ECO-215-501

Which of the following statements about a well-maintained yard best conveys the general nature of the externality?

A well-maintained yard conveys a positive externality because it increases the value of adjacent properties in the neighborhood.

Which of the following is not an example of price discrimination A. A movie theater charges a lower price for a child's ticket than for an adult's ticket. B. A local pizza chain offers a "buy three get one free" deal. C. A university rebates part of the cost of tuition in the form of financial aid for underprivileged students. D. An ice cream parlor charges a higher price for ice cream than for sherbet.

An ice cream parlor charges a higher price for ice cream than for sherbet

Which of the following represents the firm's short-run condition for shutting down? Shut down if TR < FC Shut down if TR < TC Shut down if TR < VC Shut down if P < ATC

Shut down if TR < VC

Monopoly firms face

downward-sloping demand curves, so they can sell only the specific price-quantity combinations that lie on the demand curve.

Externality

rises when a person engages in a activity that influences the well being of a bystander

A benevolent social planner would prefer that the output of good x be increased from its current level if, at the current level of output of good x

social cost = private cost = private value < social value

Which of the following goods is rival and excludable?

A congested toll road

Which of the following firms is the closest to being a perfectly competitive firm?

A grain farmer in Illinois

Suppose a firm in a competitive market earned $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold?

$10 and 100 units

Katherine gives piano lessons for $15 per hour. She also grows flowers, which she arranges and sells at the local farmer's market. One day she spends 5 hours planting $50 worth of seeds in her garden. Once the seeds have grown into flowers, she can sell them for $150 at the farmer's market. Katherine's accounting profits are

$100, and her economic profits are $25.

Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales. If the firm increases its output to 200 units, the average revenue of the 200th unit will be

$12

A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. Refer to Scenario 15-1. At Q = 500, the firm's total revenue is

$30,000.

A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. Refer to Scenario 15-1. At Q = 500, the firm's marginal cost is

$30.

Ziva is an organic lettuce farmer, but she also spends part of her day as a professional organizing consultant. As a consultant, Ziva helps people organize their houses. Due to the popularity of her home-organization services, Farmer Ziva has more clients requesting her services than she has time to help if she maintains her farming business. Farmer Ziva charges $25 an hour for her home-organization services. One spring day, Ziva spends 10 hours in her fields planting $130 worth of seeds on her farm. She expects that the seeds she planted will yield $300 worth of lettuce. Refer to Scenario 13-3. An economist would calculate Ziva's total cost for the day of farming to equal

$380

Bev is opening her own court-reporting business. She financed the business by withdrawing money from her personal savings account. When she closed the account, the bank representative mentioned that she would have earned $300 in interest next year. If Bev hadn't opened her own business, she would have earned a salary of $25,000. In her first year, Bev's revenues were $30,000, and she spent $1,000 on materials and supplies. Which of the following statements is correct?

Bev's economic profit is $3,700

A regional lobster management board recently proposed a five-year moratorium on lobster fishing in the Atlantic waters south of Cape Cod based on a study of the lobster population. Which of the following statements is not correct?

If left unregulated, the lobster population will likely increase.

To maximize total surplus with a monopoly firm, a benevolent social planner would choose the level of output where

MC intersects the demand curve.

A city street is

a common resource when it is congested, but it is a public good when it is not congested

When an industry is a natural monopoly

a larger number of firms will lead to a higher average total cost

Which of the following expressions is correct?

accounting profit = economic profit + implicit costs

Suppose that for a particular business there are no implicit costs. Then

accounting profit will be the same as economic profit

For an individual firm operating in a competitive market, marginal revenue equals

average revenue and the price for all levels of output.

When a firm has a natural monopoly, the firm's

average total cost curve is downward sloping.

When firms are said to be price takers, it implies that if a firm raises its price,

buyers will go elsewhere

For a firm, marginal revenue minus marginal cost is equal to

change in profit

The parable called the Tragedy of the Commons applies to goods such as

clean air and clean water

Pay-per-view broadcasts are

club goods.

When a firm operates under conditions of monopoly, its price is

constrained by demand

Whenever a perfectly competitive firm chooses to change its level of output, its marginal revenue

does not change

If the production of computer chips yields greater technology spillovers than the production of potato chips, the government should

encourage the production of computer chips with subsidies

In the short run, a firm that produces and sells house paint can adjust

how many workers to hire.

Price discrimination adds to social welfare in the form of

increased total surplus.

The minimum points of the average variable cost and average total cost curves occur where the

marginal cost curve intersects those curves.

If the distribution of water is a natural monopoly, then

multiple firms would likely each have to pay large fixed costs to develop their own network of pipes.

If a road is congested, then use of that road by an additional person would lead to a

negative externality

A good is excludable if

people can be prevented from using it.

Total revenue equals

price × quantity.

Goods that are excludable include both

private goods and club goods.

The deadweight loss associated with a monopoly occurs because the monopolist

produces an output level less than the socially optimal level

It is commonly argued that national defense is a public good. Nevertheless, the weapons used by the U.S. military are produced by private firms. We can conclude that

weapons are rival in consumption and excludable, but national defense is not rival in consumption and not excludable