Microeconomics Exam 02 Study Guide

Which of the following is usually true about government-provided goods?

People do not have to pay an explicit fee to enjoy these goods.

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

Variable cost

Which of the following is an example of a positive externality?

Your neighbor plants a nice garden in front of his house.

A state-owned bridge is

a common resource when it is congested, but it is a public good when it is not congested.

Pay-per-view broadcasts are

club goods

Goods that are rival in consumption include both

common resources and private goods.

Private goods are both

excludable and rival in consumption.

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

Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers

labor to be variable and capital to be fixed.

An example of an explicit cost of production would be the

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

The U.S. military defends Ngoc from foreign conflict. The fact that Ngoc enjoys this protection does not detract from other Americans' enjoyment of it. For this reason, we say that national defense is

not rival in consumption

An externality is the uncompensated impact of

one person's actions on the well-being of a bystander.

A good is excludable if

people can be prevented from using it.

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

$100

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

$100

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

$50

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

$50

Nathan makes candles. If he charges $20 for each candle, his total revenue will be

$500 if he sells 25 candles.

Flu shots provide a positive externality. Suppose that the market for vaccinations is perfectly competitive. Without government intervention in the vaccination market, which of the following statements is correct?

At the current output level, the marginal social benefit exceeds the marginal private benefit.

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

$100

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

$150

Refer to Figure 10-1. This graph represents the tobacco industry. Without any government intervention, the equilibrium price and quantity are

$2.07 and 76 units, respectively.

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

$2.80 and 48 units, respectively

Kate is a florist. Kate can arrange 15 bouquets per day. She is considering hiring her husband Amir to work for her. Together Kate and Amir can arrange 23 bouquets per day. What is Amir's marginal product?

8 bouquets

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.

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

Taxes

Governments can improve market outcomes for

both public goods and common resources.

Total revenue equals

price × quantity

When an externality is present, the market equilibrium is

inefficient, and the equilibrium does not maximize the total benefit to society as a whole.

For most goods in an economy, the primary signal that guides the decisions of buyers and sellers is

price

For private goods allocated in markets,

prices guide the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources.

Dioxin emission that results from the production of paper is a good example of a negative externality because

self-interested paper producers will not consider the full cost of the dioxin pollution they create.