Econ 101
Consider the figure The Market for Hero Sandwiches. If the price were capped at $4, what would be the resulting deadweight loss?
$3
What is the profit margin for this firm if it produces a quantity of six?
$3
Pay per view movies on xfinity cable. The figure shows the demand and marginal revenue curves for on demand movie rentals on xfinity. Assume that marginal cost and average cost are constant at $40. If the cable company has market power, what price will it charge.
$75
Bob's Basses only makes basses using rare, hard to get African Blackwood. What would you guess the elasticity of supply for Bob's basses is?
.1
Suppose Qd=10-P Qs=-8+P/2 What quantity would be bought and sold in this market?
0
If the price of a good falls by 8%, quantity, demanded rises by 8%. What is the price elasticity of demand? (put the absolute value - so NO negative sign). Round to two decimal points.
1
The figure shows the market for green tea. In the green tea market, the pretax equilibrium is $3, and the pretax equilibrium quantity is 20 cups. A tax, charged on suppliers is levied on each cup of green tea. Based on the graph, the incidence of the tax on consumers is $?
1
The graph shows the marginal social cost, demand, and supply curves in the cinnamon roll market. A corrective tax of $. . per unit will move the cinnamon roll market to the socially optimal output of blank units.
1 8
Donuts cost $1 each. Look at the data. How many donuts should you buy?
4
Assume perfect competition. Suppose the market price is $80. A firm's MC curve has the equation. MC=60+.5 (Q) What is the firms profit maximizing quantity
40
Suppose we have this system: D: P=28-2Q S: P=8+3Q Suppose we have free trade and the world price is $14, how much will be imported or exported?
5 will be imported
After the worst of Covid had passed, demand for restaurant meals increased.
As a result, demand for restaurant servers increased and wages rose. Demand is derived.
Figure. Use supply and demand in the peach market. The market is in equilibrium at Point C. A reputable scientist asserts in a major scientific publication that drinking peach juice will increase your lifespan. What will be the MOST likely new equilibrium point in the peach juice market.
B
In one hour, Keshia can bake 5 muffins or mix 15 glasses of passionfruit juice. Her friend Ewan can bake 10 muffins or mix 20 glasses of passionfruit juice. Which is accurate?
Keshia comparitive advantage in mixing passionfruit juice
The gas stations in your town form a competitive marker. In your own worder there are blank gas stations and blank people with cars in your town,
Many gas stations and many people with cars in your town.
When deciding on how much to produce, suppliers in perfect competition use the cost-benefit principle and use.
Market price as the benefit and marginal cost as the cost for each unit.
In autarky (without trade) the price of grapes in California is PA. When the economy is opened to trade, the price falls to PW and the change in consumer surplus is area
N+O+P
Why can't firms in a competitive market earn positive economic profits in the long run?
Over time, more firms will enter, pushing price down until profits are zero
Why would it be a bad idea for a retailer to use wearing nail polish as the basis for segmenting customers into groups for price discrimination?
People can easily switch from wearing nail polish to not wearing it
You've driven to Chicago and are trying to decide which fancy restaurant to walk to from your hotel. Which of these costs should not affect your decision?
The amount you spent on gas to get to Chicago
Ceteris paribus, as price rises, what do the substitution and income effects do to demand?
The substitution and income effect both push you to buy a lower quantity.
If the price of a product changes
We don't shift demand
Elon Musk develops a new brain implant that makes all tesla workers 20% more productive. All else equal, this means that tesla's
demand for labor will shift out resulting in more workers
Suppose the world price of steel beams is lower then the US domestic price. If the US places a tariff on imported steel beams, who would be sad?
domestic consumers of both imported and domestic steel beams
This Friday night you have 3 options: go to a party, watch a movie at home, or put in 3 hours at your part time job which pays $15/hour. You can only do one of them. You are pretty stressed from studying econ and decide that work is the last thing you want to do. What is the opportunity cost of watching a movie at home?
going to the party
The existence of implicit costs ensures that accounting profit is
greater than economic profit
Suppose Babcock's charged UW faculty 50% more than they charge UW students. This would be an example of
group pricing
Which of these factors explains the vast majority of wage differences between different jobs
human capital requirements of the job
Since 1980, the Gini coefficient has risen. What does this mean?
income inequally has increased
An industry that generates external benefits produces a quantity of output that is
less than the socially optimal quantity
According to the marginal principle, decisions should be made based on ...
the additional costs and benefits of the next unit
If supply shifts back (decreases) and demand shifts back (decreases) what happens to equilibrium price and quantity?
the effect on price is unclear, quantity falls
Every few months, the local national public radio station has a fundraising drive where they try to get listeners to donate money to help fund the station. These fundraising events are an effort to battle what economic problem?
the free rider problem
Consider a prisoner's dilemma type game. If repeated, the result is more likely to be the same as the one-shot game (over and over again) if
the game is repeated a known, pre-determined number of times
Which of the following does not occur in a market when one or more sellers exits the market?
the market demand rises
The market for mangoes is in equilibrium at a price of $0.50 per pound. If the government imposes a price floor in the mango market at $0.40 per pound.
the market price and output of mangoes will be unaffected
If you love your job, the opportunity cost of working is blank the opportunity cost of working if you dislike your job.
the same as
Externalities tend to occur because decision makers consider blank and do not consider blank
their own costs and benefits the effects of their actions on others
If a firm in an imperfectly competitive marker (or a monopoly) practices perfect price discrimination then blank compared to the one price result
total economic surplus will rise
In game theory, the result of playing the maximin strategy is that the player
will never get the worst possible payoff
for an individual labor supply curve, if the income effect dominates, then a higher wage will cause the
worker to work less
Which of the following will not shift a company's demand curve for labor?
change in the wage paid to workers
Of the following groups, for whom has the poverty rate not fallen significantly since the 1960's?
children under 18
What is the marginal revenue of the sixth unit in the following example.
-2
Consider the following data. If the wage is 15 an hour and the price of ice cream cones is $3, how many workers will the chocolate shoppe hire?
3
Suppose Qd=10-P. Using the midpoint formula, calculate the price elasticity of demand if price started at 5 and rose by one dollar. Use absolute value and round to two decimal points.
1.22
Spain and Italy both produce port and wool with constant opportunity costs. Spain can produce 150 barrels of port if it produces no wool or 100 bolts of wool if it produces no port. Italy can produce 50 barrels of port if it produces no wool or 100 bolts of wool if it produces no port. What is Spain's opportunity cost of producing one bolt of wool?
1.5 barrels of port
Belinda runs the only bakers in town, and so has a monopoly position in the cake marker. She initially makes and sells the quantity of cakes at which her marginal cost equals her marinal revenue, as shown in the accompanying graph. After a period of time, however, she decides to use her market power to negotiate the selling price of each cake with its buyer. If she were to sell each cake at a price equal to the marginal benefit of the purchaser, Belinda's producer surplus would go from blank to blank. Total surplus would go from blank to blank.
12 to 24 18 to 24
Suppose we see the following numbers for a firm. Quantity = 30 Marginal cost = 20 Average variable cost = 5 Price = 20 What is total profit?
150
Suppose the inverse demand is P = 12-2Q. What is the consumer surplus if P=4?
16
If Qd=32 - P and Qs = -7 +29 What is the equilibrium quantity?
19
Suppose we have this system D: P=28-2Q S: P=8+3Q What is the equilibrium price?
20
Consider these demand and supply equations. Qd=100-P Qs=-20+29 If price is $33, how big is the shortage?
21
Suppose we have this system. D: P=28-2Q S: P=8+3Q Now suppose the government imposes a $5 per-unit tax on producers. What is new equilibrium price paid by consumers?
22
And industry has 4 firms with market shares of 50%, 25%, 20% and 5%. By how much would the HHI rise if the 25% merged with the 5% firm
250
Refer to the marker for reusable jute shopping bags that is shown in the figure. The original equilibrium price is $7 per bag. A subsidy is now introduced for buyers of the bags. The amount of the subside is $?
3
What is the most profit this firm can earn?
600
Suppose a monopolist has the following inverse demand equation P=90-Q MR=90-2Q MC=40 + .5(Q) What is the firm's profit maximizing price?
70
Suppose there are 10 sellers of red and white striped overalls on State Street, and that they all have identical individual supply curves. Qs=5P-100 If the price is $35, how many overalls will be for sale on State Street? (what is the market quantity supplied?)
750
Refer to the image. In the graph, the movement from point P to point Q represents.
A decrease in quantity demanded
Consider this game below. What is the nash equilibrium
A plays bottom, B plays right
Consider the figure equilibrium in the market for mechanical pencils. At the equilibrium price, the total economic surplus equals area:
AIF
Choose all correct answers The demand curve....
All of these
Which of these will not lead to a higher wage in an industry.
An increase in the number of people who want to work in that industry
Check all the options that would cause demand to shift out
An increase in the price of a substitute. An increase in come (assuming a normal good)
There are 2 made up products called zoomies and blabbos. Last week, the price of zoomies rose by 30% and the number of blabbos fell by 15%.
Based on this info, the cross price elasticity, between zoomies and blabbos is -0.5 and the two products are complements.
The graph shows the domestic supply of and demand for grapes in California. When the government imposes a tariff on imported goods, the price of grapes in California rises from PW to PW. Domestic producer surplus rises by blank and domestic consumer surplus falls by blank
C C+D+E+F
Suppose supply shifts back. What happens to consumer surplus (CS) and total surplus (TS)
CS falls and TS falls
When a monopolist engages in price discrimination, consumers blank tend to pay a blank price
Consumers who have more inelastic demand tend to pay a higher price
Sarah got a 30% raise at work. As a result, she bought 18% less frozen pizza.
Income elasticity of demand. Elasticity of Demand: .6 Inferior good
Suppose a firm in an imperfectly competitive market sees an increase in its fixed costs. How will it respond to maximize profits.
It will change nothing
A decrease in the price of capital will blank the demand for labor if capital and labor are substitutes, and it will blank the demand for labor if capital and labor are complementary inputs.
Decrease the demand for labor. if substitutes Increase the demand for labor id capital and labor are complementary.
In a 2 by 2 coordination game, each player wants to do blank and there are blank possible Nash equilibria
Each player wants to do the same thing as the other player. 2 possible nash
Which of the following diagrams represents the demand and average cost curves of a firm in the long run, given free entry and exit?
Firm D
Suppose we see the following numbers for a firm. Quantity = 30 Marginal Cost = 20 Average variable cost = 10 Average fixed cost = 5 Price = 20
Firm is perfectly competitive and not in the long run equilibrium
As wage falls, which effect suggests that worker will work more hours?
Income effect
As the cost of producing something rises (ceteris paribus) what happens to the willingness to pay for the product?
Nothing - it stays the same
What info do you need to calculate a firm's profit?
Price Average total cost quantity
Consider the supply and demand model. For a surplus to exist.
Price must be higher than the equilibrium price.
As an industry gets less competitive, we can expect prices to blank and market quantity to blank? As this happens, total economic surplus blank
Prices to rise. Market quantity to fall. Total economic surplus falls.
If a monopolist engages in perfect price discrimination, which of these is true?
Producer surplus is maximized, consumer surplus is minimized, and there is no deadweight loss
Blank determines the amount of economic surplus, blank determines whether buyers or sellers get the surplus.
Quantity Price
Suppose the price of brats rises by 20%. For demand for brats to be considered elastic, the quantity would have to fall by blank. If this were the case, a brat's seller's total revenue would blank if price rose by 20%
Quantity would fall by more than 20%. A brat's seller's total revenue would fall.
Consider this firm. The profit maximizing quantity is blank and the profit maximizing price is blank
Quantity: 20 Price: 140
Opportunity cost arises from the fundamental economic problem of.
Scaricity
Choose all options that would make demand for a good less elastic?
Shorter time frame It's a necessity It has few substitutes
A company needs one of its managers to locate to fairbanks, Alaska for winter. To get someone to volunteer, the company offers a $50,000 bonus. This is an example of what
a compensating differential
The SNAP food stamp program is an example of blank and is blank
a social safety net program, income assistance, means tested
Which of these would not cause a rightword shift out of the supply curve for a good?
an increase in price caused by a shift in demand
If both of my kids play in the basement, they end up fighting. If both of my kids hang out upstairs, they end up fighting. If one hands out in the basement and the other hangs out upstairs, they are fine. What is the term for the type of game they are playing?
anti-coordination game
Which of the following is not true regarding discrimination in labor markets?
any differences in wages between members of different racial or age groups is due to discrimination
Diminishing marginal product of labor is due to
approaching the production limit due to a fixed factor of production
Suppose supply for a good shifts back a little, while demand shifts out A LOT. What do you think would happen to equilibrium price and quantity?
both would rise
When it comes to solving a negative externality, which is true when comparing taxing the pollution to taxing the product that creates the pollution?
taxing pollution gives the firms incentive to adopt new, cleaner, technologies when possible, wheras taxing production does not
A perfectly competitive firm's demand curve blank while an imperfectly competitive firm's demand curve blank
perfect demand is horizontal imperfect demand is sloping down
A large fireworks display over lake mendota is an example of what type of good?
public
Levi runs a stand in a perfectly competitive market that sells Rice krispies treats on state street. (main ingredients rice krispies and marshmallows). Suppose the grocery store has a big sale on rice krispies. Also suppose that the rice krispies lovers of america is having their national conference in Madison. What will happen to the price and quantity of rice krispies treats.
quantity will rise but the effect on price is not certain
Consider the following data. Is the tax system progressive, regressive, or proportional?
regressive
The graph shows the domestic supply of and demand for tea in India. Without trade the price is PA. When the economy is opened to trade, the price rises to PW, and producer surplus blank to blank
rises G+H+I+J+K
Suppose the price elasticity of demand for a good is 1.2, while the price of elasticity of supply is 0.6. If a tax is imposed on the buyer, which side of the market will pay more of the tax (economic burden)?
seller
