Microeconomics Final
which of the following events could increase the demand for labor
an increase in the marginal productivity of workers
each firm in a monopolistically competitive market
faces a downward sloping demand curve
based on the US data for 2008, the poverty rate is the highest for which group of people
female households, no spouse present
why does a typically monopolistically competitive firm face a downward sloping demand curve
firms have market power: they can raise prices without losing all of their customers.
US income data over the last 75 years suggests that the distribution of income
gradually became more equal until about 1970, then became less equal from 1970 to 2008
libertarians believe that
it is more important to evaluate the process by which economic outcomes are produced than the outcomes themselves
for a superstar to emerge, it must be the case that
it is possible to supply the good or service that the superstar produces at low cost to every customer
in the signaling theory of education
the worker signals to the employer that he is a valuable employee because he was willing to spend time to get an education
Even when allowed to collude, firms in an oligopoly may choose to cheat on their agreements with the rest of the cartel. Why?
they are seeking the most beneficial deal for themselves
the federal government sets the poverty line at roughly
three times the cost of providing an adequate diet
a downward sloping demand curve
is a feature of all monopolistically competitive firms.
the time spent by students in college
is an investment in human capital
in the United States, the earnings gap between workers with college degrees and workers with highschool degrees,
is evident and it has widened over the last several years
suppose the average value of in kind transfers increases by 2000 from 2010 to 2011. the poverty rate
is more likely to overstate the true level of poverty
the ownership of human capital
is not easily transferrable
Monopolistic competition is an inefficient market structure because
it has a deadweight lost, just as monopoly does
the prisoners' dilemma is an important game to study because
it identifies the fundamental difficulty I maintaining cooperative agreements
A concentration ratio
- measures the percentage of total output supplied by the four largest firms in the industry. - reflects the level of competition in an industry. - is related to the control that each firm has over price.
Assume the role of a critic of advertising. Describe the characteristics of advertising that reduce the effectiveness of markets and decrease the social welfare of society.
1) Deception: advertising can exaggerate products and make false claims 2) Manipulation: uses emotional manipulation such as fear or insecurity to encourage consumption (can lead to irrational decision making) 3) Monopolistic effects: large companies with large budgets can dominate markets and stifle competition. this can reduce innovation
Assume the role of a defender of advertising. Describe the characteristics of advertising that enhance the effectiveness of markets and increase the social welfare of society.
1) Tool of promotion 2) used as a means of communication with the targeted audience 3) has a wide variety of objectives: it aims at increasing sales, building brand image, and educating people and helps to form public relations
Based on the US income data from 2008, the bottom fifth of all families received approximately what percent of all income?
4 percent
of the total income earned in the US economy, approximately
75 percent is earned by workers and 25 percent is earned by owners of land and capital
which of the following statements is characteristic of utilitarianism
an extra dollar of income provides higher marginal utility to a poor person than to a rich person
human capital is
an important determinant of wages and it affects the production of goods and services
Which of the following statements is not correct? a. Monopolistic competition is similar to monopoly because in each market structurethe firm can charge a price above marginal costs. b. Monopolistic competition is similar to perfect competition because both marketstructures are characterized by free entry. c. Monopolistic competition is similar to oligopoly because both market structuresare characterized by barriers to entry. d. Monopolistic competition is similar to perfect competition because both marketstructures are characterized by many sellers
C
which of the following explains the rise in income inequality in the US from 1970 to 2008?
an increase in the demand for skilled labor
Fiona's hourly wage increases from 8 to 10. which of the following describes a consequence of the increase in Fiona's wage?
Fiona may choose to work fewer hours due to the increase in her wage
a compensating differential is
a difference in pay due to nonmonetary characteristics of jobs
firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell
a highly differentiated consumer good
among the people who are characterized below, who has the highest opportunity cost of leisure
a medical doctor who earns $210 per hour and who sleeps during his leisure time
which of the following represents a problem in measuring inequality?
a normal life cycle pattern causes inequality in the income distribution but may not reflect inequality in living standards
firms that spend a large amount of money on advertising a particular product are likely to be providing consumers with
a signal of product quality
Which of the following is a commonly cited benefit of advertising a)can be a signal of the quality of a product b) impedes competition c) reduces the deadweight loss associated with monopolistic competition
a) can be a signal of the quality of a product
in a game theory, a Nash equilibrium is
all of the above are correct
A recent study of the determinants of wages for clerical staff at a state university found that years of school, experience, age and job characteristics only explained about one half of the difference in wages. describe other factors that my be important in explaining wages differences for clerical staff.
another factor is gender; men may choose this job more over women, and result in a wage gap
of the four countries, which has the highest degree of income inequality?
brazil
a profit maximizing firm in a monopolistically competitive market is characterized by which of the following a) marginal cost exceeds marginal revenue b) average revenue equals marginal cost c) price exceeds marginal cost d) all of the above are correct
c) price exceeds marginal cost
Which of the following is not an argument made by critics of advertising a) advertising manipulates peoples' tastes b) advertising impedes competition c) advertising promotes economies of scale d) advertising increases the perception of product differentiation
c) promotes economies of scale
competitive firms that maximize profits will hire workers until the value of the marginal product of labor
equals the wage
bill and ted went to school at the same time. each graduated with an associates degree. they have received similar performance evaluations. bills employer is not a good business manager, and the bookkeeper embezzled money. because of the loss, the employees didn't receive raises. ted's employer is savvy. if ted has higher earnings than bill, the difference is most likely a function of
chance
what causes the labor demand curve to shift?
changed in productivity and changes in output prices
economic mobility in the US is
common. fewer than 3 percent of poor families remain poor for 8 or more years
the Sherman antitrust act prohibits price fixing in the sense that
competing executives cannot even talk about fixing prices
Which of the following pairs illustrates the two extreme examples of market structures?
competition and monopoly
In a long run equilibrium, price is equal to average total cost. This statement applies to
competitive and monopolistically competitive markets, but not to monopolies
A distinguishing feature of an oligopolistic industry is the tension between
cooperation and self interest
if hiring more workers results in each additional worker contributing successively smaller amounts of output, then which of the following is present
diminishing marginal product
That some schools direct females away from science and math courses is evidence of
discrimination that occurs prior to people entering the labor market
a signaling theory of education suggests that
education does not necessarily increase productivity
certain factors that are probably important in determining wages are nevertheless difficult to measure. consequently, labor economists find those factors difficult to incorporate into their studies of labor markets and wages. those factors include
effort and natural ability
A firm that practices resale price maintenance
has no incentive to reduce competition between its retailers. resale price maintenance can lead to more service
if a worker is indifferent between a job with a wage of 12 per hour and a job of 15 per hour, then
higher paying job has a compensating wage differential of 3 per hour
the accumulation of investments in people such as education and on the job training is known as
human capital
the beauty premium can be explained by the fact that
in some occupations, physical attractiveness may enhance the value of their marginal product
in the prisoners' dilemma game with bonnie and Clyde as the players, the likely outcome is one
in which both bonnie and Clyde confess
when the government taxes income as part of a redistribution program,
incentives to earn income are diminished
the poverty rate is based on a family's
income only
immigration of workers into the us is often an important source of
increase in the supply of labor in the US
the study by cox and alm found
inequality in consumption is much smaller than inequality in annual income
in the parable of the leaky bucket, a fundamental problem with government redistribution programs is identified. as long as the government only has "leaky buckets" at its disposal,
it should not try to reach complete equality in income
liberalism is the political philosophy espoused by
john rawls
which of the following is an example of a factor of production
land
the political philosophy that views the redistribution of income as a form of social insurance is
liberalism
equality of opportunities is more important than equality of incomes. this statement would be most likely attributed to which political philosophy?
libertarianism
when a market is monopolistically competitive, the typical firm in the market can earn
losses in the short run and zero profit in the long run
Monopolistically competitive firms have excess capacity. To maximize profits, firm will
maintain the excess capacity
a monopolistically competitive industry is characterized by
many firms selling products that are similar but not identical
liberalism suggests that public policies should aim to
maximize the well being of the worst-off person in society
economic mobility refers to the
movement of people among income classes
which of the following is an example of a monopolistically competitive industry? -computer operating systems -tennis balls -movies -cable television
movies
Two bottles of body wash sit side-by-side in a grocery store: Olay (a brand name) sells for $6.00, while Up and Up (not a brand name) sells for $3.00. Even defenders of brand names would have to admit that
none of the above
the marginal product of labor is defined as the change in
output per additional unit of labor
Which of the following graphs depicts a short run equilibrium that will encourage the entry of other firms into a monopolistic competitive industry?
panel c
a family's ability to buy goods and services depends largely on the family's
permanent income
if a market is a duopoly and additional firms enter and do not cooperate, then
price falls and quantity rises
when we compare the income distribution of the US to those of other countries, we find that the US
ranks around the middle group
Like monopolists, oligopolists are aware that an increase in the quantity of output always
reduces the price of their product
value of marginal product is defined as the additional
revenue earned from hiring one more factor of production
the human capital theory explanation for why people invest in education has been challenged by a theory that suggests
schooling acts only as a signal of ability
List five goods that are likely sold in a monopolistically competitive market
soap, hamburgers, jeans, shoes, coffee shops
a utilitarian government has to balance the gains from greater income equality against the losses from distorted work incentives. to maximize total utility, therefore, the government
stops short of a fully egalitarian society
economists have proposed which of the following hypotheses to explain the rising wage gap between skilled and unskilled workers
technological change
the most popular movie starts have high income for a number of reasons. one such reason is
the ability for almost everyone to enjoy movies at a relatively low cost
factor markets are different from product markets in an important way because
the demand for a factor of production is a derived demand
a college degree makes a person more productive according to
the human capital but not the signaling theory of education
libertarianism identifies a redistribution of income role for government when
the income distribution is altered by illegal means (theft)
in markets characterized by oligopoly,
the oligopolists earn the highest profit when they cooperate and behave like a monopolist
the poverty rate is
the percentage of the population whose family income falls below a specified level
if a person can prove that she was damaged by an illegal arrangement to restrain trade, that person can sue and recover
three times the damages she sustained, as provided for in the Clayton act
suppose the market for labor is initially in equilibrium. an increase in immigration will cause the equilibrium wage
to fall and the equilibrium quantity of labor to rise
daryn is raking leaves to earn money for his university's economics club. in the first hour, he rakes 8 bags. in the second hour, he rakes 6. if he earns $8 per hour, the value of the marginal product of the second hour of labor is $48.
true
higher levels of human capital are correlated with higher earnings because firms are willing to pay more for better educated workers who have higher marginal productivities.
true
in a competitive market, strategic interactions among the firms are not important
true
land, labor and capital are examples of factors of production
true
monopolistically competitive firms, like monopoly firms, maximize their profits by charging a price that exceeds marginal cost
true
the fact that doctors are paid more than economists is an example of compensating differential.
true
from society's standpoint, cooperation among oligopolists is
undesirable because it leads to output levels that are too low and prices that are too high
Jose receives a pay raise at his part time job from 9 to 11 per hour. he used to work 12 hours per week but now he decides to work 15 hours per week. for this price range, his labor supply curve is
upward sloping
which of the following statements is correct
when oligopoly firms collude, they are behaving as a cartel
the labor supply curve is fundamentally a representation of the trade off people face between which of the following
work and leisure