Econ Final cengage

Scenario 13-3 Ziva is an organic lettuce farmer, but she also spends part of her day as a professional organizing consultant. As a consultant, Ziva helps people organize their houses. Due to the popularity of her home-organization services, Farmer Ziva has more clients requesting her services than she has time to help if she maintains her farming business. Farmer Ziva charges $25 an hour for her home-organization services. One spring day, Ziva spends 10 hours in her fields planting $130 worth of seeds on her farm. She expects that the seeds she planted will yield $300 worth of lettuce.

$-80

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If the size of a tax doubles, the deadweight loss doubles. (true/false)

False

The fundamental cause of monopolies is barriers to entry. (true/False)

True

Brady Industries 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 a. $2. b. $1,000. c. $2,000. d. $4.

b. $1,000.

Suppose a tax of $5 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 200 units to 100 units. The tax decreases consumer surplus by $450 and decreases producer surplus by $300. The deadweight loss from the tax is a. $500. b. $250. c. $1,000. d. $750

b. $250.

Labor 0-0-30-0 1-100-30-15 2-180-30-30 3-240-30-45 4-280-30-60 5-300-30-75 Refer to Table 13-9. For the firm whose production function and costs are specified in the table, its average-variable-cost curve is? a. constant. b. decreasing. c. increasing. d. U-shaped.

c. increasing.

Refer to Figure 7-4 . Which area represents producer surplus when the price is P 1 ? a. ACH b. ABGD c. DGH d. BCG

d. BCG

Buyer Willingness to Pay for a Baseball Game Ticket (Dollars) Jennifer-10 Bryce-15 Dan-20 David-25 Ken-50 Lisa-60 Refer to Table 7-3. If you have two (essentially) identical tickets that you sell to the group in an auction, assuming that each person can only buy one ticket, which of the following is closest to the selling price for each ticket? a. $21 b. $51 c. $26 d. $61

c. $26

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. 3 houses b. 5 houses c. 8 houses d. 2 houses

c. 8 houses

Refer to Figure 15-7. To maximize total surplus, a benevolent social planner would choose which of the following outcomes? a. Q = 60 and P = 30 b. 0=30 and P = 60 c. Q = 45 and P = 45 d. Q= 30 and P = 30

c. Q = 45 and P = 45

Suppose Yolanda needs a dog sitter so that she can travel to her sister's wedding. Yolanda values dog sitting for the weekend at $200. Rebecca is willing to dog sit for Yolanda so long as she receives at least $175. Yolanda and Rebecca agree on a price of $185. Suppose the government imposes a tax of $30 on dog sitting What is the deadweight loss of the tax? a. The maximum value that Yolanda would pay for dog sitting b. The $30 tax c. The lost benefit to Yolanda and Rebecca because after the tax, Rebecca will not dog sit for Yolanda d. The lost benefit to Yolanda of being unable to hire a dog sitter because Yolanda is the one who would pay the tax

c. The lost benefit to Yolanda and Rebecca because after the tax, Rebecca will not dog sit for Yolanda

Some colleges charge all students the same "activity fee." Suppose that students differ by how many campus activities they engage in. This charge is most like a. an excise tax that conforms to the benefits principle. b. a lump-sum tax that conforms to the benefits principle. c. a lump-sum tax that violates the benefits principle. d. an excise tax that violates the benefits principle.

c. a lump-sum tax that violates the benefits principle.

Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are available only in limited quantities. In this market, an increase in demand will. a. not affect price in either the short or the long run. b. increase price in the long run but not in the short run. c. increase price in the short run but not in the long run. d. increase price both in the short and the long run.

c. increase price in the short run but not in the long run.

If the distribution of water is a natural monopoly, then a. allowing for competition among different firms in the water-distribution industry is efficient. b. a single firm cannot serve the market at the lowest possible average total cost. c. multiple firms would likely each have to pay large fixed costs to develop their own network of pipes. d. average cost increases as the quantity of water produced increases.

c. multiple firms would likely each have to pay large fixed costs to develop their own network of pipes.

The deadweight loss associated with a tax on a commodity is generated by? a. the consumers who are unable to avoid paying the tax. b. the consumers who still choose to consume the commodity but pay a higher price that reflects the tax. c. the consumers who choose to not consume the commodity that is taxed. d. all citizens who are able to use services provided by government.

c. the consumers who choose to not consume the commodity that is taxed.

One problem with government operation of monopolies is that a. a government-regulated outcome will increase the profitability of the monopoly. b. a benevolent government is likely to be interested in generating profits for political gain c. the government typically has little incentive to reduce costs. d. monopolies typically have rising average costs.

c. the government typically has little incentive to reduce costs.

One of the most difficult issues associated with trying to structure a tax policy to satisfy horizontal equity is determining a. the source of income for taxpayers. b. the level of transfer payments made to low-income groups. c. what differences are relevant to a family's ability to pay. d. whether or not a taxpayer falls within the highest income quintile.

c. what differences are relevant to a family's ability to pay.

Price-quantity demanded-quality supplied 12.00-0-36 10.00-3-30 8.00-6-24 6.00-9-18 4.00-12-12 2.00-15-6 0.00-18-0 Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, producers will be. a. $26. b. $16. c. $18. d. $24.

d. $24.

Suppose a firm in each of the two markets listed below were to increase its price by 25 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed might not? a. Rice and soybeans b. Electricity and natural gas c. Restaurants and smartphones d. Corn and satellite radio

d. Corn and satellite radio

Of the following countries, which country's government collects the largest amount of tax revenue as a percentage of that country's total income? a. United States b. Greece c. Canada d. Denmark

d. Denmark

The revenue that the federal government collects from payroll taxes is mostly earmarked to pay for a. national defense and income security (welfare) programs b. Social Security and public schools c. national defense and Medicare d. Social Security and Medicare

d. Social Security and Medicare

Which of the following is true when the price of a good or service rises? a. Buyers who were already buying the good or service are better off. b. The total value of purchases before and after the price change is the same. c. The total consumer surplus in the market increases. d. Some buyers exit the market.

d. Some buyers exit the market.

For a large firm that produces and sells automobiles, which of the following costs would be a variable cost? a. The cost of internet advertising incurred each year b. The rent that the firm pays for office space in a suburb of St. Louis c. The $20 million payment that the firm pays each year for accounting services d. The cost of the steel that is used in producing automobiles

d. The cost of the steel that is used in producing automobiles

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product? a. The farmer is able to produce 6,000 bushels of wheat when he hires 4 workers. b. The Farmer able to produce 6,200 bushels of wheat when he hires 4 workers. c. The farmer is able to produce 5,800 bushels of wheat when he hires 4 workers. d. The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers.

d. The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers.

In order for antitrust laws to raise social welfare, the government must a. disallow any mergers from taking place. b. always attempt to keep markets in their most competitive form. c. disallow synergy benefits from accruing to monopolists. d. be able to determine which mergers are desirable and which are not.

d. be able to determine which mergers are desirable and which are not.

Monopoly firms face a. downward-sloping demand curves, so they can sell as much output as they desire at the market price. b. horizontal demand curves, so they can sell only a limited quantity of output at each price. c. horizontal demand curves, so they can sell as much output as they desire at the market price. d. downward-sloping demand curves, so they can sell only the specific price-quantity combinations that lie on the demand curve.

d. downward-sloping demand curves, so they can sell only the specific price-quantity combinations that lie on the demand curve.

A difference between explicit and implicit costs is that a. explicit costs do not require a direct monetary outlay by the firm, whereas implicit costs do. b. explicit costs must be greater than implicit costs. c. implicit costs must be greater than explicit costs. d. implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.

d. implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.

Suppose most people regard emeralds, rubies, and sapphires as close substitutes for diamonds. Then DeBeers, a large diamond company, has a. less incentive to advertise than it would otherwise have. b. more control over the price of diamonds than it would otherwise have. c. higher profits than it would otherwise have. d. less market power than it would otherwise have.

d. less market power than it would otherwise have.

Corporate profits distributed as dividends are a. tax free. b. taxed once. c. taxed three times. d. taxed twice.

d. taxed twice.

If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is a. positive, and the consumer would purchase the product. b. There is not enough information given to answer this question. c. negative, and the consumer would not purchase the product. d. zero.

d. zero.

A monopoly creates a deadweight loss to society because it earns both short-run and long-run positive economic profits. (true/false)

False

A natural monopoly will always operate in the region of the long run average total cost curve where the cost per unit is constant. (true/false)

False

In 2014, the largest source of receipts for state and local governments was corporate income taxes. (true/false)

False

The more elastic the supply, the larger the deadweight loss from a tax, all else equal. (true/false)

False

Karole's income rises from $50,000 to $75,000 and her income tax increases from $8,000 to $9,500. Her average tax rate is 6%. (true/false)

Fasle

A buyer is willing to buy a product at a price greater than or equal to his willingness to pay, but would refuse to buy a product at a price less than his willingness to pay. (True/False)

True

A family tax liability is the amount of money it owes in taxes. (True/False)

True

A firm operating in a perfectly competitive industry will shut down in the short run but earn losses if the market price is less than that firm's average variable cost. (True/False)

True

A firm operating ion a perfectly competitive industry will continue to operate if it earns zero economic profits, because it is likely to be earning positive accounting profits. (True/False)

True

A popular resort restaurant will maximize profits if it chooses to stay open during the less-crowded "off season" when its total revenues exceed its variable costs. (True/False)

True

A tax on a good causes the size of the market to shrink. (true/false)

True

As a firm moves along its long-run average cost curve, it is adjusting the size of its factory to the quantity of production. (True/False)

True

Because of the greater flexibility that firms have in the long run, all short-run cost curves lie on or above the long-run curve. (True/False)

True

Economist Arthur Laffer made the argument that tax rates in the United States were so high that reducing the rates would increase tax revenue. (true/False)

True

Government spending is projected to rise over the next few decades. Three of the most important reasons are spending on Social Security, Medicare, and healthcare. (True/False)

True

In order to conclude that markets are efficient, we assume that they are perfectly competitive. (True/False)

True

Resources devoted to complying with the tax laws are a type of deadweight loss. (True/False)

True

The administrative burden of any tax system is part of the inefficiency it creates. (true/false)

True

The amount of power that a monopoly has depends on whether there are close substitutes for its product. (true/false)

True

The average-total-cost curve reflects the shape of both the average-fixed-cost and average-variable-cost curves. (True/False)

True

The fact that many inputs are fixed in the short run but variable in the long run has little impact on the firm's cost curves. (true/false)

True

The marginal-cost curve intersects the average-total-cost curve at the minimum point of the marginal-cost curve. (True/False)

True

When average total cost rises if a producer either increases or decreases production, then the firm is said to be operating at efficient scale. (true/false)

True

Refer to Figure 7-5. If the supply curve is S', the demand curve is D, and the equilibrium price is $150, what is the producer surplus? a. $2,500 b. $5,000 c. $625

a. $2,500

Labor-Output-Fixed Cost-Variable Cost 0-0-30-0 1-100-30-15 2-180-30-30 3-240-30-45 4-280-30-60 5-300-30-75 Refer to Table 13-9. What is the marginal product of the third worker? a. 60 units b. 40 units c. 20 units d. 80 units

a. 60 units

Which tax system requires higher-income taxpayers to have lower tax rates, even though they pay a larger amount of tax when compared to lower-income taxpayers? a. A regressive tax b. A lump-sum tax c. A progressive tax d. A proportional tax

a. A regressive tax

Dallas buys strawberries, and he would be willing to pay more than he now pays. Suppose that Dallas has a change in his tastes such that he values strawberries more than before. If the market price is the same as before, then a. Dallas's consumer surplus would increase b. Dallas's consumer surplus would be unaffected. c. Dallas would be wise to buy fewer strawberries than before. d. Dallas's consumer surplus would decrease.

a. Dallas's consumer surplus would increase

Refer To Figure 13-4 Which of the figures represents the total cost curve for a typical firm? a. Figure 2 b. Figure 4 c. Figure 1 d. Figure 3

a. Figure 2

Refer to Figure 8-8. Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax? a. Graph (a) b. Graph (c) c. Graph (b) d. Graph (d)

a. Graph (a)

If a firm in a perfectly competitive market triples the quantity of output sold, then total revenue will a. exactly triple. b. less than triple. c. more than triple. d. be reduced by one third.

a. exactly triple.

Scenario 12-1 Ken places a $20 value on a cigar, and Mark places a $17 value on it. The equilibrium price for this brand of cigar is $15. • Refer to Scenario 12-1. Suppose the government levies a tax of $3 on each cigar, and the equilibrium price of a cigar increases to $18. Because total consumer surplus has a. fallen by more than the tax revenue, the tax has a deadweight loss b. fallen by less than the tax revenue, the tax has no dead weight loss. c. increased by less than the tax revenue, the tax has a deadweight loss. d. fallen by exactly the amount of the tax revenue, the tax has no deadweight loss.

a. fallen by more than the tax revenue, the tax has a deadweight loss

A firm cannot price discriminate if a. it operates in a competitive market. b. it has declining marginal revenue. c. it has a constant marginal cost. d. buyers only reveal the price they are willing to pay for the product.

a. it operates in a competitive market.

Free entry means that a. no legal barriers prevent a firm from entering an industry. b. a firm's marginal cost is zero. c. the government pays any entry costs for individual firms. d. government-funded research lowers the costs of patents and other barriers to entry.

a. no legal barriers prevent a firm from entering an industry.

At Nick's Bakery, the cost to make a cheese danish is $1.50 per danish. As a result of selling 10 danishes, Nick experiences a producer surplus in the amount of $20. Nick must be selling his danishes for a. $2.00 each. b. $3.50 each. c. $0.50 each. d. $5.00 each.

b. $3.50 each.

Quantity-long-run total cost Firm 1, firm 2, firm 3, firm 4 1-180-120-150-210 2-350-250-300-340 3-510-390-450-490 4-660-540-600-660 5-800-700-750-850 6-930-870-900-1060 7-1050-1050-1050-1290 Refer to table 13-12. Firm 4's efficient scale occurs at what quantity? a. 2 b. 3 c. 4 d. 5

b. 3

Labor-output-marginal product 0-0- 1-300- 2-500- 3-600- 4-650- Refer to Table 13-2. What is the marginal product of the first worker? a. 100 units b. 300 units c. 50 units d. 200 units

b. 300 units

Which of the following would be most likely to have monopoly power? a. A large department store b. A local cable TV provider c. A long-distance telephone service provider d. A gas station

b. A local cable TV provider

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? a. The price of Bob's bison burgers will equal Bob's marginal cost. b. The price of Bob's bison burgers will exceed Bob's marginal cost. c. Costs are irrelevant to Bob because he is a monopolist. d. The price of Bob's bison burgers will be less than Bob's marginal cost.

b. The price of Bob's bison burgers will exceed Bob's marginal cost.

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 a. only shows G-rated movies. b. can prevent children from buying the lower-priced tickets and selling them to adults. c. has no monopoly pricing power. d. cannot easily distinguish between the two groups of customers.

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

In the long run a company that produces and sells popcorn incurs total costs of $1,050 when output is 90 canisters and $1,200 when output is 120 canisters. The popcorn company exhibits a. diseconomies of scale because average total cost is rising as output rises. b. economies of scale because average total cost is falling as output rises. c. economies of scale because total cost is rising as output rises. d. diseconomies of scale because total cost is rising as output rises.

b. economies of scale because average total cost is falling as output rises.

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it a. maximizes both the total revenue for firms and the quantity supplied of the product. b. maximizes the combined welfare of buyers and sellers. c. minimizes costs and maximizes output. d. minimizes the level of welfare payments.

b. maximizes the combined welfare of buyers and sellers.

One reason that deadweight losses are so difficult to avoid is that a. the administrative burden is hard to calculate. b. taxes affect the decisions that people make. c. consumption taxes must be universally applied to all commodities. d. income taxes are not paid by everyone.

b. taxes affect the decisions that people make.