Chapter 13 - Micro, Micro Calhoun Ch. 9, Calhoun Exam 2, ECO 2023 Calhoun FSU Exam 1

If the price elasticity of demand for opera tickets is estimated to be 4.5, then a 10 percent increase in opera ticket prices would be expected to cause a

45 percent decrease in quantity demanded.

Economic theory suggests that college graduates receive higher wages than those with only a high school education because A) college graduates are more productive. B) college graduates must be paid higher wages because their educational costs were higher. C) college graduates have formed stronger unions. D) the supply of high school graduates is small relative to the demand for their labor.

A

If carpentry positions A and B required identical skill levels, other things constant, which one of the following would most likely increase the wage rate of position A relative to position B? A) The work place of position A is in the intense heat of the sun, whereas the work place of B is air-conditioned. B) Position A is a safe office job; position B requires the employee to operate a dangerous saw. C) Position A offers steady employment, whereas employees holding position B are often laid off. D) Position A offers more sick leave and more paid holidays.

A

Economic studies have generally found that professional sports players have salaries that A) greatly exceed their marginal contribution to a team's revenue stream. B) are approximately equal to their marginal revenue products. C) are about one-half of what they contribute to a team's profitability. D) are less than one-tenth of their marginal revenue products.

B

If there is employment discrimination against minorities, this will cause the A) supply of their services to increase, and their wages to fall. B) demand for their services to decline, and their wages to fall. C) supply of their services to decline, and their wages to rise. D) demand for their services to decline, and their wages to rise.

B

Which of the following would be most likely to cause an increase in the wage rate for a particular job? A) A decrease in the amount of training needed to perform this job. B) An increase in the danger of this job. C) A decrease in the danger of this job. D) An improvement in the working conditions associated with this job. E) An increase in the number of workers with the skills for this job.

B

Everything else equal, wages are likely to be higher when A) the location of the job is more desirable. B) the work environment is more prestigious. C) more skill is required to perform well on the job. D) the work is safer.

C

Which of the following is a normative economic statement? -Congress should increase the legal minimum wage. -An increase in the legal minimum wage would cause unemployment to increase. -An increase in the legal minimum wage would cause unemployment to decrease. -An increase in the legal minimum wage would lead to more equality in the distribution of income.

Congress should increase the legal minimum wage.

Business owners who care only about maximizing profits are A) likely to discriminate against certain groups of workers. B) likely to be replaced by discriminating businesses. C) more concerned about racial discrimination than gender discrimination. D) at an advantage when competing against those who practice employment discrimination.

D

Which of the following best explains why productive workers can command high wages? A) The bargaining power of labor unions. B) The presence of minimum wage legislation. C) Wage and price controls that reflect the political power of labor organizations. D) Competition among employers for productive workers.

D

Which of the following is most likely to cause the productivity of labor to increase? A) Higher money wages. B) An increase in the proportion of the workforce that belongs to a labor union. C) More flexible working hours and improved retirement plans. D) A higher rate of investment in human and nonhuman capital.

D

Which of the following is true about earnings and productivity? A) When workers are more productive, the demand for their services will be higher. B) In order to earn a large income, one must provide large benefits to others. C) High productivity (a large output per hour worked) is the key to high earnings for both individuals and countries. D) All of the above are true.

D

Farmers can choose to produce eggs or milk. If there is an increase in the price of milk then what will be the effect in the egg market?

Egg supply will decrease.

Suppose demand increases and supply increases. Which of the following will happen?

Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase.

Which of the following statements about exchange is false? -The expectation of gain motivates people to engage in trade. -If a party to a potential exchange does not believe that it will lead to personal gain, he or she can chose not to engage in the trade. -Voluntary exchange is generally mutually beneficial to the trading partners. -If one trading partner gains, the other must lose.

If one trading partner gains, the other must lose.

Which of the following is most consistent with economizing behavior?

If you get the same satisfaction from a chicken sandwich and a salad, you should purchase the one that costs the least.

Which of the following is often referred to as the basic postulate of economics?

Incentives matter--individuals respond in predictable ways to changes in personal costs and benefits.

If price falls, what happens to the demand for a product?

It does not change.

Suppose both the equilibrium price and quantity rise for a particular product. Which of the following best explains this situation? -Supply and demand simultaneously increased and the shift in supply was greater than the shift in demand. -Supply and demand simultaneously increased and the shift in supply was less than the shift in demand. -Supply and demand simultaneously decreased and the shift in supply was greater than the shift in demand. -Supply and demand simultaneously decreased and the shift in supply was less than the shift in demand.

Supply and demand simultaneously increased and the shift in supply was less than the shift in demand.

If Terrell can produce more bagels in one day than Zori can produce in one day, then

Terrell has an absolute advantage in the production of bagels.

Land used to grow corn could also be used to grow soybeans. Which of the following is true when the farmer plants soybeans and the market price of corn rises? -The opportunity cost of producing soybeans decreases. -The opportunity cost of producing soybeans increases. -There will be no change in the opportunity cost of producing soybeans. -The opportunity cost of producing corn increases.

The opportunity cost of producing soybeans increases.

Suppose that country A produces mostly consumption goods and few investment goods, while country B produces mostly investment goods with few consumption goods. Other things constant, which of the following is most likely to happen in the future? -The per capita income of country A will grow more rapidly than country B. -The population of country B will grow more rapidly than country A. -The production possibilities curve (PPC) of country B will shift out more rapidly than the PPC of country A. -The production possibilities curve (PPC) of country A will shift out more rapidly than the PPC of country B.

The production possibilities curve (PPC) of country B will shift out more rapidly than the PPC of country A.

A decrease in supply will cause

a decrease in quantity demanded.

Which of the following would most likely cause the price of wheat to decline? -a decrease in the production costs of corn, a substitute for wheat -a decrease in the price of soybeans, a substitute for wheat -an increase in the price of fertilizer, a resource used to produce wheat -a sandwich craze among Americans, causing increased demand for whole-wheat bread

a decrease in the price of soybeans, a substitute for wheat

Because private owners are held responsible for damages their property causes to the property of others, private owners have

a strong incentive to take steps to reduce the chance that they will harm the property of others.

In a competitive market, profit can be considered a reward to businesses that a. produce a good that consumers value more highly than its component resources. b. reduce the value of resources used as inputs in production. c. prohibit rival firms from entering the market and competing. d. control costs, rather than following the wishes of consumers when deciding what products to produce.

a. produce a good that consumers value more highly than its component resources.

In the short run, the firm's average fixed costs

always decline as output increases.

If rice is an inferior good,

an increase in income will cause the demand curve for rice to shift to the left.

Which of the following would tend to increase the price of lumber?

an increase in the demand for newly constructed homes

"There is no such thing as a free lunch." This statement best reflects the fact that

an opportunity cost is always present when scarce resources are used to produce a good.

If a firm increases its output and finds that its average total cost decreases as a result, this implies that

average total cost exceeds marginal cost.

Competition as a dynamic process implies that individual firms in a market a. seek to utilize a variety of techniques, such as product, style, and convenience of location, to win the dollar vote of consumers, but they never use price to compete. b. use price competition as well as other forms of competition to gain the dollar votes of consumers. c. produce a homogeneous product. d. cooperate, attempting to establish a price and output structure so each firm can survive and continue to serve the consumer.

b. use price competition as well as other forms of competition to gain the dollar votes of consumers.

A student noted that the football team won by a larger margin when the third-string played more minutes. Therefore, he recommended that the third-stringers become the first team. His conclusion was probably erroneous because he

failed to recognize that association is not causation.

The government sometimes provides public goods because

free-riders make it difficult for private markets to supply the efficient quantity.

The production possibilities curve illustrates the basic principle that

if all the resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.

The economic way of thinking stresses that

incentives matter--individuals respond in predictable ways to changes in personal costs and benefits.

Which of the following would most likely increase the supply of beef? -lower prices of grains used to feed cattle -lower prices for chicken, a substitute for beef -new medical research suggesting that beef causes more serious health problems than was previously thought -an increase in the cost of transporting beef products to the consumer market

lower prices of grains used to feed cattle

When external costs are present in a market,

more of the good will be produced than the amount consistent with economic efficiency.

If the demand for a good is very price elastic, the imposition of a tax on that good

places the largest portion of the burden on the sellers of that product

The presence of price controls in a market usually is an indication that

policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers.

The government also sometimes provides public goods because

private markets would not produce the efficient quantity of the goods.

Consider two goods - one that generates external benefits and another that generates external costs. The actual market outcome would

result in a price that is lower than the efficient price for both goods.

If demand is inelastic, an increase in the price of a good will cause total expenditures on the good to

rise.

If the federal government began granting a subsidy of 10 cents per apple to apple growers and as a result the price of apples to consumers falls by 8 cents,

the actual benefit of this subsidy goes mostly to consumers.

If the price of grapes increases, total expenditures on grapes will decline if

the demand for grapes is elastic.

Suppose prices for new homes have risen and sales of new homes have also risen. We can conclude that

the demand for new homes has risen.

When a firm generates external benefits, a more efficient outcome would result if

the firm produced a larger output level.

The minimum points of the average variable cost and average total cost curves occur where

the marginal cost curve intersects those curves.

If production of a good creates pollution costs that impose an externality, firms will produce

too much of the good.

Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because

with shortages and waiting lists, they have no incentive to maintain and improve their property.

When entry barriers into a market are low, firms will tend to earn zero economic profit in the long run because a. low entry barriers lead to rising costs. b. profit-seeking entrepreneurs will not enter a market when entry barriers are low. c. short-run profit attracts additional suppliers and drives down the market price. d. consumers will refuse to pay more than the cost of producing a good once they find out the producer's per-unit costs

c. short-run profit attracts additional suppliers and drives down the market price.

If a price-taker firm selling in a competitive market offers its product at a higher price than others, it will a. increase its profits. b. maintain its profit base if the demand for the product is inelastic. c. be able to expand output. d. not be able to sell any output.

d. not be able to sell any output.

If a firm doubles all of its inputs and its output triples, it is said to be experiencing

economies of scale.

The difference between zero accounting profit and zero economic profit is that

economists include opportunity cost in zero economic profit, while accountants do not include opportunity cost in zero accounting profit.

Rebel Records announces it is cutting the prices of its bluegrass album titles by 25 percent. If Rebel is seeking to increase revenues, it must believe that the elasticity of demand for bluegrass albums is

elastic.

Technological progress generally has the effect of A) creating permanently higher levels of unemployment. B) freeing resources that can now go to other uses. C) lowering the national standard of living. D) doing all of the above.

B

Which of the following is most likely to cause the productivity of labor to increase? A) Higher money wages. B) A higher rate of investment in human and nonhuman capital. C) More flexible working hours and improved retirement plans. D) An increase in the proportion of the workforce that belongs to a labor union.

B

Which of the following is most likely to reduce the market wage rate in a job category? A) The job requires substantial out-of-town travel. B) Employees have considerable flexibility in choosing their work hours. C) The job is widely viewed as dangerous. D) The job requires employees to move from city to city quite often.

B

Which of the following is true of occupational licensing laws? A) Occupational licensing requires that the competency of workers be certified, but no one is prohibited from providing their services in the licensed occupations. B) Occupational licensing laws reduce competition in some occupations and make it more difficult for new entrants to compete in these labor markets. C) Occupational licensing has become less common over the past 40 years in the U.S. D) Occupational licensing is mandated by the Occupational Safety and Health Administration in order to make employment safer for workers.

B

Which of the following about employment discrimination is true? A) Employers who discriminate against blacks and other minorities will have lower costs than rival firms that hire employees strictly on the basis of productivity. B) After adjusting for factors such as education, experience, and location, the earnings of black men are almost identical to the earnings of white men. C) If minority and white employees in a skill category are equally productive, the profit motive provides employers with a strong incentive to hire minority employees if they are available at a lower wage. D) The empirical evidence indicates that the earnings gap between whites and blacks is entirely the result of worker preference.

C

If a competitive price-taker firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then a. a one-unit increase in output will increase the firm's profit. b. a one-unit decrease in output will increase the firm's profit. c. total revenue exceeds total cost. d. total cost exceeds total revenue

a. a one-unit increase in output will increase the firm's profit.

In a competitive price-taker market, the actions of any single buyer or seller will a. have a negligible impact on the market price. b. have little effect on overall production but will ultimately change final product price. c. cause a noticeable change in overall production and a change in final product price. d. adversely affect the profitability of more than one firm in the market.

a. have a negligible impact on the market price.

Several producers in industry A developed an improved technology that reduces the quantity of resources used to produce a given output. Which of the following would be expected? a. The per-unit costs of production of the firms adopting the technology would increase. b. In the short run, economic profits would be earned by the earliest firms adopting the technology. c. Product price would immediately fall to the minimum average total cost of the firms quickly adopting the technology, thus retarding the rate at which firms enter the industry. d. Producers who adopt the technology will have short-run economic losses

b. In the short run, economic profits would be earned by the earliest firms adopting the technology.

When new firms have an incentive to enter a competitive price-taker market, their entry will a. increase the price of the product. b. drive down profits of existing firms in the market. c. shift the market supply curve to the left. d. increase demand for the product

b. drive down profits of existing firms in the market.

If a competitive price-taker firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then a. average revenue exceeds marginal cost. b. the firm is earning a positive profit. c. a one-unit decrease in output would increase the firm's profit. d. All of the above are correct.

c. a one-unit decrease in output would increase the firm's profit.

A profit-maximizing firm will continue to expand output a. as long as the revenues from the production and sale of an additional unit exceeds the average costs of the unit. b. until the average cost of producing the good or service is at a minimum. c. as long as the revenues from the production and sale of an additional unit exceeds the marginal cost of the unit. d. until the marginal cost of producing a good or service is at a minimum

c. as long as the revenues from the production and sale of an additional unit exceeds the marginal cost of the unit.

The textile industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses, and many sellers have left the industry. Economic theory suggests that if technology, imports, and other factors remain constant, these conditions will a. shift the market demand curve outward so that price will rise to the level of production cost. b. cause the remaining firms to collude so they can produce more efficiently. c. cause the market supply to decline and the price of textiles to rise. d. cause firms in the textile industry to suffer long-run economic losses

c. cause the market supply to decline and the price of textiles to rise.

When the conditions in a competitive price-taker market are such that the firms are consistently unable to cover their production costs, a. the firms will suffer short-run economic losses that will be exactly offset by long-run economic profits. b. all firms will go out of business since consumers will not pay prices that enable firms to cover their production costs. c. some firms will exit from the industry, and market price will rise until the remaining firms can earn the normal rate of return. d. resource prices will increase, competition will decline, and eventually the firms in the industry will earn monopoly profit

c. some firms will exit from the industry, and market price will rise until the remaining firms can earn the normal rate of return.

When price is greater than marginal cost for a firm in a competitive market, a. marginal cost must be falling. b. the firm must be minimizing its losses. c. there are opportunities to increase profit by increasing production. d. the firm should decrease output to maximize profit.

c. there are opportunities to increase profit by increasing production.

Market prices generally promote social cooperation because they

clarify the options available to people and encourage individuals to help others in exchange for income.

Externalities cause the market mechanism to allocate goods and resources inefficiently because

competitive markets fail to give producers and consumers correct price signals.

An increase in the demand for a good means that

consumers are willing to purchase more of the good at each possible price.

In 2010 the federal government reduced the Social Security tax withholding rate from 12.4 percent (6.2 percent on both the employer and employee) to 8.4 percent (4.2 percent on both the employer and employee) on the wages of all workers. If the supply of labor is relatively inelastic when compared to the elasticity of the demand for labor, the burden of this tax will

continue to fall primarily on employees.

A firm is currently operating where the MC of the last unit produced is $84, and the MR of this unit is $70. What would you advise this firm to do? a. Shut down. b. Increase output. c. Stay at its current output. d. Decrease output. e. Decrease price

d. Decrease output.

Suppose a typical firm in a particular industry is making positive economic profits. These economic profits a. reflect a waste of society's scarce resources and reflect inefficient production. b. signal owners of factors of production to move their resources out of that industry. c. imply that accounting costs are greater than economic costs in this industry. d. signal owners of factors of production to move resources into this industry

d. signal owners of factors of production to move resources into this industry

If a government price control succeeds in affecting price, it can be expected to lead to a corresponding

decrease in the quantity of sales whether the price is forced up or down.

Even countries that depend primarily on market forces to resolve the basic economic questions will usually rely on the collective decision-making process to -determine the prices of goods and resources. -allocate goods that are essential to life. -determine the distribution of income among citizens. -define and enforce private-property rights and designate the acceptable forms of competitive economic behavior.

define and enforce private-property rights and designate the acceptable forms of competitive economic behavior.

Last year, 1,000 cases of bottled water were sold at $5; this year, 1,200 cases were sold at $7. These data could be explained by the

demand curve shifting to the right, with no change in supply.

The burden of a tax will fall primarily on sellers when the

demand for the product is highly elastic and the supply is relatively inelastic.