ECON Final

II and III only

A cartel is characterized by firms that act together in order to: I. increase competition. II. raise prices. III. raise profit.

the combined actions of buyers and sellers

A free market achieves an equilibrium price and quantity due to:

does not maximize

A free market with externalities ______ social surplus.

both supply and demand are elastic.

A given tax will impose a greater deadweight loss when:

people who do not pay can be easily prevented from using the good

A good is excludable if:

equals marginal cost.

A monopolist maximizes profits where marginal revenue:

that sets price above marginal cost without concern that other firms will enter the industry.

A monopoly is a firm:

price discrimination.

A museum in Russia has two entrances: one for locals (written in Russian) and one for tourists (written in English). People who enter through the entrance written in Russian will end up paying 81.93 Rubles ($3.00). English-speaking tourists will use the entrance written in English, but they will end up paying 409.67 Rubles ($15.00). This practice is an example of:

I, II, and IV only

A perfectly competitive industry exists under which of the following conditions? I. The product sold is similar across firms. II. There are many sellers, each small relative to the total market. III. There are many sellers, each with total assets less than $2 million. IV. The threat of competition exists from potential sellers that have not yet entered the market.

price discrimination.

Economists call selling the same product at different prices to different customers:

the long run.

Economists call the time after all exit or entry has occurred:

Quantity demanded will exceed quantity supplied and the market price will eventually rise.

If the market price is below the equilibrium price, what would occur?

the same price.

In a perfectly competitive market, each firm sells at:

the fewer the number of firms there are in the industry.

In an oligopolistic market, prices will tend to be closer to the competitive price:

the greater the number of firms in the industry.

In an oligopolistic market, prices will tend to be closer to the competitive price:

firms will earn zero economic profits in the long run.

In competitive markets,:

higher prices

In free markets, shortage lead to:

lower prices

In free markets, surpluses lead to:

been a large failure.

In general, central planning has:

an increase in supply, an increase in quantity demanded, and a decrease in price

In markets for manufactured goods, a new form of 3-D printing that lowers production costs will lead to:

society's best interest

In markets for public goods, the invisible hand concept does not work in:

P < AC.

In the long run, competitive firms want to exit industries in which:

D

Test #2 Question 18 (Figure: Costs of Tariffs) Refer to the figure. In the figure representing the market for leather, domestic suppliers are the high-cost producers of leather. However, import restrictions push the domestic price up to $100. Which area represents the deadweight loss that results?

are better off specializing in their comparative advantages and trading for other goods

Producers who have absolute advantages in all goods:

create higher unemployment.

Raising the minimum wage is not an effective way to eliminate poverty because increases in the minimum wage:

They would not be able to afford their fixed costs and would go out of business.

Software development has high fixed costs and marginal costs that are close to zero. What would happen if software firms sold their product for marginal cost?

economic profit.

Stock market investors should ultimately focus on a company's:

$231; $90-4= $86 $90-$10= $80 $90- $25= $65 $86+$80+$65= $231

Suppose that Saudi Arabia can produce oil at $4 per barrel, Iran at $10 per barrel, and Canada at $25 per barrel. If the price of oil is $90 barrel, what is total producer surplus per barrel for world suppliers?

Equilibrium price will rise; equilibrium quantity will rise.

Suppose there is an increase in demand in a market and no change in the supply. What will happen to the market equilibrium price and quantity?

True

T/ F There is a tendency for economic profit in all competitive industries to go to zero.

False

T/F To determine the production level, the monopolist sets marginal cost equal to price.

P = $4; Q = 50

Test #2 Question 19 (Figure: External Cost 1) Refer to the figure. Paper mills are notorious for emitting horrible smells that impose external costs on those living around the mills. According to the figure, what is the market price and quantity of paper?

at the market price.

To maximize profits, a firm in a highly competitive industry should set its price:

more inelastic

To maximize profits, the monopolist should set a higher price in a market with ______ demand

Total Revenue - Total Costs.

Total profit for a given quantity of output can be calculated as:

excess competition

Which of the following is NOT a reason that monopolies arise?

B. excess competition

Which of the following is NOT a reason that monopolies arise? A. patents B. excess competition C. control of natural resources D. economies of scale

price of $16 in Market A and $10 in Market B.

hp.13 &14 #6 (Figure: Price-Discriminating Monopolist) Refer to the figure. In order to maximize profits, the monopolist should charge a:

4

refer to the table. What is the monopolist's profit-maximizing level of output?

I, II, and III

Firms in competitive industries: I. can only charge a price equal to the market price. II. cannot charge any more than the market price. III. will earn less profit if they charge less than the market price.

complements.

If the cross-price elasticity of demand of two goods is negative, we can conclude that the two goods are:

Lower

If the demand decreases, ceteris paribus, market price will be ________ at the new equilibrium point.

substitutes for each other

If the demand for good A increases when the price of good B increases, then good A and good B are:

Walnut retailers and consumers

If the government taxes walnuts at 50 cent a package, who pays the tax?

an inferior good.

If the income elasticity of demand of a good is negative, we can conclude that the good is:

9 units of output.

(Figure: Monopoly 8) The natural monopolist in this figure would produce:

triangle abc.

(Figure: Monopoly Markup) Refer to the figure. Consumer surplus under monopoly is represented by:

triangle cef.

(Figure: Monopoly Markup) Refer to the figure. The deadweight loss attributable to monopoly is:

8

(Table: Barrels of Oil 2) Refer to the table. How many barrels of oil should the company produce to maximize profit?

$224.

(Table: Barrels of Oil 2) Refer to the table. The maximum profit available to the company is:

36

(Table: Barrels of Oil 2) Refer to the table. What is the marginal cost of producing the seventh barrel of oil?

3

(Table: Profit Maximization) The table represents the total revenues and total costs of a local sub shop. Based on the table, how many subs should the store produce to maximize profits?

$15

(Table: Profit Maximization) The table represents the total revenues and total costs of a local sub shop. Based on the table, what is the marginal revenue generated from producing the second sub?

Q2.

(Figure: Maximize Monopoly Profits) Refer to the figure. The monopolist will maximize its profit by producing at output equal to:

decrease to the point that P = AC.

(Figure: Monopolistic Competition) Refer to the figure. Suppose the figure represents a firm that operates in a monopolistic competitive market. In the long run you would expect prices in this market to:

$10 < PU < $16

(Figure: Price-Discriminating Monopolist) Refer to the figure. Based on the demand curves for a monopolist's product in two different markets—Market A and Market B—if the monopolist were to charge a uniform price PU between the two markets, in which range would the price fall?

$6; $3

(Figure: Tax on Sellers) Refer to the figure. Suppose the imposition of a per-unit tax on sellers shifts the supply curve from S0 to S1. With the tax, buyers pay ________ and sellers receive ________.

45 units

(Figure: Two-Firm Industry) Refer to the figures. At a market price of $25, the total quantity supplied in the industry is

45 units.

(Figure: Two-Firm Industry) Refer to the figures. At a market price of $25, the total quantity supplied in the industry is:

profit

(P - AC) × Q =

profit.

(P - AC) × Q =

shortage; below the equilibrium price

A price ceiling creates a ________ when it is set ________.

a minimum price allowed by law.

A price floor is:

a cost paid by the consumer or the producer trading in the market.

A private cost is:

nonrival and nonexcludable.

A public good is:

one person's use prevents another person's ability to use that good at the same time.

A rival good is one where:

1.2426 (with margin: 0.1) (215-401) / ((215+401)/2)= -0.604 (1.33-0.81) / ((1.33+ 0.81)/2)) = 0.486 -0.604 / 0.486 = 1.24

A shortfall in production in California, the leading U.S. avocado grower, has kicked up wholesale prices in recent weeks — which means you may soon be paying more for fresh guacamole and avocado toast. A wholesale box of 60 avocados currently costs about $80, or $1.33 per avocado, said Jim Boyce, owner of Produce Express, a produce supplier in the Sacramento area. "Normally at this time in August we're typically in the high 40s" in terms of a box's wholesale dollar price, or about 81 cents apiece, Boyce said. "It's very abnormal this time of year." The production shortfall is blamed in good part on severe heat in California growing regions during the summer last year. California avocado production this year is forecast to plunge 46% to 215 million pounds from 401 million pounds in 2016, according to the California Avocado Commission. Using the per avocado price, calculate the elasticity of Avocado sales (show your work!). Please enter a positive number regardless of your answer. Canvas can only handle absolute values....

tax on imports.

A tariff is a:

cartel

A(n) ________ is a group of suppliers who try to act together to reduce supply.

D. the lowest cost of production

Absolute advantage derives from which of the following? A. the last expensive labor force B. the best educated labor force C. the most suitable climate D. the lowest cost of production

an increase in orange prices and a decrease in orange sales.

After a hurricane in FL destroys half of the orange crop, economists predict:

in its price.

All relevant information about the use of a good is captured:

a cost paid by people other than the consumer or the producer trading in the market.

An external cost is:

The equilibrium price decreases; the change in the equilibrium quantity is uncertain

An increase in supply and a decrease in demand occur in a market. What happens to the equilibrium price and quantity?

each firm has virtually no influence over the price of its product.

An industry is said to be perfectly competitive when:

decreases, shifts to the left.

As more firms enter a monopolistically competitive market, the individual firm's demand curve:

another store will open that will charge lower prices.

At a ski resort located over one hour from the nearest large town, there is only one grocery store and it charges prices more than 200% percent above the typical retail prices. In the long run, we would expect that:

beans; tea

Beans (mil of tons) Tea (mil of tons) Kenya: 100 200 Sri Lanka 150 450 (Table: Production Possibilities for Kenya and Sri Lanka) According to the table on production possibilities for Kenya and Sri Lanka, Kenya should produce __________ and Sri Lanka should produce ________.

C. two teas for one bean < Trade price < three teas for one bean

Beans (mil of tons) Tea (mil of tons) Kenya: 100 200 Sri Lanka 150 450 (Table: Production Possibilities for Kenya and Sri Lanka) According to the table on production possibilities for Kenya and Sri Lanka, which of the following answers identifies a trade price that both countries would find acceptable? (units are in tons) A. 0.3 bean for one tea < Trade price < two beans for one tea B. 0.5 bean for one tea < Trade price < three beans for one tea C. two teas for one bean < Trade price < three teas for one bean D. 0.5 bean for one tea < Trade price < two teas for one bean

two teas; three teas

Beans (mil of tons) Tea (mil of tons) Kenya: 100 200 Sri Lanka 150 450 (Table: Production Possibilities for Kenya and Sri Lanka) According to the table on production possibilities for Kenya and Sri Lanka,Kenya's opportunity cost of producing beans is _____, which Sri Lanka's opportunity cost of producing bean is.

C. Maria has an absolute advantage in baking both cookies and bread

Both Maria and Jorge bake cookies and bread, but Maria spends less time baking each batch of cookies and each loaf of bread than Jorge does. Which of the following is TRUE? A. Jorge has an absolute advantage in baking both cookies and bread B. Maria has an comparative advantage in baking both cookies and bread C. Maria has an absolute advantage in baking both cookies and bread D. Jorge has an comparative advantage in baking both cookies and bread

supply is more elastic than demand.

Buyers bear a greater share of a tax burden when a tax is imposed in a market where:

$2.83 and $11, respectively.

Chp. 13 & 14 #1 (Table: Profit-Maximizing Monopolist) Refer to the table. For the quantity of 6 units, this monopolist's average cost and average revenue levels are:

9 units of output.

Chp. 13 & 14 #13(Figure: Monopoly 8) The natural monopolist in this figure would produce:

the demand curve

Chp. 13 & 14 #14(Figure: Perfect Price Discrimination) Refer to the figure. Which curve represents the marginal revenue (MR) curve for the monopolist who practices perfect price discrimination?

4

Chp. 13 & 14 #17 Refer to the table. What is the monopolist's profit-maximizing level of output?

triangle cef.

Chp. 13 & 14 #20 (Figure: Monopoly Markup) Refer to the figure. The deadweight loss attributable to monopoly is:

triangle adf.

Chp. 13 & 14 #5(Figure: Monopoly Markup) Refer to the figure. Consumer surplus under competition is represented by:

D - - B.

Chp. 13&14 #9 In this figure, the marginal revenue of the third unit is given by area:

8

Chp.13 & 14 # 19(Table: Profit-Maximizing Monopolist) Refer to the table. The profit-maximizing quantity for this monopolist is ________ units

A monopolistic industry will have lower output and higher prices than a competitive industry.

Compare a monopolistic industry and competitive industry:

P > AC.

Competitive firms want to enter industries in which:

P = MC.

Competitive firms want to produce the quantity such that:

are willing to pay for a good minus what they actually pay for it

Consumer surplus is the amount that consumers:

the total of lost consumer and producer surplus when not all mutually profitable gains from trade are exploited.

Deadweight loss is:

decrease; better; better

Deadweight loss occurs because some consumers are willing to pay at least the marginal cost for the good, even if they are not willing to pay the monopolist's price. If monopolies were able to charge these consumers a lower price without lowering prices to consumers willing to pay more, deadweight loss would ______, some consumers would be ______ off, and the monopolist would be ______ off.

The supply curve will shift to the right, the equilibrium P will fall, and the equilibrium Q will rise.

Five new seller enter a market (that previously had seven) and begin producing a good. What will happen to the equilibrium of Q and P?

when a monopolist lowers the price to sell more units, it must lower the prices of all units sold

For a monopolist, MR is always less than P because:

patents.

GlaxoSmithKline owns a government grant of temporary monopoly rights on the AIDS drug Combivir due to:

there are too many resources in that industry.

If P < AC in a given industry, then:

there are too few resources in that industry.

If P > AC in a given industry, then:

P = AC.

If P > AC in competitive markets, firms enter the market until:

$1,000

If Tom sells 500 sandwiches for $7 and has an average cost of $5, what is his profit?

$50

If a firm has revenues of $100, explicit costs of $50, and implicit costs of $50, then its accounting profit is:

decrease; a decrease

If demand is inelastic, a price ________ causes ________ in total revenue.

demand for gasoline is higher in the long run.

If gasoline prices remain high long enough, people will arrange to do more telecommuting. This would be an example of why the elasticity of:

decrease output.

If marginal revenue is less than marginal cost, a firm should:

Joe should decline the job, since he would lose $20 per hour worked.

Joe runs a landscape business. He knows that providing landscaping services cost him $100 per hour on average, while the cost of providing such services is $150 per hour after 5 pm (due to overtime pay, reduced productivity, and the added wear and tear on his equipment). A potential client offers Joe $130 per hour to provide services but needs him to provide the services after 5 PM due to circumstances at the property.

$35,000; $6,680

Marcie quit her job as a preschool teacher, which paid an annual salary of $28,000, and became a street food vendor. She used $8,000 out of her savings account that paid a 4% annual interest rate to buy a street cart to sell food. In her first year of operations, she spent $10,000 on food and supplies (napkins, cups, plates, etc.) and earned total revenue of $45,000. Marcie's accounting profit is ______ and economic profit is ______.

many sellers, free entry, and product differentiation.

Monopolistic competition is a market that has:

market with a large number of firms selling similar but not identical products.

Monopolistic competition is a:

lower than monopolies but higher than competitive markets.

Oligopolies tend to set prices:

family income level.

Private universities such as Williams College price discriminate most directly by:

P = $5; Q = 30

Test #2 Revised Question 10 (Figure: External Cost 1) Refer to the figure. Paper mills are notorious for emitting horrible smells that impose external costs on those living around the mills. According to the figure, what is the efficient price and quantity of paper?

shortage of 40 units

Test #2 Revised Question 12; Refer to the figure. If the government imposes a price ceiling at the price of $4.00, the result would be a:

12

Test #2 Revised Question 2 (Figure: Tax on Sellers) Refer to the figure. Suppose the imposition of a per-unit tax on sellers shifts the supply curve from S0 to S1. The equilibrium quantity sold under the tax is:

$50

Test #2 Revised Question 5 (Figure: Costs of Tariffs) Refer to the figure. In the figure representing the market for leather, what price would consumers pay for leather in the absence of a tariff or other import restrictions?

B. I, II, and III

Test 1, #6 (Y axis) Good Y 100 80 40 100 Good X Country A goes from 80 to 40 Country B goes from 100 to 100 (Figure Countries A and B) Refer to the figure. According to the diagram about countries A and B, which of the following statement(s) is correct? I. Country A has a comparative advantage in Good Y. II. Country B has an absolute advantage in both goods. III. Country B has a comparative advantage in Good X

the higher her opportunity cost of ironing her own shirts ( if she was doing worse, lower her opportunity cost of ironing her own shirts)

The better Martha Stewart is at running her business:

a large increase in price causes quantity demanded to decrease by very little.

The demand curve for physician office visits is quite inelastic; therefore:

price and quantity demand

The demand curve shows the relationship between:

Elastic

The elasticity you found in the last question was ______________.

Demand

The elasticity you found in the question was the elasticity of ______________.

$80; 3

The firm in this table can earn a maximum profit of ______, which occurs at an output of ______ barrels per day.

quantity demanded equals quantity supplied

The key condition for equilibrium to occur in a market is:

the lower the price, the greater quantity demanded

The law of demand states that all other things being equal:

perfectly competitive industry.

The long-run level of profit is the same in each:

vertical axis as the demand curve but with twice the slope

The marginal revenue curve is a straight line beginning at the same point on the:

is higher for people who are employed than for the unemployed.

The opportunity cost of committing a crime and spending 5 year in jail:

higher in the market with less elastic demand.

The optimal price for a monopolist facing different demand curves in two separate markets will be:

market power.

The power to raise price above marginal cost without fear that other firms will enter the market is:

the combinations of output that an economy can produce given its productivity and supply of inputs

The production possibility frontier shows:

consumers are willing and able to buy at a given price

The quantity demanded of a good or service is the amount that:

the period before entry or exit can occur.

The short run is defined as:

a country's opportunity cost of production

The slope of the production possibilities frontier at a given point indicates ________.

the quantity of oil supplied at different prices of oil

The supply curve for oil shows:

U-shaped because the firm's fixed costs are first spread over greater quantities, but then increasingly greater quantities will create production capacity constraints.

The typical average cost curve in a competitive market is:

marginal revenue is equal to marginal cost.

To maximize , a monopolist will produce the level of output where:

higher price in markets with more inelastic demand.

To maximize profit the monopolist should set a:

Early adopters are less sensitive to price than late adopters.

Two months after Apple introduced the iPhone in 2007, the company reduced the price from $600 to $400. How is this drop of price an example of price discrimination?

caused never-ending shortages and surpluses.

Universal price controls in the Soviet Union:

price of substitutes, tastes, price of complements

What are the factors that shift the demand curve?

Supply increases and the price declines, which in turn lowers profits.

What happens in a competitive industry when more firms enter?

The supply cotton will decrease, causing the equilibrium price to rise and equilibrium quantity to fall.

What will happen in the market for cotton as a result of a severe drought?

$10.

When a firm expands output from 10 to 11 units and total revenue increases from $100 to $110, marginal revenue of the eleventh unit is:

marginal revenue is less than the price.

When a monopolist faces downward-sloping demand:

the industry demand curve is somewhat elastic.

When there are many buyers and sellers of a good and the product sold is identical across firms,:

A. Someone has the ability to produce the same good for the lowest opportunity cost

Which of the following best describes the principle of comparative advantages? A. Someone has the ability to produce the same good for the lowest opportunity cost B. Some people can produce the same good better than other producers can. C. To produce more of one good, people have to produce less of another good. D. Someone has the ability to produce the same good using fewer inputs than another producer.

A family in a distant state gives bottled water to its dog, but a family in the hurricane area cannot find bottled water to drink.

Which of the following best represents the misallocation of resources that would occur under a price ceiling on bottled water following a major hurricane? A. Bottles of water sit on the shelves because nobody can afford it. B. A family in a distant state takes time off work to bring bottled water to the hurricane-ravaged area. C. Families in the hurricane area brush their teeth with bottled water but cannot find enough to drink. D. A family in a distant state gives bottled water to its dog, but a family in the hurricane area cannot find bottled water to drink.

C. a decrease in the price of high-definition Blu-ray players

Which of the following might explain why the price of DVD players has been failing? A. a decrease in the price of DVDs B. an increase in the price of gasoline C. a decrease in the price of high-definition Blu-ray players D. an increase in customer income

D. tax preparation services

Which of the following would be most difficult to arbitrage? A. aluminum B. automobiles C. pharmaceutical drugs D. tax preparation services

The opportunity cost is lower during a recession because there are fewer labor market opportunities

Why is it less costly to attend college during a recession?

If we had perfect competition instead of monopolistic competition, we would not have all the variety and innovation that we have today.

Why might the benefits of monopolistic competition outweigh the inefficiencies?

higher price in markets with more inelastic demand.

to maximize profit the monopolist should set a: