econ mid ter, 2

Refer to Scenario 13-3. An economist would calculate Ziva's total cost for the day of farming to equal

$490

Refer to Table 10-2. How large would a subsidy need to be in this market to move the market from the equilibrium level of output to the socially optimal level of output?

$2

Refer to Figure 10-1. This graph represents the tobacco industry. The socially optimal price and quantity are

$2.80 and 48 units, respectively.

Lim Industries has average variable costs of $1 and average total costs of $12 when it produces 500 units of output. The firm's total fixed costs equal

$5,500.

Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, total surplus will be

$52

Refer to Figure 6-10. The per-unit burden of the tax on buyers is

$8

Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, total surplus will

$54

If the government levies a $700 tax per motorcycle on sellers of motorcycles, then the price paid by buyers of motorcycles would

increase by less than $700.

Ashlyn installed a wooden sculpture in her front yard. A positive externality arises if the sculpture

increases the value of other properties in the neighborhood.

In some cases, tradable pollution permits may be better than a corrective tax because

the government can set a maximum level of pollution using permits.

Refer to Table 7-4. The market quantity of apples demanded per day is exactly seven if the price of an orange, P, satisfies

$0.25 < P < $0.60.

You are offered a free ticket to see the Chicago Cubs play the Chicago White Sox at Wrigley Field. Assume the ticket has no resale value. Willie Nelson is performing on the same night, and his concert is your next-best alternative activity. Tickets to see Willie Nelson cost $40. On any given day, you would be willing to pay up to $50 to see and hear Willie Nelson perform. Assume there are no other costs of seeing either event. Based on this information, at a minimum, how much would you have to value seeing the Cubs play the White Sox to accept the ticket and go to the game?

$10

Refer to Table 13-7. What is the value of C?

$100

This graph shows the market for pollution when permits are issued to firms and traded in the marketplace. In the absence of a pollution permit system, the quantity of pollution would be

100

Refer to Figure 10-5. A benevolent social planner would prefer

140 units to any other quantity of output.

Two firms, A and B, each currently emit 100 tons of chemicals into the air. The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution emitted into the air. The government gives each firm 40 pollution permits, which it can either use or sell to the other firm. It costs Firm A $200 for each ton of pollution that it eliminates before it is emitted into the air, and it costs Firm B $100 for each ton of pollution that it eliminates before it is emitted into the air. After the two firms buy or sell pollution permits from each other, we would expect that Firm A will emit

20 fewer tons of pollution into the air, and Firm B will emit 100 fewer tons of pollution into the air.

Refer to Table 10-1. What is the equilibrium quantity of output in the market?

4 units

Refer to Table 7-4. If the market price of an apple is $0.70, then the market quantity of apples demanded per day is

6

Refer to Table 13-9. What is the marginal product of the third worker?

60 units

Refer to Figure 7-9. If the price were P3, consumer surplus would be represented by the area

A.

Which of the following statements is not true of both pollution permits and corrective taxes?

Both policies increase the amount of pollution compared to the market equilibrium.

Which of the following costs of publishing a book is a fixed cost?

Composition, typesetting, and jacket design for the book

Refer to Figure 10-4. The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack. Therefore, the market for smokestack scrubbers is shown in

Graph (c) only.

Which of the following is true when the price of a good or service falls?

More buyers enter the market.

Refer to Scenario 10-1. Let Q represent the number of gallons of gasoline and let P represent the price of a gallon of gasoline. Which of the following statements is correct?

One point on the supply curve is (Q = 200, P = $3.03).

Refer to Figure 7-9. The equilibrium price is

P2

Which of the following is correct?

Rent control is an example of a price ceiling, and the minimum wage is an example of a price floor.

Which of the following causes the price paid by buyers to be different than the price received by sellers?

Tax on the good

Which of the following is NOT a way of internalizing technology spillovers?

Taxes

Suppose that cookie producers create a positive externality equal to $2 per dozen. What is the relationship between the equilibrium quantity and the socially optimal quantity of cookies to be produced?

The equilibrium quantity is less than the socially optimal quantity.

Which of the following statements is not correct?

The government cannot improve upon the outcomes of private markets.

Refer to Figure 6-15. In which market will the majority of the tax burden fall on buyers?

The market shown in graph (b)

Which of the following will cause an increase in producer surplus?

The price of a substitute increases

Which of the following will cause an increase in producer surplus? You Answered

The price of a substitute increases

Refer to Figure 10-2. This market is characterized by

a negative externality.

Refer to Table 7-4. If the market price of an apple increases from $0.80 to $1.05, then consumer surplus

decreases by $0.95.

Refer to Table 7-8. If the sellers bid against each other for the right to sell the good to a consumer, then the good will sell for

$100 or slightly less.

The Bow Wow company produced and sold 350 dog beds. The average cost of production per dog bed was $35. Each dog bed can be sold for a price of $45. Bow Wow's total costs are

$12,250

Ryzard decides to open his own business and earns $60,000 in accounting profit the first year. When deciding to open his own business, he withdrew $20,000 from his savings, which earned 6 percent interest. He also turned down three separate job offers with annual salaries of $30,000, $40,000, and $45,000. What is Ryzard's economic profit from running his own business?

$13,800

Refer to Table 7-3. If you have 2 (essentially) identical tickets that you sell to the group in an auction, assuming that each person can only buy one ticket, which of the following is closest to the selling price for each ticket?

$16

Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, producer surplus will be

$18

Refer to Figure 6-10. The price that buyers pay after the tax is imposed is

$24.

Refer to Table 7-11. The equilibrium price is

$4.00.

Refer to Table 7-7. If the market price is $1,000, the producer surplus in the market is $100.

$400

Refer to Table 7-9. The equilibrium market price for 10 piano lessons is $400. What is the total producer surplus in the market?

$400

Refer to Table 13-10. What is the average variable cost for the month if 6 instructional modules are produced?

$533.33

Refer to Figure 7-5. If the supply curve is S', the demand curve is D, and the equilibrium price is $150, what is the producer surplus?

$625

Taylor sells 400 candy bars at $0.50 each. Her total costs are $125. Her profits are

$75.00

Refer to Table 13-10. How many instructional modules are produced when marginal cost is $1,300?

8

Which of the following is not a characteristic of pollution permits?

Allowing firms to trade their permits reduces the total quantity of pollution beyond the initial allocation.

Refer to Scenario 14-2. Let Q represent the quantity of output. Which of the following magnitudes has the same value at Q = 100 and at Q = 101?

Average revenue

Refer to Figure 13-5. Which of the following statements is correct?

Average variable cost is declining for quantities less than B because marginal cost is lower than average variable cost.

Bev is opening her own court-reporting business. She financed the business by withdrawing money from her personal savings account. When she closed the account, the bank representative mentioned that she would have earned $300 in interest next year. If Bev hadn't opened her own business, she would have earned a salary of $25,000. In her first year, Bev's revenues were $30,000, and she spent $1,000 on materials and supplies. Which of the following statements is correct?

Bev's economic profit is $3,700.

Refer to Table 13-9. For the firm whose production function and costs are specified in the table, its average-total-cost curve is

U-shaped.

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then

a one-unit decrease in output will increase the firm's profit.

Refer to Figure 6-8. When the price ceiling is enforced in this market and the supply curve for gasoline shifts from S1 to S2,

a shortage will occur at the new market price of P2.

If a binding price floor is imposed on the drone market, then

a surplus of drones will develop.

If a price floor is not binding, then

the equilibrium price is above the price floor.

When a tax is placed on the sellers of cell phones, the size of the cell phone market

and the effective price received by sellers both decrease.

Refer to Figure 13-2. Curve B intersects curve D

at the efficient scale.

Marginal cost is equal to average total cost when

average total cost is at its minimum.

A surplus results when a

binding price floor is imposed on a market.

Refer to Figure 6-3. A government-imposed price of $24 in this market is an example of a

binding price floor that creates a surplus.

Refer to Table 7-3. If you have a ticket that you sell to the group in an auction, who will buy the ticket?

biyu

A tax on the buyers of smart watches encourages

buyers to demand a smaller quantity at every price.

Refer to Figure 6-14. Suppose D1 represents the demand curve for gasoline in both the short run and long run, S1 represents the supply curve for gasoline in the short run, and S2 represents the supply curve for gasoline in the long run. After the imposition of the $2 tax, the price paid by buyers will be Correct Answer

higher in the long run than in the short run.

Price ceilings and price floors that are binding

cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price.

Refer to Table 14-1. The price and quantity relationship in the table is most likely a demand curve faced by a firm in a

competitive market.

Suppose there is an early freeze in California that reduces the size of the lemon crop. As the price of lemons rises, what happens to consumer surplus in the market for lemons?

consumer surplus decreases

Refer to Figure 10-6. Each unit of plastics that is produced results in an external

cost of $12

Justin builds furniture for a living. Justin's out-of-pocket expenses (for wood, paint, etc.) plus the value that he places on his own time amount to his

cost of building furniture

If the government imposes a binding price ceiling on a market, then the price paid by buyers will

decrease, and the quantity sold in the market will decrease.

Refer to Figure 10-2. If this market is currently producing at Q4, then total economic well-being would be maximized if output

decreased to Q2.

As Bubba's Bubble Gum Company adds workers while using the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Bubba's Bubble Gum Company encounters

diminishing marginal product.

Refer to Figure 6-6. When a certain price control is imposed on this market, the resulting quantity of the good that is actually bought and sold is such that buyers are willing and able to pay a maximum of P1 dollars per unit for that quantity and sellers are willing and able to accept a minimum of P2 dollars per unit for that quantity. If P1 − P2 = $3, then the price control is

either a price ceiling of $3.00 or a price floor of $6.00.

Refer to Figure 6-1. A binding price ceiling is shown in

graph (b) only.

In the long run,

inputs that were fixed in the short run become variable.

Refer to Figure 10-3. If the government wanted to tax or subsidize this good to achieve the socially optimal level of output, it would

introduce a subsidy of $16 per unit.

Refer to Figure 10-1. The social cost curve is above the supply curve because

it takes into account the external costs imposed on society by tobacco consumption.

Refer to Figure 6-8. When the price ceiling is enforced in this market, and the supply curve for gasoline shifts from S1 to S2, the resulting quantity of gasoline that is bought and sold is

less than Q3.

Refer to Figure 13-1. As the number of workers increases,

marginal product decreases.

If marginal cost is rising,

marginal product must be falling.

Refer to Figure 10-6. If 325 units of plastics are produced and consumed, then the

market equilibrium has been reached.

Total cost is the

market value of the inputs a firm uses in production.

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it

maximizes the combined welfare of buyers and sellers.

The presence of a price control in a market for a good or service usually is an indication that

policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers.

cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price.

quantity demanded to be greater than quantity supplied.

Moving production from a high-cost producer to a low-cost producer will

raise total surplus

Suppose that in a particular market, the supply curve is highly inelastic and the demand curve is highly elastic. If a tax is imposed in this market, then the

sellers will bear a greater burden of the tax than the buyers.

Suppose there is currently a tax of $80 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $80 per ticket to $64 per ticket, then the

supply curve will shift downward by $16, and the effective price received by sellers will increase by less than $16.

Producer surplus is

the amount a seller is paid minus the cost of production.

Refer to Scenario 10-1. From the given information, it is apparent that

the production of gasoline involves a negative externality, so the market will produce a larger quantity of gasoline than is socially desirable.

Farmer McDonald sells wheat to a broker in Kansas City, Missouri. Because the market for wheat is generally considered to be competitive, Mr. McDonald maximizes his profit by choosing

the quantity at which market price is equal to Mr. McDonald's marginal cost of production.

Refer to Figure 6-13. Suppose buyers, rather than sellers, were required to pay this tax (in the same amount per unit as shown in the graph). Relative to the tax on sellers, the tax on buyers would result in

the same amount of tax revenue for the government.

Producer surplus directly measures

the well-being of sellers

Refer to Table 13-8. What is the shape of the marginal cost curve for this firm?

upward-sloping

If a firm produces nothing, which of the following costs will be zero?

variable cost