Econ 101 post midterm

In some countries, the birth rate is now below the replacement rate. What implications does this have for wages and employment in the future? A. Wages and employment will both rise. B. Wages and employment will both fall. C. Wages will rise and employment will fall. D. Wages will fall and employment will rise.

C

A drug company has been granted a patent for their product, EVZIO, which is a user-friendly naloxone injector. Naloxone is a drug used to treat heroin overdoses, and EVZIO allows people without medical training, like family and friends, to deliver the life-saving drug. This patent will likely lead to a(n): A. Underproduction problem B. Overproduction problem C. Output effect D. Discount effect E. Income effect

A

A market that has a lot of firms producing similar goods is experiencing which of the five forces? A. Existing competitors B. Potential competitors C. Competitors in other markets D. Bargaining power of suppliers E. Bargaining power of buyers

A

Why has requiring restaurants to post hygiene grade cards in their windows improved food safety practices? A. Food cards mean that the restaurants' hidden actions were not monitorable. B. Grade cards are a complement to improved food safety. C. Food cards give restaurants as take in the outcome. D. Food cards ensure that restaurants won't ever try to exploit customers.

A

Collusion A. can never occur. B. can occur only in a one-shot game. C. can occur only in a finitely repeated game. D. usually occurs in infinitely repeated games.

D

Increasing the reward _____ the utility of taking the risk. Increasing the risk aversion _____ the utility of taking the risk. A. increases; increases B. decreases; decreases C. decreases; increases D. increases; decreases

D

A small tech start-up has two workers: Paola and Yucheng. They can either write lines of code or make new customer calls. Yucheng can write 50 lines of code or make 10 new customer calls per hour. Paola can write 75 lines of code or make 8 new customer calls per hour. Assuming each person can only do one thing, who should write code and make new customer calls based on the principle of comparative advantage? A. Yucheng should make new customer calls. Paola should write lines of code. B. Yucheng should write lines of code. Paola should make new customer calls.

A

What is the relationship among marginal cost, marginal revenue, average cost, and price in a market with imperfect competition and free entry in the long run? A. Marginal cost = Marginal revenue < Price = Average cost B. Marginal cost = Marginal revenue = Price = Average cost C. Marginal cost=Average cost<Price=Marginal revenue D. Marginal cost=Marginal revenue=Average cost< Price

A

Which of the following market structures has theflattest firm demand curve, all else equal? A. Perfect competition B. Monopolisticcompetition C. Oligopoly D. Monopoly

A

A market with price discrimination has a _____ quantity and a _____ price than a market without price discrimination. A. higher; higher B. higher; lower C. lower; higher D. lower; lower

B

Corrective taxes are efficient because they A. cause consumers to internalize the social benefit. B. cause producers to internalize the social cost. C. restrict the quantity to the socially optimal quantity. D. require firms to abide by laws that are good for society.

B

The Prisoner's Dilemma usually leads to an equilibrium that is not the best outcome because the A. players do not have all the information. B. players are tempted to take advantage of each other. C. players do not understand how the game is played. D. equilibrium outcome is always the best outcome.

B

Toyota has ongoing relationships with its part manufacturers, due in large part because the manufacturers believe that Toyota will not try to renegotiate lower prices. This is an example of A. complete contracts. B. reputation and repeated interaction. C. vertical integration.

B

What is the relationship among marginal revenue, marginal cost, and price in a firm with market power? A. Marginal cost=Marginal revenue=Price B. Marginal cost=Marginal revenue<Price C. Marginal cost=Marginal revenue>Price D. Marginal revenue<Price=Marginal cost

B

When people fear shark attacks, this is an example of A. overconfidence. B. availability bias. C. anchoring bias. D. representativeness bias.

B

Which of the following is a price ceiling? A. The government lifts the number of refugees who can enter the country annually. B. The FDA limits the price of a new high-blood pressure drug to $100 per pill. C. Joy smokes two packs of cigarettes every week. She is thinking of cutting back to one pack a week due to a cigarette tax that will take effect next month.

B

Your boss asks you to develop a talking point to show income inequality in the U.S. is not as bad as people believe. If you want to use a measure that minimizes the ratio of the most well-off quintile to the least well-off quintile, which measure should you use in your comparison? A. wealth B. consumption (spending) C. annual income

B

A minimum wage creates unemployment because A. It is a price ceiling and therefore creates a surplus of labor. B. It is a price ceiling and therefore creates a shortage of labor. C. It is a price floor and therefore creates a surplus of labor. D. It is a price floor and therefore creates a shortage of labor.

C

Diminishing marginal utility means that the size of the utility gain from gaining $1 is _____ the size of the utility loss from losing $1. A. greater than B. equal to C. less than D. greater than, equal to, or less than

C

While beekeepers are in the business of producing honey, beekeeping also provides an additional benefit of pollinating nearby crops. The extra benefit of pollinating nearby crops is an externality. The U.S. Department of Agriculture (USDA) is considering policy options to address this externality. Which government intervention(s) would be effective in addressing this externality? Select all that apply. A. The USDA issues a set number of permits for beekeepers. Beekeepers can only produce honey if they have a permit. B. The USDA institutes a tax on beekeepers equal to the marginal external cost of beekeeping. C. The USDA institutes a subsidy for beekeepers equal to the marginal external benefit of beekeeping. D. The USDA facilitates communication between beekeepers and farmers growing crops in the U.S. to encourage private bargaining to address the externality.

C and D

Which of the following is a demand-side strategy for deterring entry? A. Learning by doing B. Mass production C. Research and development D. Adding switching costs

D

Suppose that you are opening a new store in a market with only one competitor. If your objective is to get as many customers as possible, you should position yourself _____ your competitor. If your objective is to avoid price undercutting, your should position yourself _____ your competitor. A. close to; close to B. close to; far away from C. farawayfrom;closeto D. far away from; far away from

B

While beekeepers are in the business of producing honey, beekeeping also provides an additional benefit of pollinating nearby crops. The extra benefit of pollinating nearby crops is an externality. True or false: In a perfectly competitive market for honey with no government intervention or private bargaining, the amount of honey produced will be more than the socially optimal amount (i.e., an overproduction). A. true B. false

B

Price ceilings _____ economic surplus in perfectly competitive markets and _____ economic surplus in imperfectly competitive markets. A. increase; increase B. increase; decrease C. decrease; increase D. decrease; decrease

C

The U.S. is considering signing a new trade agreement with China to reduce tariffs on steel and aluminum. China produces steel below the world price and aluminum above the world price. The U.S. produces steel above the world price and aluminum below the world price. What will the likely lobbying activity be for this trade deal? A. The U.S. steel industry will lobby for the deal, and the U.S. aluminum industry will lobby against the deal. Aluminum workers will lobby harder than steel workers. B. The U.S. steel industry will lobby against the deal, and the U.S. aluminum industry will lobby for the deal. Both lobbying efforts will be equal in strength. C. The U.S. steel industry will lobby for the deal, and the U.S. aluminum industry will lobby against the deal. Steel workers will lobby harder than aluminum workers. D. The U.S. steel industry will lobby against the deal, and the U.S. aluminum industry will lobby for the deal. Steel workers will lobby harder than aluminum workers. E. The U.S. steel industry will lobby for the deal, and the U.S. aluminum industry will lobby against the deal. Both lobbying efforts will be equal in strength. F. The U.S. steel industry will lobby against the deal, and the U.S. aluminum industry will lobby for the deal. Aluminum workers will lobby harder than steel workers.

D

Which of the following is an example of group pricing? A. The local café charges $3.50 for a cup of cappuccino. B. A ham and cheese sandwich is $3.99 at the school cafeteria. C. A hair dresser charges more for women's haircuts than for men's. D. All of the above are examples of group pricing.

C

A local bookstore with market power wants to use price discrimination to increase revenue. Which of the following are considered hurdles? Choose all applicable answers. A. Each morning, the first 10 customers receive a 10% discount B. The bookstore sometimes emails customers coupons for select books C. Books in the science-fiction genre receive a 5% discount

a and b

Imagine you have created a new app that allows users to pre-order their coffee from their favorite coffee shops. Your app is incredibly popular and you begin to make economic profit. However, there are many competitors considering entering your market. They would be able to do so very easily. Given these circumstances, what is the likely outcome? A. Competitors enter the market, which reduces your economic profit and market power B. Competitors enter the market, which increases your economic profit and market power C. Competitors do not enter the market, and your economic profit and market power are unaffected D. Competitors enter the market, and your economic profit and market power are unaffected

A

Why does raising the price of a health care plan cause the price to soar even further? A. Healthy participants leave, causing costs, and thus price to rise. B. Sick participants leave, causing costs, and thus price to rise. C. Both healthy and sick participants leave, causing demand to decrease. D. Price will not continue to rise.

A

Suppose that you have studied well enough to earn a 92% on an exam, on average. You would prefer an exam that has more questions, because the likelihood of you earning an A is higher. This is an example of A. risk spreading. B. diversification. C. insurance. D. hedging. E. gathering information.

B

After learning about the costs of administering safety net programs that provide in-kind benefits, you write your Congressman asking him to support a cash payment program in which poor families would receive a single check to spend on what they need most. You receive a letter back from his office stating cash payments would be an irresponsible use of taxpayer money because recipients would spend it on drugs. Which argument for in-kind benefits best summarizes his response? A. In-kind benefits encourage work B. In-kind benefits reduce fraud because only the poor value the benefits C. In-kind benefits prevent spending on demerit goods

C

Which of the following scenarios is likely to suffer from adverse selection of sellers? A. You want to buy goods online. B. You want to buy free-range or wild meat. C. You want to buy shares in a company. D. All of the above.

D

Fast food workers in New York City went on strike to demonstrate their support of increasing the minimum wage. On the day of this strike, supply of fast food in New York City significantly decreased. How will this strike affect total economic surplus in the New York City fast food market on the day of the strike? (Hint: Draw a graph to visualize changes in economic surplus). A. Total economic surplus will decrease B. Total economic surplus will increase C. Total economic surplus will remain unchanged

A

Which of the following are negative externalities? Select all that apply. A. The fossil fuel power plant near your city burns oil and coal to generate electricity, which increases pollution and negatively affects your health B. Increased consumer demand for housing in San Francisco makes my rent more expensive C. Some parents refuse to vaccinate their children which exposes infants, who can't be vaccinated yet, to danger from diseases like measles

A and C

Suppose you run a coffee stand. Your fixed costs are $10,000 for the equipment. Your variable costs are $1 per cup of coffee. You expect to sell 20,000 cups of coffee this year at a price of $3 per cup. What is your profit margin per cup of coffee? A. $2 per cup B. $1.50 per cup C. $0.50 per cup D. -$3 per cup (operating at a loss)

B

A new trade agreement would reduce tariffs on fresh fruit sold between the U.S. and Mexico. Due to a number of factors, the equilibrium price for fresh fruit in the Mexico market is below the world price, while the equilibrium price for fresh fruit in U.S. is above the world price. Based on the information provided, what reasons could American fresh fruit producers have offered to oppose the trade deal? Select all that apply. A. Fresh fruit imported from Mexico will be more expensive for American consumers B. Workers in the U.S. fresh fruit industry will lose their jobs C. The fresh fruit market in the U.S. is an infant industry, so limiting trade with Mexico will protect U.S. fresh fruit producers while they become more efficient at production

B and C

A new trade bill would reduce tariffs on fresh fruit sold between the U.S. and Mexico. Due to a number of factors, the equilibrium price for fresh fruit in the Mexico market is below the world price, while the equilibrium price for fresh fruit in U.S. is above the world price. What effect would passage of this new trade bill have on production of fresh fruit in the U.S.? Assume that U.S. and Mexico-produced fresh fruit are identical in quality and features. A. U.S. fresh fruit producers produce more fresh fruit, and the surplus of the quantity supplied by domestic producers relative to the quantity demanded by domestic buyers is addressed by exporting fresh fruit to Mexico. B. U.S. fresh fruit producers continue to produce the same amount of fresh fruit. C. U.S. fresh fruit producers produce less fresh fruit, and the shortage of the quantity demanded by domestic buyers relative to the quantity supplied by domestic producers is filled by imports from Mexico.

C

The government hires you as an analyst at a good salary, and the hiring manager says the skills you learned in your economics classes played a key role in their decision because they expect you to use knowledge you learned in econ to be more effective in your job. What is this an example of? A. Economics of superstars B. Monopsony power C. Human capital D. Signaling

C

The price in perfect competition is _____ than the price under imperfect competition. The quantity in perfect competition is _____ than the quantity under imperfect competition. A. higher; higher B. higher; lower C. lower; higher D. lower; lower

C

During the Great Recession, unemployment rates in Michigan spiked partly due to massive layoffs in the automobile industry. Assume that as a result, the Governor instituted a new state-run welfare program that provides cash assistance equivalent to the average automobile factory worker's annual salary each year for each unemployed individual looking for new work. The program manager evaluated this program after a year and found that unemployment rates decreased by far less than they had expected. What policy change(s) could Michigan's Governor institute to make this program more effective? Select all that apply. A. In addition to cash assistance, provide subsidies to Michigan-based museums to increase unemployed people's value of leisure. B. Increase the amount of cash assistance for each individual so they can enjoy a higher quality of life while searching for a new job. C. Add a free entrepreneurship program (e.g., training, opportunity for funding) for unemployed individuals to help them create a new career outside the automobile industry. D. Include a requirement that anyone receiving benefits must attend job search training and submit evidence of their active job search status (e.g., receipt of applications).

C and D

Which of the following is an example of a principal-agent problem? A. Tenants are responsible for their landlord's property, but landlords can't tell whether floors were scratched because they were old or because the tenant was careless. B. Restaurants overload meals with calories because customers can't easily observe how many calories are in a meal, and restaurants aren't responsible for the costs of poor health. C. Some banks take on too much risk because they expect the government to bail them out if things go wrong. D. All of the above.

D

Which of the following is an example of the hurdle method? A. Jane uses coupons when shopping for groceries at her local supermarket. B. Pete waits until Black Friday to purchase a video game console. C. When buying a new car, Fred haggles for a discount At the car dealership. D. All of the above.

D

In the 1980's, airline companies' found their economic profits shifting closer to zero, so they began looking for ways to gain market power and increase economic profit. Which of the following demand side strategies would be effective in doing this? Select all that apply. A. Filing for a patent with the U.S. government to protect the airline's proprietary, ultra-fast refueling system. B. Creating frequent flyer programs to increase customer loyalty. These miles can only be used on flights with the offering airline. C. Improving customer service policies to be more customer-friendly, so that consumers know they can trust the airline company to quickly re-book passengers when flights are cancelled. D. Developing a close relationship with airplane manufacturers to ensure quick delivery and significant discounts when the airline orders new planes for their fleet.

b and c

Which of the following statements are true? Select all that apply. A. The U.S. has more income inequality than most other developed nations B. About 900 million people have incomes below the global poverty line of $1.90 per day C. Those who are poor in the U.S. are rich in a global context D. The U.S. has more intergenerational mobility than Australia, Canada, France, or Germany

a, b, c

Which of the following is a variable cost? A. labor wages B. rent C. taxes D. dividends

A

Which of the following might decrease your employee's productivity? A. Pay employee's an hourly wage instead of based on the number of completed tasks. B. Provide benefits such as healthcare. C. Create a culture of treating your employees fairly. D. Hire employees with general skills and train them for the job-specific skills.

A

A critical issue in the trucking industry is the decrease in labor supply of truck drivers over the last decade. What could be the reason for the decrease in labor supply of truck drivers? Select all that apply. A. The value of leisure among truck drivers has increased B. The value of income support programs provided by the U.S. government to non-working individuals increased. (Assume the value has in fact increased over the past decade.) C. The wages of other jobs that require driving skills (e.g., Uber drivers, public transit bus drivers) have increased

A, B, C

As a textile artist, you enter a short-term contract with IKEA to design fabrics for decorative pillows and bedding. IKEA wants fabric designs that complement their existing products: couches, bedroom sets, rugs, and curtains. You spend months adapting your designs to match IKEA's aesthetic and developing new fabric patterns. At the end of the contract, IKEA asks to renew but offers you less money for your designs. What type of problem are you caught in? A. Underinvestment problem B. The holdup problem C. High value next best alternative problem D. No relationship specific investments problem

B

If an employer infers that an individual is more or less "suited" to a particular job based on that individual's gender, the employer is exhibiting what type of discrimination? A. Prejudice B. Implicit bias C. Statistical discrimination

B

Which of the following is an example of a negative externality? A. Your neighbor plants a garden, causing the value of your house to rise. B. Your neighbor's band practices early in the morning, waking you up. C. More people decide to drink tea instead of coffee, increasing the price of tea. D. The cost of sugar falls, decreasing the price of ice cream.

B

Which of the following would increase the quantity of labor supplied (move along the labor supply curve) in the labor market for bakers? A. Wages in the coffee industry (an alternative to the bakery industry) fall. B. Wages for bakers rise. C. More bakers move into town. D. Income taxes for bakers fall.

B

You developed a drone to help your shipping company make package deliveries in residential areas. However, when you attempt to add drone delivery as part of your business, you learn there are federal, state, and local laws specifying how drones can be used in residential areas. Which type of government policy is limiting your entry to the drone delivery market? A. patents B. regulations C. occupational licenses

B

Which of the following are positive externalities? Select all that apply. A. Rent control in New York City lowers my cost of living B. Your coworker's decision to buy a new coffee machine for the office allows everyone to make better coffee at work C. Someone's decision to drive drunk increases my risk of a collision while driving D. You invest in pest control on your property resulting in your neighbor's property seeing fewer pests

B and D

Due to rising income inequality in Washington State, the state legislature considers a bill to redistribute income by taxing high-income people and distributing those funds to low-income people through cash assistance. Some state representatives come out against this policy, citing the leaky bucket argument. Which of the following points support their argument against redistribution? A. Benefit recipients will face a low effective marginal tax rate, which will reduce their incentive to work B. Raising income taxes on the wealthy reduces the incentive for those individuals to work, which will lead people to work less C. The safety net will encourage people to take more risks, so the number of people who need benefits will increase D. The administrative costs to implement the program reduce the benefits distributed to low-income people

B, C, D

Which of the following are used in calculating the official poverty measure in the U.S. and evaluating whether a household is above or below the poverty line? Select all that apply. A. household medical expenses B. number of people in the household C. cost of a minimum diet in 1963 D. inflation E. before-tax cash income F. geographic differences in housing costs

B, C, D, E

For decades, Kodak sold inexpensive cameras and film. Because Kodak enjoyed a high profit margin on film, the company was slow to invest in digital photography, despite having developed a digital camera in 1975. By focusing on film instead of digital photography, Kodak ignored the threat to profitability from: A. current competition B. suppliers C. potential substitutes D. customers

C

Home sellers are required to disclose problems that they are aware of in the houses they are selling. Which solution to adverse selection of sellers is this? A. Buyers can learn from third-party vendors. B. Sellers can signal their product's quality. C. Government can increase information or weed out low-quality goods.

C

Use the same information as in the previous example, but suppose this time that there is only a 20% chance that the investment will succeed. Should you invest? A. yes, because the expected utility of the investment is higher than the utility of not investing B. yes, because the expected utility of the investment is equal to the utility of not investing C. no, because the expected utility of the investment is lower than the utility of not investing

C

Fast food workers in New York City went on strike to demonstrate their support of increasing the minimum wage. On the day of this strike, supply of fast food in New York City significantly decreased. How will this strike affect consumer surplus in the New York City fast food market on the day of the strike? (Hint: Draw a graph to visualize changes in economic surplus). A. Consumer surplus will decrease B. Consumer surplus will increase C. Consumer surplus will remain unchanged

A

If the government raises the minimum wage and there is a large decrease in the number of low-wage positions, what does that say about labor demand for low-wage workers? A. Labor demand is elastic B. Labor demand is inelastic

A

Two companies, Procter & Gamble and Colgate-Palmolive, control more than 80% of the market for toothpaste. What type of competitive landscape describes the market for toothpaste? A. Monopolistic competition B. Monopoly C. Perfect competition D. Oligopoloy

D

U.S. oil companies want to prevent foreign competitors from extracting oil on U.S. land. What supply side barriers could they establish to protect their market power? Select all that apply. A. U.S. oil companies lobby the federal government to prevent extraction on U.S. lands by foreign entities. B. U.S. oil companies lease or buy all land suitable for extraction to prevent foreign competitors from having access. C. U.S. oil companies reward frequent customers with discounts on gasoline. D. U.S. oil companies develop proprietary extraction techniques--hydraulic fracturing or "fracking"--to reduce their costs.

b and d

Economists believe there is diminishing marginal benefit for income. If that is the case, what will be the effect of redistributing income from a wealthy person to a poor person? A. The poor person's well-being will increase by exactly the same amount as the wealthy person's well-being will decrease B. The poor person's well-being will increase by less than the wealthy person's well-being will decrease C. The poor person's well-being will increase by more than the wealthy person's well-being will decrease.

C

Ford Motor Company introduced new "collaborative robots," called co-bots, to lift heavy parts on their vehicle assembly line in Germany. Assuming there was a scale effect and no substitution effect, what impact did this have on Ford's labor demand curve for manufacturing workers in Germany? A. The labor demand curve for for manufacturing workers at Ford did not shift B. The labor demand curve for manufacturing workers at Ford shifted to the left C. The labor demand curve for manufacturing workers at Ford shifted to the right

C

A local bookstore with market power wants to use price discrimination to increase revenue. Which of the following are considered group discounts and would likely increase revenue? Choose all applicable answers. A. Retirees receive a discount by presenting identification verifying their age B. People receive a discount on books by their favorite author when they tell the cashier the name of their favorite author C. People whose favorite color is blue receive a discount for telling the cashier that blue is their favorite color D. Students receive a discount by presenting their student identification

a and d

Which of the following is an example of non-price competition? A. Customer service B. Product quality C. Advertising D. All of the above

D

Anuj works part-time at Mighty Good Coffee. He recently received a raise from $12 to $15 per hour and, as a result, decided to increase the number of hours he works per week. Which of the following has a stronger impact on Anuj's decision? A. Substitution effect B. Income effect C. Both the income effect and substitution effect have an equal effect

A

As firms enter a market, their firm demand curves A. flatten. B. steepen. C. remain the same. D. can flatten, steepen or remain the same.

A

Diminishing marginal benefits mean that the well-being curve flattens as income increases. Therefore, when income is redistributed from those with high incomes to those with low incomes, A. the marginal increase in well-being for those with low incomes is greater than the marginal decrease in well-being for those with high incomes. B. the marginal increase in well-being for those with low incomes is less than the marginal decrease in well-being for those with high incomes. C. the marginal increase in well-being for those with low incomes is equal to the marginal decrease in well-being for those with high incomes. D. there is not enough information to answer.

A

If the demand for labor rises, what happens to the wage and the hours of employment? A. Wage rises and hours of employment rise. B. Wage rises and hours of employment fall. C. Wage falls and hours of employment rise. D. Wage falls and hours of employment fall.

A

Price discrimination A. increases efficiency relative to a market without price discrimination. B. decreases efficiency relative to a market without price discrimination. C. has the same level of efficiency of a market without price discrimination.

A

Services that used to be call-based are shifting toward mobile applications ("apps"). For example, rather than calling a taxi phone operator, you can make a few clicks in an app to find a ride. Meanwhile, app-based services are increasingly profitable. What are the likely labor market outcomes for phone operators who coordinate call-based services and computer programmers who build apps? A. Labor demand curve for phone operators shifts left; labor demand curve for computer programmers shifts right B. Labor demand curve for phone operators shifts right; labor demand curve for computer programmers shifts left C. Labor demand curve for phone operators shifts right; labor demand curve for computer programmers shifts right D. Labor demand curve for phone operators shifts left; labor demand curve for computer programmers shifts left

A

Starbucks is renowned for having an excellent supply chain. To achieve this, Starbucks spent years understanding desires of business suppliers, negotiated contracts that were fair and beneficial to both parties, and pursued other equitable business practices. Identify the type of supply side barrier that Starbucks established in this description. A. Relationships with suppliers B. Research and development C. Learning-by-doing D. Benefits of mass production E. Access to key inputs

A

Suppose the price of haircuts rises. What happens to the demand for hair stylists? A. The demand increases. B. The demand decreases. C. The demand does not change. D. The effect on demand is ambiguous.

A

Taxi companies have lost many of their customers to ridesharing companies like Lyft and Uber. Imagine a city with a single taxi company. After the introduction of ridesharing in this city, which of the following describes the new firm demand curve for the taxi company? A. The taxi company loses some market power, and the firm demand curve becomes less steep. B. The taxi company maintains its market power, and the firm demand curve is equal to the market demand curve. C. The taxi company loses all market power, and the firm demand curve is now flat. D. The taxi company loses some market power, and the firm demand curve becomes steeper.

A

The hotel market in Chicago is a perfectly competitive market currently in equilibrium, with no externalities, and the buyers and sellers are perfectly informed. Which of the following actions can the city government take to increase total economic surplus in the Chicago hotel market? Select all that apply. A. No actions B. Set a binding price floor C. Set a binding price ceiling D. Impose a tax on sellers E. Impose a tax on buyers

A

When public opinion poll respondents were asked "what is the smallest amount of money a family of four needs to get along in your community," the average in 1947 was approximately $25,000 (in 2014 dollars). In 2013, the same questions was asked, but the average amount was $59,000 (also in 2014 dollars). This suggests people think of income need as a(n) ______ measure. A. relative B. absolute

A

Which of the following is a quota? A. The Organization of the Petroleum Exporting Companies (OPEC) sets an official production cap of 24.845 million barrels a day. B. Swati wants to move in to an apartment building that is rent-controlled but is put on a waiting list for at least one year. C. Ben wants to purchase the trendiest sneakers available at a department store but finds that they are already sold out.

A

Which of the following is an example of a positive externality? A. Your neighbor plants a garden, causing the value of your house to rise. B. Your neighbor's band practices early in the morning, waking you up. C. More people decide to drink tea instead of coffee, increasing the price of tea. D. The cost of sugar falls, decreasing the price of ice cream.

A

Over half of Americans will experience poverty (i.e., have household incomes below the U.S. poverty line) in their lifetimes. Which of these additional statements about U.S. poverty are true? Select all that apply. A. most spells of poverty are temporary B. child poverty in the US is quite uncommon C. about three-fifths of people in poverty are non-Hispanic Whites D. Over half of currently poor people are in a spell of poverty which will last 8+ years

A, C, D

A new trade agreement would reduce tariffs on fresh fruit sold between the U.S. and Mexico. Due to a number of factors, the equilibrium price for fresh fruit in the Mexico market is below the world price, while the equilibrium price for fresh fruit in U.S. is above the world price. Assume the new trade deal goes through. Which of the following statements are true? Assume that U.S. and Mexican fresh fruit are identical in quality and features. Select all that apply. A. Producer surplus increases for Mexican fresh fruit producers B. Both consumers and producers in both the U.S. and Mexican fresh fruit markets are better off C. Producer surplus increases for American fresh fruit producers D. Total economic surplus increases for Americans in the fresh fruit market E. Total economic surplus increases for Mexicans in the fresh fruit market

A, D, E

DTE Energy is a monopoly supplier of electric services in Southeast Michigan. Its business practices are illegal, because it is illegal for a business to be a monopoly. A. true B. false

B

The current sales tax in Michigan is 6%, and everyone, regardless of their income, pays this sales tax. Is the sales tax progressive, regressive, or neither? A. Progressive B. Regressive C. Neither

B

To start your job search, a career advisor recommends you create a LinkedIn profile. With LinkedIn, you can advertise your skills, share previous work experience, and connect with recruiters. You don't like the user interface of the LinkedIn website, but you won't change to a different job search site because you are now connected to so many prospective employers who only use LinkedIn. Identify the type of demand side barrier to entry LinkedIn established. A. Reputation and goodwill B. Network effect C. Compulsory licensing D. Economies of scale

B

Coordination is difficult because A. players do not have all the information. B. players are interested only in their own outcomes. C. there are multiple equilibria. - Correct Answer D. coordination is always possible.

C

How should you set group prices? A. Set one price for all consumers. B. Set a different price for each consumer. C. Set prices for different groups as you would for different markets. D. Set supply equal to demand.

C

In the fall, you sell apples at a farmer's market where several other vendors also sell apples. Why is fierce price competition likely in this market? Select all that apply. A. Prices are easily observed B. Switching costs are low C. Your apples are positioned to win different segments of the market D. You and your rivals sell nearly identical products E. Switching costs are high F. You offer different services than your rivals

a, b, d

Which of the following are experience goods? Select all that apply. A. restaurant meal B. health insurance C. credit card D. tickets to a broadway show E. vacation package in Ireland

a, d, e

H&M, the world's second largest clothing retailer, has been struggling to maintain its profitability. Which of the following could be threatening H&M's profitability? Select all that apply. A. potential substitutes: no other retailer offers similar styles to H&M B. Suppliers: foreign contractors who manufacture H&M's clothing have recently renegotiated their contracts for higher wages. C. Current competitors: ZARA, H&M's top competitor, is able to offer more fashionable styles at a lower price D. Customers: H&M's consumers are spread out across the economy and have little bargaining power

b and c

There is less inequality in permanent income than annual income, because some of the income inequality in annual income reflects short-term ups and downs that don't reflect a person's long-run economic situation. A. true B. false

true

A recent study by the Environmental Protection Agency (EPA) found that lawn herbicides have significant negative externalities (increased risk of cancer, contamination of water, and the creation of "superweeds"). Which government intervention(s) could address this negative externality? Select all that apply. A. The EPA issues a finite number of permits to consumers who want to use lawn herbicides, and they can trade those permits to other consumers. B. The EPA institutes a tax on consumers of lawn herbicides equal to the marginal external cost. C. The EPA provides a subsidy to consumers of lawn herbicides equal to the marginal external benefit. D. The EPA mandates that all farmers use lawn herbicides to prevent unwanted weeds from growing near their crops.

A and B

Which of the following are valid economic reasons that could explain why Mexican-produced fresh fruit can produce at below world price, while U.S.-produced fresh fruit is produced at above world price. Assume that the statements below are true. A. Mexico has an abundance of land and a climate that is ideal for growing fresh fruit B. Mexican fresh fruit producers have specialized skills and production techniques that enable them to produce fresh fruit more efficiently than American fresh fruit producers C. Many Mexican fresh fruit producers benefit from mass production, whereas most American fresh fruit producers operate a small plot of land and grow fresh fruit on a smaller scale D. Mexican fresh fruit producers have the absolute, but not comparative, advantage in producing fresh fruit, compared to American fresh fruit producers

A, B, and C

Ford Motor Company introduced new "collaborative robots," called co-bots, to lift heavy parts on their vehicle assembly line in Germany. Co-bots can lift 30 parts per hour and cost $18 to rent per hour. Human workers can lift 22 parts per hour and cost $15 per hour. Ford should: A. hire more workers B. use more co-bots

B

Many are concerned that large beer companies, such as Anheuser-Busch InBev, are monopolizing the beer market by buying small, craft beer companies before they can grow. Which of the following policies can government use to ensure competition remains in the U.S. beer market or reduce the consumer harm caused by market power? Select all that apply. A. Disallow mergers in which big companies buy smaller rivals B. Reduce international trade of beer C. Enforce laws that ban collusion among beer companies D. Encourage more mergers in the beer market E. Regulate maximum beer prices

A, C, E

Which of the following are examples of price discrimination? Select all that apply. A. A restaurant offers a senior citizen discount B. A child care center charges the same rate to everyone C. The U.S. Postal Service sells stamps for the same price online and at the post office D. A car wash charges more for luxury cars than for standard cars of the same size E. Wholesalers sell large volumes of food at a lower price per pound than small volumes

A, D, E

If firms with market power follow the Rational Rule for Sellers with market power, they will keep selling until: A. Marginal revenue > marginal cost B. Marginal revenue = marginal cost C. Price = marginal cost D. Marginal revenue < marginal cost

B

In a sequential game, you should look A. forward and reason forward. B. forward and reason backward. C. backward and reason forward. D. backward and reason backward.

C

Public goods are A. excludable and rival. B. excludable and nonrival. C. nonexcludable and rival. D. nonexcludable and nonrival.

D

Which of the following has the most market power? A. perfect competition B. monopolistic competition C. oligopoly D. monopoly

D

On the 50th anniversary of President Johnson's War on Poverty, the Heritage Foundation published an article calling it a failure, saying the official poverty rate of 14.5% in 2014 was almost the same as the official poverty rate in 1967. Select all the talking points that meet both criteria: 1. The statement is true; and 2. The statement would counter this argument to show actual poverty has declined even if measured poverty has not. A. The Earned Income Tax Credit (EITC), introduced in the mid-1970s and expanded in the 1990s, is not counted as income in the official poverty measure B. The Heritage Foundation is using a relative measure of poverty. The 2014 poverty rate is similar to the 1967 rate because it is calculated using U.S. median income, which has increased since the 1960s C. Many anti-poverty programs introduced or expanded after 1967 give in-kind benefits, not cash, so they are not counted as income in the official poverty measure. D. Housing costs, which have increased as a share of household expenditures since the 1960s, are not counted as necessary expenses in the official poverty measure

a and c

You run a farm-to-table restaurant and buy produce from local farms. When you see a local farm for sale, you realize it could provide most of the produce you need. If you buy the farm, what are some likely advantages to this vertical integration? Select all that apply. A. Eliminate supplier market power B. Reduce transaction costs C. Increase intra-brand competition D. Eliminate the holdup problem

a, b, d

A recent study by the Environmental Protection Agency (EPA) found that lawn herbicides have significant negative externalities (increased risk of cancer, contamination of water, and the creation of "superweeds"). This will lead to: A. An underproduction of lawn herbicides B. An overproduction of lawn herbicides

B

Chipotle has decided to increase the hourly wage they offer employees. Assuming employees have control over the number of hours they can work, what will be the impact of this wage change? A. Workers will decide to work more hours B. Not enough information available to determine the change in worker hours C. Workers will decide to work fewer hours

B

In the U.S., which type of taxation is regressive? A. Federal income tax, where different tax rates are charged based on a household's income level B. Sales tax, where a flat tax rate is charged to all purchases

B

Negative externalities lead to _____, while positive externalities lead to _____. A. overproduction; overproduction B. overproduction; underproduction C. underproduction; overproduction D. underproduction; underproduction

B

Successful advertising will make your firm's demand curve A. more elastic. B. less elastic. C. shift but with the same elasticity.

B

Which of the following is a government subsidy? A. Joy smokes two packs of cigarettes every week. She is thinking of cutting back to one pack a week due to a cigarette tax that will take effect next month. B. Zach lives in the Bronx and goes to Baruch College in Manhattan. New York City gives him a free MetroCard every month for him to get from his home to his classes. C. Alex wants to visit Machu Picchu in Peru next week but can't because the Peruvian government has set a daily limit of 2,500 visitors per day.

B

Which of the following is an example of a binding price floor? A. The minimum wage in New York City is $15, which is below the market wage for many industries. B. Sugar processers in the United States are required to pay farmers at least a minimum amount per pound of sugar. C. The Organization of the Petroleum Exporting Countries (OPEC) limits the production of oil to set a certain international price.

B

Your friend manages a grocery store and wants to get her employees to work harder and do better work. Which of these strategies is the least effective way to achieve this goal? A. Create a positive, mission-oriented corporate culture B. Make couches, smoothies, and ping pong tables available C. Link pay to performance D. Train employees in job-specific skills

B

A compensating wage differential is A. a wage that will make all workers want a particular job. B. a wage above equilibrium wage. C. a premium paid to workers in undesirable jobs. D. a wage below equilibrium wage.

C

Is the U.S. poverty line an absolute or relative standard? A. absolute B. relative C. both D. neither

C

Suppose that the demand for candy is less elastic than the supply of candy. If a tax is imposed on sellers of candy, which of the following is true? A. Sellers will bear all of the tax burden. B. Sellers will bear a larger share of the tax burden since the tax is imposed on them. C. Sellers will bear a smaller share of the tax burden because supply is more elastic than demand. D. Sellers will bear none of the tax burden.

C

Suppose your classmate tells you that you don't need to worry about people in poverty because most spells of poverty are short. Does this mean that we don't need to worry about poverty? A. We don't need to worry about poverty because most poor people are only temporarily poor. B. We don't need to worry about poverty because only a small minority of the population will ever experience poverty. C. We should still worry about poverty because most poor people are in long-term poverty.

C

You're a young married woman, and a hiring manager decides to hire a man instead of you because he is worried you may become pregnant and take maternity leave. This is an example of: A. Prejudice B. Implicit bias C. Statistical discrimination

C

Your best response is A. your favorite choice. B. the choice that yields the highest payoff. C. the choice that yields the highest payoff given the other player's choice. D. the choice the ensures the other player receives the lowest payoff.

C

Truck driving requires working long hours and spending extended periods of time away from home, which many consider to be negative job attributes. To correct for these negative attributes, trucking companies pay higher wages to truck drivers to attract them to the job. This is an example of: A. Pay for performance B. Rational rule for employers C. The demand for superstars in the truck driver labor market D. Compensating differential

D

Recently, due to declining profits, automobile manufacturers have been forced to consider whether to stay in the market or exit. Mary Barra is the CEO of General Motors (GM), and she knows if others leave the market first her economic profit will increase. She wants to outlast other automobile manufacturers to reap the economic profits. However, she knows other automobile manufacturers will not leave the market solely because of her statements that she will not close her business. She needs to create a credible threat to show the other CEOs that GM will stay in the business. Identify the options Mary could utilize to establish a credible threat. Select all that apply. A. Accept pre-orders with down payments from customers on a new vehicle model B. Stop selling trucks C. Begin building a new automobile assembly plant D. Send a strongly worded letter to all other CEOs stating her intention to stay in business

a and c

You work for a consulting firm that provides local governments and nonprofits with economic impact analyses for proposed policies and programs. Many similar firms offer the same services and have the same marginal costs. Which of the following strategies will help your firm boost its bargaining power? Select all that apply. A. Raise the price of your consulting engagements B. Advertise your analyses as the most robust evaluations in the market C. Create a loyalty program rewarding repeat clients with on-demand access to your firm's experts D. Differentiate your reports by adding more visually appealing charts and graphics (assume no change in marginal cost)

b, c, d

When the labor supply curve is backward-bending, then when the wage is A. low, the income effect dominates the substitution effect. B. low, the income effect and substitution effects offset each other. C. high, the income effect and substitution effects offset each other. D. high, the income effect dominates the substitution effect.

D