econ 110 final - Assignment Essays

question

If Tanya sells 200 glasses of fruit punch at $0.50 each, her total revenues are

answer

$100

question

An example of an explicit cost of production would be

answer

lease payments for the land on which a firm's factory stands

question

Which of the following expressions is correct?

answer

accounting profit = total revenue - explicit costs

question

Suppose a certain firm is able to produce 165 units of output per day when 15 workers are hired. The firm is able to produce 176 units of output per day when 16 workers are hired, holding other inputs fixed. The marginal product of the 16th worker is

answer

11 units of output

question

Which of the following statements best captures the nature of the underlying production function?

answer

Output increases at a decreasing rate with additional units of input

question

Fixed costs can be defined as costs that

answer

are incurred even if nothing is produced

question

Suppose that a firm has only one variable input, labor, and firm output is zero when labor is zero. When the firm hires 6 workers the firm produces 90 units of output. Fixed costs of production are $6 and the variable cost per unit of labor is $10. The marginal product of the seventh unit of labor is 4. Given this information, what is the average total cost of production when the firm hires 7 workers?

answer

81 cents

question

When marginal cost exceeds average total cost

answer

average total cost must be rising

question

The average fixed cost curve

answer

always declines with increased levels of output

question

Economies of scale occur when

answer

long-run average total costs fall as output increases

question

When a firm experiences diseconomies of scale

answer

long-run average total cost increases as output increases

question

When a firm's long-run average total costs do not vary as output increases, the firm exhibits

answer

constant returns to scale

question

Suppose that in a competitive market the equilibrium price is $2.50. What is marginal revenue for the last unit sold by the typical firm in this market?

answer

exactly $2.50

question

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

answer

profit is maximized

question

Mrs. Smith operates a business in a competitive market. The current market price is $8.10. At her profit-maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should

answer

continue to operate in the short run but shut down in the long run

question

A market is competitive if
(i) firms have the flexibility to price their own product.
(ii) each buyer is small compared to the market.
(iii) each seller is small compared to the market.

answer

(ii) and (iii) only

question

Which of the following would be an example of an implicit cost?
(i) forgone investment opportunities
(ii) wages of workers
(iii) raw materials costs

answer

(i) only

question

Zach withdrew $400,000 out of his personal savings account and used it to start his new cookie business. The bank account pays 3 percent interest per year. During the first year of his business, Zach sold 6,000 boxes of cookies for $2.50 per box. Also during the first year, the cookie business made monetary outlays of $9,000. You may assume that there is no opportunity cost to Zach's time.

Refer to Scenario 13-11. Zach's accounting profit for the year was

answer

$6,000

question

answer

$-6,000

question

Which of the following statements is correct?

answer

Only for competitive firms does average revenue equal marginal revenue.

question

In the short run, a firm operating in a competitive industry will produce the quantity of output where price equals marginal cost as long as the

answer

price is greater than average variable cost

question

In the short run, a firm operating in a competitive industry will shut down if price is

answer

less than average variable cost

question

A difference between explicit and implicit costs is that

answer

implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do

question

In a competitive market the current price is $7, and the typical firm in the market has ATC = $7.50 and AVC = $7.15.

answer

In the short run firms will shut down, and in the long run firms will leave the market

question

Jose's restaurant operates in a perfectly competitive market. At the point where marginal cost equals marginal revenue, ATC = $20, AVC = $15, and the price per unit is $10. In this situation

answer

Jose's restaurant should shut down immediately.

question

A sunk cost is one that

answer

was paid in the past and will not change regardless of the present decision

question

In the short-run, a firm's supply curve is equal to the

answer

marginal cost curve above its average variable cost curve

question

A certain firm manufactures and sells computer chips. Last year it sold 2 million chips at a price of $10 per chip. For last year, the firm's

answer

total revenue was $20 million

question

When new firms have an incentive to enter a competitive market, their entry will

answer

drive down profits of existing firms in the market

question

In a perfectly competitive market, the process of entry and exit will end when
(i) accounting profits are zero.
(ii) economic profits are zero.
(iii) price equals minimum marginal cost.
(iv) price equals minimum average total cost.

answer

(ii) and (iv) only

question

Profit is defined as

answer

total revenue minus total cost

question

In a competitive market with free entry and exit, if all firms have the same cost structure, then

answer

all firms will operate at their efficient scale in the long run

question

Timmy's Trophies operates in a perfectly competitive market. If trophies sell for $20 each and average total cost per trophy is $15 at the profit-maximizing output level, then in the long run

answer

more firms will enter the market.

question

A long-run supply curve is flatter than a short-run supply curve because

answer

firms can enter and exit a market more easily in the long run than in the short run

question

Carol owns a running shoe store that operates in a perfectly competitive market. If running shoes sell for $120 per pair and the average total cost per pair of shoes is $125 at the profit-maximizing output level, then in the long run

answer

some firms will exit from the market

question

A price ceiling is binding when it is set

answer

below the equilibrium price, causing a shortage

question

In the housing market, supply and demand are

answer

more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the long run than in the short run

question

A tax imposed on the buyers of a good will raise the

answer

price paid by buyers and lower the equilibrium quantity

question

Consumer surplus is

answer

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it

question

All else equal, what happens to consumer surplus if the price of a good increases?

answer

Consumer surplus decreases

question

Total surplus is equal to

answer

value to buyers - cost to sellers

question

The amount of deadweight loss from a tax depends upon the

answer

a.price elasticity of demand.
b.price elasticity of supply.
c.amount of the tax per unit.
*d.All of the above are correct.

question

If the size of a tax increases, tax revenue

answer

may increase, decrease, or remain the same

question

The price elasticities of supply and demand affect

answer

both the size of the deadweight loss from a tax and the tax incidence

question

Buyers of a product will bear the larger part of the tax burden, and sellers will bear a smaller part of the tax burden, when the

answer

supply of the product is more elastic than the demand for the product

question

Suppose the tax on liquor is increased so that the tax goes from being a "medium" tax to being a "large" tax. As a result, it is likely that

answer

tax revenue decreases, and the deadweight loss increases

question

A decrease in the size of a tax is most likely to increase tax revenue in a market with

answer

elastic demand and elastic supply

question

The Laffer curve illustrates that

answer

tax revenue first rises, then falls as a tax increases.

question

Suppose the government has imposed a price ceiling on cellular phones. Which of the following events could transform the price ceiling from one that is binding to one that is not binding?

answer

A technological advance makes cellular phone production less expensive

question

When a tax is placed on the sellers of energy drinks, the

answer

burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal.

question

Deadweight loss measures the loss

answer

in a market to buyers and sellers that is not offset by an increase in government revenue

question

Welfare economics is the study of how

answer

the allocation of resources affects economic well-being

question

Which of the following statements is true for markets in which the demand curve slopes downward and the supply curve slopes upward?

answer

As the size of the tax increases, tax revenue rises initially, but it eventually begins to fall; deadweight loss continually rises.

question

Which of the following statements is correct concerning the burden of a tax imposed on take-out food?

answer

Buyers and sellers share the burden of the tax

question

Which of the following statements is correct regarding a tax on a good and the resulting deadweight loss?

answer

The greater are the price elasticities of supply and demand, the greater is the deadweight loss.

question

Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue, it is

answer

assuming that the demand for university education is inelastic.

question

Which of the following will cause a decrease in consumer surplus?

answer

the imposition of a binding price floor in the market

question

The marginal seller is the seller who

answer

would leave the market first if the price were any lower

question

When a tax is levied on a good

answer

a. government collects revenues which might justify the loss in total welfare.
b. there is a decrease in the quantity of the good bought and sold in the market.
c. a wedge is placed between the price buyers pay and the price sellers effectively receive.
*d. All of the above are correct.

question

The Laffer curve relates

answer

the tax rate to tax revenue raised by the tax

question

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it

answer

maximizes the combined welfare of buyers and sellers

question

Market economies are distinguished from other types of economies largely on the basis of

answer

the ways in which scarce resources are allocated.

question

When computing the opportunity cost of attending a Broadway show you should include

answer

the price you pay for the ticket and the value of your time

question

Which of the following statements about the circular-flow diagram is correct?

answer

The diagram leaves out details that are not essential for understanding the economic transactions that occur between households and firms.

question

A positive economic statement such as "Pollution taxes decrease the quantity of pollution generated by firms"

answer

would require data but not values in order to be evaluated

question

An example of an externality is the impact of

answer

pollution from a factory on the health of people in the vicinity of the factory

question

Any point on a country's production possibilities frontier represents a combination of two goods that an economy

answer

can produce using all available resources and technology.

question

Enid regularly buys fruits and vegetables at a grocery store. Santo regularly pays a lawn-care company to mow his lawn. If the flow of fruits and vegetables from the grocery store to Enid is represented by an arrow from Box C to Box B of this circular-flow diagram, then the money paid by Santo to the lawn-care company is represented by an arrow

answer

from Box B to Box C

question

Russell spends an hour studying instead of playing tennis. The opportunity cost to him of studying is

answer

the enjoyment and exercise he would have received had he played tennis.

question

An economy's production of two goods is efficient if

answer

it is impossible to produce more of one good without producing less of the other.

question

Rational people make decisions at the margin by

answer

comparing marginal costs and marginal benefits

question

Which of the following claims is consistent with the views of mainstream economists?

answer

If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will temporarily fall.

question

For which of the following problems can well-designed public policy enhance economic efficiency?

answer

both externalities and market power

question

When the price of hot dogs changes, the demand curve for hot dogs

answer

does not shift because the price of hot dogs is measured on the vertical axis of the graph.

question

You wear either shorts or sweatpants every day. You notice that sweatpants have gone on sale, so your demand for

answer

shorts will decrease.

question

Which of the following transactions does not take place in the markets for factors of production in the circular-flow diagram?

answer

a woman buys corn for dinner

question

In the simple circular-flow diagram,

answer

a. households own the factors of production.
b. households buy all the goods and services that firms produce.
c. land, labor, and capital flow from households to firms.
*d. All of the above are correct.

question

Tom is restoring a car and has already spent $3500 on the restoration. He expects to be able to sell the car for $5000. Tom discovers that he needs to do an additional $2000 of work to make the table worth $5000 to potential buyers. He could also sell the car now, without completing the additional work, for $2800. What should he do?

answer

He should complete the additional work and sell the car for $5000

question

The price elasticity of demand measures how much

answer

quantity demanded responds to a change in price

question

A certain production possibilities frontier shows production possibilities for two goods: wheat and shirts. Which of the following concepts cannot be illustrated by this model?

answer

the flow of dollars between sellers of wheat and shirts and buyers of wheat and shirts

question

Economists speaking like policy advisers make

answer

claims about how the world should be

question

A tradeoff exists between a clean environment and a higher level of income in that

answer

laws that reduce pollution raise costs of production and reduce incomes.

question

The primary determinant of a country's standard of living is

answer

the country's ability to produce goods and services.

question

In a competitive market, the quantity of a product produced and the price of the product are determined by

answer

all buyers and all sellers.

question

If the demand for donuts is elastic, then a decrease in the price of donuts will

answer

increase total revenue of donut sellers.

question

The price elasticity of supply measures how much

answer

the quantity supplied responds to changes in the price of the good

question

Efficiency means that

answer

society is getting the maximum benefits from its scarce resources

question

Economists use the word equality to describe a situation in which

answer

each member of society has the same income

question

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly

answer

elastic, and the demand curve will be horizontal.

question

The greater the price elasticity of demand, the

answer

greater the responsiveness of quantity demanded to a change in price.

question

A university's football stadium is never more than half-full during football games. This indicates

answer

the ticket price is above the equilibrium price

question

The equilibrium of supply and demand in a market

answer

maximizes the total benefits received by buyers and sellers

question

In competitive markets, buyers

answer

and sellers are price takers

question

When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about

answer

0.67

1 of 94

question

If Tanya sells 200 glasses of fruit punch at $0.50 each, her total revenues are

answer

$100

question

An example of an explicit cost of production would be

answer

lease payments for the land on which a firm's factory stands

question

Which of the following expressions is correct?

answer

accounting profit = total revenue - explicit costs

question

answer

11 units of output

question

Which of the following statements best captures the nature of the underlying production function?

answer

Output increases at a decreasing rate with additional units of input

question

Fixed costs can be defined as costs that

answer

are incurred even if nothing is produced

question

answer

81 cents

question

When marginal cost exceeds average total cost

answer

average total cost must be rising

question

The average fixed cost curve

answer

always declines with increased levels of output

question

Economies of scale occur when

answer

long-run average total costs fall as output increases

question

When a firm experiences diseconomies of scale

answer

long-run average total cost increases as output increases

question

When a firm's long-run average total costs do not vary as output increases, the firm exhibits

answer

constant returns to scale

question

Suppose that in a competitive market the equilibrium price is $2.50. What is marginal revenue for the last unit sold by the typical firm in this market?

answer

exactly $2.50

question

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

answer

profit is maximized

question

answer

continue to operate in the short run but shut down in the long run

question

A market is competitive if
(i) firms have the flexibility to price their own product.
(ii) each buyer is small compared to the market.
(iii) each seller is small compared to the market.

answer

(ii) and (iii) only

question

Which of the following would be an example of an implicit cost?
(i) forgone investment opportunities
(ii) wages of workers
(iii) raw materials costs

answer

(i) only

question

answer

$6,000

question

answer

$-6,000

question

Which of the following statements is correct?

answer

Only for competitive firms does average revenue equal marginal revenue.

question

In the short run, a firm operating in a competitive industry will produce the quantity of output where price equals marginal cost as long as the

answer

price is greater than average variable cost

question

In the short run, a firm operating in a competitive industry will shut down if price is

answer

less than average variable cost

question

A difference between explicit and implicit costs is that

answer

implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do

question

In a competitive market the current price is $7, and the typical firm in the market has ATC = $7.50 and AVC = $7.15.

answer

In the short run firms will shut down, and in the long run firms will leave the market

question

Jose's restaurant operates in a perfectly competitive market. At the point where marginal cost equals marginal revenue, ATC = $20, AVC = $15, and the price per unit is $10. In this situation

answer

Jose's restaurant should shut down immediately.

question

A sunk cost is one that

answer

was paid in the past and will not change regardless of the present decision

question

In the short-run, a firm's supply curve is equal to the

answer

marginal cost curve above its average variable cost curve

question

A certain firm manufactures and sells computer chips. Last year it sold 2 million chips at a price of $10 per chip. For last year, the firm's

answer

total revenue was $20 million

question

When new firms have an incentive to enter a competitive market, their entry will

answer

drive down profits of existing firms in the market

question

answer

(ii) and (iv) only

question

Profit is defined as

answer

total revenue minus total cost

question

In a competitive market with free entry and exit, if all firms have the same cost structure, then

answer

all firms will operate at their efficient scale in the long run

question

Timmy's Trophies operates in a perfectly competitive market. If trophies sell for $20 each and average total cost per trophy is $15 at the profit-maximizing output level, then in the long run

answer

more firms will enter the market.

question

A long-run supply curve is flatter than a short-run supply curve because

answer

firms can enter and exit a market more easily in the long run than in the short run

question

answer

some firms will exit from the market

question

A price ceiling is binding when it is set

answer

below the equilibrium price, causing a shortage

question

In the housing market, supply and demand are

answer

more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the long run than in the short run

question

A tax imposed on the buyers of a good will raise the

answer

price paid by buyers and lower the equilibrium quantity

question

Consumer surplus is

answer

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it

question

All else equal, what happens to consumer surplus if the price of a good increases?

answer

Consumer surplus decreases

question

Total surplus is equal to

answer

value to buyers - cost to sellers

question

The amount of deadweight loss from a tax depends upon the

answer

a.price elasticity of demand.
b.price elasticity of supply.
c.amount of the tax per unit.
*d.All of the above are correct.

question

If the size of a tax increases, tax revenue

answer

may increase, decrease, or remain the same

question

The price elasticities of supply and demand affect

answer

both the size of the deadweight loss from a tax and the tax incidence

question

Buyers of a product will bear the larger part of the tax burden, and sellers will bear a smaller part of the tax burden, when the

answer

supply of the product is more elastic than the demand for the product

question

Suppose the tax on liquor is increased so that the tax goes from being a "medium" tax to being a "large" tax. As a result, it is likely that

answer

tax revenue decreases, and the deadweight loss increases

question

A decrease in the size of a tax is most likely to increase tax revenue in a market with

answer

elastic demand and elastic supply

question

The Laffer curve illustrates that

answer

tax revenue first rises, then falls as a tax increases.

question

Suppose the government has imposed a price ceiling on cellular phones. Which of the following events could transform the price ceiling from one that is binding to one that is not binding?

answer

A technological advance makes cellular phone production less expensive

question

When a tax is placed on the sellers of energy drinks, the

answer

burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal.

question

Deadweight loss measures the loss

answer

in a market to buyers and sellers that is not offset by an increase in government revenue

question

Welfare economics is the study of how

answer

the allocation of resources affects economic well-being

question

Which of the following statements is true for markets in which the demand curve slopes downward and the supply curve slopes upward?

answer

As the size of the tax increases, tax revenue rises initially, but it eventually begins to fall; deadweight loss continually rises.

question

Which of the following statements is correct concerning the burden of a tax imposed on take-out food?

answer

Buyers and sellers share the burden of the tax

question

Which of the following statements is correct regarding a tax on a good and the resulting deadweight loss?

answer

The greater are the price elasticities of supply and demand, the greater is the deadweight loss.

question

Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue, it is

answer

assuming that the demand for university education is inelastic.

question

Which of the following will cause a decrease in consumer surplus?

answer

the imposition of a binding price floor in the market

question

The marginal seller is the seller who

answer

would leave the market first if the price were any lower

question

When a tax is levied on a good

answer

question

The Laffer curve relates

answer

the tax rate to tax revenue raised by the tax

question

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it

answer

maximizes the combined welfare of buyers and sellers

question

Market economies are distinguished from other types of economies largely on the basis of

answer

the ways in which scarce resources are allocated.

question

When computing the opportunity cost of attending a Broadway show you should include

answer

the price you pay for the ticket and the value of your time

question

Which of the following statements about the circular-flow diagram is correct?

answer

The diagram leaves out details that are not essential for understanding the economic transactions that occur between households and firms.

question

A positive economic statement such as "Pollution taxes decrease the quantity of pollution generated by firms"

answer

would require data but not values in order to be evaluated

question

An example of an externality is the impact of

answer

pollution from a factory on the health of people in the vicinity of the factory

question

Any point on a country's production possibilities frontier represents a combination of two goods that an economy

answer

can produce using all available resources and technology.

question

answer

from Box B to Box C

question

Russell spends an hour studying instead of playing tennis. The opportunity cost to him of studying is

answer

the enjoyment and exercise he would have received had he played tennis.

question

An economy's production of two goods is efficient if

answer

it is impossible to produce more of one good without producing less of the other.

question

Rational people make decisions at the margin by

answer

comparing marginal costs and marginal benefits

question

Which of the following claims is consistent with the views of mainstream economists?

answer

If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will temporarily fall.

question

For which of the following problems can well-designed public policy enhance economic efficiency?

answer

both externalities and market power

question

When the price of hot dogs changes, the demand curve for hot dogs

answer

does not shift because the price of hot dogs is measured on the vertical axis of the graph.

question

You wear either shorts or sweatpants every day. You notice that sweatpants have gone on sale, so your demand for

answer

shorts will decrease.

question

Which of the following transactions does not take place in the markets for factors of production in the circular-flow diagram?

answer

a woman buys corn for dinner

question

In the simple circular-flow diagram,

answer

question

answer

He should complete the additional work and sell the car for $5000

question

The price elasticity of demand measures how much

answer

quantity demanded responds to a change in price

question

A certain production possibilities frontier shows production possibilities for two goods: wheat and shirts. Which of the following concepts cannot be illustrated by this model?

answer

the flow of dollars between sellers of wheat and shirts and buyers of wheat and shirts

question

Economists speaking like policy advisers make

answer

claims about how the world should be

question

A tradeoff exists between a clean environment and a higher level of income in that

answer

laws that reduce pollution raise costs of production and reduce incomes.

question

The primary determinant of a country's standard of living is

answer

the country's ability to produce goods and services.

question

In a competitive market, the quantity of a product produced and the price of the product are determined by

answer

all buyers and all sellers.

question

If the demand for donuts is elastic, then a decrease in the price of donuts will

answer

increase total revenue of donut sellers.

question

The price elasticity of supply measures how much

answer

the quantity supplied responds to changes in the price of the good

question

Efficiency means that

answer

society is getting the maximum benefits from its scarce resources

question

Economists use the word equality to describe a situation in which

answer

each member of society has the same income

question

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly

answer

elastic, and the demand curve will be horizontal.

question

The greater the price elasticity of demand, the

answer

greater the responsiveness of quantity demanded to a change in price.

question

A university's football stadium is never more than half-full during football games. This indicates

answer

the ticket price is above the equilibrium price

question

The equilibrium of supply and demand in a market

answer

maximizes the total benefits received by buyers and sellers

question

In competitive markets, buyers

answer

and sellers are price takers

question

answer

0.67

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