Econ 224 Exams 1 and 2

if the market price is $6, what is the firm's short-run economic profit? a. $0 b. $12 c. $15 d. $18

a. $0

the firm will shut down in the short run if the price of the good is a. $75 b. $85 c. $95 d. all of the above are correct

a. $75

as price falls from Pa to Pb, which demand curve represents the most elastic demand? a. D1 b. D2 c. D3 d. all of the above are equally elastic

a. D1

in panel (a), there will be a. a shortage b. equilibrium in the market c. a surplus d. lines of people waiting to buy the good

a. a shortage

the firm will earn a positive economic profit in the short run if the market price is a. above $6.30 b. less than $6.30 but more than $4.50 c. less than $4.50 d. exactly $6.30

a. above $6.30

if the solid horizontal line on the graph represents a price floor, then the price floor is a. binding and creates a surplus of 60 units of the good b. binding and creates a surplus of 20 units of the good c. binding and creates a surplus of 40 units of the good d. not binding, and there will be no surplus or shortage of the good

a. binding and creates a surplus of 60 units of the good

consider the market for portable air conditioners in equilibrium. a summer of unseasonably cool weather would cause a. both the equilibrium price and quantity to decrease b. both the equilibrium price and quantity to increase c. the equilibrium price to increase and the equilibrium quantity to decrease d. the equilibrium price to decrease and the equilibrium quantity to increase

a. both the equilibrium price and quantity to decrease

other things equal, the demand for a good tends to be more inelastic, the: a. fewer the available substitutes b. longer the time period considered c. more the good is considered a luxury good d. more narrowly defined is the market for the good

a. fewer the available substitutes

if a good is normal, then an increase in income will result in a(n) a. increase in the demand for the good b. decrease in the demand for the good c. movement down and to the right along the demand curve for the good d. movement up and to the left along the demand curve for the good

a. increase in the demand for the good

a perfectly price-discriminating monopolist is able to a. maximize profit and produce a socially-optimal level of output b. maximize profit, but not produce a socially-optimal level of output c. produce a socially-optimal level of output, but not maximize profit d. exercise illegal preferences regarding the race and/or gender of its employees

a. maximize profit and produce a socially-optimal level of output

in the short run, if the market price is higher than p4 but less than p6, individual firms in a competitive industry will earn a. positive profits b. zero profits c. losses but will remain in business d. losses and will shut down

a. positive profits

because there are positive externalities from higher education a. private markets will under-supply college classes b. private markets will over-supply college classes c. the government should impose a tax on college students d. government intervention cannot improve the market for college classes

a. private markets will under-supply college classes

fundamentally, economics deals with a. scarcity b. money c. poverty d. banking

a. scarcity

which of the following is NOT a determinant of demand? a. the price of a resource that is used to produce the good b. the price of a complementary good c. the price of the good next month d. the price of a substitute good

a. the price of a resource that is used to price the good

this graph represents the tobacco industry. the socially optimal price and quantity are a. $1.90 and 38 units, respectively b. $1.80 and 35 units, respectively c. $1.60 and 42 units, respectively d. $1.35 and 58 units, respectively

b. $1.80 and 35 units, respectively

if the market price is $10, what is the firm's short-run economic profit? a. $9 b. $15 c. $30 d. $50

b. $15

when the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. using the midpoint method, the price elasticity of demand is aboutL a. 0.22 b. 0.67 c. 1.33 d. 1.50

b. 0.67

holding all other forces constant, when the price of gasoline rises, the number of gallos of gasoline demanded would fall substantially over a ten-year period because a. buyers tend to be much less sensitive to a change in price when given more time to react b. buyers tend to be much more sensitive to a change in price when given more time to react c. buyers will have substantially more real income over a ten-year period d. the quantity supplied of gasoline increases very little in response to an increase in the price of gasoline

b. buyers tend to be much more sensitive to a change in price when given more time to react

the imposition of a binding price floor on a market a. causes quantity demanded to be greater than quantity supplied b. causes quantity demanded to be less than quantity supplied c. causes quantity demanded to be equal to quantity supplied d. causes a decrease in demand

b. causes quantity demanded to be less than quantity supplied

area c represents the a. decrease in consumer surplus that results from a downward-sloping demand curve b. consumer surplus to new consumers who enter the market when the price falls from p2 to p1 c. increase in producer surplus when quantity sold increases from q2 to q1 d. decrease in consumer surplus to each consumer in the market when the price increases from p1 to p2

b. consumer surplus to new customers who enter the market when the price falls from p2 to p1

when the price of an eBook is $15.00, the quantity demanded is 400 eBooks per day. when the price falls to $10.00, the quantity demanded increases to 700. given this information and using the midpoint method, we know that the demand for eBooks is: a. inelastic b. elastic c. unit elastic d. perfectly inelastic

b. elastic

elasticity of demand is closely related to the slope of the demand curve. the more responsive buyers are to a change in price, the a. steeper the demand curve will be b. flatter the demand curve will be c. further to the right the demand curve will sit d. closer to the vertical axis the demand curve will sit

b. flatter the demand curve will be

The shift from S to S' could be cause by an a. increase in the price of the good b. improvement in production technology c. increase in income d. increase input prices

b. improvement in production technology

when studying how some event or policy affects market, elasticity provides information on the: a. equity on the market by identifying the winners and losers b. magnitude of the effect on the market c. speed of adjustment of the market in response to the event or policy d. number of market participants who are directly affected by the event or policy

b. magnitude of the effect on the market

when a firm's average total cost curve continually declines, the firm is a a. government-created monopoly b. natural monopoly c. revenue monopoly d. all of the above are correct

b. natural monopoly

this graph represents the tobacco industry. the industry creates a. positive externalities b. negative externalities c. no externalities d. no equilibrium in the market

b. negative externalities

which of the following movements would illustrate the effect in the market for paper napkins as a result of a "Go Green" advertising campaign encouraging people to use cloth napkins? a. point A to point B b. point C to point B c. point C to point D d. point A to point D

b. point C to point B

what is the socially efficient price and quantity? a. price = a; quantity = x b. price = b; quantity = y c. price = b; quantity = x d. price = c; quantity = x

b. price = b; quantity = y

rent control a. serves as an example of how a social problem can be alleviated or even solved by government policies b. serves as an example of a price ceiling c. is regarded by most economists as en efficient way of helping the poor d. is the most efficient way to allocate scare housing resources

b. serves as an example of a price ceiling

the smaller the price elasticity of demand, the: a. more likely the product is a luxury b. smaller the responsiveness of quantity demanded to a change in price c. more substitutes the product has d. greater the responsiveness of a quantity demanded to a change in price

b. smaller the responsiveness of quantity demanded to a change in price

if the minimum wage exceeds the equilibrium wage, then a. the quantity demanded of labor will exceed the quantity supplied b. the quantity supplied of labor will exceed the quantity demanded c. the minimum wage will not be binding d. there will be no unemployment

b. the quantity supplied of labor will exceed the quantity demanded

what area represents the total surplus lost due to monopoly pricing? a. the rectangle (a-c)*x b. the triangle 1/2[(a-c)*(y-x)] c. the triangle 1/2[(a-b)*(y-x)] d. the rectangle (a-c)*x plus the triangle 1/2[(a-c)*(y-x)]

b. the triangle 1/2[(a-c)*(y-x)]

in the short run, if the market price is p4, individual firms in a competitive industry will earn a. positive profits b. zero profits c. losses but will remain in business d. losses and will shut down

b. zero profits

this graph represents the tobacco industry. without any government intervention, the equilibrium price and quantity are a. $1.90 and 38 units, respectively b. $1.80 and 35 units, respectively c. $1.60 and 42 units, respectively d. $1.35 and 58 units, respectively

c. $1.60 and 42 units respectively

at what price is the firm's maximum profit zero? a. $80 b. $90 c. $100 d. $125

c. $100

a profit-maximizing monopolist would earn profits of a. $96 b. $117 c. $120 d. $126

c. $120

when the price of the good is $175, the firm's maximum profit is a. $16,500 b. $20,375 c. $25,750 d.$90,125

c. $25,750

the firm's short-run supply curve is its marginal cost curve above a. $1 b. $3 c. $4.50 d. $6.30

c. $4.50

the efficient price is: a. $80, and the efficient quantity is 50 b. $70, and the efficient quantity is 60 c. $70, and the efficient quantity is 100 d. $50, and the efficient quantity is 60

c. $70, and the efficient quantity is 100

monopolies are inefficient because they (i) eliminate barriers to entry (ii) price their product at a level where marginal revenue exceeds marginal cost (iii) restrict output below the socially efficient level of production a. (i) and (ii) only b (ii) and (iii) only c. (iii) only d. (i), (ii), and (iii)

c. (iii) only

when market price is P7, a profit-maximizing firm's short-run profits can be represented by the area a. p7 x q5 b. p7 x q3 c. (p7-p5) x q3 d. we are unable to determine the firm's profits because the quantity that the firm would produce is not labeled on the graph

c. (p7-p5) x q3

if the price elasticity of demand for a good is 0.3, then a 20 percent decrease in price results in a: a. 0.0015 percent increase in the quantity demanded b. 0.6 percent increase in the quantity demanded c. 6 percent increase in the quantity demanded d. 66 percent increase in the quantity demanded

c. 6 percent increase in the quantity demanded

when the price is p1, consumer surplus is a. A b. A+B c. A+B+C d. A+B+D

c. A+B+C

an externality is an example of a. a corrective tax b. a tradable pollution permit c. a market failure d. both a and b are correct

c. a market failure

good x and good y are substitutes. if the price of good y increases, then the a. demand for good x will decrease b. quantity demanded of good x will decrease c. demand for good x will increase d. quantity demanded of good x will increase

c. demand for good x will increase

a monopolist faces a a. horizontal demand curve b. vertical demand curve c. downward-sloping demand curve d. U-shaped demand curve

c. downward-sloping demand curve

at a price of $20, there would be a(n) a. shortage. the law of supply and demand predicts that the price will fall from $20 to a lower price b. surplus. the law of supply and demand predicts that the price will rise from $20 to a higher price c. excess demand. the law of supply and demand predicts that the price will rise from $20 to a higher price d. excess supply. the law of supply and demand predicts that the price will fall from $20 to a lower price

c. excess demand. the law of supply and demand predicts that the price will rise from $20 to a higher price

a consumer's willingness to pay directly measures a. the extent to which advertising and other external forces have influenced the consumer's preferences b. the cost of a good to the buyer c. how much a buyer values a good d. consumer surplus

c. how much a buyer values a good

the firm will earn a negative economic profit but remain in business in the short run if the market price is a. above $6.30 but less than $8 b. above $6.30 c. less than $6.30 but more than $4.50 d. less than $4.50

c. less than $6.30 but more than $4.50

in the short run, if the market price is higher than p1 but less than p4, individual firms in a competitive industry will earn a. positive profits b. zero profits c. losses but will remain in business d. losses and will shut down

c. losses but will remain in business

in order to sell more if its product, a monopolist must a. sell to the government b. sell in international markets c. lower its price d. use its market power to force up the price of complementary products

c. lower its price

a group of buyers and sellers of a particular goof or service is called a(n) a. coalition b. economy c. market d. competition

c. market

an externality is the impact of a. society's decisions on the well-being of society b. a person's actions on that person's well-being c. one person's actions on the well-being of a bystander d. society's decisions on the poorest person in the society

c. one person's actions on the well-being of a bystander

research into new technologies provides a a. negative externality, and too few resources are devoted to research as a result b. negative externality, and too many resources are devoted to research as a result c. positive externality, and too few resources are devoted to research as a result d. positive externality, and too many resources are devoted to research as a result

c. positive externality, and too few resources are devoted to research as a result

Dioxin emission that results from the production of paper is a good example of a negative externality because a. self-interest paper firms are generally unaware of the environmental regulations b. there are fines for producing too much dioxin c. self-interest paper producers will not consider the full cost of the dioxin pollution they create d. toxic emissions are the best example of an externality

c. self-interested paper producers will not consider the full cost of the dioxin pollution they create

suppose a tax of $6 per unit is imposed on this market. which of the following is correct? a. buyers and sellers will share the burden of the tax equally b. buyers will bear more of the burden of the tax than sellers will c. sellers will bear more of the burden of the tax than the buyers will d. any of the above is possible

c. sellers will bear more of the burden the tax than buyers will

we can say that the allocation of resources is efficient if a. producer surplus is maximized b. consumer surplus is maximized c. total surplus is maximized d. sellers' costs are minimized

c. total surplus is maximized

suppose AVC = $113 when the firm produces 151 units of output. then the firm's fixed cost amounts to a. $5,500, and its profit amounts to $20,375 b. $5,750, and its profit amounts to $20,375 c. $5,980, and its profit amounts to $25, 750 d. $6,180, and its profit amounts to $25,750

d. $6,180, and its profit amounts to $25,750

which of the following could be the price elasticity of demand for a good for which an increase in price would decrease the revenue? a. 0.6 b. 0.9 c. 1 d. 2.6

d. 2.6 (elastic demand is greater than 1)

in the long run, the firm will exit the market if the price of the good is a. $75 b. $85 c. $95 d. all of the above are correct

d. all of the above are correct

the incidence of a tax falls more heavily on a. a consumer if demand is more inelastic than supply b. producers than consumer if the supply is more inelastic than demand c. consumers than producers if supply is more elastic than demand d. all of the above are correct

d. all of the above are correct

the fundamental cause of a monopoly is a. incompetent management in competitive firms b. the zero-profit feature of long-run equilibrium in competitive markets c. advertising d. barriers to entry

d. barriers to entry

which of the following represents a way that government can help the private market to internalize an externality a. taxing goods that have negative externalities b. subsidizing goods that have positive externalities c. the government cannot improve upon the outcomes of private markets d. both a and b are correct

d. both a and b are correct

The movement from point A to point B on the graph shows a(n): a. decrease in demand b. increase in demand c. decrease in quantity demanded d. increase in quantity demanded

d. increase in quantity demanded

for a monopolist, marginal revenue is a. equal to price, as it is for a perfectly competitive firm b. less than price, as it is for a perfectly competitive firm c. equal to price, whereas marginal revenue is less than price for a perfectly competitive firm d. less than price, whereas marginal revenue is equal to price for a perfectly competitive firm

d. less than price, whereas marginal revenue is equal to price for a perfectly competitive firm

firms would be encouraged to enter this market for all prices that exceed a. p1 b. p2 c. p3 d. p4

d. p4

the highest form of competition is called a. arbitrage b. monopolistic competition c. equilibrium d. perfect competition

d. perfect competition

a downward-sloping demand curve illustrates a. that demand decreases over time b. that prices fall over time c. the relationship between income and quantity demanded d. the law of demand

d. the law of demand

in the long run, a profit-maximizing firm will choose to exit a market when a. average fixed cost is falling b. variable costs exceed sunk costs c. marginal cost exceeds marginal revenue at the current level of production d. total revenue is less than total cost

d. total revenue is less than total cost