ECON FINAL

Oranges costs $ 2 per pound and starfruit cost $ 5 per pound . The table shows Ned's total utility from eating various amounts of oranges and starfruits . How many pounds of oranges and starfruit should Ned eat , if Ned has $ 26 ?

3 pounds of oranges and 4 pounds of starfruit

( Table 51-6 : Utility from Candy Bars and Sodas ) Stan is choosing between two goods , candy bars and sodas , and his marginal utility from each is as shown in the table . If he consumes two candy bars and two sodas , his total utility will be equal to :

33 utils

( Table 54-1 : Labor and Output ) Referring to the table , the marginal product of the fifth worker is :

4

You own a small manufacturing company that produces gadgets . The table shows the quantity of gadgets that you could produce , the total cost you . incur at each level of production , and the total revenue you earn at each level of production . At what level of output does marginal revenue equal marginal cost ?

4

( Table 55-2 : Output and Costs ) Using the information in the table , when quantity equals four , total variable cost equals :

48 .

Figure 3-4 : Production Possibility Curve for Tealand ) In the figure , Tealand is currently producing at point C on its production possibility curve . What is the opportunity cost in Tealand of increasing the production of tea from 20 million cups to 30 million cups ?

5 million scones

Table 3-1 : Production Possibilities Schedule I ) The opportunity cost of producing the fourth unit of consumer goods is ________units of capital goods .

8

Use the " Supply and Demand in the Orange Juice Market " Figure 7-3 . Assume that a hurricane damages the Florida orange crop . In response , what would be the most likely equilibrium point in the orange juice market illustrated ?

A

The following are four statements about monopoly and perfect competition . Which of these is correct ?

A monopolist has market power while a perfect competitor does not .

( Figure 6-1 : Supply of Coconuts ) If there is an improvement in the technology used to harvest coconuts ( e.g. , a faster , less expensive coconut picker ) , then the movement in the model could be :

A to C

The figure shows cost curves for a firm operating in a perfectly competitive market . If the market price is P4

There will be economic profits and firms will enter the industry in the long run

An increase in price and an ambiguous change in quantity is most likely caused by :

a shift to the left in supply and a shift to the right in demand .

Which of the following will result in an increased price of milk ?

a shift to the right of the demand curve for milk

In perfectly competitive long - run equilibrium

all firms produce at the minimum point of their average total cost curves .

In the long run

all inputs are variable

The law of demand states that , other things equal :

as the price increases , the quantity demanded will decrease .

An economy is said to have a comparative advantage in the production of a good if it can produce that good :

at a lower opportunity cost than another economy .

Suppose that each of two prisoners , Mel and Max , has the independent choice of confessing to a crime or not confessing . If neither confesses , they spend 2 years in jail ; if both confess , they spend 3 years in jail . If one confesses while the other does not , the confessor gets off with 1 year in jail while the other gets 6 years in jail . According to game theory , the likely strategy by the prisoners is that :

both will confess

In which of the following industries would you expect to see more non - price competitition such as product differentiation ?

breakfast cereals

Suppose a monopoly is producing the level of output where marginal revenue equals marginal cost . If the monopolist reduces output , it :

can charge a higher price .

Price discrimination is the practice of :

charging different prices to buyers of the same good .

Within the context of the production possibility curve framework , if the opportunity cost of producing either of the two goods in question is increasing , this means the production possibility curve is :

concave , or bowed outward , from the origin

Suppose Prof. Dumbler's magic hat monopoly is broken up and the magic hat industry becomes perfectly competitive . We would expect the _______to increase from the breakup and ________to decrease from the breakup .

consumer surplus and total surplus ; producer surplus

If price is greater than average variable cost and less than average total cost at the profit - maximizing quantity of output in the short run , a perfectly competitive firm will :

continue to produce at an economic loss .

If a monopolist knows , at the firm's current level of output , that its price elasticity of demand is greater than one , then a ( n ) :

decrease in price will increase total revenue .

If goods A and B are substitutes , a decrease in the price of good B will :

decrease the demand for good A.

Consider the supply curve for cotton shirts . An increase in the price of cotton will :

decrease the supply of cotton shirts

The demand curve facing a monopolist is :

downward - sloping , unlike the horizontal demand curve facing a perfectly competitive firm .

After the first unit sold , the marginal revenue a good is less than the price at which that unit is sold monopolist receives from selling one more unit of a because of :

downward sloping demand curve .

For a perfectly competitive firm , the short - run supply curve is the :

rising part of the MC curve beginning at shut - down point .

( Figure 50-8 : The Gas Market The figure represents the market for gasoline . An excise tax has been levied on each gallon of gasoline supplied by producers . What is the tax rate ?

$ 1.50 per gallon

( Table 8-5 : Market for Butter ) If the government imposes a price floor of $ 0.90 per pound of butter the quantity of butter actually purchased will be :

$ 10.0 million pounds

Competitive Market for Good Z ) A surplus of the good will occur at a price of

$ 15

Suppose that a monopolist increases production from 10 units to 11 units . If the market price declines from $ 30 per unit to $ 29 per unit , marginal revenue for the eleventh unit is :

$ 19 .

Table 49-6 : Producer Surplus ) If the price of a ticket to see The Nutty Nutcracker is $ 50 , then Dudley's producer surplus is :

$ 25 .

Table 61-1 : Demand and Total Cost ) Lenoia runs a natural monopoly producing electricity for a small mountain village . The table shows Lenoia's demand and total cost of producing electricity . The marginal revenue of the fourth unit of production is :

$ 250 .

( Figure 61-1 : Profit - Maximizing Output and Price ) Assume there are no fixed costs and AC = MC . In the figure , at the profit - maximizing quantity of production for the monopolist , total revenue is _____ , total cost is ______and profit is______

$ 4,800 ; $ 1,600 ; $ 3,200

Zoe's Bakery operates in a perfectly competitive industry . Suppose that when the market price is $ 5 , the profit - maximizing output level of pastries is 150 units , with average total cost of $ 4 , and average variable cost of $ 3 . From this we know Zoe's marginal cost is ________and her short - run profits are _______

$ 5 ; $ 150

Table 65-1 : Two Rival Gas Stations ) There are only two gas stations in a small town , Swifty Gas and Speedy Gas . Each firm can set either a high price or a low price , and customers view these two firms as nearly perfect substitutes . The table shows the payoff matrix of daily profits that each firm would receive from their pricing decision , given the pricing decision of their rival . Profits in each cell of the payoff matrix are given as ( Swifty , Speedy If each firm sets the price independently , the Nash equilibrium outcome will be :

$ 50 , $ 50

Figure 50-6 : Market for Yachts ) If the the government imposes a 30,000 dollar tax on the yachts ( collected from the producers ) , the price of yachts will rise to _______and government collect tax revenue equal to______

$140,000; $90 million

The table shows some cost data for a firm currently operating in the short run. What is the value of the total fixed cost for this firm?

$50

The profit associated with this unregulated monopoly can be measured as the area :

( P₂ - P4 ) ( Q2 )

The firm's total cost of producing its most profitable level of output is

0FKD

Table 4-1 : Coffee and Salmon Production Possibilities ) The table shows the maximum amounts of coffee and salmon that Brazil and Alaska can produce if they just produce one good . The opportunity cost of producing 1 unit of coffee for Brazil is :

1/2 salmon

Prof. Dumbler has a monopoly on magic hats . He sells at most one hat to each customer , and the table shows each customer's willingness to pay . The marginal cost of producing a hat is $ 18 . How many hats should Prof. Dumbler produce , and what price should he charge to maximize his profits ?

3 ; $ 24

When the price of lamps increases , the :

quantity supplied increases

( Figure 49-2 : Consumer Surplus II ) At a price of P1 , consumer surplus equals the area :

AFP₁ (a fortune prize)

Which of the following cost concepts is correctly defined ?

ATC = AVC + AFC

Figure 5-1 : Demand for Coconuts ) If coconuts are considered a normal good and the overall income level of consumers is falling , then the movement that would take place in the model could be :

C to A.

Which of the following scenarios best describes an oligopolistic industry

Coca - Cola and Pepsi sell most of the soft drinks consumed around the world .

Suppose the demand for Good X is perfectly inelastic and a tax is levied on the producers of each unit . Which of the following is a result of this tax ?

Consumers pay the entire tax and there is no deadweight loss because the equilibrium quantity of Good X remains constant .

If the market price is $4.50 the profit maximizing quantity of output is _____ units

Eight

Between points a and b the marginal product of labor is

Falling

If they spend all night writing computer programs , Laurence can write 10 programs while Carrie Anne can write 5. If they spend all night making sunglasses , Laurence can make 6 while Carrie Anne can make 4. We know that :

Laurence's opportunity cost of writing programs is less than that of Carrie Anne .

Which of the following is true ?

MR=MC is a profit - maximizing rule for any firm .

An increase in the fixed costs of a monopoly firm would ______price and ______quantity in the short run .

Not change ; Not change

In the short run , a monopoly will stop producing if :

P < AVC .

Provided that there are no external benefits or costs , resources are efficiently allocated when :

P = MC

A perfectly competitive firm is definitely earning an economic profit when :

P > ATC

( Figure 61-2 : Computing Monopoly Profit ) The profit - maximizing price is ______and will generate total economic profit of _____

P3 ; the rectangle P₂P 3EF

The graph shows a monopoly firm that sells gadgets . If the firm is regulated such that there is no dead weight loss , the firm will sell ___ units at a price of _______ per unit .

Q3 , P2

The graph shows a monopoly firm that sells gadgets . If the firm is regulated such that the firm earns zero economic profit , the firm will sell ______ units at a price of ______per unit .

Q4 ; P3

Figure 59-6 : Short - Run Costs ) At the given price , the most profitable level of output occurs at quantity :

S.

Table 65-1 : Two Rival Gas Stations ) There are only two gas stations in a small town , Swifty Gas and Speedy Gas . Each firm can set either a high price or a low price , and customers view these two firms as nearly perfect substitutes . The table shows the payoff matrix of daily profits that each firm would receive from their pricing decision , given the pricing decision of their rival . Profits in each cell of the payoff matrix are given as ( Swifty , Speedy ) . Which of the following choices describes a dominant strategy in this game ?

Swifty will always set a low price , no matter Speedy's choice .

The economy of Elijaburg produces two goods : paper and pens . Suppose that technological progress has increased Elijaburg's ability to produce paper , but has not affected the ability to produce pens . How will this impact the production possibility curve ?

The curve has shifted outward along the paper axis , decreasing the opportunity cost of producing paper .

The demand for textbooks is price inelastic . Which of the following would explain this ?

The good is a necessity for college students .

What would happen in the market for canned pinto beans if individuals ' incomes increase ?

The income elasticity of demand would be positive if beans are a normal good .

Suppose that Indiana produces only steel and corn with fixed amounts of land , labor , and capital resources . Which of the following best reflects the potential for economic growth of the Indiana economy ?

The percentage of Indiana residents with a college degree rises from 25 % to 30 % .

A monopoly is likely to ______units of output and ______price than a perfectly competitive firm .

produce fewer ; charge a higher

Figure 56-1 : Long - Run Average Cost ) Output per period in the region 0 to A indicates that a firm is experiencing :

economies of scale

A firm will adjust prices so that customers with more ______demand pay _______ prices than those customers with ______elastic demand .

elastic ; lower ; less

The cross - price elasticity of electricity with respect to the price of natural gas has been estimated as being equal to 0.2 . This implies that :

electricity and natural gas are substitutes .

In the long run , economic profits in a perfectly competitive industry induce _________and losses induce _______

entry ; exit

Resources are being used efficiently when :

every opportunity to make people better off has been utilized .

A natural monopoly exists whenever a single firm :

experiences economies of scale over the entire range of production that is relevant to itsmarket .

initially in long - run Suppose that the market for candy canes operates under conditions of perfect competition , that it equilibrium , and that the price of each candy cane is $ 0.10 . Now suppose that the price of sugar rises , increasing the marginal and average total cost of producing candy canes by $ 0.05 ; there are no other changes in production costs . Based on the information given , we can conclude that in the long run we will observe :

firms leaving the industry

The table describes Bart's perfectly competitive skateboard - producing firm . If the market price is $ 67.50 , how many skateboards will the firm produce ?

four

All of the following are examples of price discrimination except :

generally lower prices at Wal - Mart than at Target

Because of monopoly , consumers typically have :

higher prices

Figure 58-1 : Profits Marginal Revenue , Costs) In the figure , if market price increases to $ 20 , marginal revenue _______profit maximizing output______

increases ; increases

Points A , B , E , and F

indicate combinations of guns and butter that society can produce using all of its factors efficiently

Microeconomics deals with

individual decision-makers in the economy

If a monopolist can engage in perfect price discrimination , then :

it produces at the socially efficient level .

An individual gets , five units of utility from one slice of pizza and nine units of utility from two slices of pizza . The principle of diminishing marginal utility implies that the total utility from three slices of pizza will be :

less than 13 units of utility .

An assumption of the model of perfect competition is :

many buyers and sellers

Rapidly increasing health costs have been a major political concern for several decades . Suppose that to control rising health costs the government sets the maximum price for a normal doctor's visit at $ 20 , but the current market price is $ 40 . Then :

more people will try to visit the doctor , but the doctor will see fewer patients .

Two rival firms vigorously compete by spending millions of dollars on product improvements and advertising to promote those improvements . This is an example of firms engaging in :

non - price competition

If price is greater than average variable cost and less than average total cost at the profit - maximizing quantity of output in the short run , a perfectly competitive firm will :

produce at an economic loss .

Prof. Dumbler has a monopoly on magic hats . He sells at most one hat to each customer , and the table shows each customer's willingness to pay . The marginal cost of producing a hat is $ 18 . Suppose Dumbler can perfectly price discriminate . How many hats will he produce ?

six

Oligopoly is a market structure that is characterized by a _____ number of ______ firms that produce _____products .

small ; interdependent ; identical or differentiated

Scarcity in economics means

society is unable to produce all the goods and services we want with existing resources .

If the price elasticity of supply is greater than 1 , then

supply is price - elastic .

If the marginal revenue received from a good is equal to the marginal cost of production , then :

the firm cannot increase profit by changing output .

If regulation of a monopoly results in a price equal to marginal cost , but price is below average total cost :

the firm will require subsidization or it will go out of business

A good is likely to have an inelastic demand curve if :

the good has few available substitutes .

The break - even price for a perfectly competitive firm is equal to :

the minimum value of average total cost

The price of gizmos has risen by 2.5 % . If the price elasticity of demand is equal to 4 , we would expect to see

the quantity of gizmos demanded to fall by 10 % .

Although water is very abundant in most places , it is still a scarce resource because :

there is not enough of it to meet all needs at zero cost .

The opportunity cost of something is :

what is given up to acquire it .

You manage a popular malt shop and lately revenues have been disappointing . Your friend suggests that raising soda prices will increase revenues , but your waitress suggests that decreasing soda prices will increase revenues . You aren't sure who is right , but you do know that :

your friend thinks the demand for sodas is Vinelastic , while your waitress thinks the demand for sodas is elastic