ECN 212
Human capital labor market issues:
- Include the skills, knowledge, and experience that people obtain
The less elastic side of the market will
-A greater share of the tax
Above-normal profits are eliminated by ______, and below-normal profits are eliminated by ______.
Entry; exit
What does it mean that elasticity equals escape?
It is easy for market participants to escape to another market if they have elastic demand or supply.
The supply of a good is more elastic when...
It is easy to produce more at the same cost.
Circa 1200 BCE, a decreasing supply of tin due to wars and the breakdown of trade led to a drastic increase in the price of bronze in the Middle East and Greece (tin being necessary for its production). It is around this time that blacksmiths developed iron- and steel-making techniques (as substitutes for bronze). What does the increasing price of bronze signal?
It tells people that bronze is getting harder to find and its higher price will signal consumer to conserve it more or seek substitutes
To better feed his army, Napoleon established a technology prize that led to the development of canning in 1809. Napoleon required the inventor—Nicolas Francois Appert—to publish the method. Napoleon's reign as Emperor ended after his defeat at Waterloo, a defeat which might not have been so decisive had canned food not made its way to the enemies' mouths. By demanding Appert publish his method, what did Napoleon force Appert to give up?
a monopoly
In a competitive market, what does it mean when a company goes out of business?
- Resources are freed up to go to some other higher-valued use
Janitors in India might make $1,000 per year, while they could easily earn $20,000 per year in the United States. How is this a forgone gain from trade?
- Total surplus would be higher if the Indian janitors could come to the United States to work
Above-normal profits are eliminated by ______, and below-normal profits are eliminated by ______.
- entry; exit
Since a competitive firm sets MR = P to determine all quantities in the short run, we can conclude that:
- the demand curve faced by each individual competitive firm is perfectly elastic.
Fill in the blanks: When the government subsidizes an activity, resources such as labor, machines, and bank lending will tend to gravitate __________ the activity that is subsidized and will tend to gravitate ___________ activity that is not subsidized?
- toward; away from
Refer to the figure. What is the maximum price that the consumer is willing to pay for 100 units? Refer to the figure. What is the profit that the monopolist is earning? Refer to the figure. What is the profit-maximizing quantity for this monopolist?
-$100 -There is not enough information to answer the question - 110
A monopolist can sell 300 units of output for $29.00 per unit. Alternatively, it can sell 301 units of output for $28.25 per unit. The marginal revenue of the 301st unit of output is:
-$196.75
Refer to the figure. Based on the demand curves for a monopolist's product in two different markets—Market A and Market B—through the process of price discrimination, how much profit is the monopolist making in Market A?
-$450
Refer to the table. What is the monopolist's profit-maximizing level of output?
-4
Clark starts a coffee shop and begins hiring employees. The first employee's marginal product of labor (MPL) is $128 an hour and the MPL for each employee beyond the first adds half of the previous employee's ($64 for the second, $32 for the third, etc.). If the market wage for employees is $7 an hour, how many employees should Clark hire?
-5
Refer to the table. If the market wage for each worker is $100 per day, how many workers will the company hire? Refer to the table. If the market wage for each worker was $125 per day, how many workers would the firm hire? Refer to the table. What is the marginal product of labor for the fifth worker?
-6 -6 -$180
What is a price floor:
-A minimum price allowed by the law
The more elastic side of the market will pay
-A small share of the tax
Which of the following best illustrates the elimination principle?
-Above-normal profits are reduced as new firms enter the market.
Some bars host a "ladies' night," on which women get drinks free or at a discount. Aside from differing elasticities of demand, why might bars want to charge a lower price to women than to men?
-An increased quantity of drinks sold to women will attract male customers
In Chicago's Southside (and other places), auto mechanics (who work outside the formal sector, without a business license, advertising, or even a garage) will do work for gang members without charging them. In exchange, gang members chase away other mechanics who wish to operate in the area. These auto mechanics have monopoly power; what type of source does it come from?
-Barriers to entry
A sales manager at a car dealership revealed that he considers how much the customer appears to know about the car when he's negotiating a price. Ignorant people tend to pay a premium on their car. Price discrimination explains this "ignorance premium" since people who:
-Don't bother to research are probably less sensitive to price
If the Bill and Melinda Gates Foundation were to buy out and destroy the patent for Combivir, which of the following would NOT be one of the effects?
-Drug companies would have no incentive to create new and better drugs
Buyers compete with sellers? (t/f)
-False
Who pays the tax does depend on who writes the check to the government? (t/f)
-False
This figure shows the production costs of two firms that produce bird feeders. If these two firms represent total production in the industry, how should they allocate the production of 200 bird feeders to minimize costs?
-Firm 1 should produce 150 bird feeders, and Firm 2 should product 50 bird feeders
In order to minimize deadweight loss, governments should place taxes on?
-Goods with inelastic demand.
What does the supply curve show?
-How much of a good people will make at different prices
When labor supply decreases, the wage is expected to:
-Increase
If the price of output in an industry rises, firms in that industry will ______ labor
-Increase their demand for
When a monopolist's demand cruve is inelastic, raising the price:
-Increases total revenue decreases total cost.
On Black Fridays, most retail outlets have major storewide sales. Yet, as one of the busiest shopping days in the United States, one would expect prices to increase, not decrease. Price discrimination explains the answer to this question because price:
-Insensitive shoppers will stay away to avoid the crowds
In the case of an external cost, marginal private cost:
-Is less than marginal social cost for all quantity levels
World supply of a good _____ domestic supply.
-Is more elastic than
Writing in 1849, Jules Dupuit observed why the rail companies actively made third-class accommodations terrible, including removing the roof from the car and having nonupholstered seats: "It is not because of the several thousand francs which they would have to spend to cover the third-class wagons or to upholster the benches that a particular railway has uncovered carriages and wooden benches; it would happily sacrifice this for the sake of its popularity. . . It hurts the poor not because it wants them to personally suffer, but to scare the rich." How does "scaring the rich" illustrate price discrimination?
-It deters those who are willing to pay more from going to third class.
If a single supplier produces a good with many good substitutes, then:
-It will have little control over the market price
There are two major theories of why education leads to higher earnings (though they are not mutually exclusive): signaling and the building of labor market issues. If the signaling theory is dominant, how would the average wage for college graduates change if everyone received a college degree?
-It would decrease because it would be more difficult to differentiate workers
Suppose that you own two farms on which to grow corn. In order to lower the cost of production, you determine to increase production on Farm 1 and reduce it on Farm 2. This implies that the marginal cost of production on Farm 1 is:
-Less than the marginal cost of production on Farm 2
What is the profit maximization condition for a monopolist?
-MR = MC
Because of pressure from Western countries, garment producers in Bangladesh quit employing 30,000 to 50,000 child workers. What happened to these children?
-Many children went to work in jobs with worse conditions and lower pay, many in prostitution.
The market demand curve for labor is based on the:
-Marginal product of labor
Which equation correctly identifies social cost?
-Market price + external cost= social cost
The pursuit of profits in a competitive market:
-Minimizes total industry costs
Airline regulation of the 1970's produced a similar result to which of the fonixo
-Minimum wage laws
The following are marginal cost curves for selling chicken in a Mom & Pop (MCM) store and in a Big-Box retailer (MCB). MCM = 2 + 2QM MCB = 4 + QB If there are 7 total chickens being sold, how many chickens does each firm sell?
-Mom & Pop: 3; Big-Box: 4
If there are 7 total chickens being sold, how many chickens does each firm sell?
-Mom & Pop; 3 ; Big-Box: 4
Pfizer sells Atgam in New Zealand for $14 per pill for $8 per pill. This implies that the demand curve in New Zealand must be ____ than in Brazil.
-More inelastic
Competitive firms want to enter industries in which:
-P>AC
Which of the following conditions would prevent a firm from setting different prices in different markets?
-Possibility of arbitrage for buyers between different markets
In 1938, Congress set the first minimum wage at $0.25 per hour. While this was a modest price floor for the country, it was a very large increase for what US territory which was not exempt from the law?
-Puerto Rico
If the price goes up?
-Sellers will wants to sell more
A student trying to maximize her semester GPA already studies as many hours as possible but can perhaps use that time more efficiently. A marginal hour spent studying economics will raise her GPA by 0.05. A marginal hour spent studying literature will raise her GPA by 0.02. Should she reallocate her time?
-She should spend more time studying economics and less time studying literature
The market supply curve for labor:
-Slopes up
The individual supply curve for labor:
-Starts slopping up and then bends back as wages rate
Adults have more money than teenagers and perhaps more inelastic demand for video games than teenage video gamers. Why might it be difficult to price discriminate based on this fact?
-Teenage games could exploit arbitrage opportunities, buy games at the low price, and re-sell them to adult games
Marginal cost is:
-The change in total cost from producing one more unit of output
When the price of Peanut Butter goes DOWN, what probably happens to the demand for Jelly, a compliment for peanut butter?
-The demand for jelly increases
Who is harmed by trade protection like tariffs and quotas?
-The industries and consumers affected by the inefficient use of domestic resources sucked into the protected industry -Foreign producers whose product are placed at a disadvantage by the protections -Consumers who have to pay a higher price for the good
Which of the following is a possible effect of a price floor?
-The quantity supplied exceed the quantity demanded
A natural monopoly occurs when:
-There are economies of scale over the relevant range of output.
Some workers have lower wages than others because:
-There are variations in the difficulty of the work
Which of the following is TRUE for monopolists?
-They produce all units of output for which marginal revenue is greater than or equal to marginal cost.
Which of the following statements is TRUE?
-To maximize profits, monopolists will always set a higher price in markets with more inelastic demand curves
Who gets the subsidy does not depend on who writes the check to the government? (t/f)
-True
Who pays the tax does depend on the relative elasticities of demand and supply? (t/f)
-True
Hewlett Packard's pricing scheme is to sell printers at relatively low price and ink cartridges at relatively high price. This practice is known as:
-Tying
Great economics problem?
-Using limited resources.....
Why are the long lines generated by a shortage worse than paying a high price in money?
-Waiting in line is a waste of a valuable resource: time. Paying a price in money transfers the value of resources from one person to another, and maximizes the value of resources.
For a monopolist, MR is always less than P because:
-When a monopolist lowers the price to sell more units, it must lower the prices of all units sold
What is comparative advantage?
-When an individual, firm, or country can produce something at a lower opportunity cost than other individuals, firms, or countries.
When will people search harder for substitutes and alternatives for oil?
-When the price of oil is high
Your neighbor has a tree that blocks your view of a distant hill. Your neighbor values the tree at $100. You value the tree's removal at $150. Tree removal costs $60. In this case, property rights are clear. Your neighbor owns the airspace extending above his house for some distance. Transaction costs in this case:
-Would prohibit a private solution to the external cost
Which is an example of an external benefit?
-Your neighbors fix up their homes, which raises property values on the entire street.
Normal Profits in a perfectly competitive industry refer to _____ run profits.
-Zero Long
In the case of a perfectly price-discriminating monopoly, there is:
-Zero consumer surplus
When demand is relatively elastic, monopolists will charge:
-a lower markup
Imagine that you could travel back in time to another era, bringing with you all the knowledge you have from the modern age. Your wage in the older era might be higher because people with your knowledge were in short supply then. But why might your wage also be lower?
-because in bygone eras the economy was less productive overall
If arbitrage becomes extensive, a price-discriminating monopolist selling its patented drug in two markets will:
-begin to charge the same price in both markets.
The social cost of driving an SUV is equal to:
-both the cost of the vehicle's pollution and its operation (gas, etc.)
Economic theory suggests that college graduates receive higher wages than those with only a high school education because:
-college graduates are more productive.
The economic inefficiency of a monopolist can be measured by the:
-deadweight loss
As more workers are hired, the marginal product of labor typically:
-decreases
When the price of a good increases, the quantity demanded ____?
-decreases
In a free market, if the profit rate in the car industry were higher than in the computer industry, this is a signal that
-entrepreneurs should move resources from the computer industry to the car industry.
A Pigouvian tax:
-is levied on a good that creates a negative externality and should be set equal to the external cost to eliminate the deadweight loss.
f the government imposes a commodity tax on the sellers of a good, which of the following describes the change to the market?
-supply shift up by the amount of tax
Economies of scale are
-the advantages of large-scale production that reduce average cost as quantity increases
Under perfect competition, the rate of profit tends to be ______ in all industries, so the marginal value of resources is ______ in all industries.
-the same, the same
If a firm has revenues of $100, explicit costs of $50, and implicit costs of $50, its economic profit is:
0
The table below show the hours of work necessary to produce one unit of each good for each country. Country Cloth Wine England 108 95 Portugal 102 90 Identify which country has an comparative advantage in the production of cloth by entering in their value from the table above for the number of hours needed to make 1 unit of cloth.
102
Karl values Word at $100 and Excel at $40, and Adam values Word at $20 and Excel at $90. If the programs are sold as a bundle, what is the profit-maximizing price?
110
Refer to the table. The market equilibrium quantity is _____ and the efficient equilibrium quantity is _____. Refer to the table. The marginal social cost of the fifth unit is: Refer to the table. The marginal social cost of the fifth unit is::
3 ; 2 -$35 Private cost but not the external cost
Suppose that Southwestern Airlines flight 171 will depart BWI for Detroit in 3 hours. The marginal cost and average cost of flying a customer are $35 and $68, respectively. Southwestern Airlines can increase its profits by selling a ticket for no less than:
35
Refer to the table. What is the marginal cost of producing the seventh barrel of oil? Refer to the table. What is the marginal revenue of producing the fifth barrel of oil? How many barrels of oil should be produced to maximize profit.: Refer to the table. The maximum profit available to the company is:
36 -50 8 $224
If a firm has revenues of $100, explicit costs of $50, and implicit costs of $50, its accounting profit is
50
s$100, explicit costs of $50, and implicit costs of $50, then its accounting profit is:
50
What is a price ceiling:
A maximum price allowed by law
To maximize profits, a firm in a highly competitive industry should set its price:
At the market price
The following are marginal cost curves for selling chicken in a Mom & Pop (MCM) store and in a Big-Box retailer (MCB). MCM = 2 + 2QM MCB = 4 + QB If the price of a chicken is $12, how many chickens does each store supply?
C. Mom & Pop: 5; Big-Box: 8
Suppose Winston's loud music externalizes a cost onto his neighbor, Chloe. Suppose Winston and Chloe decide to solve this problem using the Coase theorem. If they are successful, what is a possible result of the execution of this theorem?
Chloe pays Winston weekly to refrain from playing music loudly.
Which of the following goods is likely to have the most inelastic demand curve?
Demand for food
Which of the following goods is likely to have the most inelastic demand curve?
Demand for transportation
The textbook for your economics class is available in an American version and in a much cheaper Indian version that has the same text but no colors for the graphs (the difference in prices is much higher than the difference in costs). Why is this the case?
Demand in the United States is much more inelastic than demand in India.
If the government imposes a commodity tax on the buyers of a good, which of the following describes the change to the market?
Demand shifts down by the amount of the tax.
An industry is said to be perfectly competitive when:
Each firm has virtually no influence over the price of its product
Why does economic growth require job destruction?
Economic growth comes from creating and producing goods that use resources more productively, causing job loss in industries that use outdated technology
In an effort to reduce obesity, many governments have imposed or considered placing a tax on sugar-sweetened beverages like soda. If the government is hoping that a small tax can actually discourage soda consumption, it should hope for:
Elastic supply and elastic demand
The shortage in apartments caused by rent control is worse...
In the long-run, because the long-run supply is more elastic.
Large-scale central planning has been abandoned throughout the world (except for North Korea and Cuba) because of ______ and ___ problems.
Information; incentive
Along a supply curve, if the price of oil falls, what will happen to the quantity of oil supplied?
It will decrease
Which of the following best describes a competitive industry?
Its firms sell similar products and have little control over their prices; there are many buyers and sellers and each is relatively small compared with the overall market.
Profit maximization occurs when:
MR = MC
Profit maximization occurs when
MR=MC
If the price of cars were to fall, what would carmakers likely do?
Make fewer cars.
If the price of cars were to raise, what would carmakers likely do?
Make more cars
The power to raise price above marginal cost without fear that other firms will enter the market is:
Market Power
To maximize profit, a firm in a competitive market increases output until:
P=MC
Competitive firms want to enter industries in which
P>AC
An external cost is a cost paid by:
People other than the consumer and the producer trading in the market
Which of the following properly summarizes economics into four words?
People respond to incentives
If the U.S. government wanted to use strategic trade protectionism for U.S.- produced fertilizer it would:
Place a tax or put a limit on the exports of U.S. fertilizer
When demand decreases, what happens to price and quantity in equilibrium?
Price decreases and quantity decreases.
When supply increases, what happens to price and quantity in equilibrium?
Price decreases and quantity increases.
A museum in Russia has two entrances: one for locals (written in Russian) and one for tourists (written in English). People who enter through the entrance written in Russian will end up paying 81.93 Rubles ($3.00). English-speaking tourists will use the entrance written in English, but they will end up paying 409.67 Rubles ($15.00). This practice is an example of:
Price discrimination
When supply decreases, what happens to price and quantity in equilibrium?
Price increases and quantity decreases.
The elasticity of demand is 1.4. Is the demand curve relatively steep or flat? Will a fall in price raise total revenue or lower it?
Relatively flat; raise total revenue
The elasticity of demand is 0.6. Is the demand curve relatively steep or flat? Will a fall in price raise total revenue or lower it?
Relatively steep; lower total revenue
Millions of producers working across the world cooperate to ensure that many more millions of consumers can have the goods and services they desire. These producers do not know each other and are not coordinated by a central agency. Their actions are directed simply by:
Self interest
On June 30, 2011, the price of 5,000 ounces of silver for December 1, 2013, was about $36 an ounce (or $180,000 for all 5,000 ounces). Suppose Chloe believes that the price of an ounce of silver in December 2013 will be $20. Should Chloe agree to buy or sell silver in a futures contract?
She should sell, because $20 is cheaper than $36
An efficient equilibrium occurs whenever
Social surplus is maximized
A firm with no competitors:
Still faces a downward sloping demand curve
Increasing prices act as a signal to:
Suppliers to increase the quantity supplied in those markets
Which of the following goods is likely to have the most elastic supply curve?
Supply of Maruchan Ramen Noodles., Supply of coffee over the next decade, Supply of bananas in Tempe, AZ,There are many substitutes for that good.
A tariff is a :
Tax on imports
Which of the following is an example of an external cost?
The annoyance your neighbor experiences from hearing you play your music.
When the price of Coca-cola goes DOWN, what probably happens to the demand for Pepsi, a substitute for Coke-Cola?
The demand for Pepsi decreases
When the price of Coca-cola goes UP, what probably happens to the demand for Pepsi, a substitute for Coke-Cola?
The demand for Pepsi increases
When the price of Peanut Butter goes UP, what probably happens to the demand for Jelly, a compliment for peanut butter?
The demand for jelly decreases
Before the shipping container, cargo had to be removed from a ship piece by piece, a very time-consuming process requiring a lot of dockworkers to accomplish. The shipping container allows a single dockworker to accomplish what it took several workers to do by moving many pieces of cargo all at once. The West Coast Dockworkers' Union was concerned about the change and demanded compensation from an association of shipping companies resulting in the Mechanization and Modernization Agreement of 1961. But, if automation increased wages, which of the following best explains why the workers resisted change?
The least productive members were concerned about automation.
The market price of Good X is $10.75 and every time Good X is consumed it creates an external benefit of $3.00. Therefore, which statement is correct?
The social benefit of Good X is $13.75, a justification for the government to give buyers a $3.00 subsidy.
If students in the United States go online and import the much cheaper Indian version of your textbook instead of buying the American edition, how might this arbitrage nevertheless help the publisher of your textbook?
The students who go to the trouble to do this might have had low willingness-to-pay in the first place, so the arbitrage enables another layer of price discrimination.
What is likely to happen if the price of oil increases?
The supply of rubber duckies, which use oil as an input of production, would decrease.
A slave redemption program would be most effective at reducing slavery when...
The supply of slaves is inelastic.
What is deadweight loss?
The value of trades which are mutually beneficial to both buyers and sellers, but do not occur because of a tax.
What happens when the price in a market is below the equilibrium price?
There is a shortage of the good and buyers must compete with each other in order to get the good, often resulting in a bidding up of the price paid.
What happens when the price in a market is above the equilibrium price?
There is a surplus of the good produced which forces sellers to compete with each other by lowering their price to incentivize buyers to buy from them.
Which of the following is TRUE for monopolists?
They produce all units of output for which marginal revenue is greater than or equal to marginal cost.
How did the British successfully deal with the high mortality rate aboard ships carrying prisoners to Australia?
They switched from paying per prisoner who boarded the ship, to paying only for the prisoners who made it to Australia alive.
Lynda and Timothy both make cakes, but each of them face a different trade-off when it comes to making the cake batter vs. the frosting. Their production possibilities are as follows: Lynda Timothy Batter Frosting Batter Frosting 20 0 30 0 10 15 15 10 0 30 0 20 Given this data, who should specialize in making cake batter?
Timothy
If owns patent number 5,547,091, only Colgate sells toothpaste with a flip-top cap, while others use the more traditional screw top. A patent probably wasn't a necessary incentive for Colgate to develop the flip-top cap, so why did it patent the cap?
To establish market power
Programs such as Steam distribute more and more video games. Purchasers buy the game and download it immediately to their computer. If the entire system is automated, estimate the marginal cost of producing and selling video games this way (ignore electricity costs).
Zero
A plague called The Black Death swept Medieval Europe. At the time, people believed cats spread the plague (cats were associated with the Devil) and started killing them to prevent the spread of disease. In reality, rats spread the plague and the slaughter of their natural predators only hastened the disease's proliferation. With this in mind, a market for cats would have had a ______ externality because the cats ______.
positive; killed rats regardless of who those rats would infect
Economic theory suggests that a natural monopoly should be:
regulated to take advantage of economies of scale.
A prediction market is a:
speculative market carefully designed so that prices can be interpreted as probabilities and used to make predictions.
Marián Hossa was paid $7.4 million by the Detroit Red Wings for the 2008-2009 season. We can conclude that
the Red Wings expected Marián Hossa to increase the team's revenue by at least $7.4 million.
The paper industry and brewery industry each emit 60 tons of particulates into the air. It costs the paper industry $1,000 to remove 1 ton of particulates, and it costs the brewery industry $1,400 to remove 1 ton of particulates. In an effort to reduce particulate pollution, the government gives each industry tradable allowances worth 50 tons of particulates. We would expect that:
the brewery industry will buy tradable allowances from the paper industry at a cost between $1,000 and $1,400 per allowance.
Sales (in unit) 5,000-10,000 10,000-15,000 15,000-20,000 20,000-25,000 25,000-30,000 Price ($) 0.10 0.20 0.40 0.20 0.10 (Table: The HP Stock Exchange) The HP Stock Exchange lets members of HP's sales team buy and sell shares that pay off when sales fall within a certain range. A typical security would pay out $1, if and only if future sales fell within the specific range of that share. Accordingly, the trading price given in the table between 15,000 and 20,000 units implies that:
the probability of selling between 15,000 and 20,000 units is believed to be 40%.
After a hurricane knocks out power to thousands of households, the price of electric generators increases threefold. According to economists:
this discourages the use of electric generators in low-value uses, making them more readily available for high-value uses.
During a crisis such as Hurricane Katrina, governments often make it illegal to raise the price of emergency items like flashlights and bottled water. In practice, this means that these items get sold on a first-come, first-served basis. If a person has a flashlight that she values at $5, but its price on the black market is $40, what gains from trade are lost if the government shuts down the black market?
$35
Use the figure. At a price of $20, the firm earns profit of:
$75 (look at unit 9 quiz for graph)
Refer to the figure. Based on the demand curves for a monopolist's product in two different markets—Market A and Market B—what price should the monopolist charge in Market B?
$9
In the United States, the long-run elasticity of oil demand has been estimated at -0.5. Some policymakers and environmental scientists would like to see the United States cut back on its use of oil in the long run. We can use this elasticity estimate to get a rough measure of how high the price of oil would have to permanently rise in order to get people to make big cuts in oil consumption. How much would the price of oil have to permanently rise in order to cut oil consumption by 50%?
100%
In which year did President Nixon declare a freeze on all price and wage increases?
1971
The table below show the hours of work necessary to produce one unit of each good for each country. Country Cloth Wine England 98 64 Portugal 156 47 Identify which country has an absolute advantage in the production of cloth by entering in their value from the table above for the number of hours needed to make 1 unit of cloth.
98
A futures contract is:
A contract to buy or sell commodities at some point in the future at a predetermined price
The following are marginal cost curves for selling chicken in a Mom & Pop (MCM) store andin a Big-Box retailer (MCB).MCM=2+2QMMCB=4+QBIf the price of a chicken is $12, how many chickens does each store supply?
AMom & Pop: 5;
Why can't marginal cost decrease forever?
At some point, firms encounter physical limits of production
Which of the following goods is likely to have the most inelastic demand curve?
Demand for beef over the next day.
A firm is willing to hire a worker when the marginal product of labor is:
Greater than the wage
If you are low on gas while evacuating for a hurricane, what gas prices do you hope to see?
High gas prices
What does the demand curve show?
How much of a good people will want at different prices.
Suppose that changing climate conditions results in a shortage of wood. Which of the following is the most likely consequence of this shortage?
No one has any idea, but the market system will sort everything out for us, and make sure we continue to use wood in the most valuable ways possible.
Which of the following is an example of an implicit cost of production?
Opportunity cost
In their calculation of profit, accountants typically do not take into account:
Opportunity costs
Stating that TR = TC is equivalent to stating that:
P = AC
A firm should exit an industry if:
P- AC < 0.
In the long run, competitive firms want to exit industries in which:
P<AC
Competitive firms want to produce the quantity such that:
P=MC
After a pair of wars in the late seventeenth and early eighteenth centuries, French-british relations decayed to the point that england began putting tariffs on french wines. A large part of support for this law came from british brewers and distillers who feared the return of french competition after the wars. These tariffs help explain why, to this day, the english prefer beer over wine. Of the arguments against free trade, which seems most likely to apply here, given the information provided?
Saving domestic jobs
Which of the following is a possible effect of a price ceiling?
Shortages, loss of gains from trade
Which of the following is an example of a price floor?
The minimum wage
Which of the following is true only at the market equilibrium?
The quantity people demand is equal to the quantity producers supply.
What do economists consider to be "the greater problem"?
Using limited resources to satisfy as many of our unlimited wants as possible
What is absolute advantage:
When an individual, firm, or country can produce something using fewer resources than other individuals, firms, or countries.
if the price goes down...
buyers will want to buy more.
Entrepreneurs have the incentive to:
move resources out of low-value industries and into high-value industrie
A compensating differential is mainly a cause of a difference in wages because:
of differences in working conditions.
The total cost equals fixed cost __ variable cost.
plus