Test 2

Refer to Table 5 . What is Bill's economic profit at the profit-maximizing output level?

$115

Scenario A Zane wants to start his own t-shirt business. He can purchase a suitable factory that costs $100,000. Zane currently has $150,000 in the bank earning 3 percent interest per year.Refer to Scenario A. Suppose Zane purchases the factory using $50,000 of his own money and $50,000 borrowed from a bank at an interest rate of 6 percent. What is Zane's annual opportunity cost of purchasing the factory?

$3,000

The Carolina Christmas Tree Corporation grows and sells 500 Christmas trees. The average cost of production per tree is $50. Each tree sells for a price of $65. The Carolina Christmas Tree Corporation's total revenues are

$32,500

Refer to Table 5. What is the total revenue from selling 7 units?

$382

Refer to Table 5. What is the marginal cost of the 5th unit?

$68

Bob purchases a book for $6, and his consumer surplus is $2. How much is Bob willing to pay for the book?

$8

Refer to Figure 5. With trade, total surplus in the Guatemalan coffee market amounts to

1,870

Table 4The following table shows the marginal costs for each of four firms (A, B, C, and D) to eliminate units of pollution from their production processes. For example, for Firm A to eliminate one unit of pollution, it would cost $54, and for Firm A to eliminate a second unit of pollution it would cost an additional $67. Unit to be eliminated A B C D First unit First unit 54 57 54 62 Second unit 67 68 66 73 Third unit 82 86 82 91 Fourth unit 107 108 107 111 Refer to Table 4 . If the government charged a fee of $84 per unit of pollution, how many units of pollution would the firms eliminate altogether?

10

Refer to Table 3. Suppose the cost to plant each tree is $300. How many trees should be planted to maximize the total surplus of the four homeowners?

2

Suppose the government taxes 25 percent of the first $60,000 of income and 40 percent of all income above $60,000. For a person earning $200,000, the marginal tax rate is

40 percent, and the average tax rate is 36 percent.

Refer to Table 2. What is the socially-optimal level of output in this market?

5 units

Refer to Table 4. The marginal product of the fourth worker is

5,000

In deciding whether a good is a public good, one must determine the

All of these are correct

Refer to Figure 2. The tax causes consumer surplus to decrease by the area

B+C

Refer to Figure 2. The government collects tax revenue that is the area

B+D

Table 1Consider the following table of long-run total cost for four different firms: Quantity 1 2 3 4 5 6 7 Firm 1 $180 $350 $510 $660 $800 $930 $1,050 Firm 2 $120 $250 $390 $540 $700 $870 $1,050 Firm 3 $150 $300 $450 $600 $750 $900 $1,050 Firm 4 $210 $340 $490 $660 $850 $1,060 $1,290 Refer to Table 1.Which firm has economies of scale over the entire range of output?

Firm 3 Only

Refer to Figure 5. From the figure it is apparent that

Guatemala has a comparative advantage in producing coffee, relative to the rest of the world.

Refer to Figure 1. Suppose the government imposes a tax of P' - P'''. Total surplus after the tax is measured by the area

I+J+K+L+M+Y.

Refer to Table 1. Which firm has diseconomies of scale over the entire range of output?

Table 2 Only

The Ogallala aquifer is a large underground pool of fresh water under several western states in the United States. Any farmer with land above the aquifer can at present pump water out of it. Which of the following statements about the aquifer is correct?

The aquifer is a common resource which will be overused if no one owns it.

A city street is

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

A taxpayer faces the following tax rates on her income: 20 percent of the first $40,000 of her income; 30 percent of all her income above $40,000. The taxpayer faces

an average tax rate of 22.0 percent when her income is $50,000.

If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the

consumer does not purchase the good.

Both tariffs and import quotas

decrease the quantity of imports and raise the domestic price of the good

Refer to Figure 3. If this market is currently producing at Q4, then total economic well-being would be maximized if output

decreased to Q2.

Refer to Figure 5. When trade in coffee is allowed, consumer surplus in Guatemala

decreases by the area B + D.

Refer to Figure 5. With trade, Guatemala will

export 22 units of coffee.

In many cases selling pollution permits is a better method for reducing pollution than imposing a corrective tax because

it is hard to estimate the market demand curve and thus charge the "right" corrective tax.

If the government were to impose a tax that assigned everyone the same tax liability, it would be

lump-sum tax

Refer to Table 5. 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

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it

maximizes the combined welfare of buyers and sellers.

When externalities exist, buyers and sellers

neglect the external effects of their actions, and the market equilibrium is not efficient.

When the government intervenes in markets with externalities, it does so in order to

protect the interests of bystanders.

When a tax is justified on the basis that the taxpayers who pay the tax receive specific government services from payment of the tax, the tax

satisfies the benefits principle.

When taxes are imposed on a commodity,

some consumers alter their consumption by not purchasing the taxed commodity

Efficiency in a market is achieved when

the sum of producer and consumer surplus is maximized

Trade enhances the economic well-being of a nation in the sense that

trade results in an increase in total surplus.