AGEC 103 - Spring 2022 - Final Exam Practice
Which of the following is a result of corruption?
Inequality in the distribution of resources. Using a lesser proportion of the total assigned amount of money for public projects. Using public funds for increasing personal wealth.
In which of the following areas will taking an economics course help benefit you throughout your life?
It will instill the concept that what activity is given up by a decision plays an important role when making choices. It will help you analyze and predict human behavior in a variety of situations. It will give you the logic behind using cost-benefit analysis when evaluating decisions. Your answer is not correct.
What is the difference between marginal values and average values?
Marginal values show the additional benefit or cost from consuming an additional unit of a good, while average values are the benefit or cost per unit of a good.
How does a natural monopoly differ from a firm that becomes a monopoly due to network effects?
Natural monopolies result from economies of scale, while network effects come from the benefits to consumers from having many people use a service.
Some people choose to live close to the city center; others choose to live away from the city center and take a longer commute to work every day. Does this mean that those who stay away from the city center are being irrational?
No, because their opportunity cost of commuting must be lower.
Which of the following statements about price, P, is correct?
P =MR =MC can only be true in perfect competition.
Which of the following is not a result of corruption?
Selling goods at a price that does not include taxes.
Why does a demand curve with a constant slope not have a constant elasticity?
Slope is based on absolute change and elasticity is based on percentage change.
Which of the following statements are true regarding first-degree price discrimination?
The consumer surplus is zero. There is extreme inequity in the allocation of surplus.
Which of the following is not characteristic of the demand for a commodity that is elastic?
The elasticity coefficient is less than one.
Which of the following would be an example of the Coase Theorem?
The homeowners association provides a fireworks show that ends at 10 p.m.
How does the sample size affect the validity of an empirical argument?
The larger the sample size the better.
All of the following statements describe a duopoly with homogeneous products, cost structures, and effort except:
The market demand curve is elastic.
Which of the following statements is not true regarding the concepts of corruption and the underground economy?
There is an increase in deadweight loss.
What is the intent of a Pigouvian tax?
To induce producers of a negative externality to reduce production to the socially optimal level.
Which of the following would maximize social surplus?
Trade at the competitive market equilibrium.
Decide whether each of the following statements is true or false for each of three different types of market: perfect competition, monopoly, and monopolistic competition. Firms equate price and marginal cost. Perfect competition: ......... Monopoly: ........ Monopolistic competition: ........
True False False
Suppose you come across a study that has discovered a link between reading books and life expectancy: People who read more books live longer. Which of the following correlations might exist between reading books and life expectancy even though there is no direct causal link between them?
Wealthy individuals who can afford to spend more time reading can also afford better medical care.
Holding all else equal, if the price of a digital camera rises, then we can expect
a decrease in the quantity demanded of digital cameras.
Which of the following could cause an increase in producer surplus?
a downward shift in the marginal cost curve. a shift in the market demand curve. a higher equilibrium price.
When tax rates increase, the deadweight loss of taxation increases by ........ .This implies that, all else being equal, it is better to have ........ rather than one large tax source ........ .
a greater amount many small tax sources one large tax source
If a country can produce a product using fewer total resources than another, you know the country has _______________________ in producing the product.
an absolute advantage.
You are trying to decide how to spend $40 you earned last night. You could buy a new shirt or go out to dinner and a movie with a friend. You could also go to the movie, not have popcorn, and buy a less expensive shirt. Taken together these things form your
budget constraint
All of the following are properties of the most exciting economic questions, except good questions
cannot be answered.
Externalities are called market failures because they ___________.
cause markets to produce suboptimal social outcomes.
Which of the following are elasticity measures?
cross-price elasticity of demand. price elasticity of demand. income elasticity of demand.
When economists test their theories using evidence-based analysis, they are most likely using __________.
empiricism through the use of data.
The case for a natural monopoly is characterized by high ........ costs and decreasing ....... costs.
fixed average
Marginal analysis is a cost-benefit calculation that
focuses on the differences between one feasonable alternative and the next feasible alternative.
Consumer sovereignty suggests that ____________.
government should not interfere with consumer choices.
If opportunity cost were to suddenly increase, total cost would
increase and net benefit would decrease.
An argument in favor of employers paying for the job training of an employee is:
job training can improve a worker's job-specific skill set.
Education and experience are desirable traits in a worker because both tend to shift the ....... . This also tends to lead to a wage for the worker.
marginal product of labor (MPL) rightward higher
A group of economic agents who are trading a good or service would define a ....... . Price takers exist throughout ........ markets.
market competitive
A supply curve has a ...... slope due to the Law of Supply. The Law of Supply states that supplies ...... as price increases.
positive increase
Which change causes a movement along the demand curve?
price of the good itself
A pure monopolist is selling 6 units at a price of $12. If the marginal revenue of the seventh unit is $5, then:
price of the seventh unit is $11.
Which of the following could influence the relationship between inequality and social surplus and move an economy from Point A to Point B on the curve?
raising marginal corporate taxes
Positive externalities result in a ....... shift of the ....... curve. There ........ a deadweight loss with a positive externality.
rightward demand is
Consider the following demand schedule: When price rises from $5 to $8, total expenditure on this good When price rises from $8 to $16, total expenditure on this good When price rises from $16 to $20, total expenditure on this good
rise remains constant falls
In equilibrium, everyone ___________.
simultaneously optimizes, so that nobody benefits by changing his or her own behavior.
Holding all else constant, if the number of cell phone manufacturers suddenly decreased due to increased regulations, then
supply would shift leftwards, equilibrium price would increase, and equilibrium quantity would decrease.
Other things equal, which of the following might shift the demand curve for gasoline to the left?
the development of a low-cost electric automobile
A perfectly competitive firm will operate and incur an economic loss in the short run if
the loss is smaller than its total fixed costs.
John will continue to consume leisure up to the point at which _______
the marginal benefit of leisure is equal to the marginal cost.
In a competitive market, if economic profits exist, then:
the market supply curve will shift rightward and the price will decrease.
All of the following statements about means and medians are true, except
the median is more skewed by extreme values.
In reality, practicing price discrimination is difficult because:
the monopolist doesn't know each consumer's willingness to pay.
The concept of diminishing marginal benefits states that
the more you consume of a good, your willingness to pay for an additional unit declines.
Empiricism is a principle in economics that _________.
uses data to test economic models.
In a competitive labor market, the profit-maximizing number of workers that a firm will hire occurs where the ____________.
value of marginal product of labor is equal to the market wage.
Suppose that you are on a date with an economics major, and you want to impress them by talking about economics. Your date challenges you to state your knowledge of positive and normative questions. You say that positive questions ask ....... and normative questions ask ....... Which of the following examples do you provide as a normative question? Which of the following do you provide as a positive question?
what is or what will be what ought to be Should welfare be repealed? How much is the national debt?
With the help of the graph, it is observed that the marginal private benefit of the good is $95 and, due to a positive externality, the marginal benefit to society is $125. In this case, the marginal external benefit created by the positive externality is $...... In the graph, ...... represents a deadweight loss. The deadweight loss ....... the foregone benefit to society of the externality. Positive externality will occur when _____. Which of the following statements is true regarding pecuniary externalities?
30 area A is equal to the marginal social benefit is greater than the marginal cost to produce at the market equilibrium It affects other people only through market price.
Firms A and B plan to collude in an economy for their similar products, which includes the grim strategy for punishment. They plan to set the price of their product at $8. The marginal cost of Firm A is $5 and Firm B is $4.50. If firm A is impatient to earn more profits and Firm B wishes to last in the business for the long-run, which of the following situations would likely occur?
Firm A reduces the price to $7 causing Firm B to reduce its price to $4.50.
Which of the following is a key difference between perfect competition and monopoly?
In perfect competition, no one firm can influence price, but with monopoly, a single seller sets the price.
Which of the following statements regarding a market are not true?
It is a group of people who do not engage in any type of trade. It is always located at a specific place.
All of the following statements are true of a labor supply curve except:
It is downsloping due to the income effect.
Which of the following statements regarding social enforcement mechanisms is not true?
It is enforced by official government regulations and results in a stiff financial penalty if not followed. It reduces the net benefit to society.
All of the following are true of the demand for labor except:
It is not affected by the retail price.
The government of a certain country decides that all its citizens should be equally well off. It decides to redistribute money so that each person has a roughly equal share of the total income. How would this policy affect economic activity in the country?
It would be adversely affected since incentives to work or seek profits would be greatly diminished.
Assume that the market for chocolates is perfectly competitive. Which of the following statements would be true in this case?
Jill starts to produce chocolates today, but the addition of her supply into the market does not decrease the market price.
Jones and Smith share the same cubical in the office. Jones loves to listen to music on his speakers while working. Smith is not able to concentrate on his work in the presence of music. Jones receives benefits worth $200 regardless of whether he listens to music on his speakers or headphones. The cost of headphones is $50. Smith is not able to concentrate on his work and suffers damages worth $350 when Jones listens to music without his headphones. Smith does not suffer any damages when Jones listens to music on his headphones. Suppose the office does not have any rules against listening to music on speakers while working. In this case, if Jones and Smith do not communicate, the market outcome is that ....... This market outcome is ........ Which of the following is the outcome of bargaining when Jones and Smith can bargain at zero cost? Now suppose their office passes a rule that says employees are not allowed to listen to music on their speakers while working. As before, Jones and Smith can bargain at a zero cost. What will be the final outcome in this case? When Jones and Smith can bargain at zero cost, the new rule of the office has ....... impact on achieving the economically efficient outcome.
Jones continues to listen to music on his speakers; therefore, Smith is not able to concentrate on his work socially inefficient Smith gives $50 to Jones, and Jones agrees to listen to music using his headphones. Jones buys headphones to listen to music, giving him net benefits worth $150. Smith does not suffer any damages. no
Consider the figure on the right. The blue line shows how many units of goods A and B a worker in Taiwan can produce, and the tan line shows the number of units of goods A and B that a worker in Korea can produce. Does this figure indicate anything about either worker having a comparative or absolute advantage in either good? According to the figure, ....... has an absolute advantage in the production of good A and ....... has an absolute advantage in the production of good B. Considering comparative advantage, .......
Korea Korea Taiwan Korea
Which of the following describes the sequence of events in a competitive market if demand were to increase?
Market price increases, economic profits increase, short-run market supply increases, long-run supply settles at minimum ATC
Which of the following is not a characteristic of a market?
Markets are physical locations where trading occurs
In which of the following ways is a monopoly beneficial to an economy?
Monopoly profits give firms more reason to invest in the creation of new products through research and development. With natural monopolies, costs may be lower than those that would exist in competitive markets with many producers. Firms that are allowed monopoly profits search out innovative technologies that they can bring to market.
Sara and Jim are going to lunch together and rank the restaurant options in the following way. Which of the following restaurant choices are Pareto efficient for Sara and Jim?
Naf Naf Blaze
Which of the following is not likely to be subject to the tragedy of the commons?
National defense.
Edgar says that a single firm in the wind power industry is unlikely to have a significant degree of monopoly power for an extended period of time. Since the cost of producing an additional unit of wind energy is so low, a large number of firms can enter the market and compete away economic profits. Do you agree with this analysis?
No, Edgar's argument ignores potentially large fixed costs that will act as a barrier to entry.
Sofia, a political science student, thinks that the government should intervene to revive declining industries like video stores and print newspapers. The government, she reasons, can resolve the coordination problem of getting the agents in these markets to trade. Do you agree with her? Explain your answer.
No, these industries are declining not because of coordination problems but, rather, because of falling demand.
Which of the following are properties of a monopoly?
Price-maker. There are high barriers to entry. There is only one seller.
Which of the following are necessary ingredients to the buyer's problem?
Prices of goods and services. Amount of money the consumer has to spend. Consumer's tastes and preferences.
Criminals spend vast resources trying to avoid taxes and regulations, break laws, and undermine bans and, in turn, authorities spend resources to catch criminals. What does this reflect?
Problems generated by the underground economy.
Which of the following is not a characteristic of monopoly?
Produces identical goods.
Identify the type of price discrimination for each of the following examples. Airlines charge different prices depending on the season and day of the week Students often get discounts on the purchase of laptops A book store has an offer of buy two get one free
Second-degree price discrimination Third-degree price discrimination Second-degree price discrimination
Which of the following statements regarding social enforcement mechanisms is true?
Shame, guilt, and the risk that we will be publicly decried are the various forms of it. It is a private solution to the externality problem that invokes a moral code that one should 'do the right thing'.
Antitrust policy started with the ____________, which prohibited any agreements or actions that would put restraints on trade.
Sherman Act of 1890.
For a long time, your firm has been paying its workers a wage of $20 per hour and your employees have been happy to work 40 hours per week at this wage. Business is suddenly booming and your firm would really like your workers to agree to a 50-hour work week in order to meet this new demand for your product. You are considering two strategies. Both strategies have the same cost of $1,100 if a worker chooses to work 50 hours. Which strategy is more likely to lead your employees to agree to a 50-hour work week?
Strategy 2, because the MC of not working increases significantly after 40 hours of work.
What is meant by randomization in the context of an economic experiment?
Subjects are assigned by chance, rather than by choice, to a group.
The equilibrium rent in a town is $500 per month, and the equilibrium number of apartments is 100. The city now passes a rent control law that sets the maximum rent at $400. The diagram on the right summarizes the supply and demand for apartments in this city.
Table 1: Before Rent Control Consumer Surplus: A + B Producer Surplus: C + D + F Social Surplus: A + B + C + D + F Table 2: After Rental Control Consumer Surplus: A + C Producer Surplus: F Social Surplus: A + C + F In Table 3, show the change in consumer surplus, producer surplus and social surplus resulting from the rent control law. Table 3: Change Consumer Surplus: C - B Producer Surplus: - (C + D) Social Surplus: - (D + B) Using the results from Table 3, assess each change from the before value to after value as positive, negative, or unclear. Table 4: Direction of Change Consumer Surplus: Unclear Producer Surplus: Negative Social Surplus: Negative
Let's say that you are trying to decide what to do on Friday at 11 a.m. You rank your possible options from the one you value the most to the one that you value the least in the following order: going to class, sleeping in late, going to work early, getting lunch, going to the gym to exercise, and watching television. If you decide to go to class, then what do we know about the opportunity cost of your decision?
The opportunity cost would be sleeping in late, since it was your next-best option.
When deciding whether to install visible countdown timers for pedestrians at crosswalks, which of the following would be considered in the cost-benefit analysis?
The value of the lives lost by drivers who watch the countdown timers and try to make it through a light. The value of the pedestrians' lives saved by having the timers to assist in crossing the street. The higher maintenance bill associated with fixing these more complex signals when they break down. The cost in terms of dollars of installing these new timers all over the city.
Are all efficient outcomes also equitable? Explain.
There is really no definitive answer to this question since issues surrounding efficiency and equity are the domain of normative economics, where subjective value judgments are made.
Why does a monopolistically competitive industry make zero economic profit in the long-run?
There is the free entry of many firms in the long-run.
Firms produce the quantity that minimizes long-run average cost. Perfect competition: ........ Monopoly: ........ Monopolistic competition: ...........
True False False
New firms are free to enter the industry in the long run. Perfect competition: ........ Monopoly: ........ Monopolistic competition: ...........
True False True
Firms equate marginal revenue and marginal cost. Perfect competition: ........ Monopoly: ........ Monopolistic competition: ...........
True Ture True
Which of the following is least likely to be a question or study of economic concern?
What is the motivation of the Red Cross?
How do economic profits and losses allocate resources in an economy?
When an industry's goods (or services) become more highly valued by society, positive economic profits emerge for firms in the industry, attracting new firms and their resources to that industry. Businesses always seek to improve their profits and in so doing, they move resources into the production of goods and services that society values the highest. When an industry's goods (or services) become less highly valued by society, firms in the industry suffer losses and thus become motivated to put their resources to more profitable uses elsewhere.
In the United States in 2011, there were 104 fatalities per 100,000 workers in the logging industry. This is the second-highest rate after the fisheries industry. Everything else equal, would you expect workers in the logging industry to be paid higher wages than workers with similar levels of education in other industries? Explain.
Yes, loggers should be paid higher wages to compensate for risk.
Suppose you had to organize a double oral auction for a good that has perfectly elastic demand. Do you expect prices to approach the competitive equilibrium?
Yes, there is no reason why price in a double oral auction for a good with perfectly elastic demand would not be expected to approach the equilibrium price.
Suppose that both the equilibrium price and quantity of tofu fall. The simplest consistent explanation for these observations is
a decrease in demand for tofu with no change in supply.
If L and M are complementary goods, an increase in the price of L will result in:
a decrease in the sales of M.
The substitution effect implies there is ....... relationship between the wage rate and the quantity of labor supplied. While the income effect implies there is ....... relationship between wage rate and the quantity of labor supplied.
a positive an inverse
When optimizing for total value, opportunity cost must be ....... total cost. Assuming ....... benefits, the lowest cost option is the optimal choice.
added to equal
In a perfectly competitive market, ___________.
all of the buyers and sellers are price takers
Suppose you have just landed a job near the center of a city and you now need to decide where to live. If you live close to the city center, your round-trip commute will be 15 minutes. If you live in the distant suburbs, your round-trip commute will be 60 minutes. There are lots of workers like you who work downtown. Since there are only a limited number of apartments near the city center, these apartments will be allocated based on ....... that you face. This process is known as ........
both the costs and benefits optimization
You are trying to decide how to spend $40 you earned last night. You could buy a new shirt or go out to dinner and a movie with a friend. You could also go to the movie, not have popcorn, and buy a less expensive shirt. Taken together these things form your ........
budget constraint
In a perfectly competitive market, sellers _________ and buyers _________. In a perfectly competitive market, if one seller chooses to charge a price for its good that is slightly higher than the market price, then it will _________.
cannot charge more than the market price; cannot pay less than the market price. lose all or almost all of its customers.
Private provision of public goods is often accomplished through ....... and is ....... related to the overall wealth of the economy.
charity directly
In a ...... economy, a central authority determines the goods and services produced while a ....... economy is based on price signals and strong economic incentives.
command market
Firms estimate the demand for labor by ____________.
computing the marginal product of labor and multiplying it by the price of the product being produced. determining the value of marginal product of labor (VMPL).
You decide to run an experiment. You invite 20 friends to a party. You randomly select 10 friends and tell them that there will be free food: most of them show up to your party. For the other 10 friends you do not mention the free food: none of these friends show up. Based on the correlation in your data and also assuming that the correlation is not spurious, you conclude that free food causes people to come to parties. Given this information, it can be concluded that ..........
correlation implies causation
Comparing a set of feasible alternatives and picking the best one is an optimization process called _________.
cost-benefit analysis.
An individual's willingness to pay measured over different quantities of the same good define the ....... . If the retail price of the good increases, the ....... will decrease, all other things constant.
demand curve quantity demanded
The variety of mattresses available indicates that mattresses are ....... products. Because there are many firms that manufacture and sell mattresses, the market structure for mattresses is likely ........
differentiated a monopolistic competition
A natural monopoly may develop because ....... make(s) it efficient to have only one provider of a good or service. It is characterized by fixed costs that are ....... The formation of such a monopoly is practical for both producers and consumers because it offers them ....... Natural monopolists worry ....... about potential entrants compared to the monopolies that arise through legal means since economic profits are ........ likely to attract potential market entrants. Which of the following is not an example of a natural monopoly?
economies of scale substantial cost advantages less less A pizza restaurant and a burger restaurant come together in order to reduce competition and earn higher profits.
For a market to be in equilibrium, three conditions must hold. Fill in the blanks below to complete these conditions. The amount produced by sellers must be ....... the amount purchased by buyers. The costs of making a product must be ........ the final price at which the product sells. Buyers must place a value on the uses of the product that is ........ the cost of buying the product.
equal to less than greater than
Assume there are two industries in our economy: the production of pizza and the production of calzones. Each of these products is produced in a similar way with similar ingredients and requires similar skills. If the market price of pizza in this competitive market is below the ATC curve and the price of calzones is above the ATC curve, ____________.
firms currently making pizza will switch to making calzones.
Suppose you are ready to check out and see two lines: Line A has three people, while Line B has five people. Assume people choose lines at random and have not yet had a chance to switch lines. The situation will move toward equilibrium if the....... Assume that all eight shoppers are optimizing (i.e., they had a chance to switch lines) and the situation is in equilibrium. Given this information, you could infer that the shorter line will move ........ the longer line. Assume that all eight shoppers are optimizing (i.e., they had a chance to switch lines) and the situation is in equilibrium. Given this information, you could infer that the behavior of the .............. is most informative.
last person from the longer line switches to the shorter line slower than last person in the five-person line
You have just been appointed as the County Commissioner of Hazard County. You realize that you should learn some economic concepts that will be useful to you in your new job. In a free market, efficient firms will produce where ....... equals ....... ....... is maximized when firms produce at equilibrium in a free market. Which of the following is not an example of when the free market fails to generate maximum social surplus?
marginal cost marginal revenue total surplus Private goods.
Education and experience are desirable traits in a worker because both tend to shift the ....... ........ .This also tends to lead to a .......This also tends to lead to a
marginal product of labor (MPL) rightward higher
Consider four market structures: perfect competition, monopolistic competition, oligopoly, and monopoly. Firms in all four market structures maximize profits by producing the quantity where ___________.
marginal revenue equals marginal cost.
A study was conducted examining diabetes rates by ethnicity. It was determined that Hispanics had the highest rate of diabetes. A conclusion might be made that people of Hispanic origin are the most inclined to be diabetic. However, that ........ correlation could be the result of ........, given that other factors, such as diet, that were not considered.
positive omitted variables
A perfectly competitive firm will choose to shut down when the ....... intersects the marginal cost curve below the ........ Therefore, the short-run supply curve for a perfectly competitive firm is represented by __________. In the long run, the supply curve for a perfectly competitive firm is represented by __________.
price (marginal revenue) average variable cost curve the portion of the marginal cost curve above average variable cost. the portion of the marginal cost curve above average total cost.
A perfectly competitive firm will choose to shut down when the ....... intersects the marginal cost curve below the ........ Therefore, the short-run supply curve for a perfectly competitive firm is represented by __________. In the long run, the supply curve for a perfectly competitive firm is represented by __________.
price (marginal revenue) average variable cost curve the portion of the marginal cost curve above average variable cost. the portion of the marginal cost curve above average total cost.
Suppose an increase in the price of a good from $5 to $11 caused the quantity demanded of the good to decrease from 600 million to 300 million. In this case, with an increase in the price of the good, ........ Therefore, total revenue ...... by $....... million. Consider an agricultural market with several farmers selling identical products. Which of the following statements is true in this case?
the price effect dominates the quantity effect increases 300 The prices are set such that they are equal to the marginal cost.
The production function is:
the relationship between the quantity of inputs used and the quantity of outputs produced.
The aggregate difference between the average total cost (ATC) and average variable cost (AVC) for all units of production is the:
total fixed cost.
A profit-maximizing firm will hire workers until the ........ equals the ....... To hire beyond that would mean the firm would be paying the worker ....... than the worker's contribution to the firm.
value of the marginal product of labor (VMPL) wage more
The opportunity cost of an activity is a measure of ....... when you do that activity.
what is given up
Relative to a perfectly competitive industry with the same cost and demand, a single-price monopolist produces
less output and has a higher price.
According to the principle of comparative advantage, both parties will engage in a trade if the trading price:
lies between their opportunity costs.
If the market price of an ICU2 computer monitor, whose demand curve is shown above, increases from $140 to $160 due to more restrictive disposal fees for producers, the ....... in consumer surplus would be $...... million.
loss 750
All of the following statements describe a duopoly with homogeneous products, cost structures, and effort:
The residual demand curve is less than the market demand curve. Price-cutting will drive prices down to marginal cost. If prices are equal, each firm will have half of the demand.
How is a monopolistically competitive market similar to a perfectly competitive market? Which of the following common features do monopolistically competitive markets and monopolies share?
There are no restrictions on the entry of new firms. Firms face downward-sloping demand curves.
When a cost-benefit analysis is done:
all relevant options must be considered
This third principle of economics, supported by the scientific method, is:
empiricism.
In the model of an oligopoly with identical (homogeneous) products, the price is likely to be ___________.
equal to marginal cost.
For most people, one of the biggest challenges involved in studying economics is:
it looks beyond simple cause and effect to the many possible long term effects of an action.
Total revenue for a monopolist is maximized
only if marginal revenue is zero.
An increase in income shifts the budget constraint ....... . The shift in income causes the budget constraint to increase ........ and the slope to ........
outward by the same amount remain the same
Paternalism is the view that ___________.
people do not always know what is best for them, and government should encourage them to make the right choices.
A monopolist with constant marginal cost of $5 faces demand QD=30−2P. This implies that the inverse demand curve is P=15−12Q and that the marginal revenue is MR=15−Q. Given the information above draw the demand, marginal revenue, and marginal cost curves. 1.) Using the line drawing tool, draw the demand curve for the monopolist. Label the curve appropriately. 2.) Using the line drawing tool, draw the marginal revenue curve for the monopolist. Label the curve appropriately. 3.) Using the line drawing tool, draw the marginal cost curve for the monopolist. Label the curve appropriately. The profit-maximizing price for the monopolist is $......., and the profit-maximizing output is ....... units. The producer surplus (profit, ignoring fixed costs) for the firm at the profit-maximizing price is $.......
10 10 50
The diagram on the right shows the short-run demand curve (D), marginal revenue curve (MR), average total cost curve (ATC), and marginal cost curve (MC) for a firm in a monopolistically competitive market. This firm should produce ...... units of output. (Enter your response as an integer.) This firm should charge a price of $.... per unit. (Enter your response as an integer.) This firm will earn ....... economic profits. In the long run, firms should .......... this industry.
32 19 positive enter
Consider the given graph that shows the price and the quantity demanded and supplied of good X in a competitive market. The price that equates the quantity supplied and the quantity demanded of good X is $....... The quantity that corresponds to the competitive equilibrium price is ....... units of good X. In the graph, at the market price of $60, the market is ......... a competitive equilibrium. At this price, the ....... equals ....... units of good X. In the graph, at the market price of $20, the quantity demanded is ....... the quantity supplied by ....... units of good X. The competitive process will eventually push ....... the market price to $....... As a result, the market will ....... in competitive equilibrium.
40 3000 not in excess supply 1000 greater than 2000 up 40 be
In an economy with unit elasticity of demand, the equilibrium price of Good A is $6 and equilibrium quantity demanded is 640 units. Suppose there is imposition of a tax of $2 on Good A. If the tax is collected from the suppliers, the equilibrium quantity demanded will be ....... units. If the tax is collected from the consumers, then the equilibrium price is $.... and the tax incidence ....
480 8 remains independent
Suppose there are three goods: A, B, and C. The price of good A is $5, the price of good B is $10, and the price of good C is $20. The total budget of the consumer is $75. The total benefit from different quantities of each good is shown in the table below. The optimal choice for the consumer is: ....... unit(s) of good A, ....... unit(s) of good B, and ....... unit(s) of good C. In equilibrium, the total benefits received by the consumer are $........
5 3 1 378
Which of the following are necessary ingredients to the buyer's problem? (Check all that apply.)
Amount of money the consumer has to spend. Prices of goods and services. Consumer's tastes and preferences.
How does the labor-leisure trade-off determine the supply of labor?
An increase in the wage rate is an increase in the opportunity cost of leisure, and can therefore be expected to reduce the amount of leisure one wishes to consume. Choosing less leisure is equivalent to supplying more labor, thus yielding a positive relationship between the wage rate and the amount of labor supplied.
Which of the following statements is not correct?
At all times an increase in wage increases labor supply.
Firms earn economic profits in the long run. Perfect competition: ........ Monopoly: ........ Monopolistic competition: ...........
False True False
Suppose the market price of corn is $5.50 per bushel. Which of the following is not one of the three conditions that will need to be satisfied for the corn market to be in equilibrium at this price?
Both the buyers and sellers of corn could benefit by making small changes to their market behaviors. This is the correct answer.
Carly, Marquis, and Kodjo are discussing tax equity. Carly earns $75,000 per year, Marquis earns $50,000 per year, and Kodjo earns $100,000 per year. If they agree that the best option is a regressive tax, then which of the following is true?
Carly should pay $15,000, Marquis should pay $12,500, and Kodjo should pay $18,000.
Due to changes in the government's foreign policy, there is a 15% increase in the prices of laptops imported from other countries while there is a 5% decrease in the prices of similar, domestically produced laptops. Which of the following statements is not true about the consumer's choice? Given the prices and budget, which of the following commodities would any rational consumer purchase?
Consumers will prefer the domestically produced laptops over the imported laptops. The commodity that best suits the consumer's tastes and preferences and maximizes satisfaction.
Which of the following are examples of inefficiencies created by government intervention?
Creating a large workforce of professionals who review whether the financial reports of companies are true and fair. Quality deterioration in a market after government implements a price control.
Which of the following statements regarding internalizing an externality is true?
It means agents account for the full costs and benefits of their actions.
Refer to the above figure. To maximize profit or minimize losses this firm will produce:
E units at price A.
Which of the following is not a characteristic of monopolistic competition? (Check all that apply.)
Entry and exit is not easy. Products are perfect substitutes.
If a good is considered to be a luxury good, does it mean that the Law of Demand does not hold?
No, it only means that its income elasticity of demand is greater than 1.0, so the Law of Demand still holds.
Which of the following would be considered a true public good?
a road sign
Identify the cause and effect in the following examples: Lower infant mortality is .... and an improvement in nutrition is .... A surge in cocoa prices is .... and a pest attack on the cocoa crop is ....
an effect; the cause an effect; the cause
All of the following could cause an increase in producer surplus except:
an upward shift in the marginal cost curve.
On the Production Possibilities Curve, possible production levels are represented:
at any point on or below the curve.
All of the following are elasticity measures, except:
behavioral elasticity of demand.
On the graph shown, consumer surplus would be the area:
below the market demand curve and above the market price.
If elasticity of demand is 3 and the price is increased by 10 percent, then the quantity demanded will:
decrease by 30 percent
When compared to competition, monopoly prices are ....... and quantity produced is ....... . The purpose of antitrust policy is to ....... this situation.
higher lower reverse
In competitive markets, tax incidence, as well as the equilibrium, is independent of whether the tax is imposed on consumers or sellers because:
if it is imposed on the seller, the seller will raise the price and pass it to the consumer.
When firms switch from making pizza to making calzones, the price of pizza will ....... and the price of calzones will .......
increase decrease
If a firm is operating at marginal cost pricing:
more firms entering the industry will not affect prices.
An outcome is Pareto efficient if
no individual can be made better off without making someone else worse off.
Which of the following are NOT necessary ingredients to the buyer's problem? (Check all that apply.)
Consumer's ability to discern product usefulness. Employment status of the consumer.
Janet knows a lot of people who do not like Marmite®, a yeast extract that is used as a spread on toast. She says that Marmite is so unpopular that Unilever, the company that manufactures Marmite®, cannot possibly have any monopoly power. Do you agree with this analysis?
No, monopoly power is based on whether a good has any close substitutes, not whether your friends like the product.
Are there real-world markets that resemble double oral auctions? Suppose you had to organize a double oral auction for a good that has perfectly elastic demand. Do you expect prices to approach the competitive equilibrium?
Yes, trading on the New York Stock Exchange is very similar to a double oral auction. Yes, there is no reason why price in a double oral auction for a good with perfectly elastic demand would not be expected to approach the equilibrium price.
A report by the Wall Street Journal found there were several online retailers that offered customers different prices based on their browsing history and other characteristics. This is an example of ____________. How can such strategies help retailers?
third-degree price discrimination. Retailers can charge a price closer to each consumer's willingness to pay, thus increasing profits. By charging different prices to different groups, producer surplus will likely increase. By segmenting the market into groups, retailers can maximize profits by acting like a monopolist.
