Last of micro

Education yields positive externalities. For example,

a more educated population tends to result in lower crime rates.

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

In assessing the difference between monopoly performance and that of perfect competition, the best approach is to

measure the output of the monopolist and the output of the perfectly competitive firm

In the housing market, supply and demand are

more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the long run than in the short run.

Suppose for a consumer the MU of bread is 20 utils and the MU of milk is 10 utils; the price of bread is $3 and the price of milk is $1. Given this,

more utility per dollar is gained from consuming bread than milk

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

If the distribution of water is a natural monopoly, then

multiple firms would likely each have to pay large fixed costs to develop their own network of pipes

Katherine gives piano lessons for $45 per hour. She also grows flowers, which she arranges and sells at the farmers market. One day she spend 5 hours planting $50 worth of seeds in her garden. Once the seeds have grown into flowers she can sell them for $450 at the farmers market. Katherine's accounting profits are

$400 and her economic profit is $175

Helga owns viking inc, starts with her $100,000 inheritance. Helga's accountant informs her that her firm earned a profit of $100,000 last year, and that if she chooses to invest the money she can expect a 10% return. If Helga did not run viking, she would not work. What were her economic profits last year?

$90,000

Jack receives 30 utils from one apple, 45 utils from two apples, and 55 utils from three apples. It follows that the marginal utility of the third apple is __________ utils and that Jack's __________utility rises as his __________ declines.

10; total; marginal

When you graduate from high school you had a choice between coming to JMU and working at Walmart where you would earn $25,000 per year. Suppose the tuition at JMU is $10,000 per year, textbooks expenses are $1250 per year, and board expenses are $15,000 per year. Assume that when you graduate you'll get a job that pays you $65,000 per year. The opportunity cost of attending JMU for four years is

145,000

Suppose on Friday night you have a choice to go to a Katy Perry or Taylor Swift concert. You won a free ticket to see Katy. You would pay as much as $600 to see Taylor, and tickets to her show cost $350. After thinking about it, you decide to go to the Katy concert. Since you chose Katie over Taylor, you must be willing to pay more than $_______ to see Katy

250

Consider two points on the PPF: point A, at which there a 50 apples and 40 pears, and point B, at which there a 46 apples and 41 pears. If the economy is currently at point A, the opportunity cost of moving to point b is

4 apples

Which of the following events would cause both the equilibrium price and equilibrium quantity of number two grade potatoes to increase and number two grade potatoes are inferior good?

A decrease in consumer income

In the supply and demand diagram of the market for peanut butter, the equilibrium point has moved up into the right. What could have caused us?

A shift in preferences toward peanut butter

Which of the following statements about a well-maintained yard best conveys the general nature of the externality?

A well-maintained yard conveys a positive externality because it increases the value of adjacent properties in the neighborhood.

If an allocation of resources is efficient, then

All potential gains from trade among buyers and sellers are being realized

In which of the following cases is the coase theorem most likely to solve the extrernality? A. Polluted water runoff from farms is making residence of a nearby town sick. B. Ed is allergic to his roommate's cat C. Industrialization around the world is causing global warming D. Chemicals for manufacturing plants in the Midwest are causing acid rain in Canada

B

Which of the following statements is true? A. The concept of opportunity costs cannot be illustrated with a PPF framework B. If scarcity did not exist, the PPF framework would be irrelevant C. There are more attainable points than unattainable points in every PPF diagram D. All PPFs are downward slope and straight lines

B

Assume that both the demand curve and the supply curve for DVD players shift to the left but demand curve shifts more than the supply curve. As a result

Both the equilibrium price and quantity of DVD players will decrease

If consumers often purchase croissants to eat while they drink their cappuccinos at a local coffee shop, what would happen to the equilibrium price and quantity of cappuccinos if the price of croissants rises?

Both the equilibrium price and quantity would decrease

Which of the following statements is not true of both pollution permits and corrective taxes? A. Both policies lead to the establishment of an equilibrium price of pollution B. Both policies internalize the externality of pollution C. Both policies increase the amount of pollution compared to the market equilibrium D. Both policies require firms to pay for their pollution

C

Which of the following will cause an increase in producer surplus? A. Buyers expect the price of the good to be lower next month B. And coming increases and buyers consider the good to be inferior C. The price of a substitute increases D. The imposition of a binding price ceiling in the market

C

Consider the U.S. market for tea, a market in which the government has imposed a nonbinding price ceiling. Which of the following events could convert the price ceiling from a nonbinding to a binding price ceiling?

Chinese tea plant producers refuse to ship to tea producers in the US

Decision making "at the margin" means making a choice based on ______ of decision

Comparing the additional benefits and costs

When economists speak of scarcity, they are referring to

Condition in which peoples wants outstrip the limited resources available to satisfy those ones

The economy is currently on its PPF. A politician says that it is possible to get more of everything: more infrastructure, more schools, more national defense, more spending on social programs, and so on. The politician is

Correct if he assuming an outward shifting PPF

Which of the following issues is most unlikely to be addressed by an economist practicing positive economics? A. The effect of a minimum wage increase on inner-city crime rates B. The relationship between the minimum wage and the number of unemployed unskilled workers C. The consequences of implementing a minimum wage law in China D. The desirability of a minimum wage increase

D

Steak and chicken are substitutes. A sharp reduction in the supply of steak would

Decrease consumer surplus in the market for steak and increase producers surplus in the market for chicken

Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market?

Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous

A popular celebrity that is paid highly for her time should probably not mow her lawn because

Her opportunity cost of mowing her lawn is higher than the cost of paying someone to mow it for her

The fundamental reason why most supply curves are upward sloping is that

Higher production raises the opportunity cost of production and so price must rise to induce more output

Which of the following markets most closely resembles the characteristics of perfectly competitive market?

Hot dog vendors on city streets

The principle of comparative advantage does not provide answers to certain questions. One of those questions is

How are the gains from trade shared among the parties to a trade?

Labor is a resource that is necessary to produce many goods. "If the price of labor falls" says the economist, "the prices of goods will soon follow." How does this work?

If the price of labor falls, the supply of goods rises, and the prices of those goods fall.

Suppose the world price of a television is $300. Before Italy allowed trade of televisions the price of a TV there was $350. Once Italy began allowing trade and televisions with other countries, Italy began,

Importing televisions and the price of a television in Italy decreased to $300

Studies have shown that drinking one glass of red wine per day may help prevent heart disease. Assume this is true, and a fungal disease destroys a large portion of the grape harvest of California vineyards. In the market for red wine, these two developments would

Increase demand and decrease supply, resulting in an increase in the equilibrium price and an uncertain effect on the equilibrium quantity of red wine

When Monique drives to work every morning, she drives a congested highway. Monique does not realize that when she enters the highway each morning that she increases the travel time of all other drivers on the highway. In this case, the external cost of Monique's highway trip

Increases the social cost above the private cost

If society decides it wants more of one good and all resources are fully utilized then

It has to give up some of another good and incur some opportunity costs

Economic reasoning is based on the premise that any activity involves a trade-off. What does this mean?

It means that undertaking one activity necessitates giving up something else.

Most labor economist believe that the supply of labor is

Less elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax

Suppose you just finished your third plateful of Thanksgiving dinner and it yielded zero units of additional satisfaction. Should you go back for more?

No way. You could get negative utility from the fourth plateful

At a price of $15 each, Marta buys four books per month. When the price increases to $20, Marta buys three books per month. Lou says that Marta's demand for books has decreased. Is Lou correct?

No, Lou is incorrect. Martas quantity demanded has decreased, but her demand has stayed the same

Suppose the government provides peanut butter to everyone free of charge and everyone consumes it to the point at which they receive no additional satisfaction from another spoonful. According to Econ, is this good?

No, because there might be some cases where the resources used to produce peanut butter could have been better used to produce more of other products

Assume, for Brazil, the domestic price of Apple's without international trade is higher than the world price of apples. This suggest that, in the production of apples,

Other countries have a comparative advantage over Brazil and Brazil will import apples

Holding all other personal characteristics such as age, gender, and constant income, economist expect that

People with health insurance are more likely to be overweight than people without health insurance

Oil produces expect that oil prices next year will be lower than oil prices this year. As a result, oil producers are most likely to

Place more oil in the market this year, the shifting the present supply curve of oil rightward

What would happen to the equilibrium price and quantity of coffee if the wages of coffee bean pickers fell and the price of tea fell?

Price would fall, and the effect on quantity would b ambiguous

Zelzar has decided to end its policy of not trading with the rest of the world. When it ends it's trade restrictions, it discovers that it is importing incense, exporting steel, and neither importing nor exporting rugs. Which groups in Zelzar are better off as a result of the new free trade policy?

Producers of steel and consumers of incense

Markets fail to allocate resources efficiently when

Property rights are not well established

When China allows trade and it becomes an exporter of silk

Residents of China who produce silk become better off; residents of China who buy silk become worse off; and the economic well-being of China rises

What is the reason for the law of increasing opportunity costs?

Resources have varying abilities and those with lower opportunity cost of producing a good will be used to produce it before resources with higher opportunity cost produce it.

Price ceiling causes a _______ while price floor causes a _______

Shortage; surplus

At a price for which quantity demanded exceeds quantity supplied, a ______ is experienced, which pushes the price ______ toward its equilibrium value

Shortage; upward

The opportunity cost of attending college is

The highest value alternative one forfeits to attend college

Many people buy one newspaper per day, but rarely do they buy two papers of the same newspapers on the same day. What is the economic justification for this behavior?

The marginal cost of purchasing the second newspaper sees the marginal benefit of purchasing that second paper

Kalene's Smoke House is the only place within 100 miles that sells smoked sausage. Assuming that Kalene is a monopolist and maximizing her profit, what is true?

The price of Kalene's smoked sausage will exceed her marginal cost

What would cause the price of oranges to fall?

The price of land throughout Florida decreases, and Florida produces a significant proportion of the nations oranges.

A rightward shift in demand curve for tennis balls would most likely be caused by a fall in

The price of tennis rackets

Suppose the government decides that every family should own its own home. To bring this about, the government decides to subsidize the home construction industry by giving the home construction companies $10,000 for every house that they built. As a result of this

The supply curve of new houses with shift rightward, since builders would be willing to reduce and sell more houses at each given price

The simultaneous increase in both of the demand for tablets and the supply of tablets would imply that

The value of tablets to consumers has increased, and the cost of producing tablets has decreased

If there's no comparative advantage in the production of either of the two goods produced by countries 1 and 2 then

There are no gains from specialization and trade between the two countries

Dan is currently consuming 10 Cokes and 5 slices of pizza per week such that the marginal utility of the tenth Coke is 12 utils and that of the fifth slice of pizza is also 12 utils. How should Dan redirect his purchases so as to attain consumer equilibrium?

There is not enough info to answer the question

Ari is currently consuming 10 hot dogs and 8 hamburgers per week. The last hot dog she consumed yielded 20 utils while the last hamburger she ate gave her 25 utils. If hot dogs cost $2 and hamburgers cost $2.50, is Ari consuming the correct quantities of these two goods to be in consumer equilibrium?

Yes, so there is no need to change her eating habits

Zaria and Hannah are roommates. Zaria assigns a $30 value to smoking cigarettes. Hannah values smoke-free air at $15. Which of the following scenarios is a successful example of the Coase theorem?

Zaria pays Hannah $16 so that Zaria can smoke.

Cold Duck Airlines flies between Tacoma and Portland. The company leases planes on a year-long contract at a cost that averages $600 per flight. Other costs (fuel, flight attendants, etc.) amount to $550 per flight. Currently, Cold Duck's revenues are $1,000 per flight. All prices and costs are expected to continue at their present levels. If it wants to maximize profit, Cold Duck Airlines should

continue flying until the lease expires and then drop the run

At his current level of output, a monopolist has a Marginal Revenue of $10, a Marginal Cost of $6, and an economic profit of zero. If the market demand curve is downward sloping and his marginal cost curve is upward sloping, the monopolist:

could increase his profit by increasing output

An increase in the number of sellers of a good will ____ for that good, ceteris paribus

decrease equilibrium price and increase equilibrium quantity.

Suppose that a tax is placed on books. If the buyers pay the majority of the tax, then we know that the

demand is more inelastic than the supply.

If Farmer Brown plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 5 bushels of wheat. If he plants 2 bags, he gets 9 bushels. If he plants 3 bags, he gets 12 bushels. A bag of seeds costs $120, and seeds are his only cost. Farmer Brown's production function exhibits

diminishing marginal product

In the long run a company that produces and sells popcorn incurs total costs of $750 when output is 70 canisters and $1,000 when output is 100 canisters. The popcorn company exhibits

economies of scale because avg total cost is falling as output rises

Producer surplus _______ on a price ceiling and _______on a price floor

falls; rises

Competitive markets are characterized by

free entry and exit by firms

A monopolists profit with price discrimination will be

higher than if the firm changed just one price because the firm will capture more consumer surplus

The problem with the protection-as-a-bargaining-chip argument for trade restrictions is

if it fails the country faces a choice between two bad options.

Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are available only in limited quantities. In this market, an increase in demand will

increase price in the short run but not in the long run

A decrease in expected price of corn would likely to do the following to the current supply and demand for corn

increase the supply, but decrease the demand.

The short run supply curve of a perfectly competitive-firm

intersects the minimum point of its short-run avg variable cost curve but not its short-run avg total cost curve

The infant industry argument

is based on the belief that protecting industries producing goods and services for infants is necessary if a country is to have healthy children

an example of explicit cost of production would be the

lease payments for the land on which a firm's factory stands

Suppose most people regard emeralds, rubies, and sapphires as close substitutes for diamonds. Then DeBeers, a large diamond company, has

less market power than it would otherwise have

Economics of scale occur when

long-run average total costs fall as output increases

The minimum points of the average variable cost and average total cost curves occur where

marginal cost curve intersects those curves

If marginal cost is rising,

marginal product must be falling

Ms. Joplin sells colored pencils. The colored-pencil industry is competitive. Ms. Joplin hires a business consultant to analyze her company's financial records. The consultant recommends that Ms. Joplin increase her production. The consultant must have concluded that , at her current level of production, Ms. Joplin's

marginal revenue exceeds her marginal cost

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 too buyers or sellers

The provision of a public good generates a

positive externality and the use of a common resource generates a negative externality

What can eliminate the inefficiency inherent in monopoly pricing?

price discrimination

Goods that are excludable include both

private goods and club goods

The deadweight loss associated with a monopoly occurs because the monopolist

produces an output level less than the socially optimal level

Consumer surplus _______ on a price ceiling and _______on a price floor

rises; falls

When positive externalities are present in a market

social benefits will be greater than private benefits.

Total surplus _______ on a price ceiling and _______on a price floor

stays the same; falls

Suppose the government imposes a 20 cent tax on the sellers of artificially sweetened beverages. The tax would shift

supply; raising the equilibrium price and lowering the equilibrium quantity in the market for artificially sweetened beverages

if the opportunity cost of capital is below the rate of return to capital earned in the perfectly competitive beauty salon industry,

the beauty industry cannot be in long-run equilibrium

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 marginal cost of production

Diamond-Water Paradox

those things that have the greatest value in use often have little value in exchange and those things that have little value in use often have the greatest value in exchange

If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is

zero