Correct Econ Exam 2

Which of the following statements is not correct

The government cannot improve upon the outcomes of private markets

A state-owned bridge is

a common resource when it is congested, but it is a public good when it is not congested

Suppose that a firm ins a competitive market faces the following revenues and costs: If the firm is currently producing 14 units, what would you advise the owners

continue to operate at 14 units

Barking dogs cannot be considered an externality because externalities must be associated with some form of market exchange

false

Because there are many sellers in a competitive market, individual firms are unable to maximize profits

false

The two characteristics of a competitive market are 1) many buyers and sellers in the market and 2) goods offered by the various sellers are highly differentiated

false

Total cost is the

market value of the inputs a firm uses in production

An externality is the uncompensated impact of

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

The provision of a public good generates a

positive externality and the use of a common resource generates a negative externality

Goods that are excludable include both

private goods and clubs goods

A tax on a good

raises the price that buyers pay and lowers the price that sellers receive

When a tax is levied on a good, the buyers and sellers of the good share the burden,

regardless of how the tax is levied

A firm is currently producing 100 units of output per day. The manager reports the owner that producing the 100th unit costs the firm $5. The firm can sell the 100th unit for $5. The firm should continue to produce 100 units in order to maximize its profits (or minimize its losses)

true

A good that is excludable but not rival is known as a club good

true

The area below the prices and above the supply curve measures the producer surplus in a market

true

The difference between economic profit and accounting profit is that economic profit is calculated based on the explicit costs only

true

When a driver enters a crowded highway he increases the travel times of all other drivers on the highway. This is an example of a negative externality

true

accounting profit is greater than or equal to economic profit

true

firms in a competitive market are said to be price takers because there are many sellers in the market, and the goods offered by the firms are very similar if not identical

true

if a firm produces nothing, it still incurs its fixed costs

true

when a tax is imposed on buyers, consumer surplus and producer surplus both decrease

true

when goods are available free of charge, the market forces that normally allocate resources in our economy are absent

true

The maximum price that a buyer will pay for a good is called

willingness to pay

The Bow Wow company produced and sold 350 dog beds. The average cost of production per dog bed was $35. Each dog bed can be sold for a price of $45. Bow Wow's total costs are

$12,250

Taylor sells 400 candy bars at $0.50 each. Her total costs are $125. Her profits are

$75.00

Which of the following statements about a well-maintained yard best conveys the general nature of the externality

A well-maintained yard conveys a positive externality because it increases the value of adjacent properties in the neighborhood