Micro Test 3

Corn chips and potato chips are substitutes. Good weather that sharply increases the corn harvest would

increase consumer surplus in the market for corn chips and decrease producer surplus in the market for potato chips

When a factory is operating in the short run

it cannot adjust the quantity of fixed inputs

Suppose a firm in each of the two markets listed below were to increase its price by 15 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 would not?

#2 lead pencils and college textbooks

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

$5

When there is a technological advance in the pork industry, consumer surplus in that market will

increase

Johnny is a sophomore in college and has a 1.5 cumulative grade point average (GPA). Johnny's cumulative GPA will fall even further next semester if he performs worse than

His cumulative GPA and he ever performed before

Why does a firm in a competitive industry charge the market price?

If a firm charges less than the market price, it loses potential revenue, If a firm charges more than the market price, it loses all its customers to other firms, and the firm can sell as many units of output as it wants to at the market price.

Suppose the demand for peaches decreases. What will happen to producer surplus in the market for peaches

It decreases

How long does it take a firm to go from the short run to the long run?

It depends on the nature of the firm

Which of the following measures of cost is best described as "the increase in total cost that arises from an extra unit of production?"

Marginal Cost

Sonia opened a yoga studio where she teaches classes and sells yoga clothing. Variable costs for Sonia's yoga studio include the cost of the

Tank tops and wages to pay the other yoga instructors

If the United States changed its laws to allow for the legal sale of a kidney, which of the following isleast likely to occur

The allocation of kidneys would be fair.

Average total cost tells us the

cost of a typical unit of output, if total cost is divided evenly over all the units produced

At low levels of production, the firm

benefits from increased size because it can take advantage of greater specialization, has the potential for economies of scale, and is unlikely to experiences acute problems with coordination.

When a buyer's willingness to pay for a good is equal to the price of the good, the

buyer is indifferent between buying the good and not buying it

Which of the following costs of publishing a book is a fixed cost?

composition, typesetting, and jacket design for the book

In the short run, a firm that produces and sells house paint can adjust

how many workers to hire

To fully understand how taxes affect economic well-being, we must compare the

decrease in total surplus to the increase in revenue raised by the government

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

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

For any competitive market, the supply curve is closely related to the

firms' costs of production in that market

Taxes cause deadweight losses because they

lead to losses in surplus for consumers and for producers that, when taken together, exceed tax revenue collected by the government. distort incentives to both buyers and sellers. prevent buyers and sellers from realizing some of the gains from trade

Diseconomies of scale occur when a firm's

long-run average total costs are increasing as output increases

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it

maximizes the combined welfare of buyers and sellers

At present, the maximum legal price for a human kidney is $0. The price of $0 maximizes

neither consumer nor producer surplus.

For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $11 and a marginal cost of $10. It follows that the

production of the 100th unit of output increases the firm's profit by $1

When a tax is levied on a good, the buyers and sellers of the good share the burden

regardless of how the tax is levied

Comparing marginal revenue to marginal cost

reveals the contribution of the last unit of production to total profit and is helpful in making profit-maximizing production decisions.

Cost is a measure of the

seller's willingness to sell

If a tax shifts the supply curve upward (or to the left), we can infer that the tax was levied on

sellers of the good

Consumer surplus is

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it

product surplus

the amount a seller is paid for a good minus the seller's cost of providing it

Marginal revenue

the change in total revenue from an additional unit sold

If the current allocation of resources in the market for hammers is inefficient, then it must be the case that

the sum of consumer surplus and producer surplus could be increased by moving to a different allocation of resources

Efficiency in a market is achieved when

the sum of producer surplus and consumer surplus is maximized