Econ 2005 final
An increase in the price of capital will _____ demand for labor if capital and labor are substitutes, and it will _____ the demand for labor if the scale effect dominates.
increase; decrease
Damon's wage rises. The substitution effect would cause him to _____ his work hours, and the income effect would cause him to _____ his work hours.
increase; decrease
what was the primary effect of "redlining" in the US?
it prevented african americans from buying homes
a price-taker is a seller that
charges the current market price for its product
Suppose the percent change in the quantity demanded for water for any price change is zero. The demand curve for water is _____, and the price elasticity of demand is perfectly _____.
vertical; perfectly inelastic
a nonrival good is a good
where one person's use of good
the marginal revenue product of labor is equal to
MP of labor × Price
Which of the following is NOT an example of the hurdle method of price discrimination? You Answered
Segmenting the market into identifiable groups with different prices.
Suppose that you have a pumpkin stall at a farmer's market, and the Halloween season arrives. You know that your customers want to buy many pumpkins to carve into jack-o-lanterns. Which of the following is a likely result of this scenario?
You can charge a higher price per pumpkin and will sell more
a binding price ceiling is
always below the equilibrum price
for normal goods
an increase in consumer income will lead to a rise their demand
if the price of airline ticket goes up, there will be
an increase in the demand for both bus and train tickets
people gain consumer surplus when they purhase an item
at a price below the value of the benefit they receive from the item.
a company's profit margin is calculated as
average revenue minus average cost
a tax on sellers would not cause a decrease in quantity sold if
demand is perfectly inelastic
If an aircraft is found to have software problems that could lead to a malfunction, the effect on the aircraft market will be that the
demand will decrease, and the price of the aircraft will fall.
fixed costs
do not chnage with the level of production in the short run, are present even when the firm is producing zero units, are irrelevant to marginal cost
which of the following statements is TRUE regarding economic efficency
efficent outcomes rarely make everyone happy
When there is free entry and exit in a market, in the long run, price will:
equals avergae cost
what attracts new sellers into a market?
existing sellers in the market earning
The profit-maximizing rule MR = MC is:
followed by all types of firms
When setting prices for different groups of customers, a manager should charge lower prices to groups that
have a more elastic demand.
Redistribution programs are means-tested. To qualify for such a program, a person must demonstrate that:
his or her income (or means) is below a certain specified level.
according to the coase theorem the private market can achieve an efficent outcome
if bargaining costs are low and property rights are well defined
what is the difference between accounting profit and economic profit
implicit opportunity costs
Jonathan Mendez is deciding whether to study for his economics exam at a café down the street or go to a concert a few cities over. The time spent commuting to the concert is ____ in his opportunity cost calculations and represents a _____ cost.
included; nonfinancial
A corrective tax designed to resolve a negative externality problem is typically set at an amount equal to the _____ cost.
marginal external
Compared to other high income countries, the U.S. has ______inequality. Correct!
more
A higher Gini coefficient means that a country has _________
more inequality
A market consists of ten similar suppliers that are making the same supply decisions. To find the market supply of these ten suppliers, you:
multiply the individual supply of one of the suppliers by ten.
Suppose that each of the two firms in a duopoly has the independent choice of advertising or not advertising. If neither advertises, each gets $10 million in profit; if both advertise, their profits will be $5 million each; and if one advertises while the other does not, the advertiser gets profit of $15 million and the other gets profit of $2 million. According to game theory, if the firms collude to maximize joint profits:
neither will advertise.
A market with negative externalities will tend to _____ compared to a market producing the socially optimal output.
overproduce and sell at a lower price
The relationship between price expectations and demand is
positive; when future prices are expected to rise, current demand will rise.
Marginal social cost equals marginal _____ cost plus marginal _____ cost.
private; external
Market power results in companies that _____ and that have _____ compared to perfect competition.
produce less ; higher price
a natural monoply exists when
producing a large output has significantly lower marginal cost than producing a small output.
Household A earns $50,000 a year and pays $10,000 in taxes. Household B earns $200,000 a year and pays $50,000 in taxes. The tax system described here is...
progressive
During the pandemic, people don't want to go out to eat as much. At the same time, costs for restaurants are rising to ensure the safety of their employees. What do you predict will happen to the equilibrium price and quantity for restaurant meals?
quantity falls, the effect on price is uncertain
If an item is a necessity rather than a luxury, and has few substitutes, its demand curve will likely be:
relatively steep
Assume an economy moves from autarky to free international trade. For goods that are imported, consumer surplus _______, producer surplus ________, and the economy as a whole ________
rises, falls, gains
when education level is used to convey information to an employer , it serves as a
signal
The opportunity costs of a decision may include each of the following types of costs EXCEPT
sunk costs
sellers bear a smaller incidence of a tax when
supply is more elastic relative to demand
the marginal cost of an additional worker
the additional cost of hiring one more worker
Which of the following is NOT a factor that can shift supply?
the market price of a product
Cedar point amusement park reduces its entry fees. As a result of this price fall,
the quanitity demanded will be higher
A large amount of harvested grain used to make flour grows mold due to flooding. How will this affect the supply of flour in the market? Correct!
the supply of flour will decrease in the market
what will the impact be on the supply of long- haul truck transportation services if diesel fuel becomes cheaper?
the supply of truck transportation services will increase
statistical discrimination
the use of observations about the average characteristics of a group to make inferences about an individual member of the group.
If a store runs a sale on a product to clear out its stock, we can conclude that:
there was a surplus of the product in the store
Suppose that government officials have set an emissions tax to reduce pollution. Assume that the optimal tax would be $1,500, but government officials have set the tax at $500. At the equilibrium with the $500 tax:
there will be too much pollution
Which type of strategy for repeated games involves doing whatever the other player did the last time the game was played?
tit- for- tat
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
The price of a dozen eggs falls from $2.50 to $1.50. In response to this price change, the quantity demanded for eggs increases by 10%. Using the midpoint formula, what is the absolute value of the price elasticity of demand for eggs?
0.2
If income rises by 20% and the quantity demanded of an item rises by 10%, the income elasticity of demand for this item is:
0.5
The price of product C rises by 10%. As a result, the quantity demanded of product D rises by 20%. The cross-price elasticity of demand between product C and product D is _____, and they are _____.
2; substitutes
There are 3 pizza places in a small town. One has 50% market share, one has 40% market share, and one has 10% market share. What is the HHI for the pizza places?
4200
Betty is willing to pay up to $160 for a particular pair of boots. She is able to buy the boots for $120. The marginal cost of producing the boots is $70. How large is the total economic surplus associated with her purchase of the boots? (do not put "$" in your answer - just the number)
90
Grapes become more expensive in the market. Which of the following can explain the increase in price?
Grape production is the same, but wine production has gone up, which requires more grapes.
Workers on the night shift at a factory earn more per hour than workers on the day shift, although their human capital and productivity are the same. This is an example of: Correct!
a compensating differential
If wages fall for surgeons but not for family practice doctors, there will be _____ in the market for surgeons and _____ in the market for family practice doctors.
a decrease in quantity supplied; a rightward shift of labor supply
The basic logic behind the Rational Rule for Sellers is that a company owner should increase output as long as the extra output
adds more to revenue than it adds to costs
Large barriers to entry in the gas station business explain why the two only gas stations in a small town:
can earn an economic profit in the long run
The last 3 times I wore my orange socks to the basketball game, the Hokies won. I didn't wear my socks to the last game and they lost. "My socks determine whether the Hokies win." is an example of
confusing association (or correlation) with causation.