Micro Final
Which of the following is an example of a common resource: Fish in the ocean Chickens on a farm A movie on Netflix A box of clementines
Fish in the ocean
Which of the following is true for a perfectly competitive firm at any level of output: Price=Marginal Revenue; Marginal Costs=Marginal Revenue; Both A and B. None of the above.
Price=Marginal Revenue;
Which of the following is produced efficiently by a free competative market? Common good Private good Public good
Private good
Suppose Colorado introduces an income tax under which the marginal tax rate for the highest income bracket is higher than the average tax rate. This would best be described as a proportional tax progressive tax regressive tax excise tax none of the above
progressive tax
The main issue with common resources is that in a free market they are typically: Overused; Underused; Provided optimally.
Overused;
Laura is operating a perfectly competitive firm. She sells her goods at $10 per unit. What is her marginal revenue? $10; More than $10; Less than $10;
$10;
Consider the following tax system. The marginal tax rate for income between $0 and $30,000 is 15%. The marginal tax rate for income above $30,000 is 25%. If Randy earned $80,000 in income, how much will he owe in taxes? $17,000 $12,000 $15,000 $22,000 $20,000
$17,000
Max has 3 options of what to do in the afternoon. A) play ultimate frisbee which he values at $40 and is free; B) Go to CrossFit which he values at $30 and costs $12 to do C) Lift at his home gym which he values at $20 and is free. He chooses to play ultimate frisbee. What are his opportunity costs in this example? $50 $40; $38; $30 $20; $18.
$20;
Student 1 is willing to tutor economics for $20 per hour. Student 2 is willing to tutor economics for $16 per hour. Student 3 is willing to tutor economics for $12 per hour. The actual rate for tutoring is $17 per hour. What is a daily producer surplus on this market given that they only work 1 hour a day. $6 $3 -$3 $0
$6
Which of the following is an example of negative externality A person buys fried chicken and is dissatisfied with its taste; Alyssa gets a flue shot and other people in her building are less likely to get a flue now; A homeowner is lazy to put salt on the sidewalk in front of their house and another person passing by slips on ice because of it; A woman harms her own health strongly by smoking.
A homeowner is lazy to put salt on the sidewalk in front of their house and another person passing by slips on ice because of it; Actions of one person negatively affect another person. B is a positive externality and A and D is private consumption.
Which of the following occurs when a new tax is placed on satellite radio services, which have normal looking demand and supply curves? The quanNty of satellite radio services will rise to make up for the tax. The profits of satellite radio companies will rise. A deadweight loss is created in the market. Consumers will end up with the enNre burden of the new tax.
A deadweight loss is created in the market. Taxation creates deadweight loss.
What is efficient level of alcohol consumption in the society? Zero; A level at which Marginal Social Cost of alcohol consumption equal Marginal Social Benefits; A level at which Marginal Private Cost of alcohol consumption equal Marginal Private Benefits; None of the above.
A level at which Marginal Social Cost of alcohol consumption equal Marginal Social Benefits; MSB = MSC
Which of the following is non-rival in consumption? a healthy meal A movie on Netflix elephants in Africa a dog bed
A movie on Netflix
Which of the following goods is rival in consumption: Fireworks; National defense; A public tennis court; Computer software;
A public tennis court;
A study has shown that the demand for coffee is inelastic. Given this information we expect to see _________________ in the quantity demanded of coffee when the price of coffee increases by a lot. A large decrease A small decrease A proportional change No change
A small decrease
The good has a negative externality in consumption. In this case the free market will produce: Socially optimal quantity of output; Below the socially optimal quantity of output; Above the socially optimal quantity of output.
Above the socially optimal quantity of output.
Which of the following is NOT a characteristic that a monopolistically competitive firm uses to differentiate products? offering additional services differentiating in product qualities differentiating in physical sizes of the product choosing different locations where product is sold All of the above are techniques firm use to differentiate the product
All of the above are techniques firm use to differentiate the product
Which of the following elasticities can be positive? Elasticity of Income; Cross price elasticity; Elasticity of supply; All of the above.
All of the above.
Which of the following statements about Public Goods is true: Public goods are provided below the optimal level by free markets; Public goods suffer from free-rider problem; Marginal Social Benefit of a public good equals the sum of marginal benefits to all consumers. Both B and C; All of the above.
All of the above.
The state of New York decides to introduce a tax on movie theaters (the movie theaters now have to pay a tax per each ticket sold). Which of the following is true: Both consumers and producers will share the tax burden; This tax will create deadweight loss; All of the above.
All of the above. Taxation creates deadweight loss and unless demand or supply are perfectly inelastic both parties share the burden
The government imposes a price ceiling below the equilibrium price. Which of the following are the effects of this price ceiling? Shortage; Deadweight loss; Inefficiently low quality of the good; A and B. All of the above; None of the above.
All of the above;
Which of the following is a rival in consumption? A bicycle; A small park; Leopards; All of the above;
All of the above;
Lindahl taxes allow efficient provision of public goods through: Charging each consumer the same price for a public good; Charging each consumer their marginal benefits from the good; Charging each consumer the minimum marginal benefit for the good among all consumers;
Charging each consumer their marginal benefits from the good;
A good has a positive externality in production. In this case the free market will produce: Socially optimal quantity of output; Below the socially optimal quantity of output; Above the socially optimal quantity of output.
Below the socially optimal quantity of output;
A point above the Production Possibility Frontier line: Can potentially become feasible through trade/exchange; Can potentially become feasible through economic growth; Both A and B Can never become feasible.
Both A and B
Which of the following is always true when a perfectly competitive firm is producing at a profit maximizing quantity of output: MR=MC; P=MC; Both A and B P>minATC All of the above
Both A and B
Which of the following is an explanation for the deadweight loss that arises as a result of a sales tax? The quantity of goods consumed under a tax is lower than the welfare maximizing quantity Taxes can distort the incentives faced by consumers and producers The government wastes the revenue collected from taxes Both A and B None of the above
Both A and B
Which of the following can make a positive profit in the short run? A perfectly competitive firm; A monopoly; Both A and B.
Both A and B.
Which of the following are necessary characteristics of oligopoly: Presence of competition; Presence of barriers to entry; Standardized product; Both A and B; All of the above.
Both A and B;
Lili can do 60 econ or 40 math problems in 1 hour. Alan can do 50 econ or 30 math problems in one hour. Which of the following statements is true? Alan can benefit from exchange with Lili but Lili can't benefit from exchange with Alan; Lili can benefit from exchange with Alan but Alan can't benefit from exchange with Lili; Both Lili and Alan can't benefit from exchange; Both Lili and Alan can benefit from exchange.
Both Lili and Alan can benefit from exchange.
Government decides to increase the tax on a good a large corporation sells. Assuming regularly shaped supply and demand curves the burden of taxation will fall on: Only on the corporation; Only on consumers; Both on consumers and producers.
Both on consumers and producers. It doesn't matter who writes the check to the government. The burden is split between producers and consumers (unless supply or demand is perfectly inelastic).
Which of the following goods is excludable and non-rival? Small swimming pool in a backyard; Computer software; Fish in the ocean; A pint of ice cream;
Computer software;
Which of the following goods is excludable but non-rival in consumption? National defense; Leopards in the wild; Computer software; Gym membership at a very small gym;
Computer software;
Demand for gas is more inelastic than supply of gas. Who is going to bear a larger share of the tax burden on gas? Consumers Both consumers and producers will share teh birden equaly. Producers
Consumers
Supply of a good is more elastic than the demand for the good. Who will bear the larger burden of taxation in this case? Consumers and producers will share the burden of taxation in equal proportion; Consumers will bear the larger share of burden of taxation; Producers will bear the larger share of burden of taxation; We can't tell who will bear the larger burden.
Consumers will bear the larger share of burden of taxation;
Demand for vaccines is less elastic than supply of vaccines. Government introduces a tax on vaccines. Which of the following is true: Consumers and producers will share the burden of taxation in equal proportion; Consumers will bear the larger share of burden of taxation; Producers will bear the larger share of burden of taxation; We can't tell who will bear the larger burden.
Consumers will bear the larger share of burden of taxation; Whoever has more inelastic curve bears more of the burden of taxation.
Suppose demand for gas is more inelastic than supply of gas. Which of the following statements about the gas market is true: Consumers and producers will share the burden of taxation equally Producers will share the larger burden of taxation than consumers do Consumers will share the larger burden of taxation than producers do
Consumers will share the larger burden of taxation than producers do
A local museum is considering purchasing one more painting. In order to have a socially optimal number of paintings the museum should purchase one more painting as long as: Costs of the additional painting are smaller or equal to the additional benefits of the consumer with the highest benefits from the painting; Costs of the additional painting are greater than additional benefits of the consumer with the highest benefits from the painting; Costs of the additional painting are smaller or equal to the additional benefits from the painting to all the visitors of the museum; Costs of the additional painting are greater than the additional benefits from the painting to all the visitors of the museum.
Costs of the additional painting are smaller or equal to the additional benefits from the painting to all the visitors of the museum; Get more of a good as long as MSB (sum of benefits to everyone) outweigh or equal to additional costs.
Suppose demand for a good is perfectly inealstic. The tax on a good is introduced. This will: Create deadweigt loss Create NO deadweigt loss
Create NO deadweigt loss
The price of a slice of cheesecake increased from $4 to $5. The price elasticity of demand for cheesecake is 2 in absolute value. What will be the percentage change in quantity demanded of cheesecake as a result of this price change? Decrease by 12.5%; Increase by 12.5%; Decrease by 40%; Increase by 40%; Decrease by 50%; Increase by 50%;
Decrease by 50%;
The government introduces a binding price floor on a market. As a result of this price floor the quantity actually bought and sold on the market will: Increase in comparison to initial equilibrium without a price floor; Decrease in comparison to initial equilibrium without a price floor; Stay the same as in initial equilibrium without a price floor;
Decrease in comparison to initial equilibrium without a price floor;
An economist observes the following: The price of goods increased a little and as a result total revenue of the firm increased. Which of the following could explain this observation: Demand is perfectly elastic; Demand is perfectly inelastic; Demand is unit-elastic.
Demand is perfectly inelastic;
Under Monopolistic Competition firms typically sell goods that are ___________ and there _____________ to entry in the industry. Standardized; no barriers Differentiated; no barriers Standardized; barriers Differentiated; barriers
Differentiated; no barriers
There is not enough information to answer this question. 24. The price elasticity of demand for Prada shoes equals -5. This suggests that demand for Prada shoes is: Inelastic; Elastic; Perfectly elastic; Perfectly inelastic.
Elastic;
The government decides to correct a negative externality by imposing a tax. In order to reach socially optimal level of production the tax should be: Below the external hard done Above the external harm done Exactly equal to external harm done
Exactly equal to external harm done
A good is rival and excludable. Free competitive markets will result in provision of the good that is Below the socially optimal level Above the socially optimal level Exactly equal to the socially optimal level
Exactly equal to the socially optimal level
Suppose demand for good X is less elastic than demand for good Y. Suppose the government wants to minimize the deadweight loss from taxation. Which good should the government tax in this case: Good X; Good Y; It doesn't matter which good the government taxes, deadweight loss will be the same in both cases.
Good X;
The demand for the good X is more elastic than demand for good Y. Which will create more deadweight loss if the tax is imposed? Good X; Good Y; The deadweight loss will be the same for good X and Y.
Good X; Deadweight loss is higher for goods with more elastic demand because people can respond to tax more by switching to other goods and that creates larger response in quantity which is what determines deadweight loss.
Good X has more elastic demand than good Y. Taxing which of the two goods will minimize deadweight loss? Good X Good Y It doesn't matter which good to tax: deadweight loss will be the same
Good Y
In comparison to perfect price discrimination single price monopoly results in ______________ deadweight loss and ________________ consumer surplus. Lower; lower. Lower; higher; Higher; lower. Higher; higher.
Higher; higher.
A monopolistic competition firm currently has positive profit. This means that the firm is operating: In the short run; In the long run; We can't tell.
In the short run;
Olivia likes to listen to loud music aMer 11pm which is very Nring for her neighbor Raj. Suppose that the benefit of listening to loud music is worth $50 to Olivia and that Raj bears a cost of $20 from the music. Assuming that Olivia has a right to play loud music in the evening which of the following private solutions will be possible? Olivia pays Raj $60 and continues to listen to music; Olivia pays Raj $30 and continues to listen to music; Raj pays Olivia $10 and she stops playing music; Olivia doesn't pay anything to Raj and listens to music loud.
Olivia doesn't pay anything to Raj and listens to music loud. The outcome is efficient and the same regardless of who has the property rights. Who pays differs.
Consider a perfectly competitive market. Currently the equilibrium price is above the minimum of Average Total Cost. This is likely to result in _____________ and ___________ in price. Increase in market supply; and decrease; Decrease in market supply; and decrease; Increase in market supply; and increase; Decrease in market supply; and increase; Decrease in market demand; decrease in price; Increase in market demand; increase in price
Increase in market supply; and decrease;
If a good is really unique and at the same time is cheap (constitutes a small share of a consumer budget), the demand for the good is likely to be: Elastic; Inelastic; Unit elastic;
Inelastic; If a good has few substitutes (like insulin) the demand is usually inelastic; If the good constitutes a small proportion of the budget the demand is inelastic; Other factor necessity or luxury good, time passes after the price change;
A good does not create any externalities to consumers. In this case Marginal Social Benefit from the good________________ Is equal zero; Is below Marginal Private Benefits; Is above Marginal Private Benefits; Is equal to Marginal Private Benefits. None of the above.
Is equal to Marginal Private Benefits.
The cigarette tax is formally paid by consumers. The tax burden of this tax _________________. Lays fully on consumers Lays fully on producers Is split between consumers and producers
Is split between consumers and producers
Which of the following statements is false: Collusion allows oligopolistic firms to increase their profits by charging monopoly price; It is easy for oligopolistic firms to sustain a collusion; If two firms are in a collusion and Firm 1 violates the agreement by lowering the price, Firm 1 will increase its own profit but overall profit in the industry will go down; Duopoly is a market structure with two firms.
It is easy for oligopolistic firms to sustain a collusion;
For a good to be efficiently provided by a market economy, which of the following characteristics is essential? It is rival in consumption It is excludable. It is a common resource. It is rival in consumption and it is excludable.
It is rival in consumption
Which of the following is monopolistic competitor? A local farm that grows Empire apples; J crew, an apparel store; Your local water company.
J crew, an apparel store; The store offers slightly different mix of apparel than competitors, that gives the brand some pricing power. Apples are likely perfect competition; Water is likely a monopoly.
A firm was producing at profit maximizing output and decided to shut down in the short run. Which of the following is certainly true: P<minAVC P<AFC P>minATC Not enough information to answer this question.
P<minAVC
Lili can do 60 econ or 40 math problems in 1 hour. Alan can do 50 econ or 30 math problems in one hour. Which of the following statements is true? Lili has a comparative advantage in econ; Lili has a comparative advantage in math; Lili does not have a comparative advantage in anything; Lili has a comparative advantage in both math and econ.
Lili has a comparative advantage in math;
Suppose two consumers are enjoying a particular public good. Optimal provision of a public good happens when: Marginal cost of producing a good equal marginal benefits of the good to consumer with the highest willingness to pay; Marginal cost of producing a good equal marginal benefits of the good to consumer with the lowest willingness to pay; Marginal cost of producing a good equal the sum of marginal benefits of the good to both consumers;
Marginal cost of producing a good equal the sum of marginal benefits of the good to both consumers;
Olivia likes to listen to loud music after 11pm which is very tiring for her neighbor Raj. Suppose that the benefit of listening to loud music is worth $50 to Olivia and that Raj bears a cost of $20 from the music. Assuming that Raj has a right to quiet environment in the evening which of the following private solutions will be possible? Olivia pays Raj $60 and continues to listen to music; Olivia pays Raj $30 and continues to listen to music; Raj pays Olivia $10 and she stops playing music; Olivia doesn't pay anything to Raj and listens to music loud.
Olivia pays Raj $30 and continues to listen to music; In this case it is efficient for music to play (benefits out weight the costs).This outcome is better than no music for both Raj and Olivia.
A firm that is operating under monopolistic competition can make positive profits: Only in the Long Run Only in the Short Run Both in the Long and Short Run
Only in the Short Run
For monopolistic competition profit can be positive: Only in the short run; Only in the long run; Both in the short run and the long run.
Only in the short run;
A private good which creates no externalities is _____________________ by a free competitive market. Underprovided; Overprovided; Optimally provided.
Optimally provided.
A person is playing loud music in an apartment building and it is unpleasant to neighbors. This is an example of __________ externality. Competitive market results in _________ of playing of loud music. Positive; overprovision; Negative; overprovision; Positive; underpovision; Negative; underprovision.
Negative; overprovision;
Good X has a perfectly inelastic demand. Will taxation create deadweight loss in this case? Yes No
No
Happyland can produce 40 tones of marshmallows or 20 tones of chocolate in a year. Friendshipland can produce 80 tons of marshmallows or 40 tons of chocolate in a year. Can these countries benefit from trade with each other based on specialization and comparative advantage? Yes; No.
No.
Are public schools in the U.S. an example of a public good? Yes; No.
No. Public schools are excludable (students can go to a particular school only if they live around it), they are also rivals in consumption (if there are too many people in a school it is harder to get a good education).
Recently the price of cellphones, which are considered a normal good, has decreased and it causes A decrease in the supply of cellphones A decrease in the demand of cellphones An increase in the demand for cellphones None of the above
None of the above A change in price of a good changes quantity demanded and supplied but does not change demand or supply.
The current price of cocktails increased. As a result: Demand for cocktails will increase; Demand for cocktails will decrease; None of the above.
None of the above.
Which of the following is true for a monopoly at any level of output: Price=Marginal Revenue; Marginal Costs=Marginal Revenue; Both A and B. None of the above.
None of the above.
The government imposes a price ceiling above the equilibrium price. The price ceiling will cause: quantity demanded to decrease; quantity supplied to increase; surplus of the good; All of the above; None of the above.
None of the above. This price ceiling is not binding
Suppose price is currently below minimum of ATC and the firm is producing a profit maximizing quantity of output. In the short run the firm should: Increase output; Decrease output; Stay open at a loss; Stay open making positive profit; Not enough information.
Not enough information. In the short run we need to know if P is above AVC (then stay open) or P is below AVC (then shut down). In the long run the firm would shut down the second the price is below min ATC (because in the long run FC=0 and hence if they shut down they get zero, which is better than losses when P<ATC).
Common resources are typically ___________. Underused Overused Overproduced
Overused
A good is rival and excludable. A free competitive market will typically: Produce the good at an efficient level; Result in overproduction of the good; Result in underproduction of the good; We can't tell.
Produce the good at an efficient level; Private goods are produced at an efficient level by free compeTITIve markets.
Consider a market for fountain pens. Suppose the ink (complement for fountain pens) becomes more expensive. What is going to happen to produce surplus on the fountain pens market? Producer surplus will increase; Producer surplus will decrease; Producer surplus will stay the same; Change in producer surplus will be ambiguous.
Producer surplus will decrease;
A monopoly is currently producing at an output level where MR is less than MC. This suggests that: Profit is currently being maximized Profit can be maximized by increasing output Profit can be maximized by decreasing output A firm is making losses A firm should shut down
Profit can be maximized by decreasing output
The price of chicken wings decreased. Which of the following is likely to happen: The supply of chicken wings will increase; The supply of chicken wings will decrease; Quantity supplied of chicken wings will decrease; Quantity supplied of chicken wings will increase.
Quantity supplied of chicken wings will decrease;
A good is nonrival and nonexcludable. A free competitive market will typically: Produce the good at an efficient level; Result in overproducTIon of the good; Result in underproduction of the good; We can't tell.
Result in underproduction of the good; Public goods are usually underprovided by competitive markets due to the free-rider problem.
Which of the following is an example of a common resource? Computer software; National defense; Rhinoceros in Africa; Bicycle;
Rhinoceros in Africa; Common resources are non-excludable and rival in consumption.
Supply of land in San Francisco is very inelastic, while demand for land has a regular shape. The government increases the tax on land. Consumers and sellers will share the burden of taxation in equal proportion; Consumers will bear the larger share of burden of taxation; Sellers will bear the larger share of burden of taxation; We can't tell who will bear the larger burden.
Sellers will bear the larger share of burden of taxation; Supply is inelastic, so sellers will pay the largest cost.
Production of a good creates a negative externality to other producers. A Pigouvian tax on the good is introduced. This tax leads to: Shift of MPB all the way up to MSB, resulting in efficient level of production; Shift of MPC above MSC, resulting in efficient level of production; Shift of MPC all the way up to MSC, resulting in efficient level of production; Improvement on efficiency but not full efficiency.
Shift of MPC all the way up to MSC, resulting in efficient level of production;
Suppose the consumption of the good creates positive externality to consumers. Which of the following statements is true: Social Marginal Benefit is below the regular demand curve; Social Marginal Benefit is above the regular demand curve; Social Marginal Benefit is equal to the regular demand curve.
Social Marginal Benefit is above the regular demand curve;
Suppose demand is perfectly elastic. The tax on the good is introduced. This will result in: Some deadweight loss No deadweight loss
Some deadweight loss
Comparing opt-in and opt-out take up rates of HIV testing program researchers have found that much more people get tested with opt-out consent form than with an opt-in form. This is an example of: Standard rational behavior; Status quo bias.
Status quo bias. The costs and benefits of testing for HIV remain exactly the same with an opt-in or opt-out consent form. So rationally it should not matter what the form is. But in practice people tend to favor status quo, whatever it is.
Consumption of electric cars creates positive externalities. To achieve efficient level of production the government should: Tax electric car production. Tax equals external benefit created by electric cars; Subsidize electric car production. Subsidy equals external benefit created by electric cars; Tax electric car production. Set the tax above external benefit created by electric cars; Subsidize electric car production. Set the subsidy above external benefit created by electric cars.
Subsidize electric car production. Subsidy equals external benefit created by electric cars;
One of the solutions to inefficiencies created by positive externalities is Taxing the good Subsidizing the good
Subsidizing the good
Demand for a good is PERFECTLY ELASTIC while supply is regularly shaped. Suppose the government taxes the goods. Which of the following statements is true: The tax will create deadweight loss; The tax will NOT create deadweight loss.
The tax will create deadweight loss;
Demand for a good is perfectly inelastic. A tax on a good is imposed. Taxation will create Deadweight Loss in this case; Taxation will NOT create Deadweight Loss in this case;
Taxation will NOT create Deadweight Loss in this case;
Suppose the number of consumers of cameras increased. At the same time the wages of workers producing the cameras decreased. What will happen to the equilibrium price of cameras? It will increase; It will decrease; It will stay the same; The change will be ambiguous.
The change will be ambiguous.
The good is rival in consumption if: The fact that one person consumes the good does not prevent others from consuming the same good to the full extent. The fact that one person consumes the good does prevents others from consuming the same good to the full extent; It is possible to exclude a person from consuming a good if they didn't pay for it; It is NOT possible to exclude a person from consuming a good if they didn't pay for it.
The fact that one person consumes the good does prevents others from consuming the same good to the full extent; Example: fish in the ocean, a salad.
Currently for a monopoly Marginal Revenue is below the Marginal Cost. This suggests that: Firm is making negative profit; The firm can increase profit by decreasing output; The firm can increase profit by increasing output; Not enough information to answer this question.
The firm can increase profit by decreasing output;
Currently the firm is producing at a profit maximizing quantity of output and has a total revenue of $5000. Variable costs are $4000 and Fixed costs are $2000. Which of the following is true for this firm in the short run: The firm should continue producing at a loss; The firm should shut down immediately; The firm should continue to produce since it is making profit; The firm should adjust (increase or decrease) output;
The firm should continue producing at a loss;
Dan's Pub currently has Fixed Costs of zero and Variable Costs of $5000 per month. This suggests that Dan's Pub is operating: The short run; The long run; We can't tell if it is short run or long run.
The long run;
When production of a good creates a negative externality to consumers than the following is expected to happen: The quantity of the good provided by the market is below the socially optimal output Consumers are aware of the externality and switch to buying different goods to compensate The market demand curve is above the marginal social benefit curve The government can correct the externality by subsidizing the good.
The market demand curve is above the marginal social benefit curve
Which of the following is true about output in the case of monopolistic competition? The output is efficient; The output is above efficient level; The output is below efficient level.
The output is below efficient level. In monopolistic competition firms charge a markup on their goods, which decreases output below the efficient (perfectly competitive) level.
Two things happen simultaneously. Both supply and demand of the good decrease. But demand decreases by more than supply does. What will happen to the equilibrium price on this market? The price will increase; The price will decrease; The change in price will be ambiguous.
The price will decrease;
Consider a market for breakfast burritos. The cost of eggs (an input in production of breakfast burritos) increased. At the same time the price of other breakfast foods (a substitute for breakfast burrito) increased. Which of the following will happen to the equilibrium price on the breakfast burrito market? The price will increase; The price will decrease; The change in price will be ambiguous.
The price will increase;
Consider the market for corn. The price of soy (substitute in production for corn) increased. At the same time the cost of fertilizer increased. What will happen to the equilibrium quantity on the corn market? The quantity will increase; The quantity will decrease; The change in quantity will be ambiguous.
The quantity will decrease;
The good creates a negative externality to producers. The government taxes producers exactly at the size of the external harm created by the externality. Which of the following is true: The tax will result in under provision of the good compared to the optimum; The tax will result in over provision of the good compared to the optimum; The tax will result in an optimal production of the good.
The tax will result in an optimal production of the good.
It has been observed that now the demand for TVs has increased. The following is a possible explanation for that increase in the demand today: Today the price of TVs has decreased The costs of TVs producers are decreasing The total number of consumers in the market has decreased There is an increase in the expected price of TVs in the nearest future
There is an increase in the expected price of TVs in the nearest future
A monopolistically competitive firm is similar to a perfectly competitive firm because: They both charge prices that equal MC They both face barriers of entry Neither of them incurs deadweight loss They both earn zero profit in the long run
They both charge prices that equal MC
Kayla and Sarah are roommates. Sarah leaves her socks all around the apparent an this annoys Kayla. According to Coase theorem an efficient outcome can be reached if: Transaction costs are low; Transaction costs are high.
Transaction costs are low;
Firms which are a part of a cartel have incentives to deviate from it for example by lowering the price a little: that would give them more customers at a still high price and would allow them to get higher profit than in a cartel. This however would lower profit of the other cartel members because they would loose customers. True False
True
Monopolistic competition creates Deadweight loss compared to perfect competition. True False
True
The highest joint profit the firms can earn in case of oligopoly is by forming a cartel and producing a monopoly quantity and splitting the monopoly profit. True False
True
In case of monopolistic competition price is above the minimum of ATC in the long run True; False.
True;
Free competitive market results in _________________ of public goods. Overprovision; Under-provision; It depends.
Under-provision;
Positive externality results in ____________ of teh good by a free competative market. Efficient production Overproduction Underproduction
Underproduction
A public good which creates no externalities is _____________________ by a free competitive market. Underprovided; Overprovided; Optimally provided.
Underprovided;
Vaccination creates positive externalities to other consumers. Free competitive market results in: Efficient provision of vaccination; Underprovision of vaccination; Overprovision of vaccination.
Underprovision of vaccination; Goods that create positive externalities are provided below the efficient level.
Currently a firm is producing at MR=MC. This suggest that: Profit is positive; Profit is negative; We can't tell if profit is positive or negative.
We can't tell if profit is positive or negative. MR=MC means profit is the highest possible but it can still mean that the firm is making losses. P>ATC - positive profit P<ATC - negative profit.
Which of the following describes the law of diminishing returns to labor? When one more worker got hired their marginal product was negative; When one more worker got hired total product of the firm went down; When one more worker got hired their marginal product was lower than the marginal product of the previous worker;
When one more worker got hired their marginal product was lower than the marginal product of the previous worker;
Select the best definition of a public good. a good that is paid for by public funds a good that is excludable and rival in consumption a good that is nonexcludable and nonrival in consumption a good that is excludable and nonrival in consumption a good that is nonexcludable and rival in consumption
a good that is nonexcludable and nonrival in consumption
Suppose the good creates a positive externality. Free competitive market would provide this good below efficient level at the efficient level above the efficient level
below efficient level
A firm that is operating under oligopoly can make positive profits: only in the long-run only in the short-run both in the long-run and short-run
both in the long-run and short-run
A firm in a monopolistically competitive market is similar to a monopolist in the sense that it: can make positive profit in the long-run faces a downward-sloping demand has no barriers to entry or exit has many firms
can make positive profit in the long-run
As a group, oligopolies would always earn the highest profit if they would produce the perfectly competitive quantity of output produce more than the perfectly competitive quantity of output charge the same price that a monopolist would charge if the market were a monopoly
charge the same price that a monopolist would charge if the market were a monopoly
Assuming usually slopped supply and demand curves taxation _____________ deadweight loss. Because taxes result in ___________ output than output without taxation. creates, smaller does not create, smaller creates, larger does not create, larger
creates, smaller
Consider a Production Possibility Frontier that bows outward. Suppose the production of one good increases. As a result, the opportunity cost of producing this good will __________ because productive resources ___________________ in their suitability for producing different kinds of goods. increase; differ; decrease; are the same; increase; are the same; decrease; differ.
increase; differ;
When a vaccination program generates a positive externality: market demand curve is above the marginal social benefit curve. market demand curve is below the marginal social benefit curve. marginal cost of production is below the market demand curve. market will produce more than the efficient level of output.
market demand curve is below the marginal social benefit curve.
The free rider problem: occurs when an individual only partially pays for a public good. occurs when an individual can avoid paying for a public good while he or she cannot be excluded from enjoying the good once it is provided. exists when individuals can be excluded from using the good. Is the ability of an individual to bear the full cost of a public good.
occurs when an individual can avoid paying for a public good while he or she cannot be excluded from enjoying the good once it is provided.
Loud music on a college campus is an example of negative externality. In principle, it should be possible to internalize this externality by permitting students to negotiate about rights to play music during particular time periods. The most likely reason that this does not happen is that: most students are unfamiliar with the Coase theorem. the transactions costs associated with identifying and establishing communication with students would be high. any agreements arising from such negotiations could not be enforced. most students don't view loud music as a negative externality.
the transactions costs associated with identifying and establishing communication with students would be high.
Suppose the government wants to minimize deadweight loss of taxation. Should they tax the goods with very inelastic or very elastic demand? very elastic very inelastic
very inelastic
The efficient level of pollution is: the quantity at which its total benefits equal its total costs. where the marginal social benefit of an additional unit of pollution emission is greater than the marginal social cost of the additional unit of pollution. where the marginal social benefit of an additional unit of pollution emission is less than the marginal social cost of the additional unit of pollution. where the marginal social benefit of an additional unit of pollution emission is exactly equal to the marginal social cost of the additional unit of pollution; where the marginal private benefit of an additional unit of pollution emission is exactly equal to the marginal private cost of the additional unit of pollution.
where the marginal social benefit of an additional unit of pollution emission is exactly equal to the marginal social cost of the additional unit of pollution;