Micro Finalllll!

Is competition for network goods "in the market" or "for the market"?

"for the market"

If someone offers to pay you $1,200 in three years and the going interest rate is 4%, what is the present value for this future payment?

$1,066.80

If someone offers to pay you $500 in year one, $1000 in year two, $1500 in year three, and $2000 in year four, what is the present value of this income stream if the going interest rate is 4%?

$4,448.44

XYZ Company is currently experiencing a backlog at its loading dock. A manager figures that if she were to hire an extra worker for $100 per day, then sales volumes would increase by $400, due to the removal of the congestion on the dock. The worker's marginal revenue product is:

$400.

You purchase an annuity when interest rates are 8%. How much do you need to set aside so that you will earn $4,000 every year to pay for your vacation?

$50,000

In a competitive labor market, if a new manufacturing plant seeks to build its labor force, what is assumed about the quantity of workers?

the quantity of workers available is greater than the quantity of workers that are sought.

On a given work day, a single worker is assumed to have the ability to supply:

24 hours of labor

Why might occupational segregation and resulting wage differentials between men and women occur?

Cultural stereotypes for "men's work" and "women's work," different degrees of labor force attachment, and past discriminatory practices barring women from certain jobs or educational opportunities are all reasons.

_____, often called spillovers, arise when two parties engage in a transaction, yet some third party uninvolved in the transaction either benefits or is harmed.

Externalities

Which curve represents the MOST equitable distribution of income?

D (positively sloping diagonal)

______ are examples of market failure caused by "spillovers" or unintended byproducts of a market transaction.

Externalities

Assume that oligopolists A and B both charge $20 for the product and face roughly the same costs. Firm A is considering a price decrease to $15. Profits for each are given in the payoff matrix (A's profits, B's profits) that follows. How will Firm B react?

Firm B will match Firm A's price, and both will gain $80,000 in profit.

Are park passes that the government sells a public good?

No

Can monopolies sell network goods?

Yes

"Derived demand" means that:

a change in the demand for a good changes the demand for labor.

Did rigid command control policies prove to be efficient in the past for environmental regulation?

No

Do the best products win when networks are important?

No

Which of the following goods represent network goods?

Twitter, Microsoft Excel, Facebook.com

An oil field lies beneath the border of Oklahoma and Texas. Both states drill wells every 100 yards, and in two weeks the field loses all its pressure and ability to produce, leaving 80% of the oil in the ground. This consequence is an example of market failure due to:

common property resource.

Reasons for market failure include:

common property resources; public goods; products or services that create externalities.

Cost-benefit analysis includes the following steps, except:

computing the future value of each alternative.

A Lorenz curve measures the _________ on the horizontal axis.

cumulative percentage of households

As a household approaches retirement years, income tends to _______ and saving tends to _____.

decline; rise

Which of the following properties is not a recent trend in the labor market?

declining weekly hours of work

Approximately 80,000 European fishing boats now use advanced technology that makes finding and catching Atlantic cod easier. Over the last 10 years, the Atlantic cod catch has:

decreased.

The demand for labor that arises from consumer demand for the firm's product and the productivity of labor is called:

derived demand.

In competitive labor markets, the going wage is/are:

determined by the intersection of the market supply and market demand curves for labor

For most developing nations:

economic growth will reduce income disparity.

If Edna lives next door to a nightclub and the loud music disturbs her sleep, the Coase theorem suggests that an efficient agreement can be reached if:

either one of the parties has a well-defined property right.

If wages increase at a 5% rate and the quantity demanded of labor decreases 10%, then the demand curve for labor is:

elastic

Which of the following is NOT a good example of a contestable market?

electricity providers

The Census Bureau has developed alternative measures of poverty, which use after-tax income plus capital gains and adds noncash benefits, such as food stamps, to income. Under these alternative measures, poverty rates:

fell by roughly a quarter

An increase in college tuition will lead to:

fewer younger people going to college.

Assume that the going wage for a worker at a competitive firm is $50 a day. If the marginal revenue product for the sixth worker is $45 a day, the:

firm should hire fewer than six workers.

Markets tend to be more easily monopolized when

fixed costs are high.

If Larry is given a $2-per-hour pay increase, and after this event Larry decides to work less overtime, then:

for Larry, the income effect is dominating the substitution effect.

Which of the following resources is considered exhaustible yet renewable?

forests

To determine if education is a good investment, one must compare the:

future earnings from education against its present costs.

When the market for a network good is contestable, it is hard for consumers to _________________

get locked into a 'bad' outcome

Nintendo offers a $10 rebate and Sony responds with a $10 rebate and three free games. This is an example of what type of game strategy?

grim trigger

Labor's share of national income:

has decreased slightly every decade since 1970.

According to human capital theory, younger workers:

have a lower opportunity cost of going to college, so will be more likely to attend college.

Which of the following would not be considered to be leisure?

having a dinner meeting with a client

According to human capital theory, which of the following occurrences would increase the demand for college education?

higher subjective discount rate

the competitive labor market model assumes that labor is _________

homogenous.

Several studies of income mobility show:

how fluid the income distribution really is

Which of the following changes will cause the market labor supply curve to shift outward to the right?

increase in immigration

A network good is a good whose value to one consumer:

increases the more that other consumers use the good.

The cost of sending a space shuttle into orbit is $4 billion. Total cost for the astronaut's salary is $300,000 per year. The demand curve for astronauts will probably be:

inelastic.

______________ does not shift the market supply curve

inflation.

Market failure:

is a reason that unregulated markets may have inequitable results and may be solved by government policies if special interests can be minimized.

Competition for the market rather than in the market:

is the reason why Friendster is no longer the leading social network; explains why Microsoft Word is the leading word processing network; means that Facebook may one day no longer be one of the leading social networks.

An association of employees that bargains with employers over terms and conditions of work is called a:

labor union

The competitive labor market does not assume that workers are preferable to __________

machines

. Equal Pay Act of 1963

makes it illegal to "discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's race, color, religion, sex, or national origin"

When economists say that education and earnings are positively correlated, they mean that:

people with a high school degree have higher average earnings than people without a high school degree

A Gini coefficient of zero means that there is:

perfect income equality.

For an individual firm with a good credit rating, the supply of loanable funds is:

perfectly elastic.

The supply curve of labor within a competitive labor market is:

perfectly elastic.

The grim trigger strategy is one in which the actions of opponents are met with:

permanent retaliatory force

Which of the following is a significant reason why an individual would demonstrate no upward income mobility?

physical disability

The market labor supply curve is:

positively sloped.

According to the World Bank's standards:

poverty in the United States has been eradicated already.

If Firecat's charcoal factory is able to release black smoke into the air, then it will tend to:

produce more than it would if it had to contain the smoke

The "maximin principle" as proposed by John Rawls:

proposes that society should maximize the welfare of the least well-off individual.

Age Discrimination in Employment Act

protects workers over age 40 from discrimination

Which of the following would NOT be considered a network good?

quiet study rooms

The Lorenz curve typically breaks the income distribution into:

quintiles.

The _____ compares a household's income to the poverty threshold and is expressed as a fraction

ratio of income to poverty

Entrepreneurs:

receive profits as rewards for risks they assume in producing goods and services.

Civil Rights Act of 1964

requires employers to give to the federal government details regarding the demographic background of employees

Affirmative Action

requires that men and women receive equal pay for equal work

Economic growth is accompanied by more efficient use of ________ ______________

scarce resources

If a defense industry firm hires a history major, then the company is probably looking at the degree as a(n):

screening device.

Your SAT scores may someday be a:

screening device.

Firms that operate in contestable markets

still price competitively since they face the threat of competition from new entrants.

All of the following are considered private goods except:

street lights

The market demand curve for a public good is derived by:

summing individual's demand curves vertically.

The _____ shows the amount of time an individual is willing to work at various wage rates

supply of labor

The demand for labor is elastic if:

the change in labor exceeds change in the wage rate.

The idea that the demand for labor is a derived demand means that:

the demand for labor depends on the demand for the product the labor produces.

Which of the following will not affect the elasticity of demand for labor?

the elasticity of supply for labor

Suppose a steam locomotive emits sparks and burns an adjoining wheat field. According to the Coase theorem, if property rights to the crop were given to the farmer, then:

the farmer would receive payment from the railroad company to compensate for the damage

Contestable markets tend to arise when

the incumbent firm does not control access to an important resource.

Discrimination can cause a vicious circle because:

the lack of high wages reduces the incentives to invest in human capital.

Which of the following is NOT a measure of income?

your assets as of July 1, 2014

Wage discrimination because of gender will:

lead to lower demand for education for women

In economics, the term _____ encompasses all activities that do not involve paid work.

leisure

Customer loyalty programs, such as frequent flier programs, tend to lead to

less competition and higher prices.

According to Coase, which of the following is not necessary to achieve a socially optimal level of pollution?

low production costs

A lower elasticity of demand of a product results in a:

lower elasticity of demand for the labor that produces the product.

If an entrepreneur opens an adult day care center that produces positive externalities, the equilibrium quantity of day care that is produced will be:

lower than socially optimal.

The demand for copper increases. As a result, in the industry, the:

wage rate increases and the quantity of workers supplied increases

In competitive labor markets, we assume that information in the industry is ________ and ____________

widely available and accurate

Pure public goods:

are nonrival in consumption.

A sweatshop in California can sell socks for 50 cents a pair, and 10 cents of the price covers all other costs. If a worker can produce 20 pairs of socks per hour, how much can the sweatshop owner afford to pay the worker?

$8 per hour

An income to poverty ratio of ___ would classify a household as severely poor.

0.3

Which Gini coefficient represents the highest level of income inequality?

0.5

If a firm requires investments to yield 25%, what would be an acceptable rate of return for the firm's latest investment?

30%

The cost of capital for a new project is $55,000. The project is expected to yield $20,000 in year one and $40,000 in year two. What is the approximate rate of return over this time period?

5.4%

Which of the following statements best illustrates the relationship of present value to future value?

A bird in the hand is worth two in the bush.

_____ is an example of a nonrival good.

A lighthouse; Cable TV

Which of the following is a positive externality?

A star basketball player increases revenue at sports bars.

Suppose we have two firms: Sun and Taylor. If both Taylor and Sun decide against using advertising methods, then both firms will increase the profitability of their firm by 3%. If Sun advertises and Taylor does not, Sun will increase profits by 5% and Taylor will increase by 1%. If Sun does not advertise, but Taylor does, then Sun's profit will increase by 1% and Taylor's profit will increase by 5%. If both choose to advertise, then each of the firms will increase its profitability by 10%. Which scenario provides the best benefits for both organizations?

Both firms advertise.

In the payoff matrix here, two possible pricing strategies per 12-pack for Bud and Miller are shown and the profit payoff to each firm is also shown. What is the competitive solution?

Both firms charge $8 per 12-pack.

Which of the following statements CANNOT be true?

Jane earns a very high salary but has negative net wealth.

_____ are one of the most popular and effective market-based policies aimed at correcting for externalities

Marketable or tradable permits

Which of the following is NOT an argument of those on the political right?

Public policy should ultimately be guided by human needs

The online photo-sharing website Shutterfly offers unlimited free uploads. Which of the following best explains why they offer this service at no charge?

Shutterfly is trying to increase switching costs for their consumers.

Which of the following stipulations describes the Civil Rights Act of 1964?

The Act makes it illegal to "discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's race, color, religion, sex, or national origin."

Which of the following stipulations is the key feature of the Americans with Disabilities Act?

The Act prohibits discrimination against people with a physical or mental disability who could perform a job with reasonable accommodation.

Which of the following conditions is required for a network good to succeed over a better good in the market?

The network good should have a much larger number of consumers or users than the better good.

_____ is a stock measure of an individual's or household's assets, net of liabilities, at a given point in time.

Wealth

All of the following would explain a change in labor supply except:

a decrease in productivity.

A network good is:

a good whose value increases to consumers as more consumers use the good

To derive the market demand for public goods, individual demand must be:

added vertically.

The trembling hand trigger game:

allows an opponent to make a mistake before employing the grim trigger game.

Firms sometimes give away products for free in the hopes of:

becoming the dominant standard.

A free rider is a person who:

benefits from consuming public goods without paying for them.

The life cycle effects of income indicate that peak income usually occurs:

between the ages of 45 and 55.

Individual firms hire workers based on where the market's equilibrium wage equals _______________

marginal revenue product for labor.

In a court case in 2008, heard by the Supreme Court regarding older power plants and how best to protect fish and aquatic organisms, Justice David Souter remarked, "The difficulty that I have is if you are going to apply . . . a cost-benefit analysis, I'm not sure how it would work. Are a thousand plankton worth a million dollars?" Justice Souter's question points out the difficulty of:

measuring nonmarket or intangible aspects of public projects.

Which of the following problems does not represent an environmental cost of pollution?

medical costs incurred due to obesity

Boeing purchases thousands of specialized components to build commercial jets. For most of these transactions, Boeing is a:

monopsonist.

The supply of land is (more/less) inelastic than other production inputs

more inelastic

Which of the following explains why frequent flier programs reduce contestability in the airline industry?

more inelastic demand, more monopoly power, higher prices

According to the Census Bureau, a household with a ratio of income to poverty threshold of 1.20 is considered to be:

near poor

Public goods are:

nonexcludable and nonrival.

Mosquito spraying in a local community is an example of a public good because it is:

nonrival in consumption and exhibits nonexcludability.

Which of the following items is not a demographic change that will shift the market labor supply curve?

nonwage income

Market failure occurs when:

the market does not provide the socially optimal amount of a good.

According to Robert Nozick

the state should not use its coercive power to make some people better off at the expense of others.

Nintendo offers a $10 rebate and Sony responds with a $10 rebate. This is an example of what type of game strategy?

tit-for-tat

Which of the following is a repeated game strategy?

trigger strategies

Suppose that all people within a given age group have the same earnings profile and that the percentage of the population in each age category is the same. The distribution of income at any point in time will be:

unequal, because incomes differ by age.

A(n)____ is a workplace where workers are do not have to be union members to be hired, but must join the union within 30 days.

union shop