Econ Final 2

When trade is based on comparative advantage -specialization will diminish. -one trading partner gains at the expense of the other. -output may fall. -both trading partners end up better off.

both trading partners end up better off.

If a player has a Grim Trigger strategy, that player: -becomes pessimistic if any other player gains an advantage that the player does not share in. -cooperates if other players have cooperated in all previous rounds but defects if any player ever defects. -is serious and firm in her quest to do whatever it takes to succeed, particularly if opposition from other players rises. -becomes hostile if she is the only player left in the game.

cooperates if other players have cooperated in all previous rounds but defects if any player ever defects.

Which of the following sellers will achieve their desired result for total revenue? -An airline maintains higher prices in the hopes of maintaining sales. However, a new low-cost competing airline has just entered the market. -In a market with a relatively inelastic demand curve, a coffee shop lowers coffee prices in the hopes of raising total revenue. -A pharmacy raises the price of its store-brand pain medication in order to raise revenue from sales. The store-brand medication has many brand-name substitutes. -A florist raises the price of roses before and on Valentine's Day and hopes to raise total revenue. The florist is the only flower shop in town.

A florist raises the price of roses before and on Valentine's Day and hopes to raise total revenue. The florist is the only flower shop in town.

Which of the following claims reflects normative analysis? -Higher prices mean that the purchasing power of income falls. -If the minimum wage were higher, companies that employ minimum wage workers would have higher costs. -The minimum wage should be higher so that workers earn a living wage. -Fewer people will buy cars if their price rises.

The minimum wage should be higher so that workers earn a living wage.

John is thinking of opening a florist shop. He forecasts revenues of $200,000 per year and explicit financial costs of $140,000 per year. He can pursue this opportunity only if he quits his current job as a driver, where he earns $45,000 per year. He would also need to invest $110,000 of his savings to set up the shop—funds on which he would otherwise be earning a 6% return. Based on this information, how much economic profit or loss would John earn in his first year in business? -a loss of $5,400 -a loss of $50,000 -a profit of $8,400 -a profit of $60,000

a profit of $8,400

Which of the following scenarios does not illustrate the law of demand? -Layla buys less tea when the price of tea rises. -Freya buys more doughnuts when the price of doughnuts is higher. -Darren buys two pairs of jeans when they are $40 each, but only one pair when it is $60. -When Kit-Kats are cheaper, Mary opts to buy more Kit-Kats.

Freya buys more doughnuts when the price of doughnuts is higher.

An equilibrium in which the choice that each player makes is a best response to the choices other players are making is the definition of a: -Nash equilibrium. -strategic equilibrium. -game-played solution. -Coase theorem solution.

Nash equilibrium.

Which of the following is a social insurance program in the United States? -Social Security -earned income tax credit -Medicaid -housing assistance

Social Security

When the price elasticity of demand is _____ relative to the price elasticity of supply, then buyers bear _____ of the economic burden of a tax. -large; a bigger share -small; all -large; a smaller share -small; none

large; a smaller share

The percent of the population whose household income falls below the poverty line is known as the: -needs rate. -poverty prevalence. -poverty line proportion. -poverty rate.

poverty rate.

A company's profit margin per unit sold equals: -total revenue minus total cost. -total cost minus total revenue. -price minus average cost. -average cost minus price.

price minus average cost.

The area on a market graph that lies below the price and above the supply curve is equal to: -consumer surplus. -producer surplus. -economic efficiency. -economic equity.

producer surplus.

The cost of your favorite coffee is $5 per cup at the coffee shop. The marginal cost of each cup you drink is _____. The first cup of coffee you drink gives you a marginal benefit of $8. The marginal benefit from the second cup is $6, $4 from the third, $2 from the fourth, and $0 from the fifth. You should drink _____ cups of coffee. -$2; four -$5; three -$2; five -$5; two

$5; two

The price of product A is cut by 20%. As a result, the quantity demanded of product B rises by 50%. The cross-price elasticity of demand between product A and product B is _____, and they are _____. --0.4; substitutes --0.4; complements --2.5; substitutes --2.5; complements

-2.5; complements

The price of a dozen eggs rises from $3 to $4.50. In response to this price change, quantity supplied increases from 100,000 dozen eggs to 130,000 dozen eggs. What is the approximate price elasticity of supply for eggs? -2.5 -0.65 -1.54 -0.26

0.65

Which of the following tax systems is progressive? Corinne pays a 10% tax on the first $20,000 she earns plus a _____ tax on any additional income. -25% -5% -7% -10%

25%

Uber increases the price of a ride in New York City by 10%, and the quantity of rides demanded falls by 30%. The absolute value of the price elasticity of demand for Uber rides is _____, and the price elasticity of demand is _____. -0.33; elastic -3; inelastic -0.33; inelastic -3; elastic

3; elastic

Which of the following describes a situation with a negative externality? -After a commercial poultry farm opens, neighbors on all sides complain of its smell. -When the price of gasoline rises by 10%, the quantity sold drops by 8%. -When 10% more people get a flu shot, the incidence of the flu drops by 20%. -The buyer of a skateboard falls when using it and is injured.

After a commercial poultry farm opens, neighbors on all sides complain of its smell.

Which of the following will NOT shift a company's demand curve for labor? -Change in the demand for the company's product -Change in the price of capital -Better management techniques -Change in the wage paid to workers

Change in the wage paid to workers

Which of the following scenarios depicts a rational buyer? -Mary values a bag of salad at $2, but she buys the bag of salad even when the price is $4. -John walks into a grocery store and purchases monthly groceries without paying attention to the prices of groceries. -Damien chooses to buy a sandwich for $5 when the marginal benefit of the sandwich to him is $7. -Darwin buys a can of shoe polish at $4.50 when his marginal benefit from it is $3.75.

Damien chooses to buy a sandwich for $5 when the marginal benefit of the sandwich to him is $7.

Which of the following is a characteristic of a perfectly competitive market? -There are only a few sellers in the market. -The product varies across the sellers. -Sellers are price-takers. -There are some dominant sellers.

Sellers are price-takers

You are studying the international market for coffee. The world production of coffee beans increases, and at the same time, consumers worldwide start favoring tea over coffee. What is the effect on the equilibrium price and the equilibrium quantity in the coffee market? -The equilibrium price rises, and the equilibrium quantity falls. -The equilibrium price falls, and the change in the equilibrium quantity is ambiguous. -The equilibrium quantity falls, and the change in the equilibrium price is ambiguous. -The equilibrium price falls, and the equilibrium quantity rises.

The equilibrium price falls, and the change in the equilibrium quantity is ambiguous.

What happens to the equilibrium price and equilibrium quantity when demand and supply increase simultaneously, but the relative size of the shifts are not known? -The equilibrium price rises, and the change in the equilibrium quantity is ambiguous. -The equilibrium price falls, and the change in the equilibrium quantity is ambiguous. -The equilibrium quantity falls, and the change in the equilibrium price is ambiguous. -The equilibrium quantity rises, and the change in the equilibrium price is ambiguous.

The equilibrium quantity rises, and the change in the equilibrium price is ambiguous.

Price discrimination is feasible only when certain conditions are present for the company in the market. Which of the following is NOT one of these necessary conditions? -The market is overproducing. -The company has market power. -The product cannot be resold. -The company can identify customers' reservation prices.

The market is overproducing.

A difference in wages required to offset the desirable or undesirable aspects of a job is: -a compensating differential. -a workplace offset. -a stress adjustment. -an offset adjustment.

a compensating differential

A tax designed to induce people to take account of the negative externalities that they cause is referred to as _____ tax. -a corrective -an externality -an open offset -a compensatory

a corrective

An anti-coordination game is a game where: -both players will gain from coordination but will resist initiating it. -a player's best response is to take a different (but complementary) action to the other player. -a player's best response goes against the welfare of the other player without complementarity. -both players have the same best response, regardless of what one player does.

a player's best response is to take a different (but complementary) action to the other player.

The market power of a firm is its -market share based on the percentage of total market revenue. -ability to raise its price without losing many of its customers to competing businesses. -ability to cause other firms in its market to drop out of the market. -ranking based on units sold compared to other firms selling the same product.

ability to raise its price without losing many of its customers to competing businesses.

The person who can produce a product using the fewest inputs has _____ in that product.​ -market power -an absolute advantage -maximum profit -a comparative advantage

an absolute advantage

Surpluses always occur -when the quantity demanded exceeds the quantity supplied. -at prices below the equilibrium price. -at prices above the equilibrium price. -at the equilibrium price.

at prices above the equilibrium price.

Price discrimination occurs when a company -buys a given input from several sellers and pays a different price to each seller. -charges different prices to different customers who are all buying the same product. -produces different versions of its product. -refuses to sell its product to certain customers based on some distinguishing factor such as race or religion.

charges different prices to different customers who are all buying the same product.

What type of good is nonrival and excludable? -public goods -club goods -private goods -common resources

club goods

When education functions as a signal to an employer, it: -overstates ability. -matches job applicants to employer needs. -indicates a certain level of training. -conveys information about a job applicant's intelligence and tenacity

conveys information about a job applicant's intelligence and tenacity

If demand is _____, a higher price yields _____ total revenue. -elastic; higher -inelastic; lower -inelastic; no change in -elastic; lower

elastic; lower

Good A has an income elasticity of demand of 0.05. Which of the following items is good A? -a low-cost brand of noodle -frozen pizza =steak dinner at a relatively expensive restaurant -electricity

electricity

A U.S.-made automobile purchased by a Japanese citizen is an example of a U.S. _____, and a Japanese-made automobile purchased by a U.S. citizen is an example of a U.S. _____. -import; export -export; import -import; import -export; export

export; import

Positive analysis is based on identifying _____ and _____. -facts; relationships -beliefs; options -priorities; scruples -values; judgments

facts; relationships

The substitution effect of a higher wage measures -how people choose one of many possible occupations. -how people respond to a change in relative prices. -the trade-off between relative -quantities. -the trade-off between production and inputs.

how people respond to a change in relative prices.

Consumer surplus equals:​ -marginal benefit minus price. -total benefit minus total expenditure. -price minus marginal cost. -marginal revenue minus price.

marginal benefit minus price.

When sellers exit a market due to losses: -remaining sellers' demand holds steady. -the market price falls. -remaining sellers face reduced demand. -market power of remaining sellers rises.

market power of remaining sellers rises.

A situation with more than one equilibrium is called: -partial equilibrium. -excess balance points. -varied settlements. -multiple equilibria.

multiple equilibria.

When firms in a market with free entry and exit have economic profits, then: -new companies will enter the market, raising average company profits. -some companies will exit the market, reducing average company profits. -new companies will enter the market, reducing average company profits. -some companies will exit the market, raising average company profits.

new companies will enter the market, reducing average company profits.

Jonathan Mendez is deciding whether to study for his economics exam at a café or go to a concert with friends tonight. The cost of the concert ticket that he purchased yesterday is ____ in his opportunity cost and represents a _____ cost. -not included; sunk -included; financial -included; nonfinancial -not included; financial

not included; sunk

An equilibrium price is a price where the -amount that buyers are willing to buy is equal to the amount that buyers are able to buy. -demand curve is identical to the supply curve -quantity demanded no longer changes. -quantity supplied equals the quantity demanded.

quantity supplied equals the quantity demanded.

If a certain item has many substitutes, its demand curve will be: -relatively steep. -relatively flat. -perfectly elastic. -perfectly inelastic.

relatively flat.

The negative outcomes of market power do NOT include​ -higher prices. -smaller demand. -larger economic profits. -higher costs.

smaller demand.

It is a rainy day, and you are considering taking an Uber one mile to meet some friends. You have decided you are willing to pay $20 to avoid getting wet from the rain. The trip would normally cost you $8, but because of the weather the surcharge is twice the regular cost. You should _____ because the benefit to you of taking the Uber is _____ than the cost. -take an Uber; less -walk; less -walk; more -take an Uber; more

take an Uber; more

When you are a seller who offers lower prices only to people who are willing to overcome some obstacle to get the lower price, you are using _____ to get consumers to reveal their reservation price. -incentive revelation -segment blocking -the hurdle method -impediment pricing

the hurdle method

The law of supply refers to -the inverse relationship between price and quantity supplied. -the inverse relationship between price and quantity demanded. -the positive relationship between price and quantity demanded. -the positive relationship between price and quantity supplied.

the positive relationship between price and quantity supplied.

In a labor market, the wage is -what workers pay. -the quantity of labor. -what employers receive. -the price of labor.

the price of labor.

The basic idea of a natural monopoly is that there is one producer, and new sellers are discouraged from entering the market because -there would be legal barriers against entering the market. -the current producer is facing a rise in costs due to natural increases in the prices of inputs. -they would have significantly higher marginal costs than the existing seller in the market. -the current producer has a patent on its product.

they would have significantly higher marginal costs than the existing seller in the market.

Organizations that jointly represent a group of workers in negotiating with employers are called:​ -clubs. -unions. -sponsors. -cartels.

unions

Which of the following lists only factors that would cause an increase in the supply of an item? -A rise in the price of a substitute-in-production; an increase in the price of a complement-in-production; an expectation that the price of the item will increase in the future. -A decrease in the number of sellers in the market; a fall in the price of a complement-in-production; a technological setback. -A decrease in input prices; a technological innovation; a fall in the price of a substitute-in-production. -An increase in input prices; a decrease in the number of sellers in the market; an increase in the price of a substitute-in-production.

A decrease in input prices; a technological innovation; a fall in the price of a substitute-in-production.

Which of the following scenarios does NOT depict a rational seller? -The Flowery Bower calculates the marginal cost of a bouquet of red roses as $10 and sells it at $45. -Main Street Bakery calculates the marginal cost of a multilayer red velvet cake as $9 and sells it for $8. -United Airlines determines the marginal cost of an extra passenger to be $55 and sells a discount seat for $150. -An auto-rickshaw driver in New Delhi, India, calculates a trip to have a marginal cost of 350 rupees and accepts a ride request for 500 rupees.

Main Street Bakery calculates the marginal cost of a multilayer red velvet cake as $9 and sells it for $8.

How is the labor market for estheticians affected if the government requires estheticians to have licenses to work in the field? -Market demand decreases, leading to a lower equilibrium wage and a lower quantity of labor. -Market supply decreases, leading to a higher equilibrium wage and a lower quantity of labor. -Market demand increases, leading to a higher equilibrium wage and a higher quantity of labor. -Market supply increases, leading to a lower equilibrium wage and a higher quantity of labor.

Market supply decreases, leading to a higher equilibrium wage and a lower quantity of labor.

Which of the following is not a demand shifter? -The price of a complementary good. -The price of the product. -The price of a substitute good. -The number of buyers in the market.

The price of the product.

Rachelle is considered poor because her income is in the bottom quintile of the population. Marcella is considered poor because her income is below a long-standing poverty line of $10,000. Rachelle is considered to be in poverty under _____ poverty standard, and Marcella is considered to be in poverty under _____ poverty standard. -a relative; a relative -an absolute; an absolute -an absolute; a relative -a relative; an absolute

a relative; an absolute

When price changes act as a line of communication between buyers and sellers, price is functioning as -a signal. -an information aggregator. -a producer. -an incentive.

a signal