MICRO FINAL study cards

The demand for labor would most likely become more elastic as a result of:

An increase in the proportion of labor cost to total costs

The downward-sloping demand curve of a monopolistic competitor:

Reflects product differentiation

The principle of comparative advantage indicates that mutually beneficial international trade can take place only when:

Relative costs of production differ between nations

Which would be characteristic of monopolistic competition?

Relatively small market share for each firm

As the area between the Lorenz curve and diagonal gets larger, the Gini ratio:

Rises to reflect greater inequality

The kinked demand model of noncollusive oligopoly assumes that:

Rivals will ignore price increases and match price cuts

What would be an example of how pure luck contributes to income inequality?

Selection as winner of a state lottery

Suppose some firms exit an industry characterized by monopolistic competition. We would expect the demand curve of a firm already in the industry to:

Shift to the right

Suppose capital is readily substitutable for labor and that the price of capital falls. We can conclude that the:

Substitution effect will tend to reduce the demand for labor

If the supply of labor in a purely competitive labor market decreases, the labor:

Supply curve for a single employer will shift upward

An increase in the demand for computers leads to an increase in demand for computer programmers. This situation arises because:

The demand for programmers is a derived demand

A Lorenz curve shows:

The distribution of income

If country A has a comparative advantage in the production of good X over country B, then:

The domestic opportunity cost of producing X in country A is lower than in country B

A characteristic of monopolistically competitive industries is that:

The entry and exit of firms causes the representative firm to break even in the long run

If the price of a good increases, then in the market for labor which is used to produce this product:

The marginal revenue product (MRP) of labor will increase

If the U.S. dollar appreciates relative to the British pound, then:

The pound will depreciate relative to the U.S. dollar

If oligopolistic firms facing similar cost and demand conditions successfully collude, price and output results in this industry will be most accurately predicted by which of the following models?

The pure monopoly model

If there is no comparative advantage between two countries:

There are no gains from specialization and trade

Which assumption is part of the model of monopolistic competition?

There is no collusion among firms

One difference between monopolistic competition and pure competition is that:

There is some control over price in monopolistic competition

Marginal revenue product is the increase in:

Total revenue from the use of an additional unit of a resource

Which is an example of a change in product demand that increases labor demand?

Tourism increases in popularity, increasing the demand for workers at tourist resorts

In pure competition, a profit-maximizing firm will equate the marginal revenue product of labor with the:

Wage rate

The marginal cost of a productive resource is equal to the price of the resource if a firm is:

A price taker in the resource market

In long-run equilibrium, a profit-maximizing firm in a monopolistically competitive industry will produce the quantity of output where:

AC = P, MR = MC < P

The wages and salaries that people earn differ partly because of differences in:

Ability

In the short run, the monopolistically competitive firm will experience

Economic profits or losses, but in the long run only a normal profit

The diagonal line in a Lorenz curve represents perfect:

Equality in the distribution of personal income

In the long run, the representative firm in monopolistic competition tends to have:

Excess capacity

Monopolistic competition is characterized by excess capacity because:

Firms produce at an output level less than the least-cost output

Derived demand is the demand:

For a resource to produce a product

The domestic opportunity cost of producing 100 barrels of chemicals in Germany is one ton of steel. In France, the domestic opportunity cost of producing 100 barrels of chemicals is two tons of steel. In this case:

Germany has a comparative advantage in the production of chemicals

A trade deficit refers to an excess of:

Goods imports over goods exports

A representative firm in monopolistic competition will tend to make economic profits:

Or losses in the short run, but the firm will break even in the long run

An industrial union:

Organizes skilled and unskilled workers in an industry

A craft union:

Organizes workers who have similar skills or jobs in an industry

Which is a likely characteristic of a differentiated oligopolistic market?

Price and output decisions of firms are interdependent

The goal of product differentiation and advertising in monopolistic competition is to make:

Price less of a factor and product differences more of a factor in consumer purchases

The demand for a resource will increase if the:

Price of the product the firm is producing increases

Monopolistic competition is characterized by firms:

Producing differentiated products

Demand and marginal revenue curves are downward sloping for monopolistically competitive firms because:

Product differentiation allows each firm some degree of monopoly power

Critics of the minimum wage argue that an increase in the minimum wage rate above the equilibrium rate of a purely competitive labor market would:

Increase unemployment in the labor market

Which would make an individual firm's demand curve less elastic?

Increased brand loyalty toward the firm's product

Trade between individuals and between nations leads to:

Increased specialization

A positive effect of advertising for society is that it:

Provides useful information to reduce search cost for consumers

Taxes and transfer payments

Reduce the degree of income inequality

Collusive control over price may permit oligopolists to:

Reduce uncertainty, increase profits, and possibly limit entry of new firms

If an American can purchase 40,000 British pounds for $90,000, the dollar rate of exchange for the pound is:

$2.25

Which of the following Gini ratios would indicate the least amount of income inequality?

0.2

The best example of a monopsonist is:

A large army post located in a small community

Which constitutes an obstacle to collusion among oligopolists?

A large number of firms

When firms in an industry reach an agreement to fix prices, divide up market share, or otherwise restrict competition, they are practicing the strategy of:

Collusion

Mutual interdependence means that each firm in oligopolistic industry:

Considers the reactions of its rivals when it determines its price policy

Consider two countries which trade with each other. The degree of specialization according to their respective comparative advantages will be greater if the countries face:

Constant costs

Craft unions have typically been most effective in raising wage rates by:

Decreasing the supply of labor

Exclusive unionism has the economic effect of:

Decreasing the supply of labor

The Lorenz curve is a graph that shows the:

Degree of income inequality

A cause of the unequal distribution of income in the United States is:

Differences in preferences and risks

The elasticity of demand for labor varies:

Directly with labor's share of the total cost of the product

The Gini ratio is determined by:

Dividing the area between the Lorenz curve and the diagonal by the total area below the diagonal

There is a fall in the relative prices of Japanese goods to Americans when the:

Dollar appreciates

According to the principle of comparative advantage, worldwide output and consumption levels will be highest when goods are produced in nations where:

Domestic opportunity costs are lowest

The incentive to cheat is strong in a cartel because:

Each firm can increase its output and thus its profits by cutting price

In the long run, a representative firm in a monopolistically competitive industry will typically:

Earn a normal profit, but not an economic profit

The debate over income distribution focuses on the tradeoff between:

Economic efficiency and equality

A Lorenz curve showing perfect equality in the distribution of income:

Is a straight line with a 45-degree angle

The demand curve faced by a monopolistically competitive firm

Is more elastic than the monopolist's demand curve

The individual firm which hires labor under competitive conditions faces a labor supply curve which:

Is perfectly elastic

An example of derived demand is the demand for:

Labor used to produce automobiles

The monopolistically competitive seller's demand curve will become more elastic the:

Larger the number of competitors

The marginal revenue product of labor in a competitive market decreases as a firm increases the quantity of labor used because of the:

Law of diminishing returns

The more inelastic the demand for a resource the:

Less elastic its marginal revenue product curve

In the kinked demand model of noncollusive oligopoly, each firm thinks that the demand curve below the going price is:

Less elastic than the demand curve above the going price

When the supply curve of labor is upward sloping, the marginal cost curve of labor facing the monopsonist:

Lies above the supply curve of labor

The greater the degree of inequality in the size distribution of income, the more bowed will be the Lorenz curve toward the

Lower right-hand corner

A characteristic of a purely competitive labor market would be:

Many firms competing in hiring workers

If the wage rate in a purely competitive labor market decreases, it will cause the:

Marginal resource cost for a single competitive firm in the industry to decrease

A major reason that firms form a cartel is to:

Maximize joint profits

A single buyer is called a(n):

Monopsonist

The labor market for teachers in a small, isolated community that has one school district would be best described as a(n):

Monopsony

The domestic opportunity cost of producing a television in the United States is 20 bushels of wheat. In Korea, the domestic opportunity cost of producing a television is 10 bushels of wheat. In this case:

Mutual gains from trade can be obtained if the United States imports televisions from Korea and Korea imports wheat from the United States

A unique feature of an oligopolistic industry is:

Mutual interdependence

In an oligopolistic market there is likely to be:

Neither allocative nor productive efficiency

A monopolistically competitive industry is like a purely competitive industry in that:

Neither industry has significant barriers to entry

If monopolistically competitive firms in an industry are making an economic profit, then:

New firms will enter the industry and product demand will decrease for the existing firms

The basic economic argument for greater income equality is that:

a more equal distribution of a given amount of income will increase the total utility of consumers.

Appreciation of the Canadian dollar will:

make Canada's exports more expensive and its imports less expensive.

A market in which the money of one nation is exchanged for the money of another nation is a:

foreign exchange market.

Depreciation of the dollar will:

increase the prices of U.S. imports, but decrease the prices to foreigners of U.S. exports.