microeconomics test 2

Brady Industries has average variable costs of $1 and average total costs of $3 when it produces 500 units of output. The firm's total fixed costs equal

$1,000

Refer to Figure 8-2. The loss of consumer surplus associated with some buyers dropping out of the market as a result of the tax is

$1.50

Refer to Figure 9-3 . The amount of deadweight loss caused by the tariff equals

$100

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

$100

Refer to Figure 9-2 . With trade, the price of tricycles in this country is

$11, with 200 tricycles produced in this country and another 320 tricycles imported

Tom's Tent Company has total fixed costs of $300,000 per year. The firm's average variable cost is $80 for 10,000 tents. At that level of output, the firm's average total costs equal

$110

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

$150

Refer to Figure 8-3 . As a result of the tax, consumer surplus decreases by

$160, producer surplus decreases by $160, tax revenue is $240, and deadweight loss is $80

Refer to Scenario 13-1. Suppose Korie purchases the factory using $200,000 of her own money and $200,000 borrowed from a bank at an interest rate of 6 percent. What is Korie's annual opportunity cost of purchasing the factory?

$18,000

For widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. A tax of $15 per unit is imposed on widgets. The tax reduces the equilibrium quantity in the market by 300 units. The deadweight loss from the tax is

$2,250

Refer to Figure 8-2. The amount of deadweight loss as a result of the tax is

$2.50

Refer to Figure 8-2. The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is

$3

Jacqui decides to open her own business and earns $50,000 in accounting profit the first year. When deciding to open her own business, she withdrew $20,000 from her savings, which earned 5 percent interest. She also turned down three separate job offers with annual salaries of $30,000, $40,000, and $45,000. What is Jacqui's economic profit from running her own business?

$4,000

Refer to Table 13-8. What is the average variable cost of producing 5 units of output?

$40

Refer to Figure 8-2. The amount of tax revenue received by the government is

$5

Refer to Figure 8-2. The amount of the tax on each unit of the good is

$5

Refer to Table 10-5. If the government wanted to eliminate exactly 11 units of pollution, which of the following fees per unit of pollution would achieve that goal?

$87

Billy's Bean Bag Emporium produced 300 bean bag chairs but sold only 275 of the units it produced. The average cost of production for each unit of output produced was $100. The price for each of the 275 units sold was $95. Total profit for Billy's Bean Bag Emporium would be

-$3,875

Refer to Figure 9-1. In the absence of trade, total surplus in the Guatemalan coffee market amounts to

1,650

Refer to Figure 10-3. What is the socially optimal quantity of output in this market?

10 units

If the tax on a good is increased from $1 per unit to $4 per unit, the deadweight loss from the tax increases by a factor of

16

Suppose a certain firm is able to produce 165 units of output per day when 15 workers are hired. The firm is able to produce 181 units of output per day when 16 workers are hired, holding other inputs fixed. The marginal product of the 16th worker is

16 units of output

Refer to Table 13-12. Firm 4's efficient scale occurs at what quantity?

3

Refer to Table 11-1. Suppose the cost to build the park is $24 per acre. How many acres should the park be to maximize total surplus from the park in Springfield?

3 acres

Refer to Table 10-2. What is the equilibrium quantity of output in this market?

4 units

Refer to Figure 10-5. The socially optimal quantity of output is

420 units, since the value to society of the 420th unit is equal to the cost incurred by the seller of the 420th unit

Refer to Table 10-4. The market equilibrium quantity of output is

6 units

Let L represent the number of workers hired by a firm, and let Qrepresent that firm's quantity of output. Assume two points on the firm's production function are (L = 12, Q = 122) and (L = 13, Q = 130). Then the marginal product of the 13th worker is

8 units of output

Refer to Figure 9-1. In the absence of trade, total surplus in Guatemala is represented by the area

A + B + C + D + F

The town of Isle is on a small island connected to Big City by a single bridge. Most of the residents of Isle work in Big City. As a result, the bridge becomes very congested for two hours each day at the typical morning and evening commute times. Which of the following policies considered by the mayor of Isle would likely be most efficient in alleviating the congestion?

A variable toll for the bridge payable only by vehicles crossing the bridge during the congested commute times

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

Refer to Figure 9-4 . Total surplus in this market after trade is

A+B+C+D

Refer to Figure 9-5 . Producer surplus plus consumer surplus in this market after trade is

A+B+C+D

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

Which of the following is not a characteristic of a public good?

Because it is a free good, there is no opportunity cost

Which of the following statements is not correct?

Corrective taxes require the government to set a target level of pollution

Refer to Figure 9-5 . The change in total surplus in this market because of trade is

D, and this area represents a gain in total surplus

Who among the following is a free rider?

Ernie listens to National Public Radio, but does not contribute to any fundraising efforts

Refer to Figure 10-4. The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, the market for antibiotics is shown in

Graph (b) only

Refer to Table 8-1. Suppose the government is considering levying a tax in one or more of the markets described in the table. Which of the markets will allow the government to minimize the deadweight loss(es) from the tax?

Markets B and D only

In analyzing the gains and losses from international trade, to say that Moldova is a small country is to say that

Moldova is a price taker

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

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

Refer to Figure 10-2. If all external costs were internalized, then the market's output would be

Q2

For a large firm that produces and sells automobiles, which of the following costs would be a variable cost?

The cost of the steel that is used in producing automobiles

Which of the following quantities decrease in response to a tax on a good?

The equilibrium quantity in the market for the good, producer surplus, and the well-being of buyers of the good

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?

The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers

Suppose Yolanda needs a dog sitter so that she can travel to her sister's wedding. Yolanda values dog sitting for the weekend at $200. Rebecca is willing to dog sit for Yolanda so long as she receives at least $175. Yolanda and Rebecca agree on a price of $185. Suppose the government imposes a tax of $30 on dog sitting. What is the deadweight loss of the tax?

The lost benefit to Yolanda and Rebecca because after the tax, Rebecca will not dog sit for Yolanda

Which of the following is an example of an implicit cost?

The owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm

Refer to Table 13-5 . The Wooden Chair Factory experiences diminishing marginal product of labor with the addition of which worker?

The sixth worker

What happens to the total surplus in a market when the government imposes a tax?

Total surplus decreases

Which of the following is not a typical solution to the "Tragedy of the Commons?"

Turning the common resource into a club good

The nation of Wheatland forbids international trade. In Wheatland, you can buy 1 pound of corn for 3 pounds of fish. In other countries, you can buy 1 pound of corn for 2 pounds of fish. These facts indicate that

Wheatland were to allow trade, it would import corn

When a country is on the downward-sloping side of the Laffer curves, a cut in the tax rate will

When a country is on the downward-sloping side of the Laffer curves, a cut in the tax rate will

Zaria and Hannah are roommates. Zaria assigns a $30 value to smoking cigarettes. Hannah values smoke-free air at $15. Which of the following scenarios is a successful example of the Coase theorem?

Zaria pays Hannah $16 so that Zaria can smoke

Refer to Figure 10-2. This market is characterized by

a negative externality

Average total cost is very high when a small amount of output is produced because

average fixed cost is high

When a good is taxed,

both buyers and sellers of the good are made worse off

Two types of private solutions to the problem of externalities are

charities and the Golden Rule

Goods that are rival in consumption include both

common resources and private goods

Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by J represents

consumer surplus after the tax

When a country that imports a particular good imposes an import quota on that good,

consumer surplus decreases and total surplus decreases in the market for that good

Refer to Figure 9-2 . If this country allows free trade in tricycles,

consumers will gain and producers will lose

Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by I + Y represents the

deadweight loss due to the tax

Four friends decide to meet at a Chinese restaurant for dinner. They decide that each person will order an item off the menu, and they will share all dishes. They will split the cost of the final bill evenly among each of the people at the table. A Tragedy of the Commons problem is likely for each of the following reasons except

each dish would be both excludable and rival in consumption

If long-run average total cost decreases as the quantity of output increases, the firm is experiencing

economies of scale

The world price of a pound of almonds is $4.50. Before Uruguay allowed trade in almonds, the price of a pound of almonds there was $3.00. Once Uruguay began allowing trade in almonds with other countries, Uruguay began

exporting almonds and the price per pound in Uruguay increased to $4.50

The failure of markets to adequately protect the environment can be viewed either as a problem of

externalities or as a problem of common resources

If the Korean steel industry subsidizes the steel that it sells to the United States, the

harm done to U.S. steel producers is less than the benefit that accrues to U.S. consumers of steel

If the labor supply curve is very elastic, a tax on labor

has a large deadweight loss

Refer to Figure 9-6. The tariff

increases producer surplus by the area C and decreases consumer surplus by the area C + D + E + F

Refer to Table 13-9. For the firm whose production function and costs are specified in the table, its average-variable-cost curve is

increasing

Private decisions about consumption of common resources and production of public goods usually lead to an

inefficient allocation of resources and external effects

The deadweight loss from a tax per unit of good will be smallest in a market with

inelastic supply and inelastic demand

The infant-industry argument

is based on the belief that protecting industries when they are young will pay off later

Most economists prefer corrective taxes to regulation as a way to correct the problem of pollution because the market-based solution

is less costly to society

Firms may experience diseconomies of scale when

large management structures are bureaucratic and inefficient

Refer to Figure 9-3 . When the tariff is imposed, domestic consumers

lose surplus $450

If marginal cost is rising,

marginal product must be falling

A traffic light at an intersection is

not rival and not excludable in consumption

An externality is the uncompensated impact of

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

Cost-benefit analysts often encounter the problem that those who would benefit from government provision of a public good tend to

overstate the benefit they would receive from the public good and those who would be harmed by government provision of a public good tend to overstate the costs they would incur from the public good

The provision of a public good generates a

positive externality and the use of a common resource generates a negative externality

A textbook is a

private good and the knowledge that one gains from reading the book is a public good

Goods that are excludable include both

private goods and club goods

When the nation of Duxembourg allows trade and becomes an importer of software,

residents of Duxembourg who produce software become worse off; residents of Duxembourg who buy software become better off; and the economic well-being of Duxembourg rises

Refer to Figure 8-5. Which of the following combinations will maximize the deadweight loss from a tax?

supply2 and demand2

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

taxes

The "unfair-competition" argument might be cited by an American who believes that

the French government's subsidies to French farmers justify restrictions on American imports of French agricultural products

The overuse of a common resource relative to its economically efficient use is called

the Tragedy of the Commons

According to the Coase theorem, private parties can solve the problem of externalities if

the cost of bargaining is small

Representative Vazquez cites the "jobs argument" when he argues before Congress in favor of restrictions on trade; he argues that everything can be produced at lower cost in other countries. The likely flaw in Representative Vazquez's reasoning is that he ignores the fact that

the gains from trade are based on comparative advantage

If a sawmill creates too much noise for local residents,

the government can raise economic well-being through noise-control regulations

Concerning the labor market and taxes on labor, economists disagree about

the size of the deadweight loss of the tax on labor

Producers have little incentive to produce a public good because

there is a free-rider problem

Refer to Table 10-4. The table represents a market in which

there is a negative externality

Refer to Table 10-3. The table represents a market in which

there is a positive externality

Private companies are most likely to invest in medical research if

they will produce a specific product for which they may receive a patent

It is commonly argued that national defense is a public good. Nevertheless, the weapons used by the U.S. military are produced by private firms. We can conclude that

weapons are rival in consumption and excludable, but national defense is not rival in consumption and not excludable

A cost-benefit analysis of a highway is difficult to conduct because analysts

will have difficulty estimating the value of the highway

Suppose Brazil has an absolute advantage over other countries in producing almonds, but other countries have a comparative advantage over Brazil in producing almonds. If trade in almonds is allowed, Brazil

will import almonds