Econ Final

In economics, we assume that firms make decisions in order to:

maximize profit.

What is the opportunity cost of taking this exam?

the highest valued alternative that you gave up to prepare for and attend the exam

A demand schedule:

is a table representing the relationship between the price of a good or service and the quantity demanded.

A supply schedule:

is a table representing the relationship between the price of a good or service and the quantity supplied.

An expectation of a lower price in the future will:

decrease current demand.

If a good is inferior, an increase in income would shift the _____

demand curve leftward.

The marginal private benefit curve is also the:

demand curve.

Buyers bear a smaller incidence of the tax when:

demand is more elastic than supply.

The quantity of a good that consumers are willing and able to buy is best explained by _____

demand.

Extrinsic motivation is the:

desire to do something for its external rewards.

Intrinsic motivation is the:

desire to do something for the enjoyment of the activity itself.

Workers consider a company's _____ and not just the _____.

entire compensation package; annual salary

Which of the following is NOT a source of market failure?

excessive information

Of the following, which group has the fastest-growing population in the United States?

female heads of households

The producer surplus on a unit sold equals:

price minus marginal cost.

The gap between the average total cost (ATC) and average variable cost (AVC) curves represents:

average fixed cost.

When you are a seller who offers lower prices only to people who are willing to overcome some obstacle to get the lower price, you are using _____ to get consumers to reveal their reservation price.

the hurdle method

A supply curve typically slopes upward because _____

the opportunity cost of production increases as quantity supplied increases.

Implicit costs are:

the opportunity cost of the means of production.

A tax on sellers causes which of the following?(i) a leftward shift of the supply curve(ii) a decrease in quantity sold(iii) an increase in the price buyers pay

(i), (ii), and (iii)

Russia and Kazakhstan both produce horses and oil. If Kazakhstan is much more efficient than Russia in the production of horses and slightly more efficient than Russia in the production of oil, _____ can benefit from trading horses and oil with each other.

both countries

The key to using the cost-benefit principle is to think about _____ aspects of a decision.

both financial and nonfinancial

A furniture store owner allows its salespersons to lower a price by up to ten percent to gain a sale if the buyer appears price sensitive. The owner also instructs salespersons to confer with management about the possibility of higher discounts if needed to make a sale. This example of individually negotiated prices is a form of price discrimination known as

haggling.

Lena likes to buy vegetables at a farmer's market. Each week, she walks through the market to see what's available and compares prices offered by different sellers. She makes sure each seller knows that she is comparing prices and then buys from the one who gives her the best deal. Lena is practicing:

haggling.

Which of the following is MOST likely to be traded internationally?

hair gel

A firm characterized as a price-taker:

has no control over the price it pays, or receives, in the market.

The substitution effect describes the:

incentive to work more when the wage rises.

Asking "What else?" allows the _____ principle to be boiled down to a simple question.

interdependence

The principle that your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future is known as the _____ principle.

interdependence

A town on the Gulf Coast is battered by a massive hurricane that destroys most of its productive resources. The community's production possibilities frontier (PPF) would show an:

inward shift of the PPF.

Rent-seeking:

is a type of competition that leads to an undesirable outcome.

A monopoly:

is characterized by a single seller who produces a well-defined product for which there are no good substitutes.

A systematic risk is a risk that:

is common across the whole economy.

The most efficient outcome in a set of options is the one with the:

largest economic surplus.

If Joe says that nothing comes close to Pepsi, his demand for Pepsi is likely to be _____

relatively price inelastic.

When the price elasticity of demand is elastic, a consumer is:

relatively responsive to a change in price.

Firms are indifferent to changing prices when the price elasticity of demand is:

unitary elastic.

The supply curve for dorm rooms on a university campus is likely to be _____

vertical

(Table: U.S. International Trade in Goods and Services, 2016, in millions of dollars. Details may not equal totals due to seasonal adjustment and rounding.)In 2016, the United States was a net _____ of _____ million in goods.

importer; $751,051

When people focus on their comparative advantage and then trade for other things, they:

improve their standard of living or increase their leisure time.

Economists say that official poverty statistics do not accurately measure the true rate of poverty because the data fails to include:

in-kind transfers.

When someone can enjoy the benefits of a good without bearing the cost, the good:

is subject to the free-rider problem.

The three primary inputs are:

land, labor, and capital.

Dependencies between markets reflect the fact that

resources are spread across different markets.

A person who is __________ is likely to pay more for insurance to protect against financial loss than a person who is __________.

risk averse; a risk taker

Data on the distribution of income for the United States show that from 1970 through 2014, the share of income earned by the top quintile _____, and the share earned by the bottom quintile _____.

rose; fell

A first-mover advantage is the:

strategic gain from an anticipatory action that can force a rival to respond less aggressively.

Which of the following is an example of a trade cost associated with a U.S. citizen importing a sweater produced in India?

the cost of the tariff on imported sweaters from India

A market's deadweight loss is calculated as:

the economic surplus at the efficient quantity minus the economic surplus at the actual quantity.

Two events occur simultaneously in the market for automobiles: (1) an improvement in assembly line technology and (2) a recession in the economy that decreases consumers' income. Which of the following can be predicted about this market with certainty?

the equilibrium price will fall

The benefits that come from reallocating resources, goods, and services to better uses when trade occurs are called

the gains from trade.

A reservation price is

the highest price that a customer is willing to pay for a product.

A knowledge problem exists when

the information needed to make a good decision is not available to a decision-maker.

Beth is deciding whether to pick up more hours at work or to take a vacation. This decision best describes:

the labor-leisure trade-off.

The fundamental decision faced by workers is called:

the labor-leisure trade-off.

The highest price that Dara would be willing to pay for a particular vase is:

the marginal benefit she would receive from the vase.

The order in which you should apply the four core principles of economics is:

the marginal principle, the cost-benefit principle, the opportunity cost principle, the interdependence principle.

Christopher's Campground is the only campground located in Abilene, Texas. Christopher's Campground's demand curve is:

the market demand curve.

A price ceiling is:

the maximum price that a seller can charge in a market.

Elasticity measures _____

the responsiveness of decision makers to changes in price, income, and other variables.

As a discipline, economics is best described by which of the following?

the study of how to use scarce resources to satisfy unlimited wants and needs

The production possibilities frontier (PPF) shows:

the trade-off between the efficient production of two different goods.

A coordination game exists when:

all players have a common interest in coordinating their choices.

Complements-in-production

allows a business to produce goods together.

At what price does this market experience a surplus of 70 units?

$11

Which of the following is caused by a subsidy for buyers of a particular item?(i) a leftward shift of the demand curve(ii) an increase in quantity sold(iii) a rightward shift of the demand curve

(ii) and (iii)

Which of the following is an example of a quantity quota?

A city enforces zoning laws that restrict the number of housing units.

Which of the following items is an inferior good?

Discount stores

___________ exists when a person places more value on avoiding losses than attempting to realize gains.

Loss aversion

Which of the following is not true about income quintiles?

Only one in three households in the top quintile has anybody working at all

How can a company's hiring manager attract workers who are motivated to advance in their field?

Provide training.

The idea that society should produce another unit of a product if the marginal social benefit exceeds the marginal social cost is known as the:

Rational Rule for Society.

Which of the following statements is based on normative analysis?

We should protect the environment.

Using a compensating differential wage theory, why do some individuals earn more than others?

Workers need to earn more to be willing to accept dangerous working conditions.

An external benefit is:

a benefit accruing to bystanders.

When a market transaction has a beneficial effect on bystanders who were not involved in the transaction, this effect is called:

a positive externality.

In the text, the population is divided into _____ groups based on income, and each group is called _____ when data on the distribution of income in a country are presented.

five; a quintile

A tariff is a:

tax on imported products.

It's easy to determine if a firm is making long-run production decisions by looking at its cost structure because, in the long run, a firm does not have any:

fixed costs.

The _____ information that you have that is relevant to a decision, the _____ risk that is associated with the decision.

more; less

From an economic perspective, the outcome that yields the greatest economic surplus is the:

most efficient outcome.

The opportunity cost principle states that the true cost of something is the

next best alternative you have to give up to get it.

A strategic interaction that occurs only once is called a _____ game.

one-shot

An example of price discrimination is when:

out-of-state students pay more for the same education as in-state students.

If a firm expects lower prices in the future

it will increase supply today.

An economics conference is scheduled to take place in San Diego. Several thousand attendees from around the world are expected to arrive in San Diego for the conference. Which graph depicts what will happen in the market for hotel rooms in San Diego?

new demand ->

How is the economic surplus generated by a decision calculated?

It is the total benefits minus total costs arising from the decision.

Some employers are willing to provide job training for workers. However, an employer might require the worker to pay for the training when the training is:

a general skill that could be used in any job for any employer.

Who benefits from voluntary trade?

buyers and sellers

What theory would lead you to be suspicious of a job advertisement that reads: "Help Wanted! Fun and exciting job with excellent pay"?

compensating differentials

Monopolists:

enjoy market power for their specific product.

Two government-created barriers to entry are:

licensing and patent system/copyright law.

A good is characterized as _____ when one person's use of the good does not reduce another person's ability to use the same unit of the good.

nonrival

Price minus marginal cost equals the:

producer surplus of a unit sold.

Accounting profit is equal to:

total revenue minus explicit costs.

The price elasticity of demand helps determine the effect of price changes on a firm's _____

total revenue.

Risk spreading is:

transforming big risks into small risks to be spread over many people.

(Table: U.S. International Trade in Goods and Services, 2016, in millions of dollars. Details may not equal totals, due to seasonal adjustment and rounding.)What is the value of goods that the United States exported (in millions of dollars) in 2016?

$1,456,957

(Figure: Market for Logs) A quota of 10,000 logs forest wood per month is placed in the market that is shown in the figure. How much are buyers willing to pay after the implementation of the quota?

$20,000

Amanda Mendez goes to a local café and orders a sandwich. Her willingness to pay for that sandwich is $10. The price of the sandwich is $4. The cost to the cafe to produce that sandwich is $1. How much economic surplus does Amanda receive when she purchases the sandwich?

$6

(Figure: Tax on Seller) In the graph shown, the original equilibrium price is $50. A $6 tax is placed on the seller in this market. The economic burden of this tax on the buyer is $_____.

1

What is the equilibrium quantity in this market?

160 units

Which of the following market changes would lead to a shift of the demand curve from Old demand to New demand?

A fall in the price of a substitute product.

Which of the following is an example of a quota?

A government limits the amount of a product that can be sold in a market.

___________ occurs when those who collect welfare benefits are then discouraged from working.

A samaritan's dilemma

Ang can mow the lawn in two hours. Bill takes three hours to mow the same lawn. What can you conclude from this information?

Ang has an absolute advantage over Bill in mowing the lawn.

Which of the following situations is considered price discrimination?

Barnes and Noble offers books at a lower-than-market price to members, who must pay an annual fee.

__________ is the field of economics that studies how human psychology influences the decision-making process.

Behavioral economics

Which of the following is NOT a characteristic of social insurance programs?

Benefits are available only to the poor.

When trade is voluntary, who gains from it?

Both the seller and the buyer gain, although not necessarily equally.

Which of the following is NOT something companies try to achieve through price discrimination?

Create barriers to entry.

A bakery hires a baker who can make 15 cakes per day. The bakery then decides to hire a second baker who will use the kitchen at the same time as the first baker. The bakery finds that the second baker can produce only an additional nine cakes per day. What concept does this scenario illustrate?

Diminishing marginal product

Regardless of the price of Kit-Kats, Damien has decided to eat five Kit-Kats every day. Which of the figures shows Damien's daily demand curve for Kit-Kats?

Figure B

Refer to the accompanying figure. What event would cause the supply curve to shift out?

Firms entered the market.

Which graph shows the effect on the supply curve for new housing in Dubai, if economists predict a decrease in demand for new housing?

Graph B

(Figure: Market for Printing Paper) Which of the following graphs illustrates what we expect to see in the market for printing paper if the price of printing paper rises?

Graph C

People have different abilities for performing the same two tasks, and you want to identify who has a comparative advantage in one of the tasks. Which of the following is NOT one of the three steps for identifying, who has a comparative advantage in performing the selected task?

Identify which person can perform the selected task most quickly.

Which of the following statements describes the Coase Theorem?

If bargaining is costless, and property rights are clearly established and enforced, then externality problems can be solved through private bargaining.

Consider your decision to attend class each day or skip it. Which of the four core principles of economics applies to the notion that attending class will most likely help you understand the material better and perform well on future exams?

Interdependence principle

Jennifer expects the price of chewing gum to go up by 10 percent next week. Which of the following is the most likely result of such an expectation?

Jennifer's demand for chewing gum will increase during this week.

Which of the following is an example of a company practicing price discrimination?

Most passengers traveling on an airplane pay different prices for their tickets.

For fall 2021, some universities required that students get vaccinated against COVID-19 (unless they had a medical or religious reason not to) in order to enroll in classes. This is an example of:

None of the Above

San Francisco decides to remove a binding price ceiling on rail fares. Which of the following is likely to happen in the market?

Overcrowding on trains will go down.

Which of the following conditions will result in the firm making an economic profit?

P>ATC

Which of the following is NOT an example of the hurdle method of price discrimination?

Segmenting the market into identifiable groups with different prices.

Suppose the market for a good is initially in equilibrium. Which of the following is most likely to occur if both the demand for and the supply of the good increases during a particular point in time?

Suppose the market for a good is initially in equilibrium. Which of the following is most likely to occur if both the demand for and the supply of the good increases during a particular point in time?

How does price aggregate information?

The actions of many buyers and sellers impact the price in the market.

A new study discovers the health benefits of eating fish regularly. At the same time, some consumers decide to become vegetarians. What is the effect of these events on the equilibrium price and quantity in the fish market?

The change in both the equilibrium price and quantity is ambiguous.

Profit maximization occurs when:

a firm expands output until marginal revenue is equal to marginal cost.

Charging more for fast shipping than for slower shipping is an example of a retailer using _____ to create _____.

alternate versions; hurdles

A binding price floor is:

always above the equilibrium price.

A binding price ceiling is:

always below the equilibrium price.

Diminishing marginal benefit

can be observed in the downward slope of the demand curve.

A firm's inputs are also known as its:

factors of production.

The branch of economics that studies strategic decision making is called:

game theory.

Which of the following formats shows how a game plays out over time, with the first move forming the trunk, each subsequent choice creating a new branch, and the final leaves showing all possible outcomes?

game tree

The interdependence principle:

implies that buyers decisions are affected by many factors other than the price of an item.

In modern society, most goods are allocated by:

markets.

The supply of paintings by Van Gogh is most likely to be _____

perfectly inelastic because supply is limited.

The main role of markets is:

reallocating resources to better uses.

Overconfidence is the:

tendency to overrate the accuracy of your forecasts.

Cross-price elasticity measures the relationship between:

two goods and services.

The cross-price elasticity of demand is used to determine whether _____

two products are substitutes or complements.

The efficiency problem that results from market power is that the market:

underproduces.

A measure of the relative levels of satisfaction that consumers enjoy from the consumption of goods and services is called:

utility.

Variable costs are the costs that

vary with the quantity of output produced.

When workers of the same ability are not paid the same amount because of a group characteristic such as ethnic origin or age, we call this:

wage discrimination.

Which of the following is the best example of a variable cost in the short run?

wages for employees

Which of the following five scenarios illustrate markets in action?(i) You rent a book at the university bookstore.(ii) You bargain at a street stall.(iii) You mow your own lawn.(iv) You get a manicure at a nail salon.(v) You grow your own vegetables and consume them yourself.

(i), (ii), and (iv)

Amul Food Factory in India makes ice cream and produces processed and condensed milk. In the factory, the firm's employees use milk and sugar. The firm runs on electricity and purchases raw milk every day. Large robotic assembly lines fill and package the ice cream containers. Large industrial freezers store the ice cream. Which of the following are variable costs for Amul Food Factory?(i) The cost of the raw milk purchased from farmers.(ii) The cost of buying the robotic assembly lines.(iii) The cost of buying electricity.(iv) The cost of buying industrial freezers.(v) The cost of sugar.

(i), (iii), and (v)

Which of the following is caused by a subsidy for sellers of a particular item?(i) a leftward shift of the supply curve(ii) an increase in quantity sold(iii) a rightward shift of the supply curve

(ii) and (iii)

Assume that the market for nachos has only two suppliers: Firm 1 and Firm 2. According to this table, if the price of nachos is $6, the market will supply:

10 nachos.

Take a look at Spice King Burgers' supply curve for burgers. How many burgers will they supply at a market price of $1.50 per burger?

200 units

Refer to the market supply schedule for pizza in Table 4.2. When the price is $15, what is the quantity supplied in the pizza market?

28 million pizzas

Approximately what percentage of income is earned by the poorest 20% of households in the United States?

3.2%

Which criteria for market segmentation would be easiest to use for an online retailer?

Account address

Why do people make decisions with incomplete information?

Information is costly to obtain.

How does government regulation affect market efficiency?

Some regulations correct for market failure; other regulations cause inefficient outcomes.

Which of the following statements about a demand curve is true?

The demand curve for a good will not shift when price changes.

Which of the following is necessary for price discrimination to occur?

The firm is able to distinguish among groups of buyers easily.

Which of the following is an example of a negative externality?

When Fazio parks his big truck at the grocery store, people in the cars on each side of his parking space have a hard time opening their car doors.

Other things constant, which of the following is likely to bring about a movement along the supply curve for oranges?

a change in the price of oranges

Economists use money equivalents to compare costs and benefits because money is

a common measuring stick.

When price changes act as a line of communication between buyers and sellers, price is functioning as

a signal.

A binding price floor leads to:

a surplus.

An example of a weight-loss intervention is:

a) Education about the health benefits of maintaining a healthy weight

People gain consumer surplus when they purchase an item:

at a price below the value of the benefit they receive from the item.

Demand for a necessity, such as food, is _____

both income and price inelastic.

Monopolistic competition is like monopoly in that:

both industries represent price-making firms.

The Rational Rule for Sellers says that a seller should sell one more unit of an item if the price is:

greater than or equal to the marginal cost.

Price discrimination by charging different prices to different groups of people is called

group pricing.

Stores that are expected to perform better during recessions are those that sell

inferior goods.

The term ________ means "additional."

marginal

When the hurdle method is used to price a product across buyers,

only those who overcome the obstacle that the seller specifies will get a lower price.

Asking "Or what?" allows the _____ principle to be analyzed as a simple question.

opportunity cost

The area on a market graph that lies below the price and above the supply curve is equal to:

producer surplus.

Markets allocate

resources, goods, and services.

Barriers to entry:

restrict the entry of new firms into the market.

When Clayton starts working at his first full-time job out of college with a $60,000 salary, he is likely to buy more ________ and less ________.

sushi; canned tuna

The production function for bookshelves includes:

wood, nails, carpenters, saws, and hammers.

(Figure: Graph) Refer to the graph to answer the question. In the graph, the movement from point W to point P represents:

a decrease in demand.

Explicit costs are:

always paid out of pocket.

Which of the following is NOT a trade cost?

the cost of producing a good

What advantage does a game tree have over a payoff table in presenting data for players in a game that plays out over time?

The game tree allows a player to look forward and reason backward.

Which of the following is NOT a factor that can shift supply?

The price of the product.

(Figure: Graph) Refer to the graph to answer the question. In the graph, the movement from point P to point Q represents

a decrease in quantity demanded.

What two factors have to be balanced when developing poverty policies?

a desire to help the poor with a need for the poor to eventually become self-sufficient

What is a game tree?

a diagram that shows how a game plays out over time, with the first move forming the trunk, subsequent choices adding branches, and the final leaves showing all possible outcomes

The production function for automobiles includes:

a factory, an assembly line, workers, and robots.

A subsidy is a:

a government payment designed to encourage particular purchases or productive activities.

An externality is NOT:

a price change.

Insurance is:

a promise of compensation if a specified bad thing happens.

In a market graph, consumer surplus is the area:

above the price and below the demand curve.

On a market graph, producer surplus is the area that is:

above the supply curve and below the price.

To hedge is to:

acquire an offsetting risk.

When market forces lead to efficient production, each producer is _____, and the product is produced _____.

acting in self-interest; at the lowest possible marginal cost

When looking at a demand and supply graph, if a tax is implemented on a buyer, the vertical distance between the old and new demand curves at the new equilibrium quantity will be equivalent to the

amount of the tax.

A good that takes up a very large percentage of a consumer's budget will tend to have _____

an elastic demand.

A side effect of an activity that affects bystanders whose interests are not taken into account is known as:

an externality.

A trade cost is:

an extra cost incurred as a result of buying or selling a good abroad rather than domestically.

The movement from point M to point N represents:

an increase in quantity demanded.

Other things constant, which of the following would shift the supply curve of a good to the left?

an increase in the cost of an important resource used to produce the good

In games that play out over time, the phrase "look forward" means to:

anticipate the likely consequences of choices.

Suppose that in Fall 2022, VT made flu shots (which are free for people who have health insurance) available in classroom buildings where it would be easy for students to both remember to get a flu shot and convenient to get one. This is an example of:

c) A Nudge

When two or more firms set prices or quantities in unison, economists refer to them as a:

cartel.

The world demand curve slopes downward because, as the world price of a product falls:

consumers want to buy a larger quantity.

The world demand curve slopes downward because, as the world price of a product increases:

consumers want to buy a smaller quantity.

Asking "Benefit beat cost?" allows the _____ principle to be boiled down to a simple question.

cost-benefit

Your personal best interest is based on the _____, and society's best interest is based on _____.

costs and benefits you face personally; the costs and benefits of everyone

Given upward-sloping supply curve, all other things remaining constant, a decrease in demand will lead to a(n) _____

decrease in the equilibrium price.

In July 2012, it cost $125 to purchase a ticket to visit the parks at Disneyland for one day. A five-day pass to the same parks cost only $290. Disneyland charges less for the additional days because of:

diminishing marginal utility.

When marginal utility declines as consumption increases, the consumer is experiencing:

diminishing marginal utility.

If a firm's long-run average total costs increase as it increases its scale of production, the firm is experiencing:

diseconomies of scale.

_____ is a temporary mismatch between quantity supplied and quantity demanded as the market seeks equilibrium.

disequilibrium

A simultaneous game is one in which:

each player must choose without knowing the other player's choice.

If you are a seller making decisions according to the rational rule, you will:

earn producer surplus on all except the last unit sold.

A firm's accounting profit is always greater than its economic profit because:

economic profit considers implicit costs, which accounting profit does not.

A firm's economic profit is always less than its accounting profit because:

economic profit considers implicit costs, which accounting profit does not.

If a firm's average total costs decrease as it increases its scale of production, the firm is experiencing:

economies of scale.

Measurement of the official poverty level

includes cash transfers but not in-kind transfers

Behavioral economics is economic analysis that:

includes psychological factors in assessing how people make economic decisions.

If the number of consumers for a good increases, demand will ______

increase

(Figure: Market) Refer to the graph. Suppose that a binding price floor of $35 is removed. The number of consumers who are able to purchase the product will:

increase from 25 to 50.

Which of the following is NOT a reason for the increase in international trade over the past century?

increases in tariff rates across countries

If Good A and Good B are complements, then a decrease in the price of Good B _____

increases the demand for Good A.

In economics, _____ means incremental, additional, or extra.

marginal

One source of economic inefficiency from monopolistic competition is:

markup.

Estimating willingness to pay quantifies _____ costs or benefits associated with a choice.

nonfinancial

According to the cost-benefit principle, framing effects or how a choice is described, should

not affect a decision.

The substitution effect:

occurs when a consumer buys more of a good as a result of a relative price change.

Which one of the following pairs of goods is likely to have a positive cross-price elasticity of demand?

pancakes and waffles

Choose the term that is used for analyzing by this process: "Start by analyzing the last period of the game. Use this to figure what will happen in the second-to-last period, and keep reasoning backward until you can see all the consequences that follow from today's decision."

reasoning backward

A list of instructions that describe exactly how to respond in any possible situation is a:

strategic plan.

The marginal benefit of consuming an item is

the additional benefit from buying one more unit of that item.

Opportunity cost is defined

as the value of the best alternative not chosen

In 2011, Japan suffered a major earthquake and tsunami. Honda parts that were sourced from Japan could no longer be produced, which caused Honda to cut its production of cars. Which graph shows the effect of this shortfall?

Graph C

(Figure: Market for Apple Computers) Dell and Apple are competitors in the computer market. Which graph illustrates the effect of a rise in the price of Dell computers on the demand for Apple computers?

Graph D

Why would a seller choose the hurdle method instead of group pricing to price discriminate?

The seller cannot find a verifiable, hard-to-change characteristic on which to base the group segmentation.

A negative externality is:

a side effect of an activity when the side effect harms bystanders.

The cost-benefit principle states that a decision should be pursued only if the

benefits are greater than the costs.

The term "gains from trade" means the

benefits that come from reallocating resources, goods, and services to better uses.

Argentina and Chile both produce copper and timber. If Chile produces copper much more efficiently than Argentina and timber slightly more efficiently than Argentina, _____ can benefit from trading copper and timber with each other.

both countries

If people have more time to adjust to a price change, the price elasticity of demand for that good is likely to _____

increase.

Which of the following is caused by a subsidy for sellers of a particular item?(i) an increase in supply(ii) an increase in quantity sold(iii) a leftward shift of demand curve

(i) and (ii)

Which of the following is true in long-run equilibrium for both a competitive market and monopolistic competition?

Economic profit is zero.

Which of the following is NOT a result of an efficient market?

Economic surplus is minimized to reduce waste.

A __________ agreement among rival firms will most likely specify the price each firm will charge and the quantity each firm will produce/sell.

collusive

Temporary Assistance for Needy Families and Supplemental Security Income are

cash transfers for income assistance

Price is functioning as an incentive when a price change

causes buyers and sellers to change their behavior.

Perfect price discrimination occurs when a firm is able to:

charge each buyer the highest price she or he is willing to pay for the good.

If a good is normal, an increase in consumers' income would shift the _____

demand curve rightward.

In deciding how many segments to divide its market into, a company should look for ways to identify clear segments that have _____ demand.

distinctly different

Nerida Kyle can either commute to work using a bus or purchase a new car. The bus fare each way is $2. Nerida works five days a week for 50 weeks a year. Based solely on the benefit of avoiding the cost of her bus tickets, Nerida should purchase a car if the cost of the car is _____ than _____ per week.

less; $20

Pay-for-performance:

links the incomes your workers earn to their performance.

One thing that makes monopolistic competition similar to perfect competition is that, in the:

long run, both will earn zero economic profit.

In behavioral economics, the status quo bias is often accompanied by ___________, which exists when a person places more value on avoiding losses than attempting to realize gains.

loss aversion

Economists generally assume that people make:

predictable, repeatable decisions that can be modeled.

People who are risk averse:

prefer a sure thing over a gamble with a higher expected value.

An appliance store holds a week-long sale on refrigerators every summer, and on stoves every fall. This is an example of a seller using _____ to achieve price discrimination through _____.

price fluctuation; the hurdle method.

What type of good is rival and excludable?

private goods

A firm can be identified as practicing price discrimination when:

producers set different prices for distinct groups of consumers, despite selling identical products to each group.

During the Great Recession of 2007-2009, unemployment shot up and a lot of people lost their jobs. All over the United States, people worried about job security. Which of the following do you think happened as a result of the Great Recession?(i) Consumers ate out less often.(ii) Consumers purchased fewer higher-end vehicles.(iii) Purchases of new housing went down.(iv) Consumers took fewer vacations outside the United States.

(i), (ii), (iii) and (iv) are all correct.

If an increase in price from $1 to $2 per unit leads to an increase in quantity supplied from 20 to 100 units, then the value of the price elasticity of supply is _____

2.

Which of the following statements regarding the basic economic problem of scarcity is correct?

The problem will exist as long as resources are available in limited amounts.

When drawing a production possibilities frontier, all of the following are usually assumed except one. Which is the exception?

The quantity of resources is rapidly growing.

Which of the following is most likely to shift the current supply curve of a good to the right?

an improvement in the technology used in the good's production

In a voluntary economic transaction between a buyer and a seller, _____ can earn economic surplus from the transaction.

both the buyer and the seller

Nita is a devoted Coca-Cola consumer, whereas Becky can drink either Coca-Cola or Pepsi products. Nita's demand for Coca-Cola will be relatively more ________, while Becky's demand will be relatively more ________.

inelastic; elastic

Diminishing marginal benefit:

is when buying an additional item yields a smaller marginal benefit than the previous item.

Juan McDonald is willing to pay $600 for a new iPad. Apple (the producer of iPads) is selling a new iPad for $700. It costs Apple $400 to produce this iPad. A voluntary economic transaction between Juan and Apple _____ occur because ____ would be better off due to the transaction.

will not; only Apple

Inferior goods have an income elasticity of demand that is _____

negative

Microeconomics is the study of _____

the economic behavior of individual decision makers.

(Figure: Market for TVs) According to the figure, the equilibrium world price of TVs is:

$500.

(Figure: Market for TVs 2) According to the figure, if there is international trade in this market, and the world price of a television is $500, buyers and sellers will make exchanges at a price of _____ because buyers will refuse to pay _____ than the world price.

$500; more

What are the equilibrium price and quantity?Price Quantity Quantityper Demanded SuppliedPizza per week (millions) per week (millions)$10 10 30$8 15 25$6 20 20$4 25 15$2 30 10

$6 and 20 million pizzas

What is quantity supplied at a price of $6?Price Quantity Quantityper Demanded SuppliedPizza per week (millions) per week (millions)$10 10 30$8 15 25$6 20 20$4 25 15$2 30 10

$6 and 20 million pizzas

Portia produces and sells headbands. Her marginal cost for one headband is $6, and her average cost is $4. She gains producer surplus only when she sells headbands at a price above:

$6.

Lauren owns a bakery. Her total costs are $150,000 per year, and her variable costs are $85,000. This means that her fixed costs are:

$65,000.

Ralph owns a small pizza restaurant, where he works full-time in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Ralph could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His total explicit costs for the year were:

$66,000.

Lauren is the owner of a bakery that earns 0 (zero) economic profit. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her total explicit costs were:

$92,000.

The combination of Good X and Good Y that will maximize your utility will have which of the following properties?

(MU_x/P_x)=(MU_y/P_y)

A subsidy is(i) a negative tax.(ii) a tax rebate given to those who make a specific choice.(iii) a payment made by the government to those who make a specific choice.

(i) and (iii)

A supply curve(i) plots the quantities a seller is willing to sell at different prices.(ii) shows the total cost to the seller.(iii) shows rising marginal costs.(iv) shows rising fixed costs.

(i) and (iii)

Which of the following can a government use to change the quantity traded in a market?(i) quotas(ii) binding price floors(iii) binding price ceilings(iv) taxes

(i), (ii), (iii), and (iv)

A tax on buyers causes which of the following?(i) a leftward shift of the demand curve(ii) a decrease in quantity sold(iii) an increase in the price buyers pay

(i), (ii), and (iii)

Lauren owns a bakery that produces, among other things, wedding cakes. She currently has 5 employees; with 5 employees, her bakery can produce 7 wedding cakes per day. If she hired a sixth employee, she'd be able to produce 9 wedding cakes per day. Therefore, the marginal product of the sixth employee is __________ wedding cake(s).

2

(Figure: Kenyan Labor Market) The government of Kenya implements a minimum wage of 15,000 Kenyan shillings per month. After the implementation of the wage, _____ workers are hired.

30,000

When people focus their efforts, on the tasks they have a comparative advantage in, what will happen to output?

More of all goods will be produced than if everyone produced everything for themselves.

How does coupon clipping allow for price discrimination?

One price is charged to people who put forth the effort to use the coupon, while another price is charged to consumers for whom the marginal cost of finding and using the coupon is greater than the marginal benefit of a lowered price.

Which of the following statements is TRUE regarding comparative advantage and absolute advantage?

People can have a comparative advantage without having an absolute advantage in a task.

Which of the following personnel policies would help your company's hiring manager attract the best workers?

Reward productivity.

If the price rises to $10, what will happen?Price Quantity Quantityper Demanded SuppliedPizza per week (millions) per week (millions)$10 10 30$8 15 25$6 20 20$4 25 15$2 30 10

There will be a surplus of 20 million pizzas and the price will fall.

_____ is a problem in markets where companies exercise market power and it is resolved when companies practice price discrimination.

Underproduction

Which of the following is a downside for country that reduces its barriers to trade?

Unemployment in the sectors in which the country does not have a comparative advantage will likely increase.

What is a significant difference between a union job and a non-union job in terms of pay?

Union jobs pay more than non-union jobs because of the threat of a strike.

In the graph, the movement from point J to point K must have been caused by:

a fall in the price of the item.

When goods are allocated in a way that creates the largest economic surplus:

efficient allocation has been achieved.

Price discrimination allows businesses to make additional profits and allows markets to work more:

efficiently.

Which of the following is both a shift in supply and a shift in demand?

expectations of future prices

If you need to make a decision and all the information needed to make a good decision is not available, then you:

have a knowledge problem.

Markets allocate goods to those with the:

highest marginal benefit.

Welfare benefits

may do of all of the following

A prediction market is a market where:

payoffs are linked to whether an uncertain event occurs.

Raul works at a factory that produces wooden benches. The four main tasks are cutting the wood, constructing, sanding, and staining. Out of all the workers, Raul enjoys cutting the most, is the slowest at constructing, has the lowest opportunity cost for sanding, and is the fastest at staining. If his manager wants to maximize factory output, he will assign Raul to

sanding.

Rational choice takes time and requires information, but time and information are themselves ____.

scarce

Opportunity cost arises from the fundamental economic problem of

scarcity.

According to the law of demand, all other things being equal,

the quantity demanded falls when the price rises, and the quantity demanded rises when the price falls.

When the price of an hour of tutoring increases,

the quantity demanded for tutoring decreases.

(Figure: Market for TVs) According to the figure, at a world price of $600:

the quantity supplied exceeds the quantity demanded, and there is downward pressure on the world price.

The law of supply states that, all other things being equal,

the quantity supplied falls when the price falls, and the quantity supplied rises when the price rises.

When plotting a supply curve

the quantity supplied goes on the horizontal axis.

A shortage occurs whenever:

the quantity supplied is less than the quantity demanded.

When comparing individuals' wages, what effect do differences in their levels of education and training have?

Education and training can partially explain why some individuals earn higher wages than others.

Which of the following statements is TRUE regarding economic efficiency?

Efficient outcomes rarely make everyone happy.

Which of the following is NOT true of the incidence of poverty in the United States?

Elderly people are more likely than other age groups to be in poverty.

Why would the government allow companies to buy and sell permits that allow companies to emit specified amounts of pollutants?

It ensures that emissions reductions are primarily undertaken by firms that can reduce emissions at a lower cost than others can.

What is social insurance?

It is government-provided financial funding to households to compensate for bad outcomes such as unemployment, illness, disability, or outliving their savings.

What institution allows people to gain access to others who have different comparative advantages without meeting them or communicating directly with them?

Markets

What is the function of the markets?

Markets reallocate resources, goods, and services to better uses.

Which of the following is an example of an in-kind transfer?

Martin receives housing from the government due to his low income.

In a market system, public goods would:

be underproduced.

Anchoring bias is the tendency to:

begin with an anchor, or starting point, and insufficiently adjust from there.

Refer to the accompanying figure. A firm would be suffering a loss but still be producing if the price is:

below $5 but above $4.

Joshua Murphy is planning on studying late into the night for his economics exam. How many cups of coffee should he buy tonight? Joshua should keep buying coffee throughout the evening until the marginal:

benefit of purchasing one more coffee equals the marginal cost.

When trade is based on comparative advantage

both trading partners end up better off.

Whenever consumers make decisions without perfect information, the decision reflects:

bounded rationality.

Which of the following has the least elastic demand?

breakfast cereal

The economic burden of a tax is the:

burden created by the change in after-tax prices faced by buyers and sellers.

You have an absolute advantage in producing a product if you:

can produce the product using the fewest inputs.

Patents and copyrights can:

create strong incentives to develop new drugs.

Which of the following statements is true about utility?

Some products produce more utility than others.

What three conditions must be present before a company can price discriminate?

The company can identify how much each customer is willing to pay; the product cannot be resold; the company has market power.

The cross-price elasticity of demand between pancakes and waffles is positive. This indicates all of the following except one. Which of the following is the exception?

The demand for pancakes and the demand for waffles are price elastic.

You are studying the international market for coffee. The world production of coffee beans increases, and at the same time, consumers worldwide start favoring tea over coffee. What is the effect on the equilibrium price and the equilibrium quantity in the coffee market?

The equilibrium price falls, and the change in the equilibrium quantity is ambiguous.

Which of the following is NOT a way that the government can intervene in markets?

The government can stop the forces of demand and supply from working in markets.

Kroger offers a discounted price on bottles of soda if customers buy four or more bottles. What kind of price discrimination strategy is this?

The hurdle method

Zephyr Appliances sells the same stove to customers at two different prices. The higher price is for buyers who get top-notch customer service. The lower price is for those who forgo customer service. This is an example of what kind of price discrimination?

The hurdle method

As a part of a market research project, you survey six food trucks across the city to gather data on how many meals they would plan to sale at various prices. The data you collect is in the accompanying table. What is the change in the total supply of meals in your survey when the price increases from $8 per meal to $9 per meal?Quantity of Meals Supplied Per WeekPrice Mario's Curbside Chuckin' Clouds Dan's La Jefa Jamaican$6.00 100 150 125 200 100 160$7.00 120 180 150 220 120 190$8.00 140 210 175 240 150 220$9.00 160 240 200 260 190 250$10.00 180 270 225 280 250 280

The quantity supplied rises by 165.

How would a growing Latino population affect the demand for Latino foods?

The supply curve for Latino foods will shift right.

Paper producers can manufacture both printing and drawing paper. What effect would rising prices for printing paper have on the market for drawing paper?

The supply of drawing paper will decrease.

Which of the following illustrates a positive externality?

The value of Maria's house rises when the city builds a park nearby, enhancing her view.

How does the level of income inequality in the United States compare to that in other countries?

There is greater income inequality in the United States when compared to other developed countries, and less in the United States when compared to less-developed countries.

Which of the following conditions is a requirement for price discrimination?

There is no reselling allowed in the market.

A monopolistically competitive market consists of many sellers, an oligopoly consists of __________ seller(s), and a monopoly consists of __________ seller(s).

a few; one

An import quota is:

a limit on the quantity of a good that can be imported.

How is opportunity cost illustrated?

a move from point B to point C

When a good is nonrival and nonexcludable, the good is referred to as:

a public good.

At Trader Joe's, the price of chocolate chip cookies falls. As a result, you would expect to see

a rise in the quantity demanded of chocolate chip cookies.

A binding price ceiling leads to:

a shortage.

Efficient outcomes in markets are NOT dependent on:

advanced technology.

The normal life-cycle pattern of income reflects differences in earnings based on

age and education

Representativeness bias is the tendency to:

assess the likelihood that something belongs in a category by judging how similar it is to that category.

You have a comparative advantage if you can complete a task:

at a lower opportunity cost than anyone else.

Lauren owns a bakery that produces, among other things, wedding cakes. She currently has 7 employees; with 7 employees, her bakery can produce 12 wedding cakes per day. If she hired an eighth employee, she'd be able to produce 16 wedding cakes per day. Therefore, the marginal product of the eighth employee is __________ wedding cake(s).

4

(Figure: Leonard's Demand for Pecan Pie) Look at Leonard's weekly demand curve for slices of pie. How many slices of pie is Leonard willing to buy at $3 per slice?

5 slices

(Figure: Market) A quota of 10,000 logs of forest wood per month is placed in the market that is shown in the figure. The equilibrium quantity sold in the market before the implementation of the quota was _____ logs.

50

(Figure: Market) A quota of 25 units is placed on the market that is shown in the figure. The equilibrium quantity sold in the market before the implementation of the quota was _____ units.

50

As part of a market research project, you survey six random people to see how much gas per week they would buy at various prices. The data you collect is in the accompanying table. What is the total demand for gasoline at $2.50 per gallon in your survey?Quantity of Gallons of Gas Demanded Per WeekPrice Marty Zain Doc Mikael Zoya Amirah$1.50 10 15 6 20 20 6$2.00 8 12 3 18 19 5$2.50 6 9 1 14 17 4$3.00 4 6 0 10 15 3$3.50 2 3 0 4 12 1

51 gallons

(Figure: Market for TVs 2) According to the figure, if there is international trade in this market, and the world price of a television is $400, the quantity demanded is _____, and the quantity supplied is _____ at the world price.

80,000; 20,000

Which of the following lists only the factors that would cause a decrease in the supply of an item?

A rise in input prices; a decrease in the number of sellers in the market; a rise in the price of a substitute-in-production.

Which of the following market changes would lead to a shift of the supply curve from Old supply to New supply?

An increase in the price of an input used in production

Marginal utility:

is the additional satisfaction derived from consuming one more unit of a good or service.

The consumer optimum:

is the combination of goods and services that maximizes utility for a given income.

Globalization:

is the increasing economic, political, and cultural integration of different countries.

A nonexcludable good is a good in which:

it is difficult to prevent someone from using or having access to the good.

Skills only useful in a job with one employer are classified as _____ skills.

job-specific

The three primary factors of production are:

land, labor, and capital.

Which of the following is NOT an argument for limiting international trade? An increase in international trade may:

lead to economic growth through specialization in comparative advantages.

Which of the following is a term economists use to explain why specific industries can become more efficient over time?

learning by doing

Nerida Kyle could either commute to work via Uber or purchase a new car. The average cost of her one-way Uber trip is $15. Nerida works five days a week for 50 weeks a year. Based solely on avoiding the cost of an Uber, Nerida should purchase a car if the cost of the car is _____ than _____ per week.

less; $150

Countries benefit from trade by exporting goods in which their opportunity costs are relatively _____ and importing goods in which their opportunity costs are relatively _____.

low; high

Goods with an income elasticity of demand greater than 1 are called _____

luxuries.

Firms engage in price discrimination primarily to:

make additional profits.

Which of the following lists the three main characteristics of a competitive market?

many buyers and sellers, similar products, easy entry into the market

A monopolistically competitive market is characterized by:

many small sellers selling a differentiated product.

Asking "One more?" allows the _____ principle to be analyzed as a simple question.

marginal

Economists believe that optimal decisions are made up to the point where:

marginal benefits are equal to marginal costs.

Following the rational rule, the economic surplus is maximized when

marginal benefits equal marginal costs.

When the average total cost curve is at its minimum, we know that the:

marginal cost curve intersects the average total cost curve.

The change in total cost given a change in output is also known as:

marginal cost.

The efficient market quantity is the quantity where _____ equals _____.

marginal cost; marginal benefit

The cost paid by the seller in producing one additional unit of output is known as the _____ cost.

marginal private

Firms in a monopolistically competitive market structure maximize their profit by producing an output where:

marginal revenue equals marginal cost.

All firms, no matter what type of firm structure they are producing in, make their production decisions based on the point where their:

marginal revenue equals marginal costs.

Marginal private cost plus marginal external cost equals _____ cost.

marginal social

The marginal private benefit plus the marginal external benefit equals the ____ benefit.

marginal social

When externalities are present, the socially optimal outcome occurs where the _____ benefit equals the _____ cost.

marginal social; marginal social

Data for the United States show that poverty is not evenly distributed across groups in the population. Which of the following groups has the LOWEST poverty rate?

married couples

A firm's decisions are ultimately oriented toward:

maximizing profit.

Focusing illusion is the tendency to:

mispredict your utility by focusing on a few factors at the expense of others.

Helena works in a factory that makes plastic phone cases. The four main tasks are mixing, molding, curing, and polishing. Out of all the workers, she is the fastest mixer, has the lowest opportunity cost for molding, is the most careful in curing, and enjoys polishing the most. If her manager makes assignments in a way that maximizes output, then she will be assigned to

molding.

Inefficient output and price, few choices, and rent seeking are all problems associated with:

monopolies.

Fast-food restaurants are a good illustration of:

monopolistic competition.

The fast-food, bottled water, and cereal markets are all examples of:

monopolistically competitive markets.

The rational rule for markets is to produce:

more if the unit's marginal benefit exceeds its marginal cost.

Demand is almost always more price elastic in the long run because:

more options become available and people can make different choices.

When a company price discriminates, it ends up selling

more than it would sell otherwise.

Holding all else constant, if people eat out more at expensive restaurants when they earn more, then expensive restaurant meals are

normal goods.

Diminishing marginal utility:

occurs when the additional utility for each good declines as consumption increases.

An insurance policy is actuarially fair if:

on average, it is expected to pay out as much in compensation as it receives in premiums.

When a good is a rival good:

one person's use of it prevents others from using it.

Economic growth can be depicted on a production possibilities frontier (PPF) as an:

outward shift of the PPF.

Availability bias is the tendency to:

overestimate the frequency of events that are easily recalled and to underestimate the frequency of less memorable events.

The interdependence principle states that your best choice today depends on all of the following EXCEPT

past decisions you have made.

The assumption that individuals act rationally implies that people _____

people implicitly calculate the costs of and the benefits from an activity to decide if it is worthwhile.

The poverty rate is the:

percent of people whose family income is below the poverty line.

When modeling economic situations using game theory, the economic participants are generally referred to as:

players.

Equilibrium is the

point at which there is no tendency for change.

The type of analysis that describes what is happening and makes predictions based on identified relationships is called _____ analysis.

positive

An income level below which a family is defined to be in poverty is known as the:

poverty line.

People who are risk takers:

prefer gambles with lower expected values, but potentially higher winnings, over a sure thing.

Which of the following is a characteristic of a monopoly but not of a competitive market?

price > marginal cost

The law of demand implies that _____

price and quantity demanded are inversely related.

The law of supply implies that _____

price and quantity supplied are positively related.

Pancho owns a small grocery store. Even though Pancho's costs do not vary much from month to month, he puts most of his merchandise on sale a few times a year. He rotates the items which are on sale each month. He is using the strategy of _____ to create _____ for customers who _____.

price fluctuation; hurdles; are price sensitive

When plotting a demand curve

price is on the vertical axis.

If a business finds that demand for its good is very price elastic, it knows that:

price is very important.

The figure shows four different supply curves for four products: A, B, C and D. Which of the products has an elastic, but not perfectly elastic, supply curve?

product D

A buyer's reservation price for a product is equal to the _____ and the _____.

product's marginal benefit to the buyer; maximum price the buyer would pay for the product

In markets, prices act as all of the following except

productivity.

Total revenue minus total cost equals:

profit.

Apple and Google apply for hundreds of patents every year. These patents:

provide incentives for Apple and Google to spend large amounts of money up front on research and development of new products.

A Grim Trigger strategy is to:

punish rivals who do not cooperate.

An import is a good or service:

purchased from a foreign seller.

Price elasticity of demand measures the change in:

quantity demanded due to the change in price.

Income elasticity of demand measures how responsive the:

quantity demanded of a good is to changes in income.

The income elasticity of demand for a good measures the responsiveness of ________ to a change in ________.

quantity demanded; income

Bayside Shoe Shop offers a BOGO (buy one, get one) special where customers can buy one pair at full price and get another pair at half-price. This form of price discrimination is referred to as

quantity discount.

Quotas change _____, and taxes change _____ when they are used to deal with externalities.

quantity; price

Economists believe that individuals compare the benefits and costs of various options when making a decision and in so doing act ________.

rationally

Diversification is:

reducing risk by combining a large number of small risks whose outcomes are not closely related.

Product differentiation:

refers to firms' attempts to make real or apparent differences in essentially substitutable products look different in the minds of consumers.

Three ways to solve coordination problems include:

regulations, focal points, and communication.

The cross-price elasticity of demand measures the _____

relationship between the demand for one good and the price of another.

A local sandwich shop can quickly place an order for food with its local vendors if it uses up its existing resources quickly. This indicates that the price elasticity of supply is:

relatively elastic.

If monopolistically competitive firms are making zero economic profit, then these firms would:

remain in the industry.

When a game player faces the same strategic interaction with the same rivals and the same payoffs in successive periods, then the game is called a _____ game.

repeated

Maximizing utility:

requires that consumers get the most satisfaction out of every dollar they spend.

The reason that the production possibilities frontier is usually a bow-shaped curve instead of a straight line is that

resources are not perfectly adaptable to the production of all goods

Dependencies over time reflect the fact that

resources can be spread across time.

In economics, elasticity means _____

responsiveness to price changes.

Marginal revenue is the change in total:

revenue when the firm produces additional units.

Rising input costs lead to

rising marginal costs for a seller.

A market is a

setting that brings together potential buyers and sellers.

Changes in population can:

shift the demand curve of a good or service in an area.

Sunk costs

should not be considered when making economic decisions

(Figure: Marginal Benefit Curves 2) Use the graph of marginal benefit curves for cans of shaving cream to answer the question.When the market price is $3, the total quantity of cans purchased across Bruno and Martin will be:

six.

The outcome that is most efficient for society as a whole — including the interests of buyers, sellers, and bystanders — is the _____ outcome.

socially optimal

Dependencies between various people's choices reflect the fact that

society has limited resources.

An export is a good or service:

sold to a foreign buyer.

A good has a free-rider problem when:

someone can enjoy the benefits of the good without bearing the costs.

When the hurdle method is used to price discriminate, buyers

sort themselves into reservation price groups based on their willingness to overcome the hurdle.

Comparative advantage explains why people

specialize and trade.

A firm has a certain amount of capital and land. As it hires more labor, each worker is able to:

specialize.

A second-mover advantage is the:

strategic advantage that can follow from taking an action that adapts to your rival's choice.

Economics:

studies human behavior when scarcity exists and choices must be made.

Due to a decline in demand and popularity, Ford Motor Company is planning to phase out traditional sedans such as 'Fusion' and 'Taurus' to focus on SUVs and trucks. Ford's sedans and trucks/SUVs are

substitutes-in-production.

When a hurricane rips through Florida, the price of oranges rises because the:

supply curve shifts to the left.

Suppose the line you are standing in at a grocery checkout counter has not moved for 10 minutes. You notice a cashier opening a new one and inviting you to check out. Do you switch to the new cashier or stay put because you have already waited for 10 minutes?

switch, because the 10 minutes you waited is a sunk cost

When a market is characterized by mutual interdependence:

the actions of one firm have an impact on the price and output of its competitors.

The marginal cost of an additional worker is

the additional cost of hiring one more worker.

Economics is concerned with the trade-offs that emerge because of scarcity. The term "trade-offs" refers to:

the alternatives given up when making choices.

Which of the following best defines supply?

the amount of a good that producers are willing and able to sell at each possible price, other things constant

Marginal private cost is the:

the cost paid by the seller in producing one additional unit of output.

Which principle helps buyers and sellers make decisions about whether to trade?

the cost-benefit principle

If the price of vanilla ice cream increases, everything else remaining constant, it is likely that _____

the demand for chocolate ice cream, a substitute, will increase.

Derived demand is:

the demand for factors of production dependent on consumer demand for output.

The incidence of a tax is

the division of the economic burden of a tax between buyers and sellers.

An example of a negative income tax is:

the earned income tax credit.

The price elasticity of demand is defined as _____

the percentage change in quantity demanded divided by the percentage change in price.

What does a supply schedule show?

the quantities supplied at various possible prices

Which of the following does not determine a good's price elasticity of demand?

the slope of the demand curve

What is the basis for the income level that the U.S. government uses as the poverty line?

the value of a low-cost food plan multiplied by three, updated annually for inflation

What is the opportunity cost of an item?

the value of the best alternative not chosen.

Competitive markets exist when:

there are so many buyers and sellers that each has only a small impact on the market price and the market output.

Perfect competition and monopolistic competition are similar because, under both market structures:

there are zero economic profits in the long run.

Multiple equilibria exist when:

there is more than one equilibrium.

To say that people make decisions at the margin means that _____

they weigh the additional costs and the additional benefits of various activities before they make a decision.

Airlines require every passenger with a ticket to have a matching government-issued photo identification. Price discrimination is made easier because:

this practice prevents a passenger who purchased a discounted fare from reselling that ticket to another customer who is willing to pay more.

To be a family living below the poverty threshold means having an income less than:

three times the income needed to buy the food necessary to achieve a nutritionally balanced diet.

The early bird specials at many restaurants are an example of using _____ to create _____.

timing; a hurdle

Economic surplus measures the value of a decision's:

total benefits minus its total costs.

The market supply is the

total quantity produced by all sellers in the market at each price.

Normative analysis is analysis that focuses on:

what should happen or what ought to be, and it involves value judgments.

The law of demand indicates that _____

when prices rise, the quantity demanded falls.

Market failure occurs:

when the output level of the firm is inefficient.

One problem with assuming that people's willingness to pay is a measure of the marginal benefit they would receive from the product is that:

willingness to pay reflects ability to pay as well as marginal benefit.

The efficient quantity prevails in a market when the market:

yields the largest possible economic surplus.

Dependencies between your own choices reflect the fact that:

you have limited resources.

Darrell is the owner of a furniture store. Last year, his total revenue was $525,000 and his total labor costs were $200,000. His overhead expenses, including insurance and legal fees, were $175,000. The rent on his building was $45,000. Darrell could earn $105,000 per year working at a nearby furniture distributor. From this information, we know that his accounting profit was:

$105,000.

Kevin Williamson goes to a local coffee shop and orders a medium-sized latte. His willingness to pay for that latte is $6. The price of the latte is $2. The cost to the coffee shop to produce the latte is $1. How much economic surplus does Kevin gain when he purchases the latte?

$4

Chuck Diesel Burger is a food truck in Houston, Texas. Imagine that Chuck Diesel Burger's minimum average total cost (ATC) is $3.75 and that its minimum average variable cost (AVC) is $2.50. Assume there are no barriers to entry into or exit from the food-truck market. Chuck Diesel Burger will make a positive economic profit if the price is equal to:

$4.00.

Suppose that the world price of TVs is $400, and the government imposes a $100 tariff. The new price domestic consumers pay for a TV is:

$500.

There are three consumers in the market for playing cards: Don, Jon, and Ron. At a price of $2 per pack, what is the total quantity demanded for playing cards?Cards Don Jon Ron$2.00 3 2 1$1.50 4 5 3

6

Refer to the accompanying table. If Jane confesses, John will spend __________ years in jail if he also confesses and __________ years in jail if he keeps quiet.

10; 25

Approximately what percentage of the total national income is owned by the poorest 40% (bottom two quintiles) of households in the United States?

12%

Bae is willing to pay up to $160 for a particular pair of boots. She is able to buy the boots for $120. The marginal cost of producing the boots is $70. Which of the following is TRUE regarding the economic surplus associated with her purchase of the boots?

Consumer surplus is $40, and producer surplus is $50.

Which of the following statements about economic surplus is FALSE?

Economic surplus is the area below the supply curve, above the demand curve, and to the right of quantity sold.

Which of the following is a positive economic statement?

If the government raises taxes, people will have less income available for purchases and saving.

What is positive analysis?

It describes what is happening, explains why it is happening, or predicts what will happen.

Which of the following is the best way to describe Behavioral Economics?

It includes ideas from both economics and psychology to understand how people make decisions

When faced with a quantity decision, the economic surplus is always maximized by following the

Rational Rule.

Which of the following is NOT a reason for government failure?

Regulators are overly focused on efficiency.

Which of the following will NOT happen if a country increases trade based on comparative advantage?

Some countries involved in the trade will have a loss in welfare.

What happens to the equilibrium price and equilibrium quantity when demand and supply increase simultaneously, but the relative size of the shifts are not known?

The equilibrium quantity rises, and the change in the equilibrium price is ambiguous.

A binding price floor in a market is removed. Which of the following is likely to occur as a result?

The market price will fall.

Which of the following will cause a movement along the demand curve?

a change in price

Which of the following will not shift the supply curve?

a change in price

Joachim produces and sells baskets. His marginal cost for one basket is $10, and his average cost is $7. He gains producer surplus every time that he sells a basket at a price:

above $10.

Chantelle grows tomatoes and sells them at the farmer's market. Because the price of tomatoes rises, she is encouraged to grow and sell more. This is an example of price functioning as

an incentive.

In 2004, Kenya became the first country to abolish the sales tax on menstrual products. The effect of this tax repeal would be:

an increase in sales of menstrual products.

Managers can harness market forces by setting up internal markets, which:

are organized within a company to buy and sell scarce resources.

Where would we find a firm's minimum efficient scale of production?

at the lowest point on its long-run average total cost curve

If a company engages in perfect price discrimination, it is attempting to

charge each customer their reservation price.

Price discrimination occurs when a company

charges different prices to different customers who are all buying the same product.

Microeconomics is the branch of economics that focuses on the:

choices and decision-making of individuals and firms.

The most important characteristic of the equilibrium price is that it _____

clears the market, leaving neither a surplus nor a shortage.

Marginal benefit minus price equals:

consumer surplus.

Policy makers refer to "nudges" as policies where, instead of forbidding decision-making options,:

d) The decision-making is environment is changed to make it easier for people to make good choices

In 2016, Amazon began charging a 5.75% sales tax on products it sells in the District of Columbia. Holding all else constant, the effect of this tax would be to _____ in the District of Columbia.

decrease Amazon sales

Three natural barriers to entry are:

economies of scale, problems raising capital, and control of resources.

Producing a given quantity of output at the lowest possible cost and lowest marginal cost is called:

efficient production.

What is the name of the model that best explains why an actor in a nationally broadcast television program earns so much more than an actor who is equally talented and productive but who performs in a local play?

winner-take-all

What theory can explain why a CEO might earn so much more than other managers with similar experience and education at the same company?

winner-take-all theory

When comparing the standard models in the respective fields of economics and psychology, it is clear that:

economists generally assume that people behave in a rational way, whereas psychologists generally do not.

What theory would suggest that an employee should receive a wage higher than the equilibrium wage rate?

efficiency wage theory

One way to improve the social welfare of a society is to __________ competition and __________ monopoly practices through policy legislation.

encourage; limit

The difference between a club good and a public good is that a club good is _____ and a public good is _____.

excludable and nonrival; nonexcludable and nonrival

(Table: U.S. International Trade in Goods and Services, 2018, in millions of dollars. Details may not equal totals due to seasonal adjustment and rounding.)From January to September in 2018, the United States was a net _____ of _____ million in services.

exporter; $205,812

A marginal external benefit is the:

extra benefit accruing to bystanders as a result of one extra unit of output.

In a finitely repeated game, each player:

faces the same strategic interaction a fixed number of times.

A repeated game is a game where a player:

faces the same strategic interaction with the same rivals and the same payoffs in successive periods.

A key difference between equity and efficiency is that equity deals with _____ and efficiency focuses on _____.

fairness; maximizing economic surplus

The poverty rate of the elderly in the United States has

fallen since 1959 because of the growth in Social Security and Medicare programs

A good that is defined broadly has _____

fewer substitutes and a less elastic demand.

(Figure: Price Ceilings) A binding price ceiling can be seen in:

figure B.

When resources are used to secure monopoly rights through the political process:

firms are rent-seeking.

If Tommy's Tank Tops is a perfectly competitive firm and is currently making positive economic profits of $1,000:

firms will enter the market.

If Dirk's Doughnuts is a perfectly competitive firm and is currently incurring economic losses of $500:

firms will exit the market.

Company owners want their company to be known as a family-friendly place to work to attract employees who are stable and require a steady income. Which of the following personnel policies would be most conducive to achieving this goal?

flexibility to work from home

When using the opportunity cost principle, a seller has to

focus on the opportunity cost of producing an item.

To maximize production, people should

focus on the task in which they have a comparative advantage.

Demand is more elastic _____

for goods with many substitutes than for goods with only a few.

(Figure: Marginal Benefit Curves) Use the graph of marginal benefit curves for slices of cheesecake to answer the question.When the market price is $3, Becca will purchase _____ slices, and Marcella will purchase _____ slices.

four; two

In Exhibit 2-3, if resources are used fully and efficiently, then the economy can produce at point(s)

g, h, or i

A fair bet is a:

gamble that, on average, will leave a person with the same amount of money.

A __________ consists of a set of players, a set of strategies available to those players, and a specification of the payoffs to each player for each possible combination of strategies.

game

Skills that are useful to many employers are classified as _____ skills.

general

Investing in the _____ skills of your workers makes them more marketable, and investing in their _____ skills enables your firm to become more productive.

general; job-specific

All of the solutions to externality problems involve:

getting buyers and sellers to consider marginal external costs and benefits.

Which of the following is NOT a source of comparative advantage?

global supply chains

When government policies lead to outcomes that are worse than those that would occur in unregulated markets:

government failure occurs.

The statutory burden of a tax is the:

government-designated burden of a tax payment.

Firms will always stay in the market if the price they charge is:

greater than their minimum average variable cost (AVC).

A price-maker:

has some control over the price it charges.

If you can complete a task at a lower opportunity cost than anyone else, then you

have a comparative advantage in that task.

The United States has a comparative advantage in _____-skilled labor. This explains why the U.S. is a net _____ of manufactured goods.

high; importer

When comparing a union job to a non-union job, we would expect to see:

higher wages being paid for the employee holding a union job.

The typical result of monopoly is __________ prices and __________ output than we find in a competitive market.

higher; lower

Which of the following is NOT a social insurance program in the United States?

housing assistance

What theory would suggest that learning material on your own generates the same benefits as those achieved by formally attending classes and receiving a degree?

human capital

Suppose a market is in equilibrium. An increase in demand in this market, all other things remaining constant, will lead to a(n) _____

increase in quantity supplied.

A tax on sellers:

increases the price that buyers pay and decreases the price that sellers receive.

Because of scarcity:

individuals and societies must choose which wants and needs to satisfy.

Another term for factors of production is:

inputs.

When a manager sets up markets within the company to buy and sell scarce resources, these markets are called

internal markets.

In 2018, Hurricane Michael hit Florida and destroyed some shrimp wholesale facilities. Which graph correctly depicts the effect of the hurricane on the equilibrium price and quantity in the shrimp market?

Graph C

(Figure: Market for Community College) Which graph illustrates the effect on the demand for community college, if an economy faces a recession, and there is rising unemployment?

Graph D

Which graph shows the income effect dominating the substitution effect of higher wages?

Graph E

Which of the following describes the marginal product of labor?

It is the additional amount of output that can be produced from hiring one more worker.