Econ Exam 2
Miller Technologies 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 6-14. The amount of the tax per unit is
$14
Refer to Table 7-7. If Charlie, Quinn, and Wrex sell the good, and the resulting producer surplus is $300, then the price must have been
$200.
Refer to Figure 6-14. The effective price that buyers will pay after the tax is imposed is
$24.
Michael values a stainless steel refrigerator for his new house at $3,500, but he succeeds in buying one for $3,000. Michael's willingness to pay is
$3,500.
Scenario 13-5 A certain firm produces and sells staplers. Last year, it produced 7,000 staplers and sold each stapler for $6. In producing the 7,000 staplers, it incurred variable costs of $28,000 and a total cost of $45,000. Refer to Scenario 13-5. In producing the 7,000 staplers, the firm's average variable cost was
$4.
Scenario 13-5 A certain firm produces and sells staplers. Last year, it produced 7,000 staplers and sold each stapler for $6. In producing the 7,000 staplers, it incurred variable costs of $28,000 and a total cost of $45,000. Refer to Scenario 13-5. In producing the 7,000 staplers, the firm's average total cost was
$6.43.
Refer to Table 7-4. If tickets sell for $25 each, then what is the total consumer surplus in the market?
$60
Refer to Figure 6-9. How much tax revenue does this tax produce for the government?
$600
Refer to Figure 9-13. With trade, producer surplus is
$900.
Refer to Figure 9-12. With trade, domestic production and domestic consumption, respectively, are
800 and 400.
Refer to Figure 13-6. Which of the curves is most likely to represent marginal cost?
A
Refer to Figure 7-1. When the price is P1, consumer surplus is
A + B + C
Refer to Figure 7-14. Which area represents consumer surplus when the price is P1?
B
Refer to Figure 9-11. Producer surplus in this market before trade is
B + C
Explicit costs
Both b and c are correct. enter into the accountant's measurement of a firm's profit. enter into the economist's measurement of a firm's profit.
Which of the following statements is correct concerning the burden of a tax imposed on candles?
Buyers and sellers share the burden of the tax.
Refer to Figure 9-17. With free trade, the country imports
Refer to Figure 9-17. With free trade, the country imports
Suppose the demand for macaroni is inelastic and the supply of macaroni is elastic, and the demand for cigarettes is inelastic and the supply of cigarettes is elastic. If a tax were levied on the sellers of both of these commodities, we would expect that the
burden of both taxes would fall more heavily on the buyers than on the sellers.
If a price ceiling is a binding constraint on the market,
buyers cannot buy all they want to buy at the price ceiling.
When a tax is placed on the buyers of a product, a result is that, relative to the pre-tax situation,
buyers pay more and sellers receive less.
Over time, housing shortages caused by rent control
increase, because the demand for, and supply of, housing are more elastic in the long run.
Refer to Figure 9-17. When the country moves from no trade to free trade, consumer surplus
increases by $300 and producer surplus decreases by $150.
Refer to Figure 9-1. When trade in wool is allowed, producer surplus in New Zealand
increases by the area B + D + G.
A tariff on a product
increases the domestic quantity supplied.
Under rent control, tenants can expect
lower rent and lower quality housing.
When a country takes a unilateral approach to free trade, it
removes trade restrictions on its own.
Refer to Figure 7-17. If 4 units of the good are produced and sold, then
the allocation of resources is inefficient.
Refer to Figure 6-8. As the figure is drawn, who sends the tax payments to the government?
the buyers
Average total cost is equal to
total cost/output.
Refer to Table 13-5. What is the variable cost of producing five widgets?
$15.00
Refer to Figure 7-4. At the equilibrium price, consumer surplus is
$300.
Refer to Figure 13-9. The three average total cost curves on the diagram correspond to three different
factory sizes.
A tax imposed on the sellers of a good
raises the price buyers pay and lowers the effective price for sellers.
Refer to Figure 9-5. The increase in total surplus resulting from trade is
$75, since consumer surplus increases by $240 and producer surplus falls by $165.
Refer to Figure 9-6. Without trade, the equilibrium price of carnations is
$8 and the equilibrium quantity is 300.
The U.S. Congress first instituted a minimum wage in
1938.
In the housing market, rent control causes
quantity supplied to fall and quantity demanded to rise.
In 1990, Congress passed a new luxury tax on items such as yachts, private airplanes, furs, jewelry, and expensive cars. The goal of the tax was to
raise revenue from the wealthy.
A tax imposed on the sellers of a good will
raise the price paid by buyers and lower the equilibrium quantity.
In which of these cases will the tax burden fall most heavily on buyers of the good?
The demand curve is relatively steep and the supply curve is relatively flat.
A shortage results when
a binding price ceiling is imposed.
A tariff on a product makes
domestic sellers better off and domestic buyers worse off.
Refer to Figure 13-8. At levels of output below M the firm experiences
economies of scale.
When, for a firm, long-run average total cost decreases as the quantity of output increases, we have a situation of
economies of scale.
Advocates of the minimum wage
emphasize the low annual incomes of those who work for the minimum wage.
Refer to Figure 6-12. In which market will the majority of the tax burden fall on the seller?
market (a)
Refer to Figure 6-12. In which market will the majority of the tax burden fall on the buyer?
market (b)
Refer to Figure 6-12. In which market will the tax burden be most equally divided between the buyer and the seller?
market (c)
Many economists believe that restrictions against ticket scalping result in each of the following except
shorter lines at cultural and sporting events.
When a tax is placed on the sellers of a product, the
size of the market is decreased. effective price received by sellers decreases and the price paid by buyers increases. supply of the product decreases. Correct Answer: All of the above are correct.
John owns a shoe-shine business. His accountant most likely includes which of the following costs on his financial statements?
the cost of shoe polish
Refer to Figure 9-6. With trade and without a tariff,
the domestic price is equal to the world price.
When a country allows trade and becomes an importer of steel,
the gains of the domestic consumers of steel exceed the losses of the domestic producers of steel.
Trade raises the economic well-being of a nation in the sense that
the gains of the winners exceed the losses of the losers.
Refer to Figure 7-8. If the supply curve is S and the demand curve shifts from D to D', what is the increase in producer surplus to existing producers?
$2,500.
Scenario 13-3 Tony is a wheat farmer, but he also spends part of his day teaching guitar lessons. Due to the popularity of his local country western band, Farmer Tony has more students requesting lessons than he has time for if he is to also maintain his farming business. Farmer Tony charges $25 an hour for his guitar lessons. One spring day, he spends 10 hours in his fields planting $130 worth of seeds on his farm. He expects that the seeds he planted will yield $300 worth of wheat. Refer to Scenario 13-3. Tony's economic profit equals
$-80
Refer to Figure 6-8. The burden of the tax on sellers is
$1.00 per unit.
Refer to Figure 6-10. Buyers effectively pay how much of the tax per unit?
$1.00.
Refer to Figure 6-10. Sellers effectively pay how much of the tax per unit?
$1.50.
Refer to Table 13-8. What is the average variable cost of producing 3 gigaplots at Jimmy's Gigaplot factory?
$15
Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that marginal cost when three workers are hired is $40 and the average total cost when three workers are hired is $50. What is the total cost of production when three workers are hired?
$150
Refer to Table 7-9. Both the demand curve and the supply curve are straight lines. At equilibrium, consumer surplus is
$16.
Scenario 13-5 A certain firm produces and sells staplers. Last year, it produced 7,000 staplers and sold each stapler for $6. In producing the 7,000 staplers, it incurred variable costs of $28,000 and a total cost of $45,000. Refer to Scenario 13-5. The firm's fixed costs amounted to
$17,000.
Cameron visits a sporting goods store to buy a new set of golf clubs. He is willing to pay $750 for the clubs but buys them on sale for $575. Cameron's consumer surplus from the purchase is
$175.
Scenario 13-5 A certain firm produces and sells staplers. Last year, it produced 7,000 staplers and sold each stapler for $6. In producing the 7,000 staplers, it incurred variable costs of $28,000 and a total cost of $45,000. Refer to Scenario 13-5. In producing the 7,000 staplers, the firm's average fixed cost was
$2.43.
Refer to Table 13-9. What is average variable cost when output is 50 units?
$4.80
Jane decides to open her own business and earns $50,000 in accounting profit the first year. When deciding to open her own business she turned down three separate job offers with annual salaries of $30,000, $40,000, and $45,000. What is Jane's economic profit from running her own business?
$5,000.
Scenario 13-5 A certain firm produces and sells staplers. Last year, it produced 7,000 staplers and sold each stapler for $6. In producing the 7,000 staplers, it incurred variable costs of $28,000 and a total cost of $45,000. Refer to Scenario 13-5. In producing the 7,000 staplers, the firm's average total cost was
$6.43
Refer to Table 7-6. If the market price is $1,000, the producer surplus in the market is
$750.
Senator Blowhard represents a state in which many textile firms are located. He wants to impose tariffs on all imported textiles. Which of the following is the least likely consequence of such tariffs?
Domestic textile sellers will have a higher rate of technological advance.
In the long run for Firm A, total cost is $105 when output is 3 units and $120 when output is 4 units. Does Firm A exhibit economies or diseconomies of scale?
Economies of scale, since average total cost is falling as output rises.
Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a price of $80. Katie's willingness to pay was $100, Kendra's willingness to pay was $95, and Kristen's willingness to pay was $80. Which of the following statements is correct?
For the three individuals together, consumer surplus amounts to $35.
Refer to Figure 6-6. When the price ceiling applies in this market and the supply curve for gasoline shifts from S1 to S2, the resulting quantity of gasoline that is bought and sold is
Less than Q3
Refer to Figure 6-7. Which panel(s) best represent(s) a non-binding rent control in the long run?
Neither panel
Refer to Figure 9-1. When trade is allowed,
New Zealand producers of wool become better off and New Zealand consumers of wool become worse off.
Refer to Figure 9-7. The equilibrium price and the equilibrium quantity of cheese in Wales before trade are
P0 & Q0
Refer to Figure 6-13. The effective price that will be paid by buyers after the tax is
P2
Refer to Figure 6-13. The per-unit burden of the tax on buyers is
P2 minus P1
Harry's Hotdogs is a small street vendor business owned by Harry Huggins. Harry is trying to get a better understanding of his costs by categorizing them as fixed or variable. Which of the following costs are most likely to be considered fixed costs?
The cost of bookkeeping services
Refer to Figure 9-5. Bearing in mind that this country is "small," what would happen if there were a decrease in the price of horses within this country, given that wagons and horses are complements?
The quantity of wagons that this country imports would increase.
At present, the United States uses a system of quotas to limit the amount of sugar imported into the country. Which of the following statements is most likely true?
The quotas are probably the result of lobbying from U.S. producers of sugar. The quotas increase producer surplus for the United States, reduce consumer surplus for the United States, and harm foreign sugar producers.
Refer to Figure 9-14. A result of this country allowing international trade in computers is as follows:
The well-being of domestic computer producers is now higher in that they now sell more computers at a higher price per computer.
Turkey is an importer of wheat. The world price of a bushel of wheat is $7. Turkey imposes a $3-per-bushel tariff on wheat. Turkey is a price-taker in the wheat market. As a result of the tariff,
Turkish consumers of wheat become worse off and Turkish producers of wheat become better off.
Refer to Figure 6-5. When a certain price control is imposed in this market, the resulting quantity of the good that is actually bought and sold is such that buyers are willing and able to pay a maximum of P1 dollars per unit for that quantity and sellers are willing and able to accept a minimum of P2 dollars per unit for that quantity. If P1 - P2 = $3.00, then the price control in question is
a price ceiling of $2.00.
If a binding price ceiling were imposed in the computer market,
a shortage of computers would develop.
A demand curve reflects each of the following except the
ability of buyers to obtain the quantity they desire.
Which of the following expressions is correct?
accounting profit = total revenue - explicit costs
A binding minimum wage
alters both the quantity demanded and quantity supplied of labor.
Consumer surplus is the
amount a consumer is willing to pay minus the amount the consumer actually pays.
A minimum wage that is set above a market's equilibrium wage will result in
an excess supply of labor, that is, unemployment.
If Franco's Pizza Parlor knows that the marginal cost of the 500th pizza is $3.50 and that the average total cost of making 499 pizzas is $3.30, then
average costs are rising at Q = 500.
quantity supplied to fall and quantity demanded to rise.
can generate inequities of their own.
Relative to a situation in which domestic firms do not compete with foreign firms, firms in countries that engage in free trade
can realize economies of scale more fully.
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.
When a country allows trade and becomes an exporter of a good,
consumer surplus decreases and producer surplus increases.
Refer to Figure 9-5. If this country allows free trade in wagons,
consumers will gain and producers will lose.
When marginal cost is rising, average variable cost
could be rising or falling.
Both tariffs and import quotas
decrease the quantity of imports and raise the domestic price of the good.
Refer to Figure 9-17. When the country moves from free trade to trade and a tariff, consumer surplus
decreases by $144 and producer surplus increases by $48.
Refer to Figure 7-1. When the price rises from P1 to P2, consumer surplus
decreases by an amount equal to B+C.
A drought in California destroys many red grapes. As a result of the drought, the consumer surplus in the market for red grapes
decreases, and the consumer surplus in the market for red wine decreases.
In the final analysis, tax incidence
depends on the forces of supply and demand.
Opponents of the minimum wage point out that the minimum wage
encourages teenagers to drop out of school. prevents some workers from getting needed on-the-job training. contributes to the problem of unemployment. Correct!: All of the above are correct.
Refer to Figure 9-7. With trade, Wales
exports Q2 - Q1 units of cheese.
Refer to Figure 13-9. The firm experiences diseconomies of scale if it changes its level of output
from Q4 to Q5.
The United States has imposed taxes on some imported goods that have been sold here by foreign countries at below their cost of production. These taxes
harm the United States as a whole, because they reduce consumer surplus by an amount that exceeds the gain in producer surplus and government revenue.
Refer to Figure 9-8. The country for which the figure is drawn
has a comparative disadvantage relative to other countries in the production of cars and it will import cars.
A price ceiling that is not binding will
have no effect on the market price.
The General Agreement on Tariffs and Trade (GATT) was initiated in response to
high tariffs imposed during the Great Depression of the 1930s.
Refer to Figure 9-8. In the country for which the figure is drawn, total surplus with international trade in cars
is larger than total surplus without international trade in cars.
An example of an explicit cost of production would be
lease payments for the land on which a firm's factory stands.
Constant returns to scale occur when
long-run average total costs are constant as output increases.
Susan used to work as a telemarketer, earning $25,000 per year. She gave up that job to start a catering business. In calculating the economic profit of her catering business, the $25,000 income that she gave up is counted as part of the catering firm's
opportunity cost
Refer to Figure 6-3. Which of the panels represents a binding price floor?
panel (b) but not panel (a)
Refer to Figure 6-1. A binding price ceiling is shown in
panel (b) but not panel (a).
When government imposes a price ceiling or a price floor in a market,
price no longer serves as a rationing device.
A total-cost curve shows the relationship between the
quantity of output produced and the total cost of production.
Refer to Figure 6-2. If the government imposes a price ceiling of $8 in this market, the result would be a
shortage of 20.
At Bert's Bootery, the total cost of producing twenty pairs of boots is $400. The marginal cost of producing the twenty-first pair of boots is $83. We can conclude that the average
total cost of 21 pairs of boots is $23.
The before-trade domestic price of tomatoes in the United States is $500 per ton. The world price of tomatoes is $600 per ton. The U.S. is a price-taker in the market for tomatoes. If trade in tomatoes is allowed, the United States
will become an exporter of tomatoes.
The before-trade domestic price of tomatoes in the United States is $500 per ton. The world price of tomatoes is $600 per ton. The U.S. is a price-taker in the market for tomatoes. If trade in tomatoes is allowed, the price of tomatoes in the United States
will increase, and this will cause consumer surplus to decrease.
Refer to Figure 9-4. Consumer surplus in Jamaica without trade is
$2,250.
Refer to Figure 6-10. The amount of the tax per unit is
$2.50.
Refer to Figure 7-6. If the price of the good is $14, then producer surplus is
$25.
Olaf would be willing to pay $35 to attend a dog show, but he buys a ticket for $20. Olaf values the dog show at
$35.
Refer to Figure 9-12. Consumer surplus before trade is
$3600
Refer to Figure 9-2. With free trade, producer surplus is
$472.50.
Kristi and Rebecca sell lemonade on the corner. It costs them 7 cents to make each cup. On a certain day, they sell 40 cups, and their producer surplus for that day amounts to $15.20. Kristi and Rebecca sold each cup for
45 cents.
Refer to Table 7-5. If the market price of an orange is $0.70, the market quantity of oranges demanded per day is
7.
Which of the following is not an advantage of a multilateral approach to free trade over a unilateral approach?
A multilateral approach requires the agreement of two or more nations.
Refer to Figure 7-2. Which area represents consumer surplus at a price of P1?
ABD
Chad is willing to pay $5.00 to get his first cup of morning latté; he is willing to pay $4.50 for a second cup. He buys his first cup from a vendor selling latté for $3.75 per cup. He returns to that vendor later in the morning to find that the vendor has increased her price to $3.90 per cup. Chad buys a second cup. Which of the following statements is correct?
Chad's willingness to pay for his second cup of latté was smaller than his willingness to pay for his first cup of latté.
The minimum wage is an example of
a price floor.
When a country allows trade and becomes an importer of a good,
domestic producers become worse off, and domestic consumers become better off.
Critics of free trade sometimes argue that allowing imports from foreign countries causes a reduction in the number of domestic jobs. An economist would argue that
foreign competition may cause unemployment in import-competing industries, but the effect is temporary because other industries, especially exporting industries, will be expanding.
Which of the following is not a result of government-imposed rent control?
higher quality housing
If the demand for a good or service increases, producer surplus
increases.
Refer to Figure 7-19. At the quantity Q2, the marginal value to buyers
is P2, and the marginal cost to sellers is P3.
A price floor
is a legal minimum on the price at which a good can be sold. can result when sellers of a good are successful in their attempts to convince the government that the market outcome without a price floor is unfair to them. can create inequities in a market. Correct! All of the above are correct.
When a price floor is binding, the equilibrium price is
lower than the price floor.
Refer to Figure 6-12. In which market will the majority of the tax burden fall on the
market (a)
Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6, producer surplus
might increase or decrease.
Suppose a tax is imposed on the buyers of a good or service. The burden of the tax will fall
on both the buyers and the sellers.
The initial impact of a tax on the sellers of a product is
on the supply of the product.
Refer to Figure 6-1. In which panel(s) of the figure would there be a shortage of the good at the ceiling price?
panel (b) but not panel (a)
When a country that exported a particular good abandons a free-trade policy and adopts a no-trade policy,
producer surplus decreases and total surplus decreases in the market for that good.
When a country that imports a particular good imposes a tariff on that good,
producer surplus increases and total surplus decreases in the market for that good.
A tax on the sellers of cell phones will
reduce the size of the cell phone market.
Consumer surplus is a good measure of economic welfare if policymakers want to
respect the preferences of buyers.
To say that a price ceiling is binding is to say that the price ceiling
results in excess demand.
Consider Figure 6-11. From the appearance of the graph, it is apparent that, for every unit of the good that is sold,
sellers are required to send three dollars to the government and buyers are required to send nothing to the government.
Refer to Figure 6-5. If the government imposes a price ceiling of $2.00 in this market, the result is a
shortage of 20 units of the good.
Suppose that a tax is placed on DVDs. If the sellers end up bearing most of the tax burden, we know that the
supply is more inelastic than demand.
Refer to Figure 6-8. Suppose the same S and D curves apply, and a tax of the same amount per unit as shown here is imposed. Now, however, the sellers of the good, rather than the buyers, are required to pay the tax to the government. Now, relative to the case depicted in the figure
the burden on buyers will be the same and the burden on sellers will be the same.
Which of the following will cause a decrease in consumer surplus?
the imposition of a binding price floor in the market
Consider Figure 6-11. As a result of the tax,
the price paid by buyers rises from $5 to $7.
Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling,
the quantity demanded of physicals increases and the quantity supplied of physicals decreases.
Suppose France imposes a tariff on wine of 3 euros per bottle. If government revenue from the tariff amounts to 30 million euros per year and if the quantity of wine supplied by French wine producers, with the tariff, is 8 million bottles per year, then we can conclude that
the quantity of wine demanded by France, with the tariff, is 18 million bottles per year.
At a minimum wage that exceeds the equilibrium wage,
the quantity supplied of labor will exceed the quantity demanded.
When a tax is placed on the buyers of milk, the
the size of the milk market is reduced
Buyers of a good bear the larger share of the tax burden when a tax is placed on a product for which
the supply is more elastic than the demand.
Trade enhances the economic well-being of a nation in the sense that
trade results in an increase in total surplus.
A $2.00 tax placed on the sellers of mailboxes will shift the supply curve
upward by exactly $2.00.
The study of how the allocation of resources affects economic well-being is called
welfare economics
The before-trade domestic price of tomatoes in the United States is $500 per ton. The world price of tomatoes is $600 per ton. The U.S. is a price-taker in the market for tomatoes. If trade in tomatoes is allowed, the price of tomatoes in the United States
will be equal to the world price.
The price of a good that prevails in a world market is called the
world price