ECON final practice

introduce a subsidy of $4 per unit.

Refer to Figure 10-3. If the government wanted to tax or subsidize this good to achieve the socially optimal level of output, it would

The equilibrium quantity in markets characterized by oligopoly is

higher than in monopoly markets and lower than in perfectly competitive markets.

Scenario 15-1 A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. Refer to Scenario 15-1. At Q = 500, the firm's profit is

$13,000

Kelly has decided to start his own business giving sailing lessons. To purchase equipment for the business, Kelly withdrew $1,000 from his savings account, which was earning 3% interest, and borrowed an additional $2,000 from the bank at an interest rate of 7%. What is Kelly's annual opportunity cost of the financial capital that has been invested in the business?

$170

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by

40 percent.

Which of the following is not a characteristic of a public good?

Because it is a free good, there is no opportunity cost.

Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good?

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

$2.50

Refer to Figure 8-2. The amount of deadweight loss as a result of the tax is

the market experiences a deadweight loss of $80.

Refer to Figure 8-3 . As a result of the tax,

$820

Refer to Scenario 15-2. What is Vincent's profit on a typical day?

c. −2.57, and X and Y are complements.

Refer to Scenario 5-1. Using the midpoint method, if the price of good X is constant at $10 and the price of good Y decreases from $10 to $8, the cross-price elasticity of demand is about a. −0.22, and X and Y are complements. b. 0.57, and X and Y are substitutes. c. −2.57, and X and Y are complements. d. −0.80, and X and Y are complements.

A tax of $6 per unit of output

Refer to Table 10-4. Which of the following policies would move the market from the market equilibrium to the socially optimal equilibrium?

$120.00

Refer to Table 13-10. What is the average fixed cost for the month if 9 instructional modules are produced?

as output rises from 0 to 26, but rises after that.

Refer to Table 13-6. Bobby pays all his workers the same wage, and labor is his only variable cost. From this information we can conclude that Bobby's average variable cost decreases

$150

Refer to Table 13-7. What is the value of F?

$120

Refer to Table 14-4. What is the marginal revenue from selling the 3rd unit?

5 units.

Refer to Table 14-6. The firm should not produce an output level beyond

$130

Refer to Table 15-3. If the monopolist can engage in perfect price discrimination, what is the average revenue when 7 ties are sold?

$9,000

Refer to Table 17-1. If Rochelle and Alec operate as a profit-maximizing monopoly in the market for water, how much profit will each of them earn, assuming that the two producers split the market equally?

$800

Refer to Table 17-1. Suppose the town enacts new antitrust laws that prohibit Rochelle and Alec from operating as a monopoly. How many gallons of water will be produced and sold once Rochelle and Alec reach a Nash equilibrium?

$20

Refer to Table 17-4. How much less do each of these firms earn in the Nash equilibrium than if they jointly maximize profits?

What would happen to the equilibrium price and quantity of lattés if the cost of producing steamed milk, which is used to make lattés, rises?

The equilibrium price would increase, and the equilibrium quantity would decrease.

Which of the following is an example of a positive externality?

The mayor of a small town plants flowers in the city park.

Trade between countries a. must benefit both countries equally; otherwise, trade is not mutually beneficial. b. allows each country to consume at a point outside its production possibilities frontier. c. can best be understood by examining the countries' absolute advantages. d. limits a country's ability to produce goods and services on its own.

b. allows each country to consume at a point outside its production possibilities frontier.

Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor, the

b. quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases.

If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then a. Iowa has an absolute advantage in the production of corn. b. Oklahoma should produce just enough corn to satisfy its own residents' demands. c. Iowa should import corn from Oklahoma. d. Iowa has a comparative advantage in the production of corn.

d. Iowa has a comparative advantage in the production of corn.

In order to sell more of its product, a monopolist must

lower its price.

Suppose that a decrease in the price of good X results in fewer units of good Y being demanded. This implies that X and Y are

substitute goods

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

$250

Scenario 14-2 The information below applies to a competitive firm that sells its output for $40 per unit. • When the firm produces and sells 150 units of output, its average total cost is $24.50. • When the firm produces and sells 151 units of output, its average total cost is $24.55. Refer to Scenario 14-2. When the firm produces 150 units of output, its total cost is

$3,675.00.

0

Refer to Figure 14-2. If the market price is $6, what is the firm's short-run economic profit?

(K − B) × W

Refer to Figure 15-4. What area measures the monopolist's profit?

$200

Refer to Figure 16-2. How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

not in long-run equilibrium.

Refer to Figure 16-4 . Graph (b) is consistent with a firm in a monopolistically competitive market that is

more than 133.33 units of output.

Refer to Figure 16-5. Given this firm's cost curves, if the firm were perfectly competitive rather than monopolistically competitive, then in a long-run equilibrium it would produce

$0

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

some of the firms that are currently in the market to exit.

Refer to Figure 16-6. In response to the situation represented by the figure, we would expect

d. Alice produces more lemonade and Betty produces more pizzas.

Refer to Figure 3-4. If point A represents Alice's current production and point B represents Betty's current production, under what circumstances can both Alice and Betty benefit from specialization and trade? a. Both Alice and Betty produce only pizzas. b. Alice produces more pizzas and Betty produces more lemonade. c. There are no circumstances under which both Alice and Betty can benefit from specialization and trade. d. Alice produces more lemonade and Betty produces more pizzas.

c. demanded to exceed quantity supplied by 90 units.

Refer to Figure 6-2. The price ceiling causes quantity a. supplied to exceed quantity demanded by 90 units. b. demanded to exceed quantity supplied by 30 units. c. demanded to exceed quantity supplied by 90 units. d. supplied to exceed quantity demanded by 60 units.

$800

Refer to Figure 7-2. At the equilibrium price, consumer surplus is

$600

Refer to Figure 7-2. If the government imposes a price floor of $110 in this market, then consumer surplus will decrease by

Producer surplus increases by $3,125

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

$12,000

Refer to Table 17-2. Assume that there are two profit-maximizing internet radio providers operating in this market. Further assume that they are not able to collude on the price and quantity of subscriptions to sell. How much profit will each firm earn when this market reaches a Nash equilibrium?

b. (8 computers set up, 32 computers tested)

Refer to Table 3-7. Which of the following points would not be on Barb's production possibilities frontier, based on a 40-hour week? a. (0 computers set up, 40 computers tested) b. (8 computers set up, 32 computers tested) c. (25 computers set up, 20 computers tested) d. (30 computers set up, 16 computers tested)

d. 2.8

Refer to Table 5-2. Using the midpoint method, if the price falls from $200 to $150, the absolute value of the price elasticity of demand is a. 0.36. b. 5.3. c. 0.8. d. 2.8.

d. 5

Refer to Table 6-1. How many units of the good are purchased after the imposition of the price floor? a. 10 b. 15 c. 9 d. 5

$48

Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. At equilibrium, consumer surplus is

The two types of imperfectly competitive markets are

monopolistic competition and oligopoly.

Because public goods are

not excludable, people have an incentive to be free riders