econ final

An isocost lines identifies all those combinations of inputs that can be purchased for a given amount of the money A) True B) False

A) True

When diminishing returns exist, then the marginal cost curve is upward-sloping. A) True B) False

A) True

Marginal revenue: A) equals the market price in perfect competition. B) is the price divided by the change in quantity. C) is the slope of the average revenue curve. D) is the change in quantity divided by the change in total revenue.

A) equals the market price in perfect competition.

The ____ function in producer theory is analogous to the ___ function in consumer theory-- ___. (Choose the answer that is both correct and most informative). A) production; utility; that is, both measure output: one in units of product produced, the other in utils produced. B) production: utility; except output levels have cardinal meaning whereas utility numbers only represent an ordering of bundles

B) production: utility; except output levels have cardinal meaning whereas utility numbers only represent an ordering of bundles

An electronic book is an artificially-scarce good because the private market ________ prevent consumption by people who do not pay for it. Further, the same e-Book ________ be consumed by more than one person at the same time. A) cannot; cannot B) cannot; can C) can; cannot D) can; can

D) can; can

The model/theory generated the prediction that George knows calculus but not algebra. Which set of the following assumptions mostly likely generated this prediction. A) Assume George is alive. Assume no living person knows algebra. B) Assume only God knows algebra. Assume George is not God. Assume everyone who's name starts with "G" knows calculus C) Assume everyone know calculus. Assume God does not go by the name of George. Assume God knows algebra D) Assume George never took an algebra course. Assume it is impossible to know algebra unless you have taken an algebra course.

B) Assume only God knows algebra. Assume George is not God. Assume everyone who's name starts with "G" knows calculus

Assuming no technical progress, the firm's shortrun cost of producing an output level must be greater than its longrun cost of producing that output level. A) True B) False

B) False

Basic consumer theory, as we learned in class, assumes that individual ranks goods not bundles. A) True B) False

B) False

Consider two commodities: skiing at Vail and skiing at Aspen. The Vail-price elasticity of demand for trips to Aspen is likely negative. A) True B) False

B) False

Marginal social cost of an action is the cost of the action that the producer of the action does not pay A) True B) False

B) False

Consider the statement, "The slope of an indifference curve (budget line) for goods A and B indicates the rate at which the individual (the market) substitutes good A for Good B." This statement is A) not enough information to determine whether it is true or false. B) true C) false

B) true

An individual is *more likely* to free ride when a good is: A) artificially scarce. B) private. C) nonexcludable. D) nonrival.

C) nonexcludable.

What is a Pigouvian tax? A) A tax that attempts to drive up demand B) A tax that internalizes the inefficiency associated with an external effect C) A tax that attempts to address the inefficiency associated with price floors D) A tax on property rights

B) A tax that internalizes the inefficiency associated with an external effect

Assume a world of only two goods: hamburgers and hot dogs. At Mabel's current consumption levels, the maximum amount of hot dogs she would be willing to give up in order to obtain one more hamburger is her A) Marginal rate of substitution of hot dogs for hamburgers B) Marginal rate of substitution of hamburgers for hot dogs

B) Marginal rate of substitution of hamburgers for hot dogs

Will widening I-70 between Denver and Summit County, by itself, eliminate all congestion externalities on the highway? A) Yes B) No C) Maybe D) Can't tell

B) No

Assume all firms are price takers in input markets (they take input prices as given). Is the following statement correct or incorrect:? "A firm's LR production function and its LR cost function are two different ways to completely characterize the state-of -technology for producing this firm's product. A) The statement is incorrect. B) The statement is correct

B) The statement is correct

Would Paul and Robin (the authors of your textbook) agree, or disagree, with the following statement. "Making a second-hand market for our textbook illegal will make us (Robin and Paul) better off, but it is efficiency decreasing. A) They would disagree. B) They would agree.

B) They would agree.

Any potential externalities associated with tattoos on George can be eliminated by forcing George to show the efficient number of tattoos from Society's perspective, no more, no less. A) False B) True

B) True

For a competitive market economy to achieve an efficient allocation of resources, property rights must be well defined for all scare resources. A) False B) True

B) True

When deciding whether the current allocation of society's resources is, or is not, efficient, one takes the stock of society's resources as given A) False B) True

B) True

When production in a society is efficient, it is still often possible to make some members of society better off, without making any other members worse off. A) False B) True

B) True Efficiency in production is necessary but not sufficient for overall efficiency. So, one can have efficiency in production without overall efficiency.

If a competitive firm is maximizing it profits it is producing its level of output at minimum cost. A) Not enough information to tell. B) True C) False

B) True If it was not minimizing its output level at min cost, it could increase its profits by doing so, which mean its profits are not currently maximized.

Kaz loves an educated public so much that she prefers every state of the world with an educated public over every state of the world with an uneducated public. Given this, evaluate the following statement: Kaz would prefer to live friendless in a tiny apartment eating cat food if the public is educated, to a life with abundant food, friends, and accommodations but an uneducated public. A) Not enough information to tell. B) True. C) False.

B) True.

Assume Jim and Mary are stuck together in the same small room: they can't leave. Jim wants to smoke. His smoking would make him better off and Mary worse off. If he had to, Jim would have paid $20 for the opportunity to smoke. Mary hates second-hand smoke but is poor, so would have let him smoke for $15. His smoking would be A) Efficiency decreasing B) Not enough information to tell C) Efficiency increasing

C) Efficiency increasing

Suppose that a steel manufacturing plant in Chicago dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the plant. Producing an additional ton of steel imposes a constant marginal external cost of $225 regardless of the level of production. There is no marginal external benefit from steel productions, so the marginal benefit to consumers equals the marginal social benefit. The market price for steel $930. To create an incentive for the firm to produce the socially optimal quantity of steel, the government could _______ of _______ per ton of steel. A) impose a tax; $225 B) impose a tax; $930 C) grant a subsidy; $930 D) grant a subsidy; $225

A) impose a tax; $225

Which of the following is both correct and most explanatory as an ending for the sentence? The cost of producing another unit of a public good .... A) is typically positive but once another unit is produced, the cost of supplying it to additional individuals is zero B) is equal to the cost of supplying it to another individual C) is zero because once it is produced for one individual it is there for everyone. D) is typically positive and not equal to the cost of supplying it to another individual

A) is typically positive but once another unit is produced, the cost of supplying it to additional individuals is zero

Assume that the production of good x initially involves external costs. The government then taxes all of the firms in this industry such that these external costs are internalized (paid by the firms). One would expect the price of product x to A) rise and industry output to decrease, and this is efficient because less of x is produced and consumed B) rise and industry output to decrease, and this is inefficient because less of x is produced and consumed

A) rise and industry output to decrease, and this is efficient because less of x is produced and consumed

If goods A and B are substitutes, a decrease in the price of good B will: A) shift the demand curve for good A to the left. B) shift the demand curve for good A to the right. C) shift the demand curve for good B to the right and shift the demand curve for good A to the left. D) shift the demand curve for good B to the right.

A) shift the demand curve for good A to the left. If the price of B decreases, this will make A relatively less attractive at every price (demand curve for A will shift left). A change in the price of B is a movement along its demand curve, not a shift.

Assume a manna-from-heaven economy (so no production). Further assume only goods fall from the sky. Evaluate the next two statements: (1) There will necessarily be efficiency if all of the goods are consumed. (2) Efficiency requires that all of the goods are consumed. The first statement is ____ and the second statement is ____. A) True: True B) True: False C) False: False D) False: True

D) False: True Just because everything is assumed does not mean the amounts are efficiently distributed (efficiency increasing trades might be possible) Since only "goods" fall from heaven, if everything was not being consumed, efficiency would increase by consuming more.

A firm calculates that at its current level of output its average cost is increasing. Which of the following is true: A) Its marginal cost is decreasing B) Its marginal cost must be less than the average total cost C) Its marginal cost must be greater than its average total cost, and increasing. D) Its marginal cost must be greater than its average cost

D) Its marginal cost must be greater than its average cost Marginal cost must be greater than average cost, but marginal cost, at that point, could be increasing or decreasing.

Imagine a world where no one is affected by the health of others, and everyone has to pay for their own medical care. Suppose that smoking cigarettes creates no negative or positive external effects, but, as is well known, causes a lot of smokers to get lung cancer. If the government does not interfere in the cigarette market, then________. A) The market equilibrium quantity of cigarettes smoked will be greater than the socially efficient number. B) There is not enough information to answer the question. C) The market equilibrium quantity of cigarettes smoked will be less than the socially efficient number. D) The market equilibrium quantity of cigarettes smoked will be the efficient number from society's perspective.

D) The market equilibrium quantity of cigarettes smoked will be the efficient number from society's perspective.

Suppose Un's rubber factory belches black smoke in the air during the production process. If the government forces the plant to internalize this external cost with a pollution tax, then we would expect A) The social marginal cost of Un producing rubber will increase B) The firm's supply curve for rubber will shift to the right C) The demand curve for rubber will shift to the left because the price of rubber will rise D) The private marginal cost of Un producing rubber will increase

D) The private marginal cost of Un producing rubber will increase

Bob's Brewery dumps waste into the Boulder Creek because it is the cheapest way for the brewery to dispose of the waste. The waste negatively impacts the residents in the area because they can no longer use the creek for recreation. Currently, there is no tax or regulation in place to limit Bob's waste disposal. Which of the following is both correct, and most informative? A) This is an example where the socially optimal level of pollution is occurring. B) This is an example of a negative external effect. C) This is an example of a negative externality. D) This is an example of a negative external effect and a negative externality.

D) This is an example of a negative external effect and a negative externality.

For a firm that faces exogenous input prices, its LR cost function A) identifies minimum production costs as a function of it output price and input prices. B) identifies minimum production costs as a function of its output level and the amounts of inputs it uses. C) identifies production costs as a function of its output level and input prices. D) identifies minimum production costs as a function of its output level and input prices.

D) identifies minimum production costs as a function of its output level and input prices.

An externality is said to exist when: A) individuals impose costs or benefits on others, and the market provides incentives to take these costs and benefits into account. B) individual actions are affected by external forces; for example, the loss of U.S. jobs due to competition from abroad is an externality. C) individual actions are affected by government policies (such as taxes) that are externally imposed on the market. D) individuals impose costs or benefits on others but have no incentive to take these costs and benefits into account.

D) individuals impose costs or benefits on others but have no incentive to take these costs and benefits into account.

Based on Edward's definition of a public commodity, sufficient conditions for a commodity to be a public commodity are A) non-congestible and non-excludable B) non-rivalrous C) none of the properties listed in any of possible answer are sufficient to make a good a public good. D) non-congestible, non-excludable, and everyone must consume every unit produced

D) non-congestible, non-excludable, and everyone must consume every unit produced

If a good that involves external costs is then priced to take these costs into account, then its price would: A) rise but output would stay the same. B) not change but output would fall. C) fall and output would go up. D) rise and output would likely fall.

D) rise and output would likely fall.

A group of university students buys coconuts from a farmers' market. The students consume the meat of the coconuts for food and use the shells to make sculptures. These sculptures are placed in a public park that any student can visit. The park sustains itself through students' donations. Some individuals have no incentive to donate to the park and will, instead, depend on those who do donate. Which of the following is this an example of? A) A negative externality B) overuse of coconuts C) Socially efficient allocation of coconuts D) the free-rider problem

D) the free-rider problem

The government sets a binding price ceiling on rent for NYC apartments, causing inefficiency. This is an example of a market failure. A) False B) True

A) False

To identify one or more of an individual's indifference curves one must know their utility function because along an indifference curve utility is constant. A) False B) True

A) False

To produce X widgets a firm *must* choose an input combination that is on the isoquant for X widgets. A) False B) True

A) False

So, Fred and Wilma are retiring, selling their home in New Orleans and buying a house in Boulder. George, a longtime resident of Boulder has already rented but now has saved up enough money to buy the house of his dreams for $700K, the asking price. But he loses it to Fred and Wilma who agree to buy it for $710K. George has obviously been made worse off by the action of Fred and Wilma. A) This is an example of the market working. B) This is an example of an externality-type market failure because one agent's actions have a negative external effect on another agent.

A) This is an example of the market working.

If property-rights are non-enforceable ____ (Choose the answer that is both correct and most informative.) A) Market transactions will not occur. B) The market outcome will be inefficient.

A) Market transactions will not occur.

Within a firm, inputs are not allocated by markets. A) True B) False

A) True

You go to college. It costs money, precludes you from working, and is more stressful than not going to college. Given this, tranquility is part of the opportunity cost of going to college. A) True B) False

A) True

Lilly is the price-taking owner of an apple orchard. Currently the price of apples is high enough that Lilly is earning positive economic profits. In the long run, Lilly should expect: A) lower apple prices due to exit of existing firms. B) lower apple prices due to entry of new firms. C) higher apple prices due to entry of new firms. D) higher apple prices due to exit of existing firms.

B) lower apple prices due to entry of new firms.

Assume there are 5 identical firms in a perfectly-competitive market, each with the marginal cost curve MC=0.5Q. When the market price is 500, the total supply of this five-firm economy will be___. A) 250 B) 1000 C) 5000 D) 500

C) 5000

George makes candy bars. Inputs are chocolate, c, and sugar, s. The constant MRTScs = 3/4. The price of sugar is $10 per unit and the price of chocolate is $10 per unit. George will A) use only sugar to produce candy bars B) use only chocolate to produce candy bars C) use both chocolate and sugar to produce candy bars

A) use only sugar to produce candy bars

The Atlanta Symphony wants to make sure that its concerts are affordable for all residents of Atlanta and therefore prices all its tickets at $25 each. However, outside Symphony Hall, scalpers can sell the same tickets for $75 or more. The true cost to the concertgoer of a ticket to the symphony is at least: A) $50. B) $75. C) $100. D) $25.

B) $75.

In the market place the aggregate demand curve for gubers is Gd=10-2P and the aggregate supply curve is GS=5+P where P is the price of a guber. The equilibrium price of a guber is A) neither of the other two answers B) 5/3 C) 6 and 2/3

B) 5/3

Production is efficient when A) The only way to increase the production of a good requires that the production of some other good or goods be decreased. B) Both of the other answers are correct. C) The only way to make one member of society better off requires that another member be made worse off.

B) Both of the other answers are correct. Both answers are correct. If there is overall efficiency there must be efficiency in production.

A firm's cost function identifies the state of technical knowledge for producing the firm's output. A) Incorrect B) Correct

B) Correct

Is the following statement true or false? "George's demand function for Diet Coke(s) and George's marginal willingness-to-pay function for Diet Coke contain the same information, neither contains more nor less. A) Incorrect B) Correct

B) Correct

Assume a society where there are some resources that are both common property (no economic agent(s) control access) and not scarce. The existence of such resources will cause the competitive market equilibrium to be inefficient. A) True B) False

B) False

Former Vice-President Al Gore has suggested that it is possible to produce more goods and have a cleaner environment. Consider a production possibility frontier with goods on the vertical axis and amount pollution is reduced from its no-abatement level on the horizontal axis. Assume that society is currently producing along the frontier, is Al Gore's suggestion true or false? A) True B) False

B) False

If society's allocation of resources and distribution of goods is efficient, it still might be possible to increase the production of good X without decreasing the production of any other good. A) True B) False

B) False

Imagine a demand curve for husbands with the "price"/cost of acquiring a husband on the vertical axis. Also imagine a supply curve of males willing to get married, such that the more males are paid to get married (the higher the price), the more that will offer themselves up at the altar. The article you read, "Supply, Demand and Marriage," suggests that the increase in premarital sex in the 1960's (the "Sexual Revolution") was driven by shifts in the demand and supply curve for husbands. Specifically that the husband supply curve (how many guys will get married at each "price") shifted to the right. A) True B) False

B) False

In the longrun, a competitive firm will operate at an output level where its total costs are minimized. A) True B) False

B) False

Increasing the state of knowledge is efficiency increasing A) True B) False

B) False

More efficient is always preferred to less efficient. A) True B) False

B) False

Our text, Krugman and Wells, costs $100. Gerard's WTP is $95. His consumer's surplus from the book is -$5. A) True B) False

B) False

Since texting while driving generates a negative external effect (it makes the roads less safe for others), banning texting while driving would necessarily be efficiency increasing. A) True B) False

B) False

The city of Boulder wants to make marijuana affordable to all, so it sets a ceiling on its price. This price ceiling is set at an amount well below the equilibrium price. This government policy will lead to more marijuana being consumed. A) True B) False

B) False

The efficient number of murders in the U.S. is likely zero. A) True B) False

B) False

The government set an effective price ceiling on rent for NYC apartments, causing a shortage. This is an example of a market failure. A) True B) False

B) False

Assuming the model (theory) of consumer behavior taught in class and in the book, and assuming all commodities are goods, reducing an individual's budget set will always make the individual worse off. A) True B) False

B) False False because this is not always true. For example, I am consuming only one good, cigars, and the price of Coke goes up, I will continue to consume the same bundle and not be worse off because my budget set decreased.

In our George tattoo example in class, efficiency can necessarily be achieved by taxing George, at some appropriate level, for each tattoo he has. A) True B) False

B) False No, the problem is that the negative effect is caused not by his tattoos but because he shows them in public (runs around nude).

Gasoline, a derivative of oil, is a large part of transportation costs for many producers of goods. If the price of oil falls at the same time that incomes rise for many consumers, one would expect the equilibrium price of many normal goods to ________, while their equilibrium quantities would ________. A) rise; fall, rise or stay the same. B) fall, rise, or stay the same; rise C) fall, rise, or stay the same; decrease D) fall; fall, rise, or stay the same

B) fall, rise, or stay the same; rise

Choose the statement that is correct A) the income elasticity of weight is the percentage change in income divided by the percentage change in weight B) indifference curves and isoquants are contour lines C) the slope of an isoquant curve is called the marginal rate of substitution D) for an individual an indifference curve further from the origin is always preferred to an indifference curve closer to the origin.

B) indifference curves and isoquants are contour lines

Along an isoquant ____ constant. Along an indifference curve ____ constant. An isoquant identifies combinations of ____. An indifference curve identifies combinations of ____. A) technology is: preferences are; goods: inputs. B) output is: utility is; inputs: goods C) utility is: output is : goods: inputs D) resources are: utility is; goods; inputs

B) output is: utility is; inputs: goods

Considering texting while driving and assume texting while driving imposes cost on other drivers and on pedestrians. The efficient amount of texting while driving is A) necessarily zero. B) possibly zero.

B) possibly zero.

In the perfectly competitive guidebook industry, the market price is $35. A firm is currently producing 10,000 guidebooks; average total cost is $38, marginal cost is $30, and average variable cost is $30. The firm should: A) shut down, because the firm is losing money. B) produce more guidebooks, because the next guidebook produced increases profit by $5. C) raise the price of guidebooks, because the firm is losing money. D) keep output the same, because the firm is producing at minimum average variable cost.

B) produce more guidebooks, because the next guidebook produced increases profit by $5.

Regardless of whether or not they pay for them, people cannot be excluded from receiving the benefits of: A) common resources. B) public goods and common-property resources. C) private goods. D) public goods.

B) public goods and common-property resources.

How a competitive firm chooses the input combination to produce its chosen level of output does not depend on the price at which it can sell its output. A) True B) False

A) True True. While how much the firm wants to produce and sell depends on the price it can sell its output, how to produce the profit-maximizing level of output (what input combination to use) does not depend on the price at which the output can sell. One want to produce the profit-maximizing output level in the minimum cost way and this depends, only, on the state of technical knowledge for producing the output (the production function) and the prices of the inputs.

A firm faced with a per-unit tax on the amount of a pollutant it emits will continue to pollute its current amount if the tax is less than the cost of reducing pollution by an additional unit. Said another way, it will not reduce emissions further if the marginal abatements cost is greater than the tax. A) True B) False

A) True True: It is cheaper to pollute and pay the tax.

Larry the Liberal hates The Donald, and ranks every bundle with Donald as President lower than every bundle where Donald is not President. Given this, evaluate the following statement. "Larry would rather his kids starve than have Donald as President." (Choose the answer that is both correct and most informative.) A) The quoted statement does not logically follow from what is assumed. B) There is no enough information to determine whether the quoted statement logically follows from what is assumed. C) The quoted statement logically follows from what is assumed.

C) The quoted statement logically follows from what is assumed.

Flu vaccines often provide both private benefits to individuals and positive external benefits to other members of society. As a result, without government intervention one would find: A) a shortage of flu vaccines. B) too many flu vaccines being produced since external benefits would not be considered. C) too few flu vaccines being produced since external benefits would not be considered. D) the optimal amount of flu vaccines would be produced since external benefits would not be considered.

C) too few flu vaccines being produced since external benefits would not be considered.

Santa Claus, on Christmas Eve when he is delivering toys to children, is. A) a public good because the fact that he delivered toys to my house does not preclude him from delivering toys to your house. That is, he is non-congestible. B) a private good C) what the textbook calls an artificially-scare good D) what the textbook calls an artificially-scare good. The market efficiently allocates such goods.

C) what the textbook calls an artificially-scare good

Buford Bus Manufacturing installs a new assembly line. As a result, the output produced per worker increases. The marginal cost of output at Buford: A) will be unchanged. B) is at its maximum. C) will decrease (the MC curve will shift right). D) will increase (the MC curve will shift left).

C) will decrease (the MC curve will shift right).

A market for a good requires that the property rights for the good are well defined. A) True B) False

A) True

Excess market power typically causes the market system to fail A) True B) False

A) True

Making the allocation of society's resources less efficient can increase the welfare of society. A) True B) False

A) True The important words are "can" and "welfare." If the current allocation is highly unfair, society might prefer a less efficient but fairer allocation.

George has many tattoos on his body that the public find offensive. George also likes walking around without much clothing on. This leads to a situation where George is displaying more tattoos than is socially efficient. Which of the following would be a *Coasian* solution to the problem? A) A law forbidding George from displaying tattoos. B) A law clarifying property rights, that says that George cannot have tattoos showing unless everyone is OK with it. In this case, society could end up with the socially optimal amount of tattoos on George because George has an incentive to bribe people so he can go naked. C) A tax on the number of tattoos that George displays. D) None of the above.

B) A law clarifying property rights, that says that George cannot have tattoos showing unless everyone is OK with it. In this case, society could end up with the socially optimal amount of tattoos on George because George has an incentive to bribe people so he can go naked.

Dollars on the vertical axis, quantity on the horizontal axis. There is a downward-sloping demand curve for mineral water, but the positive supply of mineral water is fixed (supply does not depend on price). The market for mineral water is in equilibrium. Which of the following statement is correct and most informative? A) Both producer's and consumer's surplus is positive and the supply curve is horizontal B) Both producer's and consumer's surplus is positive and the supply curve is vertical C) The supply curve is horizontal, producer's surplus is zero, and consumer's surplus is positive

B) Both producer's and consumer's surplus is positive and the supply curve is vertical

If both the demand and supply curves for peanut butter ($ on the vertical axis) shift right A) Equilibrium quantity will fall but we cannot say what will happen to equilibrium price B) Equilibrium quantity will rise but we cannot say what will happen to equilibrium price C) Equilibrium price will rise but we cannot say what will happen to equilibrium quantity D) Equilibrium price will fall but we cannot say what will happen to equilibrium quantity

B) Equilibrium quantity will rise but we cannot say what will happen to equilibrium price

*Because* Americans eat a lot of meat, and because meat production uses more resources to produce than other types of food, food production in the U.S. is inefficient. A) True B) False

B) False

Externalities and external effects are the same thing. A) True B) False

B) False

George steals your wallet, making himself better off, and you worse off. Before the theft took place the allocation of resources was necessarily efficient. A) True B) False

B) False

In lecture, we looked at an example where Professor Morey's daughter, Fred, was paid $1 per mile skied. Fred's only cost was the value of her time, $3 an hour. In order to maximize profit, Fred will ski up the point where it cost her $3 to ski her last mile. A) True B) False

B) False

Trades can be involuntary transactions A) True B) False

B) False

True or False? For an individual, the "consumer's surplus" associated with being able to purchase a market good at a specific price, rather than it being unavailable at any price, does not depend on his willingness to pay for that good. A) True B) False

B) False

Thelma's love for Wayne never waned. (Note that "waned" means "diminished".) A) True B) False

B) False False: a quote directly from the online notes of Thelma, Wayne, and barbed wire.

Let's say you want to know how responsive Fred's miles skied are to a change in the number of hours she skis (her labor). From the following list which is the best measure. A) How much more time she needs to ski one more mile. B) Her labor elasticity of miles skied C) How much she needs to increase her time skied (labor) in percentage terms to increase her miles skied by 1%.

B) Her labor elasticity of miles skied

All I care about is publishing research papers and going skiing; I like doing both--the more the better. CU pays me $105 a week (my income). Skiing costs $20 a trip, and journals charge $15 for each paper they publish- they always accept my papers. It takes me 6 hours to do a ski trip and 4 hours to write a paper. I have 40 hours a week to allocate to writing and skiing, and I can spend only spend my $105 on these two activities. Which of the following statements is both correct and most informative? A) I might ski 3 times and write 2 papers. B) I might ski 3 times and write 3 papers. C) I might ski 7 times

B) I might ski 3 times and write 3 papers.

I care about only two things: scotch and Swiss chocolate bars. Consider my utility function and indifference curves. My utility function looks like the crater of a volcano: my indifference curves are circles and the quantities of both commodities are positive at the bottom of the crater. Which of the following statements is both correct and most informative? A) Scotch is initially a good but then becomes a bad B) Scotch is initially a bad but then becomes a good. C) Scotch and chocolate are both bads D) Chocolate is a bad

B) Scotch is initially a bad but then becomes a good.

Lauren has 11 people working in her tangerine grove. The marginal product of the eleventh worker equals 13 bushels of tangerines. If she hires a twelfth worker, the marginal product of that worker will equal: A) 12 bushels. B) The answer cannot be determined with the information available. C) 15 bushels. D) 14 bushels.

B) The answer cannot be determined with the information available.

An isocost line identifies all those combinations of inputs that can be purchased for a given amount of the money. A) False B) True

B) True

When the per-unit tax on pollution is zero, the profit-maximizing competitive firm emits 10 units of pollution. Then a pollution tax of $5 a unit is imposed. The marginal cost of decreasing pollution is increasing and it will cost the firm $8 to reduce its pollution from 10 to 9 units. The profit maximizing firm should keep should keep polluting the ten units of pollution and pay its pollution tax bill of $50? A) False B) True C) It should keep polluting 10 units, but its pollution-tax bill is not $50

B) True It would cost the firm $8 to reduce its pollution from 10 to 9 units. If it does not reduce from 10 to 9 units, it has to pay a $5 tax. Would you rather pay $8 or $5

Assume there are only two commodities in this world: books by Marcel Proust (a famous French author) and books by the British Author E.L. James (One of his books is "Fifty Shades of Grey"). Given your tastes, books by James are perfect substitutes for books by Proust, and both are goods. Let PP be the price of a book by Proust, and PJ be the price of a book by James. Your money income is M, and you face no other constraints. Which is more likely? A) You buy books by both authors. B) You buy books by only one of the authors.

B) You buy books by only one of the authors

In our story about taming the Wild West, the arrival of John Wayne decreased the farmer's cost of protecting his property rights. A) incorrect B) correct

B) correct

The difference between total revenue and total cost is: A) marginal revenue. B) economic profit. C) nominal revenue. D) average revenue.

B) economic profit.

Imagine a world of two commodities: pollution (a bad) and a good. Betty and Bob have the same preferences, face the same prices, and each has the same amount of income. Neither faces any other constraints. Their WTP to reduce pollution by on unit (in terms of forgone goods) is A) not necessarily the same. B) necessarily the same.

B) necessarily the same.

If government officials set an emissions tax too high: A) the amount of pollution will necessarily be less efficient than if there was no emissions tax B) there will be too little pollution from a social efficiency perspective C) there will be too much pollution from a social efficiency perspective D) the marginal social cost of pollution will exceed the marginal social benefit of pollution.

B) there will be too little pollution from a social efficiency perspective

A Netflix program is A) a good that is non-congestible but excludable B) two of the other answers are correct C) an artificially-scare good D) a public good because it is non-congestible (everyone can watch the same show at the same time)

B) two of the other answers are correct

Suppose Justin's Candy Factory currently employs seven workers who produce candy. With these seven workers, the average production of candy is 10 candies per worker. Upon hiring one additional worker, the average production of candy per worker decreases to 8 candies. What is the marginal product of labor? A) 6 B) the marginal product of labor is positive but there is not enough information to determine its exact magnitude. C) -6 D) there is not enough information to determine the marginal product of labor

C) -6

I care about only two things: scotch and Swiss chocolate bars. Consider my utility function and indifference curves. My utility function looks like the crater of a volcano: my indifference curves are circles and the quantities of both commodities are positive at the bottom of the crater. Which of the following statements is both correct and most informative? A) Scotch is a good B) Scotch and chocolate are both bads C) Chocolate is initially a bad but then becomes a good. D) Scotch is initially a good but then becomes a bad

C) Chocolate is initially a bad but then becomes a good.

Suppose that smoking cigarettes creates a negative external effect. If the government does not interfere in the cigarette market, then________. A) The market equilibrium quantity of cigarettes smoked will be less than the socially efficient number. B) There is not enough information to answer the question. C) The market equilibrium quantity of cigarettes smoked will be greater than the socially efficient number. D) The market equilibrium quantity of cigarettes smoked will the efficient number from society's perspective.

C) The market equilibrium quantity of cigarettes smoked will be greater than the socially efficient number.

Why was John replaced by barb wire? (Choose the alternative that is both correct and most informative.) A) With John replaced by barb wire, Thelma is free to start dating again. B) Thelma's love for John waned. C) The opportunity cost to Thelma of enforcing her property rights are lower with barb wire, partially because her love for John waned.

C) The opportunity cost to Thelma of enforcing her property rights are lower with barb wire, partially because her love for John waned.

Consider, as presented in class, Fred's production of snerd edibles. Fred is a competitive firm. Which of the following are exogenous to Fred? A) Only two of the other answers are correct. B) the isoquants for producing edibles. C) Three of the other answers are correct D) the price of edibles E) the state-of technology for producing edibles

C) Three of the other answers are correct

Two firms in town emit Guber gas. For Firm 1 they can always decrease their emission of GG by one unit at a cost of $5. In contrast, for Firm 2, it costs $1 to eliminate the first unit, $3 to eliminate the second unit, $6 for the third unit, $10 for the 4th unit, $17 for the fifth unit, etc. The two firms together currently emit 25 units of guber gas, 10 by Firm 1 and 15 by Firm 2. The City want to reduce the total to 20 units, so they issue 20 pollution permits for Guber gas, and require each firm to have a permit for each unit of gas they emit. Given all this, when the permit market is in equilibrium, Firm 2 will emit 13 units (reduce by 2) and Firm one will emit 7 units (reduce by 3 units). And the equilibrium price of a permit will be between $5 and $6. A) False B) Not enough information to determine whether it is true or false. C) True

C) True

A good can be both non-congestible, and excludable. A) Yes this is possible and an example is Donald Trump in his capacity as our President. B) No, this is not possible. C) Yes this is possible and an example is HBO or some other cable station.

C) Yes this is possible and an example is HBO or some other cable station.

If Jack and Jill are positioned inside of their UPF curve (not on the line) then which one of the following scenarios is NOT possible: A) The situation may be equitable from their point of view B) They are not consuming all of the goods C) Production efficiency is being achieved D) All of the above are possible scenarios

D) All of the above are possible scenarios

Which of the following is an example of scarcity A) If a city uses an acre of land to build a park there will be less land available for houses. B) If I buy a new house I won't have enough money to go on vacation. C) You choose to stay home and study instead of going to the movies. D) All of these things.

D) All of these things.

Which of the following is the best example of a non-excludable good? A) ice cream B) Education C) health care D) national defense

D) national defense

Roads that are open-access (common-property resources) often have an inefficient amount of traffic congestion. This happens because A) the marginal social cost of any one individual's use of the roads equals the individual's marginal cost. B) the marginal social cost of any one individual's use of the roads is less than the individual's marginal cost. C) it is impossible to compare the marginal social cost of any one individual's use of the roads with the individual's marginal cost. D) the marginal social cost of any one individual's use of the roads is greater than the individual's marginal cost.

D) the marginal social cost of any one individual's use of the roads is greater than the individual's marginal cost.

Consider a situation where a potential seller's WTA (willingness-to-accept) the loss of the good is less than a potential buyer's WTP (willingness-to-pay) for the good. This situation could occur in an equilibrium. A) Incorrect B) Correct

A) Incorrect If someone is still willing to sell something for less that someone else is still willing to pay for it, the current situation (before the sell occurs) cannot be an equilibrium.

"Competitive markets achieve efficiency." Choose the answer that is both correct and most informative. A) The statement is too strong. Competitive markets are often efficient, but there are significant exceptions. B) This statement is true and is the foundation for our belief in the supremacy of the a market economy C) Economics professors often say this. D) This statement is false.

A) The statement is too strong. Competitive markets are often efficient, but there are significant exceptions.

The marginal product of labor is: A) the slope of the total product of labor curve. B) the change in average product divided by the change in the quantity of labor. C) the change in output that occurs when capital increases by one unit. D) the change in labor divided by the change in total product.

A) the slope of the total product of labor curve.

Melvin is the only guy town selling "medical" marijuana--he is a monopolist and demand is strong. He can sell 3 tons at $9k a ton, but if he lowers his price from $9K a ton to $8K a ton he can sell 4 tons. For Melvin, the marginal revenue associated with the 4th ton is A) $32K B) $5K C) Not enough information to figure it out D) $1K

B) $5K

Krugman and Wells put goods into four categories based on two characteristics of goods. What do they call goods that are both non-rivalrous (what Edward would call non-congestible) and excludable? A) Common Resources B) Artificially Scarce Goods C) Public Goods D) Private Goods

B) Artificially Scarce Goods

Assume a world of two commodities. Could the indifference curves look like circles? A) Incorrect B) Correct

B) Correct

If I donate $100 to the Trump re-election campaign, this indicates that my MRSTG is at least $100, where T is a second term for Donald, and G is market goods. A) Incorrect B) Correct

B) Correct

Is the following statement true or false? "Google is a large centrally planned economy." A) It is false B) It is true

B) It is true

Branding cattle was a way to maintain and enforce property rights. A) incorrect B) correct

B) correct

Picture the indifference curve for carrots, a good, and candy, initially more is preferred to less but eventually it become a bad. If quantity of candy is on the vertical axis and the quantity of carrots is on the horizontal axis which statement best describes the shape of the indifference curve? A) U-shaped B) inverted U-shaped C) C-shaped D) backward C-shaped E) None of the above

C) C-shaped

My demand curve for cigars, per day, is C=10-2P, where P is the price of a cigar and C is the number of cigars I buy and smoke. Assume the current price is $5/cigar. My total willingness-to-pay for cigars is A) $0 B) $13.50 C) not enough information to answer the question D) $25

D) $25

A perfectly competitive firm is definitely earning an economic profit when: A) P > AVC. B) P > MC. C) MR > MC. D) P > ATC.

D) P > ATC.

Economic situations that are in equilibrium are ______ efficient. (Choose the answer that is both correct and most informative.) A) Never B) Almost C) Always D) Sometimes

D) Sometimes

A negative relationship between the quantity demanded and price is called the law of: A) increasing returns. B) market clearing. C) supply. D) demand.

D) demand.

Betsy loves to garden and her rose garden is enjoyed by everyone in her neighborhood. Because her consumption of rosebushes provides a positive external effect to her neighborhood, the government should: A) impose a tax on Betsy because the market quantity of rosebushes is lower than the socially efficient quantity. B) provide Betsy a subsidy because the market quantity of rosebushes is lower than the socially efficient quantity. C) impose a tax on Betsy because the market quantity of rosebushes is greater than the socially efficient quantity. D) provide Betsy a subsidy because the market quantity of rosebushes is greater than the socially efficient quantity.

B) provide Betsy a subsidy because the market quantity of rosebushes is lower than the socially efficient quantity.

The short-run average total cost curve is U-shaped because at low output levels the spreading effect of falling average fixed costs dominates the diminishing returns effect, while at high output levels the reverse is true. A) True B) False

A) True

There is some efficient amount of drunk driving A) True B) False

A) True

Which statement best describes how the competitive firm chooses the input combination it will use to produce, in the long run, its chosen level of output. A) It is determined by the state of technical knowledge for producing its output and the constraints imposed on the firm by the input markets. B) It is determined by the isoquant map C) It is determined by the input prices D) It is determined by the price it can sell its output.

A) It is determined by the state of technical knowledge for producing its output and the constraints imposed on the firm by the input markets.

In unregulated markets where external effects are produced, the efficient amounts of the external effects will be produced. A) True B) False

B) False

Consider two types of welfare payments to the poor: $300 in food stamps or $300 in cash. An economist would argue that the recipient would never prefer the food stamps. A) True B) False

A) True

For an economist, the statement, "I value my friendship with Marc more than I value my friendship with Don." simply means my WTA the loss of Marc as a friend is greater than my WTA the loss of Don as a friend. A) True B) False

A) True

Global warming (a warmer planet) is a good example of a public commodity, for some a public bad, for some a public good. A) True B) False

A) True

Ice cream is congestible. A) True B) False

A) True

Since talking/texting while driving generates a negative external effect (it makes the roads less safe for others), banning talking while driving would necessarily be efficiency increasing. A) False B) True

A) False

Television programs distributed by satellite with encoded signals are public goods A) False B) True

A) False

Consider the George tattoo example from class. Which of the following are necessary conditions for George's tattoo consumption to constitute a negative externality market failure? A) George doesn't internalize the costs his tattoo consumption imposes on society B) George's tattoo consumption directly affects other people (not through prices) C) George is consuming more tattoos than is efficient D) George's tattoo consumption causes prices to rise E) A, B, & C

E) A, B, & C

Assuming no technical progress, at every level of output, no point on a shortrun average cost curve can lie below the corresponding point on the longrun average cost curve. A) True B) False

A) True

Basic consumer theory would say that people do bad things because it increases their utility A) True B) False

A) True

Consider George from lectures, the guy with the tattoos. Why isn't the number of tattoos George shows in public zero? (Choose the answer that is both correct and most informative, assuming what was assumed in the lectures.) A) Some people like to see his tattoos B) George is a member of society and he likes his tattoos, and he likes being naked in public

B) George is a member of society and he likes his tattoos, and he likes being naked in public

If the market price of a good decreases, Wilbur's demand curve for the good remaining the same, his consumer's surplus associated with that good increases. A) No B) Maybe C) Yes

B) Maybe

An isocost line identifies all those combinations of inputs that can produce the same amount of a good. A) False B) True

A) False

A move to Commerce City from Boulder would make you worse off. Your WTA the move is bounded from above by your income/wealth. A) True B) False

B) False

The concept in consumer theory that is analogous to the marginal product of an input in production theory is the marginal utility of a good in consumption. A) Correct B) Incorrect

A) Correct

If all prices decrease by 10%, and, at the same time income decreases by 5%, there will be an "income effect" but no "substitution effect." A) True B) False

A) True

If society's WTP for an additional unit of diamonds is greater than its WTP for an additional unit of food for poor people, this indicates that the utility the consumers of the diamonds will get from the additional diamonds is greater than the marginal utility the poor will get from the consumption of the additional food. A) True B) False

A) True

Consider, as presented in class, Fred's production of snerd edibles. Remember that Fred is a competitive firm. It is the shortrun and there are two variable inputs (hours of Lucas's time, and cans of Red Bull). Fill in the blanks. The marginal product of ____ in the production of ____ is how much ___ ___ when ____ increases by one unit, holding constant ____ A) Both of the other answers are correct. B) Red Bull; snerd edibles; output; increases; Red Bull; the number of hours Lucas works. C) labor; snerd edibles; output; increases; labor, Red Bull

A) Both of the other answers are correct.

Assume that people like to shoot bears - its fun and the meat is tasty. This assumption implies that shooting bears is efficiency increasing. A) True B) False

B) False

A rational consumer will always choose to consume a commodity bundle that is on her budget line. A) Yes B) No

B) No The answer is no unless one assumes all commodities are goods.

My demand for cigars is C=12-2P where P is the price of cigars and C is the number of cigars I purchase and smoke. Assume the current price of cigars is $2/cigar. My total willingness-to-pay for cigars is A) $16 B) $36 C) $12 D) Not enough information to tell.

B) $36

Imagine widgets are a public commodity that can be produced at the constant cost of $30 a unit. Assume society consists of Fred, Mabel, and Ralph. 1. Fred's marginal wtp for additional widgets is $35 for the first, $25 for the second, and zero for each additional unit. 2. For Mabel they are $5, $5, $0, and then -$5 for each additional unit. 3. For Ralph, they are constant at $10. The efficient number of widget to produce is? A) 3 B) 2 C) 1 D) 0

B) 2

My demand curve for cigars, per day, is C=10-2P, where P is the price of a cigar and C is the number of cigars I would buy and smoke. But currently cigars are not sold (it is illegal to sell cigars). The government is considering a policy that would make it legal to sell and consume cigars at a price of $2/cigar. What is the maximum I would pay to have this policy enacted? (Note that if the demand function is C=10-2P, then the demand function in terms of P (the inverse demand function) is P=5-.5C.) A) $21 B) $12 C) $24 D) $9

D) $9 One is looking form the area under the curve P=5-.5C, above $2. If the price is $2, I will buy and consume 6 cigars. So the area under P=5-.5C, above $2 is half of six multiplied by 3 (3 is 5 minus 2). So the answer is $9

If Maria's consumption of eggnog increases from .75 quarts an hour to 1.25 quarts per hour, her frequency of barfing (throwing up) will increase from 4.5 to 5.5 times an hour. Her eggnog elasticity of barfing (her (EEB) is A) 2.5 B) -2.5 C) -.4 D) .4

D) .4

If the own-price elasticity of demand is -1.5 and a price increase caused demand to increase by 1.8%, approximately how much did the price increase in % terms? A) 0.83% B) 2.70% C) 0.67% D) 1.20%

D) 1.20%

If the price of tacos increases from $1 to $2, and customers decrease their consumption from 10 tacos to 8 tacos, what is the price elasticity of demand, using the midpoint method? A) 1/2 B) 3/2 C) 1 D) 1/3

D) 1/3

Suppose we have the following cost function for snerd edibles: c(e,w) = we2 where e is the number of edibles produced and w is the wage rate. If the wage is currently set at w= $3, what is the marginal cost of producing the 3rd unit? A) 3 B) 27 C) 12 D) 15

D) 15

Willy can only produce apples and carrots. Willy's production-possibilities frontier can be represented with the function C=20-(1/3)A where C is the number of carrots he produces and A is the number of apples he produces. For Willy, the opportunity cost of producing a carrot is ___ and the opportunity cost of producing an apple is ___ A) 1/3 apple, 3 carrots B) 3 apples, 3 carrots C) 1 carrot, 2 apples D) 3 apples, 1/3 carrot

D) 3 apples, 1/3 carrot

Suppose Susan can wash three windows per hour or she can iron six shirts per hour. Paul can wash two windows per hour or he can iron five shirts per hour. (Choose the answer that is both correct and most informative.) A) Susan has an absolute advantage over Paul in washing windows. B) Susan has a comparative advantage over Paul in washing windows. C) Paul has a comparative advantage over Susan in ironing shirts. D) All of the above are correct

D) All of the above are correct

Which of the following statements is correct? (Note that this question might help you in answering some of the other questions.) A) The marginal rate of substitution of good X for good Y by individual i, MRSi XY, describes the rate at which individual i is willing to substitute good X for good Y. B) In competitive equilibrium, if goods are divisible in production and consumption, Fred's MRS between X and Y will equal the MRTXY. C) The marginal rate of transformation of good X for good Y, MRTXY, describes the rate at which good X can be substituted for good Y in production. D) All of the answers about MRS and/or MRT are correct E) In competitive equilibrium, if goods are divisible, every individual will have the same MRSXY F) Some, but not all, of the answers about MRS and/or MRT are correct

D) All of the answers about MRS and/or MRT are correct

Edward dislikes drinking hot cocoa. He hates drinking wine more. He lives in a world that only contains two items, wine and hot cocoa. Based on his above preferences, rank the following baskets. Basket A= 3 cups of hot cocoa and 5 glasses of wine Basket B= 1 cup of hot cocoa and 5 glasses of wine Basket C= 1 cup of hot cocoa and 3 glasses of wine Basket D= 3 cups of hot cocoa and 6 glasses of wine. ( A<B means basket B is preferred to basket A. A=B means Edward is indifferent between baskets A and B) A) B<A<D<C B) A=B<D<C C) C<A=B<D D) D<A<B<C

D) D<A<B<C

Boulder Colorado, wants to reduce it emissions of Guber gas by 10 units. Two firms in town emit Guber gas. For Firm 1 they can always decrease their emission of GG by one unit at a cost of $5. In contrast, for Firm 2 it costs $1 to eliminate the first unit, $3 to eliminate the second unit, $6 for the third unit, $10 for the 4th unit, $15 for the fifth unit, etc. The-cost minimizing way to reduce these ten units is ______, and the total cost will be ____. If each firm reduces 5 units the total cost of the 10 unit reduction with be ____. A) For Firm 1 to reduce 10 units; $50; $60 B) For Firm 2 to reduce two units and Firm 1 to reduce 8 units: $65; $60 C) For each firm to reduce five units: $65; $65 D) For Firm 2 to reduce two units and Firm 1 to reduce 8 units; $44; $60

D) For Firm 2 to reduce two units and Firm 1 to reduce 8 units; $44; $60

Suppose Hobo Hank spends his money on two goods; cigarettes and alcohol, and he is currently consuming some of both. His indifference curves are downward sloping getting less steep as the amount of cigarettes increases (cigarettes on the horizontal axis, alcohol on the vertical). Then, a tax is imposed on cigarettes that increases their price. After the tax is implemented, Hobo Hank is worse off, and expresses his concerns on a cardboard sign to elicit sympathy. This causes his panhandling income to increase just enough to get him back to his pre-tax indifference curve. We would expect: A) His consumption of cigarettes to decrease and his consumption of alcohol is ambiguous B) His consumption of cigarettes to increase and his consumption of alcohol to decrease C) His consumption of cigarettes and alcohol to increase D) His consumption of cigarettes to decrease and his consumption of alcohol to increase

D) His consumption of cigarettes to decrease and his consumption of alcohol to increase

Ingrid, when she is in Sweden, and not skiing for CU, consumes only pickled herring and Aquavit (a Swedish type of booze). She is indifferent to the amount of pickled herring she eats, but the more the better for Aquavit. Consider her indifference curves with Aquavit on the vertical axis and herring on the horizontal axis A) Ingrid's indifference curves are vertical lines B) Ingrid's indifference curves are downward sloping C) Ingrid's indifference curves are upward sloping D) Ingrid's indifference curves are flat (horizontal lines)

D) Ingrid's indifference curves are flat (horizontal lines)

Ingrid, when she is in Sweden, and not skiing for CU, consumes only pickled herring and Aquavit (a Swedish type of booze). She loves pickled herring: the more the better, but is indifferent to the amount of Aquavit she drinks. Consider her indifference curves with Aquavit on the vertical axis and herring on the horizontal axis A) Ingrid's indifference curves are upward sloping B) Ingrid's indifference curves are downward sloping C) Ingrid's indifference curves are flat (horizontal lines) D) Ingrid's indifference curves are vertical lines

D) Ingrid's indifference curves are vertical lines

Mary Jane lives in a world of only two commodities: joints (marijuana cigarettes) and workouts. She enjoys both and the two goods are perfect substitutes: one workout is as good as two joints. Both goods are free and the amount of time it takes to smoke a joint and workout are the same. Unfortunately, Mary Jane cannot do both at the same time. Choose the answer that is both correct and most informative. A) Mary will consume joints and workouts in the ratio two joints for each workout B) Mary will spend her life smoking joints and never workout. C) Mary will be on the same indifference curve no matter what she does. D) Mary will spend her life working out and will never smoke a joint

D) Mary will spend her life working out and will never smoke a joint

Assume a world of no external effects, and consider the demand and supply curves for low-skilled workers with the wage rate on the vertical axis. Now assume that the government has imposed a binding maximum wage for low-skilled workers. That is, firms cannot pay workers more than the legislated amount. Choose the statement about the effect of this binding maximum wage that is both correct and most informative. A) From an efficiency perspective, too few of the low-skilled will work, and there will be firms who want to hire the low skilled at the legislated maximum wage, but cannot. B) There will be an excess demand for low-skilled workers at the legislated maximum wage, and the allocation of low-skilled workers will be inefficient C) There will be an excess supply of low-skilled workers at the legislated maximum wage, and the allocation of low-skilled workers will be efficient. D) More than one of the other answers is correct.

D) More than one of the other answers is correct . Draw the graph. Note the word "maximum" meaning that firms cannot pay more than is max wage, and this max wage is below the equilibrium wage. A and B are both correct. C is not correct (at this max wage there will be excess demand, not excess supply.

Which of the following best describes the relationship between a utility-possibilities frontier and a production-possibilities frontier? A) They are both representations of efficiency. The UPF identifies combinations of utility that are efficient. The PFF identifies combinations of goods where there is efficiency in production. B) They both describe the maximum amount of an output that can be produced holding constant the amounts of the other outputs produced. For the PPF the outputs are goods and for the UPF the outputs are utility levels. C) They are conceptually unrelated. D) More than one of the other answers is correct.

D) More than one of the other answers is correct.

I have a ton of old newspapers in my home office. I like them there; Sally, my wife, does not. The current situation is inefficient because ________? Choose the best possible answer. A) Sally's WTP for their removal is less than my WTA their removal. B) Sally's WTP for their removal is more than my WTP to keep them around. C) it is not right for me to clutter up our home with yellowing newspapers. D) Sally's WTP for their removal is more than my WTA their removal.

D) Sally's WTP for their removal is more than my WTA their removal.

I care about only two things: scotch and Swiss chocolate bars. Consider my utility function and indifference curves. My utility function looks like a mountain such that my indifference curves are circles and the quantities of both commodities are positive at the top of the mountain. Which of the following statements is both correct and most informative? A) Scotch is initially a bad but then becomes a good B) Chocolate is initially a bad but then becomes a good. C) Scotch and chocolate are both bads D) Scotch starts off as a good and then becomes a bad

D) Scotch starts off as a good and then becomes a bad

If the price of a Lady Gaga concert ticket in Boulder is $100 per seat, the ticket office can sell 10,000 tickets. If the price of a ticket is $150 per seat, they can sell 6,000 tickets. Which of the following statements is true? A) The demand for this ticket is price inelastic, so an increase in the price of the ticket will decrease the total revenue of the ticket seller. B) The demand for this ticket is price inelastic, so an increase in the price of the ticket will increase the total revenue of the ticket seller. C) The demand for this ticket is elastic, so an increase in the price of the ticket will increase the total revenue of the ticket seller. D) The demand for this ticket is price elastic, so an increase in the price of the ticket will decrease the total revenue of the ticket seller

D) The demand for this ticket is price elastic, so an increase in the price of the ticket will decrease the total revenue of the ticket seller

How many of the following statements are correct? (1) In a competitive market economy, everyone faces the same exogenous prices for goods, and (2) if there are no external effects, the relative prices of two goods reflect how much less of the one can be produced if society produces one more unit of the other, (3) in equilibrium everyone has the same marginal rates of substitution. And (4) Everyone consumes the same amounts of each good. A) Only (1) is correct B) The first three statements are correct, but (4) is incorrect. C) All four statements are correct. D) The first three statements are correct, but there is not enough information to determine whether (4) is correct.

D) The first three statements are correct, but there is not enough information to determine whether (4) is correct.

Consider the probability of being infected with AIDs, and the frequency one has unprotected sex with a stranger. While you would never have unprotected sex with a stranger, you have a friend who told you he is going to increase his frequency of unprotected stranger-sex by 10%, and you are worried he might contract AIDs. Under which of the following four scenarios will you worry the least about him contracting AIDs A) The percentage change in the probability of him contracting AIDs divided by the percentage change in the frequency of his unprotected stranger-sex is a number greater than one. B) The percentage change in the probability of him contracting AIDS divided by the percentage change in the frequency of his unprotected stranger-sex is positive number between zero and one. C) The percentage change in the probability of him contracting AIDs divided by the percentage change in the frequency of his unprotected stranger-sex is between zero and negative one. D) The percentage change in the probability of him contracting AIDs divided by the percentage change in the frequency of his unprotected stranger-sex is a number less than negative one.

D) The percentage change in the probability of him contracting AIDs divided by the percentage change in the frequency of his unprotected stranger-sex is a number less than negative one.

Which of the following is an example of a common-property resource? A) A Miley Cyrus concert where the tickets are $100 each, but seats are not assigned. B) A highway to which access is granted only to those who pay a specified toll C) A public beach with no entry fee. D) Two, but only two, of other answers are correct. E) The Boston Commons back in the day when anyone who lived in Boston could graze their livestock on it without paying a fee.

D) Two, but only two, of other answers are correct.

I am a firm that needs to dump my toxic waste in a stream, only one stream. I know that after I do it, I will be sued by the Federal Government and forced to pay damages in the sum of total lost consumer's surplus to everyone who fished at the site before I dumped. Ignoring the varying cost of transporting the toxic waste to different streams, which of the following stream options would be my choice if my intent is to maximize the damages I pay. A) a polluted stream with few fish located near a good number of pristine trout streams. B) a pristine stream with a lot of good substitutes because many anglers will get almost as much utility by fishing at one of those close substitutes. C) a polluted stream with few fish, located near a good number equally polluted streams. D) a pristine stream with few good substitutes.

D) a pristine stream with few good substitutes.

According to many economists, the government should: A) achieve the efficient level of pollution by reducing the costs of pollution, which will always increase the benefits to society. B) reduce the level of emissions as far as possible. C) reduce emissions whenever the marginal cost exceeds a predetermined level set by the courts. D) achieve the least-cost way of reducing the level of emissions.

D) achieve the least-cost way of reducing the level of emissions.

Mark has ten apples, but does not like apples. His friends Adam and Sarah like apples, and it costs Mark nothing to give his apples to one or both of them. Initially Adam has ten apples and Sarah has seven. Mark gives Sarah three apples, so Adam and Sarah each have the same number of apples. Mark's gift was ____________, and the final allocation of apples is ____________. A) efficiency increasing; efficient B) efficiency increasing; indeterminate in terms of whether it is efficient or inefficient C) indeterminate in terms of whether it increased or decreased efficiency; inefficient D) efficiency increasing; inefficient

D) efficiency increasing; inefficient

To say that you can't have too much of a good thing means that for any good that you enjoy (for example, pizza): A) higher consumption will increase utility but only up to a point; after that utility will start to decrease. B) it is valid to measure utility in utils. C) higher consumption will cause utility to increase at an increasing rate. D) higher consumption will always lead to greater utility.

D) higher consumption will always lead to greater utility.

The phrase "gains from trade" refers to the: A) gains that one obtains by taking advantage of a temporary discount or "sale" price. B) gains that one obtains by taking advantage of an uninformed buyer and selling at a higher than average price. C) profits obtained from sales of a good or service. D) increase in total output that is realized when individuals specialize in particular tasks and trade with each other.

D) increase in total output that is realized when individuals specialize in particular tasks and trade with each other.

If Marie Marionettes is operating under conditions of diminishing marginal product, the marginal costs will be: A) constant. B) equal to ATC. C) decreasing. D) increasing.

D) increasing.

A curve that represents combinations of two goods that yield equal levels of satisfaction is a(n): A) budget curve. B) marginal utility curve. C) price-consumption curve. D) indifference curve.

D) indifference curve.

The assumptions of perfect competition imply that: A) individuals can influence the market price. B) the price will be a fair price. C) the price will be low. D) individuals in the market accept the market price as given

D) individuals in the market accept the market price as given

The ________ is the increase in output obtained by hiring an additional worker. A) total product B) marginal cost C) average product D) marginal product

D) marginal product

Both Fred and George can buy as many Cuban cigars as they want at $5 a cigar. George buys 8/day, Fred, 3/day. George's consumer's surplus from cigar consumption A) equals Fred's because they both pay $5/cigar. B) is larger than Fred's consumer's surplus from cigar consumption. C) is smaller than Fred's consumer's surplus from cigar consumption. D) might be smaller than Fred's consumer's surplus from cigar consumption.

D) might be smaller than Fred's consumer's surplus from cigar consumption.

Kimberly likes to gamble and party. And, lucky her, she has won an allexpense-paid trip to Vegas over Spring break. She loves Vegas but decides instead to spend $5000 of her own money to go to Africa to dig latrines in a small remote village. The free trip to Vegas would have been her second choice. What do we know about the opportunity cost of Kimberly going to Africa? What do we know about the consumer's surplus she will get from the Africa trip? (Choose the alternative that is correct and most informative.) A) opportunity cost is $5000; her consumer's surplus from the Africa trip is at least $5000 B) None of the other three options is correct. C) opportunity cost is the trip to Vegas; her consumer's surplus from the Africa trip is at least $5000. D) opportunity cost is the trip to Vegas and the $5000 to spend on something else; her consumer's surplus from the Africa trip is zero or positive.

D) opportunity cost is the trip to Vegas and the $5000 to spend on something else; her consumer's surplus from the Africa trip is zero or positive.

A product produced by a monopolist is likely to be (choose the best answer) A) produced at an inefficient level (too much) from society's perspective. B) produced at the efficient level from society's perspective. C) produced at the efficient and equitable level from society's perspective. D) produced at an inefficient level (too little) from society's perspective.

D) produced at an inefficient level (too little) from society's perspective.

Assume, for example, the following demand function for Steven's ski days at Steamboat ski area: Dssb = 20 + .03Snowsb-.06Psb + .01Pvail, Where Dssb is the individual's demand, this year, for Steamboat ski days. Snowsb is Steamboat's total snow fall, last year, in inches. Psb is the cost of a steamboat ski day, measured in dollars. Pvail is the cost of a vail ski day, measured in dollars. If the cost of a vail ski day rises from $50 to $100, then Steven's demand function for Steamboat ski days (dollar on the vertical axis) will A) not shift; instead, Steven will move along his demand curve downward and to the right. B) not shift; instead, Steven will move along his demand curve upward and to the left. C) shift to the left. D) shift to the right.

D) shift to the right.

If steak and potatoes are complements, when the price of steak goes up, the demand curve for potatoes: A) stays the same. B) shifts to the right. C) shifts to the right and then moves back. D) shifts to the left.

D) shifts to the left.

On the ballot today was a referendum to increase the State tax on cigarettes by $1.50 a pack. At the current price (before it increases because of the tax), own-price elasticity of demand for cigarettes is elastic. Given all this, if the tax went into effect, the total amount paid for cigarettes after the tax is imposed will be A) the same B) not enough information to tell C) Greater D) smaller

D) smaller

Assuming no other relevant government policies, if the government sets an emissions tax on a noxious gas at a level such that the private cost of emitting that gas (including the tax) is greater than the social cost of emitting that gas: (Choose the answer that the answer that is correct and most informative.) A) compared to a tax of zero, emissions will decline and the environment will be cleaner. B) there is not enough information to determine whether the amount of emissions will be efficient. C) the amount of emissions will be inefficient, too high, and while the environment will be cleaner than if there were no tax, it will be too dirty from an efficiency perspective. D) the amount of emissions will be inefficient, too low, and while the environment will be cleaner than if there were no tax, it will be too clean from an efficiency perspective.

D) the amount of emissions will be inefficient, too low, and while the environment will be cleaner than if there were no tax, it will be too clean from an efficiency perspective.

The cost of leaving the skating championship before it ends is ________, while the cost of staying for the entire match is ________. A) zero—you don't have to pay to leave; zero—the ticket to the match is already paid so there is no cost B) the opportunity cost of not seeing the perfect "10" performance; zero—the ticket to the championship is already paid so there is no cost C) the cost of the ticket; also the cost of the ticket D) the opportunity cost of not seeing the perfect "10" performance; the opportunity cost of what else you could have done during that time

D) the opportunity cost of not seeing the perfect "10" performance; the opportunity cost of what else you could have done during that time

An individual's weight elasticity of candy consumption is (choose the answer that is both correct and most complete) A) the percentage change in their candy consumption divided by the percentage change in their weight, It is a measure of how much their weight will be affected by an increase in candy consumption. B) the percentage change in their weight divided by the percentage change in their candy consumption. It is a measure of how much their weight will be affected by an increase in candy consumption. C) the percentage change in their weight divided by the percentage change in their candy consumption. It is a measure of how much their candy consumption will be affect by an increase in their weight. D) the percentage change in their candy consumption divided by the percentage change in their weight. It is a measure of how much their candy consumption would be affected by an increase in their weight.

D) the percentage change in their candy consumption divided by the percentage change in their weight. It is a measure of how much their candy consumption would be affected by an increase in their weight.

The basic concern of microeconomics is: A) to prove that capitalism is better than socialism. B) to use unlimited resources to produce goods and services to satisfy limited wants. C) to keep business firms from losing money. D) to study the choices people make.

D) to study the choices people make.

The slope of a straight line is the ratio of the: A) run over the rise. B) vertical change to the horizontal change, and it must be positive. C) horizontal change to the vertical change. D) vertical change to the horizontal change.

D) vertical change to the horizontal change.

The best measure of the opportunity cost of any choice is: A) your hourly wage. B) the cost associated with not taking full advantage of the opportunity offered by that choice. C) the monetary cost of that choice. D) whatever you have given up to make that choice, even if no monetary costs are involved.

D) whatever you have given up to make that choice, even if no monetary costs are involved.

Suppose that your tuition to attend college is $5,000 per year and you spend $1,000 per year on books, and $4000 on rent. If you were working full time instead, you could earn $20,000 per year, and would live at home, for free, with your mom. What is your opportunity cost of attending college for one year, in $? A) $30,000 B) $25,000 C) $20,000 D) $24,000 E) $26,000

A) $30,000

Given Frank's demand schedule for chocolate bars per week: Price($) Quantity Demanded 1. 15 2. 12 3. 9 4. 6 5. 3 What is Frank's price elasticity of demand when price increases from $2 to $4? A) -1 B) -1/3 C) -2 D) -3

A) -1

Willy can only produce apples and carrots. Willy's production-possibilities frontier can be represented with the function C=20-2A where C is the number of carrots he produces and A is the number of apples he produces. For Willy, the opportunity cost of producing a carrot is ___ and the opportunity cost of producing an apple is ___ A) 1/2 apple, 2 carrots B) 1 apple, 2 carrots C) 1apple, 1 carrot D) 2 apples, 1/2 carrot

A) 1/2 apple, 2 carrots

Willy can only produce apples and carrots. Willy's production-possibilities frontier can be represented with the function C=20-3A where C is the number of carrots he produces and A is the number of apples he produces. For Willy, the opportunity cost of producing a carrot is ___ and the opportunity cost of producing an apple is ___ A) 1/3 apple, 3 carrots B) 3 apples, 3 carrots C) 1 carrot, 2 apples D) 3 apples, 1/3 carrot

A) 1/3 apple, 3 carrots

In the theory of the firm, we use "isoquants". Breaking down the term we have "quant" as in "quantity," and "iso" as in "one," meaning every point on an isoquant corresponds to the same quantity. The analogous concept in regards to consumer theory is_______. A) An Indifference curve B) Preferences C) A budget line D) Utility

A) An Indifference curve

A fish stock that lives in the ocean in international waters (outside the control of any government or group) is a public good because everyone can, if they want, harvest from the stock without limits or restrictions (free entry) A) False B) True

A) False

Consider a manna-from-heaven model such that God provides the world, every morning, with a fixed amount of cigars and wine, both goods. There has been a war and only two individuals have survived, Esther and Edith, and both are members of society. Visualize their utility-possibilities frontier and a point C inside that frontier. At point C, it must be the case that some of the cigars and wine are not being consumed. A) False B) True

A) False

Consider a situation where the potential seller's WTA (willingness-to-accept) the loss of the good is less than the potential buyer's WTP (willingness-to-pay) for the good. This situation can occur at the market equilibrium price. A) False B) True

A) False

Public schools and public highways are examples of public goods. A) False B) True

A) False

It costs residents of Boulder a lot more to ski Aspen for a day than it costs residents of Aspen. Which statement is both correct and most informative? A) Given the information provided little can be concluded about how much consumer's surplus an Aspen resident gets from her Aspen ski days compared to how much a Boulder resident gets from her Aspen ski days. B) Since they pay more per day to ski Aspen, Boulder residents who ski Aspen must value skiing Aspen more highly than do residents of Aspen. C) Residents of Boulder necessarily get less consumer's surplus from their Aspen ski days than Aspen residents get from their Aspen ski days.

A) Given the information provided little can be concluded about how much consumer's surplus an Aspen resident gets from her Aspen ski days compared to how much a Boulder resident gets from her Aspen ski days.

Consider a world with only two commodities: beer and cigarettes. For Wilma, beer is a good, but for Wilma cigarettes start off as a bad but eventually turns into a good. Consider Wilma's indifference curves with cigarettes on the horizontal axis and beer on the vertical axis Which statement is both correct and most informative? A) Her indifference curves are shaped like an inverted U (increasing beer consumption from zero, first the slope is positive but then switches to negative) B) Her indifference curves are U-shaped (increasing beer consumption from zero, first the slope is negative but then switches to positive) C) Her indifference curves are all upward sloping D) Her indifference curves are all downward sloping.

A) Her indifference curves are shaped like an inverted U (increasing beer consumption from zero, first the slope is positive but then switches to negative)

Assume I and II: I is "Fish need water". II is "All living things need water". It logically follows from I and II that fish are living things. A) Incorrect B) Correct

A) Incorrect

Given consumer theory as presented in class, if you and I have different preferences and have different budget sets, we necessarily will consume different bundles. A) Incorrect B) Correct

A) Incorrect

Since pollution negatively affects people (reduces utility and/or increases production costs), the efficient amount of pollution is zero. A) Incorrect B) Correct

A) Incorrect

Suppose we spend some more time observing Wilbur and discover he lives in the mountains of Colorado and snowfall affects his demand for gasoline in the following way: Q = 8 + .2Y - .75P2 + .5S Where S stands for annual snowfall in feet, Y is his income (in thousands) and P is the price of gasoline. Based on Wilbur's demand function, Wilbur probably does not like snow sports (skiing, boarding, etc.) A) Incorrect B) Correct

A) Incorrect

Consider a utility-possibilities frontier. Imagine a society must choose between one specific efficient allocation and one specific inefficient allocation. A society will always choose the efficient allocation. A) Maybe not B) Of course

A) Maybe not Consider a society with two people: George and Jorge. Imagine an allocation on the UPF (utility-possibilities frontier) where Jorge has it all (poor George gets no utility). Compare this to a point slightly inside the UPF (so inefficient) with a more equal distribution of utility. If the society had to choose between this inefficient allocation and this efficient allocation, they might reasonably choose the inefficient allocation.

Consider a world of two inputs vegetables and butter. The people of Vegland produce vegetables, but must buy their butter from Bovland. Their meals always consist of some butter and some vegetables. For people in Vegland their isoquants for producing meals (Veg on the vertical axis) are negatively sloped, decreasing in slope as the amount of the butter input increases. Bovland suffers a bovine-virus outbreak causing a lot of its cows to die, so the price of butter rises--the price of vegetables is unaffected Elections in Vegland are coming up, and to assure their reelection, the government gives each household in Vegland some money, just enough for the household to get back to their original indifference curve. Given all this, choose the answer that is both correct and most informative. A) Meals in Vegland will be produced with less butter and more vegetables B) There is not enough information to determine how meals will be prepared in Vegland. C) Meals in Vegland will be produced with more butter and less vegetables D) How meals are produced in Vegland and the number produced will be unaffected.

A) Meals in Vegland will be produced with less butter and more vegetables

An economic agent will continue to consume more units of a commodity as long as total benefits are greater than total costs. A) No B) Yes

A) No

Assume a society that produces only two goods: opera productions and pounds of BBQ. One knows the production function for producing opera productions and the production function for producing BBQ. Is knowledge of the two production function sufficient to determine society's production-possibility frontier for operas and BBQ? A) No B) Yes

A) No

If all prices change by the same proportion (all increase or decrease by the same percent), income remaining constant, there will be both an "substitution effect" and an "income effect." A) No B) Yes

A) No

Local governments often ban activities that produce negative external effects (no smoking, no skateboarding, no mountain biking, etc.) Is is likely that most of these bans achieve the efficient amount of the activity. A) No B) Yes

A) No

Wanda cares about only two things in life: friends and shooting moose. Currently she averages four friends and one shot-moose per year. Wanda's MRS of moose in place of (for) friends is .5. The devil makes Wanda the following offer, "Give up one of your four friends and you can average two moose a year. Should Wanda take the deal? Yes or No. A) No B) Yes

A) No Here MRSmf is how many friends she would give up to get another moose. The answer is .5 friends. But the offer requires she give up 1 whole friend.

Is the following statement a technically correct and complete definition of production function? A production function identifies output as a function of the input levels. A) No this statement is not technically correct. B) Yes this statement is technically correct.

A) No this statement is not technically correct. It would be correct if it said "identifies maximum output"

Edward hates brussel sprouts and Bud Lite (an American "beer"): both, for him, are bads. His indifference curves for these two commodities A) Slope down B) Slope up C) Are horizontal lines D) Are vertical lines

A) Slope down

If Jakob knows the marginal cost of producing the seventh sports jersey is $21, then the total cost of seven sports jerseys is: A) The answer cannot be determined from the information provided. B) $147. C) $21. D) $60.

A) The answer cannot be determined from the information provided.

How many of the following statements are correct? "(1) In a competitive market economy, everyone faces the same exogenous prices for goods, and (2) if there are no external effects, the relative prices of two goods reflect how much less of the one can be produced if society produces one more unit of the other, (3) in equilibrium everyone has the same marginal rates of substitution. And (4), given (1)-(3) everyone is necessarily consuming the same bundle of goods. A) The first three statements are correct, but (4) is incorrect. B) Only assertions (1) and (2) are correct. C) All four assertions are correct. D) Only assertion (1) is correct

A) The first three statements are correct, but (4) is incorrect.

In a society that consists of one individual, which statement best describes the allocation of resources that is socially optimal A) The individual is doing the best they can given their constraints B) The individual is doing well C) It is an equilibrium D) The allocation is efficient

A) The individual is doing the best they can given their constraints

Which of the following statements best describes how most environmental economist view CO2 emissions and global warming (GW)? (Choose the answer that is both correct and most informative.) In choosing your answer, assume that GW is real and is caused by CO2 emissions. A) The market produces an inefficient amount of CO2 emissions (too many) *because* the private cost of emitting CO2 is less than the social cost of emitting CO2 B) Too much CO2 is emitted into the atmosphere (an inefficient amount) *because* many people do not believe CO2 emissions are causing GW. C) Too much CO2 is emitted into the atmosphere (an inefficient amount) *because* many people do not care about GW.

A) The market produces an inefficient amount of CO2 emissions (too many) *because* the private cost of emitting CO2 is less than the social cost of emitting CO2 While many people might not believe is GW, making them believe will not solve cause the private cost of emitting CO2 to equal the social cost.

Imagine Boulder is required by the Federal Government to reduce its toxic emissions by 20%. These emissions come from many different sources. The Boulder City Council achieves this goal by requiring every such facility in Boulder that emits this toxin to reduce their emissions of it by 20%. Which alternative most likely and most fully describes the result? A) The requirement is achieved, but not at minimum cost B) The requirement is achieved at minimum cost C) The requirement is achieved efficiently

A) The requirement is achieved, but not at minimum cost

Assume a world of only two goods, x and y, and assume x and y are perfect substitutes (the marginal rate of substitution between them is a constant). George has a positive income and no control over the prices of x and y. If the price of good y decreases, George will buy more of good y. A) There is not enough information given to determine whether he will buy more of good y. B) Definitely true C) Definitely false

A) There is not enough information given to determine whether he will buy more of good y.

A market that is in long-run equilibrium must also be in short-run equilibrium. A) True B) False

A) True

A necessary condition for successful Coasian bargaining is property rights are well defined for the scarce resources in question A) True B) False

A) True

An externality occurs when an external effect is being produced at an inefficient level. A) True B) False

A) True

An externality occurs when one economic agent's actions directly affect another economic agent(s) (not through market prices) and the producer of the external effect does not have the correct incentive (not compelled) to take the influence of their actions into account. A) True B) False

A) True

Assume that cigarette smoking produces a negative external effect (second-hand smoke). The government reacts to this situation by setting a tax on cigarette smoking such that with the tax included the marginal cost of smoking for the smoker is GREATER than the marginal cost to society from his smoking. In this case, the smoker will smoke too little from society's perspective. A) True B) False

A) True

Assuming goods are normal goods and pollution reduction is a superior good, is the following statement correct? " Everything else constant, efficiency dictates that pollution-intensive industries be located in poor, rather than rich, communities. A) True B) False

A) True

Consider a competitive firm in the shortrun with marginal costs that increase as output increases. If this firm is producing a positive amount of output, and if at that amount of output price equals marginal cost, the firm is maximizing it profits. A) True B) False

A) True

It is impossible for two people to consume the same unit of a private good. A) True B) False

A) True

The benefit to society of an additional unit of a public good is the net benefits to all members of society from that additional unit. A) True B) False

A) True

The marginal cost curve is the mirror image of the: A) marginal product curve. B) total product curve. C) average total cost curve. D) average product curve.

A) marginal product curve.

According to economists, equilibrium in the allocation of resources and distribution of goods exists when: A) no individual has an incentive to change his or her behavior. B) an individual would be better off taking a different action. C) output is distributed equitably. D) scarcity is eliminated.

A) no individual has an incentive to change his or her behavior.

Consider Fred the skier who is producing ski miles using two variable inputs: her time and cans of Red Bull (a drink packed with caffeine). Might, at some levels of use, the MP of Red Bull be negative? A) Unlikely B) Definitely

B) Definitely

A commodity that might be a public commodity in an economy where resources are primarily allocated by a central planner (e.g. Cuba) would not likely be a public commodity in an economy where resources are primarily allocated by free markets. A) True B) False

B) False

If there are no fixed costs, then the firm's average cost curve and it average variable cost curve are same curves. A) No B) Yes

B) Yes

Edward and Unjung live in the jungle. They train a monkey, George, to do two things: patrol the perimeter of their camp and to gather fruit. Which of the following are public goods. A) both the fruit and the patrols B) the patrols C) the fruit D) none of the above

B) the patrols

If a supply curve (price on the vertical axis, quantity on the horizontal axis) is represented by the equation Q = 10 + 2P, what is its slope of the graph? A) 2 B) ½ C) 5 D) 1

B) ½

Which of the following statements is both correct and most informative? A) Efficiency in production is a necessary condition for overall efficiency. B) None of the other statements is correct C) If there is inefficiency in production, there is not overall efficiency because society could increase the production of one or more goods without decreasing the production of other goods. And, if this happened the extra goods could be used to make someone better off without making anyone else worse off. D) One can have overall efficiency without efficiency in production.

C) If there is inefficiency in production, there is not overall efficiency because society could increase the production of one or more goods without decreasing the production of other goods. And, if this happened the extra goods could be used to make someone better off without making anyone else worse off.

In the threesome discussed in class -- John, Thelma, and Barbed Wire-- which of the following best describes, *in economic terms*, the situation before John arrived, before Barbed arrived, and after Barbed arrived. A) John was treated poorly by Thelma. B) The farm while "owned" was effectively a public good/commodity, it was noncongestible. The arrival of John eliminated the public good aspect of the farm, but at a high cost. Barbed could eliminate the public good-problem more cheaply than could John. C) The farm while "owned" was effectively a common-property resource from the perspective of cattle drives. John's arrival eliminated the CP problem, but at a high cost. Barbed could enforce the property right at a lower cost than could John. D) The farm while "owned" was effectively a common-property resource from the perspective of cattle drives. John's arrival eliminated the CP problem, but at a high cost. John got dumped.

C) The farm while "owned" was effectively a common-property resource from the perspective of cattle drives. John's arrival eliminated the CP problem, but at a high cost. Barbed could enforce the property right at a lower cost than could John.

Binding quotas on the amount of a good that can be produced necessarily cause inefficiency. A) There is not enough information provided to determine whether the statement is correct or incorrect. B) This statement is correct C) This statement is incorrect

C) This statement is incorrect

Assume that Brooke is maximizing her utility and consuming a positive amount of Bud Lite. Then the market price of Bud Lite decreases, Brooke's downward-sloping demand curve for the Bud Lite remaining the same, her consumer's surplus associated with Bud Lite increases. A) No B) Maybe C) Yes

C) Yes

The MRT (marginal rate of transformation) is the slope of a (an) ___. A) Isoquant. B) Utility Possibility Frontier. C) Indifference curve. D) Production Possibility Frontier.

D) Production Possibility Frontier.

In Colorado, there has been a drought, and rural communities are fighting with urban areas over water. This statement best represents the economic concept of: A) when markets don't achieve efficiency, government intervention can improve society's welfare. B) government policies can change spending. C) resources should be used as efficiently as possible to achieve society's goals. D) resources are scarce.

D) resources are scarce.

A market economy, without any government regulation, will produce: A) the socially optimal quantity of pollution. B) too little pollution. C) the amount of pollution that maximizes total surplus. D) too much pollution.

D) too much pollution.

There are two commodities in the world, pancakes (p)and sausage links (s). Joe's Utility function is U(p,s) = 2p + 3s. How many pancakes must Joe give up if he is to gain one more sausage while staying on the same indifference curve? A) 3/2 B) 2 C) 3 D) 2/3

A) 3/2

Marc, the Boulder liberal, loves Obamacare even more than he loves his wife and kids. Given this, for Marc, every state-of-the-world without Obamacare is ranked lower than every state-of-the-world with Obamacare. (Choose that answer that is both correct and most informative.) A) Possible, but highly unlikely. B) Definitely true C) Definitely false

A) Possible, but highly unlikely.

When the government removes a binding quota: A) Price will decrease. B) Price may increase, decrease, or remain the same. C) Price will increase. D) Price will remain the same

A) Price will decrease.

In a manna from heaven model A) the issue is consumption B) the market is not used to allocate C) production is efficient D) consumption and production are both efficient

A) the issue is consumption

The prefix "iso" means equal? A) Incorrect B) Correct

B) Correct

An externality is the actions of one or more economic agents directly affecting, not indirectly through market prices, one or more other economic agents. A) True B) False

B) False

The marginal cost of Fred producing ski miles depends on only her production function for producing ski miles. A) Correct B) Incorrect because it also depends on the opportunity cost of her time and the prices of the other variable inputs. C) Incorrect because it also depends on the opportunity cost of her time.

B) Incorrect because it also depends on the opportunity cost of her time and the prices of the other variable inputs.

One of the constraints faced by students wanting to take Econ, 2010, Fall 2017 semester was that one of the sections will be taught by Edward Morey at 9:30 a.m. on Tuesdays and Thursdays. A) No: this was not a constraint from the perspective of prospective students. B) Yes, this was a constraint.

B) Yes, this was a constraint.

Bluefin tuna travel in schools throughout the world's oceans. Fishing boats from many nations harvest Bluefin tuna as the schools migrate through international waters. The schools of Bluefin tuna are best described as: A) a public good. B) a common-property resource. C) a private good. D) an artificially scarce resource.

B) a common-property resource.

My demand curve for cigars, per day, is C=8-4P, where P is the price of a cigar and C is the number of cigars I buy and smoke. Assume the current price is $4/cigar. My WTP to able to buy cigars at $4 each (as compared to no cigars for sale) is A) $4 B) $8 C) $0

C) $0

Production efficiency is being achieved. Is there overall efficiency? A) Yes B) No C) Maybe

C) Maybe Production efficiency is necessary but not sufficient for overall efficiency.

Imagine you were trying to fly your jet coast to coast and came upon a utility function sitting in the middle of Kansas, a utility function for two goods. Could you fly over it? A) Not enough information to tell. B) Yes C) No

C) No

In a lecture, Edward said, "Efficiency is like______ more is better, unless it's not." A) chocolate B) happiness C) good sex D) money

C) good sex

Suppose the U.S. government imposes a binding quota on the number of Japanese-made cars allowed into the United States. Assuming that Japanese-made cars and U.S.-made cars are substitutes in consumption, we would expect the price of Japanese cars to _____ and the price of U.S.-made cars to _____. A) decrease; increase B) decrease; decrease C) increase; decrease D) increase; increase

D) increase; increase

The free-rider problem is a direct result of: A) full-cost pricing. B) horizontally summed supply curves. C) marginal-cost pricing. D) the inability to exclude nonpayers.

D) the inability to exclude nonpayers.

A small community finds that tidy lawns and neighborhoods provide both private and external benefits. They determine the marginal private benefit (MPB) of lawns can be represented by the following equation: MPB = 50 - 0.5Q, where Q is the number of hours spent on keeping lawns tidy. The marginal private cost (MPC) of such lawn upkeep is represented by the following equation: MPC = 0.5Q, where Q is again the number of hours engaged in lawn upkeep. Based on the information provided, how many hours of lawn upkeep will occur in this community, and what will the marginal private benefit be of such upkeep? A) 50 hours; $25 B) 50 hours; $50 C) 100 hours; $50 D) 45 hours; $20

A) 50 hours; $25

Consider instead of George and his Tattoos, pollution from automobiles. Burning gasoline generates a number of pollutants, two being CO2 emissions (a greenhouse gas) and particulates (small particles that get can get stuck in one's lungs). Assume that the amounts of these pollutants currently emitted are inefficient--too large. As we learned in class, a direct tax on a pollutant can reduce the amount emitted to its efficient amount, and achieve this reduction at minimum cost. But directly taxing what comes out of tailpipes is difficult so instead consider a tax on gasoline as a way to achieve the efficient amount of car pollution, and achieve it at minimum cost. (Which of the following statements is both correct and more informative? Hint: Recollect the distinction between George having tattoos and George showing those tattoos in public) A) A tax on gasoline can be used to reduce the amount of a pollutant that cars emit to the efficient level but will only achieve the reduction at minimum cost if there is a fixed relationship between the amount of gas burned and the amount of the pollutant emitted. B) A tax on gasoline cannot be used to reduce the amount of a pollutant that cars emit to the efficient level unless there is a fixed relationship between the amount of gas burned and the amount of the pollutant emitted. C) A tax on gasoline can be used to reduce the amount of a pollutant that cars emit to the efficient level but won't necessarily achieve the reduction at minimum cost. D) A tax on gasoline can be used to reduce the amount of a pollutant that cars emit to the efficient levels but will definitely not achieve the reduction at minimum cost.

A) A tax on gasoline can be used to reduce the amount of a pollutant that cars emit to the efficient level but will only achieve the reduction at minimum cost if there is a fixed relationship between the amount of gas burned and the amount of the pollutant emitted.

I care about only two things: scotch and Swiss chocolate bars. Consider my utility function and indifference curves. My utility function looks like a mountain such that my indifference curves are circles and the quantities of both commodities are positive at the top of the mountain. Which of the following statements is both correct and most informative? A) Chocolate starts off as a good and then becomes a bad B) Scotch is initially a bad but then becomes a good. C) Chocolate is initially a bad but then becomes a good D) Scotch and chocolate are both bads

A) Chocolate starts off as a good and then becomes a bad

Assume the following: (1) Members of the Tea Party are not Democrats. (2) The existence of the Tea Party makes Democrats happy. (3) Happy people never smile. (4) Obama belongs to the Tea Party. (5) Sarah P. is not a Republican. (6) The Tea Party exists. And (7) Democrats are people. Which of the following predictions follows from these assumptions? A) Democrats are not smiling, and Obama is not a Democrat B) All Republicans are smiling C) All the members of the Tea Party are smiling D) Obama is not smiling E) Obama is smiling

A) Democrats are not smiling, and Obama is not a Democrat

The purpose of the travel-cost method is to A) Estimate demand functions for site-specific activities B) Find the optimal method of travel to a particular site C) Determine the average cost a consumer incurs from visiting a site D) Estimate the average distance the relevant consumers must travel to a particular site

A) Estimate demand functions for site-specific activities The TC is a method for estimating the demand site-specific activities (rec fishing, DH skiing, etc.) using the fact that the cost of visiting the site(s) varies across individuals as a function of how far they live from the site.

A competitive market system with no government intervention will provide an efficient amount of public goods A) False B) True

A) False

The fact that children starve in economies where resources and goods are allocated by competitive markets proves that the market can fail. A) False B) True

A) False

The marginal rate of transformation of good X for good Y, MRTXY, is the rate at which a individual is willing to trade off good Y for good X A) False B) True

A) False

The market will fail in the allocation of a common-property resource that is not scare. A) False B) True

A) False

Consider George from lectures, the guy with the tattoos. Society consists only of residents of New York City and George resides in NYC, and he never leaves town. Residents of NYC are used to both tattoos and nudity, so they do not care how George looks when he walks around town. Visitors to the city, however, while not caring about tattoos are offended by George's nudity. (Choose the answer that is both correct and most informative) A) George displays both the efficient amount of skin and the efficient amount of tattoos. B) George shows an inefficient number of tattoos in public C) George wears an inefficient amount of clothes in public D) George displays the efficient amount of tattoos but shows too much skin

A) George displays both the efficient amount of skin and the efficient amount of tattoos. A: the tourists don't count. George is a member of society and likes to walk around nude. And, no other member of society cares what George looks like.

Fabian wants to get exactly 70% on the final. Fabian produces the exam score using two inputs: hours of study time and milligrams of a drug that helps him to concentrate. Which of the following statements is both necessarily correct and most informative A) His isoquant for producing a 70% result identifies all those combinations of study hours and milligrams of drugs that will just get him a score of 70%. B) His isoquant for producing a 70% result is the rate at which he can substitute study hours for milligrams of drugs in the production of the 70% score C) His isoquant for producing the 70% score identifies all the different ways he would like to achieve a 70% score. D) Fabian will get a 70% score on the exam

A) His isoquant for producing a 70% result identifies all those combinations of study hours and milligrams of drugs that will just get him a score of 70%.

Ali's marginal rate of substitution of candy for time disco dancing (for Ali, both goods) is, in absolute value, his WTP for another unit of dancing, expressed in terms of forgone candy. A) Incorrect B) Correct

A) Incorrect Ali's MRScd is, in absolute value his WTP for another unit of candy, expressed in terms of forgone dancing time

The following is the "definition" of a cost function: The cost function identifies the amount of money a firm spends producing its output as a function of its output level, the prices of the inputs, and the quantities of its fixed inputs. A) Incorrect B) Correct

A) Incorrect As I have stressed and underlined, many times the cost function identifies the minimum amount of money the firm needs to spend as a function of its output levels, the price of its inputs, and the quantities its fixed inputs. The critical word is minimum. A firm could spend more.

Wilbur's ranking of bundles is simply a convenient way to keep track of how much utility Wilbur gets from each bundle. A) Incorrect B) Correct

A) Incorrect This is backwards (incorrect): Wilbur has a ranking of bundles and his utility function is simply a way to keep track of how he ranks bundles. Economists don't really believe you have utility somewhere in your head. You have a ranking of bundles.

Suppose Alice consumes only wine and cheese. Alice's income increases, the price of wine increases and the price of cheese decreases. Consider Alice's budget line with wine on the vertical axis and cheese on the horizontal axis. What will happen to the slope of Alice's budget line? A) It becomes flatter. B) It necessarily remains the same. C) There is not enough information to tell. D) It becomes steeper.

A) It becomes flatter.

Ralph takes 8 hours to build a shelter and 3 hours to hunt a pig. Jack takes 5 hours to build a shelter and 2 hours to hunt a pig. A) Jack has a comparative advantage in building shelters B) Jack has a comparative advantage in hunting pigs. C) Ralph has an absolute advantage in hunting pigs. D) Ralph has an absolute advantage in building shelters

A) Jack has a comparative advantage in building shelters

Suppose Mindy and Jeanine are roommates in an apartment that allows smoking indoors (A fact initially overlooked by Jeanine when she signed the lease). Mindy is a regular cigarette smoker and her roommate Jeanine is not. Mindy values being able to smoke in the house at $300 a year. Jeanine puts a value of $200 to avoid second hand smoke in the apartment. Jeanine offers Mindy $250 to walk out to the patio to smoke her cigarettes. Would this bargain increase efficiency? A) No, it would not B) Not enough information to determine whether the it would increase efficiency. C) Yes, it would

A) No, it would not

Which of these two statements is incorrect? A) The opportunity cost of activity I is always expressed in units of activity I B) The opportunity cost of activity I in terms of activity II is the inverse (reciprocal) of the opportunity cost of activity II in terms of activity I. A) Only statement A is incorrect B) Only statement B is incorrect C) Both statements A and B are incorrect D) Neither statement A nor B are incorrect

A) Only statement A is incorrect

Imagine the U.N. requires that carbon dioxide emissions by China and the U.S. be reduced by 100 units, a small percentage of each country's current carbon-dioxide emissions. Imagine that in the 100 unit range, the cost, on the margin, of reducing carbon emissions is always less in China than in the U.S. This is likely to be the case because China tends to produce heat and energy using carbon more intensely than does the U.S. Given all this, which of the following statements is both most likely and most informative? A) Reducing carbon dioxide emission by 100 units in China (zero units in the U.S.) will cost less in terms of the world's scarce resources because, in the relevant range, the marginal cost of abatement is always lower in China. B) The cost-effective way to achieve the required reduction is for the reduction to occur in the U.S. because production is more efficient in the U.S. than in China. C) The cost-effective way to achieve the required reduction is for some of the reduction to occur in the U.S. and for some of it to occur in China. D) Efficiency requires that the 100 unit reduction be achieved by reducing emissions by 100 units in China and zero units in the U.S because labor is abundant in China.

A) Reducing carbon dioxide emission by 100 units in China (zero units in the U.S.) will cost less in terms of the world's scarce resources because, in the relevant range, the marginal cost of abatement is always lower in China.

If we want to see how attendance at recitation will respond to a change in the difficulty level of the lectures, we should measure ____ , which is ______. A) The lecture-difficulty elasticity of recitation's attendance; the percentage change in recitation attendance divided by the percentage change in lecture difficulty. B) The lecture-difficulty elasticity of recitation's attendance; the percentage change in lecture difficulty divided by percentage change in recitation attendance. C) The recitation-attendance elasticity of lecture difficulty; the percentage change in recitation attendance divided by the percentage change in lecture difficulty. D) The recitation-attendance elasticity of lecture difficulty; the percentage change in lecture difficulty divided by the percentage change in recitation attendance.

A) The lecture-difficulty elasticity of recitation's attendance; the percentage change in recitation attendance divided by the percentage change in lecture difficulty.

Consider two firms: Suppose that firm A pollutes, this negatively affects firm B, and the amount firm A pollutes is un-taxed and unregulated. Which of the following statements is definitely NOT true? A) The marginal cost of firm B is unaffected by the pollution from firm A B) The supply curve for firm B does not reflect social marginal costs C) The equilibrium quantity of output for firm A is not the efficient quantity from society's perspective D) The marginal cost of firm A is affected by how much firm B produces

A) The marginal cost of firm B is unaffected by the pollution from firm A

Which statement best describes how goods and services are distributed in a competitive market economy in equilibrium A) The more resources one owns/controls, the more of the goods-and-services pie one consumes B) Those who work hardest consume the most stuff. C) Who gets what depends on property rights D) They are be distributed equitably, everyone getting their fair share.

A) The more resources one owns/controls, the more of the goods-and-services pie one consumes

Production is efficient when A) The only way to increase the production of a good requires that the production of some other good or goods be decreased. B) The only way to make one member of society better off requires that another member be made worse off.

A) The only way to increase the production of a good requires that the production of some other good or goods be decreased.

Assume the price of a tradable emissions permit for a ton of sulfur dioxide is $150. Which of the following is incorrect? A) The opportunity cost of emitting an additional ton of sulfur dioxide is less than $150 for all firms. B) A firm that buys permits has an incentive to limit pollution up to the point at which the marginal benefit of emissions is equal to $150. C) The opportunity cost of emitting an additional ton of sulfur dioxide is $150 for all firms. D) A firm that has more permits than it plans to use has an incentive to limit pollution up to the point at which the marginal benefit of emissions is equal to $150.

A) The opportunity cost of emitting an additional ton of sulfur dioxide is less than $150 for all firms. The permit price, $150, is what it costs to legally pollute one unit of pollution. If the price of a permit is $150, each firm will reduce pollution as long as the cost of reducing an additional unit is less than $150. (They would rather pay that amount than $150, which is larger.) So they will keep abating pollution as along as the cost of abating is less than $150. If the cost of abating is greater than $150, it is cheaper to pay for a permit. So each firm will operate at the point where the cost of abating one additional unit of pollution is $150. So answer A is incorrect: it is equal to $150 for each firm, not less than $150.

Society consists of Bubba, Molly and a bunch of *other people*. Bubba owns a gun and Molly owns a copy of "Fifty Shades of Grey." They trade making both of them better off. Which of the following statements is both necessarily correct and most informative? A) The trade might be efficiency increasing, we don't know for sure. B) After the trade the allocation of goods is efficient C) The trade is efficiency increasing because they are both better off.

A) The trade might be efficiency increasing, we don't know for sure. The trade makes both Bubba and Molly better off. If it had no negative effects on anyone else we would know that the trade was efficiency increasing, but we do not know that. Maybe Molly with a gun, or Bubba with the box, would wreak havoc on other people, a lot of havoc.

Consider a world of only two perfectly divisible goods: anchovies and onions. Currently, Willy's marginal utility from anchovies is greater than his is marginal utility from onions. And, anchovies cost more than onions. Willy should : A) There is not enough information provided to determine what he should do B) Buy more onions and less anchovies C) Definitely buy more onions but there is not enough information to to determine whether he should buy less anchovies. D) Buy more anchovies and less onions

A) There is not enough information provided to determine what he should do

The market for tattoos in the U.S. is completely unregulated. This is because there are no external costs associated with producing tattoos and no one who lives in the U.S. is affected by the tattoos they see on others. However, tourists from other countries tend to hate them: from their perspective too many American and Confederate flags, too many eagles, too many snakes, and too many Buddhist sayings. Which statement is both correct and most informative? A) There is not enough information provided to determine whether the efficient number of tattoos are produced. B) The U.S. will produce an efficient amount of tattoos because private and social benefits of tattoos are equal. C) Economists would say that there will be too many tattoos produced because individuals will not correctly take into account how the tattoos will look when they are old and wrinkled. D) The U.S. will produce too many tattoos from an efficiency perspective because the private benefit of having a tattoo is greater than the social benefit.

A) There is not enough information provided to determine whether the efficient number of tattoos are produced.

Assume everyone attending Professor Morey's Microeconomics class is part of society. You like to sit in the front row and use Twitter during class. The person next to you enjoys looking at your crazy tweets about the class (the items that you post on Twitter) but the guy sitting behind you is annoyed. No one else cares, including Professor Morey. From society's perspective, A) There is not enough information to determine whether you are tweeting the efficient amount. B) You are tweeting the efficient amount because the positive and negative external effects cancel each other out.

A) There is not enough information to determine whether you are tweeting the efficient amount. Your tweeting has both positive and negative external effects but we do not know their magnitudes so do not know if they cancel out. What is the guy in the back would have to be paid $5 to put up with your tweeting, but the guy next to you, while he enjoys your tweets, would only pay $1 to see them.

If action A makes you better off and me worse off, before action A is undertaken the allocation is A) There is not enough information to tell whether the allocation is efficient before A is undertaken. B) Efficient C) Inefficient

A) There is not enough information to tell whether the allocation is efficient before A is undertaken.

Suppose Alice consumes only wine and cheese. Alice's income increases, the price of wine decreases, and the price of cheese decreases. Consider Alice's budget line with cheese on the vertical axis and wine on the horizontal axis. What will happen to the slope of Alice's budget line? A) There is not enough information to tell. B) It necessarily remains the same. C) It becomes steeper. D) It becomes flatter.

A) There is not enough information to tell.

An example from the class notes: In places like Aspen, If wood-burning fireplaces and stoves are unregulated there will be too much smoke from an efficiency point of view: Aspen is a box canyon and the smoke has nowhere to go. The city government is considering requiring permits for wood-burning devices. Which of the following narratives is, in Edward's view, both correct and most generally informative? A) This is an example where a binding quota, achieved by requiring but limiting the number of permits, can increase efficiency (achieves the efficient number of woodburning devices) rather than causing inefficiency. B) Without government intervention the market is failing. C) When equilibrium is achieved in the market for permits those with the highest WTP for permits will not necessarily hold all of the permits.

A) This is an example where a binding quota, achieved by requiring but limiting the number of permits, can increase efficiency (achieves the efficient number of woodburning devices) rather than causing inefficiency.

A model (theory) must have at least two assumptions. A) True B) False

A) True

Consider a situation where purchases do not occur because the potential seller's WTA (willingness-to-accept) the loss of the good is greater than the potential buyer's WTP (willingness-to-pay) for the good. This situation can occur at the market equilibrium price. A) True B) False

A) True

Eating chocolate bars causes people to be less violent. That said, while people like the taste of chocolate not much of it is consumed because people don't like to eat things that are brown. People care less about whether eating chocolate makes them more or less violent--they don't even know it has this effect. Given this, is the following statement true or false? "This side effect of chocolate means that, all else constant, the equilibrium quantity of chocolate consumed in a world with flexible chocolate prices will be too low from an efficiency point of view, and a more efficient amount of chocolate could be produced if the government subsidized the consumption of chocolate." A) True B) False

A) True

Is the following statement true or false? "George's demand function for Diet Cokes and George's marginal willingness-to-pay function for Diet Coke contain the same information, neither contains more nor less. A) True B) False

A) True

Joe is a cocaine addict. For him, the marginal utility of consuming the first ounce of cocaine is 15 utils and the marginal utility of consuming the second ounce of cocaine is 20 utils. This behavior is possible, and contradicts the principle of diminishing marginal utility. A) True B) False

A) True

Let d denote Diet Cokes and c chocolate bars. At my current consumption level my MRSdc=3. So, my wtp for an additional Diet Coke is 3 chocolate bars. A) True B) False

A) True

Many competitive firms produce steel and, as a by-product, pollution. They all face the same input prices, the same world price for steel, and the same state of technical knowledge. Input prices reflect the social costs of the resources. The government wants to reduce total emissions from steel production by 20%. The government accomplishes this goal by requiring each firm to reduce their pollution by 20%. This goal of the government is achieved at minimum cost to society. A) True B) False

A) True

Property rights typically include the right to sell the ownership right to the highest bidder. A) True B) False

A) True

Put simply, the free-rider problem is that a market economy will likely produce an inefficient amount of public goods (not enough units) because, given that no one can be excluded from consuming the amount produced, consumers have an incentive not to buy the good, hoping that someone else will pay for its production. A) True B) False

A) True

Suppose a a pharmaceutical firm invests in research and development and creates new drugs. These creations cause the firm to earn great profits. These new drugs decrease the cost to this firm, and other firms of creating additional drugs - knowledge is increased industry wide. The government paying the initial firm to create drugs could increase efficiency. A) True B) False

A) True

The efficient amount of drunk driving is positive, not zero. A) True B) False

A) True

The textile industry is composed of a large number of small firms that produce products that are very similar. In recent years these firms have suffered economic losses - demand for their products have decreased - and many of them have gone out of business. Economic theory suggests that the firms that remain in the industry will earn a normal rate of return. A) True B) False

A) True

Unregulated competitive markets evolved to increase efficiency, not equity. A) True B) False

A) True

Unregulated markets are designed to increase efficiency, not equity. A) True B) False

A) True

Consider a situation where the potential seller's WTA (willingness-to-accept) the loss of the good is less than the potential buyer's WTP (willingness-to-pay) for the good. This situation is likely if the price is not the market equilibrium price. A) True B) False

A) True It is true. If WTA is less than WTP at the current price, the price can't be the equilibrium price because there are unconsummated trades. The price is too high.

To produce 10 deep-fried cats efficiently, one must operate on the isoquant for 10 deep-fried cats. A) True B) False

A) True True: one could operate to the right of the isoquant (use inputs in an inefficient/wasteful manner) but that would not be efficient.

George is a competitive firm making candies. Inputs are chocolate, c, and sugar, s. The constant MRTScs=3/4. George will use both chocolate and sugar to produce his candies. (To help your answer the question sketch a representative isoquant and isocost line.) A) Unlikely B) Likely

A) Unlikely I keep asking this question because people keep getting is wrong. If the slope of the isoquant is a constant, the isoquant is a straight line. In that case, the firm will most likely only use one input. It is unlikely because the two inputs are perfect substitutes. George will produce candy using only one input, the one what has the highest marginal product per $1 cost.

Wanda, age 32, wants to find a male to date. No one turns Wanda down for a date. She likes intelligent and she likes young. Assume intelligence in all males is 100 at age 15 and then increases 2 points a year, forever. Wanda faces a tradeoff. Further assume that the dictates of society, which Wanda will not violate, is that females cannot date someone who is less than half their age plus seven. Which statement about Wanda is both correct and most informative? A) Wanda might date a geezer, someone elderly. B) Wanda will date a 23 year-old because young is good and, 23 is as young as she is allowed to go. C) Wanda is more likely to date a 40 year-old than a 25 year-old because they are more intelligent. D) We know nothing about who Wanda will date, but she must be attractive

A) Wanda might date a geezer, someone elderly.

Consider Xiodo China, a small rural community, Assume the marriage age in China is 25. Assume that twenty-five years ago China invoked a one-child policy (only one child per couple). This decreased the number of children born. It also led to more male babies than female babies. Imagine that before the policy change, at age 25 the number of potential brides and grooms were equal. But now the first post-policy cohort has reached the age of 25. Further assume potential grooms do not import brides from other places. Which of the following is the most reasonable economic explanation of the effect of this policy on the marriage market A) When the first post-policy cohort reaches 25, initially the demand for brides will exceed the supply of brides, causing the "price" of wooing a willing bride to increase. B) When the first post-policy cohort reaches 25, initially the supply of brides will exceed the demand for brides, causing the "price" of wooing a willing bride to decrease. until demand drops to equal the supply of brides.

A) When the first post-policy cohort reaches 25, initially the demand for brides will exceed the supply of brides, causing the "price" of wooing a willing bride to increase.

Wilbur is an unattractive guy who has a hard time getting a date: bad breath, greasy hair, and little money. His current probability of getting a date on a Saturday night is 10%. But, Wilbur has a plan: he gets a bunch of cats hoping that having cats will increase his chances of getting a date -- everyone knows that single women love cats. Let "cats" denote how many cats Wilbur has and let "date-probability" denote his probability of getting a date. Given all this, which of the following statements is most conducive to Wilbur achieving his goal. A) Wilbur's cat elasticity of date-probability is positive and elastic B) Wilbur's date-probability elasticity of cats is negative and elastic C) Wilbur's cat elasticity of date-probability is positive and inelastic D) Wilbur's date-probability elasticity of cats is positive and elastic

A) Wilbur's cat elasticity of date-probability is positive and elastic

Wilma's utility function for the two goods x and y is U=x2 y.5. (Notice the size of the exponents) Given these preference, Wilma is likely to consume more x than y? (Choose the answer that is both correct and most informative.) A) Without more information it is impossible to tell. B) Yes C) No

A) Without more information it is impossible to tell.

Many roads and highways in the U.S. are effectively common-property transportation inputs. A) Yes B) No

A) Yes

Meat processing plants emit unpleasant odors that waft across the city. Because the production of processed meat provides a negative external effect, it must be the case that at the unregulated, competitive market equilibrium quantity: A) all of the other options are correct. B) the market price does not reflect the opportunity cost of producing the processed meat. C) the marginal social cost of producing processed meat exceeds the market price. D) too much processed meat is produced

A) all of the other options are correct.

A choice made _____ is a choice whether to do a little more or a little less of something. A) at the margin B) at the fringe C) after the fact D) in the beginning

A) at the margin

The price elasticity of demand can be found by: A) comparing the percentage change in quantity demanded to the percentage change in price. B) examining only the slope of the demand curve. C) knowing that when price changes, the quantity demanded goes in the opposite direction. D) measuring absolute changes in price and quantity demanded.

A) comparing the percentage change in quantity demanded to the percentage change in price.

A private good is: A) excludable and rivalrous in consumption. B) non-excludable and rivalrous in consumption. C) non-excludable and non-rivalrous in consumption. D) excludable and non-rivalrous in consumption.

A) excludable and rivalrous in consumption.

A cost that does not depend on the quantity of output produced is called a: A) fixed cost. B) variable cost. C) average cost. D) marginal cost.

A) fixed cost.

You work in an office and one of your co-workers has announced his retirement. You have offered to purchase the retirement gift, so you place a collection jar in the lunch room for anonymous donations to help pay for the gift. After a week, you find that very few dollars are in the jar, so you end up paying for a large share of the retirement gift. You are the victim of the: A) free-rider problem. B) common-resource problem. C) overuse of a common resource problem. D) private good problem.

A) free-rider problem.

Assume that there are only 2 commodities in this economy. If these two commodities are both bads, a consumer in this economy can achieve a maximum level of utility when ______. A) he or she consumes nothing. B) he or she chooses a consumption bundle that maximizes the amount of each commodity. C) he or she consumes a bundle consisting of just one of the commodities. D) None of the above.

A) he or she consumes nothing.

Consider a world with two goods: hummus and falafel. Ali loves falafel, the more the better, but is indifferent to the amount of hummus he eats. If the quantity of hummus is placed on the horizontal axis and the quantity of falafels he eats is placed on the vertical axis, which statement best describes the shape of Ali's indifference curve? A) horizontal straight line B) upward sloping C) vertical straight lines D) downward sloping

A) horizontal straight line

The short-run supply curve for a perfectly competitive firm is its: A) marginal cost curve above its average variable cost curve. B) average total cost curve below its marginal cost curve. C) marginal revenue curve to the right of its marginal cost curve. D) demand curve above its marginal revenue curve.

A) marginal cost curve above its average variable cost curve.

Zoe's Bakery operates in a perfectly competitive industry. The variable costs at Zoe's Bakery increase, so all the cost curves (with the exception of fixed cost) shift leftward. The demand for Zoe's pastries does not change, nor does the firm shut down. Hence, Zoe's Bakery will ________ its price and ________ its level of production. A) not change; decrease B) raise; decrease C) raise; increase D) decrease; increase

A) not change; decrease

Wilma, a rational economic agent, consumes only two goods: torrid romance novels and beer. She had just achieved the utility-maximizing solution in her consumption of the two goods, then the price of torrid novels rises. Adjusting to this event, she will consume: A) not sure B) less novels and more beer. C) more novels and less beer. D) less beer and less novels

A) not sure

If the price of gasoline rises and stays high for an extended period of time, we expect people to: A) reduce the number of miles they drive, buy smaller and more gas efficient cars, and use more public transportation. B) use more public transportation. C) reduce the number of miles they drive. D) buy smaller and more fuel-efficient cars.

A) reduce the number of miles they drive, buy smaller and more gas efficient cars, and use more public transportation.

Suppose an emissions tax is imposed on all dairy farms in Wisconsin. This tax would have the effect of: A) reducing the supply of milk in Wisconsin. B) increasing the supply of milk in Wisconsin. C) increasing the level of emissions. D) encouraging the dairy farmers to lower prices.

A) reducing the supply of milk in Wisconsin.

You come home to find that your dog, Killer, is missing. Where he once sat is a ransom note: "$500.00 or Killer dies." You have $500.00 in savings earmarked for a new bike. You pay the ransom with that $500. What is the opportunity cost of your decision? A) the bike and a dead Killer B) the bike C) the bike and a live Killer D) a dead Killer

A) the bike and a dead Killer

Perfect competition is characterized by: A) the inability of any one firm to influence price. B) rivalry in advertising. C) widely recognized brands. D) fierce quality competition.

A) the inability of any one firm to influence price.

Which of the following is an example of a negative external effect? A) the risks to nonsmokers from second-hand smoke B) the increased risk of a traffic accident to an individual who uses a cell phone while driving C) unemployment in the steel industry caused by low prices of imported (external) steel D) high prices for necessities such as drinking water in the aftermath of a natural disaster

A) the risks to nonsmokers from second-hand smoke

Public goods should be produced up to the point at which the marginal cost of production equals: A) the sum of the individual marginal benefits from all consumers of that unit. B) the maximum price any individual is willing to pay for that unit. C) the highest marginal benefit from any individual consumer of the good. D) zero, which is the marginal cost of allowing another individual to consume the good.

A) the sum of the individual marginal benefits from all consumers of that unit.

Average total cost is: A) total cost divided by output. B) total cost times output. C) the change in cost divided by the change in output. D) the change in output divided by the change in costs.

A) total cost divided by output.

Marginal cost is the change in: A) total cost resulting from a one-unit change in output. B) total cost resulting from a one-unit change in a variable input.

A) total cost resulting from a one-unit change in output.

Total revenue is a firm's: A) total output times the price at which it sells that output. B) change in revenue resulting from a unit change in output. C) ratio of revenue to quantity. D) difference between revenue and cost.

A) total output times the price at which it sells that output.

The organized exchange of licenses that enable the holder to pollute up to a specified amount during a given time period is called: A) tradable emissions permits. B) Pigouvian taxes. C) environmental standards. D) emissions taxes.

A) tradable emissions permits.

Consider a firm that uses capital and labor to produce its output, bottles of bad wine. It is a competitive firm in that the price of labor, the price of capital, and the price of bad wine are all exogenous. Given all of this, the firm's longrun production function and its longrun cost function are A) two different ways of describing the state of technology for producing bad wine. B) both need to be known to determine the firm's profit-maximizing amount of bad wine. C) all that one needs to determine the firm's profit-maximizing amount of bad wine.

A) two different ways of describing the state of technology for producing bad wine.

number of workouts (per week) & Willingness to pay for each additional workout 1. $35 2. 30 3. 25 4. 20 5. 15 6. 10 7. 5 8. 0 Look at the table Workouts. Suppose that Eli receives an offer from the club for a weekly membership fee of $50 that allows him to use the club as much as he wants per week with no additional charge. Assuming Eli joins the club, how much consumer surplus will he receive per week? A) neither of the other two answers. B) $90 C) $140

B) $90

Wanda's willingness-to-pay for beer is as follows: she is willing to pay $10 for one beer, $19 for two, $24 for three, and $27 for four beers. The cost of a beer is $8, regardless of how many she drinks. How many beers should she purchase? A) 3 B) 2 C) 4 D) 1

B) 2

If competitive market price is $60/unit, and a perfectly competitive firm is maximizing its SR profit at an output level of 70, where TC = $6000 and TFC = $4000. Then: A) SR profits are positive. B) Both of the other answers are correct. C) MC = 60.

B) Both of the other answers are correct.

The proposition that if bargaining is costless, then the market can achieve an efficient outcome, is referred to as the: A) market rights theorem. B) Coase theorem. C) efficient environment paradigm. D) property rights paradigm.

B) Coase theorem.

According to consumer theory, every possible bundle is on one of your indifference curves (in one of your indifference sets) A) Incorrect B) Correct

B) Correct

An external effect occurs when the actions of one economic agent directly affects, not indirectly through market prices, another economic agent. A) Incorrect B) Correct

B) Correct

Market failures are things that are inherent to the market that cause the market allocation to be inefficient. A) Incorrect B) Correct

B) Correct

You donate to a food bank because it makes you feel good, better off. Those who get food from the food bank are better off because of your donation. Assuming no one else is affected, before your donation there was inefficiency. A) Incorrect B) Correct

B) Correct

With respect to the allocation of public goods the market fails. A) Incorrect B) Correct

B) Correct The market is incapable of producing the efficient amounts of public goods.

Property rights and markets are a mechanism to allocate resources and distribute goods and services. Consider the following statement: "Well-functioning market will achieve equity/fairness in terms of what is produced and who gets it." An economist would respond, "Probably not. Markets were not designed to achieve equity/fairness." A) Incorrect: this is not what an economist would likely say. B) Correct: this is what an economist would likely say.

B) Correct: this is what an economist would likely say.

If both the demand and supply curves for peanut butter ($ on the vertical axis) shift left A) Equilibrium price will fall but we cannot say what will happen to equilibrium quantity B) Equilibrium quantity will fall but we cannot say what will happen to equilibrium price C) Equilibrium price will rise but we cannot say what will happen to equilibrium quantity D) Equilibrium quantity will rise but we cannot say what will happen to equilibrium price

B) Equilibrium quantity will fall but we cannot say what will happen to equilibrium price

A town hires more police officers and then has an increase in arrests. One can conclude that the larger police force caused more crime. A) True B) False

B) False

An externality has occurred if a bunch of people move to Boulder and drive up the cost of housing. A) True B) False

B) False

An individual's MRSxy is how much how much he would give up to get another unit of x, and a firm's MRTSlk is how much less capital the firm would need to use, holding output constant, if it increased its use of labor by 1 unit. A) True B) False

B) False

Apple likely produces an efficient number of iPods from society's perspective A) True B) False

B) False

Assume that cigarette smoking produces a negative external effect (second-hand smoke). The government reacts to this situation by setting a tax on cigarette smoking such that with the tax included the marginal cost of smoking for the smoker is LESS than the marginal cost to society from his smoking. In this case, the smoker will smoke too little from society's perspective. A) True B) False

B) False

Assume, consistent with the facts, that construction of housing in Europe involves more recycling of existing building than in the U.S. where most construction is new construction. So, Europeans are necessarily more efficient in the production of housing than we are here in the U.S. A) True B) False

B) False

Consider the statement, "Pandas are valuable and should be saved from extinction, even though people do not care one way or the other about pandas." Assuming society consists of only people, this notion of "value" is consistent with how economists define value. A) True B) False

B) False

Consider the total quantity of goods produced. Consider bundles A and B, where B contains all that is in A, plus some more goods. Bundle A is necessarily less efficient than bundle B A) True B) False

B) False

For the purposes of this question assume that society consists of children who believe in Santa Claus. Further assume that Santa delivers, on Christmas Eve, presents to all good children who believe in him. Given all this, Santa, on Christmas Eve, is an ideal example of a public good in that he is capable of visiting every house on Christmas Eve, no matter how many (his time on Christmas Eve is non-congestible). A) True B) False

B) False

Goods are redistributed between George and Fred such that after the redistribution Fred is better off and George is worse off. Given this, we know that before the redistribution, the distribution of goods between Fred and George was efficient. A) True B) False

B) False

I-70 is a public good A) True B) False

B) False

If China grows, increasing the world demand for oil will increase the price we pay for gasoline, this is an example of a negative externality. A) True B) False

B) False

If a perfectly competitive firm reduces its output, the market price will increase. A) True B) False

B) False

If a society is producing on their PPF, then allocations are necessarily efficient. A) True B) False

B) False

If an individual's consumption of a good directly affects others, the individual will always consume either too much or too little of the good from a social efficiency perspective. A) True B) False

B) False

If one thought that the world was using up its oil reserves too quickly and one had to choose between oil being extracted and sold by a monopolist vs. oil being extracted and sold by a competitive industry, one would choose the competitive industry. A) True B) False

B) False

Ignoring the cost of producing another unit of a public commodity, everyone in society necessarily benefits when the supply of a public commodity increases by one unit A) True B) False

B) False

In the Fred lectures, If Fred is being paid $x a mile to ski, and currently it is costing her more than $x to crank out her last mile, to increase her profits she needs to ski more. A) True B) False

B) False

Low-skilled workers, most poor, likely want to work more than they can at their equilibrium wage. A) True B) False

B) False

Thelma's farm, before John arrived, could be reasonable described as a public good because it was open to the public. And, after John arrived, it could be reasonably described as privately-owned resource. A) True B) False

B) False

Suppose we invent and produce 10 million robots, and then forget how to produce robots. Each of those robots has an absolute advantage over us (humans) in the production of everything, except robots. Like us, the robots do not know how to produce robots. Further assume the robots are maintenance free but need electricity to operate. Further assume that these 10 million robots can produce, without any help from us, current output levels, plus the electricity they need to run. What they produce, above and beyond the electricity they need to run, is given to us humans, for free, so we can all consume what we are currently consuming without any of us working. In this world, all, or most, of us humans will surely end up unemployed? A) True B) False

B) False The answer is false unless we are satiated in the consumption of all produced commodities.

Society consists of only George and Mabel. George kicks her in the booty, making himself better off (he likes to kick women) and Mabel worse off. If he had to, George would have paid $10 for the opportunity to kick Mabel. Mabel does not like George and does not like being kicked, but would have voluntarily let him kick her for $12. Assuming no one else is affected, which alternative is both correct and more informative. A) George kicking Mabel would increase efficiency, but only if George compensated Mabel. B) George kicking Mabel would decrease efficiency C) George kicking Mabel would increase efficiency, even if George did not compensate Mabel.

B) George kicking Mabel would decrease efficiency George's wtp to kick is $10 which is less than Mabel's wta of $12, so kicking would decrease efficiency. Whether a change is efficiency increasing or decreasing does not depend on whether compensation is paid.

Consider a world with only two commodities: beer and bibles. For Wilma, bibles are a good but for Wilma beer starts off as a good but eventually turns into a bad. Consider Wilma's indifference curves with beer on the horizontal axis. Which statement is both correct and most informative. A) Her indifference curves are shaped like an inverted U (first the slope is positive but then switches to negative) B) Her indifference curves are U-shaped (first the slope is negative but then switches to positive) C) Her indifference curves are all upward sloping D) Her indifference curves are all downward sloping.

B) Her indifference curves are U-shaped (first the slope is negative but then switches to positive) With beer on the horizontal axis and bibles (a good) on the vertical axis, going straight up increases utility (moves Wilma to a higher indifference curve). Since beer goes from a good to a bad, at low levels of beer, moving straight right (holding bibles constant and increasing beer) increases utility, but at high level of beer moving straight right decreases utility. So, at low levels of beer, both bibles and beer are goods, implying the normal downward-sloped shape to indifference curves in this region. But, as the amount of beer in the bundle increases, bibles remain a good but beer becomes a bad. In this region, the indifference curves must slope upward (to offset the benefits of more bibles, one must drink more of the bad). So, Wilma's indifference curves are U-shaped.

Assume is the short-run and Fred is producing snerd edibles. Her fixed costs are zero and she is maximizing her profits producing some positive number of edibles, earning positive profits. Then consider Fred in the same situation except that she has some fixed costs. With these fixed costs, A) Her profit-maximizing level of output will be lower B) Her profit-maximizing level of output will be the same as it was with no fixed costs. C) Her profit-maximizing level of output will be higher because she has to cover these fixed costs

B) Her profit-maximizing level of output will be the same as it was with no fixed costs. Note that initially Fred's profit-maximizing level of output is positive (rather than zero). Since, initially, she has not fixed costs, average costs and variable costs are the same, and she is producing at a level where here ac is less than the price (otherwise there would not be positive profits) Then a fixed cost is introduced (a cost she will have to pay even if she produces zero snerds). This will create a wedge between ac and avc, but it will not affect her mc curve Profits at maximized at the same point, where p=mc. She won't shut down because we know she is already covering her avc, so would lose more money if she shut down

Suppose Alice consumes only wine and cheese. Alice's income increases, the price of wine decreases, and the price of cheese increases. Consider Alice's budget line with cheese on the vertical axis and wine on the horizontal axis. What will happen to the slope of Alice's budget line? A) It becomes steeper. B) It becomes flatter. C) There is not enough information to tell. D) It necessarily remains the same.

B) It becomes flatter.

Assume two inputs (K and L) and two goods (X and Y). Further assume you know the production functions for goods X and Y. Society consists of only one person, and you know her preferences (utility function). To determine a point on the production possibilities frontier, you could choose a given amount of ____ to allocate to the ____ . You would then determine the maximum amount of ____ that can be _________ with these amounts. You would then determine, the maximum amount of _____ that can be ______ with the ___ A) X and Y; production of utility; utility; produced; utility; produced; remaining L and K. B) L and K; production of X; X: produced; Y; produced; remaining L and K.

B) L and K; production of X; X: produced; Y; produced; remaining L and K.

Texas executes a lot of inmates. According to an article in "The Onion," Texas has passed a new law to eliminate the traditional last meal offered to death row inmates. Spicy John's BBQ had been a favorite last meal choice. The new legislation will____ A) Raise the equilibrium price and raise the equilibrium quantity of meals at Spicy John's B) Lower the equilibrium price and lower the equilibrium quantity of meals at Spicy John's C) Raise the equilibrium price and lower the equilibrium quantity of meals at Spicy John's

B) Lower the equilibrium price and lower the equilibrium quantity of meals at Spicy John's

Fill in the blanks to help explain the relationship between marginal revenue and price. For a monopolist ______and for a competitive firm_________. A) MR = Price; MR > Price B) MR < Price; MR = Price C) MR > Price; MR = Price D) MR = Price; MR < Price

B) MR < Price; MR = Price

Assume you consume two commodities, pollution, which is a bad, and other stuff. Do your indifference curves for pollution and other stuff look the same as the indifference curves discussed in Krugman and Wells? A) Yes B) No C) Maybe

B) No If the other stuff are goods then the indifference curves are upward sloping, so not like in KW. If other stuff is bad, so two bads, the indifference curves are downward sloping but bend the opposite way from those in KW.

A rational individual will continue to buy and consume more units of a good as long as the total benefits he gets from the quantity he consumes are greater than the total costs of consuming that quantity. A) Yes B) No

B) No No, as long as marginal benefits are greater than marginal costs.

Congestion in private amusement parks (like Disneyland) implies their use levels are inefficient. A) Yes B) No

B) No The firm has an a profit incentive to charge the price that achieves the efficient amount of congestion.

You often read in micro-economics textbooks that shortrun profits are maximized at a level of output where price equals the marginal cost of production. Consider this assertion in the context of a firm that can sell as much, or as little, as it wants at some exogenous price, and where marginal cost is the same constant at every level of output (e.g. $5). In this situation, the firm's profits will necessarily be maximized at a level of output where price equals the marginal cost of production? (Choose the answer that is both correct and most informative.) A) No B) No--because there might not be a level of output where price equals marginal cost. C) Yes--because there is always a level of output where price equals marginal cost. D) Yes

B) No--because there might not be a level of output where price equals marginal cost.

Krugman and Wells define a category of goods as "artificially scarce goods". Such goods are A) Rivalrous and non-excludable B) Non-rivalrous (aka non-congestible) and excludable C) Rivalrous and excludable D) Non-rivalrous and non-excludable

B) Non-rivalrous (aka non-congestible) and excludable

Which statement is both correct and most informative A) Prices are too high B) Prices are signals that coordinate production and consumption. C) Prices are signals that always push consumers and producers toward efficiency

B) Prices are signals that coordinate production and consumption.

Assume you live in Boulder and like to ski. If Eldora Ski area (20 miles from Boulder) deteriorates in quality (one of their ski lifts breaks) your demand curve for trips to Winter Park Ski area (70 miles from Boulder) will likely A) Who knows. B) Stay the same or shift to the right C) Stay the same or shift to the left D) Not shift

B) Stay the same or shift to the right

Which situation would most likely cause a decrease in consumer surplus in the toy market? A) A new assembly line design increases worker productivity. B) The cost of shipping increases due to higher oil prices. C) Consumer income increases. D) There is an unexpected baby boom.

B) The cost of shipping increases due to higher oil prices.

While one can say they will do something in the future, often such "commitments" are not binding in the sense that when the future arrives one can change their mind and not do what they promised to do. Call this the "inability to reliably commit." Which of the following answers are both correct and most informative. A) The inability to reliably commit can be a source of inefficiency in the allocation of resources, a market failure. B) The inability to reliably commit can be a source of inefficiency in the allocation of resources, a market failure. For example, I might, now, promise to pay you after I receive the EBay product I want to buy from you, but since you, the seller, cannot be assured that I will pay later, you do not sell me the product, even though I would have paid, making us both better off. C) The inability to reliably commit does not cause inefficiency in the allocation of resources because preferences and constraints change over time. D) The inability to reliably commit is not a source of inefficiency in the allocation of resources.

B) The inability to reliably commit can be a source of inefficiency in the allocation of resources, a market failure. For example, I might, now, promise to pay you after I receive the EBay product I want to buy from you, but since you, the seller, cannot be assured that I will pay later, you do not sell me the product, even though I would have paid, making us both better off.

The french-fry consumption elasticity of body fat is (choose the correct answer that is most informative) A) The percent change in one's consumption of french fries divided by the percent change in one's body-fat percentage. B) The percent change in one's body fat divided by the percent change in one's consumption of french fries C) The percent change in one's body-fat percentage divided by percent change in one's consumption of french fries D) The percent change in one's consumption of french fries divided by the percent change in one's body fat

B) The percent change in one's body fat divided by the percent change in one's consumption of french fries

Julia, a student in class, correctly pointed out that in terms of delivering presents on Christmas Eve, Santa is an artificially-scarce good. A) The statement is false. In addition, I am not sure her name is Julia. B) The statement is true but I am not sure her name is Julia

B) The statement is true but I am not sure her name is Julia

Consider, as presented in class, Fred's production of snerd edibles. Remember that Fred is a competitive firm. It is the shortrun and there is only one variable input, hours of Lucas's time. To maximize her profits, Fred should increase Lucas's hours worked if A) Neither of the other answers are correct. B) The value of what Lucas produces if he works another hour is greater than his hourly wage rate. C) The value of what Lucas produces if he works another hour is great than the price of edibles.

B) The value of what Lucas produces if he works another hour is greater than his hourly wage rate.

Suppose Alice consumes only wine and cheese. Alice's income increases, the price of wine decreases, and the price of cheese decreases. Consider Alice's budget line with cheese on the vertical axis and wine on the horizontal axis. What will happen to the slope of Alice's budget line? A) It becomes flatter. B) There is not enough information to tell. C) It becomes steeper. D) It necessarily remains the same.

B) There is not enough information to tell. Changing income has no effect on the slope. If cheese is on the vertical axis then lowering the price cheese makes the budget line steeper. But if wine decreases in price the budget line becomes flatter. So, unless we know the exact changes we don't know whether the budget line ends up steeper or flatter.

A competitive firm in the shortrun is maximizing its profits at the output level where (choose the answer that is both correct and most informative) A) Price equals marginal cost, even if profits are maximized at an output level of zero. B) Total revenue minus total cost takes its largest value, a value that could be positive, negative, or even zero. C) Total revenue minus total cost takes its largest value. D) The firm is doing the best it can given its constraints.

B) Total revenue minus total cost takes its largest value, a value that could be positive, negative, or even zero.

From the individual's perspective, maximizing their utility and behaving efficiently are one and the same. A) False B) True

B) True

Imagine a society of two individuals (Colin, the cowboy and Sofia, the New Yorker) and two commodities: operas CDs and barbecued steaks. For Sofia both are goods, but for Colin steaks are a bad. Further assume a manna-from-heaven model (no production). Assume we have correctly drawn their UPF. The allocation of steaks and opera CDs is efficient. Given all this, it must be the case that Sofia is eating all of the steaks. A) False B) True

B) True Colin giving steaks to Sofia makes both of them better off. So efficiency is not achieved until Sofia is eating all of the steaks.

It is sometimes possible for two people to consume the same unit of the same good. A) False B) True

B) True This is the definition of con-congestible (non-rivalrous). It is a property of all public goods and all artificially scarce goods.

Donald inherited his mother's emerald broach. He loves wearing it, but Donald is poor and his kids are not getting enough to eat, so Donald would be willing to sell the broach for $100. Wanda saw Donald wearing the broach at a Trump rally. She steals it because she knows she can get away with, but, if she had to, she would have paid Donald $400 for the broach. (Assume no one else is affected) Which alternative is both correct and most informative. A) Wanda stealing the broach decreases efficiency B) Two of the other alternatives are correct. C) Efficiency would have increased if Wanda had bought the broach from Donald for more than $100 but less than $400 D) Wanda stealing Donald's broach is efficiency increasing

B) Two of the other alternatives are correct.

Assume for the purposes of this question, that people in Argentina have the same preference as people in the U.S. Also assume the same state of technical knowledge in both countries. For the purpose of this question also assume a meal is a meal; that is the objective is to eat calories; what one eats is secondary. We observe that the production of meals in Argentina uses relatively more meat than the production of meals in the U.S. In the U.S. relatively more labor is used to produce meals. Which explanation is most correct and most explanatory? A) In the U.S. the price of meat relative to the price of labor is higher than it is in the Argentina. B) With meat on the vertical axis and labor on the horizontal axis, since meat is relatively cheaper in Argentina, the isocost lines for meal production are steeper in Argentina because meat is relatively cheaper than it is in the U.S. (labor is relatively more expensive). This causes the cost-minimizing input combination for meal production to be more labor intensive in the U.S. (less meat intensive). C) in Argentina the price of meat relative to the price of labor is higher than it is in the U.S. D) relative input prices differ between the two counties.

B) With meat on the vertical axis and labor on the horizontal axis, since meat is relatively cheaper in Argentina, the isocost lines for meal production are steeper in Argentina because meat is relatively cheaper than it is in the U.S. (labor is relatively more expensive). This causes the cost-minimizing input combination for meal production to be more labor intensive in the U.S. (less meat intensive).

Could a government policy that reduces pollution to its efficient level, be inefficient? A) No B) Yes

B) Yes

In the U.S., is the amount one works outside the home predominately determined by a market transaction? A) No B) Yes

B) Yes

A rational consumer will always choose to consume a bundle of goods that is on her budget line. A) No B) Yes

B) Yes The critical word here is "goods" meaning that for both commodities more is always preferred to less. In which case, if one is not spending all of their money, they can increase their utility by spending more of it.

A shift of the demand curve for thin-crust pizza (income on the vertical axis, quantity demanded on the horizontal axis) could be caused by a change in the price of thin-crust pizza. A) No, it could not B) Yes, it could

B) Yes, it could

The term diminishing returns refers to: A) a reduction in profits caused by increasing output beyond the optimal point. B) a decrease in the extra output due to the use of an additional unit of a variable input, when more and more of the variable input is used and all other things are held constant. C) a falling interest rate that can be expected as one's investment in a single asset increases. D) a decrease in total output due to overcrowding, when too much labor is used with too little land or capital.

B) a decrease in the extra output due to the use of an additional unit of a variable input, when more and more of the variable input is used and all other things are held constant.

Barak Obama, in his capacity as President of the U.S, is A) a public good B) a public commodity

B) a public commodity

Picture the indifference curve for carrots, a good, and candy, a bad. If quantity of candy is placed on the horizontal axis and quantity of carrots are placed on the vertical axis which statement best describes the shape of each indifference curve, given that consuming another unit of carrots (candy) always increases (decreases) utility by the same amount. (Choose the answer that is both correct and most informative.) A) a negative-sloping line B) a straight, positive-sloping line C) a straight, negative-sloping line D) a positive-sloping line E) none of the above

B) a straight, positive-sloping line If one commodity is a good and the other is a bad the indifference curve must be positively sloped. The issue is whether it is a straight line, or not. Note the assumption in the question about how much utility changes when either commodity changes levels.

Which of the following is an environmental policy based on tradable pollution permits? A) paying automobile drivers 10 cents for each 10% reduction in automobile emissions B) allowing automobile drivers to buy and sell the right to a certain level of automobile emissions C) ignoring pollution and letting private markets operate without government interference D) a charge to automobile drivers of 10 cents for 100 units of pollutants emitted

B) allowing automobile drivers to buy and sell the right to a certain level of automobile emissions

If all firms in an industry are price-takers, then: A) each firm takes the market price as given for its current output level, recognizing that the price will change if it alters its output significantly. B) an individual firm cannot alter the market price even if it doubles its output. C) the market sets the price, and each firm can take it or leave it (by setting a different price). D) each firm can take the price that it wants to charge and sell at this price, provided it is not too different from the prices other firms are charging.

B) an individual firm cannot alter the market price even if it doubles its output.

An economy is said to have a comparative advantage in the production of a good if it can produce that good: A) with a higher opportunity cost than another economy. B) at a lower opportunity cost than another economy. C) with more resources than another economy. D) outside its production possibilities curve.

B) at a lower opportunity cost than another economy.

Public goods differ from common-property resources in that: A) both are excludable, but public goods are non-rivalrous in consumption, while common-property resources are rivalrous in consumption. B) both are non-excludable, but public goods are non-rivalrous in consumption, while common-property resources are rivalrous in consumption. C) both are rival in consumption, but public goods are non-excludable, while common-property resources are excludable. D) both are non-rivalrous in consumption, but public goods are excludable, while common-property resources are non-excludable.

B) both are non-excludable, but public goods are non-rivalrous in consumption, while common-property resources are rivalrous in consumption.

Both competitive firms and monopolists face constraints from the market. A competitive firm is constrained by _____ and a monopolist is constrained by________. A) the market demand curve; the market demand curve B) price; the market demand curve C) the market demand curve; price D) price; price

B) price; the market demand curve

Consumer surplus for an individual buyer is equal to: A) the marginal cost of the good, minus the consumer's willingness to pay for the good. B) the consumer's willingness to pay for the good, minus the price of the good. C) the consumer's willingness to pay for the good, minus the marginal cost of producing the good. D) the price of the good, minus the marginal cost of producing the good.

B) the consumer's willingness to pay for the good, minus the price of the good.

The own price elasticity of demand will be larger, in absolute terms, when A) there are few good substitutes for the good B) the good is a luxury good rather than a necessity. C) all of the other answers D) the time period to adjust is short

B) the good is a luxury good rather than a necessity.

If individuals text while driving without considering the costs texting while driving imposes on other drivers and pedestrians: (Choose the answer that is both correct and most informative.) A) the number of texts sent by each driver will be inefficient from his or her perspective, and be inefficient from society's perspective. B) the number of texts sent by each driver will be efficient from his or her perspective, but not efficient from society's perspective. C) the number of texts sent by drivers will be inefficient.

B) the number of texts sent by each driver will be efficient from his or her perspective, but not efficient from society's perspective. Everyone texts the efficient amount from their own perspective. But since You texting imposes a cost on others (increases the probability that they will kill you with their car), there will be too many texts from society's perspective (an inefficiently high number).

Austin's total fixed cost is $3,600. Austin employs 20 workers and pays each worker $60. The average product of labor is 30, and the marginal product of the twentieth worker is 12. What is the marginal cost of the last unit produced by the last worker Austin hired? A) $240 B) $720 C) $5 D) $0.20

C) $5

Zoe's Bakery operates in a perfectly competitive industry. Suppose that when the market price is $5, the profit-maximizing output level of pastries is 150 units, with average total cost of $4, and average variable cost of $3. From this we know Zoe's marginal cost is ________, and her short-run profits are ________. A) $5; $300 B) $1; $300 C) $5; $150 D) $1; $150

C) $5; $150

My demand curve for cigars, per day, is C=8-4P, where P is the price of a cigar and C is the number of cigars I buy and smoke. Assume the current price is $4/cigar. My total WTP for cigars is A) $0 B) $4 C) $8

C) $8 If C=8-4P, then WTP=2-(1/4)*C. My total WTP for cigars is $8 (the area under the WTP line above zero.

My demand curve for cigars, per day, is C=8-4P, where P is the price of a cigar and C is the number of cigars I buy and smoke. Assume the current price is $2/cigar. My total WTP for cigars is A) $4 B) not enough information to answer the question C) $8 D) $16

C) $8 Note we are asking about total WTP not WTP to buy cigars at $2 each.

My dog Sofie's willingness-to-pay for french fries is as follows: she is willing to pay 12 dog biscuits for the first bag of fries, 25 dog biscuits for two bags, 32 biscuits for three bags, and 39 biscuits for four bags. I charge her 10 dog biscuits for each bag of french fries How many bags of french fries should Sofie purchase from me? A) 4 B) 1 C) 2 D) 3

C) 2 Sofie gets wtp for the first bag of fries is 12 DB, 13 DB for the second bag, 7 DB for the third bag, and 7 for the fourth bag. Sofie wants to buy only two bags: past that she would be paying more than she values them.

Suppose the market demand for TV remotes is given by the equation Qd = 50 - .5P, where P is the price and Qd represents the number of TV remotes demanded. (The corresponding inverse demand function is P=100-2Qd ) If the market price of TV remotes is $40, then the quantity demanded would equal ________ and total consumer's surplus will be ________. A) 20; $900 B) 30; $1800 C) 30; $900 D) 30; $400

C) 30; $900 If the price of remotes is $40, demand will be 30. To calculate total consumer's surplus, use the inverse demand function. At a price of $40, 30 units are purchased, so what is the area above $40? At a price of $100 demand is zero, so we are looking at the area of a right triangle with a height of $60 (100-4) and a width of 30. $60 multiplied by 30 is $1800, and half of that is $900. Note the distinction between "total consumer's surplus" and total WTP for 30 remotes.

A recent study found that by the age of 20 years, in the U.S., A) 40% have, at least briefly, been the recipient of food stamps B) 30% have, at least briefly, been the recipient of food stamps C) 50% have, at least briefly, been the recipient of food stamps D) 20% have, at least briefly, been the recipient of food stamps E) 60% have, at least briefly, been the recipient of food stamps

C) 50% have, at least briefly, been the recipient of food stamps

A small community finds that tidy lawns and neighborhoods provide both private and external benefits. They determine the marginal private benefit (MPB) of lawns can be represented by the following equation: MPB = 50 - 0.5Q, where Q is the number of hours spent on keeping lawns tidy. The marginal private cost (MPC) of such lawn upkeep is represented by the following equation: MPC = 0.5Q, where Q is again the number of hours engaged in lawn upkeep. Suppose the community is able to estimate the marginal social benefit from lawn upkeep as $15. Given this information, what is the socially optimal amount of lawn upkeep for this community? A) 45 hours B) 50 hours C) 65 hours D) 0 hours

C) 65 hours

Consider Adam and Eve in the Garden of Eden before God kicked them out. Adam and Eve could harvest from the Garden to their hearts content--it was a garden of plenty. (Choose the answer that is most likely to be correct.) A) Because the Garden was a CP resource, Adam and Eve harvested an inefficient amount of its resources. B) Because the resources in the Garden are public goods, Adam and Eve harvested an inefficient amount of them. C) Assuming Adam and Eve were utility maximizers, an efficient amount of the Garden's resources were harvested.

C) Assuming Adam and Eve were utility maximizers, an efficient amount of the Garden's resources were harvested.

Whales in the ocean are common-property resources if ______________. And, if in addition, they are _______, they will be harvested at an _____ rate. A) access to them is uncontrolled; scarce; inefficient B) access to them is uncontrolled; ; not scarce; efficient C) Both of the other answers are correct.

C) Both of the other answers are correct.

Hilary had $10 left to send Bill and Chelsea on get-out-the-vote trips. It cost $1 to send Chelsea on each trip but $2 a trip for Bill (they need to send a handler with him). The following are the total number of votes Chelsea trips would have produced as as function of how many trips she took (10, 16, 20, 22, and 22. For Bill the total votes produced would have been 19, 29, 34, 39, and 41. If Hilary had wanted to get the most votes for her $10, how many trips would Chelsea and Bill have taken take? How many votes will they produce together? A) Chelsea 4 trips, Bill 3 trips. 160 votes B) Chelsea 2 trips, Bill 4 trips. 55 votes C) Chelsea 4 trips, Bill 3 trips. 56 votes D) Chelsea 2 trips, Bill 4 trips. 147 votes

C) Chelsea 4 trips, Bill 3 trips. 56 votes

After a hot dog is put in a bun, adding more hot dogs to the same bun has no effect on Bob's utility. And, after surrounding a hot dog with a bun, adding more buns to the meal does not increase Bob's utility. But, Bob's utility is increasing in the number of buned hot-dogs that he eats. What do Bob's indifference curves look like (with buns on the vertical axis and hot dogs on the horizontal axis)? A) Each indifference curve is a vertical line. B) not enough information to tell C) Each indifference curve looks like the letter "L" D) Each indifference curve is a downward-sloping straight line.

C) Each indifference curve looks like the letter "L"

George sneaks up behind Mabel and kisses her, making himself better off and Mabel worse off. If he had to, George would have paid $50 for the opportunity to sneak up and kiss Mabel. Mabel hates George but would have let him kiss her for $75. The kiss is A) Not enough information to tell whether the kiss is efficiency increasing or decreasing. B) Efficiency increasing C) Efficiency decreasing

C) Efficiency decreasing

George sneaks up behind Mabel and kisses her, making himself better off and Mabel worse off. If he had to, George would have paid $75 for the opportunity to sneak up and kiss Mabel. Mabel hates George but would have let him kiss her for $50. The kiss is A) Efficiency decreasing because Mabel is worse off. B) Not enough information to tell whether the kiss is efficiency increasing or decreasing. C) Efficiency increasing, even though it makes Mabel worse off.

C) Efficiency increasing, even though it makes Mabel worse off.

Consider my dog, Giacomo. He cares about only two things: playing and eating. He always prefers an additional kilo of meat to an additional kilo of cheese. He always prefers additional playing tug to additional playing fetch. In fact, he does not like to play fetch. Bundles for Giacomo consist of different amounts of meat, cheese, tug time, and fetch time. If two bundles have the same amount of cheese, he will, for sure, rank lower, the one with less meat. A) Giacomo will always rank a bundle with less meat lower than all bundles with more meat. B) This last statement follows from what was assumed. C) He might rank lower the one with less meat, but this does not follow from what was assumed. D) This question is stupid: Giacomo is just a dog, so can't rank bundles.

C) He might rank lower the one with less meat, but this does not follow from what was assumed.

Consider a world with only two commodities: beer and bibles. For Wilma, beer is a good, but for Wilma bibles start off as a bad but eventually turns into a good. Consider Wilma's indifference curves with bibles on the horizontal axis and beer on the vertical axis Which statement is both correct and most informative? A) Her indifference curves are all upward sloping B) Her indifference curves are U-shaped (increasing beer consumption from zero, first the slope is negative but then switches to positive) C) Her indifference curves are shaped like an inverted U (increasing bible consumption from zero, first the slope is positive but then switches to negative) D) Her indifference curves are all downward sloping.

C) Her indifference curves are shaped like an inverted U (increasing bible consumption from zero, first the slope is positive but then switches to negative) When one is a bad and the other a good, the indifference curve is positively sloped. When they are both goods (at some level of consumption of bibles), the indifference curve is negatively sloped.

Consider commodity X and consider the marginal social benefit curve for the consumption of Commodity X (units consumed on the horizontal axis and marginal social benefits on the vertical axis). Which of the following statements is both correct and most informative? A) If X is a public good, the marginal social benefit curve is the horizontal summation of every individual's marginal private benefit curve. B) More than one of the other answers is correct. C) If X is a public good, the marginal social benefit curve is the vertical summation of every individual's marginal private benefit curve. D) If X is a congestible good, the marginal private benefit curve and marginal social benefit curve for X are always one and the same.

C) If X is a public good, the marginal social benefit curve is the vertical summation of every individual's marginal private benefit curve.

After spending his second hour with Mickey, Donald's insanity increased by 20%. Which of the following statements is both correct and most? A) In this range, the time-with-Mickey elasticity of Donald's insanity is positive and elastic B) In this range, the Donald's-insanity elasticity of time-with-Mickey is positive and elastic. C) In this range, the time-with-Mickey elasticity of Donald's insanity is positive but inelastic D) In this range, the Donald's-insanity elasticity of time-with-Mickey is positive but inelastic

C) In this range, the time-with-Mickey elasticity of Donald's insanity is positive but inelastic

Which of the following statements is true? A) Individuals tend to underestimate the amount of a public good that they desire. B) It is straightforward to estimate the marginal social benefits of public goods. C) It is difficult for governments to get an accurate estimate of the marginal social benefits of public goods, because individuals have an incentive to distort the truth about their willingness to pay. D) It is possible to observe how much people are willing-to-pay for an additional unit of a public good.

C) It is difficult for governments to get an accurate estimate of the marginal social benefits of public goods, because individuals have an incentive to distort the truth about their willingness to pay.

I am thinking about hiring someone to go through my thousands of photos and delete at least half of them. I need to clear up space on my hard drive. Besides, there are just too many of them. Given that the goal is to delete half of the photos (Choose the alternative that is both correct and most informative.) A) A real economist would never hire someone who does not know him and his family to do this. B) It only makes sense if the person I hire can do it more quickly than I can. C) It makes sense if the person hired has a comparative advantage in choosing the photos to delete.

C) It makes sense if the person hired has a comparative advantage in choosing the photos to delete.

In Spumoni Colorado, Mary and Jane work at the one ice-cream parlor. They both can make ice-cream sundaes or ice-cream cones. Working for one hour, Jane can make 20 sundaes, and working for one hour Mary can make 30 sundaes. Alternatively, in one-hour Jane can make 16 cones whereas Mary can make 24 cones. Choose the alternative that is both correct and most informative. A) Jane has an absolute disadvantage in the production of cones but a comparative advantage in the production of cones. B) Jane has a comparative advantage in the production of sundaes. C) Mary has an absolute advantage in the production of both cones and sundaes but a comparative advantage in the production of neither. D) Mary has an absolute advantage in the production of both cones and sundaes

C) Mary has an absolute advantage in the production of both cones and sundaes but a comparative advantage in the production of neither.

There can be too little pollution from an efficiency point of view. A) True B) False C) Probably true D) Probably false

C) Probably true

For the purposes of this question assume that society consists of children who believe in Santa Claus. Further assume that Santa delivers, on Christmas Eve, presents to all good children who believe in him. He is capable of visiting every house on Christmas Eve, no matter how many (his time on Christmas Eve is non-congestible). Given all this, what type of commodity is Santa on Christmas Eve? Choose the answer that seems most reasonable. A) It is not reasonable to describe Santa as either a public commodity or an artificially-scare commodity. B) Santa on Christmas Eve is a public commodity C) Santa on Christmas Eve is an artificially-scarce commodity

C) Santa on Christmas Eve is an artificially-scarce commodity

Specialization in production was the starting point for what book in economics that many regard as the beginning of economics? A) Free to Choose by Milton Friedman B) Das Kapital by Karl Marx C) The Wealth of Nations by Adam Smith D) The General Theory by John Maynard Keynes

C) The Wealth of Nations by Adam Smith

Consider a society that is currently operating a point inside their Utility-Possibilities Frontier. Is it possible to have a Pareto improvement and not achieve efficiency? Is it possible to have a change that is not a Pareto improvement but achieves efficiency? A) The answer to the first question is yes and the answer to the second is no B) The answer to the first question is not and the answer to the second is yes C) The answer to both questions is yes D) The answer to both questions is no.

C) The answer to both questions is yes

Consider, as presented in class, Fred's production of snerd edibles. Assume Fred's shortrun production function of producing edibles is e=e(L)= 10(L).3, where L is labor. Which of the following is both correct and most informative? A) The marginal product of labor start positive be eventually becomes negative. B) The marginal product of labor is always declining. C) The marginal product of labor is both always positive and always declining.

C) The marginal product of labor is both always positive and always declining.

Which of the following is the best definition of an economic system? A) Supply and demand B) The market which determines what will be produced and how it will be distributed C) The process a society uses to determine what will be produced and how it will be distributed D) The family

C) The process a society uses to determine what will be produced and how it will be distributed

Imagine that a firm's maximum output depends on three things: the amount of labor it uses, the amount of capital it uses, and the amount of air pollution in the neighborhood. It is the shortrun and the firm is constrained to use a fixed amount of capital. All else constant, the more air pollution, the less output the firm produces. The firm's isoquants (pollution on the vertical axis, labor on the horizontal axis: (Choose the answer that is both correct and most informative.) A) They most likely slope up. B) They must slope down C) They must slope up D) They most likely slope down

C) They must slope up There are three factors that determine how much a firm produces: two inputs (l and k) and pollution (which is a bad) It is the SR, so the amount of k is fixed. So, there are only two factors that vary: l and p. Draw the isoquant, pollution on the vertical axis. On factor is a bad, one a good, so, if pollution increases, to hold output constant (remain on the same isoquant) l must increase. That is, they must slope up.

Assume that everyone living in Boulder or Aspen have the same income and the same preferences. It costs Boulder residents more per day to ski at Aspen than it costs Aspen residents. Given the current prices, everyone living in Aspen or Boulder skis Aspen at least one day a year. Aspen residents will necessarily get more consumer's s surplus from skiing Aspen than will residents of Boulder? A) False B) Not enough information to determine whether Aspen residents will get more consumer's surplus from skiing Aspen. C) True

C) True If people have the same income and the same preferences they have the same demand curves; that is they have the same WTP curves (the demand curve with $ on the vertical axis). The questions is about the area under this curve above the cost of an Aspen ski trip. The cost is higher for Boulder residents, so Aspen residents will get more CS.

Fred, from class, is a competitive firm that produce snerd edibles. Consider her marginal product of labor curve (hours of labor (Lucas' time) on the horizontal axis and snerd edibles on the vertical axis). Consider also her marginal cost curve for producing edibles, edibles on the horizontal axis and $ on the vertical axis. For the purposes of this question assume Red Bull is free. Which of the following statements describes the technology for producing edibles consistent with how that technology was presented in lecture? A) The marginal cost of producing edibles is positive and increasing, and the MC curve shifts downward every time Lucas's consumption of Red Bull is increased. B) The marginal product of labor is positive but declining, and shifts upward every time Lucas drinks another can of Red Bull C) Two, and only two, of the other statements/answers are correct. D) The marginal product of labor is positive and increasing, and shifts downward every time Lucas drinks another can of Red Bull.

C) Two, and only two, of the other statements/answers are correct. Statement A is correct. Statement B is correct. Statement D is incorrect: marginal product of labor increases, not decreases, when Lucas drinks another can.

There are three bundles: A, B, and C. I strictly prefer C to A, I strictly prefer B to A, and am indifferent between C and B. Is this ranking of bundles consistent with rationality in the economic sense of the term? A) No B) Not enough information to tell C) Yes

C) Yes

Assume a world of only two commodities: adult diapers and Hostess Twinkies. These two commodities are produced using only two inputs: labor and plastic. Assume, you know society's stock of labor and plastic, society's production possibilities frontier and the production function for adult diapers. Given all this, do you have sufficient information to determine the production function for Twinkies? (Choose the answer that is both correct and most informative.) A) No because this information is necessary, but not sufficient, to derive the production function for Twinkies. B) No C) Yes

C) Yes If you know the PPF and the production function for one of two goods, the amount of the other good that can be produced from different amounts of the remaining amounts of the two inputs is what is left.

Two bads will have ________ indifference curve; one bad and one good will have __________ indifference curve; and two goods will have ________ indifference curve. A) an upward-sloping; a downward-sloping; an upward-sloping. B) a downward-sloping; a downward-sloping; an upward-sloping. C) a downward-sloping; an upward-sloping; a downward-sloping. D) an upward-sloping; an upward-sloping; a downward-sloping.

C) a downward-sloping; an upward-sloping; a downward-sloping. Two bads have downward sloping indifference curves (if you go more of one of the bads, to keep you indifferent you have to have less of the other. One good and one bad must be upward sloping (to compensate for more of the bad you need more of the good)

A price control is: A) a tax on the sale of a good that controls the market price. B) control of the price of a good by the firm that produces it. C) a legal restriction on how high or low a price in a market may go. D) an upper limit on the quantity of some good that can be bought or sold.

C) a legal restriction on how high or low a price in a market may go.

I am a firm that needs to dump my toxic waste in a stream, only one stream. I know that after I do it, I will be sued by the Federal Government and forced to pay damages in the sum of total lost consumer's surplus to everyone who fished at the site before I dumped. Ignoring the varying cost of transporting the toxic waste to different streams, which of the following stream options would be my best choice if my intent is to minimize the damages I pay? A) a pristine stream with a lot of good substitutes because many anglers will get almost as much utility by fishing at one of those close substitutes. B) a pristine stream with few good substitutes because many anglers will then no longer care about fishing. C) a polluted stream with few fish located near a good number of pristine trout streams. D) a polluted stream with few fish, located near a good number equally polluted streams.

C) a polluted stream with few fish located near a good number of pristine trout streams.

I am a firm that needs to dump some toxic medical waste (dirty needles, etc.). I am going to dump it on a swimming beach, but which one? I want to choose the beach so as to maximize the damages to beach goers (maximize the lost consumer's surplus to beach goers). The firm is owned by a mean guy, me, who does not like to see scantily-clad people. Which of the following is my best choice? In answering, ignore transportation costs. A) a polluted/ugly beach located near a good number of pristine beaches B) a polluted/ugly beach near a good number of equally-trashed beaches C) a pristine beach with few good substitutes D) a pristine beach with a lot of good substitutes

C) a pristine beach with few good substitutes

Your budget set identifies ____. Your indifference set for bundle xi identifies _____. A) all those bundles that exhaust your budget; all those bundles that you rank equal to bundle xi B) all those bundles that you can afford; all those bundles that you rank equal to or higher than bundle xi C) all those bundles that you can afford; all those bundles that you rank equal to bundle xi

C) all those bundles that you can afford; all those bundles that you rank equal to bundle xi

There are two plants (A and B) in an industry. To reduce pollution, the government has imposed environmental standards forcing each plant to cut emissions by 60%. At the emissions standard, the marginal social benefit of pollution for Plant A is $500 and the marginal social benefit of pollution for Plant B is $125. The same level of pollution can be achieved at a lower cost by: A) forcing both plants to reduce emissions. B) allowing both plants to pollute more. C) allowing Plant A to pollute more and Plant B to pollute less. D) forcing Plant A to reduce emissions and allowing Plant B to increase emissions

C) allowing Plant A to pollute more and Plant B to pollute less.

In London, any motorist entering a particular area in the city center during certain specified times must pay a congestion fee equal to £8, with fines for noncompliance rising to as high as £120. The congestion fee is: (Choose the answer that is both correct and most informative.) A) the wrong policy tool for solving the problem of congestion; instead, motorists should be allowed to make deals to determine when and where individuals are permitted to drive. B) an attempt to internalize the costs due to traffic delays and congestion that are created by drivers in the specified area. C) an example of a Pigouvian tax aimed at regulating the use of the common resource of city streets and an attempt to internalize the costs due to traffic delays and congestion that are created by drivers in the specified area. D) an example of a Pigouvian tax aimed at regulating the use of the common resource of city streets.

C) an example of a Pigouvian tax aimed at regulating the use of the common resource of city streets and an attempt to internalize the costs due to traffic delays and congestion that are created by drivers in the specified area.

Consider the just-ended Presidential election, and the amount of money both sides spent on TV ads. In addition, keep in my that the outcome of the election in terms of the percentage of the vote for each candidate is what the polls predicted months ago. Given all this, up until the day of the election, both sides spending vast amounts on TV ads was _____ . A) efficient but not an equilibrium B) an efficient equilibrium C) an inefficient equilibrium D) inefficient but not an equilibrium

C) an inefficient equilibrium We talked a lot about inefficient equilibria (divorce lawyers, nuclear-arms race, etc.) The money spend on ads did not affect the outcome of the election (the polls six months before the election had effectively the same margin for Obama has the final result). But Obama had to spend a shit load of money on ads because Romney was doing it, and Romney had to do the same because Obama was doing it. Just like the divorce-lawyer game. Both sides had to keep spending. It was in Obama's (Romney's) interest to spend if Romney (Obama) was spending, and it was in Obama's (Romney's) interest to spend if Romney (Obama) was not spending.

Markets for the right to pollute are: A) likely to result in fewer incentives to find and create technology that reduces pollution. B) a means by which more pollution is encouraged. C) created by government when it issues tradable pollution permits. D) created by individual firms when they reduce pollution emissions.

C) created by government when it issues tradable pollution permits.

Karen consumes gasoline and other goods. A new excise tax on gasoline raises gas prices. However, the government pays Karen an income subsidy that is just enough for her to stay on her original (pre-tax) indifference curve. Her new optimal consumption bundle will have: A) This question can't be answered, since some essential information (such as Karen's income, the pre- and post-tax prices of gas, etc.) is missing. B) the same amount of both goods as before. C) less gas and more of other goods. D) less of other goods and more gas.

C) less gas and more of other goods.

Consider Carpenter Bill's supply curve (price on the vertical axis) for rocking chairs. The market price for rocking chairs doubles from $20 to $40. This will_____ A) cause Bill's supply curve for rocking chairs to shift to the right B) cause Bill's supply curve for rocking chairs to shift to the left. C) not shift Bill's supply curve for rocking chairs

C) not shift Bill's supply curve for rocking chairs

Currently, in the U.S. food stamps help to feed A) one in twenty children B) one in ten children C) one in four children

C) one in four children

The long run is a planning period: A) that is at least 5 years in length. B) that must be between 6 months and 5 years. C) over which a firm can consider all inputs as variable. D) that must be over 6 months in length.

C) over which a firm can consider all inputs as variable.

For a market commodity ____ is exogenous and quantity is ____. For a nonmarket commodity ____ is exogenous and ____ is endogenous. (choose the best fill-ins) A) price, exogenous, price, quantity B) price, endogenous, price, value C) price, endogenous, quantity, price D) price, endogenous, quantity, value

C) price, endogenous, quantity, price

Rent controls set a price ceiling below the equilibrium price and therefore: A) a surplus of rental units will result. B) poor people will obviously be helped. C) quantity demanded exceeds the quantity supplied. D) quantity supplied exceeds the quantity demanded.

C) quantity demanded exceeds the quantity supplied.

Which of the following list includes all of the constraints faced in the SR by a competitive firm that produces and sells snerd edibles? A) the price of snerd edibles, the technology for producing snerd edibles, the levels of the fixed inputs, input prices, and the aggregate demand curve for snerd edibles. B) the price of snerd edibles, the levels of the fixed inputs, input prices, and the aggregate demand curve for snerd edibles. C) the price of snerd edibles, the technology for producing snerd edibles, the levels of the fixed inputs, and input prices. D) the price of snerd edibles, the levels of the fixed inputs, and input prices.

C) the price of snerd edibles, the technology for producing snerd edibles, the levels of the fixed inputs, and input prices.

Consider the market for pigs and assume there is a marginal external cost associated with raising pigs. Without government regulation, at the market equilibrium price and quantity of pigs: A) the price will be less than the marginal benefit. B) the price will be less than the marginal cost to pig farmers. C) the price will be less than the marginal social cost. D) too few pigs will be raised.

C) the price will be less than the marginal social cost.

With tradable emissions permits, the price of the permit is determined by: A) the World Trade Organization. B) the government. C) the supply of and demand for permits. D) environmental protection organizations.

C) the supply of and demand for permits.

When individuals take external costs and benefits into account: A) the market will not reach an efficient solution. B) there are no external costs. C) they internalize the externality. D) the government needs to intervene in the market.

C) they internalize the externality.

A plastics manufacturing plant emits pollution into the Big River. This leads to higher costs and disruption for fisherman on the lake, for which they are not compensated. In this situation, we can assume that: A) the ideal amount of society's resources is being used to produce plastic. B) there is an external benefit to society from plastic production. C) too many of society's resources are being used to produce plastic. D) too few of society's resources are being used to produce plastic.

C) too many of society's resources are being used to produce plastic.

Marginal cost can be calculated as: A) ∆VC/∆Q, where VC is variable cost and Q is output. B) the slope of the total cost curve. C) ∆TC/∆Q, where TC is total cost and Q is output; ∆VC/∆Q, where VC is variable cost and Q is output; and as the slope of the total cost curve. D) ∆TC/∆Q, where TC is total cost and Q is output.

C) ∆TC/∆Q, where TC is total cost and Q is output; ∆VC/∆Q, where VC is variable cost and Q is output; and as the slope of the total cost curve.

Vonda and Aleiyah are shopping together at the mall for new jeans. Vonda is willing to pay $90 and Aleiyah is willing to pay $50 for a pair of jeans (they have no WTP for a second pair). If the price of jeans is $59, how much total consumer surplus will Vonda and Aleiyah achieve in this market? A) $9 B) $40 C) $0 D) $31

D) $31

Xavier is the only guy town selling "medical" marijuana--he is a monopolist and demand is strong. He can sell 3 tons at $10k a ton, but if he lowers his price from $10K a ton to $9K a ton he can sell 4 tons. For Xavier, the marginal revenue associated with the 4th ton is A) $8K B) $10K C) $9K D) $6K

D) $6K

When the allocation of resources and the distribution of goods is efficient, it is still often possible to make some members of society better off. A) True B) False

A) True

People who make more money income necessarily face fewer constraints than do people who make less money income. A) Incorrect B) Correct

A) Incorrect

In long-run equilibrium, economic profits in a perfectly competitive industry are: A) indeterminate. B) negative. C) positive. D) zero.

D) zero.

Johnny has been saving up to buy a new bike for the last year. Suddenly, bikes become much more popular causing the demand curve to shift to the right and the equilibrium price of bikes to rise. Johnny can no longer afford the bike that he wanted and is worse off. This is an example of A) a pecuniary externality B) a negative externality C) the market working efficiently D) a positive externality E) two of the other answers are correct

E) two of the other answers are correct

Imagine a society of two individuals (Colin and Sofia) and two goods: operas CDs, O, and BBQ steaks, B. Both are goods for both individuals. Further assume a manna-from heaven model (no production). Assume we have correctly drawn their UPF. Society is currently operating at a point inside this UPF. At this point, it must be the case that not all of the steaks and CDs are being consumed. A) False B) True

A) False They could be inside the UPF either because not all is consumed or because all is being consumed by there are exchanges between Colin and Sofia that would have increased efficiency.

Assume that one can only consume what he or she personally buys (no gifting). In competitive market equilibrium, there could be people who are consuming Diet Coke that have a lower WTP for Diet Coke than some of the people who are not consuming it. (Choose the answer that is both correct and most informative.) A) False B) True, but unlikely C) True

A) False This situation cannot happen. If I have a Diet Coke and you do not, and my WTP to drink it is lower than yours, this cannot be competitive market equilibrium because you buying the Diet Coke from me can make both of us better off. False because it can't be equilibrium: those with a higher WTP will buy the scotch off those with a lower WTPs

Assume society consists of only U.S. citizens. Consider George and his tattoos, a George whose tattoos are unregulated and untaxed, and George is walking around naked showing all of his tattoos, his utility-maximizing number of tattoos. But George lives in a neighborhood that, except for George, consists of only French people, and George never leaves the neighborhood. Which answer is correct? A) George is showing the efficient number of tattoos from society's perspective. B) The market is necessarily failing in that George is showing too many tattoos from society's perspective

A) George is showing the efficient number of tattoos from society's perspective.

The efficient level of an external effect could be zero. A) True B) False

A) True

Assume that the temperature in a house depends on three inputs whose levels are determined when the house is built. These are: number of windows, amount of insulation, and type of heating/cooling system.. Kas Construction has been hired by Fred and Mabel to build their house. The heating/cooling has already been installed, when Mabel tells Kas that they want the house to always be 70 degrees Farenheit. Consider the isoquant line (windows on the vertical axis, insulation on the horizontal) for maintaining the temperature at 70 degrees. This isoquant is a A) Upward sloping line B) vertical line C) horizontal line D) Downward sloping line

A) Upward sloping line To keep the heat right at 70 the more windows you have the more insulation you will need to minimize heat transfer.

Which of the following represents a condition that needs to be met for efficiency to be achieved in a market economy? A) Well-defined property rights B) Excess market power C) Negative externalities D) Perfect equity E) All of the above

A) Well-defined property rights

An external benefit is a(n): A) benefit that individuals or firms confer on others without receiving compensation. B) example of a negative externality. C) benefit that accrues to domestic firms due to the actions of foreign (external) firms. D) benefit that accrues to foreign (external) firms due to the actions of domestic firms.

A) benefit that individuals or firms confer on others without receiving compensation.

A Pigouvian subsidy is: A) designed to encourage activities generating external benefits. B) appropriate when the marginal social cost curve and the marginal social benefit curve intersect at an inefficient level. C) designed to discourage activities generating externalities. D) appropriate when the marginal social cost curve is above the marginal cost of production curve.

A) designed to encourage activities generating external benefits.

Which of the following would cause the demand for chocolate bars to increase while not shifting the demand curve for chocolate bars (price on the vertical axis, quantity on the horizontal axis)? A) An increase in the supply of chocolate bars at every price. B) The US government imposing a binding price ceiling on chocolate bars. C) Both of the other two answers are correct.

C) Both of the other two answers are correct.

When cars burn gas or diesel, carbon is emitted, which combines in the atmosphere with oxygen to produce CO2, a global-warming gas. This damages society. To achieve the efficient amount CO2 emissions an economist might recommend. A) Carbon emissions be banned. B) The government should neither tax, nor subsidize, nor regulate the burning of gas and diesel because that interferes with the efficient workings of the market. C) Car users should pay a tax that reflects the damage caused by the carbon they emit. D) Cars that produce CO2 should be banned

C) Car users should pay a tax that reflects the damage caused by the carbon they emit.

Which of the following are examples of external effects? A) I smoke a cigarette you are subjected to second-hand smoke B) I eat pizza for lunch and am happy because I like pizza C) You put Snow White and the Seven Dwarfs figurines in your yard and make your neighbors happy when they walk by. D) A&C E) A&B

D) A&C

A competitive firm produces bad wine. Evaluate the following statement: Its production function and its cost function contain different pieces of information about the technology for producing bad wine. A) Incorrect. B) Correct.

A) Incorrect.

Consider a manna-from-heaven model such that God provides the world, every morning, with a fixed amount of cigars and wine, both goods. There has been a war and only two individuals have survived, Esther and Edith, and both are members of society. Visualize their utility-possibilities frontier and a point C inside that frontier. At point C, A) maybe all of the wine and cigars are being consumed B) definitely all the wine and cigars are not being consumed C) definitely all of the wine and cigars are being consumed

A) maybe all of the wine and cigars are being consumed

The market demand for sleigh rides is P=50-5Q. The market supply for sleigh rides is P=10Q+5. Assume the market for sleigh rides acts in a perfectly competitive manner. The consumer surplus is _____. A) 60 B) 22.5 C) Not enough information to determine. D) 45

B) 22.5

The isocost line in producer theory is analogous to which of the following from consumer theory? A) An isoquant B) A budget line. C) An indifference curve D) None of the above

B) A budget line.

A model (theory) can have only one assumption. A) True B) False

B) False

In a world of only two commodities, both goods, indifference curves always slope down. A) This statement is not correct. B) This statement is correct.

B) This statement is correct.

Can a competitive firm produce its profit-maximizing level of output, and not be maximizing it profits? A) No B) Yes

B) Yes

The socially optimal quantity of pollution occurs where: A) the marginal social benefit of pollution is less than the marginal social cost of pollution. B) the marginal social benefit of pollution is equal to the marginal social cost of pollution. C) there is no pollution. D) the marginal social benefit of pollution is greater than the marginal social cost of pollution.

B) the marginal social benefit of pollution is equal to the marginal social cost of pollution.

Which answer correctly and best describes the link between a theory's definitions and assumptions, and its predictions? A) logic B) the process of logical deduction C) the process of logical induction D) mathematics

B) the process of logical deduction

Suppose at the current amount of pollution, the marginal social benefit of pollution is greater than the marginal social cost of pollution, then: A) the externality is minimized. B) there is too little pollution from an efficiency perspective. C) there is too much pollution from an efficiency perspective D) society is achieving the optimal amount of pollution.

B) there is too little pollution from an efficiency perspective.

If people get a flu vaccination so they do not get the flu, and if spreading the flu to someone else is bad, then getting a flu vaccination produces A) can produce negative external effects because the vaccination makes some people who get one sick B) negative external effects because the resources used to produce and administer the vaccines might have been used to produce something society values more. C) positive external effects

C) positive external effects

Which of the following goods best fit the characteristics of a private good? A) fire protection B) a professor giving a lecture in a large classroom C) disease prevention D) an ice-cream cone

D) an ice-cream cone

Which of the following is an example of a positive externality? A) Sam buys a dilapidated house, renovates it, and increases the property values of all houses in the neighborhood. B) Sam dug a pond so he could go fishing, but the pond has contributed to an explosion of mosquitoes in your neighborhood. C) Liquid waste from Sam's chicken farm flows into a neighbor's well water. D) Sam has dozens of cats and they come into your yard to hunt the birds that come to your bird bath.

A) Sam buys a dilapidated house, renovates it, and increases the property values of all houses in the neighborhood.

In our George tattoo example in class, efficiency can necessarily be achieved by taxing George, at some appropriate level, for each tattoo he shows in public. A) True B) False

A) True

In the case of a negative externality from consumption, an individual chooses to consume too much from society's point of view. A) True B) False

A) True

The presence of an external negative effect implies the market is failing. A) false B) True

A) false The market is failing if there is an external effect (positive or negative) at an inefficient level. For example, consider second-hand smoke from cigarettes. If second-hand smoke is regulated/taxed at a level such there is the efficient amount there will still be negative external effects (the second-hand smoke) but there will be not externality (no market failure).

Imagine a world where, if you went into the business of producing gubers, you could sell as many gubers as you want at the going price for gubers. If you try to sell at a higher price, you would sell zero gubers. Further assume that, for you, the marginal cost of guber production is a positive constant. Which of the following statements is both correct and most informative? A) If the price is greater than your MC you should produce and sell zillions of gubers. B) If price is equal to marginal cost, you should definitely produce and sell gubers. C) You should produce the number of gubers where price equals marginal cost. D) If the price is greater than your MC you should start producing and selling gubers

A) If the price is greater than your MC you should produce and sell zillions of gubers.

Society is made up of only Jane and wolves. Jane likes to run with the wolves and deer, but they don't like to run with her. The wolves are indifferent to Jane running with the deer. Note that the deer are not members of society. Currently, Jane is not allowed to run with the deer or the wolves. Which of the following changes would *necessarily* increase efficiency? (Choose the answer that is both correct and most informative.) A) Jane is allowed to run with the deer. B) Jane is allowed to run with the wolves. C) The situation is already efficient. D) Jane is allowed to run with both the deer and the wolves.

A) Jane is allowed to run with the deer.

Santa Claus is a mythical creature that delivers presents to children on Christmas Eve, but only to children who believe in him, have been good, and celebrate Christmas. Santa Claus on Christmas Eve is A) Not a public commodity because his services on Christmas Eve are excludable B) A good example of a public commodity because his time is not rivalrous. C) Not a public commodity because his services on Christmas Eve are not congestible. D) A good example of a public commodity because his time is not congestible.

A) Not a public commodity because his services on Christmas Eve are excludable