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For the following labor supply curve Qls= -200+ 200w -50R, where Qls=quantity of labor supplied, W=wage rate, and R=average rainfall per month , the change in labor supplied as rainfall increases constitutes a change based on
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a shift in the supply curve
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Economic theory predicts that a wage floor should lead to
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unemployment and an excess labor supply
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A hailstorm kills all the wheat in Minnesota. What will happen to the price and quantity of wheat sold in the U.S.?
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Equilibrium price rises, equilibrium quantity falls
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The "bliss point" is the utility level that
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one wishes to achieve but usually cant because of budget constraints, and the highest utility one can get independent of ones budget
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If food is on the horizontal axis and shelter on the vertical axis, the slope of the budget line is given by
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-Pf/Ps
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Where Y is earnings (from work), Yo is a transfer payment, L is leisure, and X1, X2, W, Px1, Px2, are as defined in class, a persons daily wage constraint is best depicted as
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(24-L)W + Yo = Y
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Excluding corner solutions, in consumer equilibrium, which of the following is true?
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The marginal rate of substitution equals. the slope of the budget constraint
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An Engel Curve
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Always slopes down for an inferior good
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What is the substitution effect of a price increase of ski bindings assuming one purchases skis and ski bindings in a fixed proportion?
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zero
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Indifference curves in the labor-leisure framework have the following slope
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-MUL/ MUy
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There are 100 consumers each with demand curve: P=1000-100q. The market demand curve is
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P=1000-Q
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The cross price elasticity of demand for complements is
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Negative
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One reason the consumer price index (CPI) overstates inflation is because
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It neglects possible consumer substitution
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Higher impatience makes one
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want to buy more now
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Suppose you receive Y1, of your income this period and Y2 of your income in the next period. If you can either borrow or lend at an interest rate r, what is the most you can consume in your future period?
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Y1(1+r)+ Y2
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A production function such that F(2K, 2L)> 2f(K,L) exhibits
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increasing returns to scale
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The regression function G=18.0 + 0.6Z where G represents student grades and Z student iClicker scores was estimated based on the multiple choice grades of the last test and it implies
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on average having a 20 point higher iClicker score raises ones grade by 12 points, and the marginal (impact) product of each iClicker point is 0.6
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The following is an example of a Leontief fixed-factor production function
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Q=min(aL, BK)
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The slope of an isoquant with labor on the horizontal axis and capital on the vertical axis is
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-MPL/MPK
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The marginal product of a variable input is
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The change in the total product that occurs in response to a unit change in the variable input
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When the marginal product curve is below the average product curve, then
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the average product curve must be falling
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Suppose that at a firms current level of production the marginal product of capital is equal to 10 units, while the marginal rate of technical substitution between capital and labor is 2. Given this, we know the marginal product of labor must be:
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20
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Given an output level, firms choose inputs to
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minimize costs
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With labor on the horizontal axis and capital on the vertical axis, the slope of the iso-cost curve is
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-w/r
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In the learning process, the elasticity of demand for pencils is smaller than the elasticity of demand for books because
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pencils represent a small cost in producing knowledge
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According to Marshalls laws the demand for labor is more elastic the
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Greater the elasticity of substitution of capital for labor, the greater the elasticity of consumer demand for the product the firm produces, and the greater the elasticity of supply of factors of production other than labor
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The short run total cost of zero output is equal to
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fixed cost
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The vertical. distance between the average variable cost and average total cost curves
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Decreases as quantity increases
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The profit maximizing output level for a perfectly competitive firm is always where
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P=MC, and MR=MC
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The following firm cost function C= 10+ 3Q^2 where Q is. the output produced is
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Necessarily a short run cost function
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Suppose an industry has 100 firms, each with supply curve P= 50+10Q. Furthermore, suppose the market demand curve is given by P= 200-0.9Q. What is the industry supply curve?
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P= 50+0.1Q
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Suppose that the supply curve is given by P=Q. What is the elasticity of supply?
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1
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Let the TC curve be given by the equation TC(Q) = 10+ 5Q. The average variable cost can be expressed as
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5
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The output where MC=AVC is called the
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Shutdown point
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The relationship between producer surplus and consumer surplus is
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Producer surplus may be greater, equal, or less than consumer surplus
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Assume an inverse demand curve P(t) =100- Q(t) and a supply curve Q(t) = 30 + 0.5P(t-1). A shift up in demand in such market will
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yield converging oscillations in prices and quantities
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One difference between a monopolist and a competitive firm is
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The competitive is a price taker and the monopolist is not, and the competitive firm has a flat marginal revenue curve and the competitive firm does not
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what is the marginal revenue for a monopolist that faces a demand elasticity of 2 (in absolute value) and sells its product for $1?
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1/2
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You own a profit maximizing monopoly facing a downward sloping demand curve. Which of the following would not reflect the elasticity of demand (in absolute value) at which your monopoly company operates?
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demand in inelastic
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If the demand equation for a single price monopolist is P= 25/Q, the marginal revenue curve for this monopolist is
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zero
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If a monopolist had no costs, its best possible price would be where demand is
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Unit elastic
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The price markup would be greatest for a monopolist facing which of the following elasticities of demand
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Ed =1.5
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A profit maximizing monopolist face the following information: P=$4, MR=$2, MC=$1.50. The firm should
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Increase output
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Price discrimination can only come about when the product sold
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cannot be resold
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A monopolist selling in two markets charges
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A higher price in the market where the demand curve has the lowest elasticity
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The deadweight loss is smallest in
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in a competitive firm and/or a first degree discriminating monopolist
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In monopsony compared to monopoly, prices are
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lower
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The marginal factor cost (MFC) curve is the same as the supply curve for a
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perfectly discriminating monopsony
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The demand curve in a labor market is W= 40-2L and the supply curve is W= 4 +3L. The monopsonists firm's marginal factor cost of labor curve is
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W= 4 + 6L
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In a prisoners dilemma game a dominant strategy would mean that one of the players
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will benefit most from one particular move no matter what the opponent does
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In a battle of Boeing and Airbus a Nash Equilibrium will exist if
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They are presenting operating at a point where neither one would benefit by unilaterally changing strategies
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In a Cournot Duopoly model
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Each firm takes the quantities produced by its rivals as given
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Which of the duopoly model has the highest overall combined profit level?
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The shared monopoly model
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If conflict leads to the diminution of trade, then country pairs with the greatest gains from trade will
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In general cooperate more politically
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In sequential games
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The order of moves matters
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In which of the following situations will a monopolist markup price is the most?
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When elasticity of demand is 1
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The strategy for tit-for-tat is
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To cooperate for the first interaction, and to imitate your rivals behavior in each subsequent interaction
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The cobweb model refers to a model
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containing a lagged supply respone
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The marginal cost curve troughs (its at it lowest point) when
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the marginal product curve peaks (its at its highest point)
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Total expenditures are highest when the elasticity of demand is
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one
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A typical income -uncompensated demand schedule (and curve) is derived by
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Rotating a budget line over a set of indifference curves
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