Eco exam 3 part 1/2 1-24

A negative externality is a cost to the seller. exists with all market transactions. Correct! is a cost to a bystander. is a cost to the buyer.

b

A paper plant produces water pollution during the production process. If the government forces the plant to internalize the negative externality, then the demand curve for paper would shift to the left. demand curve for paper would shift to the right. Correct! supply curve for paper would shift to the left. supply curve for paper would shift to the right

b

A pizza is Correct! excludable and rival in consumption. excludable and nonrival in consumption. nonexcludable and nonrival in consumption. nonexcludable and rival in consumption

b

Congressman Smith and Congresswoman Johnson both consider themselves advocates for the national parks and are introducing different bills designed to benefit the parks. Congressman Smith's bill calls for an increase in the entrance fees. Congresswoman Johnson's bill calls for a decrease in the entrance fees. Which of the bills would be more effective at ensuring the quality of the national parks? Correct! Congressman Smith's bill because it will reduce the overuse of the parks Congresswoman Johnson's bill because more visitors means more citizens will value and care for the parks Neither bill would be effective. Both bills would be equally effective.

b

Economies of scale arise when Correct! workers are able to specialize in a particular task. individuals in a society are self-sufficient. fixed costs are large relative to variable costs. an economy is self-sufficient in production.

b

Figure 9-14. On the diagram below, Q represents the quantity of crude oil and P represents the price of crude oil. Refer to Figure 9-14. The country for which the figure is drawn You Answered has a comparative disadvantage relative to other countries in the production of crude oil and it will export crude oil. Correct Answer has a comparative advantage relative to other countries in the production of crude oil and it will export crude oil. has a comparative advantage relative to other countries in the production of crude oil and it will import crude oil

b

For private goods allocated in markets, the government guides the decisions of buyers and sellers and these decisions lead to an inefficient allocation of resources. You Answered the government guides the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources. Correct Answer prices guide the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources.

b

Refer to Figure 10-10. An increase in output from 120 units to 160 units would be an action of which a benevolent social planner would approve. Correct Answer move the market from a socially efficient outcome to a socially inefficient outcome. increase the external cost per unit of output. You Answered increase total economic well-being.

b

Refer to Figure 10-4. If all external costs were internalized, then the market's equilibrium output would be Correct! Q2. Q3. Q4. Q1.

b

Refer to Figure 9-1. When trade in coffee is allowed, producer surplus in Guatemala decreases by the area G. increases by the area B + D. decreases by the area C + F. Correct! increases by the area B + D + G.

b

Refer to Figure 9-3. Relative to a no-trade situation, which of the following comes with trade? Consumer surplus decreases by $1,000 and producer surplus increases by $1,750. Consumer surplus increases by $1,800 and producer surplus increases by $1,600. Correct! Consumer surplus decreases by $1,000 and producer surplus increases by $1,500.

b

Scenario 13-8 Wanda owns a lemonade stand. She produces lemonade using five inputs: water, sugar, lemons, paper cups, and labor. Her costs per glass are as follows: $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor. She can sell 300 glasses for $0.50 each. Refer to Scenario 13-8. What are Wanda's total accounting profits? $150 Correct Answer $126 You Answered $96

b

Suppose that a firm has only one variable input, labor, and firm output is zero when labor is zero. When the firm hires 6 workers it produces 90 units of output. Fixed cost of production are $6 and the variable cost per unit of labor is $10. The marginal product of the seventh unit of labor is 4. Given this information, what is the total cost of production when the firm hires 7 workers? $66 $906 $946 Correct! $76

b

The Coase theorem suggests that private solutions to an externality problem are only efficient when there are negative externalities. may not be possible because of the distribution of property rights. Correct! will usually allocate resources efficiently if private parties can bargain without cost. are effective under all conditions.

b

The Flying Elvis Copter Rides Quantity Total Cost Fixed Cost Variable Cost Marginal Cost Average Fixed Cost Average Variable Cost Average Total Cost 0 $50 $50 $0 -- -- -- -- 1 $150 A B C D E F 2 G H I $120 J K L 3 M N O P Q $120 R Refer to Table 13-7. What is the value of C? $25 $200 $50 Correct! $100

b

The Tragedy of the Commons results when a good is Correct Answer rival in consumption and not excludable. You Answered both rival in consumption and excludable. neither rival in consumption nor excludable. excludable and not rival in consumption.

b

The commercial value of ivory is a threat to the elephant, but the commercial value of beef is a guardian of the cow. This is because cows and elephants are public goods, but ivory is nonrival. the cow is raised in developed countries, while the elephant lives primarily in less-developed countries. ivory is nonrival and nonexclusive, but beef is rival and exclusive. Correct! cows are private goods, while elephants tend to roam freely without owners.

b

When one firm sells its pollution permit to another firm, the total amount of pollution remains the same. both firms benefit. the total amount of pollution decreases. Correct! Both a and b are correct

b

Which of the following arguments for trade restrictions is often advanced? Trade restrictions are necessary for economic growth. Correct! Trade restrictions are sometimes necessary for national security. Trade restrictions make all Americans better off. Trade restrictions increase economic efficiency.

b

Which of the following is not a public good? national defense the elimination of poverty Correct! patented technological knowledge general knowledge

b

Which of the following is not correct? Governments can sometimes improve market outcomes. Correct Answer Externalities cannot be positive. Markets allocate scarce resources with the forces of supply and demand. You Answered The equilibrium of supply and demand is typically an efficient allocation of resources.

b

Which of the following is the most accurate statement? Almost all economists insist that it is never appropriate to protect "key" industries, even when there are legitimate concerns about national security. Correct! The idea that one nation might want to threaten another nation with a trade restriction is associated with the protection-as-a-bargaining-chip argument for restricting trade.

b

Which of the following statements is not correct? Private markets tend to over-produce products with negative externalities. Private markets tend to under-produce products with positive externalities. Private parties can bargain to efficient outcomes even in the presence of externalities. Correct! Private parties are usually more successful in achieving efficient outcomes than government policies.

b