Microeconmics Exam 2 Chap 5-11

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is it possible for accounting profit to be positive and economic profit to be negative?

Yes, this could occur if explicit costs were modest and implicit costs were high.

An individual or a firm can internalize an externality by​ ___________.

paying the cost of the externality.

An example of a proportional tax is the​ ___________

Medicare Tax

All firms in a perfectly competitive market are said to be ____

Price Takers

A non market price imposition is ____

Price control

Given that there are costs involved with the government intervention in an economy, governments still choose to intervene in market to _____

address externalizes

A linear PPC would show _____, and a PPC that is curved away from the origin would show ____

constant opportunity costs increasing opportunity costs

As a consequence of the current short-run conditions in this industry, it may be expected that firms will ____ this market

enter

Given this information, the senator's comment is _____, since these types of costs ____ affect current and future decisions

flawed, should not

Because the nonprofit hospitals of may bury minimize the long run average cost of treating patients,they operate at the patient level (that is, the size) which corresponds to the average cost curve's ____ point

minimum

Paternalism is the view that​ ___________.

people do not always know what is best for​ them, and government should encourage them to make the right choices.

Imagine you are a buyer ina double oral auction with a reservation value of $16 and there is a seller asking for $10. If you accept this offer you will gain ___

$6

How does a consumer's budget set differ from his budget constraint?

A budget set refers to all of the possible bundles of foods and services a consumer can purchase, while a budget constant is limited tot eh bundles he ca purchase using all of his income.

The "hundred billion dollars" that Senator Nelson is referring to known as _____

A sunk cost

For​ Joe, which production points are​ efficient? ​(Check all that apply.​)

A, B

Social surplus is maximized when the

Al of the abov

How do economic profits and losses allocate resources in an economy?

All of the above

Which of the following equations represents the​ firm's average variable​ cost?

B. 0.1q.

Based on your understand of how the invisible hand works, what do you think should bed done to correct this problem

Cab fares should be allowed to increase

In a perfectly competitive market, a seller ________ choose to raise the price of its good since all sellers in the market produce________, so raising the price would result in ________

Cannot, identical Goods Losing all its customer

Which of the following is not an important determinant of wage inequality within an​ economy?

Differences in connections to influential people.

under which of the following examples is it likely that the accounting profit is positive and the economic profit is negative?

If you open an amusement park in the middle of New York City

Now suppose the apartment builiding passes a rule that says residents are not allowed to play music their neighbors can hear if any of the neighbors object. As​ before, Jones and Smith can bargain at zero cost. According to the coase Theorem, ____ to compensate for the ____

Jones will pay $60 to Smith Negative externality

Which of the following is not an​ externality?

Jordan has lung cancer from smoking cigarettes.

What are the types of goods that are causing the shift in the balance of imports and exports in the United​ States?

Manufactured goods have played an important role in the​ shift, even though the number of manufactured goods has increased.

Is the entire burden of the tax always borne by those on whom it is​ imposed?

Not​ necessarily, since the burden of the tax depends on price elasticity.

Which of the following shows the arc elasticity method of calculating the price elasticity of demand?

Q2-Q1/(Q2+Q1)/2/P2-P1/(P2+P1)/2

This problem tell us that one if the sources of economies of scale is ____

Specialization

The figure at right shows a production possibilities curve LOADING... ​(PPC) for Joe. He can spend his time making pizzas or chocolate cakes. For​ Joe, which production points are​ attainable? ​(Check all that apply.​)

a, b, d, e

Suppose a CEO of a firm that manufactures surgical equipment has a production plant in Alabama where it employs highly skilled labor. The CEO of the firm is considering moving its production facilities from Alabama to Guangzhou in China in an attempt to lower labor costs. When the CEO compares wages in China and in the United​ States, she notices that the average wage in China is significantly lower than the average American wage. What factors would the textbook argue the CEO should consider when she decides whether or not to move production to​ China? ​(Check all that apply​.)

all expect "china's record on human rights"

Suppose that an individual who buys only wine ​(W​) and cheese ​(C​) is currently maximizing his total benefits. From​ this, we know​ that: MB Subscript Upper W divided by Upper P Subscript Upper W equals MB Subscript Upper C divided by Upper P Subscript Upper C MBW/PW = MBC/PC Now suppose the price of wine wine ​falls, all else constant. From the​ "equal bang for the​ buck" rule, we can predict that he responds by increasing his consumption of wine . Given the​ consumer's response to a decrease in the price of wine wine​, we can say that the solution of the​ buyer's problem​ ___________.

all of the above

social surplus is maximized when the _______

all of the above

At this movement of firms occurs, comic profits for the typical firm will ____

approach zero

Is it true that a country needs to have an absolute advantage in the production of a good in order to benefit from trade in that​ good? Countries that do not have an absolute advantage in the production of a good ___ benefit from trade

can

Externalities are called market failures because they​ ___________.

cause markets to produce suboptimal social outcomes.

You are the County Commissioner of Hazard County. There is a popular lake for fishing located in eastern Hazard County on​ county-owned park​ land, which is open to the public.​ Recently, the Reed brothers have started using large nets to catch large amounts of​ fish, severely depleting the amount of fish left for other fishermen. The fish in the lake are an example of a _____ Common pool resources are ___ in rivalry in ___ i excitability THe over fishing by the Reed brothers is an example of ____ What approach would be the lest effective way to deal with the over fishing problem

common pool resources high, low tragedy of the commons limit who is allowed to fish in the lake

Which of the following is a cost associated with government intervention in an economic​ system?

corruption

How will the invisible hand move corn prices in response to each of the following: A weather pattern that produces a bumper corn crop This will ____ corn prices by shifting the supply curve ___

decrease, rightward

When economist of a dead wight loss, they are referring to a ___ in ___ caused by a market distortion

decrease,social surplus

Consumer sovereignty suggests that​ ____________.

government should not interfere with consumer choices.

This price adjustment would eliminate the mismatch by ___ market participants to change their behavior

incentivizing

An example of a progressive tax is the​ __________.

income tax

A change in consumer tastes away from hot dogs toward corn dogs This will ___ corn prices by shifting the demand curve for corn ____

increase, rightward

A change in consumer tastes away from hot dogs toward corn dogs This will ___ corn prices by shifting the demand curve for corn _____

increase, rightward

A rise in the price of what THis will ___ corn prices by shifting the demand curve for corn ____

increase, rightward

A rise in the price of wheat This will ___ corn prices by shifting the demand curve for corn ____

increase, rightward

According to your graph, when some sellers exit a competitive market, the equilibrium price ____, and the equilibrium quantity ____

increases, decreases

The substitution effect of a decrease in the price of one good always ___ the amount of that good in the individuals new consumption choice (bundle) and ___ the amount of the other good

increases, decreases

Because this firm is competitive and has no control over its​ product's price, the declining values for VMPL are a result of diminishing

marginal productivity

If the price of the good decreases to $4, the firm now experiences a ___ economic profit

negative

Producer surplus is the difference between the ___ and the _____

price consumers pay, supply curve

A non market price imposition is a ___

price control

An example of a regressive tax is the​ ___________.

property tax

this lump-sum income tax is a ____ tax

regressive

The primary types of tax systems are​ ___________. ​(Check all that apply​.)

regressive, progressive, proportional

Social surplus is the​ ____________.

sum of consumer surplus and producer surplus

How does a​ command-and-control policy differ from a​ market-based policy? With a​ command-and-control policy,_____. while with a market-based policy, ____

the government directly regulates the allocation of resources the government provides incentives fro private organizations to internalize the externalize

A firm will employ physical capital until​ ____________.

the value of marginal product of capital (VMPK) equals the rental price of capital

If the imposed price PC were removed, market forces would rectify the mismatch between quantity demanded and quantity supplied by pushing the price ____

upward

Tax incidence refers to​ ____________.

who bears the burden of a tax

In the case of the​ profit-maximizing, perfectly competitive hospitals in​ Springfield, profits and losses and thus the movement of firms will in the long run result in _____ economic profits

zero

The associated income effect of a decrease of one good ____ the quantity of that good and _____ the quantity of the other food in the quantities of the two goods in the new consumption choice cannot simultaneously ___ as a result of the income effect

may increase or decrease, may increase or decrease, decrease

The figure on the right shows the typical firm in a perfectly competitive industry. Equilibrium in the market is currently yielding a price of $ 70$ AT this price, the typical firm earns a ___ economic profit

positive

The Coase Theorem states that​ ____________

private bargaining will result in an efficient allocation of resources.

Classify the following goods and services as private​ goods, common pool​ resources, club​ goods, or public goods. Health insurance is a ___ Radio spectrum is a ____ A video on YouTube is a ___ A mosquito control program in a city is a ___ A library collection of e-books is a ____

private good common pool resource public good public good club good

The government could encourage the production of the efficient number of ITNs by​ ____________.

providing a subsidy fr ITNs

According to the Law of Diminishing​ Returns, ____________.

the marginal productivity of an additional unit of labor eventually decreases as the quantity of labor increases.

A production function shows​ ____________.

the number of workers employed and the corresponding output levels that will be produced.

a consumers satisfaction is maximize when the marginal benefit from the last dollar she spent on one good is equal to the marginal benefit from the last dollar she pent on another good because_____

the reality of diminish marginal benefits assures that any shift in consumption toward either good must necessarily make her worse off

The Coase Theorem will will breakdown when​ ____________. ​(select all that​ apply)

there are a large number of agents., when property rights are not clearly defined., transaction costs become high.

A government would want to be on this curve where​ ___________.

there is no correct answer to this​ question, as the answer depends on a​ government's value judgments.

This price adjustment would eliminate the mismatch by ___ market participants to change their behavior

incentive's

When the ATC curve is decreasing, we know that the MC curve is ________, and when the ATC curve is increasing, we know that MC is _______

Below the ATC curve, Above the ATC Curve

If you are the only buyer, and you know that the lowest ask price is $3, should you accept this offer?

Both A and C are correct

In the united states, __ gain from trade In Ecuador,___ gain from trade As a whole, does the United States or Ecuador benefit from a trade The gain in total surplus for the united States is ____ the gain in total surplus for Ecuador is ___

Buyers Sellers both countries benefit from trade e + f c

In the diagram on the right, the consumer surplus in the maret is represented by are ___

C

Calculate the opportunity costs of producing fish and coconuts in Nearway and​ Farway, and then complete the table below. ​(Round your responses to two decimal places.​)

Nearway-- 2.00 cocunts/ 0.50 Fish Farway-- 1.50 coconuts/ 0.67 fish

A point B, the firm experiences ___

Constant returns to scale

At pint A, the firm experinces ____

Economies of scale

According to the data, ___ has an absolute advantage in making either type of sandwich

Gonzalo

Government spending in the United States has grown over time and now accounts for more than 40 percent of U.S. national income. Does this mean that government has been consistently running a budget​ deficit?

No, government deficits depend upon spending and tax revenue.

The price elasticity of demand shows the sensitivity of consumers's purchases to a ______ change in the good's price. In the market for backpacks, suppose Green's price of elasticity of demand is 0.4, Smith's price of elasticity is 1.4, and the price of elasticity of all the other consumers is greater than 0.4 but less than 1.4. Could the market price elasticity be less than 0.4 or greater than 1.4?

No, it must lie between 0.4 and 1.4

in the market for sneakers, suppose Green's price elasticity of emand is .6, smith's price elastic is 1.6, and the Price elasticity of all the other consumers is greater than 0.6 but less than 1.6 Could the market price elasticity be less than 0.6 or greater than 1.6?

No, it must lie between 0.6 and 1.6

should you complete the apartment building?

No, the reaming cost to build is 500,000 and you can only expect to earn 499.950; you will ignore the 100,000 spent since it is a sunk cost

Which of the following are necessary ingredients to the​ buyer's problem?

Price of goods and services, ​Consumer's tastes and preferences, Amount of money the consumer has to spend.

Which of the following equations calculates the profits of a​ firm?

Total Revenues - Total Costs

this will ___ corn price by shifting the supply curve for corn ___

decrease, rightward

When the VMPL is plotted in a diagram with the number of workers measured along the horizontal​ axis, the resulting curve​ (connecting the plotted​ points) is the​ firm's

demand for labor

At point​ C, the firm experiences

dis economies of scale

When the firm's VMPL is plotted in a diagram with the quantity if labor measured along the horizontal axis, the resulting curve will be ____ and constitutes the firms ____

downward-sloping demand curve for labor

if demand shifts to the left (decreases), the last firm that entered ______

earns negative economic profits and so exits the market

Suppose a country has 100 westerners and 100 easterners. A westerner can produce either 6 units of food or 2 units of national​ defense; an easterner can produce either 2 units of food or 1 unit of national defense. According to the data, ___ have comparative advantage in the production of defense

easterners

This drop in price and corresponding change in the firms profit status ____

has no bearing on the market's characterization as competitive, since nonzero values for economic profit reflect short-run events

Hardware stores charge higher prices for snow shovels after a big snow storm What role do prices play in the snow shovel market?

it would incentive distributors to shop more snow shovels into the are to met the increased demand

in the case of the profit-maximizing, perfectly competitive hospitals in Springfield profits and losses and thus the movement of firms will in the long run result in ___ economic profits

zero

The last firm to enter earn____

zero economic profits

What approach would be the least effective way to deal with free​ riders?

Exclude citizens from benefiting from the good or service

Which nation has a comparative advantage in the production of each​ good? _____ a comparative advantage in the production of fish ___ a comparative advantage in the production of coconuts

Farway has Nearway has

The terms of trade are ___ coconuts per fish Who befits from trade? Which nation received the better deal in this trade Would nearway and Farway ever trade 120 coconuts for 40 fish

1.60 Both nation benefit from trade Nearway received the better deal No, because while Farway gains from this trade, Nearway does not

Suppose the market for​ T-shirts in the country of Argonia is perfectly​ competitive, and the price of a​ T-shirt is​ $20. A producer in this market has the following total cost and marginal cost​ functions: TC left parenthesis q right parenthesis equals 500 plus 0.1 q squaredTC(q)=500+0.1q2 MC left parenthesis q right parenthesis equals 0.2 qMC(q)=0.2q What part of the total cost function represents fixed​ costs?

500

from the given information, can you conclude whether the firm is operating in a competitive market.

A and B only

Human capital is the​ __________.

A and B only.

The value of marginal product of labor​ (VMPL) is​ ____________.

A and C only.

What would have to be true for the analysis claim (that Starbucks revenues would not fall) to hold?

A percentage on the part of customers that few good substitutes exist for Starbucks coffee. Starbucks beverages will represent a relatively small fraction of peoples budget share. Avery limited time horizon on the part of those analysts that expected no adverse revenue effects.

Suppose this country has decided it wants to produce 60 unit of defense In this case, the country will have more food to consume if the ___ produced these 60 units of defense. You should have anticipated this answer because____

Easterners The easterners have a comparative advantage in the production of defense

New York levies the highest cigarette tax in the country—​$5.85 per pack. Other states in the United States impose taxes that are much lower. The state of Virginia levies a tax of 30 cents per​ pack, which is the second lowest after Missouri. How would this explain the thriving black market for cigarettes in New​ York?

It is more profitable to sell cigarettes on the black market in New York.

Considering comparative advantage, ___ has a comparative advantage in the production of good A and ___ has a comparative advantage in the production of good B

Taiwan, Korea

If management sought to transfer 10 thousand units of Bet's production o Alpha. the firm's overall profits would____ since for those 10 thousand additional units _____

decrease, MCBeta < MCAlpha

Charley spends all of his income on soft drinks and pizza. Suppose he is currently buying these products in amounts such that his marginal benefit from an additional soft drink is $ 110 $110 and his marginal benefit from an additional slice of pizza is $ 110 $110. If the price of a soft drink is $ 5 $5 and the price of a slice of pizza is $ 6 $6​, is Charley maximizing his total​ benefits?

​No, he should shift consumption toward soft drinks soft drinks and away from pizza pizza to maximize total benefits

This long-run profit level for Springfield's hospitals means that they will end up operating at the patient level (that is , the size) which corresponds to the average cost curve's ____ point

Minimum

Are all efficient outcomes also equitable? Explain

There is really no definitive answer to this question since issues surrounding efficiency and equity are the domain of normative economics, where subjective value judgement are made/

What is the difference between accounting profit and economic profit?

Economic profit subtract both explicit and implicit costs from total revenue, while accounting profit only subtracts explicit costs

Georgina, an economics student, notices that the price of oil has been increasing steadily. She also observes that the total consumption of oil has actually increased. Georgina concludes that this is an exception to the Law of Demand. Do you agree?

No, she is mistakenly assuming a stationary demand curve when most likely she is observing changes in the equilibrium caused by an increasing quantity supplied and shifting demand.

The price of elasticity of demand shows the sensitivity of consumers purchases to ___ change in the good's price

a percentage

An increase in the number of demanders in the corn market This will ___corn prices by shifting the demand curve for corn ____

increase, rightward

For a consumer with a given level of income, the combinations of goods for the budget constraint will be ___ than for the budget set.

lower

This​ long-run profit level for​ Springfield's hospitals means that they will end up operating at the patient level​ (that is, the​ size), which corresponds to the average cost​ curve's _____ point

minimum

Compensating wages are the wage premiums​ ___________.

paid to attract workers to occupations to otherwise undesirable jobs.

If the total costs of production increases, then the average total cost curve ______, the average variable cost curve _____, and the marginal cost curve _______

shifts up, remains unchanged, remains unchanged

in the figure on the right, the imposition of price Pc results in a ____ in the market

shortage

int he figure on the right, the imposition of price PC results in a ___ in the market

shortage

A production possibilities curve​ (PPC) ___________.

shows the realtinship between the maximum production of one good for a given level of production of another good.

Suppose Joe has a comparative advantage in making pizzas and Samantha has a comparative advantage in making chocolate cakes. Both individuals will specialize and trade if the exchange rate is favorable. Using the information in the table​ below, determine whether or not each person will trade at the terms of trade offered. if the terms of trade is 1 cake for 1 pizza, Joe ___ make the trade and Samantha ___ make the trade. The term of trade at 1 cake for 1 pizza____ FOr both Joe and Samantha to beefit equally from trading, the terms of trade would have to be ____ cakes for 1 pizza. If the terms of trade is 2.5 pizzas for 1 cake, Joe ___ make the trade and Samantha ___ make the trade.

will, will favors Samantha 1.25 Joe will not, Samantha Will

In an attempt to help the​ poor, India announced a policy to implement price ceilings on several essential drugs in December 2012. Some industry​ analysts, however, claimed that this would actually end up hurting the poor more than helping them. Do you think this is a​ possibility? Explain your answer.

​Yes, it might hurt the poor by creating a shortage.

Suppose the apartment building does not have any rules about noise. Jones and Smith can bargain at zero cost. According to the Coase Theorem, ____ to compensate for the ___

Jone will pay $0 to smith Negativity externality

According to the figure, ___ has an absolute advantage in the production of good A and ___ has an absolute advantage in the production of good B

Korea, Korea

Because the nonprofit hospitals of Maybury minimize the​ long-run average cost of treating​ patients, they operate at the patient level​ (that is, the​ size), which corresponds to the average cost​ curve's _____ point

Minimum

since everyone woe ants an Ipod obtains one, and everyone who wants to get rid of their ipod sells it at the price they wanted,is social surplus maximized in the market?

No, this trade arrangement yields social surplus since each participant trades at his or hr reservation value.

Suppose trades are arranged in this market such that everyone can make a trade without losing money.​ So, Madeline buys from Fiona at a price of​ $70, Katie buys from Matt at a price of​ $60, Sean buys from Adam at a price of​ $50, and so on. Since everyone who wants an iPod obtains​ one, and everyone who wants to get rid of their iPod sells it at the price they​ wanted, is social surplus maximized in the​ market?

No, this trade arrangement yields zero social surplus since each participant trades at his or her reservation value.

Producer surplus is the difference between the ____ and the ____

Price consumers pay, supply curve

Jones and Smith live in the same apartment building. Jones loves to play his opera recordings so loudly that Smith can hear them. Smith hates opera. Jones receives​ $100 worth of benefits from his music and Smith suffers​ $60 worth of damages. From an efficiency perspective, Jones ___ allowed to play his opera music

Should be

What is the problem with the argument that infant industries need to be protected from foreign​ competition?

Starting a company in isolation may deprive it of​ "technological spillovers" that its​ competitors, all located near one​ another, may enjoy.

Based on comparative advantage, who should make salami sandwiches and who should make turkey sandwiches ___ has a comparative advantage in making salami sandwiches ___ has a comparative advantage in making turkey sandwiches

Svetlana gonzalo

_____ occurs when​ people's preferences cause them to discriminate against a certain group. ____ occurs when expectations cause people to discriminate against a certain group. The owner of company that manufactures automobile part states that it will not hire gay or lesbian employees this is an example of ____

Tate-based discrimination statistical discrimination taste-based discrimination

social surplus is the ___

sum of consumer surplus and producer surplus

How do​ labor-saving technologies differ from​ labor-complementary technologies?

All of the above.

Why are there two different views on the effect of taxation on labor supply in the United​ States?

All of the above.

How does the​ labor-leisure trade-off determine the supply of​ labor?

An increase in the wage rate is an increase in the opportunity cost of​ leisure, and can therefore be expected to reduce the amount of leisure one wishes to consume. Choosing less leisure is equivalent to supplying more​ labor, thus yielding a positive relationship between the wage rate and the amount of labor supplied.

Rhino poaching is a serious problem in South​ Africa, where a large proportion of​ Africa's rhino population is found. The demand for rhino​ horns, used in traditional Chinese​ medicine, has increased the prices of rhino horns substantially. This has fueled an illegal market for rhino horns. What economic tools can be used to solve this​ problem? in this case, rhinos are best categorized as ___ The over hunting of rhinos is an example of ____ One possible economic solution to the over hunting of rhinos is to ___

Common pool resources the tragedy of the commons allow private conservation organizations to purchase the rhinos and their habitat

Which nation has an absolute advantage in the production of each​ good? ____ an absolute advantage in the production of fish ___ had a n absolute advantage in the production of coconuts

Farway has farway has

Do firms 1 and 2 experience economies of​ scale? Or do they experience dis economies of​ scale?

Firm 1 is experiencing economies of​ scale, while firm 2 is experiencing dis economies of scale.

How has the pattern of trade changed in the United States since​ 1960?

Imports have grown faster than​ exports, and the United States has become a net importer.

An increase in the number of demanders in the corn market This will ____ corn prices by shifting the demand curve for corn ____

Increase, rightward

according to your graph, when some sellers exit a competitive market, the equilibrium price ___ and the equilibrium unity ____

Increases, decreases

How would you depict the​ trade-off between equity and efficiency on a​ graph?

Inequality on one axis and social surplus on the other with a​ positively-sloped function.

The Internal Revenue Service defines the estate tax as a tax on your right to transfer property at your death. The fair market value of the estate is taken into account when levying the tax. Once the gross value of the tax is​ computed, certain deductions are allowed to arrive at the value of the taxable estate. What is the equity implication of imposing an estate​ tax? What is the efficiency implication of imposing an estate​ tax?

It is fair because it reduces inequality. It is inefficient because it reduces investment.

Consider the following statement: Given that burgers and fries are complementary goods, if the price of fries increases the demand for both goods will fall. IS this an accurate statement?

It is somewhat inaccurate. The increase in the price of fries will reduce the quantity demanded (not the demand) for fries, it will, however as the statement claims, reduce the demand for burgers

The figure on the right shows a firm's marginal and average costs of production. Te equilibrium price in this market is $5. At this price the firm is experiencing a ____ economic profit

Zero

When economists speak of a dead weight loss, they are referring to _____ in _____ caused by a market distortion

a decrease, social surplus

When determining which firms enter the market first, we look at _____

average total cost


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