Micro exam

Assume a firm in a competitive industry is producing 800 units of output, and it sells each unit for $6. Its average total cost is $4. Its profit is

$1,600

The Three Amigo's company produced and sold 500 dog beds. The average cost of production per dog bed was $50. Each dog be sold for a price of $65. The Three Amigo's total costs are

$25,000

Suppose there is an early freeze in California that reduces the size of the lemon crop. As the price of lemon rises, what happens to consumer surplus in the market for lemons?

Consumer surplus decreases

who among the following is a free rider?

Ernie listens to National Public Radio, but does not contribute to any fundraising efforts.

Suppose that in a competitive market the equilibrium price is $2.50. What is marginal revenue for the last unit sold by the typical firm in this market?

Exactly $2.50

When an externality is present, the market equilibrium is

Inefficient, and the equilibrium does not maximize the total benefit to society as a whole

Ms. Joplin sells colored pencils. The colored-pencil industry is competitive. Ms. Joplin hires a business consultant to analyze her company's financial records. The consultant recommends that Ms. Joplin increase her production. The consultant must have concluded that , at her current level of production, Ms. Joplin's

Marginal revenue exceeds her marginal cost

The tragedy of the commons result when a good is

Rival in consumption and not excludable

Dioxin emission that results from the production of paper is a good example of a negative externality because

Self-interested paper producers will not consider the full cost of the dioxin pollution they create

Which of the following quantities decrease in response to a tax on a good?

The equilibrium quantity in the market for the good, producer surplus, and the well-being of buyers of the good

Suppose that coal producers create a negative externality equal to $5 per ton of coal. What is the relationship between the equilibrium quantity of coal and the socially quantity of coal?

The equilibrium quantity is greater than the socially optimal quantity

What happens to the total surplus in a market when the government imposes a tax?

Total surplus decreases

Which of the following expressions is correct?

accounting profit = economic profit + implicit costs

A lighthouse is typically considered to be a public good because

all passing ships are able to enjoy the benefits of the lighthouse without paying

A firm produces 400 units of output at a total cost of $1,200. If total variable costs are $1,000,

average fixed cost is 50 cents

When marginal cost is less than average total cost,

average total cost is falling

Profit-maximizing firms enter a competitive market when existing firms in that market have

average total costs that are less than market price

Dawn's bridal boutique is having a sale on evening dresses. The increase in consumer surplus comes from the benefit of the lower prices to

both existing customers who now get lower prices on the gowns they were already planning to purchase and new customers who enter the market because of the lower prices.

If a firm in a perfectly competitive market triples the quantity of output sold, then total revenue will

exactly triple

If the cost of producing sofas decreases, then consumer surplus in the sofa market will

increase

The deadweight loss from a tax per unit of good will be smallest in a market with

inelastic supply and inelastic demand

The goal of requiring licenses for hunting and fishing is to

reduce the use of a common resource

Efficiency in a market is achieved when

the sum of producer surplus and consumer surplus is maximized

It is commonly argued that national defense is a public good. Nevertheless, the weapons used by the U.S. military are produced by private firms. we can conclude that

weapons are rival in consumption and excludable, but national defense is not viral in consumption and not excludable