ECON224 Exam 3

Noise generated by an airport best illustrates: A. An inequity. B. An externality. C. Market power. D. Overproduction of private goods.

B. An externality.

Externalities are the: A. Domestic economic impact of foreign events. B. Difference between social and private costs or benefits. C. Outside costs that producers absorb. D. Effects of government actions on the private sector.

B. Difference between social and private costs or benefits.

Which of the following is not a characteristic of a monopoly? A. High barriers to entry B. Differentiated product C. Ownership of essential resources D. Large economics of scale

B. Differentiated product

In Figure 8.3, for the 7th through the 10th worker: A. MRP is greater than or equal to the equilibrium wage rate and these workers will be hired. B. MRP is less than the equilibrium wage rate and these workers will not be hired. C. MPP is greater than the equilibrium wage rate and these workers will be hired. D. The equilibrium wage rate is too high and the firm does not accept the wage.

B. MRP is less than the equilibrium wage rate and these workers will not be hired.

In Figure 7.1, at the profit maximizing level of output for a monopolist, marginal cost is: A. $5.00. B. $7.00. C. $9.00. D. Between $6.00 and $7.00.

A. $5.00.

In Figure 7.2, at the profit maximizing level of output for a monopolist, marginal cost is: A. $9.00. B. $10.00. C. $10.50. D. $11.00.

A. $9.00.

Suppose a monopoly pharmaceutical company produces a drug and sells 100 prescriptions for $25 each. In order to sell 101 prescriptions, the monopolist must lower the price to $24 per prescription. The marginal revenue of the 101st prescription is: A. -$76. B. $24. C. $25. D. $2424.

A. -$76.

In Table 8.1, if the equilibrium wage is $24 per day, how many apple pickers will the firm hire? A. 2. B. 3. C. 4. D. 5.

A. 2.

In Figure 7.2, the profit-maximizing level of output for a monopolist is: A. 3 units. B. 4 units. C. Between 3 and 4 units. D. Between 4 and 5 units.

A. 3 units.

Which of the following statements is true, assuming the same cost and demand conditions? A. A monopoly produces less output than a competitive firm. B. A monopoly cannot earn an economic profit in the long run. C. A monopoly charges a lower price than a competitive firm. D. A monopoly maximizes profit where price equals marginal cost.

A. A monopoly produces less output than a competitive firm.

Market failure means that the economy is definitely producing: A. A suboptimal mix of output. B. At a point beyond the production possibilities curve. C. At a point inside the production possibilities curve. D. Zero output.

A. A suboptimal mix of output.

Public goods: A. Can be consumed by more than one person at the same time. B. Include most goods and services that the market produces. C. Lead to the pay-as-you-go problem. D. By definition, must be produced by the government.

A. Can be consumed by more than one person at the same time.

A monopolist sets price at a point on the _______ curve, corresponding to the rate of output determined by the intersection of ______. A. Demand; marginal revenue and marginal cost. B. Marginal revenue; marginal revenue and marginal cost. C. Average total cost; price and marginal cost. D. Demand; average total cost and marginal cost.

A. Demand; marginal revenue and marginal cost.

The free-rider problem arises because those who: A. Do not pay cannot be excluded. B. Pay are not willing to share. C. Demand the goods are excluded. D. Supply the goods are greedy.

A. Do not pay cannot be excluded.

If a seafood restaurant can raise the price of its fried shrimp without losing all of its customers, then the restaurant definitely: A. Has market power. B. Is experiencing economies of scale. C. Is using predatory pricing. D. Has a monopoly.

A. Has market power.

In Figure 8.3, for the 1st through the 6th worker: A. MRP is greater than or equal to the equilibrium wage rate and these workers will be hired. B. MRP is less than the equilibrium wage rate and these workers will not be hired. C. MPP is less than the equilibrium wage rate and these workers will not be hired. D. The equilibrium wage rate is too high and the firm does not accept the wage.

A. MRP is greater than or equal to the equilibrium wage rate and these workers will be hired.

A private good is unique because: A. Nonpayers can be prevented from consuming it. B. It can be enjoyed exclusively by free riders. C. The market is likely to produce too little of it. D. It is provided most efficiently by government.

A. Nonpayers can be prevented from consuming it.

In Figure 8.2, the equilibrium wage rate is ____ and the number of unemployed workers is __. A. W1; 0 B. W1; 1350 C. W2; 0 D. W2; 1350

A. W1; 0

The optimal mix of output is: A. the most desirable combination of output attainable with existing resources, technology and social values. B. an attempt to compare the real worth rather than the market values to various goods and services. C. an exercise to determine if it is better to reduce government expenditures or reduce taxes. D. the most desirable level of the distribution of income.

A. the most desirable combination of output attainable with existing resources, technology and social values.

Suppose a monopoly firm produces a medical device and can sell 15 items per month at a price of $2,000 each. In order to increase sales by one item per month, the monopolist must lower the price of its medical device by $100 to $1,900. The marginal revenue of the 16th item is: A. $100. B. $400. C. $1,900. D. $2,000.

B. $400.

In Table 7.2, at the profit-maximizing rate of output, marginal cost is: A. $50. B. $60. C. $70. D. $80.

B. $60.

In Figure 7.1, the price charged by a profit-maximizing monopolist is: A. $5.00. B. $7.00. C. $9.00. D. Between $6.00 and $7.00.

B. $7.00.

In Table 7.2, using the profit-maximization rule, a monopolist will charge a price of: A. $90. B. $80. C. $70. D. $60.

B. $80.

In Figure 7.1, the profit-maximizing level of output for a monopolist is: A. 2 units. B. 3 units. C. 4 units. D. Between 3 and 4 units.

B. 3 units.

In Table 8.1, if the equilibrium wage is $20 per day, how many apple pickers will the firm hire? A. 2. B. 3. C. 4. D. 5.

B. 3.

An upward-sloping supply curve of labor illustrates that the: A. Supply of labor and the wage rate are inversely related. B. Quantity of labor supplied and the wage rate are directly related. C. Quantity of labor supplied and the minimum wage are indirectly related. D. Quantity of labor supplied and the hours of work per week are inversely related.

B. Quantity of labor supplied and the wage rate are directly related.

In Figure 8.2, at a wage of W2 there is a: A. Surplus of labor equal to 450 workers. B. Surplus of labor equal to 1050 workers. C. Shortage of labor equal to 1050 workers. D. Shortage of labor equal to 600 workers.

B. Surplus of labor equal to 1050 workers.

The problem with public goods is that those who do not pay receive: A. None of the good. B. The same amount of the good as those who pay. C. Some of the good but less than those who pay. D. More of the good than those who pay.

B. The same amount of the good as those who pay.

For a monopolist, the demand curve facing the firm is: A. The same as for the perfectly competitive firm. B. The same as the market demand curve. C. Always below marginal revenue. D. Perfectly elastic.

B. The same as the market demand curve.

In Figure 8.2, the equilibrium wage rate is ____ and the number of workers employed is __. A. W1; 900 B. W1; 1350 C. W2; 900 D. W2; 1350

B. W1; 1350

According to the upward-sloping labor supply curve, at lower wages: A. Workers are more willing to supply labor. B. Workers are less willing to supply labor. C. There is no opportunity cost of labor. D. The labor supply curve shifts left.

B. Workers are less willing to supply labor.

The demand for labor is a derived demand because: A. labor is hired based on when the MRP is equal to the wage rate. B. we demand what labor produces and not labor itself. C. all products must have some labor embodied in them. D. labor is a variable input.

B. we demand what labor produces and not labor itself.

In Table 7.1, the maximum profit that can be achieved is: A. $7 million per month. B. $10 million per month. C. $11 million per month. D. $21 million per month.

C. $11 million per month.

In Table 7.2, at the profit-maximizing rate of output, marginal revenue is: A. $20. B. $40. C. $60. D. $80.

C. $60.

Refer to Figure 8.2. A minimum wage of W2 will result in a surplus of ____ workers. A. 1950 B. 1350 C. 1050 D. 900

C. 1050

In Table 7.1, profit maximization is achieved at a production rate of: A. 1 plane per month. B. 2 planes per month. C. 3 planes per month. D. 4 planes per month.

C. 3 planes per month.

In Table 7.2, profit maximization is achieved at a rate of: A. 1 unit of output. B. 2 units of output. C. 3 units of output. D. 4 units of output.

C. 3 units of output.

In Table 8.1, if the equilibrium wage is $16 per day, how many apple pickers will the firm hire? A. 2. B. 3. C. 4. D. 5.

C. 4.

An industry dominated by one firm is: A. Monopolistic competition. B. Perfect competition. C. A monopoly. D. An oligopoly.

C. A monopoly.

A monopolist sets its price: A. Below the demand curve. B. Without constraints since there is no competition. C. At the rate of output where marginal revenue equals marginal cost. D. At the minimum of the long-run average total cost curve.

C. At the rate of output where marginal revenue equals marginal cost.

If the demand for labor is a derived demand, then the demand for airplane pilots depends on the: A. Amount of training that pilots receive. B. Cost of hiring a pilot. C. Desire for airline travel. D. How many pilots there are.

C. Desire for airline travel.

Ceteris paribus, the willingness and ability to work specific amounts of time at alternative wage rates in a given period of time is: A. Product supply. B. Product demand. C. Labor supply. D. Labor demand.

C. Labor supply.

A monopolist achieves the most profitable rate of output by applying which of the following rules? A. Average variable cost equals price. B. Average total cost equals price. C. Marginal revenue equals marginal cost. D. Average total cost and average variable cost are both at a minimum.

C. Marginal revenue equals marginal cost.

The market under produces public goods because: A. The government is mandated to produce public goods. B. People do not want public goods as much as private goods. C. People are less willing to pay for public goods than for private goods. D. Of concerns about equity.

C. People are less willing to pay for public goods than for private goods.

The supply curve for labor is upward sloping to the right because as wages ___, the quantity of _____ rises. A. Rise; goods purchased B. Fall; work required C. Rise; labor supplied D. Fall; labor demanded

C. Rise; labor supplied

An individual's labor-supply curve reveals how he or she chooses to allocate: A. Limited dollars between luxuries and necessities. B. Scarce money between goods and services. C. Scarce time between labor and leisure. D. Limited time between work at one job and work at another.

C. Scarce time between labor and leisure.

Which of the following is likely to be a monopolist? A. A potato chip company that sells lots of chips and competes with other chip producers. B. A farmer who specializes in growing organic fruits and vegetables. C. The sole producer of a new medical device for people with limited mobility. D. The chemical company in a small town that employs most of the town's workforce.

C. The sole producer of a new medical device for people with limited mobility.

A public good is: A. Any good produced by a unit of government. B. Priced in the market like private goods. C. The source of the free-rider dilemma. D. Only consumed by the purchaser.

C. The source of the free-rider dilemma.

Externalities are a type of market failure because: A. Buyers do not have complete information about the product. B. Producers have too much power. C. Third parties bears the costs or benefits of a market activity. D. Goods and services are not distributed fairly.

C. Third parties bears the costs or benefits of a market activity.

In Figure 7.2, the price charged by a profit-maximizing monopolist is: A. $9.00. B. $10.00. C. $10.50. D. $11.00.

D. $11.00.

Refer to Figure 8.2. The number of workers employed in this market at a wage rate of W2 is: A. 1950 workers. B. 1350 workers. C. 1050 workers. D. 900 workers.

D. 900 workers.

In economics, a public good: A. Is any good produced by the government. B. Always causes government failure. C. Is provided in an optimal amount by the market. D. Allows free riders to benefit from the good.

D. Allows free riders to benefit from the good.

In economics, a public good: A. Is any good produced by the government. B. Has social costs that are lower than private costs. C. Is provided in an optimal amount by the market. D. Cannot be denied to consumers who do not pay.

D. Cannot be denied to consumers who do not pay.

In Figure 8.3, the 7th worker will: A. Be hired since the MRP is greater than the wage rate. B. Not be hired since the MRP is greater than the wage rate. C. Be hired since the MRP is less than the wage rate. D. Not be hired since the MRP is less than the wage rate.

D. Not be hired since the MRP is less than the wage rate.

Ceteris paribus, for an upward-sloping labor supply curve, the quantity of labor supplied varies directly with: A. Payroll taxes. B. The value of leisure time. C. The derived demand for labor. D. The wage rate.

D. The wage rate.

The opportunity cost of working is the: A. Wage rate plus the value of fringe benefits earned in the process. B. Wage rate earned in the process but not the fringe benefits. C. Personal satisfaction gained from working. D. Value of leisure time that is given up in the process.

D. Value of leisure time that is given up in the process.