Diagnostic Test

One player's optimal action choice taking the other player's action as given

A best response is ______________.

The extra revenue the firm realizes from hiring that worker

A firm's primary interest when it hires an additional worker is

There are only a few sellers, each selling a unique product.

A monopoly is characterized by all of the following except

Greater than the price that would prevail if the industry was perfectly competitive

A profit maximizing monopoly's price is

A benefit or cost experienced by someone who is not a producer or consumer of a good or service.

An externality is

Adverse selection

An insurance company is likely to attract customers like Clancy who want to purchase insurance because he knows better that the company that he is more likely to make a claim on a policy. What is the term used to describe the situation above?

The demand for tarot card readers has increased.

Assume that the hourly price for the services of tarot card readers has risen and sales of these services have also risen. One can conclude that

The supply of peaches has decreased

If in the market for peaches the supply curve has shifted to the left,

The sum of consumer surplus and producer surplus is maximized.

Economic efficiency in a free market occurs when

Quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.

If, for a product, the quantity supplied exceeds the quantity demanded, the market price will fall until

Understand the game and the payoffs associated with each strategy.

In a game, a Nash equilibrium is reached only if the players:

Because there is a shortage of apartments, tenants often are willing to pay rents higher than the law allows.

In cities with rent controls, the actual rents paid can be higher than the legal maximum. One explanation for this is

How responsive quantity demanded is to a change in price

Price elasticity of demand measures

A decrease in the price of cattle

Ranchers can raise either cattle or sheep on their land. Which of the following would cause the supply of sheep to increase?

Technological advances such as cable television has increased the demand for sports entertainment.

Some superstar athletes in the sports industry earn very high levels of income relative to other occupations, and over time the wage differential has been increasing. What could have caused this?

The market demand for the product.

The demand curve for a monopoly's product is

It is derived from the demand for products that use labor in the production process.

The demand for labor is described as a derived demand because

Consumer surplus

The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called

Marginal cost

The extra cost associated with undertaking an activity is called

Opportunity cost

The highest valued alternative that must be given up to engage in an activity is the definition of

Applies economic analysis to government decision making.

The public choice model

The budget constraint

The restriction that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as

False

True or false: All else equal, as the price of a product falls, the quantity supplied increases

False

True or false: The incidence of a tax depends on whether the government collects the tax from buyers or sellers.

Forcing producers to factor into their production costs the cost of the externalities created in the production of their output

What does the phrase "internalizing an external cost" mean?

It is a problem caused by agents pursuing their own interests rather than the interests of the principals who hired them.

What is the principal-agent problem?

Moral hazard

When people who buy insurance change their behavior after the purchase because they are protected from loss by the insurance, the insurance market is said to face the problem of

Relatively inelastic

When there few close substitutes available for a good, demand tends to be

Behavioral economics

Which branch of economics considers that economic agents do not always act rationally?

Public goods

Which of the following displays these two characteristics: nonrivalry and nonexcludability in consumption?

If the price of beef falls, a larger quantity of it will be bought

Which of the following is a positive economic statement?

Incomplete property rights or inability to enforce property rights

Which of the following is a source of market failure?

Price controls benefit poor consumers but harm producers and wealthy consumers

Which of the following is not a result of government price controls?

All relevant benefits and costs of each action are taken into account

Which of the following is true of a simultaneous move game?

Because rent seeking redistributes society's resources, anyone engaging in such behavior is violating the law.

Which of the following statements about rent seeking is false?