Econ 202 Exam #4 ch. 4 & 16

A. The third unit should be produced

Suppose that Mick and Cher are the only two members of society and are willing to pay $10 and $8, respectively, for the third unit of a public good. Also, assume that the marginal cost of the third unit is $17. We can conclude that Select one: A. the third unit should be produced. B. the third unit should not be produced. C. 4 units should be produced. D. zero units should be produced.

A. supply-side market failure

The trains of the Transcontinental Railway Company, when shipping goods, sometimes emit sparks that start fires along the tracks and damage the property of others. If Transcontinental does not pay for the damage it causes, what has occurred? Select one: A. supply-side market failure B. positive externality C. demand-side market failure D. all of these

D. related to the demand for the product or service labor is producing

When economists say that the demand for labor is a derived demand, they mean that it is Select one: A. dependent on government expenditures for public goods and services. B. based on the assumption that workers are trying to maximize their money incomes. C. based on the desire of businesses to exploit labor by paying below equilibrium wage rates. D. related to the demand for the product or service labor is producing.

D. multiplying marginal product by product price

Assuming a firm is selling its output in a purely competitive market, its resource demand curve can be determined by Select one: A. comparing marginal product with various possible input prices. B. multiplying total product by product price. C. dividing total revenue by marginal product. D. multiplying marginal product by product price

D. the increase in total resource cost associated with the hire of one more unit of the resource

Marginal resource cost is Select one: A. total resource cost divided by the number of inputs employed. B. the change in total revenue associated with the employment of one more unit of the resource. C. the increase in total resource cost associated with the production of one more unit of output. D. the increase in total resource cost associated with the hire of one more unit of the resource.

B. should hire more labor because this will increase profits.

A competitive employer is using labor in such an amount that labor's MRP is $10 and its wage rate is $8. This firm Select one: A. is selling its product in an imperfectly competitive market. B. should hire more labor because this will increase profits. C. should hire more labor, although this may either increase or decrease profits. D. is currently hiring the profit-maximizing amount of labor.

C. 3

A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired, 32 when two workers are hired, 37 when three are hired, and 40 when four are hired. The farmer's product sells for $3 per unit, and the wage rate is $13 per worker. How many workers should the farmer hire? Select one: A. 1 B. 2 C. 3 D. 4

D. 8

A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired, 32 when two workers are hired, 37 when three are hired, and 40 when four are hired. The farmer's product sells for $3 per unit, and the wage rate is $13 per worker. The marginal product of the second worker is Select one: A. 1. B. 24. C. 5. D. 8.

D. $24

A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired, 32 when two workers are hired, 37 when three are hired, and 40 when four are hired. The farmer's product sells for $3 per unit, and the wage rate is $13 per worker. The marginal revenue product of the second worker is Select one: A. $8. B. $15. C. $9. D. $24.

A. is available to all and cannot be denied to anyone.

A public good A. is available to all and cannot be denied to anyone. B. is characterized by rivalry and excludability. C. can be profitably produced by private firms. D. produces no positive or negative externalities.

A. $0

Answer the question on the basis of the following information for a public good. Pa and Pb are the prices that individuals A and B are willing to pay for the last unit of a public good, rather than do without it. These people are the only two members of society. Suppose government has already produced 4 units of this public good. The amount individual B is willing voluntarily to pay for the fourth unit is Select one: A. $0. B. $5. C. $2. D. $14.

C. costs more to produce than it provides in benefits.

From society's perspective, in the presence of a supply-side market failure, the last unit of a good produced typically Select one: A. maximizes the net benefit to society. B. produces a benefit exactly equal to the cost of producing the last unit. C. costs more to produce than it provides in benefits. D. generates more of a benefit than it costs to produce.

C. Hire the second barber because he will add $28 to profits

Harry owns a barbershop and charges $6 per haircut. By hiring one barber at $10 per hour, the shop can provide 24 haircuts per eight-hour day. By hiring a second barber at the same wage rate, the shop can now provide a total of 42 haircuts per day. Harry should Select one: A. not hire the second barber, because he is less productive than the first barber. B. not hire the second barber, because he will diminish profits. C. hire the second barber because he will add $28 to profits. D. hire the second barber because he will add $108 to profits.

D. 18 haircuts

Harry owns a barbershop and charges $6 per haircut. By hiring one barber at $10 per hour, the shop can provide 24 haircuts per eight-hour day. By hiring a second barber at the same wage rate, the shop can now provide a total of 42 haircuts per day. The MP of the second barber is Select one: A. $108. B. 42 haircuts. C. $240. D. 18 haircuts.

B. $108

Harry owns a barbershop and charges $6 per haircut. By hiring one barber at $10 per hour, the shop can provide 24 haircuts per eight-hour day. By hiring a second barber at the same wage rate, the shop can now provide a total of 42 haircuts per day. The MRP of the second barber is Select one: A. 42 haircuts. B. $108. C. 18 haircuts. D. $126.

B. the marginal products of successive workers must be sold at lower prices.

If a firm is selling in an imperfectly competitive product market, then Select one: A. average product will be less than marginal product for any number of workers hired. B. the marginal products of successive workers must be sold at lower prices. C. the marginal products of successive workers can be sold at higher prices. D. the marginal products of successive workers can be sold at a constant price.

D. private markets do not allocate resources in the most economically desirable way.

Market failure is said to occur whenever Select one: A. prices rise. B. government intervenes in the functioning of private markets. C. some consumers who want a good do not obtain it because the price is higher than they are willing to pay. D. private markets do not allocate resources in the most economically desirable way

B. a + b.

Refer to the diagram. Assuming equilibrium price P1, consumer surplus is represented by areas Select one: A. c + d. B. a + b. C. a + c. D. a + b + c + d.

C. c + d

Refer to the diagram. Assuming equilibrium price P1, producer surplus is represented by areas A. a + b + c + d. B. a + c. C. c + d. D. a + b.

C. both the purely competitive and imperfectly competitive seller

The MRP curve is the resource demand curve for Select one: A. neither the purely competitive nor the imperfectly competitive seller. B. the purely competitive seller but not the imperfectly competitive seller. C. both the purely competitive and imperfectly competitive seller. D. the imperfectly competitive seller but not the purely competitive seller.

D. the demand for the product or service that it helps produce.

The demand for a resource depends primarily on Select one: A. the supply of that resource. B. the price of that input. C. the elasticity of supply of substitute inputs. D. the demand for the product or service that it helps produce.

B. Plan B

The following data are for a series of increasingly extensive flood-control projects. On the basis of cost-benefit analysis, government should undertake Select one: A. Plan A. B. Plan B. C. Plan C. D. Plan D.

B. Public goods are only provided by the government

Which of the following statements is not true? Select one: A. Some public goods are paid for by private philanthropy. B. Public goods are only provided by government. C. The free-rider problem results from the characteristics of nonrivalry and nonexcludability. D. Private provision of public goods is usually unprofitable.