Microeconomics Final Review

The loss of producer surplus for those sellers of the good who continue to sell it after the taxis imposed is Given the info from flashcard 96

$2 Like the consumer surplus one, you just add another on to it so in this case it would be an additional dollar loss.

"In a long-run equilibrium, price is equal to average total cost." This statement applies to

Competitive and monopolistically competitive markets, but not to monopolies.

Which of these types of firms can earn a positive economic profit in the long run?

Monopolies, but not competitive firms or monopolistically competitive firms

If the price is $25, then there would be an excess

Supply of 300 units, and price would fall This is because when you go to $25 you get 800 units and 500 units so if you subtract them you get 300.

A long term equilibrium is shown by

an Increase in Quantity and Price over time.

If both firms follow a dominant strategy, Firm A's profits (losses) will be Given the info from flashcard 132

$-10 This is because you take the bottom right square where both the topics aline. This would be the same for Firm B too because they did the same and were both wrong.

The loss of producer surplus associated with some sellers dropping out of the market as aresult of the tax is Given the info from flashcard 96

$1 This is because you loss 3$ before so your at 0 and now you take the bottom half under the tax and do 4-2 to get 2 times 1 to get 2 divided by 2 to get 1.

The loss of consumer surplus associated with some buyers dropping out of the market as a result of the tax is Given the info from flashcard 96

$1.50 This is because you just take the after tax consumer surplus which is like talked about earlier 12-9 is 3 times 1 is 3 divided by 2 is 1.5

The loss of producer surplus as a result of the tax is Given the info from flashcard 96

$3 This is because the original producer surplus was 3$ and there wasn't a producer surplus after tax so those 3$ were loss

The per-unit burden of the tax on buyers is Given the info from flashcard 96

$3 You get this by taking the equilibrium of the original Supply demand lines and take that point, for this case x is 2 y is 6 and divide them to get 3.

The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is Given the info from flashcard 96

$3 You would subtract 1.50 again to the already loss of consumer surplus of 4.50 to get 3

The amount of tax revenue received by the government is Given the info from flashcard 96

$5 Seems to be the same reason as above

The amount of the tax on each unit of the good is Given the info from flashcard 96

$5 You get this by subtracting the y axis numbers for Point A and B so they would be 9-4

When market price is P7 (Higher than the two point given but along the line of MC), a profit maximizing firm's short-run profits can be represented by the area

(P7-P5) times Q3. This is cause P7 and P5 are both on Q3, the line MC goes through makes P7 line up with Q3 and P5 only goes out to that point

Which are example of price discrimination?

- A movie theater chargers a lower price for a child's ticket than for an adults ticket. - A university rebates part of the cost of tuition in the form of financial aid for needy students - A local pizza chain offers a "buy three get one free" deal

Which are not example of price discrimination?

- An ice-cream parlor chargers a higher price for ice cream than for sherbet.

A movie theater can increase its profits through price discrimination by charging a higher price to adults and a lower price to children if it

- Can prevent children from buying the lower-priced tickets and selling them to adults - Has some degree of monopoly pricing power - Can easily distinguish between the two groups of customers

Using the midpoint method, what is the cross price elasticity of demand for landline and mobile service? Given the info from flashcard 73

-0.70 This is because you take the percent change in landline demand and divide it by the percent change in mobile price. This would look like 20/110=18% (CinMP) and -1500/1175= -13% (CinLD) And the Cross elasticity would be -13/18=-0.7

When this game reaches a Nash equilibrium, profits for Firm A and Firm B will be Given the info from flashcard 132

-10 and -10, respectively This just takes into account the two firms dominant strategy

Using the midpoint method, if the price falls from $100 to $50, the absolute value of the price elasticity of demand is Given the info below... The price lines up with the Quantity For Price: 250,200,150,100,50,0 For Quantity: 0,30,70,110,150,190

0.46 Midpoint formula is: (Q2-Q1) / ((Q2+Q1)/2) x 100... (P2-P1) / ((P2 + P1)/2) x 100. Then you take both percentages and do Q%/P% to get your answer

Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate.The following table shows the number of coolers or number of radios each country can produce in one day. Jamaica's opportunity cost of one cooler is? Given the info below... Jamaica produces 12 coolers and 6 radios in one day Norway produces 24 coolers and 3 radios in one day

0.5 radios, and Norway's opportunity cost of one cooler is 0.125 radios. This is because you take radios and divide it by coolers to get the opportunity cost of Coolers. so 6/12 and 3/24

Assume that the consumer depicted in the figure has an income of $50. The price ofSkittles is $5 and the price of M&M's is $5. This consumer will choose a consumption bundle where the marginal rate of substitution is

1 Same reason as above 5/5

Which of the following prices would result in a mutually advantageous trade between Chris and Tony? Given the info from Flashcard 41.

1 pound of tomatoes for 23 jars of sauce 1 pound of tomatoes for 27 jars of sauce This is because the price should be between the two opportunity costs

At which of the following prices would both Jamaica and Norway gain from trade with eachother? Using the info from flashcard 83

1 radio for 4 coolers This is because I believe an explanation above if I think its because Jamaica is willing to give up up to 2 ratios but needs to gain more than 2 coolers per ratio and Norway is willing to give up to 8 coolers but needs a ratio for every 2 coolers.

According to the same problem as 31.... The profit maximizing monopolist will earn profits of

1,600$. You would multiply 40 which is the difference between the charging price of (50) and the total costs (10) by 40 which is the units produced.

Using the midpoint method, what is the income elasticity of demand for mobile service? Given the info from flashcard 73

1.88 This is because you take the change of demand and divide it by the change of income Which would be 16.39 (CofD) / 8.7 (CoI)

If the price elasticity of demand for apples is 0.8, then a 2.4% increase in the price of apples will decrease thequantity demanded of apples by

1.92%, and apples sellers' total revenue will increase as a result. This is because you do .8 times 2.4 to get 1.92.

Assume that the consumer depicted in the figure has an income of $20. The price of Skittles is $2 and the price of M&M's is $4. The consumer will choose a consumption bundle where the marginal rate of substitution is

1/2 This is because thats the ratio of the given candies... 2/4

If the production possibilities frontier shown for Juba is for 2 hours of work, then how long does it take Juba to make one bowl? Juba can make 4 bowls or 6 cups.

1/2 hour. This is found because Juba can make 4 bowls and if its in 2 hours of work then it would take her 1/2 hour for every bowl since there are 4 bowls she can make in 2 hours.

Assume that Brad and Theresa each have 60 minutes available. If each person spends all his or her time producing the good in which he or she has a comparative advantage, then total production is Given the info from Flashcard 45.

10 bushels of wheat and 5 pounds of beef. This is because you take the person with more comparative advantage and multiply their minutes to produce by 60.

Assume that the consumer has an income of $40. If the price of chocolate chip cookies is $2 and the price of marshmallows is $2, the optimizing consumer would choose to purchase? Given the information from flashcard 155

10 marshmallows and 10 chocolate chip cookies because this will give them 40$ total being the best option.

The amount of deadweight loss caused by the tariff equals

100. It is (P2-P1) times (Q1-Q2). If answer doesn't look right divide by 2.

Given the following set of supply and demand curves, calculate equilibrium price and quantity. Please show the steps QD= 1100-3P; QS =200+2P

1100-3P=200+2P Add 3P to each sie Subtract 200 on each side Then divide 5 by each side to get P=180

At which of the following prices would both Brad and Theresa gain from trade with each other Given the info from Flashcard 45.

12 Bushels of wheat for 8 pounds of beef This is because the price should be between the two opportunity costs

If the production possibilities frontiers shown are each for 4 hours of work, then which of the following combinations of bowls and cups could Bintu and Juba together make in a given 4-hour production period? Juba can make 6 cups or 4 bowls or a combo Bintu can make 8 cups or 2 bowls or a combo

2 bowls and 11 cups. For this problem you need to make sure you check to make sure it adds up to 4 hours. For this case this worked because you cut bowls in half and cups in half to add to 4 hours for Juba's production giving you 3 cups and 2 bowls and then you use Bintu's 8 cups with no bowls in that 4 hour period. Make sure to check each one carefully and to check to see if it says each or in total 4 hours or if it can or can't make it in a given time

Jamaica and Norway would not be able to gain from trade if Norway's opportunity cost of one radio changed to? Using the info from flashcard 83

2 coolers

If the supply curve is S, the demand curve is D, and the equilibrium price is $100, what is the producer surplus? There is a graph with the following points on line D 25, 150 50, 100 Point on line D' 50, 200 75, 150 On S' 25, 150 50, 200 On S 50, 100 75, 150

2,500 This is because you just use line D and S. And you have to find the producer surplus which is below the equilibrium line at 100. So you take 100-0 and get 100 and it goes to 50 so its 100 times 50 which is 5000 and divided by 2 is 2500

The amount of deadweight loss as a result of the tax is Given the info from flashcard 96

2.50 This is because you do ((9-4)*1/2 I believe it is because you have 9 and 4 as the points for A and B and 1 is the x axis for those points divide by 2 which is the quantity from before the tax

The amount of revenue collected by the government from the tariff is

200 so its both sides of the world price + tariff and then you subtract the two

Studies indicate that the price elasticity of demand for beer is about 0.9. A government policy aimed at reducing beer consumption changed the price of a case of beer from $10 to $20. According to the midpoint method, thegovernment policy should have reduced beer consumption by

60% This is because the midpoint formula is change of price which is 10/15 to get 2/3 and then change of demand .9 times the 2/3 to get .6 aka 60%

If the supply curve is S', the demand curve is D, and the equilibrium price is $150, what is the producer surplus?

625 Same concept as above but you use S' and D with an equilibrium of 150

Assume that England and France each has 40 labor hours available. If each country divides its time equally between the production of cheese and wine, then total production is..? Given the information below... Hours needed to make 1 unit of... For England 1 hour to make 1 unit of cheese and 4 hours to make 1 unit of wine. For France 5 hours to make 1 unit of cheese and 2 hours to make 1 unit of wine Another way to look at it from the other side is, Number of units produced in 40 hours For England 40 units of cheese produced in 40 hours and 10 units produced in 40 hours For France 8 Units produced of Cheese in 40 hours and 20 Units produced of Wine in 40 hours

24 units of cheese and 15 units of wine This is because if we are dividing each countries time equally between products than you get 20 units of cheese and 5 units fo wine for England and 4 units of cheese and 10 units of wine for France. This adds up to 24 and 15.

Which of the following combinations of cheese and wine could England not produce in 40hours? According to the info from flashcard 52.

26 units of cheese and 4 units of wine This is because of the same reason as above, you need to be careful to see NOT in the question, so check everything and see which doesn't work.

What is Theresa's opportunity cost of producing on bushel of wheat? Given the info from Flashcard 45.

3/5 pounds of beef. Like the problem above, this is the opposite, which is 6/10 making it 3/5.

The loss of consumer surplus as a result of the tax is Given the info from flashcard 96

4.50 This is because you take the consumer surplus before the tax and then after and subtract the two. Make sure to act as if the highest point is the new equilibrium line showing the consumer surplus So it would look like 12-9=3 * 1 is 3/2 is 1.5 12-6=6*2 is 2 is 12 /2 is 6 6-1.5 is 4.5

Suppose a monopolist has a demand curve that can be expressed as P=90-Q. The monopolist's marginal revenue curve can be expressed as MR=90-2Q. The monopolist has constant marginal costs and average total costs of $10.... The profit maximizing monopolist will produce an output level of

40 units because when you plug it into the Marginal revenue formula you would get 10 which is equal to total costs

If the price elasticity of demand for aluminum foil is 2%, then to increase the quantity demanded of aluminum foil by 10%, how much do you need to lower the price and what happen to revenue?

5% and aluminum foil sellers' total revenue will increase as a result This is because you do 10 over 2 to get 5.

According to the same problem as 31.... The profit maximizing monopolist will charge a price of

50$ because you plug in 40 which is the answer to 31 into the Price equation.

When the firm is maximizing its profit, the markup over marginal costs amount to

50$. Markup is greater than or equal to zero if the firm never sets a price below marginal costs Markup is smaller when demand is more elastic Markup is zero when the demand curve is perfectly elastic Firms should set the price as a markup over marginal cost Markup = 1/-(Elasticity of demand) -1. Price = (1 + Markup x Marginal Cost)

If Bintu and Juba both spend all of their time making bowls, then total production is? Juba can make 6 cups or 4 bowls or a combo Bintu can make 8 cups or 2 bowls or a combo

6 because they would spend all of their time making bowls so it would be 4 plus 2.

Which of the following combinations of cheese and wine could France produce in 40 hours? According to the info from flashcard 52.

6 units of cheese and 5 units of wine This is because you need to check each answer t see if it works in 40 hours. You multiply 6 units of cheese by 5 hours which gives you 30 and then 5 units by 2 hours required to give you 10 hours which combine to 40 hours.

Brad's opportunity cost of producing one pound of beef? This is with this information below.. The minutes needed to make, Brad 10 minutes to make 1 pound of Bushel of Wheat and 12 minutes to make 1 pound of beef. Theresa 6 minutes to make 1 pound of Wheat and 10 minutes to make 1 pound of beef.

6/5 bushels of Wheat. This is because you take the item in which is being produced and divide it by the opposite item so in this case it is Brad producing one pound of beef which would be 12 divided by 10 which is 6/5.

If the price elasticity of demand for aluminum foil is 2%, then a 4% increase in price of aluminum foil will decrease the quantity demanded of aluminum foil by

8% and aluminum foil sellers' total revenue will decrease as a result

Assume that the consumer depicted in the figure has an income of $20. The price of Skittles is $2 and the price of M&M's is $4. The consumer's optimal choice is point

A Which is 3 Skittles by 3 M&Ms This is because if you multiply 3 by 4 you get 12 and 3 by 2 you get 6 which stays under the income of 20. The other options aren't under.

Which of the following is consistent with the elasticities given in Table 5-1? Given the info from Flashcard 67

A is Diet Pepsi and B is soda This is because a Luxury is more specific while Necessity is a broader item

Which of the following is consistent with the elasticities given in Table 5-1? Table 5-1 has the following info Good A has a price of elasticity of demand of 1.9 Good B has a price of elasticity of demand of 0.8

A is a luxury and B is a necessity This is because the higher the Price Elasticity of demand the more luxury. I believe anything over 1 is considering a luxury

Which of the following is consistent with the elasticities given in Table 5-1?i.A is pens and B is pencils. Given the info from Flashcard 67

A is an airline ticket from Chicago to New York demanded by a vacationer and B is an airline ticket fromChicago to New York demanded by a business traveler. This is because the business traveler has to travel constantly making it a necessity while its a luxury to be a vacationer and fly away

An equilibrium occurs in a game when

All players follow a strategy that they have no incentive to change

If the price elasticity of demand for a good is 6, then a 3 percent decrease in price results in

An 18 percent increase in the quantity demanded. This is because you take the demand and multiply it by the price And its elastic so its positive

Assume that the consumer depicted in the figure faces prices and income such that sheoptimizes at point B. According to the graph, which of the following would cause the consumer to move to point A?

An increase in the price of M&M's Point A is 4 by 4 While point b is 5 by 5

Assume that the consumer depicted in the figure has an income of $20. The price of Skittles is $2 and the price of M&M's is $2. The consumer's optimal choice is point

B Which is 5 skittles by 5 skittles This is because 5 times 2 is 10 and you get that for both and it is 20$ which maximizes your income.

Brad has an comparative advantage in the production of Given the info from Flashcard 45.

Beef and Theresa has a comparative advantage in the production of wheat. This is because when you use the opportunity cost, it is less for Brad than Theresa with Beef but with Wheat it is the opposite. So you take what is being produced which is 12 and divide it by 10 to get 1.2 and 10 divided by 6 is 1.6667.

Food in general or breakfast cereal Using the info from flashcard 149

Breakfast cereal is more elastic. It is much more specific than food in general

If Chris and Tony both decide to specialize and produce only the good in which they have a comparative advantage, then ? Given the info from Flashcard 41.

Chris will produce only sauce and Tony will produce only tomatoes.

The imposition of the tax causes the quantity sold to Given... The vertical distance between points A and B represents a tax in the market. Point A= 1,9 Point B= 1,4 Supply and Demand meet at 2,6

Decrease by 1 unit This is because Point A and B are at a quantity of 1 while The 'before tax' is at 2.

Suppose an airline determines that its customers traveling for business have inelastic demand and its customerstraveling for vacations have an elastic demand. If the airline's objective is to increase total revenue, it should

Decrease the price charged to vacationers and increase the price charged to business travelers. This is because business travelers must use airlines while vacationers could always come and go and its not a fixed amount

The imposition of a tariff on roses

Decreases the number of roses imported by 200. You find this by looking on the other side of world price and tariff.

Entry and exit drive each firm in a monopolistically competitive market to a point of tangency between its

Demand curve and its average total cost curve.

You have just been hired as a business consultant to determine what pricing policy would be appropriate to increasethe total revenue of a bakery. The first step you would take would be to

Determine the price elasticity of demand for the bakery's products.

Consider the following pairs of goods. For each pair which of the two goods would you expect the demand to be more price elastic? Water or diamonds?

Diamonds are elastic, water is a necessity

The players in a two-person game are choosing between strategy X and strategy Y. If the second player chooses strategy Y, the first player's best outcome is to select Y. If the second player chooses strategy X, the first player's best outcome is to select Y. For the first player, Strategy Y is called a

Dominant Strategy

Using the midpoint method, if the price falls from $200 to $150, the price elasticity of demand is Using the info from flashcard 86.

Elastic This is because if price falls then elasticity of demand is elastic

Suppose the point of tangency that characterizes long-run equilibrium for a monopolistically competitive firm occurs at Q1 units of output. This level of output, Q1

Falls short of the level of output at which price equals marginal cost.

Gasoline over the course of a week or gasoline over the course of a year Using the info from flashcard 149

Gasoline over the course of a year is more necessity while over a week is a luxury

Personal computers or IBM personal computers Using the info from flashcard 149

IBM personal computers are more elastic. Computers will get different broad prices so IBM specifically has many substitutes.

Before the tariff is imposed, this country

Imports ! World Price + Tariff and whatever quantity lines up with that, and it should be on the right side of the equilibrium

Total surplus in a market WON'T increase when the government.

Imposes a binding price floor or a binding price ceiling on that market or imposes a tax on that market

The deadweight loss created by the tariff is represented by the area

In between World Price + Tariff and World price. Also sticking between the Domestic supply and Domestic demand lines. They aren't in "Government revenue raised by the tariff area" but they are the triangles on each side of it.

Pursuing its own best interests, Firm B will concede that cigarette smoke causes lung cancer? Given the info from flashcard 132

In pursuing its own best interests, Firm B will concede that cigarette smoke causes lung cancer. The other option didn't work they were... Only if Firm A concedes that cigarette smoke causes lung cancer. Only if Firm A does not concede that cigarette smoke causes lung cancer. Regardless of whether Firm A concedes that cigarette smoke causes lung cancer.

Pursuing its own best interests, Firm A will concede that cigarette smoke causes lung cancer.... This is given the following information below... Two cigarette manufacturers called Firm A and Firm B are being faced with lawsuits and both have evidence that smoke cigarette causes lung cancer. For Firm A, Concede that cigarette smoke causes lung cancer... Firm A profit = $-20 Firm B profit = $-15. Argue that there is no evidence that smoke causes cancer....Firm A profit = $-5, Firm B profit = $-50. For Firm B, concede that cigarette smoke causes lung cancer...Firm A profit = $-20 and Firm B profit = $-15. Argue there is no evidence that smoke causes cancer...Firm A profit = $-50, Firm B profit = $-5.

In pursuing its own best interests, firm A will in no case concede that cigarette smoke causes lung cancer. For this question none of the things below would work The choices that didn't work were: Only if Firm B concedes that cigarette smoke causes lung cancer, only if Firm B does not concede that cigarette smoke causes lung cancer, regardless of whether Firm B concedes that cigarette smoke causes lung cancer.

Opportunity cost is found by ? 8 hours a day, Chris can produce 10 pounds of tomatoes and 300 jars of pasta sauce In that same time Tony can produce 14 pounds of tomatoes and 280 jars of pasta sauce Chris's opportunity cost of 1 pound of tomatoes is ?

In this case it is 30 jars of sauce for Chris and Tony's opportunity cost of 1 pound of tomatoes would be 20 jars of sauce. You get this because for Chris you take 300 and divide it by 10 (if it was find the opportunity cost of sauce then you would do 10 divide by 300 to get 1/30) but that will give you 30 jars. And Tony is the same 280 divided by 14 to get 20 jars of sauce.

Suppose for some firm that average total cost is minimized at Q1 units of output. For a monopolistically Competitive firm in long-run equilibrium, Q1

Is also the level of output at which marginal cost equals average total cost. Exceeds the level of output at which there is a point of tangency between the demand curve and the average total cost curve Exceeds the level of output at which marginal revenue equals marginal cost.

What is a price ceiling?

It is the price In which is taken away form the total surplus. Once you take it away there is no more price floor. You calculate the total surplus after by taking away the triangle within the total surplus triangle.

If Bintu and Juba each divides there time equally between making bowls and making cups, then total production is? Juba can make 6 cups or 4 bowls or a combo Bintu can make 8 cups or 2 bowls or a combo

It would be 3 bowls and 7 cups This is found because you divide each thing by 2 which gives you Juba making 3 cups and 2 bowls and Bintu making 4 cups and 1 bowl giving you a total of 7 cups and 3 bowls.

Assume that the consumer has an income of $40, the price of a bag of marshmallows Is $2, and the price of a bag of chocolate chip cookies is $4. The optimizing consumer will choose to purchase which bundle of marshmallows and chocolate chip cookies? (The bundle meaning which point on the graph) The following below is information on the graph and prompt The following illustrates a representative consumers preferences for marshmallows and chocolate chip cookies... The points given are A (5,5) B (6,9) C (10,10) D (9,3) The first number represents Chocolate chip cookies and the other is marshmallows

It would be point B because it gives you the most money without going over 40$

When finding producer surplus

Its similar to how we usually find it, you take the bottom half so lets say the world price is 5 you do 5-2 to get 3 and times it by the quantity that lines up with the world price which should be smaller than consumers quantity in this case it is 30 to give you 90 divided by 2 is 45. When its after you use the world price + tariff which would be 6 -2 is 4 and then times the quantity that lines up which would be the next number so for this its 40 which would be 160 divided by 2 to get 80.

When the tariff is imposed, domestic consumers

Lose by 450. This is found by taking the top peak and doing the base time height and divide them by 2

In the short run, if the market price is higher than P1 but less than P4, individual firms in a competitive industry will earn

Losses but will remain in business, This is assuming AVC in Q1 starts at P1 and ATC jumps to P4 in Q2

When a monopolistically competitive firm is in long-run equilibrium

Marginal revenue is equal to marginal cost. Price is equal to average total cost. Demand is equal to average total cost.

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? Using the info from flashcard 117

Mrs. Smith is earning a loss but should continue to operate in the short run. This is because if she commits to the long run while losing money isn't a smart decision

You find total costs incurred by

Multiplying Cost of good times units produced

Insulin or nasal decongestant spray Using the info from flashcard 149

Nasal spray is more elastic. People need insulin no matter what price

Brad has an absolute advantage in the production of ...? Given the info from Flashcard 45.

Neither good and Theresa has an absolute advantage in the production of both goods. This is because it takes less time for her to produce each good

Considering the income elasticity, what type of good is mobile telephone service? Given this prompt below.... Consider the markets for mobile and landline telephone service. Suppose that when the average income of residentsof Plainville is $55,000 per year, the quantity demanded of landline telephone service is 12,500 and the quantitydemanded of mobile service is 28,000. Suppose that when the price of mobile service rises from $100 to $120 permonth, the quantity demanded of landline service decreases to 11,000. Suppose also that when the average incomeincreases to $60,000, the quantity demanded of mobile service increases to 33,000.

Normal good

Graph B is consistent with a firm in a monopolistically competitive market that is

Not in long-run equilibrium.

Don't have questions 6-10

On online test Taking about zones for - deadweight loss -Consumer surplus after the tax - Tax revenue -Total Surplus after the tax -Total surplus before the tax

In a long-run equilibrium

Only a perfectly competitive firm operates at its efficient scale

Firms would be encouraged to enter this market for all prices that exceed

P4. This is the point that was talked about in the other questions above.

What is the equilibrium price in this market? Suppose the demand schedule in a market can be represented by the equation Q^D= 500-10P , where Q^D is the quantity demanded and P is the price. Also, suppose the supply schedule can be represented by the equation Q^S= 200+10P , Q^S where is the quantity supplied.

P= 15 This is because You set Q^d to Q^S and get 300 = 20P

If you need more dominate strategy examples go to homework 4 at the bottom.

Pages 12-15

In the short run, if the market price is higher than P4 but less than P6, individual firms in a competitive industry will earn

Positive Profits

Price floor is opposite to

Price Ceiling

The market for cars as a revolutionary adoption of new technology on assembly lines (something to those lines the question got cut off)

Price decreases and quantity increases

The market for peanut butter if a hurricane hits the peanut growing south?

Price increases and quantity decreases

If the market price is $4, this firm will The following info is below The output and Total cost line up accordingly Output is 0,1,2,3,4,5 Total Cost is is $5,10,12,15,24,40

Produce 3 units in the short run and exit in the long run

To maximize profits as a producer you

Produce the quantity of output where marginal revenue equals marginal cost. So if marginal cost of production is 20 per unit and if a firm produces 4 units and its marginal revenue is 20 then the firm should produce 4 units.

What is the equilibrium quantity in this market? According to the info in Flashcard 58

Q = 350 This is because you plug in 15 into the Q^D and get 500-150

Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor,

Quantity demanded decreases Quantity supplied increases There is a surplus

How to find maximum profits

Set profit to equal revenue minus cost F.E. Revenue= 2000x-10x^2 Cost equation is 2000+500x which can be combined with profits to get 2000x - 10x^2 - (2000 +500x) or -10x^2 to 1500x - 2000. And you set both equal to each other.

If the price is $10, then there would be a

Shortage of 600 units, and price would rise this is because when you go to $10 you get 200 and 800 units and subtracting them gives you 600 units. This is on the downfall of bout demand and supply so It would give you a shortage

When a binding price floor is imposed on a market to benefit sellers...

Some sellers will not be able to sell any amount of the good.

Which of the graphs depicts a short-run equilibrium that will encourage the entry of other firms into a monopolistically competitive industry? AND Which of the panels depicts a firm in a monopolistically competitive market earning positive economic profits?

The Graph where ATC curves and the bottom of the curve looks to be on the dashed line. It MC goes through MR and D and ATC and ATC goes through MR and D This is graph C

Production possibilities frontier is found by how? For example if Bintu can make 8 cups or 2 bowls. If she works 2 hours to make each cup then her production possibilities frontier is based on how many hours of work?

The answer is 16 hours because you take that 8 cups and multiply it by 2 because it takes 2 hours to make each cup.

Producer Surplus is

The area above World Price + Tariff but under the equilibrium point

Considering the cross price elasticity of demand for mobile and landline telephone service,is the cross price elasticity of demand positive or negative and do the consumers of Plainville regard these goods assubstitutes or complements? Given the info from flashcard 73

The cross price elasticity of demand is negative and consumers regard the two goodsas complements.

Which of the graphs depicts a short-run equilibrium that will encourage the exit of some firms from a monopolistically competitive industry?

The graph where Mc is similar to the one above but the MC is father down and to the right of the MR and ATC line. And ATC doesn't go through MR or D This is graph B

A binding price ceiling is shown in ...?

The graph with a lower bar, in this example it is B

You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that

The mayor thinks demand is inelastic and the city manager thinks demand is elastic

What is a price floor?

The minimum price you use. But in this case just find the total surplus. Producer plus Consumer.

Suppose the supply curve shifts to Q^s= 300+10P. What is the new equilibrium price and quantity in this market? According to the info in Flashcard 58

The new equilibrium is P= 10 and Q = 400. This is like the first problem, you equal them together to find the price. 300+10P=500-10P which is 20P=200 which is P=10 and then you plug 10 into the Quantity demand and you get 400.

We could use the information in the table to draw a production possibilities frontier forEngland and a second production possibilities frontier for Holland. If we were to do this, measuring milk along the horizontal axis, then Given the information below... Number of Units produced in an Hour England produced 10 units of Milk in an hour and 4 units of Oats in an hour Holland produced 8 units of Milk and 6 units of Oat

The slope of England's production possibilities frontier would be -4/10 and the slope of Holland's production possibilities frontier would be -3/4. This is because for England you divide 4 by 10 to get -4/10 and for Holland you divide 6 by 8 which gives you -3/4. These are negative because they are going down.

For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which ofthe following statements is most likely applicable to this good?

There are many close substitutes for this good

Suppose the price is currently equal to 10 in this market. Is there a shortage or surplus in this market, and how large is the shortage/surplus According to the info in Flashcard 58

There is a shortage of 100 units. This is because you plug in 10 into both Q^D and Q^S and then subtract Q^S by Q^D and it turns to be 300-400 which is -100.

Suppose the price is currently equal to 18 in this market. Is there a shortage or surplus in this market, and how large is the shortage/surplus? According to the info in Flashcard 58

There is a surplus of 60 Units. This is because like talked about above, if you plug in 18 to the two equations you get 380 - 320 is positive 60.

Everything in between World Price and World Price + Tariff are?

Things that decreased the consumer surplus because of the tariff

Which of the panels shown could illustrate the short-run situation for a monopolistically rm?

This applies for Graph A B and C. Graph D clearly doesn't look like the others.

Assume that the consumer has an income of $100 and currently optimizes at bundle A. When the price of marshmallows decreases to $5. Which bundle will the optimizing consumer choose? Given the information from flashcard 155

This is also B. Check end of T1 if questioned

What is the domestic price and quantity demanded of hammers after the tariff is imposed?

This is found by a price and quantity. The price is lined up with the point along the domestic demand line that is for world price + tariffs.

Which of the graphs depicts a short-run equilibrium that will not encourage either the entry or exit of firms in a monopolistically competitive industry? AND Panel a shows a profit-maximizing monopolistically competitive firm that is

This is similar to the one above, The ATC is along the D line but doesn't go through MR. The MC line is like Graph C's. This is graph A

Government revenue raised by the tariff is represented by the area

This is the area below the equilibrium point in between Domestic supply and demand. And with that under the world price + tariff and above the world price. But with all of that you bring the points down where the Domestic supply and demand meet the world price + tariff. So with these three things It should create a box giving you your answer

What is the quantity of hammers imported after the tariff?

This is the same concept as above, you take the world price + tariffs on both the Supply and Demand lines and subtract them.

Suppose a market has the demand function Qd = 20-0.5P. Using the midpoint method, what is the price elasticity of demand between $10 and $20.

This was wrong on the test but Im assuming its 20-5 is 15 and then 20-10 is 10 SO you do 15/10 which is 3/2 and do that over 10/20 which would be 3

In which panel of the fire would there be a shortage of the good at the price ceiling?

This would be the same as the the question above where the price ceiling is close to the bottom

Tony has an absolute advantage in the production of Given the info from Flashcard 41.

Tomatoes

Profits earned is

Total revenue minus total costs

When can two countries gain from trading two goods?

Two countries could gain from trading two goods under the following conditions.... When the first country can only produce the first good and the second country can only produce the second good; When the first country can produce both goods, but can only produce the second good at great cost, and the second can produce both goods, but can only produce the first good at great cost; When the first country is better at producing both goods and the second country is worse at producing both goods

The principle of comparative advantage does no provide answers to certain questions. One of those questions is ...?

What determines the price at which trade takes place?

The market for pizza delivery town as we go from summer to the beginning of the fall

Would increase in price and increase in quantity

With trade and without a tariff

You find the item sold and you know how much it is sold for with The equilibrium, where Domestic supply and Domestic demand meet *The domestic price is equal to the world price *

How do you find the consumer surplus given the point in which the demand and supply intersect (Equilibrium price)?

You make a line at the equilibrium price (Line that goes through the intersecting point) and find the area of the triangle ABOVE that line. So subtract the highest y axis by the equilibrium price and multiply it by the x value and then divide that product by 2

How do you find the producer surplus given the point in which the demand and supply intersect (Equilibrium price)?

You make a line at the equilibrium price (Line that goes through the intersecting point) and find the area of the triangle BELOW that line. So subtract the equilibrium price by the lowest y value in the triangle and then multiply it by the x value and then take that product and divide by 2.

How do you find total surplus when price floor/ceiling is made?

You take the consumer surplus plus the producer surplus and if there is a price floor or ceiling then you subtract it out

With world price and tariffs involved its different finding the consumer surplus before and after tariffs. In this case for before.

You take the price of world price before tariffs which in this case is 5 and subtract it by the top so it would be 13-5. Then you take the quantity that lines up with the far right world price point. So it would be 96 times 8 and then divided by 2 to give you 384. If it was after you would do the same but use the price for world price + tariffs which is 6 so it would be 13-6 to get 7 times 84 because thats the quantity that lines up with the far point that lines up with world price + tariffs

What is the quantity of hammers imported before the tariff?

You take the world price and get the quantity of the the two points on the Domestic supply line and Domestic Demand line and subtract them. They are usually the last given numbers

If the price elasticity of demand for a good is 0.4, then which of the following events is consistent with a 2 percent decrease in the quantity of the good demanded?

a 5 percent increase in the price of the good This is because you take 2/.4

Suppose we are analyzing the market for hot chocolate. Graphically illustrate the impact each of the followingwould have on demand or supply. Also show how equilibrium price and equilibrium quantity would change. a.Winter starts, and the weather turns sharply colder. b.The price of tea, a substitute for hot chocolate, falls. c.A better method of harvesting cocoa beans is introduced. d.The Surgeon General of the U.S. announces that hot chocolate cures acne. e.Protesting farmers dump millions of gallons of milk, causing the price of milk to rise. f.Consumer income falls because of a recession, and hot chocolate is considered a normalgood. g.Producers expect the price of hot chocolate to increase next month. h.Currently, the price of hot chocolate is $0.50 per cup above equilibrium.

a. price increases and quantity increases. - This is because the winter weather is perfect time to drink hot chocolate so they will make more and increase the price b.Decrease in price and Quantity -This is because the Tea is a substitute for Hot Chocolate and if its price falls than more will want it and it will hurt sales and the price will have to drop too c. Price drops and Quantity increases. This is because a better harvesting method will lead to an increase in production and the price will go down so they can gain more profits d. An increase in Price and Quantity. This is because the surgeon general gives the public a positive statement that can change the way they live and be able to cure acne. e. Price rises and quantity decrease This is because milk rises so they had to increase to keep up and that led to less sales f. Price and Quantity decrease This is because income falls during a recession and decreases sales and they need to decrease the price to make even some sales g. Price increases and quantity decreases This is because they expect price to increase which will force less sales h. a price above equilibrium will affect both quantity demanded and quantitysupplied and will cause a surplus in the market. It will not cause either demand orsupply to shift.

Determining the dominant strategy cell is determined by

checking the section in which the cell may be dominant and has to be dominant in that row

The Tariff...

increases producer surplus, decreases consumer surplus, and decreases total surplus

Suppose that quantity demand rises by 10% as a result of a 15% decrease in price. The price elasticity of demand for this good is

inelastic and equal to 0.67. Inelastic because it is a higher decrease than increase. And demand for this good is found by 10/15, demand/price

If you need total revenue, or more examples of midpoint method, check the end

of T1

Competitive firms that earn a loss in the short run should Using the info from flashcard 117

shut down if P < AVC.

Last month, sellers of good Y took in $100 in total revenue on sales of 50 units of good Y. This month sellers of good Y raised their price and took in $120 in total revenue on sales of 40 units of good Y. At the same time, the price ofgood X stayed the same, but sales of good X increased from 20 units to 40 units. We can conclude that goods X and Y are

substitutes, and have a cross-price elasticity of 1.67. This is because you have the original price of Y = 100/50 =2 New price of Y = 120/40 = 3 Percent change of price Y = 40% (Increase in price of X) Percent change of demand for X = 67% (demand for X increased from 20 to 40) Cross elasticity = 67/40= 1.67

A profit maximizing monopolist would earn total revenues of

the price to maximize profits times the units produced to maximize profits

We could use the information in the table to draw a production possibilities frontier forEngland and a second production possibilities frontier for France. If we were to do this, measuring cheese along thehorizontal axis, then According to the info from flashcard 52.

the slope of England's production possibilities frontier would be -0.25 and the slope of France's production possibilities frontier would be -2.5. This is because you divide the cheeses hours needed by the wines and get -.25 (1/4) and -2.5 cuz (5/2)

We could use the information in the table to draw a production possibilities frontier forEngland and a second production possibilities frontier for France. If we were to do this, measuring wine along thehorizontal axis, then According to the info from flashcard 52.

the slope of England's production possibilities frontier would be -4 and the slope of France's production possibilities frontier would be -0.4. This is because it is the opposite of above, you take the wine section (hours needed) and divide by the cheese section. You do this separately for England and France.

A binding price floor will reduce a firm's total revenue

when demand is elastic.

In the short run, if the market price is P4, individual firms in a competitive industry will earn

zero profits because P4 like stated would lose money in the short run