FINAL

Wanda owns a lemonade stand. She produces lemonade using five inputs: water, sugar, lemons, paper cups, and labor. Her costs per glass are as follows: $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor. She can sell 300 glasses for $0.50 each. What are Wanda's total accounting profits?

$126

Jessica makes photo frames. She spends $5 on the materials for each photo frame. She can create one photo frame in an hour. She earns $10 per hour at a part-time job at the local coffee shop. She can sell a photo frame for $30 each. An economist would calculate the total cost for one photo frame to be

$15

Each worker at the Wooden Chair Factory costs $12 per hour. The cost of each machine is $20 per day regardless of the number of chairs produced. Assume the number of machines does not change. If the factory produces at a rate of 78 chairs per hour, what is the total machine cost per day?

$40

Many species of animals are common resources, and many must be protected by law to keep them from extinction. Why is the cow not one of those endangered species even though there is such a high demand for beef?

Cows are privately owned, whereas many endangered species are owned by no one

When marginal cost is less than average total cost,

average total cost is falling.

If Farmer Brown plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 5 bushels of wheat. If he plants 2 bags, he gets 9 bushels. If he plants 3 bags, he gets 12 bushels. A bag of seeds costs $120, and seeds are his only cost. Farmer Brown's production function exhibits

diminishing marginal product.

Suppose the world price of cardboard is $45. Then, if Boxland goes from prohibiting international trade in cardboard to allowing international trade in cardboard,

domestic producers of cardboard become worse off and domestic consumers of cardboard become better off.

Goods that are not excludable are usually

free of charge

Citizens expect the government to provide various goods and services making taxes

inevitable

both public goods and common resources are

nonexcludable

when a good is excludable

people can be prevented from using the good

the provision of a public good generates a...

positive externality, and the use of a common resource generates a negative externality

The Pennsylvania Turnpike is a tolled freeway running through the state of Pennsylvania. Motorists must pay tolls at various points along the Turnpike based on the distance they traveled on the freeway. Suppose that despite the tolls, many motorists in the urban areas use the Turnpike causing traffic to slow during peak times. What type of good would the Turnpike be classified as in this case?

private good

Property rights are well established for

private goods

In the absence of externalities, the "invisible hand" leads to a market to maximize

total benefit to society from that market

On holiday weekends thousands of people picnic in state parks. Some picnic areas become so overcrowded the benefit or value of picnicking diminishes to zero. Suppose that the Minnesota State Park Service institutes a variable fee structure. On weekdays when the picnic areas get little use, the fee is zero. On normal weekends, the fee is $8 per person. On holiday weekends, the fee is $14 per person. The fee system corrects a problem known as the

tragedy of the commons