Econ 202 final
A bakery is one of many that operate in the bread industry. The market demand curve for bread is downward-sloping. The bakery incurs fixed costs and has an upward-sloping marginal cost curve. Which of the following statements is correct?
The bakery faces a flat demand curve.
Consider the case where a government introduces a specific tax on cigarettes, which reduces the consumption of cigarettes. Which of the following statements is correct?
The tax may increase social welfare.
Based on this information, which of the following statements is correct?
A bakery's marginal cost of producing the 21st loaf is approximately €2.
Which of the following is an example of a negative externality?
A commuter driving to work instead of taking public transportation
Based on the figure, which of the following statements regarding point A is correct?
A is the banana producers' profit-maximizing outcome.
Which of the following statements are correct?
A market is in equilibrium if the actions of buyers and sellers have no tendency to change the price or the quantities bought and sold.
Consider again the figure in Question 3. The government could implement four different policies to ensure the Pareto efficient outcome. When 38,000 bananas are produced, the difference between the marginal social cost (MSC) and the marginal private cost (MPC) is $105. In which of the following policies do the banana producers make the highest profit?
Coasean bargaining when the banana producers have the right to pollute.
Which of the following statements about merit goods is correct?
Emergency healthcare is a merit good.
The figure shows the demand and supply curves in the salt market. The government imposes a sales tax of 30% on the price of salt, to be paid by the suppliers. This decreases the quantity traded from Q* to QT, decreases the price received by producers from P* to PT1, and increases the price paid by consumers from P* to PT2. Which of the following statements is correct following the imposition of the tax?
The gains from trade are A + B + D + F.
Consider the perfectly competitive market for bread analyzed in Unit 8. Why is the competitive equilibrium Pareto efficient?
The gains from trade are maximized.
In which of the following markets is the equilibrium efficient?
The market for a homogenous good that has no external effect
Which of the following markets best approximates perfect competition?
The market for milk.
The figure shows the market supply curve for second-hand textbooks, together with original and new demand curves, where the curve has shifted due to the arrival of new students. Based on the figure, which of the following statements is correct?
The more elastic (or more flat) the supply curve, the smaller the price rise.
Wealth, earnings, and disposable income are just three of several ways of looking at inequality. Imagine a household that earns $80,000 per year from labor. In that year, it also receives an income of $3,000 from investments, pays $12,000 in tax, and receives $7,000 in benefits from the state. Which of the following is an accurate statement of its market income and its disposable income?
$83,000 $78,000.
Which of the following statements about the feasible frontier is correct?
All the outcomes between points R and F are Pareto efficient.
Based on this figure, which of the following statements is correct?
At A, the bakery would be making a loss.
Which of the following is the best example of a non-excludable public good?
Free WiFi
Which of the following goods is not allocated by markets in the U.S. because doing so is widely viewed as repugnant?
Human kidneys
Reconsider Figure 19.5 shown above. Which of the following statements is true?
If you are inequality-averse, then you will prefer a point between R and A.
Which of the following statements regarding monopoly and perfectly competitive markets are correct?
In a perfectly competitive market, there is lots of advertising.
Which of the following statements most accurately summarizes recent trends in global income inequality, as presented in Unit 19.1?
Inequality between countries is declining, while within-country inequality is rising, with the net effect being falling global inequality.
Which of the following statements are correct?
Market failures happen because market prices do not always take into account of the full effect of their actions on others.
Consider Figure 19.10. Which of the following statements cannot be inferred from the figure?
Men earn lower incomes in Denmark than in the US.
The figure shows the market demand curve for bread, together with original and new supply curves, where the curve has shifted due to new bakeries entering the market. All bakeries are identical, and there are no entry costs. Which of the following statements is correct?
New bakeries will continue to enter until the price equals their average cost.
An allocation is an equilibrium if
No individual has an incentive to change behavior
Based on this figure, which of the following statements is correct?
The Nash equilibrium price is $8.
Review Figure 19.2 below. Which of the following statements is true?
The UK had a relatively high level of wealth inequality until 1970.
Consider the figure in Question 1. Suppose instead the government decides to impose a specific (or fixed) tax of T per kg of salt, to be paid by the suppliers. Which of the following statements is correct?
The supply curve shifts up in a parallel manner.
An allocation is efficient if
The surplus is maximized
The government now decides to impose a sales tax of 30% on the price of salt, to be paid by the suppliers. Which of the following statements is correct?
The tax causes a decline in the quantity traded.
In Guadeloupe and Martinique, the use of pesticide chlordecone on banana plantations devastated fishing communities downstream. Which of the following statements is correct?
This was an example of a social dilemma.
There are five students who are looking to buy one second-hand textbook each. Their willingness-to-pay are £5, £6, £8, £12, and £15, respectively. Based on this information, which of the following statements is correct?
To sell three books, the maximum price that can be charged is £8
Wealth is usually more unequally distributed than earnings. This is mainly because:
Wealth is accumulated savings that can be passed on from parents to children.
Review Figure 19.13. Which of the following statements is true.
Wealth is distributed more unequally than most people think.
A social dilemma can be characterized as
a inefficient equilibrium
The (cooperate, cooperate) outcome in a Prisoner's Dilemma
is not an equilibrium