Econ 201 final review

Refer to Table 13-9. For the firm whose production function and costs are specified in the table, its total-cost curve is

c. increasing at an increasing rate

Which of the following events can cause the labor-supply curve to shift?

b. an increase in the rate of immigration

Refer to Figure 15-18. If the monopoly firm is not allowed to price discriminate, then the deadweight loss amounts to

b. $1,000.

Refer to Figure 15-19. If the monopoly firm is not allowed to price discriminate, then consumer surplus amounts to

b. $1,562.50.

Refer to Table 15-9. At the profit-maximizing price, how much profit will the monopoly earn?

b. $14

Refer to Figure 7-5. If the price of the good is $6, then consumer surplus is

b. $36

In a monopolistically competitive industry, firms set price

b. above marginal cost since each firm is a price setter.

Refer to Table 18-7. The fact that the marginal product falls as the number of workers increases illustrates a property called

a. diminishing marginal product.

An increase in the demand for houses

b. increases the equilibrium wage of carpenters and increases the value of carpenters' marginal product of labor.

Which of the following is likely to have the most price inelastic demand?

b. lightbulbs

Under which of the following market structures would consumers likely pay the highest price for a product?

b. monopoly

George and Jerry are competitors in a local market. Each is trying to decide if it is better to advertise on TV, on radio, or not at all. If they both advertise on TV, each will earn a profit of $3,000. If they both advertise on radio, each will earn a profit of $5,000. If neither advertises at all, each will earn a profit of $10,000. If one advertises on TV and the other advertises on radio, then the one advertising on TV will earn $4,000 and the other will earn $2,000. If one advertises on TV and the other does not advertise, then the one advertising on TV will earn $8,000 and the other will earn $5,000. If one advertises on radio and the other does not advertise, then the one advertising on radio will earn $9,000 and the other will earn $6,000. If both follow their dominant strategy, then George will

b. not advertise and earn $10,000.

Refer to Figure 16-7. If a firm in a monopolistically competitive market was producing the level of output depicted as Qd in panel (d), it would

b. not be maximizing its profit.

Table 17-20 Nadia and Maddie are two college roommates who both prefer a clean common space in their dorm room, but neither enjoys cleaning. The roommates must each make a decision to either clean or not clean the dorm room's common space. The payoff table for this situation is provided below, where the higher a player's payoff number, the better off that player is. The payoffs in each cell are shown as (payoff for Nadia, payoff for Maddie). Refer to Table 17-20. If Maddie chooses to clean, then Nadia will

b. not clean and Maddie's payoff will be 7

Refer to Figure 13-9. This firm experiences diseconomies of scale at what output levels?

b. output levels greater than N

A market demand curve shows how the total quantity demanded of a good varies as

b. price varies

Suppose the American Medical Association announces that men who shave their heads are less likely to die of heart failure. We could expect the current demand for

b. razors to increase

A supply curve can be used to measure producer surplus because it reflects

b. sellers' costs.

Suppose the market demand curve for a good passes through the point (quantity demanded = 100, price = $25). If there are five buyers in the market, then

b. the marginal buyer's willingness to pay for the 100th unit of the good is $25

The rental price of capital is

b. the price paid to use capital for a limited time period

Refer to Figure 5-4. The section of the demand curve from B to C represents the

d. inelastic section of the demand curve.

For a large firm that produces and sells automobiles, which of the following costs would be a variable cost?

d. the cost of the steel that is used in producing automobiles

Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to prices between $6 and $12. Then, when the price increases from $8 to $10,

d. the percent decrease in the quantity demanded exceeds the percent increase in the price.

Table 17-9 The table shows the demand schedule for a particular product. Refer to Table 17-9. Suppose the market for this product is served by two firms that have formed a cartel. What price will the cartel charge in this market if the marginal cost of production is $0?

c. $8

Consider the labor market for heath care workers. Because of the aging population in the United States, the output price for health care services has increased. Holding all else equal, in the labor market for health care employees the equilibrium wage

increases, and the equilibrium quantity of labor increases

Which of the following events could increase the demand for labor?

b. An increase in the marginal productivity of workers

Refer to Table 18-6. What is the value for the cell labeled CC?

a. 50

The welfare of sellers is measured by

producer surplus

Economists define capital as the

accumulation of goods produced in the past that are being used in the present to produce new goods and services.

An oligopolist will increase production if the output effect is

b. greater than the price effect

A movement upward and to the right along a supply curve is called a(n)

b. increase in quantity supplied.

An increase in price causes an increase in total revenue when demand is

d. inelastic

The Sherman Antitrust Act

b. elevated agreements among conspiring oligopolists from an unenforceable contract to a criminal conspiracy

Scenario 14-2 Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit. Refer to Scenario 14-2. At Q = 999, the firm's total costs equal

a. $24,980.

Comparing marginal revenue to marginal cost (i) reveals the contribution of the last unit of production to total profit. (ii) is helpful in making profit-maximizing production decisions. (iii) tells a firm whether its fixed costs are too high.

a. (i) and (ii) only

Scenario 17-3. ​ Consider two countries, Kinglandia and Rovinastan, that are engaged in an arms race. Each country must decide whether to build new weapons or to disarm existing weapons. Each country prefers to have more arms than the other because a large arsenal gives it more influence in world affairs. But each country also prefers to live in a world safe from the other country's weapons. The following table shows the possible outcomes for each decision combination. The numbers in each cell represent the country's ranking of the outcome (10 = best outcome, 1 = worst outcome). Refer to Scenario 17-3. Suppose the two countries agreed to disarm existing weapons. In reality these two countries may have a hard time keeping this agreement due to which of the following reasons? (i) Even though Kinglandia has no incentive to cheat on the agreement, Rovinastan has an incentive to cheat on the agreement. (ii) Much like the prisoners' dilemma, both countries are better off reneging on the agreement and building new weapons. (iii) Both countries want to increase their world power by building new weapons.

a. (ii) and (iii)

Refer to Table 18-4. How many workers should the firm hire?

a. 2

Table 15-19 A monopolist faces the following demand curve: Refer to Table 15-19. If a monopolist faces a constant marginal cost of $3, how much output should the firm produce?

a. 4 units

Table 17-24 Two firms are considering going out of business and selling their assets. Each considers what happens if the other goes out of business. The payoff matrix below shows the net gain or loss to each firm. Refer to Table 17-24. Which firms have a dominant strategy?

a. A but not B

Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market?

a. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

Table 17-15 This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff to B). Refer to Table 17-15. Which of the following outcomes represents a Nash equilibrium in the game?

a. Middle-Right

Refer to Figure 15-3. Which of the following statements is correct?

a. Panel A represents the typical demand curve for a monopoly

Refer to Figure 15-17. Which of the following statements best describes the changes that would occur if this firm were to switch from operating as a single price profit-maximizing monopolist to perfect price discrimination?

a. The quantity would increase from I to J, the profit would increase from BCFE to ACG, and the deadweight loss would decrease from EFG to zero.

Among the people who are characterized below, who has the highest opportunity cost of leisure?

a. a medical doctor who earns $210 per hour and who sleeps during his leisure time

Which of the following will cause an increase in consumer surplus?

a. a technological improvement in the production of the good

The cost of producing the typical unit of output is the firm's

a. average total cost

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: Refer to Figure 14-6. Firms will shut down in the short run if the market price

a. is less than P1

Demand is inelastic if the price elasticity of demand is

a. less than 1

Under which of the following market structures would consumers likely receive the most product variety?

a. monopolistic competition

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves:Refer to Figure 14-2. If the market price is Pd, in the short run the firm will earn

a. negative economic profits and will shut down

Scenario 18-4 In 1997, Albania experienced a civil war. The civil unrest sent thousands of refugees across the Adriatic Sea to Italy where they sought relief from the fighting. Refer to Scenario 18-4. The Italian government started to patrol the Adriatic Sea and had a policy of returning all refugees to Albania. This policy would contribute to

a. preventing an increase in the supply of labor in Italy

Suppose that 300 bottles of soda are demanded at a particular price. If the price of a bottle of soda rises from that price by 6 percent, the number of bottles of soda demanded falls to 275. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

a. price elasticity of demand for bottles of soda in this price range is about 1.45.

A shortage exists in a market if

a. the current price is below its equilibrium price

Refer to Figure 18-7. If the relevant labor supply curve is S2 and the current wage is W1,

a. there is a surplus of labor.

A competitive, profit-maximizing firm hires workers up to the point where the

a. value of the marginal product equals the wage.

Scenario 18-5 Suppose that workers from northern Minnesota, North Dakota, and Montana decide to emigrate to southern Canada. Refer to Scenario 18-5. In the labor market in the northern United States, the equilibrium wage

a. will rise, and the equilibrium quantity of labor will fall.

Refer to Figure 16-2. The firm's profit-maximizing level of output is

b. 24 units.

Refer to Table 7-10. Who is a marginal seller when the price is $1,100?

b. Dianne

Suppose that the market for labor is initially in equilibrium. An increase in the price of output will cause the equilibrium wage

b. and the equilibrium quantity of labor to rise.

Scenario 14-4 The information below applies to a competitive firm that sells its output for $40 per unit. • When the firm produces and sells 150 units of output, its average total cost is $24.50. • When the firm produces and sells 151 units of output, its average total cost is $24.55. Refer to Scenario 14-4. Let Q represent the quantity of output. Which of the following magnitudes has the same value at Q = 150 and at Q = 151?

b. average revenue

Figure 17-2. Two companies, Acme and Pinnacle, each decide whether to produce a good quality product or a poor quality product. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies. Refer to Figure 17-2. The more frequently this game is played, the more likely it is that

b. both firms will produce a poor quality product.

Kari downloads 7 songs per month when the price is $1.29 per song and 10 songs per month when the price is $0.99 per song. Kari's behavior demonstrates the law of

b. demand

Refer to Figure 16-5. Panel a shows a profit-maximizing monopolistically competitive firm that is

b. earning zero economic profit.

Refer to Figure 15-5. A profit-maximizing monopoly's profit is equal to

c. (P2-P5) x Q3.

Refer to Table 5-7. Using the midpoint method, at a price of $12, what is the income elasticity of demand when income rises from $5,000 to $10,000?

c. 1.00

Table 18-B Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. Refer to Table 18-B. What is the second worker's marginal product of labor?

c. 150 cupcakes

Table 7-5 For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges, and only three oranges can be supplied per day.Refer to Table 7-5. Who experiences the largest gain in consumer surplus when the price of an orange decreases from $1.05 to $0.75?

c. Allison

In a given market, how are the equilibrium price and the market-clearing price related?

c. They are the same price.

Figure 16-10 The figure is drawn for a monopolistically-competitive firm. Refer to Figure 16-10. As the figure is drawn, the firm is in

c. a short-run equilibrium but it is not in a long-run equilibrium.

In the study done by Lee Benham on advertising for eyeglasses,

c. advertising decreased the average price.

Suppose that monopolistically competitive firms in a certain market are earning positive profits. In the transition from this initial situation to a long-run equilibrium,

c. each existing firm experiences a decrease in demand for its product.

Refer to Figure 15-4. If the monopoly firm is currently producing Q4 units of output, then a decrease in output will necessarily cause profit to

c. increase as long as the new level of output is at least Q2

Figure 17-5. Two companies, ABC and QRS, are sellers in the same market. Each company decides whether to charge a high price or a low price. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies. ​ Refer to Figure 17-5. Suppose we observe that the outcome of the game is one in which each company earns a profit of $10 million. This outcome

c. is the result of cooperation between the two companies, and we know that a cooperative outcome is difficult in a game such as this one.

The law of supply states that, other things equal, an increase in

c. price causes quantity supplied to increase.

Scenario 18-2 Gertrude Kelp owns three boats that participate in commercial fishing for fresh Pacific salmon off the coast of Alaska. As part of her business she hires a captain and several crew members for each boat. In the market for fresh Pacific salmon, there are thousands of firms like Gertrude's. While Gertrude usually catches a significant number of fish each year, her contribution to the entire harvest of salmon is negligible relative to the size of the market. Refer to Scenario 18-2. In the fresh Pacific salmon product market, Gertrude has some control over the

c. quantity of fresh salmon that she supplies to the market

At all levels of production higher than the point where the marginal cost curve crosses the average variable cost curve, average variable cost

c. rises

If, at the current price, there is a surplus of a good, then

c. sellers are producing more than buyers wish to buy

If something happens to alter the quantity demanded at any given price, then

c. the demand curve shifts.

In pursing its own interest, an oligopoly firm will decide to increase production by 1 unit as long as

c. the output effect is larger than the price effect

Which of the following might be an example of an economic argument against advertising?

c. ​People may be deluded into thinking that a good with a brand name is better than an otherwise identical generic brand

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: Refer to Figure 14-3. If the market price is $6, what is the firm's short-run economic profit?

d. $0

Refer to Figure 16-3. At the profit-maximizing level of output, what is this firm's total cost of production?

d. $1,400

Refer to Figure 18-2. Suppose the firm pays a wage equal to $160 per unit of labor and sells its output at $10 per unit. What is the value of the marginal product of labor for the third worker?

d. $200

Table 18-B Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. Refer to Table 18-B. What is the value of the marginal product of the third worker?

d. $375

Refer to Table 7-11. If the sellers bid against each other for the right to sell the good to a consumer, then the producer surplus will be

d. $50 or slightly less

Table 17-6 Imagine a small town in which only two residents, Kunal and Naj, own wells that produce safe drinking water. Each week Kunal and Naj work together to decide how many gallons of water to pump, to bring the water to town, and to sell it at whatever price the market will bear. Assume Kunal and Naj can pump as much water as they want without cost so that the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water are shown in the table below Refer to Table 17-6. As long as Kunal and Naj operate as a profit-maximizing monopoly, what will their combined weekly revenue amount to?

d. $900

When demand is unit elastic, price elasticity of demand equals

d. 1, and total revenue does not change when price changes.

Table 16-7 A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to 20. Refer to Table 16-7. If the firm has a constant marginal cost of $7 per unit, how many units should the firm produce to maximize profit?

d. 3 units

Refer to Table 4-1. If the market consists of Michelle, Laura, and Hillary and the price falls by $1, the quantity demanded in the market increases by

d. 5 units

Refer to Table 14-8. The firm should not produce an output level beyond

d. 5 units.

Figure 14-9 Suppose a firm operating in a competitive market has the following cost curves: Refer to Figure 14-9. Which line segment best reflects the long-run supply curve for this firm?

d. ABCD

When policymakers are considering a particular action, they can use consumer surplus as a(n)

d. Both b) and c) are correct

Refer to Figure 4-26. Which of the following movements would illustrate the effect in the market for chocolate chip cookies of an improved high-speed mixer that allows bakers to produce cookies in less time?

d. Point A to Point B

Among the people who are characterized below, who has the highest opportunity cost of leisure?

d. a CPA who earns $150 per hour and who golfs during her leisure time

Which two curves are tangent to each other in a monopolistically competitive market with zero economic profit?

d. demand and average total cost

Product differentiation causes the seller of a good to face what type of demand curve?

d. downward sloping

If regulators required firms in monopolistically competitive markets to set price equal to marginal cost,

d. firms would require a subsidy to stay in business

Consider the labor market for computer programmers. During the late 1990s, the value of the marginal product of all computer programmers increased dramatically. Holding all else equal, what effect did this process have on the labor market for computer programmers? The equilibrium wage

d. increased, and the equilibrium quantity of labor increased.

Table 17-27 Each year the United States considers renewal of Most Favored Nation (MFN) trading status with Farland (a mythical nation). Historically, legislators have made threats of not renewing MFN status because of human rights abuses in Farland. The non-renewal of MFN trading status is likely to involve some retaliatory measures by Farland. The payoff table below shows the potential economic gains associated with a game in which Farland may impose trade sanctions against U.S. firms and the United States may not renew MFN status with Farland. The table contains the dollar value of all trade-flow benefits to the United States and Farland. Refer to Table 17-27. This particular game

is a version of the prisoners' dilemma game. features a dominant strategy for the U.S. features a dominant strategy for Farland. d. All of the above are correct.