Micro Pan Midterm 2

ATC = (total cost)/(quantity of output)

ATC Calculation

All of the above are correct

Altering incentives so that people take account of the external effects of their actions

the increase in producer surplus to those producers already in the market when the price increases from P1 to P2.

Area A represents

producer surplus to new producers entering the market as the result of an increase in the price from P1 to P2.

Area B represents

introduce a subsidy of $4 per unit.

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

125

If the price of the good is $100, then consumer surplus amounts to

185

If the price of the good is $80, then consumer surplus amounts to

Between P1 and P2

Suppose producer surplus is larger than C but smaller than A+B+C. The price of the good must be

$10

The Wacky Widget company has total fixed costs of $100,000 per year. The firm's average variablecost is $10 for 10,000 widgets. At that level of output, the firm's average total costs equal

cost of an externality.

The difference between social cost and private cost is a measure of the

negative externalities

This graph represents the tobacco industry. The industry creates

$1.80 and 35 units, respectively.

This graph represents the tobacco industry. The socially optimal price and quantity are

rising

When marginal cost is greater than average cost, average cost is

decreases, and the consumer surplus in the market for red wine decreases.

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.

$7.50 each

At Nick's Bakery, the cost to make homemade chocolate cake is $4 per cake. As a result of selling five cakes, Nick experiences a producer surplus in the amount of $17.50. Nick must be selling his cakes for

change in total costs divided by change in quantity produced

Average Total Cost

5

Bob purchases a book, and his consumer surplus is $3. If Bob is willing to pay $8 for the book, then the price of the book must be $3. $8. $5. $11.

the area below the demand curve and about the price

Consumer surplus in a market can be represented by the

$30

David tunes pianos in his spare time for extra income. The price is $135 per tuning. One particular week, David is willing to tune (i.e.. WTS) the first piano for $115, the second piano for $125, the third piano for $140, and the fourth piano for $175. Assume David is rational in deciding how many pianos to tune. His producer surplus is (hint, you want to first consider how many piano will David end up tuning).

product of an extra worker is less than the previous worker's marginal product.d. product of an extra worker is greater than the previous worker's marginal product.

Diminishing marginal product suggests that the marginal

If the willingness to sell is below to price of the good, it would be a surplus, so subtract the WTS-Price of the good

How to find consumer surplus...

emit a higher level of smoke than is socially efficient.

If an aluminum manufacturer's cost of production is only a portion of the social cost of the smoke it emits, it will

Melissa neither pays nor receives any compensation for her activity.

Melissa engages in an activity that influences the well-being of a bystander. In order for Melissa's activity to give rise to an externality, it must be the case that

The equilibrium quantity is less than the socially optimal quantity.

Suppose that flower gardens create a positive externality equal to $1 per plant. What is the relationship between the equilibrium quantity and the socially optimal quantity of plants grown?

$-80

Tonys economci profit equals

MC is the change of TC for each additional output.,

What is MC

$8

What is the equilibrium price in this market?

10 units

What is the socially-optimal quantity of output in this market?

accounting profit = economic profit + implicit costs

Which of the following expressions is correct? a. accounting profit = economic profit + implicit costs b. accounting profit = total revenue - implicit costs c. economic profit = accounting profit + explicit costsd. d. economic profit = total revenue - implicit costs