ECON 2304 Labadie Final

35. Refer to Figure 7-22. At the equilibrium price, producer surplus is

$2,500.

66. Refer to Figure 16-3. How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

$200

37. Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The amount of deadweight loss resulting from this tax is

$25

73. Refer to Table 17-6. Suppose the town enacts new antitrust laws that prohibit Kunal and Naj from operating as a monopolist. What will the new price of water be once the Nash equilibrium is reached?

$4

52. Refer to Table 11-3. What is the value of the 39th unit of police protection in Safetyville?

$54

24. Hilda's Hair Hysteria earned $3,750 in total revenue last month when it sold 125 haircuts. This month it earned $3,600 in total revenue when it sold 90 haircuts. The price elasticity of demand for Hilda's Hair Hysteria is

1.14

69. (Look for table) If this firm is in a typical perfectly competitive market, in the long run it will likely produce

10 units of output.

15. Refer to Table 3-26. Assume that Japan and Korea each has 2400 hours available. Originally, each country divided its time equally between the production of cars and airplanes. Now, each country spends all its time producing the good in which it has a comparative advantage. As a result, the total output of cars increased by

16

77. Refer to Scenario 18-8. As a result of these two events, holding all else constant, the equilibrium wages of university economics professors will

decrease.

60. In the short run, there are 500 identical firms in a competitive market. The firms do not use any resources that are available in limited quantities, and each of them has the following cost structure:

horizontal at a price of $5.

76. Consider the market for capital equipment. Suppose the value of the marginal product of capital equipment increases. Holding all else constant, the equilibrium rental price of capital equipment will

increase.

34. 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.

58. Bill operates a boat rental business in a competitive industry. He owns 10 boats and pays $1,000 per month on the loan that he took out to buy them. He rents each boat for $200 per month. The variable cost for each boat rental is $50. In the off season, Bill should

operate his business as long as he rents at least 1 boat per month.

21. Suppose that 300 bottles of soda are demanded at a particular price. If the price of a bottle of soda rises from that price by 6 percent, the number of bottles of soda demanded falls to 275. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

price elasticity of demand for bottles of soda in this price range is about 1.45

38. Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then, when the tax is imposed,

sumer surplus decreases by $11.

4. Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is

the enjoyment she would have received had she gone to the park.

43. When a country allows trade and becomes an exporter of a good,

the gains of the domestic producers of the good exceed the losses of the domestic consumers of the good.

22. Suppose the point (Q = 3,400, P = $20) is the midpoint on a certain downward-sloping, linear demand curve. Then

the maximum value of total revenue is $68,000

68. A monopolistically competitive firm is currently earning a positive economic profit. If other firms enter the market, we would expect that the added competition will cause this firm to adjust its output such that it

will operate further from its efficient scale.

12. Refer to Figure 3-14. Suppose Arturo is willing to trade 6 burritos to Dina for each 10 tacos that Dina produces and sends to Arturo. Which of the following combinations of tacos and burritos could Dina then consume, assuming Dina specializes in taco production and Arturo specializes in burrito production?

300 tacos and 60 burritos

9. Refer to Figure 2-9, Panel (a). To gain 2 donuts by moving from point L to point M (Down the curve), society must sacrifice

4 cups of coffee.

54. Which of the following is an example of the free-rider problem?

Bruce owns Buster, a large dog who barks whenever anyone walks near his house. Betty lives next to Bruce, and Buster's barking can be heard whenever anyone walks near her house, too. Thus, Betty receives free protection from burglars because of Buster's barking

67. Refer to Scenario 16-3. Which of the following statements best describes the long run adjustment in this market?

One or more new ice cream shops in Fairfield opens and competes with Peter for customers, reducing the demand for Peter's ice cream. Peter's profits decline until he earns zero profit.

70. ​A monopolistically competitive firm is currently charging a price of $10 and producing 12,000 units/month. It faces monthly fixed costs of $15,000 and has an average variable cost of $6/unit. In the long run, we would expect:

The price will fall and output will fall

5. When society requires that firms reduce pollution, there is

a tradeoff because of reduced incomes to the firms' owners and workers.

53. 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. If the residents decide to build a park with size equal to the number of acres that maximizes total surplus from the park, how much total surplus will Sophia receive?

$0

62. Refer to Figure 15-19. If the monopoly firm is not allowed to price discriminate, then the deadweight loss amounts to

$1,562.50.

56. 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

$10,985.

63. The concert promoters of a heavy-metal band, WeR2Loud, know that there are two types of concert-goers: die-hard fans and casual fans. For a particular WeR2Loud concert, there are 1,000 die-hard fans who will pay $150 for a ticket and 500 casual fans who will pay $50 for a ticket. There are 1,500 seats available at the concert venue. Suppose the cost of putting on the concert is $50,000, which includes the cost of the band, lighting, security, etc. How much additional profit can the concert promoters earn by charging each customer their willingness to pay relative to charging a flat price of $50 per ticket?

$100,000

71. Refer to Table 17-2. Suppose the town enacts new antitrust laws that prohibit Abby and Brad from operating as a monopoly. How much profit will Abby and Brad each earn once they reach a Nash equilibrium?

$16

2.If Faith attends college, it will take her four years, during which time she will earn no income. She will pay $50,000 for tuition, $12,000 for room and board, and $5,000 for books. If she spends the four years working rather than attending college, she will pay $18,000 for room and board, pay no intuition, and buy no books. Based on this information, Faith's economic cost of attending college would be $67,000 if, over the four years, she could earn

$18,000 instead of attending college.

36. Refer to Figure 8-2. The loss of producer surplus for those sellers of the good who continue to sell it after the tax is imposed is

$2

40. Refer to Figure 8-2. The amount of deadweight loss as a result of the tax is

$2.50.

45. Refer to Figure 9-2. As a result of trade, total surplus increases by

$250.

74. Refer to Table 17-10. Suppose the market for this product is served by two firms who have formed a cartel and are colluding to set the price and quantity in this market. If the marginal cost to produce this product is constant at $40 per unit and there is no fixed cost, then what will the combined profit of the cartel be?

$27,000

29. Refer to Table 6-3. Following the imposition of a price floor $2 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting market price is

$3

31. Refer to Figure 7-14. If the government imposes a price ceiling of $50 in this market, then producer surplus will decrease by

$300

51. Highway engineers want to improve a dangerous stretch of highway. They expect that it will reduce the risk of someone dying in an accident from 5.3 percent to 2.1 percent over the life of the highway. If a human life is worth $10 million, then the project is worth doing as long as it does not cost more than

$320,000

46. Refer to Figure 10-19. Note that the lines labeled "Demand" and "Social Value"are parallel. Also, the slopes of the lines on the graph reflect the following facts: (1) Private value and social value decrease by $1.00 with each additional unit of the good that is consumed, and (2) private cost increases by $1.40 with each additional unit of the good that is produced. Thus, when the 59th unit of the good is produced and consumed, social well-being increases by

$33.60

59. Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20. At Q=499, the firm's total costs equal

$5,983

49. Refer to Table 10-3. Taking into account private and external costs, the maximum total surplus that can be achieved in this market is

$55

42. Refer to Figure 9-22. Suppose the government imposes a tariff of $20 per unit. The deadweight loss caused by the tariff is

$6,000.

75. Refer to Table 17-5. Assume there are two profit-maximizing digital cable TV companies operating in this market. Further assume that they are not able to collude on the price and quantity of premium digital channel subscriptions to sell. What price will premium digital channel cable TV subscriptions be sold at when this market reaches a Nash equilibrium?

$60

32. Refer to Figure 7-11. If the supply curve is S', the demand curve is D, and the equilibrium price is $150, what is the producer surplus?

$625

65. Refer to Table 15-16. The monopolist has total fixed costs of $40 and a constant marginal cost of $5. At the profit-maximizing level of output, the monopolist's average total cost is

$7.50

72. Refer to Table 17-23. At the Nash equilibrium, how much profit will Firm A earn?

$9,000 because each firm will break the agreement and choose to advertise.

13. Refer to Figure 3-18. If Bintu and Juba switch from each person dividing her time equally between the production of cups and bowls to each person spending all of her time producing the good in which she has a comparative advantage, then total production will increase by

1 bowl and 1 cup.

78. Refer to Table 18-B. Assuming MadeFromScratch is a competitive, profit-maximizing firm, how many workers will the firm hire?

3 workers

64. Suppose a monopolist has a demand curve that can be expressed as P=90-Q. The monopolist's marginal revenue curve can be expressed as MR=90-2Q. The monopolist has constant marginal costs and average total costs of $10. The profit-maximizing monopolist will produce an output level of

40 units.

11. Refer to Figure 3-21. If Uzbekistan and Azerbaijan switch from each country dividing its time equally between the production of bolts and nails to each country spending all of its time producing the good in which it has a comparative advantage, then total production will increase by

5 bolts and 10 nails

14. Refer to Figure 3-19. If Chile and Colombia each spends all of its time producing the good in which it has a comparative advantage and the countries agree to trade 7 pounds of coffee for 5 pounds of soybeans, then Chile will consume

7 pounds of coffee and 7 pounds of soybeans and Colombia will consume 5 pounds of coffee and 5 pounds of soybeans.

55. Refer to Table 11-4. Suppose the cost to plant each tree is $340 and the 4 homeowners have agreed to split all tree-planting costs equally. Which homeowner(s) would be in favor of planting at least 1 tree?

Adams, Benitez, Chen, and Davis

50. Abe owns a dog; the dog's barking annoys Abe's neighbor, Jenny. Suppose that the benefit of owning the dog is worth $200 to Abe and that Jenny bears a cost of $400 from the barking. Assuming Abe has the legal right to keep the dog, a possible private solution to this problem is that

Jenny pays Abe $300 to give the dog to his parents who live on an isolated farm.

8. Yi and Avik are both economists. Yi thinks that taxing consumption, rather than income, would result in higher household saving because income that is saved would not be taxed. Avik does not think that household saving would respond much to a change in the tax laws. In this example, Yi and Avik

More than one of the above is correct.

16. New oak tables are normal goods. What would happen to the equilibrium price and quantity in the market for oak tables if the price of maple tables rises, the price of oak wood rises, more buyers enter the market for oak tables, and the price of the glue used in the production of the new oak tables increased?

Price will rise, and the effect on quantity is ambiguous

18. Music compact discs are normal goods. What will happen to the equilibrium price and quantity of music compact discs if musicians accept lower royalties, compact disc players become cheaper, more firms start producing music compact discs, and music lovers experience an increase in income?

Quantity will rise, and the effect on price is ambiguous.

47. Ty lives in an apartment building and gets a benefit from playing his stereo. Olivia, who lives next door to Ty and often loses sleep due to the loud music coming from Ty's stereo, bears a cost from the noise. Olivia is threatening to call the police to force Ty to turn down his stereo. Under which of the following conditions would Ty be able to offer Olivia some amount of money to keep her from calling the police and to allow him to continue to play his stereo loudly?

The benefit of the music to Ty must exceed the cost of the noise to Olivia

48. A dentist shares an office building with a radio station. The electrical current from the dentist's drill causes static in the radio broadcast, causing the radio station to lose $10,000 in profits. The radio station could put up a shield at a cost of $30,000; the dentist could buy a new drill that causes less interference for $6,000. Either would restore the radio station's lost profits. What is the economically efficient outcome?

The dentist gets a new drill; it does not matter who pays for it.

6. Which of the following is an example of a normative, as opposed to positive, statement?

Universal health care would be good for U.S. citizens.

10. Refer to Figure 2-6. If this economy devotes one-half of its available resources to the production of blankets and the other half to the production of pillows, it could produce (Picture of PPF)

We would have to know the details of this economy's technology in order to determine this.

80. Refer to Table 18-10. This table describes the number of baseballs a manufacturer can produce per day with different quantities of labor. Each baseball sells for $5 in a competitive market. For which level of employment is the marginal product of labor greatest?

b. 2 workers

3. Rick buys a 1966 Mustang for $3,000, planning to restore and sell the car. He goes on to spend $9,000 restoring the car. At this point he can sell the car for $10,000. As an alternative, he can spend an additional $3,000 replacing the engine. With a new engine the car would sell for $13,000. Rick should

be indifferent between (i) selling the car now and (ii) replacing the engine and then selling it.

57. Robin owns a horse stables and riding academy and gives riding lessons for children at "pony camp." Her business operates in a competitive industry. Robin gives riding lessons to 20 children per month. Her monthly total revenue is $4,000. The marginal cost of pony camp is $200 per child. In order to maximize profits, Robin should

continue to give riding lessons to 20 children per month.

19. Consider the market for new DVDs. If DVD players became cheaper, buyers expected DVD prices to fall next year, used DVDs became more expensive, and DVD production technology improved, then the equilibrium price of a new DVD would

could rise, fall, or remain unchanged

1. For a number of years country A had inflation of 3% but for the last five years has had inflation of 6%. Country B had inflation of 4% for many years, but very recently inflation unexpectedly rose to 9%. Other things the same, in which of the countries would the higher inflation rate be more likely to reduce unemployment?

country B but not country A

33. Hot dogs and hot dog buns are complements. An increase in the price of flour used to make hot dogs buns will

decrease consumer surplus in the market for hot dog buns and decrease producer surplus in the market for hot dogs.

17. 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 supply increases simultaneously

41. Refer to Figure 9-17. Relative to the free-trade outcome, the imposition of the tariff

decreases imports of the good by 24 units and increases domestic production of the good by 8 units.

30. Suppose there is currently a tax of $50 per ticket on airline tickets. Buyers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the

demand curve will shift upward by $20, and the effective price received by sellers will increase by less than $20.

26. Refer to Figure 6-8. When a certain price control is imposed on this market, the resulting quantity of the good that is actually bought and sold is such that buyers are willing and able to pay a maximum of P1 dollars per unit for that quantity and sellers are willing and able to accept a minimum of P2 dollars per unit for that quantity. If P1 - P2 = $3, then the price control is

either a price ceiling of $2.00 or a price floor of $5.00

7. Refer to Figure 2-2. Carla regularly buys fruits and vegetables at a grocery store. Roberto regularly pays a lawn-care company to mow his lawn. If the flow of fruits and vegetables from the grocery store to Carla is represented by an arrow from Box C to Box B of this circular-flow diagram, then the money paid by Roberto to the lawn-care company is represented by an arrow

from Box B to Box C

23. The flatter the demand curve through a given point, the

greater the price elasticity of demand at that point

44. The United States has imposed taxes on some imported goods that have been sold here by foreign countries at below their cost of production. These taxes

harm the United States as a whole, because they reduce consumer surplus by an amount that exceeds the gain in producer surplus and government revenue.

20. Equilibrium quantity must increase when demand

increases and supply does not change, when demand does not change and supply increases, and when both demand and supply increase.

39. If the tax on a good is increased from $0.30 per unit to $0.90 per unit, the deadweight loss from the tax

increases by a factor of 9.

27. Suppose that the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. A tax of $1 per frame levied on picture frames will decrease the effective price received by sellers of picture frames by

less than $0.50

28. Refer to Figure 6-29. Suppose D1 represents the demand curve for gasoline in both the short run and long run, S1 represents the supply curve for gasoline in the short run, and S2 represents the supply curve for gasoline in the long run. After the imposition of the $2

sellers bear a higher burden of the tax in the short run than in the long run

79. When the wages paid to government economists increase, the labor supply curve for academic economists

shifts to the left.

61. Refer to Figure 15-8. What area represents the total surplus lost due to monopoly pricing?

the triangle 1/2[(A-C)*(Y-X)]

25. Jerome says that he will spend exactly $25 each month on new apps for his mobile device, regardless of the price of apps. Jerome's demand for apps is

unit elastic