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Principles of Microeconomics > Exam 2 > Flashcards

Exam 2 Flashcards

1
Q

The study of how the allocation of resources affects economic well-being.

A

Welfare Economics

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2
Q

The property of distributing economic prosperity uniformly among the members of society.

A

Equality

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3
Q

The amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

A

Consumer Surplus

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4
Q

The inability of an unregulated market to allocate resources efficiently.

A

Market Failure

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5
Q

The amount a seller is paid for a good minus the seller’s cost of providing it.

A

Producer Surplus

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6
Q

The area above the supply curve and below the price.

A

Producer Surplus

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7
Q

Willingness to pay minus willingness to sell.

A

Total Surplus

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8
Q

The sum of consumer and producer surplus.

A

Total Surplus

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9
Q

The area below the demand curve and above the price.

A

Consumer Surplus

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10
Q

The property of a resource allocation of maximizing the total surplus received by all members of society.

A

Efficiency

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11
Q

The ability of an individual agent to influence market prices.

A

Market Power

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12
Q

The value of everything a seller must give up to produce a good.

A

Cost

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13
Q

The maximum amount a buyer will pay for a good.

A

Willingness to Pay

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14
Q

The fall in total surplus that results from a market distortion, such as a tax.

A

Deadweight Loss

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15
Q

The price of a good that prevails in the world market for that good.

A

World Price

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16
Q

A tax on goods produced abroad and sold domestically

A

Tariff

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17
Q

A tax designed to induce private decision makers to take account of the social costs that arise from a negative externality.

A

Corrective Tax

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18
Q

Altering incentives so that people take account of the external effects of their actions.

A

Internalizing the Externality

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19
Q

A subsidy designed to induce private decision makers to take account of the social benefits that arise from a positive externality.

A

Corrective Subsidy

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20
Q

The uncompensated impact of one person’s actions on the well-being of a bystander.

A

Externality

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21
Q

A situation where a market interaction between a buyer and seller transfers a cost to a third party.

A

Negative Externality

22
Q

A situation where a market interaction between a buyer and seller transfers a benefit to a third party.

A

Positive Externality

23
Q

The costs that parties incur in the process of agreeing to and following through on a bargain.

A

Transaction Costs

24
Q

The “true cost” of a product that should be accounted for in an efficient outcome.

A

Social Cost

25
Q

The “value” of a product that is actually measured by the market.

A

Private Benefit

26
Q

The “true value” of a product that should be accounted for in an efficient outcome.

A

Social Benefit

27
Q

The proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own.

A

Coase Theorem

28
Q

The “cost” of a product that is actually measured by the market.

A

Private Cost

29
Q

The difference between the true cost to society and the cost actually measured by the market.

A

External Cost

30
Q

The difference between the true benefit to society and the benefit actually measured by the market.

A

External Benefit

31
Q

The notion that common resources tend to be overused and abused.

A

Tragedy of the Commons

32
Q

A person who receives the benefit of a good but avoids paying for it.

A

Free Rider

33
Q

Goods that are rival but are non-excludable.

A

Common Resources

34
Q

Goods that are both excludable and rival.

A

Private Goods

35
Q

Goods that are non-excludable and non-rival.

A

Public Goods

36
Q

Goods that are excludable but are non-rival.

A

Club Goods

37
Q

The property of a good whereby one person’s use diminishes other people’s use.

A

Rivalry in Consumption

38
Q

The property of a good whereby a person can be prevented from using it.

A

Excludability

39
Q

As the size of a tax increases, the tax revenue:

Increases
Decreases
Increases and then Decreases

A

Increases and then Decreases

40
Q

The graphical representation of the relationship between tax revenue and the size of a tax.

A

Laffer Curve

41
Q

When demand is more inelastic, deadweight loss tends to be smaller / larger.

A

Smaller

42
Q

When supply is more elastic, deadweight loss tends to be smaller / larger.

A

Larger

43
Q

True or False

Deadweight loss increases as the size of the tax increases.

A

True

44
Q

If a country’s domestic price is lower than the world price for a good, it will import / export that good because it does / does not have the comparative advantage.

A

Export

Does Not

45
Q

If a country’s domestic price is higher than the world price for a good, it will import / export that good because it does / does not have the comparative advantage.

A

Import

Does

46
Q

True or False

When a country imports a good, the domestic price falls to equal the world price.

A

True

47
Q

True or False

When a country export a good, the domestic price raises to equal the world price.

A

True

48
Q

True or False

A tariff raises the domestic price above the world price by the amount of the tariff.

A

True

49
Q

True or False

When a tariff is put into effect, the domestic quantity supplied decreases.

A

False

50
Q

True or False

A tariff moves the domestic market further away from the equilibrium without trade.

A

False

Principles of Microeconomics (3 decks)

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