Week 1 2. A $1.50 tax levied on the buyers of pomegranate juice will shift the demand curve Downward by exactly $1.50 3. Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor, the Quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases 4. Which of the following is the most likely explanation for the imposition of a price ceiling on the market for milk? Buyers of milk, recognizing that he price celling is good for them, have pressured policymakers into imposing the price celling 5. Which of the following is not an example of a public policy? Equilibrium laws 6. if the government wants to reduce the burning of fossil fuels, it should impose a tax on either buyers or sellers of petrol 7. In a competitive market free of government regulation, Price adjusts until quantity demanded equals quantity supplied 8. A tax burden falls more heavily on the side of the market that is less elastic. True 9. Which of the following is correct? Rent control is an example of a price ceiling, and the minimum wage is an example of a price floor 10. Suppose the government imposes a 20-cent tax on the sellers of artificially-sweetened beverages. The tax would shift Supply raising the equilibrium price and lowering the equilibrium quantity in the market for artificially -sweetened beverages 11. A minimum wage that is set below a market's equilibrium wage will Have no impact on employment 12. Long lines and discrimination are examples of rationing methods that may naturally develop in response to a binding price ceiling. True 13. Suppose that the demand for digital cameras is elastic, and the supply of digital cameras is inelastic. A tax of $20 per camera levied on digital cameras will decrease the effective price received by sellers of digital cameras by Between $10 and $20 14. Which of the following is correct? Price controls Often hurt those they are designed to help 15. When a binding price ceiling is imposed on a market to benefit buyers, Some buyers benefit and some buyers are harmed 16. A binding price ceiling (i) causes a surplus. (ii) causes a shortage. (iii) is set at a price above the equilibrium price. (iv) is set at a price below the equilibrium price. (ii) and (iv) only 17. A tax on the buyers of cameras encourages Buyers to demand a smaller quantity at every price 18. If the demand curve is very inelastic and the supply curve is very elastic in a market, then the sellers will bear a greater burden of a tax imposed on the market, even if the tax is imposed on the buyers. 19. If a price celling is not binding, then The equlilbrium price is below the price celling Week 4 1. When comparing short-run average total cost with long-run average total cost at a given level of output, Short-run average total cost is typically above long-run average total cost 2. Short run is a period of time In which a firm uses at least one fixed input 3. If the total variable cost of producing 5 units of output is $10 and the total variable cost of producing 6 units is $15, the marginal cost of producing the sixth unit is $5. True 4. Frank owns a dog-grooming business. Which of the following costs would be implicit costs? (i) dog shampoo (ii) rent on the storefront (iii) wages Frank could earn as a substitute elementary-school teacher (iv) interest that Frank's money was earning before he spent his savings to set up the doggrooming business (iii) and (iv) only 5. David's firm experiences diminishing marginal product for all ranges of inputs. The total cost curve associated with David's firm Gets steeper as output increases 6. Economic profit is greater than or equal to accounting profit. False 7. Analyzing the behavior of the firm enhances our understanding of What decisions lie behind the market supply curve \ 8. The use of specialization to achieve economies of scale is one reason modern societies are as prosperous as they are. True 9. In the long run, a factory is usually considered a fixed input. False 10. If a firm uses labor to produce output, the firm's production function depicts the relationship between The number of workers and the quantity of output 11. Since the 1980s, Wal-Mart stores have appeared in almost every community in America. Wal-Mart buys its goods in large quantities and, therefore, at cheaper prices. Wal-Mart also locates its stores where land prices are low, usually outside of the community business district. Many customers shop at Wal-Mart because of low prices. Local retailers, like the neighborhood drug store, often go out of business because they lose customers. This story demonstrates that There are economies of scale in retail sales 12.Which of the following explains why long-run average cost at first decreases as output increases? Gains from specialization of inputs 13.The marginal product of any input is the Increase in total output obtained from one additional unit of that output 14.The marginal-cost curve intersects the average-total-cost curve at the minimum point of the marginal-cost curve. False 15.Which of the following statements is not true MC=ATC/Q 16.If MC is less than ATC, we know that: ATC must be falling 17.Economists normally assume that the goal of a firm is to earn (i) profits as large as possible, even if it means reducing output. (ii) profits as large as possible, even if it means incurring a higher total cost. (iii) revenues as large as possible, even if it reduces profits. (ii) and (ii) only 18.Which of the following explains why long-run average cost at first decreases as output increases? Gains from specializations of inputs 19.Katherine gives piano lessons for $20 per hour. She also grows flowers, which she arranges and sells at the local farmer's market. One day she spends 5 hours planting $50 worth of seeds in her garden. Once the seeds have grown into flowers, she can sell them for $150 at the farmer's market. Katherine's accounting profits are $100, and her economic profits are $0 20.n the long run a company that produces and sells kayaks incurs total costs of $15,000 when output is 30 kayaks and $20,000 when output is 40 kayaks. The kayak company exhibits constant returns to scale because average total cost is constant as output rises Week 5 1. A Midwestern wheat farmer faces a horizontal demand curve because It is so mall relative to the market as a whole that it has no impact on market price 2. Bus services often offer lower prices for students and pensioners because: They have a higher elasticity for bus services than the adult working population 3. If a firm's MR currently equals MC and product price = $24, AVC = $22 and ATC = $26, then in the long run this firm: Will go out of business 4. A firm operating in a perfectly competitive market is a price taker because: It cannot influence the price 5. The physical production of medicinal drugs is often only a very small fraction of the eventual price consumers pay. Which of the following may explain this? The high price allows the company to recoup their substantial research and development costs 6. Monopoly is a market structure characterised by: Hard entry into the market 7. Perfectly competitive markets are characterised by: A large number of small producers 8. The most effective barrier/s to protect a monopoly from competition is/are: Legal barriers or government ownership 9. At its present rate of output, Barrel O' Biscuits, a perfectly competitive firm, finds that its marginal cost exceeds its marginal revenue and price exceeds average variable cost. To maximize profit, the firm should Reduces output 10.What is true at the profit-maximizing quantity for a non-discriminating monopolist but not true of a perfectly competitive firm? Price is greater than marginal cost 11.If a competitive firm charges more than the market price, then it makes a profit and gains more customers. False 12.A monopolist earning economic profit in the short run determines that, at its present level of output, marginal revenue is $23 and marginal cost is $30. Which of the following should the firm do to increase profit? Raise price or lower output 13.A firm in a perfectly competitive market faces: A perfect elastic demand curve 14.A perfectly competitive firm's short-run supply curve is the: Marginal cost curve above the average variable cost cruve 15.The only one bakery in a small regional town would face: A downward-sloping demand curve 16.Which real-world market most closely approximates perfect competition? The stock market 17.Assume that the market equilibrium is 100 units at the price of $70. What is the price each firm can charge if each produces 10 units of output? $70 18.Predatory pricing can occur in a monopoly market because: The firm wishes to discourage potential entrants 19.Which barrier to entry results in the creation of a natural monopoly? Economies of scale 20.Compared to a perfectly competitive firm with the same cost structure, a monopoly firm will charge a