Econ Exam 2 top hat

Suppose your company has $1 million in explicit costs, and could rent out its buildings to earn a revenue of $0.5 million. Itsequipment could be rented out for another $0.25 million. What is your economic cost?

$1.75 million

The price of internet access rises from $50 per month to $70 per month. The quantity of streaming service subscriptions falls from 200 million to 175 million. What is the Arc Cross-Price Elasticity of Demand?

-0.4

Your height is 60 inches, but you lose your shins in a tragic gardening accident. As a result, your new height is 48 inches. Thepercent change in your height is...

-20%

You are repainting your house, and currently can paint one room each day. You call a friend in , and now you can paint 1.5rooms per day. The marginal product of your friend is...

0.5 rooms per day

Suppose I buy a nice dinner for $15. I was willing to pay $25 for it, and the restaurant would have been willing to sell it for as little as $11. What is the total gain to both sides?

14

If the opportunity cost of watching one episode of your favorite show on Netflix is the $5 you would have earned from working for half an hour, then the opportunity cost of working for an hour is...watching ______ episodes of your favorite show on Netflix.

2

You increase production at your ice cream factory by 50 gallons per day. This requires you to pay an additional $100 in costsfor cream, natural and artificial flavoring, sugar, guar gum, and tapioca starch. What is the marginal cost of this increase inproduction?

2

If you are willing to pay $40 for Top Hat access, but a guy in an alley sells you a black market access code for $20, your consumer surplus is

20

What is the missing Average Total Cost number?

400

Suppose you have a box that has a height of 40 inches and a width of 10 inches. What is its area?

400 square inches

Suppose you're a monopolist. You currently sell 4 units of output every month. You want to sell 8 per month. To do this, you will have to lower the price from $15 to $10, and this lower price will apply to every unit you sell. What is your Marginal Revenue? That is, what is Marginal Revenue when output goes from 4 units to 8 units?

5

In your spare time, you drive for Uber. You pick up a passenger and take her to Madison Social, for which you are paid $15. You would have been willing to drive her there for $9. Your producer surplus is...

6

You are operating a house painting business (because you got so good at it from painting your own house). You currently have yourself and two other employees, and you can paint a total of 2 rooms per day. Adding a fourth worker will allow you to paint an additional 0.5 rooms per day. What does adding the fourth worker do to your average product?

Average product falls.

Suppose you are going to a movie. You're excited to go to this; you would have paid up to $30 to go to this movie, though you actually paid $12. For simplicity, assume you are going alone. Yes, it's sad, but you have unusual taste in movies, so no one wants to join you. While you are driving to the theater, you get a call from a friend, who excitedly tells you that your favorite musical artist is performing a surprise show at a local tavern. If you turn around right now, you can make it before the music starts. It will cost you $12 to get into the tavern. You would be willing to pay up to $120 to see this artist. What is the economically rational thing to do? In case it matters to you, you've already paid for your movie ticket, and can't get your money back. You can't scalp your tickets.

Go to the musical performance

Suppose the Demand curve is P=10-Q. What does that look like on a graph?

Graph A

Which one of these functions is the most inelastic?

Graph A

Which of the following graphs depicts a monopolistically competitive firm earning zero profit?

Graph B

Which of the following goods (or services) is likely to have inelastic supply?

Higher education, which requires instructors with a PhD (which usually take 4 to 6 years to complete)

A reminder: What is the rule for profit maximization for a monopolist?

Marginal Revenue = Marginal Cost

Which market structure is most likely to result in positive economic profits that cannot be competed away?

Monopoly

What kind of economic profit is the firm on the graph below earning?

Negative

The efficient amount of output is where the marginal cost to society is equal to the marginal benefit to society. Is this where the monopolist produces?

No, the efficient output is where MC = D, because Demand represents the marginal benefits to society.

What is the title of the official in charge of making sure markets reach equilibrium?

None of the above

Producer Surplus is...

The area above the supply curve and below the price

A $1 per pound tax is imposed on cucumbers. The own-price elasticity of demand for cucumbers is 1.5, and the elasticity of supply for cucumbers is 0.7. Which of the following is correct?

The burden of the tax will fall mostly on producers

A tornado destroys several carpet factories in North Georgia. Which of the following occurs?

The carpet supply curve shifts to the left

Consumer Surplus is...

The difference between what consumers are willing to pay and what they actually pay.

Your income rises by 10%, and the quantity of raisins that you purchase falls by 5%. Which of the following is correct?

The income elasticity of demand for raisins is -0.5, and raisins are an inferior good.

You go to the bookstore or go to an online vendor, and find that they will offer you an academic discount for software. You have to present a faculty or student ID. What kind of price discrimination is this?

Third Degree

Suppose the equilibrium price of toilets is $250. The government imposes a $600 minimum price for each toilet. Which of the following is not likely to occur?

Toilet manufacturers produce the lowest-quality toilets possible, while also complying with regulations

Suppose the government imposes a maximum annual tuition on bachelor's degree-granting institutions of $2,000 per year. Which of the following is not likely to occur?

Universities will compete for students more intensely, resulting in more and larger scholarships.

When profit is positive, price must be..

greater than average total cost

A country with a comparative advantage in producing a good...

has the lowest opportunity cost of production

The value of the best thing you give up to get something is...

opportunity cost

Suppose the price of tomato sauce is $4 per jar, but then rises to $7 per jar. The Law of Demand states that...

quantity demanded will fall

In a decreasing cost industry, as firms exit the industry and industry output decreases, costs will...

rise.

Consider the supply curve for sour cream. If the price of sour cream falls, then...

the quantity supplied will fall.

In the long run in a perfectly competitive market, economic profit will tend to converge toward, and stay around,

zero economic profit

In equilibrium...

all of the above

Suppose the market for potato chips is in equilibrium, and then two things happen at the same time: The price of potatoes(which are used to make potato chips ) goes up, and a big sporting and social event occurs. Eating lots of potato chips is traditional at this big sporting event. Which of the following is correct?

Price rises, quantity is indeterminate.

A monopoly produces at MC=MR, resulting in a price of $50, quantity of 1,000 units, ATC of $30, and AVC of $20. What should this firm do?

Produce in the short run and the long run

Qualcomm and Crucial are two companies making computing components: memory and processors. According to theirproduction possibilities frontiers above, which of the following is correct?

Qualcomm has a comparative advantage in Processors, and Crucial has a comparative advantage in memory

If the price of chicken feed (which is fed to chickens) goes up, which of the following will happen in the market for chickensandwiches?

Supply will shift to the left, and price will rise

Your company produces 5000 doodads at a total accounting cost of $2 million. It sells them for $600 each. If you changed yourbusiness to produce thingies instead, you would earn a $5 million accounting profit. What is your company's economic profit?

$0

Your company produces 5000 doodads at a total cost of $2 million. It sells them for $600 each. What is your company's profit?

$1 million

The graph below depicts a tax placed on a good or service. Which of the answers below is correct?

A is tax revenue, B is consumer surplus, C is producer surplus, and E is deadweight loss.

Equilibrium is efficient because...

All of the above

What will the players do in the Prisoner's Dilemma game, assuming they each do what is in their individual self-interest?

Both players will play "Fink"

The opportunity cost for you to prepare a decent meal is one hour of work, which would earn you $10. The opportunity cost for Chef Enzo to prepare a decent meal is five minutes of work, which would earn him $2. Which of the following terms of trade would benefit you and Chef Enzo?

Chef Enzo prepares a meal for you for $8

Which of the following goods best fits the assumptions underlying perfect competition?

Common wheat

Which of these answers correctly ranks the markets from most competitive to least competitive?

Common wheat, fast food, cable internet service

If the surgeon general announces that wearing shoes is bad for your posture, which of the following will occur?

Demand for shoes will shift to the left

Suppose the market for wheat is in equilibrium, with firms earning zero economic profit. Scientists discover that eating lots of carbohydrates is actually good for you, and everyone begins eating a lot more bread. Which of the following will occur?

Demand for wheat rises, driving the price up, and causing firms to enjoy positive economic profits

Suppose the market for smartphones is in equilibrium. A new battery technology is invented which makes phones last a week without needing to be recharged. What happens in the market for smartphones?

Demand shifts to the right, price rises, quantity rises

Suppose the market for coffee is in equilibrium. An FDA report is released documenting a variety of significant health benefits of drinking coffee every day. What happens in the market for coffee (the drink—not the bean)?

Demand shifts to the right, price rises, quantity rises.

Which of the following companies is not likely to be able to benefit from significant economies of scale?

Taylor's Tailors, a company that makes unique bespoke (i.e., custom) suits for men

The shutdown rule implies that only the Marginal Cost Curve above Average Variable Costs is relevant. This section of the Marginal Cost Curve is upward sloping, and the Equimarginal Principle means that as price rises, the quantity of output a firm produces will rise. This relationship between price and quantity produced is known as...

The Law of Supply

Suppose it is 2,500 B.C.E. and the market for wheat in Egypt is in equilibrium. Two things then happen at the same time. First, the Nile fails to flood that year, so it does not deliver vital nutrients to the land around the river. Second, the Pharaoh imposes a tax of one senyu per bushel on wheat, to be paid by consumers. Which of the following is correct?

The price is indeterminate and quantity falls

Suppose the market for onions is perfectly competitive, and it's an increasing cost industry. Also suppose that right now, firms are making positive economic profits. When this market reaches a long run equilibrium, will the price be higher or lower than it is right now?

The price will be lower

Suppose the administration of FSU decides to fire all advisors and administrators, leaving only faculty, cleaning staff, andsupport staff, and by doing so it manages to cut costs significantly. The price of one year's tuition at FSU falls from $6,500 to $4,000.Which of the following will occur, ceteris paribus?

The quantity of students who choose to attend FSU will rise.

A new program to teach computer science more effectively graduates its first class of computer scientists, resulting in a significant increase in the number of programmers and software engineers available. Which of the following will occur?

The supply of software will shift to the right

For every hour you spend studying for your economics exam, you will improve your grade by 3 points. For every hour you spend studying for your Physics exam, you will improve your grade by 4 points. For every hour your friend Albert spends studying for his economics exam, his grade will improve by 8 points. For every hour he spends studying for his physics exam, his grade will improve by 16 points. Which of the following is correct?

Your opportunity cost of studying enough to improve your grade on your economics exam by 1 point is 1 1/3 points on your physics exam, and you have a comparative advantage in economics

Of the following goods, which is likely to have the most elastic demand?

candy

If a person's income goes up, and that person buys more chicken sandwiches, then we can conclude that for this person...

chicken sandwiches are a normal good