ECON 2000 Final - Marx

Billy's Bean Bag Emporium produced 300 bean bag chairs but sold only 275 of the units it produced. The average cost of production for each unit of output produced was $100. The price for each of the 275 units sold was $95. Total profit for Billy's Bean Bag Emporium would be

-$3,875

Suppose a firm in a competitive market earned $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold?

$10 and 100 units

Which of the following costs of publishing a book is a fixed cost?

Composition, typesetting, and jacket design for the book.

What happens to consumer surplus in the cell phone market if cell phones are normal goods and buyers of cell phones experience an increase in income?

Consumer surplus may increase, decrease, or remain unchanged.

Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market?

Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

For which pairs of goods is the cross-price elasticity most likely to be positive?

Pens and pencils

A tax on the buyers of cameras encourages

buyers to demand a smaller quantity at every price.

Suppose that in a particular market, the supply curve is highly elastic and the demand curve is highly inelastic. If a tax is imposed in this market, then the

buyers will bear a greater burden of the tax than the sellers.

If a government regulation sets the maximum price for a natural monopoly equal to its marginal cost, then the natural monopolist will

earn economic loses.

Private decisions about consumption of common resources and production of public goods usually lead to an

inefficient allocation of public resources and external effects.

The deadweight loss from a tax per unit of good will be smallest in a market with

inelastic supply and inelastic demand.

A movie theater can increase its profits through price discrimination by charging a higher price to adults and a lower price to children if it

can prevent children from buying the lower-priced tickets and selling them to adults.

Pollution is a

negative externality that can be viewed as a common-resource problem.

For a monopoly, the socially efficient level of output occurs where

price equals marginal cost.

An example of an explicit cost of production would be the

lease payments on the land on which a firm's factory stands.

For a good that is a luxury, demand

tends to be elastic.

You are in charge is the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that

the mayor thinks demand is inelastic, and the city manager thinks demand is elastic.

In which of the following market structures can firms earn economic profits in the long run?

Monopoly only.

If the government removes a binding price ceiling from a market, then the price paid by buyers will

increase, and the quantity sold in the market will increase.

Josiah installed a metal sculpture in his front yard. A positive externality arises if the sculpture

increases the value of other properties in the neighborhood.

If the price elasticity of demand for a good is 4.0, then a 10 percent increase in price results in a

40 percent decrease in the quantity demanded.

Equilibrium price must decrease when demand

decreases and supply does not change, when demand does not change and supply increases, and when demand decreases and increases simultaneously.

If a competitive firm is selling 900 units of its product at a price of $10 dollars per unit and earning a positive profit, then

its average total cost is less than $10 dollars.

A firm that shuts down temporarily has to pay

its fixed costs but not its variable costs.

Motor oil and gasoline are complements. If the price of motor oil increases, consumer surplus in the gasoline market

may increase, decrease, or remain unchanged.

If a price floor is not binding, then

the equilibrium price is above the price floor.

Producers have little incentive to produce a public good because

there is a free-rider problem.