Final Exam

Question 1

The extra benefit associated with producing or consuming the next unit is called the

Answer 1

Marginal Benefit

Question 2

When a producer had a comparative advantage at producing a good, it means the producer

Answer 2

has the ability to produce a good or service at a lower opportunity cost than others

Question 3

The concepts of comparative advantage, specialization, and trade form a compelling argument in favor of:

Answer 3

Free trade

Question 4

The law of demand can be stated as:

Answer 4

all else equal, quantity demanded rises as price falls

Question 5

Some non-price determinants of demand are:

Answer 5

consumer preferences, expectations of future prices, and the number of buyers in the market.

Question 6

reaching a Nash equilibrium means that

Answer 6

the players have reached a stable outcome where neither true would wish to change your strategy once your find out what the other play is doing.

Question 7

The tendency for people to behave in a risker way to renege on contracts when they do not face the full consequences of their actions is called:

Answer 7

Moral Hazard

Question 8

Screening is when someone takes action to:

Answer 8

reveal private information about someone else

Question 9

Returns that occur in the long run when average total cost does not depend on the quantity of output are

Answer 9

constant returns to scale

Question 10

In the long run, firms in a perfectly competitive market:

Answer 10

1) Produce a quantity that maximizes profit
2) earns zero economic profit
3) choose the level of output the that minimizes their total costs

Question 11

In reality the long-run supply curve for a perfectly competitive market is upward sloping because:

Answer 11

1) Of changing costs of production that firms may face
2) Not all from have identical cost structures
3) experienced firms will have different information and costs than new firms

Question 12

The monopolistic outcome happens at:

Answer 12

A higher price than perfectly completive one.

Question 13

Oligoply describes a market with:

Answer 13

only a few sellers

Question 14

Whether a cross-price elasticity of demand is positiver or negative:

Answer 14

tells us whether the goods are substitutes or complements

Question 15

A determinant of the price elasticity of supply is also a determinant of the price elasticity of demand is:

Answer 15

adjustment time

Question 16

An effective price floor

Answer 16

must be set above the equilibrium price and will likely cause a surplus

Question 17

Tax incidence:

Answer 17

Depends on the relative elasticity of the supply and demand curves in the market

Question 18

Utility measures are:

Answer 18

a relative ranking of the values a person places on alternative combination of things

Question 19

In general, general substation effect of an increase in the price of a normal good:

Answer 19

will cause the individual to buy less of that good and more of others because it is relatively more expensive

Question 20

In an effort to lose weight, Sam posts flyers all over town that offer a reward of $50 to anyone who catches him eating unhealthy food. Sam’s flyers are an example of

Answer 20

a commitment device

Question 21

Game Theory

Answer 21

the study of how people behave strategically under different circumstances

Question 22

In the short run, monopolistically competitive firms behave like ________, but in the long run, the outcome is similar to that of the_______

Answer 22

Monopolies; perfectly competitive firms

Question 23

The demand curve facing the monopolistically competitive firm is:

Answer 23

flatter the that of a monopolist

Question 24

If a monopolistically competitive firm’s demand curve shifts left, it will stop shifting

Answer 24

when the price is equal to the average total cost

Question 25

In the long run, a profit-maximizing monopolistically competitive firm sells at a price that is:

Answer 25

equal to average total cost, but higher than marginal cost

Question 26

Collusion is:

Answer 26

the act of firms working together to make decision about price and quantity.

Question 27

In the graph of supply and demand in the market for labor

Answer 27

firms provide the demand

Question 28

The competitive firm's profit-maximizing quantity of labor is the quantity where

Answer 28

the value of the marginal product of labor is equal to the market wage

Question 29

The labor-supply curve would be downward slopping if:

Answer 29

the income effect outweighs the price effect.

Question 30

In a competitive labor market, if the demand for labor decreases, labor demand will shift

Answer 30

to the left and wages will decrease

Question 31

The quantity of labor supplied is determined by the

Answer 31

opportunity cost of providing the labor

Question 32

Human capital is defined as

Answer 32

the set of skills, knowledge, experience, and talent that determine the productivity of workers

Question 33

In the market for labor, the monopolist:

Answer 33

is the sole buyer and can push wages down, below the competitive wage

Question 34

A country that would be a net-importer of wine if it moved from autarky to free trade would cause what reaction

Answer 34

Domestic wine producers would be opposed

Question 35

Laws limiting trade are often referred to as

Answer 35

Trade protection

Question 36

A benefit that accrues without compensation to someone other than than the person who caused it is called:

Answer 36

an external benefit

Question 37

When a negative externalities are present, it means that:

Answer 37

1) Individuals don't take into account all the costs associated with their market choice 2) Society bears part of the cost borne of private transactions 3) Production and consumption is above the social optimal level

Question 38

Knowing that the presence of externalities reduce surplus, it implies that

Answer 38

there are mutually beneficial trades waiting to be exploited so private parties have any incentive to solve the externality problem themselves

Question 39

When a good ends up undersupplied, we can assume it is

Answer 39

a public good

Question 40

Excludability matters because it

Answer 40

allows owners to set an enforceable price on a good

Question 41

A common resource is

Answer 41

rival In consumption, but to excludable

Question 42

Free rider enjoy:

Answer 42

positive externalities from others' choices to pay for a good

Question 43

In market where the tragedy of the commons arises, the equilibrium quantity Is both individually ______ and collectively ________

Answer 43

rational ; inefficient

Question 44

Bans are applied to

Answer 44

1) Common-resource problems 2) reduce the inefficiency created by overuse 3) situation where the optimal quantity of consumption is zero

Question 45

One of the primary aims of taxation is:

Answer 45

1) to increase government taxation 2 to reduce the equilibrium quantity 3) to alter the incentives of market participants

Question 46

How much deadweight loss a tax causes depends on:

Answer 46

How responsive buyers and sellers are to a price change

Question 47

The logistical costs associated with implementing a tax are called the:

Answer 47

Administrative burden

Question 48

A public expenditure that has to be approved each year is called

Answer 48

discretionary spending

Question 49

An example of entitlement spending is:

Answer 49

Social Security

Question 50

When a market consists of a few large firms, it:

Answer 50

is likely an oligopoly

Question 51

Monopolistic competition describes a market with:

Answer 51

Many forms that sell good and services that are similar, but slightly different

Question 52

Long-run economic profits are possible in:

Answer 52

Oligopoly

Question 53

The demand curve facing the monopolistically competitive firm is:

Answer 53

Flatter than that of a monopolist

Question 54

Discretionary spending involved public expenditures that

Answer 54

have to be approved each year

Question 55

The Laffer curve demonstrates that:

Answer 55

raising tax rates increase ten decrease tax revenues

Question 56

A $0.50 tax on lemons currently generates $200 in revenues per day. If the tax were increased to $2, the revenues generated would drop to $70. This tells you that in this range of tax rates:

Answer 56

The quantity effect outweighs the price effect

Question 57

When a tax is imposed, the surplus that is lost to buyers and sellers but converted into tax revenue is:

Answer 57

transferred to others through public programs

Question 58

The total amount of surplus for customer and producers lost due to taxation is:

Answer 58

greater than the amount of revenue generated

Question 59

The depletion of a common resource due to individually rational but collectively inefficient overconsumption is called:

Answer 59

the tragedy of the commons

Question 60

One way to solve the free-rider problem is

Answer 60

make the good or service more excludable

Question 61

A public good is:

Answer 61

not rival in consumption and not excludable

Question 62

An example of a good that is not excludable:

Answer 62

fish in the ocean

Question 63

Goods that are rival in consumption, but not excludable are

Answer 63

a common resource

Question 64

When a good is rival in consumption:

Answer 64

one person's consumption prevents or decease others ability to consume it.

Question 65

If Pigovian tax is not large enough, the resulting:

Answer 65

1) outcome will not maximize surplus 2) Quantity will be too high 3) Outcome will be inefficient

Question 66

The Coast theorem is the idea that:

Answer 66

individuals can reach an effect equilibrium through private trades, even in the presence of an externality

Question 67

One way to make consumers take a positive externality into account in their demand is to

Answer 67

subsidize the purchase of the item

Question 68

When positive externalities are present in a market, it means that

Answer 68

private benefits are less than social benefits

Question 69

As a general rule, free trade

Answer 69

increases the demand for factors of production that are domestically abundant

Question 70

An import quota is

Answer 70

a limit on the amount of a particular good that can be imported

Question 71

Who is likely to be in favor of free trade in a country that would be a net-exporter if it moved from autarky to free trade?

Answer 71

Domestic producers

Question 72

The in crease in welfare in both countries that results from specialization and trade is called:

Answer 72

gains form trade

Question 73

the facts of production called "capital" refers to:

Answer 73

manufactures good that are used to procure new goods

Question 74

The values of the marginal product is:

Answer 74

the marginal product generated by an additional unit of input ties the price of output

Question 75

Human capital is defined as:

Answer 75

the set of skills, knowledge, experience and talent that determine the productivity of workers

Question 76

In the case of borrowing in capital markets, the rental price of capital is:

Answer 76

the interest paid on loans

Question 77

a monopsony is an example of:

Answer 77

buyers holding market power

Question 78

a government-owned monopoly is more likely to:

Answer 78

1) Provide a great quantity of output than a private one 2) provide output at a lower price than a private one 3) sever public interest than maximize profit

Question 79

For a monopolist, at the profit-maximizing competitive market is:

Answer 79

goods are standardized

Question 80

Holds ture at the chosen level of output in the long runoff the firms in a perfectly competitive markey?

Answer 80

P=MC P= minimum ATC MR = MC

Question 81

The increase in output that is generated by an additional unit input is called the

Answer 81

marginal product

Question 82

When a firm can achieve economies of scale by expanding, it's long ru ATC curve:

Answer 82

Slopes down

Question 83

The marginal utility Gaines from the consumption of successive units of a normal good

Answer 83

tends to decrease

Question 84

In general, the income effect of an increase in the price of a normal good

Answer 84

will cause the individual to buy less of the good because they have relatively less income

Question 85

If the demand curve is less elastic than the supply curve, then:

Answer 85

the buyers will bear a greater tax incidence

Question 86

An interested consequence of price ceiling is:

Answer 86

non-price rationing must occur, and can lead to bribes

Question 87

If Bill's reservation price on a snowboard is $250, how many snowboards world he buy if the market price of snowboards is $500?

Answer 87

0

Question 88

Assume a market that has an equilibrium price of $7. If the price Is set at $3. what is true?

Answer 88

Some surplus is transferred from producers to consumers. but total surplus falls

Question 89

Income elasticity will be positive for:

Answer 89

all normal goods

Question 90

If the cross-price elasticity of two goods is 0.25, then we know that:

Answer 90

those goos are substitutes because their elasticity is greater than zero

Question 91

John just won Megamillion Jackpot. We can assume that

Answer 91

His demand for all normal goods will increase

Question 92

The law of supply can be states as:

Answer 92

All else equal, quantity supplied rises as prices rises

Question 93

If society were to experience an increase in its available resource

Answer 93

its production possibilities frontier would shift out

Question 94

When a producers has the ability to produce a good or service at a lower opportunity cost than others, economists say the producer:

Answer 94

Has a competitive advantage of producing that good

Question 95

The assumption of rational behavior:

Answer 95

Helps economists explain a lot about the real world by assuming that people behave in the way that will best achieve their goals

Question 96

What is an example of a positive incentive:

Answer 96

Discover credit cards after 0 percent balance transfer rates for someone to open an accountant.