Eco Mid 2

The figure below shows the supply and demand curves for jeans in Smallville. Suppose jeans initially sell for $60 per pair. If the price of jeans falls to $40 per pair, then total economic surplus will increase by ______ per day.

$160

Two firms, Kegareta Inc. and Sucio Enterprises, have access to five production processes, each one of which has a different cost and gives off a different amount of pollution. The daily costs of the processes and the corresponding number of tons of smoke emitted are shown in the accompanying table. ABCDE 4 tons/day3 tons/day2 tons/day1 tons/day0 tons/dayKegareta Inc.$40$85$135$190$250Sucio Enterprises$120$175$250$345$460 Suppose the government imposes a tax of $56 per day on each ton of smoke emitted. Assuming the revenue the government collects from the tax is used to offset other taxes, what's the total cost to society of this policy?

$205 per day

Two firms, Kegareta Inc. and Sucio Enterprises, have access to five production processes, each one of which has a different cost and gives off a different amount of pollution. The daily costs of the processes and the corresponding number of tons of smoke emitted are shown in the accompanying table. ABCDE 4 tons/day3 tons/day2 tons/day1 tons/day0 tons/dayKegareta Inc.$40$85$135$190$250Sucio Enterprises$120$175$250$345$460 If the government requires each firm to cut its emissions by 50 percent, what would be the total cost to society of this policy?

$225 per day

The accompanying figure shows the demand curve, marginal revenue curve, marginal cost curve and average total cost curve for a monopolist. At this monopolist's profit-maximizing level of output, the deadweight loss to society equals:

$24 per day.

The city of New Orleans has 200 advertising companies, 199 of which employ designers of normal ability at a salary of $100,000 a year. The firms that employ designers of normal ability each collect $600,000 in revenue a year, which is just enough to ensure that each earns exactly a normal profit. However, the 200th company employs Janus Jacobs, an unusually talented designer. Because of Jacobs's talent, this company collects $1,000,000 in revenue a year. a. How much will Jacobs earn?$ per year. What proportion of her annual salary will be economic rent?Instructions: Enter your response as a percentage rounded to the nearest whole number. %. b. Will the advertising company for which Jacobs works be able to earn an economic profit? multiple choiceYesNo a) is greater than the privately optimal quantity. b) is less than the privately optimal quantity. Incorrect c) could be greater than or less than the privately optimal quantity.

5000000 per year 80% NO

Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood that anyone will get this flu decreases as more people receive the vaccine. One of the demand curves below represents the private demand for the vaccine and the other represents the social demand for the vaccine. The private demand for the vaccine is given by ______, and social demand for the vaccine is given by ______.

D1; D2

Consider the accompanying payoff matrix. Player B LeftRightPlayer AUp60 for A70 for A60 for B5 for BDown5 for A50 for A70 for B50 for B Is this game a prisoner's dilemma?

No.

Carmen listens to opera music every evening when she gets home from work. Carmen loves listening to opera, but her neighbor Paul, who can also hear the music, hates it. If Paul is the only person besides Carmen who can hear the music, then Carmen's music generates:

a negative externality.

The owner of a thriving business wants to open a new office in a distant city. If he can hire someone who will manage the new office honestly, he can afford to pay that person a weekly salary of $2,000 ($1,000 more than the manager would be able to earn elsewhere) and still earn an economic profit of $800. The owner's concern is that he will not be able to monitor the manager's behavior and that the manager would therefore be in a position to embezzle money from the business. The owner knows that if the remote office is managed dishonestly, the manager can earn $4,500, which results in an economic loss of $600 per week. (Hint: Construct a decision tree to help you answer the questions below.) a. If the owner believes that all managers are narrowly self-interested income maximizers, will he open the new office? YES/NO b. Suppose the owner knows that a managerial candidate condemns dishonest behavior, and who would be willing to pay up to $7,000 to avoid the guilt she would feel if she were dishonest. Will the owner open the remote office? NO/YES

a) No b) yes

Jill and Jack both have two pails that can be used to carry water down from a hill. Each makes only one trip down the hill, and each pail of water can be sold for $5. Carrying the pails of water down requires considerable effort. Both Jill and Jack would be willing to pay $4 each to avoid carrying one pail down the hill, and an additional $4 to avoid carrying a second pail down the hill .a. If Jack and Jill each must decide whether to carry one or two pails of water down from the top of the hill, how many pails will each child choose to carry?2 Numeric Response 1.Edit Unavailable.. _____________pail(s) b. Jill and Jack's parents are worried that the two children don't cooperate enough with one another. Suppose they make Jill and Jack share equally their revenues from selling the water. Given that both are self-interested, construct the payoff matrix for the decisions Jill and Jack face regarding the number of pails of water each should carry.

a. 2 for each b. Carry 1 pall 1 carry palls 3.5 for Jack -.5 for jill carry 2 pails -0.5 for Jack 3.5 for Jill 2. for each

Tracy and Amy are playing a game in which Tracy has the first move at X in the decision tree shown below. Once Tracy has chosen either the top or bottom branch at X, Amy, who can see what Tracy has chosen, must choose the top or bottom branch at Y or Z. Both players know the payoffs at the end of each branch. In the equilibrium this game, Tracy chooses the ______ branch, and then Amy chooses the ______ branch.

bottom; top

Phoebe keeps a bee farm next door to an apple orchard. She chooses her optimal number of beehives by selecting the honey output level at which her private marginal benefit from beekeeping equals her private marginal cost. Use the following graph to answer the questions below. a. Assuming that Phoebe's private marginal benefit and marginal cost curves from beekeeping are normally shaped, identify which curve is the private marginal benefit curve and which one is the private marginal cost curve.Instructions: In the graph above, use the dropdowns to label each curve.b. Phoebe's bees help to pollinate the blossoms in the neighboring apple orchard, and the more beehives she keeps, the larger the fruit yield will be. Draw the social marginal benefit from Phoebe's beekeeping.Instructions: In the graph above, use the tool "MBsocial" to draw the social marginal benefit curve.c. Phoebe's bees are Africanized killer bees that aggressively sting anyone who steps into their flight path, and the more beehives Phoebe keeps, the more people will be stung. Phoebe, fortunately, is naturally immune to the bees' venom. Show the social marginal cost curve from Phoebe's beekeeping.Instructions: In the graph above, use the tool "MCsocial" to draw the social marginal cost curve.d. The socially optimal quantity of beehives: a) is greater than the privately optimal quantity. b) is less than the privately optimal quantity. Incorrect c) could be greater than or less than the privately optimal quantity.

could be greater than or less than the privately optimal quantity.

Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown below. If the government provides a subsidy of $500 per ton, then relative to before the subsidy, total economic surplus will ______ by ______ per day.

decrease; $1,000

Compared to a fixed percentage reduction regulation, a tax on pollution encourages: Multiple Choicefirms to reduce pollution by the same percent.firms to use the same technology to reduce pollution.firms that can more cheaply reduce pollution to make larger reductions.big firms to make larger reductions because they can more easily afford it.

firms that can more cheaply reduce pollution to make larger reductions.

A perfectly price discriminating monopolist's profit is ______ the profit of a monopolist who charges the same price to all of its customers.

higher than

The accompanying figure shows the demand curve, marginal revenue curve, marginal cost curve and average total cost curve for a monopolist. At this monopolist's profit-maximizing level of output, it:

incurs an economic loss of $16 per day.

Suppose the accompanying table describes the demand for a good produced by monopolist. PriceQuantity$101$92$83$74$65$56$47 The monopolist's marginal revenue from selling the 4th unit of output is less than $7 because:

it has to charge $1 less for each of the first 3 units of output.

When plotting marginal and average cost curves, the ______ cost curve always crosses the ______ cost curve at its ______.

marginal; average total; minimum

Unlike economic profit, economic rent:

may not be driven to zero by competition.

Cory ABJessA5 for Jess0 for Jess5 for Cory-5 for CoryB10 for Jess-5 for Jess0 for Cory10 for Cory Multiple ChoiceJess has a dominant strategy, but Cory does not.Cory has a dominant strategy, but Jess does not.both Cory and Jess have the same dominant strategy.neither Cory nor Jess has a dominant strategy.

neither Cory nor Jess has a dominant strategy.

Suppose all firms in a perfectly competitive industry are earning an economic profit. One would expect that, over time, the number of firms in the industry will ______ and the market price will ______.

rise; fall

Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood that anyone will get this flu decreases as more people receive the vaccine. One of the demand curves below represents the private demand for the vaccine and the other represents the social demand for the vaccine. The government could increase total economic surplus by:

subsidizing production of the vaccine.

Adam Smith's theory of the invisible hand posits that the most efficient allocation of resources is often achieved by:

the actions of independent, self-interested buyers and sellers.

Economies of scale exist when:

the average cost of production falls as output rises.