Econ 103 Final Sample Questions
. Refer to Figure 10-13. If 250 units of plastics are produced and consumed, then the a. social optimum has been reached. b. market equilibrium has been reached. c. negative externality associated with plastics has been eliminated. d. positive externality associated with plastics has been eliminated
A
. Refer to Figure 10-4. Externalities in this market could be internalized if a. there were a tax on the product. b. there were a subsidy for the product. c. production were stopped. d. the Coase theorem failed.
A
Consider luxury weekend hotel packages in Las Vegas. When the price is $250, the quantity demanded is 2,000 packages per week. When the price is $280, the quantity demanded is 1,700 packages per week. Using the midpoint method, the price elasticity of demand is about a. 1.43, and an increase in the price will cause hotels' total revenue to decrease. b. 1.43, and an increase in the price will cause hotels' total revenue to increase. c. 0.70, and an increase in the price will cause hotels' total revenue to decrease. d. 0.70, and an increase in the price will cause hotels' total revenue to increase.
A
Jessica makes photo frames. She spends $5 on the materials for each photo frame. She can create one photo frame in an hour. She earns $10 per hour at a part-time job at the local coffee shop. She can sell a photo frame for $30 each. Refer to Scenario 13-9. An accountant would calculate the total cost for one photo frame to be a. $5. b. $10. c. $15. d. $25
A
Refer to Figure 14-7. Which line segment best reflects the short-run supply curve for this firm? a. ABCF b. CD c. DF d. BCD
A
Refer to Figure 7-18. Assume demand increases and as a result, equilibrium price increases to $22 and equilibrium quantity increases to 110. The increase in producer surplus due to new producers entering the market would be a. $90. b. $210. c. $360. d. $480.
A
Refer to Figure 7-18. At the equilibrium price, consumer surplus is a. $480. b. $640. c. $1,120. d. $1,280
A
Refer to Figure 7-3. Which area represents consumer surplus at a price of P1? a. ABD b. ACG c. BCDF d. DFG
A
Refer to Table 11-4. Suppose the cost to plant each tree is $380 and the 4 homeowners have agreed to split all tree-planting costs equally. Which homeowner(s) would be opposed to planting any trees? a. only Davis b. only Adams and Davis c. only Adams, Benitez, and Davis d. Adams, Benitez, Chen, and Davis
A
Refer to Table 6-3. Following the imposition of a price floor $2 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting shortage is a. 0 units. b. 2 units. c. 5 units. d. 7 units
A
Refer to Table 6-3. How many units of the good are sold after the imposition of the price floor? a. 5 b. 9 c. 10 d. 15
A
Suppose that Abdul opens a coffee shop. He receives a loan from a bank for $100,000. He withdraws $50,000 from his personal savings account. The interest rate on the loan is 8%, and the interest rate on his savings account is 2%. Refer to Scenario 13-4. Abdul's explicit cost of capital is a. $8,000. b. $4,000. c. $2,000. d. $1,000
A
Suppose the demand for macaroni is inelastic, the supply of macaroni is elastic, the demand for cigarettes is inelastic, and the supply of cigarettes is elastic. If a tax were levied on the sellers of both of these commodities, we would expect that the burden of a. both taxes would fall more heavily on the buyers than on the sellers. b. the macaroni tax would fall more heavily on the sellers than on the buyers, and the burden of the cigarette tax would fall more heavily on the buyers than on the sellers. c. the macaroni tax would fall more heavily on the buyers than on the sellers, and the burden of the cigarette tax would fall more heavily on the sellers than on the buyers. d. both taxes would fall more heavily on the sellers than on the buyers.
A
Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for minivans causes the price of minivans to increase by 5%, then the quantity supplied of minivans will increase by about a. 1.5% in the short run and 6% in the long run. b. 6% in the short run and 1.5% in the long run. c. 16.7% in the short run and 4.2% in the long run. d. 4.2% in the short run and 16.7% in the long run.
A
The Ogallala aquifer is a large underground pool of fresh water under several western states in the United States. Any farmer with land above the aquifer can at present pump water out of it. We might expect that a. over time, the aquifer is likely to be overused. b. each farmer has a sufficient incentive to conserve the water. c. state governments have an incentive to insure that their farmers do not overuse the water. d. resources would be used more efficiently if the government paid for the pumps farmers use to get the water
A
The Pennsylvania Turnpike is a tolled freeway running through the state of Pennsylvania. Motorists must pay tolls at various points along the Turnpike based on the distance they traveled on the freeway. Suppose that despite the tolls, many motorists in the urban areas use the Turnpike causing traffic to slow during peak times. What type of good would the Turnpike be classified as in this case? a. private good b. club good c. common resource d. public good
A
When demand is inelastic, the price elasticity of demand is a. less than 1, and price and total revenue will move in the same direction. b. less than 1, and price and total revenue will move in opposite directions. c. greater than 1, and price and total revenue will move in the same direction. d. greater than 1, and price and total revenue will move in opposite directions.
A
When producers operate in a market characterized by negative externalities, a tax that forces them to internalize the externality will a. give sellers the incentive to account for the external effects of their actions. b. increase demand. c. increase the amount of the commodity exchanged in market equilibrium. d. restrict the producers' ability to take the costs of the externality into account when deciding how much to supply.
A
When the price of a good is $5, the quantity demanded is 120 units per month; when the price is $7, the quantity demanded is 100 units per month. Using the midpoint method, the price elasticity of demand is about a. 0.55. b. 1.83. c. 2. d. 10
A
Which of the following is likely to have the most price inelastic demand? a. chocolate b. Godiva chocolate c. Hershey's chocolate d. All three would have the same elasticity of demand because they are all related
A
. Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's total costs a. can be represented by the area P2 Q2. b. can be represented by the area P3 Q2. c. can be represented by the area (P3-P2) Q3. d. are zero.
B
. Refer to Table 7-8. If the sellers bid against each other for the right to sell the good to a consumer, then the producer surplus will be a. $0 or slightly more. b. $50 or slightly less. c. $150 or slightly less. d. $200 or slightly more.
B
An example of a private good would be a. a local fire department. b. a pair of pants. c. a streetlight. d. a national park
B
For a construction company that builds houses, which of the following costs would be a fixed cost? a. the $20 per hour wage paid to a construction foreman b. the $30,000 per year salary paid to the company's bookkeeper c. the $2 per worker-hour paid to the state government for workers' compensation insurance d. All of the above are correct.
B
Highway engineers want to improve a dangerous stretch of highway. They expect that it will reduce the risk of someone dying in an accident from 4.1 percent to 1.5 percent over the life of the highway. If a human life is worth $4.2 million, then the project is worth doing as long as it does not cost more than a. $67,200. b. $109,200. c. $274,500. d. $1.6 million
B
Melvin's Magnets earned $200 in total revenue last month when it sold 100 souvenir magnets. This month it earned $300 in total revenue when it sold 60 souvenir magnets. The price elasticity of demand for Marvin's Magnets is a. 0.27. b. 0.58. c. 1.25. d. 1.71.
B
Refer to Figure 10-13. Each unit of plastics that is produced results in an external a. cost of $6. b. cost of $8. c. benefit of $6. d. benefit of $8
B
Refer to Figure 10-13. If 325 units of plastics are produced and consumed, then the a. social optimum has been reached. b. market equilibrium has been reached. c. government must have imposed a corrective tax to guide the market to this outcome. d. government must have offered a corrective subsidy to guide the market to this outcome.
B
Refer to Figure 10-4. If all external costs were internalized, then the market's equilibrium output would be a. Q1. b. Q2. c. Q3. d. Q4.
B
Refer to Figure 10-4. If this market is currently producing at Q4, then total economic well-being would be maximized if output a. decreased to Q1. b. decreased to Q2. c. decreased to Q3. d. stayed at Q4.
B
Refer to Figure 10-4. The socially optimal quantity would be a. Q1. b. Q2. c. Q3. d. Q4.
B
Refer to Figure 14-6. Firms will shut down in the short run if the market price a. exceeds P3. b. is less than P1. c. is greater than P1 but less than P3. d. exceeds P2.
B
Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's total revenue a. can be represented by the area P3 Q3. b. can be represented by the area P3 Q2. c. can be represented by the area (P3-P2) Q3. d. is zero
B
Refer to Figure 6-13. In this market, a minimum wage of $7.25 is a. binding and creates a labor shortage. b. binding and creates unemployment. c. nonbinding and creates a labor shortage. d. nonbinding and creates neither a labor shortage nor unemployment.
B
Refer to Figure 7-18. At the equilibrium price, producer surplus is a. $480. b. $640. c. $1,120. d. $1,280
B
Refer to Figure 7-18. If 40 units of the good are being bought and sold, then a. the marginal cost to sellers is equal to the marginal value to buyers. b. the marginal value to buyers is greater than the marginal cost to sellers. c. the marginal cost to sellers is greater than the marginal value to buyers. d. producer surplus would be greater than consumer surplus.
B
Refer to Figure 7-18. If the price decreases from $22 to $16 due to a shift in the supply curve, consumer surplus increases by a. $120. b. $360. c. $480. d. $600.
B
Refer to Figure 7-3. Which area represents consumer surplus at a price of P2? a. ABD b. ACG c. BCDF d. DFG
B
Refer to Table 11-1. Suppose the cost to build the park is $33 per acre. How many acres should the park be to maximize total surplus from the park in Anywhere? a. 2 acres b. 3 acres c. 4 acres d. 5 acres
B
Refer to Table 11-4. Suppose the cost to plant each tree is $90. How many trees should be planted to maximize the total surplus of the four homeowners? a. 1 b. 2 c. 3 d. 4
B
Refer to Table 14-6. What is the average revenue when 4 units are sold? a. $60 b. $120 c. $125 d. $197
B
Refer to Table 14-6. What is the marginal revenue from selling the 3rd unit? a. $55 b. $120 c. $137 d. $140
B
Refer to Table 6-3. Following the imposition of a price floor $2 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting market price is a. $2. b. $3. c. $4. d. $5
B
Refer to Table 7-8. If the sellers bid against each other for the right to sell the good to a consumer, then the good will sell for a. $50 or slightly more. b. $100 or slightly less. c. $150 or slightly less. d. $200 or slightly more
B
Refer to Figure 10-13. If the government imposed a corrective tax that successfully moved the market from the market equilibrium to the social optimum, then tax revenue for the government would amount to a. $1,250. b. $1,600. c. $2,000. d. $2,500.
C
Scenario 13-2: Chelsea wants to start her own Christmas ornament business. She can purchase a suitable factory that costs $100,000. Chelsea currently has $150,000 in the bank earning 3 percent interest per year. 1. Refer to Scenario 13-2. Suppose Chelsea purchases the factory using her own money. What is Chelsea's annual implicit opportunity cost of purchasing the factory? a. $2,000 b. $3,000 c. $4,500 d. $5,000
B
Scenario 13-3 Gary is a senior majoring in computer network development at Smart State University. While he has been attending college, Gary started a computer consulting business to help senior citizens set up their network connections and teach them how to use e-mail. Gary charges $25 per hour for his consulting services. Gary also works 5 hours a week for the Economics Department to maintain that department's Web page. The Economics Department pays Gary $20 per hour Refer to Scenario 13-3. If Gary can work additional hours at either job, what is the opportunity cost if Gary spends one hour reading a novel? a. $20 b. $25 c. $100 d. $125
B
When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about a. 0.22. b. 0.67. c. 1.33. d. 1.50
B
Which of the following is an example of a positive externality? a. A college student buys a new car when she graduates. b. The mayor of a small town plants flowers in the city park. c. Local high school teachers have pizza delivered every Friday for lunch. d. An avid fisherman buys new fishing gear for his next fishing trip.
B
Which of the following is likely to have the most price inelastic demand? a. strawberry-banana milk shakes b. gasoline in the short run c. diamond earrings d. box seats at a major league baseball game
B
Consider a public road that anyone is allowed to drive on. If the road is often congested, the road would be considered a a. private good. b. club good. c. common resource. d. public good.
C
Max sells maps. The map industry is competitive. Max hires a business consultant to analyze his company's financial records. The consultant recommends that Max increase his production. The consultant must have concluded that Max's a. total revenues exceed his total accounting costs. b. marginal revenue exceeds his total cost. c. marginal revenue exceeds his marginal cost. d. marginal cost exceeds his marginal revenue.
C
Pete is a non-union employee at The Electric Co. The majority of the employees at The Electric Co. are unionized. The union at The Electric Co. has negotiated very good benefits. Even though he is not a union member and he does not have to pay union dues, Pete receives all the benefits that the union has negotiated. Pete's behavior is an example of a. rivalry. b. a barrier to entry. c. free riding. d. Taft-Hartley opposition.
C
Refer to Figure 10-13. In order to reach the social optimum, the government could a. impose a tax of $2 per unit on plastics. b. impose a tax of $6 per unit on plastics. c. impose a tax of $8 per unit on plastics. d. offer a subsidy of $6 per unit on plastics
C
Refer to Figure 10-4. This market is characterized by a. government intervention. b. a positive externality. c. a negative externality. d. None of the above is correct.
C
Refer to Figure 10-4. Without government intervention, the equilibrium quantity would be a. Q1. b. Q2. c. Q3. d. Q4
C
Refer to Figure 14-5. Firms will be encouraged to enter this market for all prices that exceed a. P1. b. P2. c. P3. d. None of the above is correct.
C
Refer to Figure 14-6. Firms will be earn losses in the short run but will remain in business if the market price a. exceeds P3. b. is less than P1. c. is greater than P1 but less than P3. d. exceeds P2.
C
Refer to Figure 7-18. At the equilibrium price, total surplus is a. $480. b. $640. c. $1,120. d. $1,280.
C
Refer to Figure 7-18. If 110 units of the good are being bought and sold, then a. the marginal cost to sellers is equal to the marginal value to buyers. b. the marginal value to buyers is greater than the marginal cost to sellers. c. the marginal cost to sellers is greater than the marginal value to buyers. d. producer surplus is greater than consumer surplus
C
Refer to Figure 7-18. The efficient price is a. $22, and the efficient quantity is 40. b. $22, and the efficient quantity is 110. c. $16, and the efficient quantity is 80. d. $8, and the efficient quantity is 40.
C
Refer to Figure 7-3. When the price falls from P1 to P2, which area represents the increase in consumer surplus to existing buyers? a. ABD b. ACG c. BCFD d. DFG
C
Refer to Scenario 13-2(Chelsea wants to start her own Christmas ornament business. She can purchase a suitable factory that costs $100,000. Chelsea currently has $150,000 in the bank earning 3 percent interest per year.) Suppose Chelsea purchases the factory using $50,000 of her own money and $50,000 borrowed from a bank at an interest rate of 6 percent. What is Chelsea's annual opportunity cost of purchasing the factory? a. $2,000 b. $3,000 c. $4,500 d. $5,000
C
Refer to Scenario 13-3. Which of the following statements is correct? a. Gary should increase the number of hours he works for the Economics Department to make it comparable to his consulting business income. b. Gary is not maximizing his well-being if he continues to work for the Economics Department. c. If Gary chooses one hour at the beach with his friends rather than spend one more hour with a consulting client, the forgone income of $25 is considered a cost of the choice to go to the beach. d. Both b) and c) are correct
C
Refer to Table 6-2. A price ceiling set at $5 will a. be binding and will result in a shortage of 50 units. b. be binding and will result in a shortage of 75 units. c. be binding and will result in a shortage of 125 units. d. not be binding.
C
Refer to Table 6-2. A price floor set at $20 will a. be binding and will result in a surplus of 50 units. b. be binding and will result in a surplus of 100 units. c. be binding and will result in a surplus of 250 units. d. not be binding.
C
Suppose that a steel factory emits a certain amount of air pollution, which constitutes a negative externality. If the market does not internalize the externality, a. the supply curve would adequately reflect the marginal social cost of production. b. consumers will be required to pay a higher price for steel than they would have if the externality were internalized. c. the market equilibrium quantity will not be the socially optimal quantity. d. producers will produce less steel than they otherwise would if the externality were internalized.
C
The Mansfield Public Library has a large number of books that anyone with a library card may borrow. Anyone can obtain a card for free. Because the number of copies of each book is limited, not everyone can have the same book at the same time. What type of good would the library books be classified as in this case? a. private goods b. club goods c. common resources d. public goods
C
The demand for salt is inelastic, and the supply of salt is elastic. The demand for caviar is elastic, and the supply of caviar is inelastic. Suppose that a tax of $1 per pound is levied on the sellers of salt, and a tax of $1 per pound is levied on the buyers of caviar. We would expect that most of the burden of these taxes will fall on a. sellers of salt and the buyers of caviar. b. sellers of salt and the sellers of caviar. c. buyers of salt and the sellers of caviar. d. buyers of salt and the buyers of caviar
C
When adding another unit of labor leads to an increase in output that is smaller than the increases in output that resulted from adding previous units of labor, the firm is experiencing a. diminishing labor. b. diminishing output. c. diminishing marginal product. d. negative marginal product
C
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. We can conclude that for Heather, macaroni a. and soy-burgers are both normal goods with income elasticities equal to 1. b. is an inferior good and soy-burgers are normal goods; both have income elasticities of 1. c. is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1. d. and soy-burgers are both inferior goods with income elasticities equal to -1.
C
When the local used bookstore prices economics books at $15 each, it generally sells 70 books per month. If it lowers the price to $7, sales increase to 90 books per month. Given this information, we know that the price elasticity of demand for economics books is about a. 2.91, and an increase in price from $7 to $15 results in an increase in total revenue. b. 2.91, and an increase in price from $7 to $15 results in a decrease in total revenue. c. 0.34, and an increase in price from $7 to $15 results in an increase in total revenue. d. 0.34, and an increase in price from $7 to $15 results in a decrease in total revenue.
C
When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for good A is a. 1.50, and an increase in price will result in an increase in total revenue for good A. b. 1.50, and an increase in price will result in a decrease in total revenue for good A. c. 0.67, and an increase in price will result in an increase in total revenue for good A. d. 0.67, and an increase in price will result in a decrease in total revenue for good A.
C
Zach has decided to start his own photography studio. To purchase the necessary equipment, Zach withdrew $10,000 from his savings account, which was earning 3% interest, and borrowed an additional $5,000 from the bank at an interest rate of 8%. What is Zach's annual opportunity cost of the financial capital that has been invested in the business? a. $300 b. $400 c. $700 d. $1,65
C
. If a profit-maximizing firm in a competitive market discovers that, at its current level of production, price is greater than marginal cost, it should a. shut down. b. reduce its output but continue operating. c. continue to produce at the current levels. d. increase its output.
D
. Which of the following statements regarding a competitive firm is correct? a. Because demand is downward sloping, if a firm increases its level of output, the firm will have to charge a lower price to sell the additional output. b. If a firm raises its price, the firm may be able to increase its total revenue even though it will sell fewer units. c. By lowering its price below the market price, the firm will benefit from selling more units at the lower price than it could have sold by charging the market price. d. For all firms, average revenue equals the price of the good.
D
A profit-maximizing firm in a competitive market is able to sell its product for $7. At its current level of output, the firm's average total cost is $10. The firm's marginal cost curve crosses its marginal revenue curve at an output level of 9 units. The firm experiences a a. profit of more than $27. b. profit of exactly $27. c. loss of more than $27. d. loss of exactly $27.
D
Each of the following is likely to be a successful way for the government to solve the problem of overuse of a common resource except a. regulating the use or consumption of the common resource. b. taxing the use or consumption of the common resource. c. selling the common resource to a private entity. d. asking individuals to voluntarily reduce their use of the resource
D
Eldin is a house painter. He can paint three houses per week. He is considering hiring his friend Murphy. Murphy can paint five houses per week. What is the maximum total output possible if Eldin hires Murphy? a. 2 houses b. 3 houses c. 5 houses d. 8 houses
D
For a construction company that builds houses, which of the following costs would be a fixed cost? a. the $50,000 per year salary paid to a construction foreman b. the $30,000 per year salary paid to the company's bookkeeper c. the $10,000 per year premium paid to an insurance company d. All of the above are correct
D
Four friends decide to meet at a Chinese restaurant for dinner. They decide that each person will order an item off the menu, and they will share all dishes. They will split the cost of the final bill evenly among each of the people at the table. A Tragedy of the Commons problem is likely for each of the following reasons except a. each person has an incentive to eat as fast as possible since their individual rate of consumption will not affect their individual cost. b. there is an externality associated with eating the food on the table. c. when one person eats, he may not take into account how his choice affects his friends. d. each dish would be both excludable and rival in consumption.
D
Holding all other factors constant and using the midpoint method, if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60, then supply is a. inelastic, since the price elasticity of supply is equal to .91. b. inelastic, since the price elasticity of supply is equal to 1.1. c. elastic, since the price elasticity of supply is equal to 0.91. d. elastic, since the price elasticity of supply is equal to 1.1
D
If marginal cost exceeds marginal revenue, the firm a. is most likely to be at a profit-maximizing level of output. b. should increase the level of production to maximize its profit. c. should reduce its average fixed cost in order to lower its marginal cost. d. may still be earning a positive accounting profit
D
Refer to Figure 10-4. If this market is currently producing at Q2, then total economic well-being would increase if output a. increased beyond Q4. b. decreased to Q1. c. increased to Q3. d. stayed at Q2
D
Refer to Figure 14-6. Firms will earn positive profits in the short run if the market price a. is less than P1. b. is greater than P1 but less than P3. c. equals P3. d. exceeds P3.
D
Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's profit a. can be represented by the area P3 Q3. b. can be represented by the area P3 Q2. c. can be represented by the area (P3-P2) Q3. d. is zero.
D
Refer to Figure 14-7. Which segment of the supply curve represents the firm shutting down? a. ABCD b. BCD c. CD d. AB
D
Refer to Figure 7-18. Assume demand increases and as a result, equilibrium price increases to $22 and equilibrium quantity increases to 110. The increase in producer surplus to producers already in the market would be a. $90. b. $210. c. $360. d. $480.
D
Refer to Figure 7-18. Assume demand increases and as a result, equilibrium price increases to $22 and equilibrium quantity increases to 110. The increase in producer surplus would be a. $210. b. $360. c. $480. d. $570.
D
Refer to Figure 7-3. When the price falls from P1 to P2, which area represents the increase in consumer surplus to new buyers entering the market? a. ABD b. ACG c. BCDF d. DFG
D
Refer to Figure 7-3. Which area represents the increase in consumer surplus when the price falls from P1 to P2? a. ABD b. ACG c. DFG d. BCGD
D
Refer to Table 11-1. Suppose the cost to build the park is $16 per acre. How large should the park be to maximize total surplus from the park in Anywhere? a. 2 acres b. 3 acres c. 4 acres d. 5 acres
D
Refer to Table 11-4. Suppose the cost to plant each tree is $300. How many trees should be planted to maximize the total surplus of the four homeowners? a. 1 b. 2 c. 3 d. 4
D
Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal revenue is equal to a. $6. b. $7. c. $8. d. $9.
D
Refer to Table 6-2. A price ceiling set at $15 will a. be binding and will result in a shortage of 50 units. b. be binding and will result in a shortage of 100 units. c. be binding and will result in a shortage of 125 units. d. not be binding.
D
Suppose that Abdul opens a coffee shop. He receives a loan from a bank for $100,000. He withdraws $50,000 from his personal savings account. The interest rate on the loan is 8%, and the interest rate on his savings account is 2%. Abdul's implicit cost of capital is a. $8,000. b. $4,000. c. $2,000. d. $1,000
D
The incidence of a tax falls more heavily on a. consumers than producers if demand is more inelastic than supply. b. producers than consumers if supply is more inelastic than demand. c. consumers than producers if supply is more elastic than demand. d. All of the above are correct
D
The privately-owned school system in Smalltown has a virtually unlimited capacity. It accepts all applicants and operates on both tuition and private donations. Although every resident places value on having an educated community, the school's revenues have suffered lately due to a large decline in private donations from the elderly population. Since the benefit that each citizen receives from having an educated community is a public good, which of the following would not be correct? a. The free-rider problem causes the private market to undersupply education to the community. b. The government can potentially help the market reach a socially optimal level of education. c. A tax increase to pay for education could potentially make the community better off. d. The private market is the best way to supply education.
D
Which of the following statements is true about patents and copyrights? (i) They have benefits and costs. (ii) They lead to higher prices. (iii) They enhance the ability of monopolists to earn above-average profits. a. (i) and (ii) only b. (ii) and (iii) only c. (ii) only d. (i), (ii), and (iii)
D
Which of the following would be considered a private good? a. national defense b. a public beach c. local cable television service d. a bottle of natural mineral water
D
