Micro Economics Final
• Suppose a poverty program has a basic benefit of $5,000, zero deductions, and a marginal tax rate of 0.50. The breakeven level of income is:
10,000
• Suppose the Martin Microchip Corporation earns a profit of $20 per share of stock. If the prevailing interest rate is 10 percent and the stock is currently selling for $100 per share, what is the current price/earnings ratio?
5
• Based on the information in Table 35.1, assume China and the United States have the same amount of resources with which to produce soybeans and computers and they produce no other goods. The opportunity cost of producing 1 ton of soybeans in the United States is:
5 computers
• Refer to Table 25.2. Assume there are only four firms in the pool sweeper industry. What is the market share for Blue Lagoon?
5 percent
• Assume that the product price is $4 per unit and that the hourly wage for workers is $12. Neither price nor wage changes with output. In Table 30.1, the marginal physical product of the third worker hired is:
5 units per hour
• Refer to Table 25.2. Assume there are only four firms in the pool sweeper industry. What is the market share for North Star?
50 percent
• The bottom 80 percent of families in Alpha receive approximately what percentage of total income? (See Figure 33.1.)
60 percent
• Suppose the larger firm of a duopoly has sales of $900 million and the smaller firm has sales of $100 million. The market share of the larger firm is:
90 percent
• If the terms of trade between any two countries lie somewhere between their respective opportunity costs, then the effects of trade will include:
An expansion of the production possibilities for both countries.
• Using Figure 35.2, the opportunity cost of producing 1 pair of golf shoes in the United States is
3 baseballs
• In Figure 28.1, if pollution costs are external, the rate of output will be
320 units
• Suppose Mr. Lee has total income of $120,000, has taxable income of $90,000, and pays $30,000 in taxes. Considering the information, what is Mr. Lee's nominal tax rate?
33.33 percent
• Suppose there are three firms in a market. The largest firm has sales of $50 million, and each of the other two firms has sales of $25 million. The Herfindahl-Hirschman Index of this industry is
3750
• If a chair can be sold for $20 and it takes a worker two hours to make a chair, the marginal revenue product of this worker is:
$10 per hour
• Suppose a monopsonist must pay $10 per hour to attract 10 workers. If the same monopsonist must raise its wage to $11 per hour to attract the 11th worker, what is its marginal factor cost for labor?
$21 per hour
• Assume that the product price is $4 per unit and that the hourly wage for workers is $12. Neither price nor wage changes with output. In Table 30.1, the marginal revenue product of the second worker hired is:
$24 per hour
• If the total wages paid change from $200,000 to $250,000 when the quantity of labor employed increases from five to seven workers, the marginal wage is:
$25,000
• If the present discounted value of a payment is $1,000,000 and there is a 40 percent chance that the payment will not occur, then the expected value is:
$600000
• Suppose Regis has a 25 percent chance of not collecting $1,000 in one year. If the interest rate is 10 percent, what is the expected value of the future payment?
$682
• If the interest rate is 8 percent, then the present discounted value of $100 to be received two years from now is closest to:
$86.00
• Given the payoff matrix in Table 25.1, if the probability of rivals reducing their price even though you don't is 10 percent, what is the expected payoff for Company ABC not cutting prices?
-$500
• If the Gini coefficient is greater for Zambia than for the Netherlands, we can conclude that the:
Distribution of income in the Netherlands is closer to being equal than in Zambia.
• In monopolistic competition, a firm's demand curve is tangent to the ATC curve in the long run because:
Entry eliminates economic profit, and exit eliminates losses.
• A 7.25 percent sales tax:
Is a regressive tax because poor individuals consume a higher percentage of their income than high-income individuals.
• One of the main differences between an oligopoly and a monopolistically competitive firm is that a monopolistically competitive firm:
Is relatively independent; an oligopoly is interdependent.
• The demand curve facing an oligopoly firm is kinked because:
It is most likely that rivals will match price cuts but not price increases.
• If a monopolistically competitive firm raises its price, it will:
Lose some of its customers, but nowhere close to all its customers.
• The profit-maximizing level of labor, in a single-employer labor market, occurs where:
MRP = marginal cost factor
• The true economic costs of pollution control are the:
Most highly valued alternative goods and services that could be produced if the resources were not used to reduce pollution.
• Requiring that a firm engage in pollution abatement will likely do all of the following except:
Shift the firm's ATC curve downward.
• The breakeven level of income equals the:
The highest level of income at which a household ceases to receive welfare benefits.
• Which of the following programs is likely to have low target efficiency?
a cash payment that the recipient is encouraged to use for housing
• Which of the following is most likely to occur if Medicare is converted from an in-kind transfer program to a cash transfer program?
a reduction in health care for the elderly
• The marginal factor cost for a buyer with market power is:
above the wage rate paid by a monopsonist
• At an exchange rate of $1 = €1 in Figure 36.1, there is an
an excess demand for dollars
• A power plant in Illinois produces electricity by burning coal. This results in acid rain that kills trees and wildlife in New York. This is an example of:
an external cost
• A monopolistically competitive firm can raise its price somewhat without fear of great change in unit sales because of:
brand loyalty
• Horizontal equity can be determined by comparing the:
effective tax rates for two taxpayers with the same nominal incomes
• An increase in the price of the U.S. dollar in terms of euros will cause, ceteris paribus,
european goods to be cheaper to residents of the US
• Which of the following generates demand for foreign currencies?
expenditures by americans traveling abroad
• In Figure 30.1, the labor supply could shift from S1 to S2 due to all of the following except:
fewer workers preferring to work in this labor market
• From a consumer's viewpoint, which of the following policies would be least desirable?
no trade
• In monopolistic competition there is allocative inefficiency because:
price is greater than MC
• In general, lower marginal tax rates provide incentives to
produce more output
• If speculators with Swiss francs believed the yen was going to depreciate against the dollar, they would most likely: =
purchase dollars
• Refer to Figure 34.3. The implied marginal tax rate is
100 percent
• If 10 workers will be hired by a firm at a wage rate of $15 per hour, but the 11th worker will be hired only if the wage rate falls to $14 per hour, then the marginal wage of the 11th worker is
$4 per hour
• Suppose there are 51 firms in a market. The largest firm has sales of $50 million and each of the other firms has sales of $1 million. The Herfindahl-Hirshman Index of this industry is:
2550
• Suppose there are only three firms in a market. The largest firm has sales of $500 million, the second-largest has sales of $300 million, and the smallest has sales of $200 million. The market share of the largest firm is:
50 percent
• Refer to Table 26.1. In order to maximize profit, Will's Beach Ball Company should produce _______ and charge a price of _______ each.
7 beach balls; $10
• Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit - 0.7 [Wages - (Work expenses + Child care costs)] Based on the information given, the marginal tax rate is:
70 percent
• Refer to Table 26.2. To maximize profit, Sylvie's Shampoo Company. should produce _______ bottles of shampoo and charge a price of _______ each.
7; $20
• Suppose the larger firm of a duopoly has sales of $400 million and the smaller firm has sales of $100 million. The market share of the larger firm is:
80 percent
• If the elasticity of labor is 0.60, a 15 percent increase in the wage rate will induce a:
9.0 percent increase in the quantity of labor supplied
• To make a tax system more progressive, policy makers could:
raise marginal tax rates for higher incomes
• From an economic perspective, the efforts of professional football, baseball, and basketball players in the United States to win the right to become free agents was really an effort to:
raise wages to the level of the players' MRP
• If there is an increase in the number of workers who want to work as accountants, there will be a:
rightward shift of the labor supply curve
• If the sellers of labor in a competitive market decided to unionize, ceteris paribus, then wages would:
rise and employment would fall
• The depreciation of a country's currency causes the price of imports to
rise and the prices of exports to fall
• The federal income tax is designed to:
shift the lorenz curve inward
• In Figure 28.1, emission fees will:
shift the marginal cost of production to the right
• If the U.S. dollar depreciates, in the long run the United States should experience a
smaller deficit in the US trade balance
• An increased willingness to lend money to a company can be shown by the:
supply of loanable funds shifting to the right
• Theoretically, the net balance of payments is
the current account plus the capital account
• The elasticity of labor supply does not depend on
the demand for labor
• In monopolistic competition, the entry of new firms will cause all of the following to happen except:
the industry cost curves will shift to the left
• A major difference between monopoly and monopolistic competition is:
the number of firms in the market
• Treasury bonds typically have lower coupon rates than corporate bonds because
there is a lower risk that the U.S. Treasury will default
• If a manufacturer does not have to pay for its contribution to pollution, it will produce:
too much output from a social viewpoint
• Which of the following groups has an interest in encouraging free trade:
workers in export industries
• Tradable pollution permits, when compared to command-and-control options, tend to
provide the same amount of pollution abatement at a lower cost
• The main difference between perfect competition and monopolistic competition is:
the degree of product differentiation
• Recipients of TANF funds are identified:
by the federally established poverty line
• Suppose China can produce 200 TVs or 200 DVD players. South Korea can produce either 100 TVs or 200 DVD players. In terms of TV production we can conclude that:
china has a comparative advantage
• There is an inverse relationship between the price of an existing bond and its:
current yield
• As an individual earns additional income, the marginal utility of income tends to:
decrease
• If the government imposed a green tax on gasoline, the amount of air pollution should:
decrease as people switch to more fuel-efficient cars
• The existence of income transfer programs is likely to:
decrease the supply of labor
• When tariffs are imposed, the losers include:
domestic consumers and foreign producers
• Because a union is a form of monopoly, it must be concerned about the ________ slope of the demand curve for labor.
downward
• Increased opportunities for trade increase production by:
improving efficiency through specialization
• If the demand for hair gel increases, the effect on the hair gel manufacturing job market will be to:
increase the demand for labor and increase equilibrium wages
• A firm that attempts to pass along the cost of higher union wages to consumers in the form of higher prices will be more successful if the price elasticity of demand for its product is
inelastic
• Suppose the United States can produce 2,000 cars or 2,000 trucks. Japan can produce either 2,000 cars or 1,000 trucks. In terms of car production we can conclude that:
japan has a comparative advantage
• If payroll taxes are increased, there will be a:
leftward shift of the labor supply curve
• If an individual is taxed at a 17 percent rate for each extra dollar earned, the reference is to the:
marginal tax rate
• In determining how much labor union workers will offer, the union concerns itself mainly with the:
marginal wage curve
• Suppose a bottle of wine produced in France sells for 35 euros. If the exchange rate between euros and dollars is €1 = $1.30, how much will an American pay for the bottle of wine in America?
$45.50
• The present discounted value of $60,000 to be received at the end of three years when the interest rate is 10 percent is closest to:
$45079
• Which of the following generates a demand for dollars in the foreign exchange market?
travel by foreign visitors in the united staes
• Suppose Canada can produce either 300 tons of paper or 200 HDTVs, and India can produce either 200 tons of paper or 100 HDTVs. The terms of trade between the two countries will lie between:
1/2 and 2/3 of an HDTV per ton of paper
• Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit - Wages Based on the information given, the marginal tax rate is
100 percent
• Suppose you purchase shares in Acme Gadget Company for $10 per share. The company believes there is a 20 percent chance it will fail to earn a discounted future profit of $1.85. What is the expected rate of return on your investment?
14.8 percent
• If one euro is equal to 0. 60 U.S. dollars, what would be the euro price of a car that costs $10,000?
16667 euros
• In Figure 28.1, if the externality is internalized, the rate of output will be
200 units
• If Shoffner Inc., a publicly traded corporation, has a share price of $125, revenues of $15.35 per share, and profits of $5.25 per share, what is the P/E ratio for Shoffner Inc. shares?
23.81
• Suppose Mr. Lee has total income of $120,000, has taxable income of $90,000, and pays $30,000 in taxes. Considering the information, what is Mr. Lee's effective tax rate?
25 percent
• The marginal cost to society of reducing pollution increases as the level of pollution reduction increases because of the law of:
diminishing returns
• Given the payoff matrix in Table 25.1, if the probability of rivals matching a price reduction is 99 percent, what is the expected payoff for a price cut by Company ABC
$5
