EC238 Chapter Notes - Chapter 7: Capital Asset, Air Purifier, Purifiers

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oliveoyster27

6 Aug 2018

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Linkage of steps 3 and 4 dose-response function: estimating response in terms, for example, of human mortality and morbidity to varying exposure levels to environmental pollutants, economists come strongly into play in step 5. Willingness to pay: the marginal damage function for increases in emissions is the same as the demand/willingness to pay function for decreases in emissions. I(cid:374)di(cid:448)iduals" pe(cid:396)(cid:272)eptio(cid:374)s of e(cid:374)(cid:448)i(cid:396)o(cid:374)(cid:373)e(cid:374)tal (cid:395)uality a(cid:396)e su(cid:271)je(cid:272)ti(cid:448)e a(cid:374)d (cid:373)ay (cid:374)ot t(cid:396)a(cid:374)slate into property valuations: calculate wtp in terms of elasticities. Identification and description of the environmental quality characteristic to be evaluated. Concluding comments on methods of valuing environmental benefits: willingness to pay vs. If environmental quality is being degraded, wta is likely a better measure. If people are being asked to indicate how much investment in improving eq they wish, wtp can be used. In practice, better to use both measures to provide a range of estimates.

Related Questions

True or False:

1. Consumer surplus is the buyer's willingness-to-pay minus the seller's opportunity cost of production.

2. If your willingness-to-pay for a hamburger is $3 and you paid $2, then your consumer surplus is $5.00

3. The opportunity cost of production for a seller includes the implicit cost of the seller's time.

4. The height of the supply curve at a selected quantity is the seller's opportunity cost of producing that marginal unit.

5. Total surplus (total well-being) is the seller's cost of production minus the buyer's willingness-to-pay.

6. The competitive market equilibrium outcome is efficient because it allocates the produced output to the buyers who place the highest value on the good

7. Producer surplus is the area above the supply curve and below the price.

8. The competitive market equilibrium outcome maximizes total surplus (total well-being)

9. Producing and consuming more of a good will always increase the total surplus(total well-being).

redelephant805

Considering the demand side of a market for a good, it is reasonable to expect that:
i. demand curves for a given good are identical between consumers
ii. demand curves for a given good differ between consumers
iii. an individual has identical demand curves for different goods
iv. an individual has different demand curves for different goods

iii

i and iii

ii and iv

Suppose the market demand curve for a good is represented by the linear equation Q = 60 - 0.75P. If the market price were to increase from P = $20 to P = $40, then holding all other factors constant:

the quantity demanded would decrease by 10 units and total expenditures on the good would decrease by $400

the quantity demanded would decrease by 15 units and total expenditures on the good would increase by $300

the quantity demanded would decrease by 30 units and total expenditures on the good would increase by $1200

the quantity demanded would increase by 20 units and total expenditures on the good would decrease by $800

the quantity demanded would increase by 10 units and total expenditures on the good would increase by $100

the quantity demanded would increase by 25 units and total expenditures on the good would increase by $1000

A perfectly competitive firms supply curve for a good identifies the:
i. minimum quantity supplied at each price, holding all other factors constant
ii. firms minimum willingness to accept for each incremental unit of the good (e.g., the first unit, second unit, etc.), holding all other factors constant
iii. maximum quantity supplied at each price, holding all other factors constant
iv. firms maximum willingness to accept for each incremental unit of the good (e.g., the first unit, second unit, etc.), holding all other factors constant

Considering the supply side of a market for a good, if a firms supply curve were vertical, then:

the law of supply holds, and quantity supplied is completely insensitive to changes in price

the law of supply holds, and quantity supplied is highly sensitive to changes in price

the law of supply fails to hold, and quantity supplied is completely insensitive to changes in price

the law of supply fails to hold, and quantity supplied is highly sensitive to changes in price

none of the above

The determinants of supply are:
i. factors other than price that will affect the quantity of a good or service a firm is willing and able to purchase
ii. factors that affect a producers maximum willingness-to-accept to produce various quantities of a good
iii. factors that affect a producers minimum willingness-to-accept to produce various quantities of a good

iii

i and ii

i and iii

The market supply curve for a good is derived by:
i. horizontally summing the supply curves of the individual firms in the market
ii. vertically summing the supply curves of the individual firms in the market
iii. summing the quantity supplied by each firm at a given price and then repeating this over the range of prices

iii

i and ii

i and iii

If the level of technology used in the production of a good improves, and assuming the quality of the good does not change, then:
i. more output may be obtained with a given amount of inputs compared to before the technological improvement
ii. a given amount of output may be obtained with fewer inputs compared to before the technological improvement
iii. the firm will increase its use of other inputs, such as the number of workers it employs
iv. market demand for the good will increase

Considering the market for gasoline, which of the following would result in an increase in market supply?
i. a decrease in the price of gasoline
ii. an improvement in oil extraction and refining technologies
iii. an increase in the wage rates paid to gasoline refinery workers
iv. a decrease in the price of crude oil, a key input used to produce gasoline
v. the imposition of a federal gasoline tax aimed a decreasing the emission of greenhouse gases

Suppose a market has two identical sellers. If each sellers supply function is given by P = 20 + Q, then the market supply function is:

From the market framework discussed in class and the readings, it may be concluded that in order for a good to be exchanged between a seller and a buyer, it must be that:

buyer maximum willingness-to-pay is greater than seller minimum willingness-to-accept

buyer maximum willingness-to-pay is greater than or equal to seller minimum willingness-to-accept

buyer minimum willingness-to-pay is greater than or equal to seller maximum willingness-to-accept

buyer minimum willingness-to-pay is greater than seller maximum willingness-to-accept

If the market demand function is given by P = 80 - 0.3Q and the market supply is given by P = 20 + 0.1Q, then the equilibrium price and quantity are:

Of concern are the affects of sustained summer droughts on the domestic supply of wheat. Noting that wheat is a primary ingredient in the production of bread and that potatoes are a substitute for bread, if the supply of wheat declines then it is reasonable to expect:

the price of wheat to fall, the supply of bread to increase, and the demand for potatoes to increase

the price of wheat to fall, the supply of bread to increase, and the demand for potatoes to decrease

the price of wheat to rise, the supply of bread to decrease, and the demand for potatoes to decrease

the price of wheat to rise, the supply of bread to decrease, and the demand for potatoes to increase

the price of wheat to rise, the supply of bread to increase, and the demand for potatoes to increase

the price of wheat to rise, the supply of bread to increase, and the demand for potatoes to decrease

Suppose a perfectly competitive market is initially in equilibrium. If market demand and supply decrease simultaneously, then equilibrium:

price will rise, but the equilibrium quantity may either rise, fall, or remain unchanged

quantity will rise, but the equilibrium price may either rise, fall, or remain unchanged

price will fall, but the equilibrium quantity may either rise, fall, or remain unchanged

quantity will fall, but the equilibrium price may either rise, fall, or remain unchanged

Considering the demand side of a market for a good, the consumer surplus derived by an individual:
i. is the difference between the maximum amount the consumer is willing to pay on each unit and the minimum prices that producers are willing to accept
ii. is the difference between the minimum amount the consumer is willing to pay on each unit and the price he/she
actually pays
iii. is the difference between the maximum amount the consumer is willing to pay on each unit and the price he/she actually pays
iv. will decrease if price increases

Suppose the market demand for a good is described by the equation P = 120 - 2Q. If a change in market supply results in price decreasing from P0 = $80 to P1 = $70, then the resulting change in consumer surplus is:

1. According to economic theory, the efficient amount of pollution in the economy is the point at which:

a. All your enemies have been vanquished by the amount of pollution you have produced

b. The total benefits of eliminating pollution are equal to the total costs of eliminating pollution

c. The marginal benefits of reducing pollution further are equal to the marginal costs of reducing pollution further

d. There is no pollution in the economy

2. Which of the following would be considered a normative statement?

a. The percentage of income earned by the top 1% of earners has been increasing over time

b. The amount of money earned by those in the bottom and middle of the income distribution should be higher

c. Income inequality has been increasing in the U.S. in recent years

d. All of the above are normative statements

3. Which of the following could be considered an indirect response to incentives provided by government programs offering wage subsidies to companies that hire more workers?

a. Companies often replace fullâtime workers with new partâtime workers whose wages are being subsidized

b. Companies often hire new workers because the subsidies reduce the cost of workers

c. Companies often decide that they do not need to hire new workers

d. All of the above

4. Which of the following is the best example of the opportunity cost of running your own business?

a. The salary you could have earned working for another company

b. The wages paid to employees of your business

c. The interest charges on money you borrowed to start your business

d. None of the above

5. A decrease in the price of a good leads to

a. A leftward shift of the demand curve

b. A rightward shift of the demand curve

c. A movement to the left along the demand curve

d. A movement to the right along the demand curve

6. Which of the following would cause the supply curve to shift to the right in the market for Hot Pockets?

a. An increase in consumer income in the area

b. An increase in the price of Hot Pockets

c. A decrease in the price of âmeatâ used to produce Hot Pockets

d. An increase in the wages of workers in the Hot Pockets production facilities

EC238 Chapter Notes - Chapter 7: Capital Asset, Air Purifier, Purifiers

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