ECON 9-12 Quizzes/ Problem Sets

A ________ is an extensive -form representation of a game. Selected Answer: game treeAnswers: game tree payoff matrixNash equilibrium pure strategy

game tree

Compensating differentials are associated most closely with which of the following? Selected Answer: hazardous jobsAnswers:economic discrimination comparable worthdifferences in education hazardous jobs

hazardous jobs

If a theatre company expects $250,000 in ticket revenue from five performances and $288,000 in ticket revenue if it adds a sixth performance, the -cost of staging the sixth performance is probably higher than the cost of staging the previous five. -company will be making a loss on the sixth performance because its ticket sales will be less than the average revenue received from the previous five. -marginal revenue of the sixth performance is $38,000. -marginal revenue of the sixth performance is $288,000.

marginal revenue of the sixth performance is $38,000.

A perfectly competitive industry achieves allocative efficiency in the long run. What does allocative efficiency mean? -Each firm produces up to the point where all scale economies are exhausted. -Each firm produces up to the point where the price of the good equals the marginal cost of producing the last unit. -Firms use an input combination that minimizes cost and maximizes output. -Production occurs at the lowest average total cost.

Each firm produces up to the point where the price of the good equals the marginal cost of producing the last unit.

In long-run perfectly competitive equilibrium, which of the following is false? -There is efficient, low-cost production at the minimum efficient scale. -Economic surplus is maximized. -Firms earn economic profit. -Economies of scale are exhausted.

Firms earn economic profit.

If, in a perfectly competitive industry, the market price facing a firm is above its average total cost at the output where marginal revenue equals marginal cost, then -firms are breaking even. -existing firms will exit the industry. -new firms are attracted to the industry. -market supply will remain constant.

new firms are attracted to the industry.

Higher wages that compensate workers for unpleasant aspects of a job are called compensating differentials. Selected Answer: True Answers: True False

True

Increases in population shift the market supply curve for labor to the right. Selected Answer: True Answers: True False

True

Larry and Mike are equally skilled construction workers employed by the Brown and Root Company. Larry's job is riskier because he typically works on a scaffold 1,000 feet above ground. Larry's higher wage rate is the result of Selected Answer: a compensating differential.Answers: a negative feedback loop.a higher marginal revenue product. a compensating differential. economic discrimination.

a compensating differential.

A sequential game can be used to analyze whether a retail firm should build a large store or a small store in a city, when the correct choice depends on whether a competing firm will build a new store in the same city. Which of the following is used to analyze this type of decision? Selected Answer: a decision treeAnswers: a decision tree an either-or grapha sequential matrix a decision matrix

a decision tree

An increase in a perfectly competitive firm's demand for labor could be caused by Selected Answer: an increase in the market demand for the firm's product.Answers: an increase in the quantity of labor supplied. an increase in the market demand for the firm's product. a decrease in the market wage rate. a decrease in the marginal product of workers.

an increase in the market demand for the firm's product

A cooperative equilibrium is most likely to arise in a Selected Answer: repeated game with a small number of players.Answers: repeated game with a small number of players.single-play game with a large number of players. single-play game without communication. repeated game with a large number of players.

repeated game with a small number of players

The opportunity cost of leisure is Selected Answer: a person's wage rate.Answers: a person's income. a person's wage rate.the substitution effect. the income effect.

a person's wage rate.

Without warranties, used car buyers can assume that all used cars are "lemons" because of Selected Answer: adverse selection.Answers: adverse selection. adverse reaction. false signals. moral hazard. moral dilemma.

adverse selection.

If a pet grooming salon hires an additional groomer, that worker can groom 4 additional pets per day. The average grooming fee is $25. The most the salon would be willing to pay that groomer is Selected Answer: $100 per day.Answers: $4 per day. $25 per day. $100 per day.indeterminate with the given information.

$100 per day.

Sue owns a baking company. The company's total revenue for a month is $4000. The monthly costs of resources bought in the market and of resources owned by the firm are $2000 and monthly costs of resources supplied by the owner are $1000. Sue's economic profit for the month is equal to -$3000. -$4000. -$2000. -$1000.

$1000

Assume it takes 10 units of labor to produce 4 units of output. When the price of labor is $6 per unit and fixed costs equal $60, what is the total cost of those 4 units of output? -$60 -$120 -$84 -$70

$120

If average total cost is $50 and average fixed cost is $15 when output is 20 units, then the firm's total variable cost at that level of output is -$1,000. -$700. -$300. -impossible to determine without additional information.

$700

Letters are used to represent the terms used to answer this question: price ( P), quantity of output ( Q), total cost ( TC) and average total cost ( ATC). Which of the following equations is equal to a firm's profit? P - TC (P × Q) - TC P - ATC (P × Q) - (P × ATC)

( P × Q) - TC

The following figure depicts four sequential games. Player A is the first to move and Player B is the second to move. Refer to the figure above. In which game do both players win money in equilibrium? Selected Answer: (1)Answers: (1)(2)(3)(4)

1

The following figure depicts four sequential games. Player A is the first to move and Player B is the second to move. Refer to the figure above. In which game do both players lose money in equilibrium? Selected Answer: (2)Answers:(1) (2)(3)(4)

2

Refer to the figure above. If the price of the output is $5.00 per unit and the wage is $30 per worker, the firm's optimal choice in the short run is to hire ________ workers. Selected Answer: 3Answers: 34 5 6

3

Which of the following is an example of adverse selection? Selected Answer: A customer buying a defective appliance from a used goods marketAnswers: A customer buying a defective appliance from a used goods marketThe generation of a harmful chemical during the production of a good Passengers travelling in a subway without a ticket Overgrazing of a common piece of land

A customer buying a defective appliance from a used goods market

Which of the following is a problem that arises in a health insurance market? Selected Answer: A disproportionate number of high-risk individuals are attracted to buy insurance.Answers: There are a large number of buyers of various insurance programs. Only risk-averse individuals buy insurance. There exists a fierce competition between the insurance providers. A disproportionate number of high-risk individuals are attracted to buy insurance.

A disproportionate number of high-risk individuals are attracted to buy insurance.

Which of the following is likely to cause an increase in the wage rate and a fall in the employment level in a country? Selected Answer: A left shift in the supply curve for labor, without any change in the demand curve for laborAnswers:A right shift in the supply curve for labor, without any change in the demand curve for labor A left shift in the demand curve for labor, without any change in the supply curve for labor A left shift in the supply curve for labor, without any change in the demand curve for laborA right shift in the demand curve for labor, without any change in the supply curve for labor

A left shift in the supply curve for labor, without any change in the demand curve for labor

Which one of the following about a monopoly is false? -A monopoly must have some kind of government privilege or government imposed barrier to maintain its monopoly. -A monopoly status could be temporary. -A monopoly could make profits in the long run. -A monopoly could break even in the long run.

A monopoly must have some kind of government privilege or government imposed barrier to maintain its monopoly.

Which of the following is likely to cause a decrease in the wage rate and an increase in the employment level of a country? Selected Answer: A right shift in the supply curve for labor, without any change in the demand curve for laborAnswers: A right shift in the supply curve for labor, without any change in the demand curve for labor A left shift in the demand curve for labor, without any change in the supply curve for labor A left shift in the supply curve for labor, without any change in the demand curve for laborA right shift in the demand curve for labor, without any change in the supply curve for labor

A right shift in the supply curve for labor, without any change in the demand curve for labor

Scenario: The market for used cell phones is very popular in Barylia. However, several phones available in this market are of inferior quality and it is often impossible to differentiate between a good-quality phone and a poor-quality phone. Refer to the scenario above. Which of the following problems is likely to arise in the market for used cell phones in Barylia? Selected Answer: Adverse selectionAnswers: Adverse selection The paradox of thrift Free-rider problemThe tragedy of the commons

Adverse selection

Which of the following is true of a simultaneous move game? Selected Answer: All relevant benefits and costs of each action are taken into account.Answers:Players choose their actions after knowing the action of the first player. It involves strategic interactions among a large number of players. All relevant benefits and costs of each action are taken into account. This game cannot be represented by a payoff matrix.

All relevant benefits and costs of each action are taken into account.

Which of the following is TRUE about the long run? -All resources are fixed. -At least one resource is fixed. -All resources are variable. -none of the above

All resources are variable.

Which of the following statements is true? -As output increases, average fixed cost becomes smaller and smaller. -Average fixed cost does not change as output increases. -When marginal cost is greater than average fixed cost, average fixed cost increases. -The marginal cost curve intersects the average fixed cost curve at its minimum point.

As output increases, average fixed cost becomes smaller and smaller.

Which of the following most resembles a case of taste-based discrimination? Selected Answer: Austin has a deep-seeded hatred of bald-headed men and refuses to hire any to work at his car wash.Answers: Rodrigo will only hire bilingual people because a majority of his customers speak either English or Spanish. Austin has a deep-seeded hatred of bald-headed men and refuses to hire any to work at his car wash. Tatiana only hires men as bartenders and women as cocktail servers at her upscale bar.Katelyn prefers not to hire women under the age of 35 because she is afraid they will eventually want to take maternity leave.

Austin has a deep-seeded hatred of bald-headed men and refuses to hire any to work at his car wash.

Scenario: Elly owns a small coffee shop. She has only one employee. One weekend, she decides to take a break from work. She is wondering whether she should trust her employee to run the shop in her absence. If she does not trust him, she would have to keep the shop closed, in which case neither she nor her employee will be able to make money. In contrast, if she trusts him, he can either cooperate and run the shop or he can defect and steal from the shop. If he cooperates, both of them will earn money. If he steals from the shop, he will make more money while she will lose. Refer to the scenario above. Which of the following is likely to happen if Elly is known to be vengeful?Both Elly and her employee will earn money. Answers: Neither of them will make money. Only Elly will make money. Only Elly's employee will make money.

Both Elly and her employee will earn money.

Sears and Wal-Mart must decide whether to lower their prices, based on the economic profits shown in the table above. Which of the following is TRUE? Selected Answer: Both Sears and Wal-Mart would jointly be better off if they could each keep their prices high.Answers: This situation is not a prisoners' dilemma. Both Sears and Wal-Mart would jointly be better off if they could each keep their prices high. If Wal-Mart lowers its prices, Sears should keep its prices high.If Sears lowers its prices and Wal-Mart does not, Sears will make a $20 million economic profit.

Both Sears and Wal-Mart would jointly be better off if they could each keep their prices high.

In the United States, the bulk of health care spending is paid by health insurance companies. Such a system is also called a third-party payer system where consumers of health care pay a nominal fee and the rest are paid by the health insurance provider. Why might such a system lead to an inefficient outcome? Selected Answer: Consumers have an incentive to over-consume health care services because they pay prices well below the cost of providing these services.Answers:Consumers fearing that excessive use of health care services may lead to a rise in insurance premiums tend to under-consume health care services. Physicians concerned that insurance companies may not approve payments tend not to order expensive tests for their patients. Consumers have an incentive to over-consume health care services because they pay prices well below the cost of providing these services. Health insurance companies have an incentive to control cost and therefore tend to deny consumers many cutting edge medical treatments.

Consumers have an incentive to over-consume health care services because they pay prices well below the cost of providing these services.

Why are decision trees useful to managers who plan business strategies? Selected Answer: Decision trees provide a systematic way of thinking through the implications of a strategy. Answers: Decision trees provide a systematic way of thinking through the implications of a strategy. Using a decision tree always leads to a dominant strategy. Decision trees explain the level of concentration in an industry. Decision trees can be used to increase the amount of product differentiation; this enables managers to charge higher prices for their products.

Decision trees provide a systematic way of thinking through the implications of a strategy.

Which of the following is a characteristic shared by a perfectly competitive firm and a monopoly? -Each maximizes profits by producing a quantity for which price equals marginal cost. -Each sets a price for its product that will maximize its revenue. -Each maximizes profits by producing a quantity for which marginal revenue equals marginal cost. -Each must lower its price to sell more output.

Each maximizes profits by producing a quantity for which marginal revenue equals marginal cost.

Which of the following statements is correct? -Economic profit takes into account all costs involved in producing a product. -Accounting profit is the same as economic profit. -Accounting profit is not relevant in preparing the firm's financial statement. -Economic profit always exceeds accounting profit.

Economic profit takes into account all costs involved in producing a product.

Which of the following correctly identifies a difference between taste-based discrimination and statistical discrimination? Selected Answer:Employers engaging in taste-based discrimination are willing to forego profits, whereas employers engaging in statistical discrimination are trying to enhance profits. Answers:Employers engaging in statistical discrimination are willing to forego profit, whereas employers engaging in taste-based discrimination are trying to enhance profits. Taste-based discrimination is observed in the manufacturing sector, whereas statistical discrimination is observed in the service sector. Employers engaging in taste-based discrimination are willing to forego profits, whereas employers engaging in statistical discrimination are trying to enhance profits. Taste-based discrimination is observed in the service sector, whereas statistical discrimination is observed in the manufacturing sector.

Employers engaging in taste-based discrimination are willing to forego profits, whereas employers engaging in statistical discrimination are trying to enhance profits.

Assume a perfectly competitive firm is in long-run equilibrium and there is a decrease in market demand for the firm's output. Which of the following will occur? -Existing firms will maintain the original level of output, but they will shift their cost functions down in the short run. -Market price will be above its original level. -Existing firms will raise price to cover the reduction in quantity demanded and maintain total revenue in the short run. -Existing firms will reduce output in the short run.

Existing firms will reduce output in the short run.

Due to adverse selection, very few lemons will be sold in the market for used cars. Selected Answer: False Answers: True False

False

If marginal cost is above the average variable cost, then average variable cost is decreasing. -True -False

False

If price is equal to average variable cost, then a perfectly competitive firm breaks even. -True -False

False

Technological advancements that increase labor's productivity shift the labor supply curve to the right. Selected Answer: False Answers: True False

False

Scenario: Two firms in a market must choose between two alternative strategies—X and Y. The figure below shows the game tree that these firms can use to make their decisions. Refer to the figure above. In equilibrium, ________. Selected Answer: Firm 1 will follow Strategy Y, and Firm 2 will follow Strategy XAnswers:Firm 1 will follow Strategy X, and Firm 2 will follow Strategy Y both firms will follow Strategy X both firms will follow Strategy Y Firm 1 will follow Strategy Y, and Firm 2 will follow Strategy X

Firm 1 will follow Strategy Y, and Firm 2 will follow Strategy X

Rob Neyer is a baseball writer for sbnation.com. He has described attending a Red Sox game at Fenway Park in Boston and having a great seat in the sun on a​ hot, humid​ day: ​"Granted, I could have moved under the overhang and enjoyed​ today's contest from a​ nice, cool, shady seat. But when you paid​ forty-five dollars for a ticket in the fourth​ row, it's tough to move back to the​ twenty-fourth [row]." ​Source: Rob​ Neyer, Feeding the Green Monster​, New​ York: iPublish.com,​ 2001, p.50. What should Rob​ do? Selected Answer:He should weigh the marginal cost of moving into the shade​ (a less desirable​ view) versus the marginal benefit of being under the shade.Answers:He should weigh the marginal cost of moving into the shade​ (a less desirable​ view) versus the marginal benefit of being under the shade. He should move into the shade. He should not ignore the price he paid for the ticket. He should weigh the additional cost of his ticket plus the additional cost of being in the sun.

He should weigh the marginal cost of moving into the shade​ (a less desirable​ view) versus the marginal benefit of being under the shade.

If, as an entrepreneur, I am earning accounting profits of $70,000 per year and the opportunity cost of my time is $50,000 -I am earning economic profits of $70,000. -I should close my business. -I am earning economic losses of $20,000. -I am earning economic profits of $20,000.

I am earning economic profits of $20,000.

Which of the following helps in reducing the problem of adverse selection in health insurance markets? Selected Answer: Insurance mandatesAnswers:High rates of taxation High premiums Insurance coverage Insurance mandates

Insurance mandates

Which of the following is true of an extensive-form game? Selected Answer: It involves sequential decision making by the players.Answers: It involves simultaneous decision making by the players. It involves sequential decision making by the players.The sum of the payoffs to the players in the game is always constant. The players in the game earn equal payoffs in equilibrium.

It involves sequential decision making by the players.

Which of the following is NOT a characteristic of a perfectly competitive market? -It is difficult for a firm to enter or leave the market. -The products sold by the firms in the market are homogeneous. -Each firm is a price taker. -There are many buyers and sellers in the market.

It is difficult for a firm to enter or leave the market.

What is allocative efficiency? -It refers to a situation in which resources are allocated such that the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it. -It refers to a situation in which resources are allocated such that goods can be produced at their lowest possible average cost. -It refers to a situation in which resources are allocated to their highest profit use. -It refers to a situation in which resources are allocated fairly to all consumers in a society.

It refers to a situation in which resources are allocated such that the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it.

What is moral hazard? Selected Answer: It refers to the actions people take after they have entered into a transaction that makes the other party to the transaction worse off.Answers: It refers to the actions people take after they have entered into a transaction that makes the other party to the transaction worse off.It refers to the private, self-interested actions that people pursue, which when taken collectively leads to a loss in economic surplus. It refers to the actions people take before they enter into a transaction so as to mislead the other party to the transaction.It refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction.

It refers to the actions people take after they have entered into a transaction that makes the other party to the transaction worse off.

Which of the following statements is true? Selected Answer: Lower wages are normally offered for jobs with better amenities.Answers: Lower wages are normally offered for jobs with better amenities. Jobs that are relatively risky pay a lower wage than other, safer jobs. Educational qualifications and wage rates are negatively correlated.Incentives are normally higher for desirable occupations than for undesirable occupations.

Lower wages are normally offered for jobs with better amenities.

A firm could continue to operate for years without ever earning a profit as long as it is producing an output where -MR > AVC. -AFC < AVC. -ATC > AVC. -MR < ATC.

MR > AVC.

A situation in which each firm chooses the best strategy given the strategies chosen by other firms is called a Selected Answer: Nash equilibrium.Answers: Nash equilibrium. collusion. payoff matrix.dominant strategy.

Nash equilibrium.

Which of the following is TRUE for the game in Scenario 13.4? Selected Answer: Neither company has a dominant strategy. Answers:NRG's dominant strategy is to sponsor the marathon. NRG's dominant strategy is to sponsor the TV show. Vita's dominant strategy is to sponsor the TV show. Vita's dominant strategy is to sponsor the marathon. Neither company has a dominant strategy.

Neither company has a dominant strategy.

Which of the following is true of a Nash equilibrium? Selected Answer: No player can improve his payoff by changing his strategy once in Nash equilibrium.Answers: A Nash equilibrium cannot occur if each player is aware of the strategies of other players.A Nash equilibrium occurs if each player earns a zero payoff irrespective of the strategy he chooses. A game can have only one Nash equilibrium. No player can improve his payoff by changing his strategy once in Nash equilibrium.

No player can improve his payoff by changing his strategy once in Nash equilibrium.

Peet's Coffee and Teas produces some flavorful varieties of Peet's brand coffee. Is Peet's a monopoly? -No, Peet's is not a monopoly because there are many branches of Peet's. -Yes, Peet's is the only supplier of Peet's coffee in a market where there are high barriers to entry. -No, although Peet's coffee is a unique product, there are many different brands of coffee that are very close substitutes. -Yes, there are no substitutes to Peet's coffee.

No, although Peet's coffee is a unique product, there are many different brands of coffee that are very close substitutes.

The average price of gasoline in your neighborhood is $2.15 per gallon. Your neighbor, Diana tells you that you can "save a lot" by frequenting a gas station 20 miles outside your neighborhood where the price of gasoline is $2.06 per gallon However, she cautions you that there are usually long lines at that station. Is her suggestion beneficial to you? Selected Answer:No, if one factors in the non-monetary opportunity costs (driving time and waiting in line), it could prove more costly to go to the lower-priced gasoline station.Answers:No, if one factors in the non-monetary opportunity costs (driving time and waiting in line), it could prove more costly to go to the lower-priced gasoline station. No, my friend is misled; clearly, the lower-priced gasoline must be of inferior quality and could damage vehicles.Yes, the lower price of gasoline at the rival station increases my purchasing power and enables me to consume more of other goods. Yes, since gasoline is a necessity for car owners, the total cost savings would be relatively substantial.

No, if one factors in the non-monetary opportunity costs (driving time and waiting in line), it could prove more costly to go to the lower-priced gasoline station.

In the above figure, a perfectly competitive market will have a price of ________, and a monopoly will have a price of ________. -P1 and quantity of Q1; P2 and quantity of Q2 -P3 and quantity of Q3; P1 and quantity of Q1 -P2 and quantity of Q2; P1 and quantity of Q1 -P2 and quantity of Q1; P1 and quantity of Q1 -P2 and quantity of Q2; P3 and quantity of Q1

P 2 and quantity of Q 2; P 1 and quantity of Q 1

Some superstar athletes in the sports industry earn very high levels of income relative to other occupations, and over time the wage differential has been increasing. What could have caused this? Selected Answer: Technological advances such as cable television has increased the demand for sports entertainment.Answers: Technological advances such as cable television has increased the demand for sports entertainment. The supply of star athletes has decreased. The supply of star athletes has increased due to college athletic programs. The market power of athletes' unions has increased.

Technological advances such as cable television has increased the demand for sports entertainment.

Which of the following is likely to be used as a signal in the job market? Selected Answer: The degree obtained by the applicantAnswers: An announcement of vacancy The letter of appointment The degree obtained by the applicant The job description

The degree obtained by the applicant

Which of the following correctly identifies the difference between the demand for labor and the demand for final goods? Selected Answer:The demand for labor is derived from the demand for final goods, whereas the demand for final goods is independent of the demand for labor. Answers:The demand for labor is fixed over time, whereas the demand for final goods changes according to changes in tastes and preferences. The demand for final goods is derived from the demand for labor, whereas the demand for labor is independent of the demand for final goods. The demand for labor is derived from the demand for final goods, whereas the demand for final goods is independent of the demand for labor. The demand for final goods is fixed over time, whereas the demand for labor changes according to the changes in tastes and preferences.

The demand for labor is derived from the demand for final goods, whereas the demand for final goods is independent of the demand for labor.

Consider the market for opticians. What is likely to happen to the equilibrium wage and quantity of opticians if more and more people turn to laser eye surgery instead of wearing glasses or contact lens? Selected Answer: The equilibrium wage and the equilibrium quantity of opticians fall.Answers:The equilibrium wage rises and the equilibrium quantity of opticians falls. The equilibrium wage and the equilibrium quantity of opticians fall.The equilibrium wage falls and the equilibrium quantity of opticians rises. The equilibrium wage and the equilibrium quantity of opticians rise.

The equilibrium wage and the equilibrium quantity of opticians fall.

Which of the following statements is NOT true for a perfectly competitive firm? -The firm can influence its demand curve by advertising its product. -The market demand and supply curves determine the market price. -A firm's demand curve is horizontal. -The firm's demand curve is perfectly elastic.

The firm can influence its demand curve by advertising its product.

Assume that the 4K and OLED television sets industry is perfectly competitive. Suppose a producer develops a successful innovation that enables it to lower its cost of production. What happens in the short run and in the long run? -This firm will be able to earn above normal profits indefinitely if it obtains a patent for its innovation. -The firm will be able to increase its economic profits temporarily, but in the long run its economic profits will be eliminated as other firms copy the innovation. -The firm will probably incur losses temporarily because of the high cost of the innovation, but in the long run it will start earning positive profits. -Initially, the firm will be able to increase its profit significantly, but in the long run its profits will still be greater than zero but lower than its short-run profits because other firms would also innovate.

The firm will be able to increase its economic profits temporarily, but in the long run its economic profits will be eliminated as other firms copy the innovation.

Which of the following will happen if a firm in a duopoly with homogeneous products increases its price above its marginal cost once a Nash equilibrium is reached? Selected Answer: The firm will lose all its customers to its rival.Answers:The firm will continue to earn zero economic profits. The firm will lose all its customers to its rival. The firm will gain market share. The firm will earn huge economic profits.

The firm will lose all its customers to its rival.

Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21. Which of the following will happen? -The firm will not sell any output. -The firm's profits will increase. -The firm will sell more output than its competitors. -The firm's revenue will increase.

The firm will not sell any output.

What does it mean to say that a game is in "extensive form"? Selected Answer: The game is presented as a decision tree. Answers: The game is presented as a decision tree. Strategies are described, rather than just numbered. The game is presented as a matrix. The game is written out as often as the situation calls for it to be played. All payoffs are shown.

The game is presented as a decision tree.

Which of the following is an example of a barrier to entry? -A firm is open for business only at certain hours of the day, and has its doors locked at other times. -The government grants licenses to taxicab drivers, without which it is illegal to operate a taxicab. -A firm is lacking a website. -A newspaper sells advertising space to businesses.

The government grants licenses to taxicab drivers, without which it is illegal to operate a taxicab.

Other things remaining the same, which of the following is likely to cause a decrease in both the wage rate and the number of workers hired in a glass factory? Selected Answer: The introduction of labor-saving technology in the factoryAnswers:A decrease in the population in the region where the factory is located The introduction of labor-complementary technology in the factoryAn increase in the population in the region where the factory is located The introduction of labor-saving technology in the factory

The introduction of labor-saving technology in the factory

Prisoner's dilemma games imply that cooperative behavior between two people or two firms always breaks down. But reality teaches us that people and firms often cooperate successfully to achieve their goals. Why do the results from prisoner's dilemma games fail to predict real-world results? Selected Answer: The prisoner's dilemma does not apply to most business situations that are repeated over and over. Answers: The prisoner's dilemma does not apply to most business situations that are repeated over and over. Most real-world situations involve more than two people or firms; the prisoner's dilemma is only applicable to situations that involve two parties. Prisoner's dilemma games do not permit people or firms from reneging on agreements, which often occurs in real-word situations. Prisoner's dilemma games predict the behavior of people and firms that engage in illegal activity; most people and firms do not resort to illegal activity.

The prisoner's dilemma does not apply to most business situations that are repeated over and over.

Which of the following statements about the perfect competitor is INCORRECT? -The products made by a perfectly competitive firm have no close substitutes. -If an individual firm raises price, it will lose business. -The perfect competitor sells a homogeneous commodity. -The perfectly competitive firm is always a price taker.

The products made by a perfectly competitive firm have no close substitutes.

Which of the following is not a characteristic of a perfectly competitive market structure? -There are a very large number of firms that are small compared to the market. -All firms sell identical products. -There are no restrictions to entry by new firms. -There are restrictions on exit of firms.

There are restrictions on exit of firms.

Assume that a comparable worth law is passed that determines that kindergarten teachers and bricklayers have comparable jobs; therefore, workers in both of these occupations should be paid the same wages. Assume that prior to the law, bricklayers were paid a higher wage than kindergarten teachers. Which of the following is the most likely result of the comparable worth law? Selected Answer: There will be a shortage in the market for bricklayers and a surplus in the market for kindergarten teachers. Answers: The equilibrium wage will be the same for kindergarten teachers and bricklayers. There will be a shortage in the market for bricklayers and a surplus in the market for kindergarten teachers. There will be surplus in the market for bricklayers and a shortage in the market for kindergarten teachers. Some former bricklayers will become kindergarten teachers and some former kindergarten teachers will become bricklayers.

There will be a shortage in the market for bricklayers and a surplus in the market for kindergarten teachers.

The typical labor supply curve is upward sloping but it is possible for the curve to be backward bending — negatively sloped — at very high wage levels. Which of the following would cause a backward-bending supply curve? Selected Answer: This would occur when the income effect from an increase in the wage becomes larger than the substitution effect. Answers:This would occur when a large number of workers choose leisure rather than employment at low wages; only a very large increase in the wage will lead these workers to prefer employment to leisure. This would occur when the income effect from an increase in the wage becomes larger than the substitution effect. This would occur when the substitution effect from an increase in the wage becomes larger than the income effect. This would occur if leisure is an inferior good.

This would occur when the income effect from an increase in the wage becomes larger than the substitution effect.

A doctor pursuing his own interests rather than the interests of his patients is an example of the principal-agent problem. Selected Answer: True Answers: True False

True

Adverse selection is a situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction. Selected Answer: True Answers: True False

True

One reason college students do not study enough to get high grades is that they are unrealistic about their future behavior. Selected Answer: True Answers: True False

True

The most important factor contributing to wage differences in the labor market is differences in the level of education and training among workers. Selected Answer: True Answers: True False

True

When firms exit a perfectly competitive industry, the market supply curve shifts to the left. -True -False

True

The total value to society of having garbage removed is greater than the value of baseball games. Why, then, are baseball players paid more than garbage collectors? Selected Answer:Wages do not depend on total values but marginal values. The marginal revenue product of baseball players exceeds the marginal revenue product of garbage collectors. Answers:Garbage removal results in significant external benefits that are not captured in the price paid for garbage removal. As a result, wages of garbage collectors do not reflect their social benefits. Wages do not depend on total values but marginal values. The marginal revenue product of baseball players exceeds the marginal revenue product of garbage collectors. There is greater competition in the garbage collection industry than there is in Major League Baseball. Although the total value of garbage removal is greater than the total value of baseball, wages are determined by average values.

Wages do not depend on total values but marginal values. The marginal revenue product of baseball players exceeds the marginal revenue product of garbage collectors.

Which of the following is a likely reason for wage inequality between men and women? Selected Answer: Women tend to spend more time out of the labor force as compared to men. Answers: Women tend to spend more time out of the labor force as compared to men. Women generally tend to have higher educational qualifications than men. Men tend to spend more time out of the labor force as compared to women. Men generally tend to have higher education qualifications than women.

Women tend to spend more time out of the labor force as compared to men.

Scenario: Your car broke down while you were driving to the office one morning. You took it to the nearest service center and were told by the mechanic that you need to pay $500 for the repair. You are uncertain about whether to trust him. If you do not trust him, you have to take it to another service center, which is far away and inconvenient. If you trust him, he can either cooperate or defect (do an honest job or not). If he does an honest job, both of you will gain from the trade. If he does not do an honest job, he will gain $500 while you will lose your money. Clearly, he will gain more by defecting rather than by cooperating with you. Refer to the scenario above. Which of the following will be true if the service center has a reputation for trustworthiness? Selected Answer: You will pay the mechanic $500, and he will cooperate.Answers: You will pay the mechanic $500, and he will cooperate. You will pay the mechanic $500, but he will defect. A unique equilibrium will not occur. The equilibrium outcome will be equitable.

You will pay the mechanic $500, and he will cooperate.

In the prisoners' dilemma game, when each player takes the best possible action given the action of the other player Selected Answer: a Nash equilibrium is reached.Answers: both players deny.one player denies and one player confesses. a Nash equilibrium is reached. a competitive equilibrium is reached.

a Nash equilibrium is reached.

One result of asymmetric information about people's ability to repay a loan is that: Selected Answer: a bank could make many loans to people who don't pay them back.Answers: banks will not make loans. loans will only be made to people who don't pay them back. lenders are better off than with perfect information. a bank could make many loans to people who don't pay them back.

a bank could make many loans to people who don't pay them back.

The relationship between a pure-strategy Nash equilibrium and a dominant-strategy equilibrium is that: Selected Answer: a dominant-strategy equilibrium is a special case of a pure-strategy Nash equilibrium. Answers: they are the same. there may not be a dominant-strategy equilibrium, but there always is a pure-strategy Nash equilibrium. a pure-strategy Nash equilibrium is a special case of a dominant-strategy equilibrium. they are mutually exclusive and exhaustive, in that a dominant-strategy equilibrium is the same thing as a mixed-strategy Nash equilibrium. a dominant-strategy equilibrium is a special case of a pure-strategy Nash equilibrium.

a dominant-strategy equilibrium is a special case of a pure-strategy Nash equilibrium.

A price maker is -a firm that is able to sell any quantity at the highest possible price. -a consumer who participates in an auction where she announces her willingness to pay for a product. -a firm that has some control over the price of the product it sells. -a person who actively seeks out the best price for a product that he or she wishes to buy.

a firm that has some control over the price of the product it sells.

Compared to a perfectly competitive market, a monopoly sets -a lower price. -the same price. a higher price. -a price that might be higher, lower, or the same depending on whether the monopoly's marginal revenue curve lies above, below, or on its demand curve. -a price that might be higher, lower, or the same depending on whether the monopoly's marginal cost curve lies above, below, or on its marginal revenue curve.

a higher price.

A firm can use anchoring to influence consumer choices so as to increase sales by marking Selected Answer: a high​ "regular price" on a​ product, which makes the discounted​ "sale price" appear to be a bargain.Answers: a low​ "regular price" on a​ product, which makes the discounted​ "sale price" appear to be a bargain. a low​ "sale price" on a​ product, which makes the regular price appear to be a bargain. a high​ "regular price" on a​ product, which makes the discounted​ "sale price" appear to be a bargain. a high​ "sale price" on a​ product, which makes the regular price appear to be a bargain.

a high​ "regular price" on a​ product, which makes the discounted​ "sale price" appear to be a bargain.

Consider a used car market in which half the cars are good and half are bad (lemons). If buyers are rational, the prices being offered for used cars will result in Selected Answer: a larger proportion of lemons being sold and consequently, producer surplus is increased.Answers: a larger proportion of lemons being sold and consequently, producer surplus is increased. an equal proportion of good cars and lemons being sold in an inefficient market.a larger proportion of good cars being sold and consequently, consumer surplus is increased. an equal proportion of a good cars and lemons being sold in an efficient market.

a larger proportion of lemons being sold and consequently, producer surplus is increased.

A dominant strategy is Selected Answer: a strategy that is the best for a firm no matter what strategies other firms use. Answers: a strategy that is obviously the best for each firm that is a party to a business decision. a strategy that is the best for a firm no matter what strategies other firms use. an equilibrium where each firm chooses the best strategy, given the strategies of other firms.a strategy chosen by two firms that decide to charge the same price or otherwise not to compete.

a strategy that is the best for a firm no matter what strategies other firms use.

In comparing accounting profit with economic profit, we generally find that -accounting profit is greater than economic profit. -accounting profit is less than economic profit. -economic profit exceeds accounting profit by the amount of opportunity costs. -economic profit and accounting profit are the same in the short run.

accounting profit is greater than economic profit.

Marginal cost is the -change in the price of inputs if a firm buys more inputs to produce an additional unit of output. -change in average cost when an additional unit of output is produced. -additional output when total cost is increased by one dollar. -additional cost of producing an additional unit of output.

additional cost of producing an additional unit of output.

An insurance company is likely to attract customers like Clancy who want to purchase insurance because he knows better than the company that he is more likely to make a claim on a policy. What is the term used to describe the situation above? Selected Answer: adverse selection Answers: asymmetric information adverse selection economic irrationality moral hazard

adverse selection

Consider a used car market in which half the cars are good and half are bad (lemons). Suppose the average price of a good car is $9,000 and the average price of a lemon is $3,000. If rational buyers are willing to pay $6,000 for a used car, then sellers will agree to sell mostly lemons at this price. What is the term used to describe this situation? Selected Answer: adverse selectionAnswers: moral hazardeconomic irrationality an efficient market adverse selection

adverse selection

Which one of the following is an example of asymmetric information? Selected Answer: all of the aboveAnswers:A homeowner knowingly sells a house that has hidden electrical problems. A company hires an employee who has an addiction to sleeping pills. A supermarket repackages packages of stale meat and sells them. all of the above

all of the above

Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it? -profit maximization -allocative efficiency -productive efficiency -marginal efficiency

allocative efficiency

A dominant strategy is one that Selected Answer: always yields the highest benefit regardless of what the other players do.Answers: turns a negative-sum game into a positive-sum game.yields a position of the winner so long as the other participants act as planned. every participant in the game will follow. always yields the highest benefit regardless of what the other players do.

always yields the highest benefit regardless of what the other players do.

An increase in technology that enhances labor productivity will likely result in: Selected Answer: an increase in labor employment and an increase in the wage rate. Answers: a decrease in labor employment and a decrease in the wage rate. an increase in labor employment and a decrease in the wage rate. an increase in labor employment and an increase in the wage rate. a decrease in labor employment and an increase in the wage rate. employers using less labor and more capital while the wage effect is unknown.

an increase in labor employment and an increase in the wage rate.

An increase in the demand for orthodontic services leads to Selected Answer: an increase in the demand for orthodontists.Answers: an increase in the demand for orthodontists. lower prices for orthodontic care. an increase in the supply of orthodontists. a rise in the rates of dental insurance.

an increase in the demand for orthodontists.

Which of the following will lead to an outward shift in the firm's short-run demand for labor? Selected Answer: an increase in the price of outputAnswers: an increase in the price of outputa reduction in average consumer income less capital per unit of labor a decline in labor productivity

an increase in the price of output

A decrease in the wage rate causes Selected Answer: an increase in the quantity of labor demanded.Answers: an increase in the quantity of labor demanded. a leftward shift of the firm's labor demand curve. a decrease in labor's productivity.a rightward shift of the firm's labor demand curve.

an increase in the quantity of labor demanded.

A natural monopoly is most likely to occur in which of the following industries? -the diamond mining and marketing industry because one firm can control a key resource -the software industry because of the importance of network externalities -an industry where fixed costs are very large relative to variable costs -the pharmaceutical industry because the development and approval of new drugs through the Food and Drug Administration can take more than 10 years

an industry where fixed costs are very large relative to variable costs

To maintain a monopoly, a firm must have -few competitors. -marginal revenue equal to demand. -an insurmountable barrier to entry. -a perfectly inelastic demand.

an insurmountable barrier to entry.

Sunk costs Selected Answer: are costs that have already been paid and cannot be recaptured in any significant way.Answers: are costs that have already been paid and cannot be recaptured in any significant way. are costs that firms sink into marketing. are costs associated with repairing something you already own. are important for optimal decision making.

are costs that have already been paid and cannot be recaptured in any significant way.

Signaling takes place in markets with ________. Selected Answer: asymmetric informationAnswers: negative externalities positive externalities perfect competition asymmetric information

asymmetric information

If in the market for used bikes only sellers can distinguish between good quality and bad quality used bikes, then in that market there exists: Selected Answer: asymmetric information.Answers: asymmetric information. public information. perfect information. duopoly information.

asymmetric information.

Scenario: Jack and Jill are two siblings. Jack's father asked him how much he would offer to Jill if he gives him $50 as pocket money. He also told Jack that if Jill refuses the offer Jack makes, neither of them will get any money. Refer to the scenario above. A player should use ________ to play this game. Selected Answer: backward inductionAnswers:his dominated strategy backward induction mixed strategies forward induction

backward induction

Scenario: You walk onto a used-car lot to buy a car. You are willing to pay up to $15,000 for a car of good quality but you value a lemon at $0.You are now wondering whether you should trust the car dealer regarding the quality of the car. If you choose to trust him, he can choose to cooperate or defect. If you do not trust him, neither will he earn money nor will you be able to buy a car and use it. If you trust him and he cooperates, both of you will gain because the dealer values a good-quality car at $13,000. However, if he defects, he will earn $15,000 while you will not derive any satisfaction. Refer to the scenario above. You should use ________ to arrive at a decision. Selected Answer: backward inductionAnswers: mixed strategies forward induction backward induction prisoners' dilemma

backward induction

The first mover in an extensive-form game should use ________ to win the game. Selected Answer: backward inductionAnswers: mixed strategies pure strategies backward induction forward induction

backward induction

The marginal physical product of labor for the most recent worker hired by a company is 100. If this company were to hire an additional worker we would expect the marginal physical product of labor to Selected Answer: be below 100.Answers: remain at 100.be above 100 by a small amount. be below 100. be infinity.

be below 100.

Microsoft hires marketing and sales specialists to decide what prices it should set for its products, whereas a wealthy corn farmer in Iowa, who sells his output in the world commodity market, does not. Why is this so? -because Microsoft is large enough to hire the best people in the field -because Microsoft could potentially lose sales if it sets prices indiscriminately -because unlike Microsoft, the wealthy corn farmer is probably a monopolist -because the wealthy corn farmer is a price maker who sets his price independently of the market price, but Microsoft's optimal output depends on the price it selects

because Microsoft could potentially lose sales if it sets prices indiscriminately

As more output is produced, the marginal product of labor declines Selected Answer: because of the law of diminishing returns. Answers: if the firm's output supply curve is inelastic. if firms reduce the wage paid to labor. because the firm's marginal revenue declines. because of the law of diminishing returns.

because of the law of diminishing returns.

In the long run, the entry of new firms in an industry -harms consumers by forcing prices up above the level of total cost -benefits consumers by forcing prices down to the level of total cost. -benefits consumers by forcing prices down to the level of average cost. -harms consumers by forcing pricesup above the level of average cost

benefits consumers by forcing prices down to the level of average cost.

In a market with asymmetric information, ________. Selected Answer: buyers and sellers have different information about the good being tradedAnswers: buyers have very low bargaining power buyers set the price of the good being traded buyers and sellers have different information about the good being traded buyers tend to forget relevant information about the good being traded

buyers and sellers have different information about the good being traded

Adverse selection arises in the health insurance market because ________. Selected Answer: buyers have private informationAnswers: the number of buyers and sellers is largedifferent firms provide different insurance schemes buyers have private information sellers have private information

buyers have private information

In the market for health​ insurance, asymmetric information problems arise because Selected Answer: buyers of health insurance policies always know more about the state of their health than do the insurance companies.Answers: the sellers of health insurance require medical exams that give them more information than the buyers normally have. health insurance policies always include clauses that only the companies understand. buyers of health insurance policies always know more about the state of their health than do the insurance companies. privacy laws prevent the sellers of health insurance from asking buyers pertinent lifestyle questions.

buyers of health insurance policies always know more about the state of their health than do the insurance companies.

Suppose you have worked at a local sandwich shop for six months and now you plan to ask your manager for a raise. How can you convince your manager that you are worth more money than you are currently being paid? Selected Answer: by demonstrating to your manager the marginal revenue product your employment contributes to the sandwich shopAnswers: by threatening to quit if he refuses to give you a raise by convincing him that you are a dedicated worker and ready to take on more responsibilities at the shop by demonstrating to your manager the marginal revenue product your employment contributes to the sandwich shop by explaining to him how difficult it is for you to save enough money to go to college

by demonstrating to your manager the marginal revenue product your employment contributes to the sandwich shop

A truck driver getting paid more than a school teacher is due to ________. Selected Answer: compensating wage differentialsAnswers: compensating wage differentials discrimination in the job market glass ceiling in the job market differences in human capital

compensating wage differentials

Firms A and B can conduct research and development (R&D) or not conduct it. R&D is costly but can increase the quality of the product and increase sales. The payoff matrix is the economic profits of the two firms and is given above, where the numbers are millions of dollars. A's best strategy is to Selected Answer: conduct R&D regardless of what B does.Answers: conduct R&D only if B conducts R&D. not conduct R&D regardless of what B does.conduct R&D only if B does not conduction R&D. conduct R&D regardless of what B does.

conduct R&D regardless of what B does.

eBay has a seller reputation system to provide Selected Answer: consumers with a signal concerning seller quality.Answers:sellers a chance to signal other sellers concerning their quality. consumers with a signal concerning seller quality. a reduction in monopoly power. improvements in investor relations.

consumers with a signal concerning seller quality.

The value of the marginal product of labor is the ________. Selected Answer: contribution of an additional unit of labor to a firm's revenue Answers: contribution of an additional unit of labor to a firm's revenue extra output that is produced by hiring an additional unit of labor amount of output produced by the first unit of labor hired by a firm value of the output produced by all the workers in a firm

contribution of an additional unit of labor to a firm's revenue

The dollar value of the marginal product of labor is the: Selected Answer: contribution of an additional unit of labor to a firm's revenue. Answers: amount of output produced by the first unit of labor hired by a firm. extra output that is produced by hiring an additional unit of labor. value of the output produced by all the workers in a firm. contribution of an additional unit of labor to a firm's revenue.

contribution of an additional unit of labor to a firm's revenue.

Fixed costs are -not actually costs since they do not affect the decisions of a firm. -costs that increase at a constant rate when output increases. -costs that a firm incurs even when output is zero. -costs that never change.

costs that a firm incurs even when output is zero.

A game in which each player adopts its dominant strategy Selected Answer: could result in a Nash equilibrium.Answers:can never result in a Nash equilibrium. will not lead to an equilibrium. must be a cooperative game. could result in a Nash equilibrium.

could result in a Nash equilibrium.

Decision trees are commonly used to illustrate how firms make business decisions that depend on the actions of rival firms. A decision tree has boxes that contain points that represent when firms must make the decisions contained in the boxes. What are these points called? Selected Answer: decision nodesAnswers:either-or terminals option points decision options decision nodes

decision nodes

Consider a labor market in equilibrium. If the demand curve shifts to the left while the supply curve shifts to the left, then the number of workers hired in the market will ________. Answers: increase decrease remain unchangedeither increase or decrease or remain unchanged

decrease

Suppose that a perfectly competitive firm's marginal revenue equals $12 when it sells 10 units of output. If the marginal cost of producing the 10th unit is $14, to maximize its profit the firm should -do nothing because it is already maximizing its profit. -increase the price it charges for its product. -increase its production. -shut down. -decrease its production.

decrease its production.

In situations where new technologies are considered substitutes for workers, demand for these workers will ________, resulting in ________ in the equilibrium wage. Selected Answer: decrease; a decreaseAnswers: increase; an increasedecrease; an increase decrease; a decrease increase; a decrease

decrease; a decrease

Buyers in the market for used guitars are getting more pessimistic about the possibility of getting a good guitar. This will cause the price of used guitars to ________ and the percentage of good used guitars to ________. Selected Answer: decrease; decreaseAnswers: increase; decrease decrease; increase decrease; decrease increase; increase

decrease; decrease

A government report that makes working in a particular industry less attractive to workers will most likely ________ the number of workers hired in that industry, and ________ the wage paid to those workers. Answers: increase; decrease decrease; increase increase; increasedecrease; decrease

decrease; increase

In order to be useful as a signal in a market with information asymmetry, the signal must be ________. Selected Answer: difficult to obtain Answers: easily available inexpensive difficult to obtain unique

difficult to obtain

Marginal cost is calculated for a particular increase in output by -multiplying the change in total cost by the change in output. -dividing the change in total cost by the change in output. -multiplying the total cost by the change in output. -dividing the total cost by the change in output.

dividing the change in total cost by the change in output.

When a firm hires a worker for one hour, the marginal benefit to that firm equals the: Selected Answer: dollar value of the goods produced by that worker in one hour.Answers: dollar value of the goods produced by that worker in one hour. hourly wage of that worker. number of items the worker produces in that hour. price of each item that the worker produces in that hour.

dollar value of the goods produced by that worker in one hour.

The demand curve for a monopoly is -downward sloping. -undefined because it is the only supplier in the market. -upward sloping. -horizontal because the demand is perfectly elastic. -vertical because the demand is perfectly inelastic.

downward sloping.

A Nash equilibrium occurs if ________. Selected Answer: each player chooses strategies that are mutual best responsesAnswers: each player chooses strategies that are mutual best responses each player chooses only a pure strategy each player chooses only a mixed strategy each player chooses his or her dominant strategy

each player chooses strategies that are mutual best responses

In a simultaneous move game, ________. Selected Answer: each player has to make his choice without knowing his rival's choiceAnswers: there is always more than one Nash equilibrium each player has to make his choice after knowing his rival's choice there is always more than one dominant strategy equilibrium each player has to make his choice without knowing his rival's choice

each player has to make his choice without knowing his rival's choice

Assume a perfectly competitive firm is producing 300 units of output, P = $10, ATC of the 300 th unit is $8, marginal cost of the 300 th unit = $10, and AVC of the 300 th unit = $6. Based on this information, the firm is: -earning an economic profit of $600. -incurring a loss of $1,200. -earning an economic profit of $1,200. -incurring a loss of $600.

earning an economic profit of $600.

In a perfectly competitive market, a(n) ________ occurs because ________. -efficient outcome; total surplus is maximized -deadweight loss; firms minimize average minimum cost -deadweight loss; firms must be price takers -deadweight loss; total surplus is minimized -efficient outcome; the fair rules condition is met

efficient outcome; total surplus is maximized

Consider a labor market in equilibrium. If both demand curve and supply curve of labor shift to the right, then the wage rate in the market will ________. Selected Answer: decreaseAnswers: increase decrease remain unchanged either increase or decrease or remain unchanged

either increase or decrease or remain unchanged

In behavioral economics, we assert that: people sometimes do things because they think it is the fair thing to do, Selected Answer: even if there is no financial or other material benefit. Answers:but actions based on fairness must also be backed by real financial gains or other material or tangible benefit. sometimes expecting nothing in return, but most often expecting real gains also. even if there is no financial or other material benefit. but only if the net gains exceed the net losses.

even if there is no financial or other material benefit.

Average fixed costs will -rise then fall as output rises. -fall as output rises. -rise as output rises. -fall then rise as output rises.

fall as output rises.

Signals are believable when the cost of sending a ________ is known to be ________. Selected Answer: false signal; highAnswers: true signal; high false signal; lowtrue OR false signal; low true signal; low false signal; high

false signal; high

The perfectly competitive market structure benefits consumers because -firms are forced by competitive pressure to be as efficient as possible. -firms add a much smaller markup over average cost than firms in any other type of market structure. -firms produce high-quality goods at low prices. -firms do not produce goods at the lowest possible price in the long run.

firms are forced by competitive pressure to be as efficient as possible.

The study of how people make decisions in situations where attaining their goals depends on their interactions with others is called Selected Answer: game theory. Answers: Nash equilibrium.dominant strategy equilibrium. the prisoner's dilemma. game theory.

game theory

A perfectly competitive industry achieves allocative efficiency when -goods and services are produced at the lowest possible cost. -goods and services are produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it. -it produces where market price equals marginal production cost. -firms carry production surpluses.

goods and services are produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it.

A patent or copyright is a barrier to entry based on -large economies of scale as output increases. -ownership of a key necessary raw material. -widespread network externalities. -government action to protect a producer.

government action to protect a producer.

A perfectly competitive firm will maximize profits (or minimize losses) so long as price (marginal revenue) is: -greater than average fixed cost. -greater than average total cost. -greater than marginal cost. -greater than average variable cost.

greater than average variable cost.

A profit-maximizing monopoly's price is -greater than the price that would prevail if the industry was perfectly competitive. -not consistently related to price that would prevail if the market was perfectly competitive. -the same as the price that would prevail if the industry was perfectly competitive. -less than the price that would prevail if the industry was perfectly competitive.

greater than the price that would prevail if the industry was perfectly competitive.

Adverse selection occurs in the market for used cars because used car buyers Selected Answer: have less information than used car sellers. Answers: tend to have more accidents than new car buyers. have less information than used car sellers. have more information than used car sellers. have less incentive to maintain the value of their cars than new car buyers.

have less information than used car sellers.

Scenario: Phillip and Joseph are two classmates who represented their college in a quiz competition as a team and won $500. However, the winning amount was handed over by the organizers to their professor who had accompanied them. The professor gave the money to Phillip and asked him to offer any amount he wants to Joseph. If Joseph accepts the offer, the money would be split in the decided proportion between them. However, if Joseph rejects the offer, the money would go to their college fund. Refer to the scenario above. If Joseph prefers fairness to money, ________. Selected Answer: he will accept the offer if offered an equal share of the moneyAnswers: he will always accept any offer made to him Phillip will offer the minimum amount of money to Joseph he will accept the offer if offered an equal share of the money he will not accept any offer made by Phillip

he will accept the offer if offered an equal share of the money

Scenario: Phillip and Joseph are two classmates who represented their college in a quiz competition as a team and won $500. However, the winning amount was handed over by the organizers to their professor who had accompanied them. The professor gave the money to Phillip and asked him to offer any amount he wants to Joseph. If Joseph accepts the offer, the money would be split in the decided proportion between them. However, if Joseph rejects the offer, the money would go to their college fund.Refer to the scenario above. If Joseph prefers money to fairness, ________. Selected Answer: he will always accept any offer made to him Answers: he will not accept any offer made by Phillip Phillip will offer the lowest possible amount to Joseph he will always accept any offer made to him he will accept the offer only if Phillip pays him an equal share of the money

he will always accept any offer made to him

Firms use information on labor's marginal revenue product to determine Selected Answer: how many workers to hire at each wage rate.Answers:how much marginal product to produce at each wage rate. how much to produce at each output price. how many workers to hire at each wage rate. how much labor services to supply at each wage rate.

how many workers to hire at each wage rate.

Peyton is a personal trainer and works at several gyms in her neighborhood. Peyton's labor supply curve is shown above. Which of the following statements is true regarding Peyton's labor supply? i. Peyton is willing to supply more labor and give up leisure at wages between $50 and $75 per hour. ii. Peyton will not work for less than $30 per hour. iii. If the wage increases higher than $75 per hour, Peyton will choose to take more leisure. Selected Answer: i, ii and iiiAnswers: i, ii and iii ii and iii i and ii iii only ii only

i, ii and ii

The main difference between the short run and the long run is that: -in the short run all inputs are fixed, while in the long run all inputs are variable. -in the long run, the firm is making a constrained decision about how to use existing plant and equipment efficiently. -in the short run, at least one of the firm's input levels is fixed. -in the short run the firm varies all of its inputs to find the least-cost combination of inputs.

in the short run, at least one of the firm's input levels is fixed.

The ________ effect means that, other things remaining the same, the higher the wage rate, the less time people will spend working and the more time people will spend at leisure. Selected Answer: incomeAnswers:substitution labor price income

income

Suppose a perfectly competitive firm faces the following cost and revenue conditions: ATC = $25.50; AVC = $20.50; MC = $25.50; MR = $28.50. The firm should -continue to produce its current output. -shut down. -increase output. -decrease output.

increase output.

A decrease in the supply of labor could be caused by Selected Answer: increased wage rates in another industry.Answers: wage rates falling in another industry. better working conditions. increased wage rates in another industry. more job flexibility.

increased wage rates in another industry.

A public franchise -is a government designation that a private firm is the only legal producer of a good or service. -is a corporation that is owned by stockholders. -is an unregulated monopoly necessary for the public good. -results from ownership of a key raw material.

is a government designation that a private firm is the only legal producer of a good or service.

If a perfectly competitive firm's price is above its average total cost, the firm -is incurring a loss. -is breaking even. -is earning a profit. -should shut down.

is earning a profit.

If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost, the firm -should shut down. -is earning a profit. -is breaking even. -is incurring a loss.

is incurring a loss.

A monopoly firm's demand curve -is more inelastic than the demand curve for the product. -is inelastic at high prices and elastic at lower prices. -is perfectly inelastic. -is the same as the market demand curve.

is the same as the market demand curve.

A strategy is dominant if Selected Answer: it yields a payoff at least as large as that from any other strategy, regardless of the actions of other players. Answers: it yields a payoff at least as large as that from any other strategy, regardless of the actions of other players. it is part of a Nash equilibrium. the player cannot gain by changing strategy, assuming that no other player changes strategy. it yields a greater payoff than any other player receives.

it yields a payoff at least as large as that from any other strategy, regardless of the actions of other players.

The perfectly competitive firm cannot influence the market price because -its costs are too high. -its production is too small to affect the market. -a few buyers have control over the market price. -it has market power.

its production is too small to affect the market.

Assume that as the wage rate rises a worker's substitution effect for leisure is larger than the income effect. We can conclude that in this region, the worker's: Selected Answer: labor supply curve will be backward bending. Answers: labor supply curve will be backward bending. supply curve will be horizontal. labor supply curve will have the usual upward slope. labor supply curve will be completely inelastic.

labor supply curve will have the usual upward slope.

One consequence of imperfect information in the health insurance market is that: Selected Answer: less healthy individuals are more likely to buy insurance, driving up the cost of insurance for everyone. Answers: unhealthy individuals are denied health insurance. health insurance increases the demand for health care and so increases the price of health care. the most healthy individuals are more likely to buy insurance, leaving the least healthy without access to health care. less healthy individuals are more likely to buy insurance, driving up the cost of insurance for everyone.

less healthy individuals are more likely to buy insurance, driving up the cost of insurance for everyone.

Suppose a family-owned donut shop has $80,000 in total revenues, $36,000 in rent, and $20,000 in additional operating costs. The husband and wife work in the shop and pay no wages to themselves or others. The economic profits from the donut shop are -$80,000. -$24,000. -more than $24,000. -less than $24,000.

less than $24,000.

The long run refers to a time period -long enough for a firm to pay all of its creditors in full. -long enough for a firm to change the use of its variable inputs. -during which a firm is able to purchase all of its inputs, including its plant and equipment. -long enough for a firm to vary all of its inputs, to adopt new technology, and change the size of its physical plant.

long enough for a firm to vary all of its inputs, to adopt new technology, and change the size of its physical plant.

The rutabaga market is perfectly competitive. Research is published claiming that eating rutabagas leads to gaining weight and so the demand for rutabagas permanently decreases. The permanent decrease in demand results in a -higher price, economic losses by rutabaga farmers, and exit from the market. -lower price, economic profits for rutabaga farmers, and entry into the market. -higher price, economic profits for rutabaga farmers, and entry into the market. -lower price, economic losses by rutabaga farmers, and entry into the market. -lower price, economic losses by rutabaga farmers, and exit from the market.

lower price, economic losses by rutabaga farmers, and exit from the market.

Undesirable job features lead to a ________ labor ________. Selected Answer: lower; supplyAnswers: higher; supply lower; supplyhigher; demand lower; demand

lower; supply

If total costs are $50,000 when 1000 units are produced, and total costs are $50,100 when 1001 units are produced, we can conclude that -marginal costs are $100. -average total costs are $100. -average variable costs are $100. -average fixed costs are $100.

marginal costs are $100.

The decision rule for a profit-maximizing firm operating in a competitive market to hire an additional worker is the value of the: Selected Answer: marginal product of the worker should be equal to or greater than the wage rate. Answers: marginal product of the worker should be equal to or greater than the wage rate. marginal product of the worker should be equal to or lower than the wage rate. average product of the worker being hired should be lower than the wage rate. average product of the worker being hired should be equal to the wage rate.

marginal product of the worker should be equal to or greater than the wage rate.

Joseph starts driving with much less care after buying car insurance. His behavior is an example of ________. Selected Answer: moral hazard Answers: a domino effectadverse selection herd behavior moral hazard

moral hazard

Martha used to pay for her expenses with her own hard-earned money. She always tried to spend as little as she could. However, she started spending more when she received a scholarship. This behavior is an example of ________. Selected Answer: moral hazardAnswers: the free-rider problema pecuniary externality the paradox of thrift moral hazard

moral hazard

More people started building houses in earthquake-prone regions when the government of Polonia launched an insurance program for houses in this region. This is an example of ________. Selected Answer: moral hazardAnswers: moral hazard adverse selectiona positive externality herd behavior

moral hazard

If perfectly competitive firms are making an economic profit, then -the market must be in long-run equilibrium but cannot be in a short-run equilibrium. -new firms will enter the market. -some firms will exit the market. -the market might be in a long-run equilibrium but not a short-run equilibrium. -the market cannot be in either a short-run or a long-run equilibrium.

new firms will enter the market.

One interesting feature of a prisoner's dilemma game is that Selected Answer: non-cooperative behavior leads to lower payoffs than cooperative behavior.Answers:cooperative behavior leads to lower payoffs than non-cooperative behavior. non-cooperative behavior leads to lower payoffs than cooperative behavior. it was only valid before the industrial revolution. individuals behave irrationally when they behave non-cooperatively.

non-cooperative behavior leads to lower payoffs than cooperative behavior.

A Nash equilibrium occurs when ________. Selected Answer: none of the players can increase their payoffs by choosing a different strategyAnswers: none of the players can increase their payoffs by choosing a different strategy each player can increase his payoff by choosing a different strategy none of the players has a dominant strategy each player has a dominant strategy

none of the players can increase their payoffs by choosing a different strategy

Alejandro is a computer programmer employed by XYZ Tech Corp. He is Hispanic. He gets an offer from another company that is trying to lure him away from XYZ and is willing to pay him a higher salary than XYZ pays him. Alejandro asks his boss whether the company is willing to match the offer to keep him at XYZ. His boss says, "Don't let the door hit you on your way out." Why did the boss fail to match the other firm's offer? Selected Answer: not clear why XYZ did not match the other firm's offerAnswers: statistical discrimination compensating differential taste-based discrimination not clear why XYZ did not match the other firm's offer

not clear why XYZ did not match the other firm's offer

In order to identify their used cars as plums (high-quality), many used car dealers: Answers:raise the minimum price of lemons (low-quality). offer money-back guarantees.raise the minimum price of plums (high-quality). advertise their prices.

offer money-back guarantees

Consider a used car market in which half the cars are good and half are bad (lemons). A rational buyer in this market should Selected Answer: offer to pay a price somewhere between the price she would pay for a good car and the price she would pay for a lemon.Answers: offer to pay a price equal to the most she would pay for a good car. offer to pay a price somewhere between the price she would pay for a good car and the price she would pay for a lemon. offer to pay a price equal to the most she would pay for a lemon. save up and buy a new car.

offer to pay a price somewhere between the price she would pay for a good car and the price she would pay for a lemon.

A natural monopoly exists when -one firm can supply an entire market at a lower average total cost than can two or more firms. -a firm can engage in price discrimination. -the producers in an industry have formed a cartel. -diseconomies of scale exist in an industry. -a monopoly firm faces a horizontal demand curve.

one firm can supply an entire market at a lower average total cost than can two or more firms.

A best response is ________. Selected Answer: one player's optimal action choice taking the other player's action as givenAnswers: an action choice that always results in a zero payoff to the opponent one player's optimal action choice taking the other player's action as givenone player's optimal action choice irrespective of the action of the other player an action choice that results in equal payoffs to all the players in a game

one player's optimal action choice taking the other player's action as given

The highest-valued alternative that must be given up to engage in an activity is the definition of Selected Answer: opportunity cost.Answers:economic sacrifice. utility. opportunity cost. implicit cost.

opportunity cost.

Adverse selection in employment is more likely when: Selected Answer: people's abilities are difficult for potential employers to observe.Answers: people's abilities are difficult for potential employers to observe. people's abilities are easy to measure. everyone is equally qualified for the job. jobs require specific training.

people's abilities are difficult for potential employers to observe.

Because perfectly competitive firms are price takers, each firm faces a demand that is -highly elastic but never is it perfectly elastic. -unit elastic. -perfectly elastic. -perfectly inelastic. -highly inelastic but never is it perfectly inelastic.

perfectly elastic.

A game is called a simultaneous move game if ________. Selected Answer: players choose their actions at the same timeAnswers:one player chooses her action after the other player makes a move players choose their dominant strategies to play the game players choose their actions at the same time players choose mixed strategies to play the game

players choose their actions at the same time

In a Nash equilibrium, Selected Answer: players may or may not have dominant strategies. Answers: no players have a dominant strategy. the player with the dominant strategy will win. at least one player has a dominant strategy. players may or may not have dominant strategies. each player has a dominant strategy.

players may or may not have dominant strategies.

A Nash equilibrium is Selected Answer:reached when each player chooses the best strategy for himself, given the other strategies chosen by the other players in the group.Answers: an equilibrium comprising non-dominant strategies only.reached when each player chooses the best strategy for himself, given the other strategies chosen by the other players in the group. reached when an oligopoly's market demand and supply intersect. reached when each player chooses the best strategy for himself and for the group.

reached when each player chooses the best strategy for himself, given the other strategies chosen by the other players in the group.

A Nash equilibrium is Selected Answer:reached when each player chooses the best strategy for himself, given the other strategies chosen by the other players in the group.Answers: reached when an oligopoly's market demand and supply intersect. reached when each player chooses the best strategy for himself and for the group. an equilibrium comprising non-dominant strategies only.reached when each player chooses the best strategy for himself, given the other strategies chosen by the other players in the group.

reached when each player chooses the best strategy for himself, given the other strategies chosen by the other players in the group.

Which of the following is an implicit cost of production? -rent that could have been earned on a building owned and used by the firm -interest paid on a loan to a bank -wages paid to labor plus the cost of carrying benefits for workers -the utility bill paid to water, electricity, and natural gas companies

rent that could have been earned on a building owned and used by the firm

A dominant strategy ________. Selected Answer: results in a higher payoff irrespective of the strategy chosen by the other playerAnswers: results in a higher payoff irrespective of the strategy chosen by the other playeralways results in a lower payoff irrespective of the strategy chosen by the other player always results in zero payoff to the opponent always results in equal payoffs to all the players in a game

results in a higher payoff irrespective of the strategy chosen by the other player

A player has a dominant strategy when: Selected Answer: she has only one best response to every possible strategy of the other player.Answers: her chosen strategy gives her a lower payoff than the other player. she has only one best response to every possible strategy of the other player.she has many best responses to any strategy of the other player in the game. her chosen strategy matches the best response of other players in the game.

she has only one best response to every possible strategy of the other player.

One reason why adverse selection problems arise in health insurance markets is that Selected Answer: sick people are more likely to want health insurance than healthy people. Answers:the average age of citizens of the United States has increased in recent years, and will continue to increase over the next 20 to 30 years. As older citizens retire, more and more of their medical bills will have to be paid by younger workers. fewer men and women are choosing medical careers because of the increase in the cost of malpractice insurance. sick people are more likely to want health insurance than healthy people. because of advances in medical technology, people are living longer. These medical advances are costly and drive up the price of insurance for everyone.

sick people are more likely to want health insurance than healthy people.

You decide to carry a letter of recommendation from your college professor while going for your first interview. This is an example of ________. Selected Answer: signalingAnswers:speculating hedging sniping signaling

signaling

Sequential games are used to analyze Selected Answer: situations in which one firm acts and other firms respond. Answers: second-price auctions. firms that are subject to the prisoner's dilemma. situations in which one firm acts and other firms respond. cartels.

situations in which one firm acts and other firms respond

Sequential games are used to analyze Selected Answer: situations in which one firm acts and other firms respond. Answers: firms that are subject to the prisoner's dilemma. situations in which one firm acts and other firms respond. second-price auctions. cartels.

situations in which one firm acts and other firms respond.

If a typical firm in a perfectly competitive industry is incurring losses, then -some firms will exit in the long run, causing market supply to decrease and market price to fall, increasing losses for the remaining firms. -some firms will enter in the long run, causing market supply to increase and market price to rise, increasing profit for all firms. -some firms will exit in the long run, causing market supply to decrease and market price to rise, increasing profits for the remaining firms. -all firms will continue to lose money.

some firms will exit in the long run, causing market supply to decrease and market price to rise, increasing profits for the remaining firms.

If a firm offers higher starting salaries to Asian job candidates than to white job candidates because Asians as a group have higher SAT scores, this is an example of ________. Selected Answer: statistical discriminationAnswers:negative compensating wage differential taste-based discrimination positive compensating wage differential statistical discrimination

statistical discrimination

When expectations cause people to discriminate against a certain group, it is referred to as ________. Selected Answer: statistical discrimination Answers: preferential bias cultural discrimination statistical discrimination taste-based discrimination

statistical discrimination

Discrimination that occurs when someone assigns the properties of a group to a particular individual who is a member of that group is known as Selected Answer: statistical discrimination.Answers:taste-based discrimination. statistical discrimination. indirect discrimination. justifying discrimination.

statistical discrimination.

When expectations cause people to discriminate against a certain group, it is referred to as: Selected Answer: statistical discrimination. Answers:taste-based discrimination. preferential bias. implicit discrimination. statistical discrimination.

statistical discrimination.

In analyzing the decision to shut down in the short run we assume that the firm's fixed costs are -nonmonetary opportunity costs. -implicit costs. -capital costs. -sunk costs.

sunk costs.

In the long run, a perfectly competitive market will -supply whatever amount consumers will buy at a price which earns the market an economic profit. -supply whatever amount consumers demand at a price determined by the minimum point on the typical firm's average total cost curve. -produce only the quantity of output that yields a long-run profit for the typical firm. -generate a long-run equilibrium where the typical firm operates at a loss.

supply whatever amount consumers demand at a price determined by the minimum point on the typical firm's average total cost curve.

Economically rational means that consumers and firms Selected Answer: take actions that are appropriate to reach goals given available information.Answers: obtain full information prior to taking actions to reach goals. are realistic about the present but not necessarily the future.take into account monetary costs but ignore nonmonetary opportunity costs. take into account monetary costs and sunk costs. take actions that are appropriate to reach goals given available information.

take actions that are appropriate to reach goals given available information.

Discrimination that occurs because the discriminator dislikes another person's gender, race, or some other personal characteristic is known as Selected Answer: taste-based discrimination.Answers: taste-based discrimination. statistical discrimination. justifying discrimination. indirect discrimination.

taste-based discrimination.

A natural barrier to entry is defined as a barrier that arises because of -patents or licenses that exclude others from producing a good or service. -many firms producing the good and thereby allowing choice for all consumers. -anticompetitive practices by a firm that keep other firms from producing. -technology that allows one firm to meet the entire market demand at lower average total cost than could two or more firms. -one firm owning a key natural resource.

technology that allows one firm to meet the entire market demand at lower average total cost than could two or more firms.

Economists generally define the short run as being -that period of time in which at least one of the firm's inputs, usually plant size, is fixed. -any period of time less than six months. -any period of time less than one year. -that period of time in which all inputs are variable.

that period of time in which at least one of the firm's inputs, usually plant size, is fixed.

The demand for labor depends primarily on the additional output produced as a result of hiring an additional worker and Selected Answer: the additional revenue received from selling the output produced as a result of hiring an additional worker. Answers: the number of workers willing to produce the additional output. the payment made to the worker for producing the additional output. the elasticity of demand for the output produced by the worker. the additional revenue received from selling the output produced as a result of hiring an additional worker.

the additional revenue received from selling the output produced as a result of hiring an additional worker.

Marginal revenue is equal to: -price, but only if the firm is a price searcher. -the change in P x Q due to a one unit change in output. -the change in price divided by the change in output. -the change in quantity divided by the change in price.

the change in P x Q due to a one unit change in output.

A firm's primary interest when it hires an additional worker is Selected Answer: the extra revenue the firm realizes from hiring that worker.Answers: the extra revenue the firm realizes from hiring that worker. the cost of hiring the additional worker.whether or not the new worker gets along with the firm's existing workers. how the average output of the firm will be affected by this new worker.

the extra revenue the firm realizes from hiring that worker.

The income effect of a wage increase is observed when Selected Answer: the higher wage income causes workers to take more leisure and work less.Answers:leisure's higher opportunity cost causes workers to take less leisure and work more. the higher wage income causes workers to take less leisure and work more. the higher wage income causes workers to take more leisure and work less.leisure's higher opportunity cost causes workers to take more leisure and work less.

the higher wage income causes workers to take more leisure and work less.

Which of the following parties is likely to have the most information about the health of an individual who is trying to purchase a health insurance policy? Selected Answer: the individual who is applying for the health insurance policyAnswers: the individual who is applying for the health insurance policy the employer of the individual who is trying to purchase the health insurance policy the company that issues the health insurance policyAll parties in the health insurance market have access to the same level of information.

the individual who is applying for the health insurance policy

Applied to perfectly competitive labor markets, the marginal principle tells firms to hire workers until: Selected Answer: the marginal revenue product of the last worker hired equals the wage. Answers: the marginal revenue product of the last worker hired equals the wage. the price of the product equals the wage of the worker. average total costs are minimized. marginal productivity begins to diminish.

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

If a fire insurance company requires firms buying fire insurance to install automatic sprinkler systems, the insurance company is trying to reduce Selected Answer: the moral hazard problem.Answers: the moral hazard problem.the problem of adverse selection. sunk costs. asymmetric information.

the moral hazard problem.

When an entrepreneur invests his own financial capital in order to start a business -the opportunity cost of capital should be included in the economic cost of doing business. -the firm's economic profits will exceed its accounting profits. -the investment is treated as a fixed cost, so it should not be considered as a cost of doing business. -the accounting costs increase because the funds would otherwise have to be borrowed.

the opportunity cost of capital should be included in the economic cost of doing business.

If productive efficiency characterizes a market -the marginal cost of production is minimized. -firms produce the goods that consumers desire most. -the output is being produced at the lowest possible cost. -firms use the best technology available to produce the good.

the output is being produced at the lowest possible cost

The labor supply for an industry would decrease if Selected Answer: the percentage of the population from age 16 to 65 decreases.Answers: the percentage of the population from age 16 to 65 decreases. the wage rate falls. the government welcomes foreign workers into the country.a greater percentage of women want to work outside the home.

the percentage of the population from age 16 to 65 decreases.

A key aspect of the principal-agent problem is that Selected Answer: the principal cannot perfectly monitor the agent's actions.Answers: the principal can perfectly monitor the agent's actions. the output level does not depend on the agent's actions. the principal is always risk averse. the principal cannot perfectly monitor the agent's actions.

the principal cannot perfectly monitor the agent's actions.

If a doctor knows that an insurance company will pay for most of a patient's bill, the doctor has more of an incentive to require additional medical procedures and tests, even if the patient may not require them. This is an example of Selected Answer: the principle-agent problem.Answers: asymmetric information. the principle-agent problem. moral hazard. adverse selection.

the principle-agent problem.

The government of Eduland provided generous unemployment benefits to all the unemployed workers. However, the new government that came into power reduced the amount of unemployment insurance paid to each worker. This increased the average number of hours spent daily by unemployed workers in looking for jobs. This suggests that ________ exists in the labor market in Eduland. Selected Answer: the problem of moral hazardAnswers: a pecuniary externality a tragedy of the commons a positive externality the problem of moral hazard

the problem of moral hazard

If the marginal productivity of labor decreases, then Selected Answer: the quantity of labor demanded at every possible wage rate will be less.Answers: the quantity of labor demanded will not be affected.the quantity of labor demanded at every possible wage rate will be higher. the quantity of labor demanded at every possible wage rate will be less. the demand curve for labor will shift upward and to the right.

the quantity of labor demanded at every possible wage rate will be less.

A payoff matrix shows ________. Selected Answer: the return from each action that players can take in a gameAnswers:the different combinations of two goods that can be bought with a given income the return from each action that players can take in a game the various combinations of inputs required to produce a good the payment made to each factor of production for the production of a good

the return from each action that players can take in a game

For a perfectly competitive corn grower in Nebraska, the marginal revenue curve is -downward sloping. -vertical at the profit maximizing quantity of production. -U-shaped. -the same as its demand curve. -upward sloping.

the same as its demand curve.

For a firm in a perfectly competitive industry, the demand curve for its own product is -always above the marginal revenue curve. -the same as the marginal revenue curve. -vertical. -downward sloping.

the same as the marginal revenue curve.

What is behavioral economics? Selected Answer: the study of situations in which people act in ways that are not economically rationalAnswers: the study of how people behave in the face of scarcity the study of how people make decisions at the margin the study of how people make wealth-maximizing decisions the study of situations in which people act in ways that are not economically rational

the study of situations in which people act in ways that are not economically rational

If Molly Bee increases her work hours when her wage increases, then Selected Answer: the substitution effect of the wage increase outweighs the income effect.Answers: leisure is an inferior good to Molly.the income effect of the wage increase outweighs the substitution effect. the substitution effect of the wage increase outweighs the income effect. Molly is spending beyond her means.

the substitution effect of the wage increase outweighs the income effect.

If the equilibrium wage is below the actual wage: Selected Answer: the wage rate will fall.Answers: the demand for labor will increase.the demand for labor will decrease. the wage rate will rise. the wage rate will fall.

the wage rate will fall.

A teenaged babysitter is similar to a firm in a perfectly competitive industry in that, for both -fixed costs are lower than variable costs. -the implicit costs of production exceed the explicit costs of production. -there are many other suppliers of similar goods or services. -average costs of production do not change when their industry expands.

there are many other suppliers of similar goods or services.

A monopoly is characterized by all of the following except -there are no close substitutes to the firm's product. -the firm has market power. -there are only a few sellers, each selling a unique product. -entry barriers are high.

there are only a few sellers, each selling a unique product.

All of the following are ways by which existing firms can deter the entry of new firms into an industry except Selected Answer: threatening to raise prices.Answers: earning less than maximum profit.continuously producing new and improved products. advertising products aggressively. threatening to raise prices.

threatening to raise prices.

Average total cost is equal to -total cost divided by the level of output. -marginal cost plus variable cost. -total cost divided by the number of workers. -average fixed cost minus average variable cost.

total cost divided by the level of output.

Which of the following costs will not change as output changes? -average variable cost -total variable cost -marginal cost -total fixed cost -average fixed cost

total fixed cost

After learning about behavioral economics, it is clear that: Selected Answer: traditional theory does not explain all consumer decisions, but it sheds light on many of them.Answers: traditional theory does not explain all consumer decisions, but it sheds light on many of them. behavioral economics is useful only for a very narrow set of questions including behavioral economics in an economic model would add unnecessary complexity. we should dispense with the traditional economic theory. traditional theory would stay but take a second place behind behavioral economics.

traditional theory does not explain all consumer decisions, but it sheds light on many of them.

The simplest prisoners' dilemma is a game that, in part, requires Selected Answer: two players who are unable to communicate with each other.Answers: two players who are able to communicate with each other. two players who are unable to communicate with each other. an oligopoly with one very large firm. monopolistic competition.

two players who are unable to communicate with each other.

Scenario: Robert and Alice are participating in a reality show on television. Robert is offered an amount of $500 and told that he can keep the money provided he shares some of it with Alice. Robert can offer Alice as much or as little as he likes, but if Alice rejects his offer, neither of them will get to keep any money. Refer to the scenario above. This is an example of a(n) ________. Selected Answer: ultimatum gameAnswers: ultimatum game symmetric game zero-sum gameprisoners' dilemma

ultimatum game

Game theory is applicable to oligopoly behavior because oligopolists Selected Answer: use strategic behavior.Answers: use strategic behavior. are price takers.can only be profitable if they collude. ignore rival firms.

use strategic behavior.

A monopolist's profit-maximizing price and output correspond to the point on a graph -where average total cost is minimized. -where marginal revenue equals marginal cost and charging the price on the market demand curve for that output. -where price is as high as possible. -where total costs are the smallest relative to price.

where marginal revenue equals marginal cost and charging the price on the market demand curve for that output.

Worker discrimination occurs when Selected Answer: workers refuse to work with persons of a different race.Answers: employers pay different employees different wages based on race.customers refuse to buy products produced by a racially diverse workforce. workers refuse to perform risky tasks. workers refuse to work with persons of a different race.

workers refuse to work with persons of a different race.