Econ Study Guide

Which of the following is true when there is free entry and exit in the market? A. All options B. In the long run, there will be zero economic profit C. Firms should exist when price< average cost D. in the long run, price=average cost

A. all options

A friend comes up to you and offers you a free ticket to a dodgers game that night, and you decide to attend the game. The game takes 5 hours and costs you $25 for transportation. If you had not attended the game, you would have worked at your part time job for $12 and hour. What is the cost of you attending the game? A $0, the ticket is free B. $85 C.$60 D.$25

B. $85

Suppose the New York City housing market is in equilibrium. A recession causes local household incomes to decline. At the same time, construction of a series of new apartment buildings has just been completed. Given these two changes, and assuming that apartment housing is a normal good, we can predict that the price of apartments will _____, and the quantity of apartments bought and sold will _____. A. fall; fall B. fall; rise or fall C. fall; rise D. rise; fall or rise

B. Fall; rise or fall

Suppose the price of a good is currently above the market equilibrium price. Is there a surplus or a shortage? Is quantity demanded or quantity supplied greater? A. Shortage; Quantity Demanded B. Surplus; Quantity Demanded C. Surplus; Quantity Supplied D. Shortage; Quantity Supplied

C. Surplus; Quanity Supplied

The socially optimal outcome occurs where the _______ benefit equals the ______ cost. A. marginal external: marginal external B. total external; total external C. marginal social: marginal social D. total social: total social

C. marginal social: marginal social

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Which of the following is NOT a signal? A. All options B. Saying you have the required skills in a job interview. C. Offering a warranty guarantee on a product. D. Third-party quality assurance for a used car purchase (Ex. CARFAX)

B. Saying you have the required skills in a job interview.

The likely result of a binding price floor is a _____ of the good at a price _____ the equilibrium price. A. surplus; below B. surplus; above C. shortage; above D. shortage; below

B. Surplus; above

Which scenario best illustrates an oligopolistic industry? A. The state university of New York has one bookstore that caters to all students across all campuses B. The coke company and pepsi, sell most of the soft drinks consumed around the world C. A single cell phone provider services the entire midwest D. thousands of quinoa farmers sell their output in global commodities market

B. The coke company and pepsi, sell most of the soft drinks consumed around the world

In which situation do you expect the store to have the most inelastic supply? A.Time Frame: 1 Year. Warehouse size: Small. B. Time Frame: 1 Day. Warehouse size: Small. C. Time Frame: 1 Year. Warehouse size: Large. D. Time Frame: 1 Day. Warehouse size: Large.

B. Time Frame: 1 Day. Warehouse size: Small.

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

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

Which statement best describes a negative externality A. Your neighbor has a honey farm, and the bees pollinate your orchard. B. Your neighbor has an ornamental pond that breeds mosquitoes. C. Your neighbor is a landscape architect who uses her property to demonstrate beautiful landscaping, increasing the value of all the houses on the block D. You can use your neighbor's pool whenever you wish

B. Your neighbor has an ornamental pond that breeds mosquitoes

A firm should specialize in producing the good for which it has the A. lowest price B. comparative advantage C. absolute advantage D. highest opportunity cost

B. absolute advantage

Fill in the blanks. For suppliers, a ______________ is an incentive to ____________, because there are few profit opportunities. A. high price; decrease production B. low price; decrease production C. low price; increase production D. high price; increase production

B. low price; decrease production

Public goods like national defense and public radio are A. nonrival and excludable B. nonrival and nonexcludable C. rival and excludable D. rival and nonexcludable

B. nonrival and nonexcludable

Which is NOT a government action that results in a barrier to entry in a product market A. Requiring that companies have licenses to produce the product B. prohibiting advertisers from making false claims C. imposing regulations that increase start up costs for new companies D. granting a patent on a product

B. prohibiting advertisers from making false claims

Suppose Otto enjoys having iced lattes with coffee and oat milk. If the price of coffee increases, what will happen to his demand for oat milk? A. Increase in demand (shift of curve) B.Increase in quantity demanded (movement along curve) C. Decrease in quantity demanded (movement along curve) D. Decrease in demand (shift of curve)

D. Decrease in demand (shift of curve)

The popularity of smartphones led app developers to be more highly valued in the labor market than their desktop computer programming colleagues. Which of the following best represents what would happen in the market for desktop computer programmers as smartphones became popular? A. Decreased Labor Demand B. Increased Labor Demand C. Increased Labor Supply D. Decreased Labor Supply

D. Decreased Labor Supply

Fill in the blanks with the best choices. Inferior goods have a ___________ income elasticity of demand. Normal goods have a ____________ income elasticity of demand. Luxuries have a __________ income elasticity of demand than necessities. A. Positive; Negative; Smaller B. Less than One; Greater than One; Smaller C. Greater than One; Less than One; Larger D. Negative; Positive; Larger

D. Negative; Positive; Larger

Suppose there was a shift in curve(s) that led to an increase in price and a decrease in quantity. What can you confidently conclude about the curves that shifted? A. Supply increased B. Demand increased C. Supply decreased and demand increased D. Supply decreased

D. Supply decreased

Paper producers can manufacture both printing paper and drawing paper. What effect would rising prices for printing paper have on the supply of drawing paper? A. The supply of drawing paper will increase. B. The quantity of drawing paper supplied will increase. C. The supply of drawing paper will decrease. D. The quantity of drawing paper supplied will decrease.

D. The quantity of drawing paper supplied will decrease.

To alleviate the problems associated with the tragedy of commons, the government can: A. set a quota B. apply a tax C. assign property rights D. all of the above

D. all of the above

In the 1970s, less than 5% of musicians in the top five U.S. orchestras were women, whereas now that percentage exceeds 30%. A key reason for the change is that, in the 1970s, orchestras began using blind auditions where candidates, with their names and backgrounds withheld, play for juries from behind a screen. Researchers have found that, even when an orchestra selection committee uses a screen only in the first round of selection, women are 50% more likely to reach the final round of selection than under nonblind conditions. What outcome, beside greater gender equality, has likely resulted from impartiality in orchestras? A. no change to orchestra quality B. worse orchestras C. increased implicit bias from committees in first-round auditions D. better orchestras

D. better orchestras

Suppose a company lowers the price of its product 10%, and sold 20% more units. You can conclude that A. demand for the product is currently elastic and revenue decreased. B. demand for the product is currently inelastic and revenue increased. C. demand for the product is currently inelastic and revenue decreased. D. demand for the product is currently elastic and revenue increased.

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

The difference between a centralized economy and a market economy is that: A. individuals make production decisions in a centralized economy, and the government makes production decisions in a market economy. B. governments have maximum decision-making power in a centralized economy but have zero decision-making power in a market economy. C. the centralized economy does not have any markets for goods and services, whereas a market economy has fully functioning markets. D. governments make production decisions in a centralized economy, and individuals make production decisions in a market economy.

D. governments make production decisions in a centralized economy, and individuals make production decisions in a market economy.

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

D. the income effect is stronger than the substitution effect.

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For most consumers, which of the following is an inferior good? A.The newest iPhone B.Dental Services C. 10 year-old used car D.Organic Produce

C. 10 year-old used car

Fill in the blanks below based on the scenario described. The number of bank tellers declined from an average of 20 per branch in 1988 to 13 in 2004, as ATMs replaced human tellers. This meant that the cost of running each branch fell. Banks responded by increasing the number of urban bank branches by 43% in the same time period, which increased the total number of bank employees. So ATMs shifted employees' work from routine tasks like deposits and withdrawals towards skills machines 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 be considered ____________ in this industry. A. substitution; complements B. scale; substitutes C. substitution; substitutes D. scale; complements

D. scale; complements

Suppose the government wants to correct for a market failure due to flu vaccines providing herd immunity. What policy would best reduce deadweight loss? A. binding price ceiling B. private bargaining C. tax D. subsidy

D. subsidy

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The price of peanut butter goes up by 10% and the demand for jelly falls by 6%. What is the cross-price elasticity of demand for jelly with respect to peanut butter? Are peanut butter and jelly substitutes or complements? A.0.6, complements B. 1.67, substitutes C. 0.6, substitutes D. 1.67, complements

A. 0.6, complements

The price of muffins at your local bakery rises from $1.50 to $2.00. As a result the quantity of brownies purchased drops from 175 to 125 muffins per day. Calculate the absolute value of the price elasticity of demand for muffins. Use the midpoint formula and round to the nearest hundredth if needed. A. 1.17 B. 2.33 C. 1.71 D. 1.00

A. 1.17

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

A. A minimum wage greater than the equilibrium wage

The rational rule for employers tells us that you should hire workers until the A. Correct: wage = marginal revenue product of labor B. price = marginal product of labor C. marginal product of labor = marginal revenue product of labor D. wage = marginal product of labor

A. Correct: wage = marginal revenue product of labor

Suppose a farmer produces crops using water, land, and fertilizer. The price of water increases due to a drought in the region. How does this affect the farmer's decisions to supply crops? A. Decrease in supply (shift of curve) B. Increase in supply (shift of curve) C. Quantity supplied decreases (movement along curve) D. Quantity supplied increases (movement along curve)

A. Decrease in supply (shift of curve)

Suppose that instead of each farmer in an area owning a specific parcel of land, all farmland is pooled together. The profits that remain from all of the pooled farmland is divided among all of the participating farmers equally. Which is the most likely consequence of a property right system like this being used? A. Free riding would occur from various farmers on the land B. The farmers would develop a sense of altruism and work hard to accomplish as much as possible as a group C. technological innovations will occur that will help the farmers become more productive D. Farmers will undertake increased investment in human and physical capital.

A. Free riding would occur from various farmers on the land

Suppose Stella ranks her preferences for spending her free afternoon as: 1. Going to get a coffee with a friend 2. studying for her accounting exam 3. Taking a nap What is her opportunity cost of getting coffee? A. Studing for her accounting exam, and the cost of the coffee b. Taking a nap C. Studying for her accounting exam D. Studying for her accounting exam and taking a nap

A. Going to get a coffee, and the cost of the coffee

Suppose Yeti water bottles were the most popular water bottles on the market, but now Stanley water bottles go viral on social media and become the most popular. What will happen to demand for Stanley water bottles? A. Increase in demand (shift of curve) B.Decrease in demand (shift of curve) C.Quantity demanded decreases (movement along curve) D.Quantity demanded increases (movement along curve)

A. Increase in demand (shift of curve)

Which of the following is a positive statement? A. Lower college tuition will lead to more children from poor families attending college. B. It is right for the government to financially support other countries through foreign aid programs. C. The price of oil should be increased because it has a negative impact on the environment. D. Income taxes are too high, and the federal government should cut them.

A. Lower college tuition will lead to more children from poor families attending college

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? A. Rent for the storefront where production happens B. Cost of string C. Cost of beads D. Wages paid to employees

A. Rent for the storefront where production happens

An externality is: A. a benefit or cost experienced by someone who is not a producer or consumer of a good or service B. a cost paid by the producer of a good or service C. anything that is external or not relevant to the production of a good or service D. a benefit realized by the purchaser of a good or service

A. a benefit or cost experienced by someone who is not a producer or consumer of a good or service

In contrast to perfect competition, a monopoly A. produces less at a higher price B. May have lower economic profits in the long run C. produces where MR>MC D. produces more at a lower price

A. produces less at a higher price

When a perfectly competitive market is in equilibrium with no market failures, which of the following occur? A. Efficient Production B Efficient Quantity C. All of the Above (all options) D. Efficient Allocation

C. All options

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 and cheese as incomes fall during a recession? A. Both the price and quantity would decrease. B. The price would decrease, and the quantity would increase. C. Both the price and quantity would increase. D. The price would increase, and the quantity would decrease.

C. Both the price and quantity would increase

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

C. Offering senior citizens a 10% discount at IHOP

Suppose Matilda likes drinking either a sparkling water or iced tea each afternoon. How will Matilda's demand for iced tea change if the price of iced tea increases? A. Increase in demand (shift of curve) B. Decrease in demand (shift of curve) C. Quantity demanded decreases (movement along curve) D. Quantity demanded increases (movement along curve)

C. Quantity demanded decreases (movement along curve)

Select the option which correctly fills in the corresponding blanks. The law of demand tells us that as price increases _____________. Diminishing marginal benefit tells us that each additional item yields a ___________ marginal benefit than the previous item. A.quantity demanded increases; smaller B.quantity demanded decreases; larger C. quantity demanded decreases; smaller D. quantity demanded increases; larger

C. Quantity demanded decreases; larger

Suppose the government institutes a policy that requires all interior designers to acquire a license in order to work in the field. What do you expect to happen to the equilibrium wage and employment in the market for interior designers? A. Wage increase, employment increases B. Wage decrease, employment decreases C. Wage increase, employment decreases D. Wage decrease, employment increases

C. Wage increase, employment decreases

Select the option which correctly fills in the corresponding blanks. A perfectly competitive market is a market in which all firms in an industry sell an .................... and there are ................ , each of whom is ................... relative to the size of the market. A. identical good; few buyers and sellers; small B. identical good; many buyers and sellers; large C. identical good; many buyers and sellers; small D. unique good; many buyers and sellers; small

C. identical good; many buyers and sellers; small

Consider the market for labor in the fast-food industry Assume that the retail industry requires similar skills as the fast-food industry. What will happen in the market for labor in the fast-food industry if wages in the retail industry increase? A. the market supply curve for labor will shift to the right. B. the point representing the equilibrium wage and quantity of workers will move up and to the right along the market supply curve for labor. C. the market supply curve for labor will shift to the left. D. the point representing the equilibrium wage and quantity of workers will move down and to the left along the market supply curve for labor.

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

Companies do not charge everyone for their reservation price because A. it is difficult for people to reveal to companies their willingness to pay B. a consumers marginal benefit is fundamentally unknowable C. willingness to pay is private information that people have an incentive to keep hidden D. companies wish to provide customers with some consumer surplus to instill

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

Which of the following positions is likely to result in a significantly lower wage (the lowest wage) relative to other nursing positions that require similar skills and experience? A. A position that requires you to work in a facility with violent patients. B. A position that requires you to work the night shift. C: A position that allows you to see patients virtually while working from home. D. A position that requires traveling to a new hospital every two weeks

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

________ markets do not necessarily lead to efficient outcomes, whereas ____ markets tend to yield efficient outcomes A. strategic: prisoner based B. prisoner based: strategic C. competitive: strategic interactions D: stratgic interactions in: competitive

D. : strategic interactions in: competitive

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

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

Liana gives up a salary of $80,000 per year at the kellogg food manufacturing plant company to start her health food manufacturing company. She invests $50,000 of her savings in her company, savings that had earned her $4000 per year in interest. During liana's first year in the health food business, total revenue is $300,000, and her explicit financial costs are $225,000. What is liana's accounting profit from her first year in business ? What is her economic profit from her first year in business? A. Accounting: -9000: Economic: $80,000 B. Accounting profit: -$9000 Economic: -59,000 C. Accounting: $75,000, Economic: $75,000 D. Accounting: $75,000, Economic: -$9000

D. Accounting: $75,000, Economic: -$9000

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