Micro

Lela must decide whether to go on a winter trip to Norway with the hope of seeing the Northern Lights. Seeing the lights would yield a utility level of 2,000, but she has only a 50% chance that they will show during the days of her trip. Making the trip without seeing the lights would yield a utility level of 100, and there is 50% chance of this happening. What is Lela's expected utility if she goes on the trip?

$1,050

At a subscription price of $12.99 per month, the Peloton app has 874,000 digital subscribers. Pelton's accountant is preparing the company's monthly financial statement. What is Peloton's monthly total revenue?

$11.353.260

At what price does this market experience a shortage of 100 units?

$40

Along an upward-sloping supply curve, a fall in the price of a good will__producer surplus.

Decrease

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.

(Figure: Supply Curves) The figure shows four different supply curves for four products. Which of the products has a perfectly elastic supply curve?

Product c

(Table: Employees and Artisanal Carpets) Use Table: Employees and Artisanal Carpets. Suppose that you achieve your dream of opening an artisanal studio specializing in the production of hand-woven carpets. You pay $10 in fixed costs for equipment and $9 per day to each of your artists (employees) who make the carpets. If the industry is perfectly competitive, and the current market price is $1, how many artists should you employ? 1 10 2 25 3 35 4 43 5 48

Three

The tragedy of commons is due to:

a failure to cooperate so that all players take only their fair share.

Cigna, your insurance provider, will send you a $100 prepaid card as a reward for attending an annual exam with your primary care provider. When you follow preventive healthcare, you'll catch any developing diseases earlier and cost your insurer less money. The annual exam generates a ____ externality, and the gift card amount equals the _____ of the appointment.

positive; marginal external benefit

Two players in a game both have an incentive to cheat, regardless of what the other player does. Furthermore, if both players cheat in this manner, both players will be worse off. This is a:

prisoners' dilemma.

Cooperation between Coke and Pepsi is difficult because each business can increase profits by:

producing more than the quantity that maximizes joint profits.

As output increases, fixed costs:

remain constant.

A person who dislikes uncertainty is known as a ____ person.

risk-averse

(Market 6) The graph shows the marginal social benefit, marginal private benefit, and marginal private curves in the taco market. The socially optimal quantity is ____ and the price is $____.

six, 9

If people demand fewer Netflix subscriptions when the price of Hulu subscriptions falls, then Netflix and Hulu are:

substitutes.

You are considering one of two $10,000 investment opportunities. The first has a 50% probability of being worth $20,000 after a year and a 50% probability of being worth $5,000. The second has a 50% probability of being worth $16,000 and a 50% probability of being worth $9,000. What might cause you to choose the first opportunity?

the probability of the $20,000 outcome rose sufficiently to make up for the higher risk

A market will move toward buying and selling low-quality products when:

there is an adverse selection problem due to private information.

The efficiency problem that results from market power is that the market:

underproduces

Common strategies used to address the problem of adverse selection include screening of buyers, signaling by sellers, and

using third-party verifiers

A university student faces the difficult decision of how to spend one hour tonight. She could babysit her professor's child at an hourly wage of $10; she could work at the college library at a wage of $12; or she could finish her economics homework assignment. If she chooses to complete her homework assignment, she has incurred an opportunity cost equal to:

$12.

Use the table to answer the question. If Bella and Martin successfully cooperate to set higher price, then Bella's profit will be ___ Martin's profit will be_____.

$5,000: $5,000

Corinne turns down a job offer with an insurance company that would have paid her $70,000 per year to start her own photographic portraiture business. She uses $20,000 of her own savings to help start the business, savings that had been providing her a return of $1,000 per year. Over her first year in business, Corinne collects total revenue of $180,000 and must cover explicit costs of $105,000. During her first year in business, Corinne's accounting profit is___ and her economic profit is___.

$75,000; $4,000

A student-run latte stand at the center of campus serves two types of customers: students and professors. There are 500 students and 30 professors at the college. Each student's reservation price for a latte is $2; each professor's reservation price for a latte is $5. Each individual buys one latte per day. The latte stand's marginal cost of producing a latte is constant at $1. Suppose the latte stand can't price-discriminate. If it charges $2 per latte, the consumer surplus will be ______ per day, and the producer surplus will be _______ per day. Suppose now that the latte stand can price-discriminate. If it charges students (who must show their student IDs) $2 and professors $5, the consumer surplus will be _______ per day, and the producer surplus will be ______ per day.

$90; $530; $0; $620

The price of product A falls by 50%. As a result, the quantity demanded of product B rises by 50%. The cross-price elasticity of demand between product A and product B is ___ and they are____.

-1; complements

Prior to any taxes, the equilibrium price of bottled water is $5 per gallon. When a $1-per-gallon tax is levied, the price of bottled water rises to $5.75 per gallon. The incidence of the $I tax is $____ paid by consumers and $____ paid by producers.

0.75: 0.25

(Figure: Tax on Seller) In the graph shown, the original equilibrium price is $50. A $6 tax is placed on sellers in this market. The economic burden of this tax on sellers is $___.

5

(Figure: Payoff Matrix for George and Garner) Use Figure: Payoff Matrix for George and Garner. The figure describes two people who sell handmade porcelain figurines in San Francisco. Both George and Garner have two strategies available to them: to produce 5,000 figurines each month or produce 7,000 figurines each month. If both follow a Grim Trigger strategy, equilibrium will be reached when George produces ____ figurines and Garner produces_____ figurines.

5,000; 5,000

(Figure: Market) The graph shows the market for snack-sized bags of potato chips. The original equilibrium price is 60 cents. A tax is then imposed on buyers. The amount of the tax is _____ cents.

6

(Figure: Tablets and Phones) Samsung Electronics uses its resources to produce tablet computers and cell phones. When Samsung reallocates its resources to produce 3.75 million tablets instead of 2 million tablets, the opportunity cost is:

7 million phones

(Figure: Shifts in Demand and Supply II) Use Figure: Shifts in Demand and Supply II. The figure shows how supply and demand might shift in response to specific events. Suppose the mortality rate decreases. Which panel BEST illustrates how this development would affect the market for senior care?

A

(Figure: Equilibrium in the Market for Mechanical Pencils) Consider the figure, Equilibrium in the Market for Mechanical Pencils. At the equilibrium price, the consumer surplus is equal to area:

ADI

Which is NOT an example of a seller offering a signal of quality?

Chau asks customers to write reviews of her manicures on a website for local businesses.

Which is NOT a characteristic of perfectly competitive markets?

Each seller sets its own price.

Embrace is a pet insurance company. Pet insurance covers the cost of certain medical expenses, much like human health insurance policies. Risk-neutral high-cost buyers value Embrace's coverage at $500 per year per animal. Risk-neutral low-cost buyers, pet owners who don't plan to make claims unless their pet has an emergency, value Embrace's coverage at $200 per year per animal. Embrace charges a premium of $300 per year per animal. Select the statement that is TRUE.

Embrace would improve its outcome if it gathered more information on buyers, for example, obtaining verified veterinarian records for each animal.

___ attract(s) new sellers into a market.

Existing sellers in the market earning economic profits

(Figure: Kenyan Labor Market) The labor market begins in equilibrium. Then, the government of Kenya implements a minimum wage of 15,000 Kenyan shillings per month. After implementation of the minimum wage, the number of workers hired ____ people.

Falls by 6,000

(Figure: Four sample demands) Bread and cheese are often considered complements. Which graph shows what will happen in the market for bread if the price of bread rises?

Graph C

(Figure: Four sample demands) Which graph illustrates what will occur in the market for printing paper if the price of printing paper rises?

Graph C

When deciding whether to take a risk, Janelle's decision should depend on what three factors?

Janelle's level of risk aversion, the risk-reward ratio, and whether the stakes are high or low

Better management increases worker productivity in the labor market for factory production line workers. What will happen in the labor market for production line workers?

Labor demand will increase, resulting in higher wages and more hours of employment for the workers.

Congress is considering a sales tax on gas-powered vehicles to fight climate change. If demand is more elastic than supply, the price received by sellers will fall by the price paid by buyers will rise.

More than

You and a few others clean apartments in a large apartment building, but there are no contracts, and the tenants can switch their cleaners each week. You and the other cleaning services have all stuck to relatively high prices and made considerable profits. Then the apartment building's management announces that they will sign a contract withra large cleaning service to clean all the apartments in the building, starting in one month. What is the most likely response by you and the others, based on game theory analysis?

You all drop your prices for the now finitely repeated game.

Suppose that the production of sunflowers generates a positive externality in that travelers enjoy the scenic beauty of sunflower fields. An appropriate government policy yielding the socially optimum outcome in this case might be:

a corrective subsidy.

A market with a large number of sellers and a high level of product differentiation is known as:

a monopolistically competitive market.

(Table: The Market for Cold-brewed Coffee) The table shows the market for bottled cold-brewed coffee. If the government imposes a price floor of $3 per bottle, there will be:

a surplus of three bottles.

AllState offers event insurance, also known as wedding insurance, which reimburses a policy holder for unforeseen calamities on their wedding day. The fact that people who host the most expensive events would require the most costly payouts illustrates:

adverse selection of buyers.

(Table: Nike and Reebok Advertising Game) Use Table: Nike and Reebok Advertising Game. The sneaker industry is dominated by Nike and Reebok, and each firm spends a lot of money on advertising. Suppose each firm is considering a costly television commercial during the World Series. The table shows the payoff matrix of profits that each firm would receive from its advertising decision, with Nike first followed by Reebok in each cell, given the advertising decision of its rival. The BEST response for Reebok would be:

advertise.

Which statement illustrates an environmental policy based on cap and trade?

allowing companies to buy and sell the right to a certain level of emissions

You and your partners in your in-class activity reject mundane explanations for a hypothetical increase in the price of a good in favor of more dramatic reasons. The professor listens to your discussion for a while and finally says,"Look for a horse, not a zebra,"alluding to:

availability bias

Price ceilings tend to create shortages when used to:

bring down price in a competitive market.

In employing the cost-benefit principle, a seller may:

compare the marginal cost of producing an item with the price it can get for that item.

In a fair bet, the:

expected winnings exactly offset the expected losses.

The income effect of a lower wage causes a(n):

increase in the quantity of labor supplied.

If a seller can create switching costs for its product, then:

it is difficult or costly for customers to switch to another seller of the product.

The local cinema offers students discounts during the week but not on Friday and Saturday nights, when it charges everyone the same price. The theater believes students are:

less price sensitive on weekends than on weekdays

Monopolistic competition is a market characterized by:

many sellers that produce different versions of the same product.

The efficient market quantity is the quantity where the _____ equals the___.

marginal cost; marginal benefit

The socially optimal outcome occurs where the ____ benefit equals the ___ cost.

marginal social; marginal social

Focusing illusion is the tendency to:

mispredict your utility by focusing on a few factors at the expense of others.

A corrective tax leads:

people to internalize the external costs and benefits of their actions.