Question 1

Why is the demand curve for labor downward sloping in a competitive labor market?

Accepted Answer

Because of diminishing marginal returns to labor

Question 2

Suppose a minimum wage is set above the equilibrium wage in the unskilled labor market. What is the most likely immediate effect?

Accepted Answer

An increase in unemployment

Question 3

Under what market condition might a minimum wage NOT cause unemployment?

Accepted Answer

If there is monopsony power in the labor market

Question 4

Why is the marginal revenue curve for a monopolist everywhere below the demand curve?

Accepted Answer

Because each additional unit is sold at a lower price than the one before, and the lower price applies to all units sold

Question 5

Suppose a monopolist faces the demand curve $$P = 1000 - Q$$ and has a total cost function $$TC = 1000 + 10Q. $$What is the equation for the marginal revenue curve?

Accepted Answer

$$MR = 1000 - 2Q$$

Question 6

In the context of price elasticity of demand, at what point on a linear demand curve is total revenue maximized?

Accepted Answer

Where elasticity equals 1

Question 7

A movie theatre charges higher prices for adults (ages 18-64) and lower prices for children and seniors. This is an example of:

Accepted Answer

Third-degree price discrimination

Question 8

In the long run, what happens to profits in a monopolistically competitive industry?

Accepted Answer

They become zero as new firms enter the market

Question 9

Which of the following best describes an information cascade?

Accepted Answer

A situation where one person's decision influences another's, leading to a chain reaction

Question 10

Suppose a monopolistically competitive firm is earning positive economic profits. What is likely to happen to its residual demand curve in the long run?

Accepted Answer

It will shift inward and become more elastic as new firms enter

Question 11

Which area on a monopoly diagram typically represents the deadweight loss due to monopoly pricing?

Accepted Answer

Areas B + C

Question 12

If the price elasticity of demand at a point on the demand curve is less than 1 (in absolute value), what will happen to total revenue if the monopolist increases price?

Accepted Answer

Total revenue will increase

Question 13

According to the field experiment by Pager (2003) in Wisconsin, which of the following is correct?

Accepted Answer

Both a and b are correct

Question 14

Which of the following best explains why the supply of labor is upward sloping?

Accepted Answer

Because leisure becomes more costly as the wage increases

Question 15

Suppose the profit function for a monopoly is $$	ext{profit} = p \cdot q - c \cdot q$$, where $$p is $$price, $$q is $$output, and $$c is $$marginal cost. Is it true that average total cost and marginal cost are equal?

Accepted Answer

Yes, because total cost is linear in output

Question 16

Which of the following is NOT a main reason people give to charities, according to your instructor?

Accepted Answer

Hyperbolic discounting

Question 17

How does monopolistic competition differ from an oligopoly?

Accepted Answer

Monopolistic competition involves a large number of sellers selling differentiated products, while an oligopoly involves a small number of sellers selling either identical or differentiated products.

Question 18

What did the Asch conformity experiment demonstrate?

Accepted Answer

That crowds of people with opposing views can cause individuals to knowingly make false statements

Question 19

Suppose the U.S. bans imports of goods produced by child labor in a developing country where children work as many hours as possible regardless of wage. What is the likely effect on the equilibrium number of children working?

Accepted Answer

It will decrease

Question 20

Is there empirical evidence of peer effects in education and health fitness?

Accepted Answer

Yes

Microeconomics Practice Final Guidance: Labor Markets, Monopoly, Price Discrimination, and Market Structures

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