Econ 2000 Test 3 review

Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit. At Q=999, the firm's total costs equal

$1,000

The following table shows the production costs for the flying elvis copter rides. What is the value of E?

$100

Table 14-3 The table represents a demand curve faced by a firm in a competitive market. For this firm, the average revenue when 14 units are produced and sold is

$11

How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially optimal outcome?

$2

If a government imposed a corrective tax that successfully moved the market from the market equilibrium to the social optimum, the tax revenue for the government would amount to

$2,000

Ziva is an organic lettuce farmer, but she also spends part of her day as a professional organizing consultant. As a consultant, Ziva helps people organize their houses. Due to the popularity of her home-organization services, Farmer Ziva has more clients requesting her services than she has time to help if she maintains her farming business. Farmer Ziva charges $25 an hour for her home-organization services. One spring day, Ziva spends 10 hours in her fields planting $130 worth of seeds on her farm. She expects that the seeds she planted will yield $300 worth of lettuce. Refer to Scenario 13-3. An economist would calculate Ziva's total cost for the day of farming to equal

$380

The following table shows the production and costs for the Wooden Chair factory. Each worker at the Wooden Chair Factory costs $12 per hour. The cost of each machine is $20 per day regardless of the number of chairs produced. What is the total daily cost of producing at a rate of 55 chairs per house if the factory operates 8 hours per day?

$520

Suppose that a firm in a competitive market has the following cost curves: The firms short-run supply curve is its marginal cost curve above

$6

The following table shows the marginal costs for each of four firms(A,B, C, and D) to eliminate units of pollution from their production processes. For example, for Firm A to eliminate one unit of pollution, it would cost $54, and for Firm A to eliminate a second unit of pollution it would cost an additional $67

$81

Consider the town of Springfield with only three residents, Sophia, Amber, and Cedric. The three residents are trying to determine how large, in acres, they should build the public park. The table below shows each resident's willingness to pay for each acre of the park.Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the cost of building the park equally. To maximize his own surplus, how many acres would Cedric like Springfield to build?

0 acres

Taking into account private value and external benefits, the maximum total surplus that can be achieved in this market is

13,230

Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. Together Kate and William can arrange 35 bouquets per day. What is William's marginal product?

15 bouquets

Table 11-1Consider the town of Springfield with only three residents, Sophia, Amber, and Cedric. The three residents are trying to determine how large, in acres, they should build the public park. The table below shows each resident's willingness to pay for each acre of the park.Acres Sophia Amber Cedric1 $10 $24 $6 2 8 18 53 6 14 44 3 8 35 1 6 26 0 4 17 0 2 0Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the cost of building the park equally. If the residents vote to determine the size of park to build, basing their decision solely on their own willingness to pay (and trying to maximize their own surplus), what is the largest park size for which the majority of residents would vote "yes?"

2 acres

What is the socially optimal quantity of output in this market?

2 units

Consider the town of Springfield with only three residents, Sophia, Amber and Cedric. The three residents are trying to determine how large, in acres they should build the public park. The following table table shows each resident's willingness to pay for each acre of the park. Suppose the cost to build the park is $24 per acre should the park be to max. total surplus from the park in Springfield?

3 acres

In the following figure, graph (a) depicts the linear marginal cost (MC) of a firm in a competitive market, and graph(b) depicts the linear market supply curve for a market with a fixed number of identical firms. If there are 300 identical firms in this market, what level of output will be supplied to the market when price is $1.00?

30,000

Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L = 12, Q = 122) and (L = 13, Q = 132). Then the marginal product of the 13th worker is a. 8 units of output. b. 10 units of output. c. 122 units of output. d. 132 units of output.

8 units of output

The marginal product of the second worker is

80 units

The town of Isle is on a small island connected to Big City by a single bridge. Most of the residents of Isle work in Big City. As a result, the bridge becomes very congested for 2 hours each day at the typical morning and evening commute times. Which of the following policies considered by the mayor of Isle would likely be most effective in alleviating the congestion?

A variable toll for the bridge payable only by vehicles crossing the bridge during the congested times.

Which of the following is not a characteristic of a public good?

B/c it is a free good, there is no opp. cost

Which of the following industries is most likely to exhibit the characteristic of free entry?

Dairy farming

Which of the figures represents the total cost curve for a typical firm?

Figure 2

Which firms long-run marginal cost decreases as output increases

Firm 1

The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, the external cost of antibiotic overuse is represented by

P3a-P3b

The Pennsylvania turnpike is a tolled freeway running through the state of Pennsylvania. Motorists must pay tolls at various points along the turnpike based on the distance they traveled on the freeway. Suppose that despite the tolls, many motorists in the urban areas use the turnpike causing traffic to slow during peak times. What type of good would the turnpike be classified as in this case?

Private good

Graph (b) and Graph (c). The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, the socially optimal quantity of antibiotics is represented by point

Q2

What causes the Tragedy of the Commons?

Social and private incentives differ, and common resources are not excludable but are rival in consumption.

Which of the following pairs of goods includes a good that is excludable and rival in consumption as a good that is not excludable and not rival in consumption?

Tablet computer, national defense

Suppose the cookie producers create a positive externality equal to $2 per dozen. What is the relationship b/w the equilibrium quantity and the socially optimal quantity of cookies to be produced?

The equilibrium quantity is less than the socially optimal quantity.

Which of the following is an example of a positive externality?

The mayor of a small town plants flowers in the city park.

Which of the following is an example of an implicit cost?

The owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm.

The following table shows the production and costs for the Wooden Chair factory. The Wooden Chair factory experiences diminishing marginal product of labor with the addition of which worker?

The sixth worker

Walter used to work as a high school teacher for $40,000 per year but quit in order to start his own painting business. To invest in his painting business, he withdrew $20,000 from his savings, which paid 3 percent interest, and borrowed $30,000 from his uncle, whom he pays 3 percent interest per year. Last year Walter paid $25,000 for supplies and had revenue of $60,000. Walter asked Tyler the accountant and Greg the economist to calculate his painting business's costs.

Tyler says his costs are $25,900 and Grey says his costs are $66,500.

You purchase a $30, nonrefundable ticket to a play at a local theater. Ten minutes into the show you realize that it is not a very good show and place only a $10 value on seeing the remainder of the show. Alternatively you could leave the theater and go home and watch TV or read a book. You place an $8 value on watching TV and a $12 value on reading a book.

You should go home and read a book.

Refer to figure 13-2. Curve D intersects curve C

at the efficient scale

For a firm, marginal revenue minus marginal cost is equal to

change in profit

Each unit of plastics that is produced results in an external

cost of $8

When new firms enter a perfectly competitive market

existing firms may see their costs rise if more firms compete for limited resources

Imagine a 2,000-acre park with picnic benches, trees, and a pond. Suppose it is publicly owned, and people are invited to enjoy its beauty. When the weather is nice, it is difficult to find parking on summer afternoons. Otherwise, it is a great place. An efficient solution to the parking problem would be to

if too many people use it, one persons use diminishes other peoples use.The figure in graph

Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are available only in limited quantities. In this market, an increase in demand will

increase price in the short run but not in the long run

When Monique drives to work every morning, she drives on a congested highway. What Monique does not realize is that when she enters the highway each morning she increases the travel time of all other drivers on the highway. In this case, the external cost of Moniques highway trip

increases the social cost above the private cost

If the government wanted to tax or subsidize this good to achieve the socially optimal level of output, it would

introduce a subsidy of $4 per unit

Most economists prefer corrective taxes to regulation as a way to correct the problem of pollution b/c the market-based solution

is less costly to society

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

its average total cost is less than $10

Firms may experience diseconomies of scale when

large management structures are bureaucratic and inefficient

An example of an explicit cost of production would be the

lease payments for the land on which a firms factory stands

If marginal cost is rising,

marginal product must be falling

when marginal revenue equals marginal cost

may be minimizing its losses rather than maximizing its profit

b/c public goods are

not excludable, people have an incentive to be free riders.

If the figure in graph (a) reflects the long-run equilibrium of a profit-maximizing firm in a competitive market, the figure in graph (b) mist likely reflects

perfectly elastic long-run market supply.

For private goods allocated in markets,

prices guide the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources.

If there is an increase in market demand in a perfectly competitive market, then in the short run

profits will rise

Markets fail to allocate resources efficiently when

property rights are not well established.

People cannot be prevented from using a good if the good is

public good or a common resource

A free rider is a person who

receives the benefit of a good but avoids paying for it

The goal of requiring licenses for hunting and fishing is to

reduce the use of a common resource

Refer to Figure 10-2. At Q3

the marginal consumer values this product less than the social cost of producing it

Scenario 10-1 The demand curve for gasoline slopes downward and the supply curve for gasoline slopes upward. The production of the 1,000th gallon of gasoline entails the following:• a private cost of $3.10;• a social cost of $3.55;• a value to consumers of $3.70. From the given information, it's is apparent that

the production of gasoline involves a negative externality, so the market will produce a larger quantity of gasoline than is socially desirable.

Farmer McDonald sells wheat to a broker in Kansas City, Missouri. Because the market for wheat is generally considered to be competitive, Mr. McDonald maximizes his profit by choosing

the quantity at which market price is equal to Mr. Mcdonalds marginal cost of production.

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: If the market price is $13, the firm will earn

zero economic profits in the short run.