ECO/365T Week 1 ,2 Practice test
The law of supply suggests that the price elasticity of supply is
positive.
Which one of the following is not assumed to be constant when the supply curve for a product is drawn?
price of the product
If a good that generates negative externalities were priced to take these negative externalities into account, its
price would increase, and its output would decrease.
Pam sees that the price of bananas has risen in the grocery store. All else equal, she decides to buy more tangerines than she normally purchases. From the information given, you might conclude that:
tangerines and bananas are substitutes.
The demand curve faced by a nondiscriminating pure monopoly is _____.
the same as the industry's demand curve
A negative externality or spillover cost (additional social cost) occurs when
the total cost of producing a good exceeds the costs borne by the producer.
Which of the following is not a main function of the entrepreneur?
to make routine pricing decisions
When the production of a good generates external costs, a firm's private supply curve will be
to the right of the social supply curve.
Tastes and preferences generally do not change for goods or services in markets.
False
When interpreting the Ed value as either elastic or inelastic, we look at the
absolute value of the Ed coefficient (dropping the negative sign).
When economists describe "a market," they mean
any place where, or mechanism by which, buyers and sellers interact to trade goods, services, or resources.
If the long-run average total cost curve for a firm is horizontal in a relevant range of production, then it indicates that there
are constant returns to scale.
In understanding and analyzing "market supply," we focus on how much all firms
are willing and able to supply at different prices.
The table below represents how Marco feels about chocolate candy bars. a. Fill in the missing values for total utility and marginal utility. Instructions: Enter your answers as a whole number. Chocolate Candy Bars and Marco's Utility Chocolate Candy Bars Total Utility (utils) Marginal Utility (utils) 0 0 — 1 25 25 25 Correct 2 42 42 Correct 17 3 54 12 12 Correct 4 62 62 Correct 8 8 Correct 5 66 4 6 65 65 Correct -1 Suppose Marco currently has two candy bars. You tell Marco you will give him either a soda, which gives him 22 utils of happiness, or two additional candy bars. b. Which is he likely to prefer? A soda Correct
b. Which is he likely to prefer? A soda Correct
The decision-making process followed by consumers to maximize utility assumes that
consumers behave rationally, attempting to maximize their satisfaction.
Variable costs are
costs that change with the amount of output a firm produces.
Use the figure below to answer the following question.For which graph is the supply perfectly inelastic?
graph 3
In deciding what to buy to maximize utility, the consumer should choose the good with the
highest marginal utility per dollar spent.
If the absolute value of the price elasticity of demand for a good is .75, the demand for that good is described as
inelastic.
Use the figure below to answer the following question.The diagram concerns supply adjustments to an increase in demand (D1 to D2) in the immediate period, the short run, and the long run. Supply curves S1, S2, and S3 apply to the
long run, short run, and immediate period respectively.
Use the following table to answer the question below. Price per Unit Quantity Demanded per Year Quantity Supplied per Year $5 2,000 0 10 1,800 300 15 1,600 600 20 1,400 900 25 1,200 1,200 30 1,000 1,500 There will be a shortage whenever the price is
lower than $25.
In a market, buyers want to pay the _____ possible price and sellers want to charge the _____ possible price.
lowest, highest
In many large U.S. cities, taxicab companies operate as near monopolies because of_____.
licenses
The cross-price elasticity of demand measures how sensitive purchases of a specific product are to changes in
the price of some other product.
A 10% decrease in the price of gas grills leads to a 15% increase in the demand for flank steaks. The cross-price elasticity of demand between gas grills and flank steaks is:
-1.5.
Assume that in a monopolistically competitive industry, firms are earning economic profit. This situation will
attract other firms to enter the industry, causing the existing firms' profits to shrink.
The elasticity of demand for a product is likely to be greater
the greater the amount of time over which buyers adjust to a price change.
Use the following graph for the milk market to answer the question below. There would be excess production of milk whenever the price is
less than $1.50 per gallon.
The total revenue received by sellers of a good is computed by
multiplying the price times the quantity sold.
The demand schedule for a product shows the relationship between how much of the product buyers are willing and able to buy and the
product's price.
The demand schedules for such products as eggs, bread, and electricity tend to be
relatively inelastic.
One major barrier to entry under pure monopoly arises from _____.
the cost of the infrastructure needed to produce.
Which of the following is an example of an oligopolistic market with a standardized product?
The market for aluminum
Which of the following will not cause a change in the demand for product A?
a change in the price of A
Fixed costs of production in the short run
cannot be reduced by producing less output.
In competitive markets, surpluses or shortages will
cause changes in the quantities demanded and supplied that tend to eliminate the excess production or excess demand.
Suppose that the market for corn is perfectly competitive. If corn farmers are currently generating losses, then we would expect that in the long run the market
supply curve will shift to the left.
Use the figure below to answer the following question. The figure above shows three supply curves for wheat. Which of the following would cause the quantity of wheat supplied to decrease from point b to point a?
a decrease in the price of wheat
Microeconomics is concerned with
a detailed examination of specific economic units that make up the economic system.
A nondiscriminating pure monopoly must decrease the price on all units of a product to sell more units. This explains why _____.
a pure monopoly's marginal revenue curve is below its demand curve
Pure monopoly refers to_____.
a single firm producing a product for which there are no close substitutes
Charlie is willing to pay $10 for a T-shirt that is priced at $9. If Charlie buys the T-shirt, then his consumer surplus is
$1.
Which of the following can best be characterized as a subject of macroeconomics?
An examination of inflation
Which of the following statements is true about supply?
As price increases, producers are willing and able to put more of the good on the market for sale.
The monthly demand and supply schedules for new cars at a large California dealership are shown in the table below. Market for New Cars Price (dollars) Quantity of Cars Demanded Quantity of Cars Supplied $30,000 0 250 25,000 100 225 20,000 200 200 15,000 300 175 10,000 400 150 If the dealership is currently charging $25,000 for a new car, at the end of the month there will be:
a surplus of 125 cars.
Marginal cost can be defined as the change in
cost resulting from one more unit of production
Consumer surplus
is the difference between the maximum price consumers are willing to pay for a product and the lower equilibrium price.
At a quantity of 130, marginal benefit equals ______ and marginal cost equals _____.
$1.60, $0.50
Graphically, producer surplus is measured as the area
above the supply curve and below the actual price.
The marginal benefit of an additional beach towel is $12. The marginal cost of producing an additional beach towel is $8. If producers are minimizing the average costs of production, then we can conclude:
beach towel production is not allocatively efficient but is productively efficient.
The most important purpose of a market is to
bring buyers and sellers together so they can trade.
A public good
cannot be provided to one person without making it available to others as well.
In competitive markets, a surplus or shortage will
cause changes in the quantities demanded and supplied that tend to eliminate the surplus or shortage.
A decrease in demand and an increase in supply will
decrease price and affect the equilibrium quantity in an indeterminate way.
If monopolistically competitive firms in an industry are making an economic profit, then new firms will enter the industry and the product demand facing existing firms will
decrease.
In perfect competition, the demand faced by a single firm is perfectly
elastic, because many other firms produce the same standardized product.
Total revenue decreases as the price of a good increases, if the demand for the good is
elastic.
Economists distinguish among the immediate period, the short run, and the long run by noting that
supply is most elastic in the long run and perfectly inelastic in the immediate period.
Use the following supply and demand graph for product X to answer the question below. What would happen if the government taxed the producers of this product because it has negative externalities in production?
supply would decrease
he table below shows the marginal revenue and costs for a monopolist. Demand, Costs, and Revenues Price (dollars) Quantity Demanded Marginal Revenue (dollars) Marginal Cost (dollars) Average Total Cost (dollars) $130 200 $110 $25 $139.00 120 300 90 32 103.30 110 400 70 40 87.50 100 500 50 50 80.00 90 600 30 62 77.00 80 700 10 77 77.00 What is the monopolist's profit at the profit-maximizing level of output?
$10,000
If you know that total fixed cost is $200, total variable cost is $600, and total product is 4 units, then average total cost must be
$200.
Use the following information to answer the next question. Harvey quit his job at State University where he earned $45,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10% interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 each. Of the $75, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.
$220,000
Suppose that a firm produces 200,000 units a year and sells them all for $10 each. The explicit costs of production are $1,500,000 and the implicit costs of production are $300,000. The firm earns an accounting profit of __________ and an economic profit of __________.
$500,000; $200,000
If you know that when a firm produces 8 units of output, average fixed cost is $12.50 and average variable cost is $81.25, then the average total cost associated with this output level is
$750.00.
If marginal cost exceeds average total cost in the short run, then which is likely to be true?
Average total cost is increasing.
Use the following graph to answer the question below. If the price is P3, then the total revenue is represented by area
B + C + D + E + F + G.
For which of the following products is demand likely to be the most elastic?
Converse All Star sneakers
What are the likely reason(s) that the market for electricity is not perfectly competitive? Select all that apply.
It is difficult to enter or exit the industry as a supplier. checkedCorrect There are few sellers in the market. checkedCorrect Electricity is not a standardized (homogeneous) product. unansweredIncorrect There are few buyers in the market. unansweredIncorrect
Which of the following is an example of a price ceiling?
Limits on interest rates charged by credit card companies.
Which of the following is an implicit cost of owning and operating a farm?
The money a farmer could earn by working for someone else
Hector would like to buy a new pair of soccer cleats. Hector prefers Adidas to Puma brand soccer cleats. But Hector chooses to buy the Puma brand cleats instead. Which of the following reasons for Hector's choice is consistent with rational consumer choice?
The price of Puma brand soccer cleats was less than the price of Adidas brand soccer cleats.
Who determines the price and quantity traded in a market?
buyers and sellers
Marginal utility is equal to
change in total utility divided by change in quantity consumed.
Mutual interdependence means that each firm in an oligopoly
considers the reactions of its rivals when it determines its pricing policy.
An industry in which its firms' cost structures do not vary with changes in production is referred to as a
constant-cost industry.
The difference between the maximum price a consumer is willing to pay for a product and the actual price the consumer pays is called
consumer surplus.
Macroeconomics
examines economies on a large scale, while microeconomics examines economic activity on a relatively small scale.
In the long run, the representative firm in monopolistic competition tends to have
excess capacity.
To an economist, the economic costs associated with the use of resources include
explicit and implicit costs.
A market with well-established rules and structure is a(n) _______ market.
formal
Use the figure below to answer the following question.
graph 3
Generic macaroni and cheese is an inferior good. Demand for generic macaroni and cheese is likely to increase when:
income decreases.
The definition of a normal good suggests that the
income elasticity of demand for the good is greater than 0
Time passes to allow lobstermen to adjust to market conditions
inelastic
A public good
is available to all and cannot be denied to anyone.
A monopolistically competitive firm's marginal revenue curve
is downward-sloping and lies below the demand curve.
A pure monopoly will find that marginal revenue _____.
is less than price
Which of the following is a land resource?
natural gas
Oligopolies are considered to be:
neither allocatively nor productively efficient.
If one person's consumption of a good does not preclude another's consumption, the good is said to be
nonrival in consumption.
The two main characteristics of a public good are
nonrivalry and nonexcludability
In which market model is there mutual interdependence?
oligopoly
External benefits in consumption refer to benefits accruing to those
other than the ones who consumed the product.
In analyzing human decision and action, economists assume that
people's behavior reflects rational self-interest.
The basic formula for the price elasticity of demand is
percentage change in quantity demanded/percentage change in price.
If the consumption of a product or service involves external benefits, then the government can improve efficiency in the market by
providing a subsidy to correct for an underallocation of resources.
The formula for the cross-price elasticity of demand is percentage change in
quantity demanded of B/percentage change in price of A.
In the circular flow model, households earn their incomes in the
resource markets.
The price elasticity of supply measures how
responsive the quantity supplied of X is to changes in the price of X
If product Y is an inferior good, a decrease in consumer incomes will
shift the demand curve for product Y to the right.
Economic analysis assumes "rational or purposeful behavior," which means that people will pursue decisions or actions
that will increase their well-being.
Which of the following defines marginal utility?
the additional satisfaction or happiness received from the consumption of an additional unit of a good or service
A positive externality or spillover benefit (additional social benefit) occurs when
the benefits associated with a product exceed those that accrue for consumers.
A constant-cost industry is one in which
the long-run supply curve is perfectly elastic.
A perfectly competitive firm will be willing to produce even at a loss in the short run, as long as
the loss is smaller than its total fixed costs.
Cross-price elasticity of demand is
unitary for secondary goods.
The representative firm in a perfectly competitive industry
will earn a normal profit in the long run.
The price elasticity of supply for a product will be 2 if a
1% decrease in price causes a 2% decrease in quantity supplied.
The demand and supply schedules for sunscreen at a small beach are shown below. Market for Sunscreen Price (dollars per bottle) Quantity of Sunscreen Demanded (bottles) Quantity of Sunscreen Supplied (bottles) $35 1,000 8,500 30 2,000 7,000 25 3,000 5,500 20 4,000 4,000 15 5,000 2,500 10 6,000 1,000 Instructions: Enter your answers as a whole number. a. If the price is $15 per bottle, how many bottles of sunscreen are demanded and supplied? Qd = 5,000 5,000 bottles Qs = 2,500 2,500 bottles In this case, there would be upward pressure on the price. b. What is the equilibrium price and quantity in the market for sunscreen? P = $ 20 20 Q = 4,000 4,000 bottles
The demand and supply schedules for sunscreen at a small beach are shown below. Market for Sunscreen Price (dollars per bottle) Quantity of Sunscreen Demanded (bottles) Quantity of Sunscreen Supplied (bottles) $35 1,000 8,500 30 2,000 7,000 25 3,000 5,500 20 4,000 4,000 15 5,000 2,500 10 6,000 1,000 Instructions: Enter your answers as a whole number. a. If the price is $15 per bottle, how many bottles of sunscreen are demanded and supplied? Qd = 5,000 5,000 bottles Qs = 2,500 2,500 bottles In this case, there would be upward pressure on the price. b. What is the equilibrium price and quantity in the market for sunscreen? P = $ 20 20 Q = 4,000 4,000 bottles
Which of the following markets is most likely to be perfectly competitive?
The market for mushrooms
Which of the following scenarios is likely to make the supply of Maine lobsters more elastic?
Time passes to allow lobstermen to adjust to market conditions
The figure below shows the average and marginal cost curves for producing cheeseburgers per hour.
a. At a quantity of 25 cheeseburgers per hour, the average total cost of production is falling Correct and the marginal cost of cheeseburger production is rising Correct . b. At a quantity of 35 cheeseburgers per hour, the average variable cost of production is rising Correct and the average total cost of cheeseburger production is falling Incorrect . answer is either rising or falling is Equal
Assume that the graphs show a competitive market for the product stated in the question. Select the graph above that best shows the change in the market for leather coats when leather coats become more fashionable among young consumers.
graph (1)
Producer surplus
is the difference between the minimum price producers are willing to accept for a product and the higher equilibrium price.
The economizing problem is essentially one of deciding how to make the best use of
limited resources to satisfy unlimited economic wants.
Use the figure below to answer the following question. The diagram above shows three supply curves for apples. A movement from point a to point b is caused by a change in the
price of apples in the market.
Answer the next question based on information in the following table. Product Percentage Change in Income Percentage Change in Quantity Demanded W −1 −1 X +6 +3 Y −1 +1 Z +4 +8 Which product would be an inferior good?
product Y
The price elasticity of supply measures how
responsive the quantity supplied of X is to changes in the price of X.
n which industry is monopolistic competition most likely to be found?
retail trade
What are the two characteristics that differentiate private goods from public goods?
rivalry and excludability
Allocative efficiency occurs only at that output where
the combined amounts of consumer surplus and producer surplus are maximized.
The opportunity cost of an action is always equal to:
the next-best alternative for the resources used to undertake the action.
If there are external benefits associated with the consumption of a good or service
the private demand curve will underestimate the true demand curve.
A pure monopoly will generate an economic profit whenever ____.
total revenue is greater than total cost
Total utility is best defined as the
total satisfaction received from consuming a good, service, or combination of goods and services.
In order to derive a market demand curve from individuals' demand curves, we add up the
various individuals' quantities demanded at each price.
If a monopolist is able to increase the amount of product she sells from 400 to 420 units by lowering the price of that product from $50 to $45, her marginal revenue is:
$-55
Use the following graph to answer the question below. The price where marginal benefit equals marginal cost is
$1.00
Use the following graph for the milk market to answer the question below. In this market, the equilibrium price is ____ and equilibrium quantity is ___
$1.50 per gallon; 28 million gallons.
Price per Unit Quantity Purchased by Consumer Quantity Sold by Producer $5 2,000 0 10 1,800 300 15 1,600 600 20 1,400 900 25 1,200 1,200 30 1,000 1,500 In the market shown in the table, the marginal cost of 600th unit is
$15.
If an increase in the price of pineapple juice of 10% results in an increase in the demand for grape juice of 5%, the cross-price elasticity of demand between pineapple juice and grape juice is:
0.5.
he table below shows the demand and total revenue for a monopolist. Fill in the "Marginal Revenue" column for the various prices and quantities. Instructions: Enter your answers as a whole number. Demand and Revenues Price (dollars) Quantity Demanded Total Revenue(dollars) Marginal Revenue (dollars) $50 30 $1,500 — 49 31 1,519 $ 19 19 Correct 48 32 1,536 17 17 Correct 47 33 1,551 15 15 Correct 46 34 1,564 13 13 Correct 45 35 1,575 11 11 Correct 44 36 1,584 9 9 Correct
19,17,15,13,11,9
Which of the following goods is nonrival?
A soccer match in a stadium
Use the following graph to answer the next question. To maximize profits, the perfectly competitive firm should produce output at
C
he table below presents four supply curves for the same product at four different time horizons. Supply in Four Time Horizons Price (dollars) Quantity Supplied in Horizon A Quantity Supplied in Horizon B Quantity Supplied in Horizon C Quantity Supplied in Horizon D $100 100 25 46 62.5 80 75 25 39 50.0 60 50 25 32 37.5 40 25 25 25 25.0 20 0 25 18 12.5 0 0 25 11 0.0 Which of the four time horizons is most likely to represent the firm's long-run supply curve?
Horizon A
The production of paper often creates a waste product that pollutes waterways. Assume the producer of paper does not directly pay to dispose of the waste in the water.
In this case, the price of paper will be below the socially efficient price and the amount of paper produced will be above the socially efficient amount.
For which of the following products is demand likely to be the most inelastic?
Table salt
Which of the following is an assumption of the decision-making process followed by consumers to maximize utility?
The consumer considers the prices of the products.
If nicotine in cigarettes is highly addictive, why would it make economic sense for producers of cigarettes to offer free samples of their products to young adults?
The free samples will help get people addicted to nicotine, which makes demand less elastic.
Which of the following statements is correct?
Total utility is the sum of marginal utilities.
Barney decides to quit his job as a corporate accountant, which pays $10,000 a month, and goes into business for himself as a certified public accountant. He runs his business from his converted garage apartment, which he could rent out for $300 a month if he wasn't using it as a home office. He must purchase office supplies worth $75 a month, and his monthly electricity bill has increased by $50 now that he is working out of his home office. After six months of working from home, Barney has earned an average of $12,000 per month.
What are Barney's average monthly accounting profits? $ 11,875 11,875 Correct b. What are Barney's average monthly economic profits? $ 10,425 10,425 Incorrect correct $1,575
Which of the following costs is an explicit cost for you?
You hire a worker who could have received the same wage working for your competitor.
Demand is said to be inelastic when
a reduction in price results in a decrease in total revenue.
The price elasticity of demand increases with the length of the period considered because
consumers will be better able to find substitutes.
For a linear demand curve
demand is elastic at high prices.
If a state decided to place a tax on home heating oil, over time:
demand would become more elastic and tax revenue would decline.
The ability of Intel to spread product development cost over a larger number of units of output arises from
economies of scale.
To economists, the main differences between "the short run" and "the long run" are that
in the long run all resources are variable, while in the short run at least one resource is fixed.
The utility of a good or service
is the satisfaction or happiness one receives from consuming it.
A perfectly competitive firm does not try to sell more of its product by lowering its price below the market price because
it can sell all it wants to at the market price.
Under monopolistic competition, entry to the industry is
more difficult than under pure competition but not nearly as difficult as under pure monopoly.
A nondiscriminating pure monopoly is generally viewed as being _____.
neither productively nor allocatively efficient
Implicit costs are
opportunity costs of using owned resources.
In perfect competition, if the market price of the product is initially higher than the minimum average total cost faced by the firms, then
other firms will enter the industry and the industry supply will increase.
Generally, we calculate elasticity as the:
percentage change in quantity demanded/supplied divided by the percentage change in price
If a firm is a price taker, then the demand curve for the firm's product is
perfectly elastic.
Use the figure below to answer the following question. An increase in price, all else held constant, would cause a change from
point 3 to point 4.
Which idea is inconsistent with perfect competition?
product differentiation
In the long run, the economic profits for a monopolistically competitive firm will be
the same as the profits for a purely competitive firm.
If a 10% increase in the price of one good results in no change in the quantity demanded of another good, then it can be concluded that the two goods are
unrelated.
For which product is the income elasticity of demand most likely to be negative?
used clothing
The satisfaction or happiness one gets from consuming a good or service is called
utility.
Use the following table to answer the question below. Price per Unit Quantity Demanded per Year Quantity Supplied per Year $5 2,000 0 10 1,800 300 15 1,600 600 20 1,400 900 25 1,200 1,200 30 1,000 1,500 In this competitive market, the price and quantity will settle at
$25 and 1,200 units.
The minimum acceptable price for a product that producer Sam is willing to receive is $15. The price he could get for the product in the market is $18. How much is Sam's producer surplus?
$3
In the market for a particular pair of shoes, Jena is willing to pay $75 for a pair while Jane is willing to pay $85 for a pair. The actual price that each has to pay for a pair of shoes is $65. What is the combined amount of consumer surplus for Jena and Jane?
$30.
If the price of Pepsi decreases, all else held constant, then we'd expect to see a consequent shift of the demand curve for
Coke to the left.
A recurring theme in economics is that people
Have unlimited economic wants, but limited resources
If some activity creates external benefits as well as private benefits, then economic theory suggests that the activity ought to be
If some activity creates external benefits as well as private benefits, then economic theory suggests that the activity ought to be
Which of the following scenarios is an example of a person interacting outside of a market?
Melissa votes for her favorite performer at a local talent show.
The market supply curve indicates the
Minimum acceptable prices that sellers are willing to accept for the product
Consumer surplus arises in a market because
The market price is below what some consumers are willing to pay for the product
Which of the following scenarios would likely shift the supply of cars to the left (decrease in supply)?
The price of steel and aluminum increase.
Use the figure below to answer the following question. The figure shows three supply curves for apples. If you observe the supply of apples shift from S1 to S3, which of the following could be responsible for this shift?
The producers of apples now must pay a tax.
Economic reasoning is based on the premise that:
all decisions or actions have a cost associated with them.
Use the figure below to answer the following question The figure above shows three supply curves for wheat. Which of the following would cause the quantity of wheat supplied to increase from point a to point b?
an increase in the price of wheat
The value that consumers get (from consuming a product) over and above what they actually paid for the product is called
consumer surplus.
A producer's minimum acceptable price for a particular unit of a good
equals the marginal cost of producing that particular unit.
Use the figure below to answer the following question. The diagram shows three supply curves for apples today. Which of the following would cause the current supply of apples to shift from S1 to S3?
expectations of higher apple prices in the future
Use the figure below to answer the following question. The diagram shows three supply curves for cars today. Which of the following would cause the supply of cars to shift from S1 to S2?
expectations of lower car prices in the future
If the equilibrium wage for fast-food restaurants is $8 and the government enforces a minimum wage of $15
fast-food restaurants will hire fewer workers.
An "increase in the quantity supplied" suggests a
movement up and to the right along the supply curve.
Texarkana Electric Company burns coal to heat the water that drives its electricity-producing turbines. The table below shows the marginal benefit of annual electricity consumption and the private marginal cost of annual electricity production. Marginal Cost and Marginal Benefit Quantity (millions of megawatts) MBprivate MCprivate MCexternal MCsocial 1.0 $145 $85 $ 20 20 $ 105 105 2.0 130 90 20 20 Correct 110 110 3.0 115 95 20 20 Correct 115 115 4.0 100 100 20 20 Correct 120 120 5.0 85 105 20 20 Correct 125 125 6.0 60 110 20 20 Correct 130 130
What is the (apparent) optimal amount of electricity for Texarkana Electric Company to produce each year? 4 4 Correct million megawatts per year Now assume the production of each million megawatts of electricity also produces sulfur dioxide (a precursor to acid rain). The external cost of the sulfur dioxide is $20 per million megawatts of electricity production. b. Fill in the external marginal cost (MCexternal) and the social marginal cost (MCsocial) columns in the table above. c. What is the socially optimal amount of electricity for Texarkana to produce if all costs and benefits are considered? 3 3 Correct million megawatts per year
Amanda keeps bees to produce honey. Each hive produces $300 worth of honey each month. The table below shows Amanda's marginal cost of tending each bee hive and her private marginal benefit, which is equal to the market value of the honey each hive produces. Marginal Cost and Marginal Benefit Quantity (hives) MCprivate MBprivate MBexternal MBsocial 1 $100 $300 $ 100 100 Correct $ 400 400 Correct 2 200 300 100 100 400 400 3 300 300 100 100 400 400 4 400 300 100 100 400 400 5 500 300 100 100 400 400
What is the optimal number of hives for Amanda to tend? 3 3 Correct hive(s) Now suppose that each of Amanda's bee hives also provides pollination services to surrounding farms and that these services are worth $100 per hive per month. b. Fill in the external marginal benefit (MBexternal) and the social marginal benefit (MBsocial) columns in the table above. c. What is the socially efficient number of hives for Amanda to tend if all costs and benefits are considered? 4 4 Correct hive(s)
Which of the following is a labor resource?
a computer programmer
Use the figure below to answer the following question. The diagram shows three supply curves for apples. Which of the following would cause the supply of apples to shift from S1 to S3?
a decrease in the number of apple farmers
magine that the market supply of peaches comes from Georgia (GA) and South Carolina (SC). The supply schedule below shows the quantity of peaches supplied in each state at each price.Individual and Market Supply of Peaches Quantity of Peaches Supplied (pounds) Price (dollars per pound) GA SC Market $10 20,000 18,000 38,000 38,000 8 16,000 15,000 31,000 31,000 6 12,000 12,000 24,000 24,000 4 8,000 9,000 17,000 17,000 2 4,000 6,000 10,000 10,000 In the table, complete the column labeled "Market." b. How many pounds of peaches will be supplied to the market when the price is $6 per pound? 24,000 pounds
ndividual and Market Supply of Peaches Quantity of Peaches Supplied (pounds) Price (dollars per pound) GA SC Market $10 20,000 18,000 38,000 38,000 8 16,000 15,000 31,000 31,000 6 12,000 12,000 24,000 24,000 4 8,000 9,000 17,000 17,000 2 4,000 6,000 10,000 10,000 Instructions: Enter your answers as a whole number. a. In the table, complete the column labeled "Market." b. How many pounds of peaches will be supplied to the market when the price is $6 per pound? 24,000 pounds
For most products, purchases tend to fall with decreases in consumers' incomes. Such products are known as
normal goods.
There is an excess demand in a market for a product when
quantity demanded is greater than quantity supplied.
There is a surplus in a market for a product when
quantity demanded is less than quantity supplied.
All else being equal, if the price of a product decreases, we would expect
quantity supplied to decrease.
The difference between the actual price that a producer receives and the minimum acceptable price the producer is willing to accept is called the producer
surplus.
Where there are spillover (or external) benefits from having a particular product in a society, the government can make the quantity of the product approach the socially optimal level by doing the following except
taxing the sellers of the product.
There is a shortage in a market for a product when
the current price is lower than the equilibrium price.
Marcus budgets $120 a week for groceries. When the price of all food goes up by 10% he buys less salmon. This can best be explained by:
the income effect.
Productive efficiency occurs at the point where
the production technique minimizes cost.
When economists speak of "demand" in a particular market, they refer to
the whole demand curve or schedule.
In order to derive the market supply curve from individual supply curves, we add up the
various quantities that individual sellers are willing and able to supply at different prices.
In understanding and analyzing "demand," we focus on how much of a product the buyers are
willing and able to buy at different prices.
