ECON 3070 FINAL

Refer to the figure. When the price of pizza is $30, total expenditure and consumer surplus are,repsectively, (a) $1,500; $250 (b) $1,500; $500 (c) $1,000; $1,000 (d) $1,000; $500

(a) $1,500; $250

The price of lemonade is $0.50; the price of popcorn is $1.00. If Fred has maximized his utility bypurchasing lemonade and popcorn, his marginal rate of substitution will be (a) 2 lemonade for each popcorn (b) 1 lemonade for each popcorn (c) 2 lemonades for each popcorn (d) indeterminate unless more information on Fred's marginal utilities is provided

(a) 2 lemonade for each popcorn

Which of the following features are relevant for determining the extent of a market?(select all that apply) (a) Its geographical boundaries (b) Technological innovations that would reduce the cost of production (c) The production process required to make the product. (d) The range of products to be included in it

(a) Its geographical boundaries (d) The range of products to be included in it

The market supply function is P = 10+Q and the market demand function is P = 702Q. Calculatethe change in consumer surplus associated with a price floor of $30 (a) Zero (b) $100 (c) $30 (d) $55

(a) Zero

Suppose the Biden administration has recommended an increase in the tax on yachts to help pay forgovernment programs. Which of the following is true?(a) The burden of this tax will fall entirely on yacht consumers. (b) The profit of yacht manufacturers will increase. (c) The sales of yachts will decrease. (d) The burden of this tax will fall entirely on yacht manufacturers

(c) The sales of yachts will decrease.

The maximum price that a consumer is willing to pay for each unit bought is the​ _____________ price. Part 2 A. reservation B. market C. consumer surplus D. auction E. choke

A. reservation

A firm uses 80 hours of labor and 6 units of capital to produce 10, 000 gadgets per day. Labor'smarginal product is 4 gadgets per hour and the marginal product of capital is 20 gadgets per unit. Each unitof labor costs $8 per hour and each unit of capital costs $50 per unit. If the firm wants to continue producing10, 000 gadgets per day at the lowest possible cost, it should (a) use more labor and less capital. (b) use more capital and less labor. (c) use less of both inputs. (d) continue using 80 hours of labor and 6 units of capital

(a) use more labor and less capital.

An invested opportunity has two possible outcomes. The expected value of the investment opportunityis $250. One outcome yields a $100 payoffand has a probability of 0.25. What is the payoffof the other outcome? (a) $400 (b) $300 (c) $0 (d) $150

(b) $300

The market supply curve for music downloads is Q = 135(P 1) where Q is millions of downloadsand P is the price in dollars per track. If the current price is $1.20 per download, what is the change in producersurplus if the price increases by $0.20 per track? (a) $5.4 million (b) $8.1 million (c) $10.8 million (d) $27 million

(b) $8.1 million

Suppose you are running a firm that produces radios. The production technology of your firm is given by F (K, L) = 8 K 1/2 L1/2 where K is the machines, and L is the labor you use in production per day. Suppose that the cost of rentingmachines is $1 per day and the wage rates are $1 per day. If you set your production goal to be 16 radios perday, what would the cost minimizing combination (K⇤, L ⇤) be? What is the minimized total cost?(a) (K⇤, L ⇤) = (4 , 4); T C = $8 (b) (K⇤, L ⇤) = (2 , 2); T C = $4 (c) (K⇤, L ⇤) = (4 , 2); T C = $6 (d) (K⇤, L ⇤) = (2 , 4); T C = $6

(b) (K⇤, L ⇤) = (2 , 2); T C = $4

n increase in income, holding prices constant, can be represented as : (a) A change in the slope of the budget line. (b) A parallel outward shift of the budget line. (c) An outward shift of the budget line with its slope becoming flatter.3

(b) A parallel outward shift of the budget line.

Refer to the figure. At which point is profit maximized? (a) At point QA (b) At point QB (c) At point QC (d) At point QD

(b) At point QB

Suppose that a firm currently produces 100 units using 10 units of K and 14 units of labor per day.The wage rate is $200 and the rental rate is $120 per day. What is the correct cost function for this firm? (a) C = ($200)(10) + ($120)(14) (b) C = ($200)(14) + ($120)(10) (c) C = ($200)(10) + ($120)(14) (d) C = ($200)(14) ($120)(10)

(b) C = ($200)(14) + ($120)(10)

long any downward-sloping linear demand curve: (a) Both the price elasticity and slope vary (b) The price elasticity varies, but the slope is constant (c) The slope varies, but the price elasticity is constant (d) Both the price elasticity and slope are constant

(b) The price elasticity varies, but the slope is constant

f a consumer prefers basket A to basket B and basket B to basket C, then the consumer also prefersA to C. This assumption is called: (a) Completeness (b) Transitivity (c) Non-Satiation (d) Rationality

(b) Transitivity

Assume that beer is an inferior good. If the price of beer falls, then the substitution effect results inthe person buying ________ of the good and the income effect results in the person buying_______ of the good. (a) more; more (b) more; less (c) less; more (d) less; less

(b) more; less

An Engel Curve (a) slopes downward for both normal and inferior goods (b) slopes upward for normal goods and downward for inferior goods (c) slopes upward for both normal and inferior goods (d) slopes upward for inferior goods and downward for normal goods

(b) slopes upward for normal goods and downward for inferior goods

A farmer uses L units of labor and K units of capital to produce Q units of corn using a productionfunction F (K, L). A production plan that uses K⇤= L⇤= 10 to produce Q⇤units of corn where Q⇤< F (10, 10)is said to be (a) technically feasible and efficient (b) technically feasible and inefficient (c) technically unfeasible and efficient (d) technically unfeasible and inefficient

(b) technically feasible and inefficient

(2 points) A person with a diminishing marginal utility of income (a) will be risk neutral (b) will be risk averse (c) will be risk loving (d) cannot decide without more information

(b) will be risk averse

Consider a good whose own price elasticity of demand is 1.5 and price elasticity of supply is 0.5.The fraction of a specific tax that is borne by producers is (a) 0 (b) 0.25 (c) 0.75 (d) 0.5

(c) 0.75

Assume that two investment opportunities have identical expected values of $100,000. Investment Ahas a variance of 25,000, while investment B's variance is 10,000. We would expect most investors (who dislikerisk) to prefer investment opportunity : (a) A, because it has less risk (b) A, because it provides higher potential earnings (c) B, because it has less risk (d) B, because it provides higher potential earnings

(c) B, because it has less risk

nita consumes pizza and chesseburgers. Denote pizza as good Pand cheeseburgers as good C.Anita's utility function from consumption is U(P,C) = P2+4C2. What is her marginal utility of cheeseburgers? (a) MUC(P,C) = P2+ 8 C (b) MUC(P,C) = 2 P+ 4 C2 (c) MUC(P,C) = 8 C (d) MUC(P,C) = 2 P

(c) MUC(P,C) = 8 C

n Eugene, Oregon, next year there is a 2% change of an earthquake severe enough to destroy allbuildings and personal property. Quincy, who has $3,000,000 in buildings and personal property, has theopportunity to purchase complete earthquake insurance. Which is true? (a) Quincy should not purchase earthquake insurance unless he can get it for less than $60,000 because that'shis expected loss in an earthquake. (b) If Quincy buys earthquake insuarance, and an earthquake does not occur, he will have received no utilityfrom the transaction. (c) What Quincy is willing to pay for the earthquake insurance depends upon his degree of risk aversion. (d) Quincy should be willing and able to pay up to $3,000,000 for earthquake insurance.

(c) What Quincy is willing to pay for the earthquake insurance depends upon his degree of risk aversion.

A production function defines the output that can be produced (a) in a given time period if no additional inputs are hired. (b) for the average firm. (c) if the firm is technically efficient (d) at the lowest cost, given the inputs available

(c) if the firm is technically efficient

A farmer uses M units of machinery and L hours of labor to produce Q tons of corn, with the followingproduction function Q = L0.5M0.75. This production function exhibits : (a) decreasing returns to scale for all output levels. (b) constant returns to scale for all output levels. (c) increasing returns to scale for all output levels. (d) no clear pattern of returns to scale.

(c) increasing returns to scale for all output levels.

Marginal profit is negative when: (a) marginal revenue is negative. (b) total cost exceeds total revenue. (c) output exceeds the profit-maximizing level. (d) profit is negative.

(c) output exceeds the profit-maximizing level.

The change in demand resuliting from the change in real purchasing power is called (a) the law of demand (b) the substitution effect (c) the income effect (d) the wealth effect

(c) the income effect

A local retailer has decided to carry a well-known brand of shampoo. The marketing departmenttells them that the demand by an average man is : Qmd= 3 0.25P, and the demand by an average woman is Qfd= 4 0.5P. Suppose the market consists of 10,000 men and 10,000 women. How many bottles of shampoocan the retailer expect to sell if they charge $6 per bottle.(a) 10,000 (b) 20,000 (c) 33,000 (d) 25,000

(d) 25,000

At the optimal point on an indifference curve and budget line diagram (assuming an interior solution) (a) The consumer spends his or her entire budget on the two goods (b) The optimal indifference curve is tanget to the budget line (c) The marginal rate of substitution between the two goods equals the ratio of their prices (d) All of the above

(d) All of the above

A Rolling Stone song goes : "You can't always get what you want." This echoes an important themefrom microeconomics. Which of the following statements is the best example of this theme? (a) Workers do not have as much leisure as they would like, given their wages and working conditions. (b) Firms in market economies have limited financial resources (c) Workers in planned economies, such as North Korea, do not have much choice over jobs. (d) Consumers must make the best purchasing decisions they can, given their limited incomes

(d) Consumers must make the best purchasing decisions they can, given their limited incomes

Which of the following is a key assumption of a perfectly competitive market?(a) Firms can influence market price. (b) Commodities have few sellers. (c) It is difficult for new sellers to enter the market. (d) Each seller has a very small share of the market.

(d) Each seller has a very small share of the market.

Which of the following is true if goods xand yare prefect substitutes? (a) MUy is increasing (b) MRS is increasing (c) MUx is decreasing (d) MRS is constant

(d) MRS is constant

In a perfectly competitive market : (a) There are a few buyers (b) There is a single-seller (c) There is a cartel (d) No single buyer or seller can significantly affect the market price.

(d) No single buyer or seller can significantly affect the market price.

The short run is: (a) less than a year. (b) three years. (c) however long it takes to produce the planned output. (d) a time period in which at least one input is fixed.

(d) a time period in which at least one input is fixed.

The U.S. government currently imposes a $0.54 per gallon tariffon all ethanol imported into thecountry. If this tariffwere removed, then (a) domestic producer surplus decreases (b) domestic consumer surplus increases (c) the domestic quantity of ethonal supplied declines (d) all of the above

(d) all of the above

Pabol's demand for pizza is inelastic. If the price of pizza increases, we can predict that Pablo will (a) eat more pizza and spend more on pizza than he did before the price increase. (b) eat less pizza and spend less on pizza than he did before the price increase. (c) eat more pizza and spend less on pizza than he did before the price increase. (d) eat less pizza and spend more on pizza than he did before the price increase.

(d) eat less pizza and spend more on pizza than he did before the price increase.

n a constant-cost industry, the long-run industry supply is (a) downward sloping (b) vertical (c) upward sloping (d) horizontal

(d) horizontal

ose rents office space for $20, 000 per year. He uses the office to fill out tax returns for 1, 000 clientsper year. If the office rent increases to $25, 000 per year, the marginal cost of filling out tax returns will (a) increase, but we cannot determine the amount of increase with the information given. (b) increase by $5, 000. (c) increase by $5. (d) not change.

(d) not change.

A firm never operates: (a) at the minimum of its AT C curve (b) at the minimum of its AV C curve (c) on the downward-sloping portion of its AT C curve. (d) on the downward-sloping portion of its AV C curve.

(d) on the downward-sloping portion of its AV C curve.

A perfectly competitive firm should shut down in the short run if (a) the firm does not earn enough to pay for all its fixed costs. (b) price is below minimum average total cost. (c) it cannot earn a profit (d) price is below minimum average variable cost.

(d) price is below minimum average variable cost.

A firm's producer surplus equals its economic profit when (a) total revenues equal total variable costs (b) fixed costs are zero. (c) average fixed costs are minimized. (d) averge variable costs are minimized.

.(b) fixed costs are zero.

What is the​ tit-for-tat strategy in a repeated​ prisoners' dilemma​ game? A. The player cooperates in the first round of play. After​ that, he or she does whatever the other player did in the previous round. B. The player alternates between cooperation and cheating in every other round of play. C. The player cooperates in the first round of play. After​ that, the player chooses to either cooperate or cheat based on how often the other player has cooperated or cheated in all previous rounds. If the other player has cooperated at least half the​ time, the first player will​ cooperate, otherwise he or she will cheat in the next round. D. The player cheats in the first round of play. After​ that, he or she does whatever the other player did in the previous round.

A. The player cooperates in the first round of play. After​ that, he or she does whatever the other player did in the previous round.

How does a​ game's Nash equilibrium differ from a​ game's maximin​ solution? Part 2 At the Nash​ equilibrium, players Part 3 A. are doing the best they can given the actions of their​ opponents, but at the maximin​ solution, players are not necessarily doing the best they can. B. are doing the best they can given the actions of their​ opponents, but at the maximin​ solution, players are responding in kind to an​ opponent's previous play. C. are doing the best they can given the actions of their​ opponents, but at the maximin​ solution, players are doing the best they can regardless of the actions of their opponents. D. are retaliating against uncooperative ​opponents, but at the maximin​ solution, players are cooperating with cooperative opponents. E. are doing the best they can regardless of the actions of their​ opponents, but at the maximin​ solution, players are not necessarily doing the best they can.

A. are doing the best they can given the actions of their​ opponents, but at the maximin​ solution, players are not necessarily doing the best they can.

In the Stackelberg​ model, the firm that sets output first has an advantage. Explain why. Part 2 The firm that sets output first​ (the leader) in the Stackelberg model has an advantage because Part 3 A. the firm that moves second must accept the​ leader's output as given. B. the firm that moves second will be unable to respond optimally. C. the leader cannot know how the firm that moves second will respond. D. the leader can sell its output before the firm that moves second produces. E. leader can learn the market price before the firm that moves second.

A. the firm that moves second must accept the​ leader's output as given.

Under a transferable emissions permit​ system, Part 2 A. the firms with the lowest marginal abatement cost curves will reduce emissions most. B. the firms with the lowest marginal social cost curves will reduce emissions most. C. the firms with the highest marginal social cost curves will reduce emissions most. D. the firms with the highest marginal abatement cost curves will reduce emissions most. E. all firms will reduce emissions equally.

A. the firms with the lowest marginal abatement cost curves will reduce emissions most.

Which of the following is not an example of a​ game? A. Setting a​ product's price in an oligopolistic market. B. Choosing the amount of automobile liability insurance to purchase. C. Bidding at an auction. D. A buyer and seller negotiating the price of a used car.

B. Choosing the amount of automobile liability insurance to purchase.

Suppose a paper mill emits noxious odors that represent a negative externality for people living near the plant. If the plant managers ignore these external effects on their​ neighbors, what is the efficiency character of the resulting market​ outcome? Part 2 A. The market outcome is efficient. B. The plant generates too much paper because the managers ignore the external costs of the air pollution on neighbors. C. The plant generates too much paper because the odors are nonexclusive. D. The plant generates too much paper due to incomplete information.

B. The plant generates too much paper because the managers ignore the external costs of the air pollution on neighbors.

Under which of the following scenarios is it most likely that monopoly power will be exhibited by​ firms? Part 2 A. When there are many firms in the market and the demand curve faced by each firm is relatively elastic B. When there are few firms in the market and the demand curve faced by each firm is relatively inelastic C. When there are many firms in the market and the demand curve faced by each firm is relatively inelastic D. When there are few firms in the market and the demand curve faced by each firm is relatively elastic

B. When there are few firms in the market and the demand curve faced by each firm is relatively inelastic

When emissions are measured on the horizontal​ axis, the marginal cost of abating emissions is Part 2 A. upward sloping because emissions become more and more easy to eliminate once the firm makes the initial commitment to do so. B. downward sloping because a high level of emissions is cheap to attain and a low level of emissions is expensive to attain. C. upward sloping because a high level of emissions is cheap to attain and a low level of emissions is expensive to attain. D. horizontal because the technology to remove emissions is assumed constant. E. downward sloping because emissions become more and more easy to eliminate once the firm makes the initial commitment to do so.

B. downward sloping because a high level of emissions is cheap to attain and a low level of emissions is expensive to attain.

A consumer or producer who does not pay for use of a nonexclusive good but expects others to pay is known as a Part 2 A. fringe element. B. free rider. C. price setter. D. none of the above.

B. free rider.

Rather than charging a single price to all​ customers, a firm charges a higher price to men and a lower price to women. By engaging in this​ practice, the firm Part 2 A. is engaging in an illegal activity that is prohibited by the Sherman Antitrust Act. B. is attempting to convert consumer surplus into producer surplus. C. is attempting to convert producer surplus into consumer surplus. D. is trying to reduce its costs and therefore increase its profit. E. both A and C are correct.

B. is attempting to convert consumer surplus into producer surplus.

Question content area Part 1 A​ price-discriminating monopolist will charge a higher price to consumers whose demand is A. more elastic. B. less elastic. C. linear. D. horizontal.

B. less elastic.

Suppose the private marginal cost of pumping water from an aquifer remains constant as the quantity of water pumped​ increases, and the marginal social cost is upward sloping. If the demand for water shifts to the right as population​ increases, then the amount of water pumped based only on private costs​ __________ and the social cost of the common property resource​ __________. Part 2 A. decreases; decreases B. increases; increases C. decreases; increases D. increases; decreases

B. ​increases; increases

To enforce the optimum level of​ emissions, a government could set an emissions standard at the quantity Part 2 A. located at the horizontal intercept of the MSB curve. B. where the MSB curve crosses the MCA curve. C. located at the vertical intercept of the MCA curve. D. located at the horizontal intercept of the MCA curve. E. located at the vertical intercept of the MSB curve.

B. where the MSB curve crosses the MCA curve.

In a Nash​ equilibrium, A. the firm that moves first always has an advantage. B. each firm makes the monopoly level of profit. C. each firm does the best it can given what the other firms are doing. D. the firms cooperate with each other and earn higher profits than they would if they did not cooperate.

C. each firm does the best it can given what the other firms are doing.

When the demand curve is downward​ sloping, marginal revenue is Part 2 A. equal to price. B. equal to average revenue. C. less than price. D. more than price.

C. less than price.

What is meant by​ "first-mover advantage"? Give an example of a gaming situation with a​ first-mover advantage. Part 2 ​"First-mover advantage" is where the player that moves first Part 3 A. punishes its opponent by reducing its opponent's payoff. B. maximizes joint payoffs for all players. C. receives the highest payoff. D. maximizes its own payoff no matter what its opponent does. E. maximizes the minimum gain it can earn.

C. receives the highest payoff.

Although firms earn zero profits in the long​ run, why is the outcome from monopolistic competition considered to be​ inefficient? Part 2 A. Price exceeds marginal cost. B. Quantity is lower than the perfectly competitive outcome. C. Goods are not identical. D. A and B are correct. E. B and C are correct.

D. A and B are correct.

Which of the following is true for both perfectly competitive and monopolistically competitive firms in the long​ run? Part 2 A. P​ = MC B. MC​ = ATC C. P​ > MR D. Profit equals zero.

D. Profit equals zero.

An example of a gaming situation with a​ first-mover advantage is Part 5 A. chess. B. connect-4. C. rock, paper, scissors. D. both a and b. E. all of the above.

D. both a and b.

What is a dominant​ strategy? Part 2 A dominant strategy is a strategy that Part 3 A. minimizes an​ opponent's payoff. B. is optimal conditional on what an opponent does. C. maximizes a​ player's expected payoff. D. is optimal no matter what an opponent does. E. is selected regardless of whether it is optimal.

D. is optimal no matter what an opponent does.

When is a maximin solution a more likely outcome than a Nash​ equilibrium? Part 5 A maximin solution is more likely than a Nash equilibrium when Part 6 A. the game is not repeated. B. dominant strategies exist. C. opponents behave optimally. D. opponents may behave sub-optimally. E. optimal behavior does not depend on an​ opponent's behavior.

D. opponents may behave sub-optimally.

Common property rights Part 2 A. enable the Coase theorem to work. B. increase efficiency over individual property rights. C. are responsible for the increasing success of preservation of African elephants. D. result in faster depletion of resources than do individual property rights. E. are responsible for the increasing success of preservation of worldwide fishing resources.

D. result in faster depletion of resources than do individual property rights.

In the Bertrand model of​ oligopoly, A. the firms cooperate with each other and earn monopoly profits. B. each firm tries to match the amount of output the other firm produces. C. each firm makes more profit than in the Cournot model of oligopoly. D. each firm earns zero economic profit.

D. each firm earns zero economic profit.

Why is an equilibrium stable in dominant​ strategies? Part 5 An equilibrium in dominant strategies is stable because Part 6 A. players have no incentive to compete. B. both players have maximized the minimum gain that can be earned. C. player strategies are interdependent. D. players have negotiated binding contracts. E. neither player has an incentive to change their behavior.

E. neither player has an incentive to change their behavior.

Mark-up formula

P-MC/P

Classify each of the following as a rival or nonrival good and as an exclusive or nonexclusive good. Part 2 a. A cup of coffee. This good is b. Cable television. This good is c. Fishing grounds. This good is d. A lighthouse. This good is

rival and excludable. nonrival and excludable. rival and nonexcludable. nonrival and nonexcludable.

Profits Formula

total revenue - total cost or (PxQ1)-(CxQ1)