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Most of the DSM modules from Pearson Mylab...

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DSM Module #6 Which of the following terms corresponds to a market where buying and selling take place at prices that violate government price regulations? Black market Prolonged shortages arise if: prices are not allowed to rise to equilibrium

According to this graph the existence of a minimum wage in the market for low-skilled workers results in a: surplus of workers

The cost of saving jobs through trade barriers like tariffs and quotas is: relatively high

Which of these graphs best describes a minimum price imposed for milk? Graph A **For a price floor to be effective it must be higher than the market determined price or it is irrelevant.

Price performs a __________ function. Inputs or outputs go to the __________ bidders if people are free to exchange voluntarily in the markets without government intervention or other market friction. rationing, highest Rent controls: make tenants less mobile A numerical limit on the quantity of a good that can be imported is a: quota

Some people believe there should be a legally determined minimum price for farm products such as milk. A limit on the price of milk would be an example of: price floor

According to this graph the existence of a minimum wage in the market for low-skilled workers results in: an increase in wages but lower employment

A legally determined maximum that sellers may charge is known as a: price ceiling A legally determined minimum price that sellers must receive is known as a: price floor For markets to generate the greatest benefit and function in the most efficient manner, they must:

be perfectly competitive. Price controls that put a price ceiling on goods and services create __________. Shortages

Price controls that put a price floor on goods and services create __________. Surpluses

In response to information regarding the salaries of executives at firms receiving bailout funds in the United States, some people called for a limit on the salaries paid to executives. Such a limit on the compensation executives can receive is an example of a: price ceiling

A __________ is a negotiated agreement between two countries that limits the quantity of a specific product that may be imported into a country. voluntary export restraint

Black markets may arise if: price ceilings exist

Prolonged agricultural surpluses can arise if governments: set the price above equilibrium

According to the graph, how much domestic sugar will be supplied at the $0.12 price under free trade? Zero pounds ***According to the graph, there will be zero pounds of domestic sugar supplied at the $0.12 price under free trade. As you can see domestic suppliers are unwilling to supply any output at a price of $0.12 per pound. They will not begin to produce at all until the price reaches $0.26 per pound.

Which of the following statements about a shortage is correct? There is no shortage of most scarce goods

If an effective minimum wage is imposed, then: more workers will be unable to find jobs According to the graph, what is the impact of a quantity restriction (known as a taxi medallion) on the number of taxis allowed to service this market? There is an excess demand for taxi service and a higher price.

***As you can see the imposition of a quantity restriction on taxis, via the use of licensure known as a taxi medallion, functions to create an excess demand. There are 10,000 miles of service demanded and the system only has the capacity to deliver 8,000 miles of service. The price also moves higher from the free market equilibrium price of $3.00 per mile to $3.30 per mile

When a country imposes a quota on the amount of goods it will allow into its borders, it creates a situation where there are clear winners and clear losers. The winners are the __________, while the losers are the __________. domestic producers; domestic consumers

A tax imposed by a government on imported products is called a: Tarif

DSM Module #7 Which of the following factors best explains why consumers might prefer to go to a restaurant that was identical to another in terms of décor, food choices, and price but had more customers? Some people receive utility from goods they believe are popular.

When network externalities are present, the usefulness of: the product increases as more consumers use it

Eating too much today based on an expectation that you will reduce your food intake at some later date to lose weight is an example of what type of flaw in decision making? Being unrealistic about future behaviour.

According to the inequality, the marginal utility per dollar spent on good X is less than the marginal utility per dollar spent on good Y. According to the rule of equal marginal utility per dollar spent, what can a consumer do to increase total utility for a given budget from consumption of goods X and Y?

A consumer can increase total utility for a given budget by consuming more good Y and less good X.

If the total utility increases with additional consumption of a good, then the marginal utility is: Positive

The optimal combination of pizza and Coke is the one where the: marginal utility per dollar spent on pizza equals the marginal utility per dollar spent on Coke

The substitution effect is the change in the quantity demanded of a good that results from __________, holding constant the effect of the price change on consumer purchasing power. a change in price making the good more or less expensive relative to other goods

In considering consumers’ attitudes towards fairness, which of the following have economists found to be true? People attempt to treat others fairly, even if doing so makes them worse of financially.

Which of the following mistakes do consumers commonly make when deciding which products or services they want to consume? They fail to ignore sunk costs.

The budget line shows: the afordable combinations of goods and services you can buy with your income

The limited amount of income available to consumers to spend on goods and services is known as the: budget constraint

According to the table, the total utility derived from consuming three ice cream cones equals

24 Utility is maximized when marginal utility per dollar is equal across all goods

If the income effect of a price change for an inferior good is larger than the substitution effect, the demand curve will be: upward sloping

If increasing your consumption of pizza from 3 to 4 slices increases your utility, which of the following must be true? The marginal utility of the fourth slice of pizza must be positive.

According to the law of diminishing marginal utility, as the consumption of a particular good increases: marginal utility decreases

The income effect is the change in quantity demanded of a good that results from __________, holding all other factors constant. the efect of a price change on consumer purchasing power

According to the table, the marginal utility from consuming the second ice cream cone equals:

8

The income effect for a normal good is _??? effect for an inferior good is __________.

while the income

negative, positive

What do economists call the study of situations in which people act in ways that do not appear to be economically rational? Behavioural economics

Suppose you have a fixed amount of income and spent equal amounts on two goods, X and Y. The price of good X is Px = $10, and the price of good Y is Py = $5. The marginal utility of X is MUx = 60 utils, and the marginal utility of Y is MUy = 15 utils. How should the consumption of X and Y change, if at all, to increase utility?

Consumption of good X should increase, and consumption of good Y should decrease.

The total utility of consuming two slices of pizza is the: total satisfaction you get from consuming the two slices of pizza

The demand curve for an inferior good is ____???_____sloping while the demand curve for a Giffen good is __________ sloping. downward, upward

The substitution effect for a normal good is _ _???___ while the substitution effect for an inferior good is __________. inversely related to price, inversely related to price

The marginal utility from consuming the second ice cream cone is the: extra satisfaction you get from consuming the second ice cream cone

Many people donate to charity and leave tips to servers in restaurants even when they will never visit the restaurant again. Economists consider this type of behaviour to be: rational, because it shows people value the principle of fairness

DSM Module 8

The only legal restriction concerning price discrimination is that firms cannot use it to: drive rivals out of business A patent gives its holder the exclusive right to a product for a period of __________ from the date the patent is filed with the government. 20 years The monopolist charges a price that is __________ the perfectly competitive industry. higher than Laws aimed at promoting competition among firms are known as: anti-combine laws

Which of the following rights is given to the holder of a patent? The exclusive right to a new product

What is a merger between firms in the same industry called? Horizontal merger In the long run, the monopolist can earn: zero or positive economic profit Which of the following Acts was designed to prevent market monopolization in Canada and to encourage greater competition? The Competition Act

Which point on this graph corresponds to a natural monopoly serving this market and breaking even?

Point A What point on the graph represents the price and output level that a monopolist will choose?

Point B

Which of the following statements regarding natural monopoly is true? Natural monopoly is most likely to occur in markets where fixed costs are large relative to variable costs. Which of the following is most likely to increase market power?

Horizontal mergers Governments deal with natural monopolies by: using regulation to protect consumers

What is the firm’s profit when it sells six subscriptions per month?

72$ In which of the following market structures is the firm’s demand curve the same as the market demand for the product? Monopoly The monopolist produces an output that is ------ the perfectly competitive industry would produce. less than Natural monopoly happens when the:

average total cost curve is decreasing Because the monopolist faces a downward sloping demand curve: there will be deadweight loss In Canada, which of the following laws prohibited charging buyers different prices if the result would reduce competition? The Competition Act A monopoly is a market structure that is characterized by: A single seller of a good or service that does not have a close substitute. In which of the following situations can a firm be considered a monopoly? When a firm can ignore the actions of all other firms Which of the following is an effect of a monopoly? Monopoly causes a reduction in consumer surplus. Price discrimination is the practice of: Dividing consumers into two or more groups and charging diferent prices to each group

A monopolist will maximize profit at the level of output where: marginal cost equals marginal revenue

What is the definition of market power? The ability of a firm to charge a price greater than marginal cost.

Chapter 9

According to the data in the table, what is the marginal cost of producing the 640thpizza?

$43.33

When graphing a conventional short-run production function, we place __________ on the horizontal axis and __________ on the vertical axis. the variable input, output The short run is a period of time where __________ while the long run is a period of time where __________. at least one input is fixed, all inputs are variable According to the graph, over what range of output do we find constant returns to scale in bookselling?

Between 20,000 and 40,000 books

What is occurring from the origin up until point A in this graph?

Output increases at an increasing rate. When the marginal product of labour is greater than the average product of labour, then the average product of labour must be: INCREASING

According to the graph, what size bookstore is more likely to experience diseconomies of scale?

Bookstores that sell more than 80,000 books per month

Which of the following are sometimes called accounting costs? Explicit

What is the name for the additional output that a firm produces as a result of hiring one more worker? Marginal product of labour

Based on the relationship between average total cost (ATC) and marginal cost (MC), which of the curves appears to be average total cost (ATC)?

Curve 2

Minimum efficient scale is the level of output at which: All economies of scale have been exhausted

Based on the relationship between marginal and average product, which curve appears to be the average product curve?

Curve 2 According to the table of data, when do diminishing returns in the production of pizzas begin?

When the third worker is hired

According to the graph, which level of output represents the minimum efficient scale in bookselling?

20,000 books

According to the graph, which change in output represents economies of scale in bookselling?

from 1,000 to 20,000 books sold per month

According to the graph, which of the following is more likely to occur when moving from point A to point B?

Diminishing returns

Which of the following is known as the highest-valued alternative that must be given up in order to engage in an activity? Opportunity cost

According to the table, what is the average total cost of producing 550 pizzas?



$5.00

In the short run, the cost that is independent of the amount of output produced is called __________. Fixed cost The downward sloping part of the long-run average total cost curve is where the firm is achieving: economies of scale

Which graph is representative of a typical average total cost curve (ATC)?

Graph B

If the number of people in a publishing company does not go up or down with the quantity of books it publishes, then how should we categorize the salaries and benefits paid to these employees? As a part of fixed cost

Which of these costs are affected by the level of output produced? Variable costs

According to the graph, over what range of output do we find constant returns to scale in bookselling?

Between 20,000 and 40,000 books

According to the table, which of the following are implicit costs?

Foregone salary and foregone interest

The relationship between the inputs used by the firm and the maximum output it can produce is known as the: production function Chapter 10 DSM

A game where pursuing dominant strategies results in noncooperation that leaves everyone worse off is called a: prisoner’s dilemma Equilibrium in a game in which players cooperate to increase their mutual payoff is called a: cooperative equilibrium Prisoner’s dilemma is an example of: non-cooperative equilibrium A strategy that is the best for a firm, no matter what strategies other firms use is known as: a dominant strategy Which of the following terms is defined as a market structure in which a small number of interdependent firms compete? Oligopoly The four-firm concentration ratio is the percentage of sales accounted for by the largest: four firms in the industry A group of firms that colludes by agreement to restrict output to increase prices and profits is called a(n) __________. cartel

A Nash equilibrium is where each firm chooses the best strategy: given the strategies chosen by other firms

An oligopoly is a market structure with:

high barriers to entry

In the broadest sense, game theory studies the decisions of firms in industries where the profits of each firm depend on: the firm’s interactions with other firms

Price leadership is a form of __________ in which one firm in an oligopoly announces a price change and the other firms in the industry match the change. implicit collusion How does the prisoner’s dilemma compare to the outcome of a repeated game? In a repeated game, two firms are more likely to charge the high price and receive high profits. When firms agree to act as a monopoly and set prices they are called __________. a cartel

A situation where each firm chooses the best strategy, given the strategies chosen by other firms is known as: Nash equilibrium In a repeated game, the losses associated with not cooperating are __________ the losses of cooperating. greater than

Suppose that market research reveals that the dairy manufacturing industry in Canada had a four-firm concentration ratio of 34 percent. This implies that the dairy manufacturing industry is:

not an oligopoly market A cooperative equilibrium is equilibrium in which players __________ to increase their mutual payoffs, while a noncooperative equilibrium is an equilibrium in which players __________. cooperate, do not cooperate Which of the following is the definition of business strategy? Actions taken by firms to attain their objectives An agreement among firms to charge the same price or to otherwise not compete is __________. collusion Economists believe that the oligopoly market is a market with a fourfirm concentration ratio that is greater than or equal to: 40% Another measure of industry concentration is the: Herfindahl-Hirschman Index Suppose that Walmart and Target are selling Sony flat-screen computer monitors for a price of $150 or $200 each. Based on the information in the payoff matrix, what is the dominant strategy?

Both firms will charge $150

Suppose that Walmart and Target are selling Sony flat-screen computer monitors for a price of $150 or $200 each. Based on the information in the payoff matrix, does a Nash equilibrium exist?

Yes

A group of firms that colludes by agreement to restrict output to increase prices and profits is called a(n) __________. cartel Suppose the government were to discover a long-run, formal conspiracy to fix the price of marine hose. This type of collusion would be considered: explicit collusion Explicit collusion differs from implicit collusion, also known as tacit collusion, in that the price-fixing is more formalized (i.e., explicit). Collusion of any type is illegal in Canada, according to antitrust legislation (The Competition Act).

If the individual countries that are members of OPEC exceed their production quotas, the amount of oil supplied to the world __________, and the price of oil __________. increases, decreases...