Final Flashcards
Which of the following is not a solution to problems caused by asymmetric information?
Innovation on quality
When the bad drives out the good in the face of asymmetric information, it is known as the?
Market for lemons
Market failure describes a situation in which the market itself _________ in a way that balances social costs and benefits.
fails to allocate resources efficiently
In the ____________, households work and receive payment from firms.
labor market
What makes it extremely difficult for cartels to function effectively without government assistance?
High prices encourage cartel members to offer discounts, and they attract new entrants to the industry.
When quantity demanded decreases in response to a change in price:
there is a movement up along the demand curve.
Idaho farmers can sell as large a quantity of their potato crop as they wish,
provided each is willing to accept the prevailing market price.
The demand curve for a typical good has a(n):
negative slope because some consumers switch to other goods as the price rises
It is said that in a perfectly competitive market, raising the price of a firm’s product from the prevailing market price of $179.00 to $199.00,___________
could likely result in a notable loss of sales to competitors
A geologist tells the ACME Mining Company she’s certain there is a gold vein one thousand feet below the surface of its property, but ACME still decides not to mine for that gold. How would an economist explain their decision?
The owners of ACME feel the additional costs of mining for gold outweigh the additional benefits.
Suppose the government establishes a price support for soybeans. The new government program will tend to
increase a farmer’s opportunity cost of producing other commodities (such as corn), which could be grown on the same land used to grow soybeans.
For a perfectly competitive firm, the marginal
cost curve is identical to the firm’s
supply curve
____________ describes a situation where a third party, outside the transaction, suffers from a market transaction by others.
Negative externality
In the circular flow diagram model:
Both (a) and (b) are correct.
If a city suddenly and unexpectedly abolishes all property taxes on residential property, which consequence is most likely to be observed first?
Higher sale prices for residential property
Marginal thinking is best demonstrated by:
choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time
A price searcher can move its marginal revenue curve closer to its demand curve if it can
charge different buyers different prices for the same good.
Which of the following is viewed as a fundamental building block of the U.S. economic way of thinking?
the principle that a system of voluntary exchange benefits both parties
Gomer can make either 200 gallons of corn liquor (L) or 200 gallons of strawberry wine (W) every six months. Goober can make only 100 gallons of corn liquor (L) or 50 gallons of strawberry wine (W) every six months. Which statement below is true?
It costs Gomer 1 L to make 1 W.
If a firm’s efforts to be technologically innovative will create a positive externality, then that firm will likely ______________
have less incentive to innovate to the extent that the whole of society desires.
If no externalities of pollution exist in a particular industry, the interaction of demand and supply ______________.
will coordinate social costs and benefits
A business __________occurs when, for practical purposes, one firm purchases another.
acquisition
Which of the following would be classified as a positive externality?
converting a derelict empty lot to a public vegetable garden
Cathy can take either of two separate roads to drive to work. The first is a lightly used new toll road that is rarely congested. The second road is a local road with no tolls, but it is often congested and has many potholes. In this instance, the toll road is
rivalrous and nonexcludable
Strong form market efficiency suggests ____________
The market capitalizes on all private, public, and past market information
A substantial increase in the legal minimum wage will tend to
reduce employment by raising the cost of hiring some employees above their expected worth to potential employers.
If a government chooses a system of marketable permits as its environmental managing tool, the reduction in pollution will
take place in the firms where it is least expensive to do so.
Economists refer to the relationship that a higher price leads to a lower quantity demanded as the
law of demand
Suppose the market clearing price for apples rises from $2.00 to $3.00 per pound, and the overall market clearing output increases from 1 million to 2 million pounds. How can we explain the increase in price and increase in market output?
Demand increased and supply remained unchanged
Marginal revenue is less than price for price searchers
when they cannot charge all customers the maximum they are willing to pay for each unit purchased.
Why do U.S. economists commonly refer to externalities as an example of market failure?
externalities present a case where markets only consider some social costs
“If I didn’t have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour.” The opportunity cost of attending class this evening is:
$44
If no beautification projects were undertaken in a city except by private individuals or firms, the city would almost surely be less beautiful than otherwise comparable cities because
it is extremely difficult to induce people to pay on a voluntary basis for the pleasure they receive from urban beautification projects.
Which of the following is most likely to be a monopoly?
local electricity distributor
As depicted in _____________, it is necessary to give up some of one good to gain more of the other good.
the production possibilities frontier
Lisa decided to give up being on the soccer team for piano lessons. Her opportunity cost of pursuing piano lessons is
the satisfaction Lisa had enjoyed by being on the soccer team
Which of the following will present the least amount of concern to a firm that has a monopoly over a particular industry?
the competitive actions of other business firms
Rent controls unintentionally create
shortages of rental units
If you buy more Folgers coffee when your income goes down, then Folgers is a
inferior good
Scarcity can be eliminated by
none of the above
If political unrest abroad substantially reduces the supply of copper to the United States, the price of copper will rise by a larger amount
the more inelastic the demand for copper.
If a steel manufacturer considers the costs of labor and materials, as well as the broader costs of environmental injuries resulting from its manufacturing processes,
it is factoring in the social costs of the pollution it generates
“Lady Gaga concert sells out. 60,000 tickets sold.” What can an economist conclude from the above headline?
Both C and D above
(The quantity supplied is 60,000.
The quantity demanded is at least 60,000.)
According to the economic way of thinking, it is efficient to support a system of law and order through taxation because
law and order create significant spillover benefits.
Movie theaters usually set lower prices for children than for adults because
they think the price elasticity of demand for movie tickets is quite elastic for children at the regular or adult price
If new manufacturers enter the computer industry, then (ceteris paribus):
the supply curve shifts to the right
