econ practice midterm #2

Consider a market where there are many firms with different cost structures. When determining which firms enter the market first, we look at _______.

average total cost.

Which of the following would be an example of the Coase Theorem?

The homeowners association provides a fireworks show that ends at 10 p.m.

If you produce at a point on your Production Possibility Curve, then you are producing at a point that is ______ .

attainable and efficient

Social surplus is the _____

the sum of consumer surplus and producer surplus

Texas and Kentucky have the following opportunity cost for the production of wine and cotton. The terms of trade range of 1 cotton for wine is ____ to_____.

1 cotton for wine = opportunity cost of wine

A country moves from no world trade to free trade. Consumer Surplus at the world price would increase by and Producer Surplus would decrease by ______ .

C+G+B+D+E+F; C+B. Consumer surplus: think of area under demand curve, except price line Producer Surplus: everything under the price line

If resources prices fall, what happens to the Production Possibility Curve?

It does not change.

Assume that the market for chocolates is perfectly competitive. Which of the following statements would be true in this case?

Jill starts to produce chocolates today, but the addition of her supply into the market does not decrease the market price.

When the nation imposes a tariff, the imports of the nation falls to_______ . However, government revenue increases by ______ and producer surplus increases by ______.

Q3-Q2; D; B

Market inefficiencies result from all of the following, except:

Social benefits or costs.

When economists speak of a deadweight loss, they are referring to _______ in _______ caused by a market distortion

a decrease; social surplus.

In assessing the performance of a perfectly competitive market, we can say that ______.

a. price efficiently allocates goods and services to buyers and sellers. b. no individual can be made better off without making someone else worse off. c. any departure from the equilibrium necessarily reduces social surplus. d. all of the above.

Positive externalities result in a deadweight loss with a positive externality.

a. rightward; demand; will be.

What is Average Total Cost of 3 units?

add average fixed and average variable costs

The long-run average total cost curve (ATC) lies ______ run supply curve is the portion of the marginal cost (MC) curve that lies above the _______ curve.

below; Average Total Cost.

If the market price of pizza in this competitive market is below the ATC curve and the price of calzones is above the ATC curve, ______. The price of pizza will ____.

firms currently making pizza will switch to making calzones; increase.

If firms in a perfectly competitive market are earning profits or incurring losses in the short run, then in the long run these profits or losses will either cause new firms to enter or existing firms to leave the market. This will result in a shift in the profits are ______.

industry supply curve; zero.

Negative externalities impose an additional cost that:

is not explicitly recognized by the buyers and sellers in the market.

This nation may not favor imposing tariffs on imports because .

it raises prices for consumers.

Negative externalities cause a shift of the supply curve and in market quantity. Recognizing this deadweight loss result in elimination of the externality.

leftward; supply; will be.

Unless shutdown or exit is optimal, every firm expands production until _______.

marginal revenue, marginal cost, and price are all equal (MR = MC = P).

What is the fixed cost of this firm?

multiply quantity by average fixed cost

From the positions the curves hold in each graph, it can be deduced that the older, less efficient facility is _____.

produces less for more

A non-market price imposition is called a price control. A price control set above the equilibrium price will result in a _______ . A price control set below the equilibrium price will result in a ____.

surplus; shortage.

When bargaining to deal with negative externalities....

the cost falls on the party with the most to gain.