Micro Midterm 2
P* = $70 Q* = 100 Refer to Figure 7-22. At the equilibrium price, producer surplus is A. $1,750. B. $2,500. C. $5,000. D. $3,500.
B. $2,500
Figure 8-6 The vertical distance between points A and B represents a tax in the market. Refer to Figure 8-6. Total surplus with the tax in place is A. $1,500. B. $4,500. C. $6,000. D. $3,600.
B. $4,500
P* = $90, Q* = 30 Figure 9-1 The figure illustrates the market for coffee in Guatemala. Refer to Figure 9-1. When trade is allowed, A. Guatemalan consumers of coffee become better off and Guatemalan producers of coffee become worse off. B. Guatemalan producers of coffee become better off and Guatemalan consumers of coffee become worse off. C. both Guatemalan producers and consumers of coffee become worse off. D. both Guatemalan producers and consumers of coffee become better off.
B. Guatemalan producers of coffee become better off and Guatemalan consumers of coffee become worse off.
.1. Which industry has the highest share of imports from China? A. Silverware & plated ware mfg B. House slipper mfg C. Electric housewares & household fan mfg D. Luggage mfg E. Women's handbag & purse mfg
B. House slipper mfg
Given the figure which of the following is NOT true. http://docs.google.com/file/d/0B4cvOO41GvQrVjdreEhnTUtBYk0/edit?usp=sharing A. In the case of a tax the green box belongs to the government B. In the case of a quota system the green box belongs to producers C. In the case of a binding price floor the green box belongs to producers D. None of the above are true.
B. In the case of a quota system the green box belongs to producers
The government of Canada uses which mechanism to control the supply of dairy. A. Price Ceiling B. Quota System C. Milk Tax D. Purchases excess milk to maintain high price.
B. Quota System
When a government imposes a subsidy who gains more from the subsidy A. The person with the relatively more elastic curve B. The person with the relatively more inelastic curve C. The person with the unit elastic curve D. None of the Above
B. The person with the relatively more inelastic curve
The cost of producing the typical unit of output is the firm's A. marginal cost. B. average total cost. C. variable cost. D. opportunity cost.
B. average total cost.
Figure 10-13. On the graph, Q represents the quantity of plastics and P represents the price of plastics. Refer to Figure 10-13. Each unit of plastics that is produced results in an external A. benefit of $8. B. cost of $8. C. cost of $6. D. benefit of $6.
B. cost of $8.
In deciding whether a good is a public good, one must determine the A. value of the external benefits that accrue to resource owners. B. excludability of the good. C. incomes of those who benefit from the good. D. All of the above are correct.
B. excludability of the good.
If the government removes a binding price ceiling from a market, then the price received by sellers will A. decrease, and the quantity sold in the market will decrease. B. increase, and the quantity sold in the market will increase. C. decrease, and the quantity sold in the market will increase. D. increase, and the quantity sold in the market will decrease.
B. increase, and the quantity sold in the market will increase
If firms are competitive and profit maximizing, the price of a good equals the A. total cost of production. B. marginal cost of production. C. fixed cost of production. D. average total cost of production.
B. marginal cost of production.
A tariff is a A. limit on how much of a good can be imported. B. tax on an imported good. C. tax on an exported good. D. limit on how much of a good can be exported.
B. tax on an imported good.
In setting the production level, a firm's cost curves A. have no bearing on what decisions the firm will make. B. dictate what decisions the firm will make. C. by themselves do not tell us what decisions the firm will make. D. None of the above is correct.
C. by themselves do not tell us what decisions the firm will make.
P* = $3, Q* = 120. Price ceiling at $2 Refer to Figure 6-2. The price ceiling A. is not binding, because it is set above the equilibrium price. B. causes a shortage of 45 units. C. causes a shortage of 85 units. D. causes a shortage of 40 units.
C. causes a shortage of 85 units
In the short run, there are 500 identical firms in a competitive market. The firms do not use any resources that are available in limited quantities, and each of them has the following cost structure: Output Total Cost 0 $0 1 $10 2 $12 3 $15 4 $24 5 $35 The long-run supply curve for this market is A. positively sloped for all prices above $10. B. horizontal at a price of $7. C. horizontal at a price of $5. D. horizontal at a price of $6.
C. horizontal at a price of $5.
If the government levies a $5 tax per MP3 player on buyers of MP3 players, then the price paid by buyers of MP3 players would likely A. increase by exactly $5. B. decrease. C. increase by less than $5. D. increase by more than $5.
C. increase by less than $5
An externality is A. the proposition that private parties can bargain without cost over the allocation of resources. B. a market equilibrium tax. C. the uncompensated impact of one person's actions on the well-being of a bystander. D. the costs that parties incur in the process of agreeing and following through on a bargain.
C. the uncompensated impact of one person's actions on the well-being of a bystander.
If a price floor is not binding, then A. there will be a surplus in the market. B. there will be a shortage in the market. C. there will be no effect on the market price or quantity sold. D. the market will be less efficient than it would be without the price floor.
C. there will be no effect on the market price or quantity sold
Producer surplus equals the A. amount received by sellers minus the cost to sellers. B. amount received by sellers minus the amount paid by buyers. C. value to buyers minus the amount paid by buyers. D. value to buyers minus the cost to sellers.
A. amount received by seller minus the cost to sellers
P* = $8 , Q* = 2000, World Price = $10 Figure 9-20 The figure illustrates the market for rice in Vietnam. Refer to Figure 9-20. With trade, Vietnam will A. export 1,500 units of rice. B. import 1,500 units of rice. C. export 1,000 units of rice. D. import 1,000 units of rice.
A. export 1,500 units of rice.
Refer to Figure 10-1. This graph represents the tobacco industry. The industry creates A. negative externalities. B. no equilibrium in the market. C. no externalities. D. positive externalities.
A. negative externalities.
Both public goods and common resources are A. nonexcludable. B. excludable. C. rival in consumption. D. nonrival in consumption.
A. nonexcludable.
Research into new technologies provides a A. positive externality, and too few resources are devoted to research as a result. B. negative externality, and too few resources are devoted to research as a result. C. negative externality, and too many resources are devoted to research as a result. D. positive externality, and too many resources are devoted to research as a result.
A. positive externality, and too few resources are devoted to research as a result.
A textbook is a A. private good and the knowledge that one gains from reading the book is a public good. B. common resource and the knowledge that one gains from reading the book is a public good. C. private good and the knowledge that one gains from reading the book is a common resource. D. common resource and the knowledge that one gains from reading the book is a private good.
A. private good and the knowledge that one gains from reading the book is a public good.
The accountants hired by the Brookside Racquet Club have determined total fixed cost to be $75,000, total variable cost to be $130,000, and total revenue to be $125,000. Because of this information, in the short run, the Brookside Racquet Club should A. shut down because staying open would be more expensive. B. lower their prices to increase their profits. C. stay open because the firm is making an economic profit. D. stay open because shutting down would be more expensive.
A. shut down because staying open would be more expensive.
One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run, A. the size of the factory is fixed. B. the number of workers used to produce the firm's product is fixed. C. there are no fixed costs. D. output is not variable
A. the size of the factory is fixed.
The following table represents the costs of five possible sellers. Seller Cost Abby $1,600 Bobby $1,300 Dianne $1,100 Evaline $900 Carlos $800 Refer to Table 7-11. Suppose each of the five sellers can supply at most one unit of the good. The market quantity supplied is exactly 2 if the price is A. $1,650. B. $1,700. C. $1,100. D. $1,050.
D. $1,050.
Refer to Table 13-14. What is the total cost of producing 7 units of output? A. $143 B. $10 C. $185 D. $153
D. $153
P* = $12 , Q* = 300, World Price = $7 Figure 9-4. The domestic country is Nicaragua. Refer to Figure 9-4. The change in total surplus in Nicaragua because of trade is A. $750, and this is a decrease in total surplus. B. $750, and this is an increase in total surplus. C. $625, and this is a decrease in total surplus. D. $625, and this is an increase in total surplus.
D. $625, and this is an increase in total surplus.
Figure 14-10 In the figure below, panel (a) depicts the linear marginal cost of a firm in a competitive market, and panel (b) depicts the linear market supply curve for a market with a fixed number of identical firms. Refer to Figure 14-10. If there are 500 identical firms in this market, what is the value of Q2? A. 60,000 B. 12,000 C. 240,000 D. 300,000
D. 300,000
Which of the following could cause a DWL? A. Subsidy B. Taxes C. Price Floor and Price Ceilings D. All of the Above.
D. All of the Above
Which of the following policies is not an example of a command-and-control policy? A. Pigovian taxes B. tradable pollution permits C. subsidies D. None of the above is an example of a command-and-control policy.
D. None of the above is an example of a command-and-control policy.
The average fixed cost curve A. declines as long as it is above marginal cost. B. declines as long as it is below marginal cost. C. always rises with increased levels of output. D. always declines with increased levels of output.
D. always declines with increased levels of output.
P* = $5 and Q* = 100 on graph Figure 6-19. Suppose a tax of $2 per unit is imposed on this market. How much will buyers pay per unit after the tax is imposed? A. $7 B. between $3 and $5 C. $3 D. between $5 and $7
D. between $5 and $7
For any country, if the world price of copper is lower than the domestic price of copper without trade, that country should A. neither export nor import copper, since that country already produces copper at a low cost compared to other countries. B. neither export nor import copper, since that country cannot gain from trade. C. export copper. D. import copper.
D. import copper
A view of a spectacular sunset along a private beach is an example of a A. rival but nonexcludable good. B. public good. C. private good. D. nonrival but excludable good.
D. nonrival but excludable good.
Jamar used to work as an office manager, earning $40,000 per year. He gave up that job to start a life-coaching business. In calculating the economic profit of his life-coaching business, the $40,000 income that he gave up is counted as part of the life-coaching business's A. total revenue. B. marginal costs. C. explicit costs. D. opportunity costs.
D. opportunity costs.
As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on, the A. tax revenue always decreases, and the deadweight loss always increases. B. tax revenue always increases, and the deadweight loss always increases. C. deadweight loss increases at first, but it eventually peaks and then decreases. D. tax revenue increases at first, but it eventually peaks and then decreases.
D. tax revenue increases at first, but it eventually peaks and then decreases.
The overuse of a common resource relative to its economically efficient use is called A. a public good. B. the free rider problem. C. cost-benefit analysis. D. the Tragedy of the Commons.
D. the Tragedy of the Commons.
At the equilibrium price of a good, the good will be sold by those sellers A. that can produce the good. B. whose cost is more than price. C. enter the market first. D. whose cost is less than price.
D. whose cost is less than price
A negative externality is a cost that a third party incurs from someone else's economic activity, while a positive externality is a benefit that a third party receives from someone else's economic activity. When the third party experiences an adverse effect, it is called a negative externality.
Which of the following generate the type of (negative) externality previously described? Check all that apply. Yes Your roommate Cho has bought a cat to which you are allergic. No A leading software company has decided to increase its research budget for inventing new open-source technologies. Yes The local airport has doubled the number of runways, causing additional noise pollution for the surrounding residents. No Musashi has planted several trees in his backyard that increase the beauty of the neighborhood, especially during the fall foliage season.
It's important to note that sometimes private solutions to externalities do not work. For example, this occurs when communications barriers or social customs are important enough relative to the potential gains involved that a private solution is not feasible
private solution is not feasible
Suppose that, in a competitive market without government regulations, the equilibrium price of gasoline is $3.00 per gallon. Complete the following table by indicating whether each of the statements is an example of a price ceiling or a price floor and whether it is binding or nonbinding. The government has instituted a legal minimum price of $2.50 per gallon for gasoline: Price floor & Non-binding The government prohibits gas stations from selling gasoline for more than $2.50 per gallon: Price ceiling & Binding There are many teenagers who would like to work at gas stations, but they are not hired due to minimum-wage laws: Price floor & Binding
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A good is excludable if there is a way to restrict access to it. For example, a concert in a theater is excludable because the theater management can restrict attendance to only those people who buy a ticket, but a concert in a public park is nonexcludable because anyone is allowed to walk through the park and enjoy the music. A good is nonrival in consumption when consumption by one individual does not decrease the amount that can be consumed by another individual. For example, if you watch a program on television, it doesn't interfere with anyone else's ability to watch the broadcast on a different TV set; but if you consume a hamburger, nobody else can consume the same hamburger, so it is rival in consumption. If a good is both excludable and nonrival in consumption, then it is a club good
A good that is rival in consumption and excludable is a private good. In this case, your new SUV is rival in consumption because two people cannot drive it at the same time. It is also excludable because you, as the owner, can prevent anyone else from using it. The fact that you choose to drive your friends around does not affect your SUV's classification as a private good. A good that is both nonrival in consumption and nonexcludable is a public good. In this case, looking at the fountain does not diminish anyone else's ability to do the same, so the fountain is nonrival in consumption. It is also nonexcludable because, given its location in a public space, it's impossible to prevent a person from looking at it. A good that is rival in consumption and nonexcludable is a common resource. In this case, a dock on a lake that is open to the public is rival in consumption since two people cannot use the dock at the same time. However, it is nonexcludable since anyone is free to use the lake. A good that is nonrival in consumption and excludable is a club good. None of the goods in the previous table fall under this category.
A command-and-control policy, or regulation, remedies an externality by legally limiting a specific behavior by a specific entity. Some examples of command-and-control policies are directly limiting the emissions of carbon dioxide by each factory or mandating that firms adopt emissions-reducing technology. A tradable permit system remedies an externality by regulating general behavior—in this case, total emissions of carbon dioxide—but also by allowing market forces to determine individual outcomes—in this case, the amount that each individual factory pollutes. A corrective subsidy encourages behavior that has positive external effects. Since planting trees generates a social value beyond the private value to the tree planter, a corrective subsidy to induce citizens to plant trees can help achieve the efficient quantity. A corrective tax, also known as a Pigovian tax, discourages behavior that has negative external effects. For example, since carbon-dioxide pollution generates a social cost beyond the private costs to the factory owner, a corrective tax can help achieve the socially optimal quantity of pollution.
Corrective Tax - The government charges factories $110 for every ton of carbon dioxide they emit. Tradable Permit System - The government limits total carbon-dioxide emissions by all factories to 180,000 tons per month. Each individual factory is given the right to emit 140 tons of carbon dioxide, and factories may buy and sell these rights in a marketplace. Corrective Subsidy - Trees take carbon dioxide out of the air and convert it to oxygen, so the government funds a tree-planting initiative by offering $110 to any citizen who plants a tree. Command and Control - The government orders every factory to adopt a new technology, which reduces carbon-dioxide emissions into the atmosphere.
