Micro-Economics Final

Greater emphasis on self-sufficiency and trading less with foreign countries would increase incomes and living standards in the United States

A policymaker wants to reduce inflation. In order to make an intelligent decision about how to do so, the policymaker:

If North Korea and South Korea were both equally poor in 1950, why has South Korea developed so much faster since then?

How are wealth and economic growth related?

Adam Smith's metaphor of the "invisible hand" refers to the notion that:

An example of a case in which free markets do not align self-interest with social interest is pollution-emitting production:

A high-school graduate deciding to go to college makes that decision by:

A period marked by falling wages, falling national output, and rising unemployment is called a recession.

High inflation in Zimbabwe in 2009 was a result of the Zimbabwean government's printing too much money.

Fluctuations in graduate school enrollment correlate positively with fluctuations in unemployment. What is the most likely reason why?

An automobile gets 40 miles per gallon, and a gallon of fuel costs $4.00. What is the marginal fuel cost for a typical mile of driving with this vehicle?

Adam Smith coined the term "invisible hand" to mean:

A cell phone plan costs $50 per month for 1,000 minutes, and $0.30 per minute for each additional minute after 1,000. What is the marginal fee for the 1,001st minute used?

Among the most powerful institutions for supporting good incentives are:

America was so poor in past centuries that even George Washington caught malaria.

A student at a party deciding whether to stay a few more minutes is:

A dependable legal system and competitive, open markets help to:

According to economists, when the Food and Drug Administration raises the approval requirements for new drugs:

A production possibilities frontier shows:

Refer to the figure. A country needs 4 units of labor to produce one car and 3 units of labor to produce one boat, and the country has 120 units of labor. Which of the figures represents this country's PPF?

Anita can bake 10 cakes in a day, but has no time left to make cookies. If she bakes only cookies, she can make 200 cookies in a day. John makes equally delicious cakes and cookies but can only make 7 cakes or 100 cookies in a day. Based on this information, which of the following statements is TRUE?

David sells his car, which he considers worthless, to Cameron for $200. Which of the following statements is true?

Adam Smith:

(Figure: Comparative Advantage) The figure illustrates both the U.S. and Japanese production possibilities frontiers for TVs and wheat. Based on this information, which of the following is TRUE?

Although trade increases productivity, it decreases society's collective knowledge because people specialize in a very limited number of things.

According to the theory of comparative advantage, the reason wages are lower in China than in the United States is:

(Figure: Countries A and B) Refer to the figure. According to the diagram about countries A and B, which of the following statement(s) is correct?
I. Country A has a comparative advantage in Good Y.
II. Country B has an absolute advantage in both goods.
III. Country B has a comparative advantage in Good X.

Evidence from history shows that when the extent of trade expands, the result is prosperity.

(Figure: PPF Mexico & United States) Use the above figure in which both Mexico and the United States each have 24 units of labor. Mexico has a comparative advantage in ______ and the United States has a comparative advantage in ______.

Figure: Comparative Advantage) The figure illustrates both the U.S. and Japanese production possibilities frontiers for TVs and wheat. Based on this information, which of the following is TRUE?

Adam Smith advocated the benefits of:

An advantage to specialization is that it can decrease the average cost of production by concentrating on smaller-scale production.

Absolute advantage is the ability to produce a:

(Figure: Computers and Books) According to the figure, both countries can increase consumption if:

Everyone, from the most to the least skilled to the most and least educated, can benefit from trade.

Suppose the figure illustrates the United States PPF for the production of corn and TVs. Which of the following statements is TRUE?

(Figure: PPF Goods X & Y) Refer to the figure. Point A represents an allocation of resources that is:

According to Adam Smith:

Economies can grow due to:

(Figure: Bananas) Refer to the figure. If the price of bananas is $2 a pound, how many pounds of bananas will suppliers supply?

Refer to the figure. Calculate the dollar amount of consumer surplus being earned in this market when the price is $30 and there are 300 units consumed.

Advances in technology such as personal computers and cellular telecommunications are indicated in the supply graph by a movement along the supply curve.

Which of the following could explain the figure?

A farmer can grow soy or sorghum. If the price of soy increases, the opportunity cost of growing sorghum ______, shifting the supply curve of sorghum ______.

A farmer can grow either apples or oranges. An increase in the price of apples ______ the opportunity cost of growing oranges so that the supply curve of oranges shifts ______.

A decrease in income causes demand for a normal good to ________, and an increase in income causes demand for an inferior good to ________.

Refer to the figure. Calculate the total dollar amount of producer surplus earned in this market at a price of $100.

A change in quantity supplied is reflected by a movement along the same supply curve while a change in supply refers to a shift in the entire supply curve.

In the diagram, for a market price of $4 total consumer surplus equals:

In the figure, a $10 tax is imposed on the market for lobsters. What is the market price that lobster producers would need to receive to induce them to produce 5,000 bushels of lobster per day?

A government subsidy to producers causes the:

Refer to the figure. Producer surplus at a price of $40 is:

A decrease in the price of one substitute good causes:

Which of the following factors would cause the change in the figure?

(Figure: Good X) From the figure, which statement is TRUE?

An increase in a per unit production tax ______ supply.

Refer to the two figures. Which statement is TRUE?

(Figure: Good X) From the figure, the maximum price that consumers are willing to pay for _____ units of Good X is _____ per unit.

Refer to the figure. What is the maximum amount that buyers are willing and able to pay at a price of $45 per book?

Refer to the figure. If the price of bananas in the diagram is $6 a pound, what is the total producer surplus?

A demand curve indicates that:

A decrease in the opportunity cost of steel production will:

An increase in a per unit production subsidy ______ supply.

Refer to the figure. What is the maximum price per book that buyers are willing to pay for 2,500 books?

Refer to the figure. The market price of the product is $20 per unit. Calculate the dollar amount of consumer surplus being earned in this market.

A decrease in expected future supply of a good will lead to:

Advertising, fads, and fashion are examples of influences on demand that are generally referred to as altering expectations about products.

A change in which factor would shift the supply curve?

Which statement is TRUE regarding the figure?

A change in price is reflected by a movement along the same demand curve while a change in demand refers to a shift of the entire demand curve.

A decrease in production costs at any given quantity ______ supply.

A good is considered normal if demand for it ______ when income ______.

A decrease in demand refers to:

A firm produces volleyballs and soccer balls. What happens to the supply of soccer balls if the market price of volleyballs increases?

(Figure: Bananas) Refer to the figure. If the price of bananas is $10 a pound, which number is closest to the number of pounds that suppliers will supply?

Refer to the figure. Calculate the total dollar amount of producer surplus earned in this market if the market price is $60.

A higher opportunity cost of producing a good increases the supply of that good.

A decrease in the cost of inputs will shift the supply curve down and to the right.

In the diagram, the current demand curve for chicken legs is represented by D1. If the price of chicken thighs, a substitute for chicken legs, decreases, the demand curve for chicken legs will:

An increase in demand and a decrease in supply occur in a market. What happens to the equilibrium price and quantity?

(Figure: Chocolate) What is the equilibrium price per pound in the diagram?

(Figure: Demand, Supply Shifts) In the figure, the initial demand curve is D1 and the initial supply curve is S1. Resource prices in this market increase; at the same time, the consumer population declines as migration causes an outflow of population to other regions. What happens to the supply curve and/or demand curve?

(Figure: Demand, Supply Shifts) In the figure, the initial demand curve is D1 and the initial supply curve is S1. If technological innovations lower the costs of production, what will happen?

An early frost in the vineyards of Napa Valley would cause a(n):

The Arab Oil Embargo of 1973, the Iranian Revolution of 1979, and the Gulf War of 1991 all affected oil prices by:

(Figure: Basic Supply and Demand) In the diagram, the market price is stable only at a price of:

(Table: Equilibrium Adjustment) Refer to the table. The equilibrium price is:

(Table: Equilibrium Adjustment) Refer to the table. If the price in the free market is $2, then a:

(Figure: Demand, Supply Shifts) In the figure, the initial demand curve is D1 and the initial supply curve is S1. Suppose this depicts the market for corn. How does the market change when flooding in Iowa destroys a significant amount of the corn crop.

(Figure: Demand and Supply) Refer to the figure. Which statement is TRUE?

(Figure: Equilibrium) Refer to the figure. The equilibrium price (in $) is:

An increase in supply and a decrease in demand occur in a market. What happens to the equilibrium price and quantity?

A decrease in the supply of milk will lead to a decrease in the QUANTITY DEMANDED of milk.

An increase in quantity demanded is a movement along a fixed demand curve caused by a shift in the supply curve.

(Figure: Demand, Supply Shifts) In the figure, the initial demand curve is D1 and the initial supply curve is S1. If this depicts the equilibrium in the market for computer printers, what will happen when the price of computers increases?

Refer to the figure. When the demand curve shifts from D0 to D1, the equilibrium price rises to:

After a hurricane in Florida destroys half of the orange crop, economists predict:

(Table: Equilibrium Adjustment) Refer to the table. If the price in the free market is $8, then a:

An increase in supply causes a temporary surplus at the old equilibrium price.

(Figure: Equilibrium) Refer to the figure. The equilibrium quantity (in units) is:

A market shortage can be defined as a situation in which the quantity supplied in a market is greater than the quantity demanded, at the given price.

An increase in quantity demanded is a shift in the entire demand curve.

A market surplus can be defined as a situation in which the quantity demanded in a market is less than the quantity supplied, at the given price.

An increase in demand causes an increase in quantity supplied, which causes a decrease in price.

(Table: Equilibrium Price, Quantity) Refer to the table. If the price in the market was $12, there would be a:

A decrease in supply raises the price of a good, but it also decreases the quantity demanded, which lowers the price of a good. The net effect on price is ambiguous.

(Figure: Basic Supply and Demand) In the diagram, which of the following statements is TRUE?

(Table: Equilibrium Price, Quantity) Refer to the table. If the demand curve for the product shifted to the right such that 10 more units of the good are demanded at every price, what is the new equilibrium price?

A free market achieves an equilibrium price and quantity due to:

A decrease in demand for a good will lead to a decrease in the price of the good, but an increase in the quantity supplied.

An increase in demand causes a:

(Figure: Demand and Supply) Refer to the figure. At the equilibrium quantity, total surplus is:

Figure: Basic Supply and Demand) In the diagram, which of the following statements is TRUE?

(Figure: Chocolate) If the price in the diagram is $5, what will happen?

A demand curve shows the relationship between:

In the figure, the demand curve shifted from D0 to D1. To describe this movement, we would say that:

A(n) ______ causes the equilibrium price to ______ and equilibrium quantity to ______.

(Figure: Demand, Supply Shifts) In the figure, the initial demand curve is D1 and the initial supply curve is S1. If this depicts the equilibrium in the market for computer printers, what will happen when the price of computers increases?

A decrease in the supply of milk will lead to a decrease in the QUANTITY DEMANDED of milk.

Drug prohibition is likely to increase drug-industry revenue because the demand for drugs is inelastic.

A good with an absolute value of the price elasticity of demand of 0.5 has:

Assume a product has a rather elastic demand. If the producer of the good raises the price of the product, that producer's total revenue will decrease.

A perfectly elastic supply curve is:

Demand for a specific brand ______ demand for the corresponding product category.

Demand for a specific brand ______ demand for the corresponding product category.

(Figure: Elasticity of Supply) Refer to the figure. Which supply curve is the most elastic?

A good with many substitutes will have a _____ curve that is relatively _____ elastic than a good with few substitutes.

Both the elasticities of demand and supply tend to be more elastic in the long-run.

Good X and Good Y are related goods. When the price of Good X rises by 5 percent, the quantity demanded for Good Y rises by 15 percent. Calculate the cross-price elasticity.

Refer to the figure. Which one of the four supply curves has the greatest responsiveness to price changes?

Good X and Good Y are related goods. When the price of Good X rises by 20 percent, the quantity demanded for Good Y falls by 40 percent. What is the cross-price elasticity?

Refer to the figure. When the price of the product rises from $4 to $6, the total revenue changes by the area(s) represented by:

A 4 percent increase in the price of beer will cause a 1 percent decline in the quantity of beer demanded. The demand for beer is:

If a 4 percent increase in the price of pepper results in a 1 percent decrease in pepper sales, what is the absolute value of the price elasticity of demand for pepper? Is it elastic or inelastic?

A good with an absolute value of the price elasticity of demand of 1.0 is classified as:

(Figure: Elasticity of Supply) Refer to the figure. Which supply curve is the most inelastic?

Demand for necessities is inelastic, while demand for luxuries is elastic.

Refer to the figure. It shows two different demand curves. Based on the graph, which statement is TRUE?

Demand for necessities is elastic, while demand for luxuries is inelastic.

Assume that demand increases by 1 percent, the absolute value of price elasticity of demand is 1.0, and price elasticity of supply is 1.0. What is the percentage price change in this case?

Refer to the figure. It shows two different supply curves. Based on the graph, which statement is TRUE?

Assume a product has an inelastic demand. If the producer of the good raises the price of the product, that producer's total revenue will decrease.

Goods tend to be more elastic in the short run than in the long run.

Assume that demand decreases by 3 percent, the absolute value of price elasticity of demand is 1.0, and price elasticity of supply is 1.0. What is the percentage price change in this case?

Refer to the figure. If price increases from $10 to $20, total revenue will:

A firm's revenue is price per unit times the quantity sold, so an increase in price decreases revenue if demand is elastic.

Are there more substitutes for Cheerios or for cereal in general? For which good is demand more elastic?

If a rising price leads to falling revenues, then demand is elastic.

Refer to the figure. If price falls from $60 to $40, total revenue goes ________, so demand is ________.

For a price increase from $100 to $110, supply is the most elastic when quantity supplied:

A higher income tends to make demand for a given good ______ elastic.

Refer to the figure. Which of the four demand curves has the greatest responsiveness to price changes?

Refer to the figure. Compared to S1, S2 is more:

Refer to the figure. If price decreases from $20 to $10, total revenue will

A cross-price elasticity value that is negative will always indicate goods that are substitutes.

A perfectly inelastic supply curve is a:

A cross-price elasticity value that is positive will indicate goods that are substitutes.

In the figure where S1 is the supply of drugs with no prohibition and S2 is the supply of drugs with prohibition, the area that represents total revenue with drug prohibition is ______, and the area that represents total revenue with no prohibition is ______.

A wage subsidy would:

(Figure: Demand Tax) The figure illustrates a market for gasoline with a $1 tax imposed on the buyers. What price do sellers receive for a gallon of gasoline in this market?

As supply becomes more elastic, ceteris paribus, the deadweight loss from a tax:

A subsidy will cause the biggest deadweight loss when:

Ceteris paribus, the total subsidy is largest when:

(Figure: Deadweight Loss) Which of the areas represent the area of government revenue resulting from a $2 tax?

According to economic theory, consumers should support taxes on the producer, and producers should support taxes on the consumer.

According to the figure, who bears the greater burden of the tax?

(Figure: Commodity Tax on Suppliers) Refer to the figure. If a tax shifts the supply curve from S1 to S2, tax revenue is:

A subsidy causes deadweight loss:

(Figure: Consumer and Producer Surplus) According to the figure, what is the value of the deadweight loss?

A subsidy is similar to a reverse tax—instead of taking money away from buyers (or sellers), the government gives money back to buyers (or sellers).

A subsidy is:

According to Nobel Laureate Edmund Phelps, minimum wages cause higher unemployment, but wage subsidies cause higher employment.

A tax on the seller of a product:

A ________ creates a situation in which the price received by sellers ________ the price paid by buyers.

Andy and Annie are in a happy relationship. Annie has many substitutes for Andy, but Andy has few substitutes for Annie. Suppose that one of them has to move two hours away for work. Which one of them will do the majority of the driving if they decide to continue their relationship on a long-distance basis?

As demand becomes more elastic, ceteris paribus, the deadweight loss from a tax:

(Figure: Supply and Demand with Subsidy) Refer to the figure. The deadweight loss from a $2 subsidy is:

(Figure: Consumer and Producer Surplus) According to the figure, what would happen to the deadweight loss if the tax increased to $2 per basket of apples?

A tax on sellers of popcorn will:

A tax imposed on sellers will:

A subsidy targeted to raise consumption by a specific amount will cost the most when:

A commodity tax increases gains from trade.

(Figure: Deadweight Loss) Which of the areas in this figure represents the lost consumer surplus resulting from a $2 tax?

(Figure: Imposition of a Tax) Refer to the figure. With a $4 tax, the deadweight loss is:

A given tax will impose a greater deadweight loss when:

With a $4 subsidy in the figure, buyers pay _____ and sellers receive _____.

Which combination of demand and supply curves results in the greatest tax burden to buyers?

(Figure: Imposition of a Tax) Refer to the figure. After the imposition of a $4 tax, the government collects revenues of:

As long as neither supply nor demand is perfectly elastic, both suppliers and demanders will pay part of any tax.

Commodity taxes impose a ______ upon society.

According to the figure, who bears the greater burden of a commodity tax?

A wage subsidy will:

(Figure: Commodity Tax on Suppliers) Refer to the figure. If a tax shifts the supply curve from S1 to S2, the value of deadweight loss is:

(Figure: Demand Tax) The figure illustrates a market for gasoline with a $1 tax imposed on the buyers. What price do buyers pay for a gallon of gasoline in this market?

(Figure: Deadweight Loss) Which of the areas in this figure represents the deadweight loss resulting from a $2 tax?

A tax on sellers of apples:

If the government places a tax on sellers of $0.67 per unit in this market, who will bear the burden of the tax?

(Figure: Imposition of a Tax) Refer to the figure. Consumer surplus before the $4 tax is ________, and consumer surplus after the $4 tax is ________.

(Figure: Government Price Controls) Refer to the figure. The government enacts a price control causing a shortage of 15 units of the good. Therefore, the ________ is set at ________.

A binding price ceiling leads to a(n):

A nonbinding price floor leads to a(n):

A legal maximum price at which a good can be sold is a price:

(Figure: Price Ceiling of Ps) Refer to the figure. Suppose a price ceiling of Ps is imposed. The shaded area may likely represent all of the following EXCEPT:

A major hurricane damages many oil refineries, which increases the market price of gasoline from $3.50 to $5 per gallon. The Attorney General threatens legal action against gas station owners who raise prices above pre-hurricane levels, causing gas station owners to reluctantly sell gas for $3.50 per gallon. At $3.50 per gallon, shortages cause buyers to wait in line for 2 hours. If the average purchase is 15 gallons and buyers value their time at $20 an hour, is the Attorney General helping?

(Figure: Price Ceiling of Ps) Refer to the figure. Suppose a price ceiling of Ps is imposed. As a result:

A minimum wage mostly creates unemployment among older workers

Refer to the figure. If the government imposes a price ceiling at the price of $4.00, the result would be a:

(Figure: Effects of Price Ceilings) Refer to the figure. At a price ceiling of $2 per unit, consumers are willing to pay a maximum of:

Although a minimum wage increases unemployment, it doesn't create a deadweight loss.

Refer to the figure. The deadweight loss from the $8 minimum wage is area:

An alternative to rent control that has been used in some cities since the 1990s is:

Refer to the figure. What areas represent the deadweight losses in the labor market as a result of the imposition of a minimum wage at $4?

A binding price floor leads to a(n):

A nonbinding price ceiling leads to a(n):

Allocating products with long lines, using a first-come, first-served system, is:

(Figure: Price Ceiling) Refer to the figure. If a price ceiling were set at $12, there would be a:

(Figure: Effects of Price Ceilings) Refer to the figure. At a price ceiling of $2:

An alternative to rent controls that increases the quantity of housing and targets consumers that need low-cost rental property is:

Airline regulation from 1938 to 1978 was successful in keeping prices high because:

Refer to the figure. Which statement is correct?

(Figure: Effects of Price Ceilings) Refer to the figure. Suppose that the data represent the retail gasoline market. At a price ceiling of $2, the total value of wasted time from waiting in line is:

A free market maximizes the gains from trade, the sum of consumer and producer surplus, meeting all of the following conditions EXCEPT:

A market with price ceilings fails to maximize all of the following EXCEPT:

A deadweight loss is the total of:

(Figure: Price Ceiling) Refer to the figure. A price ceiling of $10 results in a:

An economy with permanent, universal price controls is in essence a:

(Figure: Government Price Controls) Refer to the figure. If the government sets the price ceiling at $31, there will be

(Figure: Costs of Price Ceilings) Refer to the figure. What is the dollar amount of the value of wasted time if a price ceiling of $4 is implemented?

Refer to the figure. In the diagram, a minimum wage of $7 causes a deadweight loss of:

(Figure: Price Ceiling) Refer to the figure. When a price ceiling of $10 is instituted by the government, consumers are able to buy how many units of the product?

A price ceiling:

A price ceiling is a legal maximum on the price of the good or service

(Figure: Minimum Wage) Refer to the figure. At a minimum wage of $8, firms are willing to hire ________ workers.

A price ceiling creates a ________ when it is set ________.

An increase in the minimum wage would likely increase unemployment among which group of workers?

(Figure: Minimum Wage) Refer to the figure. How many workers are unemployed at a minimum wage of $8?

(Figure: Losses from Price Ceilings) Refer to the figure. A price ceiling of $1 causes lost consumer surplus equal to area ________, and lost producer surplus equal to area ________.

(Figure: International Trade 1) Refer to the figure. With the international trade in this figure, domestic consumption is ______ units, and ______ of those units are imported.

A quota caps the quantity of an import.

As a result of tariffs, domestic producers tend to:

As a result of U.S. quotas on sugar imports, all of the following are true, EXCEPT:

A tariff ______ the world supply of a good.

A tariff on a good when the world price is lower than the domestic price leads to:

A tariff is

(Figure: Foreign Trade) Refer to the figure. What quantity would be traded in a free-trade environment?

(Figure: Costs of Tariffs) Refer to the figure. In the figure representing the market for leather, domestic suppliers are the high-cost producers of leather. However, import restrictions push domestic prices up to $100. Which area represents the value of wasted resources?

Child labor is primarily a result of:

(Figure: Foreign Trade) Refer to the figure. What quantity would be produced domestically?

(Figure: Foreign Trade 2) Refer to the figure. What is the dollar value of the deadweight loss created as a result of prohibiting trade in this market?

(Figure: Foreign Trade) Refer to the figure. What quantity would be imported?

A trade quota is:

According to the supply and demand framework in the text, an increase in import trade tends to ______ domestic production of a good.

(Figure: Foreign Trade 2) Refer to the figure. What is the dollar value of wasted resources as a result of prohibiting trade in this market?

A tariff results in a higher:
I. consumer surplus.
II. producer surplus.
III. government revenue.

All of the following reduce child labor, EXCEPT:

(Figure: Bananas) If there is a $3 tariff on bananas, what is the total tariff revenue?

(Figure: A Tariff on Imports) Refer to the figure. Suppose the government intervenes with a $2 tariff; the total value of deadweight loss as a result of the tariff is:

(Figure: Foreign Trade with a Tariff) Refer to the figure. A $1 tariff generates increased domestic production by:

Consider the following statements:
I. Relative to a no-trade situation, if the United States exported wheat, the U.S. domestic wheat price would rise and domestic production of wheat would expand.
II. Relative to a no-trade situation, international trade causes the prices of all goods to rise.

A tariff benefits domestic producers but hurts domestic consumers.

As GDP per capita increases, child labor tends to

(Figure: Foreign Trade) Refer to the figure. What quantity would be traded in the absence of any international trade?

(Figure: Foreign Trade Market) Refer to the figure. What is the dollar value of the lost consumer surplus as a result of prohibiting trade in this market?

(Figure: International Trade 1) Refer to the figure. According to the figure, which of the following statements is TRUE?

(Figure: A Tariff on Imports) Refer to the figure. Suppose the government intervenes with a $2 tariff; the total cost of the tariff to the citizens in that country is:

Both domestic production and consumption increase because of tariffs.

(Figure: Foreign Trade Market) Refer to the figure. What is the dollar value of the deadweight loss created by the loss of foreign trade?

As a result of tariffs:

(Figure: Foreign Trade with a Tariff) Refer to the figure. A $1 tariff results in:

Economic growth requires:

(Figure: Foreign Trade with a Tariff) Refer to the figure. A $1 tariff generates government revenue of:

An increase in import trade tends to ______ domestic prices.

Tradable allowances for pollution:

According to the Coase theorem, the private market will need government intervention in order to reach an efficient outcome when externalities are present.

Antibiotics may be ________ since people consider only the ________.

An external cost:

A(n) ______ is a tax on a good with external costs.

When externalities are present in a market, social surplus is maximized.

When external benefits are significant:

An efficient equilibrium occurs when:

A free market void of externalities ______ social surplus.

All of the following would be government solutions to externality problems EXCEPT:

(Figure: Market for Vaccines) Refer to the figure. The figure represents the market for vaccines with external benefits. The market's outcome generates a(n):

When the government intervenes in markets with external costs, it does so in order to:

An external benefit in a market will cause the market to produce:

An external cost is:

An external benefit is a benefit received by:

A free market with an external benefit is ______, and one with an external cost is ______.

Transaction costs:

When external benefits are present in a market:

A free market with externalities ______ social surplus.

(Figure: Palm Oil) Refer to the figure. Indonesian palm oil producers deforest tropical rainforests to grow the plants that excrete the oil. With this externality, what is the deadweight loss (if any) of producing palm oil?

An external cost is a cost paid by:

A(n) ______ subsidy is a subsidy on a good with external benefits.

Antibiotics tend to be overused, as the producers of antibiotics are required to bear all the costs of antibiotic use

A Pigouvian subsidy should be set equal to the amount of the external benefit.

When patients or farmers choose whether to use more antibiotics, they compare:

An external cost is built into the market price of a good and thus paid by the consumers

When external benefits are present, the market price is ________, however when external costs are present, the market price is ________.

Refer to the figure. Which price and quantity combination represents the efficient equilibrium?

(Figure: Efficient Market Outcome) Refer to the figure. Which point represents the efficient equilibrium?

An example of a transaction cost for a shirt is the price you pay for a shirt.

(Figure: Dishwashing Detergent) Refer to the figure. Dishwashing detergent contains phosphates that harm marine life. In this figure, what is the external cost of using dishwashing detergent?

(Figure: Dishwashing Detergent) Refer to the figure. Dishwashing detergent contains phosphates that harm marine life. In this figure, SC represents the:

n efficient equilibrium occurs whenever:

(Figure: Efficient Market Outcome) Refer to the figure. The efficient price and quantity are, respectively:

When external costs are present in a market:

When significant externalities exist:
I. the market equilibrium is no longer efficient.
II. the market equilibrium is only efficient if the externality is an external benefit.
III. social surplus is not maximized.
IV. the government may increase efficiency by imposing a tax on the market.

Tradable pollution permits:

A Pigouvian tax:

According to the Coase theorem, which situation would MOST likely result in a private bargaining solution and yield an efficient market?

Economic profit is equal to total revenue minus explicit costs.

Use the figure. The profit-maximizing output for this firm is:

A competitive firm maximizes profits when price equals marginal cost.

Firms are profitable when price is:

(Figure: Profits and Competitive Firms) Refer to the four panels in the figure. Which panel shows a competitive firm making zero economic profits?

(Figure: Two-Firm Industry) Refer to the figures. At a market price of $25, the total quantity supplied in the industry is:

(Figure: Costs) Use the figure. At a price of $20, the firm earns profit of:

(Figure: Two-Firm Industry) Refer to the figures. At a market price of $20, the total quantity supplied in the industry is:

Refer to the figure. In the long run, what do you expect this firm's economic profit or loss to be?

A firm's short-run supply curve is its marginal cost curve.

Firms earn negative profit when price is:

Economists study decreasing cost industries in order to explain:

Firm profit is defined as:

How much profit is the firm making at the profit-maximizing quantity?

A firm's total profit is equal to the marginal cost of production multiplied by the quantity produced.

For a small firm in an extremely competitive industry, marginal revenue is always equal to price because:

If P = $20, AC = $16, and Q = 100, then profit = $3,600.

Economists call the time after all exit or entry has occurred:

(Figure: Profits and Competitive Firms) Refer to the four panels in the figure. Which panel shows a competitive firm making positive economic profits?

Firms should exit the market if:

A firm should always shut down if it is earning negative profits.

(Figure: Industry Firms) Refer to the figures. The market is characterized by demand curve D2 and supply curve S1. The firms in the industry are earning ________, which will cause the______________.

(Figure: Costs of Oil Production) Refer to the figure. Assuming that price equals marginal cost, the profit of producing eight barrels of oil is:

Decreasing cost industries have supply curves that slope downward forever.

Average cost is equal to total cost divided by quantity

Refer to the figure. If you are one of literally thousands of maple syrup producers and you wanted to increase your maple syrup production from 100 gallons to 110 gallons, what price would you charge?

A firm should exit an industry if:

Firms in a perfectly competitive industry maximize profits by:

(Figure: Profits and Competitive Firms) Refer to the four panels in the figure. Which panel shows a competitive firm making an economic loss?

Refer to the set of four panels in the figure. Which panel shows the typical shape of the average cost curve in a competitive market?

Economic profit differs from accounting profits because of its inclusion of:

Firms in competitive industries:
I. can only charge a price equal to the market price.
II. cannot charge any more than the market price.
III. will earn less profit if they charge less than the market price.

Average total cost is equal to total cost divided by profit

Explicit costs incurred by firms include the firm's opportunity costs.

A market is considered perfectly competitive if:
I. there is a lot of product differentiation among sellers.
II. there are many sellers, each small relative to the total market.
III. the product sold is similar across sellers.
IV. there are only a few buyers

A firm will continue to produce additional output, as long as marginal revenue is greater than marginal cost.

Firms have less pricing power if their firm-level product is more unique.

A firm should exit an industry if price is less than average cost.

For a monopolist, MR is always less than P because:

(Figure: Maximum Willingness to Pay) Refer to the figure. What is the profit-maximizing quantity for this monopolist?

Refer to the figure. The monopolist's price markup is:

A natural monopoly occurs when:

(Figure: Maximum Willingness to Pay) Refer to the figure. What is the maximum price that the consumer is willing to pay for 100 units?

(Figure: Monopoly Markup) Refer to the figure. The deadweight loss attributable to monopoly is:

A profit-maximizing monopolist chooses the output level where MR = MC and chooses the corresponding price from the marginal revenue curve.

A monopolistic industry will have lower output and higher prices than a competitive industry.

Refer to the figure. Deadweight loss caused by monopoly pricing is represented by the area:

Deadweight loss is present in both competitive and monopoly markets.

For a linear demand curve, the marginal revenue curve has:

(Figure: Monopoly 8) The natural monopolist in this figure would produce:

(Figure: Monopoly Markup) Refer to the figure. Consumer surplus under competition is represented by:

(Figure: Monopoly 6) If the market in this figure is a monopoly, the consumer surplus is area ______, and the deadweight loss is area ______.

A monopolist maximizes profits where marginal revenue equals marginal cost.

(Figure: Monopolist 3) In this figure, the monopolist's maximum profit is:

(Figure: Monopoly 8) If the government set price equal to average cost, the natural monopolist in this figure would produce:

In this figure, the monopolist's marginal revenue curve is:

(Figure: Paint Market 2) If the fixed costs were halved, deadweight loss would:

(Figure: Monopoly Markup) Refer to the figure. Consumer surplus under monopoly is represented by:

A monopoly is a firm with market power, and market power may arise from economies of scale, patent protection, and innovation.

A firm will attain more monopoly power as demand for its product becomes more elastic.

If this figure represents the demand and cost curves for a firm with market power, what price should the firm charge to maximize profits?

(Figure: Maximize Monopoly Profits) Refer to the figure. The monopolist will maximize its profit by charging a price equal to:

A monopoly maximizes profit by finding the output level where the difference between marginal revenue and marginal costs is as large as possible.

Refer to the figure. The competitive industry level of output is:

Refer to the figure. Which of the following answers correctly indicates the profit earned by this monopolist at the profit-maximizing quantity?

A firm with no competition faces a perfectly inelastic demand curve.

(Figure: Monopoly Profits) Refer to the figure. What is the monopolist's optimal price and output level?

(Figure: Monopoly 6) If the market in this figure is a competitive market, consumer surplus is given by area(s):

(Figure: Maximize Monopoly Profits) Refer to the figure. The monopolist will maximize its profit by producing at output equal to:

A monopolist can raise its price further above marginal cost, the more ______ is the ______ for its product.

What is the profit or loss for this monopoly?

For a monopoly, the entire consumer surplus is transferred to the monopolist as profit.

Economists call a single firm that can supply the entire market at a lower cost than two or more firms a __________ monopoly.

A government can maximize efficiency in monopoly markets by setting prices equal to the monopolist's average cost of production albeit at the cost of reduced long term innovation.

(Figure: Paint Market 2) What is the deadweight loss (if any) from the monopoly in this diagram relative to its optimum quantity?

(Figure: Monopoly Profits) Refer to the figure. The monopolist earns a profit of:

(Figure: Monopolist 3) In this figure, the profit-maximizing monopolist sells:

(Figure: PPD) Refer to the figure. Which of the following statements best explains why a firm that perfectly price discriminates would sell additional units beyond a units of output?

An example of price discrimination is charging more for steak than for a hamburger.

Even when gas stations and grocery stores are close enough to share a parking lot, gas stations will typically charge much more for candy bars. This kind of price discrimination occurs because grocery store patrons have a:

(Figure: PPD) Refer to the figure. Which of the following statements best explains why a firm that perfectly price discriminates would sell additional units beyond c units of output?

(Figure: Price-Discriminating Monopolist 2) The perfectly price-discriminating monopolist in this diagram will produce _____ units of output, and a single-price monopolist would produce ______ units of output.

Refer to the figure. A monopolist who cannot price discriminate earns profit equal to area(s) ________, and a monopolist practicing perfect price discrimination earns profit equal to areas ________.

A monopolist sells its output in two markets: Canada and Europe, as shown in these figures. To maximize profits, the monopolist should:

(Figure: Perfect Price Discrimination) Refer to the figure. Which curve represents the marginal revenue (MR) curve for the monopolist who practices perfect price discrimination?

GlaxoSmithKline attempts to prevent arbitrage of its drug Combivir by selling different colored pills in special bar-coded packages, to identify and track distributors in different markets.

Airlines engage in price discrimination.

(Figure: Monopolist) Refer to the figure. Based on the demand curves for a monopolist's product in two different markets—Market A and Market B—through the process of price discrimination, how much profit is the monopolist making in Market A?

(Figure: Perfect Price Discrimination) Refer to the figure. For a firm practicing perfect price discrimination, calculate the dollar amount of consumer surplus in this market.

How does price discrimination increase social surplus?

A monopolist sells its output in two markets, each with different demand curves as shown in this figure. If the marginal cost is identical in both markets, the monopolist should charge a ______ price in the inelastic market, represented by the demand curve ______.

If two products from a company are designed to perfectly complement each other (in a one-to-many ratio), then the products are:

(Figure: Monopolist) Refer to the figure. Based on the demand curves for a monopolist's product in two different markets—Market A and Market B—what price should the monopolist charge in Market B?

Economists call selling the same product at different prices to different customers:

Bundling is expected to provide greater profits when the two bundled goods are:
I. substitutes.
II. goods that have high fixed costs and low marginal costs.
III. very close complements.

(Figure: Monopolist) Refer to the figure. Based on the demand curves for a monopolist's product in two different markets—Market A and Market B—if the monopolist were to charge a uniform price PU between the two markets, in which range would the price fall?

(Figure: Price-Discriminating Monopolist) Refer to the figure. Based on the demand curves for a monopolist's product in two different markets—Market A and Market B—if the monopolist were to charge a uniform price PU between the two markets, in which range would the price fall?

How did IBM price discriminate its laser printers?

(Figure: Price-Discriminating Monopolist) Refer to the figure. In order to maximize profits, the monopolist should charge a:

(Figure: Monopolist) Refer to the figure. Based on the demand curves for a monopolist's product in two different markets—Market A and Market B—what price should the monopolist charge in Market A?

Hewlett Packard's pricing scheme is to sell printers at relatively low price and ink cartridges at relatively high price. This practice is known as:

Airlines price discriminate prominently by charging _______ more than _________.

A monopolist facing different demand curves in two separate markets maximizes profit by:

Refer to the figure. Profit for the single-price monopoly in this diagram is ______, and under perfect price discrimination, profit is ______.

Refer to the figure. Suppose that a German manufacturer can sell its kidney lithotripter in two markets: Country X and Country Y. If this firm is interested in maximizing profits, it should set a price of ________ in Country X and ________ in Country Y.

A museum in Russia has two entrances: one for locals (written in Russian) and one for tourists (written in English). People who enter through the entrance written in Russian will end up paying 81.93 Rubles ($3.00). English-speaking tourists will use the entrance written in English, but they will end up paying 409.67 Rubles ($15.00). This practice is an example of:

(Figure: PPD) Refer to the figure. A firm that perfectly price discriminates will sell:

(Figure: Monopolist) Refer to the figure. Based on the demand curves for a monopolist's product in two different markets—Market A and Market B—through the process of price discrimination, how much profit is the monopolist making in Market B?

Haircuts for men are often cheaper than haircuts for women, even when they are offered by the same stylist. Why might this be price discrimination?

Although price discrimination may increase the profits of drug companies, it reduces the incentive for drug companies to develop new drugs.

Airlines try to differentiate their customers by willingness to pay based on:

If a monopolist begins to perfectly price discriminate,:

(Figure: Price-Discriminating Monopolist 2) Consumer surplus with a single-price monopoly is ______, and consumer surplus with a perfect price discrimination is ______.

Gillette's practice of selling razors at a relatively low cost but marking up the price significantly on its blades when Gillette razors will only work with Gillette blades is an example of:

For price discrimination to work, the young should ________ than/to the old.

A cartel is a group of consumers that tries to act together to increase their bargaining power.

Prices in an oligopolistic market are likely to be:

Firms operating in a cartel have a large incentive to cheat on the agreement by:

If the two-firm oligopoly facing the market in this diagram is currently producing at the competitive output level and one of the firms reduces output by 4 units, the firm's profits would increase from _________________.

A cartel can remain powerful even when all the members engage in secret price cuts.

Game theory is the study of:

A dominant strategy is a strategy that has a higher payoff than any other strategy no matter what the other player does.

Barriers to entry include:

A market dominated by a small number of firms is called a(n):

A cartel is a:

A dominant strategy is a strategy that a player should take only if the other player cheats.

Oligopolies tend to set prices:

Cheaters in cartels make ________ profit when the other cartel members ________ their promise.

(Figure: Demand 1) A cartel facing the market in this diagram would try to cause industry output to:

A firm receives the largest profit from cheating on a cartel agreement when:

In a competitive market, each firm earns ________ economic profits, whereas firms in a successful cartel will earn ________.

(Table: Oil Output) Refer to the table. The situation between Iraq and Iran is similar to a:

A cartel is a group of suppliers who act together in order to:

A cartel member has _____ incentive to increase quantity than a standard monopolist.

(Table: Christie' and Sotheby's) Each cell of this table presents the revenues earned by the auction houses, Christie's and Sotheby's. Revenues are based on the type of commission each firm charges its clients, as well as what commission the other charges. Christie's revenues are listed first in each cell, then Sotheby's. Christie's dominant strategy is ______ commission and Sotheby's dominant strategy is ______ commission.

Oligopolies are:

A cartel is a group of firms that try to monopolize the market.

(Table: Mary, Silvia Payoff Table) Refer to the table. Mary and Silvia are producers. If Mary cheats, what is Silvia's dominant strategy?

In the prisoner's dilemma, both players have an incentive to cheat, even though they would both be better off if they both cooperated.

(Table: Mary, Silvia Payoff Table) Refer to the table. Mary and Silvia are producers. If Silvia cooperates, what is Mary's dominant strategy?

(Figure: Competitive Market) Refer to the figure. If all firms in the market form a successful cartel, price and output in the market would be:

(Table: Christie' and Sotheby's) Each cell of this table presents the revenues earned by the auction houses, Christie's and Sotheby's. Revenues are based on the type of commission each firm charges its clients, as well as what commission the other charges. Christie's revenues are listed first in each cell, then Sotheby's. If both firms cooperate and act like a cartel:

(Figure: Competitive Market) Refer to the figure. If the market is competitive, price and output in the market would be

(Figure: Demand 1) A successful cartel facing the market in this diagram would cause the industry price to

Compared to a competitive market, firms operating in a cartel will charge a price that is:

A government-supported cartel usually means:

One sign of the cartel power of the NBA is the use of salary caps.

(Table: Oil Output) Refer to the table. The equilibrium outcome is:

Game theory can be used to study cartels and their behavior.

Two firms in an industry act as a cartel, with each firm agreeing to charge a price of $16 and sell two units of output. If one of them cheats and produces two more units of output, the cheating firm's total revenue increases by ______ and the other firm's total revenue decreases by ______.

Game theory is used to model decisions in situations where the players interact.

In the prisoner's dilemma, a dominant strategy:

(Table: Oil Output) Refer to the table. If both countries abide by the cartel agreement (i.e., not cheat):

Governments create barriers to entry with licenses or other regulations that limit entry.

Overfishing in oceans is a prisoner's ______ outcome.

A compensating differential is:

A union can raise wages by:

In the Wealth of Nations, Adam Smith wrote:

Pecuniary wages and profit, indeed, are everywhere in Europe extremely different according to the different employments of labour and stock. But this difference arises partly from certain circumstances in the employments themselves, which, either really, or at least in the imaginations of men, make up for a small pecuniary gain in some, and counterbalance a great one in others; and partly from the policy of Europe, which nowhere leaves things at perfect liberty. (Book 1, Chapter 10)

Which idea was Smith describing?

A firm will continue to hire workers as long as:

A firm will hire a worker as long as:

A single person's supply curve for labor slopes down when:

An individual's labor supply curve:

If the marginal product of labor is $10 an hour, the firm should hire the worker so long as the wage (including fringe benefits) exceeds $10 an hour.

Firms will hire additional workers as long as:

Discrimination is:

A firm is willing to hire a worker when the marginal product of labor is:

Refer to the figure. How many workers will this firm hire at a wage of $29?

If the market in this figure is in equilibrium, the hourly wage paid to plumbers is ______ and the marginal product of a plumber is ______.

In general, wages are determined:

A binding minimum wage is a(n) ______ for labor.

Discrimination by employers:

Discrimination by employees:

A newly imposed binding minimum wage:

Refer to the figure. Which of the following would represent the wage and number of workers of unionized jobs?

An individual's labor supply curve might be backward bending.

Discrimination by customers:

Customer-based discrimination is weakened by:

In a market economy discrimination by employers will NOT:

A firm will hire workers as long as the marginal product of labor is:

A compensating differential is mainly a cause of a difference in wages because:

Good-looking people:

Evidence suggests that résumés with names closely associated with African Americans received:

The firm in this figure will hire ______ worker(s) at a wage of $10 and 2 workers at a wage of _______.

A union can lower wage by:

In a world of perfect information:

A market labor supply curve:

An individual labor supply curve:

An individual's labor supply curve:

If the marginal product of labor is constant in labor, then a market labor demand curve is:

College graduates are paid more, on average, partly because the act of finishing college signals that they are more likely to be a good employee.

A firm will hire a worker whenever that worker's marginal product of labor is: