Microeconomics

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Which of the following rules is satisfied when a monopoly maximizes profits?

MR = MC.

Monopoly leads to: No ________________ efficiency & may not use the best technology.

Productive.

If price is greater than marginal cost, a perfectly competitive firm should increase output because

additional units of output will add to the firm's profits (or reduce losses).

Under some conditions, markets may help to eliminate _____; under other circumstances, it can be consistent with an efficient market.

discrimination

When a produce is acting efficiently:

they are producing at a point on their production possibilities frontier

the distribution of income has become more _____________ since 1975

unequal

What is the "Break-even Price"?

Minimum ATC

What is the shut-down price?

Minimum AVC for q > 0.

A firm should hire an additional worker as long as the wage rate is

Less than the MRP.

The long run is

a period long enough for all inputs to be variable.

As # of buyers increases, demand...

increases.

What are the three characteristics of a theoretical market with pure competition?

1. Price-takers. 2. Identical Product. 3. Costless Entry and Exit of Firms.

What are the basic conditions of oligopoly?

1. Rivalry - Behavior effects other firms' behavior - Can be modeled with game theory

What are the Four Fundamental Questions?

1. What will be produced? 2. How will g&s be produced? 3. Who will get g&s? 4. How will system allow changes

What is a sunk cost?

A cost that is incurred and unrecoverable

unitary elasticity

A situation in which total revenue remains the same when prices change.

High training costs help firms maintain

Barriers to entry.

Investment minus depreciation equals:

Change

In monopolistic competition, demand slopes:

Down.

If AC decreases over large output range, it is __________ expensive for 1 firm to produce.

Less.

What is Allocative Efficiency?

Mix of goods and services produced is most wanted by society

Profit per unit is equal to

P - ATC

Choice:

Scarcity necessitates choice

Microeconomics

Studies specific economic units

Market share can be computed by dividing

The amount sold by a single firm by the total sold in the market.

Determine whether each of the following taxes is proportional, regressive, or progressive. A fee of $500 per year for municipal services, charged to everyone who lives within the city limits. This tax is a. regressive. b. progressive c, proportional

market power

a firm's ability to raise the price of a good without losing all its sales

price ceiling

a maximum price that sellers may charge for a good

if we believe that people make considered choices to maximize their own welfare, then in-kind transfers are inefficient because

chase provides recipients with the flexibility to choose the goods that will do them the most good

If the Gini coefficient is 1, there is

complete income inequality.

Fixed costs are

constant in the short run.

As # of buyers decreases, demand...

decreases.

Who actually loses surplus as a result of the tax is the _____ incidence of the tax.

economic

A proportional income tax is sometimes called a "_____ tax."

flat

The law of demand describes the:

inverse relationship between price and quantity demanded

Suppose two countries produce the same two goods and have identical production possibilities frontiers. You would expect these countries:

not to trade because identical production possibilities frontiers would indicate that the two countries face the same opportunity costs, so there are no gains from trade.

Which of the following market structures is characterized by the absence of market power?

perfect competition.

A(n) _____ poverty measure is not directly tied to the cost of living.

relative

A main purpose of taxes is

to raise public revenue.

In the short run... Total Cost =

(AVC*q) + TFC

What is the Income Elasticity of Demand formula?

(Change in Qd) ( ----------------- ) (Qd Mdpt) ------------------------------ (Change in Income) ( --------------------- ) (Income Mdpt)

What is the Cross Elasticity of Demand Formula?

(Change in Qd) ( ----------------- ) (Qd Mdpt) ------------------------------ (Change in Other Prices) ( --------------------- ) (Other Price Mdpt)

What is the Price Elasticity of Supply formula?

(Change in Qs) ( ----------------- ) (Qs Mdpt) ------------------------------ (Change in Price) ( --------------------- ) (Price Mdpt)

What is the midpoint formula?

(Change) / (Midpoint)

What is the "wedge"?

(Demand Price) - (Supply Price)

What is "Average Profit"?

(P - ATC)

In the short run... Profit =

(Price - AVC)*q - (TFC)

What are the profit possibilities in the short run?

(TR - TC) = Profit (P*q)-(ATC*q) = (P-ATC)*q = Profit "Average Profit" = P - ATC

How do you calculate Average Total Costs?

(Total Cost) ------------- (Output)

How do you calculate AFC?

(Total Fixed Cost) -------------------- (Output)

What is Economic Profit?

(Total Revenue) - (Total Economic Costs)

How do you calculate AVC?

(Total Variable Cost) ----------------------- (Output)

How do you calculate Marginal Cost (from labor)?

(Wage Rate) -------------- MP

How do you calculate Average Cost (from labor)?

(Wage Rate) -------------------- (Average Product)

What is tax revenue?

(Wedge)*(Quantity)

equity

(n.) the state of being just, fair, or impartial; fair and equal treatment; something that is fair; the money value of a property above and beyond any mortgage or other claim

The most common international poverty measure is the number of people living on less than $_____ per day, which is _____ than the official U.S. poverty line.

- 1.90 - lower

Research suggests that only about _____ percent of people living under the poverty line in any given year are _____ poor.

- 3 - chronically

In the case of the labor market, we often see that women earn less than men. From this, we can conclude which of the following?

- An omitted variable is possibly responsible for the variation - Income is correlated with gender

When comparing a monopoly and a P.C., assume one owner buys all P.C. firms, keeps them all open but operates as a Monopolist, what happens?

- Cost curves stay same. - Monopoly industry quantity < P.C. - Monopoly price > P.C.

Which three of the following concepts are particularly useful in evaluating the costs and benefits of alternative types of taxes?

- Incidence - Revenue - Efficiency

Allocative Efficiency:

- MB of consumption = MC of production - Monopoly restrict output is dead weight loss. - Do NOT have alloc., effic.

What are the solution concepts of the game theory?

- Nash Equilibrium - Cooperative

What is the Nash Equilibrium concept?

- No incentive to unilaterally deviate; a.k.a. neither player can do better by switching one-at-a-time - May be zero Nash, one Nash, or more than one Nash

Productive Efficiency:

- P.E.: Minimum ATC - In LR PC → Produce min ATC - Monopoly Output < P.C. → not at min ATC - No productive efficiency - Tech effic?

What is the cooperative concept?

- Players receive highest sum of payoffs - Nash and Cooperative may or may not be the same strategy

What is meant by Identical Product?

- Sellers produce exactly the same product - Consumers know same

With Individual Demand and Supply... Market supply is:

- Sum of quantities of each firm - Upward Sloping

Which of the following is correct?

- Under some conditions, markets may help to eliminate discrimination. - Discrimination can be consistent with an efficient market.

One type of inefficiency of a tax is _____ burden, which represents the effort to manage and collect _____.

- administrative - taxes

When we consider the income differences between men and women, we have to be careful not to confuse _____ with _____.

- correlation - causation

_____ can have long-lasting effects on people and markets, even after the active _____ itself ends.

- discrimination - discrimination

The goal of _____ _____ is not only the immediate effect of the policy on poverty but also the growth it will produce for the entire economy in the future.

- economic - development

The tax revenue collected is smaller in the market with price-_____ demand, because the equilibrium quantity shrinks more than in a market with a price-_____ demand.

- elastic - inelastic

Because income is not distributed perfectly equally anywhere in the world, the top quintiles earn a disproportionately _____ share of income and the lower quintiles earn a disproportionately _____ share of income.

- high - low

People who grow up in poor families or communities are likely to have reduced opportunities to acquire _____ _____.

- human - capital

The simplest method of summarizing _____ _____ divides households into five equally sized groups.

- income - distribution

The ability to improve one's economic circumstances over time is known as _____ _____.

- income - mobility

A tax may create a(n) _____, and the revenue it generates may be used to fix another _____.

- inefficiency - inefficiency

All else equal, imposing taxes in markets where demand and supply are price-_____ not only causes less _____ but also raises more _____.

- inelastic - inefficiency - revenue

The federal government calculates taxes by fiscal year, which begins on the first day in _____ of one calendar year and runs through the last day in _____ of the following year.

- october - september

_____ insurance programs are similar to _____ insurance programs in that they pool risks across a large population.

- private - social

The design of the _____ U.S. federal income tax system has the effect of reducing income inequality: Those with _____ income pay a larger proportion of their income than those with _____ income.

- progressive - higher - lower

Economists and policymakers classify taxes in one of three categories. These three categories are which of the following?

- proportional - progressive - regressive

Policies that benefit the poor may _____ resources with the explicit purpose of reducing chronic poverty or lessening income inequality.

- redistribute - reallocate

We can distinguish among three different types of public policy approaches related to poverty and inequality:

- safety nets - economic development - redistribution of resources

_____ incidence of the tax has no effect on the _____ incidence of the tax.

- statutory - economic

With a tax, the value of the _____ that is lost to buyers and sellers but converted into tax revenue may be transferred to someone else through _____ policies, but it is not lost.

- surplus - government

The _____ that is lost to buyers and sellers but converted into tax _____ is not considered a cost, because the the money funds public services.

- surplus - tax revenue

Under a _____, the consumer and producer surplus that is no longer generated is _____ loss.

- tax - deadweight

Calculating the revenue raised by a tax is simple: Multiply the _____ rate by the _____ of units of the thing being taxed.

- tax - number / quantity

To determine revenue from a _____ on a toll road, multiply the fee per car by the _____ of cars.

- tax - number / quantity

Suppose a monopoly concrete contractor builds 20 driveways per month for $10,000 each. In order to increase sales to 21 driveways, the contractor must lower the price of driveways to $9,500. The marginal revenue of the 21st driveway is

-$500.

What is a market system?

-Private ownership of resources -Markets & prices coordinate & direct economic activity -Each participant acts in self-interest & has choice

What is perfectly elastic?

-Qd any amount for a price -Elasticity = Infinite -Graphically, a horizontal line -Creates a price threshold

What is perfectly inelastic?

-Qd does not depend on price -Elasticity = 0 -Graphically, vertical line

Factors that contribute to income inequality:

-ability -education and training -discrimination -preferences and risks -unequal distribution of wealth -market power -luck, connections, misfortunes

What is the criteria for Inelastic?

0 < |Price E-d| < 1

the Gini coefficient for complete inequality is

2 ways to measure income inequality

1) distribution by income category 2) distribution by quintiles (fifths)

Causes of growing inequality

1) greater demand in highly skilled workers 2)demographic changes 3)international trade, immigration, and decline in unionism

the case for inequality:

1) it results from differences in the quantity and quality of labor and other resources supplied by individuals to the economy 2) it is unavoidable consequence of maintaining the incentives needed to motivate people to produce output and income year after year

The US income-maintenance system consists of two kinds of programs, eltitlement programs:

1) social insurance 2) public assistance or "welfare"

What are the basic conditions of a monopoly?

1. 1 seller; monopolist is "price maker". 2. No close substitutes. 3. Barriers to entry; others cannot enter.

What are the sources of inefficiency?

1. Allocation to consumer--Quantity Shortage 2. Wasted resources; opportunity costs from search 3. Low quality; why maintain/improve quality? 4. Black markets; illegal activity

What are the conditions of Total and Marginal Utility?

1. As TU increases, MU > 0. 2. TU is maxed when product is consumed until MU = 0. -"Satiation Point": MU = 0 3. As TU decreases, MU < 0.

What are the different types of Price Discrimination?

1. First Degree (Perfect) 2. Second Degree (Multi-part Pricing) 3. Third Degree (Group Pricing)

What are the factors of production?

1. Land 2. Labor 3. Capital 4. Entrepreneurial Ability

What are the basic conditions of Monopolistic Competition?

1. Large # sellers, small industry shares 2. Independent action - my pricing does not influence other firm's pricing. 3. Demand influenced by entry and exit but not by pricing and output decisions of other firms. (E.g. gas stations, chain fast food). 4. Differentiated products - small amount of control over price 5. Easy entry and exit - may be advertising costs, etc., that limit entry

What is the scientific method?

1. Observe facts 2. Formulate an explanation 3. Test explanation 4. Accept, reject, or modify hypothesis 5. Continue to test

In Pure/Perfect Competition, the theoretical market has 3 characteristics:

1. Price-Takers 2. Identical Product 3. Costless Entry and Exit of Firms

Suppose the government wants to levy a new excise tax. For each of the following goods, determine whether you would expect an excise tax to result in large or small deadweight loss. 1. Alcohol Deadweight loss is relatively a. large b. small 2. Milk Deadweight loss is relatively a. large b. small 3. Diamonds Deadweight loss is relatively a. large b. small 4. Tropical vacations Deadweight loss is relatively a. large b. small 5. Socks Deadweight loss is relatively a. large b. small

1. b 2. b 3. a 4. a 5. b

according to the most recent estimates, 869 million people lived in poverty (living on less than $1.90 per day) in 2012, or roughly ______ of the worlds population

13%

Let's say that you are a single person who earned $30,000 in 2017. Using that tax table from the book (Table 20.1), your average tax rate is

13.55%

Let's say that you are a single person who earned $34,000 in 2010. Using that tax table from the book (Table 20.1), your average tax rate is

13.72%

The percent of the population living under the official federal poverty line in the United States was approximately _____ percent in 2014.

the percent of the population living under that official federal poverty line in the US was appoximatley ____ percent in 2014

Suppose the figure shown represents the production possibilities frontier for Country A. Country B offers to trade four trucks for every airplane. Assuming Country A specializes in airplane production, which of the following combination of goods could Country A consume?

15 airplanes, 20 trucks

Consider the production possibilities frontier displayed in the figure shown. Which of the following combinations could be produced?

15 watermelons, 100 bushels of apples

Transient poverty is usually measured as a spell of poverty that lasts at least _____ consecutive months within a year.

When dividing a population into five groups, each group represents _____ percent of the population.

A patent gives a firm the exclusive right to produce a product for

20 years.

Imagine a person who makes $400 per week working 40 hours per week for 50 weeks of the year. She is currently eligible for a welfare program, available to people with income equal to or less than $20,000, that gives her $800 a year. No such program is available to people with income above $20,000 per year. Her boss offers her a promotion that would increase her wage by 25 cents per hour. a. Her total income before the promotion is __________ b. Her total income if she accepts the promotion is _________ c. She (should or should not) accept the promotion if she wants to have higher income.

20800, 20500 should not

In the United States, the poverty line was set in the 1960s by taking the cost of food for a family of a given size and multiplying it by

Tom and Jerry have two tasks to do all day: set traps and build bombs. If Tom spends all day setting traps, he will have set 16 traps. If he instead devotes his day to building bombs, Tom will build 4 bombs. If Jerry spends his day setting traps, he will set 14 traps; if he spends the day building bombs, he will build 7 bombs. For Tom, the opportunity cost of building a bomb is __________ traps set.

Suppose the price of a sweater is $56. Julia's marginal benefit for purchasing each additional sweater is given in the table below. Julia gets the most benefit from the first sweater and less benefit from each additional sweater. If Julia is behaving rationally, how many sweaters will she purchase?

4 +/- 2%

Tom and Jerry have two tasks to do all day: set traps and build bombs. If Tom spends all day setting traps, he will have set 16 traps. If he instead devotes his day to building bombs, Tom will build 4 bombs. If Jerry spends his day setting traps, he will set 14 traps; if he spends the day builiding bombs, he will build 7 bombs. The opportunity cost of one bomb is _____ for Tom and ______ for Jerry. Therefore Tom should specialize in _____.

4 traps; 2 traps; traps

Suppose the quantity of apples supplied in your market is 2,400. If there are 60 apple producers, each with identical cost structures, how many apples does each producer supply to the market? _______ apples

the simplest method of summarizing income distribution divides households into ______ equally sized groups

Suppose the figure shown represents the production possibilities frontier for Country A. Which of the following combination of goods could Country A consume?

5 airplanes, 30 trucks

Maya and Max are neighbors. Each grows lettuce and tomatoes in their gardens. Maya can grow 45 heads of lettuce or 9 pounds of tomatoes this summer. Max can grow 42 heads of lettuce or 6 pounds of tomatoes this summer. If Maya and Max specialize and trade, the price of tomatoes (in terms of lettuce) would be: 1 pound of tomatoes would cost between _____ heads of lettuce.

5 and 7

Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day. A Canadian worker, on the other hand, can produce 10 pairs of shoes or grow 20 apples per day. The opportunity cost for the United States is:

5 apples for each pair of shoes

Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year. Country B has 400 workers. The opportunity cost of one tomato in Country A is:

5 bananas

5,000 bananas, 0 tomatoes & 2,500 bananas, 500 tomatoes

Suppose there are only three firms in a market. The largest firm has sales of $500 million, the second-largest has sales of $300 million, and the smallest has sales of $200 million. The market share of the largest firm is

50 percent.

Suppose an American worker can make 50 pairs of gloves or grow 300 radishes per day. A Bangladeshi worker, on the other hand, can produce 100 pairs of gloves or grow 200 radishes per day. The opportunity cost of one pair of gloves is

6 radishes for the United States and 2 radishes for Bangladesh

private insurance programs

65% of the U.S. population has private insurance, although few such programs pay all medical costs (protect agains unexpected events)

Which of the following could be considered a microeconomic issue?

A family decides to drive their child to school instead of relying on a school bus. Apple releases a new version of the iPhone. Coors Light packages alcohol in bottles that turn blue when cold. ALL OF THESE ARE EXAMPLES OF MICROECONOMIC ISSUES.

welfare state

A government that undertakes responsibility for the welfare of its citizens through programs in public health and public housing and pensions and unemployment compensation etc. (promote economic well being of citizens)

market

A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade

Which of the following is a barrier to entry in a monopoly market?

A patent on a new product.

A cartel is

A public agreement between firms or countries to restrict production and raise prices.

The equilibrium price of a good or service in a competitive market is

A reflection of the opportunity cost of producing the product.

economic theory

A statement or set of related statements about cause and effect, action and reaction

lorenz curve

A widely used graph of the distribution of income, with cumulative percentage of families plotted along the horizontal axis and cumulative percentage of income plotted along the vertical axis.

A firm realizes that the market price has fallen below its average total costs, and it is now earning a loss. What is the best action for the firm to take in the short run? A. Produce where MC = MR to minimize losses if P > AVC. B. Shut down if price is greater than average variable costs. C. Produce where MC = MR to minimize losses if P < AVC. D. Shut down.

A. Produce where MC = MR to minimize losses if P > AVC.

In an effort to lose weight, Sam posts flyers all over town that offer a reward of $50 to anyone who catches him eating unhealthy food. Sam's flyers are an example of: A. a commitment device. B. price-optimization theory. C. the law of supply. D. a way to deal with inconsistent costs.

A. a commitment device.

An example of a fixed cost for a shoe factory would be buying: A. a sewing machine, and would be included in total cost. B. a sewing machine, and would be excluded from total cost. C. leather to make the shoes, and would be included in total cost. D. leather to make the shoes, and would be excluded from total cost.

A. a sewing machine, and would be included in total cost.

Economies of scale refers to returns that occur when: A. an increase in the quantity of output decreases average total cost in the long run. B. an increase in the quantity of output increases average total cost in the long run. C. average total cost does not depend on the quantity of output in the long run. D. None of these is true.

A. an increase in the quantity of output decreases average total cost in the long run.

An essential characteristic of a perfectly competitive market is: A. buyers and sellers have no control over the market price. B. sellers are selling unique products. C. buyers have some control over the market price. D. sellers have some control over the market price.

A. buyers and sellers have no control over the market price.

A natural monopoly is a market in which a single firm: A. can produce, at a lower cost than multiple firms, the entire quantity of output demanded. B. owns a key resource or input into the production of the good. C. is protected from competition through government legislation. D. gains market share over time through aggressive tactics.

A. can produce, at a lower cost than multiple firms, the entire quantity of output demanded.

Which of the following statements is true about consumers and utility? A. consumers always seek to maximize utility. B. consumers always seek to maximize their income, not utility. C. consumers will either minimize or maximize utility depending on the situation. D. consumers try to maximize their profit.

A. consumers always seek to maximize utility

The prisoner's dilemma is a game of strategy: A. in which people make rational choices that lead to a less-than-ideal result for all. B. in which people make rational choices that lead to the ideal result for all. C. that leads everyone to be as well off as possible without making another worse off. D. that leads people to make irrational choices that lead to the ideal result for all.

A. in which people make rational choices that lead to a less-than-ideal result for all.

A dominant strategy: A. is the best one to follow no matter what strategy other players choose. B. exists in every game. C. is always the same for all players of a game. D. All of these statements are true.

A. is the best one to follow no matter what strategy other players choose.

For a firm in a perfectly competitive market with increasing marginal cost, if it produces where marginal cost exceeds marginal revenue: A. it should cut back production to increase profits. B. it should increase production to increase profits. C. it is producing a profit-maximizing quantity. D. The firm is not maximizing profits, but it is impossible to tell how quantity should be changed without more information

A. it should cut back production to increase profits.

Firms in perfectly competitive markets who wish to maximize profits should produce where: A. marginal revenue and marginal cost are equal. B. marginal revenue and market price are equal. C. marginal revenue and average revenue are equal. D. marginal cost and average cost are equal.

A. marginal revenue and marginal cost are equal.

When demand increases in a perfectly competitive market, in the short run __________________, and in the long run __________________. A. prices increase; supply increases B. prices increase; prices stay permanently higher C. quantity supplied increases; prices increase D. quantity supplied decreases; prices decrease

A. prices increase; supply increases

Adverse selection: A. results from unobserved characteristics of people or commodities. B. is about the actions of people. C. occurs after the parties have entered into an agreement. D. All of these statements are true.

A. results from unobserved characteristics of people or commodities.

When one person or company has to make a decision before the other in a game, it is called a: A. sequential game. B. commitment strategy. C. simultaneous game. D. prisoner's dilemma.

A. sequential game.

A dominant strategy is one: A. that is the best one to follow, no matter what strategy other players choose. B. in which a player is forced to choose given the rules of the game. C. in which a player must choose, even though it does not optimize his outcome. D. that is best to follow only for certain strategy choices of rivals.

A. that is the best one to follow, no matter what strategy other players choose.

Marginal cost of output is: A. the additional cost a firm will incur by producing one additional unit of output. B. the additional output a firm will get by employing one additional unit of input. C. the total cost a firm will incur by producing a given level of output. D. the costs that sit on the margin, that do not change regardless of the level of output.

A. the additional cost a firm will incur by producing one additional unit of output.

The revenue curves the monopoly faces are different from that a perfectly competitive firm faces in that: A. the marginal revenue curve is downward sloping instead of flat. B. the average revenue curve is no longer equal to price. C. the marginal revenue curve is now flat instead of downward sloping. D. The revenue curves are the same for a firm regardless of market structure.

A. the marginal revenue curve is downward sloping instead of flat.

Moral hazard is: A. the tendency for people to behave in a riskier way or to renege on contracts when they do not face the full consequences of their actions. B. when people engage in behavior that is considered highly desirable by the person who bears the cost of the behavior. C. when buyers and sellers have different information about the quality of a good or the riskiness of a situation. D. when buyers and sellers with the same information about the quality of a good or the riskiness of a situation agree to a somewhat shady deal.

A. the tendency for people to behave in a riskier way or to renege on contracts when they do not face the full consequences of their actions.

Procrastination can be seen as irrational behavior on the surface. One tool that behavioral economists have developed to account for this typical behavior is: A. the time inconsistency of our decision-making. B. the fungibility of money. C. thinking inconsistently about prices. D. None of these is a tool that has been developed by behavioral economists

A. the time inconsistency of our decision-making.

Utility is: A. useful in describing a person's preferences for one good over another. B. useful in comparing different people's preferences for a particular good. C. useful in predicting when to put an item on sale. D. an interesting concept, but not really useful for anything.

A. useful in describing a person's preferences for one good over another.

The graph below shows Tanya's weekly production possibilities frontier for doing homework (writing papers and doing problem sets). The vertical intercept (point A) is 8, and the horizontal intercept (point B) is 2. A: The slope of the production possibilities frontier is B: The opportunity cost of doing one problem set is C: The opportunity cost of writing one paper is

A: -4 B: 0.25 paper C: 4 problem sets

Your friend Sam has been asked to prepare appetizers for the university reception. She has an unlimited amount of ingredients and six hours in which to prepare them. Sam can make 360 mini-sandwiches or 180 servings of melon slices topped with smoked salmon and a dab of sauce per hour. A: Sam's opportunity cost of making one mini-sandwich is: B: Sam's opportunity cost of making one melon appetizer is: C: Suppose the reception has been postponed, so Sam has an extra four hours to prepare. The opportunity cost of making one mini-sandwich is now: D: Suppose the reception has been postponed, so Sam has an extra four hours to prepare. The opportunity cost of making one melon appetizer is now: E: Suppose Sam's friend Chris helps by preparing the melon slices, increasing Sam's productivity to 360 mini-sandwiches or 360 melon appetizers per hour. The opportunity cost of making one mini-sandwich is now: F: Suppose Sam's friend Chris helps by preparing the melon slices, increasing Sam's productivity to 360 mini-sandwiches or 360 melon appetizers per hour. The opportunity cost of making one melon appetizer is now

A: 0.5 melon appetizers B: 2 mini-sandwiches C: 0.5 melon appetizers D: 2 mini sandwiches E: 1 melon appetizer F: 1 mini-sandwich

Suppose that workers in a country can produce either yams or potatoes, and that all inputs are equally well-suited to the production of both goods. If all workers produce yams, 40 million yams can be produced. If all workers produce potatoes, 20 million potatoes can be produced. A: The opportunity cost of producing a potato is B: The opportunity cost of producing a yam is C: Suppose that there is an increase in resources that shifts the horizontal intercept to 40 million potatoes. The opportunity cost of potatoes is now

A: 2 B: 0.5 C: 1

Seller Willingness to sell one unit A $4 B $9 C $12 D $14 E $15 F $21 G $23 H $30 I $51 A: The quantity supplied at a price of $10 is B: The quantity supplied at a price $25 is

A: 2 B: 7

Vietnam and Ecuador both produce shrimp and rice. Vietnam can produce 140 thousand pounds of shrimp or 70 thousand pounds of rice in a year. Ecuador can produce 90 thousand pounds of shrimp or 15 thousand pounds of rice in a year. A: Vietnam's opportunity cost of producing one pound of rice is equal to B: Ecuador's opportunity cost of producing one pound of rice is equal to C: The two countries decide to specialize and trade with each other. The country that produces rice will sell one pound of rice for no less than _______ pounds of shrimp. The other country will pay no more than _______t pounds of shrimp for the one pound of rice.

A: 2 pounds of shrimp B: 6 pounds of shrimp C: 2 pounds of shrimp, 6 pounds of shrimp

The Red Cross and WIC (Women Infants Children program) both provide emergency food packages and first-aid kits to New York City homeless shelters. The table below shows their weekly production possibilities in providing emergency goods to NYC homeless shelters. Red Cross WIC Food packages 300 or 0 200 or 0 First-aid kits 0 50 0 20 NYC homeless shelters need a total of 20 first-aid kits per week. Currently, they get 10 kits from the Red Cross and 10 kits from WIC. With their remaining resources, how many food packages can each organization provide to NYC homeless shelters? A: red cross B: WIC

A: 240 B: 100

Katrina and David can both produce pizzas and loaves of bread. In one hour, Katrina can produce 10 pizzas or 15 loaves of bread. In one hour, David can produce 8 pizzas or 16 loaves of bread. Each person has 6 hours to spend baking. A: If Katrina and David split their time equally between pizza and bread, the total production of pizza will be ______ pizzas, and the total production of bread will be _______ loaves of bread. B: If Katrina and David each produce the good in which she or he has a comparative advantage, the total production of pizza will be _________ pizzas, and the total production of bread will be _______ loaves of bread.

A: 54, 93 B: 60, 96

Eleanor and her little sister Joanna are responsible for two chores on their family's farm, gathering eggs and collecting milk. Eleanor can gather 9 dozen eggs or collect 3 gallons of milk per week. Joanna can gather 2 dozen eggs or collect 2 gallons of milk per week. A: The family wants 2 gallons of milk per week and as many eggs as the sisters can gather. Currently, they collect one gallon of milk each and as many eggs as they can. How many dozens of eggs does the family have per week? B: If the sisters specialized, which sister should collect the milk? C: If the sisters specialized, how many dozens of eggs would the family have per week?

A: 7 dozen eggs B: Joanna C: 9 dozen eggs

When the price of gasoline was very high in the summer of 2008, several U.S. presidential candidates proposed implementing a national price ceiling to keep fuel affordable. A: How would this policy have affected producer and consumer surplus? B: This policy would cause total surplus to:

A: Producer surplus would fall, and individual consumer surplus may increase or decrease. B: decrease

Two students are assigned to work together on a project that requires both writing and an oral presentation. Steve can write 1 page or prepare 3 minutes of a presentation each day. Anna can write 2 pages or prepare 1 minute of a presentation each day. A: Who has a comparative advantage at writing? B: Suppose that Steve goes to a writing tutor and learns some tricks that enable him to write 3 pages each day. Now who has a comparative advantage at writing?

A: anna B: anna

You've been put in charge of a bake sale for a local charity at which you are planning to sell cookies and cupcakes. Suppose another volunteer is going to help you bake. Suppose you have a comparative advantage at baking cookies and the other volunteer has a comparative advantage at baking cupcakes. A: In this case, you should bake ________ and the other volunteer should bake _________. B: You should split up the baking because:

A: cookies, cupcakes B: there will be more cookies and cupcakes produced between you than if you each spent half of your time baking each good.

Assume the market for wine is functioning at its equilibrium. For each of the following situations, say whether the new market outcome will be efficient or inefficient. A: A new report shows that wine is good for heart health: B: The government sets a minimum price for wine, which increases the current price: C: An unexpected late frost ruins large crops of grapes: D: Grape pickers demand higher wages, increasing the price of wine:

A: efficient B: inefficient C:efficient D: efficient

You've been put in charge of a bake sale for a local charity at which you are planning to sell cookies and cupcakes. Suppose another volunteer is going to help you bake. A: If one of you has a comparative advantage at baking cookies, it means that one of you: B: Could one of you have an comparative advantage at baking both items?

A: gives up fewer cupcakes for each cookie baked. B: No, because each person can have a comparative advantage in only one task.

Suppose that the manager of a restaurant has two new employees, Rahul and Henriette, and is trying to decide which one to assign to which task. Rahul can chop 20 pounds of vegetables or wash 100 dishes per hour. Henriette can chop 30 pounds of vegetables or wash 120 dishes. A: Who should be assigned to chop vegetables? B: Who should be assigned to wash dishes?

A: henriette B: Rahul

New York City has a long-standing policy of controlling rents in certain parts of the city—in essence, a price ceiling on rent. A: The market for apartments is likely to be: B: The size of total surplus will be:

A: inefficient because the quantity supplied will be less than the quantity demanded. B: smaller than if there was not market restriction.

The Dominican Republic and Nicaragua both produce coffee and rum. The Dominican Republic can produce 20 thousand tons of coffee per year or 5 thousand barrels of rum. Nicaragua can produce 15 thousand tons of coffee per year or 3 thousand barrels of rum. Suppose the Dominican Republic and Nicaragua sign a trade agreement in which each country would specialize in the production of either coffee or rum. A: Which country should specialize in coffee? Nicaragua Correct B: Which country should specialize in rum? The Dominican Republic C: The minimum price at which these countries will trade coffee is _________ barrel of rum per ton of coffee and the maximum price is ________ barrel of rum per ton of coffee

A: nicaragua B: Dominican republic C: 0.200, 0.250

You've been put in charge of a bake sale for a local charity, at which you are planning to sell cookies and cupcakes. Suppose another volunteer is going to help you bake. A: If one of you has an absolute advantage at baking cookies or cupcakes, it means that: B: Could one of you have an absolute advantage at baking both items?

A: one of you can produce more cupcakes (or cookies) in total with the same amount of resources than the other person. Correct B: Yes, if one of you is more productive in both goods than the other. Correct

What would it mean for one of you to have an absolute advantage over a product?

Absolute advantage in production of one item means your can produce more of that one item in total with the same amount of resources than the other volunteer: greater productivity

What is marginal?

Additional or change in

What is Marginal Product?

Additional total product from additional units of labor. (Change in total) ------------------- (Change in labor)

What is the law of diminishing returns?

Additional units of variable inputs provide less and less additional product in the short run.

What is the law of diminishing marginal utility?

Additional units provide less and less additional utility over a short time period

In a monopoly, when does DWL occur?

After an increase in price.

Prior to 1996, the federal government administered a program called _____ which gave money to poor households with children.

Aid to Families with Dependent Children

Some economists have studied the effects of "lookism," or discrimination based on how attractive a person is. Which of the following are positions where the market might encourage lookism?

Airplane cabin crew Automobile Sales Hotel and Hospitality

What is a budget schedule?

All combos of 2 goods that spend all income.

Monopoly leads to: Dead weight loss to society -- no _______________ efficiency.

Allocative.

command economy

An economy in which a central government either directly or indirectly sets output targets, incomes, and prices

If two products are homogeneous, then they

Are identical.

What is the law of diminishing returns?

As more input is added to a fixed resource marginal product declines.

What is the law of Increasing Costs?

As more of same product is produced marginal opportunity costs increase

What is the law of demand?

As price decreases, quantity demanded increases

law of diminishing marginal utility

As the quantity of a good consumed increases the extra satisfaction gained decreases

The market supply curve for labor curve is upward-sloping because

As the wage rises, most workers are willing to work more hours.

Use the information below to construct a step-graph of the six sellers' willingness to sell. Seller Willingness to sell one unit ($) Joseph 25 Juan 20 Kristin 60 Peter 10 &Candice 25 Solomon 50

At a price of $10, one producer is willing to sell the good (Peter). At a price of $20, two producers are willing to sell the good (Peter and Juan). At a price of $25, four producers are willing to sell the good (Peter, Juan, Joseph, and Candice). At a price of $50, five producers are willing to sell the good (Peter, Juan, Joseph, Candice, and Solomon). At a price of $60, all six producers are willing to sell the good.

Use the information below to construct a step-graph of the six consumers' willingness to pay. Consumer Willingness to pay for one unit ($) Fred 8 Ann 2 Morgan 16 Andre 12 Carla 2 Hanson 4

At a price of $16, one consumer is willing to buy the good (Morgan). At a price of $12, two consumers are willing to buy the good (Morgan and Andre). At a price of $8, three consumers are willing to buy the good (Morgan, Andre, and Fred). At a price of $4, four consumers are willing to buy the good (Morgan, Andre, Fred, and Hanson). At a price of $2, all six consumers are willing to buy the good.

Production in the Short-run:

At least one input is fixed.

Suppose the market for gourmet chocolate is in long-run equilibrium, and an economic downturn has reduced consumer discretionary incomes. Assume chocolate is a normal good, and the chocolate producers have identical cost structures. - chocolate producers will ______ the market A. enter B. Exit

For a monopolist, total revenues: A. decrease and then increase as output increases. B. increase and then decrease as output increases. C. increase as output increases. D. decrease as output increases.

B. increase and then decrease as output increases.

A monopoly: A. is constrained because its decisions cannot affect market price. B. is constrained by demand. C. faces a horizontal demand curve. D. is constantly threatened by the entry of new firms.

B. is constrained by demand.

In a monopolistic market, consumer surplus is: A. higher than that of a competitive market. B. lower than that of a competitive market. C. the same as that of a competitive market. D. Any of these is possible.

B. lower than that of a competitive market.

A budget constraint: A. shows different bundles of goods that all yield the same total utility. B. shows different bundles of goods that all cost the same amount. C. shows different bundles of goods that all maximize an individual's utility. D. shows how much income is needed to maximize total utility.

B. shows different bundles of goods that all cost the same amount.

Total revenue is: A. the amount that a firm spends on all inputs that go into producing a good or service. B. the quantity sold multiplied by the price paid for each unit. C. the quantity produced multiplied by the cost of producing each unit. D. the amount that an individual gets paid over a specified period of time, typically annually

B. the quantity sold multiplied by the price paid for each unit.

Economic profits are calculated as: A. total revenue minus explicit costs. B. total revenue minus all costs, explicit and implicit. C. total revenue minus implicit costs. D. None of these is true.

B. total revenue minus all costs, explicit and implicit.

If a firm produces nothing, then its: A. fixed costs equal zero. B. variable costs equal zero. C. total costs equal zero. D. All of these are true.

B. variable costs equal zero.

If a firm produces nothing, then its: A. fixed costs equal zero. B. variable costs equal zero. C. total costs equal zero. D. All of these are true.

B. variable costs equal zero.

Barbie and Ken are married. Barbie stays home and cares for the children, while Ken spends his day at work earning money to support the household. Economists might conclude:

Barbie has the comparative advantage in caring for the children, and so the family benefits by Barbie staying home and Ken earning money at work.

In a contestable market,

Barriers to entry and long-run economic profits are low.

What is another name for min ATC?

Break-even price

Assume the apple market is competitive. If citizens want wages and the number of available jobs for apple pickers to increase, the best strategy would be to

Buy more apples

How do consumers maximize utilities?

By considering their utility from each good, the price of each good, and their budget

Which one is true about average cost (AC) and marginal cost (MC) curves: A. AC is U-shaped and MC is always increasing. B. ATC crosses MC at the minimum point of marginal cost curve. C. MC crosses ATC at the minimum point of average total cost curve. D. In long run they are the same.

C. MC crosses ATC at the minimum point of average total cost curve.

Altruism describes: A. a motive for action in which a person's utility is unaffected when another's utility increases. B. a motive for action in which a person's utility is decreased when another's utility increases. C. a motive for action in which a person's utility is increased when another's utility increases. D. a motive for action in which a person's utility becomes negative when another's utility increases.

C. a motive for action in which a person's utility is increased when another's utility increases.

Moral hazard: A. always happens when adverse selection is a problem. B. never happens when adverse selection is a problem. C. can happen when adverse selection is a problem. D. None of these statements is true.

C. can happen when adverse selection is a problem.

A monopolist can maximize profits by: A. selling as much as he can produce. B. producing at the level of output at which MR = 0. C. following the same rules as a perfectly competitive firm. D. maximizing revenue.

C. following the same rules as a perfectly competitive firm.

Dave and Buster play two games of tennis, then decide to go have lunch. Using the concept of utility to explain their choices, we can conclude that: A. they each won one game of tennis. B. the marginal utility from playing a third game must be negative for them. C. the marginal utility from playing a third game must be less than the utility from having lunch. D. All of these must be true.

C. the marginal utility from playing a third game must be less than the utility from having lunch

Procrastination can be seen as irrational behavior. One tool that behavioral economists have developed to account for this typical behavior is: A. thinking inconsistently about prices. B. the fungibility of money. C. the time inconsistency of our decision-making. D. None of these is a tool that has been developed by behavioral economists.

C. the time inconsistency of our decision-making.

Sadie has just eaten a donut and received a utility of 6. If she chooses to eat another donut: A. we can assume she will get at least a utility of 6 from this extra donut. B. we can assume she will get a utility of 6 from this extra donut. C. we can assume she will get less than a utility of 6 from this extra donut. D. we can assume Sadie's total utility will fall because of diminishing marginal utility.

C. we can assume she will get less than a utility of 6 from this extra donut.

Trade:

Can benefit both parties

Trade:

Can benefit everyone involved

The United States and Canada trade hockey skates and apple pie. The United States has an absolute and a comparative advantage in the production of apple pie, therefore:

Canada must have the comparative advantage in the production of skates

What are marginal costs?

Change in total costs from extra unit.

What is marginal revenue (MR)?

Change in total revenue from adding one-unit in output

What is Marginal Revenue?

Change in total revenue from adding one-unit in output.

What does substitution do?

Changes the amount of g/s we can buy.

A monopoly

Charges higher prices than competitive firms, ceteris paribus.

What is price discrimination?

Charging different people/firms different prices.

Suppose that, given the same number of workers, the United States can produce two times as many TVs or 20 times as many potatoes as Chile. Which of the following statements is true?

Chile should trade with the United States for potatoes because the United States has an absolute advantage in the production of potatoes. Chile should trade with the United States for TVs because the United States has an absolute advantage in the production of potatoes. The United States can benefit from trading TVs but not potatoes with Chile. NONE OF THESE STATEMENTS IS NECESSARILY TRUE

the global reduction in poverty has been heavily concentrated in

China

What is the money flow in the circular flow model?

Clockwise flow of income and consumption expenditures

Public-opinion polls in a small city have revealed that citizens want more resources spent on public safety, an annual fireworks display, and more community swimming pools. Which of these three citizen requests could be privatized by assigning property rights?

Community swimming pools. correct

What would it mean for one of you to have an comparative advantage over a product?

Comparative advantage in production means you have a lower opportunity cost than the other volunteer - not possible to have comparative advantage in two products

What is the rule of Maximizing within a budget?

Consume until MU of last dollar spent is the same for each g/s and spend ALL income. (MU of X) = (MU of Y) ----------- ----------- , (Price X) (Price Y) for any goods X & Y.

Market power is the ability of a firm to

Control the price and quantity supplied.

Correlation and causation can be confused in which of the following ways?

Correlation without causation Omitted variables Reverse causality ALL OF THESE

What is the real flow in the circular flow model?

Counterclockwise flow of economic resources and finished g&s

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. Which of the following statements can be said of Country A?

Country A has the comparative advantage in car production only.

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. After comparing each country's production possibilities curves, it is clear that:

Country A should specialize in cars and Country B should specialize in trucks, and both will benefit from trade

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. Considering both country's production possibilities frontiers, we can guess that:

Country A will specialize in cars, and be willing to give no more than 5 cars for each truck.

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. After examining the production possibilities of each country, we can surmise that:

Country A's opportunity cost of a car is lower than that of Country B, and so they should specialize in cars and trade.

Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year. Country A has 100 workers. Suppose a worker in Country B can make either 2 iPods or 10 tablets each year. Country B has 200 workers. Which of the following is true?

Country B should produce tablets and Country A should produce iPods, and they could benefit from trade.

Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year. Country B has 400 workers. Suppose Country A specializes in bananas, and Country B specializes in tomatoes. The limits to the terms of trade that Country B would find acceptable are:

Country B will accept no less than 3 bananas for each tomato.

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. Considering both country's production possibilities frontiers, we can conclude that:

Country B will specialize in trucks, and be willing to accept no less than 3 cars for each truck.

What is the most likely response by rivals when an oligopolist cuts its price to increase its sales?

Cut their prices.

When economic profits are negative, accounting profits could be: A. positive. B. negative. C. zero. D. All of these are possible.

D. All of these are possible.

For firms that sell one product in a perfectly competitive market, average revenue: A. is calculated by total revenue divided by total output. B. is equal to marginal revenue. C. is equal to the market price. D. All of these are true.

D. All of these are true.

For firms that sell one product in a perfectly competitive market, the market price: A. is constant, regardless of quantity sold. B. is equal to average revenue for a firm. C. is equal to marginal revenue for a firm. D. All of these are true.

D. All of these are true.

In the long run, firms in a perfectly competitive market: A. produce a quantity that maximizes profits. B. earn a zero economic profit. C. choose the level of output that minimizes average total costs. D. All of these are true.

D. All of these are true.

A monopoly: A. has no competition at all. B. has complete market control. C. restricts output to maximize profits. D. All of these statements are true.