Microeconomics Flashcards

Flashcards for reviewing microeconomics concepts, including market structures, labor markets, capital, innovation, externalities, public goods, income inequality, and poverty.

In monopolistic competition, what does the term 'monopolistic' refer to?

Each firm produces a unique version of the product.

Under monopolistic competition, what is the typical effect of new entry on price and profits?

Price decreases; profits decrease.

In the long run, what is the relationship between price, average total cost, marginal revenue, and marginal cost for a monopolistically competitive firm?

Price equals average total cost and MR = MC.

Give an example of an oligopoly

Mobile wireless providers in California.

Which characteristic does NOT describe an oligopoly?

Economic profits being zero in the long run

Compared with a competitive market, what will a cartel do?

Produce less output in order to increase prices.

What are the basic components of a game, as defined in game theory?

Information, strategies, and payoffs.

What are golf and bargaining games examples of?

Sequential-move games.

What is the relationship between best-response strategy and Nash Equilibrium?

It results from each player using a best-response strategy to all other players

What characterizes the 'dilemma' in a Prisoner's Dilemma?

Both players would be better off by cooperating, but not cooperating is a dominant strategy.

Under what condition can a Prisoner's Dilemma outcome most likely be avoided?

If the game is repeated over and over under the same conditions

Define reservation wage.

The minimum wage a person requires before accepting a job.

What does a backward-bending individual labor supply curve indicate?

The income effect is stronger than the substitution effect.

What factor would shift the market labor supply curve to the right?

An increase in wages in alternative jobs using the same skills

What happens to equillibrium wages and labor quanitity if the government eases restrictions on the immigration of scientists and engineers?

Equilibrium wages would fall and labor quantity would rise

What would happen to wages and labor if worker safety regulations were abolished, making work conditions more dangerous?

Wages would rise and labor quantity would fall.

According to Gary Becker's theory on economic discrimination, employers who successfully discriminate in their hiring practices will:

earn less profits because they must pay more for labor.

Which situation is least likely to be an example of labor discrimination?

Women earning less money in a career that offers flexible work hours

How do unions typically affect wage differentials between union and non-union sectors?

Increase; restricting

Name a trend of labor markets over the past 50 years

A shift from manufacturing to service sector jobs

Which career is least likely to expand in demand over the next decade?

Steel manufacturing

Which of these would NOT be categorized as “land” as a factor of production?

an axe used to cut down trees in a forest

If the supply of loanable funds increases, the marginal revenue product of capital (MRPK) that would be needed in order to break even would:

Fall.

Which form of financial capital involves giving up ownership in a company?

shares of stock

What is the main advantage of issuing stock to raise financial capital?

limited liability of risk

As one progresses through his or her working life, the average income tends to _, holding the level of education constant.

rise then fall

People who believe that success in one's career depends largely on one's innate intellect and work ethic would argue that a college education:

is useful to the extent that it allows people to signal their natural talents.

What is not an example of an intellectual property right?

the name of a famous basketball player

An important tradeoff that entrepreneurs face in their decision making is versus .

profit; risk

Innovation leads to all of these EXCEPT

an increase in the inherent amount of land and natural resources available.

What type of government policy is generally used when a positive externality is present?

Subsidies

Which statement describes a public good?

It is nonrival in consumption and nonexcludable.

Which of these is nonexcludable but rival?

a common property resource

Explain Free Rider Problem

Typically results in a production of output that is less than the social optimal quantity

If an unregulated industry generates pollution, the market price is than the socially optimal price, and the market quantity is than the socially optimal quantity.

greater; greater

Which of these is not a market-based policy to reduce pollution?

carbon restrictions

Externalities are the impacts:

on third parties.

Why is global climate change described as a public good?

it is subjected to the free rider problem.

All of these are consequences of global warming EXCEPT:

an increase in the natural carbon absorption system

Wages are the most common form of income in the U.S. economy.

True.

Income redistribution efforts such as progressive taxation and transfer payments will typically income inequality, which means that the Gini coefficient will .

decrease; fall

The poverty thresholds in the United States are largely based on an adjusted measure of prices of which category or categories of goods?

food