微观经济学练习题与答案英文版

英文微观经济学试题及答案一、选择题（每题2分，共20分）1. Which of the following is not a characteristic of a perfectly competitive market?A. Many buyers and sellersB. Homogeneous productsC. Free entry and exitD. Monopoly powerAnswer: D2. The law of diminishing returns states that:A. The total product of labor increases as more labor is addedB. The marginal product of labor eventually decreases as more labor is addedC. The average product of labor is always higher than the marginal productD. The marginal product of labor is always higher than the average productAnswer: B3. In the short run, a firm in a perfectly competitive market will shut down if:A. Total revenue is greater than total variable costB. Total revenue is less than total costC. Total revenue is less than total variable costD. Total revenue is less than average total costAnswer: C4. The demand for a good is likely to be more elastic when:A. The good has many close substitutesB. The good is a luxury itemC. The good is a necessityD. The good represents a small proportion of consumer's incomeAnswer: A5. The consumer surplus is the difference between:A. The maximum price a consumer is willing to pay and the market priceB. The market price and the minimum price a consumer is willing to payC. The maximum price a consumer is willing to pay and the minimum price a consumer is willing to payD. The minimum price a consumer is willing to pay and the market priceAnswer: A...（此处省略其他选择题）二、简答题（每题10分，共30分）1. Explain the concept of price elasticity of demand and itsdeterminants.Answer: Price elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in its price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. The determinants of price elasticity include the availability of substitutes, the proportion of income spent on the good, the necessity of the good, and the time period over which the demand is being considered.2. What is the difference between a normal good and aninferior good?Answer: A normal good is a good for which the demand increases as income increases, while the demand for aninferior good decreases as income increases. This is because normal goods are typically considered desirable or of higher quality, while inferior goods are seen as lower quality substitutes that consumers prefer to avoid as their income increases.3. Define the law of supply and give an example.Answer: The law of supply states that, all else being equal, the quantity supplied of a good will increase as the price of the good increases, and decrease as the price of the good decreases. An example of this would be the supply of oil; if the price of oil rises, producers are more likely to increase production and supply more oil to the market.三、计算题（每题25分，共50分）1. A firm has the following total cost function: TC = 0.5Q^2 - 4Q + 100. Calculate the firm's average total cost (ATC) and marginal cost (MC) at the quantity level of Q = 50.Answer:To find the average total cost (ATC), we divide the total cost (TC) by the quantity (Q):\[ ATC = \frac{TC}{Q} = \frac{0.5Q^2 - 4Q + 100}{Q} \]At Q = 50:\[ ATC = \frac{0.5(50)^2 - 4(50) + 100}{50} = \frac{1250}{50} = 25 \]The marginal cost (MC) is the derivative of the total cost function with respect to quantity:\[ MC = \frac{dTC}{dQ} = 0.5 \times 2Q - 4 \]At Q = 50:\[ MC = 0.5 \times 2 \times 50 - 4 = 50 - 4 = 46 \]2. A monopolist faces the demand function P = 100 - 2Q and has a total cost function TC = 10Q. Calculate the profit-maximizing level of output and the corresponding price.Answer:First, calculate the marginal revenue (MR) by taking the derivative of the total revenue (TR) with respect to Q. TR is P*Q, so:\[ TR = (100 -。

微观经济学英⽂版9-14章⾃测题及答案第九章⾃测题：1. If the world price of a product is higher than a country’s domestic price we know that countrya. should import that product.b. should no longer produce that product.c. has a comparative advantage in that product.d. could benefit by imposing a tariff on that product.2. Which of the following is NOT a benefit of trade?a. an increased variety of goodsb. lower costs through economies of scalec. increased competitiond. an ability to control domestic and world prices3. When a country allows trade and becomes an exporter of a good, domestic producersa. gain and domestic consumers lose.b. lose and domestic consumers gain.c. and domestic consumers both gain.d. and domestic consumers both lose.4. The world price of yo-yo’s is $4.00 each. The pre-trade price of yo-yo’s in Taiwan is $3.50 each. If Taiwan allows trade in yo-yo’s we know that Taiwan willa. import yo-yo’s and the price in Taiwan will be $4.00 each.b. import yo-yo’s and the price in Taiwan will be $3.50 each.c. export yo-yo’s and the price in Taiwan will be $4.00 each.d. export yo-yo’s and the price in Taiwan will be $3.50 each.5. When a country moves from a free trade position and imposes a tariff on imports, this causesa. a decrease in total surplus in the market.b. a decrease in producer surplus in the market.c. an increase in consumer surplus in the market.d. a decrease in revenue to the government.6. A tariff and an import quota will botha. increase the quantity of imports and raise domestic price.b. increase the quantity of imports and lower domestic price.c. reduce the quantity of imports and raise domestic price.d. reduce the quantity of imports and lower domestic price.7. The major difference between tariffs and import quotas is thata. tariffs create deadweight losses, but import quotas do not.b. tariffs help domestic consumers, and import quotas help domestic producers.c. tariffs raise revenue for the government, but import quotas create a surplus for import license holders.d. All of the above are correct.8. According to the graph, consumer surplusin this market before trade would bea. A.b. B + C.c. A + B + D.d. C.9. According to the graph, consumer surplusin this market after trade would bea. A.b. C + B.c. A + B + D.d. B + C + D.10. According to the graph, the change in total surplus in this market because of trade isa. Ab.Bc. Cd. D参考答案：1.c2.d3.a4.c5.a6.c7.c8.a9.c 10.d第⼗章⾃测题：1. An externality is the impact ofa. society’s decisions on the well-being of society.b. a person’s actions on that person’s well-being.c. one person’s actions on the well-being of a bystander.d. society’s decisions on the well-being of one person in the society2. If education produces positive externalities we would expecta. government to tax education.b. government to subsidize education.c. people to realize the benefits and therefore cause demand for education to increase.d. colleges to relax admission requirements.3. When a negative externality exists in a market the cost to producersa. is greater than the cost to society.b. will be the same as the cost to society.c. will be less than the cost to society.d. and society will be different regardless of whether an externality is present.4. Internalizing an externality refers to makinga. buyers and sellers take into account the external effects of their actions.b. certain that all market transaction benefits go to only buyers and sellers.c. certain government does not disrupt the internal workings of the market.d. buyers pay the full price for the products they purchase.5. Technology spillover is one type ofa. negative externality.b. positive externality.c. subsidy.d. producer surplus.6. According to the Coase theorem, private markets will solve externality problems and allocate resources efficiently as long asa. private parties can bargain without cost.b. government assigns property rights to the harmed party.c. the externalities that are present are positive and not negative.d. businesses determine an appropriate level of production.7. Pigovian taxes are typically advocated to correct for the effects ofa. positive externalities.b. negative externalities.c. regulatory burden.d. All of the above are correct.8. If the government were to limit the release of air-pollution produced by a steel mill to 10,000 units, this policy would be considered aa. regulation.b. Pigovian tax.c. subsidy.d. market-based policy.9. When one firm sells its pollution permit to another firm, which of the following does NOT occur?a. Both firms benefit.b. The total amount of pollution remains the same.c. Social welfare is enhanced.d. Over time, pollution will be eliminated.10. Which of the following policies is government most inclined to use when faced with a positive externality?a. taxationb. permitsc. subsidiesd. usage fees参考答案：1.c2.b3.c4.a5.b6.a7.b8.a9.d 10.c第⼗⼀章⾃测题1. Goods that are excludable include botha. natural monopolies and public goods.b. public goods and common resources.c. common resources and private goods.d. private goods and natural monopolies.2. Which of the following would be considered a private good?a. national defenseb. a public beachc. local cable television serviced. a bottle of natural mineral water3. The government provides public goods becausea. private markets are incapable of producing public goods.b. free-riders make it difficult for private markets to supply the socially optimal quantity.c. markets are always better off with some government oversight.d. external benefits will occur to private producers.4. The difference between technological knowledge and general knowledge is thata. general knowledge creation is usually more profitable for the creator.b. technological knowledge is excludable and general knowledge is not.c. general knowledge is excludable and technological knowledge is not.d. general knowledge is rival and technological knowledge is not.5. A lighthouse is typically considered a good example of a public good becausea. the owner of the lighthouse is able to exclude beneficiaries from enjoying the lighthouse.b. there is rarely another lighthouse nearby to provide competition.c. a nearby port authority cannot avoid paying fees to the lighthouse owner.d. all passing ships are able to enjoy the benefits of the lighthouse without paying.6. The Tragedy of the Commons results when a good isa. rival and not excludable.b. excludable and not rival.c. both rival and excludable.d. neither rival nor excludable.7. If the use of a common resource is not regulated,a. it cannot be used by anyone.b. the economy will end up with too much of a good thing.c. it becomes a private good.d. it will be overused.8. Government may be able to solve the problem of overuse of a common resource by doing each of the following EXCEPTa. regulating the use or consumption of the common resource.b. taxing the use or consumption of the common resource.c. selling the common resource to a private entity.d. allowing individuals to voluntarily reduce their use of the resource.9. Why do elephants face the threat of extinction while cows do not?a. Cattle are a valuable source of income for many people and elephants have no market value.b. There is a high demand for products that come only from the cow.c. There are still lots of cattle that roam free, while most elephants are in zoos.d. Cattle are owned by ranchers, while elephants are owned by no one.10. Excessive fishing occurs becausea. each individual fisherman has little incentive to maintain the species for the next year.b. fishermen rely on government managers to worry about fish populations.c. fishermen are concerned about the population dynamics of fish biomass, not current harvest rates.d. fishermen have other marketable skills and do not fear exploitation of fish reserves.参考答案：1.d2.d3.b4.b5.d6.a7.d8.d9.d 10.a第⼗⼆章⾃测题1. Which of the following is an implicit cost?(i) the owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm(ii) interest paid on th e firm’s debt(iii) rent paid by the firm to lease office spacea. (ii) and (iii)b. (i) and (iii)c. (i) onlyd. All of the above are correct.2. John owns a shoe-shine business. His accountant most likely includes which of the following costs on his financial statements?a. wages John could earn washing windowsb. dividends John’s money was earning in the stock market before John sold his stock and bought a shoe-shine boothc. the cost of shoe polishd. All of the above are correct.3. Economic profita. will never exceed accounting profit.b. is most often equal to accounting profit.c. is always at least as large as accounting profit.d. is a less complete measure of profitability than accounting profit.4. Zach took $500,000 out of the bank and used it to start his new cookie business. The bankaccount pays 4 percent interest per year. During the first year of his business, Zach sold 12,000 boxes of cookies for $3 per box. Also, during the first year, the cookie business incurred costs that required outl ays of money amounting to$14,000.Zach’s economic profit for the year wasa. $–478,000.b. $–56,000.c. $2,000.d. $22,000.5. The marginal product of labor is equal to thea. incremental cost associated with a one unit increase in labor.b. incremental profit associated with a one unit increase in labor.c. increase in labor necessary to generate a one unit increase in output.d. increase in output obtained from a one unit increase in labor.6. Suppose Jan is starting up a small lemonade stand business. Va riable costs for Jan’s lemonade stand would include the cost ofa. building the lemonade stand.b. hiring an artist to design a logo for her sign.c. lemonade mix.d. All of the above are correct.7. Variable cost divided by quantity produced isa. average total cost.b. marginal cost.c. profit.d. None of the above are correct.8. The average fixed cost curvea. always declines with increased levels of output.b. always rises with increased levels of output.c. declines as long as it is above marginal cost.d. declines as long as it is below marginal cost.9. The efficient scale of the firm is the quantity of output thata. maximizes marginal product.b. maximizes profit.c. minimizes average total cost.d. minimizes average variable cost.10. Average total cost is increasing whenevera. total cost is increasing.b. marginal cost is increasing.c. marginal cost is less than average total cost.d. marginal cost is greater than average total cost.11. Which of the following expressions is correct?a. marginal cost = (change in quantity of output)/(change in total cost).b. average total cost = total cost/quantity of output.c. total cost = variable cost + marginal cost.d. All of the above are correct.12. Which of the following must always be true as the quantity of output increases?a. Marginal cost must rise.b. Average total cost must rise.c. Average variable cost must rise.d. Average fixed cost must fall.13. In the long run,a. inputs that were fixed in the short run remain fixed.b. inputs that were fixed in the short run become variable.c. inputs that were variable in the short run become fixed.d. variable inputs are rarely used.14. The length of the short runa. is different for different types of firms.b. can never exceed 3 years.c. can never exceed 1 year.d. is always less than 6 months.15. Economies of scale occur whena. long-run average total costs rise as output increases.b. long-run average total costs fall as output increases.c. average fixed costs are falling.d. average fixed costs are constant.16. Long-run average total cost curves are often U-shapeda. for the same reasons that average total cost curves are often U-shaped.b. because of constant returns to scale.c. because of increasing coordination problems at low levels of production and increasing specialization of workers at high levels of production.d. because of increasing specialization of workers at low levels of production and increasing coordination problems at high levels of production.参考答案：1.c2.c3.a4.c5.d6.c7.d8.a9.c 10.d 11.b 12.d 13.b 14.a 15.b 16.d第⼗三章⾃测题：1. For a firm in a perfectly competitive market, the price of the good is alwaysa. equal to marginal revenue.b. equal to total revenue.c. greater than average revenue.d. All of the above are correct.2. Which of the following is NOT a characteristic of a perfectly competitive market?a. Firms are price takers.b. Firms have difficulty entering the market.c. There are many sellers in the market.d. Goods offered for sale are largely the same.3. When a competitive firm triples the amount of output it sells,a. its total revenue triples.b. its average revenue triples.c. its marginal revenue triples.d. All of the above are correct.4. When a profit-maximizing firm in a competitive market has zero economic profit, accounting profita. is negative (accounting losses).b. is positive.c. is also zero.d. could be positive, negative or zero.5. For a competitive firm,a. Total revenue = Average revenue.b. Total revenue = Marginal revenue.c. Total cost = Marginal revenue.d. Average revenue = Marginal revenue.6. If marginal cost exceeds marginal revenue, the firma. is most likely to be at a profit-maximizing level of output.b. should increase the level of production to maximize its profit.c. must be experiencing losses.d. may still be earning a profit.7. When price is greater than marginal cost for a firm in a competitive market,a. marginal cost must be falling.b. the firm must be minimizing its losses.c. there are opportunities to increase profit by increasing production.d. the firm should decrease output to maximize profit.8. When fixed costs are ignored because they are irrelevant to a business’s production decision, they are calleda. explicit costs.b. implicit costs.c. sunk costs.d. opportunity costs.9. When a firm makes a short-run decision not to produce anything during a specified period of time because of current market conditions, the firm is said toa. shut down.b. exit.c. withdraw.d. leave the industry.10. Profit-maximizing firms enter a competitive market when, for existing firms in that market,a. total revenue exceeds fixed costs.b. total revenue exceeds total variable costs.c. average total cost exceeds average revenue.d. price exceeds average total cost.11. A firm’s short-run supply curve is part of which of the following curves?a. marginal revenueb. average variable costc. average total costd. marginal cost12. Suppose you bought a ticket to a football game for $30, and that you place a $35 value on seeing the game. If you lose the ticket, then what is the maximum price you should pay for another ticket?a. $30b. $35c. $60d. $6513. When new firms have an incentive to enter a competitive market, their entry willa. increase the price of the product.b. drive down profits of existing firms in the market.c. shift the market supply curve to the left.d. All of the above are correct.14. In a perfectly competitive market, the process of entry and exit will end when, for firms in the market,a. price is equal to average variable cost.b. marginal revenue is equal to average variable cost.c. economic profits are zero.d. All of the above are correct.15. In a competitive market that is characterized by free entry and exit,a. all firms will operate at efficient scale in the short run.b. all firms will operate at efficient scale in the long run.c. the price of the product will differ across firms.d. the number of sellers in the market will steadily decrease over time.16. The assumption of a fixed number of firms is appropriate for analysis ofa. the short run, but not the long run.b. the long run, but not the short run.c. both the short run and the long run.d. neither the short run nor the long run.参考答案：1.a2.b3.a4.b5.d6.d7.c8.c9.a 10.d 11.d 12.b 13.b 14.c 15.b 16.a第⼗四章⾃测题：1. Which of the following statements is correct?a. A competitive firm is a price maker and a monopoly is a price taker.b. A competitive firm is a price taker and a monopoly is a price maker.c. Both competitive firms and monopolies are price takers.d. Both competitive firms and monopolies are price makers.2. Which of the following is an example of a barrier to entry?(i) A key resource is owned by a single firm.(ii) The costs of production make a single producer more efficient than a large number of producers. (iii) The government has given the existing monopoly the exclusive right to produce the good.a. (i) and (ii)b. (ii) and (iii)c. (i) onlyd. All of the above are correct.3. The defining characteristic of a natural monopoly isa. constant marginal cost over the relevant range of output.b. economies of scale over the relevant range of output.c. constant returns to scale over the relevant range of output.d. diseconomies of scale over the relevant range of output.4. Patent and copyright laws are major sources ofa. natural monopolies.b. government-created monopolies.c. resource monopolies.d. None of the above are correct.5. The De Beers diamond monopoly is a classic example of a monopoly thata. is government-created.b. arises from the ownership of a key resource.c. results in very little advertising of the product that the monopolist produces.d. was broken up by the government a long time ago.6. In order to sell more of its product, a monopolist musta. sell to the government.b. sell in international markets.c. lower its price.d. use its market power to force up the price of complementary products.7. For a profit-maximizing monopolist,a. P＞MR = MC.b. P = MR = MC.c. P ＞MR ＞MC.d. MR ＜MC ＜P.8. For a monopoly, the supply curve is a portion of itsa. marginal revenue curve.b. marginal cost curve.c. average total cost curve.d. none of the above; a monopoly does not have a supply curve.9. What is the monopolist’s profit under the following conditions? The profit-maximizing price charged for goods produced is $16. The intersection of the marginal revenue and marginal cost curves occurs where output is 10 units and marginal cost is $8. Average total cost for 10 units of output is $6.a. $20b. $80c. $100d. $16010. Antitrust laws allow the government toa. prevent mergers.b. break up companies.c. promote competition.d. All of the above are correct.参考答案：1.b2.d3.b4.b5.b6.c7.a8.d9.c 10.d。

Chapter 5 Elasticity and Its Application1. If price elasticity of demand is2.0, this implies that consumers would ( c )a.buy twice as much of the good if price falls by 10 percent.b.require a 2 percent cut in price to raise quantity demanded of the good by 1percent.c.buy 2 percent more of the good in response to a 1 percent cut in price.d.require at least a $2 increase in price before showing any response to the priceincrease.2. If the price elasticity of demand within the price range from $1 and $1.25 for carrots is0.79 and for radishes is 1.6, then within that price range ( b )a.carrots are more price elastic than radishes.b.radishes are more price elastic than carrots.c.carrots and radishes must be substitute goods.d.carrots and radishes must be complementary goods.3. S ue’s Bagel Shop wants to estimate how responsive bagels are to a change in cream cheese prices. To accomplish this task, the following data would NOT be needed? ( a )a.Percentage change in bagel price.b.Original price of cream cheese.c.New quantity of bagels sold.d.Original quantity of bagels sold.4. If Weiskamp T-Shirt Co. lowers its price from $6 to $5 and finds that students increase their quantity demanded from 400 to 600 T-shirts, then the demand for Weiskamp T-shirts within this price range is ( b )a.price inelastic. c. unit elastic.b.price elastic.d. cross elastic.5. The slope of the demand curve is not the same as the price elasticity of demand because the slope of a demand curve ( b )pares percentage changes in quantity demanded and price.pares absolute changes in quantity demanded and price.c.obeys the law of demand.d.is not constant when the demand curve is linear.6. The cross elasticity of demand for substitute goods must be ( d )a.greater than one. c. zero.b.less than one. d. greater than zero.7. A 5 percent increase in the price of sugar reduces sugar consumption by about 10 percent. The increase causes households to ( b )a.spend more on sugar.b.spend less on sugar.c.spend the same amount on sugar.d.consumer more goods like coffee and tea that are complements of sugar.8. As a result of running high temperature this summer in the south of China, the corn crop declined sharply. If corn growers experienced an increase in sales revenue, the demand for corn must be ( b )a.price elastic. c. unitary elastic.b.price inelastic.d. perfectly inelastic.9. The U.S. Post Office finds that it now has extra costs associated with decontaminating first class mail for anthrax（炭疽病）. It is considering a rate hike, but it will only be successful in raising more revenue to pay for these additional costs if ( c )a.there are many substitutes for first class mail service.b.no anthrax is found on the mail.c.the demand for first class mail service is inelastic.d.the rate increase is a very large one.10. Suppose that the elasticity of supply of lawn mowers is 1.5. If the price of lawn mowers rises 5 percent, the quantity supplied of lawn mowers would ( b )a.decline 7.5 percent. c. rise 1.5 percent.b.rise 7.5 percent. d. rise 0.3 percent.11. A decrease in supply will raise the equilibrium price most when demand is ( b )a.relatively elastic. c. unit elastic.b.relatively inelastic.d. perfectly elastic.。

微观经济学试题及答案英文Microeconomics Exam Questions and AnswersQuestion 1: Define the law of demand and explain how itrelates to the concept of price elasticity of demand.Answer 1: The law of demand states that, all else being equal, the quantity demanded of a good or service will decrease asthe price increases. Price elasticity of demand measures the responsiveness of the quantity demanded to a change in price. If the quantity demanded changes significantly in response to a price change, the demand is said to be elastic. Conversely, if the quantity demanded changes very little, the demand is inelastic.Question 2: What is the difference between a firm's total revenue and marginal revenue?Answer 2: Total revenue is the total income received by afirm from selling its product, calculated as the price perunit multiplied by the quantity sold. Marginal revenue, onthe other hand, is the additional revenue generated fromselling one more unit of the product. It is the change intotal revenue divided by the change in quantity sold. In a perfectly competitive market, marginal revenue equals the price, but in a market with some degree of monopoly power, marginal revenue is less than the price.Question 3: Explain the concept of consumer surplus and howit is calculated.Answer 3: Consumer surplus is the difference between what consumers are willing to pay for a good or service and what they actually pay. It is a measure of the welfare gain to consumers from participating in a market. It is calculated by finding the area under the demand curve but above the market price, which represents the total amount consumers would have been willing to pay for each unit up to the quantity they actually purchase.Question 4: What is the marginal cost and how does it relateto a firm's decision to produce?Answer 4: Marginal cost is the cost of producing oneadditional unit of a good or service. It is the change intotal cost resulting from producing one more unit. Firms will continue to produce additional units as long as the marginal cost is less than the marginal revenue. If the marginal cost exceeds the marginal revenue, the firm will reduce production, as producing one more unit would result in a loss.Question 5: Define economies of scale and explain how they affect a firm's cost structure.Answer 5: Economies of scale refer to the cost advantagesthat a firm experiences when it increases its level of output. As the scale of production increases, the average cost perunit of output decreases due to factors such as spreadingfixed costs over more units, specialization of labor, andbulk purchasing discounts. This can lead to lower per-unit costs and potentially higher profits.Question 6: What is the difference between a normal good and an inferior good?Answer 6: A normal good is a good for which the demand increases as consumers' income increases. In contrast, an inferior good is a good for which the demand decreases as consumers' income increases. This is because consumers tend to substitute inferior goods with superior or higher-quality goods when their income rises.End of ExamPlease note that this is a sample set of microeconomics exam questions and answers. The actual content of an exam would depend on the specific topics covered in the course and the level of difficulty desired by the instructor.。

Chapter 7Markets in ActionCheckpoint 7.1Price Ceilings7.1.1)A price ceilingA)is an illegal price.B)is the price that exists in a black market.C)is the maximum price that can legally be charged.D)Both answers A and B are correct.E)Both answers B and C are correct.Answer:CTopic:Price ceilingSkill:Level 1: DefinitionObjective:Checkpoint 7.1Author:SA7.1.2)If a price ceiling is set above the equilibrium price, thenA)there will be a surplus of the good.B)there will be a shortage of the good.C)there will be neither a shortage nor a surplus of the good.D)the price ceiling will generate revenue for the government.E)the price ceiling affects suppliers but not demanders.Answer:CTopic:Price ceiling, shortageSkill:Level 4: Applying modelsObjective:Checkpoint 7.1Author:SA7.1.3)A price ceiling in the market for fuel oil that is below the equilibrium price willA)lead to the quantity supplied of fuel oil exceeding the quantity demanded.B)lead to the quantity demanded of fuel oil exceeding the quantity supplied.C)decrease the demand for fuel oil.D)increase the supply of fuel oil.E)have no effect in the market for fuel oil.Answer:BTopic:Price ceiling, shortageSkill:Level 4: Applying modelsObjective:Checkpoint 7.1Author:SAChapter 7 Markets in Action 277Price(dollars per sliceof pizza)Quantity supplied(slices of pizzaper week)Quantity demanded(slices of pizzaper week) 11050220403303044020550107.1.4)The demand and supply schedules for pizza are in the table above. A price ceiling of $2 perslice results inA)a surplus of 20 slices of pizza.B)a shortage of 20 slices of pizza.C)a shortage of 40 slices of pizza.D)a shortage of 60 slices of pizza.E)neither a shortage nor a surplus.Answer:BTopic:Price ceiling, shortageSkill:Level 4: Applying modelsObjective:Checkpoint 7.1Author:SA7.1.5)The demand and supply schedules for pizza are in the table above. A price ceiling of $4 perslice results inA)a surplus of 20 slices of pizza.B)a shortage of 20 slices of pizza.C)a shortage of 40 slices of pizza.D)a shortage of 60 slices of pizza.E)neither a shortage nor a surplus.Answer:ETopic:Price ceiling, shortageSkill:Level 4: Applying modelsObjective:Checkpoint 7.1Author:SA278 7.1.6)The demand and supply schedules for pizza are in the table above. If the government sets amaximum legal price of $2 per slice of pizza, thenA)there is a shortage of 20 slices of pizza.B)this maximum price is an example of a price floor.C)this maximum price is an example of a price ceiling.D)Both answers A and C are correct.E)Both answers B and C are correct.Answer:DTopic:Price ceiling, shortageSkill:Level 4: Applying modelsObjective:Checkpoint 7.1Author:SABade/Parkin Foundations of Microeconomics , Fourth Edition·Chapter 7 Markets in Action 2797.1.7)The figure above illustrates the bagel market. Which of the following statements is correct?A)With a price ceiling of $1.00 per bagel, the quantity demanded is equal to the quantitysupplied.B)With a price ceiling of $3.00 per bagel, the quantity demanded is greater than thequantity supplied.C)With a price ceiling of $1.00 per bagel, there is a shortage of bagels.D)Answers A and B are correct.E)Answers B and C are correct.Answer:CTopic:Price ceiling, shortageSkill:Level 4: Applying modelsObjective:Checkpoint 7.1Author:SA7.1.8)The figure above illustrates the bagel market. Which of the following statements is correct?A)With a price ceiling of $1.00 per bagel, the price of a bagel is $1.B)With a price ceiling of $3.00 per bagel, the price of a bagel is $2.C)With no government intervention, the equilibrium price of a bagel is $2.D) Only answers A and B are correct.E)Answers A, B, and C are correct.Answer:ETopic:Price ceilingSkill:Level 4: Applying modelsObjective:Checkpoint 7.1Author:SA280 7.1.9)In a housing market with no rent ceilings, the equilibrium rent is that for which the quantityof apartments demandedA)equals the quantity supplied.B)is greater than the quantity supplied.C)is less than the quantity supplied.D)might be greater than, equal to, or less than the quantity supplied depending onwhether the supply curve is upward sloping, horizontal, or vertical.E)None of the above answers is correct because without rent ceilings there is noequilibrium rent.Answer:ATopic:Rent ceilingSkill:Level 2: Using definitionsObjective:Checkpoint 7.1Author:JC7.1.10)Suppose the equilibrium rent in Denver is $1,050. A rent ceiling of $755 per month leads toA)a surplus of apartments in Denver.B)a shortage of apartments in Denver.C)no change in the Denver apartment market.D)fair prices in the Denver market.E)compared to the situation at the equilibrium rent, a decrease in the quantity ofapartments demanded and an increase in the quantity of apartments supplied.Answer:BTopic:Rent ceiling, shortageSkill:Level 2: Using definitionsObjective:Checkpoint 7.1Author:JC7.1.11)Suppose the equilibrium rent in Boston is $1,500. A rent ceiling of $1,600 per month leads toA)a surplus of apartments in Boston.B)a shortage of apartments in Boston.C)no change in the Boston apartment market.D)fair prices in the Boston apartment market.E)compared to the situation at the equilibrium rent, a decrease in the quantity ofapartments demanded and an increase in the quantity of apartments supplied.Answer:CTopic:Rent ceiling, shortageSkill:Level 2: Using definitionsObjective:Checkpoint 7.1Author:JCBade/Parkin Foundations of Microeconomics , Fourth Edition·Chapter 7 Markets in Action 2817.1.12)An illegal market in which the price exceeds a legally imposed price ceiling is called aA)shortage market.B)surplus market.C)black market.D)fair market.E)subsidized market.Answer:CTopic:Price ceiling, black marketSkill:Level 1: DefinitionObjective:Checkpoint 7.1Author:JC7.1.13)One of the consequences of a rent ceiling set below the equilibrium rent isA)decreased search activity.B)increased search activity.C)the establishment of landlord unions.D)surpluses of apartments.E)the elimination of the deadweight loss that would otherwise exist in the housingmarket.Answer:BTopic:Rent ceiling, searchSkill:Level 2: Using definitionsObjective:Checkpoint 7.1Author:JC7.1.14)The opportunity cost of an apartment in a rent controlled market is equal toA)the rent charged for the apartment.B)the opportunity cost of searching for the apartment.C)the rent charged for the apartment plus the opportunity cost of searching for theapartment.D)nothing because of the surplus of apartments when there are rent controls.E)the rent charged for the apartment minus the opportunity cost of searching for theapartment.Answer:CTopic:Rent ceiling, searchSkill:Level 2: Using definitionsObjective:Checkpoint 7.1Author:JC282 7.1.15)A rent ceiling in a housing marketA)makes all rents lower than the ceiling illegal to charge.B)is set above the equilibrium rent in order to have an effect.C)increases the time people spend searching for housing.D)Both answers B and C are correct.E)Both answers A and C are correct.Answer:CTopic:Rent ceiling, searchSkill:Level 3: Using modelsObjective:Checkpoint 7.1Author:SA7.1.16)In a market with a rent ceiling set below the equilibrium rent, the producer and consumersurplusA)both increase.B)both decrease but generally not to zero.C)do not change.D)are eliminated.E)are both totally converted into deadweight loss.Answer:BTopic:Rent ceiling, efficiencySkill:Level 2: Using definitionsObjective:Checkpoint 7.1Author:JC7.1.17)The deadweight loss in a housing market with a rent ceiling set below the equilibrium rent istheA)loss to those who cannot find apartments and the gain to landlords who charge blackmarket rents.B)loss to those who cannot find apartments and the loss to landlords who cannot offerhousing at the lower rent ceiling.C)loss to landlords and the gain to tenants who pay a fairer rent.D)loss to tenants and the gain to landlords who have the incentive to offer moreapartments for rent.E)gain to landlords and to tenants because now a fairer rent is charged.Answer:BTopic:Rent ceiling, deadweight lossSkill:Level 2: Using definitionsObjective:Checkpoint 7.1Author:JCBade/Parkin Foundations of Microeconomics , Fourth Edition·Chapter 7 Markets in Action 2837.1.18)Rent ceilings set below the equilibrium renti.create a deadweight loss.ii.increase search activity.iii.encourage landlords to charge a high price for new locks and keys, called ʺkey money.ʺA)i only.B)ii only.C)i and iii.D)i and ii.E)i, ii, and iii.Answer:ETopic:Rent ceiling, deadweight lossSkill:Level 3: Using modelsObjective:Checkpoint 7.1Author:SA7.1.19)In a housing market with a rent ceiling set below the equilibrium rent, as time passes thesupply of apartmentsA)decreases.B)increases.C)does not change.D)becomes fixed by the government.E)increases while the demand for apartments decreases.Answer:ATopic:Rent ceiling, change in supply over timeSkill:Level 2: Using definitionsObjective:Checkpoint 7.1Author:JC7.1.20)Which of the following is an example of the unfairness of rent control?A)Voluntary exchange is encouraged by rent control.B)Racial discrimination in renting is discouraged by rent control.C)Newcomers have a more difficult time finding apartments.D)Rich people do not get apartments in these markets.E)Too many people rent apartments.Answer:CTopic:Rent ceiling, unfairnessSkill:Level 2: Using definitionsObjective:Checkpoint 7.1Author:JC284 7.1.21)Suppose the city of Chicago imposes a rent control program that fixes rents at $400 below theequilibrium rent. With this planA)the quantity of apartments demanded will increase.B)the quantity of apartments supplied will increase.C)young people and poor people will have an easier time finding apartments.D)the deadweight loss in Chicago ʹs apartment market will be eliminated.E)there will be a surplus of apartments offered for rent.Answer:ATopic:Rent ceiling, unfairnessSkill:Level 3: Using modelsObjective:Checkpoint 7.1Author:JC7.1.22)Rent controlsA)create a deadweight loss.B)increase maintenance by landlords.C)benefit people who live in rent controlled apartments.D) Both answers A and C are correct.E) Both answers B and C are correct.Answer:DTopic:Rent ceiling, unfairnessSkill:Level 4: Applying modelsObjective:Checkpoint 7.1Author:SACheckpoint 7.2Price Floors7.2.1)A price floor isA)the highest possible legal price that can be charged for a good or service.B)usually equal to the equilibrium price established before the government imposed theprice floor.C)the lowest legal price at which a good or service can be traded.D)a legal price of zero that can be charged for a good or service.E)almost always equal to the price ceiling.Answer:CTopic:Price floorSkill:Level 1: DefinitionObjective:Checkpoint 7.2Author:JCBade/Parkin Foundations of Microeconomics , Fourth Edition·Chapter 7 Markets in Action 2857.2.2)A price floor set above the equilibrium priceA)creates a surplus.B)creates a shortage.C)creates excess demand.D)balances supply and demand.E)has no effect.Answer:ATopic:Price floor, surplusSkill:Level 4: Applying modelsObjective:Checkpoint 7.2Author:SA7.2.3)A price floorA)changes the equilibrium price if it is imposed in black markets.B)changes the price and quantity if it is set below the equilibrium price.C)changes the price and quantity if it is set above the equilibrium price.D)does not create a black market if it is set above the equilibrium price.E)changes the price and quantity only if it equals the equilibrium price.Answer:CTopic:Price floor, surplusSkill:Level 4: Applying modelsObjective:Checkpoint 7.2Author:SA7.2.4)Suppose the equilibrium price of a gallon of milk is $4. If the government imposes a pricefloor of $5 per gallon of milk, theA)quantity supplied of milk falls short of the quantity demanded.B)quantity supplied of milk exceeds the quantity demanded.C)supply increases.D)demand decreases.E)price of milk remains $4 per gallon.Answer:BTopic:Price floor, surplusSkill:Level 4: Applying modelsObjective:Checkpoint 7.2Author:SA7.2.5)Suppose the current equilibrium wage rate for housekeepers is $8.60 per hour. An increase inthe minimum wage to $7.50 per hour leads toA)a surplus of housekeepers.B)a shortage of housekeepers.C)no change in the market for housekeepers.D)an increase in the quantity of housekeepers supplied.E)unemployment of housekeepers.Answer:CTopic:Minimum wage, employmentSkill:Level 2: Using definitionsObjective:Checkpoint 7.2Author:JC7.2.6)Suppose the equilibrium wage rate for apricot pickers is $6.00 per hour and at that wage ratethe equilibrium quantity of apricot pickers employed is 14,000. If the minimum wage is set at $6.50 per hour, then theA)quantity of apricot pickers employed increases.B)quantity of apricot pickers employed decreases.C)quantity of apricot pickers employed does not change.D)wage rate for apricot pickers decreases.E)quantity of apricot pickers demanded does not change and the quantity of apricotpickers supplied does not change.Answer:BTopic:Minimum wage, employmentSkill:Level 4: Applying modelsObjective:Checkpoint 7.2Author:JC7.2.7)Suppose the current equilibrium wage rate for landscapers is $5.65 in Little Rock; $6.50 in St.Louis and $8.05 in Raleigh. An increase in the minimum wage to $6.50 per hour results inunemployment of landscapers inA)Little Rock and St. Louis.B)only Raleigh.C)Little Rock, St. Louis, and Raleigh.D)only Little Rock.E)St. Louis and Raleigh.Answer:DTopic:Minimum wage, employmentSkill:Level 3: Using modelsObjective:Checkpoint 7.2Author:JC7.2.8)Suppose the equilibrium wage rate for apricot pickers is $9.00 per hour in California and atthat wage rate the equilibrium quantity of apricot pickers is 14,000. If the minimum wage is set at $7.50 per hour, then theA)quantity of apricot pickers employed increases.B)quantity of apricot pickers employed decreases.C)quantity of apricot pickers employed does not change.D)wage rate for apricot pickers increases.E)some apricot pickers are unemployed.Answer:CTopic:Minimum wage, employmentSkill:Level 4: Applying modelsObjective:Checkpoint 7.2Author:JCWage rate(dollars per hour)Quantity demanded(workers)Quantity supplied(workers)9 40010008 600 9007 800 80061000 70051200 5007.2.9)The labor demand and labor supply schedules are given in the table above. If a minimumwage of $8 per hour is imposed,A)a surplus of 300 workers occurs.B)there is no shortage or surplus of workers.C)900 workers are employed.D)Both answers B and C are correct.E)Both answers A and C are correct.Answer:ATopic:Minimum wage, employmentSkill:Level 4: Applying modelsObjective:Checkpoint 7.2Author:SA7.2.10)The labor demand and labor supply schedules are given in the table above. If a minimumwage of $6 per hour is imposed,A)a surplus of 300 workers occurs.B)a shortage of 300 workers occurs.C)there is no surplus or shortage of workers.D)the quantity demanded is 1,000 workers.E)there is unemployment of 700 workers.Answer:CTopic:Minimum wage, employmentSkill:Level 4: Applying modelsObjective:Checkpoint 7.2Author:SA7.2.11)The figure above shows the labor market in a region. For a minimum wage to change thewage rate and amount of employment, it must beA)left to the forces of supply and demand.B)set above $6 an hour.C)set equal to $6 an hour.D)set below $6 an hour.E)set at $12 per hour.Answer:BTopic:Minimum wage, employmentSkill:Level 3: Using modelsObjective:Checkpoint 7.2Author:SA7.2.12)The figure above shows the labor market in a region. If a minimum wage of $8 an hour isimposed, then there are ________ unemployed workers.A)20,000B)40,000C)60,000D)80,000E)zeroAnswer:BTopic:Minimum wage, employmentSkill:Level 3: Using modelsObjective:Checkpoint 7.2Author:SA7.2.13)The figure above shows the labor market in a region. If a minimum wage of $8 an hour isimposed, then the quantity of labor supplied is ________ and the quantity of labor demanded is ________.A)60,000; 60,000B)80,000; 40,000C)40,000; 60,000D)60,000; 40,000E)40,000; 40,000Answer:BTopic:Minimum wage, employmentSkill:Level 3: Using modelsObjective:Checkpoint 7.2Author:SA7.2.14)The figure above shows the labor market in a region. In which of the following cases wouldthe amount of unemployment be the largest?A)when the market is at its equilibrium, with no minimum wageB)when a minimum wage of $4 an hour is imposedC)when a minimum wage of $6 an hour is imposedD)when a minimum wage of $8 an hour is imposedE)None of the above because the market will adjust so that there is no unemployment.Answer:DTopic:Minimum wage, unemploymentSkill:Level 3: Using modelsObjective:Checkpoint 7.2Author:MR7.2.15)One result of the minimum wage isA)a black market for labor that pays more than the minimum wage.B)a black market for labor that pays less than the minimum wage.C)decreased job search activity.D)a decrease in unemployment among poor and unskilled workers.E)an increase in employment among poor and unskilled workers.Answer:BTopic:Minimum wage, black marketSkill:Level 2: Using definitionsObjective:Checkpoint 7.2Author:JC7.2.16)An increase in the minimum wage to $15 per hour would lead toA)an increase in search activity for many workers.B)a decrease in search activity for many workers.C)a decrease in unemployment.D)no change in unemployment.E)no change in employment.Answer:ATopic:Minimum wage, searchSkill:Level 3: Using modelsObjective:Checkpoint 7.2Author:JC7.2.17)Suppose the marginal benefit a cherry orchard derives from hiring Lauren to pick cherries is$8 per hour. If the wage rate that Lauren earns is $7 per hour, then the orchardʹs surplus from Laurenʹs labor is ________ per hour.A)$7B)$15C)$1D)$8E)$0Answer:CTopic:Demand for labor, surplusSkill:Level 2: Using definitionsObjective:Checkpoint 7.2Author:JC7.2.18)The surplus for workers from a job is equal to theA)marginal cost of work.B)wage rate.C)marginal cost of work minus the wage rate.D)wage rate minus the marginal cost of work.E)marginal benefit of hiring a worker minus the wage rate.Answer:DTopic:Supply of labor, surplusSkill:Level 1: DefinitionObjective:Checkpoint 7.2Author:JC7.2.19)An efficient allocation of labor occurs when theA)marginal benefit to workers exceeds the marginal benefit to firms.B)marginal benefit to firms exceeds the marginal benefit to workers.C)marginal cost to workers is equal to the marginal benefit to firms.D)marginal cost and marginal benefit of both workers and the firms are equal to zero.E)marginal benefit of workers exceeds the marginal cost to firms by as much as possible.Answer:CTopic:Minimum wage, efficiencySkill:Level 3: Using modelsObjective:Checkpoint 7.2Author:SA7.2.20)If the minimum wage is set above the equilibrium wage, after taking into account theresources lost in job search, the firmsʹ surplus ________ and the workersʹ surplus ________.A)increases; increasesB)increases; decreases.C)decreases; increasesD)decreases; decreasesE)does not change; decreasesAnswer:DTopic:Minimum wage, efficiencySkill:Level 2: Using definitionsObjective:Checkpoint 7.2Author:JC7.2.21)A minimum wage set above the equilibrium wageA)decreases the deadweight loss in the market.B)decreases the workersʹ surplus because workers must spend resources looking for jobs.C)increases the firmʹs surplus.D)increases the marketʹs efficiency.E)has no effect on the market.Answer:BTopic:Minimum wage, efficiencySkill:Level 2: Using definitionsObjective:Checkpoint 7.2Author:SA7.2.22)Labor unions ________ increases in the minimum wage because an increase in the minimumwage ________ the demand for union labor.A)support; increasesB)support; decreasesC)oppose; increasesD)oppose; decreasesE)support; has no effect onAnswer:ATopic:Minimum wage, supportSkill:Level 2: Using definitionsObjective:Checkpoint 7.2Author:JC7.2.23)In the figure above, if the wage rate is $6 per hour, then theA)firmsʹ surplus is the area d+e+f.B)workersʹ surplus is the area a +b +c.C)deadweight loss equals zero.D)Only answers A and C are correct.E)Answers A, B, and C are correct.Answer:ETopic:Minimum wage, efficiencySkill:Level 4: Applying modelsObjective:Checkpoint 7.2Author:SA7.2.24)In the figure above, if the minimum wage rate is $8 per hour, then after taking account ofresources lost in job search, the workersʹ surplus is the area ________ and the firmsʹ surplus is the area ________.A)e; cB)d; bC)a; fD)f; aE)a + b + c + d + e; fAnswer:CTopic:Minimum wage, efficiencySkill:Level 4: Applying modelsObjective:Checkpoint 7.2Author:SA7.2.25)In the figure above, if the minimum wage is $8 per hour, thenA)resources used in job-search activity increase compared to the situation before theminimum wage.B)it is legal to hire workers for a wage below the minimum wage because otherwiseunemployment would result.C)the deadweight loss is minimized.D)Both answers A and B are correct.E)Both answers B and C are correct.Answer:ATopic:Minimum wage, efficiencySkill:Level 4: Applying modelsObjective:Checkpoint 7.2Author:SACheckpoint 7.3Price Supports in Agriculture7.3.1)Which of the following is true regarding a price support set above the equilibrium price?i.The price support increases the price consumers pay.ii.The price support creates a deadweight loss.iii.The price support decreases output.A)i and iiB)i and iiiC)iii onlyD)i, ii, and iiiE)i onlyAnswer:ATopic:Price supportSkill:Level 2: Using definitionsObjective:Checkpoint 7.3Author:CD7.3.2)A price support leads to inefficiency becauseA)output is more than the efficient, equilibrium quantity.B)the marginal benefit of the last unit produced is larger than the marginal cost.C)the price charged is less than the equilibrium price.D)producer surplus is less than consumer surplus.E)producers must pay a subsidy to the government.Answer:ATopic:Price support, deadweight lossSkill:Level 2: Using definitionsObjective:Checkpoint 7.3Author:CD7.3.3)Suppose the government imposes a price support that is above the equilibrium price. As aresult,A)total revenue increases.B)consumer surplus increases.C)the marginal cost of the last unit produced decreases.D)the government has effectively imposed a price ceiling.E)the subsidy the government pays decreases.Answer:ATopic:Price support, deadweight lossSkill:Level 2: Using definitionsObjective:Checkpoint 7.3Author:CDCheckpoint 7.4Integrative Questions7.4.1)The shortage created by a rent ceiling below the equilibrium rent is smallest when thedemand for housing is ________ and the supply of housing is ________.A)elastic; elasticB)elastic; inelasticC)inelastic; elasticD)inelastic; inelasticE)unit elastic; unit elasticAnswer:DTopic:IntegrativeSkill:Level 3: Using modelsObjective:IntegrativeAuthor:MR7.4.2)A regulation that sets the highest price at which it is legal to trade a good is aA)production quota.B)price floor.C)price support.D)price ceiling.E)subsidyAnswer:DTopic:IntegrativeSkill:Level 1: DefinitionObjective:IntegrativeAuthor:MR7.4.3)A regulation that sets the lowest price at which it is legal to trade a good is aA)search ceiling.B)price floor.C)production ceiling.D)price ceiling.E)subsidyAnswer:BTopic:IntegrativeSkill:Level 1: DefinitionObjective:IntegrativeAuthor:MR7.4.4)If the government imposes an effective ________, output decreases and ________ increases.A)price support; consumer surplusB)price floor; consumer surplusC)price support; total revenueD)price floor; marginal benefit to consumersE)price ceiling; efficiencyAnswer:CTopic:IntegrativeSkill:Level 3: Using modelsObjective:IntegrativeAuthor:CD7.4.5)If the government imposes an effective ________, a deadweight loss ________.A)price floor; does not occurB)price ceiling; does not occurC)price ceiling; occursD)price support; does not occurE)Both answers C and D are correct.Answer:CTopic:IntegrativeSkill:Level 3: Using modelsObjective:IntegrativeAuthor:CD7.4.6)Producers favor a ________ because ________.A)price ceiling; the equilibrium price increasesB)price support; the deadweight loss is minimizedC)price ceiling; total revenue increasesD)price support; total revenue increasesE)price ceiling; consumer surplus increasesAnswer:DTopic:IntegrativeSkill:Level 3: Using modelsObjective:IntegrativeAuthor:CD7.4.7)In order to have an impact, a ________ must be set below the equilibrium price and whenthis occurs, ________.A)price ceiling; consumer surplus increasesB)price floor; consumer surplus decreasesC)price ceiling; producer surplus decreasesD)price support; total revenue increasesE)price support; consumer surplus increasesAnswer:CTopic:IntegrativeSkill:Level 3: Using modelsObjective:IntegrativeAuthor:CD7.4.8)Which of the following describes a difference between a price support and a price ceiling?A)A price support creates a deadweight loss while a price ceiling does not.B)A price ceiling is a regulated price while a price support is a regulated quantity.C)A price support decreases the quantity while a price ceiling does not.D)A price ceiling increases the price above the equilibrium price while a price supportdoes not.E)A price support attempts to raise the price above the equilibrium price while a priceceiling does not.Answer:ETopic:IntegrativeSkill:Level 3: Using modelsObjective:IntegrativeAuthor:CD7.4.9)Both price supports and a price floor canA)create a deadweight loss.B)decrease output below the equilibrium quantity.C)decrease the price below the equilibrium price.D)increase consumer surplus.E)have no effect on producer surplus.Answer:ATopic:IntegrativeSkill:Level 3: Using modelsObjective:IntegrativeAuthor:MR7.4.10)Which of the following is true?i. A price ceiling set above the equilibrium price has no effects.ii. A price ceiling set below the equilibrium price creates a surplus.iii. A price floor set above the equilibrium price has no effects.A)Only iB)Only iiC)Only iiiD)i and iiE)ii and iiiAnswer:ATopic:IntegrativeSkill:Level 2: Using definitionsObjective:IntegrativeAuthor:CO7.4.11)Which of the following is true?i. A price ceiling is inefficient but fair.ii. A price floor is inefficient and unfair.iii. A price support increases the quantity produced.A)Only iB)Only iiC)Only iiiD)i and iiE)ii and iiiAnswer:BTopic:IntegrativeSkill:Level 2: Using definitionsObjective:IntegrativeAuthor:CO。

《微观经济学：利润最大化与竞争性供给》问答与练习（英文版含答案）PROFIT MAXIMIZATION AND COMPETITIVE SUPPLY1. Why would a firm that incurs losses choose to produce rather than shut down?Losses occur when revenues do not cover total costs. Revenues could still be greater thanvariable costs, but not fixed costs. If a firm is incurring a loss, it will seek to minimizethat loss. In the short run, losses will be minimized as long as the firm covers its variablecosts. In the long run, all costs are variable. Thus, all costs must be covered if the firmis to remain in business.2. The supply curve for a firm in the short run is the short-run marginal cost curve (above the point of minimum average variable cost). Why is the supply curve in the long run not the long-run marginal cost curve (above the point of minimum average total cost)?In the short run, a change in the market price induces the profit-maximizing firm tochange its optimal level of output. This optimal output occurs when price is equal tomarginal cost, as long as marginal cost exceeds average variable cost. Therefore, thesupply curve of the firm is its marginal cost curve, above average variable cost. (Whenthe price falls below average variable cost, the firm will shut down.)In the long run, the firm adjusts its inputs so that its long-run marginal cost is equal tothe market price. At this level of output, it is operating on a short-run marginal costcurve where short-run marginal cost is equal to price. As the long-run price changes,the firm gradually changes its mix of inputs to minimize cost. Thus, the long-run supplyresponse is this adjustment from one set of short-run marginal cost curves to another.3. In long-run equilibrium, all firms in the industry earn zero economic profit. Why is this true?The theory of perfect competition explicitly assumes that there are no entry or exitbarriers to new participants in an industry. With free entry, positive economic profitsinduce new entrants. As these firms enter, the supply curve shifts to the right, causinga fall in the equilibrium price of the product. Entry will stop, and equilibrium will beachieved, when economic profits have fallen to zero.4. What is the difference between economic profit and producer surplus?While economic profit is the difference between total revenue and total cost, producersurplus is the difference between total revenue and total variable cost. The differencebetween economic profit and producer surplus is the fixed cost of production.5. Why do firms enter an industry when they know that in the long run economic profit will be zero?Firms enter an industry when they expect to earn economic profit. These short-runprofits are enough to encourage entry. Zero economic profits in the long run implynormal returns to the factors of production, including the labor and capital of the ownersof firms. For example, the owner of a small business might experience positiveaccounting profits before the foregone wages from running the business are subtractedfrom these profits. If the revenue minus other costs is just equal to what could be earnedelsewhere, then the owner is indifferent to staying in business or exiting.6. At the beginning of the twentieth century, there were many small American automobile manufacturers. At the end of the century, there are only three large ones. Suppose that this situation is not the result of lax federal enforcement of antimonopoly laws. How do you explain the decrease in the number of manufacturers? (Hint: What is the inherent cost structure of the automobile industry?) Automobile plants are highly capital-intensive. Assuming there have been noimpediments to competition, increasing returns to scale can reduce the number of firmsin the long run. As firms grow, their costs decrease with increasing returns to scale.Larger firms are able to sell their product for a lower price and push out smaller firms inthe long run. Increasing returns may cease at some level of output, leaving more thanone firm in the industry.7. Industry X is characterized by perfect competition, so every firm in the industry is earning zero economic profit. If the product price falls, no firms can survive. Do you agree or disagree? Discuss.Disagree. As the market price falls, firms cut their production. If price falls belowaverage total cost, firms continue to produce in the short run and cease production in thelong run. If price falls below average variable costs, firms cease production in the shortrun. Therefore, with a small decrease in price, i.e., less than the difference between theprice and average variable cost, firms can survive. With larger price decrease,i.e.,greater than the difference between price and minimum average cost, no firms survive.8. An increase in the demand for video films also increases the salaries of actors and actresses. Is the long-run supply curve for films likely to be horizontal or upward sloping? Explain.The long-run supply curve depends on the cost structure of the industry. If there is a fixedsupply of actors and actresses, as more films are produced, higher salaries must be offered.Therefore, the industry experiences increasing costs. In an increasing-cost industry, thelong-run supply curve is upward sloping. Thus, the supply curve for videos would beupward sloping.9. True or false: A firm should always produce at an output at which long-run average cost is minimized. Explain.False. In the long run, under perfect competition, firms should produce where averagecosts are minimized. The long-run average cost curve is formed by determining theminimum cost at every level of output. In the short run, however, the firm might not beproducing the optimal long-run output. Thus, if there are any fixed factors of production,the firm does not always produce where long-run average cost is minimized.10. Can there be constant returns to scale in an industry with an upward-sloping supply curve? Explain.Constant returns to scale imply that proportional increases in all inputs yield the sameproportional increase in output. Proportional increases in inputs can induce higherprices if the supply curves for these inputs are upward sloping. Therefore, constantreturns to scale does not always imply long-run horizontal supply curves.11. What assumptions are necessary for a market to be perfectly competitive? In light of what you have learned in this chapter, why is each of these assumptions important?The two primary assumptions of perfect competition are (1) all firms in the industry areprice takers, and (2) there is free entry and exit of firms from the market. This chapterdiscusses how competitive equilibrium is achieved under these assumptions. In particular,we have seen that in a competitive equilibrium, price is equal to marginal cost. Bothassumptions insure this equilibrium condition in the long run. In the short run, pricecould be greater than average cost, implying positive economic profits. With free entryand exit, positive economic profits would encourage other firms to enter. This entryexerts downward pressure on price until price is equal to both marginal cost andminimum average cost.12. Suppose a competitive industry faces an increase in demand (i.e., the curve shifts upward). What are the steps by which a competitive market insures increased output? Does your answer change if the government imposes a price ceiling?If demand increases with fixed supply, price and profits increase. The price increaseinduces the firms in the industry to increase output. Also, with positive profit, firmsenter the industry, shifting the supply curve to the right. With an effective price ceiling,profit will be lower than without the ceiling, reducing the incentive for firms to enter theindustry. With zero economic profit, no firms enter and there is no shift in the supplycurve.13. The government passes a law that allows a substantial subsidy for every acre of land used to grow tobacco. How does this program affect the long-run supply curve for tobacco?A subsidy to tobacco pro duction decreases the firm’s costs of production. These costdecreases encourage other firms to enter tobacco production, and the supply curve for theindustry shifts out.1. From the data in Table 8.2, show what happens to the firm’s output ch oice and profit if the price of the product falls from $40 to $35.The table below shows the firm’s revenue and cost information when the price falls to $35.At a price of $35, the firm should produce seven units to maximize profits, because this isthe point closest to where price equals marginal cost without having marginal cost exceedprice.2. Again, from the data in Table 8.2, show what happens to the firm’s output choice and profit if the fixed cost of production increases from $50 to $100, and then to $150. What general conclusion can you reach about the effects of fixed costs on the firm’s output choice?The table below shows the firm’s revenue and cost information for Fixed Cost, FC of 50,100, and 150.With fixed costs of 100, the firm maximizes profit at 8 units of output. It also minimizeslosses with fixed costs of 150 at the same level. Fixed costs do not influence the optimalquantity, because they do not influence marginal cost.3. Suppose you are the manager of a watchmaking firm operating in a competitive market. Your cost of production is given by C = 100 + Q2, where Q is the level of output and C is total cost. (The marginal cost of production is 2Q. The fixed cost of production is $100.)a. If the price of watches is $60, how many watches should you produce to maximize profit?Profits are maximized where marginal cost is equal to marginal revenue. Here,marginal revenue is equal to $60; recall that price equals marginal revenue in acompetitive market:60 = 2Q, or Q = 30.b. What will the profit level be?Profit is equal to total revenue minus total cost:π = (60)(30) - (100 + 302) = $800.c. At what minimum price will the firm produce a positive output?A firm will produce in the short run if the revenues it receives are greater than its variablecosts. Remember that the firm’s short-run supply curve is its marginal cost curve abovethe minimum of average variable cost. Here, average variable cost is VCQQQQ ==2.Also, MC is equal to 2Q. So, MC is greater than AVC for any quantity greater than 0. This means that the firm produces in the short run as long as price is positive.4. Use the same information as in Exercise 1 to answer the following.a. Derive the firm’s short-run supply curve. (Hint: you may want to plot the appropriate costcurves.)The firm’s short-run supply curve is its marginal cost curve above average variable cost.The table below lists marginal cost, total cost, variable cost, fixed cost, and averagevariable cost.Q P TR TC MC TVC TFC AVC0 40 0 50 -50 ___ 0 50 ___1 40 40 100 -60 50 50 50 50.02 40 80 128 -48 28 78 50 39.03 40 120 148 -28 20 98 50 32.74 40 160 162 -2 14 112 50 28.05 40 200 180 20 18 130 50 26.06 40 240 200 40 20 150 50 25.07 40 280 222 58 22 172 50 24.68 40 320 260 60 38 210 50 26.3b. If 100 identical firms are in the market, what is the industry supply curve?For 100 firms with identical cost structures, the market supply curve is the horizontalsummation of each firm’s output at each price.Figure 8.4.b5. A sales tax of $1 per unit of output is placed on one firm whose product sells for $5 in a competitive industry.a. How will this tax affect the cost curves for the firm?With the imposition of a $1 tax on a single firm, all its cost curves shift up by $1.b. What will happen to the firm’s price, output, and profit in the short run?Since the firm is a price-taker in a competitive market, the imposition of the tax on onlyone firm does not change the market price. Since the firm’s short-run supply curve is itsmarginal cost curve above average variable cost and that marginal cost curve has shiftedup (inward), the firm supplies less to the market at every price. Profits are lower atevery quantity.c. What will happen in the long run?If the tax is placed on a single firm, that firm will go out of business.6. Suppose that a competitive firm’s marginal cost of producing output q is given byMC(q) = 3 + 2q. Assume that the market price of the firm’s product is $9:a. What level of output will the firm produce?To maximize profits, the firm should set marginal revenue equal to marginal cost. Giventhe fact that this firm is operating in a competitive market, the market price it faces isequal to marginal revenue. Thus, the firm should set the market price equal to marginalcost to maximize its profits:9 = 3 + 2q, or q = 3.Total revenue is price times quantity:TR = ($9)(3) = $27.Profit is total revenue minus total cost:= $27 - $21 = $6.Therefore, the firm is earning positive economic profits.8. A competitive industry is in long-run equilibrium. A sales tax is then placed on all firms in the industry. What do you expect to happen to the price of the product, the number of firms in the industry, and the output of each firm in the long run?With the imposition of a sales tax on all firms, the supply curve shifts up and a newequilibrium will result with a lower quantity and a higher price. This shift in supplyrepresents lower production for all firms.*9. A sales tax of 10 percent is placed on half the firms (the polluters) in a competitive industry. The revenue is paid to the remaining firms (the nonpolluters) as a 10 percent subsidy on the value of output sold.a. Assuming that all firms have identical constant long-run average costs before the sales tax-subsidy policy, what do you expect to happen to the price of the product, the output of each of the firms, and industry output, in the short run and the long run? (Hint: How does price relate to industry input?)The price of the product depends on the quantity produced by all firms in the industry.The immediate response to the sales-tax=subsidy policy is a reduction in quantity bypolluters and an increase in quantity by non-polluters. If a long-run competitiveequilibrium existed before the sales-tax=subsidy policy, price would have been equal tomarginal cost and long-run minimum average cost. For the polluters, the price after thesales tax is below long-run average cost; therefore, in the long run, they will exit theindustry. Furthermore, after the subsidy, the non-polluters earn economic profits thatwill encourage the entry of non-polluters. If this is a constant cost industry and the lossof the polluters’ output is compensated by an increase in the non-polluters’ output, theprice will remain constant.b. Can such a policy always be achieved with a balanced budget in which tax revenues are equal tosubsidy payments? Why? Explain.As the polluters exit and non-polluters enter the industry, revenues from pollutersdecrease and the subsidy to the non-polluters increases. This imbalance occurs whenthe first polluter leaves the industry and persist’s ever after.。

曼昆微观经济学课后练习英文答案集团标准化办公室：[VV986T-J682P28-JP266L8-68PNN]the link between buyers’ willingness to pay for a good and the demandcurve.how to define and measure consumer surplus.the link between sellers’ costs of producing a good and the supply curve.how to define and measure producer surplus.that the equilibrium of supply and demand maximizes total surplus in amarket.CONTEXT AND PURPOSE:Chapter 7 is the first chapter in a three-chapter sequence on welfare economics and market efficiency. Chapter 7 employs the supply and demand model to develop consumer surplus and producer surplus as a measure of welfare and market efficiency. These concepts are then utilized in Chapters 8 and 9 to determine the winners and losers from taxation and restrictions on international trade.The purpose of Chapter 7 is to develop welfare economics—the study of how the allocation of resources affects economic well-being. Chapters 4 through 6 employed supply and demand in a positive framework, which focused on the question, “What is the equilibrium price and quantity in a market” This chapter now addresses the normative question, “Is the equilibrium price and quantity in a market the best possible solution to the resource allocation problem, or is it simply the price and quantity that balance supply and demand” Students will discover that under most circumstances the equilibrium price and quantity is also the one that maximizes welfare.KEY POINTS:Consumer surplus equals buyers’ willingness to pay for a good minus the amount they actually pay for it, and it measures the benefit buyers get from participating in a market. Consumer surplus can be computed by finding the area below the demand curve and above the price.Producer surplus equals the amount sellers receive for their goods minus their costs of production, and it measures the benefit sellers get from participating in a market. Producer surplus can be computed by finding the area below the price and above the supply curve.An allocation of resources that maximizes the sum of consumer and producer surplus is said to be efficient. Policymakers are often concerned with the efficiency, as well as the equality, of economic outcomes.The equilibrium of supply and demand maximizes the sum of consumer andproducer surplus. That is, the invisible hand of the marketplace leadsbuyers and sellers to allocate resources efficiently.Markets do not allocate resources efficiently in the presence of market failures such as market power or externalities.CHAPTER OUTLINE:I. Definition of welfare economics: the study of how the allocation of resources affects economic well-being.A. Willingness to Pay1. Definition of willingness to pay: the maximum amount that a buyer will pay for a good.2. Example: You are auctioning a mint-condition recording of Elvis Presley’s first album. Four buyers show up. Their willingness to pay is as follows:If the bidding goes to slightly higher than $80, all buyersdrop out except for John. Because John is willing to paymore than he has to for the album, he derives some benefitfrom participating in the market.3. Definition of consumer surplus: the amount a buyer is willing to payfor a good minus the amount the buyer actually pays for it.4. Note that if you had more than one copy of the album, the price in the auction would end up being lower (a little over $70 in the case of two albums) and both John and Paul would gain consumer surplus.B. Using the Demand Curve to Measure Consumer Surplus1. We can use the information on willingness to pay to derive a demandmarginal buyer . Because the demand curve shows the buyers’ willingness to pay, we can use the demand curve to measure c onsumer surplus.C. How a Lower Price Raises Consumer Surplussurplus because they are paying less for the product than before (area A on the graph).b. Because the price is now lower, some new buyers will enter the market and receive consumer surplus on these additional units of output purchased (area B on the graph).D. What Does Consumer Surplus Measure?1. Remember that consumer surplus is the difference between the amount that buyers are willing to pay for a good and the price that they actually pay.2. Thus, it measures the benefit that consumers receive from the good as the buyers themselves perceive it.III. Producer SurplusA. Cost and the Willingness to Sell1. Definition of cost: the value of everything a seller must give up to produce a good .2. Example: You want to hire someone to paint your house. You accept bidsfor the work from four sellers. Each painter is willing to work if the priceyou will pay exceeds her opportunity cost. (Note that this opportunity costthus represents willingness to sell.) The costs are:sellers will drop out except for Grandma. Because Grandma receives more than she would require to paint the house, she derives some benefit from producing in the market.4. Definition of producer surplus: the amount a seller is paid for a good minus the seller’s cost of providing it.5. Note that if you had more than one house to paint, the price in the auction would end up being higher (a little under $800 in the case of two houses) and both Grandma and Georgia would gain producer surplus.ALTERNATIVE CLASSROOM EXAMPLE:Review the material on price ceilings from Chapter 6. Redraw themarket for two-bedroom apartments in your town. Draw in a priceceiling below the equilibrium price.Then go through:consumer surplus before the price ceiling is put into place. consumer surplus after the price ceiling is put into place. You will need to take some time to explain the relationship between the producers’ willingness to sell and the cost of producing the good. The relationship between cost and the supply curve is not as apparent as the relationship between the It is important to stress that consumer surplus is measured inmonetary terms. Consumer surplus gives us a way to place amonetary cost on inefficient market outcomes (due to governmentB. Using the Supply Curve to Measure Producer Surplus1. We can use the information on cost (willingness to sell) to derive a2.the cost of the marginal seller. Because the supply curve shows the sellers’ cost (willingness to sell), we can use the supply curve to measure producer surplus.C. How a Higher Price Raises Producer Surplussurplus because they are receiving more for the product than before (area C on the graph).b. Because the price is now higher, some new sellers will enter the market and receive producer surplus on these additional units of output sold (area D on the graph).D. Producer surplus is used to measure the economic well-being of producers,ALTERNATIVE CLASSROOM EXAMPLE:Review the material on price floors from Chapter 6. Redraw the marketfor an agricultural product such as corn. Draw in a price supportabove the equilibrium price.Then go through:producer surplus before the price support is put in place.producer surplus after the price support is put in place.Make sure that you discuss the cost of the price support tomuch like consumer surplus is used to measure the economic well-being of consumers.IV. Market EfficiencyA. The Benevolent Social Planner1. The economic well-being of everyone in society can be measured by total surplus, which is the sum of consumer surplus and producer surplus:Total Surplus = Consumer Surplus + Producer SurplusTotal Surplus = (Value to Buyers – Amount Paid byBuyers) +(Amount Received by Sellers – Cost to Sellers)Because the Amount Paid by Buyers = Amount Received bySellers:2. Definition of efficiency: the property of a resource allocation of maximizing the total surplus received by all members of society .3. Definition of equality: the property of distributing economicprosperity uniformly the members of society .a. Buyers who value the product more than the equilibrium price will purchase the product; those who do not, will not purchase the product. Inother words, the free market allocates the supply of a good to the buyers who value it most highly, as measured by their willingness to pay.b. Sellers whose costs are lower than the equilibrium price will produce the product; those whose costs are higher, will not produce the product. Inother words, the free market allocates the demand for goods to the sellers who can produce it at the lowest cost.value of the product to the marginal buyer is greater than the cost to the marginal seller so total surplus would rise if output increases.Pretty Woman, Chapter 6. Vivien (Julia Roberts) and Edward(Richard Gere) negotiate a price. Afterward, Vivien reveals shewould have accepted a lower price, while Edward admits he wouldhave paid more. If you have done a good job of introducingconsumer and producer surplus, you will see the light bulbs gob. At any quantity of output greater than the equilibrium quantity, the value of the product to the marginal buyer is less than the cost to the marginal seller so total surplus would rise if output decreases.3. Note that this is one of the reasons that economists believe Principle #6: Markets are usually a good way to organize economic activity.C. In the News: Ticket Scalping1. Ticket scalping is an example of how markets work to achieve anefficient outcome.2. This article from The Boston Globe describes economist Chip Case’sexperience with ticket scalping.D. Case Study: Should There Be a Market in Organs?1. As a matter of public policy, people are not allowed to sell their organs.a. In essence, this means that there is a price ceiling on organs of $0.b. This has led to a shortage of organs.2. The creation of a market for organs would lead to a more efficientallocation of resources, but critics worry about the equity of a market system for organs.V. Market Efficiency and Market FailureA. To conclude that markets are efficient, we made several assumptions about how markets worked.1. Perfectly competitive markets.2. No externalities.B. When these assumptions do not hold, the market equilibrium may not be efficient.C. When markets fail, public policy can potentially remedy the situation. SOLUTIONS TO TEXT PROBLEMS:Quick Quizzes1. Figure 1 shows the demand curve for turkey. The price of turkey is P 1and the consumer surplus that results from that price is denoted CS. Consumer surplus is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. It measures the benefit to buyers ofparticipating in a market.Figure 1 Figure 22. Figure 2 shows the supply curve for turkey. The price of turkey is P 1and the producer surplus that results from that price is denoted PS. Producer surplus is the amount sellers are paid for a good minus the sellers’ cost of providing it (measured by the supply curve). It measures the benefit to sellers of participating in a market.It would be a good idea to remind students that there are circumstances when the market process does not lead to the most efficient outcome. Examples include situations such as when a firm (or buyer) has market power over price or when there areFigure 33. Figure 3 shows the supply and demand for turkey. The price of turkey is P, consumer surplus is CS, and producer surplus is PS. Producing more turkeys 1than the equilibrium quantity would lower total surplus because the value to the marginal buyer would be lower than the cost to the marginal seller on those additional units.Questions for Review1. The price a buyer is willing to pay, consumer surplus, and the demand curve are all closely related. The height of the demand curve represents the willingness to pay of the buyers. Consumer surplus is the area below the demand curve and above the price, which equals the price that each buyer is willing to pay minus the price actually paid.2. Sellers' costs, producer surplus, and the supply curve are all closely related. The height of the supply curve represents the costs of the sellers. Producer surplus is the area below the price and above the supply curve, which equals the price received minus each seller's costs of producing the good.Figure 43. Figure 4 shows producer and consumer surplus in a supply-and-demand diagram.4. An allocation of resources is efficient if it maximizes total surplus, the sum of consumer surplus and producer surplus. But efficiency may not be the only goal of economic policymakers; they may also be concerned about equitythe fairness of the distribution of well-being.5. The invisible hand of the marketplace guides the self-interest of buyers and sellers into promoting general economic well-being. Despite decentralized decision making and self-interested decision makers, free markets often lead to an efficient outcome.6. Two types of market failure are market power and externalities. Market power may cause market outcomes to be inefficient because firms may cause price and quantity to differ from the levels they would be under perfect competition, which keeps total surplus from being maximized. Externalities are side effects that are not taken into account by buyers and sellers. As a result, the free market does not maximize total surplus.Problems and Applications1. a. Consumer surplus is equal to willingness to pay minus the price paid. Therefore, Melissa’s willingness to pay must be $200 ($120 + $80).b. Her consumer surplus at a price of $90 would be $200 $90 = $110.c. If the price of an iPod was $250, Melissa would not have purchased one because the price is greater than her willingness to pay. Therefore, she would receive no consumer surplus.2. If an early freeze in California sours the lemon crop, the supply curve for lemons shifts to the left, as shown in Figure 5. The result is a rise in the price of lemons and a decline in consumer surplus from A + B + C to just A. So consumer surplus declines by the amount B + C.Figure 5 Figure 6In the market for lemonade, the higher cost of lemons reduces the supply of lemonade, as shown in Figure 6. The result is a rise in the price of lemonade and a decline in consumer surplus from D + E + F to just D, a loss of E + F. Note that an event that affects consumer surplus in one market oftenhas effects on consumer surplus in other markets.3. A rise in the demand for French bread leads to an increase in producer surplus in the market for French bread, as shown in Figure 7. The shift of the demand curve leads to an increased price, which increases producer surplusfrom area A to area A + B + C.Figure 7The increased quantity of French bread being sold increases the demandfor flour, as shown in Figure 8. As a result, the price of flour rises, increasing producer surplus from area D to D + E + F. Note that an event that affects producer surplus in one market leads to effects on producer surplus in related markets.Figure 84. a.Figure 9b. When the price of a bottle of water is $4, Bert buys two bottles of water. His consumer surplus is shown as area A in the figure. He values hisfirst bottle of water at $7, but pays only $4 for it, so has consumer surplus of $3. He values his second bottle of water at $5, but pays only $4 for it, so has consumer surplus of $1. Thus Bert’s total consumer surplus is $3 + $1 = $4, which is the area of A in the figure.c. When the price of a bottle of water falls from $4 to $2, Bert buys three bottles of water, an increase of one. His consumer surplus consists of both areas A and B in the figure, an increase in the amount of area B. He gets consumer surplus of $5 from the first bottle ($7 value minus $2 price), $3from the second bottle ($5 value minus $2 price), and $1 from the third bottle ($3 value minus $2 price), for a total consumer surplus of $9. Thus consumer surplus rises by $5 (which is the size of area B) when the price of a bottle of water falls from $4 to $2.5. a.Figure 10b. When the price of a bottle of water is $4, Ernie sells two bottles of water. His producer surplus is shown as area A in the figure. He receives $4 for his first bottle of water, but it costs only $1 to produce, so Ernie has producer surplus of $3. He also receives $4 for his second bottle of water, which costs $3 to produce, so he has producer surplus of $1. Thus Ernie’s total producer surplus is $3 + $1 = $4, which is the area of A in the figure.c. When the price of a bottle of water rises from $4 to $6, Ernie sells three bottles of water, an increase of one. His producer surplus consists of both areas A and B in the figure, an increase by the amount of area B. He gets producer surplus of $5 from the first bottle ($6 price minus $1 cost), $3 from the second bottle ($6 price minus $3 cost), and $1 from the third bottle ($6 price minus $5 price), for a total producer surplus of $9. Thus producer surplus rises by $5 (which is the size of area B) when the price of a bottle of water rises from $4 to $6.6. a. From Ernie’s supply schedule and Bert’s demand schedule, thean equilibrium quantity of two.b. At a price of $4, consumer surplus is $4 and producer surplus is $4, as shown in Problems 3 and 4 above. Total surplus is $4 + $4 = $8.c. If Ernie produced one less bottle, his producer surplus would decline to $3, as shown in Problem 4 above. If Bert consumed one less bottle, hisconsumer surplus would decline to $3, as shown in Problem 3 above. So total surplus would decline to $3 + $3 = $6.d. If Ernie produced one additional bottle of water, his cost would be $5, but the price is only $4, so his producer surplus would decline by $1. If Bert consumed one additional bottle of water, his value would be $3, but the price is $4, so his consumer surplus would decline by $1. So total surplus declines by $1 + $1 = $2.7. a. The effect of falling production costs in the market for stereos results in a shift to the right in the supply curve, as shown in Figure 11. As a result, the equilibrium price of stereos declines and the equilibriumquantity increases.Figure 11b. The decline in the price of stereos increases consumer surplus from area A to A + B + C + D, an increase in the amount B + C + D. Prior to the shift in supply, producer surplus was areas B + E (the area above the supply curve and below the price). After the shift in supply, producer surplus is areas E + F + G. So producer surplus changes by the amount F + G – B, which may be positive or negative. The increase in quantity increases producer surplus, while the decline in the price reduces producer surplus. Because consumer surplus rises by B + C + D and producer surplus rises by F + G – B, total surplus rises by C + D + F + G.c. If the supply of stereos is very elastic, then the shift of the supply curve benefits consumers most. To take the most dramatic case, suppose the supply curve were horizontal, as shown in Figure 12. Then there is no producer surplus at all. Consumers capture all the benefits of falling production costs, with consumer surplus rising from area A to area A + B.Figure 128. Figure 13 shows supply and demand curves for haircuts. Supply equals demand at a quantity of three haircuts and a price between $4 and $5. Firms A, C, and D should cut the hair of Ellen, Jerry, and Phil. Oprah’s willingnessto pay is too low and firm B’s costs are too high, so they do not participate. The maximum total surplus is the area between the demand and supply curves, which totals $11 ($8 value minus $2 cost for the first haircut, plus $7 value minus $3 cost for the second, plus $5 value minus $4 cost for the third).Figure 139. a. The effect of falling production costs in the market for computers results in a shift to the right in the supply curve, as shown in Figure 14. As a result, the equilibrium price of computers declines and the equilibrium quantity increases. The decline in the price of computers increases consumer surplus from area A to A + B + C + D, an increase in the amount B + C + D.Figure 14 Figure 15Prior to the shift in supply, producer surplus was areas B + E(the area above the supply curve and below the price). After theshift in supply, producer surplus is areas E + F + G. So producersurplus changes by the amount F + G – B, which may be positive ornegative. The increase in quantity increases producer surplus,while the decline in the price reduces producer surplus. Becauseconsumer surplus rises by B + C + D and producer surplus rises byF +G – B, total surplus rises by C + D + F + G.b. Because typewriters are substitutes for computers, the decline in the price of computers means that people substitute computers for typewriters, shifting the demand for typewriters to the left, as shown in Figure 15. The result is a decline in both the equilibrium price and equilibrium quantity of typewriters. Consumer surplus in the typewriter market changes from area A + B to A + C, a net change of C – B. Producer surplus changes from area C + D + E to area E, a net loss of C + D. Typewriter producers are sad about technological advances in computers because their producer surplus declines.c. Because software and computers are complements, the decline in the price and increase in the quantity of computers means that the demand for software increases, shifting the demand for software to the right, as shown in Figure 16. The result is an increase in both the price and quantity of software. Consumer surplus in the software market changes from B + C to A + B, a net change of A – C. Producer surplus changes from E to C + D + E, an increase of C + D, so software producers should be happy about the technological progress in computers.Figure 16d. Yes, this analysis helps explain why Bill Gates is one the world’s richest people, because his company produces a lot of software that is a complement with computers and there has been tremendous technological advance in computers.10. a. With Provider A, the cost of an extra minute is $0. WithProvider B, the cost of an extra minute is $1.b. With Provider A, my friend will purchase 150 minutes [= 150 –(50)(0)]. With Provider B, my friend would purchase 100 minutes [=150 – (50)(1)].c. With Provider A, he would pay $120. The cost would be $100 with Provider B.Figure 17d. Figure 17 shows the friend’s demand. With Provider A, he buys 150minutes and his consumer surplus is equal to (1/2)(3)(150) – 120= 105. With Provider B, his consumer surplus is equal to(1/2)(2)(100) = 100.e. I would recommend Provider A because he receives greater consumer surplus.11. a. Figure 18 illustrates the demand for medical care. If each procedure has a price of $100, quantity demanded will be Q1 procedures.Figure 18b. If consumers pay only $20 per procedure, the quantity demanded will be Qprocedures. Because the cost to society is $100, the number of procedures 2performed is too large to maximize total surplus. The quantity that maximizes total surplus is Q1 procedures, which is less than Q2.c. The use of medical care is excessive in the sense that consumers get procedures whose value is less than the cost of producing them. As a result, the economy’s total surplus is reduced.d. To prevent this excessive use, the consumer must bear the marginal cost of the procedure. But this would require eliminating insurance. Another possibility would be that the insurance company, which pays most of the marginal cost of the procedure ($80, in this case) could decide whether the procedure should be performed. But the insurance company does not get the benefits of the procedure, so its decisions may not reflect the value to the consumer.。

Chapter 01Thinking Like an Economist Multiple Choice Questions1. Economics is best defined as the study of: A. prices and quantities.B. inflation and interest rates.C. how people make choices under the conditions of scarcity and the results of those choices.D. wages and incomes.2. Economic questions always deal with: A. financial matters.B. political matters.C. insufficient resources.D. choice in the face of limited resources.3. The range of topics or issues that fit within the definition of economicsis: A. limited to market activities, e.g., buying soap.B. limited to individuals and firms.C. extremely wide, requiring only the ideas of choice and scarcity.D. very limited.4. The central concern of economics is: A. poverty.B. scarcity.C. wealth accumulation.D. overconsumption.5. The scarcity principle indicates that: A. no matter how much one has, it is never enough.B. compared to 100 years ago, individuals have less time today.C. with limited resources, having more of "this" means having less of "that."D. because tradeoffs must be made, resources are therefore scarce.6. The logical implication of the scarcity principle is that: A. one will never be satisfied with what one has.B. as wealth increases, making choices becomes less necessary.C. as wealth decreases, making choices becomes lessnecessary.D. choices must be made.7. If all the world's resources were to magically increase a hundredfold,then: A. the scarcity principle would still govern behavior.B. economics would no longer be relevant.C. the scarcity principle would disappear.D. tradeoffs would become unnecessary.8. The principle of scarcity applies to: A. the poor exclusively.B. all consumers.C. all firms.D. everyone—consumers, firms, governments, and nations.9. At the very least, Joe Average and Bill Gates are both identically limited by: A. their wealth.B. the 24 hours that comprise a day.C. theirknowledge.D. their influence.10. Forest is a mountain man living in complete isolation in Montana. He is completely self-sufficient through hunting, fishing, and farming. He has not been in the city to buy anything in five years. One can infer: A. the scarcity principle does not apply to Forest.B. Forest is not required to make choices.C. the scarcity principle still applies because more hunting means less fishing andfarming.D. Forest is very satisfied.11. The scarcity principle applies to: A. all decisions.B. only market decisions,e.g., buying a car.C. only non-market decisions, e.g., watching a sunset.D. only the poor.12. Chris has a one-hour break between classes every Wednesday. Chris can either stay at the library and study or go to the gym and work out. The decision Chris must make is: A. not an economic problem because neither one costs money.B. not an economic problem because it's an hour that is wasted no matter what Chris does.C. an economic problem because the tuition Chris pays covers both the gym and the library.D. an economic problem because Chris has only one hour during which he can study or work out.13. Josh wants to go to the football game this weekend, but he has a paper due on Monday. It will take him the whole weekend to write the paper. Josh decided to stay home and work on the paper. According to the scarcity principle, the reason Josh didn't go to the game is that: A. Josh prefers schoolwork to football games.B. writing the paper is easier than going to the game.C. Josh doesn't have enough time for writing the paper and going to the game.D. it's too expensive to go to the game.14. Whether studying the size of the U.S. economy or the number of children a couple will choose to have, the unifying concept is that wants are: A. limited, resources are limited, and thus choices must be made.B. unlimited, resources are limited, and thus choices must be made.C. unlimited, resources are limited to some but not to others, and thus some people must make choices.D. unlimited, resources are limited, and thus government needs to do more.15. The cost-benefit principle indicates that an action should be taken: A. if the total benefits exceed the total costs.B. if the average benefits exceed the average costs.C. if the net benefit (benefit minus cost) is zero.D. if the extra benefit is greater than or equal to the extra costs.16. When a person decides to pursue an activity as long as the extra benefits are at least equal to the extra costs, that person is: A. violating the cost-benefit principle.B. following the scarcity principle.C. following the cost-benefit principle.D. pursuing the activity too long.17. Choosing to study for an exam until the extra benefit (improved score) equals the extra cost (mental fatigue) is: A. not rational.B. an application of thecost-benefit principle.C. an application of the scarcity principle.D. the relevant opportunity cost.18. The scarcity principle tells us that __________, and the cost-benefit principle tells us __________. A. choices must be made; how to make thechoicesB. choices must be made; that the costs can never outweigh the benefits of the choicesC. rare goods are expensive; that the costs should outweigh the benefits of the choicesD. rare goods are expensive; that the costs can never outweigh the benefits of the choices19. According to the cost-benefit principle: A. the lowest cost activity usually gives the lowest benefit.B. a person should always choose the activity with the lowest cost.C. a person should always choose the activity with the greatest benefit.D. the extra costs and benefits of an activity are more important considerations than the total costs and benefits.20. A rational person is one who: A. is reasonable.B. makes choices that are easily understood.C. possesses well-defined goals and seeks to achieve them.D. is highly cynical.21. The seventh glass of soda that Tim consumes will produce an extra benefit of 10 cents and has an extra cost of zero (Tim is eating at the cafeteria). Thecost-benefit principle predicts that Tim will: A. realize he has had too much soda to drink and go home.B. drink the seventh glass and continue until the marginal benefit of drinking another glass of soda is zero.C. volunteer to empty out the fountain.D. not drink the seventh glass.22. Janie must either mow the lawn or wash clothes, earning her a benefit of $30 or $45, respectively. She dislikes both equally and they both take the same amount of time. Janie will therefore choose to _________ because the economic surplus is ________. A. mow the lawn; greaterB. wash clothes; greaterC. mow the lawn; smallerD. wash clothes; smaller23. Dean decided to play golf rather than prepare for tomorrow's exam in economics. One can infer that: A. Dean has made an irrational choice.B. Dean is doing poorly in his economics class.C. the economic surplus from playing golf exceeded the surplus from studying.D. the cost of studying was less than the cost of golfing.Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $15,000 per year.24. The opportunity cost of attending Elite Uis: A. $50,000B. $10,000C. $20,000D. $15,00025. The opportunity cost of attending State Collegeis: A. $30,000B. $20,000C. $15,000D. $10,00026. Larry maximizes his surplus by attending: A. Elite U, because $60,000 is greater than the benefit at the other schools.B. State College, because the difference between the benefit and cost is greatest there.C. NoName U, because Larry has a full scholarship there.D. Elite U, because the opportunity costs of attending Elite U are the lowest.27. Larry has decided to go to Elite U. Assuming that all of the values described are correct, for Larry to decide on Elite U, he must have: A. calculated his surplus from each choice and picked the one with the highest surplus.B. underestimated the benefits of attending NoName.C. miscalculated the surplus of attending Elite U.D. determined the opportunity cost of each choice and picked the one with the lowest opportunity cost.28. Jen spends her afternoon at the beach, paying $1 to rent a beach umbrella and $11 for food and drinks rather than spending an equal amount of money to go to a movie. The opportunity cost of going to the beach is: A. the $12 she spent on the umbrella, food and drinks.B. only $1 because she would have spent the money on food and drinks whether or not she went to the beach.C. the movie she missed seeing.D. the movie she missed seeing plus the $12 she spent on the umbrella, food and drinks.29. Relative to a person who earns minimum wage, a person who earns $30 per hour has: A. a lower opportunity cost of working longer hours.B. a higher opportunity cost of taking a day off.C. a lower opportunity cost of driving farther to work.D. the same opportunity cost of spending time on leisure activities.30. The opportunity cost of an activity is the value of: A. an alternative forgone.B. the next-best alternative forgone.C. the least-best alternative forgone.D. the difference between the chosen activity and the next-best alternative forgone.31. Amy is thinking about going to the movies tonight. A ticket costs $7 and she will have to cancel her dog-sitting job that pays $30. The cost of seeing the movie is: A. $7.B. $30.C. $37.D. $37 minus the benefit of seeing the movie.32. Economic surplus is: A. the benefit gained by taking an action.B. the price paid to take an action.C. the difference between the benefit gained and the cost incurred of taking an action.D. the wage someone would have to earn in order to take an action.33. The Governor of your state has cut the budget for the University and increased spending on Medicaid. This is an example of: A. the pitfalls of considering average costs instead of marginal costs.B. poor normative economic decision making.C. poor positive economic decision making.D. choice in the face of limited resources.34. Sally earned $25,000 per year before she became a mother. After she becamea mother, she told her employer that her opportunity cost of working is now $50,000, and so she is not willing to work for anything less. Her decision is based on: A. the high cost of raising a child.B. her desire to save for her child's college expenses.C. her increased value to her employer.D. the value she places on spending time with her child.35. Alex received a four-year scholarship to State U. that covered tuition and fees, room and board, and books and supplies. As a result: A. attending State U. for four years is costless for Alex.B. Alex has no incentive to work hard while at State U.C. the cost of attending State U. is the amount of money Alex could have earned working for four years.D. the cost of attending State U. is the sum of the benefits Alex would have had attending each of the four other schools to which Alex had been admitted.36. Suppose Mary is willing to pay up to $15,000 for a used Ford pick-up truck, but she finds one for $12,000. Her __________ is __________. A. benefit; $12,000B. cost; $15,000C. economic surplus; $3,000D. economic surplus; $12,00037. In general, rational decision making requires one to choose the actions that yield the: A. largest total benefits.B. smallest total costs.C. smallest net benefits.D. largest economic surpluses.38. Suppose the most you would be willing to pay for a plane ticket home is $250, but you buy one online for $175. The economic surplus of buying the online ticket is: A. $175.B. $250.C. $75.D. $0.39. The use of economic models, like the cost-benefit principle, means economists believe that: A. this is exactly how people choose between alternatives.B. this is a reasonable abstraction of how people choose between alternatives.C. those who explicitly make decisions this way are smarter.D. with enough education, all people will start to explicitly make decisions this way.40. Jenna decides to see a movie that costs $7 for the ticket and has an opportunity cost of $20. After the movie, she says to one of her friends that the movie was not worth it. Apparently: A. Jenna failed to apply the cost-benefit model to her decision.B. Jenna was not rational.C. Jenna overestimated the benefits of the movie.D. Jenna underestimated the benefits of the movie.41. Most of us make sensible decisions most of the time, because: A. we know the cost-benefit principle.B. subconsciously we are weighing costs andbenefits.C. most people know about the scarcity principle.D. we conduct hypothetical mental auctions when we make decisions.42. Suppose a person makes a choice that seems inconsistent with the cost-benefit principle. Which of the following statements represents the most reasonable conclusion to draw? A. The person (explicitly or implicitly) over-estimated the benefits or under-estimated the costs or both.B. The cost-benefit principle is rarely true.C. The person does not grasp how decisions should be made.D. The person is simply irrational.43. Economic models are intended to: A. apply to all examples equallywell.B. eliminate differences in the way people behave.C. generalize about patterns in decision-making.D. distinguish economics students from everyone else.44. Economic models claim to be: A. reasonable abstractions of how people make choices, highlighting the most important factors.B. exact replications of the decision-making process people use.C. interesting chalkboard exercises with little applicability to the real world.D. exceptionally accurate methods of predicting nearly all behavior of everyone.45. The cost-benefit model used by economists is: A. unrealistic because it is too detailed and specific to apply to a variety of situations.B. unrealistic because everyone can think of times when he or she violated the principle.C. useful because everyone follows it all of the time.D. useful because most people follow it most of the time.46. Barry owns a clothing store in the mall and has asked two economic consultants to develop models of consumer behavior that he can use to increase sales. Barry should choose the model that: A. does not include simplifying assumptions.B. is the most detailed and complex.C. assumes that consumers apply the cost-benefit principle.D. predicts that consumers will always prefer Barry's store to the competing stores.47. Economists use abstract models because: A. every economic situation is unique, so it is impossible to make generalizations.B. every economic situation is essentially the same, so specific details are unnecessary.C. they are useful for describing general patterns of behavior.D. computers have allowed economists to develop abstract models.48. Most people make some decisions based on intuition rather than calculation. This is: A. irrational, because intuition is often wrong.B. consistent with the economic model of decision-making, because calculating costs and benefits leads to decision-making pitfalls.C. consistent with the economic model because people intuitively compare the relative costs and benefits of the choices they face.D. inconsistent with the economic model, but rational because intuition takes into account non-financial considerations.49. Moe has a big exam tomorrow. He considered studying this evening, but decided to go out with Curly instead. Since Moe always chooses rationally, it must be true that: A. the opportunity cost of studying tonight is less than the value Moe gets from spending time with Curly.B. the opportunity cost of studying tonight is equal to the value Moe gets from spending time with Curly minus the cost of earning a low grade on the exam.C. Moe gets more benefit from spending time with Curly than from studying.D. Moe gets less benefit from spending time with Curly than from studying.50. If one fails to account for implicit costs in decision making, then applying the cost-benefit rule will be flawed because: A. the benefits will be overstated.B. the costs will be understated.C. the benefits will be understated.D. the costs will be overstated.Your classmates from the University of Chicago are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfares are $600, but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare. All other costs for the vacation are exactly $900. The most you would be willing to pay for the trip is $1400. Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation, which your parents are forcing you to attend. The Chicago-Atlanta round-trip airfares are $450.51. If you do not use the frequent-flyer coupon to fly, should you go to Miami? A. Yes, your benefit is more than your cost.B. No, your benefit is less than your cost.C. Yes, your benefit is equal to your cost.D. No, because there are no benefits in the trip.52. What is the opportunity cost of using the coupon for the Miamitrip? A. $100B. $450C. $500D. $55053. If you use the frequent-flyer coupon to fly to Atlanta, would you get any economic surplus by making the trip? A. No, there is a loss of $50.B. Yes, surplus of $350.C. Yes, surplus of $400.D. Yes, surplus of $100.54. If the Chicago-Atlanta round-trip air fare is $350, should you go to Miami? A. No, there is a loss of $50.B. No, there is a loss of $100.C. Yes, there is economic surplus of $50.D. Yes, there is economic surplus of $400.55. Pat earns $25,000 per year (after taxes), and Pat's spouse, Chris, earns $35,000 (after taxes). They have two pre-school children. Childcare for their children costs $12,000 per year. Pat has decided to stay home and take care of the children. Pat must: A. value spending time with the children by more than $25,000.B. value spending time with the children by more than $12,000.C. value spending time with the children by more than $13,000.D. value spending time with the children as much as does Chris.You paid $35 for a ticket (which is non-refundable) to see SPAM, a local rock band, in concert on Saturday. (Assume that you would not have been willing to pay any more than $35 for this concert.) Your boss called and she is looking for someone to cover a shift on Saturday at the same time as the concert. You will have to work 4 hours and she will pay you time and a half, which is $9/hr.56. Should you go to the concert instead of working Saturday? A. Yes, your benefit is more than your cost.B. No, your benefit is less than your cost.C. Yes, your benefit is equal to your cost.D. No, because there are no benefits in the concert.57. What is the opportunity cost of going to the concert? A. $1B. $9C. $35D. $3658. What is your opportunity cost, if you go to work onSaturday? A. $0B. $9C. $35D. $3659. Your economic surplus of going to work on Saturdayis: A. $0B. $1C. $35D. $36Matt has decided to purchase his textbooks for the semester. His options are to purchase the books via the Internet with next day delivery to his home at a cost of $175, or to drive to campus tomorrow to buy the books at the university bookstore at a cost of $170. Last week he drove to campus to buy a concert ticket because they offered 25 percent off the regular price of $16.因为他们提供75折的正常价格16美元。

ECON915, Seminar 4Attempt all of the following questions.1.) Assume that in a credit market with standard debt contracts, there are two groups of investors. Low risk investors (group 1) have a success probability of p 1=0.8 and a return of $150 on a successful investment of K=100, yielding an expected return of E(R 1)=0.8($150)+0.2($100)=$140. Assume further that the same amount of K=$100 is invested by either group and assuming further that 10 investors are present in either group. Based on the above, state what rate of return on successful investments, high risk investors would have to achieve in order to match the expected return of $140 if their success probability is p 2=0.6 .The expected return on a high risk investment is:E(R):= 140 = 0.6x+0.4(100), which can easily be solved for x:140=0.6x + 400.6x=140-40=100x=100/0.6=166.667=R 2, R 2/K=1.672.) Against the data provided above in Q1, what is the highest rate of return that could be achieved without violating the participation constraint for low and high risk investors respectively?The participation constraint in either case is E(Πi )>=0 which essentially implies that R S >=r. The maximum value is obtained for the point where the constraint holds with equality. So, for low risk investors we have:E(Π1)=0.8(150-100-100r) which yields 100r = 50, so r = 50/100 =0.5.This yields the following rate of return:%3535.0)7.0(5.020)10(6.0)10(8.05.0≈==+=Max ρ So the highest interest rate that can be reconciled with the low risk participation constraint is 50%. This yields a rate of return of 35% to the banking sector, because the interest rate is charged to a mixed pool of high and low risk investors.Likewise, for high risk investors we have E(Π2)=0.6(166.67-100-100r) which yields 100r = 66.67, so r = 0.67 and:()40.06.067.02,==Max ρwhich is just the expected rate of return for high risk investors.3.) Against the background of questions 1 and 2, compute which rates of return would be obtained by interest rates of r = 48%, 53% and 66% respectively.r = 48% would not yet violate low risk investors' participation constraint so:%6.33 i.e. ,34.0)7.0(48.020)10(6.0)10(8.048.0==+=A ρ For interest rates of r=53% and 66% low risk investors' participation constraint is violated, so:ρB = 0.53*0.6=0.312, i.e. 31.2%ρC = 0.66*0.6=0.396, i.e. 39.6%Note that r B >r A and yet ρB <ρA !。