Micro Exam 3

The figure shows the car market in Brazil when Brazil places no restriction on imports of cars. The world price of a car is​ $10,000. Suppose the government of Brazil introduces a​ $2,000 tariff on car imports. The price of a car in Brazil with the tariff is ​_____ The quantity of cars imported into Brazil is ___ million a year. The quantity of cars produced in Brazil is ___ million a year The​ government's tariff revenue is ​$___ million dollars.

12,000 0 80 0

The graph shows the U.S. demand for potash and the U.S. supply of potash. The world price of potash is​ $50 a ton. Total surplus in the United States from potash when the United States does not trade internationally ____ million. Total surplus in the United States from potash when the United States trades internationally is ​___ million.

240 255

The graph shows the U.S. supply of​ cotton, U.S. demand for​ cotton, and the world price of cotton. The total surplus in the United States from cotton when the United States does not trade internationally is $____ million The total surplus in the United States from cotton when the United States trades internationally is ____ million

250 340

When the government of Mexico introduces an import quota of 4 million​ cars, Mexico imports ___ million cars and produces ___ million cars.

4 6

Nancy bought a laptop for​ $1,260 on Thanksgiving 2012 and she plans to sell it for​ $750 on Thanksgiving 2013. Her economic depreciation for the laptop is​ $_____.

510

​_____ is rival and​ _____ is nonrival.

A seat on a bus at rush​ hour; national defense

Which of the following illustrates increasing and decreasing marginal returns​?

An increase in the quantity of labor from 3 to 4 increases output at a faster rate. Hiring more workers decreases the productivity of each additional worker.

​_____ is excludable and​ _____ is nonexcludable.

A​ camera; a concert in a public park

When the government imposes a tariff on rose​ imports, the U.S. consumer surplus that is redistributed to U.S. producers is area​ _______.

B

​_______ from this trade.

Both Brazil and the United States gain

The top figure show the U.S. market for shoes and the bottom figure shows​ Brazil's market for shoes if there is no trade between the United States and Brazil. ​_____ has a comparative advantage in producing shoes. With trade between Brazil and the United​ States, _____ exports shoes.

Brazil; Brazil

When the government imposes a tariff on rose​ imports, the​ government's tariff revenue is area​ _______.

D

Which of the following illustrates economies of scale​, diseconomies of scale​, and constant returns to scale​? ​Liza's average total cost changes from​ $4.50 to​ $2.20 when she increases salad production from 7 to 9 an hour. ​Sam's average total cost changes from​ $1.30 to​ $2.80 when he increases smoothie production from 5 to 8 gallons an hour. ​Tina's average total cost remains at​ $3 when she increases pizza production from 12 to 13 an hour.

Liza faces economies of​ scale; Sam faces diseconomies of​ scale; Tina faces constant returns to scale.

What is the relationship between marginal external​ cost, marginal social​ cost, and marginal private​ cost?

Marginal social cost equals marginal private cost plus marginal external cost.

Which of the following illustrates explicit and implicit costs​?

Ned pays an hourly wage of​ $18 to his employees. Ned runs a hair salon out of the first floor of his house.

​_______ from this trade in roses and would lobby for a tariff on roses.

Rose producers in the United States lose

Which of the following are examples of short run and long run​ decisions?

Starbucks' has hired more labor to meet the increasing demand. ​Starbucks' has opened another store to meet the increasing demand.

In the following​ statements, who is a free rider​?

Ted does not pay taxes but uses roads and highways.

​_______ gain from the tariff freeze.

The Australian government and Australian car makers

Airlines seek new ways to save on fuel as costs soar Fuel is an​ airline's biggest single expense. In​ 2008, the cost of jet fuel rocketed. Airlines tried to switch to newer generation​ aircraft, which have more​ fuel-efficient engines.

The cost of fuel is a variable cost for an airline.

Which of the following is an example of an abatement technology​?

The use of catalytic converters in US cars has improved air quality.

The winner from the removal of U.S. tariffs on goods imported from Mexico is​ _______ and the loser is​ _______.

U.S. consumers of goods imported from​ Mexico; U.S. producers of goods that are imported from Mexico

Suppose that this​ year, tomato growers in Florida lobby the U.S. government to impose an import quota on Mexican tomatoes. If the lobbying is successful and the U.S. government imposes an import​ quota, ​ ______ gain and​ ______ lose.

U.S. growers of​ tomatoes; U.S. consumers of tomatoes

​______ will gain and​ ______ will lose from the restrictions on steel imports.

U.S. producers of steel and U.S.​ importers; U.S. consumers

A semiconductor is a key component in your​ laptop, cell​ phone, and iPod. The table provides information about the market for semiconductors in the United States. Producers of semiconductors can get​ $18 a unit on the world market. With no international​ trade, what is the price of a semiconductor and how many semiconductors are bought and sold in the United​ States? Does the United States have a comparative advantage in the production of​ semiconductors?

With no international​ trade, the price of a semiconductor is ​$12 and 20 billion semiconductors a year are bought and sold in the United States. The United States has a comparative advantage in producing semiconductors. If U.S. producers of semiconductors sell at the highest possible​ price, they sell 5 billion units in the United States and they export 75 billion units.

Beth is​ _____ when she is protected by the​ nation's military but does not pay anything for the protection.

a free rider

Which of the following items is an example of an excludable and rival good or​ resource?

a meal at your favorite restaurant

An externality can be created by​ _______.

a production activity or a consumption activity

Total cost is the cost of​ _____ by a firm. Total fixed cost is the cost of the​ _____ - the cost of​ _____, _____, and​ _____. Total variable cost is the cost of the​ _____ - the cost of​ _____.

all the factors of production​ used; ​firm's fixed factors of​ production; land,​ capital; entrepreneurship; ​firm's variable factor of​ production; labor

Marginal private cost is the cost of producing​ _____ of a good or service that is borne by the​ _____ of that good or service. Marginal external cost is the cost of producing​ _____ of a good or service that falls on people other than the​ _____.

an additional​ unit; producer an additional​ unit; producer

The supply of roses in the United States is made up of U.S. grown roses and imported roses. With no international​ trade, the price is​ $30 a bouquet and​ 300,000 bouquets a year are produced. The graph shows the U.S. market for roses when the U.S. government puts an import quota on roses. The U.S. consumer surplus that is redistributed to U.S. producers is​ _______ and the import quota creates a deadweight loss equal to​ _______.

area​ B; area D​ + E

The​ long-run average cost curve traces out the lowest possible​ _______ of producing each output.

average total cost

The output at which average product is a maximum is the same output at which​ ______ is a minimum.

average variable cost

If country A has a comparative advantage in the production of automobiles and country B has a comparative advantage in the production of​ boats, ______.

both countries will gain if country A exports automobiles to country B and country B exports boats to country A

Externalities​ _______.

can be negative or positive. Logging has a negative​ externality, and education has a positive externality

Could U.S. pollution regulations help​ smog-enshrouded China? Beijing officials issued a​ "red alert" for air​ quality, closed​ schools, limited automobile​ traffic, and kept people indoors to avoid toxic smog. Most of​ Beijing's energy comes from​ carbon-emitting coal. The U.S. EPA is working with China to develop a national​ cap-and-trade system. ​Source: The Christian Science Monitor​, December​ 8, 2015 Explain the inefficiency in​ Beijing's market for electricity and contrast it with the U.S. market. How can​ cap-and-trade achieve an efficient​ outcome? ​Cap-and-trade can achieve an efficient outcome by​ _______.

confronting power utilities with the marginal social cost of their production

Moving from no trade in coffee to trade in​ coffee, the United States gains because​ _______.

consumer surplus increases by more than producer surplus decreases

New​ power-plant rule aids Northeast A new Obama air pollution rule requires​ coal-fired power plants to reduce both smog and​ acid-rain causing pollutants. The coal industry says this rule is among the most expensive ever imposed by the EPA. ​Source: The Wall Street Journal​, July​ 7, 2011 Explain how a pollution limit will change the quantity of electricity produced. For whom would the pollution limit be​ expensive? A pollution limit​ _______.

decreases the quantity of electricity produced

Suppose that the world price of steel is​ $100 a​ ton, India does not trade​ internationally, and the equilibrium price of steel in India is​ $60 a ton. Suppose that India now begins to trade internationally. The price of steel in India​ ______. The quantity of steel produced in India​ ______. The quantity of steel bought by India​ ______. India​ ______ steel.

decreases; exports

The quantity of bananas consumed in Australia​ ______ and the quantity of bananas grown in Australia​ ______.

decreases; increases

Airlines seek new ways to save on fuel as costs soar Fuel is an​ airline's biggest single expense. In​ 2008, the cost of jet fuel rocketed. Airlines tried to switch to newer generation​ aircraft, which have more​ fuel-efficient engines. Explain how an increase in the price of fuel changes an​ airline's total​ costs, average​ costs, and marginal cost. When the cost of fuel​ increases, average fixed cost​ ______ and average variable cost.​ ______.

does not​ change; increases

Airlines seek new ways to save on fuel as costs soar Fuel is an​ airline's biggest single expense. In​ 2008, the cost of jet fuel rocketed. Airlines tried to switch to newer generation​ aircraft, which have more​ fuel-efficient engines. Explain how an increase in the price of fuel changes an​ airline's total​ costs, average​ costs, and marginal cost. When the cost of fuel​ increases, total fixed cost​ _______ and total variable cost​ _______.

does not​ change; increases

Could U.S. pollution regulations help​ smog-enshrouded China? Beijing officials issued a​ "red alert" for air​ quality, closed​ schools, limited automobile​ traffic, and kept people indoors to avoid toxic smog. Most of​ Beijing's energy comes from​ carbon-emitting coal. The U.S. EPA is working with China to develop a national​ cap-and-trade system. ​Source: The Christian Science Monitor​, December​ 8, 2015 Explain the inefficiency in​ Beijing's market for electricity and contrast it with the U.S. market. How can​ cap-and-trade achieve an efficient​ outcome? The Beijing market for electricity is inefficient because​ _______.

electricity production has a large external cost arising from carbon emissions from​ coal-powered generators

A tariff​ _______.

enables the government to satisfy the​ self-interest of people who earn their incomes in​ import-competing industries

​______ are the​ ______ that we sell to people in other countries.

exports; goods and services

Suppose that the world price of bananas is 18cents¢ a pound and that when Australia does not trade bananas​ internationally, the market price of bananas in Australia is 12cents¢ a pound. If Australia opens up to​ trade, Australia​ ______ bananas. The price of bananas in Australia​ ______.

exports; rises

The price of shoes in the importing country​ _____ and the quantity produced by the importing country​ _____.

falls; decreases

Suppose that the world price of sugar is 10cents¢ a​ pound, the United States does not trade​ internationally, and the U.S. equilibrium price of sugar is 20cents¢ a pound. The United States then begins to trade internationally. The price of sugar in the United States​ ______. U.S. consumers buy​ ______ sugar.

falls; more

China​ _______ from this trade in coal.

gains

Before the development of new fracking​ technology, the opportunity cost of producing oil in the United States was​ _______ the world market price. After the development of new fracking​ technology, the opportunity cost of producing oil in the United States is​ _______ the world market price.

greater than; less than

If the United States and Canada did not​ trade, the price of lumber in the United States would be​ ______ than the world price and the price of lumber in Canada would be​ ______ than the world price.

higher; lower

​______ are the​ ______ that we buy from people in other countries.

imports; goods and services

​Deere, struggling with​ sales, to lay off 220 Deere​ & Co. plans to lay off 220 workers and decrease its output of farm equipment. If Deere​ & Co. is operating at maximum total product before it cuts its​ workforce, how will the marginal product of a worker change in the short​ run? Before the cut in its​ workforce, Deere​ & Co is operating at maximum total product. As Deere cuts the number of​ workers, the marginal product of a worker will​ ______ in the short run.

increase

To increase output in the short​ run, a firm must​ _______. To increase output in the long​ run, a firm​ _______.

increase the quantity of a variable factor of​ production; is able to choose whether to change its plant as well as the quantity of labor it hires

Airlines seek new ways to save on fuel as costs soar Fuel is an​ airline's biggest single expense. In​ 2008, the cost of jet fuel rocketed. Airlines tried to switch to newer generation​ aircraft, which have more​ fuel-efficient engines. Explain how a technological advance that makes airplane engines more fuel efficient changes an​ airline's total​ product, marginal​ product, and average product. An​ airline's average product​ _______.

increases

Airlines seek new ways to save on fuel as costs soar Fuel is an​ airline's biggest single expense. In​ 2008, the cost of jet fuel rocketed. Airlines tried to switch to newer generation​ aircraft, which have more​ fuel-efficient engines. Explain how an increase in the price of fuel changes an​ airline's total​ costs, average​ costs, and marginal cost. When the cost of fuel​ increases, total cost​ _______.

increases

The graph shows the U.S. demand for and U.S. supply of shoes. The world price of a pair of shoes is​ $20. With free international​ trade, U.S. consumer surplus​ ______ and U.S. producer surplus​ ______.

increases by area A​ + B​; decreases by area B

The graph shows the demand for shoes in​ Brazil, DB​, the supply of shoes produced in​ Brazil, SB​, and the market equilibrium in Brazil when it does not trade internationally. If the world price of a pair of shoes is​ $20 and Brazil opens up and trades​ internationally, producer surplus in Brazil​ ______ and consumer surplus in Brazil​ ______.

increases by area C​ + D​; decreases by area C

Maryland farmers turn from tobacco to flowers Maryland tobacco farmers will be subsidized if they switch from growing tobacco to growing crops such as flowers and organic vegetables. How would a tobacco farmer decide whether to give up farming rather than grow another​ crop? A tobacco farmer will exit the tobacco market and enter the flower market if he​ ______. A tobacco farmer will exit farming altogether if he​ ______.

incurs an economic loss in the production of tobacco and makes an economic profit in the production of​ flowers; incurs an economic loss in all farming activities that he could perform

Marginal external cost​ _______.

is an opportunity cost

Marginal external cost​ _______.

is an opportunity cost borne by someone other than the producer

U.S. comparative advantage in oil has changed because​ _______.

its opportunity cost of producing oil has decreased

Could U.S. pollution regulations help​ smog-enshrouded China? Beijing officials issued a​ "red alert" for air​ quality, closed​ schools, limited automobile​ traffic, and kept people indoors to avoid toxic smog. Most of​ Beijing's energy comes from​ carbon-emitting coal. The U.S. EPA is working with China to develop a national​ cap-and-trade system. ​Source: The Christian Science Monitor​, December​ 8, 2015 Explain the inefficiency in​ Beijing's market for electricity and contrast it with the U.S. market. How can​ cap-and-trade achieve an efficient​ outcome? Comparing the U.S. market for electricity and the Beijing market for​ electricity, the U.S. market is​ _______ inefficient.

less

Suppose that the world price of sugar is 10cents¢ a​ pound, the United States does not trade​ internationally, and the U.S. equilibrium price of sugar is 20cents¢ a pound. The United States then begins to trade internationally. The price of sugar in the United States​ ______. U.S. consumers buy​ ______ sugar. U.S. sugar growers produce​ ______ sugar. The United States​ ______ sugar.

less; imports

With​ trade, Americans produce​ ______ lumber and Canadians produce​ ______ wine.

less; less

If the United States and Canada did not​ trade, the price of wine in the United States would be​ ______ than the world price and the price of wine in Canada would be​ ______ than the world price.

lower; higher

With​ trade, Americans buy​ ______ lumber and Canadians buy​ ______ wine.

more; more

Classify the following services for computer owners with an Internet connection as​ rival, nonrival,​ excludable, or nonexcludable. MyEconLab Web site is​ _______.

nonrival and excludable

Classify the following services for computer owners with an Internet connection as​ rival, nonrival,​ excludable, or nonexcludable. A Twitter page is​ _______.

nonrival and excludable or nonexcludable

Classify the following services for computer owners with an Internet connection as​ rival, nonrival,​ excludable, or nonexcludable. eBay is​ _______.

nonrival and nonexcludable

National comparative advantage arises from the differences in​ _______ across countries.

opportunity costs

Marginal social cost is the marginal cost incurred by the entire society​ - by the producer and by everyone else on whom the cost falls. It is the sum of marginal​ _____ and marginal​ _____.

private​ cost; external cost

Moving from no trade in services to trade in​ services, the United States gains because​ _______.

producer surplus increases by more than consumer surplus decreases

With an import restriction on​ steel, we can expect the prices of automobiles and construction materials to​ _______.

rise

Suppose that the world price of steel is​ $100 a​ ton, India does not trade​ internationally, and the equilibrium price of steel in India is​ $60 a ton. Suppose that India now begins to trade internationally. The price of steel in India​ ______. The quantity of steel produced in India​ ______.

rises; increases

Classify the following services for computer owners with an Internet connection as​ rival, nonrival,​ excludable, or nonexcludable. A mouse is​ _______

rival and excludable

A Bridge Too Far Gone Gasoline taxes paid for much of​ America's post-war freeway​ system, but gas taxes​ haven't changed since the early 1990s. After taking inflation into​ account, gas taxes today are​ one-third of what they were in the early 1960s. Increasing the gas tax is​ "politically tricky," but building toll roads brings howls of outrage. ​ Distinguish between private production of a public good and public provision. Think of three public goods that are produced by private firms. Three public goods that are produced by private firms are​ _______.

snow​ removal, trash​ collection, and street cleaning

In​ economics, the short run is the time frame in which the quantities of​ ______ and the long run is the period of time in which​ ______.

some resources are​ fixed; the quantities of all resources can be varied

The budget of a government bureau increases beyond the efficient level if​ _______.

special interest lobbying is combined with rational ignorance of some voters

Economists measure the net gain from international trade as​ _____.

the increase in total surplus

The tariff cut is​ "bad news for the local car​ makers" because​ ______. The union is demanding a tariff freeze because​ ______.

their producer surplus will​ decrease; it will lead to greater Australian production and more jobs

Rational ignorance suggests that​ ______.

voters are ignorant on issues that are not of special interest to them

What does it cost to make 100 pairs of running​ shoes? An Asian manufacturer of running shoes pays its workers​ $275 to make 100 pairs an hour. Workers use​ company-owned equipment that costs​ $300 in forgone interest and economic depreciation. Materials cost​ $900. Which costs are explicit​ costs? Which costs are implicit​ costs? With total revenue from the sale of 100 pairs of shoes of​ $1,650, calculate economic profit. The costs that are explicit costs are​ _______. The costs that are implicit costs are​ _______. If the total revenue from the sale of 100 pairs of shoes is​ $1,650, the​ manufacturer's economic profit is ​$____

wages and​ materials; forgone interest and economic depreciation 175

Which of the following is an example of using a public​ good?

watching wild bison on the Great Plains

Rational ignorance​ _______.

will not be​ eliminated, even if the population becomes more educated

New​ power-plant rule aids Northeast A new Obama air pollution rule requires​ coal-fired power plants to reduce both smog and​ acid-rain causing pollutants. The coal industry says this rule is among the most expensive ever imposed by the EPA. ​Source: The Wall Street Journal​, July​ 7, 2011 Explain how a pollution limit will change the quantity of electricity produced. For whom would the pollution limit be​ expensive? The pollution limit is expensive for​ ______ because​ ______.

​consumers; price of electricity rises

Normal profit is the return to​ _____. Normal profit is part of a​ firm's _____ cost because it is the cost of not running another firm.

​entrepreneurship; opportunity

The Coase theorem is the proposition that if property rights​ _____, only a small number of parties are involved and transaction costs are​ _____, then private transactions are​ _____ and the outcome is not affected by who has been assigned the property rights.

​exist; low; efficient

With the removal of U.S.​ tariffs, the price that U.S. consumers pay for goods imported from Mexico will​ _______, and the quantity of U.S. imports from Mexico will​ _______.

​fall; increase

When a country opens up to free international​ trade, producers of the exported good receive a​ ______ price and sell a​ ______ quantity of it. Producer surplus​ _______.

​higher; greater increases

Before​ 1995, the United States imposed tariffs on goods imported from Mexico and Mexico imposed tariffs on goods imported from the United States. In​ 1995, Mexico joined NAFTA. U.S. tariffs on imports from Mexico and Mexican tariffs on imports from the United States are gradually being removed. The quantity of U.S. exports to Mexico has​ ______ and the U.S.​ government's tariff revenue from trade with Mexico has​ ______.

​increased; decreased

Airlines seek new ways to save on fuel as costs soar Fuel is an​ airline's biggest single expense. In​ 2008, the cost of jet fuel rocketed. Airlines tried to switch to newer generation​ aircraft, which have more​ fuel-efficient engines. Explain how a technological advance that makes airplane engines more fuel efficient changes an​ airline's total​ product, marginal​ product, and average product. A technological advance that makes an airplane engine more fuel efficient​ ______ an​ airline's total product and​ ______ an​ airline's marginal product.

​increases; increases

Airlines seek new ways to save on fuel as costs soar Fuel is an​ airline's biggest single expense. In​ 2008, the cost of jet fuel rocketed. Airlines tried to switch to newer generation​ aircraft, which have more​ fuel-efficient engines. Explain how an increase in the price of fuel changes an​ airline's total​ costs, average​ costs, and marginal cost. When the cost of fuel​ increases, average total cost​ ______, and marginal cost​ ______.

​increases; increases

Maryland farmers turn from tobacco to flowers Maryland tobacco farmers will be subsidized if they switch from growing tobacco to growing crops such as flowers and organic vegetables. How does offering farmers a payment to exit tobacco growing influence the opportunity cost of growing​ tobacco? What is the opportunity cost of using the equipment owned by a tobacco​ farmer? Offering farmers a payment to exit tobacco growing​ _______ the opportunity cost of growing tobacco. The opportunity cost of using the equipment owned by a tobacco farmer is​ _______.

​increases; the next best alternative​ forgone, which could be the production of flowers and organic vegetables

When a country opens up to free international​ trade, domestic producers of the imported good receive a​ ______ price and sell a​ ______ quantity of it. Producer surplus​ _______.

​lower; smaller decreases

The figures show the U.S. market for shoes and​ Brazil's market for shoes if there is no international trade. If the United States and Brazil engage in free​ trade, U.S.______ of shoes lose because​ ______.

​producers; the price of shoes​ falls, the quantity of shoes they sell​ decreases, and producer surplus decreases

Total product is the total​ _____ of a good produced in a given period. Marginal product is the change in​ _____ product that results from a​ one-unit increase in the​ _____. Average product is the total product divided by the​ _____.

​quantity; total; quantity of labor​ employed; quantity of a factor of production

China has a comparative advantage in producing​ ______. China​ ______ coal.

​shoes; imports

A Bridge Too Far Gone Gasoline taxes paid for much of​ America's post-war freeway​ system, but gas taxes​ haven't changed since the early 1990s. After taking inflation into​ account, gas taxes today are​ one-third of what they were in the early 1960s. Increasing the gas tax is​ "politically tricky," but building toll roads brings howls of outrage. ​ Distinguish between private production of a public good and public provision. Think of three public goods that are produced by private firms. Private production of a public good results in​ ______ and public production of a public good results in​ ______.

​underproduction; overproduction

In​ China, coal​ _______ gain and coal​ _______ lose from international trade in coal.

​users; producers