Econ 102 Final
The potential problem with competitive pricing regulation of a natural monopoly is that _____.
P < ATC
In a free-market economy, a product that entails a positive externality (additional social benefit) will be
underproduced.
The satisfaction or happiness one gets from consuming a good or service is called
utility.
Which of the following relationships exists in first-degree price discrimination?
D=MR
Which is not true for a monopolistically competitive industry?
Firms operate at the lowest point of their ATC curves in the long run.
How have companies like Uber and Lyft affected the ride-sharing market?
Price of the rides decreased, and the quantity of rides have increased.
Which situation is consistent with the law of diminishing marginal utility?
The more pizza Joe eats, the less he enjoys an additional slice.
Which of the following statements is correct?
Total utility is the sum of marginal utilities.
Which of the following indifference curves is not possible given the consumer's budget line?
U4 (doesn't touch/cross U4)
Use the following table to answer the question below. (1) Qd: 50, 60, 80, 90, 100 (2) Qd: 40, 50, 60, 70, 80 (3) Price: $10, $9, $8, $7, $6 (4) Qs: 70, 60, 50, 40, 30 (5) Qs: 80, 70, 60, 50, 40 Suppose that market demand is represented by two demanders in columns (1) and (2) and market supply is represented by two suppliers in columns (4) and (5). If the price were artificially set at $6
a shortage of 110 units would occur
The table below shows the weekly supply for hamburgers in a market where there are just three sellers. Price: $5, $4, $3, $2 Seller 1 Qs 1: 8, 6, 4, 2 Seller 2 Qs 2: 5, 4, 3, 2 Seller 3 Qs 3: 4, 3, 2, 1 Refer to the above table. If the price of a hamburger falls from $5 to $4, then the weekly market quantity of hamburgers supplied will
decrease from 17 to 13
In deciding what to buy to maximize utility, the consumer should choose the good with the
highest marginal utility per dollar spent.
A monopolistically competitive firm is operating at a short-run level of output where price is $21, average total cost is $15, marginal cost is $13, and marginal revenue is $13. In the short run this firm should
make no change in the level of output.
From an economic perspective, when consumers leave a fast-food restaurant because the lines to be served are too long, they have concluded that the
marginal cost of waiting is greater than the marginal benefit of being served.
The market supply curve indicates the
minimum acceptable prices that sellers are willing to accept for the product.
Use the figure below to answer the following question. An increase in price, all else held constant, would cause a change from
point 3 to point 4 (increase in price rises on the curve)
When diminishing marginal utility starts happening as a person consumes more and more of a given good
total utility will increase at a diminishing rate.
Use the following graph to answer the next question. The graph shows the cost curves for a perfectly competitive firm. If the market price of the product is $1.25 per unit, then the firm will earn how much profit per unit in the short run?
$0.45
Use the figure below to answer the following question. At equilibrium, economic surplus is
350
Use the following graph to answer the next question. This perfectly competitive firm will not produce unless price is at least
$5 (where AVC = MC)
Because of the popularity of the movie "Frozen," there is a large increase in demand for the merchandise, there is also many new companies producing items from backpacks, to dresses, to "Frozen" themed food items. How has this affected the market for "Frozen" merchandise?
Quantity increases and price is indeterminate.
Use the following graph to answer the next question. How much profit will this firm make?
$200 (MR = MC multiply Q x P and divide by 2)
Answer the next question based on the following data. Output: 0, 1, 2, 3, 4, 5, 6 Total Cost: $24, $33, $41, $48, $54, $61, $69 The fixed cost of production is
$24
Use the following graph to answer the next question. If the industry were perfectly competitive, then the market price would be _____.
$25, which is lower than what the price would have been if the industry were a pure monopoly
To answer the next question, use the following table, which shows the demand schedule faced by Ninaskets, a pure monopoly selling baskets. Price: $20, $18, $16, $14, $12, $10 Number of Baskets Sold: 3, 5, 7, 10, 15, 30 What is the change in total revenue if the pure monopoly lowers the price from $20 to $18?
$30
Use the following graph for a competitive market to answer the question below. Assume the government imposes a $2.25 tax on suppliers, which results in a shift of the supply curve from S1 to S2. The government's tax revenue is
$675
Use the figure below to answer the following question. What is the amount of deadweight loss after the government imposes the excise tax on the market?
$8
Use the following table to answer this question, which provides information on the production of a product that requires one variable input. Input: 0, 10, 20, 30, 40, 50, 60 Total Product: 0, 200, 600, 720, 820, 900, 980 The marginal product of the 40th input item is
10
Suppose, that your community has identified five different areas of town that are polluted and has assigned clean-up projects to each area: projects A through E in the table below. For simplicity, let's assume that the marginal cost of each project is $75,000. The marginal benefit to the community, however, is different for each and listed in the table below. If your city has enough money to pay for all five projects, which areas should it clean up? Project: A, B, C, D, E Marginal Benefit: $150,000, $125,000, $100,000, $75,000, $50,000
A, B, C, and D
Use the following graphs to answer the next question. The long-run equilibrium for a monopolistically competitive firm is represented by graph
B (where ATC touches slanted Demand curve)
Use the following graphs to answer the next question. A short-run equilibrium that would produce losses for a monopolistically competitive firm would be represented by graph
D (where ATC is above D curve)
Which of the following is most likely to be an implicit cost for Company X?
Forgone rent from the building owned and used by Company X
Which of the following characteristics of property rights is key for the Coase Theorem to work?
Low transaction costs
Use the following graph Suppose Asarta Inc. is polluting yucko and they have been tasked with cleaning up some of their waste. The company decides to clean up Q tons of yucko—are they cleaning up enough?
No, because the MB > MC
Use the following graph to answer the next question. If the government regulated the pure monopoly and made it set a normal profit price, what price and quantity of output levels would we observe in the short run?
P3 and Q2 (where MC = ATC)
Which is most likely to be observed in a community where price ceilings are imposed on residential rents?
People moving into the community will have difficulty locating residential space to rent.
Due to a recent hurricane there is a major loss of sugarcane crops. At the same time in the U.S. consumers are eating healthier and cutting back on eating items that have sugar in them. How will this affect the price and quantity in the sugar market?
Quantity decreases and price is indeterminate
Use the following diagram to answer the question. Which of the following best depicts the change in the market for apples if producing apples becomes more efficient due to the use of watering technology, which allows farmers to know if the trees are being over- or under-watered?
Shift S1 to S2 (supply curve would shift to the right)
Which of the following is not an assumption of the decision-making process followed by consumers to maximize utility?
The consumer does not consider the prices of the products.
Which of the following statements is correct?
The marginal cost curve intersects the average variable cost curve at its lowest point.
Which of the following factors will make the demand for a product relatively elastic?
The time interval considered is long.
Why do private companies rarely provide public goods?
There is no way to force people to pay for the public good which increases free riders.
Which of the following indifference curves maximizes utility or satisfaction given the consumer's budget line for sodas and cookies?
U3 (Demand curve hits U3 curve)
Joshua's indifference curves for two products are shown below: Which of the following indifference curves is the most preferred?
U3 (highest)
A perfectly competitive producer is
a "price taker."
Use the figure below to answer the following question. A movement along the supply schedule from point x to point y (down the supply curve) depicts
a decrease in quantity supplied
The monopolistically competitive seller's demand curve will become more elastic with
a larger number of competitors.
The cross-price elasticity of demand between pasta and spaghetti sauce is likely to be
a negative number.
If the economic profit generated by a firm is zero and its implicit costs are greater than zero, then
accounting profit is greater than zero.
In the circular flow model of the market system, households
buy products and sell resources.
A third-degree price-discriminating pure monopoly will follow a system where _____.
buyers with relatively more inelastic demands are charged higher prices than buyers with relatively more elastic demands
Which of the following pairs are not considered to be complementary goods?
coffee and tea
An individual should specialize in the production of a good for which he/she has a
comparative advantage.
From an economic perspective, when a consumer decides to buy more life insurance, the consumer has most likely concluded that the marginal
cost of more insurance coverage is less than the marginal benefit.
Use the figure below to answer the following question. If a price floor in this market is set at P2, then deadweight loss equals area
d
Use the following graph for a perfectly competitive firm to answer the next question. The firm is
earning a normal profit.
In a perfectly competitive industry
economic profits may exist in the short run but not in the long run.
Use the following figure to answer the question below. The combination of zero pounds of corn and eighty pounds of green beans is
efficient (whichever combination is on the curve is efficient)
Total revenue decreases as the price of a good increases, if the demand for the good is
elastic.
In perfect competition, each additional unit of output that a firm sells will yield a marginal revenue that is
equal to price.
Economic profit is
equal to the difference between accounting profit and implicit costs.
Accounting profit is typically
greater than economic profit because the former does not take implicit costs into account.
The supply of cars will be more elastic
in the long run than in the short run.
If the price of gasoline increases significantly, then we'd expect the price for hybrid and electric cars to
increase, and the quantity increase.
Fixed costs are those costs that are
independent of the amount of output a firm produces in the short run.
Use the following graph showing the average total cost curve for a perfectly competitive firm to answer the next question. At the long-run equilibrium level of output, this firm's total cost
is $400 (equilibrium quantity x price)
Producer surplus
is the difference between the minimum price producers are willing to accept for a product and the higher equilibrium price.
A perfectly competitive firm does not try to sell more of its product by lowering its price below the market price because
it can sell all it wants to at the market price.
Answer the next question based on the following payoff matrix for a duopoly in which the numbers indicate the profit in millions of dollars for each firm. Firm A High Price Low Price Firm B High price A = $250A = $325B = $250B = $200Low price A = $200A = $175B = $325B = $175 If firm A adopts the high-price strategy, then firm B would adopt the
low-price strategy and earn $325.
If an individual has a comparative advantage in the production of a good, then this individual has the
lowest opportunity cost in the production of the good.
A unique feature of an oligopolistic industry is
mutual interdependence.
Assume there is no way to prevent someone from using an interstate highway, regardless of whether or not he or she helps pay for it. This characteristic is called
nonexcludability.
Use the following diagram in which S is the market supply curve and S1 is a supply curve (S1 is above S) comprising all costs of production, including external costs, to answer the question below. Assume that the number of people affected by these external costs is large. Without government interference, this market will reach a(n)
overallocation of resources to this product.
We would expect the cross-price elasticity of demand between Pepsi and Coke to be
positive, indicating substitute goods.
The law of demand states that, all else held constant,
price and quantity demanded are inversely related.
Monopolistic competition is characterized by firms
producing differentiated products.
There is a surplus in a market for a product when
quantity demanded is less than quantity supplied.
The local pizza place sells 1 large pizza for $7.99 or 2 large pizzas for $11.99. The pizza joint is engaging in _____.
second-degree price discrimination
The concept of price elasticity of supply measures the
sensitivity of sellers to price changes.
According to the law of diminishing marginal returns
the additional product generated by additional units of an input will eventually diminish.
Use the figure below to answer the following question. The equilibrium point in the market is the point at which the S and D curves intersect. Assuming equilibrium price P1 , producer surplus is represented by areas
c + d
Use the figure below to answer the following question. In the past few years, the demand for donuts has increased. This would be illustrated by a change from
point 4 to point 6 (increase in demand would mean moving to the curve to the right)
Steve went to his favorite hamburger restaurant with $3, expecting to buy a $2 hamburger and a $1 soda. When he arrived, he discovered that hamburgers were on sale for $1 each, so Steve bought two hamburgers and a soda. Steve's response to the decrease in the price of hamburgers is best explained by
the income effect.
Use the following graph showing cost curves for a perfectly competitive firm to answer the next question. What is the lowest price at which the firm will start producing output in the short run?
$0.60 (where MC = AVC)
Use the data in the table below to answer the following question. Price: $20, $18, $16, $14, $12, $10, $8, $6, $4 Quantity Demanded: 12, 17, 20, 24, 30, 36, 40, 44, 48 The price elasticity of demand (based on the midpoint formula) when price decreases from $12 to $10 is
-1
Answer the next question based on the following payoff matrix for two oligopolistic firms in which the numbers indicate the profit in thousands of dollars for a high-price or a low-price strategy. Firm A High Price Low Price Firm B High price A = $625A = $725B = $625B = $475 Low price A = $475A = $400B = $725B = $400 If both firms collude to maximize joint profits, the total profits for the two firms will be
$1,250,000
Use the following graph to answer the question below. The price where marginal benefit equals marginal cost is
$1.00 (where MC crosses MB)
Use the data in the table below to answer the following question. Price: $20, $18, $16, $14, $12, $10, $8, $6, $4 Quantity Demanded: 12, 17, 20, 24, 30, 36, 40, 44, 48 The price elasticity of demand (based on the midpoint formula) when price decreases from $8 to $6 is
-0.33
Use the following table to answer the question below. Jake's Production Possibilities Schedule: Green Beans: 0, 10, 20, 30, 40 Pounds of Corn: 160, 120, 80, 40, 0 Jane's Production Possibilities Schedule: Green Beans: 0, 20, 40, 60, 80 Pounds of Corn: 80, 60, 40, 20, 0 Without trade Jake consumes 20 pounds of green beans and 80 pounds of corn, and Jane consumes 40 pounds of green beans and 40 pounds of corn. If the terms of trade are 1 pound of green beans for 3 pounds of corn, and Jake sells Jane 72 pounds of corn, then the gains from trade for Jane are ______ pounds of green beans and ______ pounds of corn with trade and specialization.
16, 32
Use the following graph to answer the next question. If the industry were perfectly competitive, the quantity of output produced would be _____.
160 (Q where MC = D)
Use the following information to answer the question below. Cloe is given $4 of pocket money to be spent on either hard candies or chocolates. Chocolates cost 40 cents each and hard candies cost 80 cents each. The marginal utilities derived from the consumption of each product are as shown in the following table. Number of Items: 1, 2, 3, 4, 5, 6, 7, 8 Marginal Utility of Chocolates: 60,50, 40, 30, 20, 10, 5, 0 Marginal Utility of Hard Candies: 150, 140, 120, 100, 80, 70, 50, 20 Which combination would maximize Cloe's total utility given her $4 budget?
2 chocolates and 4 hard candies
A nation can produce two products: steel and wheat. The table below is the nation's production possibilities schedule: Production Possibilities Schedule: Product: A, B, C, D, E, F, Steel: 0, 1, 2, 3, 4, 5, Wheat: 100, 90, 75, 55, 30, 0 Which of the following output-combinations is unattainable?
4 units of steel and 55 units of wheat
Use the following table to answer the question below. Jake's Production Possibilities Schedule: Green Beans: 0, 10, 20, 30, 40 Pounds of Corn: 160, 120, 80, 40, 0 Jane's Production Possibilities Schedule: Green Beans: 0, 20, 40, 60, 80 Pounds of Corn: 80, 60, 40, 20, 0 One pound of green beans costs Jake _____ pound(s) of corn. One pound of green beans costs Jane _____ pound(s) of corn.
4, 1
Use the following table to answer the question below. Units Consumed: 0, 1, 2, 3, 4 Total Utility: 0, W, 35, Y, 40 Marginal Utility: -, 20, X, 10, Z The value for Y is
45
The table below shows the weekly demand for hamburgers in a market where there are just three buyers. Price: $6, $5, $4, $3 Quantity Demanded by Buyer 1: 7, 9, 15, 21 Quantity Demanded by Buyer 2: 4, 7, 10, 15 Quantity Demanded by Buyer 3: 6, 8, 12, 16 Refer to the table. If there were 100 buyers in the market, each with a demand schedule identical to Buyer 3 in the table, then the weekly quantity of hamburgers demanded in the market at a price of $6 would be
600
In long-run equilibrium, a profit-maximizing firm in a monopolistically competitive industry will produce the quantity of output where
ATC = P, MR = MC < P.
Which of the following illustrates a macroeconomic question?
Are increasing wage demands by workers contributing to price inflation?
Use the following graph to answer the next question. To maximize profits, the perfectly competitive firm should produce output at
C (where D = MC)
Why does producer surplus decrease as price decreases?
Producers sell less of the good and receive less from the lower price.
The supply of product X is elastic if
a 5% increase in price generates a 7% increase in quantity supplied.
The assertion that "there is no free lunch" means that
all production has an opportunity cost.
Use the figure below to answer the following question. If actual production and consumption occur at Q1 and the price is P1
consumer surplus equals area a + b.
Imagine that a firm expands the size of its plant, doubling its total cost of production but more than doubling its output. This situation is known as
economies of scale.
Use the following table to answer the question below. Pounds of Green Beans: 0, 20, 40, 60, 80 Pounds of Corn: 160, 120, 80, 40, 0 Dave's production possibilities schedule demonstrates that
he does face scarcity
Which of the following is not a main function of the entrepreneur?
to make routine pricing decisions
The opportunity cost to a consumer who smokes cigarettes consists of the
product that the consumer could have bought instead of cigarettes
Assume that Alex would like to purchase a combination of product A and product B such that, after he is done spending his limited income, the MUa / Pa = 8 and MUb / Pb = 4. To maximize utility without spending more money, Alex should
purchase more of product A and less of product B.
Farmers selling some of their soybeans in storage because they anticipate a lower price of soybeans in the near future would cause a
rightward shift in the current supply of soybeans.
If product Y is an inferior good, a decrease in consumer incomes will
shift the demand curve for product Y to the right.
Indifference curves do not cross because if you prefer steak over salmon and salmon over chicken then you also prefer
steak over chicken.
All else held constant, if the price of a resource used to produce product X falls, the
supply curve of X will shift to the right.
Use the following graph for a competitive market to answer the question below. A price floor of $25 per unit (above equilibrium) will result in a
surplus of 200 units
Use the following diagram for the corn market to answer the question below. If the price in this market is $4 per bushel (above equilibrium), there will be a
surplus, and the price will tend to fall.
Allocative efficiency occurs only at that output where
the combined amounts of consumer surplus and producer surplus are maximized.
There is excess production of tomatoes in the market. This implies that
the current price is above the equilibrium level.
Macroeconomics approaches the study of economics from the viewpoint of
the entire economy.
An increase in the demand for bubble gum might be caused by
the fact that blowing bubbles is now a popular activity.
The demand curve faced by a nondiscriminating pure monopoly is _____.
the same as the industry's demand curve
It takes a considerable amount of time to increase the production of pork. This implies that
the short-run supply curve for pork is relatively less elastic than the long-run supply curve for pork.
A negative externality or spillover cost (additional social cost) occurs when
the total cost of producing a good exceeds the costs borne by the producer.
