Econ-121 Quiz 5

Refer to Table 17-1. Suppose the output price is $3. If the wage rate is $90, what is the profit maximizing quantity of labor that the firm should hire?

7 units

Assume that a monopolist practices perfect price discrimination. The firm will produce an output rate

that is equal to the efficient level of output.

If Molly Bee increases her work hours when her wage increases, then

the substitution effect of the wage increase outweighs the income effect.

All of the following will shift the labor supply curve except

An increase in the wage rate

Refer to Table 17-1. Suppose the output price is $3. If the firm represented in the table is maximizing its profit by hiring six workers, what is the wage rate?

$120

Refer to Figure 16-5. Suppose the firm represented in the diagram decides to practice perfect price discrimination. What is the total revenue collected by the firm?

$13,440

If a worker can produce 20 units of output which can be sold for $4 per unit, what is the maximum wage that firm should pay to hire this worker?

$80

A Gini coefficient of ________ means that an income distribution is perfectly equal and a Gini coefficient of ________ means the income distribution is perfectly unequal.

0; 1

Compensating differentials are associated most closely with which of the following?

hazardous jobs

Figure 17-2 shows the marginal revenue product for Becca's Baubles, a producer of hand-beaded bracelets. Refer to Figure 17-2. If Becca can sell her bracelets at $3 each, what is the marginal product of the 4th worker?

12 bracelets

Leisure is

A normal good

College students and faculty members have a more elastic demand than the general public for Apple's iMac desktop computers. From this we can conclude that

Apple will charge college students and faculty members lower prices than it charges the general public.

What is regulatory capture?

It is a situation in which a firm being regulated successfully influences the regulatory agency's actions to benefit the interests of the firm, rather than the public interest.

How will an increase in population affect the labor market?

It will shift the market supply curve.

The largest percentage of federal income tax revenue in the United States is paid by the

highest income taxpayers.

Insurance companies typically charge women lower prices than men for automobile insurance. Is this an example of price discrimination?

No, because, on average, women have better driving records than men and the costs of insuring men are greater than the costs of insuring women.

Let MP = marginal product, P = output price, and W = wage, then the equation that represents the condition where a competitive firm would hire another worker is

P × MP > W or MRR > W

Refer to Figure 16-5. Suppose the firm represented in the diagram decides to act as a monopolist and charge a single price. What is the profit maximizing quantity produced and what is the price charged?

Q = 320 units; P = $24

How will an increase in labor productivity affect equilibrium in the labor market?

The demand for labor will increase and the equilibrium wage and quantity of labor will increase.

Refer to Figure 16-1. What is the price charged under perfect price discrimination?

a range of prices corresponding to the demand curve from P3 and above

The "ability-to-pay" principle of taxation is the normative idea that

an equitable tax system is one in which high income individuals should bear a greater burden of taxes than low income individuals.

If the demand for labor is unchanged, an increase in the supply of labor will lead to

an increase in the quantity of labor demanded and a decrease in the equilibrium wage

Because leisure is a normal good, an increase in the wage rate will result in

an increase in the quantity of labor supplied because of the substitution effect and a decrease in the quantity of labor supplied because of the income effect.

Some individuals seek to use government action to make themselves better off at the expense of others. The actions of these individuals

are examples of rent seeking.

According to public choice theory, policymakers

are likely to pursue their own self-interest, even if their self-interest conflicts with the public interest.

Price discrimination is possible in which of the following market structures? a. perfect competition b. monopoly c. oligopoly d. monopolistic competition

b, c, and d only

Most movie theatres charge different prices to different groups of customers for movie admission but not on movie popcorn. Which of the following is a reason for this?

because it is easier to limit resale in movie admissions but not in popcorn

Assume that a monopolist practices perfect price discrimination. The firm's marginal revenue curve will

be equal to its demand curve.

If a monopolist practices perfect price discrimination

consumer surplus will be zero.

A firm that can effectively price discriminate will charge a higher price to

customers who have the more inelastic demand for the product.

Figure 18-5 shows the Lorenz curve for a hypothetical country. Refer to Figure 18-5. The middle 20 percent of households

earn 20 percent of the society's total income.

Many people sell goods through eBay at prices that are higher than the prices they paid for these goods. Economists consider these transactions as

examples of arbitrage.

When members of Congress vote to pass new legislation, they will

fail to consistently represent the underlying preferences of voters.

The wage rate is the opportunity cost of

leisure

The median voter model implies that

many people will be dissatisfied with the amount of spending on government funded projects.

Table 18-9 shows the income tax brackets and tax rates for single taxpayers in Monrovia. Refer to Table 18-9. Sylvia is a single taxpayer with an income of $70,000. What is her marginal tax rate and what is her average tax rate?

marginal tax rate = 30%; average tax rate = 22.5%

Table 18-6 shows the income tax brackets and tax rates for single taxpayers in Calpernia. Refer to Table 18-6. Sasha is a single taxpayer with an income of $60,000. What is his marginal tax rate and what is his average tax rate?

marginal tax rate = 38%; average tax rate = 24%

The Buda Agri Corporation is the sole employer in rural Hungary. In the labor market, Buda Agri is a

monopsony

When a firm charges $4.95 instead of $5.00, what do economists call this pricing strategy?

odd pricing

A firm's demand curve for labor slopes downwards because

of the law of diminishing marginal returns.

A regressive tax is a tax for which people with lower incomes

pay a higher percentage of their incomes in tax than do people with higher incomes.

In which market structure is it not possible to practice price discrimination?

perfect competition

Plato Playhouse, a theatre company in the university town of Wegg, caters to two groups of customers: students and the non-student population. Figure 16-2 shows the demand curves for the two groups of customers. Refer to Figure 16-2. What is the price charged in the two markets?

price in the student market = Pc; price in the non-student market = Pe

In the United States, the federal income tax is an example of a

progressive tax.

If the marginal tax rate is equal to the average tax rate as taxable income increases, the tax structure is

proportional.

If you pay $2,000 in taxes on an income of $20,000, and a tax of $3,000 on an income of $30,000, then over this range of income the tax is

proportional.

If you pay $2,000 in taxes on an income of $20,000, and a tax of $2,700 on an income of $30,000, then over this range of income the tax is

regressive.

A firm's primary interest when it hires an additional worker is

the extra revenue the firm realizes from hiring that worker.

One requirement for a firm pursuing a price-discrimination strategy is the ability to segment the market for its product. This means that

the firm must be able to divide the market in a way that makes arbitrage impossible.

A price-discriminating firm charges the highest price to

the group with the least elastic demand.

In order for a labor supply curve to be backward bending at high wages

the income effect of a wage increase must be greater than the substitution effect.

In a market economy, the high salaries of some star baseball players such as Zach Greinke, are determined by

the interaction of the demand for star athletes and the supply of star athletes.

One reason why the average salary of Major League Baseball players is higher than the average salary of college professors is

the marginal revenue product of baseball players is greater than the marginal revenue product of college professors.

Holding the price of a firm's output constant, if the marginal product of labor increases

the marginal revenue product of labor also increases.

A common belief among political analysts is that someone running for his or her party's nomination for president of the United States must choose a different strategy once the nomination is secured. To be nominated, the candidate must appeal to voters from one party - Democrat or Republican - but in a general election a party's nominee must appeal to voters from both parties as well as independent voters. Which of the following offers the best explanation for this change in strategy?

the median voter theorem

What is the poverty rate?

the percentage of the population earning an annual income below the poverty line, according to the federal government's definition

Refer to Figure 16-1. What is the consumer surplus received under perfect price discrimination?

zero