Econ Final

Suppose Stella ranks her preferences for spending her free afternoon as:1. Going to a get coffee with a friend2. Studying for her accounting exam3. Taking a nap. what is her opportunity cost of getting coffee?

studying for her accounting exam, and the cost of the coffee

Suppose the price is of a good is currently above the market equilibrium price. Is there asurplus or a shortage? Is quantity demanded or quantity supplied greater?

surplus; quantity supplied

Successfully advertising your product to attract new customers and build loyalty wouldMOST likely 1. increase demand 2. increase demand AND increase market power. 3. increase market power 4. decrease demand AND increase market power

increase demand AND increase market power.

After a year delivering pizzas, you get a raise, and you cut back on your hours. For you: 1. the substitution effect is stronger than the income effect. 2. the income effect is stronger than the substitution effect. 3. leisure is an inferior good. 4. both leisure and labor are normal goods

the income effect is stronger than the substitution effect.

Suppose the government wants to correct for a market failure due to flu vaccinesproviding herd immunity. What policy would best reduce deadweight loss? 1. binding price ceiling 2. private bargaining 3. tax 4. Subsidy.

subsidy

Consider the market for labor in the fast-food industry Assume that the retail industry requires similar skills as the fast-food industry. What willhappen in the market for labor in the fast-food industry if wages in the retailindustry increase? 1. the market supply curve for labor will shift to the right. 2. the market supply curve for labor will shift to the left. 3. the point representing the equilibrium wage and quantity of workers will move upand to the right along the market supply curve for labor .4. the point representing the equilibrium wage and quantity of workers will movedown and to the left along the market supply curve for labor

the market supply curve for labor will shift to the left.

In which situation do you expect the store to have the most inelastic supply? 1. Time Frame: 1 Year. Warehouse size: Small. 2. Time Frame: 1 Year. Warehouse size: Large. 3. Time Frame: 1 Day. Warehouse size: Small. 4. Time Frame: 1 Day. Warehouse size: Large.

time frame: 1 day. warehouse size: small

The rational rule for employers tells us that you should hire workers until the 1. marginal product of labor = marginal revenue product of labor 2. price = marginal product of labor 3. wage = marginal product of labor 4. wage = marginal revenue product of labor.

wage = marginal revenue product of labor.

Which statement BEST describes a negative externality? 1. Your neighbor has a honey farm, and the bees pollinate your orchard. 2. Your neighbor has an ornamental pond that breeds mosquitoes. 3. Your neighbor is a landscape architect who uses her property to demonstratebeautiful landscaping, increasing the value of all of the houses on the block .4. You can use your neighbor's pool whenever you wish.

your neighbor has an ornamental pond that breeds mosquitoes.

subsidy

A government payment that supports a business or market example: electric car

Which of the following positions is likely to result in a significantly lower wage (thelowest wage) relative to other nursing positions that require similar skills andexperience? 1. A position that requires you to work in a facility with violent patients. 2. A position that requires you to work the night shift. 3. A position that allows you to see patients virtually while working from home 4. A position that requires traveling to a new hospital every two weeks.

A position that allows you to see patients virtually while working from home

sunk cost

a cost that happened and can't be reversed good decisions=no sunk cost

inferior good

a good for which higher income causes a decrease in demand -lower quality example: non-smartphone, fast food

variable costs

costs that vary directly with the level of production

positive policy

describes what is happening, explaining why, predicting what will happen

club goods

excludable but not rival example: cable tv, passwords

congestion

good becomes less valuable because others us it example: your demand for driving on a particular road declines if you know others are taking it. traffic jam.

private goods

goods that are both excludable and rival in consumption -airline seat

rival goods

goods that only one person can consume at a time example: eating a cupcake then no one else can eat it

substitute goods

goods that replace each other -causes demand to increase example: coke vs. pepsi example: if Pizza Hut raises their prices, my demand for dominos will increase

The slope of a utility function is: 1. positive and increasing. 2. positive and diminishing. 3. negative and increasing. 4. negative and diminishing

positive and diminishing

inelastic

smaller than one. -needs -buyer is not as responsive

perfectly inelastic

vertical line

The price of peanut butter goes up by 10% and the demand for jelly falls by 6%. What isthe cross-price elasticity of demand for jelly with respect to peanut butter? Are peanutbutter and jelly substitutes or complements?

-0.6, complements

perfectly competitive market

-all businesses sell and identical good -many buyers and sellers (businesses have no market power) -price takers example: agriculture products: corn is corn (no one can tell a difference) -least amount of market power

strategic interaction

-when your best choice depends on what others choose -your decisions and payoffs are intertwined with those of others

unit elasticity

1

If drivers for ridesharing services like Uber and Lyft successfully negotiate for higherpay, and parking lot operators in the city raise parking rates, what can you concludeabout the new equilibrium in the ridesharing market?

1. The equilibrium price will rise, but the impact on quantity is unclear. Correct answer 2. The equilibrium quantity will rise, but the impact on price is unclear .3. Both the equilibrium price and quantity will rise .4. Both the equilibrium price and quantity will fall.

The price of muffins at your local bakery rises from $1.50 to $2.00. As a result thequantity of brownies purchased drops from 175 to 125 muffins per day. Calculate theabsolute value of the price elasticity of demand for muffins. Use the midpoint formulaand round to the nearest hundredth if needed

1.17

Which of the following is a positive statement? 1.It is right for the government to financially support other countries through foreignaid programs. 2. Income taxes are too high, and the federal government should cut them. 3. Lower college tuition will lead to more children from poor families attendingcollege. 4. The price of oil should be increased because it has a negative impact on theenvironment.

3. Lower college tuition will lead to more children from poor families attendingcollege.

monopoly

A market in which there are many buyers but only one seller. -lots of market power -no one is selling the same thing -price setter

oligopoly

A market structure in which a few large firms dominate a market -you have some market power -not a price taker example: AT&T, Verizon, t-mobile

Which of the following would be a binding policy? 1. A rent control policy greater than the equilibrium rent 2. A minimum wage greater than the equilibrium wage. 3. A quota on oil sales set above the equilibrium quantity 4. A salary cap above the equilibrium wage

A minimum wage greater than the equilibrium wage.

diminishing marginal benefit

Each additional item yields a smaller marginal benefit than the previous item -demand curve and and marginal benefit curve are the same

Which of the following is an example of a progressive feature of a tax system? 1. Retirement savings being excluded from taxable income. 2. Social Security taxes only applying to roughly the first $150,000 of income. 3. Federal income tax rates increasing as income increases. 4. Having a flat sales tax on all products

Federal income tax rates increasing as income increases.

Assume that the value of a high-quality used phone of a particular model is $200,whereas the value of a low-quality used phone is $100. Assume that 15% of usedphones are low quality and 85% are high quality. Which is TRUE? 1. Fewer than 15% of buyers will expect low quality. 2. Fewer than 15% of sellers will charge a low price. 3. Fewer than 15% of phones sold will be low quality. 4. More than 15% of phones sold will be low quality.

More than 15% of phones sold will be low quality.

Which scenario BEST illustrates an oligopolistic industry? 1. A single cell phone provider services the entire Midwest. 2. Thousands of quinoa farmers sell their output in global commodities markets. 3. The Coca-Cola Company and PepsiCo (the companies that make Coke and Pepsi,respectively) sell most of the soft drinks consumed around the world. 4. The State University of New York has one bookstore that caters to all studentsacross all campuses

The Coca-Cola Company and PepsiCo (the companies that make Coke and Pepsi,respectively) sell most of the soft drinks consumed around the world.

normal good

a good for which higher income causes an increase in demand -better quality example: organic food

common resource

a good that is rival but not excludable -fish in the ocean, national parks sometimes make you pay a fee

price elasticity of demand

a measure of how responsive buyers are to price changes -formula: percent change in quantity divided by the percent change in price

price floor

a minimum price for a good or service

mandate

a requirement to buy or sell a minimum amount of a good example: health insurance mandates US citizens to have health insurance

Suppose the government wants to correct for a market failure due to positiveexternalities that cause underproduction (for example: flu vaccines and herd immunity).What policy could reduce deadweight loss? 1. A binding quota 2. A binding price ceiling 3. A subsidy. 4. A tax

a subsidy

when you want to position your product based on supply-side considerations, you will position your product to: 1. get the most customers by offering the lowest price 2. offer nearly the same products and services as those of your competitors 3. attract as many customers as possible 4. be as different from your competitors products as possible

be as different from your competitors products as possible

elastic

greater than one. buyer is responsive -wants -more competing products=greater elasticity

positive externality

leads to underproduction -benefits bystanders example: getting a flu shot so others don't get sick

quota

limit on maximum quantity of a good -NYC has a taxi quota which only allows people with a medallion to drive a taxi in the city

For suppliers, a ______________ is an incentive to ____________, because there are fewprofit opportunities. 1. low price; increase production 2. high price; increase production 3. high price; decrease production 4. low price; decrease production.

low price; decrease production.

Monopolist Competition

market with many small businesses; each selling different products -imperfect competition -second to last in market power

__is consistent with the idea that people with health insurance that protects against high medical expenses will seek more medical care than those without health insurance. 1. Adverse selection of sellers 2. Moral Hazard. 3. Adverse selection of buyers 4. Market disequilibrium

moral hazard

The more price sensitive a group is, the _____ their demand. Thus, you'll want to chargethem a _____ price. 1. more elastic; lower. 2. more elastic; higher less elastic; lower less inelastic; higher

more elastic; lower.

Which is NOT a government action that results in a barrier to entry in a product market? 1. granting a patent on a product 2. prohibiting advertisers from making false claims. 3. imposing regulations that increase start-up costs for new companies 4. requiring that companies have licenses to produce the product

prohibiting advertisers from making false claims.

Suppose Matilda likes drinking either a sparkling water or iced tea each afternoon. Howwill Matilda's demand for iced tea change if the price of iced tea increases?

quantity demanded decreases

The number of bank tellers declined from an average of 20 per branch in 1988 to 13 in2004, as ATMs replaced human tellers. This meant that the cost of running each branchfell. Banks responded by increasing the number of urban bank branches by 43% in thesame time period, which increased the total number of bank employees. So ATMsshifted employees' work from routine tasks like deposits and withdrawals towards skillsmachines cannot provide, such as sales and customer service.When the use of ATMs became more prevalent, reducing the banks' overall costs,the ___________ effect was dominant. On net, labor and capital would beconsidered ____________ in this industry. 1. substitution; substitutes 2. substitution; complements 3. scale; substitutes 4. scale; complements.

scale; complements

All of these are ways to solve moral hazard problems EXCEPT: 1. giving the actor "skin in the game," or a stake in the outcome. 2. sellers offering different contracts so that buyers separate themselves. 3. making hidden actions observable through monitoring. 4. aligning incentives through government rules and social norms.

sellers offering different contracts so that buyers separate themselves.

network

when a good becomes more useful because other people use it. example: USA uses snapchat and instagram and china uses WeChat

Companies do not charge everyone their reservation price because 1. it is difficult for people to reveal to companies their willingness to pay. 2. a consumer's marginal benefit is fundamentally unknowable. 3. willingness to pay is private information that people have an incentive to keep hidden 4. companies wish to provide customers with some consumer surplus to instillcustomer loyalty.

willingness to pay is private information that people have an incentive to keep hidden

public goods

Goods that are neither excludable nor rival in consumption -national defense, public education

rational rule for sellers

Keep selling until price = marginal cost

perfectly elastic

horizontal line

comparative advantage

the ability to do a task at a lower opportunity cost

negative externality

harms bystanders -too much, people do it a lot -leads to overproduction -smoking

marginal principle

how many ---- "one more"

What is Paulie's opportunity cost of producing one ice cream cone? 1. 2 ice cream cones 2. 5 t-shirts 3. 4 t-shirts. 4.4 ice cream cones

4 t-shirts

Which of the following situations would lead to the largest tax incidence for suppliers? 1. A tax of $1 is placed on suppliers and supply is the relatively more elastic curve. 2. A tax of $1 is placed on suppliers and demand is the relativelymore inelastic curve. 3. A tax of $1 is placed on buyers and demand is the relatively more inelastic curve. 4. A tax of $1 is placed on buyers and supply is the relatively more inelastic curve.

A tax of $1 is placed on buyers and supply is the relatively more inelastic curve

hurdle method

Offer lower prices only to buyers who are willing to overcome some hurdle example: haggling people, bad service

In which situation will communication NOT solve a coordination problem? 1. Choosing which phone brand to buy 2. Two prisoners deciding to confess or not with a plea deal option. 3. Reconnecting a call after it drops 4. A car and pedestrian meeting at an intersection

Two prisoners deciding to confess or not with a plea deal option.

Suppose the government institutes a policy that requires all interior designers toacquire a license in order to work in the field. What do you expect to happen to theequilibrium wage and employment in the market for interior designers? 1. Wage increase, employment increases 2. Wage increase, employment decreases. 3. Wage decrease, employment increases 4. Wage decrease, employment decreases

Wage increase, employment decreases.

Suppose you are thinking about funding a Kickstarter campaign for a hybridmechanical/digital calendar for which you are willing to pay $125. To receive a calendar,the company requires you to pledge $100. You think there is about an 80% chance ofthe company succeeding. If the company fails, you will not receive a refund. Use the consumer surplus you obtain if the company succeeds to evaluate whether the bet is fair. Is the bet fair? Would a risk-averse individual take this bet? 1. No. Yes. 2. Yes. No. 3. No. No. 4. Yes. Yes.

Yes; No

binding price floor

above equilibrium -causes a surplus

non-binding price ceiling

above the equilibrium price and has no effect

moral hazard

actions you take because they aren't observable and your partially insulated from their consequences

When a perfectly competitive market is in equilibrium with no market failures, which ofthe following occur? 1. Efficient Quantity 2. Efficient Allocation 3. Efficient Production 4. All of the Above.

all of the above

interdependence principle

all of your choices are connected

Which of the following is true when there is free entry and exit in the market? 1. Firms should exit when price < average cost. 2. In the long run, price = average cost. 3. In the long run, there will be zero economic profit. 4. All options.

all options

binding price ceiling

below equilibrium -causes a shortage

A firm should specialize in producing the good for which it has the 1. highest opportunity cost 2. comparative advantage. 3. absolute advantage 4. lowest price

comparative advantage

cross price of elasticity

complements have negative cross price elasticity substitutes have positive cross price elasticity formula: percent change quantity demanded/percent change in price of another good

Suppose Otto enjoys having iced lattes with coffee and oat milk. If the price of coffeeincreases, what will happen to his demand for oat milk?

decrease in demand

The popularity of smartphones led app developers to be more highly valued in the labormarket than their desktop computer programming colleagues. Which of the followingbest represents what would happen in the market for desktop computerprogrammers as smartphones became popular? 1. Increased Labor Demand 2. Decreased Labor Demand 3. Increased Labor Supply 4. Decreased Labor Supply

decreased labor supply

Suppose a company lowers the price of its product 10%, and sold 20% more units. You can conclude that

demand for the product is currently elastic and revenue increased

A perfectly competitive market is a market in which all firms in an industry sellan .................... and there are ................ , each of whom is ................... relative tothe size of the market.

identical good; many buyers and sellers; small

price ceiling

maximum legal price that can be charged for a product

Select the option which correctly fills in the corresponding blanks. The law of demand tells us that as price increases ....................... . The law of supplytells us that as price increases ................... .

quantity demanded decreases; quantity supplied increases

Suppose Taylor has decided to start a bracelet making business. Which of these costs will not be considered in marginal decisions of how many bracelets to produce? cost of string rent for the storefront where production happens cost of beads wages paid to employees

rent for the storefront where production happens

rational rule for sellers in competitive markets

sell one more item if the price is greater than (or equal to) the marginal cost

group pricing

selling the same product at different prices to different groups example: charging $100/person with groups with 1-5 people and $50/person for groups 6-10 people

law of supply

the tendency for the quantity supplied to be higher when the price is higher

complimentary goods (complements)

they go well together -causes demand to decrease example: if the price of hotdogs goes up, you will buy less hotdog buns

opportunity cost of a task

time this task takes / time required to produce the alternative

In which type of market structure is advertising used MORE intensively to increasedemand for a company's product rather than market demand? 1. perfect competition 2. monopoly 3. imperfect competition. 4. both perfect and imperfect competition

imperfect competition

Public goods like national defense and public radio are 1. nonrival and excludable. 2. nonrival and nonexcludable. 3. rival and excludable. 4. rival and nonexcludable.

nonrival and nonexcludable

Which of the following is the most effective example of group price discrimination? 1. Offering a student discount for vintage sports memorabilia. 2. Offering men a 10% discount on a car. 3. Offering senior citizens a 10% discount at IHOP. 4. Offering a discount on an online store for anyone that has naturally red hair

Offering senior citizens a 10% discount at IHOP.

Suppose you manage a convenience store. If macaroni and cheese is an inferior good,what do you suppose would happen to the price and quantity sold of macaroni andcheese as incomes fall during a recession?

1. The price would increase, and the quantity would decrease. 2. Both the price and quantity would increase. Correct answer 3. Both the price and quantity would decrease. 4. The price would decrease, and the quantity would increase.

Suppose a farmer produces crops using water, land, and fertilizer. The price of waterincreases due to a drought in the region. How does this affect the farmer's decisions tosupply crops?

supply decreases

Suppose there was a shift in curve(s) that led to an increase in price and a decrease inquantity. What can you confidently conclude about the curves that shifted?

supply decreased

In the United States, the top brands of kitchen appliances include Samsung and LG,which are South Korean companies, and General Electric and Whirlpool, which areAmerican companies. Without international trade, General Electric and Whirlpool wouldhave _____ market power, and American consumers would face _____ prices. 1. more; higher. 2. less; higher 3. more; lower 4. less; lower

more; higher

Inferior goods have a ___________ income elasticity of demand. Normal goods have a____________ income elasticity of demand. Luxuries have a __________ income elasticity ofdemand than necessities. negative, positive, larger Positive; Negative; Smaller 3. Greater than One; Less than One; Larger 4. Less than One; Greater than One; Smaller

negative, positive, larger

When a signal from sellers to buyers is effective, then sellers: 1. know which buyers are not interested in quality. 2. know which buyers are willing to pay a high price. 3. of low-quality products can charge the same price as sellers of high-qualityproducts. 4. of high-quality products can charge a higher price than sellers of low-qualityproducts.

of high-quality products can charge a higher price than sellers of low-qualityproducts.

Which is NOT an example of a relationship-specific investment that could result in ahold-up problem? 1. locating a factory near a major supplier of inputs 2. training employees in the same computer system and programming used bycustomers to simplify transfer of data 3. buying customized equipment to produce output to the specifications of a majorcustomer 4. organizing the layout of a factory for the most efficient flow of the production line.

organizing the layout of a factory for the most efficient flow of the production line.

normative policy

prescribes what should happen. opinion based