MicroEcon Unit 5 Exam

The need to study economics would cease to exist if

there were enough resources to produce all the goods and services people would like to obtain

If a firm hires another worker and her marginal product of labor is 0 (zero), we know that the firm's total output is:

unchanged

The pay for journalists is quite varied. A top-tier journalist often receives a steady flow of assignments, such as two weekly columns, and so earns generous pay. A lower-tier journalist, however, often experiences sporadic work assignments with little to no pay. What economic theory explains this situation?

winner-take-all

All taxes create some deadweight loss except those on goods:

with a perfectly inelastic demand or supply.

The labor supply curve is given by the equation LS = 3W + 20 and the labor demand curve is given by the equation LD = 80 - 2W. The equilibrium wage in this labor market is:

$12

ECON-Jammin' has recently discovered that its fans are made up of two distinct groups, which they can easily distinguish. They have decided to utilize their economic knowledge and offer a high-priced ticket of $40 per person and a low-priced ticket of $20 per person. Based on this information, what is the net revenue earned by the sales of the high-priced ticket?

$300

When her income increases from $10,000 to $20,000, as shown in the accompanying table, Marguerite increases the quantity demanded from 3 to 7 rolls at a price of $3. From the midpoint method, income elasticity of demand for sushi is:

1.20

Use the following information to answer the questions that follow. Market for a new hardcover book: Demand: Qd = 325 - 8 P Supply: Qs = -60 + 3 P What would be the quantity demanded if a price ceiling is set at $50?

35

Peanut butter and jelly are complements. If a tax is imposed on peanut butter, how will that affect the market for jelly?

Demand for jelly will decrease along with the price.

Why would perfectly competitive industries advertise even though individual firms do not?

Even though the output of an individual firm would be considered homogeneous to other firms, the industry output would be differentiated (for example, Florida orange juice versus imports).

Suppose the printing press is invented. Which graph best depicts how this would affect the PPF?

Graph B

Assume that SkyMasters, Inc. follows the profit-maximizing rule and that the company charges a single price for skydiving. Which potential customer(s) will not purchase a skydiving experience?

Matt and Ivana

At the Kickin' Chicken Family Restaurant, which of the following menu items represents the company's attempt to price-discriminate?

The "chicken little tenders appetizer with fries" costs $8.99 while a "kickin' chicken tender basket with fries" costs $6.99; both have the same amount of tenders and fries

When supply is perfectly inelastic, the supply curve is:

Vertical

The opportunity cost to free trade is:

a gain of domestic jobs.

Mirabella Creations is a custom jewelry company that specializes in unique, handmade, wearable artwork. Each piece of jewelry offered for sale is made after an extensive customer consultation, which results in a one-of-a-kind piece of heirloom jewelry. To maximize profits, the firm owner should charge

a price that is close to each customer's willingness to pay

The following excerpt describes Qcue, a software-based dynamic pricing management company that has developed software to assist professional and collegiate sports teams increase their ticket sales by practicing near-perfect price discrimination.

airline tickets.

Which of the following situations would cause the demand curve to shift to the right?

an increase in the price of a substitute

Which of the following industries is most likely an oligopoly?

cellphone industry

The accompanying payoff matrix depicts the possible outcomes for two players involved in a game of Rock, Paper, Scissors. If a player receives a payoff of 1, the player wins; if the player receives a payoff of -1, the player loses; if both players receive 0 (zero), the players tie. Brian's optimal strategy is to:

choose rock with probability 0.33, paper with probability 0.33, and scissors with probability 0.33 because neither he nor Meg has a dominant strategy

A __________ agreement among rival firms will most likely specify the price each firm will charge and the quantity each firm will produce/sell.

collusive

The ability of one producer to produce a good at a lower opportunity cost than another producer is called:

comparative advantage.

Every year the U.S. sugar industry, which is dominated by only a few firms, spends millions of dollars lobbying members of Congress and contributing to their reelection campaigns. It does so for both Democrats and Republicans. One goal of these contributions is the preservation of the U.S. sugar quota, which limits the importation of less expensive sugar from other countries. Ultimately, all of these activities are motivated by a desire among U.S. sugar producers to:

keep their profits as high as possible.

As a college student, you realize that you have become an expert at playing video games. If you saw a commercial on TV seeking applications for video-game testers (your dream job), what would you expect the job to pay?

low wages because of compensating differentials

You have recently been trained as a highly specialized medical physician. There is only one hospital that needs your services. You can expect your wages to be __________ compared to what your wages would be in a situation of perfect competition

lower

From the accompanying table, we would expect that, for recreational skaters, the price elasticity of demand for ice skates between $10 and $20 to be ________ than that of hockey players because ________

more elastic; recreational skaters can substitute other activities

Timothy is trying to figure out what combination of bags of peanuts and bags of popcorn he should buy with his $13 budget. The price of peanuts is currently $5 per bag and the price of popcorn is currently $2 per bag. If Timothy's marginal utility from consuming his third bag of peanuts is 15 utils and his marginal utility from consuming his second bag of popcorn is 6 utils, Timothy should:

not change his consumption.

Kevin tells the manager at Moo's Ice Cream that he won't buy any ice cream cones costing more than $2, but he will buy a limitless number at any price less than $2. His price elasticity of demand for ice cream cones is

perfectly elastic.

Assume that the market for pencils is in equilibrium and that demand is very price elastic. The popularity of digital tablets and electronic pens increases and demand for pencils declines. The equilibrium change in quantity demanded is

relatively large

Which of the following characteristics best defines a common-resource good?

rival and nonexcludable

Oligopolistic markets are __________ because price is __________ marginal cost.

socially inefficient; greater than

Harnessing the benefits of competition, reducing trade barriers, and regulating markets are three:

solutions to the problems of monopoly.

One reason why the long-run supply curve may slope upward in a competitive market is that:

some resources necessary to produce the product may be available only in limited supplies

When a hurricane rips through Florida, the price of oranges rises because the:

supply curve shifts to the left.

Taxing goods with very inelastic demand generates less deadweight loss than taxing goods with very elastic demand because:

the change in consumer behavior is smaller.

Taxes will almost always cause consumer prices to increase. How much they increase depends on

the elasticities of supply and demand.

Consider the market for refined oil. In the market equilibrium,

the internal supply equals the internal demand.

According to the figure, the movement from point (4,3) to point A is a function of ____________, while the subsequent movement from point A to point (2,3) results from ____________.

the real-income effect alone; the substitution effect alone

For a market to be competitive:

each buyer and seller is small, relative to the whole market; no single decision-maker has any influence over the market price

One difference between implicit costs and explicit costs is that:

explicit costs are included in accounting profits, whereas implicit costs are not.

Donna owns a temp agency. She sees demand for her workers increase because firms prefer a more contingent workforce. The value of the marginal product of labor of her temps:

increases because the price of their services is higher.

When a competitive market becomes controlled by a monopoly, the price _________ and the output _________.

increases; decreases

What is Michael's opportunity cost of a painting?

2 sculptures

Use the following information to answer the questions that follow. Market for used cars: Demand: Qd = 154,000 - 86 P Supply: Qs = -100 + 14 P What would be the quantity supplied if a price floor is set at $100?

21,474

Which areas represent the amount of producer surplus lost due to the tax?

C + G

If attorneys can prove beyond a reasonable doubt that a merger between two major airlines lessens competition, then the merger likely violates the:

Clayton Act.

SkyMasters, Inc. has decided to charge two different prices, a high price and a low price, based on age. Which age group would pay the higher price?

Customers age 40 and over would pay more.

As the mayor of a local town, I have the power to repeal workplace safety laws. How would repealing all workplace safety laws affect the wages of construction workers building the local school?

It would increase wages because of more severe negative compensating differentials

Ireland's tax on plastic shopping bags successfully reduced consumer use of these bags because the

demand for plastic bags is very elastic.

If a firm's long-run average total costs increase as it increases its scale of production, the firm is experiencing

diseconomies of scale.