Micro Econ Final 2018

What price represents the shut-down price in the short run?

$10

If the government establishes a quota of 7 million pounds in the market, what will the supply price of swordfish be (per pound)?

$12

If the government establishes a quota of 7 million pounds in the market, what will the demand price of swordfish be (per pound)?

$18

How much does a price floor of $5 cost the government if it maintains the price floor by buying any surplus corn?

$2,000

If there is a quota of 7 million pounds and swordfish fishing licenses are traded in a market, how much will the price of a fishing license be per pound?

$6

What is the quota rent per pound of swordfish received by licensed fishing boats when the government sets a quota of 7 million pounds?

$6

How much revenue do corn farmers receive if there is a price floor at $5?

$6,000

How much revenue would the government collect from the tax on jeans?

$600

Buyers in the jeans market gain ______ in consumer surplus before the imposition of the tax, and they gain ______ in consumer surplus after the imposition of the tax.

$625, $400

The deadweight loss caused by the tax on jeans is

$75.

Using the midpoint method, the price elasticity of supply between points J and E is _______ and economists would classify it as ______ .

0.33, inelastic

If the government sets a price floor of $5 per bushel, how many bushels of corn are produced?

1,200

Using the midpoint method, the price elasticity of demand between points C and E is _______ and economists would classify it as ______.

1.5, elastic

Which of the following combinations of output is efficient?

1000;0

How many apartments will be offered for rent if the government sets a price ceiling at $400?

180,000

If Atlantis is efficient in production, what is the opportunity cost of increasing the annual output of potatoes from 600 to 800 pounds?

200 pounds of fish

If the government sets a price ceiling at $400, how many apartments will be demanded by consumers?

220,000

Suppose the government levies a tax on the buyers of jeans that shifts the demand curve from D1 to DT. Using the diagram, determine the amount of the tax per pair of jeans sold.

33

Now suppose a decrease in the demand for tomatoes brings the market price down to $15. How many tomatoes should be produced in order to maximize profit?

4

How many bushels of corn are purchased by the government if it maintains a price floor of $5 by buying all surplus corn?

400

Atlantis can produce which of the following combinations of output?

400;600

If this business can sell all it can produce at a market price of $16, the firm should produce how many units in order to maximize profits?

5

A rational person would attend another year of college if the additional income expected plus the value of improved quality of life were worth at least

54,500

Suppose an increase in the demand for tomatoes brings the market price up to $22. How many tomatoes should be produced in order to maximize profit?

6

If the government sets a price floor of $5 per bushel, how many bushels of corn are purchased by consumers?

800

Diminishing marginal returns always involve

A fixed input

Falling output in an economy is consistent with which of the following?

A recession

Which of the following statements about the tax on jeans is true?

Buyers bear a smaller tax burden than sellers, since demand is more elastic than supply.

Which of the following events will increase both the price and the quantity of pizza?

Consumer income falls and pizza is an inferior good.

Which of the following situations is explained by increasing opportunity costs?

Convenience stores cater to busy people.

Marginal cost rises due to

Diminishing marginal return

In the short-run, as output increases, average fixed cost

Falls continuously

In A.D. 100, the Frivoli discovered a new technique for making meatballs and doubled the quantity of meatballs they could produce each month. After the discovery of this new technique in Frivoli only, which tribe had an absolute advantage in meatball production and which had a comparative advantage in meatball production?

Frivoli;Tivoli

Which of the following is a basic source of economic growth in the production possibilities model?

Improved Technology

Assume a perfectly competitive firm is producing at a level of output where marginal revenue is greater than marginal cost. To maximize profits, the firm should

Increase Output

If marginal product is positive and declining as more workers are hired, then total product is

Increasing at a decreasing rate

As Atlantis produces more potatoes, what is true about the opportunity cost of producing potatoes?

It continuously increases

Jill is willing to sell her used calculator for $20. Her friend Jack is willing to pay $90 for a used calculator. They agree and trade at a price of $50. Which of the following is correct?

Jill's individual producer surplus is $30.

If marginal cost is rising and lies above average variable cost, then average total cost

May be rising or falling

A survey indicated that chocolate is America's favorite ice cream flavor. Which of the following will lead to a decrease in the price of chocolate ice cream?

New freezer technology lowers the cost of producing ice cream.

Use the following situation and diagram to answer Questions 10-15. For the last 70 years, the U.S. government has used price supports to provide income assistance to U.S. farmers. At times, the government has used price floors, which it maintains by buying up the surplus farm products. At other times, it has used target prices, giving the farmer an amount equal to the difference between the market price and the target price for each unit sold. What are the equilibrium price and quantity in the market for corn?

P:$3 Q:1,000

Which of the following is a goal for the macro-economy?

Rising aggregate output

If economists were to study the tax incidence in this cigarette market, they would conclude which of the following?

The burden of this tax falls more on producers than on consumers.

Which of the following will occur if consumer incomes increase?

The demand for normal goods will increase.

Which of the following is a normative statement?

The government should increase the minimum wage.

Which of the following changes will most likely result in an increase in the demand for hamburgers in your hometown?

The number of vegetarians in your town decreases and the population size remains the same.

Pizza and soda are often consumed together at Joe's Diner. Suppose that the price of pizza rises from $0.75 a slice to $1.25 a slice, and consequently April sales of pizza drop from 1,050 to 950 slices. Using the midpoint method and this information, an economist could conclude the following:

The price elasticity of demand is 0.2.

Which of the following is true at the equilibrium price in a market?

The quantity demanded of the good equals the quantity supplied.

Comparative advantage explains which of the following?

The source of gains from trade

Which of the following changes will most likely result in a decrease in the supply of guitars?

The wages of guitar makers increase.

In the ancient country of Roma, only two goods—spaghetti and meatballs—are produced. There are two tribes in Roma, the Tivoli and the Frivoli. By themselves, in a given month, the Tivoli can produce 30 pounds of spaghetti and no meatballs, 50 pounds of meatballs and no spaghetti, or any combination in between. In the same month, the Frivoli can produce 40 pounds of spaghetti and no meatballs, 30 pounds of meatballs and no spaghetti, or any combination in between. Which tribe has a comparative advantage in meatball and spaghetti production?

Tivoli;Frivoli

If two goods are complements, an increase in the price of one good will cause which of the following?

a decrease in the demand for the other

An increase in the wages of workers producing a good will most likely lead to which of the following?

a decrease in the supply of the good

Compared to a monopolistically competitive industry, an oligopoly has

a higher Herfindahl-Hirschman Index, fewer firms, and more barriers to entry.

Compared to a monopoly, an oligopoly has

a lower Herfindahl-Hirschman Index, more firms, and fewer barriers to entry.

If Jill purchased 5 video games and 1 ball toss game, she would receive _______ and _______ .

a marginal utility of 10 from her last video game, a marginal utility of 70 from her last ball toss game

A price ceiling set at $400 will result in which of the following in the market for apartments?

a shortage of 40,000 apartments

The relationship between the marginal cost curve and the average cost curve is that when marginal cost is

above average cost, average cost must be rising.

At the arcade, Jill likes the video games, which cost $0.50 to play, and the ball toss, which costs $2 to play. She has $6 to spend at the arcade. If Jill maximizes her utility, she will

achieve a total utility of 220.

Suppose the government levies a tax of $0.50 per pack on the buyers of cigarettes. Suppose also that the price elasticity of demand for cigarettes is 1.2 and the price elasticity of supply is 0.7.

an excise tax.

Which of the following will most likely result in a decrease in the quantity of lemons demanded?

an increase in the price of lemons

Suppose Jolene buys apples weekly. If the price of apples were to drop, Jolene would experience ______ in _____ .

an increase, consumer surplus

Comparing accounting profit to economic profit, accounting profit can

be equal to or more than economic profit.

Where must an effective price ceiling in this market be set?

below $500

Diseconomies of scale can be caused by

communication problems.

Average total cost is minimized by producing the level of output where the marginal cost

curve intersects the average total cost curve.

When transactions do not occur due to price or quantity controls, what is the term for the lost gains?

deadweight loss

After this tax is levied, total surplus will _______ , and the price received by producers (not including the tax) will ________ .

decrease, fall by less than $0.50

Monopolistically competitive industries are characterized by

differentiated products, many firms, and easy entry and exit.

The demand curve for a monopolist producing a normal good is downward-sloping because of

diminishing marginal utility.

The long-run average cost curve eventually slopes up due to

diseconomies of scale.

A fixed input

does not change with the output level in the short run.

In this example, cigarettes have

elastic demand.

In the long run for a perfectly competitive constant-cost industry, if existing firms are producing where price is greater than average total cost, firms will enter the industry, price will

fall, and existing firms will decrease production.

The spreading effect causes the average total cost curve to

fall, while the diminishing returns effect causes it to rise.

The long-run industry supply curve for a perfectly competitive firm is

flatter and more elastic than the short-run supply curve.

Suppose that video games still cost $0.50 and the ball toss still costs $2, but Jill now has $10.50 to spend at the arcade. If Jill chooses her optimal consumption bundle, she will purchase 9 video games and 3 games of ball toss.

her total utility will be 280.

For a perfectly competitive industry, the short-run industry supply curve is determined by

horizontally summing all the firm's supply curves.

When a firm makes production decisions, the sunk cost should be

ignored

Jeans and product X (not shown) have a cross price elasticity of 3.7. After the imposition of the tax on jeans, buyers' consumption of product X would ______ because jeans and product X are ______ .

increase, substitutes

When the price of a normal good falls, consumers will ______ the quantity they want, in part because they now have more money to spend on these units, which economists call ______ .

increase, the income effect

If marginal cost is positive and rising as more output is produced, then total cost is

increasing at an increasing rate.

A perfectly competitive firm is a price-taker because

intense competition prevents it from influencing the market price.

Which of the following pairs indicates a category of resources and an example of that resource?

land;timber

In a market economy, most choices about production and consumption are made by which of the following?

many individuals and firms

The short-run supply curve for a perfectly competitive firm is its

marginal cost curve above the average variable cost curve.

If labor is the only variable input and the wage rate is constant, marginal cost reaches its minimum when

marginal product reaches its maximum.

According to the price-taking firm's optimal output rule, a perfectly competitive firm should produce the quantity at which marginal cost is equal to

marginal revenue and price.

When a firm is producing where marginal cost is equal to marginal revenue, the firm

may be making profits or losses

A price ceiling set at $600 will result in which of the following in the market for apartments?

no surplus or shortage

Which kind of profit is just enough to keep a firm operating in the long run?

normal

Because a perfectly competitive firm is a price-taker, its short-run demand curve is

perfectly elastic.

Suppose market prices for potatoes were to increase by 10%, and potato farmers wanted to know whether or not their overall total revenues would rise or fall as a consequence. The farmers could figure this out by calculating which of the following economic concepts?

price elasticity of demand

A perfectly competitive firm is guaranteed to be profitable when it produces a level of output where

price is greater than average total cost.

Oscar sells bicycles in a perfectly competitive market. In the short run, at the quantity that equates marginal revenue and marginal cost, the market price is above Oscar's average variable cost and below his average total cost. Oscar should

produce at a loss because he is covering his variable costs.

For a perfectly competitive increasing-cost industry, an increase in demand will cause the price to

rise and the cost of inputs to rise.

Tia sells hats in a perfectly competitive market. If, in the long run, the market price exceeds the minimum of Tia's average variable cost but is below the minimum of her average total cost, Tia should

shut down her business at that time.

You can either go to a movie or study for an exam. Which of the following is an opportunity cost of studying for the exam?

the enjoyment from seeing the movie

If the average product of labor is rising as more workers are hired, then

the marginal product of labor must be higher than the average product of labor

If at the current level of output of 200 units, average variable cost is $10 per unit and average total cost is $15 per unit, the

total fixed cost is equal to $1,000.