Microeconomics Exam 2

Suppose a small island nation nation imports sugar for its population at the world price of $1500 per ton. The domestic market for sugar is shown in the accompanying figure If the government provides a subsidy of $500 per ton, the equilibrium price of sugar will be _____ per ton, the equilibrium quantity will be ______ for tons per day

$1000; 12

Referred to the accompanying table. An output level of 15 units, this firms the counting profit is _____, and its economic profit is _______.

$12; $6

Refer to the accompanying figure If this market is unregulated, the economic surplus received by producers is

$16

The accompanying table shows a pizzerias fixed cost and variable cost at different levels of output. Pizzas sell for $20 each. When the pizzeria makes 25 pizzas, its average fixed cost is

$20

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. 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 When the firm uses 9 employee hours per day, it's total revenue each day is

$240

When Acme Dynamite produces 275 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 275 units of output, its profit is:

$3000

Taylor used to work as a yoga instructor, at the local gym earning $35,000 a year. Taylor quit that job and started working as a personal trainer. Taylor makes $50,000 total annual revenue. Taylor's only out-of-pocket costs are $12,000 per year for rent and utilities, $1000 per year for advertising and $3000 per year for equipment. Taylor's accounting profit is _____, and Taylor's economic profit is _____.

$34,000; -$1000

The figure below shows the supply and demand curves for oranges in Smallville. What is the marginal cost of producing the 12th pound of oranges?

$4.80

If a firm spends $300 to produce 10 units of output and spends $720 to produce 20 units, then between 10 and 20 units of output, the marginal cost of production is

$42

If an individual producers willing to produce one unit of a good for $2.50 but is able to sell it for $7.50, and his or her producer surplus from the sale that unit would be

$5

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. 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 This firm's fixed cost each day is:

$50

The accompanying table shows a pizzerias fixed cost and variable cost at different levels of output. Pizzas sell for $20 each. When the pizzeria makes 100 pizzas a day, it's fixed cost is ______ and it's total cost is ______.

$500; $1350

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. When Sarah produces 2 cakes per day, her average variable cost is ____

$60

Suppose a small island nation imports sugar for its population of the world price of $1500 per ton. The domestic market for sugar is shown in the accompanying figure. If the government provides a subsidy of $500 per ton, then the cost of subsidy would which must be borne by taxpayers, will be ______ per day

$6000

Suppose the current market price for wheat is $10 per bushel and there are 200,000 bushels sold each day. If the supply curve is a straight line that intersects the price axis at $2 per bushel, what is the total amount of producer supplying the market l

$800,000

Suppose Vivek owns a small company that makes kites. The market for kites is perfectly competitive and kite sell for $25 each. Vivek's total production costs vary depending on the number of kites he makes each day, as shown in the accompanying table What is Viveks economic profit at his profit-maximizing level of output?

-$72

Refer to the accompanying table. At what output level or levels are the firms owners doing as well as or better than they could do with the next best use of their resources?

10, 15, and 20 units

Assume that all firms in this industry have identical cost curves and that the market is perfectly competitive. If S3 is the market supply curve, then in the short run, the profit maximizing level of output for a single firm in this market is _____ gallons per week.

200

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. If the market for wedding cakes is perfectly competitive, and the wedding cake sell for $95 each, then Sarah should produce _____ cakes per day

3

Last year Christine worked as a consultant. She hired an administrative assistant for $16,500 per year and rented office space (utilities included) for $2700 per month. Her total revenue for the year was $130,000. If Christina hadn't worked as a consultant, she would have worked as a real estate firm earning $55,000 a year. Last year, Christine's accounting profit was_____ and her economic profit was _______.

81,100; $26,100

Last year, Amanda grew fresh vegetables, which she sold at her local farmers market, but this year, Amanda did not plant any vegetables and went to work at a bank instead. Which of the following best explains Amanda's career change?

Amanda's opportunity costs of gardening exceeded Amanda's opportunity cost of working at the bank.

Which of the following will cause a decrease in the supply of jeans?

An increase in the wages paid to workers who make jeans.

The allocative function of purse cannot operate unless there is

Both free entry and free exit

In an industry with free entry and exit, positive economic profit

Cannot be sustained indefinitely

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

Consumer surplus

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 firms revenue is sufficient to cover its variable cost, the firm should

Decrease production

Suppose a small island nation import sugar for the population of the world price of $1500 per ton. The domestic market for sugar is shown in the accompanying figure If the government provides a subsidy of $500 per ton, then relative to before the subsidy, total economic surplus will _____ by _____ per day.

Decrease; $1000

The allocative function of prices is to

Direct resources away from markets that are overcrowded and toward markets that are undeserved

Suppose farmers in a given market can either grow soybeans or corn on their land. In addition, suppose an increase in demand for corn causes the price of corn to increase. As a result of the increase in the price of corn, farmers who were already growing corn will earn a

Economic profit in the short run

Refer to the accompanying figure If a price ceiling were imposed at point G, then excess demand would be measured by the distance between points.

F and I

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. The firm depicted in the graph on the right faces a demand curve that is

Horizontal at the market place

For a given seller, the accompanying figure shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. As the market price of this good increases, the quantity produced by the seller will

Increase

Suppose a small island nation import sugar for its population of the world price of $1500 per ton. The domestic market for sugar is shown in the accompanying figure. If the government provides a subsidy of $500 per ton, then relative to before the subsidy, consumer surplus will _____ by______ per day

Increase; $5000

Refer to the accompanying graph. If this firm is a price taker and the price of each unit of output is $9, then at its profit maximizing level of output, this firm will earn a ______ of __________

Loss of $300

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

Adam Smith believed that the individual pursuit of self-interest

Often promotes the broader interests of society

Abdul Runs a fishing lodge and has a very profitable business during the summer. In the fall the number of guests at the lodge start to decline. Abdul should keep the lodge open

Only during the months in which his total revenue exceeds his variable cost

Suppose several United States software design companies compete with each other in a perfectly competitive environment. If one company decides to move some of its offices to a low wage country in order to reduce operating costs, then

Other companies will have an incentive to move to lower each countries in order to remain competitive

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

Producers surplus

An increase in consumers' demand for espresso will lead to an increase in ______, while an increase in the number of firms producing espresso will lead to a(n) ________.

Quantity supplied; increase in supply

Subsidies are most likely to

Reduce total economic surplus

Assuming that the production technology required to produce goods X and Y is very similar. If a firm that is producing good X notices that the market price of good Y is rising, it will

Shift into producing good Y

In a perfectly competitive market, supply and demand fully reflect all of the costs and benefits associated with production and consumption, then total economic surplus is maximize when

The market is in equilibrium

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

The number of librarians

The accompanying graph shows the cost curves for Mei's mushroom gathering business, which is perfectly competitive. If mushroom sells for $10 a bushel, and Mei chooses the profit maximizing quantity, she will gather

Zero bushels

If a perfectly competitive firm produces an output level at which price is greater than marginal cost, then the firm should

expand output to earn greater profits or smaller losses

A rational seller will sell another unit of output:

if the cost of making another unit is less than the revenue gained from selling another unit.

A profit maximizing firm will only produce a positive amount of output if

its total revenue is greater than or equal to its variable cost.

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

marginal cost equals the price.

Average total cost is defined as

total cost divided by total output