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Table 14-10: The marginal cost of producing the 4th unit is


Table 14-10: At which level of production will the firm maximize profit?

3 units

Tax incidence refers to

who bears the tax burden

Figure 13-9: Which of the curves is most likely to characterize the short-run average total cost curve of the smallest factory?


Externalities tend to cause markets to be


Sally's cat causes Mike to sneeze. Sally values her cat's companionship at $300 per year. The cost to mike of tissues and his allergy medication is $350 per year. Based on the Coase theorem,

Mike should pay Sally $325 to give away her cat.

Figure 13-5: Which curve is most likely to represent average total cost?


Figure 13-5: Curve C represents which type of cost curve?

Average total Cost

Figure 13-5: Curve a represents which type of cost curve?

average fixed cost

Figure 13-5: Which of the curves is most likely to represent average fixed cost?


The old lyric "the best things in life are free"

refers to goods provided by nature or the government

Figure 10-15: Which graph illustrates a pollution permit program?

the right graph

Over the past 100 years, as the U.S. economy's income has grown,

both tax rates and tax revenues have increased

An example of an oppurtunity cost that is also an implicit cost is

the value of the business owner's time

For a firm in a perfectly competitive market, the price of the good is always

equal to marginal revenue

Using a toll to reduce traffic when congestion is greatest is an example of a

corrective tax

both public goods and common resources are

rival in consumption

The government's health plan for the elderly is called


A lighthouse is typically considered to be a public good because

all passing ships are able to enjoy the benefits of the lighthouse without paying.

The marginal product of an input in the production process is the increase in

quantity of output obtained from an additional unit of that input

Table 13-2: What is the marginal product of the first worker?

200 units

Which of the following represents the firm's long-run condition for exiting a market?

exit if P<ATC

Table 13-1: What is the total output when 1 worker is hired?


If a tax takes a smaller fraction of income as income rises, it is


At the profit-maximizing level of output

marignal revenue equals marginal cost

Which of the following is most likely to face extinction?

tigers living in the wild

Four roomates share an off-campu house and equally share the cost of rent. Everyone says that she values a clean house, yet the house is usually dirty. To an economist, a clean house in this case represents

a common resource problem

when a good is excludable

people can be prevented from using the good

Externalities can be corrected by each of the following except

normal market adjustments

Figure 10-1: This graph represents the tobacco industry. the industry creates

negative externalities

The largest source of income for the federal government is

individual income taxes

A budget deficit

occurs when government receipts are less than spending

Because public goods are

not excludable, people have an incentive to be free riders.

In choosing the form of a tax, there is often a tradeoff between

efficiency and fairness

If darren sells 300 glasses of iced tea at $0.50 each his total revenues are


The U.S. tax burden is

lower that most European countries

Most people agree that the tax system

should be both efficient and equitable

A key characteristic of a competitive market is that

producers sell nearly identical products

If the government were to impose a fine of $1,000 for each unit of air-pollution released by a steel mill, the policy would be considered

a corrective tax

The U.S. income tax

discourages saving

The shift from S to S' is called

increase in supply

Most studies indicate that tobacco and marijuana tend to be


at a price of $20, which statement is not correct

equilibrium price is equal to equilibrium quantity

another term for equilibrium price is

market clearing price

the word economy comes from the Greek word oikonomos, meaning

one who manages a household

the property of society getting the most it can from its scarce resources is called


the combination of president Obama's strategies and the federal reserves reaction tot he deep economic downturn int he US in 2008 and 2009

intended to reduce unemployment and may lead to excessive inflation over time

which of the following is an important cause of inflation in an economy

growth in the quantity of money in the economy

a production possibilities frontier can shift outward if

there is a technological improvement

what is the opportunity cost to Batterland of increasing the production of pancakes from 150 to 300

75 waffles

at which point is this economy producing its maximum possible quantity of pans?

on the pan axis, N

this economy has the ability to produce at which points?

any inside or on the line, KMN

movement from point M to K could be caused by


which arrow represents the flow of good and services?

the flow from markets of goods and services to households, arrow B

elasticity is the measure of

how much buyers and sellers respond to changes in market conditions

the price elasticity of demand measures how much

quantity demanded responds to a change in price

assume that the UK and the USA each has 80 labor hours available. If each country divides its time equally between the production of coolers and radios, then total production is

60 coolers and 18 radios

marquis and serena would like to wear sweaters and eat tasty food. The gains from trade between them are most obvious in which of the following cases?

marquis's skills are such that he can produce only sweaters, and serena's skills are such that she can produce only tasty food

assume Andia and Zardia each has 360 min available. If each person divides his time equally between the production of wheat and beef, then total production is

21 bushels of wheat and 33 lbs of beef

which of the following combinations of wheat and beef could andia produce in one 8 hour day

9 bushels of wheat and 25 pounds of beef

which of the following combinations of wheat and beef could zardia not produce in one 10 hour day

25 bushels of wheat and 25 lbs of beef

uppose him and tom can both produce two goods: baseball bats and hockey sticks. Which of the following is not possible?

jim has a comparative advantage in the production of baseball bats and in the production of hockey sticks

when each person specializes in producing the good in which he or she has a comparative advantage, total production in the economy


trade can make everybody better off because it

allows people to specialize according to comparative advantage

for an economist, the idea of making assumptions is regarded generally as a

good idea, since doing so helps to simplify the compile world and make it easier to understand

a model that shows how dollars flow through markets among households and firms is called the

circular flow diagram

the adage "there is no such thing as a free lunch" means,

people face tradeoffs

in economics, the cost of something is

what you give up to get it

making rational decisions at the margin means that people

compare the marginal costs and marginal benefits of each decision

people are willing to pay more for a diamond than for a bottle of water because

the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water

for a competitive market

if a seller charges more than the going price, buyers will go elsewhere to make their purchases

if the law of demand applies to this good, then Q1 could be


at a price of FIG 4-14

$7, there is a surplus of 4 units

a likely example of substitute goods for most people would be

pencils and pens

which of the following is not held constant in a demand schedule


when drawing a demand curve

price is measured along the vertical axis, and quantity demanded is measured along the horizontal axis

Table 4-1 if the market consists of Michelle and Laura only and the price falls by $1, the quantity demanded in the market increase by

3 units

the short run tradeoff between inflation and unemployment implies that, in the short run,

a decrease in the growth rate of the quantity of money will be accompanied by an increase in the unemployment rate

when the price of a good or service changes

there is a movement along a given demand curve

a minimum wage that is set below a market's equilibrium wage will result in an excess

none of the above is correct

a binding floor is shown in

panel B only

Fig 8-8 after the tax goes into effect, producer surplus is the area


Fig 8-8 the government collects tax revenue that is the area


Fig 9-1 when trade in wool is allowed, producer surplus in Scotland

increases by the area B+D+G

Fig 9-1 in the absence of trade, total surplus in SCotland is represented by the area


Fig 6-4 which of the following statements is not correct

when the price is $6, there is a surplus of 8 units

when a country allows trade and becomes an importer of a good

the gains of the winners exceed the losses of the losers

which of the following is not an example of a public policy

equilibrium laws

if a country allows trade and for a certain good the domestic price without trade is lower than the world price

the country will be an exporter of the good

at present, the maximum legal price for a human kidney is $0. The price of $0 maximizes

neither consumer nor producer surplus

Fig 7-16 total surplus can be measured as the area


Table 7-1 if the price of the product is $15, then who would be willing to purchase the product?

Lori, Audrey and Zach

if a price ceiling is not binding then

the equilibrium price is below the price ceiling

Fig 7-2 when the price rises from P1 to P2, consumer surplus

decreases by an amount equal to B+C

necessities such as food and clothing tend to have

low price elasticities of demand and low income elasticities of demand

when a country allows trade and becomes an exporter of a good, which of the following is not a consequence

the losses of domestic consumers of the good exceed the gains of domestic producers of the good

Fig 8-9 the imposition of the tax causes the quantity sold to

decrease by 20 units

the decrease in total surplus that results from a market distortion, such as a tax, is called a

deadweight loss

the invisible hand refers to

the marketplace guiding the self interests of market participants into promoting general economic well being

assume, for the US, that the domestic price of wheat without international trade is higher tan the world price of wheat. This suggests that, in the production of wheat,

other countries have a comparative advantage over the US and the US will import wheat

Fig 6-2 the price ceiling causes a

shortage of 85 units

when a tax is placed on the sellers of a product, buyers pay

more and sellers receive less than they did before the tax

when a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic

buyers of the good will bear most of the burden of the tax

if the cross price elasticity of two goods is negative, then the two goods are


price controls

can generate inequities of their own

a decrease in supply will cause the largest increase in price when

both supply and demand are inelastic

when a nation first begins to trade with other countries and the nation becomes an exporter of soybeans,

all of the above

the study of how the allocation of resources affects economic well being is called

welfare economics

which of the following is not a commonly advanced argument for trade restrictions

the efficiency argument

total surplus with a tax is equal to

consumer surplus plus producer surplus plus tax revenue

Fig 5-14 along which of these segments of the supply curve is supply least elastic


a tax on an imported good is called a


fig 7-19 if the price were P3, consumer surplus would be represented by the area


the goal of rent control is to

help the poor by making housing more affordable

cross price elasticity of demand measures how

the quantity demanded of one good changes in response to a change in the price of another good

suppose raymond and victoria attend a charity benefit and participate in a silent auction. Each has in mind a maximum amount that he or she will bid for an oil painting by a locally famous artist. This maximum is called

willingness to pay

table 5-6 using the midpoint method, the income elasticity of demand for good Y is

-2.33 and good Y is an inferior good

the laffer curve relates

the tax rate revenue raised y the tax

ronald reagan believed that reducing income tax rates would

raise economic well being and perhaps even tax revenue

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