Econ Test 3
In the perfectly competitive market for widgets, demand is given by P = 5,000 - 0.025Q, LRAC reaches its minimum at $10 and optimal scale is 80 units. How many firms will be in this industry in the long-run?
2,495
The supply and demand in the market for canned corn are given by the following functions: Q D = 37,500 - 10,000P Q S = 10,000 + 3,750P The equilibrium price and quantity in this market are
Q* = 17,500 ; P* = 2
The supply and demand in the market for canned corn are given by the following functions: QD = 26,000 - 8,500P QS = 8,000 + 500P The equilibrium price and quantity in this market are
Q* = 9,000; P* = $2
Which of the following is a potential result of a price floor?
a black market in which producers offer to sell goods for a lower price.
The long-run supply curve is horizontal in which type of industry?
a constant cost industry
The long-run supply curve is horizontal for what type of industry?
a constant cost industry.
Goods A and B are substitutes. If the price of good B decreases, then we should expect to see
a decrease in both equilibrium price and quantity for good A.
The long-run supply curve is downward sloping in which type of industry?
a decreasing cost industry
Which of the following is an example of a price ceiling?
a government limits the amount that can be charged for rent on inner-city apartments.
A price floor at $5 in the market in the graph would cause a ______ of _______ units.
a price ceiling at $5 would have no effect on this market.
A price ceiling at $9 in the market in the graph would cause a ______ of _______ units.
a price ceiling at $9 would have no effect on this market.
Goods A and B are complements. If the price of good B decreases, then we should expect to see
an increase both equilibrium price and quantity for good A.
Which of the following lists the correct sequence of events that will take place when a perfectly competitive firm earns a positive profit?
firms enter, supply shifts out, price falls, profits reach zero
Which of the following lists the correct sequence of events that will take place when a perfectly competitive firm earns a negative profit?
firms exit, supply shifts in, price rises, profits reach zero
If profits are positive in a perfectly competitive industry, what will happen as we adjust to long-run equilibrium?
firms will enter and shift supply out which will decrease price to the point where all firms break even.
Suppose that an effective price ceiling on milk is removed. This would cause the
price to increase and the quantity exchanged to increase
If there is a hurricane in Florida, then
the demand for hotel rooms in Georgia will shift out
When the price of maple syrup falls, what should we expect to happen in the market for maple furniture?
the equilibrium price of furniture will fall and the equilibrium quantity will rise
When the price of maple syrup rises, what should we expect to happen in the market for maple furniture?
the equilibrium price of furniture will rise and the equilibrium quantity will fall
Which of the following is an example of a price floor?
the government sets a minimum wage.
If a market has attained Pareto efficiency, then
we can't make one person better off without harming another person
Jim operates in a perfectly competitive, decreasing cost industry with MC = 50q and a market price of $1,000. How much profit do you expect Jim to earn in the long-run?
$0
Jim operates in a perfectly competitive, increasing cost industry with MC = 5q and a market price of $15. How much profit do you expect Jim to earn in the long-run?
$0
How much deadweight loss would result from a price ceiling set at $5 in the market in the graph
$12
In equilibrium in the market in the graph, consumer surplus is equal to
$24
In equilibrium in the market in the graph, producer surplus is equal to
$24
In the perfectly competitive market for widgets, demand is given by P = 5,000 - 0.01Q, LRAC reaches its minimum at $5 and optimal scale is 15 units. How many firms will be in this industry in the long-run?
33,300
Which of the following is NOT a potential effect of an increase in the minimum wage?
ALL OF THESE 1) increased unemployment in the labor market covered by the minimum wage law. 2) a decrease in wages for unskilled workers who are not covered by the minimum wage law. 3) an increase in wages for skilled labor. 4) a greater number of unskilled workers employed in jobs that are not covered by the minimum wage law.
Whenever profits are positive in a perfectly competitive market,
ALL OF THESE 1)supply shifts to bring price to the minimum of average cost 2) firms are NOT producing at optimal scale 3) supply shifts to bring profits to zero 4) new firms will enter the market
When a perfectly competitive market is in long run equilibrium,
ALL OF THESE 1)there is no deadweight loss 2) the market is Pareto efficient 3) the sum of consumer and producer surplus is maximized 4) there is no surplus or shortage
When a perfectly competitive market is in long run equilibrium,
ALL OF THESE 1) there is no deadweight loss 2) the market is Pareto efficient 3) the sum of consumer and producer surplus is maximized 4) there is no surplus or shortage
Which of the following industry characteristics will lead to a firm earning zero profit in the long-run?
No barriers to entry
The equilibrium price and quantity in the market in the graph are given by:
P*=8; Q*=8
The idea that no economic agent can be made better off without harming another is known as
Pareto efficiency
Which of the following is a potential result of a price ceiling?
a black market in which consumers offer to buy goods for a higher price.
A firm earning zero profit will
continue to operate regardless of whether it is in the long-run or short-run
Whenever an industry fails to produce output for which someone would have been willing to pay more than the marginal cost of production, we get
deadweight loss
To find the long-run number of firms in a competitive market,
divide the industry output by the optimal scale
If demand shifts outward in a perfectly competitive decreasing cost industry operating in the long-run then, as we adjust to the new long-run equilibrium, we would expect the price to
fall as quantity rises
If profits are negative in a perfectly competitive industry, what will happen as we adjust to long-run equilibrium?
firms will exit and shift supply in which will increase price to the point where the remaining firms break even.
An effective price floor
is set above the equilibrium price
An effective price ceiling
is set below the equilibrium price
Which of the following industry characteristics will lead to a firm earning zero profit in the long-run?
no barriers to entry
Which of the following best describes the adjustment in a decreasing cost industry in long-run equilibrium after an INWARD shift in demand?
price falls, firms exit, supply shifts in, price rises to above the original level where firms earn zero profit.
Which of the following best describes the adjustment in a constant cost industry in long-run equilibrium after an outward shift in demand?
price rises, firms enter, supply shifts out, price falls to back to the original level where firms earn zero profit.
Suppose that an effective price floor on milk is removed. This would cause the
price to decrease and the quantity exchanged to increase
If demand shifts outward in a perfectly competitive increasing cost industry operating in the long-run then, as we adjust to the new long-run equilibrium, we would expect the price to
rise as quantity rises
The supply and demand in the market for canned corn are given by the following functions: QD = 26,000 - 8,500P QS = 8,000 + 500P At a price of $1 per can, there is a
shortage of 9,000 units
Whenever profits are negative in a perfectly competitive market,
supply shifts to bring price to the minimum of average cost
Whenever profits are positive in a perfectly competitive market,
supply shifts to bring profits to zero
If an increase in wages raises the cost of producing lawnmowers, then
supply will shift in causing equilibrium price to rise and equilibrium quantity to fall.
If the price of an input falls, then
supply will shift out causing equilibrium price to fall and equilibrium quantity to rise.
The supply and demand in the market for tires are given by the following functions: Q D = 500 - 2P Q S = 100 + 3P At a price of $100 per tire, there is a
surplus of 100 units
The supply and demand in the market for tires are given by the following functions: QD = 500 - 2P QS = 120 + 3P At a price of $100 per tire, there is a
surplus of 120 units
The supply and demand in the market for canned corn are given by the following functions: Q D = 37,500 - 10,000P Q S = 10,000 + 3,750P At a price of $3 per can, there is a
surplus of 13,750 units
A price floor at $11 in the market in the graph would cause a _____ of ______ units.
surplus; eight
A price floor at $7 in the market in the graph would cause a _____ of ______ units.
surplus; six