Econ101 Final
The market shares (in percentage terms) for the 10 firms that comprise an industry are 22, 18, 14, 10, 9, 7, 6, 6, 4, and 4. The Herfindahl index is __________ and the four-firm concentration ratio is __________.
1,338; 64 percent
If there are six firms in an industry and the market shares of the firms are 32 percent, 25 percent, 19 percent, 9 percent, 8 percent and 7 percent, the Herfindahl index is
2,204
The Justice Department considers a Herfindahl index larger than __________ to be representative of a highly concentrated industry.
2,500
What is the Herfindahl index of an industry made up of four equal-sized firms?
2,500
Which of the following assumptions is likely to be met in the real world?
All labor is homogeneous.
A firm defending itself in an antitrust suit would prefer to have the market it operates in defined broadly, rather than narrowly. T or F
F
A good example of a vertical merger would need to be the merger between two automobile manufacturers. T or F
F
Economists are nearly unanimous in their belief that small firms in highly competitive markets with many rivals are more likely to innovate than are firms with larger market shares. T or F
F
Labor unions obtain higher wages for their members by reducing the profits of the business owners in the short run and in the long run. T or F
F
Tariffs raise the price of imported goods, but quotas rarely do. T or F
F
The Herfindahl index for a monopoly is 1,000. T or F
F
The higher the labor cost to total cost ratio, the lower the elasticity of demand for labor. T or F
F
Under profit regulation, a natural monopolist has an incentive to be very careful about minimizing costs. T or F
F
Which of the following statements is false? The monopsonist buys that quantity of a factor at which marginal revenue product equals marginal factor cost. For the monopsonist, marginal factor cost decreases as it buys additional units of a factor. For the monopsonist, the supply curve of the factor it buys is different from the marginal factor cost curve. The monopsonist pays its factors a dollar amount less than its marginal factor cost.
For the monopsonist, marginal factor cost decreases as it buys additional units of a factor.
To minimize cost, a firm should hire two factors, X and Y, until
MPPX/PX = MPPY/PY.
If a monopsonist is hiring factors, it will choose to hire that quantity of labor at which __________ and pay a wage rate that is __________.
MRP = MFC; less than labor's MRP
A tariff raises the price of the product on which the tariff has been placed, decreases consumers' surplus, increases producers' surplus, and generates tariff revenue for the government. T or F
T
According to the substitution effect, as the wage rate rises the monetary reward from working increases and workers will want to work more. T or F
T
As long as there are advancements in technology, some workers will be temporarily displaced. T or F
T
Countries that engage in specialization and trade can consume at a level beyond their production possibilities frontier. T or F
T
Dumping occurs when a firm sells goods abroad at a price below their cost and below the price charged in their domestic market. T or F
T
It is unlikely that very many (pure) monopsony firms exist today, given that workers are increasingly mobile. T or F
T
Labor supply is a reflection of the number of persons who can actually do a job. T or F
T
Natural monopolies arise in industries with large economies of scale. T or F
T
Natural monopolies can be regulated based on price, profit, or output. T or F
T
The elasticity of demand for labor measures the percentage change in quantity demanded of labor that occurs as a result of a percentage change in the wage rate. T or F
T
The national defense argument has been used in the past to justify trade restrictions by firms in the peanut industry and the pottery industry. T or F
T
The term outsourcing is used to describe work done for a company by individuals working for another company in a different country. T or F
T
The type of proposed merger that generally concerns the federal government the most is a horizontal merger. T or F
T
To decrease the supply of its labor, a union might argue against right-to-work laws. T or F
T
Which of the following statements is false? A change in the supply of labor can affect the wage rate. A change in the wage rate can change the quantity demanded and quantity supplied of labor. Nonpecuniary aspects of a job refer to the nonmoney aspects of a job. There are no special nonpecuniary aspects to any job.
There are no special nonpecuniary aspects to any job.
In a perfectly competitive industry, do higher wages for labor union members diminish profits?
Yes, in the short run, but not in the long run in which some firms exit the industry because of higher costs.
A market demand curve for labor shows the quantities of labor demanded by
all the firms in a specific labor market.
If a firm is a monopsonist, then it faces
an upward sloping factor supply curve, and its marginal factor cost curve will lie above the factor supply curve.
The profit-maximizing natural monopoly will
charge the highest price per unit for the quantity of output it chooses to produce.
A country has a (an) __________ in the production of a good it produces at lower opportunity cost than another country.
comparative advantage
The primary intent of antitrust legislation is to
control monopoly power and preserve and promote competition.
The effects of a quota include:
decreasing consumers' surplus.
The Herfindahl index measures the
degree of concentration in an industry
The Herfindahl index measures the
degree of concentration in an industry.
Union training programs are meant to shift the __________ labor to the __________.
demand curve for; right
Given a 10 percent increase in wages, firm A cuts back on labor more than firm B. It follows that, ceteris paribus,
firm A likely has a higher labor cost-total cost ratio than firm B.
In contrast to a tariff, a quota does not
generate revenues for government.
A tariff is a tax on
imports.
For a union to be successful in increasing the total wage bill received by its members by forcing up the wage rate, the demand curve for labor needs to be
inelastic.
For the perfectly price-discriminating monopolist, its __________ curve is the same as its __________ curve.
marginal cost; average fixed cost
Since workers today can move from city to city (quite easily) and from firm to firm (again, quite easily), it is unlikely that there are very many pure
monopsony firms.
The infant industry argument for trade protectionism holds that
new industries sometimes need a protective environment in which to grow so that they can compete with older, more established foreign competitors.
The market demand curve for labor is
not the horizontal summation of the firms' demand curves for labor because higher wage rates result in a higher price for the goods produced.
Natural monopoly exists when
one firm can supply the entire output demanded at lower cost than two or more firms can.
The natural monopolist might have an incentive to let costs increase under
output regulation.
Which of the following was not included in the list of determinants of elasticity of demand for labor presented in the textbook?
price elasticity of supply for capital.
The natural monopolist might have an incentive to go out of business under
price regulation.
Producers' surplus is the difference between the price
sellers receive for a good and the minimum price for which they could have sold the good.
If MRP = VMP = MFC = wages, then the firm is
selling its product in a perfectly competitive market and is hiring its labor in a perfectly competitive labor market.
A tariff is a
tax imposed on imported goods.
Which of the following is usually considered a natural monopoly?
water & sewer services
