Miro-Economics Mixon Final Troy University
All else equal, what happens to consumer surplus if the price of a good increases?
$1,600.
In 2011, the average American paid approximately how much to the federal government in taxes?
$2,000
Refer to Figure 7-22. At the equilibrium price, producer surplus is
$2,500.
Suppose that a firm operating in perfectly competitive market sells 50 units of output. Its total revenues from the sale are $500. Which of the following statements is correct?
(ii) only (Average revenue equals $10)
Refer to Table 4-1. Which of the following illustrates the market demand curve?
(on the graph) price $5 and quantity 45
Which of the following is not correct?
A monopolist can alter the market price by adjusting the quantity that it produces.
In a market economy
Both a and b are correct.
Suppose the government imposes a $10 per unit tax on a good. Refer to Figure 8-8. The decrease in consumer and producer surpluses that is not offset by tax revenue is the area
C+F
Refer to Figure 8-18. Suppose the government imposes a $1 tax in each of the four markets represented by supply curves S1, S2, S3, and S4. The deadweight will be the smallest in the market represented by
S4.
A competitive firm
and a monopolist are price takers.
Refer to Figure 8-9. The imposition of the tax causes the price received by sellers to
decrease from $600 to $300.
The typical state spends the most on
education
When interest income from savings is taxed, people will save
less than they would without the tax
Refer to Figure 15-10. What area measures the deadweight loss?
0.5[(A-H)*(L-J)]
Refer to Table 14-10. At which level of output in the table is average variable cost equal to $6?
3 units
Refer to Figure 4-24. All else equal, buyers expecting turkey to be more expensive in the future would cause a current move from
DB to DA.
Refer to Figure 7-23. The efficient price-quantity combination is
P2 and Q2.
Which of the following is not an example of a graph of a single variable?
a scatterplot
Market power refers to the
ability of market participants to influence price
In the United States, incomes have historically grown
about 2 percent per year
A value-added tax or VAT is a tax on
all stages of production of a good.
Constant returns to scale occur when the firm's long-run
average total costs are constant as output increases
In the circular-flow diagram, which of the following items flows from households to firms through the markets for goods and services?
goods and services
What term refers to the property that society has limited resources and therefore cannot produce all the goods and services people wish to have?
inequality
Which of the following is not a reason for the existence of a monopoly?
marginal-cost pricing
For a monopolist, when the output effect is greater than the price effect, marginal revenue is
negative
Explicit costs
require an outlay of money by the firm
Which of the following words and phrases best captures the notion of equality?
sameness
The Federal Reserve
sets the nation's monetary policy.
The demand for a good or service is determined by
those who buy the good or service.
Economists typically measure efficiency using
total surplus.
Analyzing the behavior of the firm enhances our understanding of
what decisions lie behind the market supply curve
Who gets scarce resources in a market economy?
whoever is willing and able to pay the price
Suppose Roger and Regina receive great satisfaction from their consumption of cheesecake. Regina would be willing to purchase only one slice and would pay up to $8 for it. Roger would be willing to pay $11 for his first slice, $9 for his second slice, and $5 for his third slice. The current market price is $5 per slice. Refer to Scenario 12-3. Assume that the government places a $2 tax on each slice of cheesecake and that the new equilibrium price is $7. What is the deadweight loss of the tax?
zero
Refer to Figure 8-2. The loss of producer surplus for those sellers of the good who continue to sell it after the tax is imposed is
$1
Refer to Figure 7-8. If the government imposes a price ceiling of $80 in this market, then, assuming those with the highest willingness to pay purchase the good, consumer surplus will be
$1,200.
Eileen's Elegant Earrings produces pairs of earrings for its mail order catalogue business. Each pair is shipped in a separate box. She rents a small room for $150 a week in the downtown business district that serves as her factory. She can hire workers for $275 a week. There are no implicit costs Refer to Table 13-12. What is the total cost associated with making 890 boxes of earrings per week?
$1,250
Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week. Refer to Scenario 8-1. If Erin pays Ernesto $90 to clean her house, Erin's consumer surplus is
$10
Ziva is an organic lettuce farmer, but she also spends part of her day as a professional organizing consultant. As a consultant, Ziva helps people organize their houses. Due to the popularity of her home-organization services, Farmer Ziva has more clients requesting her services than she has time to help if she maintains her farming business. Farmer Ziva charges $25 an hour for her home-organization services. One spring day, Ziva spends 10 hours in her fields planting $130 worth of seeds on her farm. She expects that the seeds she planted will yield $300 worth of lettuce. Refer to Scenario 13-6. Ziva's accountant would calculate the total cost of farming to equal
$130.
When a certain competitive firm produces and sells 100 units of output, marginal revenue is $80. When the same firm produces and sells 200 units of output, what is average revenue?
$160
Refer to Table 15-2. What is Tanya's profit-maximizing price?
$2
Wilma values a decorative garden rock at $15, while Fred values it at $10. The price of a decorative garden rock is $9. If the government imposes a $2 tax per decorative garden rock and the price of the rock rises to $11, what part of the deadweight loss comes from Wilma, and what part comes from Fred?
$2 comes from Wilma; $1 comes from Fred
Jeff decides that he would pay as much as $3,000 for a new laptop computer. He buys the computer and realizes consumer surplus of $700. How much did Jeff pay for his computer?
$2,300
Refer to Figure 4-18. At what price would there be an excess demand of 200 units of the good?
$20
Refer to Figure 7-14. If the government imposes a price ceiling of $50 in this market, then producer surplus will decrease by
$200.
The concert promoters of a heavy-metal band, WeR2Loud, know that there are two types of concert-goers: diehard fans and casual fans. For a particular WeR2Loud concert, there are 1,000 die-hard fans who will pay $150 for a ticket and 500 casual fans who will pay $50 for a ticket. There are 1,500 seats available at the concert venue. Suppose the cost of putting on the concert is $50,000, which includes the cost of the band, lighting, security, etc. Refer to Scenario 15-6. How much additional profit can the concert promoters earn by charging each customer their willingness to pay relative to charging a flat price of $150 per ticket?
$25,000
Refer to Figure 7-22. If the price decreases from $80 to $70 due to a shift in the supply curve, consumer surplus increases by
$250
Scenario 12-2 Suppose that Bob places a value of $10 on a movie ticket and that Lisa places a value of $7 on a movie ticket. In addition, suppose the price of a movie ticket is $5. Refer to Scenario 12-2. Suppose the government levies a tax of $3 on a movie ticket and that, as a result, the price of a movie ticket increases to $8. What is the deadweight loss from the tax?
$3
Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20. Refer to Scenario 14-3. At Q=500, the firm's profits equal
$4,000.
When a certain monopoly sets its price at $8 it sells 64 units. When the monopoly sets its price at $10 it sells 60 units. The marginal revenue for the firm over this range is
$44.
Refer to Table 15-11. What would be the firm's marginal revenue at the profit-maximizing level of output?
$6
In 2012, the U.S. minimum wage according to federal law was
$7.25 per hour.
If the monopolist can engage in perfect price discrimination, what is the average revenue when 7 ties are sold?
$90
Refer to Figure 14-7. Suppose the price of the good is $175. If the firm produces and sells 515 units of output, its total revenue is
$90,125
Refer to Figure 15-5. A profit-maximizing monopoly's profit is equal to
(P2-P4) x Q3
Which of the following statements is correct? Monopolies are socially inefficient because they (i) charge a price above marginal cost. (ii) produce too little output. (iii) earn profits at the expense of consumers. (iv) maximize the market's total surplus.
(i) and (ii) only
If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is
1.33
Suppose a firm currently produces 325 units of output per day with 15 workers. The firm is able to produce 340 units of output with a 16th worker. What is the marginal product of the 16th worker?
15 units of output
In 2011, approximately what percentage of the U.S. federal government's receipts came from individual income taxes?
15%
Suppose a certain firm is able to produce 165 units of output per day when 15 workers are hired. The firm is able to produce 181 units of output per day when 16 workers are hired, holding other inputs fixed. The marginal product of the 16th worker is
16 units of output.
Sue earns income of $80,000 per year. Her average tax rate is 50 percent. Sue paid $5,000 in taxes on the first $30,000 she earned. What was the marginal tax rate on the first $30,000 she earned, and what was the marginal tax rate on the remaining $50,000?
16.67 percent and 70.00 percent, respectively
Adam Smith's book The Wealth of Nations was published in
1776.
The collapse of communism in the Soviet Union and Eastern Europe took place mainly in the
1980s.
Consider a competitive market with 50 identical firms. Suppose the market demand is given by the equation QD = 200 - 10P and the market supply is given by the equation QS = 10P. In addition, suppose the following table shows the marginal cost of production for various levels of output for firms in this market. How many units should a firm in this market produce to maximize profit?
2 Units
Eldin is a house painter. He can paint three houses per week. He is considering hiring his friend Murphy. Together, Eldin and Murphy can paint five houses per week. What is Murphy's marginal product?
2 houses
At a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.20, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about
2.20
A 10 percent increase in gasoline prices reduces gasoline consumption by about
2.5 percent after one year and 6 percent after five years.
Refer to Figure 2-10, Panel (a). The opportunity cost of one sofa is highest when the economy produces
24 sofas.
Today the typical American pays approximately what percent of income in taxes, including all federal, state, and local taxes?
25 percent
Scenario 13-16 Barney builds custom wooden birdhouses. He can make 150 birdhouses per month and sell them for $50 each. His average total cost is $30 per birdhouse. Refer to Scenario 13- 16. Barney is considering hiring his best friend Fred to work for him. Fred can build 125 birdhouses per month. If Barney hires Fred, what will be the monthly total output of his birdhouse business?
275
Refer to Table 13-3. At which number of workers does diminishing marginal product begin?
3
Riva crafts and sells hard cider as a part-time job. She can bottle and sell four cases in a week. She is considering hiring her friend Atul to help her. Together, Riva and Atul can bottle and sell seven cases per week. What is Atul's marginal product?
3 cases
For state and local governments, in 2011, education accounted for approximately what percentage of spending?
34 percent
A monopolist faces the following demand curve: Refer to Table 15-17. If the marginal cost of production is constant at $18 per unit, this profit-maximizing monopolist will choose to produce
40 units.
James earns income of $90,000 per year. His average tax rate is 40percent. James paid $5,500 in taxes on the first $40,000 he earned. What was the marginal tax rate on the rest of his income?
44 percent
Refer to Table 15-20. If a monopolist faces a constant marginal cost of $2, how much output should the firm produce in order to maximize profit?
5 units
Refer to Table 15-7. Sally will maximize her profits by selling
6 pairs of shoes.
In 2011, what percentage of federal government receipts came from corporate income taxes?
7%
To raise productivity, policymakers could
All of the above are correct
According to economist John Maynard Keynes, a great economist must also be a(n)
All of the above are correct.
In a market economy, supply and demand are important because they
All of the above are correct.
Which of the following is a decision that economists study?
All of the above are correct. ( *how much people work *what people buy *how much money people save)
The supply curve for motor oil is the typical upward-sloping straight line, and the demand curve for motor oil is the typical downward-sloping straight line. When motor oil is taxed, the area on the relevant supply-and-demand graph that represents the deadweight loss is
All of the above are correct. (larger than the area that represents consumer surplus in the absence of the tax. larger than the area that represents government's tax revenue. a triangle.)
Refer to Table 7-5. Who experiences the largest gain in consumer surplus when the price of an orange decreases from $1.05 to $0.75?
Allison
Which of the following statements is correct concerning the burden of a tax imposed on take-out food?
Buyers and sellers share the burden of the tax
If the price of Vanilla Coke is $6.90, who will purchase the good?
David and Laura
Which of the following events must result in a lower price in the market for Snickers?
Demand for Snickers decreases, and supply of Snickers increases.
Analysis of data on workers and those looking for work is conducted by economists at the
Department of Labor.
Refer to Table 13-17. Which firm has diseconomies of scale over the entire range of output?
Firm 1 only
DeShawn has spent $600 purchasing and repairing an old fishing boat, which he expects to sell for $900 once the repairs are complete. DeShawn discovers that, in addition to the $600 he has already spent, he needs to make an additional repair, which will cost another $400, in order to make the boat worth $900 to potential buyers. He can sell the boat as it is now for $400. What should he do?
He should complete the repairs and sell the boat for $900.
Kate is a personal trainer whose client William pays $80 per hour-long session. William values this service at $100 per hour, while the opportunity cost of Kate's time is $75 per hour. The government places a tax of $10 per hour on personal trainers. After the tax, what is likely to happen in the market for personal training?
Kate and William will agree to a new price somewhere between $85 and $100
The government's health plan for the elderly is called
Medicare.
Who once said that taxes are the price we pay for a civilized society?
Oliver Wendell Holmes, Jr.
Which of the following is a characteristic of a natural monopoly?
One firm can supply output at a lower cost than two firms.
Refer to Figure 4-6. Suppose that the federal government is concerned about obesity in the United States. Congress is considering two plans. One would require "junk food" producers to include warning labels on all junk food. The other would impose a tax on all products considered to be junk food. We could illustrate the tax as producing a movement from
Point A to Point B in Panel 1.
Assuming that the firm depicted produces cookies, which of the statements below is most consistent with the shape of the total cost curve?
Producing an additional cookie is always more costly than producing the previous cookie
Refer to Figure 2-4. Efficient production is represented by which point(s)?
R, U
Which of the following ideas is the most plausible?
Tax revenue is more likely to increase when a low tax rate is increased than when a high tax rate is increased.
Assume the supply curve for cigars is a typical, upward-sloping straight line, and the demand curve for cigars is a typical, downward-sloping straight line. Suppose the equilibrium quantity in the market for cigars is 1,000 per month when there is no tax. Then a tax of $0.50 per cigar is imposed. The effective price paid by buyers increases from $1.50 to $1.90 and the effective price received by sellers falls from $1.50 to $1.40. The government's tax revenue amounts to $475 per month. Which of the following statements is correct?
The deadweight loss of the tax is $12.50.
Suppose sellers of perfume are required to send $1.00 to the government for every bottle of perfume they sell. Further, suppose this tax causes the price paid by buyers of perfume to rise by $0.60 per bottle. Which of the following statements is correct?
The effective price received by sellers is $0.40 per bottle less than it was before the tax
Which of the following is not an example of the opportunity cost of going to school?
The money a student spends on rent for his apartment while attending school.
Refer to Table 12-17. Suppose one goal of the tax system was to achieve vertical equity. While people may disagree about what is "equitable," based on the marginal tax rates given for the two years, which of the following statements is true?
Vertical equity is possible in both years
Refer to Figure 2-6. If this economy devotes one-half of its available resources to the production of blankets and the other half to the production of pillows, it could produce
We would have to know the details of this economy's technology in order to determine this.
You receive a paycheck from your employer, and your pay stub indicates that $400 was deducted to pay the FICA (Social Security/Medicare) tax. Which of the following statements is correct?
Your employer is required by law to pay $400 to match the $400 deducted from your check.
Refer to Figure 4-14. Which of the following best describes the movement from E1 to E2?
a decrease in demand
Which of the following would be most likely to have monopoly power?
a local electrical cooperative
If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then
a one-unit increase in output will increase the firm's profit.
Which tax system requires higher-income taxpayers to have lower tax rates, even though they pay a larger amount of tax when compared to lower-income taxpayers?
a regressive tax
European countries tend to rely on which type of tax more so than the United States does?
a value-added tax
When a tax is levied on buyers of a good,
a wedge is placed between the price buyers pay and the price sellers effectively receive.
Refer to Table 12-12. If the government imposes a $2,000 lump-sum tax, the average tax rate for Marcia and Charles would be
a. 5 percent and 6.7 percent, respectively.
Almost all economists agree that rent control
adversely affects the availability and quality of housing.
Refer to Table 5-9. Along which of the supply curves does quantity supplied move proportionately more than the price?
along supply curve B only
Refer to Figure 13-3. The graph illustrates a typical total cost curve. Based on its shape, what does the corresponding production function look like?
an upward-sloping curve that increases at a decreasing rate
Scenario 14-4 The information below applies to a competitive firm that sells its output for $40 per unit. • When the firm produces and sells 150 units of output, its average total cost is $24.50. • When the firm produces and sells 151 units of output, its average total cost is $24.55. Refer to Scenario 14-4. Let Q represent the quantity of output. Which of the following magnitudes has the same value at Q = 150 and at Q = 151?
average revenue
For a monopoly
average revenue is less than marginal revenue.
Which of the following measures of cost is best described as "the cost of a typical unit of output if total cost is divided evenly over all the units produced?"
average total cost
When a firm is experiencing economies of scale, long-run
average total cost is greater than long-run marginal cost.
If marginal cost is greater than average total cost, then
average total cost is increasing.
If Franco's Pizza Parlor knows that the marginal cost of the 500th pizza is $3.50 and that the average total cost of making 499 pizzas is $3.30, then
average total costs are rising at Q = 500.
Suppose that a country that has a high level of output per person agrees to trade with a country that has a low level of output per person. Which country can benefit?
both
Suppose that the market price for pizzas increases. The increase in producer surplus comes from the benefit of the higher prices to
both existing sellers who now receive higher prices on the pizzas they were already selling and new sellers who enter the market because of the higher prices.
Irregular fluctuations in economic activity are known as the
business cycle.
Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. The marginal cost per room per night
cannot be determined from the information given.
In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith described a visit he made to a
car factory
In the long run a company that produces and sells kayaks incurs total costs of $15,000 when output is 30 kayaks and $20,000 when output is 40 kayaks. The kayak company exhibits
constant returns to scale because average total cost is constant as output rises.
The benefit to buyers of participating in a market is measured by
consumer surplus
Total surplus in a market is equal to
consumer surplus + producer surplus.
Total surplus with a tax is equal to
consumer surplus plus producer surplus plus tax revenue.
Taxes can create deadweight losses because they
create administrative burdens as people comply with tax laws.
The art in scientific thinking -- whether in chemistry, economics, or biology -- is
deciding which assumptions to make
Suppose that some firms in a competitive industry are earning zero economic profits, while others are experiencing losses. All else equal, in the long run, we would expect the number of firms in the industry to
decrease
In a particular country in 1998, the average worker needed to work 40 hours to produce 100 units of output. In that same country in 2008, the average worker needed to work 36 hours to produce 72 units of output. In that country, the productivity of the average worker
decreased between 1998 and 2008, so we would expect the standard of living to have decreased accordingly.
Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the
demand curve will shift upward by $20, and the price paid by buyers will decrease by $20
Refer to Figure 4-1. It is apparent from the figure that the
demand for the good conforms to the law of demand.
If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then the
demand for the good is said to be inelastic.
A tax system with little deadweight loss and a small administrative burden would be described as
efficient.
Over the past century, the average income in the United States has risen about
eightfold.
Opponents of cigarette taxes often argue that tobacco and marijuana are substitutes so that high cigarette prices
encourage marijuana use, and the evidence supports this argument
Market failure can be caused by
externalities and market power
Lawmakers designed the burden of the FICA payroll tax to be split evenly between workers and firms. Labor economists believe that
firms bear most of the burden of the tax
The use of theory and observation is more difficult in economics than in sciences such as physics due to the difficulty in
formulating theories about economic events.
Which of the following is not a characteristic of a monopoly?
free entry and exit
Welfare economics is the study of
how the allocation of resources affects economic well-being.
The marginal product of labor is equal to the
increase in output obtained from a one unit increase in labor.
Refer to Figure 4-7. The movement from Da to Db in the market for potato chips could be caused by a(n)
increase in the price of a pretzels.
Refer to Figure 5-17. If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $7, then sellers' total revenue would
increase.
Two goods are complements when a decrease in the price of one good
increases the quantity demanded of the other good.
If the demand for leather decreases, producer surplus in the leather market
increases.
Factors of production are
inputs into the production process
The French expression used by free-market advocates, which literally translates as "allow them to do," is
laissez-faire
Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will
lower both price and total revenues
The competitive firm's short-run supply curve is that portion of the
marginal cost curve that lies above average variable cost.
Suppose ABC Aluminum Inc. owns 80% of the world's bauxite, a mineral used in the production of aluminum. Which of the following reasons describes the fundamental barrier to entry for the aluminum industry?
monopoly resources
Suppose that a firm in a competitive market has the following cost curves: Refer to Figure 14-1. If the market price is $5.00, the firm will earn
negative economic profits in the short run but remain in business.
Refer to Figure 6-16. In this market, a minimum wage of $2.75 creates a labor
neither a labor shortage nor surplus.
Goals of efficiency and equity in tax policy are
often in conflict with each other
John is an athlete. He has $120 to spend and wants to buy either a heart rate monitor or new running shoes. Both the heart rate monitor and running shoes cost $120, so he can only buy one. This illustrates the principle that
people face trade-offs
All of the following are transfer payments except
personal income taxes.
Market power refers to the
power of a single person or small group to influence market prices
Financial aid to college students, quantity discounts, and senior citizen discounts are all examples of
price discrimination
Economists assume that monopolists behave as
profit maximizers.
The ability of an individual to own and exercise control over scarce resources is called
property rights.
Economists at the Department of the Treasury
provide advice on tax policy to the President
If the tax on a good is doubled, the deadweight loss of the tax
quadruples.
A demand curve shows the relationship between price and
quantity demanded.
The quantity supplied of a good is the amount that
sellers are willing and able to sell.
For a college student who wishes to calculate the true costs of going to college, the costs of room and board
should be counted only to the extent that they are more expensive at college than elsewhere.
For a good that is taxed, the area on the relevant supply-and-demand graph that represents government's tax revenue is
smaller than the area that represents the loss of consumer surplus and producer surplus caused by the tax.
The smaller the price elasticity of demand, the
steeper the demand curve will be through a given point.
If the quantity supplied responds only slightly to changes in price, then
supply is said to be elastic.
Suppose chocolate-dipped strawberries are currently selling for $30 per dozen, but the equilibrium price of chocolate-dipped strawberries is $20 per dozen. We would expect a
surplus to exist and the market price of chocolate-dipped strawberries to increase.
Welfare economics is the study of how
the allocation of resources affects economic well-being.
If revenue from a gasoline tax is used to build and maintain public roads, the gasoline tax may be justified on the basis of
the benefits principle.
You have driven 800 miles on a vacation and then you notice that you are only 15 miles from an attraction you hadn't known about, but would really like to see. In computing the opportunity cost of visiting this attraction you had not planned to visit, you should include
the cost of driving the next 15 miles, but not the cost of driving the first 800 miles.
In the circular-flow diagram, in the markets for
the factors of production, households and firms are both buyers.
Which of the following will cause an increase in producer surplus?
the imposition of a binding price ceiling in the market
Refer to Figure 5-10. If rectangle D is larger than rectangle A, then
the magnitude of the percent change in price between P1 and P2 is smaller than the magnitude of the corresponding percent change in quantity demanded.
A simultaneous increase in both the demand for MP3 players and the supply of MP3 players would imply that
the value of MP3 players to consumers has increased, and the cost of producing MP3 players has decreased.
A payroll tax is a tax on
the wages that a firm pays its workers.
The first number in any ordered pair is
the x-coordinate.
A dairy produces and sells organic milk. Last year it sold 500,000 gallons of milk at a price of $7 per gallon. For last year, the firm's
total revenue was $3.5 million.
The language of economics is
valuable because it provides a new and useful way of learning about the world.
At the equilibrium price of a good, the good will be purchased by those buyers who
value the good more than price
The circular-flow diagram is a
visual model of the economy.
The Earned Income Tax Credit is an example of a
wage subsidy.
In the simple circular flow diagram, the flow of money from the firms to the markets for factors of production is called
wages, rent, and profit
If the profit-maximizing quantity of production for a competitive firm occurs at a point where the firm's average total cost of production is falling as production increases, then the firm
will be earning positive economic profit at the profit-maximizing quantity.
Refer to Figure 8-2. The loss of producer surplus as a result of the tax is
$3
Refer to Table 14-15. What is the lowest price at which this firm would operate in the short run?
$3
Refer to Figure 8-2. The loss of consumer surplus as a result of the tax is
$4.50.
The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Karen paid $6,000 in taxes. What were her marginal and average tax rates?
20 percent and 12 percent, respectively
The income tax requires that taxpayers pay 10 percent on the first $40,000 of income and 20 percent on all income over $40,000. Emily paid $9,000 in taxes. What were her marginal and average tax rates?
20 percent and 13.8 percent, respectively
Refer to Table 15-19. If a monopolist faces a constant marginal cost of $3, how much output should the firm produce?
4 units
Refer to Figure 7-24. At equilibrium, total surplus is measured by the area
ABD
Refer to Figure 7-24. At equilibrium, consumer surplus is measured by the area
AFB
A rationale for government involvement in a market economy is
All of the above are correct.
Patent and copyright laws encourage
Both a and b are correct.
Suppose when a monopolist produces 75 units its average revenue is $10 per unit, its marginal revenue is $5 per unit, its marginal cost is $6 per unit, and its average total cost is $5 per unit. What can we conclude about this monopolist?
The monopolist is currently maximizing profits, and its total profits are $375.
The market for ice cream is a
highly competitive market.
If the government removes a binding price ceiling from a market, then the price paid by buyers will
increase, and the quantity sold in the market will decrease.
Refer to Table 13-15. What is average variable cost when output is 50 units?
$4.80
Refer to Table 13-15. What is average fixed cost when output is 40 units?
$5.00
Hilda's Hair Hysteria earned $3,750 in total revenue last month when it sold 125 haircuts. This month it earned $3,600 in total revenue when it sold 90 haircuts. The price elasticity of demand for Hilda's Hair Hysteria is
1.14.
Assume the price of gasoline is $2.40 per gallon, and the equilibrium quantity of gasoline is 12 million gallons per day with no tax on gasoline. Starting from this initial situation, which of the following scenarios would result in the largest deadweight loss?
A 10 percent increase in the price of gasoline reduces the quantity of gasoline demanded by 2 percent and it increases the quantity of gasoline supplied by 7 percent; and the tax on gasoline amounts to $0.40 per gallon.
Suppose the government has imposed a price ceiling on sliced sandwich bread. Which of the following events could transform the price ceiling from one that is binding to one that is not binding?
A decease in the price of unsliced bread, which people consider as a substitute for sliced bread
Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?
A is a luxury and B is a necessity
Patent and copyright laws encourage
competition among firms.
Horizontal equity in taxation refers to the idea that people
in equal conditions should pay equal taxes.
A reduction in a monopolist's fixed costs would
not effect the profit-maximizing price or quantity.
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.
When a monopolist is able to sell its product at different prices, it is engaging in
price discrimination.
If the monopolist produces 5 units, what is its marginal revenue?
$15
Refer to Scenario 12-2. Suppose the government levies a tax of $3 on a movie ticket and that, as a result, the price of a movie ticket increases to $8. What is total consumer surplus after the tax is imposed?
$2
What is the value of P?
$360
Suppose a tax of $5 per unit is imposed on a good. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. The tax decreases consumer surplus by $10,000 and decreases producer surplus by $15,000. The deadweight loss of the tax is $2,500. The tax decreased the equilibrium quantity of the good from
5,000 to 3,000.
Refer to Figure 5-4. If the price decreases in the region of the demand curve between points A and B, we can expect total revenue to
decrease
Macroeconomics is the study of
economy-wide phenomena.
An example of a perfectly competitive market would be the market for
electricity.
Economists at the Department of Justice
help enforce the nation's antitrust laws.
Microeconomics is the study of
how individual households and firms make decisions.
Which of the following is a tax on labor?
sales tax
The price elasticity of supply measures how responsive
sellers are to a change in price
Refer to Figure 15-8. What is the area of deadweight loss?
the triangle 1/2[(A-C)*(Y-X)]
The minimum wage does not apply to
unpaid internships
On a downward-sloping linear demand curve, total revenue reaches its maximum value at the
upper end of the demand curve.
Refer to Figure 7-11. If the supply curve is S and the demand curve shifts from D to D', what is the change in producer surplus?
Producer surplus increases by $3,125.
Suppose the point (Q = 3,400, P = $20) is the midpoint on a certain downward-sloping, linear demand curve. Then
a decrease in price from $18 to $16 will increase total revenue.
Refer to Figure 7-11. If the supply curve is S', the demand curve is D, and the equilibrium price is $150, what is the producer surplus?
$1,250
The concert promoters of a heavy-metal band, WeR2Loud, know that there are two types of concert-goers: diehard fans and casual fans. For a particular WeR2Loud concert, there are 1,000 die-hard fans who will pay $150 for a ticket and 500 casual fans who will pay $50 for a ticket. There are 1,500 seats available at the concert venue. Suppose the cost of putting on the concert is $50,000, which includes the cost of the band, lighting, security, etc. Refer to Scenario 15-6. How much additional profit can the concert promoters earn by charging each customer their willingness to pay relative to charging a flat price of $50 per ticket?
$100,000
In the market for widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. The equilibrium quantity in the market for widgets is 200 per month when there is no tax. Then a tax of $5 per widget is imposed. The price paid by buyers increases by $2 and the after-tax price received by sellers falls by $3. The government is able to raise $750 per month in revenue from the tax. The deadweight loss from the tax is
$125
Refer to Figure 7-18. If total surplus is $240 and consumer surplus is
$130, then the price of the good is $120.
Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The amount of deadweight loss resulting from this tax is
$25.
Katie is planning to sell her house, and she is considering making two upgrades to the house before listing it for sale. Replacing the carpeting will cost her $2,500 and replacing the roof will cost her $9,000. Katie expects the new carpeting to increase the value of her house by $3,000 and the new roof to increase the value of her house by $7,000.
She should replace the carpeting but not replace the roof.
Refer to Figure 15-17. Which of the following statements best describes the changes that would occur if this firm were to switch from operating as a single price profit-maximizing monopolist to perfect price discrimination?
The quantity would remain constant, the profit would increase from BCFE to ABCFE and the deadweight loss would decrease from EFG to zero
