Micro Final

Reggie owns and operates a cheese shop in the village of Somerset. Although Reggie has a degree in mechanical engineering and could easily go to work for his brother's company earning $64000$64000 a year, his true passion is for cheese. Consider the list of Reggie's revenue and expenses from last year. Please use the information provided to answer the questions. Revenue from 2010: $75000, Rent: $15000, Equipment: $3000, Supplies: $3000 What is Reggie's accounting profit?- What is Reggie's economic profit?-

- $54000 - (−$10000)

Based on the data, answer the questions. Earner : Sally, Pat. Annual income amount: $90797.00, $300803.00. Income tax amount: $29963.01, $72192.72. What is Sally's tax rate?- What is Pat's tax rate?-

- 33% - 24%

In anticipation of a major hurricane hitting the Gulf Coast, the quantity of gasoline sales rise from 360360 million gallons to 375375 million gallons. Based on this information, what is the percent change in gasoline sales? Please specify your answer to one decimal place and use the midpoint formula-

- 4.1% (look at pic for formula)

Which statement describes a monopoly?-

- A single firm produces a product with no close substitutes and control over the market price.

Which of the statements is true regarding advertising?-

- Advertising is only potentially effective if a firm has some market power.

The graph shows the costs of a firm in the short run. Match the labels to the curves they best represent. Note that not all labels will be used.-

- Average total cost, then marginal cost, then average variable cost.

Which of the following is the best definition of the opportunity cost of a decision?-

- Benefits from the best foregone alternative.

During the Obama administration, the development of low-cost batteries for electric cars received large amounts of federal funding in terms of subsidies. Meanwhile, American households gave a higher priority towards minimizing their environmental impact. Consider the market for zero-emissions electric vehicles where there is an upward-sloping supply curve and a downward-sloping demand curve. Which direction will demand and supply shift?- What will happen to the equilibrium price?- What will happen to the equilibrium quantity?-

- Both curves will shift right. - The change is ambiguous. - The quantity increases.

The graph shows the market for pizza cutters. Assuming $5 to be the equilibrium price for this market, please shade in consumer surplus (CS), producer surplus (PS), and total surplus (TS). Assume Fiona is willing to pay $8 for a pizza cutter. Tim also wants one, but is only willing to pay $6 for one. At a pizza baker's convention, Fiona buys the last pizza cutter at the market price just before Tim can buy it. Tim contacts the convention organizers and complains about missing out on the last pizza cutter. The organizers refund Fiona for the pizza cutter and allow Tim to buy it at the market price. What happens as a result of the organizers refunding Fiona, taking the pizza cutter from her, and letting Tim buy it at the market price?-

- CS is a triangle on the left above the middle, PS is a triangle on the left below the middle, and TS both CS and PS on the left side. - Consumer surplus decreases.

Below is the market for nonfat decaf lattes. Shade total consumer surplus (CS) on the graph by correctly placing the CS shaded area.-

- CS is a triangle on the left side and above the middle in the graph.

The accompanying table contains the willingness to pay for 5 students in the market for a new tablet. Identify which portion of the demand curve below represents each individual. Francisco is- Lily is- Amanda is- Julio is- Anthony is- Which students will purchase a tablet if the price of a tablet is $450?-

- D - C - B - E - A - Anthony

What do economists mean when they say behavior is "rational"?-

- Individuals making choices which help them reach their goals.

If Mary can bake a cake at a lower opportunity cost than Sarah can, then:-

- Mary has a comparative advantage in baking cakes.

Assume Maisey works at Dairy Princess, a top‑notch fast‑food restaurant where Maisey earns $8.008.00 per hour. Maisey took the day off from Dairy Princess today to go see the Yankees play the Cardinals live at the local stadium. Maisey paid $40.0040.00 for a non-refundable ticket, but after the third inning, the Yankees are losing 14-0 to the Cardinals. Although Maisey is no longer enjoying the game, she does not really have any other ideas on how to spend the afternoon. Then, she gets a text from Dora, one of her coworkers, asking if Maisey would be willing to come in and work the rest of Dora's shift for her. Maisey calculates that if she left the game immediately, she could get to Dairy Princess in time to pick up three paid hours. Should Maisey leave or stay at the game?-

- She should leave and go work the extra hours at Dairy Princess.

Which curve in the graph is the long‑run industry supply curve?-

- Supply curve B

The accompanying graph represents the supply of printer ink cartridges. The current price of ink (per cartridge) is $20 and indicated by the point on the supply curve. Suppose the price of cartridges increases to $24. Illustrate on the graph how the market for Ink Cartridges changes.-

- Supply curve doesn't move, only the dot moves to (7,24)

The graph depicts the total cost (TC), total variable cost (TVC), and total fixed cost (TFC) curves. Identify the curves.-

- TC, then TVC, then TFC.

Each graph illustrates three short-run cost curves for firms, where ATC is average total cost (aka average cost), MC is marginal cost, and AVC is average variable cost. Which graph correctly represents the relationship between all three cost curves?-

- The first graph where ATC is above AVC and nothing intersects.

In economics, what is meant by "optimal decisions are made at the margin?"-

- The idea of the margin is related to making decisions while thinking about the benefits and costs of small changes in behavior.

Which is NOT an example of a behavior exhibited in a market economy?-

- The president of the European country of Semolina decrees that pasta must be consumed at all meals in an effort to help domestic pasta makers.

Andrew, a college student, loves drinking coffee late at night to study for exams. Having a small income, he is used to buying cheap, bad-tasting coffee that he needs to grind and brew himself. The coffee tastes putrid but, with enough cream and sugar, Andrew is able to tolerate it. Occasionally, he does go out to Starbucks when he has spare money. After graduation, Andrew gets a job working at a database firm as a programmer. His income is now a healthy $75,000 a year and he decides he's had enough bad-tasting coffee. He ends up buying coffee daily from Starbucks even though it costs significantly more. Andrew's demand for Starbucks coffee changed as a result of-

- a change in income.

Which is most likely to be a natural monopoly?-

- a firm that provides electricity to all of the homes in Los Angeles

Select the best definition of a public good.-

- a good that is nonexcludable and nonrival in consumption

Identify whether each scenario is an example of a regressive or a progressive tax. A sales tax on food and clothing is an example of- An additional sales tax on cars bought for over $50,000 is an example of-

- a regressive tax - a progressive tax

How does the ability to product differentiate benefit a monopolistically competitive firm? Product differentiation-

- allows monopolistically competitive firms to compete on price and quality.

Betty lives in a state where the minimum legal price for a gallon of milk is $2.50. She convinces a local dairy farmer to sell her milk for $2.00 per gallon instead. Betty and the farmer are participating in a-

- black market.

Monopolies exist because of barriers to entry, obstacles that prevent other firms from entering an industry and competing for market share. For each case below, indicate which barrier to entry applies. a. Coca-Cola's vast market share in the soft drink market:- b. China's control of the market for rare earths (a group of minerals used to produce electronics):- c. Pfizer's control of the production of Viagra:- d. The local utility company that can provide electricity to the entire market at a lower average cost than other producers:- e. Facebook's position in social media:-

- brand loyalty - control of a resource - legal barrier - economics of scale - network externalities

Marginal cost is the-

- change in total cost for a one unit change in output.

Suppose that in the market for cell phone service the number of competitors has dwindled until KrugTron Networks and Spa T. Wireless have become the only providers left in the nation. Seeking to boost their profits, the two companies secretly agree to a coordinated increase in their prices for cell phone minutes. This practice is known as-

- collusion.

The graph shows the market demand and supply curves for wheat, and assume it to be a perfectly (or purely) competitive good. Suppose that it is discovered that wheat farmers are earning positive economic profits. Assuming all else remains the same, show how the market responds to this discovery in the graph.-

- demand doesn't move, supply moves to the right.

The lease on Allison's apartment will expire next month, and she wants to move closer to campus. There are two apartments that she likes. Both are close to campus and in her price range. The first one is next door to a garage where local bands often practice late at night. The second one is next door to a donut shop that opens at 5 a.m. If she likes to stay up late and loves listening to all kinds of music, she will view the bands practicing as a(n)- If she is a morning person and loves the smell of donuts, she will view the donut shop as a(n)- If her roommate hates loud music, and the smell of donuts makes her sick, she will reject both apartments due to what she sees as-

- external benefit. - external benefit. - external cost.

The statements are about firms, profits, and economic costs. Determine if each statement is true or false and place the correct term next to each statement. 1. Economists assume that only corporations seek to maximize their profits.- 2. Normal profits are profits that are in excess of implicit and explicit costs.- 3. "Normal profit" and "zero economic profit" refer to the same concept.- 4. A partnership has most of the legal rights of individuals and can issue shares of stock to raise financial capital.- 5. Am entrepreneur who works for free during the early start‑up phases of a firm should not count forgone salary as an economic, or implicit, cost.- 6. Firms located in an area with access to lots of low‑cost labor tend to use low‑technology, labor‑intensive production processes.- 7. The percentage of Europeans who classify themselves as entrepreneurs is approximately half the percentage in the United States.-

- false - false - true - false - false - true - true

All of the concepts are integral to the definition of economics as a social science EXCEPT-

- money

In the figure is the production possibility frontier (PPF) for a society, Rubberland. On a given day, the society can produce according to the PPF shown and only makes rubber band balls and rubber hoses. Suppose the economy is currently producing at point A. A large earthquake destroys many of the factories in the region where hoses and rubber band balls are produced. Shift the PPF by moving the endpoints in the desired directions to show the impact of this event.-

- move point 1 to (0,100), then move point 2 to (60,0). Point A doesn't move.

The accompanying graph depicts the marginal cost (MC), average total cost (ATC), and marginal revenue (MR) curves for a perfectly competitive firm. Move point A to identify the profit-maximizing price and quantity for this firm.-

- move point A to (12,12)

Which of the following are characteristics of a monopoly market structure? In a monopoly,-

- no close substitutes are available, there is only one firm in the industry.

Answer the two questions relating to demand and the law of demand. Which can cause a shift in the demand curve? A change in- Which of the choices illustrates the law of demand? Pat-

- one of the determinants of demand - wants to buy more candy bars at $1 than at $2.

Monopolies and monopolistically competitive firms differ in that monopolies- Firms in monopolistic competition-

- participate in markets where barriers to entry are present. - differentiate their products.

Farmer Andy raises goats. When he can sell his goats for $200/goat he will sell any or all of his goats. He never asks for more than $200/goat and he never sells his goats for less than $200/goat. This is an example of-

- perfectly elastic supply.

Assume that in the market for ramen noodles, a price increase would lead to complete disinterest in the product, whereas a price decrease would cause all college students in the city to flock to the grocery store to buy every last package of ramen noodles. Please draw the demand curve for ramen noodles, given these assumptions, in the graph by moving the two points.

- point 1 at (0,5), point 2 at (10,5)

Steve decides not to rent out his second home since he is not allowed to set the rate above $1000$1000 per month even though he knows he could find renters willing to pay much more. Select the term that best fits the scenario.-

- price ceiling.

The graph illustrates the relationship between taxes paid and income level. Please identify the relevant curves with the tax type shown.-

- progressive tax, then proportional tax, then regressive tax.

The table contains the demand and supply schedule for apartments in a city. Suppose the city council feels that the equilibrium rent is too high and imposes a price ceiling of $750/month. Rent/month: $1,750, $1,500, $1,250, $1,000, $750; Quantity demanded: 300, 600, 1200, 2400, 4800; Quantity supplied: 4800, 2400, 1200, 600, 300. The price ceiling results in a- The city now has a shortage or surplus of how many apartments- -

- shortage - 4500 apartments.

Which of the following is not a characteristic of a perfectly competitive market?-

- some control over price

The long run is best defined as a time period- One thing that distinguishes the short run from the long run is-

- that is long enough to change all factors of production. - whether any costs are fixed.

Ronald Coase's ideas on property rights have helped economists and policymakers better understand environmental problems. Identify the true statement regarding Coase and property rights. Coase contended that-

- the assignment of property rights to someone is essential.

Which of the markets is the best example of monopolistic competition?-

- the fast food industry

Daniel has decided to open his own bakery using locally sourced ingredients and supplies. He provides income and jobs to local suppliers. He also provides his community with a place to buy delicious baked goods. This is an example of-

- the invisible hand.

Utility is the measure of-

- the satisfaction a good or service gives to the consumer.

Determine whether the statements are true or false. A monopolistic competitor, much like a firm in perfect competition, sells its product at a point where price is equal to marginal cost.- Advertising can play a role as an indirect signal of product quality to customers.-

-False -True