume that..
there is a market for risk, and trade in risk produces mutual gains from trade.
suppose that a binding price floor is in place in a particular market. if the market is deregulated and the price floor is removed, then which of the following effects could occur?
there would be a decrease in the quality of the good supplied
a plastics manufacturing plant emits pollution into a river. this leads to higher cost and disruption for fishermen downstream, for which they are not compensated. in this situation we can assume that
too many of societies resources are being used to produce plastic
a market economy, without any regulation, will produce
too much pollution
in the short run, the fixed cost of running a firm should play no role in determining the level of production unless variables costs exceed total revenue
true
when markets are complete, taxes create a deadweight loss. when negative externalities are present, however, taxes can actually improve the market's efficiency
true
when markets are perfectly competitive, price ceilings are inefficient and create shortages. under monopoly, price ceilings can make the market more efficient without creating shortages
true
for a good like basic research with nonexcludable benefits a market economy will:
under-produce the good
which of the following activities is a pure public good?
voting
Margo spends $10,000 on one year's college tuition. the opportunity cost of spending one year in college for Margo is
whatever she would've purchased with the $10,000, plus what she could've purchased with the wages she would earn had she not been in college
an externality is said to be internalized:
when individuals take external costs and benefits into account in their decision making
