Econ Final
28.(a) Figure 7.11 depicts the demand curve for Beautiful Cars, together with the marginal cost and isoprofit curves. The quantity-price combination at point E is (Q*,P*) = (32, 5,440). The average cost of producing 50 cars is the same as the average cost of producing 32. Suppose that the firm keeps the price at P = $5,440 but now produces 50 cars instead of 32. Which of the following is correct? The firm will now sell all 50 cars at $5,440. The firm's profit will increase. The firm's profit remains the same. The firm's profit is now reduced. (b) Suppose that the firm chooses instead to produce Q = 32 cars and sets the price at P = $5,400. Which of the following statements is correct? The profit remains the same at $63,360. The profit is reduced to $62,080. The average cost of production is $34,000 The firm is unable to sell all the cars. (c) Suppose the firm decides to switch from P* = $5,440 and Q* = 32 to a higher price, and chooses the profit-maximising level of output at the new price. Which of the following statements is correct? The quantity of cars produced is reduced. The marginal cost of producing an extra car is higher. The total cost of production is higher. The profit is increased due to the new higher price.
(a) D, (b) B, (c) A
If Mark is earning $22 an hour and his disutility of work is $5 per hour and he would receive unemployment benefits equal to $6 per hour, then his employment rent is $ __ per hour. (in whole dollars, no dollar sign)
11
1. The figure below depicts the effect of a change in the unemployment benefit on the workers' best response curve, when the unemployment rate is 12%. Which of the following statements is correct following a rise in the unemployment benefit? A. The firm's profit level falls B. The workers' reservation wage falls C. The wage curve shifts to the right D. The firm sets a lower real wage
A
40. Figure 8.5 shows a price-taking bakery's marginal and average cost curves, and its isoprofit curves. The market price for bread is P*= €2.35. Which of the following statements is correct? A. The marginal cost is the firm's supply curve. B. At any market price, the firm's supply is given by the corresponding point on the average cost curve. C. The firm's supply curve is horizontal. D. At the market price of $2.35, the firm will supply 62 loaves, at the point where the firm makes zero profit
A
6. In the labor market, firms pay workers a wage _________ than their reservation wage in order to give them an incentive to provide more _____________. A. Higher; effort B. Lower; effort C. Equal to; time D. Equal to; effort
A
7. The optimal amount of work that a worker chooses to perform for each wage that the employer may offer is known as the: A. Worker's best response function B. Reservation wage C. Employment rent D. Principal-agent relationship
A
Consider a firm with fixed costs of production. Which of the following statements about its average cost (AC) and marginal cost (MC) is correct? A. When AC=MC, the AC curve has a slope of 0. B. When AC>MC, the MC curve is downward sloping. C. When AC<MC, the AC curve is downward sloping. D. The MC curve cannot be horizontal
A
Even firms with a lot of market power cannot set prices as high as they want because as price _______, quantity _________, eventually leading to lower profits. A. Increases; decreases B. Increases; increases C. Decreases; stays the same D. Decreases; decreases
A
In figure 7-5, the firm will produce at point E because it is the point that _______. A. Maximizes profit B. Maximizes cost C. Maximizes consumer utility D. Maximizes revenue
A
The following is an order book for News Corp shares. Consider the case where there is a limit buy order for 650 shares at $16.59, followed by a limit sell order for 600 shares at $16.55. Based on this information, which of the following statements is correct? A. After the initial limit buy order, there will be 150 shares at $16.59 on the bid side of the order book. B. The last traded price would be $16.56 C. The subsequent limit sell order will be filled with 400 shares at $16.56 and 200 shares at $16.55. D. After the two trades, the first buyer will have bought 500 shares at $16.59 and the remaining 150 shares at $16.55.
A
The graph depicts the MPC and MSC of the robot factory production The robot market is competitive and the market price is $340. Currently the factory is producing an output of 120, but 80 would be Pareto efficient. Which of the following statements is correct? A.To reduce output to 80, the factory's minimum acceptable payment would be $1,600. B.The maximum that the nurses are willing to pay to induce the factory to reduce the output to 80 is $2,400. C.The factory would not reduce its output to 80 unless it received at least $4,000. D.The net social gain from the output reduction to 80 depends on the amount paid by the nurses to the factory.
A
The graph shows the MPC and MSC of robot production for the factory situated next to a dormitory for nurses who work nightshifts. The market for robots is competitive and the market price is $340. The initial output is 120 but the government uses a Pigouvian tax to reduce this to the efficient level of 80. Which of the following statements is correct? A.Under the Pigouvian tax, the factory's surplus will be $6,400. B.The required Pigouvian tax is $120 per robot. C.The nurses are at least as well off as they would be under Coasean bargaining. D.The nurses obtain no benefit from the imposition of the Pigouvian tax.
A
The market demand curve of a particular good is downward-sloping. Based on this information, which of the following statements is correct regarding a price-taking firm producing that good? A. The firm chooses its output such that the marginal cost equals the price. B. The firm chooses the price that equals the marginal cost. C. The demand curve faced by the firm is downward sloping. D. A price-taking firm cannot be profit maximising.
A
Watch our 'Economist in action' video of James Heckman. According to Heckman, which of the following individual attributes are NOT among the reasons for persistent poverty in a family from generation to generation? A. Inherited IQ B. Limited schooling C. Race D. Social behavior
A
Which of the following statements about short selling (shorting) is correct? A. Shorting is used to benefit from a price fall. B. Shorting involves selling shares that you currently own. C. The maximum loss a trader can incur by shorting is the price he receives from the sale of the shares. D. Shorting is a sure way of profiting from a suspected bubble.
A
Which of the following statements are correct? A. Endowments are facts about an individual that may affect his or her income. B. Having or not having a degree does not constitute a difference in endowments if it is a matter of individual choice. C. All individuals have the same reservation option irrespective of their endowments. D. A visa (permission to work for a non-citizen) is not an element of an individual's endowment because it cannot be sold.
A
Which of the following statements is correct? A. Consumer surplus is the difference between the consumer's willingness to pay and what they actually pay. B. Producer surplus equals the firm's profit. C. Deadweight loss is the loss incurred by the producer for not selling more cars. D. All possible gains from trade are achieved when the firm chooses its profit-maximising output and price
A
Which of the following statements is correct? A. The fundamental value of the shares in a firm is determined by expected future profits and systematic risks. B. If there is no new information regarding the future profitability or systematic risk of a firm, but its share price keeps rising, the fundamental value must be increasing. C. Buying a share at a price above its fundamental value in the hope that someone else would buy it from you at an even higher price is guaranteed to lose money. D. All investors always agree on the fundamental value of the shares in a firm.
A
Which of the following statements regarding segmented labor markets are correct? A. A 'gig economy' is not part of the primary labor market. B. Workers in the secondary labor market are better paid than those in the primary labor market. C. Trade unions have attempted to reduce hours of work by introducing zero hours contracts. D. Primary labor market jobs are concentrated in agriculture.
A
Which of the following statements are true? (multiple correct) A. If unemployment benefits are increased, the minimum cost of a unit of effort for the employer will rise. B. If the wage doesn't change, employees will work harder in periods of high unemployment. C. If workers continue to receive benefits however long they remained unemployed, an increase in the level of unemployment will have no effect on the best response curve. D. If an employee's disutility of effort increases, the reservation wage will rise.
A, B
Which of the following are reasons why employment contracts are incomplete? (multiple correct) A. The firm cannot contract an employee not to leave. B. The firm cannot specify every eventuality in a contract. C. The firm is unable to observe exactly how an employee is fulfilling the contract. D. The contract is unfinished.
A, B, C
3. Figure 6.4 depicted Maria's best response curve when the expected duration of unemployment was 44 weeks. Which of the following statements is correct? (multiple correct) A. If the expected unemployment duration increased to 50 weeks, Maria's best response to a wage of $12 would be an effort level above 0.5. B. If the unemployment benefit was reduced, then Maria's reservation wage would be higher than $6. C. Over the range of wages shown in the figure, Maria would never exert the maximum possible effort per hour. D. Increasing effort from 0.5 to 0.6 requires a bigger wage increase than increasing effort from 0.8 to 0.9.
A, C
Which of the following statements is correct? (multiple correct) A. If a firm's technology exhibits constant returns to scale, doubling the input leads to doubling of the output level. B. If a firm's technology exhibits decreasing returns to scale, doubling the inputs more than doubles the output level. C. If a firm's technology exhibits economies of scale, costs per unit will fall as the firm expands its production D. If a firm's technology exhibits diseconomies of scale, doubling the inputs leads to less than doubling the output level.
A, C, D
Match the terms and definitions: A. Public expenditure in the form of free or subsidized services for households rather than in the form of cash transfers. B. An expenditure or transfer that increases the incomes of poorer households by more than richer households, in percentage terms. C. A set of government policies designed to provide improvements in the welfare of citizens by assisting with income smoothing (for example, unemployment benefits and pensions). D. Expenditure by the government, financed by taxation, which provides protection against various economic risks (for example, loss of income due to sickness, or unemployment) and enables people to smooth incomes throughout their lifetime. 1. In-kind transfers 2. Welfare state 3. Social insurance 4. Progressive policy
A, C, D, B
. Which of the following statements are correct? (multiple correct) A. A fall in the mortgage interest rate would shift up the demand curve for new houses. B. The launch of a new Sony smartphone would shift up the demand curve for the existing iPhones. C. A fall in the oil price would shift up the demand curve for oil. D. A fall in the oil price would shift down the supply curve for plastics.
A, D
Figure 11.22 illustrates the rental housing market. Initially, the market clears at €500 with 8,000 tenancies. Then, there is an outward shift in the demand curve, as shown in the diagram. In response, the city authority imposes a rent ceiling of €500 and prohibits subletting. Based on this information, which of the following statements are correct? (multiple correct) A. There are 4,000 potential tenants who are left unhoused. B. The market would clear at $1,100. C. If subletting was possible, then those renting could earn an economic rent of $330. D. Excess demand could be eliminated in the long run by building more houses.
A, D
Figure 19.1 shows the inequality in wealth, earnings, and disposable income in the US, Sweden, and Japan using the Gini coefficient. Based on this information, which of the following statements are correct? A. Wealth is much more unequally distributed than earnings in all three countries. B. Sweden is an unambiguously more unequal society than Japan. C. Of the three countries, the US is the most unequal society. D. Sweden attains its relatively equal disposable income distribution through its system of taxes and transfers.
A, D
In which of the following employment situations would the employment rent be high, ceteris paribus? (multiple correct) A. In a job that provides many benefits, such as housing and medical insurance. B. In an economic boom, when the ratio of job-seekers to vacancies is low. C. When the worker is paid a high salary because she is a qualified accountant and there is a shortage of accountancy skills. D. When the worker is paid a high salary because the firm's customers know and trust her.
A, D
The figure depicts two demand curves, D1 and D2. Based on the figure, which of the following statements are correct? (multiple correct) A. At E, demand curve D1 is less elastic than D2. B. The elasticity is the same at A and C. C. At E, both demand curves have the same elasticity. D. The elasticity is higher at E than at B.
A, D
Which of the following statements about asset prices are correct? (multiple correct) A. A bubble occurs when beliefs about future prices amplify a price rise. B. When positive feedback occurs, the market is quickly restored to equilibrium. C. Negative feedback is when prices give traders the wrong information about the fundamental value. D. When beliefs dampen price rises, the market equilibrium is stable.
A, D
.Which of the following statements is correct? A.The problem with the credit market is that rich people will always get a loan irrespective of the quality of their project. B.It is easier for rich people to get loans because they are able to provide equity or collateral. C.Banks are described as 'too big to fail' when their large size makes them safe institutions. D.Banks that are 'too big to fail' are careful not to make risky loans.
B
41. There are two different types of producers of a good in an industry where firms are price-takers. The marginal cost curves of the two types are given below: A> Type A is more efficient than Type B: for example, as shown, at the output of 20 units, the Type A firms have a marginal cost of $2, as opposed to a marginal cost of $3 for the Type B firms. There are 10 Type A firms and 8 Type B firms in the market. Which of the following statements is correct? B. At price $2, the market supply is 450 units. The market will supply 510 units at price $3. C. At price $2, the market's marginal cost of supplying one extra unit of the good will depend on the type of the firm that produces it. D. With different types of firms, we cannot determine the marginal cost curve for the market.
B
56. Figure 11.6 shows the market for bread in the short run, with 50 bakeries, and in the long run when more bakeries can enter. All bakeries are identical. Which of the following statements is correct? A. The supply curve of each bakery shifts as more bakeries enter the market. B. A and B cannot be long-run equilibria, as the bakeries are making a positive economic rent. C. More bakeries will want to enter the market when C is reached. D. Bakeries will want to leave the market when C is reached, because they don't make any profit.
B
According to Figure 19-10, children born in the bottom 20% of families by income have a ______ chance of staying in the bottom 20%. 20% 40% 25% 7.4%
B
Consider the situation where the noise of a factory's production affects nurses in the dormitory next door. If there are no transaction costs to impede Coasean bargaining, which of the following statements is correct? A.Whether the final output level will be Pareto efficient depends on who has the initial property rights. B.The nurses would be better off in the bargained allocation if they initially had a right to undisturbed sleep than they would if the factory has the right to make noise. C.If the factory has the right to make noise, it will prefer not to bargain with the nurses. D.If the nurses have the initial rights, they will obtain all of the net social gain from robot production.
B
Figure 11.21 is a stylized representation of the market for an event at the 2012 London Olympic Games. 40,000 tickets were allocated by lottery, at £100 each. Assume that buyers could resell their tickets in the secondary market. Which of the following statements is correct? A. The market cleared at $100. B. The probability of obtaining a ticket was 4/7. C. The economic rent earned by those selling in the secondary market was $100. D. The lottery organizers should have chosen a price of $225.
B
Figure 19.10 shows the proportion of children in earnings quantile conditional on their father's earnings quantile in the US and Denmark, respectively. Based on this information, which of the following statements is correct? A. The data provides support for the 'American Dream,' a term coined in 1931 by James Truslow Adams that refers to 'a dream of social order in which each man and woman shall be able to attain to the full stature of which they are innately capable... regardless of the fortuitous circumstances of birth or position' (in The Epic of America, 1931.) B. In the US, 7.4% of the poorest 20% of the families managed to move up to become part of the richest 20%. C. In Denmark, it is far more difficult for the richest families to preserve their status for their next generation than in the US. D. The figure suggest that there is very little governments can do to reduce intergenerational transmission of economic status.
B
Figure 6.6 depicts the efficiency wage equilibrium of a worker and a firm. According to this figure: A. Along the isocost line tangent to the best response curve, doubling of the per-hour effort from 0.45 to 0.90 would lead to an increased profit for the firm. B. The slope of each isocost line is the number of units of effort per dollar. C. At the equilibrium point, the marginal rate of transformation on the isocost line equals the marginal rate of substitution on the worker's best response curve. D. Points C and A both represent Nash equilibria because they are on the best response curve.
B
If people start drinking more concentrated frozen orange juice (demand increases) but there is a frost in Florida killing many orange trees (supply decrease), what do we know for certain about the new price and quantity in the market? A. Price decreases B. Price increases C. Quantity decreases D. Quantity increases
B
In Figure 6-5 the profit at point A is __________ than the profit at point B because the firm has to pay _____________ for the same level of effort from its employees. A. Lower; less B. Lower; more C. Higher; more D. Higher; less
B
The UK introduced a national minimum wage in 1998. Which of the following statements regarding minimum wages is correct? A. A minimum wage is a form of price ceiling. B. A minimum wage would not lead to increased unemployment if it is set low enough. C. Instead of a minimum wage, the government can promote increased labor participation to encourage higher wages. D. The introduction of a minimum wage would always lead to a fall in the demand for labor by firms.
B
The table represents market demand Q for a good at different prices P. Q 100 200 300 400 500 600 700 800 900 10001 P($) 270 240 210 180 150 120 90 60 30 0 A. The firm's unit cost of production is$ 60. Based on this information, which of the following is correct? B. At Q=100, the firm's profit is$ 20,000. The profit-maximising output is Q=400. C. The maximum profit that can be obtained is$ 50,000. D. The firm will make a loss at all outputs of 800 and above.
B
What is the term used to describe inequality between groups, such as by gender or race? A. Gini coefficient B. Categorical inequality C. Income earned by top 1% D. 90/10 income ratio
B
Which of the following is NOT a cause of market failures? A. Missing markets B. Complete property rights C. Asymmetric information D. Incomplete contracts
B
Which of the following statements is correct regarding policies on inequality? A. Japan has a more equal society compared to the US due to its large equalizing effect of taxes and transfers. B. Providing high-quality education to citizens is a way of rising the endowments of the less well-off people. C. An increase in the minimum wage increases unemployment, leading to higher inequality unambiguously. D. Non-complete contracts mean that workers can demand higher wages, leading to reduced inequality.
B
Match the following terms and definitions: A. A person's next best alternative among all options in a particular transaction. B. Costs that impede the bargaining process or the agreement of a contract. They include costs of acquiring information about the good to be traded, and costs of enforcing a contract. C. In the ultimatum game, the smallest offer by the Proposer that will not be rejected by the Responder. Generally implied in bargaining situations to mean the least favorable offer that would be accepted. 1. Transaction costs 2. Reservation option 3. Minimum acceptable offer
B, A, C
Figure 11.2 shows the hat market before and after a demand shift. Based on this information, which of the following statements are correct? (multiple correct) A. After the demand increase, sellers will initially sell more hats at $8. B. The adjustment to the new equilibrium is driven by the rent-seeking behavior of the buyers and the sellers. C. While the market adjusts, some buyers may pay more for a hat than others. D. The new equilibrium price may be anywhere between A and B.
B, C
In which of the following cases is there an adverse selection problem? A.A motor insurance market, in which the insurers do not know how carefully the insured people drive. B.A health insurance market, in which the insurers do not know whether or not the applicants for insurance are habitual smokers. C.Online sales of nutritional supplements, when consumers cannot tell whether their contents are as claimed by sellers. D.A firm that employs home-workers, but cannot observe how hard they are working.
B, C
Suppose that in a small town, a multinational retailer is planning to build a new superstore. Which of the following arguments could be correct? (multiple correct) A. The local protestors argue that the close substitutability of some of the goods sold between the new retailer and existing ones means that the new retailer faces inelastic demand for those goods, giving it excessive market power. B. The new retailer argues that the close substitutability of some of the goods implies a high elasticity of demand, leading to healthy competition and lower prices for consumers. C. The local protestors argue that once the local retailers are driven out, there will be no competition, giving the multinational retailer more market power and driving up prices. D. The new retailer argues that most of the goods sold by local retailers are sufficiently differentiated from its own goods that their elasticity of demand will be high enough to protect the local retailers' profit.
B, C
The diagram depicts two alternative demand curves, D and D', for a product. Based on this graph, which of the following are correct? (multiple correct) A. On demand curve D, when the price is $5,000, the firm can sell 15 units of the product. B. On demand curve D', the firm can sell 70 units at a price of $3,000. C. At a price of $1,000, the firm can sell 40 more units of the product on D' than on D. D. With an output of 30 units, the firm can charge $2,000 more on D' than on D.
B, C
Which of the following are stationary rents? (multiple correct) A. Innovation rents where firms make positive economic profits from a new invention. B. Employment rent where the wage is set high to induce workers to work hard. C. Monopoly rent where the firms make excess profits due to limited competition. D. Speculative rent where profits are made by correctly betting on the price changes in a bubble.
B, C
The following diagram shows the market demand curve of Apple Cinnamon Cheerios, the isoprofit curves of the producer firm, and the firm's profit function curve. Based on the graph, which of the following statements are correct? (multiple correct) A. The highest profit that the firm can make is $60,000 B. The profit-maximising choice for the firm is where the highest attainable isoprofit curve is tangent to the demand curve. C. The profit-maximising choice for the firm is where its marginal rate of substitution between the price charged and the quantity produced is equal to its marginal rate of transformation. D. The profit-maximising choice for the firm is at the peak of its profit function curve
B, C, D
. A shop sells 20 hats per week at $10 each. When it increases its prices to $12, the number of hats sold falls to 15 per week. Which of the following statements are correct? (multiple correct) A. When the price increases from $10 to $12, demand increases by 25%. B. A 20% increase in price causes a 25% fall in demand. C. The demand for hats is inelastic. D. The elasticity of demand is approximately 1.25.
B, D
Which of the following statements about a competitive equilibrium allocation are correct? (multiple correct) A. It is the best possible allocation. B. No buyer's or seller's surplus can be increased without reducing someone else's surplus. C. The allocation must be Pareto efficient D. The total surplus from trade is maximised.
B, D
. If a competitive market is in equilibrium and there is an increase in supply due to an improvement in technology, then price will ________ and quantity will _________. A. Increase; decrease B. Increase; increase C. Decrease; increase D. Decrease; decrease
C
5. Employers may be against the government providing higher unemployment benefits because it will shift the workers' best response curve to the ________ and ________ the firms' profits. A. Right; increase B. Left; reduce C. Right; reduce D. Left; increase
C
87. Figure 19.6 is a scatterplot of occupations for the US economy, with the 2015 mean hourly wages on the vertical axis and the 2014-24 projected job growth on the horizontal axis: Based on this information, which of the following is correct? A. Occupations with the biggest projected growth are those that benefit from innovations that increase automation. B. Occupations with substantial projected job losses are those with the highest wages, which would encourage employers to invest in automation. C. The high wage occupations with projected job growth are either in human services or occupations in which digital information processing has greatly increased the productivity of high skill workers. D. There is no particular pattern between the mean average wage and the projected job growth.
C
A firm with higher price elasticity of demand will have a _____ markup than a firm with a lower elasticity of demand. ______ is one way to increase the price elasticity of demand in an industry. A. Lower; regulation B. Higher; regulation C. Lower; competition D. Higher; competition
C
A firm's cost of production is 12 per unit of output. If P is the price of the output good and Q is the number of units produced, which of the following statements is correct? A. Point (Q, P) = (2,000, 20) is on the isoprofit curve representing the profit level £20,000. B. Point (Q, P) = (2,000, 20) is on a lower isoprofit curve than point (Q, P) = (1,200, 24). C. Points (Q, P) = (2,000, 20) and (4,000, 16) are on the same isoprofit curve. D. Point (Q, P) = (5,000, 12) is not on any isoprofit curve.
C
Figure 8.17 shows the effect of a tax intended to reduce the consumption of butter. The before-tax equilibrium is at A = (2.0 kg, 45 kr) and the after-tax equilibrium is at B = (1.6 kg, 54 kr). The tax imposed is 10 kr per kg of butter. Which of the following statements is correct? A. The producer receives 45 kr per kg of butter. B. The tax policy would be more effective if the supply curve were less elastic. C. The very elastic supply curve implies that the incidence of the tax falls mainly on consumers. D. The loss of consumer surplus due to tax is (½)(10)(2.0-1.6) = 2.
C
Firms maximize profit by setting _____ equal to ______. A. Marginal revenue; average cost B. Price; marginal cost C. Marginal revenue; marginal cost D. Marginal revenue; price
C
In Thomas Piketty's 'Economist in action' video, which of the following were NOT among the reasons that Piketty gave for the fall in the incomes of the very rich during the twentieth century? A. The First World War B. The Great Depression C. The Russian Revolution D. The Second World War
C
The diagram depicts the marginal cost curve (MC), the average cost curve (AC), and the isoprofit curves of a firm. What can we deduce from the information in the diagram? A. The profit level at A is 500. B. The profit level at B is 150. C. The price at C is 50. D. The price at B is 36.
C
The diagram shows the demand and the supply curves for a textbook. The curves intersect at (Q, P) = (24, 8). Which of the following is correct? A. At price $10, there is an excess demand for the textbook B. At $8, some of the sellers have an incentive to increase their selling price to $9. C. At $8, the market clears. D. 40 books will be sold in total.
C
There are 10 cars on the market, of which six are good quality cars worth $9,000 to buyers, and the others are lemons, worth zero. There are many potential buyers who do not know the quality of each car, but they know the proportion of good quality cars, and are willing to pay the average value. All sellers are happy to accept a price at least half the value of their car. Based on this information, which of the following statements is correct? A.The buyers are willing to pay at most $4,500. B.Only the lemons will be sold in this market. C.All cars will be sold at a price of $5,400. D.All cars will be sold at a price of $4,500.
C
Which of the following statements about bubbles is correct? A. A bubble occurs when the fundamental value of a share rises too quickly. B. A bubble is less likely to occur in a market where people can easily switch from buying to selling. C. Momentum trading strategies make bubbles more likely to occur. D. Bubbles can only occur in financial markets.
C
Which of the following statements about the separation of ownership and control is true? A. When the ownership and control of a firm is separated, the managers become the residual claimants. B. Managers always work to maximize the firm's profit. C. One way to address the problem associated with the separation of ownership and control is to pay the managers a salary that depends on the performance of the firm's share price. D. It is effective for shareholders to monitor the performance of the management, in a firm owned by a large number of shareholders.
C
Which of the following statements is true? A. A labour contract transfers ownership of the employee from the employee to the employer. B. The office where the employee works is a relation-specific asset, because the employee cannot use it after leaving the firm. C. In a labour contract, one side of the contract has the power to issue orders to the other side, but this power is absent from a sale contract. D. A firm is a structure that involves decentralization of power to the employees
C
he figure shows an order book for News Corp shares. Which of the following statements about this order book is correct? Bid Ask Price ($) Quantity Price ($) Quantity 16.56 400 16.59 500 16.55 400 16.60 700 16.54 400 16.61 800 16.53 600 16.62 500 16.52 200 16.63 500 A buyer wants 500 shares at $16.59. A limit buy order at $16.56 means that the buyer would pay at least $16.56 per share. A limit sell order for 100 shares at $16.58 will be unfilled. A limit buy order for 600 shares at $16.59 will be filled with 500 shares bought at $16.59 and the remaining 100 shares bought at $16.60.
C
Match the definition to the following financial terms: A. A financial instrument issued by governments that promises to pay flows of money at specific intervals. B. A type of financial asset for which the issuer promises to pay a given amount over time to the holder. C. Anything of value that is owned. D. A part of the assets of a firm that may be traded. It gives the holder a right to receive a proportion of a firm's profit and to benefit when the firm's assets become more valuable. Asset Government bond Bond Stock or share
C, A, B, D
Match the following terms and definitions: A. An equilibrium such that, if a shock disturbs the equilibrium, there is a subsequent tendency to move even further away from the equilibrium. B. A process whereby some initial change sets in motion a process that dampens the initial change. C. A process whereby some initial change sets in motion a process that magnifies the initial change. D. An equilibrium in which there is a tendency for the equilibrium to be restored after it is disturbed by a small shock. Positive feedback Negative feedback Stable equilibrium Unstable equilibrium
C, B, D, A
Consider a firm whose unit cost (the cost of producing one unit of output) is the same at all output levels. Which of the following statements are correct? (multiple correct) A. Each isoprofit curve depicts the firm's profit for different outputs for a given price of the output good. B. Isoprofit curves can be upward sloping when at high profit levels. C. Every price-quantity combination lies on an isoprofit curve. D. Isoprofit curves slope downward when the price is above the unit cost.
C, D
Figure 8.14 shows the demand and supply curves for salt, and the shift in the supply curve due to the implementation of a 30% tax on the price of salt. Which of the following statements are correct? (multiple correct) A. In the post-tax equilibrium, consumers pay P1 and producers receive P*. B. The government's tax revenue is given by (P*-Po)Q1. C. The deadweight loss is given by (½)(P1-Po)(Q*-Q1). D. As a result of the tax, the consumer surplus is reduced by (½)(Q1+Q*)(P1-P*P.
C, D
In Figure 8.9a, the market equilibrium output and price of the bread market is shown to be at (Q*, P*) = (5,000, €2). Suppose that the mayor decrees that bakeries must sell as much bread as consumers want, at a price of €1.50. Which of the following statements are correct? (multiple correct) A. The consumer and producer surpluses both increase. B. The producer surplus increases but the consumer surplus decreases. C. The consumer surplus increases but the producer surplus decreases. D. The total surplus is lower than at the market equilibrium.
C, D
. Figure 11.1 shows how bargaining power affected prices in Kerala beach markets on 14 January 1997. Based on this information, what can we conclude? A. The higher the excess supply, the lower the price of fish. B. The price of fish in all markets with excess demand is 9.3. C. The data satisfy the law of one price. D. The data demonstrate that the buyers have bargaining power when there is excess supply.
D
. If demand for a brand decreases because consumers' tastes change, then we would expect price to _______ and quantity to _________. A. Increase; decrease B. Increase; increase C. Decrease; increase D. Decrease; decrease
D
A factory is situated next to a dormitory for nurses who work night shifts. The factory produces 120 humanoid robots a day. The production process is rather noisy, and the nurses often complain that their sleep is disturbed. Based on this information, which of the following statements is correct? A.The marginal private cost is the factory's total cost of producing 120 robots a day. B.The marginal social cost is the noise cost incurred by the nurses from production of an additional robot. C.The marginal external cost is the cost to the factory, plus the noise cost incurred by the nurses, when an additional robot is produced. D.The total external cost is the total costs per day imposed on the nurses by the factory's production.
D
A factory is situated next to a dormitory for nurses who work night shifts. The factory produces 120 units of humanoid robots a day. The production process is rather noisy, and the nurses often complain that their sleep is disturbed. The following graph depicts the MPC and MSC of the robot factory production. The robot market is competitive and the market price is £340. Based on this information, which of the following statements is correct? A. At Q = 80, both the factory and the nurses would benefit from the factory paying a fee less than 80 to the nurses to increase output. B. The efficient level of output is the factory's profit-maximizing quantity, which is 120. C. The efficient level of output is 0, where there is zero marginal external cost to the nurses. D. At Q = 120, both the factory and the nurses would benefit from the nurses paying a fee less than 120 to the factory to reduce output.
D
According to our 'Economist in action' video of Arin Dube, which of the following was a finding of his study of the minimum wage increase? A. Increasing the minimum wage increased the worker turnover. B. A 10 increase in minimum wage resulted in a 4 increase in earnings. C. A 10 increase in minimum wage resulted in a 4 decrease in employment. D. There was a minimal negative effect on employment.
D
As a student representative, one of your roles is to organize a second-hand textbook market between the current and former first-year students. After a survey, you estimate the demand and supply curves to be the ones shown in Figures 8.1 and 8.2. For example, you estimate that pricing the book at $7 would lead to a supply of 20 books and a demand of 26 books. Which of the following statements is correct? A. Demand would double if the price were reduced sufficiently. B. A rumor that the textbook may no longer be on the reading list for first-year students would change the demand curve, shifting it upwards. C. Doubling the price to $14 would double the supply. D. A rumor that the textbook may be required again in Year 2 would change the supply curve, shifting it upwards.
D
Figure 19.15 shows the feasible frontier of the incomes of the rich and the poor. Which of the following statements is correct? A. E, the point of maximum equality, is Pareto efficient. B. For the inequality-averse citizen shown, any point between R and F on the frontier is preferable to any point inside the frontier. C. If you had a 50-50 chance of being rich or poor, then your expected income is maximized at point B. D. Between D and F, lower income for the poor leads also to lower income for the rich.
D
In the long-run of a profitable market, both demand and supply elasticities tend to be ____________ as firms enter and exit the market and substitutes become available. A. More inelastic B. Less elastic C. The same D. More elastic
D
Look again at Figure 8.18, which shows the market for Choccos and for all chocolate bars. Based on the two diagrams, which of the following statements is correct? A. The firm that makes Choccos chooses to produce at the bottom of the U-shaped isoprofit curve. B. All chocolate bars will be sold at the same price P*. C. The existence of many competitors means that the firm is a price-taker. D. The market marginal cost (MC) is approximately the sum of the MC curves of all the producers of the chocolate bars.
D
Maria earns $12 per hour in her current job and works 35 hours a week. Her disutility of effort is equivalent to a cost of $2 per hour of work. If she loses her job, she will receive unemployment benefit equivalent to $6 per hour. Additionally, being unemployed has psychological and social costs equivalent to $1 per hour. Then: A. The employment rent per hour is $3. B. Maria's reservation wage is $6 per hour. C. Maria's employment rent if she can get another job with the same wage rate after 44 weeks of being unemployed is $6,160. D. Maria's employment rent if she can only get a job at a lower wage rate after 44 weeks of being unemployed is more than $7,700.
D
One solution to a market failure is for the government to impose _______________ so that a firm's marginal private cost is equal to the marginal social cost. A. a quota B. a production ban C. clear property rights D. a Pigouvian tax
D
Suppose that the unit cost of producing a pound of cereal is $2, irrespective of the level of output. (This means there are no fixed costs, that is, costs that are present for any level of output, including zero.) Which of the following statements is correct? A. The total cost curve is a horizontal straight line. B. The average cost curve is downward sloping. C. The marginal cost curve is upward sloping. D. The marginal cost and the average cost curves coincide.
D
The figure shows the marginal cost and marginal revenue curves for Beautiful Cars. Which of the following statements is correct, based on the information shown? A. When Q = 40, the marginal cost is greater than the marginal revenue, so the firm's profit must be negative. B. Revenue is greater if Q = 10 than if Q = 20. C. The firm would not choose to produce at point E because marginal profit is zero. D. Profit is greater when Q = 20 than if Q = 10.
D
The following diagram depicts the competitive market for hats before and after a demand shift. Based on this information, which of the following statements is correct? A. At E, lowering the price to $7 result in a Nash equilibrium for the buyers and sellers. B. At E, the sellers are on the short side of the market. C. In the adjustment process from E to the new equilibrium F, the sellers behave as price-makers while the buyers remain price-takers. D. After the demand shift, the market initially moves from A to E, before settling to the new equilibrium at F.
D
Which of the following statements is correct? A.Some public goods are rival. B.A public good must be non-excludable. C.A good cannot be rival and non-excludable. D.If a good is non-rival, then the cost of an additional person consuming it is zero.
D
Match the following terms and definitions: A. A good that is both rival, and from which others can be excluded. B. A public good that is possible to exclude some people from enjoying it. C. A rival good that one cannot prevent others from enjoying. D. A good for which use by one person does not reduce its availability to others. 1. Public good 2. Artificially scarce good 3. Private good 4. Common-pool resource
D, B, A, C
Match the following terms and definitions: A. A negative external effect; that is, the negative effect of production, consumption, or other economic decisions on another person or party, which is not specified as a liability in a contract. B. The cost of producing an additional unit of good, taking into account both the cost for the producer and the costs incurred by others affected by the good's production. Marginal social cost is the sum of the marginal private cost and the marginal external cost. C. A positive or negative effect of a production, consumption or other economic decision on another person or people that is not specified as a benefit or liability in a contract. It is called an external effect because the effect in question is outside the contract. D. When markets allocate resources in a Pareto-ineffecient way. 1. Market failure 2. External effect or externality 3. External cost 4. Marginal social cost (MSC)
D, C, A, B
