Microeconomics Final Exam

A labor union that limits its membership to workers with a particular skill.

Craft (Exclusive Union)

The development of new products and production methods simultaneously eliminates the market power of existing firms

Creative Destruction

The government grants inventors exclusive rights to make and sell a product

Patent

In total, the Supply of Land is:

Perfectly Inelastic

Price Elasticity of Resource Demand measures producers sensitivity to changes in resource prices.

Price Elasticity of Resource Demand

Development of new or improved production or distribution methods.

Process Innovation

Development of new or improved products.

Product Innovation

Excise taxes or duties on imported goods.

Protective Tariffs

A labor union that represents mainly workers for local, state or federal government.

Public Union

Market where many firms compete to hire labor in where are many qualified workers.

Purely Competitive Labor Market

A wage adjusted for the effects of inflation.

Real Wage

The price paid for the use of land and other natural resources is:

Rent

Process innovation will tend to increase a firm's profit by reducing the costs of the firm.

costs

To maximize profits, a firm should hire additional resources as long as each additional resource unit adds more to REVENUE than it does to COSTS.

false

Would an (A.) INCREASE in Product Demand OR (B.) a DECREASE in Product Demand INCREASE RESOURCE DEMAND?

increase

Technological advance increases the productivity of inputs, and by reducing average total costs it enhances (allocative or productive) [A] efficiency; when it gives society a more preferred product mix of goods and services it enhances (allocative or productive ) [B] efficiency.

productive, allocative

Product innovation will tend to increase a firm's profit by increasing the revenues of the firm.

revenues

The demand for a resource depends primarily on the demand for the good or service that it is used to produce.

the demand for the good or service that it is used to produce.

Process innovation results in a shift upward in the firm's total product curve and a shift downward in the firm's average total cost curve, which in turn increases the firm's profit.

upward, downwards, increases

The Inverted U theory suggests that R&D effort is (stronger or weaker) [A] in industries with very low and very high concentrations. The optimal industry structure for R&D is one in which expected returns on R&D spending are (high or low) [B] and funds are readily available and inexpensive to finance.

weaker, high

The marginal revenue product of an input in a competitive market decreases as a firm increases the quantity of an input used because of the Law of Diminishing Returns.

Law of Diminishing Returns

Compared with a purely competitive labor market, a monopsonistic market will result in lower wage rates and a lower level of employment. They are the wage makers and have more labor market control.

Lower wage rates and a lower level of employment.

The lowest wage employers may legally pay for an hour of work

Minimum Wage

There is only one buyer of a particular kind of labor.

Monopsony

The following would make Resource Demand more ELASTIC:

More Substitute Resources Available Elastic Product Demand High % of Total Cost determined by a resource

A wage not adjusted for the effects of inflation.

Nominal Wage

Licensing requirements, unreasonable standards, and red tape.

Non-Tariff Barriers

If the annual rate of interest were 15% and the rate of return a firm expects to earn annually by building a new plant were 13%, the firm would:

Not build the new plant

State or local laws require a worker to obtain a license before engaging in an occupation.

Occupational Licensing

Spread of successful innovation through imitation or copying

Diffusion

Why is the demand for loanable funds down-sloping?

At higher interest rates, fewer investment projects will be profitable to businesses, and a small quantity of loanable funds will be demanded.

Which of the following is an insurable risk?

Flood and fire insurance

First commercial introduction of a new product or process.

Innovation

First discovery of a product or process.

Invention

Three principles established in the 1947 GATT are:

a. Equal, nondiscriminatory treatment of all member nations b. Reduction of tariffs by multilateral negotiations c. Elimination of import quotas

Major provisions of the Uruguay Round of GATT negotiations include:

a. Tariff reductions, b. Coverage of legal, financial, and other services, c. Cuts in agricultural export subsidies, and d. Protection of intellectual property.

Since 1900, the relative share of income paid to American resource suppliers as rent, interest, and corporate profit has been about:

20%

Which would increase the demand for a particular type of labor?

An increase in the prices of resources that are substitutes for that type of labor would increase the demand for a particular type of labor.

Market with a single seller and a single buyer of labor resulting in competitive conditions.

Bilateral Monopoly

Would an (A.) INCREASE in Complementary Resource Price OR (B.) a DECREASE in Complementary Resource Price INCREASE RESOURCE DEMAND?

Decrease

Would an (A.) INCREASE in Substitute Resource Price OR (B. a DECREASE in Substitute Resource Price INCREASE RESOURCE DEMAND? (assuming output effect outweighed substitution effect)

Decrease

Occupational licensing laws have the economic effect of:

Decreasing the Supply of Labor

The economic rent from land will decrease whenever the:

Demand for land decreases

Individual who is an initiator, innovator, and risk bearer who combines resources in unique ways to produce new goods and services

Entrepreneur

Government payments to domestic producers of exports.

Export Subsidies

When a dominant firm quickly imitates the successful new product of its competitors.

Fast Second Strategy

Limit on quantities or total value of import items.

Import Quotas

Would an (A.) INCREASE in Productivity - Quality of Resource OR (B.) a DECREASE in Productivity - Quality of Resource INCREASE RESOURCE DEMAND?

Increase

Would an (A.) INCREASE in Productivity - Quantity of Resource OR (B.) a DECREASE in Productivity - Quantity of Resource INCREASE RESOURCE DEMAND?

Increase

Would an (A.) INCREASE in Productivity - Technology for Resource OR (B.) a DECREASE in Productivity - Technology for Resource INCREASE RESOURCE DEMAND?

Increase

Would an (A.) INCREASE in Substitute Resource Price OR (B. a DECREASE in Substitute Resource Price INCREASE RESOURCE DEMAND? (assuming substitution effect outweighed output effect)

Increase

A labor union that accepts as members all workers employed in a particular industry (firm).

Industrial (Inclusive Union)

Indicate which of the following would make Resource Demand more ELASTIC: (More OR Fewer) [A] Substitute Resources available. (Elastic OR Inelastic) [B] Product Demand. (High OR Low) [C] % of Total Cost determined by a resource.

Specified Answer for: A More Specified Answer for: B Elastic Specified Answer for: C High

Splitting off a unit of an existing company to form a new innovative firm

Spin-offs

Formation of a new company focused on creating and introducing a new product or production technique

Start-ups

Which of the following does not primarily affect the interest rate of a loan?

State of the loan

Marginal Revenue Product (MRP) is the increase in total revenue from the use of an additional unit of a resource.

Total revenue from the use of an additional unit of a resource

Accounting profit is what remains of a firm's total revenue after it has paid individuals and other firms for the materials, capital, and labor they have supplied to the firm.

True

The following specifies the maximum interest rate for loans:

Usury Laws

Ways a firm can obtain funding to finance R&D spending (loans, bonds, savings, etc.)

Venture Capital

Limit on export quantities or total value a country imposes on itself.

Voluntary Export Restriction

The price paid per unit of time for any type of labor.

Wage Rate

A characteristic of a purely competitive labor market would be Wage Taker behavior by the firms.

Wage Taker behavior by the firms

If a firm employs resources in imperfectly competitive markets, to maximize its profits the Marginal Revenue Product of each resource must equal its Marginal Resource Cost.

its Marginal Resource Cost

Data on the functional distribution of household income shows that the largest single source in the United States is (rents OR interest and profits, OR wages and salaries) [A] and the smallest is (rents OR interest and profits, OR wages and salaries) [B].

largest=wages and salaries smallest=rents