Econ Test 2

which of the following will cause an increase in consumer surplus

a technological improvement in the production of the good

which of the following is an example of the Tragedy of the Commons?

a type of duck becomes extinct to overhunting

producers have little incentive to produce a public good because

there is a free rider problem

Producers have little incentive to produce a public good because

there is a free-rider problem

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

increase price in the short run but NOT in the long run

if stella's fashion jewelry sells its product in a competitive market, then

stella's fashion jewelry total revenue must be proportional to its quantity of output

amir tutors in his spare time for extra income. students are willing to pay $54 per hour for as many hours amir is willing to tutor. on a particular day, he is willing to tutor the first hour for $18, the second hour for $27, the third hour for $32, and the fourth hour for $54. assume amir is rational in deciding how many hours to tutor. his producer surplus is

$85

mike and laura sell lemonade on the corner for $3.20 per cup. it costs them $0.20 to make each cup. on a certain day, their producer surplus is $60. how many cups did Mike and Laura sell?

20

who among the following is a free rider?

Mike listens to National Public Radio, but does not contribute to any fundraising efforts

The minimum wage was instituted to ensure workers

a minimally adequate standard of living

a textbook is a

a private good and the knowledge that one gains from reading a textbook is a public good

suppose the government wants to encourage Americans to exercise more, so it imposes a binding price ceiling on the market for in-home treadmills. as a result,

a shortage of treadmills will develop

the average fixed cost curve

always declines with increased levels of output

short run

at least one input is fixed

if a firm experiences constant returns to scale at all output levels, then its long-run average total cost curve would

be horizontal

minimize deadweight loss

be inelastic to both supply and demand

a shortage results when a

binding ceiling price is imposed on a market

a surplus results when a

binding price floor is imposed on a market

six friends decide to meet at a greek restaurant for dinner. they decide that each person will order an item off the menu, and they will share all dishes. they will split the cost of the final bill evenly among each of the people at the table. a tragedy of the commons problem is likely for each of the following reasons except

each dish would be both excludable and rival in consumption

if the production of computer chips yields greater technology spillovers than the production of potato chips, the government should

encourage the production of computer chips with subsidies

when new firms enter a perfectly competitive market,

existing firms may see their costs rise if more firms compete for limited resources

The parable called the Tragedy of the Commons applies to goods such as

grazing land and fishing

If the labor supply curve is very elastic, a tax on labor

has a large deadweight loss

A regional elephant management board recently proposed a five-year moratorium on elephant hunting in Botswana based on a study of the elephant population. Which of the following statements is not correct?

if left unregulated, the elephant population will likely increase

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

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

a firm that shuts down temporarily has to pay

its fixed costs but not its variable costs

economies of scale

long-run average total cost falls as the quantity of output increases

diseconomies of scale

long-run average total cost rises as the quantity of output increases

when property rights are not well established,

markets fail to allocate resources efficiently

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it

maximizes the combined welfare of buyers and sellers

If the size of a tax increases, tax revenue

may increase, decrease, or remain the same

because public goods are

not excludable, people have an incentive to be free riders

a television broadcast is an example of a good that is

not rival in consumption

if a tax is levied on the sellers of a product, then the demand curve will

not shift

an externality is the uncompensated impact of

one person's actions on the well-being of a bystander

minimum-wage laws dictate

only a minimum wage that firms may pay workers

cost-benefit analysts often encounter the problem that those who would benefit from government provision of a public good tend to

overstate the benefit that they would receive from the public good and those who would be harmed by government provision of a public good tend to overstate the costs they would incur from the public good

the provision of a public good generates a

positive externality and the use of a common resource generates a negative externality

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

profits will rise

which of the following expressions is correct for a competitive firm?

proft = (quantity of output) x (price - average total cost)

The phenomenon of free riding is most closely associated with which type of good?

public goods

a free rider is a person who

receives the benefit of a good but avoids paying for it

which of the following statements regarding a Laffer Curve is the most plausible?

reducing a high tax rate is more likely to increase tax revenue than is reducing a low tax rate

which of the following represents the firm's short-run condition for shutting down?

shut down if TR < VC

suppose the government imposes a 20-cent tax on the sellers of artificially sweetened beverages. the tax would shift

supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially sweetened beverages

in some cases, tradable pollution permits may be better than a corrective tax because

the government can set a maximum level of pollution using permits

the privately-owned school system in Fort Yaman has a virtually unlimited capacity. it accepts all applicants and operates on both tuition and private donations. although every resident places value on having an educated community, the school's revenue have suffered lately due to a large decline in private donations from the elderly population. because the benefit that each citizen receives from having an educated community is a public good, which of the following would NOT be correct?

the private market is the best way to suply education

efficiency in a market is achieved when

the sum of producer surplus and consumer surplus is maximized

long run

the time period in which all inputs can be varied

Suppose that electricity producers create a negative externality equal to $5 per unit. further suppose that the government imposes a $5 per-unit tax on the producers. what is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of electricity to be produced?

they are equal

if a tax shifts the supply downward,

we cannot infer anything because the shift described is not consistent with a tax

constant returns to scale

when long-run average total cost is constant as output increases

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

zero