PUAD630_MIDTERM & UNITS 5 - 7 QUIZZES

output per person; output per worker

Average consumption in an economy is best measured by ________, while average productivity in an economy is best measured by ________.

games in which timing matters.

A decision tree is used when modeling:

not all economically valuable goods and services are bought and sold in markets.

A drawback of using market values to aggregate the quantities of goods and services produced in an economy is that:

does not pay for the good but still enjoys the benefits of consumption.

A free rider is someone who

labor union.

A group of workers who bargain collectively with employers for higher wages and better working conditions is called a:

all passing ships are able to enjoy the benefits of the lighthouse without paying.

A lighthouse is typically considered to be a public good because________.

real GDP.

A measure of GDP in which quantities produced are valued at the prices of a fixed base year is called:

negative income tax.

A program under which the government gives all citizens a substantial lump sum payment that is financed by a tax earned income is termed a(n):

exports are less than imports.

A trade deficit occurs when:

4

A village has five residents, each of whom has accumulated savings of $100. Each villager can use the money to buy a government bond that pays 12% interest per year or to buy a year-old goat, send it onto the commons to graze, and sell it after one year. The price of the goat that the villager will get at the end of the year depends on the amount of weight it gains while grazing on the commons, which in turn depends on the number of goats sent onto the commons, as shown in table below. Refer to the information given below. Suppose the self-interested villagers sequentially decide whether to purchase a goat. How many goats will be purchased?

75

According to the textbook, the real mean income of the top quintile of families increased by ________ percent from 1980 to 2016.

10 percent

According to the textbook, the union wage premium for workers with the same amount of human capital is about ________.

Loss Averse

An investor for whom a $100 loss has twice the psychological effect as a $100 gain is said to be:

16

Art, Betty, and Cal are the only people in town. The figure shows each person's donut demand. What is the market demand for donuts when the price is 25 Cents?

$10,000

Assume an economy produces only hamburgers and hot dogs and the base year is 2016. Given the data in the table above, what is the value of real GDP in 2017?

pay your roommate at least $100 but no more than $200 to clean up after herself.

Assume that your roommate is very messy. Suppose she gets a $100 benefit from being messy but imposes a $200 cost on you. An efficient solution would be for you to

there would be a shortage of 400 units.

At a price of $15:

incurs a per-unit loss of $11.00

At the point of profit maximization, the monopolist...

0CEA

At the profit-maximizing level of output, the monopolist collects total revenues equal to the area:

There is no private transaction that would improve this situation.

Dick owns a dog whose barking annoys Dick's neighbor Jane. Suppose that the benefit of owning the dog is worth $700 to Dick and that Jane bears a cost of $500 from the barking. Assuming Dick has the legal right to keep the dog, a possible private solution to this problem is that

5

East Lansonia is a town of ten people. There are two occupations: basket weaving and fishing. Basket weavers make $5 per day. The income, I, from fishing is a function of the number of people fishing on a given day. This is because the more fishing boats out on the lake, the less fish each boat will catch. Specifically, I = 16 - 2*n , where n is the number of fishers. The lake is open-access, or publicly owned, so that any of the ten villagers is free to fish on the lake. How many people will fish in the private market outcome?

10

East Lansonia is a town of ten people. There are two occupations: basket weaving and fishing. Basket weavers make $5 per day. The income, I, from fishing is a function of the number of people fishing on a given day. This is because the more fishing boats out on the lake, the less fish each boat will catch. Specifically, I = 16 - 2*n , where n is the number of fishers. The lake is open-access, or publicly owned, so that any of the ten villagers is free to fish on the lake. What is the deadweight loss caused by the tragedy of the commons?

3

East Lansonia is a town of ten people. There are two occupations: basket weaving and fishing. Basket weavers make $5 per day. The income, I, from fishing is a function of the number of people fishing on a given day. This is because the more fishing boats out on the lake, the less fish each boat will catch. Specifically, I = 16 - 2*n , where n is the number of fishers. The lake is open-access, or publicly owned, so that any of the ten villagers is free to fish on the lake. What is the socially optimal number of fishers?

55

East Lansonia is a town of ten people. There are two occupations: basket weaving and fishing. Basket weavers make $5 per day. The income, I, from fishing is a function of the number of people fishing on a given day. This is because the more fishing boats out on the lake, the less fish each boat will catch. Specifically, I = 16 - 2*n , where n is the number of fishers. The lake is open-access, or publicly owned, so that any of the ten villagers is free to fish on the lake. What is total village income in the private market outcome?

average costs fall as the scale of production grows.

Economies of scale exist when:

10

Espresso Yourself Coffee Shop hires workers in a competitive labor market to make coffee. The ingredients required to make each cup of coffee cost 50 cents. The coffee shop's hourly output of coffee varies with the number of workers hired, as shown in the table. Each cup of coffee sells for $2.00. Number of workers | Coffee (cups/hour) 0 | 0 1 | 25 2 | 45 3 | 60 4 | 70 5 | 75 The marginal product of the fourth worker is ________ cups of coffee per hour.

less; diminishing returns are present

Espresso Yourself Coffee Shop hires workers in a competitive labor market to make coffee. The ingredients required to make each cup of coffee cost 50 cents. The coffee shop's hourly output of coffee varies with the number of workers hired, as shown in the table. Each cup of coffee sells for $2.00. Number of workers | Coffee (cups/hour) 0 | 0 1 | 25 2 | 45 3 | 60 4 | 70 5 | 75 The marginal product of the third worker is ________ than the marginal product of the second worker, implying that ________.

$37.50

Espresso Yourself Coffee Shop hires workers in a competitive labor market to make coffee. The ingredients required to make each cup of coffee cost 50 cents. The coffee shop's hourly output of coffee varies with the number of workers hired, as shown in the table. Each cup of coffee sells for $2.00. Number of workers | Coffee (cups/hour) 0 | 0 1 | 25 2 | 45 3 | 60 4 | 70 5 | 75 The value of marginal product of the first worker is ________ per hour.

interdependence.

Game theory provides tools that are used to model:

macroeconomic

Government actions designed to affect the performance of the economy as a whole are called ________ policies.

1

How many pure-strategy Nash equilibria are there?

Mental Accounting

Humans' tendency to rely too heavily on the first piece of information offered, even if it is irrelevant to the decision at hand, is known as:

0.5 and supply is inelastic.

If a 30 % change in price causes a 15 percent change in quantity supplied, then the price elasticity of supply is:

nonrival

If a good can be consumed by one person without reducing the availability of the good to others, this good is a(n) __________ good.

$7

If a pizza maker pays $1 for tomatoes, $1 for cheese, $2 for sausage, and sells the pizza made with these ingredients for $7, then each pizza sold contributes how much to GDP?

all potential gains from trade among buyers are sellers are being realized.

If an allocation of resources is efficient, then:

government budget deficit.

If tax revenues equal 20 percent of total output and government expenditures equal 25 percent of total output, then there is a:

elastic

If the consumers can easily switch to a close substitute when the price of a good increases, demand for that good is likely to be:

demand curve shifts right.

If the external benefit of an activity is added to the private benefits, then the

40% increase in the quantity demanded of chicken.

If the price elasticity of demand for chicken is 2, a 20% decrease in the price of chicken will lead to a:

increased by 14 percent.

If the total expenditures of a typical family equaled $35,000 per year in 2015 and the exact same basket of goods and services cost $40,000 in the year 2017, the family's cost of living:

remains constant.

If total output increases from $1 trillion to $2 trillion as population increases from 100 million to 200 million, then output per person:

makes some workers worse off.

Imposing a minimum wage above the equilibrium wage:

firms; workers

In competitive labor markets, ________ demand labor and ________ supply labor.

lower its price.

In order to sell another unit, an imperfectly competitive firm must:

the market for baseball players is a winner-take-all market.

In professional baseball, some players earn over $20 million per year, while the average salary is about $4 million per year. The most likely explanation for this is that:

0

In this game, how many dominant strategies does Player B have?

Richard is annoyed because his roommate smokes.

In which of the following cases is the Coase theorem most likely to solve the externality?

Inga to earn more than Ron.

Inga and Ron both work for the same firm on the same career ladder. Each has the same stock of human capital except for one difference: Inga has worked at the firm for 10 continuous years but Ron has had two leaves of absence mixed in with his 10 years of experience with the firm. One should expect:

pay more than otherwise similar jobs.

Jobs in which there is a higher risk of injury or death will:

lower payoff than each would receive if each played his dominated strategy.

Joe is the owner of the 7-11 Mini Mart, Sam is the owner of the SuperAmerica Mini Mart and together they are the only gas stations in town. At the current price of $3 per gallon, both receive total revenues of $1,000. Joe is considering cutting his price to $2.90, which would increase his total revenue to $1,350 if Sam continues to charge $3. If Sam's price remains $3 after Joe cuts his price, Sam will collect $500 in revenues. If Sam cuts his price to $2.90, his total revenues would also rise to $1,350 if Joe continues to charge $3. Joe will collect $500 in revenues if he keeps his price at $3 while Sam lowers his to $2.90. Joe and Sam will receive $900 each in total revenue if they both lower their price to $2.90. In this situation the Nash Equilibrium yields a: Drawing a payoff matrix in this situation may help you.

dominated strategy.

Joe is the owner of the 7-11 Mini Mart, Sam is the owner of the SuperAmerica Mini Mart and together they are the only gas stations in town. At the current price of $3 per gallon, both receive total revenues of $1,000. Joe is considering cutting his price to $2.90, which would increase his total revenue to $1,350 if Sam continues to charge $3. If Sam's price remains $3 after Joe cuts his price, Sam will collect $500 in revenues. If Sam cuts his price to $2.90, his total revenues would also rise to $1,350 if Joe continues to charge $3. Joe will collect $500 in revenues if he keeps his price at $3 while Sam lowers his to $2.90. Joe and Sam will receive $900 each in total revenue if they both lower their price to $2.90. To Joe, leaving his price at $3 is a: Drawing a payoff matrix in this situation may help you.

No

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table. Cleaning Time (hr/day) | Total # of Windows Cleaned 0 | 0 1 | 7 2 | 11 3 | 14 4 | 16 5 | 17 Does the third hour of window cleaning pass a cost-benefit test?

7

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table. Cleaning Time (hr/day) | Total # of Windows Cleaned 0 | 0 1 | 7 2 | 11 3 | 14 4 | 16 5 | 17 What is John's hourly opportunity cost of cleaning windows?

14

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table. Cleaning Time (hr/day) | Total # of Windows Cleaned 0 | 0 1 | 7 2 | 11 3 | 14 4 | 16 5 | 17 What is John's marginal benefit from the first hour of window cleaning?

1

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table. Cleaning Time (hr/day) | Total # of Windows Cleaned 0 | 0 1 | 7 2 | 11 3 | 14 4 | 16 5 | 17 What is the smallest amount of money per window cleaned that would induce John to spend at least one hour per day cleaning windows?

Install the lights because the benefits outweigh the costs.

Ken, Danita, and C.J. all enjoy watching the holiday lights displayed in their neighborhood. The homes association is considering displaying lights around the sign at the entrance to the neighborhood. Ken values the lights at $50, Danita at $40, and C.J. at $20. The lights cost $100. What should the homes association do?

$1200

Lane and Riley are the only two residents in a neighborhood, and they share the same driveway. They would like to have the driveway paved. The value of the paved driveway is $1200 to Lane and $900 to Riley. Irrespective of who pays for the paving both people will benefit from it. What is the most a contractor can charge for paving the driveway and still be hired by at least one of them?

efficient; surplus of $100

Lane and Riley are the only two residents in a neighborhood, and they share the same driveway. They would like to have the driveway paved. The value of the paved driveway is $1200 to Lane and $900 to Riley. Irrespective of who pays for the paving both people will benefit from it.Suppose the cost of paving the driveway is $2000, it is _____ for them to pave the driveway, and will result in a _____.

How do monopoly firms set prices and determine quantities to produce?

Major macroeconomic questions include all of the following EXCEPT:

larger; males and females choose different majors

Males major in engineering much more frequently than females. Starting salaries for engineers (male or female) are much higher than average. As a result, the observed gender wage gap for all college graduates will be ________ than the gender wage gaps in specific majors because ________.

demand for labor has increased.

Suppose it is observed that the equilibrium wage and employment level have both risen in a competitive labor market. One can infer that the:

just east of A

Miniville is an isolated town located on the southern shore of Lake Condescending, a very large lake. The western edge of Miniville is adjacent to impassable mountains and there are no towns or businesses for many miles to the east. The 300 residents of Miniville are evenly distributed along 3 miles of shoreline on the lake, east of the mountains. Lake Shore Drive, the only street in town, provides access to Miniville's homes and businesses. All residents live between the lake and the street; businesses locate on the other side of the street. Lake Shore Drive is 3 miles long, and the points labeled A, B, and C are 1, 2, and 3 miles from the western end of Lake Shore Drive, respectively. All residents of Miniville shop at the store located closest to their homes. If the first store to open in Miniville is located at A, to maximize the number of customers it attracts, the next store to open should locate:

unionized firms hire more selectively, employing workers with greater human capital.

One reason nonunionized firms do not always drive unionized firms out of business is that:

earn $5 million.

P-TV and QRS-TV are planning their fall line-up. Suppose that sit-coms are more popular than reality shows, and so generate more advertising revenue than do reality shows, but they are more expensive to produce since real actors must be hired. In the following decision tree, QRS-TV announces its decision first and P-TV observes that choice before it decides whether to air a sit-com in the same time slot or a reality show. Both stations know all of the information shown in this diagram when they make their decisions. Refer to the information above. Given the information in this decision tree, if QRS-TV announces that it will air a sit-com, it can expect to:

6

Paper Pushers Inc. hires workers in a competitive labor market. Apart from labor, the company has no other variable inputs. The company's hourly output varies with the number of workers hired, as shown in the table. If each page sells for $2 and the market wage is $15 per hour, then this firm will hire ________ workers per hour. Workers| Pages/hour 0 | 0 1 | 40 2 | 75 3 | 105 4 | 125 5 | 140 6 | 150 7 | 155

each buyer pays exactly his or her reservation price.

Perfect price discrimination occurs when:

equal to the external cost

Pigou's proposed solution to the negative externality problem is to set a tax

choose Left when A chooses Up and choose Right when A chooses Down.

Player A can infer that Player B will

Evaluating suspects sequentially

Police lineups normally constitute of a witness attempting to recognize one person in a group of potential suspects standing next to each other in a line. Although this method is popular, growing evidence suggests that false recognition—mistakenly identifying an innocent person as the perpetrator—is fairly common. Using insights from behavioral economics, researchers recently suggested what improvement to the system whereby suspects would be evaluated?

cooperation; cooperative

Refer to the figure above. The equilibrium for this game is for Lee to choose _______ and for Cody to be _______ in response.

4

Sam owns a candy factory and hires workers in a competitive labor market to pack cases of candy. The company's weekly output of cases of candy varies with the number of workers hired, as shown in the following table: If each case sells for $5 more than the cost of the materials used in producing it, and the competitive market wage is $625/week, then how many workers should Sam hire each week? Number of workers | Cases/week 0 | 0 1 | 160 2 | 310 3 | 450 4 | 580 5 | 700 6 | 810 If each case sells for $5 more than the cost of the materials used in producing it, and the competitive market wage is $625/week, then how many workers should Sam hire each week?

that Jordan bought a ticket for the comedy.

Suppose Jordan and Lee are trying to decide what to do on a Friday. Jordan would prefer to see a comedy while Lee would prefer to see a documentary. One documentary and one comedy are showing at the local cinema. The benefit they receive from seeing the films either together or separately are shown in the payoff matrix. Both Jordan and Lee know the information contained in the payoff matrix. They purchase their tickets simultaneously, ignorant of the other's choice. Suppose a timing element is added to the game, and that Jordan buys a ticket first. While Lee did not see which ticket Jordan bought, Lee does know the values in the payoff matrix and that Jordan has purchased first. Assuming that Jordan and Lee are both self-interested, Lee can infer:

Sarah's wages to be lower at Firm A than at Firm B.

Suppose Sarah has been offered a position as web designer at Firm A and Firm B. Both firms require their employees to work for 9 hours a day, but Firm A allows its employees to have a flexible work schedule, while Firm B requires its employees to be at work from 9am to 5pm. Otherwise, the jobs are identical. You would expect:

86

Suppose a village elder decides the total number of goats and bonds with the goal of maximizing total village income.

substitute goods.

Suppose that a decrease in the price of good X results in fewer units of good Y being sold. This implies that X and Y are:

375

Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood that anyone will get this flu decreases as more people receive the vaccine. If the flu vaccine is provided by private markets, deadweight loss will be

subsidy; 30

Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood that anyone will get this flu decreases as more people receive the vaccine. Policymakers should impose a ____ of ____ on vaccines

50; $60

Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood that anyone will get this flu decreases as more people receive the vaccine. Private incentives will lead to _____ people receiving the vaccine at a cost of _____.

benefit; $30

Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood that anyone will get this flu decreases as more people receive the vaccine. The dollar value of the external ______ is _____ per vaccine.

75

Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood that anyone will get this flu decreases as more people receive the vaccine. The socially optimal number of vaccines is

1125

Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood that anyone will get this flu decreases as more people receive the vaccine. What is Consumer Surplus when P = 80?

2250

Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood that anyone will get this flu decreases as more people receive the vaccine. What is Producer Surplus when P = 80?

$7.00

Suppose that the total production of an economy consists of 10 oranges and 5 candy bars, each orange sells for $0.20, and each candy bar sells for $1.00. What is the market value of production in this economy?

More attractive employment opportunities become available in other profession

Suppose that this graph describes the current labor market for high school teachers: Why might the supply curve in this market shift to the left?

income

Suppose the market wage for cashiers increases from $7 per hour to $9 per hour. As a result, Pat, who is a cashier, now works five more hours per week. On the other hand Chris, who is also a cashier, now works five fewer hours per week. Chris's behavior illustrates the ________ effect of a wage increase.

human capital.

Taken together, factors such as education, training, experience, intelligence, and work habits are known as:

a concept developed by Adam Smith to describe the virtues of free markets.

The "invisible hand" is:

monetary; fiscal

The Federal Reserve makes decisions regarding ________ policy while Congress makes decisions regarding ________ policy.

marginal product of labor.

The additional output a firm gets from hiring an additional unit of labor is the

1.25

The consumer price index for Planet Econ consists of only two items: books and hamburgers. In 2015, the base year, the typical consumer purchased 10 books for $25 each and 25 hamburgers for $2 each. In 2017, the typical consumer purchased 15 books for $30 each and 30 hamburgers for $3 each. The consumer price index for 2017 on Planet Econ equals:

a greater than optimal level of production.

The existence of a negative externality will result in

unemployment rate.

The fraction of people who would like to be employed, but cant find work is called the:

KEI

The loss of surplus resulting from monopoly is represented by the area:

Coase Theorem

The major implication of the _______ is that individuals can solve many externalities if they can buy and sell the right to generate the externality.

it is impossible to prevent any single person from enjoying the benefit of national defense.

The market does not provide national defense because_____________.

consumer price index.

The measure of the cost of a standard basket of goods and services in any period relative to the cost of the same basket of goods and services in the base year is called the:

gross domestic product.

The most commonly used measure of an economy's output is:

increases as the number of salads increases.

The opportunity cost of making an additional salad:

economic growth.

The process of steady increase in the quantity and quality of goods and services the economy can produce is called:

inflation rate.

The rate at which prices in general are increasing is called the:

cattle were owned by ranchers whereas buffalo were wild.

The reason buffalo were driven to extinction while at the same time cattle were thriving is

they fear ending up in a disadvantaged position themselves.

The reason people in Professor Rawls' thought experiment would choose an equal distribution of income is that:

$5 and 7 units of output

The socially efficient price and output combination is:

output per person.

The standard of living in an economy is best measured by:

1.77

The table below gives the quantities and prices for 2005 and 2015 for an economy that produces just two goods: sailboats and coconuts.

prisoner's dilemma

The table below shows the payoff matrix in the form of short term profits for two firms, A and B, for two different strategies, investing in new capital or not investing in new capital. Payoffs are in millions of dollars.

decreased by 4.5 percent.

The typical family on the Planet Econ consumes 10 pizzas, 7 pairs of jeans, and 20 gallons of milk. In 2016, pizzas cost $10 each, jeans cost $40 per pair, and milk cost $3 per gallon. In 2017, the price of pizzas went down to $8 each, while the prices of jeans and milk remained the same. Between 2016 and 2017, a typical family's cost of living:

never falls to zero.

The unemployment rate in the United States:

help reduce poverty.

Those who favor programs aimed at reducing inequality argue that these programs:

the more income one earns, the smaller the size of the benefit.

To say that a given welfare program is means-tested implies that:

False

True or False: Connie can clean windows in large office buildings at a cost of $1 per window. The market price for window-cleaning services is $3 per window. If Connie cleans 100 windows, her producer surplus is $100.

A

Using the diagram above, which point shows the profit-maximizing level of output for the monopolist?

C

Using the diagram above, which point shows the profit-maximizing price for the monopolist?

5

Using the diagram, what is the price elasticity of demand when P = 5?

20

Using the diagram, what is total surplus at the equilibrium price?

Ricky

Using this table, which worker has the comparative advantage in producing hats? Ricky | 3 Hats | 2 Pencils Lake | 6 Hates | 5 Pencils

people can be prevented from using the good.

When a good is excludable______.

negative externality.

When part of the cost of an activity falls on people not pursuing the activity, it is a(n)

Gail buys paper and crayons to donate to poor children in need of school supplies.

Which of the following activities is most likely to be counted in GDP?

Fast food restaurants

Which of the following industries does not fit the natural monopoly model?

Firms can easily buy and sell the productive resources necessary to compete in the market.

Which of the following is a condition that is necessary for a market to be perfectly competitive?

Pigouvian taxes

Which of the following is not a nudge that is important for public policy?

Fresh vegetables purchased by a restaurant

Which of the following is not classified as a final good?

Pay-per-view movies.

Which of the following items is an example of a nonrival but excludable good?

The increasing opportunity cost principle: you completed the easiest problems first.

Your math professor has assigned 20 homework problems that are due next week. After working for an hour, you notice you have completed 4 problems. After another hour, you have completed 3 more problems. During the third hour, you finish 2 problems. What economic principle best explains this?

Mental Accounting

________ refers to the tendency for people to separate their money into separate accounts based on a variety of subjective criteria, like the source of the money and intent for each account.