econ markets Flashcards
what scenario best illustrates a positive externality in a market?
a homeowner’s beautiful garden increasing neighboring property values
in the context of a market consolidation, why might breaking up large technology comapanies like Facebook be partially
the Sherman antitrust act doesn’t apply to technology companies
what best explains why voluntary exchange creates wealth in markets
both parties believe they will be better off after the exchange
a pharmaceutical company develops a new vaccine and charger high prices while receiving significant government research funding, which market flaw?
negative externality
In terms of market behavior, which statement most accurately describes the relationship between monopolies does and efficiency
large corporations can provide goods more efficiently, but this efficiency may come at the cost of reduced competition
which scenario represents the most complex interaction of multiple flaws?
a large tech company buying user data, utilizing public in fracture, while dominating the market with no real competitors
A small local coffee shop opens near a Starbucks and differentiates itself by offering unique flavor combinations and personalized customer service. Despite being much smaller it manages to maintain profitable operations. This scenario best demonstrates which characteristics of monopolistic competition
product differentiation allows smaller firms to compete effectively
In an industry where three major industries companies control 85% of the market share, Company A announces a price increase. what is most likely strategic consideration for the other two companies
They must carefully analyze whether to match,exceed, or maintain current prices based on potential competitor reactions
If the pharmaceutical industry has signing can consolidation through mergers and acquisitions, which market outcome is least likely to occur
lower consumer prices for medications
a tech startup develops an innovative new social media platform. Yo maintain its market position, which combination of market structure characteristics would be most advantageous for the company to pursue
strong barriers to entry and unique product features
An economist observes that when household incomes increased in a city, the demand for public bus transportation decreased. This observation suggest that public bus transportation Is
an inferior good
If consumers believe that a severe coffee bean shortage will occur in 6 months, which is more likely to occur to the current demand curve for coffee
the curve will shift right, as people stock up before shortage
In a scenario where both printer prices and printer ink prices decrease simultaneously, which economic concept best explains why the quantity demanded for printers might increase more than expected.
the substitution effect
A market analyst notices that the quantity of energy drinks demanded remains constant despite significant price changes, this is an observation of
the existence of other significant market factors offsetting the price effect
when analyzing changes in demand, which combination of event would most likely result in offsetting effects on the demand curve for luxury cars
income increases and consumer expectations become negative
A competitive analysis of the smartphone market reveals a significant increase in demand despite no change in price
attitude changed and price expectations only
A pharmaceutical company increases the price of a life saving medication by 30%, resulting in only a 5% decrease in quantity demanded. What best explains this consumer behavior
the medications is inelastic due to its essential nature and lack of substitutes
Two competing products show different responses to a 15% prince increase:
products A-quantity demanded drops 30%
product B- quantity demanded drops 5%
which economic conclusion can be drawn
Product A is elastic (coefficent=2)
Product be is inelastic (coefficent =0.33)
what scenario is the best represents a change in supply rather than a change in quantity supplied
a new manufacturing technology reduces production costs industry wide
if a market experiences elastic supply (elasticity >1) what does this indicate about the product
the product is relatively simple yo manufacture and adjust production
In the context of supply elasticity, why might prescription medications typically demonstrate inelastic supply
because of regularity restrictions and complex productions processes
which combination of factors would most likely cause the largest rightward shift in aggregate supply?
decreased input costs and new technological innovations
how would the supply curve be affected if producers expect prices to significantly decrease in the near future
the supply sure would shift left as produced rescue current production
what distinguishes aggregate supply from individual firm supply
aggregate supply represents the total market supply from all producers
if geopolitical events cause supply distributions, which economic outcome would not be expected
movement along the existing supply curve
If the government implements a price floor about equilibrium price, which outcome would represent a likely unintended consequence
a surplus of labor develops, leading to increase unemployment
which scenario would most likely tcreate both higher equilibrium prices and higher equilibrium quantities in the New York CIty apartment market
an increase in population and higher incomes among potential renters
In a market system, why do surpluses tend to be self-correcting without government intervention
housing shortages develop and maintenance quantity improves
a city implements rent control (price ceiling) on apartments, which combination of effects is most likely to occur?
housing shortages develop and maintenance decreases
what happens to the price if demand increases while supply remains the same
price increases
what could cause a rightward shift in demand
an increase in consumer preferences for the good
what could be the reason for a decrease in supply
a rise in the cost of raw materials
what is the likely outcome of a price ceiling set below equilibrium
a shortage of goods
if both supply and demand increase simultaneously, what happens to equilibrium price?
it depends on the relative magnitudes of the shifts
