ECON FINAL
Refer to Table 17-1. If this market for water were perfectly competitive instead of monopolistic, what price would be charged? -$0 -$18 -$27 -$36
$0
Refer to Table 13-9. The average variable cost of producing 240 units is -$0.13 -$0.19 -$0.32 -$0.80
$0.19
Refer to Figure 9-3. The size of the tariff on roses is -$4 -$3 -$2 -$1
$1
Refer to Table 7-12. Both the demand curve and the supply curve are straight lines. At equilibrium, producer surplus is -$24 -$32 -$48 -$64
$24
Refer to Figure 7-2. If the government imposes a price floor of $110 in this market, then consumer surplus will decrease by -$800 -$200 -$600 -$400
$600
What is Vincent's total revenue on a typical day? $2,170
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Refer to Figure 10-6. In order to reach the social optimum, the government could -impose a tax of $2 per unit on plastics -impose a tax of $6 per unit on plastics -impose a tax of $8 per unit on plastics -offer a subsidy of $6 per unit on plastics
impose a tax of $8 per unit on plastics
If marginal cost is rising, -average variable cost must be falling -average fixed cost must be rising -marginal product must be falling -marginal product must be rising
marginal product must be falling
The short-run supply curve for a firm in a perfectly competitive market is -horizontal -likely to slope downward -determined by forces external to the firm -the portion of its marginal cost curve that lies above its average variable cost
the portion of its marginal cost curve that lies above its average variable cost
Price discrimination can maximize profits if the seller can prevent the resale of goods between customers.
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Which of the following is not an example of a barrier to entry? An entrepreneur opens a popular new hair salon
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Eldin is a house painter. He can paint three houses per week. He is considering hiring his friend Murphy. Murphy can paint five houses per week. What is the maximum total output possible if Eldin hires Murphy? -2 houses -3 houses -5 houses -8 houses
8 houses
Refer to Table 13-3. The marginal product of the second worker is -90 units -85 units -80 units -20 units
80 units
Refer to Figure 9-4. Total surplus in this market before trade is -A + B -A + B + C -A + B + C + D -B + C + D
A + B + C
Refer to Figure 7-9. At equilibrium, consumer surplus is represented by the area -A -A+B+C -D+H+F -A+B+C+D+H+F
A+B+C
Refer to Table 7-1. If the price of the product is $110, then who would be willing to purchase the product? -Calvin -Calvin and Sam -Calvin, Sam, and Andrew -Calvin, Sam, Andrew, and Sasha
Calvin, Sam, and Andrew
Refer to Figure 10-4. Which graph represents a market with a negative externality? Graph (b) only Graph (c) only Graph (a) Graphs (b) and (c)
Graph (b) only
Refer to Figure 15-7. To maximize total surplus, a benevolent social planner would choose which of the following outcomes? -Q = 30 and P = 30 -Q = 30 and P = 60 -Q = 45 and P = 45 -Q = 60 and P = 30
Q = 45 and P = 45
Refer to Table 13-9. For the firm whose production function and costs are specified in the table, its average-total-cost curve is -constant -decreasing -increasing -U-shaped
U-shaped
Refer to Scenario 14-2. Suppose the firm is currently producing and selling 100 units of output. Should the firm increase its output to 101 units? -Yes, because the marginal revenue exceeds the marginal cost -Yes, because the marginal revenue exceeds the average total cost -No, because the marginal cost exceeds the marginal revenue -No, because the average total cost exceeds the marginal revenue
Yes, because the marginal revenue exceeds the marginal cost
When a firm operates under conditions of monopoly, its price is -not constrained -constrained by marginal cost -constrained by demand -constrained only by its social agenda
constrained by demand
If the government levies a $1900 tax per truck on sellers of trucks, then the price paid by buyers of trucks would -increase by more than $1900 -increase by exactly $1900 -increase by less than $1900 -decrease by an indeterminate amount
increase by less than $1900
When a monopolist decreases the amount of output that it produces and sells, average revenue -decreases, and marginal revenue decreases -decreases, and marginal revenue increases -increases, and marginal revenue decreases -increases, and marginal revenue increases
increases, and marginal revenue increases
The Social Security tax is a tax on -capital -labor -land -savings
labor
Refer to Figure 14-1. The firm should shut down if the market price is -above $6.5 -above $3 but less than $6.5 -above $6.5 but less than $10 -less than $3
less than $3
When buyers in a competitive market take the selling price as given, they are said to be -price takers -market entrants -monopolists -free riders
price takers
If a price ceiling is not binding, then -there will be a surplus in the market. -there will be a shortage in the market. -the market will be less efficient than it would be without the price ceiling. -there will be no effect on the market price or quantity sold.
there will be no effect on the market price or quantity sold
Refer to Table 7-4. The market quantity of apples demanded per day is exactly seven if the price of an orange, P, satisfies -$0.60 < P < $0.75 -$0.60 < P < $2.00 -$0.25 < P < $0.75 -$0.25 < P < $0.60
$0.25 < P < $0.60
Refer to Table 13-9. The average total cost of producing 240 units is -$0.13 -$0.19 -$0.32 -$0.80
$0.32
Refer to Figure 8-2. Total surplus without the tax is -$7.5, and total surplus with the tax is $10 -$10, and total surplus with the tax is $7.5 -$6, and total surplus with the tax is $1.5 -$1.5, and total surplus with the tax is $6
$10, and total surplus with the tax is $7.5
Refer to Table 17-1. Suppose the town enacts new antitrust laws that prohibit Celia and Venya from operating as a monopoly. What will be the price of water once Celia and Venya reach a Nash equilibrium? -$9 -$12 -$15 -$18
$12
Refer to Table 14-4. What is the average revenue when 6 units are sold? -$20 -$465 -$120 -$78
$120
Refer to Table 15-1. At what price will the monopolist maximize his profit? -$6 -$12 -$18 -$24
$18
Refer to Table 17-1. If Celia and Venya operate as a profit-maximizing monopoly in the market for water, what price will they charge? -$21 -$18 -$15 -$12
$18
Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, producer surplus will be -$16 -$18 -$24 -$26
$18
Refer to Scenario 13-1. Suppose Korie purchases the factory using $200,000 of her own money and $200,000 borrowed from a bank at an interest rate of 6 percent. What is Korie's annual opportunity cost of purchasing the factory? -$3,000 -$6,000 -$15,000 -$18,000
$18,000
Refer to Figure 8-2. The amount of deadweight loss as a result of the tax is -$2.5 -$6 -$4 -$5
$2.5
Refer to Table 13-8. What is the average fixed cost of producing 5 units of output? -$4 -$5 -$40 -$44
$4
Refer to Figure 9-3. Without trade, the equilibrium price of roses is -$4 and the equilibrium quantity is 300 roses -$3 and the equilibrium quantity is 200 roses -$3 and the equilibrium quantity is 400 roses -$2 and the equilibrium quantity is 500 roses
$4 and the equilibrium quantity is 300 roses
Refer to Table 15-3. If the monopolist can engage in perfect price discrimination, what is the total revenue when 3 ties are sold? -$140 -$420 -$450 -$620
$450
Refer to Figure 8-2. The amount of the tax on each unit of the good is -$1 -$3 -$5 -$2
$5
Refer to Table 13-7. What is the value of D? -$25 -$50 -$100 -$200
$50
Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $425. Billie Jo's willingness to pay for the dishwasher is -$150 -$425 -$500 -$850
$500
Refer to Figure 8-2. Consumer surplus without the tax is -$6, and consumer surplus with the tax is $1.5 -$1.5, and consumer surplus with the tax is $6 -$4, and consumer surplus with the tax is $1 -$1, and consumer surplus with the tax is $4
$6, and consumer surplus with the tax is $1.5
Refer to Figure 7-5. If the supply curve is S and the demand curve shifts from D to D', what is the increase in producer surplus due to new producers entering the market? -$625 -$2,500 -$3,125 -$5,625
$625
Refer to Table 13-8. What is the marginal cost of producing the fifth unit of output? -$4 -$40 -$50 -$70
$70
Refer to Table 7-7. Suppose each of the five sellers can supply at most one unit of the good. The market quantity supplied is exactly 2 if the price is -$1,150 -$1,400 -$700 -$950
$950
A movie theater can increase its profits through price discrimination by charging a higher price to adults and a lower price to children if it can prevent children from buying the lower-priced tickets and selling them to adults.
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A natural monopoly occurs when there are economies of scale over the relevant range of output.
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Based upon the information shown, how many units will Bearclaws produce to maximize profits? 70
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Based upon the information shown, what price will Bearclaws charge to maximize profits? $14
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For a firm to price discriminate, it must have some market power.
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For a monopoly, the socially efficient level of output occurs where price equals marginal cost.
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Given that Bearclaws chooses the profit-maximizing price and quantity, what profit level will it obtain? $280.
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If a monopolist is able to perfectly price discriminate, consumer surplus and deadweight losses are transformed into monopoly profits.
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If a profit-maximizing monopolist faces a downward-sloping market demand curve, its marginal revenue is less than the price of the product.
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In order for antitrust laws to raise social welfare, the government must be able to determine which mergers are desirable and which are not.
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Monopoly firms face downward-sloping demand curves, so they can sell only the specific price-quantity combinations that lie on the demand curve.
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Suppose most people regard emeralds, rubies, and sapphires as close substitutes for diamonds. Then DeBeers, a large diamond company, has less market power than it would otherwise have.
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What is the socially efficient price and quantity for this natural monopolist? F and V
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When regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly will experience a loss.
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Which of the following is not an example of price discrimination by a firm? A natural gas company charging all customers a higher rate in the winter than in summer
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Refer to Table 13-3. At which number of workers does diminishing marginal product begin? -1 -2 -3 -4
2
Refer to Table 14-8. If the firm's fixed cost of production is $3, and the market price is $10, how many units should the firm produce to maximize profit? -1 unit -2 units -3 units -4 units
3 units
Refer to Table 14-6. The firm should not produce an output level beyond -4 units -5 units -6 units -7 units
5 units
Refer to Table 14-6. In order to maximize profits, the firm will produce -1 unit of output because marginal cost is minimized -4 units of output because marginal revenue exceeds marginal cost -5 units of output because marginal revenue equals marginal cost -7 units of output because total revenue is maximized
5 units of output because marginal revenue equals marginal cost
Refer to Figure 9-4. Total surplus in this market after trade is -A + B -A + B + C -A + B + C + D -B + C + D.
A + B + C + D
Refer to Figure 9-5. Producer surplus plus consumer surplus in this market after trade is A + B A + B + C B + C + D A + B + C + D
A + B + C + D
Which of the following firms is the closest to being a perfectly competitive firm? -A grain farmer in Illinois -Microsoft Corporation -Ford Motor Company -An aerospace company
A grain farmer in Illinois
Refer to Figure 13-6. Which of the curves is most likely to characterize the short-run average total cost curve of the smallest factory? ATCA ATCB ATCD ATCC
ATCA
Refer to Figure 13-2. Curve C represents which type of cost curve? -Marginal cost -Total cost -Average variable cost -Average fixed cost
Average fixed cost
Refer to Figure 8-2. The per-unit burden of the tax on buyers is -$1 -$3 -$4 -$6
$3
Refer to Table 10-3. Taking into account private and external benefits, the total surplus to society at the socially efficient quantity is -$18 -$38 -$43.5 -$62.5
$62.5
Monopolies are socially inefficient because the price they charge is above marginal cost.
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What is the maximum profit that the monopolist can earn? $20
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Refer to Figure 9-6. Government revenue raised by the tariff is represented by the area -E -B + E -D + E + F -B + D + E + F
E
Refer to Figure 10-2. If all external costs were internalized, then the market's output would be Q1 Q2 Q3 Q4
Q2
Which of the following is an example of a positive externality? -A college student buyers a new car when she graduates -Your neighbor plants a nice garden in front of his house -A person litters in a public park -Your friend pays to get her hair cut and colored at the salon
Your neighbor plants a nice garden in front of his house
When marginal cost is less than average total cost, -marginal cost must be falling -average variable cost must be falling -average total cost is falling -average total cost is rising
average total cost is falling
Refer to Figure 6-13. Suppose buyers, rather than sellers, were required to pay this tax (in the same amount per unit as shown in the graph). Relative to the tax on sellers, the tax on buyers would result in -buyers bearing a larger share of the tax burden. -sellers bearing a smaller share of the tax burden. -the same amount of tax revenue for the government. -an increase in the amount of tax revenue for the government
buyers bearing a larger share of the tax burden
Refer to Figure 13-1. The graph illustrates a typical -total-cost curve -production function -production possibilities frontier -marginal product of labor curv
production function
Cost is a measure of the -seller's willingness to sell. -seller's producer surplus. -producer shortage. -seller's willingness to buy.
seller's willingness to sell
The maximum price that a buyer will pay for a good is called -consumer surplus -producer surplus -efficiency -willingness to pay
willingness to pay
Which tools allow economists to determine if the allocation of resources determined by free markets is desirable? -Profits and costs to firms -Consumer and producer surplus -The equilibrium price and quantity -Incomes of and prices paid by buyers
Consumer and producer surplus
Which of the following is not a characteristic of a competitive market? -Buyers and sellers are price takers. -Entry is limited. -Each firm sells a virtually identical product. -Each firm chooses an output level that maximizes profits.
Entry is limited.
Refer to Figure 8-8. Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax? -Graph (a) -Graph (b) -Graph (c) -Graph (d)
Graph (a)
Taxes on labor encourage which of the following? -Labor demand to be more inelastic -Mothers to stay at home rather than work in the labor force -Workers to work overtime -Fathers to take on second jobs
Mothers to stay at home rather than work in the labor force
Which of the following statements is correct? -For all firms, marginal revenue equals the price of the good -Only for competitive firms does average revenue equal the price of the good -Marginal revenue can be calculated as total revenue divided by the quantity sold -Only for competitive firms does average revenue equal marginal revenue
Only for competitive firms does average revenue equal marginal revenue
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? -Shut down the business -Produce more custom-made shoes -Decrease the price -Produce fewer custom-made shoes
Produce fewer custom-made shoes
Refer to Figure 10-2. The socially optimal quantity would be Q1 Q2 Q3 Q4
Q2
Consider the U.S. market for chocolate, a market in which the government has imposed a nonbinding price ceiling. Which of the following events could convert the price ceiling from a nonbinding to a binding price ceiling? -A government study that shows that consuming chocolate increases the incidence of cancer -A large increase in the size of the cocoa bean crop; cocoa beans are used to produce chocolate -South American cocoa bean producers refuse to ship to chocolate producers in the United States -A sharp drop in consumer income; chocolate is a normal good
South American cocoa bean producers refuse to ship to chocolate producers in the United States
Which of the following is NOT a way of internalizing technology spillovers? -Subsidies -Patent protection -Industrial policy -Taxes
Taxes
Which of the following industries is most likely to exhibit the characteristic of free entry? -Electricity -Satellite radio -Tennis shoes -Mineral mining
Tennis shoes
You receive a paycheck from your employer, and your pay stub indicates that $300 was deducted to pay the FICA (Social Security/Medicare) tax. Which of the following statements is correct? -You will owe $300 per paycheck to pay the FICA tax for the remainder of the fiscal year regardless of your wages. -Your employer is required by law to pay $150 to match half the $300 deducted from your check -This type of tax is an example of a sales tax -The $300 that you paid is not necessarily the true burden of the tax that falls on you, the employee
The $300 that you paid is not necessarily the true burden of the tax that falls on you, the employee
Suppose that cookie producers create a positive externality equal to $2 per dozen. What is the relationship between the equilibrium quantity and the socially optimal quantity of cookies to be produced? -They are equal. -The equilibrium quantity is greater than the socially optimal quantity. -The equilibrium quantity is less than the socially optimal quantity. -There is not enough information to answer the question
The equilibrium quantity is less than the socially optimal quantity
Walter used to work as a high school teacher for $40,000 per year but quit in order to start his own painting business. To invest in his painting business, he withdrew $20,000 from his savings, which paid 3 percent interest, and borrowed $30,000 from his uncle, whom he pays 3 percent interest per year. Last year Walter paid $25,000 for supplies and had revenue of $60,000. Walter asked Tyler the accountant and Greg the economist to calculate his painting business's costs. -Tyler says his costs are $25,900, and Greg says his costs are $66,500 -Tyler says his costs are $25,000, and Greg says his costs are $65,000 -Tyler says his costs are $66,500, and Greg says his costs are $66,500 -Tyler says his costs are $75,000, and Greg says his costs are $41,500.
Tyler says his costs are $25,900, and Greg says his costs are $66,500
Refer to Figure 14-1. The firm will earn a positive economic profit in the short run if the market price is -above $6.5 -less than $6.5 but more than $3 -less than $3 -exactly $6.5
above $6.5
The average fixed cost curve -always declines with increased levels of output -always rises with increased levels of output -declines as long as it is above marginal cost -declines as long as it is below marginal cost
always declines with increased levels of output
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 -a new market equilibrium at point X -an eventual increase in the number of firms in the market and a new long-run equilibrium at point Z -rising prices and falling profits for existing firms in the market -falling prices and falling profits for existing firms in the market
an eventual increase in the number of firms in the market and a new long-run equilibrium at point Z
Refer to Table 13-6. Bobby pays all his workers the same wage, and labor is his only variable cost. From this information we can conclude that Bobby's average variable cost decreases -as output rises from 0 to 10, but rises after that -as output rises from 0 to 26, but rises after that -as output rises from 0 to 33, but increases after that -continually as output rises
as output rises from 0 to 26, but rises after that
For an individual firm operating in a competitive market, marginal revenue equals -average revenue and the price for all levels of output -average revenue, which is greater than the price for all levels of output -average revenue, the price, and marginal cost for all levels of output -marginal cost, which is greater than average revenue for all levels of output
average revenue and the price for all levels of output
Suppose that the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. A tax of $1 per frame levied on picture frames will increase the price paid by buyers of picture frames by -less than $0.50 -$0.50 -between $0.50 and $1 -$1.
between $0.50 and $1
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 -only existing customers who now get lower prices on the gowns they were already planning to purchase -only new customers who enter the market because of the lower prices -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 -Consumer surplus does not increase; it decreases
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
Suppose that in a particular market, the supply curve is highly elastic and the demand curve is highly inelastic. If a tax is imposed in this market, then the -buyers will bear a greater burden of the tax than the sellers -sellers will bear a greater burden of the tax than the buyers -buyers and sellers are likely to share the burden of the tax equally -buyers and sellers will not share the burden equally, but it is impossible to determine who will bear the greater burden of the tax without more information
buyers will bear a greater burden of the tax than the sellers
Refer to Table 14-1. The price and quantity relationship in the table is most likely a demand curve faced by a firm in a -monopoly -strategic market -competitive market -concentrated market
competitive market
When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy, -consumer surplus increases and total surplus increases in the market for that good -consumer surplus increases and total surplus decreases in the market for that good -consumer surplus decreases and total surplus increases in the market for that good -consumer surplus decreases and total surplus decreases in the market for that good
consumer surplus decreases and total surplus decreases in the market for that good
Refer to Figure 7-6. When the price falls from P2 to P1, producer surplus -decreases by an amount equal to C -decreases by an amount equal to A+B -decreases by an amount equal to A+C -increases by an amount equal to A+B.
decreases by an amount equal to A+B
If a firm in a competitive market doubles its number of units sold, total revenue for the firm will -more than double -increase but by less than double -double -may increase or decrease depending on the price elasticity of demand
double
Cartels are difficult to maintain because -the monopoly output is very difficult to determine. -the number of firms is always large. -costs to the firms in a cartel are continually rising. -each firm has an incentive to deviate from its agreed output level
each firm has an incentive to deviate from its agreed output level
If long-run average total cost decreases as the quantity of output increases, the firm is experiencing -economies of scale -diseconomies of scale -coordination problems arising from the large size of the firm -fixed costs greatly exceeding variable costs
economies of scale
In the long run a company that produces and sells popcorn incurs total costs of $1,150 when output is 70 canisters and $1,000 when output is 100 canisters. The popcorn company exhibits -diseconomies of scale because total cost is rising as output rises -diseconomies of scale because average total cost is rising as output rises -economies of scale because total cost is rising as output rises -economies of scale because average total cost is falling as output rises
economies of scale because average total cost is falling as output rises
Refer to Scenario 9-1. Suppose the world price of cardboard is $139. Then, relative to the no-trade situation, international trade in cardboard -harms Boxlandian consumers by $7,803.00 and benefits Boxlandian producers by $7,152.75 -harms Boxlandian consumers by $7,803.00 and benefits Boxlandian producers by $14,305.50 -harms Boxlandian consumers by $3,901.50 and benefits Boxlandian producers by $14,305.50 -harms Boxlandian consumers by $3,901.50 and benefits Boxlandian producers by $7,152.75
harms Boxlandian consumers by $7,803.00 and benefits Boxlandian producers by $14,305.50
In a natural monopoly, -society would be better off if antitrust laws were used to create many different firms in the market -the marginal cost curve is positively sloped -if the government requires marginal cost pricing, it will likely have to subsidize the firm -the marginal revenue curve is horizontal
if the government requires marginal cost pricing, it will likely have to subsidize the firm
A difference between explicit and implicit costs is that -explicit costs must be greater than implicit costs -explicit costs do not require a direct monetary outlay by the firm, whereas implicit costs do -implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do -implicit costs must be greater than explicit costs
implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do
Suppose the world price of a television is $300. Before Paraguay allowed trade in televisions, the price of a television there was $350. Once Paraguay began allowing trade in televisions with other countries, Paraguay began -importing televisions and the price of a television in Paraguay decreased to $300 -importing televisions and the price of a television in Paraguay remained at $350 -exporting televisions and the price of a television in Paraguay decreased to $300 -exporting televisions and the price of a television in Paraguay remained at $350
importing televisions and the price of a television in Paraguay decreased to $300
Most economists prefer corrective taxes to regulation as a way to correct the problem of pollution because the market-based solution -is less efficient -can result in a greater increase in pollution lowers revenue for the government -is less costly to society
is less costly to society
Refer to Table 14-6. The firm will produce a quantity greater than three because at 3 units of output, marginal cost -is greater than marginal revenue -equals marginal revenue -is less than marginal revenue -is minimized
is less than marginal revenue
Firms may experience diseconomies of scale when -they are too small to take advantage of specialization -large management structures are bureaucratic and inefficient -there are too few employees, and managers do not have enough to do -average fixed costs begin to rise again
large management structures are bureaucratic and inefficient
In order to sell more of its product, a monopolist must -lobby the government for a subsidy -lower its price -advertise -enact barriers to entry in related markets
lower its price
Ms. Joplin sells colored pencils. The colored-pencil industry is competitive. Ms. Joplin hires a business consultant to analyze her company's financial records. The consultant recommends that Ms. Joplin increase her production. The consultant must have concluded that, at her current level of production, Ms. Joplin's -total revenues equal her total economic costs -marginal revenue exceeds her total cost -marginal revenue exceeds her marginal cost -marginal cost exceeds her marginal revenue
marginal revenue exceeds her marginal cost
When profit-maximizing firms in competitive markets are earning profits, -market demand must exceed market supply at the market equilibrium price -market supply must exceed market demand at the market equilibrium price -new firms will enter the market -the most inefficient firms will be encouraged to leave the market
new firms will enter the market
The presence of a price control in a market for a good or service usually is an indication that -an insufficient quantity of the good or service was being produced in that market to meet the public's need -the usual forces of supply and demand were not able to establish an equilibrium price in that market -policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers -policymakers correctly believed that price controls would generate no inequities of their own once imposed
policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers
The imposition of a binding price ceiling on a market causes -quantity demanded to be greater than quantity supplied -quantity demanded to be less than quantity supplied -quantity demanded to be equal to quantity supplied -the price of the good to be greater than its equilibrium price
quantity demanded to be greater than quantity supplied
Suppose a firm in a competitive market reduces its output by 20 percent. As a result, the price of its output is likely to increase by 20 percent -remain unchanged -increase by less than 20 percent -decline by more than 20 percent
remain unchanged
Refer to Scenario 10-1. Suppose the dollar amount of the externality, per gallon of gasoline, is constant, regardless of how much gasoline is produced. Then the externality could be internalized if producers of gasoline were -provided a subsidy of $0.11 per gallon of gasoline sold -provided a subsidy of $0.27 per gallon of gasoline sold -required to pay a tax of $0.27 per gallon of gasoline sold -required to pay a tax of $0.11 per gallon of gasoline sold
required to pay a tax of $0.27 per gallon of gasoline sold
Refer to Figure 10-6. If 250 units of plastics are produced and consumed, then the -social optimum has been reached -market equilibrium has been reached -negative externality associated with plastics has been eliminated -positive externality associated with plastics has been eliminated
social optimum has been reached
If a tax shifts the demand curve downward, -we can infer that the tax was levied on buyers of the good -we can infer that the tax was levied on sellers of the good -we can infer that the tax was levied on both buyers and sellers of the good -we cannot infer anything because the shift described is not consistent with a tax
we can infer that the tax was levied on buyers of the good
A. Compute CS, PS, and total surplus without a tax. Without tax: CS = ½ x $200 x 100 = $10,000 PS = ½ x $200 x 100 = $10,000 TS = $20,000 B. If a $200 tax per unit is imposed, compute CS, PS, tax revenue, total surplus, and DWL. With $200 tax: CS = ½ x $100 x 50 = $2,500 PS = $2,500 Tax revenue = $200 x 50 = $10,000 TS = $15,000 DWL = $5,000
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Evan purchases a wall calendar for $9, and his consumer surplus is $1. How much is Evan willing to pay for the wall calendar? -$9 -$5 -$10 -$8
$10
You are offered a free ticket to see the Chicago Cubs play the Chicago White Sox at Wrigley Field. Assume the ticket has no resale value. Willie Nelson is performing on the same night, and his concert is your next-best alternative activity. Tickets to see Willie Nelson cost $40. On any given day, you would be willing to pay up to $50 to see and hear Willie Nelson perform. Assume there are no other costs of seeing either event. Based on this information, at a minimum, how much would you have to value seeing the Cubs play the White Sox to accept the ticket and go to the game? -$0 -$10 -$40 -$50
$10
Refer to Figure 6-13. What is the amount of the tax per unit? -$1 -$2 -$3 -$4
$4
Determine this firm's profit or loss. Show your calculations. A. Calculate TR and TC TR = Price x Quantity = 3 x 30 = $90 TC = ATC x Quantity = $5 x 30 = $150 B. Calculate profit (or loss) P < ATC 3 < 5 = loss Loss = (ATC - D) x Q = (5-3) x 30 = 60 C. Identify the profit (or loss) area on the graph. The loss is represented in the yellow region.
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Fill in the blank spaces of this table and answer the following questions. A. What is the efficient scale? The efficient scale would be at Q3. B. At which quantity will MC and AVC intersect? MC and AVC will intersect at Q1. C. At which quantity will MC and ATC intersect? MC and ATC will intersect in between Q3 and Q4.
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The following table shows the marginal costs for firms A and B to eliminate units of pollution from their production processes. For example, for Firm A to eliminate one unit of pollution, it would cost $54, and for Firm A to eliminate a second unit of pollution it would cost an additional $67. a) If the government demanded that each firm should reduce their pollution by 2 units, how much does it cost to Firms A and B in total? Is it efficient? Why or why not? - Firm A would pay $121 and firm B would pay $155 so in total it would be $276. It is not efficient because taxes are efficient, and regulations are not. b) If the government charged a fee of $84 per unit of pollution, how many units of pollution would the firms eliminate altogether? What is the abatement cost to the society? - Firm A would reduce 3 units and firm B would reduce 1 unit so the total amount of units eliminated would be 4. The total abatement cost is $272.
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Think about your favorite frozen yogurt shop. Answer the following questions. A. List three different costs they have. - Toppings - Yogurt Mix - Cups and spoons B. List three different business decisions that are affected by these costs. - The quantity of toppings - The quality of cups and spoons - How much they charge per ounce....pricing
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You are the manager of the only movie theater in town. The price you charge is $18 per ticket, and in a given week you sell Q = 1,000 movie tickets. Assume that you incur only a fixed cost of $10,000 in a week. A. How much profit is the movie theater making? - $8,000 B. If you are dropping the price to $5, you will be able to sell Q = 2,500 movie tickets. Calculate the profit. - $2,500 C. Suggest a way you can price discriminate when selling movie tickets. Calculate the profit if you price discriminate, with P1 = $18 and P2 = $5. - Child/senior discount - Profit = $15,500
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Zaria and Hannah are roommates. Zaria assigns a $30 value to smoking cigarettes. Hannah values smoke-free air at $15. Which of the following scenarios is a successful example of the Coase theorem? -Hannah offers Zaria $20 not to smoke. Zaria accepts and does not smoke -Zaria pays Hannah $16 so that Zaria can smoke -Zaria pays Hannah $14 so that Zaria can smoke -Hannah offers Zaria $15 not to smoke. Zaria accepts and does not smok
Zaria pays Hannah $16 so that Zaria can smoke
Refer to Figure 10-2. This market is characterized by -government intervention -a positive externality -a negative externality -a price control
a negative externality
When a tax is placed on the sellers of cell phones, the size of the cell phone market -and the effective price received by sellers both increase. -increases, but the effective price received by sellers decreases. -decreases, but the effective price received by sellers increases. -and the effective price received by sellers both decrease.
and the effective price received by sellers both decrease
Marginal cost is equal to average total cost when -average variable cost is falling -average fixed cost is rising -marginal cost is at its minimum -average total cost is at its minimum
average total cost is at its minimum
A shortage results when a -nonbinding price ceiling is imposed on a market. -nonbinding price ceiling is removed from a market. -binding price ceiling is imposed on a market. -binding price ceiling is removed from a market.
binding price ceiling is imposed on a market
Refer to Figure 6-5. A government-imposed price of $12 in this market is an example of a -binding price ceiling that creates a shortage. -nonbinding price ceiling that creates a shortage. -binding price floor that creates a surplus. -nonbinding price floor that creates a surplus.
binding price floor that creates a surplus
Price ceilings and price floors that are binding -are desirable because they make markets more efficient and more fair. -cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price. -can have the effect of restoring a market to equilibrium. -are imposed because they can make the poor in the economy better off without causing adverse effects.
cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price
If the government removes a tax on a good, then the price paid by buyers will -increase, and the price received by sellers will increase. -increase, and the price received by sellers will decrease. -decrease, and the price received by sellers will increase. -decrease, and the price received by sellers will decrease.
decrease, and the price received by sellers will increase
Suppose the government imposes a tax on cheese. The deadweight loss from this tax will likely be greater in the -first year after it is imposed than in the eighth year after it is imposed because demand and supply will be more elastic in the first year than in the eighth year -first year after it is imposed than in the eighth year after it is imposed because demand and supply will be less elastic in the first year than in the eighth year -eighth year after it is imposed than in the first year after it is imposed because demand and supply will be more elastic in the first year than in the eighth year -eighth year after it is imposed than in the first year after it is imposed because demand and supply will be less elastic in the first year than in the eighth year.
eighth year after it is imposed than in the first year after it is imposed because demand and supply will be less elastic in the first year than in the eighth year
Refer to Figure 9-6. The tariff -decreases producer surplus by the area C, decreases consumer surplus by the area C + D + E, and decreases total surplus by the area D + F -increases producer surplus by the area C, decreases consumer surplus by the area C + D + E + F, and decreases total surplus by the area D + F -creates government revenue represented by the area B + E and decreases total surplus by the area D + E + F -increases producer surplus by the area C + G and creates government revenue represented by the area D + E + F.
increases producer surplus by the area C, decreases consumer surplus by the area C + D + E + F, and decreases total surplus by the area D + F
The deadweight loss from a tax per unit of good will be smallest in a market with -inelastic supply and elastic demand -inelastic supply and inelastic demand -elastic supply and elastic demand -elastic supply and inelastic demand
inelastic supply and inelastic demand
Refer to Figure 9-3. When the tariff is imposed, domestic consumers -lose surplus of $400 -lose surplus of $450 -gain surplus of $50 -gain surplus of $800
lose surplus of $450
A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it -maximizes both the total revenue for firms and the quantity supplied of the product. -maximizes the combined welfare of buyers and sellers. -minimizes costs and maximizes output. -minimizes the level of welfare payments
maximizes the combined welfare of buyers and sellers
As a result of a decrease in price, -new buyers enter the market, increasing consumer surplus. -new buyers enter the market, decreasing consumer surplus. -existing buyers exit the market, increasing consumer surplus. -existing buyers exit the market, decreasing consumer surplus
new buyers enter the market, increasing consumer surplus
An externality is the uncompensated impact of -society's decisions on the well-being of society -a person's actions on that person's well-being -one person's actions on the well-being of a bystander -society's decisions on the poorest person in the society
one person's actions on the well-being of a bystander
The size of a tax and the deadweight loss that results from the tax are -positively related -negatively related -independent of each other -equal to each other.
positively related
According to the Coase theorem, private parties can solve the problem of externalities if -property rights are clearly defined. -the cost of bargaining is large. -the number of parties involved is sufficiently large. -the initial distribution of legal rights favors the person causing the negative externality
property rights are clearly defined
If a nonbinding price floor is imposed on a market, then the -quantity sold in the market will decrease. -quantity sold in the market will stay the same. -price in the market will increase. -price in the market will decrease.
quantity sold in the market will stay the same
When a tax is levied on a good, the buyers and sellers of the good share the burden, -provided the tax is levied on the sellers -provided the tax is levied on the buyers -provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers -regardless of how the tax is levied
regardless of how the tax is levied
Suppose that in a particular market, the supply curve is highly inelastic and the demand curve is highly elastic. If a tax is imposed in this market, then the -sellers will bear a greater burden of the tax than the buyers. -buyers will bear a greater burden of the tax than the sellers. -buyers and sellers are likely to share the burden of the tax equally. -buyers and sellers will not share the burden equally, but it is impossible to determine who will bear the greater burden of the tax without more information
sellers will bear a greater burden of the tax than the buyers
In the 1970s, long lines at gas stations in the United States were primarily a result of the fact that -OPEC raised the price of crude oil in world markets. -U.S. gasoline producers raised the price of gasoline. -the U.S. government maintained a price ceiling on gasoline. -Americans typically commuted long distances.
the U.S. government maintained a price ceiling on gasoline
Refer to Figure 9-3. With trade and without a tariff, -the domestic price is equal to the world price -roses are sold at $4 in this market -there is a shortage of 400 roses in this market -this country imports 200 roses
the domestic price is equal to the world price
Refer to Scenario 10-1. From the given information, it is apparent that -the production of gasoline involves a negative externality, so the market will produce a smaller quantity of gasoline than is socially desirable -the production of gasoline involves a negative externality, so the market will produce a larger quantity of gasoline than is socially desirable -the production of gasoline involves a positive externality, so the market will produce a smaller quantity of gasoline than is socially desirable -the production of gasoline involves a positive externality, so the market will produce a larger quantity of gasoline than is socially desirable
the production of gasoline involves a negative externality, so the market will produce a larger quantity of gasoline than is socially desirable
Under rent control, landlords can cease to be responsive to tenants' concerns about the quality of the housing because -with rent control, the government guarantees landlords a minimum level of profit. -they become resigned to the fact that many of their apartments are going to be vacant at any given time. -with shortages and waiting lists, they have no incentive to maintain and improve their property. -with rent control, it becomes the government's responsibility to maintain rental housing.
with shortages and waiting lists, they have no incentive to maintain and improve their property.
Refer to Figure 8-2. Producer surplus without the tax is -$4, and producer surplus with the tax is $1 -$1, and producer surplus with the tax is $4 -$6, and producer surplus with the tax is $1.5 -$1.5, and producer surplus with the tax is $6
$4, and producer surplus with the tax is $1
Refer to Table 7-9. The equilibrium market price for 10 piano lessons is $400. What is the total producer surplus in the market? -$0 -$300 -$400 -$700
$400
Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. At equilibrium, consumer surplus is -$24 -$36 -$42 -$48
$48
A simultaneous increase in both the demand for tablets and the supply of tablets would imply that -both the value of tablets to consumers and the cost of producing tablets has increased -both the value of tablets to consumers and the cost of producing tablets has decreased -the value of tablets to consumers has decreased, and the cost of producing tablets has increased -the value of tablets to consumers has increased, and the cost of producing tablets has decreased
the value of tablets to consumers has increased, and the cost of producing tablets has decreased
Refer to Figure 6-13. How is the burden of the tax shared between buyers and sellers? Buyers bear -three-fourths of the burden, and sellers bear one-fourth of the burden. -two-thirds of the burden, and sellers bear one-third of the burden. -one-half of the burden, and sellers bear one-half of the burden. -one-fourth of the burden, and sellers bear three-fourths of the burden.
three-fourths of the burden, and sellers bear one-fourth of the burden
In the market for apartments, rent control causes the quantity supplied -and quantity demanded to fall. -to fall and quantity demanded to rise. -to rise and quantity demanded to fall. -and quantity demanded to rise.
to fall and quantity demanded to rise.
A. Suppose there is no trade. What are CS, PS, and TS? - CS = A+B - PS = C - TS = A+B+C B. Once the trade is allowed, is this country an exporting or importing country? - Exporting C. What is the new CS, PS, and TS under free trade? - CS = A - PS = B+C+D - TS = A+B+C+D D. Would it be beneficial to allow trade (compare TS before and after the trade)? - Yes, it would be beneficial. E. Who gains and who loses? - Producers gain and consumers lose.
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Part I. Refer to the demand curve and answer the following questions. A. Find marginal buyer's WTP at Q = 10. At Q = 10, marginal buyer's WTP is $30. B. Find CS for P = $30 CS = ½ x 10 x $10 = $50
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Part II. Supply Curve. Answer the following questions. A. Find marginal seller's cost at Q = 10. At Q = 10, marginal cost = $20 B. Find total PS for P = $20. PS = ½ x 10 x $20 = $100
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The market for bicycles is in equilibrium as in the graph. Determine the effects of: A. $90 price ceiling - The price falls to $90. Buyers demand 120 bikes, sellers supply 90 bikes, leaving a shortage. B. $90 price floor - Equilibrium price is above the floor, so floor is not binding. - P = $100, Q = 100 bikes. C. $120 price floor - The price rises to $120. Buyers demand 60 bikes, sellers supply 120, causing a surplus.
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Refer to Scenario 9-1. Suppose the world price of cardboard is $139 and international trade is allowed. Then Boxland's consumers demand -102 tons of cardboard and Boxland's producers supply 357 tons of cardboard -102 tons of cardboard and Boxland's producers supply 204 tons of cardboard -204 tons of cardboard and Boxland's producers supply 357 tons of cardboard -204 tons of cardboard and Boxland's producers supply 204 tons of cardboard
102 tons of cardboard and Boxland's producers supply 357 tons of cardboard
Refer to Table 10-3. The market equilibrium quantity of output is -3 units -4 units -5 units -6 units
3 units
Refer to Table 10-3. The socially optimal quantity of output is -3 units -4 units -5 units -6 units
5 units
Which of the following is not an advantage of a multilateral approach to free trade over a unilateral approach? -A multilateral approach can reduce trade restrictions abroad as well as at home -A multilateral approach has the potential to result in freer trade -A multilateral approach requires the agreement of two or more nations -A multilateral approach may have political advantages
A multilateral approach requires the agreement of two or more nations
Refer to Figure 7-4. Which area represents producer surplus when the price is P2? -ACH -BCG -ABGD -DGH
ACH
Refer to Figure 9-6. The deadweight loss created by the tariff is represented by the area -B -D + F -D + E + F -B + D + E + F
D + F
In which of the following cases is the Coase theorem most likely to solve the externality? -Ed is allergic to his roommate's cat -Chemicals from manufacturing plants in the Midwest are causing acid rain in Canada -Polluted water runoff from farms is making residents of a nearby town sick -Industrialization around the world is causing global warming
Ed is allergic to his roommate's cat
Which of the following statements is not correct? -A patent is a way for the government to encourage the production of a good with technology spillovers -A tax is a way for the government to reduce the production of a good with a negative externality -A tax that accurately reflects external costs produces the socially optimal outcome -Government policies cannot improve upon private market outcomes
Government policies cannot improve upon private market outcomes
Assume, for India, that the domestic price of copper without international trade is lower than the world price of copper. This suggests that, in the production of copper, -India has a comparative advantage over other countries and India will import copper -India has a comparative advantage over other countries and India will export copper -other countries have a comparative advantage over India and India will import copper -other countries have a comparative advantage over India and India will export copper
India has a comparative advantage over other countries and India will export copper
Refer to Figure 10-4, Graph (b) and Graph (c). The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, the socially optimal quantity of antibiotics is represented by point -Q2 -Q3 -Q4 -Q5
Q2
Refer to Figure 10-4, Graph (b) and Graph (c). The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, a government policy that internalized the externality would move the quantity of antibiotics used from point -Q2 to point Q3 -Q3 to point Q2 -Q4 to point Q5 -Q5 to point Q4
Q3 to point Q2
Which of the following is correct? - Rent control and the minimum wage are both examples of price ceilings. - Rent control is an example of a price ceiling, and the minimum wage is an example of a price floor. - Rent control is an example of a price floor, and the minimum wage is an example of a price ceiling. - Rent control and the minimum wage are both examples of price floors.
Rent control is an example of a price ceiling, and the minimum wage is an example of a price floor.
If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, total tax revenue received by government can be expressed as -T/Q -T + Q -T × Q -(T × Q)/Q.
T × Q
Which of the following is not correct? -Taxes levied on sellers and taxes levied on buyers are not equivalent. -A tax places a wedge between the price that buyers pay and the price that sellers receive. -The wedge between the buyers' price and the sellers' price is the same, regardless of whether the tax is levied on buyers or sellers. -In the new after-tax equilibrium, buyers and sellers share the burden of the tax.
Taxes levied on sellers and taxes levied on buyers are not equivalent.
When a country allows trade and becomes an exporter of silk, which of the following is not a consequence? -The price paid by domestic consumers of silk increases -The price received by domestic producers of silk increases -The price paid by domestic consumers of silk decreases -The gains of domestic producers of silk exceed the losses of domestic consumers of silk
The price paid by domestic consumers of silk decreases
Which of the following is not an advantage of corrective taxes? -They raise revenues for the government -They enhance economic efficiency -They subsidize the production of goods with positive externalities -They move the allocation of resources closer to the social optimum
They subsidize the production of goods with positive externalities
Refer to Figure 8-5. Graph (a) and Graph (b) each illustrate a $4 tax placed on a market. In comparison to Graph (a), Graph (b) illustrates which of the following statements? -When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic -When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic -When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic -When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic.
When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic
Employing a lawyer to draft and enforce a private contract between parties wishing to solve an externality problem is an example of -an opportunity cost -an implicit cost -a sunk cost -a transaction cost
a transaction cost
In this market, a minimum wage of $6 is -binding and creates a labor shortage. -binding and creates unemployment. -nonbinding and creates a labor shortage. -nonbinding and creates neither a labor shortage nor unemployment.
binding and creates unemployment
Refer to Figure 9-3. When a tariff is imposed in the market, domestic producers -gain $200 of producer surplus -gain $150 of producer surplus -gain $50 of producer surplus -gain $100 of producer surplus
gain $150 of producer surplus
If the government levies a $800 tax per motorcycle on sellers of motorcycles, then the price paid by buyers of motorcycles would -increase by less than $800. -increase by exactly $800. -increase by more than $800. -decrease by an indeterminate amount.
increase by less than $800
Refer to Figure 13-1. As the number of workers increases, -marginal product decreases -total output decreases -marginal product increases but at a decreasing rate -total output increases at an increasing rate
marginal product decreases
Suppose televisions are a normal good and buyers of televisions experience a decrease in income. As a result, consumer surplus in the television market -decreases -is unchanged -increases -may increase, decrease, or remain unchanged
may increase, decrease, or remain unchanged
When positive externalities are present in a market -private benefits will be greater than social benefits -social benefits will be greater than private benefits -only government regulation will solve the problem -the market will not be able to generate an equilibrium
social benefits will be greater than private benefits
Refer to Figure 8-3. As a result of the tax, -consumer surplus decreases from $200 to $80 -producer surplus decreases from $200 to $145 -the market experiences a deadweight loss of $80 -total surplus increases from $180 to $200.
the market experiences a deadweight loss of $80
