Econ Exam 2
Miller Technologies has average variable costs of $1 and average total costs of $3 when it produces 500 units of output. The firm's total fixed costs equal $500 $1,000 $1,500 $2,000
$1,000
Refer to Figure 7-15. At the equilibrium price, total surplus is $480. $640. $1,120. $1,280.
$1,120.
Refer to Table 7-6. Suppose each of the five sellers can supply at most one unit of the good. The market quantity supplied is exactly 4 if the price is $770. $970. $1,170. $1,370.
$1,370.
Refer to Figure 6-8. The burden of the tax on sellers is $1.00 per unit. $1.50 per unit. $2.00 per unit. $3.00 per unit.
$1.00 per unit.
Refer to Table 13-8. What is the average variable cost of producing 3 gigaplots at Jimmy's Gigaplot factory? $14 $15 $16 $17
$15
Donald produces nails at a cost of $200 per ton. If he sells the nails for $350 per ton, his producer surplus per ton is $150. $200. $350. $550.
$150.
Refer to Table 7-9. Both the demand curve and the supply curve are straight lines. At equilibrium, consumer surplus is $8. $12. $16. $32.
$16.
Sarah buys a new MP3 player for $135. She receives consumer surplus of $25 on her purchase if her willingness to pay is $25. $110. $135. $160.
$160.
Scenario 13-5 A certain firm produces and sells staplers. Last year, it produced 7,000 staplers and sold each stapler for $6. In producing the 7,000 staplers, it incurred variable costs of $28,000 and a total cost of $45,000. Refer to Scenario 13-5. The firm's fixed costs amounted to $7,000. $17,000. $28,000. $42,000.
$17,000.
Refer to Table 13-8. What is the marginal cost of the 4th gigaplot at Jimmy's Gigaplot factory $13 $15 $19 $64
$19
Refer to Figure 7-8. 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? $625 $2,500 $5,625 $3,125
$2,500
Scenario 13-5 A certain firm produces and sells staplers. Last year, it produced 7,000 staplers and sold each stapler for $6. In producing the 7,000 staplers, it incurred variable costs of $28,000 and a total cost of $45,000. Refer to Scenario 13-5. In producing the 7,000 staplers, the firm's average fixed cost was $1.00 $1.32 $2.21 $2.43
$2.43
Refer to Table 7-3. If the price is $30, then consumer surplus in the market is $20, and Wilbur and Ming-la purchase the good. $20, and Carlos and Quilana purchase the good. $30, and Wilbur and Ming-la purchase the good. $30, and Carlos and Quilana purchase the good.
$20, and Wilbur and Ming-la purchase the good.
Refer to Figure 9-17. The deadweight loss caused by the tariff is $24. $72. $96. $150.
$24.
Anita sharpens knives in her spare time for extra income. Buyers of her service are willing to pay $3.50 per knife for as many knives as Anita is willing to sharpen. On a particular day, she is willing to sharpen the first knife for $2.00, the second knife for $2.50, the third knife for $3.00, and the fourth knife for $3.50. Assume Anita is rational in deciding how many knives to sharpen. Her producer surplus is $3.50. $3.00. $2.00. $0.50.
$3.00.
Refer to Table 13-8. What is the average fixed cost of producing 8 gigaplots at Jimmy's Gigaplot factory? $2.12 $3.13 $20.00 $24.37
$3.13
Refer to Figure 7-4. At the equilibrium price, consumer surplus is $500. $600. $200. $300.
$300.
he average total cost when 5 units of output are produced is $30, and the marginal cost of the sixth unit of output is $60. What is the average total cost when six units are produced? $10 $25 $30 $35
$35
Refer to Table 7-3. If there is only one unit of the good and if the buyers bid against each other for the right to purchase it, then the good will sell for $15 or slightly less. $25 or slightly more. $35 or slightly more. $45 or slightly less.
$35 or slightly more.
Refer to Table 7-9. Both the demand curve and the supply curve are straight lines. If the price is $8 but only 4 units are bought and sold, total surplus will be $20. $30. $36. $40.
$36.
Scenario 13-5 A certain firm produces and sells staplers. Last year, it produced 7,000 staplers and sold each stapler for $6. In producing the 7,000 staplers, it incurred variable costs of $28,000 and a total cost of $45,000. Refer to Scenario 13-5. In producing the 7,000 staplers, the firm's average variable cost was $2. $4. $6. $8.
$4.
Jane decides to open her own business and earns $50,000 in accounting profit the first year. When deciding to open her own business she turned down three separate job offers with annual salaries of $30,000, $40,000, and $45,000. What is Jane's economic profit from running her own business? $-65,000 $5,000 $10,000 $20,000
$5,000
Refer to Figure 6-8. The price that sellers receive after the tax is imposed is $8. $6. $5. $3.
$5.
Refer to Figure 7-15. 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 $210. $360. $480. $570.
$570.
cenario 13-2 Zach took $400,000 out of the bank and used it to start his new cookie business. The bank account pays 3 percent interest per year. During the first year of his business, Zach sold 6,000 boxes of cookies for $2.50 per box. Also, during the first year, the cookie business incurred costs that required outlays of money amounting to $9,000. Refer to Scenario 13-2. Zach's accounting profit for the year was $-494,000. $-6,000. $6,000. $12,000.
$6,000.
Refer to Figure 9-12. Producer surplus after trade is $4,800. $5,600. $6,400. $7,000.
$6,400.
Refer to Table 13-5. The marginal cost of producing the sixth widget is $1.00 $3.50 $5.00 $6.00
$6.00
Scenario 13-5 A certain firm produces and sells staplers. Last year, it produced 7,000 staplers and sold each stapler for $6. In producing the 7,000 staplers, it incurred variable costs of $28,000 and a total cost of $45,000. Refer to Scenario 13-5. In producing the 7,000 staplers, the firm's average total cost was $5.00 $5.42 $6.21 $6.43
$6.43
Refer to Table 7-4. If tickets sell for $25 each, then what is the total consumer surplus in the market? $25 $60 $110 $35
$60
Refer to Figure 6-9. How much tax revenue does this tax produce for the government? $480 $600 $800 $1,080
$600
Refer to Figure 9-5. With trade, total surplus is $245. $367.50. $607.50. $687.50.
$687.50.
If Roberta sells a shirt for $30, and her producer surplus from the sale is $23, her cost must have been $53. $30. $7. We would have to know the consumer surplus in order to make this determination.
$7.
Refer to Figure 9-17. The amount of revenue collected by the government from the tariff is $8. $72. $180. $252.
$72.
Refer to Table 7-6. If the market price is $1,000, the producer surplus in the market is $700. $2,250. $750. $3,700.
$750.
Refer to Table 7-6. If the market price is $1,000, the producer surplus in the market is $700. $750. $2,250. $3,700.
$750.
Refer to Figure 6-8. The effective price that buyers pay after the tax is imposed is $8. $6. $5. $3.
$8.
Refer to Figure 9-13. With trade, producer surplus is $900. $1,100. $1,500. $2,000.
$900.
Refer to Table 13-3. Assume Gallo's currently employs 5 workers. What is the marginal product of labor when Gallo's adds a 6th worker? 5 corks per hour 15 corks per hour 25 corks per hour 70 corks per hour
15 corks per hour
Since World War II, GATT has been responsible for reducing the average tariff among member countries from about 40 percent to about 5 percent. 40 percent to about 20 percent. 80 percent to about 20 percent. 20 percent to about 10 percent.
40 percent to about 5 percent.
Refer to Table 13-6. One week, Adrian earns a profit of $125. If her revenue for the week is $1100, how many boxes of chocolate did she produce? 140 330 780 950
780
Refer to Table 13-2. What is the marginal product of the fourth worker? 65 70 75 80
80
Refer to Figure 9-12. With trade, domestic production and domestic consumption, respectively, are 600 and 400. 800 and 400. 400 and 600. 400 and 800.
800 and 400.
Refer to Figure 9-9. Consumer surplus in this market before trade is A. A + B. A + B + D. C.
A + B.
Refer to Figure 7-1. When the price is P1, consumer surplus is A+B. A+B+C. A. A+B+D.
A+B+C.
Refer to Figure 13-8. Which of the curves is most likely to characterize the short-run average total cost curve of the smallest factory? ATCA ATCB ATCC ATCD
ATCA
Refer to Figure 13-8. Which curve represents the long-run average total cost? ATCA ATCB ATCC ATCD
ATCD
Refer to Figure 13-8. Which curve represents the long-run average total cost? ATCA ATCB ATCC ATCD
ATCD
For a construction company that builds houses, which of the following costs would be a fixed cost? The $50,000 per year salary paid to a construction foreman The $30,000 per year salary paid to the company's bookkeeper The $10,000 per year premium paid to an insurance company All of the above are correct.
All of the above are correct.
Suppose a country abandons a no-trade policy in favor of a free-trade policy. If, as a result, the domestic price of beans increases to equal the world price of beans, then that country becomes an exporter of beans. that country has a comparative advantage in producing beans. at the world price, the quantity of beans supplied in that country exceeds the quantity of beans demanded in that country. All of the above are correct.
All of the above are correct.
The marginal cost curve crosses the average total cost curve at the efficient scale. the minimum point on the average total cost curve. a point where the marginal cost curve is rising. All of the above are correct.
All of the above are correct.
When a country allows international trade and becomes an exporter of a good, domestic producers of the good become better off. domestic consumers of the good become worse off. the gains of the winners exceed the losses of the losers. All of the above are correct.
All of the above are correct.
When a tax is placed on the sellers of a product, the size of the market is decreased. effective price received by sellers decreases and the price paid by buyers increases. supply of the product decreases. All of the above are correct.
All of the above are correct.
Which of the following tools and concepts is useful in the analysis of international trade? total surplus domestic supply equilibrium price All of the above are correct.
All of the above are correct.
Which of the following tools and concepts is useful in the analysis of international trade? total surplus domestic supply equilibrium price All of the above are correct.
All of the above are correct.
Consider Figure 6-11. Suppose the demand curve is not the one drawn on the graph; instead, the demand curve is a vertical line passing through the point (Q = 10, P = 5). Using the two supply curves that are drawn, which of the following statements would describe the effects of the tax correctly? The price paid by buyers would be $9. The price received by sellers (after paying the tax) would be $6.50. The government would collect $27 from the tax. Buyers of the good would bear 100 percent of the burden of the tax
Buyers of the good would bear 100 percent of the burden of the tax
Refer to Figure 13-6. Which of the curves is most likely to represent average fixed cost? A B C D
D
Refer to Figure 13-6. Which of the curves is most likely to represent average fixed cost? A B C D
D
Refer to Figure 9-15. As a result of the tariff, there is a deadweight loss that amounts to B. E. D + F. B + D + E + F.
D + F.
Refer to Table 7-2. If the price of Vanilla Coke is $6.90, who will purchase the good? all five individuals Megan, Mallory and Audrey David, Laura and Megan David and Laura
David and Laura
Refer to Table 7-6. If the price is $775, who would be willing to supply the product? Abby and Bobby Abby, Bobby, and Carlos Carlos, Dianne, and Evalina Dianne and Evalina
Dianne and Evalina
Senator Blowhard represents a state in which many textile firms are located. He wants to impose tariffs on all imported textiles. Which of the following is the least likely consequence of such tariffs? Domestic textile buyers will lose consumer surplus, have less variety, and will pay higher prices. Domestic textile sellers will gain producer surplus. Domestic textile sellers will have a higher rate of technological advance. Domestic textile sellers will have more market power.
Domestic textile sellers will have a higher rate of technological advance.
Which of the following statements is false? In the long run, there are no fixed costs. Marginal cost is independent of fixed costs. Economies of scale is a short-run concept. Diminishing marginal product explains increasing marginal cost.
Economies of scale is a short-run concept.
Refer to Table 13-10. Which firm has economies of scale over the entire range of output? Firm 1 Firm 2 Firm 3 Firm 4
Firm 2
Refer to Table 13-10. Which firm has constant returns to scale over the entire range of output Firm 1 Firm 2 Firm 3 Firm 4
Firm 4
Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a price of $80. Katie's willingness to pay was $100, Kendra's willingness to pay was $95, and Kristen's willingness to pay was $80. Which of the following statements is correct? The fact that all three individuals paid $80 for the same type of cell phone indicates that each one placed the same value on that cell phone. Had the price of the cell phone been $95 rather than $80, Katie and Kendra definitely would have been buyers and Kristen definitely would not have been a buyer. For the three individuals together, consumer surplus amounts to $35. Having bought the cell phone, Kristen is better off than she would have been had she not bought it.
For the three individuals together, consumer surplus amounts to $35.
Refer to Figure 9-18. If Isoland allows international trade and if the world price of peaches is $5, then Isoland has a comparative advantage, relative to other countries, in producing peaches. Isoland will import peaches. consumer surplus with trade exceeds consumer surplus without trade. All of the above are correct.
Isoland has a comparative advantage, relative to other countries, in producing peaches.
Refer to Figure 9-18. If Isoland allows international trade and if the world price of peaches is $5, then Isoland has a comparative advantage, relative to other countries, in producing peaches. Isoland will import peaches. consumer surplus with trade exceeds consumer surplus without trade. All of the above are correct.
Isoland has a comparative advantage, relative to other countries, in producing peaches.
Dolores used to work as a high school teacher for $40,000 per year but quit in order to start her own catering business. To buy the necessary equipment, she withdrew $20,000 from her savings, (which paid 3 percent interest) and borrowed $30,000 from a bank, whom she pays 3 percent interest per year. Last year she paid $25,000 for ingredients and had revenue of $60,000. She asked Louis the accountant and Greg the economist to calculate her profit for her. Louis says her profit is $34,100 and Greg says her profit is $6,500. Louis says her profit is $34,100 and Greg says she lost $6,500. Louis says her profit is $35,000 and Greg says she lost $5,000. Louis says her profit is $33,500 and Greg says her profit is 33,500.
Louis says her profit is $34,100 and Greg says she lost $6,500.
Which of the Ten Principles of Economics does welfare economics explain more fully? The cost of something is what you give up to get it. Markets are usually a good way to organize economic activity. Trade can make everyone better off. A country's standard of living depends on its ability to produce goods and services.
Markets are usually a good way to organize economic activity.
Denmark is an importer of computer chips, taking the world price of $12 per chip as given. Suppose Denmark imposes a $5 tariff on chips. Which of the following outcomes is possible? More Danish-produced chips are sold in Denmark. More foreign-produced chips are sold in Denmark. Danish consumers of chips become better off. Total surplus in the Danish chip market increases.
More Danish-produced chips are sold in Denmark.
Denmark is an importer of computer chips, taking the world price of $12 per chip as given. Suppose Denmark imposes a $5 tariff on chips. Which of the following outcomes is possible? More Danish-produced chips are sold in Denmark. More foreign-produced chips are sold in Denmark. Danish consumers of chips become better off. Total surplus in the Danish chip market increases.
More Danish-produced chips are sold in Denmark.
A minimum wage that is set below a market's equilibrium wage will result in an excess demand for labor, that is, unemployment. an excess demand for labor, that is, a shortage of workers. an excess supply of labor, that is, unemployment. None of the above is correct.
None of the above is correct.
Refer to Figure 9-7. The equilibrium price and the equilibrium quantity of cheese in Wales before trade are P1 and Q2. P1 and Q1. P0 and Q0. P0 and Q1.
P0 and Q0.
Refer to Figure 7-16. The efficient price-quantity combination is P1 and Q1. P2 and Q2. P3 and Q1. P4 and 0.
P2 and Q2.
Which of the following characterizations is correct? Rent control and the minimum wage are both examples of price ceilings. Rent control is an example of a price ceiling and the minimum wage is an example of a price floor. Rent control is an example of a price floor and the minimum wage is an example of a price ceiling. Rent control and the minimum wage are both examples of price floors.
Rent control is an example of a price ceiling and the minimum wage is an example of a price floor.
Harry's Hotdogs is a small street vendor business owned by Harry Huggins. Harry is trying to get a better understanding of his costs by categorizing them as fixed or variable. Which of the following costs are most likely to be considered fixed costs? The cost of mustard The cost of hotdog buns Wages paid to workers that sell hotdogs The cost of bookkeeping services
The cost of bookkeeping services
For a large firm that produces and sells automobiles, which of the following costs would be a variable cost? The $20 million payment that the firm pays each year for accounting services The cost of the steel that is used in producing automobiles The rent that the firm pays for office space in a suburb of St. Louis All of the above are correct.
The cost of the steel that is used in producing automobiles
Which of the following is not true when the price of a good or service falls? Buyers who were already buying the good or service are better off. Some new buyers, who are now willing to buy, enter the market. The total consumer surplus in the market increases. The total value of purchases before and after the price change is the same.
The total value of purchases before and after the price change is the same.
Turkey is an importer of wheat. The world price of a bushel of wheat is $7. Turkey imposes a $3-per-bushel tariff on wheat. Turkey is a price-taker in the wheat market. As a result of the tariff, Turkish consumers of wheat become worse off and Turkish producers of wheat become worse off. Turkish consumers of wheat become worse off and Turkish producers of wheat become better off. Turkish consumers of wheat become better off and Turkish producers of wheat become worse off. Turkish consumers of wheat become better off and Turkish producers of wheat become better off.
Turkish consumers of wheat become worse off and Turkish producers of wheat become better off.
For a country that is considering the adoption of either a tariff or an import quota on a particular good, an important difference is that an import quota has no effect on consumer surplus, while a tariff decreases consumer surplus. an import quota has no effect on producer surplus, while a tariff decreases producer surplus. a tariff raises total surplus, while an import quota does not. a tariff raises revenue for that country's government, while an import quota does not.
a tariff raises revenue for that country's government, while an import quota does not.
A demand curve reflects each of the following exceptthe value each buyer in the market places on the good. willingness to pay of all buyers in the market. ability of buyers to obtain the quantity they desire. highest price buyers are willing to pay for each quantity.
ability of buyers to obtain the quantity they desire.
Which of the following expressions is correct? accounting profit = total revenue - explicit costs economic profit = total revenue - implicit costs economic profit = total revenue - explicit costs Both a and b are correct.
accounting profit = total revenue - explicit costs
If Franco's Pizza Parlor knows that the marginal cost of the 500th pizza is $3.50 and that the average total cost of making 499 pizzas is $3.30, then average costs are rising at Q = 500. average costs are falling at Q = 500. total costs are falling at Q = 500. average variable costs must be falling.
average costs are rising at Q = 500.
If Franco's Pizza Parlor knows that the marginal cost of the 500th pizza is $3.50 and that the average total cost of making 499 pizzas is $3.30, then average costs are rising at Q = 500. average costs are falling at Q = 500. total costs are falling at Q = 500. average variable costs must be falling.
average costs are rising at Q = 500.
Average total cost is very high when a small amount of output is produced because average variable cost is high. average fixed cost is high. marginal cost is high. marginal product is high.
average fixed cost is high.
Average total cost is very high when a small amount of output is produced because average variable cost is high. average fixed cost is high. marginal cost is high. marginal product is high.
average fixed cost is high.
When marginal cost is less than average total cost, marginal cost must be falling. average variable cost must be falling. average total cost is falling. average total cost is rising.
average total cost is falling.
The firm's efficient scale is the quantity of output that minimizes average total cost. average fixed cost. average variable cost. marginal cost.
average total cost.
If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the price of the good will fall due to market forces. consumer does not purchase the good. market is not a competitive market. consumer has consumer surplus of $2 if he or she buys the good.
consumer does not purchase the good.
A drought in California destroys many red grapes. As a result of the drought, the consumer surplus in the market for red grapes decreases, and the consumer surplus in the market for red WINE increases. increases, and the consumer surplus in the market for red WINE increases. decreases, and the consumer surplus in the market for red WINE decreases. increases, and the consumer surplus in the market for red WINE decreases.
decreases, and the consumer surplus in the market for red WINE decreases.
The term tax incidence refers to the widespread view that taxes always will be a fact of life. ongoing debate about which types of taxes make the most economic sense. division of the tax burden between buyers and sellers. division of the tax burden between sales taxes and income taxes.
division of the tax burden between buyers and sellers.
Implicit costs do not require an outlay of money by the firm. do not enter into the economist's measurement of a firm's profit. are also known as variable costs. are not part of an economist's measurement of opportunity cost.
do not require an outlay of money by the firm.
implicit costs do not require an outlay of money by the firm. do not enter into the economist's measurement of a firm's profit. are also known as variable costs. are not part of an economist's measurement of opportunity cost.
do not require an outlay of money by the firm.
A tariff on a product makes domestic sellers better off and domestic buyers worse off. domestic sellers worse off and domestic buyers worse off. domestic sellers better off and domestic buyers better off. domestic sellers worse off and domestic buyers better off.
domestic sellers better off and domestic buyers worse off.
If buyers are required to pay a $0.10 tax per bag on Hershey's kisses, the demand curve for kisses will shift upward by $0.10 per bag. upward by $0.05 per bag. downward by $0.10 per bag. downward by $0.05 per bag.
downward by $0.10 per bag.
When a tax is imposed on the buyers of a good, the demand curve shifts downward by the amount of the tax. upward by the amount of the tax. downward by less than the amount of the tax. upward by more than the amount of the tax.
downward by the amount of the tax.
Refer to Figure 6-5. When a certain price control is imposed in this market, the resulting quantity of the good that is actually bought and sold is such that buyers are willing and able to pay a maximum of P1 dollars per unit for that quantity and sellers are willing and able to accept a minimum of P2 dollars per unit for that quantity. If P1 - P2 = $3.00, then the price control in question is a price ceiling of $2.00. a price ceiling of $5.00. a price floor of $5.00. either a price ceiling of $2.00 or a price floor of $5.00.
either a price ceiling of $2.00 or a price floor of $5.00.
Advocates of the minimum wage deny that the minimum wage produces any adverse effects. emphasize the benefits to teenagers of increases in the minimum wage. emphasize the low annual incomes of those who work for the minimum wage. All of the above are correct.
emphasize the low annual incomes of those who work for the minimum wage.
For any country, if the world price of zinc is higher than the domestic price of zinc without trade, that country should export zinc, since that country has a comparative advantage in zinc. import zinc, since that country has a comparative advantage in zinc. neither export nor import zinc, since that country cannot gain from trade. neither export nor import zinc, since that country already produces zinc at a low cost compared to other countries.
export zinc, since that country has a comparative advantage in zinc.
Refer to Figure 9-7. With trade, Wales imports Q2 - Q1 units of cheese. exports Q2 - Q1 units of cheese. imports Q2 - Q0 units of cheese. exports Q2 - Q0 units of cheese.
exports Q2 - Q1 units of cheese.
Refer to Figure 13-9. The three average total cost curves on the diagram correspond to three different time horizons. products. firms. factory sizes.
factory sizes.
An important factor in the decline of the U.S. textile industry over the past 100 or so years is foreign competitors that can produce quality textile goods at low cost. lower prices of goods that are substitutes for clothing. a decrease in Americans' demand for clothing, due to increased incomes and the fact that clothing is an inferior good. the fact that the minimum wage in the U.S. has failed to keep pace with the cost of living.
foreign competitors that can produce quality textile goods at low cost.
Refer to Figure 13-9. The firm experiences economies of scale if it changes its level of output from Q1 to Q2. from Q2 to Q3. from Q3 to Q4. from Q4 to Q5.
from Q1 to Q2.
Refer to Figure 13-9. The firm experiences diseconomies of scale if it changes its level of output from Q1 to Q2. from Q2 to Q3. from Q3 to Q4. from Q4 to Q5.
from Q4 to Q5.
The United States has imposed taxes on some imported goods that have been sold here by foreign countries at below their cost of production. These taxes benefit the United States as a whole, because they generate revenue for the government. In addition, because the goods are priced below cost, the taxes do not harm domestic consumers. benefit the United States as a whole, because they generate revenue for the government and increase producer surplus. harm the United States as a whole, because they reduce consumer surplus by an amount that exceeds the gain in producer surplus and government revenue. harm the United States as a whole, because they reduce producer surplus by an amount that exceeds the gain in consumer surplus and government revenue.
harm the United States as a whole, because they reduce consumer surplus by an amount that exceeds the gain in producer surplus and government revenue.
Refer to Figure 9-8. The country for which the figure is drawn has a comparative advantage relative to other countries in the production of cars and it will export cars. has a comparative advantage relative to other countries in the production of cars and it will import cars. has a comparative disadvantage relative to other countries in the production of cars and it will export cars. has a comparative disadvantage relative to other countries in the production of cars and it will import cars.
has a comparative disadvantage relative to other countries in the production of cars and it will import cars.
A price ceiling that is not binding will cause a surplus in the market. cause a shortage in the market. cause the market to be less efficient than it would be without the price ceiling. have no effect on the market price.
have no effect on the market price.
Welfare economics is the study of taxes and subsidies. how technology is best put to use in the production of goods and services. government welfare programs for needy people. how the allocation of resources affects economic well-being.
how the allocation of resources affects economic well-being.
Raisin bran and milk are complementary goods. A decrease in the price of raisins will increase consumer surplus in the market for raisin bran and decrease producer surplus in the market for milk. increase consumer surplus in the market for raisin bran and increase producer surplus in the market for milk. decrease consumer surplus in the market for raisin bran and increase producer surplus in the market for milk. decrease consumer surplus in the market for raisin bran and decrease producer surplus in the market for milk.
increase consumer surplus in the market for raisin bran and increase producer surplus in the market for milk.
Over time, housing shortages caused by rent control increase, because the demand for, and supply of, housing are less elastic in the long run. increase, because the demand for, and supply of, housing are more elastic in the long run. decrease, because the demand for, and supply of, housing are less elastic in the long run. decrease, because the demand for, and supply of, housing are more elastic in the long run.
increase, because the demand for, and supply of, housing are more elastic in the long run.
Refer to Figure 9-1. When trade in wool is allowed, producer surplus in New Zealand increases by the area B + D. increases by the area B + D + G. decreases by the area C + F. decreases by the area G.
increases by the area B + D + G.
A tax imposed on the sellers of blueberries increases sellers' costs, shifts the supply curve to the left (upward), and reduces profits. increases sellers' costs, shifts the supply curve to the right (downward), and reduces profits. increases sellers' costs, causes a movement upward and to the right along the supply curve, and reduces profits. is passed on in full to the buyers of blueberries and profits remain unchanged.
increases sellers' costs, shifts the supply curve to the left (upward), and reduces profits.
Refer to Figure 7-19. At the quantity Q2, the marginal value to buyers and the marginal cost to sellers are both P2. is P2, and the marginal cost to sellers is P3. and the marginal cost to sellers are both P3. is P3, and the marginal cost to sellers is P2.
is P2, and the marginal cost to sellers is P3.
A price ceiling is a legal maximum on the price at which a good can be sold. is often imposed in markets in which "cutthroat competition" would prevail without a price ceiling. is often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price ceiling. All of the above are correct.
is a legal maximum on the price at which a good can be sold.
The length of the short run is different for different types of firms. can never exceed 3 years. can never exceed 1 year. is always less than 6 months.
is different for different types of firms.
Refer to Figure 9-8. In the country for which the figure is drawn, total surplus with international trade in cars is represented by the area A + B + C. is represented by the area A + B + D. is smaller than producer surplus without international trade in cars. is larger than total surplus without international trade in cars.
is larger than total surplus without international trade in cars.
Some reasons that firms may experience diseconomies of scale include that the firm is too small to take advantage of specialization. large management structures may be bureaucratic and inefficient. if there are too many employees, the work place becomes crowded and people become less productive. average fixed costs begin to rise again.
large management structures may be bureaucratic and inefficient.
An example of an explicit cost of production would be the cost of forgone labor earnings for an entrepreneur. the lost opportunity to invest in capital markets when the money is invested in one's business. lease payments for the land on which a firm's factory stands. Both a and c are correct.
lease payments for the land on which a firm's factory stands.
When a price floor is binding, the equilibrium price is lower than the price floor. higher than the price floor. equal to the price floor. It is impossible to compare the equilibrium price with the price floor.
lower than the price floor.
Minimum wage laws dictate the average price employers must pay for labor. highest price employers may pay for labor. lowest price employers may pay for labor. quality of labor which must be supplied.
lowest price employers may pay for labor.
When, in our analysis of the gains and losses from international trade, we assume that a particular country is small, we are assuming the domestic price before trade will continue to prevail once that country is opened up to trade with other countries. assuming there is no demand for that country's domestically-produced goods by other countries. assuming international trade can benefit producers, but not consumers, in that country. making an assumption that is not necessary to analyze the gains and losses from international trade.
making an assumption that is not necessary to analyze the gains and losses from international trade.
When a firm's only variable input is labor, then the slope of the production function measures the quantity of labor. quantity of output. total cost. marginal product of labor.
marginal product of labor.
The efficient scale of the firm is the quantity of output that maximizes marginal product. maximizes profit. minimizes average total cost. minimizes average variable cost.
minimizes average total cost.
Assume, for France, that the domestic price of tea without international trade is higher than the world price of tea. This suggests that other countries have a comparative advantage over France in producing tea. France has an absolute advantage over other countries in producing tea. France will export tea if international trade is allowed. French tea buyers will become worse off if international trade is allowed.
other countries have a comparative advantage over France in producing tea.
Refer to Figure 13-8. This firm experiences diseconomies of scale at what output levels? output levels above N output levels between M and N output levels below M All of the above are correct, if the firm is operating in the long run.
output levels above N
The presence of price controls in a market usually is an indication that an insufficient quantity of a good or service was being produced in that market to meet the public's need. the usual forces of supply and demand were not able to establish an equilibrium price in that market. policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers. policymakers correctly believed that, in that market, price controls would generate no inequities of their own.
policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers.
When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an importer of a particular good, producer surplus increases and total surplus increases in the market for that good. producer surplus increases and total surplus decreases in the market for that good. producer surplus decreases and total surplus increases in the market for that good. producer surplus decreases and total surplus decreases in the market for that good.
producer surplus decreases and total surplus increases in the market for that good.
When a country that imports a particular good imposes a tariff on that good, producer surplus increases and total surplus increases in the market for that good. producer surplus increases and total surplus decreases in the market for that good. producer surplus decreases and total surplus increases in the market for that good. producer surplus decreases and total surplus decreases in the market for that good.
producer surplus increases and total surplus decreases in the market for that good.
Aquilonia has decided to end its policy of not trading with the rest of the world. When it ends its trade restrictions, it discovers that it is importing incense, exporting steel, and neither importing nor exporting rugs. Which groups in Aquilonia are better off as a result of the new free-trade policy? producers of incense and consumers of steel consumers of all three goods consumers of incense and producers of rugs producers of steel and consumers of incense
producers of steel and consumers of incense
Diminishing marginal product suggests that the marginal cost of an extra worker is unchanged. cost of an extra worker is less than the previous worker's marginal cost. product of an extra worker is less than the previous worker's marginal product. product of an extra worker is greater than the previous worker's marginal product.
product of an extra worker is less than the previous worker's marginal product.
A tariff lowers the domestic price of the exported good below the world price. keeps the domestic price of the exported good the same as the world price. raises the domestic price of the imported good above the world price. lowers the domestic price of the imported good below the world price.
raises the domestic price of the imported good above the world price.
When a country takes a multilateral approach to free trade, it removes trade restrictions on its own. reduces its trade restrictions while other countries do the same. does not remove trade restrictions no matter what other countries do. is willing to trade with multiple countries at once.
reduces its trade restrictions while other countries do the same.
Explicit costs require an outlay of money by the firm. include all of the firm's opportunity costs. include income that is forgone by the firm's owners. Both b and c are correct.
require an outlay of money by the firm.
Cost is a measure of the seller's willingness to sell. seller's producer surplus. producer shortage. seller's willingness to buy.
seller's willingness to sell.
Refer to Figure 6-2. If the government imposes a price ceiling of $8 in this market, the result would be a surplus of 10. surplus of 20. shortage of 10. shortage of 20.
shortage of 20.
When a binding price ceiling is imposed to benefit buyers, a result is that every buyer in the market benefits. every seller in the market benefits, but the overall benefit to sellers is smaller than the overall benefit to buyers. every buyer in the market benefits and every seller in the market is harmed. some buyers will not be able to buy any amount of the good.
some buyers will not be able to buy any amount of the good.
Refer to Figure 7-17. If 4 units of the good are produced and sold, then producer surplus is maximized. the allocation of resources is inefficient. the cost to sellers exceeds the value to buyers. total surplus is minimized.
the allocation of resources is inefficient.
Within a country, the domestic price of a product will equal the world price if trade restrictions are imposed on the product. the country allows free trade. the country chooses to import, but not export, the product. the country chooses to export, but not import, the product.
the country allows free trade.
Suppose a price ceiling is not binding; this means that the equilibrium price is above the price ceiling. the equilibrium price is below the price ceiling. it has no legal enforcement mechanism. people are finding a way to circumvent the law.
the equilibrium price is below the price ceiling.
Congressman Smith cites the "jobs argument" when he argues in favor of restrictions on trade; he argues that everything can be produced at lower cost in other countries. The likely flaw in Congressman Smith's reasoning is that he ignores the fact that there is no evidence that any worker ever lost his or her job because of free trade. unemployment of labor is not a serious problem relative to other economic problems. the gains from trade are based on comparative advantage. the gains from trade are based on absolute advantage.
the gains from trade are based on comparative advantage.
Refer to Figure 7-11. Area A represents producer surplus to new producers entering the market as the result of an increase in price from P1 to P2. the increase in consumer surplus that results from an upward-sloping supply curve. the increase in total surplus when sellers are willing and able to increase supply from Q1 to Q2. the increase in producer surplus to those producers already in the market when the price increases from P1 to P2.
the increase in producer surplus to those producers already in the market when the price increases from P1 to P2.
Which of the following will cause an increase in producer surplus? the imposition of a binding price ceiling in the market buyers expect the price of the good to be lower next month the price of a substitute increases income increases and buyers consider the good to be inferior
the price of a substitute increases
Refer to Figure 6-4. Suppose a price ceiling of $4.50 is imposed. As a result, there is a shortage of 15 units of the good. the demand curve will shift to the left so as to now pass through the point (Q = 35, P = $4.50). the situation is very much like the one created by a binding minimum wage. the quantity of the good that is bought and sold is the same as it would have been had a price floor of $7.50 been imposed.
the quantity of the good that is bought and sold is the same as it would have been had a price floor of $7.50 been imposed.
Since the 1980s, Wal-Mart stores have appeared in almost every community in America. Wal-Mart buys its goods in large quantities and, therefore, at cheaper prices. Wal-Mart also locates its stores where land prices are low, usually outside of the community business district. Many customers shop at Wal-Mart because of low prices. Local retailers, like the neighborhood drug store, often go out of business because they lose customers. This story demonstrates that consumers are boycotting local retailers whose prices are relatively higher. there are diseconomies of scale in retail sales. there are economies of scale in retail sales. there are diminishing returns to producing and selling retail goods.
there are economies of scale in retail sales.
At Bert's Bootery, the total cost of producing twenty pairs of boots is $400. The marginal cost of producing the twenty-first pair of boots is $83. We can conclude that the average variable cost of 21 pairs of boots is $23. total cost of 21 pairs of boots is $23. total cost of 21 pairs of boots is $15.09. total cost of 21 pairs of boots cannot be calculated from the information given.
total cost of 21 pairs of boots is $23.
Refer to Figure 13-1. As the number of workers increases, total output increases, but at a decreasing rate. marginal product increases, but at a decreasing rate. marginal product increases at an increasing rate. total output decreases.
total output increases, but at a decreasing rate.
Refer to Figure 7-14. When the price is P1, area B+C represents total surplus. producer surplus. consumer surplus. None of the above is correct.
total surplus.
The before-trade domestic price of tomatoes in the United States is $500 per ton. The world price of tomatoes is $600 per ton. The U.S. is a price-taker in the market for tomatoes. If trade in tomatoes is allowed, the United States will become an importer of tomatoes. will become an exporter of tomatoes. may become either an importer or an exporter of tomatoes, but this cannot be determined. will experience increases in both consumer surplus and producer surplus.
will become an exporter of tomatoes.
The before-trade domestic price of tomatoes in the United States is $500 per ton. The world price of tomatoes is $600 per ton. The U.S. is a price-taker in the market for tomatoes. If trade in tomatoes is allowed, the price of tomatoes in the United States will increase, and this will cause consumer surplus to decrease. will decrease, and this will cause consumer surplus to increase. will be unaffected, and consumer surplus will be unaffected as well. could increase or decrease or be unaffected; this cannot be determined.
will increase, and this will cause consumer surplus to decrease.
Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because with shortages and waiting lists, they have no incentive to maintain and improve their property. they become resigned to the fact that many of their apartments are going to be vacant at any given time. with rent control the government guarantees landlords a minimal level of profit. with rent control it becomes the government's responsibility to maintain rental housing.
with shortages and waiting lists, they have no incentive to maintain and improve their property.
Economies of scale arise when an economy is self-sufficient in production. individuals in a society are self-sufficient. fixed costs are large relative to variable costs. workers are able to specialize in a particular task.
workers are able to specialize in a particular task.
If the United States threatens to impose a tariff on German cars if Germany does not remove agricultural subsidies, the United States will be better off no matter how Germany responds. better off if Germany gives in, and will be no worse off if it doesn't. worse off if Germany doesn't give in to the threat. worse off no matter how Germany responds.
worse off if Germany doesn't give in to the threat.
Refer to Table 7-9. Both the demand curve and the supply curve are straight lines. At equilibrium, producer surplus is $24. $32. $48. $64.
$32.
Refer to Figure 6-12. In which market will the majority of the tax burden fall on the buyer? market (a) market (b) market (c) All of the above are correct.
All of the above are correct.
Refer to Figure 7-11. When the price rises from P1 to P2, which area represents the increase in producer surplus due to new producers entering the market? A B A+B
B
Refer to Figure 6-13. The effective price that sellers receive after the tax is imposed is P0. P1. P2. impossible to determine.
P0.
Suppose that a tax is placed on books. If the buyers pay the majority of the tax, we know that the demand is more inelastic than the supply. supply is more inelastic than the demand. government has required that buyers remit the tax payments. government has required that buyers remit the tax payments.
demand is more inelastic than the supply.
The term tax incidence refers to the idespread view that taxes always will be a fact of life. ongoing debate about which types of taxes make the most economic sense. division of the tax burden between buyers and sellers. division of the tax burden between sales taxes and income taxes.
division of the tax burden between buyers and sellers.
Consumer surplus is the amount of a good that a consumer can buy at a price below equilibrium price. is the amount a consumer is willing to pay minus the amount the consumer actually pays. is the number of consumers who are excluded from a market because of scarcity. measures how much a seller values a good.
is the amount a consumer is willing to pay minus the amount the consumer actually pays.
Under rent control, tenants can expect lower rent and higher quality housing. lower rent and lower quality housing. higher rent and a shortage of rental housing. higher rent and a surplus of rental housing.
lower rent and lower quality housing.
Refer to Figure 6-2. If the government imposes a price ceiling of $12 in this market, the result would be a surplus of 10. a surplus of 20. a shortage of 20. neither a surplus nor a shortage.
neither a surplus nor a shortage.
Refer to Table 7-1. If the price of the product is $51, then who would be willing to purchase the product? Mike Mike and Sandy Mike, Sandy, and Jonathan no one
no one
Refer to Figure 6-3. Which of the panels represents a binding price floor? panel (a) but not panel (b) panel (b) but not panel (a) panel (a) and panel (b) neither panel (a) nor panel (b)
panel (b) but not panel (a)
Refer to Figure 6-1. A binding price ceiling is shown in panel (a) but not panel (b). panel (b) but not panel (a). both panel (a) and panel (b). neither panel (a) nor panel (b).
panel (b) but not panel (a).
Refer to Figure 7-14. When the price is P1, area C represents total benefit. producer surplus. consumer surplus. None of the above is correct.
producer surplus.
A tax imposed on the sellers of a good will raise the price paid by buyers and lower the equilibrium quantity. raise the price paid by buyers and raise the equilibrium quantity. raise the effective price received by sellers and raise the equilibrium quantity. raise the effective price received by sellers and lower the equilibrium quantity.
raise the price paid by buyers and lower the equilibrium quantity.
A tax imposed on the sellers of a good raises both the price buyers pay and the effective price for sellers. raises the price buyers pay and lowers the effective price for sellers. lowers the price buyers pay and raises the effective price for sellers. lowers both the price buyers pay and the effective price for sellers.
raises the price buyers pay and lowers the effective price for sellers.
To say that a price ceiling is binding is to say that the price ceiling results in a scarcity. is set above the equilibrium price. results in excess demand. All of the above are correct.
results in excess demand.
A seller is willing to sell a product only if the seller receives a price that is at least as great as the seller's producer surplus. sellers's cost of production. seller's profit. average willingness to pay of buyers of the product.
sellers's cost of production.
Refer to Figure 6-2. If the government imposes a price floor of $14 in this market, the result would be a surplus of 20. surplus of 40. shortage of 20. shortage of 40.
surplus of 40.
Refer to Figure 6-8. As the figure is drawn, who sends the tax payments to the government? the buyers the sellers A portion of the tax payments is sent by the buyers and the remaining portion is sent by the sellers. The question of who sends the tax payments cannot be determined from the figure.
the buyers
Which of the following will cause a decrease in consumer surplus? an increase in the number of sellers of the good a decrease in the production cost of the good sellers expect the price of the good to be lower next month the imposition of a binding price floor in the market
the imposition of a binding price floor in the market
Buyers of a good bear the larger share of the tax burden when a tax is placed on a product for which the supply is more elastic than the demand. the demand in more elastic than the supply. the tax is placed on the sellers of the product. the tax is placed on the buyers of the product.
the supply is more elastic than the demand.
Refer to Figure 7-18. If the government mandated a price increase from P1 to a higher price, then total surplus would decrease. consumer surplus would increase. total surplus would increase, since producer surplus would increase. total surplus would remain unchanged.
total surplus would decrease.
At the equilibrium price of a good, the good will be purchased by those buyers who value the good more than price. value the good less than price. have the money to buy the good. consider the good a necessity.
value the good more than price.
Total surplus in a market is equal to value to buyers - amount paid by buyers. amount received by sellers - costs of sellers. value to buyers - costs of sellers. amount received by sellers - amount paid by buyers.
value to buyers - costs of sellers.
In a market, the marginal buyer is the buyer whose willingness to pay is higher than that of all other buyers and potential buyers. whose willingness to pay is lower than that of all other buyers and potential buyers. who is willing to buy exactly one unit of the good. who would be the first to leave the market if the price were any higher.
who would be the first to leave the market if the price were any higher.
Suppose Chris and Laura attend a charity benefit and participate in a silent auction. Each has in mind a maximum amount that he or she will bid for an oil painting by a locally famous artist. This maximum is called deadweight loss. willingness to pay. consumer surplus. producer surplus.
willingness to pay.
If a binding price ceiling were imposed in the computer market, the quantity of computers demanded would increase. the quantity of computers supplied would decrease. a shortage of computers would develop. All of the above are correct.
All of the above are correct.
Opponents of the minimum wage point out that the minimum wage encourages teenagers to drop out of school. prevents some workers from getting needed on-the-job training. contributes to the problem of unemployment. All of the above are correct.
All of the above are correct.
Suppose the demand for nachos decreases. What will happen to producer surplus in the market for nachos? It increases. It decreases. It remains unchanged. It may increase, decrease, or remain unchanged.
It decreases.
Refer to Figure 7-5. What happens to the consumer surplus if the price rises from $100 to $150? The new consumer surplus is half of the original consumer surplus. The new consumer surplus is 25 percent of the original consumer surplus. The new consumer surplus is double the original consumer surplus. The new consumer surplus is triple the original consumer surplus.
The new consumer surplus is 25 percent of the original consumer surplus.
Consider Figure 6-11. Which of these statements about the effects of the tax is correct? The tax is paid by sellers; sellers bear one-half of the burden of the tax; government collects $24 from the tax. The tax is paid by sellers; sellers bear one-third of the burden of the tax; government collects $24 from the tax. The tax is paid by sellers; sellers bear two-thirds of the burden of the tax; government collects $30 from the tax. The tax is paid by buyers; buyers bear two-thirds of the burden of the tax; government collects $16 from the tax.
The tax is paid by sellers; sellers bear one-third of the burden of the tax; government collects $24 from the tax.
A binding price floor in a market is set above equilibrium price and causes a shortage. above equilibrium price and causes a surplus. below equilibrium price and causes a surplus. below equilibrium price and causes a shortage.
above equilibrium price and causes a surplus.
A binding minimum wage alters both the quantity demanded and quantity supplied of labor. affects only the quantity of labor demanded; it does not affect the quantity of labor supplied. has no effect on the quantity of labor demanded or the quantity of labor supplied. causes only temporary unemployment, since the market will adjust and eliminate any temporary surplus of workers.
alters both the quantity demanded and quantity supplied of labor.
A price ceiling will be binding only if it is set equal to equilibrium price. above equilibrium price. below equilibrium price. none of the above; a price ceiling is never binding.
below equilibrium price.
On a graph, consumer surplus is represented by the area between the demand and supply curves. below the demand curve and above price. below the price and above the supply curve. below the demand curve and to the right of equilibrium price.
below the demand curve and above price.
Under rent control, bribery is a mechanism to bring the total price of an apartment (including the bribe) closer to the equilibrium price. allocate housing to the poorest individuals in the market. force the total price of an apartment (including the bribe) to be less than the market price. allocate housing to the most deserving tenants.
bring the total price of an apartment (including the bribe) closer to the equilibrium price.
If a tax is imposed on a market with inelastic demand and elastic supply, buyers will bear most of the burden of the tax. sellers will bear most of the burden of the tax. the burden of the tax will be shared equally between buyers and sellers. it is impossible to determine how the burden of the tax will be shared.
buyers will bear most of the burden of the tax.
On a graph, the area below a demand curve and above the price measures producer surplus. consumer surplus. deadweight loss. willingness to pay.
consumer surplus.
Assume the law of demand and the law of supply both apply to the market for cars. If the government imposed a $500 tax per car on buyers of cars, then the price received by sellers of cars would decrease by less than $500. decrease by exactly $500. decrease by more than $500. increase by an indeterminate amount.
decrease by less than $500.
Refer to Figure 7-11. When the price falls from P2 to P1, producer surplus decreases by an amount equal to C. decreases by an amount equal to A+B. decreases by an amount equal to A+C. increases by an amount equal to A+B.
decreases by an amount equal to A+B.
A drought in California destroys many red grapes. As a result of the drought, the consumer surplus in the market for red grapes increases, and the consumer surplus in the market for red wine increases. increases, and the consumer surplus in the market for red wine decreases. decreases, and the consumer surplus in the market for red wine increases. decreases, and the consumer surplus in the market for red wine decreases.
decreases, and the consumer surplus in the market for red wine decreases.
If the demand for a good or service decreases, producer surplus increases. decreases. remains the same. may increase, decrease, or remain the same.
decreases.
The decisions of buyers and sellers that affect people who are not participants in the market create market power. externalities. profiteering. market equilibrium.
externalities.
When government imposes a price ceiling or a price floor in a market, price no longer serves as a rationing device. efficiency in the market is enhanced. shortages and surpluses are eliminated. buyers and sellers both become better off.
price no longer serves as a rationing device.
