MICROECON EXAM, Exam 3 Microeconomics

The market price will fall

A binding price floor in a market is removed. Which of the following is likely to occur as a result?

always above the equilibrium price

A binding price floor is

someone can enjoy the benefits of the good without bearing the costs.

A good has a free-rider problem when

nonrival

A good is characterized as _____ when one person's use of the good does not reduce another person's ability to use the same unit of the good

the economic surplus at the efficient quantity minus the economic surplus at the actual quantity.

A market's deadweight loss is calculated as

prejudice

A preconceived bias against a group that's not based on reason or experience is known as:

payoffs are linked to whether an uncertain event occurs

A prediction market is a market where

the maximum price that a seller can charge in a market

A price ceiling is

minimum or maximum quantity that can be sold.

A quantity regulation is a

demand curve to the right.

A subsidy for buyers of a product shifts the

a government payment designed to encourage particular purchases or productive activities

A subsidy is a

supply curve to the left

A tax on sellers shifts the

Yes, it was a good move because it added more to revenue than to cost

Alena manages a small theme park. She hires one more custodian at $450 per week, and her park is cleaner and more attractive. As a result of this improvement, ticket sales rise by 40 tickets per week. Tickets sell for $12. Use the Rational Rule for Employers to determine if hiring the extra custodian was a good move.

getting buyers and sellers to consider marginal external costs and benefits.

All of the solutions to externality problems involve

higher wage paid to encourage greater worker productivity

An efficiency wage is a:

more productive workers may be forgone in order to hire less productive workers who have preferred characteristics.

An employer who discriminates in hiring based on prejudice is likely to have higher costs than necessary because:

a side-effect of an activity that affects bystanders whose interests are not taken into account.

An externality is defined as:

positive

Analysis that describes what would happen if various actions were taken is _____ analysis.

aggregate information

As prices _____, they provide useful business intelligence.

demand is more elastic than supply

Buyers bear a smaller incidence of the tax when

overproduce

By contrast with a market that produces the socially optimal output, a market with negative externalities will

invests in job-specific skills

Callie's firm uses a proprietary and complicated production process to ensure product quality. Her workers are carefully trained in this process as soon as they are hired. Callie thereby:

higher salaries for more unpleasant jobs.

Compensating differentials lead to:

Higher wages

Consider the labor market, predict which of the following create an incentive for investment in capital?

if you find it easy

Consideration of the benefits of choosing an occupation should NOT include

lives up to a core set of ideals that workers identify with

Employees will be motivated to work hard and try to help their employer succeed if the company:

Provide training

How can a company's hiring manager attract workers who are motivated to advance in their field?

Unionized workers earn more.

How does the pay of unionized workers compare with that of nonunionized workers in similar jobs, on average?

left because employees are more expensive to the firm

If a company incurs expenses to start providing childcare at work so that employees can have lunch with their preschool children, the company's demand curve for labor will shift to the

relatively steep

If an item is a necessity rather than a luxury, its demand curve will be:

inelastic; higher

If demand is _____, a higher price yields _____ total revenue.

marginal revenue product of; increase

If the demand for Ono Yo's organic frozen yogurt increases, then the _____ Ono Yo's workers will _____.

have a knowledge problem

If you need to make a decision and all the information needed to make a good decision is not available, then you

wage; hours of labor

In a labor market graph, _____ is measured on the vertical axis, and _____ is measured on the horizontal axis.

above the price and below the demand curve

In a market graph, consumer surplus is the area:

they would not be able to hire anyone

In a perfectly competitive labor market, employers will not pay less than the market wage because at a wage below the equilibrium

the employers looking to hire programmers.

In the labor market for computer programmers, the labor demand represents

set up to allocate resources of a company more efficiently, often not using real money.

Internal markets, which are markets that managers set up within their organization, are:

more than a compensating differential because she has greater concerns than most workers

Kaila wants her employer to pay her 20% more for making night deliveries in a high-crime neighborhood than the day delivery people receive. Most of the delivery people are willing to make night deliveries in the neighborhood for only a 10% differential. Kaila is seeking:

pay-for-performance

Linking your workers' earnings to their performance is called:

are organized within a company to buy and sell scarce resources

Managers can harness market forces by setting up internal markets, which

an externality

Marjean walks to work every day along a busy road. As she does so, she breathes in the fumes of many cars, often arriving at work coughing. The economic term for the impact of the cars on Marjean is

at a price below the value of the benefit they receive from the item

People gain consumer surplus when they purchase an item:

comparative advantage

Specialization will increase output when it is based on:

normative

Statements about what option should be chosen are _____ statements

reduce; the amount of the reduction

Studies of the minimum wage indicate that minimum wage laws _____ employment opportunities for low-skilled workers, but there is less agreement regarding _____

Graph B

Supermarkets need to hire fewer cashiers, due to self-checkout counters. Which graph shows what happens to the labor market for cashiers?

more elastic

Suppose the price of gasoline rises. As time passes, people adjust to the higher price, and the demand for gasoline becomes

remove the ability to tell whether the product is an inferior good or a normal good

Taking the absolute value of the income elasticity of demand is incorrect because it would

the marginal social benefit exceeds the marginal social cost

The Rational Rule for Society is that society should produce another unit of a good if

one more hour as long as the wage is at least as large as the marginal benefit of another hour of leisure

The Rational Rule for Workers is to work

human capital

The accumulated knowledge and skills that make a worker more productive are known as:

could have been bought with the income earned

The costs of working do NOT include what

demand for one good is to a change in the price of another good

The cross-price elasticity of demand measures how responsive the

burden created by the change in after-tax prices faced by buyers and sellers

The economic burden of a tax is the

how people's choices change when they have more income.

The income effect measures

nonwage benefits increase for social workers

The labor supply curve for social workers will shift to the right when:

reallocating resources to better uses

The main role of markets is:

the economic surplus.

The marginal benefit minus the marginal cost equals:

xtra benefit enjoyed by the buyer of one extra unit of a good or service.

The marginal private benefit is the:

marginal revenue product.

The marginal revenue from hiring an additional worker is known as

MPL × P

The marginal revenue product of labor is equal to

what you would have done during the time if you were not working

The opportunity cost of working is

The optometrist labor supply curve shifts leftward

The population of Japan is declining. What impact will this have on the labor market for optometrists in Japan?

perfectly elastic

The price elasticity of demand for a good with a vertical demand curve is

price minus marginal cost

The producer surplus on a unit sold equals

government-designated burden of a tax payment

The statutory burden of a tax is the:

how many workers to hire

The three key labor market decisions that you make do NOT include

malevolent bias.

The three sources of discrimination do NOT include:

tendency to overconsume common resources

The tragedy of the commons is the:

can do the task with the lowest opportunity cost

To get maximum output, you should allocate each task to the person who:

jointly represent a group of workers in negotiating with employers.

Unions are organizations that:

three

Use the data in Table: Pat's Pedicures to answer the question. If Pat uses the Rational Rule for Employers, how many nail technicians will she hire?

Bargaining costs must be low, and property rights must be clear

What conditions must be met for private bargaining to be effective in resolving an externality?

It has increased the gap in income significantly

What impact has technology had on the difference between the income of the best engineers and that of good engineers?

positive

What type of relationship exists between the level of a company's market power and the price that its owner is able to charge for its product?

The supply of workers will increase, resulting in a lower wage and higher quantity of labor.

What will happen in the labor market for aestheticians if the government deregulates the industry and no longer requires individuals to obtain a license to work as aestheticians?

a higher wage.

When it is hard to monitor worker productivity, employers often pay:

improve their standard of living or increase their leisure time

When people focus on their comparative advantage and then trade for other things, they:

elastic

When the absolute value of the price elasticity of demand is greater than 1, demand is

perfectly elastic

When the absolute value of the price elasticity of demand is infinite, demand is

inelastic

When the absolute value of the price elasticity of demand is less than 1, demand is

deadweight loss

When the economic surplus in a market is less than it would be if the market were efficient, the market is experiencing

supply decreases

When the government requires that a person have a license to work in a particular occupation, then in the labor market for that occupation

Graph A

Which graph shows the scenario where the substitution effect dominates labor supply decisions?

Better allocation of its resources and more accurate predictions.

Which of the following benefits could a company gain from using internal markets?

Any differences in wages between members of different racial or age groups is due to discrimination.

Which of the following is NOT true regarding discrimination in labor markets?

In one evening, many more people can view a movie than can see a Broadway play

Which of the following is a valid explanation of why a star movie actor earns many times more than a star Broadway actor?

A city enforces zoning laws that restrict the number of housing units

Which of the following is an example of a quantity quota?

Shares of McDonald's stock

Which of the following markets is an example of a perfectly competitive market?

If bargaining is costless, and property rights are clearly established and enforced, then externality problems can be solved through private bargaining

Which of the following statements describes the Coase Theorem?

a siren tornado warning system

Which of the following would be both nonrival and nonexcludable?

The government increases its provision of childcare services

Which of the following would shift the labor supply curve?

the cost-benefit principle

Which principle helps buyers and sellers make decisions about whether to trade?

diminishing marginal product

Why does an employer's labor demand curve slope downward?

To solve the knowledge problem.

Why would a company set up internal markets?

at a lower opportunity cost than anyone else

You have a comparative advantage if you can complete a task:

can produce the product using the fewest inputs

You have an absolute advantage in producing a product if you: