ECON FINAL

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One thing that distinguishes the short run and the long run is

the existence of at least one fixed input.

Recent data suggest that the LARGEST share of health care costs is paid for by:

the government

In the short run, perfectly (or purely) competitive firms will maximize their profit by producing which of the choices? Select all that apply.

the quantity where marginal revenue = marginal cost the quantity where price equals marginal cost

The MAIN reason a monopoly engages in price discrimination is:

to increase its profits.

Figure: Efficiency and Pollution in the Market for Vehicle Emissions) Use Figure: Efficiency and Pollution in the Market for Vehicle Emissions. Assume that firms are the only beneficiaries of pollution and that costs are borne solely by others in the society. If the government imposed an environmental standard that did not allow the quantity of pollution to exceed 20 tons, there would be: too little pollution because the marginal social benefit would exceed the marginal social cost. too much pollution because the marginal social cost would exceed the marginal social benefit. a socially optimal quantity of pollution. too much pollution because any pollution is too much from an economist's perspective.

too little pollution because the marginal social benefit would exceed the marginal social cost.

Which of the choices best explains why this price will cause the firm to shut down instead of continuing to operate at a loss?

total revenue < total variable costs

Consider the table. Number of street lamps1 2 3 4 5 6 7Marginal benefit (in $)30 26 22 18 14 10 6 Suppose that a small town wants to install street lamps, which are nonrival in consumption and nonexcludable. Each of the 25 people in the town value street lamps according to the given schedule. Street lamps each cost $250 to install. Use this information to answer the questions. Suppose that 20 of the 25 townspeople decide that they will not help pay for street lamps, and will instead enjoy (for free) the street lamps built by the other five people. What is the maximum number of street lamps that will be built by the remaining five people?

0 street lamps

The Gini coefficient is a measure income inequality that can take on values from:

0 to 1

(Figure: The Environmental Monopolist) Use Figure: The Environmental Monopolist. The deadweight loss associated with this monopoly can be measured as the area:

0.5 (P2 - P4)(Q4 - Q2).

(Table: Blueberry Farm) Use Table: Blueberry Farm. Henry and Ophelia own one of 100 farms in the perfectly competitive blueberry industry. If the price of blueberries is $5 per pound, in the short run, the industry will supply _____ pounds.

500

(Table: Output and Cost Curves for Buckwheat Farm) Use Table: Output and Cost Curves for Buckwheat Farm. If the market price of a bushel of buckwheat is $17, how many bushels will the farmer produce to maximize short-run profit?

Which statement describes a monopoly?

A single firm produces a product with no close substitutes and control over the market price.

The price increase is a result of an increase in demand from younger generations, mainly millennials, increasing their desire to purchase real Christmas trees.

In the short run, producers earn profits and increase supply. Supply is less elastic in the short run than in the long run.

The price increase is a result of fewer Christmas tree farms harvesting trees in response to consumers purchasing more artificial trees.

In the short run, the increase in price leads to profits for tree farms.

How has inequality changed over time?

Inequality has increased over time in both countries as the share of income earned by the top 10% has increased while that of the bottom 50% has decreased.

_____ gives its citizens a choice between care in private hospitals and in a government-run system.

Switzerland

The graph shows the relevant curves for a profit maximizing monopolist. Assume that it is possible for the firm to produce a quantity that is not a whole number.

What quantity will the firm produce? 30.36 units What price will the firm charge? 20.59 What is the firm's profit? 171.2304

A market in which there is one buyer is:

a monopsony.

Determine if each example represents a barrier to entry or not.

barrier to entry, for all answers

In perfect competition:

total revenue is found by multiplying the market price by the firm's quantity of output.

A firm's ___________________ are costs that increase as quantity produced increases. These costs often show ___________________ illustrated by the increasingly steeper slope of the total cost curve.

variable costs; diminishing marginal returns

For a firm producing at a quantity of output below the profit-maximizing quantity of output, an increase in output adds:

more to total revenue than to total cost.

(Figure: Big Tree Organic Farms in the Short Run) Use Figure: Big Tree Organic Farms in the Short Run. Big Tree Organic is a perfectly competitive organic farm in Turlock, California. The minimum price that the farm must receive to produce in the short run is:

In the short run, a perfectly competitive firm produces output and earns ZERO economic profit if:

P = ATC.

Under monopoly, the firm produces the output where _____, and in perfect competition, the firm produces the output where _____.

P > MR = MC; P = MR = MC

(Figure: Computing Monopoly Profits for Exxon Mobile Gas) Use Figure: Computing Monopoly Profits for Exxon Mobile Gas. At the profit-maximizing output, total cost is:

P20QF.

The graph represents the hypothetical market for shrimp in a coastal village. Since there are no restrictions on catching shrimp in public waters in this village, shrimp are a common resource. Without any policy intervention, the equilibrium amount of shrimp caught and sold each day is 7 kg. However, the socially optimal amount of shrimp is 4 kg. Adjust the supply curve and marginal social cost curve to reflect the market quantity and the socially optimal quantity. By how much is the market price below the socially optimal price? If necessary, round to the nearest dollar. Suppose the government imposes a Pigouvian tax. What is the optimal size of the tax for each kilogram of shrimp?

Price Difference: $3/kg optimal tax: $7/kg

(Figure: Joshua's Lawn Mowing Business) Use Figure: Joshua's Lawn Mowing Business. If Joshua's lawn mowing firm's MR curve is MR2, then the firm's optimal output is _____ units of output, and its economic profit will be _____.

Q2; negative

Figure: The Existential Monopolist) Use Figure: The Existential Monopolist. If this market became perfectly competitive, total market output in the long run would be _____ units, and the market price would be _____.

Q3; P3

(Figure: The Optimal Quantity of Pollution in the Market for Benzene Waste) Use Figure: The Optimal Quantity of Pollution in the Market for Benzene Waste. The figure shows the marginal social cost (MSC) and marginal social benefit (MSB) for firms that pollute the air with benzene fumes. Using the figure, the optimal Pigouvian tax per unit of pollution is: $500. $83. $250. $167.

$167.

infeasible to move a plant each time a specific individual walks by) and non-rival in consumption (if one worker looks at the plant, it does not prevent another from doing so as well). The company employs three workers: Paul, Tyler, and Sharon. The company is thinking about buying up to three plants, and wants to know how much workers would enjoy each plant. For Paul, the first plant has a benefit of $31 per day, the second plant has a benefit of $19 per day, and the third plant has a benefit of $9 per day. For Tyler, the first plant has a benefit of $26 per day, the second has a benefit of $13 per day, and the third has a benefit of $7 per day. For Sharon, the first plant has a benefit of $17 per day, the second has a benefit of $11 per day, and the third has a benefit of $3 per day. Given that no one else will see the plants, no one else values the plants in the lobby. What is the marginal social benefit of the third plant?

$19

The graph depicts the market for cable where there is one natural monopoly; AC represents average (total) cost, D represents market demand, and MR represents marginal revenue. Assume that the marginal cost is equal to 0. Suppose that before the cable company lays any cable, the government decides to regulate the monopoly by setting the price. What is the lowest price that the government can impose while ensuring that the cable company enters the market? What will a monopolist charge in the absence of any regulation?

$2 $4

(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 table shows the demand facing Valkyrie and Valkyrie's total costs. The firm's maximum profit is:

$225.

(Figure: Pay Per View Movies on Xfinity Cable) Use Figure: Pay Per View Movies on Xfinity Cable. The figure shows the demand and marginal revenue curves for on-demand movie rentals on Xfinity. Assume that marginal cost and average cost are constant at $20. If the cable company is a monopoly, how much total surplus is there when the monopolist maximizes profit?

$270

(Table: Lunch on the Lake with William) Use Table: Lunch on the Lake with William. The table shows the market demand for afternoon picnic lunches for visitors who take all-day canoeing trips on Lake Campbell. William's firm provides lunches to visitors at a constant marginal cost and a constant average cost of $4. If William's firm is one of many firms in a competitive market, what price will he charge for a lunch in the long run?

Antonio sells cell phone cases in a perfectly competitive market. If Antonio sells 40 cell phone cases at a price of $40 per unit, his marginal revenue is:

$40.

Suppose that a small company is thinking of putting plants in their lobby for employees to view and enjoy. Since the plants are to be viewed by employees, the plants are non-excludable (it is infeasible to move a plant each time a specific individual walks by) and non-rival in consumption (if one worker looks at the plant, it does not prevent another from doing so as well). The company employs three workers: Paul, Tyler, and Sharon. The company is thinking about buying up to three plants, and wants to know how much workers would enjoy each plant. For Paul, the first plant has a benefit of $31 per day, the second plant has a benefit of $19 per day, and the third plant has a benefit of $9 per day. For Tyler, the first plant has a benefit of $26$26 per day, the second has a benefit of $13 per day, and the third has a benefit of $7 per day. For Sharon, the first plant has a benefit of $17 per day, the second has a benefit of $11 per day, and the third has a benefit of $3 per day. Given that no one else will see the plants, no one else values the plants in the lobby. What is the marginal social benefit of the second plant?

$43

Consider the table. Number of street lamps1 2 3 4 5 6 7Marginal benefit (in $)30 26 22 18 14 10 6 Suppose that a small town wants to install street lamps, which are nonrival in consumption and nonexcludable. Each of the 25 people in the town value street lamps according to the given schedule. Street lamps each cost $250 to install. Use this information to answer the questions. Suppose the town government decides to build street lamps and pay for the street lamps through taxation. How much should each person be taxed to pay for the optimal number of street lamps if everyone is taxed equally?

$60

Suppose that a small company is thinking of putting plants in their lobby for employees to view and enjoy. Since the plants are to be viewed by employees, the plants are non-excludable (it is infeasible to move a plant each time a specific individual walks by) and non-rival in consumption (if one worker looks at the plant, it does not prevent another from doing so as well). The company employs three workers: Paul, Tyler, and Sharon. The company is thinking about buying up to three plants, and wants to know how much workers would enjoy each plant. For Paul, the first plant has a benefit of $31$31 per day, the second plant has a benefit of $19$19 per day, and the third plant has a benefit of $9$9 per day. For Tyler, the first plant has a benefit of $26$26 per day, the second has a benefit of $13$13 per day, and the third has a benefit of $7$7 per day. For Sharon, the first plant has a benefit of $17$17 per day, the second has a benefit of $11$11 per day, and the third has a benefit of $3$3 per day. Given that no one else will see the plants, no one else values the plants in the lobby. What is the marginal social benefit of the first plant?

$74

$75.

(Figure: The Perfectly Competitive Firm) Use Figure: The Perfectly Competitive Firm. The figure shows a perfectly competitive firm that faces demand curve d and maximizes profit. Given a market price of $3, the firm's total revenue per day is:

$900.

Which of the statements is not true?

- NOT TRUE: Costs that are small and unimportant with little impact on profits are called marginal costs. - Marginal cost and marginal productivity are inversely related. - Marginal cost is the change in a firm's total cost due to a one‑unit change in output. - A marginal cost curve will always intersect the average total cost curve at the minimum average total cost. What is the marginal cost of the eighth unit based on the table? $50

Labor costs represent a large percentage of total costs for many firms. According to data from the Bureau of Labor Statistics, U.S. labor costs were up 2.0% in 2015, compared to 2014.

- increase - increase - increase - increase

The Gini coefficient: - varies between 0 and 1. - is also equal to the mean household income for a country. - is the same for most industrially developed countries. - is seldom used, since it does not help one understand income inequality.

- varies between 0 and 1.

(Table: Positive Externalities from State Parks) Use: Table: Positive Externalities from State Parks. The table shows the marginal social benefit and marginal social cost of preserving various amounts of land for state parks. Suppose that state parks yield benefits for the general public but that the marginal benefit that any one individual receives from state parks is close to zero. Without government intervention, the amount of land dedicated to state parks will be _____ acres. 3 0 9 1

(Figure: Monopoly Model in the Market for Electricity) Use Figure: Monopoly Model in the Market for Electricity. When the firm is in equilibrium—maximizing economic profit—its total cost is represented by:

0SBJ.

Identify whether the activities are associated with positive externalities (external benefits), negative externalities (external costs), or no externalities. Obtaining an education results in_____ externalities Overfishing results in_______ externalities. Playing an addictive single-player cell phone game such as Happy Fish results in _______ externalities. Reducing pollution results in________ externalities. Receiving a flu vaccine results in _________ externalities. Enhancing the aesthetic appeal of a property in a residential neighborhood results in ________ externalities. Developing a productivity-enhancing technology results in _________ externalities. Cigarette smoking in a non-smoking section results in __________ externalities. Eating a delicious cookie results in ______ externalities.

1. positive 2. negative 3. no 4. positive 5. positive 6. positive 7. positive 8. negative 9. no

Select the appropriate term to complete the sentences. a. According to the Coase theorem, private parties can negotiate to an efficient solution in the presence of externalities if the ________ is (are) relatively low. b. Suppose Jeremy, Francis, and Andrew are part of Mu Epsilon Nu, a college fraternity known for its very loud, rambunctious weekend parties. The parties annoy many of the residents in nearby apartment complexes due to the loud music and blaring neon lights. This is an example of________ Indicate whether each possible solution is a private or non-private approach to the problem caused by the loud fraternity. c. The local city government sends the police to break up the parties ___________ d. The fraternity pays the local community to compensate for the noise pollution __________ e. The residents of the apartment complexes pay Mu Epsilon Nu not to have loud parties.___________

1. transaction costs 2. an external cost 3.non-private solution to an externality 4.private solution to an externality 5. private solution to an externality

Classify the statements as true or false. a. Emissions taxes encourage firms to find innovative ways to remove pollution. b. Firms generate the same level of pollution regardless of any emissions taxes that are imposed. c. An emissions tax is a type of Pigouvian tax. d. Environmental standards are typically more efficient than emissions taxes. e. With an emissions tax, firms must pay a fine if they pollute more than the legally specified amount.

1. true 2. false 3. true 4. false 5. false

the collection of government-sponsored programs created to ease economic difficulties for affected people a government program created to aid individuals who undergo unforeseen financial issues a government program designed to help the poor says that people with low incomes should pay a smaller fraction of their income in taxes than people with higher incomes the annual income amount where those beneath the cutoff are considered poor

1. welfare state 2. social insurance program 3. poverty program 4. ability-to-pay principle 5. poverty threshold

The hypothetical city of Hurstville is trying to decide how many city beautification projects should be approved each year. These projects involve planting gardens, commissioning murals, and building fountains. The city has two types of citizens.Type B citizens appreciate beauty more than type A citizens. There is an equal number of each type of citizen. The accompanying graph depicts each type of citizen's marginal benefit for city beautification projects. The average cost of each project is $400. Use the information in the graph to answer the questions. Use the interactive points to draw the marginal social benefits (MSB) curve. What is the optimal quantity of city beautification projects?

3 projects

(Figure: Revenues, Costs, and Profits for Avocado Producers III) Use Figure: Revenues, Costs, and Profits for Avocado Producers III. The market for avocados is perfectly competitive. If the market price of a bushel of avocados is $14, in the short run, the farmer's profit-maximizing output is _____ bushels.

6 street lamps

(Figure: The Environmental Monopolist II) Use Figure: The Environmental Monopolist II. If this monopolist perfectly price-discriminates, then it will produce _____ units. This will lead to producer surplus equal to _____, consumer surplus equal to _____, and a deadweight loss equal to _____.

70; $2,450; $0; $0

Your economics professor assigns a group project for the course. To combat the free-rider problem to which such an assignment might lead, the instructor asks you to evaluate the contributions of your peers in a confidential report. Will this evaluation have the desired effects?

A student's grade depends on the quality of the entire group's work. If one student minimizes the effort put in, the impact on the grade will be small. This gives each member of the group an incentive to shirk. The result is that the project will be of lower quality than it otherwise might be. The confidential evaluation could mitigate the free-rider problem if there is a credible threat that shirking will result in a lower grade for the shirker than for non-shirkers.

The table shows the cost structure of a firm producing computer mainframes. Calculate the missing values A through H and enter these into the boxes provided.

A:20000 B:20000 C:277.78 D:384.16 E: 833.33 F: 833.33 G: 384.62 H: 319.15

(Figure: Profit-Maximization for Fabulous Finn's Flower Firm in the Short Run) Use Figure: Profit-Maximization for Fabulous Finn's Flower Firm in the Short Run. Which statement is TRUE?

AFC is represented by the vertical distance between curve N and curve O at any level of output.

How does the post-tax income distribution (the second graph on the page) differ from the pre-tax distribution?

After-tax income distribution in both Finland and Netherlands improves inequality as the share in income of the bottom 50% increases, while that of the top 10% falls.

Washington state is the largest producer of apples in the United States. In 2018, farms in Washington produced 171 million bushels of apples, nearly five times more than the next highest-producing state, New York. Many apple farms in Washington depend on migrant labor from Mexico and Central America. These countries were once reliable sources of labor, but farmers are now experiencing a large shortage of labor. Most migrant workers are choosing year-round positions in the construction industry instead of the seasonal work offered in agriculture, leaving apple farms relying on undocumented migrant labor. With fewer undocumented workers, labor costs have soared, forcing many farmers to invest in expensive mechanical harvesting devices.

All of the above: Firms have to cut back on growing apples, and the market supply of apples will decrease. Firms who cannot break even due to higher production costs will exit the industry. Firms will experience an increase in average variable costs as labor becomes more expensive. Firms will experience an increase in average fixed costs as they invest in expensive mechanical harvesting devices.

ch 12 homework - Classify the assumptions according to whether or not each item is an assumption made under perfect competition (also known as pure competition or competitive industry)

Assumed in perfect condition: price-taking behavior Not assumed in perfect condition: a small number of producers, significant barriers to entry, firms selling a similar but differentiated good

When marginal cost is above average total cost, average total cost must be falling.

False; when marginal cost is above average total cost, then producing the next unit of output will be more costly than the average, increasing average total cost.

The country of Marxland has the following income tax and social insurance system. Each citizen's income is taxed at an average tax rate of 100%. A social insurance system then provides transfers to each citizen such that each citizen's after-tax income is exactly equal. That is, each citizen gets (through a government transfer payment) an equal share of the income tax revenue.

Each citizen has an incentive: not to work at all but to accept an equal share of total income. What will the total tax revenue in Marxland be? $0 What will the transfer payment for each citizen be? $0 Do you think such a tax system that creates perfect equality will work?: No. Everyone has the same incentive to minimize effort, and the result will be that no one does any work.

In the long run, choosing a higher level of fixed cost shifts the long-run average total cost curve upward.

False; choosing a higher level of fixed cost causes rightward movement along the long-run average total cost curve. The average total cost curve remains the same.

An increase in fixed cost increases marginal cost.

False; fixed costs do not change with increases in output, so the change in total cost resulting from an increase in production will remain unchanged. Changes in fixed cost do not affect marginal cost.

The short-run average variable cost can never be less than the long-run average total cost.

False; short-run average variable costs do not include fixed costs, so short-run average variable cost may be lower than long-run average total cost for high levels of fixed cost.

Perfect Competition and the Supply Curve — End of Chapter ProblemA recent report found that Christmas trees have doubled in price over the last three years. The price surge is partly due to a glut of trees 10 years prior. During the Great Recession of 2008 many consumers reduced their purchases, leading to a surplus of trees and lower prices. Explain how a glut in trees 10 years prior could lead to higher prices today. Focus on how farms changed operations in response to the price decrease.Please select all that help explain the increase in Christmas tree prices.The glut in trees led farms to move up along their marginal cost curves to better deal with the reduced demand.Farms suffer from losses and cut back on production or exit the Christmas tree market due to the fall in demand in 2008.The demand for Christmas trees has increased in recent years due to the economic expansion.It takes seven to ten years for a Christmas tree to reach a height of six to seven feet. Farms suffer from losses and cut back on production or exit the Christmas tree market due to the fall in demand in 2008.The demand for Christmas trees has increased in recent years due to the economic expansion.It takes seven to ten years for a Christmas tree to reach a height of six to seven feet.

Farms suffer from losses and cut back on production or exit the Christmas tree market due to the fall in demand in 2008.The demand for Christmas trees has increased in recent years due to the economic expansion.It takes seven to ten years for a Christmas tree to reach a height of six to seven feet.

The table shows total cost and total revenue information for a perfectly (or purely) competitive firm. QuantityTotal costTotal revenue 0 500 0 1 600 135 2 710 270 3 830 405 4 960 540 5 1100 675 6 1250 810 7 1410 945 8 1580 1080 9 1760 1215 10 1950 1350

Firms earning a loss will sometimes shut down in the short run. What quantity will the firm produce if it shuts down in the short run? 0 units What will the profits be if this firm shuts down? -$500 Firms sometimes prefer to minimize losses by continuing to operate in the short run. What quantity will the firm produce to minimizes losses in the short run? 4 units If this firm chooses to operate, what will its profits equal? Enter a negative number for a loss. $-420 If the cost and revenue numbers in the table will continue forever (permanently), is it better for this firm to (continue to operate in the short run, and exit the market in the long run.) profits=total revenue−total costs

Marty's Frozen Yogurt is a small shop that sells cups of frozen yogurt in a university town. Marty owns three frozen yogurt machines. His other inputs are refrigerators, frozen yogurt mix, cups, sprinkle toppings, and, of course, workers. He estimates that his daily production function when he varies the number of workers employed (and at the same time, of course, yogurt mix, cups, and so on) is as shown in the accompanying table.

Fixed inputs: - refrigerators - frozen yogurt machines - frozen yogurt shot Variable inputs: - frozen yogurt mix - cups - sprinkle toppings - labor c. Marginal product of the first worker: 110 Marginal product of the second worker: 90 Third worker: 70 Why does marginal product decline as the number of workers increases?: The number of workers increases, but the number of yogurt machines does not. Since additional workers reduce each worker's access to capital, each additional worker contributes less to total output.

Fixed inputs:- refrigerators- frozen yogurt machines- frozen yogurt shotVariable inputs:- frozen yogurt mix- cups- sprinkle toppings- laborc.Marginal product of the first worker: 110Marginal product of the second worker: 90Third worker: 70Why does marginal product decline as the number of workers increases?:The number of workers increases, but the number of yogurt machines does not. Since additional workers reduce each worker's access to capital, each additional worker contributes less to total output

The incomes of five citizens from a hypothetical economy are in the accompanying table. Suppose the government introduces a new program for low-wage earners. Under this program, each citizen is given a refund that is paid for with tax revenues and is equal to a percentage of the citizen's income. The chart shows applicable income brackets and the percentage to be refunded. Citizen Income($): Frankie29000.00, Vinnie33000.00, Artie13000.00, Nicky62000.00, Jackie23000.00 Income Range ($): 0-17,000, 17,001- 36,000, 36,001- 52,000, 52,000 and above Income Supplement: 40%, 25%, 10%, 0% What is the amount of Frankie's refund? What is the amount of Artie's refund? What is the amount of Nicky's refund?

Franky: $7250 Artie: $5200 Nicky: 0

My Attempt The accompanying graph represents Hayden's Fro-Yo Emporium, which is the only seller of frozen yogurt in a small college town, showing the marginal cost (MC), average cost (AC), marginal revenue (MR), and demand (D) curves

How many cups of frozen yogurt should Hayden sell? Q1 How much should Hayden charge per cup? p4

In the city of Metropolis, there are 100 residents, each of whom lives until age 75. Residents of Metropolis have the following incomes over their lifetime:

How much income does a resident in the lowest quintile have? What share of total income goes to the residents in the lowest quintile? income: 0 share of Total income: 0 How much income does a resident in the second quintile have? What share of total income goes to the residents in the second quintile? income: 100 Share of total income: 10 How much income does a resident in the third quintile have? What share of total income goes to the residents in the third quintile? income: 200 share of Toal income: 20 How much income does a resident in the fourth quintile have? What share of total income goes to the residents in the fourth quintile? income: 300 share of total income: 30 How much income does a resident in the top quintile have? What share of total income goes to the residents in the top quintile? income: 400 share of total income: 40

The accompanying diagram illustrates your local electric company's natural monopoly. It shows the demand curve for kilowatt-hours (kWh) of electricity, the company's marginal revenue (MR) curve, its marginal cost (MC) curve, and its average total cost (ATC) curve. The government wants to regulate the monopolist by imposing a price ceiling.

If the government does not regulate this monopolist, the firm will charge a price of $0.80 . Illustrate the inefficiency this creates by shading the deadweight loss from monopoly. b. If the government imposes a price ceiling equal to the marginal cost, $0.30, the monopolist will not make a profit. Shade the area of profit or loss for the monopolist. If the government imposes this price ceiling, the firm will not continue to produce in the long run. c. If the government imposes a price ceiling of $0.50, the monopolist will break even.

The hypothetical production data is for a profit maximizing firm. Suppose the market price falls from $200 to $182 and the firm does not shut down. Use this information and the table to match the labels.

If the market price is $160$160, then the firm will shutdown. False Since the firm is still operating, the firm must be earning a positive profit. False If the price increases to $200$200, then the firm will earn a positive economic profit. true

The production function for Marty's Frozen Yogurt is shown in the accompanying table. Marty pays each of his workers $80 per day. The cost of his other variable inputs is $0.50 per cup of yogurt. His fixed cost is $100 per day.

Image in link: https://docs.google.com/document/d/1T96Tm3Y3NCOMsv0D_r8MXSVQ_k9V6IZU8tIcmMt1c2E/edit c. the fixed cost... spreading effect the amount... diminishing... d. 270

In Europe, when a service contract is purchased, many cell phone service providers give away for free what would otherwise be very expensive cell service. Such a pricing strategy exemplifies a two-part tariff.

In England, the country's antitrust authority prohibited the cell phone service provider Vodafone from offering a plan that gave customers free calls to other Vodafone customers. By offering these calls for free, Vodafone was likely seeking to create network externalities , enabling it to increase its market power. Although a government may wish to ban this practice to encourage competition , such interference might be unwise in this case, since a bigger network may offer more value to consumers

Walmart is the world's largest retailer. As a consequence, it has sufficient bargaining power to push its suppliers to lower their prices so it can honor its slogan of "Save Money—Live Better" for its customers.

In using its bargaining power to drive suppliers' prices down, Walmart is acting as a monopsonist. b. By using its bargaining power over its suppliers, Walmart increases the consumer surplus of its customers and decreases the producer surplus of its suppliers. c. Over time, the quality of products produced by Walmart's suppliers will likely decrease.

An increase in labor productivity means that each worker can produce more output. Recent data on productivity show that labor productivity in the U.S. nonfarm business sector grew by 1.7% between 1970 and 1999, by 2.6% between 2000 and 2009, and by 1.1% between 2010 and 2015.

Increases in labor productivity will lower the cost of production, counteracting the effects of the labor cost increase.

Nikos' lawn-mowing service is a profit-maximizing, competitive firm. If Nikos mows ten lawns per day at a price of $27 per lawn and has a total cost of $280, of which $30 is a fixed cost, what should Nikos do in the long run?

Leave the industry, since he is not covering his fixed costs

The tax system in Taxilvania includes a negative income tax. On the first $10,000 earned, individuals pay an income tax of −40% (that is, they receive a payment of 40% of their income). For any income above the $10,000 threshold, the tax rate on that additional income is 10%.

Lowani's income tax: $-3,200 Lowani's after-tax income: $11,200 Midram's income tax: $-1,000 Midram's after-tax income: $41,000 Hi-Wan's income tax: $5,000 Hi-Wan's after-tax income: $95,000 b. is not, up, 1.40, up, 0.90

The table shows the demand schedule of a monopolist. Calculate marginal revenue and fill in the revenue column in the table. Assume that output can only be sold in integer amounts (i.e., 1 unit, 2 units, etc.). Once you have filled in marginal revenue, identify the quantity produced by the monopolist in this market. Quantity Price Marginal Cost Marginal Revenue 1 $13 $1 MR12$12$2MR23$11$3MR34$10$4MR45$9$5MR56$8$6MR6

MR1 :13 MR2 :11 MR3 :9 MR4 :7 MR5 :5 MR6 :3 How many units does the monopolist produce? Quantity: 5

A monopolist with a linear demand curve will not produce on the inelastic portion of the demand curve, since in that range:

MR<0.

The efficient rate of emissions occurs when: MSB < MSC. MSB = MSC. There is no efficient or acceptable rate of emissions. MSB > MSC.

MSB = MSC.

(Figure: Pollution and Efficiency in the Market for Coal Fired Electricity) Use Figure: Pollution and Efficiency in the Market for Coal Fired Electricity. In this market, in which carbon dioxide emissions result from production, at a price of $10, ______. In this situation, price will ______ the socially optimal amount of pollution is reached. MSB = MSC; not change as MSB > MSC; increase until MSC < MSB; decrease until MSB < MSC; decrease until

MSB > MSC; increase until

Each of five people receives a different social service benefit from the government. Based on the descriptions provided, place each individual in the appropriate category. b. Jenny does not work and receives a monthly government benefit that can only be used to buy food.

Means-tested in-kind benefit

Each of five people receives a different social service benefit from the government. Based on the descriptions provided, place each individual in the appropriate category. a. Moses receives monthly government support to help him care for his children. His benefit is only for a set period of time and will be discontinued if he finds work.

Means-tested monetary transfer

Each of five people receives a different social service benefit from the government. Based on the descriptions provided, place each individual in the appropriate category. e. Clement claims a tax deduction for each of his children. This tax deduction increases along with his income, up to a certain point.

Means-tested monetary transfer

Which of the following is a U.S. government health insurance program designed for people aged 65 years and above?

Medicare

Each of the following firms possesses market power. Merck, the producer of the cholesterol-lowering drug Zetia WaterWorks, which provides piped water to suburban areas with no municipal contracts Chiquita, a supplier of bananas and owner of most banana plantations The Walt Disney Company and Mickey Mouse movies Identify the source of each firm's market power.

Merck - government created barrier Disney - government created barrier Chiquita - control of a scarce resource Waterworks - increasing return to scale

Classify each statement about types of market structure as either true or false.

Monopolies produce differentiated products.false Monopolistic competition is a market structure that consists of a small number of producers.false Perfect (pure) competition is characterized by product differentiation.false Oligopolies exist in a market that has a small number of producers that may or may not exhibit product differentiation.true

Each of five people receives a different social service benefit from the government. Based on the descriptions provided, place each individual in the appropriate category. c. Enrique is retired and receives a monthly supplement from the government that is based on the amount he earned while working.

Non-means-tested monetary transfer

Each of five people receives a different social service benefit from the government. Based on the descriptions provided, place each individual in the appropriate category. d. Quinn has been laid off from his job. He will receive monthly support from the government for the next 99 weeks or until he finds work, whichever comes first.

Non-means-tested monetary transfer

A monopolist knows that in order to expand the quantity of output it produces from 8 to 9 units, it must lower the price of its output from $2 to $1.

Quantity effect: $1 Price effect: $-8 MR 9th unitMR 9th unit: $-7 The marginal cost of producing the ninth unit is positive. Should the monopolist produce the 9th unit? no

(Figure: Short-Run Monopoly in the Market for Electricity) Use Figure: Short-Run Monopoly in the Market for Electricity. The profit-maximizing rule is satisfied by the intersection at point:

Which U.S. welfare program is the LARGEST, as measured by the amount of money spent by the U.S. government?

Social Security

In the United States, the Federal Trade Commission (FTC) is charged with promoting competition and challenging mergers that would likely lead to higher prices. Several years ago, Staples and Office Depot, two of the largest office supply superstores, announced their agreement to merge. a. Some critics of the merger argued that, in many parts of the country, a merger between the two companies would create a monopoly in the office supply superstore market. Based on the FTC's argument and its mission to challenge mergers that would likely lead to higher prices, would the FTC have allowed the merger?No; if Staples and Office Depot formed an effective monopoly in the office supply superstore market, the new merged firm would likely be able to charge higher prices to extract greater profits.

Staples and Office Depot argued that, while in some parts of the country they might create a monopoly in the office supply superstore market, the FTC should consider the larger market for all office supplies, which includes many smaller stores that sell office supplies (such as grocery stores and other retailers). In that market, Staples and Office Depot would face competition from many other, smaller stores. If the market for all office supplies is the relevant market that the FTC should consider, would it make the FTC more or less likely to allow the merger? More likely; whereas a merger between Staples and Office Depot would have created a monopoly in the office supply superstore market, the market for office supplies would still have some intact competition after the merger.

The Collegetown movie theater serves 900 students and 100 professors in town. Each student's willingness to pay for a movie ticket is $5. Each professor's willingness to pay for a movie ticket is $10. Each will buy only one ticket. The movie theater's marginal cost per ticket is constant at $3, and there is no fixed cost.

Suppose the movie theater cannot price-discriminate and charges both students and professors the same price per ticket. If the movie theater charges $5, who will buy tickets, and what will the movie theater's profit be? If the movie theater charges $5 per ticket, both students and professors will buy tickets, since $5 is less than or equal to the willingness of pay of both groups. The movie theater will then sell to 1,000 customers. Since the movie theater's cost per ticket is $3, its profit is $2 per ticket for a total profit of 1,000×$2=$2,000 Students will receive no consumer surplus, but each of the 100 professors will receive a consumer surplus of $10−$5=$5, for a total consumer surplus of 100×$5=$500

A decreasing marginal product tells us that marginal cost must be rising.

True; a decreasing marginal product implies that additional units of output require larger and larger increments of the variable input; thus, marginal cost increases.

Which program, introduced in the 1990s, replaced Aid to Families with Dependent Children?

Temporary Assistance to Needy Families

An increase in fixed cost increases the minimum-cost output.

True; if fixed costs increase, the spreading effect strengthens relative to the diminishing returns effect. Accordingly, the level of output that minimizes average total cost rises.

In 2014, Time Warner and Comcast announced their intention to merge. This prompted questions of monopoly because the combined company would supply cable access to an overwhelming majority of Americans. It also raised questions of monopsony since the combined company would be virtually the only purchaser of programming for broadcast shows. Although the merger was ultimately disallowed, assume that it had occurred. In each of the following, determine whether it is evidence of monopoly, monopsony, or neither.

The monthly cable fee for consumers increases significantly more than the increase in the cost of producing and delivering programs over cable. Monopoly Companies that advertise on cable TV find that they must pay higher rates for advertising. Monopoly Companies that produce broadcast shows find they must produce more shows for the same amount they were paid before. Monopsony Consumers find that there are more shows available for the same monthly cable fee. Neither

For people with life-threatening allergies, carrying a device that can automatically inject epinephrine (called an autoinjector) is a necessity. In the summer of 2016, Mylan, the maker of the widely used autoinjector EpiPen, found itself with a virtual monopoly. A year earlier its primary competitor, Auvi-Q, was recalled amid fears that it would malfunction and deliver the wrong dose. In addition, the FDA denied the drug producer, Teva, from releasing a generic autoinjector. Prior to these events, a two-pack EpiPen sold for approximately $100. But during that summer, Mylan raised the price to over $600 per pack, leading to extensive news coverage, popular online petitions, and outrage on the part of consumers. Mylan countered that many consumers received their EpiPens through their medical insurance, hence they were protected from the price increase. For those who didn't have insurance coverage and had to pay the full price, Mylan offered a $300 savings card.

The savings card offered to those without insurance is an example of price discrimination, since it enables Mylan to segregate consumers in terms of willingness to pay . In particular, those with insurance will have relatively inelastic demand, so that Mylan will charge them the full monopoly price .

The graph illustrates a monopoly with constant marginal cost and zero fixed cost. Use the graph to show the profits and deadweight loss (DWL) for this firm. Assume that potential competitors to the monopoly face prohibitive barriers to entry. Price ($)Quantity01234567891011121314151617181920-2-10123456789101112131415161718DMRMCProfitsDWL

These profits are; economic. In the long run, economic profits for this monopoly will be: positive.

Information regarding a firm's costs is presented in the accompanying table.

Total cost, 𝑄=1: $40 𝐴𝑇𝐶, 𝑄=1: $40 𝐴𝑉𝐶, 𝑄=1: $20 Total cost, 𝑄=5: $110 𝐴𝑇𝐶, 𝑄=5: $22 𝐴𝑉𝐶, 𝑄=5: $18

The short-run average total cost can never be less than the long-run average total cost.

True; the long-run average total cost is given by the ideal level of fixed input, whereas short-run average total cost is given by an arbitrary level of fixed input.

Variable cost, 𝑄=110: $135 Variable cost, 𝑄=200: $260 Variable cost, 𝑄=270: $375 Variable cost, 𝑄=300: $470 Total cost, 𝑄=320: $660 Total cost, 𝑄=110: $235 Total cost, 𝑄=200: $360 Total cost, 𝑄=270: $475 Total cost, 𝑄=300: $570 Variable cost, 𝑄=320: $560 𝑀𝐶,𝑄=110 to 𝑄=200: $1.39 𝑀𝐶,𝑄=300 to 𝑄=320: $4.50

The production function for Marty's Frozen Yogurt is shown in the accompanying table.Marty pays each of his workers $80 per day. The cost of his other variable inputs is $0.50 per cup of yogurt. His fixed cost is $100 per day.

Variable cost, 𝑄=110: $135Variable cost, 𝑄=200: $260Variable cost, 𝑄=270: $375Variable cost, 𝑄=300: $470Total cost, 𝑄=320: $660Total cost, 𝑄=110: $235Total cost, 𝑄=200: $360Total cost, 𝑄=270: $475Total cost, 𝑄=300: $570Variable cost, 𝑄=320: $560𝑀𝐶,𝑄=110 to 𝑄=200: $1.39𝑀𝐶,𝑄=300 to 𝑄=320: $4.50

Candice is a jewelry shop owner, specializing in beaded necklaces. For each of the following inputs, indicate which items are variable inputs as opposed to fixed inputs in the long run.

Variable inputs include: computers shipping two-year lease on office and retail space chairs hourly labor upper management salaries beads

The graph shows the average total cost (ATC) curve, the marginal cost (MC) curve, the average variable cost (AVC) curve, and the marginal revenue (MR) curve (which is also the market price) for a perfectly competitive firm that produces terrible towels. Answer the three accompanying questions, assuming that the firm is profit-maximizing and does not shut down in the short run.

What is the firm's total revenue? $130000 Total cost? $211900 What is the firm's profit? (Enter a negative number for a loss.)$-81900

The table shows the cost and revenue information for a perfectly (or purely) competitive firm that produces external hard drives. Use whole numbers to answer the six questions. Quantity (units) Fixed cost ($)Variable cost ($)Total revenue ($) 10 100 36 1000 11 100 74 1100 12 100 145 1200 13 100 202 1300 14 100 300 1400 15 100 435 1500 16 100 588 1600 17 100 774 1700

What is the marginal revenue received from the 11th unit? $100 ((1100-1000) / (11-10) What is the marginal cost of producing the 11th unit? $38 ($174−$136)/(11−10) What price does this firm charge for each hard drive? $100 per unit How many units should this firm produce to maximize profits? 14 When profit maximizing, what is this firm's profit? $1000

What is a natural monopoly? answer: a monopoly that results when one firm is able to produce at a lower cost than multiple firms, giving large firms with higher levels of output an advantage over smaller competitors

Which firm is most likely to be a natural monopoly? Answer: Municipal Power Light, the local supplier of electricity

Which of the scenarios are examples of free riding? a. Bob can pay to support his local public radio station, which depends on donations to be as effective as possible. Bob listens to the radio station several hours per day but never donates since he suspects that other people will donate enough to keep the station on the air. b. Drew always buys the lunch special for $5$5 at the restaurant across the street from where he works. If he decided to eat at the restaurant after 3:003:00 p.m., however, he would be unable to get the lunch special, and would instead have to pay $10$10 for the same food. c. Jim is working on a group project for a class in which he wants a high grade. However, since the grades are assigned to the group as a whole and he knows that the other group members will pick up most of the extra work, Jim calls in sick and plays video games on his Dream Station 6464. d. Karl never drives at night, and gets no benefit from street lamps at all. Street lamps are nonexcludable and nonrival in consumption. When the community group tries to collect money to build street lamps, Karl does not donate any money.

a and c = free riding b and d = not free riding

At approximately 0.41, America's Gini coefficient is _____ than that of most _____ nations.

higher, developed

When the federal government makes payments to individuals for which no good or service is exchanged, it is called:

a transfer payment

Consider the table, which contains hypothetical data on the long‑run average cost values for the refrigerator industry.

a, c c, d d, f

Many colleges and universities are witnessing a shift in demographics due to women having fewer children today. The birth rate fell from an average of 2.1 births per woman in 2007 to 1.7 births in 2018. The declining birth rate will reduce the college-age population by as much as 15% between 2025 and 2029. Consider how the declining birth rate will affect university operations.

a. fixed costs: - salaries and benefits... - upkeep and university... - land and building... - maintenance of research... variable costs: - compensation of... - cafeteria staff... b. large c. it will rise substantially

(Table: Pollution and Water Table Damage from Cobalt Mining) Use Table: Pollution and Water Table Damage from Cobalt Mining. The table shows the marginal social benefit and marginal social cost of various amounts of pollution emitted into the air and water from a cobalt mine. If 5 tons of pollution are produced, the marginal social benefit is _____, and the marginal social cost is _____. a. $300; $500 b. $0; $800 c. $400; $400 d. $800; $0

a. $300; $500

Consider Daniella's concrete-mixing business described in Problem 12. Assume that Daniella purchased 3 trucks, expecting to produce 40 orders per week.

a. $440, $297 b. $400, smaller, falls

The accompanying table contains data on the U.S. economy for the years 1983 and 2019. The second column shows the poverty threshold. The third column shows the consumer price index (CPI), a measure of the overall level of prices. The fourth column shows U.S. gross domestic product (GDP) per capita, a measure of the standard of living.

a. 2.5 b. 2.6 c. 4.2 d. relatively worse than the average person.

Bob produces flower pots for sale, which he designs and manufactures using 3-D printing technology. Bob rents a building for $30,000 per month and rents machinery for $20,000 a month. Those are his fixed costs. His variable cost per month is given in the accompanying table.

a. 5.50 b. 16 c. 27 d. 78000 e. not in a long-run equilibrium, and price will have to decrease

In your economics class, each homework problem set is graded on the basis of a maximum score of 100. You have completed 9 out of 10 of the problem sets for the term, and your current average grade is 88.

a. 89 to 100 b. 0 to 87 c. rise .... fall

a. 89 to 100b. 0 to 87c. rise .... fall

Complete the following passage to describe the difference between diminishing marginal returns to labor and decreasing returns to scale.

a. A decline in marginal product...4....short run b. In increase in average total... 99...long run

Determine if the statements and expressions regarding costs are true or false.

a. All costs are either fixed or variable: True b. Average fixed cost is always higher than average variable cost: False c. The average fixed cost curve is downward-sloping: true d. In the short run, ATC is always greater than or equal to AVC: true e. The ATC curve crosses the MC curve at the lowest point on the MC curve: false f: true g. The ATC is increasing whenever the MC is increasing: false h. Marginal cost refers to the change in total cost associated with the production of another unit: true i. The VC curve is modeled as a horizontal line: false j: false

The accompanying table shows Tanisha's and Ari's individual marginal benefit of different amounts of street cleanings per month. Suppose that the marginal cost of street cleanings is constant at $9 each.

a. If Tanisha had to pay for street cleaning on her own, how many street cleanings would there be? 1 b. Calculate the marginal social benefit of street cleaning. What is the optimal number of street cleanings? 2 c. Consider the optimal number of street cleanings. The last street cleaning of the optimal number of street cleanings costs $9. Is Tanisha willing to pay for that last cleaning on her own? Is Ari willing to pay for that last cleaning on his own? is not, is not

Magnificent Blooms is a florist specializing in floral arrangements for weddings, graduations, and other events. Magnificent Blooms has a fixed cost associated with space and equipment of $100 per day. Each worker is paid $50 per day. The daily production function for Magnificent Blooms is shown in the accompanying table.

a. Calculate the marginal product of each worker. 1 worker - 5 2 - 4 3 - 3 4 - 2 5 - 1 What principle explains why the marginal product per worker declines as the number of workers employed increases?: The principle of diminishing returns to an input b. Calculate the marginal cost of each level of output. 5 floral arrangements - $10 9 - $12.50 12 - $16.67 14 - $25 15 - $50 What principle explains why the marginal cost per floral arrangement increases as the number of arrangements increases?: The principle of diminishing returns to an input

Daniella owns a small concrete-mixing company. Her fixed cost is the cost of the concrete-batching machinery and her mixer trucks. Her variable cost is the cost of the sand, gravel, and other inputs for producing concrete; the gas and maintenance for the machinery and trucks; and her workers. She is trying to decide how many mixer trucks to purchase. She has estimated the costs shown in the accompanying table based on estimates of the number of orders that her company will receive per week.

a. For each level of fixed cost (i.e., for each number of mixer trucks), calculate Daniella's total cost of producing 20, 40, and 60 orders per week. 20 orders 2 trucks: $8,000 60, 2: $18,000 40, 2: $11,000 30, 3: $8,800 60, 3: $17,800 40, 3: $10,800 20, 4: $9,200 40, 4: $11,600 60, 4: 16,400 b. If Daniella is producing 20 orders per week, how many trucks should she purchase, and what will her average total cost be? Round average total cost to the nearest dollar. - two - $400 If Daniella is producing 40 orders per week, how many trucks should she purchase, and what will her average total cost be? Round the average total cost to the nearest dollar. - three - $270 If Daniella is producing 60 orders per week, how many trucks should she purchase, and what will her average total cost be? Round the average total cost to the nearest dollar. - four - $273

Which best describes a negative income tax? a. Households where the combined income is greater than $25,000 pay an income tax, whereas households earning less than that are paid a tax rebate. b. The government gives out a $200 stimulus check to all people of working age to stimulate the economy after a recession. c. Justin is told by his employer that he is getting a pay cut in these lean economic times to save costs. d. Rebecca has more money taken out of her paycheck because the government increased the amount each person must contribute to Social Security. e. The minimum wage increases from $7.60 to $8.10.

a. Households where the combined income is greater than $25,000 pay an income tax, whereas households earning less than that are paid a tax rebate.

In the city of Notchingham, each worker is paid a wage rate of $10 per hour. Notchingham administers its own unemployment benefit, which is structured as follows: If you are unemployed (that is, if you do not work at all), you get unemployment benefits (a transfer from the government) of $50 per day. As soon as you work for only one hour, the unemployment benefit is completely withdrawn. That is, there is a notch in the benefit system.

a. How much income does an unemployed person have per day? $50 How much daily income does an individual who works four hours per day have? $40 How many hours do you need to work to earn just the same as if you were unemployed? 5 hours Will anyone ever accept a part-time job that requires working four hours per day rather than being unemployed? No c. Suppose that Notchingham now changes the way in which the unemployment benefit is withdrawn. For each additional dollar that an individual earns, $0.50 of the unemployment benefit is withdrawn. How much daily income does an individual who works four hours per day now have? income: $70 Is there an incentive now to work four hours per day rather than being unemployed? Yes, because income is greater for a person working fours per day.

Butchart Gardens is a very large garden in Victoria, British Columbia, renowned for its beautiful plants. It is so large that it could hold many times more visitors than currently visit it. The garden charges an admission fee of $30. At this price, 1,000 people visit the garden each day. If admission were free, 2,000 people would visit each day. The marginal cost of an additional visitor is $0.

a. excludable, nontrivial, an artificially scarce

The tables show the annual incomes for the citizens in two countries, Melka and Sorare. Use this information to answer the questions. The Nation of Sorare Citizen Income: Teddy$2,000, Kermit$50,000, Franklin$63,500 ,Anna$1,500 ,Eleanor$2,000 ,Edith$1,000 The Nation of Melka Citizen Income: Etta$20,000, Duke$21,000, Louis$20,000, Billie$20,300 ,Cole$19,000 ,Zora$19,700 Generally, what does the Gini coefficient measure? a. It is a measure of how equal or unequal an income distribution is. b. It is a measure of the percentage of income that the richest 1% in a country earns. c. It is a measure of the average income of the citizens of a nation. d. It shows the disparity in income between men and women.

a. It is a measure of how equal or unequal an income distribution is.

Everything Looks Like a Nail, Inc. is a manufacturing company that produces hammers. The company faces various fixed and variable costs in the short run. Determine which of Everything Looks Like a Nail's costs are fixed costs and which are variable costs. Assume the company cannot easily adjust the amount of capital that it uses and that salaries are negotiated only once per year.

a. Postage and packaging costs: variable cost. b. Lease on building: fixed cost. c. Cost of wood used in manufacturing: variable cost. d. Industrial equipment costs: fixed cost. e. Interest on current debt: fixed cost f. Liability insurance costs: fixed cost g. Cost of metal used in manufacturing: variable cost h. Annual salaries of top management: fixed cost

Classify the statements as either true or false.

a. Price discrimination is illegal under all circumstances. False b. Airlines are often able to price discriminate. True c. Firms do not have an incentive to price discriminate because it results in some groups paying a lower price than others. False d. Perfect price discrimination occurs when perfectly competitive firms charge some people higher prices than others. False e. All else being equal, single price monopolists earn lower profits than firms that can price discriminate. True f. Price discrimination only occurs with natural monopolies. False Solved

Anyone with a radio receiver can listen to public radio, which is funded largely by donations.

a. Public radio is nonexcludable and nonrival in consumption. It is therefore a public good b. The government should support public radio because private markets result in an inefficiently low level of public goods c. To finance itself, public radio decides to transmit only to satellite radios, for which users must pay a fee. In this scenario, public radio is an artificially scarce good. The number of listeners will be inefficiently low, since the price is above marginal cost

The production of agricultural products like wheat is one of the few examples of a perfectly competitive industry. This question analyzes results from a study released by the U.S. Department of Agriculture about wheat production in the United States in 2016.

a. The average variable cost per acre planted with wheat was $115 per acre. Assuming a yield of 44 bushels per acre, what is the average variable cost (AVC) per bushel of wheat?: 2.61 b. stayed in operation c. less than the average Toal cost, leading some farmers to exit the market d. decrease

The village of Upper Bigglesworth has a village "commons," a piece of land on which each villager, by law, is free to graze his or her cows. Use of the commons is measured in units of the number of cows grazing on it. Assume that the marginal private cost curve of cow-grazing on the commons is upward-sloping (due, say, to more time spent herding). There is also a marginal social cost curve of cow-grazing on the commons: each additional cow grazed means less grass available for others, and the damage done by overgrazing of the commons increases as the number of cows grazing increases. Finally, assume that the private benefit to the villagers of each additional cow grazing on the commons declines as more cows graze, since each additional cow has less grass to eat than the previous one.

a. The commons is nonexcludable and rival in consumption. It is thus a a common resource.

There are many differences between a market served by a monopoly and a market that is perfectly competitive. Indicate whether each item is associated with a single-price monopoly, perfect competition, or is true of both market structures.

a. The price is higher than in other market structures. monopoly b. An efficient quantity is produced. perfect competition c. Firms can earn positive economic profit in the long run. monopoly d. There are significant barriers to entry. monopoly e. Firms have no market power. perfect competition f. Firms maximize profits by operating where marginal revenue equals marginal cost. both monopoly and perfect competition

Changes in the prices of key commodities have a significant impact on a company's bottom line. For virtually all companies, the price of energy is a substantial portion of their costs. In addition, many industries, such as those that produce beef, chicken, high-fructose corn syrup, and ethanol, are highly dependent on the price of corn. In particular, corn has seen a significant increase in price.

a. There is usually a fixed energy cost associated with overhead that does not change with output, but producing more output typically takes more energy. c. Corn is a raw ingredient in the production of ethanol. An ethanol producer adjusts its corn purchases to meet its ethanol production targets

a. There is usually a fixed energy cost associated with overhead that does not change with output, but producing more output typically takes more energy.c. Corn is a raw ingredient in the production of ethanol. An ethanol producer adjusts its corn purchases to meet its ethanol production targets

You produce widgets. Currently, you produce four widgets at a total cost of $40.

a. What is your average total cost?: $10 b. Suppose you could produce one more (the fifth) widget at a marginal cost of $5. If you do produce that fifth widget, what will your average total cost be?: $9 Has your average total cost (ATC) increased or decreased? Why? - ATC has decreased, since marginal cost is below ATC. c. Suppose instead that you could produce one more (the fifth) widget at a marginal cost of $20. If you do produce that fifth widget, what will your average total cost be?: $12 Has your ATC increased or decreased? Why? - ATC has increased since marginal cost is above ATC.

An economist gives the following advice to a museum director: "You should introduce 'peak pricing.' At times when the museum has few visitors, you should admit visitors for free. And at times when the museum has many visitors, you should charge a higher admission fee."

a. When the museum is quiet, it is nonrival in consumption and excludable. The museum is, therefore, an artificially scarce good. The efficient entry admission fee is zero, as that would equal the marginal cost. b. When the museum is busy, it is rival in consumption and excludable. The busy museum is, therefore, a private good. The efficient price to charge visitors during that time is the external cost at the efficient number of visitors. as that would equal the marginal cost.

Skyscraper City has a subway system, for which a one-way fare is $1.50. There is pressure on the mayor to reduce the fare by one-third, to $1.00. The mayor is dismayed, thinking that this will mean Skyscraper City is losing one-third of its revenue from sales of subway tickets. The mayor's economic adviser reminds her that she is focusing only on the price effect and ignoring the quantity effect.

a. While the fare decline will negatively affect city revenue through the price effect, it will positively affect city revenue through the quantity effect. The overall effect on revenue will be positive if the quantity effect dominates the price effect

Assuming Wikipedia thinks they have too many free riders, which solution would NOT reduce, or offset, the free rider problem? a. Wikipedia creates a duplicate website, Wekepedia, with the same content as Wikipedia, but costs $25 a year.Wikipedia would remain free to the public. b. Wikipedia sells its sidebar space to advertising. c. Wikipedia charges a small $1$1 per year membership fee to everyone except those who author content-approvedWikipedia articles. d. Jimmy Wales, the founder, makes personal appeals asking users to donate a charitable amount to keep Wikipedia going.

a. Wikipedia creates a duplicate website, Wekepedia, with the same content as Wikipedia, but costs $25 a year.Wikipedia would remain free to the public.

Indicate whether or not each item generates network externalities.

a. a Facebook account generates network externalities b. steel production, which results in air pollution does not generate network externalities c. operating systems, such as Windows or Mac generates network externalities d. a power strip does not generate network externalities e. plastic grocery bags does not generate network externalities

Consider Bob's flower pot company, whose costs are described in the accompanying table. Assume that flower pot production is a perfectly competitive industry.

a. break ever price: 13.83 shut down price: 3 b. shut down in short run c. 5000 and -35,000 and produce in the short run but exit in the long run d. 7000 and 41000 and produce in the short run and long run

For each of the following, determine if the business is a price-taking producer and why. a. A cappuccino café in a university town where there are dozens of very similar cappuccino cafés is b. the makers of Pepsi are c. one of many sellers of zucchini at a local farmers' market is

a. considered a price taker because there are many producers and a standardized product b. not considered a price taker bc there is one manufacturer of Pepsi and a differentiated product c. considered a price taker bc there are many producers and a standardized product

The lease on Allison's apartment will expire next month, and she wants to move closer to campus. There are two apartments that she likes. Both are close to campus and in her price range. The first one is next door to a garage where local bands often practice late at night. The second one is next door to a donut shop that opens at 5 a.m. If her roommate hates loud music, and the smell of donuts makes her sick, she will reject both apartments due to what she sees as a. external cost. b. private good. c. willingness to pay. d. price floor. e. external benefit.

a. external cost.

Determine whether each statement is true or false. a. The two main political parties in the United States, the Democratic Party and the Republican Party, are extremely similar in their opinions of the U.S. welfare state. b. One of the major issues at the center of the political debate over the welfare state is the trade-off between efficiency and equality. c. As a government's welfare state system grows, it will likely increase tax rates across all earning quintiles in order to fund the expansions. d. The United States has one of the largest and most developed welfare state systems among industrialized countries even though it has some of the lowest tax rates. e. A notch is a government-imposed fine for families receiving welfare state benefits who do not meet the strict time limit for finding work.

a. false b. true c. true d. false e. false

Label the statements regarding the Patient Protection and Affordable Care Act (PPACA) as true or false. a. The ACA establishes a national healthcare system for the United States in which the government rather than insurance companies pays for all health related expenses. b. Under the ACA, the government has the right to fine employers or individuals for not having or providing health insurance. c. Assume the ACA is in effect. A health insurance company is looking over a prospective individual, Alfred, and finds that Alfred goes cliff diving regularly, which was the cause of his past six concussions. He now suffers from frequent headaches. The insurance company can deny Alfred coverage because of his preexisting medical condition. d. To fund the ACA, new taxes will be imposed on items including medical devices and indoor tanning. e. Under the ACA, until age 26, you can be covered under your parent's health insurance policy.

a. false b. false c. false d. true e. true

Indicate whether or not each item generates network externalities. a. a Facebook account b. steel production, which results in air pollution c. operating systems, such as Windows or Mac d. a power strip e. plastic grocery bags

a. generates network externalities b. does not generate network externalities c. generates network externalities d. does not generate network externalities e. does not generate network externalities

Suppose there are only two types of people, healthy people who never get sick and unhealthy people who have very high health care costs. Suppose that each person can work for one of only two firms. The firm of Emerson, Lake and Palmer pays all health insurance costs and their insurance covers all possible health issues. The company Weyland‑Yutani pays a small part of the health insurance costs and requires high copayments, but they also pay higher wages to compensate healthy people for their health costs but not unhealthy people. Also, assume that the two firms produce the exact same product and the types of work employees perform at the firms are identical. Which type of workers will likely work for Weyland‑Yutani? a. healthy workers only b. both types c. unhealthy workers only

a. healthy workers only

In 2017, Tesla Motors released the Model 3. The Model 3 is an all-wheel-drive, luxury sedan. It uses no gasoline and has a range of 220 to 310 miles per charge. Pre-orders for the Model 3 exceeded 450,000 units. To meet demand for the Model 3, Tesla announced it will increase production at its production facility to 6,000 cars per week, or about 300,000 cars per year. Currently, the plant is equipped to produce about 100,000 cars per year.

a. image in link: https://docs.google.com/document/d/1T96Tm3Y3NCOMsv0D_r8MXSVQ_k9V6IZU8tIcmMt1c2E/edit b. - more - more - lowering variable

For each of the following, identify whether the industry is perfectly competitive and why.

a. is, many, easy, standardized b. are not, there is only one beyonce c. are not, few, differentiated

There are 100 households in the economy of Equalor. Initially, 99 of them have an income of $10,000 each, and one household has an income of $1,010,000.

a. median income: 10,000 mean income: 20,000 b. median income: 20,000 mean income: 20,000 increased, stayed the same, median, mean

Please match each type of health care program with its correct description. a. Covers a wide range of medical expenses, including hospitalization and prescription drug benefits. It is available to all Americans age 65 and older. b. A means‑tested program partially funded by the federal government and partially by the states, designed to assist low-income Americans. Most of the recipients of this program are children and older Americans who need long‑term care. c. A program that provides medical and healthcare services to members of the armed forces and their families. d. An insurance plan purchased by individuals through their place of work. These benefits are untaxed and, because of this, are often considered subsidized by the federal government. e. A medical insurance plan purchased by an individual without the aid of a company or organization. The full cost for this kind of program is borne by the individual.

a. medicare b. medicaid c. veterans health administration d. employment-based. insurance e. direct-purchase insurance

Identify the characteristics that describe each good listed below. Note that each good will be described by two characteristics. "Rivalrous" is also referred to as "rival in consumption." Consider only the immediate benefits and costs, not any externalities. a. national defense b. Pay-Per-View cable television c. a Hot Pocket sandwich d. private classroom education e. pajamas f. a unicycle

a. non-excludable, non-rivalrous b. excludable, non-rivalrous c. excludable, rivalrous d. excludable, rivalrous e. excludable, rivalrous f. excludable, rivalrous

The government is involved in providing many goods and services. For each of the goods or services listed, determine whether it is rival or nonrival in consumption and whether it is excludable or nonexcludable. What type of good is it? Without government involvement, would the quantity provided be efficient, inefficiently low, or inefficiently high?

a. nontrivial, nonexludable, public good, inefficiently low b. rival, excludable, private good, inefficiently low c. nonrival, nonexcluadable, public good, inefficiently low d. rival, non excludable, common resource, inefficiently low, e. nonrival, non excludable, public, inefficiently low

Wolfsburg Wagon (WW) is a small automaker. The accompanying table shows WW's long-run average total cost.

a. one, four b. six, eight c. four, six

The first sushi restaurant opens in town. Initially, people are very cautious about eating tiny portions of raw fish, as this is a town where large portions of grilled meat have always been popular. Soon, however, an influential health report warns consumers against grilled meat and suggests that they increase their consumption of fish, especially raw fish. The sushi restaurant becomes very popular and its profit increases.

a. other firms to enter bc of positive profits, prices to decrease and the profit for the original sushi restaurant to decrease b. the number of steakhouses to decrease

Suppose that solar-powered car technology advances to the point that solar-powered cars become affordable for the average consumer. Which type of externality is likely to result from a consumer's decision to purchase a solar-powered vehicle instead of a gas-powered vehicle, and how does it arise? This decision generates a a. positive externality because the replacement of gas-powered vehicles with solar-powered vehicles will result in less environmental pollution. b. positive externality because individuals can use the money they save on gasoline to help the local community. c. negative externality because including new technology in the cars will drive up the market price. d. negative externality because companies that do not produce solar-powered cars will be put out of business. Suppose the government is interested in moving the market closer to the socially optimal quantity. Which policy would likely result in the desired outcome? An effective option is a. a subsidy to consumers who choose to purchase solar-powered vehicles. b. granting one firm monopoly rights to produce solar-powered vehicles. c. a price floor above the observed average price for a solar-powered car. d. a new tax levied on the makers of solar-powered cars.

a. positive externality because the replacement of gas-powered vehicles with solar-powered vehicles will result in less environmental pollution. a. a subsidy to consumers who choose to purchase solar-powered vehicles.

Please indicate whether each characteristic is a feature of private health insurance or government health insurance programs. a. often provided to individuals through a plan offered by their employer b. recipients pay into a large pool that covers many of the medical costs for members c. helps to cover those who may not receive insurance coverage from employers d. includes the Veterans Health Administration, which runs its own health services system for members of the armed forces and their families e. funded predominantly through tax revenue

a. private health insurance b. private health insurance c. government health insurance d. government health insurance e. government health insurance

Your roommate is having difficulty understanding how a firm can keep operating despite losing money, earning a negative profit. How will firms respond to losing money?

a. shut down, not be able to cover either its fixed costs or its variable costs b. continue operating in the short run, be able to cover its variable costs and some of its fixed costs

Categorize each policy response according to the type of regulation it best describes. a. Auto manufacturers are allowed to pollute as much as they wish, provided that they have purchased a sufficient number of pollution licenses. b. The government requires that auto manufacturers limit pollution to a specified threshold. c. The government requires that auto manufacturers use a new, cleaner technology in producing cars. d. An auto manufacturer is charged a fee per unit of pollution emitted into a river.

a. tradable emissions permits b. environmental standards c. environmental standards d. emissions taxes

In a private insurance market, there are two different kinds of people: some who are more likely to require expensive medical treatment and some who are less likely to require medical treatment and who, if they do, require less expensive treatment. One health insurance policy is offered, tailored to the average person's health care needs: the premium is equal to the average person's medical expenses (plus the insurer's expenses and normal profit).

a. will not, a lot of, high, adverse selection death spiral b. lower, lose money on this c. everyone, general tax revenues

a.fixed costs:- salaries and benefits...- upkeep and university...- land and building...- maintenance of research...variable costs:- compensation of...- cafeteria staff...b. largec. it will rise substantially

The demand curve for a monopoly is:

above the marginal revenue curve.

Medicare is provided to:

all Americans age 65 and older and is not means-tested.

In the United States, individuals pay directly (out of pocket) _____ of medical costs.

approx 12%

Bluefin tuna is a fish that is in high demand from consumers. Overfishing of this species, particularly in the Mediterranean Sea, has led to the strong possibility of extinction. The graph illustrates the marginal social cost (MSC), marginal private cost (MPC), and marginal social benefit (MSB) for a hypothetical representation of the Bluefin tuna market. Use the graph to answer the questions. Why is the market equilibrium not socially optimal? a. MSB is greater than MSC at the market equilibrium. b. MSC is greater than MSB at the market equilibrium. c. MSC is equal to MSB at the market equilibrium. d. There is still more Bluefin tuna available to catch.

b. MSC is greater than MSB at the market equilibrium.

b. Over what range of prices will Bob produce no flower pots in the short run? $0 to $3 c. Bob's individual supply curve is the portion of his MC curve starting at a price of $3.00

The chart gives the income distribution of Sambala, an island nation in the arctic ocean. Annual Income: Ken$32000, Leo$45000, Michael$65000, Marion$500000, Joseph$56000, Ellen$45000, Tom$64000 Which measure is most appropriate for understanding the income situation of the majority of the citizens in Sambala, and why? a. The mean is the most appropriate measure, because it incorporates every individual in the economy. b. The median is the most appropriate measure, because it reduces the effects of outliers. c. Both are equally valid because they produce a single monetary measure. d. Neither is valid because neither considers the spending levels of citizens in Sambala.

b. The median is the most appropriate measure, because it reduces the effects of outliers.

Suppose there are only two types of people, healthy people who never get sick and unhealthy people who have very high health care costs. Suppose that each person can work for one of only two firms. The firm of Emerson, Lake and Palmer pays all health insurance costs and their insurance covers all possible health issues. The company Weyland‑Yutani pays a small part of the health insurance costs and requires high copayments, but they also pay higher wages to compensate healthy people for their health costs but not unhealthy people. Also, assume that the two firms produce the exact same product and the types of work employees perform at the firms are identical. We see the sorting this way because of a. moral hazard. b. adverse selection.

b. adverse selection.

Eva and Bruce are a young couple in good health. Eva begins her new job as a dolphin trainer and is offered elective health care coverage from her company for a price less expensive than she and Bruce would pay if they purchased insurance on their own. The policy provides the same coverage to all participants regardless of age or health status. Every year for the next five years, they see an increase in their insurance costs. After five years, they receive a notice in the mail informing them that their insurance company has gone bankrupt. Eva contacts the company to inquire the reasoning behind the company's failure. She is informed that over the past several years, healthier individuals chose to leave their insurance policy, shrinking the company's participant pool. Eventually, no more healthy people remained in the pool except Eva and Bruce. The insurance company had no choice but to increase costs for all members. Finally, they could no longer afford to operate. Which term best describes what Eva and Bruce's insurance company has experienced? a.excess capacity b. death spiral c. stagflation d. market failure Which policy would not have been a solution for the insurance company? a. filter out the most unhealthy applicants through prescreening b. place a limit on the costs covered by the plan c. offer different plans to different individuals, based on health and age d. require all members to see a doctor approved by the insurance company

b. death spiral d. require all members to see a doctor approved by the insurance company

A Pigouvian tax is designed to reduce: a.the marginal benefit of consumption. b. external costs. c. external benefits. d. the marginal cost of production.

b. external costs.

Montgomery owns a nuclear power plant in the town of Springfield. His power plant dumps substantial quantities of radioactive waste into the local pond, which has given rise to a mutant guppy fish population with three eyes. The town decides to have Montgomery do something about the externality. Which method would NOT result in Montgomery accounting for the social cost of running the power plant? It would not work to a. have the government give Montgomery a permit to allow a limited amount of pollution but no more. b. subsidize Montgomery for every three‑eyed fish found in the pond. c. charge Montgomery $1,000 for every barrel of toxic waste his nuclear reactors produce. d. define property rights clearly to identify Springfield as the owner of the pond with the right to compensation from e. Montgomery for damages from the pollution.

b. subsidize Montgomery for every three‑eyed fish found in the pond.

Suppose there are only two types of people, healthy people who never get sick and unhealthy people who have very high health care costs. Suppose that each person can work for one of only two firms. The firm of Emerson, Lake and Palmer pays all health insurance costs and their insurance covers all possible health issues. The company Weyland‑Yutani pays a small part of the health insurance costs and requires high copayments, but they also pay higher wages to compensate healthy people for their health costs but not unhealthy people. Also, assume that the two firms produce the exact same product and the types of work employees perform at the firms are identical. Which type of workers will likely work for Emerson, Lake and Palmer? a. healthy workers only b.unhealthy workers only c.both types

b.unhealthy workers only

A monopoly is an industry structure characterized by:

barriers to entry and exit.

The tables show the annual incomes for the citizens in two countries, Melka and Sorare. Use this information to answer the questions. The Nation of Sorare Citizen Income: Teddy$2,000, Kermit$50,000, Franklin$63,500 ,Anna$1,500 ,Eleanor$2,000 ,Edith$1,000 The Nation of Melka Citizen Income: Etta$20,000, Duke$21,000, Louis$20,000, Billie$20,300 ,Cole$19,000 ,Zora$19,700 Based on the information here, which nation would you expect to have the higher Gini coefficient? a. They would have the same Gini coefficient. b. Melka c. Sorare

c. Sorare

Which of the following characteristics of the welfare state is avoided by the supplement's gradual decline? inflation a. a revenue shortfall b. recession c. a benefits notch

c. a benefits notch

What is the individual mandate component of the Patient Protection and Affordable Care Act? a. a declaration that each individual is responsible for his or her own health care needs and should not look to the government for assistance b. a provision that allows each individual patient to overrule insurance companies when selecting physicians and procedures c. a rule that requires, with limited exceptions, that every resident of the country must enroll in a health insurance plan or pay a fine d. a policy measure that assigns, or mandates, each patient to an approved primary care provider

c. a rule that requires, with limited exceptions, that every resident of the country must enroll in a health insurance plan or pay a fine

Markets for the right to pollute are: a. likely to lessen incentives to develop and implement technology that reduces pollution. b. a means of encouraging more pollution. c. established by governments when they issue tradable pollution permits. d. established by individual firms when they reduce emissions.

c. established by governments when they issue tradable pollution permits.

The marginal social benefit of pollution: a. increases as more pollution is emitted. b. equals zero when the socially optimal quantity of pollution is produced. c. is the benefit to society of one more unit of pollution. d. equals the marginal social cost of pollution in all markets at equilibrium.

c. is the benefit to society of one more unit of pollution.

Suppose Turing Inc. creates the first ever solar powered cell phone battery that absorbs ambient light and converts it into electrical power. Furthermore, the battery stores excess absorbed light as an internal battery that lasts up to 1010 hours in the dark. At a conference, a Turing Inc. representative presents the battery to representatives from many other companies, proclaiming the invention will revolutionize the cell phone industry. A few months later, Algos creates a solar powered cell phone battery that lasts 1212 hours in the dark. This example of the spreading of knowledge is known as [a(n)] a. network externality. b. positive feedback. c. technology spillover. d. industrial policy.

c. technology spillover.

Each year, around Christmas, you decorate your home so elaborately that news crews come to film stories about your Christmas spirit. As a result, hundreds of people from all over the city drive by your house to see the "Christmas" home, creating noise and congestion that is a nuisance to your neighbors. As they have a right to not be bothered, you agree to pay your neighbors a modest sum to compensate them for the disturbance. This illustrates: a. a Pigouvian tax. b. the expendable argument theorem. c. the Coase theorem. d. a Pigouvian subsidy.

c. the Coase theorem.

Your college roommate has the right to practice her tuba during the day. You, however, find that studying during the day is most conducive to good grades, and her tuba-playing makes it difficult for you to concentrate. You make a deal with your roommate: you will clean the dorm room once a week if she will practice her tuba at other times or elsewhere. This is an example of a. emission permits. b. a Pigouvian tax. c. the Coase theorem. d. a Pigouvian subsidy.

c. the Coase theorem.

The production function for Marty's Frozen Yogurt is shown in the accompanying table.Marty pays each of his workers $80 per day. The cost of his other variable inputs is $0.50 per cup of yogurt. His fixed cost is $100 per day

c.the fixed cost...spreading effectthe amount...diminishing...d. 270

If a perfectly competitive firm is producing a quantity where MC > MR, then profit:

can be increased by decreasing production.

In many planned communities, various aspects of community living are subject to regulation by a homeowners' association. These rules can regulate house architecture; require snow removal from sidewalks; exclude outdoor equipment, such as backyard swimming pools; require appropriate conduct in shared spaces, such as the community clubhouse; and so on. Suppose there has been some conflict in one such community because some homeowners feel that some of the regulations mentioned above are overly intrusive. You have been called in to mediate. Using what you have learned about public goods and common resources, how would you decide what types of regulations are warranted, and what types are not?

common goods, public goods, artificially scarce goods

Suppose the GoLogos logo monopoly is broken up. and the logo industry becomes perfectly competitive. We would expect _____ surplus to increase and _____ surplus to decrease after the breakup.

consumer and total; producer

The lease on Allison's apartment will expire next month, and she wants to move closer to campus. There are two apartments that she likes. Both are close to campus and in her price range. The first one is next door to a garage where local bands often practice late at night. The second one is next door to a donut shop that opens at 5 a.m. If she is a morning person and loves the smell of donuts, she will view the donut shop as a(n) a. external cost. b. private good. c. willingness to pay. d. price floor. e. external benefit.

e. external benefit.

The graph shows the case of an unregulated natural monopolist. Please label the appropriate areas.

costmer surplus on the top profits on the bottom Suppose that the government decides to regulate this natural monopolist by requiring the firm to charge a price of P2. Which is true if the government takes this approach?: Consumer surplus will increase.

Which is an example of an in‑kind transfer? a. Medicare b. housing vouchers c. food stamps d. all of the above

d. all of the above

City beautification is a public good because: a. it is rival in consumption and nonexcludable. b. it is rival in consumption and nonexcludable. c. it is nonrival in consumption and excludable. d. it is nonrival in consumption and nonexcludable.

d. it is nonrival in consumption and nonexcludable.

What is the primary reason for the individual mandate? a. to ensure that all sick people have health care coverage so their medical bills will be paid b. to increase the profits of companies offering health insurance c. to reduce government's role in health care and rely more on markets d. to make sure healthy people do not opt out and reduce the risk pool for insurance companies

d. to make sure healthy people do not opt out and reduce the risk pool for insurance companies

Figure: A Competitive Market in the Presence of Externalities) Use Figure: A Competitive Market in the Presence of Externalities. Given the figure, if there are external costs, a tax imposed on sellers will: decrease the equilibrium price. decrease the equilibrium quantity. have no effect on the equilibrium price. increase the equilibrium quantity.

decrease the equilibrium quantity.

A monopoly responds to a decrease in marginal cost by _____ price and _____ output.

decreasing; increasing

(Figure: The Marginal Decision Rule for Apple Farmers) Use Figure: The Marginal Decision Rule for Apple Farmers. Given the market price P1, B is the _____ curve.

demand

A Pigouvian subsidy is: appropriate when the marginal social cost curve and the marginal social benefit curve intersect at an inefficient level. designed to encourage activities that generate external benefits. appropriate when the marginal social cost curve is above the marginal cost of production curve. designed to internalize a negative externality.

designed to encourage activities that generate external benefits.

The long run is best defined as a time period

during which all inputs can be varied.

The Environmental Protection Agency is attempting to rule on whether pollution from greenhouse gas emissions endangers public safety. Among the many greenhouse gas polluters are cows emitting methane. Economists have devised a theory to help address this issue. Identify the statement that is true according to economic theory. a. If the cost of paying a pollution charge (tax on bovine methane emissions) is less than the cost of reducing pollution, the farmer will have an incentive to reduce pollution. b. To maximize social welfare, all pollution should be removed. c. The benefit of pollution cleanup to society is always less than the cost of pollution cleanup, especially if all costs are borne by the producer (which means the farmer, but technically, the cows are doing the producing). d. Environmental standards regarding cow-generated methane creates strong incentives for the farmer to reduce as much as possible. e. The efficient level of pollution removal occurs where the marginal benefit of pollution removal equals the marginal cost of pollution removal; i.e., some pollution could be allowed.

e. The efficient level of pollution removal occurs where the marginal benefit of pollution removal equals the marginal cost of pollution removal; i.e., some pollution could be allowed.

Select the best definition of a public good. a. a good that is nonexcludable and rival in consumption b. a good that is paid for by public funds c. a good that is excludable and nonrival in consumption d. a good that is excludable and rival in consumption e. a good that is nonexcludable and nonrival in consumption

e. a good that is nonexcludable and nonrival in consumption

What is an in‑kind transfer? a. any transfer of resources from one individual to another b. a transfer of resources in the form of cash rather than goods and services c. a transfer of resources from one private citizen to another without government involvement d. an anonymous charitable donation made with exclusively altruistic motives e. a transfer of resources in the form of goods and services rather than cash

e. a transfer of resources in the form of goods and services rather than cash

The lease on Allison's apartment will expire next month, and she wants to move closer to campus. There are two apartments that she likes. Both are close to campus and in her price range. The first one is next door to a garage where local bands often practice late at night. The second one is next door to a donut shop that opens at 5 a.m. If she likes to stay up late and loves listening to all kinds of music, she will view the bands practicing as a(n) a. external cost. b. private good. c. willingness to pay. d. price floor. e. external benefit.

e. external benefit.

A sudden loss of income and a significant increase in costly medical expenses are examples of: poverty thresholds. economic inequality. the Great Compression. economic insecurity.

economic insecurity.

A market for a private good with no externalities produces an _______ quantity of goods. A private good is ______ in consumption, and is _______

efficient, rival, excludable.

The demand for air travel in the tourism industry tends to be relatively ______. Thus, small _____ in air fares will result in relatively _____ in air travel.

elastic; reductions; large increases

(Figure: Environmental Standards versus Emissions Taxes in the Market for Coal Fired Electricity) Use Figure: Environmental Standards versus Emissions Taxes in the Market for Coal Fired Electricity. In the figure, if the goal is to limit the total emissions of firms A and B to 600 tons, the MOST efficient solution is an _____, and total pollution would be _____ tons. emissions tax; 600 environmental standard; 600 emissions tax; 200 environmental standard; 300

emissions tax; 600

A profit-maximizing firm in a perfectly competitive industry should select the output level at which the difference between the market price and marginal cost is greatest.

false

An increase in fixed cost lowers the profit-maximizing quantity of output produced in the short run.

false

Suppose Ralph has a chicken processing plant with the total cost function shown in the accopmanying table.

fixed cost: $800 # of workers hired: 8 Why does total cost increase faster as output increases?: There are diminishing returns to labor.

A firm's ___________________ are costs that are incurred even if there is no output. In the short run, these costs ___________________ as production increases.

fixed costs; do not change

Given the assumptions of a perfectly competitive industry, explain why firms operating in that industry are reluctant to invest in new technological development.

free entry and exit of firms, enter, standardized, price takers

A ________ is a person who _______ a public good that others __________

free rider, enjoys, pay for.

The _____ is widely used to measure income inequality

gini coefficient

Each graph illustrates three short-run cost curves for firms, where ATC is average total cost (also referred to as average cost), MC is marginal cost, and AVC is average variable cost.

graph in link: https://docs.google.com/document/d/1T96Tm3Y3NCOMsv0D_r8MXSVQ_k9V6IZU8tIcmMt1c2E/edit

Classify each statement or equation according to whether it describes average variable cost, marginal cost, or average (total) cost. (TC is total cost; VC is variable cost; Q is quantity.)

image in link: https://docs.google.com/document/d/1T96Tm3Y3NCOMsv0D_r8MXSVQ_k9V6IZU8tIcmMt1c2E/edit

The graph shows the costs of a firm in the short run. Match the labels to the curves they best represent. Note that not all labels will be used.

image in link: https://docs.google.com/document/d/1T96Tm3Y3NCOMsv0D_r8MXSVQ_k9V6IZU8tIcmMt1c2E/edit

Sandra and Trey operate a small company that produces souvenir footballs. Their fixed cost is $2,000 per month. They can hire workers for $1,000 per worker per month. Their monthly production function for footballs is as given in the accompanying table.

image in link: https://docs.google.com/document/d/1T96Tm3Y3NCOMsv0D_r8MXSVQ_k9V6IZU8tIcmMt1c2E/edit c. 1,200

Some of the major causes of poverty are racial and gender discrimination, bad luck, a lack of proficiency in English, and: inadequate education. geographic region. differences in religious preference. government restrictions.

inadequate education

Looking only at the 20 residents of Metropolis who are currently 40 years old, study the income distribution among only those residents. Split those 20 residents into quintiles according to their income. How much income does a resident in the lowest quintile have? In the second, third, fourth, and top quintiles? What share of the total income of all 40-year-olds goes to the residents in each quintile? Does this income distribution show inequality?

income, lowest quintile: 400 income, other quintiles: 400 Each quintile receives: 20% The income distribution is: perfectly equal c. greater

If the long-run market supply curve for a perfectly competitive market is upward sloping, then this industry exhibits _____ costs.

increasing

A market for an artificially scare good, also known as a club good, produces an ______ quantity. A club good is _______ in consumption, and is _______

inefficient, nonrival, excludable.

A market for a public good produces an_______ quantity. A public good is _________ in consumption and is ___________

inefficient, nonrival, nonexcludable.

A market for a common resource produces an ________ quantity. A common resource is _______ in consumption and is _________

inefficient, rival, nonexcludable

In the short run, fixed cost:

is constant.

Facebook is subject to network externalities because: its value to an individual increases when the number of other people using it increases. its value is determined only by its marginal private benefit. it yields negative externalities. its value to an individual declines when the number of other people using it increases.

its value to an individual increases when the number of other people using it increases.

mean: $115285.7 median: $56000

The accompanying table presents data from the U.S. Census Bureau on median and mean income of male workers for the years 1972 and 2018. The income figures are adjusted to eliminate the effect of inflation.

median income changed by: 3.8 mean income changed by: 31.6 b. at the top of, unequal

The accompanying graph depicts a hypothetical monopoly. Follow instuctions 1−3 below to identify the monopoly's profits. Place point E at the monopoly's profit maximizing price and quantity. Move the average total cost (ATC) curve to a position that depicts the monopoly earning a positive profit. Place the area labeled Profit in the area of the graph that represents the monopoly's profit.

move the ATC to the middle

For the Texas beef industry to be considered perfectly competitive, ranchers in Texas must have _____ on prices, and beef must be a _____ product.

no noticeable effect; standardized

Jennifer's Sunglass Hut operates in a perfectly competitive industry and has standard cost curves. The variable costs at Jennifer's Sunglass Hut decrease, so all the cost curves (except fixed cost) shift downward. The demand for Jennifer's sunglasses does not change, nor does the firm shut down. To maximize profits after the variable cost decrease, Jennifer's Sunglass Hut will _____ its price and _____ its level of production.

not change; increase

In the sleepy community of Wisteria Lane, there are six households, each of which earns $40,000 per year. Suppose that a new resident, with an income of $4 million per year, builds an ostentatious mansion in the community. After the new resident moves in, the median household income has _____, and the mean household income has _____.

not changed, increased

There are eight households in a rural community. Four of the households earn $30,000 each per year, and the other four households earn $40,000 each per year. Suppose that a new resident, with an income of $2 million per year, builds a mansion in the community. After the new resident moves in, the median household income has _____, and the mean household income has _____.

not changed; increased

(Figure: CO2 Emissions, MSB and MSC of Pollution) Use Figure: CO2 Emissions, MSB and MSC of Pollution. Assume that firms are the only beneficiaries of pollution and that costs are borne solely by others in the society. If the current level of pollution is Q1, _____ pollution is being emitted because _____. too much; MSB > MSC the socially optimal amount of; MSB = MSC not enough; MSB > MSC not enough; MSB < MSC

not enough; MSB > MSC

A(n) ______ gives an inventor a temporary monopoly on the use or sale of an invention.

patent

Generally, when preferences for a good rise, demand for the good rises. If a perfectly competitive market starts in long-run equilibrium, holding all else constant, this will result in a higher market price, which will lead to _____ in the industry and _____ the market. This causes price to _____.

positive economic profits; attracts new firms into; fall

The percentage of the population that falls below the poverty threshold is called the:

poverty rate

Bluefin tuna is a fish that is in high demand from consumers. Overfishing of this species, particularly in the Mediterranean Sea, has led to the strong possibility of extinction. The graph illustrates the marginal social cost (MSC), marginal private cost (MPC), and marginal social benefit (MSB) for a hypothetical representation of the Bluefin tuna market. Use the graph to answer the questions. If this market is unregulated, what will be the equilibrium price and quantity?

price: 40 quantity: 5000

A profit-maximizing business incurs an economic loss of $10,000 per year. Its fixed cost is $15,000 per year.

produce in the short run but exit in the long run

To encourage consumption of a good that generates a positive externality, the BEST option for policymakers is to: allow the market to reach equilibrium on its own. penalize firms through higher taxes unless they produce the socially optimal level of output. mandate consumption of the good at the socially optimal level of output. provide a subsidy to firms for each unit of the good consumed to achieve the socially optimal level of output.

provide a subsidy to firms for each unit of the good consumed to achieve the socially optimal level of output.

If a government program is not means-tested, it:

provides benefits for everyone, regardless of their incomes.

All of the following are rationales for the creation of the welfare state EXCEPT:

providing universal health care

Suppose instead that this business has a fixed cost of $6,000 per year. This firm should

shut down in the short run and exit in the long run

Perfectly competitive industries are characterized by:

standardized goods.

(Scenario: Positive Externalities with Community Lawns) Use Scenario: Positive Externalities with Community Lawns. The community determines that that the marginal benefit to visitors of lawn upkeep is $15 and that it is important to maintain the socially optimal number of lawn upkeep hours. To achieve this goal, the community will: Scenario: Positive Externalities with Community Lawns The town of Port Townsend in Washington finds that well-tended lawns provide both private and external benefits. The marginal private benefit (MPB) of lawn upkeep is MPB = 50 - 0.5Q, where Q is the number of hours spent tending to lawns. The marginal private cost (MPC) of lawn upkeep is MPC = 0.5Q, where Q is again the number of hours spent tending to lawns. require community lawn service of 45 hours. implement a Pigouvian lawn tax of $65. provide no additional funds to lawn upkeep. subsidize everyone who contributes to lawn upkeep with a payment of $15.

subsidize everyone who contributes to lawn upkeep with a payment of $15.

Tools the government commonly uses to regulate activities that impact the environment include all the following EXCEPT: cap and trade systems. the Environmental Protection Agency Action Plan. environmental regulations. emissions taxes.

the Environmental Protection Agency Action Plan.

The graph shows the demand curve for cable television. Assume that monopoly conditions apply. What is the firm's total revenue when selling cable television to 6 houses? total revenue: $ What is the firm's marginal revenue from selling cable television to the 13th house? marginal revenue: $

total revenue: $ 72 marginal revenue: $ -7

(Figure: Major U.S. Welfare State Programs) Use Figure: Major U.S. Welfare State Programs. The figure lists welfare programs available to individuals. Panel C represents programs that are not means-tested and provide monetary transfers. Which program fits this description?

unemployment insurance

How does the trend compare with the United States?

worse, top 1%

For firms in perfectly competitive markets, long‑run economic profits are zero because firms will exit the market if profits are negative and enter the market if profits are positive.

ECON FINAL

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