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1) Once a firm is forced to consider an external cost, the price of its product willincrease and output will decreaseincrease and output will increasedecrease and output will decreasedecrease and output will increase2) Which of the following would be classified as an external cost?as more firms began hiring computer programmers, the salaries of computer programmers increased and therefore the firm's cost of production increased.you eat too much pizza and end up with a stomach acheyou are not able to study at night because there is so much noise coming from the dorm room next to yours.when you purchase a prescription drug you are not made fully aware of all the possible side effects that may result from taking the dug.3) If the government taxes a firm that is generating an external cost, the price of the firm's product will.increase and output will decreaseincrease and output will increasedecrease and output will decreasedecrease and output will increase4) If, while producing goods and services, a factory is producing pollution and not incurring the cost of this pollution, then a (n) exists.government failuremarket failureacceptable outcomenone of the above5) Recall the application about the marginal cost and marginal benefit of reducing methane emissions. What does the optimal level of methane abatement depend on?the level at which the polluting firms are able to maximize their profits the total cost of abatementthe marginal benefit of abatementit is possible to determine an optimal level of methane6) Jamal and Lauren live in the countryside 30 minutes from a city in Virginia. They moved there because they wanted to enjoy the fresh air. After a year of living in their house, the 200 acres that surround their neighborhood were zoned for an industrial property. A paper mill was built on the land and now emits strong gases that can be smelled from miles away. The paper mill's emission of gases is an example of a (npublic goodgood that imposes an external costgood that provides an external benefitefficient good7) Markets that have external costs will produce______ output than the socially efficient level, whereas markets that have external benefits will produce_______output than the socially efficient level.less; lessmore; moremore; lessless; more8) When the government imposes a tax on a firm that generates external costs, the tax isalways borne entirely by the firmalways borne entirely by the consumerusually borne by both the firm and the consumerborne only by the government9) Which of the following would be an example of an external benefit?More people start to ride the bus and as a result air pollution is reducedFirms are able to reduce their costs of production by using a more efficient technologyThe government requires polluting firms to pay a special tax A firm has just gotten permission to open a landfill on property that is adjacent to your home10) The study of external costs I a major concern oflabor economicsinternational economicsenvironmental economicsmacroeconomists 11) The idea behind the pollution tax equal to the external cost per unit of pollution is toincrease the social benefit to be above the marginal costinternalize the externalityallow the firm to evade external costsdrive polluting firms out of developed countries 12) The government imposes taxes on firms that generate external costs in an effort tomake it easier for economists to measure external costslead to a zero level of outputforce decision makers to consider the full costs of their actionslower the firm's costs of production13) The biggest problem with using a tax as a way to solve an externality problem is thatthe tax sometimes increases the external costdamages must be estimated n financial terms to determine the correct level of the taxthe firm will pass the entire tax onto the consumerthe commerce clause forbids such taxes14) An external cost of production isa cost incurred by someone other than the producerthe production cost borne by a producerthe result of the sum of private and social costanother word for a tax15) A harbor lighthouse tat guides approaching ships is an example ofa public gooda private gooda monopolya good that is rival16) Private goods arerival in consumption and their benefits are excludablenonrival in consumption and their benefit are excludablenonrival in consumption and their benefits are nonexcludablerival in consumption and their benefits are nonexcludable 17) Which of the following would NOT be considered a public good?national defenseradio broadcastspolice protectiona newspaper 18) Goods that are nonrival in consumption and that have benefits that are nonexcludable areprivate goodsneighbor effectspublic goodsnone of the above19) Based on society's perspective, what are the benefits from pollution abatement? better healthincreased enjoyment of the natural environmentlower production costsall of the above20) Taxes on a firm's external costsare designed to encourage more productionare meant to force some firms out of businessare simply meat to force decision makers to consider the full costs of their actionsare designed primarily as a way to raise money so that the government can compensate the victims of the spillover21) You are the owner and only employee of a company that repairs computers. Last year, you earned total revenues of 75,000. Your costs for equipment, rent and supplies were 10,000. To start this business you quit a job at another computer software10,00040,00050,00075,00022) You are the owner and only employee of a company that repairs computers. Last year, you earned total revenues of 75,000. Your costs for equipment, rent and supplies were 10,000. To start this business you quit a job at another computer software firm that paid 40,000 a year. Last year, your economic profits were100,00075,00050,00025,00023) Which of the following is a reason why the marginal product increase as output increases? decreasing repetitionincreasing continuityboth A and Bneither A nor B24) As more of anyone good s consumed in a given period, itstotal utility decreases, then remains constantmarginal utility decreasestotal utility decreases, then increasesmarginal utility increases 25) Dan owns a factor that manufactures smartphones. He has many costs every month to keep his factory running. Which of the following is one of Dan's fixed costs?plastic used to make the smartphoneshis electricity bill for the factoryhis mortgage on the factorymemory devices used to store music and video on the smartphones26) According to the law of diminishing marginal utilityas the consumption of a particular good increases, marginal utility increasesas the consumption of a particular good increases, marginal utility decreasestotal utility is negativeboth and c are correct27) From 1998, to 2010, the cost of electricity produced with nuclear power has______and the cost of electricity produced with sola power has_________increased; increasedincreased; decreaseddecreased; increaseddecreased; decreased28) Brandon eats four slices of pizza on a Sunday night but admits each slice of pizza doesn't taste as delicious as the previous one. This suggests that for Brandonthe marginal utility of a slice of pizza is positive but decreasingthe marginal utility of a slice of pizza is negative but increasingthe total utility of slice of pizza is declining by larger and larger incrementsthe total utility of slice of pizza is increasing by larger and larger increments29) The short run can be defined as any period of timeless than one yearin which some inputs are fixedin which all inputs are variablein which price is fixed30) Utility can be thought of as the same asopportunity costsatisfactionchoicenone of the above31) The period of time when a firm is unable to change all inputs, or factors of production, is called theeconomic termshort runaccounting termlong run32) Mario has a company that produces plastic freezer bags. His company objective is to maximizehis company's revenueshis company's total out-of-pocket costhis company's opportunity costs of each factor of productionhis company's economic profits, the difference between total revenue and total cost33) The equimarginal ruleequates the marginal utility per dollar spent on each good purchasedstates that in order to maximize utility the consumer should buy more of those goods with a high marginal utilitystates that in order to maximize utility the consumer should buy more of those goods that cost lessnone of the above34) Consumers should allocate their scarce income so thatthe marginal utility for all goods consumed is zerothe marginal utility for all goods consumed is equalthe marginal utility divided by price is equal for all goods consumedthe marginal utility divided by price is maximized for all goods consumed35) Which of the following statements about fixed costs is correct?fixed costs are not opportunity costsfixed costs must be paid even if the firm's output is zerofixed costs are always the largest portion of total costsnone of the above36) Suppose that Erin spends all of her income on two goods: pizza and fiction novels. If the price of pizza rises, thenthe current marginal utility per dollar spent on pizza will risethe current marginal utility per dollar spent on pizza will fallthe current marginal utility per dollar spent on fiction novels will risethe current marginal utility per dollar spent on fiction novels will fall37) The principle of opportunity cost iswhat someone sacrifices to get somethingthe satisfaction of obtaining the best next alternativethe choice someone has to make between two different goodsthe cost of paying for something someone needs
Solution: Questions Microeconomics