Eco Exam

Which of the following is NOT a social insurance program in the United States?

housing assistance

In a perfectly competitive labor market, the manager's hiring decision is about

how many workers to hire.

When there is free entry and exit in a market, in the long run, price will:

equal average cost

When an individual's best choice may depend on what other people choose and other people's best choices may depend on what the individual chooses, then _____ is the science that is useful to help the decision makers analyze their options.

game theory

Marcella spends an hour each week going through the weekly grocery store advertisements and then shops at four or five stores to get the best deals. Her friend Hua Xing shops at the same store each week and never looks at the advertisements. The grocery stores are practicing price discrimination through the _____ method because _____ has a lower reservation price.

hurdle; Marcella

John is thinking of opening a florist shop. He forecasts revenues of $200,000 per year and explicit financial costs of $140,000 per year. He can pursue this opportunity only if he quits his current job as a driver, where he earns $45,000 per year. He would also need to invest $110,000 of his savings to set up the shop—funds on which he would otherwise be earning a 6% return. Based on this information, how much economic profit or loss would John earn in his first year in business?

a profit of $8,400

Use the data in Table: Katia's Car Wash to answer the question.When four workers are employed, the total revenue equals _____, and total cost equals _____.

$1,880, $1,600

You decide to quit your $70,000-per-year job as a hotel concierge to be an online hotel review blogger. At the end of the first year of blogging, you have earned $90,000. You also spent $10,000 for a high-end computer and wireless network. Your economic profit in the first year as an illustrator is:

$10,000.

(Figure: Market for Avocados) The figure shows the market for avocados. If the seller changes the price per avocado from $1.50 to $1.75, the change in total revenue is:

$12,750

(Figure: Profit Maximization for SoCalGas) Use Figure: Profit Maximization for SoCalGas. SoCalGas's unit profit is:

$12.

Juan earns a yearly salary of $120,000 in his job and $1,000 per year in interest on his savings. After he quits his job to start a company, he uses all his savings to purchase manufacturing equipment for his company. Given the above information and the data summarizing his first year in business in the table, how much accounting profit or loss does Juan earn?

$125,000

(Scenario: Accounting and Economic Profit) Use Scenario: Accounting and Economic Profit. Scenario: Accounting and Economic Profit Casey recently inherited $100,000 from her grandmother. Rather than invest the money in a mutual fund that earns 5% per year, she quit her job as a translator for the United Nations, which paid $60,000 per year, and started Casey's Coffee Crush, a small café in Tribeca. The location she rented cost $20,000 for the year. The equipment, café furniture, and coffee machines cost another $60,000. Staff, sales help, and advertising cost yet another $40,000. In her first year, her revenue was $150,000. Her accounting profit is:

$30,000.

If Maria charges $8, then Jose's best option would be to charge_____ in order to earn _____.

$4; $280

Use the table to answer the question.What is the equilibrium quantity in this market?

160 units

(Figure: Jane's Demand for Medication) It is mandatory for Jane to take several pills of a certain medication each day in order to remain healthy. The medication has no substitutes and is produced by only one pharmaceutical company. Which of the following demand curves represents Jane's demand for the medication? ​

A

Which of the following is an example of an anti-coordination game?

A market has enough growth in demand to support only one more firm, and Asad wants that firm to be his.

Victor owns a shoe store that is losing money, and several other shoe stores in his market are also losing money. Which of the following guidelines will help him decide whether to remain in business or exit the market?

Exit the market if price is expected to be less than average costs.

(Figure: Market for New Housing in Dubai) Which graph shows the effect on the supply curve for new housing in Dubai, if economists predict a decrease in demand for new housing?

Graph B

The Canadian dollar has weakened against the US dollar, meaning that it takes more Canadian dollars to purchase a US dollar. What will happen to the Canadian demand for US cruises from Florida? Choose the graph that correctly depicts your answer.

Graph B

Which of the following claims involves positive analysis?

Higher prices will cause the purchasing power of income to fall.

(Figure: Shift in Supply 1) Use the figure to answer the question.Which of the following market changes would lead to a shift of the supply curve from Old supply to New supply?

Lower costs of transportation for the producers.

An equilibrium in which the choice that each player makes is a best response to the choices other players are making is the definition of a:

Nash equilibrium.

A certain city has four hospitals, and there are no other hospitals within 200 miles. Two of the hospitals are more specialized than the other two because one has a large cardiac unit and the other has a specialized cancer-treatment center. The local market for hospital services is what type of market?

Oligopoly

How common is it for Americans to have a spell of poverty during their lifetime?

Over 50% will have a spell of poverty.

(Figure: Price Discrimination) A business that price discriminates will produce at what output level?

Quantity 3

Employers should hire more workers when the marginal revenue product is greater than (or equal to) the wage. This rule is known as the

Rational Rule for Employers.

With regard to income redistribution, what is the trade-off between efficiency and equality?

Redistributing incomes reduces work incentives, leading to lower average income and other costs associated with redistribution.

Marie Johnston is a manager at an electronics store, and she has to decide how many workers to hire. If she hires one worker, her revenue is $400 per day. If she hires another worker, she can make another $350 per day. The marginal benefit of hiring another worker decreases by $50 with each additional hire. Assuming that workers are paid $20 per hour and work eight hours, how many employees should Marie hire, and what will be the total revenue of her store?

She will hire five workers and the revenue of the store will be $1,500.

Which statement BEST illustrates social insurance?

Social Security

Which statement makes use of normative analysis?

The best way to encourage growth in the economy is through education.

When can making the first move NOT create an advantage?

The move is not viewed as a credible commitment.

(Figure: Utility Function) Use the utility function graph to answer the question.Olga has income of $30,000. She has an opportunity that has a 50% chance of increasing her income by $20,000 and a 50% chance of decreasing her income by $10,000. Which of the following is true regarding this opportunity and her utility?

The potential loss in utility is less than the potential gain in utility.

Which of the following conditions is NOT present in perfect competition?

The product price varies across the companies in the market.

Which is a source of market failure?

These are all sources of market failure.

When perfect competition prevails, which characteristic of firms is one likely to observe?

They are all price-takers.

The price of coffee at a local coffee shop is $3. Cheryl is willing to pay $6 for her first cup of coffee each day. The marginal benefit to her of each additional cup of coffee falls by $2. How many cups of coffee should Cheryl purchase?

Two

(Figure: Major U.S. Redistribution Programs) Use Figure: Major Redistribution State Programs. The figure lists welfare programs available to individuals. Panel C represents programs that are not means-tested and provide monetary transfers. Which program fits this description?

Unemployment Insurance

Which of the following is an example of a negative externality?

When Fazio parks his big truck at the grocery store, people in the cars on each side of his parking space have a hard time opening their car doors.

As a company manager, what do you need to know about your customers before you can successfully price discriminate?

You need to know each customer's reservation price.

Which strategy is NOT an example of price discrimination?

a Presidents Day sale

If a monopolist produces a quantity that generates MC> MR, then profit:

can be increased by increasing price.

When there is a shortage of highly skilled workers in a particular region, the:

demand for skills education increases.

When evaluating how much to produce, increase the quantity produced if the marginal benefit of an additional item is _____ the marginal cost of the additional item. Correct Answer

greater than or equal to

The Rational Rule for Sellers says that a seller should sell one more unit of an item if the price is:

greater than or equal to the marginal cost.

A seller's demand curve will have a steep negative slope when the seller

has a high level of market power.

To maximize profits, passenger trains will charge _____ prices to customers who _____.

higher; value the service more

Which of the following principles is critical to understanding how a company owner negotiates a deal to its greatest advantage?

opportunity cost

Which of the following is NOT an example of a relationship-specific investment that could result in a hold-up problem?

organizing the layout of a factory for the most efficient flow of the production line

Most social insurance programs pay benefits that are based on:

past earnings.

(Figure: Graph) Refer to the graph to answer the question.A decrease in the price of an item will cause the movement from

point Q to point P.

Which of the following is one of the five forces that determine the long-term profitability of a company in a market?

potential competitors

Ariel owns an automobile dealership that sells several car models. Ariel negotiates the price with each customer so that they are willing to pay the highest price possible. This results in customers paying different prices for the same model. Ariel is

practicing perfect price discrimination.

Selling the same good at different prices to different buyers is

price discrimination.

The two essential elements of risk are _____ and _____.

probabilities; payoffs

In Douglas County, Washington, apple production is limited by the number of acres available for agricultural production. Which economic concept does this statement BEST represent?

scarcity

In the mouthwash market, product differentiation would NOT take the form of:

setting a price well below those of rivals.

(Figure: Demand for Bananas) Use Figure: Demand for Bananas. If pears are a substitute for bananas, an increase in the price of pears could be represented as a:

shift from D1 to D2.

(Table: The Market for Salt and Vinegar Chips) Use Table: The Market for Salt and Vinegar Chips. If the price of salt and vinegar chips is $0.50, there is a:

shortage of 70 bags per month.

A second-mover advantage is the:

strategic advantage that can follow from taking an action that adapts to your rival's choice.

If the price elasticity of supply is greater than 1:

supply is elastic.

(Figure: The Demand and Supply of Quinoa) Use Figure: The Demand and Supply of Quinoa. If the price of quinoa is $8, a _____ of _____ bushels per period will result.

surplus; 4,000

The marginal benefit of consuming an item is

the additional benefit from buying one more unit of that item.

We have to make choices because:

the resources available to us are limited.

In an indefinitely repeated game, the players face:

the same strategic interaction an unknown number of times.

The selling of _____ products at different prices to different consumers is the practice of _____.

the same; price discrimination

The Rational Rule for Employers implies that they keep hiring until

the wage equals the marginal revenue product of the last worker hired.

In the labor market for computer programmers, the labor supply represents

the workers seeking to sell their labor as programmers.

Multiple equilibria exist when:

there is more than one equilibrium.

When the government requires a license or government approval for a company to produce and sell a product, then in the market for that product:

there will be fewer sellers.

Use the data in Table: Larry's Lawn Mowing to answer the question.If Larry uses the Rational Rule for Employers, how many workers will he hire?

two

While we are not used to considering this possibility, pollution has some indirect benefits, since:

we obtain goods and services that make our life more convenient, even though we pollute in the process.

An equilibrium in a market occurs:

when the quantity supplied equals the quantity demanded.

The costs of vertical integration do NOT include reduced:

within-brand competition.

Price competition with a product that is identical across sellers leads to an outcome of:

zero economic profits for the sellers.

(Figure: Producer Surplus in the Market for Lattes) Consider the figure Producer Surplus in the Market for Lattes. If the price of lattes increases from $3 to $4, the producer surplus will increase by:

$140.

The marginal cost of producing a marble sculpture is $10,000. The sculpture sold for $15,000. How much producer surplus did the artist receive?

$5,000

(Figure: Leather Wallets) Fossil has started an aggressive advertising campaign for its wallets. Which graph shows how the demand in the market might change if the advertising campaign is successful?

Graph D

(Figure: Group Pricing) The diagram represents the demand and costs facing BJ's Smoothies for two different groups of consumers. What price and quantity should BJ choose for each group?

Group A: P = $10, Q = 100; Group B: P = $9, Q = 50

Use the World Bank data in Table: Costa Rica Distribution of Income, 1986 and 2016 to determine what happened to the distribution of income in Costa Rica over the time period 1986 to 2016.

It became more unequal.

The restaurant industry is monopolistically competitive. Thus:

food served at each restaurant tends to be differentiated among the many sellers serving the market

(Figure: Market 5) Use the graph to answer the question.The graph shows the marginal social benefit, demand, and supply curves in the toothbrush market are in the graph. Market forces would yield a quantity of _____ and a price of _____.

four; $4

When an increase in demand for stand-up paddleboards rises, then the demand for skilled paddleboard shapers _____, and their marginal revenue product _____.

rises; rises

An aluminum mining operation discharges waste products into a river, causing higher costs and discomfort for downstream users of the water for which they are not compensated. In this case:

there is overproduction of aluminum.

(Figure: Prisoners' Dilemma for Thelma and Louise) Use Figure: Prisoners' Dilemma for Thelma and Louise. Thelma and Louise are arrested and jailed for bank robbery. Given the payoff matrix in the figure, the Nash equilibrium behavior is for Thelma _____ and Louise _____.

to confess; to confess

(Figure: Market 4) Use the graph for pounds of grapes to answer the question.When the actual pounds produced and sold is two, economic surplus in the market is represented by the area between the demand and supply curves:

to the left of the quantity of two.

(Figure: The Profit-Maximizing Output and Price in the Diamond Market) Use Figure: The Profit-Maximizing Output and Price in the Diamond Market. Assume that there are no fixed costs and that AC = MC = $200. Under perfect competition, the price of the good would be _____, and _____ units would be produced.

$200; 16

(Table: Demand and Total Cost for Asgard) Use Table: Demand and Total Cost for Asgard. Valkyrie runs a natural monopoly that produces electricity for a small mountain village near Asgard. The table shows the demand facing Valkyrie and Valkyrie's total costs. The marginal revenue of the third unit of output is:

$350.

(Figure: MSB and Demand Curves 2) Use the graph to answer the question.The graph shows the marginal social benefit and demand curves in the hamburger market. What is the marginal external benefit when eight units are bought?

$4

Kevin Williamson goes to a local coffee shop and orders a medium-sized latte. His willingness to pay for that latte is $6. The price of the latte is $2. The cost to the coffee shop to produce the latte is $1. How much economic surplus does Kevin gain when he purchases the latte?

$4

(Table: Income and Total Utility for Naomi) Use Table: Income and Total Utility for Naomi. Naomi earns $50,000 per year but will be docked $20,000 of her pay if she is late with her work. If there is a 25% probability that Naomi will be late with her work, reducing her income to $30,000, her expected income is:

$45,000.

(Figure: The Market for Beyond Meat Hamburgers) Consider the figure The Market for Beyond Meat Hamburgers. The maximum economic surplus in this market is _____, which occurs at a price of _____.

$600; $1.50

The demand curve(i) is a curve that shows the maximum willingness to pay for a product.(ii) is a curve that shows the marginal benefit gained from a product.(iii) is a curve that shows the production cost of a product.(iv) is a curve that shows the relationship between the price of a product and a consumer's willingness to buy at each price.

(i), (ii) and (iv) are correct.

(Table: Total Utility of Income After University Expenses and Scenario: University Expenses) Use Table: Total Utility of Income After University Expenses and Scenario: University Expenses. The Perez family's expected total utility is _____ utils. Scenario: University Expenses The Perez family would like to send their eldest daughter, Luciana, to university in the fall semester. There is a 25% chance that Luciana will earn a full scholarship to the Miller School of Medicine at the University of Miami, leaving the Perez family with $50,000 in income after tuition; a 50% chance that Luciana will earn a partial scholarship to the Florida State University College of Medicine and that the Perez family will have $40,000 in income after tuition; and a 25% chance that she will attend the Florida Institute of Technology, a private college, and that the Perez family will consequently have $30,000 in income after tuition.

3,210

(Table: Supply of Matcha Tea) Use Table: Supply of Matcha Tea. If the price of matcha tea is $0.75 per cup, the total quantity of matcha tea supplied will be _____ cups per day.

50

As part of a market research project, you survey six random people to see how much gas per week they would buy at various prices. The data you collect is in the accompanying table. What is the total demand for gasoline at $2.50 per gallon in your survey? ​ Quantity of Gallons of Gas Demanded Per Week

51 gallons

(Figure: Spice King Burgers' Supply Curve) Take a look at Spice King Burgers' supply curve for burgers. How many burgers is Spice King Burgers willing to supply at a market price of $3.50 per burger?

600 units

Assume that a country with total income of $160,000 has a population of 10 households whose incomes are listed in Table: Income of Households.What percentage of income is earned by the top quintile of the population?

69%

(Figure: Leonard's Demand for Pecan Pie) Look at Leonard's weekly demand curve for slices of pie. How many slices of pie is Leonard willing to buy at $2 per slice?

7 slices

(Figure: Risk Aversion Differences for Edward and Stephan) Use Figure: Risk Aversion differences for Edward and Stephan. An important reason that Edward and Stephen may differ in their aversion to risk is:

All of these answers are correct.

(Figure: Shifts in Demand and Supply IV) Use Figure: Shifts in Demand and Supply IV. The figure shows how supply and demand might shift in response to specific events. Suppose that a large amount of people move to Denver such that the population increases by 20%. Which panel BEST illustrates how this event will affect the market for houses in Denver?

B

Consider the decision to read your economics textbook. Which of the four core principles of economics applies to the notion that reading this textbook will help you to establish a solid foundation of understanding economics, which will be beneficial for future courses?

Interdependence principle

What effect does increasing competition have on price for firms with market power?

It drives the price down to the level of costs.

As the price of scanners with high-resolution cameras dropped, Ford began using them instead of human inspectors to check the quality of the painted surfaces of its cars. What is the relationship between capital and labor in this example? Correct Answer

Labor and capital are substitutes in production.

Which of the following sellers faces the least competitive pressure?

a monopolist with no direct rivals

Data comparing people's reported level of well-being to their income in the United States show:

a positive or direct relationship between well-being and income.

What relationship exists between income and well-being in the well-being curve found in the figure?

a positive relationship with decreasing marginal gains in well-being as income rises

In differentiating a product, the demand-side consideration is to _____ as possible.

be as attractive to buyers

If Monica is building computers under conditions of diminishing marginal product, the marginal cost will:

be increasing.

The demand for bread, a necessity with few substitutes, will tend to:

be relatively inelastic.

Economic analysis that includes psychological factors in assessing how people make economic decisions is known as:

behavioral economics.

The cost-benefit principle states that a decision should be pursued only if the

benefits are greater than the costs.

(Figure: Oligopoly Pricing Strategy in Wireless TV Market II) Use Figure: Oligopoly Pricing Strategy in Wireless TV Market II. If the two firms in the cable TV market collude: ​

both firms will set a high price, and each will earn $100,000.

The cost-benefit principle evaluates _____ costs and benefits, and willingness-to-pay considerations evaluate _____ costs and benefits.

both monetary and nonmonetary; only nonmonetary

The Clean Company sells a bottle of bathroom cleaner for $4 and a grout brush for $3. It offers a special deal for a package containing both the bathroom cleaner and the grout brush for $5. This type of quantity discount is known as

bundling.

When an event is more likely to occur if some other event occurs, the two events are said to be positively correlated. By simultaneously impacting a broad range of investments, severe weather, political events, and _____ all increase financial risk.

business cycles

How does the threat of potential substitutes lessen the market power of a business? If the substitute becomes available, then the:

business may lose customers to the substitute good's market unless it lowers price.

Alex and Marilyn started Ono Yo, an organic and fresh fruit frozen yogurt truck. As the demand for organic and healthier desserts rose, demand for Ono Yo's products grew. Because of the growth in demand for Ono Yo's product, Alex's and Marilyn's

demand for workers increased.

A common strategy for a seller to increase its market power is to

differentiate its product.

The labor demand curve has a _____ slope because of _____.

downward; diminishing marginal product

Good M has an income elasticity of demand of 0.5. Which of the following items is good M?

electricity

Barbara works at her local Costco, which provides a health insurance program for all its workers. This is an example of:

employment-based health insurance.

The price elasticity of demand for canned fruit is calculated as 0.75. Given this, demand is:

inelastic.

If a firm expects lower prices in the future

it will increase supply today.

Lenore operates a tool rental firm and will incur an economic loss in the short run when she produces the profit-maximizing quantity and the price is:

less than average cost.

Marginal revenue product is the

marginal revenue from hiring an additional worker.

When a welfare program is provided to those whose incomes fall below some minimum level, it is said to be:

means-tested.

As a basic rule of thumb, when price competition is subdued, a company owner should:

minimize product differentiation.

Focusing illusion is the tendency to:

mispredict your utility by focusing on a few factors at the expense of others.

With price discrimination, a company ends up selling

more but at an efficient output level.

An efficient producer will keep increasing production until:

price equals marginal cost.

Adriana stops at a propane station to fill up the tank of her BBQ. The propane in her tank for the BBQ is BEST described as a:

private good.

(Figure: Supply Curves) The figure shows four different supply curves for four products: A, B, C and D. Which of the products has a perfectly elastic supply curve?

product C

The tax system is used to reduce income inequality through the use of _____ taxes.

progressive

Yifen lives in a very prosperous nation. Her household income is high enough to allow her family to take a vacation to the mountains each year and pay for piano lessons for her daughter after covering food, shelter, medical care, transportation, and clothing. It exceeds the official poverty line. However, because her household income is in the bottom 10% of households in her nation, Yifen often claims that she is poor. Yifen is claiming:

relative poverty because she has less income than most others in her society.

(Figure: A Competitive Market in the Presence of Externalities) Use Figure: A Competitive Market in the Presence of Externalities. Given the figure, if there are external benefits:

resources will be under allocated to the production of the good.

Suppose the market for gasoline is in equilibrium. You have heard that the price of crude oil is rising because of Organization of Petroleum Exporting Countries (OPEC) restrictions. You are also aware that the number of drivers is rising. Knowing this, you predict that the price of gasoline will _____ and the quantity of gasoline bought and sold will _____.

rise; rise or fall

(Figure: Supply Curve) Use the graph of a supply curve for jugs of laundry detergent to answer the question.If 18 jugs are sold at a price of $20, what is the total producer surplus?

$135

(Table: Demand and Total Cost for Asgard) Use Table: Demand and Total Cost for Asgard. Valkyrie runs a natural monopoly that produces electricity for a small mountain village near Asgard. The table shows the demand facing Valkyrie and Valkyrie's total costs. The marginal cost of the fourth unit of output is:

$175.

There are eight households in a rural community. Four of the households earn $30,000 each per year, and the other four households earn $40,000 each per year. The median household income is _____, and the mean household income is _____.

$35,000; $35,000

(Table: The Demand for Potato Chips) Use Table: The Demand for Potato Chips. If Blair, Serena, and Dan are the only three buyers in the market, and the price of a bag of potato chips is $0.50, the total market quantity demanded is _____ bags per month.

240

(Table: Income and Total Utility for Naomi) Use Table: Income and Total Utility for Naomi. Naomi earns $50,000 per year but will be docked $20,000 of her pay if she is late with her work. If there is a 25% probability that Naomi will be late with her work, reducing her income to $30,000, what certain income leaves Naomi just as well off as her uncertain income?

40,500$8

(Figure: Market for Bread) Which of the following graphs shows what will happen in the market for bread if the price of organic wheat used in bread production rises? ​

Graph C

(Figure: Market for Leather Wallets) Producers of hand-made leather wallets have made manufacturing changes that have improved quality but reduced efficiency. Which graph shows this change in the market?

Graph C

(Figure: Market for Printing Paper) Which of the following graphs illustrates what we expect to see in the market for printing paper if the price of printing paper rises? ​

Graph C

A company produces a particular cell phone that requires accessories (such as chargers, cases, and ear plugs) that are specific to that phone and cannot be used with phones manufactured by other companies. The company that produces this cell phone is using what strategy to create a barrier to entry?

Increasing switching costs to ensure demand for its product.

Alena manages a small theme park. She hires one more custodian at $450 per week, and her park is cleaner and more attractive. As a result of this improvement, ticket sales rise by 40 tickets per week. Tickets sell for $12. Use the Rational Rule for Employers to determine if hiring the extra custodian was a good move.

Yes, it was a good move because it added more to revenue than to cost.

Steak is a normal good. If students' incomes at your college decrease, the effect on steak consumption will be:

a decrease in demand.

Compared with many other developed nations, the United States has:

an unusually high poverty rate.

Both emissions taxes and tradable emissions permits:

are efficient methods of pollution reduction.

People gain consumer surplus when they purchase an item:

at a price below the value of the benefit they receive from the item.

Permanent income is a person's:

average income over their lifetime.

A seller in a perfectly competitive market cannot

raise the market price of a product.

Use the table with data for Bella and Martin to answer the question.With no cooperation, the Nash equilibrium yields Bella a profit of _____ and Martin a profit of _____.

$4,000; $3,500

(Figure: Market for Train Rides) Use the figure below to answer the question.A major technological advancement occurs in transportation technology, which leads to faster and more efficient train systems. Which graph depicts the effect on the supply of train rides?

Graph D

Which of the following is NOT an entry deterrence strategy that a seller would use?

a market demand growth strategy

Otto and Marta live in a nation with a 15% poverty rate. Their household income is sufficient to pay for food, shelter, and basic needs with some funds available for other things their family wants. However, their household income is lower than 75% of the households in their nation. Otto believes that they are prosperous and not poor, but Marta believes that they are poor. Otto is defining poverty in _____ terms, and Marta is defining poverty in _____ terms.

absolute; relative

(Figure: Output Level) According to the rational rule, what output and price should the firm in the following example choose?

quantity = 4; price = $7.00

The pressure to advertise to avoid losing market share to rivals can:

raise costs and be considered wasteful.

Which of the following is NOT one of the ways companies create barriers to entry through unique cost advantages?

regulations

Use the table with data for Tasha and Hui Er to answer the question.Tasha tries to put herself in Hui Er's shoes. Tasha concludes that if she (Tasha) charges $5, then Hui Er will charge _____ to earn a profit of _____.

$5; $3,000

(Figure: Pay Per View Movies on Xfinity Cable) Use Figure: Pay Per View Movies on Xfinity Cable. The figure shows the demand and marginal revenue curves for on-demand movie rentals on Xfinity. Assume that marginal cost and average cost are constant at $20. If the cable company has market power, what price will it charge?

$60

(Figure: Market 3) Use the graph to answer the question.The graph shows the marginal social cost, supply, and demand curves in the hand sanitizer market. At what quantity could the government set a quota to control this externality?

8

Which factor will NOT cause an increase in the supply of smartphones?

an increase in the price of inputs used to produce smartphones

Often, some smaller retailers go out of business when Target opens a new store. The MOST likely reason for this outcome is that:

consumers in those areas receive a larger consumer surplus from shopping at Target than from smaller stores.

Carolyn Bates is a junior in college studying economics. She has created a new software application that applies the four principles of economic decision making to any potential decision that a user faces. She is considering leaving school after this academic year to pursue further development of her app. Carolyn should consider all of the following costs when calculating the opportunity costs of staying in college EXCEPT the

cost of supplies and the technology fees she paid during the first three years of college.

Table: Average Income and Distribution of Income Data provides data on average income and the distribution of income in four countries. According to the data in the table, which country has the largest dollar gap between the average income of those in the top and bottom quintiles?

country D

The expected utility of a choice is calculated as:

a weighted average of the different utility levels associated with each possible outcome, weighted by the probability that outcome occurs.

Each month, Evelyn spends exactly $50 on Frappuccinos, regardless of the price. Evelyn's price elasticity of demand for Frappuccinos is:

0

The price of milk at the local grocery store rises by 25%, and the quantity of milk demanded falls by 10%. The absolute value of the price elasticity of demand for milk is _____, and demand is _____.

0.4; inelastic

Lyft cuts the price of a ride in New York City by 20%. Thereafter, the quantity of rides demanded rises by 25%. What is the absolute value of the price elasticity of demand for Lyft rides?

1.25

Suppose you manage a Seven Eleven and are in charge of ordering products, while the home office sets the prices. In your area, the income elasticity of demand for beef jerky is -0.5. Because of local factory closings, you expect local incomes to decrease by 20% on average in the next month. As a result, you should stock _____ beef jerky.

10% more

(Table: Total Utility and Income for Winona) Use Table: Total Utility and Income for Winona. Winona's income next year is uncertain: there is a 40% probability she will earn $40,000 and a 60% probability she will earn $80,000. Winona's expected utility is _____ utils.

124

Table: Income Distribution in Four Countries provides recent data from the World Bank on the distribution of income in four countries.

Costa Rica

(Figure: Average Cost Curve) Which curve below has the most common shape of an average cost curve?

Curve B

Which of the following bases for segmenting people would make it most difficult for people to manipulate the situation by switching segments to get a lower price?

Customer height

A systematic risk is a risk that:

is common across the whole economy.

Opportunity cost arises from the fundamental economic problem of

scarcity.

(Figure: Demand and Supply of Sugar) Use Figure: Demand and Supply of Sugar. Given the equilibrium after a change in supply from S1 to S2:

at the old price of $25, there will be pressure for the price to fall.

(Scenario: Deciding on Insurance Type under Uncertainty) Use Scenario: Deciding on Insurance Type under Uncertainty. For $2,000, the Garcia family can buy insurance that will cover the full cost of any accident. If family members are risk averse and want to maximize their expected utility, they will: Scenario: Deciding on Insurance Type under Uncertainty The Garcia family owns three cars and is considering buying insurance to cover the cost of repairs made necessary by accidents. They face two possible states: state 1, in which their cars require no repairs, and their income available for purchasing other goods and services is $50,000; and state 2, in which their cars require $10,000 worth of repairs, and their income available for purchasing other goods and services is reduced to $40,000. The probability that their cars will require repairs is 10%; the probability that they will not is 90%.

buy the insurance as long as the utility of having a certain income of $48,000 to buy goods and services other than car repairs is higher than the utility associated with their expected income without insurance.

(Figure: Payoff Matrix for Blue Bottle and Opal Ocean) Use Figure: Payoff Matrix for Blue Bottle and Opal Ocean. The figure shows the potential profits of two producers of bottled water. Each has two strategies available to it: a high price and a low price. The BEST response for Opal Ocean is to:

charge a low price.

When using the cost-benefit principle, a seller has to

compare the marginal cost of producing an item to the price it gets for that item in the market.

A market where no single buyer or seller can influence the price is a:

competitive market.

If your purchases of toothpaste decrease from 11 units per year to 9 units per year when the price of shampoo increases from $8 to $12, all other things equal, for you, toothpaste and shampoo are _____ goods.

complementary

If ramen noodles are an inferior good for Kim, then, holding all other things constant, as Kim's income increases, her demand for ramen noodles will:

decrease.

The views of fairness discussed in the chapter do NOT include:

equal innate abilities.

(Figure: Marginal Benefit Curves) Use the graph of marginal benefit curves for slices of cheesecake to answer the question.When the market price is $3, Becca will purchase _____ slices, and Marcella will purchase _____ slices.

four; two

You are considering whether you should go out to dinner at a restaurant with your friend. The meal is expected to cost you $50, you typically leave a 20% tip, and a round-trip Uber ride will cost you $15. You value the restaurant meal at $30 and the time spent with your friend at $50. You should ____ to dinner with your friend because the benefit of doing so is _____ than the cost.

go; greater

(Figure: Payoff Matrix for the United States and Canada) Use Figure: Payoff Matrix for the United States and Canada. Suppose that the United States and Canada both produce quinoa, and each country can earn more profit if output is limited and the price of quinoa is high. The BEST response for the United States is:

high output.

In shopping for a new LED television at Best Buy, Davina finds one that she likes and that is in her price range. A warranty offered by Best Buy that would cover the cost of repair or replacement of the television would:

increase Davina's expected utility from consuming the good.

When a monopoly advertises, the goal is to _____ because _____.

increase market demand; the monopoly faces the entire market demand

Advertising is an economically productive activity and NOT a waste of resources because it:

can convey information about a product.

Benefits from social safety net programs may come in the forms of:

cash assistance, tax breaks, or in-kind transfers.

What type of good is nonrival and excludable?

club goods

Which factor will lower the price of bacon?

a shift to the right of the supply curve for bacon

Marcella owns a sandwich shop. She targets one group of potential customers by giving them a discount coupon and the other group no coupons. Which of the following would be a characteristic of the group that receives the discount coupon? They _____ than other potential customers.

must be more price-sensitive

Which statement illustrates an environmental policy that uses cap and trade?

allowing drivers to buy and sell rights to emit specified levels of vehicle emissions