Econ Exam 3

Which of the following are true of statistical discrimination?

"Ban the box" laws not allowing employers to ask potential employees whether or not they have bee in jail is increasing discrimination against Black men, particularly those without a college degree. Statistical discrimination occurs when employers discriminate against job candidates based on an irrelevant but observable characteristic which correlates to an unmeasurable but relevant characteristics.

The graph shows the marginal social cost, supply, and demand curves in the hand sanitizer market. At what quantity could the government set a quota to control this externality?

8

Workers on the night shift at a factory earn more per hour compared to workers on the day shift although their human capital and productivity are the same. This is an example of:

A compensating differential

When price discrimination is practiced, a company sells ____ and charges ____ compared to what it would do without practicing price discrimination.

A larger output; a greater range of prices

A market with many small sellers and a high level of product differentiation is known as:

A monopolistically competitive market

When a good is nonrival and nonexcludable, the good is referred to as:

A public good

An efficiency wage is NOT ____ but rather ____.

A reward; an incentive

Externality

A side-effect of an activity that affects bystanders whose interests are not taken into account

An externality is defined as:

A side-effect of an activity that affects bystanders whose interests are not taken into account.

Which of the following would be both nonrival and nonexcludable?

A siren tornado warning system

What is collusion?

Agreements between sellers to increase their market power.

A signal is:

An action taken to credibly convey information that is hard for someone else to verify

Perfect price discrimination consists of:

Charging each customer their reservation price

A tax designed to induce people to take account of the negative externalities that they cause is referred to as a:

Corrective Tax

Marginal Private Benefit curve is also known as:

Demand Curve

Labor Demand is also

Derived Demand

The marginal product of labor is the

Extra production that occurs from hiring an extra worker

When a seller is able to differentiate its product successfully, the seller

Gains market power

Price discrimination by charging different prices to different groups of people is called

Group pricing

The accumulated knowledge and skills that make a worker more productive are known as:

Human capital

There is evidence that, despite anti-discrimination laws, discrimination:

Impacts wages in labor markets.

Marginal Social Benefit

Marginal Private Benefit + Marginal External Benefit

Marginal Social Cost

Marginal Private Cost + Marginal External Cost

A supply curve is the same as:

Marginal Private Cost Curve

The marginal revenue product of labor is equal to:

Marginal Product of Labor x Price

An employer's labor demand curve is equal to the

Marginal Revenue Product Curve

The marginal revenue from hiring an additional worker is know as:

Marginal revenue product

An equilibrium in which the choice that each player makes is a best response to the choices other players are making is the definition of a:

Nash Equilibrium

A good is characterized as ____ when one person's use of the good does not reduce another person's ability to use the same unit of the good.

Non-rival

When a company has market power, it is ____ in its market.

Not a price-taker

In which market structure do the actions of a rival have a significant impact on your operations?

Oligopoly

When the hurdle method is used to price a product across buyers,

Only those who overcome the obstacle that the seller specifies will get a lower price.

A payoff table lists all possible ____, with a row for each ____ and a column for _____.

Outcomes; of one player's possible outcomes; each of the other player's possible outcomes

Selling the same good at different prices to different buyers is

Price discrimination

With a ____ number of sellers in a market, ____ market power tends to exist in the market.

Smaller; more

In a labor market, workers ____ labor, and employers ____ labor.

Supply; demand

Patents on drugs to treat AIDS were removed in South Africa. How would the market for these drugs have been different if there had never been patents on drugs?

The drugs would not have been developed.

A reservation price is

The highest price that a customer is willing to pay for a product.

An efficiency wage improves efficiency when:

The increase in worker effort and reduced turnover cover the cost of the higher wage

In a natural monopoly, what deters new sellers from entering the market?

The new seller would have much higher costs than the existing large seller in the market.

Game theory is:

The science of making good decisions in situations involving strategic interactions

The government increases the training requirements to obtain an electrician's license. What impact will this have in the labor market for electricians?

The supply of electricians will decrease, resulting in a higher wage and lower quantity of labor.

Which of the following is a characteristic of monopoly that is not present in other market structures?

There is only one seller.

Why is market power necessary for price discrimination?

Without market power, a seller would lose customers if he tried to charge a higher price.

Alena manages a small theme park. She hired one more custodian at $450 per week, and her park is cleaner and more attractive. As a result of this improvement, ticket sales rise by 40 tickers per week, Tickets sell for $12. Use the Rational Rule for Employers to determine if hiring the extra custodian was a good move.

Yes, it was a good move because it added more to revenue than to cost.

Walmart has a large aisle that displays many different kinds of toothpastes. This observation indicates that the toothpaste market is:

a monopolistically competitive market.

A characteristic of oligopoly that is not present in any other market structure is that there:

are a small number of sellers with considerable market power.

A compensating differential is an:

difference in wages that offsets the desirable or undesirable aspects of a job

The marginal private benefit is the:

extra benefit enjoyed by the buyer of one extra unit of a good or service

Any outcome that can be achieved by taxing can also be accomplished by establishing a quota. This is because:

if we know the marginal social cost, we can set the tax so that price is equal to the optimal price. As a result, the optimal quantity will be achieved. If we know the optimal quantity, we can set a quota and the market will find the optimal price.

When someone can enjoy the benefits of a good without bearing the cost, the good:

is subject to the free-rider problem

Substitution Effect

measures how people respond to a change in relative prices when the wage rises

By contrast with a market that produces the socially optimal output, a market with negative externalities will:

overproduce

The goal of price discrimination is to increase

profit by charging each customer the highest price he is willing to pay

The outcome that is most efficient for society as a whole -- including the interests of buyers, sellers, and bystanders-- the ____ outcome.

socially optimal

A good has a free-rider problem when:

someone can enjoy the benefits of the good without bearing the costs

An employer should hire one more worker if

the marginal benefit exceeds the marginal cost

The Rational Rule for Society is that society should produce another unit of a good if:

the marginal social benefit exceeds the marginal social cost

The Rational Rule for Employers implies that they keep hiring until

the wage equals the marginal revenue product of the last worker hired.

Externalities tend to occur because decision makers consider ____ and do NOT consider ____.

their own costs and benefits; the effects of their actions on others.

In a perfectly competitive labor market, employers will not pay less than the market wage because at a wage below the equilibrium:

they would not be able to hire anyone

In a labor market graph, _____ is measured on the vertical axis, and ____ is measured on the horizontal axis.

wage; hours of labor

When making labor supply decisions, your options are

working or leisure

To avoid harm to society, the government often becomes the supplier of a good or service when the respective market:

would be a natural monopoly, and the good or service is considered essential