eco 2023 unit 3 exam (quiz n exam practice answers)
chad is willing to pay $5.00 to get his first cup of morning latte. he buys a cup from a vendor selling latte for $3.75 per cup. chad's consumer surplus is
$1.25 (5-3.75=1.25)
refer to figure 8-6. the tax results in a deadweight loss that amounts to
$1500 (deadweight loss: 10x300x1/2=1500)
refer to figure 14-7. when the price of a good is $175, the firm's maximum profit is
$25,750 (profit per unit=175-125=50; profit = 50x515[profit-maximizing qty]=25750)
refer to figure 7-12. if the equilibrium price is $350, what is the producer surplus?
$30,000 (300x200x1/2=30000)
refer to figure 14-1. the firm's short-run supply curve is its marginal cost curve above
$4.50
refer to table 14-4. for this firm, the marginal revenue is
$5
refer to figure 7-1. if the price of the good is $250, then consumer surplus amounts to
$50 (300-250=50)
refer to table 13-2. what is the marginal product of the third worker
100 units (2nd worker- 500, 3rd worker- 600; 600-500=100)
Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. Together Kate and William can arrange 35 bouquets per day. What is William's marginal product?
15 bouquets
refer to table 14-8. the firm should not produce an output level beyond
5 units
refer to figure 7-10. when the price rises from p1 to p2, which area represents the increase in producer surplus to existing producers?
ABGD (DGH on the figure represents the surplus of newly entering producers)
refer to figure 7-4. which area represents consumer surplus at a price of P2?
AFG
refer to figure 7-24. if the government imposes a price floor at $18, then consumer surplus is
AGH
refer to figure 8-1. suppose the government imposes a tax of p'- p'''. total surplus after the tax is measured by the area
J+K+L+M
refer to figure 8-1. suppose the government imposes a tax of p'- p'''. the producer surplus after the tax is measured by the area
M
marginal cost is equal to
^TC/^Q (^ represents a triangle)
on a graph, consumer surplus is represented by the area
below the demand curve and above the price
refer to table 7-1. if the price of the product is $110, then who would be willing to purchase the product
calvin, sam, and andrew
refer to figure 7-21. when the price is p1, area b represents
consumer surplus
total surplus with a tax is equal to
consumer surplus plus producer surplus plus tax revenue
profit-maximizing firms in a competitive market produce an output level where
marginal cost equals marginal revenue
at the profit-maximizing level of output
marginal revenue equals marginal cost
Which of the following is not a common resource?
national defense
refer to figure 14-1. if the market price is $4.00, the firm will earn
negative economic profits and shut down.
refer to figure 14-1. if the market price rises above $6.30, the firm will earn
positive economic profits in the short run.
refer to figure 8-6. what happens to producer surplus when the tax is imposed in this market?
producer surplus falls by $1,800. (producer surplus w/o the tax=8x600x1/2=2400; ps with the tax=600; ps decrease by 2400-600=1800)
for a firm, the production function represents the relationship between
quantity of inputs and quantity of output
A free rider is a person who
receives the benefit of a good but avoids paying for it
refer to figure 13-2. as the number of workers increases,
total output increases, but at a decreasing rate
profit is defined as
total revenue minus total cost
when the price is p1, area b+c represents
total surplus
refer to figure 7-14. if the government imposes a price ceiling of $50 in this market, then the new producer surplus will be
$100 (PS when there is the $50 price ceiling; 40x5x1/2=100)
refer to figure 7-25. at the equilibrium price, total surplus is
$1152 (48x48x1/2=1152)
refer to figure 14-3. if the market price is $10, what is the firm's short-run economic profit?
$15
refer to table 7-1. if the price of the product is $135, then the total consumer surplus is
$15 (calvin will buy and get consumer surplus: 150-135=15; sam is indifferent between buying and not buying. if sam buys his surplus = 135-135=0)
refer to figure 7-7. what is the consumer surplus if the price is $100?
$2500 (100x50x1/2=2500)
refer to table 7-10. if the market price is $1000, the producer surplus in the market is
$300 evaline: $900 (1000-900=100) carlos: $800 (1000-800=200) total: 100+200=300
refer to figure 8-6. when the government imposes the tax in this market, tax revenue is
$3000 (tax revenue=10x300=3000)
refer to table 13-8. what is the average fixed cost of producing 5 units of output?
$4 (20/5=4)
refer to table 13-8. what is the average variable cost of producing 5 units of output?
$40 (200/5=40)
refer to figure 7-14. at the equilibrium price, producer surplus is
$400 (PS=80x10x1/2=400)
refer to table 7-3. if the price is $20, then consumer surplus in the market is
$45, and quilana, wilbur, and ming-la purchase the good quilana: CS = 25-20 = 5 wilbur: 35-20= 15 ming-la: 45-20= 25 total: 45
refer to figure 8-6. total surplus with the tax in place is
$4500 (TS=CS+PS+tax revenue; =900+600+3000=4500)
refer to table 14-4. for this firm, the price is
$5
refer to table 13-8. what is the marginal cost of producing the fifth unit of output?
$70 (4th unit- 130, 5th unit- 200; 200-130=70)
refer to table 7-10. if the market price is $1200, the producer surplus in the market is
$800 (abby and bobby won't sell because their cost is higher than the price, abby: $1600 and bobby: $1300; producer surplus: 1200-1100=100, 1200-900=300, 1200-800=400 —> total=800)
taxes cause deadweight losses because taxes
-reduce the sum of producer and consumer surpluses by more than the amount of tax revenue -prevent buyers and sellers from realizing some of the gains from trade -cause marginal buyers and marginal sellers to leave the market, causing the quantity sold to fall
Suppose a certain firm is able to produce 165 units of output per day when 15 workers are hired. The firm is able to produce 181 units of output per day when 16 workers are hired, holding other inputs fixed. The marginal product of the 16th worker is
16 units of output
refer to table 13-2. what is the marginal product of the second worker?
200 units (1st worker: 300, 2nd worker: 500; 500-300=200)
refer to table 13-1. what is total output when 1 worker is hired?
30 (0+30=30)
refer to table 13-9. what is the marginal product of the third worker?
60 units (2nd worker: 180, third worker: 240; 240-180=60)
Without government intervention, public goods tend to be
underproduced and common resources tend to be overconsumed.
consumer surplus is equal to the
value to buyers - amount paid by buyers
in the short run, a firm incurs fixed costs
whether it produces output or not
the maximum price that a buyer will pay for a good is called
willingness to pay
refer to figure 7-4. when the price falls from p1 to p2, which area represents the increase in consumer surplus to new buyers entering the market
ABC
refer to figure 7-4. when the price falls from p1 to p2, which area represents the increase in consumer surplus to new buyers entering the market
ABC (BCGD represents the increase in existing buyers' surplus)
refer to figure 7-24. at equilibrium, total surplus is measured by the area
ABD
refer to figure 7-4. when the price falls from p1 to p2, which area represents the increase in consumer surplus to existing buyers
BCGD
refer to figure 7-10. which area represents the increase in producer surplus when the price rises from p1 to p2 due to new producers entering the market?
DGH
Which of the following goods is rival in consumption and excludable?
DVD
refer to figure 8-1. suppose the government imposes a tax of p'-p'''. the deadweight loss due to the tax is measured by the area
I+Y
refer to figure 8-1. suppose the government imposes a tax of p'- p'''. the consumer surplus after the tax is measured by the area
J
refer to figure 8-1. suppose the government imposes a tax of p'- p'''. the tax revenue is measured by the area
K+L
refer to figure 14-2. which of the four pieces corresponds to a firm earning negative economic profits in the short run but trying to remain open?
Pc
refer to figure 14-2. which of the four pieces corresponds to a firm earning negative economic profits in the short run and shutting down?
Pd
When a free-rider problem exists,
The market will devote too few resources to the production of the good.
Which of the following is an example of the Tragedy of the Commons?
The number of satellites increases to the point where they begin running into each other.
if a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then
a one-unit increase in output will increase the firm's profit.
if an allocation of resources is efficient, then
all potential gains from trade among buyers are sellers are being realized.
marginal cost tells us the
amount by which total cost rises when output is increased by one unit
which of the following expressions is correct? a. marginal cost = (change in quantity of output)/(change in total cost) b. average total cost = (total cost)/(quantity of output) c. total cost = variable cost + marginal cost d. average variable cost = (quantity of output)/(total variable cost)
average total cost = (total cost)/(quantity of output)
refer to table 14-7. if the firm is currently producing 14 units, what would you advise the owners?
continue to operate at 14 units
if a competitive form is currently producing a level of output at which marginal cost exceeds the marginal revenue, then
decreasing output would increase the firm's profit
total surplus is
equal to the total value to buyers minus the total cost to sellers
Suppose a profit-maximizing firm in a competitive market produces rubber bands. When the market price for rubber bands falls below the minimum of its average total cost, but still lies above the minimum of average variable cost, in the short run the firm will
experience losses but will continue to produce rubber bands
some costs do not vary with the quantity of output produced. those costs are called
fixed costs
total cost can be divided into two types of costs:
fixed costs and variable costs
in a competitive market the current price is $5. the typical firm in the market has ATC=$5.50 and AVC=$4.50
in the short run firms will continue to operate, but in the long run firms will leave the market
Private decisions about consumption of common resources and production of public goods usually lead to an
inefficient allocation of resources and external effects
winona's fudge shoppe is maximizing profits by producing 1000 pounds of fudge per day. if winona's fixed costs unexpectedly increase and the market price remains constant, then the short run profit-maximizing level of output
is still 1000 pounds
if a competitive firm is selling 900 units of its product at a price of $10 per unit and earning positive profit, then
its average total cost is less than $10.
refer to figure 14-1. the firm should shut down if the market price is
less than $4.50
in the short run, a firm operating in a competitive industry will shut down if price is
less than average variable cost
economists normally assume that the goal of a firm is to
maximize its profit
willingness to pay
measures the value that a buyer places on a good
refer to figure 14-1. if the market price is $5.00, the firm will earn
negative economic profits in the short run but remain in business.
When a good is excludable,
people can be prevented from using the good
the marginal product of an input in the production process is the increase in
quantity of output obtained from an additional unit of that input
The Tragedy of the Commons results when a good is
rival in consumption and not excludable
the government's benefits from a tax can be measured by
tax revenue
producer surplus is
the amount a seller is paid minus the cost of production
consumer surplus
the amount of a good that a consumer can buy at a price below equilibrium price
harry's hotdogs is a small street vendor business owned by harry huggins. harry is trying to get a better understanding of his costs by categorizing them as fixed or variable. which of the following costs are most likely to be considered fixed costs?
the cost of bookkeeping services
what happens to the total surplus in a market when the government imposes a tax?
total surplus decreases
we can say that the allocation of resources is efficient if
total surplus is maximized
