Midterm Exam 2 ECON

Refer to figure 8-2. Producer surplus without the tax is.. A. $4 and a producer surplus with the tax is $1 B. $1 and producer surplus with the tax is $4 C. $6 and a producer surplus with the tax us $1.5 D. $1.5 and a producer surplus with the is $6

A. $4 and a producer surplus with the tax is $1

Refer to figure 10-5. Benevolent social planner would prefer... A. A $48 price to any other price B. 140 units to any other quantity of output C. A subsidy of $52 per unit to a subsidy of $54 per unit D. A tax of $54 per unit to a subsidy of $54 per unit

B. 140 United to any other quantity of output

Refer to figure 8-2. The loss of producer surplus for those sellers of the good who continue to sell it after the tax is imposed is A. $1.5 B. $1 C. $2 D. $3

C. $2

Refer to table 13-10. How many instructional modules are produced when marginal cost is $1300? A. 4 B. 5 C. 7 D. 8

D. 8

Refer to figure 14-2. If the market price is $6, what is the firms short-run economic profit? A. $0 B. $12 C. $15 D. $18

A. $0

Refer to table 7-7. Suppose each of the five sellers can supply at most one unit of the good. The market quantity supplied exactly 4 if the price is... A. $1,150 B. $1,400 C. $700 D. $900

B. $1,400

Refer to figure 7-2. At the equilibrium price, consumer surplus is A. $600 B. $800 C. $1,600 D. $200

B. $800

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it A. Maximize both the total revenue for firms in the quantity supplies of the product B. Maximize the combined welfare of buyers and sellers C. Minimizes cost and maximize output D. Minimizes the level of welfare payments

B. Maximize combined welfare of buyers and sellers

Refer to figure 14-2. If the market price is $10, what is the firms total cost? A. $15 B. $30 C. $35 D. 50

C. $35

Which of the following trade policies would benefit producers, hurt consumers, and increase the amount of trade? A. The increase of a tariff in an importing country B. The reduction of a tariff in an importing country C. Starting to allow trade when the world price is greater than the domestic price D. Starting to allow trade when the world price is less than the domestic price

C. Starting to allow trade when the world price is greater than the domestic price

Refer to figure 8-2. The amount of deadweight loss as a result of the tax is A. $2.5 B. $6 C. $4 D. $5

A. $2.5

Soji opens up A lemonade stand for two hours. He spends $10 for ingredients and sells $60 worth of lemonade. In the same 2 hours, he could have mowed his neighbors lawn for $40. Soji earns an accounting profit of ——— and an economic profit of ——— A. $50, $10 B. $90, $50 C. $10, $50 D. $50, $90

A. $50, $10

Refer to figure 9-1. With grade, Usaki will... A. Export 11 units of coffee B. Export 5 units of coffee C. Import 15 units of coffee D. Import 6 units of coffee

A. Export 11 units of coffee

Suppose the world price of a television is $300. Before Paraguay allowed trade in televisions, the price of a television there was $350. Once Paraguay began allowing trade in televisions with other countries, Paraguay began... A. Importing televisions and the price of television in Paraguay decreased to $300 B. Importing televisions and the price of a television in Paraguay remained at $350 C. Exporting televisions and the price of a television in Paraguay decreased to $300 D. Exporting televisions and the price of a television in Paraguay remained at $350

A. Importing televisions and the price of television in Paraguay decreased to $300

When the government Levis a tax and a good equal to the external cost associated with goods production, it ——— the price paid by consumers and make the market outcome ——— efficient A. Increase, more B. Increase, less C. Decrease, more D. Decrease, less

A. Increase, more

If a profit maximizing, competitive firm is producing a quantity at which marginal cost is between average variable cost and average total cost it will... A. Keep producing in the short run but exit the market in the long run B. Shut down in the short run but return to production in the long run C. Shut down in the short run and exit the market in the long run D. Keep producing both in the short run and in the long run

A. Keep producing in the short run but exit the market in the long run

Refer to figure 14-2. If the market price is $9, the firm in this competitive market will earn... A. Positive profits B. Zero profits C. Losses but will remain in business D. Losses and will shut down

A. Positive profits

If a policy maker wants to raise revenue by taxing good while minimizing the deadweight losses, he/she should look for goods with ——— elasticities of demand and ——— elasticities of supply A. Small, small B. Small, large C. Large, small D. Large, large

A. Small, small

Assume a firm in a competitive industry is producing 800 units of output, and it sells each unit for $6. Its average total cost is $3. Its profit is... A. -$2,400 B. $2,400 C. $3,200 D. $8,000

B. $2,400

The government auctions are 500 unities of pollution rates. The right sell for $50 per unit, raising $25,000 of revenue for the government. This policy is equivalent to a corrective tax of ——— per unit of pollution A. $10 B. $50 C. $450 D. $500

B. $50

Refer to table 13-10. What is the average variable cost for the month if 6 instructional modules are produced? A. $180 B. $533 C. $700 D. $713.33

B. $533

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 ... A. $63 B. $85 C. $149 D. $77

B. $85

Refer to table 14-6. The firm should not produce an output level beyond... A. 4 units B. 5 units C. 6 units D. 7 units

B. 5 units

The government imposes a $1000 per year license fee and all pizza restaurants. As a result, which cost curve shift? A. Average total cost and marginal cost B. Average total cost and average fixed cost C. Average variable cost and marginal cost D. Average variable cost and average fixed cost

B. Average total cost and average fixed cost

Gavin has been working full-time as a gardener for $300 a week. In the market price of gardeners rises to $400, Hector becomes a gardener as well. How much does producer surplus rise as a result of this price increase? A. By less than $100 B. Between $100 and $200 C. Between $200 and $300 D. By more than $300

B. Between $100 and $200

Refer to figure 10-6. Each unit of plastics that is produced results in an external... A. Cost of $9 B. Cost of $12 C. Benefit of $9 D. Benefit of $12

B. Cost of $12

The world price of a ton of steel is $1000. Before Russia allowed trade in steel, the price of a ton of steel there was $650. Once a Russia allowed trade and steel with other countries, Russia began... A. Exporting steel and the price per ton in Russia remained at $650 B. Exporting steel and the price per ton in Russia increased to $1000 C. Importing still and the price per ton in Russia remained at $650 D. Importing steel and the price per ton in Russia increase to $1000

B. Exporting steel and the price per ton in Russia increased of $1000

Robin owns a horse stable and riding academy and gives riding lessons for children at pony camp. His business operates in a competitive industry. Robin gives riding lessons to 40 children per month. His monthly total revenue is $4000. The marginal cost of pony camp is $150 per child. In order to maximize profits, Robin should... A. Give riding lessons to more than 40 children per month B. Give riding lessons to fewer than 40 children per month C. Continue to give riding lessons to 40 children per month D. We do not have enough information to answer the question

B. Give riding lessons to fewer than 40 children per month

Refer to figure 9-1. When trading coffee is allowed, producer surplus in Usaki... A. Increases by the area B+F B. Increases by the area B+F+H C. Decreases by the area A+D D. Decreases by the area H

B. Increases by the area B+F+H

Economies of scale occur when... A. Long-run average total costs rise as output increases B. Long-run average total costs fall as output increases B. Average fixed costs are falling C. Average fixed costs are constant

B. Long-run average total cost for as output increases

A perfectly competitive firm... A. Chooses its price to maximize profits B. Takes its prices given by market conditions C. Set its price to undercut other firms selling similar products D. Picks the price that yields the largest market share

B. Takes its price is given by market conditions

Zaria and Hannah are roommates. Zaria assigns a $30 value to smoking cigarettes. Hannah values smoke-free air at $15. Which of the following scenarios is a successful example of the Coase theorem? A. Hannah offers Zaria $20 not to smoke. Zaria accepts and does not smoke. B. Zaria pays Hannah $16 so that Zaria can smoke C. Zaria pays Hannah $14 so that Zaria can smoke D. Hannah offers Zaria $15 not to smoke. Zaria accepts and does not smoke

B. Zaria pays Hannah $16 so that Zaria can smoke

Refer to figure 8-2. The loss of consumer surplus as a result of the tax is A. $3 B. $2 C. $4.5 D. $1.5

C. $4.5

Refer to figure 8-2. The amount of tax revenue received by the government is A. $1 B. $10 C. $5 D. $6

C. $5

Billy Joe values a stainless steel water dishwasher for her new house at $500, but she succeeds in buying one for $425. Billy Joe's willingness to pay for the dishwasher is A. $150 B. $425 C. $500 D. $850

C. $500

Suppose a certain firm is able to produce 125 units of output per day when 19 workers are hired. The firm is able to produce 137 units of output per day when 20 workers are hired, holding other inputs fixed. The marginal product of the 20th worker is... A. 6 units of output B. 7 units of output C. 12 units of output D. 137 units of output

C. 12 units of output

Refer to figure 7-9. If the price were P2, Producer surplus would be represented by the area A. A. B. A+B+C C. D+H+F D. A+B+C+D+H+F

C. D+H+F

Refer to figure 9-1. When trading coffee is allowed, consumer surplus in Usaki... A. Increases by the area B+F B. Increases by the area A+D C. Decreases by the area B+F D. Decreases by the area F+H

C. Decreases by the area B+F

When a country is on the downward sloping side of the laffer curves, a cut in the tax rate will... A. Decrease tax revenue and decrease the deadweight loss B. Decrease tax revenue and increase the deadweight loss C. Increase tax revenue and decrease deadweight loss D. Increase tax revenue and increase the deadweight loss

C. Increase tax revenue and decrease deadweight loss

Refer to figure 9-6. The tariff.. A. Decreases producer surplus by the area C and decreases consumer surplus by the area C+ D+ E+ F B. Decreases producer surplus by the area C+ D and decreases consumer surplus by the area D + C + F C. Increases producer surplus by the area C and decreases consumer surplus by the area C+ D+ E + F D. Increases producer surplus by the area B+ C and decrease consumer surplus by the area D + E + F

C. Increases producer surplus by the area C and decreases consumer surplus by the area C+ D+ E+ F

Refer to table 14-6. The firm will produce a quantity greater than three because at three units of output, marginal cost... A. Is greater than marginal revenue B. Equals marginal revenue C. Is less than marginal revenue D. Is minimized

C. Is less than marginal revenue

If the United States threatens to impose a tariff on Columbian coffee if Columbia does not remove agricultural subsidies, the United States will be... A. Better off regardless of how Columbia responds B. Better off if Columbia removes the subsidies, and will be no worse off if it doesnt C. Worse off if Columbia doesn't remove the subsidies in response to the threat D. Worse off regardless of how Columbia responds

C. Worse off of Columbia doesn't remove the subsidies in response to the threat

Producing a quantity larger than the equilibrium of supply and demand is inefficient because of marginal buyers willingness to pay is A. Negative B. Zero C. Positive but less than the marginal sellers cost D. Positive and greater than the marginal sellers cost

C: positive but less than the marginal sellers cost

Zaid's Tent Company Has total fixed cost of $200,000 per year. The firms average variable cost is $65 for 10,000 tents. At that level of output, the firms average total costs equal... A. $55 B. $65 C. $75 D. $85

D. $85

As Bubba's Bubble Gum Company adds workers while using the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Bubba's Bubble Gum Company encounters ... A. Economies of scale B. Diseconomies of scale C. Increasing marginal product D. Diminishing marginal product

D. Diminishing marginal product

When a tax is imposed on a good, the A. Supply curve for the good always shifts B. Demand curve for the good always shifts C. I'm out of the good that buyers are willing to buy at each price always remains unchanged D. Equilibrium quantity of the good decreases

D. Equilibrium quantity of the good decreases

Which of the following statements is not correct? A. A patent is a way for the government to encourage the production of a good with technology spill overs B. A tax is a way for the government to reduce the production of a good with a negative externality C. A tax that accurately reflects the external costs produces the socially optimal outcome D. Government policies cannot improve upon private market outcomes

D. Government policies cannot improve upon private market outcomes

When an externality is present, the market equilibrium is... A. Efficient, and the equilibrium maximize the total benefit to a society as a whole B. Efficient, but the equilibrium does not maximize the total benefit to a society as a whole C. Inefficient, but the equilibrium maximize the total benefit to a society as a whole D. Inefficient, and the equilibrium does not maximize the total benefits of society as a whole

D. Inefficient, and the equilibrium does not maximize the total benefits of society as a whole

Most economists prefer corrective taxes to regulation as a way to correct the problem of pollution because the market-based solution ... A. Is less efficient B. Can result in a greater increase in pollution C. Lowers revenue for the government D. Is less costly to society

D. Is less costly to society

In the economy of agripepsi, tenant farmers rent the land they use from land owners. If the supply of land is perfectly inelastic, then a tax on land would have ——— deadweight losses, and the burden of the tax would fall entirely on the ——— A. Sizable, farmers B. Sizable, landowners C. No, farmers D. No, landowners

D. No, landowners