final micro

Tom's Tent Company has total fixed costs of $300,000 per year. The firm's average variable cost is $80 for 10,000 tents. At that level of output, the firm's average total costs equal

$110

Michael values a stainless steel refrigerator for his new house at $3,500, but he succeeds in buying one for $3,000. Michael's willingness to pay is

$3,500.

Monopolies are socially inefficient because the price they charge is

. above marginal cost.

Externalities tend to cause markets to be a. inefficient. b. unequal. c. unnecessary. d. overwhelmed.

A. inefficient

All else equal, what happens to consumer surplus if the price of a good decreases?

Consumer surplus increases.

Mrs. Smith is operating a firm in a competitive market. The market price is $6.50. At her profit-maximizing level of output, her average total cost of production is $7.00, and her average variable cost of production is $6.00. Which of the following statements about Mrs. Smith's firm is correct?

Mrs. Smith is earning a loss but should continue to operate in the short run.

Refer to Figure 10-4. The socially optimal quantity would be

Q2

Suppose that beef producers create a negative externality. What is the relationship between the equilibrium quantity of beef and the socially optimal quantity of beef?

The equilibrium quantity is greater than the socially optimal quantity.

Which of the following is not an example of price discrimination? a. An ice cream parlor charges a higher price for ice cream than for sherbet. b. A movie theater charges a lower price for a child's ticket than for an adult's ticket. c. A university rebates part of the cost of tuition in the form of financial aid for needy students. d. A local pizza chain offers a "buy three get one free" deal

a. An ice cream parlor charges a higher price for ice cream than for sherbet.

When marginal cost exceeds average total cost,

average total cost must be rising

Which of the following is an example of a positive externality a. Sue not catching the flu because she got a flu vaccine b. Mary not catching the flu from Sue because Sue got a flu vaccine c. Mary catching the flu from Sue because Sue did not get a flu vaccine d. Sue catching the flu because she did not get a flu vaccine

b. Mary not catching the flu from Sue because Sue got a flu vaccine

A market structure in which there are many firms selling products that are similar but not identical is known as

b. monopolistic competition.

Suppose a tax is imposed on the sellers of fast-food French fries. The burden of the tax will

be shared by the buyers and sellers of fast-food French fries but not necessarily equally

For a profit-maximizing monopolistically competitive firm, price exceeds marginal cost in

both the short run and the long run.

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic

buyers of the good will bear most of the burden of the tax.

On a graph, the area below a demand curve and above the price measures

consumer surplus.

Which of the following is an example of an externality? a. cigarette smoke that permeates an entire restaurant b. a flu shot that prevents a student from transmitting the virus to her roommate c. a beautiful flower garden outside of the local post office d. All of the above are correct.

d. All of the above are correct.

When one firm sells its pollution permit to another firm b. the total amount of pollution remains the same a. both firms benefit. b. the total amount of pollution remains the same. c. the total amount of pollution decreases. d. Both a and b are correct.

d. Both a and b are correct.

If a competitive firm is currently producing a level of output at which profit is not maximized, then it must be true that a. marginal revenue exceeds marginal cost. b. marginal cost exceeds marginal revenue. c. total cost exceeds total revenue. d. None of the above is correct.

d. None of the above is correct.

Hot dogs and hot dog buns are complements. An increase in the price of flour used to make hot dogs buns will

decrease consumer surplus in the market for hot dog buns and decrease producer surplus in the market for hot dogs.

When adding another unit of labor leads to an increase in output that is smaller than the increases in output that resulted from adding previous units of labor, the firm is experiencing

diminishing marginal product.

A tax imposed on the sellers of a good will lower the

effective price received by sellers and lower the equilibrium quantity.

For a firm in a perfectly competitive market, the price of the good is always

equal to marginal revenue.

In the long-run equilibrium of a market with free entry and exit, if all firms have the same cost structure, then

firms are operating at their efficient scale

In a competitive market, the actions of any single buyer or seller will

have a negligible impact on the market price

A consumer's willingness to pay directly measures

how much a buyer values a good

Suppose a competitive market is comprised of firms that face identical cost curves. The firms experience an increase in demand that results in positive profits for the firms. Which of the following events are then most likely to occur? (i) New firms will enter the market. (ii) In the short run, price will rise; in the long run, price will rise further. (iii) In the long run, all firms will be producing at their efficient scale.

i) and (iii) only

The before-trade price of fish in Germany is $8.00 per pound. The world price of fish is $6.00 per pound. Germany is a price-taker in the fish market. If Germany allows trade in fish, then Germany will become an

importer of fish and the price of fish in Germany will be $6.00.

Suppose the world price of a television is $300. Before Paraguay allowed trade in televisions, the price of a television there was $350. Once Paraguay began allowing trade in televisions with other countries, Paraguay began

importing televisions and the price of a television in Paraguay decreased to $300.

The figure illustrates the market for tricycles in a country. Refer to Figure 9-5. With trade, this country

imports 320 tricycles

Over time, housing shortages caused by rent control

increase, because the demand for and supply of housing are more elastic in the long run.

A tariff on a product

increases the domestic quantity supplied

When an externality is present, the market equilibrium is

inefficient, and the equilibrium does not maximize the total benefit to society as a whole

In the long run, a monopolistically competitive firm produces a quantity that is

less than the efficient scale.

The profit-maximizing rule for a firm in a monopolistically competitive market is to always select the quantity at which

marginal revenue is equal to marginal cost.

In the short run, a firm in a monopolistically competitive market operates much like a

monopolist

A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as

price is above or below marginal cost

When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy,

producer surplus increases and total surplus decreases in the market for that goo

The marginal product of an input in the production process is the increase in

quantity of output obtained from an additional unit of that input.

A production function is a relationship between inputs and

quantity of output.

An externality is

results in an equilibrium that does not maximize the total benefits to society.

When a tax is placed on a product, the price paid by buyers

rises, and the price received by sellers falls

Producer surplus is

the amount a seller is paid minus the cost of production.

The tax incidence

the manner in which the burden of a tax is shared among participants in a market

The Laffer curve relates

the tax rate to tax revenue raised by the tax