ECON 2000 Exam 3

Refer to Figure 14-4. When 100 identical firms participate in this market, at what price will 15,000 units be supplied to this market?

$1.50

Katherine gives piano lessons for $15 per hour. She also grows flowers, which she arranges and sells at the local farmer's market. One day she spends 5 hours planting $50 worth of seeds in her garden. Once the seeds have grown into flowers, she can sell them for $150 at the farmer's market. Katherine's accounting profits are

$100, and her economic profits are $25. 100-50= 100 -> Accounting 100-(15*5)= 25 -> Economic

The Three Amigo's company produced and sold 500 dog beds. The average cost of production per dog bed was $50. Each dog bed can be sold for a price of $65. The Three Amigo's total costs are

$25,000.

Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that the average total cost when 5 units of output are produced is $30, and the marginal cost of the sixth unit of output is $60. What is the average total cost when six units are produced?

$35

Sue earns income of $80,000 per year. Her average tax rate is 50 percent. Sue paid $5,000 in taxes on the first $30,000 she earned. What was the marginal tax rate on the first $30,000 she earned, and what was the marginal tax rate on the remaining $50,000?

16.67 percent and 70.00 percent, respectively

Consider the town of Springfield with only three residents, Sophia, Amber, and Cedric. The three residents are trying to determine how large, in acres, they should build the public park. The following table shows each resident's willingness to pay for each acre of the park. ​ Willingness to Pay (Dollars) Acres Sophia Amber Cedric ​1 10 24 6 2 8 18 5 3 6 14 4 4 3 8 3 5 1 6 2 6 0 4 1 7 0 2 0 Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the cost of building the park equally. If the residents vote to determine the size of park to build, basing their decision solely on their own willingness to pay (and trying to maximize their own surplus), what is the largest park size for which the majority of residents would vote "yes?"

2 acres

Refer to Figure 14-4. If at a market price of $1.75, 52,500 units of output are supplied to this market, how many identical firms are participating in this market?

300

Which of the following statements is correct?

Average variable cost is declining for quantities less than B because marginal cost is lower than average variable cost.

Which of the following is not a characteristic of a public good?

Because it is a free good, there is no opportunity cost.

The efficient scale of production occurs at which quantity?

C The point where ATC is the lowest will be considered as efficient scale because its the lowest cost of production

Which of the following statements regarding a competitive firm is correct?

For all firms, average revenue equals the price of the good.

Marginal product is increasing at low level of output and decreasing at high level of output.

Marginal product is increasing at low level of output and decreasing at high level of output.

The Pennsylvania Turnpike is a tolled freeway running through the state of Pennsylvania. Motorists must pay tolls at various points along the Turnpike based on the distance they traveled on the freeway. Suppose that despite the tolls, many motorists in the urban areas use the Turnpike causing traffic to slow during peak times. What type of good would the Turnpike be classified as in this case?

Private good

Raiman's Shoe Repair produces custom-made shoes. When Mr. Raiman produces 12 pairs per week, the marginal cost of the 12th pair is $84, and the marginal revenue of the 12th pair is $70. What would you advise Mr. Raiman to do?

Produce fewer custom-made shoes

Average Fixed Cost (AFC)

Refer to Figure 13-2. Curve A represents which type of cost curve?

negative economic profits in the short run but remain in business.

Refer to Figure 14-1. If the market price is $10, the firm will earn

$15

Refer to Figure 14-2. If the market price is $10, what is the firm's short-run economic profit?

$0

Refer to Figure 14-2. If the market price is $6, what is the firm's short-run economic profit?

P4.

Refer to Figure 14-3. Firms would be encouraged to enter this market for all prices that exceed

Which of the following represents the firm's short-run condition for shutting down?

Shut down if TR < VC

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?

The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers.

The firm will earn a positive economic profit in the short run if the market price is

above the efficient scale (Average total cost minimum)

Refer to Figure 14-7. Assume that the market starts in equilibrium at point W in graph (b). An increase in demand from D0 to D1 will result in

an eventual increase in the number of firms in the market and a new long-run equilibrium at point Z.

When marginal cost is less than average total cost,

average cost is falling

An efficient tax system is one that imposes small

deadweight losses and administrative burdens

In the long run a company that produces and sells popcorn incurs total costs of $1,050 when output is 90 canisters and $1,200 when output is 120 canisters. The popcorn company exhibits

economies of scale because average total cost is falling as output rises.

A difference between explicit and implicit costs is that

implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.

A firm that shuts down temporarily has to pay

its fixed costs but not its variable costs

When a firm experiences diseconomies of scale,

long-run average total cost increases as output increases

If marginal cost is rising,

marginal product must be falling

If your income is $50,000, your income tax liability is $10,000, and you paid $0.25 in taxes on the last dollar you earned, your

marginal tax rate is 25 percent.

When profit-maximizing firms in competitive markets are earning profits,

new firms will enter the market.

A good is excludable if

people can be prevented from using it

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

profit is maximized

The accountants hired by Forever Fitness have determined total fixed cost to be $75,000, total variable cost to be $130,000, and total revenue to be $125,000. Because of this information, in the short run, Forever Fitness should

shut down because staying open would be more expensive.

When fixed costs are ignored because they are irrelevant to a business's production decision, they are called

sunk cost

If the price falls less than the Marginal Cost and Average Variable Cost intersection

the firm will earn negative economic profits in the short-run and shut down

A person's marginal tax rate equals

the increase in taxes she would pay as a percentage of the rise in her income.

The firm's short-run supply curve is its marginal cost curve above

the marginal cost and average variable cost intersection

When some resources used in production are only available in limited quantities, it is likely that the long-run supply curve in a competitive market is

upward sloping.