Applied Microeconomics
Midterm Exam
Course Introduction
Applied Microeconomics explores the practical application of microeconomic theories to real-world problems and decision-making processes. The course examines how individuals, firms, and governments allocate scarce resources, analyzing market structures, consumer and producer behavior, and the impact of public policy. Students will learn to use analytical tools and economic models to assess issues such as pricing strategies, market failures, labor markets, and regulation. Through case studies and empirical methods, the course emphasizes the use of microeconomic principles to inform policy decisions and guide strategic business practices.
Recommended Textbook Microeconomics An Intuitive Approach with Calculus 1st Edition by Thomas Nechyba
Available Study Resources on Quizplus
29 Chapters
598 Verified Questions
598 Flashcards
Source URL: https://quizplus.com/study-set/3169 Page 2
Chapter 1: Introduction
Available Study Resources on Quizplus for this Chatper 10
Source URL: https://quizplus.com/quiz/62713
Sample Questions
Q1) Positive economics can tell us which policies are efficient and which are not.
A)True
B)False
Answer: True
Q2) To say that one policy is better than another because it is more efficient is a normative,not a positive,statement.
A)True
B)False
Answer: True
Q3) If medical patients are rational (in the way economists think of the term),they will do what medical experts believe is best for them.
A)True
B)False Answer: False
Q4) When economists assume that people are rational,they are assuming that people generally agree what is good for human beings.
A)True
B)False Answer: False
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: A Consumers Economic Circumstances
Available Study Resources on Quizplus for this Chatper
24 Verified Questions
24 Flashcards
Source URL: https://quizplus.com/quiz/62714
Sample Questions
Q1) A consumer has $1,000 a week to spend on renting square feet of housing (at a price of $5 per square foot)and eating out (at a price of $20 per meal).With square feet of housing on the horizontal and meals on the vertical axis,what is the vertical intercept and what is the slope of this consumer's budget constraint?
Answer: The most meals that can be consumed with $1,000 is 50 per week --- implying a vertical intercept of 50.The most square feet that can be rented with $1,000 per week is 200,implying a horizontal intercept of 200.The slope is then -50/200=-1/4.
Q2) Regardless of which consumption bundle in her choice set a consumer chooses,she will spend all of her available income.
A)True
B)False
Answer: False
Q3) Suppose that the price of a TV is $200 and he price of an MP3 player is $50.What is the opportunity cost of a TV (in terms of MP3 players),and what is the opportunity cost of an MP3 player (in terms of TVs)?
Answer: The opportunity cost of a TV is 4 MP3 players,and the opportunity cost of an MP3 player is one fourth of a TV.
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Economic Circumstances in Labor and Financial Markets
Available Study Resources on Quizplus for this Chatper
12 Verified Questions
12 Flashcards
Source URL: https://quizplus.com/quiz/62715
Sample Questions
Q1) Changes in interest rates cause the same rotations of intertemporal budget lines regardless of whether you are a borrower or a saver.
A)True
B)False
Answer: False
Q2) A bond will pay $10,000 to its owner in 5 years.If the relevant annual interest rate is 5%,what is the bond worth today (rounded to the nearest 100)?
a.
$9,500
b.
$7,800
c.
$6,600
d. $1,900
e.
None of the above.
Answer: B \[\frac { \$ 10,000 } { ( 1 + 0.05 ) ^ { 5 } } = \$ 7,835\]
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Tastes and Indifference Curves
Available Study Resources on Quizplus for this Chatper
15 Verified Questions
15 Flashcards
Source URL: https://quizplus.com/quiz/62716
Sample Questions
Q1) If you observe me choosing bundle A over bundle B on Monday,bundle B over bundle C on Tuesday and bundle C over bundle A on Wednesday,it must be that my tastes violate transitivity.
A)True
B)False
Q2) Consider the utility function \(u \left( x _ { 1 } , x _ { 2 } \right) = \ln x _
^ { 1 / 2 }\) .(Explain all your answers.)
a.Derive the function for the marginal rate of substitution.
b.Do the tastes represented by this utility function satisfy diminishing MRS?
c.The marginal utility of a good is defined as the change in utility from additional consumption of that good (holding all else constant).Derive the marginal utility of \(x _ { 1 }\) and \(x _ { 2 }\) .
d.Why does an ordinal approach to utility theory not any attention to what you derived in (c)?
e.Why does an ordinal approach to utility not treat the marginal rate of substitution the way it treats the marginal utility concept?
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Different Types of Tastes
Available Study Resources on Quizplus for this Chatper
18 Verified Questions
18 Flashcards
Source URL: https://quizplus.com/quiz/62717
Sample Questions
Q1) Suppose you are very picky about your outdoor BBQ experiences --- and you need exactly 1 cup of lighter fluid for each bag of charcoal you use.If you have either leftover charcoal or leftover lighter fluid,you simply discard it.
a.Letting cups of lighter fluid be denoted as \(x _ { 1 }\) and bags of charcoal as \(x _ { 2 }\) ,give the simplest possible utility function that captures your tastes.
b.Suppose that your favorite charcoal has just gotten better because the producer has infused the charcoal with half a cup of lighter fluid per bag.How does your answer to (a)change?
Q2) There are no quasilinear tastes that have elasticity of substitution equal to 1 everywhere.
A)True
B)False
Q3) If tastes are Cobb-Douglas,they can be represented by a utility function that is homogeneous of degree k where k can take on any positive value.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Doing the Best We Can
Available Study Resources on Quizplus for this Chatper
17 Verified Questions
17 Flashcards
Source URL: https://quizplus.com/quiz/62718
Sample Questions
Q1) You have observed a consumer who purchases only goods \(x _ { 1 }\) and \(x _ { 2 }\) and have concluded that the consumer's tastes are quasilinear in \(x _ { 2 }\)
.Whether the consumer purchases more or less of \(x _ { 1 }\) when the price of \(x _ { 1 }\) falls then depends on the size of the substitution effect.
A)True
B)False
Q2) Which of the following statements is correct and which is not? Explain why.
a.When we all face the same prices,our tastes become the same.
b.When we all face the same prices,our tastes become the same at the margin.
Q3) If we were the only two people in the world and I like bananas while you hate them,efficiency demands that I get all bananas.
A)True
B)False
Q4) If all goods are essential,a consumer will optimize at an interior solution.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 8
Chapter 7: Income and Substitution Effects in Consumer
Goods Markets
Available Study Resources on Quizplus for this Chatper
22 Verified Questions
22 Flashcards
Source URL: https://quizplus.com/quiz/62719
Sample Questions
Q1) Bag of chips and bottles of salsa are perfect complements for consumer who eats only chips and salsa,but a bottle of salsa costs $1 more than a bag of chips.The income effect of a 50 cent increase in the price of a bag of chips will be fore the consumer to eat fewer chips and less salsa.
A)True
B)False
Q2) Quasilinear goods are borderline goods between the set of normal and the set of inferior goods.
A)True
B)False
Q3) Bottles of Coca-Cola and equally-sized bottles of Pepsi Cola are perfect substitutes for a consumer,but a bottle of Coke costs 10 cents less than bottles of Pepsi.The income effect of a 15 cent increase in the price of Pepsi will be for the consumer to drink less cola.
A)True
B)False
Q4) All homothetic goods are normal goods.
A)True
B)False
Page 9
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: Wealth and Substitution Effects in Labor and Capital Markets
Available Study Resources on Quizplus for this Chatper
16 Verified Questions
16 Flashcards
Source URL: https://quizplus.com/quiz/62720
Sample Questions
Q1) In the U.S.,everyone has to pay social security taxes on labor income until pre-tax income reaches a certain amount after which no additional taxes are due.Consider the case of workers A,B and C who have 60 hours of leisure per week and who earn an hourly wage of $40.Suppose the social security tax is 50% up to a pre-tax weekly income of $1,200 and then falls to zero for any income above $1,200 per week.Assume tastes are homothetic.
a.Worker A is observed to work 40 hours per week under this tax system.Is he working more or less than he would if the system were abolished?
b.Worker B is observed to work 30 hours a week under this tax system.Is he working more or less than he would if the system were abolished?
c.Worker C is observed to work 20 hours per week under this system.Is he working more or less than he would if the system were abolished?
d.Could any of the three workers above share exactly the same tastes?
e.For which of these workers is there no deadweight loss from the tax?
Q2) Taxing savings in ways that lower the interest rate received by savers will lower savings.
A)True B)False
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Demand for Goods and Supply of Labor and Capital
Available Study Resources on Quizplus for this Chatper
22 Verified Questions
22 Flashcards
Source URL: https://quizplus.com/quiz/62721
Sample Questions
Q1) Leisure being a normal good is neither necessary nor sufficient for labor supply to slope up.
A)True
B)False
Q2) Suppose that utility over consumption and leisure takes the constant elasticity of substitution form \(u ( \ell , c ) = \left( \alpha \ell ^ { - \rho } + ( 1 - \alpha ) c ^ {\rho } \right) ^ { - 1 / \rho }\) .If \(\rho\) falls between 0 and -1,then the labor supply curve is backward bending.
A)True
B)False
Q3) When tastes are quasilinear in leisure,the labor supply curve is vertical.
A)True
B)False
Q4) Suppose your utility function is given by \(u \left( x _ { 1 } , x _ { 2 } \right) = \min \left\{ 3 x _ { 1 } , 5 x _ { 2 } \right\}\) .What is your demand function for \(x _ { 2 }\) ?
Q5) If a good is quasilinear,its own-price demand curve is vertical.
A)True B)False
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Consumer Surplus and Deadweight Loss
Available Study Resources on Quizplus for this Chatper
20 Verified Questions
20 Flashcards
Source URL: https://quizplus.com/quiz/62722
Sample Questions
Q1) Suppose x is an inferior good.Then we will overestimate the deadweight loss from taxes on consumption good x if we use the uncompensated demand curve rather than the marginal willingness to pay (or compensated demand)curve.
A)True
B)False
Q2) When a taxed good is normal,using the (uncompensated)demand curve to estimate deadweight loss will over-state the actual deadweight loss.
A)True
B)False
Q3) Indirect utility functions are homogeneous of degree 1 in income.
A)True
B)False
Q4) If tastes are homothetic,there exists a utility function (that represents those tastes)such that the indirect utility function is homogeneous of degree 1 in income.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: One Input and One Output: a Short-Run
Producer Model
Available Study Resources on Quizplus for this Chatper
29 Verified Questions
29 Flashcards
Source URL: https://quizplus.com/quiz/62723
Sample Questions
Q1) Every profit-maximizing producer is cost minimizing.
A)True
B)False
Q2) An increase in the wage will cause the output supply curve in the one-input model to shift in unless labor is an inferior input.
A)True
B)False
Q3) Output supply curves always slope up in the one-input model.
A)True
B)False
Q4) In the one-input model,profit is always maximized where marginal revenue product is equal to the input price.
A)True
B)False
Q5) The law of diminishing marginal product holds so long as the input is not a Giffen good.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Production With Multiple Inputs
Available Study Resources on Quizplus for this Chatper
30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/62724
Sample Questions
Q1) Technologically efficient production plans are also economically efficient.
A)True
B)False
Q2) Conditional input demands are homogeneous of degree zero in input prices.
A)True
B)False
Q3) If a production technology has increasing returns to scale throughout,then the marginal cost curve lies below the average cost curve throughout.
A)True
B)False
Q4) If production technologies are homothetic,all cost-minimizing production plans lie on the same ray from the origin for a given set of input prices.
A)True
B)False
Q5) Profit is constant along an isoquant.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 14
Chapter 13: Production Decisions in the Short and Long Run
Available Study Resources on Quizplus for this Chatper
24 Verified Questions
24 Flashcards
Source URL: https://quizplus.com/quiz/62725
Sample Questions
Q1) The greater the degree of substitutability between capital and labor,the greater will be the downward shift in the cost curve when wage falls.
A)True
B)False
Q2) If labor and capital are perfect complements in production,short run supply curves are vertical.
A)True
B)False
Q3) Short run economic costs must be lower than long run economic costs because long run economic costs include the cost of inputs that are fixed in the short run (and thus are not part of short run cost).
A)True
B)False
Q4) If the rental rate increases,we know for sure that the firm will produce less and will (in the long run)use less capital.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Competitive Market Equilibrium
Available Study Resources on Quizplus for this Chatper
18 Verified Questions
18 Flashcards
Source URL: https://quizplus.com/quiz/62726
Sample Questions
Q1) Short run market supply curves are formed by adding up individual firm supply curves in the industry.
A)True
B)False
Q2) A decrease in the rental rate of capital can lead to a long run increase or decrease in the number of firms in the industry.
A)True
B)False
Q3) An increase in license fees -- a long run recurring fixed cost -- will lead to a drop in the number of firms competing in a competitive industry.
A)True
B)False
Q4) If all firms are identical,output demand shifts cannot cause changes in output price in the long run.
A)True B)False
Q5) If all firms are identical,output prices will never change.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: The Invisible Hand and the First Welfare
Theorem
Available Study Resources on Quizplus for this Chatper
18 Verified Questions
18 Flashcards
Source URL: https://quizplus.com/quiz/62727
Sample Questions
Q1) Absent any violations of the conditions underlying the first welfare theorem,the competitive market equilibrium is efficient if and only if tastes are quasilinear.
A)True
B)False
Q2) Suppose the conditions of the first welfare theorem hold.If the government redistributes income prior to production and trade occurring,the market outcome (resulting from production and trade)will be the same as it would have been had the government not redistributed income (so long as redistribution does not produce deadweight losses).
A)True
B)False
Q3) A "social planner" is a fictional societal planner who would always choose the same outcome as the competitive market.
A)True
B)False
Q4) Absent any violations of the first welfare theorem,the competitive equilibrium is efficient.
A)True
B)False
17
To view all questions and flashcards with answers, click on the resource link above.
Chapter 16: General Equilibrium
Available Study Resources on Quizplus for this Chatper
21 Verified Questions
21 Flashcards
Source URL: https://quizplus.com/quiz/62728
Sample Questions
Q1) If the production technology in a Robinson Crusoe economy has increasing returns to scale,there is no production/consumption plan that is efficient.
A)True
B)False
Q2) Comment on the following: "The problem with models like the Edgeworth Box and the Robinson Crusoe economy is that it is silly to assume competitive behavior when there are so few individuals in the market."
Q3) Suppose we live in a 2-good Edgeworth Box economy and both of us have tastes that are quasilinear in good 1.
a.Illustrate one efficient allocation in the Edgeworth Box.
b.Where do the other efficient allocations that lie in the interior of the Edgeworth Box lie?
c.It is typically the case that the contract curve goes from one corner of the Edgeworth Box to the other.Is that the case here as well?
Q4) Any allocation resulting from a mutually beneficial trade is efficient.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Choice and Markets in the Presence of Risk
Available Study Resources on Quizplus for this Chatper
18 Verified Questions
18 Flashcards
Source URL: https://quizplus.com/quiz/62729
Sample Questions
Q1) Suppose,after undergoing genetic testing,you discover that you have a health condition that could result in the emergence of a disability which would make it impossible for you to continue to work.The probability of this happening is 50%.Currently your expected lifetime earnings are $5,000,000,but if the disability hits,your expected lifetime earnings will consist primarily of income earned from government support programs -- and will not add up to more than $1 million.
a.Suppose that you are risk averse and your tastes are state-independent.Illustrate your expected utility in a graph with lifetime consumption on the horizontal and utility on the vertical axis.
b.Illustrate how much you would be willing to pay for full insurance.
c.Illustrate what you showed in (b)in a different graph that has consumption in the "good" state on the horizontal and consumption in the "bad" state on the vertical.
d.What would a full menu of actuarily fair insurance contracts look like in your graph from part (c)? Where would you optimize in that graph?
e.Now suppose that you believe consumption will be more meaningful if the health condition does not materialize.What changes in your graph from part (d)?
To view all questions and flashcards with answers, click on the resource link above.
Chapter 18: Elasticities, Price-Distorting Policies, and Non-Price Rationing
Available Study Resources on Quizplus for this Chatper
21 Verified Questions
21 Flashcards
Source URL: https://quizplus.com/quiz/62730
Sample Questions
Q1) When tastes over current and future consumption are homothetic,the interest rate elasticity of savings supply is positive.
A)True
B)False
Q2) The equilibrium increase in marginal costs for firms resulting from the imposition of a price floor will be larger the more inelastic the price elasticity of demand is.
A)True
B)False
Q3) Suppose the demand function for a consumer is given by \(x \left( p _ { x } , p _ { y } \right) = \left( \frac { 4 p _ { y } } { p _ { x } } \right) ^ { 2 }\)
a.What is the own-price elasticity of demand for x?
b What is the cross-price elasticity of demand for x?
c.What happens to spending on x as the price of x increases?
d.What is the income elasticity of demand for x? What does this tell you about what kind of good x must be?
Q4) The wage elasticity of labor demand is always negative.
A)True
B)False
Page 20
To view all questions and flashcards with answers, click on the resource link above.
Chapter 19: Distortionary Taxes and Subsidies
Available Study Resources on Quizplus for this Chatper
26 Verified Questions
26 Flashcards
Source URL: https://quizplus.com/quiz/62731
Sample Questions
Q1) Under which of the following scenarios does an increase in the wage tax cause a drop in employment but no deadweight loss?
a.
When the wealth effect for workers is larger than the substitution effect.
b.
When the wealth effect for workers is smaller than the substitution effect.
c.
When the wealth effect for workers is equal to the substitution effect.
d.
It is possible under any of these scenarios.
e.
There is no scenario under which this is possible.
Q2) To identify the burden of a per-unit tax on consumers,we have to use the aggregate marginal willingness to pay curve whenever the underlying good is not quasilinear.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
21
Chapter 20: Prices and Distortions Across Markets
Available Study Resources on Quizplus for this Chatper
18 Verified Questions
18 Flashcards
Source URL: https://quizplus.com/quiz/62732
Sample Questions
Q1) In a world of certainty about future demand and supply,speculators cause price fluctuations across time to decrease.
A)True
B)False
Q2) If country A is importing good x from country B where x is produced in a perfectly competitive industry (composed of identical firms),then,in the long run,country A will suffer the entire deadweight loss from any tariff it might impose on imports of x from country B.
A)True
B)False
Q3) If country A is importing good x from country B where x is produced along a perfectly inelastic supply curve,then country B will suffer the entire deadweight loss from any tariff imposed on imports to country A.
A)True
B)False
Q4) When tariffs on exports are eliminated,there is at least in principle a way for everyone to benefit.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 22
Chapter 21: Externalities in Competitive Markets
Available Study Resources on Quizplus for this Chatper
23 Verified Questions
23 Flashcards
Source URL: https://quizplus.com/quiz/62733
Sample Questions
Q1) In order for a Pigouvian subsidy to be efficient,the amount it costs the government to implement the subsidy must be less than the economic value of the additional externality benefits created by the subsidy.
A)True
B)False
Q2) The Coase Theorem implies that the reason people sue each other in court is that property rights have not been sufficiently well specified.
A)True
B)False
Q3) According to the Coase Theorem,so long as property rights are established and transactions costs are low,plaintiffs in court cases involving externalities will not care which way a judge decides.
A)True
B)False
Q4) Explain how any cap-and-trade system can be made to be equivalent to a pollution tax and vice versa.
Q5) Explain how the introduction of an additional competitive market can always solve the efficiency problem that emerges from a negative externality.
To view all questions and flashcards with answers, click on the resource link above. Page 23
Chapter 22: Asymmetric Information in Competitive Markets
Available Study Resources on Quizplus for this Chatper
22 Verified Questions
22 Flashcards
Source URL: https://quizplus.com/quiz/62734
Sample Questions
Q1) Explain the following statement: "In health insurance markets,moral hazard implies individuals will consume too much health care,whereas adverse selection implies too little health care will be consumed."
Q2) Whether or not a pooling equilibrium exists in a competitive market with adverse selection depends on what fraction of consumers is of the high cost type and what fraction is of the low cost type.
A)True
B)False
Q3) If a pooling equilibrium exists in an insurance market,no separating equilibrium can exist.
A)True
B)False
Q4) In a competitive market with high cost and low cost consumers (where firms are unable to tell consumer types apart),any screening costs incurred by firms will be passed on to low cost consumer but not to high cost consumers.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 24
Chapter 23: Monopoly
Available Study Resources on Quizplus for this Chatper
32 Verified Questions
32 Flashcards
Source URL: https://quizplus.com/quiz/62735
Sample Questions
Q1) For any constant-elasticity market demand curve,a monopolist is profit maximizing regardless of what quantity he produces so long as marginal costs are zero.
A)True
B)False
Q2) Under second degree price discrimination,the average price per unit paid by high demand consumers is not equal to marginal willingness to pay for one additional unit.
A)True B)False
Q3) What are some obstacles to price discrimination that a monopolist who is protected by high barriers to entry might face?
Q4) Explain why the deadweight loss from monopoly power may be exacerbated if the barrier to entry that creates monopoly power is created through exclusive government granting of a monopoly.For what types of government grants of monopoly power might this not be the case?
Q5) The more profit a monopolist makes,the more inefficient is the monopoly outcome. A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
25
Chapter 24: Strategic Thinking and Game Theory
Available Study Resources on Quizplus for this Chatper
34 Verified Questions
34 Flashcards
Source URL: https://quizplus.com/quiz/62736
Sample Questions
Q1) In a simultaneous move,incomplete information game in which player 1 is unsure of which of two types player 2 is,player 1's strategy must include an action for each possible type that player 2 might be,but player 2 only needs to pick one action since he knows what type he is.
A)True
B)False
Q2) In a Bayesian incomplete information game,a "belief" is represented as the probability you place on your opponent playing one strategy versus another.
A)True
B)False
Q3) If there is no pure strategy Nash equilibrium in a complete information game,there is a mixed strategy equilibrium,and if there is no mixed strategy equilibrium,there is a pure strategy equilibrium.
A)True
B)False
Q4) If everyone has a dominant strategy,there can be no mixed strategy equilibrium.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Chapter 25: Oligopoly
Available Study Resources on Quizplus for this Chatper
19 Verified Questions
19 Flashcards
Source URL: https://quizplus.com/quiz/62737
Sample Questions
Q1) In a 2-firm oligopoly,if you can choose to either be a simultaneous move Cournot competitor or a Stackelberg leader,you will always choose to be a Stackelberg leader.
A)True
B)False
Q2) In the presence of negative pollution externalities,it is more efficient to have Cournot competitors than Bertrand competitors.
A)True
B)False
Q3) If Bertrand price competitors incur recurring fixed costs,it will still be a Nash equilibrium for price to equal marginal cost.
A)True
B)False
Q4) If two firms in an oligopoly produce undifferentiated products and face identical constant marginal costs,then,absent any implicit or explicit collusion,they will price at marginal cost regardless of whether they move sequentially or simultaneously -assuming price is the strategic variable.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Chapter 26: Product Differentiation and Innovation in Markets
Available Study Resources on Quizplus for this Chatper
13 Verified Questions
13 Flashcards
Source URL: https://quizplus.com/quiz/62738
Sample Questions
Q1) In a monopolistically competitive equilibrium,firms outside the industry could make at most zero profit by entering the industry.
A)True
B)False
Q2) Describe the tradeoffs involved when thinking about setting the time over which a patent grants an innovator exclusive monopoly rights.
Q3) Since firms outside an industry cannot have an incentive to enter the industry in equilibrium,firms inside a monopolistically competitive equilibrium must be making zero profit.
A)True
B)False
Q4) In a monopolistically competitive market with Dixit-Stiglitz preferences,equilibrium price falls as the goods in the differentiated product market become more substitutable. A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
28
Chapter 27: Public Goods
Available Study Resources on Quizplus for this Chatper
19 Verified Questions
19 Flashcards
Source URL: https://quizplus.com/quiz/62739
Sample Questions
Q1) The optimal subsidy for private giving to a public good increases as the number of people benefiting from the public good increases.
A)True
B)False
Q2) When the government contributes to a public good,private contributions will fall.
A)True
B)False
Q3) We say that individuals get a "warm glow" from giving to a public good if they not only get utility from the public good but also from giving itself.Explain the following: "While warm glow lessens the free rider problem,it cannot eliminate it."
Q4) Tiebout local public good provision is more easily implemented than a Lindahl equilibrium -- because people know each other's tastes locally and can more easily come up with the right way to divide the cost for public goods.
A)True
B)False
Q5) What problem are mechanism designers attempting to overcome when they "design mechanisms" to provide public goods?
To view all questions and flashcards with answers, click on the resource link above.
29
Chapter 28: Governments and Politics
Available Study Resources on Quizplus for this Chatper
17 Verified Questions
17 Flashcards
Source URL: https://quizplus.com/quiz/62740
Sample Questions
Q1) Consider voter preferences over a public good y that is being funded by a proportional income tax.
a.Illustrate how this might lead to single peaked voter preferences.
b.Suppose there exists a privately available good x that is substitute for y.How does this introduce non-single peakedness?
c.Now suppose x is relatively complementary to y.What would you expect to happen to voter preferences as this complementarity gets stronger?
Q2) Suppose voter preferences over a public good funded through a head tax are single peaked.If everyone has the same tastes and the public good is a normal good,then ideal points for higher income individuals will lie to the right of ideal points of lower income individuals.
A)True
B)False
Q3) The Pareto Unanimity axiom in Arrow's theorem implies that Arrow believes social choice processes should choose only pareto efficient outcomes.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Chapter 29: What Is Good Challenges From Psychology and Philosophy
Available Study Resources on Quizplus for this Chatper
20 Verified Questions
20 Flashcards
Source URL: https://quizplus.com/quiz/62741
Sample Questions
Q1) If social indifference curves are straight lines with slope of -1,the ethical standard for judging outcomes places all weight on the sum of outcomes and no weight on the distribution of outcomes.
A)True
B)False
Q2) Of all the constant elasticity of substitution social welfare function,only the one with elasticity of infinity will always choose the efficient outcome from a second-best consumption possibility frontier.
A)True
B)False
Q3) Suppose an individual has to make a decision at time t without having all the information relevant for making the decision.At time (t+1),the relevant information is revealed.We will say that the individual made a mistake if his decision in time t would have been different had he known what he knows at time (t+1).True or False: Without behavioral economics,we would not be able to explain mistakes.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 31