Micro, Micro 2, Micro 3
(Figure: Consumer Surplus I) Look at the figure Consumer Surplus I. At a price of P1, consumer surplus equals the area:
AFP1.
(Figure: Consumer Surplus I) Look at the figure Consumer Surplus I. If the good is free, consumer surplus equals the area:
AQ30.
Look at the figure and table The Budget Line. _____ in the price of potatoes would rotate the budget line along the _____ axis _____ the origin.
An increase; vertical; toward
If a firm operating in monopolistic competition is producing a quantity that generates MC < MR, then the marginal decision rule tells us that profit
C. can be increased by increasing production.
Look at the figure A Tariff on Oranges in South Africa. When the government imposes a tariff on imported oranges, the price of oranges in South Africa rises from PW to PT and the volume of imports falls to:
C2 - Q2
If a firm has to increase output suddenly to meet an increase in demand, its average total cost will decrease in the short run until it has time to add physical capital.
False
Which of the following statements is TRUE?
If a market is in equilibrium, there will be no remaining opportunities for individuals to make themselves better off.
Look at the figure Monopoly Model. The profit-maximizing quantity is at point
J
(Figure: Collusion) Look at the figure Collusion. The quantity of output produced by firm 2 when there is collusion in the industry is shown by:
J.
Look at the table Madeline's Preferences for T-Shirts and Coffee. Assume each consumption bundle provides the same level of utility. Suppose Madeline is consuming bundle A but then changes her consumption and slowly moves along her indifference curve to bundles B, C, D, and finally E. As she moves toward bundle E, she gives up:
a decreasing numbers of T-shirts to obtain another cup of coffee.
A principle suggesting that people with more income or wealth should pay more taxes is the _____ principle.
ability-to-pay
In which of the following areas does the United States significantly limit imports?
agriculture
The long run refers to the period for which
all inputs are variable
The problem of scarcity is confronted by:
all societies.
When a perfectly competitive industry is in long-run equilibrium, its firms:
allocate all of their resources efficiently
If the price of hamburger decreased, it would probably result in _____ in the demand for hamburger buns.
an increase
Which of the following ALWAYS results in an increase in price and quantity?
an increase in demand with no change in supply
All of the following would result in an increase in the supply of a good EXCEPT:
an increase in input prices
Which of the following would result in a movement along the demand curve?
an increase in the number of suppliers
An increase in demand, all other things unchanged, will result in _____ in equilibrium price and _____ in equilibrium quantity.
an increase; an increase
The field of law that attempts to limit the ability of oligopolists to collude and restrict competition is called:
antitrust policy
Consumer surplus is represented by the area _____ the demand curve and _____ the market price.
below; above
Paying a fee every time you use the municipal golf course is an example of the _____ principle
benefits
Look at the scenario Production of Wheat and Toys. If each country specializes in the good for which it has the comparative advantage, then the price of wheat in terms of toys will be:
between two units of toys and three units of toys.
The price elasticity of demand for lettuce has been estimated to be 2.58. If an insect infestation destroys 10% of the nation's lettuce crop, how will that affect total revenue from lettuce, all other things unchanged?
Total revenue will fall.
Look at the table Three Tax Structure Proposals. Policy makers interested in implementing a progressive tax structure would suggest using:
proposal 2
A decrease in the price of eggs will result in an increase in the:
quantity of eggs demanded.
The total amount of the good that can be transacted under a quantity control is called the:
quota limit.
A monopolist's marginal cost curve shifts up, but the firm's demand curve remains the same and the firm does not shut down. Compared to the condition before the increase in marginal costs, the monopolist will _____ its price and _____ its level of production.
raise; decrease
The principle of diminishing marginal utility:
refers to the tendency of marginal utility to decline as the amount of consumption of a good or service increases
A tax of $15 on an income of $200, $10 on an income of $300, and $8 on an income of $400 is:
regressive.
Wolfgang really likes rutabagas and likes broccoli as well. The price of each good is $0.60 per pound and Wolfgang is maximizing utility. At the point of maximal utility the marginal utility of:
rutabagas and broccoli are the same.
Look at the table The Production of Cabinets. After the _____ worker the firm begins to have diminishing returns to labor.
second
Read the scenario E-Books and Sports Tickets. Phillip gets an increase in the amount of his monthly income allotted for e-books and sports tickets. Holding everything else constant, Phillip's budget line has:
shifted parallel outward away from the origin.
Joseph chooses a combination of apples and oranges along his budget line. The marginal rate of substitution of apples for oranges is 2, the price of an apple is $0.50, and the price of an orange is $0.10. Joseph
should consume fewer apples and more oranges to maximize total utility
The short-run industry supply curve:
shows the total quantity supplied by all firms in an industry for each possible price when the number of producers is fixed.
If the price is consistently below the average variable cost, then in the short run a perfectly competitive firm should:
shut down.
When individuals act in their own self-interest:
society may be worse off in some cases.
In the market for wheat, if the price of ethanol (which is made from corn, a substitute in production) increased dramatically, the _____ wheat would _____.
supply of; decrease
The assumption that more is preferred to less explains why indifference curves:
that lie farther from the origin represent higher levels of utility
Look at the table Production Possibilities. The opportunity cost of 1 computer for _____ is _____.
the United States; 0.5
The relative price rule says that at the optimal consumption bundle the marginal rate of substitution between two goods must be equal to their relative price. This is equivalent to saying that:
the marginal utility per dollar is the same for both goods.
France and England both produce wine and clothing with constant opportunity costs. France will have a comparative advantage in wine production if:
the opportunity cost of wine production is lower in France than in England.
Look at the figure Pricing Strategy in Cable TV Market I. If neither CableNorth nor CableSouth advertises, then without any collusion
there will be no tendency for either CableNorth or CableSouth to begin advertising.
Among the drawbacks of brand names is the fact that:
they may encourage the consumption of expensive substitutes for generic items.
Look at the table Cost of Producing Bagels. Marginal cost reaches its minimum value for the _____ bagel.
third
The ability-to-pay principle regarding taxes suggests that:
those who can afford it should bear the greater burden of the tax.
(Table: Coke and Pepsi Advertising Game) Look at the table Coke and Pepsi Advertising Game. The soft-drink industry is dominated by Coke and Pepsi, and each firm spends a lot of money on advertising. Suppose each firm is considering a costly television commercial during halftime of the Super Bowl. The table shows the payoff matrix of profits that each firm would receive from its advertising decision, given the advertising decision of their rival. Profits in each cell of the payoff matrix are given as (Coke, Pepsi). If each firm makes the decision whether to advertise on the Super Bowl independently, the Nash equilibrium is for Coke _____ and Pepsi _____ during the Super Bowl.
to advertise; to advertise
Average total cost is:
total cost divided by output.
Look at the figure The Unknown Curve. You are a cabinetmaker. You employ several workers to produce kitchen and bathroom cabinets. Your summer intern has drawn a graph showing a relationship between the number of cabinetmakers you employ and the number of cabinets produced. Unfortunately, your intern has failed to identify this curve. It is likely to be the _____ curve:
total product
Average variable cost is:
total variable cost divided by output
Assuming that all other factors of production are held constant, marginal product is the change in _____ output resulting from a one-unit change in _____.
total; a variable input
Margo spends $10,000 on one year's college tuition. The opportunity cost of spending one year in college for Margo is:
whatever she would have purchased with the $10,000 plus whatever she would have earned had she not been in college
Holding all other things constant, if ramen noodles are an inferior good to Vanessa, then as her income increases, her demand curve for ramen noodles:
will shift left.
Both monopolists and monopolistic competitors
charge a price that is greater than the marginal cost of production.
(Figure: Monopoly Profits in Duopoly) Look at the figure Monopoly Profits in Duopoly. Two firms could engage in _____ and reap monopoly profits.
collusive behavior
Suppose there are 10 identical firms in an industry and each produces 10% of the total market sales. The HHI for this industry would indicate that the industry is
competitive.
The long-run average total cost of producing 100 units of output is $4, while the long-run average cost of producing 110 units of output is $4. These numbers suggest that the firm producing this output has:
constant returns to scale.
If the demand for good X is perfectly inelastic and a tax is levied on the producers of each unit:
consumers pay the entire tax, and there is no deadweight loss because the equilibrium quantity of good X remains constant.
A monopolist responds to a decrease in demand by _____ price and _____ output.
decreasing; decreasing
If, for Adam, the marginal utility of ties is greater than the marginal utility of shirts, to maximize utility, Adam should
determine the price of ties and the price of shirts before he decides how many of each to buy.
The principle of _____ marginal rate of substitution states that the more chocolate Susan consumes in proportion to coffee, the _____ coffee she is willing to substitute for another piece of chocolate.
diminishing; less
Monopolistic competition is similar to perfect competition because firms in both market structures:
do not face any barriers to entry to the industry in the long run.
If Coke and Pepsi are perfect substitutes for Lynn, her indifference curves are:
downward-sloping straight lines.
With one input fixed, a firm will find that as it attempts to produce more, the total product curve increases at a decreasing rate and its marginal product curve is:
downward-sloping.
An economy has achieved _____ if it _____ pass up any opportunities to make some people better off without making others worse off
efficiency; does not
At the profit-maximizing level of production, a perfectly competitive industry will produce an _____ level of production, and a monopolist produces an _____ level of production.
efficient; inefficient
A men's tie store sold an average of 30 ties per day at $5 per tie but sold 50 of the same ties per day at $3 per tie. The price elasticity of demand, by the midpoint method, is:
equal to 1.
A dozen friends got together to celebrate a birthday. If the birthday cake is cut into 12 pieces of the same size and each of the 12 partygoers gets a slice, this cake distribution is:
equitable
Look at the figure A Tariff on Oranges in South Africa. When the government imposes a tariff on imported oranges, the price of oranges in South Africa rises from PW to PT and domestic consumer surplus _____ to _____.
falls; F + L
For most restaurants, the average total cost curve _____ at _____ levels of output, then _____ at _____ levels.
falls; low; rises; high
Look at the figure Oreos and Apples, which provides an indifference curve map for Diego. As Diego moves along an indifference curve from point F to point E, he buys _____ Oreos to obtain _____ apples.
fewer;more
Look at the table The Utility of Pecan Rolls. Total utility is maximized at the _____ roll.
fourth
When a monopolist practices price discrimination, compared to a single-price monopolist, producer surplus will:
increase
The phrase gains from trade refers to the
increase in total output that is realized when individuals specialize in particular tasks and trade with each other.
The phrase gains from trade refers to the:
increase in total output that is realized when individuals specialize in particular tasks and trade with each other.
A competitive firm operating in the short run is producing at the output level at which ATC is at a minimum. If ATC = $8 and MR = $9, to maximize profits (or minimize losses), this firm should:
increase output
Sam always tries to maximize his utility in his consumption of popcorn and soft drinks. Both of these goods are subject to diminishing marginal utility. Suppose the prices of these goods, along with Sam's income, stay the same, but Sam decides to decrease his consumption of popcorn. Holding everything else constant, this means that Sam must _____ his consumption of soft drinks, and his marginal utility per dollar spent on popcorn will be _____ than it used to be.
increase; greater
Look at the table Alaina's Utility from Consuming Cups of Coffee. Given the information in the table, Alaina's total utility from drinking coffee:
increases at a decreasing rate as she consumes more coffee.
As measured by a percentage of the entire economic output of the United States, imports have been _____ and exports have been _____.
increasing; increasing
Consumption bundles that yield equal levels of total utility are shown on the same
indifference curve.
Look at the table Alaina's Utility from Consuming Cups of Coffee. Diminishing marginal utility:
is present in Alaina's consumption of coffee, since her total utility increases at a decreasing rate with each cup consumed.
Decreases in the price of the good measured on the vertical axis will make the vertical intercept _____ and make the budget line _____.
larger;steeper
A community college charges lower tuition fees to town residents than to nonresidents. This pricing strategy increases the profits of the community college. Using this information, we can conclude that nonresidents must have a _____ demand for attending the community college than residents.
less price-elastic
If minimum wages are set above the equilibrium wage in the market, then the number of workers hired will be _____ the number of people who are willing to work.
less than
Mario sees popcorn and pretzels as perfect substitutes. He is always willing to substitute 3 cups of popcorn for 1 cup of pretzels. If Mario consumes only popcorn, then we know that the relative price of popcorn in terms of pretzels is:
less than 0.33
An individual gets 5 units of utility from one slice of pizza and 9 units of utility from two slices of pizza. The principle of diminishing marginal utility implies that the total utility from three slices of pizza will be _____ units of utility
less than 13
In long-run equilibrium in monopolistic competition, marginal cost is:
less than price
Which of the following is a quota?
limits on the number of bushels of clams that can be caught in New Jersey
The _____ curve shows the additional cost of producing each additional unit of output.
marginal cost
Suppose that the Yankee Cap Company is a profit-maximizing firm with a monopoly in the production of baseball caps. The firm sells its baseball caps for $25 each. For this information, we can assume that the Yankee Cap Company is producing a level of output at which
marginal cost equals marginal revenue
The profit-maximizing level of output for a perfectly competitive firm in the short run occurs where _____ equals _____.
marginal cost; price
After eating three slices of pizza, you decide to eat one more piece. Your decision is an example of the economic principle called
marginal decision making
An industry with a single firm producing a product for which there are no close substitutes and which is protected by barriers to entry is an example of:
monopoly
(Figure: The Supply of DVD Rentals) Look at the figure The Supply of DVD Rentals. A decrease in the price of DVDs sold by movie producers to rental stores would result in a change illustrated by the move from:
n to o in panel A.
Which of the following is a common argument for trade protection?
national security
If a quota is set above the equilibrium quantity, there will be:
no effect.
Economists use the term equilibrium to describe when:
no individual would be better off taking a different action or no individual has an incentive to change his or her behavior.
In general, economists are critical of monopoly where there is (are):
no natural monopoly.
(Table: Willingness to Pay for Basketball Sneakers) The table Willingness to Pay for Basketball Sneakers shows each player's willingness to pay for basketball sneakers. Assume that each player wants to buy at most, one pair of sneakers. If the price of basketball sneakers is $180, how many pairs will be purchased?
none
Toby operates a small deli downtown. The deli industry is monopolistically competitive. Toby, along with every other deli in town, is producing the quantity that minimizes average total cost. Assuming the delis are maximizing profits, the:
number of delis will eventually increase
When a business hires people in other countries to perform various tasks, _____ has occurred.
offshore outsourcing
An industry characterized by a few interdependent firms and by barriers to entry is called:
oligopoly
Look at the figure Shifts in Demand and Supply IV. The figure shows how supply and demand might shift in response to specific events. Suppose half of the people in San Diego move to Colorado Springs. Which panel BEST describes how this will affect the market for houses in Colorado Springs?
panel B
Look at the table Production Possibilities for Machinery and Petroleum. The opportunity cost of _____ is _____ in the United States as (than) in Mexico.
petroleum; more
If the price elasticity of demand is calculated to be 0.75, then demand is:
price-inelastic.
If a player has an incentive to cheat no matter what the other player does and if both players act in this manner, both players will be worse off. This is a:
prisoners' dilemma.
If the price is greater than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:
produce at a profit.
The equilibrium price of a guidebook is $35 in the perfectly competitive guidebook industry. Our firm produces 10,000 guidebooks for an average total cost of $38, marginal cost of $30, and average variable cost of $30. Our firm should:
produce more guidebooks, because the next guidebook produced increases profit by $5
Substitutes in production suggest that a producer with a fixed set of resources initially will need to reduce production of one good when the producer
produces more of the other good
Which is NOT an example of a resource?
production
_____ illustrates an inverse relationship between price and quantity.
A demand curve
The first law designed to curb monopoly power in the United States was the _____ Act.
Sherman Antitrust
Suppose the government imposes a $10 per month tax on cell phone service. If the demand curve for cell phone service is perfectly inelastic and the supply curve is upward-sloping, the monthly price for cell phone service will increase by
$10
Since a monopolistically competitive firm faces a downward-sloping demand curve, its price will be _____ revenue
greater than marginal
(Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. When the supply curve shifted from the initial equilibrium, the new intersection of supply and demand has a price of _____ and quantity of 400. This supply shift could have resulted from _____.
$1.50; an improvement in refining technology
Look at the table Costs of Birthday Cakes. Assume that fixed costs are $10. What is the marginal cost of the second cake?
$10
Mark and Rasheed are at the bookstore buying new calculators for the semester. Mark is willing to pay $75 and Rasheed is willing to pay $100 for a graphing calculator. The price for a calculator at the bookstore is $65. How much is Mark's individual consumer surplus?
$10
Look at the table The Utility of Macaroni and Cheese. Carmen loves macaroni and cheese for Thanksgiving. The marginal utility she derives from the fifth serving she eats is:
0
(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $40. If the cable company practices perfect price discrimination, deadweight loss will be:
$0
(Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government imposes a quota limiting sales of shrimp to 1,000 pounds, the quota rent per pound is:
$0
Look at the figure The Gasoline Market. The pretax equilibrium price is $3, and the equilibrium quantity before tax is 20,000 gallons. An excise tax has been levied on each gallon of gasoline supplied by producers. Based on the graph, the incidence of the tax on suppliers is:
$0.75
(Table: Demand Schedule for Gadgets) Look at the table Demand Schedule for Gadgets. The market for gadgets consists of two producers, Margaret and Ray. Each firm can produce gadgets with no marginal cost or fixed cost. Suppose that these two producers have formed a cartel, agreed to split production of output evenly and are maximizing total industry profits. If Margaret decides to cheat on the agreement and sell 100 more gadgets but Ray continues to sell 250 gadgets, Ray's profits will be:
$1,000.
(Table: Quantity Supplied and Quantity Demanded) Using the table Quantity Supplied and Quantity Demanded, if this market is in equilibrium and the demand and supply curves are linear, then the value of consumer surplus is:
$1,225.
Using the table Quantity Supplied and Quantity Demanded, if this market is in equilibrium and the demand and supply curves are linear, then the value of consumer surplus is:
$1,225.
For a monopolistically competitive firm, Q = 160 - P; MC = 20 + 2Q; and TC = 20Q + Q2 + 20. Given the information in the scenario Monopolistically Competitive Firm, what is the profit-maximizing price for this firm in the short run?
$125
(Table: Quantity Supplied and Quantity Demanded) Look at the table Quantity Supplied and Quantity Demanded. A price floor equal to _____ would produce excess supply in this market.
$20
Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $20. If the cable company is in a perfectly competitive industry, what price will it charge?
$20
Look at the table Cakes. Pat is opening a bakery to make and sell special birthday cakes. She is trying to decide how many mixers to purchase. Her estimated fixed and average variable costs if she purchases one, two, or three mixers are shown in the table. Assume that average variable costs do not vary with the quantity of output. If Pat purchases one mixer and bakes 100 cakes per day, what is her average total cost?
$20
(Table: Demand Schedule for Gadgets) Look at the table Demand Schedule for Gadgets. The market for gadgets consists of two producers, Margaret and Ray. Each firm can produce gadgets with no marginal cost or fixed cost. If industry output is 700, each firm's profits will be _____ than they would be at the output of 500, which maximizes industry profit.
$200 less
(Figure: The Market for Hamburgers) The figure The Market for Hamburgers shows the weekly market for hamburgers in Tuscaloosa. If the price of a burger is $2, consumer surplus will equal:
$225.
Look at the table Demand and Total Cost. Lenoia runs a natural monopoly producing electricity for a small mountain village. The accompanying table shows Lenoia's demand and total cost of producing electricity. The maximum profit Lenoia can make is:
$225.
The demand curve for a monopolist is P = 75 - 0.5Q, and the monopolist has the following MC expressed as P = 2Q. Assume also that ATC at the profit-maximizing level of production is equal to $12.50. Look at the scenario Monopolist. The deadweight loss from this monopolist's production is:
$31.25.
Look at the table Demand for Solar Water Heaters. The marginal cost of producing solar water heaters is zero, and only two firms, Rheem and Calefi, produce them. Suppose they agree to produce only 25 water heaters each. If Rheem cheats on the agreement and produces 30 water heaters, what is the quantity effect for Rheem?
$4,500
Look at the table Cost Data. The marginal cost of producing the fourth purse is:
$40
Look at the figure The Average Total Cost Curve. The total cost of producing five pairs of boots is approximately:
$408
Look at the table Output and Costs. When output is 4, total variable cost equals:
$48
If a firm in perfect competition sells 10 units of output at $5 per unit, its marginal revenue is:
$5
A business produces 10 pairs of eyeglasses. It incurs $30 in average variable cost and $35 in average total cost. The total fixed cost of producing 10 pairs of eyeglasses is
$50
If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded does not change, then the price elasticity of demand (by the midpoint method) is:
0.
(Figure: Wireless Mouse Market) Look at the figure Wireless Mouse Market. Calculate the change in producer surplus when the price increases from $10 to $15.
$625
Look at the figure The Demand for Shirts. The Demand for Shirts. At a price of $40, total revenue is
$8,000
Look at the table Variable Costs for Lots. During the winter, Alexa runs a snow-clearing service in a perfectly competitive industry. Assume that costs are constant in each interval; that is, the variable cost of clearing anywhere from 1 through 10 lots is $200. Her only fixed cost is $1,000 for a snowplow. Her variable costs include fuel, her time, and hot coffee. If the price to clear a lot is $30, what is Alexa's profit per unit at the optimal output?
-$13.75
Look at the table Demand and Total Cost. Lenoia runs a natural monopoly producing electricity for a small mountain village. The table shows Lenoia's demand and total cost of producing electricity. The price effect of increasing production from 3 megawatts to 4 megawatts is
-$150
Read the scenario Tom's Budget Constraint. If we measure music downloads on the horizontal axis and movies on the vertical axis, the slope of Tom's budget line is:
-1/5
Look at the figure The Demand Curve. By the midpoint method the price elasticity of demand between $3 and $4 is approximately:
0.54.
Tomas produces 100 cartons of free range eggs when the price is $5 and 150 cartons of free range eggs when the price is $7. What is the value of Tomas's price elasticity of supply?
1.2
Look at the figure The Optimal Choice of CDs and Movies. Nina likes to spend her income on new CDs (CD) and tickets to see movies (M). The graph shows Nina's budget line and the optimal consumption bundle E. What is the price of movies in terms of CDs at point E?
1.33
If the price of a ticket to a Minnesota Wild hockey game is $60 and the price of a snow shovel is $40, the price of the hockey ticket relative to that of shovels is _____.
1.5
Look at the table Workers and Output. After graduation you achieve your dream of opening an art shop that specializes in selling mud statues. You pay $10 per day on a loan from your uncle, and regardless of how much you produce, you pay $10 per day to each of the workers who make the mud statues. The fixed cost of producing 25 statues is:
10
Look at the figure Market for Butter. If the government imposes a price floor of $0.90 per pound of butter, the quantity of butter actually purchased will be _____ million pounds.
10.0
Look at the figure The Demand for Shirts. The price elasticity of demand for the segment AB, by the midpoint method, is:
11
Look at the table Costs of Birthday Cakes. Assume that fixed costs are $10. What is the average variable cost of 2 cakes?
12.50
(Table: Prices and Demand) Look at the table Prices and Demand. Professor Dumbledore has a monopoly on magic hats. The marginal cost of producing a hat is $18. Suppose Dumbledore can perfectly price-discriminate. How many hats will he produce?
18
Look at the table Marginal Utility per Dollar II. If Manuel has $18 to spend on potatoes and clams, then the utility-maximizing combination is _____ pounds of clams and _____ pounds of potatoes.
1; 6
Look at the table Consumer Equilibrium. Assume that the price of good X is $5 per unit, the price of good Y is $1 per unit, and you have $10 to spend on both goods. To maximize utility, you would consume _____ unit(s) of X and _____ unit(s) of Y.
1;5
The price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag. You have $10 to spend on both goods. The maximum number of boxes of popcorn that you can purchase is:
20
(Figure: Water Works) Look at the figure Water Works, which describes a small town's water works, a natural monopoly. If the water works is unregulated and maximizes profit, how many customers will it serve?
200
If personal income up to and including $30,000 is not taxed, income of $30,001 to $60,000 is taxed at 10%, and income over $60,000 is taxed at 25%, then a family earning an income of $100,000 will pay a MARGINAL tax rate of:
25%.
Look at the figure and table Variable, Fixed, and Total Costs. The marginal cost of increasing production from 84 to 91 bushels of wheat is:
28.57
(Table: Lunch) Look at the figure Lunch. Joe makes and sells picnic lunches to people taking all-day rafting trips on the river. The marginal cost and average cost of each lunch are a constant $4. If Joe is a monopolist, how many lunches will he produce in the long run?
30
The price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag. You have $5 to spend. You decide to purchase 8 boxes of popcorn. The maximum number of bags of peanuts that you can purchase is:
4
One point on a standard indifference curve is 8 cookies and 2 brownies; another is 6 cookies and 4 brownies. Which of the following combinations of cookies and brownies could lie on this indifference curve?
4 cookies and 8 brownies
Look at the figure The Production Possibility Frontiers for Jackson and Tahoe. In autarky, Jackson produces and consumes 30 head of cattle and 80 bushels of wheat, while Tahoe produces and consumes 80 head of cattle and 60 bushels of wheat. If both nations specialize completely in the good of their comparative advantage and Jackson exports 120 bushels of wheat to Tahoe in exchange for 60 head of cattle, then the new consumption point for Jackson after trade is _____ bushels of wheat and _____ head of cattle.
80; 60
Look at the figure Budget Lines for Oranges and Apples. For some time, Antonio has had $5 per month to spend on oranges and apples. The price of an orange is $0.50 and the price of an apple is $0.25. Which of the charts shows what will happen to his budget line if his income increases to $6?
A
_____ illustrates a positive relationship between price and quantity
A supply curve
Look at the figure Tax Incidence. All other things unchanged, when a good or service is characterized by a relatively elastic supply, as shown in panel _____, a greater share of the burden of an excise tax is borne by _____.
A; buyers
Look at the figure A Market in Equilibrium. At the equilibrium price, this market's consumer surplus is equal to the area:
ADI.
Look at the figure Consumer Equilibrium III. A level of total utility NOT attainable is at point:
B
According to the substitution effect, which of the following best describes why a decrease in the price of LED light bulbs leads to an increase in the quantity of LED light bulbs demanded?
Buyers tend to purchase more of the now less expensive LED light bulbs.
Look at the figure Budget Lines for Tea and Scones. For months now, Agnes has had $20 per month to spend on tea and scones. The price of each cup of tea and each scone has been $1. Which of the charts shows what will happen to her budget line if the price of both a cup of tea and a scone increase to $2?
C
Look at the figure Demand Curves. Which graph shows a perfectly inelastic demand curve?
C
Look at the figure Income Tax Payments. Which panel or panels best represent the effects of a regressive income tax?
C
In the figure Comparing Long-Run Equilibriums, which of the following statements is TRUE?
C. Both panels show markets that have many firms.
Look at the table Production Possibilities. The opportunity cost of 1 computer for _____ is _____ box(es) of roses
Colombia; 2
Look at the figure A Market with a Tax. Before the tax, producer surplus is equal to the areas:
D + E + F + G.
The Market for Laptop Sleeves) Look at the figure The Market for Laptop Sleeves. Assume that S and D are the domestic supply and demand curves and the world price is PW. Identify the area of government tax revenue when a tariff raises the domestic price from the world price to PT.
E
Look at the figure Consumer Equilibrium III. Kurt would maximize his utility at point _____ with the consumption of _____.
E; Q5 and Q2
In the long run, when there are economic profits, firms enter the industry, which will increase the market supply and price until economic profits are zero.
F
Suppose that Walmart buys fresh roses from several hundred small backyard gardeners in California. These gardeners are very likely to be able to engage successfully in tacit collusion.
F
(Figure: A Perfectly Competitive Firm in the Short Run) Look at the figure A Perfectly Competitive Firm in the Short Run. If the market price is G, the firm's total economic profit at its most profitable level of output is:
FGLK.
A monopolist who practices price discrimination can increase sales but can never increase profits above the level that would pertain if the single price was set so that marginal revenue and marginal cost are equal.
False
A quota is the minimum amount of some good that can be bought and sold.
False
In the short run, the average total cost curve reaches its minimum point at a lower level of output than the short-run marginal cost curve reaches its minimum.
False
Joan adds one more employee to her construction company. The additional output produced by this employee represents the average product of this employee.
False
Miguel eats only burgers with onion rings. Miguel's indifference curve between burgers and onion rings must be a straight line.
False
One of the most inefficient ways for duopolists to earn a profit is to engage in collusion or form a cartel.
False
Suppose Sirach knows that the price of doughnuts is $3 and the price of cupcakes is $4. He also believes that the next doughnut he consumes will increase his total utility by 6 utils and the next cupcake will increase his total utility by 10 utils. Assuming he has enough money to buy either, Sirach should buy a doughnut next.
False
The total surplus generated in the market for blackberries is the total net gain to consumers in that market.
False
Total surplus is the excess of consumer surplus over producer surplus.
False
When a monopolist practices price discrimination, the monopolist's profits will be lower than in a single-price monopoly.
False
While the United States generally follows a policy of free trade, this is true particularly for agriculture and textiles, in which all restrictions on international trade have been removed.
False
In terms of indifference curves, a demand curve is generated by changes in:
the price of one good.
Which of the following statements is (are) TRUE? Quantity controls drive a wedge between the demand price and the supply price of the good. II. The difference between the demand price and the supply price at the quota limit is consumer surplus. III. Quantity controls have no undesirable side effects.
I
Which of the following is TRUE?
If price falls below average variable cost, the firm will shut down in the short run.
Which of the following statements in CORRECT?
If the government can make the tax system fairer without additional inefficiency, it should do so to maximize equity.
Look at the figure The Profit-Maximizing Firm in the Short Run. M is the _____ curve
MC
Look at the figure Profit Maximization in Monopolistic Competition. A firm in monopolistic competition will maximize profits by producing so that
MR = MC
Which of the following best describes the income effect of a price increase?
Michelle's apartment rent increases, so she cancels her subscription to a monthly magazine
_____ firms have the most market power.
Monopoly
Which of the following statements is NOT true?
Most opportunity costs are zero.
When people want more goods and services than are available, the economy undergoes inflation. This statement best represents this economic concept:
Overall spending sometimes gets out of line with the economy's productive capacity.
Two identical firms make up an industry in which the market demand curve is represented by Q = 5,000 - 4P, where Q is the quantity demanded and P is price per unit. The marginal cost of producing the good in this industry is constant and equal to $650. Fixed cost is zero. Suppose the two firms in the scenario Two Identical Firms decide to cooperate and collude, resulting in the same amount of production for each firm. What is the profit-maximizing price and output for the industry?
P = $950; Q = 1,200
Look at the figure Supply and Demand. A binding price floor is represented by:
P1.
(Figure: Consumer Surplus I) Look at the figure Consumer Surplus I. If the price falls from P2 to P1, consumer surplus increases by the area:
P1P2BF.
Provided that there are no external benefits or costs, resources are efficiently allocated when:
P=MC
Look at the table Competitive Market for Good Z. If the supply curve for good Z is linear, it can be expressed as
Qs = 3P
Which of the following is NOT true?
Resources are scarce when they can satisfy everyone's wants.
In Thailand, the land, labor, and capital in society are used to exploit all opportunities to make everyone better off. This statement best represents this economic concept:
Resources should be used as efficiently as possible to achieve society's goals
Which of the following is a reason for governments imposing or maintaining price controls?
Some consumers and producers can benefit from price controls.
Children's price elasticity of demand for hot chocolate is 0.5. Adults' price elasticity of demand for hot chocolate is 1.5. If the concession stand selling the hot chocolate wants to practice price discrimination, it should charge higher prices to adults.
T
Consumer surplus is higher under a single-price monopoly than under a perfectly price-discriminating monopoly.
T
_____ is the unwritten or unspoken agreement through which firms limit _____.
Tacit collusion; competition among themselves
Look at the figure Consumer Equilibrium II. Ashyra consumes at point I. Ashyra could gain more utility by choosing point _____, all other things held equal.
The consumer doesn't have enough income to gain more utility.
Look at the figure Change in the Total Product. Which of the following choices is a likely cause of the shift in production function from TP1 to TP2?
The firm employed more of a fixed input in the long run
In the figure Comparing Long-Run Equilibriums, which of the following statements is FALSE?
The firm in panel (b) produces where price equals marginal cost.
If you decide to go to Cancún with your friends during spring break, you cannot go to Paris with your sister in the summer. This statement best represents this economic concept
The real cost of something is what you must give up to get it.
France and the United Kingdom both produce wine and cloth with constant opportunity costs. If opportunity costs in the two countries are different and France has a comparative advantage in wine production, then England MUST have a comparative advantage in cloth production.
True
Suppose peanut butter is an inferior good for Ilya and the price of peanut butter rises. What will happen to Ilya's consumption of peanut butter?
The substitution effect will cause a decrease in the consumption of peanut butter and the income effect will cause an increase in the consumption of peanut butter.
Which of the following is TRUE?
Total economic profit is per-unit profit times quantity.
A brand name is owned by a particular firm, and it distinguishes that firm's products from those of its competitors.
True
Across most industries, oligopoly is far more common than either perfect competition or monopoly.
True
Diminishing marginal utility occurs with increasing total utility.
True
If there are many firms in an industry, there is little incentive for firms to engage in tacit collusion because a smaller proportion of the units of the product sold are affected by the price effect if a firm increases output
True
In equilibrium there will be no further opportunities for gains from trade.
True
Pooh spends all of his income on honey and maple syrup. Because he views honey and maple syrup as perfect substitutes, he is willing to substitute honey for maple syrup at the constant rate of 1 teaspoon of honey to 2 teaspoons of maple syrup. If the price of honey in terms of maple syrup is 2.2, Pooh's optimal consumption bundle will consist entirely of maple syrup.
True
Value in diversity means that by providing a variety of differentiated choices, firms in monopolistic competition provide a gain to consumers
True
When a firm adds physical capital, its variable cost will decrease in the long run.
True
Which of the following statements about unions is TRUE?
Unions cause a surplus of labor by bargaining for wages that are higher than the value of the marginal product of labor.
Which of the following statements is TRUE?
Utility maximization requires seeking the most utility from a given budget
Suppose the price elasticity of demand for yachts equals 4.04, while the price elasticity of supply for yachts equals 0.22. If Congress reinstates a luxury tax on yachts, who will pay more of the tax?
Yacht builders will pay more.
The primary difference between a change in supply and a change in the quantity supplied is that:
a change in quantity supplied is a movement along the supply curve, while a change in supply is a shift in the supply curve.
Natural monopolies are likely to include all of the following EXCEPT:
a diamond mining company
Both monopolists and cartel members will find that a drop in price leads to:
a price effect that reduces total revenue
A quota is:
a quantity restriction
A tax on imports of foreign goods is called:
a tariff
The level of inputs a firm employs will determine a firm's:
ability to produce output
The demand curve for a monopoly is:
above the marginal revenue curve
An increase in producer surplus would most likely occur if:
an effective price floor was imposed.
An effective price floor will lead to:
an excess supply or a surplus.
Look at the table Lindsay's Farm. Lindsay's variable costs of production:
are zero when she produces no crops
The student center on campus has burritos, bagels, or burgers for lunch, and they all cost the same. You decide to have a burger today, but if they were out of burgers, you would have bought a bagel. Your opportunity cost of buying a burger is your enjoyment of the:
bagel
Beth promises to do Alice's taxes, and in exchange, Alice will set up several spreadsheets for Beth's household budget. This trade will most likely
be beneficial to both individuals.
A bank offers two compensation plans to its tellers. Plan A provides an hourly wage of $12. Plan B offers $10 per hour plus additional compensation if customers sign up for a related bank product. If a teller chooses plan B, most likely this person would:
be more helpful to customers than if he or she chose plan A
Well-defined property rights:
can allow for mutually beneficial trades.
Suppose the government of the oil-rich country Saudi Arabia sets gasoline prices at $0.25 per gallon when the market price is $1.50. The Saudi government's actions will:
cause gasoline shortages even in an oil-rich country.
Which of the following is an example of marginal analysis?
deciding whether to eat one more slice of pizza
Look at the figure Harold's Indifference Curves. If the price of cheese is $2 per pound and Harold has $10 to spend on bread and cheese, Harold _____ his consumption of cheese as the price of bread rises from $1 per loaf to $2 per loaf, indicating that bread and cheese are _____.
decreases; complements
Marginal cost _____ over the range of increasing marginal returns and _____ over the range of diminishing marginal returns.
decreases; increases
Marginal cost _____ over the range of increasing marginal returns and _____ over the range of diminishing marginal returns.
decreases;increases
In the market for canned pinto beans, _____ will increase if income increases and if pinto beans are a(n) _____ good.
demand; normal
The De Beers company is described as a monopolist in the production of:
diamonds
If the firm shown in the figure Monopolistic Competitor maximizes its returns, it will
earn a positive economic profit.
In the long run, each firm in a perfectly competitive industry will:
earn only enough to cover the opportunity costs of the resources used in production.
When a firm finds that its ATC of production decreases as it increases production, this firm is said to be experiencing:
economies of scale.
Because tourist demand for airline flights is relatively _____, small _____ in ticket price will result in relatively _____ in additional tourists
elastic; reductions; large increases
The purpose of medallions issued in New York City in the 1930s was to:
ensure that taxicabs met standards of safety and cleanliness.
In long-run equilibrium in perfect competition, price is:
equal to average total cost at its minimum.
Javon is consuming his optimal utility-maximizing consumption bundle of lobster and macaroni-and-cheese dinners when he loses his job and has less money to spend. Both are normal goods. When he adjusts his consumption to reflect the new level of income, the number of macaroni-and-cheese dinners he consumes:
falls
Read the scenario E-Books and Sports Tickets. Measure e-books on the horizontal axis and sports tickets on the vertical axis. Suppose the price of e-books decreases. Holding everything else constant, Phillip's budget line has become _____, and his optimal consumption bundle will be on a _____ indifference curve.
flatter;higher
(Table: Willingness to Pay for Basketball Sneakers) The table Willingness to Pay for Basketball Sneakers shows each player's willingness to pay for basketball sneakers. Assume that each player wants to buy at most, one pair of sneakers. If the price of basketball sneakers is $100, how many pairs will be purchased?
four
Look at the figure Demand for DVDs. A decrease in the price of DVD players (a complement) would result in a change illustrated by the move from:
h to i in panel B
Because one person's spending is another person's income:
if one group in the economy spends more, the incomes of other groups will increase.
One government policy for dealing with natural monopoly is to
impose a price ceiling to reduce economic profit
According to the infant industry argument, import protection is needed because:
it enables our protected industries to achieve technological efficiency and thus become competitive with mature foreign industries.
As defined in the text, the long run is a planning period:
in which a firm can adjust all resources
In most cases, economic efficiency is achieved through
incentives built into a market economy
Along a given downward-sloping demand curve, a decrease in the price of a good will _____ consumer surplus.
increase
Assume that corn is an input in the production of beef but not in the production of pork. Further, beef and pork are substitutes in consumption. A decrease in the price of corn will _____ the supply of beef and _____ the demand for pork.
increase; decrease
Assume that the United States imposes an import quota on Italian shoes. Relative to the equilibrium world price that would exist in the absence of import quotas, the equilibrium price of shoes in the United States will most likely _____, and the equilibrium price of shoes in Italy will most likely _____.
increase; decrease
If the United States increases tariffs on imports of lumber from Canada (which raises the price of lumber in the United States), the equilibrium price of new homes in the United States will _____ and the equilibrium quantity of new homes in the United States will _____.
increase; decrease
Over the past few years, the technology associated with producing flat-panel televisions has improved. This has led to a(n) _____ in the _____ flat-panel televisions.
increase; supply of
If the executives of the U.S. silicon chip industry lobby Congress for protection from imports on the grounds that theirs is a new industry that needs time to develop technological efficiency, they are using the _____ argument.
infant industry
For a perfectly competitive firm, marginal revenue
is equal to price
Look at the table Alaina's Utility from Consuming Cups of Coffee. Diminishing marginal utility
is present in Alaina's consumption of coffee, since her total utility increases at a decreasing rate with each cup consumed
The job creation argument for protection against free trade
is that keeping out foreign imports allows the goods and services to be produced by domestic workers.
We predict the long-run price elasticity of demand for gasoline to be _____ the short-run price elasticity of demand for it.
larger than
Decreases in the price of the good measured on the vertical axis will make the vertical intercept _____ and make the budget line _____.
larger; steeper
Decreases in the price of the good measured on the horizontal axis will make the horizontal intercept _____ and make the budget line _____.
larger;flatter
When an individual continues to eat more turkey, if the principle of diminishing marginal utility applies, each additional serving yields
less marginal utility
When an individual continues to eat more turkey, if the principle of diminishing marginal utility applies, each additional serving yields:
less marginal utility.
You are planning to study eight hours this week for your economics final and are considering studying a ninth hour. You should:
make your decision based on the cost of the next best alternative use of your time compared to the benefit of one more hour of study.
Some baseball fans leave the game in the seventh or eighth inning to avoid the postgame traffic. The fans are:
making a marginal decision by comparing the cost of leaving early to the benefit of leaving early
A monopolistically competitive industry is made up of
many firms producing a differentiated product
The _____ rate applies to an additional $1 of taxable income.
marginal
As you consume more turkey relative to mashed potatoes, the _____ of turkey eventually decreases.
marginal utility
Assuming that diminishing marginal utility applies to both pomegranates and bananas, if Vanessa buys more pomegranates and fewer bananas, the _____ of pomegranates will _____, and the _____ of bananas will _____.
marginal utility; fall; marginal utility; rise
The lack of property rights and inaccuracy of prices as economic signals often lead to:
market failure.
If a tax system is designed to minimize the sum of its deadweight loss and its administrative cost, its principal goal is:
maximizing efficiency
Industries that are made up of many competing producers, each selling a differentiated product, and whose firms earn zero economic profits in the long run are:
monopolistically competitive.
A monopolist with a linear demand curve will:
not produce in the inelastic portion of its demand curve
Because people usually exploit opportunities to make themselves better off, to encourage young people to go to college in their home state, state universities can:
offer lower tuition to in-state students.
A firm that has economies of scale
over the entire range of output demanded is a natural monopoly.
Look at the figure Shifts in Demand and Supply II. The graph shows how supply and demand might shift in response to specific events. Suppose consumer incomes decrease. Which panel BEST describes how this will affect the market for used clothing, an inferior good?
panel A
(Figure: Shifts in Demand and Supply) Look at the figure Shifts in Demand and Supply. The figure shows how supply and demand might shift in response to specific events. Suppose a fall frost destroys one-third of the nation's orange crop. Which panel BEST describes how this will affect the market for oranges?
panel B
A minimum price set above the equilibrium price is a:
price floor.
Suppose the price of gasoline increases 10% and quantity of gasoline demanded in Orlando drops 5% per day. Demand for gasoline in Orlando is
price inelastic
(Figure: Payoff Matrix for Gehrig and Gabriel) The figure Payoff Matrix for Gehrig and Gabriel describes two people who sell handmade Davy Crockett figurines in San Antonio. Both Gehrig and Gabriel have two strategies available to them: to produce 5,000 figurines each month or to produce 7,000 figurines each month. For Gehrig and Gabriel, the dominant strategy is to:
produce 7,000 figurines
A monopoly:
produces a product with no close substitutes
(Figure: The Profit-Maximizing Firm in the Short Run) Look at the figure The Profit-Maximizing Firm in the Short Run. If the market price is P4, the firm will produce quantity _____ and _____ in the short run.
q3; make a profit
In a single year, Argentina can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Venezuela can raise 50 tons of beef or produce 750 boxes of tulips. When the two countries begin trading beef for tulips, we expect the total surplus from beef consumption and production to:
rise in Argentina.
We are forced to make choices because of:
scarcity.
The larger the output, the more output over which fixed cost is distributed. Called the _____ effect, this leads to a ______ average _____ cost.
spreading; lower; fixed
Raina consumes 100% more mechanical pencils when the price of felt-tip pens increases by 50%. For Raina, pencils and pens are _____, and the cross-price elasticity of demand is _____.
substitutes; 2
Goods are _____ when the cross-price elasticity of demand is positive and _____ when the cross-price elasticity of demand is negative.
substitutes; complements
The market price of airline flights increased recently. Some economists suggest that the price increased because jet fuel is much more expensive than before. As a result, they believe that in the market for flights:
supply decreased
The amount for which suppliers are willing to supply the quota limit quantity is the:
supply price.
In the short run, if a monopoly is forced to charge a price equal to marginal cost:
the deadweight loss will decrease
A market failure occurs when
the individual's pursuit of self-interest makes the society worse off.
At the optimal consumption bundle
the marginal utility per dollar spent is equal for all goods consumed.
Assume that two combinations of two goods yield the same level of satisfaction. We can conclude that these combinations are always on:
the same indifference curve
(Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are set at Rent1:
the shortage of rental units is the distance Q3 - Q1.
Milk is an important ingredient in the production of ice cream. If the price of milk increases, then one would expect, holding all other things constant:
the supply curve for ice cream to shift left.
The provision of disabled-parking passes to those with disabilities often requires that more than enough spaces be available for those with disabilities. As a result, many of these spaces are vacant quite often when they could be used by able-bodied individuals. Such a situation illustrates the:
trade-off between efficiency and equity.
Cookie Monster always consumes cookies and milk in fixed proportions: 4 cookies to 8 ounces of milk. This implies that for Cookie Monster the marginal rate of substitution of cookies for milk is:
undefined
If the price elasticity of demand equals 0, the demand curve is:
vertical
Many countries engage in trade protection by imposing import tariffs or quotas for at least some goods. This is because:
while such restrictions harm consumers, they benefit producers, who are usually a more cohesive and politically influential group
To find her optimal consumption bundle, Vanessa would have to
while such restrictions harm consumers, they benefit producers, who are usually a more cohesive and politically influential group.
Along a straight-line downward-sloping demand curve, a decrease in the market price of a good:
will increase consumer surplus
If there is an increase in supply, assuming a positively sloped supply curve and a negatively sloped demand curve, total surplus:
will increase.
If total utility is at a maximum, marginal utility is:
zero
You go to an all-you-can-eat buffet. If you maximize utility, the marginal utility of the last bite that you eat will be
zero
Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $20. If the cable company is a monopoly, how much is total surplus when the monopolist maximizes profit?
$240
Look at the scenario Monopolist. The total profit-maximizing level of profit per unit is:
$50.00
(Figure: Revenues, Costs, and Profits for Tomato Producers) Look at the figure Revenues, Costs, and Profits for Tomato Producers. The market for tomatoes is perfectly competitive. The market price of a bushel of tomatoes is $18. At the profit-maximizing quantity of output in the figure, the farmer's total revenue is _____, total cost is _____, and profit is _____.
$90; $70; $20
Look at the table Total Cost Data. What is the total variable cost for this bicycle firm when the firm produces 5 bicycles?
190
(Table: Demand Schedule for Gadgets) Look at the table Demand Schedule for Gadgets. The market for gadgets consists of two producers, Margaret and Ray. Each firm can produce gadgets with no marginal cost or fixed cost. If these two producers formed a cartel, split the production of output equally, and acted to maximize total industry profits, each firm's output would be _____ and each firm's profit would be _____.
250; $1,250
(Table: Total Cost and Output) Look at the table Total Cost and Output, which describes Sergei's total costs for his perfectly competitive all-natural ice cream firm. If the market price of a tub of ice cream is $50, what quantity will Sergei produce to maximize profit?
3
Look at the table Marginal Utility per Dollar of M&Ms. The price of M&Ms is $2 per bag. The marginal utility per dollar of the first bag of M&Ms is:
3
Look at the table Utility from Oranges and Star Fruit. Oranges cost $2 per pound and star fruit costs $5 per pound. Calvin has $26 to spend. If Calvin buys 4 pounds of star fruit, how many pounds of oranges can he buy?
3
The Production of Wheat and Toys) Look at the scenario Production of Wheat and Toys. The opportunity cost of producing a unit of wheat in country B is:
3 toys
Look at the figure Short-Run Costs II. Curve 1 crosses the average variable cost curve at
3 units of output.
Look at the table Cherry Farm. If all cherry farms are the same size, how much will each farm produce in long-run equilibrium?
4 pounds
(Table: Cherry Farm) Look at the table Cherry Farm. How much will the industry produce in long-run equilibrium?
400 pounds
Look at the figure The Production Possibilities for Two Countries. If Indonesia and Malaysia trade 1 radio for 1.5 tires, the most that Indonesia can consume is _____ radios and _____ tires, while the most that Malaysia can consume is _____ radios and _____ tires.
400; 600; 1,200; 600
The Herfindahl-Hirschman index equals _____ when _____ have (has) _____ of the market.
5,000; two firms each; 50%
Chuck spends all of his income on tacos and milkshakes. His income is $100, the price of tacos is $10, and the price of milkshakes is $2. Put tacos on the horizontal axis and milkshakes on the vertical axis. The vertical for Chuck's budget line is _____ milkshakes
50
Look at the figure The Consumption of Video Games and E-Books. Which chart shows the effects of a decrease in income when video games are an inferior good and e-books are a normal good?
A
Look at the figure The Domestic Market for Rice. Assume that PA is the autarky price and PW is the world price. Before international trade, consumer surplus is equal to the area:
A + B + D.
Look at the table Demand Schedule for Gadgets. The market for gadgets consists of two producers, Margaret and Ray. Each firm can produce gadgets at a marginal cost of $2 and no fixed cost. If these two producers formed a cartel, agreed to split production of output evenly, and acted to maximize total industry profits, total industry profit would be:
$1,600
(Table: Producer Surplus) Look at the table Producer Surplus. If the price of a ticket to see The Nutty Nutcracker is $75 and there is no other market for tickets, the total producer surplus for the five students is:
$139.
(Figure: Producer Surplus III) Look at the figure Producer Surplus III. If the price of the good decreases from $2 to $1, producer surplus will decrease by:
$15.
(Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government imposes a quota limiting sales of shrimp to 250 pounds, it will have the same effect on transactions as a price floor of:
$17.50
Janet's poodle grooming salon has a total cost curve expressed by the equation TC = 100 + 3Q2, where Q is the quantity of dogs groomed. Given this expression, if Janet grooms five dogs, her total costs will be
$175
Look at the figure The Market for Hamburgers. If the market is originally in equilibrium and the government imposes an excise tax of $0.80 per unit of the good sold, consumer surplus will be reduced by
$175
Look at the figure The Market for Hamburgers. If the market is originally in equilibrium and the government imposes an excise tax of $0.80 per unit of the good sold, consumer surplus will be reduced by:
$175.
(Table: Prices and Demand) Look at the table Prices and Demand. The New Orleans Saints have a monopoly on Saints logo hats. The marginal cost of producing a hat is $18. How much is producer surplus at the Saint's profit-maximizing output?
$18
