Econ Exam #2

Austin's total fixed cost at the bakery is $3,600 a month. Austin employs 20 workers and pays each worker $8 an hour. The marginal product of the twentieth worker is 12 iced cupcakes an hour. Assume that labor is the only variable input. What is the marginal cost of the last cupcake produced by the last worker Austin hired?

$0.66

(See chapter 5 homework #4 for the table) Examine the table The Market for Soda. If there government does not impose a price control, the price of a can of soda will equal:

$0.75

Pauli's Pizza offers the following prices: one slice for $2, two slices for $3.50, three slices for $4.50, four slices for $5.00. The marginal cost of the third slice to Hui is:

$1

(The table is from chapter 8 homework #16) Examine the figure The Average Total Cost Curve. In the figure, the total cost of producing 10 pairs of boots is approximately:

$1,308

(The table is from Chapter homework # 20) Examine the table Cakes. Pat is opening a small bakery to make and sell special birthday cakes. She is trying to decide how many mixers to purchase. Her estimated fixed and average variable costs if she purchases one, two, or three mixers are shown in the table. Assume that average variable costs are constant and do not vary with the quantity of output produced. If Pat purchases one mixer and bakes 100 cakes per day, what is her average fixed cost?

$10

(The table is from chapter 8 homework #11) Examine the table Production Function for Soybeans. The table shows a production function for soybeans, showing daily production. Assume that the fixed input, capital, is 10 acres of land and a tractor, which have a combined cost of $150 per day. The cost of labor is $100 per worker per day. The fixed cost of producing 25 bushels of soybeans is:

$150

(The table is from chapter 8 homework #10) Examine the table Total Cost Data. The table shows cost data for a bicycle firm operating in the short run. What is the total variable cost for this firm when the firm produces five bicycles?

$190

(The table is from Chapter 8 homework #21) Examine the table Cakes. Pat is opening a small bakery to make and sell special birthday cakes. She is trying to decide how many mixers to purchase. Her estimated fixed and average variable costs if she purchases one, two, or three mixers are shown in the table. Assume that average variable costs are constant and do not vary with the quantity of output produced. If Pat purchases one mixer and bakes 100 cakes per day, what is her average total cost?

$20

(The table is from chapter 8 homework #14) Examine the figure The Average Total Cost Curve. In the figure, the total cost of producing three pairs of boots is approximately:

$216

(See chapter 5 homework #6 for the table) Examine the figure The Effect of a quota. The graph shows a market in which a quota of 85 units has been imposed. What is the supply price of 85 units?

$25

(The table is from chapter 8 homework #15) Examine the figure The Average Total Cost Curve. In the figure, the total cost of producing five pairs of boots is approximately:

$408

(See chapter 5 homework #14 for the table) Examine the figure The Effect of a Quota. The graph shows a market in which a quota of 85 units has been imposed. What is the demand price of 85 units?

$50

(The table is from chapter8 homework #9) Examine the table Total Cost Data. The table shows cost data for a bicycle firm operating in the short run. What is the total fixed cost for this firm?

$50

After Alistair earned his BA, he had to decide whether to accept the offer of a job that will pay him $45,000 per year or spend an additional two years earning an MBA. If he decides to pursue the graduate degree, his annual expenses for tuition, books, board, and lodging will be $32,000. Alistair has been offered a scholarship for $10,000 per year, but in order to pay the remaining $22,000 per year, he would have to cash in savings bonds that his grandparents have given him that have been earning $500 in interest per year. The annual opportunity cost of earning his MBA is:

$67,500

Sarah's accountant tells her that she made a profit of $43,002 running a pottery studio in Orlando. Sarah's husband, an economist, claims Sarah lost $43,002 running her pottery studio. This means her husband is claiming that she incurred _____ in _____ costs.

$86,004; implicit

(Table is from #22 from Chapter 7 homework) Examine the table The Utility of Pecan Rolls. The marginal utility for the sixth roll is:

-5

At the point at which it is currently producing, Britain must give up the production of 75 hats to produce 25 additional sweaters. The opportunity cost of producing 3 hats is _____ sweater(s).

1

In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750 boxes of tulips. In autarky, the opportunity cost of one ton of beef in the Netherlands is:

10 boxes of tulips.

(Table is from #21 from Chapter 7 homework) Examine the table The Utility of Pecan Rolls. The marginal utility for the second roll is:

15

(See chapter 6 homework #17 for the table) Examine the table Production Possibilities for Machinery and Petroleum. The table shows the maximum quantity of machinery and petroleum the two countries can produce when they devote all of their resources to the production of that good. The opportunity cost in the United States of producing 40 units of machinery is _____ units of petroleum.

20

Which of these is an example of a black market?

A tenant in a rent-controlled apartment subletting at a higher price

(The table is from chapter 7 homework #23) Examine the table The Utility of Pecan Rolls. Total utility is maximized at the _____ roll.

Fourth

(See chapter 5 homework #10 for the table) Examine the figure The Shrimp Market. If the government wants to limit shrimp sales to 500 pounds, it could impose a:

Price floor of $15 or a price ceiling of $10

(See chapter 6 homework #8 for the table) Examine the figure The Market for Roses. Assume that PA is the autarky price and PW is the world price. In the figure, consumer surplus with international trade would be area:

W + X + Z.

(The table is from chapter 8 homework #18) Examine the figure Long-Run and Short-Run Average Cost Curves. If a firm is producing at point C on the ATC2 but anticipates increasing output to 225,000 units in the long run, the firm will build a _____ plant and have _____.

bigger; diseconomies of scale

When a decision maker makes a quick decision without taking the time to compare the opportunity cost of all possible options, he is using:

bounded rationality

Countries that engage in trade will tend to specialize in goods in which they have a(n) _____ and will _____ those goods.

comparative advantage; export

An economy moves from autarky to free international trade. In the import sector:

consumer surplus rises, producer surplus falls, and the economy as a whole gains

An urbanized country has 100 million workers living on 100 square miles of land. A country that is principally rural has 1 million workers living on 10 square miles of land. From this information, the urbanized country is _____ relative to the rural country

labor-abundant

An individual gets 5 units of utility from one slice of pizza and 9 units of utility from two slices of pizza. The principle of diminishing marginal utility implies that the total utility from three slices of pizza will be:

less than 13 units of utility

Suppose the government decides to fight obesity in America by imposing an excise tax based on the saturated fat content of food. The most likely effect of this tax would be to

lower the profits of ice cream suppliers

The _____ is the increase in output that is produced when hiring an additional worker.

marginal product

Joshua is tired of school and his part-time job and decides on the spur of the moment to take a weekend trip to Cabo San Lucas. He pays for it with his credit card rather than with money from his checking account. Which type of irrational behavior does this best represent?

mental accounting

The long run is a planning period

over which a firm can consider all inputs as variable.

Which good is most likely to display increasing marginal utility over some range?

paint, because you need it in an amount sufficient to paint at least one entire room

The relationship between a firm's inputs and its quantity of output is known as the:

production function

Suppose a government imposes an income tax that taxes 0% of the first $1,000, 10% of the next $10,000, and 20% of the remainder of earnings. This type of tax can be defined as:

progressive

Income tax rates are such that Mr. R. Hood earns $35,000 per year and pays $7,000 in taxes, whereas Mr. G. Gisbourne earns $1 million per year and pays $200,000 in taxes. This tax is

proportional

If a nation exports a good when the economy is opened to trade, the domestic price of the good will _____ and domestic consumption will _____ relative to the autarky price.

rise; fall

People are willing to buy insurance because of:

risk aversion

The utility of a good is determined by how much _____ a particular consumer obtains from it.

satisfaction

The belief that trade must be bad for exporting countries because those workers are paid very low wages by our standards is the:

sweatshop labor fallacy

An example of a tariff is a:

tax of 10% of the value of each Honda automobile imported from Japan

Bangladesh exports shirts, the making of which is labor-intensive, to the United States. The likely source of Bangladesh's comparative advantage in shirts is

that in comparison with the United States, Bangladesh is a labor-abundant country

In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750 boxes of tulips. From this information, it is know that:

the Netherlands has a comparative advantage in raising beef.

(See chapter 5 homework #6 for the table) Examine the figure The Effect of a Quota. The graph shows a market in which a quota of 85 units has been imposed. Those who sell in this market will earn a quota rent due to the fact that:

the demand price of 85 units exceeds the supply price of 85 units

A rational decision is one that leads to:

the most preferred outcome

(See chapter 6 homework #4 for the table) Examine the table Production Possibilities for Machinery and Petroleum. The table shows the maximum quantity of machinery and petroleum the two countries can produce when they devote all of their resources to the production of that good. Based on the information in the table, it is true that:

the opportunity cost of petroleum is more in the United States than in Mexico.

France and England both produce wine and clothing under conditions of constant opportunity costs. France will have a comparative advantage in wine production if:

the opportunity cost of wine production is lower in France than in England.

Suppose the government imposes a $10 excise tax on the sale of sweaters by charging suppliers $10 for each sweater sold. Using economic analysis, if demand is downward sloping and supply is upward sloping, one would predict that

the price of sweaters will increase but by less than $10

Jacquelyn is a student at a major state university. Which is NOT an example of an explicit cost of her attending college?

the salary that she could have earned working full-time

(The table is from chapter 8 homework #24) Examine the table Long-Run Total Cost. Over what range of output does this soybean grower experience constant returns to scale?

the third and fourth bushels

In economics, a marginal value refers to:

the value associated with one more unit of an activity

(See chapter 6 homework #3 for the table) Examine the table The Production Possibilities for Cars and Leather Boots. Given the opportunity costs of production:

there is no basis for trade

For Heidi, the marginal cost of producing one additional photograph equals the change in _____ divided by the change in the _____.

total cost; number of photographs

The marginal utility of coffee consumption for Steve is the change in _____ generated by consuming an additional cup of coffee.

total utility

Policies that limit imports, usually with the goal of protecting domestic producers in import-competing industries from foreign competition, are known as

trade protection

The relationship between an individual's consumption bundle and utility is called a:

utility function

In the long run, all costs are:

variable

(See chapter 6 homework #23 for the table) Examine the figure The Market for MP3 Players. Assume that Sd represents the domestic supply curve and Dd represents the domestic demand curve. In the market for MP3 players, if the world price equals $100 and there is free trade, this country:

will import 150,000 MP3 players.

When total utility is at a maximum, marginal utility is:

zero

(The table is from Chapter 8 homework #3) Examine the table Labor and Output. The marginal product of the fifth worker is:

4

At the point at which it is currently producing, the United States must give up the production of 500 bicycles to produce 20 additional tractors. The opportunity cost of producing 100 bicycles is _____ tractor(s).

4

(The table is from Chapter 8 homework #5) Examine the figure Marginal Product of Labor. The total product for three workers is:

51 bushels

(The table is from chapter 8 homework #8) The table gives the production function for Andrew's Garage. If labor is the variable input and number of cars serviced is the output, what is the marginal product of labor when the number of workers rises from 2 to 3?

8

(See chapter 5 homework #20 for the table) Examine the figure Income Tax Payments. Which panel or panels best represent the effects of a proportional income tax?

A

(See chapter 5 homework #5 for the table) Examine the table The Market for Soda. If the government imposes a price ceiling for $0.50 per can of soda, there will be:

A shortage of 3 cans

(See chapter 5 homework #6 for the table) Examine the table Market for fried twinkies. In response to popular anger over the high price of fried Twinkies and the extreme wealth of fried twinkies producers, the government imposes a price ceiling of $1.20 per fried twinkie. From this table, the price ceiling causes:

A shortage of 3,000 fried twinkies

(See chapter 5 homework #9 for the table) Examine the table The Market for Soda. If the government imposes a price floor of $1.00 per can of soda, there will be:

A surplus of 3 cans

(The table is from chapter 8 homework #17) Examine the figure Long-Run and Short-Run Average Cost Curves. If a firm faced the long-run average total cost curve shown in the figure and it expected to produce 100,000 units of the good in the long run, the firm should build the plant associated with:

ATC2

A quota is:

An upper limit on the quantity of a good that can be bought or sold

The NFL wants to give the "common fan" the opportunity to attend the Super Bowl, so it sets Super Bowl prices "low"- tickets for a regular seat at Super Bowl XXXVII cost just at $400. Scalpers, however, sell tickets for $1,500 or more. If there are no transaction costs to selling a ticket, the true cost of a regular ticket to Super Bowl XXXVII is:

At least $1,500

(See chapter 5 homework #19 for the table) Examine the figure Income Tax Payments. Which panel or panels best represent the effects of a progressive income tax?

B

(See chapter 5 homework #21 for the table) Examine the figure Income Tax Payments. Which panel or panels best represent the effects of a regressive income tax?

C

(See chapter 6 homework #26 for the table) Examine the figure A Tariff on Oranges in South Africa. When the government imposes a tariff on imported oranges, the price of oranges in South Africa rises from PW to PT and the volume of imports falls to:

C2 − Q2

The United States can produce wine domestically, but it can also import wine on the world market if the world price of wine is lower than the domestic price of wine. Which statement correctly describes the impact of imported wine on total surplus in the U.S. wine market?

Consumer surplus will increase by more than the decrease in producer surplus; total surplus will increase.

Black markets may develop with price controls because:

Individuals can profit by illegal exchanges

Typically, the government limits the quantity of a good that can be bought and sold in a market by:

Issuing licenses which give only people with the license the legal right to supply the good

A binding price ceiling is designed to:

Keeps prices below the equilibrium level

Which topic is an example of quantity control?

Limits on the number of red snappers that can be caught in the gulf of Mexico

(The table is from Chapter 7 homework #25) Examine the table Exercise and Total Utility. The table shows Marta's total utility from hours of exercise at the gym. Given this information, what can be said about Marta's marginal utility from exercise?

Marginal utility initially increases but eventually decreases as more exercise is consumed.

Rapidly increasing health costs have been a major political concern since at least 1992. Suppose the government sets the maximum price for a normal doctor's visit at $20 to control rising health costs but the current market price is $40. What will happen?

More people will try to visit the doctor, but there will be fewer doctors willing to see patients at that price.

(See chapter 5 homework #6 for the table) Examine the figure The Effect of a Quota. The graph shows a market in which a quota of 85 units has been imposed. What is the amount of the resulting deadweight loss?

Triangle acd

(See chapter 6 homework #7 for the table) Examine the table Production Possibilities for the United States and Canada. Both nations can produce cars and lumber. If these nations were to specialize and trade, which statement is a potential agreement that would benefit both nations?

The United States would export 1 million cars to Canada in exchange for 2 million board feet of lumber.

Which statement is an example of bounded rationality?

Tim studies only an hour on the morning of his economics exam because he is satisfied just to make a passing grade.

Most economic models:

assume that people behave rationally

For which decision would marginal analysis be relevant?

deciding how much to spend on a summer vacation

The term diminishing returns refers to a:

decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant.

A road blockade at the border between the United States and Canada prevents the entry of all lumber products to the United States from Canada. This blockade will:

decrease the producer surplus for Canadian lumber producers

The long-run average cost curve will be upward sloping when the firm is experiencing:

diseconomies of scale.

The term autarky refers to a situation in which a country

does not trade with other countries

When Caroline's dress factory hires two workers, the total product is 50 dresses. When she hires three workers, total product is 60, and when she hires four workers, total product is 65. The slope of the marginal product curve when two to four workers are hired is:

downward sloping

Accounting profit differs from economic profit because

economic costs are generally higher than accounting costs because economic costs include all opportunity costs, whereas accounting costs include explicit costs only.

If a tax system is poorly designed, it may be possible to increase:

equity without causing inefficiency or increase efficiency without sacrificing equity.

If a country's price for wood furniture in the absence of trade is lower than the price with trade, the country will likely:

export wooden furniture.

To say that you can't have too much of a good thing means that for any good that you enjoy (for example, pizza):

higher consumption will always lead to higher utility

Behavioral economics was motivated by an attempt to understand:

how people actually make choices.

Goods and services purchased from abroad are _____, whereas goods and services sold abroad are _____.

imports; exports

When a firm adds physical capital, in the short run, fixed costs will:

increase

The effect of international trade on U.S. factor markets is to

increase the wage of highly educated workers