Econ HW 1-

Refer to the table to the right which shows cost data for Lotus​ Lanterns, a producer of whimsical night lights. What is the marginal cost per unit of production when the firm produces 100​ lanterns? A. ​$32 Your answer is correct. B. ​$320 C. ​$8.1 D. ​$11.1

$32 (see photo)

The figure to the right represents the market for vaccinations. Vaccinations are considered a benefit to​ society, and the figure shows both the marginal private benefit and the marginal social benefit from vaccinations. The market equilibrium quantity is​ ________ thousand vaccinations. A. 100 B. 200 Your answer is correct. C. 300 D. ​>300

200

The figure to the right represents the market for vaccinations. Vaccinations are considered a benefit to​ society, and the figure shows both the marginal private benefit and the marginal social benefit from vaccinations. The efficient equilibrium quantity is​ ________ thousand vaccinations. A. 100 B. 200 C. 300 Your answer is correct. D. ​>300

300

Which of the following equations is incorrect​? A. AFC​ = ATC − AVC B. AVC​ + AFC​ = ATC C. ATC − AFC​ = AVC D. ATC​ = AVC − AFC

ATC​ = AVC − AFC

In the diagram to the​ right, illustrating a binding price ceiling at P3​, the amount of producer surplus transferred to consumers is represented by area C and the deadweight loss is equal to areas B and D .

C; B and D

What is the difference between​ "diminishing marginal​ returns" and​ "diseconomies of​ scale"? A. Diminishing marginal returns which applies only in the short​ run, when at least one factor is​ fixed, explains why marginal cost​ increases, while diseconomies of scale which applies in the long​ run, when all factors are​ variable, explains why average cost increases. Your answer is correct. B. Both concepts explain why marginal cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed​ factor, while diseconomies of scale applies in the long run when all factors are variable. C. Diminishing marginal returns which applies only in the short​ run, when at least one factor is​ fixed, explains why average variable cost​ increases, while diseconomies of scale which applies in the long​ run, when all factors are​ variable, explains why average total cost increases. D. Both concepts explain why average total cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed​ factor, while diseconomies of scale applies in the long run when all factors are variable.

Diminishing marginal returns which applies only in the short​ run, when at least one factor is​ fixed, explains why marginal cost​ increases, while diseconomies of scale which applies in the long​ run, when all factors are​ variable, explains why average cost increases.

Briefly explain whether you agree with the following​ statement: ​"The reluctance of healthy young adults to buy medical insurance creates a moral hazard problem for insurance​ companies." A. Disagree. Moral hazard becomes a problem after one purchases insurance. In this​ case, the reluctance of​ young, healthy adults to purchase insurance in the first place leads to an adverse selection problem. Your answer is correct. B. Agree. The only way for insurance companies to get​ young, healthy adults to buy insurance is to lower the price. ​ However, this is a form of price​ discrimination, which is often referred to as a moral hazard problem. C. Disagree.​ Young, healthy adults do not need insurance.​ Thus, selling insurance to someone who​ doesn't need it would be a moral hazard. D. Agree. We have a moral obligation to be covered by insurance so that in the event we do become sick or injured taxpayers​ won't be stuck paying our bills.

Disagree. Moral hazard becomes a problem after one purchases insurance. In this​ case, the reluctance of​ young, healthy adults to purchase insurance in the first place leads to an adverse selection problem.

Refer to the diagram to the right. Identify the curves in the diagram. A. E ​= marginal cost​ curve; F ​= total cost​ curve; G ​= variable cost​ curve, H​ = average fixed cost curve B. E ​= average fixed cost​ curve; F ​= variable cost​ curve; G ​= total cost​ curve, H​ = marginal cost curve C. E ​= marginal cost​ curve; F ​= average total cost​ curve; G ​= average variable cost​curve; H​ = average fixed cost curve. Your answer is correct. D. E ​= average fixed cost​ curve; F ​= average total cost​ curve; G ​= average variable cost​curve, H​ = marginal cost curve

E ​= marginal cost​ curve; F ​= average total cost​ curve; G ​= average variable cost​curve; H​ = average fixed cost curve.

If Jill expects to produce 900 pizzas per​ week, should she build a smaller restaurant or a larger​restaurant? Briefly explain. A. Jill should build a larger restaurant because average total costs will be lower than for a smaller restaurant. Your answer is correct. B. Jill should build a larger restaurant because a smaller restaurant is unable to produce 900 pizzas per week. C. Jill should build a smaller restaurant because average total costs will be lower than for a larger restaurant. D. It does not matter which size restaurant Jill builds because they both can produce 900 pizzas per week. E. Jill should build a smaller restaurant because a larger restaurant is unable to produce 900 pizzas per week.

Jill should build a larger restaurant because average total costs will be lower than for a smaller restaurant.

Suppose that Jill Johnson has to choose between building a smaller restaurant and a larger restaurant. In the​ graph, the relationship between costs and output for the smaller restaurant is represented by the curve ATC1​, and the relationship between costs and output for the larger restaurant is represented by the curve ATC2. If Jill expects to produce 200 pizzas per​ week, should she build a smaller restaurant or a larger​restaurant? Briefly explain. A. Jill should build a larger restaurant because a smaller restaurant is unable to produce 200 pizzas per week. B. Jill should build a larger restaurant because average total costs will be lower than for a smaller restaurant. C. It does not matter which size restaurant Jill builds because they both can produce 200 pizzas per week. D. Jill should build a smaller restaurant because average total costs will be lower than for a larger restaurant. Your answer is correct. E. Jill should build a smaller restaurant because a larger restaurant is unable to produce 200 pizzas per week.

Jill should build a smaller restaurant because average total costs will be lower than for a larger restaurant.

How can marginal cost be expressed​ mathematically? Marginal cost​ (MC) can be expressed as A. MC=ΔACΔQ​, where AC is average cost and Q is output. B. MC=ΔFCΔQ​, where FC is fixed cost and Q is output. C. MC=TCQ​, where TC is total cost and Q is output. D. MC=ΔTCΔQ​, where TC is total cost and Q is output. Your answer is correct. E. MC=TC−​FC, where TC is total cost and FC is fixed cost. For​ example, if the total cost of producing three units of output is ​$2,153 and the total cost of producing four units of output is ​$3,008​, then the marginal cost of the fourth unit is ​$855. ​(Enter your response as an​ integer.)

MC=ΔTC/ΔQ​, where TC is total cost and Q is output. 855

Match the terms below on the left with the definitions to their right. Do this by inserting into each​ term's response box the number associated with its correct definition. 2 ​ Principal-agent problem 1. Refers to actions people take after they have entered into a transaction that make the other party to the transaction worse off. 3 Adverse selection 2. Results from agents pursuing their own interests rather than the interests of the principals who hired them. 4 Asymmetric information 3. Is the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction. 1 Moral hazard 4. Occurs when one party to an economic transaction has less information than the other party.

Principal-agent problem- 2. Results from agents pursuing their own interests rather than the interests of the principals who hired them. Adverse selection- 3. Is the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction. Asymmetric information- 4. Occurs when one party to an economic transaction has less information than the other party. Moral hazard- 1. Refers to actions people take after they have entered into a transaction that make the other party to the transaction worse off.

Suppose that in a market for used​ cars, there are good used cars and bad used cars​ (lemons). Consumers are willing to pay as much as​ $6,000 for a good used car but only​ $1,000 for a lemon. Sellers of good used cars value their cars at​ $5,000 each and sellers of lemons value their cars at​ $800 each. Buyers cannot tell if a used car is reliable or is a lemon. Based on this​ information, what is the likely outcome in the market for used​ cars? A. Sellers of good used cars will drop out of the market. Your answer is correct. B. Sellers of good used cars will incur losses. C. Sellers of lemons will drop out of the market. D. Used cars will sell for​ $3,000.

Sellers of good used cars will drop out of the market.

The figure illustrates the​ short-run cost curves for a company that produces cell phones. Identify the average total cost curve​ (ATC), the average variable cost curve​ (AVC), the average fixed cost curve​ (AFC), and the marginal cost curve​ (MC) in the figure. The ATC curve is Upper C 3​, the AVC curve is Upper C 2​, the AFC curve is Upper C 1, and the MC curve is Upper C 4

The ATC curve is Upper C 3​, the AVC curve is Upper C 2​, the AFC curve is Upper C 1, and the MC curve is Upper C 4

A student​ asks, "If the average cost of producing pizzas is lower in the larger restaurant when Jill produces​ 1,100 pizzas per​ week, why​ isn't it also lower when Jill produces 500 per​ week?" Give a brief answer to the​ student's question. A. The smaller restaurant benefits more from division of labor. B. The larger restaurant experiences diminishing returns sooner than the smaller restaurant. C. The smaller restaurant has no fixed costs. D. The larger restaurant has higher fixed costs than the smaller restaurant. Your answer is correct. E. Both a and b.

The larger restaurant has higher fixed costs than the smaller restaurant.

Which of the following is an example of a​ long-run adjustment? A. A soybean farmer turns on the irrigation system after a month long dry spell. B. Ford Motor Company lays off​ 2,000 assembly line workers. C. Walmart builds another Supercenter. Your answer is correct. D. Your university offers Saturday morning classes next fall.

Walmart builds another Supercenter.

The marginal cost of production shows the change in a​ firm's total cost from producing one more unit of a good or service. What is the shape of the marginal cost​ curve? ​Graphically, the marginal cost curve is A. a U​ shape, initially falling when the marginal product of labor is below marginal cost and then eventually rising when the marginal product of labor is above marginal cost. B. a U​ shape, initially falling due to diminishing returns and then eventually rising due to division of labor. C. shaped like a​ hill, rising when the average cost of production is rising and then eventually falling when the average cost of production is falling. D. shaped like a​ hill, initially rising when the marginal product of labor is falling and then eventually falling when the marginal product of labor is rising. E. a U​ shape, initially falling when the marginal product of labor is rising and then eventually rising when the marginal product of labor is falling.

a U​ shape, initially falling when the marginal product of labor is rising and then eventually rising when the marginal product of labor is falling.

An article in the Wall Street Journal refers to​ "the basic principle of insurance—pooling risk in order to minimize liability from unforeseen​ dangers." ​Source: Amanda​ Foreman, "Insuring against​ Disaster," Wall Street Journal​, February​ 20, 2019. The problem of (blank) adverse selection is that it undermines the ability of insurance to provide the benefit of sharing risk.

adverse selection

Which of the following terms refers to the situation in which one party to an economic transaction takes advantage of knowing more than the other party to the​ transaction? A. moral hazard B. ​principal-agent problem C. ​co-payment D. adverse selection

adverse selection

A characteristic of the long run is A. there are fixed inputs. B. all inputs can be varied. Your answer is correct. C. plant capacity cannot be increased or decreased. D. there are both fixed and variable inputs.

all inputs can be varied.

Does the production of flowers experience the effects of the law of diminishing returns? The effects of the law of diminishing returns A. are never experienced. B. are experienced when the fifth worker is hired. C. are experienced when the fourth worker is hired. D. are experienced when the second worker is hired. E. are experienced when the third worker is hired.

are experienced when the third worker is hired.

The president of​ Toyota's Georgetown plant was quoted as​ saying, 'Demand for high volumes saps your energy. Over a period of​ time, it eroded our focus​ [and] thinned out the expertise and knowledge we painstakingly built up over the​ years.' This quote suggests that A. as Toyota expanded its​ capacity, it experienced diseconomies of scale. Your answer is correct. B. high demand for​ Toyota's cars prevented the company from focusing on its​ strength: auto design. C. Toyota was experiencing an excess demand for its automobiles which it had difficulty keeping up with. D. Toyota was focused on​ "churning" out cars that it did not invest sufficiently in training its workers.

as Toyota expanded its​ capacity, it experienced diseconomies of scale.

Firms experience economies of scaleLOADING... for several reasons. What is one such​ reason? A firm might experience economies of scale because A. workers experience diminishing returns, decreasing their marginal productivity as output expands. B. managers begin to have difficulty coordinating the operation of the firm. C. a​ firm's technology may make it impossible to increase production without a larger proportional increase input usage. D. as a firm expands, it may be able to borrow money more inexpensively. Your answer is correct. E. large firms may be required to purchase inputs at higher costs than smaller competitors.

as a firm expands, it may be able to borrow money more inexpensively.

What is the difference in the short run and the long​ run? In the short​ run, A. all of the​ firm's inputs are​ variable, while in the long​ run, the firm is able to vary all its inputs as well as adopt new technology and change the size of its physical plant. B. at least one of the​ firm's inputs is​ fixed, while in the long​ run, at least one of the​ firm's inputs is variable. C. at least one of the​ firm's inputs is​ fixed, while in the long​ run, the firm is able to vary all its​ inputs, adopt new​ technology, and change the size of its physical plant. Your answer is correct. D. at least one of the​ firm's inputs is​ fixed, while in the long​ run, the firm is either able to vary all its​ inputs, adopt new​ technology, or change the size of its physical plant. E. all of the​ firm's inputs are​ fixed, while in the long​ run, the firm is able to vary all its​ inputs, adopt new​ technology, and change the size of its physical plant.

at least one of the​ firm's inputs is​ fixed, while in the long​ run, the firm is able to vary all its​ inputs, adopt new​ technology, and change the size of its physical plant.

Your company incurs a cost for machinery​, ​which, in the short​ run, is fixed. What happens to this cost in the long​ run? In the long​ run, the cost of machinery A. remains a fixed cost. B. becomes a variable cost. Your answer is correct. C. becomes a nonmonetary opportunity cost. D. becomes zero. E. becomes an accounting cost.

becomes a variable cost.

The figure to the right illustrates the​ long-run average cost curve for a company that makes motors. Suppose the company produces 15 thousand motors per month. Is it experiencing economies of​scale, diseconomies of​ scale, or constant returns to​ scale? If the company produces 15 thousand​ motors, then it experiences diseconomies of scale. At what level of output does the firm experience the minimum efficient​ scale? The minimum efficient scale occurs when the firm produces 5 thousand motors. ​(Enter your response as an​ integer.)

diseconomies of scale; 5

For Jill​ Johnson's pizza​ restaurant, explain whether each of the following is a fixed or variable cost. The payment she makes on her fire insurance policy is a fixed cost. The payment she makes to buy pizza dough is a variable cost. The wages she pays her workers is a variable cost. The lease payment she makes to her landlord who owns the building where her store is located is a fixed cost. The​ $300-per-month payment she makes to her local newspaper for running her weekly advertisements is a fixed cost.

fixed; variable;variable;fixed;fixed

Why might the demand for Post Raisin Bran cereal be more elastic than the demand for all types of breakfast​ cereals? Post Raisin Bran cereal A. is a smaller share of a​ consumer's budget. B. has fewer substitutes available. C. is consumed over a shorter period of time. D. is more of a necessity. E. is defined more narrowly.

is defined more narrowly.

Consider a production process where flowers are grown​ (the output) using gardeners​ (labor) and greenhouses​ (capital). The quantity of flowers grown per day with various combinations of labor and capital are shown in the table below. Suppose that each gardener is paid ​$240 per day and the greenhouse is rented for ​$400 per day.

look at photo

In the short​ run, if the marginal product is at its​ maximum, then the A. average variable cost is at its minimum. B. marginal cost is at its minimum. Your answer is correct. C. total cost is at its maximum. D. average cost is at its minimum.

marginal cost is at its minimum.

Asymmetric information is a situation in which one party to an economic transaction has less information than the other party. Two types of problems associated with asymmetric information are adverse selection and moral hazard. Which of the following is an example of adverse selection​? An example of adverse selection is A. those without health insurance using illegal drugs. B. those with health insurance smoking cigarettes. C. old people being more likely to purchase health insurance than young people. Your answer is correct. D. those without​ pre-existing health problems being more likely to purchase health insurance than those with​ pre-existing health problems. E. doctors prescribing unnecessary tests for those with health insurance.

old people being more likely to purchase health insurance than young people.

What can health insurance companies do to minimize problems associated with asymmetric information such as adverse selection or moral​ hazard? To deal with asymmetric​ information, insurance companies can A. prevent applicants from submitting medical records. B. reduce costs by eliminating their own medical examinations. C. eliminate coinsurance from their policies. D. require policyholders to pay deductibles. Your answer is correct. E. extend coverage for​ pre-existing conditions.

require policyholders to pay deductibles.

onsider a production process where flowers are grown​ (the output) using gardeners​ (labor) and greenhouses​ (capital). The quantity of flowers grown per day with various combinations of labor and capital are shown in the table. Fill in the marginal product of labor in the table below. ​(Enter your responses as​ integers.)

see photo

Tax incidence is A. the actual division of the burden of a tax between buyers and government in a market. B. the actual division of the burden of a tax between buyers and sellers in a market. C. the potential division of the burden of a tax between buyers and government in a market. D. the potential division of the burden of a tax between buyers and sellers in a market.

the actual division of the burden of a tax between buyers and sellers in a market.

Which of the following cost will not change as output​ changes? A. marginal cost B. total fixed cost Your answer is correct. C. total variable cost D. average fixed cost

total fixed cost

Consumer and producer surplus measure the​ _____ benefit rather than the​ _____ benefit. A. ​total; net B. ​marginal; additional C. ​subjective; objective D. ​net; total

​net; total

In the​ diagram, point A provides the​ _____, point B the​ _____, and point C the​ _____. A. equilibrium​ price; surplus or​ shortage; equilibrium quantity B. equilibrium​ price; market​ equilibrium; surplus C. market clearing​ price; equilibrium​ point; shortage D. equilibrium​ price; market​ equilibrium; equilibrium quantity

equilibrium​ price; market​ equilibrium; equilibrium quantity

Consider the market for a new​ CD, where the price is initially ​$7.00 and 32 thousand copies are​sold, as indicated in the figure at point A. The music company is considering lowering the price to ​$6.00​, at which price 36 thousand copies would be sold. What is total revenue at the initial price​ (at point​ A)? Revenue is initially ​$224 thousand. What would total revenue be at the lower price​ (at point​ B)? Revenue would be ​$216 thousand. Given this change in total​ revenue, is demand between these prices elastic or​ inelastic? Demand​ (in this range of​ prices) is inelastic

$224 ; $216 ; inelastic

Suppose the United States and Mexico both produce hamburgers and tacos. The combinations of the two goods that each country can produce in one day are presented in the table below. Which country has an absolute advantage in producing​ tacos? Which country has a comparative advantage in producing​ tacos? Suppose the United States is currently producing 160 tons of hamburgers and 48 tons of tacos and Mexico is currently producing 16 tons of hamburgers and 40 tons of tacos.

(see screenshot) The United States- absolute advantage Mexico-comparative advantage If the United States and Mexico each specialize in producing only one good​ (the good for which each has a comparative​ advantage), then a total of 64 additional​ ton(s) of hamburgers can be produced for the two countries combined ​(enter a numeric response using an​ integer) and a total of 32 additional​ ton(s) of tacos can be produced.

From the PPFs shown above it can be determined that the opportunity cost of oil is lower in Given the comparative opportunity costs as revealed by the PPFs shown​ above, the comparative advantage for country B After these two countries specialize and trade with each​ other, country A will be importing

(see screenshot) country A. country B lies in corn. country A will be importing corn.

Suppose the price of pepper increases by 20 percent​ and, as a​ result, the quantity of salt demanded​ (holding the price of salt ​constant) decreases by 7 percent. The​ cross-price elasticity of demand between pepper and salt is negative 0.35−0.35. ​(Enter your response rounded to two decimal places and include a minus sign if​ appropriate.) In this​ example, pepper and salt are complementscomplements. ​Instead, suppose pepper and salt were substitutes. If​ so, then the​ cross-price elasticity of demand between pepper and salt would be A. less than 1. B. greater than −1. C. zero. D. positive. E. negative.

-0.35; complements; positive.

Consider the market for a new DVD​ movie, where the price is initially ​$22 and 16 copies are sold per day at a​ superstore, as indicated in the figure to the right. The superstore is considering lowering the price to ​$20. What is the price elasticity of demand between these two prices ​(use the Midpoint Formula​)? The price elasticity of demand is −2.32.

-2.32

Suppose income increases by 25 percent​ and, as a​ result, the quantity of a particular brand of automobile demanded​ (holding the price for this particular automobile​ constant) increases by 32 percent. The income elasticity of demand for this brand of car is 1.281.28. ​(Enter your response rounded to two decimal places and include a minus sign if​ appropriate.) This particular brand of automobile is​ a(n) normalnormal good. In another​ example, suppose market research shows that a particular brand of truck is a normal good and a luxury. If​ so, then the income elasticity of demand for this truck is A. less than 1 but greater than 0. B. zero. C. negative. D. positive. E. greater than 1.

1.28; normal; greater than 1.

The figure to the right represents the market for medical services with and without​ insurance, and the effect of a third−party payer system on the demand for medical services. If consumers paid the full price of medical​ services, the equilibrium quantity would be A. 200. B. 500. Your answer is correct. C. 700. D. ​>700.

500.

Suppose the United States has two​ utilities, Commonweath Utilities and Consolidated Electric. Both produce 20 million tons of sulfur dioxide pollution per year.​ However, the marginal cost of reducing a ton of pollution for Consolidated Electric is ​$325 per ton and the marginal cost of reducing a ton of pollution for Commonwealth Utilities is ​$425 per ton. The​ government's goal is to cut sulfur dioxide pollution in half​ (by 20 million tons per​ year). If the government issues 10 million tradable pollution permits to each​ utility, what will be the cost of eliminating half of the pollution to​ society? Using a cap-and-trade system of tradable emission allowances will eliminate half of the sulfur dioxide pollution at a cost of ​$6500 million per year. If the permits are not​ tradable, what will be the cost of eliminating half of the​ pollution? If permits cannot be​ traded, then the cost of the pollution reduction will be ​$7500 million per year.

6500; 7500

Suppose the figure to the right illustrates the marginal cost and marginal benefit from reducing sulfur dioxide pollution. Suppose also that the United States is currently generating 12.0 million tons of pollution per year. What is the optimal level of pollution​ reduction? The optimal level of pollution reduction is 7 million tons per year. ​(Enter your response rounded to one decimal​ place.)

7 million

According to the law of​ supply, A. there is a positive relationship between price and quantity supplied. B. as the price of a product​ increases, firms will supply less of it to the market. C. as the price of a product​ increases, firms will supply more of it to the market. D. A and C only

A and C only

A price ceiling is a legally determined maximum price that sellers may charge. A price floor is a legally determined minimum price that sellers may receive.

A price ceiling is a legally determined maximum price that sellers may charge. A price floor is a legally determined minimum price that sellers may receive.

Alzania produces and consumes​ 500,000 tons of cotton during a year. Reports indicate that​ Alzania's neighbor, which also employs the same number of people in the cotton​ industry, consumed​ 400,000 tons of cotton. This led industry experts to believe that Alzania had an absolute advantage in the production of cotton over its neighbor. Which of the​ following, if​ true, could weaken this​ view? A. ​Alzania's neighbor has been producing cotton longer than Alzania. B. Workers in Alzania have higher productivity due to better education and training. C. The cotton industry in Alzania is heavily regulated by the government. D. Alzania is a closed economy. E. ​Alzania's neighbor exported half its production of cotton that year.

Alzania's neighbor exported half its production of cotton that year.

Which of the following events would cause the supply curve to decrease from S1 to S2​? A. An increase in the number of firms in the market. B. An increase in the price of inputs. C. A decrease in the price of inputs. D. Lower expected future prices.

An increase in the price of inputs.

What is the impact of an increase in worker productivity when demand is relatively more​ elastic? A. A large increase in the price received by the firm. B. A decline in sales revenue received by the firm. C. An increase in sales revenue received by the firm. D. A small increase in the price received by the firm.

An increase in sales revenue received by the firm.

In the diagram to the​ right, illustrating a binding price floor at P1​, the amount of consumer surplus transferred to producers is represented by area B and the deadweight loss is equal to areas C and E .

B; C and E

Using the same amount of​ resources, the United States and Canada can both produce lumberjack shirts and lumberjack​boots, as shown in the production possibilities frontiers in the figure to the right. Canada has a comparative advantage in producing lumberjack boots. The United States has a comparative advantage in producing lumberjack shirts. Does either country have an absolute advantage in producing both​ goods? A. Neither country has an absolute advantage in both goods because Canada can produce more boots but the United States can produce more shirts. B. Neither country has an absolute advantage in both goods because the United States can produce more boots but Canada can produce more shirts. C. Canada has an absolute advantage in both goods because it can produce more boots and more shirts. D. The United States has an absolute advantage in both goods because it can produce more boots and more shirts. E. Both countries have an absolute advantage in both goods because they both produce boots and shirts. Suppose initially that the United States is consuming 2 boots and 12 shirts and Canada is consuming 8 boots and 4 ​shirts, as indicated in the figure. ​ Then, suppose the United States and Canada specialize by each only producing the good for which they have a comparative advantage and then trade. In​ particular, suppose the United States trades Canada half of its production for half of what Canada produces.

Canada- boot United States- shirts Neither country has an absolute advantage in both goods because Canada can produce more boots but the United States can produce more shirts. The United States will have 0 additional​ shirt(s) after the trade ​(enter a numeric response using an​ integer) and 10 additional​ boot(s). At the same​ time, Canada will be able to consume 8 additional​ shirt(s) as a result of the trade and 4 additional​ boot(s). (see screenshot)

Deadweight loss is the reduction in economic surplus resulting from a market not being in competitive equilibrium. In the​ diagram, deadweight loss is equal to the​ area(s): A. C​ & E. Your answer is correct. B. B​ & D. C. ​A, B,​ & C. D. A.

C​ & E.

In the diagram to the​ right, illustrating a​ per-unit tax equal to P2 minus P3​, tax revenue is represented by the areas D and F and the excess burden of the tax is represented by areas E and G

D and F; E and G

Which of the following would cause a shift in the demand curve from point A to point​ B? A. An increase in income​ (normal good). B. A decrease in income​ (inferior good). C. An increase in the price of a substitute good. D All of the above.

D. All of the above.

Consider the two demand curves illustrated in the figure. Which of the two is relatively more elastic Upper D 2

D2 is more elastic.

Consider the demand curve illustrated in the figure to the right. Is demand elastic or​ inelastic? A. Demand is elastic at all prices above ​$5.00 and inelastic at all prices below ​$5.00. B. Demand is elastic​ (at all​ prices). C. Demand is inelastic at all prices above ​$7.00 and elastic at all prices below ​$7.00. D. Demand is elastic at all prices above ​$7.00 and inelastic at all prices below ​$7.00. E. Demand is inelastic​ (at all​ prices). At what price is total revenue​ maximized? Total revenue is maximized when price equals ​$7. ​(Enter your response as a real number rounded to two decimal​ places.)

Demand is elastic at all prices above ​$7.00 and inelastic at all prices below ​$7.00. $7

How do property rights affect externalities and market​ failure? A. Externalities and market failure will result from the difficulty of enforcing property rights. Your answer is correct. B. Externalities will be positive and market failure will not occur when property rights are divided equally among market participants. C. Externalities and market failure will result from producers having all the property rights. D. Externalities will be positive and market failure will not occur when property rights are enforced. E. Externalities and market failure will not occur when property rights are incomplete.

Externalities and market failure will result from the difficulty of enforcing property rights.

Suppose that France and Germany both produce wine and cheese. The table below shows combinations of the goods that each country can produce in a day. Who has the comparative advantage in producing wine and who has the comparative advantage in producing​ cheese? A. France has a comparative advantage producing wine and Germany has a comparative advantage producing cheese. B. France has a comparative advantage producing wine and cheese. C. Germany has a comparative advantage producing wine and cheese. D. Neither has a comparative advantage producing wine or cheese. E. France has a comparative advantage producing cheese and Germany has a comparative advantage producing wine. Suppose that France is currently producing 1 bottle of wine and 6 pounds of cheese and Germany is currently producing 3 bottles of wine and 10 pounds of cheese. ​ Then, assume instead that France and Germany specialize by producing only the good for which they have a comparative advantage and then trade 3 bottles of wine for 10 pounds of cheese.

France has a comparative advantage producing wine and Germany has a comparative advantage producing cheese. After specialization and​ trade, France gains by consuming the same amount of wine and 4 additional​ pound(s) of cheese ​(enter a numeric response using an​ integer) and Germany gains by consuming the same amount of wine and 5 additional​ pound(s) of cheese.

A large corporation that runs nursing homes estimates that changes to Medicare will result in lower payments by Medicare to nursing homes for​ short-term stays by patients that require therapy or care upon leaving hospitals. Assume the corporation is considering expanding the number of​ "beds" it offers at its nursing homes. Given the changes to​ Medicare, if the marginal benefit of offering an additional bed is ​$6,000 and the marginal cost is ​$8,000 per​ bed, then the corporation blank offer additional beds.

Given the changes to​ Medicare, if the marginal benefit of offering an additional bed is ​$6,000 and the marginal cost is ​$8,000 per​ bed, then the corporation should not offer additional beds.

In England during the Middle​ Ages, each village had an area of​ pasture, known as a​ commons, on which any family in the village was allowed to graze its cows or sheep without charge. Was the common land used​ optimally? A. The commons was underused due to free riding. B. Grazing created no​ externality, resulting in the commons being used optimally. C. The commons was overused because the commons was an excludable good. D. The commons was underused because the commons was a rival good. E. Grazing created a negative​ externality, resulting in the commons being overused.

Grazing created a negative​ externality, resulting in the commons being overused.

Consider the figure to the right and assume that it is the market for​ health-care services. When the​ "baby boomer" generation​ retires, the number of people who require health care increases by​ 30%, and, as a​ result, the number of​ health-care providers also​ increases, but by only​ 25%. What is the effect on the price of​ health-care services over​ time? A. It increases because demand increased by less than supply. B. It decreases because demand increased by more than supply. C. It decreases because demand increased by less than supply. D. It increases because demand increased by more than supply.

It increases because demand increased by more than supply.

Which of the following is not an argument used by economists and policymakers who are in favor of moving toward a Medicare for All system of health​ care? A. A​ single-payer plan would reduce the paperwork caused by the current system. B. Medicare for All would potentially reduce the administrative cost of coordinating a decentralized system. C. The Medicare for All structure would save costs due to the bargaining power of the federal government. D. The Medicare for All structure would ultimately increase competition in the health insurance​ industry, and this would reduce health care costs and increase economic efficiency.

The Medicare for All structure would ultimately increase competition in the health insurance​ industry, and this would reduce health care costs and increase economic efficiency.

MIT economist Jerry Hausman has estimated the price elasticity of demand for Post Raisin Bran cereal to be −2.5 and the price elasticity of demand for all types of breakfast cereals to be −0.9.

The demand for Post Raisin Bran cereal is elastic​, and the demand for all types of breakfast cereals is inelastic.

Microsoft charges a price of​ $599 for a copy of Windows 7. Is this pricing decision​ rational? A. We cannot assume that this pricing decision was rational because we do not have enough information to make an assumption. B. ​Microsoft's choice was​ rational: the price will maximize profit. C. ​Microsoft's choice cannot be​ rational: the price is clearly more than most people are willing and able to pay. D. When we assume the managers at Microsoft have used all available information and have weighed all known benefits and​ costs, we are assuming rationality.

When we assume the managers at Microsoft have used all available information and have weighed all known benefits and​ costs, we are assuming rationality.

Panel a Price ​(dollars per​ player) Quantity ​(millions of players per​ month) ​$300 30 250 35 200 40 150 45 100 50 The diagram in panel a is an example of A. a demand schedule. B. the income effect. C. the substitution effect. D. a demand curve.

a demand schedule.

A black market is A. very similar to a​ "gray" market except that the goods and services exchanged are imported. B. a market in which buying and selling take place at prices consistent with government price regulations. C. a market in which all transactions involve activities​ (such illicit​ drugs, prostitution,​ etc.) many in the population find morally offensive. D. a market in which buying and selling take place at prices that violate government price regulations.

a market in which buying and selling take place at prices that violate government price regulations.

Economic efficiency is A. a market outcome in which the marginal benefit to consumers of the last unit produced is greater than its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum. B. a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum. Your answer is correct. C. a government outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum. D. a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is not at a maximum.

a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.

Consider the consumption of electricity. What type of good is electricity​? Electricity is A. a quasi−public good. Your answer is correct. B. a common resource. C. a private good. D. a public good. E. an externality.

a quasi−public good.

Panel a Price ​(dollars per​ player) Quantity ​(millions of players per​ month) ​$300 50 250 45 200 40 150 35 100 30 The diagram in panel b is an example of A. the substitution effect. B. a supply schedule. C. the income effect. D. a supply curve.

a supply curve.

Consider a used car market in which half the cars are good and half are bad​ (lemons). Suppose the average price of a good car is​ $9,000 and the average price of a lemon is​ $3,000. If rational buyers are willing to pay​ $6,000 for a used​ car, then sellers will agree to sell mostly lemons at this price. What is the term used to describe this​ situation? A. economic irrationality B. moral hazard C. adverse selection Your answer is correct. D. an efficient market

adverse selection

The​ "lemons problem" refers to the observation that the presence of asymmetric information in the used car market leads to the problem of adverse selection​, causing the cars offered for sale to be predominantly poor in quality. In the case of health​ insurance, a lemons problem exists since those more likely to want health insurance are sick people.

adverse selection; poor; sick

When are we likely to see private solutions to the problem of​ externalities? A. When the parties involved have information about the externality. B. When transaction costs are low. C. When the number of parties involved is small. D. both a and b. E. all of the above.

all of the above.

What must be true for the Coase TheoremLOADING... to​ hold? For the Coase Theorem to​ hold, A. transaction costs to obtain an agreement must be high. B. the parties to an agreement cannot know the full cost of the externality. C. the externality must be created by the production of a good or service. D. the government must monitor the negotiations to obtain an agreement. E. all parties to an agreement must be willing to accept a reasonable agreement.

all parties to an agreement must be willing to accept a reasonable agreement.

The term that is used to refer to a situation in which one party to an economic transaction has less information than the other party is A. moral hazard. B. asymmetric information. Your answer is correct. C. information disparity. D. inefficient market hypothesis.

asymmetric information.

The parties involved in an externality have an incentive to reach an efficient solution because A. government regulations compel private parties. B. the party that causes negative externality does not have any legal right to do so. C. it is morally the right thing to do. D. both parties become better off when an efficient solution is reached.

both parties become better off when an efficient solution is reached.

The production possibilities frontiers depicted in the diagram to the right illustrate (look at pic on your phone) A. technological advances in the tank industry. B. both the labor force and capital stock decreasing. C. the likely result of a ground war. D. both the labor force and capital stock increasing.

both the labor force and capital stock increasing.

A market is a group of blank of a good or service and the institution or arrangement by which they come together to trade.

buyers and sellers

Consumer surplus is the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. This component of economic surplus is illustrated in the diagram by area A

consumer; A

Suppose Wendy's hamburgers have many close substitutes available. If​ so, then an increase in the price of Wendy's hamburgers will likely A. increase the quantity of Wendy's hamburgers demanded by a relatively small amount. B. decrease the quantity of Wendy's hamburgers demanded by a relatively small amount. C. increase the quantity of Wendy's hamburgers demanded by a relatively large amount. D. not change the quantity of Wendy's hamburgers demanded. E. decrease the quantity of Wendy's hamburgers demanded by a relatively large amount.

decrease the quantity of Wendy's hamburgers demanded by a relatively large amount.

Consider the demand for cigarettes. Suppose the government increases the price of cigarettes by raising cigarette taxes. How will this affect the demand for cigarettes over​ time? If the price of cigarettes increases​, then the quantity of cigarettes demanded will A. likely never change either initially or over time. B. decrease​, and this effect will likely remain constant over time. C. increase​, and this effect will likely become larger​ (in absolute​ value) over time. D. decrease​, but this effect will likely become smaller​ (in absolute​ value) over time. E. decrease​, and this effect will likely become larger​ (in absolute​ value) over time.

decrease​,and this effect will likely become larger​ (in absolute​ value) over time.

In addition to covering the costs of unpredictable​ events, health insurance typically covers many planned​ expenses, such as routine​ checkups, annual​ physicals, and the cost of vaccinations. Because of​ this, health insurance A. generates an efficient quantity of health care services. B. encourages overuse of health care services. Your answer is correct. C. is not accepted by most doctors and hospitals. D. discourages overuse of health care services.

encourages overuse of health care services.

Consider firms that introduce new​ products, such as DVDs in 2001. When firms introduce new​ products, how do they typically determine the price elasticity of demand for those​ products? Firms with new products often A. estimate price elasticity of demand by experimenting with different prices. B. guess price elasticity of demand based on market competition. C. approximate price elasticity of demand with market signals such as shortages. D. identify price elasticity of demand by using price controls to set price ceilings. E. identify price elasticity of demand by asking for government assistance.

estimate price elasticity of demand by experimenting with different prices.

Suppose that your local police department recovers 100 tickets to a big NASCAR race in a drug raid. It decides to distribute these to residents and announces that tickets will be given away at 10 A.M. Monday morning at City Hall. Suppose that your college decides to give away​ 1,000 tickets to the football game against your​ school's biggest rival. The athletic department elects to distribute the tickets by giving them away to the first​ 1,000 students who show up at the​department's office at 10 a.m. the following Monday. a. The groups of people that are most likely to get the tickets will be those for whom the expected marginal benefits of going to the​ department's office on Monday morning are greater than the expected marginal costs. b. What is the actual cost and also the opportunity cost of distributing the tickets this​ way? A. The activities that cannot be done​ (such as earning money at​ work) when one is standing in line. B. The cost of travel to the​ department's office. C. The cost of people blocking traffic in and around the​ department's office building. D. All of the above. Your answer is correct. E. A and B only. c. Productive efficiency occurs when a good or service​ (such as the distribution of​ tickets) is produced at the lowest possible cost. Is this an efficient way to distribute the​ tickets? No. d. This is A. an equitable way to distribute the tickets because the students who really want them will be able to go and get them. B. not an equitable way to distribute the tickets because some students who really want them may be unable to go and get them. Your answer is correct. C. not an equitable way to distribute the tickets because there may be enough tickets for faculty and staff. D. an equitable way to distribute the tickets because everyone has an equal chance of getting a ticket.

first blank- benefits second blank- costs b- all the above c- no d- not an equitable way to distribute the tickets because some students who really want them may be unable to go and get them.

Societies organize their economies in two main ways to answer the three questions of​ what, how, and who. A society can have a blank economy in which the government decides how economic resources will be allocated. Or a society can have a blank economy in which the decisions of households and firms interacting in markets allocate economic resources.

first blank- centrally planned second blank- market

The Coase Theorem states that A. if transaction costs are​ low, the government will regulate an efficient solution to the problem of externalities. B. if transaction costs are​ low, private bargaining will result in an efficient solution to the problem of externalities. Your answer is correct. C. if transaction costs are​ low, private markets will create externalities and result in efficient outcomes. D. if transaction costs are​ low, private deals will create externalities and result in inefficient outcomes. E. if imposed on free​ markets, government regulations will result in inefficient outcomes and create deadweight loss.

if transaction costs are​ low, private bargaining will result in an efficient solution to the problem of externalities.

​"Rent controls, government farm​ programs, and other price ceilings and price floors are​ bad." This is an example of a A. normative statement. The statement is concerned with what should be. B. positive statement. The statement is concerned with what is. C. normative statement. The statement is concerned with what is. D. positive statement. The statement is concerned with what should be.

normative statement. The statement is concerned with what should be.

Between 1950 and​ 2017, the price of wheat fell dramatically from​ $19.23 per bushel to​ $3.85 per bushel. Suppose between 1950 and​ 2017, the supply of wheat increased substantially due to increases in​ productivity, shifting the wheat supply curve to the right. With this supply​ shift, the amount by which the price of wheat falls will be larger the more inelastic the demand for wheat. In​ addition, assume that between 1950 and 2017 the income of the average American increased substantially and that wheat is a normal good. With this increase in​ income, A. the amount by which the price of wheat falls will be larger the higher the income elasticity of wheat. B. the amount by which the price of wheat rises will be smaller the higher the income elasticity of wheat. C. the price of wheat will be unaffected. D. the amount by which the price of wheat rises will be smaller the lower the income elasticity of wheat. Your answer is correct. E. the amount by which the price of wheat falls will be smaller the higher the income elasticity of wheat.

inelastic; the amount by which the price of wheat rises will be smaller the lower the income elasticity of wheat.

In the​ diagram, marginal benefit is equal to marginal cost at output level Q2. This output level is considered economically efficient.

is equal to; efficient

When consumers pay only a fraction of the true cost of medical​ services, their demand increases. The marginal cost of producing these extra services A. is greater than the marginal benefit consumers receive from them. B. is zero due to the insurance payments. C. is equal to the marginal benefit consumers receive from them. D. is less than the marginal benefit consumers receive from them.

is greater than the marginal benefit consumers receive from them.

Suppose the government requires each firm to reduce sulfur dioxide emissions by an equal amount such that total emissions are reduced by 7.0 million tons per year. Is this approach necessarily economically​ efficient? This​ command-and-control approach A. is not efficient because some firms may still be generating pollution. B. is not efficient because firms can have different costs of reducing pollution. Your answer is correct. C. is efficient because reducing sulfur dioxide pollution by 7.0 million tons per year is where the marginal cost and marginal benefit of pollution reduction are equal. D. is efficient because it does not require the government to know the​ firms' cost of reducing pollution. E. is efficient because each firm is reducing pollution by the same amount.

is not efficient because firms can have different costs of reducing pollution.

Suppose the figure to the right illustrates the marginal cost and marginal benefit from reducing sulfur dioxide pollution. How could the government use a command-and-controlLOADING... approach to reduce pollution to the optimal level for​ society? The government could A. prohibit sulfur dioxide pollution entirely. B. tax each ton of sulfur dioxide pollution. C. limit sulfur dioxide pollution to a particular quantity per year. Your answer is correct. D. reduce transaction costs to encourage private solutions to the problems associated with sulfur dioxide pollution. E. subsidize each ton of sulfur dioxide pollution.

limit sulfur dioxide pollution to a particular quantity per year.

Compare the demand for pencils with demand for food. The demand for pencils is likely A. more inelastic because pencils tend to be purchased more frequently. B. more elastic because pencils tend to represent a larger fraction of a​ consumer's budget. C. more inelastic because pencils tend to represent a smaller fraction of a​ consumer's budget. D. more elastic because pencils tend to represent a smaller fraction of a​ consumer's budget. E. more elastic because pencils tend to be purchased in larger quantities.

more inelastic because pencils tend to represent a smaller fraction of a​ consumer's budget.

Suppose the production of electricity by a utility generates pollution that harms others. Suppose also that Coase bargainingLOADING...can occur between the utility and the victims of pollution but that the utility has not been legally liable for the damages from its pollution. How would making the utility legally liable for the damages from its pollution affect pollution​ reduction? If the electric utility and the people suffering the effects of the​ utility's pollution can​ bargain, then making the utility legally liable for the damages from its pollution will A. not change the amount of pollution reduction because the marginal benefit and marginal cost of pollution reduction will not change. Your answer is correct. B. increase the amount of pollution reduction by decreasing the marginal cost of pollution reduction to the utility. C. increase the amount of pollution reduction by increasing the marginal benefit of pollution reduction to the utility. D. increase the amount of pollution reduction by increasing the marginal cost and increasing the marginal benefit of pollution reduction to the utility. E. decrease the amount of pollution reduction by decreasing the marginal benefit of pollution reduction to the victims of pollution.

not change the amount of pollution reduction because the marginal benefit and marginal cost of pollution reduction will not change.

How might society solve problems associated with externalities and market failureLOADING...​? If an externality is​ present, resulting in market​ failure, then A. private solutions may reduce or correct market failure. Your answer is correct. B. additional competition will reduce problems associated with market failure. C. government intervention will further reduce the well−being of society. D. only government intervention can increase economic efficiency. E. it is not possible to enhance the well−being of society.

private solutions may reduce or correct market failure.

Producer surplus is the difference between the lowest price a firm would be willing to accept and the price it actually receives. This component of economic surplus is illustrated in the diagram by area B .

producer;B

How do externalities in the production of electricity result in market failure​? Because of​ externalities, the market for electricity will A. provide too much electricity. B. result in a surplus of electricity. C. provide insufficient electricity. D. generate too much economic surplus. E. result in a price for electricity that is inefficiently high.

provide too much electricity.

consider the market for dams along a river​, illustrated in the figure to the​ right, where S1 is marginal private cost and D1 is marginal private benefit. Dams are an example of a public good. Suppose that the consumption of dams along a river generates a positive externality of ​$50 per unit. If​ so, then according to the​ figure, the optimal quantity of dams along a river for society is 8 units. ​(Enter your response as an​ integer.)

public good; 8

Compare the demand for water with the demand for wine. The demand for wine is likely A. relatively more elastic because wine is a luxury. B. relatively more inelastic because wine is a luxury. C. equally elastic as the demand for water. D. relatively more inelastic because wine is a necessity. E. relatively more elastic because wine is a necessity.

relatively more elastic because wine is a luxury.

Consider a pair of Gap Jeans. Is the consumption of Gap Jeans rival and excludableLOADING...​? The consumption of Gap Jeans is A. nonrival and nonexcludable. B. rival and nonexcludable. C. nonrival and excludable. D. rival and excludable. Your answer is correct. E. ​quasi-rival and​ quasi-excludable.

rival and excludable.

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls A. the market. B. scarcity. C. rationality. D. economics.

scarcity.

A small town provides a fireworks​ display, which is a public​ good, every fourth of July. For​simplicity, assume the town only has two​ residents: Hayden and Madison. Their demands for the fireworks display are illustrated in the figure to the right. Construct the market demand curve for this public good. Use the line drawing tool to draw the market demand curve ​(DMarket​) for the fireworks display. Properly label this line.

see photo

In the table​ below, fill in the missing blanks to complete the summary of the effects of changes in demand and supply on equilibrium price and quantity. Supply Curve Unchanged Supply Curve Shifts to the Right Supply Curve Shifts to the Left Demand Curve Unchanged Q unchanged P unchanged Q increases P decreases Q decreases P increases Demand Curve Shifts to the Right Q increases P increases Q increases P indeterminant Q indeterminant P increases Demand Curve Shifts to the Left Q decreases P decreases Q indeterminate P decreases Q decreases P indeterminant

see photo of graph

When the government imposes price floors or price​ ceilings, A. everyone​ wins, goods and services distribution is more​ just, and there is an increase in economic efficiency. B. everyone​ wins, goods and services distribution is more​ just, and there is a loss of economic efficiency. C. some people​ win, some people​ lose, and there is a loss of economic efficiency. D. some people​ win, some people​ lose, and there is an increase in economic efficiency.

some people​ win, some people​ lose, and there is a loss of economic efficiency.

The distinction between substitutes and complements is A. substitute goods are used together while complementary goods are used for the same purposes. B. when income​ increases, demand for a complementary good decreases while demand for a substitute good increases. C. substitute goods are used for the same purposes while complementary goods are used together. D. when income​ increases, demand for a substitute good increases while demand for a complementary good falls.

substitute goods are used for the same purposes while complementary goods are used together.

Economist X. M. Gao and two colleagues have estimated that the​ cross-price elasticity of demand between beer and wine is 0.31. If​ so, then beer and wine are substitutes. Gao and colleagues have estimated that the​ cross-price elasticity of demand between beer and spirits is 0.15. If the price of spirits increases by 10​ percent, then the quantity of beer demanded will increase by 1.5 percent. ​(Enter your response rounded to one decimal​ place.) In​ addition, Gao and colleagues have estimated the income elasticity of demand for beer to be −0.09. If​ so, then beer is A. an inferior good. Your answer is correct. B. a normal good that may be a luxury or a necessity. C. a normal good that is a luxury. D. a luxury that may be a normal good or an inferior good. E. a normal good that is a necessity.

substitutes; increase; 1.5; an inferior good.

In the diagram to the​ right, when the price is ​$65 per​ player, the amount of the surplus is 40 million players per month.

surplus; 40 million

The figure to the right illustrates the U.S. market for rugs made in a particular foreign country. Suppose the market price of rugs is ​$1,750. At a price of ​$1,750​, there will be a surplus of rugs. To reach an​ equilibrium, the price of rugs in this market must fall.

surplus; fall

In the​ diagram, when supply increases​, a surplus develops at the original price. Equilibrium price will fall and equilibrium quantity will rise as a new equilibrium is established.

surplus; fall;rise

In the diagram to the​ right, when demand decreases​, a surplus develops at the original price. Equilibrium price will fall and equilibrium quantity will fall as a new equilibrium is established.

surplus;fall;fall

suppose the figure to the right illustrates the market for toilet​ paper, where S1 represents the marginal private cost of production and D1 represents the marginal private benefit from consumption. Companies that produce toilet paper bleach the paper to make it white. Some paper plants discharge the bleach into rivers and​ lakes, causing substantial environmental damage. Assume that S2 represents the marginal social cost of producing toilet paper​(incorporating the​ externality). What could the government do to internalize the​ externality? In the presence of a negative​ externality, the government could tax toilet paper production. In​ particular, the government should set a Pigovian tax. of ​$150 per ton of toilet paper produced.

tax; 150

The production possibilities frontiers depicted in the diagram to the right illustrate A. technological advances in both the tank and automobile industries. B. increases in both the labor force and capital stock. C. technological advances in the automobile industry. D. technological advances in the tank industry.

technological advances in the tank industry.

Suppose a common resource—wood in a public forest—is being overused because residents consider the benefits of gaining firewood or wood for building but do not account for the cost of deforestation when chopping down trees. What could be done to prevent wood in the forest from being​ overused? To prevent overuse of the common​ resource, A. the community could create transaction costs to private bargaining. B. the community could establish norms where social pressure limits deforestation. Your answer is correct. C. the government could make a binding commitment to keep the forest lands public. D. the government could subsidize chopping down trees. E. the community could establish social customs prohibiting the use of permits required to chop down trees.

the community could establish norms where social pressure limits deforestation.

A. the cost of drafting a contract or agreement. Your answer is correct. B. the time required to negotiate an agreement. Your answer is correct. C. the cost of monitoring an agreement. Your answer is correct. D. the difference between the private costs and social costs of production. E. the cost of the externality.

the cost of drafting a contract or agreement. the time required to negotiate an agreement. the cost of monitoring an agreement

What information must economists have to estimate the price elasticity of​ demand? To estimate the price elasticity of​ demand, economists need to know A. total revenue. B. the supply curve for a product. C. the change in price. D. the demand curve for a product. E. the market price and quantity sold.

the demand curve for a product.

Which provision of the Affordable Care Act​ (ACA) was repealed by Congress in​ 2017? A. the individual mandate Your answer is correct. B. the state health insurance marketplace C. the employer mandate D. the regulation of health insurance

the individual mandate

Prepping for a​ next-day exam over the course of an evening​ (and possibly into the wee hours of test​ day) poses increasing costs since A. studying productivity declines sharply as the effort extends through the evening. B. the longer you choose to study will result in an increase in the number and value of foregone activities. C. tutors charge higher rates after 7 p.m. D. evenings are a less productive time to study compared to daylight hours.

the longer you choose to study will result in an increase in the number and value of foregone activities.

What do economists mean by​ "an economically efficient level of​ pollution"? The economically efficient level of pollution is that amount where A. the marginal cost of pollution reduction is zero and the marginal benefit of pollution reduction is very high. B. the marginal cost of pollution reduction equals the marginal benefit of pollution reduction. Your answer is correct. C. pollution is eliminated. D. the marginal cost of pollution reduction and the marginal benefit of pollution reduction equal zero. E. the total benefit of pollution reduction is maximized.

the marginal cost of pollution reduction equals the marginal benefit of pollution reduction.

If a fire insurance company requires firms buying fire insurance to install automatic sprinkler​ systems, the insurance company is trying to reduce A. asymmetric information. B. the moral hazard problem. Your answer is correct. C. sunk costs. D. the problem of adverse selection.

the moral hazard problem.

Which of the following is a primary determinant of the price elasticity of supplyLOADING...​? The price elasticity of supply is affected by A. whether the good produced has close substitutes available. B. the definition of the market. C. whether the good produced is a luxury or a necessity. D. the passage of time. Your answer is correct. E. the share of the good in consumer budgets. In​ particular, the supply curve for a particular product will be increasingly more elastic over a longer period of time.

the passage of time; over a longer period of time.

How is the price elasticity of demand​ measured? The price elasticity of demand is measured as A. the change in the quantity demanded divided by the change in price. B. the quantity demanded divided by price. C. the percentage change in the quantity demanded divided by the percentage change in price. D. the slope of the demand curve. E. the percentage change in the quantity demanded divided by the percentage change in the quantity supplied.

the percentage change in the quantity demanded divided by the percentage change in price.

How do externalities affect​ markets? If a positive externality in consumption is present in a​ market, then A. the private benefit from consumption will be different than the social benefit from consumption. B. the social cost of production will be equal to the social benefit from consumption. C. consumer and producer surplus will be maximized. D. the private cost of production will be different than the social cost of production. E. the private cost of production will be equal to the private benefit from consumption.

the private benefit from consumption will be different than the social benefit from consumption.

Property rights are A. the rights individuals or firms have to the exclusive use of their property within individual culturally defined norms which are inconsistent in each area of the United States. B. the rights individuals or firms have to the exclusive use of their​ property, excluding the right to buy or sell it. C. the rights individuals or firms have to the exclusive use of their​ property, including the right to buy or sell it. D. the rights government has to the exclusive use of all​ property, including the right to buy or sell it.

the rights individuals or firms have to the exclusive use of their​ property, including the right to buy or sell it.

Over the past 30​ years, the price of oil has been relatively​ unstable, fluctuating between​ $11.00 and well over​ $100 per barrel. Which of the following potentially contributes to​ oil-price instability? Oil prices are relatively unstable because A. OPEC has been successful in controlling the quantity of oil its members supply. B. the supply of oil is inelastic. Your answer is correct. C. the market for oil is relatively competitive. D. the demand for oil is elastic. E. the income elasticity of demand for oil is negative.

the supply of oil is inelastic.

Suppose a professional basketball game is to be played at a suburban ​arena, which increases demand for parking on the night of the game. If the suburban area has the ability to create additional parking during periods of peak​ demand, then A. the supply of parking will be more inelastic and the price of parking will not change the night of the game. B. the supply of parking will be more elastic and the price of parking will increase by a relatively large amount the night of the game. C. the supply of parking will be more inelastic and the price of parking will increase by a relatively small amount the night of the game. D. the supply of parking will be more elastic and the price of parking will increase by a relatively small amount the night of the game. Your answer is correct. E. the supply of parking will be perfectly elastic and the price of parking will increase by a relatively large amount the night of the game.

the supply of parking will be more elastic and the price of parking will increase by a relatively small amount the night of the game.

Because consumers who have insurance provided by their employers usually only pay a deductible for a visit to the​ doctor's office, A. the insurance companies provide a larger quantity of health care services than they would if the consumer paid a price that better represented the true cost of providing the service. B. they demand a smaller quantity of health care services than they would if they paid a price that better represented the true cost of providing the service. C. they demand a larger quantity of health care services than they would if they paid a price that better represented the true cost of providing the service. Your answer is correct. D. the doctors supply a smaller quantity of health care services than they would if the consumer paid a price that better represented the true cost of providing the service.

they demand a larger quantity of health care services than they would if they paid a price that better represented the true cost of providing the service.

The distinction between a normal and an inferior good is A. when income​ increases, demand for a normal good decreases while demand for an inferior good increases. B. when income​ increases, demand for a normal good increases while demand for an inferior good falls. C. normal goods are used for the same purposes while inferior goods are used together. D. normal goods are used together while inferior goods are used for the same purposes.

when income​ increases, demand for a normal good increases while demand for an inferior good falls

Suppose a new recreational neighborhood park would cost​ $20,000, including opportunity​ costs, to construct and maintain. If​ built, the park would be a public good For​ simplicity, assume the neighborhood park would be used by three​ families, each of whom would derive a marginal benefit equivalent to​ $8,000 from the park. Should the neighborhood park be​ built? It would be optimal for the park to be built. If left to the private​ market, without private bargaining or government​ intervention, would the park be​ built? Without private bargaining or government​ intervention, the park would not be built.

would be optimal; would not be built

Economic surplus in a market is the sum of​ _____ surplus and​ _____ surplus. In a competitive​ market, with many buyers and sellers and no government​ restrictions, economic surplus is at a​_____ when the market is in​ _____. A. ​consumer; government;​ maximum; equilibrium B. ​consumer; producer;​ maximum; equilibrium Your answer is correct. C. ​consumer; producer;​ maximum; disequilibrium D. ​consumer; producer;​ minimum; equilibrium

​consumer; producer;​ maximum; equilibrium

Consider the following​ statement: ​"An increase in supply decreases the equilibrium price. The decrease in price increases​ demand." The statement is A. ​false: increases in supply decrease price. B. ​true: increases in supply decrease price. Decreases in price increase demand. C. ​false: increases in supply increase price. Decreases in price increase demand. D. ​false: decreases in price affect the quantity​ demanded, not demand.

​false: decreases in price affect the quantity​ demanded, not demand.

A report from the Center for American Progress states that administration costs for health care in the United States are well above those in other​ high-income countries, accounting for 8.3 percent of spending in the health care​ sector, compared to a global average of about 3 percent. According to the​ report, average billing and​ insurance-related costs per patient encounter include​ $215 for inpatient​ surgery, $62 for an emergency room​ visit, and​ $20 for a primary care visit. The report noted that a structural overhaul of finance and pricing in the health care industry would greatly help in eliminating excess administrative​ costs, but moving to a complete​ single-payer health care system is not mandatory. According to the​ report, setting uniform rates where all health insurers pay the same price for services would go a long way to reducing administrative costs. ​Source: Sarah​ Kilff, "2 charts that show our health care administrative costs are really​ high," vox.com, April​ 8, 2019. The article discusses the high administrative costs of health care in the United States. Even if private insurance companies were more efficient and brought administrative costs down by paying uniform​ rates, consumers would still pay less than the full cost of medical treatment. This would result in the market equilibrium price of medical services being​ ________ than the efficient equilibrium​ price, and the market equilibrium quantity of medical services being​ ________ than the efficient equilibrium quantity. A. ​less; less Your answer is correct. B. ​greater; less C. ​less; greater D. ​greater; greater

​less; less