FPC1 Flashcards Questions with
All Correct Answers
Which of the following equations is correct? - Answer-MSC = MC + marginal external
cost
If the marginal social cost of generating a kilowatt of electricity is $0.10 and the marginal
private cost is $0.08, what is the marginal external cost? - Answer-$0.02
When a person receives a flu vaccination, the ________ is the additional benefit the
person receives from getting the shot. - Answer-marginal private benefit
If the marginal private benefit of attending college for Shelly is $40,000 and the marginal
external benefit is $15,000, she will attend college if the cost of attendance is no more
than - Answer-$40,000.
If a government action is designed to achieve efficiency, then the action must have the
market produce the amount of output so that the - Answer-marginal social cost equals
the marginal social benefit.
If all education in the United States were provided by private, tuition-charging schools, -
Answer-too little education would be consumed.
A good or service with a positive externality is one which (Choose 2) - Answer-the
marginal social benefit exceeds the marginal private benefit.
there will be underproduction of the good.
Nadir and Nina consume the same goods. If Nadir has more income than Nina, then
Nina's budget line will - Answer-lie to the left of Nadir's budget line.
The fact that diamonds have a much higher price than water - Answer-does not violate
the rules of utility maximization because water's marginal utility is low.
The solution to the paradox of value is found by looking at which of the following? -
Answer-the difference between marginal utility and total utility
Billy has a $20 budget to spend on yogurt and cereal. Yogurt cost $2 each and cereal
costs $4 each. Suppose that the quantity of yogurt is on the vertical axis and the
quantity of cereal is on the horizontal axis. The budget line's vertical intercept equals
________. - Answer-10 yogurts
, To resolve the paradox of value, you must - Answer-distinguish between marginal and
total utility.
One reason why the price of diamonds is so high is because the - Answer-marginal
utility of diamonds is high.
Why does the paradox of value between diamonds and water arise? - Answer-because
water has a low price and a low marginal utility, while diamonds have a high price and a
high marginal utility
Related to the paradox of value, which of the following statements is correct? - Answer-
The marginal utility of water is small but the total utility is enormous.
The paradox of value with respect to water and diamonds can be explained using
consumer surplus because - Answer-water is cheap but provides a large consumer
surplus, while diamonds are expensive with a small consumer surplus.
The paradox of value refers to the - Answer-fact that water is vital but cheap while
diamonds are relatively useless but expensive.
________ in consumer surplus occurs when the price of a good ________. - Answer-An
increase; decreases and consumers can buy more of the good at the lower price
A budget line (Choose 2) - Answer-shifts outward with no change in its slope if the
budget increases and prices don't change.
has a slope equal to the opportunity cost
The long run average cost curve - Answer-shows the lowest average cost facing a firm
as it increases output changing both its plant and labor force.
The long-run average cost curve is U-shaped because of which of the following? -
Answer-economies and diseconomies of scale
A normal profit is defined as - Answer-the return to entrepreneurship.
Jennifer owns a pig farm near Salina, Kansas. Last year she earned $39,000 in total
revenue while incurring $38,000 in explicit costs. She could have earned $27,000 as a
teacher in Salina. These are all her revenue and costs. Therefore Jennifer earned an -
Answer-accounting profit of $1,000 but incurred an economic loss of $26,000.
Suppose a firm's total revenue is $1,000,000. The firm has incurred explicit costs of
$750,000. There is also $50,000 of forgone wages by the owner, $10,000 of forgone
interest by the owner, $3,000 worth of economic depreciation, and $20,000 worth of
normal profit. What is the firm's economic profit? - Answer-$167,000
All Correct Answers
Which of the following equations is correct? - Answer-MSC = MC + marginal external
cost
If the marginal social cost of generating a kilowatt of electricity is $0.10 and the marginal
private cost is $0.08, what is the marginal external cost? - Answer-$0.02
When a person receives a flu vaccination, the ________ is the additional benefit the
person receives from getting the shot. - Answer-marginal private benefit
If the marginal private benefit of attending college for Shelly is $40,000 and the marginal
external benefit is $15,000, she will attend college if the cost of attendance is no more
than - Answer-$40,000.
If a government action is designed to achieve efficiency, then the action must have the
market produce the amount of output so that the - Answer-marginal social cost equals
the marginal social benefit.
If all education in the United States were provided by private, tuition-charging schools, -
Answer-too little education would be consumed.
A good or service with a positive externality is one which (Choose 2) - Answer-the
marginal social benefit exceeds the marginal private benefit.
there will be underproduction of the good.
Nadir and Nina consume the same goods. If Nadir has more income than Nina, then
Nina's budget line will - Answer-lie to the left of Nadir's budget line.
The fact that diamonds have a much higher price than water - Answer-does not violate
the rules of utility maximization because water's marginal utility is low.
The solution to the paradox of value is found by looking at which of the following? -
Answer-the difference between marginal utility and total utility
Billy has a $20 budget to spend on yogurt and cereal. Yogurt cost $2 each and cereal
costs $4 each. Suppose that the quantity of yogurt is on the vertical axis and the
quantity of cereal is on the horizontal axis. The budget line's vertical intercept equals
________. - Answer-10 yogurts
, To resolve the paradox of value, you must - Answer-distinguish between marginal and
total utility.
One reason why the price of diamonds is so high is because the - Answer-marginal
utility of diamonds is high.
Why does the paradox of value between diamonds and water arise? - Answer-because
water has a low price and a low marginal utility, while diamonds have a high price and a
high marginal utility
Related to the paradox of value, which of the following statements is correct? - Answer-
The marginal utility of water is small but the total utility is enormous.
The paradox of value with respect to water and diamonds can be explained using
consumer surplus because - Answer-water is cheap but provides a large consumer
surplus, while diamonds are expensive with a small consumer surplus.
The paradox of value refers to the - Answer-fact that water is vital but cheap while
diamonds are relatively useless but expensive.
________ in consumer surplus occurs when the price of a good ________. - Answer-An
increase; decreases and consumers can buy more of the good at the lower price
A budget line (Choose 2) - Answer-shifts outward with no change in its slope if the
budget increases and prices don't change.
has a slope equal to the opportunity cost
The long run average cost curve - Answer-shows the lowest average cost facing a firm
as it increases output changing both its plant and labor force.
The long-run average cost curve is U-shaped because of which of the following? -
Answer-economies and diseconomies of scale
A normal profit is defined as - Answer-the return to entrepreneurship.
Jennifer owns a pig farm near Salina, Kansas. Last year she earned $39,000 in total
revenue while incurring $38,000 in explicit costs. She could have earned $27,000 as a
teacher in Salina. These are all her revenue and costs. Therefore Jennifer earned an -
Answer-accounting profit of $1,000 but incurred an economic loss of $26,000.
Suppose a firm's total revenue is $1,000,000. The firm has incurred explicit costs of
$750,000. There is also $50,000 of forgone wages by the owner, $10,000 of forgone
interest by the owner, $3,000 worth of economic depreciation, and $20,000 worth of
normal profit. What is the firm's economic profit? - Answer-$167,000
