Celebration Of Knowledge One - Assignment Essays

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1. When the production or consumption of a good involves an externality:

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b) someone not directly involved in buying or selling the good is affected.

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2. Ruth is an early bird and loves to get up and do things in the morning. Her roommate Elizabeth is not a morning person. When Ruth gets up she likes to hum, sing, and clean up the kitchen, rattling pots and pans. Ruth is probably:

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c) inflicting a negative externality on Elizabeth.

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3. If the production of a particular good involves significant external benefits (i.e. a positive externality), to force the externality to be internalized the government might:

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c) offer a subsidy for production of the good in order to increase production.

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4. Which of the following would be an appropriate government response to a negative externality?

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a) All of the above are appropriate governmental regulatory responses.

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5. In the absence of government action, the private market would probably not provide as much national defense as is socially desirable because:

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b) it is difficult to prevent free riders from benefiting from some national defense services.

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6. If there are free riders, there may be insufficient funding for public goods because

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a) each consumer has an incentive to underpay (and maybe not pay at all) and hope that others will pay his share.

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6. The official U.S. "poverty rate" last year was

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a) lower for adults than for children

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6. Which of the following is least likely to live in poverty?

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a) A family with both parents present

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6. Approximately ___ of the entire world's population lives on less than $3.10 U.S. (PPP) per day.

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a) 50%

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6. Marge R. Itaville receives 100 units of happiness (utils) from her first Jimmy Buffet CD, but expects to receive less than 100 units from her second Jimmy Buffet CD purchase. This is an illustration of which of the following concepts?

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a) The law of (eventually) diminishing marginal utility

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6. The "paradox" or puzzle referred to in the "diamond/water paradox" is that

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a) under normal circumstances, water, an essential good, is cheap, while a diamond, a non-essential good, is expensive.

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12. What is the Total Utility the above consumer will receive if she spends 5 hours watching TV?

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d) 132 utils

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Ali Mony purchases only pizza and cola. The price of pizza is $3 per slice and the price of cola is $1 per bottle. The table below details Ali's marginal utility from Pizza Slices and Cola.

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a. 3 pizza slices and 5 colas

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13. As a utility-maximizing consumer, if Ali has a disposable income of $14, Ali should purchase ________________________ to maximize her total utility.

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a. 3 pizza slices and 5 colas

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13. Now suppose Ali has only $10 of disposable income and that she decides to buy three (3) slices of pizza and one (1) cola. Which of the following is a correct statement about this choice?

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a. This is not a utility-maximizing choice; with $10 of disposable income, Ali's total utility would have been higher if she bought more cola and less pizza.

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13. Will E. Wonka is trying to maximize his utility by buying 10 candy bars and 20 glasses of milk. Will E.'s marginal utility from the 10th candy bar is 150 utils, and his marginal utility from the 20th glass of milk is 200 utils. The price of candy bars is $1.50 per bar, and the price of milk is $1 per glass. Assuming Mr. Wonka is spending all his disposable income, is his current choice maximizing his total utility?

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a. No, Will E's marginal utility per dollar spent on the last unit of milk is greater than the marginal utility per dollar spent on the last unit of candy, so he should consume more milk and less candy.

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13. The period of time during which at least one input is fixed is called the

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a. short run

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17. Diminishing marginal productivity of labor must eventually occur because

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a) as increasing units of labor are added to a fixed input (say capital), each additional worker has less capital with which to work.

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18. When the marginal product of labor is decreasing:

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a) the marginal cost of producing output is increasing.

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19. The Marginal Product of the 5th worker equals _______ and diminishing marginal productivity sets in with the addition of the ________ worker.

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a) 3; fourth

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19. Consider the following two statements:
Statement I. If marginal cost is greater than average total cost, average total cost must be rising.
Statement II. If average total cost is greater than marginal cost, marginal cost must be rising.

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a) I is true; II is false.

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21. There are two types of costs associated with production: ________ costs that require monetary payments, and _________ costs that do not.

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d) explicit; implicit

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22. Chubby's Ice Cream Parlor took out a bank loan last year to expand its store (to accommodate its 299 flavors of ice cream). The interest paid on that bank loan this year is:

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d) both a) and b) but not c).

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23. Variable costs:

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c) increase as production increases.

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24. Which of the following are variable costs of production?

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d) all of the above are variable costs of production.

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25. Economic profit is defined as:

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a) total revenue - explicit costs - implicit costs.

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25. Matt quits his job, at which he was earning $50,000 per year, and opens a small business. In the first year, the business has sales of $75,000 and explicit costs of $45,000. Matt is only interested in maximizing his economic profit. Which of the following statements is TRUE?

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a) Matt would have been better off staying in his previous job than starting the new business.

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25. If the Total Cost (TC) of producing 100 computers is $2005, and the Marginal Cost (MC) of producing the 101st computer is $15, what is the Average Total Cost (ATC) of producing 101 computers?

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a) $20

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25. The Total Fixed Costs (TFC) for this firm equal

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a) $100

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25. The Marginal Cost (MC) of producing the fourth unit equals _______, and the Average Variable Cost (AVC) of producing four units equals _______.

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a) $25; $17.50

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25. As output rises, Average Fixed Cost (AFC) falls because:

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a) total fixed costs are spread over more and more units.

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25. Consider the following statements about short-run cost curves.
Statement I. The Marginal Cost curve crosses the ATC curve at its minimum point.
Statement II. The Marginal Cost curve crosses the AVC curve at its minimum point.

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a) Both statements are true.

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25. Which of the following is a possible explanation for the existence of Long-Run economies of scale?

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a) Both b) and c) are possible explanations for the existence of "economies of scale"

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25. The above graph shows a Long-Run Average Cost (LRAC) curve. The portion of the curve in which the firm has diseconomies of scale is ______; the portion of the curve in which the firm has economies of scale is ______; the portion of the curve in which the firm has constant returns to scale is ______.

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a) C, A, B

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25. When Harry's Magic Widget Company doubled in size, average (per unit) costs of production decreased. This is an example of

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a) economies of scale.

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35. Which of the following is true?

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c) A perfectly competitive firm has no power to influence the market price for its product.

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36. In a perfectly competitive market, the demand curve for the entire market is ________, while the demand curve facing each individual firm is _______.

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d) downward sloping; perfectly elastic

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37. In order to maximize profits, a firm should produce the output where

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b) MR=MC

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38. Frank N. Stein runs a hot dog and root beer restaurant. His weekly total revenue equals $2,000. His weekly total economic cost of running the restaurant equals $2,500, consisting of $1,500 of variable costs and $1,000 of fixed costs. An economist would likely advise Frank N. Stein in this short run situation to:

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d) keep the restaurant open for a while longer because he is covering all of his variable costs and some of his fixed costs, and is thus minimizing his short-run losses.

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39. Bob's Hot Dogs is a firm in a perfectly competitive market. Bob can sell hot dogs at a price of $3 each. If he sells 200 hot dogs, his Marginal Revenue (MR) from the 200th unit will equal

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a) $3

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39. A perfectly competitive firm can sell their product at a price of $10 per unit. If the Marginal Cost (MC) of the last unit produced was $6, which of the following statements is true?

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a) This firm should increase output to increase its profit.

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39. The Table above gives short-run cost data facing a perfectly competitive firm. The current market equilibrium price of the product is $25. In order to maximize profits, this firm should produce _______ units, charge a price of _______ per unit. This will lead to an economic profit equal to _________.

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6; $25; $24

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39. A perfectly competitive firm's short-run supply curve is:

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a) the portion of the marginal cost curve above minimum average variable cost.

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39. The graph above shows the cost curves for a perfectly competitive firm in the short run. If the price of the product is $32, this profit-maximizing firm should produce _____ units. This decision will lead to a profit that is _______.

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a) 15, less than zero

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39. In the Short Run, this firm will shut down if the price is less than ______. In the Long Run, this firm will shut down if the price is less than ______.

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a) $25; $40

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39. In long-run equilibrium, there cannot be positive economic profits in a perfectly competitive industry because

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a) short-run positive economic profits attract entry, leading to a fall in the market price until economic profit equals zero.

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If the cost of a firm's raw materials decreases, that firm's Marginal Costs will _______, and the firm's short-run supply curve will ______.

answer

decrease; shift rightward

1 of 47

question

1. When the production or consumption of a good involves an externality:

answer

b) someone not directly involved in buying or selling the good is affected.

question

answer

c) inflicting a negative externality on Elizabeth.

question

3. If the production of a particular good involves significant external benefits (i.e. a positive externality), to force the externality to be internalized the government might:

answer

c) offer a subsidy for production of the good in order to increase production.

question

4. Which of the following would be an appropriate government response to a negative externality?

answer

a) All of the above are appropriate governmental regulatory responses.

question

5. In the absence of government action, the private market would probably not provide as much national defense as is socially desirable because:

answer

b) it is difficult to prevent free riders from benefiting from some national defense services.

question

6. If there are free riders, there may be insufficient funding for public goods because

answer

a) each consumer has an incentive to underpay (and maybe not pay at all) and hope that others will pay his share.

question

6. The official U.S. "poverty rate" last year was

answer

a) lower for adults than for children

question

6. Which of the following is least likely to live in poverty?

answer

a) A family with both parents present

question

6. Approximately ___ of the entire world's population lives on less than $3.10 U.S. (PPP) per day.

answer

a) 50%

question

answer

a) The law of (eventually) diminishing marginal utility

question

6. The "paradox" or puzzle referred to in the "diamond/water paradox" is that

answer

a) under normal circumstances, water, an essential good, is cheap, while a diamond, a non-essential good, is expensive.

question

12. What is the Total Utility the above consumer will receive if she spends 5 hours watching TV?

answer

d) 132 utils

question

Ali Mony purchases only pizza and cola. The price of pizza is $3 per slice and the price of cola is $1 per bottle. The table below details Ali's marginal utility from Pizza Slices and Cola.

answer

a. 3 pizza slices and 5 colas

question

13. As a utility-maximizing consumer, if Ali has a disposable income of $14, Ali should purchase ________________________ to maximize her total utility.

answer

a. 3 pizza slices and 5 colas

question

13. Now suppose Ali has only $10 of disposable income and that she decides to buy three (3) slices of pizza and one (1) cola. Which of the following is a correct statement about this choice?

answer

a. This is not a utility-maximizing choice; with $10 of disposable income, Ali's total utility would have been higher if she bought more cola and less pizza.

question

answer

question

13. The period of time during which at least one input is fixed is called the

answer

a. short run

question

17. Diminishing marginal productivity of labor must eventually occur because

answer

a) as increasing units of labor are added to a fixed input (say capital), each additional worker has less capital with which to work.

question

18. When the marginal product of labor is decreasing:

answer

a) the marginal cost of producing output is increasing.

question

19. The Marginal Product of the 5th worker equals _______ and diminishing marginal productivity sets in with the addition of the ________ worker.

answer

a) 3; fourth

question

answer

a) I is true; II is false.

question

21. There are two types of costs associated with production: ________ costs that require monetary payments, and _________ costs that do not.

answer

d) explicit; implicit

question

22. Chubby's Ice Cream Parlor took out a bank loan last year to expand its store (to accommodate its 299 flavors of ice cream). The interest paid on that bank loan this year is:

answer

d) both a) and b) but not c).

question

23. Variable costs:

answer

c) increase as production increases.

question

24. Which of the following are variable costs of production?

answer

d) all of the above are variable costs of production.

question

25. Economic profit is defined as:

answer

a) total revenue - explicit costs - implicit costs.

question

answer

a) Matt would have been better off staying in his previous job than starting the new business.

question

25. If the Total Cost (TC) of producing 100 computers is $2005, and the Marginal Cost (MC) of producing the 101st computer is $15, what is the Average Total Cost (ATC) of producing 101 computers?

answer

a) $20

question

25. The Total Fixed Costs (TFC) for this firm equal

answer

a) $100

question

25. The Marginal Cost (MC) of producing the fourth unit equals _______, and the Average Variable Cost (AVC) of producing four units equals _______.

answer

a) $25; $17.50

question

25. As output rises, Average Fixed Cost (AFC) falls because:

answer

a) total fixed costs are spread over more and more units.

question

answer

a) Both statements are true.

question

25. Which of the following is a possible explanation for the existence of Long-Run economies of scale?

answer

a) Both b) and c) are possible explanations for the existence of "economies of scale"

question

answer

a) C, A, B

question

25. When Harry's Magic Widget Company doubled in size, average (per unit) costs of production decreased. This is an example of

answer

a) economies of scale.

question

35. Which of the following is true?

answer

c) A perfectly competitive firm has no power to influence the market price for its product.

question

36. In a perfectly competitive market, the demand curve for the entire market is ________, while the demand curve facing each individual firm is _______.

answer

d) downward sloping; perfectly elastic

question

37. In order to maximize profits, a firm should produce the output where

answer

b) MR=MC

question

answer

d) keep the restaurant open for a while longer because he is covering all of his variable costs and some of his fixed costs, and is thus minimizing his short-run losses.

question

39. Bob's Hot Dogs is a firm in a perfectly competitive market. Bob can sell hot dogs at a price of $3 each. If he sells 200 hot dogs, his Marginal Revenue (MR) from the 200th unit will equal

answer

a) $3

question

39. A perfectly competitive firm can sell their product at a price of $10 per unit. If the Marginal Cost (MC) of the last unit produced was $6, which of the following statements is true?

answer

a) This firm should increase output to increase its profit.

question

answer

6; $25; $24

question

39. A perfectly competitive firm's short-run supply curve is:

answer

a) the portion of the marginal cost curve above minimum average variable cost.

question

answer

a) 15, less than zero

question

39. In the Short Run, this firm will shut down if the price is less than ______. In the Long Run, this firm will shut down if the price is less than ______.

answer

a) $25; $40

question

39. In long-run equilibrium, there cannot be positive economic profits in a perfectly competitive industry because

answer

a) short-run positive economic profits attract entry, leading to a fall in the market price until economic profit equals zero.

question

If the cost of a firm's raw materials decreases, that firm's Marginal Costs will _______, and the firm's short-run supply curve will ______.

answer

decrease; shift rightward

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