MICRO Final Exam

Sam's Surfboards is the sole renter of surfboards on Big Wave Island. For​ Sam's Surfboards, the change in total revenue for each additional surfboard rented is always​ _______.

less than the rental price of a surfboard

The graph shows the marginal cost​ curve, average total cost​ curve, and demand curve of a natural monopoly. Draw a point to indicate the output and price under an average cost pricing rule.

makes zero economic profit

In political equilibrium

no group of​ voters, firms,​ politicians, or bureaucrats can see a way to improve their position by making a different choice

Resale price maintenance​ _______.

occurs when a retailer agrees with the manufacturer of a good to sell it at a price at or above a specified level

Marginal external benefit is the benefit from an additional unit of a good or service that​ _______.

people other than its consumer enjoy

Suppose that an economy is made up of two​ people, Marie and Stephen. The graph shows that the marginal benefit that Marie and Stephen receive from the parks that are in their city. Draw a point to show the​ economy's marginal social benefit when the quantity of parks is 1. Label it 1. Draw a point to show the​ economy's marginal social benefit when the quantity of parks is 5. Label it 2. Draw the​ economy's marginal social benefit curve. Label it MSB.

picture on desktop

A healthy person lowers the costs of a​ government-funded medical system. This is an example of a​ _______ externality.

positive consumption

A firm does research and development which can also be applied in the manufacturing processes of other firms. This is an example of a​ _______.

positive production externality

​_______ pricing is setting a low price to drive competitors out of business with the intention of setting a monopoly price when the competition has gone.

predatory

In the United​ States, most healthcare services are produced by private doctors and hospitals that receive their incomes from​ _______.

private​ health-insurance, governments, and patients

The production possibilities frontier is the boundary between those combination of goods and services that can be

produced and those that cannot be produced

When a firm practices perfect price discrimination all of the following occurs except ​ _______.

producer surplus decreases

Because​ _______a common resource is overused.

producers consider their own private cost but not the cost they impose on others that

Rational ignorance suggests that​ ______.

voters are ignorant on issues that are not of special interest to them

When a market failure arises because marginal social benefit exceeds the ability and willingness to​ pay, economists suggest that​ _______.

vouchers be used

The political equilibrium provides public goods in excess of the efficient quantity if​ _______.

well informed interest groups are combined with the rational ignorance of some voters

Suppose people buy more of good 1 when the price of good 2 falls. These goods are

complements

The antitrust law passed in 1890 was the​ _______, which​ _______.

Sherman​ Act; made it a felony to create or attempt to create a monopoly or a cartel

Which of the following items is an example of a natural monopoly​ good?

cable TV

Mario's Pizza is the only pizza place in Sorrento City. The graph shows the market demand curve for pizza in Sorrento City. ​Mario's Pizza is a perfect price discriminator. The marginal revenue from the 20th pizza sold in an hour is​ _______.

$15

ou plan to travel in Europe this summer. If you​ do, you​ won't be able to take your usual summer job that pays ​$12,000 for the​ summer, and you​ won't be able to live at home for free. The cost of transportation is ​$2,000​, visas cost ​$200​, and living expenses are ​$1,400. What is the opportunity cost of your plan to travel in​ Europe?

$15,600

​Bob's Books is the only bookstore in town. The graph shows the demand curve for books and​ Bob's Books' marginal revenue curve and marginal cost curve. ​Bob's Books maximizes its profit by charging​ ______ a book and selling​ ______ books a year.

$22; 16,000

Suppose you got a gift certificate to a nice restaurant in town. The certificate can be exchanged at the restaurant for​ $50 worth of food. You would be willing to pay​ $20 for that much food at the restaurant. Your neighbor offered to pay you​ $40 for the gift certificate.​ Instead, you gave it to me as a gift. How much did this gift cost you to​ give?

$40

Suppose Tom can produce 10 scarves OR 10 towels per hour. Suppose Mark can produce 8 scarves OR 4 towels per hour. Assume that Tom and Mark face constant​ (but, obviously,​ different) marginal costs of producing scarves regardless of how many they make per hour. Tom and Mark decide to specialize and trade according to the theory of comparative advantage. Which of the following is a valid price of towels at which they might​ trade?

1.5 scarves

A merger in a market with a​ Herfindahl-Hirschman Index between​ 1,500 and​ 2,500 will be challenged by the Federal Trade Commission if the merger increases the index by _______ points or more.

100

The graph shows the market for fighter jets. Fighter jets are used in the production of national defense. What is the efficient quantity of fighter​ jets? The efficient quantity of fighter jets is ---. A private company would provide --- fighter jets. Suppose that voters are well informed about fighter jets and the political marketplace is competitive. In a​ single-issue election on the quantity of fighter​ jets, the quantity of fighter jets provided would be ---.

100 0 100

The graph shows the marginal private benefit and the marginal social benefit of college education. When the number of students enrolled is​ 12,000 a​ year, the marginal external benefit of a college education is​ ______ per student per year.

16,000

Suppose the price elasticity of demand for oil is 0.1. In order to lower the price of oil by 20​ percent, the quantity of oil supplied must be increased by

2 percent

Wanda's Healthy Waters is a monopoly. The table gives the demand schedule for water bottled by​ Wanda's Healthy Waters. ​Wanda's marginal cost is a constant​ $2 a bottle. There are no fixed costs. ​Wanda's produces​ _____ bottles of water and charges​ _____ a bottle.

2,000; $4 Wanda's producer surplus is ​$4000 a day

The graph shows the market for education in a developing country. In this country all schools are private and there is no government involvement in education. If the government decides to subsidize​ education, the subsidy that achieves the efficient number of students is​ _____ per student per year.

3,000

The graph shows the market for liquid fertilizer. When firms produce liquid fertilizer they also create​ waste, which they dump into lakes. The government has assessed the marginal external cost of pollution accurately and imposes a tax on the firms that exactly equals this cost. When the market is in​ equilibrium, the government collects​ ______ a month in tax revenue.

320,000

The graph shows the market for education in a developing country. In this country all schools are private and there is no government involvement in education. The number of students enrolled is​ _____ a year.

4,000

The activity of rent seeking shifts the​ firm's _______ curve upward.

ATC

Barbara owns a truck stop on the​ prairies, miles from anywhere. The graph shows her marginal revenue and marginal cost curves and the demand curve she faces. How many fewer meals does Barbara serve than she would if the market were perfectly​ competitive?

Barbara serves 40 fewer meals a week than she would if the market were perfectly competitive.

Choose the statement about ITQs that is incorrect.

ITQs, like production quotas in other markets, produce a deadweight loss

Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this​ observation?

New medical evidence has been released that indicates a negative correlation between a​ person's beef consumption and her or his longevity​ (or life​ span).

Rain spoils the strawberry crop. As a​ result, the price of strawberries rises from ​$22 to ​$44 a box and the quantity demanded decreases from 1400 to 1000 boxes a week. Over this price​ range, what is the price elasticity of​ demand? Describe the demand for strawberries. Over this price​ range, the demand for strawberries is​ ______.

Over the price range of ​$22 to ​$44​, the price elasticity of demand is 0.5 inelastic

The first firm to be accused of this practice was​ _______.

Standard Oil

The country that has the highest private per person expenditure on healthcare is​ _______.

The US

The graph shows the demand and cost conditions facing a perfectly competitive industry. If the industry is taken over by a​ monopoly, what is the deadweight loss that results from the behavior of the​ monopoly?

The deadweight loss that results from the behavior of the monopoly is ​$64000 per year.

The graph shows the marginal social​ cost, marginal private​ cost, and marginal social benefit curves from fishing. What is the efficient catch of​ fish?

The efficient catch of fish is 600 thousand tons per year.

he graph shows the market for chemical production. Draw a point to indicate the inefficient market equilibrium. Draw a shape that shows the deadweight loss created by the pollution externality. Label it.

The efficient equilibrium occurs at a quantity of 2 tons a week

The table gives information about the marginal benefit and marginal cost of a trade school education. What is the value of the voucher that the government must provide to result in the efficient number of trade school students​ enrolled?

The efficient number of trade school students will enroll if the government provides vouchers worth ​$3000 per student per year.

Choose the correct statement.

The marginal social benefit from healthcare exceeds the willingness and ability to pay.

The graph shows the relationship between the number of sheep that feed on a plot of land and the amount of wool produced. What is the maximum sustainable output and the number of sheep that produces​ it?

The maximum sustainable output is 100 bales per​ year, produced by 40 sheep.

The original tragedy of the commons concerned grazing cows and sheep in fourteenth century England. Choose the statement about this tragedy of the commons that is incorrect.

The tragedy of the commons was overcome by the king declaring the common lands to be under his protection.

Choose the correct statement.

There is agreement among economists that ITQs offer an effective tool for dealing with overfishing and achieving an efficient use of the stock of ocean fish

There is one newspaper publisher in the town of​ Sparta, and it is a monopoly. The table shows the total revenue and total cost schedules of the publisher. What is the​ publisher's profit-maximizing​ output?

The​ publisher's profit-maximizing output is 120 newspapers per day.

The table gives information about the marginal benefit and marginal cost of educating a university student. If the government pays a subsidy equal to marginal external​ benefit, what is the cost of​ tuition?

Tuition is ​$14000 per student per year when the government pays a subsidy equal to marginal external benefit.

A​ single-price monopoly​ _______.

can sell a larger quantity only by setting a lower price

_____ express their demand for public goods and services by​ voting, helping in political​ campaigns, lobbying, and making campaign contributions. ____ ​don't vote, but do make campaign contributions and are a major source of funds for political parties. _____ are the elected persons in the​ federal, state, and local governments. ______ administer tax​ collection, the delivery of public goods and​ services, and the administration of rules and regulations.

Voters Firms Politicians Bureaucrats

The graph illustrates the demand for​ Sandi's hand-made greeting cards. What is​ Sandi's marginal revenue when production increases from 1 card to 2 ​cards?

When Sandi increases production from 1 card to 2 ​cards, marginal revenue is 4 dollars.

Chemical-producing factories are located upriver from a​ water-ski club. The graph shows the market for chemical production. Draw a point to indicate the market equilibrium when the​ water-ski club owns the river.

With property rights, the marginal cost curve that excludes pollution costs and the cost of abatement shows only part of the producers' marginal cost

Choose the statement that is incorrect.

a binding agreement among nations to reduce greenhouse gas emissions, the Kyoto Protocol, was ratified by all major developing countries and the US

Yellowstone National ParkYellowstone National Park is​ ______.

a common resource

JK​ Rowling's copyright on the Harry Potter series of books is an example of​ _______.

a legal barrier to entry

Which of the following firms is most likely to be a​ monopoly?

a local distributor of electricity

You read in a news​ report: "Recent technology innovations are expected to reduce the price of providing electrivity with wind​ ('wind power'). This occurence is expected to depress coal prices and​ output." Coal is a major source of electricity. In terms of conventional supply and demand​ analysis, this situation is best described​ as:

a movement along the demand curve for wind power and a shift in demand for coal

Which of the following items is an example of a nonexcludable but rival good or​ resource?

a national park

Healthcare is

a private good that the government provides because left to the market​ alone, it would be inefficiently underprovided and unfairly distributed

Choose the statement that is incorrect.

all games have a unique equilibrium

In game​ theory, strategies include​ _______.

all possible actions of each player

f the cross elasticity of demand for golf clubsgolf clubs with respect to the price of a golf lessona golf lesson is​ negative, then golf clubsgolf clubs and golf lessonsgolf lessons are​ ______.

complements

A market in which firms can enter and leave so easily that firms in the market face competition from potential entrants is a​ _______ market.

contestable

In a repeated​ game, punishments that result in heavy damages are an incentive for players to adopt the strategies that result in a​ _______ equilibrium.

cooperative

The Surgeon General announces that cigarettes cause cancer. Everything else​ equal, as a​ result, the equilibrium price of cigarettes

decreases; and producer surplus decreases

For the past​ year, Venus has played tennis three timesthree times a month. She now decides to play tennis four times a month. You infer that for Venus, ​_______.

either the marginal benefit from a game of tennis has increased or the marginal cost has decreased

Because the marginal social benefit from healthcare​ _______ the marginal benefit perceived by its​ consumers, a competitive market in healthcare would​ _______ it.

exceeds; under provide

Bubble bathBubble bath is​ ______.

excludable and rival

At the quantity of 1000 tacos the marginal social benefit of a taco is​ $.50 and the marginal social cost is​ $.60. To produce the efficient quantity of​ tacos,

fewer tacos should be produced

A factor market is a market in which

households sell the services of the factors of production they control.

A tying arrangement is​ _______.

illegal under the Clayton Act if it lessens competition or creates monopoly

Choose the statement about incentives that is incorrect.

incentives create scarcity

Fill in the blanks most​ appropriately: In class we discussed the claim by Amazon that demand in the ebook market is elastic for a price decrease from​ $14.99 to​ $9.99 per ebook. If this is​ true, lowering ebook prices will​ _____________ ebook revenue for authors. Demand for all formats of the book will likely be​ ________ elastic.

increase; less

When Mohesha receives an increase in her pay check from​ $1,800 a month to​ $2,200 a​ month, she increases the quantity of hot chocolate that she buys from 19 cups a month to 21 cups a month. ​Mohesha's demand for hot chocolate is income​ ______. For​ Mohesha, hot chocolate is​ ______ good.

inelastic; a normal

A​ profit-maximizing monopoly never produces an output in the​ _______ range of its​ _______ curve.

inelastic; demand

Read the news​ clip, then answer the following questions. The supply of housing in Honolulu is​ ______. The​ ______ elastic the supply of​ housing, the greater the rise in the price of housing when demand increases.

inelastic; less

A price cap regulation​ _______.

is a price ceiling

Marginal external cost​ _______.

is an opportunity cost

The social cost of a monopoly​ ______.

is greater with rent seeking than it otherwise would be

Harry produces 22 balloon rides and 55 boat rides an hour. Harry could notcould not produce more balloon rides without producing fewer boat rides. Harry is​ ______ his production possibilities frontier.

producing on

A negative externality arises from​ _______. A positive externality arises from​ _______.

production or​ consumption; production or consumption

A corn farmer would grow soybean because​ _______.

soybean is a substitute in production for​ corn, and when the relative price of corn​ falls, farmers plant more soybeans

If the cross elasticity of demand for ramen noodlesramen noodles with respect to the price of ricerice is​ positive, then ramen noodlesramen noodles and ricerice are​ ______.

substitutes

In​ 2013, the price of corn fell and in 2014 some corn farmers will switch from growing corn to growing soybeans. This statement illustrates the law of​ _________because the fall in the price of corn results in​ _________.

supply; a decrease in the quantity of corn supplied

An increaseAn increase in the supply of pizza brings a​ ______ of pizza at the original price and a​ ______ in its price.

surplus; fall

The principle of minimum differentiation suggests that political parties will​ _______.

tend to become similar as they try to appeal to a majority of voters

The graph shows the marginal costs of chemical production. Draw an arrow to show the marginal external cost of producing the 3rd ton of chemicals in a week.

that falls on people other than the producer of the good

In the Canadian healthcare system​ _______.

the government produces a fixed quantity of healthcare

Choose the statement about ITQs that is incorrect.

the major problem with ITQs is that they create a monopoly

The city plants trees along city streets. Draw a marginal benefit curve for​ Julia, who enjoys seeing the trees but is a free rider. Label it.

the marginal social benefit of a private good is the sum of the marginal benefits of all individuals at each quantity

If the government assigns property rights to a common​ resource, _______.

the marginal social cost curve becomes the marginal private cost curve, and the use of the resource is efficient

When a production quota is used that makes the market for a common resource​ efficient, _______.

the production quota is set for total production at the quantity at which marginal social benefit equals marginal social cost

A monopoly that can perfectly price discriminate has a marginal revenue curve that is​ ______ the demand curve for the good that the monopoly produces. If a monopoly can perfectly price​ discriminate, it produces​ ______ deadweight loss.

the same​ as; no If a monopoly can perfectly price​ discriminate, it is more efficient than a​ single-price monopoly.

For a particular​ good, a 10 percent increase in price causes a 1 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this​ good?

there are no close substitutes for this good

A duopoly occurs when​ _______.

two producers of a particular good compete in the same market

and Washington's FinestWashington's Finest are the only major producers of canned cold dash water shrimpcanned cold-water shrimp. Each company has developed a canned shrimp productcanned shrimp product and aggressively advertises it. The two firms are locked in a​ duopolists' dilemma. The​ duopolists' dilemma facing Oregon's BestOregon's Best and Washington's FinestWashington's Finest is​ _______.

whether they could trust each other to raise the price of can of shrimp and decrease advertising to raise economic profit

Rocky's Mountain Water is a natural​ monopoly, which the government regulates by imposing a marginal cost pricing rule. The graph shows the demand for​ Rocky's Mountain Water and the marginal cost is​ $0.20 a bottle. The price of​ Rocky's Mountain Water is​ ______ a bottle and​ ______ bottles are sold a day.

​$0.20; 600

Roxy Theater is a monopoly. Roxy discovers that at the price that maximizes its​ profit, seniors are not coming to the theater. So​ Roxie's conducts a survey. The table reveals the results of the survey. Roxy decides to price discriminate among patrons who attend on weekends and those who attend on weekdays. If the marginal cost of a show is​ $6.00, Roxy will maximize profit by charging​ ______ a ticket on weekdays and charging​ ______ a ticket on the weekend.

​$7.50; $12.00

As we move from point A to point B to point C​, the opportunity cost of producing a sweater ​______ because resources​ ______.

​increases; are not all equally productive in all activities