Micro Chapter 3 Exam

Alan Jones owns a company that sells life insurance. When he employs 10 salespersons his firm sells $200,000 worth of contracts per week, and when he employs 11 salespersons, total revenue is $210,000. The marginal revenue product of the 11th salesperson is:

$10,000

Deregulation, especially for the transportation and telecommunication industries, was the trend in the United States during the:

1980s

Clayton Act

A 1914 amendment that strengthens the Sherman Act by making it illegal for firms to engage in certain anticompetitive business practices.

Robinson-Patman Act

A 1936 amendment to the Clayton Act that strengthens the Clayton Act against price discrimination.

Celler-Kefauver Act

A 1950 amendment to the Clayton Act that prohibits one firm from merging with a competitor by purchasing its physical assets if the effect is to substantially lessen competition.

Which of the following mergers would result from the purchase of a retail clothing chain by a computer software company?

A conglomerate merger

Demand curve for labor

A curve showing the different quantities of labor employers are willing to hire at different wage rates in a given time period, ceteris paribus. It is equal to the marginal revenue product of labor.

Supply curve of labor

A curve showing the different quantities of labor workers are willing to offer employers at different wage rates in a given time period, ceteris paribus.

Conglomerate merger

A merger between firms in unrelated markets.

Vertical merger

A merger of a firm with its supplier

Horizontal merger

A merger of firms that compete in the same market

Negative income tax (NIT)

A plan under which families below a certain break-even level of income would receive cash payments that decrease as their incomes increase

Means test

A requirement that a family's income not exceed a certain level to be eligible for public assistance.

Marginal cost pricing

A system of pricing in which the price charged equals the marginal cost of the last unit produced

Which of the following involved deregulation

Airline Deregulation Act of 1978. Staggers Rail Act of 1980. Motor Carrier Act of 1982

Which of the following is illegal under the Sherman Act

Attempts to monopolize. Price fixing. Formation of cartels

Which of the following is not one of the four anti-competitive activities outlined in the Clayton Act?

Buying a competitor's plants and equipment

If a firm has a tying agreement with a distributor which substantially lessens competition, then it is likely to be in violation of the

Clayton Act

Interlocking directorates are illegal under the __________ whether or not the effect may be to substantially lessen competition.

Clayton Act

Which of the following is an amendment that strengthened the Sherman Act

Clayton Act

Which of the following statements is true?

Derived demand for labor depends on the demand for the product labor produces. Unions can either increase demand or decrease the supply of labor. Investment in human capital is expected to increase the demand for those workers

Which of the following might increase the supply curve of labor?

Elimination of discrimination against blacks. Elimination of discrimination against females. Easing licensing requirements

In-kind transfers

Government payments in the form of goods and services, rather than cash, including such government programs as food stamps, Medicaid, and housing.

A graph that shows the percentage of the families on one axis and the percentage of income on the other is called the

Lorenz curve

If more and better technology is used for producing wheat in the United States than in a lesser-developed country, then the:

MRP of the U.S. workers will be higher than the MRP of the workers in the lesser-developed country.

If product price increases, then:

MRP will increase

Which of the following type of firm is not a price taker in the market in which the firm buys its inputs?

Monopsony

Which of the following would be a human capital investment?

On the job training programs Health care programs. Formal education.

If two or more firms combine or conspire to monopolize trade, this would be in violation of the

Sherman Antitrust Act

The antitrust law that prohibits firms from combining or conspiring to restrain trade in interstate commerce is the

Sherman Antitrust Act

The first federal antitrust law was the

Sherman Antitrust Act

The rule of reason was applied in the

Standard Oil case. U.S. Steel case. American Tobacco Trust case

Which one of the following examples is a cash assistance program used to fight poverty in the United States?

Temporary Assistance to Needy Families (TANF)

In which antitrust case did the Supreme Court begin to apply the per se rule to determine whether a firm was in violation of the Sherman Act?

The Alcoa case

Human capital

The accumulation of education, training, experience, and health that enables a worker to enter an occupation and be productive.

marginal factor cost (MFC)

The additional total cost resulting from a one-unit increase in the quantity of a factor.

Per se rule

The antitrust doctrine that the existence of monopoly alone is illegal, regardless of whether or not the monopoly engages in illegal business practices

Rule of reason

The antitrust doctrine that the existence of monopoly alone is not illegal unless the monopoly engages in illegal business practice

Derived demand

The demand for labor and other factors of production that depends on the consumer demand for the final goods and services the factors produce

Deregulation

The elimination or phasing out of government restrictions on economic activities

Federal Trade Commission Act

The federal act that in 1914 established the Federal Trade Commission (FTC) to investigate unfair competitive practices of firms

Sherman Act

The federal antitrust law enacted in 1890 that prohibits monopolization and conspiracies to restrain trade.

Unemployment compensation

The government insurance program that pays income for a short time period to unemployed workers

marginal revenue product (MRP)

The increase in a firm's total revenue resulting from hiring an additional unit of labor or other variable resource.

Predatory pricing

The practice of one or more firms temporarily reducing prices in order to eliminate competition and then raising prices.

Comparable worth

The principle that employees who work for the same employer must be paid the same wage when their jobs, even if different, require similar levels of education, training, experience, and responsibility. A nonmarket wage-setting process is used to evaluate and compensate jobs according to point scores assigned.

Collective bargaining

The process of negotiating labor contracts between the union and management concerning wages and working condition

Which of the following statements concerning the supply of labor is true?

The typical labor supply curve is upward sloping

Which of the following is not an in kind subsidy

Unemployment compensation

"Dividing the economic pie more equally may reduce the size of the economic pie." This argument is characterized as:

a conflict between equity and efficiency.

The task of economic regulation is to

approximate the results of the competitive market

The rule of reason was an antitrust law guideline that emphasized the importance of ________ over ________.

behavior; size

During this century, court decisions on antitrust have

changed from rule of reason, to per se, and back to rule of reason

Some people believe that employees should be paid the same wages when their jobs, although different, require similar levels of education, training, experience, and responsibility. This principle is known as

comparable worth

A firm's demand for labor depends on, in part, the demand for the firm's product. To summarize this idea, economists say that the demand for labor is:

derived demand

Since the demand for labor depends on the demand for the product labor produces, the demand for labor is called:

derived demand.

The Lorenz curve measures the

distribution of income

Comparable worth is the principle that

employees who perform comparable jobs should be paid the same wage

Today, the Federal Trade Commission (FTC) is concerned with

enforcing consumer protection legislation. prohibiting deceptive advertising. preventing collusion.

The poverty line

equals three times an economy food budget

An individual firm in a competitive labor market faces a(n):

horizontal labor supply curve

A merger between firms that compete in the same market is called a

horizontal merger

The rule of reason refers to the interpretation of the courts that dominant firms should be broken up because of their:

illegal business practices

The Social Security Act was passed

in 1935

A monopsonist's marginal factor cost (MFC) curve lies above its supply curve because the firm must

increase the factor price to hire more.

Featherbedding allows unions to increase wages by:

increasing firms' demand for labor

The main attractive feature(s) of a negative income tax program is (are):

it is simple. it avoids the stigma of hand-outs.

The most important weakness of the Sherman Antitrust Act was that

it wasn't specific about the types of acts which would violate the law

If the wage rate is fixed at a certain level, the:

labor supply curve is horizontal

Under a per se approach to the antitrust laws

large size alone can be an antitrust violation

Compared to a competitive input market, a monopsonist will hire:

less and pay a lower input price.

Given the same marginal revenue product (MRP) and supply curves, the equilibrium quantity of labor employed in a monopsonistic labor market will be:

less than that in a competitive labor market.

Government regulators can achieve efficiency for a natural monopoly by setting a price ceiling equal to the intersection of the demand curve and the:

marginal cost curve

A firm's demand curve for labor coincides with the:

marginal revenue product curve

The per se rule refers to the interpretation of the courts that dominant firms should be broken up because of their:

market share of dominance

Economic regulation occurs when

monopoly is the optimal market structure

One reason the supply of carpenters is greater than the supply of physicians is because

of differences in human capital.

Under a rule of reason approach, an act is illegal

only if it is shown to result in an anticompetitive outcome

The practice of firms temporarily reducing prices in order to eliminate competition is called

predatory pricing

For a competitive firm, workers' marginal revenue product equals the marginal product of labor times the:

price of the firm's product

For a perfectly competitive firm, marginal revenue product is equal to:

price times marginal product.

The primary purpose of antitrust legislation is to

protect the competitiveness of U.S. business

If the price of labor falls, we can expect

quantity demanded of labor will increase

Marginal revenue product is defined as the extra:

revenue earned by hiring one more unit of resource

The increase in a firm's total revenues resulting from hiring an additional unit of labor is known as the marginal:

revenue product.

Other things equal, assume consumer demand for children's toys increases. The result is a (an):

rightward shift in the market demand for labor curve in the toy industry increase in the marginal revenue product of firms in the toy industry increase in derived demand for workers in the toy industry

An increase in the demand for a product will shift the demand for labor used to produce the product:

rightward.

A union may attempt to obtain stricter certification requirements or longer apprenticeships. These changes would raise workers' wages because they:

shift in labor supply curve leftward.

A monopsony is a

single buyer.

The per se rule was an antitrust law guideline that emphasized ________ over ________.

size; behavior

If regulation imposes marginal cost pricing on a natural monopoly, then the monopoly will

suffer persistent economic losses

Statistics on families below the poverty line may be overstated because

the income levels used to measure poverty do not include in kind transfers

Marginal cost pricing is a system of pricing in which the price charged equals the marginal cost of

the last unit produced

The marginal cost of labor for a perfectly competitive firm is given by:

the market wage rate.

A conglomerate occurs when

the products of the merging firms were not related in any manner before the merger

A firm that places its assets in the custody of a board of trustees is called a

trust

A merger of firms with a supplier is a

vertical merger

The optimal hiring rule is to employ labor up to the point where

wage = MRP

Regulatory commissions may focus on establishing a "fair-return" price to be charged by a monopolist. Under this policy, the monopolist would earn

zero economic profits