Midterm Ch 11, 13, 14, 15

The market power of a firm is its

Ability to raise its price without losing many of its customers to competing businesses

What is a progressive tax system?

It is a system where those with more income pay a higher share of their income in taxes than thosewith lower incomes.

What is social insurance?

It is government-provided financial funding to households to compensate for bad outcomes such asunemployment, illness, disability, or outliving their savings.

What is social safety net?

It is the cash-assistance, goods, and services provided by the government to better the lives of thoseat the bottom of the income distribution.

Who gains the most when robots replace workers?

Owners of robots

Which of the following is an example of derived demand?

The demand for kitchen renovation affects the demand for carpenters

What is the relationship between a company's market power and the price that the company's owner cancharge for its product?

The greater the market power, the higher the price the firm can charge without losing many customers

If wages fall for surgeons but not for family practice doctors, there will be _____ in the market for surgeonsand _____ in the market for family practice doctors.

a decrease in quantity supplied; a rightward shift of labor supply

In the short run, companies face _____, and in the long run, _____.

a fixed set of competitors; the number of competitors can change

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

a monopolistically competitive market

Most U.S. grocery stores sell a variety of boxed breakfast cereals. This observation indicates that the boxedbreakfast cereal market is

a monopolistically competitve market (cereal)

If a firm hires labor such that W > MRPL, then profit:

can be increased by hiring less labor

A merger benefits society when it results in

cost savings

The labor demand curve has a _____ slope because of _____

downward; diminishing marginal product

Implicit opportunity costs of running a business include:

earnings that are given up in order for the owner to start or run a business

Government programs that are "means-tested" require:

eligibility to be based on income and sometimes on wealth

Which of the following would shift both the labor supply curve and the labor demand curve?

emplyers begin covering the cost of better health insurance of all employees

Patents have a positive impact of _____ and the negative impact of _____

encouraging research; creating a monopoly

When developing laws and regulations, elected government leaders are often biased in favor of the interestsof established companies over those of new entrants because:

established companies and their employees are voters who have clear interests in preserving the success of established companies

When a seller is able to differentiate its product successfully, the seller

gains market power

When new sellers enter a market, existing sellers will:

have less market power

Consider the labor market, predict which of the following create an incentive for investment in capital?

higher wages

The logic of income redistribution by the government is that it:

increases total utility in the population by placing income where it yields the highest marginal benefit

The wage in a labor market is determined by the

intersection of its labor demand and labor supply curves

If a business owner is maximizing their economic profit, the owner:

is better off financially than with any other use of the resources used in the business

How long does it take for a company to be in the long run?

it takes as long as is needed for the number of sellers in the company's market to increase or decrease

If the accounting profit of a firm is negative:

its economic profit must be negative

The long-run effect of laws that raise the minimum wage is that

labor saving devices and management practices are slowly adopted

A difference between a means-tested government social safety net program and a government socialinsurance program is that means-tested social safety net benefits are available based on _____ while socialinsurance benefits are available to those who _____.

low income; experience specified negative incomes

If the demand for Ono Yo's organic frozen yogurt increases, then the _____ Ono Yo's workers will _____.

marginal revenue product of; increase

A seller's demand curve summarizes its _____, and its marginal revenue curve measures its _____

market power; incentive to increase production

Which of the following two market structures are LESS common?

monopoly and perfect competition

When a country is open to international trade, the product markets in the country become

more competitive because there are more suppliers (both domestic and international sellers) selling in the product markets

In a _____ monopoly, the marginal cost falls as production increases. Only one company can survive in themarket as new entrants will always be at a cost disadvantage

natural

As wage rises, the opportunity cost principle leads to a _____ in the number of hours supplied and a _____ inthe number of hours demanded in the labor market for marketers

rise; fall

Data on the distribution of income for the United States show that from 1970 through 2014, the share ofincome earned by the top quintile _____, and the share earned by the bottom quintile _____

rose; fell

Suppose the labor market for electricians is in equilibrium. Which event might DECREASE the wage ofelectricians?

unemployed manufacturing workers attend techincal schools to learn the electrician's trade

Your company sells 19 units at a price of $10 and must change price to $9.90 in order to sell 20 units. Whatis the marginal revenue of the twentieth unit?

8 dollars

Diminishing returns to an input occur when:

At least one input is fixed

How does the law of diminishing marginal utility relate to changing income?

The marginal benefit of an extra dollar of income falls as income rises

Which of the following conditions is NOT present in perfect competition?

The product price varies across the companies in the market

Which of the following statements is an accepted insight into imperfect competition?

a seller's best choice depends on the actions that other businesses take

When collusion occurs, sellers in a market

act like a monopolist to increase profits

In an oligopolistic market, the impact on a seller of the _____ is greater than in other types of market structures

actions of other market sellers

A regressive tax is a tax where:

additional income earned is taxed at lower rates as additional income is earned

What level of market power exists for sellers in a perfectly competitive market?

all sellers lack market power

Permanent income is a person's:

average income over their lifetime

A company's profit margin is calculated as:

average revenue minus average cost

When a seller has a high level of market power, the seller

can raise its prices without losing many customers

An agreement among sellers in a market that limits competition is called:

collusion

A seller strives to achieve consistently high quality in all its output so that customers can trust that they willbe pleased with the product. Building a reputation for high quality is consistent with a seller trying to _____through _____ strategy

create customer lock in; a demand side

The demand for factors of production is known as derived demand because it is:

derived from demand for the outputs produced by factors of production

Why do average variable costs eventually rise if a company's output increases enough?

diminishing marginal product occurs, causing average variable costs to rise

The factors that cause a labor market supply curve to be upward sloping do NOT include

how many employers there are

The three key labor market decisions that you make do NOT include

how many workers to hire

The substitution effect of a higher wage measures

how people respond to a change in relative prices

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

oilgopoly

The Rational Rule for Workers is to work

one more hour as long as the wage is at least as large as the marginal benefit of another hour ofleisure.

Following the Rational Rule for Sellers, how does output for a seller who has market power compare tooutput for a seller who does not have market power?

output is higher without market power than with market power

The poverty rate is the:

percent of people whose family income is below poverty line

The Rational Rule for Entry says that a seller should enter a market when

price exceeds average cost

Olya and her husband share an apartment. He feels prosperous because they have enough income to coverfood, shelter, and other basic needs without going into debt. She feels poor because she has less than her sister'sfamily and the families of some of her friends. Olya is defining poverty in _____ terms, while her husband isdefining poverty in _____ terms

relative; absolute

Which of the following is NOT a government action that results in a barrier to entry in a product market?

requiring that advertising not make false claims

Certain events can trigger a spell of poverty. Which of the following is NOT among the events that normallycan trigger a spell of poverty?

retirement

Which of the following is a characteristic of a perfectly competitive market?

sellers are price takers

The labor demand curve in a labor market

slopes downward

The labor supply curve in a labor market

slopes upward

When you're working in labor market, you are

supplying labor

Which of the following is NOT a principle used in determining how many workers a company should hire?

the absolute advantage principle

How is the result of the Rational Rule for Sellers different for companies with market power versus companies with no market power?

the price is higher for companies with market power

The slope of a labor market supply curve depends on each of the following factors EXCEPT the

wage

To maximize profits when hiring employees, continue to hire workers until

wage equals marginal revenue product

_____ is a stock that is more unequal across households than income, which is a flow

wealth

The poverty line is:

an income level determined by the government, below which a family is defined to be in poverty

A characteristic of oligopoly that is not present in other market structures is that there

are a small number of sellers and they have market power

Total revenue divided by quantity is called _____ or _____.

average revenue; price

In the long run, a company's ability to maintain profits depends on:

barriers to entry

Creating _____ to _____ is key to a company's ability to earn profits in the long run

barriers to entry; deter new entrants

How does marginal revenue compare to price for a seller with market power?

beyond the first unit sold, marginal revenue is below price

Hedra is a legislator who is concerned about income inequality in her country. She has data on thedistribution of income over time that show that the distribution is becoming more unequal. Which importantstep should she take next in order to make credible arguments in the legislature that income inequality is anissue that needs attention?

determine if her conclusions are consistent across alternative ways of conceptualizing and measuring the issue

When interdependence exists between sellers in a market, then

each seller's best choicce depends on what the other sellers choose to do

What attracts new sellers into a market?

existing sellers in the market earning economic profits

The formula for calculating accounting profit is total revenue minus _____ costs.

explicit financial

The marginal product of labor is the

extra production that occurs from hiring an extra worker

What is the difference between accounting profit and economic profit?

impllicit opportunity costs

The extra production that occurs from hiring an extra worker is known as the

marginal product of labor

The marginal revenue product is equal to:

marginal product of labor times the price per unit of output

The change in total revenue from selling one additional unit of output is the

marginal revenue (additional unit of output)

The marginal revenue from hiring an additional worker is known as

marginal revenue product

Sellers in a market will become less profitable when

new sellers enter the market

Economists believe that average lifetime income is a better predictor of a person's current living standard thancurrent income because:

people can save and borrow to average out consumption over their lifetimes

A natural monopoly exists when

producing a large output has significantly lower marginal cost than producing a small output

When buyers in a market have market power, then the

product price is lower

Social safety nets, social insurance programs, and progressive tax systems are all types of income _____programs that have the impact of moving income distribution _____ equality

redistribution; closer to

What happens in the labor market for custodians in Indonesia when the population of Indonesia grows?

the custodian labor supply curve shifts rightward

Intergenerational mobility is the extent to which:

the economic status of children is independent of the economic status of their parents

Which of the following statements about market power is TRUE?

the extent of market power held by a seller can vary along a spectrum from none to a high level

How do American's beliefs about the ideal distribution of wealth compare to their perception of thedistribution of wealth in the United States?

the ideal distribution of wealth is more equal than the perceived distribution of wealth

Suppose you own a small café that sells sandwiches, salads, and fancy coffees. Which factor is an implicitopportunity cost of the business?

the job offer you did not accept at a hotel restaurant

To maximize profit, firms should hire workers up to the point where:

the marginal product of labor times the price equals the workers wage

How does the slope and placement of the marginal revenue curve compare to the demand curve inimperfectly competitive markets?

the marginal revenue curve has a steeper negative slope and is below the demand curve

The population of Japan is declining. What impact will this have on the labor market for optometrists inJapan?a. The optometrist labor supply curve shifts rightward.

the optometrist labor supply curve shifts leftward

A shift in the demand for labor will NOT occur if:

the price of labor falls

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

there is only one seller

What will happen in the labor market if income tax rates rise?

there will be a leftward shift of the labor supply curve

When the government requires a license or government approval for a company to produce and sell aproduct, then in the market for that product:

there will be fewer sellers

To maximize social benefits from markets, governments regulate markets using what two basic approaches?

they encourage competition and minimize harm from market power

If the wages rate falls, firms will find that:

they move downward and to the right along the labor demand curve

The basic idea of a natural monopoly is that there is one producer, and new sellers are discouraged fromentering the market because

they would have significantly higher marginal costs than the existing seller in the market

The poverty line in the United States is based on an estimate of:

three times the value of low cost food for the household

Price is equal to:

total revenue divided by the quantity sold

Which of the following is NOT a correct rationale about why income redistribution programs do not alwaysreduce efficiency?

when incomes are more equal, work incentive grows

The Rational Rule for Sellers is that sellers should choose the quantity _____ and choose the price _____

where marginal revenue equals marginal cost; that is on the seller's demand curve for that quantity

In which of the following situations would Maria's Doughnut Shop have the LEAST market power?

within three miles, there are five other doughnut shops and three bakeries that sell breakfast pastries

Which of the following is a negative result of redistributing income toward equality?

work incentives are reduced