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Homework answers / question archive / University of Waterloo MICROECONO AFM101 Chapter 5 1)The graph shows the demand curve for smartphones
University of Waterloo
MICROECONO AFM101
Chapter 5
1)The graph shows the demand curve for smartphones.
Draw the points on the curve that show the maximum price at which people are willing to buy:
1) the 1 millionth smartphone. Label it 1.
2) the 2 millionth smartphone. Label it 2. Choose the correct statement.
A. The value of one more unit of a good or service is equal to the price of one more unit of a good or service.
B. The value of one more unit of a good or service is its marginal benefit, and we measure marginal benefit by the maximum price that is willingly paid for another unit of the good or service.
C. The price of one more unit of a good or service is its marginal benefit.
D. The value of one more unit of a good or service is its marginal benefit, and we measure marginal benefit by the area under the demand curve.
2) Sally and Eric are the only people in an economy.
Sally buys 3 bottles of water when the price is $2 a bottle, 4 bottles of water when the price is $1, and 5 bottles when the price is $0.50.
Eric buys 10 bottles of water when the price is $0.50 and 5 bottles of water when the price is $1, and no battles when the price is $2 a bottle.
Complete the following sentence.
In the market for water, the quantity demanded .
A. is 4 bottles at a price of $1 a bottle
B. is 8 bottles at a price of $2 a bottle
C. increases as the price falls
D. increases as the price rises
3) The graph shows the market supply curve of milkshakes.
Draw the point on the curve that show the minimum price at which producers are willing to sell:
1) the 2 millionth milkshake a year. Label it 1.
2) the 3 millionth milkshake a year. Label it 2. Choose the correct statement.
A. The cost of producing one more unit of a good or service is its marginal cost, which is the minimum price that producers must receive to induce them to offer to sell another unit of the good or service.
B. The cost of producing one more unit of a good or service is the producer's marginal cost, and we measure marginal cost as the area above the supply curve and below the market price.
C. The cost of producing one more unit of a good or service is equal to the market price.
D. The price of one more unit of a good or service is its marginal cost.
4) What is the moral principle at the center of all major religions? The moral principle at the center of all major religions is .
A. the fairness principle
B. the symmetrically fair principle
C. the symmetry principle
D. the common property syndrome
5) Which method is used to allocate strategic resources in the military?
A. market price
B. majority rule
C. contest
D. command
6) Choose the correct statement.
A. When the efficient quantity is produced in a competitive market, consumer surplus is maximized.
B. Competitive equilibrium occurs when demand equals supply.
C. The competitive market pushes the quantity produced to its efficient level
D. When the efficient quantity is produced in a competitive market, producer surplus is maximized.
7) The table gives the demand and supply schedules for movie downloads.
In an efficient market, what is the quantity of movie downloads and the price of a movie download? The efficient quantity of movie downloads is ________________ a day.
The price of a movie download in an efficient market is
8) Choose the correct statement.
A. The big tradeoff is the tradeoff between income tax and redistribution.
B. The greater the amount of income redistribution through income taxes, the greater is the inefficiency.
C. Through income tax and redistribution, a dollar taken from a rich person ends up as a dollar in the hands of a poorer person.
D. Taxing people's income from employment makes them work more so that their take-home income will increase.
9) What is utilitarianism?
Utilitarianism is a principle whose goal is .
A. equal pay for equal work
B. equal happiness for all workers
C. the greatest happiness for the greatest number
D. the greatest pay for the greatest number
10) The graph shows the market for digital cameras. Suppose 4 million digital cameras a year are being produced.
Draw a shape that shows the deadweight loss on digital cameras.
Deadweight loss .
A. occurs only when production is greater than the efficient quantity
B. occurs in markets that produce at the competitive equilibrium and in markets that produce more than the quantity at the competitive equilibrium
C. is the decrease in total surplus that results from an inefficient level of production
D. is the decrease in producer surplus that results from a decrease in price when demand decreases
11) What is the market supply curve?
The market supply curve is the sum of the individual supply curves. It is formed by adding the .
A. horizontal; quantities supplied by all the producers at each price
B. vertical; marginal cost of all producers at each quantity
C. horizontal; marginal cost of all producers at each quantity
D. vertical; quantities supplied by all the producers at each pric
12) The graph shows the demand curve for coats. Suppose the price of a coat is $200.
Draw an arrow that shows the consumer surplus on the 1 millionth coat bought.
Consumer surplus is .
A. greater on the 100th unit of a good that we buy than on the 1st unit of a good that we buy
summed over the quantity bought
C. equal to the amount that we pay for a good or service
D. the value that we receive by purchasing a good or service
13) Which method is used to allocate hotel rooms in Ottawa for Canada's 150th birthday celebrations?
A. command
B. majority rule
C. market price
D. contest
14) Which method is used to allocate the Academy Awards?
A. command
B. contest
C. personal characteristics
D. lottery
15) What is an external benefit? An external benefit is a benefit that .
A. is greatest at the equilibrium point
B. always equals external cost
C. experiences increasing marginal returns
D. affects someone other than the buyer of a good
16) At the competitive equilibrium, what is the relationship between marginal social benefit and marginal social cost? At the competitive equilibrium, .
A. marginal social benefit exceeds marginal social cost
B. marginal social cost equals marginal social benefit
C. marginal social cost exceeds marginal social benefit
D. marginal social benefit can be either equal to or greater than marginal social cost
17) Choose the correct statement about value.
A. Value is what we get, and the price is what we pay.
B. Value is equal to the marginal benefit of a good minus the price paid for it, summed over the quantity bought.
C. The value of one more unit of a good or service is its total benefit.
D. When consumer surplus increases, value increases.
18) Choose the correct statement about monopoly.
A. A monopoly is the provider of a single good or service.
B. A market that is a monopoly is efficient.
C. A monopoly sets its price to achieve its self-interest.
D. A monopoly produces more than the efficient quantity and charges too high a price.
19) The graph shows the market for smartphones.
Draw the consumer surplus on smartphones. Label it CS. Draw the producer surplus on smartphones. Label it PS.
When the efficient quantity is produced .
A. buyers and sellers acting in their self-interest do not promote the social interest
B. consumer surplus is maximized
C. producer surplus is maximized
D. total surplus is maximized
20) Everything else remaining the same, which of the following results in an efficient market?
A. price and quantity regulationsprice and quantity regulations
C. high transactions costs
D. taxes and subsidies
21) The graph shows the supply curve of coats.
Draw an arrow that shows the producer surplus on the 2 millionth coat sold.
Producer surplus is .
A. equal to the amount paid for a good or service
B. the value that we receive by purchasing a good or service
C. calculated as the price received for a good minus its minimum supply-price, summed over the quantity sold
D. more on the 100th unit of a good that is produced than on the 1st unit of a good that is produced
Chapter 5B
1) Was Katie Holmes' Marathon Entrance Unfair?
Runners in the recent New York Marathon have been asking why Katie Holmes was admitted to the race when 60,000 hopefuls were denied Holmes was admitted to the race as a VIP. She was not
given a spot through a lottery system, or for running in one of the 26 sanctioned New York Marathon charities. or even for having a competitive running time. The minimum qualifying run time for a
woman runner is 3 hours and 23 minutes. Katie completed the marathon in 5 hours, 29 minutes and 58 seconds.
Is adding Katie Holmes to the New York Marathon fair?
MSNBC,
November 9, 2007
Admitting Katie Holmes to the New York Marathon is by the fair results view of fairness and by the fair rules view of fairness.
B. unfair; unfair
B. unfair; fair
C. fair; unfair
D. fair; fair
2) What is the big tradeoff?
The big tradeoff is the tradeoff between .
B. efficiency and fairness
B. value and price
C. marginal benefit and marginal cost
D. happiness and wealth
3) The graph shows the demand curve for blankets and the market price of a blanket. Draw a point that shows the value of the 20th blanket.
The value of the 20th blanket is the .
A. cost of producing the 20th blanket
B. maximum price that someone is willing to pay for the 20th blanket
C. price of the 20th blanket
D. consumer surplus received from purchasing the 20th blanket
4) Choose the statement that is correct.
A. A good with an external benefit is a good from which everyone benefits and no one can be excluded.
B. When an electric utility does not consider the cost of pollution that arises from electricity production, the result is overproduction.
C. An electric utility creates an external benefit by burning coal.
D. An external benefit results in overproduction.
5) What type of allocation system allocates resources by the order of someone in authority?
A. A paternalistic system
B. A command system
C. A hierarchical system
D. A military system
5) Which method is used to allocate resources in countries with political systems similar to North Korea?
A. majority rule
B. command
C. market price
D. Contest
Anne, Debbie, and Mary are the only producers of fudge in an isolated village. The table shows their supply of fudge each week.
When the price of a bag of fudge is
$1.00, what is the quantity of fudge supplied by the market in a week?When the price of a bag of fudge is $1.00, he quantity supplied by the market is
bags of fudge a week.
6) Complete the following sentences.
A is owned by no one but is available to be used by everyone. This source of market failure leads to .
A. public good; overproduction
B. common resource; high transactions costs in a market
C. monopoly; lack of competitors
D. common resource; overuse
7)What are the characteristics of an allocation of scarce resources by market price?
When a market price allocates a scarce resource, the people who get the resource.
B. are willing and able to pay that price
B. uphold the law
C. line up first
D. pick the winning number
8) Which method is used to allocate best dash selling booksbest-selling books on the New York Times list?
B. market price
B. command
C. majority rule
D. contest
9) Complete the following sentences.
Taxes lead to and subsidies lead to .
A. overproduction; underproduction
B. underproduction; underproduction
C. underproduction; overproduction
D. overproduction; overproduction
10) Price regulations that put a cap on the rent a landlord is permitted to charge lead to . A monopoly leads to .
A. underproduction; overproduction
B. underproduction; underproduction
C. overproduction; overproduction
D. overproduction; underproduction
11) Which method is used to allocate a free on dash street parking spota free on-street parking spot?
B. first-come, first-served
B. contest
C. command
D personal characteristics
12) The graph shows the supply curve of sleeping bags and the market price of a sleeping bag. Draw a point that shows the marginal cost of the 30th sleeping bag.
The marginal cost of the 30th sleeping bag is .
A. the price received when the 30th sleeping bag is sold
B. the value of the 30th sleeping bag
C. the minimum price that producers must receive to induce them to sell the 30th sleeping bag
D. the producer surplus earned on the 30th sleeping bag
13) The graph shows the market for digital cameras. Suppose 1 million digital cameras a year are being produced. Draw the deadweight loss on digital cameras.
Suppose the quantity of digital cameras produced is 1 million and the price is the equilibrium price. Calculate the consumer surplus, producer surplus, and deadweight loss.
The consumer surplus is
The producer surplus is
Robert Nozick suggests that fairness obeys two rules. What are these rules?
14) Robert Nozick suggests that fairness obeys two rules, which are .
A. the state must enforce laws that establish and protect private property, and people in similar situations must be treated similarly
B equality occurs only when we achieve the greatest happiness for the greatest number, and private property may be transferred from one person to another only by voluntary exchange
C. people in similar situations must be treated similarly, and equality occurs only when we achieve the greatest happiness for the greatest number
D. the state must enforce laws that establish and protect private property, and private property may be transferred from one person to another only by voluntary exchange
15) The graph shows the competitive market for fitness trackers.
Draw a point that shows the efficient quantity of fitness trackers and the marginal social benefit and marginal social cost at the efficient quantity. Label it Efficient.
Choose the statement that is correct.
A. The market for fitness trackers is not in the social interest because buyers and sellers act only in their self-interest.
B. The competitive market pushes the quantity of fitness trackers produced beyond its efficient level.
C. If production in the market for fitness trackers is less than the equilibrium quantity, the marginal fitness tracker costs more to produce than the value that consumers place on it.
efficiency.
16) The graph shows the demand curve for fitness trackers. Draw a shape that shows consumer surplus on fitness trackers.
Consumer surplus .
A. is the value of a good
B. increases when the market price rises
C. equals the amount that we spend on a good
D. is calculated as the value of a good minus the price paid for it, summed over the quantity bought
17) The graph shows the market for haircuts.
Draw an arrow at a quantity at which marginal social benefit exceeds marginal social cost, and which shows the size of the difference between them. Label it MSB >
MSC.
Draw an arrow at a quantity at which marginal social cost exceeds marginal social benefit, and which shows the size of the difference between them. Label it MSC >
MSB.
When a shortage occurs in the market, .
A. the price falls to return to the competitive equilibrium
B. marginal social benefit exceeds marginal social cost
C. marginal social benefit is less than marginal social cost
D. consumer surplus is maximized
18) The graph shows the supply curve of bicycles and the market price of a bicycle. Draw a shape that shows the producer surplus on bicycles.
Producer surplus is .
A. calculated as the value of a good minus its marginal cost, summed over the quantity sold
B. the marginal benefit received by a producer on every unit that he sells
C. equal to the value of the good
over the quantity sold
19) All ideas about fairness can be divided into two broad groups:
It's not fair if , and it's not fair if .
B. the result isn't fair; the rules aren't fair
B. the poor are not made as well off as possible; private property is transferred from one person to another by methods other than voluntary exchange
C. some people are educated and others are not; free trade takes away jobs from one country and gives them to another country
D. some people live in democracies and others live under communism; some people live in opulence and others live in squalor
20) The figure shows the market for haircuts. What is the maximum total surplus?
The maximum total surplus is
This maximum total surplus occurs when the quantity produced is
haircuts a day.
21) Anne, Debbie, and Mary are the only popcorn consumers in an isolated village. The table shows their demand schedules for popcorn each week.
When the price of a bag of popcorn is $0.75,
what is the quantity of bags of popcorn demanded by the market in a week?
2) Was Katie Holmes' Marathon Entrance Unfair?
Runners in the recent New York Marathon have been asking why Katie Holmes was admitted to the race when 60,000 hopefuls were denied. Holmes was admitted to the race as a VIP. She was not given a spot through a lottery system, or for running in one of the 26 sanctioned New York Marathon charities or even for having a competitive running time. The minimum qualifying run time for a woman runner is 3 hours and 23 minutes. Katie completed the marathon in 5 hours, 29 minutes and 58 seconds.
Which allocation method granted Katie Holmes entrance to the marathon?
MSNBC,
November 9, 2007
22) Entrance to the marathon was granted to Katie Holmes through the allocation method.
A. first-come, first-served
B. majority rule
C. lottery
D. personal characteristics
23) Choose the correct statement.
A. At the competitive equilibrium, buyers and sellers act in their self-interest but the outcome is not necessarily in the social interest.
B. At the competitive equilibrium, the last unit of the good produced is valued more highly than its marginal social cost.
C. At the competitive equilibrium, total surplus is maximized.
J. A deadweight loss can arise at the competitive equilibrium.
