Econ midterm 3

Parker owns a car wash. She currently has four employees and is able to wash 18 cars per day. If she hires a fifth employee, she will be able to wash 21 cars per day. Car washes cost $10 each. What is the marginal revenue product of the fifth employee?"

$30

marshall is willing to pay $4 for a cup of coffee. Brad is willing to pay $2 for a cup of coffee. It costs Kool Beanz coffee Company $1 to make a cup of coffee. Assume that Marshall and Brad are the only two potential customers for this coffee shop. Suppose Brad is a college student and has a student ID; Marshall is not a college student. Cool beans coffee company could maximize profits by charging college students a price of __________ and non-college students a price of ____________. A. 2, 2 B. 4,4 C. 2,4 D. 4,2

C. $2,$4

which of the following is NOT an example of price discrimination? A. Sony sells cheaper blu ray disc overseas, but you cannot use them in an American blu ray player B. Colleges offer need-based financial aid C. A jewelry store charges a higher price for a gold ring than it charges for a silver ring D. Mcdonalds offers half price coffee to senior citizens

C. A jewelry store charges a higher price for a gold ring than it charges for a silver ring (different products so not price discrimination)

relative to a model of perfect completion, a monopolist produces A. The same quantity B a higher quantity C. A lower quantity

C. A lower quantity

According to what we learned in class, which of the following is not an example of a downside of redistribution: A. Eddie moves to Nashville to try. to become a professional singer, even though he can't sing. He plans to rely on unemployment benefits of his income B. Eric cheats on his income taxes C. Angelica takes out student loans to attend law school. She graduates, gets a high paying job with a law firm, and repays her loans D. The government has to hire thousands of employees to process claims for medicare and medicaid

C. Angelica takes out student loans to attend law school. She graduates, gets a high paying job with a law firm, and repays her loans

Greg owns a company which manufactures dishwashers. He employs forklift drivers to move refrigerators around his factory and warehouse. Which of the following will increase the demand for forklift drivers? A) A decrease in the price of forklifts. B) An increase in the demand for dishwashers. C) Better management results in forklift drivers being more productive.

C. Better management results in forklift drivers being more productive (this increases MPL, which means you can hire more workers before MPL is equivalent to MC)

which of the following is consistent with a model of perfect competition? A. a small number of sellers B. Lots of firms selling slightly different products C. Firms are "price takers" D. Demand slopes up E. The demand curve is a vertical line

C. Firms are "price-takers"

According to what we learned in class, what is the marginal cost of working for one hour if your hourly wage is $12? A. $12 B. $0 C. One hour of leisure D. One hour of work

C. One hour of leisure (think opportunity cost)

Subscribing to Disney+ cost 7.99 per month. Subscribing to Hulu cost 7.99 per month. There is also a bundle available that includes subscriptions to both services and costs $9.99 per month this suggests that A. the marginal cost of providing the services is $7.99 per month B. People with a high willingness to pay for Disney plus also have a high willingness to pay for Hulu C. People with a high willingness to pay for Disney plus have a low willingness to pay for hulu D. People with a high willingness to pay for hulu get no enjoyment from having disney plus subscription

C. People with a high willingness to pay for Disney plus have a low willingness to pay for hulu

An argument for redistribution is based on diminishing marginal benefits. Suppose Walter earns 1 million per year while Oliver earns 15,000 per year which of the following best summarizes the diminishing marginal benefits argument for redistributing wealth from Walter to Oliver A. The marginal value of 15,000th dollar of income is greater for Walter than for Oliver B. For Walter, the marginal value of dollar $1,00,001 is greater than the marginal value of dollar $15,001 while for Oliver the opposite is true C. The marginal value of dollar $1,000,001 is less than the marginal value of dollar $15,001 D. It is not fair for Walter to earn so much more than Oliver earns

C. The marginal value of dollar $1,000,001 is less than the marginal value of dollar $15,001

In a model of perfect competition, the demand curve that an individual firm sees is: A. Downward sloping B. upward sloping C. a horizontal line D. a vertical line

C. a horizontal line

Which of the following is an example of a situation where we could expect to see third degree price discrimination: A. charging college students a lower price for groceries B. a shoe store occasionally sending 10%off coupons in the mail C. a restaurant offering senior citizens 10% of their breakfast D. A buffet charging hungrier people higher prices

C. a restaurant offering senior citizens 10% of their breakfast

A coordination game exists when: A. the product or issue of the game concerns communication, such as phone calls or media B. coordination is costless and easy, regardless of whether it is harmful C. all players have common interest in coordinating their choices D. collusion created the market or situation from the start

C. all players have common interest in coordinating their choices

Based on the rational rule for sellers how does a manager set price and quantity? If the company has no market power, the marginal cost ________ price.. If the company has market power, the marginal cost is ______ than price. A. is less than; greater B. is greater than; less C. equals; less D. equals; greater

C. equals; less

Which of the following is consistent with a model of perfect competition? A. a small number of sellers B. lots of firms selling slightly different products C. firms are "price takers" D. demand slopes up E. The demand curve is a vertical line

C. firms are "price takers"

Third degree price discrimination for concessions at ball parks is not applied to adults and children because_________. A. Childrens demand for food is elastic and adults demand for food is inelastic B. Adults demand for food is elastic and children demand for food is inelastic C. there could be exchange of the products from children, who could buy them at a lower price, to adults D. Adults would buy goods at a high price and give them to their children

C. there could be exchange of the products from children, who could buy them at a lower price, to adults

You own a snow shoveling company. You have four employees and are considering hiring a fifth. Hiring a fifth employee will increase the number of houses you can serve from 45 to 50. You charge $30 per house. What is the marginal revenue product of the fifth employee? A) 5 houses B) 10 houses C) $20 D) $150 E) $1,000

D. $150

marshall is willing to pay $4 for a cup of coffee. Brad is willing to pay $2 for a cup of coffee. It costs Kool Beanz coffee Company $1 to make a cup of coffee. Assume that Marshall and Brad are the only two potential customers for this coffee shop. Suppose cool beans coffee company must charge all customers the same price. The company should charge a price of ______. It will earn a profit of ________. A. 2, 6 B 2, 4 C 4,2 D. 4,3

D. $4, $3

Which of the following conditions is present for all sellers in a perfectly competitive market? A. All sellers have an equal and high level of market power B. The product price varies across sellers C. The number of sellers is small D. All sellers are selling identical products

D. All sellers are selling identical products

The equilibrium wage grocery store cashiers is $15 per hour. Sam supermarket just opened, and Sam is playing to hire dockworkers to unload food from trucks. He plans to pay them $15 per hour. Relative to working as a cashier, being a dock worker is more dangerous and requires workers to work on ours. What do we expect to happen? A. Most cashiers will quit their jobs to work as dock workers B. Sam will have lots of workers apply to be dock workers, leading to a labor shortage C. Sam is overpaying dock workers, so he will lower dock wages D. Few workers will work for sam unless he increases dock workers pay

D. Few workers will work for sam unless he increases dock workers pay

Which of these industries would be the closest to "monopolistic competition"? A. Soybeans B. A gas station without any local competitors C. Cell phone providers D. Ice cream

D. Ice cream

Which of the following is an example of benefiting from social insurance: A. Sara buys homeowners insurance B. Abby buys a smoke detector C. Natalie gets a payoff from her auto insurance company when she gets in a car accident D. Josephine gets workers compensation when her employer goes out of business

D. Josephine gets workers compensation when her employer goes out of business

When a seller has a high level of market power, the seller A. produces a product that is identical to the output of other companies in the market B. is in a market with growing demand C. is one of many sellers selling in it market D. can raise its price without losing many customers

D. can raise its price without losing many customers

Which of the following statements is true regarding discrimination in labor markets? A. when discrimination occurs, all workers are treated equally B. If two workers in the same job have different salaries, one is a victim of discrimination C if average income differs across groups of workers, there is discrimination D. discrimination accounts for only part of the differences in wages across groups of workers

D. discrimination accounts for only part of the differences in wages across groups of workers

Why can a company with monopsony power in its labor market succeed in paying low wages? a. workers don't have other employment options b. the employer doesn't have other options for employees c. there is very limited supply of workers d. it must charge a low product price

a. workers don't have other employment options

Francine owns a restaurant and is considering expanding her restaurant and hiring more workers. However, she knows that if she does this, she will have to offer daily happy hour specials in order to get extra customers to come. This is an example of: A) Diminishing marginal product B) Declining output prices C) Labor-capital substitution

b. declining output prices (offering specials is an equivalent of cutting prices)

unions try to _________ union members by ________ a. ensure more jobs for; reducing wages b. ensure more jobs for; rising wages c. raise wages of; shifting the labor supply curve to the left d. raise the wages of; shifting the labor supply curve to the right

c. raise wages of; shifting the labor supply curve to the left

Which of the following is NOT among the main factors affecting wages? a. discrimination b. regulation and institutional factors c. labor demand d. complements

d. complements

Kaila wants her employer to pay her 20% more for making night deliveries in a high-crime neighborhood than the day delivery people receive. Most of the delivery people are willing to make night deliveries in the neighborhood for only a 10% differential. Kaila is seeking: a. a compensating differential based on her individual concerns about the risks b. a compensating differential because others are undervaluing her concerns c. less than a compensating differential because she is asking for more than others are d. more than a compensating differential because she has greater concerns than most workers

d. more than a compensating differential because she has greater concerns than most workers

In a monopoly there Is one _____________; in a monopsony, there is one ______________.

seller; buyer

Chad loves playing Valorant on his computer. He will work as much as necessary to afford his apartment, food, and other necessities, but he prefers to spend as much time as possible playing Valorant. If Chad gets a raise, we expect him to choose to work___________ A) Fewer hours because for Chad, the income effect is very important B) More hours because for Chad, the income effect is very important C) Fewer hours because for Chad, the substitution effect is very important D) More hours because for Chad, the substitution effect is very important

A. Fewer hours because for Chad, the income effect is very important

According to what we learned in class, what is the main reason that perfect (first-degree) price discrimination is so rare? A. Finding everyones willingness to pay is costly and difficult B. Overcoming legal conflicts to charge each person differently is costly C. Not every person has a maximum willingness to pay for a good D. Most consumers have identical preferences

A. Finding everyones willingness to pay is costly and difficult

Which of the following is NOT true about imperfect competition A. Greater product differentiation decreases market power B. A smaller number of sellers in a market increases market power C. Imperfect competition among buyers gives them bargaining power D. Sellers with market power can use independent pricing strategies

A. Greater product differentiation decreases market power

Relative to traditional monopoly pricing, price discrimination leads to A. Increased quantities B. decreased quantities

A. Increased quantities (price discrimination allows a monopolist to sell to individuals who have been priced out by traditional monopoly pricing these are individuals who have valuation greater than marginal costs but less than the monopoly price)

Louisa owns a lawnmowing service. She hires high school students and college students to mow lawns for homes and businesses in the area. This summer, Louisa upgraded her lawn mower fleet by purchasing new mowers that are much faster and allow her employees to cut lawns in half the time. According to what we learned in class, how will this shift Louisa's labor demand? A. Labor demand shifts right B. Labor demand shifts left C. Labor demand is unaffected

A. Labor demand shifts right

Which of the following statements is TRUE? A. Labor unions shift the labor demand curve to the right B. A monosony will likely lead to lower wages C. All wage difference between men and women is due to discrimination D. Jobs which are unpleasant will have a compensating differential pay, which leads to workers at this job being payed less

A. Labor unions shift the labor demand curve to the right

Kara owns a company that makes jackets. Her company is doing well and she's considering expanding by hiring more employees. However, she knows that if she hires more employees and increases her production, she will have to cut prices in order to sell more jackets. This is a good example of: A) Why labor demand slopes down B) Why Marginal Resource Cost is a horizontal line C) Why machinery is not a good substitute for high-skill labor D) Why marginal revenue product is upward sloping

A. Why labor demand slopes down

In which of the following situations would Marias doughnut shop have the LEAST market power? A. within three miles, there are five other doughnut shops and three bakeries that sell breakfast pastries B. There are two rival doughnut shops within three miles and no other bakeries C. The closest doughnut shop is 10 miles away, but there is a bakery with breakfast pastries two miles away D. The closest doughnut shop or bakery is 25 miles away from Marias shop

A. within three miles, there are five other doughnut shops and three bakeries that sell breakfast pastries

A market with lots of competitors all selling slightly different products would be categorized as: A) Perfect competition B) Monopolistic competition C) Monopoly D) Oligopoly

B) Monopolistic competition

According to what we learned in class, which of the following is true about the congressional Budget Office estimations of what would happen If the minimum wage increased from $7.25 to $10.10? A. A lot of people's wages would increase B. There would be a large increase in the unemployment rate C. Most of the people who benefit from this policy are below the poverty line

A. A lot of peoples wages would increase

The city of Eagleton raises the minimum from $9 per hour to $16 per hour. As a result of this minimum wage increase, there is a large increase in the unemployment rate. They suggest that the demand for labor is relatively A. Elastic B. Inelastic

A. Elastic (Elastic= change in quantity demanded due to change in price is large)

If Michigan were to simplify the licensing requirements for marijuana sale what would happen to previous businesses A. Existing establishments would be less profitable B. The number of licensed marijuana establishments would decrease C. The equilibrium price of marijuana would increase D. The number of licensed marijuana establishments would be unaffected

A. Existing establishments would be less profitable

In the 2023 2024 basketball season, the highest paid NBA player is Stephen Curry, who makes 52 million per year. Three of his teammates make only $560,000 per year so curry makes almost 100 times as much money as them. However most are not concerned about this inequality. According to what we learned in class why is it that people might consider this outcome to be "fair" A. there any quality of outcomes because Curry and his teammates play for the same team and will share their team success B. Curry's salary is the result of a fair process NBA teams choose to pay the best player the most money if any player becomes as good at basketball as Curry is that player could command a gigantic curry level salary C. Curry has a greater marginal benefit from an extra dollar of income than his teammates do

B. Curry's salary is the result of a fair process NBA teams choose to pay the best player the most money if any player becomes as good at basketball as Curry is that player could command a gigantic curry level salary

According to what we learned in class, which of the following statements about redistribution income is NOT true: A. There are substantial differences over what a "fair" outcome will is B. Economists have the ability to use mathematics to show what a "fair" outcome will be C. There are substantial costs to redistributing income D. redistribution can be thought of as a form of social insurance

B. Economists have the ability to use mathematics to show what a "fair" outcome will be

Consumers who clip and redeem discount coupons_____________. A. exhibit the same price elasticity of demand for a given product than consumers who do not clip and redeem coupons B. Exhibit a relatively higher price elasticity of demand for a given product than consumers who do not clip and redeem coupons C. Exhibit a relatively lower price elasticity of demand for a given product than consumers who do not clip and redeem coupons D. Cause total revenue to decrease for firms that issue coupons for their products

B. Exhibit a relatively higher price elasticity of demand for a given product than consumers who do not clip and redeem coupons

Entrepreneurs who wish to open a licensed marijuana retail establishment in Michigan must go through an extensive and complicated application process. Which of the following statements is likely TRUE: A. Existing businesses like these complicated restrictions because they shift labor demand to the right B. Existing businesses like these complicated restrictions because they shift labor demand to the left C. Existing businesses do not like these complicated restrictions because they shift labor supply demand to the right D. Existing businesses do not like these complicated restrictions because they shift labor supply demand to the left

B. Existing businesses like these complicated restrictions because they shift labor supply demand to the left

According to what we learned in class, which of the following statements about inequality is true? A. Most poor people are senior citizens B. Full-time workers are unlikely to be in poverty C. Fewer than 10% of American ever experience poverty D. married couples are more likely to be in poverty than single parents are

B. Full-time workers are unlikely to experience poverty

According to what we learned in class, which of the following statements about inequality is true? A. lowest earning people in the US are considerably poor and the lowest earning people in other advanced democracies B. inequality in the United States is greater now than it was 50 years ago C. There is more inequality in permanent income than in income given at any point in time D. the highest earning people in the US have around the same income as the highest earning people and other advanced democracies

B. Inequality in the United States us greater now than it was 50 years ago

Which of the following is true for both perfect competition and monopoly? A. Price= marginal cost B. Marginal revenue= marginal cost C. The quantity sold maximize total surplus D. Price > marginal revenue

B. Marginal revenue= marginal cost

Kristen's hobbies Lesley of hanging out with big groups of people indoors going to concerts, visiting restaurants, and going out dancing with her friends. During the 2020 pandemic, many of these options are available to her to the government mandated business closures how did this affect Kristens labor supply curve? ( assume that the labor demand curve for Kristen did not change. Second, use what we know about the opportunity cost of labor to answer this question) A. Shifted to the left B. Shifted to the right C. Movement up along the supply curve D. Movement down along the supply curve

B. Shifted to the right

Which of the following best describes a market where a seller with market power would use the "hurdle method"? A. College students have a higher willingness to pay for textbooks than non-college students B. Some theater fans can't afford to pay full-price for broadway shows, but they are willing to in line to purchase discount tickets C. People are willing to pay a higher price for human medicine than they are willing to pay for pet medicine D. People with higher incomes can afford to pay higher college tuition

B. Some theater fans can't afford to pay full-price for broadway shows, but they are willing to in line to purchase discount tickets

Human capital is: A. capital equipment made my hand B. accumulated knowledge and skills that make a worker more productive C. capital equipment that must be operated by humans D. human labor used in place of machines

B. accumulated knowledge and skills that make a worker more productive

A characteristic of monopolistic competition that is not present in any other market structure is that there A. is only one seller and that seller holds a high level of market power B. are many sellers and each produces its own version of the product C. are a small number of sellers who have market power D. are many sellers that produce identical products

B. are many sellers and each produces its own version of the product

3. When an individuals best choice may depend on what other people choose and other peoples best choices may depend on what the individual chooses, then _________ is the science that is useful to help decision makers analyze their options. A. strategic interaction theory B. game theory C. analytical strategy D. partial equilibrium analysis

B. game theory

Which of the following is an example of a cartel: A. Apple designs a FaceTime so that it cannot be used by anyone without and iPhone B. two beer distributors agree that each of them will serve half the city of Lansing C. McDonalds runs a radio commercial that says its French fries taste better than burger kings D. Pfizer charges a very high price for a cancer treatment drug that it has patented

B. two beer distributors agree that each of them will serve half the city of Lansing