question
Sam has two options this weekend. He could work at his job and earn $9/hour for three hours, or he could go to a show at the theater for that three hours. A ticket to the theater costs $30. What is the opportunity cost of going to the theater?
answer
$ 57
question
Economics is the study of how people allocate their __________ resources to satisfy their nearly _______ wants
answer
limited, unlimited
question
opportunity cost is the ________ alternative that must be sacrificed in order to get something else.
answer
highest- valued
question
scarcity refers to the _______ nature of society's resources
answer
limited
question
Suppose that Marie is buying bananas. She decides that she would like to purchase 3 bananas for the price of $0.25/banana but not a 4th banana. Which of the five foundations of economics best describes Marie's thinking?
answer
marginal thinking
question
Suppose that government officials want to increase the population, so they offer $1,000 payment to the parents of each child born. which of the five foundations of econ best describes the thinking of these government officials?
answer
incensitive
question
suppose there is a country where factory production creates a lot of the air pollution. What could be a possible trade-off if the country wanted to lower the levels of pollution?
answer
lower national income
question
Suppose your friend can obtain concert tickets for $100 but you can't get them for less than $300. Your friend sells the tickets to you for $200. Which of the five foundations of economics best describes this activity?
answer
trade creates value
question
The circular flow model shows how resources and final goods and services flow through the economy. There are two groups in the circular flow model. Which of the following make up the two groups?
answer
households and firms
question
The field of economics that studies the decisions of individuals and firms is called
answer
microeconomics
question
The opportunity cost of attending college is likely to be highest for a high school graduate
answer
who is capable of playing a well paid professional sport
question
What is the term for the voluntary exchange of goods and services between two or more parties?
answer
trade
question
which of the following is a type of incentive?
answer
direct
question
which of the following statements refers to the macroeconomic issue?
answer
The national unemployment rate is currently 7.7%
question
The difference between the study of microeconomics and the study of macroeconomics is a difference between
answer
between the study of microeconomics and the study of macroeconomics is a difference between
the study of individual economic units and the study of aspects of the economy as a whole
the study of individual economic units and the study of aspects of the economy as a whole
question
Suppose that Tegan is good at cooking but not very good at cleaning up the kitchen afterward and that Sara is good at cleaning kitchens but not very good at cooking. Which of the following statements is true with regard to Tegan and Sara?
answer
Tegan should cook and Sara should clean up the kitchen.
question
Suppose a student has 3 hours of time to spend at her apartment before afternoon classes. She has the option of doing laundry, studying for a test, or watching television. If she decides to do laundry, then her opportunity cost is
answer
either watching tv or studying for the test, whichever would have been her second choice to doing laundry
question
You order a $20 sweatshirt online for a Father's Day gift. The shipping charge is $10. You can get free shipping if your order totals $25 or more. Consequently, you order a $5 bobble head doll, even though neither you nor your father really likes bobble head dolls. This is an example of
answer
incentives
question
Alison goes to an all-you-can-eat restaurant. She has eaten three slices of pizza and is considering having another, but she is quite full from the first three slices. Alison's consideration is an example of
answer
marginal thinking
question
What is the term for the voluntary exchange of goods and services between two or more parties
answer
trade
question
The concept of scarcity in economics refers to
answer
limited resources and unlimited wants
question
Judy spent 8 hours studying for an exam. Normally, she would have spent that time watching TV instead of studying. She figures she could have made a "B" after only studying 4 hours, but she really wanted an "A." What is Judy's marginal cost in terms of TV viewing to improve her grade from a "B" to an "A"
answer
4 hours
question
a physician who hires a plumber to fix a broken toilet is an example of
answer
comparative advantage
question
what role does money play in the circular flow model?
answer
It increases the efficiency of a market
question
A friend of yours has an interview with an economics consulting firm and has been asked to discuss a microeconomics topic. Which of the following topics would you recommend that your friend discuss
answer
the study of how prices are determined in the baseball card industry
question
A production possibilities frontier with constant opportunity cost is
answer
a straight downward-sloping line
question
Based on the figure below, what is the opportunity cost in terms of wings when producing 20 more pizzas if the economy is efficiently producing 150 wings and 50 pizzas?
answer
60 wings
Person 1 Pizza 1 WingDebra 2 wings 1/2 pizzaMike 3 wings 1/2 Pizza
Person 1 Pizza 1 WingDebra 2 wings 1/2 pizzaMike 3 wings 1/2 Pizza
question
Based on the table below which one of the following statements is true?
answer
The terms of trade will be less than 0.5 but greater than 0.33
question
Economists use the concept of ceteris paribus to examine a change in ____________ in a model, while assuming that all other variables remain constant.
answer
One Variable
(To examine a change in one variable in a model, an economist must assume everything else is constant. This is the concept of ceteris paribus, from the Latin meaning "other things being equal.")
(To examine a change in one variable in a model, an economist must assume everything else is constant. This is the concept of ceteris paribus, from the Latin meaning "other things being equal.")
question
The graph below illustrates the effect on the production possibilities frontier if the population grows, making more workers available. This new production possibilities frontier reflects the ability of society to
answer
produce more wings and more pizza.
question
the law of increasing opportunity cost states that
answer
the opportunity costs rise as more of the good is produced.
question
the limiting of ones work to a particular area is referred to as
answer
specialization
question
The table below shows the daily production potential of two workers if they devote all their time to making either pizza or wings. Who has the absolute advantage at producing pizzas?
answer
Debra
Winger
FEEDBACK: Absolute advantage refers to the ability of one producer to make more than another producer with the same quantity of resources. Under the pizza column, you can see that Debra Winger can make 60 pizzas in a day, and Mike Piazza can make 24 pizzas. Therefore, Debra Winger has absolute advantage in pizza making.
Winger
FEEDBACK: Absolute advantage refers to the ability of one producer to make more than another producer with the same quantity of resources. Under the pizza column, you can see that Debra Winger can make 60 pizzas in a day, and Mike Piazza can make 24 pizzas. Therefore, Debra Winger has absolute advantage in pizza making.
question
Which of the following is a decision an Italian restaurant owner makes in the long run?
answer
The decision to stay in business
question
Which of the following is an assumption that underlies the construction of a production possibilities frontier?
answer
that the technology available for use in production remains constant
question
which of the following statements is normative?
answer
Microeconomics is a great class.
question
Which of these is an exogenous factor?
answer
yearly rainfall
question
Which point on the graph is unattainable because the economy does not have enough resources to produce it?
answer
Point E
outside of the line and the shades area under the line
outside of the line and the shades area under the line
question
Which point on the graph below represents an inefficient use of societies resources?
answer
Point F
question
Austin, Jensen, Matthew, and Walker can all produce matches, brushes, cans, and shirts. The table below identifies how many of each good they can make in a day if they devote themselves to producing only that good.
Who has the absolute advantage in producing brushes?
Who has the absolute advantage in producing brushes?
answer
Walker
question
Examine the two figures below. Which of these figures will experience a higher long-run growth rate, assuming their ratio of consumer goods to capital goods produced is constant over time?
answer
Economy B, because it produces more capital goods relative to consumer goods
question
Which of the following would lead to the situation show in the figure above?
answer
an improvement in technology for production of both pizza and wings
question
Mike has a linear production possibilities frontier that shows maximum production of trucks or computers of 10 million each. Debra also has a linear production possibilities curve that shows maximum production of 9 million trucks or 3 million computers.
answer
Mike has a comparative advantage in the production of computers.
question
Suppose that a politician wants to build more production facilities for solar power and wind power. At the same time, the politician is unwilling to cut any other programs. If the resources that would be used to produce the solar and wind power facilities are already being efficiently used in other programs, where is the point the politician is trying to reach located on the production possibilities frontier?
answer
a point outside the frontier
question
Suppose workers attend several skill-building workshops, increasing their labor productivity. How is this represented by a production possibilities frontier?
answer
the entire PPF shifts out
question
When a student is making a decision about the college she will attend, which of the following would be an endogenous factor?
answer
location of the school
question
Where is unemployment such that employment is below the full-employment level plotted on a production possibilities frontier?
answer
a point inside the PPF
question
Which of the following is an example of a positive economic statement?
answer
The average rainfall in August 2016 was 5 inches nationwide.
question
Which of the following statements is consistent with Jonathan having a comparative advantage in producing apples?
answer
Jonathan's opportunity cost for producing apples is lower than anyone else's.
question
Which of the following would be consistent with taking the short-run approach to decision-making?
answer
Buying a new leather jacket instead of saving for retirement
question
Where would you plot full employment on a production possibilities frontier if all other resources are being used efficiently?
answer
a point on the PPF
question
A recent study shows the benefits of using public transportation. Government officials have hired your consulting firm to increase the demand for public transportation. They come to you with three of their suggestions.• Suggestion 1. Reduce the price of public transportation.• Suggestion 2. Increase the price of private transportation by increasing tolls.• Suggestion 3. Offer monthly and yearly passes that reduce the price paid per ride of public transportation.Which suggestion(s) does your firm recommend?
answer
B. 2
question
According to the Food and Drug Administration, "the ultraviolet (UV) radiation from these devices [sunlamps and tanning beds] poses serious health risks." As a result of reading this, the local mayor decides to introduce legislation that will put a 10% excise tax on tanning consumers. From an economic point of view, this will
answer
B. shift the demand curve leftward for tanning.The excise tax lowers demand because consumers must now pay a higher tax in addition to the price they pay for the good. People will tan less because they now have to factor in the extra cost. This will be shown as a leftward shift of the demand curve.
question
As the owner of a hotel, you have decided to lower the price for all rooms in the month of October. What should you expect to happen?
answer
B. As the price is lowered, the quantity demanded of rooms will increase.
The law of demand states that quantity demanded will increase when price is lowered, all things being equal. In this case, more rooms will be sold. If only the price changes, apply the law of demand.
The law of demand states that quantity demanded will increase when price is lowered, all things being equal. In this case, more rooms will be sold. If only the price changes, apply the law of demand.
question
Businesses across the country are starting to install extra insulation in their buildings and warehouses. Households are now deciding to install more insulation as well. Which of the following outcomes would you predict will happen to the market for oil?
answer
B. Equilibrium price and quantity of oil will decrease.
Increased insulation will decrease the demand for heating oil. The demand curve for oil will shift leftward, leading to a decrease in the equilibrium price and quantity of oil.
Increased insulation will decrease the demand for heating oil. The demand curve for oil will shift leftward, leading to a decrease in the equilibrium price and quantity of oil.
question
Candy makers face high prices for cocoa butter, the special ingredient that gives chocolate its melt-in-the-mouth texture. This event will be shown in
answer
D. Graph D.
Since the cocoa butter is an ingredient in the product of chocolate, the change in the cost of this ingredient will affect the supply curve. Since the cocoa butter is more expensive, it will lower profit margins for firms, and the supply curve will shift. The demand curve does not shift, because ingredient cost does not shift the demand curve.
Since the cocoa butter is an ingredient in the product of chocolate, the change in the cost of this ingredient will affect the supply curve. Since the cocoa butter is more expensive, it will lower profit margins for firms, and the supply curve will shift. The demand curve does not shift, because ingredient cost does not shift the demand curve.
question
In order to ensure that as many individuals as possible install a smoke detector, the government recently decided to subsidize the production of smoke detectors.
answer
B. Graph B
The government wants households to be able to afford smoke detectors and to encourage the production of smoke detectors. As a result, subsidizing the industry and shifting the supply curve rightward will have the effect of lowering the equilibrium price and increasing the equilibrium quantity.
The government wants households to be able to afford smoke detectors and to encourage the production of smoke detectors. As a result, subsidizing the industry and shifting the supply curve rightward will have the effect of lowering the equilibrium price and increasing the equilibrium quantity.
question
The market for breakfast cereal is currently in equilibrium. Suddenly there is a storm that destroys the wheat that farmers had been growing for the cereal manufacturer. What will happen to the cereal market after the storm?
answer
D. Supply will decrease.
A storm that destroyed the wheat crops would cause the price of that grain to rise. Given that grains are an important input in the manufacture of cereal, the rise in the price of grain represents an increase in input prices for cereal. This is represented in the cereal market as a leftward shift of the supply curve and no change in the demand curve.
A storm that destroyed the wheat crops would cause the price of that grain to rise. Given that grains are an important input in the manufacture of cereal, the rise in the price of grain represents an increase in input prices for cereal. This is represented in the cereal market as a leftward shift of the supply curve and no change in the demand curve.
question
There are a number goods that over time, for a variety of reasons, transition from being a normal good to an inferior good or from being an inferior good to a normal good. One such example of a good is the Toyota Camry. In the 1980s, more income for a household usually resulted in more Camry's being purchased. However, today more Toyota Camry's are purchased by households that have experienced a reduction in income.How could this happen?
answer
D. The Camry becomes an inferior good because the good is now perceived as lower in quality than a Lexus.
A normal good like a Camry can become an inferior good if it is perceived to be a lower quality good. What causes a person with more income to buy less of a product?
A normal good like a Camry can become an inferior good if it is perceived to be a lower quality good. What causes a person with more income to buy less of a product?
question
Which of the following will cause an increase in the supply of yogurt?
answer
B. An increase in the number of sellers in the market for yogurt.
An increase in the supply is shown as a rightward shift of the supply curve. An increase in the number of sellers will lead to an increase in marker production, and as a result, will shift the supply curve to the right.
An increase in the supply is shown as a rightward shift of the supply curve. An increase in the number of sellers will lead to an increase in marker production, and as a result, will shift the supply curve to the right.
question
You advise the owner of a local restaurant to lower the prices of his burgers. Which of the following is a consequence of this price change?
answer
B. There is an increase in demand for fries.
Since fries are a complement for burgers, lowering the price of he burger will increase demand for fries. Fewer people will cook burgers at home, because cooking burgers at home is a substitute good for getting burgers at a restaurant. Reducing the price of a burger will increase the quantity demanded, but will not shift the demand curve.
Since fries are a complement for burgers, lowering the price of he burger will increase demand for fries. Fewer people will cook burgers at home, because cooking burgers at home is a substitute good for getting burgers at a restaurant. Reducing the price of a burger will increase the quantity demanded, but will not shift the demand curve.
question
You are a producer of tortillas. In the market for tortillas, two events happen simultaneously: there is a decrease in the price of corn used to make your tortillas, and there are headlines that promotes the link between eating tortillas and reducing heart attacks.Which of the following is a consequence?
answer
D. We know the quantity will increase, but we don't know what will happen to the price unless we know the size of the shifts.
The cost of making tortillas has decreased due to a cheaper ingredient, so the supply of tortillas will increase. The headlines linking lower rates of heart attacks with consumption of tortillas will increase the demand for tortillas. Both of these changes increase the equilibrium quantity of tortillas. To determine whether price will increase or decrease, we need to know whether the shift in supply or the shift in demand is greater.
The cost of making tortillas has decreased due to a cheaper ingredient, so the supply of tortillas will increase. The headlines linking lower rates of heart attacks with consumption of tortillas will increase the demand for tortillas. Both of these changes increase the equilibrium quantity of tortillas. To determine whether price will increase or decrease, we need to know whether the shift in supply or the shift in demand is greater.
question
You find out that the local Walmart is having a huge sale on Mountain Dew. You rush down with the intent of buying as much Mountain Dew as you can. This would be shown as
answer
A. a movement along the demand curve for Mountain Dew.
Since the sale involves a reduction of the price, you are going to be staying on your original demand curve, and moving to a lower point. This is a change in quantity demanded and a movement along the curve. If your purchase behavior were changing due to health concerns, for example, his would be shown as a shift of the demand curve.
Since the sale involves a reduction of the price, you are going to be staying on your original demand curve, and moving to a lower point. This is a change in quantity demanded and a movement along the curve. If your purchase behavior were changing due to health concerns, for example, his would be shown as a shift of the demand curve.
question
You're an entrepreneur and had a great idea to sell shoes that have springs installed in them to make walking easier. However, the development costs were so high that the shoes are priced 15 times higher than shoes without springs. As a result, many of the shoes have gone unsold. What possible event could eliminate the disequilibrium in the market for shoes?
answer
B. There is an increase in income and "spring shoes" are a normal good.
When there are too many "spring shoes" available, what is revealed is a surplus, where quantity supplied is greater than quantity demanded. On a graph, a surplus is illustrated with a horizontal line above the equilibrium point. The surplus can be removed as quantity demanded increases or when quantity supplied falls. In this case, an increase in income increases the demand for normal goods like "spring shoes," thus removing the surplus.
When there are too many "spring shoes" available, what is revealed is a surplus, where quantity supplied is greater than quantity demanded. On a graph, a surplus is illustrated with a horizontal line above the equilibrium point. The surplus can be removed as quantity demanded increases or when quantity supplied falls. In this case, an increase in income increases the demand for normal goods like "spring shoes," thus removing the surplus.
question
A change in which of the following will cause a change in the quantity demanded of coffee?
answer
The price of coffee
question
A change in which of the following will cause a change in the quantity supplied of coffee?
answer
the price of the coffee
question
According to the law of demand, what is the relationship between price and quantity demanded?
answer
inverse
question
According to the law of supply, what is the relationship between price and quantity supplied?
answer
Direct
question
Flour is a factor of production of cupcakes. How will an increase in the price of flour affect the market for cupcakes?
answer
Overall supply will decrease
question
For a firm to have market power, it must...
answer
have some control over price.
question
In a competitive market, the price of the product is...
answer
set by market supply and demand
question
In an imperfect market, individual firms
answer
are able to influence the price of their product
question
Refer to the figure. At a price of $15, this market is experiencing
answer
a surplus
question
Refer to the following figure. At a price of $5, this market is experiencing
answer
a shortage
question
Refer to the following graph, the demand curve slopes downward because
answer
the price and quantity demanded move in opposite directions
question
When a market in equilibrium, which of the following is true?
answer
the quantity supplies is equal to the quantity demanded
question
Refer to the graph below. The supply cure is upward sloping because
answer
the prices and quantity supplies more in the same direction
question
Suppose that Coca Cola and Pepsi are substitutes in consumption. If the price of Coca Cola decreases, then which of the following graphs would be relevant for pepsi?
answer
Graph C?
question
Suppose that burgers and fries are complements in consumption. If the price of fries increases
answer
overall demand for burgers will decrease
question
What must happen to the market price in order for a shortage to be eliminated?
answer
price must rise
question
Which of the following firms operates as a monopoly?
answer
local cable company
question
Which of the following firms participates in a competitive market?
answer
a corn farmer
question
Which of the following is NOT characteristic of a market economy?
answer
significant government intervention
question
which of the following will cause a shift rightward in the supply curve for tabacco
answer
an improvement in the technology used to produce tobacco
question
A car rental agency lowers their rates by 10 percent. If the agency wants to recoup the income lost by lowering the prices and have total revenues at least as high as before, it needs sales to
answer
increase by 20 percent
question
A local paintball business receives total revenue of $10,000 per month when it charges $12 person, and $15,000 in total revenue when it charges $8 per person. Over that range of prices, the business faces
answer
elastic demand
question
An online advertising company sells small page ads or full page ads. The elasticity of demand for small page ads is -0.8 and the elasticity of demand for full page ads is -1.3. The company should
answer
raise the price for small page ads and lower the price for full page ads
question
At a price of $150, a cell phone company manufactures 200,000 units. At a price of $250, the company manufactures 400,000 units. What is the price elasticity of supply?
answer
1.33
question
College logo water bottles priced at $12 sell at a rate of 30 per week, but when the bookstore marks them down to $8, it finds that it can sell 45 water bottles per week. What is the price elasticity of demand for the water bottles?
answer
-1.00
question
If a 20% increase in price causes a 30% drop in quantity demanded, this good is:
answer
elastic
question
Suppose the cross-price elasticity of demand between hot dog and mustard is -3.00. This implies that a 30 percent increase in the price of hot dogs will cause the quantity of mustard to
answer
falls by 90 percent
question
Suppose the price that Rodale Press has set for Prevention magazine is elastic. How would an increase in price affect revenues?
answer
they would decrease
question
The owner of a John Deere dealership hires you to maximize the revenue from the DL007 model. Your advice would be to:
answer
set the price in the unitary elastic region
question
Which of the following goods is perfectly elastic?
answer
photocopies that cost 11 cents per copy at one copy shop and 10 cent per copy at this shop's competitor located next door
question
Which of the following goods is perfectly inelastic?
answer
a life-saving medication
question
Which of the following goods is relatively elastic?
answer
. a fast-food restaurant located in the food court of a shopping mall
question
A supply curve that has a __________ slope represents a more elastic supply curve.
answer
flatter
question
Demand for a good is elastic if quantity demanded ________________ in response to a small price change.
answer
changes significantly
question
For which of the following goods is supply the most responsive to a change in price?
answer
hot dog vendor
question
For which of the following goods would you expect demand to be the most responsive to a rise in price?
answer
spaghetti
question
If income increases by 10% and the demand for tuna decreases by 20%, tuna is
answer
an inferior good
question
If the cross-price elasticity of demand for two goods is zero, the two goods are
answer
not related
question
in which time period is demand most elastic?
answer
long run
question
Over a longer period of time, supply becomes
answer
relatively more elastic
question
Price elasticity of supply is always positive except when supply is
answer
perfectly inelastic
question
Suppose that demand for automobiles increases by 25% when consumers' income increases by 20%. What is the income elasticity of demand for automobiles?
answer
1.25
question
Suppose the price of IBM computers falls from $2,500 to $2,000 and the quantity demanded increases from 10,000 to 20,000. Calculate the price elasticity of demand.
answer
-3
question
The income elasticity of demand is _____________ for normal goods.
answer
greater than zero
question
The price of peanut butter increases from $2.50 to $3.00 and the quantity of jelly demanded falls from 30 jars to 24 jars. Calculate the cross-price elasticity of demand.
answer
-11/9
question
When a supplier has a limited ability to make quick adjustments to quantity supplied, the elasticity of supply is
answer
less than 1
question
Common resources are associated with the incentive to...
answer
neglect
question
In most areas, developers are required to submit environmental impact studies before work can begin on new construction projects. Suppose that a commercial developer wants to build a new shopping center on an environmentally protected piece of property that is home to a rare three-eyed toad. The shopping complex, if approved by the local planning commission, will cover 10 acres.The planning commission wants construction to go forward, since that means additional jobs for the local community, but it also wants to be environmentally responsible. One member of the commission suggests that the developer relocate the toads. She describes the relocation process as follows: "The developer builds the shopping mall and agrees to create 10 acres of artificial toad habitat elsewhere." The builder will agree with the proposed solution if ______________
answer
the benefits of building the shopping center outweigh the costs including that of relocating the toads.
question
Q1 is the market equilibrium of output of this product, and Q2 is the social optimum. This figure indicates that there are _______________ externalities created by this good. This good should be ______________ to reach the social optimum level.
answer
positive, subsidized
question
Suppose visitors can enter the local park free of charge, but frequently all the picnic tables in the park are in use. As a result we can say that the park is a
answer
common-resource good
question
The tragedy of commons occurs when
answer
the good is rival in consumption but nonexcludable
question
Two roommates are the opposite. One enjoys playing Modern Warfare with his friends all night. The other likes to get to bed early for a full 8 hours of sleep. The roommate who plays Modern Warefare values gaming more than his roommate values sleep. According to the Coase theorem,
answer
the person who plays Modern Warefare will compensate his roommate for loss of sleep
question
Under which of the following scenarios would a park be considered a public good?
answer
Visitors can enter the park free of charge, and there are always plenty of empty picnic tables.
question
Which antipollution policy does not consider cost-benefit analysis?
answer
passing a law that bans all pollution
question
Which of the following activities create positive externalities?
answer
you and your friends volunteer to plant wildflowers along the local highway
question
Which of the following is a club good?
answer
swimming pool
question
which of the following is an example of market failure?
answer
a river polluted by a local fertilizer plant
question
In the graph below, Q2 is the market equilibrium of output of this product and q1 is the social optimum. The graph below shows a ________ externalize, which can be corrected to the optimal level with a ________
answer
negative, tax
question
Based on the coase theorem, private solutions to externalizes will be impossible if
answer
the number of parties involved is large
question
copyright laws make the digital music you buy
answer
nonrival and excludable
question
Cost-benefit analysis is used to determine whether the benefits of providing a ______________ outweigh the costs.
answer
public good
question
externalities are
answer
sometimes negative and sometimes positive
question
For which type of good does the textbook describe the use of cost-benefit analysis?
answer
public goods
question
In the case of negative externalities, social costs are ____________ internal costs.
answer
greater than
question
Public goods are________ in the market
answer
underproduced
question
The term market failure refers to
answer
a market that fails to allocate resources efficiently
question
Where there are established, well-defined private property rights, externalities will be
answer
less prevalent
question
which of the following is NOT an example of a public good?
answer
pools
question
Which of the following is a common solution to the free-rider problem?
answer
the government provides the good and then pays for its production through taxation
question
Which of the following is a solution to negative externalities?
answer
taxes
question
Which of the following is an example of a private good?
answer
pizza
question
Which of the following is an example of the tragedy of the commons?
answer
the overgrazing of common pastures shared by herders in pastoral communities
question
Which of the following is incentivzed by private property rights?
answer
property maintenance
question
The graph below portrays a market for a good whose consumption causes a positive externality. The curve marked Dinternal shows the market demand when consumers pay attention to only their internal benefits; the curve marked Dsocial shows demand when consumers observe social benefits. The socially optimal price is ______ than the market equilibrium price, and the socially optimal output level is _____ than the market equilibrium output level.
answer
higher, higher
question
The graph below portrays a market for a good whose production causes a negative externality. The curve marked Sinternal shows the market supply when producers pay only their internal costs; the curve marked Ssocial shows supply when producers pay social costs.The socially optimal price is ______ than the market equilibrium price, and the socially optimal output level is _____ than the market equilibrium output level.
answer
higher, lower
question
A pizza business has the cost structure described below. The firm's fixed costs are $ 20 per day. What are the firm's average fixed costs at an output of five pizzas?
answer
$4
question
A pizza business has the cost structure described below. The firm's fixed costs are $ 20 per day. What are the firm's average variables costs at an output of 25 pizzas?
answer
$7
question
A pizza business has the cost structure described below. The firm's fixed costs are $ 20 per day. What are the firms average total costs at an output of 10 pizzas?
answer
$12
question
A pizza business has the cost structure described below. The firm's fixed costs are $ 20 per day. What are the firm's marginal costs at an output of 35 pizzas?
answer
$4
question
A semiprofessional baseball team near your town plays two home games each month at the local baseball park. they split the concessions 50/50 with the city but keep revenue from ticket sales for themselves. The city charges the team $100 each month for three-month season. The team pays the players and manager a total of $1,000 a month. The team charges $10 for each ticket and the average customer spends $7 at the concession stand. Attendance averages 30 people at each home game. In order to break even, how many tickets does the team need to sell for each game?
answer
41
question
As a waiter you earn $60,000 per year, including tips. Someone offers you a new job as an economic consultant, which pays $100,000 per year. In order to be a consultant, you'll need to rent an office and purchase supplies and new computer equipment. We can conclude which of the following?
answer
If the explicit cost for the consulting job is $25,000 per year, your economic profit is equal to $15,000.
FEEDBACK: Economic profits are calculated by subtracting implicit cost from accounting profit. With explicit costs of $25,000, the accounting profit is equal to $75,000. Because you're giving up your next best job, being a waiter, the implicit cost of being a consultant is $60,000. Therefore, your economic profit is equal to $15,000.
FEEDBACK: Economic profits are calculated by subtracting implicit cost from accounting profit. With explicit costs of $25,000, the accounting profit is equal to $75,000. Because you're giving up your next best job, being a waiter, the implicit cost of being a consultant is $60,000. Therefore, your economic profit is equal to $15,000.
question
If the average total cost is falling,
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the marginal cost curve must be below the average total cost curve.
question
the cookie company in the mall hires workers to produce cookies. The workers are paid $75 per day, and the cost of renting the space in the mall is $250 per day. What are the fixed costs?
answer
$250
FEEDBACK: Regardless of the number of cookies made or workers hired, the bakery still pays $250 per day for its space in the mall. The fixed cost is therefore $250.
FEEDBACK: Regardless of the number of cookies made or workers hired, the bakery still pays $250 per day for its space in the mall. The fixed cost is therefore $250.
question
the cookie company in the mall hires workers to produce cookies. The workers are paid $75 per day, and the cost of renting the space in the mall is $250 per day. If two workers are hired, the variable costs are...
answer
$150
question
the cookie company in the mall hires workers to produce cookies. The workers are paid $75 per day, and the cost of renting the space in the mall is $250 per day. The total costs when three workers are hired is
answer
$475
question
The following table shows a short-run production function for laptop computers. Use the data to determine where diminishing product begins . Diminishing product begins after you hire worker number______.
answer
4
question
The local ice cream shop is trying to figure out how many workers to hire, and part of the decision will be based on the marginal product of labor. The following table shows a shor-run production function for quality ice cream tubs produced. Diminishing marginal returns begins after hiring which worker?
answer
second
question
The marginal cost curve
answer
intersects the ATC at its minimum point
question
Which of the following statements is true?
answer
the AFC curve can never rise
question
Billy Bob runs a seafood restaurant. Last year he earned $50,000 in revenue. He had explicit costs of $20,000. Billy Bob could have made $30,000 working for the county and could have received an additional $20,000 if he rented out his building and equipment. Calculate Billy Bob's accounting profit.
answer
$30,000
question
Billy Bob runs a seafood restaurant. Last year he earned $50,000 in revenue. He had explicit costs of $20,000. Billy Bob could have made $30,000 working for the county and could have received an additional $20,000 if he rented out his building and equipment. Calculate Billy Bob's implicit costs.
answer
$50,000
question
Billy Bob runs a seafood restaurant. Last year he earned $50,000 in revenue. He had explicit costs of $20,000. Billy Bob could have made $30,000 working for the county and could have received an additional $20,000 if he rented out his building and equipment. Calculate Billy Bob's economic profit.
answer
-$20,000
question
Dasenbrock and Gauss farms are able to achieve huge cost savings as they increase their acreage. this would be referred to in economics as
answer
achieving economies of scale
question
Diminishing marginal product refers to marginal product that often initially ______ but eventually_____
answer
increases, decreases
question
Explicit costs are called _____ costs and implicit costs are ______ costs
answer
out-of-pocket, opportunity
question
In this example presented by this graph, at what number of workers does the point of diminishing marginal product occur?
answer
fourth worker
question
In the example presented by this graph, what is total output when the fifth worker is added?
answer
52 meals served per hour
question
In the long run, costs are
answer
variable only
question
Laronda went into the business of producing and selling greeting cards. For this business,which of the following is likely to be fixed cost?
answer
the 6-month lease for the factory
question
profits and losses are determined by
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subtracting total costs from total revenue
question
The cost of a firm's inputs increased by 40%. As a result, output increased by 25%. This firm experienced
answer
diseconomies of scale
question
The increasing returns to hiring the first workers exist because of
answer
specialization
question
The table below lists costs for producing Big Macs, a product of McDonald's. Based on the table, what are total fixed costs associated with Big Mac production?
answer
$100
question
Which of the following is a factor of production?
answer
capital
question
Which of the following is an explicit cost for a business owner?
answer
a workers salary
question
In this large business, we see that there are a total of ____________ supervisors and managers (including the owner).
answer
19
question
The large firm has 14.9% reduced productivity, and the small firm has 10% reduced productivity. If everything else is constant, what can we say about the cost structures in this industry?
answer
The firms in this industry have diseconomies of scale.
question
This large business has 127 employees, 19 of whom are managers or supervisors; its reduced productivity is 19 ÷ 127 = 14.9%. Consider a "Super-Large Business" that's larger than the business shown below. It has 270 workers, 30 supervisors, 10 line managers, 5 division managers, 2 executive managers, and one CEO. Assuming the same conditions as the large and small businesses, what is the reduced productivity for this Super-Large Business?
answer
15.1
question
This large business has 127 employees, 19 of whom are managers or supervisors; its reduced productivity is 19 ÷ 127 = 14.9%. Suppose the executive manager realizes that the business can accomplish the same amount of work with only 3 line managers and 9 supervisors, and lays off the others. Calculate their new reduced productivity level. (Calculate to nearest tenth of a percent.) ______________________%
answer
12.2%
question
A competitive firm maximizes profit at an output level of 500 units, market price is $24 and ATC is $24.50. At what range of AVC values for an output level of 500 would the firm choose not to shut down?
answer
AVC < $24
question
Converse, an apparel company, has been fairly successful selling denim-colored college sportswear. Lydia sees an opportunity for profit and enters the market. After producing her profit maximizing level of output, she finds that her average total cost per unit is $40, her average variable cost per unit is $30, and the market price is $35. In the short run, Lydia should
answer
stay in business even though she is suffering a loss
question
Firms producing an identical product in a perfectly competitive market are producing at a quantity that maximizes profit. The current market price is $4.50 per unit, and the firms are producing at a long-run average cost of $3.50 per unit. Firms in this market experience
answer
a profit
question
Firms producing an identical product in a competitive market are producing at a level of output that maximizes profit. The current market price is $4.50 per unit and the firms are producing at a long-run average cost of $3.50 per unit. Over the long-run one should expect
answer
entry of new firms into this market
question
For a perfectly competitive firm, marginal revenue is
answer
equal to price
question
If competitive firms experience a loss, over the long run there will be a
answer
decrease in market supply to increase the market price
question
In a perfectly competitive market, the long-run market supply curve is
answer
horizontal at the market price
question
In a perfectly competitive market, the price of the product is
answer
set by market supply and demand
question
Profits when a competitive firm shuts down are -$7,250 and -$250 when the firm continues to produce. This firm will minimize losses by
answer
continuing to produce
question
The price of a competitive firm's product is $50 per unit. The firm currently has marginal cost equal to $40. To maximize profits this firm
answer
should increase its output
question
To maximize profits, firms expand output until
answer
mr=mc
question
What type of firm most closely fits the description of a competitive firm?
answer
corn farmers
question
which of the new stadiums has seen the biggest increase in attendence?
answer
philadelphia
question
A firm is experiencing a loss of $5,000 per year when operating. The firm has fixed costs of $8,000 per year. The firm should ______ in the short run and should ______ in the long run.
answer
operate; shut down
question
A local snow cone business sells snow cones in one size for $5. It has the following cost and output structure per hour. to maximize profit the firm should produce how many snow cones per hour?
answer
40
question
A producer would decide to produce in a competitive market in which she will earn zero profit in the long run because
answer
at zero profit, her revenue will cover all her costs, both explicit and implicit (opportunity cost).
question
Suppose the firm whose demand and cost curves are represented in the table above operates in a perfectly competitive market. What is the profit-maximizing output?
answer
25
The price in a competitive market does not change because of one firm's actions, so it is always $16. The total revenue is calculated by multiplying price by output.The total revenue (TR) is calculated by multiplying the quantity (output) by the price ($5). MR is the difference in TR from the previous amount of production to the current amount of production. MC is calculated by taking the difference in cost between each level of output. Profit is maximized when MR = MC.The profit-maximizing output is where MC = MR, at a quantity of 25.
The price in a competitive market does not change because of one firm's actions, so it is always $16. The total revenue is calculated by multiplying price by output.The total revenue (TR) is calculated by multiplying the quantity (output) by the price ($5). MR is the difference in TR from the previous amount of production to the current amount of production. MC is calculated by taking the difference in cost between each level of output. Profit is maximized when MR = MC.The profit-maximizing output is where MC = MR, at a quantity of 25.
question
At what price is the firm making an economic profit?
answer
P6
question
At what price is the firm breaking even?
answer
P4
question
At what price is the firm experiencing an economic loss?
answer
P3
question
Which of the following can be considered a competitive market?
answer
international market for coffee beans
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