ECON 2000 Marx Final

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If the demand for a good falls when income falls then the good is called

a normal good

If a price ceiling is not binding, then

there will be no effect on the market price or quantity sold

which of the following is not an advantage of corrective taxes

they subsidize the production of goods with positive externalities

A key determinant of the price of the price elasticity of supply is the

time horizon

If the supply of a product increases, then we would expect equilibrium price

to decrease and equilibrium quantity to increase

All else equal, what happens to consumer surplus if the price of a good increases?

consumer surplus decreases

when profit-maximizing firms in competitive markets are earning profits

new firms will enter the market

Suppose that the demand for aged cheddar cheese is elastic, and the demand for bread is inelastic. Suppose that the price of each good falls by 20% because of a sales promotion. Then total consumer spending on aged cheddar cheese will

Increase, and total consumer spending on bread will decrease

Suppose peter, paul, and mary are the only three customers in the market for tambourines. Peter values a tambourine at $30, paul values it at $20, and mary values it at $40. If the price is $25 what is their consumer surplus.

$20

vincent operates a scenic bus tour business in boston. He has one bus that can fit 50 people per tour and each tour lasts two hours. his total cost of operating one tour is fixed at 450. vincent's cost is not reduced if he runs a tour with a partially full bus. While his cost is the same for all tours, vincent charges each passenger his/her willingness to pay: adults 18 per trip, children 10 per trip, and senior citizens 12 per trip. At those rates, on a typical day vincent's demand is 70 adults, 25 children, and 55 senior citizens. Assume that vincent's customers are always available for the tour; therefore, he can fill his bus for each tour as long as there is sufficient total demand for the day. what is vincent's profit on a typical day?

$820

If a 30% change in price results in a 15% change in quantity demanded then the price elasticity of demand is

0.5 and demand is inelastic

If the price elasticity of supply is 1.5, and the price increase led to a 1.8 percent increase in quantity supplied, then the price increase is about

1.20 percent

suppose a certain firm is able to produce 165 units of output per day when 15 workers are hired. The firm is able to produce 181 units of output per day when 16 workers are hired, holding other inputs fixed. the marginal product of the 16th worker is

16 units of output

Last year, Tess bought five handbags when her income was 55,000. TYhis year, after having taken ECON 2000, her income is 65,000, and she purchased seven handbags. Holding other factors constant and using the midpoint method, it follows that Tess's income elasticity of demand is about

2, and tess regards handbags as normal goods

flu shots provide a positive externality. Suppose that the market for vaccination is perfectly competitive. Without government intervention in the vaccine market, which of the following statements is correct

At the current output level , the marginal social benefit exceeds the marginal private benefit

suppose there is an early freeze in california that reduces the size of the lemon crop. As the price of lemons rises, what happens to consumer surplus in the market for lemons?

Consumer surplus decreases

Suppose the number of buyers in a market decreases at the same time as a technological advancement occurs. What would we expect to happen in the market?

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

The governments benefit from a tax can be measured by

tax revenue

Which of the following statements is valid when the market supply curve is vertical

The equilibrium quantity supplied does not change when the price changes

Which of the following is not a determinant of the demand for a particular good

The prices of the inputs used to produce the good

If a surplus exists in a market we know that the actual price is

above the equilibrium price, and quantity supplied is greater than quantity demanded

If an allocation of resources is efficient, then

all potential gains from trade among buyers and sellers are being realized

which of the following is not an example of a barrier to entry

an entrepreneur opens a popular new restaurant

a firm produces 400 units of output at a total cost of 1200. If total variable costs are 1000

average fixed cost is 50 cents

profit-maximizing firms enter a competitive market when existing firms in that market

average total costs are less than market price

Bev is opening her own court-reporting business. She financed the business by withdrawing money from her personal savings account. When she closed the account, the bank representative mentioned that she would have earned $300 in interest next year. If Bev hadn't opened her own business, she would have earned a salary of $25,000. In her first year, Bev's revenues were $30,000. Which of the following statements is correct?

bev's economic profit is 3700

which of the following causes a shortage of a good

binding price ceiling

A surplus results when

binding price floor is imposed on a market

Dawn's bridal boutique is having a sale on evening dresses. The increase in consumer surplus comes from the benefit of the lower prices to

both existing customers who now get lower prices on the gowns they were already planning to purchase and new customers who enter the market because of the lower prices

demand would be said to be price elastic if

buyers respond substantially to changes in the price of a good

Cold Duck Airlines flies between Tacoma and Portland. The company leases planes on a year-long contract at a cost that averages $600 per flight. Other costs (fuel, flight attendants, etc.) amount to $550 per flight. Currently, Cold Duck's revenues are $1,000 per flight. All prices and costs are expected to continue at their present levels. If it wants to maximize profit, Cold Duck Airlines should

continue flying until the lease expires then drop the run

The decrease in total surplus that results from a market distortion, such as a tax, is called a

deadweight loss

The market for new yachts has elastic demand and relatively inelastic supply. As a result, a tax on the buyers of yachts will

decrease the quantity of yachts purchased in equilibrium, and the tax burden will fall mostly on shipbuilders

If the demand for eggs is inelastic. then a decrease inthe price of eggs

decrease total revenue of egg sellers

which of the following expressions for economic profit is correct

economic profit=total revenue-explicit costs-implicit costs

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly

elastic and demand curve will be horizontal

The demand for grape flavored hubba bubba bubble gum is likely

elastic because there are many close substitutes

suppose supply is perfectly inelastic, and demand for the good in question increases (shifts to the right). As a result

equilibrium price increases and equilibrium quantity is unchanged

At the equilibrium price, the quantity of the good that buyers are willing and able to buy

exactly equals the quantity that sellers are able and willing to sell

which of the following statements regarding a competitive firm is correct

for all firms, marginal revenue equals the price of the good

If the government adds a tax on a good, then the price paid by buyers will

increase and the price received by sellers will decrease

Two goods are compliments when a decrease in the price of one good

increases the demand for the other good

price discrimination adds to social welfare in the form of

increases total surplus

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

inelastic supply and inelastic demand

Which of the following demonstrates the law of demand

jayden buys more donuts at the .25 per donut price than at .50 per donut, all other things equal

suppose demand for marijuana is inelastic. Then a new policy that shifts the supply curve for marijuana to the right would lead to

lower prices and lower total revenue

A likely example of compliments for most people would be

peanut butter and jelly

John Paul would be willing to pay as much as $25 for one of philippe's famous cheesecakes. Philippe's opportunity cost of baking the cheesecake is $23. Assume that the city imposes a sugar tax of $3 on such desserts. Which of the following is correct

philippe will not bake john paul a cake

A legal minimum on the price at which a good can be sold is called a

price floor

raiman's shoe repair produces custom made shoes. when mr raiman produces 12 pairs per week, the marginal cost of the 12th pair is 84, and the marginal revenue of the 12th pair is 70. What would you advise mr raiman to do?

produce fewer custom made shoes

a key characteristic of a competitive market is that

producers sell nearly identical products

If there is an increase in market demand in a perfectly competitive market, then in the short run

profits will rise

suppose the cross-price elasticity of demand between kale and spinach is 1.5. This implies that a 20% increase in the price of kale will cause the quantity of spinach purchases to

rise by 30%

dioxin emission that results from the production of paper is a good example of a negative externality because

self-interested paper producers will not consider the full cost of the dioxin pollution they cause

A supply curve can be used to measure producer surplus because it reflects

sellers costs

price discrimination is the business practice of

selling the same good at different prices to different customers

which of the following represents the firms short-run condition for shutting down

shut down if TR<VC

when negative externalities are present in a market

social costs will be greater than private costs

An example of a perfectly competitive market would be the

soybean market

When fixed costs are ignored because they are irrelevant to a business's production decision, they are called

sunk costs

An improvement in production technology will shift the

supply curve to the right

If the number of sellers in a market increases, then the

supply in the market will increase

for a long while, electricity producers were thought to be a classic example of a natural monopoly. People held this view because

the average cost of producing units of electricity by one producer in a specific region was lower than if the same quantity were produced by two or more producers in the same region

If something happens to alter the quantity demanded at any given price, then

the demand curve shifts

The term tax incidence refers to

the distribution of the tax burden between buyers and sellers

suppose that coal producers create a negative externality equal to $5 per ton of coal. What is the relationship between the equilibrium quantity of coal and the socially optimum quantity of coal

the equilibrium quantity is greater than the socially optimal quantity

which of the following is a necessary characteristic of a monopoly

the firm is the sole seller of its product

Which of the following is an example of a price floor

the minimum wage

which of the following is an example of an implicit cost

the owner of a firm forgoing an opportunity to earn a large salary working for a wall street brokerage firm

bob's butcher shop is the only place within 100 miles that sells bison burgers. assuming that bob is a monopolist and maximizing his profit, which of the following statements is true

the price of bob's bison burgers will exceed bob's marginal cost

Cross-price elasticity of demand measures how

the quantity demanded of one good changes in response to a change in the price of another good

Which of the following is not a determinant of the price elasticity of demand for a good

the steepness or flatness of the supply curve for the good

a natural monopoly occurs when

there are economies of scale over the relevant range of output

If a firm produces nothing, which of the following costs will be 0

variable costs

Which of the following statements is correct

who bears the burden of a tax depends on the price elasticities of supply and demand


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