Econ EXAM 3

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In the United States, government policies with respect to monopolies and collusion are embodied in common law, which the United States adopted from English law. antitrust laws. the Supreme Court. the U.S. Constitution.

antitrust laws.

A private good is a good that is rivalrous and nonexcludable. a good that is nonrivalrous and excludable. a good that is nonrivalrous and nonexcludable. a good that is rivalrous and excludable.

a good that is rivalrous and excludable.

Consider a used car market in which half the cars are good and half are bad (lemons). If buyers are rational, the prices being offered for used cars will result in a larger proportion of lemons being sold and consequently, producer surplus is increased. an equal proportion of good cars and lemons being sold in an inefficient market. an equal proportion of a good cars and lemons being sold in an efficient market. a larger proportion of good cars being sold and consequently, consumer surplus is increased.

a larger proportion of lemons being sold and consequently, producer surplus is increased.

Information asymmetry in a market can lead to ________. the free-rider problem a tragedy of the commons a market failure the paradox of thrift

a market failure

"Free riding" is a characteristic of which type of good? a good that is both rival and excludable a common resource a private good a public good

a public good

The public choice model assumes that government policymakers must promote the public interest at the expense of their own self-interests in order to be re-elected. will often act irrationally in their personal affairs, but will act rationally when they promote the public interest. are likely to pursue their own self-interests, even if their self-interests conflict with the public interest. will pursue their self-interests in personal affairs but only if it does not conflict with the public interest.

are likely to pursue their own self-interests, even if their self-interests conflict with the public interest.

A monopoly firm's demand curve is perfectly inelastic. is more inelastic than the demand curve for the product. is the same as the market demand curve. is inelastic at high prices and elastic at lower prices.

is the same as the market demand curve.

A product is considered to be nonexcludable if your consumption of the product reduces the quantity available for others to consume. you can keep those who did not pay for the item from enjoying its benefits. it is jointly owned by all members of a community. you cannot keep those who did not pay for the item from enjoying its benefits.

you cannot keep those who did not pay for the item from enjoying its benefits.

Average variable cost can be calculated using any of the formulas below except Δ(TC - FC)/ΔQ. (TC - FC)/Q. (TC/Q) - AFC. TVC/Q.

Δ(TC - FC)/ΔQ.

Which of the following statements refers to rent seeking? "There is an opportunity cost whenever the federal government spends tax revenue. For example, an additional $1 billion spent on national defense means there will be less revenue for highway construction and maintenance or some other program." "The role of the federal government in the U.S. economy grew significantly after the Great Depression. Government spending and taxes are a much greater proportion of total income today than they were in 1929." "Laws passed by the federal government often provide benefits for a small number of individuals. These individuals, in turn, have an incentive to contribute to the campaigns of politicians who pass these laws." "The federal government should spend more money on programs that help low income citizens and less money on national defense."

"Laws passed by the federal government often provide benefits for a small number of individuals. These individuals, in turn, have an incentive to contribute to the campaigns of politicians who pass these laws."

Wendell can sell five motor homes per week at a price of $22,000. If he lowers the price of motor homes to $20,000 per week he will sell six motor homes. What is the marginal revenue of the sixth motor home? $10,000 $12,000 $20,000 $22,000

$10,000

When a firm produces 50,000 units of output, its total cost equals $6.5 million. When it increases its production to 70,000 units of output, its total cost increases to $9.4 million. Within this range, the marginal cost of an additional unit of output is $41.43. $134.29. $135. $145.

$145.

https://tamu.blackboard.com/courses/1/ECON.202.599.1731/ppg/quiz9.50825171609/f1q10g1.jpg When output level is 100, what is the total cost of production? $20 $1,000 $1,200 $2,000

$2,000

Price per Unit Quantity Demanded Total Cost of Production $85 10 $530 80 11 540 75 12 550 70 13 560 65 14 575 60 15 595 55 16 625 When producing the profit-maximizing output, what is the amount of the firm's profit? $335 $350 $880 $910

$350

If a worker can produce 20 units of output which can be sold for $4 per unit, what is the maximum wage that firm should pay to hire this worker? $80 minus the firm's profit markup It depends on what the going wage rate is in the labor market. $80 There is insufficient information to answer the question.

$80

Price per Dose Quantity Demanded Total Cost of Production $80 0 $80 72 1 82 64 2 88 56 3 100 48 4 124 40 5 164 32 6 208 24 7 268 16 8 340 What is the amount of Shakti's profit? $68 $72 $124 $192

$68

https://tamu.blackboard.com/courses/1/ECON.202.599.1731/ppg/quiz9.30825171548/f1q3g1.jpg The marginal product of the 3rd worker is 57. 19. 15. 11.

15.

Price per Dose Quantity Demanded Total Cost of Production $80 0 $80 72 1 82 64 2 88 56 3 100 48 4 124 40 5 164 32 6 208 24 7 268 16 8 340 What is Shakti's profit-maximizing output? 4 units 5 units 6 units 7 units

1 12 2 30 3 45 4 50 5 54 6 56 What is the marginal product of the 4th worker? 137 pounds 50 pounds 12.5 pounds 5 pounds

When the average total cost is $16 and the total cost is $800, then the number of units the firm is producing is impossible to determine with the information given. 12,800. 784. 50.

50.

The key problem(s) with externalities is that Private costs do not equal social costs. Private benefits do not equal social benefits. The government is often inefficient. All of the above. A and B above.

A and B above

The appropriate charge for trash disposal should be set by The opportunity cost of using the landfill, The cost of the trucks and labor needed to haul trash away, The impact of buried plastic bottles that only slowly degrade. A and B above.

A and B above.

Other things remaining the same, which of the following is likely to cause a left shift in the supply curve for labor? An increase in population A decrease in the demand for the final product that the labor is used to produce An increase in the demand for the final product that the labor is used to produce A decrease in population

A decrease in population

Which of the following is a problem that arises in a health insurance market? A disproportionate number of high-risk individuals are attracted to buy insurance. There exists a fierce competition between the insurance providers. There are a large number of buyers of various insurance programs. Only risk-averse individuals buy insurance.

A disproportionate number of high-risk individuals are attracted to buy insurance

Which of the following is likely to cause an increase in the wage rate and a fall in the employment level in a country? A right shift in the supply curve for labor, without any change in the demand curve for labor A left shift in the demand curve for labor, without any change in the supply curve for labor A right shift in the demand curve for labor, without any change in the supply curve for labor A left shift in the supply curve for labor, without any change in the demand curve for labor

A left shift in the supply curve for labor, without any change in the demand curve for labor

Which of the following is likely to cause a decrease in the wage rate and an increase in the employment level of a country? A right shift in the supply curve for labor, without any change in the demand curve for labor A left shift in the demand curve for labor, without any change in the supply curve for labor A left shift in the supply curve for labor, without any change in the demand curve for labor A right shift in the demand curve for labor, without any change in the supply curve for labor

A right shift in the supply curve for labor, without any change in the demand curve for labor

________ occurs when one agent in a transaction knows about a hidden characteristic of a good. The tragedy of the commons Adverse selection The free-rider problem Moral hazard

Adverse selection

Key limitations on the government correcting "market failures" include: Information Misaligned incentives between the government and citizens The incentive of the government to tax and spend to help politicians get elected or re-elected. All of the above.

All of the above.

Restaurant owners have an incentive to Fully account for the value impact of restaurant smoking on nonsmokers. Fully account for the value of restaurant smoking to smokers. Take into account how smoking shifts the overall demand curve for restaurant meals. All of the above.

All of the above.

To evaluate recycling, you must consider The demand for recycled products, The incremental costs to society for recycling products, The value of the land used for landfills, All of the above. B and C above.

All of the above.

Sewage treatment is an example of An externality, An internalized externality, The need to return resources to their natural state, All of the above, A and C above.

An externality,

The key to solving problems associated with smoking in restaurants is to Assign property rights to the air to smokers. Assign property rights to the air to nonsmokers. Ban smoking to prevent associated diseases. Assign property rights to restaurant owners.

Assign property rights to restaurant owners.

https://tamu.blackboard.com/courses/1/ECON.202.599.1731/ppg/quiz9.50825171609/f1q9g1.jpg In the figure above which letter represents the average total cost curve? A B C D

Which of the following statements about rent seeking is false? If a firm can benefit from government intervention in the economy, it is more likely to spend resources attempting to secure this intervention than toward innovating its product to gain a competitive edge in the market. Rent seeking often involves governments because governments transfer huge amounts of funds that economic agents must compete for. A person is engaging in rent-seeking behavior when he uses the political process to acquire ownership of a resource that belongs to the public. Because rent seeking redistributes society's resources, anyone engaging in such behavior is violating the law.

Because rent seeking redistributes society's resources, anyone engaging in such behavior is violating the law

Which of the following is an example of a club good? Forests Streetlights A diamond ring Cable TV

Cable TV

Which of the following is an example of signaling in a market with asymmetric information? Certification of used cars by third parties Discounts offered by sellers during the holiday season Taxation of alcoholic beverages Rent controls imposed by the government

Certification of used cars by third parties

In the United States, the bulk of health care spending is paid by health insurance companies. Such a system is also called a third-party payer system where consumers of health care pay a nominal fee and the rest are paid by the health insurance provider. Why might such a system lead to an inefficient outcome? Consumers have an incentive to over-consume health care services because they pay prices well below the cost of providing these services. Physicians concerned that insurance companies may not approve payments tend not to order expensive tests for their patients. Health insurance companies have an incentive to control cost and therefore tend to deny consumers many cutting edge medical treatments. Consumers fearing that excessive use of health care services may lead to a rise in insurance premiums tend to under-consume health care services.

Consumers have an incentive to over-consume health care services because they pay prices well below the cost of providing these services.

The central question In trying to determine whether to involve the government in an economic issue is Determining whether or not the government can be relied on to make things better. Determining whether or not property rights are involved. Determining the social value of the goods in question. Determining the appropriate tax rate.

Determining whether or not the government can be relied on to make things better.

https://tamu.blackboard.com/courses/1/ECON.202.599.1731/ppg/quiz9.50825171609/f1q7g1.jpg Identify the curves in the diagram. E = marginal cost curve; F = average total cost curve; G = average variable cost curve; H = average fixed cost curve. E = average fixed cost curve; F = average total cost curve; G = average variable cost curve, H = marginal cost curve E = average fixed cost curve; F = variable cost curve; G = total cost curve, H = marginal cost curve E = marginal cost curve; F = total cost curve; G = variable cost curve, H = average fixed cost curve

E = marginal cost curve; F = average total cost curve; G = average variable cost curve; H = average fixed cost curve.

Which of the following is a characteristic shared by a perfectly competitive firm and a monopoly? Each must lower its price to sell more output. Each maximizes profits by producing a quantity for which marginal revenue equals marginal cost. Each maximizes profits by producing a quantity for which price equals marginal cost. Each sets a price for its product that will maximize its revenue.

Each maximizes profits by producing a quantity for which marginal revenue equals marginal cost.

t/f : According to the video, the government should ban smoking in restaurants because of the diseases caused by passive smoking.

False

t/f : Banning smoking in restaurants is clearly economically efficient because passive smoke is harmful.

False

t/f : The best solution to water pollution is to make the responsible people clean the water and return it to its natural state.

False

t/f : The point of the video is that the government can seldom enhance economic efficiency.

False

t/f : The social problem of smoking in restaurants is caused because smokers want to pollute the air, causing harm to people around them.

False

Some economists who use the public choice model to explain the ways government intervenes in the economy believe that regulatory capture results when an agency or commission is given authority over a particular industry or product. Which of the following is the best example of regulatory capture? The Food and Drug Administration (FDA) has increased the time and expense pharmaceutical firms incur to receive approval to market a new drug. A federal government agency hires more employees than it requires to regulate an industry because it does not seek to minimize costs or maximize the agency's profits. Firms that were regulated by the Interstate Commerce Commission (ICC) attempted for many years to influence the ICC's actions. The head of an agency is required to testify before Congress because Congress controls the size of the agency's budget. Congress "captures" the agency because of its budget authority.

Firms that were regulated by the Interstate Commerce Commission (ICC) attempted for many years to influence the ICC's actions.

Which two factors make regulating mergers complicated? First, the time it takes to reach a decision to approve a merger is so long that the firms often have new owners and mangers. Second, by law, government officials are not allowed to consider the impact of foreign trade (exports and imports) on the degree of competition in the markets of the merged firms. First, it is not always clear what market firms are in. Second, the newly merged firm might be more efficient than the merging firms were individually. First, the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice must both approve mergers. Second, the concentration ratios that are used to evaluate the degree of competition the merged firms face are flawed. First, firms may lobby government officials to influence their decision to approve the merger. Second, by the time the government officials reach a decision regarding the merger, the firms often decide not to merge

First, it is not always clear what market firms are in. Second, the newly merged firm might be more efficient than the merging firms were individually.

Which of the following is an example of an ordinary private good? The Internet Furniture Water Cable TV

Furniture

________ discourage low-risk individuals from seeking health insurance. Low interest rates High premiums Low premiums High costs of medical treatment

High premiums

Which of the following explains why the marginal cost curve has a U shape? Initially, the marginal product of labor falls, then rises. Initially, the marginal product of labor rises, then falls. Initially, the average cost of production rises, then falls. Initially, the average product of labor rises, then falls.

Initially, the marginal product of labor rises, then falls.

Which of the following helps in reducing the problem of adverse selection in health insurance markets? Insurance mandates High premiums Insurance coverage High rates of taxation

Insurance mandates

The net effect of smoking in a restaurant is to Lower demand, Increase demand, Leave demand unchanged. It depends - there is no general answer.

It depends - there is no general answer.

For certain public projects such as building a dam on a river or a bridge to an island, what procedure is a government likely to use to determine what quantity of a public good should be supplied? It conducts public surveys to determine if consumers want the product. It hires economists to estimate the market demand for the product. It takes a vote in Congress. It evaluates the costs and benefits of producing the good.

It evaluates the costs and benefits of producing the good.

What is the principal-agent problem? It is a problem that exists when a person (principal) has more information about the task than the agent he hires to perform the task. It is a problem caused by a person (principal) who hires an agent to act on his behalf but is unwilling to delegate authority to the agent to carry out the task in the best possible way. It is a problem of the power system of boss and subordinate where the boss (principal) exerts influence over his subordinates (agents) using punishment or threat. It is a problem caused by agents pursuing their own interests rather than the interests of the principals who hired them

It is a problem caused by agents pursuing their own interests rather than the interests of the principals who hired them

What is moral hazard? It refers to the actions people take after they have entered into a transaction that makes the other party to the transaction worse off. It refers to the actions people take before they enter into a transaction so as to mislead the other party to the transaction. It refers to the private, self-interested actions that people pursue, which when taken collectively leads to a loss in economic surplus. It refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transactio

It refers to the actions people take after they have entered into a transaction that makes the other party to the transaction worse off.

What is adverse selection? It refers to the actions people take before they enter into a transaction so as to mislead the other party to the transaction. It refers to the actions people take after they have entered into a transaction that make the other party to the transaction worse off. It refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction. It refers to the private, self-interested actions people that people pursue, which when taken collectively leads to a loss in economic surplus.

It refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction.

Sarah is a high school graduate and James is a college graduate. Which of the following statements is true? Both Sara and James are likely to have the same amount of human capital. Sara is likely to have more human capital than James. Both Sara and James are likely to earn the same wage in the labor market. James is likely to have more human capital than Sara.

James is likely to have more human capital than Sara.

https://tamu.blackboard.com/courses/1/ECON.202.599.1731/ppg/quiz9.70825171628/f1q2g1.jpg To maximize profit, the firm will produce at output level Q1. Q2. Q3. Q4.

An example of a monopoly based on control of a key resource is Microsoft's Windows operating system. the U.S. Food and Drug Administration. Major League Baseball. NASA.

Major League Baseball.

Which of the following is true at the output level where average total cost is at its minimum? Average total cost equals average fixed cost. Marginal cost equals average total cost. Marginal cost equals average variable cost. Average variable cost equals fixed cost.

Marginal cost equals average total cost.

Which of the following statements is false? Marginal cost will equal average total cost when average total cost is at its lowest point. When marginal cost is less than average total cost, average total cost will fall. Marginal cost will equal average total cost when marginal cost is at its lowest point. When marginal cost is greater than average total cost, average total cost will rise.

Marginal cost will equal average total cost when marginal cost is at its lowest point.

Peet's Coffee and Teas produces some flavorful varieties of Peet's brand coffee. Is Peet's a monopoly? Yes, there are no substitutes to Peet's coffee. No, although Peet's coffee is a unique product, there are many different brands of coffee that are very close substitutes. Yes, Peet's is the only supplier of Peet's coffee in a market where there are high barriers to entry. No, Peet's is not a monopoly because there are many branches of Peet's.

No, although Peet's coffee is a unique product, there are many different brands of coffee that are very close substitutes.

According to the video, W. Kip Viscusi studied tobacco smoking and concluded that There were significant negative externalities associated with smoking, There were significant net social benefits to smoking. Smokers, in general, made poor decisions. None of the above.

None of the above.

Beginning in the 1950s economists began to investigate incentives within government. They found that: Government should not get involved in the economy. Government should only implement monetary policy income taxes, and leave the rest of the economy alone. One should be cautious in calling on the government to improve economic performance. None of the above.

One should be cautious in calling on the government to improve economic performance.

https://tamu.blackboard.com/courses/1/ECON.202.599.1731/ppg/quiz%207.41020161113/f1q13g1.jpg The profit-maximizing price is P1. P2. P3. P4.

According to the video, the key to Viscusi's findings about the net impact of smoking on healthcare costs is that Smoking does not really cause significant health effects, People who smoke tend to weigh less and the lower weight offsets the effects of smoking. People who smoke need more medical care, but they also (unfortunately) tend to die younger, and that creates an offsetting reduction in health care costs. None of the above.

People who smoke need more medical care, but they also (unfortunately) tend to die younger, and that creates an offsetting reduction in health care costs.

https://tamu.blackboard.com/courses/1/ECON.202.599.1731/ppg/quiz%207.41020161113/f1q22g1.jpg In the absence of any government regulation, the profit-maximizing owners of this firm will produce ________ units and charge a price of ________. Q2 units; P2 Q1 units; P1 Q1 units; P4 Q3 units; P3

Q2 units; P2

https://tamu.blackboard.com/courses/1/ECON.202.599.1731/ppg/quiz%207.41020161113/f1q21g1.jpg If the regulators of the natural monopoly allow the owners of the firm to break even on their investment the firm will produce an output of ________ and charge a price of ________. Q1 units; P1 Q5 units; P3 Q3 units; P4 Q1 units; P4

Q3 units; P4

The economically efficient amount of recycling will occur if Recyclers pay the full cost of picking up recycled products, The government subsidizes recycling by paying for the cost of pickup. All goods are recycled whenever possible. B and C above.

Recyclers pay the full cost of picking up recycled products,

Which of the following is not an example of rent-seeking behavior? Regulators want the regulated industry to spend a lot of time and effort on compliance. Regulators, in general, don't want to be jerks. The regulated industry cares more about regulations than consumers do. The regulated industry is the main employer of those who leave the regulatory body.

Regulators want the regulated industry to spend a lot of time and effort on compliance.

In Walnut Creek, California, there are three very popular supermarkets: Safeway, Whole Foods, and Lunardi's. While Safeway remains open twenty-four hours a day, Whole Foods and Lunardi's close at 9 pm. Which of the following statements is true? Safeway is a monopoly all day because it produces a service that has no close substitutes. Safeway can ignore the pricing decisions of the other two supermarkets. Safeway probably has a higher markup to compensate for its higher cost of production. Safeway has a monopoly at midnight but not during the day.

Safeway has a monopoly at midnight but not during the day.

Which of following is the best example of a monopoly if we use a broader definition of monopoly? Zippie Rentals, a sports car rental service in the downtown Boston area Santos Tacos, the only taqueria in the small town of Santosville Spuds McKenzie, a wealthy potato farmer in Idaho Cheap Gas, one of two gasoline stations in a large rural community

Santos Tacos, the only taqueria in the small town of Santosville

Which of the following is a market-based solution to the problem of adverse selection? Subsidization Taxation Signaling Sniping

Signaling

A key advantage of assigning property rights to owners of restaurants is that They will usually ban smoking. Smokers and nonsmokers are likely to be able to eat meals the way they like. They will usually allow smoking. They will usually set up no smoking sections.

Smokers and nonsmokers are likely to be able to eat meals the way they like.

The U.S. government has imposed quotas on the importation of sugar that makes sugar prices higher because Sugar farmers lobbied for regulation that would increase their profits by limiting competition. Sugar is unhealthy and a higher price means people will consume less of it. Soft drink companies wanted an incentive to switch to using corn syrup. The consumers of sugar wanted elected officials to impose those quotas.

Sugar farmers lobbied for regulation that would increase their profits by limiting competition.

The difference between the salaries paid to movie stars and to actors who play supporting roles is much greater today than it was in the 1930s and 1940s. What factor explains this increase in relative salaries over time? The studio system that dominated the industry in the 1930s and 1940s no longer exists. The studio system allowed movie studios to sign actors to long-term contracts that kept salaries down. Agents of movies stars are effective in obtaining large salaries for their clients today. Few movie stars had agents to negotiate for them in the 1930s and 1940s. There was no actors' union in the 1930s and 1940s. The rise of strong actors' unions has caused salaries of movies stars to be greater today than in previous years. Technological advances in the entertainment industry increase the revenue that successful movies can earn. This has increased the movie studios' willingness to pay high salaries to movie stars.

Technological advances in the entertainment industry increase the revenue that successful movies can earn. This has increased the movie studios' willingness to pay high salaries to movie stars.

Some superstar athletes in the sports industry earn very high levels of income relative to other occupations, and over time the wage differential has been increasing. What could have caused this? The supply of star athletes has increased due to college athletic programs. Technological advances such as cable television has increased the demand for sports entertainment. The supply of star athletes has decreased. The market power of athletes' unions has increased.

Technological advances such as cable television has increased the demand for sports entertainment.

Which of the following exemplifies the tragedy of the commons? The Pleasant Hill community is growing so fast that the city's only post office is not able to keep pace with the population growth in the community. Canadian citizens receive free universal health care administered by provincial governments. The Malaysian tapir, distinguished for its unusual coloration, is a target for poachers who hunt it for its tough and leathery hide. Residents on the northern coast of California receive only one public broadcasting signal which may be eliminated altogether if government funding is cut.

The Malaysian tapir, distinguished for its unusual coloration, is a target for poachers who hunt it for its tough and leathery hide.

Which of the following is likely to be used as a signal in the job market? An announcement of vacancy The job description The degree obtained by the applicant The letter of appointment

The degree obtained by the applicant

Which of the following would cause an increase in the equilibrium wage? The supply of labor increases more than the demand for labor. The supply of jobs increases less than the demand for jobs. The demand for labor increases faster than the supply of labor. The supply of labor increases and the demand for labor decreases.

The demand for labor increases faster than the supply of labor.

Which of the following correctly identifies the difference between the demand for labor and the demand for final goods? The demand for final goods is fixed over time, whereas the demand for labor changes according to the changes in tastes and preferences. The demand for final goods is derived from the demand for labor, whereas the demand for labor is independent of the demand for final goods. The demand for labor is fixed over time, whereas the demand for final goods changes according to changes in tastes and preferences. The demand for labor is derived from the demand for final goods, whereas the demand for final goods is independent of the demand for labor.

The demand for labor is derived from the demand for final goods, whereas the demand for final goods is independent of the demand for labor.

In the legal sector, some practice areas have declined in recent years. For example, personal-injury and medical-malpractice cases have been undercut by state laws limiting class-action suits, out-of-state plaintiffs, and payouts on damages, and securities class-action litigation has declined in part because of a buoyant stock market. How does this affect the market for lawyers? The supply of lawyers shifts to the left. The demand for lawyers shifts to the left. The quantity of lawyers demanded decreases and this is represented by a movement along the demand curve. Both the demand and supply curves decrease.

The demand for lawyers shifts to the left.

What is likely to happen in a used-car market if the buyers feel that the best they can do is to buy a lemon? Higher gains from trade are realized. The entire market shuts down. The sellers of lemons earn high profits. The sellers of gems reap high profits.

The entire market shuts down.

Consider the market for opticians. What is likely to happen to the equilibrium wage and quantity of opticians if more and more people turn to laser eye surgery instead of wearing glasses or contact lens? The equilibrium wage and the equilibrium quantity of opticians fall. The equilibrium wage falls and the equilibrium quantity of opticians rises. The equilibrium wage rises and the equilibrium quantity of opticians falls. The equilibrium wage and the equilibrium quantity of opticians rise.

The equilibrium wage and the equilibrium quantity of opticians fall.

Which of the following is likely to lead to a left shift in the supply curve for labor to a firm? An increase in the opportunity cost of leisure The establishment of a new firm nearby that offers higher wages The introduction of labor-complementary technology The introduction of labor-saving technology

The establishment of a new firm nearby that offers higher wages

https://tamu.blackboard.com/courses/1/ECON.202.599.1731/ppg/quiz9.20825171535/f1q11g1.jpg Which of the following statements about the firm depicted in the diagram is true? The fact that this firm is a natural monopoly is shown by the continually declining market demand curve as output rises. The fact that this firm is a natural monopoly is shown by the continually declining marginal revenue curve as output rises. The fact that this firm is a natural monopoly is shown by the fact that marginal cost lies below the long-run average total cost where the firm maximizes its profits. The fact that this firm is a natural monopoly is shown by the long-run average total cost curve still falling when it crosses the demand curve.

The fact that this firm is a natural monopoly is shown by the fact that marginal cost lies below the long-run average total cost where the firm maximizes its profits

Which of the following statements is true? The slope of the labor supply curve depends only on the income effect of a wage rate change. The slope of the labor supply curve depends only on the substitution effect of a wage rate change. The income effect and the substitution effect of a wage rate change work in opposite directions. The income effect and the substitution effect of a wage rate change work in the same direction.

The income effect and the substitution effect of a wage rate change work in opposite directions.

Other things remaining the same, which of the following is likely to cause a decrease in both the wage rate and the number of workers hired in a glass factory? An increase in the population in the region where the factory is located A decrease in the population in the region where the factory is located The introduction of labor-complementary technology in the factory The introduction of labor-saving technology in the factory

The introduction of labor-saving technology in the factory

What is the difference between labor's marginal product and marginal revenue product? The marginal product of labor is the additional labor's contribution to the firm's total output while the marginal revenue product is the additional labor's contribution to the firm's total sales revenue. Labor's marginal product is a measure of labor's productivity while labor's marginal revenue product is a measure of labor's ability to sell the firm's products. The marginal revenue product of labor is the dollar value of hiring an additional worker while the marginal product of labor is the increase in the firm's physical output as a result of hiring an additional worker. The marginal product of labor is the increase in output as a result of hiring an additional worker while the marginal revenue product of labor is the increase in profit as a result of hiring an additional worker.

The marginal product of labor is the additional labor's contribution to the firm's total output while the marginal revenue product is the additional labor's contribution to the firm's total sales revenue.

How does the construction of a market demand curve for a private good differ from that for a public good? There is no difference; in both cases the demand curve is determined by adding up the price each consumer is willing to pay for each quantity of the good. The market demand curve for a private good is determined by adding up the quantities demanded by each consumer at each price but the market demand curve for a public good is determined by adding up the price each consumer is willing to pay for each quantity of the good. The market demand curve for a private good is determined by adding up the price each consumer is willing to pay for each quantity of the good but the market demand curve for a public good is determined by adding up the quantities demanded by each consumer at each price. There is no difference; in both cases the demand curve is determined by adding up the quantities demanded by each consumer at each price.

The market demand curve for a private good is determined by adding up the quantities demanded by each consumer at each price but the market demand curve for a public good is determined by adding up the price each consumer is willing to pay for each quantity of the good.

In which of the following markets are buyers likely to have private information? The market for banking services The market for fresh fruits and vegetables The market for used cars The market for health insurance

The market for health insurance

Which of the following leads to the tragedy of the commons? The high rate of taxation on common pool resources The use of common pool resources above the socially optimal level The low level of satisfaction derived from the use of common pool resources The tendency of consumers to use common pool resources without paying for them

The use of common pool resources above the socially optimal level

The opportunity cost of using land for a landfill is determined by The value of the land before the landfill was developed, minus the cost of the land after the landfill is full. The cost of land in neighboring counties. The full value of the land at the time of purchase, since land used for landfill has no subsequent value. All of the above. B and C above.

The value of the land before the landfill was developed, minus the cost of the land after the landfill is full.

Other things remaining the same, which of the following is likely to happen if there is a decrease in the price of flour products? There will be a decrease in the wage rate and an increase in the employment levels in the flour industry. There will be an increase in both the wage rate and the employment levels in the flour industry. There will be a decrease in both the wage rate and the employment levels in the flour industry. There will be an increase in the wage rate and a decrease in the employment levels in the flour industry.

There will be a decrease in both the wage rate and the employment levels in the flour industry.

The typical labor supply curve is upward sloping but it is possible for the curve to be backward bending — negatively sloped — at very high wage levels. Which of the following would cause a backward-bending supply curve? This would occur when the income effect from an increase in the wage becomes larger than the substitution effect. This would occur when the substitution effect from an increase in the wage becomes larger than the income effect. This would occur when a large number of workers choose leisure rather than employment at low wages; only a very large increase in the wage will lead these workers to prefer employment to leisure. This would occur if leisure is an inferior good.

This would occur when the income effect from an increase in the wage becomes larger than the substitution effect.

t/f : The social problem of smoking in restaurants because smokers and nonsmokers want to use the air in different ways.

True

Which of the following is an example of rent seeking behavior? U.S. sugar firms convinced Congress to impose a quota on imports of sugar. Amazon introduced the Kindle to compete with Sony's Digital Reader. Amazon was motivated by the desire to earn profits from the Kindle but also increased the choice of digital music players available to consumers. Apple earned large profits from the development and sale of the iPhone. Recent increases in cigarette taxes faced little opposition from voters, many of whom were rationally ignorant with respect to the tax.

U.S. sugar firms convinced Congress to impose a quota on imports of sugar.

The total value to society of having garbage removed is greater than the value of baseball games. Why, then, are baseball players paid more than garbage collectors? There is greater competition in the garbage collection industry than there is in Major League Baseball. Garbage removal results in significant external benefits that are not captured in the price paid for garbage removal. As a result, wages of garbage collectors do not reflect their social benefits. Although the total value of garbage removal is greater than the total value of baseball, wages are determined by average values. Wages do not depend on total values but marginal values. The marginal revenue product of baseball players exceeds the marginal revenue product of garbage collectors.

Wages do not depend on total values but marginal values. The marginal revenue product of baseball players exceeds the marginal revenue product of garbage collectors.

Larry and Mike are equally skilled construction workers employed by the Brown and Root Company. Larry's job is riskier because he typically works on a scaffold 1,000 feet above ground. Larry's higher wage rate is the result of a negative feedback loop. economic discrimination. a higher marginal revenue product. a compensating differential.

a compensating differential.

For a natural monopoly to exist a firm's long-run average cost curve must exhibit diseconomies of scale beyond the economically efficient output level. a firm's long-run average cost curve must exhibit economies of scale throughout the relevant range of market demand. a firm must have a government-imposed barrier. a firm must continually buy up its rivals.

a firm's long-run average cost curve must exhibit economies of scale throughout the relevant range of market demand.

Marginal cost is the change in average cost when an additional unit of output is produced. change in the price of inputs if a firm buys more inputs to produce an additional unit of output. the additional output when total cost is increased by one dollar. additional cost of producing an additional unit of output.

additional cost of producing an additional unit of output

An insurance company is likely to attract customers like Clancy who want to purchase insurance because he knows better than the company that he is more likely to make a claim on a policy. What is the term used to describe the situation above? economic irrationality asymmetric information moral hazard adverse selection

adverse selection

Consider a used car market in which half the cars are good and half are bad (lemons). Suppose the average price of a good car is $9,000 and the average price of a lemon is $3,000. If rational buyers are willing to pay $6,000 for a used car, then sellers will agree to sell mostly lemons at this price. What is the term used to describe this situation? adverse selection moral hazard an efficient market economic irrationality

adverse selection

Collusion is an agreement among firms to charge the same price or otherwise not to compete. legal under U.S. antitrust laws if the intent is to increase competition. common among monopoly firms. necessary for firms to raise money by borrowing from investors or from banks in order to fund research and development required to develop new products.

an agreement among firms to charge the same price or otherwise not to compete.

An increase in the supply of capital, which is a complement to labor, will lead to an increase in the demand for labor. a decrease in the demand for labor. an increase in the quantity of labor demanded. a decrease in the quantity of labor demanded.

an increase in the demand for labor.

An increase in the demand for orthodontic services leads to an increase in the supply of orthodontists. lower prices for orthodontic care. a rise in the rates of dental insurance. an increase in the demand for orthodontists

an increase in the demand for orthodontists

An increase in a perfectly competitive firm's demand for labor could be caused by an increase in the market demand for the firm's product. an increase in the quantity of labor supplied. a decrease in the market wage rate. a decrease in the marginal product of workers.

an increase in the market demand for the firm's product.

If the demand for labor is unchanged, an increase in the supply of labor will lead to a decrease in the quantity of labor demanded and a decrease in the equilibrium wage. an increase in the quantity of labor demanded and an increase in the equilibrium wage. an increase in the quantity of labor demanded and a decrease in the equilibrium wage. a decrease in the quantity of labor demanded and an increase in the equilibrium wage.

an increase in the quantity of labor demanded and a decrease in the equilibrium wage.

At low wages, the labor supply curve for most people slopes upward because as wages increase the opportunity cost of leisure increases. the demand for labor is perfectly elastic at low wages. as wages increase income also increases unless hours worked decrease. the supply of labor is perfectly inelastic at low wages.

as wages increase the opportunity cost of leisure increases

Signaling takes place in markets with ________ negative externalities positive externalities perfect competition asymmetric information

asymmetric information

The term that is used to refer to a situation in which one party to an economic transaction has less information than the other party is information disparity. asymmetric information. inefficient market hypothesis. moral hazard.

asymmetric information.

If the marginal cost curve is below the average variable cost curve, then average variable cost is increasing. average variable cost could either be increasing or decreasing. average variable cost is decreasing. marginal cost must be decreasing.

average variable cost is decreasing.

As more output is produced, the marginal product of labor declines if the firm's output supply curve is inelastic. because the firm's marginal revenue declines. if firms reduce the wage paid to labor. because of the law of diminishing returns.

because of the law of diminishing returns.

Which of the following explains why talented major league baseball players command much higher salaries than neurosurgeons? because the supply of talented major league baseball players is relatively low compared to the supply of neurosurgeons. Therefore, major league baseball players exert far more market power than neurosurgeons. because it takes far more skill and training to be a major league baseball player than to be a neurosurgeon because the supply of talented major league baseball players is low relative to its demand compared to the supply of neurosurgeons. Therefore, adding another player yields far greater marginal benefit than adding another neurosurgeon. because the total value of baseball games is much higher than the total value of neurosurgery

because the supply of talented major league baseball players is low relative to its demand compared to the supply of neurosurgeons. Therefore, adding another player yields far greater marginal benefit than adding another neurosurgeon.

In a market with asymmetric information, ________. buyers set the price of the good being traded buyers tend to forget relevant information about the good being traded buyers and sellers have different information about the good being traded buyers have very low bargaining powe

buyers and sellers have different information about the good being traded

In the market for health insurance, asymmetric information problems arise because buyers of health insurance policies always know more about the state of their health than do the insurance companies. privacy laws prevent the sellers of health insurance from asking buyers pertinent lifestyle questions. the sellers of health insurance require medical exams that give them more information than the buyers normally have. health insurance policies always include clauses that only the companies understand.

buyers of health insurance policies always know more about the state of their health than do the insurance companies.

For-profit producers will produce only private goods because buyers will be willing to pay for the goods since the benefits are excludable. the cost of production can be easily determined. all external benefits can be internalized using market prices. markets exist for private goods but not for public goods.

buyers will be willing to pay for the goods since the benefits are excludable.

Suppose you have worked at a local sandwich shop for six months and now you plan to ask your manager for a raise. How can you convince your manager that you are worth more money than you are currently being paid? by demonstrating to your manager the marginal revenue product your employment contributes to the sandwich shop by explaining to him how difficult it is for you to save enough money to go to college by convincing him that you are a dedicated worker and ready to take on more responsibilities at the shop by threatening to quit if he refuses to give you a raise

by demonstrating to your manager the marginal revenue

by demonstrating to your manager the marginal revenue product your employment contributes to the sandwich shop

Marginal cost is equal to the change in average total costs divided by the change in output. change in average product divided by the change in output. change in total product divided by the change in output. change in total cost divided by the change in output.

change in total cost divided by the change in output.

The Sherman Act prohibited selling below average total cost. collusive price agreements among rival sellers. setting price above marginal cost. marginal cost pricing.

collusive price agreements among rival sellers.

Governments grant patents to compensate firms for research and development costs. encourage competition. encourage low prices. encourage firms to reveal secret production techniques.

compensate firms for research and development costs.

In order to be useful as a signal in a market with information asymmetry, the signal must be ________. unique easily available inexpensive difficult to obtain

difficult to obtain

A local electricity-generating company has a monopoly that is protected by an entry barrier that takes the form of network externalities. a perfectly inelastic demand curve. control of a key raw material. economies of scale.

economies of scale.

Which of the following is an example of a common resource? a college education lions in a zoo public transportation elephants in the wild

elephants in the wild

Marginal revenue product of labor for a competitive seller is the change in total product from hiring one more worker. equal to the marginal product of labor multiplied by the output price. the marginal revenue of the product multiplied by the output price. the output price multiplied by the quantity sold.

equal to the marginal product of labor multiplied by the output price.

t / f : A monopolist's demand curve is the same as the marginal revenue curve for the product.

false

t / f : Due to adverse selection, very few lemons will be sold in the market for used cars.

false

t /f : A snack shop inside a hotel in a busy city has a monopoly on food sales if it is the only food vendor in the hotel that is open 24 hours a day.

false

t/f : Economics shows that it is inefficient to recycle plastic bottles because they have little value.

false

t/f : Recycling is an economic problem because the land is substantially damaged by the creation of garbage dumps.

false

t/f : Recycling is not an economic problem because there is only so much land on Earth.

false

t/f : The government can be relied on to efficiently solve problems associated with pollution through (Pigovian) taxes.

false

t/f : The use of landfills means the land will lose all its value for subsequent use.

false

A profit maximizing monopoly's price is not consistently related to price that would prevail if the market was perfectly competitive. greater than the price that would prevail if the industry was perfectly competitive. less than the price that would prevail if the industry was perfectly competitive. the same as the price that would prevail if the industry was perfectly competitive.

greater than the price that would prevail if the industry was perfectly competitive.

Scenario: The market for used cell phones is very popular in Barylia. However, several phones available in this market are of inferior quality and it is often impossible to differentiate between a good-quality phone and a poor-quality phone. Refer to the scenario above. Based on the given information, we can conclude that the market for used cell phones in Barylia: has only one seller. is perfectly competitive. has asymmetric information. is monopolistically competitive.

has asymmetric information.

Adverse selection occurs in the market for used cars because used car buyers tend to have more accidents than new car buyers. have more information than used car sellers. have less incentive to maintain the value of their cars than new car buyers. have less information than used car sellers.

have less information than used car sellers.

Some colleges now offer massive open online courses (MOOCs), where students do not need to be in the same classroom as their instructors. The fixed cost of an online course is relatively ________, but after the courses are placed online, the marginal cost of providing instruction to an additional student is ________. low; high low; low high; low high; high

high; low

Compensating differentials are non-monetary benefits from being employed, such as health-care benefits. higher wages that compensate workers for unpleasant aspects of a job. higher wages that compensate the more experienced workers in a field. wages paid to workers where the supply of labor is great relative to demand.

higher wages that compensate workers for unpleasant aspects of a job.

A merger between the Ford Motor Company and General Motors would be an example of a vertical merger. conglomerate merger. horizontal merger. trust.

horizontal merger.

Firms use information on labor's marginal revenue product to determine how much to produce at each output price. how much marginal product to produce at each wage rate. how much labor services to supply at each wage rate. how many workers to hire at each wage rate.

how many workers to hire at each wage rate.

A person's stock of skills to produce economic value is referred to as: personal capital. human capital. personal wealth. fixed capital.

human capital.

The combined effect (both income and substitution) of a wage increase is that if the substitution effect outweighs the income effect, the labor supply curve slopes upward, but if the income effect outweighs the substitution effect, the labor supply curve is backward bending. the income effect always dominates, leading to less work at a higher wage. if the substitution effect outweighs the income effect, the labor supply curve is backward bending, but if the income effect outweighs the substitution effect, the labor supply curve slopes upward. the substitution effect always dominates, leading to more work at a higher wage.

if the substitution effect outweighs the income effect, the labor supply curve slopes upward, but if the income effect outweighs the substitution effect, the labor supply curve is backward bending.

A monopoly differs from monopolistic competition in that a monopoly can never make a loss but a firm in monopolistic competition can. a monopoly has market power while a firm in monopolistic competition does not have any market power. in a monopoly there are significant entry barriers but there are low barriers to entry in a monopolistically competitive market structure. a monopoly faces a perfectly inelastic demand curve while a monopolistic competitor faces an elastic demand curve.

in a monopoly there are significant entry barriers but there are low barriers to entry in a monopolistically competitive market structure.

A reason why a perfectly competitive firm's demand for labor curve slopes downward is that the firm's demand curve for the product that uses labor is downward sloping. the extra cost of hiring additional units of labor increases as a firm hires more units of labor. each additional unit of labor hired is less efficient than previously hired units. in the short run, as more labor is hired, labor's marginal product falls because of the law of diminishing returns.

in the short run, as more labor is hired, labor's marginal product falls because of the law of diminishing returns.

In situations where new technologies are considered complementary to workers, demand for these workers will ________, resulting in ________ in the equilibrium wage. decrease; an increase increase; a decrease increase; an increase decrease; a decrease

increase; an increase

A public franchise results from ownership of a key raw material. is a government designation that a private firm is the only legal producer of a good or service. is an unregulated monopoly necessary for the public good. is a corporation that is owned by stockholders

is a government designation that a private firm is the only legal producer of a good or service.

The Aluminum Company of America (Alcoa) had a monopoly until the 1940s because the company had a secret technique for making aluminum from bauxite. it was a public enterprise. it had a patent on the manufacture of aluminum. it had control of almost all the available supply of bauxite.

it had control of almost all the available supply of bauxite.

What is regulatory capture? It is the exchange of political support between a regulatory agency and the regulated firm resulting in both parties capturing economic rents. It is a situation in which a regulatory agency uses its authority to force actions that are not favored by the regulated firms but are in the public's interest. It is a situation in which a policymaker seeks to improve his election prospects by aligning himself with a powerful special interest group which will finance his political campaign. it is a situation in which a firm being regulated successfully influences the regulatory agency's actions to benefit the interests of the firm, rather than the public interest.

it is a situation in which a firm being regulated successfully influences the regulatory agency's actions to benefit the interests of the firm, rather than the public interest.

The demand for labor is described as a derived demand because it is derived by producers seeking to make profits by starting new businesses. it is derived by workers seeking to earn income to fund the consumption of goods and services. it is derived from government institutions which rely on labor markets for the purpose of raising tax revenue. it is derived from the demand for products that use labor in the production process.

it is derived from the demand for products that use labor in the production process.

The wage rate is the opportunity cost of leisure consumption working overtime working

leisure

The substitution effect of a wage increase is observed when the higher wage income causes workers to take more leisure and work less. the higher wage income causes workers to take more leisure and work more. leisure's higher opportunity cost causes workers to take more leisure and work less. leisure's higher opportunity cost causes workers to take less leisure and work more.

leisure's higher opportunity cost causes workers to take less leisure and work more.

https://tamu.blackboard.com/courses/1/ECON.202.599.1731/ppg/quiz9.70825171628/f1q11g1.jpg Suppose the monopolist represented in the diagram above produces positive output. What is the profit/loss per unit? loss of $7 per unit profit of $14 per unit loss of $21 per unit profit of $30 per unit

loss of $7 per unit

If the average variable cost curve is above the marginal cost curve, then marginal costs must be increasing. marginal costs must be decreasing. marginal costs can be either increasing or decreasing. average variable costs must be increasing.

marginal costs can be either increasing or decreasing.

The decision rule for a profit-maximizing firm operating in a competitive market to hire an additional worker is the value of the: marginal product of the worker should be equal to or greater than the wage rate. average product of the worker being hired should be lower than the wage rate. average product of the worker being hired should be equal to the wage rate. marginal product of the worker should be equal to or lower than the wage rate.

marginal product of the worker should be equal to or greater than the wage rate.

If a theatre company expects $250,000 in ticket revenue from five performances and $288,000 in ticket revenue if it adds a sixth performance, the marginal revenue of the sixth performance is $38,000. company will be making a loss on the sixth performance because its ticket sales will be less than the average revenue received from the previous five. marginal revenue of the sixth performance is $288,000. cost of staging the sixth performance is probably higher than the cost of staging the previous five.

marginal revenue of the sixth performance is $38,000.

Martha used to pay for her expenses with her own hard-earned money. She always tried to spend as little as she could. However, she started spending more when she received a scholarship. This behavior is an example of ________. the free-rider problem a pecuniary externality the paradox of thrift moral hazard

moral hazard

More people started building houses in earthquake-prone regions when the government of Polonia launched an insurance program for houses in this region. This is an example of ________. adverse selection a positive externality moral hazard herd behavior

moral hazard

Automobile insurance companies have a problem with people who buy insurance and then drive recklessly or take less care to avoid losses after being insured. In other words, the automobile insurance market is subject to asymmetric information. market signaling. moral hazard. adverse selection.

moral hazard.

When people who buy insurance change their behavior after the purchase because they are protected from loss by the insurance, the insurance market is said to face the problem of adverse selection. moral hazard. asymmetric information. economic irrationality.

moral hazard.

The reason that the Fisherman's Friend restaurant in Stonington, Maine had a monopoly on selling seafood dinners in that town is most likely due to no competitors apparently found the profit level attractive enough to enter the market. occupational licensing. the restaurant owned all the fresh seafood in the state. a government-imposed barrier.

no competitors apparently found the profit level attractive enough to enter the market.

A green pasture has turned barren due to overgrazing. This happened because the pasture was ________. non-excludable and non-rival excludable and rival non-excludable but rival excludable but non-rival

non-excludable but rival

The tragedy of the commons occurs because some goods are ________ in consumption non-rival and non-excludable non-rival excludable non-excludable but rival

non-excludable but rival

Consider a used car market in which half the cars are good and half are bad (lemons). A rational buyer in this market should save up and buy a new car. offer to pay a price somewhere between the price she would pay for a good car and the price she would pay for a lemon. offer to pay a price equal to the most she would pay for a good car. offer to pay a price equal to the most she would pay for a lemon.

offer to pay a price somewhere between the price she would pay for a good car and the price she would pay for a lemon.

A good is non-rival in consumption if ________. people cannot be prevented from using it the demand for the good increases with an increase in the consumer's income one person's use of the good does not preclude consumption by others the government can regulate its production

one person's use of the good does not preclude consumption by others

Painters who paint water towers earn higher wages relative to painters who paint houses because the supply of water tower painters exceeds the supply of house painters. the tower painters' union is probably more powerful than the house painters' union. painting water towers is more risky than painting houses. the demand for tower painters is greater than the demand for residential painters.

painting water towers is more risky than painting houses.

The "tragedy of the commons" refers to the phenomenon where there is rivalry in consumption. people do not internalize an externality. individuals are free riders. people overuse a common resource.

people overuse a common resource.

The basic idea behind moral hazard is that ________. some economic transactions give rise to an additional benefit to society people do not reveal their true preference for goods that are non-excludable in consumption people tend to take more risks if they do not have to bear the costs of their behavior some economic transactions impose an additional cost on society

people tend to take more risks if they do not have to bear the costs of their behavior

There are several types of barriers to entry that can create a monopoly. Which of the following barriers is the result of government action? network externalities control of a key resource economies of scale public franchise

public franchise

A street light is a ________. public good club good private good common pool resource

public good

Governments grant patents to encourage low prices. competition. research and development on new products. firms to form public enterprises.

research and development on new products.

Goods can be classified on the basis of whether their consumption is internal and excludable. rival and excludable. rival and competitive. includable and cooperative.

rival and excludable.

One reason why adverse selection problems arise in health insurance markets is that fewer men and women are choosing medical careers because of the increase in the cost of malpractice insurance. the average age of citizens of the United States has increased in recent years, and will continue to increase over the next 20 to 30 years. As older citizens retire, more and more of their medical bills will have to be paid by younger workers. because of advances in medical technology, people are living longer. These medical advances are costly and drive up the price of insurance for everyone. sick people are more likely to want health insurance than healthy people.

sick people are more likely to want health insurance than healthy people.

You decide to carry a letter of recommendation from your college professor while going for your first interview. This is an example of ________ speculating hedging signaling sniping

signaling

t /f : A doctor pursuing his own interests rather than the interests of his patients is an example of the principal-agent problem.

The law of diminishing marginal returns states that at some point, adding more of a fixed input to a given amount of variable inputs will cause the marginal product of the variable input to decline. average total costs of production initially fall and after some point starts to rise at a decreasing rate as output increases. that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline. that in the presence of a fixed factor, at some point average product of labor starts to fall as more and more variable inputs are added.

that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline.

The first important law regulating monopolies in the United States was the Federal Trade Commission Act, which was passed in 1914. the Grant Act, which was passed in 1890. the Clayton Act, which was passed in 1890. the Sherman Act, which was passed in 1890.

the Sherman Act, which was passed in 1890.

The marginal product of labor is defined as the additional sales revenue that results when one more worker is hired. the cost of hiring one more worker. the additional number of workers required to produce one more unit of output. the additional output that results when one more worker is hired, holding all other resources constant.

the additional output that results when one more worker is hired, holding all other resources constant.

The demand for labor depends primarily on the additional output produced as a result of hiring an additional worker and the elasticity of demand for the output produced by the worker. the additional revenue received from selling the output produced as a result of hiring an additional worker. the payment made to the worker for producing the additional output. the number of workers willing to produce the additional output.

the additional revenue received from selling the output produced as a result of hiring an additional worker

the additional revenue received from selling the output produced as a result of hiring an additional worker.

One reason patent protection is vitally important to pharmaceutical firms is that taxes on profits from drugs are very high; profits from patent protection enable firms to pay these taxes. successful new drugs are not profitable. If firms are not granted patents many would go out of business and health care would be severely diminished. the high salaries pharmaceutical firms pay to scientists and doctors make their labor costs higher than for any other business. Profits from patents are needed to pay these labor costs. the approval process for new drugs through the Food and Drug Administration can take more than 10 years and is very costly. Patents enable firms to recover costs incurred during this process.

the approval process for new drugs through the Food and Drug Administration can take more than 10 years and is very costly. Patents enable firms to recover costs incurred during this process.

t/f : The video indicated that there is a significant difference between recycling fluorescent lights and plastic bottles.

true

Marginal revenue product for a perfectly competitive seller is equal to the output price multiplied by the number workers hired. the output price multiplied by the total product of labor. the marginal cost of production. the change in total revenue that results from hiring another worker.

the change in total revenue that results from hiring another worker.

The change in a firm's total cost from producing one more unit of a good or service is the definition of marginal cost. the definition of marginal product impossible to observe in large firms with many manufacturing plants. the result of economies of scale.

the definition of marginal cost.

As output increases the difference between average total cost and average variable cost becomes greater and greater. the difference between average total cost and average variable cost decreases. marginal cost increases continuously. average variable cost becomes smaller and smaller.

the difference between average total cost and average variable cost decreases

A firm's primary interest when it hires an additional worker is the extra revenue the firm realizes from hiring that worker. how the average output of the firm will be affected by this new worker. the cost of hiring the additional worker. whether or not the new worker gets along with the firm's existing workers.

the extra revenue the firm realizes from hiring that worker.

A fireworks show has been arranged in a park. The ticket for the show is $5 but only 40% of the tickets get sold as spectators can watch the show without entering the park. This is an example of ________. the free-rider problem the tragedy of the commons the paradox of thrift the paradox of plenty

the free-rider problem

If Alan Shaw reduces his work hours when his salary increases, then the income effect of his salary increase dominates the substitution effect. the income effect of his salary increase is completely offset by the substitution effect. leisure is an inferior good to Alan. the substitution effect of his salary increase dominates the income effect.

the income effect of his salary increase dominates the substitution effect.

The demand curve for a monopoly's product is more elastic than the market demand for the product. the market demand for the product. more inelastic than the market demand for the product. undefined.

the market demand for the product.

The labor supply for an industry would decrease if the wage rate falls. the percentage of the population from age 16 to 65 decreases. a greater percentage of women want to work outside the home. the government welcomes foreign workers into the country

the percentage of the population from age 16 to 65 decreases.

Mr. Smith put his laptop up for sale. He is aware of the fact that the laptop malfunctions frequently. However, none of the potential customers who came to buy the laptop were able to discover the problem and one of them actually bought it at a remunerative price. This occurred due to ________. the presence of asymmetric information the presence of negative externalities the selective retention of information by sellers the presence of positive externalities

the presence of asymmetric information

The government of Eduland provided generous unemployment benefits to all the unemployed workers. However, the new government that came into power reduced the amount of unemployment insurance paid to each worker. This increased the average number of hours spent daily by unemployed workers in looking for jobs. This suggests that ________ exists in the labor market in Eduland. a positive externality a tragedy of the commons a pecuniary externality the problem of moral hazard

the problem of moral hazard

If Molly Bee increases her work hours when her wage increases, then leisure is an inferior good to Molly. the substitution effect of the wage increase outweighs the income effect. Molly is spending beyond her means. the income effect of the wage increase outweighs the substitution effect.

the substitution effect of the wage increase outweighs the income effect.

Overfishing leading to a rapid depletion of the stock of fish is an example of ________. the tragedy of the commons the free-rider problem the paradox of thrift the prisoners' dilemma

the tragedy of the commons

Haiti was once a heavily forested country. Today, 80 percent of Haiti's forests have been cut down, primarily to be burned to create charcoal. The reduction in the number of trees has lead to devastating floods when it rains heavily. This is an example of the consequences of not having a market economic system. tragic externalities. the tragedy of the commons. human greed.

the tragedy of the commons.

https://tamu.blackboard.com/courses/1/ECON.202.599.1731/ppg/quiz9.70825171628/f1q13g1.jpg What is the area that represents producer surplus under a monopoly? the triangle 0P2E the trapezium 0P1FH the rectangle P1P3HF the triangle 0P3H

the trapezium 0P1FH

https://tamu.blackboard.com/courses/1/ECON.202.599.1731/ppg/quiz9.70825171628/f1q18g1.jpg What is the area that represents consumer surplus under a monopoly? the trapezium P1P2EF the triangle P0P2E the rectangle P1P3HF the triangle P0P1F

the triangle P0P1F

Which of the following factors will not cause the labor demand curve to shift? changes in technology increases in human capital a change in the price of the product produced with labor the wage rate

the wage rate

A monopoly is characterized by all of the following except there are no close substitutes to the firm's product. entry barriers are high. there are only a few sellers, each selling a unique product. the firm has market power.

there are only a few sellers, each selling a unique product.

The lawsuit the Justice Department brought against Apple regarding the pricing of e-books for its iPad is an example of attempts by the government to regulate a natural monopoly by establishing government-regulated prices. to prevent vertical mergers which would significantly reduce competition. to prevent horizontal mergers which would significantly reduce competition. to keep firms from artificially restricting competition to raise prices.

to keep firms from artificially restricting competition to raise prices.

The function of the agent in the principal-agent relationship is to perform tasks for the principal. to act as go-between for the principal's negotiations. to be the legal advisor of the principal. to be trusted with the principal's information

to perform tasks for the principal.

Health insurance companies impose deductibles on policies and co-payments on claims to increase sales. to reduce moral hazard problems. to reduces sunk costs. to increase prices.

to reduce moral hazard problems.

Average total cost is equal to average fixed cost minus average variable cost. total cost divided by the number of workers. total cost divided by the level of output. marginal cost plus variable cost.

total cost divided by the level of output.

Which of the following costs will not change as output changes? total variable cost marginal cost total fixed cost average variable cost average fixed cost

total fixed cost

A retired athlete built a gym near his house that could be used for free by all the residents in the neighborhood. However, the overuse of the facilities soon led to irreparable damages. This is an example of the ________. prisoners' dilemma paradox of thrift tragedy of the commons pecuniary externality

tragedy of the commons

t / f : A monopoly is a firm that is the only seller of a good or service that does not have a close substitute.

true

t / f : Adverse selection is a situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction.

true

t / f : An increase in the price of grape juice causes an increase in the marginal revenue product of labor used to produce grape juice.

true

t / f : An increase in the supply of capital, which is a substitute to labor, will lead to a decrease in the demand for labor.

true

t / f : Increases in population shift the market supply curve for labor to the right.

true

t / f : Moral hazard refers to the actions people take after they have entered into a transaction that make the other party to the transaction worse off.

true

t / f : Unlike a perfect competitor, a monopolist faces the market demand curve.

true

t/f : One problem with using taxes to solve economic externalities is that politicians may spend the money on things they like, rather than things their constituents want.

true

t/f : Recycling is an economic issue because the goods that are recycled, the land for landfills, and the trucks and labor needed for both recycling and trash disposal are all examples of scarce resources.

true

t/f : Rent-seeking behavior, unlike profit-maximizing behavior in competitive markets, wastes society's scarce resources

true

t/f : The possibility of "government failures" should be evaluated before getting the government involved in addressing "market failures."

true

t/f : The social benefit of a given level of a public good is the vertical sum of all private benefits for that level.

true

A monopolist's profit-maximizing price and output correspond to the point on a graph where price is as high as possible. where average total cost is minimized. where marginal revenue equals marginal cost and charging the price on the market demand curve for that output. where total costs are the smallest relative to price.

where marginal revenue equals marginal cost and charging the price on the market demand curve for that output.

One difference between the demand for a private good and that for a public good is that the marginal benefit from consuming the last unit of a public good always exceeds the marginal benefit from consuming the last unit of a private good because there are externalities in the consumption of the public good. with a private good, each consumer receives different amounts of benefit from consuming the product but with a public good, every consumer realizes the same amount of benefit from consuming the product. with a private good, each consumer chooses the quantity she wants to consume but with a public good, everyone consumes the same quantity. with a private good, each consumer chooses the quantity she wants to consume but with a public good, each consumer chooses the price she is willing to pay for a fixed quantity.

with a private good, each consumer chooses the quantity she wants to consume but with a public good, everyone consumes the same quantity.

Econ EXAM 3

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