economics assignment

Intermediate Microeconomics (Econ 021)

July/24/2020

Quiz 4 (Time Allotted: 30 minutes)

Student Name: ___________________________________ Score:_____/30

Part I: Multiple choice. Answer all questions in this part. (12 marks).

1. Which statement is true about producer surplus

(a) The amount a seller is paid for a good plus the sellers cost of providing it

(b) The amount a seller is paid for a good minus the sellers cost of providing it

(c) The value of everything a smaller must give up to produce a good

(d) The extra money producers make extra

2. Which statement about deadweight loss is true:

(a) The fall in total surplus that that results from a market distortion

(b) Welfare spending is consumption

(c) Deadweight is not a binding price ceiling

(d) A larger at the equilibrium quantity and price more than any other quantity and price.

3. Which of these qualify as an example of a negative externality

(a) Increasing demand

(b) Net welfare loss

(c) Air pollution

(d) Increasing supply

4. If the product of Phone production yields a negative externality, then the social-cost curve lies

above the supply curve, and the socially optimal quantity is ______than the equilibrium quantity

(a) Greater

(b) Below

(c) Less

(d) Above

The figure below will be used to answer questions 5 and 6. The Figure 1 shown depicts average total

cost functions for a firm that produces automobiles.

Figure 1

5. Referring to Figure 1, which of the curves is most likely to characterize the short-term average

total cost curve of the biggest factory?

(a) ATCa

(b) ATCb

(c) ATCc

(d) ATCd

6. Referring Figure 1, at levels of output above point N the firm experiences

(a) Economies of scale

(b) Diseconomies of scale

(c) Economic profit

(d) Accounting profit

7. The tax code exempts the first 25000 of income from taxation and then taxes 15 percent of all

income above that level, then a person who earns $70,000 has an average tax rate of ____

percent and a marginal tax rate of ____ percent

(a)25 and 8

(b)18and6

(c) 9.64 and 15

(d)15 and 9.64

8. An example of an implicit cost of production would be

(a) The cost of raw materials for producing milk in factory

(b) The cost of delivery bikes in a business that does not make a lot of deliveries

(c) The income a businessman could have earned working for another person

(d) All the above

9. Economic profit is equal to

(a) Total revenue – the opportunity cost of producing goods and services

(b) Average revenue – the average cost of producing the last unit of a good or service.

(c) Total revenue – the accounting cost of producing goods and services

(d) Total revenue- the explicit cost of producing goods and services

Figure 2

10. Figure 2 depicts a production for a firm that produces banana cookies. Use the graph below to

answer the following question; as the number of workers increase

(a) Total output increases, but at a decreasing rate.

(b) Total output decreases

(c) Marginal product increases, but at a decreasing rate

(d) Marginal product increases

11. Which is an explanation for why the demand curve is down sloping?

(a) A) normal goods

(b) B) the law of supply

(c) C) the law of diminishing marginal utility

(d) D) the law of increasing opportunity cost

12. When marginal utility is decreasing but positive, total utility is:

(a) increasing at a decreasing rate.

(b) decreasing at a decreasing rate.

(c) increasing at an increasing rate.

(d) decreasing at an increasing rate.

PART II Answer all questions. (18 marks)

QUESTION 1: Analyze the graph below and answer the questions that follow. (6 marks)

(i) What type of elasticity is shown in this graph?

(ii) List the causes of this elasticity

Question 2: Comprehensive Question (12 marks)

The "Wuhan Ka Hei Ya" shop specializing in food products rents a building at the corner of Wuluo Lu

JiedaoKou. In the short run, it can vary its output (the number of duck meat sold) only by varying the

number of workers it employs. Each Wuhan Ka Hei Ya employee is paid a fixed wage.

Over the years, Wu Wei, the owner of " Wuhan Ka Hei Ya ", has tried hiring different numbers of

workers. The data about the average productivity of each worker (also known as the Average Product of

Labor) for each number of workers are given in the table below.

Number of

workers

Average

productivity

Total

Product

Marginal

Product

1 5

2 7

3 10

4 11

5 10

6 9

(i) (4marks) Complete the table by calculating the Total Product of Labor (total output of the firm) and Marginal Product of Labor corresponding to each number of workers.

(ii) (2 marks) At which worker does the Law of Diminishing Marginal Returns start working? How do you know?

(iii) (2 marks) Using the Wuhan Ka Hei Ya example, explain why every firm, as it hires more people in an attempt to increase its output, will sooner or later hit the range of diminishing

marginal returns.

(iv) (2 marks) When Mr. Wei's son looked at the table, he said to his dad: "Hiring 5th and 6th person makes no sense!" Do you agree? Explain.

(v) (2 marks) Currently, " Wuhan Ka Hei Ya" employs 3 workers, each of whom is paid $200 a