Microeconomics Final Review

Lamar is an organic lettuce farmer, but he also spends part of his day as a professional organizing consultant. As a consultant, Lamar helps people organize their houses. Due to the popularity of her home-organization services, Farmer Lamar has more clients requesting his services than he has time to help if he maintains his farming business. Farmer Lamar charges $25 an hour for his home-organization services. One spring day, Lamar spends 9 hours in his fields planting $130 worth of seeds on his farm. He expects that the seeds he planted will yield $300 worth of lettuce. Refer to Scenario 13-3.Lamar's accounting profit from farming equals Question options: −$80. $130. $170. $260.

$170.

If the price of the good is $13.50, then producer surplus is Question options: $18.50. $17.50. $7.50. $19.00.

$19.00.

Suppose a firm in a competitive market earned $2,000 in total revenue and had a marginal revenue of $20 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold? Question options: $5 and 50 units $5 and 100 units $100 and 20 units $20 and 100 units

$20 and 100 units

Suppose that when the price of good X increases from $730 to $880, the quantity demanded of good Y decreases from 60 to -20. Using the midpoint method, the cross-price elasticity of demand is about Question options: 21.47, and X and Y are substitutes. -0.05, and X and Y are complements. 0.05, and X and Y are substitutes. -21.47, and X and Y are complements.

-21.47, and X and Y are complements.

1. Does Cuba or Denmark have an absolute advantage in producing coolers? Does Cuba or Denmark have an absolute advantage in producing radios? Why? 2. Calculate the opportunity cost of radios in Cuba and Denmark. Which country has a comparative advantage in making radios? 3. If each country allocates equally to coolers and radios, what is the total production of coolers? What is the total production of radios? 4. If they both specialize in the product they have a comparative advantage in, what is the total production of coolers? What is the total production of radios? 5. (Bonus. 5'). If Cuba and Denmark are allowed to trade, what are the terms of trade? (Hint: at what price level would both countries agree to trade?)

1. Denmark has the absolute advantage in producing coolers. Cuba has the absolute advantage in producing radios. This is because the input is less for each country. They can make more than the other with the time they are given. 2. The opportunity cost of radios in Cuba is 2 coolers vs the opportunity cost in Denmark is 4 coolers. This means that Cuba has the comparative advantage in producing radios because they are giving up less radios to make coolers. They have less of a trade off. 3. If each country allocates equally to coolers and radios, the total productions of coolers would be 50 coolers and 17 radios. 4. If they both specialized in what they have a comparative advantage in then there would be 60 coolers and 48 radios. 5. If Cuba and Denmark were allowed to trade the terms of the trade would have to be at a price level where each would be benefiting. Cuba would trade Denmark radios for coolers and Denmark would trade Cuba coolers for radios. In terms of ratio it would be 1:4.

Refer to Table 1. What is the opportunity cost of increasing the production of corn from 500 bushels to 1000 bushels? Question options: 400 bushels of rye 300 bushels of rye 500 bushels of rye 600 bushels of rye

300 bushels of rye

Which of the following changes would not shift the demand curve for a good or service? Question options: A change in income. A change in the price of the good or service. A change in expectations about the future price of the good or service. A change in the price of a related good or service.

A change in the price of the good or service.

Which of the following is not an example of price discrimination? Question options: A music venue charges a lower price for a child's ticket than for an adult's ticket. A college rebates part of the cost of tuition in the form of financial aid for underprivileged students. A local fast food chain offers a "buy three get one free" deal. A donut shop charges a higher price for donuts than for bagels.

A donut shop charges a higher price for donuts than for bagels.

Which of the following statements is correct? Question options: A subsidy that accurately reflects external costs produces the socially optimal outcome. A patent is a way for the government to encourage the production of a good with technology spillovers. Government policies cannot improve upon private market outcomes. A subsity is a way for the government to reduce the production of a good with a negative externality.

A patent is a way for the government to encourage the production of a good with technology spillovers.

The figure above shows the supply and demand curves for electric cars. Using the three-step framework, explain how each event might affect demand, supply, or both, and identify how the equilibrium price and quantity of electric cars might change while all other factors remain constant. A. New suppliers enter the market B. The price of gas-powered cars rises. C. An increase in income and electric cars are a normal good

A. If new suppliers enter the market that causes a shift in the supply curve. This shift will be towards the right. The quantity of elecric cars would increase because there is an increase in supply. The equilibrium price would decrease because of the supply increase. B. If the price of gas powered cars rise this would cause a shift in the demand curve. This shift will be towards the right. When the price of a substitute like gas vs electric, the demand of the lower price increases. In this senario the demand of elecric cars would invrease. As for the quantity supplied this would remain the same. The equilibrium price would increase because there is a higher demand. C. If an increase in income happened when elecric cars were a normal good this would result in a shift of the demand curve. The demand curve would move to the right, and the quantity demanded would increase. The equilibrium price would also increase because of the shift in demand. The quantity demanded of elecrice cars would increase, and the quantity supplied would remain the same. D. If new suppliers enter the market and the price of gas powered cars rises, both the supply and demand curves would shift. They would both shift to the right. The quantity supplied would increase due to the new suppliers, and the quantity demanded would also increase due to the increase of price of a substitute good. The equilibrium price would remain the same because both of these changes occur at the same time.

Which of the following is not a characteristic of pollution permits? Question options: Real-world markets for pollution permits include sulfur dioxide and carbon. Firms for whom pollution reduction is very expensive are willing to pay more for permits than firms for whom pollution reduction is less expensive. Allowing firms to trade their permits reduces the total quantity of pollution beyond the initial allocation. Prices are set by supply and demand.

Allowing firms to trade their permits reduces the total quantity of pollution beyond the initial allocation.

Which of the following statements is correct? Question options: Assuming that explicit costs are positive, economic profit is greater than accounting profit. Assuming that implicit costs are positive, accounting profit is greater than economic profit. Assuming that explicit costs are positive, accounting profit is equal to economic profit. Assuming that implicit costs are positive, economic profit is positive.

Assuming that implicit costs are positive, accounting profit is greater than economic profit.

Why doesn't the total cost curve begin at the origin (the point 0,0)? Question options: Because variable costs are positive when output is zero Because fixed costs are positive when output is zero Because the firm is producing at the efficient scale Because the firm is maximizing profits

Because fixed costs are positive when output is zero

Bev is opening her own court-reporting business. She financed the business by withdrawing money from her personal savings account. When she closed the account, the bank representative mentioned that she would have earned $300 in interest next year. If Bev hadn't opened her own business, she would have earned a salary of $25,000. In her first year, Bev's revenues were $30,000, and she spent $1,000 on materials and supplies. Which of the following statements is correct? Question options: Bev's total explicit costs are $26,300. Bev's total implicit costs are $300. Bev's accounting profits exceed her economic profits by $300. Bev's economic profit is $3,700.

Bev's economic profit is $3,700.

What is the fundamental basis for trade among nations? Question options: Misguided economic policies Absolute advantage Shortages or surpluses in nations that do not trade Comparative advantage

Comparative advantage

Price ceilings and price floors that are binding Question options: cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price. can have the effect of restoring a market to equilibrium. are desirable because they make markets more efficient and more fair. are imposed because they can make the poor in the economy better off without causing adverse effects.

Corrective taxes set the maximum quantity of pollution, whereas tradable pollution permits fix the price of pollution.

The distinction between efficiency and equality can be described as follows: Question options: Efficiency refers to maximizing the size of the pie; equality refers to producing a pie of a given size at the least possible cost. Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society. Efficiency refers to maximizing the number of trades among buyers and sellers; equality refers to maximizing the gains from trade among buyers and sellers. Efficiency refers to minimizing the price paid by buyers; equality refers to maximizing the gains from trade among buyers and sellers.

Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society.

Refer to Figure 5-6. Along which of these segments of the supply curve is supply most elastic? (least steep) Question options: FE DC FD BA

FE

A circular-flow diagram is a model that incorporates all aspects of the real economy. Question options: True False

False

In a perfectly competitive market, buyers and sellers are price setters. Question options: True False

False

Some countries win in international trade, while other countries lose. Question options: True False

False

Taxation is a source of market distortion and always creates market inefficiency. Question options: True False

False

Which of the following demonstrates the law of demand? Question options: After Qyatt got a raise at work, he bought more pretzels at $1.50 per pretzel than he did before his raise. Sanjay buys fewer pastries at $0.75 per pastry than at $1 per pastry, other things equal. Haidy buys more donuts at $0.25 per donut than at $0.50 per donut, other things equal. Ellie buys fewer Mounds at $0.60 per candy bar after the price of Skittles falls to $0.50 per bag.

Haidy buys more donuts at $0.25 per donut than at $0.50 per donut, other things equal.

Bonus. Have you watched the movie Old School? A recurring theme in Old School is Frank trying to give away a bread maker he received as a wedding present. First, he tries to give it to one of his friends as a housewarming gift—but it was his friend who had originally given him the gift in the first place. Later in the movie we see him giving the bread maker to a small boy at a birthday party. Both efforts at regifting fail miserably.It serves as an example of the Waldfogel's 1993 article "The Deadweight Loss of Christmas." Waldfogel argued that that the holiday season results in an exchange of gifts that is not optimal (or efficient). Do you think Waldfogel's claim is correct? Why or why not?

I have not watched the movie old school, however I do agree that regifting a gift multiple times does seem not optimal or efficient. The deadweight loss does almost relate directly here because no one can find value in the gift and as it gets passed on and older it loses value. If frank successfully regifted the bread maker then it wouldn't have been seen as a "deadweight loss" but because it keeps getting passed along its very inefficient.

A hair stylist currently cuts and colors hair for 100 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand? Question options: Yes, because cutting hair is profitable. No, because he may not be able to sell more services. It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients. It depends on the average cost of serving more clients and the average revenue he will earn from serving more clients.

It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients.

Is the price elasticity of demand the same as we move along a linear demand curve? Why or why not?

No. The price elasticity of demand is not the same as we move along a linear demand curve, this is because as we move along the demand curve the price changes. When the price increases the quantity demanded decreases, when the price decreases the quantity of demand increases. These two changes make the price elasticity of demand different as we move along the linear demand curve.

In the circular-flow diagram, which of the following is not a factor of production? Question options: Labor Land Capital Output

Output

Which of the following is not held constant in a demand schedule? Question options: Income Tastes Price Expectations

Price

Which of the following is an example of a positive, as opposed to normative, statement? Question options: If welfare payments increase, the world will be a better place. The income tax rate should be increased to offset the budget deficit. Prices rise when the government prints too much money. Antitrust laws should be used to prevent further concentration in the wireless telephone service market.

Prices rise when the government prints too much money.

Which of the following is correct? Question options: Rent control and the minimum wage are both examples of price floors. Rent control and the minimum wage are both examples of price ceilings. Rent control is an example of a price ceiling, and the minimum wage is an example of a price floor. Rent control is an example of a price floor, and the minimum wage is an example of a price ceiling.

Rent control is an example of a price ceiling, and the minimum wage is an example of a price floor.

What is the socially optimal quantity output in this market?

Social cost and demand meet

Which of the following causes the price paid by buyers to be different than the price received by sellers? Question options: Binding price ceiling Nonbinding price control Tax on the good Binding price floor

Tax on the good

Which of the following is NOT a way of internalizing technology spillovers? Question options: Subsidies Taxes Industrial policy Patent protection

Taxes

Which of the following is not correct? Question options: Taxes levied on sellers and taxes levied on buyers are not equivalent. The wedge between the buyers' price and the sellers' price is the same, regardless of whether the tax is levied on buyers or sellers. In the new after-tax equilibrium, buyers and sellers share the burden of the tax. A tax places a wedge between the price that buyers pay and the price that sellers receive.

Taxes levied on sellers and taxes levied on buyers are not equivalent.

For a large firm that produces and sells automobiles, which of the following costs would be a variable cost? Question options: The $20 million payment that the firm pays each year for accounting services The cost of the steel that is used in producing automobiles The rent that the firm pays for office space in a suburb of St. Louis The cost of internet advertising incurred each year

The cost of the steel that is used in producing automobiles

Under what conditions might government intervention in a market economy improve the economy's performance? Why?

The government might intervene in the market to improve the economy's performance when the government is not spreading its resources efficiently or fairly. They also may intervene when there is market power. The government tries to stay out of the economy however if there is something wrong they may step in to fix it.

Refer to Figure 2-3. Suppose this economy is producing at point B. (Below the curve) Which of the following statements would best explain this situation? Question options: The economy has insufficient resources to produce at a more desirable point. The economy's available technology prevents it from producing at a more desirable point. There is widespread unemployment in the economy. The economy is experiencing economic growth.

There is widespread unemployment in the economy.

An economy can produce at any point on or inside its production possibilities frontier, but it cannot produce at points outside its production possibilities frontier. Question options: True False

True

Comparative advantage is the foundation of international trade. Question options: True False

True

Which of the following statements is true? Question options: When a competitive firm sells an additional unit of output, its revenue increases by an amount less than the price. Average revenue is the same as price for monopoly firms but not competitive firms. Average revenue is the same as price for competitive firms but not monopoly firms. When a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price.

When a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price.

Zaria and Hannah are roommates. Zaria assigns a $30 value to smoking cigarettes. Hannah values smoke-free air at $15. Which of the following scenarios is a successful example of the Coase theorem? Question options: Zaria pays Hannah $20 so that Zaria can smoke. Hannah offers Zaria $20 not to smoke. Zaria accepts and does not smoke. Hannah offers Zaria $15 not to smoke. Zaria accepts and does not smoke. Zaria pays Hannah $12 so that Zaria can smoke.

Zaria pays Hannah $20 so that Zaria can smoke.

A group of buyers and sellers of a particular good or service is called Question options: a coalition. an economy. a market. a competition.

a market.

a. Define externality. Give one example each of positive and negative externality. (2') b. Define market failure. Explain why markets with externality are referred as market failure. (2') c. What are typical public policies to deal with negative externality?Which policy is more efficient? explain. (3') d. What is a potential private solution? (1')

a. An externality is the effects of actions on bystanders. One example of a positive externality is getting a vaccine to help stop the spread of a disease. An example of a negative externality is living next to a construction site and having noise complaints, this has a negative or adverse effect on bystanders. b. market failure is when a market fails to allocate its resources. Markets with externality are referred as market failure because social welfare is not maximized at the equilibrium, it also doesn't reflect the costs and benefits of the product. c. typical public policies to deal with negative externality is command and control policies, this regulates the behavior directly by requiring or forbidding certain behaviors although it is impossible to forbid all behaviors. One example of this is maximum levels of pollution. Another example of public policies are market based policies, the goal is to align private incentives with social efficiency. I believe the market based policies are more efficient because they line up with what society wants and deems valuable. This is much more effective than making regulations. d. A potential private solution is abetment costs, this would work to effectively reduce different pollutions.

a) Using the midpoint method, compute the elasticity of demand between points A ($2.20 and 440 million gallons) and B ($2.00 and 460 million gallons). b) Is demand along this portion of the curve elastic or inelastic? Interpret your answer. (hint: if price increases by 1%, what happens to the quantity demanded?) c) Using the midpoint method, compute the elasticity of demand between points B and C ($1.80 and 500 million gallons). Is demand along this portion of the curve elastic or inelastic? d). Does the total revenue of gasoline rise or fall when price goes down from $2.00 to $1.80? Why or why not?

a. The elasticity of demand is 0.47 b. The demand along this portion is inelastic because it is less than 1, if the price rises by 1% then the quantity demanded decreases which is shown on the graph. c. Using the midpoint method the elasticity of demand between points b and c is equal to 1.58, this means that it is elastic because the elasticity is greater than 1. d. The total revenue would remain the same. This is because when the price decreases the quantity increases. Using the equation TR= P x Q, we can see that both are equal to 900, meaning they remain the same.

a. Explain the "invisible hand".

a. The invisible hand is the idea that the firms and households will make decisions to better themselves. It is the things that influence the "behind the scenes". It causes the market to be competitive.

Whenever a perfectly competitive firm chooses to change its level of output, its marginal revenue Question options: increases if MR < ATC and decreases if MR > ATC. does not change. always increases. always decreases.

always increases.

When marginal cost is less than average total cost, Question options: marginal cost must be falling. average variable cost must be falling. average total cost is falling. average total cost is rising.

average total cost is falling.

b. What causes a movement along a demand curve? What causes a shift in the demand curve?

b. Movement along a demand curve is caused by a change in price for a good or a service. A shift in the demand curve is caused by changes in taste, expectations, price of related goods, technology, and input prices.

If a seller in a competitive market chooses to charge more than the going price, then Question options: the sellers' profits must increase. the owners of the raw materials used in production would raise the prices for the raw materials. other sellers would also raise their prices. buyers will make purchases from other sellers.

buyers will make purchases from other sellers.

A monopoly can earn positive profits because it Question options: can sell unlimited quantities at any price it chooses. takes the market price as given and can sell unlimited quantities. can set the price it charges for its output but faces a horizontal demand curve. can maintain a price such that total revenues will exceed total costs.

can maintain a price such that total revenues will exceed total costs.

Price ceilings and price floors that are binding Question options: cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price. can have the effect of restoring a market to equilibrium. are desirable because they make markets more efficient and more fair. are imposed because they can make the poor in the economy better off without causing adverse effects.

cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price.

For a firm, marginal revenue minus marginal cost is equal to Question options: profit. average total cost. change in profit. change in average revenue.

change in profit.

Suppose that the price falls from P2 to P1. Area C represents the Question options: additional consumer surplus to initial consumers when the price falls. decrease in producer surplus that results from a downward-sloping demand curve. decrease in producer surplus in the market when the price increases from P1 to P2. consumer surplus to new consumers who enter the market.

consumer surplus to new consumers who enter the market. NOT SURE??

When a country is on the upward-sloping side of the Laffer curves, a cut in the tax rate will Question options: decrease tax revenue and decrease the deadweight loss. increase tax revenue and increase the deadweight loss. decrease tax revenue and increase the deadweight loss. increase tax revenue and decrease the deadweight loss.

decrease tax revenue and increase the deadweight loss.

At levels of output less than P, the firm experiences Question options: economies of scale. diseconomies of scale. constant returns to scale. both diminishing marginal productivity and coordination problems.

economies of scale.

A benefit to society of the patent and copyright laws is that those laws Question options: help to keep prices down. help to prevent a single firm from acquiring ownership of a key resource. encourage creative activity. discourage the production of inefficient products.

encourage creative activity.

When a tax is imposed on a good, the Question options: demand curve for the good always shifts. supply curve for the good always shifts. equilibrium quantity of the good always decreases. amount of the good that buyers are willing to buy at each price always remains unchanged.

equilibrium quantity of the good always decreases. NOT SURE??

Large or persistent inflation is almost always caused by Question options: excessive government spending. excessive growth in the quantity of money. foreign competition. higher-than-normal levels of productivity.

excessive growth in the quantity of money.

Instead of conducting laboratory experiments to generate data to test their theories, economists often Question options: ask winners of the Nobel Prize in Economics to evaluate their theories. do without data. gather data from historical episodes of economic change. substitute assumptions for data when data are unavailable.

gather data from historical episodes of economic change.

The basic principles of economics suggest that Question options: markets are seldom, if ever, a good way to organize economic activity. government should become involved in markets when trade between countries is involved. government should become involved in markets when those markets fail to produce efficient or fair outcomes. government should never become involved in markets.

government should become involved in markets when those markets fail to produce efficient or fair outcomes.

The goal of rent control is to Question options: help landlords by assuring them a low vacancy rate for their apartments. help the poor by assuring them an adequate supply of apartments. help the poor by making housing more affordable. facilitate controlled economic experiments in urban areas.

help the poor by making housing more affordable.

Microeconomics is the study of Question options: how money affects the economy. how individual households and firms make decisions. how government affects the economy. how the economy as a whole works.

how individual households and firms make decisions.

In a natural monopoly, Question options: society would be better off if antitrust laws were used to create many different firms in the market. the marginal cost curve is positively sloped. if the government requires marginal cost pricing, it will likely have to subsidize the firm. the marginal revenue curve is horizontal.

if the government requires marginal cost pricing, it will likely have to subsidize the firm.

Price discrimination adds to social welfare in the form of Question options: increased total surplus. decreased total surplus reduced costs of production. increased consumer surplus and decreased producer surplus.

increased total surplus.

If the government wanted to tax or subsidize this good to achieve the socially optimal level of output, it would Question options: introduce a subsidy of $32 per unit. impose a tax of $16 per unit. introduce a subsidy of $16 per unit. impose a tax of $32 per unit.

introduce a subsidy of $16 per unit.

When her income increased from $10,000 to $20,000, Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. Using the midpoint method, we can conclude that for Heather, macaroni Question options: and soy-burgers are both normal goods with income elasticities equal to 1. is an inferior good and soy-burgers are normal goods; both have income elasticities of 1. is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1. and soy-burgers are both inferior goods with income elasticities equal to -1.

is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1.

A farmer has the ability to grow either corn or cotton or some combination of the two. Given no other information, it follows that the farmer's opportunity cost of a bushel of corn multiplied by his opportunity cost of a bushel of cotton Question options: is equal to 0. is between 0 and 1. is equal to 1. is greater than 1.

is equal to 1.

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth Question options: is more efficient and more equal for society. is more efficient but less equal for society. is more equal but less efficient for society. is less equal and less efficient for society.

is more equal but less efficient for society.

When a factory is operating in the short run, Question options: it cannot alter variable costs. total cost and variable cost are usually the same. average fixed cost rises as output increases. it cannot adjust the quantity of fixed inputs.

it cannot adjust the quantity of fixed inputs.

A firm cannot price discriminate if Question options: it has declining marginal revenue. it operates in a competitive market. buyers only reveal the price they are willing to pay for the product. it has a constant marginal cost.

it operates in a competitive market.

A firm that shuts down temporarily has to pay Question options: its variable costs but not its fixed costs. its fixed costs but not its variable costs. both its variable costs and its fixed costs. neither its variable costs nor its fixed costs.

its fixed costs but not its variable costs.

Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers Question options: both labor and capital to be fixed. both labor and capital to be variable. labor to be variable and capital to be fixed. capital to be variable and labor to be fixed.

labor to be variable and capital to be fixed.

When a firm experiences constant returns to scale, Question options: long-run average total cost is unchanged, even when output increases. long-run marginal cost is greater than long-run average total cost. long-run marginal cost is less than long-run average total cost. the firm is experiencing coordination problems.

long-run average total cost is unchanged, even when output increases.

Total cost is the Question options: amount a firm receives for the sale of its output. fixed cost less variable cost. market value of the inputs a firm uses in production. quantity of output minus the quantity of inputs used to make a good.

market value of the inputs a firm uses in production.

If the size of a tax increases, tax revenue Question options: may increase, decrease, or remain the same. decreases. increases. remains the same.

may increase, decrease, or remain the same.

An externality is the uncompensated impact of Question options: society's decisions on the poorest person in the society. a person's actions on that person's well-being. one person's actions on the well-being of a bystander. society's decisions on the well-being of society.

one person's actions on the well-being of a bystander.

A legal maximum on the price at which a good can be sold is called a Question options: price ceiling. price subsidy. price floor. tax.

price ceiling.

According to the Coase theorem, private parties can solve the problem of externalities if Question options: property rights are clearly defined. the initial distribution of legal rights favors the person causing the negative externality. the number of parties involved is sufficiently large. the cost of bargaining is large.

property rights are clearly defined.

When a tax is levied on a good, the buyers and sellers of the good share the burden, Question options: provided the tax is levied on the buyers. provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers. regardless of how the tax is levied. provided the tax is levied on the sellers.

regardless of how the tax is levied.

What term refers to the idea that society has limited resources and therefore cannot produce all the goods and services people wish to have? Question options: inefficiency inequality scarcity market failure

scarcity

In a market economy, economic activity is guided by Question options: the government. public-interest groups. central planners. self-interest and prices.

self-interest and prices.

Cost is a measure of the Question options: seller's willingness to sell. producer shortage. seller's willingness to buy. seller's producer surplus.

seller's willingness to sell.

A monopoly is a market with one Question options: seller, and that seller is a price taker. seller, and that seller sets the price. buyer, and that buyer is a price taker. buyer, and that buyer sets the price.

seller, and that seller sets the price.

In the 1970s, long lines at gas stations in the United States were primarily a result of the fact that Question options: OPEC raised the price of crude oil in world markets. Americans typically commuted long distances. U.S. gasoline producers raised the price of gasoline. the U.S. government maintained a price ceiling on gasoline.

the U.S. government maintained a price ceiling on gasoline.

The term tax incidence refers to Question options: widespread view that taxes (and death) are the only certainties in life. the distribution of the tax burden between buyers and sellers. whether the demand curve or the supply curve shifts when the tax is imposed. whether buyers or sellers of a good are required to send tax payments to the government.

the distribution of the tax burden between buyers and sellers.

If a construction site creates too much noise for local residents, Question options: the government can raise economic well-being through noise-control regulations. noise restrictions will force residents to move out of the area. a sense of social responsibility will cause owners of the mill to reduce noise levels. the government should avoid intervening because the market will always allocate resources efficiently

the government can raise economic well-being through noise-control regulations.

If a firm uses labor to produce output, the firm's production function depicts the relationship between Question options: the number of workers and the quantity of output. marginal product and marginal cost. the maximum quantity that the firm can produce as it adds more capital to a fixed quantity of labor. fixed inputs and variable inputs in the short run.

the number of workers and the quantity of output.

The price elasticity of demand measures how much Question options: the quantity demanded responds to changes in input prices. the quantity demanded responds to changes in the price of the good. the price of the good responds to changes in demand. sellers respond to changes in technology.

the quantity demanded responds to changes in the price of the good.

If marijuana were legalized, it is likely that there would be an increase in the demand for marijuana. If demand for marijuana is inelastic and the supply of marijuana is perfectly elastic, this will result in Question options: higher prices and higher total revenue from marijuana sales. higher prices but lower total revenue from marijuana sales. the same price and higher total revenue from marijuana sales. the same price but lower total revenue from marijuana sales.

the same price and higher total revenue from marijuana sales.

Refer to Figure 2-6. Consider the production possibilities frontier for an economy that produces only computers and televisions. The opportunity cost of each computer is Question options: the slope of the production possibilities frontier, or of a television. the reciprocal of the slope of the production possibilities frontier, or 2 televisions. the reciprocal of the slope of the production possibilities frontier, or of a television. the slope of the production possibilities frontier, or 2 televisions.

the slope of the production possibilities frontier, or 2 televisions.

A simultaneous increase in both the demand for tablets and the supply of tablets would imply that Question options: both the value of tablets to consumers and the cost of producing tablets has decreased. the value of tablets to consumers has increased, and the cost of producing tablets has decreased. both the value of tablets to consumers and the cost of producing tablets has increased. the value of tablets to consumers has decreased, and the cost of producing tablets has increased.

the value of tablets to consumers has increased, and the cost of producing tablets has decreased.

The long-run market supply curve in a competitive market will Question options: always be horizontal. be the portion of the MC that lies above the minimum of AVC for the marginal firm. typically be more elastic than the short-run supply curve. be above the competitive firm's efficient scale.

typically be more elastic than the short-run supply curve.

Lamar is an organic lettuce farmer, but he also spends part of his day as a professional organizing consultant. As a consultant, Lamar helps people organize their houses. Due to the popularity of her home-organization services, Farmer Lamar has more clients requesting his services than he has time to help if he maintains his farming business. Farmer Lamar charges $25 an hour for his home-organization services. One spring day, Lamar spends 9 hours in his fields planting $130 worth of seeds on his farm. He expects that the seeds he planted will yield $300 worth of lettuce. Refer to Scenario 13-3. Lamar's economic profit from farming equals Question options: −$130. −$55. $130. $170.

−$55.