Econ 2000 final Scott Abraham's

Suppose a firm in a competitive market earned $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold?

$10 and 100 units

If the government imposed a corrective tax that successfully moved to the market from equilibrium to the social optimum then tax revenue for the government would amount

$2000

Refer to Figure 7-5.If the supply curve is S and the demand curve shifts from D to D', what is the increase in producer surplus to existing producers?

$2500

Refer to Figure 16-5. When the firm is maximizing its profit, the markup over marginal cost amounts to

$50

Refer to Figure 5-3. The maximum value of total revenue corresponds to a price of

$50

Suppose a firm operating in a competitive market has the following cost curves:

$50

Refer to Figure 16-2.What price will the monopolistically competitive firm charge in this market?

$80

Refer to Figure 8-3. The deadweight loss associated with this tax amounts to

$80, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.

Refer to Figure 4-9. All else equal, an increase in the use of laptop computers for note-taking would cause a move from

(-y,x)

Scenario 10-1 The demand curve for gasoline slopes downward and the supply curve for gasoline slopes upward. The production of the 1,000 gallon of gasoline entails the following: • a private cost of $3.10; • a social cost of $3.55; • a value to consumers of $3.70. Refer to Scenario 10-1. Let QMARKET represent the equilibrium quantity of gasoline, and let oPTIMUM represent the socially optimal quantity of gasoline. Which of the following inequalities is correct?

1,000 < OPTIMUM< QMARKET

The following figure depicts average total cost functions for a firm that produces automobiles.

12. Constant returns to scale

Suppose that a worker in Caninia can produce either 2 blankets or 8 meals per day, and a worker in Felinia can produce either 5 blankets or 1 meal per day. Each nation has 10 workers. For many years, the two countries traded, each completely specializing according to their respective comparative advantages. Now war has broken out between them and all trade has stopped. Without trade, Caninia produces and consumes 10 blankets and 40 meals per day and Felinia produces and consumes 25 blankets and 5 meals per day. The war has caused the combined daily output of the two countries to decline by

15 blankets and 35 meals

Refer to Figure 15-7.To maximize total surplus, a benevolent social planner would choose which of the following outcomes?

18. Q=45 and P=45

Using the midpoint method, if the price falls from $200 to $150, the absolute value of the price elasticity of demand is

2.8

If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a

20 percent decrease in the quantity demanded.

Refer to figure 10-5 the socially optimal quantity of output is

420 units since the value to the society of the 420th unit is = to the cost incurred by the 420th unit

The monopolist has fixed costs of $1,000 and has a constant marginal cost of $2 per unit. If the monopolist were able to perfectly price discriminate, how many units would it sell?

900

What happens to consumer surplus in the cell phone market if cell phones are normal goods and buyers of cell phones experience an increase in income?

Consumer surplus may increase, decrease, or remain unchanged.

Suppose that a firm in a competitive market faces the following revenues and costs:

Continue to operate at 14 units

At equilibrium, producer surplus is represented by the area

D+H+F

Equilibrium price must decrease when demand

Decreases and supply does not change when demand does not change and supply increases, and when demand decreases and supply increases simultaneously

Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market?

Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

Refer to Figure 15-4. What price will the monopolist charge in order to maximize profit?

K

An example of an explicit cost of production would be the

Lease payments for land in which the factory stands

Refer to figure 13-3 which of the following can be inferred from the figure above

Marginal product is 📈 at low level of output and 📉 at high level of output

In which of the following market structures can firms earn economic profits in the long run?

Monopoly only

Refer to Figure 6-11.Suppose a tax of $2 per unit is imposed on this market. Which of the following is correct?

One-half of the burden of the tax will fall on buyers, and one-half of the burden

Suppose a firm operating in a competitive market has the following cost curves:

P^4

For which pairs of goods is the cross-price elasticity most likely to be positive?

Pen and pencil

Refer to Figure 14-7. Assume that the market starts in equilibrium at point W in graph (b) and that graph (a) illustrates the cost curves facing individual firms. Suppose that demand increases from Do to D. Which of the following statements is correct?

Points W and Z represent long run equilibrium

Refer to Figure 15-3. A profit-maximizing monopoly will produce an output level of

Q3

Refer to Figure 16-5. As the figure is drawn, the firm is in

a short-run equilibrium as well as a long-run equilibrium.

Refer to Figure 6-3.A government-imposed price of $24 in this market is an example of a

binding price floor that creates a surplus.

A tax on the buyers of cameras encourages

buyers to demand a smaller quantity at every price

Suppose that in a particular market, the supply curve is highly elastic and the demand curve is highly inelastic. If a tax is imposed in this market, then the

buyers will bear a greater burden of the tax than the sellers

A movie theater can increase its profits through price discrimination by charging a higher price to adults and a lower price to children if it

can prevent children from buying the lower-priced tickets and selling them to adults.

Which of the following costs of publishing a book is a fixed cost?

composition, typesetting, and jacket design for the book

Refer to Figure 4-1.It is apparent from the figure that the

demand for the good conforms to the law of demand.

If government regulation sets the maximum price for a natural monopoly equal to its marginal cost, then the natural monopolist will

earn economic losses

Refer to Figure 4-6.The shift from S to S' could be caused by an

improvement in production technology

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 increase

Private decisions about consumption of common resources and production of public goods usually lead to an

inefficient allocation of resources and external effects

The deadweight loss from a tax per unit of good will be smallest in a market with

inelastic supply and inelastic demand

If a competitive firm is selling 900 units of its product at a price of $10 per unit and earning a positive profit, then

its average total cost is less than $10.

A firm that shuts down temporarily has to pay

its fixed costs but not its variable costs

Motor oil and gasoline are complements. If the price of motor oil increases, consumer surplus in the gasoline market

may increase, decrease, or remain unchanged.

For a monopoly, the socially efficient level of output occurs where

price equals marginal cost

If duopoly firms that are not colluding were able to successfully collude, then

price would rise and quantity would fall.

Scenario 10-1 The demand curve for gasoline slopes downward and the supply curve for gasoline slopes upward. The production of the 1,000th gallon of gasoline entails the following: • a private cost of $3.10; • a social cost of $3.55; • a value to consumers of $3.70. Refer to Scenario 10-1. Suppose the dollar amount of the externality, per gallon of gasoline, is constant, regardless of how much gasoline is produced. Then the externality could be internalized if producers of gasoline were

required to pay a tax of $0.45 per gallon of gasoline sold.

Refer to Table 4-6.If the price were $8, a

surplus of 25 units would exist, and price would tend to fall.

For a good that is a luxury, demand

tends to be elastic

If a price floor is not binding, then

the equilibrium price is above the price floor

If a sawmill creates too much noise for local residents,

the government can raise economic well-being through noise-control regulations.

In some cases, tradable pollution permits may be better than a corrective tax because

the government can set a maximum level of pollution using permits

You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that

the mayor thinks demand is inelastic, and the city manager thinks demand is elastic.

Producers have little incentive to produce a public good because

there is a free-rider problem.

Refer to Figure 16-5.The firm's maximum profit is

$0