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Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18.Refer to Figure 4-3. What is the value of the deadweight loss at the equilibrium price of $15?

Figure 4-1 shows Arnold's demand curve for burritos. Refer to Figure 4-1. If the market price is $1.00, what is the consumer surplus on the third burrito?

$0.50

Table 12-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.Refer to Table 12-1. What is the fixed cost of production?

$1,000

Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights.Refer to Table 11-7. What is the variable cost of production when the firm produces 115 lanterns?

$1,157

Figure 15-6 shows the cost and demand curves for a monopolist. Refer to Figure 15-6. The monopolist's total cost is

$1,240

Figure 15-6 shows the cost and demand curves for a monopolist. Refer to Figure 15-6. The monopolist's total revenue is

$1,488

Table 11-8 shows cost data for Happy Gardens, a producer of garden gnomes.Refer to Table 11-8. What is the marginal cost per unit of production when the firm produces 450 garden gnomes?

$1.38

Figure 4-1 shows Arnold's demand curve for burritos. Refer to Figure 4-1. Arnold's marginal benefit from consuming the third burrito is

$1.50.

Figure 9-1 shows the U.S. demand and supply for leather footwear. Refer to Figure 9-1. Under autarky, the producer surplus is

$105

When a firm produces 50,000 units of output, its total cost equals $6.5 million. When it increases its production to 70,000 units of output, its total cost increases to $9.4 million. Within this range, the marginal cost of an additional unit of output is

$145

Refer to Table 16-1. If the output price is $3, what is the marginal revenue product of the fifth unit of labor?

$150

Figure 13-8 shows cost and demand curves for a monopolistically competitive producer of iced tea. Refer to Figure 13-8. What is the firm's profit-maximizing price?

$16

$160

Figure 9-1 shows the U.S. demand and supply for leather footwear. Refer to Figure 9-1. Suppose the government allows imports of leather footwear into the United States. What will the market price be?

$18

Figure 9-1 shows the U.S. demand and supply for leather footwear. Refer to Figure 9-1. Under autarky, the consumer surplus is

$195

Figure 4-8 shows the market for beer. The government plans to impose a per-unit tax in this market. Refer to Figure 4-8. How much of the tax is paid by sellers?

Figure 11-7 shows the cost structure for a firm. Refer to Figure 11-7. When output level is 100, what is the total cost of production?

$2,000

Figure 15-4 shows the demand and cost curves for a monopolist.Refer to Figure 15-4. What is the amount of the monopoly's profit?

$2,700

DeShawn's Detailing is a service that details cars at the customers' homes or places of work. DeShawn's cost for a basic detailing package is $40, and he charges $75 for this service. For a total price of $90, DeShawn will also detail the car's engine, a service that adds an additional $20 to the total cost of the package. What is the marginal cost of adding the engine detailing to the basic detailing package?

$20

Figure 4-8 shows the market for beer. The government plans to impose a per-unit tax in this market. Refer to Figure 4-8. For each unit sold, the price sellers receive after the tax (net of tax) is

$20

$240

Figure 15-6 shows the cost and demand curves for a monopolist. Refer to Figure 15-6. The monopolist earns a profit of

$248

If the market price is $25 in a perfectly competitive market, the marginal revenue from selling the fifth unit is

$25

If the market price is $25, the average revenue of selling five units is

$25

Refer to Figure 3-5. At a price of $15,

$27

Figure 4-1 shows Arnold's demand curve for burritos. Refer to Figure 4-1. What is the total amount that Arnold is willing to pay for 2 burritos?

$4.40

Golda Rush quit her job as a manager for Home Depot to start her own hair dressing salon, Goldilocks. She gave up a salary of $40,000 per year, invested her savings of $30,000 (which was earning 5 percent interest) and borrowed $10,000 from a close friend, agreeing to pay 5 percent interest per year. In her first year, Golda spent $18,000 to rent a salon, hired a part-time assistant for $12,000 and incurred another $15,000 in expenses on equipment and hairdressing material. Based on this information, what is the amount of her implicit costs for the first year?

$41,500

If a monopolist's price is $50 at 63 units of output and average total cost equals $43, then the firm's total profit is

$441

$45,500

Figure 4-8 shows the market for beer. The government plans to impose a per-unit tax in this market. Refer to Figure 4-8. How much of the tax is paid by buyers?

Refer to Table 13-1. What is the marginal revenue of the 3rd unit?

$5.50

Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. Refer to Figure 12-5. If the market price is $20, what is the amount of the firm's profit?

$6,750

Table 11-8 shows cost data for Happy Gardens, a producer of garden gnomes.Refer to Table 11-8. What is the variable cost of production when the firm produces 520 garden gnomes?

$664

Figure 4-8 shows the market for beer. The government plans to impose a per-unit tax in this market. Refer to Figure 4-8. What is the size of the per-unit tax?

DeShawn's Detailing is a service that details cars at the customers' homes or places of work. DeShawn's cost for a basic detailing package is $40, and he charges $75 for this service. For a total price of $90, DeShawn will also detail the car's engine, a service that adds an additional $20 to the total cost of the package. What is DeShawn's marginal benefit if he sells a basic detailing package?

$75

Paul goes to Dick's Sporting Goods to buy a new tennis racquet. He is willing to pay $200 for a new racquet, but buys one on sale for $125. Paul's consumer surplus from the purchase is

$75

Table 12-2 lists the various pounds (lbs.) of apples that Margie Stattler can sell. Assume that Margie operates in a perfectly competitive market.Refer to Table 12-2. What is Margie's total revenue if she sells 250 pounds of apples?

$750

Figure 11-7 shows the cost structure for a firm. Refer to Figure 11-7. When the output level is 100 units average fixed cost is

Figure 11-7 shows the cost structure for a firm. Refer to Figure 11-7. If output is 100 units what is the fixed cost of production?

$800

Table 2-7 shows the output per week of two jewelers, Serena and Haley. They can either devote their time to making bracelets or making necklaces. Refer to Table 2-7. What is Haley's opportunity cost of making a bracelet?

1 1/3 necklaces

Figure 2-2 above shows the production possibilities frontier for Mendonca, an agrarian nation that produces two goods, meat and vegetables. Refer to Figure 2-2. What is the opportunity cost of one pound of meat?

1 1/3 pounds of vegetables

Figure 9-1 shows the U.S. demand and supply for leather footwear. Refer to Figure 9-1. Suppose the government allows imports of leather footwear into the United States. What will be the domestic quantity supplied?

10 units

Figure 16-1 shows the marginal revenue product for Dale's Hand-Sewn Doilies, a producer of linen doilies. Refer to Figure 16-1. If Dale can sell her doilies at $2 each, what is the marginal product of the 5th worker?

14 doilies

Refer to Figure 11-1. The marginal product of the 3rd worker is

Denmark and Belize can produce both clocks and hats. Each country has a total of 200 available labor hours for the production of clocks and hats. Table 9-6 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade.Refer to Table 9-6. With trade, what is the total gain in clock production?

150 clocks

Figure 12-4Figure 12-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.Refer to Figure 12-4. If the market price is $30, the firm's profit-maximizing output level is

180

The Coffee Nook, a small cafe near campus, sells cappuccinos for $2.50 and Russian tea cakes for $1.00 each. What is the opportunity cost of buying a cappuccino?

2 1/2 Russian tea cakes

If four workers can produce 18 chairs a day and five can produce 20 chairs a day, the marginal product of the fifth worker is

2 chairs.

20 units

Refer to Figure 3-4. At a price of $10, how many units will be sold?

200

Figure 13-8 shows cost and demand curves for a monopolistically competitive producer of iced tea. Refer to Figure 13-8. What is the profit-maximizing output level?

22 cases

Figure 16-1 shows the marginal revenue product for Dale's Hand-Sewn Doilies, a producer of linen doilies. Refer to Figure 16-1. If the wage rate is $40, how many workers should Dale hire?

3 cups of soup and 4 sandwiches

Keegan has $30 to spend on Pita Wraps and Bubble Tea. The price of a Pita Wrap is $6 and the price of a glass of Bubble Tea is $3. Table 10-1 shows his total utility from different quantities of the two items. Refer to Table 10-1. What is Keegan's optimal consumption bundle?

3 pita wraps and 4 bubble teas

3/4 of a bracelet

3/4 pound of meat

Refer to Table 4-3. The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear. If the market price of cowboy hats is $50, how many hats will be produced?

Table 10-2 above shows Keira's utility from soup and sandwiches. The price of soup is $2 per cup and the price of a sandwich is $3. Keira has $18 to spend on these two goods.Refer to Table 10-2. Suppose Keira's income increases from $18 to $23 but prices have not changed. What is her utility maximizing bundle now?

4 cups of soup and 5 sandwiches

Lydia runs a small nail salon in the town of New Hope. She is debating whether she should extend her hours of operation. Lydia figures that her sales revenue will depend on the number of extra hours the nail salon is open as shown in the table above. She would have to hire a worker for those extra hours at a wage rate of $10 per hour. Refer to Table 1-1. Using marginal analysis, by how many hours should Lydia extend her nail salon's hours of operations?

5 hours

Refer to Figure 2-5. If the economy is currently producing at point W, what is the opportunity cost of moving to point X?

5 million tons of paper

Figure 2-9 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton and cashews.Refer to Figure 2-9. What is the opportunity cost of producing 1 bolt of cotton in Pakistan?

5/8 of a pound of cashews

When the average total cost is $16 and the total cost is $800, then the number of units the firm is producing is

Refer to Table 3-3. The table above shows the demand schedules for caviar of two individuals (Ari and Sonia) and the rest of the market. At a price of $75, the quantity demanded in the market would be

52 oz

If a consumer receives 22 units of marginal utility for consuming the first can of soda, 20 units from consuming the second, and 15 from the third, the total utility of consuming the three units is

57 utils

Figure 16-2 shows the marginal revenue product for Becca's Baubles, a producer of hand-beaded bracelets. Refer to Figure 16-2. If the wage rate is $20, how many workers should Becca hire?

6 glasses

6 utils

Refer to Table 16-1. The marginal product of the fourth unit of labor is

Refer to Table 3-1. The table above shows the demand schedules for loose-leaf tea of two individuals (Sunil and Mia) and the rest of the market. At a price of $5, the quantity demanded in the market would be

63 lbs.

Suppose Joe is maximizing total utility within his budget constraint. If the price of the last pair of jeans purchased is $25 and it yields 100 units of extra satisfaction and the price of the last shirt purchased is $20, then, using the rule of equal marginal utility per dollar spent, the extra satisfaction received from the last shirt must be

80 units of utility.

Consider a chemical plant that discharges toxic fumes over a nearby community. To reduce the emissions of toxic fumes the firm can install pollution abatement devices. Figure 5-8 shows the marginal benefit and the marginal cost from reducing the toxic fumes emissions. Refer to Figure 5-8. What is the economically efficient level of pollution reduction?

9 million tons

Figure 4-6 shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf. Refer to Figure 4-6. What area represents consumer surplus after the imposition of the price floor?

Refer to Figure 4-2. What area represents producer surplus at a price of P2?

A + B + C

Which of the following is an example of positive technological change?

A firm's workers participate in a training program designed to increase the number of surf boards they can produce per day.

Refer to Figure 3-1. A decrease in the price of the product would be represented by a movement from

A to B

Which of the following equations is correct?

AFC + AVC = ATC

Alpha and Beta are the only firms selling gyros in the upscale town of Delphi. Each firm must decide on whether to offer a discount to students to compete for customers. If one firm offers a discount but the other does not, then the firm that offers the discount will increase its profit. Table 14-4 shows the payoff matrix for this game.Refer to Table 14-4. If Alpha assumes that Beta would offer a student discount, what should it do?

Alpha should also offer a student discount.

What is the difference between an "increase in demand" and an "increase in quantity demanded"?

An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.

What is the difference between an "increase in supply" and an "increase in quantity supplied"?

An "increase in supply" means the supply curve has shifted to the right while an "increase in quantity supplied" refers to a movement along a given supply curve in response to an increase in price.

Which of the following is the correct way to describe equilibrium in a market?

At equilibrium, quantity demanded equals quantity supplied.

If the 15th unit of output has a marginal cost of $29.50 and the average cost of producing 14 units of output is $30.23, what will happen to the average cost of production if the 15th unit is produced?

Average cost will fall.

Figure 4-6 shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf. Refer to Figure 4-6. What is the area that represents producer surplus after the imposition of the price floor?

B + E

Refer to Figure 3-2. A decrease in the price of the product would be represented by a movement from

B to A.

Both Alpha and Beta offer a student discount.

Table 10-2 above shows Keira's utility from soup and sandwiches. The price of soup is $2 per cup and the price of a sandwich is $3. Keira has $18 to spend on these two goods.Refer to Table 10-2. Holding prices constant, when Keira's income changed from $18 to $23, her utility maximizing bundle changed. Based on your answers to her optimal choices at the two income levels, what type of goods are soup and sandwiches?

Both soup and sandwiches are normal goods.

Refer to Figure 2-12. One segment of the circular flow diagram in the figure shows the flow of goods and services from market C to economic agents A. What is market C and who are economic agents A?

C = product markets; A = households

Figure 4-6 shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf. Refer to Figure 4-6. What area represents the deadweight loss after the imposition of the price floor?

C+D

As a percentage of GDP, exports are greater than imports for which of the following countries?

China

The largest exporter in the world is

China

________ is the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors.

Comparative advantage

Which of the following statements about competition in a market is true?

Competition forces firms to produce and sell products as long as the marginal benefit to consumers exceeds the marginal cost of production.

Which of the following statements is true?

Consumer surplus measures the net benefit from participating in a market.

Refer to Figure 3-1. A decrease in taste or preference would be represented by a movement from

D2 to D1.

Denmark and Belize can produce both clocks and hats. Each country has a total of 200 available labor hours for the production of clocks and hats. Table 9-6 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade.Refer to Table 9-6. Which country has a comparative advantage in producing clocks?

Denmark

Denmark and Belize can produce both clocks and hats. Each country has a total of 200 available labor hours for the production of clocks and hats. Table 9-6 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade.Refer to Table 9-6. Which country has an absolute advantage in producing clocks?

Denmark

Refer to Figure 11-5. Identify the curves in the diagram.

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

Which of the following statements is true?

Each country as a whole is made better off as a result of international trade, but individuals within each country may be made worse off.

________ is maximized in a competitive market when marginal benefit equals marginal cost.

Economic surplus

Refer to Figure 15-10. The deadweight loss due to a monopoly is represented by the area

FHE

Which of the following is not a characteristic of monopolistic competition?

Firms are price takers.

Refer to Figure 2-3. Sergio Vignetto raises cattle and llamas on his land. His land is equally suitable for raising either animal. Which of the graphs in Figure 2-3 represent his production possibilities frontier?

Graph A

Refer to Figure 2-3. Sergio Vignetto raises cattle and llamas on his land. A portion of his land is more suitable for raising cattle, and the other portion is better suited for raising llamas. Which of the graphs in Figure 2-3 represent his production possibilities frontier that displays increasing opportunity costs?

Graph C

Table 2-10 shows the number of labor hours required to produce a canoe and a sailboat in Guatemala and Honduras.Refer to Table 2-10. If the two countries specialize and trade, who should export canoes?

Guatemala

Table 2-7 shows the output per week of two jewelers, Serena and Haley. They can either devote their time to making bracelets or making necklaces. Refer to Table 2-7. Which of the following statements is true?

Haley has a comparative advantage in making bracelets and Serena in making necklaces.

Haley has an absolute advantage in making bracelets and Serena in making necklaces.

Which of the following is a positive economic statement?

If the price of iPhones falls, a larger quantity of iPhones will be purchased.

________ marginal opportunity cost implies that the more resources already devoted to any activity, the payoff from allocating yet more resources to that activity increases by progressively smaller amounts.

Increasing

Figure 2-9 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton and cashews.Refer to Figure 2-9. If the two countries have the same amount of resources and the same technological knowledge, which country has an absolute advantage in the production of cotton?

Indonesia

Figure 2-9 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton and cashews.Refer to Figure 2-9. Which country has a comparative advantage in the production of cotton?

Indonesia

Which of the following explains why the marginal cost curve has a U shape?

Initially, the marginal product of labor rises, then falls.

What is a factor market?

It is a market where resources used to produce final goods are traded.

Which of the following statements best describes the economic short run?

It is a period during which at least one of the firm's inputs is fixed.

What is a market failure?

It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost.

How will an increase in population affect the labor market?

It will shift the market supply curve.

Scenario 1-1Suppose a cell phone manufacturer currently sells 20,000 cell phones per week and makes a profit of $5,000 per week. A manager at the plant observes, "Although the last 3,000 cell phones we produced and sold increased our revenue by $6,000 and our costs by $6,700, we are still making an overall profit of $5,000 per week so I think we're on the right track. We are producing the optimal number of cell phones."Refer to Scenario 1-1. Had the firm not produced and sold the last 3,000 cell phones, would its profit be higher or lower, and by how much?

Its profit will be $700 higher.

Refer to Figure 2-14. Which two arrows in the diagram depict the following transaction: Myrna earns $450 for working at HempHill's Drug Store.

J and M

Jennifer Borts moves her office from the premises she rents at a local mall to her home. As a result of this move

Jennifer's explicit costs fall and her implicit costs rise.

Refer to Figure 2-11. One segment of the circular flow diagram in the figure shows the flow of labor services from market Kto economic agents J. What is market K and who are economic agents J?

K = factor markets; J = firms

Refer to Figure 2-11. One segment of the circular flow diagram in the figure shows the flow of wages and salaries from market K to economic agents M. What is market K and who are economic agents M?

K = factor markets; M = households

Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 9-1 lists the number of dogs Linda and Sandy can each bathe and groom in one week. Refer to Table 9-1. Select the statement that accurately interprets the data in the table.

Linda has an absolute advantage in dog bathing and Sandy has an absolute advantage in dog grooming.

If Ewan is consuming his utility maximizing bundle and the price of one good falls, what happens to the marginal utility per dollar spent on this good (MU/P), and what should Ewan do?

MU/P has increased and Ewan should buy more of this good.

An example of a monopoly based on control of a key resource is

Major League Baseball.

Which of the following is true at the output level where average total cost is at its minimum?

Marginal cost equals average total cost.

Which of the following statements applies to a monopolist but not to a perfectly competitive firm at their profit-maximizing outputs?

Marginal revenue is less than price.

Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18.Refer to Figure 4-3. At a price of $18 consumers are willing to buy 40 pounds of tiger shrimp. Is this an economically efficient quantity?

No, the marginal benefit of the 40th unit exceeds the marginal cost of that 40th unit.

Refer to Figure 13-6. Suppose Dell finds the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced is as shown by Figure 13-2. Dell will maximize profits if it produces ________ notebook computers per month.

Not enough information is given to determine the profit-maximizing quantity.

For the monopolistically competitive firm,

P = AR > MR

Coal burning utilities release sulfur dioxide and nitric acid which react with water to produce acid rain. Acid rain damages trees and crops and kills fish. Because the utilities do not bear the cost of the acid rain, they overproduce the quantity of electricity. This is illustrated in Figure 5-11. Refer to Figure 5-11. S1 represents the supply curve that reflects the marginal private cost of production and S2represents the supply curve that reflects the marginal social cost of production. One way to internalize the external cost generated by utilities is to impose a Pigovian tax on the production of electricity. What is the size of the Pigovian tax that will internalize the cost of the externality?

P2-P0

Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for women's clothing. Which panel best describes what happens in this market when the wages of seamstresses rise?

Panel (b)

Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for Fruitopia, a soft drink. Which panel describes what happens in the market for Fruitopia when the price of Snapple, a substitute product, decreases?

Panel (d)

Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for bicycle helmets. Which panel best describes what happens in this market if there is a substantial increase in the price of bicycles?

Panel (d)

Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for potatoes and that steak and potatoes are complements. What panel describes what happens in this market when the price of steak rises?

Panel (d)

Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for rice. What happens in this market if buyers expect the price of rice to fall?

Panel (d)

Which of the following is a normative economic statement?

Pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable.

________ is a situation in which a good or service is produced at the lowest possible cost.

Productive efficiency

Refer to Figure 12-20. If the market price is P1, what is the allocatively efficient output level?

Refer to Figure 5-3. The market equilibrium output level is

Qm.

Refer to Figure 5-3. The efficient output level is

Refer to Figure 3-2. A decrease in the expected future price of the product would be represented by a movement from

S1 to S2.

Refer to Figure 3-2. An increase in the number of firms in the market would be represented by a movement from

S1 to S2.

Refer to Figure 3-2. An increase in price of inputs would be represented by a movement from

S2 to S1.

Sandy has a comparative advantage in dog grooming.

Which of the following is a positive economic statement?

Scarcity necessitates that people make trade-offs.

Which of the following statements about scarcity is true?

Scarcity refers to the situation in which unlimited wants exceed limited resources.

Figure 16-2 shows the marginal revenue product for Becca's Baubles, a producer of hand-beaded bracelets. Refer to Figure 16-2. Suppose the market price of bracelets falls to $2. What happens to the curve given in the diagram?

The curve shifts to the left.

In June, buyers of titanium expect that the price of titanium will fall in July. What happens in the titanium market in June, holding everything else constant?

The demand curve shifts to the left.

Which of the following statements about the economically efficient level of air pollution is correct?

The economically efficient level of pollution occurs where the marginal cost of pollution reduction equals the marginal social benefit of reduction.

What happens to the equilibrium wage and quantity of labor if output price rises?

The equilibrium wage and the equilibrium quantity of labor rise.

Consider the market for pilots. What is likely to happen to the equilibrium wage and quantity of pilots if the government enforces a lower mandatory retirement age, say from age 65 to age 62?

The equilibrium wage rises and the equilibrium quantity of pilots falls.

Refer to Figure 15-1. Which of the following statements about the firm depicted in the diagram is true?

The fact that this firm is a natural monopoly is shown by the long-run average total cost curve still falling when it crosses the demand curve.

What is the difference between labor's marginal product and marginal revenue product?

The marginal product of labor is the additional labor's contribution to the firm's total output while the marginal revenue product is the additional labor's contribution to the firm's total sales revenue.

How does the construction of a market demand curve for a private good differ from that for a public good?

The market demand curve for a private good is determined by adding up the quantities demanded by each consumer at each price but the market demand curve for a public good is determined by adding up the price each consumer is willing to pay for each quantity of the good.

Which of the following describes a difference between the marginal revenue and demand curves of a perfectly competitive firm and a monopolistically competitive firm?

The perfectly competitive firm's marginal revenue and demand curves are the same; the marginal revenue curve of a monopolistically competitive firm lies below its demand curve.

Which of the following is a normative economic statement?

The price of gasoline is too high.

Table 13-4 lists estimated revenues and costs (per week) for plastic vials (100 vials per box) for the Victoria Biological Supplies Company. Victoria sells plastic vials to universities and private research laboratories.Refer to Table 13-4. Based on the data in the table, which of the following statements is true?

The table summarizes Victoria's short-run, rather than long-run, market for plastic vials.

Which of the following must be present to reach a private solution to an externality problem?

The transactions costs to negotiate a solution must be relatively low.

Which of the following correctly describes the relationship between economic efficiency and economic equity?

There is often a trade-off between the two.

Refer to Table 4-1. The table above lists the highest prices three consumers, Tom, Dick, and Harriet, are willing to pay for a short-sleeved polo shirt. If the price of one of the shirts is $28 dollars,

Tom will receive $12 of consumer surplus from buying one shirt.

After selling 1,000 three-ring binders Tony DiFulvio realizes that the marginal revenue from selling the last binder was less than the marginal cost. From this we can conclude that

Tony's profit fell after selling his 1,000th three-ring binder.

Table 4-5 shows the demand and supply schedules for the labor market in the city of Pixley. Refer to Table 4-5. What is the equilibrium hourly wage (W*) and the equilibrium quantity of labor (Q*)?

W* = $10.50; Q* = 590,000

Which of the following is an example of a long-run adjustment?

Walmart builds another Supercenter.

Which of the following is likely to occur as the result of the law of diminishing marginal utility?

Wesley enjoyed his second bottle of iced tea less than his first bottle, other things constant.

The three fundamental questions that any economy must address are:

What goods and services to produce; how will these goods and services be produced; and who receives them?

Alpha and Beta are the only firms selling gyros in the upscale town of Delphi. Each firm must decide on whether to offer a discount to students to compete for customers. If one firm offers a discount but the other does not, then the firm that offers the discount will increase its profit. Table 14-4 shows the payoff matrix for this game.Refer to Table 14-4. Does Beta have a dominant strategy and if so, what is it?

Yes, Beta should offer a student discount.

LimoZeenz and AirPorter and are the only two airport shuttle and limousine rental service companies in the mid-sized town of Shady Shores. Each firm must decide on whether to offer its customers a mid-week discount for airport transportation. Table 14-1 shows the payoff matrix for profits earned by each company based on either offering or not offering the discount.Refer to Table 14-1. Is there a dominant strategy for LimoZeenz and if so, what is it?

Yes, LimoZeenz should not offer the mid-week discount.

Assume that Lexus (L) is the first automobile company to produce a luxury class hybrid automobile and is the only such company for the past four years. BMW is now considering producing its own luxury hybrid automobile and Lexus must decide whether or not to lower the price of its luxury hybrid to counter BMW's entry into the luxury hybrid niche.Refer to Figure 14-1. If Lexus lowers its price, will this deter BMW from entering the market?

Yes, because BMW stands to lose $100 million if it competes with Lexus.

Figure 4-8 shows the market for beer. The government plans to impose a per-unit tax in this market. Refer to Figure 4-8. As a result of the tax, is there a loss in consumer surplus?

Yes, because consumers pay a price above the economically efficient price.

Figure 12-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.Refer to Figure 12-4. If the market price is $30, should the firm represented in the diagram continue to stay open?

Yes, because it is covering part of its fixed cost.

Table 14-2 shows the payoff matrix for Walmart and Target from every combination of pricing strategies for the popular PlayStation 4. At the start of the game each firm charges a low price and each earns a profit of $7,000.Refer to Table 14-2. Is the current strategy in which each firm charges the low price and earns a profit of $7,000 a Nash equilibrium? If not, why and what is the Nash equilibrium?

Yes, the current situation is a Nash equilibrium.

Suppose OPEC has only two producers, Saudi Arabia and Ecuador. Saudi Arabia has far more oil reserves and is the lower-cost producer compared to Ecuador. The payoff matrix in Table 14-3 shows the profits earned per day by each country. "Low output" corresponds to producing the OPEC assigned quota and "high output" corresponds to producing the maximum capacity beyond the assigned quota.Refer to Table 14-3. Is there a dominant strategy for Saudi Arabia and, if so, what is it?

Yes, the dominant strategy is to produce a low output.

Which of the following is the best example of a short-run adjustment?

Your local Walmart hires two more associates.

Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.Refer to Figure 12-9. At price P1, the firm would produce

Zero units

Offering to pay the passenger in front of you to keep her from reclining her airplane seat is an example of

a Coasian solution to an externality situation.

When BMW, an German company, purchases a welding machine that was made in Toronto, the purchase is

a German import and a Canadian export.

Assume that production from an electric utility caused acid rain and that the government imposed a tax on the utility equal to the cost of the acid rain. This is an example of

a Pigovian tax.

An externality is

a benefit or cost experienced by someone who is not a producer or consumer of a good or service.

A monopoly is a firm that is the only seller of a good or service that does not have

a close substitute.

If, in response to an increase in the price of chocolate the quantity of chocolate demanded decreases, then economists would describe this as

a decrease in quantity demanded.

Which of the following will shift the demand curve for a good?

a decrease in the price of a complementary good

Ranchers can raise either cattle or sheep on their land. Which of the following would cause the supply of sheep to increase?

a decrease in the price of cattle

An increase in the wage rate causes

a decrease in the quantity of labor demanded.

A monopolist faces

a downward-sloping demand curve.

Which of the following is a factor of production that generally is fixed in the short run?

a factory building

A cartel is

a group of firms that enter into a formal agreement to fix prices to maximize joint profits.

When every good or service is produced up to the point where the last unit provides ________, allocative efficiency occurs.

a marginal benefit to society equal to the marginal cost of producing it

If opportunity costs are constant, the production possibilities frontier would be graphed as

a negatively sloped straight line.

The income effect due to a price decrease will result in an increase in the quantity demanded for

a normal good.

Rent control is an example of

a price ceiling.

Refer to Figure 3-5. In a free market such as that depicted above, a surplus is eliminated by

a price decrease, decreasing the quantity supplied and increasing the quantity demanded.

A decrease in the price of dashboard cameras will result in

a smaller quantity of dashboard cameras supplied.

The idea that because of scarcity, producing more of one good or service means producing less of another good or service refers to the economic concept of

a trade-off.

Consider the following statements: a.Car owners purchase more gasoline from a gas station that sells gasoline at a lower price than other rival gas stations in the area. b.Banks do not take steps to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring equipment. c.Firms produce more of a particular DVD when its selling price rises. Which of the above statements demonstrates that economic agents respond to incentives?

a, b, and c

Figure 5-2 shows a market with a negative externality.Refer to Figure 5-2. The deadweight loss due to the externality is represented by the area

abf

The explicit cost of production is also called

accounting cost.

Marginal benefit is equal to the ________ benefit a consumer receives from consuming one more unit of a good or service.

additional

Which of the following is an example of a way in which an oligopolistic firm can escape the prisoner's dilemma?

advertising that it will match its rival's price

A characteristic of the long run is

all inputs can be changed.

If, in response to a decrease in the price of grapes, the quantity of grapes demanded increases, then economists would describe this as

an increase in quantity demanded.

Which of the following would shift the supply curve for MP3 players to the left?

an increase in the price of an input used to produce MP3 players

If the price of orchids falls, the substitution effect due to the price change will cause

an increase in the quantity of orchids demanded.

If an increase in income leads to a decrease in the demand for popcorn, then popcorn is

an inferior good.

Which of the following is a factor of production?

an oven in a bakery

Economists assume that individuals

are rational and respond to incentives.

Arlene quits her $125,000-a-year job to take care of her ailing parents. What is the opportunity cost of her decision?

at least $125,000

A situation in which a country does not trade with other countries is called

autarky

Monopolistic competition is a market structure in which

barriers to entry are low.

As more output is produced, the marginal product of labor declines

because of the law of diminishing returns.

Which of the following explains why talented major league baseball players command much higher salaries than neurosurgeons?

because the supply of talented major league baseball players is low relative to its demand compared to the supply of neurosurgeons. Therefore, adding another player yields far greater marginal benefit than adding another neurosurgeon.

Whenever a buyer and a seller agree to trade,

both must believe they will be made better off.

Consumers maximize total utility within their budget constraint by

buying the goods with the largest marginal utility per dollar spent.

We can derive the market demand curve for gold earrings

by adding horizontally the individual demand curves of each gold earring consumer.

Both monopolistically competitive firms and perfectly competitive firms maximize profits

by producing where marginal revenue equals marginal cost.

Marginal cost is equal to the

change in total cost divided by the change in output.

The concept of ________ explains how trade between two countries can make each better off.

comparative advantage

Elvira decreased her consumption of bananas when the price of peanut butter increased. For Elvira, peanut butter and bananas are

complements

The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called

consumer surplus.

The decision about what goods and services will be produced in a market economy is made by

consumers and firms choosing which goods and services to buy or produce.

Figure 2-4 shows various points on three different production possibilities frontiers for a nation.Refer to Figure 2-4. A movement from X to Y

could occur because of an influx of immigrant labor.

If total utility increases at a decreasing rate as a consumer consumes more coffee, then marginal utility must

decrease

Each point on a ________ curve shows the willingness of consumers to purchase a product at different prices.

demand

If a demand curve shifts to the right, then

demand has increased.

Marginal revenue for an oligopolist is

difficult to determine because the firm's demand curve is typically unknown.

A market comprised of only two firms is called a

duopoly

The demand curve for each seller's product in perfect competition is horizontal at the market price because

each seller is too small to affect the market price.

Figure 13-8 shows cost and demand curves for a monopolistically competitive producer of iced tea. Refer to Figure 13-8. At the profit-maximizing output level the firm will

earn a profit of $88.

In economics, the term "equity" means

economic benefits are distributed fairly.

Economic costs of production differ from accounting costs in that

economic costs add the opportunity costs of a firm using its own resources while accounting costs do not.

Marginal revenue product of labor for a competitive seller is

equal to the marginal product of labor multiplied by the output price.

When a firm produces more output using the same inputs or the same output using fewer inputs we say that the firm

experiences positive technological change.

Marginal utility is the

extra satisfaction received from consuming one more unit of a product.

In 2017, Tesla Motors introduced the Model 3, its first low cost model which it had hoped to sell for $35,000 but realized that it would lose several thousand dollars per car at that price. Prior to the introduction of the Model 3, Tesla's two existing models (the Model S sedan and the Model X SUV) had starting prices of over $70,000 and at those prices, the company was earning a profit on each car sold. Tesla CEO Elon Musk said that "Higher volume and manufacturing design improvements are crucial for Tesla [to sell the Model 3 at a price of $35,000]...." In deciding to increase volume and improve manufacturing design for the Model 3, Tesla

faced a trade-off between devoting additional resources to the production of the Model 3 and devoting additional resources to producing its other models.

Parents who do not have their children immunized and attempt to benefit from other parents who did have their own children immunized are exhibiting an economic behavior known as

free riding.

Trade between countries that is without restrictions is called

free trade.

The study of how people make decisions in situations where attaining their goals depends on their interactions with others is called

game theory.

A patent or copyright is a barrier to entry based on

government action to protect a producer.

Patents, tariffs, and quotas are all examples of

government-imposed barriers.

Table 3-4 represents the supply schedule for surfboards. Assume that the market for surfboards has an upward-sloping supply curve.Refer to Table 3-4. At a price of $600, the quantity of surfboards supplied per week will be

greater than 175 per week.

To be a natural monopoly, a firm must

have economies of scale that are so large that it can supply the entire market at a lower cost than two or more firms.

Both individual buyers and sellers in perfect competition

have to take the market price as a given.

Perfect competition is characterized by all of the following except

heavy advertising by individual sellers.

Suppose a competitive firm pays a wage of $12 an hour and sells its product at $3 per unit. Assume that labor is the only input. If hiring another worker would increase output by five units per hour, then to maximize profits the firm should

hire the additional worker.

Oligopolies are difficult to analyze because

how firms respond to a price change by a rival is uncertain.

In economics, the accumulated skills and training that workers have is known as

human capital.

The production possibilities frontier model shows that

if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.

The Coase theorem states that

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

A tariff is a tax imposed by a government on

imports

Goods and services bought domestically but produced in other countries are referred to as

imports

If the amount of athletic shoes purchased by millennials and members of generation Z increase as they choose to purchase these types of shoes compared to other types such as sandals and hiking boots, this will likely

increase the demand for athletic shoes, because athletic shoes, sandals, and hiking boots are considered substitutes.

If the labor supply is unchanged, an increase in the demand for labor will

increase the equilibrium wage and increase the number of workers employed.

A production possibilities frontier with a bowed-outward shape indicates

increasing opportunity costs as more and more of one good is produced.

Refer to Figure 2-1. Point A is

inefficient in that not all resources are being used.

A characteristic found only in oligopolies is

interdependence of firms.

A supply schedule

is a table that shows the relationship between the price of a product and the quantity of the product supplied.

Economic surplus

is equal to the sum of consumer surplus and producer surplus.

Total utility

is equal to the sum of the marginal utilities of all units consumed.

When there is a negative externality, the marginal private cost of production ________ the marginal social cost of production.

is less than

For a monopolistically competitive firm, marginal revenue

is less than the price.

A dominant strategy

is one that is the best for a firm, no matter what strategies other firms use.

Figure 2-4 shows various points on three different production possibilities frontiers for a nation.Refer to Figure 2-4. A movement from Y to Z

is the result of advancements in plastic production technology.

An advantage of imposing a tax on the producer that generates pollution is that

it forces the polluting producer to internalize the external cost of the pollution.

The demand for labor is described as a derived demand because

it is derived from the demand for products that use labor in the production process.

If a firm faces a downward-sloping demand curve,

it must reduce its price to sell more units.

Refer to Figure 12-1. If the firm is producing 200 units

it should increase its output to maximize profit.

Which of the following activities create a negative externality?

keeping a junked car parked on your front lawn

Table 3-2 represents the demand schedule for surfboards. Assume that the market for surfboards has a downward-sloping demand curve.Refer to Table 3-2. At a price of $650, the quantity of surfboards demanded will be

less than 340 per week.

If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced.

linear

The long run refers to a time period

long enough for a firm to vary all of its inputs, to adopt new technology, and change the size of its physical plant.

Figure 12-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.Refer to Figure 12-4. If the market price is $30 and the firm is producing output, what is the amount of the firm's profit or loss?

loss of $1,080

A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000. The price of each good is $10. Calculate the firm's short-run profit or loss.

loss of $6,000

The difference between the ________ and the ________ from the sale of a product is called producer surplus.

lowest price a firm would have been willing to accept; price it actually receives

Economists assume that the goal of consumers is to

make themselves as well off as possible.

In a perfectly competitive market, there are ________ buyers and ________ sellers.

many; many

In economics, the term ________ means "additional" or "extra."

marginal

Economists reason that the optimal decision is to continue any activity up to the point where the

marginal benefit equals the marginal cost.

Scenario 1-1Suppose a cell phone manufacturer currently sells 20,000 cell phones per week and makes a profit of $5,000 per week. A manager at the plant observes, "Although the last 3,000 cell phones we produced and sold increased our revenue by $6,000 and our costs by $6,700, we are still making an overall profit of $5,000 per week so I think we're on the right track. We are producing the optimal number of cell phones."Refer to Scenario 1-1. Using marginal analysis terminology, what is another economic term for the incremental cost of producing the last 3,000 cell phones?

marginal cost

Refer to Figure 12-10. The firm's short-run supply curve is its

marginal cost curve from b and above.

In the short run, if the marginal product is at its maximum, then the

marginal cost is at its minimum.

The extra cost associated with undertaking an activity is called

marginal cost.

A market demand curve reflects the

marginal private benefits of consuming a product.

A market supply curve reflects the

marginal private costs of producing a good or service.

Scenario 1-1Suppose a cell phone manufacturer currently sells 20,000 cell phones per week and makes a profit of $5,000 per week. A manager at the plant observes, "Although the last 3,000 cell phones we produced and sold increased our revenue by $6,000 and our costs by $6,700, we are still making an overall profit of $5,000 per week so I think we're on the right track. We are producing the optimal number of cell phones."Refer to Scenario 1-1. Using marginal analysis terminology, what is another economic term for the incremental revenue received from the sale of the last 3,000 cell phones?

marginal revenue

To maximize profit a monopolist will produce where

marginal revenue is equal to marginal cost.

A firm's demand for labor curve is also called its

marginal revenue product of labor curve.

In economics, the term ________ refers to a group of buyers and sellers of a product and the arrangement by which they come together to trade.

market

The demand by all the consumers of a given good or service is the ________ for the good or service.

market demand

The production possibilities frontier shows the ________ combinations of two products that can be produced in a particular time period with available resources.

maximum attainable

The slope of a production possibilities frontier

measures the opportunity cost of producing one more unit of a good.

An economic ________ is a simplified version of some aspect of economic life used to analyze an economic issue.

model

In economics, all of the following is counted as "capital" except

money

In San Francisco there are many restaurants that specialize in a wide variety of cuisines. Patronage at these restaurants is influenced by factors such as tastes, price, and location. This market is

monopolistically competitive.

When a negative externality exists, the private market produces

more than the economically efficient output level.

Refer to Figure 5-3. The deadweight loss due to the externality is represented by the area

msn

Pollution is an example of a

negative externality

Figure 13-8 shows cost and demand curves for a monopolistically competitive producer of iced tea. Refer to Figure 13-8. Based on the diagram, one can conclude that

new firms will enter the market.

Public goods are distinguished by two primary characteristics. What are they?

nonrivalry and nonexcludability

A monopolistically competitive firm faces a downward-sloping demand curve because

of product differentiation.

Refer to Table 2-1. Assume that Tomaso's Trattoria only produces pizzas and calzones. A combination of 24 pizzas and 30 calzones would appear

on Tomaso's production possibilities frontier.

Private producers have no incentive to provide public goods because

once produced, it will not be possible to exclude those who do not pay for the good.

In economics, the term "free rider" refers to

one who waits for others to produce a good and then enjoys its benefits without paying for it.

The highest-valued alternative that must be given up to engage in an activity is the definition of

opportunity cost.

Figure 15-6 shows the cost and demand curves for a monopolist. Refer to Figure 15-6. The profit-maximizing output and price for the monopolist are

output = 62; price = $24.

Refer to Table 2-1. Assume that Tomaso's Trattoria only produces pizzas and calzones. A combination of 36 pizzas and 30 calzones would appear

outside Tomaso's production possibilities frontier.

The DeBeers Company of South Africa was able to block competition through

ownership of an essential input.

Painters who paint water towers earn higher wages relative to painters who paint houses because

painting water towers is more risky than painting houses.

The machines that workers have to work with are considered

physical capital.

If a firm charges different consumers different prices for the same product and the difference cannot be attributed to cost variations, then it is engaging in

price discrimination.

Plato Playhouse, a theatre company in the university town of Wegg, caters to two groups of customers: students and the non-student population. Figure 15-16 shows the demand curves for the two groups of customers.Refer to Figure 15-16. Suppose Plato Playhouse price discriminates. What is the price charged in the two markets?

price in the student market = Pc; price in the non-student market = Pe

Which of the following displays rivalry and excludability in consumption?

private goods

Assume that price is greater than average variable cost. If a perfectly competitive seller is producing at an output where price is $11 and the marginal cost is $14.54, then to maximize profits the firm should

produce a smaller level of output.

Refer to Table 4-3. The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear. If the market price of The Waco Kid's cowboy hats is $40,

producer surplus will equal $28.

When you purchase a new pair of jeans you do so in the

product market.

The relationship between the inputs employed by a firm and the maximum output that it can produce with those inputs is the firm's

production function.

Which of the following describes a situation in which a good or service is produced at the lowest possible cost?

productive efficiency

Which of the following displays these two characteristics: nonrivalry and nonexcludability in consumption?

public goods

Households ________ final goods and services in the ________ market.

purchase; product

A Nash equilibrium is

reached when each player chooses the best strategy for himself, given the other strategies chosen by the other players in the group.

Economists argue that the level of pollution should be

reduced to the point where the marginal benefit of pollution reduction is equal to the marginal cost of pollution reduction to society.

The income effect of an increase in the price of salmon

refers to the effect on a consumer's purchasing power which causes the consumer to buy less salmon, holding all other factors constant.

Which of the following is an implicit cost of production?

rent that could have been earned on a building owned and used by the firm

In economics, choices must be made because we live in a world of

scarcity

The key characteristics of a monopolistically competitive market structure include

sellers selling similar but differentiated products.

If a perfectly competitive firm's total revenue is less than its total variable cost, the firm

should stop production by shutting down temporarily.

The supply curve for watches

shows the relationship between the price of watches and the quantity of watches supplied.

In general, the labor supply curve

slopes upward because as the wage rises, the opportunity cost of leisure increases.

When production generates a negative externality, the true cost of production is the

social cost of production.

Exports are domestically produced goods and services

sold to other countries.

Which of the following is an example of an activity undertaken by an entrepreneur?

starting your own cigar manufacturing business

Governments can increase the consumption of a product that creates positive externalities by

subsidizing the production of the product so that the supply is increased and market price is reduced.

The athletic shoe industry is highly competitive. In recent years, companies like Allbirds and Skechers began offering shoes made of different materials or in different styles to better compete with industry giants Nike and Adidas. These new styles of athletic shoes that are being marketed to compete with shoes by Nike and Adidas would be considered

substitutes for shoes by Nike and Adidas.

Households ________ factors of production and ________ goods and services.

supply; demand

Table 4-5 shows the demand and supply schedules for the labor market in the city of Pixley. Refer to Table 4-5. If a minimum wage of $11.50 is mandated, there will be a

surplus of 40,000 units of labor.

The actual division of the burden of a tax between buyers and sellers in a market is called

tax incidence.

Refer to Figure 2-1. Point B is

technically efficient.

The processes a firm uses to turn inputs into outputs of goods and services is called

technology.

The law of diminishing marginal returns states

that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline.

Allocative efficiency is achieved when firms produce goods and services

that consumers value most.

Refer to Figure 11-1. Diminishing marginal productivity sets in after

the 2nd worker is hired.

The term "property rights" refers to

the ability to exercise control over one's own resources within the confines of the law.

Absolute advantage is

the ability to produce more of a good or service than competitors when using the same amount of resources.

Marginal cost is

the additional cost to a firm of producing one more unit of a good or service.

The marginal product of labor is defined as

the additional output that results when one more worker is hired, holding all other resources constant.

Consumer surplus in a market for a product would be equal to ________ if the market price was zero.

the area under the demand curve

Refer to Figure 4-4. The figure above represents the market for pecans. Assume that this is a competitive market. If 4,000 pounds of pecans are sold

the deadweight loss is equal to $12,000.

The equilibrium wage and quantity of labor in the market for skilled workers is determined by

the demand and supply of labor.

Figure 5-5 shows a market with an externality. The current market equilibrium output of Q1 is not the economically efficient output. The economically efficient output is Q2. Refer to Figure 5-5. If, because of an externality, the economically efficient output is Q2 and not the current equilibrium output of Q1, what does D2 represent?

the demand curve reflecting social benefits

The term "derived demand" refers to

the demand for a factor of production that is derived from the demand for the good the factor produces.

The concept of opportunity cost is that

the economic cost of using a factor of production is the alternative use of that factor that is given up.

Figure 5-1 shows a market with an externality. The current market equilibrium output of Q1 is not the economically efficient output. The economically efficient output is Q2. Refer to Figure 5-1. Suppose the current market equilibrium output of Q1 is not the economically efficient output because of an externality. The economically efficient output is Q2. In that case, the diagram shows

the effect of a negative externality in the production of a good.

The law of diminishing marginal utility states that

the extra satisfaction from consuming a good decreases as more of a good is consumed, other things constant.

The substitution effect of an increase in the price of Raisin Bran refers to

the fact that the higher price of Raisin Bran relative to its substitutes, such as Cheerios, causes consumers to buy less Raisin Bran.

Consider the following economic agents: a.the government b. consumers c.producers Who, in a centrally planned economy, decides what goods and services will be produced with the scarce resources available in that economy?

the government

A very large number of small sellers who sell identical products imply

the inability of one seller to influence the price.

Refer to Figure 10-1. When the price of hoagies increases from $5.00 to $5.75, quantity demanded decreases from Q1 to Q0. This change in quantity demanded is due to

the income and substitution effects.

Economic efficiency in a competitive market is achieved when

the marginal benefit equals the marginal cost from the last unit sold.

Refer to Figure 4-4. The figure above represents the market for pecans. Assume that this is a competitive market. At a quantity of 4,000 pounds

the marginal benefit of pecans is greater than the marginal cost; therefore, output is inefficiently low.

Refer to Figure 4-4. The figure above represents the market for pecans. Assume that this is a competitive market. At a quantity of 12,000 pounds

the marginal cost of pecans is greater than the marginal benefit; therefore, output is inefficiently high.

Marginal revenue product falls as more labor is hired because

the marginal product of labor falls as a result of the law of diminishing returns.

A positive externality causes

the marginal social benefit to exceed the marginal private cost at the market equilibrium.

A negative externality exists if

the marginal social cost of producing a good or service exceeds the private cost.

If a consumer always buys goods rationally, then

the marginal utility per dollar spent on all goods will be equal.

In perfect competition

the market demand curve is downward sloping while demand for an individual seller's product is perfectly elastic.

Figure 5-1 shows a market with an externality. The current market equilibrium output of Q1 is not the economically efficient output. The economically efficient output is Q2. Refer to Figure 5-1. If, because of an externality, the economically efficient output is Q2 and not the current equilibrium output of Q1, what does S1 represent?

the market supply curve reflecting marginal private cost

Figure 5-1 shows a market with an externality. The current market equilibrium output of Q1 is not the economically efficient output. The economically efficient output is Q2. Refer to Figure 5-1. If, because of an externality, the economically efficient output is Q2 and not the current equilibrium output of Q1, what does S2 represent?

the market supply curve reflecting marginal social cost

Suppose there are several paper mills producing paper for a market. These mills, located upstream from a fishing village, discharge a large amount of wastewater into the river. The waste material affects the number of fish in the river and the use of the river for recreation and as a public water supply source. Figure 5-4 shows the paper market. Use this Figure to answer the following question(s).Refer to Figure 5-4. What does S1 represent?

the market supply curve that reflects private cost

the market supply curve that reflects social cost

The production function shows

the maximum output that can be produced from a set of inputs.

Because a monopoly's demand curve is the same as the market demand curve for its product

the monopoly must lower its price to sell more of its product.

Implicit costs can be defined as

the non-monetary opportunity cost of using the firm's own resources.

In order to derive an individual's demand curve for salmon, we would observe what happens to the utility-maximizing bundle when we change

the price of the product and hold everything else constant.

Suppliers will be willing to supply a product only if

the price received is at least equal to the additional cost of producing the product.

Technology is defined as

the processes used to produce goods and services.

The law of demand implies, holding everything else constant, that as the price of bagels increases

the quantity of bagels demanded will decrease.

An individual's labor supply curve shows

the relationship between wages and the quantity of labor that she is willing to supply.

When a competitive equilibrium is achieved in a market

the total net benefit to society is maximized.

An oligopolist differs from a perfect competitor in that

there are no entry barriers in perfect competition but there are entry barriers in oligopoly.

Refer to Figure 3-4. If the price is $10,

there would be a shortage of 600 units.

Refer to Figure 3-5. At a price of $15,

there would be a surplus of 4 units.

Consumers have to make tradeoffs in deciding what to consume because

they are limited by a budget constraint.

Who receives the most of what is produced in a market economy?

those who are most willing and able to buy them

If a monopolist's marginal revenue is $25 a unit and its marginal cost is $25, then

to maximize profit the firm should continue to produce the output it is producing.

If a monopolist's marginal revenue is $35 per unit and its marginal cost is $25, then

to maximize profit the firm should increase output.

What is the profit-maximizing rule for a monopolistically competitive firm?

to produce a quantity such that marginal revenue equals marginal cost

The basic activity of a firm is

to use inputs to produce outputs of goods and services.

Which of the following costs will not change as output changes?

total fixed cost

The points outside the production possibilities frontier are

unattainable

Refer to Figure 2-1. Point C is

unattainable with current resources.

An oligopolist's demand curve is

unknown because a response of firms to price changes by rivals is uncertain.

Marginal analysis involves undertaking an activity

until its marginal benefits equal marginal costs.

If Valerie purchases ankle socks at $5 and gets 25 units of marginal utility from the last unit, and bandanas at $3 and gets 12 units of marginal utility from the last bandana purchased, she

wants to consume more ankle socks and fewer bandanas.

If Japanese workers are more productive than French workers then trade between Japan and France

will take place so long as each country has a comparative advantage in a good or service that buyers in the other country want.

A product is considered to be nonexcludable if

you cannot keep those who did not pay for the item from enjoying its benefits.

A product is considered to be rival if

your consumption of the product reduces the quantity available for others to consume.

Refer to Figure 2-5. If the economy is currently producing at point Y, what is the opportunity cost of moving to point W?

Final-Micro

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