CHAPTER 24: Industry Supply
MULTIPLE CHOICE
1. In Problem 1, if the cost of plaster and labor were $11 per gnome and everything else is as in the
problem (gnome molds cost $1,000, interest rate is 10%), what is the lowest price of gnomes at which
there would be a positive supply in the long run?
a.
$11
b.
$22
c.
$13.20
d.
$12.10
e.
$13.20
2. In Problem 1, if the cost of plaster and labor were $13 per gnome and everything else is as in the
problem (gnome molds cost $1,000, interest rate is 10%), what is the lowest price of gnomes at which
there would be a positive supply in the long run?
a.
$14.30
b.
$26
c.
$15.20
d.
$13
e.
$15.60
3. In Problem 1, if the cost of plaster and labor were $5 per gnome and everything else is as in the
problem (gnome molds cost $1,000, interest rate is 10%), what is the lowest price of gnomes at which
there would be a positive supply in the long run?
a.
$5.50
b.
$7.20
c.
$5
d.
$10
e.
$6
4. In Problem 1, if the cost of plaster and labor were $10 per gnome and everything else is as in the
problem (gnome molds cost $1,000, interest rate is 10%), what is the lowest price of gnomes at which
there would be a positive supply in the long run?
a.
$10
b.
$11
c.
$20
d.
$12.20
e.
$12
5. In Problem 1, if the cost of plaster and labor were $5 per gnome and everything else is as in the
problem (gnome molds cost $1,000, interest rate is 10%), what is the lowest price of gnomes at which
there would be a positive supply in the long run?
a.
$5
b.
$10
c.
$7.20
d.
$5.50
e.
$6
6. Suppose that the garden gnome industry was in long-run equilibrium given the circumstances
described in Problem 1. Suppose, as in Problem 2, that it was discovered to everyone’s surprise on
January 1, 1993, after it was too late to change orders for gnome molds, that the cost of the plaster and
labor needed to make a gnome had changed to $8. If the demand curve does not change, what will
happen to the equilibrium price of gnomes?
a.
Rises by $1.
b.
Falls by $1.
c.
Stays constant.
d.
Rises by $8.
e.
Falls by $4.
7. Suppose that the garden gnome industry was in long-run equilibrium given the circumstances
described in Problem 1. Suppose, as in Problem 2, that it was discovered to everyone’s surprise on
January 1, 1993, after it was too late to change orders for gnome molds, that the cost of the plaster and
labor needed to make a gnome had changed to $9. If the demand curve does not change, what will
happen to the equilibrium price of gnomes?
a.
Stays constant.
b.
Rises by $2.
c.
Falls by $2.
d.
Rises by $9.
e.
Falls by $4.50.
8. Suppose that the garden gnome industry was in long-run equilibrium given the circumstances
described in Problem 1. Suppose, as in Problem 2, that it was discovered to everyone’s surprise on
January 1, 1993, after it was too late to change orders for gnome molds, that the cost of the plaster and
labor needed to make a gnome had changed to $6. If the demand curve does not change, what will
happen to the equilibrium price of gnomes?
a.
Rises by $6.
b.
Rises by $1.
c.
Stays constant.
d.
Falls by $1.
e.
Falls by $3.
9. Suppose that the garden gnome industry was in long-run equilibrium given the circumstances
described in Problem 1. Suppose, as in Problem 2, that it was discovered to everyone’s surprise on
January 1, 1993, after it was too late to change orders for gnome molds, that the cost of the plaster and
labor needed to make a gnome had changed to $6. If the demand curve does not change, what will
happen to the equilibrium price of gnomes?
a.
Stays constant.
b.
Falls by $1.
c.
Rises by $6.
d.
Rises by $1.
e.
Falls by $3.
10. Suppose that the garden gnome industry was in long-run equilibrium given the circumstances
described in Problem 1. Suppose, as in Problem 2, that it was discovered to everyone’s surprise on
January 1, 1993, after it was too late to change orders for gnome molds, that the cost of the plaster and
labor needed to make a gnome had changed to $6. If the demand curve does not change, what will
happen to the equilibrium price of gnomes?
a.
Falls by $1.
b.
Rises by $6.
c.
Stays constant.
d.
Rises by $1.
e.
Falls by $3.
11. Suppose that the garden gnome industry was in long-run equilibrium as described in Problem 1. On
January 1, 1993, the cost of plaster and labor remained at $7 per gnome, gnome molds still cost
$1,000, and the interest rate remained at 10%, but the government introduced a tax of $4 on every
garden gnome sold. Then the equilibrium price of garden gnomes in 1993 would be
a.
$11.
b.
$9.20.
c.
$13.
d.
$4.
e.
$15.
12. Suppose that the garden gnome industry was in long-run equilibrium as described in Problem 1. On
January 1, 1993, the cost of plaster and labor remained at $7 per gnome, gnome molds still cost
$1,000, and the interest rate remained at 10%, but the government introduced a tax of $9 on every
garden gnome sold. Then the equilibrium price of garden gnomes in 1993 would be
a.
$16.
b.
$9.
c.
$18.
d.
$9.20.
e.
$25.
13. Suppose that the garden gnome industry was in long-run equilibrium as described in Problem 1. On
January 1, 1993, the cost of plaster and labor remained at $7 per gnome, gnome molds still cost
$1,000, and the interest rate remained at 10%, but the government introduced a tax of $7 on every
garden gnome sold. Then the equilibrium price of garden gnomes in 1993 would be
a.
$16.
b.
$9.20.
c.
$7.
d.
$14.
e.
$21.
14. Suppose that the garden gnome industry was in long-run equilibrium as described in Problem 1. On
January 1, 1993, the cost of plaster and labor remained at $7 per gnome, gnome molds still cost
$1,000, and the interest rate remained at 10%, but the government introduced a tax of $8 on every
garden gnome sold. Then the equilibrium price of garden gnomes in 1993 would be
a.
$17.
b.
$8.
c.
$9.20.
d.
$15.
e.
$23.
15. Suppose that the garden gnome industry was in long-run equilibrium as described in Problem 1. On
January 1, 1993, the cost of plaster and labor remained at $7 per gnome, gnome molds still cost
$1,000, and the interest rate remained at 10%, but the government introduced a tax of $4 on every
garden gnome sold. Then the equilibrium price of garden gnomes in 1993 would be
a.
$13.
b.
$4.
c.
$9.20.
d.
$11.
e.
$15.
16. Suppose that the cost of capturing a cockatoo and transporting him to the United States is about $40
per bird. Cockatoos are drugged and smuggled in suitcases to the United States. Half of the smuggled
cockatoos die in transit. Each smuggled cockatoo has a 10% probability of being discovered, in which
case the smuggler is fined. If the fine imposed for each smuggled cockatoo is increased to $1,000, then
the equilibrium price of cockatoos in the United States will be
a.
$311.11.
b.
$140.
c.
$90.
d.
$70.
e.
$222.22.
17. Suppose that the cost of capturing a cockatoo and transporting him to the United States is about $40
per bird. Cockatoos are drugged and smuggled in suitcases to the United States. Half of the smuggled
cockatoos die in transit. Each smuggled cockatoo has a 10% probability of being discovered, in which
case the smuggler is fined. If the fine imposed for each smuggled cockatoo is increased to $1,000, then
the equilibrium price of cockatoos in the United States will be
a.
$140.
b.
$90.
c.
$70.
d.
$311.11.
e.
$222.22.
18. Suppose that the cost of capturing a cockatoo and transporting him to the United States is about $40
per bird. Cockatoos are drugged and smuggled in suitcases to the United States. Half of the smuggled
cockatoos die in transit. Each smuggled cockatoo has a 10% probability of being discovered, in which
case the smuggler is fined. If the fine imposed for each smuggled cockatoo is increased to $700, then
the equilibrium price of cockatoos in the United States will be
a.
$61.
b.
$244.44.
c.
$75.
d.
$110.
e.
$155.56.
19. Suppose that the cost of capturing a cockatoo and transporting him to the United States is about $40
per bird. Cockatoos are drugged and smuggled in suitcases to the United States. Half of the smuggled
cockatoos die in transit. Each smuggled cockatoo has a 10% probability of being discovered, in which
case the smuggler is fined. If the fine imposed for each smuggled cockatoo is increased to $900, then
the equilibrium price of cockatoos in the United States will be
a.
$130.
b.
$85.
c.
$288.89.
d.
$67.
e.
$200.
20. Suppose that the cost of capturing a cockatoo and transporting him to the United States is about $40
per bird. Cockatoos are drugged and smuggled in suitcases to the United States. Half of the smuggled
cockatoos die in transit. Each smuggled cockatoo has a 10% probability of being discovered, in which
case the smuggler is fined. If the fine imposed for each smuggled cockatoo is increased to $1,100, then
the equilibrium price of cockatoos in the United States will be
a.
$150.
b.
$95.
c.
$73.
d.
$333.33.
e.
$244.44.
21. In Problem 13, in the absence of government interference, there is a constant marginal cost of $5 per
ounce for growing marijuana and delivering it to buyers. If the probability that any shipment of
marijuana seized is .30 and the fine if a shipper caught is $50 per ounce, then the equilibrium price of
marijuana per ounce is
a.
$28.57.
b.
$20.
c.
$55.
d.
$3.50.
e.
$6.50.
22. In Problem 13, in the absence of government interference, there is a constant marginal cost of $5 per
ounce for growing marijuana and delivering it to buyers. If the probability that any shipment of
marijuana seized is .20 and the fine if a shipper caught is $45 per ounce, then the equilibrium price of
marijuana per ounce is
a.
$50.
b.
$17.50.
c.
$4.
d.
$14.
e.
$6.
23. In Problem 13, in the absence of government interference, there is a constant marginal cost of $5 per
ounce for growing marijuana and delivering it to buyers. If the probability that any shipment of
marijuana seized is .10 and the fine if a shipper caught is $20 per ounce, then the equilibrium price of
marijuana per ounce is
a.
$25.
b.
$4.50.
c.
$7.78.
d.
$7.
e.
$5.50.
24. In Problem 13, in the absence of government interference, there is a constant marginal cost of $5 per
ounce for growing marijuana and delivering it to buyers. If the probability that any shipment of
marijuana seized is .50 and the fine if a shipper caught is $40 per ounce, then the equilibrium price of
marijuana per ounce is
a.
$50.
b.
$45.
c.
$2.50.
d.
$25.
e.
$7.50.
25. In Problem 13, in the absence o5f government interference, there is a constant marginal cost of $5 per
ounce for growing marijuana and delivering it to buyers. If the probability that any shipment of
marijuana seized is .50 and the fine if a shipper caught is $40 per ounce, then the equilibrium price of
marijuana per ounce is
a.
$50.
b.
$2.50.
c.
$25.
d.
$45.
e.
$7.50.
26. In Problem 8, the supply curve of any firm is Si(p) = p/2. If a firm produces 6 units of output, what are
its total variable costs?
a.
$72
b.
$34
c.
$54
d.
$36
e.
There is not enough information given to determine total variable costs.
27. In Problem 8, the supply curve of any firm is Si(p) = p/2. If a firm produces 4 units of output, what are
its total variable costs?
a.
$16
b.
$14
c.
$24
d.
$32
e.
There is not enough information given to determine total variable costs.
28. In Problem 8, the supply curve of any firm is Si(p) = p/2. If a firm produces 2 units of output, what are
its total variable costs?
a.
$8
b.
$6
c.
$2
d.
$4
e.
There is not enough information given to determine total variable costs.
29. In Problem 8, the supply curve of any firm is Si(p) = p/2. If a firm produces 5 units of output, what are
its total variable costs?
a.
$37.50
b.
$25
c.
$50
d.
$23
e.
There is not enough information given to determine total variable costs.
30. In Problem 8, the supply curve of any firm is Si(p) = p/2. If a firm produces 3 units of output, what are
its total variable costs?
a.
$9
b.
$13.50
c.
$7
d.
$18
e.
There is not enough information given to determine total variable costs.
31. In Problem 9, if the demand curve for pollicles is negatively sloped and the government imposes a tax
t on every unit of output sold by the industry, in the long run
a.
fewer pollicles will be sold.
b.
more pollicles will be sold.
c.
each firm in the industry produces more pollicles.
d.
each firm in the industry produces fewer pollicles.
e.
the same number of pollicles will be sold.
32. In Problem 8, if market demand is equal to D(p) = 20 − 3p, the equilibrium price and number of firms
operating in the market are (in that order)
a.
$3.08 and 7
b.
$3.00 and 6
c.
$3.00 and 8
d.
$3.14 and 3
e.
$3.33 and 5
33. In Problem 4, suppose that each firm has the cost function c(y) = y2 + 9 for y 0 and c(0) = 0. With
industry demand given by D(p) = 51 − p, the equilibrium price and equilibrium number of firms in the
industry (in that order) will be
a.
$8 and 11.
b.
$3 and 18.
c.
$3 and 48.
d.
$6 and 15.
e.
$6 and 45.