Final Econ Exam
If the price of a movie rises 3 percent and, as a result, the quantity demanded of video rentals increases 6 percent, then the cross elasticity of demand is
2
When a city licenses only 3 taxi firms to serve the market, the city has created a
A legal oligopoly
What is the national security argument to support protection from international trade?
Any firm necessary in wartime must be protected.
While high-paid American workers fear competition with low-paid foreign workers, low-paid foreign workers fear competition with high-paid American workers. Why
Because high wages reflect high worker productivity and the low-paid foreign workers are not as productive.
The tool that economists use to analyze the mutual interdependence of oligopolies is
Game Theory
The price elasticity of demanded measures which of the following?
How responsive the quantity demanded is to changes in price.
Pizza producers charge one price for a single pizza and almost give away a second one. This is an example of
Price discrimination
An example of someone bearing the burden of a negative production externality would be
Taylor living downwind from a smelly feedlot where pigs are raised
Water bottlers announce that next month the price of bottled water will rise by 25 percent. Which of the following occurs immediately?
The demand for bottled water increases.
True or False In order to price discriminate, a firm must sell a good or service that cannot be resold.
True
If an Atlanta bakery raise the price of their rye bread by 11 percent and the quantity demanded decrease by 11 percent, then the demand for the rye bread is --?-- and the bakery's total revenue --?--
Unit elastic; does not change
Gasoline prices increases by 50 percent nd other things remain the same. As a result, there is
a decrease in quantity of gasoline demanded.
A cartel is
a group of firms acting together to raise price, decrease output, and increase economic profit.
One of the major reasons why the United States exports jet airplanes is because Boeing faces --?-- opportunity cost compared with firms in other nations in the production of such aircraft.
a lower
If the Herfindahl-Hirschman Index in the market for single-use cameras equals 10,000 then the single-use camera industry is best characterized as
a monopoly
There are two bookstores in a college town. If another bookstore opened, each of the stores would incur an economic loss. This bookstore market is
a natural oligopoly
People eat at restaurants less often when their incomes fall because of a recession. Eating at restaurants must be
a normal good
The benefit that Joan gets from eating cherries is an example of
a private benefit
A major characteristic of monopoly is
a single seller of a product
A payment made by the government to private producers of roads and libraries would be an example of
a subsidy
An example of a common resource is
a tuna in the ocean.
"Duopoly" is
a two-firm oligopoly
A price ceiling is a government regulation that makes it illegal to charge a price
above some specified level.
The price elasticity of supply measures
the extent to which the quantity supplied of a good changes when the price of a good changes, other things remaining the same.
If a few oil-producing countries in the Middle East decide to jointly limit the production of oil,
they are forming a cartel
Marginal benefit is the
additional benefit we receive from consuming one more unit of a good or service
The tendency for people to enter into agreements in which they can use their private information to their own advantage and to the disadvantage of the less informed party is known as?
adverse selection
The prisoners' dilemma is
an example of a duopoly game
Which of the following is an example of an external cost?
an oil spill off the coast of South America.
Herb's Inc. has a large share of its market and is tempted to collude with the few firms that are in its market. Herb's operates in
an oligopoly
Sammy's Inc. competes with a few other firms because there are barriers to entry. Sammy's operates in
an oligopoly
An effective price support --?-- producers and --?-- a deadweight loss.
benefits; creates
Asymmetric information means that
either the buyer has information that the seller does not have or the seller has information that the buyer does not have.
If the price of corn increases by 20 percent and the quantity supplied of corn increases by 30 percent, then supply is
elastic and elasticity of supply equals 1.5.
Signals are believable when the cost of sending a --?-- is known to be --?--
false signal; high
In an oligopoly there are
few firms and barriers to entry
University of Colorado reserves 5,000 free tickets to each home football game for students. Students must stand in line to receive their ticket. football tickets are allocated through which method?
first-come, first-served
The United States exports
goods and services
The good produced by a monopoly
has no close substitutes
Setting a price support in the market for sugar beets above equilibrium price --?-- the quantity produced and --?-- he quantity bought by consumers.
increase; decrease
An increase in the number of fast-food restaurants
increases the supply of fast-food meals
When a country exports a good, the country's producer surplus --?--, consumer surplus --?--, and the country --?-- from the trade.
increases; decreases; gains
When producers are hard to monitor and property rights are too costly, --?-- is (are) an effective method to achieve efficient of a(n) --?--
individual transferable quotas; common resource
The supply of beach front property on St. Simon's Island is
inelastic
If the percentage change in price is 10 percent and the demand is elastic, then the percentage change in the quantity demanded
is larger than 10 percent.
During the winter, theme parks in Orlando close earlier than in the summer. The reason the theme parks close early during the winter is because during that season the marginal revenue from staying open later is --?-- the marginal cost.
less than
Monopolistic competition is defined as a type of market structure in which
many firms produce the good.
The characteristics that describe a perfectly competitive industry include
many firms selling an identical product.
A perfectly competitive firm is a price because
many other firms produce the same product.
Education has an external benefit. So to achieve the efficient level of education voucher must equal the difference between the
marginal (private) benefit and the marginal social benefit.
To an economist, "value" is the same as
marginal benefit
A competitive market with no externalities is efficient when it is equilibrium because
marginal benefit equals marginal cost.
A market with a large numbers of sellers
might be a monopolistically competitive or perfectly competitive market
An industry with a large number of firms, differentiated products, and free entry and exit is called?
monopolistic competition
Which market structure is characterized by the following characteristics? i. a large number of firms compete ii. each firm produces a differentiated product iii. firms are free to enter and exit
monopolistic competition
Because Don has health insurance, he is more likely to see the doctor when he has a cold. This is an example of?
moral hazard
Public goods create a free-rider problem because
people can enjoy the good or service no matter whether or not they pay for it
The missing insurance market in health care is the insurance market for
people who have pre-existing health problems
The tragedy of the commons is the absence of incentives to
prevent overuse and depletion of the common resource.
The difference between private cost and social cost is that
private cost only considers the cost borne by producers of the good.
Firms in monopolistic competition compete on?
quality, price, and marketing
For a syrup producer in central Vermont, profit is maximized at the level of output for which total
revenue exceeds total cost by the largest amount
All games have which features?
rules, strategies, and payoffs
A perfectly competitive firm
sells a product that has perfect substitutes
single-price monopoly
sets a single price for all consumers
Oligopoly is a market structure in which
small number of firms compete
A tax on a good that is imposed by the importing country is called a
tariff
People who benefit from a rent ceiling include
tenants who have a rent ceiling include
Marginal revenue is
the change in total revenue from a one-unit increase in the quantity sold
The idea of the "big tradeoff" points out the costs of
transferring income using taxes that decrease efficiency
Which of the following has a positive externality and hence can be underprovided?
vaccination
A good or resource is excludable if
when you pay for the good or resource, you are guaranteed to be sole consumer.
Country A imports 1,000 cars per month. After imposing a $50 per car tariff, imports fall to 800 cars per month. How much does Country A's government collect in tariff revenue?
$40,000
If tuition at a college is $30,000 and the external benefit of graduating from this college is $10,000, then
- in the absence of any government intervention, the number of students graduating is less than the efficient number - the government could increase the number of graduates by giving the college a $10,000 subsidy per student - the government could increase the number of graduates by giving the students $10,000 vouchers
Government bureaucracies over-provide goods and grow larger because of their goal of --?-- combined with --?-- of the voters.
budget maximization; rational igmorance
Cap-and-Trade refers to
capping emissions and issuing tradeable emissions permits
A group of firms acting together to limit output, raise price, and increase economic profit is a called a
cartel
A differentiated product has
close but not perfect substitutes
Allocating resources by the order of someone in authority is a --?-- allocation method.
command
"Screening" means that an auto insurance company is
creating an incentive for a risky driver to reveal that he or she is risky.
When a nation starts importing a good or service, domestic employment in that industry
decreases
An example of a pure private good?
the new heat pump your neighbor bought for her house.
The law of demand refers to how
the quantity demanded changes when the price of the good changes.
Market equilibrium occurs when
the quantity demanded equals the quantity supplied
A price ceiling in the market for gasoline that is below the equilibrium price will lead to
the quantity demanded of gasoline exceeding the quantity supplied.
When the price of orange increases,
the quantity of oranges supplied increases.
Suppose the equilibrium price of gallon of milk is $4. If the government imposes a price floor of $5 per gallon of milk,
the quantity supplied of milk exceeds the quantity demanded.
What is a characteristic of monopoly
there are barriers to enter the market
In both monopolistic competition and perfect competition,
there is easy entry and exit