Econ 201 Final Exam
what is a natural monopoly
long-run average total costs continue to decline as firm size increases over the entire range of market demand
When natural monopoly is present in an industry, the per-unit costs of production will be
lowest when a single firm generates the entire output of the industry.
If skilled labor is three times the cost of unskilled labor, a profit-maximizing firm will vary the quantity of each type of labor until the
marginal product of unskilled labor is one-third that of skilled labor.
marginal revenue product
marginal product x marginal revenue
Dynamic Competition
profitability and high prices encourage innovation and technological change
In a market economy, which of the following is most important if a worker is going to achieve high earnings?
provision of goods and/or services that others value highly
Automated production methods are only attractive when they
reduce per-unit costs.
A monopolist has less to gain from cost-saving measures in the production process when
regulators use average cost pricing to set the monopolist's price.
When firms use resources in an attempt to secure and maintain grants of market protection from the government, it is called
rent-seeking
A monopolist will maximize profits by
selling at the price on the demand curve at the output rate where marginal revenue equals marginal cost.
Characteristics of an oligopoly
small number of rival firms substantial economies of scale significant barriers to entry products may be identical or differentiated
Economic theory suggests that the standard of living of American workers would rise if
technological improvements increased output per worker-hour.
Suppose the United Auto Workers' Union succeeded in obtaining a 10 percent increase in the wages of its workers and that the wage increase caused automobile prices to rise. Employment in the auto industry would be most likely to decline significantly if
the demand for American-made automobiles was highly elastic.
Wages in the United States are higher than those in India primarily because
the human and physical capital of American workers exceeds that of their Indian counterparts.
According to the principle of marginal productivity, if
the price of the input equals MRP, the firm is maximizing profit.
What happens if firms in an oligopoly work together?
the price would rise to monopoly price
human resources
the skills and abilities of workers used in production
If the demand for workers with doctorate degrees in economics increases, we would expect
the wages of economists to increase in the short run and the number of economists employed to increase in the long run.
The demand curve for a human resource will be more elastic when
there are more and better substitutes are available for it.
If all persons had identical preferences and productivity factors (ability, skill level, education, experience, etc.), the highest paying jobs would be the most
undesirable
collusion
work together in secret
The fact that some people will work hard to earn a lot of money while others will be content with much less income indicates that
worker preferences are an important source of earning differentials.
The cost and demand conditions for a monopolist are depicted in Figure 11-3 (output on the graph is measured in thousands). If the monopolist is maximizing profit, it will charge a price of
$20 and produce an output of 10,000.
Consider a competitive price searcher industry. In the short run, total revenues of each firm exceed total costs. What will happen in the long run?
Additional firms will enter the market, and price paid to each firm will be driven down to where each firm will be making just enough to cover per unit costs.
Consider a price-taker industry. In the short run, total revenues of each firm exceed total costs. What will happen in the long run?
Additional firms will enter the market, and price will be driven down to where each firm will be making just enough to cover per unit costs.
Which of the following is true about employment discrimination?
If employers can hire equally productive female employees at a lower wage than males, the profit motive gives them a strong incentive to do so.
Consider a price searcher industry with high barriers to entry. In the short run, total revenues of the monopoly exceeds total costs. What will happen in the long run? Correct!
Nothing, because would-be rival firms are prohibited from entering the industry or find the start-up costs too costly to warrant the entrepreneurial risk to enter the industry.
non-human resources
Physical capital, land, natural resources
What quantity would the industry depicted in Figure 11-14 produce if member firms were successfully colluding?
Q2
Using Figure 11-14, determine what quantity these firms would produce, in the short run, if the firms were engaging in vigorous competition.
Q4
Which of the following would constitute the strongest evidence of employment discrimination against female employees?
The average wage of female employees is lower than the average wage of males with similar productive characteristics.
Regarding employment discrimination, which of the following is true?
The earnings differential between men and women who never married is considerably smaller than the differential between married men and married women.
Given the current cost and demand conditions for a competitive price searcher depicted in Figure 11-2, which of the following best describe the firm's profitability in the short-run? Figure 11-2 (see screenshot)
The firm will make positive economic profits.
Given the current cost and demand conditions for a monopolist depicted in Figure 11-2, which of the following best describe the firm's profitability in the long-run? Figure 11-2
The firm will make positive economic profits.
Given the current cost and demand conditions for a monopolist depicted in Figure 11-2, which of the following best describe the firm's profitability in the short-run? Figure 11-2
The firm will make positive economic profits.
Given the current cost and demand conditions for a competitive price searcher depicted in Figure 11-2, which of the following best describe the firm's profitability in the long-run? Figure 11-2
The firm will make zero economic profit.
Which of the following is most likely to reduce the nominal market wage in a job category?
The job is prestigious, and the work is quite interesting.
Other things constant, which of the following job characteristics would be most likely to result in a higher pay rate for the job?
The job requires substantial amounts of stressful out-of-town travel.
Assuming that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency?
The output of the monopolist will be too small and its price too high.
Refer to Figure 11-15. Which of the following areas represents the deadweight loss due to monopoly pricing?
Triangle bge
Women earn less on average than men. Which of the following would be the logical conclusion?
Without consideration of preferences and productivity factors, differences in unadjusted mean earnings do not necessarily reflect employment discrimination.
When economists talk about a barrier to entry, they are referring to
a factor that makes it difficult for potential competitors to enter a market.
Which one of the following is the best description of a monopolist?
a firm that is the sole producer of a product for which there are no good substitutes in a market with high barriers to entry
resource market
a market in which households sell and firms buy resources or the services of resources
As the proportion of women preparing for careers as professionals increases,
all of the above
Traditionally, men have been more willing to accept jobs that
all of the above are correct
The earnings of all employees in a competitive economy would be equal if
all of the above are true.
Oligopolistic agreements on price tend to be unstable because
although the monopoly price maximizes the joint profits of the firms, a secret price cut by any individual firm will increase the profits of that firm; hence, collusive agreements tend to break down.
When employment discrimination results from the personal prejudices of employers, economic theory suggests that
an employer who discriminates will experience higher costs.
If the firms in this oligopolistic industry depicted in Figure 11-12 are unable to collude and instead engage in aggressive competitive practices with one another, the price of their product will tend to be
approximatley equal to P1
An increase in the demand for a product will cause
both the demand for and prices of the resources used to produce the product to increase.
If the firms in this oligopolistic industry depicted in Figure 11-12 can collude effectively and restrict the entry of potential competitors, the price of their product will tend to be
close to P2
If a firm refuses to hire any females due to a personal prejudice, its profits will
decrease
Which one of the following labor resources will likely have the most inelastic supply schedule in the short run?
dentists
The notion that the demand for inputs depends on the demand for outputs is termed
derived demand
demand for resources
derived from the demand for the products made with the resources
What concept implies that a firm's marginal revenue product curve for labor will slope downward in the short run?
diminishing marginal returns
What are possible entry barriers
econmies of scale government licensing patents control over an essential resource
How does a monopoly maximize profit?
expand its output until marginal revenue just equals marginal cost
The price charged by oligopolists will
generally fall between the monopoly and competitive market equilibrium prices.
An oligopolistic market
has low entry barriers facing firms that may be interested in entering the market.
a monopoly is a market with
high entry barriers and is a single seller of a well-defined product
If the demand for a consumer good decreases, the demand for resources required to make the good will
increase or decrease depending on whether the demand for the product is elastic or inelastic.
