MICRO Final

19/7 Vincent and Jean are two cooks who work in a village. Each of them can either bake cakes or make pizzas. Every ingredient is readily available to them, and the only scarce resource is the cooks' time. Vincent can bake 1010 cakes or make 55 pizzas in an hour. Jean can bake 1212 cakes or make 88 pizzas in an hour. Please answer the four questions.

1 Which cook has the absolute advantage in baking cakes? = jean Which cook has the absolute advantage in making pizzas? = jean Which cook has the comparative advantage in baking cakes? vincent Which cook has the comparative advantage in making pizzas? = jean

17/20 Suppose that you place $200 into an account that pays a simple interest rate of 5% for 10 years and another $200 into an account offering a compound interest rate of 55% for 10 years. Compute the difference between the final values of the two accounts. What is the difference between the values of the deposits after 10 years?

25.8

CH.11 Q15 The accompanying graph represents a hypothetical natural monopoly. What price would the monopolist set without any market intervention? At this price how much profit would the monopolist make?

A. $6 B. $16

10/17 What is the most likely price agreed upon by the cartel? The perceived demand curve for this oligopolistic firm in a cartel appears kinked because

A. 70 B. all firms will match price decreases but not price increases

11/14 What is a natural monopoly? Which of the firms is most likely to be a natural monopoly?

A. A monopoly that faces a high fixed cost and low marginal costs so that the average total cost curve slopes downward. B. Municipal Power Light, the local supplier of electricity.

9/15 The accompanying graph represents Hayden's Fro-Yo Emporium, which is the only seller of frozen yogurt in a small college town, showing the marginal cost (MC), average cost (AC), marginal revenue (MR), and demand (D) curves. How many cups of frozen yogurt should Hayden sell? How much should Hayden charge per cup?

A. Q1 B. P4

Q4 The table shows the demand schedule and two supply schedules for a tire producer. Does there appear to be an externality associated with tire production? At a price of $100, 90 tires/day are demanded. At this price, society will be The socially efficient number of tires is BLANK the number of tires produced at the market equilibrium

A. Yes, a negative externality B. worse off C. lower than

Q3 Please classify the source of barriers to entry described in each scenario below. A. There are a limited number of licenses for taxi drivers in NYC. B. Drug companies obtain patents so that they can recover research and development costs by the exclusive sale of the drug for some number of years. c. Building a brewery is a high start‑up cost operation. d. Caribbean Cruz owns the only swimmable beach on an exclusive island in the Bahamas. e. It is very expensive to build an amusement park but not that expensive to admit an additional customer. f. The government establishes a tariff on tea. g. The government establishes a quota on how much foreign oil can be imported.

A. government-imposed B. government-imposed C. economies of scale D. ownership of a key input E. economies of scale F. government-imposed G. government-imposed

9/7 Match each creation with the type of legal protection that covers it. A recipe for really good baked beans told only to the family dog is a A hit song should have a A new fish tank cleaning device needs a A particularly catchy name for a product should have a Video game code hidden in an underground vault is a A new play called The Secret Sauce needs a A compelling new cartoon character should have a

A. trade secret B. copyright C. patent D. trademark E. trade secret F. copyright G. copyright

10/10 What did the economist A.C. Pigou think the relationship was between advertising and monopolistic competition?

A.C. Pigou thought that advertising by monopolistically competitive firms will not have any net effect in the market.

Q3 Which of the following are characteristics of a monopoly market structure?

ALL

9/18 Happy Go Lucky Electric Company is the only company providing electric power to the city of Go Lucky. The accompanying graph depicts their marginal costs (MC), average total costs (ATC), demand (D), and marginal revenue (MR). a. Move point E to the firm's profit maximizing price and quantity. b. At the profit maximizing point, what is Happy Go Lucky's level of profit?

Happy Go Lucky's profit is $30.

20/6 The table shows the demand and supply for coffee in two countries: Cape Verde and Laos. Use the information in the table provided to answer the questions. Laos imposes an import quota on coffee from Cape Verde, limiting imports to 40 lb. How is this quota likely to affect the price of coffee in Laos? Using free trade as the starting point, how will this quota affect consumers and producers in Cape Verde?

The price will be higher than free trade levels but lower than when no trade existed. Only consumers will benefit; producers will not benefit.

20/8 Identify whether the statements regarding the impact of free trade on wages and employment is true or false.

True - free trade generally increases the wage rates and productivity across an economy false - a trade agreement reducing trade barriers between the US and a low income economy woould lead to an increase in the unemployment rates in the US -free trade does not generally benefit those employed in high skill jobs - a trade agreement reducing trade barriers between the US and a low income economy would reduce employment in low-wage service industry jobs in the US

Q4

With a monopoly, there IS ONE FIRM in a market with NO SIMILAR products In perfect competition there ARE MANY FIRMS in a market with IDENTICAL products In an oligopolistic market, there are FEW FIRMS in a market with IDENTICAL OR SIMILAR products in monopolisitc competition, there are MANY FIRMS in a market SIMILAR BUT NOT IDENTICAL products

17/1 Venture capital firms provide new companies with (select one or more)

advice, money

12/12 All are examples of the benefits of clean air and water EXCEPT

decreased prices for all goods and services

20/18 Trade policy and the relationships between trading partners are characterized by several trend. The use of tariffs as a form of protectionism has BLANK between 1946 and 2016. There are BLANK trade agreements in existence in 2016 than there were in 1946. Overall, trade today can be described as BLANK free in 2016 than 1946

decreased, more, more

12/3 Specialized electronic batteries, such as those for laptops, are hard to dispose of safely, yielding excess pollution when one gets thrown away. Suppose that producing these batteries creates an external cost of $150 per unit. The accompanying diagram depicts the market for these batteries in which these external costs are not internalized. Please adjust the appropriate curves to represent the market if the external costs are internalized.

see 12/3

19/12 Suppose the nations of Utopia and Paradise both produce popcorn and cola. They currently do not trade. Below are the production possibilities frontiers for both countries, with current production levels marked by the point labeled "No Trade." The no trade point for Paradise is (6.00 cola, 6.25 popcorn) and the no trade point for Utopia is (4.25 cola, 3.00 popcorn). Use this information to answer the three questions below. Which of these prices, or terms of trade, will allow both countries to gain from trade?

1 pound of popcorn for 2 liters of cola

9/1 Which statement describes a monopoly?

A single firm produces a product with no close substitutes and control over the market price.

10/15 Antel and IMD both produce similar computer chips, and the two companies dominate this market. The table shows the choices available to Antel and IMD in terms of total output and the profits they would make in each of these situations. Use this table to answer the four questions. a. Using what you know about the prisoner's dilemma, what would be the profit for Antel and IMD in millions? B. What would be the best collective option for both firms? C. Select all of the reasons Antel and IMD would make more profit at the original constant production level?

A. Antel and IMD profit = 100 million B. cooperate C. It restricts the supply of computer chips AND they can both charge more for the product at the given level of production

9/11 The corresponding graph shows the total revenue and total cost curve for a profit maximizing monopolist. Where on the graph is profit positive? Where on the graph does the firm earn zero economic profit? Where on the graph is profit negative?

A. Q2 B. Both Q1 and Q3 C. quantities less than Q1 or more than Q3

Q4 The graph shows the short-run cost, revenue, and perceived demand curves for all firms in the convenience store market, which is a monopolistically competitive market. Use the graph to answer the four questions. What profitability will firms in this industry achieve in the short run? What profitability will firms in this industry most likely achieve in the long run? What will happen to the number of firms in the industry as it moves from the short run to the long run? What would you expect to happen to the perceived demand curve in the long run?

A. make a profit B. break even or exit the market C. more firms will enter the market D. shift to the left

20/5 Consider the graphs showing the markets for passenger airplanes in Mexico and the United States without trade. E1 and E2 represent the equilibrium points in each market. Assuming these are the only two countries, suppose all trade barriers are completely removed. Shift the horizontal international price lines (P1 and P2) to show the equilibrium that the two countries will reach with free trade. All prices have been converted to U.S. dollars.

In the new equilibrium Mexico imports airplanes from the United States.

10/18 The graphs show typical demand or perceived demand curves for firms in various competition scenarios. Select the type of competition from the drop down lists that best matches each graph.

Perfect competition = flat horizontal line Monopolistic competition = higher to lower but flat Monopoly = higher to lower, but steeper Oligopoly = high to low, then drops fast

19/21 Identify each statement as true or false. a. When two countries choose to partake in international trade, it is a mutually beneficial activity for both countries. b. Wealthier countries always benefit more from international trade than poorer countries. c. Countries trade for goods in which they do not have a comparative advantage, and therefore, would never trade with nations that have similar resource endowments. d. Through specialization and trade, it is possible for a country to consume a combination of goods that is beyondits original production possibilities frontier.

a. true b. false c. false d. true

20/4 The table shows the demand and supply for cocoa beans in two countries: Cameroon and Nigeria. Use the information in the table to answer the questions.

price, Cameroon = 5 quantity demanded, Cameroon = 280 price, Nigeria = 5 quantity demanded, Nigeria = 220

20/19 There are trade-offs associated with international trade. Classify the statements that are consistent with mainstream economists' views on international trade as "True" and statements that are inconsistent as "False."

true - in the aggregate, international trade is beneficial - international trade leads to lower prices and increased. variety for consumers in the importing nation false - international trade is unwise during a recession when unemployment is high - trade between two countries will make one country better off and the other worse off - international trade improves the well being of everyone

17/19 Suppose that you deposit $6000.00 into a mutual fund that will earn a yearly return of 6.50% and leave the money there for 30 years. What would be your mutual fund account balance after the 30th year?

39686.20

17/13 Suppose that Tom bought a house 3 years ago for $235,000 and paid 17% as a down payment. To finance the rest, he took a bank loan, which has an outstanding balance today of $210,000 that may be liquidated in full. The current appraisal value of Tom's house is $250,000. What is the equity on his house?

40,000

17/6 Suppose the Chief Financial Officer (CFO) of a company is interested in raising funds for a major investment by issuing bonds of varying maturity to investors. One of the longer-term bonds being issued can be purchased for $25,000.00$⁢25,000.00 per bond and pays $1,900.00$⁢1,900.00 annually to the investor. What is the anual interest rate on this bond?

7.6%

Q4 A. Command and control policies are examples of tradable allowance, which is a solution to the tragedy of the commons B. It is harder to find a solution to the tragedy of the commons within a small village or tribal group C. Creating individual transferable quotas while also defining property rights has resulted in some success in addressing the tragedy of the commons

A and B = false C = true

17/2 Indicate whether each scenario is a characteristic or an example of a stock or bond. A. Catherine purchases a financial asset that gives her partial ownership of a company B. Netflix finances an expansion of its operations by giving investors small ownership stakes in the company. C. Mason lends money to his city. The city issues him a certificate specifying when Mason will be repaid and the interest he will earn. D. Johnson & Johnson wants to build a new factory but does not have the cash on hand to pay for it. It finances its new factory through debt financing

A and B = stocks C and D = bonds

10/13 Brian and Paige are arrested and charged with armed robbery. The police interview both suspects separately about their involvement in the crime. The table shows the sentences that Brian and Paige will receive given their choices. Use the table to answer the three questions. A. If Brian trusts Paige to remain silent, what should he do to minimize his sentence? B. If Brian thinks Paige will confess, what should he do to minimize his sentence? C. What will be the dominant strategy outcome for Brian and Paige?

A and B. confess C. they both get 12 years

9/10 Consider the two perceived demand curves shown in the graph (ch. 9 q10) Select the statement that best describes the market structure of each

A is perfect competition, and B is monopoly

12/1 Classify the scenarios according to whether or not they describe a negative externality. A. A donut shop emits a delicious smell into the air as a by-product of production. B. A neighbor plays loud music that annoys the surrounding community. C. A person with no allergies gets a mosquito bite from a disease-free mosquito. D. A person gets a flu shot and is therefore less likely to spread illness to others. E. A factory emits pollution into the atmosphere as a by-product of production.

A, C, D = NOT an example of a negative externality B, E = an example of a negative externality

11/16 The graph shows the relevant curves for a natural monopoly. The two AC curves show average cost before and after the discovery of a new process that reduces costs. Suppose that the firm is regulated using the cost‑plus, or fair‑return price, method and that regulators can accurately estimate the firm's costs of production. When the firm's average cost function is represented by the curve AC1, what is the firm's economic profit? After the firm discovers the above mentioned cost savings and is now represented by AC2, what is the firm's economic profit? Given the profit identified with each cost structure, the firm

A. 0 B. 0 C. has no incentive to either minimize costs or keep costs high

10/7 The graph presents the short‑run costs and revenue for a monopolistically competitive firm. Use this information to determine the profit‑maximizing output and profit for this firm in the short run. A. What is the profit‑maximizing output of this monopolistically competitive firm? B. What is the maximum level of profits for this monopolistically competitive firm?

A. 11 B. 1100

9/12 A monopolist makes self-cleaning jackets. At a price of 100$ each, it can sell 20 jackets. At a price of 98$ each, it can sell 21 jackets. Assume the monopolist cannot price discriminate. When charging 100$ per jacket, total revenue is When charging 98$ per jacket, total revenue is So the marginal revenue of selling the 21st jacket is

A. 2000 B. 2058 C. 58

11/7 Please use the hypothetical information in the table, which concerns the acoustic guitar market, to answer the questions. Calculate the Herfindahl-Hirschman Index (HHI) for this market. If Taylor and Ibanez decided to merge, what action would the Federal Trade Commission (FTC) most likely take?

A. 2776 B. The FTC would challenge the merger automatically because the original index is so high.

13/8 Policymakers are provided data about the private and social benefits of a good being sold in the market. What is the size of the externality? If the externality is positive, enter a positive number. If negative, make it a negative number. Given this data, policymakers must decide whether to address the associated externality with a subsidy or a tax. As their economic consultant, which of the two policy tools would you recommend?

A. 3 B. a subsidy

9/16 The graph shows the relevant curves for a profit maximizing monopolist. Assume that it is possible for the firm to produce a quantity that is not a whole number. What quantity will the firm produce? What price will the firm charge? What is the firm's profit?

A. 30.36 B. 20.59 C. 171.23

9/13 The graph shows the demand curve for cable television. Assume that monopoly conditions apply. What is the firm's total revenue when selling cable television to 6 houses? What is the firm's marginal revenue from selling cable television to the 13th house?

A. 72 $ B. -7$

12/9 The Matrixlandia Government wants to reduce the total amount of sulfur dioxide (SO2)(SO2) emitted by the electric industry by requiring both Modern Electric and Ancient Electric to reduce their emissions by 3 tons each, for a total SO2SO2 reduction of 6 tons. The table provides marginal cost (MC) of emissions reduction data. What will be the industry's total cost of reducing emissions by 6 tons (in hundreds of dollars)? Round your answer to two decimals. When the government enacts a cap and trade policy, Modern Electric decides to reduce its SO2SO2 emissions by 4 tons and trade (sell) one SO2SO2 emissions permit to Ancient Electric for $18.25$18.25 . With the permit from Modern, Ancient Electric needs to reduce its emissions by only 2 tons. What will be the industry's total cost for reducing emissions by 6 tons under the cap‑and‑trade policy (in hundreds of dollars)? Using the information above, can a cap and trade policy help lower the total cost of pollution control?

A. 88.50 B. 82 C. Yes

20/11 Which of these scenarios describe circumstances of trade dumping? Note that all values are in United States (U.S.) dollars for ease of comparison and that there are no transportation costs. Why might a firm engage in dumping?

A. An Indian firm produces cars for $7,000 each and sells them in the United States for $6,000. B. The firm is reacting to market forces that have driven the price level to below production costs. B. The firm is trying to undercut foreign competitors in order to drive them out of the market in the long term.

9/2 Determine if each example represents a barrier to entry or not. Pfizer is the only firm that is legally allowed to produce and sell Lipitor, a best‑selling cholesterol drug. DeBeers owns nearly all of the world's diamond mines. Boeing already serves a large fraction of the jumbo jet market and is able to produce at a lower average cost than any potential competitors. Tinseltown Theaters shows almost all the most popular newly‑released movies.

A. Barrier to entry B. Barrier to entry C. Barrier to entry 4. Not a barrier to entry

11/19 Identify the true statement

A. Deregulation can describe either removing government control of the price of a good OR the removal of government control of quantities B. Most often, deregulation has resulted in prices decreasing C. Deregulation has led to increased instability for firms and is associated with higher rates of entry and exit.

10/16 The accompanying payoff matrix presents the profits for Firm A and Firm B under two pricing strategies. Suppose both firms have agreed to employ strategies that maximize their combined profits. How will the firms act? Compare the profits of Firm A when both firms respect the collusive agreement to the profits of Firm A when Firm A secretly cheats on the agreement. How much additional profit would Firm A earn by secretly cheating on the agreement to collude? Compare the profits of Firm A when both firms respect the collusive agreement to the profits of Firm A when both firms cheat on the agreement. By how much would the profit of Firm A fall if both firms cheat on the agreement to collude?

A. Firm A and Firm B will set a high price B. additional profit when cheating: 18 C. lost profits when both cheat: 8

11/8 Consider the tables displaying market share data for the largest firms in two industries. Suppose that there are 10 firms in the printer market and 20 firms in the microwave market. Given the data presented here, only the BLANK can be calculated Applying this measure of market power to the date in the tables, it can be concluded that the market for BLANK is more concentrated What is the reason that the other measure of market power cannot be calculated?

A. Four-firm concentration ratio B. printers C. It needs the market share for all the firms in the market.

10/19 For each of the situations described, determine whether the firms involved are part of a cartel or are simply colluding. A. Landscaping company owners in a county hold an annual meeting at a hotel. There, owners make contact with industry leaders, share cost-saving ideas, and set minimum prices for services in the coming year. Owners who set prices below these minimums are not invited to next year's meeting. B. Most hot dog carts in a city sell hot dogs for $3.00 each. Each stand makes comparable products, but each is independently owned and operated. The marginal cost of selling hot dogs on the street is around $1.00, but owners have maintained the $3.00 price point for several years. The cart owners are not in regular contact. C. Three friends start a bakery in the east side of a city. There is a higher demand for baked goods on the west side of the city, but the bakery's owners refrain from expanding there due the large number of well-established bakeries already there. D. A city has two major nut vending companies. I.M. Nutz operates roasted nut carts on the north side of the city, while Go Go Nuts operates carts on the south side of the city. Both companies operate at high margins and have a robust distribution infrastructure that would allow them to operate city-wide, but each company operates exclusively on its end of town.

A. Landscaping company owners who attend the meeting HAVE FORMED A CARTEL B. Hot dog vendors in this city ARE COLLUDING WITH ONE ANOTHER BUT NOT AS PART OF A CARTEL C. The east side bakery owners are ACTING COMPETITIVELY BY AVOIDING A POOR BUSINESS DECISION D. I.M. Nutz and Go Go Nuts COLLUDE WITH ONE ANOTHER TO MAINTAIN MARKET POWER IN THEIR RESPECTIVE AREAS

11/1 What are antitrust laws? Identify the first antitrust law and its purpose.

A. Laws meant to eliminate collusion and promote competition among firms. B. The Sherman Act of 18901890 prohibits price fixing, collusion, and monopolization.

9/19 Use the cost and revenue data to answer the questions. If the firm is a monopoly, what is marginal revenue when quantity is 10? What is marginal cost when quantity is 12? If this firm is a monopoly, at what quantity will marginal profit be $0.00? If this is a perfectly competitive market, which quantity will be produced? Comparing monopoly to perfect competition, which of the statements are true? Select all that apply.

A. MR = $20 B. MC = $90 C. Quantity = 6 D. Quantity = 8 E. The monopoly is likely to be less responsive to consumers AND the monopoly's price is higher.

9/4 Which of the following describes rules created by governments that allow for exclusivity in sales, use, and production of an invention for a limited period? Which of the following is a word, name, symbol or device that shows the creator of the good and can only be used by that firm? Which of the following is a legal rule that prohibits copying of material in order to protect the rights of those responsible for the creation of the good?

A. Patent B. Trademark C. Copyright

9/9 Match each scenario with the source of monopoly market power. Mary McFly invents a time machine and gets legal protection from competition Main Line Utilities can operate at a lower cost than multiple electric companies The author of Economies for Dumbbells is given exclusive rights to produce this book Your city council gives All Talk Communication Services exclusive rights to build high speed internet infrastructure in your town. DeJeers Jewelers owns 80% of the world's diamond mines.

A. Patent B. economies of scale C. copyright D. government licensing E. control over resources

Q3 Match each antitrust law to its description. Enacted in 1890, this law prohibits price fixing, collusion, and monopolization. Enacted in 1914, this law created an independent agency of the U.S. government to promote consumer protection and prevent anticompetitive business practices. Enacted in 1950, this law increases restrictions on mergers by prohibiting those that reduce competition. Enacted in 1936, this law prohibits firms from charging different buyers different prices if the result reduces competition. Enacted in 1914, this law prohibits firms from having directors on the boards of competing firms and from owning shares in competitors.

A. Sherman Act B. FTC Act C. Celler-Kefauver Act D. Robinson-Patman Act E. Clayton Act

13/1 Match the inventor and their listed invention to the reason that they did not receive large profits for their innovations. A. No government wanted to buy it B. Waited too long to patent it because the inventor thought it had to be working first. C. Courts in the southern states would not uphold the patent rights or punish patent infringements

A. Thomas Edison - automatic vote counter B. Gordon Gould - laser C. Eli Whitney - cotton gin

Q4 For this question, imagine two firms in a duopoly in a price competition game. Each firm can charge either a high price or a low price, but competes with the other for market share. Please match the terms with their respective definitions. An equilibrium in which both firms stick to the higher price to their mutual benefit. A situation in which the firms' dominant strategies result in an outcome that leaves everyone worse off. A situation in which neither firm can do better with another strategy, considering the strategy used by the other firm. An equilibrium in which both firms act in self interest rather than sticking to the tacit or stated collusive agreement.

A. cooperative solution B. prisoner's dilemma C. nash equilibrium D. noncooperative equilibrium

10/1 Classify each statement about types of market structure as either true or false A. Monopolies produce differentiated products B. Monopolistic Competition is a market structure that consists of a small number of producers C. Perfect (pure) competition is characterized by product differentiation D. Oligopolies exist in a market that has a small number of producers that may or may not exhibit product differentiation

A. false B. false C. false D. true

13/13 Which of the scenarios are examples of free riding? Bob can pay to support his local public radio station, which depends on donations to be as effective as possible. Bob listens to the radio station several hours per day but never donates since he suspects that other people will donate enough to keep the station on the air. Drew always buys the lunch special for $5 at the restaurant across the street from where he works. If he decided to eat at the restaurant after 3:00 p.m., however, he would be unable to get the lunch special, and would instead have to pay $10 for the same food. Jim is working on a group project for a class in which he wants a high grade. However, since the grades are assigned to the group as a whole and he knows that the other group members will pick up most of the extra work, Jim calls in sick and plays video games on his Dream Station 64 Karl never drives at night, and gets no benefit from street lamps at all. Street lamps are nonexcludable and nonrival in consumption. When the community group tries to collect money to build street lamps, Karl does not donate any money. not free-riding

A. free riding B. not free riding C. free riding D. not free riding

Q4 The graph shows the market for steel. Assume that steel production creates pollution, which is a negative externality. Use this information to answer the question. The private marginal cost curve for steel

A. is the supply curve itself

13/9 Each of the scenarios describes a situation that results in a positive or negative externality. Please determine which action an economist might recommend in response to each externality. A. MongoCorp, a producer of industrial plastics, textiles, and chemical products, releases harmful levels of nitrogen dioxide into the air, contributing significantly to air pollution in nearby cities. An economist might recommend B. Omnicrom, a pharmaceutical research and development firm, has developed a new treatment for halitosis—the medical term for chronic bad breath—that promises to treat both the bad taste in patients' mouths and the foul odor that bothers those close to them. An economist might recommend C. A new report is released by the American Society for Rural Dwellings, concluding that living in the countryside has positive health benefits. As a result, many homeowners decide to build new homes in the country, which stimulates the local economy of many small towns. An economist might recommend D. Myploy Fish Sauce produces some of the most in-demand fish sauce in the world, prized for its pungent aroma and lingering taste. However, every year, as part of the production process for its fish sauce, Myploy produces millions of tons of potentially toxic fish sludge, which is drained into local rivers and streams. An economist might recommend E. Espalda, a manufacturer of ergonomic furniture, has created a new chair with a unique design shown to improve posture and increase productivity while also leading to a better mood for the person using the chair. An economist might recommend

A. levying at tax on B. issuing a patent to C. subsidizing D. levying a tax on E. issuing a patent to

13/11 Identify the characteristics that describe each good listed below. Note that each good will be described by two characteristics. "Rivalrous" is also referred to as "rival in consumption." Consider only the immediate benefits and costs, not any externalities.

A. nonexcludable, nonrivalrous national defense B. excludable, nonrivalrous Payperview cable television C. excludable, rivalrous a hot pocket sandwich d. excludable, rivalrous private classroom education E. excludable, rivalrous pajamas F. excludable, rivalrous unicycle

11/10 Regulation is most likely to occur in a market characterized as Regulation is most likely to occur in a market with a Herfindahl-Hirschman Index (HHI) of Regulation is more likely to occur in

A. oligpolisitc B. 2500 C. narrowly defined markets

10/2 Monopolies and monopolistically competitive firms differ in that monopolies Which of the following makes monopolistic competition different than perfect competition? Monopolistically competitive firms In comparison to oligopolies, firms in monopolistic competition Which scenario is an example of an industry in monopolistic competition?

A. participate in markets where barriers to entry are present. B. differentiate their products C. face competition from many other firms. D. Within walking distance from your home, there are a plethora of fast-food restaurants including Koala Express,Cabo Bob's Burritos, Oodles of Noodles, and Hanz's Hearty Hamburgers.

12/11 The scenarios reflect different policies regarding pollution. Select the policy that best matches each scenario. A. an auto manufacturer is charged a fee per unit of pollution emitted into a river. B. Government requires that auto manufacturers use a new, cleaner technology in producing cars. C. Government requires that auto manufacturers limit pollution to a specified threshold. D. Auto manufacturers are allowed to pollute as much as they wish, provided that they have purchased a sufficient number of pollution vouchers. E. A steel mill pays nearby homeowners to compensate them for the noise they must put up with as a result of the steel manufacturing process

A. pollution or emissions tax B. command and control regulation - eg., environmental standards C. command and control regulation - eg., environmental standards D. marketable or tradable pollution permits - cap and trade E. well-defined property rights

Q3 The given terms refer to different approaches to regulating natural monopolies. Place each with its corresponding description. A. A firm is allowed to price its product so that it earns a normal return on capital invested. B. firms are directed to charge the price associated with the extra cost of making each unit. This pricing rule often leads to firms earning a negative profit C. Firms charge a price that allows them to earn only a normal economic profit D. this places maximum limits on the price firms can charge for a good or service.

A. rate of return regulation B. marginal cost pricing rule C. average cost pricing rule D. price caps

10/3 The area covered by rectangle C D F E is the firm's The area covered by rectangle A B D C is the firm's The area covered by rectangle A B F e is the firm's

A. total cost B. profit C. total revenue

11/3 Determine whether each of the statements regarding the regulation of mergers in the United States is true or false. The Department of Justice and the Federal Trade Commission are responsible for approving mergers and enforcing antitrust law. Market definition is one of the main parts of current merger guidelines. The Federal Reserve oversees the enforcement of antitrust law. Measure of concentration is one of the main parts of current merger guidelines. Mergers that result in a relatively high HHI are less likely to be approved than mergers resulting in a lower HHI. Firm diversification is one of the main parts of the current merger guidelines.

A. true B. true C. false D. true E. true F. false

19/11 Assume Aaron and José each own a small ranch, and each produces milk and cheese. One of them is better than the other at producing both milk and cheese (but we do not know who). Which of the statements cannot be true regarding absolute or comparative advantage?

Aaron could have a comparative advantage in producing both milk and cheese.

19/23 Suppose that research finds a link between high fructose corn syrup (HFCS) and obesity, which then leads American consumers to switch from HFCS products to pure cane sugar products. The graphs show the markets for cane sugar in Haiti and the United States before the studies were divulged. Shift the curves in the graphs, including the horizontal world price curve, to describe the new trade equilibrium that results after the switch in preferences of American households, and then answer the follow‑up question. Assume that the United States and Haiti are the only non‑HFCS sugar trading parties in the world and that there are no quotas, subsidies, or tariffs distorting these markets.

According to your graphs, at the new equilibrium = cane sugar producers in Haiti benefit.

Q3 Classify the assumptions according to whether or not each item is an assumption made under perfect competition (also known as pure competition or competitive industry).

Assumed in Perfect Competition - price-taking behavior Not assumed in perfect competition - a small number of producers - significant barriers to entry - firms selling a similar but differentiated good

Q3 The accompanying graph depicts the cost curves of an individual firm in a perfectly (or purely) competitive industry. a. Use the line labeled 'Supply' to trace out the firm's Short-Run supply curve. b. What is the minimum quantity this firm will produce in the short run? c. In the long run, the firm will shut down if the market price stays below

B. 12 units C. Below 9 Units

13/14 National defense is a good that is nonexcludable and nonrival in consumption. Suppose that instead of national defense being paid for with tax dollars national defense is paid for by voluntary contributions from (potentially) all individuals within Latvia. Bob, who is a Latvian citizen, must decide whether he wants to contribute to the national-defense budget. Further, suppose that there are a total of 10 citizens, including Bob. For the optimal amount of safety, each citizen should pay $10. Every $1 contributed (by anyone) to the national defense leads to increased security, which each person values at $0.30. This means that every dollar spent on defense is worth $3.00 to Latvia as a whole.

Bob's personal value = $3 total contributed voluntarily = $0 Bob's gain or loss under tax = $20

11/11 There are several practices that firms can use to restrict competition. Match the restrictive behavior with its correct description.

Bundling - An NFL team requiring that fans who purchase tickets to a desirable game must also buy tickets to a less desirable game Predatory pricing - the iPad being priced at an artificially low price to drive competing products out of business Exclusive dealing - a theme park agreeing to sell only Pepsi products Minimun resale pricing arrangements - Volkswagen requiring that dealers do not sell cars at a price below a certain threshold

9/17 The accompanying graph depicts a hypothetical monopoly. Follow instuctions 1−3 below to identify the monopoly's profits. Place point E at the monopoly's profit maximizing price and quantity. Move the average total cost (ATC) curve to a position that depicts the monopoly earning a positive profit. Place the area labeled Profit in the area of the graph that represents the monopoly's profit.

Ch 9 Q 17

9/3 Move the demand curve so that it is in the natural monopoly region of the long‑run average cost curve (LRAC).

Ch. 9 Q3

19/17 There are several economic explanations for why trade is so commonplace. Match each of the examples listed with the economic concept that best explains the behavior or observation.

Comparative advantage - the ability of developing nations to export textiles to wealthier countries - your economics professor paying a gardener to do work that he or she could do on their own specialization or economies of scale - swiss watch manufacturers producing high quality time pieces - U.S. auto makers offering a great variety of makes and models of cars -doctors becoming experts in one type of medicine rather than becoming proficient in many areas

9/20 Match the characteristic to the market structure.

Competitive Market - many firms, produces efficient output level, no lung- run economic profits Monopoly - single firm, produces inefficient output level, price maker

Q3 Classify each scenario according to whether it represents a competitive market or an imperfect market.

Competitive market - moulin rouge is one of many cancan shoe makers, and they choose to increase the price of their shoes by 10$. they do not understand why they can no longer sell any of their shoes -Grande Jatte is a lawn mowing service. Thanks to new lawn mowers, employees are very efficient and consequently the company charges 2 dollars less per mowed lawn. They are unable to keep up with all of the customers requesting their service -Water Lilies, one of many flower farming companies, decides to grow an extra acre of tulips Imperfect market - Starry Night -Mondrian House -Haystacks is a pharmaceutical giant -Persistence of Memory

13/4 Acquiring skills is thought of as an investment because it involves BLANK today in anticipation of BLANK in the future. Firms invest in their workers to increase BLANK in the future

Costs Benefits Productivity

12/13 The graph shows the marginal social benefit curve (MB) and marginal social cost curve (MC) for pollution removal.

For the 20th unit of pollution removal = the marginal benefit exceeds the marginal cost For the 50th unit of pollution removal, the marginal cost exceeds the marginal benefit Determine the socially optimal level of pollution removal = 46.23 units

11/2 The table represents the market share of the 10 largest steel producers. What is the four‑firm concentration ratio for the steel industry represented in the table?

Four-firm concentration ratio: 73.3

19/4 The table shows the units of output a worker can produce per month in Germany and Korea for two different goods: televisions and personal computers. Use this table to answer the question. Which of the statements is true?

Germany has a comparative advantage in the production of televisions, while Korea has a comparative advantage in the production of personal computers.

19/2 The table shows the units of steel and personal computers a worker can produce per month in Germany and South Korea. Use this table to answer the question. Which statement about absolute advantage is true?

Germany has an absolute advantage in the production of both steel and PCs.

12/16 From the examples below, determine which best describes an international externality.

Global warming fears rise as a result of increased pollution in Singapore.

10/5 and Q4 Product differentiation is a key component of monopolistic competition. Given the scenarios, label them accordingly by how products are differentiated.

Grrr. Arg! = differentiated by style/type Jay is a Korean pop star = differentiated by location Wayne is a beginning photographer = differentiated by quality The video game industry = differentiated by style/ type Jackie's coffee = differentiated by service car dealership = differentiated by perception beverage company = differentiated by brand name/advertising

11/9 Suppose that the table shows market share data for all of the sushi restaurants in town. Calculate the Herfindahl‑Hirschman index (HHI) for the local sushi market.

HHI = 3250 (square everything and add it up)

17/5 Rank the different types of bank accounts according to their liquidity.

Highest to Lowest Checking account savings account certificate of deposit

Q 4 Which of the statements is true of the prisoner's dilemma?

In the prisoner's dilemma, firms could do better if they both did exactly the opposite of what they ultimately choose to do.

Q4 Decide whether each corrective measure increases the production of positive externalities or reduces the production of negative externalities.

Increases positive externalities - coupons and discounts - compulsory attendance at school up until the age of 16 Reduces negative externalities - congestion charges - cap and trade policies - fishing quotas - taxes on plastic bags

19/18 Which scenario describes the operation of a tariff? Which is NOT an effect of a tariff?

Ireland taxes the import of potatoes in order to keep domestic farmers in business. increased demand

9/8 Classify each scenario according to whether or not it is an example of predatory pricing.

Is an example of predatory pricing - Delta Airlines offering discounted fares for a limited time to prevent competitors from entering the market Is NOT an example of predatory pricing - Walmart offering lower prices than a local competitor because of economies of scale - Champ's Sporting Goods putting all hunter gear on sale - A firm charging different people different prices for the same good

19/5 The table presents information about the productivity of digital cameras and personal computers in the United States and Japan. The data are presented in units of output per hour of work.

Japan has an absolute advantage in producing personal computers

19/9 The figures illustrate the production possibilities available to Kate and Sarah with eight hours of labor in their bakery. Answer the questions according to these figures.

Kate has a comparative advantage in = cake BITCH has a comparative advantage in = bread

19/8 These figures illustrate the production possibilities available to Kate and Sarah with eight hours of labor in their bakery. Answer the questions according to these figures.

Kate has an absolute advantage in = neither goods BITCH has an absolute advantage in = both goods

9/14 The table shows the demand schedule of a monopolist. Calculate marginal revenue and fill in the revenue column in the table. Assume that output can only be sold in integer amounts (i.e., 11 unit, 22 units, etc.). Once you have filled in marginal revenue, identify the quantity produced by the monopolist in this market. (ch9 q14)

MR 1 = 13 MR 2 = 11 MR 3 = 9 MR 4 = 7 MR 5 = 5 MR 6 = 3 How many units does the monopolist produce? Quantity = 4

11/6 The table shows sales information for the firms in three different markets. Use the Herfindahl‑Hirschman Index (HHI) to sort the markets from most concentrated to least concentrated.

Most to Least B, C, A

17/12 Caro has $10,000 to invest. Her best friend, Imelda, happens to be a stockbroker. Imelda tells Caro that her investments should be diversified. To make sure that Caro understand what diversification really means, Imelda asks her to rank a set of investment portfolios according to how diversified they are. Demonstrate how Caro's ranking should look below.

Most to least 3,400 in a mutual fund, 3,300 in bunds, and 3,300 in a land purchase 10,000 in a mutual fund 5,000 in one stock and 5,000 in another 10,000 in one stock

17/14 Order the following saving mechanism in descending order of liquidity.

Most to least cash in your pocket checking account savings account corporate bond a house

17/11 How do mutual funds reduce risk for the average individual investor?

Mutual funds reduce risk through portfolio diversification.

11/12 Which restrictive practice is an example of bundling?

None of the choices are correct

19/19 Juan Valdez, a coffee farmer in Colombia, sells his coffee to Cafe Emporium, a U.S. firm which specializes in gourmet coffee blends. What must be true of this arrangement? What can be inferred from the fact that Juan has voluntarily entered into a contract with Cafe Emporium?

None of these statements must be true. Juan is better off as a result of his deal with Cafe Emporium.

19/13 Suppose that Rob and Big both raise animals and sell them. Because Rob and Big have different talents, they have varying abilities to raise these animals. In 1 day, Rob can produce either 10 cows or 20 pigs. In 1 day, Big can produce either 9 cows or 36 pigs. Assume that Rob and Big decide to specialize completely and trade with one another.

Over the course of 1 month (30 days), Rob will produce 300 cows and 0 pigs, whereas Big will produce 0 cows and 1080 pigs

13/15 In economics, what is the meaning of the phrase 'the tragedy of the commons?'

People will overuse or misuse a common resource that is not excludable but is rivalrous

20/3 The table shows the hypothetical demand and supply for coffee beans in two countries: Guatemala and Belarus. Use the information in the table to answer the questions.

Price in guatemala = 4 quantity in guatemala = 320 price in belarus = 7 quantity in belarus = 180

Q3 Sort between productive efficiency and allocative efficiency

Productive - Both goods and services Allocative - Production... - The price consumer pay...

17/16 Investors face various choices regarding what they can invest in, and the choices carry varying amounts of risk. For example, stock prices are much more volatile than bond prices. What is the typical reason why investors would choose to put their money into an investment with higher risk rather than one with lower risk?

Riskier investments typically have higher returns.

11/20 As a result of the accounting fraud that led to the demise of Tyco International, what legislation was passed to protect investors by improving financial disclosures and preventing accounting fraud?

Sarbanes-Oxley Act

Q3 The accompanying graph depicts the marginal cost (MC), average total cost (ATC), and marginal revenue (MR) curves for a perfectly (or purely) competitive firm. Move point A to identify the profit maximizing price and quantity for this firm.

See Quiz3

20/13 Some people use a "race to the bottom" argument to suggest that there are detrimental environmental effects from globalization. Classify each scenario by how it relates to this argument.

Srengthens - in response to new emissions taxes in their home country, acme metals moves their steel production plant from Germany to Bangladesh Weakens - BMW decides to produce several of their automobiles in SC where their factory is subject to more stringent US environmental laws - in response to american consumer concern, enacts more stringent regulations on caviar producers - a firm building a new factory in a country with loose environmental laws decides to use the same blueprint it used for a factory in a country with much stricter rules Neither - a firm chooses to build a factory in a less developed country with equally strong environmental standards, so that it can reduce costs by paying lower wages

Q4 Classify each example according to whether it represents a rivalrous, nonrivalrous, excludable or nonexcludable good.

Street lighting in a public park: nonrivalrous and nonexcludable a chipotle burrito: rivalrous and excludable wild tuna in the Pacific Ocean: rivalrous and nonexludale playing world of warcraft: nonrivalrous and excludable

Q4 The terms and definitions regard internalizing externalities through the use of the legal system and legislation. Match the term to the appropriate definition. Each term is used only once.

Student 1: the term describes reductions in pollution = pollution abatement Student 2: When it comes to stopping pollution, this legal procedure is if the pollution is on-going = injunction Student 3: The clean air act of 1990 = cap and trade Student 4: this legal procedure is implemented once the damage has been done by requiring the pollution party to pay the aggrieved party = liability rules

20/2 Although both tariffs and quotas are tools used to restrict or reduce trade, which of the statements best describes their differences?

Tariffs are a tax on imported goods, and quotas are limits on the number of imported goods.

20/16 The World Trade Organization (WTO) has an important role in international trade. From the list, select all statements about the WTO that are true. It is possible that more than one statement is true.

The WTO attempts to minimize barriers to trade. The WTO assesses complaints of unfair trading from member countries.

19/15 The Cuckoo rice cooker, made by the Cuckoo Company, Inc., is an electric rice cooker that promises perfectly made rice with each use. When the rice is done, a jingle plays (in this case, a silly rhyming song, "Your rice is done, so it's time to have some, you no longer have to wait, so go get your plate."). It is unique in that many of its components are from abroad: the voice that sings the jingle was recorded by the SingMore Company in Korea, the constructed steel body of the rice cooker is made by the FunPots Company in the United States, the rice scooper is produced by the ScoopMore company in Taiwan, and the full assembly of the rice cooker is completed in China by the Cuckoo Company, Inc., which also distributes it to retailers in North America.

The entire process of the creation of the Cuckoo rice cooker, as described, is best illustrated by which of the terms? Splitting up the value chain

20/14 Bertrand is an avid supporter of protectionism. His primary platform is the idea that the United States imports too many foreign goods. He dislikes that many of his clothes are made in China instead of the United States because clothing is a basic need, even for babies. He would prefer that the United States drill in the Arctic National Wildlife Refuge (ANWR) instead of importing oil from Kuwait because oil powers our military's tanks and planes. Which argument for protectionism is Bertrand using?

The national interest argument

11/5 Which is not a feature of the four‑firm concentration ratio?

The ratio considers differences between the market shares of the top four firms.

13/2 Suppose Turing Inc. creates the first ever solar powered cell phone battery that absorbs ambient light and converts it into electrical power. Furthermore, the battery stores excess absorbed light as an internal battery that lasts up to 1010 hours in the dark. At a conference, a Turing Inc. representative presents the battery to representatives from many other companies, proclaiming the invention will revolutionize the cell phone industry. A few months later, Algos creates a solar powered cell phone battery that lasts 1212 hours in the dark.

This example of the spreading of knowledge is known as = technology spillover This example of the spreading of knowledge is also a = positive externality

9/6 Indicate which of the following are treated by intellectual property law.

Treated by intellectual property law - patents, trademarks, copyrights, trade secrets Not treated by intellectual property laws - deregulation, control of a physical resource

11/13 Identify whether each statement is true or false by placing each statement in the correct category.

True - Market power is the ability of a firm to charge a price greater than marginal cost - In reality, few markets are perfectly competitive and some loss of economic efficiency occurs in most markets False - Charging a price greater than marginal cost leads to maximum economic efficiency. - Most markets are perfectly competitive and economists have found that there is no loss of economic efficiency in the U.S. economy.

12/8 Indicate whether the statements are true or false

True - Marketable permits provide their owners with the right to pollute a specified amount - the term "cap and trade" describes regulation by marketable permits - marketable permits typically achieve pollution reduction at a lower cost than command and control regulation False - Compared with no regulation, regulation with marketable permits decreases firms' costs - pollution taxes are more effective at reducing pollution than marketable permits

11/17 Indicate whether the statements are true or false by placing them into the appropriate category.

True - Price cap regulation describes a policy where government sets the price of a natural monopolist's product and then allows the firm to maximize profit - Cost-plus regulation allows natural monopolies to earn zero economic profit False - From the firms' perspective, price cap regulation is always preferable to other methods of regulation - From the firm's perspective, price cap regulation is never preferable to other methods of regulation - Cost-plus regulation encourages firms to produce as efficiently as possible

11/18 Indicate whether the statements are true or false by placing them in the appropriate bin.

True - Regulatory capture is when the firms being regulated have undue influence on the regulatory process - Lobbyists contribute to regulatory capture False - Regulatory capture is when the government takes over a firm and, by doing so, increases the firm's market share - Regulatory capture is when consumers have undue influence on the regulatory process

12/2 Classify each statement as true or false

True - Social cost is the sum of private and external costs - When the production of a good results in pollution, private and social costs are different - Pollution is an example of an external cost False - the terms "social cost" and "external cost" are synonyms - when the production of a good results in pollution, private and social costs are the same - wages are an example of an external cost - private costs are costs that the firm is not obligated to disclose to the public

10/9 The given statements are about monopolistic competition. Indicate whether each statement is true or false.

True - a monopolistically, competitive firm may be able to distinguish itself from other firms by adjusting the physical attributes of its product, by offering a distinctive level of service, or by selecting a convenient location. - product differentiation enables a monopolistically competitive firm to have some control over the price of its product - to maintain a competitive edge and earn economic profits, a monopolistically competitive firm has an incentive to improve its product - compared with purely competitive markets, under monopolistic competition consumers with a diversity of tastes can benefit from the opportunity to choose from a greater range of products and services - in order to maximize its profits, each monopolistically competitive firm must determine the price of its product, how to differentiate it and how much it will spend on advertising False - in the long run, each monopolistically competitive firm produces a level of output that results in ALLOCATIVE efficiency OR PRODUCTIVE efficiency

12/4 Distinguish the true statements from the false statements

True - market failure occurs when either negative or positive externalities are present - market failure is when market provision of a good results in an inefficient quantity - government sometimes intervenes when market failure occurs False - market failure occurs when negative externalities are present but not when positive externalities are present - market failure occurs when positive externalities are present but not when negative externalities are present - externalities are the only example of market failure

12/5 Command and control, sometimes called direct control, is when the government passes legislation specifically regulating an activity, typically because the activity leads to market failure. Classify each statement about this type of regulation as either true or false. Classify each statement.

True - under command and control, the government has the option to specify the technology that firms must use in production -command and control is subject to political considerations - a limitation of a command and control is that firms have no incentive to remove additional pollution once they are within the legal pollution limits - one option with command and control is for the government to decide on a specific amount of pollution that firms can legally emit False - command and control is always the best option when it comes to reducing the amount of pollution - command and control is more flexible than market-based regulation

12/10 Ronald Coase's ideas on property rights have helped economists and policymakers better understand environmental problems.

True statement = the assignment of property rights to SOMEONE is essential

13/16 Which scenario is the best example of the "tragedy of the commons?"

Users of a shared shower in a dorm allow the shower to get nasty by failing to clean it often enough.

10/6 The accompanying graph depicts average total cost (ATC), marginal cost (MC), marginal revenue (M), and demand (D) facing a monopolistically competitive firm. Place point A at the firm's profit maximizing price and quantity.

What is the firms total cost? $1250 What is the firm's total revenue? $1500

10/4 The accompanying graph depicts the marginal cost (MC), average total cost (ATC), demand, and marginal revenue (MR) curves facing a monopolistically competitive firm. Place point A at the profit-maximizing price and quantity combination for the firm.

What is the total profit made by the firm 21 $

12/6 The graph shows the marginal cost of abatement curve, which shows the extra cost to the firm of cleaning up an additional unit of pollution.

When a pollution charge of $5 per unit emitted is imposed, how many units of pollution will the firm choose to clean up? = 0 When a pollution tax of $20 per unit emitted is imposed, how many units of pollution will the firm choose to clean up? = 40

13/3 Which of the following statements describes the occurance of a positive externality resulting from the production of a good by a new technology?

When people who neither paid for developing the technology nor the good produced by the new technology are better off from the advancement

19/6 Assume Italy and Mali can both produce grain and dates, and that the only limited resource is the farming labor force, meaning that land, water, and all other resources are plentiful in both countries. Each farmer in Italy can produce 10 t of grain or 5 t of dates in a season. Each farmer in Mali can also produce 10 t of grain or 25 t of dates. Please answer the four questions.

Which country has the absolute advantage in producing dates? = Mali Which country has the absolute advantage in producing grain? = neither Which country has the comparative advantage in producing dates? = mali Which country has the comparative advantage in producing grain? = italy

12/15 The graph illustrates a nation's production possibility frontier (PPF) for timber production and spotted owl habitat. According to the graph, there are four possible combinations of timber production and spotted owl habitat, points A, B, C, and D.

Which point best fits the situation where the country prioritizes increasing Gross Domestic Product (GDP) directly in relation to timber production? = D Which point best fits the situation where the country prioritizes environmental quality? = A Which point is currently not attainable? = C Which point is attainable but not efficient? = B

13/6 Determine whether each activity will increase a worker's human capital.

Will increase human capital - completing an on the job training program - earning a college degree - participating in an apprenticeship - learning a new programming language Will NOT increase human capital - building a new factory - buying a share of stock - saving money for down payment on a new far

17/21 A key source of financial capital is a bond. A bond is a financial contract in which a borrower agrees to repay a specified amount with interest over a period of time. Determine the types of bonds in the passage based on the descriptions provided.

a CORPORATE bond is issued by firms to willing investors a MUNICIPAL bond issued by cities, towns, or other local agencies A TREASURY bond is issued by the federal government

17/3 One of the biggest initial public offerings (IPO), and consequent disappointments, in the past decade was the announced IPO of Facebook. Why would a successful firm like Facebook want to conduct an IPO? Note that some items may remain unplaced

a reason why facebook would want to issue public stock - facebook may have wanted to pay back the venture capitalist firms that helped start it up - facebook wanted funding to help expand its company in future endeavors

9/5 Kentucky Fried Chicken, better known as KFC, holds one of the most desired recipes in the world for their signature, 11‑spice blend used in their fried chicken. In fact, it is so valuable, the recipe is kept in a vault and only two people in the world know the full contents of the recipe. The KFC fried chicken recipe is an example of

a trade secret

19/3 Suppose that Paulie and Vinny each can produce ice cream or t-shirts. The table shows the quantity of each good that Paulie and Vinny each can produce in 11 hour, respectively, if they devote all of their time and effort into making the good. a. What is Paulie's opportunity cost of producing a cup of ice cream? b. What is Vinny's opportunity cost of producing a t-shirt? c. paulie has a comparative advantage in BLANK and Vinny has a comparative advantage in BLANK

a. 4 b. 0.533 c. t shirts, ice cream

12/17 A small city has an open space in the middle of downtown it can rent for concerts. Concerts are fun, but noise from the music and the concertgoers annoys some of the quieter citizens. The marginal private benefit (𝑀𝐵𝑃M⁢BP), marginal private cost (𝑀𝐶𝑃M⁢CP), and marginal external cost (𝑀𝐶𝐸M⁢CE) for each number of concerts are given in the accompanying table:

a. Absent government intervention, how many concerts are held downtown? QP = 6 concerts b. After receiving several complaints from downtown residents, the city council decides to limit the number of concerts for which it will rent the downtown space. What is the socially optimal number of downtown concerts (𝑄∗)(Q∗)? Q* - 4 concerts c. The city council's staff economist suggests that instead of imposing a strict limit on the number of concerts, the city council should implement a "noise fee." What should this fee be to result in the same number of concerts as in part b? Optimal fee = $2000 per concert D. Which statement most accurately describes the city council's action in part b? The city council imposed an evironmental regulation. E. Which statement most accurately describes the staff economist's proposition in part c? The economist suggested Imposing a Pigouvian tax

17/8 Stock market indices The Dow Jones Industrial Average (DIJA), Standard and Poor's 500 (S&P 500), and the NASDAQ Composite Index are three of the most used stock indexes. Identify which index is described in each definition below. Includes the stock prices of five hundred U.S. firms. Index of the stock prices of thirty large firms. Includes the stock prices of firms whose shares are traded "over-the-counter."

a. are average stock prices for a group of companies meant to measure a section of the stock market. b. s&p 500 c. DJIA d. NASDAQ compositve

19/22 Classify the statements as true or false. a. The process of specialization and trade has positive net benefits and is, therefore, beneficial to everyone. b. A nation will not have a comparative advantage in a product if it does not also have an absolute advantage in the production of that good c. It can be mutually beneficial for two nations to specialize in goods for which they have a comparative advantage and then trade with one another. d. Countries specialize in the production of goods for which they have a comparative advantage. e. Absolute advantage is the source of the potential gains from specialization and trade

a. false b. false c. true d. true e. false

17/10 match each term with its definition a. a claim to ownership of part of a firm b. a legal obligation to repay a debt at a specified date in the future c. failure to repay a debt d. a group of investments packaged together and sold as one investment opportunity e. profits distributed to a firm's ownderhip

a. stock b. bond c. default d. mutual fund e. dividend

20/12 Protectionism can involve several kinds of policies and practices to protect domestic industries from foreign competition. Identify the best policy for each scenario listed. It is possible a policy is not protectionism. A. The United States, in 2002, imposes a 30% tax on all imported steel. This is B. The country of Cakistan imposes a limit of 50,000 cookies per year that can be imported from Cookietonia. This is C. The Zombie Nation subsidizes production of shotguns so that they can be sold artifically cheaply. They aim to drive foreign shotgun manufacturers out of business. This is d. The United States introduces requirements that all toys imported from China pass a series of rigorous new safety tests. This is E. Dustopia introduces a $100 per unit fee on all imported washing machines. This is f. A Canadian firm conducts a "Made in Canada" ad campaign that disparages imported goods. This is not a trade barrier.

a. tariff b. quota c. dumping d. non-tariff barrier e. tariff f. not a trade barrier

20/17 Match each trade organization or agreement with its description. a. oversees trade agreements among over 150 member nations and arbitrates trade disagreements among member countries b. created a free-trade zone consisting of the United States, Canada, and Mexico with the purpose of eliminating trade barriers between these countries c. an agreement between over 25 nations, which abolished tariffs among member countries and standardized policies on agriculture, transportation, and business practices

a. world trade organization b. north american free trade agreement c. the european union

17/4 Banks are known to act as financial intermediaries Between whom do banks serve this function?

between savers and borrowers

20/7 The corresponding graphs show the supply and the demand for strawberries in two countries: Berryland and Fruitland. Use the information in the graphs to answer the questions. Which groups benefit from free trade in strawberries between the two countries? Choose all that apply. How is the price of strawberries in Berryland, compared to the free-trade prices, affected if it introduces a $0.50 tariff on imports from Fruitland? What quantity of strawberries is demanded for Fruitland with the $0.50 Berryland tariff on imports?

consumers in Berryland, producers in Fruitland price increases 80 units

17/7 Consider a $500 bond that pays an interest rate of 1.5% with a maturity of one year. Suppose that the prevailing interest rate rises to 6%. Complete the equation to calculate the current bond price by placing the numbers in the correct position. Note that some numbers may be unplaced and some spaces unfilled. Now, use the equation to calculate the current bond price to the nearest penny.

current bond price = (500 (1+0.015)) / (1+0.06) current bond price = $478.77

10/14 Suppose that in the small town, Prairie, there are only two cable providers What type of market structure does the local cable market have?

duopoly

19/16 Suppose a small country specializes in producing washers and dryers, and produces more than the domestic market's quantity demanded. With trade, this country is able to achieve low per‑unit costs. This is an example of Suppose a domestic firm is forced to invest in research and development in order to survive due to imports of the same product. This is an example of

economies of scale. increased competition.

11/21 An agreement between a retailer and a manufacturer for the retailer to be the sole distributor of a given product is defined as

exclusive dealing

13/12 A BLANK is a person who BLANK a public good that others BLANK

free rider enjoys pay for

17/18 Complete the equation for compound interest.

future value = present value x (1 + interest rate) ^ number of years

12/14 The Environmental Protection Agency is attempting to rule on whether pollution from greenhouse gas emissions endangers public safety. Among the many greenhouse gas polluters are cows emitting methane. Economists have devised a theory to help address this issue.

identify the statement that is true according to the economic theory = the efficient level of pollution removal occurs where the marginal benefit of pollution removal equals the marginal cost of pollution removal; ie, some pollution could be allowed

20/15 Several arguments exist supporting the use of protectionism. Classify each of the statements according to which argument is being used.

infant industry argument - some industries should be protected until domestic firms emerge as industry leaders, at which point protectionist policies may be removed the national interest argument - protectionism is justified when a product is required for the safety or security of the domestic population the race to the bottom argument - globalization causes environmental degradation as countries choose increasingly lower environmental standards to attract industry - the unsafe consumer products argument - differences in standards of production across trading partners make it unwise to have certain goods imported

19/1 Absolute advantage can be determined by comparing different producers'

input requirements per unit of output.

19/14 Intra‑industry trade is primarily concerned with Select the two main reasons for countries to engage in intra‑industry trade.

international trade of goods within the same industry. specialization and economies of scale

13/4 Investment in human capital is best described as

investing in education and training to improve a worker's productivity

20/10 The infant industry argument states that domestic industries should be ____________ foreign competition in the early stages of development so that the industry Suppose you are working for the Department of Trade and Industry in India. The Department is aware of the counterarguments to the infant industry argument but still seeks the goal expressed in the previous answer. Based on international experience of similar policies, which of the recommendations should the Department accept and which should they not accept when introducing this policy?

protected from; can mature the department should - have guidelines for when the policy will end -focus on a few key industries the department should not - provide protection to all industries - maintain the protections indefinitely

11/4 The four‑firm concentration ratio is useful for

providing a rough gauge of the distribution of market power in a given market.

10/8 Suppose the accompanying graph depicts a monopolistically competitive firm earning positive economic profits. Please shift the curves to show the effects of long-run competition and then place Point A at the price and quantity at which the firm will produce in the long-run.

see 10/8

17/9 Classify each phrase as a description of a stock, a bond, a junk bond, or a mutual fund. Some descriptions may not pertain to any category.

stock = a percentage of ownership in a company bond = a promise to repay money along with interest in the future junk bond = a loan to either a form of government that is associated with a high rate of interest mutual funds = investment in several stocks or bonds in an effort to limit risk by diversifying

17/17 Stock prices follow a random walk with a trend because

stock prices are based on both future profits and expectations about future profits and gradually rise over time.

17/15 Place each term into the category of financial security to which it is most related.

stocks - dow jones industrial average - s7p 500 - ownership stake bonds - treasury securities - home mortgages

20/20 Some have used the national security argument to suggest that protectionist policies should be used for select industries. Categorize the items in terms of whether they strengthen or weaken this argument. Each item either strengthens or weakens the argument.

strengthens - observing china effectively limiting the world's supply of rare earth metals - the presence of the strategic pretroleum reserve, which provides a stockpile of oil that can be used in an emergency - the ability of lobbyists to make a case that nearly any good is vital to national security

20/1 Canada is considering imposing a tax on imports of Chinese solar panels. This action would be best described as a In general, which of the statements is most likely to occur as a result of the proposed tax on imported solar panels?

tariff. Consumers in Canada will face higher prices for solar panels.

10/12 In game theory, a dominant strategy is

the best strategy pick, no matter which moves are chosen by the other player

9/21 Deregulation is characterized as

the elimination or reduction of government restrictions on the number of firms, prices the firms charge, and and the quantity of products produced.

13/7 Suppose that solar-powered car technology advances to the point that solar-powered cars become affordable for the average consumer. Which type of externality is likely to result from a consumer's decision to purchase a solar-powered vehicle instead of a gas-powered vehicle, and how does it arise? Suppose the government is interested in moving the market closer to the socially optimal quantity.

this decision generates a = positive externality because the replacement of gas-powered vehicles with solar-powered vehicles will result in less environmental pollution. Which policy would likely result in the desired outcome? = a subsidy to consumers who choose to purchase solar-powered vehicles

10/11 Suppose that in the market for cell phone service the number of competitors has dwindled until Cellaphone and Kahneman Talk have become the only providers left in the nation. Seeking to boost their profits, the two companies secretly agree to a coordinated increase in their prices for cell phone minutes.

this practice is known as COLLUSION

13/10 Why does the United States government provide tax breaks related to the amount of money companies spend on research and development?

to provide incentives for companies to conduct research and development AND to involve less government scrutiny than a government funded project

19/10 Kate and Sarah own a bakery together. The two figures illustrate the production possibilities available to them if they work at their bakery for 8 h a day. If Kate and Sarah both specialize in the good in which they have a comparative advantage, the

total production of bread will be 12 loaves, and the total production of cake will be 8 units.

12/7 Classify the statements as true or false

true - a pollution charge and a pollution tax are the same thing - pollution taxes encourage firms to find innovative ways to remove pollution False - with a pollution tax, firms must pay a fine if they pollute more than the legally specified amount - command and control regulation is typically more efficient than emissions taxes - firms generate the same level of pollution regardless of any pollution taxes that are imposed

20/9 The statements relate to the impact of protectionism on wages and employment. Classify whether each statement is true or false.

true - protectionism can reduce domestic consumers' real income - protectionism costs jobs in unprotected industries false - protectionism does not generally save jobs in the industry protected - protectionism guarantees better labor standards in the industry protected

19/20 Determine whether the statements regarding international trade are true or false.

true - the presence of international trade can make some individuals worse off than if their nation were closed to trade - when using all resources in the production of beef or oil, Canada and Kuwait can produce the given quantity ... canada has a comparative advantage in beef false - in order for some countries to gain from specialization and international trade, other countries must be harmed by it