ECON FINAL 2

Refer to Table 7-1. If the table represents the willingness to pay of four buyers and the price of the product is $15, then who would be willing to purchase the product?

Mike, Sandy, and Jonathan

Table 14-4 The following table presents cost and revenue information for John's Vineyard. Refer to Table 14-4. What is the marginal cost of the 5th unit?

NOT $68

Refer to Figure 6-8. The price that sellers receive after the tax is imposed is

NOT $8

Refer to Table 13-2. After what number of workers does diminishing marginal product begin?

NOT 4 TO 5

Refer to Figure 7-6. When the price falls from P2 to P1, producer surplus

decreases by an amount equal to A B.

Refer to Figure 13-2. The changing slope of the total cost curve reflects

decreasing marginal product.

The largest source of revenue for the federal government is the

individual income tax.

Suppose a tax is imposed on the buyers of a good or service. The burden of the tax will fall

on both the buyers and the sellers.

With no price discrimination, the monopolist sells every unit at the same price. Therefore

price is greater than marginal revenue.

Which of the following statements best reflects a price-taking firm?

If the firm were to charge more than the going price, it would sell none of its goods.

Which of the following statements about rent control in New York City is accurate?

Many people who are not poor live in rent-controlled apartments.

Refer to Figure 15-7. If fixed costs of production = $1,000, monopoly profit without price discrimination equals

$1,000.

Refer to Figure 6-8. The burden of the tax on buyers is

$1.00 per unit.

In the figure below, panel (a) depicts the linear marginal cost of a firm in a competitive market, and panel (b) depicts the linear market supply curve for a market with a fixed number of identical firms. Refer to Figure 14-6. When 100 identical firms participate in this market, at what price will 15,000 units be supplied to this market?

$1.50

Refer to Figure 6-10. Economic incidence on sellers is how much per unit?

$1.50.

Refer to Table 13-5. The average fixed cost of producing five widgets is

$2

Refer to Figure 15-6. The deadweight loss caused by a profit-maximizing monopoly amounts to

$250.

Kyle places a $10 value on a glass of red wine, and Keith places an $8 value on it. If there is no tax on glasses of red wine, the price of a glass of red wine reflects the cost of making it. The equilibrium price for a glass of red wine is $6. Suppose the government levies a tax of $3 on each glass of red wine, and the equilibrium price of a glass of red wine increases to $9. How much tax revenue is collected?

$3

Use the information for a competitive firm in the table below to answer the following questions. Refer to Table 14-3. The maximum profit available to this firm is

$5

The following table shows quantity, price, and marginal cost information for a monopoly. What price should the firm charge to maximize its profit?

$7

Farmer Jack is a watermelon farmer. If Jack plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 30 watermelons. If he plants 2 bags of seeds, he gets 50 watermelons. If he plants 3 bags of seeds he gets 60 watermelons. A bag of seeds costs $100, and the costs of seeds are his only costs. Refer to Scenario 13-6. Which of the following statements is (are) true? (i) Farmer Jack experiences decreasing marginal product. (ii) Farmer Jack's production function is nonlinear. (iii) Farmer Jack's total cost curve is linear.

(i) and (ii)

Refer to Figure 15-6. A profit maximizing monopolist would choose to produce

100 units of output and a price of $20 per unit

Refer to Table 12-5. What is the marginal tax rate for a person who makes $35,000?

20%

In the figure below, panel (a) depicts the linear marginal cost of a firm in a competitive market, and panel (b) depicts the linear market supply curve for a market with a fixed number of identical firms. Refer to Figure 14-6. If at a market price of $1.75, 43,750 units of output are supplied to this market, how many identical firms are participating in this market?

250

Refer to Table 12-6. What is the marginal tax rate for a person who makes $50,000?

40%

Refer to Table 12-9. A proportional tax is illustrated by tax

A

The figure below depicts average total cost functions for a firm that produces automobiles. efer to Figure 13-8. Which of the curves is most likely to characterize the short-run average total cost curve of the largest factory?

ATCC

Figure 14-2 The figure below depicts the cost structure of a profit-maximizing firm in a competitive market. Refer to Figure 14-2. If the firm is in a short-run position where P > AVC, it must be on what segment of its supply curve?

CE

A legal maximum price at which a good can be sold is a price

CEILING

Refer to Figure 8-4. Producer surplus before the tax was levied is represented by area

D E F.

Which of the following is not a reason for the existence of a monopoly?

Diseconomies of scale

All else constant, a tax in a market where either supply or demand is more elastic will cause less deadweight loss than in a market where either demand or supply is less elastic (more inelastic).

FALSE

All straight line demand curves are "unit elastic" for all small changed in P and Q.

FALSE

As defined in the Mankiw text, Economic costs include explicit costs, but not implicit costs.

FALSE

As defined in the Mankiw text, accounting costs include both implicit and explicit costs.

FALSE

If average total cost is falling as output increases, then marginal cost must be falling as well.

FALSE

Sunk costs are one component of the Marginal Cost

FALSE

The "Laffer Curve" shows that as inequality increases, tax revenue increases.

FALSE

The Mankiw text mentions the existence of a "tradeoff" between equity and efficiency. This implies that if equity increases - so will efficiency.

FALSE

The late 19th century economist and social philosopher Henry George favored a single tax on food.

FALSE

The notion of horizontal equity suggests that individuals with the same age, should pay the same amount in tax.

FALSE

In the perfectly competitive model, a firm's average total cost curve is assumed to be downward sloping for all levels of output they may produce.

FASLE

Standard Economic theory as presented in the text by Mankiw suggests that the firm should produce a positive amount of output so long as average sunk costs are below marginal revenue.

FASLE

Which of the following costs do not vary with the amount of output a firm produces?

FIXED COSTS

If average sunk cost typically rises as output increases.

False

In a perfectly competitive market, as described in the Mankiw text, each firm has an incentive to watch the behavior of other competitive firms in the market, and to adjust to the behavior of other individual firms.

False

If long run equilibrium price in a perfectly competitive market is $20 per unit. If government imposes a $18 per unit price ceiling and firms continue to produce a positive level of output, this implies that for firms after the price ceiling:

NOT Average total cost is lower than $18

Refer to Figure 13-6. Which of the curves is most likely to represent average variable cost?

NOT D

If an unregulated profit maximizing natural monopolist charges a price of $30 and its marginal cost is $10 per unit and average total cost = $15, then if government sets the price = $25 per unit (like a price ceiling) it will cause the monopolist to

NOT Go out of business and "exit the industry" in the long run (but operate in the short run)

Refer to Table 13-5. What is the variable cost of producing five widgets?

NOT It can't be determined from the information given.

If it costs $10 to produce a unit of X, regardless of how many have already been produced, and there are no fixed costs; which of the following are NOT true?

NOT Marginal Cost = $10

The figure below illustrates the cost and revenue structure for a monopoly firm. Refer to Figure 15-3. A profit-maximizing monopoly's total cost is equal to

NOT P0 * Q3.

Refer to Figure 8-2. The equilibrium price before the tax is imposed is

NOT P1.

Table 14-3 Use the information for a competitive firm in the table below to answer the following questions. Refer to Table 14-3. At a production level of 4 units which of the following is true?

NOT Total revenue is smaller than variable cost.

If demand is very inelastic and supply very elastic, then for ________, economic incidence will be greater on suppliers than demanders.

NOT a sales tax collected from buyers, but not excise tax collected from sellers

Refer to Figure 6-1. The situation in panel (a) may be described as one in which

NOT a surplus of the good will be observed.

Refer to Figure 14-7. Assume that the market starts in equilibrium at point A in panel (b). An increase in demand from Demand0 to Demand1 will result in

NOT an eventual increase in the number of firms in the market and a new long-run equilibrium at point D.

If marginal cost is rising,

NOT average fixed cost must be rising.

Figure 14-1 The graph below depicts the cost structure for a firm in a competitive market. Refer to Figure 14-1. When price falls from P4 to P3, the firm finds that

NOT it should shut down immediately.

Which of the following is true in a theoretical perfectly competitive market?

NOT market demand is perfectly inelastic

Deadweight losses represent the

NOT part of consumer and producer surplus that is now revenue to the government.

As a tax on good X increases:

NOT tax revenue increases.

Taxes cause deadweight losses because

NOT taxes prevent buyers and sellers from realizing some of the gains from trade.

When a tax is imposed on a good,

NOT the demand curve for the good always shifts.

Refer to Figure 8-2. The price that sellers effectively receive after the tax is imposed is

P1

Refer to Figure 8-4. The price that buyers effectively pay after the tax is imposed is

P3

Refer to Figure 8-2. The per-unit burden of the tax on sellers is

P3 - P2.

Refer to Figure 8-2. The amount of tax revenue received by the government is equal to the area

P3 A C P1.

In the long run the market supply

could be upward sloping if the cost of production rises as new firms enter the market.

Which of the following represents the firm's short-run condition for shutting down?

Shut down if TR < VC

Refer to Figure 6-8. As the figure is drawn, who sends the tax payments to the government?

THE BUYERS

For very low income households, the amount paid to the social security payroll tax is typically larger than that paid in personal income tax.

TRUE

If a production function is getting flatter as number of workers hired increases from 12 to 13; then the total cost curve would have to be getting steeper as output increases from the level produced by 12 workers, to the amount produced by 13 workers.

TRUE

If a profit maximizing monopolist can perfectly price discrimate, the level of output it chooses is allocatively efficient.

TRUE

If either supply or demand is perfectly inelastic, then theory suggests there would be no deadweight loss from a tax in this in this market.

TRUE

In a competitive market, if production (and consumption) continues until the marginal benefit of one more unit equals marginal cost, then total surplus is maximized.

TRUE

The Mankiw text reports that Education is the largest category of expenditure for U.S. State and Local Governments

TRUE

Refer to Figure 14-7. Assume that the market starts in equilibrium at point A in panel (b). An increase in demand from Demand0 to Demand1 will result in

an eventual increase in the number of firms in the market and a new long-run equilibrium at point C.

When a tax is imposed on tea and buyers (not the sellers) of tea are required to directly provide the tax payments to the government:

buyers of tea and sellers of tea both are made worse off.

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

buyers of the good will bear most of the burden of the tax.

When a tax is placed on the buyers of a product, a result is that, relative to the pre-tax situation,

buyers pay more and sellers receive less.

A legal minimum price at which a good can be sold is

called a price floor.

The decrease in total surplus that results from a market distortion, such as a tax, is called a

deadweight loss.

The defining characteristic of a natural monopoly is

economies of scale over the relevant range of output.

For a firm in a perfectly competitive market, the price of the good is always

equal to marginal revenue.

Patent and copyright laws are major sources of

government-created monopolies.

The goal of a rent-control policy is to

help the poor by making housing more affordable.

The idea that people in equal conditions should pay equal taxes is referred to as

horizontal equity.

Welfare economics is the study of

how the allocation of resources affects economic well-being (as shown by consumer and producer surplus).

The marginal product of labor is equal to the

increase in output obtained from a one unit increase in labor.

The graph below depicts the cost structure for a firm in a competitive market. Refer to Figure 14-1. When price falls from P3 to P1, the firm finds that

it should shut down immediately.

Which of the following is assumed in a perfectly competive market?

many buyers

The efficient scale of the firm is the quantity of output that

minimizes average total cost.

Market Supply and Demand for Pepperoni Pizza Refer to Table 7-5. At a price of $4.00, total surplus is

more than it would be at the equilibrium price.

A tax on a good

raises the price that buyers effectively pay and lowers the price that sellers effectively receive.

When a tax is imposed on the sellers of a good,

the supply curve shifts upward by the amount of the tax.

Buyers of a product will bear the larger part of the tax burden, and sellers will bear a smaller part of the tax burden, when

the supply of the product is more elastic than the demand for the product.

A payroll tax is a tax on

the wages that a firm pays its workers.

Suppose a tax is levied on the sellers of a good;

then the supply curve shifts upward by the amount of the tax.

Average total cost is equal to

total cost/output.