Econ final exam

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The distribution of household income

A Lorenz curve is a graph that shows: The equity versus efficiency trade-off How many households are living in poverty The tradeoff between inflation and unemployment The distribution of household income

Is a straight line with a 45-degree angle

A Lorenz curve showing perfect equality in the distribution of income: Coincides with the horizontal axis Coincides with the vertical axis Is a straight line with a 45-degree angle Is a curve bowed to the southwest

Price of the input equals the marginal revenue product of the input

A competitive employer will hire inputs up to the point where the: Marginal product of the input reaches a maximum Price of the input equals the price of the output Price of the input equals the marginal product of the input Price of the input equals the marginal revenue product of the input

Wage Taker

A firm that hires labor in a purely competitive resource market is a: "Price maker" "Product taker" "Money maker" "Wage taker"

Monopsony

A market where there is only a single buyer is called a(n): Monopoly Monopsony Oligopoly Dominant firm

-$13

A monopolist can sell 20 toys per day for $8.00 each. To sell 21 toys per day, the price must be cut to $7.00. The marginal revenue of the 21st toy is: -$10 -$13 +$7 +$21

Agree with each other to set prices and output

Collusion refers to a situation where rival firms decide to: Compete aggressively against each other Cheat on each other Agree with each other to set prices and output Combine their operations and merge with each other

The monopolist produces a product with no close substitutes

One defining characteristic of pure monopoly is that: The monopolist is a price taker The monopolist uses advertising The monopolist produces a product with no close substitutes There is relatively easy entry into the industry, but exit is difficult

A price maker

One feature of pure monopoly is that the firm is: A producer of products with close substitutes One of several producers of a product A price taker A price maker

Ownership of essential resources

One major barrier to entry under pure monopoly arises from: The availability of close substitutes for a product Ownership of essential resources The price taking ability of the firm Diseconomies of scale

Education

One of the major causes of income inequality is differences in: Unemployment benefits Transportation Education Housing

Law of diminishing returns

The marginal revenue product of an input in a competitive market decreases as a firm increases the quantity of the input employed because of the: Law of diminishing returns Law of diminishing marginal utility Homogeneity of the product Free mobility of resources

Marginal revenue is less than average revenue

The non-discriminating pure monopolist must decrease price on all units of a product sold in order to sell more units. This explains why: There are barriers to entry in pure monopoly A monopoly has a perfectly elastic demand curve Marginal revenue is less than average revenue Total revenues are greater than total costs at the profit maximizing level of output

Higher wages must be paid to bid workers away from other opportunities

The reason that the supply curve for labor in a purely competitive market slopes upward is because: The wage rate paid to workers falls as more are hired The marginal product of labor falls as output increases Marginal resource cost rises as productivity increases Higher wages must be paid to bid workers away from other opportunities

Marginal cost = marginal revenue

Many people believe that monopolies charge any price they want to without affecting sales. Instead, the output level for a profit-maximizing monopoly is determined by: Marginal cost = average revenue Marginal revenue = average cost Average total cost = average revenue Marginal cost = marginal revenue

The increase in a firm's total cost caused by hiring one additional unit of an input

Marginal resource cost is: The increase in a firm's total cost caused by hiring one additional unit of an input A firm's cost of hiring one group of inputs, such as capital or labor The firm's demand curve for a productive resource Determined by the marginal physical product schedule for an input

Producing differentiated products

Monopolistic competition is characterized by firms: Producing differentiated products Making economic profits in the long run Producing at optimal productive efficiency Producing where price equals marginal cost

Marginal revenues that are less than price

Monopolistically competitive firms are similar to monopolies in that they have: High barriers to entry in their industry Close substitutes for their products Inelastic demand for their products Marginal revenues that are less than price

Considers the reactions of its rivals when it determines its pricing policy

Mutual interdependence means that each firm in an oligopoly: Faces a perfectly inelastic demand for its product Considers the reactions of its rivals when it determines its pricing policy Depends on the other firms for its inputs Depends on the other firms for its markets

Rises to reflect greater inequality

As the area between the Lorenz curve and diagonal gets larger, the Gini ratio: Rises to reflect greater equality Rises to reflect greater inequality Falls to reflect greater inequality Falls to reflect greater equality

An increase in product demand

As the baby boomers in America grow old, the demand for health-care workers increases. This would be an example of which determinant of labor demand? An increase in labor productivity An increase in product demand A decrease in the price of another resource An increase in the price of another resource

Price is greater than marginal cost

At the profit-maximizing level of output for a monopolist: Price is greater than marginal cost Price is greater than average revenue Average total cost equals marginal cost Total revenue is greater than total cost

2150

Industry Y is dominated by five large firms that hold market shares of 20, 20, 25, 25, and 10. The Herfindahl index for this industry is: 1560 2150 2340 3500

0.20

Which of the following Gini ratios would indicate the least amount of income inequality? 0.20 0.40 0.60 0.80

The widespread availability of news on the Web reduces the demand for newspaper workers

Which of the following decreases in labor demand is due to a change in product demand? An increase in the price of paper increases the cost of making books, thus decreasing the demand for bookbinders The widespread availability of news on the Web reduces the demand for newspaper workers An increase in the price of steel increases the cost of producing cars and trucks, thus decreasing the demand for automobile workers A decline in productivity in retailing decreases the demand for retail sales workers

With a loss

A monopolistically competitive firm is producing at an output level in the short run where average total cost is $4.50, price is $4.00, marginal revenue is $2.50, and marginal cost is $2.50. This firm is operating: With positive profits With a loss At the break-even point At a non-optimal level of output

Neither industry has significant barriers to entry

A monopolistically competitive industry is like a purely competitive industry in that: Each industry produces a standardized product Nonprice competition is a feature in both industries Neither industry has significant barriers to entry Firms in both industries face a horizontal demand curve

Marginal revenue product of the input is at least as much as the cost of hiring the input

A profit-maximizing firm should hire an input as long as the: Firm can increase its total revenue Price of the input doesn't exceed the price of the other inputs used in the firm's production Marginal revenue product of the input is at least as much as the cost of hiring the input Marginal revenue product of the input is greater than the marginal revenue product of other inputs the firm is using

Dominant Strategy

A strategy that is better than any alternative strategy - regardless of what the other firm does - is called a: Dominant strategy Nash strategy Positive-sum strategy Best strategy

Auto Workers

An example of derived demand in the auto industry is the demand for: New automobiles Used automobiles Auto workers Drivers' insurance

Can result from government regulation

Barriers to entry: Usually result in pure competition Can result from government regulation Exist in economic theory but not in the real world Are typically the result of wrongdoing on the part of a firm

The marginal revenue product (MRP) of labor will increase

If the price of a good increases, then in the market for the type of labor needed to produce this good: Employment will decrease The labor supply will increase The marginal product (MP) of labor will increase The marginal revenue product (MRP) of labor will increase

Decrease the units of the resource used in order to increase profits

If the price of a resource is greater than its marginal revenue product, the firm should: Charge a higher price for its product Make no change in the units of the resource used Increase the units of the resource used in order to increase profits Decrease the units of the resource used in order to increase profits

Marginal resource cost curve for a single competitive firm in the industry to shift up

If the wage rate in a purely competitive labor market increases, it will cause the: Marginal resource cost curve for a single competitive firm in the industry to shift down Marginal resource cost curve for a single competitive firm in the industry to shift up Labor supply curve for a single competitive firm to shift downward Labor supply curve for the industry to shift rightward

May be positive, negative, or zero

In the short run equilibrium, a monopolist's profits: May be positive, negative, or zero Are positive because of the monopolist's market power Are positive if the product's elasticity of demand is less than 1 Are positive if the product's elasticity of demand is greater than 1

Shift to the right

Suppose some firms exit an industry characterized by monopolistic competition. We would expect the demand curve of a firm already in the industry to: Shift to the left Shift to the right Become less elastic Remain the same since entering firms serve other customers in the market

Depends on the demand for the product it helps to produce

The demand for a productive resource is said to be "derived" because the demand for the factor: Depends on the demand for the product it helps to produce Depends on the demand for a complementary factor Is derived from the state of the economy Is derived from government policy

The annual data indicate inequality, but the two-year data indicate equality

Suppose that Jane earns $10,000 in year 1 and $15,000 in year 2, while Jim earns $15,000 in year 1 and $10,000 in year 2. Is there income equality for the two individuals? The annual data indicate equality, but the two-year data indicate inequality The annual data indicate inequality, but the two-year data indicate equality Both the annual and the two-year data indicate equality Both the annual and the two-year data indicate inequality

Total area below the diagonal

The Gini ratio is calculated by dividing the area between the Lorenz curve and the diagonal by the: Remaining area below the diagonal Total area below the diagonal Total area of the box or rectangle Remaining area of the box or rectangle

Degree of income inequality

The Gini ratio or Gini coefficient is a measure of the: Inflationary gap Recessionary gap Number of households that are classified as being poor Degree of income inequality

Overstated because it does not take into account income mobility

The degree of inequality in income distribution based on single-year data is: Understated even though it takes into account income mobility Overstated because it does not take into account income mobility Understated because it does not take into account income mobility Overstated even though it takes into account income mobility

The same as the industry's demand curve

The demand curve confronting a non-discriminating pure monopolist is: Horizontal The same as the industry's demand curve More elastic than the demand curve confronting a competitive firm Derived by vertically summing the individual demand curves for the buyers

Price less of a factor and product differences more of a factor in consumer purchases

The goal of product differentiation and advertising in monopolistic competition is to make: The firm allocatively efficient even if it is not productively efficient The firm productively efficient even if it is not allocatively efficient Price less of a factor and product differences more of a factor in consumer purchases Price more of a factor and product differences less of a factor in consumer purchases

Decide to increase advertising expenditures even if it means a reduction in profits

Under oligopoly, if one firm in an industry significantly increases advertising expenditures in order to capture a greater market share, it is most likely that other firms in that industry will: Pursue a strategy to reduce advertising expenditures to maintain profits Decide to increase advertising expenditures even if it means a reduction in profits Make no changes in advertising expenditures because advertising is effective in the short run, but not the long run Increase the price of the product to improve profits and then increase advertising expenditures

The wage rate the firm must pay varies directly with the number of workers it employs

Which of the following is characteristic of a labor market that is a monopsony? The type of labor available is relatively mobile from one industry to another The supply curve for labor lies above the marginal resource cost curve of the firm The wage rate the firm must pay varies directly with the number of workers it employs The firm's employment is a small portion of the total employment of that type of labor


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