Author: Anonymous

Which of the following will shift the demand curve for a factor of production to the left?

Maya has a limited weekly income of $18, and she spends it all on books and pencils. Assume the price of each book is $4 and the price of pencils is $1 per unit. Table: Maya’s Marginal Benefits and Budget Allocation for Books and Pencils Quantity of Books Marginal Benefit of Books Quantity of Pencils Marginal Benefit of Pencils 1 $28 1 $32 2 $16 2 $16 3 $4 3 $8 4 $2 4 $4 5 $1 5 $2   Use the information in the table to answer questions a-d. Calculate the total consumer surplus from books if Maya buys 5 books. Show your work. (3 points) Given her weekly income, would Maya be able to buy 3 books and 2 units of pencils? Explain using numbers. (3 points) Identify the quantity of books and the quantity of pencils that will maximize Maya’s total benefit given her weekly income. Explain using marginal analysis. (3 points) Assume books are produced in a perfectly competitive market and that there is an increase in the number of buyers in the market for books. Would Maya’s total consumer surplus from books if she buys 5 books increase, decrease, or stay the same compared to your answer in part (a)? Explain. (3 points) Will the quantity of books that will maximize Maya’s total benefit increase, decrease, or stay the same? Explain. (3 points)

RedGold Farms is a firm that produces and sells tomatoes. The market for tomatoes is perfectly competitive. The Marginal Private Benefit (MPB), Marginal Social Benefit (MSB), and Marginal Social Cost (MSC) are shown on the following graph. This graph shows RedGold Farms’ market for tomatoes, with price per unit on the vertical axis ranging from $4 to $8, and quantity of output on the horizontal axis. The downward-sloping Marginal Private Benefit (MPB) curve and the downward-sloping Marginal Social Benefit (MSB) curve are drawn, with MSB above MPB. An upward-sloping curve labeled MPC equals MSC represents marginal private and social costs. Horizontal dashed lines indicate price levels at $4, $5, $7, and $8, while vertical dashed lines mark quantities at Q0, Q1, and Q2. The graph illustrates potential market outcomes, showing where private and social benefits differ from social costs in a perfectly competitive market for tomatoes. Use the graph to answer questions a-d. Identify the kind of market failure represented by this graph. (3 points) Using numbers from the graph, identify the marginal external benefit. (3 points) Assume the tomato market is in short-run equilibrium and RedGold hires workers in a perfectly competitive labor market at a wage of $20 per hour. The marginal product of the last worker hired was 6 units of tomatoes per hour. Calculate the change in RedGold’s profit per hour from the last worker hired. Show your work. (3 points) Suppose that the government decides to provide a per-unit subsidy to consumers who buy tomatoes. How would the per-unit subsidy affect RedGold’s marginal revenue product curve? Explain. (3 points) Instead of hiring workers in a perfectly competitive labor market, assume RedGold hires workers in a monopsony labor market. Will the number of workers hired increase, decrease, or stay the same? Explain. (3 points)

Which of the following will occur when wage rates decrease in a given labor market?

When the demand for new homes decreases, the demand for construction workers who build homes decreases. This relationship illustrates the concept of

Which of the following is true of the marginal revenue curve for a monopolistically competitive firm?

At a given quantity of output of a firm, if the marginal product of capital equals the marginal product of labor and the wage rate equals the rental rate of capital, then

A firm with market power sells its product in two markets. The firm faces the same cost curves in both markets but faces a relatively elastic demand in one market for its product and a relatively inelastic demand in the other market for that same product. Which of the following will increase the firm’s profits?

In the short run in perfect competition, the industry’s demand curve and a firm’s demand curve have which of the following slopes?

Which of the following is always true for a firm with monopsony power?