Exam 7: Efficiency, Exchange, and the Invisible Hand in Action

Suppose farmers in a given market can either grow soy beans or corn on their land. In addition, suppose an increase in the demand for corn causes the price of corn to increase. In the long run, this increase in the demand for corn is likely to ________ the price of soy beans.

Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown below. If the government provides a subsidy of $500 per ton, the equilibrium price of sugar will be ________ per ton, and the equilibrium quantity will be ________ tons per day.

A situation is efficient if it is:

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. If S3 is the market supply curve, then each firm in this market will earn an economic loss of ________ per week.

Refer to the figure below. If a price ceiling were imposed at $4, total economic surplus would be ________, which is ________ less than when the market is unregulated market.

Suppose Lando Calrissian owns a smuggling business whose total revenue is $30,000 per month. The accompanying table shows Lando's monthly expenses. If Lando weren't a smuggler, he would earn $6,000 per month working for the Rebel Alliance. Apart from pay, Lando is indifferent between working as a smuggler and working for the Rebel Alliance. Fuel \ 4,000 Mairterarce \ 12,000 Weapors \ 6,000 Bribes \ 3,000   In the long run, we would expect Lando to:

Mary Jane is willing to babysit for $6 an hour. Her neighbor has asked her to babysit for $8 an hour. Assuming Mary Jane accepts the offer:

If there is excess demand in a market, then this suggests that:

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive.   The long-run equilibrium price in this industry is:

Ingrid has been waiting for the show "Mamma Mia!" to come to town. When it finally does come, tickets cost $60. Ingrid's reservation price is $75. But when Ingrid tries to buy a ticket, they are sold out. Suppose Steven was able to purchase a ticket at the box office for $60. Steven's reservation price for the ticket is $65. If Steven attends "Mamma Mia!" and Ingrid does not, then this situation is:

Suppose several United States software design companies compete with each other in a perfectly competitive environment. If one company decides to move some of its offices to a low-wage country in order to reduce operating costs, then:

Ingrid has been waiting for the show "Mamma Mia!" to come to town. When it finally does come, tickets cost $60. Ingrid's reservation price is $75. But when Ingrid tries to buy a ticket, they are sold out. Ingrid decides to try to buy a ticket from a scalper (a person who purchased extra tickets at the box office with the intent to resell them at a higher price). If Ingrid finds someone who is willing to sell her a ticket for $70, she should:

Accounting profit minus implicit costs equals:

Refer to the table below. An output level of 25 units, this firm's accounting profit is ________, and its economic profit is ________. Quantity Total Revenue Explicit Casts Implicit Casts 10 50 36 5 15 75 63 6 20 100 93 7 25 125 125 8 30 150 161 9

Adam Smith believed that the individual pursuit of self-interest:

The figure below shows the supply and demand curves for jeans in Smallville. At the price of $60 per pair, sellers offer ________ pairs of jeans per day, and buyers wish to purchase ________ pairs of jeans a day.

Suppose the production of cotton causes substantial environmental damage because the pesticides used by cotton farmers often make their way into nearby rivers and streams, and are very harmful to fish and other wildlife. If cotton farmers do not have to pay for the environmental damage caused by the pesticides used to grow cotton, then the market equilibrium price will be ________ and the market equilibrium quantity will be ________.

One difference between the long run and the short run in a perfectly competitive industry is that:

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. If the market supply curve is given by S3, then we would expect firms to: