ECON 3352 Final

The market supply function is P = 10 + Q and the market demand function is P = 70 - 2Q. What is the change in consumer surplus associated with a minimum floor price of $30?

$-55

Refer to the Figure. If the government establishes a price ceiling of $1.00, total consumer and producer surplus will be:

$450

If the doctor is risk-averse, she would accept:

$95,000 for sure rather than face option 1 and option 2 in research.

For U.S. consumers, the income elasticity of demand for fruit juice is 2.2. If the economy enters a recession next year and consumer income declines by 5%, what is the expected change in the quantity of fruit juice demanded next year?

-11%

Consider the information in the table, describing choices for a new doctor. The outcomes represent different macroeconomic environments, which the individual cannot predict. The expected utility of income from research is:

.1 u($500,000) + .9 u($50,000).

The price elasticity of gasoline supply in the U.S. is 0.2. If the price of gasoline rises by 4%, what is the expected change in the quantity of gasoline supplied in the U.S.?

.8%

Refer to the Figure. At price levels P2 and P3, the output levels on the industry supply curve equal:

15 and 21 units of output

Daniel derives utility from only two goods, cake (Qc) and donuts (Qd). The marginal utility that Daniel receives from cake (MUc) and donuts (MUd) are given as follows: MUc = Qd MUd = Qc Daniel has an income of $240 and the price of cake (Pc) and donuts (Pd) are both $3. What quantity Qc will maximize Daniel's utility given the information above?

40

Refer to the Figure. At free trade, domestic consumption is:

5500; domestic production is 1000; imports are 4500

Refer to the Figure. At which point or range is profit maximized?

At point B

Which oligopoly model(s) have the same results as the competitive model?

Bertrand

Two firms operating in the same market must choose between a collude price and a cheat price. Firm A's profit is listed before the comma, B's outcome after the comma. If each firm tries to choose a price that is best for it, regardless of the other firm's price, which of these statements is correct?

Both firms should charge a cheat price.

Which of the following equations based on capital (K) and labor (L) inputs does not represent a plausible production function?

F(K,L) = K + L - 1

Upon graduation, you are offered three jobs. Which of the following is true?

If you're risk-neutral, you go work for Job B.

Cartels can more easily detect cheating by cartel members if the products sold by each member are largely homogeneous. As product quality varies, the observed prices charged by cartel members may be due to differences in the products, or they may be due to cheating. Which of the following goods would more difficult to monitor for potential cheating?

Luxury yachts

You may consume ice cream or frozen yogurt, and ice cream consumption is plotted along the horizontal axis of your indifference map. The prices are denoted 𝑃𝑌 for frozen yogurt and 𝑃IC or ice cream. Under what conditions will you only consume frozen yogurt?

MRS is less than PIC​/PY

Some economists conduct empirical research on the theory of the firm by measuring the degree of technical efficiency achieved by actual firms. What type of research contributions are provided by these studies?

Positive

Which of the following strategies are used by business firms to capture consumer surplus?

Price discrimination Two-part tariffs Bundling (all of the above)

Suppose there are ten identical manufacturing firms that produce computer chips with machinery (capital, K) and labor (L), and each firm has a production function of the form q = 10KL0.5. What is the industry-level production function?

Q = 100KL^0.5

Which of the following statements is not true?

You view coffee and donuts as perfect complements, and the corners of your indifference curves follow the 45-degree line. As long as your income and the prices of coffee and donuts are positive, you will not choose a corner solution.

Refer to the Figure. The shift in the marginal cost curve implies:

an increase in the price of an input, which reduces the profit-maximizing level of output.

Jacob is trying to decide which courses to take next semester. He has narrowed down his choice to two courses, Econ 1 and Econ 2. Now he is having trouble and cannot decide which of the two courses to take. It's not that he is indifferent between the two courses, he just cannot decide. An economist would say that this is an example of preferences that:

are incomplete.

• Through their marketing and advertising efforts, companies try to:

augment the impact of the snob effect

For an inferior good, the income and substitution effects

can work together or in opposition to each other depending upon their relative magnitudes.

Refer to the Figure. The ability to produce output in this isoquant map shows:

diminishing marginal returns.

A specific tax will be imposed on a good. The supply and demand curves for the good are shown in the Figure. Given this information, the burden of the tax:

falls mostly on consumers.

At a given level of labor employment, knowing the difference between the average product of labor and the marginal product of labor tells you:

how increasing labor use alters the average product of labor.

Refer to the Figure. The situation pictured is one of:

increasing returns to scale, because doubling inputs results in more than double the amount of output

Refer to the Figure. An increase in production, from q1 to q2:

is more costly in the short run than in the long run.

Generally, economies of scope are present when:

joint output is greater from a single firm producing two goods than could be achieved by two different firms each producing a single product (assuming equivalent production inputs in both situations).

Three hundred firms supply the market for paint. For fifty of the firms, their short-run average variable costs are minimized at $10 and short-run total costs are minimized at $15. For the remaining firms, the short-run average variable costs and short-run average total costs are minimized at $20 and $25, respectively. If each firm has a U-shaped marginal cost curve then the short-run market supply curve is:

kinked at $20

Risk-neutral Icarus Airlines must commit now to leasing 1, 2, or 3 new airplanes. It knows with certainty that on the basis of business travel alone, it will need at least 1 airplane. The marketing division says that there is a 50% chance that tourism will be big enough for a second plane only. Otherwise, tourism will be big enough for a third plane. This, plus revenue information, yields the following table: Without additional information, Icarus Airlines would:

lease 3 airplanes because $75 million is greater than $60 million.

A negative network externality causes demand to become:

less elastic

A market with few entry barriers and with many firms that sell differentiated products is:

monopolistically competitive.

The situation in which buyers are able to affect the price of a good is referred to as ________ power.

monopsony

In the personal computer market, some large manufacturers are able to buy computer components (e.g., disk drives, flat-screen monitors, and memory chips) and software at lower prices than smaller firms in the market. This outcome indicates that the large firms enjoy some degree of ________ in this market.

monopsony power

When network externalities are present, the market demand for the good in question becomes:

more elastic.

The individual pictured in the Figure.

must be risk-loving

When network externalities are present:

one person's demand also depends on the demands of other people.

Refer to the Figure. The firm in this situation should decide to:

produce at a loss.

Refer to the Figure. Which levels of output are produced at the minimum possible cost per unit?

q2

Refer to the Figure. When market price equals $40, the long run level of output will be

q3

The policy shown in the Figure is a:

quota of 2000.

After a good falls in price, consumers are better off because they can buy the same amount of the good for less money, and thus have money left over for additional purchases. This fact is called:

the income effect.

The monopolist has no supply curve because

the quantity supplied at any particular price depends on the monopolist's demand curve

After a good falls in price, consumers will tend to buy more of the good that has become cheaper and less of those goods that are now relatively more expensive. This fact is called:

the substitution effect.

In an oligopsony market:

there are a few buyers and many sellers.

The equation below gives the degree of economies of scope SC=(C1Q1)+C(Q2)−C(Q1,Q2))/C(Q1,Q2) where C(Q1) is the cost of producing output Q1, C(Q2) is the cost of producing output Q2 , and C(Q1,Q2 ) is the joint cost of producing both outputs.If SC is negative:

there are diseconomies of scope

Garza would prefer a certain income of $20,000 to a gamble with a 0.5 probability of $10,000 and a 0.5 probability of $30,000. Based on this information:

we can infer that Garza is risk averse.

The individual pictured in the Figure.

would want to be paid a risk premium of $1000 to give up the opportunity of facing the two outcomes.