ECON 202 quizzes and exams
Consider an ultimatum game where the Proposer has $100 and offers a proportion of it to the Responder, who can either accept or reject the offer. If the Responder accepts, both the Proposer and the Responder keep the agreed share, while if the Responder rejects, then both receive nothing. Which of the following statements is correct?
Responders often reject offers greater than $0.
In the following diagram you are given two technologies, A and B, which can produce 100 meters of cloth. Technology A uses 1 worker and 4 tonnes of coal, while technology B uses 4 workers and 2 tonnes of coal. The diagram also depicts three examples of isocost curves, NM, GF and JH. The wage and the price of coal are denoted by w and p, respectively.
Technology B is cheaper in period 1 and Technology A is cheaper in period 2.
The following table gives different technologies that produce 100 meters of cloth. Based on this information, which of the following statements is correct?
Technology B is never cost-minimizing.
The figure shows a student's production function with the final grade (the output) related to the number of hours spent studying (the input). Which of the following statements regarding the average product of labour (APL) is correct?
The APL at 4 hours is 12.5.
Consider the Lorenz curves for pirate ships and navy ships. Given the information in the figure, which of the following statements must be true?
The Gini coefficient on pirate ships was much lower than the Gini coefficient on navy ships.
The figure shows a student's production function with the final grade (the output) related to the number of hours spent studying (the input). Which of the following statements regarding marginal product of labour (MPL) are correct?
The MPL at 4 hours is the slope of the tangent line.
The figure below shows a real wage index in England from 1260 and 2000, highlighting the period following the bubonic plagues of 1348 and 1351. Which of the following statements is correct?
The Malthusian model can explain the rise and fall in real wages from 1300 to 1600.
The diagram shows the demand and the supply curves for textbooks. Based on this figure, which of the following statements is correct?
The Nash equilibrium price is $8.
A bakery is one of many that operate in the bread industry. The market demand curve for bread is downward-sloping. The bakery incurs fixed costs and has an upward-sloping marginal cost curve. Which of the following statements is correct?
The bakery faces a flat demand curve.
Consider an employee with a reservation wage of $6 an hour. The employee chooses an effort level between zero and one. Which of the following statements regarding her best response curve is correct?
The best response curve describes the effort that the employee would choose for each level of the hourly wage
Bruno is a landowner and Angela is a farmer who pays a share of her grain output to Bruno for the use of the land. The figure shows Angela and Bruno's feasible frontier, Angela's biological survival constraint and her reservation indifference curve. If Angela does not work she receives a ration of 2.5 bushels from the government. Of the four points depicted in the figure, which allocation Pareto dominates Z?
d.
Consider the following four games where players Row and Column each have two strategies: A and B. Which of the following games illustrates a prisoners' dilemma?
d. "This is a prisoners' dilemma because there is a single Nash equilibrium, (B, B), and this dominant strategy equilibrium is worse for both players than if both players played the strategy A."
Figure 1.2 shows the distribution of income across and within countries in 2014. The height of each bar represents the annual income of the population (for each decile), measured in 2005 US$, while the width of each country's bar represents its population. The red countries were the poorest countries in 1980, while the green countries were the richest in 1980. Based on this information, which of the following statements is correct?
d. The poorest decile in the US earns more than the richest decile in some poor countries.
The table below displays the daily production possibilities for Antony and Cleopatra, who are castaways on a deserted island in the Mediterranean and are discussing the possibilities of specialization and trade between themselves. According to the numbers given in the table, and assuming that Antony and Cleopatra are producing by themselves individually, the cost (trade-off) associated with Antony producing 1 fish is ______ and the cost (trade-off) associated with Cleopatra producing 1 fish is _____.
4 dates; 5 dates
US GDP was approximately $18.6 trillion in 2016 and $19.4 trillion in 2017. What was the approximate annual growth rate?
4.3%
The figure below is the Lorenz curve of a population. Based on this figure, which of the following statements are correct?
50% of the population owns 100% of the land.
The diagram shows the market demand and supply curves for the bread market. You know that there are 250 identical bakeries operating in the market, but you do not know their cost structure (i.e. their average cost and marginal cost curves). Based on this information, which of the following statements is correct?
A bakery's marginal cost of producing the 21st loaf is approximately €2.
Which of the following statements are correct?
A market is in equilibrium if the actions of buyers and sellers have no tendency to change the price or the quantities bought and sold.
In their study of a firm during 2006-2010 that includes the financial crisis, Lazear and his co-authors found that (i) the firm's productivity increased dramatically as unemployment rose, and (ii) the wage level was kept unchanged. Based on this information, which of the following statements are correct?
A possible explanation for why the wage level was not cut may be that the firm judged that the costs of lower employee morale and retention would be greater than what they would have saved in wages.
Labor contracts are incomplete because
All of the above.
Which of the following statements regarding social preferences is correct?
Altruism is an example of social preferences.
The figure depicts the efficiency wage equilibrium of a worker and a firm. Which of the following statements is correct?
At A, given that the firm pays the hourly wage of $12, the worker's best response is to exert an effort of 0.5.
The figure shows a bakery's marginal and average cost curves, and its isoprofit curves. The bakery is a price-taker in a large bread market. Based on this figure, which of the following statements is correct?
At A, the bakery would be making a loss.
The figure shows the indifference curves of a student for the two 'goods', free time and final grade. Based on this information, which of the following statements is correct?
At A, the student is willing to give up 34 grade points for five extra hours of free time.
Refer to the figure in question 6. Which of the following statements is correct?
At B, the decrease in price that keeps profits constant when one extra car is sold is larger than the decrease in price required to sell one extra car.
Which of the following statements regarding Pareto efficiency is correct?
At a Pareto-efficient allocation, it is impossible to make one person better off without making another person worse off.
The table below displays the daily production possibilities for Antony and Cleopatra, who are castaways on a deserted island in the Mediterranean and are discussing the possibilities of specialization and trade between themselves. According to the numbers given in the table, which of the following is correct?
Both the first and second options are correct.
According to Elinor Ostrom, which of the following statements about the tragedy of the commons is correct?
Communities sometimes govern common property resources effectively due to social preferences, repeated interactions, and formal and informal institutions.
Consider a world of just two individuals, Gonzalo and Leila, who each need two goods to survive, apples and wheat. They differ in how productive they are in growing apples and wheat: Based on this information, which of the following statements is correct?
Correct Answer Leila has a comparative advantage in producing wheat.
Which of the following statements regarding Adam Smith are correct?
Correct! Adam Smith claimed that coordination among large number of economic actors, often unknown to each other, might spontaneously arise without any person or institution consciously attempting to create or maintain it.
Capitalism is an economic system based on:
Correct! Private property, markets, and firms
The process of requiring fewer inputs to produce the same output is referred to as:
Correct! The technological revolution
Bruno is a landowner and Angela is a farmer who pays a share of her grain output to Bruno as rent for the use of the land. Consider the following figure, which shows Angela's and Bruno's combined feasible set and the interpretation of the allocation at point E. Based on the figure, which of the following statements are correct?
Depending on the shape of her indifference curves, Angela may prefer G to E, she may prefer E to G, or she may be indifferent between the two.
Which of the following statements regarding employment contracts is correct?
Employees' effort levels cannot be the basis of an enforceable contract.
Which of the following statements regarding employment rents is correct?
Employers can use high employment rents to exert power over employees.
Bruno is a landowner and Angela is a farmer who pays a share of her grain output to Bruno for the use of the land. The figure shows Angela and Bruno's feasible frontier, two of Angela's indifference curves, and the Pareto efficiency curve CD. Note that Angela's preferences are quasi-linear, so IC2 is simply IC1 shifted upwards. Based on this information, which of the following statements is correct?
F is not Pareto efficient because the marginal rate of substitution does not equal the marginal rate of transformation at this point.
Which of the following statements regarding Karl Marx are correct?
He thought that capitalism, by organizing production and allocation in anonymous markets, created atomised individuals instead of integrated communities.
Anthony loves going to the opera while Becky loves watching football. The following is the payoff table for their choice of activity: For example if Anthony chooses opera and Becky chooses football, then the activities are valued at $10 to Anthony and $20 to Becky. Assume that they can only choose one activity (i.e. they cannot randomize). Based on this information, which of the following statements is correct?
If Anthony offers $20 to Becky for coming to the opera with him, then (Opera, Opera) may be chosen.
The figure below illustrates Maria's employment rent on her current job, given her wage, her disutility of work, the unemployment benefit, and the expect duration of unemployment. Which of the following statements is correct.
If the expected duration of unemployment falls to 22 weeks, Maria's employment rent will be $3,080.
Which of the following statements regarding Nash equilibrium are correct?
In a Nash equilibrium, all players choose their best response strategy given the other players' strategies.
Which of the following statements regarding bargaining power is correct?
In a dictator game, the Proposer has all the bargaining power.
Which of the following statements is true?
In a labor contract, one side of the contract has the power to issue orders to the other side, but this power is absent from a sale contract.
Which of the following statements regarding monopoly and perfectly competitive markets are correct?
In a monopoly market, the firm is a price-setter.
Bruno is a landowner and Angela is a farmer who pays a share of her grain output to Bruno for the use of the land. The figure shows Angela and Bruno's feasible frontier, Angela's biological survival constraint and her reservation indifference curve, and how many bushels Angela would get at allocations B and D. Based on the figure, which of the following statements is correct?
In a voluntary exchange where Bruno has all the bargaining power, if Bruno charges 4.5 bushels of rent for the use of his land, then Angela would choose to work 8 hours.
Consider an ultimatum game of sharing a pie of $100. The first table shows the cumulative percentage of the Responders who accept the amount offered by the Proposers for when the game was played with two separate groups (Kenyan farmers and US university students). The second table shows the percentage of the Proposers who made those offers in the two groups. Based on this information, which of the following statements is correct?
In both groups, the highest proportion of Proposers offered the amount that maximized their expected payoff.
Which of the following variables has not followed a 'hockey-stick' trajectory - that is little to no growth for most of history followed by a sudden and sharp change to a positive growth rate?
Income inequality
Which of the following statements regarding the Malthusian model are correct when there is a permanent, positive technological shock (such as an improved seed)?
Income initially rises but then falls back to the subsistence level.
According to Malthus, which of the following are the causes of diminishing average product of labor?
More labor is devoted to a fixed quantity of land, or new land brought into cultivation is of inferior quality.
The figure shows the market demand curve for bread, together with original and new supply curves, where the curve has shifted due to new bakeries entering the market. All bakeries are identical, and there are no entry costs. Which of the following statements is correct?
New bakeries will continue to enter until the price equals their average cost.
The figure shows the Lorenz curve for market income and disposable income in the Netherlands in 2010. Which of the following statements are correct?
One-fifth of the Dutch population has virtually no market income.
A firm's fixed cost is $0 and marginal cost is $20. P is the price of the unit and Q represents the number of units produced. Which of the following statements is correct?
Producing 2,000 units with a price of $40 (Q=2000, P=40) and producing 20,000 units with a price of $22 (Q=20,000, P=22) are both points on the same isoprofit curve.
Which of the following statements regarding Adam Smith is correct?
Smith claimed that self-interested individuals can be guided by an invisible hand to promote the public good.
According to Elinor Ostrom, which of the following statements about the problem of tragedy of the commons are correct?
Social norms can be drawn on to enforce sustainable resources, although it does not always succeed.
Which of the following is a non-excludable public good?
Streetlights
The following diagram depicts the effect of the change in wage level on a worker's choice of consumption and hours of free time. The choice before and after the wage rise are given by A and D, respectively. Based on this information, which of the following statements is correct?
The change in the choice from C to D represents the substitution effect.
Select the correct statement regarding the Gini coefficient.
The coefficient takes the value of 1 when a single individual receives all income.
Production of cloth requires two inputs: L workers and R tonnes of coal. The following diagram depicts the isocost line associated with production. The wage (w) is $20 and the price of coal (p) is $30. Which of the following statements is correct?
The cost of using 6 workers and 2 tonnes of coal is the same as that of using 3 workers and 4 tonnes of coal.
The figure depicts the demand curve of a firm producing cars, together with its marginal cost, average cost, and isoprofit curves. Based on the figure, which of the following statements is correct?
The deadweight loss in the profit-maximizing outcome is $23,580.
The diagram depicts the demand curve of a product. Assume that there are 100 potential buyers who can choose to purchase one unit each. Based on this graph, which of the following statements is correct?
The diagram demonstrates the Law of Demand.
Which of the following are factors that contribute to a firm's diseconomies of scale?
The difficulty of monitoring workers' effort as the number of employees increases.
Bruno is a landowner and Angela is a farmer who pays a share of her grain output to Bruno for the use of the land. The figure shows Angela and Bruno's feasible frontier, Angela's biological survival constraint, and Angela's reservation indifference curve. If Angela does not work, she receives a ration of 2.5 bushels from the government. Which of the following statements is correct?
The economically feasible set is a subset of the technically feasible set.
In which of the following cases would a firm be maximizing profits?
The firm minimizes the cost per unit of effort.
The figure shows the demand and supply curves in the salt market. The government imposes a sales tax of 30% on the price of salt, to be paid by the suppliers. This decreases the quantity traded from Q* to QT, decreases the price received by producers from P* to PT1, and increases the price paid by consumers from P* to PT2. Which of the following statements is correct following the imposition of the tax? Which of the following statements is correct following the imposition of the tax?
The gains from trade are A + B + D + F.
Consider the perfectly competitive market for bread analyzed in Unit 8. Why is the competitive equilibrium Pareto efficient?
The gains from trade are maximized.
The following figure shows labor productivity and the real wage index in England from 1750 to 2000. Based on this information, which of the following statements is correct?
The graph demonstrates the importance of bargaining power for workers to benefit from higher labor productivity.
Suppose that the unit cost of producing a tee shirt is $5, regardless of the level of output and there are no fixed costs. Which of the following statements is correct?
The marginal cost curve is a horizontal straight line
In which of the following markets is the equilibrium efficient?
The market for a homogenous good that has no external effect
Which of the following markets best approximates perfect competition?
The market for milk.
The figure shows the market supply curve for second-hand textbooks, together with original and new demand curves, where the curve has shifted due to the arrival of new students. Based on the figure, which of the following statements is correct?
The more elastic (or more flat) the supply curve, the smaller the price rise.
Consider a student whose final grade increases with the number of hours spent studying. Her choice is between more free time and higher grades, both of which are 'goods'. Which of the following is not the same as her marginal rate of transformation between the two goods?
The number of percentage points the student is willing to give up for another hour of free time.
Consider a student whose final grade increases with the number of hours spent studying. Her choice is between more free time and higher grades, both of which are goods. Which of the following is NOT the same as her marginal rate of transformation between the two goods?
The number of points she is willing to give up for an additional hour of free time.
The following figure depicts an employee's best response to wage when the expected unemployment duration is 44 weeks. Which of the following statements is correct?
The slope of the best response curve is the employer's marginal rate of transformation of higher wages into worker effort.
In Britain before 1870, both wages and hours worked rose, while after 1900 working hours fell as wages continued to rise. Based on this information, which of the following statements is correct?
The substitution effect dominated the income effect before 1870, but the income effect dominated the substitution effect after 1900.
Consider the figure in Question 1. Suppose instead the government decides to impose a specific (or fixed) tax of T per kg of salt, to be paid by the suppliers. Which of the following statements is correct?
The supply curve shifts up in a parallel manner.
The figure shows the demand and supply curves in the salt market. The government now decides to impose a sales tax of 30% on the price of salt, to be paid by the suppliers. Which of the following statements is correct?
The tax causes a decline in the quantity traded.
Consider the case where a government introduces a specific tax on cigarettes, which reduces the consumption of cigarettes. Which of the following statements is correct?
The tax may increase social welfare.
The figure depicts the demand curve of a firm producing cars, together with its marginal cost, average cost, and isoprofit curves. At C, the firm sets the price at $5,440, sells 32 cars, and earns a profit of $63,360. Which of the following statements is correct?
The total cost of producing 32 cars is $110,720.
According to Garret Hardin, which of the following statements about the tragedy of the commons is correct?
The tragedy occurs when individuals pursue their self-interest without concern for others.
Consider the technologies and costs from the previous problem. In period 1, the wage and the price of coal are (w, p) = ($10, $20) and the firm uses technology B. In period 2, the wage cost and the price of coal change to (w, p) = ($20, $10). The price of the cloth is $2 per meter in both periods. Which of the following statements is correct?
There is a positive economic rent in switching from technology B to A in period 2.
The figure shows a demand curve for Cheerios. Based on this figure, which of the following statements is correct?
There is no demand if the price is set above $7.20.
The figure below plots real wages against population in England from the 1280s to the 1860s. Why is the period from the 13th to 16th centuries considered a Malthusian trap?
There was a negative relationship between population and real wages during this period.
You currently work for 40 hours a week at wage rate of £12 an hour. Your free hours are defined as the number of hours not in work, which in this case is 24 hours × 7 days - 40 hours = 128 hours per week. Suppose that you are happy to keep your total weekly income constant. Then:
To have 16 hours of more free time, your wage rate needs to increase by £8.
There are five students who are looking to buy one second-hand textbook each. Their willingness-to-pay are £5, £6, £8, £12, and £15, respectively. Based on this information, which of the following statements is correct?
To sell three books, the maximum price that can be charged is £8.
The top curve shows labor productivity (or the size of the pie) and the bottom curve shows real wages (or labor's share of the pie) from 1760 to 1930. Which of the following statements is true?
Workers earned the same real wage in 1847 as they did in 1760
The figure below depicts a model of labor supply and consumption for five countries in 2013. Which of the following statements is correct?
Workers in South Korea appear to have a lower marginal rate of substitution than workers in the US
Figure 3.2 is a plot of GDP per capita against average annual hours of free time per worker in different countries. Which of the following statements is correct?
Workers in the US and Turkey enjoy a similar amount of free time despite a large disparity in income.
Which of the following is a non-excludable public good?
a firework show
According to the World Bank, real per capita income in the U.S. increased from $57,640 in 2015 to $58,030 in 2016. What was the approximate annual growth rate?
a. 0.7%
Experimental economists find that subjects make large and consistent contributions in public good games that allow for:
all of the above.
Diminishing average product of labor means:
as more labor is used in a production process, the amount produced per worker decreases.
Imagine an economy that grows at a constant rate for the 21st century. A plot of the level of GDP over time will fit:
b.A convex line on a linear scale, and a straight upward-sloping line on a ratio scale.
Which of the following statements is correct regarding disposable income?
c. Disposable income is the maximum amount of expenditure possible without having to borrow or sell possessions.
The 1978 law that protected Bengali sharecroppers from eviction and increased their share of the crop from 50% to 75% did all the following except
generate a Pareto improvement.
The model of technological choice presented in Unit 2 of The Economysuggests that the main reason the Industrial Revolution first occurred in Britain was that:
in Britain the price of coal was low relative to labor.
According to Thomas Malthus, which of the following is the cause of the diminishing average product of labor?
more labor devoted to a fixed quantity of land, or land of inferior quality
Capitalism is an economic system based on:
private property, markets, and firms.
The figure below shows GDP per capita in five countries from the year 1000 to the year 2000. Here, growth in GDP per capita is shown using a:
ratio scale.
A common pool resource (like the shared pasture in the grazing game) is a:
rival and non-excludable good.
Average work hours declined in the US from 1900 to 2000, while average wages increased six-fold. If American workers chose to take more free time even though the opportunity cost of free time increased, then:
the income effect dominated the substitution effect.
In economics, institutions refer to
the rules of the game.