modul 8

Question 1

Economists assume that people act as if they have __ in their heads with which to draw marginal benefit and marginal cost curves.

Answer 1

numerical scales

Question 2

The additional benefit and the additional cost of another unit of the activity are considered at the _

Answer 2

margin

Question 3

Models in economic analysis are different from the ______ world.

Answer 3

real

Question 4

How can the marginal decision rule be used to determine the quantity of an activity that maximizes net benefit?

Answer 4

By finding the point where marginal benefit equals marginal cost, the quantity of an activity that maximizes net benefit can be determined.

Question 5

What is net benefit and how is it calculated?

Answer 5

Net benefit is the difference between total benefit and total cost. It is calculated by subtracting the total cost from the total benefit.

Question 6

How do consumers and firms maximize net benefit?

Answer 6

By evaluating each activity at the margin and considering the additional benefit and cost of another unit

Question 7

What is the concept used to determine the quantity of an activity that maximizes net benefit?

Answer 7

Marginal benefit

Question 8

What is the relationship between marginal benefit and marginal cost?

Answer 8

They can be equal or marginal benefit can be greater than marginal cost.

Question 9

What is the maximization assumption made by economists in explaining consumer and firm behavior?

Answer 9

Consumers and firms always maximize their profits

Question 10

What are the concepts of marginal benefit and marginal cost?

Answer 10

Marginal benefit is the additional benefit gained from consuming or producing one more unit of a good or service, while marginal cost is the additional cost incurred from consuming or producing one more unit of a good or service.

Question 11

How can the concepts of marginal benefit and marginal cost be applied to understand the marginal decision rule?

Answer 11

The marginal decision rule states that individuals should continue consuming or producing a good or service as long as the marginal benefit exceeds the marginal cost.

Question 12

What is the net benefit of an activity?

Answer 12

The total benefit of the activity minus its opportunity cost

Question 13

Models in economic analysis are simplified representations of the __ world.

Answer 13

real

Question 14

What assumption do economists make when explaining consumer and firm behavior?

Answer 14

People act as if they have numerical scales in their heads to draw marginal benefit and marginal cost curves.

Question 15

How is net benefit calculated?

Answer 15

Net benefit is calculated by subtracting the total cost of an activity from its total benefit.

Question 16

What assumption do economists make about consumer and firm behavior?

Answer 16

Consumers seek to maximize utility and firms seek to maximize economic profit

Question 17

The marginal cost curve for an activity rises as the ______ marginal benefits are likely to be.

Answer 17

forgone

Question 18

What is the relationship between total benefit and marginal benefit?

Answer 18

Total benefit is always greater than marginal benefit

Question 19

The free rider problem occurs with _ goods, where individuals can benefit from the good without contributing to its production.

Answer 19

public

Question 20

What are the conditions that may lead to market failure?

Answer 20

External costs and benefits

Question 21

What is the concept of market failure?

Answer 21

The inability of the market to allocate resources efficiently

Question 22

The conditions that may lead to market failure can _

Answer 22

vary

Question 23

What is the role of government intervention when external costs and benefits are present?

Answer 23

Government intervention is necessary to address external costs and benefits by implementing regulations, taxes, subsidies, or other policies to internalize the externalities and ensure efficient allocation of resources.

Question 24

What is a free rider?

Answer 24

A person or firm that consumes a public good

Question 25

What is an external cost?

Answer 25

A cost imposed on others outside of any market exchange

Question 26

What conditions may lead to market failure?

Answer 26

Market failure may occur if markets are not competitive or if property rights are not well defined and fully transferable.

Question 27

Why is a common property resource unlikely to be allocated efficiently in the marketplace?

Answer 27

Because the cost of an extra household is zero

Question 28

What is an external benefit?

Answer 28

A benefit imposed on others outside of any market exchange

Question 29

What are external costs and benefits?

Answer 29

External costs are costs imposed on third parties as a result of an economic activity, while external benefits are benefits received by third parties as a result of an economic activity.

Question 30

What are free riders?

Answer 30

People or firms that consume a public good without paying for it

Question 31

What is the difference between private goods and public goods?

Answer 31

Private goods are excludable and rivalrous, meaning they can be owned and consumed exclusively by individuals. Public goods are non-excludable and non-rivalrous, meaning they are available to everyone and consumption by one individual does not reduce availability to others.

Question 32

External costs occur when firms generate costs that are not reflected in their _ costs.

Answer 32

private

Question 33

What is market failure?

Answer 33

A situation where the market is unable to allocate resources efficiently

Question 34

What is a public good?

Answer 34

A good for which the cost of exclusion is prohibitive and for which the marginal cost of an additional user is zero

Question 35

What are examples of public goods?

Answer 35

Examples of public goods include national defense, law enforcement, fire protection, and efforts to preserve endangered species.

Question 36

______ goods are rivalrous and excludable

Answer 36

private

Question 37

A government agency may impose limits on the killing of an animal or destruction of its habitat to prevent the excessive ______ of a common property resource.

Answer 37

private use

Question 38

What is utility in economics?

Answer 38

The satisfaction or happiness that a consumer derives from consuming a good or service

Question 39

What is the difference between total utility and marginal utility?

Answer 39

Total utility measures the total satisfaction from consuming all units of a good, while marginal utility measures the satisfaction from consuming one additional unit of a good

Question 40

What is total utility?

Answer 40

The number of units of utility gained from consuming a given quantity of a good

Question 41

Utility is defined as the __ derived from consuming a good or service

Answer 41

satisfaction

Question 42

What is the definition of utility in economics?

Answer 42

Utility in economics refers to the satisfaction or happiness that a consumer derives from consuming a good or service.

Question 43

What is the utility-maximizing condition?

Answer 43

The utility-maximizing condition is when a consumer allocates their income in a way that the marginal utility per dollar spent is equal for all goods and services.

Question 44

What is the relationship between total utility and quantity consumed?

Answer 44

Total utility increases at a decreasing rate as quantity consumed increases

Question 45

Goods must be ______ in order to apply the marginal decision rule to utility maximization.

Answer 45

divisible

Question 46

What are the limitations of measuring utility?

Answer 46

Measuring utility is subjective and varies from person to person. It is also difficult to quantify utility numerically.

Question 47

Utility is maximized when total outlays equal the ______ available.

Answer 47

budget

Question 48

What is the relationship between marginal utility and quantity consumed?

Answer 48

Marginal utility decreases as quantity consumed increases

Question 49

The marginal decision rule states that an activity should be expanded if its marginal benefit exceeds its ______.

Answer 49

marginal cost

Question 50

______ is the amount by which total utility rises with consumption of an additional unit of a good, service, or activity.

Answer 50

Marginal utility

Question 51

What is the law of diminishing marginal utility?

Answer 51

The law of diminishing marginal utility states that as a consumer consumes more units of a good, the additional satisfaction or utility derived from each additional unit decreases.

Question 52

According to the reading, what is utility in economics?

Answer 52

The measure of how much a consumer enjoys consuming a good or service