ECO 2010 Microeconomics

Which of the following events may increase labor supply? Check all that apply. A decrease in the wage rate An increase in the working population An increase in women's desire to work rather than stay at home with their kids (in other words, a change in tastes) A decrease in the working population

An increase in the working population An increase in women's desire to work rather than stay at home with their kids (in other words, a change in tastes

In the following table, indicate whether the long-run average cost curve exhibits economies of scale, constant returns to scale, or diseconomies of scale for each range of bike production.

Between 300 and 400 bikes per month= Constant Returns to Scale More than 400 bikes per month= Diseconomies of Scale Fewer than 300 bikes per month= Economies of Scale

A good with many close substitutes is likely to have relatively __________________ demand, since consumers can easily choose to purchase one of the close substitutes if the price of the good rises.

Elastic

A measure of responsiveness of quantity demanded or quantity supplied to a change in one of its determinants.

Elasticity

When the government imposes a binding price floor, it causes

a surplus of the good to develop.

Note that Clancy and Eileen started by behaving cooperatively. However, once Clancy decided to cheat, Eileen decided to cheat as well. In other words, Eileen's output decisions are based on Clancy's actions. This behavior is an example of ______

a tit-for-tat strategy

According to the midpoint method, the price elasticity of demand for apples between point X and point Y is approximately _(a)__ , which suggests that the demand for apples is __(b)_______ between points X and Y. a- 0.02; 0.05; 0.37; 2.67 b- Elastic; Inelastic

a- .0.37 b- Inelastic

According to the midpoint method, the price elasticity of demand for oranges between point X and point Y is approximately ___(a)_____ , which suggests that the demand for oranges is ___(b)______ between points X and Y. a- 0.07; 0.1; 0.69; 1.44 b- elastic; inelastic

a- .69 b- inelastic

According to the midpoint method, the price elasticity of demand for tomatoes between point X and point Y is approximately ___(a)____ , which suggests that the demand for tomatoes is __(b)_____ between points X and Y. a- 0.1; 0.24; 0.41; 2.43 b- elastic; inelastic

a- 2.43 b- elastic

Suppose the price of bikes is currently $60 per bike, shown as point B on the initial graph. Because the demand between points A and B is __(a)_____, a $20-per-bike increase in price will lead to ___(b)______ in total revenue per day.

a- inelastic b- an increase

An increase in the minimum wage reduces the total amount paid to the affected workers if the price elasticity of ______ is ______ than one.

demand; greater

Rent control causes larger shortages in the _______ run because over that time horizon, supply and demand are _______ elastic.

long; more

A visual representation of a game showing all possible strategies for each player and all potential outcomes and payoffs

payoff matrix

If Dairy King doesn't advertise, Creamland makes a higher profit if it chooses

to advertise

If Dairy King advertises, Creamland makes a higher profit if it chooses

to advertise .

average total cost

total cost divided by the quantity of output

If the elasticity is exactly one, the percentage change in quantity equals the percentage change in price, and demand is said to have _____________________.

unit elasticity

average variable cost

variable cost divided by the quantity of output

Meekertonian producers were better off without free trade than they are with it.

True

Suppose Antonio is willing to pay a total of $160,000 for a yacht. True or False: Keeping his maximum willingness to pay for a yacht in mind, Antonio will not buy the yacht because it would be worth less to him than its market price of $200,000.

True

Suppose Carlos is willing to pay a total of $135,000 for an apartment. True or False: Keeping his maximum willingness to pay for an apartment in mind, Carlos will not buy the apartment because it would be worth less to him than its market price of $180,000.

True

TRUE/FALSE: Producer surplus is larger when the price is $140 than when it is $100.

True

True or False: The value of the price elasticity of demand is not equal to the slope of the demand curve.

True

True or False: When a nation is too small to affect world prices, allowing free trade will always decrease total surplus in that country, regardless of whether it imports or exports as a result of international trade.

True

True or False: When a nation is too small to affect world prices, allowing free trade will have a non-negative effect on total surplus in that country, regardless of whether it imports or exports as a result of international trade.

True

Price Floor

a legal minimum on the price at which a good can be sold.

Suppose the price of apple pie were to fall to $2.25 per slice. At this lower price, Kevin would receive a consumer surplus of ______ from the 8th slice of apple pie he buys.

$1.50

If Cream land decides to advertise, it will earn a profit of ______million if Dairy King advertises and a profit of ______million if Dairy King does not advertise.

$10, $18

The following graph shows the supply curve for a group of students looking to sell used smartphones. Each student has only one used smartphone to sell. Each rectangular segment under the supply curve represents the "cost," or minimum acceptable price, for one student. Assume that anyone who has a cost just equal to the market price is willing to sell his or her used smartphone. Region A (the purple shaded area) represents the total producer surplus when the market price is ______, while Region B (the grey shaded area) represents ______ when the market price ______ .

$100, the change in total producer surplus, 160

The following graph shows the supply curve for a group of students looking to sell used graphing calculators. Each student has only one used calculator to sell. Each rectangular segment under the supply curve represents the "cost," or minimum acceptable price, for one student. Assume that anyone who has a cost just equal to the market price is willing to sell his or her used calculator Region A (the purple shaded area) represents the total producer surplus when the market price is _______, while Region B (the grey shaded area) represents ______ when the market price ______ .

$180, the change in total producer surplus, 180

If Creamland decides not to advertise, it will earn a profit of ______ million if Dairy King advertises and a profit of ______million if Dairy King does not advertise

$2, $11

In order for Frances to earn a producer surplus of exactly $30 from selling a used calculator, the market price needs to be ______.

$210 Producer Surplus= Market Price- Seller's Cost $30= Market Price- $180 Market Price= $30+$180 =$210

In order for Neha to earn a producer surplus of exactly $60 from selling a used smartphone, the market price needs to be ______.

$240 Producer Surplus= Market Price- Seller's Cost $60= Market Price- $180 Market Price= $60+$180 =$240

The following problem analyzes the Brazilian market for limes. The graph below shows the domestic supply and demand curves for limes in Brazil. Assume that Brazil's government does not currently permit international trade in limes. Use the black point (plus symbol) to denote the equilibrium price of one ton of limes and the equilibrium quantity of limes in Brazil without international trade. Next, use the green triangle (triangle symbol) to shade in the area that represents consumer surplus in equilibrium. Finally, use the purple triangle (diamond symbol) to shade in the area that represents producer surplus in equilibrium. Based on the information from the previous graph, absent international trade total surplus is __________.

$25,000

Suppose Clancy and Eileen form a cartel and behave as a monopolist. The profit-maximizing price is ______ per gallon, and the total output is ______ gallons. As part of their cartel agreement, Clancy and Eileen agree to split production equally. Therefore, Clancy's profit is ______, and Eileen's profit is ______.

$3.00, 270, $405.00, $405.00

The following graph shows Kevin's weekly demand for apple pie, represented by the blue line. Point A represents a point along his weekly demand curve. The market price of apple pie is $3.00 per slice, as shown by the horizontal black line. From the previous graph, you can tell that Kevin is willing to pay ______ for his 8th slice of apple pie each week. Because he has to pay only $3.00 per slice, the consumer surplus he gains from the 8th slice of apple pie is ______.

$3.75, $.75

The following problem analyzes the Burundian market for melons. The graph below shows the domestic supply and demand curves for melons in Burundi. Assume that Burundi's government does not currently permit international trade in melons. Use the black point (plus symbol) to denote the equilibrium price of one ton of melons and the equilibrium quantity of melons in Burundi without international trade. Next, use the green triangle (triangle symbol) to shade in the area that represents consumer surplus in equilibrium. Finally, use the purple triangle (diamond symbol) to shade in the area that represents producer surplus in equilibrium. Based on the information from the previous graph, absent international trade total surplus is $____________.

$30,000 CS= 1/2 X ($660 per ton - $460 per ton) X 150 tons= $15,000 PS= 1/2 X ($460 per ton - $260 per ton) X 150 tons= $15,000 Total Surplus= CS + PS TS= $15,000 + $15,000 = $30,000

Consider a river found in the city of Pittsburgh, and then answer the questions that follow. The city has a boat tour whose visitors use the river for recreation. The city also has a fish processor that dumps industrial waste into the river. This pollutes the river and makes it a less desirable vacation destination. That is, the fish processor's waste decreases the boat tour's economic profit. Suppose that the fish processor could use a different production method that involves recycling water. This would reduce the pollution in the river to levels safe for recreation, and the boat tour would no longer be affected. If the fish processor uses the recycling method, then the fish processor's economic profit is $1,800 per week, and the boat tour's economic profit is $1,900 per week. If the fish processor does not use the recycling method, then the fish processor's economic profit is $2,100 per week, and the boat tour's economic profit is $1,100 per week. These figures are summarized in the following table

$3200, $3700, used, use, $0, use, between #300 and $800, it has property rights to a clean river, false

Automotive assembly plants emit particulate matter as a waste product. This generates a cost to society that is not paid for by the firm; therefore, pollution is a negative externality of vehicle production. Suppose the U.S. government wants to correct this market failure by getting firms to internalize the cost of pollution. To do this, the government can charge firms for pollution rights (the right to emit a given quantity of particulate matter). The following graph shows the daily demand for pollution rights. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Suppose the government has determined that the socially optimal quantity of particulate matter is 360 million tons per day. One way governments can charge firms for pollution rights is by imposing a per-unit tax on emissions. A tax (or price in this case) of $______ per ton of particulate matter emitted will achieve the desired level of pollution. Now suppose the U.S. government does not know the demand curve for pollution and, therefore, cannot determine the optimal tax to achieve the desired level of pollution. Instead, it auctions off tradable pollution permits. Each permit entitles its owner to emit one ton of particulate matter per day. To achieve the socially optimal quantity of pollution, the government auctions off 360 million pollution permits. Given this quantity of permits, the price for each permit in the market for pollution rights will be ______. If this is all the information the government has, which solution to reduce pollution is appropriate? Check all that apply. Corrective taxes Tradable permits

$36, $36, Tradable permits

Because Clancy has deviated from the cartel agreement and increased his output of water to 45 gallons more than the cartel amount, Eileen decides that she will also increase her production to 45 gallons more than the cartel amount. After Eileen increases her production, Clancy's profit becomes ______, Eileen's profit becomes______, and total profit (the sum of the profits of Clancy and Eileen) is now$722.00.

$360.00, $360.00, $720.00

Consider a lake found in the town of Center Barnstead, and then answer the questions that follow. The town has a kayak rental whose visitors use the lake for recreation. The town also has a ketchup factory that dumps industrial waste into the lake. This pollutes the lake and makes it a less desirable vacation destination. That is, the ketchup factory's waste decreases the kayak rental's economic profit. Suppose that the ketchup factory could use a different production method that involves recycling water. This would reduce the pollution in the lake to levels safe for recreation, and the kayak rental would no longer be affected. If the ketchup factory uses the recycling method, then the ketchup factory's economic profit is $2,200 per week, and the kayak rental's economic profit is $2,200 per week. If the ketchup factory does not use the recycling method, then the ketchup factory's economic profit is $2,400 per week, and the kayak rental's economic profit is $1,700 per week. These figures are summarized in the following table. Total economic profit is highest when the recycling production method is ______. When the ketchup factory uses the recycling method, the kayak rental earns $2,200−$1,700=$500$2,200−$1,700=$500 more per week than it does with no recycling. Therefore, the kayak rental should be willing to pay up to $500 per week for the ketchup factory to recycle water. However, the recycling method decreases the ketchup factory's economic profit by $2,400−$2,200=$200$2,400−$2,200=$200 per week. Therefore, the ketchup factory should be willing to use the recycling method if it is compensated with at least $200 per week. Suppose the kayak rental has the property rights to the lake. That is, the kayak rental has the right to a clean (unpolluted) lake. In this case, assuming the two firms can bargain at no cost, the ketchup factory will ______ the recycling method and will pay the kayak rental $______ per week. Now, suppose the ketchup factory has the property rights to the lake, including the right to pollute it. In this case, assuming the two firms can bargain at no cost, the ketchup factory will ______ the recycling method, and the kayak rental will pay the ketchup factory $_______ per week. The ketchup factory will make the most economic profit when _________. True or False: The lake will remain polluted, regardless of who has the property rights.

$4,100, $4,400, used, use, $0, use, between $200 and $500, it has property rights to pollute the lake, false.

Ike's Bikes is a major manufacturer of bicycles. Currently, the company produces bikes using only one factory. However, it is conside ring expanding production to two or even three factories. The following table shows the company's short-run average total cost (SRATC) each month for various levels of production if it uses one, two, or three factories. (Note: Q equals the total quantity of bikes produced by all factories.) Suppose Ike's Bikes is currently producing 500 bikes per month in its only factory. Its short-run average total cost is ______ per bike.

$400

Now suppose the Venezuelan government decides to impose a tariff of $40 on each imported ton of wheat. Under the tariff, the price Venezuelan consumers pay for a ton of wheat becomes __________, and Venezuela will import __________ tons of wheat.

$440, 30 tons of what

Nuclear facilities emit radioactive waste as a waste product. This generates a cost to society that is not paid for by the firm; therefore, pollution is a negative externality of electricity production. Suppose the U.S. government wants to correct this market failure by getting firms to internalize the cost of pollution. To do this, the government can charge firms for pollution rights (the right to emit a given quantity of radioactive waste). The following graph shows the daily demand for pollution rights. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Suppose the government has determined that the socially optimal quantity of radioactive waste is 120 million tons per day. One way governments can charge firms for pollution rights is by imposing a per-unit tax on emissions. A tax (or price in this case) of $______ per ton of radioactive waste emitted will achieve the desired level of pollution. Now suppose the U.S. government does not know the demand curve for pollution and, therefore, cannot determine the optimal tax to achieve the desired level of pollution. Instead, it auctions off tradable pollution permits. Each permit entitles its owner to emit one ton of radioactive waste per day. To achieve the socially optimal quantity of pollution, the government auctions off 120 million pollution permits. Given this quantity of permits, the price for each permit in the market for pollution rights will be $______. The previous analysis hinges on the government having good information regarding either the demand for pollution permits or the optimal level of pollution (or both). Given that the appropriate policy (tradable permits or corrective taxes) can depend on the available information and the policy goal, consider the following scenario. An environmental study conducted in a particular city suggests that if a chemical plant emits more than 80 million tons of chemicals each year, the water supply will become contaminated beyond the point where filtration techniques can make it safe for drinking. If this is all the information the government has, which solution to reduce pollution is appropriate? Check all that apply. Tradable permits Corrective taxes

$48, $48, Tradable Permits

On the following graph, plot Brian's production function using the green points (triangle symbol). Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. Hint: Be sure to plot the first point at (0, 0).

(0,0) (1,100) (2,180) (3,240) (4,280) (5,300)

Suppose that labor is Brian's only variable cost and that he has a fixed cost of $50 per day and pays each of his workers $40 per day. Use the orange points (square symbol) to plot Brian's total cost curve on the following graph using the quantities from the preceding table

(0,50) (100,90) (180,130) (240,170) (280,210) (300,250)

An oligopolistic market structure is distinguished by several characteristics, one of which is either similar or identical products. Which of the following are other characteristics of this market structure? Check all that apply - Market control by many small firms - Difficult entry - Market control by a few firms - Mutual interdependence - Neither mutual interdependence nor mutual dependence

- Difficult entry - Market control by a few firms - Mutual interdependence

Organize the goods found in the following table by indicating which is likely to have the most elastic demand, which is likely to have the least elastic demand, and which will have demand that falls in between. - Red bell peppers - Food - Vegetables

- Red bell peppers: More Elastic - Food- Least Elastic - Vegetables- In Between

Brian's daily production schedule is presented in the following table. Fill in the blanks to complete the Marginal Product of Labor column for each worker.

0,0 (0) 1,100 (100) 2,180 (80) 3,240 (60) 4,280 (40) 5,300 (20)

According to the midpoint method, the price elasticity of demand between points A and B is approximately_________. 0.47 0.96 1.6 0.20

0.47

Which of the following generate the type of externality previously described? Check all that apply. 1) A leading electronics manufacturer has discovered a new technology that dramatically improves the picture quality of plasma televisions. Firms of all brands have free access to this technology. 2) Brian has planted several trees in his backyard that increase the beauty of the neighborhood, especially during the fall foliage season. 3) The city where you live has turned the publicly owned land next to your house into a park, causing trash dropped by park visitors to pile up in your backyard. 4) Your roommate Edison has bought a bird that keeps you up at night with its chirping.

1) A leading electronics manufacturer has discovered a new technology that dramatically improves the picture quality of plasma televisions. Firms of all brands have free access to this technology. 2) Brian has planted several trees in his backyard that increase the beauty of the neighborhood, especially during the fall foliage season.

Suppose the Environmental Protection Agency (EPA) proposes a mandate that carbon emissions by American firms must be reduced to zero in order to combat climate change. Which of the following arguments best describes why the majority of economists would disagree with this policy? 1) The opportunity cost of zero pollution is much higher than its benefit. 2) Reducing methane emissions is desirable, but whatever levels of pollution firms decide to emit privately are already efficient. 3) Society would not benefit from lower air pollution. 4) The environment isn't worth protecting.

1) The opportunity cost of zero pollution is much higher than its benefit.

Carbon dioxide emissions have been linked to the degradation of air quality. The following table lists some potential regulations targeting the amount of airborne carbon dioxide. For each policy listed, identify whether it is a command-and-control policy (regulation), tradable permit system, corrective subsidy, or corrective tax. 1) The government limits total carbon-dioxide emissions by all factories to 280,000 tons per five years. Each individual factory is given the right to emit 240 tons of carbon dioxide, and factories may buy and sell these rights in a marketplace. 2) The government agrees to reimburse all factories that purchase new, emissions-reducing technology in order to provide cleaner air. 3) The government charges factories $550 for every ton of carbon dioxide they emit. 4) The government orders every factory to adopt a new technology, which reduces carbon-dioxide emissions into the atmosphere.

1) Tradable Permit System 2) Corrective Subsidy 3) Corrective Tax 4) Command-and-Control Policy

Using the midpoint method, the elasticity of demand for laptops is about ___________

1.47

When Paraguay adjusts its trade policy to allow free trade of pears, the price of one ton of pears in Paraguay becomes $350. At this price, _____________ tons of pears will be demanded in Paraguay, and ______ tons will be supplied by domestic suppliers. Therefore, Paraguay will export _________ tons of pears.

105 tons, 245 tons, 140 tons Exports When World Price Is $350= Domestic Supply at $350−Domestic Demand at $350 = 245 tons−105 tons = 140 tons

When Burundi adjusts its trade policy to allow free trade of melons, the price of one ton of melons in Burundi becomes $500. At this price, __________ tons of melons will be demanded in Burundi, and __________ tons will be supplied by domestic suppliers. Therefore, Burundi will export __________ tons of melons.

120, 180, 60

Beth is a stay-at-home parent who lives in Denver and provides math tutoring for extra cash. At a wage of $25 per hour, she is willing to tutor 6 hours per week. At $35 per hour, she is willing to tutor 16 hours per week. Using the midpoint method, the elasticity of Beth's labor supply between the wages of $25 and $35 per hour is approximately _________, which means that Beth's supply of labor over this wage range is ______________ .

2.73 elastic

The following graph shows the annual market for Florida oranges, which are sold in units of 90-pound boxes. In this market, the equilibrium price is ______ per box, and the equilibrium quantity of oranges is ______ million boxes.

25, 450

Which of the following generate the type of externality previously described? Check all that apply. 1) Maria has planted hundreds of flowers in her front yard, beautifying the neighborhood both for herself and for her neighbors. 2) A microbiology lab has published its breakthrough in swine flu research. 3) The local airport has doubled the number of runways, causing additional noise pollution for the surrounding residents. 4) Your roommate Ana has bought a cat to which you are allergic.

3) The local airport has doubled the number of runways, causing additional noise pollution for the surrounding residents. 4) Your roommate Ana has bought a cat to which you are allergic.

What is one explanation for why this labor supply curve is upward sloping? 1) Wages have to increase to accommodate union pressure. 2) Unemployment benefits are steadily declining. 3) The opportunity cost of leisure increases as wages increase. 4) Firms are willing to hire more personal trainers at a lower wage.

3) The opportunity cost of leisure increases as wages increase.

The market equilibrium quantity is ______ units of electricity, but the socially optimal quantity of electricity production is ______ units. To create an incentive for the firm to produce the socially optimal quantity of electricity, the government could impose a ______ of $______per unit of electricity.

3.5, 3 tax, $75

The market equilibrium quantity is ______ units of pharmaceuticals, but the socially optimal quantity of pharmaceutical production is ______ units. To create an incentive for the firm to produce the socially optimal quantity of pharmaceuticals, the government could impose a ______ of $______per unit of pharmaceuticals.

4.5, 3 tax, $210

The market equilibrium quantity is ____ units of electric cars, but the socially optimal quantity of electric car production is ____ units.

4.5, 3.5

When Brazil adjusts its trade policy to allow free trade of limes, the price of one ton of limes in Brazil becomes $800. At this price, ___________ tons of limes will be demanded in Brazil, and ___________ tons will be supplied by domestic suppliers. Therefore, Brazil will export __________ tons of limes.

40, 160, 120

Consider a company operating in a competitive market. The company sells units of output and receives a price of $30 per unit, and pays a daily market wage of $285 to each worker it employs. In the following table, complete the column for the value of the marginal product of labor (VMPL) at each quantity of workers. Output MPL 16 16 31 15 45 14 56 11 64 8 On the following graph, use the blue points (circle symbol) to plot the firm's labor demand curve. Then, use the orange line (square symbols) to show the wage rate. (Note: If you cannot place the wage rate at the level you want, move the two end points individually.) Hint: Remember to plot each point halfway between the two integers. For example, when the number of workers increases from 0 to 1, the value of the marginal product for the first worker should be plotted with a horizontal coordinate of 0.5, the value halfway between 0 and 1. Line segments will automatically connect the points. The profit-maximizing quantity of labor at the market wage is ______.

480, 450, 420, 330, 240 Output price of $30 X each MPL 4 workers.

Suppose Venezuela is open to free trade in the world market for wheat. Since Venezuela is small relative to the international market, the demand for and supply of wheat in Venezuela have no impact on the world price. The following graph shows the domestic market for wheat in Venezuela. The world price of a ton of wheat is PW = $400. On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer surplus (CS) when the economy is at the free-trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producer surplus (PS). Because Venezuela participates in international trade in the market for wheat, it will import __________ tons of wheat.

60 tons of wheat

When they act as a profit-maximizing cartel, each company will produce _______ cans and charge ______ per can. Given this information, each firm earns a daily profit of ______, so the daily total industry profit in the beer market is ______.

70, $1.20, $28.00, $56.00 Each Firm's Profit = Total Revenue−Total Cost = (Price×Quantity)−(Average Total Cost×Quantity) = ($1.20 per can×70 cans)−($0.80 per can×70 cans) = $28.00

Suppose the market for pizza is a perfectly competitive market—that is, sellers take the market price as given. Rajiv owns a restaurant where he sells pizza. The following graph shows Rajiv's weekly supply curve, represented by the orange line. Point A represents a point along his supply curve. The price of pizza is $3.00 per slice, as shown by the horizontal black line. A) From the previous graph, you can tell that Rajiv is willing to supply his 8th slice of pizza for ______ each week. Since he receives $3.00 per slice, the producer surplus he gains from supplying the 8th slice of pizza is ______. B) Suppose the price of pizza were to rise to $3.75 per slice. At this higher price, Rajiv would receive a producer surplus of ______from the 8th slice of pizza he sells.

A) $2.25, $.75 B) $1.50

Complete the following table by determining Brian's accounting and economic profit of his guitar business

Accounting: $32,000 Accounting Profit= Total Revenue- Total Explicit Costs [722,000−($422,000+$268,000)] Economic: $9,000 Economic Profit= Total Revenue-Total Costs Economic Profit= Total Revenue- (Total Explicit Costs + Total Implicit Costs) [$722,000−(($422,000+$268,000)+($2,000+$21,000))]

For each of the regions listed in the following table, use the midpoint method to identify if the demand for this good is elastic, (approximately) unit elastic, or inelastic. Between W and X (elastic, inelastic, unit elastic) Between X and Y (elastic, inelastic, unit elastic) Between Y and Z (elastic, inelastic, unit elastic)

Between W and X (elastic) Between X and Y (unit elastic) Between Y and Z (inelastic)

The following graph shows the supply of a good. For each of the regions, use the midpoint method to identify whether the supply of this good is elastic or inelastic. Between Y and Z (elastic/inelastic) Between W and X (elastic/inelastic)

Between Y and Z (inelastic) Between W and X (elastic)

For each of the regions listed in the following table, use the midpoint method to identify if the demand for this good is elastic, (approximately) unit elastic, or inelastic. Between Y and Z (elastic, inelastic, unit elastic) Between W and X (elastic, inelastic, unit elastic) Between X and Y (elastic, inelastic, unit elastic)

Between Y and Z (inelastic) Between W and X (elastic) Between X and Y (unit elastic)

The following graph displays four supply curves (HH, II, JJ, and KK) that intersect at point A. Using the graph, complete the table that follows by indicating whether each statement is true or false. Between points A and B, curve II is unit elastic. (True/False) Curve JJ is more elastic between points A and D than curve KK is between points A and C. (True/False) Between points A and D, curve JJ is inelastic. (True/False)

Between points A and B, curve II is unit elastic. (False) Curve JJ is more elastic between points A and D than curve KK is between points A and C. (True) Between points A and D, curve JJ is inelastic. (False)

Using the graph, complete the table that follows by indicating whether each statement is true or false. Between points A and B, curve LL is perfectly elastic.(True/False) Between points A and C, curve MM is elastic. (True/False) Curve NN is less elastic between points A and D than curve MM is between points A and C. (True/False)

Between points A and B, curve LL is perfectly elastic.(True) Between points A and C, curve MM is elastic. (True) Curve NN is less elastic between points A and D than curve MM is between points A and C. (True)

Organize the goods found in the following table by indicating which is likely to have the most elastic demand, which is likely to have the least elastic demand, and which will have demand that falls in between. - Boot-cut Jeans - Pants - Clothing

Boot-cut Jeans: Most Elastic Pants: In Between Clothing: Least elastic

Again, suppose that both firms start off not advertising. If the firms decide to collude, what strategies will they end up choosing?

Both firms will choose not to advertise.

Suppose that both firms start off not advertising. If the firms act independently, what strategies will they end up choosing?

Both firms will choose to advertise.

Consider the following scenario: Suppose that a chicken farm uses a nearby stream to dispose of the wastes released by its chickens. These wastes flow downstream into a lake that has become thick with algae and polluted by the minerals in the waste matter. The local office of a nonprofit environmental organization collects enough donations to fund a campaign to stop the farm's pollution. Which of the following private solutions resolving the externality of pollution took place in this scenario? 1) Contracts 2) Integration of different types of businesses through merger or acquisition 3) Moral codes and social sanctions 4) Charities Keep in mind that sometimes private solutions to externalities are not achieved. For instance, this could occur when an excessive amount of time or money must be spent for parties to reach an agreement. This describes the problem of ______.

Charities, transaction costs

A good's price elasticity of demand depends in part on how necessary it is relative to other goods. If the following goods are priced approximately the same, which one has the least elastic demand? - Chemotherapy for cancer patients - Yacht

Chemotherapy for cancer patients

Even though I was willing to pay up to $136 for a used laptop, I bought a used laptop for only $126.

Consumer Surplus

Even though I was willing to pay up to $71 for a watch, I bought a watch for only $63.

Consumer Surplus

The following diagram shows supply and demand in the market for tablets. Use the black point (plus symbol) to indicate the equilibrium price and quantity of tablets. Then use the green point (triangle symbol) to fill the area representing consumer surplus, and use the purple point (diamond symbol) to fill the area representing producer surplus. Total surplus in this market is ______million.

Consumer Surplus = 1/2×Base×Height =1/2×200 million tablets × $100 per laptop =1/2×$20,000 million = $10,000 million

The following diagram shows supply and demand in the market for smartphones. Use the black point (plus symbol) to indicate the equilibrium price and quantity of smartphones. Then use the green point (triangle symbol) to fill the area representing consumer surplus, and use the purple point (diamond symbol) to fill the area representing producer surplus. Total surplus in this market is ______million.

Consumer Surplus = 1/2×Base×Height =1/2×210 million phones×$75 per laptop =1/2×$15,750 million = $7,875 million

The following diagram shows supply and demand in the market for laptops. Use the black point (plus symbol) to indicate the equilibrium price and quantity of laptops. Then use the green point (triangle symbol) to fill the area representing consumer surplus, and use the purple point (diamond symbol) to fill the area representing producer surplus. Total surplus in this market is ______million.

Consumer Surplus = =1/2×Base×Height =1/2×60 million laptops×$90 per laptop =1/2×$5,400 million = $2,700 million

The following problem analyzes the Paraguayan market for pears. The graph below shows the domestic supply and demand curves for pears in Paraguay. Assume that Paraguay's government does not currently permit international trade in pears. Use the black point (plus symbol) to denote the equilibrium price of one ton of pears and the equilibrium quantity of pears in Paraguay without international trade. Next, use the green triangle (triangle symbol) to shade in the area that represents consumer surplus in equilibrium. Finally, use the purple triangle (diamond symbol) to shade in the area that represents producer surplus in equilibrium. Based on the information from the previous graph, absent international trade total surplus is.

Consumer Surplus= 1/2 X ($410 per ton -$310 per ton) X 175 tons= $8,750.00 Producer Surplus= 1/2 X ($310 per ton - $210 per ton) X $175 ton= $8,750.00 Total Surplus= $8,750.00 + $8,750.00 = $17,500.00

Blinkies quantity 20 and 40 Consumer surplus after the tax is imposed Tax revenue after the tax is imposed Producer surplus after the tax is imposed

Consumer surplus after the tax is imposed (A) Tax revenue after the tax is imposed (B+D) Producer surplus after the tax is imposed (F)

Using the graph, complete the table that follows by indicating whether each statement is true or false. Curve NN is more elastic between points A and D than curve MM is between points A and C. (True/False) Between points A and E, curve OO is perfectly inelastic. (True/False) Between points A and D, curve NN is elastic. (True/False)

Curve NN is more elastic between points A and D than curve MM is between points A and C. (False) Between points A and E, curve OO is perfectly inelastic. (True) Between points A and D, curve NN is elastic. (False)

A player's best choice, if it exists, regardless of his or her opponent's strategy

Dominant Strategy

Based on the information in the second graph, when the market price of a laptop increases to $150, the number of consumers willing to buy a laptop ________ to __________ , and total consumer surplus ______ to ______ .

Decreases, two consumers, decreases, $90

Based on the information in the second graph, when the market price of a smartphone decreases to $150, the number of sellers willing to sell a smartphone ______ to ______ , and total producer surplus ______ to $______.

Decreases, two sellers, decreases, $150 Market price= $150 Brian willingness = $50 Crystal willingness= $100 $150 market price-Brian willingness of $50= $100 $150 market price-Crystal willingness of $100= $50 $100+$50= $150 producer surplus

Based on the information in the second graph, when the market price of a tablet decreases to $90, the number of sellers willing to sell a tablet ______ to______ , and total producer surplus ______ to ______.

Decreases, two sellers, decreases, $90 Market price= $90 Darnell willingness = $30 Eleanor willingness= $60 $90 market price-Darnell willingness of $30= $60 $90 market price-Eleanor willingness of $60= $30 $60+$30= $90 producer surplus

A good's price elasticity of demand depends in part on how necessary it is relative to other goods. If the following goods are priced approximately the same, which one has the most elastic demand? - Amputation procedures for diabetes sufferers - Diamond necklace

Diamond necklace

Suppose that the following graph shows a free market equilibrium, with QE as the equilibrium quantity. For an output level below QE, the value of a unit to a buyer ______ is the cost of a unit to a seller. Suppose a firm that produces for this market is able to dump toxic chemicals into a river next to its factory, which poisons wildlife and harms the health of nearby residents who have no business with the company. This scenario is characterized by ______ , which is an example of ______ .

Equal to, an externality, market failure

You can think of the result in any one game as being Jake's marginal free-throw percentage. Based on your previous answer, you can deduce that when Jake's marginal free-throw percentage is below the average, the average must be ______.

Falling

You can think of the result in any one game as being Musashi's marginal free-throw percentage. Based on your previous answer, you can deduce that when Musashi's marginal free-throw percentage is below the average, the average must be ______ .

Falling

You can now apply this analysis to production costs. For a U-shaped average total cost (ATC) curve, when the marginal cost curve is below the average total cost curve, the average total cost must be ______. Also, when the marginal cost curve is above the average total cost curve, the average total cost must be ______ . Therefore, the marginal cost curve intersects the average total cost curve ______ .

Falling, Rising, At its minimum

Suppose Sean is willing to pay a total of $280,000 for an antique car. True or False: Keeping his maximum willingness to pay for an antique car in mind, Sean will buy the antique car because it would be worth more to him than its market price of $350,000.

False

TRUE/FALSE: Assuming each student receives a positive surplus, Dina will always receive less producer surplus than Gilberto.

False

True or False: A price ceiling above $25 per box is a binding price ceiling in this market.

False

True or False: Based on the fact that both Clancy and Eileen increased production from the initial cartel quantity, you know that the output effect was smaller than the price effect at that quantity.

False

True or False: For high levels of quantity supplied where firms have reached near maximum capacity, supply becomes more elastic because firms may need to invest in additional capital in order to increase production further.

False

True or False: The value of the price elasticity of demand is equal to the slope of the demand curve.

False

True?False: Producer surplus is smaller when the price is $210 than when it is $180.

False

Based on the previous description, the trade-off Canada faces between producing smartphones and tablets is best represented by ___________.

Graph 1

Negative Externality With this type of externality, in the absence of government intervention, the market equilibrium quantity produced will be ______ than the socially optimal quantity.

Greater

Which of the following three goods is most likely to be classified as a luxury good? - Clubs - Flops - Houses

Houses

The following scenario examines markets for factors of production, which include capital and labor, used to produce furniture in the United States before the invention of electric motors. In the late 19th century, commercially successful electric motors became available and enabled furniture and many other goods to be produced more efficiently. Assuming the cost of producing capital goods is unchanged, show how the availability of electric motors affected the market for capital in the United States on the following graph. From the graph, you can deduce that the development of electric motors led the equilibrium rental price of capital in the United States to _____.

Increase

When Paraguay allows free trade, the country's producer surplus ______ by $_______, and consumer surplus by ________ $______. Therefore, the net effect of allowing international trade on Paraguay's total surplus is a ______ of $______.

Increases, $8,400, decreases, $5,600, loss, $2,800 Graphically, consumer surplus is the area below the demand curve, above the price consumers pay, and to the left of the quantity they consume. Without international trade, the domestic price of pears (PD) is $310 per ton, so consumer surplus is $8,750.00. When Paraguay opens to trade, the price of pears rises to $350 per ton (PW), and consumer surplus decreases to $3,150.00-a loss of $5,600.00. Visually, you can see on the following graph that consumer surplus decreases from areas A and B to just area A. Graphically, producer surplus is the area above the supply curve, below the price sellers receive, and to the left of the quantity produced. With no international trade, the price of pears is $310 per ton (PD), so producer surplus is $8,750.00. With international trade, the price of pears rises to $350 per ton (PW), and producer surplus rises to $17,150.00-a gain of $8,400.00. Visually, you can see on the following graph that producer surplus increases from area C to areas C, B, and D. Net Effect on Welfare= Rise in Producer Surplus - Fall in Consumer Surplus = (Area B + Area D) - Area B = $8,400 -$5,600 =$2,800 Whenever a country opens itself to international trade, there is a net increase in total welfare. When a country exports, producer surplus increases more than consumer surplus decreases.

Based on the information in the second graph, when the market price of a smartphone decreases to $50, the number of consumers willing to buy a smartphone ______ to ______ , and total consumer surplus _____ to ________ .

Increases, four consumers, increases, $240 (Willingness to pay - Market Price) for each consumer willing to pay above market price. Market price = $50 Charles= $140 Dina= $120 Gilberto= $110 Juanita= $70 Charles willingness of $140- $50 market price= $90 Dina willingness of $120- $50 market price= $70 Gilberto willingness of $110- $50 market price= $60 Juanita willingness of $70-$50= $20 $90+$70+$60+$20= $240 consumer surplus

Based on the information in the second graph, when the market price of a tablet decreases to $100, the number of consumers willing to buy a tablet ______ to ______ , and total consumer surplus ______ to $______.

Increases, four consumers, increases, $700 (Willingness to pay - Market Price) for each consumer willing to pay above market price. Market price = $100 Tim= $375 Alyssa= $325 Brian= $250 Tim willingness of $375- $100 market price= $275 Alyssa willingness of $325- $100 market price= $225 Brian willingness of $250- $100 market price= $150 Crystal willingness of $150- $100 market price= $50 $275+$225+$150+$50= $700 consumer surplus

Based on the information in the second graph, when the market price of a laptop increases to $120, the number of sellers willing to sell a laptop _______ to ______ , and total producer surplus ________ to $260.

Increases, four sellers, increases, $260 Market price= $120 Alex willingness = $20 Becky willingness= $40 Clancy willingness= $60 Eileen willingness= $100 $120 market price-Alex willingness of $20= $100 $120 market price-Becky willingness of $40= $80 $120 market price-Clancy willingness of $60= $60 $120 market price- Eileen willingness of $100= $20 $100+$80+$60+$20= $260 producer surplus

A good without any close substitutes is likely to have relatively ________________ demand, since consumers cannot easily switch to a substitute good if the price of the good rises.

Inelastic

Consider Blewitt's Farm, a small blueberry grower relative to the size of the market whose production has no impact on wages and prices. The following table presents Blewitt's production schedule for blueberries: Labor Output 0 0 1 16 2 30 3 42 4 52 5 60 Suppose that the market wage for blueberry pickers is $200 per worker per day, and the price of blueberries is $15 per pound. On the following graph, use the blue points (circle symbol) to plot Blewitt's labor demand curve when the output price is $15 per pound. Note: Remember to plot each point between the two integers. For example, when the number of workers increases from 0 to 1, the value of the marginal product of for the first worker should be plotted with a horizontal coordinate of 0.5, the value halfway between 0 and 1. Line segments will automatically connect the points. At the given wage and price level, Blewitt's should hire _______. Suppose that the price of blueberries decreases to $13 per pound, but the wage rate remains at $200. On the previous graph, use the purple points (diamond symbol) to plot Blewitt's labor demand curve when the output price is $13 per pound. Now Blewitt's should hire ______ when the output price is $13 per pound. Assuming that all blueberry-producing firms have similar production schedules, a decrease in the price of blueberries will cause the ______ blueberry pickers to ______. Suppose that wages decrease to $150 due to a decreased demand for workers in this market. Assuming that the price of blueberries remains at $13 per pound, Blewitt's will now hire ______.

Labor MPL $15 lb. 0.5 16 240 1.5 14 210 2.5 12 180 3.5 10 150 4.5 8 120 Labor MPL $13 lb. 0.5 16 208 1.5 14 182 2.5 12 156 3.5 10 130 4.5 8 104 two workers One worker demand for, decrease Three workers

Other things being equal, the demand for natural gas will tend to be ______________ elastic in the short run than in the long run.

Less

With this type of externality, in the absence of government intervention, the market equilibrium quantity produced will be ______ than the socially optimal quantity.

Less

Suppose that the following graph shows a free market equilibrium, with QE as the equilibrium quantity. For an output level below QE, the value of a unit to a buyer ______ is the cost of a unit to a seller. Suppose a firm that produces for this market employs a private security force that makes town residents, many of whom have no business with the company, feel safer. Such a situation is characterized by ______ , which is an example of ______ .

Less than, an externality, market failure

Suppose that the following graph shows a free market equilibrium, with QE as the equilibrium quantity. For an output level above QE, the value of a unit to a buyer ______ is the cost of a unit to a seller. Suppose a firm that produces for this market is able to influence the market price, which leads to an outcome that differs from the free market equilibrium shown in the previous graph. Such a situation is characterized by ______ , which is an example of ______ .

Less than, market power, inefficiency

The increase in the amount of output from an additional unit of labor

Marginal Product of Labor

The graphical representation of the relationship between the wage rate and the quantity of labor workers are willing to provide in a market

Market Labor SUpply Curve

The graphical representation of the relationship between the wage rate and the quantity of labor firms are willing to hire in a market

Market Labor Supply Curve

The following graph shows the daily demand curve for bikes in Houston.

Point A- (p80, q63) Point B- (p60, q72)

Suppose a municipality votes to reduce the combined pollution introduced by three local companies. Presently, each firm creates 4 units of pollution in the area, for a total of 12 pollution units. The government can reduce total pollution in the area to 6 units by choosing between the following two methods: 1. The government imposes pollution standards using regulation. 2. The government issues tradable pollution permits. The costs faced by each firm are different, so it is more difficult for some firms to reduce pollution than others. The following table shows the cost faced by each firm to eliminate each unit of pollution. Assume that the cost of eliminating all 4 units of pollution (that is, reducing pollution to zero) is prohibitively expensive for all three firms. Next, suppose that two government officials proposed alternative plans that would reduce pollution by 6 units. Method 1: Regulation The first government employee suggests reducing pollution through regulation. To meet the pollution goal, the government requires each firm to reduce its pollution by 2 units. Complete the following table with the total cost to each firm of reducing its pollution by 2 units. Method 2: Tradable Permits Meanwhile, the other employee proposes using a different strategy to achieve the government's goal of reducing pollution in the area from 12 units to 6 units. This employee suggests that the government issue two pollution permits to each firm. For each permit a firm has in its possession, it can emit 1 unit of pollution. Firms are free to trade pollution permits with one another (that is, buy and sell them) as long as both firms can agree on a price. For example, if firm A agrees to sell a permit to firm B at an agreed-upon price, then firm B would end up with three permits and would need to reduce its pollution by only 1 unit while firm A would end up with only one permit and would have to reduce its pollution by 3 units. Assume the negotiation and exchange of permits are costless. Because firm C has high pollution-reduction costs, it thinks it might be better off buying a permit from firm B and a permit from firm A so that it doesn't have to reduce its own pollution emissions. At which of the following prices is firm B willing to sell one of its permits to firm C, but firm A is not? Check all that apply. 1) $123 2) $212 3) $219 4) $569 5) $595 Suppose the the government has set the trading price of a permit at $218 per permit. Complete the following table with the action each firm will take at this permit price, the amount of pollution each firm will eliminate, and the amount it costs each firm to reduce pollution to the necessary level. If a firm is willing to buy two permits, assume that it buys one permit from each of the other firms. (Hint: Do not include the prices paid for permits in the cost of reducing pollution.) In this case, you can conclude that eliminating pollution is ______ costly to society when the government distributes tradable permits than when it regulates each firm to eliminate a certain amount of pollution.

Method A- Firm A: 295 Firm B: 205 Firm C: 1,350 Method B- $123, $569, $595 Firm A: Don't Buy/sell; 2 units; $295 Firm B: Sell one permit; 3 units, $345 Firm C: Buy one permit; 1 unit, $600 Regulation: $1,850 Tradable Permits: $1,240 less

Compared to the short-run demand for oil, the demand for oil in the long run will tend to be____________________ elastic.

More

Sizzler's produces charcoal grills in a small manufacturing facility and sells the grills in a competitive market. The following table presents the company's production function: Labor Output 0 0 1 90 2 175 3 245 4 300 5 325 Calculate the marginal product of labor (MPL) of each worker, and then plot the MPL curve on the following graph using the blue points (circle symbol). Note: Remember to plot each point halfway between two integers. For example, when the number of workers increases from 0 to 1, the MPL of the first worker should be plotted with a horizontal coordinate of 0.5, the value halfway between 0 and 1. Line segments will automatically connect the points. Given the company's marginal product of labor curve shown on the second graph, line ______ on this graph shows Sizzler's demand for labor when the price of a grill is $1.50, and line ______ shows Sizzler's demand for labor when the price of a grill is $2.00.

N and O

A set of strategies (one for each player) in which each player's strategy is the best option for that player, given the chosen strategy of the player's opponents

Nash Equilbrium

An externality arises when a firm or person engages in an activity that affects the well-being of a third party, yet neither pays nor receives any compensation for that effect. If the impact on the third party is adverse, it is called a ______ externality.

Negative

I paid $70 for a used textbook last week. This week, the same store is selling textbooks for $61.

Neither Consumer Surplus or Producer Surplus

I sold a jersey sweater for $26 on eBay last week. This week, someone offered me $45 for it.

Neither consumer surplus or producer surplus

When cities prevent landlords from charging market rents, which of the following are common long-run outcomes? Check all that apply.

Nonprice methods of rationing emerge. The quality of rental housing units falls.

Blinkie quantity at 28 and 36 The following graph represents the demand and supply for blinkies (an imaginary product). The black point (plus symbol) indicates the pre-tax equilibrium. Suppose the government has just decided to impose a tax on this market; the grey points (star symbol) indicate the after-tax scenario. Per-unit tax Equilibrium quantity AFTER tax Price producers receive BEFORE tax

Per-unit tax =$8.00 Equilibrium quantity AFTER tax= 28 Price producers receive BEFORE tax= $18.00

An externality arises when a firm or person engages in an activity that affects the well-being of a third party, yet neither pays nor receives any compensation for that effect. If the impact on the third party is beneficial, it is called a _________ externality.

Positive A negative externality is a cost that a third party incurs from someone else's economic activity. A positive externality is a benefit that a third party receives from someone else's economic activity.

On the following graph, use the green point (triangle symbol) to plot the annual total revenue when the market price is $40, $60, $80, $100, $120, $140, and $160 per bike.

Price Quantity Total Revenue ($ per bike) (Bikes) (Dollars) 40 81 3,240 60 72 4,320 80 63 5,040 100 54 5,400 120 45 5,400 140 36 5,040 160 27 4,320 Total Revenue= Price (p) X Quantity (q) = $40 per bike x 81 bikes per day = $3,240 per day

A measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price

Price elasticity of demand

Blinkies quantity 20 and 40 The following graph represents the demand and supply for blinkies (an imaginary product). The black point (plus symbol) indicates the pre-tax equilibrium. Suppose the government has just decided to impose a tax on this market; the grey points (star symbol) indicate the after-tax scenario. Find the value of the following. Price producers receive after tax Per-unit tax Equilibrium quantity before tax

Price producers receive after tax= $6.00 Per-unit tax= $8.00 Equilibrium quantity before tax= 40

A case in which individually rational behavior leads to a jointly inefficient outcome

Prisoners' Dilemma Game

I sold a used textbook for $43, even though I was willing to go as low as $36 in order to sell it.

Producer Surplus

I sold a watch for $62, even though I was willing to go as low as $52 in order to sell it.

Producer Surplus

Blinkie quantity at 28 and 36 Producer surplus after the tax is imposed Deadweight loss after the tax is imposed Consumer surplus before the tax is imposed

Producer surplus after the tax is imposed (F) Deadweight loss after the tax is imposed (C, E) Consumer surplus before the tax is imposed (A, B, C)

You can think of the result in any one game as being Carlos's marginal free-throw percentage. Based on your previous answer, you can deduce that when Carlos's marginal free-throw percentage is above the average, the average must be ______.

Rising

Sizzler's produces charcoal grills in a small manufacturing facility and sells the grills in a competitive market. The following table presents the company's production function: Labor Output 0 0 1 80 2 150 3 210 4 250 5 270 Calculate the marginal product of labor (MPL) of each worker, and then plot the MPL curve on the following graph using the blue points (circle symbol). Note: Remember to plot each point halfway between two integers. For example, when the number of workers increases from 0 to 1, the MPL of the first worker should be plotted with a horizontal coordinate of 0.5, the value halfway between 0 and 1. Line segments will automatically connect the points. Given the company's marginal product of labor curve shown on the second graph, line ______ on this graph shows Sizzler's demand for labor when the price of a grill is $1.00, and line ______ shows Sizzler's demand for labor when the price of a grill is $2.00.

The MPL represents the additional output gained from an additional worker. Hiring the first worker increases output by 80 grills, so the MPL is 80 grills. Thus, the first point on the MPL curve is (0.5, 80). Increasing the number of workers from 1 to 2 raises production from 80 to 150, so the marginal product is equal to 150 grills−80 grills=70 grills. Thus, (1.5, 70) is another point on the MPL curve. O and N Sizzler's demand for labor depends on the value it receives from hiring workers. The value of the marginal product of labor (VMPL) measures exactly that because it is the additional revenue resulting from the sale of output produced by an additional worker. Since revenue is equal to output times price, the VMPL is equal to MPL times price. Therefore, the demand for labor when the price is $1.00 is equal to the MPL curve with the vertical coordinates multiplied by $1.00, and the demand for labor when the price is $2.00 is equal to the MPL curve times $2.00. The following table summarizes the VMPL using the two different prices: Labor= 0, 1, 2, 3, 4, 5 Output= 80, 150, 210, 250, 270 MPL= 80, 70, 60, 40, 20 VPL with P= $1.00= $80.00, $70.00, $60.00, $40.00, $20.00 VMPL with P=$2.00= $160, $140, $120, $80, $40

Suppose that, in a competitive market without government regulations, the equilibrium price of milk is $2.50 per gallon. Complete the following table by indicating whether each of the statements is an example of a price ceiling or a price floor and whether it is binding or nonbinding. The government prohibits grocery stores from selling milk for more than $3.00 per gallon. (Price Ceiling/Price Floor/Binding/Not Binding) The government has instituted a legal minimum price of $3.00 per gallon for milk.(Price Ceiling/Price Floor/Binding/Not Binding) Due to new regulations, grocery stores that would like to pay better wages in order to hire more workers are prohibited from doing so. (Price Ceiling/Price Floor/Binding/Not Binding)

The government prohibits grocery stores from selling milk for more than $3.00 per gallon. (Price Ceiling/Not Binding) The government has instituted a legal minimum price of $3.00 per gallon for milk.(Price Floor/Binding) Due to new regulations, grocery stores that would like to pay better wages in order to hire more workers are prohibited from doing so. (Price Ceiling/Binding)

Suppose that, in a competitive market without government regulations, the equilibrium price of donuts is $1.50 each. Complete the following table by indicating whether each of the statements is an example of a price ceiling or a price floor and whether it is binding or nonbinding. There are many teenagers who would like to work at donut shops, but they are not hired due to minimum-wage laws.(Price Ceiling/Price Floor/Binding/Not Binding) The government prohibits donut shops from selling donuts for more than $2.00 each.(Price Ceiling/Price Floor/Binding/Not Binding) The government has instituted a legal minimum price of $1.00 each for donuts.(Price Ceiling/Price Floor/Binding/Not Binding)

There are many teenagers who would like to work at donut shops, but they are not hired due to minimum-wage laws.(Price Floor/Binding) The government prohibits donut shops from selling donuts for more than $2.00 each.(Price Ceiling/Not Binding) The government has instituted a legal minimum price of $1.00 each for donuts.(Price Floor/Not Binding)

Suppose that, in a competitive market without government regulations, the equilibrium price of gasoline is $4.00 per gallon. Complete the following table by indicating whether each of the statements is an example of a price ceiling or a price floor and whether it is binding or nonbinding. There are many teenagers who would like to work at gas stations, but they are not hired due to minimum-wage laws. (Price Ceiling/Price Floor/Binding/Not Binding) The government prohibits gas stations from selling gasoline for more than $3.70 per gallon. (Price Ceiling/Price Floor/Binding/Not Binding) The government has instituted a legal minimum price of $3.70 per gallon for gasoline.(Price Ceiling/Price Floor/Binding/Not Binding)

There are many teenagers who would like to work at gas stations, but they are not hired due to minimum-wage laws. (Price Floor/Binding) The government prohibits gas stations from selling gasoline for more than $3.70 per gallon. (Price Ceiling//Binding) The government has instituted a legal minimum price of $3.70 per gallon for gasoline.(Price Floor/Not Binding)

Meekertonian consumers were worse off without free trade than they are with it.

True

Suppose Ike's Bikes is expecting to produce 500 bikes per month for several years. In this case, in the long run, it would choose to produce bikes using ______ .

Three Factories

Based on the information on the previous graph, you can tell that ______ will buy smartphones at the given market price, and total consumer surplus in this market will be _________.

Three consumers $100 (Willingness to pay - Market Price) for each consumer willing to pay above market price. Market price = $90 Charles= $140 Dina= $120 Gilberto= $110 Charles willingness of $140- $90 market price= $50 Dina willingness of $120- $90 market price= $30 Gilberto willingness of $110- $90 market price= $20 $50+$30+$20= $100 consumer surplus

Based on the information on the previous graph, you can tell that ______ will buy laptops at the given market price, and total consumer surplus in this market will be ______.

Three consumers $240

Based on the information on the previous graph, you can tell that ______ will buy tablets at the given market price, and total consumer surplus in this market will be ______.

Three consumers, $350 (Willingness to pay - Market Price) for each consumer willing to pay above market price. Market price = $200 Tim= $375 Alyssa= $325 Brian= $250 Tim willingness of $375- $200 market price= $175 Alyssa willingness of $325- $200 market price= $125 Brian willingness of $250- $200 market price= $50 $175+$125+$50= $350 consumer surplus

Based on the information on the preceding graph, you can tell that _______ will sell tablets at the given market price, and total producer surplus in this market will be ______.

Three sellers, $240 Market price= $150 Darnell willingness = $30 Eleanor willingness= $60 Jacques willingness= $120 $150 market price-Darnell willingness of $30= $120 $150 market price-Eleanor willingness of $60= $90 $150 market price-Jacques willingness of $120= $30 $120+$90+$30= $240 producer surplus

Based on the information on the preceding graph, you can tell that ______ will sell laptops at the given market price, and total producer surplus in this market will be ______.

Three sellers, $240 Market price= $80 Alex willingness = $20 Becky willingness= $40 Clancy willingness= $60 $80 market price-Alex willingness of $20= $60 $80 market price-Becky willingness of $40= $40 $80 market price-Clancy willingness of $60= $20 $60+$40+$20= $120 producer surplus

Based on the information on the preceding graph, you can tell that ______ will sell smartphones at the given market price, and total producer surplus in this market will be $______.

Three sellers, $400 Market price= $250 Brian willingness = $50 Crystal willingness= $100 Edison willingness= $200 $250 market price-Brian willingness of $50= $200 $250 market price-Crystal willingness of $100= $150 $250 market price-Edison willingness of $200= $50 $200+$150+$50= $400 producer surplus

The law of diminishing marginal product of labor is demonstrated by which of the following?

Total output increases at a decreasing rate as you increase the quantity of labor.

Assuming each student receives a positive surplus, Antonio will always receive more producer surplus than Caroline.

True

The additional revenue the firm receives from selling the output produced from an additional unit of labor

Value of the Marginal Product of Labor

Brian's Performance Pizza is a small restaurant in San Diego that sells gluten-free pizzas. Brian's very tiny kitchen has barely enough room for the two ovens in which his workers bake the pizzas. Brian signed a lease obligating him to pay the rent for the two ovens for the next year. Because of this, and because Brian's kitchen cannot fit more than two ovens, Brian cannot change the number of ovens he uses in his production of pizzas in the short run. However, Brian's decision regarding how many workers to use can vary from week to week because his workers tend to be students. Each Monday, Brian lets them know how many workers he needs for each day of the week. In the short run, these workers are ______ inputs, and the ovens are _____ inputs.

Variable input Fixed

If the equilibrium price of is above the price ceiling, the ceiling is

a binding constraint on the market.

Price Cieling

a legal maximum on the price at which a good can be sold.

If the equilibrium price is below the price floor, the price floor is

binding constraint on the market.

Two goods are said to be _______ when an increase in the price of one good decreases the quantity demanded for the other or when a decrease in the price of one good increases the quantity demanded for the other.

complements

In a market with a binding price ceiling, increasing the ceiling price will

decrease the shortage.

Oligopolists often behave noncooperatively and act in their own self-interest even though this decreases total profit in the market. Again, assume the two companies form a cartel and decide to work together. Both firms initially agree to produce half the quantity that maximizes total industry profit. Now, suppose that Mays decides to break the collusion and increase its output by 50%, while McCovey continues to produce the amount set under the collusive agreement. Mays's deviation from the collusive agreement causes the price of a can of beer to ______ to ______ per can. Mays's profit is now ______, while McCovey's profit is now ______. Therefore, you can conclude that total industry profit ______ when Mays increases its output beyond the collusive quantity.

decrease, $1.10, 31.50, 21.00, decrease Mays's Profit = Total Revenue−Total Cost = (Price×Quantity)−(Average Total Cost×Quantity) = ($1.10 per can×105 cans)−($0.80 per can×105 cans) = $31.50 tMcCovey's Profit = Total Revenue−Total Cost = (Price×Quantity)−(Average Total Cost×Quantity) = ($1.10 per can×70 cans)−($0.80 per can×70 cans) = $21.00

After Clancy implements his new plan, the price of water ______ to ______ per gallon. Given Eileen and Clancy's production levels, Clancy's profit becomes ______ and Eileen's profit becomes ______

decreases, $2.50, $450.00. $337.50

Based on your analysis, as a result of the tariff, Venezuela's consumer surplus _________ by $___________, producer surplus __________ by $ __________, and the government collects $ _________ in revenue. Therefore, the net welfare effect is a ________ of $___________.

decreases, $3,900, increases, $2,100, $1,200, loss, $600

Demand for a good is said to be _________ if the quantity demanded responds substantially to changes in the price.

elastic

Demand is considered __________ when the elasticity is greater than one, which means the quantity moves proportionately more than the price.

elastic

Luxuries have ____________ demands

elastic

Consider the imaginary economy of Meekerton and the market for meekies, a hypothetical good. Without international trade the domestic price of meekies is $28. Suppose that the world price of meekies is $35. Assume that if it were to enter the international market for meekies, Meekerton is too small to influence the world price. If Meekerton decides to participate in free trade, then it will _________ meekies

export

This exercise examines the effect of a good season of weather in North Dakota on the price of wheat in the United States and daily wages of wheat harvesters in Kansas. Assume that buyers of wheat have no preference for wheat grown in North Dakota versus Kansas. On the following graph, show the effect the good season of weather in North Dakota has on the market for wheat in the United States by shifting either the demand curve, the supply curve, or both. Based on the graph for the market for wheat in the United States, the good season has caused the price of wheat in the United States to ______. As a result of the change in the price of wheat, the wage level for wheat pickers in Kansas ______.

fall, decreases

Meekertonian consumers were worse off without free trade than they are with it.

false

Meekertonian producers are worse off under free trade than they were before.

false

average fixed cost

fixed cost divided by the quantity of output

Consider the imaginary economy of Meekerton and the market for meekies, a hypothetical good. Without international trade the domestic price of meekies is $35. Suppose that the world price of meekies is $21. Assume that if it were to enter the international market for meekies, Meekerton is too small to influence the world price. If Meekerton decides to participate in free trade, then it will __________ meekies.

import

When Brazil allows free trade, the country's producer surplus __________ by $__________, and consumer surplus __________ by __________. Therefore, the net effect of allowing international trade on Brazil's total surplus is a __________ of $__________.

increases, $19,500, decreases $10,500, gain, $9,000

When Burundi allows free trade, the country's producer surplus __________ by $__________, and consumer surplus __________ by $__________. Therefore, the net effect of allowing international trade on Burundi's total surplus is a __________ of $__________.

increases, $6,600, decreases, $5,400, gain, $1,200

Demand is considered ___________ when the elasticity is less than one, which means the quantity moves proportionately less than the price.

inelastic

Demand is said to be _____________ if the quantity demanded responds only slightly to changes in the price.

inelastic

In general, in order for a price decrease to cause a decrease in total revenue, demand must be __________ .

inelastic

Necessities tend to have _____________ demands

inelastic

Suppose Canada produces only tablets and smartphones. The resources that are used in the production of these two goods are not specialized—that is, the same set of resources is equally useful in producing both smartphones and tablets. The shape of Canada's production possibilities frontier (PPF) should reflect the fact that as Canada produces more smartphones and fewer tablets, the opportunity cost of producing each additional smartphone _______________ .

remains constant

Because it takes many years before newly planted orange trees bear fruit, the supply curve in the short run is almost vertical. In the long run, farmers can decide whether to plant oranges on their land, to plant something else, or to sell their land altogether. Therefore, the long-run supply of oranges is much more price sensitive than the short-run supply of oranges. Assuming that the long-run demand for oranges is the same as the short-run demand, you would expect a binding price ceiling to result in a (surplus/shortage) that is (smaller/larger) in the long run than in the short run.

shortage/larger

Two goods are said to be _________ when an increase in the price of one good increases the quantity demanded for the other or when a decrease in the price of one good decreases the quantity demanded for the other

substitutes

To create an incentive for the firm to produce the socially optimal quantity of electric cars, the government could impose a ______ of $______per unit of electric cars.

tax, $240

Consumer Surplus

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

The price floor is not binding when

the equilibrium price is above the floor.

The price ceiling is not binding when

the equilibrium price is below the ceiling.

Willingness to Pay

the maximum amount that a buyer will pay for a good