ECON 2000 Marx Final
If the demand for a good falls when income falls then the good is called
a normal good
If a price ceiling is not binding, then
there will be no effect on the market price or quantity sold
which of the following is not an advantage of corrective taxes
they subsidize the production of goods with positive externalities
A key determinant of the price of the price elasticity of supply is the
time horizon
If the supply of a product increases, then we would expect equilibrium price
to decrease and equilibrium quantity to increase
All else equal, what happens to consumer surplus if the price of a good increases?
consumer surplus decreases
when profit-maximizing firms in competitive markets are earning profits
new firms will enter the market
Suppose that the demand for aged cheddar cheese is elastic, and the demand for bread is inelastic. Suppose that the price of each good falls by 20% because of a sales promotion. Then total consumer spending on aged cheddar cheese will
Increase, and total consumer spending on bread will decrease
Suppose peter, paul, and mary are the only three customers in the market for tambourines. Peter values a tambourine at $30, paul values it at $20, and mary values it at $40. If the price is $25 what is their consumer surplus.
$20
vincent operates a scenic bus tour business in boston. He has one bus that can fit 50 people per tour and each tour lasts two hours. his total cost of operating one tour is fixed at 450. vincent's cost is not reduced if he runs a tour with a partially full bus. While his cost is the same for all tours, vincent charges each passenger his/her willingness to pay: adults 18 per trip, children 10 per trip, and senior citizens 12 per trip. At those rates, on a typical day vincent's demand is 70 adults, 25 children, and 55 senior citizens. Assume that vincent's customers are always available for the tour; therefore, he can fill his bus for each tour as long as there is sufficient total demand for the day. what is vincent's profit on a typical day?
$820
If a 30% change in price results in a 15% change in quantity demanded then the price elasticity of demand is
0.5 and demand is inelastic
If the price elasticity of supply is 1.5, and the price increase led to a 1.8 percent increase in quantity supplied, then the price increase is about
1.20 percent
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
Last year, Tess bought five handbags when her income was 55,000. TYhis year, after having taken ECON 2000, her income is 65,000, and she purchased seven handbags. Holding other factors constant and using the midpoint method, it follows that Tess's income elasticity of demand is about
2, and tess regards handbags as normal goods
flu shots provide a positive externality. Suppose that the market for vaccination is perfectly competitive. Without government intervention in the vaccine market, which of the following statements is correct
At the current output level , the marginal social benefit exceeds the marginal private benefit
suppose there is an early freeze in california that reduces the size of the lemon crop. As the price of lemons rises, what happens to consumer surplus in the market for lemons?
Consumer surplus decreases
Suppose the number of buyers in a market decreases at the same time as a technological advancement occurs. What would we expect to happen in the market?
Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous
The governments benefit from a tax can be measured by
tax revenue
Which of the following statements is valid when the market supply curve is vertical
The equilibrium quantity supplied does not change when the price changes
Which of the following is not a determinant of the demand for a particular good
The prices of the inputs used to produce the good
If a surplus exists in a market we know that the actual price is
above the equilibrium price, and quantity supplied is greater than quantity demanded
If an allocation of resources is efficient, then
all potential gains from trade among buyers and sellers are being realized
which of the following is not an example of a barrier to entry
an entrepreneur opens a popular new restaurant
a firm produces 400 units of output at a total cost of 1200. If total variable costs are 1000
average fixed cost is 50 cents
profit-maximizing firms enter a competitive market when existing firms in that market
average total costs are less than market price
Bev is opening her own court-reporting business. She financed the business by withdrawing money from her personal savings account. When she closed the account, the bank representative mentioned that she would have earned $300 in interest next year. If Bev hadn't opened her own business, she would have earned a salary of $25,000. In her first year, Bev's revenues were $30,000. Which of the following statements is correct?
bev's economic profit is 3700
which of the following causes a shortage of a good
binding price ceiling
A surplus results when
binding price floor is imposed on a market
Dawn's bridal boutique is having a sale on evening dresses. The increase in consumer surplus comes from the benefit of the lower prices to
both existing customers who now get lower prices on the gowns they were already planning to purchase and new customers who enter the market because of the lower prices
demand would be said to be price elastic if
buyers respond substantially to changes in the price of a good
Cold Duck Airlines flies between Tacoma and Portland. The company leases planes on a year-long contract at a cost that averages $600 per flight. Other costs (fuel, flight attendants, etc.) amount to $550 per flight. Currently, Cold Duck's revenues are $1,000 per flight. All prices and costs are expected to continue at their present levels. If it wants to maximize profit, Cold Duck Airlines should
continue flying until the lease expires then drop the run
The decrease in total surplus that results from a market distortion, such as a tax, is called a
deadweight loss
The market for new yachts has elastic demand and relatively inelastic supply. As a result, a tax on the buyers of yachts will
decrease the quantity of yachts purchased in equilibrium, and the tax burden will fall mostly on shipbuilders
If the demand for eggs is inelastic. then a decrease inthe price of eggs
decrease total revenue of egg sellers
which of the following expressions for economic profit is correct
economic profit=total revenue-explicit costs-implicit costs
When small changes in price lead to infinite changes in quantity demanded, demand is perfectly
elastic and demand curve will be horizontal
The demand for grape flavored hubba bubba bubble gum is likely
elastic because there are many close substitutes
suppose supply is perfectly inelastic, and demand for the good in question increases (shifts to the right). As a result
equilibrium price increases and equilibrium quantity is unchanged
At the equilibrium price, the quantity of the good that buyers are willing and able to buy
exactly equals the quantity that sellers are able and willing to sell
which of the following statements regarding a competitive firm is correct
for all firms, marginal revenue equals the price of the good
If the government adds a tax on a good, then the price paid by buyers will
increase and the price received by sellers will decrease
Two goods are compliments when a decrease in the price of one good
increases the demand for the other good
price discrimination adds to social welfare in the form of
increases total surplus
The deadweight loss from a tax per unit of good will be smallest in a market with
inelastic supply and inelastic demand
Which of the following demonstrates the law of demand
jayden buys more donuts at the .25 per donut price than at .50 per donut, all other things equal
suppose demand for marijuana is inelastic. Then a new policy that shifts the supply curve for marijuana to the right would lead to
lower prices and lower total revenue
A likely example of compliments for most people would be
peanut butter and jelly
John Paul would be willing to pay as much as $25 for one of philippe's famous cheesecakes. Philippe's opportunity cost of baking the cheesecake is $23. Assume that the city imposes a sugar tax of $3 on such desserts. Which of the following is correct
philippe will not bake john paul a cake
A legal minimum on the price at which a good can be sold is called a
price floor
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
a key characteristic of a competitive market is that
producers sell nearly identical products
If there is an increase in market demand in a perfectly competitive market, then in the short run
profits will rise
suppose the cross-price elasticity of demand between kale and spinach is 1.5. This implies that a 20% increase in the price of kale will cause the quantity of spinach purchases to
rise by 30%
dioxin emission that results from the production of paper is a good example of a negative externality because
self-interested paper producers will not consider the full cost of the dioxin pollution they cause
A supply curve can be used to measure producer surplus because it reflects
sellers costs
price discrimination is the business practice of
selling the same good at different prices to different customers
which of the following represents the firms short-run condition for shutting down
shut down if TR<VC
when negative externalities are present in a market
social costs will be greater than private costs
An example of a perfectly competitive market would be the
soybean market
When fixed costs are ignored because they are irrelevant to a business's production decision, they are called
sunk costs
An improvement in production technology will shift the
supply curve to the right
If the number of sellers in a market increases, then the
supply in the market will increase
for a long while, electricity producers were thought to be a classic example of a natural monopoly. People held this view because
the average cost of producing units of electricity by one producer in a specific region was lower than if the same quantity were produced by two or more producers in the same region
If something happens to alter the quantity demanded at any given price, then
the demand curve shifts
The term tax incidence refers to
the distribution of the tax burden between buyers and sellers
suppose that coal producers create a negative externality equal to $5 per ton of coal. What is the relationship between the equilibrium quantity of coal and the socially optimum quantity of coal
the equilibrium quantity is greater than the socially optimal quantity
which of the following is a necessary characteristic of a monopoly
the firm is the sole seller of its product
Which of the following is an example of a price floor
the minimum wage
which of the following is an example of an implicit cost
the owner of a firm forgoing an opportunity to earn a large salary working for a wall street brokerage firm
bob's butcher shop is the only place within 100 miles that sells bison burgers. assuming that bob is a monopolist and maximizing his profit, which of the following statements is true
the price of bob's bison burgers will exceed bob's marginal cost
Cross-price elasticity of demand measures how
the quantity demanded of one good changes in response to a change in the price of another good
Which of the following is not a determinant of the price elasticity of demand for a good
the steepness or flatness of the supply curve for the good
a natural monopoly occurs when
there are economies of scale over the relevant range of output
If a firm produces nothing, which of the following costs will be 0
variable costs
Which of the following statements is correct
who bears the burden of a tax depends on the price elasticities of supply and demand
