Econ Midterm #2
at equilibrium, total surplus is represented by the area
a+b+C+D+h+f
what is the total cost of producing 2 units of output?
$48
the least expensive way to clean up the environment is for all firms to reduce pollution by an equal percentage.
(true/false)
although economists and accountants treat many costs differently, they both treat the cost of capital the same
False
in a market characterized by externalities, the market equilibrium fails to maximize the total benefit to society as a whole.
True
jack borrows $10,000 from a bank and withdraws $20,000 from his personal savings to open a tattoo parlor. The intrest rate is 3 percent for both the bank loan and his personal savings. Jaxon also quit his job as a waiter, which paid $20,000. According to an economist, Jaxon's opportunity cost of opening the tattoo parlor equals $20,900.
True
the equilibrium of supply and demand in a market maximizes the total benefits to buyers and sellers of participating in that market
True
if the government allowed the a free market in organs for transplant there would be
an decrease in the waiting period for transplant organs
What is the difference between command-and-control policies and market-based policies towards externalilities?
command and control policies regulate behavior directly, whereas market-based policies provide incentives for private decision makers to change their behavior
in the long run the local coffee shop incurs total costs of $625 when output is 1250 cups of coffee and $750 when output is 1500 coups of coffee. For the range of output, the coffee shop exhibits
constant returns to scale
When a policy succeeds in giving buyers and sellers in a market an incentive to take into account the external effects of their actions, the policy is said to
equalize private value and private costs
Consumer surplus is the amount a buyer is willing to pay for a good minus the seller's cost.
false
If your willingness to pay for a hamburger is $3.00 and the price is $2.00, your consumer surplus is $5.00.
false
let P represent price, let Qs represent quantity supplied, and assume the equation of the supply curve is ...If 80 units of the goods are produced and sold the producer surplus amounts to $1,200
false
Producer surplus is a measure of the unsold inventories of suppliers in a market
false (measure of the benefits of market participation to the sellers in a market.)
consider a good for which the number of people who benefit from the good is large and the exclusion of one of these goods is impossible. in this case, the good will likely have a
free rider problem
farmer brown's marginal cost curve is
increasing
how long does it take the firm to go from the short run to the long run?
it depends on the firm
both public goods and common resources are
nonexcludable
for most goods in an economy, the primary signal that guides the decisions of buyers and sellers is
price
when marginal cost is greater than average cost, average cost is
rising
the ogalla aquifer is a large underground pool of freshwater under several western states in the U.S. Any farmer with land above the aquifer can at present pump water out of it. Which of the following statements about the aquifer is correct?
the aquifer is a common resource which will be overused if no one owns it
University researchers create a positive externality because what they discover in their research labs can easily be learned by others who haven't contributed to the research costs. What could the federal government do to equate the equilibrium quantity of university research and the socially optimal quantity of university research produced?
the equilibrium quantity is less than the socially optimal quantity
if education produces positive externalities and the government does not intervene in the market, we would expect
the equilibrium quantity to be lower than the optimal level
in deciding whether a good is a public good, one must determine
the excludability of the good
that some firms are engaged in more than one type of buisness is explained, in some cases, by t
the fact that the internalization of externalities sometimes coincides with the self interest of the relevant parties
a lighthouse might be considered a private good if
the owner of the lighthouse is able to exclude beneficiaries from receiving benefits of the lighthouse
an example of an opportunity cost that is an implicit cost is
the value of the business over time
the "invisible hand" leads markets to maximize
total benefit to society from that market
profit is defined as
total revenue minus total cost
Consumer surplus is a good measure of buyers' benefits if buyers are rational.
true
Cost to the seller includes the opportunity cost of the seller's time.
true
If the demand curve in a market is stationary, consumer surplus decreases when the price in that market increases.
true
The cost of producing an additional unit of a good is not the same as the average cost of the good
true
The height of the supply curve is the marginal seller's cost.
true
the market equilibrum fails to maximize the total benefit to society as a whole
true
variable costs usually change as the firm alters the quantity of output produce.
true
A seller's opportunity cost measures the
value of everything she must give up to produce a good
a seller's oppertunity cost measures the
value of everything she must give up to produce a good
tradable pollution permits
will be more valuable to firms that can reduce pollution only at high costs
