A worldwide hops (a flowers used in brewing) shortage made stouts, ales and other specialty microbrews more pricy in 2008. Gayle Goshie, a hops farmer, blames overproduction for hops' previously cheap place on the agricultural market.
The glut pushed many hop farmers out business, which gradually helped hop prices recover. Suppose farming hops is a perfectly competitive market. Why would some hop farmers go out of business? A) because the price of hops was below the minimum of average fixed cost
B) because the price of hops was lower than the minimum of average variable cost
C) because the price of hops was higher than the minimum of average variable cost
D) because the price of hops was lower than the minimum of average total cost
Ques. 2When individuals make decisions about how much schooling to obtain, they
A) do not take account of the personal benefits that it creates.
B) do not take account of the external benefits that it creates.
C) overvalue the personal benefits that it creates.
D) overvalue the external benefits that it creates.
Ques. 3The number of taxicabs in Motorville and the taxicab fares are regulated. The fare currently charged is 5 a ride.
Motorville taxicab drivers want to obtain government's permission to raise the fare to increase their revenues and ask you to be their economic adviser. After studying the market, you come up with the following demand schedule for taxicab rides: a) Calculate the price elasticity of demand for taxicab rides as the fare rises from 5 to 6. (Use the midpoint method in your calculations.) Is the demand price elastic or inelastic for this fare rise? b) What happens to the taxicab drivers' total revenue if the fare rises from 5 to 6? How can you use your answers in part a to answer this question? Should the drivers try to obtain permission to raise the fare? c) Calculate the price elasticity of demand for taxicab rides as the fare falls from 5 to 4. (Use the midpoint method in your calculations.) Is the demand price elastic or inelastic for this fare decrease? d) What happens to the taxicab drivers' total revenue if the fare falls from 5 to 4? How can you use your answers in part c to answer this question? Should the drivers try to obtain permission to lower the fare? e) What fare will maximize the taxicab drivers' total revenue? Explain.
Ques. 4If the price of a good increases, a consumer will substitute away from the relatively more expensive good, which will increase the marginal utility for that good and bring the consumer back to equilibrium.
Indicate whether the statement is true or false
Ques. 5If the monopoly illustrated in the figure above could engage in perfect price discrimination, then when it maximizes its profit the total revenue collected by the firm would be
A) 110.
B) 120.
C) 210.
D) 310.
Ques. 6The market for wheat can be described at perfectly competitive while the market for pizza is better described as monopolistically competitive.
Which of the following is a NOT a similarity between perfectly competitive and monopolistically competitive firms? A) Both monopolistically competitive and perfectly competitive firms produce at their efficient scale.
B) Both monopolistically competitive and perfectly competitive firms are free to enter and exit the market.
C) Both monopolistically competitive and perfectly competitive firms have a small market share.
D) There are a large number of firms in both monopolistically competitive and perfectly competitive markets.
Ques. 7If the marginal social benefit of a good equals the marginal private benefit of the good, then the marginal external benefit of the good
A) is zero.
B) equals the marginal social benefit.
C) equals the marginal social cost.
D) equals the marginal private cost.
Ques. 8If the monopoly illustrated in the figure above could engage in perfect price discrimination, then it would sell
A) 30 tickets.
B) 50 tickets.
C) 60 tickets.
D) 100 tickets.
Ques. 9The average total cost curves for plants A, B, C and D are shown in the above figure. Which plant is best to use to produce 60 units per day?
A) plant A
B) plant B
C) plant C
D) plant D
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