ECON 120 Final

The law of diminishing marginal returns becomes evident after ________ units of output are produced.

66

Leo is a welfare recipient....suppose leo earns 10$. He will lose ____ from each benefit, for a total loss of ___

7.50$; $15.00

If pollution is unregulated the a total of _____ tons of smoke will be emitted each day

8

The short run is best defined as:

A period of time sufficiently short that at least one factor of production is fixed

When cody went to the physician for a sore elbow.... which of the following physicians is more likely to recommend option 2?

A physician who is compensated under a conventional health insurance plan

The primary objective of most private firms is to:

Maximize profit

If a one percent increase in the price of oranges leads to a five percent increase in the quantity supplied the price elasticity of supply for oranges is________

5

The price elasticity of demand at point A is:

5/2

In the US the emergence of the 3rd party payment system has

led health care costs to increase over time

If most consumer goods and services are _______ then most income elasticizes are __________

normal; positive

A situation is efficient if it is:

not possible to find a transaction that will make at least one person better off without harming others

A monopolistically competitive firm is one

of many firms that sell products that are close but no perfect substitutes

If a firm functions in an oligopoly it is

one of a small number of firms that produce goods that are either close or perfect substitutes

The tragedy of the commons refers to the:

overuse of resources that have no price

When calculating price elasticity of demand, if the percentage change in price is negative, then the percentage change in quantity demanded is typically:

positive

Adams smiths 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

Suppose that if the price of plane tickets increased, more people would choose to travel by train, if this happened you would know that:

the cross-price elasticity between plane tickets and train tickets is positive

When joes gas raises its price for regular unleaded gasoline, total revenue from regular unleaded gas falls to zero. it must be the case that:

the demand for joes regular unleaded gasoline is perfectly elastic

Economic rent:

the difference between the payment made to the owner of a factor of production and the owners reservation price.

The earned income tax credit for EITC:

gives low-income workers credits on their federal income taxes

The total revenue from selling 6 units is ____ and the marginal revenue of selling the 6th unit is _____

$30; 0

Suppose pollution is initially unregulated. if the city council requires each firm to reduce emissions by 50% then the total cost to society of this policy will be ___ per day

$360

The slow of the demand curve (ignoring the negative sign) is:

0.5

Fran runs a doughnut shop in a tiny-3person town. The table below shows the quantity demand by the 3 townspeople at various prices. ; When the price of a doughnut is 25 cents, what is the market demand for the doughnuts?

16 doughnuts

If ava had to pay the entire marginal cost of spending a day in the hospital, then she would choose to stay __ days

2

if 20% increase in the price of a good leads to a 60$ decrease in the quantity demanded, then what is the price elasticity of demand?

3

If the market for mugs is perfectly competitive and mugs sell for $7.50 each, then Chris should make _______ mugs per day

4

Suppose pollution is initially unregulated. if the city council imposes a tax of $91 per day on each ton of smoke emitted then total emissions will fall to ___ tons of smoke per day

4

refer to the figure below. If Laura and Chris are the only two consumers in this market then at a price of $2.50 per pound, the market demand for hamburger is:

4.5 pounds per week

A maket equilibrium is only efficient if:

All relevant costs and benefits are reflected in the market supply and demand curves

Which of the following is NOT necessarily true in a market equilibrium?

Both rich and poor have adequate access to the good

The responsiveness of the quantity demanded of one good to a change in the prices of a different good is measured by the :

Cross-price elasticity of demand

If two products are substitutes then the:

Cross-price elasticity of demand between them will be positive

If the price elasticity of demand for a good is greater than one, then the demand for that good is:

Elastic

A price-taker faces a demand curve that is:

Horizontal at the market price

The most important challenge facing a firm in a perfectly competitive market is deciding

How much to produce

Numerous studies have shown that breathing second hand cigarette smoke is harmful to your health. this suggest that a tax on cigarettes will

Increase total economic surplus

If demand is _________ with respect to price, a price increase will _________ total revenue.

Inelastic; increase

According to the law of diminishing returns, when some factors of production are fixed, in order to increase production by a given amount, a firm will eventually need to add successively:

Larger and larger quantities of the variable factors of production

An external benefit implies that private markets will provide _______ than the socially optimal quantity and an external cost implies that private markets will provide ____ than the socially optimal quantity.

Less; more

Curly told larry about his new business. Curly pays Acme international $1000 per month for supplies, works out of his apartment on his own computer and earns a monthly revenue of $1500. Should Larry quit his job and do what Curly is doing?

Not if Larry is earning more than $500 per month at his current job

The essential cause of the tragedy of the commons is the fact that:

One persons use of commonly held resource imposes an external cost on others

If consumers completely cease purchasing a product when its price increases by any amount, the demand is:

Perfectly elastic

The percentage change in quantity supplied that results from a 1 percent change in price is known as the:

Price elasticity of supply

The cost-benefit principle tells us that a firm should continue to expand production as long as:

Price of the good is greater than its marginal cost

Private markets will lead to a:

Sub optimally low; the external benefit of being vaccinated would not fully be taken into account by decision makers

The tendency for consumers to purchase more of a good or service as its prices falls is captured by:

The law of demand

If the market supply curve does not capture all of the costs to society of producing an additional unit of good then:

The market equilibrium will not be efficient

If there is excess demand in a market then this suggests that

Theres is an opportunity for mutually beneficial trades

Which of the following statements about implicit costs is true?

They measure the forgone opportunities of the firms owners

Which of the following is a defining characteristic of all perfectly competitive markets?

all firms sell the same standardized product

Duke is a highly skilled negotiator who could work of many law firms. The law firm that hires Duke is able to collect twice as much revenue per house of Dukes time than it can for an other negotiator in town. The increased revenue will:

all go to Duke because, if it didn't another firm could hire duke right away

The role that prices play in directing resources away from overcrowded markets and towards markets that are underserved is known as the _______ function of price

allocative

When the government transfers resources to the poor in the form of a good or service it is called

an in-kind transfer

The allocative function of price cannot operate unless there is:

both free entry and free exit

The case theorem states that if private parties can negotiate the purchase of sale of the right to perform activities that cause externalities then they

can always arrive at efficient solutions to the problems caused by externalities

At point A, demand is:

elastic

For perfectly competitive firms, marginal revenue ____ price; for monopolists marginal revenue ___ price

equals; is less than

In perfectly competitive markets and implication of entry and exit in response to economic profit and loss is that

firms will earn zero economic profit in the long run

The growth of medical insurance in general and first dollar coverage specifically has reduced the marginal cost of treatment to the consumer. therefore the current level of medical treatment in the US is:

greater than the efficient level

According to the textbook, the percentage of gross domestic product devoted to healthcare between the years 1940 and 2013

increased from 4% to more than 17%

If it is possible to make a change that will help some people without harming others, then the situation is

inefficient

If the price of the textbooks increases by one percent and the quantity demanded falls by one-half percent, then the demand for textbooks is:

inelastic

The monopolists 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

If the marginal cost of pollution abatement is smaller for large firms than it is for small firms then it is efficient for

large firms to reduce pollution by more than small firms

The overconsumption of medical care due to first dollar health insurance coverage is

larger the higher the elasticity of demand for medical care

Suppose two demand curves intersect and so have a point in common. At that point, demand shown by the steeper curve will be __________ the flatter curve

less elastic than

The most efficient distribution of pollution abatement is such that the:

marginal cost of abatement is the same across all polluters

For all firms, the additional revenue collected from the sale of one additional unit of output is

marginal revenue

If the demand curve facing a monopolistic shifts then the monopolistics

marginal revenue curve and profit-maximizing level of output will change

Unlike economic profit, economic rent

may not be driven to zero by competition

In many cities in the US a single firm provides electricity those firms are

monopolists

If a firms production process exhibits increasing returns to scale, then doubling all the firms inputs will lead output to

more than double

A cost of an activity that falls on people not engaged in the activity is call a

negative externality

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 per besides career who can hear the music then Carmen music generates a:

negative externality

A program under which the government gives all citizens a substantial lump sum payment that is financed by a tax earned income is termed a

negative income tax

Suppose all firms in this industry have identical costs to this firm and are producing 15 units of output one can predict that:

new firms will enter the industry

Total revenue minus both explicit and implicit costs defines a firms:

profit

The price of elasticity of demand for a good measures the responsiveness of:

quantity demanded to a one percent change in price of that good

If coal mining produces a negative externality because it leads to environmental damage then the

quantity of coal produced at the market equilibrium will be greater than the socially optimal quantity

to say that a given welfare program is means-tested implies that

the more income one ears, the smaller the size of the benefit

If the marginal cost of reducing pollution is positive then:

the optimal amount of pollution is greater than zero

In general, when the price of a variable factor of production increases:

the profit-maximizing level of output falls

Lunch in jambs dorm is an all you can eat buffet, served from 11am to 1pm. by noon the buffet picked over and by 12:30 there are very few popular items left. the garbage bind though are full of food. the buffet in jambs dorm is an example of

the tragedy of the commons

Efficiency is an important goal because when markets are efficient:

there are more resources available to achieve other goals

If the market equilibrium quantity is greater than the socially optimal quantity, one can infer that:

there is a negative externality associated with this good

If fewer families choose to purchase medical insurance because of rising health insurance premiums then

those who remain inside will tend to have higher than average rates of illness

refer to the figure. If the price of a latte increases from $2.00 to $2.50:

total expenditure would decrease

A socially optimal public health policy should expand the promotion of the population vaccinated:

until the marginal cost of an additional vaccination equals the marginal benefit of an additional vaccination

If the marginal benefit of additional spending on a public health measure is greater than its marginal cost then total economic surplus

will increase if the government increase spending on the health measure