Microeconomics Final

Private goods

goods that are both excludable and rival in consumption

Public Goods

goods that are neither excludable nor rival in consumption

Coase Theorem

the proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own.

How do you find total surplus?

Add together the producer and consumer surplus.

PED

Change in quantity demanded / change in price

Refer to Figure 6-9. At which price would a price floor be binding? Select one: a. $6 b. $5 c. $4 d. $3

a. $6

Figure 6-17 Note: The tax amount is the distance between S1 and S2 Refer to Figure 6-17. Acme, Inc. is a seller of the good. Acme sells a unit of the good to a buyer and then pays the tax on that unit to the government. Acme is left with how much money? Select one: a. $8.00 b. $9.00 c. $10.50 d. $12.00

a. $8.00

The Table shows the number of hours it takes each country (Aruba and Iceland) to make one unit of each product. Table 3-2 Labor Hours Needed to Make 1 Cooler Radio Aruba 2 5 Iceland 1 4 Aruba's opportunity cost of one cooler is Select one: a. 0.4 radios b. 2.5 radios c. 0.25 radios d. 4 radios

a. 0.4 radios

The following table shows the demand schedule for a particular good. Price Quantity $15 0 $12 5 $9 10 $6 15 $3 20 $0 25 When the price falls from $6 to $3, the price elasticity of demand is Select one: a. 0.43 b. 0.67 c. 1.50 d. 2.33

a. 0.43

The Surgeon General announces that eating apples promotes healthy teeth. As a result, the equilibrium price of apples Select one: a. increases, and producer surplus increases. b. increases, and producer surplus decreases. c. decreases, and producer surplus increases. d. decreases, and producer surplus decreases.

a. increases, and producer surplus increases.

Nonrival goods

also called club goods. goods that are excludable but not rival in consumption

Rival Goods

also called common resources. the property of a good whereby one person's use diminishes other people's use

Refer to Figure 10-10. Taking into account private and external costs, the maximum total surplus that can be achieved in this market is Select one: a. $760. b. $1,080. c. $1,440. d. $1,920.

b. $1,080.

Figure 8-2 The vertical distance between points A and B represents a tax in the market. The loss of consumer surplus associated with some buyers dropping out of the market as a result of the tax is Select one: a. $0. b. $1.50. c. $3. d. $4.50.

b. $1.50

Refer to Figure 8-2. Total surplus without the tax is Select one: a. $10, and total surplus with the tax is $2.50. b. $10, and total surplus with the tax is $7.50. c. $20, and total surplus with the tax is $2.50. d. $20, and total surplus with the tax is $7.50.

b. $10, and total surplus with the tax is $7.50.

Figure 6-9 Refer to Figure 6-9. A price ceiling set at Select one: a. $4 will be binding and will result in a shortage of 3 units. b. $4 will be binding and will result in a shortage of 6 units. c. $7 will be binding and will result in a surplus of 6 units. d. $7 will be binding and will result in a surplus of 12 units.

b. $4 will be binding and will result in a shortage of 6 units.

Refer again to Figure 8-2. How much tax revenue is generated from a tax of A-B? Select one: a. $2.00 b. $5.00 c. $3.00 d. $4.00

b. $5.00

Consider the town of Anywhere with only three residents, Mary, Bill, and Tricia. The three residents are trying to determine how large, in acres, they should build the public park. The table below shows each resident's willingness to pay for each acre of the park. Acres Mary Bill Tricia 1 $14 $18 $30 2 10 14 26 3 6 10 22 4 4 6 18 5 2 3 14 6 0 1 10 7 0 0 6 Refer to Table 11-1. Suppose the cost to build the park is $33 per acre. How many acres should the park be to maximize the difference between total benefits and total costs? Hint: this is also known as maximizing total surplus. Select one: a. 2 acres b. 3 acres c. 4 acres d. 5 acres

b. 3 acres

College-age athletes who drop out of college to play professional sports: a. are not rational decision makers. b. are well aware that their opportunity cost of attending college is very high. c. are concerned more about present circumstances than their future. d. underestimate the value of a college education.

b. are well aware that their opportunity cost of attending college is very high.

Figure 7-2 Area C represents the Select one: a. decrease in consumer surplus that results from a downward-sloping demand curve. b. consumer surplus to new consumers who enter the market when the price falls from P2 to P1. c. increase in producer surplus when quantity sold increases from Q2 to Q1. d. decrease in consumer surplus to each consumer in the market when the price increases from P1 to P2.

b. consumer surplus to new consumers who enter the market when the price falls from P2 to P1

Refer to Figure 7-2. When the price rises from P1 to P2, consumer surplus Select one: a. increases by an amount equal to A. b. decreases by an amount equal to B+C. c. increases by an amount equal to B+C. d. decreases by an amount equal to C.

b. decreases by an amount equal to B+C.

Refer to Figure 10-10. The graph represents a market in which Select one: a. there is no externality. b. there is a positive externality. c. there is a negative externality. d. The answer cannot be determined from inspection of the graph.

c. there is a negative externality.

Suppose the Market Demand Function is Qd = 20 - 1.5P and the Market Supply Function is Qs = 0.5P What is the competitive market equilibrium Price? Select one: a. $20 b. $15 c. $10 d. $5 e. More information is needed to answer this question

c. $10

Refer again to Figure 8-2. What is the deadweight loss from a tax of A-B? Select one: a. $7.50 b. $5.00 c. $2.50 d. $1.50

c. $2.50

Refer to Figure 6-17. In the after-tax equilibrium, how much revenue does the government collect from the tax on this good? Select one: a. $210 b. $345 c. $420 d. $480

c. $420

Refer to Figure 7-2. When the price is P1, consumer surplus is Select one: a. A. b. A+B. c. A+B+C. d. A+B+D.

c. A+B+C.

Which of the following is an example of a positive, as opposed to normative, statement? a. Inflation is more harmful to the economy than unemployment is. b. If welfare payments increase, the world will be a better place. c. Prices rise when the government prints too much money. d. When public policies are evaluated, the benefits to the economy of improved equality should be considered more important than the costs of reduced efficiency.

c. Prices rise when the government prints too much money

Figure 4-15 Refer to Figure 4-15. At a price of $15, there would be a Select one: a. surplus of 400 units. b. shortage of 200 units. c. shortage of 400 units. d. shortage of 600 units.

c. shortage of 400 units.

Ed spends an hour studying instead of watching tv with his friends. The opportunity cost to him of studying is: a. the improvement in his grades from studying for the hour. b. the improvement in his grades from studying minus the enjoyment of watching tv. c. the enjoyment he would have received if he had watched tv with his friends. d. zero. Since Ed chose to study rather than to watch tv, the value of studying must have been greater than the value of watching tv.

c. the enjoyment he would have received if he had watched tv with his friends

SIMILAR ON EXAM NOT EXACT Q Bill created a new software program he is willing to sell for $200. He sells his first copy and enjoys a producer surplus of $150. What is the price paid for the software? Select one: a. $50. b. $150. c. $200. d. $350.

d. $350.

If a binding price floor is imposed on the video game market, then Select one: a. the quantity of video games demanded will decrease. b. the quantity of video games supplied will increase. c. a surplus of video games will develop. d. All of the above are correct.

d. All of the above are correct.

When calculating the cost of college, which of the following should you probably not include? a. The cost of tuition b. The cost of books required for college classes c. The income you would have earned had you not gone to college d. The cost of rent for your off-campus apartment.

d. The cost of rent for your off-campus apartment.

What is opportunity cost?

what you give up to get that item