Q&A Hero

Q: Differences in marginal revenue products are the most important factor in explaining wage differences. Other factors that explain wage differences include all but one of the following. Which factor does not help explain differences in wages? A) cognitive differentials B) compensating differentials C) discrimination D) labor unions

Q: The difference between the salaries paid to movie stars and to actors who play supporting roles is much greater today than it was in the 1930s and 1940s. What factor explains this increase in relative salaries over time? A) Technological advances in the entertainment industry increase the revenue that successful movies can earn. This has increased the movie studios' willingness to pay high salaries to movie stars. B) Agents of movies stars are effective in obtaining large salaries for their clients today. Few movie stars had agents to negotiate for them in the 1930s and 1940s. C) The studio system that dominated the industry in the 1930s and 1940s no longer exists. The studio system allowed movie studios to sign actors to long-term contracts that kept salaries down. D) There was no actors' union in the 1930s and 1940s. The rise of strong actors' unions has caused salaries of movies stars to be greater today than in previous years.

Q: The total value to society of having garbage removed is greater than the value of baseball games. Why, then, are baseball players paid more than garbage collectors? A) Although the total value of garbage removal is greater than the total value of baseball, wages are determined by average values. B) Garbage removal results in significant external benefits that are not captured in the price paid for garbage removal. As a result, wages of garbage collectors do not reflect their social benefits. C) There is greater competition in the garbage collection industry than there is in Major League Baseball. D) Wages do not depend on total values but marginal values. The marginal revenue product of baseball players exceeds the marginal revenue product of garbage collectors.

Q: Zach Greinke's marginal product as a baseball player would be about the same as a Los Angeles Dodger and a Kansas City Royal. Why were the Dodgers willing to pay Greinke a higher salary than he was paid as a Royal? A) The Dodgers play needed a superstar to attract fans to their games. The Royals had no need to attract fans to their games. B) The Dodgers play more home games than the Royals. As a result, the Dodgers earn more revenue from ticket sales that they can use to pay player salaries. C) Greinke's marginal revenue product is higher as a Dodger than it was as a Royal. D) The owner of the Dodgers was under more pressure from the fans and the Los Angeles media to pay Greinke a higher salary than the Royals were willing to pay.

Q: One reason why the average salary of Major League Baseball players is higher than the average salary of college professors is A) the careers of most baseball players are much shorter than the careers of most college professors. B) the marginal revenue product of baseball players is greater than the marginal revenue product of college professors. C) college professors accept lower salaries in exchange for better working conditions. D) competition among baseball club owners forces player salaries to be much higher than the players' marginal revenue products.

Q: In a study conducted by Marianne Bertrand and Sendhil Mullianthan, identical resumes were sent in response to help wanted ads in newspapers, with half of the resumes assigned an African-American-sounding name and half assigned a white-sounding name. The study found that A) employers were equally likely to interview workers with white-sounding names and with African-American-sounding names. B) employers were 50 percent more likely to interview workers with African-American-sounding names. C) employers were 50 percent more likely to interview workers with white-sounding names. D) no employers chose to interview workers with African-American-sounding names.

Q: Scenario 17-1 In academia, professors in some disciplines receive higher salaries than others. For example, professors teaching in business schools receive higher salaries than professors in the English department. Suppose at Unity College, assistant professors in the business school earn $80,000 while assistant professors in the English department earn $50,000. Now suppose the government passes comparable worth legislation that requires academic institutions to pay all faculty the same salaries. Refer to Scenario 17-1. Following the passage of comparable worth legislation, Unity College responds by placing salaries at $65,000. Which of the following is the result of the legislation? A) The supply of English professors increases and the supply of business professors decreases. B) The demand for English professors decreases and the demand for business professors increases. C) There will be a surplus in the market for English professors and a shortage in the market for business professors. D) There will be a surplus in the market for English professors and the market for business professors will not be affected.

Q: Scenario 17-1 In academia, professors in some disciplines receive higher salaries than others. For example, professors teaching in business schools receive higher salaries than professors in the English department. Suppose at Unity College, assistant professors in the business school earn $80,000 while assistant professors in the English department earn $50,000. Now suppose the government passes comparable worth legislation that requires academic institutions to pay all faculty the same salaries. Refer to Scenario 17-1. Following the passage of comparable worth legislation, Unity College responds by placing salaries for all assistant professors at $80,000. Which of the following is the result of the legislation? A) The supply of English professors increases; the market for business professors is not affected. B) The demand for English professors decreases; the market for business professors is not affected. C) There will be a surplus in the market for English professors and a shortage in the market for business professors. D) There will be a surplus in the market for English professors and the market for business professors will not be affected.

Q: Comparable worth legislation A) will eliminate the earnings gap between men and women. B) mandate that employers pay the same wages to workers, regardless of their gender, for jobs that have comparable worth. C) mandate that potential employers demonstrate that they are worth the wages they expect to earn. D) guide markets toward the economically efficient wage.

Q: The primary purpose of labor unions is to A) ensure that workers receive adequate safety training. B) ensure that all members earn identical incomes. C) negotiate with employers about wages and working conditions. D) endorse candidates and donate money to them.

Q: Consider the following pieces of information: a. According to Bonnie Reyes, president and chief operating officer of Better Investing, a national organization of investment clubs, women have traditionally made up about 60 percent of the membership of investment clubs. By contrast, less than a third of team-managed mutual funds on Wall Street have even one woman on the management team. b. Research conducted by professors E. Brooke Harrington and Max Planck concluded that mixed investment clubs, on average, outperformed the typical single-sex investment club. c. The lack of gender diversity in Wall Street could be influenced by its reputation, according to professor Harrington, "for being inhospitable to women." Source: Michael Hulbert, "Strategies: At some Funds, a Gender Communications Gap," The New York Times, October 7, 2007, Sunday Money, page 5. The information presented is an example of A) economic discrimination. B) a negative feedback loop. C) marginal productivity theory. D) the absence of comparable worth.

Q: That some talented people may not enter an occupation because they have heard that people with their personal characteristics do not get hired in that occupation is known as A) economic discrimination. B) a compensating difference. C) a negative feedback loop. D) worker discrimination.

Q: Which of the following is a reason why it is difficult to estimate the extent of economic discrimination in the labor market? A) Employers who discriminate are likely to do so in overt ways such as awarding some workers with benefits-in-kind. B) Ultimately, employers who discriminate cannot remain profitable. C) Employers who discriminate pay an economic penalty. D) Differences in wages can be attributed to many other factors as well, such as differences in productivity and preferences.

Q: Customer discrimination occurs when A) a firm pays workers different wages based on irrelevant factors. B) customers refuse to buy products produced by a racially diverse workforce. C) customers refuse to buy products they believe to be of poor quality. D) workers refuse to serve customers of a different race.

Q: Worker discrimination occurs when A) workers refuse to perform risky tasks. B) workers refuse to work with persons of a different race. C) customers refuse to buy products produced by a racially diverse workforce. D) employers pay different employees different wages based on race.

Q: Women typically earn less than men, even in the same occupation. Which of the following is an explanation for this discrepancy? A) Women do not work as hard as men because of cultural influences. B) Women have, on average, less workforce experience than men of the same age. C) Women are, on average, less motivated than men and therefore tend to avoid taking on more responsibilities. D) Women tend to take riskier jobs and earn compensating wage differentials.

Q: Wage differences among workers of different races and gender could be due to all of the following except A) differences in preferences for jobs. B) differences in work experience. C) differences in education. D) labor unions.

Q: Economic discrimination takes place when an employer A) pays workers the lowest wage possible. B) pays workers different wages on the basis of some arbitrary characteristics of workers that are irrelevant to the job performed. C) pays lower wages to workers who are not as productive as other workers. D) pays workers compensating wage differentials.

Q: If workers in nuclear power plants underestimate the true risk of their jobs A) employers will pay compensating differential to compensate employees fully for the risk they have assumed. B) safety legislation will not make workers better off. C) the wages of these workers will not be high enough to compensate them fully for the risk they have assumed. D) the supply of workers in this occupation will exceed demand.

Q: If national laws protecting the health and safety of workers completely eliminate any and all risk, then A) workers in risky occupations become better off. B) compensating wage differentials disappear and workers in risky occupations may be no better off. C) compensating differentials would grow because workers could not be compensated by being given lower risk jobs. D) more people would be employed.

Q: Which of the following is an example of a compensating wage differential? A) Nurse anesthetists are paid less than anesthesiologists (who have medical degrees). B) Workers in a dynamite mine receive higher wages than if they worked in other jobs that require the same level of skills. C) In the market for lawyers, top graduates from the top programs earn starting salaries that are significantly higher than the starting salaries earned by lower-ranked graduates from the lower-ranked programs. D) Popular movie stars like George Clooney command much higher salaries than other talented but lesser-known actors.

Q: Compensating differentials are A) non-monetary benefits from being employed, such as health-care benefits. B) wages paid to workers where the supply of labor is great relative to demand. C) higher wages that compensate workers for unpleasant aspects of a job. D) higher wages that compensate the more experienced workers in a field.

Q: Which of the following explains why talented major league baseball players command much higher salaries than neurosurgeons? A) because the total value of baseball games is much higher than the total value of neurosurgery B) because it takes far more skill and training to be a major league baseball player than to be a neurosurgeon C) because the supply of talented major league baseball players is relatively low compared to the supply of neurosurgeons. Therefore, major league baseball players exert far more market power than neurosurgeon. D) because the supply of talented major league baseball players is low relative to its demand compared to the supply of neurosurgeons. Therefore, adding another player yields far greater marginal benefit than adding another neurosurgeon.

Q: Some superstar athletes in the sports industry earn very high levels of income relative to other occupations, and over time the wage differential has been increasing. What could have caused this? A) The supply of star athletes has decreased. B) The supply of star athletes has increased due to college athletic programs. C) Technological advances such as cable television has increased the demand for sports entertainment. D) The market power of athletes' unions has increased.

Q: A study by Price Fishback and Shawn Kantor of the University of Arizona shows that after the passage of workers' compensation laws, wages received by workers in the coal and lumber industries fell. Source: Price V. Fishback and Shawn Everett Kantor, "Did Workers Pay for the Passage of Workers' Compensation Laws?" Quarterly Journal of Economics, Vol. 100, No. 3, August 1995, pp. 713-742. Which of the following could explain why passage of workers' compensation laws led to a fall in wages in some industries? A) The passage of the workers' compensation laws made it more expensive for firms to employ workers, thus reducing the demand for workers. B) The passage of the workers' compensation laws allowed employers in hazardous industries to reduce compensating differentials which, in turn, reduce wages. C) Employers reduced wages to partially offset the cost of having to purchase insurance that would compensate workers for injuries suffered on the job. D) The supply of labor in these hazardous industries increased following the passage of the workers' compensation laws because jobs in these industries now pose less risk.

Q: Wage differentials between occupations can be explained by all of the following except A) the fact that some occupations require higher levels of human capital than others. B) the fact that some occupations are more desirable than others. C) the market power of different employers. D) the relative differences between demand and supply in various occupations

Q: Painters who paint water towers earn higher wages relative to painters who paint houses because A) the demand for tower painters is greater than the demand for residential painters. B) painting water towers is more risky than painting houses. C) the tower painters' union is probably more powerful than the house painters' union. D) the supply of water tower painters exceeds the supply of house painters.

Q: If the labor supply curve shifts to the right and the labor demand curve remains unchanged, what will happen to the equilibrium wage and the equilibrium level of employment? Illustrate your answer with a graph.

Q: If the labor demand curve shifts to the left and the labor supply curve remains unchanged, what will happen to the equilibrium wage and the equilibrium level of employment? Illustrate your answer with a graph.

Q: If the labor supply curve shifts to the left and the labor demand curve remains unchanged, what will happen to the equilibrium wage and the equilibrium level of employment? Illustrate your answer with a graph.

Q: If the labor demand curve shifts to the right and the labor supply curve remains unchanged, what will happen to the equilibrium wage and the equilibrium level of employment? Illustrate your answer with a graph.

Q: Consider the market for nurses in a given city. In each of the following cases, explain what happens to the equilibrium wage rate and the quantity of nurses hired. a. One of the major hospitals in the city closes. b. A record number of students graduate with bachelor's degrees in nursing. c. Traditionally, nursing is a field that attracts women. However, changes in access to education and to the labor force participation rate by women have led to a greater demand for the services of women in a wide range of occupations. The demand for nurses, however, does not change. d. Advances in medical technology reduce the amount of time physicians must spend with patients in intensive care and increase the time that nurses spend with patients.

Q: Consider the market for blackjack dealers in Las Vegas. In each of the following cases, explain what happens to the equilibrium wage rate and the quantity of blackjack dealers hired. a. Three new large resort casinos open in Las Vegas. b. Fewer students are attending classes to learn to become blackjack dealers. c. Traditionally, blackjack dealing is a field that attracts foreign workers. However, changes in immigration laws have made it more difficult for foreign workers to come to Las Vegas to obtain jobs. The demand for blackjack dealers, however, does not change. d. Advances in technology have increased the popularity of electronic blackjack machines and decreased the popularity of live table games which require the use of a dealer.

Q: Economist Michael Spence uses a concept called the "signaling hypothesis" to argue that college graduates don't earn high incomes because the skills they learned while in college serve to increase their productivity. Explain the signaling hypothesis. Is there evidence that the signaling hypothesis is not valid?

Q: What is the signaling hypothesis of education?

Q: According to the U.S. Bureau of Labor Statistics, between 2000 and 2005, real wages in concrete work fell by 16.5%, despite a soaring demand for workers. This implies that the supply of workers in this field increased faster than the demand for workers.

Q: If the demand for labor is unchanged, population growth will increase the supply of labor and increase the equilibrium wage.

Q: All else equal, a decrease in the supply of labor will shift the labor supply curve to the left and decrease the equilibrium wage.

Q: The signaling hypothesis of education states that education is a costly activity that enhances a worker's productivity.

Q: Since Poland joined the European Union in 2004, many young and educated Poles have emigrated to the United Kingdom. As a result, the labor supply curve in the United Kingdom shifts to the right and the equilibrium wage rises.

Q: The success of Walt Disney's animated film The Lion King in 1994, increased production of animated films, increasing the demand for animators much faster than the supply of animators was increasing. As a result, in the market for animators, the equilibrium wage fell and the equilibrium quantity increased.

Q: If the number of employees who quit, are fired, or retire increases while the hiring of new employees declines, this indicates that the A) labor demand curve is shifting to the right. B) labor supply curve is shifting to the right. C) labor demand curve is shifting to the left. D) labor supply curve and labor demand curve are both shifting to the right.

Q: All else equal, if job turnover has people leaving jobs and finding new jobs in the same industry, this will A) increase the demand for labor and the supply of labor. B) increase the demand for labor and decrease the supply of labor. C) decrease the supply of labor, but not change the demand for labor. D) not change demand or supply in the labor market.

Q: How will an increase in labor productivity affect equilibrium in the labor market? A) The supply of labor will increase and the equilibrium wage and quantity of labor will increase. B) The demand for jobs will increase and the equilibrium wage and quantity of labor will increase. C) The demand for labor will increase and the equilibrium wage and quantity of labor will increase. D) The demand for labor will decrease because fewer workers will be needed to produce the same output. The equilibrium wage and quantity of labor will decrease.

Q: If the demand for labor is unchanged, an increase in the supply of labor will lead to A) a decrease in the quantity of labor demanded and a decrease in the equilibrium wage. B) an increase in the quantity of labor demanded and a decrease in the equilibrium wage. C) an increase in the quantity of labor demanded and an increase in the equilibrium wage. D) a decrease in the quantity of labor demanded and an increase in the equilibrium wage.

Q: Suppose the labor market is in equilibrium. Which of the following statements is false? A) The equilibrium wage rate is equal to the marginal revenue product of labor. B) At the equilibrium wage, the quantity of labor demanded equals the quantity of labor supplied. C) Some workers will earn more than the equilibrium wage. D) At the equilibrium wage, the demand for labor is equal to the supply of labor.

Q: Which of the following would cause an increase in the equilibrium wage? A) The supply of labor increases more than the demand for labor. B) The supply of jobs increases more than the demand for jobs. C) The demand for labor increases faster than the supply of labor. D) The supply of labor increases and the demand for labor decreases.

Q: Which of the following summarizes the impact of population growth on the labor market? A) This will increase the labor supply, reduce the equilibrium wage and increase the quantity of labor demanded. B) There will be an increase in the demand for labor. As a result, the wage rate will rise and the quantity of workers supplied will decrease. C) There will be an increase in the demand for jobs. This will result in an increase in the equilibrium wage rate and a movement along the labor supply curve. D) There will be an increase in both the demand for labor and the supply of labor. As a result, the equilibrium wage will not change.

Q: Daniel Hammermesh and Stephen Donald studied the determinants of the earnings of college graduates years after they graduated. Which of the following is one result of their study? A) The earnings of identical twins were about 9 percent higher than the earnings of all other students. B) Students who had taken 15 credits of upper-division science and mathematics courses and earned high grades in these courses earned about 10 percent more than students who took no upper-division classes in these subjects. C) Students who took more Advanced Placement (AP) courses while still in high school earned significantly more income for each AP course they passed with a grade of 4 or 5. D) Students who took at least three economics courses earned about 9 percent more income than students who took no college economics courses.

Q: Michael Spence proposed the signaling hypothesis. According to this hypothesis A) workers signal their desire to work for a particular firm by the way they answer questions in job interviews. B) employers signal their preferences for the type of employee they wish to hire through job ads and the questions they ask during job interviews. C) employers view a college education as a signal that potential workers have certain desirable qualities. D) high wages are a signal that workers have skills that are highly valued by employers.

Q: If the labor supply is unchanged, an increase in the demand for labor will A) increase the equilibrium wage and decrease the number of workers employed. B) increase the equilibrium wage and increase the quantity of jobs demanded. C) decrease the equilibrium wage and increase the number of workers employed. D) increase the equilibrium wage and increase the number of workers employed.

Q: All else equal, if the supply of veterinarians continues to increase while the population of dogs and cats continues to decline, the incomes of veterinarians will A) increase. B) decline. C) remain unchanged. D) be indeterminate.

Q: Consider the following statements about the signaling hypothesis of education: a. The signaling hypothesis of education is based on the idea that college graduates are more productive than non-college graduates. b. The signaling hypothesis of education suggests that firms rely on human capital requirements to ensure worker quality. c. Employers rely on certain signals, such as a college diploma, to gauge a potential employee's abilities because it could lower the cost of acquiring information about the person that is not easily observed. Which of the statements above is true about the signaling hypothesis of education? A) a, b, and c B) a and b only C) b and c only D) a and c only

Q: According to the signaling hypothesis A) signaling about job openings occurs in help wanted classified ads. B) a college diploma signals to employers that a person has certain desirable characteristics. C) a slowdown in output signals to companies the need to hire more labor. D) a high unemployment rate is a signal to the government to take some policy action.

Q: Colleges offer merit awards to students who ordinarily would not qualify for financial help. Some have criticized this on grounds that merit awards disproportionately benefit students from wealthier communities with better school systems, siphoning resources away from lower-income students with greater financial need. A college's decision to grant merit awards is motivated by economic efficiency.

Q: When colleges use yield management techniques, they increase financial aid offers to students likely to be more price sensitive and they reduce financial aid offers to students likely to be less price sensitive.

Q: If price discrimination occurs in a market A) the law of one price does not hold. B) the firm earns arbitrage profits. C) consumers whose demand for the product sold is more elastic pay higher prices than consumers whose demand is less elastic. D) the marginal cost of production is constant.

Q: Article SummaryBrandeis University economist Benjamin Shiller has written a paper which explains how Netflix could combine demographic data with customers' Web browsing habits to more accurately predict how much a customer would be willing to pay for a Netflix subscription, and how using this method of first-degree price discrimination would generate higher profits. Shiller explains that the more information a company has about its customers, the better it is at being able to set prices to increase profits. As he stated in his paper, "Using all variables to tailor prices, one can yield variable profits 1.39 percent higher than variable profits obtained using non-tailored 2nd degree price-discrimination. Using demographics alone to tailor prices raises profits by much less, yielding variable profits only 0.14% higher than variable profits attainable under 2nd degree [price discrimination]."Source: Brian Fung, "How Netflix could use Big Data to make twice as much money off you," Washington Post, September 4, 2013.Refer to the Article Summary. If Netflix chose to use Shiller's pricing methodA) consumer surplus would be zero.B) producer surplus would be zero.C) deadweight loss would be maximized.D) consumer surplus, producer surplus, and deadweight loss would all be equal.

Q: Article SummaryBrandeis University economist Benjamin Shiller has written a paper which explains how Netflix could combine demographic data with customers' Web browsing habits to more accurately predict how much a customer would be willing to pay for a Netflix subscription, and how using this method of first-degree price discrimination would generate higher profits. Shiller explains that the more information a company has about its customers, the better it is at being able to set prices to increase profits. As he stated in his paper, "Using all variables to tailor prices, one can yield variable profits 1.39 percent higher than variable profits obtained using non-tailored 2nd degree price-discrimination. Using demographics alone to tailor prices raises profits by much less, yielding variable profits only 0.14% higher than variable profits attainable under 2nd degree [price discrimination]."Source: Brian Fung, "How Netflix could use Big Data to make twice as much money off you," Washington Post, September 4, 2013.Refer to the Article Summary. The pricing method described in the article is referred to as first-degree price discrimination. First-degree price discrimination is also known asA) arbitrage.B) perfect price discrimination.C) odd pricing.D) two-part tariff pricing.

Q: A perfectly competitive firm cannot practice price discrimination because A) a firm that breaks even in the long run cannot afford to engage in yield management. B) it does not advertise; this prevents the firm from marketing its product to different segments of the market. C) each consumer in a perfectly competitive market has the same willingness to pay. D) the firm can only charge the market price.

Q: One requirement for a firm pursuing a price-discrimination strategy is the ability to segment the market for its product. This means that A) the firm must set different prices for different regions where the product is sold. B) the firm must be willing to offer price discounts for senior citizens and children. C) the firm must be able to divide the market in a way that makes arbitrage impossible. D) the firm must choose a marketing strategy that appeals to different segments of the economy.

Q: Table 16-3Potential CustomerWillingness to Pay (dollars per hour)Arun$8Bernice9Cara10Dawn12Julie plans to start a pet-sitting service. She surveyed her neighborhood to determine the demand for this service. Assume that each person surveyed demands only one hour of pet sitting services per period. Table 16-3 above shows a portion of her survey results.Refer to Table 16-3. Suppose Julie's marginal cost of providing this service is constant at $7 and she charges each customer according to his or her willingness to pay instead of a uniform price of $7. Which of the following statements is true?A) Julie is worse off because the demand for her services is reduced.B) Julie has converted the consumer surplus (from a uniform price) into economic profit.C) Julie's customers are better off because their consumer surplus has increased.D) Julie's has converted the producer surplus (from a uniform price) into consumer surplus.

Q: Table 16-3Potential CustomerWillingness to Pay (dollars per hour)Arun$8Bernice9Cara10Dawn12Julie plans to start a pet-sitting service. She surveyed her neighborhood to determine the demand for this service. Assume that each person surveyed demands only one hour of pet sitting services per period. Table 16-3 above shows a portion of her survey results.Refer to Table 16-3. Suppose Julie's marginal cost of providing this service is constant at $7 and she decides to charge each customer according to his or her willingness to pay. What is the value of consumer surplus by her customers?A) $39B) $28C) $11D) $0

Q: Table 16-3Potential CustomerWillingness to Pay (dollars per hour)Arun$8Bernice9Cara10Dawn12Julie plans to start a pet-sitting service. She surveyed her neighborhood to determine the demand for this service. Assume that each person surveyed demands only one hour of pet sitting services per period. Table 16-3 above shows a portion of her survey results.Refer to Table 16-3. Suppose Julie's marginal cost of providing this service is constant at $7 and she decides to charge each customer according to his or her willingness to pay. What is Julie's total revenue and how many hours of service will be purchased?A) 4 hours and her total revenue = $39B) 4 hours and her total revenue = $28C) 1 hour and her total revenue = $7D) 5 hours and her total revenue = $35

Q: Table 16-3Potential CustomerWillingness to Pay (dollars per hour)Arun$8Bernice9Cara10Dawn12Julie plans to start a pet-sitting service. She surveyed her neighborhood to determine the demand for this service. Assume that each person surveyed demands only one hour of pet sitting services per period. Table 16-3 above shows a portion of her survey results.Refer to Table 16-3. Suppose Julie's marginal cost of providing this service is constant at $7 and she charges $7. What is the value of the consumer surplus enjoyed by her customers?A) $39B) $28C) $11D) $0

Q: Table 16-3Potential CustomerWillingness to Pay (dollars per hour)Arun$8Bernice9Cara10Dawn12Julie plans to start a pet-sitting service. She surveyed her neighborhood to determine the demand for this service. Assume that each person surveyed demands only one hour of pet sitting services per period. Table 16-3 above shows a portion of her survey results.Refer to Table 16-3. Suppose Julie's marginal cost of providing this service is constant at $7 and she charges $7 per hour. What is her marginal revenue?A) It is $7 for the first hour and starts declining thereafter.B) It is $7 for the first hour and starts increasing thereafter.C) It is constant at $7.D) It coincides with the figures in the table; $12 for the first hour, $10 for the second, $9 for the third and $8 for the fourth.

Q: Table 16-3Potential CustomerWillingness to Pay (dollars per hour)Arun$8Bernice9Cara10Dawn12Julie plans to start a pet-sitting service. She surveyed her neighborhood to determine the demand for this service. Assume that each person surveyed demands only one hour of pet sitting services per period. Table 16-3 above shows a portion of her survey results.Refer to Table 16-3. Suppose Julie's marginal cost of providing this service is constant at $7 and she charges $7. How many hours will be purchased and what is her total revenue?A) 5 hours; total revenue = $35B) 4 hours; total revenue = $28C) 3 hours; total revenue = $21D) 2 hours; total revenue = $14

Q: Table 16-3Potential CustomerWillingness to Pay (dollars per hour)Arun$8Bernice9Cara10Dawn12Julie plans to start a pet-sitting service. She surveyed her neighborhood to determine the demand for this service. Assume that each person surveyed demands only one hour of pet sitting services per period. Table 16-3 above shows a portion of her survey results.Refer to Table 16-3. If Julie charges $10 per hour, what is the value of the consumer surplus received by Dawn?A) $2B) $10C) $12D) $22

Q: Table 16-3Potential CustomerWillingness to Pay (dollars per hour)Arun$8Bernice9Cara10Dawn12Julie plans to start a pet-sitting service. She surveyed her neighborhood to determine the demand for this service. Assume that each person surveyed demands only one hour of pet sitting services per period. Table 16-3 above shows a portion of her survey results.Refer to Table 16-3. If Julie charges $10 per hour, how many hours of pet sitting services will be purchased and by whom?A) 2 hours (1 hour by Cara and 1 hour by Dawn)B) 1 hour by Cara onlyC) 1 hour by Dawn onlyD) 3 hours (1 hour each by Arun, Bernice and Cara)

Q: Clarissa Kessler operates a store that sells recorded music. Her business suffered tremendously when a giant discount store chain opened a store in the area and is able to sell its products for less than Clarissa's wholesale cost. Is this evidence of illegal price discrimination on the part of the discount store chain? A) Yes, it is clearly a violation of the Robinson-Patman Act. B) No, because it can be argued that the discount store chain is justified in charging lower prices because it is a large-volume buyer and is able to purchase recorded music at a lower wholesale price than Clarissa. C) Yes, the discount store chain is engaging in predatory pricing. D) No, even if the price discrimination is based on differences in cost, the law states that it is not illegal.

Q: Which of the following antitrust laws forbade firms to engage in price discrimination if the effect would lessen competition or create a monopoly? A) the Sherman Act B) the Clayton Act C) the Robinson-Patman Act D) the Cellar-Kefauver Act

Q: Consumers who will pay high prices to be among the first to own certain new products are called A) savvy consumers. B) naive consumers. C) gullible. D) early adopters.

Q: The term "early adopters" refers to A) firms that are the first to implement a new technology that is used to produce new goods or services. B) book clubs that are first to recommend best-selling books to their members. C) consumers who respond quickly to fads, seasonal changes, etc. D) consumers who are willing to pay high prices to be among the first to own new products.

Q: Publishers practice price discrimination when they sell books at high prices to A) early adopters. B) local bookstores. C) large chain bookstores. D) online book sellers.

Q: Suppose that a price-discriminating producer divides its market into two segments. If the firm sells its product at a price of $34 in the market segment with relatively less-elastic customer demand, the price in the market segment with more-elastic customer demand will be A) greater than $34. B) less than $34. C) less than marginal revenue in that market segment. D) equal to marginal revenue in that market segment.

Q: Which of the following statements about perfect price discrimination is false? A) There is no consumer surplus if a firm engages in perfect price discrimination. B) Perfect price discrimination occurs when the seller charges the highest price each consumer would be willing to pay for the product. C) A condition for perfect price discrimination is that it must be costlier to service some customers than others. D) For the price-discriminating firm, its marginal revenue curve coincides with its demand curve.

Q: If a monopolist practices perfect price discrimination A) the firm will break even in the long run. B) consumers surplus will be equal to the deadweight loss. C) producer surplus will equal consumer surplus. D) consumer surplus will be zero.

Q: Assume that a monopolist practices perfect price discrimination. The firm will produce an output rate A) that is less than the efficient level of output. B) that is greater than the efficient level of output. C) that is equal to the efficient level of output. D) that converts consumers surplus into a deadweight loss.

Q: Assume that a monopolist practices perfect price discrimination. The firm's marginal revenue curve will A) be perfectly elastic. B) be equal to its demand curve. C) will be perfectly inelastic. D) will lie below its demand curve.

Q: Figure 16-3 Chantal owns a hairdressing salon which caters to two main groups of customers: residents of "The Chateau," a retirement community, and other residents in the neighborhood. Figure 16-3 shows the demand curves for the residents of the retirement community, labeled Market A, and other residents in the neighborhood, labeled Market B. The demand curves are not identical. Refer to Figure 16-3. Suppose Chantal charges all her customers a uniform price of $10 for a haircut. Which of the following statements is true? A) Chantal is selling more than the profit-maximizing quantity of haircuts in market B. B) Chantal is selling less than the profit-maximizing quantity of haircuts in market B. C) Chantal is maximizing revenue in market B. D) Chantal will earn a greater profit through uniform pricing than if she practices price discriminates.