Econ Exam 3

perfect price discrimination, the consumer surplus is

0

price discrimination leads to...

A) Increased quantities

declining output prices

Apple could hire more designers and sell updated versions of the iPhone more frequently, but they will have to cut their prices to get people to upgrade more often

social insurance

Programs in which eligibility is based on prior contributions to government, usually in the form of payroll taxes.

Nash Equilibrium

a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen

price discrimination

charging different prices to different consumers for the same good

first degree price discrimination

charging each individual customer a different price based on their willingness to pay (perfect price discrimination)

income effect

the change in consumption resulting from a change in real income

marginal product of labor

the change in output from hiring one additional unit of labor

game theory

the science that is useful to help the decision makersanalyze their options when an individual's best choice may depend on what other people choose and other people's best choicesmay depend on what the individual chooses

compensating differential

wage premium that compensates workers for adverse attributes of a job

substitution effect

when consumers react to an increase in a good's price by consuming less of that good and more of other goods

anti coordination game

when your best response is to take a different (but complementary) action to the other player

Monopoly

A market in which there are many buyers but only one seller.

Oligopoly

A market structure in which a few large firms dominate a market

coordination game

A type of game in which a Nash equilibrium occurs when each player chooses the same strategy; neither player can do better than matching the other player's strategy

According to what we learned in class, what is the main reason that perfect (first-degree)price discrimination is so rare? A) Finding everyone's willingness to pay is costly and difficult. B) Overcoming legal conflicts to charge each person differently is costly C) Not every person has a maximum willingness to pay for a good. D) Most consumers have identical preferences

A) Finding everyone's willingness to pay is costly and difficult.

3) Consumers who clip and redeem discount coupons ________. A) exhibit the same price elasticity of demand for a given product than consumers whodo not clip and redeem coupons B) exhibit a relatively higher price elasticity of demand for a given product thanconsumers who do not clip and redeem coupons C) exhibit a relatively lower price elasticity of demand for a given product thanconsumers who do not clip and redeem coupons D) cause total revenue to decrease for firms that issue coupons for their products

B) exhibit a relatively higher price elasticity of demand for a given product thanconsumers who do not clip and redeem coupons

Relative to a model of perfect competition, a monopolist produces A) The same quantity B) A higher quanitity C) A lower quantity

C) A lower quantity

Third-degree price discrimination for concessions at ball parks is not applied to adults andchildren because_____. A) children's demand for food is elastic and adults' demand for food is inelastic B) adults' demand for food is elastic and children's demand for food is inelastic C) there could be exchange of the products from children, who could buy them at alower price, to adults D) Adults would buy goods at a high price and give them to their children

C) there could be exchange of the products from children, who could buy them at alower price, to adults - requirement for successful price discrimination is that the good cannot easily betransferred. Otherwise, someone in the low-price group could buy it and then transfer itto someone in the high-price group. In this example, a child would be in the low-pricegroup (since we typically think that parents aren't willing to pay high prices for kids food,similar to how kids' menus at restaurants have lower prices)

Marginal revenue

Change in total revenue

rational rule for employers

Hire more workers if their marginal revenue product is greater than (or equal to) the wage

rational rule

If something is worth doing, keep doing it until your marginal benefits = marginal costs.

social safety nets, social insurance programs, and progressive tax systems are all types of income _____programs that have the impact of moving income distribution _____ equality a. redistribution; closer to b. replacement; further from c. redistribution; further from d. replacement; closer to

a. redistribution; closer to

perfect competition, consumer surplus

area between the demand curve and theprice level.

A characteristic of monopolistic competition that is not present in any other market structure is that there a. is only one seller and that seller holds a high level of market power. b. are many sellers and each produces its own version of the product. c. are a small number of sellers who have market power. d. are many sellers that produce identical products

b. are many sellers and each produces its own version of the product.

A coordination game exists when: a. the product or issue of the game concerns communication, such as phones or media. b. coordination is costless and easy, regardless of whether it is harmful. c. all players have a common interest in coordinating their choices. d. collusion created the market or situation from the start.

c. all players have a common interest in coordinating their choices.

Based on the Rational Rule for Sellers, how does a manager set price and quantity? If the company has no market power, the marginal cost _____ price. If the company has market power, the marginal cost is _____ thanprice. a. is less than; greater b. is greater than; less c. equals; less d. equals; greater

c. equals; less

Which of the following conditions is present for all sellers in a perfectly competitive market? a. All sellers have an equal and high level of market power. b. The product price varies across the sellers. c. The number of sellers is small d. All sellers are selling identical products.

d. All sellers are selling identical products.

When a seller has a high level of market power, the seller a. produces a product that is identical to the output of other companies in the market. b. is in a market with growing demand c. is one of many sellers selling in its market. d. can raise its price without losing many customers.

d. can raise its price without losing many customers.

labor-capital substitution

higher wages make machines cheaper, relative to labor

labor supply curve

individual's willingness to work at different wage levels

third degree price discrimination

practice of dividing consumers into two or more groups with separate demand curves and charging different prices to each group

total revenue

quantity x price

marginal revenue product

the change in total revenue associated with one additional unit of input

diminishing marginal product

the property whereby the marginal product of an input declines as the quantity of the input increases

Which of the following is NOT true about imperfect competition? a. Greater product differentiation decreases market power. b. A smaller number of sellers in a market increases market power. c. Imperfect competition among buyers gives them bargaining power. d. Sellers with market power can use independent pricing strategies.

a. Greater product differentiation decreases market power.

hurdle method

Offer lower prices only to buyers who are willing to overcome some hurdle

Labor Demand

The relationship between the quantity of labor demanded by firms and the wage.

Cartel

a formal organization of producers that agree to coordinate prices and production

perfect competition

a market structure in which a large number of firms all produce the same product; MC = Demand

monopolistic competition

a market structure in which many companies sell products that are similar but not identical

Monopsony

a market structure in which there is only a single buyer of a good, service, or resource; leads to lower wages