Microeconomics Final

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which of the following events could increase the demand for labor

an increase in the marginal productivity of workers

each firm in a monopolistically competitive market

faces a downward sloping demand curve

based on the US data for 2008, the poverty rate is the highest for which group of people

female households, no spouse present

why does a typically monopolistically competitive firm face a downward sloping demand curve

firms have market power: they can raise prices without losing all of their customers.

US income data over the last 75 years suggests that the distribution of income

gradually became more equal until about 1970, then became less equal from 1970 to 2008

libertarians believe that

it is more important to evaluate the process by which economic outcomes are produced than the outcomes themselves

for a superstar to emerge, it must be the case that

it is possible to supply the good or service that the superstar produces at low cost to every customer

in the signaling theory of education

the worker signals to the employer that he is a valuable employee because he was willing to spend time to get an education

Even when allowed to collude, firms in an oligopoly may choose to cheat on their agreements with the rest of the cartel. Why?

they are seeking the most beneficial deal for themselves

the federal government sets the poverty line at roughly

three times the cost of providing an adequate diet

a downward sloping demand curve

is a feature of all monopolistically competitive firms.

the time spent by students in college

is an investment in human capital

in the United States, the earnings gap between workers with college degrees and workers with highschool degrees,

is evident and it has widened over the last several years

suppose the average value of in kind transfers increases by 2000 from 2010 to 2011. the poverty rate

is more likely to overstate the true level of poverty

the ownership of human capital

is not easily transferrable

Monopolistic competition is an inefficient market structure because

it has a deadweight lost, just as monopoly does

the prisoners' dilemma is an important game to study because

it identifies the fundamental difficulty I maintaining cooperative agreements

A concentration ratio

- measures the percentage of total output supplied by the four largest firms in the industry. - reflects the level of competition in an industry. - is related to the control that each firm has over price.

Assume the role of a critic of advertising. Describe the characteristics of advertising that reduce the effectiveness of markets and decrease the social welfare of society.

1) Deception: advertising can exaggerate products and make false claims 2) Manipulation: uses emotional manipulation such as fear or insecurity to encourage consumption (can lead to irrational decision making) 3) Monopolistic effects: large companies with large budgets can dominate markets and stifle competition. this can reduce innovation

Assume the role of a defender of advertising. Describe the characteristics of advertising that enhance the effectiveness of markets and increase the social welfare of society.

1) Tool of promotion 2) used as a means of communication with the targeted audience 3) has a wide variety of objectives: it aims at increasing sales, building brand image, and educating people and helps to form public relations

Based on the US income data from 2008, the bottom fifth of all families received approximately what percent of all income?

4 percent

of the total income earned in the US economy, approximately

75 percent is earned by workers and 25 percent is earned by owners of land and capital

which of the following statements is characteristic of utilitarianism

an extra dollar of income provides higher marginal utility to a poor person than to a rich person

human capital is

an important determinant of wages and it affects the production of goods and services

Which of the following statements is not correct? a. Monopolistic competition is similar to monopoly because in each market structurethe firm can charge a price above marginal costs. b. Monopolistic competition is similar to perfect competition because both marketstructures are characterized by free entry. c. Monopolistic competition is similar to oligopoly because both market structuresare characterized by barriers to entry. d. Monopolistic competition is similar to perfect competition because both marketstructures are characterized by many sellers

C

which of the following explains the rise in income inequality in the US from 1970 to 2008?

an increase in the demand for skilled labor

Fiona's hourly wage increases from 8 to 10. which of the following describes a consequence of the increase in Fiona's wage?

Fiona may choose to work fewer hours due to the increase in her wage

a compensating differential is

a difference in pay due to nonmonetary characteristics of jobs

firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

a highly differentiated consumer good

among the people who are characterized below, who has the highest opportunity cost of leisure

a medical doctor who earns $210 per hour and who sleeps during his leisure time

which of the following represents a problem in measuring inequality?

a normal life cycle pattern causes inequality in the income distribution but may not reflect inequality in living standards

firms that spend a large amount of money on advertising a particular product are likely to be providing consumers with

a signal of product quality

Which of the following is a commonly cited benefit of advertising a)can be a signal of the quality of a product b) impedes competition c) reduces the deadweight loss associated with monopolistic competition

a) can be a signal of the quality of a product

in a game theory, a Nash equilibrium is

all of the above are correct

A recent study of the determinants of wages for clerical staff at a state university found that years of school, experience, age and job characteristics only explained about one half of the difference in wages. describe other factors that my be important in explaining wages differences for clerical staff.

another factor is gender; men may choose this job more over women, and result in a wage gap

of the four countries, which has the highest degree of income inequality?

brazil

a profit maximizing firm in a monopolistically competitive market is characterized by which of the following a) marginal cost exceeds marginal revenue b) average revenue equals marginal cost c) price exceeds marginal cost d) all of the above are correct

c) price exceeds marginal cost

Which of the following is not an argument made by critics of advertising a) advertising manipulates peoples' tastes b) advertising impedes competition c) advertising promotes economies of scale d) advertising increases the perception of product differentiation

c) promotes economies of scale

competitive firms that maximize profits will hire workers until the value of the marginal product of labor

equals the wage

bill and ted went to school at the same time. each graduated with an associates degree. they have received similar performance evaluations. bills employer is not a good business manager, and the bookkeeper embezzled money. because of the loss, the employees didn't receive raises. ted's employer is savvy. if ted has higher earnings than bill, the difference is most likely a function of

chance

what causes the labor demand curve to shift?

changed in productivity and changes in output prices

economic mobility in the US is

common. fewer than 3 percent of poor families remain poor for 8 or more years

the Sherman antitrust act prohibits price fixing in the sense that

competing executives cannot even talk about fixing prices

Which of the following pairs illustrates the two extreme examples of market structures?

competition and monopoly

In a long run equilibrium, price is equal to average total cost. This statement applies to

competitive and monopolistically competitive markets, but not to monopolies

A distinguishing feature of an oligopolistic industry is the tension between

cooperation and self interest

if hiring more workers results in each additional worker contributing successively smaller amounts of output, then which of the following is present

diminishing marginal product

That some schools direct females away from science and math courses is evidence of

discrimination that occurs prior to people entering the labor market

a signaling theory of education suggests that

education does not necessarily increase productivity

certain factors that are probably important in determining wages are nevertheless difficult to measure. consequently, labor economists find those factors difficult to incorporate into their studies of labor markets and wages. those factors include

effort and natural ability

A firm that practices resale price maintenance

has no incentive to reduce competition between its retailers. resale price maintenance can lead to more service

if a worker is indifferent between a job with a wage of 12 per hour and a job of 15 per hour, then

higher paying job has a compensating wage differential of 3 per hour

the accumulation of investments in people such as education and on the job training is known as

human capital

the beauty premium can be explained by the fact that

in some occupations, physical attractiveness may enhance the value of their marginal product

in the prisoners' dilemma game with bonnie and Clyde as the players, the likely outcome is one

in which both bonnie and Clyde confess

when the government taxes income as part of a redistribution program,

incentives to earn income are diminished

the poverty rate is based on a family's

income only

immigration of workers into the us is often an important source of

increase in the supply of labor in the US

the study by cox and alm found

inequality in consumption is much smaller than inequality in annual income

in the parable of the leaky bucket, a fundamental problem with government redistribution programs is identified. as long as the government only has "leaky buckets" at its disposal,

it should not try to reach complete equality in income

liberalism is the political philosophy espoused by

john rawls

which of the following is an example of a factor of production

land

the political philosophy that views the redistribution of income as a form of social insurance is

liberalism

equality of opportunities is more important than equality of incomes. this statement would be most likely attributed to which political philosophy?

libertarianism

when a market is monopolistically competitive, the typical firm in the market can earn

losses in the short run and zero profit in the long run

Monopolistically competitive firms have excess capacity. To maximize profits, firm will

maintain the excess capacity

a monopolistically competitive industry is characterized by

many firms selling products that are similar but not identical

liberalism suggests that public policies should aim to

maximize the well being of the worst-off person in society

economic mobility refers to the

movement of people among income classes

which of the following is an example of a monopolistically competitive industry? -computer operating systems -tennis balls -movies -cable television

movies

Two bottles of body wash sit side-by-side in a grocery store: Olay (a brand name) sells for $6.00, while Up and Up (not a brand name) sells for $3.00. Even defenders of brand names would have to admit that

none of the above

the marginal product of labor is defined as the change in

output per additional unit of labor

Which of the following graphs depicts a short run equilibrium that will encourage the entry of other firms into a monopolistic competitive industry?

panel c

a family's ability to buy goods and services depends largely on the family's

permanent income

if a market is a duopoly and additional firms enter and do not cooperate, then

price falls and quantity rises

when we compare the income distribution of the US to those of other countries, we find that the US

ranks around the middle group

Like monopolists, oligopolists are aware that an increase in the quantity of output always

reduces the price of their product

value of marginal product is defined as the additional

revenue earned from hiring one more factor of production

the human capital theory explanation for why people invest in education has been challenged by a theory that suggests

schooling acts only as a signal of ability

List five goods that are likely sold in a monopolistically competitive market

soap, hamburgers, jeans, shoes, coffee shops

a utilitarian government has to balance the gains from greater income equality against the losses from distorted work incentives. to maximize total utility, therefore, the government

stops short of a fully egalitarian society

economists have proposed which of the following hypotheses to explain the rising wage gap between skilled and unskilled workers

technological change

the most popular movie starts have high income for a number of reasons. one such reason is

the ability for almost everyone to enjoy movies at a relatively low cost

factor markets are different from product markets in an important way because

the demand for a factor of production is a derived demand

a college degree makes a person more productive according to

the human capital but not the signaling theory of education

libertarianism identifies a redistribution of income role for government when

the income distribution is altered by illegal means (theft)

in markets characterized by oligopoly,

the oligopolists earn the highest profit when they cooperate and behave like a monopolist

the poverty rate is

the percentage of the population whose family income falls below a specified level

if a person can prove that she was damaged by an illegal arrangement to restrain trade, that person can sue and recover

three times the damages she sustained, as provided for in the Clayton act

suppose the market for labor is initially in equilibrium. an increase in immigration will cause the equilibrium wage

to fall and the equilibrium quantity of labor to rise

daryn is raking leaves to earn money for his university's economics club. in the first hour, he rakes 8 bags. in the second hour, he rakes 6. if he earns $8 per hour, the value of the marginal product of the second hour of labor is $48.

true

higher levels of human capital are correlated with higher earnings because firms are willing to pay more for better educated workers who have higher marginal productivities.

true

in a competitive market, strategic interactions among the firms are not important

true

land, labor and capital are examples of factors of production

true

monopolistically competitive firms, like monopoly firms, maximize their profits by charging a price that exceeds marginal cost

true

the fact that doctors are paid more than economists is an example of compensating differential.

true

from society's standpoint, cooperation among oligopolists is

undesirable because it leads to output levels that are too low and prices that are too high

Jose receives a pay raise at his part time job from 9 to 11 per hour. he used to work 12 hours per week but now he decides to work 15 hours per week. for this price range, his labor supply curve is

upward sloping

which of the following statements is correct

when oligopoly firms collude, they are behaving as a cartel

the labor supply curve is fundamentally a representation of the trade off people face between which of the following

work and leisure


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