Microeconomics Exam 2

5. (Figure 9-6) The size of the tariff on roses is

$1

21. Refer to Figure 10-2. Suppose that the production of plastic creates a social cost which is depicted in the graph above. What is the socially optimal quantity of plastic?

500 units

19. Figure 10-2. Suppose that the production of plastic creates a social cost which is depicted in the graph above. Without any government regulation, how much plastic will be produced?

650

10. Figure 9-1. In the absence of trade, total surplus in Guatemala is represented by the area_____.

A+B+C+D+F

2. If the government REMOVES a tax on a good, then the price paid by buyers will________.

Decrease, and the price received by sellers will increase.

9. Figure 9-1. When trade in coffee is allowed, consumer surplus in Guatemala _____.

Decreases by the area B+D

8. Figure 6-23 Which of the following is deadweight loss with the tax?

F+G

7. Tariffs and import quotas are different in the sense that tariffs raise revenue for the government, while import quotas do not raise revenue for the government.

It is a true statement

14. In a market economy, government intervention_____________.

may improve market outcomes in the presence of externalities

world price > domestic price

to export

Economic Profit

total revenue - (explicit costs + implicit costs)

Accounting Profit

total revenue - explicit costs

28. (Table 13-1) Which of the following is total fixed cost of this company?

$200

3. (Figure 9-4) In the absence of trade, the equilibrium price of calculators in Nicaragua is ______.

$12

5. Refer to Figure 6-23. Which of the following is the government's tax revenue?

$48

27. (Table 13-1) Which of the following is in Z? (Hint: Be careful about the changes in output)

$5

24. Raj opens up a lemonade stand for two hours. He spends $10 for ingredients and sells $60 worth of lemonade. In the same two hours, he could have mowed his neighbor's lawn for $40. Raj has an accounting profit of ____ and an economic profit of ____.

$50, $10

20. Figure 10-2. Suppose that the production of plastic creates a social cost which is depicted in the graph above. Without any government regulation, what price will the firm charge per unit of plastic?

$7.00

16. Figure 10-8. What is the equilibrium price in this market?

$8

26. (Table 13-1) Which of the following is in Y?

$8

17. Figure 10-8. What is the socially-optimal quantity of output in this market?

10 units

25. (Table 13-1) Which of the following is in X?

20 units

3. Refer to Figure 6-23. Total surplus WITHOUT any tax is measured by____.

A+B+C+E+F+G

13. Which of the following is true about the North American Free Trade Agreement (NAFTA)?

All of the above are true

15. The impact of one person's actions on the well-being of a bystander is called_____________.

An Externality

29. Which of the following is the marginal product of labor?

An increase in output obtained from a one unit increase in labor

2. (Figure 9-4) With trade, Nicaragua ________.

Imports 250 Calculators

Producer Surplus (PS)

Price received by sellers - Sellers cost

1. A tax levied on the sellers of a good shifts the

Supply curve upward (or to the left)

1. When a country allows trade and become an importer of a good, _______.

The gains of the winners exceed the losses of the losers

12. Which of the following arguments for restricting trade explain the scenario 1? Scenario 1: The U.S. can threaten to limit imports of French wine unless France lifts their quotas on American beef.

The protection-as-bargaining-chip argument

18. Figure 10-8. If the government wanted to tax or subsidize this good to achieve the socially-optimal level of output, it would ________.

introduce a subsidy of $4 per units

23. Jamar used to work as an office manager, earning $40,000 per year. He gave up that job to start a life-coaching business. In calculating the economic profit of his life-coaching business, the $40,000 income that he gave up is counted as part of the life-coaching business's

opportunity costs

11. When we assume that a particular country is small and imports goods and services from foreign countries, we are _______.

Assuming the country is a price taker in world markets and its actions do not affect the world price

6. Figure 6-23. Which of the following is the producer surplus WITHOUT the tax?

C+E+G

8. When Germany opens itself to world trade in coffee beans, the domestic price of coffee beans falls. Which of the following describes the situation?

Domestic production of coffee falls, and Germany becomes a coffee importer

7. Figure 6-23. When tax is imposed on sellers, price changes and some buyers leave the market. Which of the following describes a decrease in consumer surplus led by these buyers' leaving the market?

F

Import quotas and tariffs produce some common results.

Import Quota reduces buyers welfare Import quota increases sellers welfare Import Quota limits quantity of imports

6. Import quotas and tariffs produce similar results. Which of the following is NOT one of those results?

Import quota imposes taxes on sellers in an exporting country

4. (Figure 9-6) Refer to Figure 9-6. Before the tariff is imposed, this country

Imports 400 roses

A positive externality arises when a person engages in an activity that has

a beneficial effect on a bystander who does not pay the person who causes the effect

A negative externality arises when a person engages in an activity that has

an adverse effect on a bystander who is not compensated by the person who causes the effect

The impact of one persons actions on the well-being of a bystander is called

an externality

4. Refer to Figure 6-23. The price paid by buyers after the tax is imposed is ____.

$22

domestic price > world price

Import the good, the world has comparative advantage

The difference between social cost and private cost is a measure of the

cost of an externality

22. Stick Storage manufactures and sells computer flash drives. Last year it sold 2 million flash drives at a price of $10 each. For last year, the firm's

total revenue was $20 million