Micro Test 3 (Ch. 9 & 10 )

(Figure: Market 3) Use the graph to answer the question. GRAPH HW 9-10 question 1 The graph shows the marginal social cost, supply, and demand curves in the hand sanitizer market. At what quantity could the government set a quota to control this externality?

8

What is collusion?

Agreements between sellers to increase their market power

The marginal private benefit is the:

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

The marginal revenue from hiring an additional worker is known as

marginal revenue product.

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

not a price-taker

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

overproduce.

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

socially optimal

A good has a free-rider problem when:

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

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

the marginal social benefit exceeds the marginal social cost.

The graphs show individual labor supply curves for two different people. Use the graphs to answer the questions. (GRAPHS on HW 10. , question 5) In graph one, _________ dominates ___________. In graph two, _________ dominates ___________.

the substitution effect; the income effect the income effect; the substitution effect

The Rational Rule for Employers implies that they keep hiring until

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

Which of the following are true of statistical discrimination? There may be more than one correct answer.

1. Statistical discrimination occurs when employers discriminate against job candidates based on an irrelevant but observable characteristic which correlates to an unmeasurable but relevant characteristic. 2. "Ban the box" laws not allowing employers to ask potential employees whether or not they have been in jail is increasing discrimination against Black men, particularly those without a college degree.

Use the table to answer the questions. (GRAPH on HW 10, question 6) How many workers would the firm hire if it were required to pay a wage of $14/h? number of workers at $14/h: _______ workers If the Federal minimum wage were suddenly increased to $20/h, how many workers would the firm then employ? number of workers at $20/h: ________ workers

4; 3

Which graph shows the scenario where the substitution effect dominates labor supply decisions? (GRAPHS on HW 10, question 9)

Graph A

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

Oligopoly

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

The drugs would not have been developed.

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

There is only one seller.

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

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

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

a monopolistically competitive market.

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

a monopolistically competitive market.

An externality is defined as:

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

Which of the following would be both nonrival and nonexcludable?

a siren tornado warning system

Externalities and Public Goods — End of Chapter Problem The Nobel Prize‑winning economist Oliver Hart once said, "If we know the marginal social cost [of pollution] emissions, a tax is better, but if we know the optimal quantity, cap and trade is better." Given this statement and the knowledge of ways governments can intervene in markets, evaluate the following statement: Any outcome that can be achieved by taxing can also be accomplished by establishing a quota. This is because...

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

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

nonrival

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

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

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

they would not be able to hire anyone.

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

wage; hours of labor

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

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