micro econ final

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Under which of the following scenarios would a park be considered a public good?

Visitors can enter the park free of charge, and there are always plenty of empty picnic tables.

you are a producer of tortillas. In the market for tortillas, two events happen simultaneously: there is a decrease in the price of corn used to make your tortillas, and there are news headlines that promote the link between eating tortillas and reducing heart attacks.Which of the following is a consequence?

We know the quantity will increase, but we don't know what will happen to the price unless we know the size of the shifts.

Which of the following activities create positive externalities?

You and your friends volunteer to plant wildflowers along the local highway.

Suppose visitors can enter the local park free of charge, but frequently all the picnic tables in the park are in use. As a result, we can say that the park is a

a common-resource good

If competitive firms experience a loss, over the long run there will be

a decrease in market supply to increase the market price.

Refer to the payoff matrix provided here. In this game, Delta Airlines is better off charging a low price, regardless of what American Airlines does. Given this, we say that Delta has

a dominant strategy.

When a student is explaining to her academic advisor why she needs to take a semester break from school, which of the following would be an exogenous factor?

a family member's serious illness

Which of the following firms participates in a competitive market?

a farmer selling corn at a farmer's market

In monopolistic competition, demand for a single firm's product is

a fraction of overall market demand

Suppose that the demand for low-skill labor, QD, is represented by the equation QD = 56,000,000 - 3,000,000 ?0× W, where W is the wage rate. The supply of low-skill labor, QS, is represented by the equation QS = -8,000,000 + 5,000,000 ?0× W. If the minimum wage is $9, there will be __________ of labor in the market.

a surplus

Examine the graph. Many consumers will be unable to buy the good at a price ceiling of $0.50 because of a shortage. However, black market purchases of the good will occur at a price

above $1.00

In order for a price floor to be binding, it must be set

above the equilibrium price.

Suppose the government decides the Big Mac is an American tradition. To recognize the value of the Big Mac, the government passes legislation making it illegal to sell a Big Mac for less than $8. The equilibrium price of a Big Mac is $4. As a result of the government legislation, there will be

an excess supply of Big Macs.

Which of the following would lead to the situation shown in the figure?

an improvement in technology for production of both pizza and wings

Which of the following will cause a shift rightward in the supply curve for tobacco?

an improvement in the technology used in the production of tobacco

Which of the following will cause an increase in the supply of yogurt?

an increase in the number of sellers in the market for yogurt

With regard to social welfare, oligopolists forming a cooperative alliance is

bad because prices will then be too high and output will be too low.

Suppose an unregulated natural monopoly becomes regulated using marginal cost pricing. As a result, the firm's profits would

become negative

Based on the following graph, at a price __________/hr neither Ann, April, nor Andy will tutor, but at a price __________/hr, all three of them will tutor.

below $10; above $30

Predatory pricing occurs when firms, with the intent of driving rivals from the market, deliberately set their prices

below average variable costs.

in order for a price ceiling to be binding, it must be set

below the equilibrium price.

Based on the data in the box, the Nash equilibrium between the two countries is where

both countries levy high tariffs .

Demand for a good is elastic if quantity demanded __________ in response to a small price change.

changes significantly

Which two goods are opposites both when it comes to consumption and when it comes to excludability?

common-resource goods and club goods

A physician who hires a plumber to fix a broken toilet is an example of

comparative advantage

If you were willing to pay $3.05 for a gallon of milk purchased at the grocery store but bought the milk for only $2.05, you have gained a

consumer surplus amounting to $1.00.

Profits when a competitive firm shuts down are -$7,250, and profits are -$250 when the firm continues to produce. This firm will minimize losses by

continuing to produce

Which of the following types of firm MOST closely fits the description of a competitive firm?

corn farmers

Suppose that the equilibrium price of a bike is $250. The government passes a law setting a maximum price of $150 for a bike. As a result of the legislation, the quality of bikes available for purchase will MOST likely

decline

If Coca-Cola increases its advertising, and the advertising is effective, we would expect the equilibrium price for Pepsi to __________ and the equilibrium quantity to __________.

decrease,decrease

When a firm increased its output by 25%, the cost of its inputs increased by 40%. This firm experienced

diseconomies of scale.

Microsoft likely has to spend billions of dollars building and developing an operating system, but once it is produced, the cost to get the software to each customer is almost zero. Therefore, when Microsoft sells more units, their average total costs steadily decrease. This means Microsoft is said to have __________.

economies of scale

Suppose a student has three hours of time to spend at her apartment before afternoon classes. She has the option of doing laundry, studying for a test, or watching television. If she decides to do laundry, then her opportunity cost is

either watching television or studying for the test, whichever would have been her second choice after doing laundry.

If the government wants to minimize the deadweight loss of taxation, which of the following items is a good candidate for an excise tax?

emergency plumbing services

Firms producing an identical product in a competitive market are producing at a level of output that maximizes profit. The current market price is $4.50 per unit, and the firms are producing at a long-run average cost of $3.50 per unit. Over the long run one should expect

entry of new firms into this market.

For a perfectly competitive firm, marginal revenue is

equal to price

Based on the following graph, if the situation persists in the long run, the firm would

exit the industry .

Suppose the cross-price elasticity of demand between hot dogs and mustard is -3.00. This implies that a 30% increase in the price of hot dogs will cause the quantity of mustard to

fall by 90%

Compared to perfect competition, monopoly results in

fewer units produced and sold

Based on the two graphs, which of the firms is facing greater market competition?

firm B

Imagine that local suburban leaders decide to enact a minimum wage, and soon after, a nearby city votes to increase the minimum wage to the same rate. As a result,

firms will not have an incentive to move to the nearby city, and the suburb may or may not lose jobs, depending on whether the minimum wage is binding.

A supply curve with what type of slope represents a more elastic supply curve?

flatter slope

The Clayton Act of 1914 is an antitrust law. Which of the following was NOT added to the list of activities that were deemed socially detrimental?

forming monopolies

Diminishing product begins after you hire worker number

four

Suppose that burgers and fries are complements in consumption. If the price of fries increases,

overall demand for burgers will decrease.

In the graph below, what price will a monopolist charge?

Which of the following markets is oligopolistic?

passenger airlines

Which antipollution policy does NOT consider cost-benefit analysis?

passing a law that bans all pollution

At many amusement parks, customers who enter the park after 4 p.m. receive a steep discount on the price they pay. This is a type of price discrimination because the amusement park charges a higher price to

people who have a more inelastic demand for amusement parks.

Price elasticity of supply is always positive, except when supply is

perfectly inelastic.

Which of the new stadiums has seen the biggest increase in attendance?

philidephia

Which of the following is an example of a private good?

pizza

In the graph, which point would typically represent quantity sold by monopolistically competitive firms in the long run, after advertising?

point 3

Which point on the graph below is unattainable because the economy does NOT have enough resources to produce it?

point E

Which point on the graph here represents an inefficient use of society's resources?

point F

Which of the following is NOT an example of a public good?

pools

Laws that prohibit price gouging are often politically

popular, because consumers do not like having to pay more for a good in times of emergency, but the laws result in product shortages.

Monopoly power measures the ability to set a good's

price

If both Pepsi and Coca Cola increase their advertising, it can be said that

the costs of production will increase for both companies.

Which of the following is a decision an Italian restaurant owner makes only in the long run?

the decision to stay in business

The tragedy of the commons occurs when

the good is rival in consumption, and nonexcludable.

If the average total costs is falling,

the marginal cost curve must be below the average total cost curve.

Based on the graph below, how does the monopolist's profit-maximizing price and output compare to the efficient price and output?

the monopolist charges more and produces less.

Based on the Coase theorem, private solutions to externalities will be impossible if

the number of parties involved is large.

For any given good that is produced, the law of increasing opportunity costs states that

the opportunity costs rise as more of the good is produced.

Which of the following is an example of the tragedy of the commons?

the overgrazing of common pastures shared by herders in pastoral communities

Suppose that the market equilibrium price for a good is $1. A nonbinding price ceiling in this market will result in a price set at what amount?

A firm carries out price discrimination when it charges

a lower price to consumers whose demand is more elastic.

in the figure, which demand curve represents the firm that has run the more successful advertising campaign?

The term market failure refers to

a market that fails to allocate resources efficiently.

Which of the following firms operates as a monopoly?

a local cable company

Look at the provided figure. Which area represents producer surplus after the tax?

Which of the following statements is normative?

Microeconomics is a great class.

Which of the following is true regarding regulating natural monopolies?

Price can be set equal to the average total cost.

Which of the following statements is true?

The AFC curve can never rise.

Which of the following is true regarding monopolies?

They tend to engage in rent seeking.

If two workers are hired, the variable costs are

$150

Andrew paid $30 to buy a potato cannon, a cylinder that shoots potatoes hundreds of feet. He was willing to pay $45. When Andrew's friend Nick learns that Andrew bought a potato cannon, he asks Andrew if he will sell it for $60, and Andrew agrees, since he would have sold it for $45. Nick is thrilled, since he would have paid Andrew up to $80 for the cannon. Andrew is also delighted.What is Nick's consumer surplus from the resale?

$20

flat Earth Air, a commercial airline, charges the same price to every flyer and has a monopoly on the route it flies. Calculate Flat Earth Air profits using the graph.

$20,000

The fixed costs of production are

$250

Sam has two options this weekend. He could work at his job and earn $9/hour for three hours, or he could go to a show at the theater for that three hours. What is the opportunity cost of going to the theater?

$27

Billy Bob runs a seafood restaurant. Last year he earned $50,000 in revenue. He had explicit costs of $20,000. Billy Bob could have made $30,000 working for the county and could have received an additional $20,000 if he rented out his building and equipment. Calculate Billy Bob's accounting profit.

$30,000

$35

A pizza business has the cost structure described in the table. The firm's fixed costs are $20 per day. What are the firm's average fixed costs at an output of five pizzas

What are the firm's marginal costs at an output of 35 pizzas?

$4.00

Perfect Flights, a commercial airline, has a monopoly on the route it flies but decides to charge each passenger a price exactly equal to what the passenger is willing to pay. As shown in the graph below, at $500 no one is willing to fly, at a price of $300 there are 100 passengers willing to fly, and at a price of $100 there are 200 customers willing to fly. The marginal cost of a passenger on a flight is constant for any number of passengers at $100. Calculate profits for Perfect Flights.

$40,000

the total costs when three workers are hired is

$475

$50,00

Seven potential customers are interested in seeing a movie. Since the marginal cost of admitting additional customers is zero, the movie theater maximizes its profits by maximizing its revenue. Based on the table shown, if the theater can only charge one price to all customers, what price does it charge?

Austin and Erin are willing to pay $10 and $9, respectively, for a ticket to a screening of a new movie. What is the total consumer surplus for both Austin and Erin if the market price of a ticket is $6?

A pizza business has the cost structure described in the table. The firm's fixed costs are $20 per day. What are the firm's average variable costs at an output of 25 pizzas?

$7.00

Suppose that this year, 500 million pounds of blueberries are grown, handled, produced, sold, or bought in Maine. How much revenue will Maine expect to collect from the Blueberry Tax described here?

$7.5 million

The following table shows the willingness of three people to sell their tutoring services. Calculate the producer surplus for Ann if the going rate for tutoring is $18 per hour.

$8/hr

-$20,000

College logo water bottles priced at $12 sell at a rate of 30 per week, but when the bookstore marks them down to $8, it finds that it can sell 45 water bottles per week. What is the price elasticity of demand for the water bottles?

-1.00

Suppose the price of IBM computers falls from $2,500 to $2,000 and the quantity demanded increases from 10,000 to 20,000. Calculate the price elasticity of demand.

-3

Suppose that demand for sports cars increases by 25% when consumer income increases by 20%. What is the income elasticity of demand for sports cars?

1.25

At a price of $150, a cell phone company manufactures 200,000 units. At a price of $250, the company manufactures 400,000 units. What is the price elasticity of supply?

1.33

Government officials have hired your consulting firm to increase the demand for public transportation. They come to you with three of their suggestions.Suggestion 1. Reduce the price of public transportation.Suggestion 2. Increase the price of private transportation by increasing tolls.Suggestion 3. Offer monthly and yearly passes that reduce the price paid per ride of public transportation.Which suggestion(s) does your firm recommend?

Assume that a monopolist faces the demand schedule given below, and a constant marginal cost of $2 for each unit of output. To maximize profits, this monopolist would produce what number of units of output and charge what price per unit?

2 units, $5

Assume that a monopolist faces the demand schedule given in columns (1) and (2) of the table, and a constant marginal cost of $50 for each additional customer. To maximize profits, the monopolist would serve __________ customers at a price of __________ per head.

3000, $70

Using the table below, determine the quantity at which a monopolist will produce.

A semiprofessional baseball team near your town plays two home games each month at the local baseball park. They split the concessions 50/50 with the city, but keep revenue from ticket sales for themselves. The city charges the team $100 each month for the 3-month season. The team pays the players and manager a total of $1,000 a month. The team charges $10 for each ticket, and the average customer spends $7 at the concession stand. Attendance averages 30 people at each home game.In order to break even, how many tickets does the team need to sell for each game?

In the example presented by this graph, what is total output when the fifth worker is added?

52 meals per hour

Which of the following is an example of perfect price discrimination?

A golf instructor charges each customer a fee equal to the customer's maximum willingness to pay for lesson

Which of the following is true in regard to monopoly?

A monopolist charges a price where marginal cost is equal to marginal revenue.

Which of the following is an example of market failure?

A river is polluted by a local fertilizer plant.

Suppose that the equilibrium price of a bike is $250. The government passes a law setting a maximum price of $150 for a bike. As a result of the legislation, what will happen?

A smaller number of mountain bikes will be sold than before the legislation.

When a company spends money for television commercials, it intends to shift the

demand curve to the right and make demand less elastic.

According to the law of supply, what is the relationship between price and quantity supplied?

direct

Which region or regions represent the total surplus in the monopoly outcome?

A+B+C+D

Look at the provided figure. Which area represents consumer surplus before the tax?

A+B+E

Which of the following is a type of incentive?

direct

Which of the following is an example of price discrimination at the movies?

discounted matinee tickets

Network externalities are important for

AARP, an organization that advocates for seniors.

A competitive firm maximizes profit at an output level of 500 units, the market price is $24, and the ATC is $24.50. At what range of AVC values for an output level of 500 would the firm choose NOT to shut down?

AVC < $24

Look at the provided figure. Which area represents the tax revenue after the tax?

B+C

Based on the figure below, which areas represent producer surplus under perfect price discrimination?

B+C+D

Which region or regions represent the producer surplus in the monopoly outcome?

B+C+D

For which of the following goods is demand relatively elastic but NOT perfectly elastic?

a meal from a fast-food restaurant located in a shopping mall food court

Which of the following is considered a government-created barrier?

licensing

Economics is the study of how people allocate their __________ resources to satisfy their practically __________ wants.

limited; unlimited

a good example of a monopolistically competitive market is

local restaurants

Externalities are

sometimes negative and sometimes positive.

Dasenbrock and Gauss, a farming company, is able to achieve huge cost savings as it increases its acreage. This would be referred to in economics as

achieving economies of scale.

Which of the following is an example of price discrimination?

airlines charging lower prices for those who book in advance

Suppose that the equilibrium price of a bike is $250. The government passes a law setting a maximum price of $150 for a bike. As a result of the legislation, there will be

an excess demand for bikes

as the owner of a hotel, you have decided to lower the price for all rooms in the month of October. What should you expect to happen?

As the price is lowered, the quantity of rooms demanded will increase.

In the long run, how is price related to marginal cost in both perfect competition and monopolistic competition?

Because monopolistically competitive firms have market power, they set a price higher than marginal cost, while perfectly competitive firms cannot

based on the payoff matrix illustrated in the figure, what is the Nash equilibrium for the two suspects?

Both suspects testify

Look at the provided figure. Which area represents producer surplus before the tax?

C+D+F

Which of the following statements is consistent with Jonathan having a comparative advantage in producing apples?

Jonathan's opportunity cost for producing apples is lower than anyone else's.

You find out that the local Walmart is having a huge sale on Mountain Dew. You rush down with the intent of buying as much Mountain Dew as you can. In a graph of supply and demand, your action would be shown as

a movement along the demand curve for Mountain Dew

Suppose there were only one producer of an expensive heart medication. The source of that producer's monopoly would MOST likely come from

a patent to produce the drug.

Where is unemployment, such that employment is below the full-employment level, plotted in relation to a production possibilities frontier?

a point inside the PPF

Where would you plot full employment in relation to a production possibilities frontier, if all other resources are being used efficiently?

a point on the PPF

Rent control is an example of

a price ceiling

Refer to the following figure. At a price of $5, this market is experiencing

a shortage

The local city council passes a law that establishes a maximum rent for apartments in your city. Which of the following is likely to happen?

Current renters will sublet to others at prices above the legal maximum.

A production possibilities frontier with constant opportunity cost is

a straight downward-sloping line.

Farm price supports are an example of price floors in the market for farm products. A binding price support will cause

a surplus of farm products.

Why does price discrimination improve the efficiency of the market compared to monopoly?

Perfect price discrimination allows a firm to operate at a point where MC = D.

Refer to the following figure. At a price of $15, this market is experiencing

a surplus.

Which of the following is an explicit cost for a business owner?

a workers salary

Titleist's advertising slogan is "#1 ball in golf." Consumers can also buy generic golf balls. The manufacturers of generic golf balls do not engage in any advertising. Assume that the average total cost of producing Titleist and generic golf balls is the same.

Look at the provided figure. Which area represents the deadweight loss after the tax?

E+F

what region or regions of the graph represent deadweight loss in the monopoly outcome?

E+F

Examine the two figures below. Which of these figures will experience a higher long-run growth rate, assuming their ratio of consumer goods to capital goods produced remains constant over time?

Economy B, because it produces more capital goods relative to consumer goods.

Which of the following statements is true?

Even though the pharmaceutical industry cannot stop other countries from selling lower-priced drugs to U.S. residents, the industry's efforts to price-discriminate are profitable.

Suppose the government decides the Big Mac is an American tradition. To recognize the value of the Big Mac, the government passes legislation making it illegal sell a Big Mac for less than $8. The equilibrium price of a Big Mac is $4. As a result of the government legislation, what will happen?

Fewer Big Macs will be bought and sold than before.

Given the data in the matrix, which of the following is correct

Firm A's dominant strategy is to break the agreement, and Firm B's dominant strategy is to break the agreement.

Which of the following conditions must be met for price discrimination to occur?

both distinguishing groups of buyers with different price elasticities of demand and preventing resale

As a waiter you earn $60,000 per year, including tips. Someone offers you a new job as an economic consultant, which pays $100,000 per year. In order to be a consultant, you'll need to rent an office and purchase supplies and new computer equipment. We can conclude which of the following?

If the explicit cost for the consulting job is $25,000 per year, your economic profit is equal to $15,000.

Which of the following statements is true?

In perfect price discrimination, the firm is able to convert the entire area of consumer surplus that existed under perfect competition into producer surplus.

In the long run with regard to price ceilings, we can expect

What does a market do, by definition?

It brings buyers and sellers together to exchange goods and services.

Suppose that a politician wants to build more production facilities for solar power and wind power. At the same time, the politician is unwilling to cut any other programs. If the resources that would be used to produce the solar and wind power facilities are already being efficiently used in other programs, where is the point the politician is trying to reach located, in relation to the production possibilities frontier?

It lies outside the frontier.

Which of the following would be consistent with taking the short-run approach to decision-making?

buying an expensive new leather jacket instead of saving for retirement

irk and Lee are two college roommates who would both like to have a clean room, but neither enjoys cleaning. The roommates must each make a decision to either clean or not clean the dorm room's common space. The payoff table for this situation is provided below, where the higher a player's payoff number, the better off that player is. Dirk: CleanDirk: Don't CleanLee: Clean(120, 120)(28,200)Lee: Don't Clean(200, 28)(40, 40) What is Lee's dominant strategy?

Lee should always choose Don't Clean

To maximize profits, firms expand output until

MR=MC

Mike has a linear production possibilities frontier that shows maximum production of trucks or computers of 10 million each. Debra also has a linear production possibilities curve that shows maximum production of 9 million trucks or 3 million computers. which is true

Mike has a comparative advantage in the production of computers.

which of the following statements is true?

Monopolistically competitive firms produce less than those operating at the most efficient scale of production.

Suppose a firm comes up with a new air freshener that produces its own smells. They operate in monopolistic competition and are making a profit. Which of the following would MOST likely occur?

Other firms are attracted by the profits and will want to produce a similar air freshener.

Which of the following statements is true?

Output will be higher in an oligopoly market than in a monopoly.

Over the long run, a monopolist

can continue to make economic profits if it can maintain a monopoly and keep competitors from entering the market.

Which of the following is NOT a characteristic of an efficient market?

Only consumer surplus is maximized.

Flour is a factor of the production of cupcakes. How will an increase in the price of flour affect the market for cupcakes?

Overall supply will decrease.

Which of the following statements is correct?

Price floors and price ceilings are typically imposed by the government.

Refer to the following graph. When a market is in equilibrium, which of the following is true?

Quantity supplied is equal to quantity demanded.

Assume that all fast-food restaurants employ many minimum wage workers. Suppose 20,000 people in Pennsylvania work in fast-food restaurants for the federal minimum wage of $7.25/hour. If the state of Pennsylvania increases its minimum wage to $9.00/hour, who will be better off? Who will be worse off?

Some minimum wage workers will be better off, some minimum wage workers will be worse off, and all fast-food restaurant owners will be worse off.

the market for breakfast cereal is currently in equilibrium. Suddenly there is a storm that destroys the wheat that farmers had been growing for the cereal manufacturer. What will happen to the cereal market after the storm?

Supply will decrease.

Suppose that Tegan is good at cooking but not very good at cleaning up the kitchen afterward, and that Sara is good at cleaning kitchens but not very good at cooking. Which of the following statements is true with regard to Tegan and Sara?

Tegan should cook and Sara should clean up the kitchen.

Suppose university officials felt that football tickets at your school are too expensive and decide to limit the price the athletic department can charge for a ticket to a single game. What will result from this decision if resale is NOT permitted and this rule is enforceable?

The quality of facilities will decrease.

The following table lists costs for producing Big Macs, a product of McDonald's. Based on the table, what are total fixed costs associated with Big Mac production?

specialization

Which of the following is an example of a positive economic statement?

The average rainfall in August 2016 was 5 inches nationwide.

In most areas, developers are required to submit environmental impact studies before work can begin on new construction projects. Suppose that a commercial developer wants to build a new shopping center on an environmentally protected piece of property that is home to a rare three-eyed toad. The shopping complex, if approved by the local planning commission, will cover 10 acres.The planning commission wants construction to go forward, since that means additional jobs for the local community, but it also wants to be environmentally responsible. One member of the commission suggests that the developer relocate the toads. She describes the relocation process as follows: "The developer builds the shopping mall and agrees to create 10 acres of artificial toad habitat elsewhere."The builder will agree with the proposed solution under what circumstances?

The benefits of building the shopping center outweigh the costs, including that of relocating the toads.

A city spent $2 million to build a pedestrian bridge that has proved unsafe. The city can repair this bridge or demolish it and build a new one. If the resulting bridge would be equally attractive and useful either way, how should the $2 million already spent factor into the city's decision?

The city should ignore the $2 million, since either way it has already been spent.

Which is an accurate statement about why firms air commercials during the Super Bowl?

The commercials on television tend to give the impression that the goods are high quality.

According to the matrix provided here, there is a dominant strategy in this game, which shows what each firm should do regardless of what the other firm is doing.However, in the real world, both airlines posted their planned fare cuts on a computer system that allowed each of them to see what their rival was doing. They each saw the price war starting, backed down, and escaped the prisoner's dilemma.Which of the following is the best explanation for why the actual outcome is different from the outcome we predicted using game theory?

The computer system allowed the two airlines to be in communication with each other, and they could therefore coordinate their strategies and cooperate.

In competitive markets, price is equal to marginal cost in the long run. In monopolistic competition, why is price greater than marginal cost in the long run?

The demand curves for the two types of firms are different. Monopolistically competitive firms have market power and a downward sloping demand curve, so they set a price higher than marginal cost.

Suppose workers attend several skill-building workshops, increasing their labor productivity. How is this represented by a production possibilities frontier?

The entire PPF shifts out.

Businesses across the country are starting to install extra insulation in their buildings and warehouses. Households are now deciding to install more insulation as well. Which of the following outcomes would you predict for the market for oil?

The equilibrium price and quantity of oil will decrease

There are a number of goods that, over time for a variety of reasons, transition from being a normal good to being an inferior good or from being an inferior good to being a normal good. One example is the flip phone. Prior to about 2010, more income for a household usually resulted in more flip phones being purchased. However, today flip phones are liable to be purchased by households that have experienced a reduction in income.How could this happen?

The flip phone becomes an inferior good because the good is now perceived as lower in quality than a smartphone.

Which of the following is a common solution to the free-rider problem?

The government provides the good and then pays for its production through taxation.

Based on the infographic, what are the minimum wages in Nebraska and Colorado in relation to the federal minimum wage?

The minimum wage in both Colorado and Nebraska is higher than the federal minimum wage.

Which of the following statements refers to a macroeconomic issue?

The national unemployment rate is currently 7.7%.

Based on the table here, which of the following statements is true?

The terms of trade for Blake and Gwen, in pizzas per wing, will be less than 0.5 but greater than 0.33.

Suppose the government decides to outlaw price discrimination by movie theaters. Who will likely be better off and who will be worse off?

The theater will be worse off, some consumers will be better off, and some consumers will be worse off.

you're an entrepreneur and had a great idea to sell shoes that have springs installed in them to make walking easier. However, the development costs were so high that the shoes are priced 15 times higher than shoes without springs. As a result, many of the shoes have gone unsold.What possible event could eliminate the disequilibrium in the market for shoes?

There is an increase in income and "spring shoes" are a normal good.

You advise the owner of a local restaurant to lower the prices of his burgers. Which of the following is a consequence of this price change?

There is an increase in the demand for fries.

Two of the bizarre taxes mentioned in this chapter's Snapshot were the Flush Tax and the Window Tax. Which of the following statements is true based on the description of these taxes shown here?

There is no way to calculate the deadweight loss for both taxes given the information provided.

What role do funds (money) play in the circular flow model?

They are what households or firms pay for products or resources.

Using the information in the figure and table, determine which of the following statements is true.

Total welfare is lower in a single-price monopoly than in either perfect competition or a monopoly with perfect price discrimination.

Suppose a monopolist practices perfect price discrimination. It will have

a greater total revenue and sell a greater output than if it were not practicing price discrimination.

For which of the following goods is demand perfectly inelastic?

a life-saving medication available from just one supplier

Which of the following is a firm in the MOST perfectly competitive market?

a local independent corn farmer

The limiting of one's work to a particular area is referred to as

specialization

Which of the following is incentivized by private property rights?

Suppose that at the current level of production, the price of a monopolist's product is equal to $15 per unit. Marginal revenue is equal to $10 per unit, and marginal cost is equal to $15 per unit. This monopoly

can increase its profit by producing and selling fewer units of its product.

Which of the following is a factor of production?

capital

In an imperfect market, individual firms

are able to influence the price of their product

In the market portrayed in this graph, a nonbinding price floor of $2 will result in a price set

at $3

Which of the following sets of firms is best described as an oligopoly?

automobile industry

If a 20% increase in price causes a 30% drop in quantity demanded, the demand for this good is

elastic

Under monopolistic competition, a market has

many firms

Over a longer period of time,

supply becomes relatively more elastic.

A duopoly is a market in which

there are two producers of a product.

Monopolies choose their profit maximizing

output level and price

According to the law of demand, what is the relationship between price and quantity demanded?

inverse

Which of the demand curves in the figure is consistent with a monopolistic competitor making zero economic profit in the long run?

Explicit costs are called __________ costs, and implicit costs are __________ costs.

out-of-pocket; opportunity

The following table lists costs for producing Big Macs, a product of McDonald's. Based on the table, what are total fixed costs associated with Big Mac production?

$100

Looking at the following graph, consider a law that caps the quantity at 70. The deadweight loss from the imposition of this quantity ceiling is

$105

A pizza business has the cost structure described in the table. The firm's fixed costs are $20 per day. What are the firm's average total costs at an output of 10 pizzas?

$12

Using the following table, calculate the total consumer surplus for Ron, Leslie, and Tom if the price of the textbook is $110.

$130

$15

Suppose that the equilibrium price of a bike is $250. The government passes a law setting a maximum price of $150 for a bike. As a result of the legislation, and in the absence of a black market, the price of a mountain bike will be what?

$150

Assume that Waterland and Aquataste make a nonbinding, informal agreement that each will produce 250 gallons of water, charge $1.50 per gallon, and evenly split the profit of $750.If Aquataste sticks to the agreement, Waterland has an incentive to renege on the agreement by cutting its price to $1.25, because Waterland's profits would then increase from $375 to

$750.00

Laronda went into the business of producing and selling greeting cards. For this business, which of the following is likely to be a fixed cost?

6 month lease for factory

Based on the figure here, what is the opportunity cost in terms of wings when producing 20 more pizzas if the economy is efficiently producing 150 wings and 50 pizzas?

60 wings

Which region represents the consumer surplus in the monopoly outcome?

look at the provided figure. Which area represents consumer surplus after the tax?

judy spent eight hours studying for an exam. Normally, she would have spent that time watching TV instead of studying. She figures she could have gotten a "B" after only studying four hours, but she really wanted an "A." What is Judy's marginal cost in terms of TV viewing to improve her grade from a "B" to an "A"?

four hours

In the example presented by this graph, at what number of workers does the point of diminishing marginal product occur

fourth worker

in order to ensure that as many individuals as possible install smoke detectors, the government recently decided to subsidize the production of smoke detectors.Which of the following graphs demonstrates the change in the market for smoke detectors?

graph b

Suppose that Coca-Cola and Pepsi are substitutes in consumption. If the price of Coca-Cola decreases, then which of the following graphs would show what happens with Pepsi?

graph c

Candy makers face high prices for cocoa butter, the special ingredient that gives chocolate its melt-in-the-mouth texture. Which graph depicts this event?

graph d

In the case of negative externalities, social costs are __________ internal costs.

greater than

In monopolistic competition, the firm's optimal price is

greater than marginal cost

The income elasticity of demand is __________ for normal goods.

greater than zero

the markup the firm charges in a monopolistically competitive market is __________ the markup charged by a firm in a perfectly competitive market, and the excess capacity in a monopolistically competitive market is __________ the firm's excess capacity in a perfectly competitive market.

greater than, greater than

The table below shows the daily production potential of two workers if they devote all their time to making either pizza or wings. Who has the absolute advantage at producing pizzas?

gwen

For a firm to have market power, it must

have some control over price.

higher price

Suppose that the equilibrium wage for teachers in Minnesota is $15/hour. Also suppose that the state of Minnesota raises its minimum wage to $10/hour. Since the equilibrium wage for teachers is __________ the new minimum wage, we would expect the number of teachers employed to __________ and the equilibrium wage for teachers to __________.

higher than; stay the same; stay the same

Opportunity cost is the __________ alternative that must be sacrificed in order to get something else.

highest-valued

suppose an employer can hire four low-skilled workers to move dirt with shovels at $5/hour, or can hire one skilled worker at $24/hour to move the same amount of dirt with a skid loader. What will the employer do if the minimum wage increases from $5/hour to $6.50/hour?

hire the oneskilled worker

In a perfectly competitive market, the long-run market supply curve is

horizontal at market price

For which of the following goods is supply the MOST rapidly responsive to a change in price?

hotdog vender

The circular flow diagram shows how resources and final goods and services flow through the economy. There are two groups of entities exchanging goods and services in the circular flow. Which of the following make up the two groups?

households and firms

Suppose that government officials want to promote national population growth, so they offer a $1,000 payment to the parents of each child born. Which of the five foundations of economics best describes the thinking of these government officials?

incentives

You order a $20 sweatshirt online for a Father's Day gift. The shipping charge is $10. You can get free shipping if your order totals $25 or more. Consequently, you order a $5 bobble head doll, even though neither you nor your father really likes bobble head dolls. This is an example of

incentives.

The price of a competitive firm's product is $50 per unit. The firm currently has marginal cost equal to $40. To maximize profits, what should this firm do?

increase its output

In order to sell more units, a monopolist must lower its prices. As shown in the table, total revenue will initially __________ and then __________.

increase, decrease

Suppose that government officials in Arkansas decide to repeal the Tattoo Tax described here. If this tax was eliminated, we would expect total consumer surplus in the tattoo market to __________ because the deadweight loss in the tattoo market __________.

increase, decrease

Diminishing marginal product refers to marginal product that often initially __________ but eventually __________.

increase, descrease

If Pepsi increases its advertising, and the advertising is effective, we would expect the equilibrium price for Pepsi to __________ and the equilibrium quantity to __________.

increase, increase

A car rental agency lowers its rates by 15%. If the agency wants to recoup the income lost by lowering the prices and have total revenues be at least as high as before, it needs sales to __________ by at least __________.

increase; 20%

The network effect arises when a buyer's preference for a product __________ as the number of people buying it __________.

increases, increases

The difference between microeconomics and macroeconomics is a difference between

individual economic units and the economy as a whole.

If income for tuna increases by 10% and the demand decreases by 20%, tuna is

inferior good

The marginal cost curve intersects Which of the following statements is true?

intersects the ATC at its minimum point.

Suppose that the federal government places a binding price floor on chocolate. To help support the price floor, the government decides to purchase all chocolate that consumers do not buy. What do you expect will happen to the quantity of chocolate demanded by consumers compared to the quantity of chocolate demanded before the price floor?

it will decrease

Suppose that the federal government places a binding price floor on chocolate. To help support the price floor, the government decides to purchase all chocolate that consumers do not buy. What do you expect will happen to the quantity of chocolate supplied by producers compared to the quantity of chocolate supplied before the price floor?

it will increase

Suppose that the federal government places a binding price floor on chocolate. To help support the price floor, the government purchases all chocolate that consumers do not buy. If the price floor remains in place for a number of years, what do you expect to happen to the quantity of chocolate purchased by the government compared to the quantity of chocolate purchased by the government when the price floor is first imposed?

it will increase

How likely is a monopolist to advertise compared with a monopolistically competitive firm?

less likely

Where there are established, well-defined private property rights, externalities will be

less prevalent

Examine the graph. Sellers who are unable to sell their good at a price floor of $6 may still be able to sell their good on the black market at a price

less than $3

When a supplier has only a limited ability to make quick adjustments to quantity supplied, the elasticity of supply is

less than 1

Compare long-run equilibrium in a market with monopolistic competition and a competitive market. Long-run equilibrium under monopolistic competition results in __________ output and a __________ price than in a perfectly competitive market.

less, higher

Scarcity refers to the __________ nature of society's resources.

limited

The concept of scarcity in economics refers to

limited resources and unlimited wants.

The commercials on television tend to give the impression that the goods are high quality.

location

in which time period is demand MOST elastic?

long run

A natural monopoly exists when a single seller experiences __________ average total costs compared with any potential competitor.

lower

Suppose there is a country where factory production creates a lot of the air pollution. What could be a possible trade-off if the country wanted to lower the levels of pollution?

lower national income

For which of the following goods is demand perfectly elastic?

mailing envelopes available from two vendors both selling through Amazon

Alison goes to an all-you-can-eat restaurant. She has eaten three slices of pizza and is considering having another, but she is quite full from the first three slices. Alison's consideration is an example of

marginal thinking

suppose that Marie is buying bananas. She decides she would like to purchase three bananas at the price of $0.25/banana, but not a fourth banana. Which of the five foundations of economics best describes Marie's thinking?

marginal thinking

A price ceiling is a legally imposed __________ price.

maximum

The field of economics that studies the decisions of individuals and firms is called

microeconomics

A price floor is a legally imposed __________ price.

minimum

The theater will be worse off, some consumers will be better off, and some consumers will be worse off.

more elastic than

A firm in monopolistic competition tends to have more control over price when it is

more successful at differentiating its product.

What is the minimum wage that employees can receive in Nevada

more than $7.25

Price discrimination exists when a firm sells the same good to different groups of customers at

more than one price

An outcome from a duopoly is __________ efficient than a monopolistic outcome and __________ efficient than a competitive market outcome.

more, less

Common resources are associated with the incentive to

neglect

Deadweight loss can be thought of as surplus that is transferred from producers or consumers and given to whom?

no individual or group

Under monopolistic competition, there areno long-run barriers to entry of new firms.

no long-run barriers to entry of new firms.

nonrival and excludable

If the cross-price elasticity of demand for two goods is zero, the two goods are

not related

A Nash equilibrium occurs when an economic decision-maker has __________ to gain by changing strategy unless it can collude?

nothing

Refer to the payoff matrix provided here. In this game between Delta Airlines and American Airlines, what is American's dominant strategy?

offering a discount

Before deciding on a pricing strategy, Wallmart consults with a strategy team to understand what discounts Doormart is offering. The model that BEST fits this industry is

oligopoly.

Economists use the concept of ceteris paribus to examine a change in __________ in a model, while assuming that all other variables remain constant.

one variable

Many local governments use parking meters on crowded downtown streets. However, the parking spaces along the street are typically hard to find, because the metered price is often set below the market price. This represents a __________, which results in a __________ of parking spots.

price ceiling, shortage

Refer to the following graph. The demand curve slopes downward because

prices and quantity demanded move in opposite directions.

Refer to the following graph. The supply curve is upward sloping because

prices and quantity supplied move in the same direction.

The graph here illustrates the effect on the production possibilities frontier if the population grows, making more workers available. This new production possibilities frontier reflects the ability of society to

produce more wings and more pizza

Under monopolistic competition, firms produce

products that are somewhat differentiated

Firms producing an identical product in a perfectly competitive market are producing at a quantity that maximizes profit. The current market price is $4.50 per unit, and the firms are producing at a long-run average cost of $3.50 per unit.

profit

In 1911, the U.S. government sued Standard Oil, a U.S. company, for violation of antitrust laws. The company broke up into 34 smaller companies. This is an example of

promoting competition.

Cost-benefit analysis is used to determine whether the benefits of providing a __________ outweigh the costs.

public good

In the graph below, what quantity will a monopolist produce?

An online advertising company sells small page ads or full page ads. The elasticity of demand for small page ads is -0.8, and the elasticity of demand for full page ads is -1.3. To increase total revenue, the company should

raise the price for small page ads and lower the price for full page ads.

The Water and Electric Board in Eugene, Oregon, is a monopolist in the supply of electricity. The city government must approve the rates the company charges for its electricity. This is an example of

regulating market

The local ice cream shop is trying to figure out how many workers to hire, and part of the decision will be based on the marginal product of labor. The following table shows a short-run production function for quantity of ice cream tubs produced. Diminishing marginal returns begins after hiring which worker?

second

in a competitive market, the price of the product is

set by market supply and demand.

in a perfectly competitive market, the price of the product is

set by market supply and demand.

The owner of a John Deere dealership hires you to maximize the revenue from the DL007 model. Your advice would be to

set the price in the region of unitary elasticity.

According to the Food and Drug Administration, "...the ultraviolet (UV) radiation from these devices [sunlamps and tanning beds] poses serious health risks." As a result of reading this, a local mayor decides to introduce legislation that will put a 10% excise tax on purchases of these tanning products. From an economic point of view, this will

shift the demand curve for tanning leftward.

A large group of fans are upset about the high price of tickets to many events. As a result of their lobbying efforts, a new law caps the maximum ticket price to any sporting event at $50. Assume there are a fixed amount of seats in the stadium, all seats are available to be sold, and the price of tickets before the ceiling was at an equilibrium point above $50. The price ceiling will create a __________ of tickets, which will be greater if demand is more __________, and __________ people will attend the events.

shortage; elastic; the same number of

Which of the following is NOT a characteristic of a market economy?

significant government intervention

For which of the following goods would you expect demand to be the MOST responsive to a rise in price?

spaghetti

Converse, an apparel company, has been fairly successful selling denim-colored college sportswear. Lydia sees an opportunity for profit and enters the market. After producing her profit maximizing level of output, she finds that her average total cost per unit is $40, her average variable cost per unit is $30, and the market price is $35. In the short run, Lydia should

stay in business even though she is suffering a loss.

Profits and losses are determined by

subtracting total costs from total revenue.

You have been hired as an economic consultant to the mayor. He is considering putting a tax on several products. You are worried about the impact of deadweight loss on the market for these products. You tell the mayor that the deadweight loss will be lower when

supply is inelastic and demand is inelastic.

Refer to the figure. At a price floor of $6, this market is experiencing

surplus

Which of the following is a club good?

swimming pool

Which of the following is a solution to negative externalities?

taxes

Deadweight loss may occur in a market because

taxes increase the purchase price of a good, causing consumers to buy less and producers to supply less.

Which of the following is an assumption that underlies the construction of a production possibilities frontier?

that the technology available for use in production remains constant

Refer to the payoff matrix provided here. In this game between Delta Airlines and American Airlines, what is the Nash equilibrium

the Nash equilibrium occurs when both firms offer a discount.

A dominant strategy is

the best strategy for a player to follow, regardless of the strategies followed by other players.

The difference between the willingness to pay for a good and the price that is paid to get it is

the consumer surplus

Two roommates are opposites. One enjoys playing Modern Warfare with his friends all night. The other likes to get to bed early for a full 8 hours of sleep. The roommate who plays Modern Warfare values gaming more than his roommate values his sleep. According to the Coase theorem, if the roommates make a deal to resolve this conflict,

the person who plays Modern Warfare will compensate his roommate for loss of sleep.

What must happen to the market price in order for a shortage to be eliminated?

the price must rise

a change in which of the following will cause a change in the quantity demanded of coffee, without shifting the demand curve?

the price of coffee

The difference between the willingness to sell a good and the price that the seller receives for it is

the producer surpluse

A firm that makes high-tech athletic shoes is looking to enter the shoe market in a developing nation where the economy has been growing rapidly. Which factor would MOST naturally be considered a signal in this context?

the profitability of firms already operating in the market in question

A friend of yours has an interview with an economics consulting firm and has been asked to discuss a microeconomics topic. Which of the following topics would you recommend that your friend discuss?

the study of how prices are determined in the baseball card industry

Firms that advertise during the Super Bowl build brand recognition, which helps to differentiate their product from the competition. As a result, the firms that advertise during the Super Bowl expect

their demand curve to be steeper

Refer to the graph. Some buyers will offer sellers $10 per unit instead of the $6 price ceiling, because

they want to increase their chances of buying a good that is in shortage.

Suppose Rodale Press sets the price for Prevention magazine as elastic. How would an increase in price affect revenues?

they would decrease

With price sensitivity in mind, who would you expect to be more likely to purchase food at the movie concession counter?

those who attend evening showings

titleist

We have antitrust laws

to protect the competitiveness of U.S. markets.

What is the term for the voluntary exchange of goods and services between two or more parties?

trade

Suppose your friend can obtain concert tickets for $100 each, but you can't get one for less than $300. Your friend sells a ticket to you for $200. Which of the five foundations of economics best describes this activity?

trade creates value

Public goods are __________ in the market.

underproduced

The year is 2278, and the starship Enterprise is running low on dilithium crystals, which are used to control the matter-antimatter reactions to propel the ship across the universe. Without the crystals, space-time travel is not possible. If the crystals are government owned or regulated, and the government wants to create the greatest welfare for society, the government should set the price

using the marginal price rule

In the long run, costs are

variable only

Austin, Jensen, Matthew, and Walker can all produce matches, brushes, cans, and shirts. The table below identifies how many of each good they can make in a day if they devote themselves to producing only that good. Who has the absolute advantage in producing brushes?

walker

In the figure, where does a monopoly operate to maximize profits?

where MR=MC

The opportunity cost of attending college is likely to be highest for a high school graduate

who is capable of playing a well-paid professional sport.

Which of these is an exogenous factor, relative to a model of the economy?

yearly rainfall

If you and your partner are required to work together on a number of projects throughout the semester, what other possible equilibrium might you be able to sustain?

you both work hard

The Nash equilibrium is that

you both work less hard.

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