Econ 2020 Final Study Guide
Econ 2020 Final Study Guide Econ 2020
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This 28 page Study Guide was uploaded by Karlee Castleberry on Friday April 29, 2016. The Study Guide belongs to Econ 2020 at Auburn University taught by William M. Finck in Spring 2016. Since its upload, it has received 29 views. For similar materials see Principles of Economics: Microeconomics in Business at Auburn University.
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ECON 2020 Exam #1 1. The condition whereby the economic resources we use to produce goods and services are limited relative to our wants for them is referred to by economists as A. a shortage B. scarcity C. inefficiency D. a surplus E. quantity demanded 2. What happens to the market for toilets when the price of an input falls? A. supply decreases B. there is a shortage at the old price C. equilibrium price decreases D. equilibrium quantity decreases E. “I’m Ron Burgundy?” 3. When the price of a good decreases, A. producer surplus decreases and consumer surplus decreases B. producer surplus decreases and consumer surplus increases C. producer surplus increases and consumer surplus increases D. producer surplus increases and consumer surplus decreases E. “I miss being with you. I miss being near you. I miss your laugh. I miss your scent. I miss your musk. When this all gets sorted out, I think you and me should get an apartment together!” Use the following demand and supply schedules to answer question 4. Price $100 $80 $60 $40 $20 $0 Quantity Demanded 0 50 100 150 200 250 Quantity Supplied 60 50 40 30 20 10 4. The equilibrium price in the above market is A. $100 B. $40 C. $80 D. $60 E. $20 Use the following figure to answer questions 5 – 8. PS 5. Equilibrium occurs in this market at a price of ____ and quantity of _____ units. A. $10; 1100 B. $30; 500 C. $10; 800 D. $20; 800 E. $20; 1100 6. If the price in this market falls from $30 to $20, the area labeled D represents A. the consumer surplus to new buyers B. the producer surplus to new sellers C. the additional producer surplus to the initial sellers D. the additional consumer surplus to the initial buyers 7. A price floor of $30 in this market would cause a A. surplus of 600 units B. surplus of 300 units C. shortage of 600 units D. shortage of 300 units E. it would have no effect 8. A price ceiling of $30 in this market would cause a A. surplus of 600 units B. surplus of 300 units C. shortage of 600 units D. shortage of 300 units E. it would have no effect 9. In a market where the demand is given by the equation Qd = 462 – 5P and supply is given by the equation Qs = 42 + 2P, find the equilibrium price and equilibrium quantity. A. $72; 102 units B. $140; 322 units C. $168; 378 units D. $60; 162 units E. “I don’t know how to put this, but I’m kind of a big deal. People know me.” Use the following graph of the market for ribs to answer question 10. 10. Which of the following could have caused the above change in the market for ribs? A. a fall in the price of a substitute B. a fall in the price of a complement C. a fall in the price of an input D. expectations of lower future prices 11. If last week, the Mexican restaurant Escupimos en su Alimento sold 600 dinners for a price of $16 each, and this week it sells 450 dinners for a price of $14 each, what change most likely occurred in the market for Mexican food? A. an increase in demand B. an increase in supply C. a decrease in demand D. a decrease in supply 12. Wes Mantooth is getting ready for news team poker night at his apartment. If he wasn’t having poker night, then he could have made $750 working the late night news broadcast. He spent $100 on cigars, $20 on snacks, and $150 on drinks. Which of the following statements about his costs is TRUE? A. His explicit costs are $1020 B. His economic costs are $1020 C. His opportunity cost is $1020 D. His implicit cost is $1020 E. B and D only 13. How do expectations of lower future prices affect the market for Sex Panther cologne today? A. demand decreases and supply increases, causing a fall in equilibrium price and an indeterminate change in quantity B. demand increases and supply decreases, causing a fall in equilibrium price and an indeterminate change in quantity C. demand decreases and supply increases, causing a rise in equilibrium price and an indeterminate change in quantity D. demand increases and supply decreases, causing a rise in equilibrium price and an indeterminate change in quantity E. “Sixty percent of the time, it works every time.” 14. Economics is the social science concerned with how individuals, institutions and society A. make scarce choices under optimal conditions B. make supplemental choices under conditions of scarcity C. make optimal conditions under choices of scarcity D. make optimal choices under conditions of scarcity E. “What? You pooped in the refrigerator? And ate the whole wheel of cheese? How’d you do that? Heck, I’m not even mad -- that’s amazing!” 15. Which of the following is NOT a type of resource? A. marginal B. capital C. labor D. natural 16. A rise in the price of a mystery good caused a change in the market for a bottle of scotch that led to a rise in the price of a bottle of scotch. Which of the following could possibly be the mystery good? A. a rocks glass (a complement) B. a bottle of bourbon (a substitute) C. malted barley (an input) D. A and B only E. B and C only 17. Which of the following statements is FALSE? A. Economists believe that price rationing is the least efficient rationing method. B. Price rationing allows every consumer that would like the good to have it. C. Price rationing allows every consumer willing to pay the equilibrium price to have the good. D. A and B only E. A and C only 18. Milk is an input in ice cream. Ice cream and gelato are substitutes. How would a decrease in the price of milk affect the market for gelato? A. “Milk was a bad choice.” B. the equilibrium price would fall and equilibrium quantity would rise C. the equilibrium price would rise and equilibrium quantity would fall D. the equilibrium price and equilibrium quantity both would fall E. the equilibrium price and equilibrium quantity both would rise 19. If the price of a hand grenade is $28, how many will Brick offer for sale? A. 4 B. 6 C. 3 D. 5 E. 7 20. If the price of a hand grenade is $28, what is Brick’s producer surplus? A. “Yeah, there were horses, and a man on fire, and I killed a guy with a trident.” B. $120 C. $34 D. $48 E. $36 21. Which of the following consequences results from an effective price ceiling? A. a surplus B. inefficient allocation among consumers C. a shortage D. A and B only E. B and C only 22. A demand curve represents A. the maximum that consumers are willing to pay for any quantity B. the maximum that producers are willing to accept as payment for any quantity C. the minimum that consumers are willing to pay for any quantity D. the minimum that producers are willing to accept as payment for any quantity 23. Which of the following would NOT increase the demand for blue suits? A. a fall in the price of blue ties (a complement) B. a rise in the price of brown suits (a substitute) C. an increase in consumer income (assume blue suits are normal goods) D. a fall in the price of blue suits E. all of the above WILL increase the demand for blue suits 5 24. How would a decrease in consumer income affect the market for steak if steak is a normal good? A. demand would decrease, causing equilibrium price to rise and quantity to fall B. demand would increase, causing equilibrium price and quantity both to fall C. demand would increase, causing equilibrium price to fall and quantity to rise D. demand would decrease, causing equilibrium price and quantity both to fall E. demand would increase, causing equilibrium price and quantity both to rise 25. According to the Circular Flow diagram, in product markets ___ demand ___ which are supplied by ____ . A. “I love lamp.” B. households, resources, firms C. firms, resources, households D. firms, goods and services, households E. households, goods and services, firms ECON 2020 Exam #2 1. A producer faces a price elasticity of demand of 1.18 when the price of the good is $24 and the quantity demanded is 1400 units. Find the change in quantity demanded if the producer decreases price by $2. (Round to nearest unit.) A. 69 B. 117 C. 25 D. 138 E. 1088 2. The cross elasticity coefficient between a steak and a mystery good is 0.67. The mystery good is probably a. a baked potato (a complement) b. a pork chop (a substitute) c. a cow (an input) d. a tiger (a dangerous pet) 3. Alan faces the following production possibilities: Pagers: 200 180 150 110 60 0 Payphones: 0 1 2 3 4 5 What is the opportunity cost of producing the 2nd pay phone? a. 30 pagers b. 75 pagers c. 40 pagers d. 150 pagers e. 1 pager 4. Which of the following statements about the economy above is TRUE? A. The PPF is a downward-sloping bowed line. B. The PPF is a downward-sloping straight line. C. His opportunity cost of producing pagers increases as he produces more pagers. D. A and C only E. B and C only 5. A perfectly inelastic demand curve A. has an elasticity coefficient equal to infinity B. has an elasticity coefficient equal to zero C. is represented on a graph by a vertical line D. A and C only E. B and C only 6. Using the midpoint formula, find the price elasticity of demand coefficient for a producer when a price decrease from $24 to $21 causes a rise in quantity demanded from 600 units to 660 units. A. 1.4 B. 0.71 C. 0.92 D. 1.09 E. 1.0 Use the following diagram to answer questions 7 – 8. Pianos 7. Which of the following could cause a movement from point 1 to point 3? F. a technological improvement G. trade with another economy H. a decrease in the unemployment rate I. an increase in the unemployment rate J. A, B and C only 8. Which of the following would cause a shift from PPF1 to PPF2? a. a technological improvement b. trade with another economy c. a decrease in the unemployment rate d. an increase in the unemployment rate e. A, B and C only 9. A decrease in the demand for a product is most likely to result in a large equilibrium quantity decrease if A. “I'm not supposed to be within two hundred feet of a school... or a Chuck E. Cheese.” B. the good is being exported C. the good is being imported D. the supply curve of the product is relatively price inelastic E. the supply curve for the product is relatively price elastic 10. At the midpoint of a linear demand curve, A. total cost is maximized B. marginal revenue is equal to 1 C. price elasticity of demand is equal to 1 D. A and B only E. A and C only Use the following graph to answer questions 11 – 12. 11. The above economy will export A. 10 units of pepper B. 8 units of pepper C. 2 units of cinnamon D. 4 units of cinnamon E. 18 units of cinnamon 12. One unit of cinnamon trades for A. “Tigers love pepper. They hate cinnamon.” B. 4 units of pepper C. 2.5 units of pepper D. 3 units of pepper E. 2 units of pepper 13. Dr. Stu’s Dentistry faces a price elasticity of demand of 1.15. If management increases prices, what will happen to Dr. Stu’s total revenue? A. “Not at the table, Carlos!” B. total revenue will not change C. total revenue will increase D. total revenue will decrease Use the following graph to answer questions 14 – 15. 14. With free trade, the above economy will A. export 90 units B. export 170 units C. export 80 units D. import 170 units 15. The gained producer surplus is represented by area(s) A. A only A. A only B. A and B C. C only D. B and C E. A, B and C Use the following graph to answer question 16. 16. Given the graph above, which of the following statements is TRUE? A. D1 is relatively more price inelastic than D2. B. For a given price change, the elasticity coefficient for D1 is bigger than that for D2. C. For a given price change, the change in Qd along D1 is bigger than the change in Qd along D2. D. A and C only E. B and C only 17. Which of the following would cause a consumer’s demand to become relatively more price elastic? A. the good becomes a larger proportion of the consumer’s budget B. the consumer finds she has less time to make the purchase C. the consumer finds fewer substitutes are available D. all of the above E. B and C only Use the following information to answer questions 18 – 20. 18. Alan’s opportunity cost of a camera is A. 35 satchels B. 5 satchels C. 0.125 satchels D. 35 satchels E. 8 satchels 19. Which of the following statements is TRUE? A. Doug has a comparative advantage in producing cameras. B. Alan has a comparative advantage in producing cameras. C. Alan has an absolute advantage in producing satchels. D. Alan has an absolute advantage in producing cameras. E. A and C only 20. Assume that one camera trades for 6 satchels. If Alan and Doug completely specialize, and the camera producer trades 3 units, which of the following quantities will Doug consume? A. 22 satchels and 3 cameras B. 68 satchels and 7 cameras C. 18 satchels and 7 cameras D. 32 satchels and 3 cameras Use the following graph to answer questions 21 – 25. 2 21. How many units did the economy import before the tariff? A. 170 B. 60 C. 70 D. 40 E. 130 22. What is the value of the tariff? A. $60 B. $18 C. $25 D. $7 E. “What do tigers dream of when they take a little tiger snooze?” 23. When the government uses a tariff to restrict trade, the gained producer surplus is represented by A. area A B. area B C. areas C D. area D E. none of the above 24. If the government uses an import quota to restrict trade, then the area labeled ‘B’ represents A. gained producer surplus B. domestic producer revenue C. foreign producer revenue D. tax revenue 25. At which point would the Dd demand curve be relatively more price elastic? A. 1 B. 2 C. elasticity is constant along a demand curve 6 ECON 2020 Exam #3 1. The correct value for the blank labeled "A" is A. 14 B. 19 C. 15 D. 5 E. 20 2. Which of the following statements about utility is TRUE? A. We cannot compare the utils assigned to a good by multiple people. B. We cannot compare the utils assigned to multiple goods by one person. C. We can compare the utils assigned to a good by multiple people. D. A and B only E. B and C only 3. Which of the following will cause a decrease in the long run cost curves? a. an improvement in technology b. an increase in the price of an input c. an increase in taxes d. all of the above 4. Dale considers pancakes and chocolate chips to be perfect complements. If the price of a pancake is $3, and the price of a package of chocolate chips is $5, and Dale has $120 to spend, which bundle will he purchase? A. 40 pancakes and 0 packages of chocolate chips B. 0 pancakes and 24 packages of chocolate chips C. 15 pancakes and 15 packages of chocolate chips D. 8 pancakes and 8 packages of chocolate chips E. “I didn’t want salmon! I said it four times!” 5. The correct value for the blank labeled "A" is A. 180 B. 115 C. 65 D. 60 E. “Your voice is like a combination of Fergie and Jesus.” 6. The correct value for the blank labeled "B" is A. 99 B. 139 C. 90 D. 550 E. “You better not go to sleep, because as soon as your eyes shut I’m gonna punch you square in the face.” 7. If the above firm sells 3 units at $100 each, what is the firm’s profit? A. $300 B. $30 C. $10 D. -$150 8. Suppose that for Dr. Doback’s planned consumption bundle, MUx/Px is less than MUy/Py for the last unit of each good purchased. If Dr. Doback is currently planning to spend all of his income, he could increase his total utility by purchasing: a. less of Y only b. less of X only c. lessofYandmoreofX d. less of X and more of Y 9. Diseconomies of scale occur when a. long run average total cost decreases as output increases b. long run average total cost increases as output increases c. long run total cost decreases as output increases d. long run total cost increases as output increases e. “Did we just become best friends?!” 10. A movement of the budget line from BL1 to BL2 would represent A. a fall in consumer income B. a fall in the price of Chewbacca masks C. a rise in the price of Chewbacca masks D. a rise in the price of crossbows E. a fall in the price of crossbows 11. Which of the following statements is TRUE? A. DW drums are more expensive than Pearl drums. B. Dale considers Pearl drums and DW drums to be perfect substitutes. C. Dale considers Pearl drums and DW drums to be perfect complements. D. A and B only E. A and C only 12. Which bundle represents Dale’s optimal consumption? A. A B. B C. C D. D E. “It’s just weird, ‘cause it seems like someone definitely touched my drum set.” 13. Which point on the above graph has the lowest marginal rate of substitution? A. A B. B C. C D. D E. E 14. If the consumer has $12,000 to spend, what is the price of one bottle of wine? A. $150 B. $300 C. $3000 D. $200 E. $20 15. Which of the following statements about the points on the above graph is TRUE? A. Bundle A yields a higher level of total utility than bundles D and E. B. Bundle D yields a higher level of total utility than bundles A and E. C. Bundle E yields a higher level of total utility than bundles A and D. D. Bundles A, D, and E yield the same level of total utility. E. Bundles A and E yield a higher level of total utility than bundle D. 16 If the consumer is at consumption bundle A, then total utility could be increased by A. buying fewer helicopters and fewer bottles of wine. B. buying more helicopters and more bottles of wine. C. buying fewer helicopters and more bottles of wine. D. buying more helicopters and fewer bottles of wine. E. he is already maximizing total utility 17. Which of the following statements about fixed costs is FALSE? A. Fixed costs are usually associated with capital. B. Fixed costs still exist (in the SR) when output is zero. C. Fixed costs cannot be varied in the long run. D. Fixed costs do not change as output changes. 18. At the optimal consumption bundle, the consumer will derive A. 396 utils B. 144 utils C. 477 utils D. 357 utils E. 258 utils 19. Prestige Worldwide is a firm earning normal profit. Which of the following statements about Prestige Worldwide is TRUE? A. The firm is earning less than it could in another industry. B. The economic profit is equal to zero. C. The accounting profit is equal to zero. D. AandBonly E. A and C only 20. If the price of good X is $16 and the price of good Y is $2, what is the optimal consumption bundle? A. A B. B C. C D. D E. not enough information 21. Brennan gets a raise at PetSmart and increases his demand for pirate hats. How will the utility Brennan receives from pirate hats change? A. his marginal utility from the last unit consumed will increase B. his marginal utility from the last unit consumed will decrease C. his total utility will increase D. A and C only E. B and C only 22. Which of the following statements about the Law of Diminishing Marginal Returns is FALSE? A. LDMR states that as successive units of a variable resource are added to a fixed resource, the marginal product of the variable resource eventually increases. B. LDMR explains why short run cost curves eventually decrease as output increases. C. LDMR only applies in the short run. D. all of the above E. A and B only 23. Which of the following is one of the properties of most indifference curves? A. indifference curves closer to the origin represent a higher level of total utility B. indifference curves never cross C. indifference curves are upward sloping D. A and B only E. A and C only 24. Nancy has $96 to spend on goods X and Y. Good X has a price of $4 and good Y has a price of $8. What is the opportunity cost of one unit of good Y? A. 0.5 units of X B. 24 units of X C. 8 units of X D. 12 units of X E. 2 units of X 25. If Nancy from the above question spends all of her income on a consumption bundle containing units of good X and good Y, and the bundle contains 4 units of good X, how many units of good Y did she buy? A. 8 B. 12 C. 10 D. 24 ECON 2020 Exam #4 1. In the price discrimination model, the group with the relatively flat demand curve... A. is charged a higher price B. faces a lower opportunity cost C. has a relatively inelastic demand D. has fewer options available Use the following graph to answer questions 2 – 3. 2. A profit-maximizing producer will sell ____ units at a price of ___ . A. 78; $19 B. 40; $38 C. 84; $22 D. 64; $16 E. 64; $30 3. If the above firm operates in a monopolistic competitive market structure, what will happen in the long run? A. firms will enter the market, D and MR will decrease, and profit = zero. B. firms will enter the market, D and MR will increase, and profit = zero. C. firms will exit the market, D and MR will decrease, and profit = zero. D. firms will exit the market, D and MR will increase, and profit = zero. E. profit will not change in the LR due to high barriers to entry 4. Which of the following statements about monopoly is TRUE? A. A technological advance can create faster growth over time for perfect competition than for monopoly. B. Monopolists create a contrived scarcity by producing an output below the perfectly competitive equilibrium output. C. For a monopoly short run profit is usually greater than long run profit. D. all of the above E. A and B only 5. A firm facing P4 will produce ____ units and earn ____ economic profit. A. q4; positive B. q4; zero C. q4; negative D. q3; zero E. q3; positive 6. A firm facing P1 will produce ____ units and earn ____ economic profit A. q1; positive B. q1; negative C. zero; negative D. q1; zero E. zero; zero 7. Assume a market in long run competitive equilibrium experiences a decrease in demand. After market adjustments occur, what is the netchange in market price and quantity after the market returns to long run equilibrium? A. price falls and quantity falls B. price falls and quantity does not change C. price does not change and quantity rises D. price does not change and quantity falls E. “You mean the drug dealer in the liquor store wasn’t a good guy?” 8. When an industry exhibits productive efficiency, A. P = MC B. P = min ATC C. everyone willing to pay at least MC will get the good D. A and C only E. B and C only 9. A monopolist can sell 8 units for $22 eachor 9 units for $21 each. What is the marginal revenue earned from selling the 9th unit? A. $21 B. $13 C. $176 D. $189 E.“Your language is offensive!” 10. Identify the area that represents consumer surplus if this market is perfectly competitive. A. triangle ADF B. “Alan, did you just eat sofa pizza?” C. triangle CEF D. rectangle BCED E. triangle ABC 11.Which of the following is a type of barrier to entry? A. contrived scarcity B. economies of scale C. control of an essential resource D. all of the above E. B and C only 12. If Dr. Stu’s Dentistry sells 52 false teeth for $84 each and the firm faces an average total cost of $78, what is Dr. Stu’s profit? A. $56 B. $6 C. $312 D. $4056 E. $4368 13. If Dr. Stu’s from the above question sells its output in a monopoly market structure, what will happen in the long run? A. firms will exit the market, D and MR will decrease, and profit = zero. B. firms will exit the market, D and MR will increase, and profit = zero. C. firms will enter the market, D and MR will decrease, and profit = zero. D. firms will enter the market, D and MR will increase, and profit = zero. E. profit will not change in the LR due to high barriers to entry. 14. Which of the following statements about monopolistic competition is TRUE? A. Monopolistically competitive firms set their price above marginal cost. B. Monopolistically competitive firms create excess capacity by producing an output above the output where ATC is minimized. C. Advertising decreases search and information costs. D. all of the above E. A and C only 15. Firms find the profit-maximizing level of output where A. P = ATC B. MR = MC C. P= MR D. TR = TC E. “What do tigers dream of when they take a little tiger snooze?” 16. Which of the following is an effect of a decrease in demand on a market in long run competitive equilibrium? A. price increases initially B. firms increase q* initially C. firms earn positive economic profit D. firms enter (supply increases) E. equilibrium (market) quantity falls 17. Which of the following conditions is necessary for price discrimination? A. two or more groups of buyers with different ethnicities B. some degree of marsupial power C. prevention of resale Use the following information to answer question 18. P = 84 –Q MC = 12 + 2Q 18. For the monopolist facing this demand curve with these costs, the profit- maximizing level of output is ___ units and price is ____ . A. 24; $60 B. 18; $48 C. 31; $53 D. 18; $66 E. 24; $36 19. Which of the following is a characteristic of monopolistic competition? A. high barriers to entry B. perfect information C. many small buyers and sellers D. all of the above E. B and C only 20. If the above firm decreases price from P1 to P2, then total revenue A. increases by area A and increases by area B B. increases by area A and decreases by area C C. decreases by area A and increases by area B D. decreases by area A and increases by area C E. “’Cause we’re the three best friends that anyone could have. . .” 21. If the above firm sells Q1 units at a price of P1, then the marginal revenue from the last unit sold will be A. equal to P1 B. greater than P1 C. less than P1 D. “I tend to think of myself as a one-man wolf pack.” 22. Which market characteristic implies that long run profits can be greater than zero? A. high barriers to entry B. many, small buyers and sellers C. differentiated products D. perfect information E. “Not at the table, Carlos!” 23. A firm in a perfectly competitive product market faces a market price of $22. If the firm faces marginal cost represented by the equation MC = 2 + 4q, then q* is A. 3.67 units B. 7 units C. 5 units D. 6 units E. “I'm not supposed to be within two hundred feet of a school... or a Chuck E. Cheese.” 24. Assume a perfectly competitive market is in competitive equilibrium. How would firms respond to an increase in costs? A. firms increase q initially, new firms enter, original firms decrease q B. firms increase q initially, firms exit, remaining firms increase q C. firms decrease q initially, new firms enter, original firms decrease q D. firms decrease q initially, firms exit, remaining firms increase q 25. Monopolistically competitive firms advertise in order to ... A. increase demand B. increase price elasticity of demand C. decrease price elasticity of demand D. A and B only E. A and C only Econ 2020 Exam #5 Use the following information to answer question 1. MRP L 410 –2L W = 10 + L 1. For the monopsonist facing this demand curve with these costs, the profit- maximizing level of employment is ___ workers and wage is ____ . A. 80, $90 B. 105, $115 C. 133, $143 D. 100, $210 E. 100, $110 Use the following graph to answer questions 2-3. 2. The dotted area represents… A. producer burden B. consumer burden C. deadweight loss D. tax revenue E. “That's a good call. Here, that's worth a nickel.” 3. What is the amount of the excise tax? A. $14.00 B. $20.00 C. $6.00 D. $8.00 E. “Why, if it isn't our mangy, transient grandfather.” 4. A firm operates in a perfectly competitive labor market has a marginal revenue product of labor curve of MRPL= 228 –6L. If the market wage rate is $24, what level of employment will maximize profits? A. 42 workers B. 13 workers C. 26 workers D. 57 workers E. 34 workers Use the following information to answer question 5. Due to the fact that packs of wild dogs have taken over some major cities, the Federal government is assigning Special Forces teams to cities across the country. Each team will cost taxpayers $6,800. There are two types of consumers: major city residents, and rural area residents. The marginal benefit of each additional team is represented in the following table: 5. If there are 800 major city residents and 400 rural area residents, what is the socially optimal number of teams? A. 1 B. 2 C. 3 D. 4 E. 5 6. When all other firms in a cartel obey the rules of the collusion agreement, A. an individual firm demand curve will be more inelastic if it colludes than if it cheats B. an individual firm demand curve will be more inelastic if it cheats than if it colludes C. an individual firm can make more money by cheating than by colluding D. A and C only E. B and C only 7. Which of the following will increase the demand for labor? A. a decrease in the number of substitute inputs B. an increase in the price of substitute inputs C. an increase in the demand for the output D. all of the above E. B and C only Use the following table to answer questions 8 -12. 8. The correct value for the blank labeled "A" is… A. 15 B. 19 C. 9 D. 20 E. “I'm all jacked up on Mountain Dew!” 9. The correct value for the blank labeled "B" is A. 17 B. 23 C. 24 D. 25 E. 96 10. The employer will hire ___ workers at a wage of ____. A. 3, $22 B. 3, $24 C. 4, $23 D. 4, $24 E. 4, $25 11. In which type of product market does this firm sell? A. perfect competition B. monopoly C. monopsony D. “So when you say psychosomatic, you mean, like, he could start a fire with his thoughts?” 12. In which type of labor market does this firm hire workers? A. perfect competition B. monopoly C. monopsony D. “Hakuna matata...” Use the following graph to answer question 13. 13. In a monopsony labor market, ____ workers would be hired for a wage of _____ . A. 600; $21 B. 200; $17 C. 200; $21 D. 300; $40 E. 300; $17 14. Which of the following actions is taken by labor unions to reach their goals? A. advertising union-made B. lobbying for import restrictions C. lobbying for minimum wage decreases D. all of the above E. A and B only 15. Which of the following is one of the characteristics of oligopoly? A. no barriers to entry B. perfect information C. few, mutually interdependent sellers D. all of the above E. B and C only 16. Jean Girard played jazz on the jukebox at the Pit Stop, which created a negative externality. Which of the following government actions could improve social welfare? A. a tax on jazz, causing more jazz to be played B. a tax on jazz, causing less jazz to be played C. a subsidy on jazz, causing more jazz to be played D. a subsidy on jazz, causing less jazz to be played E. “Shake and bake!” Use the following game to answer question 17. 17. With respect to the above “game,” which of the following statements is FALSE? A. The players maximize their individual welfare by colluding. B. The players maximize total producer welfare by cheating. C. Consumers are better off when the players cheat. D. A and B only E. B and C only Use the following graph to answer questions 18 –19. 18. Without regulation, the equilibrium price and quantity will be… A. $22; 85 units B. $17; 85 units C. $20; 75 units D. $20; 95 units 19. The optimal _____ for this market is _____ . A. tax, $5 B. subsidy, $5 C. tax, $2 D. subsidy, $2 E. “What does that do? Does that blow your mind? That just happened!!” 20. Larry Dennit Jr. is considering hiring Jean Girardto race for his team. Which of the following effects will Jean’s hiring have on Mr. Dennit’s firm? A. profit will rise B. total cost will fall C. total revenue will rise D. A and B only E. A and C only 21. When an unregulated negative externality exists, A. the marginal social cost exceeds the marginal social benefit B. the marginal social benefit exceeds the marginal social cost C. the market equilibrium output is greater than the socially optimal level D. A and C only E. B and C only 22. Lucius Washington has just discovered a new production process that will increase the marginal productivity of all Dennit Racing team members. What will happen to Dennit Racing’s demand for labor? (HINT: Remember that DL = MRPL ) A. DL will increase B. DL will decrease C. DL will stay the same D. “This sticker is dangerous and inconvenient, but I do love Fig Newtons.” 23. Which of the following factors will NOT break down collusion? A. a small number of sellers B. differentiated products C. antitrust policy D. A and B only E. B and C only 24. Assume labor unions successfully lobby for an increase in the minimum wage. Implementation of this proposal is likely to A. increase employment among young (non-union) people B. increase unemployment among young (non-union) people C. decrease the demand for union labor D. A and C only E. B and C only 25. All firms find the profit-maximizing level of employment where… A. W = MPL B. MRPL= MFC C. MRPL= W D. MR = MC E. “If you ain't first, you're last!”
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