Econs exam 2

The diagram shows the market demand and supply curves for the bread market. You know that there are 250 identical bakeries operations in the market, but you do not know their cost structure. Based on this information, which of the following statements is correct?

A bakery's marginal cost of producing the 21st loaf is €2

Which of the following statements are measures that can reduce principal agent problems

A black box in a car that measures the speed of the driver An excess payment for the first 100 in your travel insurance Paying apart of the chief executive's bonus in the company shares

The following diagram shows the consumer and producer surplus in the market for bread. Consider changes in the elasticities of the demand and supply curves. Assuming that the market equilibrium output and price are unchanged, which of the following statements is correct

A less elastic supply curve will lead to a larger producer surplus.

Which of the following are correct

A market is in equilibrium if the actions of buyers and sellers have no tendency to change the price or the quantities bought and sold In a competitive equilibrium, both buyers and sellers are price takers

Ceteris Paribus, In which of the following cases would the wage setting curve shift up?

A more generous unemployment insurance scheme.

The figure describes the effect of immigration on unemployment in the labour market. The labour market equilibrium is at A and C before and after the influx of immigration, respectively. Based on this figure, which of the following statements is correct?

All incumbent workers are no worse off in the new equilibrium.

The figure shows a bakery's marginal and average cost curves, and its isoprofit curves. The bakery is a price-taker in a large bread market. Based on this figure, which of the following statements is correct?

At A, the bakery would be making a loss.

Which of the following statements about the price setting curve is correct

At points below the price-setting curve, the firms are setting prices too high compared to their profit-maximizing level.

A profit function, drawn on a graph with quantity on the horizontal axis and profit on the vertical axis, depicts a firms profit for different outputs. Which of the following statements is correct?

At the peak of the profit function, the profit level equals that of the isoprofit curve that is tangent to the demand curve Assuming no fixed costs of production, the profit function goes through the origin

A u-shaped average cost function implies that which of the following are possible

Average cost is higher than the marginal cost Marginal costs increase but average costs decrease Average cost is lower than the marginal cost

The figure depicts the labour market model, which is currently at point X. In which of the following cases would the employment rate rise

Better monitoring of employees effort Higher labour productivity

The figure shows the demand and supply curves in the salt market. The government now decides to impose a sales tax of 30% on the price of salt, to be paid by the suppliers. Which of the following statements is correct?

Both consumer surplus and producer surplus decrease.

The government has instituted a subsidy ( paid to the buyers) of 3000 pounds per electric car bought in 2017. The electric car industry is competitive. Which of the following statements is true

Buyers gain more from the subsidy than sellers if demand is more inelastic than supply The final price paid by consumers of electric cars will increase by 3000 if supply is perfectly inelastic

Which of the following statements regarding employment contracts are correct

Employees effort levels cannot be the basis of an enforceable contract

Which, if any, of the following statements is true?

Employer provision of onsite childcare raises the employment rent If the expected duration of unemployment is 40 weeks, by unemployment benefit is only paid for the first 8 weeks, then the employment rent is smaller than without the presence of unemployment benefit

Which of the following statements regarding employment rents are correct

Employers can use high employment rents to exert power over employees.

The figure depicts the labour market when there has been a negative aggregate demand shock. Which of the following statements is correct

Firms may be reluctant to make the nominal wage adjustment from B to C Rather than wait for the wage and price adjustments, the central bank can aid demand recovery by reducing the interest rate

The figure shows the demand and supply curves in the salt market. The government now decides to impose a sales tax of 30% on the price of salt, to be paid by the suppliers. As a result, the equilibrium quantity fall from Q to Q^T. Which of the following statements is correct after the tax has been implemented

Gains from trade are A+B+D+F

Which of the following regarding Karl Marx are correct

He acknowledged that the capitalist economy was the most dynamic economic system in human history He though that capitalism, by organizing production and allocation in anonymous markets, created atomised individuals instead of integrated communities

Which of the following statements are true for a competitive market in which all firms have upward sloping marginal cost curves

If more firms enter the market, the market price will fall, and so will profits The marginal cost is always equal to price

Which of the following statements regarding monopoly and perfectly competitive markets are correct

In a monopoly market, the firm is a price-maker In a perfectly competitive market, there is little advertising

Angela currently has a job with an hourly wage rate of €10, and her disutility from employment is €1 an hour. If she loses this job, then she can get a job with hourly wage rate of €8 after 36 weeks. In the interim period, she can claim unemployment benefits for 20 weeks at €175 per week. Assume that a week contains 35 hours that she can work and get paid for. In order to calculate the employment rent she receives in her current job, which of the following are correct:

If she lost her job, the employment rent per hour that she would lose during the weeks when she would receive unemployment benefit is €4 If she lost her job, the employment rent per hour that she would lose during the weeks when she would not receive unemployment benefit but hasn't found a job is €9 If she loses her job, the total loss of employment rent over the entire period during which she would receive unemployment benefit is greater than the employment rent she would lose in the first 8 weeks in the new job

The firm produces 24 units of output with 10 workers and 4 machines. Which of the following statements is correct

If the firm produces 10 units of output with 5 workers and 2 machines, then the firms technology exhibits increasing returns to scale If the firm produces 30 units of output with 15 workers and 6 machines, then the firms technology exhibits decreasing returns to scale

Consider an economy with homogeneous firms and homogeneous workers. Which of the following statements are true?

If there is involuntary unemployment then there is income inequality The government cannot eliminate involuntary unemployment

Which of the following statements correctly identify who is the principal and who is the agent

In a contract between a football club and it's star player, the club is the principal and the player is the agent In a air bnb contract, the owner and the traveler are both principals and agents

Which of the following markets can generally be considered to be competitive

The market for milk The market for place tickets from London to Tokyo

Which of the following events would contribute to economics of scale

Large supermarkets being able to drive down the cost of purchasing milk as increases its scale of business A merger of two firms leading to savings on the costs of HR, IT, and legal departments The higher the number of users of windows 10, the more likely it is that Microsoft will be able to achieve a higher scale of its operating system

Maria earns $15 per hour in her current job and works 40 hours a week. Her disutility of effort is measured as $1 per hour of work. In this case that she does her job, she receives $5 per hour employment benefit. Additionally, being unemployed has psychological and social costs which is a disutility equivalent to $2per hour. Then,

Maria's employment rent if she can get another job with the same wage rate after 44 weeks of being unemployed is more than $6,160

The figure shows the market demand curve for bread, together with original and new supply curves, where the curve has shifted due to new bakeries entering the market. All bakeries are identical, and there are no entry costs. Which of the following statements is correct?

New bakeries will continue to enter until the price equals their average cost.

In a perfectly competitive market, if demand increases because consumers are richer, and supply increases because marginal cost decrease, then in the new equilibrium:

Quantity in the market will always be higher Total surplus will always be higher

Thomas earns $12 per hour in his current job and works 36 hours a week. He loves his job and puts his maximum effort with no disutility. In fact, Thomas earns extra utility worth $3 per hour from camaraderie, status, and enjoyment of the job. If he loses the job he has two choices . Self employed $7 an hour for 36 weeks, or he can be unemployed and receive an unemployment benefit of $150 per week. Job similar to one in 24 weeks. Which of the following change results in an increase in his employment rent?

Self employment would only bring him in 32 hours of work a week

Which of the following statements regarding the marginal rate of substitution (MRS) and the marginal rate of transformation (MRT) of a profit maximizing firm is correct

The MRS is how much the price you are willing to give up for an incremental increase in the quantity, holding profits constant

The diagram shows the demand and the supply curves for textbooks. Based on this figure, which of the following statements is correct?

The Nash equilibrium price is $8.

The figure shows the market demand curve for bread, together with original and new supply curves, where the curve has shifted due to an introduction of a new technology. Assume that the number of bakeries remains constant. Which of the following statements is correct

The bakeries marginal cost of production has fallen.

A bakery is one of many that operate in the bread industry. The market demand curve for bread is downward-sloping. The bakery incurs fixed costs and has an upward-sloping marginal cost curve. Which of the following statements is correct?

The bakery faces a flat demand curve.

The figure shows a bakery's marginal and average cost curves, and its isoprofit curves. The bakery is a price-taker in a large bread market. Suppose the current market is p_1. Based on this figure, which of the following statements is correct?

The bakery would be minimising a loss at A If the bakery is not yet In the market then it would not enter the market

Consider an employee with a reservation wage of $6 an hour. The employee chooses an effort level between zero and one. Which of the following statements regarding her best response curve is correct?

The best response curve describes the effort that the employee would choose for each level of the hourly wage.

Consider the case where a government introduces a specific tax on cigarettes, which reduces the consumption of cigarettes. Which of the following statements is correct?

The cost of collecting taxes must be considered when assessing the success of this policy.

The figure depicts the demand curve of a firm producing cars, together with its marginal cost, average cost, and isoprofit curves. Based on this figure, which of the following statements is correct

The deadweight loss in the profit maximising outcome is $20,640

The figure depicts the labour market when there has been a negative aggregate demand shock. Which of the following statements are correct

The derived demand for labour is N_X at X, and is N_B at B N_L - N_X and N_L - N_B are the levels of involuntary unemployment at X and B, respectively

The diagram depicts the demand curve of a product. Assume that there are 100 potential buyers who can choose to purchase one unit each.Based on this graph, which of the following statements is correct?

The diagram demonstrates the law of demand

Which of the following are factors that contribute to a firms diseconomies of scale

The difficulty of monitoring workers' effort as the number of employees increases.

As the hourly wage rises, the workers best response function( with effort on the vertical axis and wages on the horizontal axis) becomes flatter because

The disutility of work at the level chosen by the worker increase

If unemployment benefits increase

The employment rent will fall unless the firm raises the wage

perfectly competitive market in which the demand is Q=30 - P and the supply is Q= 2P-3:

The equilibrium price is p=11 The consumer surplus at equilibrium is 180.5

The market demand curve of a particular good is downward-sloping. Based on this information, which of the following statements is correct regarding a price- taking firm producing that good?

The firm chooses its output such that the marginal cost equals the price.

Consider an economy with firms selling differentiated products, where the only input to production is labour. Which of the following statements is correct

The more inelastic the demand curve faced by the firm, the higher the markup set by the firm.

The figure depicts the demand curve of a firms producing cars, together with its marginal cost, average cost, and isoprofit curves. Based on this figure which of the following statements is correct

The firm makes the same profit at B and D The slope of the isoprofit is zero at D

Which of the following cases would be form be maximising profits

The firm minimises the cost per unit of effort The firm maximizes the efficiency units per dollar of wage cost

The figure depict four possible combinations of average cost (AC) and marginal cost (MC) curves. The horizontal axis is output Q. Which of the following statements correctly matches the corresponding diagram?

The firm shown in panel (a) exhibits diseconomies of scale The firm shown in panel (c) has constant unit cost of production

The figure depicts the efficiency wage equilibrium of a worker and firm. According to this figure:

The firm would maximise its profits by paying an hourly wage that is $6 above the worker's reservation wage.

Consider a worker's best response curve in the labour discipline model. Currently the firm chooses to pay $12 per hour to minimize the cost of effort, which induces an effort level of 0.6 from the worker. Now consider a rise in the unemployment benefit. Then:

The firm's new wage offer that minimizes the cost of effort will be higher than $12.

The figure depicts the labour market model. Which of the following statements are correct at outcome X

The firms wage offered is at point of tangency between their isocost line and the workers best response function curve for effort The firms price and output are at the point of tangency between their isoprofit curve and their demand curve

In the equilibrium of the labour market:

The greater the level of labour productivity, the higher the real wage

The following diagram depicts a firms isoprofit curves and demand curve, given the the economy- wide demand. Which of the following is correct?

The isoprofit curves would be steeper for lower W

In which of the following situations could the competitive market not be Pareto efficient

The product sold is a differentiated good In the labour market, where workers effort levels are non-verifiable When production of a good trader creates air pollution

The following diagram shows the market demand curve of apple cinnamon cheerios, the isoprofit curves of the producer firm, and the firms profit function curve. Based on the graph, which of the following statements is correct

The profit maximizing choice for the firm is where the highest attainable isoprofit curve is tangent to the demand curve The profit maximising choice for the firm is where it's marginal rate of substitution between the price charged and the quantity produced is equal to its marginal rate of transformation The profit maximising choice for the firm is at the peak of its profit function curve

Which of the following statements regarding the cost structure of the film( movie) industry is correct

The quantity sold in the film industry is inefficient.

A shop produces and sells 100 luxury hampers a day at €80 each. When it cut the price to €64 it increased its sale to 116 hampers a day. Which of the following statements is correct

The shop should raise its price in order to increase profits

The following figure depicts an employees best response to wage when the expected unemployment duration is 44weeks. Which of the following statements is correct

The slope of the best response curve is the employers marginal rate of transformation of higher wages into worker effort

The figure shows the demand and supply curves in the salt market. The government now decides to impose a specific (fixed) tax of T per kg of salt, to be paid by the suppliers. Which of the following statements is correct

The supply curve shifts up in a parallel manner.

Consider the labour discipline model applied to two countries. A high wage country and a low wage country. Assume that the high wage country has a higher unemployment benefit. Consider a firm producing the same product in both countries. Which of the following statements is correct

The threat of outsourcing from the high wage country to the low wage country would raise the workers best response curve in the high wage country

The figure depicts the demand curve of a firm producing cars, together with its marginal cost,average cost, and isoprofit curves. At c, the firm sells 32 cars at $5,440. The profit associated with isoprofit A is $63,360. Based on this information which of the following statements are correct

The total cost of producing 32 cars is $110,720

Which of the following aspects of a university lecturers job would the employer like to see done but cannot be covered in a contract

The type of quality of job that students get immediately after graduation Approachability for the students

The figure shows the wage-setting curve and the real wage w*, which of the following statements is correct?

The unemployment rate is 5%.

Which of the following statements best describes the game played by the employer and the employee in the labour discipline model

The worker selects the effort level that balances his desire to keep his job with his desire also to not exhaust himself on the job.

The figure shows a demand curve for Cheerios. Based on this figure, which of the following statements is correct?

There is no demand if the price is set above $7.20.

Which of the following statements regarding piece rate wage contracts are correct

They provide an employee an incentive to exert effort A piece rate wage contract would be inappropriate for kitchen staff at a restaurant

The figure depicts the price setting curve. Assume that the average product of labour a is given. Based on this figure, which of the following statements is correct?

To go from A to B, the firm would be raising its price

There are five students who are looking to buy one second hand textbook each. Their willingness to pay are £5,£6,£8,£12, and £15 respectively. Based on this information, which of the following statements is correct

To sell three books, the maximum price that can be charged is £8

Consider the demand curve shown in the figure. Suppose that the unit cost( cost of producing each pound) is $c at the levels of output. Which of the following statements is correct

Total cost doubles when quantity doubles

Which of the following statements regarding labour unions and wage bargaining is correct?

Unions may choose to restrain their use of bargaining power.

Which of the following statements regarding average cost and marginal cost of a firm is correct?

When marginal cost equals average cost, the slope of the average cost curve is zero.

The figure depicts the model of wage setting by the union. Which of the following statements is correct?

Workers exert higher effort under union bargaining than when the firm selects its profit-maximising wage level.