ECON 2302 - Exam #2 Review

Which area represents producer surplus when the price is P1?

BCG

If the price of the good is $250, then consumer surplus amounts to

$50 300 - 250 = $50

What is the total cost of creating the 2nd instructional module in a given month?

$1,930

The effective price that sellers receive after the tax is imposed is

$10.

A price floor set at

$16 will be binding and will result in a surplus of 12 units.

What is the value of G?

$270.

A price ceiling set at

$6 will be binding and will result in a shortage of 8 units.

At equilibrium, producer surplus is

$72 (1/2) * b * h

The per-unit burden of the tax on buyers is

$8 $24 - $16 = $8

Suppose a certain firm is able to produce 200 units of output per day when 15 workers are hired. The firm is able to produce 220 units of output per day when 16 workers are hired, holding other inputs fixed. The marginal product of the 16th worker is

20 units of output. Current Output - Old Output (previous output when 1 unit less) 220 - 200 = 20 units for the 16th Worker

What is the marginal product of the first worker?

200 units.

At which number of workers does diminishing marginal product begin?

3.

Which area represents consumer surplus at a price of P1?

ABD

Which area represents the increase in producer surplus when the price rises from P1 to P2?

AHGB

Which curve represents the long-run average total cost?

ATC(d)

Alex is willing to pay $12, and Bella is willing to pay $8, for an Indian curry buffet. When the price of Indian curry decreases from $11 to $9,

Alex experiences an increase in consumer surplus, but Bella does not.

Curve A represents which type of cost curve?

Average fixed cost.

The efficient scale of production occurs at which quantity?

C

Buyer | Willingness to Pay: David | $8.50 Laura | $7.00 Megan | $5.50 Mallory | $4.00 Audrey | $3.50 If the price of Vanilla Coke is $8.10, who will purchase the good?

David. He is the only one willing to pay $8.10 (he's willing to pay up to $8.50 for this product).

Total cost can be divided into two types of costs:

Fixed costs and variable costs.

The "invisible hand" is

a concept developed by Adam Smith to describe the virtues of free markets.

Suppose the government wants to encourage Americans to exercise more, so it imposes a binding price ceiling on the market for in-home treadmills. As a result,

a shortage of treadmills will develop.

The value of a business owner's time is an example of

an implicit cost.

If marginal cost is equal to average total cost, then

average total cost is minimized.

The firm's efficient scale of production is the quantity of output that minimizes

average total cost.

Suppose that the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. A tax of $4 per frame levied on picture frames will increase the price paid by buyers of picture frames by?

between $2 and $4.

If a consumer places a value of $30 on a particular good and if the price of the good is $20 then the

consumer has consumer surplus of $10 if he buys the good.

If the total cost curve gets steeper as output increases, the firm is experiencing

diminishing marginal product.

In the long-run Firm A incurs total costs of $1,050 when output is 30 units and $1,200 when output is 40 units. Firm A exhibits

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

A legal minimum on the price at which a good can be sold is called a price

floor.

The tax burden will fall most heavily on buyers of the good when the demand curve

is relatively steep, and the supply curve is relatively flat.

Economies of scale occur when a firm's

long-run average total costs are decreasing as output increases.

To encourage college education in the USA, the government should impose

price ceiling below the market equilibrium price.

Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor, the

quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases.

The marginal product of an input is the increase in

quantity of output obtained from an additional unit of that input.

Consumer surplus is

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. WTP - P

If a price ceiling is not binding, then

there will be no effect on the market price or quantity sold.

Efficiency is attained when

total surplus is maximized.

Price controls are usually enacted

when government believe that the market price of a good is unfair to buyers/sellers.

In a market, the marginal buyer is the buyer whose

who would be the first to leave the market if the price were any higher.