Microeconomics test #3

If a natural monopoly is forced to use marginal cost pricing, which of the following is not true?

Average total costs would increase

If welfare benefits equaled the poverty gap, for each household in poverty

Poverty would be eliminated

To maximize profit, a natural monopolist will

Produce where MR = MC

Other things being equal, which of the following would increase the market demand for labor?

An increase in the marginal productivity of labor

The costs associated with the employment of more than 100,000 workers by the federal government regulatory agencies are an example of

Administrative costs

The opportunity cost of working is the

Value of leisure time that must be given up

Charles is retired and earns $10,000 per year working part-time. He is entitled to a maximum Social Security retirement benefit of $14,000. Social Security regulations allow him to earn $8,000 and still get maximum benefits. If he increases the number of hours he works and thus increases his earnings to $20,000 his total benefits will decrease by

$4,000

The percentage of federal tax receipts allocated to income transfers is

50%

A progressive tax is

A tax system in which tax rates rise as income rises

In monopolistic competition, the entry of new firms will

All of the above (study, 14)

Workers typically require higher wages in order to work additional hours because of the

All of the above (study, 37)

The demand for factors of production is

All of the above (study, 42)

Which of the following would shift the market demand for labor, ceteris paribus?

All of the above (study, 45)

When the minimum wage is raised in a competitive market, ceteris paribus

All of the above (study, 61)

Wealth

All of the above (study, 69)

If the market's response to the FOR WHOM question is suboptimal

All of the above (study, 75)

If welfare benefits equaled the poverty gap, for each household in poverty

All of the above (study, 94)

The Social Security program is an income-transfer program for

All of the above (study, 97)

Approximately what percentage of U.S. households receive transfer payments?

Almost every household receives some form of income transfer payment

Cost efficiency refers to the

Amount of output associated with an additional dollar spent on input

If the MPP of an additional unit of labor is 4 units per hour, product price is constant $3 per unit, and the wage rate is $15 per hour, then

An additional unit of labor should not be employed

Which of the following is a form of government intervention that is designed to correct market failures?

Antitrust laws

To be eligible for a welfare program, the recipient must be

Any of the above (study)

Social insurance programs insure people against the costs of

Any of the above (study, 91)

The demand for labors and other factors of production typically declines in a recession because those factors

Are derived from the demand for final output, which also declines in a recession

Social Security annual benefits to retirees

Are higher for high income workers and lower for low income workers

The marginal revenue product of labor is equal to

Change in total revenue / change in quantity of labor

The costs that firms incur to learn about the regulations in their industry are referred to as

Compliance costs

Higher marginal tax rates fir welfare programs will

Decrease incentive to work

Critics content that imposing a minimum wage higher than the equilibrium wage in a competitive industry would

Decrease the number of workers employed in that industry

Both perfect competition and monopolistic competition

Earn zero economic profit in the long run

When the regulatory process itself becomes a drag on economic growth, society experiences

Efficiency costs of regulation

In monopolistic competition, a firm's demand is tangent to the long-run average cost curve in the long run because

Entry eliminates economic profit, and exit eliminates losses

Ceteris paribus, if the demand for computers increases, the demand for labor in the computer manufacturing industry will

Increase because the MRP of labor has increased

A marginal tax rate of zero for welfare programs will

Increase the number of people eligible for welfare

A payroll tax

Increases the nominal cost of labor

The fact that landlords are able to pass the majority, but not all, of the burden of property taxes on to renters suggests that the price elasticity of demand for apartments is

Inelastic

A college graduate who works at a firm is also working part-time on a master's degree in business and expects to be paid a higher wage after earning the degree. The basic reason for this wage differential is

Investment in human capital

A 7.25% sales tax

Is a regressive tax because poor individuals consume a higher percentage of their income than high-income individuals

The long-run average total cost curve of a natural monopolist

Is always above the marginal cost curve in the relevant range of production

The individual firm that hires labor under competitive conditions faces a labor supply curve which

Is perfectly elastic

A natural monopoly is a desirable market structure because

It can offer the products consumers want at the lowest possible price because of economies of scale

Which of the following is true about a payroll tax?

It reduces the net wages to employees

The marginal revenue product of labor curve is the firms

Labor-demand curve

Brand loyalty usually makes the demand curve for a product

Less price elastic

The cost efficiency of labor is equal to the

MPP of labor divided by the wage rate

The change in total revenue associated with one additional unit of input measures labors

MRP

Which of the following characterizes monopolistic competition?

Many firms produce a particular type of product but each maintains some independent control over its own price

If an individual is taxed at a 30% rate for each extra dollar earned, the reference is to the

Marginal tax rate

The number of hours that a worker is willing to work is determined by the trade-off between the increasing

Marginal utility of leisure and the decreasing marginal utility of income

Market failure includes

Market power resulting in reduced output and higher price

The primary benefit of the Social Security program is the

More equitable distribution of income that results

The law of diminishing returns states that, ceteris paribus, the MPP of labor declines as

More labor is employed

To produce with the greatest possible price efficiency, a natural monopoly

Must be subsidized by the government to overcome losses

Suppose that an economy wants to eliminate the resource waste associated with excess capacity in monopolistically competitive markets. Which of the following actions would achieve this goal?

Require all firms in a given monopolistically competitive market to produce identical products

In which industry is monopolistic competition most likely to be found?

Retail trade

If household income and wealth increases there will be a

Rightward shift of the labor supply curve

State and local governments generate most of their revenues through

Sales and property taxes

By instituting a sales tax, a tax plan would

Shift the Lorenz curve for after-tax income away from the absolute equality

The federal income tax is designed to

Shift the Lorenz curve inward

Why do skilled workers generally earn more than unskilled workers?

Skilled labor has higher marginal revenue products than unskilled labor

If Reggie's substitution effects outweigh his income effects, his labor-supply curve

Slope upward

At the point where income effects outweigh substitution effects, the labor-supply curve

Starts to bend backward

When people are standing in line for jobs and there are more people than jobs, then the labor market is characterized by a

Surplus of labor

The Social Security program is financed by

Taxes on payrolls

Other things being equal, a profit-maximizing employer will employ additional labor as long as

The MRP of labor exceeds the wage rate

A tax structure is called progressive when

The average tax rate decreases if income decreases

The benefits received principle of taxation is

The basis for the gasoline tax

Which of the following increases labor demand for workers at tourist resorts

Tourism increases in popularity, increasing the demand for workers at tourist resorts

Which of the following is an example of product differentiation?

Two bars of soap differ only in their label, but consumers pay $0.20 more for the label they recoginze

If the government forces a natural monopoly to produce the output where P = MC, the firm

Will incur losses

The difference between personal income and wealth is that

Income is a flow, while wealth is a stock

The size distribution of income best measures the answer to the

FOR WHOM question

In monopolistic competition, a firm

Has a downward-sloping demand curve

Which of the following has not been a major factor contributing to the high productivity of labor in the United States?

High wage rates

A profit-maximizing firm's daily total revenue is $155 with 3 workers, $200 with 4 workers, and $230 with 5 workers. The cost of each worker is $40 per day. The firm should

Hire 4 workers

Suppose that Silvia's Dance Studio uses both labor and capital, the cost efficiency of labor is 5 dance lessons per dollar and the cost efficiency of capital is 1 dance lesson per dollar. Silvia should

Hire less capital and more labor

If wages dropped below $100 per period, ceteris paribus, the firm depicted in the above figure should

Hire more workers (study, 63)

Which statement best describes the overall tax and transfer systems of the U.S.?

Our tax system does not by itself reallocate income; transfer payments help redistribute income from rich to poor

The economic inefficiency of monopolistic competition means that

Producers produce at an output short of, and charge a price greater than, minimum average total cost

If the taxes by state and local governments were combined with Federal tax system, the overall tax structure in the U.S. would best be characterized as

Progressive

The labor-supply cover depicts the

Quantities of labor supplied at alternative wage rates

An upward-sloping labor-supply curve illustrates

The direct relationship between quantity of labor supplied and the wage rate

Which of the following statements regarding the distribution of money income is most correct?

The distribution of money income overstates the extent of poverty in the U.S.

Tax incidence most accurately refers to

The distribution of the real burden of a tax

Personal income

The flow of annual income received by a household before paying taxes

Economists Chamberlain and Prante of the Tax Foundation note that if the U.S. population in 2004 were grouped into quintiles by income

The top two income quintiles paid more in taxes than the benefits received from government spending

In-kind transfers are

The transfer of goods and services, instead of income, to those in need

Which of the following would NOT shift the market demand for labor, ceteris paribus?

The wage paid to labor

At a given wage rate, the firm will be willing to hire an additional worker only if

The worker contributes at least as much to marginal revenue as to marginal costs