Assignment #10 ( Chapter 12 and little of 4)

The cost of chicken will increase.; gravy and rice; Demand shifts to the left​: Equilibrium price and quantity will both decrease;A greater amount of farmland will be devoted to goods that are substitutes for anchovies.

A major source of chicken feed in the United States is​ anchovies, small fish that can be scooped out of the ocean at low cost. Every 7​ years, when the anchovies disappear to​ spawn, producers must turn to​ grain, which is more​ expensive, to feed their chickens. What is likely to happen to the cost of chicken when the anchovies​ disappear? What is a complement for​ chicken? How are the markets for these complements affected when the anchovies​ disappear? How might the allocation of farmland be changed as a result of the disappearance of​ anchovies?

a benefit bestowed on an individual or a group that is outside of, or external to, the transaction.positive externalities and negative externalities

A positive externality is What type of externalities misallocate resources and result in market​ failure, waste, or lost​ value?

A+B+E

Refer to the information provided in the figure at right to answer the question that follows. Equilibrium in this market occurs at the intersection of curves S and D. If price is P1​, consumer surplus is area

C+F

Refer to the information provided in the figure at right to answer the question that follows. Equilibrium in this market occurs at the intersection of curves S and D. If price is P1​, the deadweight loss due to under production is area

greater than the marginal cost to produce that good.

Society will benefit from more of a good being produced when the price of a good is

short-run profits in the potato chip market increase.

Suppose there is a permanent shift of consumer preferences away from pretzels and toward potato chips. The most likely result would be

to the highest bidder because the passenger for whom the seat has the greatest value will bid the highest​ amount, but tossing a coin would allocate the seat randomly. to the highest bidder because that is efficient. by tossing a coin because awarding it to the highest bidder favors the rich. by tossing a coin because both passengers will have an equal chance of obtaining the seat. both a and b are possible arguments.

Suppose two passengers end up with a reservation for the last seat on a train from San Francisco to Los Angeles. Two alternatives are​ proposed: a.Toss a coin b.Sell the ticket to the highest bidder Compare the two options from the standpoint of efficiency and equity. It will be efficient to allocate the last seat on the train. It will be equitable to allocate the last seat on the train

marginal revenue product of labor equals the wage rate.; the same on all boats labor will be allocated efficiently among the firms.

The commercial fishing industry is competitive. Hundreds of commercial fishing boats work along the coast of Maine. Each boat owner hires workers up to the point where If wages are uniform in this​ industry, and all firms are maximizing​ profits, then the marginal product of labor will be ​Therefore, viewed as an example of an input​ market, we can conclude that

general equilibrium

The condition that exists when all markets in an economy are in simultaneous equilibrium is known as

total surplus is $50 million

The diagram to the right depicts a local market for hot dogs. Notice that the quantity of hot dogs sold is millions of hot dogs per month. ​1.) Using the triangle drawing​ tool, illustrate consumer surplus. Label this area​ 'CS'. ​2.) Using the triangle drawing​ tool, illustrate producer surplus. Label this area​ 'PS'.

​Frank's producer surplus from producing the optimal quantity of hot dogs per month is ​$ 16 million per month.

The diagram to the right illustrates the supply curve for hot dogs by​ Frank's Frankfurters, a local hot dog producer. Calculate the dollar value of producer surplus if equilibrium price is ​$0.80 per dozen. ​1.) Using the point drawing​ tool, find the quantity that​ Frank's Frankfurters is willing to supply if equilibrium price is ​$0.80 per dozen. ​2.) Using the triangle drawing​ tool, illustrate the amount of producer surplus that Frank receives if equilibrium price is ​$0.80 per dozen. Carefully follow the instructions above and only draw the required objects.

more efficient when it produces at point B than at point A

The firm is

deadweight loss

The total loss of producer and consumer surplus from underproduction or overproduction​ is:

False; above the price and below the demand curve.

Consumer surplus is the difference between the minimum amount a person is willing to pay for a good and its current market price. On a​ graph, consumer surplus is represented by the area

is the difference between the maximum amount a person is willing to pay for a good and its current market price.

Consumer​ surplus:

the economy is producing what people want at least possible cost.

Efficiency occurs when

partial equilibrium analysis.

Examining the equilibrium conditions of individual markets and for households and firms separately is referred to as

This is not public good

Identify whether the following represents a public good. therapeutic stone massage at the Sahra Spa in the Cosmopolitan Hotel and Casino in Las Vegas.

E-C

If price goes from equilibrium to Upper P1​, consumer surplus changes by the area

affect input and output markets in the automobile industry and other related industries.

A technological change in the production of cars will

no change is possible that will make some members of society better off without making some members of society worse off.

A condition is Pareto optimal when

​Clarice's neighbors also receive a benefit from the​ ditch, so the true social value will not be reflected in the price.

After suffering from three floods in five​ years, Clarice decided to have a new drainage ditch installed at the front of her property. This new ditch not only keeps water from flooding her​ home, but also channels some of the water away from neighboring​ properties, where it flows directly into the city sewer. Explain why the installation of the drainage ditch might lead to an inefficient outcome.

into, out of; increase, decrease

A​ two-sector economy consists of X and Y​, and both sectors are in​ long-run equilibrium. If the demand for Y increases without an increase in​ income, capital will start to flow​ ________ sector Y and will flow​ ________ sector X. A​ two-sector economy consists of X and Y​, and both sectors are in​ long-run equilibrium. If the demand for Y increases without an increase in​ income, the price of Y will​ ________ and the price of X will​ ________.

hire 6 workers and decrease output.

Barry owns a commercial fishing boat based in Bar​ Harbor, Maine. The table at right shows how his daily catch varies with the amount of labor he hires. Barry sells the fish he catches at a price of ​$150 per ton. Barry had been paying his workers ​$150 per​ day, and hiring 8 workers. ​Recently, increased demand for labor in Bar Harbor pushed the wages he has to pay up to ​$450per day. Assuming Barry still sells the fish he catches at a price of ​$150 per​ ton, this will lead Barry to

If Barry pays his workers ​$400 per​ day, he should hire 7 workers.

Barry owns a commercial fishing boat based in Bar​ Harbor, Maine. The table at right shows how his daily catch varies with the amount of labor he hires. Barry sells the fish he catches at a price of ​$200 per ton.

True

Both positive and negative externalities are sources of market failure

is the difference between the current market price and the cost of production for the firm.

Producer​ surplus:

E+F.

Refer to the information provided in the figure at right to answer the question that follows. Equilibrium in this market occurs at the intersection of curves S and D. If price goes from equilibrium to P1​, producer surplus changes by the area

Public​ good, because new fire engines would bestow collective benefits to society. Imperfect​ competition, because the gas stations are not acting like​ price-takers. Imperfect​ information, because you lack information about electrical repairs to know which repair is unnecessary. Negative​ externality, because individuals outside the transaction are negatively affected.

Each instance that follows is an example of one of the four types of market failure discussed in this chapter. In each​ case, identify the type of market failure and defend your choice briefly. Everyone in town would benefit from the acquisition of two new fire​ engines, but the town does not have the money to pay for them and no one is willing to purchase and donate them to the town. The only three gas stations in a small town all agree to raise their prices. Your electrician convinces you that you need to replace your entire breaker box when all you really need is a new breaker switch. Your neighbor refuses to vaccinate his children for measles.

G

If price is P1​, producer surplus is area

$15.

If the market price of a basketball is​ $35 and the full cost of producing it is​ $20, then a basketball producing firm gets producer surplus of

$65

If the most someone is willing to pay for ticket to see their favorite team is​ $100 and the market price of the ticket is​ $35, then this buyer will get consumer surplus of

true

Imperfect information can lead to transactions that are ultimately disadvantageous.

decrease the demand for land line phones.

In recent​ years, cellular phones have become very popular. Using the line drawing tool​, show the effect of this change in taste and preferences on the market for cellular phones. Properly label your line. ​Note: Carefully follow the instructions above and only draw the required object. This change would likely

True

It is possible that government involvement in the economy can lead to markets functioning more efficiently as well as markets functioning less efficiently.

True below the price and above the supply curve.

Producer surplus is the difference between the current market price and the cost of production for the firm. On a​ graph, producer surplus is represented by the area

Consumer surplus at a price of​ $12 and production of 500 thousand flu vaccinations per day is ​$3.25 million. For the same​ equilibrium, total producer surplus is ​$1.65 million.Assuming price remained at​ $12 but production was cut to 200 thousand vaccinations per​ day, producer surplus is now ​$1.06 million and consumer surplus is ​$2.1 million.The deadweight loss from underproduction is ​$1.8 million.

Use the diagram on the right to answer the following​ questions:​ (round all numerical responses to two decimal​ places)

Not Pareto​ efficient, because you are better off but some other drivers are worse off. Not Pareto​ efficient, because you are worse off. Pareto​ efficient, because both you and the store agree to the transaction. Pareto​ efficient, because both you and the scalper agree to the transaction

Which of the following are actual​ Pareto-efficient changes? Explain briefly. You blast your MP3 player at full volume through your car speakers while driving your convertible through Chicago. Your neighbor never returns the lawnmower he borrowed from you. You use a store coupon to save​ $1.50 on a jar of peanut butter. You pay a ticket scalper​ $250 for a ticket to a Green Bay​ Packer's game at Lambeau Field. The ticket has a face value of​ $125.