ECON final

Economic surplus

total benefits-total cost

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

2. increase demand and increase market power

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

2. moral hazard

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

2. nontrivial and non excludable

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

2. positive and diminishing

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.

2. sellers offering different contracts so that buyers separate themselves.

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? 1. Demand increased 2. Supply decreased. 3. Supply increased 4. Supply decreased and demand increased

2. supply decreased

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.

2. the income effect is stronger than the income effect

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.

2. your neighbor has an ornamental pond that breeds mosquitos

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

3. A subsidy

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 attending college. 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 attending college

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.

3. Offering senior citizens a 10% discount at IHOP.

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? 1. Surplus; Quantity Demanded 2. Surplus; Quantity Supplied. 3. Shortage; Quantity Demanded 4. Shortage; Quantity Supplied

3. Shortage, quantity demanded

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.

3. Time frame: 1 day. Warehouse size: small

Suppose a company lowers the price of its product 10%, and sold 20% more units. You can conclude that 1. demand for the product is currently elastic and revenue decreased. 2. demand for the product is currently inelastic and revenue decreased. 3. demand for the product is currently elastic and revenue increased. 4. demand for the product is currently inelastic and revenue increased.

3. demand for the product is currently elastic and revenue increased

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

3. imperfect competition

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.

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

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.

4. a tax of $1 is placed on buyers and supply is the relatively more inelastic curve

When you want to position your product based on supply-side considerations, you willposition 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.

4. be as different from your competitors products as possible

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

4. low price, decrease production

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.

4. more than 15% of phones sold will be low quality

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-quality products.

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

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.

4. subsidy

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.

4. wage = marginal revenue product of labor

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? 1. -0.6, complements. 2. 0.6, substitutes 3. -1.67, substitutes 4. 1.67, complements

1. -0.6, complements

Inferior goods have a ___________ income elasticity of demand. Normal goods have a____________ income elasticity of demand. Luxuries have a __________ income elasticity ofdemand than necessities. 1. Negative; Positive; Larger. 2. Positive; Negative; Smaller 3. Greater than One; Less than One; Larger 4. Less than One; Greater than One; Smaller

1. Negative, positive, larger

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 3. less elastic; lower 4. less inelastic; higher

1. more elastic; lower.

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. 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.

1. the equilibrium price will rise, but the impact on quantity is unclear

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. 1.00 2. 1.17. 3. 1.71 4. 2.33

2. 1.71

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

2. A minimum wage greater than the equilibrium wage

At the efficiency outcome, what is the consumer surplus? (look at graph on phone Q3) 1. A + B 2. A + B + C. 3. E + F + J 4. A + B + C + E + F + J

2. A+B+C

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.

3. federal income tax rates increasing as income increases

monopolistic competition

A market structure in which barriers to entry are low and many firms compete by selling similar, but not identical, products.

Production possibility

different sets of outputs that are attainable with your scarce resources

Oliogopolistic competition

only a few firms are in the market

The law of demand tells us that if price increases,_______________. The law of supply tells us that as price increases________________________.

quantity demanded decreases, quantity supplied decreases.

When is economic surplus maximized

when marginal benefit equals marginal cost

Increase in demand Decrease in demand Which shifts to the right and which shifts to the left?

Increase to the right Decrease to the left

Cost Benefit

incentives that shape a decision

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

2. comparative advantage

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. 3. Both the price and quantity would decrease. 4. The price would decrease, and the quantity would increase

2. both price and quantity would decrease

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