Econ 101 Exam #2 Cheat Sheet
Econ 101 Exam #2 Cheat Sheet 101
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This 3 page Study Guide was uploaded by Drew Hoefel on Wednesday February 18, 2015. The Study Guide belongs to 101 at Washington State University taught by Dr. Love in Fall. Since its upload, it has received 1715 views. For similar materials see Microeconomics in Economcs at Washington State University.
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Date Created: 02/18/15
She can sell six per week at a price of 2000 If she charges 2100 she will sell only ve per week The marginal bene t of selling the sixth icemaking machine is 1500 if you studied for a total of 3 hours you would expect your combined scores to be 155 points the total cost of mowing ve lawns is approximately 68 if the cost of producing lawn mowing increased the mar inal cost curve in the gure would shift to the left and the total net gain would decrease Which of the following statements about i is not true Opportunity cost is synonymous with the explicit costs tells her that she made a pro t of 43002 running a pottery studio in Orlando Sarah s husband an economist claims Sarah lost 43002 running her pottery studio This means her husband is claiming that she incurred 86004 in implicit costs occur when each individual unit costs the same to produce as the previous one if the colle e re uires all tutors to register with the dean and charges each tutor 10 to register Sigmund s total net gain from tutoring will be 40 offers the following prices one slice for 2 two slices for 350 three slices for 450 four slices for 5 The marginal cost of the third slice to Hui is 1 differs from economic pro t because economic costs are generally higher than accounting costs because economic costs include all opportunity costs while accounting costs include explicit costs only The implicit cost of capital for Wang s Wicker Furniture Store is 5000 is thinking of mowing lawns over the summer His friend Jason mows lawns and he says the marginal cost of mowing the fourth lawn in a day is 40 Feng thinks about it and realizes that the total cost of mowing four lawns is not possible to determine from the information provided Sed is decidin how many football games he wants to attend this year If the games are free how many games should he attend 8 i at a major state university Which of the following is not an example of an explicit cost of her attending college The salary that she could have earned working fulltime you have to decide whether to accept the offer of a job that will pay you 45000 per year or spend an additional two years earning an MBA If you decide to pursue the graduate degree your annual expenses for tuition books board and lodging will be 32000 You have been offered a scholarship for 10000 per year but in order to pay the remaining 22000 per year you would have to cash in savings bonds that your grandparents have iven ou that have been earning 500 in interest per year The annual opportunity cost of earning your MBA is 67500 has explicit costs of 2 million per year and implicit costs of 44000 per year If the store earned an economic pro t of 50000 last year this means that the store s accounting pro t equaled 94000 an individual s consumption bundle and utility is called a utility function u carmen loves macaroni and cheese for thanksgiving The marginal utility she derives from the second serving she eats is 15 buying wine and cheese The marginal utility of the last bottle of wine he bought is 60 and the marginal utility of the last block of cheese he bought is 30 The price of wine is 3 and the price of cheese is 2 Benny should buy more wine and less cheese spends all her income on halvah X and pomegranates Y and is urchasin the o timal consumption bundle If MuxMUy 3 and the price of halvah is 12 then the price of pomegranates is 4 H for months now agnes has had 20 per month to spend on tea and scones The price of each cup of tea and each scone has been 1 Which of the charts in the gure shows what will happen to her budget line if the price of a cup of tea falls to 050 Chart D move right together at 20 scones Which of the charts in the gure shows what will happen to her budget line if her income decreases to 10 Chart C move left not touching Which of the charts in the ure shows what will happen to her budget line if the price of a scone rises to 2 Chart B move left together at 20 tea who is consuming the optimal quantity of wallets and eyeglasses and spending her entire budget The price of wallets falls ane will increase her consumption of wallets if wallets are a normal good as the income effect reinforces the substitution effect If total utility is at a maximum then marginal utility is zero If a consumer purchases a combination of such that MUcoffeePcoffee 20 and MUfootball ticketsPfootball tickets 10 to maximize utility the consumer should buy more coffee and fewer football tickets The will always slope downward because the substitution effect and the income effect reinforce each other and the substitution effect always displays an inverse relation between price and quantity demanded If the and the consumer decides to buy more coffee cups solely because they are less expensive this describes the substitution effect that can be spent on books B and pencils P The price of a book is 5 and the rice of a encil is 050 The equation for Adam s daily budget constraint can be written as 58 050P lt or to 20 bins and fewer door hooks the marginal utility of plastic bins will fall and the marginal utility of door hooks will rise adds a worker the total cost of production increase by 24000 Adding the worker increases total cherry output by 600 pounds Therefore the mar inal cost of the last pound of cherries produced is 40 The marginal product of the fth worker is 4 In the gure the total cost of producing ve pairs of boots is approximately 408 The is 20 at the current out ut level of 100 units per week If xed cost is 1200 per week average variable cost is 8 If a rm is producing at point C on the ATC2 but anticipates increasing output to 225000 units in the long run the rm will build a bigger plant and have diseconomies of scale occur when an additional variable factor adds less to total output than the previous unit Labor added L1 and up to L2 is subject to diminishing marginal returns Assume that the xed input capital is 10 acres of land and a tractor which have a combined cost of 150 per day The cost of labor is 100 per worker per day The xed cost of producing 25 bushels of soybeans is 150 the variable cost of producing 25 bushels of soybeans is 100 and the total cost of producing 25 bushels of soybeans is 250 If then average total cost is at it s minimum The gure shows a production function that moves from TP1 to TP2 Based upon this change what has happened to the marginal product of labor curve It has shifted upward and become steeper are a reason the marginal cost curve is upward sloping of producing 9 scones is 5 while the average total cost of producing 10 scones is 520 What is the marginal cost of the 10th scone 7 Using the information in the table when the output increases from one to two marginal cost equals 8 marginal cost curve is above the average total cost curve This means Becca Furniture39s average total cost curve must be rising Which of the following is correctly de ned ATC AVC AFC When hires two workers the total product is 50 dresses When she hires three workers total product is 60 and when she hires four workers total product is 65 The slope of the marginal product curve when two to four workers are hired is downward sloping The market for corn is perfectly competitive and an individual corn farmer faces the cost curves shown in the gure If the price of a bushel of corn in the market is 14 then the farmer will produce 4 bushels of corn and earn an economic pro t equal to 0 the assumption of easy entry and exit implies that in the long run all rms in the industry will earn zero economic pro ts The for a perfectly competitive rm is the marginal cost curve above the shutdown price At the given price the most pro table level of output occurs at quantity S Lilly is the pricetaking owner of an apple orchard its variable costs are given in the table Her orchard has xed costs of 30 If the price of a bushel of apples is 35 During the summer Alex runs a lawnmowing service and lawnmowing is a perfectly competitive industry made up of 100 identical rms The table shows his variable costs for lawnmowing and the number of lawns mowed Alex s xed cost is 1000 for the mower His variable costs include fuel his time and mower arts If the rice for mowin a lawn is 60 how much is Alex s pro t per unit at the pro tmaximizing output Assume the rm produces the pro tmaximizing output and that it earns economic pro ts At the pro tmaximizing output all of the following are correct except of individual rms MC curves at and above the shutdown price is the The announcement that mad cow disease has been discovered in the United States reduces the demand for beef sharply and the price falls to 200 er pound If the longrun supply curve is horizontal then when the long run equilibrium is reestablished the price will be Lenoia runs a natural monopoly producing electricity for a small mountain village The table shows Lenoia s demand and total cost of roducing electricity The pro tmaximizin uantit of electricity for her to produce is this rm s pro t per unit is The new orleans saints have a monopoly on saints logo baseball hats The saints sell at most one hat to each customer and the table shows each customer s willin ness to a The mar inal cost of producing a hat is 18 How much is deadweight loss at the Saint s pro t maximizing output The rm in this gure will produce units of output per week Lenoia runs a natural monopoly producing electricity for a small mountain village The accom aniin table shows Lenoia39s demand and total cost of producing electricity The maximum pro t Lenoia can make is Lenoia runs a natural monopoly rm producing electricity for a small mountain village The table shows Lenoia s demand and total cost of roducin electricit To maximize ro ts Lenoia should char e a of Which of the following is consumer surplus equal to and a deadweight loss equal to monopoly Which of the following is is most likely to occur when rms has the independent choice of confessing to a crime or not confessing to a crime they were alleged to jointly commit They cannot communicate with each other If neither confesses they spend 4 years in jail if both confess they spend 6 years in jail and if one confesses while the other does not the confessor ets off with 2 years in jail while the other ets 10 ears in all Accordin to ame theor the likel strategy by the prisoners is Which of the following scenarios H Each has two strategies available to it a high price and a low price The dominant strategy for Purple Rain is to collusion between rms usually leads to higher pro ts than noncooperative behavior However formal overt collusion doesn t usually occur in the United States because silently agree to charge the same price as the largest rm The softdrink industry is dominated by CocaCola and Pepsi and each rm spends a lot of money on advertising Suppose each rm is considering a costly television commercial during halftime of the Super Bowl The table show the payoff matrix of pro ts that each rm would receive from their advertising decision given the advertising decision of their rival Pro ts in each cell of the payoff matrix are given as coke e si If both rms ex ect to la this game ever ear for the foreseeable future what outcome might result from tacit collusion For simplicity assume that the cost of producing crude oil is zero the marginal cost of crude oil equals zero There are only two producers of crude oil and they cannot cooperate But they play this game ever week each player has a titfor tat strategy and the other la er knows this When both rms use a titfortat strategy rm 1 will produce ilbarrels and rm 2 will produce I barrels i The market for gadgets is dominated by two producers Margaret and Ray Each rm can produce gadgets at a marginal cost of 0 The table shows the market demand schedule for gadgets If these two producers formed a cartel and acted to maximize total industry pro ts each rm s output would be and each rm s pro t would be Suppose that these two producers have formed a cartel and are maximizing total industry pro ts If Margaret decides to cheat on the agreement and sell 100 more gadgets Margaret39s pro t will be and Rya39s pro t will be If these two producers formed a cartel and acted to maximize total industry pro ts total industry pro t would be the optimal combination for maximum combined pro t occurs when are typically dif cult for cartels to maintain because each rm can increase pro ts by The market for gadgets is dominated by two producers Margaret and Ray Each rm can produce gadgets at a marginal cost of 0 The table shows the market demand schedule for gadgets If these two roducers formed a cartel and acted to maximize total industry pro ts total industry output would be and the rice would be often engages in price wars This means that rms often prices until pro ts h Swifty Gas and Speedy Gas are the only two gas stations in a small town Each rm can set either a high price or a low price and customers view these two rms as nearly perfect substitutes The table shows the payoff matrix of daily pro ts that each rm would receive from its pricing decision given the pricing decision of its rival Pro ts in each cell of the payoff matrix are given as Swifty Speedy If each rm sets the rice inde endentl the Nash e uilibrium outcome will be that is characterized by a the gure illustrates a rm in the in the the demand and marginal revenue curves will shift to the Suppose that an innovation reduces a rm s xed costs and reduces cost from ATC and ATC After the innovation reduced the cost the rm s maximum economic pro t is Before the innovation reduced the cost the rm s maximum economic pro t was The rm shown in the gure may engage in advertising because Assume that many rms differentiated products and easy entry and easy exit characterize the restaurant market If the restaurant shown here is typical of others in the community then in the lon run we would expect to observe For the restaurant shown here the pro t per unit is i and is in shortrun e uilibrium Suppose that a xed cost for this rm decreases As a result the the rm s output will and the rm s economic pro t will n is producing a quantity at which then the marginal decision rule tells us that pro t given the scenario what is the pro tmaximizing level of output for this rm in the a monopolistically competitive rm should produce the level of output at which rm s price will short run will engage in advertising in order to d curve for its product primarily because by many rms producing similar but differentiated products in a market with easy entry rm has a downwardslo in deman and exit is called At his current consumption bundle the marginal utility of baseball cards is 20 and the mar inal utilit of cand is 10 If the rice of baseball cards is 10 and the rice of candy is 2 The gure shows a production function that moves from The relationship between an available to Joe if he highspeed Internet service would marginal utility than on a TP1 to TP2 Which of the following choices is a likely cause of this shift In the gure the total cost of producing 10 pairs of boots is approximately and utility is called a re ects the of his income When marginal utility is have a marginal utility than in New York City while quiet evenings in New York City would carry a deserted island occur when then the rm is operating is and pro t is If the marginal external cost of raising a pig for pork is 200 then the socially optimal quantity of pigs to raise is and the socially optimal price is The marginal cost of producing the pro tmaximizing quantity is cost Assume there are no xed costs and AC MC At the ro tmaximizini uantiti of Eroduction for the monopolist total revenue is total cost
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