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In the example presented by this graph, what is total output when the fifth worker is added? See Figure.

52 meals served per hour

Suppose the government decides the Big Mac is an American tradition. To recognize the value of the Big Mac, government passes legislation making it illegal to sell a Big Mac for less than $8. The equilibrium price of a Big Mac is $4. As a result of the government legislation, there will be

a excess supply of big macs

You are an owner of a restaurant. In an attempt to increase sales, you have lowered prices by 10%. Which of the following is a NOT consequence of this price change?

The supply of restaurant meals will increase

If you were willing to pay $3.05 for a gallon of milk purchased at the grocery store but were required to pay only $2.05, you have gained

a consumer surplus amounting to $1.00

Over the long run, a monopolist

can continue to make economic profits if it can maintain a monopoly and keep competitors from entering the market

The cost of a firms inputs increased by 40%. As a result, output increased by 25%. This firm experienced

diseconomies of scale

For a consumer with insurance, the incentive to obtain more medical care is _____ as the marginal cost of additional care is _____.

high;low

Tim Taylor is very reckless, but he neglected to tell his insurance provider when buying his policy. Over the last year, he used his insurance to pay for two broken arms, stitches several times, and a broken leg. When renewing Tim's policy, his insurance provider should require ____________ due to the _______________.

higher co-payments; moral hazard problem

Compared to perfect competition, monopolies charge

higher price

What is the minimum wage that employees can receive in California?

more than $7.25 per hour

Price discrimination exists when a firm sells the same good at __________________ to different groups of customers.

more than one price

Which of the following is NOT an example of price discrimination at the movies?

movie genre

The price of a competitive firm's product is $50 per unit. The firm currently has marginal cost equal to $40. To maximize profits this firm

should increase its output

On average, if the price of health care increased, the quantity demanded for health care would

decrease by less than the price increase.

If competitive firms experience a loss, over the long run there will be a(n)

decrease in market supply to increase the market price

Earned Income Tax Credits

decrease tax liability and are phased out.

What effect would tougher immigration laws have on labor supply?

decrease the supply of labor

According to the law of demand, what is the relationship between price and quantity demanded?

inverse

A firm that wants to employ workers should

hire workers as long as the wage is less than the value of the marginal product.

For which of the following goods is supply the most responsive to a change in price?

hot dog vendor

Based on the figure below, Firm A has _______ product differentiation than Firm B.

In 2010, more than 50% of health care costs in the United States come from

physicians/clinics and hospital care.

A change in which of the following will cause a change in the quantity demanded of coffee?

price of coffee

The Clayton Act of 1914 added to the list of activities that were deemed socially detrimental, including

all of these

You have an eight-sided fair die. You can roll the die with a chance to win $1,000 if it lands on 5, or take the sure thing of $100. The expected value of the game is

$125, and you take the sure thing if you are risk averse.

College logo water bottles priced at $12 sell at a rate of 30 per week, but when the bookstore marks them down to $8, it finds that it can sell 45 water bottles per week. What is the price elasticity of demand for the water bottles?

-1.60

Suppose that the market equilibrium price for a good is $1. A nonbinding price ceiling in this market will result in a price set at

After a recent study showed significant benefits to the use of public transportation, government officials have hired your consulting firm to increase the use of public transportation. In the initial meeting between the government officials and your consulting firm, some ideas for increasing demand were discussed. Three of those suggestions are listed below. Suggestion 1. Reduce the price of public transportation Suggestion 2. Increase the price of private transportation by increasing tools Suggestion 3. Offer monthly and yearly passes that reduce the price paid per ride Based on your knowledge of the law of demand, which suggestions would you recommend?

The table below shows the willingness of three people to sell their tutoring services. Calculate the producer surplus for Frank if the price of the tutoring is $18 per hour.

8.hr

Using the information provided above, we know that in Alabama approximately _____________ decks of playing cards were sold in 2011.

900,000

Which of the following firms operates as a monopoly?

A local water utility

Efficiency wages are set

above he equilibrium wage and create a surplus of labor

In order for a price floor to be binding, it must be set

above the equilibrium price

Which of the following causes difficulties in measuring income inequality?

all

Look at the provided figure. What area(s) represent the tax revenue after the tax (select all that apply)?

b c

Demand for a good is elastic if quantity demanded ________________ in response to a price change.

changes significantly

Suppose consumers suddenly start preferring hamburgers to fish. How does this affect consumer demand for fish?

demand decreases

Suppose the cost of processing fish increases. How will this affect the demand for fish?

demand will not change

A shift in the labor supply curve can be caused by

demographic changes, immigration, migration, and other employment opportunities

The type of demand that factors of production are said to have is

derived demand.

The ______________ paradox was described by Adam Smith in 1776.

diamond-water

When solving the diamond-water paradox we notice that the marginal utility of

diamonds is greater than the marginal utility of water.

The value of the marginal product curve slopes _________ due to _______________

downward, diminishing marginal product

The consumer surplus for water is

greater than that for diamonds because water is essential.

Since the equilibrium wage for teachers is ____________ the new minimum wage, we would expect the number of teachers employed to _____________________ and the equilibrium wage for teachers to ______________________.

higher than; stay the same; stay the same

Under monopolistic competition, there are:

no long-run barriers to entry of new firms.

Difficulty in assessing probabilities is best exemplified by

none of these

nonrival and exludable

A Nash equilibrium occurs when an economic decision maker has ______ to gain by changing strategy unless it can collude.

nothing

Wage discrimination and the earnings gap are often misinterpreted because

of human capital differences between new entrants and mid-career workers.

Alex Rodriguez made $27.5 million a year in 2007. This large disparity in salary compared to the average player in the major league is because

of marginal differences in talent.

What must happen to the market price in order for a shortage to be eliminated?

price must rise

Which of the following are exogenous factors in a student's decision about whether to attend a particular college? Select all that apply.

price of tuition classes/majors offered location of the school price of room and board

Refer to the following graph. The demand curve slopes downward because

prices and quantity demanded move in opposite directions.

The chapter discusses how cost-benefit analysis is used to determine whether the benefits of providing a ______________ outweigh the costs.

public good

For which type of good does the textbook describe the use of cost-benefit analysis?

public goods

At a price ceiling of $0.50, this market is experiencing a(n)

shortage

A duopoly is a market in which

there are two producers of a product

Suppose that government officials in Arkansas decide to repeal the tattoo tax. If this tax is eliminated, we would expect the total surplus to ___________________ because the deadweight loss _________________________.

increase;decreases

Suppose a consumer consumes only diamonds and water, and the price of diamonds increases. All else being equal, a consumer's marginal utility for diamonds

increases, and the marginal utility for water decreases.

For someone in the bottom 20% of income-earners to have a greater chance of income mobility, they must be the

marginal poor

Look at the provided figure. What area(s) represent producer surplus after the tax (select all that apply)?

Look at the provided figure. What area(s) represent the deadweight loss after the tax (select all that apply)?

e f

Firms producing an identical product in a competitive market are producing at a level of output that maximizes profit. The current market price is $4.50 per unit and the firms are producing at a long-run average cost of $3.50 per unit. Over the long-run one should expect

entry of new firms into this market

The United States is likely to get increasingly ________ marginal health benefits as it increases its quantity and spending of health care because of ______________.

less; diminishing returns

Scarcity refers to the __________ nature of society's resources.

limited

Under monopolistic competition, a market has

many firms

What is key to solving the diamond-water paradox?

marginal utility

A price ceiling is a legally imposed ___________ price.

maximum

A price floor is a legally imposed ___________ price.

minimum

Apartments in New York City are priced higher than those 15 miles from the city because of

of the difference between what a factor of production earns and what it could in earn in the next- best alternative.

Economists use ____________ as a measure of the relative level of satisfaction when someone consumes a good or service.

utility

The supply curve for land is ordinarily

vertical.

Austin, Jensen, Matthew, and Walker can all produce matches, brushes, cans, and shirts. The table below identifies how many of each good they can make in a day if they devote themselves to producing only that good. Who has the absolute advantage in brushes?

walker

Which of the following goods in relatively inelastic?

water bill you pay

The opportunity cost of attending college is likely to be highest for a high school graduate

who is capable of competing successfully in professional tennis

Examine the graph. Sellers who are unable to sell their good at a price floor of $6, may still be able to sell their good at a price of

A competitive firm maximizes profit at an output level of 500 units, market price is $24, and ATC is $24.50. At what range of AVC values for an output level of 500 would the firm choose not to shut down?

AVC < $24

In the market for desk lamps, which of the following will increase demand? Select all the answer options that apply.

An increase in income if the good is an inferior good If the price of floor lamps increases and floor lamps are a substitute good An increase in income if the good is a normal good

As the owner of a hotel, you have decided to lower the price for all rooms in the month of October. What should you expect to happen?

As the price is lowered, the quantity demanded of rooms will increase

Which of the following goods is perfectly elastic?

photocopies that cost 11 cents per copy at one copy shop, when all of the shop's competitors charge 10 cents per copy

In the graph below, which point represents quantity sold by monopolistically competitive firms in the long run, after advertising?

point 3

You own a pizza restaurant that employs workers at the minimum wage. Suppose the minimum wage increases. What is the likely result?

The quantity of labor demanded falls.

You're an entrepreneur and had a great idea to sell shoes that have springs installed in them to make walking easier. The development costs were so high that the shoes are priced 15 times higher than shoes without springs. As a result, many of the shoes have gone unsold. What would be a possible event that could eliminate or reduce the disequilibrium in the market for shoes?

There is an increase in income and "spring shoes" are a normal good

Which point on the graph below is unattainable because the economy does not have enough resources to produce it?

point E

Which point on the graph below represents an inefficient use of society's resources?

point F

You are normally a risk-averse person. However, you need some extra money this month to make ends meet. You decide to play the Powerball lottery. Economists would say that you have had a

preference reversal.

Monopoly power measures the ability to set the ________ for a good.

price

The graph below illustrates the effect on the production possibilities frontier if the population grows, making more workers available. This new production possibilities frontier reflects the ability of society to

produce both more wings and more pizza.

The difference between the willingness to sell a good and the price that the seller receives for it is

producer surplus

Under monopolistic competition, firms produce

products that are somewhat differentiated.

If you prefer a gamble with a lower expected value and potentially higher winnings, you are

a risk taker.

In order for a price ceiling to be binding, it must be set

below the equilibrium price

What would we have to assume before constructing a society's production possibilities frontier?

both A and B are true

Which of the following conditions must be met for price discrimination to occur?

both a and b

Which of the following conditions must be met for a single seller to become a monopolist?

both a and b are true

Suppose that at the current level of production, the price of a monopolist's product is equal to $15 per unit. Marginal revenue is equal to $10 per unit, and marginal cost is equal to $15 per unit. This monopoly

can increase its profit by producing and selling fewer units of its product.

The table below shows the daily production potential of two workers, if they devote all their time to making either pizza or wings. Who has the absolute advantage at producing wings?

debra winger

Suppose that the federal government places a binding price floor on chocolate. To help support the price floor, the government purchases all chocolate that consumers do not buy. If the price floor remains in place for a number of years, what do you expect to happen to the quantity of chocolate demanded by consumers?

it will decrease

it will increase

Endogenous factors in a model are factors that we

know about and can control

A monopolist is ______ likely to advertise than a monopolistically competitive firm.

less

In a perfectly competitive market, the price of the product is

set by market supply and demand

In a competitive market, the price of the product is

set by market supply and demand.

If the marginal utility of good 1 is 15 and its price is $3, and the marginal utility of good 2 is 12, and its price is $4, then the consumer

should increase his or her consumption of good 1.

Oligopoly occurs in markets with

small number of large firms

Externalities are

sometimes negative and sometimes positive

For which of the following goods would you expect demand to be the most responsive to a rise in price?

spaghetti

Which of the following is NOT a solution to correct for negative externalities?

subsidies

Profits and losses are determined by

subtracting total costs from total revenue

Sue likes brownies. However, Sue notices that the more brownies she eats the less satisfaction she receives from each extra brownie. We can say that Sue is experiencing ___________________ from each extra brownie.

diminishing marginal utility

The bandwagon effect arises when a buyer's preference for a product ____________ as the number of people buying it ______________.

increases,increases

In which time period is demand most elastic?

long run

If the demand for labor increases, there will be a

shortage of workers, and the equilibrium wage will rise.

Suppose that a group of die-hard sports fans is upset about the high price of tickets to many events. As a result of their lobbying efforts, a new law caps the maximum ticket price to any sporting event at $50. Assume there are a fixed amount of seats in the stadium, all seats are available to be sold, and the price of tickets before the ceiling was at an equilibrium point above $50. The price ceiling will create a ___________ of tickets, which will be greater if demand is more _______________. _________ people will attend the events.

shortage;elastic;the same number of

In the market for breakfast cereal, the market is currently in equilibrium. Suddenly there is a storm that destroys the wheat that farmers had been growing for the cereal manufacturer. What will happen to the cereal market after the storm?

supply will decrease

At a price of $15, this market is experiencing a(n)

surplus

Farm price supports are an example of a price floor, in this case the market for farm products. A binding price support will cause

surplus of farm products

A change in which of the following will cause a change in the quantity supplied of coffee?

the price of coffee

Suppose university officials felt the price of football tickets at your school are too expensive and decide to limit the price the athletic department can charge for a ticket to a single game. What will result from this decision? Select all that apply.

the quality of facilities will decrease a shortage of tickets will exist

Suppose the price of an iPod decreases and the price of HD TVs remains the same; what noticeable effect(s) occur(s)?

the substitution effect and real-income effect, if there is a noticeable change in purchasing power

Your friend suggests that you play the lottery, and you win. Your friend wants some of the winnings, since it was her suggestion. You offer her 0.005% of $10,000 or nothing. This is an example of ____________ and your friend will ____________.

the ultimatum game; almost always reject the offer

When comparing the income inequality ratio (top 20% / bottom 20%) across nations we can say that the United States has a lower ratio compared to Namibia because

there are more low-income earners in Namibia.

Refer to the graph below. The supply curve is _______________ driven by the law of supply.

upward sloping

While at the grocery store you see two packages of beef. One package has a label that reads 90% lean. The other package has a label that reads 10% fat. You opt for the 90% package. This is a classic example of

the framing effect.

In the long run, costs are

variable only

At a price of $150, a cell phone company manufactures 200,000 units. At a price of $250, the company produces 400,000 phones. What is the price elasticity of supply?

1.33

Suppose that the equilibrium price of a mountain bike is $250. The government decides that people have a right to affordable mountain biking. To protect this new right, government passes a law setting a maximum price of $150 for a bike. As a result of the legislation, and in the absence of a black market, the price of a mountain bike will be

150

Now consider Discriminating Fliers, which has a monopoly on the route it flies but decides to charge two prices for its flights. It charges $400 for midweek flights or last-minute bookings, and it charges $200 for weekend flights and to customers who book in advance. Calculate Discriminating Fliers' profits.

25,000

Billy Bob runs a seafood restaurant. Last year he earned $50,000 in revenue. He had explicit costs of $20,000. Billy Bob could have made $30,000 working for the county and could have received an additional $20,000 if he rented out his building and equipment. Calculate Billy Bob's accounting profit.

30,000

Which of the following types of cost always decreases with increasing output? Refer to the figure below.

AFC

Which of the following is an example of adverse selection?

Jill has a preexisting medical condition and neglects to tell her insurance provider when she buys her policy.

Suppose an airline determines it can charge different prices to people traveling on business or because of an emergency and leisure travelers who travel for pleasure. The airline's goal is to increase total revenue. Based on the price elasticity of demand for each type of travel, how should it adjust its prices?

Lower the price for leisure travelers and raise the price for business travelers.

. At a price of $5, this market is experiencing

a shortage

a smaller number of mountain bikes sold than before the legislation

The demand for fresh vegetables is

relatively elastic.

Over a longer period of time, supply becomes

relatively more elastic.

To maximize profits, firms expand output until

MR = MC

A consumer is in equilibrium when consuming two goods when which of the following holds?

MUa/ Pa = MUb/ Pb

Which of the following statements is normative?

Microeconomics is a great class.

Rent control is an example of

a price ceiling

In an imperfect market, individual firms

are able to influence the price of their product.

Incentives can be classified as

both of these

50,000

Which statement best exemplifies a status quo bias?

Employees at a company refuse to upgrade to new equipment because it would require over 30 hours of work to learn the more productive equipment.

Flour is a factor of production of cupcakes. How will an increase in the price of flour affect the market for cupcakes?

Overall supply will decrease

There are a number goods that over time, for a variety of reasons, transition from being a normal good to an inferior good or from being an inferior good to a normal good. One such example of a good that experienced this transition is a CRT television, also known as a tube television. In the 1980s, more income for a household usually resulted in more CRT TVs being purchased. Today, more CRT TVs are purchased by households that have experienced a reduction in income. Why does this happen?

The CRT TV becomes an inferior good because the good becomes perceived as being of a lower quality than a flat-screen TV

Suppose we have a two-person world with only Shaq and his friend, LeBron. Suppose that Shaq can move 40 boxes in an hour or could bake 20 cookies in an hour. Suppose that LeBron could move 20 boxes in an hour or bake 5 cookies in an hour. Is it to their advantage to trade?

Yes, trade is advisable. Shaq should make cookies while LeBron moves boxes, since Shaq has a comparative advantage in making cookies, and LeBron has a comparative advantage in moving boxes.

Look at the provided figure. What area(s) represent consumer surplus after the tax (select all that apply)?

Look at the provided figure. What area(s) represent consumer surplus before the tax (select all that apply)?

a b e

The income inequality ratio can be used to determine how much more income the top 20% of households has compared to

all of these

an excess demand for mountain bikes

Based on the graph below, at a price of ___/hr neither Frank, Mitch, nor Beanie will tutor, but at a price of ___ /hr, all three of them will tutor.

below 10,above 30

Predatory pricing occurs when firms deliberately set their prices ___________________, with the intent of driving rivals from the market.

below average variable costs

Based on the payoff matrix illustrated in Figure 13.1 on page 393, what is the Nash equilibrium for the two suspects?

both suspects testify

Based on the payoff matrix illustrated in Figure 13.1 on page 393, what is the dominant strategy for the two suspects?

both suspects testify

Suppose that Coca Cola and Pepsi are substitutes in consumption. If the price of Coca Cola decreases, then

both the equilibrium price and the quantity of Pepsi demanded will decrease.

Look at the provided figure. What area(s) represent producer surplus before the tax (select all that apply)?

c d f

Which of the following types of firms most closely fits the description of a competitive firm?

corn farmers

The table below shows the daily production potential of two workers if they devote all their time to making either pizza or wings. Who has the absolute advantage at producing pizzas?

debra winger

an excess demand for mountain bikes

decline

One condition of wage equality is that

each worker must have the same skills, ability, and productivity.

Which poverty policy has been the most effective in addressing the work incentive problem?

earned income tax credit

The income elasticity of demand coefficient is _____________ for normal goods.

equal to zero

Suppose pasta salad is a normal good. If the price of pasta (a major ingredient in pasta salad) increases and income also increases, the

equilibrium quantity of pasta salad may either increase or decrease and the equilibrium price of pasta salad will increase.

A political poll wants to influence voters toward the governor Joe Politician. In his past term, Joe was successful at increasing jobs and income. In what order should these questions be asked to prime the voters? I. Are you happier today compared to a year ago? II. Have you noticed an increase in your income in the past two years? III. Has Joe Politician done a good job as your governor?

ii,i,iii

The table provided below shows how to calculate a monopoly's total revenue and marginal revenue. As price falls, total revenue initially ____________ and then ______________.

increase,decreases

-20,000

Suppose the price of IBM computers falls from $2,500 to $2,000 and the quantity demanded increases from 10,000 to 20,000. Calculate the price elasticity of demand.

-3

Assume that Debra and Mike, without trading with each other, will produce and consume the following number of pizzas and wings Thumbnail Click to view graphic. Now, assume that both Debra and Mike decide to specialize, and then Debra trades 19 pizzas to Mike for 47 wings. This outcome is shown in the table below. Compared to the result without trade, what are the gains from trade that Debra experiences when she and Mike specialize and trade? Thumbnail

1 pizza and 7 wings

What is marginal product of the fourth worker? See Figure.

The local city council passes a law that establishes a maximum rent for apartments in your city. Which of the following is likely to happen?

Current renters will sublet to others at prices above the legal maximum.

On the figure below, which demand curve represents a firm that has run a successful advertising campaign?

Suppose the cost of shipping fish drops. How will this affect the equilibrium price and equilibrium quantity of fish?

Equilibrium price decreases but equilibrium quantity increases.

Which of the following sets of firms is best described as an oligopoly?

GM, Ford, Chrysler, Honda, and Toyota

Consider Dirk and Lee. They are both eating pizza. Which of the following statements is true regarding their satisfaction and utility?

It is difficult to determine because utility is subjective.

Based on the table below, which of the following statements is true?

Mike has a comparative advantage in producing wings, while Debra has a comparative advantage in producing pizzas.

When a market is in equilibrium, which of the following is true?

Quantity supplied is equal to quantity demanded

Which of the following is NOT characteristic of a market economy?

Significant government intervention

Smoke detectors have been shown to effectively reduce the death rate due to fires. In order to ensure that as many individuals as possible install a smoke detector, the government recently decided to subsidize the production of smoke detectors. Which of the following will be the consequences of this subsidy? Select all the answer options that apply.

The demand curve shifts to the left The supply curve shifts to the right

You are a producer of calculators. In the market for calculators, two events happened simultaneously last month. There was a fire at your calculator factory that eliminated half of your firm's production capability. At the same time, your compensation costs increased by 5% because of an annual pay raise you give your employees. With these events happening simultaneously, which of the following is a consequence?

The fire causes the supply curve to shift a large amount but the increase in wages causes the supply curve to shift to the left by an even smaller amount

Based on the infographic, what are the minimum wages in Nebraska and Colorado in relation to the federal minimum wage?

The minimum wage in Colorado is higher than the federal minimum wage, while Nebraska's minimum wage is equal to the federal minimum wage.

Which of the following is an example of normative analysis?

The multimillion dollar B-1 bombers are a waste of tax money.

Which of the following statements refers to a macroeconomic issue?

The national unemployment rate is currently 7.7%.

Rachel and Joey are playing racquetball. They are of equal ability, and each point comes down to whether the players guess correctly about the direction the other player will hit. Look at the payoff matrix provided below. The Nash equilibrium for Rachel and Joey is

There is no Nash equilibrium.

Which of the following are characteristics of an efficient market? Select all that apply.

Total surplus (aka social welfare) is maximized. Quantity supplied equals quantity demanded. Deadweight loss equals zero.

Using the information in the figure and table below, which of the following statements is true?

Total welfare is lower under a monopoly that charges a single price than under either perfect competition or perfect price discrimination.

On the figure below, where does a monopoly operate to maximize profits?

Where MR = MC

Suppose you and a classmate decide to split up tasks for a group project. In two hours you can write 6 pages of a paper or create 24 presentation slides. Your classmate can write 4 pages of a paper or create 20 slides. Assume that your work is of equal quality. Do you have a comparative advantage in production?

You have a comparative advantage in producing the paper.

Suppose you and a classmate decide to split up tasks for a group project. In two hours you can write 6 pages of a paper or create 24 presentation slides. In the same two hours your classmate can write 4 pages of a paper or create 20 slides. Your work is of equal quality. Do you have an absolute advantage in production for this project?

You have an absolute advantage in producing both the paper and the presentation slides.

Which of the following would be considered a monopsony in the labor market?

a company town

Which of the following firms participates in a competitive market?

a corn farmer

Which of the following goods is relatively elastic?

a fast-food restaurant located in the food court of a shopping mall

In monopolistic competition, demand for a single firm's product is

a fraction of overall market demand.

Which of the following goods is perfectly inelastic?

a life-saving medication

Firms producing an identical product in a perfectly competitive market are producing at a quantity that maximizes profit. The current market price is $4.50 per unit, and the firms are producing at a long-run average cost of $3.50 per unit. Firms in this market experience

a profit

Assume that game 1 has an expected value of $10 and game 2 has an expected value of $5. A risk-averse person would prefer

a sure thing of $4 in game 2, and a risk-neutral person would play game 1.

At a price floor of $6, this market is experiencing

a surplus

Using the figure below, which areas represent producer surplus under perfect price discrimination?

a+b+c

Which product's demand is more inelastic: Coffee or Movie Tickets?

coffee

The difference between the willingness to pay for a good and the price that is paid to get it is

consumer surplus

According to the law of supply, what is the relationship between price and quantity supplied?

direct

If a 20% increase in price causes a 30% drop in quantity demanded, this good is

elastic

Because of barriers to entry, the wages of physicians and nurses are ______ and quantity demanded is ______, causing a ______ from the previous market equilibrium.

higher;lowerlshortage

Opportunity cost is the ______________ alternative that must be sacrificed in order to get something else.

highest-valued

The long-run market supply curve is

horizontal at the market price

As a result of the National Organ Transplant Act of 1984, it is ________ to sell organs. This caused the quantity _______ of many organs to exceed the quantity ________ of those organs, as the ____________ curve of those organs is fixed.

illegal; demanded; supplied; supply

If income increases by 10% and the demand for tuna decreases by 20%, then tuna is a(n)

inferior good

By choosing to consume at the consumer optimum, consumers will

maximize their total utility.

People with health insurance are __________ their quantity demanded of doctor's office visits compared to those without health insurance.

more likely to increase

Which of the following is NOT an example of a private good?

satellite television

Welfare is a _________ that helps the poor by supplementing their income with ________.

series of initiatives; subsidies, vouchers, and health services

Suppose your friend can obtain concert tickets for $100 but you can't get them for less than $300. Your friend sells the tickets to you for $200. Which of the five foundations of economics best describes this activity?

trade creates value

Public goods are ___________ in the market.

underproduced

Consumers of health care use ______________ to obtain health care services.

all

Diminishing marginal product refers to marginal product that initially _____ but eventually ______.

increases;decreases

For many products, the total utility curve is

increasing initially at a decreasing rate because of diminishing marginal utility but eventually decreases.

Compare long-run equilibrium in a market with monopolistic competition and a competitive market. Long-run equilibrium under monopolistic competition results in __________ output and a ________ price.

less;higher

Which of the following is NOT considered a natural barrier?

licensing

Economics is the study of how people allocate their ________ resources to satisfy their nearly _________ wants.

limited;unlimited

A good example of a monopolistically competitive market is

local restaurants

A natural monopoly exists when a single seller experiences ____________ average total costs than any potential competitor.

lower

Think about a country where most economic production comes from factories that create air pollution. What would be the trade-off of lower levels of pollution?

lower incomes

On a backward-bending labor supply curve, at the point it bends back, the substitution effect

must be less than the income effect.

If the cross-price elasticity of demand for two goods is zero, the two goods are

not related

Suppose that the demand for low-skill labor, QD, is represented by the following equation, where W is the wage rate QD = 56,000,000 - 3,000,000 W The supply of low-skill labor, QS, is represented by the equation QS = -8,000,000 + 5,000,000 W If the minimum wage is $9, there will be a ______________ of labor in the market.

surplus

Lee saves most of his money from his paycheck; he forgoes restaurant meals, new clothes, and a new car, and he lives in a small one-bedroom apartment. He understands that his utility is low now. However, his ______________ will give him _____ utility in the future.

intertemporal decision making; higher

Suppose that burgers and fries are complements in consumption. If the price of fries increases

overall demand for burgers will decrease

Price elasticity of supply is always positive except when supply is

perfectly inelastic.

Which of the following is considered to have derived demand? I. a large Pizza Hut pizza II. an oven used to bake the pizza III. an employee of Pizza Hut

2 and 3

Assume that a monopolist faces the demand schedule given below, and a constant marginal cost of $2 for each unit of output. To maximize profits, this monopolist would produce ____ units of output and charge a price of ____ per unit.

2 unites, 5 per unit

Flat Earth Air, a commercial airline, charges the same price to every flyer and has a monopoly on the route it flies. Calculate Flat Earth Air profits.

20,000

Look at the payoff matrix illustrated in Figure 13.2 on page 395. If the companies operated as a cartel, they would each earn _________ in profits.

27,000

Based on the infographic, what is the minimum amount employees can be paid by law in the state of Wyoming?

7.25/hour

An example of the tragedy of the commons would be

all

Two of the bizarre taxes mentioned in this chapter's Snapshot were the "Flush Tax" and the "Window Tax." Which tax likely caused a bigger deadweight loss?

window tax

When total utility is maximized, marginal utility will be

zero

Suppose that demand for automobiles increases by 25% when consumers' income increases by 20%. What is the income elasticity of demand for automobiles?

1.25

Based on the table below, what is the average variable cost of producing 60 Big Macs? Use Figure.

1.67

You are thinking about traveling to visit friends in Atlanta. You can fly or take the bus. A round-trip plane ticket costs $300, and it takes three hours to get from your house to your friend's house if you fly. A round-trip bus ticket costs $150 and it takes 10 hours to get door-to-door using the bus. What is the minimum value of your time necessary to induce you to buy the plane ticket instead of taking the bus?

10.71 / hour

The table below lists costs for producing Big Macs, a product of McDonald's. Based on the table, what are total fixed costs associated with Big Mac production? Use Figure.

100

Using the table below, calculate total consumer surplus for Beanie, Mitch, and Frank if the price of the textbook is $110.

130

Andrew paid $30 to buy a potato cannon, a cylinder that shoots potatoes hundreds of feet. He was willing to pay $45. When Andrew's friend Nick learns that Andrew bought a potato cannon, he asks Andrew if he will sell it for $60, and Andrew agrees, since he would have sold it for $45. Nick is thrilled, since he would have paid Andrew up to $80 for the cannon. Andrew is also delighted. What is Andrew's producer surplus from the resale?

Examine the graph. Many consumers will be unable to buy the good at a price ceiling of $0.50 because of a shortage. However, they may still be able to purchase the good at the price of

In the market portrayed in this graph, a nonbinding price floor of $2 will result in a price set

Assume that a monopolist faces the demand schedule given in the table below and a constant marginal cost of $50 for each unit of output. To maximize profits, the monopolist would produce ____ units of output at a price of ____ per unit.

3,000 70

Perfect Flights, a commercial airline, has a monopoly on the route it flies but decides to charge each passenger a price exactly equal to what the passenger is willing to pay. At $500 no one is willing to fly. At a price of $300 there are 100 passengers willing to fly, and finally at a price of $100 there are 200 customers willing to fly. Calculate profits for Perfect Flights.

40,000

In the example presented by this graph, at what number of workers does the point of diminishing marginal product occur? See Figure.

4th workers

Sam has two options this weekend. He could work at his job and earn $9/hour for three hours, or he could go to a show at the theatre for that three hours. A ticket to the theatre costs $30. What is the opportunity cost of going to the theatre? $______________

Based on the figure below, what would be the opportunity cost in terms of wings when producing 20 more pizzas if the economy is efficiently producing 150 wings and 50 pizzas?

60 wings

Austin and Erin are willing to pay $10 and $9, respectively, for a ticket to a screening of a new movie. What is the total consumer surplus for both Austin and Erin if the market price of a ticket is $6?

Suppose that this year 500 million pounds of blueberries are handled in Maine. How much revenue will Maine expect to collect from the "Blueberry Tax"? _____________________

7.5 million

Which of the following will cause a rightward shift in the supply curve for tobacco?

An improvement in the technology used in the production of tobacco

Suppose that two things happen simultaneously in the market for fish. First, a new technology allows fishing boats to catch more fish with using the same number of crewmembers. At the same time a new study shows that eating fish at least three times a week helps prevent heart attacks. How will the market for fish respond?

Equilibrium quantity will increase but the effect on the price is unknown without more information.

Bounded rationality can be understood through I. limited information II. limited brain processing capability III. long decision-making times IV. short decision-making times

I, II, and III

Your friend Matthew is a very busy guy who is becoming concerned with his weight and health. Because he is so busy, he often stops to grab a fast-food dinner. When you tell him that fast-food meals are not conducive to losing weight, he replies that "it's just this one burger." What advice would you give him?

Matthew needs to think about long-term trade-offs. There are short run trade-offs between time and money for meal preparation but long-term trade-offs between diet and health. A fast-food meal would be OK if it really was an occasional thing but not if it is a regular occurrence.

Assume that all fast-food restaurants employ many minimum wage workers. Suppose 20,000 people in Pennsylvania work in fast-food restaurants for the federal minimum wage of $7.25/hour. If the state of Pennsylvania increases its minimum wage to $9.00/hour, who will be better off? Who will be worse off?

Some minimum wage workers will be better off, some minimum wage workers will be worse off, and all fast-food restaurant owners will be worse off

Which of the following statements is normative?

There should be unemployment benefits for farmers who lose their farms.

Suppose that many people who earn a living catching fish decide they can make more money selling t-shirts and switch occupations. How will this affect the number of fish supplied by producers?

There will be a decrease in supply.

Where would you plot unemployment on a production possibilities frontier?

a point inside the PPF

Where would you plot full employment on a production possibilities frontier?

a point on the PPF

a price floor

Which of the following does not represent an implicit cost for a business owner?

a workers salary

Asymmetric information can arise in which way?

adverse selection

Which of the following is NOT a way in which monopolistically competitive firms can choose to differentiate?

all

Jewell attends a wedding reception where dinner is served. For her entrée, she has the option of steak, chicken, or pasta. If she chooses the pasta, then her opportunity cost is

either the chicken or the steak—whichever would have been her second choice to the pasta

Monopolies lead to

both a and b are true

Profits when a competitive firm shuts down are -$7,250 and -$250 when the firm continues to produce. This firm will minimize losses by

continuing to produce

Boeing and Rolls-Royce Holdings are the sole producers of a special jet engine. The two firms currently charge the same price for their products. If neither firm reduces the price of its engines, each firm earns $36 million in profit. If both firms reduce their prices, each firm will earn $10 million in profit. If one firm reduces the price and the other does not, the firm that reduces the price will earn a profit of $50 million while the other firm will earn a profit of $5 million. Assuming that collusion is not a possibility, the Nash equilibrium occurs when

each firm reduces its price.

Suppose that Boeing and Rolls-Royce Holdings are the sole producers of a particular jet engine. The two firms currently charge the same price for their products. If neither firm reduces the price of its engine, each firm earns $36 million in profit. If both firms reduce their prices, then each firm will earn $10 million in profit. If one firm reduces its price and the other does not, then the firm that reduces price will earn a profit of $50 million while the other firm will earn a profit of $5 million. If the firms can operate as a cartel, then

each firm will maintain its current price.

Where there are established, well-defined private property rights, externalities will be

less prevalent

A local paintball business receives total revenue of $10,000 per month when it charges $12 per person, and $15,000 in total revenue when it charges $8 per person. Over that range of prices, the business faces

elastic demand

If the government wants to minimize the deadweight loss of taxation, which of the following items are good candidates for an excise tax (select all that apply)?

emergency plumber services insulin

If the "bang per buck" for land is greater than capital, and "bang per buck" for capital is greater than labor, then to obtain the right mix of resources the firm should

employ more land and capital and less labor.

Which of the following is NOT a nonmonetary determinant of wages?

employer generositty

Suppose that in a time of crisis everyone pitches in and works much harder than usual. How is this represented by a production possibilities frontier?

entire PPF shifts out

For a perfectly competitive firm, marginal revenue is

equal to price

Suppose the government decides the Big Mac is an American tradition. To recognize the value of the Big Mac, government passes legislation making it illegal sell a Big Mac for less than $8. The equilibrium price of a Big Mac is $4. As a result of the government legislation, there will be

fewer Big Macs bought and sold than before

Compared to perfect competition, monopoly results in

fewer units produced and sold.

Examine the two figures below. Which illustrates a society that produces more capital goods than consumer goods?

figure B

Imagine that local suburban leaders decide to enact a minimum wage, and soon after, a nearby city votes to increase the minimum wage to the same rate. As a result

firms will not have an incentive to move to the nearby city and the community will not lose jobs

A supply curve that has a __________ slope represents a more elastic supply curve.

flatter

Suppose there are two breakfast restaurants in your college town, Waffle Kingdom and Flip's Flapjacks, and they decide to operate collusively as a cartel. If both restaurants abide by the cartel's agreement, then each will earn $100,000 in profit. If both restaurants cheat on the cartel's agreement, then each will earn $25,000 in profit. If one restaurant cheats and the other abides by the agreement, then the cheater will earn a profit of $150,000 while the restaurant that abides will have a loss of $12,500. The Nash equilibrium for the two restaurants would be

for both restaurants cheat on the cartel's agreement.

Suppose there are two breakfast restaurants in your college town, Waffle Kingdom and Flip's Flapjacks, and they decide to operate collusively as a cartel. If both restaurants abide by the cartel's agreement, then each will earn $100,000 in profit. If both restaurants cheat on the cartel's agreement, then each will earn $25,000 in profit. If one restaurant cheats and the other abides by the agreement, then the cheater will earn a profit of $150,000 while the firm that abides will have a loss of $12,500. The most profitable combined outcome for the two restaurants would be

for both restaurants to abide by the cartel's agreement.

A common solution to the free-rider problem is

for government to provide the good and then pay for its production through taxation

Judy spent eight hours studying for an exam. Normally, she would have spent that time watching TV instead of studying. She figures she could have made a "B" after only studying four hours, but she really wanted an "A." What is Judy's marginal cost in terms of TV viewing to improve her grade from a "B" to an "A"?

four hours

Which of the following describes Jonathan having a comparative advantage in producing apples?

giving up less production of other goods when producing an apple

Canada is able to provide medical care to all its citizens through

government-set rates. Private practices are not allowed, and physicians' salaries are capped.

In the case of negative externalities, social costs are ____________ internal costs.

greater than

In monopolistic competition, the firm's optimal price is

greater than marginal cost

Assume that the government imposes a 30% tax on your income and deducts $8,000 from the result. Under a negative income tax scheme, if you earn $30,000 a year, you will

have a tax liability of $1,000.

Students who choose to attend graduate or medical school are often rewarded with higher wages because they have acquired more

human capital

When a supplier has a limited ability to make quick adjustments to quantity supplied, the elasticity of supply is

less than 1

Suppose that a politician tells you about a plan to create two expensive but necessary programs to build more production facilities for solar power and wind power. At the same time, the politician is unwilling to cut any other programs. Assuming the resources are already being efficiently used in other programs, where would the point the politician is trying to reach be on the production possibilities frontier?

impossible point

Suppose that government officials want to increase the population, so they offer a $1,000 payment for to the parents of each child born. Which of the five foundations of economics best describes the thinking of these government officials?

incentives

Suppose that a local pizzeria produces pizzas with a demand elasticity of -1.6. If it lowers the price of pizzas, total revenue would

increease

it will increase

Customers who visit convenience stores at 3 a.m. have a price elasticity of demand that is _____________ elastic than those who visit at 3 p.m.

less

Suppose that Marie is buying bananas. She decides that she would like to purchase three bananas at the price of $0.25/banana but not a fourth. Which of the five foundations of economics best describes Marie's thinking?

marginal thinking

Compared to Canada, the United States spends ____________ on health care and has a ____________.

more per capita; lower life expectancy

An outcome from a duopoly is ____________ efficient than a monopolistic outcome and ____________ efficient than a competitive market outcome.

more;less

In a single-payer system, the government covers the cost of

most health care through taxes.

Which of the following is NOT an example of a public good?

national parks

Irrational behavior may include which of the following assumptions?

none of these

Economists use the concept of ceteris paribus to examine a change in ____________ in a model, while assuming that all other variables remain constant.

one variable

Which of the following is NOT a factor of production?

output

Monopolies choose their profit maximizing:

output level and price

Many local governments use parking meters on crowded downtown streets. However, the parking spaces along the street are typically hard to find because the metered price is often set below the market price. This represents a ___________, which results in a ___________ of parking spots.

price ceiling; shortage

If the perceived utility and risk you get from winning $1,000 is different from the perceived utility and risk you get from losing $1,000, then your behavior is consistent with

prospect theory.

The poverty _______________is defined as the percentage of the population whose income is below the poverty threshold.

rate

When consumers get the biggest bang for the buck, we say they

reached a consumer optimum.

Because of barriers to entry, the supply curve for physicians and nurses is

restricited

Converse, an apparel company, has been fairly successful selling denim-colored college sportswear. Lydia sees an opportunity for profit and enters the market. After producing her profit maximizing level of output, she finds that her average total cost per unit is $40, her average variable cost per unit is $30, and the market price is $35. In the short run, Lydia should

stay in business even though she is suffering a loss

If the current wage for nurses is higher than the equilibrium wage, this will create a

surplus of nurses and downward pressure on wages.

LeBron James scored 16 points in the third period. In the fourth period, the basketball was given to Dwayne Wade instead of Lebron James. Their coach is NOT subject to

the hot-hand fallacy.

The Coase theorem suggests private solutions to externalities would not be possible if

the number of parties involves is large

Annie is excited about a $500 income tax return and is already contemplating which shoes to purchase. Annie is exhibiting

weakly positive time preferences and preference reversal.

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