eco tophat unit 5-9

RM Motors, a manufacturer of model metal vehicles, has the following total cost schedule. What is the value of the firm's fixed costs? Q; Total Cost 0, 100 2, 175 3 205 4, 245 5, 310

$100

Consider the tax diagram below that indicates the effects of $50 specific tax imposed on transactions in this market. From the information provided we can infer that the government collected

$1750=$50 * 35 in tax revenues

Refer to the supply and demand diagram below. If a subsidy of $3 per unit is introduced in this market, the price that consumers pay will equal ____ and the price that producers receive net of the subsidy will equal ____. (Hint: a subsidy to suppliers would be like reducing effective marginal cost of supply...shifting out the effective supply curve)

$4, $7

Suppose the authorities set the rent price ceiling at $5000 per unit. At that price ceiling the market, the market equilibrium price will be _____ and the quantity of apartments supplied will be___

$4000; 2000 units

At what market price does the DEMAND for units equal 1000?

$5000

After working full-time flipping burgers earning $15,000 a year Frank quits his job to start his own firm making and selling artisan homemade potato chips. After a year his total annual revenues are $200,000 and explicit total costs (wages to employees and cost of inputs such as potatoes and rent) are $180,000. What is the level of economic profits that Frank is earning?

$5000 200,000-180,000 = 20,000 - 15,000

Refer to the supply and demand diagram below. If an output (excise) tax of $5 per unit is introduced in this market, the price that consumes pay will equal ____ and the price that producers receive net of the tax will equal ____

$8; $3

f a $6 per unit tax is introduced in this market, then the price that consumers pay will equal _____ and the price that producers receive net of the tax will equal _____

$9; $3

In the market shown, if a price ceiling of 10 is imposed, the shortage is

(250-100) 150.0

In the market shown, with a price floor of 25, the surplus quantity is

(250-150) 100.0

A firms profits can be written as

(price minus average cost) times quantity produced

Consider the market in the figure where D1 denotes demand and S1 denotes supply. When a unit tax of 15 is imposed on sellers in the market, the tax burden per unit on buyers is ____ and on sellers is ____. The burden of the tax is greater on ____ (buyers or sellers) Hint: by tax burden on consumers we mean what part of the $15 tax do they end up paying (i.e. how much does the buyer price go up compared to a situation with no tax)

10.0 5.0 buyers

In the market shown, with a price ceiling of 10, the deadweight loss relative to the market equilibrium is ____ (hint: calculate the correct triangular area)

1000.0

Profits are equal to total revenues minus total costs. If (at a rent-controlled price of $2000 per unit) landlords as a group have total revenues given by the value of the rental payments (which you just calculated) and total costs (which you also just calculated) then total profits is thee same as total producer surplus (PS) on the diagram. Producer surplus is equal to ____ dollars.

1000000.0

the height of the supply curve tells us the marginal cost of supply. For example, the 1000th unit supplied is supplied at an (opportunity) cost of $2000. What is the total cost of supplying the first 1000 units? Hint: total cost can be calculated as the sum of all the costs, or the area beneath the supply curve. Enter the total cost of supplying 1000 units as a number, measured in dollars.

1000000.0

In the market shown, with a price flow of 25, the consumer surplus is _____ and the producer surplus is ____.

1125.0 and 2625.0

Continuing with the last question, if the airport authority can sell each permit to pickup passengers at the price that you indicated above, then the total revenue from selling those permits (i.e. the value of the economic rents captured by the airport authority) is equal to $

1200.0

Consider the market in the figure where D1 denotes demand and S1 denotes supply. When a unit tax of 15 is imposed on sellers in the market, the equilibrium quantity is _____. The government collects ____ in total tax revenue

150.0 2250.0

Consider the market in the figure where D1 denotes demand and S1 denotes supply. When a unit tax of 15 is imposed on sellers in the market, the loss in consumer surplus (relative to the no tax equilibrium) is _____, the loss in producer surplus is ____, and the deadweight loss of the tax is_____

1750.0 875.0 375.0

If a $6 per unit tax is introduced in this market, then the new equilibrium quantity will be:

20 units

consider the market in the figure where D1 denotes demand and S1 denotes supply. The equilibrium price is _____ and the equilibrium quantity is _____

20.0 and 200.0

Consider the market in the figure. If a quantitative restriction (a quota) is imposed at a quantity of 100, the shortage of the good in the market would equal____ and the deadweight loss of the restriction would equal ____

200.0 and 1000.0

In the market shown, if a price ceiling of 10 is imposed, producer surplus changes from ____ when the market is in equilibrium to ____ when the price ceiling is imposed, implying a ___ (loss or gain) or producer surplus.

2000.0; 500.0; loss

At a rent controlled price of $2000 a unit, what is the value of total rental payments to landlords (i.e. rent price times number of units), measured in dollars?

2000000.0

How many students would be in one class, on average, if the neighborhood had 42 kids?

21

What is the approximate pass rate percentage in math when the class size is 30?

25.0

How many students would be in one class, one average, if the neighborhood had 81 kids?

27

If Qt = 90,000 candy bars are sold each day with a specific tax of $0.30 per candy bar, what os the total amount of taxes on candy collected each day, measured in dollars?

27000.0

Suppose that a price ceiling of 10 is imposed on the market shown. How much shortage is created?

300-100 = 200.0

After demand for apartments has expanded to curve D', if the market price were held at $2000 there would be an excess demand of ___ apartment units. (Hint: although you may not be able to read off the answer by just looking at intercepts the horizontal axis, you should be able to figure out those values from geometry)

3000.0

How many students would be in one class, on average, if the neighborhood had 38 kids?

38

RM Motors, a manufacturer of model metal vehicles, has the following total cost schedule. What is the marginal cost of producing a fourth vehicle? Q; Total Cost 0, 100 2, 175 3 205 4, 245 5, 310

40 (245-205)

Consider the supply and demand diagram below. If a $2 per unit subsidy is introduced, what will be the equilibrium quantity?

40 units

In the market shown, if a price ceiling of 10 is imposed, consumer surplus changed from ____ when the market is in equilibrium to ____ when the price ceiling is imposed, implying a ___ (loss, gain or neither) of consumer surplus

40000.0; 4000.0; neither

Approximately, how many percentage points can one gain in the pass rate by decreasing class size by 10?

5.0

In the market shown, with a price ceiling of 10, the producer surplus is ____ and the consumer surplus is ____ (assume that any economic rents from this situation gets added to consumer surplus)

500.0 [(10*100)/2] 2500.0

How many test points, non average, did students in the treated schools do better by?

6.25

The diagram below depicts the effects of a quantitative restriction that restricts supply to be no more than 30 units (e.g. the government issues only 30 "permits" and transactions are only allowed if the buyer or seller can present a permit for the government to authorize the transaction. Match the labeled area to the corresponding concept.

A (top left triangle) consumer surplus B (rectangle) economic rent C (middle triangle) deadweight loss D (bottom left triangle) producer surplus

The diagram below depicts the market for housing on the outskirts of Los Angeles, with an upward sloping supply of new housing. In the absence of any zoning restrictions the market equilibrium would be at E, with houses being built and sold for $50,000 a unit. However the existing homeowners of the zone get together and pass city ordinances limiting the number of building permits to just 40. The effects of this quantitative restriction (QR) are shown in the diagram.

After the imposition of the QR the houses are sold for a price of 60. This implies an economic rent of 20 because the price exceeds the cost of constructing a new house (i.e. cost of building the 40th house) by 40.

The diagram shows the effects f a quantitative restriction n the market for taxi cab rides from an airport to downtown. In an unregulated market the equilibrium price would be $60 per ride and there would be 60 rides. The airport authority decides to limit the number of rides to just 30 via a system of permits. The airport issues just 30 permits and auctions them off to the taxi drivers who bid against each other to buy a permit.

After the introduction of the permit system the taxi rise customer pays a price of $80, the airport authority sells each permit for $40 and the taxi drivers are left with $40 per ride

In which of these scenarios is the deadweight loss of the tax largest?

B (demand curve is more elastic and large gap between S and S')

The diagram shows the market for computer semiconductor chips in a country that is at first open to free trade with the world without tariffs. Consumers purchase semiconductors from domestic suppliers and/or world market supply, whichever is cheaper. The world market is large so our country can buy as many semiconductors as it wants at the 'World price' (i.e. world supply is effectively horizontal line at that price) Study the diagram to identify consumer surplus and producer surplus when the country is open to imports. Consider next the effect of the adoption of an import tariff that raises the price of imported semiconductors up to pNT, where imports are reduced to zero (i.e. a "prohibitive tariff").

Compared to the free trade situation depicted in the same diagram, consumer surplus (CS) has now gone down and producer surplus (PS) has gone up

In which of these scenarios is the burden of the tax greater on buyers than on sellers?

D (S and S' have a large gap and demand curve is more inelastic)

Why is that not an equilibrium?

Equilibrium would be met between the seller and buyers when there is a market equilibrium. If there was a shortage of supplies and higher demand thee is no equilibrium or if the price was set higher, less people would buy making it a surplus of goods and not an equilibrium. Equilibrium is supply equals the demand. Not all people can supply or demand what is being asked in point (Qe, Pe)

Consider diagram below, which illustrates the market for low-skilled labour. If the government introduces a minimum wage law set at $9 per hour, then, in the new equilibrium, which of the following statements is TRUE? I. There will be 11,000 workers willing to work who cannot find work, given the wage. II. The number of workers that employed will decrease by 11,000 III. The number of workers that employers are prepared to hire will decrease by 5,000.

I and III only

Which of the following statements about tax incidence and relative slopes is TRUE? I. If demand is relatively steep and supply is relatively flat, then consumers bear more of the burden of a tax II. If supply is vertical, then producers bear non of the burden of a tax, no matter what the value of own-price elasticity of demand III. If the relative slopes of demand and supply are the same, the tax burden is shared equally across consumers and producers

I and III only

How do people respond to income transfers? Specifically, would low income individuals work less each week if they were given an income transfer?

Low income individuals would work less hours

How many more burgers would you sell if you lowered the price by a dollar? What quantity would you sell if you increased you price by 10%? What would you do if you really wanted to figure this out?

Over the next two months, change the price of your burger 5 times at random, sometimes up and sometimes down, by 35 cents, or by 5%, changes that you would consider small. Keep track of how purchases change

Which of the following statements about price ceilings is TRUE? (Assume the price ceiling is set below the unregulated equilibrium price)

Price ceilings make sellers worse off

Continuing with the same RM Motors manufacturers. Suppose the firm can sell each vehicle for $50. At what output level are profits maximized (or losses minimized)? Hint: You can manually calculate profits at each level of output, or use the P≥ MC rule

Q; Total Cost; Total Revenue; Profit 0, 100, 0, -100 2, 175, 50, -100 3 205, 100, -75 4, 245, 150, -55 5, 310, 200, -45 *at Q=4 (least minimum)

The diagram below shows the effects of a monopoly firm setting a price of $60 and quantity of 40 in a situation where the competitive market equilibrium price would have been $50 and quantity would have been 50 units. What is the value of lost surplus (i.e. deadweight loss) due to the firm charging a $10 markup over marginal cost?

The DWL equals $100 (=(1/2 [10 x 20])

How do you think stores decided who to send the coupons to?

The coupons are sent to a randomly selected group to customers

A government wants to limit the quantity of fish that can be extracted from a particular lake via a quota or licensing system, Without the quota 2000 fish would have been extracted and sold at a market equilibrium price. The government issues 1000 licenses and enforces the rule that one license must be presented (and surrendered) before any fish is removed. The licenses can be bought and sold

The effect of the quota licensing. system will be to *raise* the price of fish to buyers, *lower* the price of fish to sellers (fisherman) and generate *economic rent* to the owners of the licenses. In other circumstances this type of quantitative restriction would produce deadweight loss, but in a case like this whee thee might have been overfishing in a competitive market, this licensing can actually improve efficiency

What is the approximate slope of the fitted demand curve? Remember the slope is given by "the rise over the run" or the vertical change divided by the horizontal change. Choose any two points on the line and calculate the ratio of how much the quantity fell for any given increase in the price.

The slope of the line is -9.0

What are some reasons to believe smaller classes are better?

With smaller classes, it is more difficult for students to hide and get left behind because teachers will have better opportunities to observe the class and assess the students as individuals. This also helps them connect more in the classroom because participation will increase. Because there are less people, it gives students more chances to enter into class discussions

In the figure shown, with a price ceiling of 25, the deadweight loss is

[(25-15)*(200-150)]/2 250.0

A price ceiling of P3 causes

a deadweight loss triangle whose corners are ACD

if the income elasticity of demand for food is less than one, then a ten percent increase in incomes should lead to

a less than ten percent increase in quantity of food demanded

Which of the following, the best example of a fixed cost in production: a. the research and development expense that goes into designing a product b. workers' wages c. raw material costs d. the cost of spare parts for machinery

a. the research and development expense that goes into designing a product

if a firm has high fixed costs we would expect its average cost curve to be

at first falling with the level of output

Consider the supply and demand diagram below. Assume that, in the absence of government regulation the market supply curve is the one labeled S1. If a $5 per unit tax is introduced in this market, which area represents the deadweight loss?

b+c

The diagram below shows a market affected by a government subsidy. Fill in the blacks by sorting the answers below (i.e. fist item on your list should be the answer to black A, second the answer to blank. B, etc.) From the diagram we can tell that the buyer will pay a price of *PB* = blank A, and the seller will end up receiving *PS* = blank B. The *government subsidy* is blank C per unit *

blank A: 80 blank B: 140 blank C: 60

marginal cost is defined as the

change in total cost of production divided by the change in total output

Joseph Schumpeter described "the essential fact" about capitalism as

characterized by. a "process of creative destruction"

Which of the following correctly describes the equilibrium effects of a per-unit tax in a market?

consumer surplus, producer surplus and social surplus all decrease

The diagram below depicts the market for housing on the outskirts of Los Angeles, with an upward sloping supply of new housing. In the absence of any zoning restrictions the market equilibrium would be at E, with houses being built and sold for $50,000 a unit. However the existing homeowners of the zone get together and pass city ordinances limiting the number of building permits to just 40. The effects of this intervention are shown in the diagram. Click the area for economic rents that accrue to the existing homeowners in the form of an increase in the price of housing in excess of the cost of producing one more unit

economic rent is a rectangle

A price for of P1 causes

excess supply equal to the distance AB

Whereas demand facing the price taker is _____, demand facing a firm with market power is _____.

flat; downward sloping

Look at the rectangular area of the diagram that we have identified as the total economic rents. Start from where the quantitative restriction (QR) is not binding (exactly equal to the market equilibrium quantity) and then slowly tighten the restriction (drag the QR to the left). As you do this the total value of economic rents (thee rectangular area)

gets steadily bigger as the QR is restricted, but past a certain point the total value f the rents gets smaller as the QR is further reduced

a competitive price-taking firm

has little choice but to accept the going market price for their product

All else equal, the effect of the introductions oof more rent-control into the LES neighborhood, is likely to be an ___ in the demand for apartments in nearby neighborhoods, and an ____ in the equilibrium rental price in those markets

increase; increase

Consider the market in the figure where D1 denotes demand and S1 denotes supply. When a unit tax of 15 is imposed on sellers in the market, the price paid by consumers _____ (increases or decreases) to _____ and the price received by sellers _____ (increases or decreases) to _____

increases to 30.0; decreases to 15.0

A firm that is in a perfectly competitive industry faces an ______ or ________ demand curve

infinitely elastic horizontal

A firm without any market power will face a demand curve that

is horizontal

In order to keep rural farm voters happy, the prime minister decreed a floor on the price of corn. Overnight it became illegal to purchase corn at a price below $300 a ton. Click on the center of the area which represents consumer surplus after the price floor policy is introduced

left top triangle over price floor line is the consumer surplus

the period of time long enough to allow firms to vary the amount of all inputs is the

long run

The competitive firm's supply curve is best described as responding to price and given by its

marginal cost curve

Consider diagram below, which illustrates the market for low-skilled labour. Suppose that the equilibrium quantity is reduced from Q1 to Q2 units, through the introduction of a price floor. Which of the following correctly describes the resulting decrease in MARKET surplus?

market surplus will decrease by e + c (deadweight loss)

Ina competitive industry entry and exit of firms should in the long run lead firms to produce at

minimum average cost

At the equilibrium do any consumers want to change their behavior?

no

Lian quits her $7000 a month job as a patent attorney to become an entrepreneur. She starts Lian's Flower shop. She has monthly Total Revenues or sales of $20,000 and Total explicit costs oof $14,000 per month (e.g. rent, employee salaries, flowers, etc.) Is Lian's Flower Shop Profitable?

no

Suppose the quantitative restriction was set at 80 (thousand) units. What would be the market equilibrium price and quantity?

price of 50 quantity of 50 (same as competitive equilibrium)

Suppose the city of New York were to impose a new sugar tax on all sweetened drinks equal to $0.25 cents per bottle or can. Under the assumption of upwardly sloping supply and downward sloping demand, the likely effect of the tax is to

raise consumer prices and lower prices received by sellers

New York City charges a 5 cent deposit on glass, plastic and metal beverage containers (the Bottle Bill). This can be analyzed just like a tax (ignore for the moment the important fact that the deposit is redeemable). As written the law specifies that "the consumer pays a deposit tax when purchasing beverages..." We would expect that the introduction of this tax

raised the total price of purchasing beverages to consumers by less than 5 cents per beverage

A binding rent control is applied to the market depicted blow. The rent control has the effect of:

raising consumer surplus for some consumers, lowering it for others, and lowering producer surplus

A study finds that HP's new E580 Ultra laptop computer has a price elasticity of demand of 0.8. That means that if Lenovo were to increase the price of this laptop by 10% it can expect total revenue from sales of the laptop to

rise 8 percent (0.8 x 10%)

If RM can sell each model vehicle for $50, and its fixed costs are not sunk costs, should the firm shutdown or stay open? Q; Total Cost 0, 100 2, 175 3 205 4, 245 5, 310

shut down

Suppose the gap between the highest point on the demand curve and the lowest point on the supply curve on the vertical axis is $3.00 if the government wanted to raise the most tax revenue then they would set a tax rate equal to:

somewhere between $0 and $3.00

the demand for a good becomes relatively more elastic as

substitutes for the good becomes more available

Following the imposition of the. price floor at P = 300, there will be a ______ (shortage or surplus) of ____ units of corn

surplus 300 (500-200)

who pays the tax?

the buyer and the seller split the tax

The supply curve of a uniquely talented sign, dancer, our baseball player will be approximately ____ and therefore that individual will earn economic rents as demand for their talent rises quickly

vertical

deadweight loss is smallest in a diagram such as this when the specific tax is ____ (you may want to play with the interactive diagram above to change taxes)

$0