Micro chap 8 (2)
The above figure shows the market demand curve for telecommunication while driving one's car (time spent on the car phone). If the price were $2.50, consumer surplus equals
$0
The above figure shows supply and demand curves for milk. If the government passes a $2 per gallon specific tax, the tax revenue is
$2 ∗ Q1.
Mister Jones was selling his house. The asking price was $220,000, and Jones decided he would take no less than $200,000. After some negotiation, Mister Smith purchased the house for $205,000. Jones' producer surplus is
$5,000.
Joe's demand for spring water can be represented as p = 10 - Q (where p is measured in $/gallon and Q is measured in gallons). He recently discovered a spring where water can be obtained free of charge. His consumer surplus from this water is
$50.
In the short run, if a firm operates, it earns a profit of $500. The fixed costs of the firm are $100. This firm has a producer surplus of
$600.
The above figure shows the market demand curve for telecommunication while driving one's car (time spent on the car phone). If the price were zero, consumer surplus equals
1,250.00.
Suppose a farmer in a perfectly competitive agricultural industry rents land that is uniquely productive in the production of a certain crop. In the long run
the owner of the land receives economic rent while the farmer earns zero economic profit
If a city decides to restrict the number of pizza parlors,
the price of pizza will increase. pizza parlors will make higher profits. total welfare will decrease
The above figure shows supply and demand curves for apartment units in a large city. The area "e" represents
the total variable cost of supplying Q1 units
Without restrictions, the market supply curve is horizontal at P = 5, and the inverse demand curve for taxi cab rides is P = 20 - Q in a competitive market. Subsequently, only 10 taxi cabs are allowed in the market. After the market adjusts to the restricted supply
there will be a decrease in consumer surplus.
In the long run, competitive firms MUST be profit maximizers because if they do not maximize profits,
they will not survive.
Producer surplus equals
total revenue minus total variable cost. total revenue minus the sum of all marginal cost. profit plus fixed cost
If activists successfully lobbied government to force firms to produce more output than they normally would in a perfectly competitive market
total surplus in the market would decline
Economists claim that measuring society's welfare as CS + PS
treats the gains to consumers and producers equally
The above figure shows supply and demand curves for milk. In an effort to help farms, the government passes a law that establishes a $3 per gallon price support, but allows farmers to decide how much milk to produce. The government then provides a deficiency payment to guarantee that the farmers receive $3 per gallon. The required deficiency payment equals
b + c + f + g + h + i + j.
The above figure shows supply and demand curves for milk. If the government passes a $2 per gallon specific tax, the loss in consumer surplus will equal
b + f.
The above figure shows supply and demand curves for milk. In an effort to help farmers, the government passes a law that establishes a $3 per gallon price support. As a result, consumer surplus falls by
b + f.
Long-run economic profit does not exist for fixed factors like land because
bidding drives up the price of the factor until no economic profit exists
Sheri is currently purchasing 10 units of a normal good and her indifference curves exhibit diminishing marginal rate of substitution. Suppose there is a decrease in the market price of this good. Then
both her utility and her consumer surplus will increase
The above figure shows supply and demand curves for apartment units in a large city. If the city government passes a law that establishes $350 per month as the legal maximum rent, producer surplus decreases by
c + g.
The above figure shows supply and demand curves for milk. If the government passes a $2 per gallon specific tax, the loss in producer surplus will equal
c + g.
The above figure shows supply and demand curves for apartment units in a large city. If the city government passes a law that establishes $350 per month as the legal maximum rent, the consumer's net gain in surplus equals
c - f
If lower-income households spend a greater share of their income on cigarettes than do higher-income households, then a tax that raises the price of cigarettes will
cause consumer surplus to decline among smokers, but the relative impact cannot be determined from the given information
The services of real estate brokers are provided in a competitive market. If the state Board of Realtors enacts several requirements that limit the number of real estate brokers, then social welfare will most likely
decrease, although producers are made better off
Sarah and David both have linear demand curves for lemonade. Sarah's demand curve for lemonade intersects David's demand curve at a price of 50 cents per glass. Sarah's demand curve is more inelastic than David's. A change in the price of lemonade from 50 cents to 25 cents per glass will
increase David's consumer surplus more than Sarah's
The above figure shows supply and demand curves for milk. In an effort to help farms, the government passes a law that establishes a $3 per gallon price support, but allows farmers to decide how much milk to produce. The government then provides a deficiency payment to guarantee that the farmers receive $3 per gallon. The welfare loss of this price support is
j
The above figure shows supply and demand curves for milk. Suppose that the government passes a $2 per gallon subsidy. The deadweight loss resulting from this policy will be
j
Which of the following is a potential result of a price ceiling?
long lines
If a market produces a level of output that exceeds the competitive equilibrium output, then
marginal cost will exceed price.
Consumers seek to
maximize expected consumer surplus
Suppose consumers of cigarettes can be classified into two groups: heavy users and light users. Heavy users purchase more cigarettes and are less sensitive to price changes relative to light users. To determine whether a heavy user suffers a greater loss of consumer surplus than a light user does when the price of cigarettes increases, one would need to know
no additional information
Mister Jones was selling his house. The asking price was $220,000, and Jones decided he would take no less than $200,000. After some negotiation, Mister Smith purchased the house for $205,000. Smith's consumer surplus is
not able to be calculated from the information given
A firm that generates zero economic profit usually has
positive business profit
In the long-run equilibrium in perfect competition, consumer surplus is
positive.
A competitive market maximizes social welfare because in a competitive market,
price equals marginal cost of the last unit produced
If an economist states that not enough of a good is being produced, she usually means that
price exceeds marginal cost
A minimum wage is an example of a
price floor.
In the long-run equilibrium in perfect competition
producer surplus is less than consumer surplus
In 2007, the National Collegiate Athletic Association put a moratorium on new Football Bowl Series (formerly Division IA) teams. This policy will
protect the producer surplus of existing football programs.
If a city government enacts a maximum price on rent
quantity supplied will decrease. quantity demanded will increase. allocational problems develop.
Firms are ________ with an economic profit of zero, they will ________ in the industry since they ________ be better off in another industry
satisfied, stay, won't
Deadweight loss occurs when
the maximum level of total welfare is not achieved
As the price of a good increases, the loss in consumer surplus is larger
the more money previously spent on the good
In a competitive market, the demand and supply curves are Q = 12 - P and Q = 5P, respectively. If output is fixed at Q = 5, what is the amount of the resulting deadweight loss?
10
In a perfectly competitive market the long-run demand and supply curves are Q = 12 - P and Q = 5P respectively. Producer surplus in this market equals
10.
Suppose the market supply curve is p = 5Q. At a price of 10, producer surplus equals
10.
In a competitive market, the demand and supply curves are Q = 12 - P and Q = 5P, respectively. If output is fixed at Q = 11, what is the amount of the resulting deadweight loss?
11.4
Without restrictions, the market supply curve is horizontal at P = 5, and the inverse demand curve for taxi cab rides is P = 20 - Q in a competitive market. Subsequently, only 10 taxi cabs are allowed in the market. This results in a deadweight loss of
12.5.
Suppose the market supply curve is p = 5 + Q. At a price of 10, producer surplus equals
12.50.
The above figure shows the market demand curve for telecommunication while driving one's car (time spent on the car phone). At the current price of $0.35 per minute, consumer surplus equals
924.50
What is one reason it might be difficult to dissuade people from pirating music off the Internet?
Consumer surplus is very high when music is pirated
Before the DVD, the VCR was a popular format for taping and replaying video. When the DVD was introduced, which of the following most accurately describes the long-run adjustment process in the VCR industry?
Demand decreased, quantity decreased, price decreased, profit decreased
Mary purchased a stuffed animal toy for $5. After a few weeks, someone offered her $100 for the toy. Mary refused. One can conclude that Mary's consumer surplus from the toy is A) less than $5.
at least $95
Sally is shopping for textbooks at the beginning of the semester. What is one reason she might decide to not purchase a textbook?
Her expected consumer surplus is negative.
What is one reason perfectly competitive firms wish to be ever more efficient?
Individual firms can better control their costs than the price they can charge
What is one reason existing firms might lobby the government to increase regulation in their industry?
It increases entry and exit costs, thereby potentially increasing producer surplus to existing firms.
Which of the following is not a potential result of a price floor?
Lower quality inputs are used, which increases marginal cost
In economics, welfare analysis focuses on
None of these. income transfer programs. food stamp programs. international aid programs
Which of the following characterizes long-run equilibrium in perfect competition?
P = MC = ATC
The services of real estate brokers are provided in a competitive market. If the state Board of Realtors enacts several requirements that limit the number of real estate brokers, which of the following is most likely to occur?
Producer surplus will increase
The above figure shows supply and demand curves for milk. In an effort to help farmers, the government passes a law that establishes a $3 per gallon price support. To maintain the price support, government must purchase
Q2 - Q1 gallons
Sarah's demand curve for shoes has the same slope as Pete's; however, it lies to the right of Pete's. An increase in the price of shoes will cause
Sarah to incur a greater loss of consumer surplus than Pete will
The owners of sports franchises often complain that free-agency (open bidding for player services) threatens their profitability and thus their long-run viability. Given your knowledge of perfect competition, which of the following is correct?
Team owners might be correct in as much as free-agency bids up the price of players so that economic profits from those players equal zero.
What is one reason firms might lobby to prevent entry into their market?
The long run equilibrium might be characterized by P = MC > ATC
Assume government policy increases the demand for corn
The producer surplus of corn growers will increase
The services of real estate brokers are provided in a competitive market. If the state Board of Realtors enacts several requirements that limit the number of real estate brokers, which of the following is most likely to occur?
The supply curve of real estate brokers will shift to the left.
Assume the price of tomatoes increases. Which of the following causes would correspond to greater producer surplus?
an increase in demand
What is one reason activists might lobby the government to force firms to produce more output than they normally would in a perfectly competitive market?
They value consumer surplus more than producer surplus
What is one reason activists might lobby the government for regulation limiting the production of a product to less than would normally be in a perfectly competitive market?
They value producer surplus more than consumer surplus.
You enter a store and buy a bottle of soda. Do you usually receive consumer surplus?
Yes, because you wouldn't buy the soda if your willingness to pay would be less than the price.
Does a competitive long-run equilibrium require cost-minimization?
Yes, if firms fail to be as efficient as their competitors, they are driven out of the market.
The above figure shows supply and demand curves for milk. In an effort to help farmers, the government passes a law that establishes a $3 per gallon price support. The loss in social welfare resulting from this price support equals
[$3 ∗ (Q2 - Q1)] - h.
The above figure shows supply and demand curves for milk. If amount Q2 is produced in the market,
a deadweight loss is generated
The above figure shows supply and demand curves for apartment units in a large city. The area "c" represents
a transfer from producers to consumers if a rent ceiling of $350 is imposed.
Giving presents at Christmas does NOT generate a deadweight loss if
all gift are money. everybody gets exactly what they want. nobody can be made better off by returning the gift and purchasing a different one.
The total welfare associated with a market that includes a government sales tax equals
consumer surplus plus producer surplus plus government tax revenue.
The above figure shows supply and demand curves for apartment units in a large city. If the city government passes a law that establishes $350 per month as the legal maximum rent, deadweight loss occurs because
consumers place a greater value on the last apartment unit than the cost to supply it
Consumers often purchase products that, afterward, they regret purchasing. This can be explained by
consumers trying products to determine if their consumer surplus increases
The above figure shows supply and demand curves for apartment units in a large city. If the city government passes a law that establishes $350 per month as the legal maximum rent, producer surplus will be
d
The above figure shows supply and demand curves for apartment units in a large city. At the unregulated equilibrium, producer surplus will be
d + c + g.
The services of real estate brokers are provided in a competitive market. If the state Board of Realtors enacts several requirements that limit the number of real estate brokers, then consumer surplus will most likely
decrease
A new law applied to a competitive market that requires laid off workers be paid a large severance payment will
decrease consumer surplus in the market
The above figure shows supply and demand curves for apartment units in a large city. If the city government passes a law that establishes $350 per month as the legal maximum rent, producer surplus
decreases.
In economics, welfare analysis is useful to
determine who gains and who loses in a particular policy option.
Assume a consumer has a horizontal demand curve for a product. His consumer surplus from buying the product
equals zero
The above figure shows supply and demand curves for milk. In an effort to help farmers, the government passes a law that establishes a $3 per gallon price support. To maintain the price support, government expenditures must equal
f + g + h + i + j + k.
The above figure shows supply and demand curves for apartment units in a large city. If the city government passes a law that establishes $350 per month as the legal maximum rent, the loss in social welfare equals
f + g.
The above figure shows supply and demand curves for milk. If the government passes a $2 per gallon specific tax, the loss in social welfare will equal
f + g.
The above figure shows supply and demand curves for milk. If the government passes a $2 per gallon specific tax, the welfare loss will equal
f + g.
The above figure shows the market demand curve for telecommunication while driving one's car (time spent on the car phone). The current price is $0.35 per minute. If the price were to increase by ten cents per minute, consumer surplus would
fall by $84
Survivability in a perfectly competitive world requires that
firms maximize profit
The difference between producer surplus and profit is always the associated with
fixed costs
If a firm enjoys producer surplus in perfectly competitive Market A of $1000 and would enjoy producer surplus in perfectly competitive Market B of $1200, the firm would consider moving to Market B if
fixed costs in Market B are less than the fixed costs in Market A plus $200
If a market produces a level of output below the competitive equilibrium, then
social welfare is not maximized.
If in a market the last unit of output was sold at a price higher than marginal cost,
social welfare is not maximized.
Advocates of steel tariffs to protect U.S. steel firms realize that when imposing such tariffs, the gains of firms are outweighed by the losses to consumers.. This implies that
such advocates value producer surplus more than consumer surplus
The deadweight loss associated with output less than the competitive level can be determined by
summing the change in the total consumer and producer surplus from moving from the competitive level of output to less output.
Producer surplus is equal to
the difference between price and marginal cost for all units sold
If a firm is in a perfectly competitive world but decides to charge a higher price than its competitors,
the firm's profits will be zero or negative, and the firm will fail in the long run.
Suppose when a market has four firms, average economic profit is $1,000 per month. When the market has five firms, the average economic profit is -$50 per month. This suggests that
the long-run equilibrium number of firms is between four and five