ECN 212 ASU QUESTIONS

The graph shows cost curves, demand and marginal revenue for a laptop computer producer with a patent on the production process. What price will the firm charge to maximize profits?

$375

The Arizona Chronicle combines workers and printing presses to produce newspapers. The figure displays isoquants for the production of 10, 20, 30 and 40 units of newspapers. Each worker costs $120 and a printing press costs $24.If fixed costs for the company amount to $300, at the cost-minimizing point, what is the average total cost of producing 30 newspapers?

$58.00

The Arizona Chronicle combines workers and printing presses to produce newspapers. The figure displays isoquants for the production of 10, 20, 30 and 40 units of newspapers. Each worker costs $120 and a printing press costs $24. What is the average variable cost of producing 20 newspapers?

$59.28

The graph shows average costs, marginal cost and marginal revenue for a perfectly competitive sugarcane producer. If the price of sugarcane is $63 per MT, what are the firm's total costs?

$675

A hospital combines surgeons and operating rooms to treat patients. The figure displays the combinations of hospital rooms and surgeons required to treat 400 patients. If surgeons cost $300, operating rooms cost $120 and fixed costs are $2000, what is the minimum total cost of treating 400 patients?

$8,000

The Arizona Chronicle combines workers and printing presses to produce newspapers. The figure displays isoquants for the production of 10, 20, 30 and 40 units of newspapers. Each worker costs $120 and a printing press costs $24. What is the minimum variable cost required to produce 10 units of newspapers?

$835.20

The figure shows demand, marginal revenue and cost curves for a firm that produces designer jeans. There are many producers of jeans, each selling a differentiated product. This firm maximizes profits when it charges ___ per pair.

$90

Alonzo receives utility from purchasing roses, r, and sunflowers, s, for his mother. His utility is represented by a function U(r,s)=r2s. Of the four available choices, which consumption bundle (r, s) provides Alonzo with the most utility?

(6,3)

The figure shows the demand for oil in a particular country, in this country there is only one firm in the market for oil with monopoly power. What will be the change in revenue (in millions) if the firm decides to decrease it's production of oil from Q2 to Q1?

-$600

Ali consumes 50 potatoes per year when the price of potatoes is $1 each. When the price of potatoes changes to $1.5 each, he buys 45 potatoes per year. Find Ali's price elasticity of demand for potatoes.

-0.2

Referencing this linear demand curve for coffee, when price increases from $1.00 to $1.20, what is the price elasticity of demand?

-1.25

Suppose the world price of basketballs is Pw = $3. If a tariff of $1 is imposed, what is the change in consumer surplus?

-78

According to the market demand curve, how many thousand oranges would be purchased if oranges cost $1.25 each?

10

An autoshop uses workers and machines to repair cars. Cars repaired as a function of labor is plotted in the figure. What is the approximate marginal product of first worker?

10

Chas is starting a shoe collection, and he has $100 dollars to spend on sneakers or slippers. A pair of sneakers costs $10, while a pair of slippers costs $5. What is the maximum number of pairs of sneakers that Chas can purchase?

10

John is a factory worker who is still sorting out his work schedule. All his earnings go toward purchasing sandwiches, which cost $5 each, and he can work for a maximum of 24 hours every day. After a 20% tax on wages, John earns $20 per hour. Suppose the tax is lifted and John earns $25 per hour. What is the maximum number of sandwiches John can purchase when he pays no taxes?

120

Suppose no corrective action is taken to address a negative production externality. Which of the following would most likely occur?

A deadweight loss due to overproduction.

If no action is taken to correct the externality in the market shown in the figure, which of the following will happen as a result?

A deadweight loss due to underproduction.

The market for pens is shown in the figure. Beginning at point A, what would be the new equilibrium in the market for pens if the supply of pens increased?

B

In the figure, the world price under free trade is P1. If the government imposes an import quota of (Q4 - Q2) what will be total change in domestic producer surplus?

C

The figure represents a firms short-run marginal, average, and variable costs. Each point in the figure represents a combination of price and quantity, which of the points in the figure shows the firm earning negative profits?

C

Identify the area of the deadweight loss in the figure if the market were subject to a price ceiling at P2.

D

Consumer surplus is best defined as

Difference between total private benefit and amount paid

Despite laws prohibiting poaching of whales along the Norwegian coast, government officials are finding a decline in the whale population. What feasible step might the government take to ensure an increase in the whale population?

Increase enforcement of the law

Suppose that that tennis balls and tennis racquets are complements. If the price of tennis racquets increases, what would we expect to happen to the demand for tennis balls?

The demand for tennis balls would decrease

For a perfectly competitive market, what trait would we expect to see as part of the market structure?

The firms are small relative to the size of the market

B1

The graph shows two indifference curves for an example consumer who has preferences over goods x and y. Which bundle provides the consumer with the highest value of utility?

B3 and B4 provide the consumer with the same level of utility

The graph shows two indifference curves for an example consumer who has preferences over goods x and y. Which of the following is true?

The Aral sea has been greatly depleted by diversion of water from rivers for irrigation. This has significantly impacted the profitability of fisheries operating by the sea. In this case, the water in the river is an example of

a common resource

Congestion of public goods occurs because:

consumers do not take into account the diminished utility of others when consuming a public good

Suppose the world price of basketballs is Pw = $3. If a tariff of $1 is imposed, what is the approximate change in producer surplus?

gain of about 38

Which of the following is not something an economist would use a model for?

making an unsubstantiated claim

At market equilibrium, marginal cost is equal to

marginal benefit

In her backyard, Lizzie is lighting fireworks. Her neighbors are unable to sleep due to the noise. This is an example of a

negative consumption externality

Last Thursday, Jerry bought a pair of sneakers. Sneakers are an example of a:

private good

Celeste uses $2 to purchase an apple. The opportunity cost of that decision depends on:

the next best use of the $2 she spent on the apple.

Which of the following to economists consider when measuring benefit to society resulting from market transactions?

total surplus

Suppose an effective price ceiling of $40 is placed on the price of jeans. What is the value of deadweight loss?

$178.25

Suppose the figure represents the market for peaches and there are no externalities in the market. Suppose a sales tax of $40 per bin of peaches is levied on consumers of peaches. The new demand curve is labeled D2. Consumer surplus after the tax is:

$300

Suppose the figure represents the market for peaches and there are no externalities in the market. Suppose a sales tax of $40 per bin of peaches is levied on consumers of peaches. The new demand curve is labeled D2. Producer surplus after the tax is:

$300

The provided figure illustrates the production function at a restaurant, where the number of meals produced (qM) is dependent on the number of cooks (qL)and the number of stoves (qK). If the restaurant has 1 cook and 2 stoves, approximately how many more meals can be produced if the number of stoves increases to 4?

10

The provided figure illustrates the marginal product of labor for each worker at an auto shop. Based on the graph, what is the approximate total number of cars repaired when the shop employs 2 workers?

13.5

Consider the market for coffee to be comprised of three people, Adam, Cesar, and Jesus. Adam drinks a lot of coffee, and is willing to buy 10 cups at a price of $4.00. However, Cesar and Jesus are less willing to buy coffee, and will only buy 2 cups each at $4.00 per cup. Both Cesar and Jesus will buy 10 cups each when the price is $1.00 per cup. What is the market demand at $4.00?

14

Chas is starting a shoe collection, and he has $100 dollars to spend on sneakers or slippers. A pair of sneakers costs $10, while a pair of slippers costs $5. What is the maximum number of pairs of slippers that Chas can purchase?

20

Kelli is buying breakfast supplies, and she has $120 to spend between cereal and bread. Each box of cereal costs $4, while each loaf of bread costs $3. Suppose that Kelli's income decreased from $120 to $90, determine the maximum number of loaves bread she can purchase.

30

John is a factory worker who is still sorting out his work schedule. All his earnings go toward purchasing sandwiches, which cost $5 each, and he can work for a maximum of 24 hours every day. John pays a 20% tax on his wages and after taxes, earns $20 per hour. What is the number of sandwiches he forgoes buying by choosing to enjoy 8 hours of leisure?

32

A software company in Silicon Valley is dedicated to developing web programs. The number of programs developed is a function of the number of computers used (qK) and the number of coders hired (qL). The figure shows an isoquant for the production of 20 programs. What is the relative productivity of labor and capital, MPLMPK, between points P and Z?

4

The provided figure illustrates the marginal product of labor for each worker at an auto shop. Based on the graph, what is the approximate marginal productivity of the sixth worker?

4

There are two individuals in this market, and their demand curves are represented in the graphs. If the price of shoes is $20, what is the market demand?

5

The figure shows the market for wheat, which of the following would result in a shortage of 8 million lbs of wheat?

A price ceiling at $0.75

A beverage company produces specialty soda using land, labor, and capital and a constant returns to scale production technology. It must pay a lease on its production plant for one year. It can hire workers at a wage of $20 per hour and capital costs are $40 per hour. Which of the following is true about costs in the short-run?

Average total cost reaches a minimum at the point where marginal cost is equal to average total costs

15/7

Cindy is determining how best to balance her work and leisure according to her utility preferences. She earns $45 an hour at work and spends all her money on sweaters, which cost $15 each. The figure illustrates her indifference curve and her budget set. At which point does Cindy choose to maximize her utility given her budget constraint?

$3

If the following represents Celene's demand curve for milk, and Celene is buying 5 liters of milk. What price does she pay?

A to B

Jenny always chooses the consumption bundle of oranges and apples that maximizes her utility subject to her budget constraint. The figure shows two indifference curves and her budget constraint before and after the recent rise in the price of apples. Her optimal consumption bundle changes from:

substitutes

Jenny always maximizes her utility subject to her budget. The provided graph depicts Jenny's budget constraints and indifference curves before and after a fall in the price of apples. What can be said of the relationship between apples and oranges?

4 muffins for 9 croissants

Jim enjoys muffins and croissants. His indifference curve is illustrated in the graph, with multiple consumption bundles highlighted. Suppose Jim has 8 muffins and 8 croissants. Which of the following trades would he accept?

B2

Marge receives utility from the consumption of roses and sunflowers described by the utility function U(roses, sunflowers). One of Marge's indifference curve is shown on the graph along with four consumption bundles. Which of the four bundles provides Marge with the highest level of utility?

How can opportunity costs be described in monetary amounts?

Opportunity costs can be described as the next best alternative use of that dollar amount

30

Robert receives utility from his consumption of apples, qA, and oranges, qO. His utility function is u(qA,qO) = qAqO. Based on this utility function, what is the value of utility Robert from the consumption of apples and oranges along the provided indifference curve?

give Robert 4 more apples

The accompanying graph shows an indifference curve for Robert, who receives utility from the consumption apples and oranges. If Robert begins with 2 apples and 5 oranges, which of the below would increase his utility the most?

The figure represents a firm's short-run marginal cost, average total cost, and average variable cost curves. What does the blue area represent?

The profit of a perfectly competitive firm facing a price of $80 per unit

Julie spends all of her income, but is not maximizing utility

The provided graph depicts Julie's budget constraints and indifference curve before and after a decrease in the price of pecans. At consumption bundle Q,

normal

Two budget constraints and indifference curves for Celeste and depicted in the provided diagram before an after an increase in Celeste's income. Based on the provided information and choices, what type of goods are shoes?

Suppose at the current quantity of apples produced and consumed, marginal social benefit exceeds marginal social cost. This could be caused by

a tax on the consumption of apples

he law of diminishing marginal product suggests that:

additional output produced falls as the amount of an input used in production increases

What is an outcome that maximizes benefits less losses to society?

an efficient outcome

The figure shows demand, marginal revenue and cost curves for a producer of power. The firm is currently the only supplier of power. Assume costs for any other firm would be similar. If another firm entered the market

both firms would earn negative economic profit

Eric is starting a new home construction project. To construct the house, he uses power tools (qK) and hires workers (qL). Power tool rental costs $10 per hour, while each worker can be hired at a rate of $30 per hour. Eric has $300 to spend, what is the slope of the isocost curve?

constant returns to scale

The provided figure illustrates the production function at a restaurant, where the number of meals produced (qM) is dependent on the number of cooks (qL)and the number of stoves (qK). If the restaurant starts out with 1 cook and two stoves and decides to double all inputs. The number of meals produced

doubles

The last step economists take when following the scientific method is to

group related, tested hypotheses into a theory

FlyPlaneAir has $360 million to acquire new aircraft or maintain its fleet. The cost of maintaining a plane is $5 million and $30 million is needed to purchase a new aircraft. Suppose the price of a new aircraft decreases to $20 million due to technological advances. What best describes the change in FlyPlaneAir's budget constraint and budget set?

he budget constraint rotates out from the origin and the budget set expands

Which of the following would NOT prohibit new firms from entering a market?

high prices

All else equal, an increase in income would cause a(n) _____ in ______ for normal goods.

increase, demand

Suppose at the current quantity of apples produced and consumed, marginal social benefit exceeds marginal social cost. The current quantity produced is _____ the efficient quantity.

less than

The time period in which all inputs in production may be varied is described by what term?

long-run

A software company in Silicon Valley is dedicated to developing web programs. The number of programs developed is a function of the number of computers used (qK) and the number of coders hired (qL). The figure shows an isoquant for the production of 20 programs. At point M, the marginal product of labor is ___ compared to point F.

lower

Suppose a monopolist controls the market for diamonds. Which is most likely true?

marginal social benefit exceeds marginal social cost

The figure depicts a perfectly competitive firm's short-run marginal and average cost curves. At a price of P, the firm is making ___________ profits.

negative

A market for pens is shown in each figure. ,Which figure depicts what would happen if firms entered the industry?

none of these

Which of the following is true about scarcity?

scarcity forces consumers to make decisions.

The figure shows the market demand for oranges, if the price of oranges is $1, what is the value of consumer surplus?

$11.25

Suppose the figure represents the market for peaches and there are no externalities in the market. Suppose a sales tax of $40 per bin of peaches is levied on consumers of peaches. The new demand curve is labeled D2. The value of tax revenue collected is:

$1200

A rice cooker company, QuickCook, produces rice cookers every month. The table shows costs and revenues at different levels of production. Fixed costs are $100 and each rice cooker sells for $25. If the company produces 25 rice cookers, how much is earned in profit?

$135

Suppose the demand curve in the figure represent's Mateo's demand for apples. If Mateo purchases 5 kg of apples at a price of $4 per kg, what is the value of consumer surplus?

$15

The figure shows demand, marginal revenue and cost curves for a manufacturer with a patent on the good it produces, making the the firm the only supplier. At the profit maximizing output quantity, this firm earns ___ in profits.

$400

The figure shows demand, marginal revenue and cost curves for a firm that produces designer jeans. There are many producers of jeans, each selling a differentiated product. This firm maximizes profits when it produces ___ pairs per hour.

16

The Arizona Chronicle combines workers and printing presses to produce newspapers. The figure displays isoquants for the production of 10, 20, 30 and 40 units of newspapers. Based on the information in the figure, what is the marginal product of labor relative to the marginal product of capital at the cost-minimizing point?

5

The graph shows cost curves, demand and marginal revenue for a monopolist that produces laptop computers. What quantity (thousands) should the monopolist choose to maximize profits?

7

The graph shows average costs, marginal cost and marginal revenue for a perfectly competitive apple producer. According to the graph, how many apples (in millions) will be supplied by this producer?

8

The figure displays several indifference curves and budget constraints for a consumer with preferences over toys and butter. Which of the following represents a change in the optimal consumption bundle resulting from a decrease in the price of toys?

A movement from A to B

The slope of an isocost curve is:

the relative per unit cost of inputs used to produce output

Models are useful because:

they include only the crucial details relevant to phenomena modeled

The free trade price of a product imported by a small nation is $50. If the government establishes an import quota nugget that generates a scarcity premium of $10, what would a domestic consumer expect to pay for the product?

$60

Eric is starting a new home construction project. To construct the house, he uses power tools (qK) and hires workers (qL). Power tool rental is $10 per hour, while each worker can be hired at a rate of $30 per hour. By hiring a worker for an hour, how many hours of rented power tools does Eric forgo?

3

FlyPlaneAir has $360 million to acquire new aircraft or maintain its fleet. The cost of maintaining a plane is $5 million and $40 million is needed to purchase a new aircraft. What is the relative price of an aircraft, expressed in terms of planes maintained?

8

Which of the following would cause movement from demand curve 2 to demand curve 1 for SUVS, assuming SUVs are normal goods?

A decrease in the price of minivans, a substitute good.

Identify the gain or loss to producers if the market shown in the figure is subject to a price floor at P2.

A gain of area B minus F

Under free trade, the domestic and world price in this market is P1. If the government sets an import tariff equal to (P2 - P1), what will be the change in TOTAL domestic surplus (i.e., consumer plus producer surplus)?

A loss of area (E + H + G)

Suppose a price floor of P2 is implemented in the competitive market depicted in the figure. Which area represents the deadweight loss resulting from the implementation of the price floor at P2?

D+F

3/4

Jim has preferences over croissants and muffins. The figure displays one of his indifference curves. What is the rate of substitution from bundle (8,8) to bundle (12,5)? Express your answer in terms of croissants per muffin.

(20,20)

Joe received a gift card of 60 dollars for his birthday that he can use towards downloading music or purchasing movies. Each movie costs $3, while the cost of each song is $1. The graph illustrating his budget constraint is displayed below. Given the provided budget constraint, which (x,y) coordinate on the graph reflects an unattainable consumption bundle?

s

Julie is shopping at a wholesale market, and and wishes to maximize her utility from pecan and cashew consumption subject to her budget constraint. An increase in the price of pecans changes her budget constraint. What was her optimal consumption point before the change in price?

Public radio in the United States relies, in part, on donations from listeners to finance its operation. Celeste and Lulu both enjoy public radio programs. Celeste donates $100 per year and Lulu does not. What describes Lulu's behavior?

Lulu is a free rider and receives the benefits of the radio without paying

Indicate the type of externality that best describes the following scenario. Raul's lawn service equipment empits pollution in neighborhoods where he provides services.

Negative production externality

-1

The accompanying graph shows two indifference curves and two budget constraints, one before and the other after a fall in the price of apples. What is the value of the marginal rate of substitution after the utility-maximizing consumer adjusts to a new optimal consumption bundle?

1:2

The accompanying graph shows two indifference curves and two budget constraints, one before and the other after an increase in the price of apples. The price of apples relative to the price of oranges changed from ___ to ___.

Bundle C provides the same amount of utility as the the optimal consumption bundle, but it is not affordable

The provided graph shows an indifference curve and budget constraint for an example consumer who has preferences over good x and good y. What is true about bundle C?

If Tom had 2 sedans and 20 convertibles, he would not be willing to trade his 2 sedans for additional 20 convertibles.

Tom Buchanan has a car collection of sedans and convertibles. One of his indifference curves is shown in the figure. Which of the following is true?

The figure displays marginal social benefit (mSb), marginal social cost (mSc), marginal private benefit (mPb), marginal private cost (mPc) curves. What type of externality, if any, is present in this market?

a positive consumption externality

Farmers living near Chetshire Meadows, a common pasture of 400 acres, often allowed their cows to roam freely. Recently, however, the pasture has become devoid of grass due to overuse. What steps could the government take to ensure that cows could continue to graze while preserving the grass in the pasture?

allow farmers to rent specific fenced areas of pasture

Trees planted in urban areas improve air quality, reduce soil erosion, and moderate temperature in hot cities. Which of the following policies would result in the socially efficient outcome?

offer residents tax credit or subsidy to plant trees

The tragedy of the commons describes:

overuse of a common resource relative to its economically efficient use

The I-5 highway in Los Angeles is frequently experiencing significant damage and wear as a result of extreme use from rush hour and general LA traffic, forcing repair work. In this instance, the I-5 can be considered a

public good

Trees planted in urban areas improve air quality, reduce soil erosion, and moderate temperature in hot cities. The figure depicts the market for trees planted in Tempe, Arizona. Without intervention, the market is ____ trees.

underproducing

What is an example of a common resource?

water from a local lake

Jan receives utility from his consumption of rice and beans. His utility function can be represented as U(x,y)=xy, where x represents the amount of beans he consumes and y represents the amount of rice. Which bundle provides Jan with the highest level of utility?

(5,5)

Tobias produces ice cream. When the price of an ice cream cup is $1 per cup he supplies 800 cups. If the price rises to $1.50 per cup, he increases the quantity supplied to 1,200 cups. What is Tobias' elasticity of supply?

1

-4/3

Kelli is buying breakfast supplies, and she has $120 to spend on cereal and bread. Each box of cereal costs $4, while each loaf of bread costs $3. Her budget constraint is represented on the graph. Supposing that Kelli's income increased from $120 to $150, determine the slope of the new budget line, expressed in terms of loaves of bread per box of cereal.

Because most market transactions are conducted with money

costs of transactions are lower than otherwise

-6

FlyPlaneAir has $360 million to acquire new aircraft or maintain its fleet. The cost of maintaining a plane is $5 million and $30 million is needed to purchase a new aircraft. What is the slope of FlyPlaneAir's budget constraint?

decrease consumption of oranges and increase consumption of apples and consume at point B

Jenny is trying to find the combination of apples and oranges that maximizes her utility given her budget. Starting at point A, describe how she should change her consumption bundle to maximize her utility. Jenny should