Exam 3 Micro
Units of Resource Total Product Product Price 0 0 $3.80 1 10 3.70 2 19 3.60 3 27 3.50 4 34 3.40 5 40 3.30 Refer to the table. The marginal revenue product of the fourth unit of input is approximately
$21
Units of Resource 0 1 2 3 4 5 Total Product 0 6 11 15 18 20 Total Revenue ($) 0 36 55 60 54 40
$5
Pure Land Rent, Per Acre Land Demanded, Acres $500 100,000 400 200,000 300 300,000 200 400,000 100 500,000 50 600,000 Suppose that the available quantity of a certain type of farmland is 400,000 acres, and the demand for this land is given in the table. If landowners were taxed at a rate of $150 per acre for their land, what would be the economic rent on this land after taxes, and how many acres would be rented?
$50 and 400,000 acres
(1) (2) (3) Number of Labor Units MRP of Labor Wage Rate 0 1 $21 $9 2 19 10 3 17 11 4 15 12 5 13 13 6 11 14 7 9 15 8 7 16 The table gives a monopsonist's marginal-revenue-product schedule for labor in columns 1 and 2 and the supply schedule for labor in columns 1 and 3. What is the firm's total labor cost if it hires 6 workers?
$84
Expected Rate of Net Return (%) Amount of Capital Goods Investment (in billions) 21 $320 19 350 17 400 15 460 13 530 11 600 The table gives investment-demand in an economy. Assume that investment demand decreased by $100 billion in the investment-demand schedule. What expected rate of return and interest rate would create $430 billion of investment?
13 percent
Number of Workers Total Product Product Price ($) 0 0 3 1 16 3 2 26 3 3 34 3 4 40 3 5 44 3 The table is for a purely competitive market for resources. How many more workers will the firm hire when the wage rate is $15 instead of $30?
2 workers
Quantity of Resource Y Employed Marginal Product of Y Product Price 0 -- 1 44 $2.00 2 42 1.90 3 36 1.80 4 32 1.70 5 24 1.60 6 14 1.50 7 2 1.40 Refer to the table. Assume that the quantities of other resources employed by the firm remain constant. How many units of resource Y would the firm employ at a price of $50 per unit of Y?
3
Unit of Labor Total Product Product Price 0 0 $2.20 1 15 2.00 2 28 1.80 3 39 1.60 4 48 1.40 5 55 1.20 6 60 1.10 Refer to the table, which gives data for a firm that is hiring labor in a purely competitive market. If the wage rate is $11, how many workers will the firm choose to employ?
3
Suppose the members of population A, consisting of Al, Bob, Curt, Doris, and Ellie, receive annual incomes of $5,000, $2,500, $1,250, $750, and $500, respectively. What percentage of total income is received by the richest quintile?
50
Wat's Production Possibilities Product A B C D E F Rice 750 600 450 300 150 . 0 Corn 0 50 100 150 200 250 Xat's Production Possibilities Product A B C D E F Rice 2,500 2,000 1,500 1,000 500 0 Corn 0 100 200 300 400 500 The hypothetical nations Wat and Xat have the production possibilities for rice and corn given in the accompanying tables. Assume that Wat originally produced rice and corn at combination C and that Xat originally produced combination B. If the nations now fully specialize based on comparative advantage, the total gains from
50 units of rice and 50 units of corn.
In the diagram, S is the before-tax supply curve and St is the supply curve after an excise tax is imposed. The total amount of the tax paid by consumers is shown by areas
A + B.
The Gini ratio
A numerical measure of the overall dispersion of income among households, families, or individuals; found graphically by dividing the area between the diagonal line and the Lorenz curve by the entire area below the diagonal line.
Which of the following cases established that the mere possession of monopoly power violated antitrust laws?
Alcoa case of 1945
Which of the following is correct?
Although land has no production cost from society's viewpoint, rental payments are costs to individual producers.
What is most likely to happen as the output of a natural monopoly increases over the range of market demand?
Average total cost decreases as output increases.
The tables give production possibilities data for two countries, Alpha and Beta, which have populations of equal size. Alpha's production possibilities A B C D E Fish (Tons) 80 60 40 20 0 Chips (Tons) 0 5 10 15 20 Beta's production possibilities A B C D E Fish (Tons) 240 180 120 60 0 Chips (Tons) 0 10 20 30 40 The given data show that
Beta is more efficient than Alpha both in catching fish and in producing chips.
Sellers bear a disproportionately large burden of the tax.
Demand is highly inelastic and supply is highly elastic.
Suppose many businesses want to increase their stock of capital goods and decide to borrow funds to do it. Which would be the likely result of this event?
Interest rates would increase.
(Consider This) Which of the following claims is not made by defenders of lotteries?
Lotteries are progressive in nature, with higher income families playing more frequently.
If a firm is hiring variable resources D and F in perfectly competitive input markets, it will minimize the cost of producing any level of output by employing D and F in such amounts that
MPD / PD = MPF / PF.
Nation A pays lower wages to workers than Nation B. Nation A also uses fewer capital goods per worker than Nation B. This suggests that gains from trade are likely to result if
Nation A produces products that are more labor-intensive and exports them to Nation B in return for products from Nation B that are more capital-intensive
Which expression is used to calculate the future value of an amount of money?
Present Value × (1 + interest rate)time
(Consider This) Which of the following claims is not made by opponents of a value-added tax (VAT)?
Sellers bear a disproportionately large burden of the tax.
The U.S. federal expenditures for "pensions and income security" are dominated by
Social Security payments.
Which of the following is not a social insurance program?
TANF (Temporary Assistance for Needy Families)
Which of the following statements about the European Union (EU) is true?
The EU has abolished most trade barriers among participating countries and has common tariffs applied to non-EU goods.
With a proportional tax, higher-income persons will pay
a bigger amount in taxes compared to lower-income persons.
Indy currently earns $50,000 in taxable income and pays $8,000 in taxes. Suppose that Indy faces a marginal tax rate of 25 percent and his boss offers him a raise of $2,000 per year. Indy should
accept the raise because his after-tax income will rise by $1,500.
Entitlement programs include
both public assistance programs and social insurance programs.
In the 2000 decision on the Microsoft antitrust case, the eventual remedy involved a
change in the business practices of Microsoft
Antitrust authorities are least likely to take action against
conglomerate mergers.
The supply of meat is more elastic in the long run than in the short run. Ceteris paribus, as time goes by, the burden of a tax on cattle will increasingly be shouldered by the
consumer
Studies show that
costs of trade barriers exceed their benefits, creating an efficiency loss for society.
Refer to the diagram. If line (c) represents the distribution of income before taxes and transfers and line (b) represents the distribution after taxes and transfers, then taxes and transfers have
decreased the Gini ratio.
The demand for land is
downsloping
Suppose the domestic price (no-international-trade price) of wheat is $3.50 a bushel in the United States while the world price is $4.00 a bushel. Assuming no transportation costs, the United States will
export wheat.
If the nominal wage rises by 4 percent and the price level rises by 7 percent, the real wage will
fall by 3 percent.
From an economic perspective, studies of the costs of trade barriers show that they
far exceed their benefits for society.
The legal cartel theory of regulation argues that
firms in certain industries want to be regulated rather than face the rigors of competition.
A college graduate who works at a firm is also working part-time on a master's degree in business and expects to be paid a higher wage after earning the degree. The basic reason for this wage differential is
investment in human capital.
Year Beginning Period Value Total Interest End Period Value 1 $2,000 A $2,200 2 $2,200 $420 B 3 C D E Refer to the table representing Kara's bank account. Assuming that $2,000 was deposited into her account at the beginning of year 1 and no further deposits or withdrawals were made, the value for cell E
is $2662
Equilibrium price differentials for productive resources
may be caused by differences in the quality of those resources.
A monopsonistic employer in an unorganized (nonunion) labor market will
pay a wage rate less than labor's MRP.
Critics of industrial regulation say that such regulation
perpetuates monopoly long after new technology has eroded natural monopoly.
Social Security payments are primarily made to assist
retired and disabled workers.
The labor demand curve of a purely competitive seller
slopes downward because the marginal product of successive workers declines.
The profit-maximizing and the least-cost combination of inputs are
such that maximizing profits always entails the least-cost combination of inputs.
The demand for airline pilots results from the demand for air travel. This fact is an example of
the derived demand for labor.
If the tax on gasoline is increased, gas stations are most likely to pass most of this increase to the consumer if the demand is
very inelastic.
If a firm is hiring variable resources D and F in imperfectly competitive input markets, it will maximize profits by employing D and F in such quantifies that
MRPD / MRCD = MRPF / MRCF = 1.
Which factor will increase the demand for loanable funds?
a technological advance that increases returns on investments
(Consider This) Entrepreneurs' singular focus on profit
encourages efficiency.
The electricians' union is a good example of
exclusive unionism.
A major distinction between government purchases and government transfer payments is that
government purchases divert resources from private uses to public uses, while transfer payments do not.
Each of the following has contributed to growing income inequality in the United States since 1975 except
government transfers.
The largest category of federal spending is for
pensions and income security.
Which of the following is a primary concern of social regulation?
product design
The highest quintile of households in the income distribution (as of 2014)
receives about 51 percent of the total income.
The empirical data indicate that the tax system and the transfer programs of the government
reduce the degree of inequality in the distribution of income.
(Last Word) Frederic Bastiat's satirical argument against protectionism called for protecting domestic producers from
the sun.
Which of the following contributes most to the reduction in income inequality?
transfer payments
If the price of a resource is greater than its marginal revenue product, the firm should
decrease the units of the resource used in order to increase profits. Q
In 2014, a household with an annual income of $75,000 would find itself in the
fourth quintile of the household income distribution.
Entrepreneurs normally do all of the following except
getting hired as a top executive in established corporations.
Which of the following amended the Clayton Act's prohibition against mergers that substantially lessen competition?
Celler-Kefauver Act of 1950
Which expression is used to calculate the present value of an amount of money?
Future Value/(1 + interest rate)time
Country A limits other nation's exports to Country A to 1,000 tons of coal annually. This is an example of a(n)
import quota.
Which of the following statements is true?
"Behavioralists" believe that some monopolists are "good" monopolists.
A caption that could serve as a warning to proponents of social regulation is
"There is no free lunch."
In 2014, the poverty line for a family of four was about
$24,230.
In 2014, the average income for households in the United States was about
$68,426.
Interest Rate Quantity of Loanable Funds Demanded Quantity of Loanable Funds Supplied 6% $300 $60 8 260 100 10 220 140 12 180 180 14 140 220 16 100 260 Answer the question using the table. Figures are in billions of dollars. The equilibrium interest rate and quantity of loanable funds demanded and supplied in this market will be
12 percent and $180 billion.
Interest Rate Quantity Supplied of Loanable Funds Quantity Demanded of Loanable Funds 6% $10 $40 8 14 34 10 18 28 12 22 22 14 26 16 16 30 10 Answer the question using the table. Figures are in billions of dollars. The equilibrium interest rate and quantity of loanable funds demanded and supplied in this market will be
12 percent and $22 billion.
Approximately what percentage of the federal government's tax revenues are generated from personal income taxes (in 2015)?
47%
Social regulation
applies more broadly and affects more people than industrial regulation.
Statistical discrimination
can persist in the long run if differences in average characteristics among groups continue.
Assume a pencil manufacturer is employing resources C and D in such quantities that the MRPs of the last units hired are $80 and $50, respectively. The price of resource C is $90, and the price of D is $35. This firm
should hire less of C and more of D.
A tariff is a
tax
(Last Word) In 2000, Microsoft was fined $2.7 billion for
using anticompetitive means to promote its Internet Explorer web browser.
In which of the following cases was the firm found not guilty of violating the Sherman Act?
DuPont cellophane case
Which of the following is correct?
Real capital is a resource, but money is not.
(1) (2) (3) (4) (5) Land Rent Quantity Supplied Quantity Demanded Quantity Demanded Quantity Demanded $400 60 40 30 10 300 60 50 40 20 200 60 60 50 30 100 60 70 60 40 0 60 80 70 50 Refer to the table, in which the values for columns (2) through (5) are in acres. If the relevant columns are (1), (2), and (4), land rent will be
$100 per acre.
Number of Workers Total Product Product Price ($) 0 0 3 1 16 3 2 26 3 3 34 3 4 40 3 5 44 3 The table is for a purely competitive market for resources. If the product price increases from $3 to $4, then at the wage rate of $15, the firm will hire
5 workers
The largest efficiency gains from deregulation have occurred in the
airlines, trucking, and railroad industries.
For all practical purposes, the supply of land is
almost perfectly inelastic
Other things equal, the resource demand curve of an imperfectly competitive seller will
be less elastic than that of a purely competitive seller.
Suppose a firm is considering the purchase of a machine which would increase its total revenues by $10,000 for the year. The machine costs $8,000 and has a useful life of one year. The interest rate is 20 percent. This investment should
be undertaken because the rate of return is 5 percent greater than the interest rate.
Since 1975 the distribution of income has
become less equal.
The federal gasoline tax is assessed on a per-gallon basis, and the proceeds are used for highway maintenance and improvements. This tax is consistent with the
benefits-received principle of taxation.
Differences in the application of antitrust laws are in part rooted on the issue of how broadly antitrust authorities should define the relevant
market
(Last Word) Suppose you deposit $5,000 in a bank that pays 10 percent interest compounded twice a year. The actual annual interest rate you receive is
0.25 percent.
Some countries have negative nominal interest rates. Which of the following statements about this situation is not true?
Consumers are expected to save more and consume less.
Which is a valid counterargument to the infant industry argument for protective tariffs?
It is difficult to determine which infant industries will become mature industries with a comparative advantage.
Which of the following results will not occur in a monopolistic market?
The output level will be higher than in a competitive market.
Which of the following gave the Federal Trade Commission responsibility to protect the public against false and misleading advertising?
Wheeler-Lea Act of 1938
Since 1980, labor union membership in the United States has been
decreasing absolutely and as a percentage of the labor force
Assume Manfred's Shoe Shine Parlor hires labor, its only variable input, under purely competitive conditions. Shoe shines are also sold competitively. Units of Labor Total Product Marginal Product Total Revenue 0 0 1 14 14 $42 2 10 3 30 90 4 35 5 39 117 6 126 7 44 2 132 If the wage rate is $11 and Manfred's only fixed input is capital, the total cost of which is $30, then what will be his economic profit?
$32
Resource Supply Demand Price A B C D 100 $1 20 40 60 60 80 2 40 60 60 80 60 3 60 80 60 90 40 4 80 100 60 100 Refer to the demand schedule and possible supply schedules, A-D. Suppose that the supply of a resource is given by the schedule that exhibits a zero price elasticity. If demand for the resource increases from the original demand schedule by 20 units at each price, then the equilibrium economic rent would be
$4
Wealth
refers to accumulated financial and real assets.
The productivity and real wages of workers in industrially advanced economies have risen historically partly because
risen because growth in the demand for labor has exceeded growth in the supply of labor.
Long-run real wages in the United States have
risen, because growth in the demand for labor has exceeded growth in the supply of labor.
As the area between the Lorenz curve and diagonal gets larger, the Gini ratio
rises to reflect greater inequality.
Taxes on commodities or on purchases are known as:
sales and excise taxes
A craft union attempts to increase wage rates by
shifting the labor supply curve to the left.
"Deficit spending" refers to a situation where the government
spends borrowed funds.
The demand curve for labor will most likely increase when the price of a
substitute input decreases, provided the output effect is greater than the substitution effect.
A firm will employ more of an input whose relative price has fallen and, conversely, will use less of an input whose relative price has risen. Thus, a fall in the price of capital will increase the relative price of labor and thereby reduce the demand for labor. This describes the
substitution effect.
The Alcoa case
supported the structuralist approach to antitrust.
"Transfer payments" may be thought of as
taxes in reverse
The so-called eurozone refers to
the EU nations that have adopted a common currency.
NAFTA established a free-trade area and eliminated trade barriers between
the U.S., Mexico, and Canada.
Economic profit affects
the allocation of resources and the level of resource use
Marginal product is
the amount an additional worker adds to the firm's total output.
The "future value" of a sum of money refers to
the amount to which some current sum of money will grow over time.
A tax structure is called progressive when
the average tax rate decreases if income decreases
The benefits-received principle of taxation is
the basis for the gasoline tax.
Which of the following was not one of the principles on which the General Agreement on Tariffs and Trade (GATT) was established?
the formation of international trade contracts to alleviate global poverty
Assume that a tariff is imposed on an imported product. The difference between the domestic price and the world price is captured by
the government.
Other things equal, the interest rate on a loan will be larger,
the higher the risk involved.
Which of the following arguments for trade protection contends that new domestic industries need support to establish themselves and survive?
the infant industry argument
Which of the following would likely reduce income inequality?
a reduction in the number of high school dropouts
If Kelly deposits $10,000 into an account that pays 8 percent interest, compounded annually, and she makes no further deposits or withdrawals, how much will Kelly have in her account at the end of 5 years?
$14,693
Year Beginning Period Value Total Interest End Period Value 1 $1,000 $60 $1,060 2 $1,060 A B 3 C D $1,191 Refer to the table representing Darcy's bank account. If she deposited $1,000 into her account at the beginning of year 1 and made no further deposits or withdrawals, what is the value for cell D?
$191
Assume a firm purchases resources a and b under purely competitive conditions and combines these resources to produce X. Product X is sold in a purely competitive market. The MPs of a and b are 6 and 3, respectively, and the prices of a and b are $12 and $6, respectively. If equilibrium exists, the price of X will be
$2
The accompanying table gives domestic supply and demand schedules for a product. Suppose that the world price of the product is $1. Quantity Supplied (Domestic) Price Quantity Demanded (Domestic) 12 $5 2 10 4 4 7 3 7 4 2 11 1 1 16 With a $1-per-unit tariff, price and total quantity sold will be
$2 and 11 units.
Price Per Unit Quantity Demanded Quantity Supplied $1 50 10 2 40 20 3 30 30 4 25 40 5 20 50 6 15 60 7 10 70 The table gives data for the market for a product. If an excise tax of $3 per unit is imposed on this product, the new equilibrium price with tax will be
$5
Quantity of Labor MP of Labor MRP of Labor Quantity of Capital MP of Capital MRP of Capital 1 15 $45 1 8 $24 2 12 36 2 6 18 3 9 27 3 5 15 4 6 18 4 4 12 5 3 9 5 3 9 6 1 3 6 2 6 Refer to the given data. If the prices of labor and capital are $9 and $15, respectively, and labor and capital are the only inputs, at the profit-maximizing level of output, the firm's total costs will be
$90
Quantity of Labor MP of Labor MRP of Labor Quantity of Capital MP of Capital MRP of Capital 1 15 $45 1 8 $24 2 12 36 2 6 18 3 9 27 3 5 15 4 6 18 4 4 12 5 3 9 5 3 9 6 1 3 6 2 6 Refer to the given data. If the prices of labor and capital are $9 and $15, respectively, and labor and capital are the only inputs, at the profit-maximizing level of output, the firm's total costs will be
$90.
(1) (2) (3) (4) (5) Land Rent Quantity Supplied Quantity Demanded Quantity Demanded Quantity Demanded $400 60 40 30 10 300 60 50 40 20 200 60 60 50 30 100 60 70 60 40 0 60 80 70 50
(1), (2), and (3) and (1), (2), and (4).
(Advanced analysis) The equations for the demand and supply curves for a particular product are P = 10 − 0.4Q and P = 2 + 0.4Q, where P is price and Q is quantity expressed in units of 100. After an excise tax is imposed on the product, the supply equation is P = 3 + 0.4Q.The equilibrium quantity before the excise tax is imposed is
1,000 units
In 2011, the 20 percent of families with the lowest incomes paid an effective average federal tax rate (on all federal taxes) of about ____, whereas the 20 percent of families with the highest incomes paid an effective average tax rate of about ____.
1.9 percent; 23.4 percent
Currently, capitalist income, that is, corporate profits, interest, and rent, accounts for about what percentage of the income paid to American resource suppliers?
20 percent
In 2013, U.S. governments (local, state, and federal) employed approximately how many million workers?
21.9
(Last Word) For each dollar paid in taxes, approximately how much do households in the top quintile receive back in the form of government expenditures?
29 cents
Labor Demand Data Labor Supply Data Employment Toatal Product Product Price Employment Wage Rate 0 0 $2.20 0 -- 1 15 2.00 1 $1.00 2 28 1.80 2 2.00 3 39 1.60 3 3.00 4 48 1.40 4 4.00 5 55 1.20 5 5.00 6 60 1.00 6 6.00 The table shows labor demand data on the left and labor supply data on the right. How many workers will this profit-maximizing firm choose to employ?
3
Inputs of a MPa Inputs of b MPb 1 25 1 40 2 20 2 36 3 15 3 32 4 10 4 24 5 5 5 20 6 2 6 16 7 1 7 8 The table gives marginal product data for resources a and b. The output of these independent resources sells in a purely competitive market at $1 per unit. Assuming the prices of resources a and b are $5 and $8 respectively, what is the least costly combination of resources for the firm to employ in producing 192 units of output?
3 of a and 4 of b
(Last Word) In 2010, the wealthiest 1 percent of U.S. households held about ____ percent of U.S. household wealth.
35
Workers MRP Wage 5 $12 $5 6 13 6 7 14 7 8 15 8 9 16 9 10 17 10 A firm faces the labor productivity and cost schedule in the table. How many workers will this profit-maximizing firm employ?
8
Interest Rate Quantity Demanded Quantity Supplied 12 100 520 10 200 480 8 300 440 6 400 400 4 500 360 2 600 320 The schedule shows various interest rates, the associated quantity demanded of loanable funds, and the quantity supplied of loanable funds in billions of dollars at those interest rates. If technology improved and the demand for loanable funds increased by $140 billion at each interest rate, the new equilibrium interest rate would be
8 percent
In the United States,
African Americans have higher unionization rates than whites.
Anticompetitive price discrimination, interlocking directorates, and tying contracts were banned by the
Clayton Act.
The legislation that prohibited acquisition of stock of another company if this would significantly lessen competition is the
Clayton Act.
The World Trade Organization was established as a successor to
GATT.
The domestic opportunity cost of producing 100 barrels of chemicals in Germany is one ton of steel. In France, the domestic opportunity cost of producing 100 barrels of chemicals is two tons of steel. In this case,
Germany has a comparative advantage in the production of chemicals.
I II III IV V Tax Base (Income) Tax Base (Income) Tax Base (Income) Tax Base (Income) Tax Base (Income) $30 $100 $10 $100 $5 $100 $30 $100 $10 $100 50 200 20 200 15 200 60 200 30 200 60 300 30 300 30 300 90 300 60 300 70 400 40 400 50 400 120 400 100 400
III and V
A firm will be hiring labor and capital in profit-maximizing amounts when
MRP capital/price of capital equals MRP labor/price of labor equals 1.
A profit-maximizing firm will employ labor up to the point where the
MRP of labor = MRC of labor.
Wine Machines Brazil 30 10 Poland 10 10 The accompanying table gives maximum-output alternatives for Brazil and Poland. It can be seen that if the two nations open up trade with each other, then
Poland will specialize in producing machines and import wine.
Which of the following is not a true statement about how social regulation differs from industrial regulation?
Social regulation is enforced by state and local governments, whereas industrial regulation tends to be the domain of the federal government.
Which of the following statements is true?
Specialization will be less than complete among nations when opportunity costs increase as the nations produce more of a particular product.
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 inequality, but the two-year data indicate equality.
Entrepreneurs mostly focus on a single number: profits. As a result, which of the following statements tends to be true about their firms?
The firms pay close attention to every aspect of their operations.
Which of the following is incorrect?
The nominal interest rate is the real interest rate less the rate of inflation.
Which would result in a decrease in the elasticity of demand for a particular resource?
a decrease in the percentage of the firm's total costs accounted for by the resource
Data on education and earnings reveal
a positive relationship between the two.
If a nation agrees to set an upper limit on the total amount of a product that it exports to another nation, then this situation would be an example of
a voluntary export restriction.
Which of the following is a source of insurable business risk?
accidents to employees
The idea that competition is in some circumstances insufficient to achieve allocative efficiency and ensure fairness to consumers and competing firms is most closely associated with which antitrust perspective?
active
Stock options as a form of payment are designed to
address the principal-agent problem.
In the market for loanable funds,
an increase in borrowing for investment will increase the interest rate.
Which of the following is a likely result of imposing tariffs to increase domestic employment?
an increase in the possibility of retaliatory tariffs
An industry would be likely to lay off workers following
an industrial union's push of wages above the MRP of labor.
The fact that people prefer present consumption to future consumption results in
an upsloping supply of loanable funds curve.
Country X Price Qdd Qsd $5.00 200 400 4.00 250 350 3.00 300 300 2.00 350 250 1.00 400 200 The accompanying table gives data for Country X. Column 1 of the table is the price of a product. Column 2 is the quantity demanded domestically (Qdd), and Column 3 is the quantity supplied domestically (Qsd). If Country X opens itself up to international trade, at what world price will it begin exporting some units of the product
any price above $3.00
Country X Price Qdd Qsd $5.00 200 400 4.00 250 350 3.00 300 300 2.00 350 250 1.00 400 200 The accompanying table gives data for Country X. Column 1 of the table is the price of a product. Column 2 is the quantity demanded domestically (Qdd), and Column 3 is the quantity supplied domestically (Qsd). If Country X opens itself up to international trade, at what world price will it begin exporting some units of the product?
any price above $3.00
Economic discrimination puts the economy inside its production possibilities curve because discrimination
arbitrarily blocks women and certain minorities from higher-productivity, higher-wage jobs and thus keeps the economy from producing its maximum output.
Answer the question on the basis of the accompanying production possibilities tables for two countries, Latalia and Trombonia. Latalia's production possibilities A B C D E Pork (Tons) 4 3 2 1 0 Beans (Tons) 0 5 10 15 20 Trombonia's production possibilities A B C D E Pork (Tons) 8 6 4 2 0 Beans (Tons) 0 6 12 18 24 The given data indicate that production in
both Latalia and Trombonia is subject to constant opportunity costs.
Globalization of resource markets has resulted in the business practice of offshoring, which involves
both an outflow as well as an inflow of jobs in the U.S.
Suppose Steve Stone takes a job with Zemo Manufacturing, whose labor contract with its unions has an agency shop clause (30 days). Steve
can decide against joining the union but nevertheless will have to pay union dues or donate an equivalent amount to an approved charity.
To firms, resource prices are a major part of
costs.
Defenders of social regulation point out that
critics who stress the high administrative and compliance costs of social regulation underestimate the social benefits that the regulations produce.
Other things equal, we would expect the labor demand curve of a monopolistic seller to
decline more rapidly than that of a purely competitive seller.
A union might increase the demand for the labor services of its members by
decreasing the prices of complementary inputs.
Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of supply of X is unitary (coefficient = 1). If the incidence of the tax is such that the producers of X pay $1.90 of the tax and the consumers pay $.10, we can conclude that the
demand for X is highly elastic.
What development in the 1970s and 1980s is considered one of the most extensive experiments in industrial policy in the last half-century?
deregulation of industries
The decision on the DuPont cellophane case of 1956 dealt with the issue of
determining the relevant market for a particular product.
Government purchases and transfer payments
differ because the former absorb resources while the latter do not.
(Consider This) The main problem with welfare cliffs is that they
discourage welfare recipients from moving into higher paying jobs and ultimately becoming self-sufficient.
The addition of government to the circular-flow model illustrates that government
does all of the things stated in the other possible answers.
The average tax rate is
equal to total taxes/total taxable income.
(Consider This) The main focus of the vignette "Slicing the Pizza" is the
equality-efficiency trade-off.
Suppose the wage rate is $5, and the marginal revenue product (MRP) of the seventh worker at a yo-yo factory is also equal to $5. The labor market was originally purely competitive, but is then monopsonized without changing the MRP of the seventh worker. That means
fewer workers will be hired and they will be paid lower wages
Year Beginning Period Value Total Interest End Period Value 1 $1,000 $60 $1,060 2 $1,060 A B 3 C D $1,191 Refer to the table representing Darcy's bank account. If she deposited $1,000 into her account at the beginning of year 1 and made no further deposits or withdrawals, the $1,191 value at the end of year 3 represents the
future value of the $1,000 deposit made at the beginning of year 1.
Which of the following would most likely increase income inequality?
greater monopoly power among product sellers
The merger of a firm in one industry with another firm in the same industry that sells similar products is called a
horizontal merger.
Demand and Supply Labor Data Employment Total Output Product Price Wage Rate 10 108 $1.05 $6 11 160 0.95 7 12 210 0.85 8 13 258 0.75 9 Refer to the table. What is the market structure in the firm's product and labor markets?
imperfectly competitive in both the product market and the labor market
The necessity to maintain incentives to work and incentives to produce output would be a point made by an individual making the case for
income inequality.
Which of the following is not one of the causes of the unequal distribution of income in the United States?
income taxes and transfers
A decrease in the supply of loanable funds and an increase in the demand for loanable funds will
increase the interest rate, but the quantity of funds loaned may either increase or decrease.
Which of the following helps explain growing income inequality in the United States in recent years?
increased demand for highly skilled workers
Taxable Income Total Tax $15,000 $1,500 30,000 3,500 60,000 9,000 120,000 25,000 The table represents a personal income tax schedule. As income increases, the marginal tax rate
increases
Rate of Return (%) Number of Investment Projects (for $1,000 each) 25 1 20 2 15 3 10 4 5 5 The table shows the projected rate of return and number of investment projects that might be undertaken by a small firm. Each project requires an investment of $1,000. If the interest rate decreases from 25 percent to 20 percent, the quantity of loanable funds demanded by this firm
increases by $1,000.
Paying an above-equilibrium wage rate might reduce unit labor costs by
increasing the opportunity cost to workers of being fired for shirking.
A Lorenz curve showing perfect equality in the distribution of income
is a straight line with a 45-degree angle.
Income mobility
is the movement of individuals and households from one income quintile to another over time.
The view that the antitrust laws should be enforced relatively leniently because of the tendency for monopoly power to erode over time is known as the
laissez-faire perspective on antitrust.
Henry George advocated a single tax on
land
Other things equal, if wage rates increase by 20 percent, the greatest decline in employment will occur when labor costs are a
large proportion of total costs and product demand is elastic.
Other things equal, the relationship between the relative importance of a given type of labor in a firm's total costs and the elasticity of demand for that labor is such that the
larger the labor cost to total cost ratio, the greater will be the elasticity of labor demand.
Intel's monopoly in the sale of microchips for personal computers would be considered
legal by "behavioralists" but illegal by "structuralists."
The so-called rule of reason, based on the 1920 U.S. Steel case, stipulates that a merger of two firms in an industry is
legal if there is no resulting unreasonable restraint of trade.
The supply curve for loanable funds is upward-sloping because
lenders are more willing to lend at higher, rather than lower, interest rates.
The more inelastic the demand for a resource, the
less elastic its marginal revenue product curve.
The basic purpose of antitrust laws is to
limit monopoly power in industry.
Which one of the following is not a cash transfer program?
low-rent public housing
The greater the degree of inequality in the distribution of income, the more bowed will be the Lorenz curve toward the
lower right-hand corner.
From 2014 to 2024, the U.S. Bureau of Labor Statistics expects that there will be a fall in demand for
manufactured building and mobile home installers.
The labor market for teachers in a small, isolated community that has one school district would be best described as a(n)
monopsony.
The actual incidence of payroll taxes, in the consensus view, is
more on the worker than on the employer.
The situation where a single firm can supply the product to an entire market at a lower unit cost than if the market were split among a number of competing firms, is called a
natural monopoly.
The crowding model is primarily concerned with explaining
occupational discrimination.
The characteristic that makes economic rent distinct from wages, interest, and profit is that it is
payment for a resource that is completely fixed in total supply.
Social Security contributions are part of
payroll taxes.
The degree of strictness in the enforcement of antitrust laws often depends on
political appointments
The following are commonly used arguments for protection against imports, except
price- and profit-maintenance
Other things equal, the interest rate on a loan will be larger,
the longer the length of the loan.
If a firm is selling in an imperfectly competitive product market, then
the marginal products of successive workers must be sold at lower prices.
A profit-maximizing firm will use additional units of resources for production until
the marginal revenue product equals the marginal resource cost.
In general, the buyers will tend to pay a bigger share of a tax on a good when
the price elasticity of supply is high and the price elasticity of demand is low.
Which will not be a determinant of the price elasticity of demand for an input?
the price of the input
(Last Word) Despite the fact that occupational licensing in many industries is unnecessary for the protection of consumers, these licensing requirements are implemented or increased because of
the special-interest effect.
Industrial regulation generally applies in cases where
there is an economic reason for an industry to be organized as a monopoly.
In considering real-world situations, we must recognize the fact that by "wages" in this chapter, we mean the following, except the
total income earned by households.
According to data compiled by the Bureau of Economic Analysis, from 1960 to 2015, government transfer payments as a percentage of U.S. output have
tripled as a percentage of output.
The marginal product of labor is expressed in _______, while the marginal revenue product of labor is expressed in __________.
units of output per unit of labor; dollars per unit of labor
The term "growing income inequality" implies that the
upper quintiles of income receivers are getting relatively more of the total income than before and the lower quintiles are getting relatively less.
Suppose that the production of wheat requires two inputs, labor and fertilizer. The price of labor is $4.50, and the price of fertilizer is $3.00. A farmer is currently employing the inputs such that the marginal product of labor is 11 and the marginal product of fertilizer is 8. If the farmer is a cost-minimizer, he should
use more fertilizer and less labor.
Economists who have studied the composition of "proprietor's income" have found that this income item is made up of
wages and profits, mostly wages.
The largest single share of all income earned by Americans consists of
wages and salaries
Being "underwater" in one's home mortgage means that the market value of one's house has fallen below
what is owed in the mortgage loan.
A firm's demand curve for labor
will shift to the left if the price of the product the labor is producing should fall.
The principal-agent problem arises in labor markets because
workers may provide less-than-expected work effort.
Economic profits are not payments received for
working for someone else.
