micro econ exam 3

Marjean walks to work every day along a busy road. As she does so, she breathes in the fumes of many cars, often arriving at work coughing. The economic term for the impact of the cars on Marjean is: a. an externality. b. exploitative supply. c. an alternative action. d. a nonmarket repercussion.

a. an externality

What conditions must be met for private bargaining to be effective in resolving an externality? a. Bargaining costs must be low, and property rights must be clear. b. There must be trade in public goods. c. Taxes must be low, and regulations must be minimal. d. Property rights must be clear, and production must begin at a socially optimal level.

a. bargaining costs must be low, and property rights must be clear

the accumulated knowledge and skills that make a worker more productive are known as: a. human capital b. labor enhancement c. labor factoring d. efficiency investment

a. human capital

There is evidence that, despite antidiscrimination laws, discrimination _____ in labor markets. a. impacts wages b. exists but has no impact c. benefits groups that are discriminated against d. accounts for all differences in wages across groups of workers

a. impacts wages

The marginal revenue from hiring an additional worker is known as a. marginal revenue product b. labor marginal revenue c. labor marginal product d. marginal worker revenue.

a. marginal revenue product

an employer's labor demand curve is equal to the a. marginal revenue product curve b. marginal product curve c. marginal revenue curve d. rational product curve

a. marginal revenue product curve

A good is characterized as _____ when one person's use of the good does not reduce another person's ability to use the same unit of the good. a. nonrival b. free c. nonexcludable d. shareable

a. nonrival

With a _____ number of sellers in a market, _____ market power tends to exist in the market. a. smaller; more b. smaller; less consistent c. greater; more d. greater; less consistent

a. smaller; more

The outcome that is most efficient for society as a whole — including the interests of buyers, sellers, and bystanders — is the _____ outcome. a. socially optimal b. externally optimal c.social benefit maximizing d. public optimal

a. socially optimal

when someone can enjoy the benefits of a good without bearing the cost, the good: a. subject to the free-rider problem b. is excludable and rival c. is a non-market good d. is attractive to manafacturers

a. subject to free rider problem

the _____ measures how people respond to a change in relative prices when the wage rises a. substitution effect b. income effect c. opportunity effect d. marginal benefit

a. substitution effect

In a labor market, workers ____ labor, and employers _____ labor a. supply; demand b. demand; supply c. hire, use d. use, hire

a. supply; demand

an efficiency wage improves efficiency when: a. the increase in worker effort and reduced turnover cover the cost of the higher wage. b. it is structured so that only the most productive workers receive a higher wage. c. capital costs are reduced enough to cover wage costs. d. improved technology accompanies the worker training.

a. the increase in worker effort and reduced turnover cover the cost of the higher wage

The Rational Rule for Society is that society should produce another unit of a good if: a. the marginal social benefit exceeds the marginal social cost. b. gains to the producer exceed losses to the producer. c. the marginal private benefit exceeds the marginal private cost. d. the total social benefit exceeds the total social cost.

a. the marginal social benefit exceeds the marginal social cost.

Which of the following illustrates a positive externality? a. Artem loses sleep when an airport is built near his home, and planes fly overhead. b. The value of Maria's house rises when the city builds a park nearby, enhancing her view. c. Martin's company experiences an increase in profits due to his cost-cutting initiatives. d. Ella can buy a shirt at half price because someone else returned it.

b. . The value of Maria's house rises when the city builds a park nearby, enhancing her view.

A market with many small sellers and a high level of product differentiation is known as a. an oligopoly. b. a monopolistically competitive market. c. a monopoly. d. a perfectly competitive market.

b. a monopolistically competitive market

which of the following would be both nonrival and nonexcludable? a. an immunization b. a siren tornado warning system c. a museum d. a road

b. a siren tornado warning system

the marginal private benefit is the: a. total extra benefit society gains from the consumption of an extra unit of a good. b. extra benefit enjoyed by the buyer of one extra unit of a good or service. c. addition to the satisfaction a buyer receives from the total quantity of a product consumed. d. extra benefit that goes to bystanders for each additional unit of a good consumed by others.

b. extra benefit enjoyed by the buyer of one extra unit of a good or service

which of the following is consistent with current U.S. laws on monopolies? a. Being a monopoly is illegal. b. Gaining monopoly or market power through specified exclusionary business practices is illegal. c. Monopolizing is legal. d. Companies can act to reduce the number of competitors but cannot discourage new entrants.

b. gaining monopoly or market power through specified exclusionary business practices is illegal

The Nobel Prize‑winning economist Oliver Hart once said, "If we know the marginal social cost [of pollution] emissions, a tax is better, but if we know the optimal quantity, cap and trade is better." Given this statement and the knowledge of ways governments can intervene in markets, evaluate the following statement: Any outcome that can be achieved by taxing can also be accomplished by establishing a quota. This is because a. knowing the marginal social cost allows companies to know how much to increase their prices and make more profits. This is better for the economy as a whole because then companies can create more jobs. Cap and trade restricts quantity, which lowers profits. b. if we know the marginal social cost, we can set the tax so that price is equal to the optimal price. As a result, the optimal quantity will be achieved. If we know the optimal quantity, we can set a quota and the market will find the optimal price. c. if we know the optimal quantity, cap and trade can be used to set the price. If we know the marginal social cost, a tax can be used to set the quantity. d. if we know the marginal social cost, we can set the optimal quantity equal to the optimal price. If we know the optimal quantity, we can set a quota equal to the optimal price.

b. if we know the marginal social cost, we can set the tax so that price is equal to the optimal price. As a result, the optimal quantity will be achieved. If we know the optimal quantity, we can set a quota and the market will find the optimal price.

a corrective tax designed to resolve a negative externality problem is typically set at an amount equal to the ____ cost a. marginal cost b. marginal externality c. total externality d. total social

b. marginal external

Marginal revenue product is the a. change in revenue from selling an extra item. b. marginal revenue from hiring an additional worker. c. extra product produced from spending marginal revenue on inputs. d. change in revenue from the total production.

b. marginal revenue from hiring an additional working

When a company has market power, it is _____ in its market. a. one of many small companies b. not a price-taker c. a producer of nondifferentiated products d. not able to impact the market equilibrium price

b. not a price-taker

What type of relationship exists between the level of a company's market power and the price that its owner is able to charge for its product? a. circular b. positive c. negative d. opposing

b. positive

in a market, when a company's owner tries to make its product slightly different from the output of other companies so that it is more attractive to buyers, the company is engaged in a. market fixation. b. product differentiation. c. dominant rivalry. d. rational competition

b. product differentiation

when the income effect dominates, an individual's labor supply curve a. slopes upward b. slopes downward c. is horizontal d. is vertical

b. slopes downward

The Rational Rule for Employers implies that they keep hiring until a. revenue equals cost. b. the wage equals the marginal revenue product of the last worker hired. c. the wage equals marginal product. d. marginal product equals marginal revenue.

b. the wage equals the marginal revenue product of the last worker hired.

Alena manages a small theme park. She hires one more custodian at $450 per week, and her park is cleaner and more attractive. As a result of this improvement, ticket sales rise by 40 tickets per week. Tickets sell for $12. Use the Rational Rule for Employers to determine if hiring the extra custodian was a good move. a. No, it was a bad move because it added more to cost than revenue. b.Yes, it was a good move because the ticket sales rose more than price. c. Yes, it was a good move because it added more to revenue than to cost. d. No, it was a bad move because price did not rise as much as ticket sales.

c. Yes, it was a good move because it added more to revenue than to cost.

Workers on the night shift at a factory earn more per hour than workers on the day shift, although their human capital and productivity are the same. This is an example of: a. discrimination based on time preferences. b. irrational decision making by an employer. c. a compensating differential. d. an efficiency wage.

c. a compensating differential

a tax designed to induce people to take account of the negative externalities that they cause is referred to as ____ tax. a. externality b. an open offset c. a corrective d. a compensatory

c. a corrective tax

an externality is defined as: a. the effect of an activity undertaken outside a building rather than inside a building. b. an effect of market activity that impacts the opposite side of the market from the side whose decision caused the effect. c. a side-effect of an activity that affects bystanders whose interests are not taken into account. d. the impact of an activity on buyers and sellers in the market where the activity takes place.

c. a side-effect of an activity that affects bystanders whose interests are not taken in account

An externality is defined as: a. the effect of an activity undertaken outside a building rather than inside a building. b. an effect of market activity that impacts the opposite side of the market from the side whose decision caused the effect. c. a side-effect of an activity that affects bystanders whose interests are not taken into account. d. the impact of an activity on buyers and sellers in the market where the activity takes place.

c. a side-effect of an activity that affects bystanders whose interests are not taken into account.

the market power of a firm is its a. ranking based on units sold compared to other firms selling the same product. b. ability to cause other firms in its market to drop out of the market. c. ability to raise its price without losing many of its customers to competing businesses. d. market share based on the percentage of total market revenue.

c. ability to raise its price without losing many of its customers to competing businesses

Which of the following is an example of statistical discrimination? a. No companies will hire Marcella because they do not want to hire women. b. Arturo is unaware that he avoids hiring Asians. c. An employer relies on stereotypes in making hiring decisions. d. Ingrid refuses to hire people who do not have at least five years of experience in their previous jobs.

c. an employer relies on stereotypes in making hiring decisions

A characteristic of oligopoly that is not present in any other market structure is that there a. is only one seller and that seller has a high level of market power. b. are many sellers and each produces its own version of the product. c. are a small number of sellers with considerable market power. d. are many sellers that produce identical products.

c. are a small number of sellers with considerable market power

the marginal private benefit curve is also the: a. supply curve b. marginal external benefit curve minus the marginal social benefit curve c. demand curve d. marginal personal benefit curve

c. demand curve

the labor demand is a/an ____ demand a. modified b. imputed c. derived d. inferred

c. derived

the supply curve of a firm is also its ______ cost curve a. average b. social c. marginal private d. marginal external

c. marginal private

the marginal private benefit plus the marginal external benefit equals the ______ benefit a. total public b. total externality c. marginal social d. marginal public

c. marginal social

In which market structure do the actions of a rival have a significant impact on your operations? a. Monopoly b. Monopolistic competition c. Oligopoly d. Perfect competition

c. oligopoly

marginal social cost equals marginal ____ cost plus marginal _____ cost a. consumer; production b. government; private c. private; external d. public; internal

c. private; external

A good has a free-rider problem when: a. any seller provides it for free as a special promotion. b. it has no negative externalities but only positive externalities. c. someone can enjoy the benefits of the good without bearing the costs. d. it can be transported at no cost to the consumer, with sellers bearing all transportation costs.

c. someone can enjoy the benefits of the good without bearing the costs.

Patents on drugs to treat AIDS were removed in South Africa. How would the market for these drugs have been different if there had never been patents on drugs? a. The drug prices would have been even higher. b. The drug prices would have been lower from the start. c. The drugs would not have been developed. d. Larger quantities of the drugs would have been produced.

c. the drugs would not have been developed

an employer should hire one more worker if a. the total benefit exceeds the total cost b. the marginal cost is falling c. the marginal benefit exceeds the marginal cost d. demand is rising

c. the marginal benefit exceeds the marginal cost

in a natural monopoly, what deters new sellers from entering the market? a. The existing seller has higher costs and profits than what the new entrant will face. b. Marginal revenue will be higher for new entrants, making profits less probable. c. The new seller would have much higher costs than the existing large seller in the market. d. The existing monopolist has long-term contracts with buyers.

c. the new seller would have higher costs than the existing larger seller in the market

The government increases the training requirements to obtain an electrician's license. What impact will this have in the labor market for electricians? a. The demand for electricians will decrease, resulting in a lower wage and lower quantity of labor. b. The demand for electricians will increase, resulting in a higher wage and higher quantity of labor. c. The supply of electricians will decrease, resulting in a higher wage and lower quantity of labor. d. The supply of electricians will increase, resulting in a lower wage and higher quantity of labor.

c. the supply of electricians will decrease, resulting in a higher wage and lower quantity of labor

In a perfectly competitive labor market, employers will not pay less than the market wage because at a wage below the equilibrium a. they would be inundated with excess workers. b. there would be a surplus of workers. c. they would not be able to hire anyone. d. the equilibrium wage would rise.

c. they would not be able to hire anyone

when making labor supply decisions, your options are a. working or doing homework b. working, shopping, or relaxing c. working or leisure d. working, sleeping, or leisure

c. working or leisure

To avoid harm to society, the government often becomes the supplier of a good or service when the respective market a. would be competitive enough to cause surpluses to develop. b. has been engaging in illegal activities that the government seeks to eliminate. c. would be a natural monopoly, and the good or service is considered essential. d. has high profit, and the government can use those to replace tax revenue.

c. would be a natural monopoly, and the good or service is considered essential

Which of the following statements describes the Coase Theorem? a. If the marginal benefit of a good exceeds the good's marginal cost, more of it should be produced. b. Elimination of an externality is possible only when the marginal benefit of a good is no higher than its marginal cost. c. Even if bargaining is not costless, and property rights are unclear, externality problems can be solved through private bargaining. d. If bargaining is costless, and property rights are clearly established and enforced, then externality problems can be solved through private bargaining.

d. If bargaining is costless, and property rights are clearly established and enforced, then externality problems can be solved through private bargaining.

The marginal revenue product of labor is equal to: a. MPL + P. b. MR × Wage. c. MR + Wage. d. MPL × P.

d. MPL x P

Walmart has a large aisle that displays many different types of shampoos. This observation indicates that the shampoo market is a. a perfectly competitive market. b. a monopoly. c. an oligopoly. d. a monopolistically competitive market.

d. a monopolistically competitive market

when a good is non-rival and non-excludable, the good is referred to as: a. a free-ride benefit good b. an external good c. a private good d. a public good

d. a public good

what is collusion? a. Regulatory restrictions on the entry of new sellers into an industry b. A merger of two sellers c. Cooperation between sellers to increase the level of competition d. Agreements between sellers to increase their market power

d. agreements between sellers to increase their market power

Why does an employer's labor demand curve slope downward? a. marginal cost adjustment b. diminishing product demand c. substitution rule d. diminishing marginal product

d. diminishing marginal product

The marginal product of labor is the a. amount of extra worker time it takes to produce one extra unit of output. b. change in output from the slowest worker to the most productive worker. c. extra output produced by all the firm's employees. d. extra production that occurs from hiring an extra worker.

d. extra production that occurs from hiring an extra worker

When a seller is able to differentiate its product successfully, the seller a. has a reduction in costs of production. b. takes its market closer to perfect competition. c. loses market share. d. gains market power.

d. gains market power

Companies with market power face a trade-off between a. gaining market share and reducing costs. b. having a higher marginal cost and a reduction in output. c. reducing costs and increasing profit. d. having a higher profit margin and selling a larger quantity.

d. having a higher profit margin and selling a larger quantity

Which of the following is an example of a labor market characterized by compensating differentials? a. A nursery school teacher earns less than a university professor. b. Two real estate agents paid on commission earn different salaries due to different listings and sales volumes. c. Adjustments are made to the salaries of teachers in different states to equalize the purchasing power of income. d. Outside window washers of skyscrapers earn higher salaries than outside window washers of single family homes.

d. outside window washers of skyscrapers earn higher salaries than outside window washers of single family homes

imperfect competition stems from _____ and whether or not the product is _____. a. the product price; produced by all firms in the market b. the costs of production; identical across firms c. market power; a good or a service d. the number of sellers; differentiated

d. the number of sellers; differentiated

Externalities tend to occur because decision makers consider _____ and do NOT consider _____. a. their own income as limitless; their income as limited b. the welfare of others; their own welfare c. their own needs as most important; the fact that others also have needs d. their own costs and benefits; the effects of their actions on others

d. their own costs and benefits; the effects of their actions on others

Which of the following is a characteristic of monopoly that is not present in other market structures? a. There are many buyers. b. Sellers are price-takers. c. The product is identical across all sellers. d. There is only one seller.

d. there is only one seller