Ag Econ 1041
Quiz 9, 30 points
November 6, 2012
Name ___KEY_______________________
8 a.m. Section
True/False – one point each
T
F
1.
Incentives are used to encourage a particular behavior.
T
F
2.
A normal profit is a cost to the firm because the owners will increase their
investment in the business if they do not receive a normal profit.
T
F
3.
If the marginal cost of producing ceiling fans exceeds average variable costs,
then average variable costs of fans must be declining.
T
F
4.
In the short run a firm will always decide to close down if demand is less than
average variable cost at all outputs.
T
F
5.
The portion of the average fixed cost curve lying above average variable cost
is the supply curve.
T
F
6.
Marginal utility is the utility derived from consuming additional increments of
a good.
Multiple choice – two points each
__D___ 7. An economic improvement occurs when
a) A reallocation of resources that helps one person hurts someone else
b) Resources are adequate to meet society’s needs
c) A reallocation of resources could make everyone worse off
d) A reallocation of resources can make someone better off without hurting
someone else
e) None of the above
__A___ 8. When marginal cost exceeds price, a profit-maximizing competitive firm will
a) Decrease production
b) Not change the level of output
c) Increase production
d) Produce nothing
e) Turn on the bat signal
TURN THE QUIZ OVER
Short answers – five points each
9. Market solutions are efficient and the government should mimic their result is the premise of
the ____Coase________ ___Theorem___________________.
10. Why do room rental rates increase in the Ozarks in the summer compared to winter?
Demand is greater in summer or demand is less in winter
Ten points
11. Diagram a per unit tax on gasoline. Be complete. Show deadweight loss and the amount of
tax collected.
a) What is the impact on consumer surplus? __it decreases_______________________
b) Why are consumers likely to eventually pay the majority of the tax assessed?
__inelastic demand_________________________
S1
P
S
P1
TAX
DWL
P0
D
0
Q1
Q0
Q