Econ Quiz #3

The law of diminishing returns indicates that

as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.

Marginal cost is the

change in total cost that results from producing one more unit of output.

A public good is

nonrival and nonexcludable

Marginal product is

the change in total output attributable to the employment of one more worker.

Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed. Number of Workers Units of Output 0 0 1 40 2 90 3 126 4 150 5 165 6 180 The marginal product of the sixth worker is:

15 units of output.

Use the following data to answer the question. Inputs of Labor Total Product 0 0 1 8 2 18 3 25 4 30 5 33 6 34 7 32 The average product (AP) when two units of labor are hired is

9

Frank buys 10 magazines and 25 newspapers. The magazines cost $5 each and the newspapers cost $2.50 each. Suppose that his MU from the final magazine is 10 utils while his MU from the final newspaper is also 10 utils. According to the utility-maximizing rule, Frank should:

Reallocate spending from magazines to newspapers.

Is the U.S. border patrol a public or private good? How about satellite TV?

The U.S. border patrol is a public good, but satellite TV is a private good.

To economists, the main difference between the short run and the long run is that

in the long run all resources are variable, while in the short run at least one resource is fixed.

Tammy spends her money on lemonade and iced tea. If the price of lemonade falls, it is as though her income _______.

increases.

The free-rider problem occurs when

people benefit from the public good without contributing to the cost.

Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed. Number of Workers Units of Output 0 0 1 40 2 90 3 126 4 150 5 165 6 180 Diminishing marginal returns become evident with the addition of the

third worker.

The amount of calendar time associated with the long run

varies from industry to industry.

Public goods are not privately provided because

when goods are nonexcludable, those people purchasing the good could simply allow others the use without requiring compensation.