Econ Exam 3
perfect price discrimination, the consumer surplus is
0
price discrimination leads to...
A) Increased quantities
declining output prices
Apple could hire more designers and sell updated versions of the iPhone more frequently, but they will have to cut their prices to get people to upgrade more often
social insurance
Programs in which eligibility is based on prior contributions to government, usually in the form of payroll taxes.
Nash Equilibrium
a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen
price discrimination
charging different prices to different consumers for the same good
first degree price discrimination
charging each individual customer a different price based on their willingness to pay (perfect price discrimination)
income effect
the change in consumption resulting from a change in real income
marginal product of labor
the change in output from hiring one additional unit of labor
game theory
the science that is useful to help the decision makersanalyze their options when an individual's best choice may depend on what other people choose and other people's best choicesmay depend on what the individual chooses
compensating differential
wage premium that compensates workers for adverse attributes of a job
substitution effect
when consumers react to an increase in a good's price by consuming less of that good and more of other goods
anti coordination game
when your best response is to take a different (but complementary) action to the other player
Monopoly
A market in which there are many buyers but only one seller.
Oligopoly
A market structure in which a few large firms dominate a market
coordination game
A type of game in which a Nash equilibrium occurs when each player chooses the same strategy; neither player can do better than matching the other player's strategy
According to what we learned in class, what is the main reason that perfect (first-degree)price discrimination is so rare? A) Finding everyone's willingness to pay is costly and difficult. B) Overcoming legal conflicts to charge each person differently is costly C) Not every person has a maximum willingness to pay for a good. D) Most consumers have identical preferences
A) Finding everyone's willingness to pay is costly and difficult.
3) Consumers who clip and redeem discount coupons ________. A) exhibit the same price elasticity of demand for a given product than consumers whodo not clip and redeem coupons B) exhibit a relatively higher price elasticity of demand for a given product thanconsumers who do not clip and redeem coupons C) exhibit a relatively lower price elasticity of demand for a given product thanconsumers who do not clip and redeem coupons D) cause total revenue to decrease for firms that issue coupons for their products
B) exhibit a relatively higher price elasticity of demand for a given product thanconsumers who do not clip and redeem coupons
Relative to a model of perfect competition, a monopolist produces A) The same quantity B) A higher quanitity C) A lower quantity
C) A lower quantity
Third-degree price discrimination for concessions at ball parks is not applied to adults andchildren because_____. A) children's demand for food is elastic and adults' demand for food is inelastic B) adults' demand for food is elastic and children's demand for food is inelastic C) there could be exchange of the products from children, who could buy them at alower price, to adults D) Adults would buy goods at a high price and give them to their children
C) there could be exchange of the products from children, who could buy them at alower price, to adults - requirement for successful price discrimination is that the good cannot easily betransferred. Otherwise, someone in the low-price group could buy it and then transfer itto someone in the high-price group. In this example, a child would be in the low-pricegroup (since we typically think that parents aren't willing to pay high prices for kids food,similar to how kids' menus at restaurants have lower prices)
Marginal revenue
Change in total revenue
rational rule for employers
Hire more workers if their marginal revenue product is greater than (or equal to) the wage
rational rule
If something is worth doing, keep doing it until your marginal benefits = marginal costs.
social safety nets, social insurance programs, and progressive tax systems are all types of income _____programs that have the impact of moving income distribution _____ equality a. redistribution; closer to b. replacement; further from c. redistribution; further from d. replacement; closer to
a. redistribution; closer to
perfect competition, consumer surplus
area between the demand curve and theprice level.
A characteristic of monopolistic competition that is not present in any other market structure is that there a. is only one seller and that seller holds a high level of market power. b. are many sellers and each produces its own version of the product. c. are a small number of sellers who have market power. d. are many sellers that produce identical products
b. are many sellers and each produces its own version of the product.
A coordination game exists when: a. the product or issue of the game concerns communication, such as phones or media. b. coordination is costless and easy, regardless of whether it is harmful. c. all players have a common interest in coordinating their choices. d. collusion created the market or situation from the start.
c. all players have a common interest in coordinating their choices.
Based on the Rational Rule for Sellers, how does a manager set price and quantity? If the company has no market power, the marginal cost _____ price. If the company has market power, the marginal cost is _____ thanprice. a. is less than; greater b. is greater than; less c. equals; less d. equals; greater
c. equals; less
Which of the following conditions is present for all sellers in a perfectly competitive market? a. All sellers have an equal and high level of market power. b. The product price varies across the sellers. c. The number of sellers is small d. All sellers are selling identical products.
d. All sellers are selling identical products.
When a seller has a high level of market power, the seller a. produces a product that is identical to the output of other companies in the market. b. is in a market with growing demand c. is one of many sellers selling in its market. d. can raise its price without losing many customers.
d. can raise its price without losing many customers.
labor-capital substitution
higher wages make machines cheaper, relative to labor
labor supply curve
individual's willingness to work at different wage levels
third degree price discrimination
practice of dividing consumers into two or more groups with separate demand curves and charging different prices to each group
total revenue
quantity x price
marginal revenue product
the change in total revenue associated with one additional unit of input
diminishing marginal product
the property whereby the marginal product of an input declines as the quantity of the input increases
Which of the following is NOT true about imperfect competition? a. Greater product differentiation decreases market power. b. A smaller number of sellers in a market increases market power. c. Imperfect competition among buyers gives them bargaining power. d. Sellers with market power can use independent pricing strategies.
a. Greater product differentiation decreases market power.
hurdle method
Offer lower prices only to buyers who are willing to overcome some hurdle
Labor Demand
The relationship between the quantity of labor demanded by firms and the wage.
Cartel
a formal organization of producers that agree to coordinate prices and production
perfect competition
a market structure in which a large number of firms all produce the same product; MC = Demand
monopolistic competition
a market structure in which many companies sell products that are similar but not identical
Monopsony
a market structure in which there is only a single buyer of a good, service, or resource; leads to lower wages