3. (13 pts.) Please answer each of the following multiple choice questions by HIGHLIGHTING OR BOLDING the response that best answers the question. Units of Labor Total Output (Q) Marginal Product (MP) 1. Of the following, the private action(s) most likely to result in a negative externality is(are): o - A. your decision to smoke cigarettes near a bunch of your neighbors. B. your decision to throw litter out the window of your car. C. your decision to crank your heavy metal music on the radio while driving past the local senior retirement home. D. all of the above are likely to create negative externalities. units, ri Consider two goods - one that generates external benefits (i.e. positive externalities) and 6. Based on the table above, the Marginal Product of the fifth unit of labor is another that generates external costs (ie. negative externalities). Relative to the socially-best and Diminishing Marginal Productivity first sets in with the addition of the worker. outcome, the free market (i.e. no governmental intervention) would tend to produce: When the Marginal Product of Labor begins to fall, the Marginal Cost of production begins to A. too much of the good that generates external costs and too little of the good that generates external benefits. A. 8; third; rise B. 8, fourth fall B. too little of the good that generates external costs and too much of the good that generates C. 104: third fall external benefits. D. 104: fifth; rise C. too little of both goods. D. too much of both goods. (Hint Look at your Productivity Graph from your note set!) The Marginal Product (MP) of a variable input (e.g. labor) reaches its maximum level: In the absence of government action, the private market would probably not provide as much A. when total product is at its maximum street lighting (Le. think light poles) as is socially desirable because: B. when average product is at its maximum A. the private benefits are greater than the private costs of providing street lighting. C. at a smaller level of the variable input than where average product reaches its maximum B. the use of this lighting by one person will significantly reduce their availability to others. D. at a greater level of the variable input than where average product reaches its maximum C. individuals are too poorly informed about the value of this street lighting. D. it is difficult to prevent free riders from benefiting from such lighting. Which of the following is most likely to be a fixed cost for a business in the Short Run? payment for supplies used in manufacturing goods From highest to lowest, order the below groups in terms of their official U.S. poverty rate property taxes for the business last year. income taxes for the business A. children; Blacks; Southerners; female-headed households with no husband present . all of the above are fixed costs in the short run. female-headed households with no husband present, Blacks; Southerners; children C. Blacks, female-headed households with no husband present; children; Southerners The portion of a Long-Run Average Cost (LRAC) curve where average costs are decreasing D. female-headed households with no husband present, Blacks; children; Southerners as a firm expands reflects A. none of the below Suppose that Ben O'Dril has allocated his entire budget to the purchase of cough syrup and diseconomies of scale Kleenex tissues. The Marginal Utility of the last bottle of cough syrup purchased is 280 utils economies of scale and each bottle of cough syrup costs $7. The Marginal Utility of the last box of Kleenex D. lower wages purchased is 90 utils and each box of Kleenex costs $2. Is this the utility-maximizing combination for Mr. O'Drill? 10. Dr. Faye Slift recently began running a plastic surgery clinic. Last month she took in $60,000 A. Yes. Ben should not change his consumption choice, as he is already maximizing his total in revenue and paid $40,000 in explicit/accounting costs. Did Dr. Slift make an economic utility. profit (as opposed to an accounting profit) last month? B. No. Ben would be made happier if he purchased more boxes of Kleenex and fewer bottles A. Definitely yes. Dr. Slift's economic profit equaled $20,000. of cough syrup because Kleenex is cheaper than bottles of cough syrup. B. Definitely not. C. No. Ben would be made happier if he purchased more boxes of Kleenex and fewer bottles C. Yes. If Dr. Slift also considers her implicit costs, it is clear that her economic profit will of cough syrup because he gets more marginal utility per dollar ("bang per buck") from exceed $20,000. the Kleenex. There isn't enough information to determine is she made a positive economic profit last D. No. Ben would be made happier if he purchased more bottles of cough syrup and fewer month boxes of Kleenex because he likes bottles of cough syrup more than Kleenex tissues. (NEXT PAGE) (NEXT PAGE)