idek man :/ econ is lame, 11, 12, 13 mods, Mods 8, 9, 10, 5, 15, 6, and 7 mods

Jerry and Ralph are consumers of hockey tickets. For this exercise, suppose that all seats in the arena are of the same quality and have the same price. When tickets cost $160, neither will buy a ticket. If tickets cost $140, Jerry is willing to buy one, but Ralph will still not buy any. When each ticket costs $120, Jerry will buy two tickets during the course of the hockey season and Ralph will still buy no tickets. At a price of $100 per ticket, Jerry is willing to buy three and Ralph is willing to buy two tickets in a season. At a price of $60, Jerry will buy five tickets and Ralph will buy six tickets a season. At $40 a ticket, Jerry will buy six and Ralph will buy eight tickets during the season. Describe Jerry's demand curve and Ralph's demand curve. Then, suppose that Jerry and Ralph are the only individuals in the market and describe the market demand curve that shows the total number of tickets the market will buy at each price. Explain how you derive the market demand curve.

Add up the individual demands of both Jerry and Ralph since they're the only ones in this market. The sum of their individual demand curve is what helps us to derive the market demand curve.

If the government is trying to raise as much revenue as possible, which of the following goods would be the most likely to be subject to a government-imposed tax?

Alcohol

Suppose a perfectly competitive market is in long-run equilibrium. If there is a permanent increase in demand,

All of these answers are correct. (at least in the short run, some firms will increase their output. at least in the short run, the price will increase initially. new firms will enter the market.)

In the long-run equilibrium for a perfectly competitive market

All of these are correct. (the firms' economic profits are zero. there is no incentive for entry or exit. average total costs of production are minimized.)

If population increases in a city with effective rent controls (and nothing else changes), which of the following describes what will happen in the market for rental housing?

An increase in demand, but no change in quantity supplied.

When the federal government subsidizes higher education in the form of Pell grants to students, it results in

An increase in the demand for higher education

When the federal government subsidizes higher education in the form of direct subsidies to universities, it results in:

An increase in the supply of higher education

Match the following goods with the state that possesses a comparative advantage in its production.

Apples- Tennessee Oranges- New York

Which of the following is NOT an assumption of marginal utility theory?

As more of a good is consumed, the decrease in the marginal utility from the good means that the total utility from the good decreases also.

Rising average product as inputs increase means that which of the following is happening to costs?

Average costs alone are falling.

The donut market is perfectly competitive. The figure shows the costs of a typical donut producer. In the short run, the donut producer's supply curve is the curve running from point ________ to point E.

B

Which points represent a production level that could be economically efficient? Select all that apply. ​[Image description: The graph below shows the production possibilities frontier for sedans and convertibles. Vertical axis is thousands of sedans and horizontal axis is thousands of convertibles. There are four points on the graph, labelled A through D. Point A is inside the PPF. Points B and C lie on the PPF at different positions. Lastly, Point D is outside of the PPF.]

B & C

If the firm were to choose a permanent output level of Q = 6,000, the lowest average cost would be achieved with the ______.

medium factory.

Studying the determination of prices in individual markets is primarily a concern of

microeconomics

Studying the effects choices have on the individual markets within the economy is part of

microeconomics

In broad terms the difference between microeconomics and macroeconomics is that

microeconomics studies decisions of individual people and firms and macroeconomics studies the entire national economy.

The above figure shows the demand and cost curves for a firm. The figure shows a

monopolistically competitive firm in the short run.

Economists are critical of monopoly because

monopolists can create a deadweight loss.

Robinson spends all his income on mangos and bananas. Mangos cost $3 per pound and bananas cost $1 per pound. The marginal utility is 30 for the last pound of mangos purchased and 8 for the last pound of bananas. To maximize his utility, Robinson should buy

more mangos and fewer bananas.

The Atlantic City Expressway is a highway that runs from outside Philadelphia to Atlantic City, New Jersey. It is notoriously congested during the summer weekends when many people are driving to the beach about the same time. Because drivers who decide to take this road ignore the impact of their driving on overall traffic congestion the result is ________ cars on the road than the efficient number of cars and a deadweight loss is ________.

more; created

Bob's Lawn Care Services is a perfectly competitive firm that currently mows 22 lawns a week. Bob's marginal cost exceeds the price he charges. Bob can increase his profit if he

mows fewer than 22 lawns a week.

Because Product X has a very small, positive income elasticity of demand, it is likely that product X is a

necessity

Marginal utility theory is used in the derivation of the

negative slope of demand curves.

Suppose that the equilibrium wage in the low-skilled labor market is $9.25. Further, suppose the federal government raises the minimum wage to $9.00 an hour from its present level of $8.15. The government's action of increasing the minimum wage will result in

neither a shortage nor a surplus of labor in the low-skilled labor market.

The figure above shows the demand for and supply of rental housing in Smallton. If a rent ceiling is set at $800, there is

neither a shortage nor a surplus of rental housing.

In the short run

no firm experiences economies of scale.

In a perfectly competitive market that is in long-run equilibrium, a rightward shift in the market demand curve results in

none of the events listed above.

In the above figure, a rent ceiling of $500 per month would

not affect the equilibrium quantity.

The local banking industry currently has a Herfindahl-Hirschman index (HHI) value of 1575 and two of the competing banks have considered merging. Because the merger would raise the HHI by 55 points, the Federal Trade Commission would likely

not challenge the merger.

Bobby consumes only chocolate ice cream and vanilla ice cream. He is spending all of his income. His marginal utility of chocolate is 100 and his marginal utility of vanilla is 200, and the price of chocolate is $1.00 per scoop and the price of vanilla is $2.00 per scoop. To maximize his utility, Bobby should

not change his purchases between chocolate ice cream and vanilla ice cream.

Interlace, Inc. produces and a unique soda. The company cannot price discriminate. The figure above shows Interlace's demand curve, marginal revenue curve, and marginal cost curve. The quantity of soda Interlace Inc. will choose to produce is ________ because when this quantity is produced, ________.

not efficient; marginal social benefit exceeds marginal social cost

The market demand for wheat is ________ and the demand for wheat produced by an individual farm is ________.

not perfectly elastic; perfectly elastic

In the market for batteries, the three largest firms earn 90% of the total revenue and there are 35 firms in the industry. This industry is best described as

oligopoly

If demand is perfectly elastic, a sales tax is paid by

only the sellers.

The loss of the highest-valued alternative defines the concept of

opportunity cost

When the government hires people to serve in the army, these people are no longer available to do other work. This choice illustrates the concept of

opportunity cost

Match the following goods with the country that possesses a comparative advantage in its production.

oranges- US apples- canada

Scarcity exists because

our wants exceed the resources available to satisfy them.

Fundamental economic problems basically arise from

our wants exceeding our scarce resources

The above figure shows the cost curves for a perfectly competitive firm. If all firms in the market have the same cost curves and the price equals $16 per unit

over time, the price will fall as new firms enter the market.

The tragedy of commons is the

overuse of a common resource.

In the long run, perfectly competitive firms earn just enough revenue to

pay all opportunity costs.

The term human capital refers to

people's knowledge and skill

If the supply curve is vertical, then supply is

perfectly inelastic

The best example of a good sold in a monopolistically competitive market is

pizza

Consumer surplus ________.

plus producer surplus is maximized when resources are used efficiently

Which country has the highest opportunity cost for producing a yard of cloth?

portugal

A $10 per-unit tax on cell phones raises the equilibrium price paid by consumers by $5. Before the tax, 5,000 cell phones were sold per year. The revenue from the tax is

positive but less than $50,000 per year.

The tragedy of the commons is the absence of incentives to

prevent overuse and depletion of a common resource.

Which of the following is always a violation of the antitrust law?

price fixing among competitors

The producer surplus from a good is equal to the

price of the good minus its opportunity cost of production summed over the quantity sold.

As long as it does not shut down, a profit-maximizing perfectly competitive firm will.

produce so that marginal revenue equals marginal cost.

The above figure shows the demand and cost curves for a monopolistically competitive firm in the long run. The firm maximizes its profit by

producing 8 units and charging a price of $15.

When the monopolistically competitive firm shown in the above figure is at its long-run equilibrium, it will be

producing at less than the efficient scale of output and is at a point such as F on the ATC curve.

Brand name drugs are chemically identical to their generic counterparts. Yet, consumers often prefer the brand name product to the generic product. Making consumers think that a brand name drug differs from its generic counterpart is an example of

product differentiation.

In a perfectly competitive market, a permanent increase in demand initially brings a higher price, economic

profit, and entry into the market.

The main purpose of antitrust law is to

prohibit monopoly practices such as restricting output.

Michigan Radio is the state's most listened-to public radio service, attracting approximately 400,000 listeners each week and is funded through listener donations. Listeners can access Sirius satellite radio through a subscription to the service. Michigan Radio is a ________ and Sirius satellite radio is a ________.

public good; natural monopoly

The above table shows the market shares for all the landscaping services in a suburban area. A merger between firms E and F would

raise the four-firm concentration ratio.

Assume that the municipality decides to place a tax on individual incomes. Suppose that the tax is a fixed sum for everyone regardless of income. Explain how you might describe the fairness of the tax. Select all that apply.

regressive

An attempt by a firm to create a monopoly and gain the economic profit from the monopoly is called

rent seeking.

When a person lobbies Congress to grant the person the exclusive right to sell a particular good, such lobbying activity is called

rent seeking.

In the above figure, a rent ceiling of $300 per month would

result in a shortage of 7000 units.

A price floor

results in a surplus if the floor price is higher than the equilibrium price.

Using the market shares in the table above, if Widgotech buys Widgette the HHI will

rise by 18

The demand for corn increases. As a result, the price of corn will ________, and the less elastic the supply of corn, the ________ will be the effect on the price.

rise; greater

People must make choices because

scarcity

Provide an example of two goods that would have a negative slope. Imagine a line showing the production of one of your goods as production of the other good increased. Describe the line.

selling bathing suits in summer versus winter

Suppose that as a firm grows, it first experiences economies of scale, then constant returns to scale, then diseconomies of scale. The LRAC for this firm will be ______.

shaped like a wide U.

If the firm were to choose a permanent output level of Q = 4,000, the lowest average cost would be achieved with the _______.

small factory.

In monopolistic competition, each firm supplies a ________ part of the total market output and its actions ________ the actions of the other firms.

small; do not directly affect

Water has a ________ marginal utility and brings a ________ consumer surplus; diamonds have a ________ marginal utility and bring a ________ consumer surplus.

small; large; large; small

An externality can be a cost or benefit arising from the production of a good that falls upon

someone other than the consumer or producer.

Sonya's budget for magazines and chocolate bars is $50. Her marginal utility from these goods is shown in the table above. The price of a magazine is $5 and the price of a chocolate bar is $2.50. Sonya currently buys 3 magazines and 14 chocolate bars. To maximize her utility, she should

stay with the current combination of goods.

The total utility you get from eating slices of pizza on a given night is the

sum of the marginal utilities of all slices eaten.

On December 10 the price of a Christmas tree is $50 and 100 trees are purchased. On December 20 the demand for Christmas trees decreases so that the price falls to $30 and 20 trees are purchased. From this set of facts, the

supply of Christmas trees is elastic.

When a firm is experiencing economies of scale

the LRAC curve slopes downward.

The problem for the prisoners in the prisoners' dilemma game in the above table is that

the Nash equilibrium is not the best outcome.

In the long-run equilibrium, perfectly competitive firms make zero economic profit because of

the ability of firms to enter and exit.

Marginal revenue is defined as

the change in total revenue that results from a one-unit increase in the quantity sold.

Microeconomics is the study of

the choices that individuals and businesses make

Danny has $12 to spend on two goods: pies and soda. The price of a pie is $4, and the price of a can of soda is $2. To maximize his utility, Danny buys ________.

the combination that gives him the same marginal utility per dollar spent on pies as on soda

If goods A and B are complements, then

the cross elasticity of demand between A and B is negative.

If the government decreases the tax on cell phones, ________.

the deadweight loss decreases

At a local ice cream parlor, when the price of half-gallons of chocolate ice cream was lowered by fifty cents per half-gallon, total revenue from the sale of chocolate ice cream decreased. This result indicates that

the demand for chocolate ice cream is inelastic.

Laura is a manager for HP. When Laura must decide whether to produce a few additional printers, she is choosing at the margin when she compares

the extra revenue from selling a few additional printers to the extra costs of producing the printers.

If regulators of the local gas and water utility companies require those firms to price their service at marginal cost

the firms might require a tax-financed subsidy to survive.

If a 5 percent increase in the price of good A leads to a 4 percent decrease in the demand for good B, then ________.

the goods are complements

This type of firm would likely operate as a monopoly

the local water company.

If the price of milk increased by 5 percent because of an increase in the demand for milk, and the quantity of milk supplied increased by 7 percent

the price elasticity of supply of milk is greater than one.

In the market for CDs, the producer surplus will decrease if ________.

the price of the CD decreases

The long run is distinguished from the short run because only in the long run

the quantities of all factors of production can be varied.

Which of the following is a microeconomic topic?

the reasons why Kathy buys less orange juice

In the short run

the size of the plant is fixed.

Human capital is:

the skill or knowledge of individuals

Last year in the United States, the price of snowboards rose by 5 percent and the price rise resulted in a 15 percent increase in the quantity supplied. This outcome is an indication that

the supply of snowboards is price elastic.

In terms of dollars, the marginal benefit of working five days a week instead of four days a week is

the wages received for the fifth day of work

A market is perfectly competitive if

there are many firms in it, each selling an identical product.

If a monopolist can perfectly price discriminate, then

there will be no consumer surplus.

The average product of labor is equal to the

total product divided by the total number of workers hired.

If a monopolist lowers its price and its demand is inelastic, then its

total revenue decreases.

A decrease in consumption will result in

total utility decreasing, but marginal utility increasing.

A measure of all the satisfaction you receive from all the coffee that you consume is your

total utility from coffee.

The principle of diminishing marginal utility says that

total utility increases by smaller and smaller amounts as the quantity of the good consumed increases.

In the above figure, if the price is $2, then the total consumer surplus is

triangle abc.

When a minimum wage is set above the equilibrium wage rate, ________.

unemployment increases

A perfectly competitive firm has a total revenue curve that is

upward sloping with a constant slope.

For a common resource, the marginal private cost curve slopes ________ and the marginal social cost curve slopes ________.

upward, upward

In the typical short run model of the firm, we generally assume that labor is_______ and capital is________ .

variable; fixed

All economic questions arise because we

want more than we can get

The paradox of value refers to the fact that

water costs little, while diamonds cost a lot.

A monopolist produces a level of output that can be described as follows. The output is:

where marginal revenue is equal to marginal cost; and too little for allocative efficiency.

The increase in the demand for widgets, shown in the figure above, is the result of an increase in the price of McBoover devices. Therefore

widgets and McBoover devices are substitutes.

In the long run, the economic profit of a firm in a perfectly competitive market

will equal zero.

On Saturday morning, you rank your choices for activities in the following order: go to the library, work out at the gym, have breakfast with friends, and sleep late. Suppose you decide to go to the library. Your opportunity cost is

working out

Homer's Holesome Donuts has determined that its profit-maximizing quantity is 10,000 donuts per year. Homer's earns $12,000 in revenue from the sale of those donuts. Homer's has two costs. First he pays $16,000 in annual rental payments for its five-year lease on its store. Second Homer incurs an additional cost of $5,000 for ingredients. Should Homer's exit the market in the long run?

yes, because he is incurring an economic loss

In the long-run equilibrium in a perfectly competitive market, the economic profit of the firms is

zero

the figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC).In the figure above, what is Gap's economic profit?

zero

Which of the following is NOT an example of an opportunity cost?

Because Mary is now being paid a higher wage, she can afford to buy a new car even though she is moving into a bigger apartment.

In the above table, based on the four-firm concentration ratio, which industry is the most concentrated?

Blodgets

The above table shows the short-run total product schedule for the campus book store. At what levels of books sold per hour will the marginal product of labor be greater than the average product of labor?

Both 40 books sold per hour and 73 books sold per hour are correct.

Disney and Fox must decide when to release their next films. The revenues received by each studio depend in part on when the other studio releases its film. Each studio can release its film at Thanksgiving or at Christmas. The revenues received by each studio, in millions of dollars, are depicted in the payoff matrix above. Which of the following statements CORRECTLY describes Disney's strategy given what Fox's release choice may be?

Both answers If Fox chooses a Thanksgiving release, Disney should choose a Christmas release and If Fox chooses a Christmas release, Disney should choose a Thanksgiving release are correct.

In the long-run equilibrium, perfectly competitive firms produce the level of output such that

Both answers average total cost is minimized and marginal cost equals the price are correct.

The price ceiling depicted in the above figure results in

Both answers consumer surplus increasing from $30 thousand to $34.5 thousand and producer surplus decreasing from $24 thousand to $6 thousand are correct.

Price discrimination by a monopoly

Both answers decreases consumer surplus and increases the firm's profit are correct.

The income elasticity of demand for restaurant meals is 1.61. So

Both answers if income increases by 10 percent, the quantity demanded of restaurant meals will increase by 16.1 percent and restaurant meals are an income elastic normal good are correct.

A small shirt factory in Taiwan doubles its labor inputs and experiences a tripling in output. A large catering kitchen in Tokyo increases its inputs by 30% and experiences a 50% increase in production. Which of the following is true?

Both firms enjoy economies of scale.

Suppose the price of soda is $2 each and the price of a pizza slice is $4 each. Jean maximizes utility and buys only sodas and slices of pizza. If the price of a soda increases to $3 each, Jean's marginal utility per dollar for soda

Both will decrease and she'll buy fewer sodas. and will decrease and she'll buy more pizza are correct.

The government of Healthyland imposes a tax on sellers of salt. The tax is $0.10 per pound. With no tax, the price of salt is $0.40 per pound. The demand for salt is perfectly inelastic and the elasticity of supply is 1.5. How is the salt tax burden shared between buyers and sellers in Healthyland?

Buyers pay the whole tax.

Match the following total production figures for computer chips with their states.

California- 750 Michigan- 500

Which point represents the optimal mix (allocative efficiency) of producing butter and shoes?

Can't tell

Use the numbers to build the firm's LRAC function. In other words, assuming that at any level of output, the firm uses the proper factory size to get the lowest average cost of production. As this firm grows from 8,000 to 10,000 units, it will be experiencing:

Constant returns to scale.

A government may impose a price ceiling if which of the following is true?

Consumers can persuade legislators that lower prices are needed

Given the following data, what should the firm do?Current production = 1,000Current price = $10Marginal cost = $10Total costs = $15,000Fixed cost = $6,000

Continue to produce in the short run, but close down in the long run.

Given the following facts, what should the firm do in the short run? In the long run?Fixed costs are $50,000. Total costs are $90,000. Total revenues are $45,000.

Continue to produce in the short run; leave the industry in the long run.

A car manufacturing plant in Michigan employs the optimal combination of both unionized and non-unionized labor. The plant agrees to a new union contract that stipulates higher wages. As the plant re-adjusts its inputs, marginal product of non-unionized workers will:

Decrease

If the country enters a period of prosperity, resulting in consumer incomes increasing by 4% and the income elasticity of a good is 0.8, what will happen to the demand for that good as a result?

Demand will increase by 3.2%

Why are cartels inherently unstable?

Each producer will have an incentive to cheat and break the agreement.

Use the numbers to build the firm's LRAC function. In other words, assuming that at any level of output, the firm uses the proper factory size to get the lowest average cost of production. As this firm grows from 2,000 to 8,000 units, it will be experiencing:

Economies of scale.

Due to_____________ , a natural monopoly's average cost is___________ as its output rises.

Economies of scale; decreasing

A property tax is likely to do what?

Encourage homeowners to consume less than the allocatively efficient amount of housing

If the countries start trading with each other, which country will specialize in and export cloth?

England

Match the following countries with their respective opportunity cost ratios of producing a barrel of wine in terms of yards of cloth.

England- 10 yards Poland- 2 yards

In a perfectly competitive market that is in long-run equilibrium, which of the following will NOT occur?

Entrepreneurs want to enter this industry.

Mimi wants to see if she should buy another oven for her restaurant. How might she use marginal analysis to make a decision?

Examine the price of the oven and the marginal product of the oven.

Which of the following is NOT an assumption of perfect competition?

Firms compete by making their product different from products produced by other firms.

Which of the following is NOT true of monopolistic competition?

Firms produce a good that is a perfect substitute for their competitors' goods.

Antitrust measures that would break up a monopoly into multiple, smaller, competing firms may NOT be a good idea if the monopolist:

Has large economies of scale.

Bill Gates, co-founder of Microsoft, was reputed to be the best computer programmer in his company. He was also apparently the most creative business mind by far in the company. Why did he specialize in one or the other activity (that is, programming or managing the business)?

He specialized in the area where he was the most efficient relative to others and let someone else specialize where he was less efficient.

Methods of rent seeking include which of the following? I. Buying a monopoly II. Creating a monopoly III. Price discrimination

I and II

You are running a small business and are thinking about ways to increase your profits. Assume you are facing an elastic demand. Would you raise or lower your prices?

I do not know because I cannot tell how much costs would change in relationship to revenues.

Which of the following does NOT contain an externality?

I sell you an ice cream and it gives you a headache.

An efficient Nebraska corn farm decides to hire more workers and use fewer harvesting machines after learning of: I. An increase in corn commodity prices. II. A decrease in fuel prices. III. An increase in worker productivity. IV. An increase in harvesting machine maintenance costs.

III and IV

Which of the following is a result of a rent ceiling set below the equilibrium rent? I. equity in the housing market II. efficient allocation of resources III. a shortage of housing units.

III only

Explain why the concept of opportunity cost should be used to determine how countries specialize and trade.

If country A's OC is less than country B's, country A should specialize where its OC is the smallest. Country A, by producing where the OC is the lowest, is giving up less than if Country B produced the good. So, the world gives up less by producing where OC is the lowest.

Which of the following best describes the relationship between diminishing marginal returns and marginal cost?

If marginal returns are diminishing while output increases, marginal cost must be increasing.

Consider a tax on individuals. Under which of the following circumstances would the tax cause the least effect on economic efficiency?

If the demand for the product is unitarily elastic.

Consider a tax on producers. Under which of the following circumstances would the tax cause the least effect on economic efficiency?

If the supply of the product is inelastic.

In order for a country to be economically efficient and operate at a point beyond the current production possibilities frontier curve, the country would have to do which of the following?

Improve technology in the future

A major city was thinking about increasing its bus fares and commissioned a study to estimate the price elasticity of demand. The study estimated that elasticity was 0.4. What action should the city have taken to increase revenue from bus fares?

Increase fares

A firm is producing where the Marginal Product of Labor is 18 and the Marginal Product of Capital is 10. The price of labor is $3 and the cost of capital is $2. The firm is planning their future inputs and can now adjust both labor and capital. How should they adjust inputs?

Increase labor and decrease capital

An increase in an effective minimum legal price will do what to prices and quantities actually sold in a market? Prices will __________ and the quantities actually sold will ___________.

Increase, decrease

Consider the attached figure. Assume both countries have the same resources available to them. The darker line shows how many units of goods A and B a worker in the Philippines can produce and the lighter line shows the number of units of goods A and B that a worker in Indonesia can produce. Which country has a comparative advantage in the production of Good A?

Indonesia, since the opportunity cost of Good A is 15/100 = 0.15

Is the demand for a container of salt likely to be inelastic or elastic? Why? Select all that apply.

Inelastic because salt is a necessary dietary component Inelastic because for most people salt is a very small part of their budget

Which of the following statements regarding an average-cost pricing rule for a natural monopoly is WRONG?

It is efficient.

Which of the following is true of an economic model?

It makes simplifying assumptions to provide a simpler version of a complex problem so that it may be studied and understood

If one state has an absolute advantage in the production of two goods, what should it do?

It should produce the good in which it has a comparative advantage and let another state produce the good in which it has a comparative advantage.

A monopoly firm currently finds that its marginal cost exceeds marginal revenue. What will the monopoly do to raise its profit?

It will lower the output and increase the price.

If the Herfindahl-Hirschman index (HHI) among the firms in the long distance telecommunications market were equal to 1755, when would the Federal Trade Commission probably challenge a proposed merger between any two of the firms?

It would challenge if the HHI would increase by more than 100 points.

If the income elasticity of a good is 0.8, what do we know about the good?

It's a normal good

We have shown that all individuals and countries can gain from trade. Can you think of a reason why some individuals or countries may object to free trade?

It's important to keep jobs in the US, our national security could be at stake, other nations not treating their workers fairly

Consider a firm, using capital (K) and labor (L) in the production process, that wants to expand production. Suppose MPK = 200 and MPL = 50. The cost of capital is r = 80, and the wage rate is w = 10. Should this firm employ more labor or more capital?

Labor

Compared with the allocative efficiency of perfectly competitive firms, a monopoly tends to be:

Less efficient, as monopoly price will be higher than the marginal cost.

You see that an industry has only a few major firms. How could you determine if it is an oligopoly or a monopolistically competitive industry?

Look to see if there are barriers to entry.

If a production process faces diminishing marginal returns, which of the following is most likely?

Marginal costs are increasing.

________ is the additional satisfaction a person receives from consuming an extra unit of a good.

Marginal utility

The table above shows Mary's utility from chips and soda. The table shows that

Mary's marginal utility decreases as she consumes more chips.

Suppose a new vaccine for Lyme disease is developed by Merck, a large drug company. Which of the following is most likely to occur?

Merck will apply for a patent on the vaccine that grants it the monopoly rights to the vaccine for many years.

Michelle spends all of her income on mangos and rice. Mangos cost $2 per pound and rice costs $1.50 per pound. If Michelle is spending all of her income and the marginal utility per dollar spent is 20 for the last pound of mangos purchased and 10 for the last pound of rice purchased, then

Michelle should buy more mangos and less rice to maximize utility.

Which of the following would most likely be a public good?

Michigan Radio is the state's most listened-to public radio service.

In order to maximize profits at any level of output, the firm must:

Minimize production costs.

When will a minimum wage be an effective price control? When it is a _________.

Minimum "price" that is above equilibrium price

If a man spends approximately 45% of his income on air travel and his sister only spends about 2% of her income on air travel (and that is the only difference), would the man's demand for air travel be less or more elastic than his sister's?

More

If the economy is producing at a point inside the production possibilities frontier, which of the following must be true?

More of both goods can be produced

In the U.S. economy, which of the following statements is TRUE?

More services are produced than goods.

Situation A: When a $10 per unit tax is imposed on the producer of Bippies (a candy), the equilibrium price increases by $4.Situation B: When a $10 per unit tax is imposed on the producer of Bippies, the equilibrium price increases by $2.Based on the two situations above, Bippies in Situation A has a _________ elastic supply OR faces a _________elastic demand than exists in Situation B.

More, less

Which of the following would be likely in a market with firms experiencing economies of scale?

Most of the firms will tend to be large.

Which of the following is a distinguishing characteristic of oligopoly?

Natural or legal barriers prevent the entry of new firms.

The Toronto Raptors, Canada's only NBA team, have been very successful lately. This has led to more young people playing basketball instead of running, leading to an increase in demand for basketball shoes and a decrease in demand for running shoes. Suppose a monopoly shoe company makes all of the basketball and running shoes in Canada. Before the success of the Toronto Raptors, the shoe producer was operating at a point that was on the boundary of their PPF. After the Raptors won the NBA championships, consumers bought 8,000 pairs of running shoes and 30,000 pairs of basketball shoes. Would this be possible for the firm to produce with their current production capabilities? With regards to the firm's PPF, how would you describe the combination of shoes that the firm would need to produce in order to satisfy all shoe demands? How could the shoe firm shift their PPF outward to produce more shoes? If the actions outlined in Problem 2.3 were the only available options, what would the firm have to consider when deciding which to take?

No Unattainable. All of the above would shift the PPF outward. The cost of each action, How much each action increases output.

Suppose that in a given industry, there are diseconomies of scale, so that larger firms generally have higher average costs than smaller firms. Should a regulator typically approve a merger between two large firms in this industry?

No, because costs will increase and market power will increase, leading to less technical and allocative efficiency.

A pizza parlor in a university town specializes in pizza and breadsticks. The parlor's fixed inputs (resources) are the number of workers hired, the number of ovens, and it is open for 4 hours a day. There are also 3 workers, paid $12/hour, and 2 ovens. The normal demand per day is 20 pizzas and 80 breadsticks. In September, when many students arrive in town, there is an increased demand for pizza, but not breadsticks: 26 pizzas and 70 breadsticks. What is the marginal cost of the last pizza made to satisfy the new demand, compared to the first pizza made? Given the PPF curve, would you expect the pizza parlor to meet the new demand? What are some plausible strategies for the pizza parlor to apply in order to meet the new demand? (select all that apply.) The option(s) selected in Problem 1.2 will meet the new demand because they:

No, it is not possible with the current inputs. Hire another worker, Buy a new oven, Remain open for longer. increase inputs instead of reallocating them

Consider the attached figure. Assume both countries have the same resources available to them. The darker line shows how many units of goods A and B a worker in the Philippines can produce and the lighter line shows the number of units of goods A and B that a worker in Indonesia can produce. If the two countries specialize in the production of the good in which they have comparative advantage and then trade these goods with each other, would both of them agree to a terms-of-trade of one unit of Good A for two units of Good B?

No, the Philippines would not agree

Suppose a firm wants to do marginal analysis to see if it should employ more capital or more labor in order to increase output. The firm knows the prices of the inputs. Is this enough information to answer the question at hand?

No, the firm also needs to know the marginal productivities of each of the inputs.

The figure above shows the marginal revenue and long-run cost curves for a perfectly competitive firm. All other firms in the industry have identical curves. Which of the following statements is TRUE?

None of these are true. (The firm's average cost exceeds the price. Over time, firms will enter this industry. The firm is earning economic profit.)

Diminishing returns is most relevant when:

None of these. (The firm employs more of all inputs. The firm employs less of all inputs. The firm employs either more or less of all inputs.)

A pool-cleaning firm employs cleaning machines and cleaning workers. If local wages fall and robots become more effective, the firm should employ:

One cannot tell.

Which of the following graphs shows the correct change in the production possibilities frontier curve if a new technology is invented that increases the productivity of watch manufacturing?

Option B

Which of the following graphs shows the change in the production possibilities frontier curve if all workers in a country become more productive

Option C

To help pay for the cost of sport related injuries, the government imposes a tax on sellers of all sports equipment. Using the above figure, how much producer surplus is lost from this tax on sports equipment?

P0P1da

Consider the attached figure. Assume both countries have the same resources available to them. The darker line shows how many units of goods A and B a worker in the Philippines can produce and the lighter line shows the number of units of goods A and B that a worker in Indonesia can produce. Which country has absolute advantage in the production of Good A?

Philippines

Consider the attached figure. Assume both countries have the same resources available to them. The darker line shows how many units of goods A and B a worker in the Philippines can produce and the lighter line shows the number of units of goods A and B that a worker in Indonesia can produce. Which country has absolute advantage in the production of Good B?

Philippines

What is the meaning of point "A" in Figure A2.8? of point "B"?

Point A represents 6 right shoes and 2 left shoes, Point B represents 4 right shoes and 8 left shoes

A monopoly is currently producing a certain quantity of output. All else being equal, what will happen to the price charged by this monopoly if there is an upward shift in demand?

Price will increase.

A firm has a choice of raising or lowering its price. If the firm wishes to increase its revenues (the price times the quantity sold), what should it do?

Raise price when demand is inelastic, because the revenues gained from the price increase will be larger than the revenues lost from the smaller quantity sold.

The figure below shows two production possibilities curves that do what? ​[Image description: There are two graphs pictured below that show the PPF for laptops and desktops for two firms. Firm A's PPF is a straight vertical downward-sloping curve, with vertical and horizontal intercepts of 10. Firm B's PPF is a downward-sloping concave curve, with a vertical intercept of 10 and a horizontal intercept of 8.]

Reveal that firm B has an increasing marginal cost of production and firm A does not

The first antitrust law passed was the ________.

Sherman Act

A firm is producing where the Marginal Product of Labor is 18 and the Marginal Product of Capital is 10. The price of labor is $3 and the cost of capital is $2. They cannot adjust their capital, so are they in the short run or the long run?

Short Run

Based on the production capabilities of one worker in Colorado or Montana, indicate which state has a comparative advantage in producing skis or computers.

Skis- colorado computers- montana

The parlor doesn't have room for an extra oven and doesn't want to wait to hire and train a new employee. Since most of the additional orders are coming in later in the evening, the parlor decides to extend its hours. How did you adjust the above graph to represent the pizza parlor's decision to stay open longer hours?

Slid the curve upwards along the pizza axis, no change to the breadsticks axis.

A tax on producers would result in the (supply/demand) curve moving to the (right/left). A tax on consumers would result in the (supply/demand) curve moving to the (left/right)

Supply, left, demand, right

A pizza parlor can make 100 pizzas in an evening. They make 40 pepperoni pizzas and 60 extra cheese pizzas. They are producing each pizza at the lowest possible cost. 100 people order pizza, but 50 people would like a pepperoni pizza and 50 would like an extra cheese pizza. This pizza parlor is what?

Technically efficient, but not allocatively efficient nor economically efficient

Consider the attached figure. Assume both countries have the same resources available to them. The darker line shows how many units of goods A and B a worker in the Philippines can produce and the lighter line shows the number of units of goods A and B that a worker in Indonesia can produce. Which country has a comparative advantage in the production of Good B?

The Philippines, since the opportunity cost of Good B is 150/35 = 4.29

The supply of oil is more elastic than the demand for oil. If oil is taxed $10 per barrel, how will the tax be divided between the buyers and sellers?

The buyers will pay more of the tax than the sellers.

Who is likely to be in favor of a price ceiling on a good?

The consumers of the good who can still purchase it after the ceiling is imposed

If a country is operating on the production possibilities frontier curve, it must mean that which of the following is true?

The country is technically efficient.

Suppose in the long run a firm's labor costs decrease. What will happen regarding the LRAC?

The entire LRAC function will shift downward.

A farm grows apples and pears. It is fully utilizing its available land and other resources, such as tractors and machinery. Tastes change, and consumers demand more pears than apples. Put the following in the right order, from the first action to the last, that would describe the farm's response.

The farm is faced with an increased demand for pears and a decreased demand for apples. The farm decides to meet the new demand since their current resources allow them to produce more pears and still meet the reduced demand for apples. The farm uses less land for apples and more land for pears. The farm's apple output decreases and the pear output increases. The farm is able to produce at a technically and allocatively efficient point on their PPF.

The figure above shows the marginal revenue and long-run cost curves for a perfectly competitive firm. Which of the following statements is TRUE?

The firm is producing at minimum long-run average cost.

What is a possible problem that may arise if a firm is subject to average cost regulation?

The firm loses the incentive to keep its costs low and may engage in wasteful spending

Which of the following is NOT necessary for a firm to engage in price discrimination?

The firm must produce output for different buyers at different costs.

What is a problem with using marginal cost pricing regulation on a natural monopoly?

The firm will be making an economic loss and eventually exit the industry.

Suppose in the long run a firm decides to grow in size and increase output. What will happen regarding the LRAC?

The firm will move from one point to another point, from left to right, on the same LRAC.

Libertyville has two optometrists, Dr. Smith and Dr. Jones. Each optometrist can choose to advertise his service or not. The incomes of each optometrist, in thousands of dollars, are given in the payoff matrix above. Which of the following statements CORRECTLY categorizes the Nash equilibrium for the game?

The game has a Nash equilibrium in which both optometrists advertise.

In 2010, the Center for Disease Control has recommended that every child between the ages of 6 months and 18 years be vaccinated, except those with a serious egg allergy. Dr. Berreman states,"By protecting ourselves from flu, we also protect our families and neighbors." Which is a solution that could be used to achieve a more efficient allocation of resources in the presence of this externality?

The government could offer a free flu vaccine clinic.

When you chose to buy the second cup of coffee instead of the third bagel, which of the following is necessarily CORRECT?

The marginal utility per dollar from the third bagel is less than the marginal utility per dollar from the second coffee.

The government creates an effective price floor. Describe how the market adjusts by putting the following statements in order.

The new minimum is now above the equillibrium price producers are willing to supply more but conumers would buy less The difference between quantity demanded and quantity supplied after the price floor comes into effect creates a surplus in the market The size of the surplus depends on the elasticity of the producers and consumers, the more elastic either party is, the bigger the surplus

Consider the following production possibilities frontier. If the economy is currently at point A and producing missiles or automobiles are the only choices, which of the following statements is true? ​[Image description: The graph below shows the production possibilities frontier for automobiles and missiles. Vertical axis is automobiles and horizontal axis is missiles. The points on the PPF are as follows: 95 automobiles, 0 missiles; 90 automobiles, 25 missiles; 85 automobiles, 50 missiles; 70 automobiles, 70 missiles; 50 automobiles, 82 missiles; 25 automobiles, 90 missiles; and 0 automobiles, 95 missiles. Point A lies within the PPF, at approximately 25 automobiles and 25 missiles.]

The opportunity cost of producing 50 additional automobiles is zero missiles

An economy is on its production possibilities frontier. If the economy faces diminishing marginal returns, what will happen to the opportunity cost as the production of one of the categories of goods increases?

The opportunity cost will increase as it takes more to produce the good.

The price elasticity of demand for purses is measured in what units?

The price elasticity of demand is a unitless measure.

If a perfectly competitive market becomes a monopoly and the costs do not change, which of the following allocations of costs and benefits applies?

The producer benefits, but consumers and society are harmed.

Consider the concepts of economies of scale and diseconomies of scale. What is meant by the word "scale" in these concepts?

The size of the firm.

If the government taxes car producers, that will happen in the market for cars?

The supply curve will shift to the left.

Which of the following is NOT a factor of production?

The wages paid to workers 175 shares of Microsoft stock

A country is currently producing bricks and spatulas using all of their resources and satisfying the wants of their economy. If the country has a change in preferences and wants more spatulas, which of the following is true?

They are no longer economically efficient because they are not allocatively efficient

How would pasta makers in Derby be affected by the trade with Okun?

They won't be able to compete with the price for Okun pasta

Why do individuals, businesses and countries trade with one another? Make a list of the benefits of trade.

Trade increases productivity through specialization, expands the variety of products for purchase, encourages investment and more rapid economic growth, keeps our economy open dynamic and competitive

The table shows the average costs of production for various quantities, given three different amounts of capital. Each factory illustrates a(n) _____ average cost curve.

U-shaped

In the long run, the total cost function will be:

Upward sloping.

At Wisconsin's snowy Lambeau Field, a football stadium, snow removal is currently done by a mix of workers (equipped with shovels and paid minimum wage) and automated self-operating snowblower machines, which require no labor. The stadium is currently using the optimal combination of both snowblowers and workers. If Wisconsin's minimum wage rises, and nothing else changes, what should the stadium do?

Utilize more machines and fewer workers.

The key difference between the short-run and long-run model of the firm is that:

We assume at least one fixed input in the short run and all variable inputs in the long run.

The price of an effective price floor goes from P1 to P2 (an increased price of 25%). Assume that the elasticity of supply is 2 and the elasticity of demand is -3. (.25 x 2 or -3, the change in price floor x Elasticity)

What is the percentage change in quantity supplied?: 50% What is the percentage change in quantity demanded?: 75%

Which of the following statements is TRUE?

When marginal product is less than average product, average product is decreasing.

We cannot tell if prices for a natural monopoly will be higher or lower is because:

While marginal costs will be much lower for the natural monopolist, they will also charge a price above marginal cost.

If Colorado had 200 workers available and Montana has 300 workers available, should Colorado specialize in one good?

Yes, Colorado should specialize in skis because Montana has a lower opportunity cost of producing computers.

Consider the attached figure. Assume both countries have the same resources available to them. The darker line shows how many units of goods A and B a worker in the Philippines can produce and the lighter line shows the number of units of goods A and B that a worker in Indonesia can produce. If the two countries specialize in the production of the good in which they have comparative advantage and then trade these goods with each other, would both of them agree to a terms-of-trade of five units of Good A for one unit of Good B?

Yes, both would agree

Should Derby trade with Okun?

Yes, the opportunity cost per pound of pasta is lower when trading with Okun.

Which of the following episodes would most likely contain an externality?

You decide to grow flowers in your front yard where everyone else can see them.

In the above figure, the marginal cost curve is curve

a

Supply is elastic if

a 1 percent change in price leads to a larger percentage change in quantity supplied.

Which of the following would most likely be a private good?

a Mariah Carey CD

When producers agree to restrict output, raise the price, and increase profits, the agreement is called ________.

a collusive agreement

The government sets a price floor for corn which is above the equilibrium price of corn. As a result, ________.

a deadweight loss will be created

If firms in a monopolistically competitive industry are making an economic profit, then definitely there is

a leftward shift in each firm's demand curve as new firms enter the market.

If the government grants a firm a public franchise to supply coal, a monopoly is created by

a legal barrier to entry.

In what type of market is a cartel possible?

a market in which there are only a few firms and barriers to entry exist

Under current guidelines, the Federal Trade Commission will likely challenge

a merger if the HHI is between 1500 and 2500 and the merger increases the HHI by 100 points or more.

If economies of scale allow one cable TV firm to supply the entire market at the lowest possible cost, then this company is

a natural monopoly.

A barrier to entry is

a natural or legal impediment that makes it difficult for new firms to enter a market.

The above figure shows the apartment market in Big City. If a government policy results in a shortage of 1,500 apartments in the Big City rental market, it is most likely that the Housing Authority has imposed

a rent ceiling of $1000.00 monthly.

The marginal benefit is the

additional gain from one more unit of an activity.

When comparing perfect competition and monopolistic competition, we find that

advertising plays a large role in monopolistic competition, unlike in perfect competition.

A cartel is a group of firms that

agree to restrict output to boost their profit.

The long run is a period of time in which

all factors of production are variable.

When a production quota is used to remedy the problem of the commons, then

all users of the resource have an incentive to cheat on the quota quantity.

If the opportunity cost of an action was greater than the benefits of that action, we would describe the effects on the economy as _______.

allocatively inefficient and economically inefficient

Patents encourage invention by

allowing patent owners to make an economic profit.

For a perfectly competitive firm, the shutdown point is the

amount of output at which price equals minimum average variable cost.

When people decorate the exteriors of their homes with colored lights, they create ________ for the motorists who pass by.

an external benefit

A cost that arises from the production of a good that is paid by someone who did not participate in the production is called

an externality.

Game theory is used to explain firms' decisions in

an oligopoly.

In the long run, perfectly competitive firms make zero economic profit (their owners earn a normal profit) because

any economic profit would attract newcomers to the industry.

Match the following goods with the state that possesses an absolute advantage in its production.

apples and oranges- Tennessee

The key feature of an oligopoly is that there

are only a few sellers.

The figure above shows the housing market in the city of Appleville. A rent ceiling of $650 per month is imposed. With the rent ceiling, the deadweight loss in the Appleville housing market is

at least $15,000 per month.

Economists define the short run as a period of time so short that

at least one factor of production cannot be varied.

The short run is a time frame in which

at least one factor of production is fixed

The short run is the time period during which

at least one factor of production is fixed.

In the long-run equilibrium, perfectly competitive firms produce where

average total cost is minimized.

If as output increases, average product increases, then ___________.

average variable cost decreases

The following graph represents a natural monopoly. The demand, marginal revenue, average cost, and marginal cost functions are shown. Points A, B, C, D, and E are also labeled. Examine the following graph. Point [ Select ] represents the price-quantity combination chosen by an **unregulated** monopoly while point [ Select ] represents the price and quantity that result from the average cost regulation of this natural monopoly. Point [ Select ] represents the price and quantity that result from marginal cost regulation of this natural monopoly and If a natural monopoly were to be regulated such that it was required to charge the price and quantity at this point, the firm would [ Select ]

b, c, d, Experience economic losses.

When natural or legal forces work to protect a firm from potential competitors, the market is said to have ________.

barriers to entry

The distinguishing features of oligopoly are ________ and a ________ in the industry.

barriers to entry; few firms

Beautification of the national highways through the planting of shrubs and wildflowers will

benefit even people who do not help pay.

Fast Copy is a perfectly competitive firm. The figure above shows Fast Copy's cost curves. If the market price is 4 cents per page, what is Fast Copy's economic profit?

between $0.51 and $1.00 per hour

In the above figure, the long-run average cost curve exhibits diseconomies of scale

between 20 and 25 units per hour.

Firms A and B can conduct research and development (R&D) or not conduct it. R&D is costly but can increase the quality of the product and increase sales. The payoff matrix is the economic profits of the two firms and is given above, where the numbers are millions of dollars. The Nash equilibrium occurs when

both A and B conduct R&D.

Dell and Gateway must decide whether to lower their prices, based on the potential economic profits shown in the payoff matrix above. (The profits are in millions of dollars.) In the Nash equilibrium

both Dell and Gateway lower prices.

The small town of Narberth has two pizza stores. Which of the following statements are CORRECT?

both I nd II

Assume that there are only two countries, only two goods, and that labor is the only input. Given the following data on how many hours it takes to produce one bushel of each of these goods, answer the questions. Match the following goods with the country that possesses an absolute advantage in its production.

both US

Consider the prisoner's dilemma model where two criminals have two options (confess or deny), and each criminal must make their decision without speaking to the other criminal first. If they both confess they each get 3 years, if only one confesses then he gets 1 and his partner gets 10, and if neither confesses then they each get 0. They are in fact both guilty. In this game, the Nash equilibrium is where

both confess.

A monopolistically competitive firm is like a monopoly firm insofar as

both have MR curves that lie below their demand curves.

In the long run, a firm can vary

both its labor and its capital.

In the above figure, the total fixed cost curve is curve

c

An example of a short-run fixed factor of production is

capital equipment.

The local banking industry currently has a Herfindahl-Hirschman index (HHI) value of 1945 and two of the competing banks have considered merging. Because the merger would raise the HHI by 155 points, the Federal Trade Commission would likely

challeneg the merger

Marginal utility is the

change in satisfaction that results from a one-unit increase in the quantity of a good consumed.

The marginal utility from the consumption of a good is equal to the

change in total utility divided by the change in the quantity consumed.

The table below describes the number of yards of cloth and barrels of wine that can be produced with a week's worth of labor in England and Portugal. Assume that no other inputs are needed. Match the following goods with the country that possesses an absolute advantage in its production.

cloth & wine- Portugal

The table below describes the number of yards of cloth and barrels of wine that can be produced with a week's worth of labor in England and Poland. Assume that no other inputs are needed. Match the following goods with the country that possesses an absolute advantage in its production.

cloth & wine- poland

Match the following goods with the country that possesses a comparative advantage in its production.

cloth- england wine- poland

Every year as the clock nears midnight on December 31st, the eyes of the world turn to Times Square in New York City to watch the famous ball drop at midnight. The event is open to everyone, but it is advised you arrive early to be able to participate because the square quickly becomes crowded with no space left for latecomers. This celebration is most like a

common resource.

Under Federal Trade Commission merger guidelines, an industry with a Herfindahl-Hirschman index (HHI) of 800 points is considered

competitive

Which party is more elastic? The producers or the consumers?

consumers

An externality can be a

cost or benefit

An incentive

could be either a reward or a penalty.

The average total cost curves for plants A, B, C, and D are shown in the above figure. It is possible that the long-run average cost curve runs through points

d, e, and f.

In the above figure, if a single-price monopolist charges the profit-maximizing price, the triangle dce represents

deadweight loss.

In the figure above, D0 is the demand for labor curve. Imposing a minimum wage of $6 per hour will initially

decrease employment from 30 to 20 million hours per year.

If a firm's marginal product of labor is less than its average product of labor, then an increase in the quantity of labor it employs definitely will

decrease its average product of labor.

Suppose the price of soda is $2 each and the price of a pizza slice is $4 each. David maximizes his utility by buying only sodas and pizza. He buys 5 sodas and 10 slices of pizza. If the price of a soda increases to $3 each, David will

decrease the number of sodas bought and move along the demand curve for soda.

The above figure shows a linear (straight-line) demand curve. Starting at point A and then moving to point B and then point C, the price elasticity of demand

decreases

As the quantity of a good consumed increases, its marginal utility ________ and its total utility ________.

decreases; increases

Economies of scale occurs when long-run average costs are and diseconomies of scale occurs when long-run average costs are .

decreasing / increasing

For a monopoly able to practice perfect price discrimination, the market

demand curve is the same as the marginal revenue curve.

The marginal benefit curve for a product can be the same as the good's

demand curve.

A shift of the supply curve of oil raises the price from $60 a barrel to $75 a barrel and reduces the quantity demanded from 40 million to 20 million barrels a day. You can conclude that the

demand for oil is elastic.

Liz loves to eat popcorn. Still, the more she eats, the less she wants each additional bite. Her marginal utility from popcorn is

diminishing

The fact that the fourth plate from the "All You Can Eat Country Buffet" generated more satisfaction than the fifth plate is an example of

diminishing marginal utility.

A restaurant employs 10 workers and has one oven. The firm hires an 11th worker. The week after, it hires a 12th worker. The marginal product of the 12th worker is less than the 11th worker because of _______.

diminishing returns.

A private psychiatrist's office is a business that will demonstrate ______________, as it will face increasing average costs in the long run.

diseconomies of scale

Suppose a company with a single large factory expands to multiple locations. This would require the firm to hire more mid-level management positions and establish an HR department. This firm is likely experiencing ________ with this expansion.

diseconomies of scale

The diamond-water paradox of value can be explained by

distinguishing between total utility and marginal utility.

For a perfectly competitive firm, as its output increases its marginal revenue ________ and its marginal cost ________.

does not change; changes

In the long run, if a firm is operating with economies of scale, it is on the ______ portion of its LRAC.

downward-sloping

An example of an activity that generates an external cost is

dumping soapsuds into a trout stream.

If the price exceeds the average variable cost, by producing the level of output such that marginal revenue equals marginal cost, the firm ensures that it will

earn the largest profit possible.

The goal of a perfectly competitive firm is to maximize its

economic profit.

Electric utility companies have built larger and larger electric generating stations and, as a result, the long-run average cost of producing each kilowatt hour decreased. This is an example of

economies of scale.

In the long run, if a firm is on the downward-sloping portion of its LRAC curve, the firm is currently experiencing ______.

economies of scale.

Macroeconomics is concerned with

economy-wide variables

Two facets of taxes that economists often use to compare taxes are _________.

efficiency and fairness

A monopolist will produce where demand is:

elastic

Goods and services that can be produced by using commonly available resources that could be allocated to a wide variety of alternative tasks have a supply that is

elastic

Price discrimination will mean that a firm will lower price to consumers whose demand is:

elastic and raise price where demand is inelastic. Revenues will rise in both cases.

If a 5 percent change in the price of a good leads to a 10 percent change in the quantity supplied, then the supply of the good is ________ and the elasticity of supply is ________.

elastic; 2.0

The amount of a tax paid by the sellers will be larger the more ________ the demand and the more ________ the supply.

elastic; inelastic

Sort the following countries in the order indicating lowest and then highest opportunity cost of producing a yard of cloth.

england poland

Human resources that perform the functions of organizing, managing, and assembling the other resources are called

entrepreneurship

Which factor of production earns profit?

entrepreneurship

A copyright creates a monopoly by restricting ________.

entry into the market

The table above shows the total utility from the two goods Freddy likes to consume. Suppose that Freddy has already eaten 5 bags of Fritos. If he consumes one more bag, his marginal utility will

equal 15

The catch of American lobster off the shores of New England is regulated using quotas. If the quota is set correctly, then at this quantity, the marginal social cost ________ the marginal social benefit.

equals

If the donut industry is perfectly competitive and is in long-run equilibrium, then the price of a donut

equals long-run average cost.

In the long-run, if firms in a perfectly competitive market are incurring persistent economic losses, some firms will

exit and the price will rise.

True or False. Colorado has a lower opportunity cost for producing computers than Montana.

false

You would expect to see diminishing marginal returns given a linear production possibility frontier as in Figure M2.2. True or False?

false

You would expect to see increasing marginal cost (increasing opportunity cost) given a linear production possibility frontier as in Figure M2.2. True or False?

false

Joshua consumes only apples and bread and is in consumer equilibrium. Joshua reads that eating bread is healthy, so his total utility from each loaf of bread increases. To maximize his total utility, Joshua would consume

fewer apples and more bread.

Teddy buys only chocolate chip cookies and hot chocolate and spends all of his income on the two items. Suppose the price of a cookie rises. According to marginal utility theory, Teddy will buy

fewer cookies and more hot chocolate, which increases his marginal utility from cookies and decreases his marginal utility from hot chocolate.

One difference between perfect competition and monopolistic competition is that

firms in monopolistic competition face a downward-sloping demand curve.

A minimum wage set above the equilibrium wage rate is a price

floor that results in a surplus of low-skilled labor.

In which of the following markets are external benefits most likely to exist?

flu shots

The price elasticity of supply of laptop computers equals 1.5 if

for every 1 percent that laptop prices increase, computer makers produce another 1.5 percent laptops.

Michigan Radio is the state's most listened-to public radio service, attracting approximately 400,000 listeners each week. The on-air fundraiser, which ran during October 2010, generated over 7400 pledges from donors. The money raised helps pay for programming costs at the station, with membership support being the single largest source of income. The 392,600 listeners who did not call and donate can be classified as what?

free riders

From 8 to 11 p.m., Sam can either attend a basketball game, a hockey match or the symphony. Suppose that Sam decides to attend the hockey match and thinks to herself that if she did not go to the match she would go to the symphony. Then the opportunity cost of attending the hockey match is

going to the symphony

A change in supply will have a (greater, lesser, the same) effect on quantity for a relatively more elastic demand curve than a relatively less elastic one.

greater

For a common resource, the marginal social cost of the resource is ________ the marginal private cost.

greater than

Pizza Hut pizza has more close substitutes than does food in general. The price elasticity of demand for Pizza Hut pizza is ________ the price elasticity of demand for food in general.

greater than

The average total cost curves for Plant 1, ATC0, and Plant 2, ATC1, are shown in the figure above. Over what range of output is it efficient to operate Plant 2?

greater than 25

Donna owns the only dog grooming salon on Lonely Island. If Donna can price discriminate between dog owners who are seniors and those who are not, her economic profit will be ________ than if she does not price discriminate and the number of dog groomings will be ________ than if she does not price discriminate.

greater; more

In the figure above, a single-price unregulated monopoly will produce an amount of output equal to

h

With respect to water and diamonds, water

has a lower marginal utility than diamonds.

A key difference between a monopoly and a perfectly competitive firm is that the monopolist

has a marginal revenue curve that lies below its demand curve.

Use the data in the table above and suppose that labor is the only variable factor of production. When 122 dozen donuts are produced at Decent Donuts, the MC curve

has a positive slope.

If labor is the only input and all goods can be produced with fewer hours of work in the U.S. than in Thailand, then the U.S. will ___________.

have an absolute advantage in the production of all goods.

Imposing a minimum wage that is above the equilibrium wage rate results in

higher job search costs.

Which of the following is a macroeconomic issue?

how federal government budget deficits affect interest rates

All economic questions are about

how to cope with scarcity

Joy is training to become a chef. The skills she is obtaining from her training and education will increase Joy's ________.

human capital

Scarcity exists because

human wants exceed the resources available to satisfy them

A natural oligopoly can form

if there are economies of scale

When an economist talks of scarcity, the economist is referring to the

inability of society to satisfy all human wants because of limited resources.

Last year, Jack's income was $15,000 and he bought 50 bags of potato chips. This year his income is $18,000 and he buys 55 bags of potato chips. Therefore, Jack's

income elasticity of demand for potato chips is 0.52.

As resources are moved from the production of one good to another, we would normally expect the cost of producing one more unit of the new good to _______.

increase

The marginal product of labor is equal to the

increase in the total product that results from hiring one more worker with all other inputs remaining the same.

The above table shows the market sales for all the landscaping services in a suburban area. A merger between the three largest firms would

increase the four-firm concentration ratio and increase the Herfindahl-Hirschman Index (HHI).

If the elasticity of supply of TV sets is equal to 3, then a 10 percent increase in the price of a TV will

increase the quantity supplied by 30.0 percent.

Firms that can price discriminate between customers do so to ________.

increase their profit

Suppose Target decided to lower the price on all shirts as part of its Back to School promotion. The cross elasticity of demand between pants and shirts is negative. Lowering the price on shirts will ________ the demand for pants because shirts and pants are ________.

increase; complements

The above figure shows the demand curve for movie rentals from Redbox. If Redbox lowered its price from $4.00 to $3.50, then total revenue would ________ because demand is ________.

increase; elastic

In the above figure, if the market price rises from $100 to $125 per ton of wheat, then producer surplus

increases

In the short run, an increase in demand for a good that is sold in a perfectly competitive market

increases the economic profits of existing firms in the market.

In the figure above, originally the apartment rental market is in short-run and long-run equilibrium with a rent of $600 per month. Then the government imposes a rent ceiling of $500 per month, which causes a shortage. Suppose that apartments are a normal good and incomes rise. The increase in income

increases the shortage

As output increases, total cost ________, total fixed cost ________, and total variable cost ________.

increases; does not change; increases

Tesla is building a car battery factory in Nevada to drastically increase their production capacity from where it is now. Since the factory has not opened, Tesla is __________.

increasing its production possibility frontier

The figure above shows a perfectly competitive firm. The firm is operating; that is, the firm has not shut down. The firm is

incurring a economic loss of $200.

If Steve's Apple Orchard, Inc. is a perfectly competitive firm, the demand for Steve's apples has

infinite elasticity.

Which of the following best defines capital as a factor of production?

instruments, machines, and buildings used in production

When the government chooses to spend the tax dollars that it collects on homeland security, its choice

involves a tradeoff of other goods and services such as education for more homeland security.

The external benefit of a good

is a benefit from the good falling on people who are not the consumers of the good.

A minimum wage ________.

is a price floor in the labor market

Suppose Company A's profits increase by $10 million and nobody is made worse off. The CEO of Company A keeps all $10 million for herself. This situation

is definitely efficient

The unregulated, single-price monopoly shown in the figure above will produce where its demand

is elastic.

In the figure above, originally the apartment rental market is in short-run and long-run equilibrium with a rent of $600 per month. Then the government imposes a rent ceiling of $500 per month. The loss of producer surplus

is larger than the gain in consumer surplus.

The economic profit of a perfectly competitive firm

is less than its total revenue.

A firm's average total cost is $80, its fixed cost is $1000, and its output is 100 units. Its average variable cost

is more than $60.

Price discrimination, where different units of a good are sold for different prices

is possible if the good cannot be resold.

An example of an externality occurs when a chemical factory

is producing ethanol and dumps waste in a river upstream from a popular fishing spot.

A student athlete is deciding whether to work out for an extra hour. Her marginal benefit from another hour of exercise

is the benefit she receives from exercising the additional hour

Liane maximizes her total utility when she allocates all of her available income such that the marginal utility per dollar spent on each good ________.

is the same

A straight-line demand curve along which the price elasticity of demand equals 0 is one that

is vertical.

Two duopoly firms form a cartel. They decide to collude and fix the price of their good. Each individual firm will earn the highest profit if

it cheats and the other sticks with the agreement.

It is easier for a monopolist to price discriminate between groups for a service than for a good because

it is easier for consumers to resell goods than resell services.

The "gifts of nature" are included as part of which factor of production?

land

Factors of production include

land, labor, capital, entrepreneurship

If the firm were to choose a permanent output level of Q = 8,000, the lowest average cost would be achieved with the _______.

large factory.

Freedom of entry and exit in monopolistic competition

leads to falling prices when new firms enter the market.

Compare the effects of a given tax on goods with elastic demands and inelastic demands in terms of amount of revenues raised from the taxes. With an elastic demand, ______ revenue will be raised than with an inelastic demand.

less

If the elasticity of supply was 1.5 instead of 2, would the surplus created by the floor be ______ before?

less than

The output at which average variable cost is a minimum is ________ than the output at which ________ is a minimum.

less than; average total cost

Silvio's Pizza is a small pizzeria. The firm's production function is shown in the table above. Suppose that Silvio's costs include only the cost of renting ovens, which is $100 per oven per week, the labor cost, $280 per worker per week, and the opportunity cost of Silvio's entrepreneurship, $1,000 per week. When Silvio's uses 2 ovens and hires the 3rd worker, the marginal product of labor is ________ the average product of labor, and therefore the average product of labor ________.

less than; increases

In every economic system, choices must be made because resources are ________ and our wants are ________.

limited; unlimited

Which of the following is an example of natural monopoly?

local water utility companies

A period of time in which the quantity of all factors of production used by a firm can be varied is called the

long run.

Diseconomies of scale definitely means that as the firm increases its output, its

long-run average total cost increases.

According to the paradox of value, expensive goods, such as gemstones, provide consumers with

low total utility and high marginal utility.

Assume a firm faces a market where there are individuals with elastic demands and inelastic demands. What should it do if it wishes to maximize revenues?

lower prices for those with elastic demand and raise them for those with inelastic demand

In a perfectly competitive market that is in long-run equilibrium, a permanent leftward shift in the market demand curve

lowers the price at first but then raises it as firms leave the market.

Because of a decrease in labor costs, a monopoly finds that its marginal cost and average total cost have decreased. The monopoly ________ its price and ________ its quantity.

lowers; increases

In the long-run equilibrium in a perfectly competitive market, the firms produce at the ________ possible average total cost and the price equals the ________ possible average total cost.

lowest; lowest

Scarcity requires that people must

make choices

Economics is best defined as the study of how people, businesses, governments, and societies

make choices to cope with scarcity

The industry that produces zangs is in long-run equilibrium. Then the demand for zangs increases permanently. As a result, firms in the industry will ________. Some firms will ________ the industry, and the industry supply curve will shift ________.

make economic an profit; enter; rightward

All the decisions made by people who operate firms have one overriding objective, which is to ________.

make maximum attainable profit

If the government assigns private property rights to a common resource, then the

marginal private cost becomes equal to the marginal social cost.

The market price of an individual transferable quota is equal to the

marginal social benefit minus the marginal cost.

The problem of the commons arises because ________ exceeds ________ when the resource is used.

marginal social cost; marginal private cost

To achieve the efficient amount of use of a common resource, the use should be such that ________ equals ________.

marginal social cost; marginal social benefit

Even though the market for bricks has a low concentration ratio nationally, the U.S. Justice Department might still scrutinize any mergers in this industry because the

market is regional not national, and the regional concentration might be high.

When the total product curve is drawn in a figure that measures employment along the horizontal axis, it is a graph that shows the

maximum output attainable for each quantity of labor employed.

Total product is

maximum output that a given quantity of labor can produce.

The government of Healthyland imposes a tax on sellers of salt. The tax is $0.10 per pound. With no tax, the price of salt is $0.40 per pound. The demand for salt is perfectly inelastic and the elasticity of supply is 1.5. With the tax, the price of salt paid by buyers in Healthyland is

$0.50 per pound.

The figure shows the market for books before and after a sales tax is introduced. The tax on books is ________ a book, buyers pay ________ of tax per book, and the government's tax revenue is ________ a week.

$1.20; $0.80; $12

The above table shows the total product schedule for the campus book store. If employees are paid $6 per hour and there are no other variable costs, then what is the marginal cost (MC) per book of increasing book sales from 83 to 87 books per hour?

$1.50

Suppose there are four firms that are each willing to sell one unit of a good. Each firm has a different minimum price that they are willing to sell for: Firm A $6, Firm B $7, Firm C $10, and Firm D $12. If the market price is $11, then the total producer surplus is

$10

During the summer you have made the decision to attend summer school, which prevents you from working at your usual summer job in which you normally earn $6,000 for the summer. Your tuition cost is $3,000 and books and supplies cost $1,300. In terms of dollars, the opportunity cost of attending summer school is

$10,300

The motel whose costs are given in the table above has total fixed costs equal to

$100

Silvio's Pizza is a small pizzeria. The firm's production function is shown in the table above. Suppose that Silvio's costs include only the cost of renting ovens, which is $100 per oven per week, the labor cost, $280 per worker per week, and the opportunity cost of Silvio's entrepreneurship, $1,000 per week. Suppose Silvio's uses Plant 1 and hires 3 workers. What is the firm's average fixed cost?

$11.00

Roxie's Movie Theatre is the only one in town. The table above gives the demand schedule for movies. If Roxie's is a single-price monopoly and the marginal cost of a movie is $6, Roxie's will charge ________ a movie and will sell ________ movie tickets a week.

$12; 200

The above table gives some production and cost information for Flaming Fernando's, a restaurant that sells Fiery Frijoles. What is the average total cost of producing 4,500 frijoles?

$2

The table above gives information on the marginal perceived private benefit and marginal social benefit associated with vaccination against varicella (chicken pox). If the marginal cost of a varicella vaccination is $10, to achieve an efficient quantity of vaccinations, the government could provide a subsidy of

$2 per vaccination

You decide to take a vacation and the trip costs you $2,000. While you are on vacation, you do not go to work where you could have earned $750. In terms of dollars, the opportunity cost of the vacation is

$2,750

Cindy's Sweaters' production function is shown in the above table. Cindy rents two knitting machines for $30 a day each and hires workers at a wage rate of $40 a day. What is the marginal cost of the 19th sweater?

$20

The above figure illustrates a single-price unregulated monopolist. If the monopolist maximizes its profit, the consumer surplus equals ________.

$20,000

The table above gives production information for Bob's Baseball Cap Company. Bob's total cost when zero caps are produced is $200 and workers cost $10 per hour. The total fixed cost of producing 10 baseball hats per hour is

$200

If the monopoly illustrated in the figure above could engage in perfect price discrimination, then when it maximizes its profit the total revenue collected by the firm would be

$210.

Assume that the relationship between GDP and the employment rate has a positive slope. If an employment rate of 100 million is associated with a GDP level of $20 trillion and an employment rate of 110 million is associated with a GDP level of $21 trillion, what can you assume is the GDP level for an employment rate of 120 million?

$22

A used car was recently priced at $20,000.00. Seeing the car, Bobby thought, "It's nice, but if I have to pay more than $19,500 for this car, then I would rather do without it." After negotiations, Bobby purchased the car for $19,250.00. His consumer surplus was equal to

$250.00

Nick can purchase each milkshake for $2. For the first milkshake purchased Nick is willing to pay $4, for the second milkshake $3, for the third milkshake $2 and for the fourth milkshake $1. What is the value of Nick's consumer surplus for the milkshakes he buys?

$3

The above figure shows the market for anti-freeze. The government imposes the sales tax shown in the figure on sellers. What is the amount of the tax?

$3 per gallon

The table above gives costs at Jan's Bike Shop. Unfortunately, Jan's record keeping has been spotty. Each worker is paid $100 a day. Labor costs are the only variable costs of production. What is the total variable cost of producing 60 bikes?

$300

La Bella Pizza is the only pizza place on Pepper Island. The figure above shows La Bella Pizza's demand curve, marginal revenue curve, and marginal cost curve. At La Bella Pizza's profit-maximizing output, its annual total revenue is

$312,000.

A company could produce t-shirts for a $500 profit, long-sleeved shirts for a $350 profit, hoodies for a $200 profit, or socks for a $50 profit. If they can only produce one of these four options, what is the opportunity cost of producing t-shirts?

$350

For the monopoly shown in the figure above, the economic profit is

$40

The above table shows some cost data for Tracey's Tents. What is the average total cost when output is 3?

$40

The figure above shows the demand for and supply of rental housing in Smallton. If a rent ceiling is set at $400, what is the rent?

$400

Stefano has just completed an original oil painting. After considering the costs for brushes, paint, canvas, and the value of Stefano's labor time, the marginal cost of the painting is $1,000. Lucky Stefano. One art lover paid him $1,500. How much producer surplus did Stefano obtain?

$500

Jane is willing to pay $80 for a pair of shoes. The actual price of the shoes is $50. Her marginal benefit is

$80

Roxie's Movie Theatre has a monopoly and discovers that at $12 a movie, no one is buying movie tickets during weekdays. Roxie's conducts a survey and the table above reveals the results of the survey. Roxie decides to price discriminate between weekend and weekday moviegoers. The marginal cost of a showing a movie is $6. Roxie's charges ________ on weekdays and ________ on weekends.

$9; $12

A fall in the price of X from $12 to $8 causes an increase in the quantity of Y demanded from 900 to 1,100 units. What is the cross elasticity of demand between X and Y?

-0.5

Florida State University has just lowered the price of its season football tickets from $350.00 to $300.00. As a result, there was an increase in the number of season tickets purchased from 43,000 to 47,000. The price elasticity of demand for season tickets equals

-0.58.

When a restaurant prices pizza at $10 per slice they sell 100 slices in a night. If they sell pizza for $5 per slice, they sell 300 slices in a night. What is the slope of this demand curve for pizza?

-1/40

Giuseppe's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $15, how much economic profit does the firm make?

0

In the table above, what is the level of unemployment (in millions of workers) if the minimum wage is set at $8 per hour?

0

There are two can companies, American and National, which have entered into a collusive agreement. The payoff matrix of economic profits is above. If both firms cheat on the collusive agreement, what amount of economic profit is made by American?

0

The market for unskilled labor is illustrated in the figure above. The market is in equilibrium and then a minimum wage of $3 per hour is imposed. Unemployment will equal

0 hours

If an industry were perfectly competitive, the four-firm concentration ratio would be close to ________ and the Herfindahl-Hirschman index would be close to ________.

0, 0

For each worker employed, Colorado has to give up________ pairs of skis in order to produce one computer. Montana has to give up _________ pairs of skis to produce one computer.

0.5 , 0.2

Fred's income has just risen from $940 per week to $1,060 per week. As a result, he decides to purchase 9 percent more steak per week. The income elasticity of Fred's demand for steak is

0.75

The above table gives the total utility that Homer obtains from consuming various quantities of chocolate chip cookies. The marginal utility from the fifth pound of cookies is

1

What would be the production of cattle in Nebraska?

1,000 head

The figure above shows the situation facing Smart Digit, Inc., a firm in monopolistic competition that produces calculators. What is the firm's economic profit per day?

1-700

Problem set module 8 A firm is producing where the Marginal Product of Labor is 18 and the Marginal Product of Capital is 10. The price of labor is $3 and the cost of capital is $2 1. They cannot adjust their capital, so are they in the short run or the long run? 2. The firm is planning their future inputs and can now adjust both labor and capital. How should they adjust inputs? 3. The short-run costs are _________ (less than/greater than) or equal to long-run costs. 4. Economies of scale occurs when long-run average costs are and diseconomies of scale occurs when long-run average costs are .

1. short run 2. Increase labor and decrease capital 3. greater than 4. decreasing / increasing

Looking at the production of handbags and phones once again, if a firm has 6 workers with three workers producing handbags and three workers producing phones, what is the marginal cost of producing one additional phone if a worker changes from handbag production to phone production?

1.25 handbags

A rise in the price of cabbage from $14 to $18 per bushel increases the quantity supplied from 4,000 to 6,000 bushels. The elasticity of supply is

1.6

What is the opportunity cost of growing one bushel of apples in Canada?

1/2 bushel of oranges

Betsy's utility depending from her consumption of coffee is shown in the table above. Betsy's marginal utility from the 3rd cup of coffee per day is

10

The table above gives Cathy's total utility from Mt. Dew. If the price of a Mt. Dew is $2, Cathy's marginal utility per dollar from the 3rd Mt. Dew is ________ units per dollar

10

The figure above shows a perfectly competitive firm. The firm is operating; that is, it has not shut down. The firm produces

10 units of output and incurs an economic loss.

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). In the figure above, Gap maximizes its profit if it sells ________ jackets per day.

100

What would be the production of cattle in California?

100 head

Consider the attached figure. Assume both countries have the same resources available to them. The darker line shows how many units of goods A and B a worker in the Philippines can produce and the lighter line shows the number of units of goods A and B that a worker in Indonesia can produce. Which will be the world production of Good A after specialization?

100 units

Suppose that you consume only pizza and Diet Pepsi. The table above gives your utility from consuming these two goods. What is the marginal utility you get from the fourth slice of pizza?

12

In the figure above, the marginal utility of the third crate of tomatoes for the person with total utility curve C is

13 units of utility.

Consider a firm, using capital (K) and labor (L) in the production process, that wants to expand production. Suppose MPK = 200 and MPL = 60. The cost of capital is r = 50. The firm would use more labor to expand production only if the wage rate is less than _____ dollars.

15

Looking at Table 2.1, what is the marginal benefit of increasing the hours spent studying economics from 3 hours to 4 hours? ​[Image description: same table as Table 2.1, see description for Table 2.1]

15

Referring to EOC 2.14, if another worker making handbags switches to making phones (i.e. decreasing the number of workers in handbags production from 2 to 1), by how much will production of handbags fall?

15

The income elasticity of demand for vacations is 5. If incomes increase by 3 percent next year, the quantity of vacations demanded at today's price will increase by ________ percent.

15

The table above gives Cathy's total utility from Mt. Dew. Cathy's marginal utility from the 4th Mt. Dew is ________ units.

15

The figure above shows the marginal revenue and costs of a perfectly competitive firm. The marginal cost of the last unit produced is

16 per unit

The above table shows the market shares for all the landscaping services in a suburban area. The Herfindahl-Hirschman Index (HHI) equals

1600

The figure above shows the marginal revenue and costs of a perfectly competitive firm. The firm's profit is maximized when the firm produces

170 units of output.

If consumers in Derby want to consume 450 pounds of pasta, how many shirts must Derby stop producing to free up enough resources and labor? Answer as a whole number.

1800.0

A company produces flashlights. If the company hires one worker that worker will produce 10 flashlights in an hour, if they hire a second worker they will produce 16 flashlights in an hour, and if they hire a third worker, they will produce 18 flashlights in total. What is the marginal benefit of hiring the third worker?

2

What is the maximum number of bushels the Canadian producers will be willing to offer in trade for a bushel of the U.S. product?

2 bushels

A firm produces pencils or pens. Three workers can produce a total of 10 pens per hour, four workers produce a total of 14 pens per hour, and 5 workers can produce a total of 16 pens per hour. Likewise, three workers can produce a total of 10 pencils per hour, four workers produce a total of 14 pencils per hour, and five workers can produce a total of 16 pencils per hour. The firm has a total of eight workers. Three workers are producing pens and five workers are producing pencils. What is the marginal cost of increasing the production of pens from 10 pens per hour to 14 pens per hour?

2 pencils per hour

The increase in the demand for widgets, shown in the figure above, is the result of an increase in the price of McBoover devices from $9 to $11. Therefore, the cross-price elasticity for these two products is

2.0

What is the opportunity cost of growing one bushel of apples in the U.S.?

2/3 bushel of oranges

In the above figure, if the price is $8 per unit, how many units will a profit maximizing perfectly competitive firm produce?

20

Julie's total utility from cheeseburgers is given in the table above. What is the marginal utility of the third cheeseburger?

20

What is the marginal benefit of the last worker in the handbag production process with the change put forth in EOC 2.16?

20

In the above figure, to achieve efficiency the government could offer a subsidy to producers of ________ per vaccination so that consumers would pay ________ per vaccination.

20, 10

Suppose the Herfindahl-Hirschman Index (HHI) in the market for chocolate is 3,200. Two companies want to merge. The FTC definitely will challenge the merger if it increases the HHI by more than

200

The figure above shows the cost, demand, and marginal revenue curves for a monopoly. At an output level of ________, demand is ________.

20; elastic

Using the table above, what is the marginal product of the 5th worker hired at Decent Donuts?

22 dozen donuts per day

A study finds that at a price of $10, 100 t-shirts are sold. At a price of $5, 300 t-shirts are sold. How many t-shirts can you assume are sold at $7? Why?

220

Using the data in the above table, if the firm employs 5 workers, total product (measured in units per day) and average product and marginal product of the fifth worker (measured in units per worker) are

25, 5.00, and 2 respectively.

The figure above shows a typical perfectly competitive corn farm, whose marginal cost curve is MC and average total cost curve is ATC. The market is initially in a long-run equilibrium, where the price is $3.00 per bushel. Then, the market demand for corn decreases and, in the short run, the price falls to $2.50 per bushel. In the new short-run equilibrium, the farm produces ________ bushels of corn and sells corn at ________ per bushel.

250,000; $2.50

The above table shows Tammy's total utility from videos and CDs. If Tammy has $110 to spend on videos and CDs and if the price of a video is $10 and the price of a CD is $20, then Tammy maximizes her utility by purchasing

3 CDs and 5 videos.

The table above gives information on the marginal perceived private benefit and marginal social benefit associated with vaccination against varicella (chicken pox). If the marginal cost of a varicella vaccination is $10, then the unregulated competitive equilibrium will have

3 million vaccinations.

The following graph represents a natural monopoly. The demand, marginal revenue, average cost, and marginal cost functions are shown. If this natural monopoly were subject to average cost regulation, how much total revenue would be earned by the firm? how much profit would be earned by the firm?

3,000, 0

Assume that both countries specialize and trade. What is the minimum number of bushels the U.S. producers will be willing to accept in trade for a bushel of its product?

3/2 of a bushel

In the above figure, the competitive unregulated equilibrium is producing and consuming ________ vaccinations per year at a price of ________.

30 thousand, 20

The unregulated, single-price monopoly shown in the figure above will sell

30 tickets.

The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for cod, a common resource. A quota to prevent the overuse of the cod sets the catch equal to ________.

300 tons per week

The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for cod, a common resource. The efficient outcome is ________.

300 tons per week

The figure illustrates the short-run costs of Paul's Picture Frames Inc. The picture frame market is perfectly competitive and the market price is $30 a frame. Paul produces ________ frames each week, makes ________ of total revenue, and makes zero ________ profit.

300; $9,000; economic

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC).In the figure above, what is Gap's excess capacity?

32 jackets

Public art installations are considered a public good because they are easily accessible for viewers and one person's viewing does not diminish the value of the art for anyone else. A small town consists of three people: Pablo, Edward, and Georgia. Their marginal benefits from viewing various quantities of public art installations are shown in the prescribed table. Assume that each public art installation costs $220 to install. If the only providers of public art are town members who are willing to pay the installation cost, the total quantity of public art that will be provided? The allocatively efficient quantity of public art is [ Select ] installations.

35

Gunther rents Nintendo games and videos. The marginal utility from his last Nintendo game is 10 and that from his last video is 5. Nintendo games rent for $2 each. Gunther's demand curve for games is shown in the figure above. How many videos a week does Gunther rent?

4

If Derby wants to produce both shirts and pasta, how many shirts must it give up for every pound of pasta it produces? Answer as a whole number.

4

If an average cost pricing rule is imposed on the natural monopoly shown in the figure above, then the price will be

4

In the above table, the marginal product of the third worker is

4

The figure above shows the costs and demand curves for the Bigshow Cable Company. Bigshow Cable Company incurs an economic loss if the regulator set its price at

4

The table above gives the demand for a monopolist's output. Between which two quantities is marginal revenue equal to 0?

4 and 5

An efficient allocation of resources is reached in the figure above when output equals

4 mil

A firm produces pencils or pens. Three workers can produce a total of 10 pens per hour, four workers produce a total of 14 pens per hour, and five workers can produce a total of 16 pens per hour. Likewise, three workers can produce a total of 10 pencils per hour, four workers produce a total of 14 pens per hour, and five workers can produce a total of 16 pens per hour. The firm has a total of eight workers. Four workers are producing pens and four workers are producing pencils. What is the marginal cost of increasing the production of pens from 14 pens per hour to 16 pens per hour?

4 pencils per hour

Bobby spends $100 per month on pizza and CDs. His utility from these goods is shown in the table above. The price of a pizza is $10 and the price of a CD is $20. Which of the following combinations of the two goods maximizes Bobby's utility?

4 pizzas and 3 CDs

The figure above shows the demand curve (D) faced by Visual, Inc., a cable TV company, and the firm's marginal revenue (MR), marginal cost (MC), and average cost (LRAC) curves. If Visual is regulated according to the social interest theory, it will serve ________ million households and set a price of ________ per household per month.

4, 12

The above figure shows the demand and cost curves for a firm in monopolistic competition. In the figure, the firm makes an economic profit of

40

The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for raising goats on a common pasture. A quota to prevent the overuse of the common pasture sets the number of goats to be raised equal to ________.

40 goats

The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for cod, a common resource. The market equilibrium with no government intervention is ________.

400 tons

In the table above, the Herfindahl-Hirschman Index in the widget industry is

4182 points.

The above figure shows the demand and cost curves for a firm in monopolistic competition. The firm makes the maximum profit when the marginal cost of last item produced equals

5

The above table shows the per day total cost for Kiley's Baseball Glove Company. Each glove is priced at $50 and Kiley's Baseball Glove Company is a perfectly competitive firm. At which of the following amounts of output is the economic profit maximized for Kiley's Baseball Glove Company?

5

What is the marginal benefit of taking another worker from the handbag production process to phone production in addition to what was done in EOC 2.14? (i.e. increasing the number of workers in phone production from 4 to 5.)

5

The table above gives information on the marginal perceived private benefit and marginal social benefit associated with vaccination against varicella (chicken pox). If the marginal cost of a varicella vaccination is $10, then the efficient quantity of vaccinations is

5 mil

When the price of perfume changes from $24 to $26, the quantity supplied increases from 100 jars to 150 jars. What is the elasticity of supply of perfume?

5.0

Consider a firm, using capital (K) and labor (L) in the production process, that wants to expand production. Suppose MPK = 400. The cost of capital is r = 80, and the wage rate is w = 10. The firm would use more labor to expand production only if the marginal product of labor is greater than _____.

50

If the government regulates the market in the above figure in a way to achieve efficiency, then ________ vaccinations will be produced and consumed.

50,000

Bill Bonecrusher graduates from college with a choice of playing professional football at $2 million a year or coaching for $50,000 a year. He decides to play football, but eight years later, though he could continue to play football at $2 million a year, he quits football to make movies for $3 million a year. His opportunity cost of playing football at graduation was ________ and eight years later the opportunity cost of making movies was ________.

50,000; 2 million

A company produces reuseable water bottles. Their technology allows one worker to produce 10 water bottles in an hour. Hiring a second worker would allow them to produce 16 total water bottles in an hour and three workers can produce 18 total water bottles. What is the marginal benefit of hiring the second worker?

6

If the natural monopoly shown in the figure above is unregulated, then it will charge a price of

6

The figure above shows the costs and demand curves for the Bigshow Cable Company. If the regulator wants to set the price so that Bigshow earns the same normal profit as a perfectly competitive firm, what price should be set?

6

The figure above shows the situation facing Smart Digit, Inc., a firm in monopolistic competition that produces calculators. The firm's markup is ________ per calculator.

6

The figure above shows the demand for and supply of labor of students in Smallville. If the minimum wage is set at $8 per hour, how many hours of students' labor are unemployed?

6,000 hours

The above table shows the total product of producing baseball hats. The average product of 3 workers is equal to

6.00 baseball hats.

The above table shows the market shares for all the landscaping services in a suburban area. The four-firm concentration ratio equals

65%

In the above table, the marginal product of the 7th worker is 6. What is the total product when 7 workers are employed?

70

The following graph presents the marginal cost and marginal benefit information for tons of steel produced. If the external costs are ignored the market equilibrium quantity will be [ Select ] tons and the market equilibrium price will be $ [ Select ] . If the external costs are included in the market price the allocatively efficient equilibrium quantity will be [ Select ] tons and the market equilibrium price will be $ [ Select ] . The policy option, [ Select ] , would result in the market producing the allocatively efficient amount of steel.

700, 195, 500, 225, A tax of $80 for every ton of steel produced.

Based on the above table, which shows the firms and sales in an industry, what is the four-firm concentration ratio?

74

The following table provides the different output levels that workers could produce. For example, if three workers are making handbags and two workers are making phones, 45 handbags and 30 phones will be made. A company has 6 workers. If 3 workers are making handbags and 3 workers are making phones, what is the marginal benefit in phones if one worker is taken from handbag production and placed into phone production?

8

The above figure shows the demand and cost curves for a monopolistically competitive firm in the long run. The firm has excess capacity of

8 units

The figure above shows the marginal revenue, marginal cost, and demand curves for an airline offering daily flights between Los Angeles and Toronto. If the airline is regulated using a marginal cost pricing rule total surplus will be ________.

80000

The figure above shows the demand for and supply of labor of students in Smallville. If the minimum wage is set at $4 per hour, how many hours do students work?

9,000 hours

When trading with Okun, how many shirts does Derby give up to buy 450 lbs of pasta?

900.0

There are six firms in an industry, with market shares of 50 percent, 25 percent, 10 percent, 10 percent, 3 percent and 2 percent. The four firm concentration ratio is ________, and the HHI is ________.

95; 3338

What does it mean if the graph of demand for Priuses (Demand Curve A, Figure A2.6) becomes steeper (Demand Curve B)?

A change in price has less of an impact on the quantity of Priuses purchased

A firm engaged in predatory pricing is

A firm that lower prices with the purpose of driving competitors out of the market

A cartel is best described as:

A group of firms working together in an attempt to become a monopoly.

Given the production possibility frontier in Figure M2.2, if you are already spending 4 hours studying economics and you increase it to 5 hours, what is the opportunity cost?

A loss of 2 points in your biology score for every 1 point gained in economics

Given the curve in Figure M2.1, if you are already spending 4 hours studying biology and you increase it to 5 hours, what is the opportunity cost?

A loss of 5 points in economics for every 1 point earned in biology.

Which of the following statements is TRUE?

A monopolist will leave the market if it incurs an economic loss in the long run.

Consider two demand curves, demand curve A has a slope of -3 and demand curve B has a slope of -2. Remember that demand curves are drawn so that price is on the y-axis and quantity of goods is on the x-axis. Which of the following must be true?

A slope of -3 for demand curve A means that for every dollar decrease in price, quantity demanded increases by 3 units. For demand curve B, the increase in quantity demanded is only 2.

Which of the following taxes is progressive?

A tax of 20% on the first $100,000 of income and 30% on any additional income

All of the following are examples of price discrimination EXCEPT

"buy now, pay later" payment options.

The fact that people with higher incomes get to consume more goods and services addresses the ________ part of one of the two big economic questions.

"for whom"

An art museum decides to offer tours by having visitors listen to cassette tapes rather than have tour guides. The museum is answering the ________ part of one of the two big economic questions.

"how"

If Taco Bell decides to produce more tacos and fewer burritos, Taco Bell is answering the ________ part of one of the two big economic questions.

"what"

When a firm decides to produce more electric cars and conventional gas powered cars, it is most directly answering the ________ part of one of the two big economic questions.

"what"

When an economy produces more houses and fewer typewriters, it is answering the ________ part of one of the two big economic questions.

"what"

When firms in an economy start producing more computers and fewer televisions, they are answering the ________ part of one of the two big economic questions.

"what"