micro 6

Question 1

Public goods (typically produced by gov) ex: parks
1) indivisible
2) exclusion principle

Answer 1

indivisible: producer can’t bar nonpayers from enjoying benefits

exclusion principle: when can’t exclude nonpayer, hard to profitably produce

Question 1

optimal quantity for public goods

Answer 1

marginal benefit=marginal cost

Question 2

Externalities
positive vs negative

Answer 2

externalities: costs/benefits “spill over” to those not consuming/producing

positive: affects demand
1. underallocation
2. solutions:
sub consumers, D right +
sub producers, S right +

negative: affects supply
1. overallocation
2. solutions:
tax

Question 3

purpose of Lorenz curve?

Answer 3

show level of income inequality in the economy

Question 4

how to find marginal external cost

Answer 4

verticle distance between MSC and MPC

Question 5

socially optimal quantity

Answer 5

MSC=MSB

Question 6

in the absence of externalities, which market produces the socially optimal quantity?

Answer 6

perfect competition bc where P=MC, MSB=MSC

Question 7

what happens when the wage rate increases?

Answer 7

The quantity of labor supplied will increase.

Question 8

if demand for cars increases, what happens to the demand for car mechanics and their wages?

Answer 8

The demand INCREASES resulting in HIGHER wages and employment.

Question 9

If the price of a product declines what happens to labor demand?

Answer 9

Demand DECREASES
producers of that product will demand fewer workers to produce that product

Question 10

compared to perfectly competitive markets, monopsonistic will get ___ workers and pay a ____ wage

Answer 10

fewer workers and pay a lower wage