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Student: ___________________________________________________________________________

1. In the following figure, the marginal willingness to pay for the 10th unit of the good is ________.

A. $12

B. $20

C. $160

D. $200

2. In the following figure, the total willingness to pay for the 10th unit of the good is ________.

A. $12

B. $20

C. $160

D. $200

3. In the following figure the marginal cost of producing the 500th unit of output is ________.

A. $500

B. $550

C. $150,000

D. $212,500

4. In the following figure the total cost of producing the 500th unit of output is ________.

A. $550

B. $150,000

C. $212,500

D. $275,000

5. The following figure shows the impact of technological change on the marginal cost of producing a

certain good. Producing Q* units with the new technology reduces total cost by an amount equal to

________.

A. area a

B. area b

C. area c

D. areas a + b

6. The following figure shows the impact of technological change on the marginal cost of producing a

certain good. With MC1 the total cost of producing Q* units is equal to ________.

A. areas a + b + c

B. areas b + c

C. area b

D. area c

7. One criterion for evaluating environmental policies is whether or not they generate ________ for

individuals, firms and industries to engage in ________.

A. disincentives; expansion activities

B. incentives; expansion activities

C. disincentives; abatement activities

D. incentives; R&D activities

8. Total benefits are equal to total willingness to pay which is equal to the area under the demand curve for a

given level of consumption.

True False

9. The production function of the firm is its supply curve.

True False

10. Technological progress results in a downward shift of the marginal cost curve.

True False

11. Suppose there are only three individuals in the market for a certain good. Individual A's inverse demand

equation is P = 12 - QD, individual B's inverse demand equation is P = 4 - QD and individual C's inverse

demand equation is P = 6 - 1/3QD. What is the aggregate demand equation for this market?

12. Suppose there are only three individuals in the market for a certain good. Individual A's inverse demand

equation is P = 5 - 1/2QD, individual B's inverse demand equation is P = 20 - QD and individual C's

inverse demand equation is P = 4 - 2/3QD. What is the aggregate demand equation for this market?

13. Suppose there are four individuals in the market for a certain good. Individual 1's demand equation is QD

= 11 - P, individual 2's demand equation is QD = 18 - 5P, individual 3's demand equation is QD = 30 -

0.5P and individual 4's demand equation is QD = 25 - 2P. What is the aggregate demand equation for this

market?

14. Suppose there are three firms in the market for a certain good. Firm 1's marginal cost equation is MC = 2

+ 1/3QS, firm 2's marginal cost equation is MC = 4 + 2QS and firm 3's marginal cost equation is MC = 10

+ QS. What is the aggregate supply equation for this market?

15. Suppose there are three firms in the market for a certain good. Firm 1's marginal cost equation is MC = 4

+ 0.25QS, firm 2's marginal cost equation is MC = 0.5QS and firm 3's marginal cost equation is MC = 2 +

QS. What is the aggregate supply equation for this market?

16. Suppose there are four individual firms in the market for a certain good. Firm 1's supply equation is QS

= 2P - 3, firm 2's supply equation is QS = 0.5P - 3, firm 3's supply equation is QS = 1.5P - 8 and firm 4's

supply equation is QS = 4P - 2. What is the aggregate supply equation for this market?

3 Key

1. In the following figure, the marginal willingness to pay for the 10th unit of the good is ________.

A. $12

B. $20

C. $160

D. $200

Difficulty: Easy

Field - Chapter 03 #1

Learning Objective: 03-01 Derive the demand curve for an individual from their willingness to pay and show how to aggregate to a market demand curve.

2. In the following figure, the total willingness to pay for the 10th unit of the good is ________.

A. $12

B. $20

C. $160

D. $200

Difficulty: Easy

Field - Chapter 03 #2

Learning Objective: 03-01 Derive the demand curve for an individual from their willingness to pay and show how to aggregate to a market demand curve.

3. In the following figure the marginal cost of producing the 500th unit of output is ________.

A. $500

B. $550

C. $150,000

D. $212,500

Difficulty: Easy

Field - Chapter 03 #3

Learning Objective: 03-02 Derive the supply curve for a firm and show how to aggregate to the market supply curve.

4. In the following figure the total cost of producing the 500th unit of output is ________.

A. $550

B. $150,000

C. $212,500

D. $275,000

Difficulty: Easy

Field - Chapter 03 #4

Learning Objective: 03-02 Derive the supply curve for a firm and show how to aggregate to the market supply curve.

5. The following figure shows the impact of technological change on the marginal cost of producing a

certain good. Producing Q* units with the new technology reduces total cost by an amount equal to

________.

A. area a

B. area b

C. area c

D. areas a + b

Difficulty: Easy

Field - Chapter 03 #5

Learning Objective: 03-03 Illustrate the impact of technological progress on marginal cost curves.

6. The following figure shows the impact of technological change on the marginal cost of producing a

certain good. With MC1 the total cost of producing Q* units is equal to ________.

A. areas a + b + c

B. areas b + c

C. area b

D. area c

Difficulty: Easy

Field - Chapter 03 #6

Learning Objective: 03-03 Illustrate the impact of technological progress on marginal cost curves.

7. One criterion for evaluating environmental policies is whether or not they generate ________ for

individuals, firms and industries to engage in ________.

A. disincentives; expansion activities

B. incentives; expansion activities

C. disincentives; abatement activities

D. incentives; R&D activities

Accessibility: Keyboard Navigation

Difficulty: Easy

Field - Chapter 03 #7

Learning Objective: 03-03 Illustrate the impact of technological progress on marginal cost curves.

8. Total benefits are equal to total willingness to pay which is equal to the area under the demand curve

for a given level of consumption.

TRUE

Accessibility: Keyboard Navigation

Difficulty: Easy

Field - Chapter 03 #8

Learning Objective: 03-01 Derive the demand curve for an individual from their willingness to pay and show how to aggregate to a market demand curve.

9. The production function of the firm is its supply curve.

FALSE

The marginal cost curve of the firm represents its supply curve.

Difficulty: Easy

Field - Chapter 03 #9

Learning Objective: 03-02 Derive the supply curve for a firm and show how to aggregate to the market supply curve.

10. Technological progress results in a downward shift of the marginal cost curve.

TRUE

Accessibility: Keyboard Navigation

Difficulty: Easy

Field - Chapter 03 #10

Learning Objective: 03-03 Illustrate the impact of technological progress on marginal cost curves.

11. Suppose there are only three individuals in the market for a certain good. Individual A's inverse

demand equation is P = 12 - QD, individual B's inverse demand equation is P = 4 - QD and individual

C's inverse demand equation is P = 6 - 1/3QD. What is the aggregate demand equation for this market?

First we need to rewrite the individual demand equations with QD on the left hand side so we can

horizontally aggregate them. Individual A's demand equation is QD = 12 - P, individual B's demand

equation is QD = 4 - P and individual C's demand equation is QD = 18 -3P. Aggregating these yields

the market demand equation: QD = 34 - 5P.

Difficulty: Moderate

Field - Chapter 03 #11

Learning Objective: 03-01 Derive the demand curve for an individual from their willingness to pay and show how to aggregate to a market demand curve.

12. Suppose there are only three individuals in the market for a certain good. Individual A's inverse

demand equation is P = 5 - 1/2QD, individual B's inverse demand equation is P = 20 - QD and

individual C's inverse demand equation is P = 4 - 2/3QD. What is the aggregate demand equation for

this market?

First we need to rewrite the individual demand equations with QD on the left hand side so we can

horizontally aggregate them. Individual A's demand equation is QD = 10 - 2P, individual B's demand

equation is QD = 20 - P and individual C's demand equation is QD = 6 -3/2P. Aggregating these yields

the market demand equation: QD = 36 - 9/2P.

Difficulty: Moderate

Field - Chapter 03 #12

Learning Objective: 03-01 Derive the demand curve for an individual from their willingness to pay and show how to aggregate to a market demand curve.

13. Suppose there are four individuals in the market for a certain good. Individual 1's demand equation is

QD = 11 - P, individual 2's demand equation is QD = 18 - 5P, individual 3's demand equation is QD =

30 - 0.5P and individual 4's demand equation is QD = 25 - 2P. What is the aggregate demand equation

for this market?

Aggregating the individual demand curves yields the market demand equation: QD = 84 - 8.5P.

Difficulty: Easy

Field - Chapter 03 #13

Learning Objective: 03-01 Derive the demand curve for an individual from their willingness to pay and show how to aggregate to a market demand curve.

14. Suppose there are three firms in the market for a certain good. Firm 1's marginal cost equation is MC

= 2 + 1/3QS, firm 2's marginal cost equation is MC = 4 + 2QS and firm 3's marginal cost equation is

MC = 10 + QS. What is the aggregate supply equation for this market?

First we need to rewrite the marginal cost equations with quantity supplied on the left hand side to

obtain the individual firms' supply curves so we can horizontally aggregate them. Firm 1's supply

equation is QS = 3P - 2, firm 2's supply equation is QS = 1/2P - 2 and firm 3's supply equation is QS =

P - 10. Aggregating these yields the market supply equation: QS = 9/2P - 14.

Difficulty: Moderate

Field - Chapter 03 #14

Learning Objective: 03-02 Derive the supply curve for a firm and show how to aggregate to the market supply curve.

15. Suppose there are three firms in the market for a certain good. Firm 1's marginal cost equation is MC

= 4 + 0.25QS, firm 2's marginal cost equation is MC = 0.5QS and firm 3's marginal cost equation is

MC = 2 + QS. What is the aggregate supply equation for this market?

First we need to rewrite the marginal cost equations with quantity supplied on the left hand side to

obtain the individual firms' supply curves so we can horizontally aggregate them. Firm 1's supply

equation is QS = 4P - 16, firm 2's supply equation is QS = 2P and firm 3's supply equation is QS = P -

2. Aggregating these yields the market supply equation: QS = 7P - 18.

Difficulty: Moderate

Field - Chapter 03 #15

Learning Objective: 03-02 Derive the supply curve for a firm and show how to aggregate to the market supply curve.

16. Suppose there are four individual firms in the market for a certain good. Firm 1's supply equation is

QS = 2P - 3, firm 2's supply equation is QS = 0.5P - 3, firm 3's supply equation is QS = 1.5P - 8 and

firm 4's supply equation is QS = 4P - 2. What is the aggregate supply equation for this market?

Aggregating the individual firm supply curves yields the market supply equation: QS = 8P - 16.

Difficulty: Easy

Field - Chapter 03 #16

Learning Objective: 03-02 Derive the supply curve for a firm and show how to aggregate to the market supply curve.

3 Summary

Category # of Questions

Accessibility: Keyboard Navigation 4

Difficulty: Easy 12

Difficulty: Moderate 4

Field - Chapter 03 16

Learning Objective: 03- 6

01 Derive the demand curve for an individual from their willingness to pay and show how to aggregate to a market demand curve.

Learning Objective: 03-02 Derive the supply curve for a firm and show how to aggregate to the market supply curve. 6

Learning Objective: 03-03 Illustrate the impact of technological progress on marginal cost curves. 4

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