sjk final set

What is the cross price elasticity of demand for two products that are unrelated?

0

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

7.50

Calculate the Cross Price Elasticity of Demand (CPED) for pizzas with respect to the price of hamburgers.

7/6

Suppose Bob can entertain people as a one-man band.

7000

Consider a firm with average total cost of 492, average variable cost of 297, and marginal cost of 227 when it produces 100 units of output. What is the firms average fixed cost when it produces 200 units of output?

98

Suppose you observe a market with a persistent surplus. Which of the following would be consistent with this observation?

A binding price floor has been imposed

Suppose that the Price Elasticity of Demand is 3/5 while the Price Elasticity of Supply is 4/5. Which of the following can you conclude?

A tax burden will fall more heavily on the demand side

Determinants of demand

Income Taste and preferences Price of a substitute, compliment good Expectations of buyers

ATC is falling as quantity increases when

MC is less than ATC

A characteristic of the long run is

all inputs can be varied.

An oligopoly differs from a perfectly competitive firm in that

there are no entry barriers in perfect competition but there are entry barriers in oligopoly.

Suppose that the marginal cost of the first unit is $4, the marginal cost of the second unit is $2, the marginal cost of the third unit is $4, the marginal cost of the fourth unit is $6, the marginal cost of the fifth unit is $8, the marginal cost of the sixth unit is $10, the marginal cost of the seventh unit is $14, and the marginal cost of the eighth unit is $18. What is the firm's profit maximizing level of output?

$4

Suppose the Price Elasticity of Demand is equal to 2/3 while the percent change in quantity is equal to 3/4. What is the percent change in price?

9/8

Suppose poor weather during the growing season results in decreased yields for corn farmers. This will result in

A decrease in market supply for corn and an increase in farmers' revenue.

If the 15th unit of output has a marginal cost of $29.50 and the average total cost of producing 14 units of output is $30.23, what will happen to the average total cost is the 15th unit is produced?

ATC will fall

Suppose that Coke and Pepsi are the only two firms in the soft drink industry. Each firm has two strategies: produce a high quantity or produce a low quantity. If both firms decide to produce a high quantity, each will earn $8 million in profits. If both firms decide to produce a low quantity, each will earn $20 million in profits. If one firm decides to produce a low quantity while the other decides to produce a high quantity, the firm that produces the low quantity will earn $10 million in profit while the firm that produce the high quantity will earn $25 million in profit.What would you expect to happen in this game?

Both will produce at the higher quantity.

Public policies on externalities

Command and control- worst way to deal with the problem

Consider the bread market. If the price of wheat rises, what effect will this have on consumer surplus in the bread market?

Consumer surplus will decrease

The study of oligopoly illustrates the tension between

Cooperation and self-interest

Which of the following is not a characteristic of an oligopoly market?

Cooperative firms.

Which of the following are characteristics of a monopolistically competitive market?

Differentiated products Free entry & exit Many firms

Fixed costs are costs that

Don't vary as output is increased

Consider the market for hamburgers in Warrensburg. Suppose that the market is initially in equilibrium. Now, suppose that people's income rises and hamburgers are an inferior good. Which of the following will result?

Equilibrium price will fall and equilibrium quantity will fall.

Consider the market for hamburgers in Warrensburg. Suppose that the demand for beef decreases. What effect will this have on the equilibrium price of hamburgers in Warrensburg? Be careful...two markets are mentioned in this question.

Equilibrium price will fall and equilibrium quantity will rise

Consider the market for hamburgers in Warrensburg. Suppose several hamburger restaurants close in Warrensburg. What effect will this have on the equilibrium price and quantity of hamburgers in Warrensburg?

Equilibrium price will rise and equilibrium quantity will fall

A $9 tax on baseball gloves will always raise the price that buyers pay for baseball gloves by $9.

False

A firm will have an easier time engaging in price discrimination when the arbitrage potential is high.

False

An increase in the price of shoes will "shift" the demand curve for shoes to the left

False

Are social and external costs the same thing?

False

Because monopolistically competitive firms have some market power, they can make positive economic profit in the long-run.

False

Consider a pizza shop in a college community. If two new restaurants open up on the same block as the pizza shop, student's demand for pizza will become more inelastic if the students view the food served at the other restaurants as good alternatives to pizza.

False

The prisoner's dilemma is a useful tool for illustrating that cooperation can be difficult to achieve. This failure to cooperate is always bad for society.

False

The quantity produced by a monopolistically competitive firm is greater than the efficient scale.

False

Total surplus is the area under the supply curve and above the demand curve.

False

When demand is elastic, price and total revenue move in the same direction

False

How do we fix negative externalities? S shifted to the left

Force the person involved to bear all the costs. Tax equal to the costs

Which of the following is not one of the public policies that we discussed in regards to correcting the deadweight loss created by monopoly?

Government forcing the monopoly to charge a price equal to average revenue.

Tom and Harry are competitors in a local market and each is trying to decide if it is worthwhile to advertise. If both of them advertise, each will earn a profit of $5,000. If neither of them advertise, each will earn a profit of $10,000. If one advertises and the other doesn't, then the one who advertises will earn a profit of $15,000, and the other will earn $7,000. To make the most money, Harry

Has no dominant strategy

The Price Elasticity of Supply measures

How the quantity supplied responds to a change in price

Two goods are complements if a decrease in the price of one good

Increases the demand for the other good

What causes diseconomies of scale?

Large production processes are inherently hard to manage.

Under rent control, tenants can expect

Lower rent and lower quality housing

The figure below reflects the cost and revenue structure for a monopoly firm. A profit-maximizing monopoly's profit is equal to

P3-P0 x Q2

The minimum wage is an example of

Price floor

Producer surplus

Price minus cost of production.

Which of the following equations is valid?

Producer surplus = Total surplus - Consumer surplus

How do we fix positive externalities? S shifted to the right

Subsidy equal to the external benefit Private parties could negotiate

Which of the following would not be a likely factor that would increase the probability of cooperation between two criminals?

The criminals have signed a contract not to break an agreement.

A decrease in the price of good Y will result in

The equilibrium price of good X decreasing and the equilibrium quantity of good X decreasing.

Which of the following is not true?

The free market results in everyone purchasing some amount of the good

The production function shows

The maximum output that can be produced from each possible quantity of inputs

Assume that the firm is producing a quantity of 2 units and charging a price of $8. From this picture you can conclude that

This is in the short run (any time P>ATC the firm is making profit.. they can only do this in the short run)

A Price Elasticity of Demand of 4/5 means that a 1% change in price will result in a 4/5% change in quantity demanded.

True

A decrease in the price of leather will cause the price of baseball gloves to fall.

True

Because of its market power, a monopolistically competitive firm is able to charge a price that is higher than its marginal cost.

True

Government is powerless in determining which side of the market bears the burden of a tax that it imposes.

True

In a Nash Equilibrium, all players are satisfied that they chose the best strategy, given the strategy of the other player.

True

Increasing the minimum wage will increase unemployment.

True

Marginal cost curve slopes upward because of diseconomies of scale

True

Reducing the amount of a tax imposed on a market would increase both CS and PS.

True

Suppose that rather than impose a tax in a market, the government provides a subsidy to sellers every time they sell a unit of the good. This will result in a deadweight loss.

True

Suppose the total cost of the 10th unit is $95. Fixed costs are $10, and the marginal cost of the 11th unit is $12. This means that the total cost of the 11th unit is $107.

True

The monopoly has no supply curve

True

The price elasticity of demand changes along a linear demand curve even though the slope is constant.

True

When the production of a good results in pollution, private and social costs are different.

True

With a perfectly price discriminating monopoly in a market, the market is efficient.

True

Suppose that the price elasticity of demand for a particular good is 9/5. If the price of an input rises, firms in the market will be

Worse off because total revenue will fall

Which of the following does NOT affect how elastic demand is?

changes in income

policy for fixing positive

subsidy patent

Beef is a normal good. You observe that both the equilibrium price and quantity of beef has fallen over time. Which of the following would be most consistent with this observation?

taste preferences have changed.. they prefer beef less than before

non policy fixing positive

tax regulation social benefits

Market base solutions

tax and subsidy tradable pollution permits

The production function below indicates that

the firm experiences diminishing marginal product