ECON 206: Final Exam Review
Jones owns a barber shop and charges $6 per haircut. By hiring one barber at $10 per hour the shop can provide 24 haircuts per 8 hour day. By taking a second barber at the same wage rate the shop can no provide a total of 42 haircuts per day. The MRP of the second barber is
$108
a profit maximizing firm employs resources to the point where
MRP = MRC
Inverted U theory
R&D expenditures first arise as a percentage of firms' sales as industry concentration increases, but then fall as higher industry concentration occurs
the outcome in a purely competitive labor market is shown by:
W = MRP, W = MRC
which of the following is a unique feature of oligopoly? a. mutual interdependence b. non-price competition c. advertising expenditures d. product differentiation
a. mutual interdependence
in the long-run, a profit-maximizing monopolistically competitive firm sets its price
above marginal cost
which of the following is not a basic monopolistic competition? a. the use of trademarks and brand names b. a relatively large number of sellers c. product differentiation d. recognized mutual interdependence
d. recognized mutual interdependence
The wide imitation and spread of an innovation is called:
diffusion
the spread of innovation through imitation refers to
diffusion
for a new product to be profitable, it must
enable customers to obtain greater total utility from their money income
in the long-run, economic theory predicts that a monopolistically competitive firm will
have excess production capacity
in the short-run, a monopolistically competitive firm's economic profit
may be positive, negative, or zero
prices are likely to be least flexible:
oligopoly
Resource pricing is important because
1. resource prices are a major determinant of money incomes. 2. resource prices allocate scarce resources among alternative uses. 3. resource prices, along with resource productivity, are important to firms in minimizing their costs.
the herfindahi index for a pure monopolist is
10,000
Jones owns a barber shop and charges $6 per haircut. By hiring one barber at $10 per hour the shop can provide 24 haircuts per 8 hour day. By taking a second barber at the same wage rate the shop can no provide a total of 42 haircuts per day. The MP of the second barber is
18
in the United States, research and development spending as a percentage of GDP is
2.5% to 3.0%, which is higher than that of most industrial countries
Oligopolistic industries are characterized by:
a few dominant firms and substantial entry barriers.
the mutual interdependence that characterizes oligopoly arises because
a small number of firms produce a large proportion of industry output
which of the following statements is true? a. innovation normally follows invention and precedes diffusion b. diffusion normally follows invention and precedes innovation c. innovation usually follows diffusion and precedes invention d. invention normally follows diffussion and precedes innovation
a. innovation normally follows invention and precedes diffusion
in the short-run, a profit-maximizing monopolistically competitive firm sets its price
above marginal cost
nonprice competition refers to
advertising, product promotion, and changes in the real or perceived characteristics of a product.
the supply of land is
almost perfectly inelastic
Marginal revenue product measures the
amount by which the extra production of one more worker increases a firm's total revenue.
in the market for loanable funds
an increase in borrowing for investment will increase the interest rate.
OPEC provides an example of:
an international cartel
process innovation can be depicted as
an upward shift in a firm's total product curve.
economic rent refers to the price paid for land and other natural resources that
are fixed in total supply
when economists view technological change as internal to the economy, they mean that it:
arises deliberately from the profit motive and competition
a union may increase the demand for the services of its constituents by all of the tactics below except a. successfully advertising the product it is producing to private consumers b. increasing the price of products that are compliments for the one it is producing c. lobbying for increases in public expenditures on the product its producing d. successfully increasing labor productivity
b. increasing the price of products that are compliments for the one it is producing
which of the following is correct for a monopolistically competitive firm in the long-run equilibrium? a. p = mc b. p exceeds minimum atc c. mc =atc d. mc exceeds mr
b. p exceeds minimum atc
which of the following is an illustration of differentiated oligopoly a. the aluminum industry b. the soft drink industry c. the steel industry d. retail stores in large cities
b. the soft drink industry
monopolistic competition resembles pure competition because
barriers to entry are either weak or nonexistent
Entrepreneurship
can be carried out either by individuals or teams of individuals
broadly defined, technological advance
comprises new and improved goods and services and new and improved ways of producing or distributing them
the demand for labor is derived from
consumer demand for the product or service it is helping to produce
in the United States professional football players can earn much higher incomes than professional soccer players. this occurs because
consumers have a greater demand for football games than for soccer games
Secret conspiracies to fix prices are examples of:
covert collusion
the process by which new firms and new products replace existing dominant firms and products is called
creative destruction
Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a monopolistic competitor? a. microsoft b. pittsburgh plate glass c. ford motor company d. subway sandwiches
d. subway sandwiches
Other things equal, an increase in the equilibrium interest rate will
decrease purchases of capital goods and reduce R&D spending
Suppose an oligopolistic producer assumes its rivals will ignore a price increase but match a price cut. In this case the firm perceives its:
demand curve is kinked, being steeper below the going price than above
as pizza is topped with BBQ chicken became popular at speciality restaurants, Pizza Hut introduced a similar pizza. this imitation illustrates
diffusion
the corporate decision on type and level of R&D activity is difficult because
expected returns lie in the future and are highly uncertain
the marginal benefit to a firm from its R&D expenditures is depicted by its
expected-rate-of-return curve
technological advance improves allocative efficiency by
giving society a more preferred mix of goods and services
If you sum the squares of the market shares of each firm in an industry (as measured by percent of industry sales), you are calculating the:
herfindahi index
to say that land rent preforms no incentive function means that
higher rental payments will not bring forth a larger quantity of land
the copper, aluminum, cement, and industrial alcohol industries are examples of
homogeneous oligopoly
process innovation refers to
implementation of better methods of producing products
the United Mine Wokers is a good illistration of
inclusive unionism
the first commercial introduction, as opposed to first discovery, of transparent tape is an example of
innovation
the first successful commercial introduction of a new product refers to
innovation
the successful introduction of a new product, the use of a new method, or the creation of a new form of businesses enterprise is called
innovation
which of the following correctly orders, highest to lowest, the relative magnitudes of the U.S. spending by businesses on components of R&D
innovation, invention, basic research
the first discovery (as distinct from first commercial application) of a product or process is called
invention
technological advance is a three-step process involving
invention, innovation, and diffusion.
the modern view of technological advance is that it
is an internal element of capitalism, occurring in responses to profit incentives
as it relates to the R&D decision, the interest-rate-cost-of-funds curve:
is the marginal cost element in the MB = MC decision framework
Henry George advocated a single tax on:
land
the monopolistically competitive seller's demand curve will become more elastic the
larger the number of competitors
technological advance improves productive efficiency by
lowering average total cost
monopolistic competition means
many firms producing differentiated products
If one worker can pick $30 worth of grapes and two workers together can pick $50 worth of grapes, the:
marginal revenue product of the second worker is $20
the economic term for a sole employer in a nonunion community is
monopolist
economic profit is most closely associated with
monopoly, innovation, and uninsurable risks
When a monopolistically competitive firm is in long-run equilibrium:
mr = mc and p > minimum atc
we would expect a cartel to achieve
neither allocative efficiency nor productive efficiency.
economic analysis of a monopolistically competitive industry is more complicated than that of pure competition because
of product differentiation and consequent product promotion activities
the market supply curve for labor is upsloping because
of the opportunity cost of labor in housekeeping, leisure, or alternative employments
the conclusion that oligopoly is inefficient relative to the competitive ideal must be qualified because
overtime oligopolistic industries may promote more rapid product development and greater improvement of production techniques than if they were purely competitive
Kodak introduced to the marketplace a digital camera which uses no film, but takes photos that can be shown on personal computers. This is an example of:
product innovation
in a oligopolistic market
products may be standardized or differentiated
a monopolist
reduces the number of workers it employs so that it can pay each worker a lower wage rate
fiber-optic telephone lines are rapidly replacing copper telephone cables, this is an example of
technological advance
the demand for farmland will increase if
technological advances make land more productive
Pure or economic profit is:
the amount by which total revenue exceeds total costs
the demand for airline pilots results from the demand for air travel. this fact is an example of
the derived demand for labor
the marginal revenue product schedule is
the firm's resource demand schedule.
If the four-firm concentration ratio for industry X is 80:
the four largest firms account for 80% of sales
Marginal revenue product of labor refers to
the increase in total revenue resulting from the hire of one or more unit of labor
oligopoly is difficult to analyze primarily because
the price and output decisions of any one firm depend on the reactions of its rivals
the equilibrium interest rate equates
the quantities demanded and supplied of loanable funds
the retained earnings that corporations often use to finance R&D are also known as
undistributed corporate profits
the major source of new scientific knowledge in the united states is
university and government research
funds lent to startup firms in return for shares of the profit if the firms succeed are called
venture capital