Econ 2005 final

An increase in the price of capital will _____ demand for labor if capital and labor are substitutes, and it will _____ the demand for labor if the scale effect dominates.

increase; decrease

Damon's wage rises. The substitution effect would cause him to _____ his work hours, and the income effect would cause him to _____ his work hours.

increase; decrease

what was the primary effect of "redlining" in the US?

it prevented african americans from buying homes

a price-taker is a seller that

charges the current market price for its product

Suppose the percent change in the quantity demanded for water for any price change is zero. The demand curve for water is _____, and the price elasticity of demand is perfectly _____.

vertical; perfectly inelastic

a nonrival good is a good

where one person's use of good

the marginal revenue product of labor is equal to

MP of labor × Price

Which of the following is NOT an example of the hurdle method of price discrimination? You Answered

Segmenting the market into identifiable groups with different prices.

Suppose that you have a pumpkin stall at a farmer's market, and the Halloween season arrives. You know that your customers want to buy many pumpkins to carve into jack-o-lanterns. Which of the following is a likely result of this scenario?

You can charge a higher price per pumpkin and will sell more

a binding price ceiling is

always below the equilibrum price

for normal goods

an increase in consumer income will lead to a rise their demand

if the price of airline ticket goes up, there will be

an increase in the demand for both bus and train tickets

people gain consumer surplus when they purhase an item

at a price below the value of the benefit they receive from the item.

a company's profit margin is calculated as

average revenue minus average cost

a tax on sellers would not cause a decrease in quantity sold if

demand is perfectly inelastic

If an aircraft is found to have software problems that could lead to a malfunction, the effect on the aircraft market will be that the

demand will decrease, and the price of the aircraft will fall.

fixed costs

do not chnage with the level of production in the short run, are present even when the firm is producing zero units, are irrelevant to marginal cost

which of the following statements is TRUE regarding economic efficency

efficent outcomes rarely make everyone happy

When there is free entry and exit in a market, in the long run, price will:

equals avergae cost

what attracts new sellers into a market?

existing sellers in the market earning

The profit-maximizing rule MR = MC is:

followed by all types of firms

When setting prices for different groups of customers, a manager should charge lower prices to groups that

have a more elastic demand.

Redistribution programs are means-tested. To qualify for such a program, a person must demonstrate that:

his or her income (or means) is below a certain specified level.

according to the coase theorem the private market can achieve an efficent outcome

if bargaining costs are low and property rights are well defined

what is the difference between accounting profit and economic profit

implicit opportunity costs

Jonathan Mendez is deciding whether to study for his economics exam at a café down the street or go to a concert a few cities over. The time spent commuting to the concert is ____ in his opportunity cost calculations and represents a _____ cost.

included; nonfinancial

A corrective tax designed to resolve a negative externality problem is typically set at an amount equal to the _____ cost.

marginal external

Compared to other high income countries, the U.S. has ______inequality. Correct!

more

A higher Gini coefficient means that a country has _________

more inequality

A market consists of ten similar suppliers that are making the same supply decisions. To find the market supply of these ten suppliers, you:

multiply the individual supply of one of the suppliers by ten.

Suppose that each of the two firms in a duopoly has the independent choice of advertising or not advertising. If neither advertises, each gets $10 million in profit; if both advertise, their profits will be $5 million each; and if one advertises while the other does not, the advertiser gets profit of $15 million and the other gets profit of $2 million. According to game theory, if the firms collude to maximize joint profits:

neither will advertise.

A market with negative externalities will tend to _____ compared to a market producing the socially optimal output.

overproduce and sell at a lower price

The relationship between price expectations and demand is

positive; when future prices are expected to rise, current demand will rise.

Marginal social cost equals marginal _____ cost plus marginal _____ cost.

private; external

Market power results in companies that _____ and that have _____ compared to perfect competition.

produce less ; higher price

a natural monoply exists when

producing a large output has significantly lower marginal cost than producing a small output.

Household A earns $50,000 a year and pays $10,000 in taxes. Household B earns $200,000 a year and pays $50,000 in taxes. The tax system described here is...

progressive

During the pandemic, people don't want to go out to eat as much. At the same time, costs for restaurants are rising to ensure the safety of their employees. What do you predict will happen to the equilibrium price and quantity for restaurant meals?

quantity falls, the effect on price is uncertain

If an item is a necessity rather than a luxury, and has few substitutes, its demand curve will likely be:

relatively steep

Assume an economy moves from autarky to free international trade. For goods that are imported, consumer surplus _______, producer surplus ________, and the economy as a whole ________

rises, falls, gains

when education level is used to convey information to an employer , it serves as a

signal

The opportunity costs of a decision may include each of the following types of costs EXCEPT

sunk costs

sellers bear a smaller incidence of a tax when

supply is more elastic relative to demand

the marginal cost of an additional worker

the additional cost of hiring one more worker

Which of the following is NOT a factor that can shift supply?

the market price of a product

Cedar point amusement park reduces its entry fees. As a result of this price fall,

the quanitity demanded will be higher

A large amount of harvested grain used to make flour grows mold due to flooding. How will this affect the supply of flour in the market? Correct!

the supply of flour will decrease in the market

what will the impact be on the supply of long- haul truck transportation services if diesel fuel becomes cheaper?

the supply of truck transportation services will increase

statistical discrimination

the use of observations about the average characteristics of a group to make inferences about an individual member of the group.

If a store runs a sale on a product to clear out its stock, we can conclude that:

there was a surplus of the product in the store

Suppose that government officials have set an emissions tax to reduce pollution. Assume that the optimal tax would be $1,500, but government officials have set the tax at $500. At the equilibrium with the $500 tax:

there will be too much pollution

Which type of strategy for repeated games involves doing whatever the other player did the last time the game was played?

tit- for- tat

The price of coffee at a local coffee shop is $3. Cheryl is willing to pay $6 for her first cup of coffee each day. The marginal benefit to her of each additional cup of coffee falls by $2. How many cups of coffee should Cheryl purchase?

two

The price of a dozen eggs falls from $2.50 to $1.50. In response to this price change, the quantity demanded for eggs increases by 10%. Using the midpoint formula, what is the absolute value of the price elasticity of demand for eggs?

0.2

If income rises by 20% and the quantity demanded of an item rises by 10%, the income elasticity of demand for this item is:

0.5

The price of product C rises by 10%. As a result, the quantity demanded of product D rises by 20%. The cross-price elasticity of demand between product C and product D is _____, and they are _____.

2; substitutes

There are 3 pizza places in a small town. One has 50% market share, one has 40% market share, and one has 10% market share. What is the HHI for the pizza places?

4200

Betty is willing to pay up to $160 for a particular pair of boots. She is able to buy the boots for $120. The marginal cost of producing the boots is $70. How large is the total economic surplus associated with her purchase of the boots? (do not put "$" in your answer - just the number)

90

Grapes become more expensive in the market. Which of the following can explain the increase in price?

Grape production is the same, but wine production has gone up, which requires more grapes.

Workers on the night shift at a factory earn more per hour than workers on the day shift, although their human capital and productivity are the same. This is an example of: Correct!

a compensating differential

If wages fall for surgeons but not for family practice doctors, there will be _____ in the market for surgeons and _____ in the market for family practice doctors.

a decrease in quantity supplied; a rightward shift of labor supply

The basic logic behind the Rational Rule for Sellers is that a company owner should increase output as long as the extra output

adds more to revenue than it adds to costs

Large barriers to entry in the gas station business explain why the two only gas stations in a small town:

can earn an economic profit in the long run

The last 3 times I wore my orange socks to the basketball game, the Hokies won. I didn't wear my socks to the last game and they lost. "My socks determine whether the Hokies win." is an example of

confusing association (or correlation) with causation.