ECON-B 251 Exam #2 Study Guide

marginal social benefit equals marginal social cost

A common resource is used efficiently if

nonrival, excludable

A movie shown on a pay-per-view cable station is an example of a _____ and _____ good.

dumping mercury into a local stream

An example of an activity generating an external cost is

decreasing marginal

As you consume more and more of any good, you experience _____ utility.

decreases, increases

Assume the consumption of coffee causes a positive marginal benefit. As the quantity of coffee consumed increases, the marginal utility of coffee _____ and the total utility of coffee _____ as additional coffee is consumed.

400, 400, 800

Assume the demand curve intersects the x-axis at $12 and the supply curve intersects the x-axis at $0. At a price floor of $8 in the above figure consumer surplus is $___, producer surplus is $___ units and search activity is $___.

shortage, 200, 200

At a price ceiling of $4 in the above figure a(n) _____ of ___ units and a deadweight loss of $___ occurs.

200

In the market above for red roses. The consumer surplus is $___ a day.

total, marginal, equal

Jared maximizes his _____ utility when he spends all his income so his _____ utility per dollar is _____ for all goods and services.

all similar individuals must be treated similarly

The symmetry principle in economics means

overproduction of goods and services quantity in which marginal social benefit exceeds marginal social cost outcome in which a cost spills onto a third party

Which of the following is an example of a market failure? A(n)

willing and able to pay the market price

When a market price allocates a scarce​ resource, the people who ​_____ get the resource.

decreases, increases, greater than

When an effective production quota is applied in the market for​ sugar, the quantity produced _____, the price​ _____, and marginal social benefit is _____ marginal social cost.

competitive markets underproduce the good

When external benefits are present,

Black market activity A decrease in consumer surplus An increase in search activity

With rent controls, which of the following is most likely to occur?

increases, decreases

You consume pizza and your income increases. If pizza is a normal good, then your consumption of pizza _____. If pizza is an inferior good, then your consumption of pizza _____.

you will buy less pizza

You consume pizza. If the price of pizza increases, then

increases

You consume pizza. If the price of pizza increases, then the marginal utility per dollar spent on pizza remains _____.

11

Homer, Bart, and Lisa are the only consumers in the market. Using the information in the above table, if the market demand for chocolate chip cookies at $4.00 , then the market quantity demanded is ___ pounds.

less than the efficient quantity would be produced

If a nonrival and nonexcludable good was produced by the private sector, then

6, 5

If income is $16, the price of a pizza slice is $1, and the price of a movie download is $2.00, then consumer optimum is ___ pizza slices and ___ movie downloads.

floor, above, surplus, labor

If policy makers believe the equilibrium wage rate is unfairly "too low," then policy makers can address this issue by imposing a price _____ _____ the equilibrium wage. As a result, a(n) _____ of _____ occurs.

first-come, first-served

In a general admission event with tickets, which method is used to allocate the best locations to experience the event​?

18,000, 30

In the above figure, the unregulated, competitive market equilibrium is tuition of $___ and the equilibrium quantity is ___ million students in college.

18,000, 9,000

In the above figure, the unregulated, the amount of the public voucher to achieve the efficient outcome is $___ and the price the student pays is $___ at the efficient quantity of college students.

4, 4, 1

In the figure above suppose total output is 2 units. At the equilibrium price, consumer surplus is $___, producer surplus is $___ and deadweight loss is $___.

1

In the figure above, at a quantity of 2 units, consumer surplus is $___.

1

In the figure above, at a quantity of 2 units, producer surplus is $___.

9

In the figure above, at the efficient quantity total surplus equals $___.

60

In the market above for hot dogs. The producer surplus is $___ per hour.

increases, decreases, less than

In the market for​ wheat when a subsidy is paid to wheat farmers, the equilibrium quantity of wheat _____, the equilibrium price​ of wheat _____, and marginal social benefit is _____ marginal social cost in the market for wheat.

he is maximizing his utility, given his income and the prices of goods and services

Juan is in consumer equilibrium when

4

Latesha has $20 to spend on pizza slices and movie downloads, which are normal goods. The price of a pizza slice is $2 and the price of a movie download is $4. If Latesha spends all of her income and she has downloaded three movies, then she can buy ___ pizza slices.

shifts outward

Latesha has $20 to spend on pizza slices and movie downloads, which are normal goods. The price of a pizza slice is $2 and the price of a movie download is $4. If Latesha's income increases to $30, then Latesha's budget line _____.

increase

Latesha has $20 to spend on pizza slices and movie downloads, which are normal goods. The price of a pizza slice is $2 and the price of a movie download is $4. If the price of pizza slices decrease, then Latesha's consumption possibilities _____.

13

Marlon, Jia, and Sam are roommates. They need lamps for their common living room. Lamps in their living room are a public good for these roommates. The marginal benefit that each individual receives from varying numbers of lamps in the living room is given in the table above. The marginal benefit for the second lamp to this group of roommates taken as a whole is ___.

6, 1

The above table shows the market for chocolate chip cookies. A $2 tax per cookie is placed on sellers. The new equilibrium price of cookies is $___ and the amount of tax paid by sellers is $___.

utilitarianism

Striving to achieve the greatest happiness for the greatest number is related to which economic concept?

larger the increase in the after-tax price

Suppose a $10 tax is placed on a good. The more elastic the supply of the good, the

3

Suppose there are four firms that are each willing to sell one unit of a good. Each firm has a different minimum price that they are willing to sell for: Firm W $6, Firm X $7, Firm Y $10, and Firm Z $12. If the market price is $11 then the market supply for this good will be ___.

low, exist, low

The Coase Theorem is the proposition that if the number of involved parties is _____, if property rights _____ and transactions costs are _____, then private transactions are efficient.

100, 4

The above figure shows the marginal social benefit, marginal private cost and marginal social cost of producing steel. There is a deadweight of $___ at a quantity of ___ tons.

100, 2

The above figure shows the marginal social benefit, marginal private cost and marginal social cost of producing steel. There is a marginal external cost of $___ per ton at the socially efficient market quantity of ___ tons.

4

The above table lists the total utility your receive from consuming different cups of coffee each week. The marginal utility from the forth cup of coffee is ___.

300, 0

The above table shows the market for apartment. If a rent ceiling is set at a price of $400 per month, then the housing shortage is ___ apartments. If a rent ceiling is set at a price of $600 per month, then the housing shortage is ___ apartments.

0, 4

The above table shows the market for labor. If a minimum wage is set at a price of $8 per hour, then the number of unemployed workers is ___ million. If a minimum wage is set at a price of $11 per month, then the number of unemployed workers is ___ million.

12, 9

The figure above shows the pizza market in the city of Pepperoniville. If the government imposes the sales tax shown in the figure on sellers, then the price the buyer pays for pizza is $___ and the price the seller receives for the pizza is $___.

120

The figure above shows the pizza market in the city of Pepperoniville. If the government imposes the sales tax shown in the figure on sellers, then the tax revenue is $120.