Practice Final

Suppose that Louise is the only person licensed to rent out tandem bicycles on the boardwalk in her small hometown. When she increases her rentals from 15 tandem bicycles to 16 tandem bicycles, the market rental price declines from $35 per rental to $34 per rental. The marginal revenue of the 16th tandem bicycle is:

$19

The cost of your favorite coffee is $6.50 per cup at the coffee shop. The marginal cost of each cup you drink is _____. The first cup of coffee you drink gives you a marginal benefit of $8. The marginal benefit from the second cup is $6, $4 from the third, $2 from the fourth, and $0 from the fifth. You should drink _____ cups of coffee.

$6.50, one

What effect would a recession have on the demand curve in the upscale restaurant market? A shift or a movement along the curve?

A leftward shift.

Which of the following is an example of a quantity quota? A) A city enforces zoning laws that restrict the number of housing units. B) A city awards a construction firm a monopoly over all public housing construction C) A city sets a limit on the maximum rent that tenants pay. D) A city imposes a tax on all people who move into the city.

A) A city enforces zoning laws that restrict the number of housing units.

Which of the following is NOT one of the main concerns about putting a high priority on economic efficiency? A) Demand reflects ability to pay and not solely marginal benefit. B) Incentives for efficiency can reduce innovation. C) Efficient results can be unfair. D) Efficient results can be unfair.

A) Demand reflects ability to pay and not solely marginal benefit.

Which of the following statements is based on positive analysis? A) If the price of cars rises, fewer cars will be sold. B) The best option is to raise the productivity expectations. C) The quality of education ought to be improved. D) Wages are too low and should be raised.

A) If the price of cars rises, fewer cars will be sold.

A common strategy for a seller to increase its market power is to A) differentiate its product B) reduce price C) raise price D) increase output

A) differentiate its product

Suppose that education were not financed by the state and that each individual had to pay for his or her own education from kindergarten through high school. One would expect that: A) less education would be acquired than at present, since an individual may not consider the positive external benefits of education to society. B) more education would be acquired than at present, since an individual may not consider the positive external benefits of education to society. C) the optimal amount of education would be acquired by community members, since they would each pay for the amount of education they want. D) a corrective tax would ensure the optimal amount of education.

A) less education would be acquired than at present, since an individual may not consider the positive external benefits of education to society.

Which statement BEST describes a negative externality? A) Your neighbor has a honey farm, and the bees pollinate your orchard. B) Your neighbor has an ornamental pond that breeds mosquitoes. C) Your neighbor is a landscape architect who uses her property to demonstrate beautiful landscaping, increasing the value of all of the houses on the block. D) You can use your neighbor's pool whenever you wish.

B) Your neighbor has an ornamental pond that breeds mosquitoes.

Perfectly competitive industries are characterized by: A) Few sellers and many buyers B) Consumers who can differentiate between products C) Identical goods D) A few producers that account for most of the market share

C) Identical goods

Pedro attends a university that provides antivirus software to all students, faculty, and staff for their personal computers as well as all university-owned computers. Why would the university pay for the protection of the personal computers of students, faculty, and staff? A) It reduces the cost of operations for the university because it can thereby buy software in bulk. B) Having this extra perk from being associated with the university makes it easier to attract high-quality students, faculty, and staff. C) It reduces the number of viruses on university-owned computers by reducing the probability that viruses will spread through files transferred from personal computers to university-owned computers and systems. D) Reducing the spread of viruses across campus promotes health among students and decreases absenteeism, which improve educational outcomes on campus.

C) It reduces the number of viruses on university-owned computers by reducing the probability that viruses will spread through files transferred from personal computers to university-owned computers and systems.

Assuming that iPhones are normal goods, which factor will NOT increase the demand for iPhones? A) an increase in the incomes of iPhones users B) Cool new games that can only be played on iPhones C) Lower prices for Samsung smartphones D) The price of laptop computers increasing

C) Lower prices for Samsung smartphones

If the market for alpine skis is in competitive equilibrium, and there are no external costs. A) the sum of consumer surplus and producer surplus is maximized. B) resources are being used efficiently. C) the marginal benefit is equal to the marginal cost. D) All of the other answer choices are correct.

D) All of the other answer choices are correct.

Which factor would result in a decrease in the supply of linen shirts? A) A decrease in the price of linen fabric B) A beneficial technology change C) An increase in the number of suppliers of linen D) An increase in the price of linen fabric

D) An increase in the price of linen fabric

Consider the daily market for shoes. For years Bill has sold shoes in his small town. Before Jackson started selling shoes, Bill sold 12 pairs each day at a price of $36 per pair, generating $144 in producer surplus each day. Now Jackson sells 27 pairs of shoes at $6 per pair and Bill is out of business, costing Bill $144 per day. Has Jackson created a negative externality?

No, the resulting equilibrium is efficient

Marie Johnston is a manager at an electronics store, and she has to decide how many workers to hire. If she hires one worker, her revenue is $400 per day. If she hires another worker, she can make another $350 per day. The marginal benefit of hiring another worker decreases by $50 with each additional hire. Assuming that workers are paid $20 per hour and work eight hours, how many employees should Marie hire, and what will be the total revenue of her store?

She will hire five workers and the revenue of the store will be $1,500

Emma spends $40,000 for one year's tuition at university. The opportunity cost of one year at university for Emma is:

Whatever she would have purchased with the $40,000 plus whatever she would have earned had she not attended university.

If the price of herring increases by 8%, and the quantity demanded falls by 20%, demand is ______. This increase in price will therefore lead to a ________ in total revenue.

elastic, decrease

The manufacturing plant used to produce aircraft is a ___________ cost for Boeing. The cost of the manufacturing plant ___________ be included in the marginal cost of producing an additional aircraft.

fixed; should not

Lumber and brick are substitutes in home construction. Consider the market for bricks. Suppose the price of lumber increases due to new regulations for the logging industry. What impact this change will have on the market for bricks? Equilibrium price _______ , equilibrium quantity _______:

increases, increases

Frank is a barley farmer in a perfectly competitive market. The market price of barley is $250 per ton. If Frank charges $245 per ton, he will

lower his profitability by $5 per ton

Consider the local market for fast food hamburgers, an inferior good. If more fast food restaurants open, while consumers' incomes increase, the equilibrium price will be _____, and the equilibrium quantity will be _____.

lower; ambiguous

The income elasticity for pears has been estimated as 2.46. If income grows by 12%, all other things equal, demand will _______.

rise

Beatrice loves to work in her magnolia garden, which provides pleasure to everyone in her neighborhood. To improve social welfare, the government could _____ Beatrice's gardening activities, since the market quantity of magnolias is _____ than the socially optimal quantity. A) subsidize; greater B) tax; less C) subsidize; less D) tax; greater

subsidize; less