Econ final exam
The distribution of household income
A Lorenz curve is a graph that shows: The equity versus efficiency trade-off How many households are living in poverty The tradeoff between inflation and unemployment The distribution of household income
Is a straight line with a 45-degree angle
A Lorenz curve showing perfect equality in the distribution of income: Coincides with the horizontal axis Coincides with the vertical axis Is a straight line with a 45-degree angle Is a curve bowed to the southwest
Price of the input equals the marginal revenue product of the input
A competitive employer will hire inputs up to the point where the: Marginal product of the input reaches a maximum Price of the input equals the price of the output Price of the input equals the marginal product of the input Price of the input equals the marginal revenue product of the input
Wage Taker
A firm that hires labor in a purely competitive resource market is a: "Price maker" "Product taker" "Money maker" "Wage taker"
Monopsony
A market where there is only a single buyer is called a(n): Monopoly Monopsony Oligopoly Dominant firm
-$13
A monopolist can sell 20 toys per day for $8.00 each. To sell 21 toys per day, the price must be cut to $7.00. The marginal revenue of the 21st toy is: -$10 -$13 +$7 +$21
Agree with each other to set prices and output
Collusion refers to a situation where rival firms decide to: Compete aggressively against each other Cheat on each other Agree with each other to set prices and output Combine their operations and merge with each other
The monopolist produces a product with no close substitutes
One defining characteristic of pure monopoly is that: The monopolist is a price taker The monopolist uses advertising The monopolist produces a product with no close substitutes There is relatively easy entry into the industry, but exit is difficult
A price maker
One feature of pure monopoly is that the firm is: A producer of products with close substitutes One of several producers of a product A price taker A price maker
Ownership of essential resources
One major barrier to entry under pure monopoly arises from: The availability of close substitutes for a product Ownership of essential resources The price taking ability of the firm Diseconomies of scale
Education
One of the major causes of income inequality is differences in: Unemployment benefits Transportation Education Housing
Law of diminishing returns
The marginal revenue product of an input in a competitive market decreases as a firm increases the quantity of the input employed because of the: Law of diminishing returns Law of diminishing marginal utility Homogeneity of the product Free mobility of resources
Marginal revenue is less than average revenue
The non-discriminating pure monopolist must decrease price on all units of a product sold in order to sell more units. This explains why: There are barriers to entry in pure monopoly A monopoly has a perfectly elastic demand curve Marginal revenue is less than average revenue Total revenues are greater than total costs at the profit maximizing level of output
Higher wages must be paid to bid workers away from other opportunities
The reason that the supply curve for labor in a purely competitive market slopes upward is because: The wage rate paid to workers falls as more are hired The marginal product of labor falls as output increases Marginal resource cost rises as productivity increases Higher wages must be paid to bid workers away from other opportunities
Marginal cost = marginal revenue
Many people believe that monopolies charge any price they want to without affecting sales. Instead, the output level for a profit-maximizing monopoly is determined by: Marginal cost = average revenue Marginal revenue = average cost Average total cost = average revenue Marginal cost = marginal revenue
The increase in a firm's total cost caused by hiring one additional unit of an input
Marginal resource cost is: The increase in a firm's total cost caused by hiring one additional unit of an input A firm's cost of hiring one group of inputs, such as capital or labor The firm's demand curve for a productive resource Determined by the marginal physical product schedule for an input
Producing differentiated products
Monopolistic competition is characterized by firms: Producing differentiated products Making economic profits in the long run Producing at optimal productive efficiency Producing where price equals marginal cost
Marginal revenues that are less than price
Monopolistically competitive firms are similar to monopolies in that they have: High barriers to entry in their industry Close substitutes for their products Inelastic demand for their products Marginal revenues that are less than price
Considers the reactions of its rivals when it determines its pricing policy
Mutual interdependence means that each firm in an oligopoly: Faces a perfectly inelastic demand for its product Considers the reactions of its rivals when it determines its pricing policy Depends on the other firms for its inputs Depends on the other firms for its markets
Rises to reflect greater inequality
As the area between the Lorenz curve and diagonal gets larger, the Gini ratio: Rises to reflect greater equality Rises to reflect greater inequality Falls to reflect greater inequality Falls to reflect greater equality
An increase in product demand
As the baby boomers in America grow old, the demand for health-care workers increases. This would be an example of which determinant of labor demand? An increase in labor productivity An increase in product demand A decrease in the price of another resource An increase in the price of another resource
Price is greater than marginal cost
At the profit-maximizing level of output for a monopolist: Price is greater than marginal cost Price is greater than average revenue Average total cost equals marginal cost Total revenue is greater than total cost
2150
Industry Y is dominated by five large firms that hold market shares of 20, 20, 25, 25, and 10. The Herfindahl index for this industry is: 1560 2150 2340 3500
0.20
Which of the following Gini ratios would indicate the least amount of income inequality? 0.20 0.40 0.60 0.80
The widespread availability of news on the Web reduces the demand for newspaper workers
Which of the following decreases in labor demand is due to a change in product demand? An increase in the price of paper increases the cost of making books, thus decreasing the demand for bookbinders The widespread availability of news on the Web reduces the demand for newspaper workers An increase in the price of steel increases the cost of producing cars and trucks, thus decreasing the demand for automobile workers A decline in productivity in retailing decreases the demand for retail sales workers
With a loss
A monopolistically competitive firm is producing at an output level in the short run where average total cost is $4.50, price is $4.00, marginal revenue is $2.50, and marginal cost is $2.50. This firm is operating: With positive profits With a loss At the break-even point At a non-optimal level of output
Neither industry has significant barriers to entry
A monopolistically competitive industry is like a purely competitive industry in that: Each industry produces a standardized product Nonprice competition is a feature in both industries Neither industry has significant barriers to entry Firms in both industries face a horizontal demand curve
Marginal revenue product of the input is at least as much as the cost of hiring the input
A profit-maximizing firm should hire an input as long as the: Firm can increase its total revenue Price of the input doesn't exceed the price of the other inputs used in the firm's production Marginal revenue product of the input is at least as much as the cost of hiring the input Marginal revenue product of the input is greater than the marginal revenue product of other inputs the firm is using
Dominant Strategy
A strategy that is better than any alternative strategy - regardless of what the other firm does - is called a: Dominant strategy Nash strategy Positive-sum strategy Best strategy
Auto Workers
An example of derived demand in the auto industry is the demand for: New automobiles Used automobiles Auto workers Drivers' insurance
Can result from government regulation
Barriers to entry: Usually result in pure competition Can result from government regulation Exist in economic theory but not in the real world Are typically the result of wrongdoing on the part of a firm
The marginal revenue product (MRP) of labor will increase
If the price of a good increases, then in the market for the type of labor needed to produce this good: Employment will decrease The labor supply will increase The marginal product (MP) of labor will increase The marginal revenue product (MRP) of labor will increase
Decrease the units of the resource used in order to increase profits
If the price of a resource is greater than its marginal revenue product, the firm should: Charge a higher price for its product Make no change in the units of the resource used Increase the units of the resource used in order to increase profits Decrease the units of the resource used in order to increase profits
Marginal resource cost curve for a single competitive firm in the industry to shift up
If the wage rate in a purely competitive labor market increases, it will cause the: Marginal resource cost curve for a single competitive firm in the industry to shift down Marginal resource cost curve for a single competitive firm in the industry to shift up Labor supply curve for a single competitive firm to shift downward Labor supply curve for the industry to shift rightward
May be positive, negative, or zero
In the short run equilibrium, a monopolist's profits: May be positive, negative, or zero Are positive because of the monopolist's market power Are positive if the product's elasticity of demand is less than 1 Are positive if the product's elasticity of demand is greater than 1
Shift to the right
Suppose some firms exit an industry characterized by monopolistic competition. We would expect the demand curve of a firm already in the industry to: Shift to the left Shift to the right Become less elastic Remain the same since entering firms serve other customers in the market
Depends on the demand for the product it helps to produce
The demand for a productive resource is said to be "derived" because the demand for the factor: Depends on the demand for the product it helps to produce Depends on the demand for a complementary factor Is derived from the state of the economy Is derived from government policy
The annual data indicate inequality, but the two-year data indicate equality
Suppose that Jane earns $10,000 in year 1 and $15,000 in year 2, while Jim earns $15,000 in year 1 and $10,000 in year 2. Is there income equality for the two individuals? The annual data indicate equality, but the two-year data indicate inequality The annual data indicate inequality, but the two-year data indicate equality Both the annual and the two-year data indicate equality Both the annual and the two-year data indicate inequality
Total area below the diagonal
The Gini ratio is calculated by dividing the area between the Lorenz curve and the diagonal by the: Remaining area below the diagonal Total area below the diagonal Total area of the box or rectangle Remaining area of the box or rectangle
Degree of income inequality
The Gini ratio or Gini coefficient is a measure of the: Inflationary gap Recessionary gap Number of households that are classified as being poor Degree of income inequality
Overstated because it does not take into account income mobility
The degree of inequality in income distribution based on single-year data is: Understated even though it takes into account income mobility Overstated because it does not take into account income mobility Understated because it does not take into account income mobility Overstated even though it takes into account income mobility
The same as the industry's demand curve
The demand curve confronting a non-discriminating pure monopolist is: Horizontal The same as the industry's demand curve More elastic than the demand curve confronting a competitive firm Derived by vertically summing the individual demand curves for the buyers
Price less of a factor and product differences more of a factor in consumer purchases
The goal of product differentiation and advertising in monopolistic competition is to make: The firm allocatively efficient even if it is not productively efficient The firm productively efficient even if it is not allocatively efficient Price less of a factor and product differences more of a factor in consumer purchases Price more of a factor and product differences less of a factor in consumer purchases
Decide to increase advertising expenditures even if it means a reduction in profits
Under oligopoly, if one firm in an industry significantly increases advertising expenditures in order to capture a greater market share, it is most likely that other firms in that industry will: Pursue a strategy to reduce advertising expenditures to maintain profits Decide to increase advertising expenditures even if it means a reduction in profits Make no changes in advertising expenditures because advertising is effective in the short run, but not the long run Increase the price of the product to improve profits and then increase advertising expenditures
The wage rate the firm must pay varies directly with the number of workers it employs
Which of the following is characteristic of a labor market that is a monopsony? The type of labor available is relatively mobile from one industry to another The supply curve for labor lies above the marginal resource cost curve of the firm The wage rate the firm must pay varies directly with the number of workers it employs The firm's employment is a small portion of the total employment of that type of labor
