Econ 2 Final Bhattacharya NWFSC

If a chair can be sold for $20 and it takes a worker two hours to make a chair, the marginal revenue product of this worker is

$10 per hour

(Table 30.1) Assume that the product price is $4 per unit and that the hourly wage for workers is $12. Neither price nor wage changes with output. The marginal revenue product of the second worker hired is

$24 per hour

If a chair can be sold for $8 and it takes a worker two hours to make a chair, the marginal revenue product of this worker is

$4 per hour

(Table 30.2) The table shows how many hairstyling appointments a hair salon can schedule per week based on the number of stylists. In the spaces provided, compute the marginal physical product (MPP) of the hair stylists, total revenue, and marginal revenue product of the stylists, assuming that a hair stylist charges $60 per appointment. What is the marginal physical product of the fourth hairstylist?

0

Suppose Canada can produce either 300 tons of paper or 200 TVs, and India can produce either 200 tons of paper or 100 TVs. The terms of trade between the two countries will lie between

1/2 and 2/3 of a TV per ton of paper

(Table 35.1) Assume China and the United States have the same amount of resources with which to produce soybeans and computers and they produce no other goods. The opportunity cost of producing 1 computer in China is

1/3 of a ton of soybeans

(Table 30.2) The table shows how many hairstyling appointments a hair salon can schedule per week based on the number of stylists. In the spaces provided, compute the marginal physical product (MPP) of the hair stylists, total revenue, and marginal revenue product of the stylists, assuming that a hair stylist charges $60 per appointment. Suppose a hairstylist is paid $600 per week. How many hairstylists should a profit-maximizing salon hire?

3

(Table 30.1) Assume that the product price is $4 per unit and that the hourly wage for workers is $12. Neither price nor wage changes with output. How many workers should be hired?

5

(Table 35.1) Assume China and the United States have the same amount of resources with which to produce soybeans and computers and they produce no other goods. The opportunity cost of producing 1 ton of soybeans in the United States is

5 computers

(Table 30.1) Assume that the product price is $4 per unit and that the hourly wage for workers is $12. Neither price nor wage changes with output. The marginal physical product of the third worker hired is

5 units per hour

Suppose China can produce 200 TVs or 200 smartphones. South Korea can produce either 100 TVs or 200 smartphones. In terms of TV production, we can conclude that

China has a comparative advantage in TV production

(Figure 25.1) For an oligopoly firm, the existing price and quantity are $10 and 2,000 units. If we assume that rival firms match price decreases but not price increases, the firm's demand curve will most likely be (from left to right)

D2ED1

What should happen to the equilibrium price and quantity in a market as a result of a quota on imports?

Equilibrium price should go up, and equilibrium quantity should go down.

Suppose the United States can produce 2,000 cars or 2,000 trucks. Japan can produce either 2,000 cars or 1,000 trucks. In terms of car production, we can conclude that

Japan has a comparative advantage

The law of diminishing returns states that, ceteris paribus, the

MPP of labor declines as more of it is employed with a given quantity of other (fixed) inputs.

In competitive markets, the marginal revenue product curve and marginal physical product curve have similar shapes because

MRP = P x MPP

The change in total revenue associated with one additional unit of input is referred to as

MRP.

Suppose the production of 12 tons of copper in the United States requires the same amount of resources as the production of 3 tons of aluminum. In Mexico, 12 tons of copper requires the same amount of resources as 2 tons of aluminum. Implicitly

Mexico has a comparative advantage in producing copper.

If a country does not engage in trade with other countries, it is known as

a closed economy

Which of the following is a gain from trade?

a higher standard of living for all trading countries

A quota is

a limit on the quantity of a good that may be imported in a given period

The infant industry argument can be justified because

a new industry may be difficult to start in the face of existing foreign competition.

A tax imposed on imported goods is

a tariff

Which of the following is true about the kink in the demand curve? a. It is the result of different rival responses to price increases and reductions. b. It leads to an explanation of price flexibility. c. It occurs because rivals do not respond to price reductions. d. It occurs because rivals match price increases.

a. It is the result of different rival responses to price increases and reductions.

Which of the following is correct when the MPP of labor is zero, ceteris paribus? a. Employment can be increased only by offering a higher wage rate. b. No further increases in output can be achieved by using additional units of labor. c. The marginal revenue product (MRP) is at a maximum. d. Additional units of labor must be employed because other factors of production are being wasted.

b. No further increases in output can be achieved by using additional units of labor.

To ensure mutually beneficial trade, the terms of trade between two countries should always

be between their respective opportunity costs in production.

Assume Belgium can produce 5 units of Good X or 2 units of Good Y. Germany can produce 4 units of Good X or 3 units of Good Y. What would be the terms of trade between Belgium and Germany for 1 unit of Good Y?

between 4/3 and 5/2 units of X

(Figure 25.1) For an oligopoly firm, assume that the existing price and quantity are $10 and 2,000 units. Which of the following statements is most likely correct? a. Demand curves D1 and D2 both assume that rivals will not match any price changes. b. Demand curves D1 and D2 both assume that rivals match any price changes. c. Demand curve D1 assumes that rivals do not match price changes. d. Demand curve D2 assumes that rivals do not match price changes.

d. Demand curve D2 assumes that rivals do not match price changes.

In which of the following market structures are entry barriers the highest? a. perfect competition b. monopolistic competition c. oligopoly d. monopoly

d. monopoly

The marginal revenue product of labor curve is the firm's

demand curve for labor.

Goods and services sold to foreign buyers are

exports

Dumping is said to occur when

foreign producers sell their goods in export markets at prices below domestic prices.

The study of how decisions are made when strategic interaction occurs between rivals is known as

game theory

The benefits from international trade include

greater efficiency in the use of the world's limited resources.

A country with a comparative advantage in producing computer chips

has a lower opportunity cost of producing computer chips than its trading partners.

Comparative advantage in production is achieved by

having a lower opportunity cost of producing a good relative to that of other countries.

When a country imposes tariffs, it is likely to cause

higher prices for the import-competing goods both domestically and abroad

Specialization in production

increases output

A country has a comparative advantage in a good if

it can produce a good at a lower opportunity cost relative to another country.

A firm's demand for labor is referred to as a derived demand because

it is derived from the demand for the product that the labor is producing.

The demand curve facing an oligopoly firm is kinked because

it is most likely that rivals will match price cuts but not price increases.

If a firm is producing at the kink in its demand curve and it decides to decrease its price, according to the kinked demand model,

its market share will not be affected.

A firm should hire an additional worker as long as the wage rate is

less than or equal to the MRP

If oligopolists start cutting prices to capture a larger market share, the result will be

lower prices, increased output, and smaller profits.

Tariffs tend to reduce the volume of imports by

making them more expensive to domestic consumers

The demand curve will be kinked if rival oligopolists

match price reductions but not price increases.

If oligopolists start cutting prices to capture a larger market share, the result will be a

movement down the market demand curve.

The only market structure in which there is significant interdependence among firms with regard to their pricing and output decisions is

oligopoly

Which market structure is characterized by a few interdependent firms?

oligopoly

There are many corn farmers, each of whom produces the same product. The corn market can best be classified as

perfect competition

A kinked demand curve indicates that rival oligopolists match all

price reductions

The kinked demand curve explains the observation that in oligopoly markets

prices may not change even in the face of cost increases

Protectionism achieves which of the following goals?

protection of infant industries

Quotas are a greater threat to competition than tariffs because

quotas preclude additional imports at any price

The amount of Good A given up for Good B in trade is the

terms of trade

If the MPP of an additional unit of labor is 4 units per hour, product price is constant at $5 per unit, and the wage rate is $19 per hour, then

the additional unit of labor should be employed

The terms of trade between two countries refers to

the amount of Good A given up for Good B.

The marginal physical product of labor is equal to

the change in total output associated with one additional unit of labor.

A competitive firm should continue to hire workers until the MRP is equal to

the market wage rate

The wage rate is

the payment for labor.

A payoff matrix shows

the risks and rewards of alternative decision options.

Game theory is

the study of decision making in situations where strategic interaction occurs between rivals.

Two countries with differing comparative advantages may engage in trade because

they will be able to consume more goods in total due to specialization and trade.

The United States is capable of producing many goods and services that it imports, but it does not because

we can import those goods at a lower opportunity cost than if we make them ourselves.