Eric and Kyle are fishermen with different equipment and, as a result, different costs for catching fish. Eric's costs for catching fish are $875 per ton for the first five tons and then $2,188 per ton for any additional tons. Kyle can harvest fish at a cost of $2,625 per ton for the first 15 tons and then $1,225 for any additional tons. Instructions:
a. If society wants 30 tons of fish and for some reason will only allow one of the two guys to do all the fishing, which one should society choose if it wants to minimize the cost of catching those 30 tons of fish? (EricKyle). How much will the total cost of catching the fish be? What will the average cost per ton be for the 30 tons?
b. If society wants 30 tons of fish and wants them for the least cost regardless of who catches them, how much should Eric and Kyle each catch? Eric = tons. Kyle = tons. How much will the total cost of catching 30 tons be? What will the average cost per ton be for the 30 tons? Instructions: Round your answer to 2 decimal places.
c. Suppose that Eric and Kyle can both sell whatever amount of fish they catch for $3,000 per ton. Also suppose that Eric is initially given ITQs for 30 tons of fish, while Kyle is given ITQs for zero tons of fish. Suppose that Kyle is willing to pay Eric $550 per ton for as many tons of ITQs as Eric is willing to sell to Kyle. How much profit would Eric make if he used all the ITQs himself? What if Eric sold 25 tons worth of his ITQs to Kyle while using the other 5 tons of ITQs to fish for himself?
d. What price per ton can Kyle offer to pay Eric for his 25 tons of ITQs such that Eric would make exactly as much money from that deal (in which he sells 25 tons worth of ITQs to Kyle while using the rest to fish for himself) as he would by using all 30 tons of ITQs for himself? Instructions: Round your answer to 1 decimal place. $ per ton of ITQs.
Eric and Kyle are fishermen with different equipment and, as a result, different costs for catching fish. Eric's costs for catching fish are $875 per ton for the first five tons and then $2,188 per ton for any additional tons. Kyle can harvest fish at a cost of $2,625 per ton for the first 15 tons and then $1,225 for any additional tons. Instructions:
a. If society wants 30 tons of fish and for some reason will only allow one of the two guys to do all the fishing, which one should society choose if it wants to minimize the cost of catching those 30 tons of fish? (EricKyle). How much will the total cost of catching the fish be? What will the average cost per ton be for the 30 tons?
b. If society wants 30 tons of fish and wants them for the least cost regardless of who catches them, how much should Eric and Kyle each catch? Eric = tons. Kyle = tons. How much will the total cost of catching 30 tons be? What will the average cost per ton be for the 30 tons? Instructions: Round your answer to 2 decimal places.
c. Suppose that Eric and Kyle can both sell whatever amount of fish they catch for $3,000 per ton. Also suppose that Eric is initially given ITQs for 30 tons of fish, while Kyle is given ITQs for zero tons of fish. Suppose that Kyle is willing to pay Eric $550 per ton for as many tons of ITQs as Eric is willing to sell to Kyle. How much profit would Eric make if he used all the ITQs himself? What if Eric sold 25 tons worth of his ITQs to Kyle while using the other 5 tons of ITQs to fish for himself?
d. What price per ton can Kyle offer to pay Eric for his 25 tons of ITQs such that Eric would make exactly as much money from that deal (in which he sells 25 tons worth of ITQs to Kyle while using the rest to fish for himself) as he would by using all 30 tons of ITQs for himself? Instructions: Round your answer to 1 decimal place. $ per ton of ITQs.
Related textbook solutions
Related questions
PLEASE ANSWER EACH QUESTION WITH A, B, C, and D. NOT ANSWERING ALL QUESTIONS OR INCORRECT ANSWERS WILL RESULT IN A THUMBS DOWN.
Question 1: Which of the following is not needed for price discrimination to be possible?
| Ā | Ā |
A. The firm must have market power. |
| Ā | Ā |
B. The firm must be able to prevent resale and arbitrage. |
| Ā | Ā |
C. The firm must eventually learn about its customers' demands. |
| Ā | Ā |
D. The firm's customers must have different demand curves. |
Ā
Question 2: Relative to standard monopoly pricing, first-degree price discrimination results in:
| Ā | A. |
higher consumer surplus, higher producer surplus, and higher total surplus. |
| Ā | B. |
lower consumer surplus, higher producer surplus, and higher total surplus. |
| Ā | C. |
lower consumer surplus, higher producer surplus, and lower total surplus. |
| Ā | D. |
lower consumer surplus, lower producer surplus, and lower total surplus. |
Ā
Question 3: Relative to perfect competition, first-degree price discrimination results in:
| Ā | Ā |
A. higher consumer surplus, higher producer surplus, and higher total surplus. |
| Ā | Ā |
B. lower consumer surplus, higher producer surplus, and equal total surplus. |
| Ā | Ā |
C. lower consumer surplus, higher producer surplus, and equal total surplus. |
| Ā | Ā |
D. lower consumer surplus, lower producer surplus, and lower total surplus. |
Question 4: If market demand is P = 100 - Q and the firm has a constant marginal cost of 20, then with first-degree price discrimination, the firm's producer surplus will be:
| A. |
$800. |
| B. |
$1,600. |
| C. |
$2,400. |
| D. |
$3,200. |
Question 5: For third-degree discrimination to be possible, which of the following features is not required?
| Ā | Ā |
A. market power |
| Ā | Ā |
B. prevention of resale |
| Ā | Ā |
C. identification of each customer's demand before purchase |
| Ā | Ā |
D. customers with different demand curves |
Ā
Question 6: A golf course has frequent players whose demand is Qf = 260 - 0.4P and infrequent players whose demand is Qi = 10 - 0.1P. The combined market demand is Q = 34 - 0.4P. The marginal cost and average total cost of providing a round of golf are $20. How much higher will the profit be if the golf course uses third-degree price discrimination instead of charging all golfers the same price?
| A. |
$0 |
| B. |
$7.50 |
| C. |
$10 |
| D. |
$110 |
Ā
Question 7: An airline sells seats on its flights to business travelers whose demand is QB = 300 - P and vacation travelers whose demand is QV = 150 - 0.5P. The combined market demand is Q = 450 - 1.5P. The marginal cost and average total cost of providing a seat on a flight are $200. How much higher will profit be if the airline uses third-degree price discrimination instead of charging all travelers the same price?
| A. |
$0 |
| B. |
$250 |
| C. |
$400 |
| D. |
$1,000 |
Ā
Question 8: If a firm practices third-degree price discrimination, the price charged should be higher in the market where demand is:
| Ā | A. |
Higher. |
| Ā | B. |
Lower. |
| Ā | C. |
More price elastic. |
| Ā | D. |
Less price is elastic. |
Ā
Question 9: The key difference between markets where third-degree price discrimination is possible and markets where second-degree price discrimination is possible is whether:
| Ā | Ā |
A. resale is possible. |
| Ā | Ā |
B. customers have the same demand curves. |
| Ā | Ā |
C. firms have market power. |
| Ā | Ā |
D. firms can identify customers' demand before the customers make a purchase. |
Ā
Question 10: For price discrimination via a quantity discount to work:
| Ā | Ā |
A. customers who purchase larger quantities must have relatively elastic demand. |
| Ā | Ā |
B. customers who purchase larger quantities must have relatively inelastic demand. |
| Ā | Ā |
C. customers who pay a relatively high price must have relatively elastic demand. |
| Ā | Ā |
D. customers who pay a relatively low price must have relatively inelastic demand. |
Ā
Question 11: A firm wants to offer a quantity discount to price-discriminate between buyers who are relatively uninterested in the product and buyers who are obsessively interested in it. The uninterested customers have a demand of QU = 30 - 0.5P. The package offered to them contains 10 units of the good at a price of $40 each. Which of the following packages designed for obsessed customers is incentive compatible?
| Ā | A.Ā |
60 units at a price of $10 each |
| Ā | B. |
40 units at a price of $10 each |
| Ā | C. |
60 units at a price of $20 each |
| Ā | D. |
40 units at a price of $20 each |
Ā
Question 12: Which of the following conditions do not have to be met in order for indirect price discrimination by versioning to work?
| Ā | Ā |
A.The firm's customers must have different demand curves. |
| Ā | Ā |
B. The marginal costs of producing each version of the product must be the same. |
| Ā | Ā |
C. The firm must be able to prevent resale. |
| Ā | Ā |
D. The firm must have market power. |
Ā
| Ā |
Willingness to pay (per month) |
|
| Ā |
Weight machines |
Indoor pool |
|
Abe |
$60 |
$50 |
|
Betty |
50 |
125 |
|
Chris |
25 |
140 |
Ā
QUESTION 13
This table shows the willingness to pay off the only three potential customers of a firm that runs both a weight room and an indoor swimming pool. The weight room and pool each have a constant marginal cost of $20 per month. Which of the following pricing strategies yields the highest producer surplus?
| Ā | Ā |
A. $60 for the weight room, $140 for the pool, or $175 for both |
| Ā | Ā |
B. $50 for the weight room, $125 for the pool, or $165 for both |
| Ā | Ā |
C. $25 for the weight room, $50 for the pool, or $70 for both |
| Ā | Ā |
D. $60 for the weight room, $130 for the pool, or $175 for both |
Ā
Question 14: Which of the following features is needed to make bundling a possible price discrimination strategy but is not required for any other price discrimination strategies?
| Ā | Ā |
A. Customers must have identical demand curves. |
| Ā | Ā |
B. The firm does not learn about customer demand until after purchase. |
| Ā | Ā |
C. Demand for two products must be negatively correlated. |
| Ā | Ā |
D. The firm must not have market power. |
Ā
Question 15: Which of the following features is not needed for price discrimination using a two-part tariff to work?
| Ā | Ā |
A. The firm must have market power. |
| Ā | Ā |
B. The firm must be able to prevent resale. |
| Ā | Ā |
C. The firm must learn about its customers' demands before purchases are made. |
| Ā | Ā |
D. The firm's customers must have different demand curves. |
Ā
Question 16: A firm faces a market demand curve P = 50 - 5Q. It has a constant marginal cost of $10. Relative to standard monopoly pricing, how would a block pricing strategy where the first four units can be purchased for a price of $30 each, but two more units can be purchased for an additional $20 each change consumer surplus and producer surplus?
| Ā | Ā |
A. Consumer surplus would decrease by $10, and producer surplus would increase by $20. |
| Ā | Ā |
B. Consumer surplus would increase by $10, and producer surplus would increase by $20. |
| Ā | Ā |
C. Consumer surplus would increase by $20, and producer surplus would increase by $10. |
| Ā | Ā |
D. Consumer surplus would increase by $20, and producer surplus would increase by $20. |
Ā
Question 17: Relative to standard monopoly pricing, block pricing:
| Ā | Ā |
A. decreases consumer surplus, increases producer surplus, and increases total surplus. |
| Ā | Ā |
B. increases consumer surplus, increases producer surplus, and increases total surplus. |
| Ā | Ā |
C. decreases consumer surplus, increases producer surplus, and decreases total surplus. |
| Ā | Ā |
D. decreases consumer surplus, decreases producer surplus, and decreases total surplus. |
Ā
Question 18: Which of the following results in the highest amount of producer surplus?
| Ā | A. |
bundling |
| Ā | B. |
third-degree price discrimination |
| Ā | C. |
block pricing |
| Ā | D. |
two-part tariffs |
Ā
Question 19: Which of the following results in the highest amount of consumer surplus?
| Ā | A. |
first-degree price discrimination |
| Ā | B. |
third-degree price discrimination |
| Ā | C. |
block pricing |
| Ā | D. |
two-part tariffs |
Ā
Question 20: Which of the following results in the highest amount of total surplus?
| Ā | A. |
third-degree price discrimination |
| Ā | B. |
block pricing |
| Ā | C. |
first-degree price discrimination |
| Ā | D. |
bundling |
Ā
1) Which of the following transactions would be included in GDP?
a) The purchase of a Monet painting.
b) The purchase of paper clips.
c) The purchase of Telstra shares.
d) The purchase of a used car.
2) Economics is the study of
a) the choices everybody makes to attain their goals, given their scarce resources.
b) supply and demand.
c) how to make money in a market economy.
d) how to make money in the stock market.
3) The economy is considered to be at full employment when
a) all unemployment is voluntary.
b) all unemployment is frictional or structural.
c) there are no unemployed workers.
d) there are more unemployed workers than job vacancies
4) An example of an intermediate good would be
a) a can of cool drink sold by a superāmarket.
b) a microwave used at home.
c) the bread that goes into a sandwich sold by a lunch bar.
d) the petrol purchased by consumers for their cars
5) From 2004 to 2005, the CPI for medical care increased from 260.8 to 272.8. What was the inflation rate for medical care?
a) 12 percent
b) 11.1 percent
c) 4.9 percent
d) 4.6 percent
6) A shift outwards of the nation's production possibility frontier can occur from
a) a reduction in unemployment.
b) an increase in the size of the labour force.
c) a change in the amounts of one good desired.
d) a natural disaster like a hurricane or severe earthquake
7) What assumptions about humans do economists make?
a) People are greedy and selfish.
b) None, because economics takes humans as given.
c) People are rational and respond to incentives.
d) Humans prefer to live in a society that values fairness above all else.
8) The labour force is the
a) a number of people employed minus the number of people unemployed.
b) ratio of the number of people employed by the number of people unemployed.
c) ratio of the number of people employed to the working-age population.
d) the number of people employed plus the number of people unemployed.
9) The production possibility frontier shows
a) attainable combinations of two products that may be produced with available resources.
b) the various products that can be produced now and in the future.
c) what an equitable distribution of products among citizens would be.
d) the rate of substitution between capital and labour.
10) Which of the following transactions would be included in the official calculation of GDP?
a) Bridgestone sells $2 million worth of tyres to General Motors Holden
b) You illegally download music off the Internet to put on your new iPod.
c) A new iPod.
d) A student buys a used textbook at the bookstore.
11) What are the three fundamental questions that any economy must answer?
a) What will be the prices of goods, how will these goods be produced, and who gets them?
b) What will be the prices of goods, what will be produced, and who gets them?
c) What will be produced, how will these goods be produced, and who gets them?
d) How much will be saved, what will be produced, and how can these goods be fairly distributed?
12) If the nominal interest rate is 6% and the inflation rate is 2%, then the real interest rate is
a) 3%.
b) 2%.
c) 4%.
d) 8%.
14) Suppose that a very simple economy produces three goods: movies, burgers, and bikes. Suppose the quantities produced and their corresponding prices for 2004 and 2009 are shown in the following table:
| 2004 | 2009 | |||
| Quantity | Price | Quantity | Price | |
| Movies | 20 | $6 | 30 | $7 |
| Burgers | 100 | $2 | 90 | $2.5 |
| Bikes | 3 | $1000 | 6 | $1100 |
What is real GDP in 2009, using 2004 as the base year?
a) $3690
b) $7035
c) $6360
d) $3320
15) If the production possibility frontier is graphed as a straight line, what does this mean?
a) Opportunity costs are constant as production shifts from one product to the other.
b) It is easy to efficiently produce output.
c) Nothing, there is no significance of a straight line production possibility frontier.
d) Opportunity costs are increasing as production shifts from one product to the other.
16) If you have both an economics exam and a management exam tomorrow, but find that you have time to fully study for only one of them, what are you facing?
a) A failing grade in both exams
b) A zero opportunity cost
c) A tradeāoff
d) An impossible situation
17) Which of the following is a problem inherent in centrally planned economies?
a) Production managers do not satisfy consumer wants but the government's orders.
b) Too much production of lowācost, highāquality goods and services.
c) There are no problems, everyone, including consumers are satisfied.
d) None of these describe the problem inherent in a centrally planned economy.
18) Inflation is an increase in the
a) average hourly wage rate.
b) general price level in the economy.
c) the overall level of economic activity.
d) rate of growth of GDP.
19) Total production in the economy is measured as the
a) dollar value of all final goods and services produced in the economy.
b) the total number of services produced in the economy.
c) the total number of goods produced in the economy.
d) the total number of goods and services produced in the economy.
20) An increase in the price of dairy products produced domestically will be reflected in
a) Both the GDP deflator and the consumer price index.
b) Neither the GDP deflator nor the consumer price index.
c) The GDP deflator but not in the consumer price index.
d) The consumer price index but not in the GDP deflator.
21) The reason that opportunity cost arises is that
a) money has proven to be an inefficient means of facilitating exchange in a market.
b) sometimes there are no alternative decisions that can be made.
c) resources are limited at any point in time. d) people have unlimited wants.
21) You have an absolute advantage whenever you
a) are better educated than someone else.
b) can produce something at a lower opportunity cost than others.
c) can produce more of something than others with the same resources.
d) prefer to do one particular activity.
22) Which of the following is an example of a worker experiencing cyclical unemployment?
a) A Freightliner employee who was sacked because of a recession.
b) A worker who quits his job because he does not get along with his boss
c) A worker that changes jobs to move closer to her family.
d) An assembly line worker who loses his job because of automation.
23) A company named Home Depot sells new and used doors to contractors who build new homes. Home Depot also sells new and used doors to homeāowners. Which of the following would be counted in GDP?
a) The sale of a used door to a homeāowner
b) The sale of a used door to for construction for installation into a new home.
c) The sale of a new door to for construction for installation into a new home.
d) The sale of a new door to homeāowner.
24) If you buy shares, the dollar value is
a) not included in GDP.
b) included in GDP under consumer expenditure.
c) included in GDP as a business expense.
d) included in GDP under-investment.
25) During the 1930s, Australia and other industrialised countries experienced the Great Depression with a large number of workers and factories unemployed.Which of the following points on a production possibility frontier model would represent this experience?
a) A point on the frontier
b) A point inside the frontier
c) An increase in the opportunity cost of the substitution between capital and labour
d) A point outside the frontier
26) How is the decision about what goods and services will be produced made in a market economy?
a) The government decides on what will be produced.
b) Producing firms decide to produce only what the firms' owners say must be produced.
c) By consumers, firms, and government choosing which goods and services to buy.
d) What will be produced is determined by what society needs the most.
27) In the country of Shem, the CPI is calculated using a market basket consisting of 5 apples, 4 loaves of bread, 3 robes and 2 gallons of gasoline. The perāunit prices of these goods have been as follows: Using 2002 as the base year, what was the inflation rate between 2003 and 2004?
a) 28.5 percent
b) 34.2 percent
c) 47 percent
d) It is impossible to determine without knowing the base year.
28) Given the following information, calculate the unemployment rate: Fullātime employed = 80 Partātime employed = 25 Unemployed = 15 Discouraged workers = 5 Members of underground economy = 6 Consumer Price Index = 110
a) 18.8 per cent.
b) 12.5 per cent.
c) 16.7 per cent.
d) 25 per cent.
29) If the quantity of resources available is fixed, as more of a good is produced, the opportunity cost of producing it increases. The most probable reason for this is that
a) as more of a good is produced, the quality of technology available to produce additional units declines.
b) the price of the inputs used to produce the good will rise.
c) consumers are unwilling to pay higher prices to cover the increases in production costs.
d) resources are not equally wellāsuited to producing all goods.
30) Which of the following is a normative statement?
a) The current high price of petrol is the result of strong worldwide demand.
b) The price of petrol is too high.
c) Larger vehicles always use more fuel per kilometre than smaller vehicles
d) The supply of petrol has not been able to meet the demand for petrol.
31) Transfer payments are not included in GDP because
a) they do not generate income.
b) their market value is difficult to measure.
c) they are not purchases of goods or services.
d) their value is included in government expenditure.
32) The opportunity cost of going to your economics class
a) depends on the cost of your transport getting to class.
b) is equal to the highest value of alternative use of the time.
c) is zero because there is no admission charged if you are enrolled in the class.
d) depends on the salary of the lecturer.
33) Establishing employment agencies that speeds up the process of matching unemployed workers with unfilled jobs are an attempt to lower
a) cyclical unemployment.
b) seasonal unemployment.
c) structural unemployment.
d) frictional unemployment.
34) Suppose that money GDP for 2009 was $15 000 billion and the price index was 150 and in 2010 money GDP was $17 050 billion with a price index of 155. What is the rate of economic growth?
a) 5%
b) 10%
c) 2%
d) 1%
35) An individual has a comparative advantage in activity whenever she
a) also has an absolute advantage in that activity.
b) can perform the activity at a lower opportunity cost than another person can.
c) can do everything better than everyone else can.
d) can do the activity in less time than anyone else.
36) GDP is not a perfect measure of wellbeing because
a) GDP is adjusted for increases in drug addiction.
b) GDP is not adjusted for the effects of pollution.
c) GDP is adjusted for changes in crime.
d) the value of leisure is included in GDP.
37) What does an entrepreneur do in a market economy?
a) Organise the factors of production in a working unit.
b) Stand to lose the personal funds provided.
c) Develop the vision for the firm and ensure funding for the firm.
d) An entrepreneur does all of these things.
38) An example of a transfer payment is
a) the purchase of a new government office block.
b) a teacher's pay is transferred electronically from the government to the teacher.
c) interest repayments on a loan.
d) an unemployment benefit.
39) Which of the following is a microeconomics question?
a) What will be the level of total production in the national economy?
b) How much income will be saved and how much will be spent on consumer goods?
c) What factors determine the price of computers in the market?
d) Why is the rate of unemployment rising?
40) The measure of production that values production using current prices is called
a) value-added GDP.
b) nominal GDP.
c) black economy GDP.
d) real GDP.
41) Which of the following causes the official measure of the unemployment rate to understate the true extent of joblessness?
a) People who collect unemployment benefits report themselves to be searching for a job.
b) Discouraged workers are counted as unemployed.
c) Discouraged workers are not counted as unemployed.
d) Many full-time workers really want to be part-time workers.
42) A production possibility frontier will shift inwards if
a) inefficiency in production processes arise.
b) there is an increase in the rate of unemployment.
c) productive resources are destroyed due to war.
d) all of these options are correct.
43) Structural unemployment would increase when
a) discouraged workers drop out of the workforce.
b) the economy enters a recession.
c) the number of individuals who quit their job to find another increase.
d) workers are replaced by machines and the workers do not have the skills to perform new jobs.
44) The 2005 CPI was 196 and the 1982 CPI was 96.5. If your parents put aside $1,000 for you in 1982, how much would you have needed in 2005 in order to buy what you could have bought with the $1,000 in 1982?
a) $1,834.20
b) $2,031.09
c) $2,308.89
d) None of the above is correct.
45) What is an economic model?
