micro final version 3

In which situation can a Prisoner's Dilemma outcome most likely be avoided? a. if the game is repeated over and over under the same conditionsb. if the players involved choose not to cooperate with one anotherc. if each player plays its best-response strategyd. if the game is only played once with no opportunity for retaliation

A

When there is a positive network externality to a network good, a larger network is associated with: a. an increase in demand.b. a decrease in demand.c. an increase in supply.d. a decrease in supply.

A

Which is the BETTER purchase: a new top-quality motorcycle or an old, used motorcycle? a. We cannot tell which is the better buy without knowing their prices or the utility derived from each.b. The new motorcycle is the better purchase.c. The used motorcycle is the better purchase.d. Both are equally good purchases.

A

Serena sells soybeans in a perfectly competitive market. If her MC = $3, her MR = $4, her ATC = $5, and herAVC = $2, then she should: a. shut down.b. increase production.c. decrease production.d. increase her price.

B

Sun's Pizza lowered its price on a one-topping pizza. Taylor Pizzeria lowered its price on a one-topping pizza.Sun created a secret sauce for its combination pizza. Taylor created a secret sauce for its combination pizza.The strategy used by Taylor Pizzeria is known as: a. grim trigger.b. tit-for-tat.c. trembling hand trigger.d. hold'em poker.

B

Suppose the marginal utility for the last pencil you buy is 36 and each costs $1, whereas the marginal utility ofthe last pad of paper you buy is 300 and costs $2. Are you maximizing utility? a. No. You need to buy more pencils and less paper.b. No. You need to buy more paper and fewer pencils.c. Yes.d. No. You need to buy less paper and fewer pencils.

B

According to the law of comparative advantage, when one country sells goods for which it has thecomparative advantage in production and buys goods for which it does not have the comparative advantage inproduction: a. total output will fall.b. buyers of goods will win and sellers of goods will lose.c. total output to each person can be expanded.d. sellers of goods will win and buyers of goods will lose.

C

Compared with competitive markets, monopolies charge ______ prices and produce a ______ output. a. lower; lowerb. lower; higherc. higher; lowerd. higher; higher

C

For a firm to price discriminate, it must: a. sell to customers with identical price elasticities of demand.b. produce a product or service that has a close substitute provided by other firms.c. be able to prevent the resale of its product.d. have different marginal costs for each of the different customers.

C

Kellogg, General Mills, Post, and Quaker Oats dominate the cereal market. This industry, which hasconsistently displayed profits in the long run is also difficult to enter due to brand recognition. The cerealindustry is an example of what type of market structure? a. perfect competitionb. monopolistic competitionc. oligopolyd. monopoly

C

Which of the following products is likely to be the MOST differentiated? a. cotton sold to a fabric makerb. fabric sold to a garment makerc. garments sold to a garment distributord. garments sold to a retail customer

D

An increase in price will cause a decrease in demand. This is the law of demand.

False

Many entrepreneurs are moving into the food truck industry in major cities. This movement into the industry suggests existing firms are earning normal profits.

False

Public goods are characterized by the ability to exclude non-payers and the fact that consumption of the gooddoes not preclude others from consuming it.

False

When the price elasticity of demand for a product is inelastic, that product is likely to have many goodsubstitutes.

False

Economies of scale in an industry can be so large that demand is able to support only one firm.

True

A college student can create a negative externality by: a. leaving a coffee cup in a classroom.b. getting a flu shot.c. sleeping late.d. selling a used textbook.

A

An effective price ceiling occurs at a price _____ the equilibrium price and causes a _____. a. below; shortageb. below; surplusc. above; shortaged. above; surplus

A

The free rider problem typically results in a production of output that is less than the social optimal quantity.

True

The income distribution in the United States is generally less equally distributed than in European countriesand is more equally distributed than in many South American countries.

True

The speed by which a network good can enter into a virtuous or vicious cycle is generally faster that of a non-network good.

True

A news website that can be accessed by many paid subscribers simultaneously is MOST likely: a. rival (depletable) and excludable.b. nonrival (non-depletable) and excludable.c. rival (depletable) and nonexcludable.d. nonrival (non-depletable) and nonexcludable.

B

Assume that this Friday you would like to go to the club. You ask your friends to go with you, but they allwant to go to the movies. Despite your friends not wanting to go with you, you decide to go to the clubanyway because you really want to go dancing. This type of thinking BEST resembles a: a. best-response strategy.b. dominant strategy.c. tit-for-tat strategy.d. grim strategy.

B

When negative externalities exist, an unregulated market will produce too little of the good and the price willbe too high when compared to the socially optimal production.

False

If the price elasticity of demand for airline tickets is 3.0 for a vacation traveler and 0.4 for a business traveler,then a monopolist interested in price discrimination would charge: a. a higher price for the business traveler and a lower price for the vacation traveler.b. a lower price for the business traveler and a higher price for the vacation traveler.c. the same price for the vacation traveler and the business traveler.d. a less profitable price for the business traveler than for the vacation traveler.

A

In the short run, once a market has reached equilibrium: a. price and quantity will be stable.b. quantity will drift upward.c. forces are set in motion that will shift supply and demand.d. price and quantity will gravitate toward a new equilibrium.

A

In the short run, the perfectly competitive firm will continue to produce even though it might experience aneconomic loss if: a. the market price exceeds the average variable cost.b. the market price exceeds the average fixed cost.c. total cost exceeds marginal cost.d. total revenue exceeds total costs.

A

It can be cost-effective to pursue economies of scale only if: a. demand is large.b. demand is small.c. marginal cost is increasing.d. marginal product is diminishing.

A

Opportunity costs exist because a. using resources for one activity means that their use elsewhere must be given up.b. sellers are unwilling to give up their product without a price.c. there are opportunities to find ways to reduce costs.d. buyers always have an opportunity to go to another seller.e. money is an ineffective medium of exchange.

A

Positive externalities result in _____ of a good. a. underproductionb. overproductionc. optimal productiond. no change in production

A

Suppose that a major drought causes a 30 percent reduction in the peanut harvest. If there is no change indemand, this event would cause a _____ at the original equilibrium price, and the equilibrium price willtherefore _____ and the equilibrium quantity will _____. a. shortage; rise; fallb. shortage; rise; risec. surplus; fall; falld. surplus; fall; rise

A

When quantity demanded exceeds quantity supplied, a _____ occurs and prices are pushed _____ towardequilibrium. a. shortage; upb. shortage; downc. surplus; upd. surplus; down

A

Which Gini coefficient represents the highest level of income equality? a. 0.21b. 0.34c. 0.77d. 0.98

A

Which factor would increase elasticity the most? a. an increase in the number of tablet brands being offeredb. a decrease in the proportion of one's income spent on televisionsc. a service such as high-speed Internet access that has become a greater necessityd. a shorter time period to make decisions

A

Which of these is a characteristic of a natural monopoly? a. high economies of scaleb. low barriers to entryc. high marginal costd. lots of competition

A

Consider the market for breakfast cereal. Which of the following will cause lower prices and a greater quantityof breakfast cereal exchanged? a. The prices of inputs like refined sugar and cereal crops (wheat, corn, etc) increase.b. There is an increase in the number of firms selling breakfast cereal.c. A medical report shows the added health benefits of eating breakfast every morning.d. A medical report raises concerns about the health risks of consuming processed cereal products.e. None of the above.

B

Consumers of public goods will: a. have an incentive to purchase only the quantity that they can afford.b. have an incentive to consume without regard to the cost of production.c. not consume the product if it costs too much to produce.d. have an incentive to save and protect the good for a time when the need is greater.

B

Perfectly competitive firms and monopoly firms should increase production when: a. marginal revenue is less than marginal cost.b. marginal revenue is greater than marginal cost.c. price is less than marginal cost.d. price is equal to marginal cost.

B

The "dilemma" in the Prisoner's Dilemma is that: a. one of the players cannot get the best outcome.b. both players would be better off by cooperating, but not cooperating is a dominant strategy.c. both players would be better off by not cooperating, but cooperating is a dominant strategy.d. the player with first-mover advantage always gets the better outcome.

B

Wheat is the main input in the production of flour. If the price of wheat increases, all else equal, we wouldexpect the: a. supply of flour to be unaffected.b. supply of flour to decrease.c. supply of flour to increase.d. demand for flour to decrease.

B

A consumer is in equilibrium when: a. an equal amount is spent on every commodity.b. the same total utility is derived from each commodity.c. the addition to total utility per dollar is the same for every commodity.d. marginal utilities are equal.

C

A firm operates in a perfectly competitive industry. At the current level of output, the marginal cost is $26 andthe average cost is $23. If the firm can sell its product for $25: a. the firm should produce more units.b. the firm is maximizing its profits at the current level of output.c. the firm should decrease its output.d. the firm's average total cost is falling.

C

Consider the market for wool sweaters. Which of the following will cause higher prices and a lower quantityof wool sweaters exchanged? a. Consumers expect the weather to be colder than normal during the next several weeks.b. Producers of cotton sweatshirts reduce the prices of their products.c. A disease significantly reduces the sheep population (wool comes from sheep).d. Apparel manufacturers develop a more efficient way of processing wool fabrics.e. None of the above.

C

Sam's Club can sell identical items at a lower price than Macy's because of Sam's Club's: a. higher rent costs.b. government assistance.c. lower average fixed costs.d. higher variable costs.

C

Suppose it is discovered that consuming Greek yogurt leads to a longer life. This information would lead toa(n): a. decrease in demand.b. increase in quantity demanded.c. increase in demand.d. decrease in quantity demanded.

C

The development of solar panels for home installation has improved due to technological advances andsubsidies. These factors shift the supply curve to the _____ and result in the equilibrium price of solar panelinstallations to _____. a. left; fallb. left; risec. right; falld. right; rise

C

The reason a monopoly imposes a deadweight loss on society is that: a. there is a gain in profitability to firms that would have been in the industry had there been no monopoly.b. the government is concerned about the negative impact of a monopoly on consumers.c. consumers are denied output for which they are willing to pay more than the cost of producing it.d. social losses weigh heavily on public authorities.

C

The socially optimal pollution is: a. zero.b. where marginal abatement costs are zero.c. where the marginal benefits of pollution abatement equal its marginal costs.d. where marginal benefits of pollution abatement are maximized.

C

The success rate of cartels is low because: a. participation is secretive.b. the agreed price is too low.c. cheating is likely to occur due to profitability.d. all cartels are designed to fail.

C

What is the difference between a change in quantity supplied and a change in supply? a. There is no difference.b. A change in the quantity supplied shifts the supply curve, and a change in supply simply moves alongthe supply curve.c. A change in the market price affects the quantity supplied, but not the supply.d. A change in the market price affects the supply, but not the quantity supplied.

C

Which of these BEST represents a barrier to entry? a. having an ability to acquire inputs from multiple sourcesb. relatively low fixed costs with high variable costsc. a research patent awarded to an inventor of a productd. government policies to promote competition among utility companies

C

Which of these is an example of a lock-in strategy? a. a bank giving free flashlights to new customers.b. several products produced by the same company being bundled together and sold at a discounted price.c. an extermination company giving customers a 10% discount if they pay for one year's worth of servicein advance rather than paying after each quarterly extermination service.d. a movie theatre discounting ticket prices for children and senior citizens.

C

Which statement describes a basic difference between a teaser strategy and a lock-in strategy? a. Lock-in strategies strive to lower prices, while teaser strategies threaten to raise prices.b. Teaser strategies offer different models of the product, while lock-in strategies keep customers in thestore until a contract has been signed.c. Lock-in strategies try to keep current customers, while teaser strategies aim to gain new customers.d. Teaser strategies are associated with the timing of a purchase, while lock-in strategies are associatedwith bundling of related products.

C

Which statement is NOT an illustration of opportunity cost? a. If a person takes a job as long-distance truck driver, he won't have as much time to spend with hisfamily.b. If a person studies for her English class, she won't have as much time to write creative poetry.c. The more a person works at her job, the more leisure time she has.d. If I party every night of the week, my grades at school will drop.

C

Which statement is descriptive of the long run rather than the short run? a. The firm must pay an electric bill that varies each month as well as a mortgage payment of $10,000 permonth.b. The firm is trying to increase its amount of output by adding an extra shift so that its equipment is in usemore hours of the day.c. A firm is deciding how much of its equipment to sell so that it can reduce its monthly loan payments forequipment.d. A firm is deciding how many workers to use in its production line.

C

If a market is NOT at equilibrium: a. supply will shift until the market reaches equilibrium.b. demand will shift until the market reaches equilibrium.c. both supply and demand will shift until the market reaches equilibrium.d. the price will change and, in response, market participants will move along the existing supply anddemand curves until the market reaches equilibrium.

D

If the variable cost for five shoes is $50 and the variable cost of six shoes is $80, which statement is true? a. The marginal cost for the sixth shoe is $80.b. Total costs for the sixth shoe is $130.c. Average variable cost of the sixth shoe is $10.d. Average variable cost for the fifth shoe is $10.

D

In a perfectly competitive industry, long-run economic profits cannot be sustained because: a. firms are small relative to the size of the market.b. products are homogeneous.c. there are many customers.d. there are no barriers to entry.

D

Jessica lists her faulty treadmill for sale on craigslist but does not disclose the problems with it. If Blake buysthe treadmill believing that it's problem-free, this is an example of market failure due to: a. the existence of external costsb. the existence of public goodsc. the lack of competitiond. asymmetric information

D

Large cities typically have many grocery stores and most sell similar products of various brands and quality.The grocery store market in a big city can be BEST classified as: a. a competitive market.b. an oligopoly.c. a monopoly.d. monopolistic competition.

D

When quantity supplied exceeds quantity demanded, a _____ occurs and prices are pushed _____ towardequilibrium. a. shortage; upb. shortage; downc. surplus; upd. surplus; down

D

Which of these is NOT a network good? a. subway service in a cityb. cell phone servicec. satellite television serviced. hospital services

D

is when once a good or service is provided, it is not feasible to exclude others from enjoying that goodor service. a. Rivalry (or depletability) b. Nonrivalry (or non-depletability)c. Excludabilityd. Nonexcludability

D

A network good is one with which the benefit to the user rises if there is a small number of other users of thegood.

False

A country's comparative advantage is determined by an assessment of its opportunity costs of productionrelative to the opportunity costs of other countries.

True

A firm should (at least temporarily) shut down its production facility if variable costs are greater than revenues.

True

An important lesson from the prisoner's dilemma game is that the interests of individuals will not always alignwith the collective interests of people.

True

Consumer loyalty to existing brands may be a formidable barrier to entry for new companies.

True

If Kim's marginal utility per dollar for hot dogs is less than her marginal utility per dollar for French fries, sheshould buy more French fries and fewer hot dogs to maximize her total utility.

True

If firms in a monopolistically competitive industry are experiencing economic losses in the short run, somefirms will exit the industry, increasing demand until each firm earns a normal profit.

True

If price exceeds marginal cost at a competitive firm's current level of output, then the firm can increase profit ifit increases the quantity it produces and sells.

True

If the government sets a price ceiling below the equilibrium market price, then we can expect that there will beshortages of the good (i.e., quantity demanded will exceed quantity supplied).

True

Network goods differ from other types of markets studied in economics because the demand curve is different.

True

Price discrimination is more likely in the case of services than in the case of goods because it is more difficultto prevent resell of services than of goods.

True