Principles of Microeconomics 7, 10, 11, 13
Refer to Table 13-7. The average total cost of producing one widget is
$11.00.
Refer to Table 13-7. The average fixed cost of producing five widgets is
$2.00.
Refer to Table 13-7. The average variable cost of producing four widgets is
$2.50.
Refer to Table 13-7. The marginal cost of producing the sixth widget is
$6
Refer to Table 7-6. If the market price is $1,000, the producer surplus in the market is
$750.
Refer to Table 11-2. Suppose the cost to install each streetlight is $400. How many streetlights should the town install to maximize total surplus from the streetlights?
3 streetlights
Refer to Table 11-2. Suppose the cost to install each streetlight is $200. How many streetlights should the town install to maximize total surplus from the streetlights?
4 streetlights
Dick owns a dog whose barking annoys Dick's neighbor Jane. Suppose that the benefit of owning the dog is worth $200 to Dick and that Jane bears a cost of $400 from the barking. Assuming Dick has the legal right to keep the dog, a possible private solution to this problem is that
??
Refer to Figure 10-6. Which price represents the equilibrium price of the product in this market?
??
The difference between social cost and private cost is a measure of the
??
Which of the following statements about a production function is correct for a firm that uses labor to produce output?
?? not all of the above
Goods that are not excludable include both
?common resources and public goods
Refer to Figure 7-1. When the price is P1, consumer surplus is
A+B+C.
Refer to Figure 7-7. Which area represents producer surplus when the price is P1?
BCG
Refer to Figure 13-7. The efficient scale of production occurs at which quantity?
C
What is the difference between command-and-control policies and market-based policies toward externalities?
Command-and-control policies regulate behavior directly, whereas market-based policies provide incentives for private decisionmakers to change their behavior.
Which of the following statements is correct?
Corrective taxes are often preferred over direct regulation because they typically reduce externalities at a lower cost.
Katherine gives piano lessons for $15 per hour. She also grows flowers, which she arranges and sells at the local farmer's market. One day she spends 5 hours planting $50 worth of seeds in her garden. Once the seeds have grown into flowers, she can sell them for $150 at the farmer's market. Which of the following statements is correct regarding Katherine's profits from selling flowers?
Katherine's accounting profits are $100, and her economic profits are $25.
Refer to Table 7-1. If the price of the product is $15, then who would be willing to purchase the product?
Mike, Sandy, and Jonathan
Reggie, Rachael, and Rudy all enjoy looking at flowers blooming in gardens in their neighborhood. The neighborhood association is considering planting a flower garden around the sign at the entrance to the neighborhood. Reggie values the garden at $20, Rachael at $35, and Rudy at $50. The flowers and labor for the garden cost $85. What should the neighborhood association do?
Plant the garden because the benefits outweigh the costs.
Refer to Figure 10-6. Which quantity represents the socially-optimal quantity of output in this market?
Q'
Refer to Figure 10-7. Which quantity represents the social optimum for this market?
Q3.
Which of the following statements is not correct?
The invisible hand can remedy most if not all types of market failures.
Consider the following problems: Overcrowded public highways, overfishing in the ocean, polluted air, and the near-extinction of the wild rhinoceros. What do these problems have in common?
They are all the result of a failure to establish clear property rights over something of value.
A local manufacturing plant that emitted sulfur dioxide was forced to stop production because it did not comply with local clean air standards. This decision provides an example of
a direct regulation of an externality.
Which of the following is an example of a positive externality?
a nice garden in front of your neighbor's house
The Tragedy of the Commons can be corrected by
assigning property rights to individuals.
Total surplus
can be used to measure a market's efficiency. is the to value to buyers minus the cost to sellers. is the sum of consumer and producer surplus. All of the above are correct.
Private contracts between parties with mutual interests
can solve some inefficiencies associated with positive externalities.
The "Great Lakes" would be a good example for
common resources
Goods that are rival in consumption but not excludable would be considered
common resources.
Private markets fail to account for externalities because
decisionmakers in the market fail to include the costs of their behavior to third parties.
Refer to Figure 7-1. When the price rises from P1 to P2, consumer surplus
decreases by an amount equal to B+C.
Refer to Figure 13-2. With regard to cookie production, the figure implies
diminishing marginal product of workers.
Private goods are both
excludable and rival in consumption.
In the short run, a firm that produces and sells computers can adjust
how many workers to hire
In the long run, a firm that produces and sells computers gets to choose
how many workers to hire. the size of its factories. which short-run average-total-cost curve to use. All of the above are correct.
Altering incentives so that people take account of the external effects of their actions
is called internalizing the externality.
When a factory is operating in the short run,
it cannot adjust the quantity of fixed inputs
National defense is a classic example of a public good because
it is difficult to exclude people from receiving the benefits from national defense once it is provided.
If the use of a common resource is not regulated,
it will be overused.
Diseconomies of scale occur when a firm's
long-run average total costs are increasing as output increases.
Total cost is the
market value of the inputs a firm uses in production.
A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it
maximizes the combined welfare of buyers and sellers.
Willingness to pay
measures the value that a buyer places on a good.
Bill owns 3 acres of beautiful wooded land. When Bill decides to move to be closer to his grandchildren, he donates the land to the state with the understanding that the land will be used as a state park. This state park is large enough that it is not congested. It is an example of a good that is
neither rival in consumption nor excludable.
Refer to Figure 10-7. To internalize the externality in this market, the government should
provide a subsidy for this product.
A streetlight is a
public good
Moving production from a high-cost producer to a low-cost producer will
raise total surplus.
Total surplus in a market will increase when the government
removes a binding price ceiling from that market.
Explicit costs
require an outlay of money by the firm.
The Tragedy of the Commons results when a good is
rival in consumption and not excludable.
Market failure is the inability of
some unregulated markets to allocate resources efficiently.
Consumer surplus is
the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.
Producer surplus is
the amount a seller is paid minus the cost of production.
If a local airport creates too much noise for local residents,
the government can raise economic well-being through noise-control regulations.
Refer to Table 13-1. Alyson's pet sitting service experiences diminishing marginal productivity with the addition of the
third worker.
Private solutions may not be possible due to the costs of negotiating and enforcing these solutions. Such costs are called
transaction costs.
Without government intervention, public goods tend to be
underproduced and common resources tend to be over consumed.
The marginal seller is the seller
who would leave the market first if the price were any lower, and the marginal buyer is the buyer who would leave the market first if the price were any higher.
