Micro Final

Tax Incidence refers to:

Who really pays the tax

Marge has spent her entire budget on milk and cookies. The last glass of milk provided Marge with 10 additional utils, and the last cookie provided her with 25 additional utils. The price of a cookie is twice the price of a glass of milk. Assuming that diminishing marginal utility applies to both goods, Marge should consume _____ milk and _____ cookies.

less; more

In one hour, the United States can produce 25 tons of steel or 250 automobiles. In one hour, Japan can produce 30 tons of steel or 275 automobiles. This information implies that:

the United States has a comparative advantage in the production of automobiles.

A perfectly price-inelastic demand curve is:

vertical.

Taken collectively, people in nations that engage in international trade are NOT likely to:

be made worse off.

Producers may supply a good with inefficiently high quality if the government imposes a:

binding price floor.

(Figure: The Market for Hybrid Cars) Use Figure: The Market for Hybrid Cars. What area represents deadweight loss if there is a binding price floor at P1?

c + e

If demand and supply are both very elastic, a decrease in the rate of an excise tax will likely:

increase government revenue.

A _____ tax takes a larger share of the income of high-income taxpayers than of low-income taxpayers.

progressive

Other things being equal, the price elasticity of demand for a product will be lower:

if there are few or no substitutes available.

(Figure and Table: Variable, Fixed, and Total Costs) Use Figure and Table: Variable, Fixed, and Total Costs. When 51 bushels of wheat is produced, the average fixed cost is _____, average variable cost is _____, and average total cost is _____.

$7.84; $11.76; $19.60

John's accountant tells him that he made a profit of $43,002 running a pottery studio in Orlando. John's wife, an economist, claims John lost $43,002 running his pottery studio. This means his wife is claiming that he incurred _____ in _____ costs.

$86,004; implicit

(Figure: The Demand for Shirts) Use Figure: The Demand for Shirts. At a price of $30, total revenue is _____, and at a price of $10, total revenue is _____.

$9,000; $5,000

(Figure: The Market for Oranges in South Africa) Use Figure: The Market for Oranges in South Africa. In autarky, the price of oranges in South Africa is P1. When the economy is opened to trade, the price falls to PW. South Africa will _____ oranges, and the volume of trade will equal _____.

import; CT - QT

It is very difficult for Julia to find inexpensive inputs for her business. Because of this, we predict that Julia'sprice elasticity of supply is:

inelastic.

An economic model:

is a simplified version of reality used to understand real-world economic conditions.

When Aishe's Bar-B-Que produces 10 pork sandwiches, the total cost is $5. When 11 pork sandwiches are produced, the total cost rises to $6. From this we know that the marginal cost of the eleventh pork sandwich:

is greater than the average cost of 11 pork sandwiches.

If a good is very inexpensive but is a necessity, you predict that demand for the good:

is price-inelastic.

A price ceiling will have NO immediate effect if:

it is set above the equilibrium price.

According to the profit-maximizing principle of marginal analysis, if the marginal benefit is _____ the marginal cost, _____.

less than; an activity should be reduced

The relation between an individual's consumption bundle and her satisfaction is called a _____ function.

utility

In economic markets, a quota is a(n):

upper limit on quantity.

A new fast-food restaurant offered a prize—a free meal (valued at $5) each week for a year—to its first 100 customers. Ramona camped out for 48 hours before the opening to be one of the first 100 customers, and she successfully obtained the prize. The cost to Ramona of obtaining the "free meal a week for a year" prize was:

whatever else she would have done with the 48 hours.

If the price of a good rises along an upward-sloping supply curve, then producer surplus:

will increase.

You can spend $100 on either a new economics textbook or a new tablet computer. If you choose to buy the new economics textbook, the opportunity cost is:

your enjoyment of the new tablet computer.

Pauli's Pizza offers one slice for $2, two slices for $3.50, three slices for $4.50, and four slices for $5.00. The marginal cost of the third slice is:

$1.

(Table: Competitive Market for Good Z) Use Table: Competitive Market for Good Z. The equilibrium price and quantity in this market are, respectively:

$10 and 30 units

(Figure: The Marginal Benefit Curve) Use Figure: The Marginal Benefit Curve. The total benefit of mowing four lawns is approximately:

$114.

(Table: Consumer Surplus) Use Table: Consumer Surplus. Assume that each student wants to buy one ticket. If the price of a ticket to see The Nutty Nutcrackeris $50, Narum's consumer surplus is:

$15.

(Figure and Table: The Market for Taxi Rides) Use Figure and Table: The Market for Taxi Rides. The figure represents a competitive market for taxi rides. If the government imposes an excise tax of $2 per ride (causing the supply curve to shift upward by that amount), then the government will collect tax revenues of _____, BUT the tax will cause a _____ deadweight loss to society.

$16 million; $2 million

(Figure: The Market for SUVs) Use Figure: The Market for SUVs. If the government imposes a $60,000 tax on SUVs(collected from the producers), the price of SUVs will rise to _____ and the government will collect _____.

$160,000; $120 million

(Figure: Monthly Supply of Bread) The figure Monthly Supply of Bread represents the monthly supply of bread at a local bakery. At $3 per loaf, the bakery produces 120 loaves per month. The producer surplus received by this bakery is equal to:

$180.

(Table: Total Cost Data) Use Table: Total Cost Data. What is the total variable cost for this bicycle firm when the firm produces 5 bicycles?

$190

(Figure: Wireless Mouse Market) Use the graph to calculate consumer surplus when the market is at equilibrium.

$2,000

(Figure: The Market for Clams) Use Figure: The Market for Clams. The government imposes a quota limiting sales of clams to 1,000 pounds. According to the figure, the quota rent per pound in this case is:

$2.50.

(Table: Consumer Surplus) Use Table: Consumer Surplus. Assume that each student wants to buy one ticket. If the price of a ticket to see The Nutty Nutcrackeris $75 and there is no other market for tickets, the total consumer surplus for the five students is:

$40.

(Figure: The Shrimp Market) Use Figure: The Shrimp Market. If the government wants to limit shrimp sales to 500 pounds, it can impose a _____ excise tax on sellers, and the total tax revenue generated will be _____.

$5; $2,500

(Scenario: Accounting and Economic Profit) Use Scenario: Accounting and Economic Profit. The economic profit of Wang's Wicker Furniture Store is: Scenario: Accounting and Economic Profit Rather than put the $100,000 that his grandmother left him in a mutual fund that earns 5% each year, Tommy Wang quit his job, which paid $60,000 per year, and started Wang's Wicker Furniture Store. He rented a showroom for $20,000 for the year, purchased $60,000 in wicker furniture, and incurred costs of $40,000 for sales help and advertising. In his first year, his revenue was $150,000.

-$35,000.

(Table: The Utility of Pecan Rolls) Use Table: The Utility of Pecan Rolls. The marginal utility for the fifth roll is:

0

Mark and Julie are going to sell brownies and cookies for their third annual fundraiser bake sale. In one day, Mark can make 40 brownies or 20 cookies, and Julie can make 15 brownies or 15 cookies. What is Mark's opportunity cost to produce one brownie?

0.5 cookie

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 190 bags to 210 bags, then the price elasticity of demand (by the midpoint method) is:

0.5.

Table: Price Elasticity) Use Table: Price Elasticity. What is the price elasticity of demand (using the midpoint formula) between $1.75 and $1.50?

1.86

(Table: Optimal Choice of Milk and Honey) Use Table: Optimal Choice of Milk and Honey. The price of milk is $2 per gallon, and the price of honey is $4 per jar. Hal's income is $16. Assuming that Hal spends all of his income on honey and milk, the combination of milk and honey that will maximize his total utility is _____ jars of honey and _____ gallons of milk.

2; 4

Faruq spends all of his income on tacos and milkshakes. His income is $100, the price of tacos is $10, and the price of milkshakes is $2. Put tacos on the horizontal axis and milkshakes on the vertical axis. If Faruq spends all of his income, the opportunity cost of one taco equals _____ milkshakes.

5

(Figure: Omar's Production Possibilities) Use Figure: Omar's Production Possibilities. The opportunity cost for Tom to move from point A on the curve to point B is:

5 coconuts.

(Figure: The Demand and Supply of Wheat) Use Figure: The Demand and Supply of Wheat. What is the equilibrium quantity in this wheat market each period?

6,000 bushels

(Figure: Omar's Production Possibilities) Use Figure: Omar's Production Possibilities. Which point or points represent(s) a combination of coconuts and fish that is efficient in production?

A and B

(Figure: The Market for iPhones) Use Figure: The Market for iPhones. Assume that PA is the autarky price, PW is the world price, and D and S represent domestic demand and supply, respectively. The loss of producer surplus when the market moves from autarky to free trade equals the area:

B.

(Figure: Budget Lines for Tea and Scones) Use Figure: Budget Lines for Tea and Scones. For months now, Agnes has had $20 per month to spend on tea and scones. The price of each cup of tea and each scone has been $1. Which chart shows what will happen to her budget line if the price of a scone rises to $2?

Chart B

(Figure: Quantity Controls) Use Figure: Quantity Controls. If the government decides to restrict the quantity sold to 100, which statement is FALSE?

Consumer surplus is maximized.

(Figure: The Market for Laptops) Use Figure: The Market for Laptops. Assume that S and D are the domestic supply and demand curves and the world price is PW. Identify the area of deadweight loss when a tariff raises the domestic price from the world price to PT.

D + F

If two goods are complementary, we can assume that the cross-price elasticity of demand for these goods is:

Less than 0

In economics, maximization of the total profit of an activity occurs when:

MB = MC.

(Table: Bongos and Frisbees) Use Table: Bongos and Frisbees. Bill and Mickey make bongos and Frisbees. Who has the comparative advantage in producing Frisbees?

Mickey

Rapidly increasing health costs have been a major political concern since at least 1992. Suppose the government sets the maximum price for a normal doctor visit at $20 to control rising health costs but the current market price is $40. What is MOST likely to happen?

More people will try to visit the doctor, but there will be fewer doctors willing to see patients at that price.

(Figure: Shifts in Demand and Supply II) Use Figure: Shifts in Demand and Supply II. The figure shows how supply and demand might shift in response to specific events. Suppose vast new oilfields are discovered offshore of California and gasoline prices fall. Which panel BEST describes how this will affect the market for sport utility vehicles, a complement in consumption to gasoline?

Panel A

(Figure: Shifts in Demand and Supply II) Use Figure: Shifts in Demand and Supply II. The graph shows how supply and demand might shift in response to specific events. Suppose scientists discover that eating pomegranates causes aging. Which panel BEST describes how this will affect the market for pomegranates?

Panel B

(Figure: Shifts in Demand and Supply II) Use Figure: Shifts in Demand and Supply II. The figure shows how supply and demand might shift in response to specific events. Suppose the technology for producing ethanol fuel improves. Which panel BEST describes how this will affect the market for ethanol?

Panel D

Which statement is TRUE concerning the relationship between efficiency and equity?

Policies designed to increase efficiency may decrease equity.

What is the difference between a shortage and scarcity?

Scarcity will almost always exist, but a shortage will exist only if the price is kept below the equilibrium level.

Which question BEST describes a "how much" decision?

Should I buy a third hot dog?

Which situation would most likely cause a DECREASE in consumer surplus in the toy market?

The cost of shipping increases because of higher oil prices.

(Figure: The Market for Roses) Use Figure: The Market for Roses. Assume that PA is the autarky price and PW is the world price. Consumer surplus with international trade would be area:

W + X + Z

If chicken and beef are substitutes, then a fall in the price of chicken will bring about:

a decrease in the demand for beef.

In the long run:

all inputs are variable.

Which factor will NOT cause an increase in demand for good X?

an increase in income if good X is a normal good

Which factor is NOT a determinant of supply?

consumer tastes

Economists generally believe that a country should specialize in the production of a good or service if the:

country can produce the product while forgoing fewer alternative products than any other country.

(Figure: The Market for Blue Jeans) Use Figure: The Market for Blue Jeans. The government recently levied a $10 tax on the producers of blue jeans. What area or areas in the graph identify the loss of producer surplus due to the tax?

d + e

Diminishing marginal returns occur when

each additional unit of a variable factor adds less to total output than the previous unit.

(Figure: Consumer and Capital Goods) Use Figure: Consumer and Capital Goods. The movement from curve 1 to curve 2 indicates:

economic growth.

A "how much" decision is BEST made by comparing the _____ of an action to the _____ of that action.

explicit costs; implicit costs

A factor of production whose quantity CANNOT be changed in the short run is a(n) _____ factor of production.

fixed

A consumer's spending is restricted because of:

his or her budget constraint.

The market for corn in Kansas is considered to be competitive. This means there are _____ buyers and _____ sellers of corn in Kansas.

many; many

The _____ curve shows the additional cost of producing each additional unit of output.

marginal cost

When milk consumption decreased, a survey firm wanted to know what was going on, so they interviewed people and found that people thought that rising milk prices were making it hard to justify their milk purchases. This suggests that what is going on is a:

movement along the demand curve for milk.

Well-functioning markets allow:

mutually beneficial trades to take place.

(Figure: Production Possibilities and Circular-Flow Diagram) Use Figure: Production Possibilities and Circular-Flow Diagram. Assume the two figures represent the same economy. Suppose that in the circular-flow diagram there is a significant decrease in the amount of labor flowing to the firms that produce coconuts. If all other variables remain unchanged, this adjustment in the economy would be BEST represented in the production possibilities figure by a move from point A toward:

point C (a decrease in coconut production).

Policies that limit imports, usually to insulate domestic producers from foreign competition, are known as:

trade protection.

The dictator of a small country restricts the price of cars to an amount less than or equal to $1,200 (a price below the equilibrium price for cars). Such a policy would set a:

price ceiling.

(Figure: Demand for Notebook Computers) Use Figure: The Demand for Notebook Computers. The change in total revenue resulting from a change in price from Pto Tsuggests that demand is:

price-elastic.

The _____ apples will decrease when apple prices rise.

quantity demanded of

The university president believes that increasing student tuition by 5% will increase revenues.If the president is correct that revenues will increase, then the tuition increase will _____ the number of students enrolling by _____%.

reduce; less than 5

The price elasticity of demand measures the:

responsiveness of the change in quantity demanded to a change in price.

If a nation exports a good when the economy is opened to trade, relative to the autarky price, the domestic price of the good will _____ and domestic consumption will _____.

rise; fall

If a country imposes a tariff on imported shoes, we expect the domestic price of shoes to _____, domestic consumption to _____, and domestic production to _____.

rise; fall; rise

The larger the output, the more output over which fixed cost is distributed. Called the _____ effect, this leads to a _____ average _____ cost as output rises.

spreading; lower; fixed

The _____ tomatoes will decrease if fertilizer prices rise.

supply of

Figure the Market for Butter If a government price floor of $1.20 is imposed on this market, an inefficiency will result in the form of a _____ of _____ million pounds of butter.

surplus; 4.5

(Figure: The Demand and Supply of Wheat) Use Figure: The Demand and Supply of Wheat. If a price of $10 temporarily exists in this market, a _____ of _____ bushels per period will result.

surplus; 8,000

China, which is labor-abundant, has a comparative advantage in clothing production, which is labor-intensive. Which model explains this pattern of comparative advantage?

the Heckscher-Ohlin model

(Table: Wheat and Aluminum) Use Table: Wheat and Aluminum. The United States and Germany can produce both wheat and aluminum. The table shows the maximum annual output combinations of wheat and aluminum that can be produced. Based on the table:

the United States has a comparative advantage in wheat and an absolute advantage in wheat.

You own a small deli that sells sandwiches, salads, and soup. Which factor is an implicit cost of the business?

the job offer you did not accept at a local catering service

At the optimal consumption bundle:

the marginal utility per dollar spent is equalized across all goods consumed.

A production possibility frontier that is a straight line sloping down from left to right suggests that:

the opportunity costs of the products are constant

(Table: Producer Surplus and PhantomTickets) The table Producer Surplus and PhantomTickets shows the minimum price at which each of the students is willing to sell a ticket to Phantom of the Opera. Assume that each student has only one ticket to sell. Given the information in the table, if these students can sell their Phantomtickets for only $5, then:

the total producer surplus for the five students will be $4

Although freshwater is very abundant in most places, it is scarce because:

there is not enough of it to meet all needs.

(Table: Long-Run Total Cost) Use Table: Long-Run Total Cost. This soybean grower receives constant returns to scale over the _____ and _____ bushels.

third; fourth

Profit is the difference between _____ and _____.

total revenues; total costs