ECON Final

(Figure: Profit Margin) What is the profit margin for this firm if it produces a quantity of six?

$7-$4=$3

Suppose that when a platinum-mining firm hires one, two, three, four, or five workers, the corresponding total output levels are 10, 15, 19, 22, and 24 tons of platinum, respectively. The marginal product of labor of the fourth worker is _____ tons of platinum.

3

Moshe participates in competitive car building, a series of judged contests that take place throughout the world each year, where competitors present "new" cars they've constructed of discarded car parts they gather from car repair shops and junkyards. To participate in the sport, Moshe must take time away from his regular job, sacrificing the hourly wage he earns for each hour that he's away from it. He also pays an assistant an hourly wage to help gather materials, and he assembles the cars in a rented garage. Moshe's "accounting profit" can be calculated as:

Moshe's total winnings minus the wages he pays his assistant minus the rental fee for the garage.

Which factor will NOT cause an increase in the supply of Rice Krispies? -an increase in the price of Rice Krispies -a cost-saving improvement in the technology of cereal production -a reduction in the price of sugar -expectations among producers that the price of Rice Krispies will fall in the future

an increase in the price of Rice Krispies

A school principal strives to motivate teachers to work hard and be effective by stressing to them the satisfaction they can gain from knowing that they can have an impact for good on the next generation. The principal is using _____ to get teachers to provide students with a high-quality education.

intrinsic motivation

If quantity demanded responds substantially to a relatively small change in price, demand is:

price-elastic

Junko's car dealership has been suffering from dust on the cars in its lot ever since Mak opened his bakery nearby. The bakery's flour deliveries send waves of dust down the block. Junko offers to cover half of the cost of Mak adding a shelter for his delivery area to reduce the blowing of flour dust toward the dealership. This is an example of reducing a negative externality through:

private bargaining

Waterworks Irrigation was a startup that was open for only one year of operation. During that year, it collected $175,000 in revenue and spent $50,000 on trucks, irrigation supplies, employees, and utilities. Instead of buying bonds and earning a 10% annual rate of return, the owner of the firm, Cosmo, spent $100,000 of his own money to buy an office building and set up the office, which he later sold at the end of the year for $100,000. The firm's economic profit is:

$115,000

(Scenario: Jillian's Cupcake Shop) Use Scenario: Jillian's Cupcake Shop. Scenario: Jillian's Cupcake Shop Jillian runs a cupcake shop where she sells cupcakes for $1 each. She employs five people, each of whom worked a total of 500 hours last year; she paid them $10 per hour. Her costs of equipment and raw materials add up to $75,000. Her business ability is legendary, and other companies have offered to pay Jillian $100,000 to come to work for them. She also knows she could sell her cupcake shop for $150,000. The bank in town pays an annual interest rate of 3% on all funds deposited with it. Jillian's implicit opportunity and explicit financial costs are:

$204,500

(Figure: Market) The graph shows the market for snack-sized bags of potato chips. The original equilibrium price is 60 cents. A tax is then imposed on buyers. After implementation of the tax, sellers receive _____ cents per unit of the product.

58

Which is NOT one of the three steps to take in segmenting customers into groups? -Divide the consumers into groups whose demand differs. -Charge higher prices to groups with more elastic demand. -Give discounts to chosen groups based on identifiable characteristics. -Base discounts on characteristics that are hard to change.

Charge higher prices to groups with more elastic demand.

An intern at Purell determines that, of the four options, graph C BEST represents the market demand curve for hand sanitizer at the beginning of the coronavirus pandemic.

Demand for hand sanitizer appears to be: inelastic

Ragnar owns a cheese shop in Carmel, California, and notices that most of his sales go to tourists rather than locals. How might Ragnar raise his profits?

Give a "local discount" to buyers who can establish local residency by presenting, for example, a driver's license.

(Figure: Four sample demands) A recent article published in the Journal of the American Dental Association discussed the impact of the Great Recession of 2007-2009 on the demand for dentistry in the United States. Which graph illustrates the likely impact of the Great Recession on this market?

Graph A

(Figure: Four sample demands) Which graph illustrates what will occur in the market for printing paper if the price of printing paper rises?

Graph C

Ari owns a hair salon in a small city. Which is NOT an effect that the opening of new hair salons in her city will have on her salon? -Its profit will decrease. -It will have less market power. -The quantity it sells will decrease. -Its cost curves will shift upward.

Its cost curves will shift upward.

(Figure: Market for Avocados) The figure shows the market for avocados. Which statement is correct about this market between points A and B?

The demand curve is inelastic, and thus the seller gains revenue by raising price from $1.50 to $1.75.

Which condition is NOT present in perfect competition? -All companies in the market sell identical goods. -All companies in the market sell a small share of the total market output. -There are many buyers and sellers in the market. -The product price varies across companies in the market.

The product price varies across companies in the market

With a fresh biomedical degree, you have a strong sense of how to design a drug that could modify and even reverse some of the symptoms of muscular dystrophy. You also have a vision of founding a company to develop it. A professor tells you that Johnson & Johnson, the world's largest pharma company in terms of revenue, is spending heavily to research possible muscular dystrophy treatments. Why might this information deter you from entering the market?

You're intimidated by the vast resources a competitor can bring to bear.

When price discrimination is practiced, a company sells _____ and charges _____ compared to what it would do without practicing price discrimination.

a larger output; a greater range of prices

If a price is above equilibrium, then:

a surplus exists

Obstacles that keep new firms out of a monopoly market are:

barriers to entry.

Harry is an engineering student taking an economics elective in his senior year. He has the option after college to work as a petroleum engineer or design rollercoasters. He is using concepts from his economics course to help with this decision. By considering that he cannot be both a petroleum engineer and a rollercoaster designer, he is acknowledging the dependencies that exist:

between his own choices

If a demand curve is downward sloping, a decrease in supply with no change in demand will lead to a(n) _____ in the equilibrium quantity and a(n) _____ in the equilibrium price.

decrease; increase

When nonwage worker benefits are increased at a company, the company's demand for labor will _____ because employees are _____ to the company.

decrease; more costly

Over the past several years, sushi has become increasingly popular among consumers. This means that the _____ has _____.

demand for sushi; increased

An industry with a large number of relatively small firms producing _____ products in a market with easy entry and exit is _____.

differentiated; monopolistically competitive

Imperfectly competitive sellers can earn higher profits because they:

face a less stark trade-off between higher prices and higher quantity

When you exit an arrivals terminal at an airport, you're greeted by a lineup of cars with drivers ready to take you to whatever destination you choose. While it's tempting to hop into one, telling the driver to take you to your destination at full price, if you instead walk to the far end of the terminal, wait in a line, and then wait for a car to arrive, you'll pay a significantly lower price. What hurdle must you clear to get this discount?

inconvenience

A labor demand curve may shift to the right because of a(n) _____ in the demand for _____.

increase; the good that the labor produces

A seller's incentive to increase production is measured by its:

marginal revenue curve

You are exploring your college town for the first time and are delighted to find a restaurant that serves gyros, your hometown favorite. Your arrival:

shifts the gyro market demand curve to the right.

The labor supply curve in a labor market:

slopes upward.

Your county requires that contractors build new homes in accordance with the National Electric Code, a standard for the safe installation of electrical wiring, to ensure safety. Under this solution to the problem of adverse selection of sellers:

the government outlaws low-quality electrical installations.

The Rational Rule for Employers says to hire more workers if:

the marginal revenue product is greater than (or equal to) the wage.

When you were earning $10 an hour, you signed up for 30 hours a week at work. When you got a raise to $15 an hour, you signed up for 40 hours a week. You are on the _____ part of your labor supply curve, and the _____ effect is larger than the _____ effect.

upward-sloping; substitution; income

Gino's Pizzeria bought a new delivery van last year for $10,000. It can now sell the van for $8,500. To buy this year's model of the same van, Gino would have to pay $11,000. What is the implicit opportunity cost of capital, assuming there is no interest to pay?

$1,500

Because of declining stocks in the Caspian Sea, Beluga caviar prices recently increased by a whopping 25% (to about $700 per ounce). As a result, purchases of Beluga caviar decreased by 5%. The price elasticity of demand for Beluga caviar is:

0.2

The price elasticity of supply for a good is 2 if a _____ in price leads to a 4% decrease in the quantity supplied.

2% decrease

The price of Tide falls, and the demand for Purex decreases. We can conclude that:

Tide and Purex are substitutes.

(Figure: Markets) In the set of figures shown,

figure D depicts a binding price floor.

If the demand for college education among low-income students is more elastic than the supply, monetary contributions of foundations and governments to education for low-income students would:

go mainly to educational institutions, which reduce the financial aid they would otherwise give low-income students.

A seller's demand curve will have a steep negative slope when the seller:

has a high level of market power

Lenore operates a tool rental firm and will incur an economic loss in the short run when she produces the profit-maximizing quantity and the price is:

less than average cost.

The percentage change in quantity demanded divided by the percentage change in price is the _____.

price elasticity of demand

You run an electronics store that sells, among other items, big screen televisions. As the market price of big screen televisions decreases, the:

quantity of big screen televisions supplied decreases.

An advantage of employment-based insurance to the individual is that it:

receives favorable tax treatment.

A book publisher offers Mariela a $30,000 advance to write a book about city politics in her home town of Chicago, a project expected to last one year. To write the book, Mariela would take an unpaid leave of absence from her job as a beat reporter, for which she earns $60,000 a year. To cover her living expenses, Mariela would take out a $30,000 loan at a 3% interest rate. The publisher projects that Mariela's book will earn $180,000 in revenue, of which Mariela would keep one-half ($90,000) minus the $30,000 advance she received. If the publisher's projections are correct, Mariela's economic profit for the year would be _____. If economic profit is Mariela's sole criterion for deciding whether to write the book, she should _____ the book.

$29,100; write

Which of these statements regarding fixed costs are correct? (i) They do not change with the level of production in the short run. (ii) They include variable costs. (iii) They are present even when the firm is producing zero units. (iv) They are irrelevant to marginal costs.

(i), (iii), and (iv)