micro ch 7,8,10,13

Consumer surplus in a market can be represented by the

area below the demand curve and above the price

All remedies for externalities share the goal of

moving the allocation of resources toward the socially optimal equilibrium

Which of the following costs will not change as output changes?

total fixed cost

David tunes pianos in his spare time for extra income. Buyers of his service are willing to pay $135 per tuning. One particular week, David is willing to tune the first piano for $115, the second piano for $125, the third piano for $140, and the fourth piano for $175. Assume David is rational in deciding how many pianos to tune. His producer surplus is

$30

Bob purchases a book, and his consumer surplus is $3. If Bob is willing to pay $8 for the book, then the price of the book must be

$5

At Nick's Bakery, the cost to make homemade chocolate cake is $4 per cake. As a result of selling five cakes, Nick experiences a producer surplus in the amount of $17.50. Nick must be selling his cakes for

$7.50 each

Melissa engages in an activity that influences the well-being of a bystander. In order for Melissa's activity to give rise to an externality, it must be the case that

Melissa neither pays nor receives any compensation for her activity

Suppose that flower gardens create a positive externality equal to $1 per plant. What is the relationship between the equilibrium quantity and the socially optimal quantity of plants grown?

The equilibrium quantity is less than the socially optimal quantity

Marginal cost is equal to the

change in total cost divided by change in output

Diminishing marginal product of labor occurs when adding another unit of labor

changes output by an amount smaller than the output added by the previous unit of labor

The difference between social cost and private cost is a measure of the

cost of an externality

A drought in California destroys many red grapes. As a result of the drought, the consumer surplus in the market for red grapes

decreases, and the consumer surplus in the market for red wine decreases.

If an aluminum manufacturer does not bear the entire cost of the smoke it emits, it will

emit a higher level of smoke than is socially efficient

Average fixed costs of production

fall as long as output is increased

When a good is taxed, the burden of the tax

falls more heavily on the side of the market that is more inelastic.

Average fixed cost is equal to

fixed cost divided by the quantity of output produced

when there is a technological advance in the pork industry, consumer surplus in that market will

increase

negative externality

is an adverse impact on a bystander

Suppose a tax of $1 per unit is imposed on a good. The more elastic the supply of the good, other things equal, the

larger is the deadweight loss of the tax

a positive externality will cause a market to produce

less than is socially desirable

Which of the following is the best example of a variable cost?

monthly wage payments for hired labor

as a result of a decrease in price

new buyers enter the market, increasing consumer surplus

which of the following events would increase producer surplus

sellers costs stay the same and the price of the good increases

Buyers of a product will bear the larger part of the tax burden, and sellers will bear a smaller part of the tax burden, when the

supply of the product is more elastic than the demand for the product.