Beruflich Dokumente
Kultur Dokumente
Question
Points
MC (50 points)
SA1 (21 points)
SA2 (8 points)
SA3 (7 points)
SA4 (14 points)
Total
8. ______
15. ______
22. ______
2. ______
9. ______
16. ______
23. ______
3. ______
10. ______
17. ______
24. ______
4. ______
11. ______
18. ______
25. ______
5. ______
12. ______
19. ______
6. ______
13. ______
20. ______
7. ______
14. ______
21. ______
1.
Suppose a government is considering imposing either a tariff or a quota on imported grain, and either policy will result in
exactly 750 tons of grain being imported. How do these policies differ?
A. The price of grain under the tariff will be higher than the price under the quota.
B. The quota will generate revenue for the government while the tariff will generate revenue for those who hold import
licenses. Only tariff generates revenue for the government
C. Domestic production will be higher with the quota than with the tariff.
D. The quota will generate revenue for those who hold import licenses while the tariff will generate revenue for the
government.
2.
Q
= P
Pat used to work as an aerobics instructor at the local gym earning $35,000 a year. Pat quit that job and started working as a
personal trainer. Pat makes $50,000 in total annual revenue. Pat's only out-of-pocket costs are $12,000 per year for rent and
utilities, $1,000 per year for advertising and $3,000 per year for equipment. Income aerobics instructor $35,000
3.
4.
Refer to the figure above. At the point of profit maximization, the monopolist
A. incurs a loss of $38.50.
B. earns a profit of $11.20.
C. incurs a loss of $11.20.
D. earns a profit of $38.50.
5.
Refer to the figure above. The socially efficient price and output combination is
A. $5 and 7.
B. $5 and 3.5.
C. $19.30 and 7.
D. $22.50 and 3.5.
Ceiling
6.
Refer to the figure above. Assume that a price ceiling is imposed at the price represented by point G. As a result of the price
ceiling, producer surplus _________ and is represented by the area _______.
A. increases; 0GFQ2
B. decreases; 0DFQ2
C. increases; DBC
D. decreases; DGF
7.
Refer to the figure above. Assume that a price ceiling is imposed at the price represented by point G. The deadweight loss due
to the price ceiling is represented by the area
A. DAC.
B. FEC.
C. GJEF.
D. JAE + DGF.
8.
9.
One complaint of Occupy Wall Street protesters is that corporations have too much influence on the government. If
corporations can influence governmental policy, then this will lead to inefficient outcomes if
A. the government takes steps to promote economic growth.
B. the government allows some corporations to have market power.
C. corporations are not required to pay very much in taxes.
D. corporations are allowed to lay off large numbers of workers during economic recessions.
10. Refer to the figure above. If this monopolistic firm's marginal cost is constant at $30, its profit maximizing output is
A. 20 units.
B. 40 units.
C. 50 units.
D. 30 units.
11. Suppose a competitive firm and a monopolist are both charging $5 for their respective outputs. One can infer that
A. marginal revenue is $5 for both firms.
B. marginal revenue is $5 for the competitive firm and less than $5 for the monopolist.
C. the competitive firm is charging too much and the monopolist too little.
D. marginal revenue is less than $5 for both firms.
S + T
inelastic demand
Supply
12. If a per unit tax is imposed, the more inelastic demand is, the
A. larger the deadweight loss to producers.
B. less likely the deadweight loss will be affected.
C. smaller the deadweight loss.
D. larger the deadweight loss.
13. Suppose Blair likes to buy shoes and dresses. If the price of shoes increases from $75 to $100 per pair, but the price of dresses
Afford less shoes
Shoes P $75 -> $100
remains fixed, then we know that
A. Blair will not change her consumption of dresses. Dress P fixed
So to buy 1 dress
B. The opportunity cost of shoes in terms of dresses will fall.
you give up less shoes
C. The opportunity cost of dresses in terms of shoes will fall.
OC of dress falls
D. Blair will consume fewer dresses since the opportunity cost of dresses in terms of shoes rises.
14. Accounting profits are
A. equal to total revenues minus explicit and implicit costs.
B. less than economic profits.
C. equal to total revenues minus implicit costs.
D. the difference between total revenues and explicit costs.
15. If a monopolist finds that its marginal revenue exceeds its marginal costs at the current level of output, it should
A. do nothing; it has maximized profits.
B. expand output until marginal revenue equals marginal costs.
C. expand output until price equals marginal costs.
D. contract production until the difference between marginal revenues and marginal costs is larger.
16. Suppose Fiona buys 15 gumdrops and 7 lollipops from her local bulk candy store. The marginal utility she gets from the
15th gumdrop is twice the marginal utility she gets from the 7th lollipop. Assuming Fiona is a rational and is maximizing her
utility, it must be the case that MUg = 2MUl
MUg
MUl 2MUl
MUl
A. Gumdrops are half the price of lollipops.
--- = --- ---- = --- Pg = 2Pl
B. Gumdrops and lollipops are complementary goods for Fiona.
Pg
Pl Pg
Pl
C. Gumdrops are twice as expensive as lollipops.
D. Fiona must really want lollipops if she buys them even though they give her less marginal utility than gumdrops.
17. Which ordering best describes how a perfectly competitive industry would respond to a sudden increase in popularity of the
product if it is an increasing cost industry? The market demand function will shift to the right causing the market
A. price to increase, and a new stable equilibrium to be established at a higher price and higher quantity.
B. price to increase, and all firms in the industry will earn higher profits at lower quantities of output.
C price to increase. Increased profits will encourage new firms to enter shifting the market supply function to the
. right. Long-run market equilibrium will be at a higher quantity and higher price than before the surge in popularity.
D price to increase. Increased profits will encourage new firms to enter shifting the market supply function to the right.
. Long-run market equilibrium will be at a higher quantity but at the same price as before the surge in popularity.
18. Perfect competition is efficient and monopoly is not because in perfect competition __________ while in monopoly
__________.
A. P = MC; P > MC
B. P < MR; P = MR
C. P = MC; P < MC
D. P = MR; P < MR
19. If the price of a good increases by 20% and that leads to a decrease in quantity demanded by 60%, what is the price elasticity
of demand for that good?
A. 1/6.
Q
B. 1/3.
E = 60/20 = 3
C. 3.
D. 30.
P
20. The more elastic supply is, the ______ the burden of the tax borne by ______.
A. smaller; consumers and producers
B. smaller; consumers
C. larger; consumers
D. larger; producers
21. Suppose the government imposes a quota on imported cars. The winners from the quota are the ________, and the losers are
the______.
A. government; domestic consumers of cars
B. domestic producers of cars; domestic consumers of cars
Charge higher price
C. importers of cars; domestic producers of cars
cause low supply
D. domestic consumers of cars; domestic producers of cars
24. Assume that the market is currently as shown in the graph on the left (i.e., price of $8). What is true of the number of firms?
A. There are currently ten firms in this industry, and that number will remain stable until there is a change in demand or in
technology.
B. There are currently ten firms in this industry, and that number is likely to increase in the near future. Profit > 0
C. There are currently 30 firms in the industry, and that number will remain stable until there is a change in demand or in
technology.
D. It is impossible to tell how many firms currently exist in this industry, but you can tell that the number of firms is likely to
increase in the near future.
25. For entertainment, suppose Rachel likes to read books and rent movies. Given the number of movies she currently rents and
the number of movies she currently buys, her marginal utility from renting movies is 5 and her marginal utility from reading
books is 4. It costs Rachel $12 to rent a movie and $10 to buy a book. Given this information we know that Rachel is willing
to give up _________ of a movie to get an additional book and that she should buy ___________________.
A. 5/4; more movies and fewer books.
B. 4/5; more movies and fewer books.
C. 5/4; more books and fewer movies.
D. 4/5; more books and fewer movies
MUbooks
MUmovie
------- = 0.416 ------- = 0.400
Pbooks
Pmovie
Rachel likes movies more than books,
so she will give up less than 1 movie to get 1 book
1. Consider
the
following
three
individuals:
Horton,
Cindy,
and
Sam.
Each
produces
green
eggs
and
ham.
Hortons
PPC
is
given
by
G=10-H,
where
G
denotes
the
number
of
green
eggs
and
H
denotes
the
number
of
slices
of
ham.
Similarly,
Cindys
PPC
is
given
by
G=10-2H
and
Sams
PPC
is
given
by
G=5-(1/2)H.
a. (4.5
points)
Sketch
each
individuals
PPC,
putting
green
eggs
on
the
y-axis
and
ham
on
the
x-axis.
For
all
three
graphs,
clearly
label
the
x-intercept,
the
y-intercept
and
the
slope.
b. (1.5
points)
For
each
individual,
calculate
the
opportunity
cost
of
producing
ham.
c. (1.5
points)
For
each
individual,
calculate
the
opportunity
cost
of
producing
green
eggs.
d. (2
points)
Who
has
a
comparative
advantage
in
the
production
of
ham?
Briefly
explain.
e. (2
points)
Who
has
a
comparative
advantage
in
the
production
of
green
eggs?
Briefly
explain.
f. (3.5
points)
Construct
the
joint
PPC
for
Horton,
Cindy
and
Sam.
As
above,
place
green
eggs
on
the
y-
axis
and
ham
on
the
x-axis.
Clearly
label
the
y-intercept,
the
x-intercept,
the
slope
of
the
PPC
along
each
segment,
and
the
coordinates
of
each
kink
point.
g. (4
points)
Suppose
that
Horton,
Cindy
and
Sam
(who
all
live
in
Whoville)
decide
to
start
trading
with
the
rest
of
the
world.
If
the
world
price
of
ham
is
30
cents
per
slice
and
the
world
price
of
green
eggs
is
40
cents
per
egg,
then
where
along
their
joint
PPC
will
Horton,
Cindy
and
Sam
produce?
Also,
at
this
point,
how
many
eggs
and
slices
of
ham
will
each
individual
produce?
[For
example,
how
many
eggs
and
how
many
slices
of
ham
does
Horton
produce?
What
about
Cindy?
What
about
Sam?]
h. (2
points)
Suppose
that
Horton,
Cindy
and
Sam
decide
they
only
want
to
eat
ham
(because
they
dont
like
green
eggsand
certainly
not
with
ham!).
Once
they
are
open
to
trade
(at
the
prices
above),
how
many
slices
of
ham
can
they
consume?
G = green eggs
Horton
Cindy Sam
H = ham slices
Horton: G=10-H
Cindy: G=10-2H
Sam: G=5-(1/2)H
G | H
----0 |10
10| 0
G | H
----0 | 5
10| 0
G | H
----0 | 10
5 | 0
G
G
10
10
Horton
slope = 1
Cindy
slope = 2
10
Sam
slope = 1/2
5
10
Cindy
Sam
10 g egg
1 ham x -------- = 1 g egg
10 ham
10 g egg
1 ham x -------- = 2 g egg
5 ham
5 g egg
1 ham x -------- = 0.5 g egg
10 ham
Cindy
Sam
10 ham
1 egg x ------ = 1 ham
10 egg
5 ham
1 egg x ------ = 0.5 ham
10 egg
10 ham
1 egg x ------ = 2 ham
5 egg
D) Sam has the comparitive advantage in making ham cause his OC is the lowest
E) Cindy has the comparitive advantage in making eggs cause her OC is the lowest
F) Joint PPC
Green eggs
25
20
slope = 1/2
slope = 1
10
slope = 2
10
20
25
Ham
2.
Let
the
supply
of
ham
be
given
by
Q=3/2P-3,
and
let
the
demand
for
ham
be
given
by
Q=5-1/2P,
where
Q
denotes
the
number
of
pounds
of
ham
and
P
denotes
the
price
per
pound.
a. (2
points)
Sketch
the
supply
curve
and
the
demand
curve.
For
each
curve,
label
the
y-intercept
and
the
slope.
b. (2
points)
How
many
pounds
of
ham
will
be
bought
and
sold
in
equilibrium?
And,
what
will
be
the
equilibrium
price
of
ham?
Label
equilibrium
price
and
quantity
on
your
graph.
c. (2
points)
In
an
effort
to
appease
the
pork
lobby,
suppose
the
government
imposes
a
price
floor
on
ham
of
$4.63
per
pound.
Will
this
price
floor
be
successful
at
increasing
the
revenue
of
ham
producers?
Explain.
d. (2
points)
Explain
why
the
price
floor
generates
deadweight
loss.
That
is,
with
the
price
floor
in
place,
why
is
the
new
equilibrium
quantity
of
ham
inefficient?
Supply
Demand
Demand
Supply curve
B) Equilibrium
P | Q
Q = 5 - (1/2)P
P | Q
Q = (3/2)P - 3
(3/2)P - 3 = 5 - (1/2)P
P = (2/3)Q + 2
P = -2Q + 10
Price
slope = 2/3
----2 | 0
----10| 0
0 | 5
2P = 8
P = 4
Q = 3
10
4.63
4
floor
2
3
slope = 2
Quantity
3. Consider
the
market
for
thneeds
(the
fictional
garment
in
Dr.
Seusss
The
Lorax).
A Thneed's a Fine-Something-That-All-People-Need!
It's a shirt. It's a sock. It's a glove. It's a hat.
But it has OTHER uses. Yes, far beyond that.
You can use it for carpets. For pillows! For sheets!
Or curtains! Or covers for bicycle seats!
a. (2.5
points)
Draw
a
simple
supply
and
demand
graph
for
the
market
for
thneeds.
Label
the
equilibrium
price
and
quantity
of
thneeds.
In
addition,
be
sure
to
clearly
label
the
supply
curve,
the
demand
curve
and
the
axes.
b. (2.5
points)
Suppose
that
the
price
of
truffula
trees
(which
are
used
to
make
thneeds)
suddenly
increases.
At
the
same
time,
suppose
the
price
of
sweaters
decreases.
On
your
graph,
illustrate
what
will
happen
to
the
supply
and
demand
for
thneeds
as
a
result
of
these
two
factors.
Be
sure
to
clearly
state
any
assumptions
you
are
making.
c. (2
points)
What
will
happen
to
equilibrium
price
and
quantity
of
thneeds.
P*
4. Suppose
Jerry
Jordan
runs
a
small
company
that
makes
strawberry
jelly.
In
the
short-run,
some
of
Jerry
Jordans
inputs
are
fixed
(for
example,
he
cannot
easily
change
the
size
of
his
kitchen),
but
he
is
easily
able
to
vary
the
number
of
hours
his
employees
work
and
the
amount
of
strawberries
he
purchases
(labor
and
strawberries
are
variable
in
the
short
run).
The
table
below
shows
Jerry
Jordans
daily
production
costs
(which
include
both
explicit
costs
and
implicit
costs).
Assume
the
market
for
strawberry
jelly
is
perfectly
competitive.
Total
Average
Jars
Per
Average
Marginal
Total
Cost
Variable
Variable
Day
Total
Cost
Cost
Cost
Cost
---
0
140
---
---
---
160-140=20
20/1=20
1
160
160/1=160
160-140=20
178-160=18
2
178
178/2=89
38/2=19
178-140=38
3
198
66
19.3
198-178=20
198-140=58
4
220
55
80
20
220-198=22
5
245
49
105
21
25
6
275
45.8
135
22.5
30
a. (2
points)
Fill
out
the
blank
cells
in
the
table
above
(you
do
not
need
to
fill
out
the
ones
with
---).
b. (2
points)
If
p*=18,
how
many
jars
of
jelly
per
day
should
Jerry
Jordan
make
in
the
short
run,
and
what
will
be
his
economic
profit?
Show
your
work.
c. (2
points)
If
p*=$22,
how
many
jars
of
jelly
per
day
should
Jerry
Jordan
make
in
the
short
run,
and
what
will
be
his
economic
profit?
Show
your
work.
d. (2
points)
Why
might
Jerry
produce
jelly
in
the
short
run
even
when
his
economic
profit
is
negative?
e. (2
points)
If
the
price
of
a
jar
of
jelly
is
$22,
what
will
Jerry
do
in
the
long
run?
Briefly
explain.
f. (2
points)
In
general,
how
will
Jerrys
short-run
production
of
jelly
change
if
his
fixed
costs
increase
to
$200
per
day?
Briefly
explain.
g. (2
points)
In
general,
how
will
Jerrys
short-run
production
of
jelly
change
if
the
price
of
strawberries
falls?
Briefly
explain.
B) P=MC
F) Fixed costs do not affect
At P=18,
He will produce 2
short-run production, so Jerry