Microeconomics Ch 5-8 MIdterm

What is the name of the agreement that went into effect in 2016 to set targets in reducing greenhouse gas emissions?

The Paris Agreement

When there is no trade between Econostan and Macroland, at current exchange rates, the price of orange juice is $1 per cup in Econostan and $0.50 in Macroland, while the price of shoes is $40 per pair in Econostan and $45 per pair in Macroland. Assuming there is no change in exchange rates, which result could be expected regarding terms of trade if trade opened up between the two countries?

The price of juice will fall and the price of shoes will rise in Econostan.

The table shows the current pollution levels for each firm and the cost of abatement on a per ton of glop basis. If the government does not know the cost of abatement for each firm, then the total cost of cleaning up 80 tons of glop using uniform regulation would be: Firms Current PollutionLevels. AbatementCost Shetland 70. $20.00 Dominion. 80 $30.00 Greener Tech 50 $10.00

$1,900.

If the average total cost of four units is $25 and the average total cost of five units is $30, what is the marginal cost of the fifth unit?

$50

Randy's Barber Shop has the following monthly expenses: Labor Wages = $6,000; Building Lease Payment = $2,000; Utilities = $1,000; Supplies = $1,000. In addition, Randy gave up a job that paid $4,000 per month to focus on managing his shop. The total of Randy's explicit costs is:

10,000

If the total product is 120 when 5 workers are hired, 140 when 6 workers are hired, and 150 when 7 workers are hired, the marginal product of the seventh worker is _____ and this firm's production is increasing at a(n)

10; decreasing rate

A firm's total cost (TC) follows this equation, where Q represents quantity: 𝑇𝐶=100+2.5𝑄. When the firm produces 60 units of output, what is its variable cost?

150

Jorge is maximizing his utility according to the utility-maximizing rule. If the marginal utility per dollar of the last $2 mango he ate was 10, what was the marginal utility of the last $5 pineapple he consumed?

25

If a Pigouvian tax designed to offset a negative externality increases the price of the good, reduces the quantity, but increases total surplus, what must be true?

At the lower output level, less of the external costs are created, so total surplus rises.

Which of these activities is MOST likely to lead to a "tragedy of the commons"?

Driving home on a freeway during rush hour.

The automobile industry in Macroland successfully lobbies for import quotas that result in automobile prices that are $1,000 higher than before the quotas. Increased sales of automobiles produced in Macroland protect the jobs of 20,000 automobile workers. What is an additional consequence of the quotas that is not as attractive for Macroland's economy?

Each of Macroland's citizens who buys a car will have $1,000 less to spend on other products, leading to reduced sales and fewer jobs in other industries.

Countries should specialize only in products in which they have an absolute advantage.

False

Imports include only goods, not services.

False

Some people hold on to a poorly performing stock because they are confident of their ability to predict future movements in stock prices, even though their confidence may not be justified. A behavior economist would say that people who hang on to a poor performing stock for this reason are subject to a framing bias.

False

Elinor Ostrom has identified rules that are required for sustainable user-managed common property resources. Which would NOT be included in that set of rules?

Government must designate one person as the proprietor.

Which statement is a reason why some policymakers are hesitant to use permit trading to reduce pollution?

It appears contradictory to use a market-based approach to solve market failure.

What does it means when trade is characterized as a positive-sum game?

It means that all countries can gain from trade regardless of their level of development.

In one week, Kenya can produce 50 safari adventures or 80 mountain expeditions, while Tanzania can produce 30 safari adventures or 60 mountain expeditions. _____ has the comparative advantage in safari adventures and _____ has the comparative advantage in mountain expeditions.

Kenya; Tanzania

Which statement is MOST accurate when describing the low wages in developing countries that allow it to export goods to developed countries?

Low wages provide developing countries a comparative advantage in producing labor-intensive goods.

The price of a good that Mark is currently consuming has increased. As a result:

Mark's purchasing power has decreased.

Which statement correctly uses the concept of a household budget constraint to explain the high level of consumer spending on days such as Black Friday in the United States or Singles Day in China?

Sellers reduce the prices of many products, effectively shifting the household budget line outward temporarily for the sale dates.

Which statement(s) describe the work of Elinor Ostrom?

She identified the concept of government failure.

Surendra's Carpet Shop has revenues of $350,000, explicit costs of $300,000, and implicit costs of $80,000. Which statement is correct?

Surendra is earning an accounting profit of $50,000 but is not earning a normal profit

Jiro and his wife Mariko are both employed. They strive to maximize utility when spending their household income. When Jiro loses his job, which of these statements will be true?

Their marginal utility schedule will remain unchanged.

An indifference curve represents a set of product bundles to which a consumer is indifferent.

True

Behavioral economics theory suggests that consumers respond more positively to a price of $3.99 than they do to a price of $4.

True

Even if Country A has an absolute advantage over Country B, Country A can still receive benefits from trade.

True

Some parents do not set aside money for their children's college because they want to buy toys for their children now. They reason that college is a long way off and that they have plenty of time to save in the future. A behavioral economist might warn these parents against overvaluing the present relative to the future.

True

The demand curve for any commodity can be derived using indifference curve analysis.

True

There is evidence to suggest that investors do NOT always act to maximize returns.

True

Which statement is a critique of marginal utility analysis?

Utility is difficult to measure.

Which company would MOST likely benefit from economies of scope?

a large bakery

Kielbasa Kings is an online wholesale distributor, with retail customers who order bulk shipments online. They have a one-year renewable lease on the firm's manufacturing facilities, equipment, and utilities. The annual rent is $100,000. They employ two workers at an annual salary of $30,000 each. The ingredients for each shipment cost $200. They currently sell 200 shipments a week for $1100 each. Increasing output by one shipment would cost an extra $1150. Before opening the company, the owner-operator had been offered a job managing a restaurant at an annual salary of $90,000. Pierogis R Us is currently making

accounting profits of $20,000.

Average total cost and average variable cost become close to one another as output rises because:

average fixed cost continually declines.

If the marginal product is greater than the average product for a certain quantity of labor, this means that:

average product must be increasing.

Government restrictions on common property resources:

can improve allocative efficiency.

What is the most important condition for the Coase theorem to resolve externality conflicts?

clearly defined property rights

Before the Affordable Care Act (ACA) became law in 2010, Elizabeth had a personal health insurance policy, whereas Jane and Lydia chose not to have insurance. After ACA's passage, Elizabeth continued her policy, Jane took out a policy to avoid the individual mandate penalty, and Lydia, who was unemployed, continued to use emergency rooms for medical care. Under the ACA, Elizabeth is a:

consumer.

A study conducted at Scotland's Rural College found that adding garlic to cattle feed reduced methane emissions by over a third. This finding creates new opportunities for:

corporate social responsibility.

If the last $1 candy bar consumed provided 6 utils of satisfaction, the last $3 croissant consumed provided 30 units of satisfaction, and the last $5 pizza consumed provided 40 units of satisfaction, rank the products in order of highest to lowest marginal utility per dollar.

croissant; pizza; candy bar

One reason a firm might dump its product in another country's market is to:

drive competitors out of the market.

Advertising has:

enabled services such as free streaming services to survive in the for-profit sector.

Beekeepers' bees pollinate farmers' crops when they travel outside the hive. Which issue does this situation involve?

external benefit

The consumer's demand curve slopes down and to the right because as price rises, the consumer gets:

fewer units of marginal utility per dollar and makes fewer purchases

Governments prefer tariffs over quotas because:

governments do not collect revenue with a quota.

One rationale used for tariff protection arises when:

imports are produced by foreign firms that receive subsidies from their governments.

Installing smart temperature controls in homes to reduce the consumption of air conditioning is an example of

individual social responsibility.

A group opposed to free trade concludes that if free trade is adopted, the total number of domestic jobs will decrease because the group estimates that 20,000 jobs will migrate abroad. The actual total loss is:

less than 20,000 because the estimate ignores the jobs created in the industries that benefit from increased exports.

After Justin Bieber filmed a music video in Iceland, many fans flocked to the video location, causing pollution and ecological damage. At the new level of pollution, the marginal abatement cost is:

lower than it was before.

When firm Alpha produced 1000 units, its total cost was $100,000. If Alpha is in the diminishing returns to scale production region, if it increases output by 20%, its total cost will be:

more than $120,000

One cause of market failure is:

prices that do not fully reflect the costs and benefits of a good.

When a tariff is imposed on a good, domestic output of the good _____ and government revenue _____.

rises; increases

The U.S. Bureau of Economic Analysis recently announced that personal incomes decreased 1.3% last month. As a result, budget lines in the United States will:

shift inward.

The U.S. Bureau of Economic Analysis recently announced that personal incomes increased 1.3% last month. As a result, budget lines in the United States will

shift outward.

Which industry is LEAST likely to be considered a key domestic industry for the national defense argument?

textiles and clothing