ECON 102 Final Exam

Jones and Smith live in the same apartment building. Jones loves to play his opera recordings so loudly that Smith can hear them. Smith hates opera. Jones receives​ $100 worth of benefits from his music and Smith suffers​ $60 worth of damages. Suppose the apartment building passes a rule that says residents are not allowed to play music their neighbors can hear if any of the neighbors object. Jones and Smith can bargain at zero cost. According to the Coase​ Theorem, Jones will pay up to $-- Smith to compensate for the negative externality. Smith would not accept anything less than $-- to agree not to complain to the apartment manager.

100 - 60

For 14,500 units of​ production, total variable cost is ​$275,500. For the 14,501st unit of​ production, total variable cost increases to 275,521.50. For 14,500 units, the average variable cost per unit is _______ and the marginal cost for the 14,501st unit is _________ (Enter your response rounded to two decimal places. )

19 , 21.50

the opportunity cost of planning a vacation with friends is ___ units of pleasure and the opportunity cost of cleaning the room is ___________________________________.

45 +, planning a vacation with your friends

Given the above production schedule, suppose Mr. Alexander gives an order of 492 leather jackets and 496 denim jackets. In this case, the factory will require_____________ full days to complete Mr. Alexander's order.

492/12 = 41 + 496/12 = 31 = 72

If video games are produced in a competitive market and the current price is $70, production in alpha is ______ thousand units and production is beta is _____ thousand units.

60, 70

Which of the following is likely to cause flour mills to increase their demand for labor?

An increase in the price of bread.

Why do economists study perfectly competitive markets even though few, if any, markets in the real world are perfectly competitive?

Because insights we gain from studying the perfectly competitive market are directly applicable to real markets, even though they are not perfectly competitive.

Which of the following statements is true?

Both life-saving drugs and ice cream are examples of scarce goods.

The production possibilities schedules and curves for farms in Idaho and Iowa are shown. ______________ has the absolute advantage in producing alfalfa and __________ has the absolute advantage in producing corn.

Idaho, Iowa

in which of the following examples is prescriptive economic analysis necessary?

Jay chooses to go to Europe rather than China because of the huge discounts.

In which of the following situations should a profit maximizing firm leave its output unaltered?

MR = MC and total revenue > total variable cost

Given this equation, which of the following represents the monopolist's marginal revenue?

MR = a - 2bQ

Priceline is a Web site that sells flights and hotel bookings based on the price that a consumer states that he or she is willing to pay. So consumers who want to book a flight or a hotel room need to tell Priceline the price that they are willing to​ pay, and the seller lets Priceline know whether it is willing to accept that price. Which of the following outcomes is likely using this form of​ pricing?

Producer surplus will​ rise, since some price offers by consumers will be higher than the price that Priceline would have​ charged, causing consumer surplus to shrink.

For a long​ time, your firm has been paying its workers a wage of​ $20 per hour and your employees have been happy to work 40 hours per week at this wage. Business is suddenly booming and your firm would really like your workers to agree to a​ 50-hour work week in order to meet this new demand for your product. You are considering two strategies. Strategy 1 You would raise the wage for all hours worked from​ $20 per hour to​ $22 per hour. Strategy 2 You would leave the wage for the first 40 hours per week at​ $20 but offer​ $30 per hour for hours worked above 40 hours​ (that is, you would offer​ time-and-a-half for​ overtime). Both strategies have the same cost of​ $1,100 if a worker chooses to work 50 hours. Which strategy is more likely to lead your employees to agree to a​ 50-hour work​ week?

Strategy​ 2, because the MC of not working increases significantly after 40 hours of work.

When a monopolist charges $5 for its product, it sells 250 units of the product. When it decreases the price of the product to $4, it sells 325 units of the product. Which of the following is true of the demand curve of the product in the price range of $4 to $5?

The demand curve is elastic.

What are different kinds of discrimination in labor market? How do they differ? Is it enough to prove discrimination just by showing a difference in the average wage rate between two groups?

The different kinds of discrimination in the labor market are taste-based discrimination and statistical discrimination. Taste-based discrimination arises due to people's prejudices against a group of people. Statistical discrimination arises due to expectations about a group of people. No, you can't prove discrimination by showing a difference in the average wage rate between two groups. You don't have enough information from a graph to prove discrimination. There's other reasons why the average wage rate might be different other than discrimination being involved.

In which of the following scenarios would a country export a good?

The domestic price for the good is below the world price.

bureaucratic costs

The greater the number of regulations = the greater the number of government workers needed to enforce them.

Macroeconomics

The study of the economy as a whole

market demand curve

The sum of the individual demand curves of all the potential buyers. It plots the relationship between the total quantity demanded and the market price, holding all else equal.

Amanda pays no tax because she has no income. If they all live in a country that has a progressive income tax, which will be higher: the tax that Ben pays or the sum of the taxes Cathy and Dylan pay?

The tax that Ben pays because high income individuals pay higher income taxes.

Suppose Amanda earns​ nothing, Ben earns​ $60,000, and Cathy and Dylan each earn​ $30,000. They are all single. Amanda pays no tax because she has no income. If they all live in a country that has a PROGRESSIVE income​ tax, which will be​ higher: the tax that Ben pays or the sum of the taxes Cathy and Dylan​ pay?

The tax that Ben pays because​ high-income individuals pay higher income taxes.

A friend tells you that he thinks that the salespeople who work at Apple stores are paid very low​ wages, given their productivity. Dividing​ Apple's revenues by the total number of employees shows that each employee contributed an average of​ $473,000 in revenues in 2011. But most of​ Apple's sales staff are paid about​ $25,000 a year. What is the​ flaw, if​ any, in your​ friend's reasoning?

The wage is equal to the value of the​ worker's marginal​ product, not revenue per worker.

As this chapter​ explains, a monopoly is an industry structure where only one firm provides a good or service that has no close substitutes. This question explores the last part of this definition further. In​ 1947, the United States government charged the DuPont Company with a violation of the Sherman Act. The government argued that DuPont was monopolizing the cellophane market. At​ trial, the government showed that DuPont produced nearly 75 percent of all of the cellophane sold in the United States each year.​ Nonetheless, the U.S. Supreme Court ruled in favor of DuPont and dismissed the case. Which of the following is a likely argument used by DuPont to convince the Supreme Court that it did not violate the Sherman​ Act?

There are many close substitutes for cellophane such as aluminum foil and waxed​ paper, so DuPont did not have significant market power.

Mary plants a number of trees in her garden every week, which keeps her neighborhood cool. Which of the following is true? A) The marginal social cost of planting a tree is lower than the marginal private cost of planting a tree. B) The marginal private benefit of planting a tree is higher than the marginal social benefit of planting a tree. C) There is an external benefit in planting a tree. D) There is a deadweight loss in planting trees.

There is an external benefit in planting a tree.

Due to the ongoing budget of short falls, the city of Detroit has suspended services, such as street cleaning and maintenance of city-owned properties in several neighborhoods. In response, some homeowners in these neighborhoods sweep the streets, replace street lights, and mow the grass on city-owned lots.

These actions by homeowners represent a positive externality in production.

All of the following statements about Pigouvian taxes are​ true, except:

They are designed to increase quantity toward optimal quantity.

Which of the following best describes network externalities?

They occur when a product's value increases as more consumers begin to use it.

Causation

When a change in one variable causes a change in another variable

natural market power

When a single firm obtains market power through barriers to entry created by the firm itself

dominant strategy equilibrium

When each strategy used is a dominant strategy

Which of the following statements is true?

When two firms have different opportunity costs of producing two goods, each firm will always have a comparative advantage in the production of one of the goods.

Which one of these statements deals with optimization, which deals with equilibrium, and which deals with empiricism? You can either stand during a college football game or you can sit.

You believe that you will see the game very well if you stand and others sit but that you will not be able to see at all if you sit and others stand. You therefore decide to stand. matches Optimization Your friend tells you that he expects many people to stand at football games. matches Equilibrium An economist studies photos of many college football games and estimates that 75 percent of all fans stand and 25 percent sit. matches Empiricism

market

a group of economic agents who are trading a good or service, and the rules and arrangements for trading

Two manufacturing plants operate at Acme Corporation: Plant A and Plant B. If Plant A uses older technology than Plant B, it is likely to have ______________ marginal cost than Plant B.

a higher

The labor demand curve will shift leftward when:

a labor-saving technology is introduced

if your income increased 10% and your demand for diamond jewelry increased 15%, diamond jewelry would be considered _______________ good.

a luxury

income elasticity of demand

a measure of how much the quantity demanded of a good responds to a change in consumers' income, computed as the percentage change in quantity demanded divided by the percentage change in income

cross price elasticity

a measure of how much the quantity demanded of one good responds to a change in the price of another good, computed as the percentage change in quantity demanded of the first good divided by the percentage change in the price of the second good

Elasticity

a measure of how sensitive one variable is to changes in another

When comparing the graph of your ATC curve for a natural monopoly with that of a firm in a perfect competition, we that:

a natural monopoly has a downward-sloping ATC curve, while a firm in a perfect competition has a U shaped curve.

microeconomics studies ______________________________, while macroeconomics studies___________________________________.

a small piece of the overall economy, the economy as a whole

demand schedule

a table that reports the quantity demanded at different prices, holding all else equal

supply schedule

a table that reports the quantity supplied at different prices, holding all else equal

the definition of economics states that it is the study of how:

agents choose to allocate scarce resources and the impact of those choices on society.

all of the following factors that contribute to a country's comparative advantage except

aging population

which of the following does not support the concept of an economic agent?

all economic agents are individuals and their decisions do not have an effect on the economy of a country.

economists study _________________; therefore, the unifying feature of economics is a focus on ________________.

all human behavior, choice

Pareto efficient All of the below is correct except: An outcome is Pareto efficient

all individuals can be made better off without making someone worse off

negative externality

an economic activity that has a negative spillover effect

positive externality

an economic activity that has a positive spillover effect

if the demand for pinot noir suddenly shifts sharply to the right, we would expect to see ________________in the demand for land in Sonoma, which would _____________the equilibrium price.

an increase, increase

a negative income elasticity would indicate _____________________ good.

an inferior

fixed factor of production

an input that cannot be changed in the short run

All of the following could cause an increase in producer surplus except

an upward shift in the marginal cost curve

As this movement of firms occurs, economic profits for the typical firm will _______________________.

approach zero

On the Production Possibilities​ Curve, possible production levels are​ represented:

at any point on or below the curve.

competitive market

at the market price, competitive firm will sell all it can produce

direct regulation

attempts by the government to control the amount of an activity also called command and control regulation

price controls

attempts by the government to control the price of an activity

feasible options are all those choices that are

available and affordable

A significant difference between monopolies and competitive firms is that

a​ monopoly's demand curve is the​ industry's demand​ curve, while the competitive​ firm's demand curve is perfectly elastic.

on the graph shown, consumer surplus would be the area:

below the market demand curve and above the market price.

the shift in income causes the budget constraint to increase ______________________ and the slope to _______________________.

by the same amount, remain the same

variable cost

changes as the level of output changes

price discrimination

charging different prices to different customers for the same product when the price differences are not due to differences in cost

barriers to entry

circumstances that prevent potential competitors from entering the market

A library's collection of e-books

club good

A pasture

common pool resource

The ability of an individual, firm, or country to produce a certain good at a lower opportunity cost than other producers is referred to as ____________________________________.

comparative advantage

A country has two types of workers, skilled, and unskilled. Workers can produce either aircraft or ships. Output per worker is as follows: ........................................Aircraft..........Ships Unskilled workers ............6 .................... 4 Skilled workers.................10....................6

comparative advantage in making aircraft - skilled workers comparative advantage in making ships - unskilled workers

price takers exist throughout ___________________.

competitive markets

You estimated the price elasticity of demand for new vehicles to be 0.75. If the price of cars increased by 20​%, one would expect the quantity of new cars demanded to by ___ %.

decrease by 15%

If management sought to transfer 10 thousand units of beta's production to alpha, the firm's overall profits would __________, since for those 10 thousand additional units _________________________________________.

decrease, MC alpha < MC beta

everything else of the same, as the price of the good increases, quantity demanded_________________.

decreases

everything else the same, as the price of the good increases, quantity demanded _______________.

decreases

The _________________ plots the relationship between prices and the quantity that buyers are willing to purchase.

demand curve

derived demand

demand for labor related to market's demand for firm's product

Most people have been staying home in China in order to avoid spreading/catching the deadly coronavirus. This implies that gasoline

demand shifts left decreasing the equilibrium quantity and price

a price ceiling set below the natural equilibrium price would cause the quantity _________________ to exceed quantity __________________.

demanded, supplied

Suppose a country has 100 westerners and 100 easterners. A westerner can produce either 6 units of food or 2 units of national​ defense; an easterner can produce either 2 units of food or 1 unit of national defense. According to the​ data, ______________ have a comparative advantage in the production of defense. Suppose this country has decided it wants to produce 60 units of defense. In this​ case, the country will have more food to consume if the ______________ produced these 60 units of defense.

easterners - easterners

All of the following are reasons for compensating wage differentials except:

educational levels

natural monopoly

emerges because it enjoys economies of scale over a very large range of output

As a consequence of the current short-run conditions in this industry, it may be expected that firms will _________________ this market.

enter

trade

exchanging one good or service for another

microeconomics is concerned with

externalities arising from production and consumption.

You read a story in the newspaper about a car company that has recently been fined five billion dollars by government regulators. The fine is for past infractions that are no longer relevant to how the firm will produce cars going forward. The story contains the statement​ "clearly, the company will now need to raise prices in order to recover this​ loss." If it is impossible for the company to pay its​ obligations and assuming the car industry is close to perfectly competitive, the company should ___

file for bankruptcy

the opportunity cost of something is what is given up in order to get that something. thus, the opportunity cost, like any other cost, is expressed as a ratio:

give up/get. notice what you get is in the denominator.

The shift toward more open, integrated economies that participate in foreign trade and investment is referred to as___________________________.

globalization

non-rival good

goods that more than one person at a time can consume

rival good

goods that only one person can consume at a time

patent

government granted permission to be the sole producer and seller of a good

copyright

government granted rights to the creator of literary or artistic work

transfer payments

government payments to individuals or groups

antitrust policy

government policies that try to prevent anti-competitive pricing, low quantities, and deadweight loss from emerging and dominating markets

A corrective subsidy would be used when marginal social benefit is -- than market demand. This causes the -- to internalize the externality.

greater - consumer

you would expect that the labor-force participation rate among highly educated women would be ______________________, since the opportunity cost of not working for highly educated women is ______________ that of all women.

higher than average, higher than

In this case, Plant A requires a market price that is __________________ Plant B in order to produce. At the market price, Plant A will produce _________________ Plant B and will earn _______________ economic profit.

higher than, less than, a lower

Since both pinot noir wine and gravestein apples use the same land in Sonoma, CA, a sharp increase in demand for pinot noir wine will result in a ______________price for gravestein apples and a _____________equilibrium quantity.

higher, lower

given the long-run adjustment process that takes place after a supply or demand shock, we know that the industry supply curve must be

horizontal, since the supply curve shifts until price is back to its original level and profits are back to zero

Economics studies

how agents make choices among scarce resources and how those choices affect society

value of marginal product of capital (VMPK)

how much each additional unit of capital contributes to the firm's revenues

the demand curve shows________________________________________________________.

how the quantity demanded responds to changes in the price of the good

the demand curve shows

how the quantity demanded responds to changes in the price of the good.

which of the following is a positive economic statement?

if minimum wage rates rise, then unemployment will rise.

Oranges and tangerines are substitutes. Suppose a nasty fungus sharply reduces the supply of oranges. What would happen to the price of tangerines, ceteris paribus?

increase

If the domestic price for a good is lower than the world price when a country opens itself to trade, domestic suppliers will _________________ the price of the good, which in turn will ______________ the domestic demand for the good.

increase, decrease

As a firm produces more units of a good, the cost of producing each additional unit __________________.

increases

This implies that the marginal cost of production a good ____________ as you make more of a good.

increases

Once again the marginal cost for your firm is MC = 2+Q. What can we say about the total cost curve?

increases at an increasing rate

the effects of tariff

increases the market price of the product

Network externalities and economies of scale both can contribute to the formation of a monopoly.​ However, they differ in that network externalities deal with

increasing benefits and economies of scale deal with decreasing costs.

Points inside a production possibilities curve are

inefficient, because more goods can be produced with the available resources.

variable factor of production

input that can be changed in a certain period of time and that changes if the level of output changes

economics

is concerned with how people make choices

The market demand curve for a public good

is found by summing all of the​ individual's marginal benefit at a given quantity.

An argument in favor of employers paying for the job training of an employee is:

job training can improve a worker's job-specific skill set.

An argument in favor of employers paying for the job training of an employee​ is:

job training can improve a​ worker's job-specific skill set.

physical capital

lasting input into the production process

If more people start to buy electric vehicles this will constitute a

leftward shift in the gasoline demand curve

according to the principle of comparative advantage, both parties will engage in a trade of the trading price

lies between their opportunity costs

According to the principle of comparative​ advantage, both parties will engage in a trade if the trading​ price:

lies between their opportunity costs.

in a perfectly competitive market, if one seller chooses to charge a price for its good that's slightly higher than the market price, then it will______________________________________.

lose all or almost all of its customers

you would expect that the total fertility rate among highly educated women would be ________________ less educated women, since the opportunity cost of staying home to raise children is _______________ for highly educated women.

lower than, higher

If your income increased 10​% and your demand for diamond jewelry increased 15​%, diamond jewelry would be considered ___ good.

luxury

a policy such as passing an economic stimulus to spur the economy would be studied under _____, since it deals with ________________________.

macro, the economy as a whole

which of the these covers the study of topics such as inflation and unemployment?

macroeconomics

National security concerns might cause a nation to:

maintain a variety of agricultural industries

National security concerns might cause a nation​ to:

maintain a variety of agricultural industries.

Input

make up production side of the equation

Optimization

making the best or most efficient use of a situation, product, or resource

When Janet looks at the additional value of purchasing a new laptop to the cost as compared to keeping her old​ one, she is using optimization based on _.

marginal analysis

A socially-optimal price regulation will NOT work if:

marginal cost is less than average total cost.

which of the following describes the long-run competitive market if demand were to increase?

market price increases, economic profits increase, short-run market supply increases, long-run supply settles at minimum ATC

Key Resources

materials that are essential for the production of a good or service

if the president of Columbia commented that "we should do something to reduce inflation in Columbia, this would be an example of:

normative statement

the statement that the United States should legalize same sex marriage is a ____________ statement since it describes what people _____________________.

normative, ought to do

selecting the best feasible option among available manufacturing options is called:

optimization

Economics differs from these other social sciences because it also addresses

optimization, equilibrium, and empiricism.

an increase in income shifts the budget constraint ______________________.

outward

national security concerns

over reliance on other countries for needed goods and services

The goal of optimization for an individual is to maximize

overall well-being

Which one of these players have market power?

patent holder of an allergy medication

short term

period of time when some of the firm's inputs can't be changed

A budget constraint for​ t-shirts and movie tickets is shown in the graph. If the price of either the​ t-shirt or the movie ticket​ decreases, the budget​ constraint:

pivots outward and the slope changes.

demand curve

plots the quantity demanded at different prices

supply curve

plots the quantity supplied at different prices

market supply curve

plots the relationship between the total quantity supplied and the market price, holding all else equal

macroeconomics is concerned with all of the following except:

political party affiliation

The figure on the right shows the typical firm in a perfectly competitive industry. Equilibrium in the market is currently yielding a price of $70. At this price, the typical firm earns a _____________________ economic profit.

positive

the statement that the United States has a budget deficit that is in excess of $15 trillion is a _____________ statement since it describes what people ________________________.

positive, actually do

A curve that shows the various combinations of goods and services that are possible for an economy to produce with a given amount of resources is referred to as a(n)

production possibilities curve

The primary types of tax systems are__________________________________________.

proportional tax systems, regressive tax systems, and progressive tax systems

The Law of Demand states that as the price of a good increases, ceteris paribus, the _____________________ decreases.

quantity demanded

which of the following is not one of the three key principles of economics?

resource allocation

When one of the five major factors​ changes, causing an increase in​ demand, the demand curve shifts

rightward

When one of the four major factors​ changes, causing an increase in​ supply, the supply curve shifts

rightward

If there is a decrease in the price of the final good that an industry produces, the labor demand curve in the industry is likely to:

shift to the left

budget constraint

shows the bundles of goods or services that a consumer can choose given her limited budget

production possibilities curve

shows the relationship between the maximum production of one good for a given level of production of another good

market economy

solves the coordination problem in a decentralized way and incentivizes people to participate transactions that are beneficial to them

omitted variables

something that has been left out of a study that, if included, would explain why two variables that are in the study are correlated

This problem tells us that one of the sources of economies of scale is ▼ fixed costs specialization diminishing returns .

specialization

budget deficit

spending is greater than tax revenues.

Coase Theorem

states that private bargaining will result in an efficient allocation of resources

Coffee and tea are likely______________ because an increase in the price of coffee______________the demand for tea.

substitutes, increases

Costs that cannot be recovered are:

sunk costs

progressive tax system

system in which average and marginal tax rates are higher for higher income levels

proportional tax system

system in which everyone pays the same proportion of their income in taxes, regardless of how much their income is

regressive tax system

system in which the lower income, the higher percentage of income is paid in taxes -marginal and average tax rates fall as income rises

A marginal tax rate is the __________________________________________________________.

tax rate on the last dollar of income earned

budget surplus

tax revenue is greater than government spending

terms of trade

the "price" of one good in terms of the other; the exchange rate between goods

absolute advantage

the ability of an economic agent to produce more output than another agent with the same resources

the optimal economic decision is to continue any activity, investing or otherwise up to the point where:

the additional benefit of the activity is at least more than the additional cost of the activity.

quantity demanded

the amount of a good that buyers are willing and able to purchase

quantity supplied

the amount of a good that sellers are willing and able to sell

revenue

the amount of money the firm brings in from the sale of its product

Average total cost decreases with an increase in output because:

the average fixed cost decreases with an increase in output.

equity-efficiency trade-off

the balance between ensuring an equitable allocation of resources (equity) and increasing social surplus or total output (efficiency)

The demand curve for pizza in Perilia is vertical. If a tax is imposed on each pizza bought,

the burden of the tax will fall entirely on the buyers

marginal analysis

the change in the net benefit of one option compared to another

Optimization is the process that describes

the choices that businesses make.

Jenny likes chocolates. One day, a friend offers her a chocolate bar and she is extremely happy on receiving it. As the day progresses, many other people also buy her chocolate. As she gets more and more chocolates, her excitement on receiving each bar is seen to gradually lessen. Which economic principle is reflected in this example?

the concept of diminishing marginal benefit The Law of Diminishing Marginal Benefit

which of the following is not a possible opportunity cost of attending college?

the cost of housing

Amanda and Ben will pay the same tax as Cathy and Dylan because______________________________________________________________________________.

the couples have the same family income.

producer surplus

the difference between the price the firm would be willing to accept and the market price the difference between the market price and the supply curve the area below price but above supply MC

during the process of optimization, economists believe that people are considering ________________________________________________________________________.

the feasibility of a choice, given the information available at the time

If it costs a firm ​$3,000 to produce 400 shirts and ​$6,500 to produce 900 ​shirts, then:

the firm is experiencing economies of scale.

The price effect of a price decrease by a monopolist refers to:

the loss in revenue due to the price reduction.

The fast food restaurant on Main Street just laid off several​ workers, replacing them with​ self-order computer kiosks. This would​ imply:

the marginal product of capital per dollar spent on capital was greater than the marginal product of labor per dollar spent on labor.

if new firms enter an existing market,

the market price is likely to sell

in a perfectly competitive market, if the economic profits exist, then:

the market supply curve will shift rightward and the price will decrease

The supply curve represents______________________________________________________.

the minimum price sellers are willing to accept to sell an extra unit of a good

the concept of diminishing marginal benefits states that_____________________________________________________.

the more you consume of a good, your willingness to pay for an additional unit declines

If the production of a good involves negative externalities, ________.

the optimal price of the good is higher than the price charged in the market

long run

the period of time in which a firm can vary all its inputs, adopt new technology, and increase or decrease the size of its physical plant

which of the following best describes the long run for a firm?

the period of time over which all factors of production are variable

competitive equilibrium

the point at which the market comes to an agreement about what the price will be and how much will be exchanged at that price

which of the following statements explain positive economics?

the predictions are testable and it can be rejected or amended depending on the evidence available.

market price

the price at which buyers and sellers conduct transactions

production

the process by which the transformation of inputs to outputs occurs

the entry and exit of firms in a perfectly competitive market is mostly dependent on:

the profitability of the existing firms

At the competitive equilibrium:

the quantity demanded is equal to the quantity supplied of a good

If negative externalities are present in a market, ________.

the quantity supplied in the market is larger than the socially optimal level.

The Law of Supply states that:

the quantity supplied of a good rises when the price rises

marginal tax rate

the rate paid on the last dollar of income

production function

the relationship between quantity of inputs used to make a good and the quantity of output of that good

The production function​ is:

the relationship between the quantity of inputs used and the quantity of outputs produced.

assumption

the sellers operate in a perfectly competitive market

reverse causality

the situation in which the apparent "cause" is actually the "effect"

which of the following statements is true of a perfectly competitive market?

there is free entry and exit in the market

If prices are held above the equilibrium price

there will be a surplus in the market

What is the relationship between pinot noir wine and gravestein apples?

they share a common input

scarce resources

things that people want, where the quantity that people want exceeds the quantity that is available

a firm is seeing a $500 loss in the short run. the fixed cost of operation for this firm is $1,000. what is the best decision for this firm in the short run?

this firm should not shut down production

when faced with the option of buying one pair of boots for $60 or three sets of sandals for $20 each, Janet chose the of boots. The opportunity cost for the boots was:

three pairs of sandals

Optimization in levels examines​ ___________, while optimization in differences analyzes​ ____________.

total net benefits of alternatives, the change in net benefits

accounting profit

total revenue - explicit costs

economic profit

total revenue minus total cost, including both explicit and implicit costs

average tax rate

total taxes paid divided by total income

When John determines what choice of walking shoes will give him the best bang for his buck​, he is using optimization based on ___.

total value

This can be shown graphically with an ______________________, supply curve or numerically in a table using a ___________________________.

upward-sloping, supply schedule

which of the following is the difference between variable costs and fixed costs?

variable costs of a firm are zero after a firm shuts down, whereas the firm continues to incur the fixed costs or production in the short run

preferences

vary over people but all people want max benefits

FDA regulations aimed at ensuring that new drugs that are marketed​ do, in​ fact, have the functions they are supposed to have are necessary​ because:

verification by each consumer would be extremely inefficient.

compensating wage differentials

wage premiums paid to attract workers to otherwise undesirable occupations

industries

want our scarce to be devoted to produce goods and services that we, as a society, value the most

the opportunity cost of an activity is a measure of _________________ when you do that activity.

what is given up

pecuniary externality

when a market exchange affects other people through market prices

network externalities

when a product's value increases as more consumers begin to use it

free rider problem

when an individual doesn't pay for a good because it's non-exclusive.

infant industry argument

when industries are first getting started, they may need some government protection from free trade until they get established

zero-sum game

when one player wins, the other loses, so the payoffs sum to zero

Nash Equilibrium

where each player chooses a strategy that is best, given the strategies of others; changing strategies does not make anyone better off.

command economy

where the production and consumption is planned by some central authority lacks such agility and hence is inefficient

Tax incidence refers to

who bears the burden of the tax

tax incidence

who bears the burden of the tax

For a buyer, reservation value is the same as _______________________________.

willingness to pay

​A political science​ student, thinks that the government should intervene to revive declining industries like video stores and print newspapers. The​ government, she​ reasons, can resolve the coordination problem of getting the agents in these markets to trade. Would an economist agree with her?

​No, these industries are declining not because of coordination problems​ but, rather, because of falling demand.

The table displays the reservation values of eight buyers and eight sellers, who each want to buy or sell a calculator. If the market is perfectly competitive, the equilibrium price of calculators is _________.

$12

If the price is $8, then the total revenue is _______ thousand. If the price is $7, then the total revenue is _____ thousand. If the price is lowered from $8 to $7, then the change in total revenue is ______ thousand.

$16, $21, $5

Suppose you are a monopolist and you have two customers, A and B. Each will buy either zero or one unit of the good you produce. A is willing to pay up to $35 and B is willing to pay up to $25 for your product. You produce this good at a constant average and marginal cost of $16. If you could NOT engage in​ third-degree price​ discrimination, what price would you​ charge?

$35

When a monopolist charges $5 for its product, it sells 250 units of the product. When it decreases the price of the product to $4, it sells 325 units of the product. What is the quantity effect after the price change?

$4 * 75 = $300 325 - 250 = 75

Fixing up old houses requires plumbing and carpentry. Jack​ (who is a jack of all trades but is a master of​ none) is a decent carpenter and a decent​ plumber, but is not particularly good at either. He can fix up two houses in a year if he does all of the carpentry and plumbing himself. His wage is ​$80,000 per year. ​Jack's average total cost of fixing up three old houses is________________.

$80,000/3 = $26,667

If George and Harriet work together and fix up seven old houses each year, their average cost is _________________________________________________.

($80,000*2)/7 = $22,857

value of marginal product of labor

- how much each worker contributes to revenue - the contribution of an additional worker to a firm's revenues - equal to MP x output price

Correlation

A measure of the relationship between two variables

Which of the following statements is true?

A monopolist can increase the price of its product without losing its business.

Using the graph, a firm with that type of cost curve is best suited to be:

a natural monopoly, since it faces economies of scale and can produce at a lower cost if done by one firm.

model

a simplified representation or abstraction of reality

Tariff

a tax added on to the price of an imported product

the invisible hand

directs consumers and producers to maximize their surplus and leads to the highest level of social welfare

The price of non-work activities is______________________________________________.

equal to the opportunity cost of those activities

With an increase in the demand for a good, if prices are not allowed to increase:

firms will have no incentive to increase the quantity supplied of the good

If a person purchases 5lbs of apples at a $1.49/lb which of the following can be inferred from this behavior

his willingness to pay for the 6th pound of apples is not more than $1.49

this will result in a shift in the _____________________ until profits are ________.

industry supply curve, zero

a group of economic agents who are trading a good or service would define a______________.

market

All of the following are factors in a firm's elasticity of supply except:

market demand

A _____________ tax system is one in which tax rates increase with taxable base incomes.

progressive

If the marginal tax rate facing a consumer on the last dollar of earned income is greater then the average tax rate, the tax system is ____________________.

progressive

Sherman Antitrust Act (1890)

prohibited restraint of trade-monopoly markets

An example of a regressive tax is

property tax

A video on YouTube

public good

market power

the ability to set the price

opportunity cost

the best alternative use of a resource

consumer surplus

the difference between what a buyer is willing to pay for a good and what the buyer actually pays.

in which of the following scenario would a country export a good?

the domestic price for the good is below the world price

Tragedy of the Commons

when common pool resources are overused

first degree price discrimination

when each consumer is charged the maximum he/she is willing to pay

Equilibrium

when everyone is optimizing; no one would be better off with a different choice.

Pareto Effect

when no one can be made better off without making someone else worse off

economic agent

Any group or individual that makes choices, such as consumers, firms, parents, politicians, etc.

The following table shows your grade on each quiz for different numbers of hours spent studying for each quiz. (For the purposes of this problem, assume that each hour of study time can't be subdivided.) Your goal is to maximize your average grade on the two quizzes. Assuming that you have 3 hours in total to prepare for the two exams. How should you allocate those 3 hours across the two subjects?

1 hour of Chemistry, 2 hours of Biology

3 measures of elasticity

1. Price elasticity of demand 2. Cross-price elasticity of demand 3. Income elasticity of demand

Suppose the market wage facing a firm in the perfectly competitive candle-making industry is $20 per hour, and the firm sells its candles for $2 each. Given this information, the firm should hire workers until the marginal product of labor equals________________.

10 candles per hour

If Yasim spent all her time on CF cases, how many CF cases can she finish?

12

The factory gives up being able to manufacture____unit(s) of a denim jacket for every leather jacket manufactured and it gives up being able to manufacture ____unit(s) of a leather jacket for every denim jacket manufactured by the factory.

16/12 = 1.33, 12/16 = 0.75

Which of the following statements is true?

An optimizing individual is also likely to exhibit rationality.

Suppose the following table gives the federal income tax rates for a single individual. Income ------------------ Rate $0 to $8,925 ------------ 10% $8,925 to $36,250 ----- 15% $36,250 to 87,850 ----- 25% $87,850 to $183,250 --- 28% $183,250 to $398, 350 -- 33% $398, 350 to $400,000 -- 35% $400,000 and above --- 35% The total tax payable for an individual who earns ​$350,000 a year is ____.​(Two decimal places.​) The marginal tax rate is ____ percent. (No decimal places.) The average tax rate is____percent. (Two decimal places)

99629.74, 33 , 28.46

Command economy

A central authority determines the goods and services produced

Which of the following is NOT an example of a market?

A city requires homeowners to pay $500 for putting in a sidewalk on their street.

positive correlation

A correlation where as one variable increases, the other also increases, or as one decreases so does the other. Both variables move in the same direction.

Why is the equilibrium price in this market ​$50​,000?

All of the above

In a command​ economy, a planning agency sets prices for various inputs and final goods. In a market​ economy, supply and demand decide the prices of various goods. In both​ cases, there is a set of prices operating in the economy. Then why are market economies considered more efficient than planned​ economies?

All of the above.

A production possibilities curve is plotted for a nation producing chairs and tables. Which of the following will cause a parallel shift in this curve?

An increase in the availability of raw materials required for the production of both chairs and tables.

The tech firm's goal is to maximize profits, while your goal as a license holder is to maximize total revenue. Given this information, what do we know about the piece of the good?

Based on the graph, we know that you prefer P1, but the tech prefers P2.

How do economic profits and losses allocate resources in an economy?

all of the above (too lazy to type it all out)

Which of the following statements is true?

Central planners in command economies have to make decisions that prices would automatically have made in market economies.

pure strategy

Choosing one strategy

The mercantilist economic doctrine was widely followed from the sixteenth to the eighteenth centuries in Europe. Mercantilists advocated the use of tariffs to restrict​ trade, as they believed that countries that export more than they import will increase wealth. What could be the problem with such an economic​ policy?

Consumers pay a price that is higher than the world​ price, reducing consumer surplus.

Which of the following gives rise to a positive externality?

Deforestation leading to the extinction of many species.

according to the rationality assumption, people:

Do not intentionally make decisions that would leave them worse off.

Suppose you have 60,000 frequent flier miles. You could exchange your miles for a round-trip ticket and hotel reservation to Bermuda over spring break. This means you get a free vacation.

FALSE

Which of the following correctly identifies an argument against globalization?

Globalization can lead to a loss of indigenous culture and tradition.

Which of the following is true of a progressive tax system?

Higher interest rates will encourage more savings An increase in income causes an increase in savings

The state with the lower opportunity cost for producing a ton of alfalfa is ___________, so the state with the comparative advantage in producing alfalfa is ____________.

Idaho (twice)

All of the following are true of the demand for labor​ except:

It is not affected by the retail price.

Consider the following situation: Suppose there are only 5 people are enrolled in a class including you. Your professor tells your class that the mean score in the final exam is 80 but the median is 100.

It is possible.

Suppose the production of a particular good causes a negative externality. Based on market forces​ only, how will this impact the production levels for a factory if negative externalities are​ present?

It will produce the good above the socially efficient level.

So far looked how price changes would affect the budget constraint. How would an increase in income affect the budget constraint when the prices remain fixed?

It would shift out with the same slope

An example of a proportional tax is the

Medicare tax

Is the income tax in this country marriage neutral?

No, because Cathy and Dylan pay higher taxes when married than before marriage.

There is a proverb​ "anything worth doing is worth doing​ well." Do you think an economist would agree with this​ proverb?

No, because the marginal cost of extra effort may be greater than the marginal benefit.

Janet knows a lot of people who do not like​ Marmite®, a yeast extract that is used as a spread on toast. She says that Marmite is so unpopular that​ Unilever, the company that manufactures​ Marmite®, cannot possibly have any monopoly power. How should you respond?

No, monopoly power is based on whether a good has any close​ substitutes, not whether your friends like the product.

Is the entire burden of the tax always borne by those on whom it is​ imposed?

Not necessarily, since the burden of the tax depends on price elasticity.

Is a player's best response in a game the same as his dominant strategy?

Not necessarily. If a player has a dominant strategy, then it is his best response; however, every best response is not always a dominant strategy.

excess demand

Occurs when consumers want more than suppliers provide at a given price. This situation results in a shortage.

excess supply

Occurs when suppliers provide more than consumers want at a given price. This situation results in a surplus.

Which of the following represents a good imported to the state of Wyoming?

Oranges from Florida shipped to Wyoming

Which of the following is not one of the sources of natural market power?

Owning a firm in a small community.

Which of the following suggests that a competitive firm earns a zero economic profits?

P = MC = ATC

budget set

all the combinations of goods and services that one could afford

Market economy

Price signals and strong economic incentives.

Which of the following is NOT one of the five major factors that shifts the demand curve when it changes?

Prices of inputs used to produce the good.

Which of the following equations calculates economic profits for a monopoly?

Profits = (P - ATC) x Q

Which of the following factors best explains why wage inequality in the United States has been increasing over the last several​ decades?

Skill-biased technological change.

You see the relationship between number of advertisements shown on national TV and monthly sales in two different states. In which state sales and the number of advertisements have a stronger relationship?

State 1

Why are the ticket prices for NBA games so high?

The demand for NBA games are high.

In a perfectly competitive​ market, all of the following are true​ except:

The market supply cannot affect the retail price.

Which of the following statements best describes absolute advantage?

The party who can produce more of the good.

Which of the following is NOT one of the four major factors that shifts the supply curve when it changes?

The price of the good itself.

which of these is a macroeconomic study?

The study of how fast prices in general are rising.

Which of the following are properties of a monopoly?

There are high barriers to entry, there is only one seller, price-maker.

Which of the following would maximize social​ surplus?

Trade at the competitive market equilibrium.

Which of the following best describes the relationship between price (P), marginal revenue (MR), and total revenue (TR) for a monopolist?

When MR is positive, TR is rising, and when MR is negative, TR is falling.

price ceiling

a cap or maximum price of a market good

fixed cost

a cost that does not change as output is increased or decreased

export

a good produced domestically and shipped to another state or country

import

a good produced in another state or country but sold domestically

VMPL

adding the value in terms of revenue that each worker adds

marginal product of labor

additional output from each additional unit of labor

economic activities that are feasible have what characteristics:

affordable and available

The diagrams shown below depict the cost curves of two plants owned by a firm producing video games. From the positions the curves hold in each graph, it can be deduced that the older, less efficient facility is __________________.

alpha

which of the following are necessary ingredients to the buyer's problem?

amount of money the consumer has to spend consumers tastes and preferences price of goods and services

graphically, producer surplus is the:

area between the supply curve and the equilibrium price line

negative correlation

as one variable increases, the other decreases

budget

assumed no borrowing, no lending

prices

assumed to be fixed

all of the following are elasticity measures, except:

behavioral elasticity of demand

The intersection of the supply and demand curves gives the labor market equilibrium, which determines:

both "the equilibrium wage" and "the quantity of labor"

policy decisions made by the government are analyzed by __________________________.

both macro and micro

Since optimization is used to analyze​ people's choices and help them improve the outcomes of their​ choices, its

both normative and positive

Economic reasoning implies that economic agents will make decisions:

by comparing the costs and benefits of various options

non-excludable good

can be consumed, even if they are not paid for

Externalities are called market failures because they​ ---

cause markets to produce outcomes that are not socially optimum

third degree price discrimination

consumers are charged different prices based on the characteristics of the customer or location

second degree price discrimination

consumers are charged different prices based on the characteristics of the purchase

which of the following is not an economic agent?

corporation, labor union, charity are all economic agents.

environmental and resource concerns

countries vary by how stringent their environmental policies are.

which of the following could be considered an economic agent?

criminals, workers, students, and firms

Facts, measurements, or statistics used to describe something specific are collectively known as:

data

A deadweight loss is the ______in social surplus that results from a market _______

decrease - distortion

this can be shown graphically with a ________________ demand curve or numerically in a table using a ________________________.

downward-sloping, demand schedule

human capital

each person's stock of skills to produce output or economic value

analyzing data of evidence is called:

empiricism

perfectly competitive market

every buyer pays and every seller charges the same market price, no buyer or seller is big enough to influence that market price, and all sellers sell an identical good or service

market demand is derived by___________________________________________________.

fixing the price and adding up the quantities that each buyer demands.

which of the following are scarce resources?

gas, diamonds, time, mechanical pencils

Governments impose taxes for all of the following reasons except_____________.

generating profits

Efficiency

getting the most out of scarce resources

macroeconomics can be used to understand all of the topics listed below, except:

how a consumer decides between the purchase of two different cars.

An example of a progressive tax is

income tax

skill-based technological change

increase the productivity of skilled workers relative to that of unskilled workers

"people are fundamentally good"

is a normative statement

which of the following is not a correct explanation of economics:

it is concerned only with money and financial aspects of human behavior.

elasticity of demand of a good measures the responsiveness of the demand to factors such as:

its own price, the price of another good, and income

When a country opens itself to trade and becomes an importer of goods and​ services, sellers --- and buyers ---

lose - win

corruption

misuse of public funds or the distortion of the allocation of resources for personal gain

excludable good

must be paid for in order to consume them

the factors that contribute most to comparative advantage at the country level are:

natural resources, stocks of human-made resources, technology, education, work habits, and experience of the labor force, relative abundance of labor and physical capital, climate

The relationship that exists between these two variables can be described as ___________________________.

negatively related

the measure of benefits minus cost is

net benefit equation: net benefit = benefit - cost

Does the shape of the market demand curve differ from the shape of an individual demand​ curve?

no, they both tend to be downward sloping curves.

the ethical implications of a hotly debated government policy would best be considered a ________________________________, since it deals with a subjective issue based on personal preferences.

normative question

statistical discrimination

occurs when expectations cause people to discriminate against a certain group

taste-based discrimination

occurs when people's preferences cause them to discriminate against a certain group

Dominant Stratgey

one player's best response, regardless of what the other person does

Monopoly

one seller of a good or service with no close substitutes

The relationship that exists between these two variables can be described as _________________________.

positively related

when an investment counselor advises a client as to the risk/return trade-off on an investment, this type of help is called___________ economics.

prescriptive

which of the following is true of the price elasticity of supply?

price elasticity of supply = percentage change in quantity supplied/percentage change in price

fair returns price

price is equal to average total cost

efficient price

price is equal to marginal cost

world price

price on the world market

The Coase Theorem states that --

private bargaining will result in an efficient allocation of resources.

Health insurance

private good

The Law of Supply states that as the price of a good increases, ceteris paribus, the ___________________ of a good increases.

quantity supplied

the competitive equilibrium price equates _______________________________.

quantity supplied to quantity demanded

mixed strategy

randomly choosing different strategies

a free rider is a person who:

receives benefit from a good without paying for the good

The equity vs efficiency trade-off states that when social inequality is high, further increases in inequality -- social surplus. The flatter the equity vs efficiency curve, the -- the cost of reducing social inequality in terms of social surplus.

reduce - greater

payoff matrix

represents payoffs for each player for each strategy

economics is the study of choice under conditions of:

scarcity

Firms

self interested profit maximizing firms maximize the total size of the social welfare

in a perfectly competitive market, ____________________________ and buyers ___________________________________.

sellers can't charge more than the market price, can't pay less than the market price

price makers

sellers that set the price of a good

If firms in a perfectly competitive industry are experiencing losses in the short run, we would expect firms to exit this industry and cause the market supply curve to______________________________________________.

shift left until price + minimum average total cost

effects on globalization

shift toward interdependent economies on domestic culture

When buyers and sellers optimize in a perfectly competitive market,

social surplus is maximized

population changes

the more people there are, the greater the supply of labor, so the labor supply curve shifts to the right

Microeconomics

the study of how individuals, households, and firms make decisions and how those decisions interact

game theory

the study of strategic interactions

Pigouvian subsidy

the subsidy necessary to make an economic agent increase consumption to the socially optimal level

social surplus

the sum of consumer surplus and producer surplus

If a tax is imposed per unit of a good sold,

the supply curve for the good shifts to the left

Pigouvian Tax

the tax necessary to incentivize a firm to produce the socially optimal level of output

a definition of opportunity cost is:

the value of best thing that you give up to get something else

Protectionism

the view that governments should control trade due to the harmful effects of free trade

If Jay's fruit stand is able to charge considerably higher prices than other fruit stands with the same produce, it is likely that___________________________________.

there are not fruit stands in close proximity to Jay's

free trade

trade without government interference

Your budget constraint for entertainment illustrates the concept of ________​, since as you increase your purchases of one​ item, you ____.

trade-offs, must decrease your purchases of the other item

scarcity is the situation of having ______________ wants in a world of ___________ resources.

unlimited, limited

A tax imposed on sellers will cause the supply curve to shift --. The more elastic the demand curve the more tax incidence falls on --

up - suppliers

Empiricism

using data to figure out answers to interesting questions