ECON Final Exam

At which combination of goods is it possible to produce more Product A without reducing the quantity of Product B that is also produced? -Point C -Point X -Point Y -Point A -Point B

Point X

Which of the following is not a likely result of a price floor imposed by the federal government on wheat? -Low-income people will be more adversely affected than will middle- and high-income people. -The price of things made with wheat will increase. -There will be a surplus of wheat. -Higher taxes and/or reallocation of existing tax dollars may be used to implement the price floor. -The price of wheat will fall.

The price of wheat will fall.

Which of the following is a "normative" statement? -The employment rate should be lower. -If the demand for cotton decreases, the price of cotton will decrease. -If the minimum wage is increased, unemployment among low-skilled workers will increase. -If the corporation income tax is decreased, more firms will locate in the U.S. -If the price of oil increases, the price of gasoline will increase.

The unemployment rate should be lower.

If the cross-price elasticity of demand between two goods is negative, the two goods are likely to be: -necessities -normal goods -substitutes -luxuries -inferior goods -complements

complements

Which of the following is likely to be a complement to coffee? -baked beans -tea -decaf coffee -cream

cream

What kind of good is a fireworks display?

public goods

What one word describes the fundamental economic problem? -supply -production -demand -distribution -capital -scarcity

scarcity

The graph shows the market for steel. Assume that steel production creates pollution, which is a negative externality. The private marginal cost curve for steel...

is the supply curve itself.

Is the following scenario an example of free riding or not? Karl never drives, and gets no benefit from street lamps at all. Street lamps are nonexcludable and nonrival in consumption. When the community group tries to collect money to build street lamps, Karl does not donate any money.

not free riding

For each of the policy objectives listed, identify each as a product of either financial incentives governments provide or the system of intellectual property that governments uphold. Some objective may not be supported by governments at all. -Ensure that investors are rewarded for making useful inventions -Present inventors from creating redundant inventions -Transfer a significant share of new inventions under government control -Fund basic research -Make research and development less risky for private firms -Ensure that investors are the only beneficiaries of their inventions' benefits

Financial Incentives: -Fund basic research -Make research and development less risky for private firms Intellectual Property -Ensure that inventors are rewarded for making useful inventions

Suppose that Timmy lives in a neighborhood where graffiti is common. People's cars and the sides of houses are often vandalized with graffiti. In response to the vandalism, the people in the neighborhood have proposed a voluntary community fund to pay for extra police patrols. There are 1000 people in Timmy's neighborhood, and each is recommended to contribute $10 a month. Timmy's car has recently been vandalized and he is concerned it may happen again. Although he believes that he will benefit from the extra police patrols, Timmy has decided to take a free‑rider approach. Given his thinking, how much will Timmy contribute to the fund?

$0

A _____ is a person who _____ a public good that others _____.

free rider ; enjoys ; pay for

You purchase an item at a retain store. The price of the item is $200. The policy of the store is that if an item is returned within two weeks, the refund is 80% of the purchase price. If you decide to return the idem after 5 days, your avoidable cost of the item is _____ and your sunk cost of the item is _____.

$160 ; $40

Suppose that a small company is thinking of putting plants in their lobby for employees to view and enjoy. Since the plants are to be viewed by employees, the plants are non-excludable (it is infeasible to move a plant each time a specific individual walks by) and non-rival in consumption (if one worker looks at the plant, it does not prevent another from doing so as well). The company employs three workers: Robin, Alex, and Karl. The company is thinking about buying up to three plants, and wants to know how much workers would enjoy each plant. For Robin, the first plant has a benefit of $31 per day, the second plant has a benefit of $19 per day, and the third plant has a benefit of $9 per day. For Alex, the first plant has a benefit of $26 per day, the second has a benefit of $13 per day, and the third has a benefit of $7 per day. For Karl, the first plant has a benefit of $17 per day, the second has a benefit of $11 per day, and the third has a benefit of $3 per day. Given that no one else will see the plants, no one else values the plants in the lobby. What is the marginal social benefit of the third plant?

$19

Suppose a tax of $25 is imposed on each unit of the good, shown by the vertical distance between the Demand and Supply curves at 5 unites. After the tax, the Consumer Surplus is _____, the Producer Surplus is _____, the Deadweight Loss is _____, and Government Revenue from the tax is _____.

$25; $37.50; $62.50; $125

The price of a new bicycle is $500. Sue values the new bicycle at $800. If costs the seller $400 for the new bicycle. What is the value of the total surplus in this market if Sue buys a new bicycle?

$400

Suppose that a small company is thinking of putting plants in their lobby for employees to view and enjoy. Since the plants are to be viewed by employees, the plants are non-excludable (it is infeasible to move a plant each time a specific individual walks by) and non-rival in consumption (if one worker looks at the plant, it does not prevent another from doing so as well). The company employs three workers: Robin, Alex, and Karl. The company is thinking about buying up to three plants, and wants to know how much workers would enjoy each plant. For Robin, the first plant has a benefit of $31 per day, the second plant has a benefit of $19 per day, and the third plant has a benefit of $9 per day. For Alex, the first plant has a benefit of $26 per day, the second has a benefit of $13 per day, and the third has a benefit of $7 per day. For Karl, the first plant has a benefit of $17 per day, the second has a benefit of $11 per day, and the third has a benefit of $3 per day. Given that no one else will see the plants, no one else values the plants in the lobby. What is the marginal social benefit of the second plant?

$43

Robert opens a lemonade stand for 2 hours. He spends $10 on ingredients/cups and his revenue from the sale of lemonade is $60. In the same 2 hours, he could have mowed his neighbor's lawn for $40. Robert has an account profit of _____ and an economic profit of _____.

$50 ; $10

If the firm wants to maximize profit, the price it should charge is _____ and the total economic profit it would earn is _____.

$550 ; $1100

Suppose that a small company is thinking of putting plants in their lobby for employees to view and enjoy. Since the plants are to be viewed by employees, the plants are non-excludable (it is infeasible to move a plant each time a specific individual walks by) and non-rival in consumption (if one worker looks at the plant, it does not prevent another from doing so as well). The company employs three workers: Robin, Alex, and Karl. The company is thinking about buying up to three plants, and wants to know how much workers would enjoy each plant. For Robin, the first plant has a benefit of $31 per day, the second plant has a benefit of $19 per day, and the third plant has a benefit of $9 per day. For Alex, the first plant has a benefit of $26 per day, the second has a benefit of $13 per day, and the third has a benefit of $7 per day. For Karl, the first plant has a benefit of $17 per day, the second has a benefit of $11 per day, and the third has a benefit of $3 per day. Given that no one else will see the plants, no one else values the plants in the lobby. What is the marginal social benefit of the first plant?

$74

Suppose that at a price of $90 per month, there are 30,000 subscribers to the Brightview Cable Television. If Brightview raises its price to $110 per month, the number of subscribers will fall to 25,000. Using the traditional method for calculating percentage change (not the mid-point method), what is the price elasticity of demand for Brightview Cable Television?

0.75

The graph shows the relevant curves in the paper production market. What is the efficient amount of paper this market should product? Specify your answer to two decimal places.

10.64 reams

The graph shows the relevant curves in the paper production market. In the absence of government intervention, how many reams of paper are purchased or sold? Specify your answer to two decimal places.

13.84 reams

The marginal product of labor as production moves from employing one worker to employing two workers is:

17

The graph shows the marginal social benefit curve (MB) and marginal social cost curve (MC) for pollution removal. Determine the socially optimal level of pollution removal.

46.23 units

To what economist is the concept of the "invisible hand of the market process" attributed? -Thomas Malthus -James Buchanan -Janet Yellen -Milton Friedman -Adam Smith

Adam Smith

Assume that television broadcasts are nonrival and nonexcludable (some TV stations, such as those on cable TV, are excludable, but many are not) and that there are no live TV recording devices, such as VCRs or DVRs like TiVo. How can advertising solve the free‑rider problem?

Advertising acts in a method similar to a free. People who watch TV broadcasts must watch ads, which they would rather not do. TV stations turn this into money by selling airtime to advertisers.

Classify the scenarios according to whether or not they describe a negative externality. -A factory emits pollution into the atmosphere as a by-product of production. -A neighbor plays loud music that annoys the surrounding community. -A person gets a flu shot and is therefore less likely to spread illness to others. -A person with no allergies gets a mosquito bite from a disease-free mosquito. -A donut shot emits a delicious smell into the air as a by-product of production.

An example of a negative externality: -A factory emits pollution into the atmosphere as a by-product of production. -A neighbor plays loud music that annoys the surrounding community. Not an example of a negative externality: -A person gets a flu shot and is therefore less likely to spread illness to others. -A person with no allergies gets a mosquito bite from a disease-free mosquito. -A donut shop emits a delicious smell into the air as a by-product of production.

Which of the following statements is true? -An individual firm in a perfectly competitive market faces a perfectly elastic demand curve. -For a perfectly competitive firm, price is always greater than marginal revenue, except for the first unit. -An individual firm in a perfectly competitive market can obtain a higher price for its product by reducing output. -The market demand curve in a perfectly competitive industry is perfectly elastic. -An individual firm in a perfectly competitive market must lower its price to sell more of its product.

An individual firm in a perfectly competitive market faces a perfectly elastic demand curve.

Which of the following is out of place among the others? -Biology -Economics -Sociology -Psychology -Anthropology -Political Science

Biology

Suppose a tax is imposed on the market. After the tax of $T per unit of the good sold, which of the following identifies the total surplus in the market after the tax? -Consumer Surplus + Producer Surplus + Deadweight Loss after the tax -Consumer Surplus + Producer Surplus + Deadweight Loss + Government Revenue after the tax -Producer Surplus after the tax -Consumer Surplus + Producer Surplus after the tax -Consumer Surplus after the tax -Consumer Surplus + Producer Surplus + Government Revenue after the tax

Consumer Surplus + Producer Surplus after the tax

Which of the following statements is false? -Collusion and cartels are illegal in the United States, while price leadership in the absence of collusion and cartels is not illegal. -Mutual interdependence among the firms is an industry is a unique feature of oligopoly. -In an oligopoly, the actions of one seller have a significant impact on the profits of other sellers in the market. -Collusion is difficult for an oligopoly to maintain if additional firms enter the market or if the economy is in the middle of a recession. -Cooperation among firms is easily maintained in an oligopoly because cooperation maximizes each individual firm's profits.

Cooperation among firms is easily maintained in an oligopoly because cooperation maximizes each individual firm's profits.

The demand for which good will decrease the most during a recession when incomes are decreasing?

Good A

Of the obtainable combinations of goods, which combination is allocatively efficient, i.e., the combination that people prefer most? -Point C -It is not possible to determine from this information. -Point A -Point X -Point Y

It is not possible to determine from this information.

Joe is a tax accountant. He receives $100 per hour doing tax returns. He can type 10,000 characters per hour into spreadsheets. He can hire an assistant who types 2,500 characters per hour into spreadsheets. Thinking like an economist, which of the following statements is true? -Joe should not hire the assistant because the assistant cannot type as fast as Joe can. -Joe should hire the assistant as long as he pays the assistant less an $75 per hour. -Joe should hire the assistant as long as he pays the assistant less than $50 per hour. -Joe should hire the assistant as long as he pays the assistant less than $95 per hour. -Joe should hire the assistant as long as he pays the assistant less than $25 per hour.

Joe should hire the assistant as long as he pays the assistant less than $25 per hour.

Suppose that Timmy lives in a neighborhood where graffiti is common. People's cars and the sides of houses are often vandalized with graffiti. In response to the vandalism, the people in the neighborhood have proposed a voluntary community fund to pay for extra police patrols. There are 1000 people in Timmy's neighborhood, and each is recommended to contribute $10 a month. Timmy's car has recently been vandalized and he is concerned it may happen again. Although he believes that he will benefit from the extra police patrols, Timmy has decided to take a free‑rider approach. Assume that the entire neighborhood has the same mentality as Timmy. What will occur?

No one will contribute to the community fund, resulting in no changes.

Which of the following is false? -Points A, B, and C are obtainable and productively efficient. -Point X is obtainable but productively inefficient. -Point Y is unobtainable without sufficient economic growth. -None of these.

None of these.

A firm would shut down in the short run if _____ and the firm would exit the industry in the long run if _____.

P < AVC ; P < ATC

Assume that television broadcasts are nonrival and nonexcludable (some TV stations, such as those on cable TV, are excludable, but many are not) and that there are no live TV recording devices, such as VCRs or DVRs like TiVo. Which condition is crucial for advertising to solve the free-rider problem?

People cannot cheaply avoid the advertisements.

Which of the following statements is true? -People in two countries can gain from trade even if one of the countries has an absolute advantage in the production of all goods. -All of these -If a particular trade is good for a few people in a country, it must be good for everyone in the country. -Very talented people have a comparative advantage in everything they produce or do. -If trade is good for one person, it can not be good for the other person.

People in two countries can gain from trade even if one of the countries has an absolute advantage in the production of all goods.

Classify each statement as a positive externality associated with education or a negative externality associated with education. -lower crime rates -reduced welfare dependency -an increased standard of living -a higher voter participation rate

Positive externalities of education: -lower crime rates -reduced welfare dependency -an increased standard of living -a higher voter participation rate

Identify whether the activities are associated with positive externalities (external benefits), negative externalities (external costs), or no externalities. -eating a delicious cookie -playing an addictive single-player cell phone game such as Happy Fish -cigarette smoking in a non-smoking section -enhancing the aesthetic appeal of a property in a residential neighborhood -developing a productivity enhancing technology -reducing pollution -overfishing -obtaining and education

Positive externalities: -obtaining an eduction -developing a productivity enhancing technology -reducing pollution -receiving a flu vaccine -enhancing the aesthetic appeal of a property in a residential neighborhood No externalities: -playing an addictive single-player cell phone game such as Happy Fish -eating a delicious cookie Negative externalities: -overfishing -cigarette smoking in a non-smoking section

Classify each scenario as to whether it describes a positive externality, no externality, or a negative externality. -Jane raises bees to produce honey for her business, but her bees also pollinate many flowers in the neighborhood where she lives. -The KingClaw fishing company illegally hunts the Coelacanth, a critically endangered fish that is close to extinction. -The U.S. government decides to house all of its nuclear waste materials at Cactus Cliff, WY. As with all nuclear waste, there is no fail-safe protection method. -Ronald, the first in his family to attend college, graduates from medical school and decides to return home to work as a doctor in his old neighborhood. -Lyle and Julia fly home from Chicago to Los Angeles with their newborn infant who cries the entire way.

Positive externality: -Ronald, the first in his family to attend college, graduates from medical school and decides to return home to work as a doctor in his old neighborhood. -Jane raises bees to produce honey for her business, but her bees also pollinate many flowers in the neighborhood where she lives. Negative externality: -The KingClaw fishing company illegally hunts the Coelacanth, a critically endangered fish that is close to extinction. -The U.S. government decides to house all of its nuclear waste material at Cactus Cliff, WY. As with all nuclear waste, there is no fail-safe protection method. -Lyle and Julia fly from Chicago to Los Angeles with their newborn infant who cries the entire way.

The table shows the production opportunities available to Frank and Rose. -Rose has an absolute advantage in producing Good N and a comparative advantage in producing Good M. -Rose has an absolute advantage and a comparative advantage in producing Good N. -Frank has an absolute advantage and a comparative advantage in producing Good N. -Frank has an absolute advantage and a comparative advantage in producing Good M. -Rose has a comparative advantage in producing both Good M and Good N.

Rose has an absolute advantage in producing Good N and a comparative advantage in producing Good M.

Rent controls can imposed on housing in only 3 of the 50 states in the U.S. because of the unintended consequences. Which of the following is not one of these states that permit rent controls? -New York -New Jersey -Texas -California

Texas

Which of the following statements is true? -The change in the price that buyers pay and the change in the revenue that sellers receive when a tax is introduced is independent of whether it is levied on buyers or sellers. -When the price elasticity of demand is low and the price elasticity of supply is high, the burden of a tax falls mainly on sellers. -When the price elasticity of demand is high and the price elasticity of supply is low, the burden of the tax falls mainly on buyers. -The incidence of a tax is determined by which group (buyers or sellers) must write the check to the government. -all of these

The change in the price that buyers pay and the change in the revenue that sellers receive when a tax is introduced is independent of whether it is levied on buyers or sellers.

Which of the following would cause the demand for a good to be price inelastic? -The good is a necessity. -The good is an inferior good. -There are a large number of substitutes for the good. -The good is a luxury. -The amount spent on the good is a large percentage of buyers' incomes.

The good is a necessity.

In an economic context, what is the "tragedy of the commons?"

The idea that people overuse or misuse a resource when property rights are not clearly defined.

In 1990, the U.S. Congress imposed a new luxury tax on items such as yachts, private airplanes, expensive jewelry and cars. Which of the following statements is true? -The larger burden of the luxury tax was on the buyers of these expensive items. -The entire burden of the tax was on buyers of these expensive items because the tax was imposed on buyers. -The larger burden of the luxury tax was on workers and owners in the factories that manufacture such items. -The burden of the tax was shared equally by buyers and sellers of these expensive items.

The larger burden of the luxury tax was on workers and owners in the factories that manufacture such items.

A large group of economists were asked whether they agree or disagree with this quote from a major U.S. newspaper: "Local ordinances that limit rent increases for some rental units, such as in New York and San Francisco, have had a positive impact over the past three decades on the amount and quality of broadly affordable rental housing in cities that have used them." Which of the following statements is true regarding a poll of many U.S. economists? -Approximately 50% of economists agreed with this statement from a major U.S. newspaper and 50% disagreed. -Approximately 30% of economists agreed with this statement from a major U.S. newspaper and 70% were unsure. -Approximately 90% of economists agreed with this statement from a major U.S. newspaper and 10% disagreed. -Approximately 70% of economists agreed with this statement from a major U.S. newspaper and 30% disagreed. -The vast majority of economists disagreed with this statement from a major U.S. newspaper.

The vast majority of economists disagreed with this statement from a major U.S. newspaper.

Suppose the city council of the city of Huntsville passes a law that all restaurants within a 10 miles radius of the University of Huntsville can charge no more than $2 a meal so that college students can eat out economically. Which statement is not a likely result of this price ceiling? -The portion sizes and quality of food at the dining establishments in Huntsville will decrease significantly. -People will waste time standing in line to get a table at these restaurants. -Some restaurants will choose to sell meals secretly at $5 each to customers who are willing to pay this higher price. -Some restaurants will tie the sale of meals to the purchase of a beverage whose price is triple what the price was before the price ceiling was imposed. -There will be food surpluses at many of the restaurants as quantity supplied exceed quantity demanded at a price of $2.00 per meal.

There will be food surpluses at many of the restaurants as quantity supplied exceeds quantity demanded at a price of $2.00 per meal.

Which of the following statements is true regarding modern economies? -There are no transactions costs in a money economy. -There are no transaction costs in a barter economy. -Transactions costs are the same in a barter economy and in a money economy. -Transactions costs are higher in a barter economy than in a money economy. -Transactions costs are higher in a money economy than in a barter economy.

Transactions costs are higher in a barter economy than in a money economy.

True or false? -Market failure occurs when either negative or positive externalities are present. -Market failure is when market provision of a good results in an inefficient quantity. -Government sometimes intervenes when market failure occurs. -Market failure occurs when negative externalities are present but not when positive externalities are present. -Market failure occurs when positive externalities are present but not when negative externalities are present. -Externalities ar

True: -Market failure occurs when either negative or positive externalities are present. -Market failure is when market provision of a good results in an inefficient quantity. -Government sometimes intervenes when market failure occurs. False: -Market failure occurs when negative externalities are present but not when positive externalities are present. -Market failure occurs when positive externalities are present but not when negative externalities are present. -Externalities are the only example of market failure.

Command and control, sometimes called direct control, is when the government passes legislation specifically regulating an activity, typically because the activity leads to market failure. Classify each statement about this type of regulation as either true or false. -Command and control is subject to political considerations. -Under command and control, the government has the option to specify the technology that firms must use in production. -One option with command and control is for the government to decide on a specific amount of pollution that firms can legally emit. -Command and control is always the best option when it comes to reducing the amount of pollution. -A limitation of a command and control is that firms have no incentive to remove additional pollution once they are within the legal pollution limits. -Command and control is more flexible than market-based regulation.

True: -One option with command and control is for the government to decide on a specific amount of pollution that firms can legally emit. -A limitation of command and control is that firms have no incentive to remove additional pollution once they are within the legal pollution limits. -Command and control is subject to political considerations. -Under command and control, the government has the option to specify the technology that firms must use in production. False: -Command and control is more flexible than market-based regulation. -Command and control is always the best option when it comes to reducing the amount of pollution.

Which scenario best characterizes the tragedy of the commons? -Observation of widening income equality evidenced by a growing Gini coefficient . -A group of farmers that forms a collective to coordinate pricing decisions. -Users of a shared shower in a dorm allowing the shower to get nasty by failing to clean it often enough. -Observation that cattle contribute to climate change by emitting methane.

Users of a shared shower in a dorm allowing the shower to get nasty by failing to clean it often enough.

Which of the following statements is true? -Price ceilings result in windfall or unearned profits to sellers. -Price ceilings result in resources being allocated to activities with the highest possible value. -A problem with price ceiling is that they lead to surpluses. -Though they face higher prices, buyers usually see an increase in product quality when price ceilings are imposed. -When price ceilings are imposed, buyers pay lower explicit prices but incur higher transactions costs for goods and services.

When higher price ceilings are imposed, buyers pay lower explicit prices but incur higher transactions costs for goods and services.

Which of the following firms has the least incentive to advertise? -a manufacturer of breakfast cereal -a manufacturer of home heating and air conditioning systems -a retailer of jewelry -a farm that produces wheat and corn -a restaurant

a farm that produces wheat and corn

Which of the following is a "natural monopoly?" -a firm selling health food that has no local competitors selling health food -a firm that has a patented product and is the only firm that can produce and sell that product -a satellite television service -a firm that owns all of the world's diamonds -a firm that delivers electricity to all of the homes and businesses in Dallas -all of these

a firm that delivers electricity to all of the homes and businesses in Dallas

Which of the following will not shift a country's production possibilities frontier outward? -an increase in the amount of physical capital -an advance in technology -a reduction in unemployment of labor and other resources -an increase in the size of the labor fource -an increase in the amount of human capital

a reduction in the unemployment of labor and other resources

Suppose that solar-powered car technology advances to the point that solar-powered cars become affordable for the average consumer. Suppose the government is interested in moving the market closer to the socially optimal quantity. Which policy would likely result in the desired outcome? -a price floor above the observed average price for a solar-powered car -a subsidy to consumers who choose to purchase solar-powered vehicles -a new tax levied on the makers of solar-powered cars -granting one firm monopoly rights to produce solar-powered vehicles

a subsidy to consumers who choose to purchase solar-powered vehicles

Joe Biden, President of the U.S., has proposed that the Corporation Income Tax be increased. If that tax increase passes, on whom will the burden of the tax be imposed? -employees of corporations due to lower wages and fringe benefits -owners of corporations because the tax is on corporation profits -buyers of goods made by corporations because of higher prices -all of these

all of these

Which of the following is an example of "Spontaneous Order?" -the evolution of life on earth -the development of languages -all of these -the invisible hand of the free market -the internet

all of these

Which of these is a likely result of an increase in the minimum wage as supported by President Joe Biden and most members of the Democratic Party? -marginally profitable firms will be driven out of business -an increase in unemployment among low-skilled workers -increased discrimination on who will be hired by firms -substitution of capital equipment for low-skilled workers -a decrease in fringe benefits offered by firms to low-skilled workers -an increase in the price of good produced by low-skilled workers -all of these

all of these

Which of the following is not an example of price discrimination? -a university charges a lower annual tuition to a student with an athletic scholarship than to a student without an athletic scholarship -an ice cream shop charges more fro a cone of ice cream than for a cone of sherbet -a theater charges and 8 year old patron less for a ticket to a movie than it charges a 32 year old patron -a grocery store charges less for a jar of mustard to customers with a coupon than to customers without a coupon -a manufacturer charges a different price per unit purchased by different buyers depending on the quantity purchased -an airline charges a higher price for a ticket purchased the day before a flight than it charges for a ticket purchased a month before the flight

an ice cream shop charges more for a cone of ice cream than for a cone of sherbet

Which of the following will not cause the demand curve for a good shift to the left, i.e., a decrease in demand? -studies that confirm that consuming the good is harmful to one's health -a decrease in the price of a substitute for the good -a decrease in income assuming the good is a normal good -an increase in the price of a complement to the good -an increase in the price of a good

an increase in the price of a good

Which of the following will not shift the supply curve of a good to the right? -a decrease in the cost of materials used to manufacture the good -a decrease in the wages of workers employed to produce the good -an advancement in the technology used to produce the good -an increase in the price of the good -an increase in the number of sellers of the good

an increase in the price of the good

Which of the following would not increase the supply of a good, that is, shift the supply curve to the right? -an increase in the price of the good -a decrease in the price of materials used to produce the good -an improvement in the technology used to produce the good -a decrease in the wage rate paid to workers -an increase in the number of suppliers of the good

an increase in the price of the good

In a typical production process, which of the following curves is not U-shaped? -marginal cost -average total cost -average variable cost -average fixed cost

average fixed cost

In order to emulate what would happen were the market competitive, regulators of a natural monopoly tend to permit the firm to change a price equal to: -average variable cost -average fixed cost -average total cost -marginal cost

average total cost

An "increasing cost industry" is one in which for individual firms in the industry: -average total cost of production increases with an increase in the number of firms -the marginal product of the variable inputs used in production increases as production increases -price is less than average variable cost -average variable cost is greater than average fixed cost -marginal revenue is less than marginal cost

average total cost of production increases with an increase in the number of firms

Determine if the situation describes an externality or market power. Fritz decides to bring back fresh sauerkraut from his vacation to Germany, and the horrible stench causes many people on his return flight to become ill.

externality

Suppose a market is at equilibrium. Then the equilibrium price in the market decreases. Which of the following could have caused that decrease in equilibrium price? -demand remained unchanged and supply decreased -demand decreased and supply increased -demand increased and supply remained unchanged -demand increased and supply decreased

demand decreased and supply increased

The demand for a good and the supply of the good increased at the same time. As a result of the increases in demand and supply, the equilibrium price of the good increased. Which of the following would have caused the increase in equilibrium price? -demand and supply increased by the same amount -it is not possible to determine from the information given -supply increased more than demand increased -demand increased more than supply increased

demand increased more than supply increased

A decrease in supply will increase total revenue in that market if: -supply is price elastic -demand is price elastic -demand is price inelastic -supply is price inelastic

demand is price inelastic

Which of the following is the order likely to occur over time in the long run if a small firm were to expand its scale of operations? -diseconomies of scale, followed by constant returns to scale, followed by economies of scale -economies of scale, followed by diseconomies of scale, followed by constant returns to scale -constant returns to scale, followed by diseconomies of scale, followed by economies of scale -diseconomies of scale, followed by economies of scale, followed by constant returns to scale -economies of scale, followed by constant returns to scale, followed by diseconomies of scale

economies of scale, followed by constant returns to scale, followed by diseconomies of scale

There are some generally accepted goals for the American economy. Which of the following is not one of these goals? -absence of inflation -allocative efficiency -full employment -equality in the distribution of economic prosperity -productive efficiency -economic growth -economic freedom

equality in the distribution of economic prosperity

Determine if the situation describes an externality or market power. Hydraulic fracturing, known as fracking, has allowed oil drillers to reach new, untapped reserves. However, it has also caused an increased in seismic activity in areas where it is done.

externality

Is the following scenario an example of free riding or not? Bob can pay to support his local public radio station, which depends on donations to be as effective as possible. Bob listens to the radio station several hours per day but never donates since he suspects that other people will donate enough to keep the station on the air.

free riding

Is the following scenario an example of free riding or not? Jim is working on a group project for a class in which he wants a high grade. However, since the grades are assigned to the group as a whole and he knows that the other group members will pick up most of the extra work, Jim calls in sick and plays video games on his Dream Station 64.

free riding

Productivity can be increased by: -government control over the price of resources -improving the education of workers -raising minimum wages -restricting trade with foreign countries -raising union wages

improving the education of workers

Suppose buyers of amplifiers and speakers regard the two goods as complements. A decrease in the price of amplifiers will cause an: -increase in the demand for amplifiers and an increase in the quantity demanded of speakers. -increase in the demand for amplifiers and an increase in the demand for speakers. -increase in the quantity demanded of amplifiers and an increase in the quantity demanded of speakers. -increase in the quantity demanded of amplifiers and an increase in the demand for speakers.

increase in the quantity demanded of amplifiers and an increase in the demand for speakers.

Suppose buyers of personal computers and printers regard these two goods as complements. A decrease in the price of personal computers will cause an: -increase in the quantity demanded of personal computers and an increase in the quantity demanded of printers -increase in the quantity demanded of personal computers and an increase in the demand for printers. -increase in the demand for personal computers and an increase in the demand for printers -increase in the demand for personal computers and an increase in the quantity demanded of printers

increase in the quantity demanded of personal computers and an increase in the quantity demanded of printers

If a firm is producing a level of output where marginal revenue exceeds marginal cost, the firm should: -maintain production at the current level -decrease production to increase profit -exit the industry -temporarily shut down -increase production to increase profit

increase production to increase profit

Verna's income decreased and as a result her demand for widgets increased. For Verna, widgets are a(n): -substitute good -inferior good -complement good -normal good

inferior good

In which of the following industries are there barriers to the entry of new firms ? -oligopoly and monopoly -oligopoly and perfect competition -monopolistic competition and monopoly -monopolistic competition and perfect competition -monopolistic competition and oligopoly

oligopoly and monopoly

Determine if the situation describes an externality or market power. Alsace Cellular is the first and only company to sell 3-D phones, and thus they can charge whatever price they like.

market power

Determine if the situation describes an externality or market power. Amos owns the only ice cream shop in his town, where the average temperature is 105ºF.

market power

Which of the following is a variable cost of production in the short run? -rent paid on the factory -interest payments on borrowed financial capital -payment on the lease for factory equipment -materials purchased to produce a product -salary paid to manager -all of these

materials purchased to produce a product

In this industry, there are many firms selling differentiated products and each firm determines the price at which its product is sold. What type of industry/market is this?

monopolistic competition

Which of the following statements is false? -A supply curve is a marginal cost curve, where marginal cost is measured in dollars. -The equilibrium price in a market maximizes the total surplus in that market. -In free markets, goods are allocated to the buyers who value them most. -A demand curve is a marginal benefit curve, where marginal benefit is measured in dollars. -In free markets, goods are produced by the sellers who can produce them at least cost. -none of these

none of these

Which of the following statements is false? -Consumer surplus from a good is equal to the value of the good to buyers minus the amount paid to buyers. -Total surplus from a good is equal to the value of the good to buyers minus the cost of the good to sellers. -none of these -Producer surplus from a good is equal to the revenue received by sellers minus their cost. -If the price of a good increases, consumer surplus from the good decreases. -If the price of a good decreases, producer surplus from the good decreases.

none of these

Classify the good according to whether they are rivalrous, nonrivalrous, excludable, or nonexcludable. The air we breathe?

nonrivalours and nonexcludable

Classify the good according to whether they are rivalrous, nonrivalrous, excludable, or nonexcludable. A toll road in normal traffic?

nonrivalrous and excludable

Is the following scenario an example of free riding or not? Drew always buys the lunch special for $5 at the restaurant across the street from where he works. If he decided to eat at the restaurant after 3:00pm, however, he would be unable to get the lunch special, and would have to pay $10 for the same food.

not free riding

Collusion, cartels, and price leadership are found in which of the following market types? -monopoly -monopolistic competition -both monopolistic competition and oligopoly -perfect competition -oligopoly -all of these

oligopoly

In which market type are long run economic profits least likely? -oligopoly -monopolistic competition -monopoly -perfect competition

perfect competition

Technological advancements are considered a _____ externality because _____ receive the majority of the benefits. Too _____ of this type of externality is usually provided.

positive ; third parties ; little

Suppose that solar-powered car technology advances to the point that solar-powered cars become affordable for the average consumer. Which type of externality is likely to result form a customer's decision to purchase a solar-powered vehicle instead of a gas-powered vehicle, and how does it arise? This decision generate a...?

positive externality because the replacement of gas-powered vehicles with solar-powered vehicles will result in less environmental pollution.

If a small percentage increase in the price of a good greatly reduces the quantity demanded of that good, the demand for that good is: -price elastic -income elastic -price inelastic -income inelastic -unit price elastic

price elastic

If there is a lot of excess capacity in a production facility, it is likely that the firm's supply curve is: -perfectly price inelastic -relatively price inelastic -relatively price elastic -perfectly price elastic

relatively price elastic

Classify the good according to whether they are rivalrous, nonrivalrous, excludable, or nonexcludable. A sports team t-shift?

rivalrous and excludable

Classify the good according to whether they are rivalrous, nonrivalrous, excludable, or nonexcludable. Atlantic bluefin tun in the Mediterranean Sea?

rivalrous and nonexcludable

If the government imposes a price ceiling on a good, the _____ caused by the price ceiling will be the greatest is _____.

shortage; both demand and supply are price elastic

In which of the following cases would an increase in demand and an increase in supply result in a decrease in the equilibrium price and an increase in the equilibrium quantity? -demand and supply increase by the same amount -it is not possible to determine from the information given -supply increases more than demand increaes -demand increases more than supply increases

supply increases more than demand increases

In which of the following cases would an increase in demand and an increase in supply result in a decrease in the equilibrium price and an increase in the equilibrium quantity? -supply increases more than demand increases -demand and supply increase by the same amount -it is not possible to determine from the information given -demand increases more than supply increases

supply increases more than demand increases

Which of the following is not part of the opportunity cost of a year as a full-time student? -the amount of money that you spend on books and supplies for your courses -the tuition that you pay to the school -the money you could have earned if you had worked full time -the amount of money that you spend on food

the amount of money that you spend on food

Suppose the demand for a good increases and at the same time the supply of the good increases. What would happen to the equilibrium price and equilibrium quantity in this market as a result of these changes in demand and supply? -the effect on equilibrium price is ambiguous (indeterminate) and equilibrium quantity would decrease -equilibrium price would increase and equilibrium quantity would increase -equilibrium price would decrease and equilibrium quantity would increase -the effect on equilibrium price is ambiguous (indeterminate) and equilibrium quantity would increase -equilibrium price would increase and the effect on equilibrium quantity is ambiguous (indeterminate)

the effect on equilibrium price is ambiguous (indeterminate) and equilibrium quantity would increase

The graph shows the marginal social benefit curve (MB) and marginal social cost curve (MC) for pollution removal. For the 50th unit of pollution removal, does (A) the marginal cost exceed the marginal benefit or (B) the marginal benefit exceeds the marginal cost.

the marginal cost exceeds the marginal benefit.

Suppose the government is concerned about climate change and therefore wants to reduce carbon emissions. Which is least likely to reduce carbon emissions? -funding research and helping with the implementation of alternative sources of fuel -the government choosing to enact carbon taxes to account for the externalities imposed by carbon emissions -the government issuing carbon permits to polluting firms where firms are able to acquire an unlimited number of permits at no cost -issuing a finite amount of permits to emit carbon

the government issuing carbon permits to polluting firms where firms are able to acquire an unlimited number of permits at no cost

The graph shows the marginal social benefit curve (MB) and marginal social cost curve (MC) for pollution removal. For the 20th unit of pollution removal, does (A) the marginal cost exceed the marginal benefit or (B) the marginal benefit exceed the marginal cost.

the marginal benefit exceeds the marginal cost.

A change in which of the following will not increase the demand for hamburgers, that is, will not change or shift the demand curve for hamburgers? -the price of hamburgers -the tastes and preferences of hamburger consumers -the price of hamburger buns -the price of hot dogs

the price of hamburgers

Which of the criteria used to classify industries into the various market types makes it difficult or impossible to find examples of industries that are Perfectly Competitive? -the products of the firms in the industry are identical or non-differentiated -there are no barriers to the entry of new firms into the industry -there are many firms in the industry -all of these -none of these

the products of the firms in the industry are identical or non-differentiated

Which of the following is an example of what economists mean by a "transactions cost?" -the delivery charge to move new appliances from a warehouse to a person's home -the price paid for new appliances for a home -the value of the time that a person spends shopping for new appliances for their home -the sales tax charges on new appliances for a home -all of these

the value of the time that a person spends shopping for new appliances for their home

The graph shows the relevant curves in the paper production market. Compared to the socially optimal level of production, is too much or too little paper produced in this market?

too much

Which of the following is a sunk cost for a firm in the short run? -average variable cost -total fixed cost -total variable cost -marginal cost -average total cost -total cost

total fixed cost

A surplus exists in a market: -when quantity demanded exceeds quantity supplied -at the market clearing (equilibrium) price -anytime the market is out of equilibrium -when the quantity supplied exceeds quantity demanded -when quantity demanded and quantity supplied are equal

when quantity supplied exceeds quantity demanded