Micro Econ 1123- Midterms 2, 3 & 4- Pallab Ghosh (Spring 2022)

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Producer surplus is the: - sum of a seller's reservation value and the price he finally receives. - difference between a seller's reservation value and the price he finally receives. - product of a seller's reservation value and the price he finally receives. - ratio of a seller's reservation value to the price he finally receives.

difference between a seller's reservation value and the price he finally receives.

Consumer surplus is the: - difference between the buyer's reservation value and the price he actually pays. - product of a buyer's reservation value and the price he actually pays. - sum of a buyer's reservation value and the price he actually pays. - ratio of a buyer's reservation value to the price he actually

difference between the buyer's reservation value and the price he actually pays.

A strategy is called a mixed strategy if it involves choosing ___________. one particular action for a situation different actions randomly an action that yields a higher payoff to the opponent an action that yields zero payoff to the player

different actions randomly

Goods that are similar but are not perfect substitutes are called _________ goods. differentiated inferior homogeneous normal

differentiated

How are the products sold by a monopolistically competitive firm different from the products sold in a competitive market? Unlike products sold in a competitive market, the products sold in a monopolistically competitive market are ___________. homogenous. differentiated. perfect substitutes. expensive.

differentiated.

The following table shows the quantity of a good sold by a monopolist at different prices. Refer to the table above. What is the total revenue of the monopolist when it charges a price of $9? $1,750 $1,250 $2,250 $1,350

$1,350

The following table shows the quantity of a good sold by a monopolist at different prices. Refer to the table above. What is the total revenue when the monopolist charges a price of $3? $1,350 $1,750 $2,750 $1,050

$1,350

The following table shows the quantity of a good sold by a monopolist at different prices. The following table shows the quantity of a good sold by a monopolist at different prices. $1,800 $3,200 $1,550 $2,150

$1,800

If Kate pays an average tax rate of 12.5% and her total income is $34,000, she pays ________ as tax. $5,500 $17,000 $4,250 $3,200

$4,250

If Kate pays an average tax rate of 12.5% and her total income is $34,000, she pays _________ as tax. $4,250 $5,500 $17,000 $3,200

$4,250

Which of the following is a cost associated with government intervention in an economic system? Inequality. Unemployment. Bureaucracies. Externalities.

Bureaucracies.

By $250 million.

Refer to the figure above. The producer surplus before the imposition of the tax isgiven by the area __________. GHF JBHF GAE JBC

GAE

Which of the following activities can give rise to a positive externality? Jogging every morning Getting a flu vaccination Consuming herbal products Buying a pair of gloves

Getting a flu vaccination

Which of the following is NOT a required characteristic of a market?

Government setting the price of the good or service

Which of the following is not a characteristic of monopoly? Market power. A single seller. Produces identical goods. Price-maker

Produces identical goods.

Which of the following is an example of differentiated goods? Fuel and water Tea and energy drinks Potatoes grown by different farmers Books and cosmetics

Tea and energy drinks

Market demand is derived by __________.

fixing the price and adding up the quantities that each buyer demands.

In a perfectly competitive market, because an individual seller tends to sell only a fraction of the total amount of the good produced:

his individual choices do not affect market outcomes

The demand curve shows ___________.

how the quantity demanded responds to changes in the price of the good.

Other things remaining same, a right shift in the demand curve will lead to:

an increase in the equilibrium price and the equilibrium quantity

The presence of a positive externality in a market leads to an underproduction of the good an overproduction of the good a deadweight loss a fall in the consumer surplus

an underproduction of the good

If the marginal cost of a perfectly competitive firm producing a good is $50 and the market price of the good is $100, the firm should:

increase its output

If the marginal cost of a perfectly competitive firm producing a good is $50 and the market price of the good is $100, the firm should: increase its output. try to decrease the market price. decrease its output. try to increase the market price.

increase its output.

Helium is lighter than air and thus can be used to make party balloons float. Helium is also an inert gas that is vital for many industrial applications (such as medical imaging technology) that require achieving super low temperatures. This relatively new industrial application for helium has caused the demand for helium to ____. This has resulted in a/an ____ in the price of party balloons since helium is a/an _____ for these balloons. Correct!

increase: increase: input

In a marketplace, prices_________.

are a trade-off

In a perfectly competitive market, situations of surplus or shortage of a good:

are self-corrected due to the competitive nature of the market

In a perfectly competitive market, situations of surplus or shortage of a good:

are self-corrected due to the competitive nature of the market.

Consider a market where there are many firms with different cost structures. When determining which firms enter the market first, we look at ____________.

average total cost

In a game with mixed strategies, does either of the players have a dominant strategy? Why or why not? yes, because dominant strategies involve picking random strategies no, because dominant strategies involve picking random strategies. no, because the best choice in a mixed strategy game is to pick a random strategy. yes, because the best choice in a mixed strategy game is to pick a random strategy.

no, because the best choice in a mixed strategy game is to pick a random strategy.

Space on a popular, public beach is __________ in consumption. excludable but non-rival non-excludable and non-rival non-excludable but rival excludable and rival

non-excludable but rival

The following table shows the total output of bread produced by different numbers of workers in a bakery. Number of Loaves Number of Workers 0- 0 12- 1 26- 2 40- 3 50- 4 58- 5 60- 6 59- 7 Refer to the table above. The marginal product of workers falls below zero when the ________ worker is hired. Group of answer choices

seventh

An expected increase in the market price of oil in the coming year is likely to __________ in the current year.

shift the supply curve of oil to the left

Alec and Kim used to be much better friends than they are now. The problem is what to do about Christmas gifts? If they wait until Christmas morning and move simultaneously, their payoff matrix is given below. If Alec commits at Thanksgiving time not to buy a gift for Kim, Kim will find it in her best interest to buy a gift for Alec not to buy a gift for Alec indifferent both B and C

not to buy a gift for Alec

Suppose in Q22 payoff matrix, Alec commits at Thanksgiving time to buy a gift for Kim, Kim will find it in her best interest to buy a gift for Alec not to buy a gift for Alec indifferent both B and C

not to buy a gift for Alec

Five players are given $10 each and asked to contribute any portion of it to a group account. They are also told that the total collection will be doubled and distributed equally among each of them. In this case, the players are likely to contribute __________. $1 each $10 each nothing $5 each

nothing

The graph below shows the short-run cost curves and three possible marginal revenue curves for a perfectly competitive firm. If the firm were facing MR3, then we know that this firm should __________.

shut down, since it is incurring a loss that is greater than the fixed costs that must be paid if it shuts down.

If a monopoly engages in first-degree price discrimination: producer surplus is minimized. social surplus is maximized. the deadweight loss is maximized. consumer surplus is maximized.

social surplus is maximized.

Increases in the marginal product of labor can be attributed to:

specialization of workers

The market demand is the ________ of the individual demand of all the potential buyers.

sum

A best response is ___________. one player's optimal action choice irrespective of the action of the other player an action choice that always results in a zero payoff to the opponent one player's optimal action choice taking the other player's action as given an action choice that results in equal payoffs to all the players in a game

one player's optimal action choice taking the other player's action as given

A _________ is the privilege granted to an individual or company by the government, which gives them the sole right to produce and sell a good. brand patent copyright trademark

patent

Greenaqua Corp. was given the exclusive right to produce and sell its newly introduced water purifier for 20 years. The right granted to Greenaqua is an example of a: patent blueprint copyright trademark

patent

Sale of a popular energy drink called 7D was banned in Bonland after a study revealed that one of its ingredients increases the risk of cancer. This legislation is an example of _______. consumer sovereignty indirect regulation paternalism internalization of externalities

paternalism

Taxes listed as Federal Insurance Contribution Act taxes on the employee paystub are payroll taxes value-added taxes income taxes excise taxes

payroll taxes

A ________ externality occurs when a market transaction affects others through market prices. positive negative production negative consumption pecuniary

pecuniary

Jack wants to buy a new house. But the surge in housing demand over the last few months has led to a sharp increase in housing prices making it impossible for him to afford one on his current income. This is an example of a positive externality negative externality pecuniary externality conspicuous externality

pecuniary externality

Which of the following is necessary for efficient markets? positive externality negative externality pecuniary externality Free-riding

pecuniary externality

The term ________ refers to how the burden of the tax is distributed across various agents in the economy. tax funding tax incidence tax haven tax discrimination

tax incidence

Negative values of the price elasticity of demand of a good can be attributed to:

the Law of Demand

The quantity demanded of a good is___________.

the amount of the good that buyers are willing to purchase at a given market price

The quantity supplied of a good is _______.

the amount of the good that sellers are ready to supply at a given price

When the marginal cost curve lies below the average cost curve,

the average cost curve slopes downward

Average total cost decreases with an increase in output because: the marginal cost of production increases with an increase in output. diminishing marginal returns sets in after a particular level of production. the total variable cost decreases with an increase in output. the average fixed cost decreases with an increase in output.

the average fixed cost decreases with an increase in output.

The tax incidence on sellers is higher if the buyers and sellers of a good are equally sensitive to price changes the buyers are more sensitive to price changes than the sellers the sellers are more sensitive to price changes than the buyers the number of buyers in a market is larger than the number of sellers

the buyers are more sensitive to price changes than the sellers

Tax incidence refers to ____________. who bears the burden of a tax. how much revenue a tax generates. The marginal tax rate the extent to which a tax is proportional.

who bears the burden of a tax.

If a good is excludable, one person's use of the good reduces the amount of the good available to others people can be prevented from using the good more than one person cannot use the good at the same time several people can use the good simultaneously

people can be prevented from using the good

Economies of scale in production act as a source of: legal market power. natural market power. restricted market power. regulated market power.

natural market power.

If a monopolist owns or controls a key resource necessary for production, it is a source of: legal market power. natural market power. regulated market power restricted market power.

natural market power.

If a monopolist owns or controls a key resource necessary for production, it is a source of: natural market power. restricted market power. legal market power. regulated market power.

natural market power.

A chemical factory releases its byproducts in a nearby river, which harms aquatic flora and fauna. This is an example of a ____________. free-rider problem pecuniary externality positive externality negative externality

negative externality

Traffic congestion is an example of a positive externality negative externality pecuniary externality free-rider problem

negative externality

The Coase Theorem states that positive externalities lead to higher market prices negative externalities lead to lower equilibrium output transaction costs are higher in free markets negotiation between economic agents leads to an efficient allocation of resources

negotiation between economic agents leads to an efficient allocation of resources

The Coase theorem relies on internalizing externalities through ____________. the provision of corrective subsidies negotiations between the parties involved the imposition of corrective taxes social enforcement mechanisms

negotiations between the parties involved

Refer to the scenario above. Collectively, the firms will be better off if: Firm 1 chooses to dump its waste into the river while Firm 2 chooses not to dump its waste. Firm 2 chooses to dump its waste into the river while Firm 1 chooses not to dump its waste. both firms choose to dump their waste into the river. neither of the firms dumps its waste into the river.

neither of the firms dumps its waste into the river.

If with a small decrease in the price of a good, the quantity supplied falls to zero, the supply of the good is said to be:

perfectly elastic

Scenario: Two factories dump their waste in a river. This has led to the contamination of the water which is also used in the production process. The matrix below shows the profits of the two firms based on their respective decisions to dump their waste into the river. Note that each firm's choice affects the other firm's profit. The first number listed in each cell is the payoff to the row player and the second number listed is the payoff to the column player. Refer to the scenario above. Collectively, the firms will be better off if: neither of the firms dumps its waste into the river. Firm 2 chooses to dump its waste into the river while Firm 1 chooses not to dump its waste. Firm 1 chooses to dump its waste into the river while Firm 2 chooses not to dump its waste. both firms choose to dump their waste into the river.

neither of the firms dumps its waste into the river.

Some economists believe the threat of unfair monopolies is greater today than when the Sherman Act was first enacted. They argue that modern software can gain monopoly status and establish a barrier to entry through ____________. greater costs in applying for patents and copyrights. network externalities. increased access to venture capital money. the ability to raise money from the stock market.

network externalities.

In a perfectly competitive market, if market price is higher than the average total cost of production, -firms will incur losses in the long run -firms will make profits in the long run -new firms will enter the industry -firms will exit the industry

new firms will enter the industry

In a perfectly competitive market, if market price is higher than the average total cost of production, ________. firms will incur losses in the long run firms will make profits in the long run firms will exit the industry new firms will enter the industry

new firms will enter the industry

An outcome is Pareto efficient if: - an individual can be made better off without making someone else worse of - benefits of the outcome are equally distributed among all the participants - no individual can be made better off without making someone else worse of - costs of the outcome are equally shared by all the participants

no individual can be made better off without making someone else worse of

In a competitive market equilibrium, the allocation of the social surplus is such that ____________. equity among the participants is attained. all participants are equally satisfied with the outcome. no individual can be made better off without making someone else worse off. no individual can be made better off or worse off

no individual can be made better off without making someone else worse off.

The marginal social cost of producing the last unit of a good is $1.10 while the consumers' willingness to pay for the last unit is $0.80. The deadweight loss from the production of the last unit of the good in equilibrium is ________. $1.90 $0.30 $0.50 $1.10

$0.30

A buyer is willing to buy 10 units of a good at a maximum price of $10 per unit. The reservation value of the buyer in this case is: $1 $10 $20 $100

$10

Refer to the scenario above. In equilibrium, Beth's payoff is ___________ to win this game. $10 $0 $20 $50

$10

Suppose a market has only one seller and only one buyer of a good. The buyer has a reservation value of $25 and the seller has a reservation value of $15. The market price of the good is determined at $20. If they trade, the social surplus will be $10 $20 $40 $60

$10

The price charged by a monopolistic competitor for each unit of a good is $7. If it produces 5,000 units of the good at a total cost of $25,000, what is his profit? $7,000 $35,000 $8,000 $10,000

$10,000

A firm sells 20 units of a good at a price of $5 per unit. If the average cost of production of the good equals $3 per unit, the firm's revenue is:

$100

A firm sells 20 units of a good at a price of $5 per unit. If the average cost of production of the good equals $3 per unit, the firm's revenue is: $40 $120 $100 $60

$100

Assume that a combination of 10 bottles of wine and 2 cartons of milk lies on a consumer's budget constraint. If the price of one bottle of wine is $10, and one carton of milk is $1, what is the consumer's income?

$102

The following table displays the reservation values of eight buyers and eight sellers where each individual wants to buy or sell a calculator Refer to the table above. If the market is perfectly competitive, the equilibrium price of calculators is: $20 $6 $2 $12

$12

Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000. Refer to the scenario above. If the market for Good Y is monopolistically competitive, a firm producing Good Y will shut down production in the short run if price falls below ________. $200 $50 $60 $120

$120

A monopolistic competitor produces 1,200 units of a good at an average cost of $120 per unit. If the price charged is $135, calculate his total profit. $18,000 $1,100 $13,500 $2,000

$18,000

If the total revenue collected by the federal government in a particular year is $1.2 billion and the total amount spent by the government during the same year is $3.8 billion, what is the budget deficit? $2.6 billion $2.2 billion $5 billion $1.6 billion

$2.6 billion

$250

John is ready to pay $5 for an extra loaf of bread. Due to an ongoing discount in the store, he gets a loaf for $2. John's consumer surplus from the purchase is

John is ready to pay $5 for an extra loaf of bread. Due to an ongoing discount in the store, he gets a loaf for $2. John's consumer surplus from the purchase is ________.

John is ready to pay $5 for an extra loaf of bread. Due to an ongoing discount in the store, he gets a loaf for $2. John's consumer surplus from the purchase is _________. $2.50 $10 $3 $2

Refer to the figure above. What is the market-wide consumer surplus when the market price of wine is $18?

$3,000

A firm sells 30 units of its product at a price of $5 per unit. It incurs a fixed cost of $100 and a variable cost of $20. The firm's profit is:

$30

A firm sells 30 units of its product at a price of $5 per unit. It incurs a fixed cost of $100 and a variable cost of $20. The firm's profit is: Group of answer choices

$30

If a firm faces an average total cost of $100 and sells its product for $115, how much profit does it make when it sells 20 units of the product? $200 $115 $300 $800

$300

If a firm faces an average total cost of $100 and sells its product for $115, how much profit does it make when it sells 20 units of the product? $200 $300 $115 $800

$300

Refer to the scenario above. What is the quantity effect of the price change? $50 $75 $150 $300

$300

A firm with a fixed cost of $300 every month and variable cost of $200 every month decides to shut down. In such a situation it would lose:

$300 every month

A firm with a fixed cost of $300 every month and variable cost of $200 every month decides to shut down. In such a situation it would lose: $0 every month. $500 every month. $200 every month. $300 every month.

$300 every month.

The government of Lithasia ran a budget deficit of $60,000 in 2014. If the tax revenue of the Lithasian government in 2014 was $320,000,000, how much did the government spend in that year? $49,000,000 $320,060,000 $1,060,000 $319,940,000

$320,060,000

The government of Lithasia ran a budget deficit of $60,000 in 2017. If the tax revenue of the Lithasian government in 2017 was $320,000,000, how much did the government spend in that year? $319,940,000 $1,060,000 $320,060,000 $49,000,000

$320,060,000

Suppose a market has only one seller and only one buyer of a good in the market. The buyer is willing to pay $50 for the good and the seller is willing to accept $15. The market price of the good is determined at $30. If they trade, the social surplus will be ________. $35 $45 $15 $65

$35

If the producer surplus in a market for a good is $36 and the consumer surplus in the market for the same good is $9, the social surplus in the market is $4 $27 $45 $325

$45

Suppose you are a monopolist, and you have two customers, A and B. Each will buy either zero or one unit of the good you produce. A is willing to pay up to $45 for your product; B is willing to pay up to $10. You produce this good at a constant average and marginal cost of $5. If you could not engage in third-degree price discrimination, what price would you charge? $55. $15. $10. $45.

$45.

The marginal cost and total revenue of a firm are $5 and $275, respectively. The reservation value of the seller in this case is $0 $5 $55 $275

If a seller's reservation value for a good is $10 and the price at which the good is sold is $15, his producer surplus is: $5. $25. $150. $1.5.

$5.

The graph on the right represents the demand, marginal revenue, and marginal cost curves for a monopoly. What price should this monopolist charge to maximize profits? $5.00. $4.50. $2.00. $4.00.

$5.00.

Refer to the figure above. What is the loss in the market-wide consumer surplus when the price of wine changes from $9 to $18?

$57,000

Refer to the figure above. What is the market-wide consumer surplus when the market price of wine is $9?

$60,000

Refer to the figure above. What is the market-wide consumer surplus when the market price of wine is $9? $180,000 $210,000 $60,000 $90,000

$60,000

A firm has an average total cost of $50. If it sells 20 units of its product at $80 each, what is its profit?

$600

A firm has an average total cost of $50. If it sells 20 units of its product at $80 each, what is its profit? $600 $1,000 $30 $1,600

$600

Refer to the table above. If the firm is a monopolistic competitor, what is the equilibrium price charged by the firm? $57 $80 $77 $65

$65

If a buyer enjoys a consumer surplus of $25 when he purchases a good for $50, his willingness to pay for the good is $2 $25 $50 $75

$75

The following table shows the total benefit that Jenny derives from consuming different quantities of chocolate. Quantity of Chocolate Consumed Total Benefit ($) 0- 0 1- 10 2- 18 3- 24 4- 29 5- 30 Refer to the table above. What is the marginal benefit that Jenny derives from the second unit of chocolate?

Suppose a monopolistic competitor produces 2,000 units of the good in equilibrium and charges a price of $10 for each unit. If the average total cost of producing 2,000 units of the good is $6, what is the total profit earned by the producer? $2,000 $8,000 $4,000 $20,000

$8,000

What is the budget surplus if the total amount of taxes collected by a local government is $171,000 and the total amount spent is $90,000? $81,000 $100,000 $70,000 $262,000

$81,000

A firm producing 10 units of output incurs a total cost of $800. When it produces 11 units, the total cost increases to $890. What is the marginal cost of producing the eleventh unit?

$90

Suppose AMD is considering cloning Intels latest CPU chip. If AMD enters Intels market, Intel can play Mean, expand its output, drop prices, and try to make AMDs profit as small as possible or play Nice by cutting back its output and sharing the market. AMD and Intel both know that after all moves are complete, the time-discounted profits of future chip production in billions of dollars are given below. Which of the following strategies are Nash equilibria? (Out, Mean) (In, Nice) (In, Mean) (Out, Nice)

(In, Nice)

Alec and Kim used to be much better friends than they are now. The problem is what to do about Christmas gifts? If they wait until Christmas morning and move simultaneously, their payoff matrix is given below. Which of the following strategies are Nash equilibria? (Gift, Gift) (Gift, No) (No, Gift) (No, No)

(No, No)

In a small isolated town, there are two types of people, saints and crooks. In business dealings between any two residents of this town, the payoffs are below. Note that the buyer choose the rows and seller choose the columns. Which of the following strategies are Nash equilibria? (5,5)(0,9) (9,0)(-2,-2) (Saint, Saint) (Saint, Crook) (Crook, Crook) None are Nash equilibria

(Saint, Crook)

If a seller's marginal cost is $25, and the price at which the good is sold is $15, the producer surplus is -$10 $10 $15 $25

-$10

If a seller's marginal cost is $25, and the price at which the good is sold is $15, the producer surplus is ________. $25 $10 -$10 $15

-$10

When the price of wine is $10 per bottle, Thomas purchases 30 bottles every month. Later, the government introduces a 50% tax on all alcoholic beverages, which is to be completely borne by consumers. This reduces Thomas's consumption to 20 bottles of wine a month.

-1

When the price of a good increases by 300%, the quantity supplied of the good increases from 200 units to 900 units. The price elasticity of supply of the good is:

1.17

The total cost of a firm is $50, the average variable cost is $2, and the average fixed cost is $3. How may units of the output does the firm produce?

10 units

The figure below shows the demand, supply, and marginal social bene t curves for Good Y. Social welfare will be maximized if units of Good Y are produced. 9 million 13 million 20 million 16 million

16 million

Assume that a consumer can spend $20 on two goods, pens and pencils. If the price of one pen is $5 and the price of one pencil is $2, which of the following combinations of the two goods represents a point on the consumers budget constraint?

2 pens and 5 pencils

Assume that a consumer can spend $20 on two goods-pens and pencils. If the price of one pen is $5 and the price of one pencil is $2, which of the following combinations of the two goods represents a point on the consumers budget constraint?

2 pens and 5 pencils

Mr. Smith pays $20,000 annually as tax. If his annual income is $100,000, what is his average tax? 5% 12% 20% 2%

20%

Refer to the figure above. What is the profit-maximizing quantity that the monopolist should produce if it faces a constant marginal cost of $5? 400 units 600 units 200 units 300 units

200 units

A firm produced 376 units with 10 workers. When the eleventh worker was hired, the output increased to 398 units. The marginal product of the eleventh worker is:

22 units

A firm produced 376 units with 10 workers. When the eleventh worker was hired, the output increased to 398 units. The marginal product of the eleventh worker is: 398 units 36.18 unit 37.6 units 22 units

22 units

A firm produces 200 units of a good when it employs 7 workers. The marginal product of the eighth worker is 46 units. If the eighth worker is hired, the firm's total product will increase to:

246 units

Refer to the table. If Maxine earns $40,000, which of the following would be her marginal tax rate and her average tax rate? 25%; about 16% about 14%; 25% 25%; about 14% 15%; about 16%

25%; about 14%

A firm earns $600 of total revenue from selling its product at $200 per unit. If the per-unit cost of producing the good is $150, the firm sells _______ units(s) of the good Group of answer choices

A firm earns $600 of total revenue from selling its product at $200 per unit. If the per-unit cost of producing the good is $150, the firm sells _______ units(s) of the good.

Suppose there are five firms in an industry. Their sales (that is, total revenue) are as follows: Firm 1: 98 million Firm 2: 46 million Firm 3: 46 million Firm 4: 14 million Firm 5: 6 million The Herfindahl-Hirschman Index (HHI) for this industry is (Enter your response as an integer.) 3,312 2,312 5,312 4,312

3,312

Refer to the figure above. What is the profit-maximizing quantity that the monopolist should produce if it faces a constant marginal cost of $3? 300 units 400 units 200 units 600 units

300 units

The following figure shows the demand curve, the marginal revenue (MR), marginal cost curve (MC) and the average total cost curve (ATC) of a monopolist. Refer to the figure above. What is the profit-maximizing quantity for the monopolist? 300 units 550 units 500 units 400 units

300 units

The following table shows the total cost incurred by a firm to produce different levels of output. It also shows the price that consumers are willing to pay for each level of output. Refer to the table above. If the firm is a monopolistic competitor, up to what output will the firm produce? 6 UNITS 2 UNITS 4 UNITS 5 UNITS

4 UNITS

Refer to the scenario above. Jack will derive ________ units of utility if he tries to move the tree while Jill does not try at all. 10 -2 -5 5

Scenario: Jack and Jill have gone out for cycling and they have come to a place where the road is obstructed by a fallen tree. They can move the tree if both of them try. If neither of them tries, they have to turn back and reach home very late. However, if one of them tries while the other does not help, the one who tries will have a muscle sprain and will not be able to move the tree. The matrix below shows the utility each of them derives in each situation. The first number listed in each cell is the payoff to the row player and the second number listed is the payoff to the column player. Refer to the scenario above. Jack will derive ________ units of utility if both of them try to move the tree. -5 -2 5 10

Sharon consumes 10 chocolates when the price of one chocolate is $2. If her elasticity of demand for chocolates is -1, she consumes ________ chocolates when the price increases to $4.

Sharon consumes 10 chocolates when the price of one chocolate is $2. If her elasticity of demand for chocolates is -1, she consumes _________ chocolates when the price increases to $4.

Refer to the table above. If the market is perfectly competitive, the equilibrium quantity of calculators is: 8 units 3 units 6 units 5 units

5 units

Refer to the table above. What is the market demand for wine when the price is $3?

50 units

The following table shows the total output produced by different numbers of workers in a shoe factory. Output per Day (pairs) Number of Workers 0- 0 50- 1 112- 2 180- 3 225- 4 260- 5 280- 6 Refer to the table above. What is the marginal product of the third worker?

68 pairs of shoes

Refer to the table above. What is the market demand for wine when the price is $1?

76 units

Refer to the scenario above. Jack will derive ________ units of utility if Jill tries to move the tree while he does not try at all. 10 -2 5 -5

??? NOT -5 ??? Ch 13 HW

Refer to the scenario above. Which of the following is true? Firm 2 should never offer a discount. Firm 2 should offer a discount if Firm 1 offers a discount. Both firms should offer a discount. Firm 1 should never choose to offer a discount.

??? NOT Both firms should offer a discount. ??? Ch 13 class quiz pt 2

Scenario: Two friends are playing a game. The rules of the game are simple. Each player is given a bag containing a white ball and a black ball, and the two are asked to simultaneously draw one ball each. They are informed about their payoffs just before the game begins, which are shown in the matrix below. The first number listed in each cell is the payoff to the row player, and the second number listed is the payoff to the column player. Refer to the scenario above. Which of the following is true? Nash equilibrium occurs if both the players draw white balls. Nash equilibrium occurs if Player 2 draws a black ball while Player 1 draws a black ball. There is no Nash equilibrium in this game. Player 1 should draw a black ball if he expects Player 2 to draw a white ball.

??? NOT Nash equilibrium occurs if Player 2 draws a black ball while Player 1 draws a black ball. ??? Ch 12 HW

In a small isolated town, there are two types of people, saints and crooks. In business dealings between any two residents of this town, the payoffs are below. Note that the buyer choose the rows and seller choose the columns. Which of the following strategies are Nash equilibria? (7,7)(0,11) (11,0)(4,4) (Saint, Saint) (Saint, Crook) (Crook, Crook) None are Nash equilibria

??? NOT None are Nash equilibria ??? Ch 13 class Quiz pt 2

3A market in which a firm emerges as a monopoly due to large economies of scale is referred to as: a natural monopoly. a regulated monopoly. a legal monopoly an exclusive monopoly.

??? NOT a natural monopoly! ???

Scenario: Two friends have settled on a unique strategy to decide who will complete his homework first and help the other. They have agreed to simultaneously make one of the three symbols with their fists - a rock, a paper, or scissors. Simple rules of "rock breaks scissors, scissors cut paper, and paper covers rock" dictate which symbol beats the other. If both of them hold out the same symbols, the game is a tie. Refer to the scenario above. This is an example of a(n) ________. prisoners' dilemma zero-sum game variable-sum game extensive-form game

??? NOT extensive-form game ?? Ch 13 HW

Refer to the scenario above. What is the price effect of the price change? $50 $75 $100 $250

???? NOT $75 ???

Suppose Boeing and Airbus are both considering expanding their plant capacity as a strategic move but cant observe their opponents move until their own move has been determined. The following are time-discounted values of all future profit streams in billions of dollars. Which of the following strategies are Nash equilibria? A. (Expand, Expand) B. (Expand, Don't) C. (Don't, Expand) D. B and C

???? NOT A. (Expand, Expand) ????

A firm is experiencing economies of scale when its average total cost declines as more output is produced. The table below shows the long-run total costs of three different firms. Do firms 1 and 2 experience economies of scale? Or do they experience diseconomies of scale?

???? NOT Both firms are experiencing economies of scale. ?????

The following figure shows the marginal cost curves of two profit-maximizing firms—Firm A and Firm B—in a perfectly competitive market Refer to the figure above. Which of the following statements is true? - Firm A produces at a lower marginal cost. - The profit-maximizing level of output of Firm B will be greater than that of Firm A at all prices. - For a particular market price, Firm A will enjoy a greater producer surplus. - Firm B will have a higher reservation value than Firm A.

???? NOT Firm B will have a higher reservation value than Firm A. ???? Homework Ch. 7

The total producer surplus in the entire market is given by the: - product of the individual seller's surplus. - area between the market supply curve and the market demand curve. - sum of all the individual sellers' producer surplus. - area between the market demand curve and the price line.

???? NOT area between the market supply curve and the market demand curve. ???? Homework Ch. 7

In a zero-sum game, __________. each player earns a zero payoff irrespective of the strategy one chooses each player has a dominant strategy one player's loss is another player's gain each player chooses a pure strategy

???? NOT each player earns a zero payoff irrespective of the strategy one chooses ???? Ch 13 HW

Deadweight loss refers to the loss in __________. consumer surplus due to an increase in the market price total surplus due to a market distortion such as an externality total surplus due to a change in consumers' preferences producer surplus due to a fall in the market price

???? NOT producer surplus due to a fall in the market price ????

Suppose Boeing and Airbus are both considering expanding their plant capacity as a strategic move but cant observe their opponents move until their own move has been determined. The following are time-discounted values of all future profit streams in billions of dollars. Which of the following strategies are Nash equilibria? (0.30,0.20)(1,0.40) (0.80,1.80)(1.10,1.50) (Expand, Don't) (Don't, Don't) (Expand, Expand) None are Nash equilibria

????? NOT (Don't, Don't) ????? Class Quiz Ch 13 pt. 2

A firm is experiencing economies of scale when its average total cost declines as more output is produced. The table below shows the long-run total costs of three different firms. Minimum efficient scale is the lowest level of output where long-run average total cost is minimized. Firm 3's minimum efficient scale occurs when the output is ______ unit(s).

????? NOT 4 ?????

Months ago you spent $30 on a ticket to see your favorite musician. However, you start having doubts the day of the show because you do not feel prepared for an exam the following day. Which of the following bits of information should (according to the ideas about sunk costs discussed in the chapter) influence your final decision? You learn there will be free pizza at the concert; thus, you will no longer have to spend $10 on dinner.

????? NOT This does not impact your decision since it is still a sunk cost that will not impact your decision. ?????

Months ago you spent $30 on a ticket to see your favorite musician. However, you start having doubts the day of the show because you do not feel prepared for an exam the following day. Which of the following bits of information should (according to the ideas about sunk costs discussed in the chapter) influence your final decision? You notice a mistake on your credit card statement! You paid $20 for the ticket, not $30.

????? NOT This lower cost will make you more likely to attend the show. ??????

Refer to the figure above. If the price of a sweater is $3 and the budget constraint of the consumer is B3, his income is:

??????

When the price of milk is $3 per bottle, Steve purchases 20 bottles of milk. When the price increases to $6, Steve's consumption falls to 15 bottles. Steve's elasticity of demand for milk is:

??????

When the price of milk is $3 per bottle, Steve purchases 20 bottles of milk. When the price increases to $6, Steve's consumption falls to 15 bottles. Steve's elasticity of demand for milk is:

???????

??????? NOT 46.7 ????

Vaccination against a disease helps in preventing the spread of the disease. Which of the following can help in increasing the number of people vaccinated to the socially optimal level? A life insurance A health tax An income tax A corrective tax

A corrective tax

Which of the following pairs of goods is likely to be considered substitutes?

A Ford car and public transportation

The price at which a seller is indifferent between making a sale and not doing so is known as his ____________. If you are the only buyer, and you know that the lowest ask price is $3, should you accept this offer? willingness-to-sell breakeven point. reservation price. A and C only.

A and C only.

Which of the following statement is true?

A binding price ceiling will always cause the quantity demanded to exceed the quantity supplied.

Which of the following is NOT an example of a market?

A city requires homeowners to pay $500 for putting in a sidewalk on their street

Smoking increases the risk of lung infections not only for active smokers but also for other people inhaling the smoke passively. Which of the following will help in reducing smoking? A health insurance A health tax A corrective tax A life insurance

A corrective tax

Which of the following factors is likely to lead to an increase in the quantity demanded of pens?

A fall in the price of pens

Which of the following is true of a duopoly with differentiated products? A firm loses all its customers when its rival lowers the price of its product A firm faces a perfectly inelastic demand curve A firm does not lose all its customers when its rival lowers the price of its product A firm faces a perfectly elastic demand curve

A firm does not lose all its customers when its rival lowers the price of its product

Which of the following is true of a duopoly with differentiated products? A firm loses all its customers when its rival lowers the price of its product. A firm faces a perfectly elastic demand curve. A firm faces a perfectly inelastic demand curve. A firm does not lose all its customers when its rival lowers the price of its product.

A firm does not lose all its customers when its rival lowers the price of its product.

Which of the following taxes does NOT lead to a deadweight loss? A proportional income tax A lump-sum tax A progressive income tax A proportional tax on property

A lump-sum tax

Which of the following statements is true? A monopolist faces an upward sloping demand curve. A perfectly competitive firm faces an upward sloping demand curve A monopolist can increase the price of its product and not lose all of its business. A perfectly competitive firm can increase the price of its product without losing its business

A monopolist can increase the price of its product and not lose all of its business.

The following figure shows the marginal revenue (MR) curve and demand curve faced by a monopolist. The monopolist faces a constant marginal cost of $3. Refer to the figure above. What is the optimal quantity that the monopolist should produce? A) 30 units B) 45 units C) 60 units D) 90 units

A) 30 units

Which of the following statements is true? A monopoly is a price maker because it faces a downward sloping demand curve. A monopoly is a price taker because it faces a downward sloping demand curve. A perfectly competitive firm is a price maker because it faces a downward sloping demand curve. A perfectly competitive firm is a price taker because it faces a downward sloping demand curve.

A monopoly is a price maker because it faces a downward sloping demand curve.

Ron plays loud music, which prevents his neighbor from studying. His neighbor values studying at $5,000, while the cost of soundproofing Ron's room is $3,000. Which of the following problems arises in this scenario? The free-rider problem Moral hazard A negative externality Low transaction costs

A negative externality

Which of the following statements correctly differentiates between a monopoly and a perfectly competitive firm? - A perfectly competitive firm faces an upward sloping demand curve, whereas a monopoly faces a horizontal demand curve. - A perfectly competitive firm sets its product price above its marginal cost, whereas a monopoly sets its product price equal to its marginal cost. - A perfectly competitive firm sets its product price at its marginal cost, whereas a monopoly sets the price above its marginal cost. - A perfectly competitive firm faces a horizontal demand curve, whereas a monopoly faces an upward sloping demand curve.

A perfectly competitive firm sets its product price at its marginal cost, whereas a monopoly sets the price above its marginal cost.

Suppose the government grants an individual or company the exclusive right to intellectual property. In this case, the government is granting a copyright. Which of the following is not likely covered by a copyright? A new song. A photocopier. A work of Art. A photograph.

A photocopier.

Which of the following is an example of a public good? A house in a tourist destination A training program for a company's employees A radio broadcast A magazine subscription

A radio broadcast

Refer to the scenario above. Which of the following is a winning strategy for this game? A random mix of all the three symbols A strategy to always show a paper A strategy to always show a scissor A strategy to always show a rock

A random mix of all the three symbols

Which of the following will lead to a change in the opportunity cost of buying a pen and a pencil?

A twofold increase in the price of pens and a threefold increase in the price of pencils

Q5. If a buyers reservation value for a good is $15 and the price at which he purchases the good is $8, his consumer surplus is: A) $7 B) $1.8 C) -$7 D) $120

A) $7

Q25. −−−−−−−−occurs when an individual has no incentive in paying for a good because failure to pay does not prevent consumption. A) A free-rider problem B) The paradox of thrift C) A tragedy of the commons D) The paradox of plenty

A) A free-rider problem

Which of the following is an example of free riding? A) An individual who sneaks inside a music concert B) A consumer who buys his groceries from a nearby store C) A tax payer who exercises in the public park near his house D) A club member who makes voluntary contributions to the club

A) An individual who sneaks inside a music concert

Q34. Which of the following is true of a progressive tax system? A) High income households pay a higher percentage of their income as taxes. B) Low income households pay a higher percentage of their income as taxes. C) All households pay the same amount of taxes irrespective of their income. D) All households pay the same percentage of their income as taxes.

A) High income households pay a higher percentage of their income as taxes.

Which of the following is true of a progressive tax system? A) High income households pay a higher percentage of their income as taxes. B) Low income households pay a higher percentage of their income as taxes. C) All households pay the same amount of taxes irrespective of their income. D) All households pay the same percentage of their income as taxes.

A) High income households pay a higher percentage of their income as taxes.

Q44. Which of the following occurs when an externality is internalized? A) Higher social well-being B) Higher private benefit C) Larger deadweight loss D) Higher returns to scale

A) Higher social well-being

Which of the following occurs when an externality is internalized? A) Higher social well-being B) Higher private benefit C) Larger deadweight loss D) Higher returns to scale

A) Higher social well-being

Q33. Which of the following programs provides economic security to the elderly, disabled, wid- ows, and fatherless children in the U.S.? A) Social security B) Income security C) Federal household assistance program D) Federal income administration program

A) Social security

Q27. Which of the following leads to the tragedy of the commons? A) The use of common pool resources above the socially optimal level B) The low level of satisfaction derived from the use of common pool resources C) The high rate of taxation on common pool resources D) The tendency of consumers to use common pool resources without paying for them

A) The use of common pool resources above the socially optimal level

A market in which a firm emerges as a monopoly due to large economies of scale is referred to as: A) a natural monopoly. B) an explicit monopoly. C) an implicit monopoly. D) an exhaustive monopoly.

A) a natural monopoly.

Third-degree price discrimination occurs when: A) different groups of consumers are charged different prices. B) consumers are charged different prices at different points of time. C) consumers are charged different prices according to their willingness to pay. D) consumers are charged different prices based on the characteristics of their purchases.

A) different groups of consumers are charged different prices.

A Nash equilibrium occurs if −−−−−−−−. A) each player chooses strategies that are mutual best responses B) each player chooses his or her dominant strategy C) each player chooses only a pure strategy D) each player chooses only a mixed strategy

A) each player chooses strategies

Q6. The invisible hand suggests that: A) individuals working for self-interest will eventually maximize the well-being of society. B) equilibrium in a competitive market is determined independent of demand and supply. C) government intervention is necessary to rectify market imperfections. D) the price mechanism allocates resources only to the people with high income in the country.

A) individuals working for self-interest will eventually maximize the well-being of society.

As the number of firms in an oligopolistic market increases, −−−−−−−−. A) prices tend to decline toward marginal cost B) prices tend to rise above marginal cost C) the market demand for the good tends to fall D) profits earned by firms tend to rise

A) prices tend to decline toward marginal cost

Q17. When buyers and sellers optimize in a perfectly competitive market A) social surplus is maximized B) social surplus is minimized C) only consumer surplus is maximized D) only consumer surplus is minimized

A) social surplus is maximized

Q35. A price ceiling does NOT lead to a deadweight loss if −−−−−−−−. A) the equilibrium market price lies below the price ceiling B) the equilibrium market price lies above the price ceiling C) the price elasticity of market demand is greater than 1 D) the price elasticity of market supply is greater than 1

A) the equilibrium market price lies below the price ceiling

Q50. A black market can emerge in a good if −−−−−−−−. A) the good is taxed heavily B) there is an excess supply of a good C) the consumption of the good is subsidized D) the production of the good is subsidized

A) the good is taxed heavily

Q23. When a Pigouvian tax is imposed, −−−−−−−−. A) the marginal private cost curve shifts upward B) the demand curve shifts rightward C) the marginal social cost curve shifts downward D) the marginal social benefit curve shifts downward

A) the marginal private cost curve shifts upward

Rita and Mike have been caught cheating on an examination. They are taken to separate rooms for interrogation. Their payoff matrix is given below. The first outcome listed in each cell is the payoff to the row player and the second outcome listed is the payoff to the column player. Refer to the scenario above. In this game, the−−−−−−−−−strategy combination gives strictly lower payoffs than the−−−−−−−−−strategy combination. A. (confess, confess); (do not confess, do not confess) B. (confess, do not confess); (do not confess, confess) C. (do not confess, do not confess); (confess, confess) D. (do not confess, confess); (confess, do not confess)

A. (confess, confess); (do not confess, do not confess)

A Nash equilibrium occurs if−−−−−−−−−. A. each player chooses strategies that are mutual best responses B. each player chooses his or her dominant strategy C. each player chooses only a pure strategy D. each player chooses only a mixed strategy

A. each player chooses strategies that are mutual best responses

A game is called a simultaneous move game if−−−−−−−−−. A. players choose their actions at the same time. B. one player chooses her action after the other player makes a move C. players choose mixed strategies to play the game D. players choose their dominant strategies to play the game.

A. players choose their actions at the same time.

the above figure shows a payoff matrix for two firms, A and B, that must choose between a high-price strategy and a low-price strategy. For firm A A. setting a low price is the dominant strategy B. setting a high price is the dominant strategy C. there is no dominant strategy D. doing the opposite of firm A is always the best strategy

A. setting a low price is the dominant strategy

A−−−−−−−−−is a complete plan describing how a player will act. A. strategy B. payoff C. hypothesis D. policy

A. strategy

Which of the following economic tools can be used to solve the tragedy of the commons? Privatization of the resource. Incentives toself-regulate the use of resources Pigouvian tax. All of the above.

All of the above.

Which of the following statements are true regarding the profit-maximizing price charged by a monopolist? It occurs at the quantity where MR= MC It occurs along the elastic part of the demand curve It is greater than MC All of the above.

All of the above.

The price elasticity of demand for a good is likely to be less elastic __________.

All of the above. - the shorter the available time during which consumers can adjust. - the lower the budget share spent on the good. - the smaller the number of close substitutes for the good.

Which of the following are necessary ingredients to the buyer's problem?

All of the given choices. - Consumer's tastes and preferences. - Amount of money the consumer has to spend. - Prices of goods and services.

Which of the following statements correctly describes a perfectly competitive market?

All participants in a perfectly competitive market are price-takers

If an individual only consumes goods X and Y and is currently maximizing her total benefits, which of the following must be true?

All the given choices. - The "equal bang for the buck" rule is adhered to. - MBx/Px = MBy/py - The marginal benefits per dollar spent are the same for both goods.

Which of the following statements is true? An increase in consumer demand can change a natural monopoly into a multi-seller market. A natural monopoly earns higher profits than a monopolistically competitive firm because it faces a horizontal market demand curve. A natural monopoly earns higher profits than a monopolistically competitive firm because it faces an upward sloping market demand curve. A natural monopoly always arises from government intervention in the market.

An increase in consumer demand can change a natural monopoly into a multi-seller market.

Which of the following is likely to lead to a rightward shift in the supply curve of cotton?

An increase in labor productivity due to training programs

At a price of $5 per table, the quantity supplied of tables is 500 units whereas the quantity demanded is 660 units. Given this information, which of the following statements is true?

At $5 per table, there is a shortage in the market.

In an economy, if the government implements a law for individuals that requires them to save at least 25% of their annual income in a social savings plan framed by the government. For supporting this plan, the government raises revenues by implementing income tax rates that are higher compared to the other countries. Which of the following will be a result(s) of this scenario? An increase in the deadweight losses. It strengthens the view of consumer sovereignty. An increase in immigration of high-income None of the above.

An increase in the deadweight losses.

Ron plays loud music, which prevents his neighbor from studying. His neighbor values studying at $5,000, while the cost of soundproofing Ron's room is $3,000. If Ron has the right to listen to music at night, how much does his neighbor need to pay him to stop playing music? Any amount between $5,000 and $8,000 Any amount above $5,000 Any amount below $3,000 Any amount between $3,000 and $5,000

Any amount between $3,000 and $5,000

At a price of $1 per table, the quantity supplied of tables is 100 units, whereas the quantity demanded is 70 units. Given this information, which of the following statements is true?

At a price of $1 per table, there is a surplus in the market

At a price of $1 per table, the quantity supplied of tables is 100 units, whereas the quantity demanded is 70 units. Given this information, which of the following statements is true?

At a price of $1 per table, there is a surplus in the market.

(Continue to Q7) Suppose the university is trying to determine the most efficient way to allocate the rooms such that those who value the rooms the most get them. Which of the following would you suggest as the most efficient?

Auctioning the rooms to the highest bidders.

The first mover in an extensive-form game should use −−−−−−−−to win the game. A) forward induction B) backward induction C) pure strategies D) mixed strategies

B) backward induction

Suppose Boeing and Airbus are both considering expanding their plant capacity as a strategic move but cant observe their opponents move until their own move has been determined. The following are time-discounted values of all future profit streams in billions of dollars. Which of the following strategies are Nash equilibria? (0.40, 0.30)(1.20, 0.60) (0.60, 1.50)(1,0.90) (Expand, Expand) (Expand, Don't) (Don't, Expand) B and C

B and C

A buyer is willing to buy 10 units of a good at a maximum price of $10 per unit. The reservation value of the buyer in this case is: A) $1. B) $10 C) $20. D) $100.

B) $10

Q46. If the total revenue collected by the federal government in a particular year is $1.2 billion and the total amount spent by the government during the same year is $3.8 billion, what is the budget deficit? A) $1.6 billion B) $2.6 billion C) $2.2 billion D) $5 billion

B) $2.6 billion

Q2. The marginal cost and total revenue of a firm are $5 and $275, respectively. The reservation value of the seller in this case is −−−−−−− A) $0 B) $5 C) $55 D) $275

B) $5

The marginal cost and total revenue of a firm are $5 and $275, respectively. The reservation value of the seller in this case is −−−−−−−−. A) $0 B) $5 C) $55 D) $275

B) $5

Q13. Which of the following best describes a command economy? A) An economy that is characterized by barter trade of goods and services B) An economy where strong controls are imposed by the ruling authority C) An economy in which resources are allocated through the price mechanism. D) An economy in which there are a few privately owned firms

B) An economy where strong controls are imposed by the ruling authority

Which of the following statements correctly identifies a similarity between network effects and economies of scale? A) Both are related to costs incurred by a firm. B) Both act as barriers to entry in a market. C) Both act as disincentives to monopolies. D) Both are related to the number of consumers using a firm's product.

B) Both act as barriers to entry in a market.

An oligopoly model in which sellers compete on quantities rather than prices is called a −−−−−−−−model. A) Bertrand B) Cournot C) Ricardian D) Keynesian

B) Cournot

Q21. Which of the following is an implication of the Coase Theorem? A) Bargaining cannot lead to an efficient allocation of resources. B) Government intervention is not always necessary to solve externality problems. C) Negotiation leads to an efficient outcome if transaction costs are high. D) Taxation leads to an efficient allocation of resources regardless of who holds the property rights.

B) Government intervention is not always necessary to solve externality problems.

Q37. Which of the following statements is true? A) Price controls strengthen the functioning of the invisible hand. B) Price controls weaken the functioning of the invisible hand. C) Price controls always benefit buyers and make sellers worse off. D) Price controls always benefit sellers and make buyers worse off.

B) Price controls weaken the functioning of the invisible hand.

Which of the following statements is true? A) Price controls strengthen the functioning of the invisible hand. B) Price controls weaken the functioning of the invisible hand. C) Price controls always benefit buyers and make sellers worse off. D) Price controls always benefit sellers and make buyers worse off.

B) Price controls weaken the functioning of the invisible hand.

Which of the following refers to diminishing marginal returns? A) The revenue of a cell phone manufacturer decreased when it increased its product price. B) The additional output produced in a firm decreased as more workers were hired. C) The profits of an entrepreneur increased substantially after he fired a few of his employees. D) The total output of a firm decreased as more workers were hired.

B) The additional output produced in a firm decreased as more workers were hired.

Which of the following examples best describes the Law of Demand? A) When John's income doubles, his telephone bill also doubles. B) When the price of bread doubles, John's consumption of bread halves. C) When the price of watches increases, a local manufacturer starts offering more watches for sale. D) When a new anti-tobacco commercial is released, the consumption of tobacco products de- creases sharply.

B) When the price of bread doubles, John's consumption of bread halves.

Q10. The entry of new firms into a perfectly competitive market will cause: A) an increase in the profitability of existing firms. B) a decrease in the profitability of existing firms. C) a left shift of the demand curve of the good being produced by the firms. D) a right shift of the demand curve of the good being produced by the firms.

B) a decrease in the profitability of existing firms.

A collusion breaks down if −−−−−−−− . A) a firm charges a price higher than the price set by the other colluding firms B) a firm charges a price lower than the price set by the other colluding firms C) the price set by the colluding firms equals the marginal cost of production D) the price set by the colluding firms exceeds the marginal cost of production

B) a firm charges a price lower than the price set by the other colluding firms

Collusion occurs when firms −−−−−−−−. A) charge a price equal to their marginal cost of production B) conspire to set the quantity they produce or the prices they charge C) compete with each other by setting a price slightly lower than the rival's price D) compete with each other by differentiating their products

B) conspire to set the quantity they produce or the prices they charge

The Herfindahl-Hirschman Index is used to −−−−−−−−. A) measure the price elasticity of demand faced by a firm B) estimate the degree of competition in an industry C) measure the price elasticity of market supply in an industry D) estimate the profit earned by firms in an industry

B) estimate the degree of competition in an industry

Q38. A price floor set above the equilibrium price leads to a(n) −−−−−−−−. A) excess demand for goods in the market B) excess supply of goods in the market C) increase in social well-being D) positive externality

B) excess supply of goods in the market

Q26. Alex is a non-union employee in a factory. If the union negotiates certain benefits for the employees, Alex enjoys all the benefits although he does not pay the union fee. His behavior is an example of −−−−−−−−. A) rent-seeking B) free-riding C) profit maximizing D) rivalry

B) free-riding

In economics, scarcity refers to the situation of: A) optimizing with the use of limited information. B) having more wants than the amount of available resources. C) rationing of available goods and services by the government. D) sellers setting the prices of their products too high for people to be able to afford them.

B) having more wants than the amount of available resources.

From a firm's point of view, when the demand for a good has a price elasticity of 0.5, then, all things remaining the same, a(n): A) increase in the price of the good will decrease the firm's revenue. B) increase in the price of the good will increase the firm's revenue. C) change in the price of the good will not affect the firm's revenue. D) change in the price of the good will not affect the quantity of the good demanded by con- sumers.

B) increase in the price of the good will increase the firm's revenue.

The quantity demanded for a duopolist's product is zero if −−−−−−−−. A) it charges a lower price than its rival B) it charges a higher price than its rival C) it charges the same price as its rival D) it can produce the product at a lower cost

B) it charges a higher price than its rival

A firm will maximize profit at the level of output where: A) its marginal revenue equals total cost. B) its marginal revenue equals marginal cost. C) its total cost equals total revenue. D) its average revenue equals average cost.

B) its marginal revenue equals marginal cost.

Q7. If firms in a competitive industry independently operate to maximize profits, the −−−−−−−− are eventually equalized across the firms. A) total costs B) marginal costs C) profits D) revenues

B) marginal costs

Q15. A −−−−−−−−occurs when an economic activity has a spillover cost that does not affect those directly engaged in the activity. A) positive externality B) negative externality C) gain in producer surplus D) gain in consumer surplus

B) negative externality

Alec and Kim used to be much better friends than they are now. The problem is what todo about Christmas gifts? If they wait until Christmas morning and move simultaneously, theirpayoff matrix is given below. If Alec commits at Thanksgiving time not to buy a gift for Kim,Kim will find it in her best interest A) to buy a gift for Alec B) not to buy a gift for Alec C) indifferent D) both B and C

B) not to buy a gift for Alec

Homogeneous goods are −−−−−−−−. A) perfect compliments B) perfect substitutes C) similar but not identical D) always inferior

B) perfect substitutes

Total surplus is maximized in a(n) −−−−−−−−. A) monopolistically competitive market B) perfectly competitive market C) oligopoly D) monopoly

B) perfectly competitive market

Q39. A minimum wage policy is an example of a −−−−−−−−. A) price ceiling B) price floor C) positive externality D) negative externality

B) price floor

La Dila and Swiss Pro are the only two firms in an industry. The firms charge equal prices for their products which are perfect substitutes. La Dila decides to lower its price slightly. Swiss Pro responds by cutting its price further. This price cutting will continue as long as each firm's −−−−−−−−. A) price is lower than marginal cost B) price is higher than marginal cost C) price is higher than zero D) price is higher than the average fixed cost

B) price is higher than marginal cost

Q11. Without any restrictions in a perfectly competitive market, if there is a sudden rightward shift in the demand for a good: A) sellers of the good will increase the supply of the good at the same price. B) sellers of the good will increase the quantity of the good supplied in the market. C) sellers of the good will decrease the supply of the good at the same price. D) sellers of the good will decrease the quantity supplied.

B) sellers of the good will increase the quantity of the good supplied in the market.

Q36. When existing firms leave a perfectly competitive industry, −−−−−−−−. A) the equilibrium price decreases, while the equilibrium quantity increases B) the equilibrium price increases, while the equilibrium quantity decreases C) both the equilibrium price and quantity increase D) both the equilibrium price and quantity decrease

B) the equilibrium price increases, while the equilibrium quantity decreases

When existing firms leave a perfectly competitive industry, −−−−−−−−. A) the equilibrium price decreases, while the equilibrium quantity increases B) the equilibrium price increases, while the equilibrium quantity decreases C) both the equilibrium price and quantity increase D) both the equilibrium price and quantity decrease

B) the equilibrium price increases, while the equilibrium quantity decreases

The Coase Theorem will breakdown when ____________. when property rights are not clearly defined. there are a large number of agents. agents decide to negotiate directly with each other. Both A and B.

Both A and B.

Q42. If negative externalities are present in a market, −−−−−−−−. A) the price charged in the market is higher than the socially optimal price B) the quantity supplied in the market is larger than the socially optimal level C) the marginal social cost of production is lower than the marginal private cost D) the average cost of production exceeds the marginal cost of production at all output levels

B) the quantity supplied in the market is larger than the socially optimal level

A monopolistically competitive firm shuts down in the short run if −−−−−−−−. A) marginal revenue equals marginal cost B) total revenues do not cover variable costs C) marginal revenue covers average fixed costs D) average total cost exceeds price

B) total revenues do not cover variable costs

Which of the following is true of a payoff matrix? A. It is the representation of only the best response of each player. B. It takes into account all relevant costs and benefits associated with each action of the players. C. It shows the payment made to each factor of production for the production of a good. D. It does not represent all the costs and benefits associated with the choices of the players.

B. It takes into account all relevant costs and benefits associated with each action of the players.

Which of the following is true of a Nash equilibrium? A. A game can have only one Nash equilibrium. B. No player can improve his payoff by changing his strategy once in Nash equilibrium. C. A Nash equilibrium cannot occur if each player is aware of the strategies of other players. D. A Nash equilibrium occurs if each player earns a zero payoff irrespective of the strategy he chooses.

B. No player can improve his payoff by changing his strategy once in Nash equilibrium.

Which of the following statements is true? A. In any game, the best response of a player is also her dominant strategy. B. The best response of a player is not always her dominant strategy. C. A prisoners' dilemma game is an example of a zero-sum game. D. A prisoners' dilemma game is an example of an extensive-form game.

B. The best response of a player is not always her dominant strategy.

A best response is−−−−−−−−−. A. one player's optimal action choice irrespective of the action of the other player B. one player's optimal action choice taking the other player's action as given C. an action choice that always results in a zero payoff to the opponent D. an action choice that results in equal payoffs to all the players in a game

B. one player's optimal action choice taking the other player's action as given

The below figure shows a payoff matrix for two firms, A and B, that must choose between a high-price strategy and a low-price strategy. For firm B A. setting a high price is the dominant strategy B. setting a low price is the dominant strategy C. there is no dominant strategy D. doing the opposite of firm A is always the best strategy

B. setting a low price is the dominant strategy

B. simultaneous-move game

Game theory is the study of _______________ A. policy analysis B. strategic interactions C. program evaluation D. irrational decision making

B. strategic interactions

An oligopoly model in which sellers compete on prices rather than quantities is called a ____________ model. Ricardian Bertrand Cournot Keynesian

Bertrand

There are two firms in an industry and their products are perfect substitutes for each other. Each firm had a market share of 50% and charged equal prices. However, when the demand for the good declined due to a recession, Firm A lowered its price to increase sales. Firm B responded by lowering its price further. This is an example of the ________ of oligopoly. Cournot model Keynesian model Bertrand model Ricardian model

Bertrand model

There are two firms in an industry and their products are perfect substitutes for each other. Each firm had a market share of 50% and charged equal prices. However, when the demand for the good declined due to a recession, Firm A lowered its price to increase sales. Firm B responded by lowering its price further. This is an example of the −−−−−−−−− of oligopoly Bertrand model Cournot Keynesian Ricardian

Bertrand model

Sara and Jim are going to lunch together and rank the restaurant options in the following way. Which of the following restaurant choices are Pareto efficient for Sara and Jim? Blaze Panera Naf Naf Both A and C are correct

Both A and C are correct

Imagine you are a buyer in a double oral auction with a reservation value of $13 and there is a seller asking for $9. If you are the only buyer, and you know that the lowest ask price is $3, should you accept this offer? Yes, accepting an offer from any other seller will reduce your surplus. No, as the only buyer you can extract a lower ask price. Yes, since you will gain $10. Both A and C are correct.

Both A and C are correct.

Firm A uses production technology that affects the environment. Which of the following are command-and-control policies used by the government to regulate firm A? - Firm A is not allowed by the government to produce more than 100 units if it does not use environment-friendly technology. - Firm A has to pay a penalty to the government for not using environment-friendly technology. - The government makes it compulsory for firm A to use environment friendly technology. - Both A and C.

Both A and C.

Which of the following goods have a high excludability? Ordinary private goods. Public goods. Club goods. Both A and C.

Both A and C.

Which of the following statements explains the concept of the tragedy of the commons? It is an example of a positive externality. The open access to common resources results in their depletion through overuse. It results when the free market equilibrium quantity is higher than the optimal equilibrium quantity. Both B and C.

Both B and C.

Refer to the scenario above. What is the equilibrium outcome in this case? Both firms will dump their waste into the river. Neither of the firms will dump its waste into the river. Firm 1 will dump its waste into the river, while Firm 2 will not dump its waste. Firm 2 will dump its waste into the river, while Firm 1 will not dump its waste

Both firms will dump their waste into the river.

Scenario: Two factories dump their waste in a river. This has led to the contamination of the water which is also used in the production process. The matrix below shows the profits of the two firms based on their respective decisions to dump their waste into the river. Note that each firm's choice affects the other firm's profit. The first number listed in each cell is the payoff to the row player and the second number listed is the payoff to the column player. Refer to the scenario above. What is the equilibrium outcome in this case? Firm 1 will dump its waste into the river, while Firm 2 will not dump its waste. Firm 2 will dump its waste into the river, while Firm 1 will not dump its waste. Neither of the firms will dump its waste into the river. Both firms will dump their waste into the river.

Both firms will dump their waste into the river.

Refer to the scenario above. What will the outcome of this game be? Rita will confess while Mike will not confess. Both of them will confess. Neither of them will confess. Mike will confess while Rita will not confess.

Both of them will confess.

Tobacco companies have often argued that they advertise to attract more existing smokers and not to persuade more people to smoke. Suppose there were just two cigarette manufacturers, Jones and Smith. Each can either advertise or not advertise. If neither advertises, they each capture 50 percent of the market and each earns $10 million. If they both advertise, they again split the market evenly, but each spends $2million on ads and so each earns just $8million (remember, advertising is not supposed to encourage more people to smoke). If one company advertises but the other does not, then the company that advertises attracts many of its rival's customers. As a result, the company that advertises earns $12 million and the company that does not earns just $6 million. What is each firm's dominant strategy? Both firms' dominant strategy is to advertise. Smith's dominant strategy is to not advertise and Jones's dominant strategy is to advertise. Smith's dominant strategy is to advertise and Jones's dominant strategy is to not advertise. Both firms' dominant strategy is to not advertise.

Both firms' dominant strategy is to advertise.

Imagine a game in which two drivers drive toward each other on a collision course: one must swerve, or both may die in the crash, but if one driver swerves and the other does not, the one who swerved will be called a "chicken," meaning he is a coward. If they both go straight, then they both die, earning -10 happiness points each. If one goes straight and the other swerves, then the brave driver gets 5 points of happiness and the "chicken" loses 2 points of happiness. If both drivers swerve, then it is a tie and nobody earns any happiness points. Construct the payoff matrix for Driver 1 and Driver 2. Identify the Nash equilibrium(s): Box 2. Box 3. Box 4. Boxes 2 and 3.

Boxes 2 and 3.

Q20. If a firm faces an average total cost of $100 and sells its product for $115, how much profit does it make when it sells 20 units of the product? A) $200 B) $115 C) $300 D) $800

C) $300

Q24. Which of the following is an example of a public good? A) A house in a tourist destination B) A training program for a company's employees C) A radio broadcast D) A magazine subscription

C) A radio broadcast

Which of the following best describes equilibrium? A) A situation where the government intervenes to allocate resources B) A situation where only one individual or firm takes an optimum decision C) A situation where no economic agent would benefit by changing his or her behavior D) A situation where economic agents do not optimize as they do not have perfect information

C) A situation where no economic agent would benefit by changing his or her behavior

Q4. Refer to the figure above. What is the equilibrium price and quantity of the light bulbs? A) Equilibrium price = $25, Equilibrium quantity = 0 units B) Equilibrium price = $25, Equilibrium quantity = 15 units C) Equilibrium price = $15, Equilibrium quantity = 15 units D) Equilibrium price = $5, Equilibrium quantity = 15 units

C) Equilibrium price = $15, Equilibrium quantity = 15 units

Which of the following statements is true? A) Monopoly is characterized by no entry barriers. B) Perfect competition is characterized by high entry barriers. C) Firms in a market with entry barriers are likely to have more market power than firms in a market with no entry barriers. D) Firms in a market with no entry barriers are likely to have more market power than firms in a market with entry barriers.

C) Firms in a market with entry barriers are likely to have more market power than firms in a market with no entry barriers.

In which of the following market structures does a seller have NO market power? A) Monopoly B) Oligopoly C) Perfect competition D) Monopolistic competition

C) Perfect competition

Q14. Which of the following statements is true? A) Maximum social surplus implies equity. B) Pareto efficiency implies equity. C) Taxation causes redistribution of wealth among the members in a society. D) Market prices act as signals that result in equal distribution of income and wealth in the society.

C) Taxation causes redistribution of wealth among the members in a society.

Which of the following statements is true of the demand curve and the marginal revenue curve of a monopolist? A) Both curves overlap at all levels of output. B) Both curves have the same intercept on the quantity axis. C) The demand curve has a higher intercept on the quantity axis than the marginal revenue curve. D) Both curves have different intercepts on both the quantity axis and the price axis.

C) The demand curve has a higher intercept on the quantity axis than the marginal revenue curve.

Which of the following is true of a prisoners' dilemma game? A) A prisoners' dilemma game has multiple Nash equilibria. B) There is no dominant strategy equilibrium in a prisoners' dilemma game. C) The dominant strategy equilibrium in a prisoners' dilemma game is also the Nash equilibri- um. D) The prisoners' dilemma game is an extensive-form game.

C) The dominant strategy equilibrium in a prisoners' dilemma game is also the Nash equilibrium.

Which among the following situations refers to a zero-sum game? A) Two nations trying to strengthen their diplomatic relations B) A business firm deciding upon the terms of partnership C) Two players playing a single game of chess D) Two teams deciding on the rules of a game

C) Two players playing a single game of chess

A firm should shut down in the short run if the price is less than the: A) average fixed cost. B) average total cost. C) average variable cost. D) marginal cost.

C) average variable cost.

Q3. The equilibrium price and quantity of a good under perfect competition are determined: A) by the intersection of the market demand and total revenue curves. B) by the intersection of the total revenue and total cost curves. C) by the intersection of the market demand and market supply curves. D) by the intersection of the market supply and total revenue curves.

C) by the intersection of the market demand and market supply curves.

A monopolistically competitive firm −−−−−−−−in the long run. A) earns low but positive economic profits B) earns high economic profits C) earns zero economic profits D) incurs losses

C) earns zero economic profits

Q16. The marginal social cost curve −−−−−−−−when production involves negative externalities. A) is parallel to the horizontal axis B) is parallel to the demand curve C) lies above the supply curve D) lies to the right of the supply curve

C) lies above the supply curve

Q43. The increasing popularity of hotdogs in a food joint has pushed up their price, making it unaffordable for many students living in the surrounding areas. This is an example of a −−−−−−−−. A) positive externality B) negative externality C) pecuniary externality D) free-rider problem

C) pecuniary externality

Q41. The social cost of producing a good that generates negative externalities is the sum of the −−−−−−−−. A) average variable cost and average fixed cost of production B) average total cost and the marginal cost of production C) private cost and external costs of production D) total fixed cost and total variable cost of production

C) private cost and external costs of production

Q48. The tax incidence on buyers is higher if −−−−−−−− A) the buyers and sellers of a good are equally sensitive to price changes B) the elasticity of the market demand curve is higher than the elasticity of the market supply curve C) the elasticity of the market supply curve is higher than the elasticity of the market demand curve D) the number of sellers in a market is larger than the number of buyers

C) the elasticity of the market supply curve is higher than the elasticity of the market demand curve

Q22. Government invention is required to solve externality problems if −−−−−−−−. A) transaction costs associated with private negotiations are low B) the number of people affected by the externality is small C) the number of people affected by the externality is large D) property rights are clearly defined

C) the number of people affected by the externality is large

The general rule for welfare maximization suggests that in personal equilibrium: A) the ratio of total benefits to price should be identical across all goods. B) the ratio of total benefits to income should be identical across all goods. C) the ratio of marginal benefits to price should be identical across all goods. D) the ratio of marginal benefits to income should be identical across all goods.

C) the ratio of marginal benefits to price should be identical across all goods.

Q18. In a competitive market equilibrium: A) social surplus is minimized. B) all the gains from trade are not realized. C) there is Pareto efficiency. D) all the firms earn positive economic profits.

C) there is Pareto efficiency.

Deadweight loss refers to the loss in −−−−−−−−. A) producer surplus due to a fall in the market price B) consumer surplus due to an increase in the market price C) total surplus due to a market distortion such as an externality D) total surplus due to a change in consumers' preferences

C) total surplus due to a market distortion such as an externality

Q40. A black market is also known as a(n) −−−−−−−−economy. A) open B) closed C) underground D) emerging

C) underground

Which of the following is likely to use the concepts of game theory? A. Deciding on how much to spend on monthly groceries B. Exit decision of competitive firms in the long run C. International trade negotiation D. Pricing decision of a firm operating in a competitive market

C. International trade negotiation

The above figure shows the payoff matrix for two firms, A and B, selecting an advertising budget. The firms must choose between a high advertising budget and a low advertising budget. A Nash equilibrium is that A. firm A selects a high advertising budget and firm B selects a low advertising budget B. firm A selects a low advertising budget and firm B selects a high advertising budget C. both firms select a high advertising budget D. both firms select a low advertising budget

C. both firms select a high advertising budget

The above figure shows the payoff matrix for two firms, A and B, selecting an advertising budget. The firms must choose between a high advertising budget and a low advertising budget. Firm B's dominant strategy A. does not exist B. is to copy firm A C. is to select a high advertising budget D. is to select a low advertising budget

C. is to select a high advertising budget

Refer to the figure above. The consumer surplus before the tax is imposed is given by the area _________. CAE BCJ BAH JBHF

CAE

Which of the following statements is true? Bringing economic agents together to trade is easier in command economies in comparison to market economies. Central planners in command economies have to make decisions that prices would have automatically made in market economies. Command economies do a better job at maximizing social welfare in comparison to market economies. The incentive problem and the coordination problem lead to lower efficiency in market economies.

Central planners in command economies have to make decisions that prices would have automatically made in market economies.

Which of the following gives rise to a positive externality? Sudden increase in the price of oil due to a supply shock Deforestation leading to the extinction of many species Consumption of a drug to cure a communicable disease Sudden increase in the demand for diamonds leading to an increase in their price

Consumption of a drug to cure a communicable disease

Which of the following is an example of a good produced under perfect competition? Cars Corn Patented software Bottled water

Corn

Which of the following is NOT a direct determining factor of consumers' purchase decisions?

Cost of factor inputs

An oligopoly model in which sellers compete on quantities rather than prices is called a ___________ model. Bertrand Keynesian Cournot Ricardian

Cournot

Crisps and Smith's are the only two bakeries that sell cookies in a small community. Crisps sells butter cookies while Smith's sells chocolate cookies. Which of the following will happen if Smith's lowers its price for cookies slightly below Crisps's price? Crisps will face a lower demand for its cookies. Smith's will face a lower demand for its cookies. Smith's will lose all its customers to Crisps. Crisps will lose all its customers to Smith's.

Crisps will face a lower demand for its cookies.

David's dominant strategy is Low Price, and Jordan's dominant strategy is Low Price. The Nash equilibrium is ___________. A B C D

Q9. Refer to the figure above. What is the revenue of the firm when it sells the profit-maximizing level of output? A) $40 B) $160 C) $180 D) $240

D) $240

Q8. Refer to the figure above. What price does the firm face in the market? A) $2 B) $4 C) $6 D) $8

D) $8

Q19. Refer to the figure above. Social welfare will be maximized if −−−−−−−−units of Good Y are produced. A) 9 million B) 20 million C) 13 million D) 16 million

D) 16 million

Rita and Mike have been caught cheating on an examination. They are taken to separate rooms for interrogation. Their payoff matrix is given below. The first outcome listed in each cell is the payoff to the row player and the second outcome listed is the payoff to the column player. Refer to the scenario above. What will the outcome of this game be? A. Mike will confess while Rita will not confess. B. Rita will confess while Mike will not confess. C. Neither of them will confess. D. Both of them will confess.

D. Both of them will confess.

Q12. Which of the following statements differentiates between a shortage and a surplus? A) A shortage occurs when price is held at the equilibrium price, but a surplus occurs when price is held above the equilibrium price. B) A shortage occurs when price is held below the equilibrium price, but a surplus occurs when price is held at the equilibrium price. C) A shortage occurs when quantity supplied exceeds quantity demanded, whereas a surplus occurs when quantity demanded exceeds quantity supplied. D) A shortage occurs when quantity demanded exceeds quantity supplied, whereas a surplus occurs when quantity supplied exceeds quantity demanded.

D) A shortage occurs when quantity demanded exceeds quantity supplied, whereas a surplus occurs when quantity supplied exceeds quantity demanded.

Q45. −−−−−−−−are highly excludable but non-rival in consumption. A) Public goods B) Private goods C) Common pool resources D) Club goods

D) Club goods

Which of the following is a feature of an oligopoly market? A) There is a large number of sellers in this market B) There are no barriers to entry in this market C) Each firm in this market earns zero economic profits D) Each firm's action affects the decisions of its rival

D) Each firm's action affects the decisions of its rival

Which of the following is a feature of a perfectly competitive market? A) There is only one seller of a commodity. B) The government rations commodities. C) Commodities are auctioned to the highest bidder. D) Each seller is too small to influence the market price.

D) Each seller is too small to influence the market price.

Q30. −−−−−−−−taxes are taxes paid when purchasing specific goods such as alcohol, tobacco, and gasoline. A) Property B) Payroll C) Wealth D) Excise

D) Excise

Q32. Which of the following accounts for the largest portion of federal government spending? A) Education B) Policing C) Infrastructure D) National defense

D) National defense

The pricing rule for a monopolist is: A) P = MR >MC B) P >MR >MC C) P = MR = MC D) P >MR = MC

D) P >MR = MC

Q28. Which of the following is true? A) Local governments cannot collect taxes in the U.S. B) Only the state governments can collect taxes in the U.S. C) Only the federal government can collect taxes in the U.S. D) The central as well as the local governments collect taxes in the U.S.

D) The central as well as the local governments collect taxes in the U.S.

Q31. Which of the following is true of individual income taxes? A) Individual income taxes are only collected by the federal government. B) Individual income taxes are only collected by the state governments. C) All states in the U.S. collect individual income taxes. D) The rate of income tax imposed by states in the U.S. varies.

D) The rate of income tax imposed by states in the U.S. varies.

Q47. The imposition of all taxes, except a Pigouvian tax, leads to−−−−−−−− A) an increase in consumer surplus B) an increase in producer surplus C) a fall in the price of the good D) a loss in total welfare

D) a loss in total welfare

The imposition of all taxes, except a Pigouvian tax, leads to −−−−−−−−. A) an increase in consumer surplus B) an increase in producer surplus C) a fall in the price of the good D) a loss in total welfare

D) a loss in total welfare

A price ceiling leads to a(n) −−−−−−−−if below equilibrium price. A) increase in social well-being B) increase in producer surplus C) decrease in market demand D) decrease in total surplus

D) decrease in total surplus

Q49. A price ceiling leads to a(n) −−−−−−−−if below equilibrium price. A) increase in social well-being B) increase in producer surplus C) decrease in market demand D) decrease in total surplus

D) decrease in total surplus

Total cost falls when marginal cost is −−−−−−−−, and total cost rises when marginal cost is−−−−−−−−. A) zero; negative B) zero; positive C) positive; negative D) negative; positive

D) negative; positive

To calculate the −−−−−−−−of an alternative, an individual needs to estimate −−−−−−−−of the alternative. A) marginal benefit; total cost B) marginal cost; total benefit C) opportunity cost; total benefit D) net benefit; both cost and benefit

D) net benefit; both cost and benefit

Making choices by selecting the best feasible option, given the available information is referred to as: A) delegation. B) imposition. C) actualization. D) optimization.

D) optimization.

A change in the quantity demanded of a good is: A) the outcome of a change in income. B) represented by a shift to a new demand curve. C) the outcome of a change in tastes and preferences. D) represented by a movement along the demand curve.

D) represented by a movement along the demand curve.

A consumer has $100 to be spent on tables and chairs. If his income increases to $200, the prices of the goods remaining unchanged, his budget constraint: A) pivots to the left along the vertical axis. B) pivots to the right along the horizontal axis. C) shifts to the left. D) shifts to the right.

D) shifts to the right.

Q29. A payroll tax is also known as a(n) −−−−−−−−tax. A) excise tax B) corporate income tax C) personal income tax D) social insurance tax

D) social insurance tax

A variable is a factor that: A) cannot be measured. B) is not affected by changes in other factors. C) is independent and cannot be determined. D) takes different values at different points of time.

D) takes different values at different points of time.

To conduct a randomized experiment, researchers usually classify the participants into a: A) study group and a control group. B) treatment group and a test group. C) study group and a treatment group. D) treatment group and a control group.

D) treatment group and a control group.

Rita and Mike have been caught cheating on an examination. They are taken to separate rooms for interrogation. Their payoff matrix is given below. The first outcome listed in each cell is the payoff to the row player and the second outcome listed is the payoff to the column player. Refer to the scenario above. Which of the following is true? A. Mike's best response is to hold out if Rita confesses. B. Rita's best response is to hold out if she expects Mike not to confess C. Rita's best response is not to confess irrespective of what Mike does D. Mike's best response is to confess irrespective of what Rita does

D. Mike's best response is to confess irrespective of what Rita does

Which of the following statements are true regarding externalities? For computing efficientoutcomes, economic agents adjust the demand curve to account for negative externalities. Deadweight loss can be either a foregone benefit or the total cost of the externality to society. In the case of anexternality, the free market will maximize social surplus. None of the above.

Deadweight loss can be either a foregone benefit or the total cost of the externality to society.

Which of the following gives rise to a negative externality? Sudden increase in the price of wheat due to a fall in supply Sudden increase in the demand for diamonds leading to an increase in their price Deforestation leading to the extinction of many species Globalization leading to creation of many new job opportunities

Deforestation leading to the extinction of many species

The automobile market in the United States is often said to be highly competitive. But it is not perfectly competitive. What makes this market not perfectly competitive? Correct!

Different car companies make different vehicles with different features

The automobile market in the United States is often said to be highly competitive. But it is not perfectly competitive. What makes this market not perfectly competitive?

Different car companies make different vehicles with different features.

Which of the following is a feature of an oligopoly market? Each firm in this market earns zero economic profits Each firm's action affects the decisions of its rival There are no barriers to entry in this market There is a large number of sellers in this market

Each firm's action affects the decisions of its rival

Which of the following is a feature of an oligopoly market? There are no barriers to entry in this market. Each firm in this market earns zero economic profits. There is a large number of sellers in this market. Each firm's action affects the decisions of its rival.

Each firm's action affects the decisions of its rival.

Suppose two countries A and B choose the quantity of oil to produce simultaneously and without consulting with one another. What is each country's dominant strategy? A's dominant strategy is to produce 10 and B's dominant strategy is to produce 20. Neither firm has a dominant strategy. Each country's dominant strategy is to produce 20. A's dominant strategy is to produce 20 and B's dominant strategy is to produce 10.

Each country's dominant strategy is to produce 20.

The figure below shows the demand curve (DD), the marginal revenue curve (MR), and the cost curves of a monopolistic competitor Refer to the figure above. What does the region ABDC indicate? Deadweight loss Loss incurred by the producer Economic profit Consumer surplus

Economic profit

What is the difference between accounting profit and economic profit?

Economic profit subtracts both explicit and implicit costs from total revenue, while accounting profit only subtracts explicit costs.

Refer to the figure above. What is the equilibrium price and quantity of the good? Equilibrium price = $80, equilibrium quantity = 30 units Equilibrium price = $40, equilibrium quantity = 20 units Equilibrium price = $60, equilibrium quantity = 10 units Equilibrium price = $60, equilibrium quantity = 20 units

Equilibrium price = $60, equilibrium quantity = 20 units

A consumer's budget constraint refers to the collection of all possible bundles that ___________.

Exactly exhausted a consumer's entire budget.

Scenario: Two firms in a market sell identical goods and charge a price of $5 per unit. However, the cost of a crucial input used in producing these goods has increased. As a result, both of the firms are considering increasing the price of the good to $6. If the firms do not raise their prices at the same time, the firm that raises the price stands to lose market share. The payoff matrix shows their respective payoffs on the basis of the prices charged by each. Here, payoffs denote the number of units sold by each firm. The first number listed in each cell is the payoff to the row player and the second number listed is the payoff to the column player. Refer to the scenario above. Which of the following is true in this case? Firm 2's dominant strategy is to charge $6 Firm 1's dominant strategy is to charge $6. Firm 1's dominant strategy is to charge $5 This game does not have a dominant strategy equilibrium.

Firm 1's dominant strategy is to charge $5

Firms A and B plan to collude in an economy for their similar products, which includes the grim strategy for punishment. They plan to set the price of their product at $8. The marginal cost of Firm A is $5 and Firm B is $4.50. If firm A is impatient to earn more profits and Firm B wishes to last in the business for the long-run, which of the following situations would likely occur? Firm B reduces the price to $7 causing Firm A to reduce its price to $7. Firm A reduces the price to $7 causing Firm B to exit the market. Firm A reduces the price to $7 causing Firm B to reduce its price to $4.50. Firm B reduces the price to $7 causing Firm A to exit the market.

Firm A reduces the price to $7 causing Firm B to reduce its price to $4.50.

Refer to the figure above. Which of the following statements is true? - At a given market price, Firm A will enjoy a greater producer surplus. - Firm B will produce a lower quantity than Firm A at all prices. - Firm B produces at a higher marginal cost than Firm A. - Firm A will have a higher reservation value for the good than Firm B.

Firm A will have a higher reservation value for the good than Firm B.

Which of the following statements is true? - Monopoly is characterized by no entry barriers - Perfect competition is characterized by high entry barriers. - Firms in a market with entry barriers are likely to have more market power than firms in a market with no entry barriers. - Firms in a market with no entry barriers are likely to have more market power than firms in a market with entry barriers.

Firms in a market with no entry barriers are likely to have more market power than firms in a market WITH entry barriers.

Which of the following is a difference between an oligopoly with homogeneous products and an oligopoly with differentiated products? Firms in an oligopoly with homogeneous products earn positive economic profits in equilibrium, while firms in an oligopoly with differentiated products earn zero economic profits. Firms in an oligopoly with homogeneous products earn zero economic profits in equilibrium, while firms in an oligopoly with differentiated products earn positive economic profits. There are huge barriers to entry in an oligopoly with homogeneous products, while there are no barriers to entry in an oligopoly with differentiated products. There are a large number of sellers in an oligopoly with homogeneous products and there are a few sellers in an oligopoly with differentiated products.

Firms in an oligopoly with homogeneous products earn zero economic profits in equilibrium, while firms in an oligopoly with differentiated products earn positive economic profits.

Consider the following graphs. Which of the graphs above, that does not actually show perfect competition, is closest to perfect competition in terms of the price and quantity? None Graph C Graph B Graph A

Graph B

Consider the following graphs. Which of the graphs above corresponds to a firm that faces perfect competition? None Graph A Graph B Graph C

Graph C

Which of the following statements is true of the concept of willingness to pay?

If a consumer is consuming 10 units of a commodity and she is ready to pay $2 for the eleventh unit, her willingness to pay for the eleventh unit is $2

Which of the following is true? - If production of a good gives rise to a negative externality, it can be internalized by taxing the producers of the good. - If production of a good gives rise to a positive externality, it can be internalized by taxing the consumers of the good. - If consumption of a good gives rise to a positive externality, it can be internalized by taxing the producers of the good. - If consumption of a good gives rise to a negative externality, it can be internalized by subsidizing the purchase of the good.

If production of a good gives rise to a negative externality, it can be internalized by taxing the producers of the good.

Invisible hand=

Individuals working for self-interest will eventually max. the well being of society

How would you depict the trade-off between equity and efficiency on a graph? Poverty on one axis and efficiency on the other with a negatively sloped. Equity on one axis and inefficiency loss on the other with a U-shaped function. Inequality on one axis and social surplus on the other with a positively-sloped function Equality on one axis and deadweight loss on the other with a negatively-sloped function.

Inequality on one axis and social surplus on the other with a positively-sloped function

Which of the following statements regarding the Coase Theorem is not true? Regardless of who has the legal ownership of property orresources, the socially efficient outcome can be achieved through private bargaining. The final outcome of bargaining will match the preferences of those who value ownership the most. Initial property right allocation determines whether the socially efficient outcome can be achieved. Negotiation between the concerned parties is necessary to solve the externality problems.

Initial property right allocation determines whether the socially efficient outcome can be achieved.

Which of the following is an example of specialization? Group of answer choices

Instead of a worker making an entire shoe, the total productivity increased when different workers were allotted different jobs in the production process

Which of the following is an example of specialization?

Instead of a worker making an entire shoe, the total productivity increased when different workers were allotted different jobs in the production process.

Consider the following statement: Given that burgers and fries are complementary goods, if the price of fries decreases the demand for both goods will rise.

It is somewhat inaccurate. The decrease in the price of fries will increase the quantity demanded (not the demand) for fries. It will, however, as the statement claims, increase the demand for burgers.

Which of the following statements regarding internalizing an externality is true? It means companies and individuals consider the internal effects of their actions. It is a theme that separates various solutions to the problem of externalities. It means agents account for the full costs and benefits of their actions. It results in a market equilibrium that lowers social well-being.

It means agents account for the full costs and benefits of their actions.

Which of the following is true of a payoff matrix? It takes into account all relevant costs and benefits associated with each action of the players. It shows the payment made to each factor of production for the production of a good. It does not represent all the costs and benefits associated with the choices of the players. It is the representation of only the best response of each player.

It takes into account all relevant costs and benefits associated with each action of the players.

Which of the following factors is likely to lead to an increase in the quantity demanded of pens?

Pens and writing pads

The government of a certain country decides that all its citizens should be equally well off. It decides to redistribute money so that each person has a roughly equal share of the total income. How would this policy affect economic activity in the country? It would be adversely affected since incentives to work or seek profits would be greatly diminished. It would be boosted since the poor will now be spending funds the rich would have otherwise saved. It would be adversely affected since the poor are generally incapable of wisely investing money It would be enhanced by the euphoria and sense of unity brought about by the creation of an egalitarian society.

It would be adversely affected since incentives to work or seek profits would be greatly diminished.

Which of the following examples best describes the concept of free entry?

Jack has an old cell phone that he wants to sell. He opens an account on eBay and auctions it off

Which of the following examples best describes the concept of free entry?

Jack has an old cell phone that he wants to sell. He opens an account on eBay and auctions it off.

Assume that the market for chocolates is perfectly competitive. Which of the following statements would be true in this case?

Jill starts to produce chocolates today, but the addition of her supply into the market does not decrease the market price.

Which of the following is not an externality? Jose, who is allergic topollen, is sick from the flowers that grow in his neighbor's garden. Jordan has lung cancer from smoking cigarettes. Alisha did not sleep well because her neighbor was playing loud music. Rochelle has asthma caused by the pollution of a local factory near her home.

Jordan has lung cancer from smoking cigarettes.

La Dila and Swiss Pro are the only two firms in an industry. The firms initially charge equal prices for their products, which are perfect substitutes. What happens if La Dila decides to lower its price slightly? La Dila will lose all its market share Swiss Pro will gain market share Swiss Pro will earn positive economic profits La Dila will face the entire market demand

La Dila will face the entire market demand

La Dila and Swiss Pro are the only two firms in an industry. The firms initially charge equal prices for their products, which are perfect substitutes. What happens if La Dila decides to lower its price slightly? La Dila will face the entire market demand. Swiss Pro will earn positive economic profits. La Dila will lose all its market share. Swiss Pro will gain market share.

La Dila will face the entire market demand.

Which of the following inputs can be changed in the short run?

Labor Employed

Which of the following inputs can be changed in the short run?

Labor employed

Suppose there are cable TV companies in your city, Astounding Cable and Broadcast Cable. They both must decide on a high advertising budget, a moderate advertising budget, or a low advertising budget. They will make their decisions simultaneously. Their payoffs are as follows: Astounding's dominant strategy is Medium, and Broadcast's dominant strategy is No dominant strategy. The equilibrium is __________. Medium/Medium. Low/Low. High/High. High/Low.

Medium/Medium.

You are the County Commissioner of Hazard County. There is a popular lake for fishing located in eastern Hazard County on county-owned park land, which is open to the public. Recently, the Reed brothers have started using large nets to catch large amounts of fish, severely depleting the amount of fish left for other fishermen. The fish in the lake are an example of a common pool resource. What approach would be the least effective way to deal with the overfishing problem? Restock the lake more often with fish. Limit who is allowed to fish in the lake. Enact a law limiting the number of fish that can be caught per person. Charge a tax per fish caught.

Limit who is allowed to fish in the lake.

An optimizing consumer has to choose between two goods Good A priced at

MBA/PA = MBB/PB

An optimizing consumer has to choose between two goods-Good A priced at P_{A} and Good B priced at P_{B}. Given that MB_{A} is the marginal benefit from consuming Good A and MB_{B} is the marginal benefit from consuming Good B, the consumer's well-being will be maximized at the point where:

MB_{A}/P_{A} = MB_{B}/P_{B}

The tables below show the reservation values of buyers and sellers in the market for used iPhones. Suppose the minimum price is given as $55 (a "price floor"). Which of the following statements is true in the market for used iPhones? Madeline and Katie will each be willing to buy an iPhone. Sean and Dave will each be willing to buy an iPhone. Dave and Ian will each be willing to buy an iPhone. Kim and Ty will each be willing to buy an iPhone.

Madeline and Katie will each be willing to buy an iPhone.

Which of the following relationships correctly identifies the profit maximization condition of a firm in a perfectly competitive market? Marginal cost > Price = Marginal revenue Marginal cost = Price < Marginal revenue Marginal cost < Price = Marginal revenue Marginal cost = Price = Marginal revenue

Marginal cost = Price = Marginal revenue

$100 is to be divided among two individualsMary and Jenna. Which of the following allocations is Pareto efficient? -Mary receives $45, and Jenna receives $45. -Mary receives $20, and Jenna receives $75. -Mary receives $1, and Jenna receives $99. -Mary receives $90, and Jenna receives $9.

Mary receives $1, and Jenna receives $99.

Reservation Value=

Maximum a buyer will buy at Minimum a seller will sell at

Refer to the scenario above. Which of the following is likely to happen if Mike confesses while Rita does not confess? 10 points will be deducted from their respective scores. Both of them will be let free. Mike will be let free while Rita will be suspended. 10 points will be deducted from Rita's score while Mike will be suspended.

Mike will be let free while Rita will be suspended.

Scenario: Rita and Mike have been caught cheating on an examination. They are taken to separate rooms for interrogation. Their payoff matrix is given below. The first outcome listed in each cell is the payoff to the row player and the second outcome listed is the payoff to the column player. Refer to the scenario above. Which of the following is true? Mike's best response is to hold out if Rita confesses. Rita's best response is not to confess irrespective of what Mike does. Mike's best response is to confess irrespective of what Rita does. Rita's best response is to hold out if she expects Mike not to confess

Mike's best response is to confess irrespective of what Rita does.

Which of the following is the largest source of revenue for state governments? Miscellaneous taxes andfees, such as tolls on roads and public transportation tickets. Individual(federal) income tax. Property tax. Sales tax.

Miscellaneous taxes andfees, such as tolls on roads and public transportation tickets.

_________ is the market structure in which there are many rival firms producing differentiated products. Monopoly Monopolistic competition Oligopoly Perfect competition

Monopolistic competition

Sellers in which of the following market structures are likely to have the highest market power? Oligopoly Monopoly Perfect competition Monopolistic competition

Monopoly

Both monopolies and monopolistically competitive firms set marginal revenue equal to marginal cost to maximize profit. Given the same cost curves, would you expect prices to be higher in a monopoly or a monopolistically competitive market? Monopolistically competitive market, because demand is greater. Monopoly, because consumers are more sensitive to price. Monopoly, because it is a price taker Monopoly, because its demand is more inelastic.

Monopoly, because its demand is more inelastic.

It is possible for two-player games to be quite asymmetric: each player might have a different set of options, and the payoffs may be quite different. Consider the following example between a large firm and a small firm. The first number in each box denotes the large firm's payoff, and the second number shows the small firm's payoff. Given this information, which of the following is true of this game? Neither of the firms has a dominant strategy. Large Firm has a dominant strategy. Small Firm has a dominant strategy. None of the above

Neither of the firms has a dominant strategy.

Which of the following statements is true? Network effects act as barriers to entry in a market. Economies of scale act as incentives for new firms to enter a market. If a firm is enjoying economies of scale, then its product must have network effects. If a firm's product has network effects, then the firm must be enjoying economies of scale

Network effects act as barriers to entry in a market.

Which of the following is true of a Nash equilibrium? A Nash equilibrium occurs if each player earns a zero payoff irrespective of the strategy he chooses. A Nash equilibrium cannot occur if each player is aware of the strategies of other players. A game can have only one Nash equilibrium. No player can improve his payoff by changing his strategy once in Nash equilibrium.

No player can improve his payoff by changing his strategy once in Nash equilibrium.

Suppose ventilator manufacturers are profit-maximizing firms with costs outlined in this chapter (large fixed cost and increasing marginal costs). These firms typically operate in a competitive market, though the government is considering the following policies to boost production. For each policy, explain whether production will in fact increase. If the government gives each firm a large sum of money with no strings attached, will ventilator production increase?

No, a no strings attached payment does not impact marginal revenue or marginal cost so production will remain unchanged.

Suppose that a player has a dominant strategy. Would she choose to play a mixed strategy (such as playing two strategies each with probability 50-50)? Why or why not? Yes, because a mixed strategy would involve choosing a single action. Yes, a mixed strategy would be optimal if one of its actions were the dominant strategy. No, because a mixed strategy would not use preassigned probabilities for the various actions. No, because it would involve choosing actions other than the dominant strategy.

No, because it would involve choosing actions other than the dominant strategy.

Government spending in the United States has grown over time and now accounts for more than 40 percent of U.S. national income. Does this mean that government has been consistently running a budget deficit? Yes, government deficits are a direct result of government spending over time. Yes, as government consumption spending has increased, deficits have become inevitable. No, government deficits also depend on the national debt. No, government deficits depend upon spending and tax revenue.

No, government deficits depend upon spending and tax revenue.

Charley spends all of his income on soft drinks and pizza. Suppose he is currently buying these products in amounts such that his marginal benefit from an additional soft drink is $70 and his marginal benefit from an additional slice of pizza is $130. If the price of a soft drink is $3 and the price of a slice of pizza is $5, is Charley maximizing his total benefits?

No, he should shift consumption toward pizza and away from soft drinks to maximize total benefits.

Charley spends all of his income on soft drinks and pizza. Suppose he is currently buying these products in amounts such that his marginal benefit from an additional soft drink is $170 and his marginal benefit from an additional slice of pizza is $30. If the price of a soft drink is $4 and the price of a slice of pizza is $4, is Charley maximizing his total benefits?

No, he should shift consumption toward soft drinks and away from pizza to maximize total benefits.

Suppose you were playing rock-paper-scissors as an extensive from game; first you choose rock, or paper, or scissors, and then your opponent makes a choice. Is there a first-mover advantage in this game? No, if you show your move first you will lose every time. Yes, first mover has an advantage by getting to pick their first choice. Yes, first mover wins in this game. No, first mover must play a dominant strategy which is good for mixed strategy games.

No, if you show your move first you will lose every time.

Does price gouging have the same effect as setting prices above equilibrium level? No, price gouging harmsbuyers, while prices set above equilibrium damages sellers. No, price gouging is actually an equilibrium outcome, while the setting of prices above equilibrium is not. Yes, both result in unjustifiably high prices given underlying supply and demand conditions. Yes, both produce an excess of quantity supplied over quantity demanded.

No, price gouging is actually an equilibrium outcome, while the setting of prices above equilibrium is not.

Is the entire burden of the tax always borne by those on whom it is imposed? Not necessarily, since the burden of the tax depends on price elasticity. No, the burden of the tax is always passed along to others. Not necessarily, since the burden of the tax falls on producers Yes, since taxes are paid by producers.

No, the burden of the tax is always passed along to others.

Does the shape of the market demand curve differ from the shape of an individual demand curve?

No, they both tend to be downward-sloping curves.

Which of the following goods have a high excludability? It is solely provided by the government. It is non-excludable and rival in consumption. It is non-excludable and non-rival in consumption. None of the above.

None of the above.

_____________ is the market structure in which there are a few rival firms. Monopolistic competition Perfect competition Monopoly Oligopoly

Oligopoly

Suppose you and your friends decide to go to the beach during spring break. You need to fly from Kansas City to Miami but only two airlines provide the service. This market is best characterized as ___________. Perfect Competition. Monopolistic Competition. Monopoly. Oligopoly.

Oligopoly.

Which of the following statements is true of the short run?

Only some of a firm's input can be varied

Which of the following best illustrates the tragedy of the commons? Donating to the World Wildlife Fund. Buying a Nintendo DS instead of funding the public library. Sneaking into a concert without paying for a ticket. Overfishing in public waters.

Overfishing in public waters

Which of the following best illustrates the tragedy of the commons? Donating to the World Wildlife Fund. Overfishing in public waters. Buying a Nintendo DS instead of funding the public library. Sneaking into a concert without paying for a ticket.

Overfishing in public waters.

Which of the following is not one of the sources of natural market power? The presence of economies of scale network externalities. Controlling a key resource. Owning a firm in a small community.

Owning a firm in a small community.

The pricing rule for a monopolist is: P = MR > MC. P > MR > MC. P = MR = MC. P > MR = MC.

P > MR = MC.

Chevron and BP are bidding against each other for new oil drilling leases in the Gulf of Mexico. The bids will be simultaneous with the high bidder as the winner. Chevron decides to hire you as a consultant to help it use game theory to make the best decision on how much to bid. What must you, as the consultant, construct for Chevron before you can determine if there is a dominant strategy equilibrium? Three-by-three Extensive-form game tree. Table with numerical probabilities. Payoff matrix.

Payoff matrix.

The effect of the invisible hand is likely to be the strongest under which market structure? Oligopoly Monopoly Perfect competition Monopolistic competition

Perfect competition

Which of the following market structures provides socially efficient outcomes? Monopoly Monopolistic competition Oligopoly Perfect competition

Perfect competition

Which of the following statements is true of monopolistic competition and perfect competition? Perfect competition and monopolistic competition are completely unrelated. Perfect competition is a special case of monopolistic competition, which occurs when demand is perfectly inelastic. Perfect competition is a special case of monopolistic competition, except firms in monopolistic competition can earn profits in the long run. Perfect competition is a special case of monopolistic competition, which occurs when demand is perfectly elastic.

Perfect competition is a special case of monopolistic competition, which occurs when demand is perfectly elastic.

Use a matrix to model a two-player game of rock-paper-scissors with a payoff of 1 if you win, -1 if you lose, and 0 if you tie. Construct the payoff matrix for this game. Why should you use a mixed strategy to play this game? Pure strategy is a more efficient way to reach higher payoff outcomes. Predictable behavior by one player can be taken advantage of by the other player. Mixed strategy has the advantage of requiring less effort to generate an optimal outcome. Random behavior generally leads to a Nash equilibrium.

Predictable behavior by one player can be taken advantage of by the other player.

Which of the following is true of a market?

Price acts as a selection device for buyers and sellers in every market

Which of the following statements correctly identifies a similarity between monopoly and perfect competition? - Firms face an upward sloping demand curve and a downward sloping marginal revenue curve in both the market structures. - Production is expanded until marginal revenue equals marginal cost in both the market structures. - Price equals marginal cost in both market structures. - Entry is restricted in both market structures.

Production is expanded until marginal revenue equals marginal cost in both the market structures.

Which of the following equations calculates economic profits for a monopoly? Profits = P x Q Profits = P + ATC/Q Profits = (P - ATC) x Q Profits = ATC x Q

Profits = (P - ATC) x Q

Local governments usually rely on the ___________ tax to fund schools, libraries, and public services such as police and fire protection. Payroll Excise Value-added Property

Property

Which of the following are examples of inefficiencies created by government intervention? An increase in the price of alcohol due to higher taxes imposed by the government. Causing a rise in inflation due to an expansionary fiscal policy of the government. Quality deterioration in a market after government implements a price control. None of the above.

Quality deterioration in a market after government implements a price control.

Equilibrium Quantity=

Quantity demanded exceeds quantity supplied

Refer to the figure above. Which of the following is likely to happen if a price control below the equilibrium price is imposed? Consumer surplus will decrease. Quantity demanded will exceed quantity supplied. Producer surplus will increase. Quantity supplied will exceed quantity demanded.

Quantity demanded will exceed quantity supplied.

Which of the following is an objective of government taxation? Reducing the demand for money in the economy Increasing the supply of money in the economy Redistribution of funds Reducing the growth rate of the economy

Redistribution of funds

Profit=

Revenue - Expenses

Refer to the scenario above. Which of the following is likely to happen if Rita confesses while Mike does not confess? Both of them will be let free. 10 points will be deducted from their respective scores. 10 points will be deducted from Mike's score while Rita will be suspended. Rita will be let free while Mike will be suspended.

Rita will be let free while Mike will be suspended.

A restaurant charges its customers 12% of the total food price as tax. This is an example of a _________ tax. Payroll Wealth Property Sales

Sales

_________ taxes are paid by a buyer as a percentage of the market price of an item. Wealth Sales Payroll Property

Sales

____________ taxes are paid by a buyer as a percentage of the market price of an item. Sales Wealth Payroll Property

Sales

Which of the following is not a result of corruption? Inequality in the distribution of resources. Selling goods at a price that does not include taxes. Using public funds for increasing personal wealth. Using a lesser proportion of the total assigned amount of money for public projects.

Selling goods at a price that does not include taxes.

Z is a normal good. The equilibrium price and equilibrium quantity of Z in the year 2019 was $25 and 60 units, respectively. In 2020, the equilibrium price of Z had decreased to $15 and the equilibrium quantity had also decreased to 50 units. Other things remaining the same, which of the following could explain this change?

Shift of the demand curve for Z to the left

Z is a normal good. The equilibrium price and quantity of Z in the year 2019 was $25 and 60 units, respectively. In 2020, the equilibrium price of Z had increased to $35 but the equilibrium quantity had decreased to 50 units. Other things remaining the same, which of the following could explain this change?

Shift of the supply curve of Z to the left

Z is a normal good. The equilibrium price and equilibrium quantity of Z in the year 2011 was $25 and 60 units, respectively. It was seen that, in 2014, the equilibrium price of Z had decreased to $15, but the equilibrium quantity had increased to 70 units. Other things remaining the same, which of the following could explain this change?

Shift of the supply curve of Z to the right

Which of the following can give rise to a negative externality? Consuming vegetarian food Planting a tree Smoking a cigarette Working for long hours

Smoking a cigarette

In which of the following situations can an externality be internalized by using the Pigouvian subsidy? John likes to play loud music in the middle of the night which disturbs his roommate's sleep. The pollution caused by a firm has adverse health consequences for nearby residences. Sophia's flower garden provides a pleasant view for her neighbors. None of the above.

Sophia's flower garden provides a pleasant view for her neighbors.

Two gas stations, A and B, are locked in a price war. Each player has the option of raising its price (R) or continuing to charge the low price (C). They will choose strategies simultaneously. If both choose C, they will both suffer a loss of $−10. If one chooses R and the other chooses C, (i) the one that chooses R loses many of its customers and earns $0, and (ii) the one that chooses C wins many new customers and earns $100. If they both choose R the price war ends and they each earn $50. What is the Nash equilibrium? The Nash equilibrium is for both stations to pick C. The Nash equilibrium is for both stations to pick R. The Nash equilibria are for both stations to pick R and for both stations to pick C. The Nash equilibria are for Station A to pick C and Station B to pick R and for Station A to pick R and Station B to pick C.

The Nash equilibria are for Station A to pick C and Station B to pick R and for Station A to pick R and Station B to pick C.

Two firms are planning to sell 10 or 20 units of their goods. Suppose Firm 1 decides how much to produce first. The game tree is illustrated in the figure on the right. What is the Nash equilibrium? The Nash equilibrium is for Firm 1 to produce 20 units and for Firm 2 to produce 10 units. The Nash equilibrium is for Firm 1 to produce 10 units and for Firm 2 to produce 20 units. The Nash equilibrium is for Firm 1 to produce 20 units and for Firm 2 to produce 20 units. The game does not have a Nash equilibrium.

The Nash equilibrium is for Firm 1 to produce 20 units and for Firm 2 to produce 10 units.

Months ago you spent $30 on a ticket to see your favorite musician. However, you start having doubts the day of the show because you do not feel prepared for an exam the following day. Which of the following bits of information should (according to the ideas about sunk costs discussed in the chapter) influence your final decision? You thought there was no hope of reselling the ticket, though your roommate just offered to buy it for $10.

The ability to resell the ticket means it is no longer a sunk cost and skipping the show brings you an additional $10 in benefit, making you more likely to skip the show.

Which of the following refers to diminishing marginal returns?

The additional output produced in a firm decreased as more workers were hired

Which of the following situations depicts diseconomies of scale?

The average total cost of a firm increases from $50 to $55 when it increases its production from 10 units to 20 units

Which of the following situations depicts diseconomies of scale?

The average total cost of a firm increases from $50 to $55 when it increases its production from 10 units to 20 units.

Which of the following statements is true? In any game, the best response of a player is also her dominant strategy. A prisoners' dilemma game is an example of a zero-sum game. A prisoners' dilemma game is an example of an extensive-form game. The best response of a player is not always her dominant strategy.

The best response of a player is not always her dominant strategy.

Suppose the market for cement is such that the output of all sellers is identical in composition and quality. While there are a large number of buyers and sellers, everyone conducts transactions at a common market price. Which of the following statements is true about the structure of the cement market?

The cement market is perfectly competitive

Which of the following is true? Local governments cannot collect taxes in the U.S. Only state governments can collect taxes in the U.S. Only the federal government can collect taxes in the U.S. The central as well as the local governments collect taxes in the U.S.

The central as well as the local governments collect taxes in the U.S.

Refer to the scenario above. How will the demand for pens faced by the existing pen manufacturers in Eduland be affected if several firms exit the industry in the long run? The demand faced by existing firms will increase. The demand faced by existing firms will decrease. The demand curve by existing firms will become perfectly inelastic. The demand curve by existing firms will become perfectly elastic.

The demand faced by existing firms will increase.

Scenario: There are several pen manufacturers in Eduland. However, the pens sold by each manufacturer have a unique design. Refer to the scenario above. How will the demand for pens faced by the existing pen manufacturers in Eduland be affected if new firms enter the industry in the long run? The demand faced by the existing firms will decrease. The demand faced by the existing firms will become perfectly inelastic. The demand faced by the existing firms will become perfectly elastic. The demand faced by the existing firms will increase.

The demand faced by the existing firms will decrease.

Refer to the scenario above. Which of the following is true? This game does not have a Nash equilibrium. A Nash equilibrium occurs if Firm 1 charges a price of $5 and Firm 2 charges a price of $6. The dominant strategy equilibrium is the Nash equilibrium. A Nash equilibrium occurs if Firm 1 charges $6 and Firm 2 charges $5.

The dominant strategy equilibrium is the Nash equilibrium.

Scenario: The payoff matrix given below shows the payoffs to two firms in millions of US dollars for choosing two alternative strategies. The first number listed in each cell is the payoff to the row player and the second number listed is the payoff to the column player. Refer to the scenario above. Which of the following is true in this case? This game does not have a Nash equilibrium. The dominant strategy equilibrium of this game is also the Nash equilibrium. This game has multiple Nash equilibria. The dominant strategy equilibrium of this game is not Pareto efficient.

The dominant strategy equilibrium of this game is also the Nash equilibrium.

Firm A and Firm B produce the same goods but with different inputs. If the inputs used by firm A are more easily available than the inputs used by firm B, then which of the following statements is true?

The elasticity of supply of firm A will be higher than the elasticity of supply of firm B

Which of the following statements is true of a perfectly competitive market? -At equilibrium, it is possible to make someone better off without making someone else worse off. -The equilibrium price in a competitive market efficiently allocates scarce resources to participants. -The equilibrium price is determined by a few large firms in the market. -The sum of consumer surplus and producer surplus is not maximized at the equilibrium

The equilibrium price in a competitive market efficiently allocates scarce resources to participants.

A firm uses workers, land, and machinery for its production process. Which of the following statements is then true?

The firm can change its output level in the long run by changing any or all of its three inputs.

The new governor of Vermont is worried about increasing geographic inequality within the state. The richest county in Vermont, Chittenden, has median per capita income of about $32,000, while the poorest counties, Caledonia, Franklin, Orleans and Essex, have median income per capita around $20,000. Vermont has a budget of about $5 billion. The governor is considering changing the allocation of the budget and taxes in order to deal with the inequality problem. His advisors inform the governor that the increased budget shortfall would be costly to finance. He instead proposes to tax the residents of Chittenden. There are about 62,500 households in Chittenden. The governor proposes a tax of 12.5 percent on each household to finance his transfer program. His advisors explain to him that the tax revenue generated by this proposal will be less than the necessary amount. Why? - Taxing all residents of Chittenden on their $32,000 median income at 12.5% will result in only $40 million in additional income. - The higher tax will lead to lower labor supply, and thus household income will fall below $32,000 in Chittenden and there will be less tax revenue. - Taxing all residents of Chittenden on their $32,000 median income at 12.5% will result in only $4 million in additional income. - None of the above is correct.

The higher tax will lead to lower labor supply, and thus household income will fall below $32,000 in Chittenden and there will be less tax revenue.

In an economy, there is a high level of social inequality. This causes the government to implement a wealth tax on its citizens who earn a high level of income and, therefore, are capable of holding assets. Which of the following is not a result of the implementation of the wealth tax? Distortion of decisions of individuals that affects efficiency A conflict between equity and efficiency. The increase in consumer surplus and decrease in social inequality. The introduction of deadweight loss.

The increase in consumer surplus and decrease in social inequality.

Which of the following markets is an example of an oligopoly? The market for video games The market for premium apparels The market for wheat The market for books

The market for premium apparels

Which of the following is an example of a monopolistically competitive market? The market for shampoo The market for coffee beans The market for premium cars The market for wheat

The market for shampoo

Which of the following examples best approximates a competitive market?

The market for soybeans in the United States

At a certain level of production, the marginal revenue and marginal cost of a monopolist are $8 and $6, respectively. Which of the following statements is true in this context? The monopolist should expand production. The monopolist should contract production The profits of the monopolist are maximized. The profits of the monopolist are minimized.

The monopolist should expand production.

At a certain level of production, the marginal revenue and marginal cost of a monopolist are $8 and $6, respectively. Which of the following statements is true in this context? The profits of the monopolist are minimized. The profits of the monopolist are maximized. The monopolist should contract production. The monopolist should expand production.

The monopolist should expand production.

Which of the following is NOT an element of a seller's decision-making process in a perfectly competitive market?

The number of buyers

Suppose the prices of a pair of jeans, a shirt, and a tie are $30, $20, and $10 respectively. Which of the following statements is true in this context?

The opportunity cost of buying a shirt is 2 ties

Suppose the prices of a pair of jeans, a shirt, and a tie are $30, $20, and $10 respectively. Which of the following statements is true in this context?

The opportunity cost of buying a shirt is 2 ties.

The following figure displays John's budget constraint when he spends his income on tables and chairs. Refer to the figure above. Which of the following statements is true?

The opportunity cost of buying one chair is 5 tables.

Which of the following will lead to an efficient private solution if negative externalities are present in a market? The party having the legal right is taxed. The party creating the externality has the legal property right The party suffering from the externality has the legal property right. The parties involved negotiate with each other and reach an agreement.

The parties involved negotiate with each other and reach an agreement.

Seller A increases the price of its good by 20% and still enjoys a high market demand. Due to the high demand, there is an increase in the number of similar sellers in the long-run. This is an example of monopolistic competition. Suppose Good A belongs to a market where the firms earn zero economic profits in the long-run and entry of new firms will result in price changes that operate through shifts in the market supply curve for Good A. Which market structure does Good A belong to? The oligopolistic market with homogenous products. The oligopolistic market with differentiated products. The monopolistic competitive market. The perfectly competitive market.

The perfectly competitive market.

Suppose Good A belongs to a market where the firms earn zero economic profits in the long-run and entry of new firms will result in price changes that operate through shifts in the market supply curve for Good A. Which market structure does Good A belong to? The oligopolistic market with homogenous products. The oligopolistic market with differentiated products. The perfectly competitive market. The monopolistic competitive market.

The perfectly competitive market.

Which of the following functions is beyond the scope of economics as far as government intervention is considered? To understand what sorts of activities require intervention. To weigh the costs and benefits of specific interventions. To make a value judgment on whether government is good or bad. To help in improving the design of policies.

To make a value judgment on whether government is good or bad.

Which of the following is a factor underlying government taxation and spending decisions? To accumulate debt in order to pay for public goods. To prevent wealth redistribution. To raise revenues to pay for operations. To create externalities

To raise revenues to pay for operations.

Seller A increases the price of its good by 20% and still enjoys a high market demand. Due to the high demand, there is an increase in the number of similar sellers in the long-run. Which of the following is not a common characteristic between a monopoly and monopolistic competition? The slope of the demand curve is negative. The products sold have close substitutes. There is deadweight loss in the market. The price set by the seller/producer will be above marginal revenue.

The products sold have close substitutes.

Seller A increases the price of its good by 20% and still enjoys a high market demand. Due to the high demand, there is an increase in the number of similar sellers in the long-run. This is an example of monopolistic competition. Which of the following is not a common characteristic between a monopoly and monopolistic competition? The products sold have close substitutes. There is deadweight loss in the market. The slope of the demand curve is negative. The price set by the seller/producer will be above marginal revenue.

The products sold have close substitutes.

A consumer stops to buy an ice cream from Gene's Ice Cream Stand who charges $2 more per ice cream than the general market price of similar ice cream stands. All of the ice cream stands incur the same costs. However, the quantity of ice cream supplied by Gene's Ice Cream Stand is exhausted for the day. Based on the given scenario, which of the following statements is not true about Gene's Ice Cream Stand? The price charged is above the marginal cost. The quantity produced is limited to earn higher economic profits. The quantity produced was at the minimum of the average total cost curve. The quantity produced is less than the socially efficient production level causing it to create a deadweight loss.

The quantity produced was at the minimum of the average total cost curve.

The social surplus in a market is $50. If another economic agent enters the market such that the marginal cost he incurs is $10 and the marginal benefit he receives from the trade is $5, then which of the following statements is true? The social surplus will remain the same The social surplus will increase by $5 The social surplus will decrease by $5 The social surplus will increase by $10

The social surplus will decrease by $5

Two gas stations, A and B, are locked in a price war. Each player has the option of raising its price (R) or continuing to charge the low price (C). They will choose strategies simultaneously. If both choose C, they will both suffer a loss of $−10. If one chooses R and the other chooses C, (i) the one that chooses R loses many of its customers and earns $0, and (ii) the one that chooses C wins many new customers and earns $100. If they both choose R the price war ends and they each earn $50 Does either player have a dominant strategy? Explain . - The stations have a dominantstrategy, which is for Station A to pick C and Station B to pick R because this is a best response regardless of what the other station does. - The stations have a dominantstrategy, which is for Station A to pick R and Station B to pick C because this maximizes their joint payoff. - The stations have a dominantstrategy, which is to pick C because this is a best response regardless of what the other station does. - The stations do not have dominant strategies because what works best depends on what the other station does.

The stations do not have dominant strategies because what works best depends on what the other station does.

Many people have argued that an income tax should be "marriage neutral," that is, two people should pay the same total tax whether they are married or they are single. Suppose Amanda earns nothing, Ben earns $60,000, and Cathy and Dylan each earn $30,000. They are all single. Amanda pays no tax because she has no income. If they all live in a country that has a progressive income tax, which will be higher: the tax that Ben pays or the sum of the taxes Cathy and Dylan pay? The sum of the taxes Cathy and Dylan pay because two people always pay more thanone, regardless of income. The tax that Ben pays because high-income individuals pay higher income taxes. Since Cathy andDylan's income sums to $60,000, these individuals will likely pay the same amount as Ben. More information is required to determine who pays the higher tax

The tax that Ben pays because high-income individuals pay higher income taxes

Refer to the scenario above. What is the change in total revenue due to the price reduction? The total revenue increases by $25. The total revenue increases by $50. The total revenue decreases by $105. The total revenue decreases by $175.

The total revenue increases by $50.

Scenario: When a monopolist charges $5 for its product, it sells 250 units of the product. When it decreases the price of the product to $4, it sells 325 units of the product. Refer to the scenario above. What is the change in total revenue due to the price reduction? The total revenue increases by $25. The total revenue decreases by $105. The total revenue increases by $50. The total revenue decreases by $175.

The total revenue increases by $50.

Which of the following statements is true of perfect competition? -The outcome in a perfectly competitive market is Pareto inefficient. -The total value of production across a perfectly competitive industry is maximized. -Firms under perfect competition produce at a point where price is greater than marginal cost. -Consumers in a competitive market purchase at a point where marginal utility is greater than price

The total value of production across a perfectly competitive industry is maximized.

Which of the following is true of monopolistic competition? The firms in this market structure earn huge economic profits in the long run There are a large number of sellers each selling a differentiated product There is only one seller in this market structure. The product sold by each seller in this market structure is identical.

There are a large number of sellers each selling a differentiated product

Which of the following is a difference between an oligopoly with differentiated products and a monopolistic competition? Firms in an oligopoly with differentiated products charge a price lower than average total cost in the long run, while firms in a monopolistic competition earn a price higher than average total cost in the long run. There are huge barriers to entry in an oligopoly with differentiated products, while there are minimal barriers to entry in a monopolistically competitive market There are no barriers to entry in an oligopoly with differentiated products, while there are huge barriers to entry in a monopolistic competition. Firms in an oligopoly market with differentiated products charge a price higher than marginal cost in the long run, while firms in a monopolistic competition charge a price lower than marginal cost in the long run.

There are huge barriers to entry in an oligopoly with differentiated products, while there are minimal barriers to entry in a monopolistically competitive market

As this chapter explains, a monopoly is an industry structure where only one firm provides a good or service that has no close substitutes. This question explores the last part of this definition further. In 1947, the United States government charged the DuPont Company with a violation of the Sherman Act. The government argued that DuPont was monopolizing the cellophane market. At trial, the government showed that DuPont produced nearly 75 percent of all of the cellophane sold in the United States each year. Nonetheless, the U.S. Supreme Court ruled in favor of DuPont and dismissed the case. Which of the following is a likely argument used by DuPont to convince the Supreme Court that it did not violate the Sherman Act? - As a monopoly, DuPont was beneficial to the community since it hired many workers and paid high salaries. - Cellophane is a small part of consumers' consumption, so monopoly pricing has not caused any harm to consumers. - There are many close substitutes for cellophane such as aluminum foil and waxedpaper, so DuPont did not have significant market power. - Since DuPont only produced 75 percent of allcellophane, not 100 percent, it is a price-taker with no pricing power.

There are many close substitutes for cellophane such as aluminum foil and waxedpaper, so DuPont did not have significant market power.

Sirius XM Satellite Radio and XM Satellite Radio were the only two satellite radio providers in the United States. The Department of Justice (DOJ) and the Federal Communications Commission (FCC) approved the merger of the two companies in 2008 even though Sirius-XM would then control 100 percent of the satellite radio market. Which of the following arguments do you think Sirius and XM used to convince the DOJ and the FCC to allow the merger to proceed? - There are many close substitutes for satelliteradio; therefore, Sirius-XM would not exercise market power. - By stopping themerger, it would have limited the amount of variety on the radio, thereby limiting free speech. - Compared to the price of acar, the satellite radio subscription was too small a part of the consumer budget to matter. - Satellite radio is most often used in cars and neither firm had any pricing power in the car market.

There are many close substitutes for satelliteradio; therefore, Sirius-XM would not exercise market power.

Which of the following statements is true of the long run?

There are no fixed inputs in the long run

Scenario: Two friends are playing a game. The rules of the game are simple. Each player is given a bag containing a white ball and a black ball, and the two are asked to simultaneously draw one ball each. They are informed about their payoffs just before the game begins, which are shown in the matrix below. The first number listed in each cell is the payoff to the row player, and the second number listed is the payoff to the column player. Refer to the scenario above. Which of the following is true in this case? Nash equilibrium occurs if both the players draw white balls. Nash equilibrium occurs if Player 1 draws a black ball while Player 2 draws a white ball. Nash equilibrium occurs if Player 2 draws a black ball while Player 1 draws a black ball. There is no Nash equilibrium in this game.

There is no Nash equilibrium in this game.

The game is played between two players, Player A and Player B. Each player has a penny and must secretly turn the penny to heads or tails. The players then reveal their choices simultaneously. If the pennies match (both heads or both tails), Player A keeps both pennies. If the pennies do not match (one heads and one tails), Player B keeps both pennies. Construct the payoff matrix for Player A and Player B. Identify the Nash equilibrium(s): Boxes 1 and 4. Boxes 2 and 3. Boxes 1, 2, 3 and 4. There is no Nash equilibrium.

There is no Nash equilibrium.

Use a matrix to model a two-player game of rock-paper-scissors with a payoff of 1 if you win, -1 if you lose, and 0 if you tie. Construct the payoff matrix for this game. The Nash equilibrium is: Scissors/Paper. Rock/Rock. Paper/Rock. There is no Nash equilibrium.

There is no Nash equilibrium.

The following figure shows the demand and supply curves for a good. The initial demand curve is D1 and the supply curve is S. Later, due to an external shock, the demand curve shifts to D2. Which of the following is likely to happen if the government imposes a price control at $60, when the demand curve shifts to D2? there will be a surplus of 10 units of the good in the market. There will be a shortage of 15 units of the good in the market. There will be a surplus of 15 units of the good in the market. There will be a shortage of 10 units of the good in the market.

There will be a shortage of 15 units of the good in the market.

Refer to the figure above. Which of the following is likely to happen if a price control of $40 is imposed? There will be a surplus of 20 units in the market. There will be a surplus of 10 units in the market. There will be a shortage of 10 units in the market. There will be a shortage of 20 units in the market.

There will be a shortage of 20 units in the market.

Which of the following best describes network externalities? They are the benefits received by other firms from the actions taken by a monopolist. They occur when a firm hires an outside company to help lower its costs. They are the benefits to a firm from increasing its online presence. They occur when a product's value increases as more consumers begin to use it.

They occur when a product's value increases as more consumers begin to use it.

Chevron and BP are bidding against each other for new oil drilling leases in the Gulf of Mexico. The bids will be simultaneous with the high bidder as the winner. Chevron decides to hire you as a consultant to help it use game theory to make the best decision on how much to bid. What elements must be known to set up a simultaneous move game? Name of third player, the payoffs, the move order. The move order, the players, the strategies. The payoffs, the move order, the players. The players, the strategies, the payoffs.

The players, the strategies, the payoffs.

Months ago you spent $30 on a ticket to see your favorite musician. However, you start having doubts the day of the show because you do not feel prepared for an exam the following day. Which of the following bits of information should (according to the ideas about sunk costs discussed in the chapter) influence your final decision? Earlier in the day you found a $10 bill on the ground, which makes you feel less guilty about wasting $30.

This does not impact your decision since it is still a sunk cost that will not impact your decision.

Social surplus is the ____________. excess of aggregate demand over aggregate supply. Total value from trade in a market difference between the amount that buyers actually pay and what they wish to pay difference between the consumer surplus and producer surplus.The tables below show the reservation values of buyers and sellers in the market for used iPhones.

Total value from trade in a market

Suppose Russia is deciding to Invade or Not Invade its neighbor Ukraine. The United States has to decide to be Tough or Make Concessions. They will make their decisions simultaneously. Their payoffs are as follows: The Nash equilibrium is ____________. Make concessions / Invade. Make concessions/ Not Invade. Tough/Not Invade Tough/Invade.

Tough/Not Invade

Which of the following best describes the relationship between price (P), marginal revenue (MR), and total revenue (TR) for a monopolist? - When MR is rising, TR is rising, and when MR is falling, TR is falling. - When MR is positive, TR is rising, and when MR is negative, TR is falling. - As MR falls, TR rises. - They are all equal for a monopolist.

When MR is positive, TR is rising, and when MR is negative, TR is falling.

Which of the following statements is true? The total cost of production in a perfectly competitive market can be minimized only when the marginal costs across firms in the market are different. Under a perfectly competitive framework, a ruling authority is essentially required to dictate goals for the betterment of society. A firm interested in maximizing profits in a perfectly competitive market will produce output at a level where marginal revenue is equal to the price and greater than the marginal cost. When a competitive market is allowed to operate efficiently, firms end up producing goods using the least amount of scarce resources.

When a competitive market is allowed to operate efficiently, firms end up producing goods using the least amount of scarce resources.

A manufacturing plant is emitting hazardous gas into the nearby area, adversely affecting the local citizens. In which of the following situations does private bargaining not likely to lead to an efficient outcome? When the law regarding whether the plant has a right to emit hazardous gas or the citizens have the right to a clean environment is clearly defined. When the transaction cost associated with negotiation between the two concerned parties is negligible. When the number of local citizens affected by the plant's pollution is quite small. When negotiating an agreement on the allowable level of emissions and who gets compensated is difficult

When negotiating an agreement on the allowable level of emissions and who gets compensated is difficult.

Suppose ventilator manufacturers are profit-maximizing firms with costs outlined in this chapter (large fixed cost and increasing marginal costs). These firms typically operate in a competitive market, though the government is considering the following policies to boost production. For each policy, explain whether production will in fact increase. Via tax subsidies, the government reduces the cost of labor and parts. Does this increase ventilator production?

Yes, the subsidy will lower cost and encourage entry into the market causing production to increase.

Is it possible for accounting profit to be positive and economic profit to be negative?

Yes, this could occur if explicit costs were modest and implicit costs were high

Two firms are thinking of entering a new market. If one enters it will be successful but if a second enters both will suffer very large losses. Is there a first-mover advantage in this game No. The firm that goes first can enter and the firm that goes second will have no incentive to enter. Yes. The firm that goes first can choose not to enter and therefore incur large losses. No. The firm that goes first can choose not to enter and the firm that goes second will therefore incur large loses. Yes. The firm that goes first can enter and the firm that goes second will have no incentive to enter.

Yes. The firm that goes first can enter and the firm that goes second will have no incentive to enter.

Suppose as creative college students you and your friends develop software that for a small fee helps students choose courses based on professors' ratings and grade distributions, and it becomes an instant hit around campus. You decide to patent your software and license its use to a large tech firm that agrees to pay you 5 percent of all revenue earned. For example, if the tech firm sells 200 subscriptions at $10 each, it will have revenue of $2,000, meaning you will earn 5 percent of that total, or $100. The tech firm's goal is to maximize profits, while your goal as a license holder is to maximize total revenue. Given this information, what do we know about the price of the good? Based on the graph, we know that ____________. You prefer P1, but the tech firm prefers P2. You both prefer the price a P1 You both prefer the price a P2 You prefer P2, but the tech firm prefers P1.

You prefer P1, but the tech firm prefers P2.

The following figure illustrates the budget constraint of a consumer of jeans and sweaters. Refer to the figure above. A change in the budget constraint from B1 to B2 indicates:

a decrease in the price of sweaters.

The entry of new firms into a perfectly competitive market will cause: a left shift of the demand curve of the good being produced by the firms. an increase in the profitability of existing firms. a right shift of the demand curve of the good being produced by the firms. a decrease in the profitability of existing firms.

a decrease in the profitability of existing firms.

An industry is deemed concentrated when ___________. a few firms account for a large fraction of total sales in that industry each firm in that industry has a small market share most of the firms in that industry earn zero economic profits in the long run all the firms in that industry charge a price lower than the average cost of production

a few firms account for a large fraction of total sales in that industry

A collusion breaks down if a firm charges a price lower than the price set by the other colluding firms the price set by the colluding firms exceeds the marginal cost of production the price set by the colluding firms equals the marginal cost of production a firm charges a price higher than the price set by the other colluding firms

a firm charges a price lower than the price set by the other colluding firms

Perfect price discrimination occurs when: a firm charges the same buyer different prices at different points of time. a firm charges wealthier buyers a lower price. a firm charges different buyers according to the characteristic of their purchase. a firm charges each buyer exactly their willingness to pay.

a firm charges each buyer exactly their willingness to pay.

If the demand and supply curves for a commodity both shift to the left and the shift in demand is less than the shift in supply, then in comparison to the initial equilibrium, the new equilibrium will be characterized by:

a higher price and a lower quantity

If the demand and supply curves for a commodity shift to the right and the shift in demand is greater than the shift in supply, then in comparison to the initial equilibrium, the new equilibrium will be characterized by:

a higher price and quantity

Assume that the supply curve for a commodity shifts to the left and the demand curve shifts to the right, and the shift in demand is greater than the shift in supply. Then, in comparison to the initial equilibrium, the new equilibrium will be characterized by:

a higher price and quantity.

If the demand and supply curves for a commodity shift to the right by the same amount, then in comparison to the initial equilibrium, the new equilibrium will be characterized by:

a higher quantity and the same price

If the demand and supply curves for a commodity shift to the right by the same amount, then in comparison to the initial equilibrium, the new equilibrium will be characterized by:

a higher quantity and the same price.

In the long run:

all factors of production can be changed

The gasoline market in the United States is often said to be highly competitive. It is not perfectly competitive, but it has features and results that are similar to those of a perfectly competitive market, such as _______.

all of the above - gas stations located near each other tend to charge the same or very similar prices - an individual gas station cannot influence the market price by itself - an individual buyer cannot influence the market price of gasoline by himself

In assessing the performance of a perfectly competitive market, we can say that ____________. price efficiently allocates goods and services to buyers and sellers. any departure from the equilibrium necessarily reduces social surplus. no individual can be made better off without making someone else worse off. all of the above.

all of the above.

Social surplus is maximized when the ___________. competitive market is in equilibrium highest-value buyers are making a purchase and the lowest-cost sellers are selling buyers and sellers as distinct groups are doing as well as they possibly can all of the above.

all of the above.

In a perfectly competitive market, ______.

all sellers sell an identical good or a service

An externality occurs when the quantity demanded of a good exceeds the quantity supplied the quantity supplied of a good exceeds the quantity demanded the government regulates production and consumption decisions an economic activity affects third parties not engaged in the activity

an economic activity affects third parties not engaged in the activity

An externality occurs when _____________. the quantity demanded of a good exceeds the quantity supplied the government regulates production and consumption decisions an economic activity affects third parties not engaged in the activity the quantity supplied of a good exceeds the quantity demanded

an economic activity affects third parties not engaged in the activity

Consider a game with two players, Bill and Larry. They play the game as summarized in the game tree below. Suppose Bill initially has a secure monopoly in the market for computer operating systems. When there is no threat of entry, Bill charges the maximum monopoly price. Then Bill discovers that a second software firm run by Larry is thinking about entering the market. Since his monopoly is now insecure, Bill has two options: he can continue to act as a monopolist and allow the second software firm to enter the market, or he can try to prevent the other firm from entering the market by producing a greater quantity at a lower cost. This is an example of: a fishbone game. a simultaneous game. an extensive game. a monopoly game.

an extensive game.

Refer to the figure above. A change in the budget constraint from B2 to B3 indicates

an increase in the consumer's income.

Refer to the scenario above. Beth should use ________ to win this game. a mixed strategy forward induction backward induction her dominant strategy

backward induction

When compared to a perfectly competitive industry, in a monopoly: consumer surplus is higher but social surplus is smaller. both consumer surplus and social surplus are larger. consumer surplus is lower but social surplus is larger. both consumer surplus and social surplus are smaller.

both consumer surplus and social surplus are smaller.

Refer to the scenario above. In equilibrium, both firms will offer a discount neither of the firms will offer a discount Firm 1 will offer a discount while Firm 2 will not offer a discount Firm 1 will continue charging the original price while Firm 2 will offer a discount

both firms will offer a discount

If a consumer purchases any combination of goods and services on his ________, he will exhaust his income completely.

budget constraint

A ________ occurs when government spending exceeds tax revenue. budget deficit negative externality consumer surplus positive externality

budget deficit

A price ceiling imposed by the government:

can create situations of excess demand

A buyer is said to be a price taker if she:

can purchase any amount of a good at a fixed price provided she has the money to pay for it.

A buyer is said to be a price taker if she: - can bargain over the prices of the goods she consumes. - always pays less than the market-determined price for the goods she is consuming. - ignores the prices of related goods and considers only the price of the goods she is purchasing. - can purchase any amount of a good at a fixed price provided she has the money to pay for it.

can purchase any amount of a good at a fixed price provided she has the money to pay for it.

In a perfectly competitive market, sellers _________ and buyers _________.

cannot charge more than the market price; cannot pay less than the market price.

Compared to a firm under perfect competition, a monopolist: charges less and produces less. charges less and produces more. charges more and produces less. charges more and produces more.

charges more and produces less.

A pure strategy involves ____________. choosing ethical actions over Nash strategies. choosing ethical actions over dominant strategies. choosing one particular action for a situation. choosing different actions randomly.

choosing one particular action for a situation.

Pay-per-view broadcasts are __________. club goods common pool resources private goods public goods

club goods

The firms in the petroleum industry of Oiland have decided to cooperate with each other by setting their respective market shares. This is an example of ________ in the petroleum industry. collusion undercutting cost cutting free riding

collusion

There are a few firms in the automobile industry in Portland. In order to prevent a price war, these firms have secretly agreed to charge a price 20% above the marginal cost of production. This is an example of undercutting cost-cutting free riding collusion

collusion

A government regulation that bans the use of a certain polluting technology in the production of a good is an example of a _______ to solve an externality. social enforcement mechanism command and control approach market-based approach Coasian approach

command and control approach

The tragedy of the commons results when ___________. people are excluded from public goods. common pool resources are overused. too many public goods are provided. common pool resources are underused.

common pool resources are overused

The tragedy of the commons results when ___________. people are excluded from public goods. common pool resources are underused. common pool resources are overused. too many public goods are provided.

common pool resources are overused.

Consider the tax burden on consumers and producers of a $1 per-unit tax to be paid by producers when demand is perfectly elastic and supply is perfectly inelastic. The incidence of the tax falls entirely on producers because ____________. consumers are infinitely price sensitive. consumers demand the same quantity regardless of price. producers supply an infinite quantity. producers are more price sensitive than consumers.

consumers are infinitely price sensitive.

A difficult problem for central planners is bringing together those economic agents whose interests coincide in order to trade. This is known as the ____________ problem. incentive collaboration communication coordination

coordination

A musician was guaranteed by the government that no one else could replicate or sell his music CDs. This is an example of a: patent blueprint copyright trademark

You are the County Commissioner of Hazard County. Dwight's neighbors bring a complaint before you that Dwight's hog farm is creating a terrible odor, and they are demanding government action. You decide to respond to the neighbor's complaints by limiting the number of hogs that Dwight can have on his farm. This is an example of using a command-and-control approach. If you were to recommend a command-and-control approach, a disadvantage would be that it ___________. puts too much of a burden on a producer. creates few incentives for innovation. is more efficient than the Pigouvian tax approach leads topro-government sentiment

creates few incentives for innovation.

A price ceiling leads to a(n) _________ if below equilibrium price. increase in social well-being decrease in market demand decrease in total surplus increase in producer surplus

decrease in total surplus

The demand curve for most goods is normally ______.

downward sloping

A monopolistically competitive firm always faces a(n) horizontal demand curve upward sloping demand curve vertical demand curve downward sloping demand curve

downward sloping demand curve

A Nash equilibrium occurs if ____________. each player chooses only a pure strategy each player chooses his or her dominant strategy each player chooses strategies that are mutual best responses each player chooses only a mixed strategy

each player chooses strategies that are mutual best responses

Refer to the table above. The firm ________ in the short run. earns a profit of $76 incurs a loss of $22 earns a profit of $22 incurs a loss of $76

earns a profit of $76

Consider a market where there are many firms with different cost structures. If demand shifts to the left (decreases), the last firm that entered ____________.

earns negative economic profits and so exits the market.

The figure below shows the demand, supply, and marginal social bene t curves for Good Y. The triangular region ABC represents the ____________. inefficiency created by not recognizing a negative externality deadweight loss due to the presence of a negative externality deadweight loss due to the presence of a pecuniary externality economic loss of not recognizing a positive externality

economic loss of not recognizing a positive externality

Free entry is said to exist in an industry when: - the government subsidizes costs for all new firms entering an industry. - equal amounts of inputs are available to all firms entering an industry. - all firms entering an industry enjoy economies of scale. - entry is unfettered by any special legal or technical barriers.

entry is unfettered by any special legal or technical barriers.

If firms in a duopoly with homogeneous products compete on price, a Nash equilibrium is reached when each firm charges a price ___________. equal to its marginal cost lower than its marginal cost higher than its average cost equal to its average cost

equal to its marginal cost

The two most important goals for government policy involve a trade-off between __________ and __________. direct regulation; indirect regulation equity; efficiency big government; small government taxation; government spending.

equity; efficiency

Revenue=

exactly what you earn, or price x quantity sold

A concert in a crowded auditorium is in __________ consumption. non-excludable and non-rival excludable and rival excludable but non-rival non-excludable but rival

excludable and rival

Refer to the scenario above. This is an example of a(n) zero-sum game extensive-form game free-rider problem tragedy of commons

extensive-form game

Assume there are two industries in our economy: the production of pizza and the production of calzones. Each of these products is produced in a similar way with similar ingredients and requires similar skills. If the market price of pizza in this competitive market is below the ATC curve and the price of calzones is above the ATC curve, ____________. firms currently making pizza will switch to making calzones. firms currently making calzones will switch to making pizza. firms will increase their productivity to lower their marginal costs. firms will continue making their current product since demand curves will adjust to equilibrate prices in both markets.

firms currently making pizza will switch to making calzones

While making a purchase decision using marginal thinking, a buyer should buy the good that yields the:

highest marginal benefit per dollar spent

Three friends stay in an apartment. Their landlord offers to air-condition the apartment if they pay for the installation charges. Although they all want an air-conditioner, none of them say so. This is an example of the __________. paradox of plenty tragedy of commons paradox of thrift free-rider problem

free-rider problem

A good is said to have a relatively elastic demand if the value of price elasticity is:

greater than 1.

At all the points above the midpoint on a linear demand curve, the value of price elasticity of demand is:

greater than one.

The buyers of a good will want to purchase it as long as their willingness to pay for the good is ______.

greater than or equal to the price

The buyers of a good will want to purchase it as long as their willingness to pay for the good is__________.

greater than or equal to the price

While making a purchase decision using marginal thinking, a buyer should buy the good that yields the:

highest marginal benefit per dollar spent.

Refer to the scenario above. This game does not have a dominant strategy equilibrium does not have a Nash equilibrium has multiple Nash equilibria has a dominant strategy equilibrium

has a dominant strategy equilibrium

Scenario: Two factories dump their waste in a river. This has led to the contamination of the water which is also used in the production process. The matrix below shows the profits of the two firms based on their respective decisions to dump their waste into the river. Note that each firm's choice affects the other firm's profit. The first number listed in each cell is the payoff to the row player and the second number listed is the payoff to the column player. Refer to the scenario above. This game ______________. has a dominant strategy equilibrium does not have a Nash equilibrium does not have a dominant strategy equilibrium has multiple Nash equilibria

has a dominant strategy equilibrium

The long-run average cost curve connects the lower part of the short-run cost curves because:

in the long run, firms have more flexibility to change input combinations

The long-run average cost curve connects the lower part of the short-run cost curves because:

in the long run, firms have more flexibility to change input combinations.

Once planners have successfully brought economic agents together, a second problem of aligning the interests of the economic agents must be solved. This is known as the ___ problem. integration incentive alignment coordination

incentive

Alec and Kim used to be much better friends than they are now. The problem is what to do about Christmas gifts? If they wait until Christmas morning and move simultaneously, their payoff matrix is given below. If Alec commits at Thanksgiving time to buy a gift for Kim, Kim will find it in her best interest to buy a gift for Alec not to buy a gift for Alec indifferent both B and C

indifferent

The largest source of the federal tax revenue is individual income taxes corporate income taxes excise taxes payroll taxes

individual income taxes

The largest source of the federal tax revenue is __________. individual income taxes excise taxes corporate income taxes payroll taxes

individual income taxes

A Pigouvian tax is a tax designed to induce consumers of a good to reduce the consumption of the good induce producers generating negative externalities to reduce production induce producers generating positive externalities to reduce production induce producers to stop the production of a good

induce producers generating negative externalities to reduce production

If the percentage change in the quantity supplied of a good is less than the percentage change in price of the good, the good is said to have a(n):

inelastic supply

An economic agent _________ when he accounts for the full costs and benefits of his actions. is called a free rider internalizes an externality maximizes his profit is called a rent seeker

internalizes an externality

An economic agent ___________ when he accounts for the full costs and benefits of his actions. is called a free rider maximizes his profit is called a rent seeker internalizes an externality

internalizes an externality

The price chosen by a monopolist: independent of the production of other firms. is dependent on the production of other firms. maximizes consumer surplus. maximizes social surplus.

is independent of the production of other firms.

Consider the market for college textbooks. Assume this market is monopolistically competitive. A representative firm's demand (D), marginal revenue (MR), marginal cost (MC), and average cost (AC) curves are illustrated in the figure on the right. This industry ____________. is not in long-run equilibrium, because firms are incurring losses, which will result in firms entering. is not in long-run equilibrium, because firms are breaking even, which will result in firms exiting. is not in long-run equilibrium, because firms are incurring losses, which will result in firms exiting. is in long-run equilibrium, because firms are breaking even.

is not in long-run equilibrium, because firms are incurring losses, which will result in firms exiting.

Willingness to pay:

is the highest price that a buyer is willing and able to pay for a unit of good

Willingness to pay:

is the highest price that a buyer is willing and able to pay for a unit of good.

The graph below shows the short-run cost curves and three possible marginal revenue curves for a perfectly competitive firm. If the firm were facing MR2, then we know that this firm should __________.

keep producing, even though it is incurring a loss it is less than the fixed costs that must be paid if it shuts down.

The graph below shows the short-run cost curves and three possible marginal revenue curves for a perfectly competitive firm. If the firm were facing MR1, then we know that this firm should __________.

keep producing, since it is making a profit at the profit-maximizing output

Two goods are said to be complements when a fall in the price of one good ______.

leads to a leftward shift in the demand for the other good

When a monopolist sells positive levels of output, its demand curve: lies below its marginal revenue curve. lies above its marginal revenue curve. and marginal revenue curve overlap. is vertical while its marginal revenue curve is horizontal.

lies above its marginal revenue curve.

The marginal social cost curve _________ when production involves negative externalities. is parallel to the horizontal axis is parallel to the demand curve lies to the right of the supply curve lies above the supply curve

lies above the supply curve

The marginal social cost curve ___________ when production involves negative externalities. is parallel to the horizontal axis is parallel to the demand curve lies above the supply curve lies to the right of the supply curve

lies above the supply curve

In a perfectly competitive market, if one seller chooses to charge a price for its good that is slightly higher than the market price, then it will _________.

lose all or almost all of its customers.

Assume that a seller in a perfectly competitive market charges more than the equilibrium price. It is likely that this seller will _______.

lose almost all of his buyers

Everything else remaining unchanged, if a new seller enters a market to compete with an existing monopoly that is enjoying economies of scale, it will lead to: higher market power for the existing firm. lower profits for the existing firm higher profits for the existing firm. higher profits for both firms.

lower profits for the existing firm

In an oligopoly with differentiated products, firms earn zero economic profits do not face competition from its rivals incur losses make positive economic profits

make positive economic profits

A seller's willingness to accept is the same as his ________ cost of production.

marginal

If firms in a competitive industry independently operate to maximize profits, the __________ are eventually equalized across the firms total costs marginal costs profits revenues

marginal costs

Which of the following is the correct definition of marginal social cost? marginal cost of the externality + marginal external cost. marginal private cost + marginal external cost. marginal cost + marginal benefit. None of the above.

marginal private cost + marginal external cost.

A profit-maximizing monopolistic competitor continues production until marginal revenue equals average revenue marginal revenue exceeds average revenue marginal revenue equals marginal cost marginal revenue exceeds marginal cost

marginal revenue equals marginal cost

At the profit-maximizing level of production of a monopolist, ____________. marginal revenue is less than marginal cost both marginal revenue and marginal cost are negative marginal revenue exceeds marginal cost marginal revenue equals marginal cost

marginal revenue equals marginal cost

Consider four market structures: perfect competition, monopolistic competition, oligopoly, and monopoly. Firms in all four market structures maximize profits by producing the quantity where ___________. marginal revenue equals marginal cost. price equals marginal revenue. price equals marginal cost. marginal cost equals zero.

marginal revenue equals marginal cost.

When two firms in a perfectly competitive market seek to maximize profit in the long run, they eventually end up: -producing at a suboptimal level. -minimizing total cost of production. -earning the same level of profits. -producing the same level of output.

minimizing total cost of production.

The Department of Justice filed a lawsuit against Microsoft claiming it was engaging in unfair practices by ____________. - keeping the software code behind its operating system secret from users and competitors. - producing less than the efficient amount of its operating system and charging above the competitive market price - monopolizing the market by bundling its operating system with its Internet Explorer browser. - selling its operating system at different prices to different people based on consumer characteristics.

monopolizing the market by bundling its operating system with its Internet Explorer browser.

If quantity of tea is measured on the horizontal axis and quantity of coffee is measured on the vertical axis, an increase in the price of coffee will cause the budget constraint to:

pivot leftward along the vertical axis

If quantity of tea is measured on the horizontal axis and quantity of coffee is measured on the vertical axis, an increase in the price of coffee will cause the budget constraint to:

pivot leftward along the vertical axis.

If the price of the good measured along the vertical axis increases without a change in the price of the good measured along the horizontal axis, the consumer's budget constraint:

pivots leftward without a change in the intercept on the horizontal axis.

The production of a certain fertilizer emits a gas that keeps away mosquitoes and other insects from the surrounding community. This is an example of a positive externality negative externality pecuniary externality comparative externality

positive externality

The price of a gallon of gasoline in Bonland is $3.20. However, just before the election, the government decides to fix the price of gasoline at $2.80 per gallon. This is an example of a ________. negative externality price ceiling positive externality price floor

price ceiling

The percentage change in the quantity demanded of a good due to a percentage change in its price is referred to as the:

price elasticity of demand.

The government of Lithasia has decided to set a minimum price for certain agriculturalproducts in order to safeguard the interests of farmers. This is an example of a ________. Pigouvian subsidy Pigouvian tax price ceiling price floor

price floor

In a perfectly competitive market: - price is always greater than marginal revenue. - price is always equal to marginal cost. - price is always equal to marginal revenue. - price is always greater than marginal cost.

price is always equal to marginal revenue.

La Dila and Swiss Pro are the only two firms in an industry. The firms charge equal prices for their products, which are perfect substitutes. La Dila decides to lower its price slightly. Swiss Pro responds by cutting its price further. This price cutting will continue as long as each firm's price is higher than zero price is higher than marginal cost price is lower than marginal cost price is higher than the average fixed cost

price is higher than marginal cost

A surplus occurs in a market when:

price is higher than the equilibrium price

In a perfectly competitive market, a seller cannot choose to raise the price of its good since all sellers in the market produce identical goods, so raising the price would result in losing all its customers. All firms in a perfectly competitive market are said to be __________.

price takers.

The Coase Theorem states that ____________. government and private partnerships will result in an efficient allocation of resources. public and private partnerships will result in an efficient allocation of resources. private bargaining will result in an efficient allocation of resources public bargaining will result in an efficient allocation of resources

private bargaining will result in an efficient allocation of resources

In comparison to firms in other market structures, monopolists: maximize social surplus. encourage the entry and exit of new firms. set price lower than marginal revenue. produce goods that do not have close substitutes.

produce goods that do not have close substitutes.

Positive economic profits in a perfectly competitive market imply that: -producers are earning more than their opportunity cost. -existing firms are likely to leave the market. -the cost of production is equalized across producers. -government intervention is required to stabilize the market.

producers are earning more than their opportunity cost.

A ________ tax system is one in which tax rates increase with taxable base incomes. regressive progressive proportional supplementary

progressive

In the United States, income taxes are __________. regressive marginal progressive proportional

progressive

The federal government relies on ____________ to limit inequality. proportional taxes marginal taxes regressive taxes progressive taxes

progressive taxes

Scenario: There are 4 households in a locality. The annual income of the first household is $20,000, the annual income of the second household is $47,000, the annual income of the third household is $50,000, and the annual income of the fourth household is $71,000. Refer to the scenario above. If each family pays 12% of its income as tax every year, the local government follows a(n) ___________ tax system. cardinal progressive ordinal proportional

proportional

At the competitive equilibrium, the ______.

quantity demanded is equal to the quantity supplied of a good

Suppose a new off-campus university apartment complex could rent its rooms on the open market for $900 a month. If, instead, the university chooses to cap the price of rooms to $500 a month for students, the result would be that ____________.

quantity demanded would exceed the quantity supplied, resulting in a shortage.

Suppose that a goalie is playing a mixed strategy between diving to the left and the right. A player decides which strategy to employ when playing a game with mixed strategies by choosing ____________. based on the dominant strategy. the Fibonacci sequence. based on the Nash equilibrium. randomly.

randomly.

One reason governments impose taxes is to __________. reduce the number of transactions in an economy increase the volume of exports increase competition among producers redistribute funds via transfer payments

redistribute funds via transfer payments

Given that there are costs involved with government intervention in an economy, governments still choose to intervene in markets to ____________. implement taxation. generate black markets. reduce poverty. decrease deficits.

reduce poverty.

Scenario: There are 4 households in a locality. The annual income of the first household is $20,000, the annual income of the second household is $47,000, the annual income of the third household is $50,000, and the annual income of the fourth household is $71,000. Refer to the scenario above. If the first household pays 20% of its income as tax, the second household pays 17.5% of its income as tax, the third household pays 13% of its income as tax, and the fourth household pays 10% of its income as tax, income taxes are ________ in nature. ordinal regressive progressive cardinal

regressive

A _________ is the price at which a trading partner is indifferent between making the trade and not doing so. discounted value reservation value shadow value market value

reservation value

A restaurant charges its customers 12% of the total food price as tax. This is an example of a _________ tax. sales wealth payroll property

sales

The graph on the bottom shows the long-run average cost curve and marginal cost curve for a firm in a perfectly competitive market. Based on the graph to the bottom, the long-run supply curve is __________.

segment BC, since at prices below B the firm would shut down in the long run.

A firm is said to be a price taker if it:

sells as much of any good as it wants at the prevailing market price

If the price of a good increases,

the consumer surplus decreases

Many people have argued that an income tax should be "marriage neutral," that is, two people should pay the same total tax whether they are married or they are single. Suppose Amanda earns nothing, Ben earns $60,000, and Cathy and Dylan each earn $30,000. They are all single. Amanda marries Ben and Cathy marries Dylan. This country taxes married couples based on a family's total income. Amanda and Ben will pay the same tax as Cathy and Dylan because ____________. the couples have the same family income. marginal tax rates equal the average tax rate for both couples. the couples have no children. the taxes the couples pay do not change with income.

the couples have the same family income.

If new firms enter a monopolistically competitive market structure in the long run, ________. the demand curves faced by the existing firms become perfectly inelastic the demand curves faced by the existing firms become more elastic the demand curves faced by the existing firms shift to the right the supply curves of the existing firms become relatively more elastic

the demand curves faced by the existing firms become more elastic

If a good has a price elasticity of demand equal to 0, ___________.

the quantity demanded is completely unaffected by a change in its price

The equilibrium price of a good sold in a competitive market is $10. If an individual firm decides to sell its product at a price higher than $10, _________. - the firm will lose all its consumers - the firm's cost of production will decrease - the firm's profits will increase - the firm's revenue will increase

the firm will lose all its consumers

A first-mover advantage occurs if __________. the first mover to act in a strategic game reaches the Nash equilibrium. the first mover to act in a sequential game gets a benefit from doing so. the first mover to act in a sequential game reaches the dominant strategy equilibrium. the first mover to act in a strategic game reaches the dominant strategy equilibrium.

the first mover to act in a sequential game gets a benefit from doing so.

the fourth worker is hired.

Utility measures ____________.

the happiness or satisfaction that comes from consuming a good.

In a perfectly competitive market:

the long-run market price is equal to the minimum average cost of the industry because of free entry and exit of firms

The production of steel in a factory generates a negative externality. A per-unit tax on the factory that equals ________ of steel production will internalize the externality entirely. the marginal external cost the marginal external benefit the marginal social cost the marginal private cost

the marginal external cost

When a Pigouvian tax is imposed, ____________. the marginal social cost curve shifts downward the marginal private cost curve shifts upward the demand curve shifts rightward the marginal social benefit curve shifts downward

the marginal private cost curve shifts upward

In a progressive tax system, the average tax rate equals the marginal tax rate the marginal tax rate exceeds the average tax rate the average tax rate exceeds the marginal tax rate the average tax rate is equal for all taxpayers

the marginal tax rate exceeds the average tax rate

A seller who is a price-taker charges ______.

the market price

The supply curve represents ___________.

the minimum price sellers are willing to accept to sell an extra unit of a good

A monopolist faces an average total cost of $6 when it produces 200 units of its product. If it sells the 200 units at $8 per unit, ________. the monopolist incurs a loss of $400 the monopolist incurs a loss of $200 the monopolist makes a profit of $200 the monopolist makes a profit of $400

the monopolist makes a profit of $400

Government invention is required to solve externality problems if transaction costs associated with private negotiations are low the number of people affected by the externality is small the number of people affected by the externality is large property rights are clearly defined

the number of people affected by the externality is large

The Law of Demand states that _______.

the quantity demanded of a commodity varies inversely with the price of the commodity, all other things remaining constant

Assume that an individual spends his income on sweaters and shirts. If the price of a sweater increases:

the opportunity cost of buying sweaters increases.

The slope of a budget constraint represents:

the opportunity cost of one good in terms of another

If the production of a good involves negative externalities, the quantity of the good supplied in the market is lower than the efficient level the optimal price of the good is higher than the price charged in the market total welfare can be increased by increasing the production of the good average cost of production can be reduced by increasing output above the optimal level

the optimal price of the good is higher than the price charged in the market

Refer to the scenario above. The demand for Sporty's soccer balls is 2,500 units if ________. the price charged by Go! is higher than the price charged by Sporty the price charged by Sporty is equal to the price charged by Go! the price charged by Go! is higher than the unit cost of producing a ball the price charged by Sporty is higher than the price charged by Go!

the price charged by Go! is higher than the price charged by Sporty

Scenario: The market demand for soccer balls in a small town is 2,500 units and there are two rival sports brands selling soccer balls in this town—Sporty and Go! The products of the two brands are identical. Refer to the scenario above. The demand for Sporty's soccer balls is 1,250 units if ________. the price charged by Go! is higher than the price charged by Sporty the price charged by Sporty is equal to the price charged by Go! the price charged by Sporty is higher than the price charged by Go! the price charged by Sporty is higher than the cost of production of each ball

the price charged by Sporty is equal to the price charged by Go!

Refer to the scenario above. The demand for Go!'s soccer balls is 2,500 units if ________. the price charged by Sporty is equal to the price charged by Go! the price charged by Go! is higher than the cost of producing a ball the price charged by Sporty is higher than the price charged by Go! the price charged by Go! is higher than the price charged by Sporty

the price charged by Sporty is higher than the price charged by Go!

The burden of a tax falls entirely on buyers if the price elasticity of demand is zero (perfectly inelastic) the price elasticity of demand is greater than 1 the income elasticity of demand is high the price elasticity of supply is unitary elastic

the price elasticity of demand is zero (perfectly inelastic)

The burden of a tax falls entirely on sellers if the price elasticity of demand is unitary elastic the price elasticity of supply is greater than 1 the income elasticity of demand is high the price elasticity of supply is zero (perfectly inelastic)

the price elasticity of supply is zero (perfectly inelastic)

A surplus occurs in a market when ___________.

the price is lower than the equilibrium price

A production function establishes the relationship between:

the quantity of inputs used and the quantity of output produced

A production function establishes the relationship between:

the quantity of inputs used and the quantity of output produced.

The Law of Supply states that ______.

the quantity supplied of a good rises when the price rises, all other things remaining constant

The general rule for benefit maximization suggests that in personal equilibrium:

the ratio of marginal benefits to price should be identical across all goods.

Elasticity is:

the ratio of the percentage change in two variables

The general rule for benefit maximization suggests that in personal equilibrium:

the ratio of total benefits to income should be identical across all goods

In a duopoly with homogeneous products, the best response of a firm is to charge a lower price than its rival as long as the rival's price is below average cost the rival's price is above marginal cost the rival's price is below marginal cost the rival's price is above average cost

the rival's price is above marginal cost

If a tax is imposed on each unit of a good purchased, the supply curve for the good shifts to the right the supply curve for the good shifts to the left the demand curve for the good shifts to the right the demand curve for the good shifts to the left

the supply curve for the good shifts to the left

If a tax is imposed per unit of a good sold, the supply curve for the good shifts to the right the supply curve for the good shifts to the left the demand curve for the good shifts to the right the demand curve for the good shifts to the left

the supply curve for the good shifts to the left

A network externality refers to a situation where: -the value of a product increases as more consumers start to use it. - firms collude to sell products at a price higher than the equilibrium market price. -a firm that has control over key resources auctions the resources off to other firms. - the government interferes to prevent the concentration of market power in the hands of a few firms

the value of a product increases as more consumers start to use it.

In recent years, some online firms have offered different consumers different prices for the same good. These firms use the consumer's IP address to find what city they are in and then charge a higher price to people in wealthier cities. This type of pricing behavior is ____________. third-degree price discrimination first-degree price discrimination. location discrimination second-degree price discrimination.

third-degree price discrimination

Deadweight loss refers to the loss in producer surplus due to a fall in the market price consumer surplus due to an increase in the market price total surplus due to a market distortion such as an externality total surplus due to a change in consumers' preferences

total surplus due to a market distortion such as an externality

A retired athlete built a gym near his house that could be used for free by all the residents in the neighborhood. However, the overuse of the facilities soon led to irreparable damages. This is an example of the _________. tragedy of the commons pecuniary externality paradox of thrift prisoners' dilemma

tragedy of the commons

Private solutions to externalities are most effective if transaction costs associated with bargaining are low transaction costs associated with bargaining are high property rights are not defined clearly a large number of people are affected by the externalities

transaction costs associated with bargaining are low

Refer to the scenario above. If this game is repeated several times, Beth will ____________ and Charles will ____________. not trust; defect trust; defect trust; cooperate not trust; cooperate

trust; cooperate

The reservation value of a buyer reflects her: - willingness to pay for a good or service - trade-off between buying various goods and services - total utility from a good or service - total income

willingness to pay for a good or service

Consider a market where there are many firms with different cost structures. The last firm to enter earns ___________.

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