Econ 4001.01 last half

A minimum wage policy induces an: a. excess demand for labor. b. excess supply of labor. c. efficient market outcome. d. elastic labor supply response.

b. excess supply of labor.

When compared to the demand curve for only one variable input, the demand curve for a factor input when several inputs are variable is a. less elastic. b. more elastic. c. vertical. d. horizontal. e. downward sloping.

b. more elastic.

What is the difference between a price support and a price floor? a. A price support is below equilibrium; a price floor is above it. b. A price support is above equilibrium; a price floor is below it. c. Government buys the excess supply to maintain a price floor, but not a price support. d. Government buys the excess supply to maintain a price support, but not for a price floor. e. There is no difference between the two.

d. Government buys the excess supply to maintain a price support, but not for a price floor.

In contrast to various forms of price discrimination, peak-load pricing does not require a. the firm to have market power. b. the firm to establish more than one price. c. customers to be prevented from re-selling the product, or using it whenever they want. d. different types of consumers. e. all of the above.

d. different types of consumers.

A firm operating in a perfectly competitive output market has a downward sloping short-run demand curve for labor because a. marginal revenue decreases as more labor is hired. b. output price decreases a more labor is hired. c. marginal utility decreases as more labor is hired. d. marginal product of labor decreases as more labor is hired. e. marginal cost increases as more output is produced.

d. marginal product of labor decreases as more labor is hired.

An effective price ceiling causes a loss of A. producer surplus for certain and possibly consumer surplus as well. B. consumer surplus only. C. producer surplus only. D. consumer surplus for certain and possibly producer surplus as well. E. neither producer nor consumer surplus

A. producer surplus for certain and possibly consumer surplus as well.

Deadweight loss refers to A. losses in consumer surplus associated with excess government regulations. B. situations where market prices fail to capture all of the costs and benefits of a policy. C. net losses in total surplus. D. losses due to the policies of labor unions.

C. net losses in total surplus.

What is the value of the Lerner index under perfect competition? a. 1 b. 0 c. infinity d. two times the price e. Indeterminate without additional information

b. 0

A firm should always hire more labor when the marginal revenue product of labor a. equals the wage rate. b. exceeds the wage rate. c. is less than the wage rate. d. is downward sloping. e. None of these are true.

b. exceeds the wage rate.

Which of the following causes a firm's long-run demand curve for labor to be relatively elastic? a. Labor and capital are relatively close substitutes. b. Labor and capital are complements. c. The scale effect is relatively small. d. Production isoquants are L-shaped. e. Isocost lines are downward sloping.

a. Labor and capital are relatively close substitutes.

If the market for widgets is suddenly monopolized, we should expect: a. a decrease in the price of widgets. b. a decrease in consumer surplus in the widget market. c. a decrease in producer surplus in the widget market. d. a gain in social welfare in the widget market. e. an increase in widget consumption.

b. a decrease in consumer surplus in the widget market.

A government can impose an import quota or an equivalent tariff that achieves the same impact on trade. What is the key difference in the welfare outcomes of these two policy options? a. The domestic quantity supplied is larger under the tariff policy. b. The domestic price is higher under the tariff policy. c. The domestic price is lower under the tariff policy. d. The government captures some of the profits from foreign suppliers through the tariff revenue.

d. The government captures some of the profits from foreign suppliers through the tariff revenue.

If a worker views leisure as a normal good, then the income effect associated with a wage decrease will a. decrease the number of hours worked. b. increase the number of hours worked. c. leave the number of hours worked unchanged. d. leave the number of leisure hours unchanged. e. increase the sum of leisure plus hours worked.

b. increase the number of hours worked.

A monopolist that charges each customer the maximum price that the customer is willing to pay is a. engaging in perfect price discrimination. b. converting producer surplus to consumer surplus. c. facing a situation where average revenue exceeds marginal revenue. d. engaging in third-degree price discrimination. e. all of the above.

a. engaging in perfect price discrimination.

Which of the following statements is not a correct characterization of a pure monopoly? a. A monopolist is the sole producer in the market. b. A monopolist's price is determined from the market demand curve. c. A monopolist can charge as high a price as it likes. d. The monopolist's demand curve is downward sloping. e. The monopolist's marginal revenue is less than its average revenue.

c. A monopolist can charge as high a price as it likes.

For a two-part tariff imposed on two consumers, the entry fee should always be based on the: a. consumer surplus of the customer with lower willingness-to-pay. b. consumer surplus of the customer with higher willingness-to-pay. c. simple average of the consumer surplus for the two buyers. d. none of the above.

a. consumer surplus of the customer with lower willingness-to-pay

To find its profit-maximizing output level, a pure monopolist will a. equate marginal revenue and marginal cost. b. equate price and marginal cost. c. equate price and average total cost. d. equate market supply and market demand. e. all of the above.

a. equate marginal revenue and marginal cost.

If a worker's labor supply curve is backward bending, then a. the income effect associated with a higher wage is greater than the substitution effect. b. the substitution effect associated with a higher wage is greater than the income effect. c. the substitution effect associated with a higher wage encourages more leisure. d. both a) and c) e. both b) and c)

a. the income effect associated with a higher wage is greater than the substitution effect.

In the personal computer market, some large manufacturers are able to buy computer components (e.g., disk drives, memory chips) at lower prices than smaller firms in the market. This outcome indicates that the large firms have a. a degree of monopoly power. b. a degree of monopsony power. c. a Lerner Index equal to zero. d. a perfectly inelastic supply curve.

b. a degree of monopsony power.

The marginal revenue product of labor can be expressed as the a. additional revenue received from selling one more unit of product. b. increment to revenue received from one additional unit of input hired. c. marginal physical product of an input times the average revenue received from the sale of the product. d. average physical product of the input times the marginal revenue received from the sale of the final product.

b. increment to revenue received from one additional unit of input hired.

When a consumer electronics company introduces a new products, it often sets a relatively high initial price, and lowers the price about a year later. This is an example of a. a two-part tariff. b. intertemporal price discrimination. c. first-degree price discrimination. d. second-degree price discrimination. e. third-degree price discrimination.

b. intertemporal price discrimination.

Although rice is a staple of the Japanese diet, the Japanese government has long restricted the importation of rice into Japan. The result of this import quota is: a. to decrease the price of rice to the Japanese people. b. to decrease the consumer surplus of Japanese rice consumers. c. to decrease the producer surplus of Japanese rice producers. d. a welfare gain for the Japanese people. e. to increase the consumption of rice by the Japanese people.

b. to decrease the consumer surplus of Japanese rice consumers.

Suppose that the marginal cost of an additional ton of steel produced by a Japanese firm is the same whether the steel is set aside for domestic use or exported abroad. If the price elasticity of demand for steel is greater abroad than it is in Japan (that is, foreign consumers are more responsive to price changes), which of the following is an expected outcome? a. The Japanese firm will sell more steel abroad than it will sell in Japan. b. The Japanese firm will sell more steel in Japan than it will sell abroad. c. The Japanese firm will charge a lower price abroad than in Japan d. The Japanese firm will charge a higher price abroad than in Japan. e. Consumer surplus will be greater than if domestic and international consumers were identical.

c. The Japanese firm will charge a lower price abroad than in Japan

Suppose Ohio's state government is considering an increase in the sale tax imposed on yachts to help pay for government programs. Which of the following is true? a. The burden of this tax will fall entirely on yacht consumers. b. The burden of this tax will fall entirely on yacht manufacturers. c. The sales of yachts will decrease. d. The profit of yacht manufacturers will increase. e. Employment of workers in the yacht industry will increase.

c. The sales of yachts will decrease.

Compared to the equilibrium price and quantity sold in a competitive market, a pure monopolist will charge a ________ price and sell a ________ quantity. a. higher; larger b. lower; larger c. higher; smaller d. lower; smaller e. none of these

c. higher; smaller

Unlike a firm buying a particular factor of production in a perfectly competitive market, a pure monopsonist a. pays a different price for each unit of the factor of production purchased. b. pays a price equal to its marginal value for the last unit purchased. c. sets marginal value equal to marginal expenditure in deciding how much of the factor to use. d. pays a price for the factor of production that depends on the number of units purchased.

d. pays a price for the factor of production that depends on the number of units purchased.

Monopoly power results from the ability to a. set price equal to marginal cost. b. equate marginal cost to marginal revenue. c. set price above average variable cost. d. set price above marginal cost.

d. set price above marginal cost.

Which of the following conditions must hold in the equilibrium of a competitive market where the government puts a specific tax on consumers? a. The quantity sold and the price paid by the buyer must lie on the demand curve. b. The quantity sold and the seller's price must lie on the supply curve. c. The quantity demanded must equal the quantity supplied. d. The difference between the price the buyer pays and the price the seller receives must equal the specific tax. e. All of the above

e. All of the above

If a decline in the wage rate causes every firm in a market to hire more labor, a. the market supply curve for output will increase. b. the equilibrium price of output will decrease. c. every firm's marginal revenue product of labor curve will decrease. d. the typical firm will end up hiring less labor than it would if it were the only firm facing the lower wage. e. All of the above.

e. All of the above.

When a firm engages in "perfect" (first-degree) price discrimination, a. consumer surplus is zero. b. consumers (as a group) buy more than they would if the firm charged a single, monopoly price. c. producer surplus is greater than it would be if the firm charged a single, monopoly price. d. the firm's profit is greater than it would be if the firm charged a single, monopoly price. e. all of the above

e. all of the above

If a worker's wage decreases, the substitution effect will a. decrease leisure, regardless of whether leisure is a normal or inferior good. b. increase leisure, regardless of whether leisure is a normal or inferior good. c. increase leisure only if leisure is a normal good. d. decrease leisure only if leisure is a normal good. e. be larger than the income effect.

b. increase leisure, regardless of whether leisure is a normal or inferior good.

For a firm engaging in "perfect" (first-degree) price discrimination, marginal revenue is a. equal to the price paid for each unit of output. b. greater than the price paid for each unit of output. c. less than the price paid for each unit of output. d. less than the height of the demand curve for the given unit of output. e. less than marginal revenue would be for a non-discriminating monopolist.

a. equal to the price paid for each unit of output.

The pure monopolist has no supply curve because a. the price set at any particular quantity level depends on the market demand curve. b. the price set at any particular quantity level depends on the marginal revenue curve. c. the monopolist's marginal cost curve changes considerably over time. d. the relationship between price and quantity depends on both marginal cost and average cost. e. although there is only a single seller at the current price, it is impossible to know how many sellers would be in the market at higher prices.

a. the price set at any particular quantity level depends on the market demand curve.

When the federal government installs a price support program that requires the government to purchase all of a good not bought in the private economy at the support price, the impact on total welfare is the a. change in consumer surplus. b. change in consumer surplus + the change in producer surplus + the cost to government. c. change in consumer surplus + the change in producer surplus - the cost to government. d. change in consumer surplus + the change in producer surplus.

c. change in consumer surplus + the change in producer surplus - the cost to government.

A firm planning to engage in third-degree price discrimination (market segmentation) must face each of the following conditions except a. a sufficient degree of market power. b. consumers that differ in their willingness to pay or own-price elasticities of demand. c. economies of scale. d. an ability to prevent re-sale. e. an ability to segment the markets.

c. economies of scale.

When the market price is held above the competitive level, the deadweight loss is composed of: a. producer surplus losses associated with units that used to be traded on the market but are no longer exchanged. b. consumer surplus losses associated with units that used to be traded on the market but are no longer exchanged. c. producer and consumer surplus losses associated with units that used to be traded on the market but are no longer exchanged. d. There is no deadweight loss if the government uses a price floor policy to increase the price.

c. producer and consumer surplus losses associated with units that used to be traded on the market but are no longer exchanged.

A tennis pro charges $15 per hour for tennis lessons for children and $30 per hour for tennis lessons for adults. The tennis pro is practicing a. first-degree price discrimination. b. second-degree price discrimination. c. third-degree price discrimination. d. fourth-degree price discrimination. e. fifth-degree price discrimination.

c. third-degree price discrimination.

An increase in technology that enhances labor productivity will likely result in: a. a decrease in labor employment and an increase in the wage rate. b. a decrease in labor employment and a decrease in the wage rate. c. an increase in labor employment and a decrease in the wage rate. d. an increase in labor employment and an increase in the wage rate. e. employers using less labor and more capital while the wage effect is unknown.

d. an increase in labor employment and an increase in the wage rate.

Cole's Coal Company is the only employer in a remote and mountainous region of the country, so the firm is a monopsony buyer of labor in the market. If the local population declines and there are fewer qualified coal miners available, which one of the curves used to determine the monopsony outcome in this market shifts? a. The demand curve b. The marginal valuation curve c. The average expenditure curve d. The marginal expenditure curve e. Both c) and d)

e. Both c) and d)

An amusement park charges an entrance fee of $35 per person plus $2.50 per ride. This is an example of a. second-degree price discrimination. b. third-degree price discrimination. c. intertemporal price discrimination. d. a quantity discount. e. a two-part tariff.

e. a two-part tariff.