ME quiz 13

fall; R; W

(Figure: Correcting Market Failure with Common Resources) Use Figure: Correcting Market Failure with Common Resources. An external cost is illustrated in the figure, with the two upward-sloping lines reflecting private and social marginal costs. When the government intervenes to correct for the external cost, output will _____ from _____ to _____. fall; W; 0 increase; W; R fall; W; R fall; R; W

$50; 125,000

(Figure: Demand and Marginal Revenue for Google Cloud Service Upgrades) Use Figure: Demand and Marginal Revenue for Google Cloud Service Upgrades. The figure reflects a software upgrade by Google Cloud Services. Google incurred a fixed cost of $10 million in producing the upgrade; the marginal cost of allowing consumers to download the upgrade is zero. To maximize profit, Google will set a price of _____ and produce _____ upgrades. $0; 250,000 $100; 125,000 $100; 250,000 $50; 125,000

deadweight loss.

(Figure: Online Movie Downloads from Amazon Prime) Use: Figure: Online Movie Downloads from Amazon Prime. In the accompanying figure, given a price of $4, area C is the: consumer surplus. total surplus. deadweight loss. total revenue.

A + B + C.

(Figure: The Domestic Market for Apple Computers) Use Figure: The Domestic Market for Apple Computers. Assume that PA is the autarky price and that PW is the world price. Total surplus before international trade is equal to the area: A + B - D - E. A. A + B + C. A + B.

I THINK: $41,250 million

(Figure: The Domestic Supply and Demand for Recreational Vehicles (RVs) in the United States) Use Figure: The Domestic Supply and Demand for Recreational Vehicles (RVs) in the United States. Suppose the world price equals $50,000, and there is free trade. Calculate the loss of consumer surplus. $41,250 million $52,500 million $30,000 million $22,250 million

$2.25 million

(Figure: The Market for Apple AirPods) Use Figure: The Market for Apple AirPods. Assume that Sd represents the domestic supply curve and that Dd represents the domestic demand curve. If the world price equals $100, and there is free trade, what is the gain in consumer surplus? $2.25 million $5 million $750,000 $2.5 million

fall; Q

(Figure: The Market for Grapes in California) Use Figure: The Market for Grapes in California. In autarky, the price of grapes in California is PA. When the economy is opened to trade, the price falls to PW, and producer surplus will _____ to area _____. fall; Q rise; M + N + O + P + Q fall; N + Q rise; M + N + O + P

1.5

(Figure: The Production Possibilities for Taiwan and Japan) Use Figure: The Production Possibilities for Taiwan and Japan. Both nations will gain from trade when 1 pair of rain boots trades for _____ microchip(s). 0.33 1.5 0.5 2

Heckscher-Ohlin

According to the ______ theory, a country has a comparative advantage in a good whose production is intensive in the factors that are abundantly available in that country. pauper labor Heckscher-Ohlin sweatshop labor comparative advantage

higher; smaller

Because of large up-front R&D (research and development) costs, pharmaceutical companies typically face high fixed costs when developing new drugs. The marginal cost of producing a drug after development is very low, often close to zero. When these companies set their price and output to maximize profit, patients pay a _____ price for a _____ quantity of the drug than is socially optimal. higher; smaller higher; larger lower; larger lower; smaller

goods that are labor-intensive in production

China is relatively labor-abundant compared with European Union member nations. Therefore, China has a comparative advantage in _____ compared with European Union member nations. all goods goods that are land-intensive in production goods that are capital-intensive in production goods that are labor-intensive in production

Mexico has a relatively large endowment of factors of production used in making clothing, while the United States has a relatively large endowment of factors of production used in making heavy equipment.

Mexico exports clothing to the United States, and the United States exports heavy equipment to Mexico. Proponents of the Heckscher-Ohlin model would explain this pattern of trade by noting that: Mexico has a relatively large endowment of factors of production used in making clothing, while the United States has a relatively large endowment of factors of production used in making heavy equipment. Mexico has an advantage in the technology used in clothing production, while the United States has an advantage in the technology used in bulldozer production. Mexico has a factor intensity in capital, and the United States has a factor intensity in labor. Mexico's climate is more conducive to producing clothing, while the United States' climate is more conducive to producing heavy equipment.

the sum of the individual marginal benefits enjoyed by all consumers of that unit.

Public goods should be produced up to the point at which the marginal cost of production equals: the highest marginal benefit enjoyed by any individual consumer of the good. the sum of the individual marginal benefits enjoyed by all consumers of that unit. the marginal cost of allowing another individual to consume the good. the price that maximizes the total surplus.

decrease; increase; increase

The United States can produce whiskey domestically, but it can also export whiskey if the world price is higher than the domestic price. If the United States exports whiskey, consumer surplus will _____, producer surplus will _____, and total surplus will ________. decrease; increase; increase increase; decrease; stay constant decrease; decrease; increase increase; decrease; decrease

zero.

The marginal cost of producing an artificially scarce good is usually equal to: its price. zero. the marginal benefit if consumer surplus equals zero. the average total cost.

the marginal social cost of producing another unit exceeds the individual's marginal cost.

The problem of negative externalities is similar to the problem of common resources in that: the individual's marginal cost of producing another unit exceeds the individual's marginal benefit. both issues concern natural resources. the marginal social benefit of producing another unit exceeds the individual's marginal benefit. the marginal social cost of producing another unit exceeds the individual's marginal cost.

producers in the exporting industry may be better off.

When a market begins to engage in international trade: consumers of the imported good may be worse off. consumers of the exported good may be better off. producers in the importing industry may be better off. producers in the exporting industry may be better off.

a public beach with free access

Which of the following is considered a common resource? municipal waste treatment a public beach with free access a toll road a seat on a train

pay-per-view wrestling on cable

Which of the following is considered an artificially scarce good? ice skating in New York's Central Park pay-per-view wrestling on cable US federal highway 1, which runs from Maine to Florida. a candy bar