ECON 1100 Final Exam

The tax generates tax revenue of _____ and a deadweight loss of _____.

$128 ; $16

When an $8 per unit tax is imposed on this market, producer surplus changes from _____ to _____.

$200 (1/2*40-20*20); $128 (1/2*40-24*16)

The price paid by customers after the tax is _____; after paying the tax, sellers keep ______.

$24 ; $16

In free market equilibrium total consumer and producer surplus is equal to _____.

$400 ($200 + $200)

The marginal benefit of the 60th unit is equal to _____ and the marginal cost of the 60th unit is equal to _____.

$5 ; $15

The equilibrium price of a pumpkin in this market is:

$6 because the quantity supplied of pumpkins is equal to the quantity demanded of pumpkins at a price of $6 per pumpkin

The opportunity cost of 1 car is:

1 boat for Country A and 2 boats for Country B

If a 10% increase in the price of a product results in a 5% decrease in the quantity demanded of the product, then the absolute value of the price elasticity of demand coefficient is _____ and demand is said to be ______.

1/2 ; inelastic

This firm will produce ______ units of output and earn total revenue equal to _____.

100 ; $1,100

If there is a price ceiling of $5, then the quantity exchanged (bought and sold) in this market will be equal to _____.

20

If the marginal product of the fourth worker is 6, then the total output when four workers are hired is _____ and the marginal product of the fifth worker is _____.

24 ; -2

Which of the following would lead to a decrease in the supply if desktop computers, ceteris paribus?

An increase in the wages paid to desktop computer factory workers

If this economy is capable of producing on PPF2, production is efficient at point(s):

E and F

Which of the following is not a characteristic of a perfectly competitive market?

High barriers to entry

Which of the following is a normative microeconomic statement?

Most U.S. corporations have profit margins that are too high.

A demand curve can be interpreted as:

a marginal benefit curve

Which of the following is not an example of government response to a market failure?

a private foundation donating computers to inner city schools

The long run is a period for which:

all inputs and all costs are variable

A positive externality occurs when:

an activity creates benefits that spill over to third parties

Ceteris paribus, for a normal good, an increase in consumer income leads to:

an increase in demand and an increase in both equilibrium price and quantity

Ceteris paribus, a decrease in supply of a product leads to:

an increase in the equilibrium price of the product and a decrease in the equilibrium quantity of the product

The demand for potato chips will increase in response to all of the following except:

an increase in the number of firms producing potato chips

In order to move from PPF1 to PPF2 this economy needs:

an increase in the resources and/or technology used to produce both consumer and capital goods

Scarcity exists...

because the wants and needs of society exceed the resources available to satisfy them

The economic burden (economic incidence) of a tax is borne by:

buyers if demand is highly inelastic and supply is elastic

If both countries produce the good for which each has a comparative advantage, Country A would produce______ and Country B would produce _____.

cars; boats

The downward-sloping portion of a LRAC curve implies:

constant returns to scale exist over that range of the curve

If a seller wants to increase revenue from the sale of a product with a price elasticity of demand coefficient of 1.6, then the seller should:

decrease price because demand is elastic

The firm is:

earning an economic profit of $200 in the short run

An outward shift of a production possibilities frontier illustrates that:

economic growth has occurred

The demand for generic shampoo is likely to be:

elastic if there are lots of good substitutes for generic shampoo available

If perfectly competitive firms are earning positive economic profits in the short run, the adjustment to long-run equilibrium includes firms _____ the market which causes market supply to _____ and market price to _____.

entering; increase; decrease

Market economies are characterized by all of the following except:

government control of capital

A firm selling in a perfectly competitive market faces a demand curve that is:

horizontal (perfectly elastic) at the market price because other firms in the market sell an output that is a perfect substitute for its output

According to the law of demand, a decrease in the price of orange juice will, ceteris paribus:

increase the quantity demanded of orange juice.

Any point inside a production possibilities frontier represents:

inefficiency

In a perfectly competitive market, an individual firm:

is a price-taker and sells output at the price determined by the market forces of supply and demand

The ceteris paribus assumption is used to:

isolate the relationship between two variables by holding other influences on the relationship constant.

Assuming no market failures, an efficient level of an output exists when:

marginal benefit is equal to marginal cost

The perfectly competitive model assumes the gaol of firms in the marketplace is to:

maximize profit

Products that generate negative externalities tend to be:

overproduced by private markets

The responsiveness of buyers to changes in the price of a product is measured by:

price elasticity of demand

Goods that are both non-rival and non-excludable are:

pure public goods

In the market for used cars, a shortage of used cars would, ceteris paribus:

put upward pressure on the price of used cars

A market price of $8 per pumpkin will lead to a:

surplus of 300 pumpkins (600 supplied - 300 demanded = 300)

If cotton clothing becomes more popular at the same time that the supply of cotton decreases, then basic supply and demand analysis predicts that:

the equilibrium price of cotton clothing will increase but the change in the equilibrium quantity of cotton clothing cannot be determined from the information given

In a competitive capitalist (market) economy:

the interaction of individual demanders and suppliers determines output prices

The Tragedy of the Commons refers to:

the tendency to use common resources more than is desirable from society's point of view

The typical firm in a perfectly competitive industry earns zero economic profit ( a normal profit) in the long run because:

there are no barriers preventing new firms from entering the industry and competing away positive economic profits in the long run

Costs that must be paid in the short run even when no output is produced are called:

total fixed costs

Demand that is perfectly elastic graphs as a(n):

vertical line