Econ 202 midterm 2

Which of the following statements regarding employment contracts is correct?

Employees' effort levels cannot be the basis of an enforceable contract.

Which of the following statements regarding employment rents is correct?

Employers can use high employment rents to exert power over employees.

Bruno is a landowner and Angela is a farmer who pays a share of her grain output to Bruno for the use of the land. The figure shows Angela and Bruno's feasible frontier, two of Angela's indifference curves, and the Pareto efficiency curve CD. Note that Angela's preferences are quasi-linear, so IC2 is simply IC1 shifted upwards.

F is not Pareto efficient because the marginal rate of substitution does not equal the marginal rate of transformation at this point.

The diagram depicts the demand curve of a product. Assume that there are 100 potential buyers who can choose to purchase one unit each.

The diagram demonstrates the Law of Demand.

Which of the following are factors that contribute to a firm's diseconomies of scale?

The difficulty of monitoring workers' effort as the number of employees increases.

Bruno is a landowner and Angela is a farmer who pays a share of her grain output to Bruno for the use of the land. The figure shows Angela and Bruno's feasible frontier, Angela's biological survival constraint, and Angela's reservation indifference curve. If Angela does not work, she receives a ration of 2.5 bushels from the government.

The economically feasible set is a subset of the technically feasible set.

Labor contracts are incomplete because

The firm cannot contract an employee not to leave. The firm cannot observe exactly how an employee fulfills the contract. The firm cannot specify every eventuality of a contract. all of the above

The figures depict four possible combinations of average cost (AC) and marginal cost (MC) curves. The horizontal axis is the output Q. Which of the following statements correctly matches the corresponding diagram?

The firm in (c) has a constant unit cost of production.

In which of the following cases would a firm be maximizing profits?

The firm minimizes the cost per unit of effort.

Which of the following statements regarding the film industry is correct?

The quantity sold in the film industry is inefficient.

In economics, institutions refer to

the rules of the game.

The figure below is the Lorenz curve of a population. Based on this figure, which of the following statements are correct?

50% of the population owns 100% of the land.

In their study of a firm during 2006-2010 that includes the financial crisis, Lazear and his co-authors found that (i) the firm's productivity increased dramatically as unemployment rose, and (ii) the wage level was kept unchanged. Based on this information, which of the following statements are correct?

A possible explanation for why the wage level was not cut may be that the firm judged that the costs of lower employee morale and retention would be greater than what they would have saved in wages.

The figure depicts the efficiency wage equilibrium of a worker and a firm.

At A, given that the firm pays the hourly wage of $12, the worker's best response is to exert an effort of 0.5.

Refer to the figure in question 5. Which of the following statements is correct?

At B, the decrease in price that keeps profits constant when one extra car is sold is larger than the decrease in price required to sell one extra car.

Which of the following statements regarding Pareto efficiency is correct?

At a Pareto-efficient allocation, it is impossible to make one person better off without making another person worse off.

Bruno is a landowner and Angela is a farmer who pays a share of her grain output to Bruno for the use of the land. The figure shows Angela and Bruno's feasible frontier, Angela's biological survival constraint and her reservation indifference curve. If Angela does not work she receives a ration of 2.5 bushels from the government.

At allocation d. Bruno receives nothing (and therefore is indifferent to Z), but Angela is above her reservation indifference curve. Hence point d. Pareto dominates Z.

Bruno is a landowner and Angela is a farmer who pays a share of her grain output to Bruno as rent for the use of the land. Consider the following figure, which shows Angela's and Bruno's combined feasible set and the interpretation of the allocation at point E.

Depending on the shape of her indifference curves, Angela may prefer G to E, she may prefer E to G, or she may be indifferent between the two.

Which of the following statements regarding Karl Marx are correct?

He thought that capitalism, by organizing production and allocation in anonymous markets, created atomised individuals instead of integrated communities.

The figure below illustrates Maria's employment rent on her current job, given her wage, her disutility of work, the unemployment benefit, and the expect duration of unemployment.

If the expected duration of unemployment falls to 22 weeks, Maria's employment rent will be $3,080.

Which of the following statements regarding bargaining power is correct?

In a dictator game, the Proposer has all the bargaining power.

Which of the following statements is true?

In a labor contract, one side of the contract has the power to issue orders to the other side, but this power is absent from a sale contract.

Bruno is a landowner and Angela is a farmer who pays a share of her grain output to Bruno for the use of the land. The figure shows Angela and Bruno's feasible frontier, Angela's biological survival constraint and her reservation indifference curve, and how many bushels Angela would get at allocations B and D.

In a voluntary exchange where Bruno has all the bargaining power, if Bruno charges 4.5 bushels of rent for the use of his land, then Angela would choose to work 8 hours.

The figure depicts the demand curve of a firm producing cars, together with its marginal cost, average cost, and isoprofit curves.

The deadweight loss in the profit-maximizing outcome is $20,640.

The figure shows the Lorenz curve for market income and disposable income in the Netherlands in 2010.

One-fifth of the Dutch population has virtually no market income.

Consider the Lorenz curves for pirate ships and navy ships.

The Gini coefficient on pirate ships was much lower than the Gini coefficient on navy ships.

Consider an employee with a reservation wage of $6 an hour. The employee chooses an effort level between zero and one. Which of the following statements regarding her best response curve is correct?

The best response curve describes the effort that the employee would choose for each level of the hourly wage.

Select the correct statement regarding the Gini coefficient.

The coefficient takes the value of 1 when a single individual receives all income.

The following figure depicts an employee's best response to wage when the expected unemployment duration is 44 weeks. Which of the following statements is correct?

The slope of the best response curve is the employer's marginal rate of transformation of higher wages into worker effort.

The figure depicts the demand curve of a firm producing cars, together with its marginal cost, average cost, and isoprofit curves. At C, the firm sets the price at $5,440, sells 32 cars, and earns a profit of $63,360. Which of the following statements is correct?

The total cost of producing 32 cars is $110,720. The total revenue at C is 5,440 × 32 = $174,080. The profit at C is $63,360. Therefore the total cost is 174,080 - 63,360 = $110,720.

The figure shows a demand curve for Cheerios. Based on this figure, which of the following statements is correct?

There is no demand if the price is set above $7.20.

The 1978 law that protected Bengali sharecroppers from eviction and increased their share of the crop from 50% to 75% did all the following except

generate a Pareto improvement.