ECON 202 Final

According to the World Bank, real per capita income in the U.S. increased from $57,640 in 2015 to $58,030 in 2016. What was the approximate annual growth rate? a.) 0.7% b.) 1.0% c.) 6.8% d.) $390

a.) 0.7%

The figure below is the Lorenz curve of a population. Based on this figure, which of the following statements are correct? a.) 50% of the population owns 100% of the land b.) The wealthiest 1% of the population owns 5% of the land. c.) The wealthiest 30% of the population owns 70% of the land. d.) 80% of the population owns no land.

a.) 50% of the population owns 100% of the land

Which of the following statements are correct? a.) A market is in equilibrium if the actions of buyers and sellers have no tendency to change the price or the quantities bought and sold. b.) The market-clearing price is the price at which all supplies are sold. c.) Buyers are price-takers if they have bargaining power. d.) In a competitive equilibrium, neither buyers or sellers are price-takers.

a.) A market is in equilibrium if the actions of buyers and sellers have no tendency to change the price or the quantities bought and sold.

Which of the following statements regarding Adam Smith are correct? a.) Adam Smith claimed that coordination among large number of economic actors, often unknown to each other, might spontaneously arise without any person or institution consciously attempting to create or maintain it. b.) Adam Smith advocated that economic agents were guided entirely by self-interest. c.) Adam Smith argued that all markets were characterised by perfect competition. d.) Adam Smith believed there should be no government involvement in the economy.

a.) Adam Smith claimed that coordination among large number of economic actors, often unknown to each other, might spontaneously arise without any person or institution consciously attempting to create or maintain it.

Which of the following statements regarding social preferences is correct? a.) Altruism is an example of social preferences. b.) Social preferences are the preferences of a society as a whole. c.) An individual has social preferences if they do not care about inequality in society. d.) "Keeping up with the Joneses" (i.e. envy) is not an example of behavior motivated by social preferences.

a.) Altruism is an example of social preferences.

The figure depicts the efficiency wage equilibrium of a worker and a firm. Which of the following statements is correct? a.) At A, given that the firm pays the hourly wage of $12, the worker's best response is to exert an effort of 0.5. b.) At A, given that the worker exerts an effort level of 0.5, the firm's best response is to offer the hourly wage of $12. c.) This is a sequential game where the firm chooses its action given the worker's best responses to its actions. Therefore the worker receives no rent. d.) The employer makes profits by coercing the worker to put in some effort.

a.) At A, given that the firm pays the hourly wage of $12, the worker's best response is to exert an effort of 0.5.

The figure shows the indifference curves of a student for the two 'goods', free time and final grade. Based on this information, which of the following statements is correct? a.) At A, the student is willing to give up 34 grade points for five extra hours of free time. You Answered b.) A is the student's most preferred choice as she would be attaining the highest grade. c.) The student strictly prefers a grade of 54 with 19 hours of free time to a grade of 67 with 18 hours of free time. d.) The student is twice as happy at point A than at point B.

a.) At A, the student is willing to give up 34 grade points for five extra hours of free time.

Which of the following statements regarding Nash equilibrium are correct? a.) In a Nash equilibrium, all players choose their best response strategy given the other players' strategies. b.) Some players have an incentive to deviate from a Nash equilibrium. c.) A dominant strategy equilibrium is not a Nash equilibrium. d.) A Nash equilibrium will always exist.

a.) In a Nash equilibrium, all players choose their best response strategy given the other players' strategies.

Which of the following statements regarding monopoly and perfectly competitive markets are correct? a.) In a monopoly market, the firm is a price-setter. b.) In a perfectly competitive market, there is lots of advertising. c.) In a monopoly market, owners receive no economic rent. d.) In a perfectly competitive market, firms invest in research and innovation.

a.) In a monopoly market, the firm is a price-setter.

Which of the following statements are correct? a.) Market failures happen because market prices do not always take into account of the full effect of their actions on others. b.) The existence of an externality always leads to overprovision of goods. c.) Market failures can always be solved by private bargaining. d.) Property rights are always enforceable.

a.) Market failures happen because market prices do not always take into account of the full effect of their actions on others.

According to Malthus, which of the following are the causes of diminishing average product of labor? a.) More labor is devoted to a fixed quantity of land, or new land brought into cultivation is of inferior quality. b.) There is an infinite amount of resources. c.) Coordination problems due to a larger labor force. d.) Environmental effects of over-cultivation (e.g. increased carbon emission).

a.) More labor is devoted to a fixed quantity of land, or new land brought into cultivation is of inferior quality.

According to Elinor Ostrom, which of the following statements about the problem of tragedy of the commons are correct? a.) Social norms can be drawn on to enforce sustainable resources, although it does not always succeed. b.) Repeated games would definitely result in cooperative outcomes. c.) Reciprocity exacerbates the tragedy of the commons. d.) Agreements for cooperation must be enforced by governments.

a.) Social norms can be drawn on to enforce sustainable resources, although it does not always succeed.

he following table gives different technologies that produce 100 meters of cloth. Based on this information, which of the following statements is correct? a.) Technology B is never cost-minimizing. b.) Technology C is more energy-intensive than technology A. c.) Shifting from technology C to technology D is labour saving. d.) Technology D uses the least total number of workers and tonnes of coal, so it is always cost-minimizing.

a.) Technology B is never cost-minimizing.

The figure shows a student's production function with the final grade (the output) related to the number of hours spent studying (the input).Capture 34.png Which of the following statements regarding the average product of labour (APL) is correct? a.) The APL at 4 hours is 12.5. b.) The APL at 10 hours is 3. c.) The APL is the slope of the tangent line. c.) The APL at 15 hours is 0.

a.) The APL at 4 hours is 12.5.

A bakery is one of many that operate in the bread industry. The market demand curve for bread is downward-sloping. The bakery incurs fixed costs and has an upward-sloping marginal cost curve. Which of the following statements is correct? a.) The bakery faces a flat demand curve. b.) The bakery's supply curve is horizontal. c.) The bakery always makes a positive economic rent. d.) The bakery can raise the market price by constraining its production.

a.) The bakery faces a flat demand curve.

Consider an employee with a reservation wage of $6 an hour. The employee chooses an effort level between zero and one. Which of the following statements regarding her best response curve is correct? a.) The best response curve describes the effort that the employee would choose for each level of the hourly wage. b.) The best response curve is upward-sloping and convex. c.) The curve crosses the horizontal axis at the origin. d.) The average effort per dollar is increasing in wages.

a.) The best response curve describes the effort that the employee would choose for each level of the hourly wage.

Production of cloth requires two inputs: L workers and R tonnes of coal. The following diagram depicts the isocost line associated with production. The wage (w) is $20 and the price of coal (p) is $30. Which of the following statements is correct? a.) The cost of using 6 workers and 2 tonnes of coal is the same as that of using 3 workers and 4 tonnes of coal. b.) The slope of the isocost line is -1/3. c.) The cost associated with the isocost line is $120. d.) All points above the isocost line would cost more than $210.

a.) The cost of using 6 workers and 2 tonnes of coal is the same as that of using 3 workers and 4 tonnes of coal.

The diagram depicts the demand curve of a product. Assume that there are 100 potential buyers who can choose to purchase one unit each. Based on this graph, which of the following statements is correct? a.) The diagram demonstrates the Law of Demand. b.) At an output of 20, the willingness to pay of all 20 consumers who buy the product is £8,000. c.) Half of the potential buyers are not willing to pay more than £2,000 for the product. d.) The firm should sell all 100 units in order to maximise its profits.

a.) The diagram demonstrates the Law of Demand.

Which of the following are factors that contribute to a firm's diseconomies of scale? a.) The difficulty of monitoring workers' effort as the number of employees increases. b.) Doubling the capacity of a pipe to transport fuel when the production level is doubled. c.) Fixed costs such as political lobbying. d.) Network effects of its output goods.

a.) The difficulty of monitoring workers' effort as the number of employees increases.

Which of the following markets best approximates perfect competition? a.) The market for milk. b.)The market for new textbooks. c.) The market for cell phones. d.) The market for Hamilton tickets.

a.) The market for milk.

Consider a student whose final grade increases with the number of hours spent studying. Her choice is between more free time and higher grades, both of which are 'goods'. Which of the following is not the same as her marginal rate of transformation between the two goods? a.) The number of percentage points the student is willing to give up for another hour of free time. b.) The number of percentage points the student would gain by giving up another hour of free time. c.) The opportunity cost of free time. d.) The slope of the student's feasible frontier.

a.) The number of percentage points the student is willing to give up for another hour of free time.

Consider the figure in Question 1. Suppose instead the government decides to impose a specific (or fixed) tax of T per kg of salt, to be paid by the suppliers. Which of the following statements is correct? a.) The supply curve shifts up in a parallel manner. b.) The new equilibrium price is P*+T. c.) Consumers bear the entire tax burden. d.) The tax raised is T×Q*.

a.) The supply curve shifts up in a parallel manner.

Figure 3.2 is a plot of GDP per capita against average annual hours of free time per worker in different countries. Which of the following statements is correct? a.) Workers in the US and Turkey enjoy a similar amount of free time despite a large disparity in income. b.) Japanese workers require more hours of work to produce the same level of output per capita as Korean workers. c.) If German workers worked as many hours as the Norwegians, then they will be able to produce a similar level of output per capita. d.) Countries with higher incomes always enjoy more free time.

a.) Workers in the US and Turkey enjoy a similar amount of free time despite a large disparity in income.

Which of the following goods is not allocated by markets in the U.S. because doing so is widely viewed as repugnant? a.) Higher education b.) Housing c.) Human kidneys d.) Childcare

c.) Human kidneys

Imagine an economy that grows at a constant rate for the 21st century. A plot of the level of GDP over time will fit: a.) A straight upward-sloping line on a linear scale, and a convex line on a linear scale. b.) A convex line on a linear scale, and a straight upward-sloping line on a ratio scale. c.) A concave line on a linear scale, and a straight upward-sloping line on a ratio scale. d.) A downward-sloping line on both a linear scale and a ratio scale.

b.) A convex line on a linear scale, and a straight upward-sloping line on a ratio scale.

The figure shows the marginal private cost and marginal social cost of producing bananas while using pesticides. The per-tonne price of bananas is constant at $400. Based on the figure, which of the following statements regarding point A is correct? a.) The marginal external cost at A is $670. b.) A is the banana producers' profit-maximizing outcome. c.) Producing 1 ton less at A leads to a fall of $400 in the producers' profit. d.) A is the Pareto optimal outcome.

b.) A is the banana producers' profit-maximizing outcome.

Refer to the figure in question 6. Which of the following statements is correct? a.) A profit-maximising firm would select the quantity at which the average cost is minimized. b.) At B, the decrease in price that keeps profits constant when one extra car is sold is larger than the decrease in price required to sell one extra car. c.) At D, the price equals the marginal cost and therefore the firm makes no profit. d.) The profit margin is the highest at C.

b.) At B, the decrease in price that keeps profits constant when one extra car is sold is larger than the decrease in price required to sell one extra car.

Bruno is a landowner and Angela is a farmer who pays a share of her grain output to Bruno for the use of the land. The figure shows Angela and Bruno's feasible frontier, two of Angela's indifference curves, and the Pareto efficiency curve CD. Note that Angela's preferences are quasi-linear, so IC2 is simply IC1 shifted upwards. Based on this information, which of the following statements is correct? a.) Moving from F to any point on line CD is Pareto-improving. b.) F is not Pareto efficient because the marginal rate of substitution does not equal the marginal rate of transformation at this point. c.) Depending on the slope of the feasible frontier, both Bruno and Angela can be better off at F than at D. d.) The relative bargaining power of Bruno and Angela determines the number of hours worked along the Pareto efficiency curve.

b.) F is not Pareto efficient because the marginal rate of substitution does not equal the marginal rate of transformation at this point.

Which of the following statements regarding Karl Marx are correct? a.) He did not acknowledge that the capitalist economy was the most dynamic economic system in human history. b.) He thought that capitalism, by organizing production and allocation in anonymous markets, created atomised individuals instead of integrated communities. c.) He observed that the transactions in the labor market were between equals: nobody is in a position to order anyone else to employ or be employed. d.) He thought that the power wielded by employers over workers was a core strength of capitalism.

b.) He thought that capitalism, by organizing production and allocation in anonymous markets, created atomised individuals instead of integrated communities.

Which of the following statements is true? a.) A labour contract transfers ownership of the employee from the employee to the employer. b.) In a labor contract, one side of the contract has the power to issue orders to the other side, but this power is absent from a sale contract. c.) A firm is a structure that involves decentralization of power to the employees. d.) The office where the employee works is a relation-specific asset, because the employee cannot use it after leaving the firm.

b.) In a labor contract, one side of the contract has the power to issue orders to the other side, but this power is absent from a sale contract.

Consider Figure 19.10. Which of the following statements cannot be inferred from the figure? a.) The intergenerational mobility is greater in Denmark than in the US. b.) Men earn lower incomes in Denmark than in the US. c.) Boys with poor fathers have a better chance of earning a high income in Denmark than in the US. d.) Boys with rich fathers are more likely to earn low incomes in Denmark than in the US.

b.) Men earn lower incomes in Denmark than in the US.

Consider an ultimatum game where the Proposer has $100 and offers a proportion of it to the Responder, who can either accept or reject the offer. If the Responder accepts, both the Proposer and the Responder keep the agreed share, while if the Responder rejects, then both receive nothing. Which of the following statements is correct? a.) The Responder should not accept any offer less than $60. b.) Responders often reject offers greater than $0. c.) If a large group of participants play the game, then the average share across pairs will always be 50:50. d.) Based on experimental evidence, many Responders will accept an offer of $0.

b.) Responders often reject offers greater than $0.

Which of the following is a non-excludable public good? a.) Library books b.) Streetlights c.) A sweater d.) Netflix

b.) Streetlights

Review Figure 19.2 below. Which of the following statements is true? a.) Wealth inequality changes little over time. b.) The UK had a relatively high level of wealth inequality until 1970. c.) The French Revolution achieved a steady decline in wealth inequality in France. d.) The US has always had a relatively high level of wealth inequality.

b.) The UK had a relatively high level of wealth inequality until 1970.

In which of the following cases would a firm be maximizing profits? a.) The firm pays its employees their reservation wage. b.) The firm minimizes the cost per unit of effort. c.) The firm hires no workers. d.) The firm selects the lowest possible (least steep) isocost line, when the hourly wage is on the horizontal axis and effort per hour is on the vertical axis.

b.) The firm minimizes the cost per unit of effort.

The figure shows the demand and supply curves in the salt market. The government imposes a sales tax of 30% on the price of salt, to be paid by the suppliers. This decreases the quantity traded from Q* to QT, decreases the price received by producers from P* to PT1, and increases the price paid by consumers from P* to PT2. Which of the following statements is correct following the imposition of the tax? Which of the following statements is correct following the imposition of the tax? a.) The consumer surplus is A + B. b.) The gains from trade are A + B + D + F. c.) The tax revenue is B + C. d.) The deadweight loss is B + C + D + E.

b.) The gains from trade are A + B + D + F.

The following figure depicts an employee's best response to wage when the expected unemployment duration is 44 weeks. Which of the following statements is correct? a.) In order to induce an extra effort of 0.1 per hour, the employer needs to increase the hourly wage by $3. b.) The slope of the best response curve is the employer's marginal rate of transformation of higher wages into worker effort. c.) A fall in the unemployment rate would reduce the reservation wage to below $6. d.) A wage of $24 per hour will still result in an effort level of 0.8 if there is an increase in the unemployment benefit.

b.) The slope of the best response curve is the employer's marginal rate of transformation of higher wages into worker effort.

Consider the case where a government introduces a specific tax on cigarettes, which reduces the consumption of cigarettes. Which of the following statements is correct? a.) This is a bad policy as it creates a deadweight loss. b.) The tax may increase social welfare. c.) The more elastic (flat) the demand for cigarettes, the larger the tax revenue. d.) The tax rate should be determined so as to maximize tax revenue.

b.) The tax may increase social welfare.

The 1978 law that protected Bengali sharecroppers from eviction and increased their share of the crop from 50% to 75% did all the following except a.) increase agricultural output. b.) generate a Pareto improvement. c.) incentivize farmers to work hard and invest in their land. d.) decrease the Gini coefficient in market income.

b.) generate a Pareto improvement.

Which of the following statements regarding employment contracts is correct? a.) The firm is required to state exactly what it needs the employee to do in an employment contract. b.) The firm needs to specify exactly how much effort employees are expected to put into their job. c.) Employees' effort levels cannot be the basis of an enforceable contract. d.) Unlike salary contracts, an hourly wage contract is a complete contract, because workers only get paid for the hours they work.

c.) Employees' effort levels cannot be the basis of an enforceable contract.

Consider again the figure in Question 3. The government could implement four different policies to ensure the Pareto efficient outcome. When 38,000 bananas are produced, the difference between the marginal social cost (MSC) and the marginal private cost (MPC) is $105. In which of the following policies do the banana producers make the highest profit? a.) Government regulation that limits production to 38,000 tons of bananas a day. b.) Pigouvian tax of $105 per tonne of bananas. c.) Coasean bargaining when the banana producers have the right to pollute. d.) Coasean bargaining when the fishermen have the right to clean water.

c.) Coasean bargaining when the banana producers have the right to pollute.

Which of the following is the best example of a non-excludable public good? a.) A bicycle b.) Empty seats in a cinema c.) Free WiFi d.) An open-access fishery

c.) Free WiFi

Wealth, earnings, and disposable income are just three of several ways of looking at inequality. Imagine a household that earns $80,000 per year from labor. In that year, it also receives an income of $3,000 from investments, pays $12,000 in tax, and receives $7,000 in benefits from the state. Which of the following is an accurate statement of its market income and its disposable income? a.) $80,000; $68,000. b.) $83,000; $71,000. c.) $83,000 $78,000. d.) $80,000; $75,000.

c.) $83,000 $78,000.

The figure shows a bakery's marginal and average cost curves, and its isoprofit curves. The bakery is a price-taker in a large bread market. Based on this figure, which of the following statements is correct? a.) At a price of P3, the bakery will choose to operate at C. b.) At B, the bakery makes zero profits. c.) At A, the bakery would be making a loss. d.) If the market price is P2, then the bakery can undercut this price to capture a higher market share.

c.) At A, the bakery would be making a loss.

Which of the following statements regarding Pareto efficiency is correct? a.) A Pareto-efficient allocation dominates every Pareto-inefficient allocation. b.) There can be many Pareto-inefficient allocations, but only one Pareto-efficient allocation. c.) At a Pareto-efficient allocation, it is impossible to make one person better off without making another person worse off. d.) A Pareto-efficient allocation is a fair allocation.

c.) At a Pareto-efficient allocation, it is impossible to make one person better off without making another person worse off.

Which of the following statements is correct regarding disposable income? a.) Disposable income is the amount of income that is given away. b.) Disposable income is total income from wages, profit, rent, and interest. c.) Disposable income is the maximum amount of expenditure possible without having to borrow or sell possessions. d.) Disposable income is the exact measure of one's wellbeing

c.) Disposable income is the maximum amount of expenditure possible without having to borrow or sell possessions.

Anthony loves going to the opera while Becky loves watching football. The following is the payoff table for their choice of activity: For example if Anthony chooses opera and Becky chooses football, then the activities are valued at $10 to Anthony and $20 to Becky. Assume that they can only choose one activity (i.e. they cannot randomize). Based on this information, which of the following statements is correct? a.) There are two Nash equilibria: (Opera, Opera) and (Football, Football). b.) If Anthony announces that he will choose opera and sticks to it, then (Opera, Opera) will be chosen. c.) If Anthony offers $20 to Becky for coming to the opera with him, then (Opera, Opera) may be chosen. d.) Anthony is willing to pay Becky up to $80 to go with him to the opera.

c.) If Anthony offers $20 to Becky for coming to the opera with him, then (Opera, Opera) may be chosen.

The figure below illustrates Maria's employment rent on her current job, given her wage, her disutility of work, the unemployment benefit, and the expect duration of unemployment. Which of the following statements is correct. a.) Maria's employment rent per hour is $6. b.) The cost to Maria of losing her job is $9,240. c.) If the expected duration of unemployment falls to 22 weeks, Maria's employment rent will be $3,080. d.) If the unemployment benefit is cut to $5 an hour, Maria's unemployment rent will be $10,780.

c.) If the expected duration of unemployment falls to 22 weeks, Maria's employment rent will be $3,080.

Reconsider Figure 19.5 shown above. Which of the following statements is true? a.) If you had a 50-50 chance of being rich or poor, then your expected income would be maximized at point B. b.) If you only care about the income of the rich, then you will prefer point D. c.) If you are inequality-averse, then you will prefer a point between R and A. d.) If you are inequality-averse, then any point between R and F on the frontier is preferable to any point inside the frontier.

c.) If you are inequality-averse, then you will prefer a point between R and A.

Which of the following statements regarding bargaining power is correct? a.) In an ultimatum game, the Proposer has all of the bargaining power. b.) In an ultimatum game, increasing the number of Responders reduces the Proposer's bargaining power. c.) In a dictator game, the Proposer has all the bargaining power. d.) In a dictator game, increasing the number of Responders reduces the Proposer's bargaining power.

c.) In a dictator game, the Proposer has all the bargaining power.

Bruno is a landowner and Angela is a farmer who pays a share of her grain output to Bruno for the use of the land. The figure shows Angela and Bruno's feasible frontier, Angela's biological survival constraint and her reservation indifference curve, and how many bushels Angela would get at allocations B and D. Based on the figure, which of the following statements is correct? a.) If Bruno can use coercion then he would force Angela to work 21 hours to maximize total production. b.) In a voluntary exchange where Bruno has all the bargaining power, B is the best choice for Bruno as it maximizes his rent. c.) In a voluntary exchange where Bruno has all the bargaining power, if Bruno charges 4.5 bushels of rent for the use of his land, then Angela would choose to work 8 hours. d.) If Angela owned the land herself, then she would choose A, where her rent is maximized.

c.) In a voluntary exchange where Bruno has all the bargaining power, if Bruno charges 4.5 bushels of rent for the use of his land, then Angela would choose to work 8 hours.

Which of the following statements regarding the Malthusian model are correct when there is a permanent, positive technological shock (such as an improved seed)? a.) There is an immediate and permanent rise in the average product of labour. b.) The population initially rises but then falls to the pre-technological shock level. c.) Income initially rises but then falls back to the subsistence level. d.) Both increased population and higher wages in the long run.

c.) Income initially rises but then falls back to the subsistence level.

The figure shows the Lorenz curve for market income and disposable income in the Netherlands in 2010. Which of the following statements are correct? a.) The entire Dutch population earns significant market income. b.) The Gini coefficient is larger for disposable income than for market income. c.) One-fifth of the Dutch population has virtually no market income. d.) The poorest one-fifth of the population receives about 20% of all disposable income.

c.) One-fifth of the Dutch population has virtually no market income.

Capitalism is an economic system based on a.) Private property b.) Private property and markets c.) Private property, markets, and firms d.) Markets and state-owned firms

c.) Private property, markets, and firms

Consider the Lorenz curves for pirate ships and navy ships. Given the information in the figure, which of the following statements must be true? a.) Pirate crewmen earned higher incomes than navy crewmen. b.) Pirate crewmen earned higher incomes than pirate captains. c.) The Gini coefficient on pirate ships was much lower than the Gini coefficient on navy ships. d.) More equal crews are fiercer fighters.

c.) The Gini coefficient on pirate ships was much lower than the Gini coefficient on navy ships.

The figure depicts the demand curve of a firm producing cars, together with its marginal cost, average cost, and isoprofit curves. Based on the figure, which of the following statements is correct? a.) The consumer surplus in the profit-maximizing outcome is $97,500. b.) The producer surplus in the Pareto efficient outcome is $112,960. c.) The deadweight loss in the profit-maximizing outcome is $23,580. d.) The firm's profit in the Pareto efficient outcome is $100,000.

c.) The deadweight loss in the profit-maximizing outcome is $23,580.

Consider the perfectly competitive market for bread analyzed in Unit 8. Why is the competitive equilibrium Pareto efficient? a.) Producers earn a positive economic profit. b.) Everyone who needs bread gets it. c.) The gains from trade are maximized. d.) The total surplus is split equally between producers and consumers.

c.) The gains from trade are maximized.

Suppose that the unit cost of producing a tee shirt is $5, regardless of the level of output and there are no fixed costs. Which of the following statements is correct? a.) The marginal cost curve is upward sloping b.) The marginal cost curve is downward sloping c.) The marginal cost curve is a horizontal straight line d.) The marginal cost curve and average cost curve do not coincide

c.) The marginal cost curve is a horizontal straight line

In which of the following markets is the equilibrium efficient? a.) The market for a differentiated good. b.) The market for labor, when workers' effort levels are non-verifiable c.) The market for a homogenous good that has no external effect d.) The market for a homogenous good that generates pollution

c.) The market for a homogenous good that has no external effect

The figure shows the market supply curve for second-hand textbooks, together with original and new demand curves, where the curve has shifted due to the arrival of new students. Based on the figure, which of the following statements is correct? a.) All buyers who would have bought under the original demand curve would also be buying under the new demand curve. b.) There has been an increase in supply. c.) The more elastic (or more flat) the supply curve, the smaller the price rise. d.) The more inelastic (or more steep) the supply curve, the larger the increase in the equilibrium quantity.

c.) The more elastic (or more flat) the supply curve, the smaller the price rise.

The figure shows the demand and supply curves in the salt market. The government now decides to impose a sales tax of 30% on the price of salt, to be paid by the suppliers. Which of the following statements is correct? a.) The supply curve shifts up in a parallel manner. b.) The new equilibrium price is 30% higher than P*. c.) The tax causes a decline in the quantity traded. d.) The tax raised is 0.3(P*×Q*).

c.) The tax causes a decline in the quantity traded.

The process of requiring fewer inputs to produce the same output is referred to as a.) Capitalism b.) Specialization c.) The technological revolution d.) History's hockey stick

c.) The technological revolution

The figure depicts the demand curve of a firm producing cars, together with its marginal cost, average cost, and isoprofit curves. At C, the firm sets the price at $5,440, sells 32 cars, and earns a profit of $63,360. Which of the following statements is correct? a.) The firm can sell its 33rd car at $5,440. b.) The total revenue from selling 32 cars is $63,360. c.) The total cost of producing 32 cars is $110,720. d.) The marginal cost of producing the 32nd car is $3,460.

c.) The total cost of producing 32 cars is $110,720.

There are five students who are looking to buy one second-hand textbook each. Their willingness-to-pay are £5, £6, £8, £12, and £15, respectively. Based on this information, which of the following statements is correct? a.) The student with a willingness-to-pay of £15 is the richest. b.) Their willingness-to-pay indicates an upward-sloping demand curve. c.) To sell three books, the maximum price that can be charged is £8. d.) If a seller is has a reservation price is £8, then he is guaranteed to sell his textbook.

c.) To sell three books, the maximum price that can be charged is £8.

Wealth is usually more unequally distributed than earnings. This is mainly because: a.) The value of assets increases more rapidly than earnings over time. b.) Zoning restrictions keep home values artificially high. c.) Wealth is accumulated savings that can be passed on from parents to children. d.) Wealth is taxed at a lower rate than earnings.

c.) Wealth is accumulated savings that can be passed on from parents to children.

Review Figure 19.13. Which of the following statements is true. a.) The poorest 40% of Americans owns about 15% of the nation's wealth. b.) The richest 20% of Americans owns about 60% of the nation's wealth. c.) Wealth is distributed more unequally than most people think. d.) People with high incomes support a lower level of wealth inequality than people with low incomes.

c.) Wealth is distributed more unequally than most people think.

Diminishing average product of labor means a.) that there are less workers working a plot of land. b.) that the the number of workers employed in the production process has no impact on the amount produced per worker. c.) as more labor is used in a production process, the amount produced per worker decreases. d.) as more labor is used in a production process, the amount produced per worker increases.

c.) as more labor is used in a production process, the amount produced per worker decreases.

In economics, institutions refer to a.) organizations such as universities. b.) financial corporations. c.) the rules of the game. d.) established laws.

c.) the rules of the game.

Which of the following statements about merit goods is correct? a.) Merit goods are allocated according to consumers' willingness-to-pay. b.) Goods with a positive externality on society are merit goods. c.) Merit goods should be provided by the private sector. d.) Emergency healthcare is a merit good.

d.) Emergency healthcare is a merit good.

The diagram shows the market demand and supply curves for the bread market. You know that there are 250 identical bakeries operating in the market, but you do not know their cost structure (i.e. their average cost and marginal cost curves). Based on this information, which of the following statements is correct? a.) At a price of €2.50, all 250 bakeries will sell 26 loaves. b.) In equilibrium, each bakery supplies 18 loaves each. c.) At a price of €1.50, all of the bakeries would be making a loss. d.) A bakery's marginal cost of producing the 21st loaf is approximately €2.

d.) A bakery's marginal cost of producing the 21st loaf is approximately €2.

Which of the following is an example of a negative externality? a.) A firm training a worker who may quit for a better job b.) A country investing in technologies to reduce carbon emissions c.) A student getting a well-rounded education d.) A commuter driving to work instead of taking public transportation

d.) A commuter driving to work instead of taking public transportation

In their study of a firm during 2006-2010 that includes the financial crisis, Lazear and his co-authors found that (i) the firm's productivity increased dramatically as unemployment rose, and (ii) the wage level was kept unchanged. Based on this information, which of the following statements are correct? a.) The rise in productivity is inconsistent with the predictions of the labour discipline model. b.) The labor discipline model predicts that a rise in unemployment would have no impact on the wage level. c.) The increase in the productivity primarily reflects that the least productive workers were fired in the downturn. Correct Answer d.) A possible explanation for why the wage level was not cut may be that the firm judged that the costs of lower employee morale and retention would be greater than what they would have saved in wages.

d.) A possible explanation for why the wage level was not cut may be that the firm judged that the costs of lower employee morale and retention would be greater than what they would have saved in wages.

Labor contracts are incomplete because a.) The firm cannot contract an employee not to leave. b.) The firm cannot observe exactly how an employee fulfills the contract. c.) The firm cannot specify every eventuality of a contract. d.) All of the above.

d.) All of the above.

Consider a world of just two individuals, Greta and Carlos, who each need two goods to survive, apples and wheat. They differ in how productive they are in growing apples and wheat: Based on this information, which of the following statements is correct? a.) Carlos has an absolute advantage in both crops. b.) Greta has a comparative advantage in both crops c.) Greta has a comparative advantage in producing wheat. d.) Carlos has a comparative advantage in producing wheat

d.) Carlos has a comparative advantage in producing wheat

Bruno is a landowner and Angela is a farmer who pays a share of her grain output to Bruno as rent for the use of the land. Consider the following figure, which shows Angela's and Bruno's combined feasible set and the interpretation of the allocation at point E. Based on the figure, which of the following statements are correct? a.) Bruno receives more grain at allocation G than at allocation F. b.) Angela prefers G to working 12 hours and consuming 10 bushels. c.) If Bruno is totally selfish, then H would be his preferred allocation. d.) Depending on the shape of her indifference curves, Angela may prefer G to E, she may prefer E to G, or she may be indifferent between the two.

d.) Depending on the shape of her indifference curves, Angela may prefer G to E, she may prefer E to G, or she may be indifferent between the two.

Which of the following statements regarding employment rents is correct? a.) They are the costs you have to pay for your employment. You Answered b.) It equals the wage you receive in your employment. c.) Higher employment rents make workers more likely to quit their job. d.) Employers can use high employment rents to exert power over employees.

d.) Employers can use high employment rents to exert power over employees.

Consider an ultimatum game of sharing a pie of $100. The first table shows the cumulative percentage of the Responders who accept the amount offered by the Proposers for when the game was played with two separate groups (Kenyan farmers and US university students). The second table shows the percentage of the Proposers who made those offers in the two groups. Based on this information, which of the following statements is correct? a.) Knowing that no Responder would accept an offer of $0, no Proposers would propose this. b.) Proposers are always best off offering $10. c.) For the US students, the Proposer's expected payoff from offering $20 is $12.60. d.) In both groups, the highest proportion of Proposers offered the amount that maximized their expected payoff.

d.) In both groups, the highest proportion of Proposers offered the amount that maximized their expected payoff.

Which of the following statements most accurately summarizes recent trends in global income inequality, as presented in Unit 19.1? a.) Most of the inequality in the world results from inequality between countries, and this is declining. b.) Most of the inequality in the world results from inequality between countries, and this is increasing. c.) Inequality between individuals within most countries is declining, leading to a decline in global inequality. d.) Inequality between countries is declining, while within-country inequality is rising, with the net effect being falling global inequality.

d.) Inequality between countries is declining, while within-country inequality is rising, with the net effect being falling global inequality.

The figure shows the market demand curve for bread, together with original and new supply curves, where the curve has shifted due to new bakeries entering the market. All bakeries are identical, and there are no entry costs. Which of the following statements is correct? a.) The bakeries' marginal cost of production has fallen. b.) The supply of bread has become less elastic. c.) With the fall in price, the bakeries now make a loss. d.) New bakeries will continue to enter until the price equals their average cost.

d.) New bakeries will continue to enter until the price equals their average cost.

A firm's fixed cost is $0 and marginal cost is $20. P is the price of the unit and Q represents the number of units produced. Which of the following statements is correct? a.) Producing 1,000 units with a price of $100 (Q=1,000, P=100) is on the isoprofit curve representing the profit level of $8,000. b.) Producing 25 units with a price of $60 (Q=25, P=60) and producing 100 units with a price of $35 (Q=100, P=35) are both points on the same isoprofit curve. c.) Producing 25 units with a price of $60 (Q=25, P=60) lies on a higher isoprofit curve than producing 100 units with a price of $35 (Q=100, P=35). d.) Producing 2,000 units with a price of $40 (Q=2000, P=40) and producing 20,000 units with a price of $22 (Q=20,000, P=22) are both points on the same isoprofit curve.

d.) Producing 2,000 units with a price of $40 (Q=2000, P=40) and producing 20,000 units with a price of $22 (Q=20,000, P=22) are both points on the same isoprofit curve.

In the following diagram you are given two technologies, A and B, which can produce 100 meters of cloth. Technology A uses 1 worker and 4 tonnes of coal, while technology B uses 4 workers and 2 tonnes of coal. The diagram also depicts three examples of isocost curves, NM, GF and JH. The wage and the price of coal are denoted by w and p, respectively. In period 1, the wage cost and the price of coal are (w, p) = ($10, $20) and in period 2, the wage cost and the price of coal change to (w, p) = ($20, $10). Which of the following statements is correct? a.) Technology A is cheaper than Technology B in both periods. b.) Technology B is cheaper than Technology A in both periods. c.) Technology A is cheaper in period 1 and Technology B is cheaper in period 2. d.) Technology B is cheaper in period 1 and Technology A is cheaper in period 2.

d.) Technology B is cheaper in period 1 and Technology A is cheaper in period 2.

The figure shows a student's production function with the final grade (the output) related to the number of hours spent studying (the input). Which of the following statements regarding marginal product of labour (MPL) are correct? a.) The MPL at 4 hours is 12.5. b.) The MPL is always greater than the APL. c.) The MPL is 6 at 15 hours. d.) The MPL at 4 hours is the slope of the tangent line.

d.) The MPL at 4 hours is the slope of the tangent line.

The diagram shows the demand and the supply curves for textbooks. Based on this figure, which of the following statements is correct? a.) At a price of $12, 40 books will be sold. b.) At a price of $6, there is an excess demand of 4 books. c.) There are sellers willing to give away their textbooks for free. d.) The Nash equilibrium price is $8.

d.) The Nash equilibrium price is $8.

The following diagram depicts the effect of the change in wage level on a worker's choice of consumption and hours of free time. The choice before and after the wage rise are given by A and D, respectively. Based on this information, which of the following statements is correct? a.) The change in the choice from A to C represents the substitution effect. b.) The overall effect of a wage increase on the hours of free time is always positive. c.) The substitution effect of a wage increase on the hours of free time is always positive. d.) The change in the choice from C to D represents the substitution effect.

d.) The change in the choice from C to D represents the substitution effect.

Select the correct statement regarding the Gini coefficient. a.) A lower Gini coefficient means greater income inequality. b.) If the government redistributes income from rich to poor, the Gini coefficient in disposable income is higher than the Gini coefficient in market income. c.) The larger the area between the Lorenz curve and the perfect equality line, the more equal the distribution. d.) The coefficient takes the value of 1 when a single individual receives all income.

d.) The coefficient takes the value of 1 when a single individual receives all income.

Bruno is a landowner and Angela is a farmer who pays a share of her grain output to Bruno for the use of the land. The figure shows Angela and Bruno's feasible frontier, Angela's biological survival constraint, and Angela's reservation indifference curve. If Angela does not work, she receives a ration of 2.5 bushels from the government. Which of the following statements is correct? a.) The economically feasible set is the area between Angela's biological survival constraint and the feasible frontier. b.) Angela's reservation indifference curve can be below her biological survival constraint. c.) Angela's reservation indifference curve may not necessarily go through Z. d.) The economically feasible set is a subset of the technically feasible set.

d.) The economically feasible set is a subset of the technically feasible set.

The following figure shows labor productivity and the real wage index in England from 1750 to 2000. Based on this information, which of the following statements is correct? a.) The real wage did not rise in the 18th century due to stagnating labor productivity. b.) The Factory Acts of 1833 and 1844 and the Ten Hours Act of 1847 reduced the bargaining power of the workers. c.) The extension of voting rights in 1875, 1918, and 1928 lead to lower real wages. d.) The graph demonstrates the importance of bargaining power for workers to benefit from higher labor productivity.

d.) The graph demonstrates the importance of bargaining power for workers to benefit from higher labor productivity.

Figure 1.2 shows the distribution of income across and within countries in 2014. The height of each bar represents the annual income of the population (for each decile), measured in 2005 US$, while the width of each country's bar represents its population. The red countries were the poorest countries in 1980, while the green countries were the richest in 1980. a.) Income inequality is higher in Japan than in the United States. b.) Countries with a larger population are poorer. c.) The income ranking between countries has remained broadly the same between 1980 and 2014. d.) The poorest decile in the US earns more than the richest decile in some poor countries.

d.) The poorest decile in the US earns more than the richest decile in some poor countries

In Britain before 1870, both wages and hours worked rose, while after 1900 working hours fell as wages continued to rise. Based on this information, which of the following statements is correct? a.) In the period before 1870, the income effect dominated the substitution effect. b.) Sometime between 1870 and 1900 the substitution effect of a rise in the wage rate on the hours of free time changed from negative to positive. c.) After 1900, the substitution effect dominated the income effect, so that hours of free time rose. d.) The substitution effect dominated the income effect before 1870, but the income effect dominated the substitution effect after 1900.

d.) The substitution effect dominated the income effect before 1870, but the income effect dominated the substitution effect after 1900.

Consider the technologies and costs from the previous problem. In period 1, the wage and the price of coal are (w, p) = ($10, $20) and the firm uses technology B. In period 2, the wage cost and the price of coal change to (w, p) = ($20, $10). The price of the cloth is $2 per meter in both periods. Which of the following statements is correct? a.) In period 1, the firm's profit per 100 meters of cloth is $100. b.) If the firm employs technology B in both periods, then the profit level would be the same in both periods. c.) The economic rent of switching to technology A in period 2 is $60. d.) There is a positive economic rent in switching from technology B to A in period 2.

d.) There is a positive economic rent in switching from technology B to A in period 2.

The figure shows a demand curve for Cheerios. Based on this figure, which of the following statements is correct? a.) If the price was $2 then the total demand would be 40,000 pounds. b.) If the firms want to sell 24,000 pounds then they should charge $2. c.) The demand curve suggests that halving the price doubles the pounds sold d.) There is no demand if the price is set above $7.20.

d.) There is no demand if the price is set above $7.20.

In Guadeloupe and Martinique, the use of pesticide chlordecone on banana plantations devastated fishing communities downstream. Which of the following statements is correct? a.) Clean water was a right for the fishing community. b.) The use of pesticide was a right for the banana producers. c.) The problem arose when actors took into account the costs their decisions impose on others. d.) This was an example of a social dilemma.

d.) This was an example of a social dilemma.

You currently work for 40 hours a week at wage rate of £12 an hour. Your free hours are defined as the number of hours not in work, which in this case is 24 hours × 7 days - 40 hours = 128 hours per week. Suppose that you are happy to keep your total weekly income constant. Then: a.) If your wage rate increases to £16 an hour, then your free time will increase to 130 hours. b.) Doubling the wage rate would decrease your working hours to 30 hours per week. c.) If your pay is cut to £9, in order to keep your income constant, you'll only get 100 hours of free time. d.) To have 16 hours of more free time, your wage rate needs to increase by £8.

d.) To have 16 hours of more free time, your wage rate needs to increase by £8.

Bruno is a landowner and Angela is a farmer who pays a share of her grain output to Bruno for the use of the land. The figure shows Angela and Bruno's feasible frontier, Angela's biological survival constraint and her reservation indifference curve. If Angela does not work she receives a ration of 2.5 bushels from the government. Of the four points depicted in the figure, which allocation Pareto dominates Z? a.) a. b.) b. c.) c. d.) d.

d.) d.

Consider Figure 19.15 in the text. Which of the following statements about the feasible frontier is correct? a.) The poor are better off at point B than point R. b.) Increasing inequality always increases average income. c.) Moving from B to A decreases average income. d.)All the outcomes between points R and F are Pareto efficient.

d.)All the outcomes between points R and F are Pareto efficient.