Econ Midterm 3

The following table presents cost and revenue information for a firm operating in a competitive industry. What is the marginal revenue from selling the 4th unit?

$120

Ryzard decides to open his own business and earns $60,000 in accounting profit the first year. When deciding to open his own business, he withdrew $20,000 from his savings, which earned 6 percent interest. He also turned down three separate job offers with annual salaries of $30,000, $40,000, and $45,000. What is Ryzard's economic profit from running his own business?

$13,800

Suppose Luke values a scoop of Italian gelato at $4. Leia values a scoop of Italian gelato at $6. The pre-tax price of a scoop of Italian gelato is $2. The government imposes a "fat tax" of $3 on each scoop of Italian gelato, and the price rises to $5. The deadweight loss from the tax is

$2, and the deadweight loss comes only from Luke because he does not buy gelato after the tax.

Leonard, Sheldon, Raj, and Penny each like to attend comic-book conventions. The price of a ticket to a convention is $50. Leonard values a ticket at $70, Sheldon at $65, Raj at $60, and Penny at $55. Suppose that if the government taxes tickets at $5 each, the price will rise to $55. A consequence of the tax is that consumer surplus shrinks by

$20 and tax revenues increase by $20, so there is no deadweight loss.

Looking at the figure above, the firm's short-run supply curve is its marginal cost curve above

$3.

Nathan makes candles. If he charges $20 for each candle, his total revenue will be

$500 if he sells 25 candles.

Zaid's Tent Company has total fixed costs of $300,000 per year. The firm's average variable cost is $65 for 10,000 tents. At that level of output, the firm's average total costs equal

$95

A monopolist can sell 300 units of output for $50 per unit. Alternatively, it can sell 301 units of output for $49.60 per unit. The marginal revenue of the 301st unit of output is

-$70.40.

Looking at the table above, what is the marginal product of the first worker?

300 units

Which of the following is an example of an excise tax?

A tax on tobacco

Looking at the table below, over which range of output is average revenue equal to price?

Average revenue is equal to price over the entire range of output.

Which of the following statements is correct?

Both equity and efficiency are important goals of the tax system.

In the absence of taxes, Carlos would prefer to purchase a large fishing boat with a 75 hp motor. The government has recently decided to place a tax on boats with 75 hp motors or higher. If Carlos decides to purchase a smaller boat with a 50 hp motor as a result of the tax, which of the following statements is correct?

Carlos is worse off, and his loss of welfare is part of the deadweight loss of the tax.

Look at the figure below. If the monopoly firm is currently producing Q4 units of output, then a decrease in output will necessarily cause profit to

Increase regardless of the level of output

For a large firm that produces and sells automobiles, which of the following costs would be a variable cost?

The cost of steel that is used in producing automobiles

Look at the figure below. What is the area of deadweight loss?

The triangle 1/2[(X-Z) x (K-J)]

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then

a one-unit decrease in output will increase the firm's profit.

For an individual firm operating in a competitive market, marginal revenue equals

average revenue and the price for all levels of output.

The fundamental source of monopoly power is

barriers to entry.

In addition to tax payments, the two other primary costs that a tax system inevitably imposes on taxpayers are

deadweight losses and administrative burdens

As Bubba's Bubble Gum Company adds workers while using the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Bubba's Bubble Gum Company encounters

diminishing marginal product.

If a firm in a competitive market doubles its number of units sold, total revenue for the firm will

double

Monopoly firms face

downward-sloping demand curves, so they can sell only the specific price-quantity combinations that lie on the demand curve.

A firm's opportunity costs of production are equal to its

explicit costs + implicit costs.

For any competitive market, the supply curve is closely related to the

firms' costs of production in that market.

Competitive markets are characterized by

free entry and exit by firms

A monopolist's profits with price discrimination will be

higher than if the firm charged just one price because the firm will capture more consumer surplus.

Bubba is a shrimp fisherman who could earn $5,000 as a fishing tour guide. Instead, he is a full-time shrimp fisherman. In calculating the economic profit of his shrimp business, the $5,000 that Bubba gave up is counted as part of the shrimp business's

implicit costs.

If a competitive firm is selling 900 units of its product at a price of $10 per unit and earning a positive profit, then

its average total cost is less than $10.

Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers

labor to be variable and capital to be fixed.

The U.S. tax burden is

lower than most European countries

If a profit-maximizing monopolist faces a downward-sloping market demand curve, its

marginal revenue is less than the price of the product.

If the distribution of water is a natural monopoly, then

multiple firms would likely each have to pay large fixed costs to develop their own network of pipes.

Total revenue equals

price x quantity

The deadweight loss associated with a monopoly occurs because the monopolist

produces an output level greater than the socially optimal level.

One tax system is less efficient than another if it

raises the same amount of revenue at a higher cost to taxpayers.

The accountants hired by Forever Fitness have determined total fixed cost to be $75,000, total variable cost to be $130,000, and total revenue to be $125,000. Because of this information, in the short run, Forever Fitness should

shut down because staying open would be more expensive.

A government-created monopoly arises when

the government gives a firm the exclusive right to sell some good or service.

A person's marginal tax rate equals

the increase in taxes she would pay as a percentage of the rise in her income.

State and local governments

use a mix of taxes and fees to generate revenue.