Econ Final Quizlet
If firms with market power follow the Rational Rule for Sellers with market power, they will keep selling until: Price = marginal cost Marginal revenue < marginal cost Marginal revenue > marginal cost Marginal revenue = marginal cost
Marginal revenue = marginal cost
You just finished a wonderful dinner at your favorite restaurant. The waiter comes over and asks if you'd like ice cream and if so, how many scoops of ice cream. In what order should you apply the four core principles of economics, below, to make a decision? Cost-Benefit Principle: Does the cost of acquiring ice cream outweigh the benefits? Opportunity Cost Principle: What do I give up by choosing to have ice cream? Marginal Principle: Should I have one more scoop of ice cream than I already have? Connectedness Principle: How will my choice to have ice cream affect other decisions?
Marginal, Cost-Benefit, Opportunity Cost, Connectedness/Interdependent
An efficient market... Minimizes producer surplus Maximizes total economic surplus Maximizes consumer surplus Minimizes total economic surplus
Maximizes total economic surplus
Which of the following would cause a shift in the supply curve in the specified market? In the market for tablets: A few schools enact a new policy requiring all students to purchase tablets. In the market for cookies: The price of flour and sugar increases. In the market for solar panels: Researchers find a way to manufacture solar panels more efficiently. In the market for bus tickets: The price of bus tickets increases due to a new city policy.
In the market for cookies: The price of flour and sugar increases. In the market for solar panels: Researchers find a way to manufacture solar panels more efficiently.
In December, some groups of friends play a game called the White Elephant Gift Exchange. The rules of the game are that everyone submits a gift to a common pool, and then in sequential order, each person picks either a gift from the pool or "steals" a gift from anyone who has previously chosen. If you could choose your order in the sequence, would you choose to go first, middle, or last to get the gift you want most? First Last Middle
Last
After the 2008 financial crisis, many consumers were displeased with GM for accepting bailout funds from the US government. This consumer displeasure is likely to shift the demand curve for GM vehicles:
Left
Pamela and Celine are working on a class project together. Based on past experience, they know Pamela can produce 5 presentation slides per hour or write 5 pages of the final report per hour, while Celine can produce 10 presentation slides per hour or write 3 pages of the final report per hour. To allocate tasks based on each person's comparative advantage: Pamela should create presentation slides, and Celine should write final report pages. They should each split their time between creating presentation slides and writing final report pages. Pamela should write final report pages, and Celine should create presentation slides. It doesn't matter who creates presentation slides and writes final report pages.
Pamela should write final report pages, and Celine should create presentation slides.
New York City Mayor Bill de Blasio is considering implementing a soda tax. If we know the market demand for soda is relatively more inelastic than supply, who will bear more of the economic burden of the soda tax? Buyers and sellers will share the economic burden equally People who buy soda People who sell soda
People who buy soda
Adult continuing education programs compete with each other for students. Massive Open Online Courses (MOOC's), which offer free or low-cost courses online, are becoming increasingly popular. For adult education programs, this is a threat from: Potential substitutes Customers Potential entrants Current competitors Suppliers
Potential substitutes
When the supply curve shifts to the right and the demand curve remains the same, what happens to the equilibrium price and quantity? Price decreases and quantity increases Price increases and quantity decreases Both price and quantity decrease Both price and quantity increase
Price decreases and quantity increases
Many employers only hire college graduates for certain positions. Some say this is not necessarily because of the skills you gain in college, but because earning a college degree tells the employer what type of worker you will likely be. This is an example of reducing adverse selection through: Skin in the game Third-party verifiers Signaling
Signaling
You order a salad for lunch for $8, but you would have been willing to pay up to $10. It cost the restaurant $3 to make one more salad for you to buy. What is the total economic surplus you experience?
$2
You order a salad for lunch for $8, but you would have been willing to pay up to $10. It cost the restaurant $3 to make one more salad for you to buy. What is the economic surplus the restaurant experiences?
$5
You order a salad for lunch for $8, but you would have been willing to pay up to $10. It cost the restaurant $3 to make one more salad for you to buy. What is the total economic surplus resulting from this transaction?
$7
When the price of backpacks decreased from $30 to $25 each, the quantity demanded increased from 1 million to 1.5 million backpacks. Calculate the price elasticity of demand using the midpoint formula. -3.00 -2.20 -0.45 -1.67 -0.33
-2.20
The price of a bus ticket increased from $1 to $2, and the quantity of bus tickets sold decreased from 500,000 to 450,000 per day. What is the price elasticity of demand for bus tickets, using the midpoint formula? -6.33 -10.00 -0.20 -0.16 -0.10
-0.16
Mary and Michael are attending a party tonight, and they have to go to the store for supplies. Mary will bring juice, soup, or pizza, and Michael will bring cups, bowls, or plates. Mary and Michael want to serve juice in cups, soup in bowls, and pizza on plates. Before the party, they go to different stores directly from work, and they don't communicate. How many simple strategy equilibria exist? 3 1 0 4 2
3
Which of the following are examples of price discrimination? Choose all applicable answers. A childcare center charges the same daily rate to everyone A car wash charges more for "luxury" cars than for standard cars of the same size A restaurant offers a senior citizen discount
A car wash charges more for "luxury" cars than for standard cars of the same size A restaurant offers a senior citizen discount
Oregon grows many trees that can be used to make wood products -- more than most other states. What is the source of Oregon's comparative advantage in wood products? Benefits of mass production Abundant inputs Specialized skills
Abundant inputs
You are in charge of a new health insurance company. You operate in a country that doesn't require health insurance, and you don't have very much information about your customers. You notice that your managers are coming to you frequently, making the case that you need to raise rates to cover your costs. What is likely causing this issue? Adverse selection of sellers; competitors in your industry are trying to sell low quality insurance plans Adverse selection of buyers; mostly unhealthy customers are opting to buy insurance Risk aversion; mostly healthy customers are opting to buy insurance
Adverse selection of buyers; mostly unhealthy customers are opting to buy insurance
You are working for a state legislator, and she is coming up with policies that would reduce carbon emissions from cars. Identify which policy solution(s) could theoretically address this market failure (ignore for now the political viability of each policy idea): Allocate a limited number of tradable permits to purchase gasoline Tax gasoline Subsidize low emissions vehicles Launch a marketing campaign to encourage people to drive less
Allocate a limited number of tradable permits to purchase gasoline Tax gasoline Subsidize low emissions vehicles Launch a marketing campaign to encourage people to drive less
You rent a house, and you want to renew your lease. Your landlord loves having you as a tenant and also wants to renew your lease. However, neither of you have discussed this shared interest in renewing. When a lease is renewed, the rent is renegotiated. Whoever asks to renew the lease will have a worse negotiating position. Assume this is a simultaneous game. You and your landlord agreed to send postcards indicating your choice between two options: (1) ask to renew the lease, or (2) ask to show the house to prospective tenants. The possible payoffs are shown in the table below. LOOK AT DRAWN GRAPH IN NOTES Your preferences, from best to worst outcome: Renew lease at a lower rent, renew lease at the same rent, renew lease at a higher rent, and lease ends (your least desired outcome). Your landlord's preferences, from best to worst outcome: Renew lease at a higher rent, renew lease at the same rent, renew lease at a lower rent, and lease ends (your landlord's least desired outcome). If you expect your landlord will ask to renew the lease, what is your best response? Play a mixed strategy Ask to renew the lease Ask to show the house If your landlord expects that you will ask to renew the lease, what is your landlord's best response? Ask to show the house Play a mixed strategy Ask to renew the lease What type of game is this? Prisoner's dilemma: highlighting the difficulty of cooperating with your landlord Anti-coordination game: your best response is to take a different action than the other player. Coordination game: your best response is the same choice as the other player How many simple strategy equilibria exist for this simultaneous game? 1 0 4 2 3
Ask to show the house Ask to show the house Anti-coordination game: your best response is to take a different action than the other player. 2
Select all of the following that are results of congestion effects- -Because of the long line at Starbucks, people bring their own coffee to work -A salmonella outbreak at a popular restaurant causes people to stop eating lunch at restaurant locations across the country -In the 1990's professionals began to use Microsoft software because many of their colleagues were using Microsoft software -People begin to bike instead of drive due to crowded roadways
Because of the long line at Starbucks, people bring their own coffee to work, People begin to bike instead of drive due to crowded roadways
In 2015, the UK government enacted a price floor for milk. Many people complain about this policy, saying it is economically inefficient. What could be some of the effects of a binding price floor on milk? The UK government brings in additional revenue due to the subsidy Because of the price floor, many farmers will choose to produce milk rather than other dairy products Inefficient dairy farmers will remain in the market At the guaranteed price, farmers will make more milk than consumers demand, and a surplus will result Farmers begin to exit the market because of the guaranteed price
Because of the price floor, many farmers will choose to produce milk rather than other dairy products Inefficient dairy farmers will remain in the market At the guaranteed price, farmers will make more milk than consumers demand, and a surplus will result
When the demand curve shifts to the left and the supply curve remains the same, what happens to the equilibrium price and quantity? Price decreases and quantity increases Both price and quantity decrease Price increases and quantity decreases Both price and quantity increase
Both price and quantity decrease
Which are signs of disequillibrium? Select all that apply. Buyers are waiting in long lines to purchase a product At a given price, buyers demand the same quantity that sellers provide Sellers have a surplus and start to lower prices Buyers begin to sell their purchased product on a black market for a higher price
Buyers are waiting in long lines to purchase a product Sellers have a surplus and start to lower prices Buyers begin to sell their purchased product on a black market for a higher price
Part 1 of 2 Imagine you've created a new app that allows users to pre-order their coffee from their favorite coffee shops. Your app is incredibly popular and you begin to make economic profit. However, there are many competitors considering entering your market. They would be able to do so very easily. Given these circumstances, what is the likely outcome? Competitors enter the market, which reduces your economic profit and market power Competitors do not enter the market, and your economic profit and market power are unaffected Competitors enter the market, and your economic profit and market power are unaffected Competitors enter the market, which increases your economic profit and market power
Competitors enter the market, which reduces your economic profit and market power
Many competitors have entered the market for pre-ordered coffee apps. In fact, there are so many competitors now that the market's sale price has dropped and many firms' economic profits have turned negative. Given these circumstances, what is the likely outcome? Competitors do not enter or exit the market, and your economic profit and market power are unaffected Competitors exit the market, which increases your economic profit and market power Competitors enter the market, which decreases your economic profit and market power Competitors exit the market, which decreases your economic profit and market power
Competitors exit the market, which increases your economic profit and market power
Below are examples of variable and fixed costs a producer might have. Identify the short-run fixed cost(s). Computers the producer purchases for her office Cost of monthly oil purchases for manufacturing and heating Cost of raw materials the producer needs to make goods Rent for a building in which products are made
Computers the producer purchases for her office, Rent for a building in which products are made
Imagine you are doing your economics homework early. Your decision to spend time on your homework right now makes you tired and it becomes harder to focus on the class you planned to study for later tonight. Which aspect(s) of the connectedness principle does this illustrate? Check all that apply. -Connections over time -Connections between your own choices -Connections between markets -Connections between your choices and the choices of others
Connections over time, Connections between your own choices
A local bookstore with market power wants to use price discrimination to increase revenue. The store sells Harry Potter books for $30, Game of Thrones books for $20, and cookbooks for $15. The marginal cost of a cookbook is $3. Which of the following are considered bundling? Choose all applicable answers. Cookbooks are discounted by 50% Customers can purchase the new Game of Thrones book and a cookbook for $35 Customers can purchase the new Harry Potter book and a cookbook for $40
Customers can purchase the new Harry Potter book and a cookbook for $40
From 2014 to 2015, the quantity of steel provided in the U.S. market fell by 14%, due to decreased demand for U.S. steel. Given the reduction in demand for steel, what is the likely outcome in the labor market for steel workers? Demand curve shifts left as demand for steelworkers falls Demand curve shifts right as demand for steelworkers rises Demand curve shifts left as demand for steelworkers rises Demand curve shifts right as demand for steelworkers falls
Demand curve shifts left as demand for steelworkers falls
Services that used to be phone-based are shifting towards mobile applications. For example, rather than calling a taxi phone operator you can just makes a few clicks in an app to find a ride. As the cost of creating apps fall, what are the likely labor market effects for computer programmers who create apps and phone operators who coordinate services? Choose all that apply. Demand for phone operators increases as the price of creating apps falls Demand for computer programmers increases as apps become cheaper to produce Demand for computer programmers decreases as they are replaced by phone operators Demand for phone operators decreases as they are replaced by apps
Demand for computer programmers increases as apps become cheaper to produce Demand for phone operators decreases as they are replaced by apps
Chelsea manages a cookie factory and currently has 10 employees to run the cookie manufacturing machines. She recently decided to hire one more worker; however, she noticed the 11th worker didn't increase the number of cookies produced as much as the 10th worker. This is an example of: Increasing opportunity cost of time Network effects Diminishing returns
Diminishing returns
An amusement park with market power wants to increase attendance by lowering ticket prices. However, one analyst warns the amusement park's revenue could fall because some tickets that would have been sold anyway will be sold at the new lower price. The analyst is describing the: Discount effect Output effect
Discount effect
In the stock market, an investor with a fixed amount of money to invest has the option to buy small pieces of many companies or big pieces of a few companies. She determines buying small pieces of many companies is the best strategy to reduce her risk. What type of risk reduction strategy is she exercising? Hedging Diversification Insurance Gathering information
Diversification
During a political debate, a candidate makes the following argument: "We should limit imports of clothing from Bangladesh because of the unsafe working conditions in garment factories." Which argument for limiting trade does this represent? National security Saving jobs Domestic regulations Unfair competition and anti-dumping Infant industry
Domestic regulations
You usually take the bus to work and drives your car on weekends. However, due to falling oil prices, the marginal cost of driving to work on weekdays has fallen below the marginal cost of taking the bus on weekdays. The substitution effect tells us you should now: -Maintain your current habits -Continue to take the bus to work but drive less on weekends -Drive to work on weekdays and continue to drive on weekends -Take the bus to work and take the bus on weekends
Drive to work on weekdays and continue to drive on weekends
You are trying to decide whether to invest in a new company. You have estimated the company has a 60 percent chance of succeeding and a 40 percent chance of failing. If it succeeds, your utility would be 8 out of 10. If it fails, your utility would be 6 out of 10. How should you calculate the expected utility of making this investment? EU = (0.4)*(8) + (0.6)*(6) EU = (0.4)*(6) + (0.6)*(8) EU = (0.5)*(8) + (0.5)*(6)
EU = (0.4)*(6) + (0.6)*(8)
Like many students, your friends eat a steady supply of Ramen noodles, an inferior good. Your friends also enjoys meals from nearby restaurants, a normal good, but only eat there sparingly due to the cost. However, one of your friends recently acquired a job as a part-time grader. The income effect tells us this friend will: Eat more Ramen, eat at restaurants less frequently Eat less ramen, eat at restaurants more frequently Eat more Ramen, eat at restaurants more frequently Eat less Ramen, eat at restaurants less frequently
Eat less ramen, eat at restaurants more frequently
Choose the correct description of economic surplus. Economic Surplus = (Producer Surplus) x (Consumer Surplus) Economic Surplus = (Producer Surplus) + (Consumer Surplus) Economic Surplus = (Equilibrium Price) x (Equilibrium Quantity) Economic Surplus = (Producer Surplus) - (Consumer Surplus)
Economic Surplus = (Producer Surplus) + (Consumer Surplus)
A flatter demand curve means price elasticity of demand is more: Inelastic Elastic
Elastic
Your favorite restaurant serves an option of french fries or tortilla chips for sides. Imagine the cost of potatoes rises while the cost of corn tortillas remains the same. What would happen to the restaurant's supply curves for french fries and tortilla chips? French fries curve shifts left, tortilla chips curve stays the same French fries curve shifts left, tortilla chips curve shifts right French fries curve shifts left, tortilla chips curve shifts left French fries curve shifts right, tortilla chips curve stays the same French fries curve shifts right, tortilla chips curve shifts right French fries curve shifts right, tortilla chips curve shifts left
French fries curve shifts left, tortilla chips curve shifts right
As technology advances, fully autonomous vehicles may replace our current vehicles. Some see this shift as an economic threat while others see it as an economic gain. Select only the following justifications for each position that are true in the near to medium term: Gain: The cost of operating transportation services will be cheaper Threat: The technology will replace drivers with autonomous vehicles Gain: People will be hired as programmers, data scientists, and other positions to support the new technology Threat: Technology will overtake the entire industry leaving zero jobs for human activity in transportation services
Gain: The cost of operating transportation services will be cheaper Threat: The technology will replace drivers with autonomous vehicles Gain: People will be hired as programmers, data scientists, and other positions to support the new technology
n the 1970's, a series of events around the world caused oil prices to rise significantly. Oil is an input for producing gasoline. How did this price change shift the supply of gasoline? Gasoline supply curve shifted right Gasoline supply curve shifted left Gasoline supply curve did not shift
Gasoline supply curve shifted left
Your friend Kelly is celebrating the first anniversary of founding a successful business. She would like to measure her success in terms of economic profit. When calculating economic profit, which of the following should she subtract as the opportunity costs of her entrepreneurship? -Her monthly health insurance costs - Her foregone wages -Her foregone investment income -Her annual rent for the storefront
Her foregone wages, Her foregone investment income
O'Mara recently opened a restaurant on Frenchman Street in New Orleans, Louisiana. She is evaluating whether to hire more servers or install a Coca-Cola Freestyle machine (Links to an external site.). The cost of an additional server would be $15 per hour, and a server can serve 30 drinks per hour. The cost of a Freestyle Machine is $30 per hour, and a Freestyle Machine can serve 45 drinks per hour. Should O'Mara hire an additional server or rent the Freestyle Machine? Hire more servers Rent the Freestyle Machine
Hire more servers
You spent $5 on a cover charge to get into a concert only to find out that your friends went elsewhere. You would rather be with your friends, but you can't get the $5 cover back. You're weighing the costs and benefits of leaving the concert to join your friends. In making your decision, which options should NOT be included? -How much it cost to travel to your current location -How much you value time spent with your friends -The cost of the taxi ride to meet your friends -How much you like the food options at your current location -Cover charges at the place where your friends are -How much you value the time spent with your friends -The cost of the cover charge you've already paid
How much it cost to travel to your current location, The cost of the cover charge you've already paid
A bakery has two workers: Tom and Irly. They can make either pies or cakes. Tom is a new employee and can make 2 pies per hour or 1 cake per hour while Irly can make 8 cakes per hour or 4 pies per hour. Assuming each baker can only make one thing, who should make pies and cakes based on the principle of comparative advantage? Who has the absolute advantage in making both cakes and pies? Irly should make pies. and Tom should make cakes. Irly has an absolute advantage in making both cakes and pies. Irly should make pies. and Tom should make cakes. Tom has an absolute advantage in making both cakes and pies. Irly should make cakes, and Tom should make pies. Tom has an absolute advantage in making both cakes and pies. Irly should make cakes, and Tom should make pies. Irly has an absolute advantage in making both cakes and pies.
Irly should make cakes, and Tom should make pies. Irly has an absolute advantage in making both cakes and pies.
Which of the following are true about an individual's demand curve? -It's also a rational individual's marginal benefit curve -It's upward sloping -It describes a quantity demanded at each price -It's a set of plans
It's also a rational individual's marginal benefit curve, It describes a quantity demanded at each price, It's a set of plans
Recently, the City of Boston passed a regulation requiring all new housing developments to reserve at least 20% of units for low-income housing. What type of policy is this? Price floor Tax on suppliers Mandate Quota
Mandate
Last year, studies found that young adults were more likely to live with their parents rather than their partners for the first time in 130 years. In response, the White House is considering a policy to boost demand for housing. Which policies would help achieve this goal? Disregard for now any negative economic or political consequences. Price floors on housing located in neighborhoods that attract young adults A tax increase on young adults seeking to move away from a parent's home Mandate for each young adult or young couple to purchase one house before the age of 30 A quota on the number of housing units that can be occupied by young adults in certain neighborhoods Subsidies for young adults planning to buy their first home Price ceilings on housing located in neighborhoods that attract young adults
Mandate for each young adult or young couple to purchase one house before the age of 30 Subsidies for young adults planning to buy their first home Price ceilings on housing located in neighborhoods that attract young adults
You are deciding how long your vacation should be. Instead of asking "how many days," she should apply the _________ principle and ask "should I take one more day off?"
Marginal
Your individual demand curve is also your individual:
Marginal benefit curve
An individual supply curve is a supplier's: Marginal cost curve Marginal benefit curve
Marginal cost curve
On Saturday evenings, your neighbor hosts loud parties that make it hard for you to sleep. You are often less productive on Sunday as a result. You estimate your lost productivity is worth $100 per week. Identify which of the following could be solutions to your problem: There is no solution to this problem Negotiate with your neighbor, agreeing to pay him $50 per week for his parties to end by midnight Lobby the city to pass a noise ordinance (a law prohibiting loud noises late at night) Rent noise-cancelling headphones for $300 per month to wear when you sleep Pay a local law student $500 per month to sue your neighbor
Negotiate with your neighbor, agreeing to pay him $50 per week for his parties to end by midnight Lobby the city to pass a noise ordinance (a law prohibiting loud noises late at night) Rent noise-cancelling headphones for $300 per month to wear when you sleep
Recently, music-festivals have become popular in cities across America. Larger festivals, such as Austin City Limits or Boston Calling attract more attendees which means they attract more bands which helps them attract more attendees. By contrast, other, less attended festivals fail to attract bands and attendees. Larger music festivals are benefitting from:
Network effects
Someone offers you a bet. You have a 60% chance of winning and a 40% chance of losing. If you win, you will get $1,600. If you lose, you will lose $2,400. If you are risk-averse, should you take the bet? Yes No
No
You attend a university and decide that you value going to your school's football game at $25. A friend offers to sell you a ticket for $30. Will you increase your economic surplus if you buys the ticket?
No
Which of the following actions can governments take to increase total economic surplus in a perfectly competitive market, currently in equilibrium and with no externalities? Set a binding price ceiling Set a binding price floor Impose a tax on buyers Impose a tax on sellers No actions
No actions
Applying the marginal principle, "how many" questions should iteratively apply the following question instead:
One more?
When you try to estimate a value, the upper and lower bounds you place on your estimate so that you're 98 percent sure that the true number lies in this range often result in too small a range to contain the true value. What is this an example of? Focusing illusion Overconfidence Anchoring bias Representative bias
Overconfidence
When demand increases and supply decreases, what happens to the equilibrium price and quantity? Price increases and quantity could increase, decrease, or stay the same Both price and quantity increase Both price and quantity decrease Quantity increases and price could increase, decrease, or stay the same
Price increases and quantity could increase, decrease, or stay the same
Select all of the factors below that could shift a market supply curve: Buyers' income Prices of other outputs a producer could make instead A change in producer productivity, and technology improvements Buyers' expectations Producers' expectations A change in the producer's cost of inputs The number and type of sellers in the market
Prices of other outputs a producer could make instead A change in producer productivity, and technology improvements Producers' expectations A change in the producer's cost of inputs The number and type of sellers in the market
Comparative advantage is a theory of task allocation. It states: Producers have a comparative advantage in producing goods for which they have the lowest opportunity cost. They should produce these goods and purchase or trade for other goods. Producers have a comparative advantage in producing goods for which they have the highest opportunity cost. They should produce these goods and purchase or trade for other goods.
Producers have a comparative advantage in producing goods for which they have the lowest opportunity cost. They should produce these goods and purchase or trade for other goods.
Governments generally provide national defense because it is a _____ good that is _______ by markets. Private overproduced Public, underproduced Private, underproduced Public, overproduced
Public, underproduced
Recently, due to declining profits, many gas station owners have to decide whether to stay in the market or exit. Barry is a gas station owner and he knows if others leave the market first, his economic profit will increase. He wants to outlast other gas station owners to reap the economic profits. However, he knows other gas station owners will not leave the market solely because of his statements that he will not close his business. He needs to create a credible threat to show the other owners that he'll stay in the business. Identify the options Barry could utilize to establish a credible threat: Stop selling diesel fuel at his gas station Send a strongly worded letter to all other gas station owners stating his intention to stay in business Purchase futures contracts for a full year's worth of gasoline to sell at his station Begin building additional pumps at his gas station
Purchase futures contracts for a full year's worth of gasoline to sell at his station Begin building additional pumps at his gas station
In developing countries, direct cash transfers, where study participants are given cash to spend freely, are used to measure economic behavior. Many Tanzanian citizens purchase rice, a normal good, for dinner. If the citizens are given cash as a result of a direct cash transfer program, the income effect tells us they will likely: Purchase less rice Stop purchasing rice Continue their current habits Purchase more rice
Purchase more rice
Part 1 of 2: Many parents depend on childcare providers while they are at work. Suppliers of childcare have relatively elastic supply compared to the inelastic, but not perfectly inelastic, demand of parents. If the supply of childcare shifts left due to increasing input costs, what will happen to the quantity of childcare supplied? Quantity of childcare supplied will decrease Quantity of childcare supplied will increase Quantity of childcare supplied will stay the same
Quantity of childcare supplied will decrease
Starbucks is renowned for having an excellent supply chain. To achieve this, Starbucks researched supplier's business desires, negotiated contracts that were fair and beneficial to their suppliers as well as to themselves, and pursued other equitable business practices. Identify the type of supply side barrier Starbucks established. Learning-by-doing Benefits of mass production Research and development Relationships with suppliers
Relationships with suppliers
In early spring, many people are busy planning summer airline travel. However, a rise in landing fees that takes effect next year has led people to expect the price of all airline tickets to rise by 10%. This shifts the current demand curve for airline tickets:
Right
Recently, Millennials became the largest demographic group in the US. Their increasing disposable income is likely to shift the demand curve for Kendrick Lamar's and Beyonce's music (we assume most Millennials enjoy Beyonce and Kendrick Lamar):
Right
Recently, governments have an increased preference for data-based policy design. This change in preference is likely to shift the demand curve for the number of data savvy professionals:
Right
Supply curves slope upward because marginal costs increase as quantity produced increases. Select the reasons marginal costs increase with increasing production. Rising input prices Diminishing returns Rational Rule for Buyers Decreasing marginal costs
Rising input prices Diminishing returns
A local bookstore with market power wants to use price discrimination to increase revenue. Which of the following are considered group discounts and would likely increase revenue? Choose all applicable answers. Senior citizens receive a discount by presenting identification verifying their age People whose favorite color is blue receive a discount for telling the cashier that blue is their favorite color Students receive a discount by presenting their student identification People receive a discount on books by their favorite author when they tell the cashier the name of their favorite author
Senior citizens receive a discount by presenting identification verifying their age Students receive a discount by presenting their student identification
For 1-ply toilet paper (an inferior good), an increase in an individual's income would:
Shift their demand curve left
Your family goes on vacation to a nearby town every year, where ice cream sells for $2 for a single scoop. Five years ago, there were only two ice cream shops in town, but this year you notice there are seven. What has happened to the supply curve in the ice cream market? Shifted left No change Shifted right
Shifted right
Which of the following are considered trade costs? Shipping costs Trading across time zones Dealing with foreign laws Adapting to different ways of doing business Taxes on imports or exports Working across language barriers
Shipping costs Trading across time zones Dealing with foreign laws Adapting to different ways of doing business Taxes on imports or exports Working across language barriers
You are managing an office in which you don't directly monitor most of your employees. Your economics lessons have taught you that you may encounter the principal-agent problem in your role. What is not an effective solution for you to address moral hazard arising from the principal-agent problem? Monitoring Efficiency wages Skin in the game (i.e. profit-sharing) Pay-for-performance Signaling
Signaling
H&M contracts its clothing production to manufacturing facilities in other countries. Their contracts are up for renegotiation soon and there has recently been some pressure on those manufacturers to increase wages for laborers. The facility managers see an opportunity to buffer their own profit margins, on top of the higher wages, when they renegotiate with H&M. This is a threat to H&M's profitability from: Suppliers Customers Potential substitutes Potential entrants Current competitors
Suppliers
Candy producers have read that analysts expect the price per pound of candy to increase in the next few months. What will they decide to do with their supply of candy this month? Supply more candy this month, in anticipation of the price change Supply the same amount of candy this month, regardless of the price change Supply less candy this month, in anticipation of the price change
Supply less candy this month, in anticipation of the price change
In the early 1990's, airlines created frequent flyer programs to increase customer loyalty. These airline miles can only be used on flights with the offering airline, and expire if a customer does not use them within a certain timespan. Identify the type of demand side barrier to entry airlines established. Switching cost Reputation and goodwill Network effect
Switching cost
Which of the following are search goods? Tablet computers Gym memberships Season football tickets Restaurant meals
Tablet computers
A local bookstore with market power wants to use price discrimination to increase revenue. Which of the following are considered hurdles? Choose all applicable answers. The bookstore sometimes emails customers one-day coupons for select books Science fiction books receive a 5% discount Each morning, the first 10 customers receive a 10% discount
The bookstore sometimes emails customers one-day coupons for select books Each morning, the first 10 customers receive a 10% discount
In which scenario is a firm likely to have more market power? The market contains many buyers and few sellers for identical goods The market contains many buyers and many sellers for identical goods
The market contains many buyers and few sellers for identical goods
The price elasticity of demand is: How much the price changes in response to a change in income The percent change in quantity divided by the percent change in price How much the price changes in response to a change in the quantity demanded
The percent change in quantity divided by the percent change in price
Select all that apply. Market equilibrium is where: The quantity supplied exceeds the quantity demanded The quantity demanded equals the quantity supplied Buyers and sellers have no incentive to change quantity The quantity demanded exceeds the quantity supplied The supply and demand curves cross
The quantity demanded equals the quantity supplied Buyers and sellers have no incentive to change quantity The supply and demand curves cross
Taxi companies have lost many of their customers to ride-sharing companies like Lyft and Uber. Imagine a city with a single taxi company. After the introduction of ride-sharing in this city, which of the following describes the new firm demand curve for the taxi company? The taxi company loses some market power, and the firm demand curve becomes more steep. The taxi company loses some market power, and the firm demand curve becomes less steep. The taxi company maintains its market power, and the firm demand curve is equal to the market demand curve. The taxi company loses all market power, and the firm demand curve is now flat.
The taxi company loses some market power, and the firm demand curve becomes less steep.
Which of the following are true of a perfectly competitive market? Select all that apply. Goods differ from one another There are many buyers and sellers of the same good No individual buyer or seller is large enough to shift the market price on their own Every good is identical Individual buyers and sellers can affect the market price
There are many buyers and sellers of the same good No individual buyer or seller is large enough to shift the market price on their own Every good is identical
Which of these is an example of the focusing illusion? Thinking you will be happier in Hawaii because it's warm and sunny, and not considering other factors Refusing to sell your house after it's declined in value to less than what you paid for it Paying too much for a house because the initial price listed was high Not investing in a company because it doesn't resemble other companies that you know have succeeded
Thinking you will be happier in Hawaii because it's warm and sunny, and not considering other factors
Recently, 3D printing has redefined the model manufacturing industry. This new technology allows industrial designers to print 3D models of their inventions in minutes, for far less money than traditional model manufacturing methods. 3D printing technology has shifted the supply curve for model manufacturing: Not at all To the left To the right
To the right
Part 2 of 2: Many parents depend on childcare providers while they are at work. Suppliers of childcare have relatively elastic supply compared to the inelastic, but not perfectly inelastic, demand of parents. If the supply of childcare shifts left due to increasing input costs, what will happen to the total revenue of childcare suppliers? Total revenue will decrease Total revenue will stay the same Total revenue will increase
Total revenue will increase
Downward-sloping demand means individuals experience diminishing marginal benefits as quantity consumed increases (for most things).
True
On construction projects, engineers inspect work done by contractors by performing site visits. When a contractor knows an engineer is planning a visit, they may do high quality work only that day, and when the contractor knows the engineer is not coming, they will continue with low quality work. True or false: Engineers should use a mixed strategy to best assess a contractor's quality of work. False True
True
Assume the current price for prescription drugs in the U.S. is higher than the world price for the same drugs. To export drugs to the U.S., foreign manufacturers must meet strict FDA regulations. If those FDA regulations are relaxed and foreign manufacturers can easily sell drugs in the U.S. at the world price, what will happen to the consumer surplus of U.S. drug consumers? U.S. consumer surplus will decrease U.S. consumer surplus will increase U.S. consumer surplus will stay the same
U.S. consumer surplus will increase
Assume the current price for prescription drugs in the U.S. is higher than the world price for the same drugs. To export drugs to the U.S., foreign manufacturers must meet strict FDA regulations. If those FDA regulations are relaxed and foreign manufacturers can easily sell drugs in the U.S. at the world price, what will happen to the producer surplus of U.S. drug manufacturers? U.S. producer surplus will increase U.S. producer surplus will decrease U.S. producer surplus will stay the same
U.S. producer surplus will decrease
A drug company with market power has raised the price of a popular diabetes drug while the drug company's marginal cost is unchanged. This will likely lead to a(n): Income effect Underproduction problem Output effect Discount effect
Underproduction problem
During a political debate, a candidate makes the following argument: "We should limit trade with China because they subsidize their steel and solar panel manufacturers and sell in the U.S. market below cost to drive our producers out of business." Which argument for limiting trade does this represent? Infant industry Domestic regulations Unfair competition and anti-dumping Saving jobs National security
Unfair competition and anti-dumping
The local grocery store is considering replacing all their cashiers with self-checkout machines. An elite cashier can process 40 customers an hour while a self-checkout machine can process 50 customers an hour. The cost per hour of a cashier-operated checkout line is $10 and the cost of a self-checkout machine per hour is $12. If the grocery store only uses bang-for-buck reasoning and wants to maximize the number of customers processed per dollar spent, what should it do? Use self-checkout machines Use cashiers Use an equal amount of both cashiers and self-checkout machines
Use self-checkout machines
Assume Venezuela faces no trade restrictions on bananas. When the domestic price of bananas in Venezuela is lower than the world price: Venezuelan farmers produce less than domestic demand, and the shortage is filled by imports from other countries. Venezuelan farmers produce more than domestic demand, and the surplus is exported to other countries. Venezuelan farmers produce what is demanded in the domestic market and don't import or export bananas.
Venezuelan farmers produce more than domestic demand, and the surplus is exported to other countries.
A local diner sells smoothies for $3 a glass. Their marginal cost for producing smoothies is $2 a glass. Assuming the diner won't change their prices, at what point should the diner stop producing smoothies? The diner should have already stopped selling smoothies When the marginal cost of providing smoothies rises above $3 a glass When the cost of providing smoothies falls below $2 a glass
When the marginal cost of providing smoothies rises above $3 a glass
You rent a house, and you want to renew your lease. Your landlord loves having you as a tenant and also wants to renew your lease. However, neither of you have discussed this shared interest in renewing. When a lease is renewed, the rent is renegotiated. Whoever asks to renew the lease will have a worse negotiating position. You and your landlord have a choice between two options: (1) ask to renew the lease, or (2) ask to show the house to prospective tenants. Now assume this is a sequential game. The payoffs and preferences remain the same. The game tree is shown below. LOOK AT DRAWN GRAPH IN NOTES Your preferences, from best to worst outcome: Renew lease at a lower rent, renew lease at the same rent, renew lease at a higher rent, and lease ends (your least desired outcome). Your landlord's preferences, from best to worst outcome: Renew lease at a higher rent, renew lease at the same rent, renew lease at a lower rent, and lease ends (your landlord's least desired outcome). Given this game tree, who is the first mover? Your landlord is the first mover You are the first mover If you move first, what decision should you make? Ask to show the house Ask to renew the lease If you move first, what is the outcome of the sequential game? Lease ends. You move and the landlord finds a new tenant. Renew lease at a higher rent Renew lease at the same rent Renew lease at a lower rent When this is a sequential game, is there a first-mover advantage or a second-mover advantage? First-mover advantage Second-mover advantage
You are the first mover Ask to show the house Renew lease at a lower rent First-mover advantage
Which one of these strategies does not reduce risk? You buy stocks in 10 companies instead of buying all stocks in one company You buy stock in your employer You buy stocks in both oil companies and renewable energy You learn more about potential investments
You buy stock in your employer
Which of the following are positive externalities? Rent control in New York City lowers my cost of living. Your decision to plant flowers in your yard makes your neighbors happy when they walk by each morning Someone's decision to drive drunk increases my risk of a collision while driving. You invest in pest control on your property resulting in your neighbor's property seeing fewer pests.
Your decision to plant flowers in your yard makes your neighbors happy when they walk by each morning You invest in pest control on your property resulting in your neighbor's property seeing fewer pests.
Which of the following are negative externalities? Your neighbor's choice to buy a large SUV with poor gas mileage increases pollution and negatively affects your health Increased consumer demand for housing in San Francisco makes my rent more expensive Some parents refuse to vaccinate their children which exposes infants, who can't be vaccinated yet, to danger from diseases like measles Your choice to buy the last donut at Starbucks prevents me from buying it.
Your neighbor's choice to buy a large SUV with poor gas mileage increases pollution and negatively affects your health Some parents refuse to vaccinate their children which exposes infants, who can't be vaccinated yet, to danger from diseases like measles
Which of these are examples of moral hazard? Select all that apply. You use some of your savings to start a business, and you don't know whether it's going to succeed. Your new job offers really good health insurance, and on your next vacation you decide to go skydiving for the first time. You run a restaurant with calorie counts on the menu. You and your friend go to the gym together regularly, and you don't know if she's going to be on time. Your boss travels a lot and doesn't always know how hard you're working when you stay in the office. Your parents pay for your college tuition, but don't know how hard you're studying.
Your new job offers really good health insurance, and on your next vacation you decide to go skydiving for the first time. Your boss travels a lot and doesn't always know how hard you're working when you stay in the office. Your parents pay for your college tuition, but don't know how hard you're studying.
