TEST 3 ( ch 10) - Assignment Essays

question

The uncompensated impact of one persons actions on the well being of a bystander

answer

Externality

question

A negative externality generates

answer

a social cost curve that is above the supply curve (private cost curve) for a good

question

positive externality generates

answer

a social value curve that is above the demand curve (private value curve) for a good

question

negative externality (that had not been internalized) causes the

answer

equilibrium quantity to exceed the optimal quantity

question

A positive externality (that has not been internalized causes the

answer

optimal quantity to exceed the equilibrium quantity

question

To internalize a negative externality, an appropriate public policy response would be to

answer

tax the good

question

the government engages in an industrial policy

answer

to internalize the positive externality associated with technology-enhancing industries

question

When an individual buys a car in a congested urban area, it generates

answer

negative externality

question

The most efficient pollution control system would ensure that

answer

the polluters with the lowest cost of reducing pollution reduce their pollution the greatest amount

question

According to the Case theorem, private parties can solve the problem of externalities if

answer

there are no transaction cost

question

To internalize a positive externality, an appropriate public policy response would be to

answer

subsidize the good

question

Which of the following is not considered transaction cost incurred by parties in the process of contracting to eliminate a pollution externality?

answer

costs incurred to reduce the pollution

question

Bob and Tom live in a university dorm. Bob values playing loud music at a value of $100. Tom values peace and quiet at a value of $150. Which of the following statements is true?

answer

It is efficient for Bob to stop playing loud music regardless of who has the property right to the level of sound.

question

Bob and Tom live in a university dorm. Bob values playing loud music at a value of $100. Tom values peace and quiet at a value of $150. Which of the following statements is true about an efficient solution to this externality problem if Bob has the right to play loud music and if there are no transaction costs?

answer

Tom will pay Bob between $100 and $150 and Bob will stop playing loud music.

question

Which of the following is true regarding tradable pollution permits and corrective taxes?

answer

Corrective taxes and tradable pollution permits create an efficient market for pollution.

question

The gas-guzzler tax that is placed on new vehicles that get very poor mileage is an example of

answer

an attempt to internalize a negative externality

question

A corrective tax on pollution

answer

sets the price of pollution

question

Tradable pollution permits

answer

set the quantity of pollution

question

When wealthy alumni provide charitable contributions to their alma mater to reduce the tuition payments of current students, it is an example of

answer

an attempt to internalize a positive externality

question

Suppose an industry emits a negative externality such as pollution, and the possible methods to internalize the externality are command-and control policies, corrective taxes, and tradable pollution permits. If economists were to rank these methods for internalizing a negative externality based on efficiency, ease of implementation, and and the incentive for the industry to further reduce pollution in the future, they would likely rank them in the following order (from most favored to least favored):

answer

tradable pollution permits, corrective taxes, command-and-control policies.

question

Going to college is an example of ?

answer

Positive externality

question

Accounting profit is equal to total revenue minus

answer

explicit costs

question

Economic profit is equal to total revenue minus

answer

the sum of implicit and explicit costs

question

Use the following information to answer question. Madelyn owns a small pottery factoryShe can make 1,000 pieces of pottery per year and sell them for . It costs Madelyn $20,000 for the raw materials to produce the 1,000 pieces of pottery. She has invested $ 100,000 in her factory and equipment wered from her savings and $50,000 borrowed at percent (assume that she could have loaned her money out at percent, too). Madelyn can work at a competing pottery factory for \$40,000 per year. The accounting profit at Madelyn's pottery factory is

answer

75,000

question

Use the following information to answer question. Madelyn owns a small pottery factoryShe can make 1,000 pieces of pottery per year and sell them for $100 each. It costs Madelyn $20,000 for the raw materials to produce the 1,000 pieces of potteryShe has invested $100,000 in her factory and equipment $50,000 from her savings and $50,000 borrowed at 10 percent (assume that she could have loaned her money out at percent, too)Madelyn can work at a competing pottery factory for $40,000 per year. The economic profit at Madelyn's pottery factory is

answer

30,000

question

If there are implicit costs of production,

answer

accounting profit will exceed economic profit

question

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

answer

wages paid to factory labor

question

The Three Amigo's company produced and sold 500 dog beds. The average cost of production per dog bed was $50. Each dog bed can be sold for a price of 65 The Three Amigo's total costs are

answer

25,000

question

Cindy's Car Wash has average variable costs of and average fixed costs of $3 when it produces units of output (car washes). The firm's total cost is

answer

500

question

A firm produces 300 units of output at a total cost of \$1,000 . If fixed costs are \$100

answer

Average variable cost is $3

question

Refer to Table 13 - 8 . What is the shape of the marginal cost curve for this firm?

answer

upward sloping

question

The average fixed cost of producing four units is

answer

$2.50

question

When a firm produces zero output, the firm incurs __________ costs

answer

Fixed

question

When a firm produces zero output, the firms variable costs are________

answer

Zero dollars

question

When a firm produces zero output the firms total cost is equal to fixed cost (T/F)

answer

True

question

Which of the following would be categorized as an implicit cost?

answer

forgone investment opportunities

question

Which of the following is an implicit cost?

answer

The owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm

question

Which of the following is an implicit cost?

answer

foregone rent on office space owned and used by the firm

question

The amount of money that a wheat farmer could have earned if he had planted barley instead of wheat is

answer

an implicit cost

question

A firm's opportunity costs of production to its

answer

Explicit costs + implicit costs

question

Which of the following expressions is correct?

answer

accounting profit = total revenue - explicit costs

question

Susan used to work as a telemarketer, earning $25,000 per year. She gave up that job to start a catering business. In calculating the economic profit of her catering business, the $25,000 income that she gave up is counted as part of the catering firm's

answer

opportunity costs

question

When calculating a firm's profit, an economist

answer

Will subtract only the opportunity costs from total revenue since these include both the implicit and explicit costs of the firm

question

Total revenue minus explicit and implicit costs is called

answer

economic profit

question

The amount of money a firm receives for the sale of its output is called

answer

Total revenue

question

A firm's explicit costs ________ an outlay of money by the firm; a firm's implicit costs ________ an outlay of money by the firm

answer

Require; do not requirr

question

The market value of the inputs a firm uses in production is called

answer

Total cost

question

When marginal costs are below average total costs

answer

average total costs are falling

question

If marginal costs equal average total costs,

answer

average total costs are minimized

question

If, as the quantity produced increases, a production function first exhibits increasing marginal product and later diminishing marginal product, the corresponding marginal-cost curve will

answer

be U-shaped

question

In the long run, if a very small factory were to expand its scale of operations, it is likely that it would initially experience

answer

economies of scale

question

The efficient scale of production is the quantity of output that minimizes

answer

average total cost

question

Which of the following statements is true?

answer

All costs are variable in the long run

question

Average fixed cost was $20 at a Q=20. What is the total cost at Q=0?

answer

Total cost= $400
Total cost= $20x$20=$400

question

When total cost=$1000 and total cost=$1130. When output increased by 20 units. What is the marginal cost?

answer

MC= TC/Q= $130/20= $6.50

question

TC= $500 at Q=30. When a firm increased its output by 20 units its marginal cost was $5. What is the total cost at Q=50

answer

$5x20= $100

question

Holden borrowed $150000 from GC bank and withdraw $200000 from his savings account. The interest rate on the loan is 5% and his savings account pays 3% a year.
1. What is the opportunity cost?
2. What's the implicit cost?
3. What's the explicit cost?

answer

1. Implicit + explicit = 6,000+7,500= 13,500
2. $200000x0.03%= $6,000
3. $150000x0.05%= $7,500

question

What are examples of positive externalities?

answer

Flu shots, higher education

question

What are examples of negative externalities?

answer

pollution, toxic gas, illegal drugs

question

Why is positive externality a problem?

answer

We under produce something or underconsume something (too little)

question

Why is negative externality a problem?

answer

We over produce and over consume (too much)

question

As you increase capacity, per unit cost ( average cost) is falling

answer

Economies of scale

question

As you increase capacity, per unit (average cost) is rising

answer

Diseconomies of scale

question

As you increase or decrease capacity, AC (per unit cost) remains the same

answer

Constant returns of scale

1 of 64

question

The uncompensated impact of one persons actions on the well being of a bystander

answer

Externality

question

A negative externality generates

answer

a social cost curve that is above the supply curve (private cost curve) for a good

question

positive externality generates

answer

a social value curve that is above the demand curve (private value curve) for a good

question

negative externality (that had not been internalized) causes the

answer

equilibrium quantity to exceed the optimal quantity

question

A positive externality (that has not been internalized causes the

answer

optimal quantity to exceed the equilibrium quantity

question

To internalize a negative externality, an appropriate public policy response would be to

answer

tax the good

question

the government engages in an industrial policy

answer

to internalize the positive externality associated with technology-enhancing industries

question

When an individual buys a car in a congested urban area, it generates

answer

negative externality

question

The most efficient pollution control system would ensure that

answer

the polluters with the lowest cost of reducing pollution reduce their pollution the greatest amount

question

According to the Case theorem, private parties can solve the problem of externalities if

answer

there are no transaction cost

question

To internalize a positive externality, an appropriate public policy response would be to

answer

subsidize the good

question

Which of the following is not considered transaction cost incurred by parties in the process of contracting to eliminate a pollution externality?

answer

costs incurred to reduce the pollution

question

Bob and Tom live in a university dorm. Bob values playing loud music at a value of $100. Tom values peace and quiet at a value of $150. Which of the following statements is true?

answer

It is efficient for Bob to stop playing loud music regardless of who has the property right to the level of sound.

question

answer

Tom will pay Bob between $100 and $150 and Bob will stop playing loud music.

question

Which of the following is true regarding tradable pollution permits and corrective taxes?

answer

Corrective taxes and tradable pollution permits create an efficient market for pollution.

question

The gas-guzzler tax that is placed on new vehicles that get very poor mileage is an example of

answer

an attempt to internalize a negative externality

question

A corrective tax on pollution

answer

sets the price of pollution

question

Tradable pollution permits

answer

set the quantity of pollution

question

When wealthy alumni provide charitable contributions to their alma mater to reduce the tuition payments of current students, it is an example of

answer

an attempt to internalize a positive externality

question

answer

tradable pollution permits, corrective taxes, command-and-control policies.

question

Going to college is an example of ?

answer

Positive externality

question

Accounting profit is equal to total revenue minus

answer

explicit costs

question

Economic profit is equal to total revenue minus

answer

the sum of implicit and explicit costs

question

answer

75,000

question

answer

30,000

question

If there are implicit costs of production,

answer

accounting profit will exceed economic profit

question

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

answer

wages paid to factory labor

question

The Three Amigo's company produced and sold 500 dog beds. The average cost of production per dog bed was $50. Each dog bed can be sold for a price of 65 The Three Amigo's total costs are

answer

25,000

question

Cindy's Car Wash has average variable costs of and average fixed costs of $3 when it produces units of output (car washes). The firm's total cost is

answer

500

question

A firm produces 300 units of output at a total cost of \$1,000 . If fixed costs are \$100

answer

Average variable cost is $3

question

Refer to Table 13 - 8 . What is the shape of the marginal cost curve for this firm?

answer

upward sloping

question

The average fixed cost of producing four units is

answer

$2.50

question

When a firm produces zero output, the firm incurs __________ costs

answer

Fixed

question

When a firm produces zero output, the firms variable costs are________

answer

Zero dollars

question

When a firm produces zero output the firms total cost is equal to fixed cost (T/F)

answer

True

question

Which of the following would be categorized as an implicit cost?

answer

forgone investment opportunities

question

Which of the following is an implicit cost?

answer

The owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm

question

Which of the following is an implicit cost?

answer

foregone rent on office space owned and used by the firm

question

The amount of money that a wheat farmer could have earned if he had planted barley instead of wheat is

answer

an implicit cost

question

A firm's opportunity costs of production to its

answer

Explicit costs + implicit costs

question

Which of the following expressions is correct?

answer

accounting profit = total revenue - explicit costs

question

answer

opportunity costs

question

When calculating a firm's profit, an economist

answer

Will subtract only the opportunity costs from total revenue since these include both the implicit and explicit costs of the firm

question

Total revenue minus explicit and implicit costs is called

answer

economic profit

question

The amount of money a firm receives for the sale of its output is called

answer

Total revenue

question

A firm's explicit costs ________ an outlay of money by the firm; a firm's implicit costs ________ an outlay of money by the firm

answer

Require; do not requirr

question

The market value of the inputs a firm uses in production is called

answer

Total cost

question

When marginal costs are below average total costs

answer

average total costs are falling

question

If marginal costs equal average total costs,

answer

average total costs are minimized

question

If, as the quantity produced increases, a production function first exhibits increasing marginal product and later diminishing marginal product, the corresponding marginal-cost curve will

answer

be U-shaped

question

In the long run, if a very small factory were to expand its scale of operations, it is likely that it would initially experience

answer

economies of scale

question

The efficient scale of production is the quantity of output that minimizes

answer

average total cost

question

Which of the following statements is true?

answer

All costs are variable in the long run

question

Average fixed cost was $20 at a Q=20. What is the total cost at Q=0?

answer

Total cost= $400
Total cost= $20x$20=$400

question

When total cost=$1000 and total cost=$1130. When output increased by 20 units. What is the marginal cost?

answer

MC= TC/Q= $130/20= $6.50

question

TC= $500 at Q=30. When a firm increased its output by 20 units its marginal cost was $5. What is the total cost at Q=50

answer

$5x20= $100

question

answer

1. Implicit + explicit = 6,000+7,500= 13,500
2. $200000x0.03%= $6,000
3. $150000x0.05%= $7,500

question

What are examples of positive externalities?

answer

Flu shots, higher education

question

What are examples of negative externalities?

answer

pollution, toxic gas, illegal drugs

question

Why is positive externality a problem?

answer

We under produce something or underconsume something (too little)

question

Why is negative externality a problem?

answer

We over produce and over consume (too much)

question

As you increase capacity, per unit cost ( average cost) is falling

answer

Economies of scale

question

As you increase capacity, per unit (average cost) is rising

answer

Diseconomies of scale

question

As you increase or decrease capacity, AC (per unit cost) remains the same

answer

Constant returns of scale

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