In the short run, if a firm operates, it earns a profit of $500. The fixed costs of the firm are $100. This firm has a producer surplus of A) $500. B) $100. C) $400. D) $600. ANSWER D
Date: September 9th, 2020
Consumers who are more sensitive to changes in price suffer a greater loss of consumer surplus from any given price increase. Indicate whether the statement is true or false ANSWER False. Consumers who are more sensitive to the price increase will reduce their purchase of the good by a greater extent than those who […]
Date: September 9th, 2020
The change in total welfare from a 10% increase in price will depend only on the elasticity of demand. Indicate whether the statement is true or false ANSWER False. The effect of a price change also depends on revenue changes.
Date: September 9th, 2020
Producer surplus is the sum of the profits earned by all firms in a market. Indicate whether the statement is true or false ANSWER False. This definition ignores fixed costs. Producer surplus minus fixed costs equals profits.
Date: September 9th, 2020
Sarah and David both have linear demand curves for lemonade. Sarah’s demand curve for lemonade intersects David’s demand curve at a price of 50 cents per glass. Sarah’s demand curve is more inelastic than David’s. A change in the price of lemonade from 50 cents to 25 cents per glass will A) decrease Sarah’s consumer […]
Date: September 9th, 2020
If entry is limited due to a limited input, firms in that market earn long run economic profit. Indicate whether the statement is true or false ANSWER False. The price of the limited input will be bid up until zero economic profits result in the market that uses the input.
Date: September 9th, 2020
In the long run, firms in a competitive market make zero economic profit. This induces most firms to leave the industry. Indicate whether the statement is true or false ANSWER False. Those firm cannot make themselves better off by moving their resources into another industry because all opportunity cost is covered.
Date: September 9th, 2020
If lower-income households spend a greater share of their income on cigarettes than do higher-income households, then a tax that raises the price of cigarettes will A) cause lower-income households to incur a greater loss of consumer surplus than that incurred by higher-income households. B) cause higher-income households to incur a greater loss of consumer […]
Date: September 9th, 2020
Mary purchased a stuffed animal toy for $5. After a few weeks, someone offered her $100 for the toy. Mary refused. One can conclude that Mary’s consumer surplus from the toy is A) less than $5. B) at least $95. C) at least $100. D) $105. ANSWER B
Date: September 9th, 2020
You enter a store and buy a bottle of soda. Do you usually receive consumer surplus? A) Yes, because you wouldn’t buy the soda if your willingness to pay would be less than the price. B) Yes, because you are thirsty. C) No, because you value other drinks more. D) No, because you have less […]
Date: September 9th, 2020
