Micro test 3

Which of the following statements describes the Coase Theorem?

If bargaining is costless, and property rights are clearly established and enforced, then externality problems can be solved through private bargaining.

The marginal revenue product of labor is equal to:

MPL x P

Which of the following illustrates a positive externality?

The value of Maria's house rises when the city builds a park nearby, enhancing her view.

Alena manages a small theme park. She hires one more custodian at $450 per week, and her park is cleaner and more attractive. As a result of this improvement, ticket sales rise by 40 tickets per week. Tickets sell for $12. Use the Rational Rule for Employers to determine if hiring the extra custodian was a good move.

Yes, it was a good move because it added more to revenue than to cost.

Workers on the night shift at a factory earn more per hour than workers on the day shift, although their human capital and productivity are the same. This is an example of:

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 tax

A market with many small sellers and a high level of product differentiation is known as

a monopolistically competitive market

Walmart has a large aisle that displays many different types of shampoos. This observation indicates that the shampoo market is

a monopolistically competitive market

when a good is non-rival and non-excludable, the good is referred to as:

a public good

an externality is defined as:

a side-effect of an activity that affects bystanders whose interests are not taken in account

An externality is defined as:

a side-effect of an activity that affects bystanders whose interests are not taken into account.

which of the following would be both nonrival and nonexcludable?

a siren tornado warning system

the market power of a firm is its

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

what is collusion?

agreements between sellers to increase their market power

Which of the following is an example of statistical discrimination?

an employer relies on stereotypes in making hiring decisions

Marjean walks to work every day along a busy road. As she does so, she breathes in the fumes of many cars, often arriving at work coughing. The economic term for the impact of the cars on Marjean is:

an externality

A characteristic of oligopoly that is not present in any other market structure is that there

are a small number of sellers with considerable market power

What conditions must be met for private bargaining to be effective in resolving an externality?

bargaining costs must be low, and property rights must be clear

the marginal private benefit curve is also the:

demand curve

the labor demand is a/an ____ demand

derived

Why does an employer's labor demand curve slope downward?

diminishing marginal product

the marginal private benefit is the:

extra benefit enjoyed by the buyer of one extra unit of a good or service

The marginal product of labor is the

extra production that occurs from hiring an extra worker

which of the following is consistent with current U.S. laws on monopolies?

gaining monopoly or market power through specified exclusionary business practices is illegal

When a seller is able to differentiate its product successfully, the seller

gains market power

Companies with market power face a trade-off between

having a higher profit margin and selling a larger quantity

the accumulated knowledge and skills that make a worker more productive are known as:

human capital

The Nobel Prize‑winning economist Oliver Hart once said, "If we know the marginal social cost [of pollution] emissions, a tax is better, but if we know the optimal quantity, cap and trade is better." Given this statement and the knowledge of ways governments can intervene in markets, evaluate the following statement:Any outcome that can be achieved by taxing can also be accomplished by establishing a quota.This is because

if we know the marginal social cost, we can set the tax so that price is equal to the optimal price. As a result, the optimal quantity will be achieved. If we know the optimal quantity, we can set a quota and the market will find the optimal price.

There is evidence that, despite antidiscrimination laws, discrimination _____ in labor markets.

impacts wages

a corrective tax designed to resolve a negative externality problem is typically set at an amount equal to the ____ cost

marginal external

the supply curve of a firm is also its ______ cost curve

marginal private

Marginal revenue product is the

marginal revenue from hiring an additional working

The marginal revenue from hiring an additional worker is known as

marginal revenue product

an employer's labor demand curve is equal to the

marginal revenue product curve

the marginal private benefit plus the marginal external benefit equals the ______ benefit

marginal social

A good is characterized as _____ when one person's use of the good does not reduce another person's ability to use the same unit of the good.

nonrival

When a company has market power, it is _____ in its market.

not a price-taker

In which market structure do the actions of a rival have a significant impact on your operations?

oligopoly

Which of the following is an example of a labor market characterized by compensating differentials?

outside window washers of skyscrapers earn higher salaries than outside window washers of single family homes

What type of relationship exists between the level of a company's market power and the price that its owner is able to charge for its product?

positive

marginal social cost equals marginal ____ cost plus marginal _____ cost

private; external

in a market, when a company's owner tries to make its product slightly different from the output of other companies so that it is more attractive to buyers, the company is engaged in

product differentiation

when the income effect dominates, an individual's labor supply curve

slopes downward

With a _____ number of sellers in a market, _____ market power tends to exist in the market.

smaller; more

The outcome that is most efficient for society as a whole — including the interests of buyers, sellers, and bystanders — is the _____ outcome.

socially optimal

A good has a free-rider problem when:

someone can enjoy the benefits of the good without bearing the costs.

when someone can enjoy the benefits of a good without bearing the cost, the good:

subject to free rider problem

the _____ measures how people respond to a change in relative prices when the wage rises

substitution effect

In a labor market, workers ____ labor, and employers _____ labor

supply; demand

Patents on drugs to treat AIDS were removed in South Africa. How would the market for these drugs have been different if there had never been patents on drugs?

the drugs would not have been developed

an efficiency wage improves efficiency when:

the increase in worker effort and reduced turnover cover the cost of the higher wage

an employer should hire one more worker if

the marginal benefit exceeds the marginal cost

The Rational Rule for Society is that society should produce another unit of a good if:

the marginal social benefit exceeds the marginal social cost.

in a natural monopoly, what deters new sellers from entering the market?

the new seller would have higher costs than the existing larger seller in the market

imperfect competition stems from _____ and whether or not the product is _____.

the number of sellers; differentiated

The government increases the training requirements to obtain an electrician's license. What impact will this have in the labor market for electricians?

the supply of electricians will decrease, resulting in a higher wage and lower quantity of labor

The Rational Rule for Employers implies that they keep hiring until

the wage equals the marginal revenue product of the last worker hired.

Externalities tend to occur because decision makers consider _____ and do NOT consider _____.

their own costs and benefits; the effects of their actions on others

Which of the following is a characteristic of monopoly that is not present in other market structures?

there is only one seller

In a perfectly competitive labor market, employers will not pay less than the market wage because at a wage below the equilibrium

they would not be able to hire anyone

when making labor supply decisions, your options are

working or leisure

To avoid harm to society, the government often becomes the supplier of a good or service when the respective market

would be a natural monopoly, and the good or service is considered essential