ECON 202 FINAL
Demand is perfectly inelastic. if the government levies a tax on customers what will be the tax incidence producers will bear ____ perfect of the tax burden
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Both competitive firms and monopolies produce at the level where marginal cost equals marginal revenue. Then, other things remaining the same, why is price lower in a competitive market than in a monopoly? A. Competitive markets face perfectly elastic demand and marginal revenue, while monopolies face downward-sloping demand and marginal revenue. B. A competitive market sets its price where marginal cost equals demand, while a monopolist sets its price where marginal cost equals marginal revenue. C. The government puts a cap on how much a competitive firm can charge, while a monopolist can charge any price it chooses. D. Competitive markets face perfectly inelastic demand and marginal revenue, while monopolies face perfectly elastic demand and marginal revenue.
A. Competitive markets face perfectly elastic demand and marginal revenue, while monopolies face downward-sloping demand and marginal revenue.
In the Dictator Game, the allocator decides how a certain sum of money is to be divided, and the recipient must accept whatever choice the allocator makes. Relative to when the allocator is anonymous, when the allocator instead sees the recipient, the allocator is more likely to ____________. A. divide the money equally due to social pressures. B. divide the money equally to avoid punishments. C. keep all the money to maximize his or her payoff. D. keep all the money due to altruism.
A. divide the money equally due to social pressures.
How is a monopolistically competitive market similar to a perfectly competitive market? A. There are no restrictions on the entry of new firms. B. Both have differentiated products with close substitutes. C. Producers with market power set their own prices. D. Both have homogeneous products with no close substitutes. Which of the following common features do monopolistically competitive markets and monopoliesshare? A. Firms face downward-sloping demand curves. B. Producers with no market power set their own prices. C. Barriers restrict new firms from entering. D. Consumers with market power set prices.
A. There are no restrictions on the entry of new firms. A. Firms face downward-sloping demand curves.
Why is national defense better off as a natural monopoly? A. Industries like national defense experience economies of scale since they have high fixed costs. Thus, it is cheaper to have a single firm provide a larger quantity. B. It experiences constant returns to scale since marginal costs are constant, allowing any number of providers to produce an efficient amount. C. It experiences diseconomies of scale since the marginal cost curve is upward-sloping, indicating that normal market forces break down and only one firm can profitably produce. D. It experiences constant returns to scale since it is sanctioned by the government, allowing a single provider to charge a lower price. An example of an industry or service that is a natural monopoly is ____________. A. landscapers. B. tax preparation. C. fast−food restaurants. D. city drinking water.
A. Industries like national defense experience economies of scale since they have high fixed costs. Thus, it is cheaper to have a single firm provide a larger quantity. D. city drinking water
Consider a trust game between two players. Suppose the players care only about their own payoffs. The payoffs are such that, in equilibrium, the players do not trust each other, leading to a socially inefficient equilibrium. How could the game be changed so that in equilibrium the players do trust one another? A. Convince the other player that you care only about your own payoff. B. Allow the players to take revenge. C. Play the game only once. D. Ensure that cheating cannot be detected.
B. Allow the players to take revenge.
Assume that a charity hired you to improve its results on donations. You decide to mail letters asking for donations. You use three different types of letters: Letter A: Control—standard letter asking for money. Letter B: "Once and Done"—standard letter but with a statement at the front noting "Make one gift now and we'll never ask for another donation again!" Letter C: "Soft Once and Done"—an upfront statement of "It only takes one gift to save a child's lifeforever." The results are as follows: Letter B raises much more money than Letter A. In most cases, it raises at least twice the money. Letter C raises more money than Letter A. Letter B raises about 50 percent more money than Letter C. Of the concepts we have discussed in the chapter (social pressure, altruism, and herding), which do you think is most responsible for the success of Letter B? A. Herding, because its recipients are conforming to expectations. B. Impure altruism, because its recipients received something in return. C. Pure altruism, because its recipients believed their donations did the most good. D. Social pressure, because its recipients were the most likely to donate.
B. Impure altruism, because its recipients received something in return.
Which of the following best describes the relationship between price (P), marginal revenue (MR), and total revenue (TR) for amonopolist? A. When MR is rising, TR is rising, and when MR is falling, TR is falling. B. When MR is positive, TR is rising, and when MR is negative, TR is falling. C. As MR falls, TR rises. D. They are all equal for a monopolist.
B. When MR is positive, TR is rising, and when MR is negative, TR is falling.
In a zero-sum game the players are better off by ________. A. choosing a pure strategy because it results in higher predictability B. choosing a mixed strategy because it enables randomization C. not choosing pure strategy because it gives lower payoffs to both the players D. not choosing a mixed strategy because the sum of the payoffs is zero Which of the following is not an example of a zero-sum game? (Check all that apply.) A. A game of chess between Magnus Carlsen and Viswanathan Anand. B. A brutal and terrible war between two nations that significantly impaired civil life. C. Jackson and David bet with each other on a game of baseball. D. A trade agreement that increases gains for both of the nations involved.
B. choosing a mixed strategy because it enables randomization B and D
Which of the following statements are true after considering the given graph? (Check all that apply.) A. The marginal revenue of the good is zero at a quantity of 800 million. B. The marginal revenue of the good is positive for a quantity below 400 million. C. The total revenue of the good is maximized at a quantity of 400 million. D. The total revenue of the good is negative for any quantity above 400 million. From the given graph, it is observed that at $4 the total revenue of the good is maximized. Therefore, price elasticity of demand at a price above $4 is ______ At $4, the price elasticity of demand for the good is ______.
B. The marginal revenue of the good is positive for a quantity below 400 million. C. The total revenue of the good is maximized at a quantity of 400 million. elastic one
Consider a three-person version of the ultimatum game: The Responder does not receive any money but instead decides whether to accept on behalf of a third-party bystander. Otherwise the structure is like the ultimatum game in which the Proposer first decides how to split $10.00. Suppose that in this version you observe that the Responder typically only accepts equal splits of $5.00 each and typically rejects all other offers. Given this information, which of the following is true of the behavior of the Responder when faced with an offer of an even split? A. The Responder has a weak desire to punish unfair offers. B. The Responder is indifferent between accepting and rejecting the offer. C. The Responder accepts the offer as she values fairness highly. D. The Responder has strong desire to help others receive higher payoffs.
C. The Responder accepts the offer as she values fairness highly.
Oligopolistic firms that sell differentiated products determine their prices when prices are __________. A. identified independently by each firm from the demand curve for its product. B. agreed upon by firms jointly conspiring to maximize profits. C. determined simultaneously by the firms as best responses given other firm prices. D. set equal to marginal cost for each firm.
C. determined simultaneously by the firms as best responses given other firm prices.
Is a player's best response in a game the same as his dominant strategy? A. Yes, if a player has a dominant strategy, then it is his best response, and every best response is always a dominant strategy. B. No, the key concept of game theory is finding a best response in each game, so that each best response leads to a Nash equilibrium. C. Yes, if a player's best responses depend on the strategy choices of other players, then aplayer's best response will be the same as his dominant strategy. D. Not necessarily. If a player has a dominant strategy, then it is his best response; however, every best response is not always a dominant strategy.
D. Not necessarily. If a player has a dominant strategy, then it is his best response; however, every best response is not always a dominant strategy.
Although there are many examples of game theory in the real world, how well do you think specifics like payoff matrices, Nash equilibrium, and dominant strategies translate to reality? Which of the following are potential reasons game theory differs from reality? (Check all that apply.) A. People are not driven by self-interested payoffs in general. B. The formulator the Nash equilibrium, John Nash, eventually became mentally unbalanced. C. Game theory is just an abstraction and cannot represent reality. D. One player may be more cunning, wiser, or more experienced than another. E. Payoffs are determined by the attitudes and feelings of individuals as well as by their monetary returns.
D. One player may be more cunning, wiser, or more experienced than another. E. Payoffs are determined by the attitudes and feelings of individuals as well as by their monetary returns.
A dominant strategy equilibrium exists if: A. the outcome is in the best interest of both players. B. the payoff for each choice is equal. C. the payoff for each player is equal. D. the relevant strategy for each player is a dominant strategy.
D. the relevant strategy for each player is a dominant strategy.
Both monopolies and monopolistically competitive firms set marginal revenue equal to marginal cost to maximize profit. Given the same cost curves, would you expect prices to be higher in a monopoly or a monopolistically competitive market? A. Monopolistically competitive market, because demand is greater. B. Monopolistically competitive market, because consumers are less sensitive to price. C. Monopolistically competitive market, because it is a price taker. D. Monopoly, because its demand is more inelastic.
D. Monopoly, because its demand is more inelastic.
Monopolistically competitive firms earn zero economic profit in the long run as do perfectly competitive firms. Does this mean that total surplus is maximized in a monopolistically competitive market? A. Yes, because production occurs at the minimum average total cost. B. No, because firms produce where marginal cost equals marginal revenue. C. No, because firms increase production to gain market share. D. No, because firms produce where price is greater than marginal cost.
D. No, because firms produce where price is greater than marginal cost.
Which of the following is a key difference between perfect competition and monopoly? A. With monopoly, social surplus is always maximized. B. In perfect competition, no one firm can influence price, but with monopoly, a single seller sets the price. C. In perfect competition, there are high entry barriers, but with monopoly, barriers to entry are low. D. Monopolies produce identical goods, while goods produced by perfectly competitive firms are slightly differentiated.
In perfect competition, no one firm can influence price, but with monopoly, a single seller sets the price.
which method is not a recommenced approach supported by externality theory to deal with this problem a. nonprofit intervention b. government regulations c. a government-imposed tax d. probate bargaining
a. nonprofit intervention
According to analysis by Charles Clotfelter, the relationship between tax rates and charitable giving is an ________ correlation. This is because as tax rates _______ the cost of charitable giving increases.
an inverse increase
Suppose the government grants an individual or company the exclusive right to intellectual property. In this case, the government is granting a____________ Which of the following is not likely covered by a copyright? A. A piece of poetry. B. A new book. C. A new drug. D. Architectural drawings.
copyright C. A new drug
terms of trade is the... terms of trade are determined...
exchange rate of good for goods on the basis of opportunity costs
the largest source of revenue for the federal government is the source of revenue for state and cola government as are ______ those of the federal government which of the following is the largest source of revenue for state governments
individual income taxes different from miscellaneous taxes and fees, such as tolls on roads and public transportations tickets
many cities tax or ban plastic grocery bags. the rationale for these taxes and bans is an externalities argument: plastic bags are an eyesore, take up space in landfills, and damage first, birds, and other. wildlife. this outcome _____ socially efficient now assume consumers are forced to pay a tax on each plastic bag used equal to the negative externality. shift d/s curve this outcome ________ socially efficient
is not shift demand back 2.5 on y and 3 on x is
the european union banned certain pesticidies for two years after studies found links between the use of these insecticides and a decline in the bee population. this outcome ________ socially efficient shift d/s curve this outcome ______ socially efficient
is not shift supply back 3 on both x and y is
which of the following is not an externality
jordan has lung cancer from smoking cigarettes
negative externalities cause a _________ shift of the supply curve and a ______ in market quantity recognizing this deadweight loss _________ result in elimination of the externality
leftward, a decrease will not
you have just been appointed as the county commissioner of hazard county. you realize that you should learn some economic concepts that will be useful to you in your new job. in a free market, efficient firms will produce where _________ equals _________ _________ is maximized when firms produce at equilibrium in a free market which of the following is not an example of when the free market fails to generate maximum social surplus a. public goods b. common pool resources c. externalities d. private goods
market cost = market revenue total surplus d
absolute advantage is the ability of an individual, firm, or country to produce
more of a certain good than other competing producers, given the same number of resources
the graph shows the production possibility curves for william and michael. based on the graph, william has the comparative advantage in producing _______. His opportunity cost of producing this good is _____ of the other good. which of the following statements will be true for william and michael in the above scenario? a. each would specialize in the good he has a comparative advantage in producing b. william has an absolute advantage in both goods c. they will carry out trade to be better off. d. they will not specialize in the good they have a comparative advantage in producing
refrigerators , 3.4 A and C
a production function shows according the the law of diminishing returns
the number of workers employed and the corresponding output levels that will be produced the marginal productivity of an addition unit of labor eventually decreases as the quantity of labor increases
in a competitive labor market, the profit maximizing number of works that a firm will hire occurs where the
value of marginal product of labor is equal to the market wage
Tax incidence refers to is the entire burden of the tax always borne by those on whom it is imposed?
who bears the tax burden not necessarily, since the burden of the tax depends on price elasticity
