Microeconomics Test Prep 3

In most cases, the "living wage" is between

$7.50 and $10 an hour.

Economies of scale protect monopolies from competition because they can produce at a low

ATC.

About how many Americans earned the minimum wage in 2018?

About 4 million

Real wages today are

about the same as they were in the 1970s.

The whole idea of legal barriers to entry is to

allow only one firm to do business.

The general thrust of public policy in the area of natural monopoly is to

allow private enterprises to do the job but regulate prices and take over as a last resort.

The market labor supply curve is probably mostly upward-sloping, rather than backward-bending, because

at high wage rates some workers would enter the labor force. at low wage rates some workers would leave the labor force.

The wage rate can be found

at the intersection of labor demand and labor supply.

The excess payment to a resource above what it is necessary to pay to secure its uses is known as

economic rate.

It is difficult to take business for a firm that has been operating since before you were borne due to

economies of being established.

The ABC, CBS, and NBC television networks were founded in the 1940s, we did not get another broadcast network until 1995 because of

economies of platform.

In addition to employment discrimination, wage differentials that exist along gender or racial lines may be also be caused by differences in:

educational attainment. work experience.

Some economists believe that the minimum wage hurts the very people it is trying to help, because a high minimum wage means that

employers will only hire workers with a high MRP.

Employers use pay differentials to

get certain unpleasant jobs filled.

When maximizing profits, the monopolists price will be

greater than marginal revenue.

A monopoly would produce at a quantity that is

greater than with long-run perfect competition.

Economic arguments against "bigness" include

higher prices and poorer services. no incentives for research and development. no incentive to produce efficiently.

The average total cost for a monopoly will be

higher than with long-run perfect competition.

While individuals come up with great idea, it typically takes

large firms to bring them to market.

Licensing, franchises, and patents are all examples of

legal barriers to entry.

The goals of government regulation would be to

lower prices. increase output.

Rapidly changing technology will

make it difficult for new monopolies to form.

With imperfect competition since the demand is not horizontal

marginal revenue and demand are the same.

If there are economies of scale for the entire range of production, a monopoly may be

more efficient than several competing firms.

Natural monopolies are

more efficient. cheaper. more convenient.

The theory of the dual labor market is

more radical than the theory of noncompeting groups.

Economists describe the various strata of labor that do not compete for jobs as

noncompeting groups.

Market labor demand curves

slope downward to the right like ordinary demand curves.

According to University of Houston economic professor Dietrich Vollrath, great market power ________________ innovation.

stifles

If a very large generation of young people were to enter the labor force, then the _____ would increase and the equilibrium wage rate would _____.

supply of labor; fall

In the long run

the distinction between noncompeting groups becomes less important.

When it comes to a monopoly size, it is important relative to

the market.

The substitution effect refers to the substitution of

more hours of work for leisure as the wage rate rises.

Government regulation and government ownership are two ways that we can prevent

natural monopolies from abusing their power.

An industry in which a single firm can provide cheaper service than could several firms is a

natural monopoly.

Monopolies can be justified because of

natural monopoly. economies of scale.

When it comes to bringing new ideas to the marketplace,

new forms a venture capital have allowed smaller dot com companies to innovate. the common belief is that it takes a large firm to have the money to bring it to market.

For a monopoly, the distinction between the long run and the short run is

not important.

Jobs such as police officers, post office supervisors, and store managers are

not well represented in the dual labor market theory.

It is difficult for new firms to enter a monopoly because

of economies of being established. of the control over a key resource. it requires scale for innovation. of economies of platform.

Google has a 88% share in the market for search advertising because

of the economies of being established.

According to the theory of the dual labor market, the primary market is the market in which the jobs

pay well, require a degree, and offer advancement opportunities.

In Memphis in the 1960s, the garbage men were

poorly paid, in contrast to the theory of pay differentials.

In the theory of the dual labor market, the market in which the jobs pay well, require a college degree, and offer the opportunity for advancement is the

primary labor market.

Labor that is more _____ will be more in demand.

productive

Studies have shown that the living wage tends to

reduce employment as well as urban poverty.

In January of 2009, President Obama signed the Lilly Ledbetter Fair Play Act that states that the 180-day statue of limitations for filing an equal-pay lawsuit regarding pay discrimination

resets with each new paycheck affected by that discriminatory action.

In the theory of the dual labor market, the market in which the jobs don't pay well and offer little or no opportunity for advancement is the

secondary labor market

If a monopoly is experiencing losses, they are in the

short run.

The firm represented here is in

short-run monopoly.

That women often take time away from work for child rearing probably explains

some but not all of the wage differences between men and women.

In general, the impact of patents

speeds up the flow of new products to the consumers.

Examples of government ownership include:

the U.S. Postal Service. Amtrak the Tennessee Valley Authority.

According to the substitution effect, people are willing to work more when the wage rate rises because, as the wage rate rises.

the cost of leisure time rises.

Money wages are

the current dollar amount of a person's wages.

One flaw of the dual labor market theory is that it doesn't account for

the huge middle level of occupations.

On the graph when output is 8 units, the marginal revenue is

$33

In the largest class-action employment discrimination suit of all time

1.5 million current and former employees sued Walmart for sex discrimination.

In the high-tech world, the last three decades have been described as "A Tale of Two Monopolies",

Microsoft; Apple

Which of these is NOT offered in the text as an explanation for the lack of growth in real wages in the US over the last several decades?

More people work in manufacturing and fewer work in service jobs.

Card and Krueger found that increases in the minimum wage did not decrease employment when they studied a minimum wage increase in

New Jersey and compared it to Pennsylvania where there was no minimum wage increase.

The rectangle QRST represents

total profits.

Suppose it takes $1 million to wire the city for electricity for a city of 1 million people. With one firm, the average fixed costs would be _____. If there were four identical firms (each needing their own wires), the average fixed costs will be ______.

$1 per unit; $4 per unit

Suppose your wage rate rose from $12 an hour in 2005 to $13.50 an hour in 2009. Meanwhile, the CPI rose from 100 in 2005 (the base year) to 120 in 2009. What was your real wage in 2009?

$11.25

Suppose your wage rate rose from $12 an hour in 2015 to $16 an hour in 2019. Meanwhile, the CPI rose from 100 in 2015 (the base year) to 120 in 2019. What was your real wage in 2019?

$13.33

If a professional hockey player makes $3 million but would be willing to play professional hockey for only $50,000, then the economic rent in this situation is

$2.95 million.

On the graph when output is 8 units, the marginal revenue is Multiple choice question.

$33.

Suppose your wage rate rose from $12 an hour in 2015 to $16 an hour in 2019. Meanwhile, the CPI rose from 100 in 2015 (the base year) to 120 in 2019. By what percent did your real wage change between 2015 and 2019?

11.11%

The federal minimum wage was set at _____ when it was established in 1938 and is currently (as of 2019) equal to _____.

25 cents an hour; $7.25 an hour

Until the 1970s, no woman had ever become the CEO of a Fortune 500 company. In 2018, ____ of all Fortune 500 CEOs were women.

4.8%

In 1972, women made on average _____ of what men made; by 2018 they made _____.

58%; 79%

In which labor market below would a high minimum wage create the MOST unemployment?

A labor market with elastic demand and elastic supply

About what percent of the labor market has wages that are set by some mechanism other than supply and demand, such as collective bargaining, minimum wages, or living wages?

About 20%

About what percent of the labor market has wages that are set by supply and demand, rather than by some mechanism other than supply and demand, such as collective bargaining, minimum wages, or living wages?

About 80%

In what sense are all workers competitors in the same employment pool?

All workers are at least partial substitutes for other workers.

All else equal, based on the idea of pay differentials, which job would you expect to have the lowest wage?

An easy, safe, and pleasant job

The market labor supply curve may in reality be backward-bending, but economists draw it as an upward-sloping line instead. Why?

Because if it bends backward it is at an average wage rate that impractically high.

How have families managed to keep up their standard of living despite stagnant or falling real wages?

By becoming two-income families

True or false: Today, women generally earn the same amount as a man for doing the same work.

False

Which group fares the worst against white men, earning just 55% of what they do?

Hispanic women.

The hourly wage floor set by the government that firms must pay their workers is the

minimum wage.

The current dollar amount of a person's wages is known as the

money wage

Which of these is NOT offered in the text as an explanation for the lack of growth in real wages in the US over the last several decades?

Rates of union membership have been rising steadily.

Which of the following is an example of semiskilled labor?

Receptionists

Which one of the following does NOT explain why some workers are more productive than others?

Some workers receive higher wages

In general, men earn more than women for doing the same work, but in which of these professions do women tend to earn more than men?

Statistician

Examples of the control over a key resource being a barrier to entry include

The International Nickel Company of Canada controlling 90% of nickel reserves. The Metropolitan Opera having labor under contract.

All market structure that are not perfect competition are

monopolies.

What additional information would allow you to calculate the marginal cost when output is 1 unit?

The fixed costs The variable costs for 1 unit

What has happened to real wages in the US since the 1970s?

They have fluctuated somewhat are now about the same as they were in the 1970s.

True or false: The 1996 Telecommunications Act is shifting local phone companies away from natural monopolies.

True

True or false: If the minimum wage were raised above the equilibrium wage, some unemployment would result.

True.

Does unskilled labor ever compete with skilled labor?

Yes, employers are often faced with the decision to hire either a skilled worker for high pay or a lower-paid trainee.

The dividing line between the primary and secondary labor markets in the theory of the dual labor market seems to be

a college degree

The demand for labor is

a derived demand.

Examples of "bigness" not being a bad thing include:

a natural monopoly lowering prices. the existence of economies of scale. a company growing large to constant innovations.

The Tennessee Valley Authority is often used as an example of

an efficient government-owned producer.

Elizabeth Wareen and Amelia Warren Tyagi believe that most two-income families today

are actually worse off today than their one-income counterparts were in the 1970s.

On this backward-bending supply curve, the substitution effect outweighs the income effect

at all points below point J.

Monopoly power is limited by the fact that

barriers to entry can be overcome.

Patents are essential to pharmaceutical companies

because they cost hundreds of millions of dollars to do research.

When comparing perfect competition and monopoly,

both operate when MR = MC. the perfect competitor would produce more.

Often when Google or Facebook was threatened by a new rival they

bought the rival to get access to the innovations.

Barnes and Noble is much larger than your campus bookstore

but the campus bookstore is more likely to be a monopoly.

African Americans have made spectacular employment advances in recent decades

but they still earn much less than their white counterparts.

The availability of close substitutes determines if a firm is a monopoly, _______ get to decide whether are not two goods are close substitutes.

buyers

From the given table, if output is 1 unit, marginal cost

cannot be calculated with knowing the fixed cost.

Barriers to entry into an industry include

control over a key resource. economies of scale. legal barriers.

Because DeBeers owned 90% of the diamond mines, it was difficult for others to compete. This is an example of

control over an essential resource.

The development of substitute products is how the _______________ work to weaken monopolies.

markets

With imperfect competition the firms:

demand curve slopes downward to the right. will need to lower their prices to sell more.

If labor were to become more productive, then the _____ would increase and the equilibrium wage rate would _____.

demand for labor; rise

If the price of the product that a certain type of labor produces were to fall, then the _____ would decrease and the equilibrium wage rate for that type of labor would _____.

demand for that labor; fall

Lily Ledbetter lost her suit against Goodyear Tire & Rubber because the Supreme Court said that she

did not file her complaint on time.

The inefficiency caused by bigness has become so acute among giant firms often referred to as "Corporate

dinosaurs

According to the theory of the dual labor market, the secondary market is the market in which the jobs

don't pay well and offer little or no chance of advancement.

The income effect is a person's willingness to

give up some income in exchange for more leisure time.

The ________________ works to weaken monopolies by regulation and antitrust.

government

Barrier to entry tends to erode over time. According to the author of the textbook, the barrier we do not want to erode is

government franchise.

The most important legal barrier to entry is

government franchise.

A solution to dealing with natural; monopolies is:

government ownership. government regulation.

Generally, the government prefers to deal with natural monopolies by

government regulation.

When the government determines the price that can be charged for a natural monopoly, it is known as

government regulation.

Economic rent is a payment made

in excess of what must be paid to secure its uses.

According to the widely-cited Card and Krueger study

increases in the minimum wage did not reduce the level of employment.

The snack stand at your local movie theater

is a form a natural monopoly.

With imperfect competition, marginal revenue

is not related the same as price.

If a monopolist is earning profits

it doesn't matter if it is the short run or the long run.

An example of a government franchise would most likely be

local utilities.

The best example of a natural monopoly is

local utilities.

Production will be more efficient in

long-run perfect competition.

On the negatively-sloped portion of a backward-bending supply curve

the income effect outweighs the substitution effect.

That workers may decide to enjoy more leisure as the wage rate rises is a demonstration of

the income effect.

The more labor mobility there is

the less demarcation there is among the nation's various occupational groups.

The minimum hourly wage rate that must be paid to employees of major contractors doing business with over 150 municipalities and countries is

the living wage.

People who claim that removal of the minimum wage would causes wages to fall must believe that

the minimum wage is set higher than the equilibrium market wage.

The market supply curve of labor does not look like a backward-bending individual labor supply curve because

the size of the labor force is not constant.

On the positively-sloped portion of a backward-bending supply curve

the substitution effect outweighs the income effect.

Typically, at lower wage rates, _____ is dominant and at higher wage rates _____ is dominant.

the substitution effect; the income effect

The demand for a certain type of labor is

the sum of all of the firms' MRP schedules.

The theory that places the entire labor force into two broad categories, the primary and secondary labor markets, is known as

the theory of the dual labor market.

In order for the market labor supply curve to bend backward upon itself

the wage rate would have to be unreasonably high.

In order for economies of scale to be a barrier to entry, there must be

the wherewithal to set up. a sufficient demand for the product.

People like to deal with established brands because

there is a long standing relationship. it is difficult to trust a new supplier when you have dealt with the old one for some time.

For most of the teenagers in the United States who earn the minimum wage,

there is an important source of income for their low-income family.

An advantage of being established for suppliers to retail store such as grocery stores is

they already have the self-space and it is difficult to take it back once given.

When a seller lowers the price of a product to sell an additional unit, they lower the price on all units causing the marginal revenue

to fall faster than demand.

What fraction of Americans who earned the minimum wage in 2018 were adults?

two-thirds.

In New York City in the 1960s, the garbage men were

well paid, consistent with the theory of pay differentials.

The civil rights movement of the 1960s and the women's liberation movement of the 1970s were important in part because African Americans and women

were the main targets of employment discrimination.

The two largest targets of employment discrimination in the middle of the 20th century were

women and African Americans.

As the wage rate rises, workers will choose to _____, and then eventually, as the wage rate keeps rising, they will choose to _____.

work more hours; work fewer hours

If the wage rate rises high enough, the income effect will start to outweigh the substitution effect, which means that

workers will work less as the wage rate rises.

At all but very high wage rates, the substitution effect usually outweighs the income effect, which means that

workers will work more as the wage rate rises.

Suppose your wage rate rose from $12 an hour in 2005 to $13.50 an hour in 2009. Meanwhile, the CPI rose from 100 in 2005 (the base year) to 120 in 2009. By what percent did your real wage change between 2005 and 2009?

−6.25%