ECON 2314 - Zhai Exam 3 Review
Based on the information provided, the marginal damage cost (e.g., external cost) imposed on society from processing four tons of salt is
$10 per ton of salt
If the marginal product of a worker for a calculator manufacturer is 10 calculators, and the price of a calculator is $10. Then the firm's value of marginal product of labor is
$100.00
An example of an effective price ceiling would be the government setting the price of wheat at ________ per bushel when the market price is at $4.25 per bushel
$3.75
If the quantity demanded of tea increases by 2% when the price of coffee increases by 6%, the cross-price elasticity of demand for tea is _________.
0.33
If income increases by 10% and, in response, the quantity demanded increases by 7%, then the income elasticity of demand for housing is
0.7
Suppose that in an hour Joe can prepare 10 sandwiches or 5 pizzas. The opportunity cost of Joe producing one sandwich is
1/2 pizza
Which of the following indicates that two goods are complements?
A negative cross-price elasticity
Patents, control of resources, economies of scale, and exclusive licenses are
All barriers to entry
Which of the following statements about a price ceiling is accurate?
An effective price ceiling must be at a price below the equilibrium price
After Julia received a raise in her income, she began purchasing more ice cream cones and fewer popsicles. For Julia, popsicles
Are an inferior good
Crying babies on airplane impose a negative externality on those sitting around them. Which of the following policies would help to internalize the externality?
Charge a higher ticket fee for babies and young children than for all other passengers
When the increase in the price of one good causes the demand for another good to decrease, the goods are
Complements
Education makes Chris a better worker, voter, parent, and citizen. Because the benefits from education go beyond those that Chris enjoys himself, education provides
Externalities and should be subsidized
A change in the price of a good or service leads to a change in the demand of the good
False
A country that can produce more of a product than the other countries should specialize in producing that product
False
A subsidy provided to the surrounding neighborhood would induce the airport to internalize the externality
False
An increase in the wage rate of diamond cutters will increase the supply of cut diamonds
False
If French fries and ketchup are complements, then an increase in the price of French fries will result in an increase in the demand for ketchup
False
Anna's MPL is 5 outputs and Bill's MPL is 8 outputs. The price of the output they produce is $60. Which of the following statements is true?
If the wage rate is $100, the firm will be hiring both workers
Which of the following is true when a monopoly is producing the profit-maximizing quantity of output? More than one may be true
Marginal revenue = Marginal cost
Microland is a small country that can produce computer chips that its own consumers demand. Focusing on the market of computer chips, the Microland government is considering the following two policies: i) close the door and protect the domestic producers from the worldwide competition ii) allow free trade Compare option (i) and (ii). Which of the following statement is correct?
Option (ii) is better. It is possible that domestic consumers may lose from free trade, but the society as a whole will benefit
Which of the following is more likely to result from a competitive market structure than from a monopoly making the same product?
Price equal to marginal cost
When there is an excess in demand of a product in an unregulated market (i.e., with no government intervention), the tendency is for
Price to rise
Which of the following is not held constant while moving along a supply curve?
The price of the good itself
A positive cross‐price elasticity between two goods implies that the two goods are substitutes
True
A simultaneous increase in both the supply of and the demand for vitamin would cause an increase in the equilibrium quantity of vitamin.
True
A subsidy may not necessarily create a deadweight loss in the market
True
A technological advance in the production of digital video recorders will cause them to become less expensive
True
An airport may cause a negative externality on the surrounding neighborhood if the noise it generates disturbs people's sleep
True
The case for free trade is based on the theory of comparative advantage
True
A point outside a production possibilities frontier indicates
an output combination that society cannot attain given its current level of resources and technology
Unregulated monopolies can often earn an economic profit in the long run because
barriers to entry prevent competing firms from entering the market
Sallyʹs Sandwiches produces sandwiches using one input -- labor. Sallyʹs Sandwiches is a _________ in the labor market and a ________ in the sandwich market
consumer; producer
Liuʹs Potato Chips is a perfectly competitive firm currently employing 30 workers. The value of marginal product of the 30th worker is $7 per hour. The wage rate is $8 per hour. To increase profits, this firm should
decrease employment until the VMPL equals $8
The production possibilities frontier is
downward sloping and reflects tradeoffs in choices.
Country A can produce 1 cello by giving up the production of 5 guitars. Country B can produce 1 guitar by giving up the production of 4 cellos. In which good does country A have a comparative advantage?
guitars
Price will ________ and output will ________ once government makes a firm internalize a negative externality externality
increase; decrease
In a perfectly competitive market,
no one has any power to negotiate on the price
Strategic behavior characterizes a(n) ________ industry
oligopolistic
When the price of fresh fish increases 10%, quantity demanded is unchanged. The price elasticity of demand for fresh fish is
perfectly inelastic
Fire extinguisher is an example of a
positive consumption externality
A shortage of supply will occur if a _____ is set ______the equilibrium price
price ceiling; below
If a profit‐maximizing competitive firm does not have to compensate society for a negative externality, the firm will choose to produce where
price equals marginal cost
Harry produces 2 balloon rides and 4 boat rides an hour. Harry could produce more balloon rides but to do so he must produce fewer boat rides. Harry is ________ his production possibilities frontier.
producing on
In Cournot equilibrium, firms choose the _______ of the output and __________ determines the _________
quantity, demand schedule, price of output
A larger proportion of tax burden would fall on sellers if
the demand is relatively elastic and the supply is relatively inelastic
Firms will employ an input up to the point where
the input's price equals its marginal product
The Coase theorem will apply only if
the number of people involved is small
The production possibilities frontier is the boundary between
those combinations of goods and services that can be produced and those that cannot
Profit‐maximizing firms want to maximize the difference between ______ revenue and ______ cost
total; total
A deadweight loss occurs ________
when there is an efficient price control
The following are key features of a monopoly except
zero externalities
