Micro Econ

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For an outcome to be risky, it ▼ must not must be random.

must

Consumer surplus is $____

125

The gain in total surplus for Ecuador is

At this profit-maximizing output level, you earn a profit of $___.

TC=$20x2=$40 $44-$40=$4

Economic profit

is the difference between a firm's revenues and the sum of its implicit and explicit costs.

Deadweight loss is $_

the decrease in social surplus from a market distortion, which is $2

Consumer surplus is

500

How much money per person will an insurance company make, on average, if it offers medical insurance at a price of $1 comma 6001,600? A. It will lose, on average, $400400 per person. B. It will make, on average, $400400 per person. C. It will make, on average, $800800 per person. D. It will lose, on average, $800800 per person

A. It will lose, on average, $400400 per person.

The cost of defense measured in terms of foregone food production is ▼ the same higher lower with a draft than with a volunteer army.

The country would produce 680 units of food if the easterners produce defense, while the country would produce 640 units of food with a draft. Therefore, the cost of defense measured in terms of foregone food production is *higher* with a draft than with a volunteer army.

The government earns $2,985,000 from the tariff.

With the tariff, imports are 199,000 units and there is a $15 tariff on each unit. So, the government earns 199,000×$15=$2,985,000.

Country A ▼ will not will have an incentive to cheat and produce 4040 instead of 2020, and Country B ▼ will will not have an incentive to cheat and produce 4040 instead of 2020 .

both will

Consumers will ▼ prefer the original bill prefer the Jones bill be indifferent between bills and producers will ▼ prefer the original bill be indifferent between bills prefer the Jones bill .

consumers= indifferent producers= be indifferent

The sources of revenue for state and local governments are ▼ unrelated to the same as different from those of the federal government.

different from

The license ▼ decreases does not change increases the short-run profit-maximizing quantity of candles to produce.

does not change

When comparing the accounting profit with economic profit, it must be true that the accounting profit is ▼ less than or equal to exactly equal to greater than or equal to economic profit.

greater than or equal to

The logical move for Bill is to produce a ▼ high quantity low quantity . Assuming Bill acts logically, then the logical move for Larry is to ▼ stay out enter .

high quantity; stay out

accounting profit

is the difference between a firm's revenues and explicit costs.

Suppose the government sets a maximum price (that is, a price ceiling) of $5. With the price ceiling, the new market price is $____and the new quantity traded is ______ units.

new market price= $5 new quantity trade= 4 units (supply) if it is $3 QMP is $3 and 2 units

An employer must decide whether to monitor her employee. If the employer monitors the employee, then she ensures the employee will work hard. However, monitoring the employee is costly. If the employer does not monitor the employee, then the employee may or may not work hard. This game is illustrated by the decision tree on the right. Use backward induction to figure out whether the employer should trust the employee to work hard. The Nash equilibrium is for the employer ▼ and for the employee ▼ if the employer does not monitor.

to not monitor; to not work hard

What is the highest interest rate such that you would be willing to buy this equipment? A. 0 percent. B. 10 percent. C. 8 percent. D. 12 percent.

whatever one equals zero!

Consumers in a competitive market are considered to be price takers because each tends to buy ▼ (only a tiny fraction/a vary large fraction) of the total amount of a produced good.

only a tiny fraction

Thus, charitable giving is more expensive for the ▼ rich poor .

poor

All firms in a perfectly competitive market are said to be __________. A. price leaders. B. price neutral. C. profitable in the long run. D. price takers.

price takers

Using backward induction, the Nash equilibrium is for Bi-Rite ▼ to not enter to enter and for Acme ▼ to accommodate to fight if Bi-Rite enters.

to enter; to accommodate

Based on this information, Allison ▼ should not buy should buy the extended warranty, since the expected value to Allison from buying the warranty is ▼ negative positive .

should not buy negative

If there are 4 queenqueen cards in a deck, the probability of drawing a queen the second time is __percent.

4/52 x 100 = 7.69

Examples of direct regulation include ____________. (Check all that apply.) A. antismoking laws. B. price ceilings. C. subsidies. D. zoning restrictions. E. taxes.

A,B,D

The gain in total surplus for the United States is _.

E+F

When it comes to determining the appropriate quantity of physical capital to use, the firm employs a decision rule that is conceptually ▼ identical to different from the approach it takes in choosing the number of workers to hire.

identical to

if new irrigation technology improves the average yield of a vineyard then the supply curve for sparkling wine would _______

increase

When the price of bottled water increased from $2.50 to $3.00, the quantity supplied by a firm increased from 100 to 110 bottles. The price elasticity of supply is nothing.

0.52

Joe's opportunity cost of producing one chocolate cake is ___ pizza(s)

If Country A produces 2020 and Country B produces 4040, then Country A's profit is $ nothing and Country B's profit is $ nothing.

1600 3200

If the cost of the car to Larry is $11,000, his profit is $______.

17,000-14,000=3000

Firms earn economic profits in the long run. Perfect competition: ▼ True False . Monopoly: ▼ True False . Monopolistic competition: ▼ False True .

false; true; false

Which nation has a comparative advantage in the production of each good? ▼ Farway has Nearway has Both have Neither has a comparative advantage in the production of fish. ▼ Farway has Nearway has Neither has Both have a comparative advantage in the production of coconuts.

faraway; nearway

Suppose the government proposes a ban on cigarette ads. The two companies should ▼ oppose favor the ban.

favor

The terms of trade at 1 cake for 1 pizza ▼

favors samantha

The total deadweight loss over the 20-year life of the patent is $____ thousand.

0.5 X 4 X 4.00 =$8 20 X $8=$160 thousand

Using the same tabl , what is the marginal cost of the secondsecond unit produced? A. 5 B. 15 C. 11 D. 0.

mc= Change in total cost/change in output 11

Astounding's dominant strategy is ▼ Low Medium High No dominant strategy , and Broadcast's dominant strategy is ▼ No dominant strategy Low Medium High.

medium; non-dominate

Calculate the price elasticity of supply in the following examples, then determine if supply is relatively elastic or inelastic, or perfectly elastic or inelastic. When the price of a pen increased from $2.502.50 to $3.003.00, the quantity supplied by a firm increased from 100100 to 150150 pens. The price elasticity of supply is nothing.

midpoint formula 2.20

Her opportunity cost of reviewing one document is ___ claim(s).

-10/30=-0.33333333

the slope of this curve is __

-10/30=-0.33333333

The slope of Raj's curve is ____.

-10/5 = -2

The marginal tax rate is _____%

If you have a fixed marginal cost of $20, then using the table above, your profit-maximizing quantity is nothing unit(s).

Raj's opportunity cost of reviewing one document is ____ claim(s).

2.00

▼ Only Amanda Both Neither Only Raj can benefit from helping each other.

both

If Red, Red has been played, then Player 1 will choose ▼ Red Green for his second move.

green

For a consumer with a given level of income, the combinations of goods for the budget set will be (lower/higher) than for the budget constraint.

higher

The maximum social surplus in the electric car market is $___.

110,000

How do the studies by Sacerdote and by Carrell, Hoekstra, and West discussed in this chapter avoid the homophily problem? A. Groups are assigned exogenously. B. Groups are motivated by pure altruism. C. Groups are not influenced by social pressures. D. Groups are carefully selected by each individual.

A. Groups are assigned exogenously.

Suppose workers consider a dollar of health insurance paid by firms to be the equivalent of $1 in wages. How will this law affect the supply curve of labor? A. Supply of labor will shift down by $1. B. Supply of labor will not change. C. Supply of labor will shift up by $1. D. There will be movement along the supply curve.

A. Supply of labor will shift down by $1.

Despite the logic described above, several recent studies have found that different online retailers often charge quite different prices. How might you explain this result? A. Sellers' shipping costsshipping costs differ. B. The cost of searching online is lowThe cost of searching online is low. C. It is easy for sellers to adjust their pricesIt is easy for sellers to adjust their prices. D. The products are homogeneous.

A. Sellers' shipping costsshipping costs differ.

For Joe, which production points are efficient? (Check all that apply.) A. Point A. B. Point B. C. Point C. D. Point D. E. Point E.

A<B

The figure at right shows a production possibilities curve LOADING... (PPC) for Joe. He can spend his time making pizzas or chocolate cakes. For Joe, which production points are attainable? (Check all that apply.) A. Point A. B. Point B. C. Point C. D. Point D. E. Point E.

A<B<D<E

The graph to the right shows the average total cost (ATC), average variable cost (AVC), marginal cost (MC), and marginal revenue (MR) curves for a firm in a perfectly competitive market. In order to maximize profits, this firm should produce approximately _________ units of output. A. 15 B. 7 C. 11 D. 8

C. 11

Suppose a monopolist faces the linear demand curve: P=a−bQ, where a is the point where the demand curve touches the y-axis and b represents the slope of the demand curve. Given this equation, which of the following represents the monopolist's marginal revenue?

MR=a-2bQ

Given the equation for demand, marginal revenue, and marginal cost above, if you find that your profit-maximizing output level is given by some number Upper QM, then which of the following equations would represent how a monopolist would determine its profit-maximizing price?

P=20-QM

Consider the figure on the right that shows a market with a government-imposed price control at Upper P Subscript Upper CPC. At this price, the transacted level of the product is ▼ Q2 QE Q1 units.

When economies open up to free trade, trading partners ▼ sometimes rarely never always benefit.

always

A linear PPC would show ▼ increasing opportunity costs constant opportunity costs decreasing opportunity costs , and a PPC that is curved away from the origin would show ▼ increasing opportunity costs decreasing opportunity costs constant opportunity costs .

constant opp. costs; increasing app costs

A decrease in the number of demanders in the corn market. This will ▼ increase decrease corn prices by shifting the demand curve for corn ▼ leftward rightward.

decrease; leftward

With this type of technological change, the marginal productivity of existing labor inputs will ▼ .

decrease; shift demand down

When economists speak of a deadweight loss, they are referring to ▼ a decrease an increase in ▼ consumer surplus social surplus Pareto efficiency caused by a market distortion.

decrease; social surplus

For two goods that are substitutes, the cross-price elasticity of demand will be ▼ negative positive greater than 1.0 .

positive

Finally, suppose Player 1 is choosing between green and red in the first move. Given the information above, he will choose _______.

red

▼ The United States has Thailand has Both have Neither has a comparative advantage in the production of computers.

the US

Suppose your total benefit from eating slices of pizza (value in dollars) is 8x−x2, where x is the number of slices of pizza. Pizza is sold by the slice and costs $2 per slice, and so the total cost of pizza is 2x. Using optimization in levels, what is the optimal amount of pizza for you to eat? Your net benefit is maximized at (3) slices of pizza. (Enter your response as an integer.) 14=6

For this exercise, assume there are only two goods. The substitution effect of an increasean increase in the price of one good always ▼ decreases leaves unchanged increases the amount of that good in the individual's new consumption choice (bundle) and ▼ increases decreases leaves unchanged the amount of the other good.

1. decreases 2. increases

The efficient toll on this one additional person (that is, the cost he imposes on other drivers) is $ nothing.

101 people x (40-39 minutes) x 0.10 per minute = $10

The marginal social cost of onea additional person is $ nothing.

102 x 40 x 0.10 = 408 408-394=14

The average tax rate is ___%

27.71 83,130.75/300,000

Terms of trade are determined ____________. A. on the basis of opportunity costs. B. by sellers. C. by buyers. D. on the basis of absolute advantage.

A. on the basis of opportunity costs.

Efficiency wages are used to ____________. A. increase signaling, thus minimizing adverse selection. B. increase motivation and productivity, thus minimizing moral hazard. C. decrease an employer's "skin in the game." D. decrease inequitable wage distribution in a company.

B. increase motivation and productivity, thus minimizing moral hazard.

Which of the following is not a source of a country's comparative advantage? A. Natural resourcesNatural resources. B. TechnologyTechnology. C. QuotasQuotas. D. ClimateClimate.

C. QuotasQuotas.

A friend tells you that he thinks that the salespeople who work at Apple stores are paid very low wages, given their productivity. Dividing Apple's revenues by the total number of employees shows that each employee contributed an average of $473,000 in revenues in 2011. But most of Apple's sales staff are paid about $25,000 a year. What is the flaw, if any, in your friend's reasoning? A. The wage is based on a competitive rate schedule, which is determined by the market, not revenue per worker. B. The wage is equal to profit per worker, not revenue per worker. C. The wage is equal to the value of the worker's marginal product, not revenue per worker. D. There is no flaw in his or her reasoning; this demonstrates the Law of Diminishing Returns.

C. The wage is equal to the value of the worker's marginal product, not revenue per worker.

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

C. To raise revenues to pay for operations.

Which of the following equations represents the firm's average variable cost? A. 400+0.1q. B. 400/q + 0.1q C. 0.1q2. D. 0.1q.

D. 0.1q.

Human capital is the __________. A. skills and knowledge that people obtain by furthering their schooling. B. experience that people derive from spending more time on a job. C. physical capital that humans are equipped with on their jobs. D. A and B only.

D. A and B only.

Why does a demand curve with a constant slope not have a constant elasticity? A. Slope measures responsiveness and elasticity measures change. B. Elasticity depends on more variables than does slope. C. Slope is based on percentage change and elasticity is based on absolute change. D. Slope is based on absolute change and elasticity is based on percentage change.

D. Slope is based on absolute change and elasticity is based on percentage change.

Identify the Nash equilibrium(s). A. Boxes 1 and 4. B. Boxes 2 and 3. C. Boxes 3 and 4. D. There is no Nash equilibrium.

D. There is no Nash equilibrium.

How do third-party certifications and warranties solve the adverse selection problem in the used car market? A. They pass on the costs of a "lemon" to a third party in the transaction. B. They make the market more efficient and eliminate the deadweight loss. C. They eliminate the moral hazard involved in selling a "lemon." D. They signal that a good car is not a lemon.

D. They signal that a good car is not a lemon.

Is the deadweight loss of taxation the same for different types of taxes? A. Yes, because all taxes distort behavior. B. No, it differs according to whether consumers or producers pay the tax. C. Yes, because the tax incidence is the same for all taxes. D. No, it differs according to how taxes change incentives.

D. No, it differs according to how taxes change incentives.

The total deadweight loss over the 20-year life of the patent is $ 9090 thousand.

DWL= equals the area under the demand curve and above the marginal cost curve for units not produced by the monopoly. This is equal to the area of a triangle with a base equal to 33 thousand (from 66 thousand, where the marginal cost curve intersects the demand curve, minus the monopoly's profit-maximizing quantity, which is 33 thousand) and a height equal to $3.003.00 (from a profit-maximizing price of $7.007.00 minus a marginal cost of $4.004.00): DWLequals=0.5×3×3.00=$4.5 thousand per year. Over 20 years, this is $9090 thousand.

The Nash equilibrium is: A. Top left. B. Bottom left. C. Top right. D. Bottom right. E. There is no Nash equilibrium.

E. There is no Nash equilibrium.

Now suppose the apartment builiding passes a rule that says residents are not allowed to play music their neighbors can hear if any of the neighbors object. As before, Jones and Smith can bargain at zero cost. According to the Coase Theorem, ▼ Smith will pay up to $40 to Jones Jones will pay $0 to Smith Jones will pay up to $40 to Smith Jones will pay $60 to Smith to compensate for the ▼ deadweight loss negative externality positive externality.

Jones will pay $60 to Smith;negative externality

Producer surplus ▼ increased decreased by _________.

With the increase in price, producer surplus increased by Upper CC. Since consumer surplus fell by negative Upper C minus Upper D−C−D and producer surplus increased by Upper CC, the change in social surplus is negative Upper C minus Upper D plus Upper C equals negative Upper D−C−D+C=−D so social surplus fell by Upper DD. **increased by C

When price rises from $3030 to $3636, total expenditure on this good ▼ .

falls

Suppose the figure on the right shows the domestic market for hockey sticks in a certain country. The government has recently imposed a tariff on hockey sticks. While the world price of a hockey stick is $60, the price in this country (with the tariff) is $75. When the government imposed a tariff, the quantity of imports ▼ increased fell by nothing units.

fell by 141,000

Given this information, the senator's comment is ▼ flawed accurate , since these types of costs ▼ should not should affect current and future decisions.

flawed; should not

Present bias suggests that today is ▼ more important than of equal importance to less important than the future.

more important than

You are considering renting a city apartment with 1,000 square feet for $1,200 per month. The monthly rent on a larger, 1,500-square-foot city apartment is $1,600. The marginal cost of renting an apartment with 500 additional square feet is $_____ per square foot per month.

$0.80 1600-1200= 400 400/500= 0.80

Assuming Bill and Larry act logically, then Bill's profit will be $____ and Larry's profit will be $____

$10,000;$0

The initial equilibrium price is $_____ and the initial equilibrium quantity is ______ units.

$3.00 1,000.00 units

Using your graph, calculate the producer surplus in this market. Producer surplus is

.5(base of triangle x height of triangle) = 8

In the United States, the opportunity cost of computers is _____ tons of rice.

1200/80 = 8

Which firms will produce an electric car if the price is $40,000? 1. B, C, and D. 2. A, B, and D. 3. A, B, and C. 4. A, C, and D

4. A, C, and D

If you could practice third-degree price discrimination, you will earn a profit of $___.

Her opportunity cost of reviewing one document is nothing claim(s).

5/20= 0.25

The following table gives the federal income tax rates for a single individual. The total tax payable for an individual who earns $300,000 a year is $____.

83,130.75

What types of goods are likely to be traded in a black market? (Check all that apply.) A. Prostitution. B. Protective services. C. Health care. D. Education. E. Drug dealing.

A and E

Identify the Nash equilibrium(s). A. Box 1. B. Box 2. C. Box 3. D. Box 4. E. Boxes 1 and 4. F. Boxes 2 and 3. G. There is no Nash equilibrium.

A. Box 1.

Even if government intervention is not warranted to address the asymmetric information problems in markets on efficiency grounds, why might intervention be justified? A. To ensure a more equitable distribution of income and resources in the society. B. There will be many lawsuits that clog the court system and cost the taxpayers money. C. To enforce the contracts created that result from the principal-agent relationship. D. Unemployed workers will create moral hazard with their behavior.

A. To ensure a more equitable distribution of income and resources in the society.

Why is the market demand curve for public goods calculated as a vertical summation of individual demand curves? A. because the public good is non-rival, so you and others can consume every unit of the good at the same time. B. because public goods are finite in availability of consumption, so the vertical summation accounts for the limit. C. because public goods are the opposite of private goods, therefore the summing must be done similar to club goods. D. because public goods require vertical summation to account for the higher level of fairness compared to private goods.

A. because the public good is non-rival, so you and others can consume every unit of the good at the same time.

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 ___________. A. differentiated. B. perfect substitutes. C. expensive. D. homogeneous.

A. differentiated.

Direct regulation is ____________. A. direct actions by the government to control the amount of an activity. B. the government determining the incidence of a tax. C. consumer sovereignty in a competitive market. D. using the tax system to influence behavior.

A. direct actions by the government to control the amount of an activity.

Asymmetric information is when ____________. A. one party to a transaction has different information from the otherlong dash—information that the other party cares about. B. there is an equity-efficiency trade-off in the outcome of a transaction. C. both parties to a transaction have the same information but fail to conclude the transaction. D. both parties to a transaction are missing the same important piece of information.

A. one party to a transaction has different information from the otherlong dash—information that the other party cares about.

A local grocery store charges more for one soda than for a six−pack. This is an example of ___________. A. second-degree price discrimination. B. first-degree price discrimination. C. perfect price discrimination. D. thirdthird-degree price discrimination.

A. second-degree price discrimination.

The equilibrium is __________. A. Medium/Medium. B. Low/Low. C. High/Low. D. High/High. E. There is no Nash equilibrium.

A. Medium/Medium.

In the Friend or Foe game, Foe is a (weakly) dominant strategy for both players. In roughly 50 percent of decisions, players chose Friend and split the sum of money with the other player to __________. A. be rational B. be fair. C. increase his or her payoff. D. avoid punishments.

B. be fair.

The Economic Man of the standard model of homo economicus, unlike that studied in behavioral and social economics, is ____________. A. motivated by his surroundings. B. completely selfish. C. affected by other people. D. at times selfless.

B. completely selfish.

A monopoly may earn positive economic profits in both the long run and the short run because a ____________. A. monopoly's product is slightly differentiated. B. monopoly has entry barriers. C. monopoly sells to many buyers. D. monopoly is a price maker with market power.

B. monopoly has entry barriers

The correct answers to the preceding questions should have been anticipated given the elasticities calculated in the table because expenditure __________. A. moves in the same direction as price when elasticity is equal to 1, in the opposite direction when elasticity is either greater than or less than 1, and remains unchanged when price changes by more than 50 percent. B. moves in the same direction as price when elasticity is less than 1, in the opposite direction when elasticity is greater than 1, and remains unchanged when elasticity is equal to 1. C. moves in the same direction as price when elasticity is greater than 1, in the opposite direction when elasticity is less than 1, and remains unchanged when elasticity is equal to 1.

B. moves in the same direction as price when elasticity is less than 1, in the opposite direction when elasticity is greater than 1, and remains unchanged when elasticity is equal to 1.

Is the most efficient method also the most fair? A. No, suggesting that people ignore their surroundings B. No, suggesting that people are not always selfish C. No, suggesting that people are not affected by other people D. Yes, suggesting people are motivated by their surroundings

B. No, suggesting that people are not always selfish

Does it make sense to buy extended warranties on televisions and other small home appliances? A. Yes, the cost of a warranty will be much lower than the cost of having to fix the item if it breaks after a few years. B. No, the cost of the warranty will be too high compared to the cost of the item, the likelihood of a breakage, and your lifetime income. C. Yes, these types of items tend to appreciate in value, so the cost of the warranty will be less than the expected value of the item in the future. D. No, warranties on these items are rarely honored by the sellers.

B. No, the cost of the warranty will be too high compared to the cost of the item, the likelihood of a breakage, and your lifetime income.

You are planning to build an apartment building. Your market research department estimates that your revenues will be $800 comma 000800,000. Your engineering department estimates the cost will be $600 comma 000600,000. You started construction and spent $150 comma 000150,000 to build the foundation when the recession begins. This causes the market research department to revise its revenue estimates downward to $449 comma 950449,950. Should you complete the apartment building? A. No, the cost to build is still 600,000 (which includes the $150,000 you spent already and the $450,000 remaining) $449,950. B. No, the remaining cost to build is $450,000 and you only expect to earn $449,950; you will ignore the 150,000 spent since it is a sunk cost. C. Yes, the $150,000 is a fixed cost of production so you must complete the building to cover these fixed costs. D. Yes, since you have already spent $150,000, you cannot stop construction since that money would be wasted.

B. No, the remaining cost to build is $450,000 and you only expect to earn $449,950; you will ignore the 150,000 spent since it is a sunk cost.

Describe the path that gives an equilibrium in this extensive game. A. Green, Green, Green. B. Red, Red, Green. C. Green, Red, Green. D. Red, Green, Red.

B. Red, Red, Green.

To restrict a firm's monopoly power, why can't antitrust authorities just set a floor or a ceiling in the market? A. It is difficult to set a fair price, so regulators do not get involved in the pricing decisions of any monopolists. B. Floors or ceilings lead to inefficiency and deadweight loss, which can be avoided if the monopoly sets its own price. C. It is difficult to set a fair price, and even if regulators did, the firm would then have no incentive to innovate. D. The government does not have the power to dictate what a firm can charge; it can only stop mergers.

C. It is difficult to set a fair price, and even if regulators did, the firm would then have no incentive to innovate.

The Internal Revenue Service defines the estate tax as a tax on your right to transfer property at your death. The fair market value of the estate is taken into account when levying the tax. Once the gross value of the tax is computed, certain deductions are allowed to arrive at the value of the taxable estate. What is the equity implication of imposing an estate tax? A. It is unfair because it reduces opportunities. B. It is fair because it increases government revenue. C. It is fair because it reduces inequality. D. It is fair because it increases economic surplus.

C. It is fair because it reduces inequality.

Why is free trade controversial? A. Deadweight loss increases. B. Companies always win at the expense of consumers. C. Some individuals may lose. D. Only countries with an absolute advantage gain.

C. Some individuals may lose.

What is the Nash equilibrium? A. The Nash equilibrium is for both stations to pick C. B. The Nash equilibrium is for both stations to pick R. 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. D. The Nash equilibria are for both stations to pick R and for both stations to pick C. E. The game does not have a Nash equilibrium.

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.

When comparing the graph of your ATC curve for a natural monopoly with that of a firm in perfect competition, we see that ____________. A. a natural monopoly has a U-shaped ATC curve, while a firm in perfect competition has a downward-sloping curve. B. a natural monopoly has an upward-sloping ATC curve, while a firm in perfect competition has a U-shaped curve. C. a natural monopoly has a downward-sloping ATC curve, while a firm in perfect competition has a U-shaped curve. D. the ATC curves are identical.

C. a natural monopoly has a downward-sloping ATC curve, while a firm in perfect competition has a U-shaped curve.

One possible economic solution to the overhunting of rhinos is to __________. A. institute diplomatic sanctions against the Chinese. B. institute harsher criminal laws for the purchase and sale of rhino horns. C. allow private conservation organizations to purchase the rhinos and their habitat. D. hunt down and imprison the poachers.

C. allow private conservation organizations to purchase the rhinos and their habitat.

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

C. choosing one particular action for a situation

A collusive agreement between two firms is likely to break down when ____________. A. it is easy to punish cheatersit is easy to punish cheaters. B. firms value profits less today than in the future. C. the market has little long minus term valuethe market has little long−term value. D. detection of cheaters is easydetection of cheaters is easy

C. the market has little long minus term valuethe market has little long−term value.

Car insurance companies charge males more for insurance than females. This is an example of ___________. A. second-degree price discrimination. B. first-degree price discrimination. C. third-degree price discrimination. D. perfect price discrimination.

C. third-degree price discrimination

Is the income tax in this country marriage neutral? A. Yes, because Amanda and Ben pay the same total taxes when married as Cathy and Dylan when married. B. No, because Ben's taxes do not increase with marriage. C. No, because Cathy and Dylan pay higher taxes when married than before marriage. D. No, because income tax rates must rise with marriage to keep government revenue constant.

C. No, because Cathy and Dylan pay higher taxes when married than before marriage.

Is there an efficiency argument in favor of the individual mandate? A. Yes, because everyone is better off with health insurance. B. No, because consumer surplus is lower with the mandate. C. Yes, because total surplus with the mandate is higher than total surplus without the mandate. D. No, because people shouldn't have to buy health insurance if they don't want to.

C. Yes, because total surplus with the mandate is higher than total surplus without the mandate.

In an attempt to help the poor, India announced a policy to implement price ceilings on several essential drugs in December 2012. Some industry analysts, however, claimed that this would actually end up hurting the poor more than helping them. Do you think this is a possibility? Explain your answer. A. No, it will help the poor by increasing output. B. No, it will help the poor by increasing demand. C. Yes, it might hurt the poor by creating a shortage. D. Yes, it might hurt the poor by lowering prices.

C. Yes, it might hurt the poor by creating a shortage.

Find consumer surplus, producer surplus, and total surplus now that there is a price ceiling of $5. Consumer surplus is $_____ producer surplus is $ total surplus is $

CS= (12-5)+(11-5)+(10-5)+(9-5)= $22 PS= (5-2)+(5-3)+(5-4)+(5-5) = $6 Total Surplus= 22=6= $28

Suppose that an individual who buys only wine (W) and cheese (C) is currently maximizing his total benefits. From this, we know that: MB Subscript Upper W divided by Upper P Subscript Upper W equals MB Subscript Upper C divided by Upper P Subscript Upper CMBW/PW = MBC/PC Now suppose the price of winewine falls, all else constant. From the "equal bang for the buck" rule, we can predict that he responds by increasing his consumption of wine . Given the consumer's response to a decrease in the price of winewine, we can say that the solution of the buyer's problem ___________. A. shows that price and quantity demanded are inversely related. B. verifies the Law of Demand. C. gives rise to a downward-sloping demand curve. D. all of the above.

The value of marginal product of labor (VMPL) is ____________. A. given by the marginal product of labor times the price of the firm's output. B. the firm's additional profit from hiring another worker. C. the contribution of an additional worker to a firm's revenues. D. A and C only.

D. A and C only.

What is meant by a preference reversal? A. It describes the process by which your preferences change after you have experienced an event. B. It is a reversal of normal weighting, since it means you put more weight on future events than you do on events today. C. A pattern that occurs when you gain more information about an activity, causing your discount weight for the activity to change from negative to positive. D. A pattern that occurs when a discount weight today gets much more weight than tomorrow, but tomorrow and the day after tomorrow receive the same (or nearly the same) weight.

D. A pattern that occurs when a discount weight today gets much more weight than tomorrow, but tomorrow and the day after tomorrow receive the same (or nearly the same) weight.

Which of the following describes a monopolist's demand curve? A. An x-intercept of 5 units and vertical. B. A y-intercept of $5 and horizontal. C. A y-intercept of $3 and upward-sloping with a slope of 1. D. A y-intercept of $8 and downward-sloping with a slope of -1.

D. A y-intercept of $8 and downward-sloping with a slope of -1.

Suppose some workers are capable and others are extraordinary. Firms are willing to pay capable workers a salary of $12,000 and extraordinary workers a salary of $15,000. Workers know if they are capable or extraordinary but firms do notlong dash—that is, ability is private information. It would cost capable persons $6,000 to earn a college degree, but it would cost extraordinary persons just $2,000 to earn a college degree since they can finish their education much faster. Workers without college degrees have high school diplomas. Which workers will go to school and earn a college degree? A. Both extraordinary workers and capable workers will earn a college degree. B. Neither extraordinary nor capable workers will earn a college degree. C. Capable workers will earn a college degree and extraordinary workers will not. D. Extraordinary workers will earn a college degree and capable workers will not.

D. Extraordinary workers will earn a college degree and capable workers will not.

Consider the following statement: Given that bacon and eggs are complementary goods, if the price of eggs decreases the demand for both goods will rise. Is this an accurate statement? A. No, the quantity demanded (not the demand) for both goods is increaseincreased as a result of the decreasedecrease in the price of eggseggs. B. It is somewhat inaccurate. The decreasedecrease in the price of eggseggs will increaseincrease the quantity demanded (not the demand) for baconbacon. It will, however, as the statement claims, increaseincrease the demand for eggseggs. C. Yes, the decreasedecrease in the price of eggseggs will increaseincrease both the demand for eggseggs and the demand for baconbacon. D. It is somewhat inaccurate. The decrease in the price of eggseggs will increaseincrease the quantity demanded (not the demand) for eggseggs. It will, however, as the statement claims, increases the demand for bacon.

D. It is somewhat inaccurate. The decrease in the price of eggseggs will increaseincrease the quantity demanded (not the demand) for eggseggs. It will, however, as the statement claims, increases the demand for bacon.

Salmon fishing in Alaska is a seasonal business; May through September is the best time to bait salmon and halibut. Toland Fisheries, a small commercial fishery, recorded its highest ever catch last year. They started this year's fishing season with the same number of workers and equipment. With the new season also starting well, Toland has increased hiring substantially. However, the fishery did not make any additional investment in trawlers and other fishing equipment. Other things remaining unchanged, what is likely to happen to the marginal product of each new worker in the short run? A. It will change cyclically, meaning that it will cycle up and down as more workers are hired. B. It will be increasing at an increasing rate, meaning each additional worker will have a higher marginal product of labor than the previous one hired. C. It will be the same as the previous workers hired, meaning each additional worker will have the same marginal product of labor as the previous one hired. D. It will be increasing at a decreasing rate, meaning each additional worker will have a lower marginal product of labor than the previous one hired.

D. It will be increasing at a decreasing rate, meaning each additional worker will have a lower marginal product of labor than the previous one hired.

Who has the comparative advantage in the production of pizza and chocolate cake? A. Joe has a comparative advantage in both goods. B. Samantha has a comparative advantage in both goods. C. Samantha has a comparative advantage in pizza, and Joe has a comparative advantage in cake. D. Joe has a comparative advantage in pizza, and Samantha has a comparative advantage in cake. E. Neither has a comparative advantage in either good.

D. Joe has a comparative advantage in pizza, and Samantha has a comparative advantage in cake.

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

D. Produces identical goods.

What happens in a monopolistically competitive market when new firms enternew firms enter the market? A. Firms have moremore market power. B. The existing firm's demand curve shifts out and becomes steeper C. Consumers become lessless sensitive to price. D. The existing firm's demand curve shifts in and becomes flatter

D. The existing firm's demand curve shifts in and becomes flatter

A randomized experiment was conducted to see how others' opinions affect a user's ratings online. Whenever a comment was added on a certain social news site, researchers gave it an upvote, downvote, or no vote. The researchers conducting the experiment noted that comments that were given an upvote were more likely to get another upvote as compared to the comments that were given other ratings. New voters could be influenced by existing voters and their votes because they ____________. A. benefit from network externalities. B. don't care about being wrong C. trust their own instincts D. believe others have better information

D. believe others have better information

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? A. Monopolistically competitive marketMonopolistically competitive market, because it is a price taker. B. Monopolistically competitive market, because demand is greater. C. Monopolistically competitive marketMonopolistically competitive market, because consumers are lessless sensitive to price. D. Monopoly, because its demand is more inelastic.

D. Monopoly, because its demand is more inelastic.

Despite the logic described above, several recent studies have found that different online retailers often charge quite different prices. How might you explain this result? A. The cost of searching online is low B. The products are homogeneous. C. Consumers have lots of information about prices D. Sellers' warrantieswarranties differ.

D. Sellers' warrantieswarranties differ.

Suppose the apartment building does not have any rules about noise. Jones and Smith can bargain at zero cost. According to the Coase Theorem, ▼ Jones will pay $0 to Smith Smith will pay up to $40 to Jones Jones will pay up to $40 to Smith Jones will pay $60 to Smith to compensate for the ▼ positive externality deadweight loss negative externality.

Jones will pay $0 to Smith; negative externality

There are four main factors underlying government taxation and spending decisions:

Raising revenues Redistributing income via transfer payments •Financing operations •Correcting market failures and externalities

Consider a game with two players, 1 and 2. They play the extensive-form game summarized in the game tree below: If Green, Green has been played, then Player 1 will choose _____ for his second move.

Red

The primary types of tax systems are ___________. A. marginal tax systems. B. regressive tax systems. C. progressive tax systems. D. proportional tax systems. E. average tax systems.

Regressive, progressive, proportional B,C,D

New firms are free to enter the industry in the long run. Perfect competition: ▼ False True . Monopoly: ▼ True False . Monopolistic competition: ▼ False True .

True; False; True

equation for price elasticity of demand

[(Q2-Q1)/(Q2+Q1)/2] / [(P2-P1)/(P2+P1)/2]

Amanda should specialize in ▼ both reviewing documents processing claims , and Raj should specialize in ▼ reviewing documents both processing claims .

a=docs raj= claims

If Country A produces 4040 and Country B produces 4040, then Country A's profit is $ nothing and Country B's profit is $ nothing.

both 1800

a decrease in the age when people begin to receive Social Security benefits

d= no change s= decrease w= increase e= decrease

If your professor decided to give all students the highest grade in the class, your classmates' incentives to study would ▼ decrease not change increase .

decrease

Suppose there is a product that is being sold in a perfectly competitive market. If the demand for the product decreases, producer surplus will ▼ decrease increase since this change results in a lowerlower price, which means there is ▼ more less area between the supply curve and the market price for the good.

decrease; less

Using Figure 1 on the right, answer the following questions. When the price increased, imports ▼ remained the same decreased increased . Consumer surplus ▼ decreased increased by ________.

decreased; decreased; -C-D

The graph on the right shows the long-run average total cost curve for a perfectly competitive firm. Refer to points A, B, and C on the graph and identify where the firm would experience economies of scale, constant returns to scale, and diseconomies of scale. At point A, the firm experiences ▼ constant returns to scale economies of scale diseconomies of scale At point B, the firm experiences ▼ economies of scale constant returns to scale diseconomies of scale At point C, the firm experiences ▼ economies of scale constant returns to scale diseconomies of scale 6.5 Review question 12

economies of scale constant returns to scale diseconomies of scale

According to your graph, the equilibrium wage ▼ falls rises and the equilibrium quantity ▼ falls rises stays the same.

falls; stays the same

According to the graph, the consequence of the change in price is a ▼ higher lower market wage and a ▼ higher lower level of employment.

higher; higher

if sparkling wine producers expect the price of wine to decrease int eh future, then the supply curve for sparking wine would _________

increase

if the number of people over the aft of 16 int eh country increased significantly, then the demand for the Toyota RAv4 SUV would ______. a. remain unchanged b. increase (shift right) c. decrease (shift left)

increase (shift right)

According to your graph, when some sellers exitexit a competitive market, the equilibrium price ▼ decreases increases and the equilibrium quantity ▼ decreases increases .

increase; decreases

Use the diagram on the right to answer the following questions about the impact of the government imposing an import tariff. With an import tariff, domestic production ▼ increases decreases from ▼ Upper Q 1Q1 Upper Q 2Q2 Upper Q 3Q3 Upper Q 4Q4 to ▼ Upper Q 1Q1 Upper Q 2Q2 Upper Q 3Q3 Upper Q 4Q4 .

increases; Q1 to Q2

If the income elasticity of demand for a good is negativenegative, the good is

inferior

Technologies that substitute for existing labor inputs are known as ▼ labor-discarding labor-complementary labor-saving technologies.

labor saving

All else being equal, the steeper the demand curve, the ▼ smaller larger the social surplus in a market.

larger

All else being equal, the steepersteeper the supply curve, ___________ the social surplus in a market.

larger

Public goods are ▼ high low in rivalry and ▼ low high in excludability.

low-low

▼ No one citizen Bob Charlie Anne will provide the display on his or her own.

no one citizen

In this case, the price elasticity of supply is ▼ perfectly elastic perfectly inelastic relatively elastic relatively inelastic .

perfectly inelastic

In this case, the price elasticity of supply is ▼ perfectly inelastic relatively inelastic relatively elastic perfectly elastic .

perfectly inelastic

When you place a large discount weight on the present and a smaller discount weight on the future that stays the same for any future date, we call this pattern ▼ regressive preferences future bias present bias

present bias

Suppose your wealth is $150,000. You are considering going to a casino and betting your entire wealth on "Red" in a game of roulette. If the ball lands on red, you double your money and have $300,000; if it does not land on red, you are penniless. Suppose you are in a casino in Europe. In Europe, a roulette wheel has 18 black slots, 18 red slots, and one green slot ("0"). The probability of landing in a red slot is ______%.

probability of red= 18/37 = 48.65%

An example of a regressive tax is the ___________. A. property taxproperty tax. B. inheritance tax. C. Medicare tax. D. income tax.

property tax

The average tax rate is ___%

total taxes/total income 66,630.75/250,000 = 26.65%

The opportunity cost of buying one unit of good Upper XX is nothing unit(s) of good Upper YY. (Round your response to three decimal places.)

10/12=0.833

Manny earns $1,000 per month and spends hishis income on clothing and books. Suppose the price of books is $40 and the price of clothing is $25. 1.) Using the line drawing tool, show MannyManny's budget constraint on the top graph to the right. Label your line 'BC1.' Carefully follow the instructions above and only draw the required object. 5.2 text problem 2

1000/25=40 clothing 1000/25=40

Suppose the price of books rises to $50, MannyManny's income remains $1,000, and the price of clothing remains $25. Draw a new diagram that shows Manny that shows Manny's new budget constraint. Identify the slope and intercepts of this budget constraint. 1.) Using the line drawing tool, show MannyManny's budget constraint using the middle graph to the right. Label your line 'BC2.'

1000/50=20 1000/40=40

You are a professor of economics at a university. You've been offered the position of serving as department head, which comes with an annual salary that is $5 comma 5005,500 higher than your current salary. However, the position will require you to work 200 additional hours per year. Suppose the next best use of your time is spending it with your family, which has value of $20 per hour. What is the difference in the net benefit from becoming the department head? The change in net benefit is $1500. To optimize, you (should) become a department head.

20*200= 4000 5500-4000=1500

Suppose the price of X is $50, the price of Y is $60, and a consumer has income of $600. Using the line drawing tool, show the budget constraint for this consumer on the graph to the right. Label your line 'BC'. Carefully follow the instructions above and only draw the required object.

600/50=12 600/60=10 12=x 10=y

AnnieAnnie consumes two goods, books and sweatersweaters. HerHer income is $40, the price of a sweatersweater is $8, and the price of a book is $4. Suppose AnnieAnnie's parents give herher $24 for herher birthday. 1.) Using the triangle drawing tool, show AnnieAnnie's budget set on the top graph to the right. Label your triangle 'BS1'.

64/8= 64/4=

For a trade to take place, a buyer's willingness to pay must be ____________. A. higher than the seller's willingness to accept. B. equal to the seller's willingness to accept. C. lower than the seller's willingness to accept. D. A and B only. E. All of the above.

A and B only

What is meant by holding all else equal and how is this concept used when discussing movements along the demand curve? A. All variables that can affect the demand for the good are held constant. B. everything else in the economy is held constant, including the price of the good. C. All variables in the model are set to equal values. D. All of the above. __________________________________ We make the assumption of holding all else equal when considering demand curves since we want to focus on the changes in the quantity demanded that result from changes in ▼ .

A. All variables that can affect the demand for the good are held constant. _________________ only the price of a good

Economists mostly use optimization in differences, as opposed to optimization in levels, because ____________. A. comparing different features of alternatives is intuitive. B. contrasting the total benefit of alternatives is simplesimple. C. examining the net benefits of alternatives is counterintuitive. D. calculating cost-benefit ratios is complicated.

A. comparing different features of alternatives is intuitive.

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 _________. A. lose all or almost all of its customers. B. see no change in its number of customers. C. see a small decrease in its number of customers. D. All of the above are equally likely.

A. lose all or almost all of its customers.

There is a proverb "anything worth doing is worth doing well." Do you think an economist would agree with this proverb? A. No, because the marginal cost of extra effort may be greater than the marginal benefit. B. No, because doing something well has no next best alternatives with which to compare. C. Yes, because the marginal costcost of extra effort is typically increasingincreasing as effort increases. D. NoNo, because the total net benefit of extra effort is negativenegative by definition. E. Yes, because doing something to the best of your ability is optimizing behavior.

A. No, because the marginal cost of extra effort may be greater than the marginal benefit.

How does a consumer's budget set differ from his budget constraint? A. A budget constraint refers to all of the possible bundles of goods and services a consumer can purchase, while a budget set is limited to the bundles he can purchase using all of his income. B. A budget set refers to all of the possible bundles of goods and services a consumer can purchase, while a budget constraint is limited to the bundles he can purchase using all of his income. C. A budget set is simply the collection of the many budget constraints a consumer faces at different points in time. D. There is no difference at all—the terms "set" and "constraint" are interchangeable.

B. A budget set refers to all of the possible bundles of goods and services a consumer can purchase, while a budget constraint is limited to the bundles he can purchase using all of his income.

Reagan determined that the net benefit of taking the combination of two lecture courses and an online lecture course was $100. The same three courses online gave her a net benefit of $80, and all three in a lecture-based format gave her a net benefit of $90. A. Optimization in differences, since she is comparing total benefits between alternatives. B. Optimization in levels, since she is comparing the net benefits between alternatives. Your answer is correct.C. Optimization in levelslevels, since she is making marginal comparisons. D. Both typesBoth types of optimization, since she is not considering the net benefits of alternatives. E. Neither typeNeither type of optimization, since she is considering the total benefits of alternatives.

B. Optimization in levels, since she is comparing the net benefits between alternatives. Your answer is correct.

Refer to the optimization analysis used to make a decision about the choice of an apartment. Suppose the government in a certain country wants to reduce urban sprawl. (Urban sprawl refers to the development of residential and commercial areas in the suburbs around the periphery of a city. One of the main problems with urban sprawl is that it leads to increased traffic congestion and air pollution as commuters travel to the city every day.) What measures could it take to ensure that people choose to live closer to the central business district? A. Encourage employers to relocate to the suburbs. B. Tax traffic moving in and out of the cityTax traffic moving in and out of the city. C. Strengthen building codes to regulate apartments being constructed. D. Decrease property taxes on houses in the suburbsDecrease property taxes on houses in the suburbs. E. Enhance the public transportation system between the city and the suburbs.

B. Tax traffic moving in and out of the cityTax traffic moving in and out of the city.

How would the equilibrium price in a market be affected if there were a smallsmall increase in demanddemand and a largelarge increase in supplysupply? A. The equilibrium price would remain the same. B. The equilibrium price decreasesdecreases. C. The equilibrium price increasesincreases. D. More information is needed. It may increase, decrease, or remain the same.

B. The equilibrium price decreasesdecreases.

how would a decrease in demand affect the equilibrium price in a market? The equilibrium price would remain the same. B. The equilibrium price decreasesdecreases. C. The equilibrium price increasesincreases. D. More information is needed. It may increase, decrease, or remain the same

B. The equilibrium price decreasesdecreases.

How would the equilibrium price in a market be affected if there were a smallsmall decrease in demanddemand and a largelarge decrease in supplysupply? A. The equilibrium price would remain the same. B. The equilibrium price increasesincreases. C. The equilibrium price decreasesdecreases. D.

B. The equilibrium price increasesincreases.

In Figure B, the change shown was caused by _________. A. a decreasea decrease in the consumer's income. B. an increasean increase in the consumer's income. C. an equal increasean equal increase in the prices of both goods. D. the consumer's desire to increaseincrease overall consumption. 5.2 review question 3

B. an increasean increase in the consumer's income.

Since optimization is used to analyze people's choices and help them improve the outcomes of their choices, its A. normative only. B. both normative and positive. Your answer is correct.C. positive only. D. neither because it doesn't show people who don't optimize how to improve their well−being.

B. both normative and positive.

Does the principle of optimization imply that people always make the best choices? A. Yes, because people make perfect calculations. B. Yes, it is a good approximation for the decisions people make. C. No, because people do not have full information. D. No, because people are irrational. E. It cannot be tested without more data.

B. Yes, it is a good approximation for the decisions people make.

Read the story to the right, and then answer the following questions: Based on what happened at the Richmond event, it is apparent that at a price of $50, the quantity _________ of laptops exceeded the quantity _________. This resulted in an excess _________ for laptops. A. supplied; demanded; demand B. demanded; supplied; demand C. supplied; demanded; supply D. demanded; supplied; supply

B. demanded; supplied; demand

When comparing the equilibriums in the lobster market for August and November, the equilibrium quantity is ______ in November than in August, while the equilibrium price is ______. A. higher; higher. B. lower; higher, lower, or unchanged. C. lower; lower. D. lower; unchanged.

B. lower; higher, lower, or unchanged.

Which of the following combinations of X and Y will be represented by a point on the consumer's budget constraint? A. 8 units of Upper X and 3 units of Upper Y8 units of X and 3 units of Y. B. 4 units of Upper X and 7 units of Upper Y4 units of X and 7 units of Y. C. 6 units of Upper X and 5 units of Upper Y6 units of X and 5 units of Y.

C. 6 units of Upper X and 5 units of

What is meant by comparative statics? Explain with an example. A. The effect of the best feasible choice, such as savingsaving, on its marginal cost. B. Equilibria across multiple markets, such as labor markets, financial markets, and service markets. C. Changes in net benefits when a person switches from one alternative, such as savingsaving, to another, such as no savingsaving. D. A change in an outcome, such as savingsaving, that results from a change in a factor, such as the interest ratethe interest rate.

D. A change in an outcome, such as savingsaving, that results from a change in a factor, such as the interest ratethe interest rate

Consider a good that you do not like at all, perhaps turnips. Given the market price for turnips, what would be your consumer surplus? A. Zero, unless someone actually pays you to eat them. B. Zero, since not liking turnips at all implies an unwillingness to pay anything. C. Some positive, but it will be a very small number. D. Both A and B are possible.

D. Both A and B are possible.

Suppose you are accepted at all of the three business schools to which you applied. Consider all the factors that could matter when it comes to choosing a business school. How would you go about making an optimal decision about which school to attend? A. Predicting which school among the three will provide the greatest future benefits. B. By considering the total benefits from attending the three schools. C. Summing the marginal costs from attending the three schools. D. By comparing the net benefits from attending the three schools. E. Identifying the school among the three with the lowest direct costs.

D. By comparing the net benefits from attending the three schools.

For an individual, consumer surplus is calculated as the difference between the ▼ ability willingness to pay and the price actually paid for a good.

willingness

The lowest price that a seller is willing to receive to sell an extra unit of a good is called ▼ willingness to accept willingness to pay willingness to exchange , while the highest price that a buyer is willing to pay for an extra unit of a good is called ▼ willingness to exchange willingness to accept willingness to pay .

willingness to accept: willingness to pay

Optimization is the process that describes __________. A. the production of resources. B. how to obtain relevant data. C. how to maximize revenuerevenue. D. the budgeting process for peoplepeople. E. the choices that householdshouseholds make.

E. the choices that householdshouseholds make.

Now suppose the price had remained at $4040 but the price of clothing had fallen to $2020 and MannyManny's income had fallen to $800800. Draw a new diagram that shows MannyManny's new budget constraint. Identify the slope and intercepts of this budget constraint. 1.) Using the line drawing tool, show MannyManny's budget constraint using the bottom graph to the right. Label your line 'BC2.'

clothes:40 books: 20

The marginal tax rate is __%.

The new higher estimate of social cost implies ▼ the same a lower a higher Pigouvian tax required to lead to the efficient level of steel.

a higher

The price elasticity of demand shows the sensitivity of consumers' purchases to ▼ a percentage an absolute change in the good's price.

a percentage

The diagram on the right shows the demand and supply for jeans. Calculate consumer surplus, producer surplus, and social surplus in this market. Consumer surplus is $____. **Consumer surplus is measured by the area under the demand curve and above the equilibrium price line.

.5(150*20)=1500

Her opportunity cost of reviewing one document is _________ claim(s).

-20/40= -0.5

The slope of the curve is

-20/80= -0.25

The value of producer surplus is

Identify the Nash equilibrium(s). A. Box 1. B. Box 2. C. Box 3. D. Boxes 2 and 3. E. There is no Nash equilibrium.

D. Boxes 2 and 3.

Which consumers will buy an electric car when the price is $40,000? A. 4, 2, and 3. B. 4, 2, and 1. C. 1, 3, and 22. D. 1, 3, and 44.

D. 1, 3, and 44.

If people care about the total village consumption of goods and everyone's benefits from flood control, then the net benefit to each dollar contributed to flood control is $_.

$1.50 Each time people contribute $1.00 to flood control, each person in the village receives $0.50 of benefits and therefore the total benefit to society increases by 5×$0.50=$2.50. Therefore, if people care about the entire village, they will contribute their entire $50.00 to flood control because the net benefit of donating a dollar to flood control is $1.50, from $2.50 - $1.00.

Imagine you are a buyer in a double oral auction with a reservation value of $17 and there is a seller asking for $11. If you accept this offer, you will gain $

After the tariff is introduced, consumer surplus ▼ decreases increases by $ nothing.

$6,382,500

The expected value of Jones's profit is $

(0.20 x 20) +(0.80 x 80) = $68

What phenomenon does this example illustrate? A. Adverse selection. B. Moral hazard. C. Principal-agent relationship. D. Signaling.

A. Adverse selection.

Which of the following is a cost associated with government intervention in an economic system? A. Bureaucracies. B. Externalities. C. Inequality. D. Under−employment.

A. Bureaucracies.

The firms that should produce those cars are ____________. A. B, C, and D. B. B, A, and C. C. B, A, and D. D. A, C, and D.

A. B, C, and D

What is not an example of a real life zero sum game? A. free market transaction. B. thermonuclear war. C. heads-or-tails. D. rock-paper-scissors.

A. free market transaction. because both sides can win a free market transaction

Suppose conditions arise in the sugar market that would lead to a competitive equilibrium price that is below 18.75 cents per pound. In this situation, sugar mills will __________. A. not sell to private buyers at this lower price and will sell to the government instead, which will drive up the domestic price until it reaches 18.75 cents per pound. B. sell only to private buyers, since they do not need to take advantage of the government subsidy when the equilibrium price is low. C. sell some to private buyers at the lower price and sell some to the government at the higher subsidized price.

A. not sell to private buyers at this lower price and will sell to the government instead, which will drive up the domestic price until it reaches 18.75 cents per pound.

The fixed cost of setting up a brewery is relatively high. A. Support, because firms could earn long-run economic profits. B. Weaken, because market share would increase. C. Support, because competition would increase. D. Weaken, because production would be less profitable.

A. Support, because firms could earn long-run economic profits.

How is a monopolistically competitive market similar to a perfectly competitive market? A. Both have differentiated products with close substitutes. B. There are no restrictions on the entry of new firms. C. Producers with market power set their own prices. D. Both have homogeneous products with no close substitutes.

B. There are no restrictions on the entry of new firms.

In a perfectly competitive market, sellers _________ and buyers _________. A. are able to charge more than the market price; are able to pay less than the market price. B. cannot charge more than the market price; cannot pay less than the market price. Your answer is correct.C. cannot charge more than the market price; are able to pay less than the market price. D. are able to charge more than the market price; cannot pay less than the market price.

B. cannot charge more than the market price; cannot pay less than the market price. Your answer is correct.

With the growth of the Internet, there are a large number of online retailers as well as buyers in the online retail market. One might think that different firms would charge very similar prices for the same good because ____________. A. consumers have limited information about pricesconsumers have limited information about prices. B. it is easy for sellers to adjust their pricesit is easy for sellers to adjust their prices. C. barriers exist to new firms selling online. D. the cost of searching online is high

B. it is easy for sellers to adjust their prices

An information cascade is when we ___________. A. sacrifice to promote equality. (Fairness) B. make choices based on the decisions of others. C. conform our decisions to the behavior of others. D. influence others with our opinions or ideologies.

B. make choices based on the decisions of others.

Optimization is the process that describes __________. A. how to obtain relevant data. B. the choices that firms make. C. how to maximize wealthwealth. D. the production of resources. E. the budgeting process for firmsfirms.

B. the choices that firms make.

Suppose you engage in second-degree price discrimination and offer your customers what seems to be a very generous deal: "Buy one at the regular price of $7575, 60 percent off on a second." With this deal, each customer will buy _______ units and you will earn a profit of _______. A. 0; $0. B. 2; $97. C. 1; $71. D. 2; $112

B. 2; $97.

Do all consumers in a competitive market enjoy the same amount of consumer surplus? A. Yes, federal law prohibits discrimination. B. No, since considerable variation exists among consumers in terms of tastes and incomes.

B. No, since considerable variation exists among consumers in terms of tastes and incomes.

Is it correct to say that people give to charity only out of selflessness and concern for the well-being of others? A. Yes, because giving generates no utility. B. No, because people maximize utility C. Sometimes, because fairness may be important. D. Sometimes, because there may be a cost to not giving

B. Sometimes, because there may be a cost to not giving

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). A. 1. B. 3. C. 2. D. 4.

B. 3

What approach would be the least effective way to deal with free riders? A. Offer citizens a favor or a small gift if they agree not to free ride. B. Threaten to expose the free riders to their neighbors. C. Exclude citizens from benefiting from the good or service. D. Appeal to their civic sense of responsibility.

C. Exclude citizens from benefiting from the good or service.

Suppose Smith goes to Jones and promises to choose High if Jones chooses High. In which situation would this not be a credible promise? A. If Smith has a reputation that he wants to protect. B. If the game is played multiple times. C. If the game is only played once. D. If Jones can punish Smith for lying.

C. If the game is only played once.

Consider whether the Law of Demand holds in the following situations. The price of anti minus venom serumanti−venom serum, sold to those with snake bitessold to those with snake bites, increased from $45 to $52, but consumption has still remained the same. In this situation, the Law of Demand __________. A. does not hold, since the product is not sold in normal markets, so it cannot follow the Law of Demand. B. holds, since the Law of Demand must hold for all goods in all instances. C. does not hold, since the product sold is required for survival, so increasing the price did not affect consumption. D. holds, since a change in the price of the product resulted in a change in the quantity demanded of the product.

C. does not hold, since the product sold is required for survival, so increasing the price did not affect consumption.

Expected value is calculated by ____________. A. dividing the minimum possible payout by the probability of that outcome. B. dividing the maximum possible payout by the probability of that outcome. C. multiplying the probability of each possible outcome by the dollars associated with each outcome. D. adding all possible payoffs together and dividing by the number of outcomes to find the average.

C. multiplying the probability of each possible outcome by the dollars associated with each outcome.

At one point, both firms were selling a slice of pizza for just $0.250.25, which is the marginal cost of a slice of pizza. This pricing game is a type of prisoners' dilemma because the ____________. A. firms must select their prices simultaneously. B. firms do not have dominant strategies. C. firms' dominant strategies don't maximize joint profits. D. Nash equilibrium is the collusion outcome. E. firms are better off competing than colluding.

C. firms' dominant strategies don't maximize joint profits.

What does this imply for the price of oil in the future? A. The demand for oil will decrease, which will lead to higher prices in the future. B. The demand for oil will increase, which will lead to lower prices in the future. C. The supply of oil will increase, which will lead to lower prices in the future. D. The supply of oil will decrease, which will lead to higher prices in the future.

D. The supply of oil will decrease, which will lead to higher prices in the future.

Unemployment benefits might create a moral hazard problem ____________. A. because workers are incentivized to lie about their skills to get a job when their unemployment benefits run out. B. if the government requires the worker receiving unemployment benefits to pay back the benefits once he or she gets a new job, which leads to workers taking the first job offered even if it's not the best job for the worker in order to reduce repayment to the government. C. if the government paying the unemployment benefits requires employers of those workers who received the benefits to pay efficiency wages before the worker can take the job. D. because how hard a worker is trying to find a job is private information and unemployment benefits imply weaker incentives to find a job, which leads to a longer duration of unemployment.

D. because how hard a worker is trying to find a job is private information and unemployment benefits imply weaker incentives to find a job, which leads to a longer duration of unemployment.

Externalities are called market failures because they ___________. A. cause markets to overproduce when there is inflation. B. raise prices for everyone. C. raise prices in an unfair manner for the poor. D. cause markets to produce suboptimal social outcomes.

D. cause markets to produce suboptimal social outcomes.

Oligopolistic firms that sell differentiated products determine their prices when prices are __________. A. agreed upon by firms jointly conspiring to maximize profits. B. identified independently by each firm from the demand curve for its product. C. set equal to marginal cost for each firm. D. determined simultaneously by the firms as best responses given other firm prices.

D. determined simultaneously by the firms as best responses given other firm prices.

When can backward induction be used to arrive at the equilibrium for a game? In the case of, A. strategic form games. B. complex games. C. zero sum games. D. extensive form games.

D. extensive form games.

The higher minimum wage ____________ the short-run profit-maximizing quantity of candles to produce.

decreases

click not he table icon

screenshot 6.2.2

In the absence of trade, if Thailand consumes 300 tons of rice, it can consume _____ computers.

If, in the absence of trade, Thailand produces and consumes 300 tons of rice, 300/60=5 workers are needed because each worker can produce 60 tons of rice. Thailand is left with 15 workers to produce computers. So 15×4=60 computers will be produced in Thailand. If, in the absence of trade, the United States produces and consumes 100 computers, 100/10=10 workers are needed because each worker can produce 10 computers. The United States is left with 30 workers to produce rice. So 30×80=2,400 tons of rice will be produced in the United States.

The annual demand for a new drug HealthyHeart is shown in the diagram. The one-time cost of developing HealthyHeart is $165165 thousand. Once the drug has been developed, the marginal cost of an additional pill is $3.003.00. Show that if the government gives the company that develops HealthyHeart a 20-year patent the company will be able to recover the $165165 thousand it spent to develop the drug. (To help you solve the questions below, you should sketch the graph by hand or by using the standalone grapher learning aid.) Excluding fixed costs, the firm's profit with a 20-year patent is $ ______ thousand.

(6.5-3) x 3.5 = 12.25 12.25x20= 245 A monopoly maximizes profit by producing the quantity where marginal revenue equals marginal cost. Marginal cost is $3.003.00 per pill. The marginal revenue curve has the same vertical intercept as the demand curve and twice the slope. Thus, the profit-maximizing quantity is 3.53.5 thousand pills. The profit-maximizing price is determined by the demand curve at the profit-maximizing quantity. In particular, consumers will demand 3.53.5 thousand pills per year if the monopoly charges a price of $6.506.50 per pill. Excluding fixed costs, the monopoly's profit equals the difference in the profit-maximizing price of $6.506.50 per pill and the $3.003.00 marginal cost of production multiplied by 3.53.5 thousand pills.

There are five people in a village. Each has $50.00. The village is prone to flooding. Flooding is reduced if people contribute to flood control efforts. In particular, each person in the village receives $0.50 of benefits when someone contributes $1.00 to flood control (flood control is a public good). So suppose, for example, each person contributes $20.00 to flood control. Total contributions will equal 5x$20.00=$100.00, each person will be left with $50.00−$20.00=$30.00 to purchase goods such as food and clothing, and each person will receive $0.50×$100.00=$50.00 in benefits from flood control. Everyone in the village makes their decision about contributions without talking to anyone else in the village. Suppose people care only about their consumption of goods and their benefits from flood control. Show that contributing $0 is a dominant strategy. If people care only about their own consumption of goods and their benefits from flood control, then the net benefit to each dollar contributed to flood control is $____.

$-0.50 Each time people contribute $1.00 to flood control, their consumption of goods goes down by $1.00 and their benefits from flood control rise by $0.50. Therefore, if people care just about themselves, they will contribute $0 because the net benefit of donating a dollar to flood control is $−0.50, from $0.50- $1.00.

The Friend or Foe game works as follows. Given a trust fund of money, two players must decide how the money is to be divided. The division of winnings depends on the players' choiceslong dash—whether they choose Friend or Foe. If both players choose Friend, then the money is divided equally. If one player chooses Friend and the other Foe, the person who chose Foe receives the entire amount, leaving the other player with nothing. If both players choose Foe, then each walk away with nothing. The payoffs from a $6060 trust fund are illustrated in the figure on the right for you and your friend, Enver. Suppose you and Enver value fairness. Both of you would consider it unfair to pick Foe and receive the entire trust fund of money if your teammate picks Friend. Your (and Enver's) best strategy will be to pick Friend if your disutility from being unfair is greater than at least $

$30

Ultimatum Game begins with the proposer's decision. In particular, the proposer can offer anywhere between $0 and $100 to the responder, and the responder then decides whether to accept or not. If the responder accepts, then both players get the money, divided as proposed. If the responder rejects the offer, then both players get nothing. To simplify, suppose the proposer must offer either $1 or $50. Suppose the responder can punish the proposer if the proposer offers $50. The proposer will be prompted to offer $1 if the responder is able to impose a penalty that is greater than at least $

$49 The proposer must offer either $1 or $50. In turn, the responder's dominant strategy is to accept any positive offer because any positive offer is better than getting $0 from rejecting. The proposer's marginal benefit from offering $50 is therefore the difference in offering $50 and offering $1. Thus, any punishment greater than $4949 (from $5050 minus $1) for offering $5050 would prompt the proposer to offer $1.

Smith and Jones are considering forming a partnership and dividing the total profits evenly. If they do this, the expected value of each person's profits is $___.

(0.20 x $100,000) +(0.80 x 60,000)=$68 Under the partnership, the total profits earned if Greece withdraws from the European Union is $180.00180.00 + $20.0020.00 = $200.00200.00, which would be split evenly into $100.00100.00 each. If Greece remains in the EU, the total profits would equal $40.0040.00 + $80.0080.00 = $120.00120.00, which would be split evenly into $60.0060.00 each. This means that both Smith and Jones would have an expected value of profits as follows:

Smith will earn a profit of $180.00 next year if Greece withdraws from the European Union (EU) or $40.00 if Greece remains in the EU. Jones will earn $20.00 if Greece withdraws from the EU or $80.00 if it remains in the EU. The probability Greece will withdraw is 0.20 and the probability it will remain is 0.80. The expected value of Smith's profit is $_____.

(0.20 x 180,000)+(0.80x40) = $68

The U.S. government, like many governments throughout the world, bailed out large financial institutions that were thought to be "too big to fail" during the 2008 financial crisis. Suppose a bank has the opportunity to invest in a risky project. If the project is successful, the bank will earn $80; if it is unsuccessful, the bank will lose $100. The probability that the project will be successful is 0.50. The expected value of investing in this project is $__

(0.50 x $80) + (0.50x $-100) = $-10

If you leave all your money in the bank for 8 years, then the future value of your money after those 8 years is $

(1+.06)^8 x 300 =478.15

When you were born, your parents deposited $15,000 in the bank. The bank offers a fixed interest rate of 3 percent. On your 18th birthday, your parents decide to withdraw the money that they deposited to pay for your college tuition. If interest is compounded annually, you can expect to withdraw $__ on your 18th birthday.

(1+0.03)^18 x (1500) = 25,536

Calculate the future value of $2 over the following time periods and interest rates. The future value of $2 after 8 years if the interest rate is 9 percent is $

(1+r)^T x (principal) FV= (1+ 0.09)^8 x(2) = $3.99

The expected value of this gamble is $

(1/4(36) + 3/4(-4) = $6.00

Suppose a wealthy widow is willing to give $150 to charity if the cost in terms of foregone consumption is no more than $105. Assume charitable contributions are tax deductible. The widow would be willing to give $150 to charity if her income tax rate is at least ___ percent.

(150-105)=45 45/150=.3 or 30%

For both Joe and Samantha to benefit equally from trading, the terms of trade would have to be_____ cake(s) for 1 pizza.

(2-0.5)/2= 1 +0.5= 1.25

Suppose you and your friend decide to gamble on the roll of a single, six-sided dice. If it lands on an even number, you must give your friend $10, and if it lands on an odd number, your friend must pay you $10. If you play the game many times, then the average payoff, or expected value, from this bet is $_.

When the price of bottled water increased from $3.003.00 to $4.004.00, the quantity supplied by a firm increased from 200200 to 216216 bottles. The price elasticity of supply is

0.27

The annual demand for a new drug HealthyHeart is shown in the diagram. The one-time cost of developing HealthyHeart is $100 thousand. Once the drug has been developed, the marginal cost of an additional pill is $4.004.00. Show that if the government gives the company that develops HealthyHeart a 20-year patent the company will be able to recover the $100100 thousand it spent to develop the drug. (To help you solve the questions below, you should sketch the graph by hand or by using the standalone grapher learning aid.) Excluding fixed costs, the firm's profit with a 20-year patent is $ nothing thousand.

(7-4) x 3 = $9 9x20=180 A monopoly maximizes profit by producing the quantity where marginal revenue equals marginal cost. Marginal cost is $4.00 per pill. The marginal revenue curve has the same vertical intercept as the demand curve and twice the slope. Thus, the profit-maximizing quantity is 3 thousand pills. The profit-maximizing price is determined by the demand curve at the profit-maximizing quantity. In particular, consumers will demand 3 thousand pills per year if the monopoly charges a price of $7.00 per pill. Excluding fixed costs, the monopoly's profit equals the difference in the profit-maximizing price of $7.00 per pill and the $4.00 marginal cost of production multiplied by 3 thousand pills.

If the gambler discounts delayed utils with a weight of 0.80, then the net benefit of continuing to gamble is ____.

(75)-(0.80x110)=-13

The following table gives the federal income tax rates for a single individual: The total tax payable for an individual who earns $250,000 a year is $_______.

(8,925)*10% +(36,250-8925)*15% +(87,850 -36,250) *25% +(183,250-87,850)*28% +(250,000-183,250)*33%= $66,630.75

Now suppose that you have a summer job that pays you $15 per hour. How would your analysis change? With a $15-per-hour summer job, (the opportunity cost of your time) would increase.

(the opportunity cost of your time)

The slope of MannyManny's budget constraint is _____, and the vertical and horizontal _____ and ____ units

-2,40,20

Even though the price of an acre of land increased from $6,000 to $10,000, the quantity supplied did not change. The price elasticity of supply is

Suppose instead you play this same game with twotwo of your friends (resulting in threethree total players in the game). Each player is assigned 22 numbersnumbers from the dice. If either of your numberseither of your numbers is rolled, then each player must pay you $10, and if either of your numberseither of your numbers areare not rolled, then you must pay the winning player $10. If you play the game many times, then the average payoff, or expected value, from this bet is $

Samantha's opportunity cost of producing one chocolate cake is nothing pizza(s).

0.5

Deadweight loss of this tax is ___ million Argonian dollars.

0.5 x (4-3) x 2 = 1 milion A dollars Deadweight loss is equal to the change in total surplus that is not part of new tax revenue. This is an amount equal to the area under the demand curve and above the supply curve for sticks of gum once traded in the market that are no longer traded.

Suppose the supply and demand curves for a good are linear. Present and discuss a diagram to show that the deadweight loss from a tax is equal to one-half the product of (1) the tax per unit on the good and (2) the change in the equilibrium quantity of the good as a result of the tax. Assume a tax of size t is levied on consumers. As a function of the equilibrium prices, quantities, and/or the tax, deadweight loss (DWL) is equal to:

0.5 x t x (Q1-Qt)

Jones TV and Smith TV are the only two stores in your town that sell flat-panel TV sets. First, Jones will choose whether to charge high prices or low prices. Smith will see Jones's decision and then choose high or low prices. If they both choose High, each earns $10,000. If they both choose Low, each earns $8,000. If one chooses High and the other chooses Low, the one that chose High earns $6,000 and the one that chose Low earns $14,000. Complete the game tree by using backward induction. The payoff for Jones and Smith, respectively, in Box 1 is ▼ $14,000 $10,000 $8,000 $6,000 and ▼ $10,000 $8,000 $6,000 $14,000 . The payoff for Jones and Smith, respectively, in Box 2 is ▼ $8,000 $6,000 $14,000 $10,000 and ▼ $10,000 $8,000 $6,000 $14,000 . The payoff for Jones and Smith, respectively, in Box 3 is ▼ $8,000 $10,000 $6,000 $14,000 and ▼ $10,000 $6,000 $14,000 $8,000 . The payoff for Jones and Smith, respectively, in Box 4 is ▼ $10,000 $8,000 $6,000 $14,000 and ▼ $10,000 $6,000 $14,000 $8,000 .

1-10,000 2- (6&14) 3- (14&6) 4- 8000

The associated income effect of an increase in the price of one good ▼ may increase or decrease will always decrease will always increase the quantity of that good and ▼ will always increase may increase or decrease will always decrease the quantity of the other good, but the quantities of the two goods in the new consumption choice cannot simultaneously ▼ increase decrease as a result of the income effect.

1. may increase or decrease 2. may increase or decrease 3. increase

Identify the Nash equilibrium(s): A. Box 1. B. Box 2. C. Box 3. D. Box 4. E. Boxes 1 and 4. F. Boxes 2 and 3. G. There is no Nash equilibrium.

G. There is no Nash equilibrium.

The opportunity cost of buying one unit of good Upper XX is ____unit(s) of good Upper YY.

1.2

You are interested in playing a card game. The rules of the game are such that you pick a card from a deck of cards and if the card is a diamond, you win $40. The catch is, every time you want to pick a card you have to pay the dealer a fee of $4. A standard deck of cards consists of 52 cards, with 13 diamonds in the deck of cards. The probability of picking a diamond is ___________ and the probability of not picking a diamond is ___________.

1/4;3/4

The value of consumer surplus is _.

The value of the deadweight loss is

For this firm to maximize profits, it should _____ T-shirts.

100

If an insurance company offers medical insurance at a price of $2 comma 2002,200, total surplus is $_____.

100 x 2,400= 240000 Total producer cost is 100x2,000=200,000 240,000-200,000=$40,000

Now suppose the government has a policy that helps banks that are suffering losses. Under this policy, the government will give a bank 30 percent of the bank's losses if a project is unsuccessful. Thus, if the project in this problem is unsuccessful, the government will give the bank 0.30×$100, or $3030. The expected value of investing in this project is $

100-70=30 (0.50 x $80) + (0.50-$70)=5

The slope of the curve is ____.

100/200= 0.5 Negative because of sloping downward

Major league baseball teams have imposed what is commonly called the "luxury tax" on themselves. A team is subject to the tax if its payroll exceeds a specified level. The annual threshold for the luxury tax is $189 million for 2014-16. A team that exceeds the threshold must pay 17.5 percent to 50 percent of the amount by which its payroll is above the threshold, where the "tax rate" depends on the number of years the team is over. This question looks at why teams might subject themselves to this tax. Suppose there are two major league baseball teams, Team 1 and Team 2. They will both choose to offer either high salaries to players or low salaries. They will make their decisions simultaneously. If both choose low each will earn $550550; if both choose high each will earn $450450. If one chooses high and the other chooses low, the team that chooses high will attract the best players and will earn $650650, but the team that chooses low will earn just $300300. Show that high is a dominant strategy but that both teams would be better off if both chose low. If one team picks low, then the other team reduces its payoff by $ nothing from picking low instead of high, and if one team picks high, then the other team reduces its payoff by $ nothing from picking low instead of high.

100;150

There is a road between the suburbs and downtown. The road is congested at rush hour. If 101 people use the road at rush hour, the trip takes 39 minutes. If one additional person enters the road, everyone has to slow down and the trip now takes 40 minutes. People value their time at $6 per hour (that is, $0.10 per minute). For simplicity, ignore all of the costs of using the road other than the cost of time. The total social cost of 101 people using the road at rush hour is $__.

101 people x 39 minutes x $0.10 per minute = $394

There is a road between the suburbs and downtown. The road is congested at rush hour. If 114114 people use the road at rush hour, the trip takes 5151 minutes. If one additional person enters the road, everyone has to slow down and the trip now takes 5252 minutes. People value their time at $6 per hour (that is, $0.10 per minute). For simplicity, ignore all of the costs of using the road other than the cost of time. The total social cost of 114114 people using the road at rush hour is $ nothing.

114 x 51 x 0.1 = 581

The marginal social cost of onea additional person is $

115 x 52 x 0.1 = 598 598-581 = 17

If there are 13 heartheart cards in a deck, the probability of getting a heartheart the second time if you chose a heartheart the first time is

12/51 x 100 = 23.53

The graph on the right shows the cost curves of a perfectly competitive firm. If the market price is $14 per unit, then this firm will produce approximately ▼ 12 4 0 units and will have ▼ negative zero positive economic profits.

12; positive

Imagine you are a buyer in a double oral auction with a reservation value of $13 and there is a seller asking for $7. If you accept this offer, you will gain $

13-7=$6

If there are 13 spadespade cards in a deck, the probability of drawing a spadespade the second time is

13/52 x 100=25%

The figure at right shows a production possibilities curve LOADING... (PPC) for Joe. He can spend his time making pizzas or chocolate cakes. Using the information in the figure, calculate Joe's opportunity cost of producing one pizza and his opportunity cost of producing one chocolate cake. Remember that the opportunity cost is how much of one good must be given up to produce one more unit of the other good. Joe's opportunity cost of producing one pizza is nothing chocolate cake(s

15/30= 0.5

The net present value of this investment if the interest rate is 88 percent is $

157.48

The graph on the right shows the market demand curve for a good. Use the graph to find total revenue and marginal revenue at the given output levels. If the price is $4, then total revenue is $_______ thousand.

Larry Krovitz is a salesman who works at a used-car showroom in Sydney, Australia. It's the last week of July, but he is yet to meet his sales target for the month. A customer, Harold Kumar, who wants to buy a Ford Fiesta, walks into the showroom. After taking one of the cars for a test drive, Harold decides to buy it. While $11,000 was the least that Larry would have been willing to accept for that car, he quotes a price of $17,000. After some bargaining, the car is sold for $14,000. In this case, the producer surplus is $_.

17,000-14,000=3,000

Joe's friend Samantha also makes pizzas and chocolate cakes. The figure at right shows the PPC for Samantha. Using the information in the figure, calculate Samantha's opportunity cost of producing one pizza and her opportunity cost of producing one chocolate cake. Samantha's opportunity cost of producing one pizza is nothing chocolate cake(s).

Three roommateslong dash—Tinker, Evers, and Chancelong dash—share an apartment. It is really cold outside and they are considering turning up the thermostat in the apartment by 1, 2, 3, or 4 degrees. Their individual marginal benefits from making it warmer in the apartment are as follows: They know that each time they raise the temperature in the apartment by 1 degree, their heating bill goes up by $2424. To maximize social benefit, they should raise the temperature by ▼ 2 degrees 3 degrees 1 degree 4 degrees .

2 degrees

If both teams picked low, then their combined payoff would be higher by $ nothing relative to the outcome where they both pick high.

200

A company mines 360,000 tons of coal per year in a rural county. The coal is worth $79 per ton. The average price for a 2,000-square-foot house with three bedrooms more than 20 km away from the mining site in this county is $220,000. The average price for a similar, 2,000-square-foot house with three bedrooms within 4 km of the mine is 8 percent lower. Using comparative statics, what is the effect of mining on home prices in this county? Mining changes the price of a 2,000-square-foot home (with three bedrooms) by $____

220,000*.08 =17600

The oil ministers realize they can do better if they collude and agree that each will produce 2020. By colluding, each country will increases its profit by $ nothing if each produces 2020 instead of 4040.

2400-1800=600

There are four consumers willing to pay the following amounts for an electric car: Customer 1: $60,000 Customer 2: $30,000 Customer 3: $80,000 Customer 4: $40,000 There are four firms that can produce electric cars. Each can produce one car at the following costs: Firm A: $20,000 Firm B: $60,000 Firm C: $30,000 Firm D: $40,000 Each firm can produce at most one car. Suppose we wanted to maximize the difference between consumers' willingness to pay for electric cars and the cost of producing those cars; that is, we wanted to maximize social surplus. We should produce ________ electric cars.

The future value of $2 after 6 years if the interest rate is 12 percent is $__

3.95

If there are 4 queen cards in a deck, the probability of getting a queenqueen the second time if you chose a queenqueen the first time is ______%.

3/51 x 100=5.88

Suppose a country has a progressive tax structure where the marginal income tax rate increases with income. Assume the marginal income tax rate for a rich individual is 28 percent and the marginal income tax rate for a poor individual is 10 percent. The cost of a $300.00 charitable contribution for the rich individual is $

300 x .28= 84 300-84=216

If you leave your money in the bank for 1 year, then the future value of your money is $

300 x 0.06 =318

The cost of a $300.00 charitable contribution for the poor individual is $ nothing

300x.10=30 300-30=270

If Country A produces 40 and Country B produces 20, then Country A's profit is $ nothing and Country B's profit is $ nothing.

3200 1600

In Thailand, the opportunity cost of computers is _________ tons of rice.

3200/40 = 15

Under the tax law in 2012, you could claim all of your charitable contributions as a deduction on your federal income tax (if you decided to itemize your deductions), and the top marginal tax rate was 3535 percent. What is the cost of a $500 charitable contribution under the 2012 tax law for someone who itemizes and who is in the top tax bracket? The cost of a $500 contribution is $______.

35% of 500 = 175 500-175= 325

If you could practice third-degree price discrimination, you will earn a profit of $

35+20=55 55-(4+4)=47

If the real estate agent sells his or her own house, the agent will then get an additional $3 comma 7003,700 in income (the $100 comma 000100,000 home price for others times the additional 3.73.7 percent). How much additional commission will the real estate agent make if he or she sells another's home for the same 3.73.7 percent increase? The real estate agent will make an additional $ nothing in commission.

3700 x 0.3 = 111

There are four consumers willing to pay the following amounts for an electric car: Customer 1: $70,000 Customer 2: $30,000 Customer 3: $90,000 Customer 4: $50,000 There are four firms that can produce electric cars. Each can produce one car at the following costs: Firm A: $80,000 Firm B: $20,000 Firm C: $30,000 Firm D: $50,000 Each firm can produce at most one car. Suppose we wanted to maximize the difference between consumers' willingness to pay for electric cars and the cost of producing those cars; that is, we wanted to maximize social surplus. We should produce ________ electric cars.

According to your diagram, the profit-maximizing level of employment for this firm is nothing workers.

George is an excellent plumber and Harriet is an excellent carpenter. George can do all of the plumbing and Harriet can do all of the carpentry to fix up sevenseven houses per year. Each earns a wage of $40 comma 00040,000 per year. If George and Harriet work together and fix up sevenseven old houses each year, their average cost is $ nothing.

40,000 x 2= 80,000 80,000/7= 11,429

Fixing up old houses requires plumbing and carpentry. Jack (who is a jack of all trades but is a master of none) is a decent carpenter and a decent plumber, but is not particularly good at either. He can fix up two houses in a year if he does all of the carpentry and plumbing himself. His wage is $40 comma 00040,000 per year. Jack's average total cost of fixing up twotwo old houses is $ nothing.

40,000/2= $20,000

The slope of Manny's budget constraint is nothing, and the vertical and horizontal intercepts are, respectively, nothing and nothing units. (Round your responses to two decimal places and use a minus sign if necessary.)

40/25=1.6 = -1.6 40 vertical 25 horizontal

For Acme Manufacturing, the marginal product of labor (MP) is MP=600−6L. Acme is a perfect competitor, sells its output at a price of $5 per unit, and pays a wage of $800 per worker. Acme's profit-maximizing number of workers is ________

43.8

Imagine that you arrive at an economics experiment with six other people and are told that you will simulate a market. You will be the only seller. The other five people will be assigned a dollar value that they will receive if they buy the good for any amount of money (so if a person's value is $5, he will buy the good for any price less than $5 and will be happy). You are also given the marginal cost and demand curves to the right and told that it represents the values that the "buyers" are assigned. Using the graph, the marginal revenue from increasing output from 1 unit to 2 units is _______. A. 3. B. 2. C. 4. D. 9.

4x2=8 5-1=5 8-5=3

Using the same table , what is the marginal cost of the firstfirst unit produced? A. 1111. B. 1515. C. 55. D. 0.

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 $5050 for your product; B is willing to pay up to $1010. You produce this good at a constant average and marginal cost of $77. If you could not engage in third-degree price discrimination, what price would you charge? A. $10. B. $15. C. $60. D. $50

Suppose at noon 50 people are using the road. The road is not congested and the trip takes just 20 minutes. If one additional driver enters the road, no one has to slow down and the trip continues to take 20 minutes. The toll at noon should be $ nothing.

50 x (20-20) x $0.10 = 0

The top marginal tax rate was raised to 39.6 percent in 2013. How would this change affect the cost of a $500 charitable contribution for someone who is in the top tax bracket? The cost of a $500 contribution is now $___.

500 x .396 = 198 500-198=302

If they agree on a terms of trade of nothing document(s) for nothing claim(s), then Amanda and Raj will each meet their manager's deadline.

500(50x10) 500(50x10) its a 1 for 1

Your house is worth $500,000 and you have $275,000 in a savings account. There is a 1 percent chance of a fire in your house. If the fire occurs, there will be $275,000 of damage. Suppose you do not have fire insurance. If the fire occurs, you will have to pay $300,000 to repair your house. The expected value of your wealth (including both the value of your home and your savings account) at the end of the year is $_____.

500,000+275,000 = $775,000 0.99 x (775,000) + 0.01 x (500,000) = $772,250 There is a 99 percent probability that there will not be a fire, so your wealth will be $500 comma 000500,000 + $275 comma 000275,000 = $775 comma 000775,000. There is a 1 percent probability that there will be a fire and you will have to use all of your savings to repair the house, so your wealth will be $500 comma 000500,000. Use this information to find the expected value of your wealth.

The diagram on the right shows the market for tennis shoes in the United States. If the United States does not trade with other countries, what are the equilibrium price and quantity of tennis shoes? The equilibrium price is $___, and the equilibrium quantity is ____ million pairs of shoes.

50;20

Tax revenue earned by the government is _______ million Argonian dollars.

6(3*2) The government's tax revenue equals the quantity of gum sold multiplied by the tax.

Complete the following table by calculating consumer surplus, producer surplus, and social surplus when the market price is $40,000 Consumer Surplus= Producer Surplus = Social Surplus=

70,000 30,000 100,000

The maximum social surplus in the electric car market is $____.

90,000

Senator Jones has proposed legislation that would change the shoe tax by switching it from the seller to the buyer. If the bill passes, the new equilibrium price is $ nothing and the new equilibrium quantity is nothing units.

A tax on consumers shifts the demand schedule by the amount of the tax. So, for example, consumers demanded 800800 units at a price of $4.00 without the tax but would demand 800800 units at a price of $1.001.00 if they have to pay a $3.003.00 tax.

Suppose a CEO of a firm that manufactures surgical equipment has a production plant in Alabama where it employs highly skilled labor. The CEO of the firm is considering moving its production facilities from Alabama to Guangzhou in China in an attempt to lower labor costs. When the CEO compares wages in China and in the United States, she notices that the average wage in China is significantly lower than the average American wage. What factors would the textbook argue the CEO should consider when she decides whether or not to move production to China? A. Wages of comparably skilled labor. B. The current and projected exchange rate. C. Projected availability and cost of other inputs. D. Productivity of comparably skilled labor. E. Institutional factors, such as China's respect for private property and its willingness to uphold and enforce contracts. F. China's record on human rights.

A,B,C,D,E

Early in 2012, Starbucks, a global coffeehouse company, raised the prices of some of its beverages in certain parts of the country, mostly the Northeast and the southern states. While some thought that this was not a good idea, most analysts agreed that the price increase would not adversely affect its revenues. What would have to be true for the analysts' claim (that Starbucks' revenues would not fall) to hold? (Check all that apply.) A. Starbucks beverages will represent a relatively small fraction of people's budget share. B. A very limited time horizon on the part of those analysts that expected no adverse revenue effects. C. Buyers of Starbucks coffee will tend to be sophisticated consumers. D. A perception on the part of customers that few good substitutes exist for Starbucks coffee.

A,B,D

How does the market for inputs like labor differ from the market for goods and services? (Check all that apply.) A. The demand for inputs is derived from the demand for final goods and services. B. Firms are buyers in the market for inputs, while individuals are buyers in the market for goods and services. C. The market for inputs resolves shortages and surpluses through government-supervised negotiations. D. Firms are sellers in the market for goods and services, while individuals are sellers in the market for inputs.

A,B,D

The Coase Theorem will will breakdown when ____________. (select all that apply) A. there are a large number of agents. B. when property rights are not clearly defined. C. agents decide to negotiate directly with each other. D. transaction costs become high. E. the dispute becomes a high priority to the agents involved.

A,B,D

Which of the following are not examples of adverse selection? (Check all that apply.) A. A new car salesman knows how the car was rated by Consumer Reports prior to selling it to a buyer. B. An employee at a company learns that a big deal is about to be signed and buys the company's stock because he's sure it is going to go up in value once the deal is announced. C. An actor knows whether or not he memorized his lines prior to auditioning for a part in a play. D. A student knows whether or not she studied for an exam prior to taking it.

A,C,D

Crabby Bob's is a seafood restaurant in a beach resort in Delaware. Crabby Bob's earns a profit each month from May through September, suffers losses in October, November, and April but remains open, and remains closed from December through March. Given that the restaurant market in this town is perfectly competitive, which of the following must be true? (Check all that apply.) A. From May through September, Crabby Bob's average revenue is above average total cost. B. From December through March, Crabby Bob's average revenue is below ATC but is greater than AVC. C. From December through March, Crabby Bob's average revenue is below average variable cost. D. In April, October, and November, Crabby Bob's average revenue is above average total cost. E. In April, October, and November, Crabby Bob's average revenue is below ATC but is greater than AVC.

A,C,E

Identify the key assumption(s) made about a Nash equilibrium. (Check all that apply.) A. All players understand the game and the payoffs associated with each strategy. B. Some players are smarter than others. C. Some players will occassionally behave illogically. D. All players understand that other players understand the game.

A,D

Which of the following are not examples of moral hazard? (Check all that apply.) A. You go skydiving and sign a waiver stating you can't sue the skydiving company if you get hurt. B. You wear your helmet when riding your bike. C. You rent a car and purchase the optional insurance. D. Your employer pays you wages that are higher than the market rate.

A,D

Which of the following represents how you would calculate the present value of a future payment?

Consider a monopolist who faces a linear demand curve P = 20−Q, where P is the price the monopolist charges and Q is the quantity consumers purchase. The monopolist's marginal revenue is MR = 20−2Q (as the chapter explains, if demand is linear then demand and marginal revenue have the same intercept but marginal revenue has twice the slope). The monopolist produces this good at a constant average and marginal cost of $10. To find the profit-maximizing quantity, which of the following represents the first step in setting two equations equal? A. 20-2Q=10 B. 20-Q=10 C. 20-Q=0 D. 20-Q=20-2Q

A. 20-2Q=10

Which of the following combinations of X and Y will be represented by a point on the consumer's budget constraint? A. 5 units of Upper X and 6 units of Y5 B. 6 units of Upper X and 5 units of Upper Y C. 4 units of Upper X and 7 units of Upper Y4 units of X and 7 units of Y.

A. 5 units of Upper X and 6 units of Y5

Therefore, when the real estate agent takes an additional 9.5 days to sell his or her own home, an additional $3 comma 7003,700 is made, but if he or she is selling another person's house, $111 is made. So agents sell others' houses for $100,000 and their own for $103,700. What economic principle could explain this outcome? A. Moral hazard. B. Equity-efficiency trade-off. C. Adverse selection. D. "Lemons" problem.

A. Moral hazard.

What is the difference between a pure strategy and a mixed strategy? A. A pure strategy involves choosing one action, while a mixed strategy involves choosing different actions randomly according to preassigned probabilities. B. A pure strategy involves choosing an action before other players choose their actions, while a mixed strategy involves choosing an action simultaneously with other players. C. A pure strategy involves choosing an action independently of other players' actions, while a mixed strategy involves choosing an action that is dependent on other players' actions. D. A pure strategy is a best response to other players' actions, while a mixed strategy is a random response that may not be a best response.

A. A pure strategy involves choosing one action, while a mixed strategy involves choosing different actions randomly according to preassigned probabilities.

If you were able to engage in perfect price discrimination, how would your graph change? A. All of the area above the marginal cost and below demand would be monopoly surplus. B. Monopoly surplus would be in the same area, but consumer surplus would become deadweight loss. C. Deadweight loss would be in the same area, but consumer surplus would become monopoly surplus. D. All of the area above the marginal cost and below demand would be deadweight loss.

A. All of the area above the marginal cost and below demand would be monopoly surplus.

How does the labor-leisure trade-off determine the supply of labor? A. An increase in the wage rate is an increase in the opportunity cost of leisure, and can therefore be expected to reduce the amount of leisure one wishes to consume. Choosing less leisure is equivalent to supplying more labor, thus yielding a positive relationship between the wage rate and the amount of labor supplied. B. The supply of labor is no different than the supply of any other good or service in that it is primarily affected by production costs. In the case of labor, the dominant production cost is the cost incurred to acquire employable skills. The supply of labor is upward-sloping because higher wages are required to cover the expense of gaining more skills. C. When an individual chooses an amount of leisure to consume, he is simultaneously choosing a quantity of labor to supply. Since leisure is a normal good, an increase in the wage induces more consumption of leisure and therefore a smaller quantity of labor supplied. D. Individuals typically trade off working versus leisure in an unplanned, unsystematic way. As a result, the supply of labor exhibits a bit of randomness, showing that higher wages sometimes increase the quantity of labor time supplied and sometimes decrease the quantity of labor time supplied.

A. An increase in the wage rate is an increase in the opportunity cost of leisure, and can therefore be expected to reduce the amount of leisure one wishes to consume. Choosing less leisure is equivalent to supplying more labor, thus yielding a positive relationship between the wage rate and the amount of labor supplied.

suppose you are accepted at all of the three business schools to which you applied. Consider all the factors that could matter when it comes to choosing a business school. How would you go about making an optimal decision about which school to attend? A. By comparing the net benefits from attending the three schools. B. Summing the marginal costs from attending the three schools. C. Predicting which school among the three will provide the greatest future benefits. D. By considering the total benefits from attending the three schools. E. Identifying the school among the three with the lowest direct costs.

A. By comparing the net benefits from attending the three schools.

How is net present value used to decide whether a project should be undertaken or not? A. By comparing the upfront cost of a project to the discounted value of the future benefits from the project. B. The net present value of a project is divided by the costs of the project to determine the project's profits. C. It determines the interest rate that the government must set in order to make projects by firms profitable. D. The net present value of a project is multiplied by the costs of the project to determine the project's profits.

A. By comparing the upfront cost of a project to the discounted value of the future benefits from the project.

What is meant by herding? A. Conforming our decisions to the behavior of others. B. Sacrificing to promote equality. C. Influencing others with our opinions or ideologies. (this is indoctrination) D. Helping others.

A. Conforming our decisions to the behavior of others.

The mercantilist economic doctrine was widely followed from the sixteenth to the eighteenth centuries in Europe. Mercantilists advocated the use of tariffs to restrict trade, as they believed that countries that export more than they import will increase wealth. What could be the problem with such an economic policy? A. Consumers pay a price that is higher than the world price, reducing consumer surplus. B. Total surplus in the economy rises. C. Domestic producers are harmed, reducing producer surplus. D. Consumers pay a price that is lower than the world price, increasing consumer surplus.

A. Consumers pay a price that is higher than the world price, reducing consumer surplus.

Intuitively, why is B part of the deadweight loss from this tariff? A. Consumers purchase fewer units of the good and lose surplus of area B as a result. B. This is the surplus lost by the exporting country. C. Consumers purchase fewer units of the good and so less tariff revenue is collected as a result. D. Gains in domestic production are not completely offset by losses in domestic consumption.

A. Consumers purchase fewer units of the good and lose surplus of area B as a result.

If the informed investors realize that the IPO is weaklong dash—the company isn't a good betlong dash—then what is likely to happen? A. Only uninformed investors will bid; they will then lose money and exit the market. B. Only informed investors will bid; they will then lose money and exit the market. C. Both will bid, but informed investors will make more money than uninformed investors. D. Neither type of investor will bid because they know the company is a bad bet.

A. Only uninformed investors will bid; they will then lose money and exit the market.

How can crime and punishment be modeled as a principal-agent problem? A. Crime can be viewed as a principal-agent relationship under moral hazard because the actions of the agent, whether he or she has broken the law or committed a crime, are not perfectly observable by the principal, in this case, the state (or the government). B. Crime can be viewed as a principal-agent relationship under adverse selection because the characteristics of the agent, whether he or she is a criminal, are not perfectly observable by the principal, in this case, the state (or the government). C. Crime can be viewed as a principal-agent relationship under adverse selection because the characteristics of the principal, whether he or she is a criminal, are not perfectly observable by the agents (police officers) of the state (or the government). D. Crime can be viewed as a principal-agent relationship under moral hazard because the actions of the principal, whether he or she has broken the law or committed a crime, are not perfectly observable by the agents (police officers).

A. Crime can be viewed as a principal-agent relationship under moral hazard because the actions of the agent, whether he or she has broken the law or committed a crime, are not perfectly observable by the principal, in this case, the state (or the government).

The Patient Protection and Affordable Care Act (ACA) requires all employers with at least 50 full-time equivalent workers to offer health insurance to their full-time employees or pay a fine of up to $2,000 per employee. Some people have argued that ACA will lower employment. This problem looks at an important issue in this debate. Suppose the government passes a law that requires firms to offer health insurance to their workers. The cost of the insurance is equal to $1 for each hour an employee works. How will this law affect firms' demand for labor? A. Demand for labor will shift down by $1. B. Demand for labor will not change. C. Demand for labor will shift up by $1. D. There will be movement along the demand curve.

A. Demand for labor will shift down by $1.

Which of the following is not an important determinant of wage inequality within an economy? A. Differences in connections to influential people. B. Differences in human capital. C. Differences in compensating wages. D. Discrimination in the job market.

A. Differences in connections to influential people.

What role does equity or fairness play in this case? A. If innocent people are sometimes mistakenly thought to have committed a crime, this would be inconsistent with what most people would regard as a fair or equitable justice system. B. There is moral hazard in accusing innocent people of crimes, which most people would regard as an unfair outcome. C. If guilty people get away with their crimes, it is not fair to the victims. D. The police will spend a disproportionate amount of time chasing innocent people, which most people would regard as unfair.

A. If innocent people are sometimes mistakenly thought to have committed a crime, this would be inconsistent with what most people would regard as a fair or equitable justice system.

Why might ballplayers in 2012 be less likely to choose to play an extra year? A. If leisure is a normal good, the higher incomes that players enjoy will cause them to increase their consumption of leisure, and this implies choosing not to play an extra year. B. Some players may choose to not play an extra year since the higher salary requires them to be more productive and work harder. C. Since players are becoming more costly to employ, team owners may seek to employ a smaller number, thereby inducing some players to choose to retire. D. All of the above.

A. If leisure is a normal good, the higher incomes that players enjoy will cause them to increase their consumption of leisure, and this implies choosing not to play an extra year.

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

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

Suppose the production of a particular good causes a negative externality. Based on market forces only, how will this impact the production levels for a factory if negative externalities are present? A. It will produce the good above the socially efficient level. B. It will produce the good below the socially efficient level. C. It will produce the same level regardless of whether externalities are present. D. Negative externalities do not impact production levels.

A. It will produce the good above the socially efficient level.

Which method is most likely to be considered "fair"? Rank the three methods in decreasing order of their perceived fairness. A. Lotteries or queues are most fair; auctions are least fair. B. Auctions or lotteries are most fair; queues are least fair. C. Auctions are most fair; lotteries and queues are least fair. D. Auctions or queues are most fair; lotteries are least fair.

A. Lotteries or queues are most fair; auctions are least fair.

What are the types of goods that are causing the shift in the balance of imports and exports in the United States? A. Manufactured goods have played an important role in the shift, even though the number of manufactured goods has increased. B. Manufactured goods have played an important role in the shift, as the number of manufactured goods produced has declined. C. The significant increase in oil exports has played an important role in the shift. D. Services have been the primary driver in the shift in the balance of imports and exports in the United States.

A. Manufactured goods have played an important role in the shift, even though the number of manufactured goods has increased.

Maya and Paul want to watch a movie. There are two movies available: a comedy and an action film. Maya loves comedies, whereas Paul enjoys action films. As separate individuals, which movie will Maya choose? Which one will Paul choose? Why? A. Maya will choose the comedy and Paul will choose the action film because their actions don't affect each other. B. Maya and Paul will both choose the comedy because they are rational. C. Maya and Paul will both choose the action film to maximize their joint payoff. D. Maya will choose the comedy and Paul will choose the action film to be fair.

A. Maya will choose the comedy and Paul will choose the action film because their actions don't affect each other.

Determine if the following statements better describe optimization in levels or optimization in differences. John is attempting to decide on a movie. He determines that the new Batman movie provides him with $5 more of a net benefit than the new Spiderman movie. A. Optimization in differences, since he is calculating the change in net benefits between alternatives. B. Both typesBoth types of optimization, since he is not considering the net benefits of alternatives. C. Optimization in differencesdifferences, since he is not making marginal comparisons. D. Neither typeNeither type of optimization, since he is considering the total benefits of alternatives. E. Optimization in levels, since he is comparing the net benefits between alternatives.

A. Optimization in differences, since he is calculating the change in net benefits between alternatives.

How much will owners of each type of used car be able to sell their cars for? A. Owners of peaches will sell their cars for $4,000 and owners of lemons will sell their cars for $200. B. Owners of lemons will sell their cars for $200 and owners of peaches will not sell their cars. C. Owners of peaches will sell their cars for $4,000 and owners of lemons will not sell their cars. D. Owners of peaches and owners of lemons will sell their cars for $2,100, the expected value of a car to buyers.

A. Owners of peaches will sell their cars for $4,000 and owners of lemons will sell their cars for $200.

Is producer surplus always equal to profit? A. Producer surplus is equal to profit when marginal cost is equal to average total cost. B. Producer surplus is equal to profit when marginal cost is equal to fixed costs. C. Producer surplus can never equal profit, since profit and producer surplus are based off of different curves. D. Producer surplus will always equal profit, since both profit and producer surplus measure the same concept.

A. Producer surplus is equal to profit when marginal cost is equal to average total cost.

Now suppose that mistakes happen and innocent people are sometimes convicted of white-collar crime. Why in this case might we want to hire more investigators instead of raising fines? A. Some innocent people will pay a very heavy fine but some guilty people will be able to get away with their crimes. B. It is too hard to collect large fines from criminals because they have no money. C. People prefer to put criminals in jail rather than collect fines from them. D. There is moral hazard in convicting innocent people.

A. Some innocent people will pay a very heavy fine but some guilty people will be able to get away with their crimes.

For a long time, your firm has been paying its workers a wage of $20 per hour and your employees have been happy to work 40 hours per week at this wage. Business is suddenly booming and your firm would really like your workers to agree to a 50-hour work week in order to meet this new demand for your product. You are considering two strategies. Strategy 1 You would raise the wage for all hours worked from $20 per hour to $22 per hour. Strategy 2 You would leave the wage for the first 40 hours per week at $20 but offer $30 per hour for hours worked above 40 hours (that is, you would offer time-and-a-half for overtime). Both strategies have the same cost of $1,100 if a worker chooses to work 50 hours. Which strategy is more likely to lead your employees to agree to a 50-hour work week? A. Strategy 2, because the MC of not working increases significantly after 40 hours of work. B. Strategy 2, because workers will refuse strategy 1 on the grounds that it violates U.S. labor laws. C. Strategy 1, because workers will receive more money per hour worked instead of only time-and-a-half for overtime. D. Both strategies will elicit the same willingness to accept since both give workers an extra $300 per week.

A. Strategy 2, because the MC of not working increases significantly after 40 hours of work.

Which of the following is not a source of a country's comparative advantage? A. Terms of tradeTerms of trade. B. Education and human capitalEducation and human capital. C. ClimateClimate. D. Relative abundance of labor and capitalRelative abundance of labor and capital.

A. Terms of tradeTerms of trade.

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? A. The Nash equilibrium is for Firm 1 to produce 20 units and for Firm 2 to produce 10 units. B. The Nash equilibrium is for Firm 1 to produce 10 units and for Firm 2 to produce 20 units. C. The Nash equilibrium is for Firm 1 to produce 20 units and for Firm 2 to produce 20 units. D. The game does not have a Nash equilibrium.

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

Under a 1922 Supreme Court decision, major league baseball is not subject to many antitrust laws. Suppose these two teams agree to a "luxury tax." Under this luxury tax, a team that chooses high must pay a tax of $275275. What is the Nash equilibrium? A. The Nash equilibrium is for both teams to pick low. B. The Nash equilibrium is for both teams to pick high. C. The Nash equilibria is for Team 1 to pick high and Team 2 to pick low and for Team 1 to pick low and Team 2 to pick high. D. The Nash equilibria is for both teams to pick high and both teams to pick low. E. The game does not have a Nash equilibrium.

A. The Nash equilibrium is for both teams to pick low.

Compare the budget constraints you drew above to answer this question. A. The budget constraints are equivalent. B. The budget constraint with the higher book price is preferable. C. The budget constraint with the lower income but lower clothing price is preferable. D. Insufficient information exists to compare the budget constraints.

A. The budget constraints are equivalent

Consider the total cost of traveling from point A to point B. The cost of traveling by car would include the cost of gasoline and the opportunity cost of time; the cost of hopping on a bus would include the bus ticket and the opportunity cost of time. Assume that the bus ticket costs less than the gasoline. Does this imply that using a bus to get to the destination involves lower total costs than getting there by car? What if the bus doesn't take the fastest route from point A to point B? A. The marginal cost of using a bus may be higher if it takes more time than by car. B. The marginal cost of using a bus will not be higher because time is not a marginal cost. C. The marginal cost of using a bus may be higher if buses cost more than cars. D. The marginal cost of using a bus will not be higher because time is not a direct cost. E. The marginal cost of using a bus may be higher if buses use less fuel than cars.

A. The marginal cost of using a bus may be higher if it takes more time than by car.

Given this information, you would be more likely to choose the ▼ 5 payments lump sum.

lump sum

Three psychologists performed the following experiment. They had groups of people ranging in size from just one person to as many as fifteen people stand on a street corner and stare up into the sky. They then observed how many passersby stopped and also looked up at the sky. They found that with only one person looking up, very few passersby stopped. If five people were staring up into the sky, then more passersby stopped, but most still ignored them. Finally, with fifteen people looking up, they found that 45 percent of passersby stopped and also stared up into the sky. How could you use the idea of an information cascade to explain this result? A. The passersby decided to stop and stare up into the sky based on the decisions of others. B. The passersby who decided to stop and look up into the sky used their own intuition. C. The people already staring up into the sky attempted to indoctrinate the others. D. The decision to stop and stare up into the sky was due to pressure from peers to conform.

A. The passersby decided to stop and stare up into the sky based on the decisions of others.

Which of the following is not one of the common arguments against free trade? A. The quality of goods decreases as inferior goods are imported from lower minus cost countries.The quality of goods decreases as inferior goods are imported from lower−cost countries. B. Potential negative effects on local wages.Potential negative effects on local wages. C. Allowing countries to specialize in the production of only one good may result in the creation of banana republics.Allowing countries to specialize in the production of only one good may result in the creation of banana republics. D. Countries with lax environmental policies allow for more pollution than those with strong environmental policies.Countries with lax environmental policies allow for more pollution than those with strong environmental policies. E. The threat of homogenization to a culture's uniqueness.The threat of homogenization to a culture's uniqueness.

A. The quality of goods decreases as inferior goods are imported from lower minus cost countries.

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? A. There are many close substitutes for cellophane such as aluminum foil and waxed paper, so DuPont did not have significant market power. B. Since DuPont only produced 75 percent of all cellophane, not 100 percent, it is a price-taker with no pricing power. C. As a monopoly, DuPont was beneficial to the community since it hired many workers and paid high salaries. D. Cellophane is a small part of consumers' consumption, so monopoly pricing has not caused any harm to consumers.

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

Which of the following is not one of the common arguments against free trade? A. Total surplus in the trading economies decreases comma harming society as a whole.Total surplus in the trading economies decreases, harming society as a whole. B. Potential negative effects on local wages.Potential negative effects on local wages. C. The desire to maintain diversification to preserve integrity in times of war.The desire to maintain diversification to preserve integrity in times of war. D. Countries with lax environmental policies allow for more pollution than those with strong environmental policies.Countries with lax environmental policies allow for more pollution than those with strong environmental policies. E. The threat of homogenization to a culture's uniqueness.The threat of homogenization to a culture's uniqueness.

A. Total surplus in the trading economies decreases comma harming society as a whole.

Sumo wrestling tournaments typically have 66 wrestlers. Each wrestles 15 matches. A wrestler who has a winning record (eight wins or more) is guaranteed to rise in the official rankings; a wrestler with a losing record falls in the rankings. Suppose the last match of a tournament is between Wrestler A, who has won eight matches so far, and Wrestler B, who has won seven. If moral hazard is a serious problem in sumo wrestling, who do you think is more likely to win this match? A. Wrestler B. B. Both Wrestler A and Wrestler B are equally likely to win. C. Wrestler A. D. The answer cannot be determined from the information given.

A. Wrestler B.

Using the graph, a firm with that type of cost curve is best suited to be ___________. A. a natural monopoly, since it faces economies of scale and can produce at a lower cost if done by one firm. B. a monopoly based on legal market power, since it faces diseconomies of scale and can produce at a lower cost if done by one firm. C. a competitive firm, since it faces economies of scale, which gives it an advantage over small competitive firms. D. a competitive firm, since it faces diseconomies of scale, which gives it an advantage over small competitive firms.

A. a natural monopoly, since it faces economies of scale and can produce at a lower cost if done by one firm.

A black market is ____________. A. a nonlegal market for regulated goods and services. B. a regulated market with excessive profits. C. an illegal market with negative externalities. D. a legal market without consumer sovereignty.

A. a nonlegal market for regulated goods and services.

Preference reversal arises when ____________. A. an activity that has a positive net benefit today has a negative net benefit when calculated for the future. B. people change their discount weights every day. C. only the present discount rate is known with certainty, while all future rates are unknown. D. someone values the present and the future with the same discount weight.

A. an activity that has a positive net benefit today has a negative net benefit when calculated for the future.

In a competitive labor market, the profit-maximizing number of workers that a firm will hire occurs where the ____________. A. value of marginal product of labor is equal to the market wage. B. marginal product of labor equals zero. C. marginal product of labor stops increasing. D. marginal product of labor is equal to the market wage.

A. value of marginal product of labor is equal to the market wage.

Firms pay efficiency wages when ____________. A. an employer either cannot observe the actions of its employees or it is prohibitively expensive to monitor employees. B. the market equilibrium wage is higher than the wage the employer is currently paying its employees. C. an employer is looking to eliminate adverse selection when it hires its employees. D. an employer wants to be altruistic toward its employees.

A. an employer either cannot observe the actions of its employees or it is prohibitively expensive to monitor employees.

Economic agents (for example, consumers or firms) often do things that at first glance seem to be inconsistent with their self-interest. People tip at restaurants when they are on vacation even if they have no intention to return to the same place. Firms, sometimes, install costly pollution abatement equipment voluntarily. These deviations from Nash predictions can most likely be explained if __________. A. an individual's benefits are defined not only by her own payoffs but also by the payoffs of others. B. there is some financial incentive to do so. C. players have reputational concerns, and they value trustworthy behavior. D. people value the payoffs to other individuals more than their own payoffs.

A. an individual's benefits are defined not only by her own payoffs but also by the payoffs of others.

With the growth of the Internet, there are a large number of online retailers as well as buyers in the online retail market. One might think that different firms would charge very similar prices for the same good because ____________. A. consumers have lots of information about pricesconsumers have lots of information about prices. B. the cost of searching online is highthe cost of searching online is high. C. it is difficult for sellers to adjust their pricesit is difficult for sellers to adjust their prices. D. barriers exist to new firms selling online.

A. consumers have lots of information about pricesconsumers have lots of information about prices.

The largest source of revenue for the federal government is ___________. A. individual income taxes. B. payroll taxes C. corporate income taxes. D. the sales tax

A. individual income taxes.

The relationship between moral hazard and efficiency wages ____________. A. is that efficiency wages are used by employers (principals) to eliminate or reduce the temptation of the employees (agents) to shirk work because they know the employer cannot catch them shirking. B. is that sometimes the market wage is too low, thus creating moral hazard for the employees (agents) to take an additional job, which reduces the marginal product of labor due to overwork, and so the employers (principals) introduce efficiency wages. C. is one in which the introduction of efficiency wages to a firm causes those workers (agents) who do not get the efficiency wages to shirk, thus creating moral hazard for the employer (principal) since it would like to pay some workers the higher wage. D. occurs when employers (principals) hire the wrong employees (agents) at the higher efficiency wage, which creates moral hazard and causes the employees to shirk.

A. is that efficiency wages are used by employers (principals) to eliminate or reduce the temptation of the employees (agents) to shirk work because they know the employer cannot catch them shirking.

The principal-agent relationship ____________. A. is where the principal designs a contract specifying the payments to the agent as a function of his or her performance, and the agent takes an action that influences performance and thus the payoff of the principal. B. is the economic theory that states in order for an outcome to be efficient, the agent must be incentivized to maximize the profits of the principal. C. determines the appropriate level of efficiency wages to be paid by the principal to the agent and sets those wages in a contract that specifies the parameters of the job to be done by the agent. D. is where the agent designs a contract specifying the payments to the principal as a function of his or her performance, and the principal takes an action that influences performance and thus the payoff of the agent.

A. is where the principal designs a contract specifying the payments to the agent as a function of his or her performance, and the agent takes an action that influences performance and thus the payoff of the principal.

Suppose that both firms together decide to increase the price to $1.001.00. Would this be considered collusion? If you knew that both these firms accounted for a negligible portion of the pizza market in New York, would that affect your answer? If both firms agree to set the price at $1.001.00, then this ____________. A. is collusion, regardless of their market share. B. is only collusion if barriers prevent entry. C. is only collusion if market concentration is low. D. is only collusion if market competition is low. E. is not collusion if their market share is low.

A. is collusion, regardless of their market share.

The likely result from paying higher wages for more arrests is ____________. A. moral hazard. B. the principal-agent problem. C. adverse selection. D. signaling.

A. moral hazard.

John Maynard Keynes (a famous British economist) said "In the long run we are all dead." An important message in this chapter is, to paraphrase Keynes, "In the long run, all profits in a monopolistically competitive market are dead." Consider a monopolistically competitive industry earning positive economic profits in the short run. In the long run, a monopolistically competitive industry earns zero economic profits because ____________. A. new firms enter, shifting a firm's demanddemand curve to the left. B. new firms enter, shifting a firm's demanddemand curve to the right. C. existing firms exit, decreasing a firm's profit-maximizing quantity. D. existing firms exit, decreasing a firm's profit-maximizing price.

A. new firms enter, shifting a firm's demanddemand curve to the left.

Our preferences are affected by indoctrination through the ____________. A. opinions of others. B. willingness of individuals to sacrifice to promote equality. C. motivation to help others. D. motivation solely to help oneself feel good.

A. opinions of others.

Suppose the market demand for this good declines substantially and the price falls to $8 per unit. If the price is $8 per unit, the firm should ___________. A. produceproduce, because price is greatergreater than the average variable cost of production. B. produce, because price is greater than the average fixed cost of production. C. produce, because average fixed costs are decreasing. D. not producenot produce, because total revenue is greatergreater than the total variable costs of production.

A. produceproduce, because price is greatergreater than the average variable cost of production.

Monopolistically competitive firms might earn positive economic profits in the short run due to ___________. A. product innovation. B. no brand names. C. imitating other firms. D. many close substitutes.

A. product innovation.

To reduce inequality and poverty in an economy, the government uses a ___________. A. progressive tax system to fund transfer payments. B. marginal tax system to generate wealth. C. proportional tax system to increase equity. D. regressive tax system to redistribute income from the rich to the poor.

A. progressive tax system to fund transfer payments.

Britain taxed windows from 1696 until 1851. Under the 1747-1757 tax rates, you would pay no tax if your home had 0-9 windows, but if your home had 10-14 windows you would pay a tax of 6 pence per window for every window in your home. The window tax is similar to the U.S. income tax in that both are ___________. A. progressive taxes. B. sales taxes. C. regressive taxes. D. proportional taxes.

A. progressive taxes.

Consider going to college. This decision has up-front costs and delayed benefits that occur at different times. To optimize your decision of whether or not to attend college, you should ____________. A. put all the up-front costs and future benefits of going to college into comparable units so they can be compared. B. overestimate the risk of going to college, because future benefits are not predictable. C. weight the up-front costs of college more heavily than the delayed benefits. D. assume that all costs and benefits are fixed in advance.

A. put all the up-front costs and future benefits of going to college into comparable units so they can be compared.

Given that there are costs involved with government intervention in an economy, governments still choose to intervene in markets to ____________. A. reduce inequality. B. increase bureaucracy. C. decrease deficitsdeficits. D. implement taxation. E. generate black markets.

A. reduce inequality.

Economists have done numerous studies on how much risk people willing to take in a variety of situations. They have found that in most situations people overall are ____. A. risk averse B. risk seeking C. risk loving D. risk neutral

A. risk averse

A production possibilities curve (PPC) ___________. A. shows the relationship between the maximum production of one good for a given level of production of another good. B. determines the levels of imports and exports within a country. C. shows the trade-off between price and quantity of produced goods or services. D. shows the combinations of inputs that can create a specific level of output

A. shows the relationship between the maximum production of one good for a given level of production of another good.

You should have anticipated this answer because ____________. A. the easterners have a comparative advantage in the production of defense. B. the westerners have an absolute advantage in the production of defense. C. the easterners have an absolute advantage in the production of defense. D. the westerners have a comparative advantage in the production of defense.

A. the easterners have a comparative advantage in the production of defense.

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

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

A production function shows ____________. A. the number of workers employed and the corresponding output levels that will be produced. B. the number of workers employed and the firm's cost of production. C. the number of workers a firm will employ at different possible wage rates. D. the output levels a firm will produce at different possible prices.

A. the number of workers employed and the corresponding output levels that will be produced.

Using your graph (a demand curve), the slope of the industry demand curve demonstrates __________. A. the realistic assumption that the Law of Demand holds for the good under consideration. B. the Law of Diminishing Returns holds for this good. C. the realistic assumption that the quantity demanded of a good will drop as the price of that good drops. D. the fact that the assumptions of perfect competition are not realistic and therefore do not hold for the industry as a whole.

A. the realistic assumption that the Law of Demand holds for the good under consideration.

Suppose a group of people just came out of the movie theater gushing about how great the comedy was and another group complaining that the action film was really bad. Based on this information, Maya and Paul respond by watching the comedy instead of the action film. This is an example of herding because their movie choice was made __________. A. to conform with others. B. to sacrifice for others. C. to help others. D. to help each other feel good about their choice.

A. to conform with others.

One of the common arguments against "sweatshops" in developing countries is that wages workers are being paid are too low. Commentators often use dollar comparisons to show that, compared to U.S. standards, "sweatshop" workers are paid unfairly low wages. Based on what you have learned about the supply of labor, it may be concluded that ____________. A. workers in these countries accept low wages since they still exceed their next-best alternative. B. "sweatshop" wages are accepted since leisure has no value to these workers. C. worker productivity is low in these countries, so wages too are low. D. all of the above.

A. workers in these countries accept low wages since they still exceed their next-best alternative.

The consumers that should purchase those cars are ___________. A. 1, 3, and 4. B. 1, 3, and 2. C. 4, 2, and 3. D. 4, 2, and 1.

A. 1, 3, and 4.

Using your answer, if your goal is to minimize the deadweight loss from a tax, would you tax goods for which demand is elastic or goods for which demand is inelastic, everything else being equal? A. Inelastic, since the change in quantity is smaller. B. InelasticInelastic, since the size of the tax will be smaller. C. InelasticInelastic, since equilibrium quantity will be higher. D. Elastic, since the change in price will be smaller.

A. Inelastic, since the change in quantity is smaller.

Suppose an identical tax is levied on capital, labor, and land. Would the tax have the same effect in each of these markets? Explain your answer. A. No, an identical tax would yield similar effects but not the same effects, since it is rather unlikely that the relative demand and supply elasticities would be the same in each market. B. Yes, since these are all factors of production, identical taxes would yield the same results in each market. C. It is impossible to say without knowing more about the individual participants in each of the markets.

A. No, an identical tax would yield similar effects but not the same effects, since it is rather unlikely that the relative demand and supply elasticities would be the same in each market.

Monopolistically competitive firms earn zero economic profit in the long run as do perfectly competitive firms. Does this mean that total surplus is maximized in a monopolistically competitive market? A. No, because firms produce where price is greater than marginal cost B. Yes, because production occurs at the minimum average total cost. C. No, because firms increase production to gain market share D. No, because firms produce where marginal cost equals marginal revenue.

A. No, because firms produce where price is greater than marginal cost

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? A. No, because it would involve choosing actions other than the dominant strategy. B. Yes, because a mixed strategy would involve choosing a single action. C. Yes, a mixed strategy would be optimal if one of its actions were the dominant strategy. D. No, because a mixed strategy would not use preassigned probabilities for the various actions.

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

As long as you receive the same amount, is a sum of money worth the same today and one year later? A. No, if there is a positive interest rate the same amount of money is worth more today than receiving it in the future. B. Yes, as long as you receive the same amount today and one year later, it is the same regardless of the interest rate. C. Yes, receiving the same amount today or in the future is the same as long as the interest rate is positive. D. No, if there is a positive interest rate the same amount of money is worth more in the future than receiving it today.

A. No, if there is a positive interest rate the same amount of money is worth more today than receiving it in the future.

Explain the potential costs of high-powered incentives by considering the case of providing incentives to police officers. Would it be a good idea to pay higher wages to police officers if they make more arrests? A. No, it is likely a large number of the arrests made would not be warranted and would only be made in order to earn higher wages. B. Yes, because as Becker and Stigler showed, the expected punishment needs to go up to disincentivize criminals, and one way to do this is to increase the probability of detection. C. Yes, because then more criminals would be taken off the street and the crime rate would drop as criminals have less incentive to do illegal things. D. No, prisons are overcrowded already and taxes would have to increase to pay the higher wages that would result from more arrests.

A. No, it is likely a large number of the arrests made would not be warranted and would only be made in order to earn higher wages.

In the market for sweaterssweaters, suppose Green's price elasticity of demand is 0.2, Smith's price elasticity is 1.2, and the price elasticity of all the other consumers is greater than 0.2 but less than 1.2. Could the market price elasticity be less than 0.2 or greater than 1.2? A. No, it must lie between 0.2 and 1.2. B. Yes, it can be a multiple or fraction of the average of the elasticities of individual consumers.

A. No, it must lie between 0.2 and 1.2.

Janet knows a lot of people who do not like Marmite®, a yeast extract that is used as a spread on toast. She says that Marmite is so unpopular that Unilever, the company that manufactures Marmite®, cannot possibly have any monopoly power. Do you agree with this analysis? A. No, monopoly power is based on whether a good has any close substitutes, not whether your friends like the product. B. Yes, since other yeast spreads must be preferred to Marmite®, it cannot have a monopoly. C. Yes, if a good is not widely liked by consumers, the producer does not have a monopoly in that good. D. No, producing Marmite® requires low fixed costs, so it is likely a regulated natural monopoly that has market power.

A. No, monopoly power is based on whether a good has any close substitutes, not whether your friends like the product.

Sofia, a political science student, thinks that the government should intervene to revive declining industries like video stores and print newspapers. The government, she reasons, can resolve the coordination problem of getting the agents in these markets to trade. Do you agree with her? Explain your answer. A. No, these industries are declining not because of coordination problems but, rather, because of falling demand. B. Yes, government intervention is necessary to generate more buyers for these industries, thus coordinating buyers with existing sellers. C. No, these declining industries are plagued by coordination problems, but government intervention is never the answer. D. Yes, the coordination problems of these industries suggest that the invisible hand is failing, so government intervention would revive these industries.

A. No, these industries are declining not because of coordination problems but, rather, because of falling demand.

Exhibit 7.1 in the chapter (shown below) shows the reservation values of the buyers and sellers in the iPod market. Buyers RV Sellers RV Madeline 70 Tom 10 Katie 60 Mary 20 Sean 50 Jeff 30 Dave 40 Phil 40 Ian 30 Adam 50 Kim 20 Matt 60 Ty 10 Fiona 70 Suppose trades are arranged in this market such that everyone can make a trade without losing money. So, Madeline buys from Fiona at a price of $70, Katie buys from Matt at a price of $60, Sean buys from Adam at a price of $50, and so on. Since everyone who wants an iPod obtains one, and everyone who wants to get rid of their iPod sells it at the price they wanted, is social surplus maximized in the market? A. No, this trade arrangement yields zero social surplus since each participant trades at his or her reservation value. B. No, social surplus is not maximized since some buyers paid more than others for the exact same good. C. Yes, as long as all those who wish to transact are able to do so, social surplus is maximized. D. Yes, since each participant transacted at a price he or she accepted as fair. E. It is not possible to say until we know the price each buyer is willing to pay and the price each seller is willing to take.

A. No, this trade arrangement yields zero social surplus since each participant trades at his or her reservation value.

The Nash equilibrium is ____________. A. Tough/Not invade. B. Make concessions/Invade. C. Tough/Invade. D. Make concessions/Not invade. E. There is no Nash equilibrium.

A. Tough/Not invade.

If there are no "losers" in free trade, does it matter if wages and employment fall when a country engages in free trade? A. Yes, it is diffcult to pinpoint who the losers are and how much each lost. B. No, because the losers can immediately go out and get new jobs. C. No, because the winners are not responsible for the effects of their comparative advantage. D. Yes, because free trade is not "fair trade."

A. Yes, it is diffcult to pinpoint who the losers are and how much each lost.

In the United States in 2011, there were 104 fatalities per 100,000 workers in the logging industry. This is the second-highest rate after the fisheries industry. Everything else equal, would you expect workers in the logging industry to be paid higher wages than workers with similar levels of education in other industries? Explain. A. Yes, loggers should be paid higher wages to compensate for risk. B. Yes, loggers deserve higher wages due to skill-based technological changes. C. No, those workers in the logging industry should receive lower wages due to statistical discrimination. D. No, workers in the logging industry should be paid lower wages because they have less human capital.

A. Yes, loggers should be paid higher wages to compensate for risk.

Is it possible for accounting profit to be positive and economic profit to be negative? A. Yes, this could occur if explicit costs were modest and implicit costs were high. B. Yes, this could occur if implicit costs were modest and explicit costs were high. C. No, economic profit must always be larger than accounting profit. D. No, economic profit and accounting profit will always end up being the same.

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

The Law of Supply states that, in most cases, the quantity supplied of a good ___________ when the price of the good rises. This means we would expect a typical supply curve to be___________. A. rises; upward-sloping. B. falls; upward-sloping. C. falls; downward-sloping. D. rises; downward-sloping.

A. rises; upward-sloping.

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 ____________. A. third-degree price discrimination. B. second-degree price discrimination. C. location discrimination. D. first-degree price discrimination.

A. third-degree price discrimination.

A country has two types of workers, skilled and unskilled. Workers can produce either aircraft or ships. Output per worker is as follows: According to the data, ▼ both have skilled workers have unskilled workers have neither has an absolute advantage in making either type of good.

AA=Skilled workers

Svetlana and Vladimir run a food truck that serves sandwiches. Before they open, they have 1 hour to make salami sandwiches and turkey sandwiches. The following table shows how many enchiladas and burritos they can each make in 1 hour. Salami: S=48 V=54 Turkey: S=45 V=75 According to the data, ▼ Vladimir Neither Svetlana has an absolute advantage in making either type of sandwich. Based on comparative advantage, who should make salami vs turkey? ▼ Neither Svetlana Vladimir has a comparative advantage in making salami sandwiches. ▼ Pam Neither Vladimir has a comparative advantage in making turkey sandwiches.

Absolute advantages= vladimir Salami=Svetlana Turkey=V

Since this market is prevented from attaining equilibrium, the result is a deadweight loss, which is measured by area ▼ B + C C + E B + D

B+D

Based on your preceding answers, which of the following is possible? (Check all that apply.) A. SheShe could prefer a gift of threethree sweatersweaters to a gift of $3030. B. AkilahAkilah could prefer a gift of $3030 to a gift of threethree sweatersweaters. C. SheShe could be indifferent between a gift of $3030 and a gift of threethree sweatersweaters.

B,C

Early in 2012, Starbucks, a global coffeehouse company, raised the prices of some of its beverages in certain parts of the country, mostly the Northeast and the southern states. While some thought that this was not a good idea, most analysts agreed that the price increase would not adversely affect its revenues. What would have to be true for the analysts' claim (that Starbucks' revenues would not fall) to hold? (Check all that apply.) A. Buyers of Starbucks coffee will tend to be sophisticated consumers. B. A perception on the part of customers that few good substitutes exist for Starbucks coffee. C. Starbucks beverages will represent a relatively small fraction of people's budget share. D. A very limited time horizon on the part of those analysts that expected no adverse revenue effects.

B,C,D

The following quote is from a section on food shortages in a book on the Soviet economy: "Why there is no fish ... I can't imagine," wrote one indignant citizen to Anastas Mikoyan, head of the Food Ministry, in 1940. "We have seas, and they are still the same as before, but then you could have as much [fish] as you wanted of whatever kind, and now I have even forgotten what it looks like." Source: Sheila Fitzpatrick. Everyday Stalinism. Ordinary Life in Extraordinary Times: Soviet Russia in the 1930s. New York and Oxford: Oxford University Press, 1999. Industries and agriculture in the former Soviet Union were state controlled and the economy's resources were allocated by a central agency, Gosplan. In the passage above, the citizen cannot understand why there is a shortage of fish although the country possesses the same resources that it did before the economy transitioned to central planning. What could explain this outcome? (Check all that apply.) A. Reactionaries and other enemies of the state conspired to wreak havoc on the economy. B. Command economies are fundamentally flawed; they cannot even remotely replicate the work of the invisible hand. C. Central planners failed to accurately estimate the demand for fish at the price the planners set. D. Central planners failed to properly incentivize the resources necessary to reach the planners' fish production target.

B,C,D

Which of the following are necessary ingredients to the buyer's problem? (Check all that apply.) A. Consumer's ability to discern product usefulness. B. Prices of goods and services. C. D. Amount of money the consumer has to spend. E. Employment status of the consumer.

B,C,D

Although there are many examples of game theory in the real world, how well do you think specifics like payoff matrices, Nash equilibrium, and dominant strategies translate to reality? Which of the following are potential reasons game theory differs from reality? (Check all that apply.) A. Game theory is just an abstraction and cannot represent reality. B. Payoffs are determined by the attitudes and feelings of individuals as well as by their monetary returns. C. The formulator the Nash equilibrium, John Nash, eventually became mentally unbalanced. D. People are not driven by self-interested payoffs in general. E. One player may be more cunning, wiser, or more experienced than another.

B,E

Which of the following is an example of signaling? A. An individual buying a used car purchases a warranty to protect against it being a "lemon." B. A doctor displays her Harvard Medical School diploma in her office waiting room. C. A basketball player hits most of his 3-point shots to show that he's a good basketball player. D. The price of a company's stock is high relative to its peers in the industry.

B. A doctor displays her Harvard Medical School diploma in her office waiting room.

As a whole, does the United StatesUnited States or EcuadorEcuador benefit from trade? A. Only EcuadorEcuador benefits from trade. B. Both countries benefit from trade. C. Neither country benefits from trade. D. Only the United StatesUnited States benefits from trade.

B. Both countries benefit from trade.

Which of the following is not one of the common arguments against free trade? A. Potential negative effects on local wages.Potential negative effects on local wages. B. Consumers always win at the expense of producers.Consumers always win at the expense of producers. C. Fear of the effects of globalization on a nation's culture.Fear of the effects of globalization on a nation's culture. D. Countries with lax environmental policies allow for more pollution than those with strong environmental policies.Countries with lax environmental policies allow for more pollution than those with strong environmental policies. E. The desire to maintain diversification to preserve integrity in times of war.The desire to maintain diversification to preserve integrity in times of war.

B. Consumers always win at the expense of producers.

What is the difference between accounting profit and economic profit? A. Accounting profit subtracts both explicit and implicit costs from total revenue, while economic profit only subtracts explicit costs. B. Economic profit subtracts both explicit and implicit costs from total revenue, while accounting profit only subtracts explicit costs. C. Accounting profit only subtracts implicit costs from total revenue, while economic profit only subtracts explicit costs. D. Economic profit only subtracts implicit costs from total revenue, while accounting profit only subtracts explicit costs.

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

Nadia consumes two goods, food and clothing. The price of food is $9, the price of clothing is $15, and her income is $1,000. Nadia always spends 50 percent of her income on food regardless of the price of food, the price of clothing, or her income. What is her price elasticity of demand for food? A. Zero. B. Exactly 1.0. C. Some number between 0 and 1.0. D. Indeterminate.

B. Exactly 1.0

Which of the following common features do monopolistically competitive markets and monopolies share? A. Consumers with market power set prices. B. Firms face downward-sloping demand curves. C. Producers with no market power set their own prices. D. Barriers restrict new firms from entering.

B. Firms face downward-sloping demand curves.

How much do firms pay college graduates and high school graduates? A. Firms pay both college graduates and high school graduates $12,000, since they cannot tell the difference between extraordinary and capable workers. B. Firms pay college graduates $15,000 and high school graduates $12,000. C. Firms pay high school graduates $15,000 and college graduates $12,000. D. Firms pay both college graduates and high school graduates $16,500, the expected value of a worker.

B. Firms pay college graduates $15,000 and high school graduates $12,000.

Suppose wages in the market for plumbers increase. Some plumbers start taking on extra plumbing jobs while others cut back on the number of hours they work. What could explain this? A. For those plumbers who choose to work more, the substitution effect (on leisure) of the wage increase is weaker than the income effect. For those who decided to work less, the reverse is true. B. For those plumbers who choose to work more, the substitution effect (on leisure) of the wage increase is stronger than the income effect. For those who decided to work less, the reverse is true. C. For those plumbers who choose to work less, the substitution effect (on leisure) of the wage increase is exactly offset by the income effect. D. For those workers who choose to work less, there is no substitution effect to offset the income effect.

B. For those plumbers who choose to work more, the substitution effect (on leisure) of the wage increase is stronger than the income effect. For those who decided to work less, the reverse is true.

An example of the use of efficiency wages is when ____________. A. the United States re-established the federal minimum wage in 1938 at $0.25 per hour. B. Henry Ford increased the daily minimum wage for Ford employees to $5.00. C. restaurants allow their waiters and waitresses to keep the tips they receive from patrons. D. more productive workers are paid more to reflect their higher output.

B. Henry Ford increased the daily minimum wage for Ford employees to $5.00.

A group of social scientists were working on the Obama campaign in the 2012 presidential election. In order to persuade their supporters to vote, they focused on telling potential voters that most of the people in their neighborhood were planning to vote. The traditional campaign approach involved telling voters that most of their neighbors did not vote and that not voting was a missed opportunity to help their country. Which of the following best explains why the Obama team felt that their new approach would work better than the old one? A. Fairness. B. Herding C. Network externalities. D. PurePure altruism.

B. Herding

The government wants to reduce white-collar crime. Suppose for the moment innocent people are never wrongly convicted of a crime. According to the Becker model of crime and punishment, why should we increase the fines people pay if they are convicted instead of hiring more people to investigate white-collar crime? A. Detecting crimes is difficult due to the principal-agent problem. B. It is more expensive to increase the probability of detection than to increase the fine. C. The expected punishment is too low even when more investigators are hired. D. Fines bring in more money for the government, which can then be used for socially useful projects.

B. It is more expensive to increase the probability of detection than to increase the fine.

New York levies the highest cigarette tax in the country long —$5.85 per pack. Other states in the United States impose taxes that are much lower. The state of Virginia levies a tax of 30 cents per pack, which is the second lowest after Missouri. How would this explain the thriving black market for cigarettes in New York? A. New York does not have to use as many resources to collect its cigarette tax. B. It is more profitable to sell cigarettes on the black market in New York. C. Smokers in New York are more likely to be willing to pay New York's cigarette taxes. D. Black market participants do not need to use as many resources to elude New York's laws.

B. It is more profitable to sell cigarettes on the black market in New York.

What effect would grade inflation have on the effectiveness of college degrees and grades as signals? A. It has no impact on the effectiveness of grades as a signal in the job market. B. It reduces the effectiveness of grades as a signal in the job market. C. It increases the effectiveness of grades as a signal in the job market. D. It increases the effectiveness of grades as a signal in the job market for those with high grades and reduces the effectiveness for those with low grades.

B. It reduces the effectiveness of grades as a signal in the job market.

Hardware stores charge higher prices for snow shovels after a big snow storm. What role do prices play in the snow shovel market? A. In such a natural disaster, prices would not efficiently guide the invisable hand. B. It would incentivize distributors to ship more snow shovels into the area to meet the increased demand. C. Prices would signal when price gouging was taking place so authorities could step in to prevent it. D. In an emergency, prices must remain fixed; therefore, prices do not play a role in this case.

B. It would incentivize distributors to ship more snow shovels into the area to meet the increased demand.

How would the introduction of legal or technical barriers to entry affect the long-run equilibrium in a perfectly competitive market? A. It would create downward pressure on prices, causing firms to exit the market. B. It would reduce any downward pressure on prices from entry and allow economic profits in the long run. C. It would make all firms in the market less competitive, since any artificial barrier hurts the market overall. D. There would be no effect on the market, since there are no barriers to entry in perfectly competitive markets.

B. It would reduce any downward pressure on prices from entry and allow economic profits in the long run.

Now suppose Jones starts a new policy that says it will always match or beat Smith's price. It advertises the new policy heavily and so must choose Low if Smith chooses Low. So the game now has the following structure. First, Jones chooses High or Low. Second, Smith chooses High or Low. Third, if Jones has chosen High and Smith has chosen Low, Jones meets Smith's price and chooses Low. What is the payoff of this game for Jones and Smith? A. Jones $14,000; Smith $6,000. B. Jones $10,000; Smith $10,000. C. Jones $8,000; Smith $8,000. D. Jones $6,000; Smith $14,000.

B. Jones $10,000; Smith $10,000.

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

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

Some critics of the bailouts argued that these policies created a problem: banks would undertake too many risky projects if they knew that the government would bail them out if the project failed. What type of problem did these critics think was created? A. Moral hazard and adverse selection problems. B. Moral hazard problem. C. Adverse selection problem. D. Principal-agent problem.

B. Moral hazard problem.

All used cars are lemons (low quality) or peaches (high quality). Owners know whether or not their car is a lemon, but buyers do not. That is, the quality of a car is private information. There are many more buyers than sellers. Buyers value a peach at $4,000 and a lemon at $200; owners value a peach at $3,000 and a lemon at $100. Owners can have their cars inspected for $100. If they do have their car inspected, they will receive a certificate that shows whether the car is a lemon or a peach. Which owners will get their cars inspected? A. Neither owners of peaches nor lemons will get their cars inspected. B. Owners of peaches will get their cars inspected and owners of lemons will not. C. Owners of lemons will get their cars inspected and owners of peaches will not. D. Both owners of peaches and lemons will get their cars inspected.

B. Owners of peaches will get their cars inspected and owners of lemons will not.

How can it lead to an information cascade? A. People may stop signaling their opinions about movies. B. People may stop using their own information about movies. C. People may have incomplete information about movies. D. People may believe the movie reviews are unfair.

B. People may stop using their own information about movies.

When a major league baseball player's contract has expired, he can either sign a new contract with his current team or become a free agent and sign a contract to play with a different team. If adverse selection is a problem in the market for major league baseball players, who do you think are more likely to be injured the season after they sign a new contract, players who re-sign with their current team or players who sign with a new team? A. Players who re-sign with their current team. B. Players who sign with a new team. C. Both types of players are equally likely to be injured the season after they sign a contract. D. It cannot be determined with the information given.

B. Players who sign with a new team.

Why should you use a mixed strategy to play this game? A. Pure strategy is a more efficient way to reach higher payoff outcomes. B. Predictable behavior by one player can be taken advantage of by the other player. C. Mixed strategy has the advantage of requiring less effort to generate an optimal outcome. D. Random behavior generally leads to a Nash equilibrium.

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

Which of the following is true about how a firm in a competitive market decides what level of output to produce in order to maximize its profit? A. Produce up to the point where price equals average total cost. B. Produce until the additional revenue from one extra unit equals the additional cost of each unit. C. Produce until marginal cost is furthest below average total cost. D. All of the above.

B. Produce until the additional revenue from one extra unit equals the additional cost of each unit.

Which of the following is not one of the sources of natural market power? A. Having individual expertise in a field. B. Production of a luxury good. C. The presence of economies of scale. D. Network externalities

B. Production of a luxury good.

Given that there is information asymmetry in the market, why are IPOs often underpriced? A. Underwriters don't know how to value the company. Therefore, the underwriters will have to make sure the price is below the actual value, which leads to underpricing. B. Since the number of informed investors is very low, underwriters need to attract uninformed investors to subscribe to the IPO. Therefore, the underwriters will have to price the IPO at a low price, which leads to underpricing. C. Underwriters know that uninformed investors will bid up the price anyway. Therefore, the underwriters will price the IPO at a low price, which leads to underpricing. D. Since there are many uninformed investors, the underwriters need to price the IPO at a low price so that more people are able to buy the stock, which leads to underpricing.

B. Since the number of informed investors is very low, underwriters need to attract uninformed investors to subscribe to the IPO. Therefore, the underwriters will have to price the IPO at a low price, which leads to underpricing.

Suppose you draw a card from a standard deck of 52 cards, put that card back in the deck, and draw a second card. What do we know about the events "Draw a queen the first time" and "Draw a queen the second time"? A. The probability of drawing a queen the first time is less than the probability of drawing one the second time. B. The probability of drawing a queen the first time is the same as the probability of drawing one the second time. C. The probability of drawing a queen the first time is greater than the probability of drawing one the second time.

B. The probability of drawing a queen the first time is the same as the probability of drawing one the second time.

Suppose you draw a card from a standard deck of 52 cards, you do not put that card back in the deck, and draw a second card. What do we know about the events "Draw a spadespade the second time" if we did not "Draw a spadespade the first time"? A. The probability of drawing a spadespade the second time is less than the probability of drawing one the first time. B. The probability of drawing a spadespade the second time is greater than the probability of drawing one the first time. C. The probability of drawing a spadespade the second time is the same as the probability of drawing one the first time.

B. The probability of drawing a spadespade the second time is greater than the probability of drawing one the first time.

What is backward induction? A. The theory that represents extensive-form games when the Nash equilibrium specifies the order of play. B. The procedure of solving an extensive-form game by first considering the last mover's decision. C. It involves choosing one particular action for a situation. D. The methodology supporting an extensive-form representation of a game.

B. The procedure of solving an extensive-form game by first considering the last mover's decision.

The market for economics textbooks is in equilibrium. The government decides to relax export restrictions on paper, leading to an increase in the demand for paper. How does social surplus in the market for textbooks change? Why? A. The social surplus increases, and both consumer and producer surplus increase. B. The social surplus decrease, producer surplus may increase or decrease, and consumer surplus decreases. C. The change in social surplus is indeterminate because an increase in producer surplus is accompanied by a decrease in consumer surplus. D. The social surplus decreases because producer surplus increases less than the accompanying decrease in consumer surplus.

B. The social surplus decrease, producer surplus may increase or decrease, and consumer surplus decreases.

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 $negative 25−25. If one chooses R and the other chooses C, (i) the one that chooses R loses many of its customers and earns $00, and (ii) the one that chooses C wins many new customers and earns $250250. If they both choose R the price war ends and they each earn $125125. Does either player have a dominant strategy? Explain. A. The stations have a dominant strategy, which is to pick C because this is a best response regardless of what the other station does. B. The stations do not have dominant strategies because what works best depends on what the other station does. C. The stations have a dominant strategy, 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. D. The stations have a dominant strategy, which is for Station A to pick R and Station B to pick C because this maximizes their joint payoff. E. The stations have a dominant strategy, which is to pick R because this maximizes their joint payoff.

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

Grade inflation is widespread; college students receive higher grades on tests and exams today for work that would have received lower grades in the past. One recent study found that 41 percent of students had grade point averages of A-minus or higher in 2009, compared to just 7 percent in 1969. In other words, grades improve while actual learning does not. Why might someone go to college to earn a college degree and work hard to earn high grades? A. It reduces the moral hazard for employers when they hire those with college degrees and high grades. B. To send a signal to potential employers that they are smarter and harder working than the rest of the job applicants. C. Earning a college degree and obtaining high grades has a low marginal cost. D. It forces employers to reveal whether or not they value smart workers.

B. To send a signal to potential employers that they are smarter and harder working than the rest of the job applicants.

Which of the following equations calculates the profits of a firm? A. Total costsminus−Fixed costs B. Total revenuesminus−Total costs C. Total revenuesminus−Fixed costs D. Total revenues + Total costs 6.2.4 concept question

B. Total revenuesminus−Total costs

Walmart and Target are both discount retailers. However, during the Great Recession of 2009, Target's same-store sales fell while sales at Walmart actually increased. Examine the following statements and identify the ones that could explain this outcome. (Check all that apply.) A. The unemployment level in the United States increased substantially during the recession of 2009. B. Walmart stocks more goods like food and health items than Target. C. Target positions itself in the market as a low-cost retailer of home accessories and clothing. D. Both Target and Walmart attract a lot of price-sensitive customers. E. Walmart's annual revenues have, on average, been higher than Target's annual revenues.

B. Walmart stocks more goods like food and health items than Target. C. Target positions itself in the market as a low-cost retailer of home accessories and clothing.

In the 1950s, sociologists coined the term "homophily"—love of the same—to explain our tendency to associate with people who are like us. Why does homophily make it difficult to estimate peer group effects empirically? A. We make the same decisions as our peers. B. We partly choose our peers. C. Our peers prompt us to conform to their opinions. D. Our peers gradually indoctrinate us.

B. We partly choose our peers.

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

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

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? A. No. The firm that goes first can choose not to enter and the firm that goes second will therefore incur large loses. B. Yes. The firm that goes first can enter and the firm that goes second will have no incentive to enter. C. No. The firm that goes first can enter and the firm that goes second will have no incentive to enter. D. Yes. The firm that goes first can choose not to enter and therefore incur large loses.

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

Suppose Sarah is out at a local club with her friends and finds out that it is "Ladies' Night" and that all women can drink for free. She knows that if she drinks it will give her immediate pleasure equal to 80.0080.00 utils, but she also knows that if she drinks she will feel bad the next morning and will therefore have a cost of drinking equal to 175.00175.00 utils. If Sarah's discount weight for tomorrow is 0.400.40, will she drink at the club? A. YesYes, her net benefit from drinking is negativenegative; therefore, the benefitsbenefits of drinking outweigh the costscosts. B. YesYes, her net benefit from drinking is positivepositive; therefore, the benefitsbenefits of drinking outweigh the costscosts. .C. NoNo, her net benefit from drinking is positivepositive; therefore, the costscosts of drinking outweigh the benefitsbenefits. D. NoNo, her net benefit from drinking is negativenegative; therefore, the costscosts of drinking outweigh the benefitsbenefits.

B. YesYes, her net benefit from drinking is positivepositive; therefore, the benefitsbenefits of drinking outweigh the costscosts.

The concept of opportunity cost would explain whether someone chooses to drive, take a cab, take a bus, or walk to school or work because someone with ___________. A. a part-time job is more likely to walk or take a bus to work because he has less income. B. a high wage is more likely to drive or take a cab to work because his time is worth more. C. higher income is more likely to drive or take a cab to work because these transportation modes are more expensive. D. less value for the future is more likely to walk or take a bus to work because these modes have higher discount rates. E. a high value for playing sports is more likely to walk or take a bus to work because of a greater value on leisure.

B. a high wage is more likely to drive or take a cab to work because his time is worth more

The concept of opportunity cost would explain whether someone chooses to drive, take a cab, take a bus, or walk to school or work because someone with ___________. A. less value for the future is more likely to walk or take a bus to work because these modes have higher discount rates. B. a high wage is more likely to drive or take a cab to work because his time is worth more. C. higher income is more likely to drive or take a cab to work because these transportation modes are more expensive. D. a high value for playing sports is more likely to walk or take a bus to work because of a greater value on leisure. E. a part-time job is more likely to walk or take a bus to work because he has less income.

B. a high wage is more likely to drive or take a cab to work because his time is worth more.

The prisoners' dilemma is ____________ with a ____________ equilibrium that is not the best outcome for both players. A. an extensive-form game; submissive strategy. B. a simultaneous move game; dominant strategy. C. an extensive-form game; dominant strategy. D. a simultaneous move game; submissive strategy.

B. a simultaneous move game; dominant strategy.

This is an example of: A. a simultaneous game. B. an extensive game. C. a monopoly game. D. a fishbone game.

B. an extensive game.

Telesource and Belair are two of the largest firms in the wireless carrier market in a certain country. Both these firms account for more than 80 percent of the market. Given that both firms differentiate their products, a Nash equilibrium is achieved in this market by ____________. A. one firm becoming the industry leader and setting the price that maximizes its payoff and then the other firm setting its price next to maximize its payoff. B. both firms maximizing their payoffs simultaneously so that their prices are best responses to each other. C. the firms colluding to set price such that their joint payoff is maximized. D. the firms acting independently to maximize their payoff without regard to their rival's behavior.

B. both firms maximizing their payoffs simultaneously so that their prices are best responses to each other.

Since optimization is used to analyze people's choices and help them improve the outcomes of their choices, its A. positive only. B. both normative and positive. C. normative only. D. neitherneither because it describes preferences but not how to improve themdescribes preferences but not how to improve them.

B. both normative and positive.

Adverse selection occurs in the health insurance market because ____________. A. unless there are deductibles and co-payments, those who buy insurance will not have "skin in the game." B. buyers have private information about their health that health insurance companies do not. C. people with health insurance are more likely to undertake risky activities since they know that any injuries or illnesses will be paid for by the insurance company. D. only people who are sick will buy health insurance, thus signaling the health of those who buy and those who do not.

B. buyers have private information about their health that health insurance companies do not.

Economists mostly use optimization in differences, as opposed to optimization in levels, because ____________. A. examining the net benefits of alternatives is counterintuitive. B. comparing different features of alternatives is simplesimple. .C. contrasting the total benefit of alternatives is intuitiveintuitive. .D. calculating cost-benefit ratios is complicated.

B. comparing different features of alternatives is simplesimple.

For a consumer with a given level of income, the combinations of goods for the budget constraint will be (lower/higher) than for the budget setset.

lower

The idea of leaving all the money in an account and earning interest not only on the original deposit but also on the past interest earned is called ____________. A. interest reduction. B. compounding. C. rate multiplication. D. expansion.

B. compounding.

A new manager is assigned to the production department. He thinks that the firm can profitably move all production to Plant 2 since the average cost of production is lower in Plant 2 than in Plant 1. If the firm only uses Plant 2, the firm's profits will ____________. A. rise to $141 B. decline to $108 C. decline to $117 D. remain unaffected

B. decline to $108

The tragedy of the commons can be modeled as a prisoners' dilemma game when the __________. A. Nash equilibrium is greater than the dominant strategy equilibrium. B. dominant strategy equilibrium leads to the destruction of a common resource. C. common resource equilibrium is the dominant strategy for public goods. D. Nash equilibrium is equal to the common resource equilibrium.

B. dominant strategy equilibrium leads to the destruction of a common resource.

Suppose there are four firms in a market and each of them sells differentiated products. If the four firms engage in a price war, then ____________. A. none of the firms will earn economic profits. B. each firm's profit will be less than with collusion but not zero. C. the firms with the most similar products will sell more output. D. the firm with the lowest price will acquire the entire market.

B. each firm's profit will be less than with collusion but not zero.

This chapter explains that signaling refers to an action that an individual with private information takes in order to convince others about his information. Screening also involves private information but is somewhat different from signaling. Screening refers to an action taken by an uninformed person to learn about someone else's private information. So, for example, you are engaged in screening if you have a mechanic inspect a used car you are considering buying. The biblical story of King Solomon is in 1 Kings 3:16dash-28 (see also http://en.wikipedia.org/wiki/Judgment_of_Solomon). Two young women who both had an infant son came to Solomon for a judgment. One of the women claimed that the other, after accidentally smothering her own son while sleeping, had exchanged the two children to make it appear that the living child was hers. The other woman denied this and so both women claimed to be the mother of the living son and said that the dead boy belonged to the other. After some deliberation, Solomon declared the live son must be split in two, each woman receiving half of the child. At that point, the boy's true mother cried out, "Oh Lord, give the baby to her, just don't kill him!" The liar said, "It shall be neither mine nor yourslong dash—divide it!" The king then declared the first mother as the true mother and gave her the baby. We know that King Solomon understood screening very well because his solution ___________. A. avoided the moral hazard that would have been involved in splitting the baby in half. B. forced the women to reveal their private information about who the real mother was. C. forced the women to reveal their public information about who the real mother was. D. signaled to the women that he knew who the true mother was.

B. forced the women to reveal their private information about who the real mother was.

The organ donation policy in the United States is based on altruism. It is illegal to buy or sell human organs, so patients who need transplants will have to wait until they find an appropriate donor. In Iran, however, donors are compensated in cash for organs. The United States has a long waiting list for organs while there are hardly any such shortages in Iran. The shortage of organs in the United States suggests that altruism __________. A. reduces organ donations. B. generates insufficient organ donations. C. is more prevalent in Iran than the United States. D. is impure in Iran.

B. generates insufficient organ donations

Consumer sovereignty suggests that ____________. A. consumers make better choices than government. B. government should not interfere with consumer choices. C. government should always interfere with consumer choices. D. consumers should be more open to government nudges.

B. government should not interfere with consumer choices.

Consider an experiment on soliciting donations for a children's hospital. Experimenters put flyers on doors saying that solicitors would be coming to their house at a particular time. Fewer people opened the door when they knew that a solicitor would be coming, but those who did gave more money, on average, than others who did not know. From the results of this experiment, you can infer that people give due to ____________. A. impure altruism, because fairness is important. B. impure altruism, because of social pressures. C. pure altruism, because there is a return to giving D. pure altruism, because people maximize utility

B. impure altruism, because of social pressures.

Suppose the act of giving is viewed as an economic good. The price of charitable donations can be measured with changes to ____________. A. minimum wage rates. B. income tax rates C. international exchange rates. D. government welfare payments.

B. income tax rates or tax deductions

Two outcomes are said to be independent when ____________. A. the payoff from one outcome does not impact the payoff from the other outcome. B. knowing about one outcome does not help you predict the other outcome. C. the probability of one outcome is different from the probability of another outcome. D. knowing about one outcome helps you predict the other outcome.

B. knowing about one outcome does not help you predict the other outcome.

An example of indoctrination is ___________. A. using drugs that are illegal. B. not smoking due to antismoking campaigns. C. fixing prices to maximize profits. D. using only one's own private information.

B. not smoking due to antismoking campaigns.

Moral hazard occurs when ____________. A. the buyer in a transaction knowingly purchases a "lemon." B. one party in a market transaction takes a hidden action that is relevant for, but not observed by, the other party. C. one party in a market transaction has a hidden characteristic that is relevant for, but not observed by, the other party. D. the seller in a transaction unknowingly sells a "lemon."

B. one party in a market transaction takes a hidden action that is relevant for, but not observed by, the other party.

Which of the following is not a source of a country's comparative advantage? A. Education and human capitalEducation and human capital. B. Relative abundance of labor and capitalRelative abundance of labor and capital. C. ClimateClimate. D. QuotasQuotas.

D. QuotasQuotas.

Compensating wages are the wage premiums ___________. A. union workers receive relative to nonunion workers. B. paid to attract workers to occupations to otherwise undesirable jobs. C. public-sector workers receive compared to private-sector workers. D. college-educated workers receive for enduring four (or more) years of college.

B. paid to attract workers to occupations to otherwise undesirable jobs.

The government could encourage the production of the efficient number of ITNs by ____________. A. enacting a tax on ITNs. B. providing a subsidy for ITNs. C. private bargaining with the suppliers of ITNs. D. all of the above.

B. providing a subsidy for ITNs.

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 ____________. A. based on the Nash equilibrium. B. randomly. C. based on the dominant strategy. D. the Fibonacci sequence.

B. randomly.

An example of an information cascade is ____________. A. saving money for the futuresaving money for the future. B. restaurants that suddenly become popular C. a new business opening. D. employers hiring those unemployedemployers hiring those unemployed.

B. restaurants that suddenly become popular

Given your response to the previous question and the fact that most extended warranties that are offered on smaller electronic purchases tend to cost more than the benefits they provide it is likely true that firms ____. A. sell no extended warranties since customers understand that the cost of the warranty is greater than the benefit B. sell many extended warranties since people are willing to pay extra to avoid the risk of a loss C. sell very few extended warranties since most people have a neutral stance on risk

B. sell many extended warranties since people are willing to pay extra to avoid the risk of a loss

Suppose people who are thinking about buying a home (demanders in the housing market) and current home owners who are thinking about selling their homes (suppliers in the housing market) suddenly believe that home prices are likely to be significantly lowerlower next year than this year. Consider the market for housing this year, as illustrated in the figure on the right. The change in the expected price of housing will ___________. A. shift the demand curve to the rightright, as home prices decreasedecrease. B. shift the demand curve to the leftleft, as buyers postponepostpone their home purchases. C. not affect the demand curve for housing, as consumers are not sensitive to future prices. D. shift the demand curve to the leftleft, as fewerfewer homes are put on the market for sale by owners.

B. shift the demand curve to the leftleft, as buyers postponepostpone their home purchases.

In a monopolistically competitive market, a firm earning negative economic profit in the short run will ____________. A. produce only if price is greater than marginal cost. B. shut down only if price is less than average variable costshut down only if price is less than average variable cost. C. produce when revenue is positive. D. shut down to avoid losses.

B. shut down only if price is less than average variable costshut down only if price is less than average variable cost.

Social surplus is the ____________. A. gain to society from having a trade surplus with other countriesgain to society from having a trade surplus with other countries. B. sum of consumer surplus and producer surplussum of consumer surplus and producer surplus. C. difference between the amount that buyers actually pay and what they wish to pay. D. excess of aggregate demand over aggregate supply.

B. sum of consumer surplus and producer surplussum of consumer surplus and producer surplus.

The government runs a budget surplus when ____________. A. investment exceeds its spending. B. tax revenue exceeds its spending. C. tax revenue falls below its spending. D. the budget is balanced.

B. tax revenue exceeds its spending.

The government runs a budget surplus when ____________. A. tax revenue falls below its spending. B. tax revenue exceeds its spending. C. consumption exceeds its spending. D. the budget is balanced.

B. tax revenue exceeds its spending.

A dominant strategy equilibrium is ____________. A. the best response to every possible strategy of the other player. B. the combination of strategies where each strategy is a dominant strategy. C. the payoffs for each action that a player can take. D. when players pick their actions at the same time.

B. the combination of strategies where each strategy is a dominant strategy.

With the growth of the Internet, there are a large number of online retailers as well as buyers in the online retail market. One might think that different firms would charge very similar prices for the same good because ____________. A. consumers have limited information about pricesconsumers have limited information about prices. B. the cost of searching online is lowthe cost of searching online is low. C. it is difficult for sellers to adjust their pricesit is difficult for sellers to adjust their prices. D. barriers exist to new firms selling online.

B. the cost of searching online is lowthe cost of searching online is low.

According to the Law of Diminishing Returns, ____________. A. as the quantity of labor increases, the quality of the labor being employed decreases. B. the marginal productivity of an additional unit of labor eventually decreases as the quantity of labor increases. C. the total productivity of labor eventually decreases as the quantity of labor increases. D. the ratio of output to labor rises then eventually falls.

B. the marginal productivity of an additional unit of labor eventually decreases as the quantity of labor increases.

This cartel would succeed if ___________. A. it is hard to punish cheatersit is hard to punish cheaters. B. the market has substantial long minus term valuethe market has substantial long−term value. C. firms value profits more today than in the future. D. detection of cheaters is difficultdetection of cheaters is difficult.

B. the market has substantial long minus term valuethe market has substantial long−term value.

An outcome is described to be risky when ____________. A. the outcome of an event that can turn out to be bad is not known in advance. B. the outcome of either a good or bad event is not known in advance. C. the probability that you will lose money is greater than the probability that you will make money. D. the probability that you will lose money is positive and the probability that you will make any money at all is zero.

B. the outcome of either a good or bad event is not known in advance.

Consumer surplus is __________. A. the per-capita excess supply that exists in a market when the price is too high. B. the value or total benefits one receives from a good in excess of the price paid for it. C. the income an individual has after his consumption plans are met. D. the portion of consumer goods that are purchased in a given time period but not consumed.

B. the value or total benefits one receives from a good in excess of the price paid for it.

In the context of this chapter, having a preference for fairness means ____________. A. when people make the same decisions as others. B. the willingness to sacrifice to help those treated differently. C. a desire to help oneself feel good. D. conforming to the decisions of others.

B. the willingness to sacrifice to help those treated differently.

When graphing the new total market supply and demand curves, these curves will be _________ the individual countries' demand curves, since these curves are derived by _________. A. above and to the right of; summing both prices and quantities simultaneously. B. to the right of; summing quantities at a given price. C. directly above; summing prices for a given quantity.

B. to the right of; summing quantities at a given price.

The market for baseball players is most like the market for ____________. A. labor because better players get paid a higher salary. B. used cars because unhealthy players are like lemons. C. labor because teams have to pay efficiency wages. D. insurance because players will need more medical care if they go to a new team.

B. used cars because unhealthy players are like lemons.

To say that a good has network effects means that the ____________. A. value of the product decreases as more people use it. B. value of the product increases as more people use it. C. good relies on the high prices of substitute goods in order to keep its demand up. D. good is just one of many goods that will be used to make a final good.

B. value of the product increases as more people use it.

Efficiency wages are ____________. A. only paid to high-paid workers. B. wages above the lowest pay that workers would accept. C. wages slightly below the lowest pay that workers would accept. D. wages below the top-paid workers at a company.

B. wages above the lowest pay that workers would accept.

Tax incidence refers to ____________. A. the extent to which a tax is regressiveregressive. B. who bears the burden of a tax. C. the averageaverage tax rate. D. how much revenue a tax generates.

B. who bears the burden of a tax.

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 who 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 ____________. A. you both prefer the price at Upper P 2P2. B. you prefer Upper P 1P1, but the tech firm prefers Upper P 2P2. C. you both prefer the price at Upper P 1P1. D. you prefer Upper P 2P2, but the tech firm prefers Upper P 1P1.

B. you prefer Upper P 1P1, but the tech firm prefers Upper P 2P2.

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? A. MonopolyMonopoly, because consumers are moremore sensitive to price. B. Monopoly, because its demand is more inelastic. C. Monopolistically competitive marketMonopolistically competitive market, because it is a price taker. D. monopolistically competitive, because demand is greater

B. Monopoly, because its demand is more inelastic.

Monopolistically competitive firms earn zero economic profit in the long run as do perfectly competitive firms. Does this mean that total surplus is maximized in a monopolistically competitive market? A. No, because firms produce where price is equal to marginal costproduce where price is equal to marginal cost. B. No, because firms restrict output to raise pricerestrict output to raise price C. Yes, because production occurs at the minimum average total cost. D. No, because firms produce where marginal cost equals marginal revenue.

B. No, because firms restrict output to raise pricerestrict output to raise price

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? A. Yes, first mover has an advantage by getting to pick their first choice. B. No, if you show your move first you will lose every time. C. No, first mover must play a dominant strategy which is good for mixed strategy games. D. Yes, first mover wins in this game.

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

Can two indifference curves intersect? Explain your answer. A. Yes, intersecting indifference curves simply imply that a consumer changes her mind from time to time. B. No, intersecting indifference curves would imply that a consumer is indifferent between bundles that yield different total benefits. C. Yes, intersecting indifference curves simply imply that a consumer has difficulty choosing between some bundles. D. No, intersecting indifference curves violate the Law of Demand.

B. No, intersecting indifference curves would imply that a consumer is indifferent between bundles that yield different total benefits.

If a good is considered to be a luxury good, does it mean that the Law of Demand does not hold? A. Yes, since luxury goods are associated with conspicuous consumption, high-income individuals purchase more of these goods as their prices rise. B. No, it only means that its income elasticity of demand is greater than 1.0, so the Law of Demand still holds. C. Yes, the Law of Demand is only relevant for normal goods. D. No, the Law of Demand is an immutable law of nature, like the law of gravity, which can never be violated.

B. No, it only means that its income elasticity of demand is greater than 1.0, so the Law of Demand still holds.

TammiTammi is working on a school report on the proposed merger between American Airlines and U.S. Airways. SheShe finds that U.S. Airways' annual revenue for 2012 rose by 4.24.2 percent over the previous year, while the revenue for American Airlines recorded an increase of almost 5.85.8 percent. Based on this, sheshe concludes that, in 2012, passenger traffic must have increased more for American AirlinesAmerican Airlines than for U.S. AirwaysU.S. Airways. Is TammiTammi's conclusion correct? Explain your answer. A. Yes, since the more rapid revenue increase at American AirlinesAmerican Airlines suggests that it also had a bigger increase in passenger traffic compared to U.S. AirwaysU.S. Airways. B. No, since total revenue is the product of price and quantity. Knowing only that revenue has increased says nothing about the reasons behind the increase. C. The information needed to assess Tammi's conclusion is insufficient; we must know how the two airlines priced their flights during 2012.

B. No, since total revenue is the product of price and quantity. Knowing only that revenue has increased says nothing about the reasons behind the increase.

We can show that a profit-maximizing firm will hire the number of workers such that the wage is equal to the value of the marginal product of labor. But, as the text showed in an earlier chapter, a profit-maximizing firm will produce the quantity of output such that price equals marginal cost. Are these two rules inconsistent? A. Yes, the rules are in fact inconsistent and often lead firms to choose employment levels that do not agree with the output choices they have made. B. No, the decision rule regarding the optimum employment level yields the level of employment exactly necessary to produce the output level where price = marginal cost. C. No, it's like comparing apples and oranges: one pertains to the profit-maximizing level of output and the other concerns the profit-maximizing level of labor employment. D. Maybe, since any given output level can be produced using many different labor-capital combinations.

B. No, the decision rule regarding the optimum employment level yields the level of employment exactly necessary to produce the output level where price = marginal cost.

Suppose one of your friends offered the following argument: A rightward shift in demand will cause an increase in price. The increase in price will cause a rightward shift of the supply curve, which will lead to an offsetting decrease in price. Therefore, it is impossible to tell what effect an increase in demand will have on price. Do you agree with your friend? A. No, the offsetting supply shift caused by the higher price will not be as large as the demand shift, so we know the price will rise some. B. No, the increase in price will not cause a shift of the supply curve. C. Yes, any time both the supply and demand curves shift, it becomes impossible to accurately determine the impact on the price of a good. D. Yes, since the shift in demand that raises the price must cause an offsetting shift in supply, we cannot know the impact on price.

B. No, the increase in price will not cause a shift of the supply curve.

Do you think from 1747-1757 the number of new homes with 9 or fewer windows increased from the pre-1747 days? A. Yes, because the marginal cost of having more windows became proportional. B. Yes, because the marginal cost of having more windows increased. C. Yes, because the marginal cost of having more windows decreased. D. No, because the marginal cost of having more windows remained unchanged.

B. Yes, because the marginal cost of having more windows increased.

The Rule of 72 is a handy way to estimate how long it will take $1 to double at various interest rates. The Rule of 72 says that if the interest rate is r percent, then $1 will double in approximately 72/r years. Are your answers to the previous questions consistent with this rule? A. No, none of the questions had a 72-year time period; each question had significantly fewer years. B. Yes, for each question, the number of years times the interest rate is 72 and the original amounts roughly doubled. C. No, the future values for each question were not double the original values.

B. Yes, for each question, the number of years times the interest rate is 72 and the original amounts roughly doubled.

If there are no "losers" in free trade, does it matter if wages and employment fall when a country engages in free trade? A. Yes, because free trade is not "fair trade." B. Yes, the government might not be able to effectively carry out such wealth transfers. C. No, because the losers can immediately go out and get new jobs. D. No, because the winners are not responsible for the effects of their comparative advantage.

B. Yes, the government might not be able to effectively carry out such wealth transfers.

Suppose you had to organize a double oral auction for a good that has perfectly elastic demand. Do you expect prices to approach the competitive equilibrium? A. No, the market for a good having a perfectly elastic demand is always in equilibrium, so examining the approach to equilibrium is pointless. B. Yes, there is no reason why price in a double oral auction for a good with perfectly elastic demand would not be expected to approach the equilibrium price. C. Maybe, it depends on the nature (durable versus nondurable) of the good.

B. Yes, there is no reason why price in a double oral auction for a good with perfectly elastic demand would not be expected to approach the equilibrium price.

Are there real-world markets that resemble double oral auctions? A. No, double oral auctions are merely experimental devices created by economists to test certain theories. B. Yes, trading on the New York Stock Exchange is very similar to a double oral auction. C. No, all real-world markets resembling double oral auctions have disappeared due to privacy laws. D. Yes, all transactions that entail bargaining between agents resemble double oral auctions.

B. Yes, trading on the New York Stock Exchange is very similar to a double oral auction.

Suppose a limited number of tickets to a popular football game had to be rationed among the public. There are three ways of doing this: Auction: The tickets will go to the highest bidder. Lottery: A certain number of lucky people will get the tickets. Queues: The tickets will be sold on a first-come, first-serve basis. Which method would yield the most efficient outcome? Rank the three methods in decreasing order of their efficiency. A. Auctions are the most efficient, then queues, and a lottery is least efficient. B. A lottery is the most efficient, then auctions, and queues are least efficient. C. Auctions are the most efficient, then a lottery, and queues are least efficient. D. A lottery is the most efficient, then queues, and auctions are least efficient.

C. Auctions are the most efficient, then a lottery, and queues are least efficient.

People who need life-saving drugs cannot do without them and surely will be willing to pay very high prices for them. So why can't producers of life-saving drugs charge any price that they wish to? A. The government will force monopolies to lower drug prices if they charge too much. B. Monopolists that sell life-saving drugs face a horizontal supply curve. C. A monopolist, such as one selling life-saving drugs, still faces downward-sloping demand curves. D. If the producers of life-saving drugs raise the price, the price effect always dominates and total revenue falls.

C. A monopolist, such as one selling life-saving drugs, still faces downward-sloping demand curves.

The firms that should produce those cars are ____________. A. B, C, and D. B. A, B, and C. C. A, C, and D. D. A, B, and D

C. A, C, and D.

Why do "bad cars drive out the good ones" in the market for used cars? A. Sellers of good used cars ask too much for their cars, and since buyers are unwilling to pay the high prices, sellers of good cars eventually stop trying to sell their cars, leaving only bad cars in the market. B. Sellers of used cars are not able to determine which buyers are willing and able to pay for the good cars, so only owners of bad cars offer their cars for sale. C. Buyers are not able to tell the difference between good cars and bad cars, and so they are not willing to pay a high price for a used car because of the significant chance it will be lemon, which makes owners of good cars unwilling to sell them. D. Buyers of used cars don't have enough money to buy good cars, so only bad cars are sold in the market.

C. Buyers are not able to tell the difference between good cars and bad cars, and so they are not willing to pay a high price for a used car because of the significant chance it will be lemon, which makes owners of good cars unwilling to sell them.

The Thai government bought rice from its farmers at a price that was 40 percent higher than the prevailing market price in the country. How is this likely to affect other buyers in the domestic market for rice? A. Since the government is willing to buy any amount, firms will increase the quantity they supply, which will drive down the price of rice for everyone. B. Other buyers in the domestic market will not be affected, since the government will be buying the excess supply that exists at equilibrium. C. It will drive the price above the market price, resulting in a higher price for domestic consumers and therefore a smaller quantity demanded. D. Firms will charge domestic consumers a price below the market price, since they are charging the government a higher price.

C. It will drive the price above the market price, resulting in a higher price for domestic consumers and therefore a smaller quantity demanded.

According to reports in the Chinese media, commuters in Beijing are facing a somewhat paradoxical situation: they find it difficult to get a cab while hundreds of cabs lie idle during rush hour. The demand for taxis in Beijing has increased as average incomes have risen. Government-determined gasoline prices have also increased. But the government, worried about rising prices for cab rides, has left the cabs' base fare unchanged. The figure on the right displays the situation in the market for cab rides prior to the events cited above. 1.) Using the line drawing tool, show the effect on supply or demand of the increase in average incomes. Label this curve appropriately. 2.) Using the line drawing tool a second time, show the effect on supply or demand of the higher gasoline prices. Label this curve appropriately. Based on your understanding of how the invisible hand works, what do you think should be done to correct this problem? A. The government should lower gasoline prices. B. Cab owners should be required to operate their cabs at all times. C. Cab fares should be allowed to increase. D. Nothing.

C. Cab fares should be allowed to increase.

Which of the following is a cost associated with government intervention in an economic system? A. Inequality. B. Unemployment. C. Corruption. D. Externalities.

C. Corruption.

What does the model suggest about crime prevention? A. There will always be moral hazard, so there is not much that can be done to prevent crime. B. Crime can be solved with the appropriate design of contracts that criminals (agents) will sign and follow. C. Crime can be solved with the right incentives, which will be in part a function of the expected punishment. D. It can be solved through the observation of the signals that people put out when they are undertaking criminal activity.

C. Crime can be solved with the right incentives, which will be in part a function of the expected punishment.

These payoffs are illustrated in the payoff matrix on the right. Suppose these countries choose the quantity of oil to produce simultaneously and without consulting with one another. What is each country's dominant strategy? A. A's dominant strategy is to produce 4040 and B's dominant strategy is to produce 2020. B. A's dominant strategy is to produce 2020 and B's dominant strategy is to produce 4040. C. Each country's dominant strategy is to produce 4040. D. Each country's dominant strategy is to produce 2020. E. Neither firm has a dominant strategy.

C. Each country's dominant strategy is to produce 4040.

Under which of the following examples is it likely that the accounting profit is positive and the economic profit is negative? A. Using a restaurant you purchased to sell Mexican food instead of Italian food. B. Opening a bank branch near a university campus. C. If you open an amusement park in the middle of New York City. D. Such a scenario, where accounting cost is positive and economic profit is negative, is not possible.

C. If you open an amusement park in the middle of New York City.

Refer to the optimization analysis used to make a decision about the choice of an apartment. Suppose the government in a certain country wants to reduce urban sprawl. (Urban sprawl refers to the development of residential and commercial areas in the suburbs around the periphery of a city. One of the main problems with urban sprawl is that it leads to increased traffic congestion and air pollution as commuters travel to the city every day.) What measures could it take to ensure that people choose to live closer to the central business district? A. Stop taxing traffic moving in and out of the cityStop taxing traffic moving in and out of the city. B. Encourage employers to relocate to the suburbs. C. Increase property taxes on houses in the suburbsIncrease property taxes on houses in the suburbs. D. Strengthen building codes to regulate apartments being constructed. E. Enhance the public transportation system between the city and the suburbs.

C. Increase property taxes on houses in the suburbsIncrease property taxes on houses in the suburbs.

A group of social scientists were working on the Obama campaign in the 2012 presidential election. In order to persuade their supporters to vote, they focused on telling potential voters that most of the people in their neighborhood were planning to vote. The traditional campaign approach involved telling voters that most of their neighbors did not vote and that not voting was a missed opportunity to help their country. Which of the following best explains why the Obama team felt that their new approach would work better than the old one? A. Network externalities. B. Impure altruism. C. Information cascades D. Fairness.

C. Information cascades

Consider the following statement: Given that burgersburgers and friesfries are complementary goods, if the price of friesfries increasesincreases the demand for both goods will fallfall. Is this an accurate statement? A. No, the quantity demanded (not the demand) for both goods is reducereduced as a result of the increaseincrease in the price of friesfries. B. It is somewhat inaccurate. The increaseincrease in the price of friesfries will reducereduce the quantity demanded (not the demand) for burgersburgers. It will, however, as the statement claims, reducereduce the demand for friesfries. C. It is somewhat inaccurate. The increaseincrease in the price of friesfries will reducereduce the quantity demanded (not the demand) for friesfries. It will, however, as the statement claims, reducereduce the demand for burgersburgers. D. Yes, the increaseincrease in the price of friesfries will reducereduce both the demand for friesfries and the demand for burgersburgers.

C. It is somewhat inaccurate. The increaseincrease in the price of friesfries will reducereduce the quantity demanded (not the demand) for friesfries. It will, however, as the statement claims, reducereduce the demand for burgersburgers.

Suppose you have to give up a job that pays you $40,000 a year to attend business school. How would this affect your calculation of whether to attend business school? A. It will increase future earnings potential from additional education, making you more likely to attend business school. B. It will increase tuition payments for business school, making you less likely to attend business school. C. It will increase the indirect cost of your time, making you less likely to attend business school. D. It will decrease the direct benefits of business school, making you more likely to attend business school. E. It will not affect the direct cost of business school, leaving you equally likely to attend business school.

C. It will increase the indirect cost of your time, making you less likely to attend business school.

Suppose you have to give up a job that pays you $40,000 a year to attend business school. How would this affect your calculation of whether to attend business school? A. It will not affect the direct cost of business school, leaving you equally likely to attend business school. B. It will increase future earnings potential from additional education, making you more likely to attend business school. C. It will increase the indirect cost of your time, making you less likely to attend business school. D. It will decrease the direct benefits of business school, making you more likely to attend business school. E. It will increase tuition payments for business school, making you less likely to attend business school.

C. It will increase the indirect cost of your time, making you less likely to attend business school.

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

C. Jordan has lung cancer from smoking cigarettes.

During an economic slump, what pricing strategy could a fast-food firm such as McDonald's have to use to maintain its sales? A. Higher prices to take advantage of increasing sales since its products are inferior goods. B. Keep prices stable to avoid the damaging effects of deflation during a recession. C. Lower prices to counteract an expected drop in sales since its products are normal goods. D. Keep prices stable to avoid angering customers likely to be already upset by the recession.

C. Lower prices to counteract an expected drop in sales since its products are normal goods.

Assume that your country's income tax structure has the following tax rates: if your income is $60 comma 00060,000 or less you pay no income tax; if your income is above $60 comma 00060,000, you pay 3030 percent of the amount above $60 comma 00060,000. And so, for example, someone who earns $120 comma 000120,000 would pay 3030%times×($120 comma 000120,000minus−$60 comma 00060,000)equals=$18 comma 00018,000. Your marginal tax rate is defined as the taxes you pay if you earn one more dollar. Your average tax rate is defined as the total taxes you pay divided by your income. And so, to continue with this example, someone who earns $120 comma 000120,000 would have a marginal tax rate of 3030 percent and an average tax rate of $ 18 comma 000 divided by $ 120 comma 000$18,000/$120,000equals=1515%. You have three alternatives. You could not work at all, you could work half time, or you could work full time. If you do not work at all, you will earn $0; if you work half time you will earn $60 comma 00060,000; and if you work full time, you will earn $120 comma 000120,000. Any time you do not work, you can spend surfing. You love to surf: surfing half time is worth $54 comma 00054,000 to you. As you are making your decision about how much to work, should you pay attention to your average tax rate or to your marginal tax rate? A. Average tax rate to isolate differences in alternatives. B. Marginal tax rate to compare levels of total net benefit. C. Marginal tax rate to identify marginal changes. D. Marginal tax rate to consider feasible options. E. Average tax rate to calculate comparative statics.

C. Marginal tax rate to identify marginal changes.

How does a natural monopoly differ from a firm that becomes a monopoly due to network effects? A. Natural monopolies result from economies of scale, while network effects come from diseconomies of scale. B. Natural monopolies result from the benefits to consumers from having many people use a service, while network effects come from economies of scale. C. Natural monopolies result from economies of scale, while network effects come from the benefits to consumers from having many people use a service. D. They do not differ. Both are directly the result of the advantages of producing under economies of scale.

C. Natural monopolies result from economies of scale, while network effects come from the benefits to consumers from having many people use a service.

Equal pay for work of comparable worth is the idea that certain jobs, though completely different, must have the same pay because they are deemed to be of similar value. For example, an X-ray technician's job may be deemed to be as valuable as a dental assistant's job and therefore, both these jobs should be paid the same salaries. Implementing equal pay for comparable worth has been suggested as a measure that would reduce discrimination and inequality in the job market. Do the authors of the textbook agree? A. No. Discrimination and inequality should be accepted as shameful but tolerable blemishes on an otherwise efficient wage-determination mechanism. B. Yes. The value of the marginal products of the many different types of labor can be easily determined using sophisticated monitoring and testing techniques. C. No. Just as central planning failed miserably to replicate the accomplishments of the invisible hand, so too would any attempt to employ similarly ill suited "officials" to gauge the value of the marginal products of the myriad jobs in a modern and fluid economy. D. Yes. The fact that discrimination and inequality persist is evidence enough that the market mechanism should be replaced by a system overseen by democratically elected (and therefore accountable) technocrats.

C. No. Just as central planning failed miserably to replicate the accomplishments of the invisible hand, so too would any attempt to employ similarly ill suited "officials" to gauge the value of the marginal products of the myriad jobs in a modern and fluid economy.

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

C. Not necessarily, since the burden of the tax depends on price elasticity. Tax incidence depends on the relative elasticities of market supply and demand.

There are 100 low-risk people in a town and 100 high-risk people. A low-risk person has an average of $1,000 in medical expenses each year and is willing to pay $1,200 for medical insurance (this person is risk averse). A high-risk person has an average of $2,000 in medical expenses each year and is willing to pay $2,400 for medical insurance. Insurance companies are unable to tell who is high risk and who is low risk. If an insurance company offers medical insurance at a price of $1,600, who will buy it? A. Neither high-risk people nor low-risk people will buy it. B. Only low-risk people will buy it. C. Only high-risk people will buy it. D. Both high-risk people and low-risk people will buy it.

C. Only high-risk people will buy it.

Nikki decided to take the first available parking space as she entered the student lot. She felt that the first available space had a $5 premium compared with all other possible spaces since she did not want to risk being late for her exam. A. Optimization in levels, since she is making marginal comparisons. B. Optimization in levels, since she is comparing the net benefits between alternatives. C. Optimization in differences, since she is calculating the change in net benefits between alternatives. Your answer is correct.D. Both typesBoth types of optimization, since she is considering the net benefits of alternatives. E. Neither typeNeither type of optimization, since she is not considering the total benefits of alternatives.

C. Optimization in differences, since she is calculating the change in net benefits between alternatives. Your answer is correct.

Marcia finds that the net benefit of flying from Chicago to Honolulu on a non-stop United Airlines flight is $400, and the net benefit for the same trip flying on a one-stop American Airlines flight is $200. A. Optimization in differences, since she is calculating the change in net benefits between alternatives. B. Neither typeNeither type of optimization, since she is not considering the total benefits of alternatives. C. Optimization in levels, since she is comparing the net benefits between alternatives. Your answer is correct.D. Optimization in levelslevels, since she is making marginal comparisons. E. Both typesBoth types of optimization, since she is considering the net benefits of alternatives.

C. Optimization in levels, since she is comparing the net benefits between alternatives. Your answer is correct.

Consider a trust game between two players. Suppose the players care only about their own payoffs. The payoffs are such that, in equilibrium, the players do not trust each other, leading to a socially inefficient equilibrium. How could the game be changed so that in equilibrium the players do trust one another? A. Convince the other player that you care only about your own payoff. B. Do not allow the players to take revenge C. Play the game multiple times D. Ensure that cheating cannot be detected.

C. Play the game multiple times

Priceline is a Web site that sells flights and hotel bookings based on the price that a consumer states that he or she is willing to pay. So consumers who want to book a flight or a hotel room need to tell Priceline the price that they are willing to pay, and the seller lets Priceline know whether it is willing to accept that price. Which of the following outcomes is likely using this form of pricing? A. Producer surplus will fall, since some price offers by consumers will be below the price that Priceline would have charged, causing consumer surplus to rise. B. Consumer and producer surplus will fall, since without a set price for the good neither side will achieve their ideal price level. C. Producer surplus will rise, since some price offers by consumers will be higher than the price that Priceline would have charged, causing consumer surplus to shrink. D. Consumer and producer surplus will rise, since consumers will only offer prices they are willing and able to pay, while firms will only accept offers that are beneficial to them.

C. Producer surplus will rise, since some price offers by consumers will be higher than the price that Priceline would have charged, causing consumer surplus to shrink.

A trust game is a sequential prisoners' dilemma. This means that it is likely that the outcome of the game is not socially efficient. Which of the following factors would likely result in a more socially efficient outcome in real life? A. Posing a credible threat to other players. B. Financial incentives. C. Reputational concerns. D. Lack of trust.

C. Reputational concerns.

What does it mean to say that we are running out of "cheap oil"? A. That world demand for oil is declining, which will raise the price of oil in the future. B. That there are declining reserves of low-quality oil, but there is still plenty of high-quality oil remaining. C. That oil reserves are becoming more expensive to find and extract over time. D. That we will soon deplete all the world's oil reserves, which will cause the price of oil to increase significantly.

C. That oil reserves are becoming more expensive to find and extract over time.

The discussion in the text implies that if this country imposes a tariff, social surplus will fall by the sum of area A and area B. Intuitively, why is A part of the deadweight loss from this tariff? A. Consumers value the additional output at less than the cost of producing it. B. Consumers have to pay more for the good. C. The incremental cost of domestically producing the additional output increases by area A. D. Only area C is transferred to producers as surplus.

C. The incremental cost of domestically producing the additional output increases by area A.

Consider the total cost of traveling from point A to point B. The cost of traveling by car would include the cost of gasoline and the opportunity cost of time; the cost of hopping on a bus would include the bus ticket and the opportunity cost of time. Assume that the bus ticket costs less than the gasoline. Does this imply that using a bus to get to the destination involves lower total costs than getting there by car? What if the bus doesn't take the fastest route from point A to point B? A. The marginal cost of using a bus may be higher if buses cost more than cars. B. The marginal cost of using a bus will not be higher because time is not a marginal cost. C. The marginal cost of using a bus may be higher if it takes more time than by car. D. The marginal cost of using a bus will not be higher because time is not a direct cost. E. The marginal cost of using a bus may be higher if buses use less fuel than cars.

C. The marginal cost of using a bus may be higher if it takes more time than by car.

A good exhibits network externalities if ____________. A. its consumption makes us feel good without affecting others. B. others can be excluded from consuming the good. C. the good can be used to punish those who are perceived as behaving unkindly. D. it becomes more useful as more people begin to use the good.

D. it becomes more useful as more people begin to use the good.

Suppose you draw a card from a standard deck of 52 cards, you do not put that card back in the deck, and draw a second card. What do we know about the events "Draw a queenqueen the second time" if we did not "Draw a queenqueen the first time"? A. The probability of drawing a queen the second time is the same as the probability of drawing one the first time. B. The probability of drawing a queen the second time is less than the probability of drawing one the first time. C. The probability of drawing a queen the second time is greater than the probability of drawing one the first time.

C. The probability of drawing a queen the second time is greater than the probability of drawing one the first time.

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? A. Since Cathy and Dylan's income sums to $60,000, these individuals will likely pay the same amount as Ben. B. The sum of the taxes Cathy and Dylan pay because two people always pay more than one, regardless of income. C. The tax that Ben pays because high-income individuals pay higher income taxes. D. More information is required to determine who pays the higher tax.

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

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? A. Satellite radio is most often used in cars and neither firm had any pricing power in the car market. B. By stopping the merger, it would have limited the amount of variety on the radio, thereby limiting free speech. C. There are many close substitutes for satellite radio; therefore, Sirius-XM would not exercise market power. D. Compared to the price of a car, the satellite radio subscription was too small a part of the consumer budget to matter.

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

Why might game theory not always be an accurate predictor of real-world situations? A. Players are not usually as cunning, wise, or experienced as game theory would predict. B. Game theory assumes all players have a dominant strategy, which is not always the case. C. We do not always know the exact payoffs, since payoffs involve attitudes and feelings as well as monetary gains. D. Models and payoff matrices demonstrate that game theory is always an accurate predictor of the real world.

C. We do not always know the exact payoffs, since payoffs involve attitudes and feelings as well as monetary gains.

Since buyers cannot distinguish between a lemon and a peach, there is asymmetric information in the used car market. According to Michael Spence's signaling model, individuals could choose costly signals in order to reveal their private information. How does this example fit in with Spence's model? A. Owners of lemons will not offer their cars for sale and so owners of peaches are signaling the true quality of their cars by offering them for sale. B. Sellers will set the price of their car appropriately, thus signaling the true quality of their car. C. With the certificate, sellers are sending a signal to buyers about the true quality of their car. D. Owners of peaches will not offer their cars for sale and so owners of lemons are signaling the true quality of their cars by offering them for sale.

C. With the certificate, sellers are sending a signal to buyers about the true quality of their car.

Consider the following pair of figures where the dark bluedark blue line is the original budget line for a consumer and the light bluelight blue line is the new one. In Figure A, the change shown was caused by _________. A. a decrease in the consumer's income. B. a decrease in the price of good Y C. an increase in the price of good Y. D. a change in the consumer's tastes away from good Y. 5.2 review question 3

C. an increase in the price of good Y.

Expected value is ____________. A. the minimum possible payout from an event. B. the dollar amount needed to make the average payout of an event equal zero. C. a probability-weighted value that gives the average payoff from an event. D. the maximum possible payout from an event.

C. a probability-weighted value that gives the average payoff from an event.

Suppose both Telesource and Belair decide to collude and set the same price. Their payoffs from cheating and colluding are given in the matrix. The Nash equilibrium in this game is for ____________. A. Telesource to cheat and Belair to collude. B. both firms to collude. C. both firms to cheat. D. Telesource to collude and Belair to cheat. E. The games does not have a Nash equilibrium.

C. both firms to cheat.

Lobsters are plentiful and easy to catch in August but scarce and difficult to catch in November. In addition, vacationers shift the demand for lobsters further to the right in August than in any other month. Given this information, we know that _________ is/are higher in August than in other months. A. only supply. B. neither supply nor demand. C. both supply and demand. D. only demand.

C. both supply and demand.

The discount weight is used to ____________. A. find the benefit that a firm receives from charging more for an item than it costs the firm to make. B. find the benefit that consumers receive from paying less than they are willing to pay. C. compare delayed utils and immediate utils; it is usually less than 1. D. compare delayed utils and immediate utils; it is usually greater than 1.

C. compare delayed utils and immediate utils; it is usually less than 1.

Economists mostly use optimization in differences, as opposed to optimization in levels, because ____________. A. contrasting the total benefit of alternatives is intuitiveintuitive. B. calculating cost-benefit ratios is complicated. C. comparing different features of alternatives is simplesimple. D. examining the net benefits of alternatives is counterintuitive.

C. comparing different features of alternatives is simplesimple.

In the Dictator Game, the allocator decides how a certain sum of money is to be divided, and the recipient must accept whatever choice the allocator makes. Relative to when the allocator is anonymous, when the allocator instead sees the recipient, the allocator is more likely to ____________. A. divide the money equally to avoid punishments. B. keep all the money to maximize his or her payoff. C. divide the money equally due to social pressures. D. keep all the money due to altruism.

C. divide the money equally due to social pressures.

Suppose you had information on the sales of similar homes just east and just west of the boundary between two school districts. Also suppose schools on one side of the school boundary are better than the schools on the other side in terms of test scores. You could estimate the average value that parents place on a one-point increase in test scores by ___________. A. multiplying the price of a home in either district by the difference in test scores between districts. B. dividing the difference in the prices of big and small homes in a district by the average test score in that district. C. dividing the difference in the prices of similar homes between districts by the difference in test scores between districts. D. dividing the difference in the prices of big homes in one district and small homes in the other district by the difference in test scores between districts. E. dividing the difference in the prices of similar homes between districts by the average test score for both districts combined.

C. dividing the difference in the prices of similar homes between districts by the difference in test scores between districts

Many basketball players and fans believe in the "hot hand." That is, they believe that a player is more likely to make a shot if that player has made several shots in a row. Those that believe in the hot hand hypothesis believe that ____________. A. each shot is an independent event. This could be tested by looking at data to see if the probability of scoring goes up after a player has made several shots in a row. B. each shot is not an independent event. This concept is not testable, however, since it is only a belief that people have about having a hot hand. C. each shot is not an independent event. This could be tested by looking at data to see if the probability of scoring goes up after a player has made several shots in a row. D. each shot is an independent event. This concept is not testable, however, since it is only a belief that people have about having a hot hand.

C. each shot is not an independent event. This could be tested by looking at data to see if the probability of scoring goes up after a player has made several shots in a row.

If demand shifts to the left (decreases), the last firm that entered ____________. A. earns positive economic profits, leading to new firms entering the market. B. is indifferent between producing or exiting the market and so the outcome is indeterminate. C. earns negative economic profits and so exits the market. D. earns negative economic profits and thus undertakes cost-cutting measures to return to profitability.

C. earns negative economic profits and so exits the market.

If two investments have the same expected return, people who are risk neutralrisk neutral will prefer the investment with ____________. A. more riskmore risk. B. less riskless risk. C. either less risk or more riskeither less risk or more risk. D. both random and fixed rewardsboth random and fixed rewards.

C. either less risk or more riskeither less risk or more risk.

In the model of an oligopoly with identical (homogeneous) products, the price is likely to be ___________. A. greater than marginal revenue. B. equal to variable costs. C. equal to marginal cost. D. less than minimum average cost.

C. equal to marginal cost.

Terms of trade is the ____________. A. time required to produce a good or service that is traded. B. benefit received from trade. C. exchange rate of goods for goods. D. legal document that trading partners sign.

C. exchange rate of goods for goods.

Lab experiments show a different outcome for the Ultimatum Game compared to the outcome predicted by game theory because ____________. A. players are rational B. social pressures have no influence. C. fairness is important. D. punishments are costly.

C. fairness is important.

Economists use the concept of utility to measure ____________. A. general well-being, and it is measured in terms of dollars. B. the cost of an activity, and it is measured in terms of dollars. C. general well-being, and it is not measured in terms of dollars. D. the cost of an activity, and it is not measured in terms of dollars.

C. general well-being, and it is not measured in terms of dollars.

Our preferences are affected by indoctrination through the ____________. A. willingness of individuals to sacrifice to promote equality. B. motivation to help others. C. ideologies of others. D. motivation solely to help oneself feel good.

C. ideologies of others.

The gambler's fallacy occurs when gamblers ____________. A. believe that betting larger sums of money will result in larger payoffs in the long run. B. believe they cannot predict outcomes of independent games by using information from previous plays. C. ignore the independence of outcomes in some games and believe they are on a hot streak. D. believe that all events are random events.

C. ignore the independence of outcomes in some games and believe they are on a hot streak.

An example of a progressive tax is the __________. A. property tax. B. Social Security tax. C. income tax. D. sales tax.

C. income tax.

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 ____________. A. is not in long-run equilibrium, because firms are earning profitsearning profits, which will result in firms exitingexiting. B. is not in long-run equilibrium, because firms are breaking even, which will result in firms exiting. C. is not in long-run equilibrium, because firms are earning profitsearning profits, which will result in firms enteringentering. D. is in long-run equilibrium, because firms are breaking even.

C. is not in long-run equilibrium, because firms are earning profitsearning profits, which will result in firms enteringentering.

An example of an industry or service that is a natural monopoly is ____________. A. carpet cleaners B. fast−food restaurants. C. national defense. D. office supply firms.

C. national defense.

The demand curve for anti minus venom serumanti−venom serum is __________. A. downward-sloping, since the demand for anti minus venom serumanti−venom serum reacts the same to changes in price as any other good. B. near horizontal, since even a small rise in the price will result in bite victimsbite victims cutting back on the quantity they demand. C. near vertical, since even if the price rises bite victimsbite victims will be willing to buy the same quantity.

C. near vertical, since even if the price rises bite victimsbite victims will be willing to buy the same quantity.

Suppose the market demand for this good declines substantially and the price falls to $44 per unit. If the price is $44 per unit, the firm should ___________. A. produce, because price is greater than the average fixed cost of production. B. produce, because average fixed costs are decreasing. C. not produce, because price is less than the average variable cost of production. D. produce, because total revenue is lessless than the total variable costs of production.

C. not produce, because price is lessless than the average variable cost of production.

Adverse selection occurs when ____________. A. the buyer in a transaction unknowingly purchases a "lemon." B. one agent in a market transaction knows about a hidden action and trades (or not) on the basis of that information. C. one agent in a transaction knows about a hidden characteristic and trades (or not) on the basis of that information. D. the seller in a transaction unknowingly sells a "lemon."

C. one agent in a transaction knows about a hidden characteristic and trades (or not) on the basis of that information.

Paternalism is the view that ___________. A. people are entitled to make bad decisions because government will "nudge" them to make good decisions. B. government intervention is always necessary to prevent people from making mistakes or bad choices. C. people do not always know what is best for them, and government should encourage them to make the right choices. D. consumer choices represent people's preferences, and the government should not interfere with these choices.

C. people do not always know what is best for them, and government should encourage them to make the right choices.

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

C. private bargaining will result in an efficient allocation of resources.

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 ____________. A. the couples have no children. B. marginal tax rates equal the average tax rate for both couples. C. the couples have the same family income. D. the taxes the couples pay do not change with income.

C. the couples have the same family income.

You and your friend, Jim, have just moved out of your dorm and into a new apartment. Both of you decide that you need to get a couch. Jim thinks you should get a new one from a furniture store nearby. You feel that, given your budget, it is best to buy a used one. Your other options are to buy one online or get a couch custom-made at the same furniture store. How would you arrive at an optimal solution here? Assume that your opportunity cost of time is $5 per hour. You and Jim would need to consider ___________. A. only the price of each couch. B. the indirect costs of traveling to the furniture store and the opportunity cost of your time required to shop. C. the direct costs and the indirect opportunity cost of your time required to shop. D. only the marginal benefit of each couch. E. the direct costs of the price of each couch and the cost of having each couch moved to your apartment.

C. the direct costs and the indirect opportunity cost of your time required to shop.

A collusive agreement between two firms is likely to break down when ____________. A. it is easy to punish cheatersit is easy to punish cheaters. B. detection of cheaters is difficultdetection of cheaters is difficult. C. the market has substantial long minus term valuethe market has substantial long−term value. D. firms value profits less today than in the future.

C. the market has substantial long minus term valuethe market has substantial long−term value.

A firm will employ physical capital until ____________. A. the ratio of capital's marginal product to the rental price of capital equals 1. B. capital's contribution to the firm's profit is maximized. C. the value of marginal product of capital left parenthesis VMPK right parenthesisthe value of marginal product of capital (VMPK) equals the rental price of capital. D. the value of marginal product of capital (VMPK) equals the value of marginal product of labor (VMPL).

C. the value of marginal product of capital left parenthesis VMPK right parenthesisthe value of marginal product of capital (VMPK) equals the rental price of capital.

A Nash equilibrium is ___________. A. when players pick their actions at the same time. B. one best response to every possible strategy of the other player(s). C. when players choose strategies that are best responses to the strategy of others. D. when prisoners confess because of unfair sentencing guidelines, which lead to heterogeneous dominant strategies.

C. when players choose strategies that are best responses to the strategy of others.

Using what you have found in the previous two questions, what would be the firm's average variable costs if it produced at the profit-maximizing quantity? A. $100. B. $400400. C. $10. D. $0.10.1.

C. $10.

The consumers that should purchase those cars are ___________. A. 4, 2, and 1. B. 1, 3, and 2. C. 1, 3, and 4. D. 4, 2, and 3.

C. 1, 3, and 4.

The window tax is different from the U.S. income tax in that as windows increase, ____________. A. only Britain's marginal window tax rate increases, and as income increases, only the U.S. average income tax rate increases. B. Britain's window tax rate increases, and as income increases, the U.S. income tax rate decreases. C. Britain's window tax increases for all windows, and as income increases, the U.S. income tax rate increases on marginal income. D. Britain's window tax becomes progressive, and as income increases, the U.S. income tax becomes proportional.

C. Britain's window tax increases for all windows, and as income increases, the U.S. income tax rate increases on marginal income.

The graph on the right shows the cost curves for a random firm competing in a perfectly competitive market. Given the shape of the curves, we know that curve A represents __________, curve B represents __________, and curve C represents _________. A. AFC; ATC; AVC B. ATC; AVC; MC C. MC; ATC; AVC D. MC; AVC; AFC

C. MC; ATC; AVC

Edgar says that a single firm in the wind power industry is unlikely to have a significant degree of monopoly power for an extended period of time. Since the cost of producing an additional unit of wind energy is so low, a large number of firms can enter the market and compete away economic profits. Do you agree with this analysis? A. Yes, if the cost of producing wind energy is low, then firms will enter the market, indicating no barriers to entry, so the firm cannot be a monopoly. B. Yes, since diseconomies of scale are likely present, the firm cannot be a monopoly. C. No, Edgar's argument ignores potentially large fixed costs that will act as a barrier to entry. D. No, there are no close substitutes for wind power so producers of this good will have monopoly power.

C. No, Edgar's argument ignores potentially large fixed costs that will act as a barrier to entry.

Suppose one firm accounts for 55 percent of the global market share for a product, while 147 other firms account for the remaining 45 percent of the market. With such a large number of buyers and sellers, is this market likely to be competitive? A. Yes, markets are only competitive if there is at least one firm large enough to act as a price setter for all other firms. B. Yes, a competitive market is characterized by having many firms, regardless of size. C. No, even though there are many firms in the market, there is one firm large enough to influence the market price. D. No, even with such a large number of buyers and sellers, there must be barriers to entry for this market to stay competitive.

C. No, even though there are many firms in the market, there is one firm large enough to influence the market price.

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? A. Yes, as government investmentinvestment spending has increased, deficits have become inevitable. B. Yes, government deficits are a direct result of government spending over time. C. No, government deficits depend upon spending and tax revenue. D. No, government deficits also depend on the national debt.

C. No, government deficits depend upon spending and tax revenue.

Georgina, an economics student, notices that the price of coalcoal has been decreasingdecreasing steadily. She also observes that the total consumption of coalcoal has actually decreaseddecreased. Georgina concludes that this is an exception to the Law of Demand. Do you agree? A. No, the Law of Demand always holds; however, the government's failure to enforce it makes it appear superficial. B. Yes, the Law of Demand is often broken, just like most other laws in society. C. No, she is mistakenly assuming a stationary demand curve when most likely she is observing changes in the equilibrium caused by a decreasinga decreasing quantity supplied and shifting demand. D. Yes, the Law of Demand only holds when "all else is constant." Since such constancy seldom holds in the real world, the Law of Demand likewise seldom holds.

C. No, she is mistakenly assuming a stationary demand curve when most likely she is observing changes in the equilibrium caused by a decreasinga decreasing quantity supplied and shifting demand.

Georgina, an economics student, notices that the price of oil has been increasing steadily. She also observes that the total consumption of oil has actually increased. Georgina concludes that this is an exception to the Law of Demand. Do you agree? A. Yes, the Law of Demand only holds when "all else is constant." Since such constancy seldom holds in the real world, the Law of Demand likewise seldom holds. B. No, the Law of Demand always holds; however, the government's failure to enforce it makes it appear superficial. C. No, she is mistakenly assuming a stationary demand curve when most likely she is observing changes in the equilibrium caused by an increasingan increasing quantity supplied and shifting demand. D. Yes, the Law of Demand is often broken, just like most other laws in society.

C. No, she is mistakenly assuming a stationary demand curve when most likely she is observing changes in the equilibrium caused by an increasingan increasing quantity supplied and shifting demand.

What could explain why South Korea's gross domestic product (GDP) per capita increased so much faster since the 1970s than North Korea's GDP per capita? A. Resource allocation in South Korea is done much more efficiently than in North Korea. B. South Korea has been better able to solve the coordination and incentive problems. C. South Korea has a market economy, while North Korea is a command economy. D. All of the above.

D. All of the above.

Madeline 70 Tom 10 Katie 60 Mary 20 Sean 50 Jeff 30 Dave 40 Phil 40 Ian 30 Adam 50 Kim 20 Matt 60 Ty 10 Fiona 70 Suppose trades are arranged in this market such that everyone can make a trade without losing money. So, Madeline buys from Fiona at a price of $70, Katie buys from Matt at a price of $60, Sean buys from Adam at a price of $50, and so on. Since everyone who wants an iPod obtains one, and everyone who wants to get rid of their iPod sells it at the price they wanted, is social surplus maximized in the market? A. Yes, since each participant transacted at a price he or she accepted as fair. B. Yes, as long as all those who wish to transact are able to do so, social surplus is maximized. C. No, this trade arrangement yields zero social surplus since each participant trades at his or her reservation value. D. No, social surplus is not maximized since some buyers paid more than others for the exact same good. E. It is not possible to say until we know the price each buyer is willing to pay and the price each seller is willing to take.

C. No, this trade arrangement yields zero social surplus since each participant trades at his or her reservation value.

Both MillerCoors and Anheuser-Busch increased the prices of beer when demand had actually fallen in 2009. A. Support, because new firms would enter. B. Weaken, because firms would face less competition. C. Support, because firms would have market power. D. Weaken, because firms would not maximize profits.

C. Support, because firms would have market power.

Most of your friends prefer drinking Budweiser, Miller, or Coors beer. Budweiser is manufactured by Anheuser-Busch, while Miller and Coors are manufactured by MillerCoors. Based on this information, you conclude that the beer market is oligopolistic. Assuming each of the following statements is true, examine whether each one will independently support or weaken your conclusion. Anheuser-Busch and MillerCoors are two of the many firms that operate in this market. A. Support, because firms would face horizontal demand curves. B. Weaken, because competition would decrease. C. Weaken, because firms would have less market power. D. Support, because barriers would prevent new firms from entering.

C. Weaken, because firms would have less market power.

The greater your discount weight, the more your current decisions are driven by the future consequences of those decisions. Do you agree? Explain. A. Yes, a larger discount rate means that you are lowering the value for any actions taken today. This will result in considering the future consequences more when making decisions. B. No, a larger discount rate results in a lower value for the utils that you receive from future events. Thus, you become less likely to consider future consequences when making decisions. C. Yes, a larger discount rate results in a larger weight on the utils you receive from future events. Thus, you will consider future consequences more when making decisions. D. No, a larger discount rate means that you are increasing the value for any actions taken today. This will result in considering the future consequences less when making decisions.

C. Yes, a larger discount rate results in a larger weight on the utils you receive from future events. Thus, you will consider future consequences more when making decisions.

Would a profit-maximizing firm continue to operate if the price in the market fell below its average cost of production in the short run? A. Yes, firms should keep producing until price falls below marginal cost. B. No, a firm should never produce if its price falls below average total cost. C. Yes, but only if price stayed above average variable cost. D. Yes, but only if price was below average variable cost.

C. Yes, but only if price stayed above average variable cost.\ check out screenshot 6.3 review problem 9

Suppose your utility function exhibits diminishing marginal utility of consumption. Should you buy this insurance policy? Defend your answer. A. Yes, buying the policy gives you wealth of $775 comma 000775,000 with certainty, which is greater than the expected value of wealth you get without insurance and thus added risk. If your marginal utility of consumption declines, you would prefer the certainty over the risk. B. No, buying the policy gives you wealth of $775 comma 000775,000 with certainty, which is greater than the expected value of wealth you get without insurance and thus added risk. If your marginal utility of consumption declines, you would prefer more risk and a smaller premium. C. Yes, buying the policy gives you wealth of $772 comma 250772,250 with certainty, which is the same as the expected value of wealth you get without insurance and thus added risk. If your marginal utility of consumption declines, you would prefer the certainty over the risk. D. No, buying the policy gives you wealth of $772 comma 250772,250 with certainty, which is the same as the expected value of wealth you get without insurance and thus added risk. If your marginal utility of consumption declines, you would prefer more risk and a smaller premium.

C. Yes, buying the policy gives you wealth of $772 comma 250772,250 with certainty, which is the same as the expected value of wealth you get without insurance and thus added risk. If your marginal utility of consumption declines, you would prefer the certainty over the risk.

Both Smith and Jones have utility functions that exhibit diminishing marginal utility of consumption. Will they agree to merge? A. No, the merger will expose each person to a greater downside risk. B. Jones will prefer to merge, but Smith will not since he will earn less with the merger. C. Yes, the merger protects each person from a greater downside risk. D. Smith will prefer to merge, but Jones will not since he will earn less with the merger.

C. Yes, the merger protects each person from a greater downside risk.

We will say that an insurance policy is fair insurance if the premium for the policy equals the expected value of the claims the insurance company will have to pay. An insurance company offers you a fire insurance policy. If a fire occurs, it will pay to repair your home. The premium for the policy is $2,750. Has the insurance company offered you fair insurance? A. No, the premium is less than the expected value of the claim the insurance company would have to pay in the event of a fire. B. No, the premium is greater than the expected value of the claim the insurance company would have to pay in the event of a fire. C. Yes, the premium is exactly equal to the expected value of the claim the insurance company would have to pay in the event of a fire. D. Yes, the premium is less than the expected value of the claim the insurance company would have to pay in the event of a fire.

C. Yes, the premium is exactly equal to the expected value of the claim the insurance company would have to pay in the event of a fire.

Thailand ▼ should not should accept this proposal, and the United States ▼ should not should accept this proposal.

both should

A pest attack on the tomato croppest attack on the tomato crop increases the cost of producing ketchupketchup. At the same time, we see the price of hamburgershamburgers falls. Suppose that after both of these events the consumption of ketchupketchup is left unchanged. In this situation, the Law of Demand __________. A. does not hold, since the product sold is a necessity, so increasing the price will not likely affect consumption. B. holds, since the Law of Demand must hold for all goods in all instances. C. holds, since the demand curves for both ketchupketchup and hamburgers are downward-sloping; it is their shifts that are determining the impact on the quantity consumed. D. does not hold, since there was no change in the quantity of ketchupketchup demanded.

C. holds, since the demand curves for both ketchupketchup and hamburgershamburgers are downward-sloping; it is their shifts that are determining the impact on the quantity consumed.

Some people might argue that the luxury tax in baseball is not an important determinant of major league salaries. As evidence, they show that team payrolls rarely exceed the threshold level and so teams rarely pay the tax. Your answer to this question suggests the logic of the luxury tax is __________. A. important, because teams collude. B. not important, because it does not affect salaries. C. important, because it promotes low salaries. D. not important, since teams seek to maximize payoffs.

C. important, because it promotes low salaries.

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

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

What is the economic interpretation of the slope of an indifference curve? The slope indicates the amount of the __________ measured good that the consumer is willing to exchange for one unit of the __________ measured good while keeping her total __________ constant. A. vertically; horizontally; expenditure. B. vertically; horizontally; income. C. vertically; horizontally; utility. D. horizontally; vertically; utility.

C. vertically; horizontally; utility.

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 $35 for your product; B is willing to pay up to $20. You produce this good at a constant average and marginal cost of $4. If you could not engage in third-degree price discrimination, what price would you charge? A. $35. B. $45. C. $20. D. $25

C. $20

Is it true that a country needs to have an absolute advantage in the production of a good in order to benefit from trade in that good? Countries that do not have an absolute advantage in the production of a good ▼ always cannot can benefit from trade.

CAN

The diagram on the right shows the demand and supply for sweaterssweaters. Calculate consumer surplus, producer surplus, and social surplus in this market. Consumer surplus is $ PS= $

CS=(30*90)/2=$1350 PS= (20*90)/2 =$900 SS= 1350+900=2250

Suppose that the four largest maple syrup manufacturers in a country decide to collude and set prices in the market. Based on demand conditions every year, they decide the quantity of maple syrup that will be supplied to maintain a certain market price. This is an example of a ▼ Cournot oligopoly Bertrand oligopoly .

Cournot oligopoly

Why are there two different views on the effect of taxation on labor supply in the United States? A. The effect of a tax on labor supply depends on the elasticity of labor supply. B. The effect of a tax on labor supply depends on the amount of deadweight loss created by the tax. C. It depends on normative questions such as how much to tax or how much government intervention is necessary. D. All of the above.

D. All of the above.

According to a 2011 study by the American Association of University Women (AAUW), about 40 percent of full-time faculty nationwide in 2005 were women, yet they made up only 22 percent of faculty in computer and information sciences, 19 percent of mathematics faculty, and 12 percent of engineering faculty (the STEM fields). In 2005, the then president of Harvard University, Lawrence Summers, suggested that differences in math and science aptitude could explain part of this pattern. What reasons other than differences in aptitude could explain why women are underrepresented in the STEM fields? A. Women may actually have a wider array of career options than men, and thus voluntarily choose to participate at a lower rate than men in the STEM fields. B. Women in the STEM fields may face discrimination. C. A lack of role models for women in the STEM fields may lower the interest women have for these careers. D. All of the above.

D. All of the above.

Denmark has high marginal tax rates and offers its citizens generous unemployment benefits and other welfare payments. While the unemployment rate in Denmark is relatively low, the proportion of the working-age population working and looking for work is quite low. After accounting for factors like the average age of the population, what else do you think could explain this? A. Even if Danish citizens lose wages from not working, the price of leisure is reduced by the welfare payments. B. Welfare payments reduce the opportunity cost of leisure and thus the willingness to supply labor. C. The incentive to supply labor is reduced by the high marginal tax rates. D. All of the above.

D. All of the above.

How do economic profits and losses allocate resources in an economy? A. When an industry's goods (or services) become less highly valued by society, firms in the industry suffer losses and thus become motivated to put their resources to more profitable uses elsewhere. B. Businesses always seek to improve their profits and in so doing, they move resources into the production of goods and services that society values the highest. C. When an industry's goods (or services) become more highly valued by society, positive economic profits emerge for firms in the industry, attracting new firms and their resources to that industry. D. All of the above.

D. All of the above.

How do labor-saving technologies differ from labor-complementary technologies? A. Labor-saving technologies result in lower wages and less employment, while labor-complementary technologies result in higher wages and more employment. B. Labor-saving technologies decrease the marginal product of labor, while labor-complementary technologies increase the marginal product of labor. C. Labor-saving technologies substitute for existing labor inputs, while labor-complementary technologies augment existing labor inputs. D. All of the above.

D. All of the above.

How do labor-saving technologies differ from labor-complementary technologies? A. Labor-saving technologies substitute for existing labor inputs, while labor-complementary technologies augment existing labor inputs. B. Labor-saving technologies decrease the marginal product of labor, while labor-complementary technologies increase the marginal product of labor. C. Labor-saving technologies result in lower wages and less employment, while labor-complementary technologies result in higher wages and more employment. D. All of the above.

D. All of the above.

In a command economy, a planning agency sets prices for various inputs and final goods. In a market economy, supply and demand decide the prices of various goods. In both cases, there is a set of prices operating in the economy. Then why are market economies considered more efficient than planned economies? A. The price mechanism utilized by market economies reflects all that is collectively known and thus ensures that economic agents make trades that are in their best interest and maximize social surplus. B. The prices set by central planners tend to be inflexible, responding to changing conditions only when planners recognize that circumstances are changing and then figure out the significance of the underlying change. C. The prices set by central planners reflect their very incomplete knowledge regarding the multitude of factors that determine the interests and decisions of economic agents. D. All of the above.

D. All of the above.

In which of the following ways is a monopoly beneficial to an economy? A. Monopoly profits give firms more reason to invest in the creation of new products through research and development. B. With natural monopolies, costs may be lower than those that would exist in competitive markets with many producers. C. Firms that are allowed monopoly profits search out innovative technologies that they can bring to market. D. All of the above.

D. All of the above.

The table below shows the average salary for major league baseball players. As you can see, the average salary of $3,440,000 in 2012 is nearly 20 times larger than the average salary in 1970. year avg. sal 1970 173,397 1980 408,198 1990 1,035,515 2000 2,649,988 2010 3,472,326 2012 3,440,000 Why might ballplayers in 2012 be more likely to choose to play an extra year? A. For many players, the high average salary exceeds the value of an extra year of leisure, inducing them to play another year. B. The high average salary means that the opportunity cost of leisure has risen, giving players a strong incentive to play another year. C. Because the salary from playing is the price of a year of leisure, an increase in its price causes players to substitute away from leisure, which means playing another year. D. All of the above.

D. All of the above.

There are four consumers willing to pay the following amounts for an electric car: Customer 1: $60,000 Customer 2: $20,000 Customer 3: $90,000 Customer 4: $40,000 There are four firms that can produce electric cars. Each can produce one car at the following costs: Firm A: $20,000 Firm B: $60,000 Firm C: $30,000 Firm D: $40,000 Each firm can produce at most one car. Suppose the market for electric cars is competitive. Why is the equilibrium price in this market $40,000? A. At this price, three consumers are willing to buy an electric car and three firms are willing to sell an electric car. B. At this price, the quantity demanded (three cars) equals the quantity supplied (three cars). C. At $40,000, three consumers have reservation values equal to or above $40,000 and three firms have reservation values equal to or below $40,000. D. All of the above.

D. All of the above.

What could be the other possible effects of such a policy? A. The officials charged with the task of setting wages would be subject to intense lobbying and may become corrupt. B. Resources that might otherwise be deployed in productive activities may instead be utilized to influence the wage-setting decision process. C. Wages may be set inappropriately, producing shortages in some occupations and surpluses elsewhere. D. All of the above.

D. All of the above.

Consider a trust game between two players. Suppose the players care only about their own payoffs. The payoffs are such that, in equilibrium, the players do not trust each other, leading to a socially inefficient equilibrium. How could the game be changed so that in equilibrium the players do trust one another? A. Convince the other player that you care only about your own payoff. B. Ensure that cheating cannot be detected. C. Play the game only oncePlay the game only once. D. Allow the players to take revenge

D. Allow the players to take revenge

If you are the only buyer, and you know that the lowest ask price is $ 3$3, should you accept this offer? A. Yes, since you will gain $ 14$14. B. No, as the only buyer you can extract a lower ask price. C. Yes, accepting an offer from any other seller will reduce your surplus. D. Both A and C are correct

D. Both A and C are correct

If you are the only buyer, and you know that the lowest ask price is $2, should you accept this offer? A. Yes, accepting an offer from any other seller will reduce your surplus. B. No, as the only buyer you can extract a lower ask price. C. Yes, since you will gain $ 11. D. Both A and C are correct.

D. Both A and C are correct.

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 $3030 million. If they both advertise, they again split the market evenly, but each spends $66 million on ads and so each earns just $2424 million (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 $3636 million and the company that does not earns just $1818 million. What is each firm's dominant strategy? A. Smith's dominant strategy is to advertise and Jones's dominant strategy is to not advertise. B. Both firms' dominant strategy is to not advertise. C. Smith's dominant strategy is to not advertise and Jones's dominant strategy is to advertise D. Both firms' dominant strategy is to advertise. This is the correct answer.E. Neither firm has a dominant strategy.

D. Both firms' dominant strategy is to advertise.

Identify the Nash equilibrium(s). A. Box 2. B. Box 3. C. Box 4. D. Boxes 2 and 3. E. Boxes 3 and 4. F. There is no Nash equilibrium.

D. Boxes 2 and 3.

Identify the Nash equilibrium(s): A. Box 2. B. Box 3. C. Box 4. D. Boxes 2 and 3. E. There is no Nash equilibrium.

D. Boxes 2 and 3.

Both competitive firms and monopolies produce at the level where marginal cost equals marginal revenue. Then, other things remaining the same, why is price lower in a competitive market than in a monopoly? A. The government puts a cap on how much a competitive firm can charge, while a monopolist can charge any price it chooses. B. A competitive market sets its price where marginal cost equals demand, while a monopolist sets its price where marginal cost equals marginal revenue. C. Competitive markets face perfectly inelastic demand and marginal revenue, while monopolies face perfectly elastic demand and marginal revenue. D. Competitive markets face perfectly elastic demand and marginal revenue, while monopolies face downward-sloping demand and marginal revenue.

D. Competitive markets face perfectly elastic demand and marginal revenue, while monopolies face downward-sloping demand and marginal revenue.

The Nash equilibrium is ___________. A. A. B. B. C. C. D. D. E. There is no Nash equilibrium.

D. D.

Can you think of a good that you use because it has network externalities? A. Toll roads. B. Disney World. C. National defense. D. Facebook

D. Facebook

Which of the following is not one of the common arguments against free trade? A. The stock of certain types of animals is endangered comma threatening species extinction.The stock of certain types of animals is endangered, threatening species extinction. B. Potential negative effects on local jobs.Potential negative effects on local jobs. C. Fear of the effects of globalization on a nation's culture.Fear of the effects of globalization on a nation's culture. D. Firms always win at the expense of consumers.Firms always win at the expense of consumers. E. The desire to maintain diversification to preserve integrity in times of war.The desire to maintain diversification to preserve integrity in times of war.

D. Firms always win at the expense of consumers.

How is a Nash equilibrium different from a dominant strategy equilibrium? A. Nash equilibriums are mathematical, while dominant strategy equilibriums are quantitative. B. Dominant strategy equilibriums are mathematical, while Nash equilibriums are quantitative. C. For a given game, there can only be one Nash equilibrium but multiple dominant strategy equilibriums. D. For a given game, there can only be one dominant strategy equilibrium but multiple Nash equilibriums.

D. For a given game, there can only be one dominant strategy equilibrium but multiple Nash equilibriums.

How has the pattern of trade changed in the United States since 1960? A. Imports have grown faster than exports, and the United States has remained a net exporter. B. Exports have grown faster than imports, and the United States has become a net importer. C. Exports and imports have grown at the same rate, and the United States has remained a net exporter. D. Imports have grown faster than exports, and the United States has become a net importer. E. Exports have grown faster than imports, and the United States has remained a net exporter.

D. Imports have grown faster than exports, and the United States has become a net importer.

Determine if the following statements better describe optimization in levels or optimization in differences. John is attempting to decide on a movie. He determines that the new Batman movie provides him with $5 more of a net benefit than the new Spiderman movie. A. Neither typeNeither type of optimization, since he is considering the total benefits of alternatives. B. Optimization in levelslevels, since he is not making marginal comparisons. C. Both typesBoth types of optimization, since he is not considering the net benefits of alternatives. D. Optimization in differences, since he is calculating the change in net benefits between alternatives. Your answer is correct.E. Optimization in levels, since he is comparing the net benefits between alternatives.

D. Optimization in differences, since he is calculating the change in net benefits between alternatives. Your answer is correct.

Assume that a charity hired you to improve its results on donations. You decide to mail letters asking for donations. You use three different types of letters: Letter A: Control—standard letter asking for money. Letter B: "Once and Done"—standard letter but with a statement at the front noting "Make one gift now and we'll never ask for another donation again!" Letter C: "Soft Once and Done"—an upfront statement of "It only takes one gift to save a child's life forever." The results are as follows: Letter B raises much more money than Letter A. In most cases, it raises at least twice the money. Letter C raises more money than Letter A. Letter B raises about 50 percent more money than Letter C. Of the concepts we have discussed in the chapter (social pressure, altruism, and herding), which do you think is most responsible for the success of Letter B? A. Pure altruism, because its recipients believed their donations did the most good. B. Social pressure, because its recipients were the most likely to donate. C. Herding, because its recipients are conforming to expectations. D. Impure altruism, because its recipients received something in return.

D. Impure altruism, because its recipients received something in return.

Why is electricity generation better off as a natural monopoly? A. It experiences diseconomies of scale since the marginal cost curve is upward-sloping, indicating that normal market forces break down and only one firm can profitably produce. B. It experiences constant returns to scale since it is sanctioned by the government, allowing a single provider to charge a lower price. C. It experiences constant returns to scale since marginal costs are constant, allowing any number of providers to produce an efficient amount. D. Industries like electricity generation experience economies of scale since they have high fixed costs. Thus, it is cheaper to have a single firm provide a larger quantity.

D. Industries like electricity generation experience economies of scale since they have high fixed costs. Thus, it is cheaper to have a single firm provide a larger quantity.

What is the efficiency implication of imposing an estate tax? A. It is efficient because it prompts more consumption. B. It is inefficient because it increases saving. C. It is efficient because it allows more government spending. D. It is inefficient because it reduces investment.

D. It is inefficient because it reduces investment.

Suppose Sarah is out at a local club with her friends and finds out that it is "Ladies' Night" and that all women can drink for free. She knows that if she drinks it will give her immediate pleasure equal to 70.0070.00 utils, but she also knows that if she drinks she will feel bad the next morning and will therefore have a cost of drinking equal to 121.67121.67 utils. If Sarah's discount weight for tomorrow is 0.600.60, will she drink at the club? A. YesYes, her net benefit from drinking is positivepositive; therefore, the benefitsbenefits of drinking outweigh the costscosts. B. YesYes, her net benefit from drinking is negativenegative; therefore, the benefitsbenefits of drinking outweigh the costscosts. C. NoNo, her net benefit from drinking is positivepositive; therefore, the costscosts of drinking outweigh the benefitsbenefits. D. NoNo, her net benefit from drinking is negativenegative; therefore, the costscosts of drinking outweigh the benefitsbenefits.

D. NoNo, her net benefit from drinking is negativenegative; therefore, the costscosts of drinking outweigh the benefits benefits. To see whether she should drink at the club, we must first calculate her net benefit from drinking: Net benefits = Benefitminus−Cost Since the cost is borne in the future, this becomes: Net benefits = (Immediate benefit)minus−(Discounted value of delayed cost)

Suppose Sarah is out at a local club with her friends and finds out that it is "Ladies' Night" and that all women can drink for free. She knows that if she drinks it will give her immediate pleasure equal to 80.0080.00 utils, but she also knows that if she drinks she will feel bad the next morning and will therefore have a cost of drinking equal to 170.00170.00 utils. If Sarah's discount weight for tomorrow is 0.500.50, will she drink at the club? A. YesYes, her net benefit from drinking is negativenegative; therefore, the benefitsbenefits of drinking outweigh the costscosts. B. YesYes, her net benefit from drinking is positivepositive; therefore, the benefitsbenefits of drinking outweigh the costscosts. C. NoNo, her net benefit from drinking is positivepositive; therefore, the costscosts of drinking outweigh the benefitsbenefits. D. NoNo, her net benefit from drinking is negativenegative; therefore, the costscosts of drinking outweigh the benefitsbenefits.

D. NoNo, her net benefit from drinking is negativenegative; therefore, the costscosts of drinking outweigh the benefitsbenefits.

Is a player's best response in a game the same as his dominant strategy? A. Yes, if a player's best responses depend on the strategy choices of other players, then a player's best response will be the same as his dominant strategy. B. No, the key concept of game theory is finding a best response in each game, so that each best response leads to a Nash equilibrium. C. Yes, if a player has a dominant strategy, then it is his best response, and every best response is always a dominant strategy. D. Not necessarily. If a player has a dominant strategy, then it is his best response; however, every best response is not always a dominant strategy.

D. Not necessarily. If a player has a dominant strategy, then it is his best response; however, every best response is not always a dominant strategy.

Suppose the refrigerator industry has an HHI of 2,500 while the aluminum industry's HHI is 6,850. Is this information sufficient to conclude that the aluminum market is less competitive than the market for refrigerators? A. Not necessarily. Although the HHI indicates a smaller number of firms, those firms may compete intensely. B. No, because close substitutes exist in the refrigerator market. C. Yes, because there are more firms in the refrigerator market. D. Not necessarily. It could indicate increased competition because firms could be more profitable.

D. Not necessarily. It could indicate increased competition because firms could be more profitable.

Which of the following is a problem that black markets pose in an economy? A. legitimate businesses extracting surplus. B. the government being forced to levy lower taxes. C. the direct costs of obeying the government regulations. D. Participants use resources to evade the law. E. less variety of goods for consumers.

D. Participants use resources to evade the law.

Which of the following equations calculates economic profits for a monopoly? A. Profits=ATC×Q. B. Profits=P+ATC/Q. C. Profits=P×Q. D. Profits=(P−ATC)×Q.

D. Profits=(P−ATC)×Q.

Some people think it's unfair that athletesathletes like LeBron JamesLeBron James earn a lot more than people who add so much more value to society, like firefightersfirefighters. What do you think explains this wage differential? A. More people are willing to accept work as firefightersfirefighters than as athletesathletes, thereby creating higher wages for athletesathletes. B. Wages of athletesathletes like LeBron JamesLeBron James are higher due to compensating wage differences. C. Discrimination among athletesathletes is higher, thereby inducing a higher wage for athletesathletes. D. The economic output of athletesathletes like LeBron JamesLeBron James adds more economic value to firms than those services provided by firefightersfirefighters.

D. The economic output of athletesathletes like LeBron JamesLeBron James adds more economic value to firms than those services provided by firefightersfirefighters.

Now suppose workers consider a dollar of health insurance paid by firms to be worth less than $11 in wages. How will this law affect the equilibrium quantity of labor in this labor market? How will it affect the equilibrium wage in this industry? A. The equilibrium wage falls and the quantity rises, with the wage declining more than in the previous case where workers consider the insurance to be the equivalent of $1 in wages. B. The equilibrium wage falls and the equilibrium quantity is unchanged. C. The equilibrium wage declines, while the effect on the equilibrium wage is indeterminate. D. The equilibrium wage and quantity both decline, with the wage declining less than in the previous case where workers consider the insurance to be the equivalent of $1 in wages.

D. The equilibrium wage and quantity both decline, with the wage declining less than in the previous case where workers consider the insurance to be the equivalent of $1 in wages.

Stafford Loans are student loans that the federal government provides to graduate and undergraduate students to fund their education. Since Stafford loans can be extended up to 30 years, the Congressional Budget Office (CBO) calculates the cost of these loans by discounting the future cash flows from the loan using the interest rate on the 30-year Treasury bond. The risk of default on the 30-year Treasury bond is extremely low, while the default rate on student loans is around 4-5 percent. Which of the following statements is true regarding the CBO's use of the yield on the 30-year Treasury bond to calculate the cost of student loans? A. The student loan costs will be overestimated, since student loans are riskier than 30-year Treasury bonds. B. The student loan costs will be highly inaccurate; only default rates matter, so the length of the bond has no impact. C. The student loan costs will be accurate; the length of the loan is all that matters—not differences in default rates. D. The student loan costs will be underestimated, since student loans are riskier than 30-year Treasury bonds.

D. The student loan costs will be underestimated, since student loans are riskier than 30-year Treasury bonds.

Are all efficient outcomes also equitable? Explain. A. No, the only efficient outcome that is equitable is the one that results in an equal distribution of goods across society. B. No, only those efficient outcomes that produce a rich-to-poor income ratio less than 5.0 are equitable. C. Yes, if an outcome is efficient, then by definition, it maximizes social surplus and consequently must be equitable. D. There is really no definitive answer to this question since issues surrounding efficiency and equity are the domain of normative economics, where subjective value judgments are made.

D. There is really no definitive answer to this question since issues surrounding efficiency and equity are the domain of normative economics, where subjective value judgments are made.

Why do individuals decide to herd? A. They believe others have less information B. They trust their own instincts C. They believe others have faulty information D. They are afraid of being wrong

D. They are afraid of being wrong

Why do individuals decide to herd? A. They believe others have faulty information B. They trust their own instincts C. They don't care about being wrong D. They believe others have more information

D. They believe others have more information

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

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

Janet Yellen, the chair of the Federal Reserve, is married to the Nobel Prize-winning economist George A. Akerlof. When they hired babysitters in the 1980s, they decided to pay wages that were higher than the going wage for babysitters. If they could get a babysitter at a lower wage, what could explain why they decided to pay more? A. They wanted to signal to others that they were wealthy and could afford the best. B. By paying a higher wage, they were "putting skin in the game." C. The market for babysitters has a "lemons" problem, and by paying higher wages, they only get the best babysitters. D. This is an example of efficiency wages, and paying efficiency wages has been shown to attract the best talent.

D. This is an example of efficiency wages, and paying efficiency wages has been shown to attract the best talent.

What is the intent of a Pigouvian tax? A. To mandate by government fiat the reduction of production to the socially optimal level. B. To eliminate the force of the invisible hand in market transactions. C. To encourage producers of a negative externality to increase production to the socially optimal level. D. To induce producers of a negative externality to reduce production to the socially optimal level.

D. To induce producers of a negative externality to reduce production to the socially optimal level.

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

D. all of the above.

The free-rider problem arises when an individual ____________. A. pays for a good only when he or she is in the top quartile of people needing the good. B. pays for a good only when being monitored by the authorities for noncompliance. C. does not pay for a good because that individual is engaging in illegal activity. D. does not pay for a good because nonpayment does not prevent consumption.

D. does not pay for a good because nonpayment does not prevent consumption.

The concept of diminishing marginal benefits means that __________. A. each additional unit consumed is worth more to you than the previous one, but the additional benefit grows at a diminishing rate. B. the more of a good that you consume, the lower is your overall benefit from that good. C. as you consume more of a good, your willingness to pay for that good increases faster than the benefit you receive. D. each additional unit consumed is worth less to you than the previous one. ________________________ The concept of diminishing marginal benefits ( ) for goods that you like a lot. _______________________________ Suppose you have a flashlight that takes three batteries to power it. If you buy the batteries one at a time, for which purchase will diminishing benefits set in? A. When you buy the first battery. B. When you buy the second battery. C. When you buy the third battery. D. When you buy the fourth battery.

D. each additional unit consumed is worth less to you than the previous one. ___________________________ Holds true _________________________ D. when you buy the fourth battery

Market demand is derived by __________. A. adding up both the prices each buyer pays and the quantities that each buyer demands. B. dividing each buyer's demand by the total number of consumers in the market. C. fixing the quantity and adding up the prices that each buyer pays. D. fixing the price and adding up the quantities that each buyer demands. _________________________ Does the shape of the market demand curve differ from the shape of an individual demand curve? A. No, they both tend to be upward-sloping curves. B. Yes, individual demand curves tend to be upward-sloping, while market demand curves are horizontal. C. Yes, individual demand curves tend to be downward-sloping, while market demand curves are upward-sloping. D. No, they both tend to be downward-sloping curves.

D. fixing the price and adding up the quantities that each buyer demands. __________________________ D. No, they both tend to be downward-sloping curves.

The probability of an event is defined as the ____________. A. chances of something occurring divided by the payoff from it occurring. B. payoff received if something occurs. C. chances of something occurring multiplied by the payoff from it occurring. D. frequency with which something occurs.

D. frequency with which something occurs.

Under present bias, the discount weight you place on the present is ______ the discount weight you place on tomorrow. Under present bias, the discount weight you place on tomorrow is ______ the weight you place on the day after tomorrow. A. less than; equal to. B. greater than; greater than. C. less than; less than. D. greater than; equal to.

D. greater than; equal to.

Moral hazard refers to ____________. A. hidden characteristics that individuals have that affect the payoff of others. B. hidden actions that individuals take and hidden characteristics that individuals have that affect the payoff of others. C. the absence of a contract in a principal-agent relationship, thus leading to an inefficient market outcome. D. hidden actions that individuals take that affect the payoff of others.

D. hidden actions that individuals take that affect the payoff of others.

The two kinds of asymmetric information are ____________. A. "lemons" and "peaches." B. moral hazard and adverse selection. C. principal-agent relationship and signaling. D. hidden characteristics and hidden actions.

D. hidden characteristics and hidden actions.

In the long run, if Toland Fisheries would like to increase the productivity of its workers, it will need to ____________. A. charge more for its services. B. charge less for its services. C. hire more workers. D. increase its amount of capital and equipment.

D. increase its amount of capital and equipment.

There was a sharp increase in the number of long-term unemployed following the recession that began in December 2007. Rand Ghayad did the following study to better understand long-term unemployment. He sent out 3,600 fake resumes in response to 600 job openings. He varied the length of time his fake applicants had been out of work, how often they had switched jobs, and their work experience. He found that the longer the "applicants" were out of work, the less likely they were to be offered an interview. The idea of an information cascade could be used to explain the results of this study because some employers _________. A. consider only their own applicant evaluations without consulting others. B. attempt to influence others with their own private information. C. maximize their own utility without considering the well-being of others. D. make hiring decisions based on the decisions of others.

D. make hiring decisions based on the decisions of others.

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

D. marginal revenue equals marginal cost.

Natural market power is created by ___________, and arises due to ____________. A. foreign competition; patentspatents. B. advertising; a change in consumer preferences. C. the government; copyrightscopyrights. D. market forces; controlling a key resourcecontrolling a key resource.

D. market forces; controlling a key resourcecontrolling a key resource.

Suppose the market demand for this good declines substantially and the price falls to $2 per unit. If the price is $2 per unit, the firm should ___________. A. produce, because average fixed costs are decreasing. B. produceproduce, because total revenue is lessless than the total variable costs of production. C. produce, because price is greater than the average fixed cost of production. D. not producenot produce, because price is lessless than the average variable cost of production.

D. not producenot produce, because price is lessless than the average variable cost of production.

An individual or a firm can internalize an externality by ___________. A. doubling the size of the externality. B. ignoring the externality. C. disputing that an externality exists. D. paying the cost of the externality.

D. paying the cost of the externality.

In a monopolistically competitive market, a firm earning negative economic profit in the short run will ____________. A. produce only if price is greater than marginal cost. B. produce when revenue is positive. C. shut down to avoid losses. D. produce only if price is greater than average variable cost

D. produce only if price is greater than average variable cost

An indifference curve is the set of bundles that ___________. A. a consumer can purchase with his income. B. a consumer most prefers. C. a consumer can purchase using all of his income. D. provide an equal level of satisfaction for the consumer.

D. provide an equal level of satisfaction for the consumer.

A fast-food combo meal costs less than if you bought each item separately. This is an example of ___________. A. first-degree price discrimination. B. third-degree price discrimination. C. perfect price discrimination. D. second-degree price discrimination.

D. second-degree price discrimination.

Europe's population fell by 30 to 60 percent following an outbreak of bubonic plague, also known as the Black Death, in the fourteenth century.in the fourteenth century. As a result comma Europe's production possibilities curve wouldAs a result, Europe's production possibilities curve would ____________. A. shift outwardoutward. B. remain unchanged. C. rotate along either the x- or y-axis. in the fourteenth century.in the fourteenth century. As a result comma Europe's production possibilities curve wouldAs a result, Europe's production possibilities curve would ____________. A. shift outwardoutward. B. remain unchanged. C. rotate along either the x- or y-axis. D. shift inwardinward. E. bow inward, becoming concave to the origin.

D. shift inwardinward.

Canada recently discovered large reserves of shale gas left parenthesis shale gas is natural gas that is trapped in fine minus grained - sedimentary rock). As a result, Canada's production possibilities curve would ____________. A. remain unchanged. B. shift inwardinward. C. rotate along either the x- or y-axis. D. shift outwardoutward. E. bow inward, becoming concave to the origin.

D. shift outwardoutward.

A consumer's satisfaction is maximized when the marginal benefit from the last dollar she spent on one good is equal to the marginal benefit from the last dollar she spent on another good because ___________. A. an inequality between these ratios implies that she has insufficient income to achieve maximum satisfaction. B. any shift in consumption toward either good will violate her budget constraint. C. her preferences become distorted and therefore invalid when the marginal benefits per dollar are unequal. D. the reality of diminishing marginal benefits assures that any shift in consumption toward either good must necessarily make her worse off.

D. the reality of diminishing marginal benefits assures that any shift in consumption toward either good must necessarily make her worse off.

A zero-sum game is when ___________. A. the dominant strategy is a payoff. B. the Nash equilibrium is dominant. C. the outcome of a payoff matrix is uncertain. D. the sum of the payoffs is zero.

D. the sum of the payoffs is zero.

A government would want to be on this curve where ___________. A. the trade-off between reducing social inequality and reducing social efficiency is greatest. B. inefficiencies do not exist. C. inequality does not exist. D. there is no correct answer to this question, as the answer depends on a government's value judgments.

D. there is no correct answer to this question, as the answer depends on a government's value judgments.

Legal market power is created by ___________, and arises due to ____________. A. advertising; a change in consumer preferences. B. foreign competition; patentspatents. C. market forces; controlling a key resourcecontrolling a key resource. D. the government; copyrightscopyrights.

D. the government; copyrightscopyrights.

In economics, signaling is an action taken by an individual ____________. A. who has private information to hide the information from others. B. to convince someone who has private information to reveal his information to others. C. to discourage someone from attempting to discover his or her private information. D. who has private information to convince others about his information.

D. who has private information to convince others about his information.

The Friend or Foe game works as follows. Given a trust fund of money, two players must decide how the money is to be divided. The division of winnings depends on the players' choices—whether they choose Friend or Foe. If both players choose Friend, then the money is divided equally. If one player chooses Friend and the other Foe, the person who chose Foe receives the entire amount, leaving the other player with nothing. If both players choose Foe, then each walk away with nothing. The payoffs from a $36 trust fund are illustrated in the figure on the right for you and your friend, Dao. The Nash equilibrium is for ____________. A. you and Dao to pick Friend. B. you to pick Friend and Dao to pick Foe. C. you to pick Friend and Dao to pick Foe and for you to pick Foe and Dao to pick Friend. D. you and Dao to pick Foe. E. The game does not have a Nash equilibrium.

D. you and Dao to pick Foe.

Given your marginal revenue curve, as a monopolist you would sell _______ units at a price of _______. A. 2; $2. B. 3; $3. C. 3; 2$. D. 2; $4.

D. 2; $4. on the MC line

Consumers are unlikely to switch between different brands of beer; most beer consumers are highly brand loyal. A. Weaken, because consumers will be relatively insensitive to prices. B. Support, because they produce differentiated products. C. Weaken, because they produce a homogeneous product. D. Neither, because differentiated products are a characteristic of both monopolistic and oligopolistic markets.

D. Neither, because differentiated products are a characteristic of both monopolistic and oligopolistic markets.

In a competitive market, a supply curve shows all the price and quantity combinations at which firms will produce. Does a monopoly face a similar supply curve? A. No, a monopoly has a vertical supply curve that is located where marginal revenue equals marginal cost. B. Yes, since monopolies and competitive firms base production on a given market price that they cannot control. C. No, a monopoly has a horizontal supply curve that is located where marginal revenue equals marginal cost. D. No, a monopoly is a price-maker and its production decisions are determined by its downward-sloping demand curve.

D. No, a monopoly is a price-maker and its production decisions are determined by its downward-sloping demand curve.

In your environmental economics study group, a friend argues that using taxes to control pollution is not efficient because, even with taxes, a positive amount of pollution is still produced. Do you agree? A. No, because air and water are club goods and therefore there is no valid reason for the government to tax industry. B. Yes, since pollution is a matter of social justice since it disproportionately impacts lower income individuals. C. Yes, since any amount of pollution ruins the natural balance of the planet. D. No, because an efficient outcome balances costs with benefits and eliminating all pollution would be cost prohibitive.

D. No, because an efficient outcome balances costs with benefits and eliminating all pollution would be cost prohibitive.

There is a proverb "anything worth doing is worth doing well." Do you think an economist would agree with this proverb? A. Yes, because doing something to the best of your ability is optimizing behavior. B. NoNo, because the total net benefit of extra effort is negativenegative by definition. C. Yes, because the marginal costcost of extra effort is typically increasingincreasing as effort increases. D. No, because the marginal cost of extra effort may be greater than the marginal benefit. E. No, because doing something well has no next best alternatives with which to compare.

D. No, because the marginal cost of extra effort may be greater than the marginal benefit.

Some people choose to live close to the city center; others choose to live away from the city center and take a longer commute to work every day. Does this mean that those who stay away from the city center are being irrational? A. No, because people face the same living costs in and away from the city. B. Yes, because their direct commuting costs must be higher. C. Yes, because people have different preferences. D. No, because their opportunity cost of commuting must be lower. E. Yes, because people face direct and indirect commuting costs.

D. No, because their opportunity cost of commuting must be lower.

IPO stands for initial public offering; it refers to the sale of the stock of a private company to the public for the first time. Since a private company does not publish data about its financial performance, it is difficult for an investor to gauge the company's prospects or the possible future value of its stock. Suppose there are two groups of investors in the market for a particular company's IPO: informed investors and uninformed investors. Will the two groups bid for stock in the same way? A. No, because informed investors have a higher willingness to pay than uninformed investors. B. Yes, because they both want to make money from the IPO. C. Yes, because they have to pay the market price. D. No, informed investors will only bid on stocks that they know are worth investing in and uninformed investors will bid on an IPO irrespective of the quality of the stock.

D. No, informed investors will only bid on stocks that they know are worth investing in and uninformed investors will bid on an IPO irrespective of the quality of the stock.

Consider indifference curves for goods X and Y. Suppose we plot the quantity of good Y on the vertical axis and the quantity of good X on the horizontal axis. These indifference curves are downward-sloping because any other slope would imply that consumption of the two goods reached the point where __________. A. the positive marginal benefit of one good is exactly offset by the negative marginal benefit of the other. B. one or both goods have zero marginal benefit. C. the consumer has become irrational. D. all of the above. E. A and B are both correct.

E. A and B are both correct.

In 2010, President Obama said that technological progress kills jobs. Recall that labor-saving technology substitutes for existing labor inputs and reduces the marginal product of labor. Taking the example of an ATM (Automatic Teller Machine), Obama said that the fact that ATMs have replaced tellers pointed to a structural problem in the economy. Do most economists think the labor-saving technology reduces efficiency? A. Yes, labor-saving technology results immediately in unemployment, which leads to increases in crime, divorce, drug abuse, and general social discontent. B. Maybe, since labor that is displaced by technology may not be quickly or smoothly re-employed elsewhere in the economy. C. Yes, the displacement of humans by machines borders on immorality because too many suffer while only the owners of capital gain. D. No, it frees up labor for the production of other goods and services that can further satisfy peoples' wantslong dash—that is, higher living standards are made possible.

D. No, it frees up labor for the production of other goods and services that can further satisfy peoples' wantslong dash—that is, higher living standards are made possible.

Does the presence of asymmetric information necessarily imply that governments should intervene in a market? A. No, with asymmetric information, even the government doesn't know how to make private information public, preventing the government from correcting the market failure. B. Yes, only the government can correct market failures that result from asymmetric information. C. No, because government regulation creates moral hazard for government administrators. D. No, there may be market solutions or it might be difficult for the government to gain enough market knowledge to improve market outcomes.

D. No, there may be market solutions or it might be difficult for the government to gain enough market knowledge to improve market outcomes.

Despite the logic described above, several recent studies have found that different online retailers often charge quite different prices. How might you explain this result? A. It is easy for sellers to adjust their pricesIt is easy for sellers to adjust their prices. B. Consumers have lots of information about pricesConsumers have lots of information about prices. C. The products are homogeneous. D. Sellers' shipping costsshipping costs differ.

D. Sellers' shipping costsshipping costs differ.

Which of the following factors best explains why wage inequality in the United States has been increasing over the last several decades? A. Decreasing opportunities for workers to acquire human capital. B. Increasing discrimination in U.S. job markets. C. The rise of powerful labor unions. D. Skill-biased technological change.

D. Skill-biased technological change.

Suppose for the moment all 10 people are using Windows and so Microsoft is a monopolist in the market for computer operating systems. Why would it be difficult for a company to offer a new alternative to Windows? Explain. A. Windows' cost will be lower due to Microsoft's market power. B. Windows' cost will be lower due to economies of scale. C. Windows' cost will be lower due to specialization. D. Windows' value will be higher since more people are using it.

D. Windows' value will be higher since more people are using it.

Are firms more likely to cheat if the cartel decided to fix prices only once as opposed to fixing prices every year? A. No, because there is no threat of new firms entering. B. No, because the market is less profitable. C. Yes, because future periods have more value. D. Yes, because future punishment for cheating isn't possible.

D. Yes, because future punishment for cheating isn't possible.

Market power relates to the ability of sellers to affect __________, and arises because of ____________. A. consumer preferences; increased ability of monopolies to advertise. B. prices; competition from foreign firms. C. consumer preferences; the invisible hand. D. prices; barriers to entry.

D. prices; barriers to entry.

Suppose the market for T-shirts in the country of Argonia is perfectly competitive, and the price of a T-shirt is $20. A producer in this market has the following total cost and marginal cost functions: TC(q)=400+0.1q2 MC(q)=0.2q What part of the total cost function represents fixed costs? A. 0.2 B. 0.1q2 C. 0.1 D. 400

D. 400

The total deadweight loss over the 20-year life of the patent is $ nothing thousand. (Round your response to two decimal places.)

Deadweight loss (DWL) equals the area under the demand curve and above the marginal cost curve for units not produced by the monopoly. This is equal to the area of a triangle with a base equal to 3.53.5 thousand (from 77 thousand, where the marginal cost curve intersects the demand curve, minus the monopoly's profit-maximizing quantity, which is 3.53.5 thousand) and a height equal to $3.503.50 (from a profit-maximizing price of $6.506.50 minus a marginal cost of $3.00): DWLequals=0.5times×3.53.5times×3.503.50equals=$6.125 thousand per year. 6.125 x 20=122.5

if people expect the price of SUVs to decrease in the future, then the demand for the Toyota Rav4 SUV would __________. a. decrease (shift left) b. increase (shift right) c. remain unchanged

Decrease (shift left)

How would the following factors affect equilibrium in the market for labor? A decrease in the demand for the product that a firm is producing.

Decrease demand; supply no change; wage decrease; decrease employment

Social surplus decreased by Upper DD.

Decreased by D

Social surplus ▼ decreases increases by ________.

Decreases; A+B

Suppose the price of X is $4848, the price of Y is $4040, and a consumer has income of $480. Using the line drawing tool, show the budget constraint for this consumer on the graph to the right. Label your line 'BC

Demand curve curve from 12 for good Y and 10 for Good X

Firms estimate the demand for labor by ____________. A. determining the value of marginal product of labor (VMPL). B. computing the marginal product of labor and multiplying it by the price of the product being produced. C. examining the additional output produced when additional workers are employed. D. all of the above. E. A and B only.

E. A and B only.

What is the problem with the argument that infant industries need to be protected from foreign competition? A. Changing a comparative advantage is nearly impossible and so the domestic industry will not likely survive anyway. B. Foreign companies may do a better job of providing the good or service. C. Because the world price will continue to drop, the domestic industry will never catch up in any case. D. Since the stock of deadweight losses builds up over time, the total lost surplus will never be made up. E. Starting a company in isolation may deprive it of "technological spillovers" that its competitors, all located near one another, may enjoy.

E. Starting a company in isolation may deprive it of "technological spillovers" that its competitors, all located near one another, may enjoy.

Which of the following is not one of the common arguments against free trade? A. Fear of the effects of globalization on a nation's culture.Fear of the effects of globalization on a nation's culture. B. The stock of certain types of animals is endangered comma threatening species extinction.The stock of certain types of animals is endangered, threatening species extinction. C. Allowing countries to specialize in the production of only one good may result in the creation of banana republics.Allowing countries to specialize in the production of only one good may result in the creation of banana republics. D. Potential negative effects on local jobs.Potential negative effects on local jobs. E. Taxes decrease comma depriving governments of needed revenues.Taxes decrease, depriving governments of needed revenues.

E. Taxes decrease comma depriving governments of needed revenues

The Nash equilibrium is: A. Paper/Rock. B. Scissors/Paper. C. Paper/Scissors. D. Rock/Rock. E. There is no Nash equilibrium.

E. There is no Nash equilibrium.

Which of the following is not one of the common arguments against free trade? A. Allowing countries to specialize in the production of only one good may result in the creation of banana republics.Allowing countries to specialize in the production of only one good may result in the creation of banana republics. B. The stock of certain types of animals is endangered comma threatening species extinction.The stock of certain types of animals is endangered, threatening species extinction. C. Upper A company is too weak to withstand competition from other firms and requires government protection to survive.A company is too weak to withstand competition from other firms and requires government protection to survive. D. The threat of homogenization to a culture's uniqueness.The threat of homogenization to a culture's uniqueness. E. Total surplus in the trading economies decreases comma harming society as a whole.Total surplus in the trading economies decreases, harming society as a whole.

E. Total surplus in the trading economies decreases comma harming society as a whole

Optimization in levels examines ___________, while optimization in differences analyzes ____________. A. total benefits of alternatives; net benefits of alternatives. B. total benefits of alternatives; total costs of alternatives. C. total net benefits of feasible alternatives; total net benefits of infeasible alternatives. D. marginal benefits of alternatives; the change in marginal benefits. E. total net benefits of alternatives; the change in net benefits.

E. total net benefits of alternatives; the change in net benefits.

Optimization in levels examines ___________, while optimization in differences analyzes ____________. A. total benefits of alternatives; total costs of alternatives. B. total net benefits of feasible alternatives; total net benefits of infeasible alternatives. C. total benefits of alternatives; net benefits of alternatives. D. marginal benefits of alternatives; the change in marginal benefits. E. total net benefits of alternatives; the change in net benefits.

E. total net benefits of alternatives; the change in net benefits.

Suppose a country has 100 westerners and 100 easterners. A westerner can produce either 6 units of food or 2 units of national defense; an easterner can produce either 2 units of food or 1 unit of national defense. According to the data, ▼ easterners both westerners neither have a comparative advantage in the production of defense. ____________________________________ Suppose this country has decided it wants to produce 60 units of defense. In this case, the country will have more food to consume if the ▼ both equally westerners easterners produced these 60 units of defense.

Easterners; easterners

What is her income elasticity of demand for food? A. Exactly 1.0. B. A small negative number, since food is an inferior good. C. A small positive number, since food is a necessity. D. Approximately zero.

Exactly 1.0

Allison bought a Blu-ray DVD player from the store for $300 that came with a one-year warranty. At checkout, she was asked if she would like to buy a two-year extended warranty that would replace her DVD player with an identical one if it broke down. The extended warranty costs $80, and Allison expects that the DVD player will depreciate in value by $50 every year as new models come out (this means a replacement would cost $200 after 2 years and $150 after 3 years). Suppose Allison pays for the purchase of the extended warranty with her credit card, which has a 5 percent interest rate. Also assume that Allison knows there is a 10 percent chance that the DVD player will break in any given year. The present value of buying the extended warranty is $________.

Expected value= (0.10) x [$200/(1+0.05)^2] + (0.10)x[$150/(1+0.05)^3] -80 = -48.90

The remote island nations of Nearway and Farway produce fish and coconuts and have recently decided to engage in trade with one another. Without trade, Nearway can produce either 400400 coconuts or 200200 fish and Farway can produce either 450450 coconuts or 300300 fish. And without trade, the two countries choose the production of each good such that its people can consume some of each. The table below summarizes the maximum outputs as well as the chosen output level for both countries. Which nation has an absolute advantage in the production of each good? ▼ Nearway has Farway has Neither has Both have an absolute advantage in the production of fish. ▼ Both have Neither has Nearway has Farway has an absolute advantage in the production of coconuts.

Faraway; faraway

Two teams played a game called Thai 21 on an episode of the television show Survivor. Call the teams Green and Red. The game begins with 21 flags. The teams take turns. When it is a team's turn, it can remove one, two, or three flags. The team that removes the last flag wins. GreenGreen goes first. ▼ RedRed GreenGreen should win this game.

Green

Suppose the supply and demand schedules for cell phones are as follows: Initial Equilibrium price= Initial Equilibrium quantity= Find consumer surplus, producer surplus, and total surplus in the cell phone market. Consumer surplus is $_____ producer surplus is $____ total surplus is $_______

IE=$7 IEQ= 6 units CS= (12-7)+(11-7)+(10-7)+(9-7)+(8-7)+(7-7)= $15 PS= (7-2)+(7-3)+(7-4)+(7-5)+(7-6)+(7-7)= $15 TS= 15+15= $30

Domestic producers complain and convince the government to impose a $55 tariff per pair of tennis shoes. What are the equilibrium price, quantity demanded, quantity supplied by domestic producers, and the quantity of imports? The equilibrium price is $ nothing, the quantity demanded is nothing million pairs of shoes, the quantity supplied by domestic producers is nothing million pairs of shoes, and the quantity of imports is nothing million pairs of shoes.

If the United States imposes a tariff of $55 on imported shoes, the domestic price becomes the world price plus the tariff: $40+$5=$45. At this price, domestic producers will supply 1515 million pairs of shoes, which is where the world price plus the tariff intersects the domestic supply curve. The quantity demanded is determined where the world price plus the tariff intersects the domestic demand curve, which is at 3535 million pairs of shoes. This means that 2020 million pairs of shoes are imported.

An example of a proportional tax is the ___________. A. Medicare tax. B. Social Security tax. C. income tax. D. property tax.

Medicare Tax households pay the same percentage of their incomes in taxes regardless of their income level; in other words, the marginal tax rate does not vary with income. Here, the marginal and average tax rates are the same.

Suppose a gambler wants to quit gambling. The utility that he gets from gamblinggambling now is 75 utils, but in the long run the benefit from not gamblinggambling is 110 utils. Use the concept of discounting to explain why a gambler may find it difficult to quit gambling although quitting may be better off for him in the future. If the gambler discounts delayed utils with a weight of 0.30, then the net benefit of continuing to gamble is $______

Net benefit= (immediate benefit)-(Discounted value of delayed cost) = (75) - (0.30 x 110) = 42.00

Opportunity cost is calculated as what you have to give up to produce a unit of output of a second good. For example, the opportunity cost for Amanda to review a single document is how many processed claims she must give up. The following table shows the opportunity costs for Amanda and Raj. Opportunity Cost Documents Claims

OPP cost Doc Claim Amanda (5/10)=0.5 (10/5)=2 Raj (10/5)=2 (5/10)=0.5

Suppose you win the Powerball lottery this year, which is worth $600 million. You can choose to take a lump sum now of $575 million or you can "annuitize" your winnings. Annuitization means that you will receive the total jackpot money in 5 equal annual payments of $120 million starting next year. Assume that your lottery winnings are not taxed. If the interest rate is 2.5 percent, the present value of the 5 equal payments is $____ million.

Payment T periods from now / (1+interest rate)^T

Supply curves can have varying degrees of price elasticity. Show graphically a perfectly elastic, a perfectly inelastic, and a unit-elastic supply curve. 1.) Using the line drawing tool, draw a supply curve that is perfectly elastic. Label your curve 'SPerfectly Elastic'. 2.) Using the line drawing tool, draw a supply curve that is perfectly inelastic. Label your curve 'Upper S Subscript Perfectly InelasticSPerfectly Inelastic'. Carefully follow the instructions above and only draw the required object. 3.) Using the line drawing tool, draw a supply curve that is unit-elastic. Label your curve 'Upper S Subscript Unit minus ElasticSUnit−Elastic'.

Perfectly elastic: straight horizontal Perfectly inelastic: vertical unit elastic: start at (0,0) and go up with a slope of 1

What must you, as the consultant, construct for Chevron before you can determine if there is a dominant strategy equilibrium? A. Extensive-form game tree. B. Table with numerical probabilities. C. Three-by-three table. D. Payoff matrix.

Playoff matrix

A project should be undertaken if the net present value is ▼ negative positive.

Positive

A non-market price imposition is a ▼ A non-market price imposition is a price control . In the figure on the right, the imposition of price Upper P Subscript Upper CPC results in a surplus in the market. If the imposed price Upper P Subscript Upper CPC were removed, market forces would rectify the mismatch between quantity demanded and quantity supplied by pushing the price downward . This price adjustment would eliminate the mismatch by incentivizing market participants to change their behavior.

Price control

The annual demand for a new drug HealthyHeart is shown in the diagram. The one-time cost of developing HealthyHeart is $240 thousand. Once the drug has been developed, the marginal cost of an additional pill is $2.00. Show that if the government gives the company that develops HealthyHeart a 20-year patent the company will be able to recover the $240 thousand it spent to develop the drug. Excluding fixed costs, the firm's profit with a 20-year patent is $____ thousand.

Profit= ($6.00-$2.00) x 4 = $16/yr 16 x 20yrs = $320

A monopolistically competitive industry in the short run is illustrated by the figure on the right with the demand (D), marginal revenue (MR), marginal cost (MC), and long-run average cost (ATC) curves for a representative firm. Suppose firms in this industry are initially producing such that they maximize profits. Does this monopolistically competitive firm earn economic profits in the short run? 1.) Using the rectangle drawing tool, shade in economic profits. Label your area either 'Profit' or 'Loss' to indicate whether the firm earns an economic profit or incurs an economic loss.

Profitequals=Total revenueminus−Total cost Profitequals=Ptimes×Qminus−ATCtimes×Q Profitequals=(Pminus−ATC)times×Q Profitequals=(28minus−16)times×3 Profitequals=$36

Is the firm making any profit when it produces at the profit-maximizing output level? The firm would make $____

PxQ= 20x100 = $2,000 TC(100)=400 + 0.1(100)^2= 1,400 2,000-1,400=600

Suppose that, at your firm, the relationship between output produced and the number of workers you hire is as in the following table. Complete the table by computing the marginal product of labor for each worker.

The marginal product of the 22ndnd worker is 1414 units. The value of this worker's marginal product is the price of output $ 2$2times×1414, or $ 28$28. This is just equal to the wage rate, thus satisfying the condition for profit maximization.

Steven Levitt and Chad Syverson compared instances of home sales in which real estate agents are hired by others to sell a home to instances in which an agent sells his or her own home. They found that homes owned by real estate agents sold for 3.73.7 percent more than other houses and stayed on the market 9.5 days longer, everything else being equal. In the United States, a real estate agent typically earns a 33 percent commission on the sale of a house. If a real estate agent sells someone else's home for $100,000, the agent will make $___ in commission.

Since a real estate agent typically earns a 33 percent commission on the sale of the house, a $100 comma 000100,000 house earns the agent $ 100 comma 000 times 0.03 equals $ 3 comma 000$100,000×0.03=$3,000.

Based on comparative advantage, who should make aircraftaircraft and who should make shipsships? ▼ Both have Neither has Unskilled workers have Skilled workers have a comparative advantage in making aircraftaircraft. ▼ Skilled workers have Both have Neither has Unskilled workers have a comparative advantage in making shipsships.

Skilled workers have the comparative advantage for making aircraft Unskilled workers have a comparative advantage in making ships ships

A country has two types of workers, skilled and unskilled. Workers can produce either aircraftaircraft or shipsships. Output per worker is as follows: According to the data, ▼ unskilled workers have both have skilled workers have neither has an absolute advantage in making either type of good.

Skilled workers=AA CA for aircraft= skilled CA for ships= unskilled

In 1999, Priceline attempted to replicate this pricing strategy with groceries and gasoline. Using this pricing strategy with these two goods soon proved unprofitable. What could explain this? The marginal cost of selling an airplane seat or a hotel room is relatively ▼ high small , while the marginal cost of selling groceries and gasoline is relatively ▼ high small .

Small; high

An example of a regressive tax is the ___________. A. income tax. B. Social Security tax. C. inheritance tax. D. Medicare tax.

Social Security Tax the marginal tax rate declines with income so that low-income households pay a greater percentage of income in taxes than do high-income households.

Some cities have much stricter zoning laws and regulatory controls than other cities (zoning laws regulate the uses of land in a city). A recent study found that increases in the demand for housing in cities with strict zoning laws led to large increases in the price of housing. It also claimed that in cities with lax zoning laws, increases in the demand for housing led to much smaller increases in the price of housing. This likely occurred since stricter zoning laws and regulatory controls __________. A. impact the demand for construction, causing the demand curve to decrease (shift left). B. limit the availability of land for construction, causing the price elasticity of supply to increase (become more elastic). C. impact the demand for construction, causing the demand curve to increase (shift right). D. limit the availability of land for construction, causing the price elasticity of supply to decrease (become more inelastic).

Stricter zoning laws and regulatory controls on residential construction limit the availability of land in the housing market. A restriction on the total land available for housing is likely to reduce the price elasticity of supply for housing. So, as the demand for housing increases, supply is unable to fully respond to the increased demand, leading to a steeper increase in prices. D. limit the availability of land for construction, causing the price elasticity of supply to decrease (become more inelastic).

When this firm produces the profit-maximizing quantity of T-shirts, its average total cost equals $___.

TC(100)= 400+0.1(100)^2=1,400 1,400/total cost of 100 = 14

Now suppose this country institutes a draft and chooses people for the military randomly. Suppose further that it drafts 20 westerners and 20 easterners (who together will produce 60 units of defense). If the country chooses to have a military draft, it will produce ______ units of food.

TOTAL: 100 W and 100 E NEW 20 W and 20 E OLD 80 W and 80 E (80x6)+(80x2) = 640

In the Godfather, Michael Corleone (the head of one Mafia family) would like to meet with Don Tessio (the head of a second Mafia family). Don Tessio is concerned that if he agrees to meet, the Corleones will kill him. We can think of their problem as a game. First, Don Tessio decides whether or not to agree to meet. If he does not accept the invitation, suppose the Tessios and the Corleones each get a payoff of zero. If he does accept the invitation, then the Corleones will decide whether or not to kill him. If they decide to kill him, then the Corleones get a payoff of 80 and the Tessio family gets a payoff of −80; if they do not kill him, then each gets a payoff of 20. This game is illustrated by the decision tree on the right. Use backward induction to figure out how this game will be played. The Nash equilibrium is for Tessio ▼ to not meet to meet and for the Corleones ▼ to kill to not kill if Tessio meets.

Tessio= to not meet Corleones= to kill

If Thailand continues to consume 300300 tons of rice, it will be able to consume nothing computers under this proposal. If the United States continues to consume 100100 computers, it will be able to consume nothing tons of rice under this proposal.

Thailand will have to produce 540540 tons of rice (300300 for Thailand and 240240 for the United States). To produce 540540 tons of rice, 540 divided by 60 equals 9540/60=9, so 99 workers are needed in rice production. Only 1111 workers will produce computers. One worker produces 44 computers, and Thailand receives 2020 computers from the United States in return for 240240 tons of rice. So Thailand can consume left parenthesis 11 times 4 right parenthesis plus 20 equals 64(11×4)+20=64 computers. The United States will have to produce 120120 computers (100100 for the United States and 2020 for Thailand). To produce 120120 computers, 120 divided by 10 equals 12120/10=12, so 1212 workers are needed in computer production. The remaining 2828 workers will produce 28 times 80 equals 2 comma 24028×80=2,240 tons of rice, and the United States receives 240240 tons of rice from Thailand in return for 2020 computers. So the United States can consume left parenthesis 28 times 80 right parenthesis plus 240 equals 2 comma 480(28×80)+240=2,480 tons of rice.

This chapter explains that a firm engaging in seconddegree price discrimination charges the same consumer different prices for different units of a good. You are a monopolist with many identical customers. Each will buy either zero, one, or two units of the good you produce. A consumer is willing to pay $75 for the first unit of this good and $30 for the second. You produce this good at a constant average and marginal cost of $4. For simplicity, assume that if a consumer is indifferent between buying and not buying, he will buy. If you could not engage in second-degree price discrimination, what price would you charge? A. $94. B. $30. C. $20. D. $75

The only sensible prices to consider are $3030 and $7575. If you charge a price of $3030, you will sell two units and receive revenue of $6060. Your total cost for those two units will be $88, resulting in profits of $5252. If you charge a price of $7575, you will only sell one unit and receive revenue of $7575. Your total cost for that unit will be $44, resulting in profits of $7171. Since your profit is highest when the price is equal to $7575, that is what you should charge.

Given this probability, the expected value of your wealth if you make this bet is $____.

The probability of landing on one of the 18 red slots and winning $300,000 is 47.37 percent, which leaves a 52.63 percent chance of landing on something other than red and getting $0. Therefore, your expected return from betting on red is: EVoB= (4737 x 300,000) + (0.5236 x 0) = $142,110.00

Given this probability, the expected value of your wealth if you make this bet is $____.

The probability of landing on one of the 18 red slots and winning $300,000 is 48.65 percent, which leaves a 51.35 percent chance of landing on something other than red and getting $0. Therefore, your expected return from betting on red equals: Expected value of bet= (0.4865 x 300,000) + (0.5135 x 0) = $145,950

Suppose you are in a casino in the United States. In the United States, a roulette wheel has 18 black slots, 18 red slots, and two green slots ("0" and "00"). The probability of landing in a red slot is _____%.

The roulette wheel in the United States has 38 slots, with 18 red slots, 18 black slots, and 2 green slots. This means the probability of landing on one of the 18 red slots is: 18/38 = 47.37%

The following graph shows the equilibrium price and quantity in the market for chewing gum in the country of Argonia. Suppose the government of Argonia passes a bill to impose a tax of 2 Argonian dollars on the production of chewing gum. The new equilibrium price is ______ Argonian dollars and the new equilibrium quantity is ______ million sticks of gum.

The tax of 2 Argonian dollars shifts the supply curve up by 2. The new equilibrium price and quantity are where the new supply curve with the tax intersects the original demand curve. This is at a price of 4.5 Argonian dollars and a quantity of 3 million sticks of gum.

Which of the following is not likely to be subject to the tragedy of the commons? A. Donuts brought to the office. B. A public area for grazing cattle. C. National defense. D. Coral reefs.

The tragedy of the commons describes why common pool resources are overused. The tragedy occurs because a common resource is used more intensely than all the users would prefer if they could just agree to coordinate their actions. NATIONAL DEFENSE

With these production allocations, the firm's profit is $___?

The firm's profit is $133. This is its total revenue $58.00×(3+7)) - 447.00 (163.50 plus 283.50163.50+283.50) = $133

Now suppose you somehow find a casino that has a roulette wheel with 18 black slots, 18 red slots, and no green slots. The expected value of your wealth if you make this bet is $___.

This roulette wheel only has 36 slots, with 18 red slots and 18 black slots. This means the probability of landing on red and winning $300,000 is the same as the probability of landing on black and getting $0. Therefore, your expected return from betting on red is: EVoB= (0.50 x 300,000) + (0.50 x 0) = $150,000

Now suppose the government in this town passes a law that requires everyone to purchase medical insurance and sets the price of insurance at $1 comma 6001,600. The total surplus under this law is $

Total willingness to pay: (100 x 1,200) + (100x2,400)=360,000 Total producer cost is: (100 x 1,000) +(100x2,000)=300,000 360,000-300,000=60,000

How will the invisible hand move corn prices in response to each of the following: A weather pattern that produces a bumper corn crop. This will ▼ How will the invisible hand move corn prices in response to each of the following: A weather pattern that produces a bumperweather pattern that produces a bumper corn crop. This will ▼ increase decrease corn prices by shifting the supply curve for corn ▼ increase decrease corn prices by shifting the supply curve for corn ▼

decreases; rightward

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? A. The move order, the players, the strategies. B. The players, the strategies, the payoffs. C. The payoffs, the move order, the players. D. Name of third player, the payoffs, the move order.

To begin, it is important to recognize the three key elements of any game: 1. The players 2. The strategies 3. The payoffs

To the right is the average total cost curve for a competitive firm. What is the relationship between the average total cost curve (ATC) and the marginal cost curve (MC)? 6.2 review Question 4

When the ATC curve is decreasing, we know that the MC curve is below the ATC curve, and when the ATC curve is increasing, we know that MC is above the ATC curve .

Suppose the United States opens to free trade with other countries and the world price is $4040 per pair of tennis shoes. What are the quantity demanded, quantity supplied by domestic producers, and the quantity of imports? The quantity demanded is 4040 million pairs of shoes, the quantity supplied by domestic producers is 1010 million pairs of shoes, and the quantity of imports is 3030 million pairs of shoes.

When the United States opens to free trade, the price is determined by the world price: $4040. At this price, domestic producers will supply 1010 million pairs of shoes, which is where the world price intersects the domestic supply curve. The quantity demanded is determined where the world price intersects the domestic demand curve, which is at 4040 million pairs of shoes. This means that 3030 million pairs of shoes are imported.

Consider the following demand schedule: Price Quantity $36 16 $30 24 $12 60 $8 80 Complete the following table by calculating the elasticity of demand using the midpoint formula. (Enter your responses as a positive number and round to two decimal places.) Price Changes From: Elasticity of Demand $8 to $12 ____A_____ $12 to $30 ____B_____ $30 to $36 ____C_____

[(Q2-Q1)/(Q2+Q1)/2] / [(P2-P1)/(P2+P1)/2] A.-0.71 B. -1.00 C. -2.20

When SamSam graduated from college and got a job, hishis income rose from $12 comma 00012,000 to $36 comma 00036,000. HisHis consumption habits also changed drastically. Use the following information to determine hishis income elasticity of demand and state whether the good is normal, inferior, or a luxury good. Use the midpoint rule in your calculations. Item Consumption Change Ramen | falls from 8 a week to 2 a week Neckties| rises from 2 a year to 10 a year Fajitas | rises from 3 a week to 5 a week For ramen noodles, Sam's income elasticity of demand is _____ Based on his income elasticity, ramen noodles are _______ good. For neckties, Sam's income elasticity of demand is _____.

[(Q2-Q1)/(Q2+Q1)/2] / [(P2-P1)/(P2+P1)/2] ramen: -1.20 ramen is inferior. Neckties: 1.33 Neckties are luxury Fajitas: 0.50 Fajitas are normal

The U.S. government recently raised its estimate of the social damage from greenhouse gases such as carbon dioxide. Steel production generates a great deal of carbon dioxide. The new higher estimate of social cost implies ▼ a lower a higher the same efficient quantity of steel.

a lower

The International Space Station (ISS) is a habitable satellite that was launched by NASA and space agencies of other countries. In 2009, NASA was considering shutting down the ISS within the next 5 to 6 years. Among those who were opposed to this idea of de-orbiting the ISS was Senator Bill Nelson, who was quoted as saying "If we've spent a hundred billion dollars, I don't think we want to shut it down in 2015." The "hundred billion dollars" that Senator Nelson is referring to is known as ▼ a sunk cost an opportunity cost a marginal cost .

a sunk cost

Which of the following ways of distributing the laptops would be more efficient? (Check all that apply.) A. Using flexible prices, so those who value the laptop more would pay more for it. B. Auctioning off the laptops to the highest bidders. C. Using a first-come, first-served rule. D. Using a random lottery to decide who gets the laptops.

a,b,d

When the VMPL is plotted in a diagram with the number of workers measured along the horizontal axis, the resulting curve (connecting the plotted points) is the firm's ▼ demand for labor production frontier supply of labor .

demand for labor

Classify the following goods and services as private goods, common pool resources, club goods, or public goods. a). Health insurance is a ▼ private good club good common pool resource public good . b). Radio spectrum is a ▼ private good club good common pool resource public good . c). A video on YouTube is a ▼ private good club good common pool resource public good . d). A mosquito control program in a city is a ▼ private good club good common pool resource public good . e). A library's collection of e-books is a ▼ private good club good common pool resource public good .

a. private b. common pool resource c. public good d. public good e. club good

Given that there are costs involved with government intervention in an economy, governments still choose to intervene in markets to ____________. A. generate black markets. B. implement taxation. C. address externalities. D. decrease deficitsdeficits. E. increase bureaucracy.

address externalities.

Firms equate marginal revenue and marginal cost. Perfect competition: ▼ True False . Monopoly: ▼ False True . Monopolistic competition: ▼ False True .

all true

In the chapter, we focused on the effects of a tax on a good. Now consider a subsidy. In particular, suppose the government pays $2 to the buyers of a good for each unit of the good they purchase. Fill in the table to explain how the subsidy affects consumer surplus (CS), producer surplus (PS), government revenue (G), and total surplus (TS). Use the original demand curve for your answers.

answers below

A firm is experiencing economies of scale when its ▼ average total cost total cost marginal cost declines as more output is produced. for more: screenshot 6.text problem 12

average total cost

Consider a market where there are many firms with different cost structures. When determining which firms enter the market first, we look at ____________. A. marginal cost. B. fixed costs. C. average variable cost. D. average total cost.

average total cost

Now suppose HannaHanna has $900900 to spend rather than $450450. How will this change affect HannaHanna's budget line? A. It pivots, moving leftward along the horizontal axis and outward along the vertical axis. B. It shifts outward in a parallel fashion. Your answer is correct.C. It shifts inward in a parallel fashion. D. It does not move. Given the information about HannaHanna's income and the prices for concerts and movies, we are unable to determine where on the budget line HannaHanna would choose to consume because __________. A. like all consumers, HannaHanna's consumption choice is a rash decision. B. HannaHanna's tastes regarding movies and concerts are unknown to us. Your answer is correct.C. HannaHanna's budget line is an incomplete description of herher choices. D. none of the above.

b,b

There are ten people in a village.

basically use the first number (but positive) subtract form 1. And then subtract 1 again to get your second answer

Suppose the world demand schedule for oil is as follows: price QD 45 80 80 60 120 40 There are two oil-producing countries, A and B. Each will produce either 20 or 40 barrels of oil. To keep things simple, assume they can produce this oil at zero cost. There are four possible outcomes: Country B produces 20 or 40 barrels of oil and Country A produces 2020 or 4040 barrels of oil. Find each country's profit for each of these four possibilities. If Country A produces 20 and Country B produces 20, then Country A's profit is $__ and Country B's profit is $__.

both 2400

Player A ▼ has does not have a dominant strategy, and Player B ▼ does not have has a dominant strategy.

both do not have

Vizzini ▼ doesn't have has a dominant strategy, and Wesley ▼ has doesn't have a dominant strategy.

both do not have

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 dash-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.

both do not have a dominate strategy

Pat's and Geno's are two rival cheesesteak restaurants in Philadelphia, Pennsylvania, that are located across the street from each other. Since they serve almost the same food, they are fiercely competitive. With the weather in Philly improving, sales at both firms are expected to increase in the next few months. Suppose both firms are now considering expanding their menu to include cheesecake and other desserts to boost sales further. The payoffs are as follows: Geno's dominant strategy is to ▼ Introduce Desserts Don't Introduce Desserts , and Pat's dominant strategy is to ▼ Don't Introduce Desserts Introduce Desserts.

both introduce desserts

David's dominant strategy is ▼ Low Price High Price , and Jordan's dominant strategy is ▼ High Price Low Price

both low price

Suppose you have just landed a job near the center of a city and you now need to decide where to live. If you live close to the city center, your round-trip commute will be 15 minutes. If you live in the distant suburbs, your round-trip commute will be 60 minutes. There are lots of workers like you who work downtown. Since there are only a limited number of apartments near the city center, these apartments will be allocated based on ▼ both the costs and benefits only the costs only the benefits that you face. This process is known as ▼ optimization differentiation "more bang for your buck" .

both the costs and benefits; optimization

The most widely consumed fruit in the United States is the humble banana. Most of the bananas consumed in the United States are imported from Latin America. Ecuador is one of the largest exporters of bananas in the world and is a major supplier of bananas to the United StatesUnited States. The figures on the right show the market for bananas in the United States and Ecuador. In the United States, ▼ neither buyers nor sellers both buyers and sellers buyers sellers gain from trade.

buyers gain

In the diagram on the right, the consumer surplus in the market is represented by area ▼ C A B 5.4 review question 6

When a country engages in free trade, the "winners" ▼ cannot can should not compensate the "losers."

can

In a perfectly competitive market, a seller ▼ can cannot choose to raise the price of its good since all sellers in the market produce ▼ different goods identical goods , so raising the price would result in ▼ earning long-run profits losing all its customers.

cannot identical goods losing all its customers

Although the government regulates the amount of noise that is allowed in a town or a city, it is difficult to decide what the appropriate level should be and how it should be measured. Based on these government regulations, if the families have a right to less noise, then the ▼ Law of Supply Law of Demand Coase Theorem would predict that with private negotiations the ▼ families will move to another location the government will shut down the wind farm families will offer to pay the wind farm to shut down wind farm will offer to pay the families to bear the noise .

chase Theorem; wind farm will offer to pay for the families to bear the noise

Rhino poaching is a serious problem in South Africa, where a large proportion of Africa's rhino population is found. The demand for rhino horns, used in traditional Chinese medicine, has increased the prices of rhino horns substantially. This has fueled an illegal market for rhino horns. What economic tools can be used to solve this problem? In this case, rhinos are best categorized as ____________. A. common pool resources. B. ordinary private goods. C. club goods. D. public goods.

common pool resource

The tax results in a loss in both consumer surplus and producer surplus. Which loss is greater? The loss in ▼ producer surplus consumer surplus is greater.

consumer

Using this information, this person would likely ▼ quit continue gamblinggambling since his net benefit from continuing is ▼ negative positive.

continue; positive (quit if negative)

In a command economy, a planning agency sets prices for various inputs and final goods. In a market economy, supply and demand decide the prices of various goods. In both cases, there is a set of prices operating in the economy. Then why are market economies considered more efficient than planned economies? A. The prices set by central planners reflect their very incomplete knowledge regarding the multitude of factors that determine the interests and decisions of economic agents. B. The prices set by central planners tend to be inflexible, responding to changing conditions only when planners recognize that circumstances are changing and then figure out the significance of the underlying change. C. The price mechanism utilized by market economies reflects all that is collectively known and thus ensures that economic agents make trades that are in their best interest and maximize social surplus. D. All of the above.

d. All of the above

As the price of giving increases, the quantity demanded of charitable giving ▼ increases decreases remains unchanged .

decreases

Domestic consumption ▼ from ▼ Upper Q 1Q1 Upper Q 2Q2 Upper Q 3Q3 Upper Q 4Q4 to ▼ Upper Q 1Q1 Upper Q 2Q2 Upper Q 3Q3 Upper Q 4Q4 .

decreases; Q4 to Q3

According to your graph, when some sellers enterenter a competitive market, the equilibrium price ▼ and the equilibrium quantity ▼ .

decreases; increases

Now suppose that the price of the product being produced increases, all else constant. 1.) Using the line drawing tool, show the impact of this event. Label your curve appropriately. or Now suppose that technological change occurs that is labor complementary, all else constant.

demand increases

the imposition of strict work rules that doubles the time that workers will take to produce a good

demand= decrease supply= no change wage= decrease employment= decrease

An indifference curve would flatten out as someone consumes more of good X and less of good Y because of the assumption of ▼ constant diminishing increasing marginal benefits.

diminishing

Now assume that your coworkers will know if either you or Freddie lie to get the other fired, and your coworkers will shun the liar and make life miserable for that person. Given these circumstances, it would be logical for you to ▼ wait for Freddie to lie first and then complain do nothing lie second to revenge yourself on Freddie lie first to get Freddie fired . The person who lies first in this situation ▼ has a first-mover advantage will be promoted incurs commitment advantage suffers reputational damange .

do nothing; suffers repetitional damage

After you examine the payoffs, you discern that BP's best response is to always bid low. Then bidding low would be BP's ▼ Nash equilibrium prisoners' dilemma dominant strategy

dominant strategy

A randomized experiment was conducted to see how others' opinions affect a user's ratings online. Whenever a comment was added on a certain social news site, researchers gave it an upvote, downvote, or no vote. The researchers conducting the experiment noted that comments that were given an upvote were more likely to get another upvote as compared to the comments that were given other ratings. New voters could be influenced by existing voters and their votes because they ____________. A. don't trust their own instinctsdon't trust their own instincts. Your answer is correct.B. believe others have less informationbelieve others have less information. C. benefit from network externalities. D. believe others have faulty informationbelieve others have faulty information.

dont trust their own instincts

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. If Bill acts as a secure monopoly and produces a low quantity at a high price, then Larry will ▼ enter stay out . If Bill acts as an insecure monopoly and produces a greater quantity at a lower price, then Larry will ▼ stay out enter .

enter; stay out

What is her cross-price elasticity of demand for food with respect to the price of clothing? A. Exactly zero. B. Approximately 1.0. C. Some positive number, since food and clothing are substitutes. D. Some negative number, since food and clothing are complements.

exactly zero

Which of the following is not a source of a country's comparative advantage? A. ClimateClimate. B. TechnologyTechnology. C. Relative abundance of labor and capitalRelative abundance of labor and capital. D. ExportsExportscl

exports

Many service-sector jobs in the United States have moved to other countries where these jobs are done at a fraction of the cost. The outsourcing of jobs overseas is heavily debated by politicians, policymakers, and economists in the United States. In the domestic economy when outsourcing exists, prices ▼ rise stay the same fall , social surplus ▼ increases stays the same decreases , and labor market welfare ▼ decreases stays the same increases .

fall; increases; decreases

The figure on the right shows the market for labor in a given industry. The demand curve is downward-sloping because marginal productivity ▼ falls rises as more workers are employed, while the supply curve is upward-sloping since an increase in the wage increases the opportunity cost of ▼ leisure work.

falls; leisure

In Horton Hears a Who by Dr. Seuss, Horton the Elephant hears voices coming from a speck of dust. He soon learns that the speck is actually a tiny planet where the Whos live. None of the other animals in the jungle can hear the Whos and they threaten to boil the speck in Beezelnut Oil. The only way the Whos can save themselves is by making so much noise that the other animals in the jungle can hear them. Horton and the Mayor of Whoville have trouble convincing all of the Whos to contribute to the noise-making effort. Finally, "a very small shirker named JoJo" joins in and together all of the Whos make enough noise to avoid disaster. JoJo's initial shirking is an example of ▼ positive externalities the free-rider problem the tragedy of the commons .

free-rider

The consequence for workers will be a wage rate that is ▼ higher lower and hours of employment that are ▼ higher lower .

higher; higher

With this type of technological change, the marginal productivity of existing labor inputs will ▼ increase not change decrease .

increase; demand shifts right

A change in consumer tastes away from hot dogshot dogs toward corn dogscorn dogs. This will ▼ corn prices by shifting the demand curve for corn ▼ leftward rightward.

increase; rightward

A riserise in the price of wheat (a substitute for corn). This will ▼ increase decrease corn prices by shifting the demand curve for corn ▼ rightward leftward.

increase; rightward

Since many people use the Microsoft Windows operating system, software developers have an incentive to write new programs for Windows, computer manufacturers make new models of their computers that use Windows, and firms that make printers will be certain their printers work well on Windows computers. Suppose there are 10 people who use personal computers and that the value to each of them from using Windows is as follows: # people using | Value to each Windows Com | Person 1 100 2 105 3 110 4 115 5 120 6 125 7 130 8 135 9 140 10 145 Show that Microsoft Windows is an example of a network externality. The benefit of using Microsoft Windows ▼ decreases remains the same increases as more people use it.

increases

Malaria is spread by mosquitos. That is a mosquito spreads malaria by biting an infected person and later infusing malaria into a different person. A study by Jeffrey Sachs and others shows a strong correlation between the incidence of malaria in a country and poverty. Malaria is known to exist in poor countries; it has also been found that the incidence of malaria exacerbates poverty. One of the simplest and effective ways of preventing the occurrence of malaria is by using insecticide-treated nets (ITNs). Consider the private market for ITNs. Use supply and demand curves to show the equilibrium level of nets that will be produced. 1.) Using the line drawing tool, draw the supply curve. Properly label your curve. 2.) Using the line drawing tool, draw the demand curve. Properly label your curve. 3.) Using the point drawing tool, indicate the equilibrium in the private market. Label your point 'E1'. This outcome ▼ is is not socially efficient

is not

Suppose Acme threatens to fight if Bi-Rite enters. This threat ▼ is not is credible.

is not

The European Union banned certain pesticides for two years after studies found links between the use of these insecticides and a decline in the bee population. In particular, research has shown that the use of imidacloprid, clothianidin, and thiamethoxam on flowering crops have adversely affected the honeybee population in North America and Europe. Consider the private market for these pesticides shown in the graph on the right. It shows the equilibrium level of pesticides that will be produced in the private, unregulated market for these pesticides. This outcome ▼ is not is socially efficient.

is not

If the terms of trade is 2.5 pizzas for 1 cake, Joe ▼ will will not make the trade and Samantha ▼ will will not make the trade.

joe= will not Sam= will

One of your coworkers, Freddie, really gets on your nerves and it would dramatically increase your happiness if he was fired. Freddie also dislikes you and wishes you would be fired. You have the option of going to your boss and lying about Freddie harassing you, which you are sure will get him fired. Freddie has the same option to make up a lie about you to get you fired. Whoever gets fired will not have any credibility to have his lies believed afterward. Given these circumstances, it would be logical for you to ▼ wait for Freddie to lie first and then complain lie second to revenge yourself on Freddie do nothing lie first to get Freddie fired . The person who lies first in this situation has a ▼ second-mover advantage commitment advantage reputational risk first-mover advantage .

lie first to get Freddie fired; first-mover advantage

The consequence for workers will be a wage rate that is ▼ higher lower and hours of employment that are ▼ lower higher .

lower;lower

Hospitals in Springfield are profit-maximizing, perfectly competitive firms. Hospitals in Maybury, on the other hand, are run by nonprofit charities that try to minimize the long-run average cost of treating patients. Hospitals in both cities have the same average and marginal cost. Show that hospitals in both cities will be the same size. Because the nonprofit hospitals of Maybury minimize the long-run average cost of treating patients, they operate at the patient level (that is, the size), which corresponds to the average cost curve's ▼ maximum optimum minimum point. In the case of the profit-maximizing, perfectly competitive hospitals in Springfield, profits and losses and thus the movement of firms will in the long run result in ▼ positive negative zero economic profits. This long-run profit level for Springfield's hospitals means that they will end up operating at the patient level (that is, the size), which corresponds to the average cost curve's ▼ optimum maximum minimum point.

minimum; zero; minimum

Caithness Energy, a firm that produces renewable energy, runs a wind farm in Ione, Oregon. The families that live close to this farm have complained to the county planning commission about the high noise levels from the wind turbines. The noise from the wind farm is a ▼ deadweight loss negative externality positive externality.

neg

For two goods that are complements, the cross-price elasticity of demand will be ▼ positive negative greater than 1.0 .

negative

You have been invited to play a 4-hour round of golf that has a value to you of $90. The total price to play the round of golf is $35. The net benefit of the round of golf is $_____ Now assume that you have a job that pays you $6 per hour. Would you be optimizing to accept the invitation to play golf? To optimize, you should (Play) golf.

net benefit: 90-35= 55 (6*4)=24-

How do public goods differ from common pool resources? Explain. Public goods are ▼ non-rival rival private excludable goods, while common pool resource goods are ▼ non-rival rival private excludable goods.

non-rival; rival

If the income elasticity of demand for a good is positive, the good is ▼ inferior a luxury normal .

normal

Suppose the town decides to put the matter to a vote. If at least two people vote in favor of the fireworks display, each person will be taxed $40 and the fireworks display will be held. ▼ One person Two people No one Three people will vote in favor of the display.

one person- anne

Suppose that you put an invisible tracking device on your computer that will instantly lead police to it if your computer is ever stolen. Your purchase of the tracking device provides a ▼ negative externality positive externality deadweight loss for other computer owners.

positive externality

Producer surplus is the difference between the ▼ and the ▼ supply curve price consumers pay demand curve chapter 6. review Question 10

price consumers pay; supply curve

Producer surplus is the difference between the ▼ demand curve price consumers pay and the ▼ price consumers pay demand curve supply curve The graph on the right depicts the supply and demand curves for a market in competitive equilibrium. 1.) Using the triangle drawing tool, highlight the area on the graph that represents producer surplus. Label this area 'PS'. 6.4 Review Question 10

price consumers pay; supply curve

Suppose you put $300 into a bank account that has a 6 percent interest rate. In this example, the $300 reflects the ▼ time value principal future value and the 6 percent reflects the ▼ time value of money intertemporal value future value .

principal; time value of money

Furthermore, you conclude that when there are negative externalities present, free markets ▼ produce too much produce too little , and when there are positive externalities present, free markets ▼ produce too little produce too much .

produce too much; produce too little

You are the County Commissioner of Hazard County. Recently a severe wave of storms swept across Hazard County, spawning several tornadoes and creating a wide path of mayhem. The citizens of Hazard County are demanding that you do something to protect them. You decide to install some early warning tornado sirens. However, there is no money left in the county budget, so you ask each citizen to donate some money to build the system. Many citizens donate money to help build the warning system; however, Ms. Nancy, who is wealthy, decides she is not going to donate. The early warning sirens are an example of a ▼ private good common good public good , and Ms. Nancy represents a ▼ public rider free rider private good .

public good; free-rider

Why is it difficult for the market to deliver socially efficient quantities of goods like clean air or street lighting? These are examples of ▼ public goods common goods private goods club goods ; therefore, even if you ▼ pay do not pay for the good you still ▼ get to enjoy it do not get to enjoy it.

public goods; do not pay; get to enjoy it

Suppose Player 2 is choosing between green and red, knowing the information above. He will choose ▼ Green Red if Green has been played. He will choose ▼ Green Red if Red has been played.

red; red

Lump-sum taxes are ▼ regressive proportional progressive .

regressive

In this case, the price elasticity of supply is ▼ relatively inelastic relatively elastic perfectly elastic perfectly inelastic .

relatively elastic (it is greater than 1)

In this case, the price elasticity of supply is

relatively inelastic

In this case, the price elasticity of supply is ▼ relatively inelastic perfectly elastic relatively elastic perfectly inelastic .

relatively inelastic (it is less than 1)

When price rises from $1212 to $3030, total expenditure on this good ▼ .

remains constant

Candle makers in Town B do not need a license. Town B, however, has passed a new minimum wage law that increasesincreases the minimum wage that candle makers in Town B pay their workers. Assume that the candle market is perfectly competitive. i. Does this higher minimum wage shift a candle maker's short-run average fixed cost curve? ii. Does this higher minimum wage shift a candle maker's short-run average variable cost curve? iii. Does this higher minimum wage shift a candle maker's short-run profit-maximizing choice of the number of candles to produce? With the higherhigher minimum wage, the short-run average fixed cost curve ▼ shifts up shifts down remains unchanged and the short-run average variable cost curve ▼ shifts up shifts down remains unchanged.

remains unchanged; shifts up

When price rises from $8 to $12, total expenditure on this good ▼

rises

If some sellers exitexit a competitive market, how will this affect its equilibrium? 1.) Using the 3-point drawing tool, show the impact if some sellers exitexit a competitive market. Label your new curve appropriately. 2.) Using the point drawing tool, show the new equilibrium price and quantity. Label this point 'A'.

screenshot 6. Review Question 14

If some sellers enterenter a competitive market, how will this affect its equilibrium? 1.) Using the 3-point drawing tool, show the impact if some sellers enterenter a competitive market. Label your new curve appropriately. 2.) Using the point drawing tool, show the new equilibrium price and quantity. Label this point 'A'.

screenshot 6.14

Now suppose instead that the government sets a minimum price (that is, a price floor) of $10. With the price floor, the new market price is $_____ and the new quantity traded is ______ units

screenshots

In Ecuador, ▼ neither buyers nor sellers both buyers and sellers buyers sellers gain from trade.

sellers gain from trade

In the next 20 years, a sizable of the US labor force is expected to include many people who are above the age of 65. As a result, the U.S. production possibilities curve would ____________. A. Shift inward B. Shift outward C. Bow, inward, becoming concave to the origin. D. remain unchanged. E. Rotate along either the x-or y-axis.

shift inward

Every candle maker in Town A must have a license. The cost of a license is the same regardless of the number of candles a business produces. Assume that the candle market is perfectly competitive. i. Does this license shift a candle maker's short-run average fixed cost curve? ii. Does this license shift a candle maker's short-run average variable cost curve? iii. Does this license shift a candle maker's short-run profit-maximizing choice of the number of candles to produce? With the license, the short-run average fixed cost curve ▼ shifts down shifts up remains unchanged and the short-run average variable cost curve ▼ shifts up remains unchanged shifts down.

shifts up; remains unchanged

If the total fixed costs of production increase, then the average total cost curve ▼ shifts down remains unchanged shifts up , the average variable cost curve ▼ shifts up remains unchanged shifts down , and the marginal cost curve ▼ shifts down remains unchanged shifts up.

shifts up; remains unchanged; remains unchanged

A three-person city is considering a fireworks display. Anne is willing to pay $50 to see the fireworks, Bob is willing to pay $15, and Charlie is willing to pay $15. The cost of the fireworks is $60. In terms of efficiency, the fireworks display ▼ should not should be offered.

should 50+15+!5= higher than the cost of the fireworks

Jones and Smith live in the same apartment building. Jones loves to play his opera recordings so loudly that Smith can hear them. Smith hates opera. Jones receives $100 worth of benefits from his music and Smith suffers $60 worth of damages. From an efficiency perspective, Jones ▼ should not be should be allowed to play his opera music.

should be

Suppose that a new idealistic political party publicly promises before the election that if the politician sells out after he is elected, then it would use its considerable power and influence to impeach the politician and throw him in prison. If this threat is credible, then the people ▼ should not should elect the politician because the ▼ trust payoff commitment of the new political party changes the payoff the politician faces.

should; commitment

All else being equal, the flatterflatter the supply curve, the (smaller/larger) the social surplus in a market.

smaller

This problem tells us that one of the sources of economies of scale is ▼ fixed costs specialization diminishing returns .

specialization

The owner of a company that manufactures automobile parts states that it will not hire youthfulyouthful employees. This is an example of ▼ statistical discrimination taste-based discrimination .

statistical discrimination

▼ Taste-based discrimination Statistical discrimination occurs when people's preferences cause them to discriminate against a certain group. ▼ Statistical discrimination Taste-based discrimination occurs when expectations cause people to discriminate against a certain group.

taste-based-discrimination; statistical

Consider a noncollusive duopoly model with both firms supplying ketchup. The marginal cost for each firm is $1.001.00. The market demand is shown by the figure on the right. Let us assume that the two firms supplying ketchup are Firm A and Firm B. The price charged by Firm A is denoted as p Subscript Upper ApA and the price charged by Firm B is denoted as p Subscript Upper BpB. If the firms collude, then firm A will charge a price of: PA =$ and Firm B will charge a price of: PB =$

the answer is whatever the price is given

You have just been appointed as the County Commissioner of Hazard County. After your first day of work, you realize that many people talked to you about externalities that day. Based on your conversations today and your economics experience, you conclude that when externalities are present, ▼ the free market outcome is not efficient pecuniary effects can crash a free market private bargining loses its effectiveness.

the free market outcome is not efficient

How does a command-and-control policy differ from a market-based policy? With a command-and-control policy, ▼ the market directly regulates the allocation of resources the government directly regulates the allocation of resources the military directs and regulates the economy , while with a market- based policy, ▼ the military directs and regulates the economy the government directly regulates the allocation of resources the government provides incentives for private organizations to internalize the externality .

the government directly regulates the allocation of resources; the government provides incentives for private organizations to internalize the externality

The overhunting of rhinos is an example of ▼ externalities the invisible hand the tragedy of the commons the Coase Theorem .

the tragedy of the commons

Consider a noncollusive duopoly model with both firms supplying bottled drinking water. The marginal cost for each firm is $1.251.25. The market demand is shown by the figure on the right. Let us assume that the two firms supplying bottled drinking water are Firm A and Firm B. The price charged by Firm A is denoted as p Subscript Upper ApA and the price charged by Firm B is denoted as p Subscript Upper BpB. Find the demand functions for each of the firms.

there is a picture^

One proposal to the 2012 law would have left the top tax rate at 35 percent but would have placed a cap on itemized deductions of $25,000. Mr. Smith is in the top tax bracket and has $25,000 of deductions for property taxes and interest on a mortgage. How would this change affect Mr. Smith's cost of a $500 charitable donation? The cost of a $500 contribution is now $_.

there is no other contribution : so it is $500.00

Consider the standard monopoly graph on the right that illustrates a monopoly's demand, marginal revenue, and marginal cost curves. If this monopoly is able to engage in perfect price discrimination, what area would be considered producer surplus? Using the triangle drawing tool, illustrate the area that would represent producer surplus if this monopoly was able to engage in perfect price discrimination. Label your area 'PS.'

third degree

The Bocchicchio family had a well-deserved reputation for ruthlessness. They had a simple code of vengeance: if you were responsible for the death of a member of their family, they would kill a member of yours, regardless of the cost to them. Suppose that when Michael invites Don Tessio to meet, he also hires a member of the Bocchicchio family to go to Tessio's house. There, the "hostage" will be guarded by Tessio's men. If Don Tessio does not return safely, Tessio's men will kill the hostage. The Bocchicchio family, seeking revenge, will blame Michael Corleone for the death, since he made the promise that Don Tessio will not be harmed, and will eventually kill Michael. If Michael and Don Tessio are both killed, each family gets a payoff of −80. Use backward induction to determine how this game will be played. The Nash equilibrium is for Tessio ▼ to meet to not meet and for the Corleones ▼ to not kill to kill if Tessio meets.

to meet; not to kill

to monitor; to not work hard

The United States's best response when Russia chooses to not invade is ▼ Tough Make concessions . The United State's best response when Russia chooses to invade is ▼ Make concessions Tough . Russia's best response when the United States chooses to be tough is ▼ Not invade Invade . Russia's best response when the United States chooses to make concessions is ▼ Not invade Invade .

tough tough not invade invade

Decide whether each of the following statements is true or false for each of three different types of market: perfect competition, monopoly, and monopolistic competition. Firms equate price and marginal cost. Perfect competition: False True Monopoly: ▼ True False Monopolistic competition: ▼ True False

true; false;false

Firms produce the quantity that minimizes long-run average cost. Perfect competition: ▼ True False . Monopoly: ▼ True False . Monopolistic competition: ▼ True False .

true; false;false

If Maya decides to watch the comedy, then Paul's best choice is ▼ unknown without the payoffs to watch the action film to watch the comedy

unknown without the payoffs

Pam and Vladimir run a food truck that serves Mexican food. Before they open, they have 1 hour to make enchiladas and burritos. The following table shows how many enchiladas and burritos they can each make in 1 hour. Enchiladas: P=32 V=36 Burritos: P=30 V=50 According to the data, ▼ Vladimir Neither Pam has an absolute advantage in making either type of Mexican food. Based on comparative advantage, who should make enchiladas and who should make burritos? ▼ Neither Pam Vladimir has a comparative advantage in making enchiladas enchiladas. ▼ Pam Neither Vladimir has a comparative advantage in making burritosburritos.

vladimir= absolute advantage Pam=ench V=burritos

If the bank is risk neutral, the bank ▼ will not make will make is indifferent about making this investment.

will make

If the bank is risk neutral, the bank ▼ is indifferent about making will make will not make this investment.

will not make

If Maya and Paul are on a date, they ▼ would be would not be influenced by each other's choice of movies.

would be

If you were able to find a roulette wheel with 18 black slots, 18 red slots, and no green slots and your utility function exhibits diminishing marginal utility of consumption, you ▼ would not would make the bet.

would not

The last firm to enter earns ___________.

zero economic profits

This is an example of ▼ tragedy of the commons a prisoners' dilemma a zero-sum game.

zero-sum game

This payoff matrix is an example of a ▼ pure strategy zero-sum game dominant strategy .

Micro Econ

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