m119

The above figure shows the marginal social benefit, marginal private cost and marginal social cost of producing steel. If the market is competitive and unregulated, the equilibrium quantity of steel is ________ tons and the efficient quantity of steel is ________ tons.

4; 2

Quantity (gloves per day) Total cost (dollars) 0 80 1 100 2 105 3 135 4 170 5 210 6 270 7 350 8 450 8. 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

The figure above shows the market for milk. The efficient quantity of milk in this market is

5 million gallons per day.

Quantity (millions of patients treated) Marginal Private Benefit (thousands of dollars) Marginal External Benefit (thousands of dollars) 1 21 6 2 19 5 3 17 4 4 15 3 5 13 2 6 11 1 14. HIV drugs provide both private benefits and external benefits. The table provides information on the marginal private benefit and the marginal external benefit (measured in dollars per year) from being treated with the HIV drugs. If the marginal cost is $15,000 a year, then the efficient number of patients treated is

5 million, which is greater than the competitive equilibrium amount of 4 million

Price (dollars per pound) Quantity supplied (pounds) Quantity demanded (pounds) 3 1 7 4 2 5 5 4 4 6 5 2 7 6 1 20. The above table shows the demand schedule and supply schedule for chocolate chip cookies. An increase in income results in an increase in the demand for chocolate cookies by an amount of 3 pounds at every price. What are the new equilibrium quantity and equilibrium price?

5 pounds, $6.00 per pound

The figure above gives the cost curves for Mario's, a Pizza shop. The output is number of pizzas per hour. Mario's pizza will shut down when the market price for pizza fall below

6

A firm that can sell its output for $40 per unit. When it increases its labor force from 4 workers to 5 workers its output increases from 15 to 17 units. The value of marginal product of the 5th worker is

80

Quantity (coats per day) Total cost (dollars per coat) 7 1,410 8 1,640 9 1,910 10 2,210 11 2,560 15. The table above shows the total cost incurred by Sue's Coat Shop, a perfectly competitive firm. If the market price of a coat is $285, Sue's will maximize economic profit by selling ________ coats a day.

9

Labor (workers per day) Output (units per day) 0 0 1 13 2 18 3 22 4 24 5 25 8. Sandra's Sweaters' production function is shown in the above table. Sandra rents three knitting machines for $30 a day each and hires workers at a wage rate of $40 a day. If Sandra produces 18 sweaters per day, what is her average total cost?

9.44

If there is an increase in supply (that is, a firm's supply curve shifts to the right), but input prices are unchanged, this could be the result of

An improvement in the technology.

Which of the following would shift the demand curve for new textbooks to the right (that is increase demand)?

An increase in college enrollments.

A shift in the production possibilities frontier from AC to BC in the figure 1 above could be due to

a technological improvement in the production of frozen yogurt

Which of the following will increase the equilibrium wage rate in the labor market?

an improvement in technology that increases the marginal product of labor

An cost saving improvement in technology for producing personal computers leads to

an increase in the supply of personal computers.

"Squids for Kids" is a competitive firm that hires workers in a competitive labor market. In order to maximize profits such a firm will hire workers

as long as the value of marginal product of labor is greater than the wage rate and will continue to hire until the value of marginal product of labor equals the wage rate

The price elasticity of demand for furniture is estimated at 1.3. This value means a one percent increase in the

price of furniture will decrease the quantity of furniture demanded by 1.3 percent.

An example of a negative externality in production occurs when a chemical factory

produces ethanol and leaves the waste in a river upstream from a popular fishing spot.

When the firms in a perfectly competitive are making an economic profit in the short run, new firms enter. The entry of the new firm shifts the short-run market supply curve ________, the market price ________, and each firm's economic profit ________.

rightward; falls; decreases

. If total fixed cost increases, then the average total cost curve ________ and the marginal cost curve ________.

shifts upward; does not shift

When the demand for electricity peaks during the hottest days of summer, Florida Power and Light Company can generate more electricity by using more fuel and increasing the working hours of many of its employees. The company cannot, however, increase electric power production by building additional generating capacity. This means that the company is in the

short run.

. If the price of a video rental is below its equilibrium price, there will be a ________ of video rentals and the price will ________.

shortage; rise

Which of the following would be classified as a fixed cost for the proprietor who owns and operates the local Texaco station?

the rent paid on the 10 year lease for the property on which the station is located

Natural gas is a natural monopoly. The figure above shows the market for natural gas in the city of Lucknow. When a marginal cost pricing rule regulation is imposed, the price per household per month is

$10 and the firm makes an economic loss

Labor (workers per week) Output with Plant 1 (1 oven) (pizzas per week) Output with Plant 2 (2 ovens) (pizzas per week) 1 50 60 2 80 130 3 100 180 4 110 220 5 115 240 3. 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. What is Silvio's long-run average cost if the output is 100 pizzas per week?

$17.60

The figure above shows the market for milk per day. At the perfectly competitive equilibrium price and output the consumer surplus is

$3.125 million

Quantity (tons) Marginal private benefit (dollars per ton) Marginal private cost (dollars per ton) Marginal social cost (dollars per ton) 1,000 140 50 80 2,000 120 60 90 3,000 100 70 100 4,000 80 80 110 5,000 60 90 120 6,000 40 100 130 5. The table above shows the marginal benefits and costs from production of fertilizer. There are no external benefits. If the market is perfectly competitive and unregulated, the efficient level of output could be achieved by setting a per ton tax of

$30.

Cost schedule Labor (workers) Output (units per day) Total fixed cost (dollars) Total variable cost (dollars) 0 0 20 0 1 4 20 25 2 9 20 50 3 13 20 75 4 16 20 100 5 18 20 125 10. Using the data in the above table, when output increases from 4 to 9 units, the marginal cost of producing an additional unit between 4 and 9 units is

$5.00

Tara, a pharmacist, is planning on opening her own pharmacy. Tara currently earns $50,000 a year at her job. She has calculated that it will cost her $6,000 in rent and utilities and $25,000 for an assistant per year to run her pharmacy. What is the amount of opportunity cost that Tara incurs in running her own pharmacy?

$81,000

Labor (workers per day) Output (units per day) 0 0 1 13 2 18 3 22 4 24 5 25 9. Sandra's Sweaters' production function is shown in the above table. Sandra rents three knitting machines for $30 a day each and hires workers at a wage rate of $40 a day. If Sandra produces 18 sweaters per day, what is her average total cost?

$9.44

The price of a bus ticket for IndyGo was raised from $1.00 to $1.50 and as a result the number of passengers per day fell from 20,000 to 19,000. This indicates that the price elasticity of demand for Indy Go bus rides is

- 0. 128 and is inelastic

When the price of a movie ticket increases from $5 to $7, the quantity of tickets demanded decreases from 600 to 400 a day. What is the price elasticity of demand for movie tickets?

-1.20

Point Production of grain (tons) Production of cars (cars) A 0 30 B 2 28 C 4 24 D 6 18 E 8 10 F 10 0 5. The table above lists six points on the production possibilities frontier for grain and cars. What is the opportunity cost of producing a car between combinations B and C?

.5 tons of grain per car

Price (dollars per disc) Quantity demanded Price (dollars per disc) Quantity supplied 4 36,000 4 4,000 8 32,000 8 8,000 12 28,000 12 12,000 16 24,000 16 16,000 20 20,000 20 20,000 24 16,000 24 24,000 28 12,000 28 28,000 32 8,000 32 32,000 36 4,000 36 36,000 21. The above table gives the demand and supply schedules for Blu-ray discs. Suppose that the price of a Blu-ray disc player increases, resulting in the demand for Blu-ray discs decreasing by 8,000 units at all prices. What are the new equilibrium quantity and equilibrium price of Blu-ray discs?

16,000 and $16

At one point along a PPF, 50 tons of coffee and 100 tons of bananas are produced. At another point along the same PPF, 30 tons of coffee and 140 tons of bananas are produced. The opportunity cost of a ton of coffee between these points is

2 tons of bananas per ton of coffee.

Labor (workers per day) Output (units per day) 0 0 1 10 2 15 3 18 4 20 5 21 10. 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 when the output changes from 18 to 20 sweaters?

20

Quantity (coats per day) Total cost (dollars per coat) 7 1,410 8 1,640 9 1,910 10 2,210 11 2,560 15. The table above shows the total cost incurred by Sue's Coat Shop, a perfectly competitive firm. If the market price of a coat is $285, Sue's will maximize economic profit by selling ________ coats a day.

20 pizzas; $60

Labor (workers) Total product (dozens of donuts per day) 0 0 1 12 2 26 3 44 4 64 5 86 6 110 7 122 8 125 9 127 10 128 7. Refer to the table above which shows the production of Donuts. What is the marginal product of the 5th worker hired at Decent Donuts?

22 dozen donuts per day

Henry's sells tomatoes in the perfectly competitive Italian Market in Philadelphia. The market price for tomatoes is $2.75 per pound. In order to sell tomatoes, he has to buy them from the wholesaler and store them, until the market opens. Henry can buy the tomatoes from a wholesaler at $1.50 a pound but has found that the marginal cost of storing the tomatoes increases at the rate of 5 cents per pound (that is, the marginal cost of storing 1 pound of tomatoes is 5 cents, the marginal cost of storing 2 pounds of tomatoes is 10 cents, and so on). In order to maximize profits Henry should sell

25 pounds of tomatoes because at this quantity, the price = marginal cost, and marginal cost is increasing.

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

30 thousand households and the deadweight loss is much less than if it is left unregulated.

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

Labor (workers) Output (haircuts per day) 0 0 1 24 2 36 3 44 4 48 5 50 7. The above table has the total product schedule for Joe's Barber Shop. Joe charges $6 per haircut. If the wage rate is $24 per worker, what quantity of labor will maximize profits?

4 workers

. If the elasticity of supply is 4, a 10 percent increase in the price of a good leads to a

40 percent increase in the quantity of supply.

Natural gas is a natural monopoly. The figure above shows the market for natural gas in the city of Lucknow. An efficient allocation of resources is reached in the figure above when output equals

40 thousand households.

. A bank increased its fees for processing personal checks from 18 cents to 24 cents per check. In a statement released a year later, the bank announced that total revenues from check processing fees increased during this period. This statement implies that

Account holders are relatively unresponsive to the check writing fee, that is, their demand for checks are inelastic.

7. Output if only computers Output if only toys are produced are produced U.S. 1,000 computers 5,000 toys Mexico 100 computers 1,000 toys The table above shows the total output of the two countries if they specialize in one particular output for an entire day. What can we say about trade between these two countries?

Both the U.S. and Mexico can be better off if the U.S. specializes in computers and Mexico in toys, and then they trade.

Suppose the output per worker for soybeans and peaches in Indiana and California are as shown in the table below Soybeans (in bushels) Peaches (in pounds) Indiana 200 50 California 200 100 This would indicate that

California has a comparative advantage in producing peaches and Indiana has a comparative in producing soybeans, and the two would benefit from trade, if each specialized in producing the good in which they have a comparative advantage.

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

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

Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich. Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich. Both individuals will be better off if

Jerry specializes in producing sandwiches , and Tom specializes in producing eggs and they trade

. As illustrated in the above figure, after 60 gallons are produced each hour at Ike's Ice Cream Kitchen, the ATC curve starts to slope upward. The ATC starts to slope upward because the

MC exceeds the ATC.

Joe Garcia has opened a coffee shop that sells gourmet coffee and sandwiches. He employs two individuals on a part time basis and manages the shop himself. The wages for the two employees comes to a total of $30, 000 every year. He spends another $30,000 on materials for the shop. He borrowed $20,000 to renovate the space for the coffee shop which he rents for $12,000 a year. He earned $120,000 in revenue last year. Joe Garcia worked as an accountant before he started the coffee shop and made an annual salary of $50,000. If the rate of interest on savings is 5%, Joe

Made an economic profit of -$3000 since the opportunity cost of the $20,000 spent on renovations as well as the opportunity cost of his time is part of the economic cost.

Durabattery Company has a plant located on the White River. It produces batteries and sells in the perfectly competitive market for batteries. If the production of these batteries cause negative externalities for downstream users of the White River and these costs are not part of the Durabattery's costs of production, then Durabattery will produce

More than the efficient output level.

Suppose the United States imposed tariffs on imported Chinese clothing. As a result

Prices of clothing would increase in the United States, consumers would be worse off, and the total surplus would decrease.

6. Generally, opportunity costs increase and the production possibilities frontier bows outward. Why?

Resources are not equally useful in all activities.

American Idle sells hammocks in a perfectly competitive market. This year, the price of hammocks has fallen to $27, and Simon Cowbell, the manager of American Idle, is trying to decide what to do. He discovers that his average variable costs (AVC) are $25, average total costs (ATC) are $30, and marginal costs are $27 and rising. What should he do?

Stay open because price > AVC

Which answer below CORRECTLY describes the relationship between the demand for labor curve and the value of marginal product curve?

The curves are the same.

. The short run supply curve of the competitive firm is

The marginal cost curve above the minimum point of the average variable cost curve

. Which of the following is TRUE regarding a perfectly competitive firm?

The marginal revenue of the firm is equal to the market price

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

The price each firm sets differs from the prices set by the other firms.

Thai producers supply a large share of the US shrimp market. Suppose the U.S. government imposes a quota restricting shrimp imports from Thailand to fifty percent of current imports. This would cause

The quantity of shrimp produced in the U. S. to increase but consumer surplus will fall leading to a deadweight loss.

Over the last few years the price of high definition TVs have fallen substantially while at the same time the number sold increased significantly. Which of the following possibilities is consistent with this observation?

The supply increased and there was movement downward along the demand curve.

Labor (workers per week) Output with Plant 1 (1 oven) (pizzas per week) Output with Plant 2 (2 ovens) (pizzas per week) 1 50 60 2 80 130 3 100 180 4 110 220 5 115 240 5. Silvio's Pizza is a small pizzeria whose production function is shown in the table above.

There is diminishing marginal product of labor when Silvio's Pizzeria uses either 1 oven or 2 ovens.

A technological advance decreases the marginal cost of producing computers. Which of the following would be the most likely to result?

There would be an increase in the supply of computers, leading to a larger equilibrium quantity and lower equilibrium price

Which of the following decreases the supply (that is shifts it inwards) of restaurant meals?

Waiters get a pay raise.

Which of the following shifts the demand curve for oranges?

a decrease in the price of a pound of bananas, a substitute in consumption for oranges

Which of the following leads to a movement along the supply curve for shredded wheat but does NOT shift the supply curve for shredded wheat?

a fall in the price of shredded wheat

11. ) Some of the cost curves for Ike's Ice Cream Kitchen are given in the above figure. Based on the figure, at which level of output does diminishing marginal returns first occur at Ike's Ice Cream Kitchen?

at 10 gals

When the marginal product curve is above the average product curve, ________ as output increases.

average product must increase

We know that the firm shown in the figure above is a natural monopoly because as output increases, the

average total cost decreases so that the firm can supply the market at lower cost than two or more firmsfirms.

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

In an eight-hour day, Andy can produce either 24 loaves of bread or 8 pounds of butter. In an eight-hour day, Bob can produce either 8 loaves of bread or 8 pounds of butter. Andy has a comparative advantage in the production of

bread, while Bob has a comparative advantage in the production of butter.

Ham and eggs are complements. If the price of ham rises, the demand for eggs will

decrease and the demand curve for eggs will shift leftward.

In perfect competition, an individual firm

determines the quantity it sells in the marketplace but has no influence over its price.

When long-run average costs decrease as output increases, there are

economies of scale.

When the price is below the equilibrium price, the quantity demanded

exceeds the equilibrium quantity but the quantity supplied is less than the equilibrium quantity.

If the marginal private cost of producing one kilowatt of power in California equals five cents and the marginal social cost of each kilowatt equals nine cents, then the marginal external cost equals ________ per kilowatt.

four cents

The principle of comparative advantage indicates that, countries can

gain from trade if they specialized in producing the good in which they have a comparative advantage and traded with other countries

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. With international trade the United States

imports 32 million shirts

Labor (workers per week) Output with Plant 1 (1 oven) (pizzas per week) Output with Plant 2 (2 ovens) (pizzas per week) 1 50 60 2 80 130 3 100 180 4 110 220 5 115 240 2. 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 kitchen currently has enough room for only one oven. Producing 200 pizzas per week is ________ in the short run and ________ in the long run. The output does not increase if it employs more than 5 workers.

impossible; possible

Peter's monthly income increases from $1,500 to $1,600. As a result, he increases the number of DVDs he buys per month from 2 to 3. Peter's demand for DVDs is

income elastic.

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 figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. International trade ________ total surplus in the United States by ________.

increases; $128 million

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. If there is international trade, then the consumer surplus in the United States ________ by ________.

increases; $320 million

The apple market is perfectly competitive and is in long-run equilibrium. Now a disease kills 50 percent of the apple orchards. In the short run, the price of a bag of apples ________ and the remaining apple growers make ________ economic profit. In the long run, the ________.

increases; positive; orchards will be replanted and economic profit will return to zero

3. Production efficiency occurs when production

is on the production possibilities frontier.

The inefficiency of a monopoly results because

it produces at a point at which price is greater then marginal cost, so that its output is LESS than the efficient output at which price = marginal cost

With respect to labor supply, the substitution effect takes account of the fact that at higher wage rates

leisure has become more expensive and so a person will substitute more work for leisure and consumes less leisure.

When the demand for electricity peaks during the hottest days of summer, Florida Power and Light Company can generate more electricity by using more fuel and increasing the working hours of many of its employees. The company cannot, however, increase electric power production by building additional generating capacity. This means that the company is in the

long run.

. If Sam wants to increase her total revenue from her sales of flowers and she knows that the demand for flowers is price elastic, that is the magnitude of the elasticity is greater then 1, she should

lower her price because she knows that the percentage increase in the quantity demanded will be greater than the percentage decrease in price.

The firm's short run supply curve is equal to the

marginal cost curve above the AVC

Suppose a firm produces pollution when it generates electricity. The cost of the pollution, when the firm does not bear the cost of the pollution, is the

marginal external cost.

In the spring of 2008, the equilibrium price of gasoline in Indianapolis approached $4.00/gallon. If the government had enacted a price floor (that is a minimum price below which the price is not allowed to fall) of $1.50/gallon, the likely result would have been:

no change in the market price of gasoline.

The price elasticity of demand is defined as the

percentage change in quantity demanded divided by the percentage change in price.

You are the new vice president in charge of advertising at Taco Bell. In your upcoming advertising campaign, you plan to degrade the fast food competitor whose product is the closest substitute for Taco Bell's tacos. That would be the fast food chain whose cross elasticity of demand with your tacos is equal to

positive 2.11

2. For the Jones household it has been estimated that for every ten degrees increase in the outdoor temperature the consumption of ice tea increases by 5 glasses. What type of relationship exists between temperature change and the consumption of ice tea?

positive relationship

Suppose the dairy industry is perfectly competitive and the market price for milk is $3.00 per gallon. The marginal cost of milk production at Dana's Dairy, at its current output, is $2.50 per gallon and is greater than the average variable cost. Dana's Dairy has the usual U-shaped marginal cost and average cost curves and it knows that its marginal cost will rise if it increases output. Dana's Dairy

should increase its output of milk to the output at which marginal cost is $3.00 to maximize profits.

A firm's long-run average cost curve

shows the lowest attainable average total cost of producing any level of output when both the plant size and labor can be varied.

The figure shows the market for milk in a day. If the producers of milk were to successfully cut the production to 2 million gallons per day. The consumer surplus would be at the equilibrium market price and the ____________

smaller than; deadweight loss would be $2.25 million.

Figure 2 shows the demand and the cost curves of a natural monopoly. Compared with the unregulated price, if the government set a maximum price at P2, the deadweight loss would be and the monopolist would .

smaller; break even

The cross-elasticity of demand between Homer's Holesome Doughnuts and Krusty's Krispy Crullers is 5.0, which indicates that Homer's doughnuts and Krusty's crullers are

substitutes and the relationship between the two goods is strong (that is, the quantity demanded of doughnuts is very responsive to changes in the price of crullers).

U.S. production possibilities France's production possibilities Steel 100 25 Concrete 200 100 10. The data in the above table demonstrates that gains from trade can be captured if

the United States produced steel in exchange for concrete produced in France.

When consumers' incomes increased 6 percent, the quantity of wine bought increased 12 percent. This result means

the demand for wine is income elastic and wine is a normal good.

Decent Donuts Labor (workers) Total product (dozens of donuts per day) 0 0 1 12 2 26 3 44 4 64 5 86 6 110 7 122 8 125 9 127 10 128 8. The table above shows the production of Donuts. Based on the data, diminishing marginal returns begins with the

the fifth worker

Suppose that in the construction industry the market equilibrium wage rate is $5 per hour. The government imposes a minimum wage of $6 per hour. Then

the firms would hire fewer workers at the minimum wage rate but the quantity supplied of labor will increase leading to unemployment (that is a surplus of workers)

. Diminishing marginal returns occur when

the marginal product of an additional worker is less than the marginal product of the previous worker hired.

. The efficient level of output is the the one at which

the sum of the producer surplus and the consumer surplus are maximized

A bakery can produce either cakes or cookies. If the price of cookies rises, then

the supply curve of cake shifts leftward.

Consider a production possibilities frontier with corn on the vertical axis and cars on the horizontal. Unusually good weather for growing corn shifts

the vertical intercept upward but does not shift the horizontal intercept.

Due to the increased demand for ethanol and other bio-fuel energy alternatives, the United States Department of Agriculture (USDA) has predicted that American farmers are likely to receive 55 percent more for a bushel of corn in the 2006/2007 growing season than they received in the 2005/2006 growing season. Annual prices are expected to increase from $2.00 per bushel to about $3.10 per bushel. Which of the following explanations is consistent with the changes in the market for corn?

there has been a shift to the right of the demand curve and an upward movement along the supply curve

Labor (workers per day) Quantity (T shirts per day) 0 0 1 10 2 22 3 30 4 34 5 35 5. The table above shows some data that describe Tom's T-Shirts' total product when Tom's has 1 sewing machine. Diminishing marginal returns begin when the ________ is employed.

third worker

In the case of a Natural monopoly, the Average cost pricing rule needs to be used since

this will allow the firm to make normal profits while vastly reducing deadweight losses from an unregulated natural monopoly.

Consumers expect that the price of a gallon of gasoline will rise next week. As a result

today's demand for gasoline increases.

The long run supply curve in an industry that has decreasing returns to scales is because the cost curves when the number of firms increase.

upward sloping ; shift up

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

what

. RAM Inc. is the sole producer of a special kind of microprocessor chip that is widely used in specialized digital cameras. The weekly demand for RAM's chips is given in the table below. If the marginal cost of producing a chip is $30 and RAM can produce a maximum of 13 chips per week, then RAM Inc. Price Quantity $70 6 $65 7 $60 8 $55 9 $50 10 $45 11 $40 12 $35 13

will produce 7 chips in a week since profits are maximized at this quantity.

In order to boost enrollment and improve retention at IUPUI, the City of Indianapolis is considering imposing a price ceiling of $500 for a one-bedroom apartment in the apartment complexes close to IUPUI. The monthly rental rate for a 1-bedroom apartment in these apartment complexes is currently $700 per month. If the apartment rental market is currently in equilibrium, we can expect that this price ceiling

would increase the quantity demanded of apartments and decrease the quantity supplied of apartments which would lead to a shortage