Microeconomics Fall Tests

The marginal external cost associated with the efficient level of air travel is ________.

$100

Suppose the government assigns property rights to the airlines, meaning the airlines have the right to create noise. No negotiations occur between the parties. The marginal external cost associated with the resulting level of air travel is ________.

$120

With a specific tariff of $3 per unit, what is the government's revenue?

$120

The market for sunglasses is in equilibrium at a price of __________ and a quantity of ___________ sunglasses.

$60; 450

Paul goes to Sportsmart to buy a new tennis racquet. He is willing to pay $200 for a new racquet, but buys one on sale for $125. Paul's consumer surplus from the purchase is

$75

With a specific tariff of $3 per unit, how much deadweight loss is there in the market?

$75

The above (incomplete) table provides information about the relationships between labor and various product measures. The amount of labor that maximizes the marginal product of labor is

4 units of labor

With a specific tariff of $3 per unit, what is the quantity of Widgets imported?

40

Refer to the figure above. The marginal product of the second worker is ________ lawns moved.

5

The above figure shows the market for steel ingots. The socially optimal quantity of steel is

50 units

In the absence of trade (in autarky) how many Widgets does this country produce

60

From 1970 to 1993, the real price of. college education increased, and total enrollment increased. Which of the following could have caused this increase in price and enrollment?

A shift to the left in the supply curve for college education and a shift to the right in the demand curve for college education

The idea of comparative advantage implies that people or countries

All of the above Can gain from trading. Should specialize in the production of goods. Can consume at a point outside their production possibilities frontier.

What is the difference between an "increase in demand" and an "increase in quantity in demanded"?

An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.

An increase in the demand for lobster due to changes in consumer tastes, accompanied by a decrease in the supply of lobster as a result bad weather reducing the number of fishermen trapping lobster will result in

An increase in the equilibrium price of lobster; the equilibrium quantity may increase or decrease.

Economics is best defined as the study of how people, businesses, governments, and societies

An increase in the number of students attending college

During strong economic times,, when consumer income increases, the demand for tacos decreases and the demand for sushi increases. This implies that tacos

Are an inferior good and sushi is a normal good

The "law of demand" implies that

As prices fall, quantity demand increases

Economic growth may occur when

Both A and B A society learns to produce more using existing resources. A society acquires new resources.

In recent years the cost of producing organic produce in the U.S. has decreased largely due technological advancement. At the same time, more and more Americans prefer organic produce over conventional produce. Which of the following best explains the effect of these events in the organic produce market?

Both the supply and demand curves have shifted to the right. As a result, there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium

Who benefits from an import quota on a good?

Domestic producers of the good

In which of the following cases does the tragedy of the commons occur? I) Cattle grazing on private ranches. II) Catching lobsters off the coast of Maine. III) Raising salmon on salmon farms. IV) Using legal services provided by the courts.

II only

The above figure shows the market for steel ingots. If the market is competitive, then to achieve the socially optimal level of pollution, the government can

Institute a specific tax of $50

Assume that the graphs in this figure represent the demand and supply curves for coffee. What happens in this market if there is a study published which which concludes that coffee consumption is linked to reduced stress and better sleep?

Panel C

Assume that the graphs in this figure represent the demand and supply curves for tuna. Which panel best describes what happens in this market when there is a decrease in the productivity of commerce fishermen?

Panel b

Assume that the graphs in this figure represent the demand and supply curves for ramen frozen yogurt. Which panel describes what happens in the market for frozen yogurt when the price of ice cream, a substitute product, increases?

Panel c

Assume that the graphs in this figure represent the demand and supply curves for ramen noodles, an inferior good. Which panel describes what happens in this market as a result of an increase in income?

Panel d

If the U.S. Surgeon General announces that increased grapefruit juice consumption could prevent heart attacks, what would happen to the equilibrium price and quantity of grapefruit juice?

Price and quantity both increases

Microeconomics is best described as the study of

The choices made by individual households, firms, and governments

What would be the impact on the price of the emission allowances in the market?

The prices rises

In recent years the cost of producing wines in the U.S. has increased largely due to rising rents for vineyards. At the same time, more and more Americans prefer wine over beer. Which of the following best explains the effect of these events in the wine market?

The supply curve is shifted to the left and the demand curve has shifted to the right. As a result, there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity

Scientists have said for years cod was so seriously overfished in European Union waters that there was a risk of extinction due to stock collapse. "To ensure this recovery... Ministers agreed a 10 percent cut in days at sea (for North Sea cod)," EU Fisheries Commissioner Joe Borg stated in 2008. What is the goal of this policy?

To reduce the number of fishing days to the point where marginal social cost per day equals marginal social benefit

Which of the following is NOT included in the various policies regarding the sugar industry?

Voluntary export restraints (VERs)

Which of the following is a microeconomics question?

What factors determine the price of carrots?

Which of the following statements is correct?

When supply increases (shifts right), the equilibrium quantity increases and the equilibrium price falls.

An insect that is resistant to currently used pesticides has infested the cotton crop, and this year's crop is only half of what was produced last year. You accurately predict that this

Will shift the supply curve of cotton to the left, the equilibrium price of cotton will increase, and the quantity demanded of cotton will decrease.

Which of the following will NOT cause a shift in the demand curve for compact discs?

a change in the price of compact disks

A private good is

a good that is rivalrous and excludable.

Kansas Power and Light, the only supplier of electricity in Kansas, is an example of a firm in what type of market?

a monopoly market

The market for wheat is an example of

a perfectly competitive market

"Free riding" is a characteristic of which type of good?

a public good

The United States placed a limit on the amount of cars that can be imported into the United States. This is an example of

a quota

Markets are best defined as

arrangements where buyers and sellers get together to buy and sell

Compare the inefficient market equilibriums for the case of an external benefit and the case of an external cost. Which of the following is true?

both result in a deadweight loss

Among the factors of production are

capital

Goods that are excludable but not rival are

club goods

Which of the following pairs of goods are most likely substitutes?

cola and lemon lime soda

A good that is rival but not excludable is a

common resource

By specialization and trade, two individuals can

consume at a point beyond their individual production possibilities frontiers.

The difference between what a consume is willing to pay for a unit of a good and what must be paid when actually buying it is called

consumer surplus

A U.S. tariff imposed on items that can be produced more cheaply abroad

creates deadweight loss

An inferior good is a good for which demand

decreases when income increases

At a price of $30, there is an excess

demand of 450 sunglasses

The production possibilities frontier

depicts the boundary between those combination of goods and services that can be produced and those that cannot given resources and the current state of technology

In the circular flow model, there are two types of markets: the __________ and the ___________ market.

goods; factors

When there is an externality in a market

government intervention may increase economic efficiency.

Marginal cost is the

increase in total cost resulting from producing one more unit of output.

Which the price of wood (which is an input in the production of furniture) falls, the consumer surplus associated with the consumption of furniture

increases

The shape of a traditional, curved production possibility frontier shows

increasing opportunity costs

Assume that production from an electric utility caused acid rain. If the government imposed a tax on the utility equal to the cost of the acid rain, the government's action would

internalize the externality

An externality

is a benefit or cost that affects someone who is not directly involved in the production or consumption of a good or service.

Which of the following activities create a negative externality?

keeping a junked car parked on your front lawn

The efficient level of paper production will occur where the

marginal private benefit from consuming paper is equal to the marginal social cost of production.

Regardless of market structure, the condition which maximizes profit for a firm is to produce output at a level where

marginal revenue is equal to marginal cost

The most important goal of the firm is to

maximize its profits

The four market structures include all of the following EXCEPT

monoligopolistition

The above figure shows the market for steel ingots. If the market is competitive, then

more than the socially optimal quantity of 50 units of steel is produced.

Public goods are distinguished by two primary characteristics. What are they?

nonrivalry and nonexcludability

If the demand for coffee decreases as income decreases, coffee is a(n)

normal good

When an action is chosen, the highest valued alternative NOT chosen is called the

opportunity cost

A positive externality results when

people who are not directly involved in producing or paying for a good or service benefit from it.

total revenue equals

price multiplied by quantity sold

When there is an excess supply of a product in an unregulated market, the tendency is for

price to decrease

The production possibilities frontier is the boundary between those combination of goods and services that can be

produced and those that cannot be produced

If the unemployment rate increases, the economy will

remain on the ppf

Poor temperatures in California have produced a depressed crop and caused the supply of strawberries in the U.S. to shift to the left. You predict that the price of strawberries will _____________, and the more elastic the demand for strawberries, the _____________ will be the effect on the price

rise; smaller

During the last decade, the price of a computer fell every year and the quantity sold increased every year. This experience suggests that the

supply curve shifted afterward

Classifying a good as excludable means

that anyone who does not pay for the good cannot consume it.

Classifying a good as rival means

that when one person consumes a unit of the good no one else can consume it.

If the price of automobiles was to increase, then

the demand for gasoline would decrease

A major problem with using tradable emissions allowance system to control pollution is

the difficulty in determining the emissions target.

A difference between a quota and a tariff is that

the government collects revenue from a tariff but does not collect revenue from a quota.

Marginal product is

the increase in output that results from a one-unit increase in the quantity of labor employed with all other inputs remaining the same.

The short run is a period of time in which

the quantity of at least one factor of production is fixed.

Economies to scale refer to

the range of output over which the long-run average cost falls as output increases.

A reason tariffs and quotas are imposed is that

their costs are spread among many people and their benefits are concentrated.