Midterm Ch 11, 13, 14, 15
The market power of a firm is its
Ability to raise its price without losing many of its customers to competing businesses
What is a progressive tax system?
It is a system where those with more income pay a higher share of their income in taxes than thosewith lower incomes.
What is social insurance?
It is government-provided financial funding to households to compensate for bad outcomes such asunemployment, illness, disability, or outliving their savings.
What is social safety net?
It is the cash-assistance, goods, and services provided by the government to better the lives of thoseat the bottom of the income distribution.
Who gains the most when robots replace workers?
Owners of robots
Which of the following is an example of derived demand?
The demand for kitchen renovation affects the demand for carpenters
What is the relationship between a company's market power and the price that the company's owner cancharge for its product?
The greater the market power, the higher the price the firm can charge without losing many customers
If wages fall for surgeons but not for family practice doctors, there will be _____ in the market for surgeonsand _____ in the market for family practice doctors.
a decrease in quantity supplied; a rightward shift of labor supply
In the short run, companies face _____, and in the long run, _____.
a fixed set of competitors; the number of competitors can change
A market with a large number of sellers and a high level of product differentiation is known as
a monopolistically competitive market
Most U.S. grocery stores sell a variety of boxed breakfast cereals. This observation indicates that the boxedbreakfast cereal market is
a monopolistically competitve market (cereal)
If a firm hires labor such that W > MRPL, then profit:
can be increased by hiring less labor
A merger benefits society when it results in
cost savings
The labor demand curve has a _____ slope because of _____
downward; diminishing marginal product
Implicit opportunity costs of running a business include:
earnings that are given up in order for the owner to start or run a business
Government programs that are "means-tested" require:
eligibility to be based on income and sometimes on wealth
Which of the following would shift both the labor supply curve and the labor demand curve?
emplyers begin covering the cost of better health insurance of all employees
Patents have a positive impact of _____ and the negative impact of _____
encouraging research; creating a monopoly
When developing laws and regulations, elected government leaders are often biased in favor of the interestsof established companies over those of new entrants because:
established companies and their employees are voters who have clear interests in preserving the success of established companies
When a seller is able to differentiate its product successfully, the seller
gains market power
When new sellers enter a market, existing sellers will:
have less market power
Consider the labor market, predict which of the following create an incentive for investment in capital?
higher wages
The logic of income redistribution by the government is that it:
increases total utility in the population by placing income where it yields the highest marginal benefit
The wage in a labor market is determined by the
intersection of its labor demand and labor supply curves
If a business owner is maximizing their economic profit, the owner:
is better off financially than with any other use of the resources used in the business
How long does it take for a company to be in the long run?
it takes as long as is needed for the number of sellers in the company's market to increase or decrease
If the accounting profit of a firm is negative:
its economic profit must be negative
The long-run effect of laws that raise the minimum wage is that
labor saving devices and management practices are slowly adopted
A difference between a means-tested government social safety net program and a government socialinsurance program is that means-tested social safety net benefits are available based on _____ while socialinsurance benefits are available to those who _____.
low income; experience specified negative incomes
If the demand for Ono Yo's organic frozen yogurt increases, then the _____ Ono Yo's workers will _____.
marginal revenue product of; increase
A seller's demand curve summarizes its _____, and its marginal revenue curve measures its _____
market power; incentive to increase production
Which of the following two market structures are LESS common?
monopoly and perfect competition
When a country is open to international trade, the product markets in the country become
more competitive because there are more suppliers (both domestic and international sellers) selling in the product markets
In a _____ monopoly, the marginal cost falls as production increases. Only one company can survive in themarket as new entrants will always be at a cost disadvantage
natural
As wage rises, the opportunity cost principle leads to a _____ in the number of hours supplied and a _____ inthe number of hours demanded in the labor market for marketers
rise; fall
Data on the distribution of income for the United States show that from 1970 through 2014, the share ofincome earned by the top quintile _____, and the share earned by the bottom quintile _____
rose; fell
Suppose the labor market for electricians is in equilibrium. Which event might DECREASE the wage ofelectricians?
unemployed manufacturing workers attend techincal schools to learn the electrician's trade
Your company sells 19 units at a price of $10 and must change price to $9.90 in order to sell 20 units. Whatis the marginal revenue of the twentieth unit?
8 dollars
Diminishing returns to an input occur when:
At least one input is fixed
How does the law of diminishing marginal utility relate to changing income?
The marginal benefit of an extra dollar of income falls as income rises
Which of the following conditions is NOT present in perfect competition?
The product price varies across the companies in the market
Which of the following statements is an accepted insight into imperfect competition?
a seller's best choice depends on the actions that other businesses take
When collusion occurs, sellers in a market
act like a monopolist to increase profits
In an oligopolistic market, the impact on a seller of the _____ is greater than in other types of market structures
actions of other market sellers
A regressive tax is a tax where:
additional income earned is taxed at lower rates as additional income is earned
What level of market power exists for sellers in a perfectly competitive market?
all sellers lack market power
Permanent income is a person's:
average income over their lifetime
A company's profit margin is calculated as:
average revenue minus average cost
When a seller has a high level of market power, the seller
can raise its prices without losing many customers
An agreement among sellers in a market that limits competition is called:
collusion
A seller strives to achieve consistently high quality in all its output so that customers can trust that they willbe pleased with the product. Building a reputation for high quality is consistent with a seller trying to _____through _____ strategy
create customer lock in; a demand side
The demand for factors of production is known as derived demand because it is:
derived from demand for the outputs produced by factors of production
Why do average variable costs eventually rise if a company's output increases enough?
diminishing marginal product occurs, causing average variable costs to rise
The factors that cause a labor market supply curve to be upward sloping do NOT include
how many employers there are
The three key labor market decisions that you make do NOT include
how many workers to hire
The substitution effect of a higher wage measures
how people respond to a change in relative prices
In which market structure do the actions of a rival have a significant impact on your operations?
oilgopoly
The Rational Rule for Workers is to work
one more hour as long as the wage is at least as large as the marginal benefit of another hour ofleisure.
Following the Rational Rule for Sellers, how does output for a seller who has market power compare tooutput for a seller who does not have market power?
output is higher without market power than with market power
The poverty rate is the:
percent of people whose family income is below poverty line
The Rational Rule for Entry says that a seller should enter a market when
price exceeds average cost
Olya and her husband share an apartment. He feels prosperous because they have enough income to coverfood, shelter, and other basic needs without going into debt. She feels poor because she has less than her sister'sfamily and the families of some of her friends. Olya is defining poverty in _____ terms, while her husband isdefining poverty in _____ terms
relative; absolute
Which of the following is NOT a government action that results in a barrier to entry in a product market?
requiring that advertising not make false claims
Certain events can trigger a spell of poverty. Which of the following is NOT among the events that normallycan trigger a spell of poverty?
retirement
Which of the following is a characteristic of a perfectly competitive market?
sellers are price takers
The labor demand curve in a labor market
slopes downward
The labor supply curve in a labor market
slopes upward
When you're working in labor market, you are
supplying labor
Which of the following is NOT a principle used in determining how many workers a company should hire?
the absolute advantage principle
How is the result of the Rational Rule for Sellers different for companies with market power versus companies with no market power?
the price is higher for companies with market power
The slope of a labor market supply curve depends on each of the following factors EXCEPT the
wage
To maximize profits when hiring employees, continue to hire workers until
wage equals marginal revenue product
_____ is a stock that is more unequal across households than income, which is a flow
wealth
The poverty line is:
an income level determined by the government, below which a family is defined to be in poverty
A characteristic of oligopoly that is not present in other market structures is that there
are a small number of sellers and they have market power
Total revenue divided by quantity is called _____ or _____.
average revenue; price
In the long run, a company's ability to maintain profits depends on:
barriers to entry
Creating _____ to _____ is key to a company's ability to earn profits in the long run
barriers to entry; deter new entrants
How does marginal revenue compare to price for a seller with market power?
beyond the first unit sold, marginal revenue is below price
Hedra is a legislator who is concerned about income inequality in her country. She has data on thedistribution of income over time that show that the distribution is becoming more unequal. Which importantstep should she take next in order to make credible arguments in the legislature that income inequality is anissue that needs attention?
determine if her conclusions are consistent across alternative ways of conceptualizing and measuring the issue
When interdependence exists between sellers in a market, then
each seller's best choicce depends on what the other sellers choose to do
What attracts new sellers into a market?
existing sellers in the market earning economic profits
The formula for calculating accounting profit is total revenue minus _____ costs.
explicit financial
The marginal product of labor is the
extra production that occurs from hiring an extra worker
What is the difference between accounting profit and economic profit?
impllicit opportunity costs
The extra production that occurs from hiring an extra worker is known as the
marginal product of labor
The marginal revenue product is equal to:
marginal product of labor times the price per unit of output
The change in total revenue from selling one additional unit of output is the
marginal revenue (additional unit of output)
The marginal revenue from hiring an additional worker is known as
marginal revenue product
Sellers in a market will become less profitable when
new sellers enter the market
Economists believe that average lifetime income is a better predictor of a person's current living standard thancurrent income because:
people can save and borrow to average out consumption over their lifetimes
A natural monopoly exists when
producing a large output has significantly lower marginal cost than producing a small output
When buyers in a market have market power, then the
product price is lower
Social safety nets, social insurance programs, and progressive tax systems are all types of income _____programs that have the impact of moving income distribution _____ equality
redistribution; closer to
What happens in the labor market for custodians in Indonesia when the population of Indonesia grows?
the custodian labor supply curve shifts rightward
Intergenerational mobility is the extent to which:
the economic status of children is independent of the economic status of their parents
Which of the following statements about market power is TRUE?
the extent of market power held by a seller can vary along a spectrum from none to a high level
How do American's beliefs about the ideal distribution of wealth compare to their perception of thedistribution of wealth in the United States?
the ideal distribution of wealth is more equal than the perceived distribution of wealth
Suppose you own a small café that sells sandwiches, salads, and fancy coffees. Which factor is an implicitopportunity cost of the business?
the job offer you did not accept at a hotel restaurant
To maximize profit, firms should hire workers up to the point where:
the marginal product of labor times the price equals the workers wage
How does the slope and placement of the marginal revenue curve compare to the demand curve inimperfectly competitive markets?
the marginal revenue curve has a steeper negative slope and is below the demand curve
The population of Japan is declining. What impact will this have on the labor market for optometrists inJapan?a. The optometrist labor supply curve shifts rightward.
the optometrist labor supply curve shifts leftward
A shift in the demand for labor will NOT occur if:
the price of labor falls
Which of the following is a characteristic of monopoly that is not present in other market structures?
there is only one seller
What will happen in the labor market if income tax rates rise?
there will be a leftward shift of the labor supply curve
When the government requires a license or government approval for a company to produce and sell aproduct, then in the market for that product:
there will be fewer sellers
To maximize social benefits from markets, governments regulate markets using what two basic approaches?
they encourage competition and minimize harm from market power
If the wages rate falls, firms will find that:
they move downward and to the right along the labor demand curve
The basic idea of a natural monopoly is that there is one producer, and new sellers are discouraged fromentering the market because
they would have significantly higher marginal costs than the existing seller in the market
The poverty line in the United States is based on an estimate of:
three times the value of low cost food for the household
Price is equal to:
total revenue divided by the quantity sold
Which of the following is NOT a correct rationale about why income redistribution programs do not alwaysreduce efficiency?
when incomes are more equal, work incentive grows
The Rational Rule for Sellers is that sellers should choose the quantity _____ and choose the price _____
where marginal revenue equals marginal cost; that is on the seller's demand curve for that quantity
In which of the following situations would Maria's Doughnut Shop have the LEAST market power?
within three miles, there are five other doughnut shops and three bakeries that sell breakfast pastries
Which of the following is a negative result of redistributing income toward equality?
work incentives are reduced