Feedback Midterm You submitted this quiz on Thu 28 Feb 2013 11:05 AM PST. You got a score of 40.

.00 out of 49.00. Top of Form Question 1 Markets emerge when participants have different desires. participants strive to improve their welfare. mutually advantageous interaction among participants is possible. all of the above. Question 2 Economics is the study of how to eliminate scarcity. how to make money. how to allocate limited resources among competing wants. all of the above. Question 3 Which of the following is NOT true about property rights? Conflict over resource use, or the potential for conflict, can be alleviated by the development of property rights. Property rights extend the range of trades. Property rights help make clear the relationship between the public and private sectors of the economy.

Property rights encourage waste in the use of resources because they allow people to destroy resources. Question 4 Consider this table when answering this question. Which of the following statements is true?

Fred has a comparative advantage in the production of coconuts. Fred has an absolute advantage in the production in both goods. Harry has an absolute advantage in the production of both goods. Harry has a comparative advantage in the production of coconuts. Question 5 Consider this table when answering this question. The cost of producing one:

coconut to Harry is one and two-thirds papayas. papaya to Fred is three coconuts. coconut to Fred three papayas. papaya to Harry five coconuts. Question 6

Consider this table when answering this question. A mutually beneficial exchange rate between coconuts (C) and papayas (P) between Fred and Harry would be:

1P = 2C 1P = 5C 1P = 3C 1P = 4C Question 7 A tragedy of the commons occurs when there is rivalry in the use of a resources and property rights are assigned. underuse of a resource and property rights are assigned. rivalry in the use of the resource and property rights are NOT assigned. underuse of a resource and property rights are NOT assigned. Question 8 The tragedy of the anticommons refers to the improved use of common-access resources after private property rights have been assigned to the common-access resource. can help explain the existence of pollution or the over-fishing of the seas. refers to the overuse of common access resources.

occurs from multiple owners of property (decision) rights and can help explain the under use of common-access resources after private property rights have been assigned to the common-access resource. Question 9 What forms of competition are important in constraining executive/manager decision making? competition in product markets competition for control of firms competition in resource markets all of the above Question 10 In searching for firms to takeover, entrepreneurs should seek out firms that are mismanaged, to one extent or another, but have the prospect of being reengineered and redirected toward greater profits. pass on firms that are grossly mismanaged. seek optimum firms with optimum organizational, financial, and incentive structures. seek out firms that are operating with maximum efficiency because those firms will be underpriced. recognize that money can be made only from profitable firms, not problem firms. Question 11 If a firms long-term profit stream rises, its current market value will tend to decrease. remain the same. increase.

(dont know; not enough information to say). Question 12 If the price of a good remains constant, but the risk cost associated with consuming or using the good rises, the quantity consumed will increase. decrease. remain the same. (dont know; not enough information to say). all of the above Question 13 Maslows Hierarchy of goods is subject to dispute by economists because it was developed from a limited number of survey participants who may or may not have been representative of the population. could be applicable only to the period in which the survey was undertaken. does not consider the prices of the various categories of goods at the time of the survey. all of the above. Question 14 If a rational person has so allocated his income between only two goods in existence (A and B) such that MUa/Pa > MUb/Pb, then the person will buy less of both A and B. do nothing. buy more B and less of A.

buy more of A and B. buy more of A and less of B. Question 15 A prisoners dilemma is a circumstance in which a. all parties have the right incentives to do what is right for the group even without the benefits of communication among the parties. b. all parties have incentives to take the noncooperative option when not allowed to communicate. c. each party has an incentive to do what is best for himself or herself, regardless of what everyone else does. d. only actual caught prisoners have self-destructive incentives. e. both b and c Question 16 Assume normal-shaped supply and demand curves in a competitive market. If the price of a substitute good (A) goes down, the equilibrium quantity of the other substitute good (B) will (dont know; not enough information to say). remain the same. decrease. increase. Question 17 Assuming a competitive labor market, an increase in the opportunity cost of workers will cause the equilibrium market quantity of labor hired to remain the same. increase.

(dont know; not enough information to say). decrease. Question 18 In a competitive labor market, the addition of a fringe benefit that is valuable to workers will cause the supply of labor curve to decrease. remain the same. increase. (dont know; not enough information to say). Question 19 A federal minimum wage imposed above the equilibrium market wage for the covered group can be expected to initially decrease the quantity of labor demanded. initially increase the quantity of labor supplied. initially lead to a surplus of labor. all of the above. Question 20 After all market (short-term and long-term) adjustments, a federal minimum wage imposed above the equilibrium market wage for the covered group can be expected to a. make workers worse off on balance. b. make employers worse off on balance. c. make workers better off while making employers worse off.

d. make workers and employers better off. e. both a and b. Question 21 When workers are initially underpaid and then later overpaid, the reward for increased performance on the job can go up from what it would be if workers were paid exactly their market value. mandatory retirement makes sense to terminate the length of time workers are overpaid. the outlawing of mandatory retirement can cause an increase in workers initial starting salary and decrease the extent of the initial underpayment. the extent of the overpayment later in workers careers can be expected to fall. all of the above. Question 22 The law of demand states there is a direct relationship between the price of a good and the quantity supplied an inverse relationship between the price and the quantity supplied a direct relationship between the price of a good and the quantity demanded an inverse relationship between the price and the quantity demanded Question 23 Which of the following will most likely shift the demand curve for a given good (A) to the left? An expected increase in the future price of the good (A). An increase in the number of buyers of the good (A). An increase in the price of a complementary good (B).

An increase in consumers incomes and the good (A) is a normal good. Question 24 If there is a decrease in price of good A, which is a compliment for good B, then the demand for good B will Increase. decrease. remain the same. Dont know (not enough information to specify one of the other options) Question 25 In the graph shown, if the price is $16, the resulting:

surplus will lead to a rise in price. shortage will lead to a rise in price. surplus will lead to a fall in price.

shortage will lead to a fall in price. Question 26 In the graph shown, if the price is $8, the resulting:

surplus will lead to a rise in price. shortage will lead to a rise in price. shortage will lead to a fall in price. surplus will lead to a fall in price. Question 27 If there is an increase in productivity of producing good A at the same time there is an increase in consumers taste for the good, then the price of the good in the market will remains the same. dont know (not enough information to specify one of the other options) increase.

decrease. Question 28 Queues in competitive markets can be explained by which of the following arguments: a. Queues are observed in markets because firms make mistakes in stocking goods. b. Queues enable firms to lower their costs and prices by more than queues raise the opportunity costs incurred by customers standing in line. c. Both answers a and b above are correct. d. Answer a above is correct, but answer b is wrong. Question 29 When a subsidy is granted to domestic producers of a good that has to compete with an imported good, what happens to the price of the imported good that competes with domestic producers? Remains the same. Increase. Dont know (not enough information to specify one of the other options). Decrease. Question 30 When a subsidy is given to domestic producers of a good that must compete with imports of the good, what will happen to the price of the good in foreign markets? Increase. Dont know (not enough information to specify one of the other options). Remains the same. Decrease. Question 31

Which of the following statements is true concerning overpayment of workers? A person who quickly fails at a high salary can end up doing far worse than the person who begins his or her career by succeeding at a more modest salary. Firms may overpay their workers laer in their careers because they have underpaid their workers early in their careers. Initial underpayment of employees may be acceptable to workers if overpayment is likely in the future. All of the above. Question 32 Being able to make credible commitments can be important to firms because such an ability a. can lower the starting wages of workers. b. can raise worker productivity over their careers. c. Both a and b d. Neither a nor b. Question 33 If the discount rate to compute present values rises, what can be expected to happen to the stock prices of firms who can reasonably expect a stream of profits into the future? Remains the same. Dont know (not enough information to say). Decreases. Increases. Question 34 Opportunity cost

is the value of the next best alternative foregone in making a choice. never exists if there are alternatives. never applies to government or public policy. is irrelevant to rational choice. Question 35 A rational person will follow the Maslow hierarchy of wants. never make mistakes choices. choose alternatives for which the expected present value is greater than the expected value of the costs. always choose those options, the future value of which is greater than the current costs. Question 36 Assume that studying economics and French are your only two activities. If you become more efficient in learning economics but your efficiency in learning French remains constant, then your ability to learn more French decreases. remains the same. dont know (not enough information to say). increases. Question 37 Suppose the poor are given an income grant of a certain amount, say, $5,000, when they earn zero income. Suppose also that as the poors earned income rises, their income grant from the government declines to zero at some given break-even earned income level. If the income grant at zero earned income is held constant but the break-even earned income level (at which the subsidy is reduced to zero) is raised to some higher dollar figure, then the implicit marginal tax rate the poor face will

decrease. dont know (not enough information to say). increase. remain the same. Question 38 If the opportunity cost of studying goes down (all other relevant factors remain constant), then the rational student will Hold study time the same Increase study time Decrease study time Dont know (rational students behavior cant be predicted) Question 39 The economic theory of groups predicts that small groups are likely to be more prevalent and successful in achieving their goals than large groups because large groups will have members with diverse interests. large groups are hard for leaders to direct and control. the free-rider problem is less likely to occur in small groups than in large groups all of the above. Question 40 Under the economic theory of groups, as the size of the group increases, monitoring costs that must be incurred to achieve group objectives can be expected to dont know (not enough information to say).

decrease. increase. remain the same. Question 41 If the market is competitive, the supply curve for a good has a positive slope, and an excise tax is imposed on producers, the excise tax does not increase the price of the good. the excise taxes is paid partially by consumers and partially by producers. the excise tax is paid totally by consumers. the excise taxes is paid totally by producers. Question 42 If an excise tax is imposed on a good in a competitive market, the after-tax price received by the producer will remain the same. increase. dont know (not enough information to say). decrease. Question 43 Consider two goods, A and B, that are substitutes in consumption and are produced under competitive market conditions. Suppose that an excise tax is imposed on good A but not good B. The equilibrium price of good B can be expected increase. dont know (not enough information to say).

decrease. remain the same. Question 44 Consider a rent control on apartments that effectively lowers the rent of units below market-clearing levels. In the long run (when the landlords have time to change the non-rent attributes of rental apartments), we would expect landlords to reduce the quality of their apartment units. build more apartment units. keep the quality of their apartment units the same. improve the quality of their apartment units. Question 45 Consider a minimum wage that is imposed above the market equilibrium wage rate. Consider also the consequences of the minimum-wage law after employers have had a chance to adjust the non-wage components of the labor contract, implicit or explicit. In the long run, we would expect the non-money forms of labor compensation to fall. remain the same. dont know (not enough information to say. ) rise. Question 46 When workers value employer arranged health insurance at more that its cost, they will seek union representation as the only way to get the health insurance. they will ask for higher wages and salaries. they will volunteer for overtime.

they will accept lower wages and salaries than when health insurance is not available. Question 47 If Europeans increase their preference for American goods, the euro value of the dollar will remain the same. increase. decrease. Dont know (not enough information to say). Question 48 When firms are allowed to impose external costs on others in competitive markets, the price in a competitive market will be lower than it should be. higher than it should be. at the efficient output level. none of the above. Question 49 Which of the following methods can be used to solve the problem of pollution? Impose an excise tax on the production of the good that causes pollution. Provide a subsidy to producers to produce some other non-polluting goods. Require producers to have rights to pollute in order to pollute, limit the number of pollution rights, and then allow producers to buy and sell pollution rights. All of the above. Bottom of Form