micro final exam hammock 2022

Your company produces 5000 doodads at a total cost of $2 million. It sells them for $600 each. What is your company's profit?

$1 million

Suppose your company has $1 million in explicit costs, and could rent out its buildings to earn a revenue of $0.5 million. Its equipment could be rented out for another $0.25 million. What is your economic cost?

$1.75 million

If you are willing to pay $40 for Top Hat access, but a guy in an alley sells you a black market access code for $20, your consumer surplus is...

$20

A lawn maintenance company tends to 50 lawns each week. It has average variable cost of $40, and average fixed cost of $60. Total cost is...

$5,000

In your spare time you drive for Uber. You pick up a passenger and take her to Madison Social, for which you are paid $15. You would have been willing to drive her there for $9. Your producer surplus is...

$6

A monopoly cable television company sells access to cable television channels. It lowers the price of a subscription from $100 to $80 and finds that the number of subscriptions sold rises from 1 million per month to 2 million per month. The monopoly's marginal revenue is...

$60

ABC corporation produces 1,000 units of output per week. Its average fixed cost is $400, and its average variable cost is $300. What is its total cost?

$700,000

Which of the following statements about the law of supply is correct?

* As price rises, quantity supplied rise * In order to be persuaded to produce more output, a firm must be paid first * A firms supply curve is its marginal cost curve above the minimum of average variable cost

If the government imposes a binding price floor on onions, which of the following should we expect to happen?

* There will be surplus onions (possibly purchased by the government) * Some resources will be used to grow onions, when it would be more efficient for them to do something else * Some sellers of onions will benefit from the higher price, while others will be upset that they have surplus onions and no buyers

Equilibrium is efficient because...

* Total surplus is maximized. * Marginal benefit equals marginal cost. * Every unit that is produced has a benefit to consumers greater than (or equal to) the cost of its production.

In equilibrium...

* total surplus is maximized * quantity supplied equals quantity demanded. * supply intersects demand.

Your company produces 5000 doodads at a total accounting cost of $2 million. It sells them for $600 each. If you changed your business to produce thingies instead, you would earn a $5 million accounting profit. What is your company's economic profit?

-$4 million

The price of internet access rises from $50 per month to $70 per month. The quantity of streaming service subscriptions falls from 200 million to 175 million. What is the Arc Cross-Price Elasticity of Demand?

-0.4

Your height is 60 inches, but you lose your shins in a tragic gardening accident. As a result, your new height is 48 inches. The percent change in your height is...

-20%

You are repainting your house, and currently can paint one room each day. You call a friend in , and now you can paint 1.5 rooms per day. The marginal product of your friend is...

0.5 rooms per day.

The price of a fancy meal out with your significant other drops from $87 to $75, and as a result you increase the number of fancy meals from 20 per year to 25 per year. What is the arc own-price elasticity of demand for meals out with your significant other?

1.5

Suppose I buy a nice dinner for $15. I was willing to pay $25 for it, and the restaurant would have been willing to sell it for as little as $11. What is the total gain to both sides?

14

If the opportunity cost of watching one episode of your favorite show on Netflix is the $5 you would have earned from working for half an hour, then the opportunity cost of working for an hour is... watching ______ episodes of your favorite show on Netflix.

2

You increase production at your ice cream factory by 50 gallons per day. This requires you to pay an additional $100 in costs for cream, natural and artificial flavoring, sugar, guar gum, and tapioca starch. What is the marginal cost of this increase in production?

2

What is the missing Average Total Cost number? VC=$200; FC=$1000; TC=$1200

400

Suppose you have a box that has a height of 40 inches and a width of 10 inches. What is its area?

400 square inches

Suppose you're a monopolist. You currently sell 4 units of output every month. You want to sell 8 per month. To do this, you will have to lower the price from $15 to $10, and this lower price will apply to every unit you sell. What is your Marginal Revenue? That is, what is Marginal Revenue when output goes from 4 units to 8 units?

5

The imposition of price ceilings on a market often results in

An increase in expenditures in the black market

You are operating a house painting business (because you got so good at it from painting your own house). You currently have yourself and two other employees, and you can paint a total of 2 rooms per day. Adding a fourth worker will allow you to paint an additional 0.5 rooms per day. What does adding the fourth worker do to your average product?

Average product falls.

Suppose the market for coffee is in equilibrium. An FDA report is released documenting a variety of significant health benefits of drinking coffee every day. What happens in the market for coffee (the drink—not the bean)?

Demand shifts to the right, price rises, quantity rises.

Suppose the market for smartphones is in equilibrium. A new battery technology is invented which makes phones last a week without needing to be recharged. What happens in the market for smartphones? a) Demand shifts to the right, price rises, quantity rises.

Demand shifts to the right, price rises, quantity rises.

Which of the following is correct? a) Average Fixed Cost declines as output rises. b) Marginal Cost falls as Marginal Product initially rises, but when diminishing returns set in, Marginal Cost rises as Marginal Product falls. c) Marginal Cost passes through the minimum of AVC and ATC. d) Average Total Cost is the sum of Average Variable Cost and Average Fixed Cost. e) All of the above. f) None of the above.

E. all of the above

Suppose you are going to a movie. You're excited to go to this; you would have paid up to $30 to go to this movie, though you actually paid $12. For simplicity, assume you are going alone. Yes, it's sad, but you have unusual taste in movies, so no one wants to join you. While you are driving to the theater, you get a call from a friend, who excitedly tells you that your favorite musical artist is performing a surprise show at a local tavern. If you turn around right now, you can make it before the music starts. It will cost you $12 to get into the tavern. You would be willing to pay up to $120 to see this artist. What is the economically rational thing to do? In case it matters to you, you've already paid for your movie ticket, and can't get your money back. You can't scalp your tickets.

Go to the musical performance.

Which of the following companies is not likely to be able to benefit from significant economies of scale?

HTC, a company that used to make phones but now plans to be the number one producer of Virtual Reality headsets.

Which of the following goods (or services) is likely to have inelastic supply?

Higher education, which requires instructors with a PhD (which usually take 4 to 6 years to complete)

Artyom mustard is one of thousands of broccoli farmers. He currently sells broccoli at the market price of $2 per pound, which is roughly equal to his marginal cost of growing another pound of broccoli. He calculates that if he were able to sell it for $2.50 per pound, he could make a lot more profit. Joe therefore raises the price. What miscalculation has Artyom just made?

In a competitive market like broccoli, no one will buy Joe's broccoli if he charges more than the market price of $2 per pound

The deadweight loss resulting from levying a tax on an economic activity is the...

Loss of potential gains from trade from activities forgone because of the tax

A reminder: What is the rule for profit maximization for a monopolist?

MR=MC

Company z makes foam pool toys. The attached table shows input and output. Which of the following is correct?

Marginal product rises until 15 workers are hired, and then diminishing returns set in

Which of the following is a characteristic of monopolistic competition?

Monopolistically competitive firms earn zero profit in the long run

Monopolistic competition is different from perfect competition in that...

Monopolistically competitive firms produce differentiated products, whereas perfectly competitive firms produce identical goods

The efficient amount of output is where the marginal cost to society is equal to the marginal benefit to society. Is this where the monopolist produces?

No, the efficient output is where MC = D, because Demand represents the marginal benefits to society

You work part time while going to college, earning $5,000cper year due to your low income, you only eat at restaurants 6 times per year. After graduating and getting a good job earning $60,000 per year, you eat at restaurants 94 times per year. Which of the following is correct?

The arc income elasticity of demand is 1.04, and meals at restaurants are a normal good

Producer Surplus is...

The area above the supply curve and below the price.

A $1 per pound tax is imposed on cucumbers. The own-price elasticity of demand for cucumbers is 1.5, and the elasticity of supply for cucumbers is 0.7. Which of the following is correct?

The burden of the tax will fall mostly on producers.

A tornado destroys several carpet factories in North Georgia. Which of the following occurs? a) The quantity of carpet supplied rises.

The carpet supply curve shifts to the left.

How will an increase in the price of coffee affect the market or cocoa, a substitute good?

The demand for cocoa will increase, leading to an increase in the price of cocoa

1Consumer Surplus is...

The difference between what consumers are willing to pay and what they actually pay.

Your income rises by 10%, and the quantity of raisins that you purchase falls by 5%. Which of the following is correct?

The income elasticity of demand for raisins is -0.5, and raisins are an inferior good.

The height of the supply curve is...

The marginal cost of producing an additional unit of output

Which of the following is most likely to be an oligopoly?

The market for smartphone operating systems, which currently consists of IOS and android

If the price of bananas rises by 10%, and the quantity of bananas falls by 20%, which of the following is correct?

The own price elasticity of demand for bananas is -0.5, and bananas are a substitute

A new program to teach computer science more effectively graduates its first class of computer scientists, resulting in a significant increase in the number of programmers and software engineers available. Which of the following will occur?

The supply of software will shift to the right.

"The resources now going into the war on terrorism and into improved airport security would save more lives if they were invested in medical research." This statement (whether you agree with it or not) most clearly reflects which of the following?

There is no such thing as free lunch—the use of scarce resources always has an opportunity cost

Marginal revenue falls faster than demand for a monopoly because

To get consumers to buy more output, the monopolist must cut the price on not only the additional units sold, but also the units that would have been sold under the higher price

Suppose the equilibrium price of toilets is $250. The government imposes a $600 minimum price for each toilet. Which of the following is not likely to occur?

Toilet manufacturers produce the lowest-quality toilets possible, while also complying with regulations.

Suppose the government imposes a maximum annual tuition on bachelor's degree-granting institutions of $2,000 per year. Which of the following is not likely to occur?

Universities will compete for students more intensely, resulting in more and larger scholarships.

Which one of the following decisions most clearly reflects a lack of understanding of the concept of sunk costs?

You study eight hours for a final exam even though there is no way now that you can pass the course

1.14) If a person's income goes up, and that person buys more chicken sandwiches, then we can conclude that for this person...

a) chicken sandwiches are a normal good.

When new firms have an incentive to enter a competitive price-taker marker, their entry will...

drive down profits of existing firms in the market

The graph below depicts an increasing cost industry that has just experienced a decrease in demand. What happens next?

firms exit, prices rise, costs fall, and zero profit is restored

Which one of these functions is the most inelastic?

graph with the steepest line

A country with a comparative advantage in producing a good...

has the lowest opportunity cost of production

A firm that wants to maximize profit will choose to... i. produce where marginal revenue equals marginal cost ii. produce where the difference between total revenue and total cost Is maximized iii. produce where marginal cost is between average total cost and average variable cost. Which of these items can correctly complete the sentence?

i and ii

Marginal cost is... i. Change in total cost/change in output ii. Change in output/change in labor iii. Change in variable cost/change in output

i and iii

What is the title of the official in charge of making sure markets reach equilibrium?

none of the above

the value of the best thing you give up to get something is...

opportunity cost

Suppose the market for coffee is in equilibrium. The price of tea rises. What happens in the market for coffee?

price rises, quantity rises

If profit seeking entrepreneurs are going to be successful, they must

produce a product that consumers value more than the cost of the resources required for its production

Suppose the own price elasticity of demand for oranges is 1.5, and the price elasticity of supply for oranges is 0.8. A $.20 per orange tax on oranges is legally assigned to consumers. Who will suffer the largest loss due to tax revenue and deadweight loss?

producers

Suppose the price of tomato sauce is $4 per jar, but then rises to $7 per jar. The Law of Demand states that... a) demand will rise.

quantity demanded will fall

when demand shifts in a constant cost industry, prices will tend to

return to their original level in the long run

Here's a question straight off of an old exam: In a decreasing cost industry, as firms exit the industry and industry output decreases, costs will...

rise

Suppose the market for onions is perfectly competitive, and it's an increasing cost industry. Also suppose that right now, firms are making positive economic profits. When this market reaches a long run equilibrium, will the price be higher or lower than it is right now?

the price will be lower

Consider the supply curve for sour cream. If the price of sour cream falls, then...

the quantity supplied will fall.

In the long run in a perfectly competitive market, economic profit will tend to converge toward, and stay around,

zero economic profit.

Which of the following statements is correct? a) In an increasing cost industry, the long run supply curve slopes upward. b) In a constant cost industry, the long run supply curve is horizontal. c) In a decreasing cost industry, the long run supply curve slopes downward. d) all of the above

all of the above

which of the following would shift demand to the right?

an increase in the price of a substitute

A decreasing cost market is one in which

as firms enter and industry output rises, costs fall

For most people, ramen noodles are an inferior good. Suppose the market for ramen noodles is in equilibrium, and then two things happen at the same. First, the incomes of consumers rise. Second, a technological improvement at noodle factories allows them to produce more noodles at a lower cost. What happens to the price and quantity of noodles?

Price falls, quantity is indeterminate

The market for computer printers is in equilibrium. Two things happen at the same time: the price of ink cartridges for the printers goes down, and there is an increases in the cost of the materials used to make printers. What happens to the price and quantity of printers?

Price rises, quantity is indeterminate

Suppose the market for potato chips is in equilibrium, and then two things happen at the same time: The price of potatoes (which are used to make potato chips ) goes up, and a big sporting and social event occurs. Eating lots of potato chips is traditional at this big sporting event. Which of the following is correct?

Price rises, quantity is indeterminate.

Qualcomm and Crucial are two companies making computing components: memory and processors. According to their production possibilities frontiers above, which of the following is correct? a) Qualcomm has a comparative advantage in memory.

Qualcomm has a comparative advantage in Processors, and Crucial has a comparative advantage in memory.

The deadweight loss of a tax refers to the

Reduction in gains from mutually beneficial exchanges that are eliminated as a result of the tax

Membership stores like Costco and Sam's club charge an up front membership fee, and then sells goods at relatively low prices, but in large quantities. This tends to be attractive to customers who are able to pay this up front free and need large quantities of goods. This is an example of...

Second degree price discrimination

Suppose that a tax is placed on a particular good. If the sellers end up bearing most of the tax burden, this indicates that the

Supply is more inelastic than demand

Suppose the price elasticity of supply for undershirts is 1.3 This means that...

A 1% in increase in price causes quantity supplied to increase by 1.3%

Which answer correctly describes each area on the graph?

A is tax per unit legally assigned to producers, B is tax revenue, C is consumer surplus, E is producer surplus, F is deadweight loss

The graph below depicts a tax placed on a good or service. Which of the answers below is correct?

A is tax revenue, B is consumer surplus, C is producer surplus, and E is deadweight loss.

When several hurricanes hit Florida in 2004, several local governments-imposed price controls that prevented sellers from raising their prices for badly needed products like plywood and generators. In the areas where the controls were imposed, they resulted in

A reduced availability of these badly needed products

If the market for a movie tickets is In equilibrium, with a price of $10, and the government imposes a price ceiling of $8, the result will be...

A shortage of movie tickets

Which of the following is the best description of the effects of an increase in the supply of bread?

Bread prices will fall, and bread sales will rise

If the price of chicken feed (which is fed to chickens) goes up, which of the following will happen in the market for chicken sandwiches?

Supply will shift to the left, and price will rise.

The opportunity cost for you to prepare a decent meal is one hour of work, which would earn you $10. The opportunity cost for Chef Enzo to prepare a decent meal is five minutes of work, which would earn him $2. Which of the following terms of trade would benefit you and Chef Enzo?

Chef Enzo prepares a meal for you for $8

Which of the following goods best fits the assumptions underlying perfect competition?

Common wheat

The table below shows possible combinations of two goods, pickles, and ice cream, produced by two countries, vinegar land and Cowistan.

Cowistan has a comparative advantage in ice cream, and vinegarland has a comparative advantage in pickles

If the surgeon general announces that wearing shoes is bad for your posture, which of the following will occur?

Demand for shoes will shift to the left.

Here's a typical exam question: Suppose the market for wheat is in equilibrium, with firms earning zero economic profit. Scientists discover that eating lots of carbohydrates is actually good for you, and everyone begins eating a lot more bread. Which of the following will occur?

Demand for wheat rises, driving the price up, and causing firms to enjoy positive economic profits.

The shutdown rule implies that only the Marginal Cost Curve above Average Variable Costs is relevant. This section of the Marginal Cost Curve is upward sloping, and the Equi-marginal Principle means that as price rises, the quantity of output a firm produces will rise. The relationship between price and quantity produced is known as

The Law of Supply

Suppose it is 2,500 B.C.E. and the market for wheat in Egypt is in equilibrium. Two things then happen at the same time. First, the Nile fails to flood that year, so it does not deliver vital nutrients to the land around the river. Second, the Pharaoh imposes a tax of one senyu per bushel on wheat, to be paid by consumers. Which of the following is correct?

The price is indeterminate and quantity falls.

Suppose the administration of FSU decides to fire all advisors and administrators, leaving only faculty, cleaning staff, and support staff, and by doing so it manages to cut costs significantly. The price of one year's tuition at FSU falls from $6,500 to $4,000. Which of the following will occur, ceteris paribus?

The quantity of students who choose to attend FSU will rise

For every hour you spend studying for your economics exam, you will improve your grade by 3 points. For every hour you spend studying for your Physics exam, you will improve your grade by 4 points. For every hour your friend Albert spends studying for his economics exam, his grade will improve by 8 points. For every hour he spends studying for his physics exam, his grade will improve by 16 points. Which of the following is correct?

Your opportunity cost of studying enough to improve your grade on your economics exam by 1 point is 1 1/3 points on your physics exam, and you have a comparative advantage in economics.

Which of the following would shift the supply of milk to the left?

a disease kills many dairy cows

The attached graph depicts the market for socks. If a price ceiling is imposed at $6 per pair, which of the following will occur?

a shortage of 4 units

Of the following goods, which is likely to have the most elastic demand?

candy