Econ study set 2
If a monopolist increases sales from 10 to 11 by lowering its price from $40 to $38, its marginal revenue is: $2. $18. $400. $418.
$18.
Refer to the graph shown. The equilibrium price for the monopolistically competitive firm represented is: $4. $6. $7. $10.
$7.
If increasing the hourly wage rate from $10 to $15 causes a worker to work 50 hours rather than 40, the worker's elasticity of labor supply is equal to: 0.05 1.8 0.50 2.
0.50
The poorest 50 percent of the families earn: 6 percent of the income. 19 percent of the income. 36 percent of the income. 64 percent of the income.
19 percent of the income.
Refer to the graph shown. If the firm maximizes profit, its daily output will be: 10 units. 20 units. 30 units. 45 units
30 units.
The 20 percent of families with the highest incomes earn what percentage of total income: 54.7 percent of the income. 6.6 percent of the income. 45.3 percent of the income. 32.6 percent of the income.
45.3 percent of the income.
The Gini coefficient is calculated as area: B divided by area A. A divided by area A + B. A divided by area B. A + B divided by area B.
A divided by area A + B.
In which firm would you expect the monitoring problem to be less of a problem? General Motors Amazon.com A small CPA firm Utah State University
A small CPA firm
The rise of which company helped lead to the Robinson-Patman Act? Wal-Mart Standard Oil A&P MicroSoft
A&P
According to the video we watched regarding private equity firm Bain Capital? Private equity is not necessarily about creating jobs. The point of private equity is to make a profit for investors. Private equity is good for the economy. All of the above are correct.
All of the above are correct.
Which of the following is (are) problems with government redistributing income? It requires a larger government and its involvement in lives of individuals. It can change the incentives faced by and the behavior of individuals in ways that hurt the individuals the government programs were designed to help. It can result in class "warfare" politics and social disharmony. All the above are correct.
All the above are correct.
For years, Amazon.com, which began as an Internet bookseller, had no profits and was incurring annual losses. Still, the stock market valued the company very highly. One reason for this was that investors believed that: Amazon.com was in a winner-takes-all market. Amazon.com faced fierce foreign competition. the Internet was a perfectly competitive market. on the Internet brand recognition is unimportant.
Amazon.com was in a winner-takes-all market.
Which of the following will shift the labor demand curve to the right? An increase in the price of a competing, substitute input A reduction in the demand for the output produced by labor A reduction in the wage rate An increase in the use of factory automation
An increase in the price of a competing, substitute input
The country with the most unequal distribution of income is: Sweden. Taiwan. the United States. Brazil.
Brazil.
In which of the following models of firm behavior do firms make strategic pricing decisions and also charge a perfectly competitive price? Cartel model of oligopoly Contestable market model of oligopoly Perfectly competitive model Monopoly model
Contestable market model of oligopoly
Refer to the graph shown. The areas that represent the net gain to society of eliminating the monopoly are: A and B. A and C. D and B. D and C.
D and B.
Sugar farmers have attempted to escape the effects of competition by? Lobbying government to impose restrictions on competition Innovation Collusion All of the above
Lobbying government to impose restrictions on competition
Refer to the graph shown. An unregulated, profit-maximizing monopolist will charge a price of: P1 and produce Q1 units of output. P2 and produce Q2 units of output. P3 and produce Q3 units of output. P3 and produce Q1 units of output.
P1 and produce Q1 units of output.
Refer to the graph shown. The profit-maximizing monopolist would sell its output at price: P1. P2. P3. P4.
P2.
In which markets will firms probably have the most difficulty recouping their investment in technological innovations? Monopoly markets Oligopoly markets Perfectly competitive and monopolistically competitive marketsAll types of markets
Perfectly competitive and monopolistically competitive markets
Which of the following is the best example of a network externality? Pollution Parks Museums The Internet
The Internet
Which of the following is not one of the side effects economists have found in programs to redistribute income? The incentive effects of a tax may result in a switch from labor to leisure. The effects of taxes may include attempts to avoid or evade taxes, leading to a decrease in measured income. The incentive effects of distributing money may cause people to make themselves look more needy than they really are. The incentive effects of distributing money may cause people to avoid government assistance programs.
The incentive effects of distributing money may cause people to avoid government assistance programs.
Which of the following factors most likely would explain why a U.S. company would choose to operate in the United States despite much lower wages in Mexico? The low cost of transportation between the two countries The lower productivity of Mexican workers The absence of significant trade barriers The presence of many Japanese companies in Mexico
The lower productivity of Mexican workers
Which of the following counties are among the 10 richest counties in the U.S. in terms of household income? Those surrounding Washington, D.C. Those in Northern Utah Those surrounding Dallas, Texas. Those surrounding Los Angeles, California.
Those surrounding Washington, D.C.
Which of the following is an argument in favor of judging competitiveness by performance rather than structure? Judgment by performance requires that each action of a firm be analyzed on a case-by-case basis, which is very time-consuming and expensive. Under the judgment by structure criterion, a firm may be breaking the law if it does what it's supposed to be doing: producing the best product it can at the lowest cost. Courts know little economic theory. Structure can be a predictor of future performance.
Under the judgment by structure criterion, a firm may be breaking the law if it does what it's supposed to be doing: producing the best
Wyoming has a right-to-work law that prohibits requiring employees to join a union once they are hired. What is another name for what the Wyoming law prohibits? Union shop Closed shop Open shop Labor shop
Union shop (firms in which all workers must join a union) This is not the right answer just context: closed shop is a firm where unions control the hiring.
eattle has a "living wage" ordinance that established minimum wage of $12.50 an hour, which will gradually rise to $15.00. How would most economists probably view this ordinance? It will help all workers in Seattle. The city will benefit because more people will move to Seattle. All people looking for work will be helped, but consumers will be hurt. Workers who were making $8.00 per hour and keep their jobs will benefit, but some workers will lose their jobs and be hurt.
Workers who were making $8.00 per hour and keep their jobs will benefit, but some workers will lose their jobs and be hurt.
A Lorenz curve that becomes less bowed out implies: a change in income distribution toward more inequality. no change in income distribution. a change in income distribution toward more equality. an increase in poverty.
a change in income distribution toward more equality.
A cartel is: legal in the United States as long as collusion is explicit. a group of firms that collude to maximize group profits. found in monopolistically competitive industries. a group of fringe firms.
a group of firms that collude to maximize group profits.
A monopoly firm is different from a competitive firm in that: there are many substitutes for a monopolist's product whereas there are no substitutes for a competitive firm's product. a monopolist's demand curve is perfectly inelastic whereas a competitive firm's demand curve is perfectly elastic. a monopolist can influence market price whereas a competitive firm cannot. a competitive firm has a U-shaped average cost curve whereas a monopolist does not.
a monopolist can influence market price whereas a competitive firm cannot.
In a market there are many firms selling differentiated products. This market is: a competitive market. a monopolistically competitive market. an oligopolistic market. a monopoly.
a monopolistically competitive market.
One way firms protect their monopoly is: raising prices. producing items that can be copied easily. advertising. taking advantage of short-run profits.
advertising.
1. It is not uncommon for businesses to pay contingent bonuses that depend on performance. Contingent bonuses are an example of what the text calls: X-inefficiency. an incentive-compatible contract. a winner-take-all contract. a network externality.
an incentive-compatible contract.
Suppose both wages and employment increase. These changes most likely were caused by an increase in labor demand. an increase in labor supply. a decrease in labor demand. a decrease in labor supply.
an increase in labor demand.
A market has the following characteristics: There is strategic pricing, output is somewhat restricted, there is interdependent decision making, and some long-run economic profits are possible. This market is: a monopoly. an oligopoly. monopolistically competitive. perfectly competitive.
an oligopoly.
A higher tax rate could result in lower tax revenues if: attempts to avoid or evade taxes increase. individuals switch from leisure to labor. fewer people qualify for government assistance. the tax has no incentive effects.
attempts to avoid or evade taxes increase.
If government regulators want a natural monopolist to earn only zero economic profit, they will set price equal to: marginal cost (MC). average variable cost (AVC). average fixed cost (AFC). average total cost (ATC).
average total cost (ATC)
According to contestable market theory: barriers to entry are much more important than market structure in determining the degree of price competition in an industry. barriers to entry are much less important than market structure in determining the degree of price competition in an industry. barriers to entry and market structure are both important in determining the degree of price competition in an industry. neither barriers to entry nor market structure affects the degree of price competition in an industry.
barriers to entry are much more important than market structure in determining the degree of price competition in an industry.
A curve that shows the wealth distribution for the United States would be: equal to the Lorenz curve for income. below the Lorenz curve for income. above the Lorenz curve for income. above the diagonal line.
below the Lorenz curve for income.
If the demand for milk increases this will: increase the wage of milkers. decrease the supply of milkers. increase the demand for milkers. both A and C are correct.
both A and C are correct.
The trend toward greater inequality that began in the 1970s can be contributed to: a movement toward a more progressive tax system. globalization. illegal immigration. both B and C are correct.
both B and C are correct.
Government has: deregulated the electricity industry because domestic producers are facing fierce international competition. deregulated the entire electricity industry because the bureaucratic costs of maintaining the regulations became too high broken the electricity industry into subindustries and deregulated the portions that do not exhibit economies of scale. broken the electricity industry into subindustries and deregulated the portions that exhibit economies of scale.
broken the electricity industry into subindustries and deregulated the portions that do not exhibit economies of scale.
The higher the concentration ratio in a given industry, the: closer the industry is to a perfectly competitive market structure. larger the market shares of the smallest four firms in the industry. closer the industry is to an oligopolistic or monopolistic type of market structure. smaller the market shares of the largest four firms in the industry.
closer the industry is to a perfectly competitive market structure.
If the demand for dairy products decreases, the demand for milkers probably will: not be affected. increase. decrease .change in a manner that cannot be predicted.
decrease
If there are a number of inexpensive substitutes for labor in the production process, labor: demand will most likely be elastic. demand will most likely be inelastic. supply will most likely be elastic. supply will most likely be inelastic.
demand will most likely be elastic. (substitutes = perfect competition = elasticity)
Refer to the graph shown. If the firm is attempting to maximize profit, it will: earn just normal profits, that is, zero economic profits. earn economic profits. incur a loss. make enough to cover its variable costs but not its fixed costs.
earn economic profits.
Lazy monopolists are characterized by the tendency to: maximize profits at the cost of losing market share. pay too much to protect their monopoly positions. earn enough profits to keep their shareholders happy without trying too hard to hold costs down. minimize losses so that the dividends of shareholders are maximized.
earn enough profits to keep their shareholders happy without trying too hard to hold costs down.
A monitoring problem most likely will occur when: employees' self-interest is the same as the firm's interest. employees' self-interest differs from the firm's interest. the owner makes all the decisions for the business. a company is employee-owned.
employees' self-interest differs from the firm's interest.
A monitoring problem most likely will occur when: employees' self-interest is the same as the firm's interest. employees' self-interest differs from the firm's interest. the owner makes all the decisions for the business. a company is employee-owned.
employees' self-interest differs from the firm's interest.
For a cartel to be successful in increasing economic profits for its members: entry of new firms must be blocked. price must be set equal to marginal cost. individual firms must be encouraged to adjust output so as to maximize their own profits at the cartel price. price must be set equal to average total cost.
entry of new firms must be blocked.
Refer to the graph shown. If the government's goal is to eliminate the welfare costs of monopoly, it will: establish a price ceiling at P3. establish a price ceiling at P2. establish a price floor at P1. not attempt to control price.
establish a price ceiling at P2.
In the Justice Department's antitrust case against Microsoft, the Court ruled that there was: insufficient evidence to reach a ruling. no evidence of unfair business practices, and Microsoft was not a monopoly. evidence of unfair business practices, and Microsoft was a monopoly. evidence of unfair business practices, but Microsoft was not a monopoly.
evidence of unfair business practices, and Microsoft was a monopoly
The price at which a monopolistically competitive firm sells its product: exceeds the marginal cost of production. produces economic profits in both the long run and the short run. equals the marginal cost of production. is less than the marginal cost of production.
exceeds the marginal cost of production.
Under monopolistic competition, there are: few barriers to entry. only a small number of sellers in the market. significant barriers to entry. only a few buyers in the market.
few barriers to entry.
Oligopoly is characterized by: no barriers to entry. low market concentration. inability to set price. few sellers.
few sellers.
When a monopolistically competitive industry is in long-run equilibrium: firms earn economic profits. firms earn zero economic profits. price equals minimum average total cost. price equals marginal cost.
firms earn zero economic profits.
In the case of a natural monopoly, as the number of firms in the industry increases, the average cost of producing a: fixed number of units decreases. fixed number of units stays the same. variable number of units stays the same. fixed number of units increases.
fixed number of units increases.
Opening an industry to international competition tends to: increase X-inefficiency. force lazy monopolists to increase efficiency. increase the incidence of lazy monopolists. raise a monopolist's profit as the price is driven up.
force lazy monopolists to increase efficiency.
A four-firm concentration ratio of 75 tells you that the top: firm in the industry produces 75 percent of the industry's output. four firms in the industry produce 75 percent of the industry's output. four firms in the industry produce 25 percent of the industry's output. four firms in the industry earn 75 percent of the industry's profits.
four firms in the industry produce 75 percent of the industry's output.
If an industry has exactly 20 firms with identical sales, the Herfindahl index must be: less than 100. greater than 100 but less than 200. greater than 200 but less than 400. greater than 400.
greater than 400.
Historically, technology has: improved and the demand for labor has decreased as output has increased. improved and the demand for labor has increased as output has increased. worsened and the demand for labor has decreased as output has decreased. worsened and the demand for labor has increased as output has decreased.
improved and the demand for labor has increased as output has increased.
If the government simultaneously increases marginal income tax rates and unemployment compensation, the incentive to work will increase. incentive to work will diminish. incentive to work will not change. effect on the incentive to work cannot be predicted.
incentive to work will diminish.
If MR > MC, a monopolist should: decrease production. increase production. maintain the same level of production. stop producing.
increase production.
Firms pay efficiency wages because these wages: minimize short-run costs. maximize short-run profits. increase worker productivity. increase worker rivalry.
increase worker productivity. (efficiency wages: wages paid above the going market wage to keep workers happy and productive)
When a tax is progressive, the average tax rate: decreases with income. is constant with income. increases with income. first increases with income, then decreases with income.
increases with income.
The central characteristic of oligopolistic industries is: interdependent pricing decisions. flexible prices. price competition. few or no economies of scale.
interdependent pricing decisions.
Discrimination based on individual characteristics that don't affect job performance: is the hardest kind of discrimination to eliminate. is costly to a firm, and so market forces will work toward eliminating it. is not costly to a firm and thus is easy to eliminate. may be profit-maximizing in some cases.
is costly to a firm, and so market forces will work toward eliminating it.
In most developed countries, the class system: is the same as in underdeveloped countries. has been completely eliminated. is a pyramid with the largest group being the lower class. is diamond-shaped with the largest group being the middle class.
is diamond-shaped with the largest group being the middle class.
A monopsonist will pay a wage that: is greater than that in a perfectly competitive labor market. is the same as that in a perfectly competitive labor market. is less than that in a perfectly competitive labor market. may be greater than, less than, or equal to that in a perfectly competitive labor market, depending on labor supply.
is less than that in a perfectly competitive labor market.
To be successful in increasing prices for their product, members of a cartel: do not talk to one another. limit output. encourage entry. engage in predatory pricing.
limit output.
Refer to the graph shown. The oligopolist shown currently charges a price P1. It believes that rival firms will: gain market share if it lowers its price. lose market share if it lowers price. raise price if it raises price. lower price if it lowers price.
lower price if it lowers price.
The technological lock-in argument suggests that: it is inefficient to try and adapt to new technology. more efficient technologies always immediately replace less efficient technologies. many of our institutions and technologies may be inefficient. existing institutions and technologies are always the most efficient.
many of our institutions and technologies may be inefficient.
In the cartel model of oligopoly, the firms would decide how much to produce where: marginal cost equals marginal revenue. marginal cost equals price. marginal cost equals average total cost. the kink in the demand curve is.
marginal cost equals marginal revenue.
Technological advance is more likely to take place in a(n): tradition-based economy where each person's occupation is determined at birth. command economy where central planners can control the efforts of research and development. market economy where individuals have a monetary incentive to improve productivity. authoritarian economy where leaders can appropriate the fruits of research.
market economy where individuals have a monetary incentive to improve productivity
Monopolies: earn the profits needed for research and development and have the strongest incentive to innovate. may earn the profits needed for research and development, but they seldom have the incentive to innovate. seldom earn the profits needed for research and development, but they have the strongest incentive to innovate. seldom earn the profits needed for research and development and have no incentive to innovate.
may earn the profits needed for research and development, but they seldom have the incentive to innovate.
Monopolistic competition is: more conducive to technological change than perfect competition because firms have some market power. more conducive to technological change than perfect competition because firms have no market power. less conducive to technological change than perfect competition because firms have some market power. less conducive to technological change than perfect competition because firms have no market power.
more conducive to technological change than perfect competition because firms have some market power.
When former president Obama promised to raise taxes only on those whose income exceeds $250,000, he was suggesting the federal tax system be: more progressive. less progressive. proportional. regressive.
more progressive.
In economics, the purpose of competition is to: ensure that every firm survives. motivate firms to make the highest possible profit. motivate firms to make better goods at lower cost. prevent unemployment.
motivate firms to make better goods at lower cost.
Refer to the graph shown. According to the graph, this monopolistically competitive industry is currently: not in long-run equilibrium, and we would expect more firms to enter this industry. not in long-run equilibrium, and we would expect some firms to exit this industry. in long-run equilibrium, and so the number of firms will remain unchanged. in short-run equilibrium with economic profit equal to zero.
not in long-run equilibrium, and we would expect more firms to enter this industry.
A monopolistically competitive industry has: a few firms producing identical products. many firms producing differentiated products. many firms producing identical products. a few firms producing differentiated products.
not sure on the correct answer
The cartel model of oligopoly assumes that: monopolists sometimes act like oligopolists when they pit divisions of the same corporation against one other. oligopolies act as if they were perfectly competitive when there are no barriers to entry. oligopolies act as if they were monopolists by assigning output quotas to each member so that joint profits are maximized. oligopolies act as if they were monopolists by setting prices competitively for each member.
oligopolies act as if they were monopolists by setting prices competitively for each member.
Most technological advance takes place in: the public sector. oligopolistic industries. monopolistic industries .competitive industries.
oligopolistic industries.
In the United States, the class system is a: triangle, and in most developing countries the class system is a triangle. pentagon, and in most developing countries the class system is a diamond. pentagon, and in most developing countries the class system is a triangle. triangle, and in most developing countries the class system is a diamond.
pentagon, and in most developing countries the class system is a triangle.
In the event of and increase in demand for a specific type of labor (e.g., accountants) current workers would prefer which of the following the most: perfectly inelastic supply of labor. elastic supply of labor. unit-elastic supply of labor. perfectly elastic supply of labor.
perfectly inelastic supply of labor.
Suppose there are no barriers to entry in the market for facial tissue, where two brands dominate the industry. According to the theory of contestable markets, the price charged for facial tissue will be: far below the cost of producing a box of facial tissue. far above the cost of producing a box of facial tissue. roughly equal to the cost of producing a box of facial tissue. much higher for the number-one-selling brand than it is for the number-two-selling brand.
roughly equal to the cost of producing a box of facial tissue.
Refer to the graph shown. The monopolistically competitive firm represented is in: both short-run and long-run equilibrium because price equals marginal cost at the profit-maximizing output level. both short-run and long-run equilibrium because price exceeds average total cost at the profit-maximizing output level. short-run equilibrium because price exceeds average total cost at the profit-maximizing output level. long-run equilibrium because economic profits are zero at the profit-maximizing output level.
short-run equilibrium because price exceeds average total cost at the profit-maximizing output level.
if a union gains significant monopoly power in a competitive market, employment: and wages should increase. and wages should decrease. should increase and wages should decrease. should decrease and wages should increase.
should decrease and wages should increase.
Refer to the graph shown. If the government set the selling price equal to the marginal cost, the firm in the graph would be: making economic profits. making normal profits. sustaining losses and eventually would go out of business. making zero economic profits.
sustaining losses and eventually would go out of business.
The largest U.S. income redistribution program is: Aid to Families with Dependent Children. SNAP (food stamps). Aid to dependent dairy farmers. the Social Security system.
the Social Security system.
Once a company like Microsoft has achieved market domination: the chances of a competitor winning the business of dissatisfied customers will increase, making continued market domination unlikely. antitrust laws will automatically force the company to break up. the commitment by consumers to the industry standard created by Microsoft makes it very difficult for other firms to compete. it is very unlikely to attempt further innovation.
the commitment by consumers to the industry standard created by Microsoft makes it very difficult for other firms to compete.
When wages rise: the quantity of labor supplied always declines. neither the opportunity cost of an hour of leisure nor the quantity of labor supplied is likely to change. the opportunity cost of an hour of leisure declines. the opportunity cost of an hour of leisure increases.
the opportunity cost of an hour of leisure increases.
The Sherman Antitrust Act of 1890 was passed primarily because of: the practices of various trusts in the railroad, steel, tobacco, and oil industries. the popularity and political influence of John D. Rockefeller. multiple examples of false and misleading advertising. the monopoly abuses committed by ALCOA.
the practices of various trusts in the railroad, steel, tobacco, and oil industries.
Institutional discrimination exists when: discrimination is based on individual characteristics related to job performance. discrimination is based on individual characteristics not related to job performance. the structure of a job makes it difficult for certain groups of individuals to succeed. discrimination is based on correctly perceived statistical characteristics of a group.
the structure of a job makes it difficult for certain groups of individuals to succeed.
The elasticity of labor demand is higher when: there are many substitutes for labor in the production process. the inputs that could be substituted for labor are relatively expensive. a large amount of labor is essential to the production process. labor productivity falls rapidly when output is increased.
there are many substitutes for labor in the production process. (hence no monopoly, this is competition)
The underclass in the United States has expanded over the last several decades as a fraction of the overall population partly because: there are more people in the United States. there has been a substantial movement of blacks into the middle class. there has been a substantial amount of well-educated immigrants from Southeast Asia. there has been a substantial amount of illegal immigration.
there has been a substantial amount of illegal immigration.
In practice, regulatory boards try to set the price of a natural monopoly so that price covers a normal return on capital investment. As a result: there is an incentive to use less equipment. there is an incentive to use more equipment. the incentive to use equipment stays the same. the price of equipment should decrease.
there is an incentive to use more equipment.
For U.S. workers in tradable sectors such as manufacturing, the effect of globalization has been: to push wages up relative to those in nontradable sectors such as medical doctors and finance professors. to cause greater upward mobility for those workers while reducing downward mobility. to push wages down or leave them unemployed. to reduce unemployment in this group while leaving wage rates about the same.
to push wages down or leave them unemployed.
Wealth is defined as the: income earned in a year. value of assets minus liabilities. income plus assets. value of liabilities minus assets.
value of assets minus liabilities.
Refer to the table shown, which shows the demand schedule for a product sold by a monopolist. Marginal revenue is negative: when price is $10. when price is above $10. when price is below $10. for every price.
when price is below $10.
All of the following are possible explanations for the fact that on average women earn lower wages than men in the United States except: women choose to work in low-wage industries. women are more productive than men on average. women enter and leave the labor force more frequently than men, causing them on average to have less experience and a lower productivity than men women are discriminated against in labor markets.
women are more productive than men on average.
