MicroEcon TESTS (1,2,3) - Final 22

true

-airlines are often able to price discriminate. - all else being equal, single price monopolistic competitors earn lower profits than firms that can price discriminate.

Which factors have the potential to develop an oligopolistic market?

-high economies of scale -the granting of a limited number of patents

false

-price discrim. is illegal under all circumstances. -firms do not have an incentive to price discrim. because it results in some groups paying lower prices than others. -perfect price discrim. occurs when perfectly competitive firms charge some people higher prices than others. -price discrim. only occurs with natural monopolies.

Which of the following are characteristics of a monopoly market structure? In a monopoly,

-there is only one firm in the industry. -no close substitutes are available.

Shep goes to his favorite coffee shop every morning and always buys one large latte, no matter whether there is a special or not (i.e., half-price Mondays). What is his price elasticity of demand for lattes? price elasticity of demand:

0

What is the marginal product of the fourth tattoo artist?

3 tattoos

What is the maximum number of hours Henrietta is willing to work?

35 hours

What is Papa Mel's profit‑maximizing level of output?

6 bales

What is the four‑firm concentration ratio? Round to the nearest whole percent in your calculations.

74%

Between which two points on the graph does the substitution effect outweigh the income effect?

A and C

Consider the labor market for electricians. The demand curve is downward sloping and the supply curve is upward sloping. In this market, however, there is a strong labor union. Assume that the electrician's union is able to negotiate a new contract that substantially raises their member's wages.

A consequence of the union negotiating a higher wage is fewer jobs for electricians.

Suppose that typically you pay $10 for an Uber ride to work. Today, you take the same trip, but find that the price has risen to $12. Which of the following options could result in the price change above? (select all that apply)

A local convention has increased traffic in the area, resulting in a longer travel time for your trip. Gas prices have significantly risen in the past day.

Which statement describes a monopoly?

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

When Ruko, a device used to stream movies at home, increases prices by 39 percent, total revenue decreases by 55 percent. When Cinema Supreme increases ticket prices by 12 percent, total revenue does not change When Bluebox, a streaming service for foreign television shows and movies, increases its prices by 5353 percent, total revenue increases by 2828 percent

elastic unit elastic inelastic

If a firm is producing a quantity where marginal revenue exceeds marginal costs, the firm should ________ existing levels of production in order to __________.

expand, increase profitability

A right to work law is a law which

forbids employers and unions from requiring all employees to pay union dues or fees.

Russ owns a fried chicken stand at the local beach. In calculating how much he earns from his business, Russ notices a difference between his economic and accounting profits. Why would Russ' economic profits differ from his accounting profits?

he may have implicit costs associated with operating the chicken stand in addition to explicit costs.

Although individual labor supply curves, such as the one shown, can be backward bending, the market labor supply curve will tend to be upward sloping across all wage rates.

higher wage rates will draw more people into a given market.

Positive Incentive

if george scores 100% on his math test, his parents will let him stay up to watch the late, late show. Sam the german shepherd gets a treat when he jumps three feet into the air on command.

Suppose that there has been a sudden influx of refugees in the small town of Dallon, leading to a doubling of the local population. The accompanying graph depicts Dallon's market for food. Adjust the graph to show the immediate impact that this rise in population has on the food market. Then determine what happens to equilibrium price and quantity. Equilibrium price

increases.

Which describes the fairness-efficiency trade‑off?

Actions intended to make economic outcomes fairer can cause efficiency to decrease.

Between which two points on the graph does the income effect outweigh the substitution effect?

C and E

What are diminishing marginal returns, and with which worker do they set in for this firm?

Diminishing marginal returns occur in the short run when variable inputs are added to a fixed input, and marginal product declines. In this case, diminishing returns set in with the fourth worker.

Scott and Kiley just purchased a piece of land and a tractor. They plan to start growing and selling organic jalapeno peppers. They have heard that the market for organic jalapeno peppers is perfectly competitive. What does that mean in terms of long‑run profit?

Firms will earn zero economic profit in the long run.

Negative incentive

If roger misses another day of work, he will be fired. Whenever Robert is rude to his sister during dinner, he is put in timeout. if a student loses a library book, they are not allowed to check out another book for one month.

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.

Which of the following best describes the economic reasoning behind the fact that the marginal physical product of labor declines as more labor is employed, with other inputs held constant?

Monster's Ink is experiencing diminishing returns, possibly caused by three workers getting in each other's way and needing to share tools (after sanitization, of course).

a. If Brian trusts Pam to remain silent, what should he do to minimize his sentence? b. If Brian thinks Pam will confess, what should he do to minimize his sentence? c. What will be the dominant strategy outcome for Brian and Pam?

a. confess b. confess c. they both get 12 years.

a. A monopolistic competitor, much like a firm in perfect competition, sells its product at a point where price is equal to marginal cost. b. Advertising can play a role as an indirect signal of product quality to customers.

a. false b. true

Perfect price discrimination is characterized by charging

each customer a price equal to his or her maximum willingness to pay.

Kivalliq Business Development Centre offers assistance to individuals interested in starting and growing businesses in Nunavut. Suppose they sponsor a business plan competition, offering a $10,000 prize to the entrepreneur who develops the best business plan.

The $10,000 prize is an example of an incentive.

Which statement best explains why consumers might benefit more from monopolistic competition than perfect competition?

The benefits of having more variety offsets the losses from productive and allocative inefficiencies.

You are the manager of Frito-Lay's Cheese Puffs account, and you notice that when the price of Cheetos increases, there is an increase in demand for Cheese Puffs. What is the economic relationship between these goods that explains this behavior?

The increase in the price of Cheetos causes an increase in the demand for Cheese Puffs; therefore, these goods are substitutes.

Which is NOT an example of a behavior exhibited in a market economy?

The president of the European country of Semolina decrees that pasta must be consumed at all meals in an effort to help domestic pasta makers.

Which statement is the best definition of the price elasticity of demand?

The ratio of the percent change in quantity demanded to the percent change in price.

positive statement

The unemployment rate in 2009 was lower than 2018. The unemployment rate in 2009 was higher than 2018. if a company pays closer attention to its opportunity costs, this should result in higher profits.

Which of the given factors is an assumption of perfect competition?

There are a large number of producers in the market.

If the price of tennis balls goes up from $7.99 to $14.99, what can be expected from suppliers of tennis balls as a result?

There will be an increase in quantity supplied.

What will be the dominant strategy outcome for Felix and Halee?

They both get 12 years.

Which statement best characterizes the relationship between the elasticity of demand, price, and total revenue?

When demand is elastic and price falls, total revenue rises.

The marginal revenue product of a factor shows how much an additional unit of a factor adds to

dollar revenue.

The long run is best defined as a time period

during which all inputs can be varied.

After graduation, Andrew gets a job working at a database firm as a programmer. His income is now a healthy $75,000 a year and he decides he's had enough bad tasting coffee. He ends up buying coffee daily from Starbucks even though it costs significantly more. Andrew's demand for Starbucks coffee changed as a result of

a change in income.

An oligopoly arises when _____________ have all or most of the sales in an industry. If oligopolists with the same marginal costs and no fixed costs compete against each other in price, it leads to all firms_____________.

a few large firms; making zero profits

An economic institution that facilitates interaction between buyers and sellers is called

a market

If oligopolists cooperate, they can act as ___________ resulting in __________.

a monopoly; higher prices and profits.

a. What is the marginal revenue received from the 11th unit? b. What is the marginal cost of producing the 11th unit? c. What price does this firm charge for each hard drive? d. How many units should this firm produce to maximize profits? e. When profit maximizing, what is this firm's profit?

a. $100 b. $38 c. $100 per unit d. 14 units e. $1000

a. What is the most likely price agreed upon by the cartel? b. 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.

Suppose that the price of a coffee table is $85/table. Jim-Bob will sell 100 coffee tables at the flea market this month. It costs Jim-Bob $50 in materials and supplies to make each coffee table and $150/month to rent space at the flea market. These are all of Jim-Bob's costs. a. How much will Jim-Bob make in total revenue this month? b. How much profit will Jim-Bob make at the flea market this month?

a. $8500 b. $3350

a. Given the market conditions, what will the prevailing interest rate be? b. Given the market conditions, how much money is borrowed in the loanable funds market?

a. 10% b. $50 billion

a. Cookie Monster's marginal utility from the fourth cookie is b. What is Cookie Monster's total utility when he eats 6 cookies? c. Cookie number __ tastes the best to Cookie Monster.

a. 140 utils. b. 705 utils. c. 2

a. Suppose the student receives a coffee shop gift card worth $7.00. What is the total utility she derives from the gift card? b. What if she were given $7.00 in cash instead? What is her total utility in this case?

a. 32 utils. b. 35 utils.

Hayfever Farms is an 80-acre hay farm in Colorado. The owners are considering changing the farm's name to Blissful Acres and growing strawberries instead of hay. a. If they continue to only grow hay, how many acres should Hayfever Farms devote to growing hay in order to maximize profits? b. If the owners decide to only grow strawberries, how many acres should Blissful Acres devote to growing strawberries in order to maximize profits?

a. 40 acres of hay b. 70 acres of strawberries

Refer to the total utility curve in the graph to answer the questions. a. Utility is maximized when b. Diminishing marginal utility occurs for all units of the good consumed beyond a quantity of

a. 6 units are consumed. b. 4 units.

a. In general, the market demand curve in a perfectly competitive market is perfectly elastic. b. In general, an individual firm in a perfectly competitive market faces a perfectly elastic demand curve. c. An individual firm in a perfectly competitive market can obtain a higher price for its product by reducing output. d. An individual firm in a perfectly competitive market must lower its price to sell more of its product. e. In a perfectly competitive market, average revenue is equal to the market price. f. In a perfectly competitive market, marginal revenue is equal to the market price.

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

In each scenario, select the source of monopoly market power. a. Mary McFly invents a time machine and gets legal protection from competition. b. One electric company can operate at a lower cost than multiple electric companies. c. The author of Economics for Dumbbells is given exclusive rights to produce this book. d. Only the United States Postal Service can deliver first‑class mail by law. e. DeJeers Jewelers owns 80% of the world's diamond mines.

a. patent b. economies of scale c. copyright d. government franchise e. control over a significant input

a. Identical/homogenous goods b. Many buyers and sellers c. Few, if any, barriers to entry d. No one buyer or seller can control price e. Differentiated goods

a. perfectly competitive markets b. both perfectly competitive and monopolistically competitive markets c. both perfectly competitive and monopolistically competitive markets d. perfectly competitive markets e. monopolistically competitive markets

a. Minors are required to take a year‑long training course to be able to work in industries deemed hazardous, including construction. b. Minors are now permitted to operate heavy machinery such as bulldozers. c. Minors who graduate with a 3.5 GPA or above are given a $20,000 check from the Department of Labor. d. Minors' maximum amount of work hours per week is cut in half. e. Minors now must be paid 10% above the federal minimum wage.

a. shifts leftward b. shifts rightward c. shifts leftward d. shifts leftward e. does not shift

a. These can be purchased in order to raise funds for a firm and represents an individual's claim of partial ownership in the business. b. A type of financial security sold with the promise of being repaid with interest after a specified date of maturity. c. A method of raising funds by borrowing through an intermediary, who receives funds from savers and lends them to borrowers. d. This is the payment received by shareholders from sale of shares or payments on their individual ownership claims. e. A method of raising funds where savers use financial markets to fund firms.

a. stocks b. bonds c. indirect finance d. dividends e. direct finance

Determine if the scenarios violate the Competition Act. a. Lenny's Lobstahs and Billy's Fishery agree to limit the supply of lobsters sold to the supermarkets in Ontario. b. Royal Dutch Smell and Brutus Petroleum conspire to drop their prices for a brief period in an effort to drive Chevry out of business. c. A historic preservation group buys historic Kelly's Small Town Grocery in Teslin. d. The NHL increases ticket prices to cover increased operating expenses.

a. violates. b. violates. c. does not violate. d. does not violate.

What is the primary difference between accounting profits and economic profits?

accounting profits ignore implicit costs; economic profits consider them.

A market will

always tends toward equilibrium

From an economic context, select the correct definition of a market.

an institution that brings together buyers and sellers of goods or services

In a market economy, there is ________________ relationship between the price of a good and the amount of a good that buyers are willing and able to purchase.

an inverse or negative

A labor union is

an organization of workers that negotiates with employers, as a group, over wages and working conditions.

The law of demand says that

as the price of a good increases, buyers are willing and able to purchase less.

If market price exceeds _______ cost, profit will be ________

average, positive

Economic costs and accounting costs differ because economists include

both explicit and implicit costs.

In anticipation of a major hurricane hitting the Gulf Coast, the quantity of gasoline sales rise from 360360 million gallons to 375375 million gallons. Based on this information, what is the percent change in gasoline sales? Please specify your answer to one decimal place and use the midpoint formula.

change: 4.1%

The law of diminishing marginal utility means that that as person receives more of a good, the added utility from each additional unit

decreases.

Penguin Island produces two goods: ice and genetically engineered fish. Due to recent technological advances, its economy has experienced growth in both ice and fish production. Show this growth in relation to the production possibilities frontier (PPF) by moving each of the individual points accordingly, then answer the question. Which of the following economic activities have led to an increase in the standard of living worldwide over the last century? Only the most complete answer will be correct.

investments in education and infrastructure increases in international trade increases in farm productivity increases in technology all of the above!!!!!!!!

Ore Karen, a server at Sonic Drive-In Farmer Tanner's tractor Aunt Sandy's Jammin' Jellies (the business) The Rio Grande Your coworkers Brandon's Taco Truck (the idea) Brandon's Taco Truck (the truck itself) Lake Casitas Your favorite bartender Which resource earns profits?

land labor capital entrepreneurs land labor entrepreneurs capital land labor entrepreneurs

Holding everything else constant, producers are willing to offer more units for sale when the price at which they can sell their product increases.

law of supply.

A person blames inflation for the general increase in prices at the grocery stores throughout British Columbia.

macroeconomics

The Canadian unemployment rate was lower in January of 2014 than it was in January of 2012.

macroeconomics

A perfectly competitive industry is characterized by

many firms with no control over the market price producing identical products.

A monopolistic competitor wishing to maximize profit will select a quantity where

marginal revenue equals marginal cost.

A profit‑maximizing firm operating in a perfectly competitive market will add new units of a factor of production until

marginal revenue product equals factor price.

A person gets a raise at work.

microeconomics

In January of 2014, a person made a personal budget.

microeconomics

A Nash equilibrium occurs when

no player has an incentive to unilaterally change strategies.

Which can cause a shift in the demand curve? A change in

one of the determinants of demand

Economic costs and accounting costs differ because accountants include

only explicit costs.

A market exists when

people exchange money for goods and services

Total revenue is best described as

price per unit times the number of units sold.

Scott and Kiley want to know the quantity they should produce to maximize profit. As their economic advisor, you recommend that they

produce until marginal cost is equal to marginal revenue.

In a competitive market, all of the choices along the production possibility frontier display ________________ efficiency, while the specific choice on the frontier that society picks is the one with _______________ efficiency.

productive; allocative

Which of the following is not a characteristic of a perfectly competitive market?

some control over price

Consider the maximum amount of a product that sellers are willing and able to provide for sale over a relevant range of prices, holding all other factors constant. Economists call this

supply

The long run is best defined as a time period

that is long enough to change all factors of production.

One thing that distinguishes the short run and the long run is

the existence of at least one fixed input.

Select all examples of a market.

the free‑agent signing period in the NFL where players hoping to sign with a team interact with teams looking for additional players a local farmer's market the New York Stock Exchange Trader Joe's: a grocery store frequented by "foodie" types

When the market price of a good increases, the amount that sellers are willing to offer for sale increases. Economists call this

the law of supply.

normative statement

the price of oil should be increased because burning it has a negative effect on the environment. it is right for the government to continue to financially support third world countries through foreign aid programs. economics classes ought to increase the amount of positive content they cover.

Demand is best described as

the quantity of a good or a service that people are willing and able to purchase at different possible prices.

Economic profit is

typically lower than accounting profit.

Which of the choices illustrates the law of demand? Pat

wants to buy more candy bars at $1 than at $2.

Which is the best definition of efficiency?

when nobody can be made better off without making someone worse off

One thing that distinguishes the short run from the long run is

whether any costs are fixed.