EC 201 Practice Problems

Which of the following are trade-offs faced by a family deciding whether to buy a new car? Check all that apply.

- A newer model offers better protection and functions but is more expensive than an older model. - An increase in the family's car payment means the family will be unable to afford a vacation.

Consider the market for mobile applications, smartphones, and conventional phones. - Mobile applications and smartphones - Mobile applications and conventional phones - Smartphones and conventional phones 1a. Suppose a network externality reduces the cost of developing cell phone applications. 1b. Next, show the effect the previous change in the market for cell phone applications has on the market for conventional phones. 1c. Finally, show the effect the previous change in the market for cell phone applications has on the market for smartphones.

- Complements - substitutes - substitutes 1a. Graph 1b. Graph 1c. Graph

- Ginny pays a storekeeper $1 for a quart of milk. - Eric earns $12 per hour working at a salon - Sharon earns $20,000 from her 10% ownership of Acme Industrial. - Lucia spends $50 for a swimming lesson.

- firm to household - household to firm -household to firm - firm to household

A commercial fisherman notices the following relationship between hours spent fishing and the quantity of fish caught: 0 0 1 10 2 18 3 24 4 28 5 30 On the following graph, use the blue points (circle symbol) to graph the fisherman's production function. The production function becomes as the number of hours spent fishing increases. he fisherman has a fixed cost of $10 (his pole). The opportunity cost of his time is $5 per hour. On the following graph, use the green points (triangle symbol) to graph the fisherman's total-cost curve at the following quantities of fish: 0, 10, 18, 24, 28, and 30 pounds. True or False: The total-cost curve is increasing and convex because there are diminishing returns to fishing time.

10,8,6,4,2 graph a flatter graph b true

A firm in a competitive market receives $1,160 in total revenue and has marginal revenue of $20. the firms average revenue is ___ and ___ units were sold

20, 58

The company that you manage has invested $5 million in developing a new product, but the development is not quite finished. At a recent meeting, your salespeople report that the introduction of competing products has reduced the expected sales of your new product to $3 million. If it would cost $1 million to finish development and make the product, youshould go ahead and do so. The most you should pay to complete development is___

3 million

Consider the following table of long-run total costs for three different firms: graph

A: Econ of scale, diseconomies of scale b: economies of scale c: diseconomies of scale

The city government is considering two tax proposals: A lump-sum tax of $300 on each producer of hamburgers.• A tax of $1 per burger, paid by producers of hamburgers. Which of the following statements is true as a result of the lump-sum tax? Check all that apply. Which of the following statements is true as a result of the per-burger tax? Check all that apply.

Average totals cost will increase, average variable cost will remain unchanged, average fixed cost will increase Marginal cost will increase, average variable cost will increase

True or False: Cheese and crackers can both be inferior goods for Kevin. If the price of cheese falls, Kevin's consumption of crackers_____ and his consumption of cheese___.

False decreases, increases

True or False: All inferior goods are Giffen goods.

False

You are trying to decide whether to take a vacation. Most of the costs of the vacation (airfare, hotel, and forgone wages) are measured in dollars, but the benefits of the vacation are psychological. How can you compare the benefits to the costs?

Determine the benefits of what you give up by going on the vacation, and compare them to the benefits of going on the vacation.

The fact that the production possibilities frontier has a bowed-out shape implies that the opportunity cost of guns __ as the society produces more butter.

Falls

- There can be no gains from trade between two countries if one of them has an absolute advantage in the production of all goods. - Comparative advantage determines the gains from specialization and trade. - If a certain trade is good for one country, it can't be good for the other country. - Two individuals can benefit from specialization and trade if they agree upon a price that lies between their opportunity costs of producing the good. - When a country opens to trade, people working in industries producing goods that the country exports are harmed by the trade.

False, True, False, True, False

Your cousin Vinnie owns a painting company with fixed costs of $150 and the following schedule for variable costs: The efficient scale is ___ houses

Graph 5

High inflation imposes various costs on society. What can policymakers do to keep inflation at a low level?

Maintain a slow growth in the quantity of money.

A 1996 bill reforming the federal government's antipoverty programs limited many welfare recipients to only two years of benefits. This change gives people the incentives to find a job ___ quickly than if welfare benefits lasted forever. Under which arrangement would the economy be more efficient?

More, Welfare benefits last for only two years.

Suppose that China catches up with American productivity so that a Chinese worker can produce 80 shirts or 20 computers. True or False: There are no longer gains from trade.

True

True or False: Both countries would be better off if they produced the good in which they have a comparative advantage and then traded 400 million tons of grain for 200 million cars.

True

True or False: If the demand for notebooks is perfectly inelastic, an increase in the supply of notebooks only lowers the price of notebooks and does not affect the quantity produced and sold.

True

Complete the following table with the number of workers needed to make one car or 1 ton of grain in the United States and Japan.

US 1/5 a car, 1/9 ton grain Japan 1/3 car, 1/9 ton grain

Complete the following table with the quantities of cars produced and consumed in each country if there is no trade.

US 250, Cars 450 Grain Japan 150 Cars, 450 Grain

Complete the following table by determining the opportunity cost of a car and of a ton of grain for both the United States and Japan.

US: 1 4/5 Car, 5/9 grain Japan: 3 Car, 1/3 grain

Over the past 40 years, technological advances have reduced the cost of computer chips. This has led to___ in the supply of computers, causing the price of computers to__ . Because computers and computer software are___ , this change in price causes the demand for computer software to___ . However, computers and typewriters are___ , so the change in the price of computers the demand for typewriters.

an increase, fall, complements, increase, substitutes, decreases

If consumers buy less of a commodity when their incomes rise, this commodity is___ When the price of this commodity rises, the substitution effect is ___ and the income effect is ___ . So the net result for consumption of this commodity_____ .

an inferior good negative, positive, depends on which effect dominates

The fact that the production possibilities frontier has a bowed-out shape implies that the opportunity cost of guns __ as the society produces more butter. Feasible but inefficient impossible for the economy to achieve

falls B,A

Suppose Americans decide to save more of their incomes. If banks lend this extra saving to businesses, which use the funds to build new factories, this leads to __ growth in productivity because workers will have __ equipment with which to work. Workers will__ from the change in productivity growth because they will produce and earn __ . True or False: Society can receive a "free lunch" when it builds new factories.

faster, more benefit, more false

Each producer in the market has a fixed cost of $9 and the following marginal cost: at price of 11___ pies are sold in the market. each producer makes ___ pies, so there are ___ producers in this market, each making a profit ____ True or False: The market is in long-run equilibrium. in the long run, each producer earns a profit of ___. the market price is ____. At this price, pies are sold in this market, and each producer makes___ pies so there are ___ producers operating

graph 200, 5, 40, 16 false 0,7,600,3,200

The opportunity cost of producing a car in Canada is __ bushels of wheat, and the opportunity cost of producing a bushel of wheat in Canada is __ On the previous graph, use the grey point (star symbol) to indicate the consumption bundle Canada can achieve with trade if it continues to consume 10 million cars. __ should accept the deal the United States proposes.

15, 1/15 Graph Should

1a. Suppose technological advances expand the functions and lower the price of tablet computers. Show the effect these technological advances regarding tablet computers have on the market for laptop computers. 1b. Suppose all colleges require students to use electronic textbooks and do assignments online. Show the effect this new technological requirement has on the market for laptop computers. 1c. Suppose more college students decide to enter the industry of laptop computer manufacturing after graduation. Show the effect this increase in workers has on the market for laptop computers. 1d. Suppose a stock market crash lowers people's wealth. Assume also that laptop computers are a normal good. Show the effect this change in people's wealth has on the market for laptop computers.

1a. Graph 1b. Graph 1c. Graph 1d. Graph

The following table describes the production possibilities of two cities in the country of Baseballia: Without trade, the price of a pair of white socks (in terms of red socks) in Boston is __ of red socks, and in Chicago it is __ of red socks. __ has an absolute advantage in the production of red socks, and__ has an absolute advantage in the production of white socks. __ has a comparative advantage in the production of red socks, and __ has a comparative advantage in the production of white socks. If the cities trade with each other, Boston will export__socks, and Chicago will export__socks. The price of white socks can be expressed in terms of red socks. The highest price at which white socks can be traded that would make both cities better off is ___of red socks per pair of white socks, and the lowest price that makes both cities better off is ___ of red socks per pair of white socks.

2 1/2 pairs, 1 1/3 pairs Boston, Chicago Boston, Chicago Red, White 2 1/2 pairs, 1 1/3 pairs

- All three spend all their time mowing lawns. (A) - All three spend all their time washing cars. (B) - All three spend half their time on each activity. (C) - Jacques spends half his time on each activity, while Musashi only washes cars and Sean only mows lawns. (D) In the following table, identify the opportunity cost of washing cars for each worker. Assume that the resources best suited to producing a particular service are preferentially used in the production of that service and that as the economy moves down along the production possibilities frontier, one worker at a time is transferred from mowing lawns to washing cars. Using the blue points (circle symbol), graph the production possibilities frontier (PPF) for this economy on the following graph. Then use the black point (plus symbol) to identify point A, the green point (triangle symbol) to identify point B, the orange point (square symbol) to identify point C, and the purple point (diamond symbol) to identify point D on the graph. True or False: The production possibilities frontier consists of straight-line segments, rather than being smoothly bowed outward throughout, because each worker faces a constant trade-off between mowing lawns and washing cars. Indicate whether each of the following allocations is efficient or inefficient.

40, 0 0, 40 20,20 20,15 Jacques, 2 lawns per car Mausashi, 1 lawn per car Sean, 1/2 lawn per car Graph True a = effcient b = effcient c = inefficient d = inefficient

Which of the following are trade-offs faced by a company president deciding whether to open a new factory? Check all that apply.

- The firm can either open a new factory or upgrade existing equipment. - The firm can either pay out more of its profit to shareholders or earn additional profit next year by increasing production. - The firm can either open a new factory or expand its current factory.

Which of the following are trade-offs faced by a recent college graduate deciding whether to go to graduate school? Check all that apply.

- If she goes to graduate school, she won't be able to spend as much time with her family. - Taking out more student loans means she may not able to purchase the new car she needs. - Graduate school means fewer years of on-the-job experience.

Which of the following are trade-offs faced by a member of Congress deciding how much to spend on national parks? Check all that apply.

- Money spent on national parks benefits park visitors, but alternatively the money could be spent on highways to benefit drivers. - Congress can spend either a small amount on a lot of parks or a large amount on a single national park.

Classify each of the following statements as positive or normative. - Limiting unemployment benefits to only two years increases the incentive to look for jobs. - The government should provide subsidies to domestic export industries. - The government should provide basic healthcare to all citizens - A reduction in the rate of money growth will reduce the rate of inflation. - Policy makers face trade-off between equality and efficiency.

- Positive - normative - normative - positive - positive

Which of the following government activities is motivated by a concern about efficiency? Check all that apply. Smoking in public places creates____ because secondhand smoke harms nonsmokers.

- Prohibiting smoking in public places - Regulating cable TV prices - Instituting laws against driving while intoxicated - Breaking up Standard Oil (which once owned 90% of all oil refineries) into several smaller companies an externality

Which of the following are trade-offs faced by a professor deciding how much time to spend preparing for class? Check all that apply.

- The more the professor prepares, the better the lectures, but the less free time the professor can enjoy doing something else. - The better the lecture, the better the professor's chances of tenure, but time spent preparing the lecture decreases the time the professor has available to work on research.

Now suppose you had been planning to spend the day working on your garden. What is the cost of going kayaking in this case? Check all that apply.

- The value of your time spent gardening - The fee for accessing the river in a national park - The rental of any kayak equipment you need

You were planning to spend Saturday working at your part-time job, but a friend asks you to go kayaking. Which of the following are included in the true cost of going kayaking? Check all that apply.

- The wages you forgo by going kayaking - The fee for accessing the river in a national park - The rental of any kayak equipment you need

- In a pizza industry, the cost of the factory is_____ only in the short run but not in the long run. - ____ is always falling as the quantity of output increases. -A cost that depends on the quantity produced is____ - The term____refers to all the things you must give up to taking some action. - The term____ refers to costs that involve direct monetary payment by the firm. - ___ is falling when marginal cost is below it and rising when marginal cost is above it.

- a fixed cost - Average fixed cost - a variable cost - opportunity cost - explicit costs - Average variable cost

- There can be no gains from trade between two countries if one of them has an absolute advantage in the production of all goods. - Comparative advantage determines the gains from specialization and trade. - If a certain trade is good for one country, it can't be good for the other country. - Two individuals can benefit from specialization and trade if they agree upon a price that lies between their opportunity costs of producing the good. - When a country opens to trade, people working in industries producing goods that the country exports are harmed by the trade.

- false - true - false - true - false

Classify the following topics as relating to microeconomics or macroeconomics. - The effect of a change in price of one good on a related goodThe effect of minimum-wage law on unemployment - The relationship between the inflation rate and the unemployment rate - A firm's decision about whether to continue production or to shut down - The effect of government subsidies on the agricultural industry

- micro - macro - macro - micro - micro

Toothbrushes and toothpaste, coffee and tea For each of the characteristics listed in the table, indicate which group of goods is more likely to exhibit that trait. - The two goods are complements. - The two goods are substitutes. - The indifference curves are fairly straight. - The indifference curves are fairly bowed. - The consumer will respond more to a change in the relative price of the two goods.

- toothbrushes and toothpaste - coffee and tea - coffee and tea - toothbrushes and toothpaste - coffee and tea

Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000 per year to rent the location and buy the stock. In addition, she would have to quit her $50,000 per year job as an accountant. What is the opportunity cost of something? Your aunt's opportunity cost of running a hardware store for a year is Suppose your aunt thought she could sell $510,000 worth of merchandise in a year.

-What must be given up to acquire it - $550,000. -should not

Ana's opportunity cost of brewing a gallon of root beer is_____, and Dina's opportunity cost of brewing a gallon of root beer is___ __ has an absolute advantage in brewing root beer, and __ has a comparative advantage in brewing root beer. If Ana and Dina trade foods with each other,__ will trade away pizza in exchange for root beer. The price of pizza can be expressed in terms of gallons of root beer. The highest price at which pizza can be traded that would make both roommates better off is __ of root beer, and the lowest price that makes both roommates better off is __ of root beer per pizza.

1 1/2 pizzas 1 2/5 pizzas Ana, Dina Ana 5/7 gallon, 2/3 gallon

A German worker takes 400 hours to produce a car and 2 hours to produce a case of wine. A French worker takes XX hours to produce a car and 3 hours to produce a case of wine. For what values of XX will gains from trade be possible? Check all that apply. For what values of XX will Germany export cars and import wine? Check all that apply.

1,2,650,800 650,700,800

Consider the market for gas-powered small cars. Assume gas-powered small cars are a normal good. 1. People decide to have more children. 2. The price of electric small cars falls. 3. The discovery of a new source of iron ore lowers steel prices. 4. An economic recession lowers people's wealth. 5. A number of major car dealers decide to switch from selling gas-powered cars to selling electric cars. 1a. Show the effect of the following event on the market for gas-powered small cars: People decide to have more children. 1b. Show the effect of the following event on the market for gas-powered small cars: The price of electric small cars falls. 1c. Show the effect of the following event on the market for gas-powered small cars: The discovery of a new source of iron ore lowers steel prices. 1d. Show the effect of the following event on the market for gas-powered small cars: A number of major car dealers decide to switch from selling gas-powered cars to selling electric cars.

1. Number of buyers, None 2. Price of substitute, none 3. None, input prices 4. Income, none 5. None, number of sellers 1a. Graph 1a 1b. graph 1b 1c. graph 1c 1d. graph 1d

The pizzeria's fixed cost is Complete the third column of the following table by calculating the marginal cost per dozen pizzas using the information on total cost. Then complete the final column by calculating the marginal cost per dozen pizzas using the information on variable cost. True or False: It doesn't matter whether you compute marginal cost using total cost or variable cost.

280 Graph true

TC = 50 +1/2q^2 MC = q demand = Qd=160-4p where PP is the price and QQ is the total quantity of the good. Each firm's fixed cost is What is each firm's variable cost? Which of the following represents the equation for each firm's average total cost? Complete the following table by computing the marginal cost and average total cost for The average total cost is at its minimum when the quantity each firm produces (q) equals Which of the following represents the equation for each firm's supply curve in the short run? In the long run, the firm will remain in the market and produce if In the short run, in which the number of firms is fixed, the equilibrium price is____ and the total quantity produced in the market is _____units. Each firm produces ____units. In this equilibrium, each firm makes a profit of firms have an incentive to ____ the market In the long run, with free entry and exit, the equilibrium price is $ _____ and the total quantity produced in the market is ____ units. There are_____ firms in the market, with each firm producing ___units.

50 1/2q^2 50/q + 1/2 graph 10 q q>= 10 16, 96, 16 78 enter 10, 120, 12, 10

Many small boats are made of fiberglass and a resin derived from crude oil. Suppose that the price of oil rises. The following graph shows two possible marginal-cost (MC) and average-total-cost (ATC) curves for an individual boat-making firm. Graph 1)In the following tables, indicate which curves represent the marginal-cost curve and average-total-cost curve before the price hike and after the price hike. 2)On the following graph, show the effect of the hike in the price of oil on the market supply of boats by shifting the curve in the appropriate direction. Graph In the short run, profits of boat makers _____. In the long run, the number of boat makers. ____

Before oil price hike MCb after oil price hike MCa Before oil price hike ATCb After oil price hike ATCa graph decrease, decreases

Five consumers have the following marginal utilities of apples and pears: The price of an apple is $1, and the price of a pear is $2. Which, if any, of these consumers are optimizing over their choice of fruit? In the following table, indicate which fruit each consumer should increase consumption of in order to achieve the optimal fruit consumption bundle.

Brian, Edison Tim apples Alyssa pears crystal apples

England and Scotland both produce scones and sweaters. Suppose that an English worker can produce 40 scones per hour or 1 sweater per hour. Suppose that a Scottish worker can produce 20 scones per hour or 2 sweaters per hour. __ workers have an absolute advantage in producing scones, and__ workers have an absolute advantage in producing sweaters. ___ workers have a comparative advantage in producing scones, and ___ workers have a comparative advantage in producing sweaters. If England and Scotland decide to trade, Scotland will trade___ to England. If a Scottish worker could produce only 1 sweater per hour, Scotland___ gain from trade, and England___ gain from trade.

English, Scottish English, Scottish Sweaters Would still, would still

Neha can read 20 pages of astronomy in an hour. She can also read 50 pages of history in an hour. She spends 5 hours per day studying. Neha's opportunity cost of reading 150 pages of history is __ pages of astronomy.

Graph

Now show the change in the market for desktop computers that is consistent with the following statement: When a technological advance improves the features of laptop computers, the price of laptop computers rises, and the price of a used desktop computer falls.

Graph

Show the change in the market for electric cars that is consistent with the following statement: "When the price of electric cars is expected to rise in the near future, the present price of electric cars rises."

Graph

Show the change in the market for laptop computers that is consistent with the following statement: When a technological advance improves the features of laptop computers, the price of laptop computers rises, and the price of a used desktop computer falls.

Graph

Show the change in the market for restaurant meals that is consistent with the following statement: "When an economic boom raises people's income, the price of restaurant meals rises."

Graph

Suppose that the price of basketball tickets at your college is determined by market forces. Currently, the demand and supply schedules are as follows: Use the blue points (circle symbol) to graph the demand for basketball tickets. Then use the orange points (square symbol) to graph the supply of tickets. Finally, use the black point (plus symbol) to indicate the equilibrium price and quantity in this market.

Graph

The first principle of economics discussed in Chapter 1 is that people face trade-offs. The following production possibilities frontier illustrates society's trade-offs between spending money on two "goods": industrial output and agricultural output. Show what happens to the production possibilities frontier (PPF) if the society develops a new fertilizer that significantly increases agricultural production.

Graph

Use the blue line (circle symbol) to graph the production possibilities frontier for the American economy. Then use the green line (triangle symbol) to graph the production possibilities frontier for the Japanese economy.

Graph

Nimbus, Inc., makes brooms and then sells them door-to-door. Here is the relationship between the number of workers and Nimbus's output in a given day: Which of the following statements are true about the patterns found in this table? Check all that apply.

Graph - when marginal product is rising, marginal cost is falling - marginal cost declines at first, then rises

You consume only soda and pizza. One day, the price of soda goes up, the price of pizza goes down, and you are just as happy as you were before the price changes. Illustrate the effect the price changes have on your budget constraint (BC). Which of these graphs is consistent with the fact that you are just as happy as you were before the price changes? As a result of the price change, you will consume ___ soda and ___ pizza. In this case, there____to consider. True or False: You can afford the bundle of soda and pizza you consumed before the price change.

Graph B less, more, is only a substitution effect False

Use the green line (triangle symbol) to draw Deborah's budget constraint if she earns $12 per hour. Then use the blue line (circle symbol) to draw her budget constraint if she earns $16 per hour. Finally, use the purple line (diamond symbol) to draw her budget constraint if she earns $20 per hour. If Deborah's labor-supply curve is upward sloping when the wage is between $12 and $16 per hour, then point__ on the graph represents a possible optimum at a wage of $16 per hour. Given this optimum at a wage of $16 per hour, an optimum of point__ generates a backward-sloping labor-supply curve when the wage is between $16 and $20 per hour.

Graph B,E

In year 1, Dmitri earns $90, milk costs $2 per quart, and cookies cost $3 per dozen. Use the green line (triangle symbol) to draw Dmitri's budget constraint on the following graph. True or False: Dmitri will consume more milk and more cookies in year 2 than in year 1.

Graph False

Use the blue points (circle symbol) to graph the demand for pizzas. Then use the orange points (square symbol) to graph the supply of pizza. Finally, use the black point (plus symbol) to indicate the equilibrium price and quantity in this market. If the actual price in this market were $8, quantity supplied would be__than quantity demanded, so there would be___ pressure on prices.

Graph greater, downward

Consider the following events: Researchers shows that eating lobsters increases the risk of heart attack, and at the same time, there is a new regulation that limit the number of lobsters people can fish. Show the effect of these two events on the market for lobsters. When the demand curve and supply curve shift in the directions indicated on this graph, you can be certain about the effect on____without knowing the magnitude of the shifts.

Graph only the equilibrium quantity

Use the blue line (circle symbol) to graph the production possibilities frontier (PPF) for the United States, and use the green line (triangle symbol) to graph the production possibilities frontier for China. If these countries were open to trade,__would export shirts and__ would benefit from trade. The price of a computer can be expressed in terms of shirts. The highest price for which a computer can be traded that would make both countries better off is _ shirts per computer, and the lowest price that makes both countries better off is _ shirts per computer.

Graph The United States, both countries 4,3

The following graph shows your budget constraint assuming that you pay no taxes on your income. On the following graph, show the effect of a 15 percent income tax on your budget constraint. In order for the overall effect of an income tax to cause the number of hours worked to decrease, the income effect must be___ the substitution effect.

Graph less than

A college student has two options for meals: eating at the dining hall for $6 per meal, or eating a package of Cup O' Soup for $2 per meal. Her weekly food budget is $60. On the following graph, use the green line (triangle symbol) to draw the college student's budget constraint. Then use the black point (plus symbol) to indicate the initial optimum in this case. As a result of this price change, the quantity of Cup O' Soup packages consumed. This means that Cup O' Soup must be, and the income effect the substitution effect. On the following graph, use the blue line (circle symbol) to draw the student's demand for Cup O' Soup by plotting the optimum information from points A and B. True or False: Cup O' Soup is not a Giffen good.

Graph (1a) increased, an inferior, outweighed Graph (1b) False

Because bagels and cream cheese are often eaten together, they are complements. Consider the effect of a rise in the price of flour, an input to making bagels. On the following graph, show the effect of the rise in the price of flour on the market for bagels. Therefore, a rise in the price of flour would cause the equilibrium price of bagels to___ and the equilibrium quantity of bagels to__ . On the following graph, show the effect of the rise in the price of flour on the market for cream cheese. Therefore, a rise in the price of flour would cause the equilibrium price of cream cheese to__ and the equilibrium quantity of cream cheese to__ .

Graph 1a Rise, fall graph 1b fall, fall

Ball Bearings, Inc., faces costs of production as follows: Complete the following table by calculating the company's total cost, marginal cost, average fixed cost, average variable cost, and average total cost at each level of production. The price of a case of ball bearings is $80. Seeing that he can't make a profit, the company's chief executive officer (CEO) decides to shut down operations. The firm's profit in this case is____ True or False: This was a wise decision. Vaguely remembering his introductory economics course, the company's chief financial officer tells the CEO it is better to produce 1 case of ball bearings, because marginal revenue equals marginal cost at that quantity. At this level of production, the firm's profit is ___ True or False: This is the best decision the firm can make.

Graph a -180 false -180 false

In the final column, enter profit for each quantity. (Note: If the firm suffers a loss, enter a negative number in the appropriate cell.) In order to maximize profit, how many units should the firm produce? Check all that apply. On the following graph, use the green points (triangle symbol) to graph the marginal-revenue curve, then use the orange points (square symbol) to plot the marginal-cost curve The marginal-revenue curve and the marginal-cost curve cross at a quantity______ This firm____ in a competitive industry, because marginal revenue is ____ as quantity increases. True or False: The industry is in a long-run equilibrium.

Graph a 4,5 graph b between 4 and 5 units is, constant false

In the following table, complete the marginal cost, average variable cost, and average total cost columns. On the following graph, use the orange points (square symbol) to plot the marginal-cost curve for Jane's Juice Bar. (Note: Be sure to plot from left to right and to plot between integers. For example, if the marginal cost of increasing production from 1 vat of juice to 2 vats of juice is $5, then you would plot a point at (1.5, 5).) Then use the purple points (diamond symbol) to plot the average-variable cost curve starting at 1 vat of juice, and use the green points (triangle symbol) to plot the average-total-cost curve also starting at 1 vat of juice. Which of the following statements are true according to the previous graph? Check all that apply.

Graph a graph b The marginal-cost curve is above the average-total-cost curve when output is greater than four and average total cost is rising.

An industry currently has 100 firms, each of which has fixed costs of $16 and average variable costs as follows: Complete the following table by deriving the total cost, marginal cost, and average total cost for each quantity from 1 to 6. The equilibrium price is currently $10. Each firm produces____units, so the total quantity supplied in the market is___units. As this market makes the transition to its long-run equilibrium, the price will___ , quantity demanded will _____, and the quantity supplied by each firm will____ .Use the orange line (square point) to graph the long-run supply curve for this market.

Graph a 5, 500 fall, rise, fall graph b

Maya divides her income between coffee and croissants (both of which are normal goods). An early frost in Brazil causes a large increase in the price of coffee in the United States. On the following graph, show the effect of the frost on Maya's budget constraint (BC). Assume the substitution effect (SE) outweighs the income effect (IE) for croissants. On the following graph, use the grey point (star symbol) to show the effect of the frost on Maya's optimal consumption bundle by placing the grey point on one of the given black points on BC2BC2.

Graph(1a) Graph(1b)

You win $200 in a basketball pool. You have a choice between spending the money now or putting it away for a year in a bank account that pays 3% interest. Which of the following is the opportunity cost of putting the $200 in a bank account for one year?

The value you could obtain by spending the money now

Which of the following is the reason behind the slow growth in U.S. incomes during the 1970s and 1980s? What can the government do to boost living standards? Check all that apply.

There was a slowdown in productivity growth. - Improve education and expand literacy among its citizens to ensure workers are well educated - Encourage research and development to ensure workers have access to the best available technology

Given this information,___ has an absolute advantage in producing cars, and___ has an absolute advantage in producing grain.

United States, neither country

Suppose the book-printing industry is competitive and begins in a long-run equilibrium. Then Hi-Tech Printing Company invents a new process that sharply reduces the cost of printing books. Which of the following statements are true about what happens in the short run? Check all that apply. Suppose the book-printing industry is competitive and begins in a long-run equilibrium. Then Hi-Tech Printing Company invents a new process that sharply reduces the cost of printing books. The following graph shows Hi-Tech's initial marginal-cost curve (MC1MC1) and average-total-cost curve (ATC1ATC1) before the new technology, and its marginal-cost curve (MC2MC2) and average-total-cost curve (ATC2ATC2) after the new technology. Which of the following statements are true about what happens in the long run? Check all that apply.

hi tech's profits increase, hi techs average total cost curve shifts downward, the price of the books remains the same all firms average total cost decline to ATC2, the market price falls to P2, all firms earn zero profit

Guaranteeing everyone in society the best healthcare possible will likely ___equality and___ efficiency. Paying laid-off workers unemployment benefits until they find a new job will likely__ equality and__efficiency.

increase, decrease increase, decrease

Consider an indifference curve for someone deciding how to allocate time between work (and thus consumption) and leisure. Suppose the wage increases. The substitution effect induces a person to work and consume___ in response to higher wages. If consumption is a normal good, the income effect induces the person to consume___ when the wage rises, but if consumption is an inferior good, the income effect induces the person to consume___ in response to higher wages. True or False: The person's consumption always rises as a result of the higher wage.

more, more, less False

A profit-maximizing firm in a competitive market is currently producing 80 units of output. It has average revenue of $11, average total cost of $11, and fixed cost of $400. The efficient scale of the firm must be 80 units.

profit = 0 marginal cost = 11 average variable cost = 6 exactly

Oyster crackers are a complement for clam chowder. If the price of clam chowder falls, the quantity of clam chowder demanded ___ , which___ the demand for oyster crackers. Because of the change in the equilibrium quantity of oyster crackers, the demand for wheat flour by oyster cracker producers__ , causing the equilibrium price of wheat flour to___ . This means producers of bread face___ input prices, and the supply of bread___ . The resulting___ in the price of bread causes people to substitute___ , so the demand for cereal ___.

rises, raises, rises, increase, higher, decreases, rise, away from bread and toward cereal, rises

Bob's lawn-mowing service is a profit-maximizing, competitive firm. Bob mows lawns for $30 each. His total cost each day is $250, of which $50 is a fixed cost. He mows 5 lawns a day. In the short run, Bob should______ . In the long run, Bob should_____ the industry.

shut down, exit

The market for fertilizer is perfectly competitive. Firms in the market are producing output but are currently making economic losses. Which of the following statements is true about the price of fertilizer? Check all that apply. If firms in the market are producing output but are currently making economic losses, ___ illustrates the present situation for the typical firm in the market, and ___ indicates the corresponding supply curve. Assuming there is no change in either demand or the firm's cost curves, which of the following statements is true about what will happen in the long run? Check all that apply.

the price of fertilizer must be less than average total cost P2, S2 average total cost will decrease, the total quantity supplied to the market will decrease, the price of fertilizer will increase

Your current level of production is 50 devices, all of which have been sold. Someone calls, desperate to buy one of your music players. The caller offers you $500 for it.

you should accept the offer