Econ Final

Which of the following would shift the supply curve of iPhones to the right?

a decrease in wages paid to workers making the iPhones.

A competitive firm will exit the industry if profits are not greater than zero in the short run.

false

The supply curve of the competitive firm is its average total cost curve above marginal cost.

false

When the government imposes a binding price ceiling, it causes a surplus of the good.

false

A market is a

group of buyers and sellers of a particular good or service.

Suppose a local city council hires a team of economists from a nearby university to conduct a cost-benefit analysis of building a new public school. The economists should consider which of the following: i) the benefits to the children who will use the school ii) the costs to the tax payers who will pay for the school iii) the increased productivities of the teachers iv) the benefits to the community of having better-educated children

i), ii), iii), and iv)

In some African countries, elephants are killed for the ivory in their tusks. In Kenya it is illegal to kill elephants and sell their ivory. In Namibia, a landowner is allowed to kill elephants, but only those on his own land. In which country is the population of elephants on the rise, and why?

in Namibia, where elephants are private property and the landowners have an incentive to protect the elephants.

Last year Ashley bought 6 pairs of shoes when her income was $40,000. This year her income is $50,000, and she purchased 10 pairs of shoes. Ashley's

income elasticity of shoes is positive.

The athletic director of State U suggests that the university should reduce ticket prices to its football games in order to increase both attendance and revenue from ticket sales. Economic theory predicts that, for a price elastic demand, this price reduction would

increase attendance and increase revenue.

If the price of yachts were to decrease by 10%, we would expect the number of yachts purchased to

increase by more than 10%.

Two firms are considering increasing production. Refer to the table. At the Nash equilibrium, how much profit will Firm A earn?

$16,000

Refer to the table. What is the marginal cost of producing the 4 th unit of output?

$18

Refer to the table. The marginal cost of producing the fifth unit of output is

$18.

Only two firms, Loft and Eagle produce golf balls. The table shows the demand curve for packages of golf balls. Each firm has the same constant marginal cost of $2. If this market were perfectly competitive instead of oligopolistic, what would the price be?

$2

golf balls profit

$225

demand curve for amonopolist. Suppose the firm's marginal cost is constant at $5, and there are no fixed costs. By producing the profit- maximizing output, this monopolist will earn total profits of

$28.

Alexander owns a small factory that makes fishing lures. He can make 10,000 lures per year and sell them for $10 each. Alexander pays $25,000 for raw materials to produce the 10,000 lures. He invested a total of $20,000 in equipment: $12,000 of his own savings and $8,000 borrowed at 10 percent interest. He could have earned 10 percent interest on his own money. Alexander could work at a competing factory for $40,000. Alexander's economic profit is _________, while his accounting profit is _________.

$33,000; $74,200.

Refer to the table. The total cost of producing five units of output is:

$50

Only two firms, Loft and Eagle produce golf balls. The table below shows the demand curve for packages of golf balls. Each firm has the same constant marginal cost of $2.Refer to the table. If Loft and Eagle operate to jointly maximize profits, then what is the price?

$6

The market for gluten-free breakfast cereal is shown in the graph. The after-tax price paid by buyers and price received by sellers are, respectively,

$6.00 $4.00

Refer to the table. The average total cost of producing five units of output is

$9.

Refer to the figures above. What is the opportunity cost of a pound of cheese in Denmark?

1/2 loaves of bread

Refer to the table. The marginal product from hiring the third worker is

12 units of output.

If the price elasticity of demand for beef is 1.6,then a 10% increase in the price of beef would be expected to result in a

16% decrease in quantity demanded.

Suppose the price of a Snickers bar is reduced , price elasticity is

2/3

Refer to the table above. The opportunity cost of a pound of coffee in Argentina is

3 bu. of wheat.

Refer to the figures above. If these two countries were to trade, a possible exchange rate would be 1 loaf of bread for

3/2 kilograms of cheese.

Refer to the table which illustrates the demand curve for a monopolist. Suppose the firm's marginal cost is constant at $5, and there are no fixed costs. This monopolist will produce

4 units of output and charge a price of $12.

Refer to the table. Assume that the firm can sell any output at the market price of $21. To maximize profit or minimize loss, the firm will produce

5 units.

Refer to the table above. If these two countries were to trade, a possible exchange rate would be 1 lb. of coffee to

5/2 bu. of wheat.

Refer to the figures. For the individual firm in a competitive market, the optimal quantity of output is _____, which would earn _________.

6 units, losses of an unspecified amount.

Which of the following is not an example of the free rider problem?

A park ranger takes a nap in his car because his boss is working hundreds of miles away and will never know about the nap.

Refer to the figure. The deadweight loss for a profit-maximizing monopolist is the area ________, and the profit per unit is the distance______.

ABC; AG.

Refer to the figure. The monopolistically competitive firm will make a profit of:

AG*Q2

In 2015, the minimum wage according to federal law was $7.25 per hour. Increasing minimum wage to $8 per hour (approximately a 10% increase) will probably lead to:

All of the above

Defenders of advertising argue that advertising

All of the above are correct.

Perfect price discrimination

All of the above are correct.

Refer to the table above. Suppose these two countries trade with each other but no other countries. With no trade restrictions in effect, what kind of trade if any would occur?

Argentina would import coffee and export wheat.

Wrigley Field (baseball park), home of the Chicago Cubs, is an example of public good.

B

Suppose that cold temperatures cause a decrease in the supply of tea. What should happen in the market for coffee, assuming tea and coffee are substitutes?

Both the equilibrium price and quantity will increase.

Refer to the table above. Which country has the absolute advantage in wheat and which has the comparative advantage in wheat?

Brazil has the absolute advantage, Argentina has the comparative advantage.

Which of the following illustrates the Tragedy of the Commons problem?

Commercial fishing companies over-fish Chilean sea bass.

Refer to the figures above. Suppose these two countries trade only with each other. With no trade restrictions in effect, what kind of trade,if any, would occur?

Denmark would sell cheese to and buy bread from Finland.

Refer to the figures above. Which country has the absolute advantage in producing cheese and which has the comparative advantage producing cheese?

Denmark, Denmark

Implicit costs are irrelevant for decisions in the short run

False

Firm A produces a razor that is very comfortable to use and lasts a long time. Firm B produces a razor that is less comfortable to use and wears out faster. Both firms are profit maximizers. Given these facts, we would expect

Firm A to spend more on advertising than Firm B.

Which of the following is not an example of price discrimination?

Lamb's wool sweaters are less expensive than cashmere sweaters.

For a perfectly competitive firm, the relationship between price (P), marginal revenue (MR), and average revenue (AR) is as follows:

P = AR = MR

Refer to the figure. The monopolistically competitive firm will charge a price of

P3 and produce quantity Q2

Refer to the figure. This monopolist will charge a price of:

P3 and produce quantity Q2

Refer to the figure. The socially optimal level of output is

Q2

Assuming the graph is drawn to scale, which of the following is true regarding the burden of the tax in market above?

Sellers pay a larger share of the tax because supply is more inelastic than demand.

The students living in "The Party House" are prone to host loud parties on Saturday night. They value these celebrations at $100. Their studious neighbors value peace and quiet at $90. The noise ordinance in this college town requires the police to stop loud parties if the neighbors complain. Assume zero transaction costs. An efficient solution for this problem would be for

The Party House to pay the neighbors $91 to not call the police.

The price elasticity of demand for gasoline has been estimated to be 0.2 for a 3-month time period. During that time period, how will an increase in the supply of gasoline affect the total revenues of sellers of gasoline?

Total revenues will fall.

Which of the following is an example of the law of demand?

When tuition at State U rises, fewer students enroll in courses at State U.

In 1971 a pocket calculator cost more than $75. In 2015 a calculator of the same quality cost less than $10. Which of the following explanations is most consistent with these facts?

a change in technology

Which of the following would improve economic efficiency in the market?

a tax equal to P1- P3, -marginal external cost

"Behavior in many complex and seemingly intractable strategic settings can be understood more clearly by working out what each party in the game will choose to do if they realize that the other parties will be solving the same problem. This insight has helped us understand behavior as diverse as military conflicts, price setting by competing firms and penalty kicking in soccer."

agree

"Some Americans who work in the production of competing goods, such as clothing and furniture, are made worse off by trade with China

agree

Declining to be vaccinated against contagious diseases such as measles imposes costs on other people, which is a negative externality.

agree

If regulators had not approved mergers in the past decade between major networked airlines, travelers would be better off today."

agree

Trade with China makes most Americans better off because, among other advantages, they can buy goods that are made or assembled more cheaply in China.

agree

Under-Gear is one of the many producers of women's athletic gear that is currently earning zero economic profit. Which of the following changes will occur in the short run (for Under-Gear) if women started exercising more (and buying more athletic gear)?

an increase in demand and profits.

The entry of a new firm into a monopolistically competitive market generates

both a positive externality on consumers and a negative externality on existing firms.

gluten free cereal

buyers and sellers to each bear a $1 burden of the tax.

The textile industry is composed of a large number of small firms. In recent years, many textile firms have suffered economic losses. Economic theory suggests that these conditions will

cause the market supply to decline and the price of textiles to rise.

The oligopolists are best off when they:

cooperate and act like a monopolist.

The long-run equilibrium of a monopolistically competitive market generates

deadweight loss and zero economic profits.

0 to 3units of labor

decreasing marginal product; be upward sloping.

A competitive firm will charge a price:

determined on the market, by the market demand and market supply

In the case of public goods, free markets

fail to allocate resources efficiently because property rights are not well established.

A demand curve with a price elasticity of zero is a horizontal line.

false

A duopoly is an oligopoly with only two buyers.

false

A movement along the downward-sloping demand curve for frozen margaritas can be caused by a change in weather

false

Changes in the price of chocolate cake cause the demand curve for chocolate cake to shift, whereas changes in income cause a movement along the demand curve for chocolate cake.

false

Countries specialize in the production of the good they can produce at the highest opportunity cost.

false

Economists consider monopolies to be inefficient because they can earn profits in the long run.

false

For a firm in a monopolistically competitive market, the relationship between price (P), marginal revenue (MR), and average revenue (AR) is: P = AR = MR.

false

Government solutions to negative externalities are always more efficient than private solutions.

false

If a country has an absolute advantage in producing a good, than it must also have a comparative advantage in producing that good.

false

If farmers become more productive in growing wheat, total revenue of wheat farmers will rise.

false

In equilibrium, the relationship between price (P), marginal revenue (MR), and marginal cost (MC) for a monopoly is: P < MR = MC.

false

Monopolistic competition refers to a market structure in which a single firm sells a good with no close substitutes.

false

Private goods are excludable and not rival in consumption.

false

The short run is a period of time less than three months.

false

Two firms are considering increasing production. Refer to the table. The dominant strategy

for both firms is to increase production.

In comparison to a perfectly competitive firm, a monopolist charges a

higher price and produces a lower quantity.

In the 1960s, the lobstering community of Port Lincoln on Australia's southern coast set a limit on the number of traps that could be set and then sold licenses for those traps. Since then, any newcomer could enter the business only by buying a license from another lobsterman. This government intervention in the lobster market caused an

increase in economic efficiency because of the existence of a common-resource problem.

Suppose that a monopolist is producing a level of output such that marginal revenue exceeds marginal cost. To increase profits, this monopolist should

increase output and decrease price.

Suppose that wheat is produced in a perfectly competitive market. If market demand increases, the individual wheat farmer's marginal revenue will

increase, and her profit- maximizing level of output will increase

Which of the following is most likely to be a fixed cost in the short run?

interest payments on funds borrowed by a farmer to finance farm machinery

In the long-run equilibrium of a monopolistically competitive market, price

is greater than marginal cost, and price equals average total cost.

Games that are repeated are more likely to

make the enforcement of collusive agreements more feasible.

Critics of advertising argue that advertising

manipulates consumer's tastes.

The Chocolate Moose Ice Cream Store is a business that closes from November to April each year. The best explanation for closing during these months is that the store's

marginal costs are less than the revenues.

Which of the following goods would have the least elastic demand?

milk

Chris owns 'Christina's bakery' that currently has 2 workers. The first worker can produce 100 delicious baked goods in one day, and the second worker increased the total production by 80 delicious baked goods in one day. Chris is hiring a 3rd worker. With three workers, what is the likely total production in one day?

more than 180 but less than 260 delicious baked goods

The cross-price elasticity of demand between golf balls and golf clubs is

negative.

A combination of great weather and beneficial scientific discoveries lead to a doubling of the per acre yield in cotton fields. Assume the demand for cotton is inelastic. Will the cotton farmers be better off?

no

When a movie theater offers a discounted ticket price to moviegoers over the age of 65, it engages in

price discrimination and decreases the deadweight loss

This graph illustrates the market for fine wine. If the current price is $50 per bottle, we expect the

price to decrease due to the surplus of wine.

This graph illustrates the market for gluten free chocolate cake. If the current price is $30 per cake, we expect the

price to increase due to the shortage of cake.

Before the 1970s, most tobacco advertising was legal in the United States. The payoff matrix for two tobacco producers, Phillip Morris and Reynolds, is given below. The big advertising budget would include radio and TV ads, whereas the moderate advertising budget would exclude those. In 1970, the Congress passed the Public Health Cigarette Smoking Act, banning the advertising of cigarettes on TV and radio. What was the effect of this Act on the profits for the two firms?

profits increased for both because they didn't have to advertise on radio and TV

Timber companies are most likely to engage in over-logging of forests on

publicly owned land because it is a common resource.

Rent controls cause

shortages of apartments which are larger in the long run than in the short run.

Art's Garage operates in a perfectly competitive market. Suppose that at the point where marginal cost equals marginal revenue, ATC = $20, and AVC = $15. If the price per unit is $10, in the short run Art will

shut down immediately.

Refer to the figure. If the market price is $2.00, this perfectly competitive firm should:

shut down in the short run to minimizes losses

According to the Coase theorem, private parties can

solve externality problems through private bargaining.

An advance in technology would shift the

supply curve to the right

Which of the following statements is correct?

the demand for Coca-Cola is more elastic than the demand for soda.

A monopolistically competitive market structure is similar to perfect competition in that

there are many firms in the industry.

The most efficient pollution control system would ensure that

those polluters with lowest cost of pollution abatement reduce their pollution most.

flu shots

too low and a quantity that is too low in comparison to the socially optimal equilibrium.

The citizens of Knoxville are complaining that the two pickle-makers in town, (cleaning cost)

total cost of cleaning 20 tons of pollution is $10,000 per year. 'Crunchy Ponds pickles' cleans 20 tons of pollution after selling 10 pollution permits to 'Sweet Rose pickles'

A monopolistic competitor chooses its short-run profit-maximizing quantity the same way that a monopoly does.

true

A natural monopoly can supply a good to the entire market at a lower cost than two or more firms could.

true

Oligopoly refers to a market structure in which a few sellers offer identical or similar products.

true

The market for tennis balls is an example of an oligopoly.

true

if a country has comparative advantage in producing a good, then the other country has comparative advantage in producing the other good.

true

Refer to the labor market graph. The imposition of an $8 minimum wage would cause

unemployment of 35 labor hours

Suppose that a market is in long-run equilibrium. Then demand increases. Suppose that the entry of new firms into the industry causes the price of a scarce resource used by firms in the industry to increase. The long-run supply curve for this industry would likely be

upward sloping.

Suppose that France has a comparative advantage in the production of cheese and that Spain has a comparative advantage in the production of oranges. If the two countries do not trade with any countries but then agree to trade with each other, which of the following will be true concerning French and Spanish consumption possibilities?

France and Spain can each consume more cheese and more oranges.

"A tax on the carbon content of fuels would be a less expensive way to reduce carbon-dioxide emissions than would a collection of policies such as 'corporate average fuel economy' requirements for automobiles."

agree

In general, using more congestion charges in crowded transportation networks — such as higher tolls during peak travel times in cities, and peak fees for airplane takeoff and landing slots — and using the proceeds to lower other taxes would make citizens on average better off."

agree

if the federal minimum wage is raised gradually to $15-per-hour by 2020, the employment rate for low-wage U.S. workers will be substantially lower than it would be under the status quo."

agree

Assuming apricots and nectarines are substitutes for peaches.Which of the following would shift the demand curve for peaches to the right?

an increase in the price of apricots

Which of the following would not be a result of a binding price ceiling on child care?

an increase in the quantity of child care supplied

Rhinoceroses are among the most endangered species. Which of the following policies would result in an efficient quantity of rhinoceroses? The governments of countries

assign property rights to individuals with rhinos on their land, allowing them to use rhinos for whatever purposes they choose.

A public good is

consumable by additional users without reducing consumption by other users.

"Local ordinances that limit rent increases for some rental housing units, such as in New York and San Francisco, have had a positive impact over the past three decades on the amount and quality of broadly affordable rental housing in cities that have used them." A.

disagree

Connecticut should pass its Senate Bill 60, which states that during a 'severe weather event emergency, no person within the chain of distribution of consumer goods and services shall sell or offer to sell consumer goods or services for a price that is unconscionably excessive."

disagree

Which of the following is most likely to occur if a firm experiences coordination problems?

diseconomies of scale

Suppose that the City of Bloomington imposes a $1 per-tire recycling fee on buyers whenever they purchase a new tire. We can illustrate the tax on a graph by shifting the demand curve

down by $1; the price paid by buyers would rise by less than $1.

The citizens of Knoxville are complaining that the two pickle-makers in town, 'Crunchy Ponds pickles' and 'Sweet Rose pickles', are polluting the environment. Currently, each pickle-maker emits 20 tons of pollution per year. 'Crunchy Ponds pickles' could clean the pollution at a cost of $500 per ton. 'Sweet Rose pickles' could also clean the pollution, but a cost of $1,100 per ton. In an effort to reduce pollution, the government of Knoxville decrees that from now on, each pickle factory has to reduce pollution to 10 tons per year each, or else. What is the cost of reducing pollution to the desired levels?

total cost of cleaning 20 tons of pollution is $16,000 per year; it costs 'Crunchy Ponds pickles' $5,000 to clean 10 tons of pollution; it costs 'Sweet Rose pickles' $11,000 to clean 10 tons of pollution.

A $2 tax levied on the producers of a good has the same effect on buyers and sellers as a $2 tax levied on the consumers of the good.

true

A vertical supply curve has a price elasticity of zero.

true

Advocates of antipoverty programs (TANF, SNAP) claim that fighting poverty is a public good.

true

Changes in the price of cheese cause a movement along the supply of cheese, whereas changes in input prices cause the supply of cheese to shift

true

Explicit costs are input costs that require an outlay of money by the firm

true

Externalities can be negative or positive.

true

If demand decreases, both the equilibrium price and quantity decrease

true

International trade can make some individuals worse off, even as it makes the country as a whole better off.

true

Sunk costs are irrelevant for decisions in the short run.

true

The Tragedy of the Commons is a parable that helps explain why common resources are used more than desirable.

true

The price elasticity of supply measures how much the quantity supplied of good X responds to changes in the price of good X.

true

You live in a building that allows smoking inside. Your roommate values smoking in the apartment at $100 and you value clean air at $200. According to Coase, you can pay your roommate $101 and he will smoke outside.

true

If the marginal cost curve is U-shaped and intersects the U-shaped average total cost curve at the minimum point on the average total cost curve, which of the following statements is correct?

when the marginal cost curve is below the average cost curve, the average total cost is decreasing as more output is produced.