ECON 3144 Midterm 3 - Assignment Essays

question

If activists successfully lobbied government to force firms to produce more output than they normally would in a perfectly competitive market:

answer

Total Surplus in the market would decline

question

Assume the price of tomatoes increases. Which of the following cause would correspond to greater PS?

answer

An increase in demand

question

Producer Surplus is equal to:

answer

the difference between price and marginal cost for all units sold

question

A competitive market maximizes social welfare because in a competitive market:

answer

Price = MC of the last unit produced

question

The total welfare associated with a market that includes a government sales tax equals:

answer

CS+PS+T

question

A specific tax of $1 per unit of output will affect a firm's:

answer

Average total cost, average variable cost, and marginal cost

question

If the cost of labor decreases, the isocost line:

answer

Rotates outward around the point where only capital is employed in production

question

A firm can minimize cost by:

answer

all of the above

question

If the MRTS for a cost minimizing firm is 2, and the wage rate for labor is $5, what is the rental rate for capital in dollars? (K on the vertical axis)

answer

2.5

question

A production expense that changes with the quantity of output produced

answer

Variable Costs

question

If Average cost is decreasing

answer

MC is less than AC

question

Suppose a firm can only vary the quantity of labor hired in the short run. An increase in the cost of capital will:

answer

Have no effect on the firm's MC

question

Which of the following will cause the average fixed cost curve of making cigarettes to shift?

answer

A $5 million penalty charge to each cigarette maker

question

Which of the following will cause the marginal cost curve of making cigarettes to shift?

answer

A $1 per pack tax on cigarettes

question

Which of the following will cause the average cost curve of making cigarettes to shift?

answer

all of the above

question

Assume Congress decides that oil companies are making too much profit and decides to tax oil companies for each gallon of gasoline produced. This would

answer

Shift the MC curve up

question

The slope of the isocost line tells the firm how much

answer

capital must be reduced to keep total cost constant when hiring one more unit of labor

question

Suppose each worker must use only one shovel to dig a trench, and shovels are useless by themselves. In the short run, an increase in the price of shovels will result in

answer

No change in the firm's output

question

When the isocost line is tangent to the isoquant, then

answer

The firm is producing that level of output at minimum cost

question

Long-run average cost is never greater than short-run average cost because in the long run

answer

The firm can move to the lowest possible isocost curve

question

Firms that exhibit price-taking behavior

answer

have outputs that are too small to influence market price and thus take it as given

question

If consumers view the output of any firm in a market to be identical to the output of any other firm in the market, the demand curve for the output of any given firm

answer

Will be horizontal

question

If a competitive firm maximizes short-run profits by producing some quantity of output, which of the following must be true at that level of output?

answer

Price is greater than or equal to AVC

question

Suppose that for each firm in the competitive market for potatoes, long-run average cost is minimized at $0.20 per pound when 500 pounds are grown. If the long-run supply curve is horizontal, then

answer

The long-run price will be $0.20 per pound

question

If a firm is a price taker, then its marginal revenue will always equal

answer

Price

question

If a competitive firm is in short-run equilibrium, then

answer

All of the above are possible in the short run

question

Which is an important aspect of the perfectly competitive market that leads to long run equilibrium?

answer

freedom of entry and exit

question

Long-run market supply curves are downward sloping if

answer

Input prices fall as the industry expands

question

Downward sloping long-run supply curves occur in markets

answer

With decreasing returns to scale

question

Mister Jones was selling his house. The asking price was $220,000, and Jones decided he would take no less than $200,000. After some negotiation, Mister Smith purchased the house for $205,000. Jones' producer surplus is

answer

$5000

question

Assume government policy increases the demand for corn.

answer

The producer surplus of corn growers will increase

question

If a market produces a level of output below the competitive equilibrium, then

answer

social welfare is not maximized

question

Deadweight loss occurs when

answer

The maximum level of total welfare is not achieved

question

The above figure shows supply and demand curves for milk. If the government passes a $2 per gallon specific tax, the tax revenue is

answer

$2 * Q1

1 of 34

question

If activists successfully lobbied government to force firms to produce more output than they normally would in a perfectly competitive market:

answer

Total Surplus in the market would decline

question

Assume the price of tomatoes increases. Which of the following cause would correspond to greater PS?

answer

An increase in demand

question

Producer Surplus is equal to:

answer

the difference between price and marginal cost for all units sold

question

A competitive market maximizes social welfare because in a competitive market:

answer

Price = MC of the last unit produced

question

The total welfare associated with a market that includes a government sales tax equals:

answer

CS+PS+T

question

A specific tax of $1 per unit of output will affect a firm's:

answer

Average total cost, average variable cost, and marginal cost

question

If the cost of labor decreases, the isocost line:

answer

Rotates outward around the point where only capital is employed in production

question

A firm can minimize cost by:

answer

all of the above

question

If the MRTS for a cost minimizing firm is 2, and the wage rate for labor is $5, what is the rental rate for capital in dollars? (K on the vertical axis)

answer

2.5

question

A production expense that changes with the quantity of output produced

answer

Variable Costs

question

If Average cost is decreasing

answer

MC is less than AC

question

Suppose a firm can only vary the quantity of labor hired in the short run. An increase in the cost of capital will:

answer

Have no effect on the firm's MC

question

Which of the following will cause the average fixed cost curve of making cigarettes to shift?

answer

A $5 million penalty charge to each cigarette maker

question

Which of the following will cause the marginal cost curve of making cigarettes to shift?

answer

A $1 per pack tax on cigarettes

question

Which of the following will cause the average cost curve of making cigarettes to shift?

answer

all of the above

question

Assume Congress decides that oil companies are making too much profit and decides to tax oil companies for each gallon of gasoline produced. This would

answer

Shift the MC curve up

question

The slope of the isocost line tells the firm how much

answer

capital must be reduced to keep total cost constant when hiring one more unit of labor

question

Suppose each worker must use only one shovel to dig a trench, and shovels are useless by themselves. In the short run, an increase in the price of shovels will result in

answer

No change in the firm's output

question

When the isocost line is tangent to the isoquant, then

answer

The firm is producing that level of output at minimum cost

question

Long-run average cost is never greater than short-run average cost because in the long run

answer

The firm can move to the lowest possible isocost curve

question

Firms that exhibit price-taking behavior

answer

have outputs that are too small to influence market price and thus take it as given

question

If consumers view the output of any firm in a market to be identical to the output of any other firm in the market, the demand curve for the output of any given firm

answer

Will be horizontal

question

If a competitive firm maximizes short-run profits by producing some quantity of output, which of the following must be true at that level of output?

answer

Price is greater than or equal to AVC

question

Suppose that for each firm in the competitive market for potatoes, long-run average cost is minimized at $0.20 per pound when 500 pounds are grown. If the long-run supply curve is horizontal, then

answer

The long-run price will be $0.20 per pound

question

If a firm is a price taker, then its marginal revenue will always equal

answer

Price

question

If a competitive firm is in short-run equilibrium, then

answer

All of the above are possible in the short run

question

Which is an important aspect of the perfectly competitive market that leads to long run equilibrium?

answer

freedom of entry and exit

question

Long-run market supply curves are downward sloping if

answer

Input prices fall as the industry expands

question

Downward sloping long-run supply curves occur in markets

answer

With decreasing returns to scale

question

answer

$5000

question

Assume government policy increases the demand for corn.

answer

The producer surplus of corn growers will increase

question

If a market produces a level of output below the competitive equilibrium, then

answer

social welfare is not maximized

question

Deadweight loss occurs when

answer

The maximum level of total welfare is not achieved

question

The above figure shows supply and demand curves for milk. If the government passes a $2 per gallon specific tax, the tax revenue is

answer

$2 * Q1

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