Econ Test 2
which of the following will cause an increase in consumer surplus
a technological improvement in the production of the good
which of the following is an example of the Tragedy of the Commons?
a type of duck becomes extinct to overhunting
producers have little incentive to produce a public good because
there is a free rider problem
Producers have little incentive to produce a public good because
there is a free-rider problem
consider a competitive market with a large number of identical firms. the firms in this market do not use any resources that are available only in limited quantities. in this market, an increase in demand will
increase price in the short run but NOT in the long run
if stella's fashion jewelry sells its product in a competitive market, then
stella's fashion jewelry total revenue must be proportional to its quantity of output
amir tutors in his spare time for extra income. students are willing to pay $54 per hour for as many hours amir is willing to tutor. on a particular day, he is willing to tutor the first hour for $18, the second hour for $27, the third hour for $32, and the fourth hour for $54. assume amir is rational in deciding how many hours to tutor. his producer surplus is
$85
mike and laura sell lemonade on the corner for $3.20 per cup. it costs them $0.20 to make each cup. on a certain day, their producer surplus is $60. how many cups did Mike and Laura sell?
20
who among the following is a free rider?
Mike listens to National Public Radio, but does not contribute to any fundraising efforts
The minimum wage was instituted to ensure workers
a minimally adequate standard of living
a textbook is a
a private good and the knowledge that one gains from reading a textbook is a public good
suppose the government wants to encourage Americans to exercise more, so it imposes a binding price ceiling on the market for in-home treadmills. as a result,
a shortage of treadmills will develop
the average fixed cost curve
always declines with increased levels of output
short run
at least one input is fixed
if a firm experiences constant returns to scale at all output levels, then its long-run average total cost curve would
be horizontal
minimize deadweight loss
be inelastic to both supply and demand
a shortage results when a
binding ceiling price is imposed on a market
a surplus results when a
binding price floor is imposed on a market
six friends decide to meet at a greek restaurant for dinner. they decide that each person will order an item off the menu, and they will share all dishes. they will split the cost of the final bill evenly among each of the people at the table. a tragedy of the commons problem is likely for each of the following reasons except
each dish would be both excludable and rival in consumption
if the production of computer chips yields greater technology spillovers than the production of potato chips, the government should
encourage the production of computer chips with subsidies
when new firms enter a perfectly competitive market,
existing firms may see their costs rise if more firms compete for limited resources
The parable called the Tragedy of the Commons applies to goods such as
grazing land and fishing
If the labor supply curve is very elastic, a tax on labor
has a large deadweight loss
A regional elephant management board recently proposed a five-year moratorium on elephant hunting in Botswana based on a study of the elephant population. Which of the following statements is not correct?
if left unregulated, the elephant population will likely increase
consider a competitive market with a large number of identical firms. the firms in this market do not use any resources that are available only in limited quantities. in this market, an increase in demand will
increase price in the short run but not in the long run
a firm that shuts down temporarily has to pay
its fixed costs but not its variable costs
economies of scale
long-run average total cost falls as the quantity of output increases
diseconomies of scale
long-run average total cost rises as the quantity of output increases
when property rights are not well established,
markets fail to allocate resources efficiently
A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it
maximizes the combined welfare of buyers and sellers
If the size of a tax increases, tax revenue
may increase, decrease, or remain the same
because public goods are
not excludable, people have an incentive to be free riders
a television broadcast is an example of a good that is
not rival in consumption
if a tax is levied on the sellers of a product, then the demand curve will
not shift
an externality is the uncompensated impact of
one person's actions on the well-being of a bystander
minimum-wage laws dictate
only a minimum wage that firms may pay workers
cost-benefit analysts often encounter the problem that those who would benefit from government provision of a public good tend to
overstate the benefit that they would receive from the public good and those who would be harmed by government provision of a public good tend to overstate the costs they would incur from the public good
the provision of a public good generates a
positive externality and the use of a common resource generates a negative externality
if there is an increase in market demand in a perfectly competitive market, then in the short run
profits will rise
which of the following expressions is correct for a competitive firm?
proft = (quantity of output) x (price - average total cost)
The phenomenon of free riding is most closely associated with which type of good?
public goods
a free rider is a person who
receives the benefit of a good but avoids paying for it
which of the following statements regarding a Laffer Curve is the most plausible?
reducing a high tax rate is more likely to increase tax revenue than is reducing a low tax rate
which of the following represents the firm's short-run condition for shutting down?
shut down if TR < VC
suppose the government imposes a 20-cent tax on the sellers of artificially sweetened beverages. the tax would shift
supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially sweetened beverages
in some cases, tradable pollution permits may be better than a corrective tax because
the government can set a maximum level of pollution using permits
the privately-owned school system in Fort Yaman has a virtually unlimited capacity. it accepts all applicants and operates on both tuition and private donations. although every resident places value on having an educated community, the school's revenue have suffered lately due to a large decline in private donations from the elderly population. because the benefit that each citizen receives from having an educated community is a public good, which of the following would NOT be correct?
the private market is the best way to suply education
efficiency in a market is achieved when
the sum of producer surplus and consumer surplus is maximized
long run
the time period in which all inputs can be varied
Suppose that electricity producers create a negative externality equal to $5 per unit. further suppose that the government imposes a $5 per-unit tax on the producers. what is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of electricity to be produced?
they are equal
if a tax shifts the supply downward,
we cannot infer anything because the shift described is not consistent with a tax
constant returns to scale
when long-run average total cost is constant as output increases
If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is
zero