ECON Final Review

In Figure 1, if the economy is operating at point D on the PPF, then the opportunity cost of producing 140 capital goods is _____ consumption goods.

120

In Figure 1, if the economy is operating at point B on the PPF, then the opportunity cost of producing 60 additional consumption goods is _____ capital goods.

20

Given Table 1, the optimal or efficient quantity of cookies for Jill to consume is ______ cookie(s).

4 at $24 (total benefit)

In the graph below, the Law of Diminishing Marginal Returns sets in at ______ units of labor, L, and the region of production is between ______ units of labor, L. Figure 8 in notes

72; 136 and 208.

Given the (short run) cost data table below, marginal cost at 6 units of output, MC(6), is ______, average total cost at 8 units of output, ATC(8), is ______, and total fixed cost, TFC, is ______. Figure 10 in notes.

$400; $650; $2,000.

In the figure below, the monopoly's profits are equal to ______. Figure 14 in notes.

$5,220.

Suppose Fred quits his $80,000 per year job and withdraws $250,000 from a bank savings account (yielding 4% interest per year) to start his firm FCF, Inc. If FCF annually spends $100,000 on capital equipment, $400,000 on employee wages, $100,000 on supplies, $60,000 on rented office space, and $35,000 on utilities, and $5,000 on coffee and kringle, then FCF's annual implicit costs are _____ and its annual explicit costs are _____.

$90,000; $700,000.

Max's marginal utility (in "utils") at various quantities of two (divisible) goods X and Y is given in the table above. Suppose that the price of X is $4 (PX = $4), the price of Y is $3 (PY = $3), and goods X and Y are infinitely divisible (i.e., good X can be purchased in fractions of a unit such as a 1/4 pound of ground beef or 1/2 gallon of gas). If Max's income is $220, then his utility maximizing bundle of goods, (QX*,QY*), is Figure 6 in notes

(25X,40Y).

A firm's explicit costs: exclude normal profit. include the wages and salaries of employees and the costs of utilities and internet service. include the costs of purchasing tools and equipment used for production. exclude the opportunity costs of the owner's labor, capital, land, and entrepreneurial ability. include the costs of materials and utilities.

All of statements in the other answers are correct.

A perfectly competitive market or industry is in long run (LR) equilibrium when

All of the conditions listed in the other answers are satisfied at a LR equilibrium.

Which of the following is economically scarce?

All of the goods or resources listed in the other answers are economically scarce.

Which of the following would shift the U.S. PPF outward, ceteris paribus?

An increase in capital.

In the graph below, the marginal cost curve is represented by curve ______, the average variable cost curve is represented by curve ______, the average total cost curve is represented by curve ______, and the average fixed cost curve is represented by curve ______. Figure 9 in notes.

D; B; C; A.

Given the short run average total cost curves (SRATCs) associated with the capital stocks K1, K2, K3, and K4 in the figure below, a firm should use ____ units of capital to produce Q3 units of output. Figure 11 in notes.

K2.

Which one of the following companies would most likely be characterized as a monopoly?

Luxottica (eyewear).

Suppose that the cheese industry is a perfectly competitive, increasing cost industry and the initial market equilibrium price and quantity are P0 and Q0. Suppose that the demand for cheese decreases. If the new SR equilibrium price and quantity are PSR and QSR and the new LR equilibrium price and quantity are PLR and QLR, then

P0 > PLR > PSR and Q0 > QSR > QLR.

Suppose that the widget industry is a perfectly competitive, constant cost industry and the initial market equilibrium price and quantity are P0 and Q0. Suppose that the demand for widgets increases. If the new SR equilibrium price and quantity are PSR and QSR and the new LR equilibrium price and quantity are PLR and QLR, then

PSR > P0 = PLR and Q0 < QSR < QLR.

In the figure below, the monopoly maximizes its profits at the quantity _____ and charges the price _____. Figure 13 in notes.

Q2, P2.

In the figure below, if the smartphone industry is a decreasing cost industry, then _____ represents the short run supply curve and _____ represents the long run supply curve. Figure 12 in notes.

S1, S4.

In the graph below, suppose that the demand for video games is represented by D1, the demand for fuzzy slippers is represented by D2, and the supply curve for both goods is represented by S. If the government imposes a $10 per unit excise tax on the production of both goods, then video game consumers will bear ______ portion of the $10 tax than will fuzzy slipper consumers and the deadweight loss in the video game market will be ______ the deadweight loss in the fuzzy slippers market. Figure 5 in notes

a larger; less than.

In the graph below, at the market equilibrium price and quantity, consumers surplus is represented by the area ______ and producers surplus is represented by the area ______. figure 4 in notes

aen; neq.

A monopoly

all of the other responses are generally correct for a monopoly.

A concave outward production possibilities frontier (PPF) for food and clothing illustrates

all of the properties or characteristics listed in the other answers.

If a shortage of gasoline exists at the price of $3.50 per gallon, then the market equilibrium price, P*, is _____ $3.50 per gallon and as the price adjusts to P*, the quantity demanded, Qd, will _____ and the quantity supplied, Qs, will _____.

below; decrease; increase.

In the figure below, the monopoly imposes a deadweight loss, DWL, represented by the area _____. Figure 13 in notes.

ben.

Given the production possibility frontiers shown in the graph below, the effects of the COVID pandemic since March 2020 are best represented by a

both an inward shift of the PPF from PPF2 to PPF1 and an additional movement to a point inside PPF1, such as point A.

Max's marginal utility (in "utils") at various quantities of two (divisible) goods X and Y is given in the table above. Suppose that the price of X is $4 (PX = $4), the price of Y is $3 (PY = $3), and goods X and Y are infinitely divisible (i.e., good X can be purchased in fractions of a unit such as a 1/4 pound of ground beef or 1/2 gallon of gas). If Max's income is $232 and he buys 28 units of X and 40 units of Y, then Max Figure 6 in notes

can increase his utility by buying $1's worth less of X and $1's worth more of Y.

Suppose that MacroGadget is a monopoly that is currently producing 100 specialized gadgets and is selling each gadget for $600,000. If MacroGadget's marginal revenue at 100 widgets is $300,000 (i.e., MR(100) = $300,000), and it's marginal cost at 100 widgets is $250,000 (i.e., MC(100) = $250,000), then MacroGadget

can increase its monopoly profits by $50,000 by producing and selling one more gadget.

In the HDTV market, a new technology for producing high-resolution displays or screens will ______ the equilibrium price and ______ the equilibrium quantity of HDTVs, ceteris paribus.

decrease; increase.

Suppose that good X and good Y are joint products in production. If the demand for good X decreases, then, ceteris paribus, the supply of good Y will ______, the equilibrium price of good Y will ______, and the equilibrium quantity of good Y will ______.

decrease; increase; decrease.

In the graph below, the initial demand and supply curves for a good X are D1and S1, respectively. If the government imposes a $4 per unit excise tax on the consumption of the good, then the "effective" or "after-tax" ______ and the deadweight loss at the after-tax quantity, Qtax, is represented by the area ______ . figure 4 in notes

demand curve will pass through the points r, t, w, f, and l; cew.

If a firm's total revenue is $500,000, its explicit costs are $300,000 and its implicit costs are $150,000, then the firm's

economic profit is $50,000.

Apple iPhones are

economically scarce because people need, want, or desire more iPhones than Apple can produce and so people must sacrifice or give up something (i.e., pay a price) in order to obtain an iPhone.

If firms in the widget industry are making positive short run (SR) profits, then in the LR other firms will _____ the industry, the price of widgets will _____ and the profits of widget firms will ______.

enter, decrease, decrease.

Table 1 shows the total benefit, TB, and total cost, TC, in dollars associated with Jill's consumption of chocolate chip cookies. Given Table 1, Jill should consume ______ five cookies because at the fifth cookie ______.

fewer than; marginal benefit is less than marginal cost, i.e., MB(5) < MC(5). .

Max's marginal utility (in "utils") at various quantities of two (divisible) goods X and Y is given in the table above. Suppose that the price of X is $4 (PX = $4), the price of Y is $3 (PY = $3), and goods X and Y are infinitely divisible (i.e., good X can be purchased in fractions of a unit such as a 1/4 pound of ground beef or 1/2 gallon of gas). Suppose that Max's income is $232 and he buys 22 units of X and 48 units of Y. If Max buys $1's worth more of good X and $1's worth less of good Y, then his total utility will Figure 6 in notes

increase by 15 utils.

Suppose that the market equilibrium price of 48" HDTVs is $400, Pmkt = $400, and at Pmkt the price elasticity of HDTV demand is 0.75 and the price elasticity of HDTV supply is 1.5 (i.e., Ed = 0.75 and Es = 1.5 at Pmkt). If the government imposes a $20 per unit excise tax on the production of HDTVs, then the consumers price will ______ and the producers price will ______. Hint: illustrate the tax in a demand and supply graph.

increase by more than $10 but less than $20, decrease by less than $10.

In the graph below, the initial demand and supply curves for a good X are D1and S1, respectively. An increase in the quantity from 50 units to 150 units will figure 4 in notes

increase total benefit, TB, by $1,000 (i.e., ∆TB = $1,000) and increase total cost, TC, by $600 (i.e., ∆TC = $600).

In the chocolate candy bar market, an increase in the price of chocolate (an input of chocolate candy bars) will _____ the equilibrium price of chocolate candy bars and will _____ the equilibrium quantity of chocolate candy bars, ceteris paribus.

increase; decrease.

If an increase in the demand for used cars is greater than (in magnitude) an increase in the supply of used cars, then the equilibrium quantity will ______ and the equilibrium price will ______.

increase; increase.

In the graph below, an increase in the market price from $8 to $10 will ______ producers surplus by the area ______. figure 4 in notes

increase; ruen.

According to marginal analysis, the optimal or efficient number of HDTVs is the quantity at which the

marginal benefit of the last HDTV produced equals the marginal cost of the last TV produced.

The table below shows the short run total product (or output) of labor at various quantities of labor (assuming the other input, capital, is fixed). Between four and seven units of labor, the Figure 7 notes

marginal product of labor, MPL, is decreasing and the average product of labor, APL, is increasing.

Producers surplus is defined as the difference between the

minimum prices producers are willing and able to accept and the market price.

When Wanda studies two hours for an economics exam she makes a "C" and when she studies six hours she makes a "B." If Wanda experiences the law of increasing opportunity cost when studying economics, then in order to make an "A" on an exam, Wanda must study _____ hours.

more than ten

A market equilibrium for good X exists at the price P1 and the quantity Q1 if the

quantity supplied, Qs, equals the quantity demanded, Qd, at P1, i.e., Qd = Qs = Q1 at P1.

In a constant cost industry, if input demand increases, then input prices will

remain constant and a firm's SR cost curves will not shift upward or downward.

In the short run, suppose that labor is variable and capital is fixed. If, at relatively low levels of labor the firm utilizes the division of labor and labor specialization based upon comparative advantage, then the

total product of labor will be increasing at an increasing rate and marginal product of labor will also be increasing.

If the government imposes an excise subsidy of $7,500 per vehicle on the consumption of electric vehicles (EVs), then from the perspective of electric vehicle producers, the "effective" or "after-subsidy" demand curve for EVs will shift

up vertically by exactly $7,500.

If Wanda buys a UW-Parkside T-shirt for $20, then Wanda's opportunity cost of the T-shirt is the

value of the next best alternative that Wanda sacrificed when she bought the T-shirt.

Economic scarcity exists

when human needs, wants, and desires exceed an economy's ability to satisfy them given available resources and current technology.

If demand decreases and supply decreases simultaneously, then the equilibrium quantity

will decrease, but the equilibrium price may increase, decrease, or remain constant.