MicroEcon Chapters 1-6 Assignment

Refer to the accompanying figure. Total producer surplus in this market is:

$125

Refer to the accompanying graph. If this firm is a price taker, then when the price of each unit of output is $30, this firm's total revenue at its profit-maximizing level of output is ______.

$2,400

The accompanying table shows a pizzeria's fixed cost and variable cost at different levels of output. Pizzas sell for $20 each. When the pizzeria makes 25 pizzas a day, its average fixed cost is ______.

$20

Refer to the accompanying figure. An increase in supply is represented by a shift from:

curve A to curve B.

As Lynn eats more pizza, we would typically expect her marginal utility from eating pizza to:

decrease

A demand curve is ______ sloping because ______.

downward; fewer people are willing to buy an item at higher prices

If the demand for a good is highly elastic, that good is likely to have:

many close substitutes

The extra benefit that results from carrying out one additional unit of an activity is the ______ of the activity.

marginal benefit

The extra cost that results from carrying out one additional unit of an activity is the _____ of the activity.

marginal cost

Suppose 30 employees per day can produce 50 units of output. Assuming the law of diminishing marginal returns is present, to produce 100 units of output would require:

more than 30 additional employees per day

If the demand for a good decreases as income decreases, then the good is a(n):

normal good

Marginal cost is calculated as:

the change in total cost divided by the change in output.

Refer to the accompanying figure. When this market is in equilibrium, total producer surplus in the market is ______ per day.

$250

Refer to the accompanying graph. If this firm is a price taker, then when the price of each unit of output is $30, this firm's profit-maximizing level of output is ______.

80

All else equal, a decrease in the demand for oranges will lead to a(n) ______ in equilibrium price and a(n) ______ in equilibrium quantity.

decrease; decrease

Refer to the accompanying graph. If this firm is a price taker, then when the price of each unit of output is $30, this firm's total cost at its profit-maximizing level of output is ______.

$1,600

Refer to the accompanying figure. The equilibrium price is ______, and the equilibrium quantity is ______.

$35; 20

The accompanying table shows a pizzeria's fixed cost and variable cost at different levels of output. Pizzas sell for $20 each. When the pizzeria makes 50 pizzas a day, its average variable cost is ______.

$5

The accompanying table shows a pizzeria's fixed cost and variable cost at different levels of output. Pizzas sell for $20 each. When the pizzeria makes 100 pizzas a day, its fixed cost is ______ and its total cost is ______.

$500;$1,350

efer to the accompanying graph. If this firm is a price taker, then when the price of each unit of output is $30, how much profit does this firm earn at its profit-maximizing level of output?

$800

A firm's profit equals:

(P − ATC) × Q [(price minus average total cost) times the quantity sold].

If the price of textbooks increases by one percent and the quantity demanded falls by one-half percent, then the price elasticity of demand is equal to:

0.5

The accompanying table below shows the relationship between the number of times you get your car washed each month and your total monthly benefit from car washes. Each car wash costs $15. How many times a month should you get your car washed?

2

In which of the following markets do firms sell the same standardized product?

2% milk

Refer to the accompanying table. It is clear that diminishing returns sets in after ______ workers per day.

4

Refer to the accompanying figure, which shows the market for cups of coffee. What might cause a shift from the original supply curve to the new supply curve?

A new technology that reduces amount of coffee beans needed to make a good cup of coffee

Which of the following will cause an increase market supply?

A technological innovation that lowers the marginal cost of producing the good.

What might cause a demand curve to shift to the right?

An increase in the price of a substitute

The accompanying graph shows the cost curves for Moe's mushroom gathering business, which is perfectly competitive. In the graph above, the average variable cost curve is labeled _____, the average total cost curve is labeled _____, and the marginal cost curve is labeled ______.

C; B; A

Suppose it takes Dan 5 minutes to make a sandwich and 15 minutes to make a smoothie, and it takes Tracy 6 minutes to make a sandwich and 12 minutes to make a smoothie. Which of the following statements is correct?

Dan has the comparative and absolute advantage in sandwiches.

Suppose it takes Dan 5 minutes to make a sandwich and 15 minutes to make a smoothie, and it takes Tracy 6 minutes to make a sandwich and 12 minutes to make a smoothie. Which of the following statements is correct?

Dan should specialize in sandwiches, and Tracy should specialize in smoothies.

The quantity that sellers wish to sell tends to ______ as price increases, and so the supply curve is ______ sloping.

Increase; upward

Lou and Alex live together and share household chores. They like to cook some meals ahead of time and eat leftovers. The accompanying table shows the number of rooms they can each clean and the number of meals they can each cook in an hour. Which of the following is true?

Lou has a comparative advantage over Alex in cleaning.

Refer to the accompanying table. ______ has the comparative advantage in making pies and ______ the comparative advantage in making cakes.

Martha; Julia

Which of the following is likely to have the highest price elasticity of demand?

Nike running shoes

Suppose Ben owns a small company that makes kites. The market for kites is perfectly competitive, and kites sell for $25 each. Ben's total production costs vary depending on the number of kites he makes each day, as shown in the accompanying table. Should Ben shut down?

No, because he can earn enough revenue to cover his variable cost.

Refer to the accompanying figure. If the government imposed a price ceiling of $40, what would happen in this market?

The price ceiling would have no effect.

The short run is best defined as:

a period of time sufficiently short that at least one factor of production is fixed.

Refer to the accompanying figure. At a price of $9, there will be:

an excess supply of 5 units.

Two goods are complements if:

an increase in the price of one good leads to a decrease in demand for the other.

According to the accompanying table, Julia has the absolute advantage in making:

both pies and cakes

Suppose a profit-maximizing firm in a perfectly competitive market is collecting $1,999 in total revenues. If the total cost of its fixed factors of production falls from $500 to $400, the firm will:

earn greater profits or smaller losses.

In general, individuals and nations should specialize in producing goods ______ other individuals or nations.

for which they have a lower opportunity cost compared to

Refer to the accompanying figure. Moving from demand curve D1 to demand curve D2 illustrates a(n):

increase in demand

According to the Incentive Principle:

people tend to do more of something when its benefits are greater.

If demand increases and supply decreases, the change in the equilibrium price will be ______, and the change in the equilibrium quantity will be ______.

positive; uncertain

Refer to the accompanying graph. If this firm is a price taker and the price of each unit of output is $15, then this firm should:

produce 60 units of output

The difference between the price a seller actually receives for a good and the seller's reservation price is:

producer surplus.

A graph that illustrates the maximum amount of one good that can be produced for every possible level of production of the other good is called a:

production possibilities curve.

Total revenue minus both explicit and implicit costs defines a firm's:

profit

The accompanying table shows a pizzeria's fixed cost and variable cost at different levels of output. Pizzas sell for $20 each. When the pizzeria makes 100 pizzas per day, it earns an economic ______ of ______.

profit; $650

Suppose that at your current consumption of two goods, A and B, MUA/PA= 25 and MUB/PB = 20. In order to maximize, your utility you should:

purchase more of A and less of B.

If fast food is an inferior good then:

the demand for fast food will fall as income rises.

When more firms enter an industry:

the industry supply curve will shift right.

If the marginal utility of the 3rd cup of coffee is 23 and the marginal utility of the 4th cup is 15, then:

there is evidence of diminishing marginal utility.

The accompanying table shows a pizzeria's fixed cost and variable cost at different levels of output. Pizzas sell for $20 each. When the pizzeria makes 50 pizzas a day, its average total cost is ______.

$15

If the absolute value of the price elasticity of demand for cell phone service is 3, then if the price of cell phone service increases by 1 percent, quantity demanded would:

decrease by 3 percent.

The demand for a good is inelastic with respect to price if the price elasticity of demand is:

less than one

Refer to the accompanying graph. If this firm is a price taker and the price of each unit of output is $9, then this firm should:

shut down in the short run

Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $15,000 per year. Larry's opportunity cost of attending State NoName U is:

$20,000

The accompanying table below shows how total donations, average donations, total labor costs and average labor costs vary depending on the number of employees State U hires for its fundraising activities. The Chair of the Economics Department at State U says that fundraising employees should be hired as long as their marginal benefit exceeds their marginal cost. If the University follows this advice, then ______ employee(s) will hired, and the net benefit (total donations minus total labor costs) will be ______.

2; $25,426

Refer to the accompanying table. Martha's opportunity cost of making a cake is:

4/3 of a pie

Refer to the accompanying figure, which shows the market for cups of coffee. At the original market equilibrium:

40 cups are sold per hour at a price of $2.00 each.

Refer to the accompanying table. Julia's opportunity cost of making a pie is:

5/6 of a cake

Assume the price of gasoline doubles tonight and remains at that price for the next two years. Compared with the long-run price elasticity of demand for gasoline, the short-run price elasticity of demand for gasoline will be ______.

lower

Refer to the accompanying graph. If this firm is a price taker and the price of each unit of output is $15, then at this firm's profit-maximizing level of output, it will earn a ______ of ______.

loss, $60

Refer to the accompanying graph. If this firm is a price taker and the price of each unit of output is $9, then at its profit-maximizing level of output, this firm will earn a ______ of ______.

loss; $300

The additional utility gained from consuming an additional unit of a good is called:

marginal utility

A perfectly competitive firm's supply curve is the portion of its ______ cost curve that lies above its ______ cost curve.

marginal; average variable

Refer to the accompanying figure. If the market for doughnuts is perfectly competitive, and the price of a doughnut is 25 cents, then at this firm's profit maximizing level of output, the firm will earn an economic ______ of ______ per day.

profit; $8