Straighterline Micro Exam Q's

should; do

Normative economic principles are concerned with how people ______ make decisions while positive economic principles are concerned with how people ______ make decisions.

economies of scale in the provision of military defense

One justification for the creation of a federal level of government is

economic profits for a few firms for a short time

A cost-saving innovation in a perfectly competitive industry will lead to

decrease in labor demand.

A decrease in demand for a firm's output results in a(n):

3 hours

A firm pays Pam $40 per hour to assemble personal computers. Each day, Pam can assemble 4 computers if she works 1 hour, 7 computers if she works 2 hours, 9 computers if she works 3 hours, and 10 computers if she works 4 hours. Pam cannot work more than 4 hours day. Each computer consists of a motherboard, a hard drive, a case, a monitor, a keyboard, and a mouse. The total cost of these parts is $600 per computer. If the firm sells each computer for $625, then how many hours a day should the firm employ Pam to maximize its net benefit from her employment?

health maintenance organization

A group of physicians that provides medical services to members for a fixed annual fee is termed a

cartel

A labor union in a labor market is analogous to a(n) ______ in an output market.

all relevant costs and benefits are reflected in the market supply and demand curves

A market equilibrium is only efficient if

in the short run only

A monopolistically competitive firm is able to earn economic profit ____.

consumers

A particular product has inelastic demand and elastic supply. If the government imposes an excise tax on this product, most of the tax burden falls on ____.

a shortage of the good

A price ceiling that is set below the equilibrium price will result in

less than its variable cost

A profit-maximizing firm will shut down if, at the firm's profit maximizing level of output, its total revenue is ______

if the cost of making another unit is less than the revenue gained from selling another unit.

A rational seller will sell another unit of output

the same health outcomes as those with first-dollar coverage.

According to the Manning study, people with $1,000-deductible health care coverage had:

less

According to the textbook, Manning and his colleagues found that people with $1,000-deductible policies spent ______ on health care relative to people with first-dollar coverage.

a combination of a negative income tax and public employment.

According to the textbook, the best possible solution to the problem of poverty is:

10 percent

According to the textbook, the union wage premium for workers with the same amount of human capital is about ______.

the actions of independent, self-interested buyers and sellers

Adam Smith's theory of the invisible hand posits that the most efficient allocation of resources is often achieved by:

often

Adam Smiths theory of the invisible hand posits the actions of independent, self-interested buyers and sellers will ______ lead to the most efficient allocation of resources.

a benefit in the form of a good or service.

An in-kind transfer payment is:

expand output

An increase in the price a firm receives for its output will lead the firm to

her final salary and the least she would be willing to accept to star in the movie

Angelina Jolie's economic rent from starring in a movie is equal to the difference between

marginal benefit

The extra benefit that results from carrying out one additional unit of an activity is the ______ of the activity.

increase

As the differences in opportunity costs between the U.S. and its trading partners increase, the potential gains from specialization and trade ______.

more firms can cover their opportunity costs of producing the good.

As the price of a good rises:

30; 6

Assume that Dusty has $30 in income, the price of a loaf of bread is $1.50, and the price of a jar of peanut butter is $3. At the original income of $30, if the price of a loaf of bread decreased to $1 and the price of a jar of peanut butter increased to $5, then Dusty could buy a maximum of ______ loaves of bread or a maximum of ______ jars of peanut butter.

will make a trade

Assume that Joe is willing to produce another hamburger that costs $1 to make. Mary is hungry and is willing to buy a hamburger for $3. According to the No Cash on the Table Principle, Joe and Mary:

this is evidence of discrimination only if all factors affecting productivity are equal.

Assume that the average male wage rate is 20% higher than the average female wage rate. One can infer that:

shift into producing good Y

Assume that the production technology required to produce goods X and Y are very similar. If a firm that is producing good X notices that the market price of good Y is rising, it will

externalities and property rights

Beyond the provision of public goods, government exists to address

70; 42

Casey earns $150 a week and consumes only fish and shrimp. The price of fish is $3 a pound and the price of shrimp is $5 a pound. If Casey's income rises to $210, he could buy a maximum of ______ pounds of fish or a maximum of ______ pounds of shrimp.

the difference between the most a buyer would be willing to pay for a product and the price actually paid.

Consumer surplus measures

compensating wage differentials

Differences in wage rates associated with differences in working conditions are called:

$4

If an individual consumer is willing to pay $11 for one unit of a good but is able to purchase it for $7, then his or her consumer surplus from the purchase of that unit would be

more

During Thanksgiving you participated in a pumpkin-pie eating contest. You really enjoyed the first two pies, the third one was okay, but as soon as you ate the fourth one you became ill and lost the contest. You got ______ utility from eating the first pie than from eating the third pie.

there are more resources available to achieve other goals

Efficiency is an important goal because when markets are efficient

the public expenditures financed by the tax lead to a big enough increase economic surplus

Even if a tax imposed in a market generates a loss in surplus for the participants in that market, the tax could still increase economic efficiency if

marginal cost of medical care to the insured.

First-dollar health insurance reduces the:

all of the insured's expenses are covered

First-dollar insurance coverage means that:

lower

For Outback Steakhouse, seating capacity is limited in the short run. In the long run, they can add as many seats as they want. Therefore, the price elasticity of supply for meals at Outback would be ______ in the short run than in the long run.

3

If 20% increase in the price of a good leads to a 60% decrease in the quantity demanded, then what is the price elasticity of demand?

efficient point

If a country is producing at point where an increase in the production of one good requires a reduction in the production of another good, then it must be producing at an:

extra benefit of the last unit produced is greater than the extra cost

If a perfectly competitive firm can sell each unit of output for $9, and the marginal cost of the last unit produced is $8.50, then the

the firm profits by hiring that worker Correct

If a pizza business finds that the marginal revenue product of an additional worker is greater than the marginal resource cost of that worker, ______.

a vertical merger

If a pizza restaurant were to merge with a firm that manufactures pizza ingredients, this merger is an example of ____.

are too small to cover the claims generated by their workers.

If all firms were to pay the same premium per worker into the workers' compensation system, then firms with high injury rates would pay premiums that:

elastic

If consumers can easily switch to a close substitute when the price of a good increases, demand for that good is likely to be

a regressive tax

If low-income households spend a larger share of their income on food than do high-income households, then a tax on food is

the problem is best addressed through federal regulation

If one state is suffering from acid rain as a result of sulfur dioxide emissions from the industries in a neighboring state, then

the value workers place on the reduction in workplace injuries is at least $1,000 per year.

If the cost to firms of reducing workplace injuries by 1 percent is $1,000 a year for each worker, then it is efficient for firms to reduce workplace injuries by 1 percent if:

normal goods.

If the demand for computers shifts to the right as consumers' incomes rise, computers are

raise

If the demand for electricity is inelastic, then if the local utility wants to increase its total revenue, it should _______ its price.

keep the price of wheat above the equilibrium price

If the government sets up a price support program for wheat, it attempts to _____.

the United States relaxed its immigration laws.

If the labor market in the United States is perfectly competitive, the labor supply curve would shift to the right if:

perfectly inelastic

If the percentage change in quantity demanded is zero for any percentage change in the price of the good, demand is classified as

(P/Q) × (1/slope)

If the quantity demanded of a good is Q when the price for the good is P, the price elasticity of demand for that good at that point is

makes some workers worse off

Imposing a minimum wage above the equilibrium wage

centralized economy

In Cuba, a bureaucratic committee makes the production decisions for the country's firms and factories. Therefore, Cuba is an example of a

computers are complements.

In the market for office workers:

first-dollar insurance coverage

Insurance that pays all expenses generated by the insured activity is known as

-$29.50

Jen is offered a job answering the phone in the State U economics department during lunchtime, from noon to 1 p.m., Tuesdays and Thursdays. Her reservation wage for this job is $15 per hour. Now suppose the department chair announces that the $150 per week earnings from the job will be divided equally among Jen and 299 other students in the department. How much economic surplus will Jen enjoy each week if she accepts the job?

reservation price.

Jessica's marginal cost for producing a pitcher of lemonade is $0.25. Therefore, $0.25 can also be called her:

pay more than otherwise similar jobs.

Jobs in which there is a higher risk of injury or death will:

more than $40,000 but less than $60,000

Josh pays $6,000 in taxes and earns $60,000. Maggie pays $4,000 in taxes. If the tax system is progressive, then Maggie earns

$40,000

Last year Christine worked as a consultant. She hired an administrative assistant for $15,000 per year and rented office space (utilities included) for $3,000 per month. Her total revenue for the year was $100,000. If Christine hadn't worked as a consultant, she would have worked at a real estate firm earning $40,000 a year.

7

Laura's total utility from consuming 8, 9, and 10 bonbons is 35, 42, and 45, respectively. Her marginal utility from the 9th bonbon is

$225; $450

Leo is a welfare recipient who qualifies for two means-tested cash benefit programs. If he does not earn any income, he receives $225 from each program. For each dollar he earns (which his employer is required to report to the welfare agency), his benefit from each program is reduced by 75 cents until the benefit equals zero.In the absence of any earnings, Leo will receive ______ in cash from each program, for a total of ______ in benefits.

$43 per hour

Matt is offered a job driving the campus shuttle bus from 4 p.m. to 6 p.m. each Monday. His reservation wage for this job is $7 per hour. If the campus transportation director offers Matt $50 per hour, how much economic surplus will Matt enjoy as a result of accepting the job?

-$6.50 per hour

Matt is offered a job driving the campus shuttle bus from 4 p.m. to 6 p.m. each Monday. His reservation wage for this job is $7 per hour. Now suppose the director offers Matt $50 per hour, but also announces that Matt's earnings will be divided equally among Matt and the 99 other students who live in Matt's dorm. What will be Matt's economic surplus from accepting the job?

after World War II

Medical insurance covering routine medical care became common

$5,000,000

MegaCable and Acme are competing for an exclusive contract to provide the city of Dustin with cable television for the next year. The firm that wins the contract will earn an economic profit of $5 million. The contact will be awarded to the firm that spends the most on lobbying. If both firms spend the same amount on lobbying, then the winner will be determined by a coin flip, so each will have a 50 percent chance of winning. The socially optimal amount for each firm to spend on lobbying is ______.

an implicit cost

Normal profit is ____.

there is only so much that can be produced using additional variable inputs when some factors of production are fixed

One reason that variable factors of production tend to show diminishing returns in the short run is that

increased; was reduced

Pepsi One is a close substitute for Diet Coke. When Pepsi introduced Pepsi One, the price elasticity of demand for Diet Coke ______ and Coke's ability to raise revenues through price increases ______.

unattainable; attainable

Points that lie outside the production possibilities curve are ______, and points that lie inside the production possibilities curve are ______.

the coach is able to earn economic rent due to his unique talents

Professor Plum, who earns $100,000 per year, read in the paper today that the university pays its basketball coach one million dollars per year in exchange for his agreement to remain at the university for at least three more years. The coach earns more than Professor Plum because

more; upward

Sellers tend to offer _______ for sale as price increases, and so the supply curve is ______ sloping.

payoff matrix

Shows the payoffs for each possible combination of strategies

prices will not ration medical care so some other rationing method will be used

Some people have argued that the government should provide medical care to everyone. Under this system

reduce total economic surplus

Subsidies are most likely to

inefficient point

Suppose Colin brews beer and makes cheese. If Colin can increase his production of beer without decreasing his production of cheese, then he is producing at an:

economic surplus; $3,000

Suppose Mary is willing to pay up to $15,000 for an used Ford pick-up truck. If she buys one for $12,000, her ______ would be ______.

collective

Suppose Stan owns a piece of property with a large lake. Initially, Stan and his family were the only people who swam in the lake. Then Stan started selling tickets to people who wanted to go swimming in the lake. When Stan died, he left the lake and the land it was on to the state, stipulating that the lake be left open to the public for swimming. Due to the lake's remote location, it was never crowded.

buy less tea and more scones

Suppose a cup of tea costs $0.60 and a scone costs $1.20. If Edith spends all of her income on these two goods, and at her current level of consumption, she receives a marginal utility of 6 utils from the last cup of tea she buys and a marginal utility of 24 utils from the last scone she buys, then Edith should:

positively related to the list price of the good

Suppose a retail store was offering 10% off list prices on all goods. The benefit of the 10% savings is:

Dan should specialize in sandwiches, and Tracy should specialize in smoothies.

Suppose it takes Dan 5 minutes to make a sandwich and 15 minutes to make a smoothie, and it takes Tracy 6 minutes to make a sandwich and 12 minutes to make a smoothie. Which of the following statements is correct?

purchase less than 20 units of good X and more than 25 units of good Y

Suppose that Cathy spends all of her income on 20 units of good X and 25 units of good Y. Cathy's marginal utility from the 20th unit of good X is 9 utils, and her marginal utility from the 25th unit of good Y is 19 utils. If the price of good X is $0.50 per unit and the price of good Y is $1.00 per unit, then to comply with the rational spending rule, Cathy should:

The U.S.'s production possibilities curve to shift outward faster than Nepal's.

Suppose that Nepal invests less in new factories and equipment than does the United States. This will likely cause:

2000; 3750

Suppose that at a price of 25 cents per orange, 500 consumers each demand 4 oranges, and at a price of 20 cents per orange, 750 consumers each demand 5 oranges. Therefore, the market demand for oranges is ______ at a price of 25 cents per orange and ______ at a price of 20 cents per orange.

increase the earnings of workers as a group

Suppose the elasticity of labor demand is less than 1 in absolute value. Imposing a minimum wage above the equilibrium wage will

relevant cost of production

Suppose the production of cotton causes substantial environmental damage because the pesticides used by cotton farmers often make their way into nearby rivers and streams, and are very harmful to fish and other wildlife. Economists would consider the environmental damage that results from the production of cotton to be a(n)

More drivers would drive on the non-toll road, making the toll road less congested

Suppose there are two parallel highways between two cities with approximately equal traffic. What would you expect to happen if the state began charging tolls to drive on one of those highways?

Both transactions, the one at the University ticket window as well as the sale at the concert entrance, occurred in markets.

Suppose you bought three tickets to a concert in advance at the University ticket window. At the last minute one friend cancelled, so you could use only two of those tickets. You scalped, or sold, the third ticket just outside the entrance to the concert for slightly more than the price you had originally paid. Which transaction occurred in a market?

in equilibrium, all opportunities have been exploited

The No Cash on the Table Principle asserts that:

marginal product of labor

The additional output a firm gets from hiring an additional unit of labor is the

maximum amount the buyer would be willing to pay for it

The buyer's reservation price of a particular good or service is the

is perfectly inelastic

The championship game will be held next weekend in your college's 40,000-seat stadium. The supply of tickets to the game:

producer surplus

The cumulative difference between the price producers actually receive for a good and the lowest price for which they would have been willing to sell it is called

producer surplus

The difference between the price a seller actually receives for a good and the seller's reservation price is

the difference between the benefit and the cost of taking an action

The economic surplus of an action is:

hiring low-wage workers overseas reduces firms' costs.

The fundamental reason firms outsource is that:

rivals ignore price increases but match price decreases

The kinked demand curve for a firm in an oligopoly market suggests that _____.

rises, less of the activity will occur

The law of demand indicates that as the cost of an activity:

its lowest point Correct

The marginal cost curve intersects the average total cost curve at _____

$32

The marginal product of the 14th worker is 8 and the firm sells its output for $4 per unit. If labor is the only variable cost, then the value of the 14th worker's marginal product is

more information because the Internet has lowered the cost of gathering information.

The number of U.S. households with access to the Internet is growing rapidly. Compared to 50 years ago, one would predict that when considering a major purchase, people today will gather:

larger the higher the elasticity of demand for medical care

The overconsumption of medical care due to first-dollar health insurance coverage is:

the demand for her large pizzas is elastic with respect to price

The owner of a pizza shop observes that when she raises the price of a large pizza, her total revenue decreases, and when she lowers the price of a large pizza, her total revenue increases. This suggests that:

doesn't always lead to an efficient outcome

The phrase "smart for one, but dumb for all" refers to the idea that the individual pursuit of self-interest

substitution effect of a price change.

The quantity of Revlon nail polish demanded by Jen decreased after the price of Revlon nail polish increased. Jen decides to find a cheaper brand of nail polish. This is called a(n):

they fear ending up in a disadvantaged position themselves

The reason people in Professor Rawls' thought experiment would choose an equal distribution of income is that:

allocative

The role that prices play in directing resources away from overcrowded markets and towards markets that are underserved is known as the ______ function of price

total surplus

The sum of producer surplus and consumer surplus is

increase the quantity supplied of a good when its price rises.

The supply curve illustrates that firms:

of the law of diminishing returns

The value of marginal product curve is downward sloping because

inconsistent reasoning; saving $20 is saving $20

Tony notes that an electronics store is offering a flat $20 off all prices in the store. Tony reasons that if he wants to buy something with a price of $50, then it is a good offer, but if he wants to buy something with a price of $500, then it is not a good offer. This is an example of:

social regulation

What type of regulation is the Consumer Product Safety Commission involved in?

intervene if the benefit of doing so exceeds the cost

When a negative externality is present in a market, the government should

few close substitutes

When the demand for a good is inelastic, that good is likely to have

The opportunity cost of picking up cans is higher for wealthy people than for poor people.

Which of the following best explains why you are more likely to see a poor person than a wealthy person picking up aluminum cans to sell?

Bill Gates purchasing the Mona Lisa for $5 billion

Which of the following is an example of the rationing function of price?

A high minimum income level with a low benefit reduction rate

Which of the following welfare plans reduce poverty the most?

the cost of providing 24-hour service is much lower today.

With ATMs, it is possible to retrieve cash from the bank at any time. One hundred years ago, one could only get cash from the bank during business hours, say, 9 am to 3 pm. The present availability of 24-hour service has arisen because:

the long-run supply of food is perfectly inelastic

You read online that, at current rates of production, the yearly world supply of food is sufficient to feed the projected 2050 population of earth, but that after 2050 there will be massive starvation. This prediction appears to assume that:

Last semester's grades were lower than your overall GPA.

Your scholarship depends on your maintaining a 3.5 cumulative GPA. Your GPA for last semester was 3.6, which brought your cumulative GPA down. What must be true?

Explicit costs

measure the payments made to the firm's factors of production