202320 Principles Of Economics-Micro ECO-2023-21011ECO 2023

Study Notes

202320 Principles Of Economics-Micro ECO-2023-21011

1. B

3. A

4. D

5. A

6. C

7. A

8. A

9. B

10. D

11. A

12. B

13. B

14. C

15. D

16. C

17. C

18. D

19. A

20. D

21. E

22. B

23. C

24. E

25. B

Bonus - Jake

ECO 2023

Final Examination

1. Pet food prices have risen sharply but quantity demanded has not fallen much. It makes sense that the demand for pet food would be ___________ since __________. Thus, higher prices would lead to ______ revenue for pet food producers.

a. Inelastic; pet food is more of a luxury good; more

b. Inelastic; people consider their pets to be necessities; more

c. Elastic; pet food takes a small percentage of most consumer’s income; less

d. Unit elastic; pet food is more of a luxury item; less

2. Suppose the price of chicken breasts falls this month. If the quantity of chicken breasts demanded rises by a much larger amount than the change in price it is because the demand for chicken breasts is __________ because_____________.

a. Inelastic; there are few close substitutes in the minds of many people.

b. Inelastic; the demand curve for chicken breasts is vertical.

c. Elastic; chicken is somewhat of a necessity for many people.

d. Unit elastic; chicken has many substitutes.

e. Elastic; chicken takes a small percentage of most buyer’s income.

3. In 1947 a ticket to a Brooklyn Dodgers World Series game cost $6 in the lower stands. Suppose the quantity demanded for these tickets equaled 22,419. If the Dodgers had instead charged $8 and sold an average of 21,014 stand tickets the price elasticity of demand would have equaled____. This indicates a(n)____ demand.

a. .226; inelastic

b. 28.57; elastic

c. 6.469; inelastic

d. 1.00; unit elastic

4. Based on your answer to question #3, it would have been __________ for Dodger revenue to raise prices because demand was __________ and therefore total revenue would have ____________. A tax imposed on each ticket to pay for extra police outside the stadium would have led to _______ revenue for the borough of Brooklyn.

a. Good, elastic, increased; less

b. Bad, elastic, decreased; more

c. Bad, inelastic, decreased; no change in

d. Good, inelastic, increased; more

5. Suppose in December of 2023 the price of softwood lumber increases from $1.31 per board foot to $2.14 per board foot and quantity demanded drops by 7.81%. This would mean the _____% increase in price is __________ to make demand unit elastic. This would also mean that a tax lumber designed to pay for climate change research would impact producers __________________ than consumers and government would see __________ revenue from this tax.

a. 48.12; not enough; less, raise

b. 1.725; enough; Less, lower

c. .1623; enough; More, greater

d. 41.99; not enough; Less, greater

6. Based on your answer to question #5 the price elasticity of demand for lumber would equal_______ because:

a. 1.725; there are insufficient substitutes for lumber in home building.

b. 48.12; the percentage change in quantity demanded is less than the percentage change in price.

c. .16; lumber is a necessity during a boom in housing production.

d. .0761; the percentage of income it takes to buy lumber is small for home builders.

7. As the pandemic has waned the demand for airline tickets has increased. If the price elasticity of demand for air travel was 3.22 before the pandemic the following is most likely now true:

a. Demand has shifted to the right, become more steeply sloped and the airlines can charge higher prices, for a while, as long at the price elasticity of demand is now less than 1.00.

b. Quantity demanded has shifted to the right, the demand curve has become flatter, and the airlines should lower prices into the inelastic range of the demand curve.

c. Airlines that previously would have been wise to leave prices unchanged are now smart to lower prices since demand has shifted to the left and become more flatly sloped.

d. Airlines should have lowered prices before the pandemic and should raise them dramatically at this point, with no regard to the price elasticity of demand.

e. A and D only.

8. Suppose the price elasticity of demand for Valencia face-to-face and online classes is 3.83 and .72 respectively. This means Valencia should:

a. Lower tuition this for live classes and raise tuition for online classes.

b. Lower tuition for online and face-to-face classes.

c. Lower tuition for live classes and leave tuition unchanged for online classes.

d. Raise tuition by a small amount for live classes and substantially for online classes.

9. The Wall Street Journal reports that Wal-Mart is increasing truck driver pay from $95,000 to $110,000 per year. This is a ____% increase. If quantity ______ increases by 4.19% in response to the pay hike the elasticity of supply will equal ____.

a. 21.82; demanded; .29

b. 14.63; supplied; .29

c. 35.04; supplied; 14.63

d. .29; demanded; 14.63

e. 1.00; supplied; 120,555.5

10. The Wall Street Journal reports that Southwest Airlines is reporting increases in pilot fatigue as flights have increased this year. The law of diminishing returns _____ to companies like Southwest because____________.

a. Does not apply; of economies of scale.

b. Does not apply; it has the option of engaging in downsizing.

c. Applies; fixed costs do not change as production levels change.

d. Applies; an increase in any variable input will eventually lead to a decline in the output from that input.

e. A and B only.

11. From the table on page 265 (257 if you have the 6th edition of the book): If this company was able to charge $310 for each pair of shoes it should hire ___ workers. At this point the total product of labor would be ___ and the company would _____________ labor costs.

a. 9; 66; not be in a position to minimize

b. 4; maximized; minimize

c. 10; 66; minimize

d. 6; 60; have falling

e. 9; 55; have rising

12.From the table on page 265: If this company faces falling demand next year – and was operating where your indicated they would be in question #11 – the company would ______ the number of workers to _____ in order to_________ the marginal cost of __________.

a. Decrease; 7; decrease; capital

b. Decrease; less than 9; decrease; labor

c. Increase; 9; increase; productivity

d. Decrease; 3; minimize; labor

e. A or D would be optimal for this company.

13. Suppose Lincoln Electric opens a new plant in Canada. Lincoln hires 214 people in this plant and pays each worker an average piece work wage of $1,014.19 per week. Suppose Lincoln’s workers combined can produce 817 welding machines per week. What is the average product of labor for this plant? What is the total variable cost per week?

a. 817.15; $620.55

b. 3.817; $217,036.66

c. 16.119; $4.88 per machine

d. 5.004; cannot be determined with information provided

e. 817; $828,593.23

14. What is this Lincoln’s AVERAGE variable cost of labor?

a. $217,036.66 per week

b. $1,014.19 per week

c. $265.65 per machine

d. $612.47 per machine

15. What is the total product of labor, per week, at this plant? What is the average fixed cost?

a. 817 machines per week; $1014.19

b. 3.817 per worker; $217,036.66

c. 214; Not enough information provided to make this calculation.

d. 817 machines per week; cannot be determined with information provided.

16. In the movie Moneyball, Oakland Athletics general manager, Billy Beane was able to _________ the marginal cost of labor by ____________________. This meant that the marginal product of labor ___________ and profits ________.

a. Lower; hiring the most expensive free agents; decreased; increased.

b. Increase; hiring less expensive, undervalued players; decreased; increased slightly.

c. Lower; employing undervalued, overlooked players, increased; increased.

d. Ignore; hiring players that were the best in their position; fell; increased sharply.

17. If the economy struggles in 2024 Lincoln Electric will see demand ____________ for its products. This would cause Lincoln to ____________ production and overall compensation for Lincoln workers would ________.

a. Fall; increase; increase

b. Increase; increase; increase

c. Fall; decrease; decrease

d. Increase; decrease; increase

e. None of the above due to Lincoln’s ‘piece work’ model of compensation.

18. Suppose the city of Cleveland imposes a living wage on all businesses there. Lincoln Electric will pay workers_____________________ rather than______________________.

a. Their average product of labor x the price of welding machine; the marginal product of labor x the price of welding machines.

b. Their marginal product of labor x the price of welding machines; a wage that is based on supply and demand conditions.

c. A higher wage then they earn currently with the expectation of greater productivity; the exploitative wages their over-worked employees now get.

d. A wage that is above market equilibrium and higher than the marginal revenue product of labor for Lincoln workers; based on the marginal product of labor of each machine produced.

19. Modern beer production involves canning and bottling mass quantities of beer at very high speed. This helps ______________ the _________________ and achieve:

a. Reduce; average fixed cost; economies of scale

b. Increase; marginal product of labor; diseconomies of scale

c. Reduce; average product of labor; unit elasticity

d. Increase; marginal fixed cost of labor; profit maximization.

e. Change; elasticity of demand towards 1.00; maximum revenue.

20. Before the arrival of baseball legend Ichiro Suzuki in the early 1990’s, Major League Baseball teams did not have one Japanese player employed. It appears the Major League teams felt that Japanese baseball was inferior to American baseball and thus, were reluctant to hire a Japanese player. This could be a form of ___________ discrimination. This helped MLB owners earn _______ revenue than they would have otherwise.

a. Monopsony; less

b. Customer-based; more

c. Employer-based; less

d. Statistical; far less

e. Employee-based; less

21. Which of the following statements is true concerning the economics of discrimination practiced by Major League Baseball until 1947?

a. Discrimination led to more profit when it is based on the desires of players and was directed against undesirable applicants.

b. Led by Branch Rickey, the owners were acting in a rational, profit-maximizing manner when they segregated baseball.

c. Teams not only had lower productivity than if they would have hired more African-American players but also lost revenue from fans that would have been interested in seeing the new players.

d. Discrimination meant teams had to be willing to sacrifice revenue and face higher labor costs in order to act on employer and employee-based discriminatory desires.

e. C and D only

22. When the Brooklyn Dodgers hired Jackie Robinson – and other baseball teams followed by hiring black players the average product of labor for these teams ________________; average variable costs _____________ and profit __________.

a. Decreased; increased; decreased

b. Increased; decreased; increased

c. Increased; increased; decreased

d. Decreased; decreased; increased

23. In 1947 Jackie Robinson faced ________nonpecuniary wages from his employment with the Brooklyn Dodgers. Therefore, it would have made sense for the Dodgers to provide a _________ compensating wage differential to Mr. Robinson. If Mr. Robinson were a rookie today with the Los Angeles Dodgers he would be _________ because of baseball’s ________________.

a. positive, positive; underpaid; monopsony power

b. negative, negative; overpaid; efforts to desegregate

c. negative, positive; underpaid; monopsony power

d. positive, negative; paid what he is worth; elimination of discrimination

24. Where did you see applications of biological economics in Moneyball?

a. In the mutative behavior associated with hiring players based on how often they got on base, rather than on traditional methods of player evaluations.

b. The adaptive behavior Billy Beane went through in signing the most expensive players he could.

c. The use of trial and error in signing certain players only to release or trade them if they did not fit the Oakland Athletics new production function.

d. The attempts to maximize profit rather than simply make profit with a new hiring model.

e. A and C only.

f. All of the above.

25. By 2021 virtually every Major League Baseball team was copying what you saw in Moneyball. This means teams are attempting to ________ profits by engaging in _________ behavior following Billy Beane’s _______. It also means that teams that use this model_______________.

A. maximize; mutative; success; will be guaranteed profit by eliminating uncertainty.

B. realize positive profit; adaptive; success relative to other teams; increase their chances of survival and pass on traits that heredity suggests will work in the future.

C. realize positive profits; reckless and irrational; failure to maximize profits; increase their chances of extinction.

D. maximize profits; mutative; long-term success; tend to eliminate uncertainty.

E. B and C only