Micro economics chapter 6,7,8,11 and 14.

Refer to the accompanying graph. If this firm is a price taker, then when the price of each unit of output is $30, this firm's total cost at its profit-maximizing level of output is ______.

$1,600

Which of the following is the best example of a pure public good?

National defense

A crowded beach without an entrance fee is a ______ good.

commons

Suppose the market consists of 3 individuals: Citizen A, Citizen B and Citizen C. If the good shown on the graphs is a public good, then the marginal benefit of the 30th unit is:

$9

The accompanying graph shows the cost curves for Moe's mushroom gathering business, which is perfectly competitive. in the graph above, the average variable cost curve is labeled _____, the average total cost curve is labeled _____, and the marginal cost curve is labeled ______.

C; B; A

The long run is best defined as:

a period of time sufficiently long that all factors of production are variable.

The figure below shows the supply and demand curves for oranges in Smallville. When this market is in equilibrium, total economic surplus is ______ per day.

$160

A pure monopoly exists when:

a single firm produces a good with no close substitutes.

When marginal revenue is zero:

total revenue is maximized.

Suppose a market is in equilibrium. The area below the demand curve and above the market price is:

consumer surplus.

If a good is nonrival, then:

consumption of the good by one person does not diminish its availability to others.

The marginal cost of providing another viewer with access to HBO is zero. Since only people who pay for HBO can watch it:

fewer than the socially optimal number of people will have access to HBO.

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. The long-run equilibrium price in this industry is:

$10

Assume that each day a firm uses 13 employee-hours per day and an office to produce 100 units of output. The price of each unit output is $5, the hourly wage rate is $10, and rent on the office is $200 per day. Each day the firm earns a ______ of ______.

profit; $170

Industries in which firms have high fixed costs and low marginal costs are likely to have a:

small number of large firms.

If all firms in a perfectly competitive industry are experiencing economic losses, then:

some firms will exit the industry, until economic profit equals zero.

If it is difficult, or costly, to prevent people who do not pay for a good from consuming the good, then the good is a ______ good.

nonexcludable

If a good can be consumed by one person without reducing its availability to others, then it is a ______ good.

nonrival

A collective good is one that, to at least some degree, is:

nonrival but excludable.

A cost of an activity that falls on people not engaged in the activity is called a(n):

negative externality.

Refer to the accompanying figure. If the market for doughnuts is perfectly competitive, and the price of a doughnut is 10 cents, then this firm:

should produce 50 doughnuts.

Suppose that when a firm produces the level of output at which price equals marginal cost, the firm's total revenue is less than its variable cost. In this case, the firm should:

shut down.

A policy maker has argued for higher taxes on gasoline to reduce the negative externalities associated with driving. This policy will lead to a relatively ______ reduction in driving if demand is ______.

small; relatively inelastic

The demand curve for a public good is constructed by:

summing voters' reservation prices at each quantity.

In order to achieve the socially optimal level of output, goods that entail negative externalities should be:

taxed.

To produce 150 units of output, a firm must use 3 employees per day. To produce 300 units of output, the firm must use 8 employees per day. Apparently, the firm is:

experiencing diminishing returns.

In a free market economy, the decisions of buyers and sellers are:

guided by prices.

Suppose the accompanying figure shows the demand curve, marginal revenue curve and marginal cost curve for a monopolist. At this monopolist's profit-maximizing level of output, its total revenue equals the area:

0FJB.

Refer to the accompanying graph. If this firm is a price taker, then when the price of each unit of output is $30, this firm's profit-maximizing level of output is ______.

80

If a firm is earning zero economic profit, then its accounting profit will:

be positive.

A good is characterized by network economies if it:

becomes more valuable as more people own it.

The figure below shows the supply and demand curves for oranges in Smallville. At a price of $4 per pound there will be an excess ______ of ______ pounds of oranges per day.

demand; 20

Free entry and exit of firms is a characteristic of:

perfectly competitive industries.

Total revenue minus both explicit and implicit costs defines a firm's: gross earnings. profit. marginal earnings. net worth.

profit

Refer to the accompanying figure. If the market for doughnuts is perfectly competitive, and the price of a doughnut is 25 cents, then at this firm's profit maximizing level of output, the firm will earn an economic ______ of ______ per day.

profit; $8

Refer to the accompanying graph. If this firm is a price taker and the price of each unit of output is $9, then this firm should:

shut down in the short run.

If a firm is earning zero economic profit, then:

the firm's accounting profit is equal to the firm's implicit costs.

If a monopolist's marginal revenue exceeds its marginal cost at its current level of output, then to maximize its profit the monopolist should:

increase output until marginal revenue equals marginal cost.

Numerous studies have shown that breathing second-hand cigarette smoke is harmful to your health. This suggests that a tax on cigarettes will:

increase total economic surplus.

In many cities in the United States, a single firm provides electricity. Those firms are:

monopolists.

Spike pays $14,000 in taxes and earns $100,000. Ace earns $120,000. If the tax system is progressive, Ace will pay ______ in taxes.

more than $16,800.

"Market power" refers to a firm's ability to:

raise its price without losing all of its sales.

Economies of scale exist when:

the average cost of production falls as output rises.

Price discrimination means charging:

different prices to different buyers for essentially the same good or service.

A highway without any tolls between 12am and 5am when there is very little traffic is an example of a ______ good.

public

A good or service that is highly nonrival and highly nonexcludable is a(n) ______ good.

pure public

A good or service that is rival but nonexcludable is called a ______, and a good or service that is nonrival but excludable is called a ______.

commons good; collective good

From the perspective of an externality, most communities have zoning laws to:

control external costs.

This graph shows the marginal cost and marginal benefit associated with roadside litter clean up. Assume that the marginal benefit curve and marginal cost curve each have their usual slope. The socially optimal number of bags of litter removed from the roadside each day is:

15

Which of the following items is an example of a good that is nonrival but excludable?

Pay-per-view movies

If the consumption of good generates an external benefit, then the market equilibrium quantity will be:

less than the socially optimal quantity.

A good or service that is both rival and excludable is a:

private good.

A monopoly that results from economies of scale is called a(n):

natural monopoly.

Consider two restaurants located next door to each other: Quick Burger and The Sunshine Café. If Quick Burger opens a drive-through window, the increased traffic and noise will bother customers seated outside at The Sunshine Café. The table below shows the monthly payoffs to Quick Burger and The Sunshine Café when Quick Burger does and does not operate a drive-through window. Quick Burger Operates aDrive-Through Window Quick Burger Does NotOperate Drive-Through Window Quick Burger $24,000 $15,000 The Sunshine Café $11,000 $23,000 If Quick Burger has the legal right to operate a drive-through window, then the Sunshine Café would have to pay Quick Burger at least ______ per month to NOT operate a drive-through window.

$9,000

A firm's profit equals:

(P − ATC) × Q [(price minus average total cost) times the quantity sold].

The figure below shows the supply and demand curves for oranges in Smallville. At the price of $4 per pound, sellers offer ______ pounds of oranges per day, and buyers want to purchase ______ pounds of oranges a day.

10; 30

Suppose Sarah owns a small company that makes wedding cakes. The accompanying table shows how Sarah's total cost varies depending on the number of wedding cakes she makes each day. Number of Cakes Per Day Total Cost Per Day 0 $100 1 $180 2 $220 3 $300 4 $400 5 $520 6 $660 If the market for wedding cakes is perfectly competitive, and wedding cakes sell for $125 each, then Sarah should produce ______ cakes per day.

5

Refer to the accompanying graph. If this firm is a price taker, then when the price of each unit if output is $15, what is this firm's profit-maximizing level of output?

60

Suppose the market consists of 3 individuals: Citizen A, Citizen B and Citizen C. If the good shown on the graphs is a private good, then at a price of $4, market demand is ______ units.

60

Consider a town with three residents. The residents' demand curves for various acres of a public park are shown below. Suppose the town can purchase land for the park at a cost of $8 per acre. The optimal park size would be ______ acres.

8

Suppose the accompanying figure shows the demand curve, marginal revenue curve and marginal cost curve for a monopolist. The profit-maximizing price for this monopolist to charge is:

B.

The insight that people can always arrive at efficient solutions to the problems caused by externalities if they can negotiate the purchase and sale of the right to perform activities that cause externalities is called the _______.

Coase Theorem

Suppose the accompanying figure shows the demand curve, marginal revenue curve and marginal cost curve for a monopolist. The profit-maximizing level of output for this monopolist is ______ units per day.

F

Refer to the figure below. Private markets will provide _____ units of this good per day, and the socially optimal number of units per day is ______.

G; F

Which of the following is NOT an example of a public good?

Government-subsidized public housing

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. If the market supply curve is given by S3, then what will happen to the market supply curve in the long run?

It will shift to S2.

Kris, Taylor and Max are the only three residents in a neighborhood. A public good that would benefit all of them has a one-time installation cost of $900. The value of the public good to each resident is shown in the table below. Any tax plan must be approved by simple majority. Resident Reservation Price Income Kris $100 $1,000 Taylor $200 $5,000 Max $700 $6,000 If the government proposes to pay for the public good with a proportional income tax of 8 percent, then:

Kris and Max will vote in favor of the tax, but Taylor will vote against it.

Kris, Taylor and Max are the only three residents in a neighborhood. A public good that would benefit all of them has a one-time installation cost of $900. The value of the public good to each resident is shown in the table below. Any tax plan must be approved by simple majority. Resident Reservation Price Income Kris $100 $1,000 Taylor $200 $5,000 Max $700 $6,000 If the government proposes to pay for the public good with a head tax of $300 per resident, then

Max will vote in favor of the tax, but Kris and Taylor will vote against it.

Suppose Ben owns a small company that makes kites. The market for kites is perfectly competitive, and kites sell for $25 each. Ben's total production costs vary depending on the number of kites he makes each day, as shown in the accompanying table. Number of kites Per Day Total Cost Per Day ($) 0 100 1 110 2 126 3 148 4 172 5 200 6 235 Should Ben shut down?

No, because he can earn enough revenue to cover his variable cost.

Which of the following is an example of an activity with an external cost?

Speeding on the interstate.

Suppose a firm produces the level of output at which the marginal cost of the last unit produced equals the price of the good. Which of the following statements is always true?

The firm should shutdown if its total revenue is less than its variable cost.

Which of the following is the most likely to be a variable factor of production at a university?

The number of librarians

Carmen listens to opera music every evening when she gets home from work. Carmen loves listening to opera, but her neighbor Paul, who can also hear the music, hates it. If Paul is the only person besides Carmen who can hear the music, then Carmen's music generates:

a negative externality.

Consider two restaurants located next door to each other: Quick Burger and The Sunshine Café. If Quick Burger opens a drive-through window, the increased traffic and noise will bother customers seated outside at The Sunshine Café. The table below shows the monthly payoffs to Quick Burger and The Sunshine Café when Quick Burger does and does not operate a drive-through window. Quick Burger Operates aDrive-Through Window Quick Burger Does NotOperate Drive-Through Window Quick Burger $24,000 $15,000 The Sunshine Café $11,000 $23,000 If Quick Burger has the legal right to operate a drive-through, and Quick Burger and The Sunshine Café CANNOT negotiate with each other, then will Quick Burger operate a drive-through window?

Yes, because Quick Burger's payoff is higher when it operates a drive-through.

Kate and Ali can live together in a two-bedroom apartment for $600 per month, or they can each rent a one-bedroom apartment for $400 per month. Apart from the rent, they are indifferent between living together and living apart, except for one problem: Kate hates Ali's taste in music. Kate would be willing to pay up to $100 a month to avoid hearing Ali's music. Ali would give up listening to her music for no less than $300 per month. If Kate and Ali decide to live together, is it socially optimal for Ali to play her music in the apartment?

Yes, because the benefit to Ali of listening to her music is greater than the cost to Kate.

Broadcast television is an example of:

a public good provided by private firms.

A price ceiling that is set below the equilibrium price will result in:

a shortage of the good.

The daily demand and supply curves for milk in the small town of Dairyville are as shown in the figure. Suppose the government imposes a price ceiling on milk of $5 per gallon. a. How many gallons of milk will be bought and sold each day after the imposition of the price ceiling? b. What will be the excess demand for milk each day after the imposition of the price ceiling? c. What will be consumer surplus after the imposition of the price ceiling? d. What will be producer surplus after the imposition of the price ceiling? e. What will be the loss in total economic surplus each day that results from the imposition of the price ceiling?

a. 400 b. 600 c. 1600 d. 800 e. 300

A market equilibrium is only efficient if:

all relevant costs and benefits are reflected in the market supply and demand curves.

Pure public goods:

are frequently provided by the government, and are sometimes provided by private firms.

Suppose a perfectly competitive firm is producing 77 units of output, and the marginal cost of the 77th unit is 11. If the firm can sell each unit of output for $8 and the firm's revenue is sufficient to cover its variable cost, the firm should:

decrease production.

The phrase "smart for one, but dumb for all" refers to the idea that the individual pursuit of self-interest:

doesn't always lead to an efficient outcome.

If the owners of a business are receiving total revenues just sufficient to cover all of their explicit and implicit costs, then they are:

earning a normal profit.

In the long run, in a perfectly competitive industry:

economic profit and loss are driven to zero by entry and exit.

In a market with barriers to entry:

economic profit will not fall to zero in the long run.

Generally, ______ motivates firms to enter an industry, while ______ motivates firms to exit an industry.

economic profit; economic loss

The government subsidizes education because:

education is thought to have positive externalities.

Lane and Riley are the only two residents in a neighborhood, and they share the same driveway. They would like to have the driveway paved. The value of the paved driveway is $1,500 to Lane and $900 to Riley. Regardless of who pays for the paving both people will benefit from it.If the cost of paving the driveway is $2,000, then it is ______ for the driveway to be paved because total economic surplus would ______.

efficient; increase by $400

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. If the market supply curve is given by S1, then in the long run firms will:

enter the market, leading the market supply curve to shift out to S2.

For perfectly competitive firms, marginal revenue ______ price; for monopolists marginal revenue ______ price.

equals; is less than

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. If the market supply curve is given by S3, then in the long run firms will:

exit the market, leading the market supply curve to shift back to S2.

there are 20 residents in the village of Towneburg. The size of the village's annual fireworks display depends upon the number of shells that are fired off. Each resident's demand for fireworks is shown below. The total cost of the fireworks display is $1,000 plus $10 per shell. Cheap Charlie is one of Towneburg's 20 residents. While Charlie enjoys fireworks as much as the next Towneburger, when the fireworks fund-raising campaign kicks off, he claims to hate them. Cheap Charlie is trying to:

free ride.

Refer to the figure below. This graph describes a good that:

generates negative externalities.

If either the production or consumption of a good generates an external cost, then the market equilibrium quantity will be:

greater than the socially optimal quantity.

An imperfectly competitive firm is one that:

has at least some influence over the market price.

A price setter is a firm that:

has some degree of control over its price.

Angelina Jolie's economic rent from starring in a movie is equal to the difference between:

her final salary and the least she would be willing to accept to star in the movie.

Natural monopolies are most likely to arise when firms have:

high start-up costs and low marginal costs.

Suppose the accompanying figure illustrates the demand curve facing a monopolist. If the monopolist decreases its price from $12 to $10, its total revenue will ______.

increase by $600

Kris, Taylor and Max are the only three residents in a neighborhood. A public good that would benefit all of them has a one-time installation cost of $900. The value of the public good to each resident is shown in the table below. Any tax plan must be approved by simple majority. Resident Reservation Price Income Kris $100 $1,000 Taylor $200 $5,000 Max $700 $6,000 Installing the public good would ______ total economic surplus by ______.

increase; $100

The small city of Pleasantville is considering building a public swimming pool that costs $1,000. Each resident's marginal benefit of the swimming pool is shown below. It takes a 4/5 majority to pass any tax measure, and all residents must vote. Voter Marginal Benefit Kyle $420 Dylan $360 Fran $350 Ronnie $190 Sam $170 Building the swimming pool would ______ total economic surplus because _____

increase; the total social benefit of the pool is greater than the total cost of the pool

The accompanying figure shows the demand curve, marginal revenue curve, marginal cost curve and average total cost curve for a monopolist. At this monopolist's profit-maximizing level of output, it:

incurs an economic loss of $16 per day.

National defense is an example of a good that is:

largely nonrival and nonexcludable.

An external benefit implies that private markets will provide ______ than the socially optimal quantity, and an external cost implies that private markets will provide ______ than the socially optimal quantity.

less; more

Refer to the accompanying graph. If this firm is a price taker and the price of each unit of output is $15, then at this firm's profit-maximizing level of output, it will earn a ______ of ______.

loss, $60

A firm is most likely to experience economies of scale if its start-up costs are high and its marginal cost is ______.

low

Given the demand curve it faces, if an imperfectly competitive firm wants to sell another unit of output, it must:

lower its price.

Assume that each day ten thousand children watch Sesame Street on public television and that watching Sesame Street generates a benefit of $100 per child per year. Once a year, public television hold a pledge drive asking viewers to make voluntary contributions in order to keep the programming available to everyone.If public television stations collect less than $100 per child during the pledge drive, then this is evidence:

of the free-rider problem.

Adam Smith's theory of the invisible hand posits the actions of independent, self-interested buyers and sellers will ______ lead to the most efficient allocation of resources.

often often lead to the most efficient allocation of resources.

If a firm functions in an oligopoly, it is:

one of a small number of firms that produce goods that are either close or perfect substitutes.

The accompanying table describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day. Employee-Hours Per Day Output Per Day 0 0 1 40 4 80 9 120 15 160 23 200 When the firm uses 9 employee-hours per day, it earns a daily ______ of ______.

profit; $64

The accompanying table shows a pizzeria's fixed cost and variable cost at different levels of output. Pizzas sell for $20 each. Number of Pizzas Per Day Fixed Cost ($/Day) Variable Cost ($/Day) 0 500 0 25 500 150 50 500 250 75 500 450 100 500 850 125 500 1,650 When the pizzeria makes 100 pizzas per day, it earns an economic ______ of ______.

profit; $650

Suppose a perfectly competitive firm and a monopolist are both charging $5 for their respective products. From this, one can infer that:

the marginal benefit from selling an additional unit of output is $5 for the competitive firm and less than $5 for the monopolist.

This graph shows the marginal cost and marginal benefit associated with roadside litter clean up. Assume that the marginal benefit curve and marginal cost curve each have their usual slope. From the graph, one can infer that:

the marginal benefit of picking up the 10th bag of litter exceed the marginal cost.

If the market demand curve does not capture all of the benefits to society of buying an additional unit of good, then:

the market equilibrium will not be efficient.

If the market supply curve does not capture all of the costs to society of producing an additional unit of good, then:

the market equilibrium will not be efficient.

If the market equilibrium quantity is greater than the socially optimal quantity, one can infer that:

there is a negative externality associated with this good.

Superstar professional athletes can sustain their economic rents because:

they have unique talents that they can sell to the highest bidder.

When a perfectly competitive firm sells additional units of output, ______, and when a monopolist sells additional units of output, ______.

total revenue always rises; total revenue could rise, fall, or remain unchanged

The sum of producer surplus and consumer surplus is:

total surplus.

Lane and Riley are the only two residents in a neighborhood, and they share the same driveway. They would like to have the driveway paved. The value of the paved driveway is $1,500 to Lane and $900 to Riley. Regardless of who pays for the paving both people will benefit from it.If the cost of paving the driveway is $2,000 and Lane proposes that they each pay 50 percent of this cost, then Riley ______ agree to Lane's proposal because ______.

will not; if they split the cost, then Riley's economic surplus would decrease

Refer to the table below. An output level of 25 units, this firm's accounting profit is ______, and its economic profit is ______. Quantity Total Revenue Explicit Costs Implicit Costs 10 50 36 5 15 75 63 6 20 100 93 7 25 125 125 8 30 150 161 9

zero; −$8

Refer to the figure below. The deadweight loss at the market equilibrium quantity is equal to the area ______.

½ × FG × AC

Consider two restaurants located next door to each other: Quick Burger and The Sunshine Café. If Quick Burger opens a drive-through window, the increased traffic and noise will bother customers seated outside at The Sunshine Café. The table below shows the monthly payoffs to Quick Burger and The Sunshine Café when Quick Burger does and does not operate a drive-through window. Quick Burger Operates aDrive-Through Window Quick Burger Does NotOperate Drive-Through Window Quick Burger $24,000 $15,000 The Sunshine Café $11,000 $23,000 If Quick Burger has the legal right to operate a drive-through window, then the Sunshine Café would be willing to pay Quick Burger as much as ______ per month to NOT operate a drive-through window.

$12,000

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. In the long run, the equilibrium price will be _____ per gallon, and each firm's profit-maximizing quantity will be ______ gallons per week.

$15; 300

The figure below shows the supply and demand curves for jeans in Smallville. Suppose jeans initially sell for $60 per pair. If the price of jeans falls to $40 per pair, then total economic surplus will increase by ______ per day.

$160

Refer to the figure below. If a price ceiling were imposed at $4, total economic surplus would be ______, which is ______ less than when the market is unregulated market.

$24; $8

Suppose the accompanying table describes the demand for a good produced by monopolist. Price Quantity $10 1 $9 2 $8 3 $7 4 $6 5 $5 6 $4 7 The total revenue from selling 6 units is ______, and the marginal revenue of selling the 6th unit is ______.

$30; 0

Pat used to work as an aerobics instructor at the local gym earning $35,000 a year. Pat quit that job and started working as a personal trainer. Pat makes $50,000 in total annual revenue. Pat's only out-of-pocket costs are $12,000 per year for rent and utilities, $1,000 per year for advertising and $3,000 per year for equipment. Pat's accounting profit is _______, and Pat's economic profit is _______.

$34,000; −$1,000

Suppose the accompanying table describes the relationship between price and quantity demanded for a monopolist. Quantity Price 1 $10 2 $9 3 $8 4 $7 5 $6 6 $5 7 $4 8 $3 If the marginal cost of producing each unit of output is $5, then this monopolist maximizes its profit by charging ______ per unit.

$8

Refer to the accompanying graph. If this firm is a price taker, then when the price of each unit of output is $30, how much profit does this firm earn at its profit-maximizing level of output?

$800

The small city of Pleasantville is considering building a public swimming pool that costs $1,000. Each resident's marginal benefit of the swimming pool is shown below. It takes a 4/5 majority to pass any tax measure, and all residents must vote. Voter Marginal Benefit Kyle $420 Dylan $360 Fran $350 Ronnie $190 Sam $170 If Fran proposes that the city build the pool and finance it with a $200 tax on each resident, then ______ residents will vote in favor of the proposal and ______ will vote against, so the proposal will ______.

3; 2; fail

This graph shows the marginal cost and marginal benefit associated with roadside litter clean up. Assume that the marginal benefit curve and marginal cost curve each have their usual slope. Picking up the 20th bag of litter would:

create deadweight loss.

The accompanying graph shows the cost curves for Moe's mushroom gathering business, which is perfectly competitive. Moe's short run supply curve is:

curve A above curve C.

Suppose the production of cotton causes substantial environmental damage because the pesticides used by cotton farmers often make their way into nearby rivers and streams, and are very harmful to fish and other wildlife. If cotton farmers do not have to pay for the environmental damage caused by the pesticides used to grow cotton, then the market equilibrium price will be ______ and the market equilibrium quantity will be ______.

inefficiently low; inefficiently high

In general, perfectly competitive firms maximize their profit by producing the level of output at which:

marginal cost equals price.

In general, when the price of a fixed factor of production increases:

marginal cost is unchanged.

If a production process exhibits diminishing returns, then as output rises:

marginal cost will eventually increase.

The monopolist will maximize profits at the output level for which:

marginal revenue equals marginal cost.

For all firms, the additional revenue collected from the sale of one additional unit of output is termed:

marginal revenue.

If coal mining produces a negative externality because it leads to environmental damage, then, at the market equilibrium, the:

quantity of coal produced will be greater than the socially optimal quantity.

A profit-maximizing perfectly competitive firm must decide:

only on how much to produce, taking price as fixed.

One assumption of the perfectly competitive model is free entry and exit. This assumption most directly leads to the implication that:

positive economic profit is only possible in the short run.

Suppose the latest Hunger Games movie first played in theaters, where it sold out during its opening week. Several months later it was available on pay-per-view TV. Two years later it was shown on CBS, a broadcast television network. When the movie was playing in theaters, it was a ______ good; when it was available on pay-per-view TV, it was a ______ good; and when it was shown on CBS, it was a ______ good.

private; collective; public

A price ceiling that is set below the equilibrium price will cause:

producer surplus to fall.

If taxpayers pay a smaller fraction of their income in taxes as their incomes rise, the tax is ______ and if taxpayers pay a larger fraction of their income in taxes as their income rise, the tax is ______.

regressive; progressive

Suppose all firms in a perfectly competitive industry are earning an economic profit. One would expect that, over time, the number of firms in the industry will ______ and the market price will ______.

rise; fall

Suppose a market is in equilibrium. The area below the market price and above the supply curve is:

producer surplus.

Pat used to work as an aerobics instructor at the local gym earning $35,000 a year. Pat quit that job and started working as a personal trainer. Pat makes $50,000 in total annual revenue. Pat's only out-of-pocket costs are $12,000 per year for rent and utilities, $1,000 per year for advertising and $3,000 per year for equipment. Pat's explicit costs are ______, and Pat's implicit costs are ______.

$16,000; $35,000

The cumulative difference between the price producers actually receive for a good and the lowest price for which they would have been willing to sell it is called:

producer surplus.

Suppose you own a small business. Last month, your total revenue was $6,000. In addition, you paid: $1,000 in monthly rent for office space, $200 in monthly rent for equipment, $3,000 to your workers in wages for the month, and $1,000 for the supplies you used that month. If you correctly determine that your economic profit last month was negative $200, then it must be true that:

your implicit costs are $1,000 per month.

Joe earns $10,000 in income and pays $1,000 in taxes while Jack earns $30,000 and pays $4,000 in taxes. The structure of this tax is:

progressive.

When Acme Dynamite produces 250 units of output, its variable cost is $2,000, and its fixed cost is $500. It sells each unit of output for $25. When Acme Dynamite produces 250 units of output, its profit is:

$3,750.

Refer to the accompanying figure. The equilibrium price in this market is ______ and the equilibrium quantity is ______.

$30; 25

The accompanying table shows a pizzeria's fixed cost and variable cost at different levels of output. Pizzas sell for $20 each. Number of Pizzas Per Day Fixed Cost ($/Day) Variable Cost ($/Day) 0 500 0 25 500 150 50 500 250 75 500 450 100 500 850 125 500 1,650 When the pizzeria makes 100 pizzas a day, its fixed cost is ______ and its total cost is ______.

$500; $1,350

The small city of Pleasantville is considering building a public swimming pool that costs $1,000. Each resident's marginal benefit of the swimming pool is shown below. It takes a 4/5 majority to pass any tax measure, and all residents must vote. Voter Marginal Benefit Kyle $420 Dylan $360 Fran $350 Ronnie $190 Sam $170 The total social benefit of the swimming pool is:

$1,490.

Suppose Sarah owns a small company that makes wedding cakes. The accompanying table shows how Sarah's total cost varies depending on the number of wedding cakes she makes each day. Number of Cakes Per Day Total Cost Per Day 0 $100 1 $180 2 $220 3 $300 4 $400 5 $520 6 $660 Sarah's fixed cost is ______ per day.

$100

If S3 is the market supply curve, then each firm in this market will earn an economic loss of ______ per week.

$2,000

Refer to the accompanying graph. If this firm is a price taker, then when the price of each unit of output is $30, this firm's total revenue at its profit-maximizing level of output is ______.

$2,400

he accompanying figure shows the demand curve, marginal revenue curve, marginal cost curve and average total cost curve for a monopolist. At this monopolist's profit-maximizing level of output, the deadweight loss to society equals:

$24 per day.

suppose the accompanying table describes the demand for a good produced by monopolist. Price Quantity $10 1 $9 2 $8 3 $7 4 $6 5 $5 6 $4 7 The monopolist's total revenue from selling 3 units is ______, and the monopolist's marginal revenue from selling the 3rd unit is ______.

$24; 6

Refer to the accompanying figure. When this market is in equilibrium, total producer surplus in the market is ______ per day.

$250

Consider a town with three residents. The residents' demand curves for various acres of a public park are shown below. The public's willingness to pay for the 2nd acre of parkland is ______.

$26.

When Acme Dynamite produces 250 units of output, its variable cost is $2,000, and its fixed cost is $500. It sells each unit of output for $25.When Acme Dynamite produces 250 units of output, its average variable cost is ______ and its average total cost is ______.

$8; $10

Suppose the market consists of 3 individuals: Citizen A, Citizen B and Citizen C. If the good shown on the graphs is a public good, and the marginal cost of providing each unit is constant and equal to $5, then what is the optimal quantity of the public good?

40 units

The accompanying figure shows the demand curve, marginal revenue curve, marginal cost curve and average total cost curve for a monopolist. This monopolist maximizes its profit by producing ______ units per day and charging a price of ______ per unit.

4; $18

The accompanying figure shows the demand curve, marginal revenue curve, marginal cost curve and average total cost curve for a monopolist. The socially optimal level of output is:

8 units per day.

The accompanying graph shows the cost curves for Moe's mushroom gathering business, which is perfectly competitive. If mushrooms sell for $40 per bushel, and Moe chooses the profit-maximizing quantity, he will:

earn positive profit.

If a firm shuts down in the short run, then its:

economic loss will equal its fixed costs.

Patents, which confer market power, are intended to:

encourage innovation by helping firms recoup the costs of research and development.

Beyond the provision of public goods, government exists to address:

externalities and property rights.

In the case of either a positive or negative externality, a good's market price will:

not fully reflect a good's social marginal cost or social marginal benefit.

Refer to the accompanying figure. If the market for doughnuts is perfectly competitive, and the price of a doughnut is 25 cents, then this firm should:

produce 80 doughnuts.

The reason economists consider monopoly to be socially undesirable is that monopolists:

produce less than the socially optimal level of output.

If an activity generates a positive externality, the government can increase total economic surplus by ______ the activity, and if an activity generates a negative externality, the government can increase total economic surplus by ______ the activity.

subsidizing; taxing

Suppose Chris is a potter who makes mugs. His total costs depend on the number of mugs he makes each day, as shown in the accompanying table. Number of Mugs Per Day Total Cost Per Day 0 $10 1 $14 2 $19 3 $25 4 $32 5 $40 6 $49 If the market for mugs is perfectly competitive, and mugs sell for $7.50 each, then Chris should make ______ mugs per day.

4

Suppose the accompanying figure shows the demand curve, marginal revenue curve and marginal cost curve for a monopolist. At the monopolist's profit-maximizing level of output, deadweight loss equals the area:

JLN

Refer to the accompanying figure. At quantities less than 50 doughnuts per day:

average cost is declining because marginal cost is less than average cost.

If a firm faces a downward-sloping demand curve, then:

the firm's marginal revenue from selling an additional unit of output is less than price.

The accompanying graph shows the cost curves for Moe's mushroom gathering business, which is perfectly competitive. If mushrooms sell for $10 per bushel, and Moe chooses the profit-maximizing quantity, he will gather:

zero bushels.

The short run is best defined as:

a period of time sufficiently short that at least one factor of production is fixed.