Liberty University Stuff: Liberty University ECON 213 quiz 6 solutions answers right

Liberty University ECON 213 quiz 6 solutions answers right

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Question 1

Question 2

Externalities are minimized if:

Question 3

To reduce the level of pollution emitted by firms in an industry, the government could use a capandtrade policy or a carbon tax. Which of the following is true?

Question 4

External benefits arise from the actions of:

Question 5

What type of good is often provided by the government because it is hard to get people to voluntarily contribute their fair share of the expense?

Question 6

Your roommate is studying to be a chef and likes to try new recipes. He leaves his delicious creations in the refrigerator for anyone who wants to eat them. The food he leaves is always gone within a day. This is an example of:

Question 7

A good that is nonrival and excludable is defined as a:

Question 8

Which goods are sold in markets?

Question 9

The thirdparty problem:

Question 10

An internal cost is best defined as the cost of an activity paid for by:

Question 11

A major reason why the market equilibrium for a manufactured good may not be efficient is:

Question 12

The city decides to offer a subsidy to each homeowner’s association that plants more flowers in their common areas. In the market for flowers, this will cause the:

Question 13

Refer to the accompanying figure, which shows the market for fish, to answer the questions that follow.

If the government sets a quota of 300 pounds of fish caught per day and issues a license that entitles the holder to catch 20 pounds of fish per day, then the value of the license is:

Question 14

Consider the accompanying figure to answer the questions that follow.

When a positive externality exists, which point best identifies the social optimum?

Question 15

Consider the following scenario when answering the questions that follow:

Jones owns a factory that is dumping toxic waste into a river where Smith owns a resort. At present, Jones is not filtering the water that he dumps into the river. There is a filter he could install that would remove a significant amount of the toxic elements from the water before it is dumped in the river. Jones and Smith have each assessed the situation and come up with the following data:

If property rights over the river are assigned to Smith, then:

Question 16

Externalities exist because:

Question 17

Consider the following scenario when answering the questions that follow:

If property rights over the river are assigned to Jones, then:

Question 18

The music you buy on the Internet is:

Question 19

Congestion charges cause the price of driving to __________. Therefore, the number of cars on the road will __________.

Question 20

According to the Coase theorem, negative externalities can be internalized if:

The city decides to offer a subsidy to each homeowner’s association that plants more flowers in their common areas. In the market for flowers, this will cause the

Museum visits in a particular city are free. This good is

Which of the following characteristics best defines a common-resource good

If the government imposes a tax on each aluminum can sold, payable by consumers when they purchase the item, then, in the market for goods sold in aluminum cans, the

Consider a market where production of a good generates a negative externality. In the market equilibrium,

Which of the following is the best definition of a cap-and-trade policy for pollution

Which of the following characteristics best defines a private good?

The Coase theorem suggests that private parties:

Which good is nonrival?

Consider a market with a negative externality. The market will tend to __________ the good because the market participants tend to ignore the __________ of their decision.

The tragedy of the commons occurs for goods that are:

Consider the accompanying figure to answer the questions that follow.
A positive externality exists and the government does not intervene. Which point best identifies the market equilibrium?

Refer to the accompanying figure. The market for dry-cleaning services is currently in equilibrium at point A, and the government decides to tax the stores that offer dry-cleaning services in order to improve the air quality. The new equilibrium will be at point:

If the government implements a cap-and-trade system to reduce pollution in a particular industry, then the:

When people elect to spend more years in school, this results in a __________ externality because there are __________ associated with this decision.

Which goods are sold in markets?

The personal decisions of consumers and firms are based on:

You share a house with two other people. You are a concert pianist and often practice at home. One roommate enjoys listening to you practice, but the other does not. For the roommate who enjoys listening to you play, this is an example of __________; for the other roommate, it is an example of __________.

A major reason why public goods are not supplied by the market is the:

If the government imposes a tax on each aluminum can sold, payable by consumers when they purchase the item, then, in the market for goods sold in aluminum cans, the

Consider a market where production of a good generates a negative externality. In the market equilibrium

If the government implements a cap-and-trade system to reduce pollution in a particular industry, then the

When people elect to spend more years in school, this results in a __________ externality because there are __________ associated with this decision

Which goods are sold in markets?

Question 1 The government imposes a tax on the sale of a good whose production is creating a negative externality. The value of the tax is $4 per unit sold. In the new equilibrium, you would expect:

Question 3 The tragedy of the commons occurs for goods that are:

Question 4 Your roommate is studying to be a chef and likes to try new recipes. He leaves his delicious creations in the refrigerator for anyone who wants to eat them. The food he leaves is always gone within a day. This is an example of:

Question 5 A positive externality exists whenever:

Question 6 Consider a market with a negative externality. The market will tend to __________ the good because the market participants tend to ignore the __________ of their decision.

Question 7 __________ can be jointly consumed by more than one person, and nonpayers are difficult to exclude.

Question 8 Which of the following characteristics best defines a private good?

Question 9 Consider the market for refined oil. In the market equilibrium,

Question 10 Common resources are:

Question 11 Which good is nonrival?

Question 12 If government regulation forces firms in an industry to internalize the externality, then we can expect the equilibrium price of the good to __________ and the equilibrium quantity to __________.

Question 13 Refer to the accompanying figure to answer the questions that follow. The figure best illustrates what type of market?

Question 14 A negative externality exists whenever:

Question 15 Refer to the accompanying table, where Q represents the quantity produced, internal cost and external cost are given for various quantities, and P represents the price consumers are willing to pay for various quantities. The market equilibrium occurs where price is __________ and quantity is __________.

Question 16 It is best to reduce the level of pollution:

Question 17 Refer to the accompanying figure. Which area represents the deadweight loss associated with producing at the market equilibrium instead of the social optimum?

Question 18 Positive externalities have __________ for third parties.

Question 19 Global warming is an example of:

Question 1 Refer to the accompanying figure, which shows the market for fish, to answer the questions that follow. If the government sets a quota of 300 pounds of fish caught per day, then fish will sell for __________ more per pound than the cost of catching the fish.

Question 2 The tragedy of the commons occurs because the good being produced is:

Question 3 The government has identified a situation where the production of a good is creating a negative externality. The government should enact legislation to require firms to internalize the externality:

Question 4 Which of the following characteristics best defines a public good?

Question 5 The market works efficiently in the absence of externalities if the good is:

Question 6 Visiting the public beach during summer is an example of an activity that is:

Question 7 Copyright laws exist to:

Question 8 The market overproduces commonresource goods because private decisionmakers consider __________ costs but society experiences __________ costs.

Question 9 Which of the following characteristics best defines a private good?

Question 10 Your neighbor is an avid gardener who changes his flower displays four times per year and who was given the “best yard on the block” award last year. While you personally enjoy these changing flower displays, some of your neighbors have said they do not like some of the flowers your neighbor chooses to plant. For you, this is an example of:

Question 11 The ability to download music and movies from the Internet without paying is:

Question 12 Consider the following scenario when answering the questions that follow: Jones owns a factory that is dumping toxic waste into a river where Smith owns a resort. At present, Jones is not filtering the water that he dumps into the river. There is a filter he could install that would remove a significant amount of the toxic elements from the water before it is dumped in the river. Jones and Smith have each assessed the situation and come up with the following data: If property rights over the river are assigned to Jones, then:

Question 13 Refer to the accompanying figure. When a negative externality exists and the government does not intervene, which point best identifies the market equilibrium?

Question 14 It is best to reduce the level of pollution:

Question 15 To reduce the level of pollution emitted by firms in an industry, the government could use a capandtrade policy or a carbon tax. Which of the following is true?

Question 16 Which rule would not protect fish populations?

Question 17 The costs of a market activity paid for by an individual NOT engaged in the market activity are:

Question 18 The city decides to offer a subsidy to each homeowner’s association that plants more flowers in their common areas. In the market for flowers, this will cause the:

Question 19 Which good has welldefined property rights?

Question 20 If the government decides to adopt a carbon tax, the price of goods whose production generates carbon emissions will __________ and the quantity produced will __________.

Question 1 Refer to the following scenario to answer the questions that follow. Five fishermen live in a village and have no other employment or incomeearning possibilities besides fishing. They each own a boat that is suitable for fishing but does not have any resale value. Fish are worth $5 per pound, and the marginal cost of operating the boat is $500 per month. They all fish a river next to the village. According to the following schedule, they have determined that, when there are more of them out on the river fishing, they each catch fewer fish per month. If four boats operate, then each boat will make a profit of:

Question 2 Refer to the accompanying figure, which shows the market for fish, to answer the questions that follow. If the government sets a quota of 300 pounds of fish caught per day and issues a license that entitles the holder to catch 20 pounds of fish per day, then the value of the license is:

Question 3 If government regulation forces firms in an industry to internalize the externality, then the:

Question 4 Consider the following scenario when answering the questions that follow: Jones owns a factory that is dumping toxic waste into a river where Smith owns a resort. At present, Jones is not filtering the water that he dumps into the river. There is a filter he could install that would remove a significant amount of the toxic elements from the water before it is dumped in the river. Jones and Smith have each assessed the situation and come up with the following data: If property rights over the river are assigned to Jones, then:

Question 5 Refer to the accompanying figure, which shows the market for fish, to answer the questions that follow. If the government sets a quota of 300 pounds of fish caught per day, then fish will sell for __________ more per pound than the cost of catching the fish.

Question 6 Copyright laws exist to:

Question 7 A good that is nonrival and excludable is defined as a:

Question 8 Which of the following is the best definition of a capandtrade policy for pollution?

Question 9 __________ can be jointly consumed by more than one person, and nonpayers are difficult to exclude.

Question 10 Refer to the following scenario to answer the questions that follow. Five fishermen live in a village and have no other employment or incomeearning possibilities besides fishing. They each own a boat that is suitable for fishing but does not have any resale value. Fish are worth $5 per pound, and the marginal cost of operating the boat is $500 per month. They all fish a river next to the village. According to the following schedule, they have determined that, when there are more of them out on the river fishing, they each catch fewer fish per month. How many fishermen will choose to operate their boats?

Question 11 For a market to work efficiently:

Question 12 A major reason why public goods are not supplied by the market is the:

Question 13 Which of the following is true?

Question 14 The ability to download music and movies from the Internet without paying is:

Question 15 Externalities exist because:

Question 16 Refer to the accompanying figure. When a negative externality exists and the government does not intervene, which point best identifies the market equilibrium?

Question 17 Refer to the accompanying figure to answer the questions that follow. At the market equilibrium, price is equal to __________ units of the good are produced.

Question 18 Two policy options for reducing emissions are capandtrade and the carbon tax. Which of the following is true?

Question 19 The personal decisions of consumers and firms are based on:

Question 20 Which of the following is the best example of a commonresource good?

A good that is rival and excludable is defined as a

The costs or benefits of a market activity that affect a third party are called

Museum visits in a particular city are free. This good is

The Coase theorem suggests that private parties

Refer to the accompanying figure to answer the questions that follow. Total utility is maximized at the:

Timothy is trying to figure out what combination of bags of peanuts and bags of popcorn he should buy with his $13 budget. The price of peanuts is currently $5 per bag and the price of popcorn is currently $2 per bag. If Timothy’s marginal utility from consuming his third bag of peanuts is 15 utils and his marginal utility from consuming his second bag of popcorn is 6 utils, Timothy should:

Diminishing marginal utility:

Utility theory seeks to measure:

Kati-Lyn has to choose between eating Chinese food and Indian food. Both Chinese food and Indian food cost the same. Which of the following equations, where MU is marginal utility and U is total utility, will lead to the optimal level of consumption?

Phillip is deciding between consuming Good X and Good Y. At his current level of consumption, his marginal utility per dollar for Good X is less than the marginal utility per dollar for Good Y. To achieve the consumer optimum, Phillip needs to:

Lauren is the owner of a bakery. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her accounting profit was:

Ralph owns a small pizza restaurant, where he works full-time in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Ralph could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His total accounting profit for the year was:

When the average total cost curve is downward-sloping, what must be true about the marginal cost curve?

Darrell owns a furniture store. His total costs are $225,000 per year, and his variable costs are $75,000 per year. This means that his fixed costs are:

Total revenue minus total cost is equal to:

In the short run, average total costs and average variable costs converge as output increases because:

When the average variable cost curve is upward-sloping, what must be true about the marginal cost curve?

Darrell is the owner of a furniture store. Last year, his total revenue was $525,000 and his total labor costs were $200,000. His overhead expenses, including insurance and legal fees, were $175,000. The rent on his building was $45,000. Darrell could earn $105,000 per year working at a nearby furniture distributor. From this information, we know that his accounting profit was:

If the market price of a product is between the minimum average variable cost (AVC) and minimum average total cost (ATC) of a firm, that firm will...

When a tax is imposed on some good, the lost consumer surplus and producer surplus both typically end up as:

You share a house with two people . You are a concert pianist and often practice at home. One roommate enjoys listening to you practice, but the other does not. For the roommate who enjoys listening to you play, this is an example of ______; for the other roommate it is an example of _____.

An example of price discrimination is when:

Monopolistically competitive firms that are earning zero economic profit would most likely:

If government regulation forces firms in an industry to internalize the externality, then we can expect the equilibrium price of the good to _____ and the equilibrium quantity to _____.

The change in total cost given a change in output is also known as:

What is necessary for price discrimination to occur

Kim owns a cupcake shop in Newport, CA. The market for cupcakes is very competitive. At Kim's current production level, her marginal cost is $25 and her marginal revenue is $29. To maximize profits, Kim should?

Accounting profit is equal to:

Compared to producers, consumers will lose the lesser amount of surplus from a tax if:

Total revenue minus total cost is equal to:

What is an example of a good that is non rival

A tax on apples would cause consumers to suffer because:

Price discrimination exists when a firm is able to sell the same good at more than one price to different groups of:

If a monopolistically competitive firm is incurring losses, then at the profit maximizing output amount:

In 1996 Victoria's Secret shipped different catalogs to customers based on their buying habits. Frequent customers received catalogs with lower prices, whereas new customers received catalogs with high prices for those same items. What is the firm's motivation for practicing price discrimination, despite knowing that if their customers' found out, the company could potentially experience a loss in sales?

If Tommy's Tank Tops is a perfectly competitive firm and is currently making a positive economic profits of $1,000:

Charlie's Churros is a perfectly competitive firm that sells desserts in Houston, Texas. Charlie's Churros currently is taking in $40,000 in revenues, and has $15,000 in explicit costs and $25,000 in implicit costs. Charlie's Churro's economic profits are:

Holding all else constant, a decrease in the market demand for a product in a competitive market would cause:

Compared to producers, consumers will lose the greater amount of surplus from a tax if:

You can tell a firm is operating in a market that is in long run competitive equilibrium if:

When talking about economic profits in a perfectly competitive market, the difference between the long run and the short run is that, in the short run, firms:

When a negative externality is not internalized, then the equilibrium price of the good purchased is too___ and the equilibrium quantity produced is too ___.

Consumer surplus is defined as the:

At current production levels, the marginal revenue of a competitive firm is $15 and the marginal cost of the firm is $15. The firm should:

A tax on apples would cause apple growers to suffer because:

Both monopolies and competitive firms:

If a firm's average total costs decrease as it increases its scale of production, the firm is experiencing:

Which of the following is a question that a firm must answer in the long run but not in the short run?

Fast food restaurants are a good illustration of:

If a monopolist is producing a quantity where marginal revenue is equal to $32 and the marginal cost is equal to $30, the monopolist should:

The incidence of a tax is determined by:

It is unrealistic to regulate a natural monopoly at marginal cost pricing because:

Two government created barriers to entry are:

Compared to consumers, producers will lose the greater amount of surplus from a tax if:

In competitive markets:

The fast food, bottled water, and cereal markets are all examples of:

When demand is perfectly inelastic, the demand curve is:

The government imposes a tax on sale of a good whose production is creating a negative externality. The value of the tax is $4 per unit sold. In the new equilibrium, you would expect:

Nathan owns a coffee roasting company. He buys raw coffee beans, roasts them, grinds them, and sells them to stores. He recently moved into a larger factory so that he can sell coffee to more stores. How would Nathan know if he is experiencing constant returns to scale from increasing the size of his factory?

If a tax is imposed on a good where both supply and demand are somewhat elastic, but demand is more elastic than supply, the burden of tax will be borne:

If a firm hires another worker and her marginal product of labor is zero, we know that the firm's total output is:

To maximize profits, a monopolist chooses the quantity where:

If Nicole's Knick Knacks is a perfectly competitive firm and is making zero economic profits:

Despite creating maximum market efficiency, perfect price discrimination is often disliked by consumers because it transfers the gains in trade from:

1. The Sunny Softball league finds that when it changed its ticket prices from $10 to $5, there was a more than proportional increase in attendance. The price elasticity of demand is:

a. perfectly inelastic.

b. inelastic.

c. elastic.

d. perfectly elastic.

e. unitary elastic.

2. When the price elasticity of demand is elastic, a consumer is

a. completely unresponsive to a change in price.

b. relatively unresponsive to a change in price.

c. unaffected by a change in price.

d. relatively responsive to a change in price.

e. completely responsive to a change in price.

3. Jaycee Jeans sold 40 pairs of jeans at a price of $40. When it lowered its price to $20, the quantity sold increased to 60 pairs. Calculate the absolute value of the price elasticity of demand.

a. 1.67

b. 1.0

c. 0.6

d. 0.53

4. Jaycee Jeans sold 40 pairs of jeans at a price of $40. When it lowered its price to $20, the quantity sold increased to 60 pairs. Calculate the absolute value of the price elasticity of demand. Use the midpoint method.

a. 1.67

b. 1.0

c. 0.6

d. 0.53

5. There are two goods: good A and good B. Good A has a demand curve with a flatter slope; good B has a more steeply sloped demand curve. Which good is more price elastic?

a. Good A

b. Good B

c. They are equally price elastic

d. There is not enough information to decide

6. There are two goods: good A and good B. Good A has a demand curve with a flatter slope; good B has a more steeply sloped demand curve. For which good are consumers more price sensitive?

a. Good A

b. Good B

c. They are equally price elastic

d. There is not enough information to decide

7. The introduction of new gaming systems that effectively competed for the Nintendo console market share will made the demand for Nintendo consoles become:

a. more price elastic

b. more price inelastic

c. perfectly price elastic

d. perfectly price inelastic

e. unchanged

8. The curve in the above graph is a

a. standard demand curve

b. standard supply curve

c. perfectly elastic demand or supply curve

d. perfectly inelastic demand or supply curve

9. Which price elasticity of demand indicates an elastic good?

a. 0

b. -0.25

c. -1

d. -2.5

10. Which income elasticity of demand indicates a normal good—necessity?

a. -0.5

b. 0.5

c. 1

d. 2.2

11. Which income elasticity of demand indicates a normal good—luxury?

a. -0.5

b. 0.5

c. 1

d. 2.2

12. Which income elasticity of demand indicates an inferior good?

a. -0.5

b. 0.5

c. 1

d. 2.2

13. Which cross-price elasticity of demand indicates substitute goods?

a. 0.5

b. 0

c. -0.5

d. -2.5

14. Consumer surplus is the difference between ________ and ________.

a. supply; demand.

b. the price the producer receives; the willingness to sell a good.

c. the willingness to pay for a good; the willingness to sell a good.

d. the willingness to pay for a good; the amount that is paid to get it

e. the price paid for a good; the amount of the good produced.

15. A nonbinding price ceiling would result in a

a. Surplus

b. Shortage

c. Both a surplus and a shortage

d. Neither a surplus nor a shortage

The following diagram illustrates the demand and supply curves for taxi rides to and from Atlanta International Airport. Assume that originally, the market is in equilibrium with a price of $16 and an equilibrium quantity of 320 taxi rides. Next suppose that the city of Atlanta imposes a price ceiling on the price of taxi rides that limits the legal price that can be charged for a taxi ride to $10.

16. Prior to the imposition of the price ceiling what is the value of producer surplus in the taxi ride market?

a. A+B+C (10,240)

b. D+E+H (2,560)

c. B+D (6,000)

d. C+E (1,800)

17. After the imposition of the price ceiling what is the value of producer surplus in the taxi ride market?

a. D+E+F (1920)

b. D+E+H (2,560)

c. H (1,000)

d. C+E (1,800)

18. The deadweight loss associated with the price ceiling is

a) B+D (6,000)

b) C+E (1,800)

c) F (360)

d) There is no deadweight loss

19. After the imposition of the price ceiling, there is:

a) an excess supply of taxi rides

b) an excess demand for taxi rides

c) market clearing

d) some excess supply, but more excess demand

The figure above shows the market for root beer. The government plans to impose a unit tax in this market.

20. The price sellers receive after the tax is

A) $7.

B) $20.

C) $22.

D) $27.

21. What is consumer surplus after the tax is imposed?

A) $5.

B) $10.

C) $125.

D) $250.

22. Graciela is willing to sell 1 dozen roses for $50, while Giuseppe is willing to sell 1 dozen roses for $60. Carlos is willing to buy 1 dozen roses for $60, while Yuriko is willing to pay $50. If the market price is $52, how many roses are sold and what is the sum total of consumer and producer surplus after the transaction(s)?

a) One dozen roses will be sold, and the total consumer and producer surplus will be $10.

b) One dozen roses will be sold, and the total consumer and producer surplus will be $16.

c) Two dozen roses will be sold, and the total consumer and producer surplus will be $16.

d) No roses will be sold, and consequently the total consumer and producer surplus will be $0.

23. Under what circumstances does the burden of an excise tax fall mainly on producers?

a) when the supply is relatively inelastic and demand is fairly elastic

b) when the supply is relatively elastic and demand is fairly inelastic

c) when consumers do not have many substitutes for the good

d) when it is easy for suppliers to expand production of the good

24. Which of the following statements is true?

a) The amount of deadweight loss from an excise tax will increase as the demand becomes more inelastic.

b) The amount of deadweight loss resulting from an excise tax will increase as the demand becomes more elastic

c) An excise tax does not create a deadweight loss if the taxed good is a necessity.

d) An excise tax does not create a deadweight loss if the taxed good is a luxury.

25. Taxes will almost always cause the price charged to consumers to increase. How much the consumer price increases depends on:

a. how often the government collects the tax.

b. the amount of the tax.

c. who pays the tax out of pocket.

d. who is legally obligated to pay the tax.

e. the elasticities of supply and demand.

26. Taxing goods with very elastic supply generates more deadweight loss than taxing goods with very inelastic supply because:

a. the amount of the tax is larger.

b. the change in producer behavior is greater

c. producers have to pay these taxes out of pocket.

d. the change in producer behavior is smaller.

e. the government does not bother collecting the revenue.

27. The revenue generated from a tax equals:

a. the amount of the good sold times the original price of the good.

b. the amount of the tax times the quantity sold after the tax is imposed

c. the total social welfare lost as a result of the tax.

d. the deadweight loss from the tax.

e. the total consumer and producer surplus before the tax.

28. The costs of a market activity paid for by an individual engaged in the market activity are:

a. external costs.

b. internal costs.

c. free-rider costs.

d. social costs.

e. common costs.

29. The costs of a market activity paid for by an individual NOT engaged in the market activity are:

a. external costs.

b. internal costs.

c. free-rider costs.

d. social costs.

e. common costs.

30. Consider the table below where Q represents the quantity produced, internal cost and external cost are given for various quantities, and P represents the price consumers are willing to pay for various quantities.

Q Internal Cost External Cost P

1 $2 $4 $14

2 $4 $4 $12

3 $6 $4 $10

4 $8 $4 $8

5 $10 $4 $6

6 $12 $4 $4

The market equilibrium occurs where price is ____ and quantity is _____.

a. $4; 2.

b. $8; 4

c. $10; 3.

d. $10; 5.

e. $12; 6.

31. Consider a market with a negative externality. The market will tend to _____ the good because the market participants tend to ignore the ____ of their decision.

a. overproduce; external benefit

b. underproduce; external benefit

c. overproduce; external cost

d. underproduce; external cost

e. overproduce; internal benefit

32. Consider a market where production of the good is creating a negative externality. In the market equilibrium there is a deadweight loss because:

a. the internal cost is not equal to the external cost.

b. the internal cost is not equal to the internal benefit.

c. the internal benefit is not equal to the external benefit.

d. the social cost is greater than the internal benefit

e. the internal benefit is less than the internal cost.

33. The economic incidence of a tax is the:

a) amount of the revenue the government collects.

b) deadweight loss arising from imposition of the tax.

c) per-unit amount of an excise tax.

d) measure of who really bears the burden of the tax

34. Consider the production of a private good such as a car, and a common-resource good such as fish. What do the markets for these two goods have in common?

a. The quantity of output produced is inefficiently low.

b. The quantity of output produced is inefficiently high.

c. Both create a positive externality.

d. Both markets are likely to arrive at the social optimum without government intervention.

e. The price of both goods is inefficiently high.

35. A good that is nonrival and excludable is defined as a:

a. private good.

b. public good.

c. common-resource good.

d. club good

e. government good.

36. Clean air becomes polluted because:

a. it is a private good.

b. no one owns the air

c. it is a club good.

d. the air is owned by private corporations.

e. the air is owned by the government.

37. A good that is rival and nonexcludable is defined as a:

a. private good.

b. public good.

c. common-resource good

d. club good.

e. government good.

38. If the firm depicted in the following graph had to pay higher rent to its landlord, we would expect its ________ curve to shift ________.

:Screen shot 2012-05-22 at 1.58.04 PM.png

a. average total cost (ATC); down

b. average variable cost (AVC); down

c. average total cost (ATC); up

d. marginal cost (MC); up

e. average variable cost (AVC); up

39. A firm’s average fixed costs:

a. Continually rise as output increases

b. Remain constant as output increases

c. Continually decline as output increases

d. Are U-shaped

40. According to the figure below, a firm would shut down in the short run if the price is:

a. anywhere below $5.

b. below $5 but above $4.

c. anywhere above $4.

d. below $4.

e. above $5.

41. Which of the curves in the accompanying graph depicts diseconomies of scale?

:Screen shot 2012-05-22 at 2.00.28 PM.png

a. LRATC1 and LRATC3

b. LRATC2

c. LRATC2 and LRATC3

d. LRATC1

e. LRATC3

42. If a firm adds multiple layers of management as it increases its scale of production, thus adding to its costs, we would expect its long-run average cost curve to be:

a. downward sloping.

b. horizontal.

c. upward sloping

d. vertical.

e. U shaped.

43. According to the figure below, a firm would be suffering a loss but still be producing if the price is:

a. anywhere below $5.

b. below $5 but above $4.

c. anywhere above $4.

d. below $4.

e. above $5.

44. The marginal cost curve intersects the average total cost curve at the level of output where average total cost is at a minimum because

a) when the marginal cost of the last unit produced is increasing, the marginal product of labor is at a minimum.

b) the firm begins experiencing economies of scale at this quantity.

c) the firm begins benefiting from division of labor at this quantity.

d) when the marginal cost of the last unit produced is below the average, it pulls the average down, and when the marginal cost is above the average, it pulls the average up.

e) the firm begins experiencing diminishing returns at this quantity.

45. Which of the following statements is true?

a) Whenever marginal cost is below average total cost, marginal cost is decreasing.

b) Whenever marginal cost is above average total cost, marginal cost is decreasing.

c) Whenever marginal cost is above average total cost, average total cost is increasing

d) When marginal cost equals average total cost, marginal cost is minimized.

46. An explicit cost for a business that manufactures bicycles would be:

a. the value of the products the firm’s employees could produce at another company.

b. the salary that the owner of the business could earn elsewhere.

c. the goods and services provided by the government with the taxes the firm pays.

d. the wages paid to employees.

e. the various products that could be made with the steel used to make bicycles.

47. When the average variable cost curve is upward sloping, then the marginal cost curve is:

a. U shaped.

b. above the average variable cost curve.

c. upward sloping.

d. below the average variable cost curve.

e. a straight line.

48. Where would we find a firm’s minimum efficient scale of production?

a. at the lowest point on its long-run average total cost curve.

b. at the highest point on its long-run average total cost curve.

c. in the middle of its long-run average total cost curve.

d. at the highest point on its long-run average fixed cost curve.

e. in the middle of its long-run average variable cost curve.

49. Profit maximization occurs when:

a. a firm expands output until marginal revenue is exceeded by marginal cost.

b. a firm expands output until marginal revenue is equal to marginal cost.

c. the price in the market is equal to the firm’s marginal revenue.

d. total costs equal total revenue.

e. a firm sets the price at a point above average total cost.

50. The entry and exit of firms ensure that the ________________ is much more ________ in the long run than in the short run.

a. market demand curve; elastic

b. market demand curve; inelastic

c. market supply curve; vertical

d. market supply curve; inelastic

e. market supply curve; elastic

51. A firm’s short-run supply curve is equal to:

a. the firm’s marginal revenue curve.

b. the firm’s demand curve.

c. the firm’s marginal cost curve above minimum average total cost (ATC).

d. the firm’s marginal cost curve below minimum average variable cost (AVC).

e. the firm’s marginal cost curve above minimum average variable cost (AVC

52. Suppose demand for a product shifted to the left. This would cause:

a. Profits to increase in the short run and supply to shift right in the long run

b. Profits to decrease in the short run and supply to shift left in the long run

c. Profits to decrease in the short run and supply to shift right in the long run

d. Profits to increase in the short run and supply to shift left in the long run

53. When firms exit a market, the ______________ curve shifts ____________ causing individual firms’ profits to _________________.

a. long-run market supply; right; decrease.

b. short-run market supply; left; decrease.

c. short-run market supply; left; increase

d. short-run market supply; right; decrease.

e. short-run market supply; right; increase.

54. If a firm experiences diseconomies of scale, its long-run average cost curve will be:

a. a horizontal line.

b. downward sloping.

c. a vertical line.

d. upward sloping

e. U shaped.

55. If a firm’s average total costs decrease as it increases its scale of production, the firm is experiencing:

a. economies of scale

b. diseconomies of scale.

c. increasing returns from specialization.

d. diminishing marginal product.

e. constant returns to scale.

1. The costs or benefits of a market activity that affect a third party are called:

a. externalities.

b. public goods.

c. club goods.

d. internal costs.

e. common-resource goods.

2. The personal decisions of consumers and firms are based on:

a. external costs.

b. social cost.

c. internal costs.

d. third-party costs.

e. public-good costs.

3. Refer to the accompanying table, where Q represents the quantity produced, internal cost and social cost are given for various quantities, and P represents the price consumers are willing to pay for various quantities.

Q	Internal Cost	Social Cost	P
100	$40	$60	$80
200	$50	$70	$70
300	$60	$80	$60
400	$70	$90	$50
500	$80	$100	$40
600	$90	$110	$30

The external cost is equal to _________ per unit.

a. $60

b. $70

c. $20

d. $50

e. $30

4. Consider a market with a negative externality. The market will tend to ___________ the good because the market participants tend to ignore the __________ of their decision.

a. overproduce; external benefit

b. under-produce; external benefit

c. overproduce; external cost

d. under-produce; external cost

e. overproduce; internal benefit

Refer to the accompanying figure to answer the next three questions.

5. At the market equilibrium, price is equal to _________ units of the good are produced.

a. $18 and 70

b. $14 and 70

c. $12 and 50

d. $14 and 50

e. $18 and 50

6. The figure best illustrates what type of market?

a. The good produced creates a positive externality.

b. The good produced creates a negative externality.

c. The good produced is a club good.

d. The good produced is a public good.

e. Firms in this industry have been given a subsidy to encourage more production.

7. To achieve the social optimum, the government could set a tax equal to __________ per unit sold.

a. $6

b. $4

c. $2

d. $3

e. $5

8. Bob is willing to pay $65 for a new pair of shoes. Bill is willing to pay $50 for the same shoes. The shoes have a price of $45. What is the total consumer surplus for Bob and Bill?

a. $15

b. $20

c. $5

d. $25

e. $35

9. Muddy’s Bakery and Lilly’s Sweetshop both sell cupcakes. The market price of one chocolate cupcake is $2.50. Muddy’s is willing to sell a cupcake for as little as $1.65; Lilly’s is willing to sell a cupcake for as little as $1.75. What is the total producer surplus for the two firms?

a. $0.75

b. $1.60

c. $0.85

d. $2.50

e. $3.40

10. Explain what happens to the amount of consumer surplus and producer surplus when the supply of scarves suddenly declines (shifts left).

a. Producer surplus declines and consumer surplus is unchanged.

b. Consumer surplus declines and producer surplus is unchanged.

c. Consumer surplus declines and producer surplus declines.

d. Consumer surplus is unchanged and producer surplus is unchanged.

e. Producer surplus increases and consumer surplus increases.

11. Social welfare is measured as the sum of:

a. tax revenue and deadweight loss.

b. deadweight loss and consumer surplus.

c. producer surplus and tax revenue.

d. consumer surplus and tax revenue.

e. consumer surplus and producer surplus.

12. Which of the following statements is concerned with efficiency rather than equity?

a. It is not fair to tax the income earned by the wealthy at higher rates than the poor.

b. Excise taxes on tobacco products affect low-income families the most and should be reduced.

c. Our income tax system should be more progressive than it is now.

d. Taxes cause distortions in markets and reduce social welfare.

e. The best type of income tax is a flat tax because it treats everyone the same.

13. Which of the following is an accurate statement about the consequence of nonbinding price ceilings?

a. They prevent the seller from receiving the equilibrium price.

b. They require the seller to advertise the product at the equilibrium price.

c. They create a surplus in the legal market.

d. They do not change the quantity of goods bought or sold in the legal market.

e. They increase the quantity demanded of the good in question.

Refer to the accompanying figure to answer the next two questions.

14. The market is currently at market equilibrium. If a binding price ceiling of P₁ is imposed, by how much would the quantity demanded change?

a. It would increase by 12,000 units.

b. It would decrease by 30,500 units.

c. It would decrease by 12,000 units.

d. It would increase by 30,500 units.

e. It would increase by 30,000 units.

15. The market is currently at market equilibrium. If a binding price ceiling of P₁ is imposed, by how much would the quantity supplied change?

a. It would increase by 32,000 units.

b. It would decrease by 18,000 units.

c. It would decrease by 30,500 units.

d. It would decrease by 30,000 units.

e. It would decrease by 32,000 units.

16. Suppose you live in a community with no price controls. What do you expect will happen if your town borders a community where there is a nonbinding price ceiling on most products?

a. Legal market prices will rise in the community with a binding price ceiling.

b. Legal market prices will fall in the community with a binding price ceiling.

c. The price and the quantity sold in the community without a nonbinding price ceiling will be the same as the price and quantity in the community with a nonbinding price ceiling.

d. There will be more shortages in the community with a binding price ceiling.

e. The black market in the community with a binding price ceiling will not be strong because consumers will simply purchase the product in the community that has no price ceiling.

17. If a good is subject to a binding price ceiling and you purchase it on the black market, what do you expect to happen to the price over time?

a. The black market price will rise over time as the supply curve becomes more elastic and the demand curve becomes more inelastic.

b. The black market price will fall over time as both the supply and demand curves become more inelastic.

c. The black market price will rise over time as the demand curve becomes more elastic and the supply curve becomes more inelastic.

d. The black market price will fall over time as both the supply and demand curves become more elastic.

e. The black market price will not change over time.

18. At a price of $5/hour, Bob wants to hire three workers. When the price rises to $7/hour, Bob wants to hire only two workers. Bob’s price elasticity of demand for workers is:

a. −0.83

b. −1.20

c. −0.33

d. −0.40

e. −0.10

19. Jane says that she will always spend $20 a week on lattes. Jane’s demand for lattes is price:

a. inelastic.

b. elastic.

c. perfectly inelastic.

d. perfectly elastic.

e. unitary elastic.

20. When the price of softballs is high, a ___________ in price will raise total revenue. When the price is low, the seller should ___________ the price to increase total revenue.

a. decrease; raise

b. rise; raise

c. decrease; decrease

d. rise; decrease

e. decrease; not change

21. Which one of the following pairs of goods is likely to have a negative cross-price elasticity of demand?

a. tea and coffee

b. soda and water

c. spaghetti and ravioli

d. tennis shoes and flip flops

e. coffee and cream

____ 1. The personal decisions of consumers and firms are based on:

a.	external costs.
b.	social cost.
c.	internal costs.
d.	third-party costs.
e.	public-good costs.

____ 2. External costs are the result of the actions of:

a.	firms.
b.	consumers.
c.	firms and consumers.
d.	the government.
e.	firms, consumers, and the government.

____ 3. Which of the following is true?

a.	social costs = internal costs – external costs
b.	social costs = internal costs + external costs
c.	internal costs = social costs + external costs
d.	external costs = social costs + internal costs
e.	internal costs – social costs = external costs

____ 4. Negative externalities have __________ for third parties.

a.	internal costs
b.	internal benefits
c.	external costs
d.	external benefits
e.	social costs

____ 5. A negative externality exists whenever:

a.	there are no internal costs.
b.	production of a good creates an external cost.
c.	production of a good creates an external benefit.
d.	production of a good has no social cost.
e.	production of a good has no social benefit.

____ 6. Which of the following is true of a negative externality?

a.	Some costs are borne by a third party.
b.	The government can use subsidies to encourage firms to internalize the externality.
c.	The government must take over the production of this good so that the externality can be internalized.
d.	Some benefits accrue to a third party.
e.	Its existence always requires corrective measures by the government.

____ 7. The third-party problem:

a.	occurs when a market activity leads to a negative externality.
b.	occurs when a market activity leads to a positive externality.
c.	occurs when a market activity leads to a negative or a positive externality.
d.	is the same as the free-rider problem.
e.	is associated with the production of private goods but not public goods.

____ 8. Your neighbor likes to mow his grass each Saturday at 7 A.M. and the noise invariably wakes you up. This is an example of:

a.	the third-party problem.
b.	the tragedy of the commons.
c.	an internal cost.
d.	the free-rider problem.
e.	a positive externality.

____ 9. Consider the market for refined oil. In the market equilibrium,

a.	the internal supply equals the internal demand.
b.	the internal supply equals the social supply.
c.	the social supply equals the internal demand.
d.	there is too little of the good being produced.
e.	there is no deadweight loss.

Refer to the accompanying figure to answer the questions that follow.

____ 10. At the market equilibrium, price is equal to __________ units of the good are produced.

a.	$18 and 70
b.	$14 and 70
c.	$12 and 50
d.	$14 and 50
e.	$18 and 50

____ 11. Refer to the accompanying table, where Q represents the quantity produced, internal cost and

external cost are given for various quantities, and P represents the price consumers are willing to pay for various quantities.

The market equilibrium occurs where price is __________ and quantity is __________.

a.	$4; 2
b.	$8; 4
c.	$10; 3
d.	$10; 5
e.	$12; 6

____ 12. If government regulation forces firms in an industry to internalize the externality, then we can expect the equilibrium price of the good to __________ and the equilibrium quantity to __________.

a.	increase; increase
b.	increase; decrease
c.	decrease; decrease
d.	decrease; increase
e.	increase; remain unchanged

____ 13. The government has identified a situation where the production of a good is creating a negative externality. The government should enact legislation to require firms to internalize the externality:

a.	in all such cases.
b.	if the benefits of doing so outweigh the costs.
c.	as long as it will not increase the price of the good being produced.
d.	as long as it will not create unemployment in this industry.
e.	as long as there are positive health benefits associated with this policy.

____ 14. Refer to the accompanying table, where Q represents the quantity produced, internal cost and external cost are given for various quantities, and P represents the price consumers are willing to pay for various quantities.

The social optimum occurs where price is __________ and quantity is __________.

a.	$4; 2
b.	$8; 4
c.	$10; 3
d.	$10; 5
e.	$12; 6

____ 15. If the government decides to adopt a carbon tax, the price of goods whose production generates carbon emissions will __________ and the quantity produced will __________.

a.	increase; increase
b.	increase; decrease
c.	increase; remain unchanged
d.	decrease; increase
e.	decrease; decrease

____ 16. The government imposes a tax on each plastic bag sold such that the producer of the plastic bags must pay the tax to the government. In the market for plastic bags, the:

a.	supply curve shifts to the left.
b.	supply curve shifts to the right.
c.	demand curve shifts to the left.
d.	demand curve shifts to the right.
e.	the supply curve and the demand curve shift to the left.

____ 17. Refer to the accompanying figure. The market for dry-cleaning services is currently in equilibrium at point A, and the government decides to tax the stores that offer dry-cleaning services in order to improve the air quality. The new equilibrium will be at point:

a.	B.
b.	C.
c.	E.
d.	F.
e.	G.

____ 18. The government imposes a tax on the sale of a good whose production is creating a negative externality. The value of the tax is $4 per unit sold. In the new equilibrium, you would expect:

a.	the same amount to be sold and the price to be $4 higher.
b.	the same amount to be sold and the price to increase by less than $4.
c.	less to be sold and the price to increase by $4.
d.	less to be sold and the price to increase by less than $4.
e.	less to be sold and the price to increase by more than $4.

____ 19. Positive externalities have __________ for third parties.

a.	internal costs
b.	internal benefits
c.	external costs
d.	external benefits
e.	social costs

____ 20. Consider a market with a positive externality. The market will tend to __________ the good because the market participants tend to ignore the __________ of their decision.

a.	overproduce; external benefit
b.	under-produce; internal benefit
c.	overproduce; external cost
d.	under-produce; external cost
e.	under-produce; external benefit

____ 21. Positive externalities exist because:

a.	internal benefits are less than external benefits.
b.	internal benefits are greater than external benefits.
c.	external benefits are greater than social benefits.
d.	internal benefits are greater than social benefits.
e.	internal benefits are less than social benefits.

Consider the accompanying figure to answer the questions that follow.

____ 22. When a positive externality exists, which point best identifies the social optimum?

a.	A
b.	B
c.	C
d.	D
e.	either A or D

____ 23. External benefits arise from the actions of:

a.	firms.
b.	consumers.
c.	firms and consumers.
d.	the government.
e.	firms, consumers, and the government.

Consider the following scenario when answering the questions that follow:

____ 24. If property rights over the river are assigned to Smith, then:

a.	Smith will force Jones to close the factory.
b.	Smith will pay Jones up to $75 per day to install the filter.
c.	Smith will pay Jones up to $125 to install the filter.
d.	Jones will install a filter and pay Smith at least $75 per day.
e.	Jones will install a filter.

____ 25. A cattle rancher and a wheat farmer own adjacent properties that may or may not be separated by a fence. The accompanying table identifies the annual profit received by each party in the event there is, or there is not, a fence. If there is no fence, one can be installed and maintained at an annual cost of $25,000.

If legal rights are assigned to the wheat farmer so that the cattle rancher is liable for any damage caused by his cattle to the wheat crop, then the:

a.	rancher will choose to close his ranch.
b.	farmer will not allow the rancher to stay in business.
c.	rancher will pay to build the fence.
d.	rancher will choose to compensate the farmer for damages.
e.	rancher will be indifferent toward neither building the fence nor compensating the farmer for damages.

____ 26. Which good is excludable?

a.	apples on a tree in a public park
b.	a fireworks display
c.	swimming in the ocean
d.	a walk in a public park
e.	education at a community college

____ 27. Visiting the public beach during summer is an example of an activity that is:

a.	excludable.
b.	rival.
c.	nonexcludable and rival.
d.	nonrival.
e.	excludable and nonrival.

____ 28. Which good is nonrival?

a.	sharing a pizza with your family
b.	swimming in a public pool
c.	driving in a city
d.	listening to public radio
e.	visiting the post office

____ 29. A good that is rival and excludable is defined as a:

a.	private good.
b.	public good.
c.	common-resource good.
d.	club good.
e.	government good.

____ 30. A major reason why public goods are not supplied by the market is the:

a.	free-rider problem.
b.	existence of negative externalities.
c.	fact that no one is willing to pay for them.
d.	fact that public goods are rival.
e.	fact that no firm would be able to earn a profit by producing them.

____ 31. Club goods are:

a.	nonrival, like public goods, and excludable, like private goods.
b.	nonrival, like private goods, and excludable, like common-resource goods.
c.	nonrival, like common-resource goods, and excludable, like public goods.
d.	rival, like private goods, and nonexcludable, like public goods.
e.	rival, like common-resource goods, and nonexcludable, like private goods.

____ 32. Club goods tend to be offered __________ market price and __________ quantity than what society desires.

a.	at a lower; at a lower
b.	at a higher; at a higher
c.	at a higher; at a lower
d.	at a lower; at a higher
e.	at the same; at the same

____ 33. Which of the following characteristics best defines a common-resource good?

a.	rival and excludable
b.	rival and nonexcludable
c.	nonrival and nonexcludable
d.	nonrival and excludable
e.	a good that is never produced by the government

____ 34. The market overproduces common-resource goods because private decision-makers consider __________ costs but society experiences __________ costs.

a.	internal; external
b.	internal; internal and external
c.	external; internal
d.	external; internal and external
e.	internal and external; external

____ 35. Copyright laws exist to:

a.	eliminate negative externalities.
b.	eliminate public goods.
c.	limit free-riding.
d.	solve the tragedy of the commons.
e.	protect consumers.

____ 36. The quantity produced of a common-resource good is likely to deviate from the socially optimal quantity because:

a.	common-resource goods are nonrival.
b.	common-resource goods cannot be traded.
c.	there is an incentive to overproduce the good.
d.	of the free-rider problem.
e.	positive externalities are likely to exist.

____ 37. The tragedy of the commons:

a.	gives rise to a negative externality.
b.	gives rise to a positive externality.
c.	occurs when club goods are produced.
d.	occurs when public goods are provided.
e.	leads to underutilized resources.

____ 38. Two policy options for reducing emissions are cap-and-trade and the carbon tax. Which of the following is true?

a.	Both will result in lower prices for consumers.
b.	Both will result in lower costs for firms.
c.	Both will increase total emissions.
d.	Both will discourage the development of greener technologies.
e.	Both will not raise large amounts of revenue for the government.

____ 39. A cap-and-trade policy is an efficient method of reducing pollution because:

a.	all firms will be forced to reduce pollution.
b.	only high-cost firms will be forced to reduce pollution.
c.	only low-cost firms will be forced to reduce pollution.
d.	those who can reduce pollution relatively more cheaply will have an incentive to buy permits.
e.	those who can reduce pollution relatively more cheaply will have an incentive to sell permits.

____ 40. If the government implements a cap-and-trade system to reduce pollution in a particular industry, then the:

a.	supply curve shifts to the left.
b.	supply curve shifts to the right.
c.	demand curve shifts to the left.
d.	demand curve shifts to the right.
e.	supply curve and the demand curve shift to the left.

Refer to the accompanying figure to answer the questions that follow.

At the market equilibrium, price is equal to __________ units of the good are produced

Clean air becomes polluted because:

The amount you pay for insurance on your car is an example of a(n):

A negative externality exists whenever:

__________ can be jointly consumed by more than one person, and nonpayers are difficult to exclude.

Congestion charges cause the price of driving to __________. Therefore, the number of cars on the road will __________.

Which of the following statements is always true when determining the consumer optimum?

When marginal utility is positive, total utility:

Refer to the accompanying figure to answer the questions that follow.

Total utility is negative:

Dave gets 20 utils from consuming guacamole and 15 utils from consuming salsa; Buster gets 30 utils from the same guacamole and 15 utils from salsa. Given this information, a researcher can conclude that

Refer to the accompanying figure to answer the questions that follow.

Total utility is maximized at the:

Explicit costs are:

Economists consider both explicit and implicit costs when measuring economic profit. The reason they consider implicit costs is that:

Steve owns a bike store. His total costs are $1.2 million per year, and his fixed costs are $450,000 per year. This means that his variable costs are:

Which of the following costs is fixed in the short run?

Accounting profit ignores which of the following costs?

Lauren is the owner of a bakery that earns 0 (zero) economic profit. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her total implicit costs were:

Darrell owns a furniture store. His total costs are $225,000 per year, and his fixed costs are $150,000 per year. This means that his variable costs are:

Use the following scenario to answer the questions that follow.
Steve owns a bike store. His total costs are $1.2 million per year, his variable costs are $750,000, and his fixed costs are $450,000 per year. Last year, Steve sold 1,200 bikes.
Steve’s average variable cost was __________ per bike.

Which of the following characteristics best defines a club good

A negative externality exists whenever:

The pollution emitted by your car is an example of a(n):

The Coase theorem suggests that private parties:

According to the Coase theorem, negative externalities can be internalized if:

A free-rider problem exists when:

Marginal utility:

When marginal utility is negative, total utility:

Utility theory seeks to measure:

The additional satisfaction derived from consuming one more unit of a good or service is called:

Joanna is deciding between consuming Good X and Good Y. At her current level of consumption, her marginal utility per dollar for Good X is greater than the marginal utility per dollar for Good Y. To achieve the consumer optimum, Joanna needs to:

When output is 100 units, the firm’s total fixed cost is $500. What will this firm’s total fixed cost be if output doubles to 200 units?

Darrell is the owner of a furniture store. Last year, his total revenue was $525,000 and his total labor costs were $200,000. His overhead expenses, including insurance and legal fees, were $175,000. The rent on his building was $45,000. Darrell could earn $105,000 per year working at a nearby furniture distributor. If his total revenue increases to $600,000 this year and all of his other expenses are held constant, we know that his economic profit is now:

Economists consider both explicit and implicit costs when measuring economic profit. The reason they consider implicit costs is that:

Lauren owns a bakery. Her total costs are $150,000 per year, and her fixed costs are $65,000. This means that her variable costs are:

Accounting profit ignores which of the following costs?

Darrell owns a furniture store. His total costs are $225,000 per year, and his variable costs are $75,000 per year. This means that his fixed costs are:

Consumer surplus is the difference between:

All else being held constant, an increase in the price of a good would necessarily:

The difference between the willingness to sell a good and the price a producer receives is also known as:

When the price of a good decreases and all else is held constant:

Producer surplus is depicted by the area:

When a tax is imposed on some good, the lost consumer surplus and producer surplus both typically end up as:

Producers will lose no producer surplus due to a tax if:

The luxury tax of 1990 produced far less tax revenue than projected because:

Positive externalities exist because:

The personal decisions of consumers and firms are based on:

Externalities are minimized if:

For a market to work efficiently:

The air is a:

If government regulation forces firms in an industry to internalize the externality, then the:

An external cost is best defined as the cost of an activity paid for by:

Which of the following characteristics best defines a club good?

The social optimum occurs where price is __________ and quantity is __________.

Which of the following is true?

1. social costs = internal costs – external costs

2. social costs = internal costs + external costs

3. internal costs = social costs + external costs

4. external costs = social costs + internal costs

5. internal costs – social costs = external costs

Which of the following is true of a positive externality?

1. Some costs are borne by a third party.

2. The government can use taxes to move the market to the social optimum.

3. There are no internal benefits.

4. Some benefits accrue to a third party.

5. Its existence always requires corrective measures by the government

To achieve the social optimum, the government could set a tax equal to __________ per unit sold.

Which of the following is the best example of a common-resource good?

1. a fireworks display

2. a lighthouse

3. cable television

4. fish in a lake

5. the production of gasoline

Which of the curves depicts economies of scale? hw7 Q1

The accompanying graph represents the __________ for a firm

Marginal product is the change in:

The change in total cost given a change in output is also known as:

An explicit cost for a business that manufactures bicycles would be the:

Lauren owns a bakery. Her total costs are $150,000 per year, and her variable costs are $85,000. This means that her fixed costs are:

Which of the following is the best example of a variable cost in the short run?

Another term for factors of production is:

Steve owns a bike store. Last year, his average cost of selling a bike was $1,000. If he expands the size of his store this year and sees his average cost remain the same, his long-run average total cost curve should be:

Steve owns a bike store. His total costs are $1.2 million per year, his variable costs are $750,000, and his fixed costs are $450,000 per year. Last year, Steve sold 1,200 bikes. Steve’s average variable cost was __________ per bike.

Lauren owns a bakery that produces, among other things, wedding cakes. She currently has 6 employees; with 6 employees, her bakery can produce 9 wedding cakes per day. If she hired a seventh employee, she’d be able to produce 12 wedding cakes per day. Therefore, the marginal product of the seventh employee is __________ wedding cakes.

In the short run, the cost of __________ is variable, whereas the cost of __________ is fixed.

A firm’s economic profit is always less than its accounting profit because:

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Wednesday, March 15, 2017

Liberty University ECON 213 quiz 6 solutions answers right

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