ECON 2106 FINAL PRACTICE EXAM
Which graph shows the scenario where the income effect dominates labor supply decisions only at high wages?
BACKWARD BENDING LABOR SUPPLY CURVE
In the graph below of a Negative Externality, region "e" is a Deadweight Loss:
DEADWEIGHT LOSS IS D
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 price paid for each unit of input keeps falling. The reduction in average fixed costs must be offset by increasing variable costs. The diminishing marginal revenue triggers increased use of resources.
Diminishing marginal product occurs, causing average variable costs to rise.
A monopolist can sell 10 items if he charges $10 per item and 11 items if he charges $9. The marginal revenue (MR) from selling the 11th item is
-$1 99-100=-1
The graph shows the marginal social cost, demand, and supply curves in the jigsaw puzzle market. What are the socially optimal quantity and price in this market?
4;$8
The graph shows the marginal social cost, demand, and supply curves in the jigsaw puzzle market. If market forces prevail, this market will produce and sell _____ units of output at a price of _____.
6,$6 WHERE SUPPLY AND DEMAND INTERSECT
Jane is a single mother who earns $25,000 per year. She receives $5,000 per year in in-kind transfers and a $1,000 earned income tax credit. If her earned income rises to $30,000, she will lose the tax credit and $2,000 of her in-kind transfer benefits. What is Jane's effective marginal tax? 60% 50% 55% 75%
60% Her income increases $5,000 She loses benefits because of the wage increaase: $1000 + $2000= $3000 total loss When you combine both her income and benefits, she's only better off by $2000 from the original $5,000 salary increase. Her effective marginal tax rate= $3,000/$5000= 60%
Martin is a piano teacher who wishes to price discriminate across his students based on their household income. What would be a simple, verifiable characteristic for him to use as a proxy measure of income? Address Gender Hair color Parents' musical background
Address
According to the Five Forces framework, the greater the _____ in an industry, the lower the _____ in the industry will be.
degree of rivalry; average profits
An online movie download is similar to a Blu-ray disc movie in that it is _____, but it is also similar to national defense in that it is _____.
excludable; nonrival in consumption
The figure represents a monopolistically competitive firm. In the long run firms will: enter this market until all firms earn a zero economic profit. exit this market until all remaining firms earn a zero economic profit. enter this market, leading to excess profit for all of the firms. exit this market, leading to excess profit for all of the remaining firms.
exit this market until all remaining firms earn a zero economic profit.
In the short run, a seller _____, but in the long run, _____. faces a fixed number of rivals; the number of rivals can vary can vary all its costs; the seller faces only fixed costs cannot differentiate its product; all sellers differentiate their products faces no barriers to entry and exit; there are barriers to entry and exit
faces a fixed number of rivals; the number of rivals can vary
Economies of scale
factors that cause a producer's average cost per unit to fall as output rises cost advantages companies experience when production becomes efficient, as costs can be spread over a larger amount of goods
Price competition is most likely to occur in each of the following situations EXCEPT when: market demand is rising the prices charged by sellers are easy to observe. switching costs are low. all sellers in the market sell identical products.
market demand is rising
The least common market structures are monopoly and perfect competition. oligopoly and monopolistic competition. monopoly and oligopoly. perfect competition and monopolistic competition.
monopoly and perfect competition.
A market with negative externalities will tend to _____ compared to a market producing the socially optimal output.
overproduce and sell at a lower price (NSLO)
In the absence of product differentiation, _____ to prevail, leading to _____ profits. price competition tends; low barriers to entry tend; high barriers to entry tend; low price competition tends; high
price competition tends; low
goods that are nonrival in consumption and nonexcludabe
public goods
In a perfectly competitive market, the firm's marginal revenue curve is the market price steeper than the firm's demand curve nonexistent perpendicular to the firm's demand curve
the market price
The graph shows the marginal social cost and supply curves in the market for shampoo. When four units are produced, the marginal external cost is: $2. $4. $6. $8.
$4.
Natural Monopoly
A natural monopoly exists in a particular market if a single firm can serve that market at lower cost than any combination of two or more firms.
Which of the following will NOT cause the labor supply curve to shift? Increase/decrease in the birth rate Increase/decrease in immigration A new program for free childcare Changes in existing technology
Changes in existing technology
Arturo makes and sells organic frozen yogurt with fresh fruit toppings. He wants to price discriminate according to a preference for organic food so that those with the most inelastic demand for organic food pay the highest price. To accomplish this, to which group should he give discount coupons for his yogurt? Customers of the local fast-food restaurant Members of the local organic food co-op People who come to the community's weekly farmer's market Students at the local art school
Customers of the local fast-food restaurant
Which of these phenomena is a result of monopolistic competition? In Midtown, there is a country music bar, a karaoke bar, a sports bar, a dive bar, and a high-class bar. The bars in Midtown have higher drink prices than bars out in the country . The bars in Midtown have happy hours during the week. The bars in Midtown don't let students in who are under 21.
In Midtown, there is a country music bar, a karaoke bar, a sports bar, a dive bar, and a high-class bar.
Which of the following is NOT one of the four key reasons that the government provides in-kind benefits rather than cash benefits? In-kind benefits give the recipient the greatest flexibility to choose what matters most. Taxpayers may care more about reducing homelessness or hunger than what will make the recipient happiest. An in-kind benefit like child care is a complement to work, which provides some incentive for recipients to provide for themselves rather than rely on the safety net. Giving goods rather than cash prevents recipients from making bad choices.
In-kind benefits give the recipient the greatest flexibility to choose what matters most.
When there is a normal monopoly, economic surplus is _____ compared to when there is perfect price discrimination.
LOWER
The presence of an externality can lead to: Market inefficiency (i.e., Deadweight Loss) Market efficiency Market contraction Market Expansion
Market inefficiency (DWL)
Which good is MOST likely to be a public good? Amazon Prime movie rental a Six Flags amusement park a pair of shoes national defense
National defense
In a _____ monopoly, the marginal cost falls as production increases. Only one company can survive in the market as new entrants will always be at a cost disadvantage.
Natural
Marginal social cost equals marginal _____ cost plus marginal _____ cost.
PRIVATE; EXTERNAL
If a firm is a price-taker, the market is most likely to be: Monopoly Oligopoly Perfect Competition Natural Monopoly
Perfect Comp
Which of the following policies to increase surplus for the poor is LEAST likely to reduce the incentive to work?' Reducing taxes Sending cash to individuals making less than $30,000 a year Sending child-care vouchers to individuals making less than $30,000 a year Cancelling student loan debt for those unemployed after college
Reducing taxes
The BEST example of a public good is: a fireworks display organized by a municipality. clothing from American Eagle. lunch at Subway. a country club membership.
a fireworks display organized by a municipality.
A firm has market power if it can a) maximize profits. b) minimize costs. c) influence the market price of the good it sells. d) hire as many workers as it needs at the prevailing wage rate.
c) influence the market price of the good it sells.
Your firm has a reputation for being a great place to work. This would allow you to _____ to increase profits. reduce wages increase wages hire more workers hire fewer workers
reduce wages
In the last 20 years, the number of people experiencing poverty in the United States has _____ and the number of people experiencing poverty globally has _____. remained about the same; decreased increased; decreased remained about the same; increased increased; increased
remained about the same; decreased
Lower wages for data analysts would NOT cause the supply curve for data analysts to shift. some people to leave the workforce as data analysts existing data analysts to work fewer hours. some people to switch to jobs other than being a data analyst.
the supply curve for data analysts to shift
Compensating differentials are variations in wages based on: The worker’s gender The length of the worker’s commute The unpleasantness of the job The amount of skill required for the job
the unpleasantness of the job
marginal revenue formula
total revenue/ change in q sold
When is the break-even point?
when average total cost equals demand
Which of the following tax systems is progressive? Corinne pays a 10% tax on the first $10,000 she earns plus a _____ tax on any additional income. 25% 10% 0% 5%
25% -Progressive tax systems are when your income increases, the more taxes you have to pay
True/False: A company's marginal revenue is the change in total revenue when they sell one additional unit.
True
True/False: A monopolist will maximize their profit if they choose a price which makes their marginal revenue equal to their marginal costs.
True
Which of the following is a good example of a natural monopoly? A bagel shop in New York City A state-owned electric company A nail salon in Atlanta A clothing store in a mall
A state-owned electric company
How does the price customers pay under price discrimination compare to the price with no price discrimination?
Under price discrimination, some customers pay a higher price, and some pay a lower price.
When there is collusion in an oligopolistic cartel: The parties in the cartel collectively act as if they were a monopolist Each cartel member agrees to restrict quantity in order to boost the price There is strong incentive for each cartel member to cheat and over-produce As more and more cartel members cheat and over-produce, the price and quantity approach the level in a competitive market All of these
All of these
Which of the following is NOT an example of price discrimination through the hurdle method? All senior citizens are eligible to receive a 10% discount. Those who use a manufacturer coupon receive $5 off the price . Those who are willing to wait for periodic sales get a lower price. Slightly different product versions are available at different prices.
All senior citizens are eligible to receive a 10% discount.
According to data presented in this class, if current trends continue a person born in 2000 is _____ to make more money than his or her parents compared to a person who was born in 1980. less likely more likely equally likely none of these
less likely
A natural monopoly arises because the firm has: Low prices Economies of scale Economies of scope Popularity with its customers
Economies of Scale
Costs that arise from a market transaction but that are borne by people not involved in the transaction are called _____ costs. outside public reversal external
External
True/False: Externalities can only be solved with government intervention.
False
True/False: If a company holds a patent on their product, then they are a natural monopolist.
False
True/False: Increasing the amount of high skilled workers in the labor force would increase the wages paid to those workers.
False
True/False: Prices are usually higher in a market with perfect competition, and lower in a market with a monopolist.
False
In a market with an oligopoly, there are ______ firms producing _______ products. Many, different Few, different Many, similar Few, similar
Few, similar
Tragedy of the Commons
HAS TO DO WITH COMMON RESOURCES WHICH ARE NONEXCLUDABLE AND RIVAL -assign ownership rights solves tradgey of commons -basically when everyone owns something. they end up acting as if no one owns it . Ownership rights help facilitate successful private bargaining
The news reports that the US Postal Service may lay off workers next year. Which graph shows what happens to the labor market for postal workers this year?
Supply shifts left
Ezra's company faces hard times and must reduce Ezra's hourly wage. In response, Ezra decides to take more days off work to pursue his hobby of cycling. This is an example of: The income effect The substitution effect Comparative advantage Deadweight loss
The substitution effect
The table provides daily data on Marla's Smoothie Shop. What is Marla's profit margin?
To calculate: (Total Revenue - Total Cost)/Quantity= $2.50
Implicit opportunity costs of running a business include: earnings that are given up in order for the owner to start or run a business. the imagined costs of inputs that a company buys at a discount. debt that a company has accumulated during the year. bills that a company pays
earnings that are given up in order for the owner to start or run a business.
When Jeremiah watches a movie on Apple TV, his viewing is _____ in consumption because other people _____ able to watch the movie at the same time as Jeremiah does.
nonrival; are
