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Microeconomics Final
Billy Foster ECN 212 Final flashcards. Not great, but it's something.
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Economics
Undergraduate 2
12/09/2015

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Term
Cartels are not always successful because:
A. the parties in the agreement have a tendency to cheat on the agreement because of profit motivations.
B. nowhere in the world are cartel agreements considered legal.
C. cartels face a lot of competition from monopolies.
D. All of the answers are correct.
Definition
the parties in the agreement have a tendency to cheat on the agreement because of profit motivations.
Term
In a competitive market, each firm earns ________, whereas firms in a successful cartel will earn ________.
A. negative profits; positive profits
B. positive profits; monopoly profits
C. positive profits; zero economic profits
D. zero profits; positive profits
Definition
zero profits; positive profits
Term
As compared to a competitive market, firms operating in a cartel will charge a price that is:
A. lower than the competitive price.
B. equal to their average cost of production.
C. higher than the competitive price.
D. equal to their marginal cost of production
Definition
higher than the competitive price.
Term
The high prices charged by cartels:
A. serve as a barrier to entry, allowing the cartel to earn above normal profits.
B. give an incentive for new firms to enter the industry, causing an expansion of industry output and lower prices.
C. reduce the incentive for increased conservation.
D. All of the answers are correct.
Definition
give an incentive for new firms to enter the industry, causing an expansion of industry output and lower prices.
Term
In some cases cartels are successful because:
A. the cartel produces a manufactured good with many substitutes.
B. the barriers to entry in the market are low.
C. the marginal costs of production are high.
D. the cartel controls access to a key input.
Definition
the cartel controls access to a key input.
Term
Which of the following describes how cartel members cheat?
A. They steal production technologies from other firms.
B. They produce more output than they promised.
C. They fail to declare profits earned in foreign countries to avoid paying taxes.
D. They use inferior inputs in production to save money.
Definition
They produce more output than they promised.
Term
When producers engage in cartel-like behavior, they attempt to mimic the behavior of:
A. a competitive firm.
B. buyers.
C. a small firm in a competitive industry.
D. a monopoly.
Definition
a monopoly
Term
Game theory is the study of:
A. random decision making.
B. decision making allowing for irrational behavior.
C. cartel decision making.
D. strategic decision making.
Definition
strategic decision making.
Term
The prisoner's dilemma describes situations where the pursuit of:
A. individual interest leads to a group outcome that is in the interest of no one.
B. all interests lead to a group outcome that is in the interest of everyone.
C. individual interest leads to a group outcome that is in the interest of everyone.
D. all interests lead to a group outcome that is in the interest of no one.
Definition
individual interest leads to a group outcome that is in the interest of no one.
Term
A strategy that has a higher payoff than any other strategy no matter what the other player does is called a:
A. dominant strategy.
B. cartel strategy.
C. valuable strategy.
D. maximizing strategy.
Definition
dominant strategy.
Term
A Nash equilibrium in game theory is defined as a situation in which:
A. no player has an incentive to change his or her strategy unilaterally.
B. no player has an incentive to change his or her strategy even when other players change.
C. any player has an incentive to change his or her strategy even when other players remain unchanged.
D. any player has an incentive to change his or her strategy until he or she reachs the optimum.
Definition
no player has an incentive to change his or her strategy unilaterally.
Term
When many people are involved and when they do not all agree about whether one good really is better than another, the best final equilibrium is usually determined by:
A. consumers.
B. accidents of history.
C. the market.
D. the government.
Definition
accidents of history.
Term
The Blu-Ray standard war illustrates that:
A. once a product standard is established the rival product disappears from the market.
B. bilateral monopolies sometimes price below average cost.
C. complementary goods have high income elasticities.
D. government protection may lead to the demise of the superior product.
Definition
once a product standard is established the rival product disappears from the market.
Term
Which of the following statements is true regarding network goods?
A. Network goods are usually sold by monopolies or oligopolies.
B. Microsoft Word has always been the dominant word processing software.
C. Microsoft Excel has always been the dominate spreadsheet software.
D. All of the answers are correct.
Definition
Network goods are usually sold by monopolies or oligopolies.
Term
Competition for the market rather than in the market:
A. is the reason why Friendster is no longer the leading social network.
B. explains why Microsoft Word is the leading word processing network.
C. means that Facebook may one day no longer be one of the leading social networks.
D. All of the answers are correct.
Definition
All of the answers are correct.
Term
Music is a network good because:
A. most people want to listen to music that is popular.
B. music that is popular is a more valuable good.
C. music that is popular offers more benefits to the listener than does music that is obscure.
D. All of the answers are correct.
Definition
All of the answers are correct.
Term
Which of the following goods represent network goods?
A. fireworks, lighthouse, swimming pool.
B. Pepsi, toilet paper, headphones
C. calculator, oven, couch
D. Twitter, Microsoft Excel, Facebook.com
Definition
Twitter, Microsoft Excel, Facebook.com
Term
A network good is:
A. a good whose value increases to consumers as more consumers use the good.
B. a good that must be bought in large quantities in order to get discounted prices.
C. a broadcast show on radio or television.
D. a good supplied by a large network of competitive firms.
Definition
a good whose value increases to consumers as more consumers use the good.
Term
Which of the following is true about network goods?
A. They are goods that are usually sold by large firms with a great deal of market power.
B. They are goods that tend to have a large number of users or consumers.
C. They are goods whose value to one consumer increases the greater the total number of consumers.
D. All of the answers are correct
Definition
All of the answers are correct
Term
Which of the following is NOT a feature of markets for network goods?
A. Network goods are usually sold by monopolies or oligopolies.
B. When networks are important the “best” product may not always win.
C. Standard wars are common in establishing network goods.
D. Competition in the market for network goods is “in the market” instead of “for the market.”
Definition
Competition in the market for network goods is “in the market” instead of “for the market.”
Term
The marginal product of labor is:
A. the increase in costs borne by the firm when one extra worker is hired
B. the additional output produced by an extra worker
C. always greater than the wage earned by one additional worker
D. the increase in firm revenue when an additional worker is employed
Definition
the increase in firm revenue when an additional worker is employed
Term
Which of the following statements is true?
A. The market supply of labor is always upward sloping, but an individual's labor supply may not be upward sloping throughout its entire range.
B. An individual's supply of labor is always upward sloping, but the market supply of labor may not be upward sloping throughout its entire range.
C. Both the market supply of labor and the individual's labor supply may not be upward sloping across their entire range.
D. Both the market supply of labor and the individual's labor supply will both be upward sloping.
Definition
The market supply of labor is always upward sloping, but an individual's labor supply may not be upward sloping throughout its entire range.
Term
In general, wages are determined:
A. by the skills of the worker; wages will be the same no matter which country he or she is working in.
B. based on the average wage for all individuals in a particular country.
C. not by the skills of the worker alone, but also by the productivity of the entire economy.
D. based on the average marginal product of labor of workers in similar countries.
Definition
not by the skills of the worker alone, but also by the productivity of the entire economy.
Term
Why might an individual's labor supply curve bend backwards?
A. When wages rise, firms hire fewer workers.
B. As wages rise above a threshold level, firms limit the amount of hours that a worker can work.
C. As wages rise above a threshold level, the individual will decide to work harder.
D. As wages rise above a threshold level, the individual may opt for more leisure time.
Definition
As wages rise above a threshold level, the individual may opt for more leisure time.
Term
If all persons had the same preferences and productivity, then the highest paying jobs would be the most:
A. easily learned.
B. convenient.
C. prestigious.
D. undesirable.
Definition
undesirable.
Term
Which of the following represents human capital?
A. skills gained while working at your current job
B. your college education
C. a government retraining program
D. All of the answers are correct.
Definition
All of the answers are correct.
Term
Some workers have higher wages than others because:
A. they have more human capital.
B. they have more access to physical capital.
C. they work harder than others.
D. All of these answers are correct.
Definition
All of these answers are correct.
Term
A firm is willing to hire a worker when the marginal product of labor is:
A. efficient.
B. less than the wage.
C. equal to or less than the wage.
D. greater than the wage.
Definition
greater than the wage.
Term
The market demand curve for labor is based on the:
A. elasticity of supply of labor.
B. elasticity of demand for labor.
C. hiring preferences of firms.
D. marginal product of labor.
Definition
marginal product of labor.
Term
The increase in a firm's revenues created by hiring an additional worker is called:
A. marginal revenue of labor.
B. marginal revenue.
C. marginal product.
D. marginal product of labor.
Definition
marginal product of labor.
Term
By assuming diminishing marginal utility, we mean that:
A. consumers get less overall value from goods as their income rises.
B. the cost of producing goods declines as output increases.
C. consumers value additional units of a good less than the previous unit.
D. consumers value some goods more than others.
Definition
onsumers value additional units of a good less than the previous unit.
Term
Consumers maximize their utility when:
A. the marginal utility per dollar is equal across all goods consumed and all income is spent.
B. they diversify their consumption across goods.
C. the total benefits are greater than total costs.
D. they consume the good on which they place the highest overall value.
Definition
the marginal utility per dollar is equal across all goods consumed and all income is spent.
Term
An increase in the price of a good leads to a(n) ______ in the marginal utility per dollar of that good, and thus a(n) ______ in the quantity purchased.
A. increase; decrease
B. increase; increase
C. decrease; increase
D. decrease; decrease
Definition
decrease; decrease
Term
The consumption bundle that maximizes utility for a consumer is the bundle that:
A. equates the slope of the budget constraint with the slope of the indifference curve.
B. minimizes the costs of production.
C. maximizes marginal utility across all goods.
D. maximizes the marginal rate of substitution.
Definition
equates the slope of the budget constraint with the slope of the indifference curve.
Term
If there are only two goods in the economy, chocolate and peanut butter, and the price of chocolate falls, the new utility maximizing bundle for a typical consumer would entail consuming ______ peanut butter and ______ chocolate.
A. less; more
B. less; less
C. more; more
D. more; less
Definition
more; more
Term
Diminishing marginal utility means that marginal utility ______ as consumption ______.
A. decreases; increases
B. increases; decreases
C. decreases; decreases
D. increases; increases
Definition
decreases; increases
Term
Assume that the unit price of good A is $2, and the unit price of good B is $5. If an individual has income of $30, which of the following consumption bundles of (good A, good B) is on the edge of the budget constraint?
A. (6,5)
B. (6,4)
C. (5,4)
D. (5,5)
Definition
(5,4)
Term
If the budget constraint shifts northeast or away from the origin, the consumer can afford
A. more bundles.
B. fewer bundles.
C. sometimes fewer bundles, sometimes more bundles, and sometimes the same number of bundles.
D. the same set of bundles.
Definition
more bundles.
Term
What does a single indifference curve represent?
A. a bundle of goods
B. decreasing marginal utility
C. a level of utility
D. a budget
Definition
a level of utility
Term
As one moves down along an indifference curve, the slope of the indifference curve typically
A. decreases.
B. changes in an indeterminate direction.
C. increases.
D. remains constant.
Definition
decreases.
Term
In consumer choice, one maximizes ______ subject to a budget constraint.
A. price savings
B. utility, price savings, and quantity
C. quantity
D. utility
Definition
utility
Term
At the consumer's utility maximizing bundle that uses all of her budget, the slope of the budget constraint is ______ the slope of the indifference curve.
A. less than
B. equal to
C. greater than
D. indeterminately different from
Definition
equal to
Term
Profit = ?1 - ?2
?1 is ?*? and ?2 ?*?
Definition
Profit = Total Revenue - Total Cost;
TR= Price*Quantity, TC= Avg Cost * Quantity
Profit = Quantity(Price - Avg Cost)
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