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70 Cards in this Set
- Front
- Back
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Ina market economy, government intervention A. will always improve market outcomes. B. is necessary to control individual greed. C. may improve market outcomes in the presence of externalities. D. reduces efficiency in the presence of externalities. |
C |
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Inthe absence of externalities, the "invisible hand" leads a market tomaximize A. producer profit from that market. B. both equality and efficiency in that market. C. total benefit to society from that market. D. output of goods or services in that market. |
C |
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Anexternality A. causes demand to exceed supply. B. strengthens the role of the "invisible hand" in the marketplace. C. affects buyers but not sellers. D. results in an equilibrium that does not maximize the total benefits to society. |
D |
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Anexternality is A. the proposition that private parties can bargain without cost over the allocation of resources. B. a market equilibrium tax. C. the costs that parties incur in the process of agreeing and following through on a bargain. D. the uncompensated impact of one person's actions on the well-being of a bystander. |
D |
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Allexternalities A. cause equilibrium prices to be too low. B. cause markets to fail to allocate resources efficiently. C. benefit producers at the expense of consumers. D. cause equilibrium prices to be too high. |
b |
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Whenan externality is present, the market equilibrium is A. inefficient, and the equilibrium does not maximize the total benefit to society as a whole. B. efficient, and the equilibrium maximizes the total benefit to society as a whole. C. inefficient, but the equilibrium maximizes the total benefit to society as a whole. D. efficient, but the equilibrium does not maximize the total benefit to society as a whole. |
a |
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Dioxinemission that results from the production of paper is a good example of anegative externality because A. self-interested paper firms are generally unaware of environmental regulations. B. toxic emissions are the best example of an externality. C. there are fines for producing too much dioxin. D. self-interested paper producers will not consider the full cost of the dioxin pollution they create. |
d |
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Ifan aluminum manufacturer does not bear the entire cost of thesmoke it emits, it will A. emit a lower level of smoke than is socially efficient. B. emit an acceptable level of smoke. C. emit a higher level of smoke than is socially efficient. D. not emit any smoke in an attempt to avoid paying the entire cost. |
c |
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Which of the following is an example of an externality? A. a beautiful flower garden outside of the local post office B. a flu shot that prevents a student from transmitting the virus to her roommate C. cigarette smoke that permeates an entire restaurant D. All of the above are correct. |
d |
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Whichof the following represents a way that a government can help the private marketto internalize an externality? A. subsidizing goods that have positive externalities B. taxing goods that have negative externalities C. The government cannot improve upon the outcomes of private markets. D. Both a and b are correct. |
d |
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Allremedies for externalities share the goal of A. moving the allocation of resources toward the market equilibrium. B. decreasing the allocation of resources. C. increasing the allocation of resources. D. moving the allocation of resources toward the socially optimal equilibrium. |
d |
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Whichof the following statements is correct? A. Government should tax goods with negative externalities and subsidize goods with positive externalities. B. Government should tax goods with positive externalities and subsidize goods with negative externalities. C. Government should subsidize goods with either positive or negative externalities. D. Government should tax goods with either positive or negative externalities. |
a |
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Whichof the following goods is both excludable and rival in consumption? A. efforts to fight poverty B. a wristwatch C. fire protection in a small town D. fish in the ocean |
b |
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Underwhich of the following scenarios would a park be considered a common resource? A. Visitors to the park must pay an admittance fee, but there are always plenty of empty picnic tables. B. Visitors can enter the park free of charge, but frequently all of the picnic tables are in use. C. Visitors to the park must pay an admittance fee and frequently all of the picnic tables are in use. D. Visitors can enter the park free of charge and there are always plenty of empty picnic tables. |
b |
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TheGreat Lakes are A. club goods. B. common resources. C. private goods. D. public goods. |
b |
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Amobile phone is a A. club good. B. private good. C. public good. D. common resource. |
b |
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Fireprotection is a A. a public good, because it is excludable but not rival in consumption. B. club good, because it is rival in consumption but not excludable. C. club good, because it is excludable but not rival in consumption. D. a public good, because it is rival in consumption but not excludable. |
c |
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Becauseit is A. neither excludable nor rival in consumption, a sweatshirt is a public good. B. both excludable and rival in consumption, a sweatshirt is a private good. C. excludable but not rival in consumption, a sweatshirt is a club good. D. rival in consumption but not excludable, a sweatshirt is a club good. |
b |
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Excludabilityis the property of a good whereby A. a person can be prevented from using it. B. the resource is congestable. C. one person's use diminishes other peoples' use. D. the government rations the quantity of a good that is available. |
a |
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Ifpeople can be prevented from using a certain good, then that good is called A. a common resource. B. a public good. C. excludable. D. rival in consumption. |
c |
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Goodsthat are not excludable include both A. common resources and public goods. B. private goods and club goods. C. private goods and public goods. D. club goods and common resources. |
a |
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Bothpublic goods and common resources are A. nonrival in consumption. B. excludable. C. rival in consumption. D. nonexcludable. |
d |
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Goodsthat are not excludable are usually A. free of charge. B. higher priced than rival goods. C. in short supply. D. higher priced than excludable goods. |
a |
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Aview of a spectacular sunset along a private beach is an example of a A. nonrival but excludable good. B. rival but nonexcludable good. C. public good. D. private good. |
a |
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Somegoods can be either common resources or public goods depending on A. whether the good is rival in consumption. B. the marginal cost of the good. C. whether the good is excludable. D. None of the above is correct. |
a |
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Whichof the following would be considered a private good? A. a ferry boat ride to an island with open seating B. a public beach C. a swimming suit D. fish in the ocean |
c |
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Peoplecan be prevented from using a good if the good is A. a private good or a common resource. B. a private good or a club good. C. a private good or a public good. D. a public good or a common resource. |
b |
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Afree rider is a person who A. will only purchase a product on sale. B. can produce a good at no cost. C. rides public transit regularly. D. receives the benefit of a good but avoids paying for it. |
d |
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Thefree-rider problem exists with A. public transportation B. knowledge. C. All of the above are correct. D. online music subscriptions. |
b |
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Becauseof the free-rider problem, A. private markets tend to undersupply public goods. B. the federal government spends too many resources on national defense and not enough resources on medical research. C. poverty has increased. D. fireworks displays have become increasingly dangerous. |
a |
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Thephenomenon of free riding is most closely associated withwhich type of good? A. public goods B. club goods C. common resources D. private goods |
a |
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Economistsnormally assume that the goal of a firm is to A. minimize its explicit costs. B. minimize its total cost. C. maximize its profit. D. maximize its total revenue. |
c |
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Theamount of money that a firm receives from the sale of its output is called A. total net profit. B. total gross profit. C. net revenue. D. total revenue. |
d |
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Totalrevenue equals A. (price x quantity) - total cost. B. output - input. C. price/quantity. D. price x quantity. |
d |
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Whichof the following can be added to profit to obtain total revenue? A. capital profit B. operational profit C. net profit D. total cost |
d |
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IfDanielle sells 300 wrist bands for $0.50 each, her total revenues are A. $600. B. $150. C. $299.50. D. $300. |
b |
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Marcussells 300 candy bars at $0.50 each. His total costs are $125. His profits are A. $25. B. $124.50. C. $150. D. $125. |
a |
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Implicitcosts A. are not part of an economist's measurement of opportunity cost. B. do not enter into the economist's measurement of a firm's profit. C. do not require an outlay of money by the firm. D. are also known as variable costs. |
c |
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Which of thefollowing is an example of an implicit cost? (i) the owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm (ii) interest paid on the firm's debt (iii) rent paid by the firm to lease office space A. (i) only B. (iii) only C. (ii) and (iii) only D. (i) and (iii) only |
a |
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Totalrevenue minus both explicit and implicit costs is called A. average total cost. B. accounting profit. C. economic profit. D. total cost. |
c |
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Totalrevenue minus only explicit costs is called A. implicit profit. B. average total cost. C. accounting profit. D. economic profit. |
c |
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Totalrevenue minus only implicit costs is called A. accounting profit. B. opportunity cost. C. economic profit. D. None of the above is correct. |
d |
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Tomquit his $65,000 a year corporate lawyer job to open up his own law practice.In Tom's first year in business his total revenue equaled $150,000. Tom'sexplicit cost during the year totaled $85,000. What is Tom's economic profitfor his first year in business? A. $0 B. $20,000 C. $65,000 D. $85,000 |
a |
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Suppose that Abdul opens a coffee shop. He receives a loan from a bank for $100,000. He withdraws $50,000 from his personal savings account. The interest rate on the loan is 8%, and the interest rate on his savings account is 2%. -Abdul'sexplicit cost of capital is A. $1,000. B. $2,000. C. $4,000. D. $8,000. |
d |
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Suppose that Abdul opens a coffee shop. He receives aloan from a bank for $100,000. He withdraws $50,000 from his personal savingsaccount. The interest rate on the loan is 8%, and the interest rate on hissavings account is 2%. -Abdul'simplicit cost of capital is A. $1,000. B. $2,000. C. $8,000. D. $4,000. |
a |
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Ifa production function shows declining marginal product of an input as thequantity of the input increases, then the production function exhibits A. diminishing profitability. B. decreasing marginal product. C. increasing marginal product. D. increasing returns to scale. |
b |
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Whichof the following costs do not vary with the amount of output a firm produces? A. average fixed costs B. marginal costs and average fixed costs C. fixed costs and average fixed costs D. fixed costs |
d |
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Fixedcosts can be defined as costs that A. are incurred even if nothing is produced. B. vary inversely with production. C. vary in proportion with production. D. are incurred only when production is large enough. |
a |
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Sonia opened a yogastudio where she teaches classes and sells yoga clothing. Fixed costs forSonia's yoga studio include the cost of the (i) tank tops. (ii) wages paid to the other yoga instructors. (iii) lease on the studio space. (iv) insurance that the landlord requires Sonia to carry for the studio. A. (i) and (ii) only B. (iii) and (iv) only C. (i) only D. (i), (ii), (iii), and (iv) |
b |
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Sonia opened a yogastudio where she teaches classes and sells yoga clothing. Variable costs forSonia's yoga studio include the cost of the (i) tank tops. (ii) wages paid to the other yoga instructors. (iii) lease on the studio space. (iv) insurance that the landlord requires Sonia to carry for the studio. A. (i) only B. (i) and (ii) only C. (iii) and (iv) only D. (i), (ii), (iii), and (iv) |
d |
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Ifa firm produces nothing, which of the following costs will be zero? A. variable cost B. opportunity cost C. total cost D. fixed cost |
a |
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Averagetotal cost equals A. (fixed costs + variable costs) divided by quantity produced. B. change in total costs divided by change in quantity produced. C. (fixed costs + variable costs) divided by change in quantity produced. D. change in total costs divided by quantity produced. |
a |
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Cindy's Car Wash has average variablecosts of $2 and average total costs of $3 when it produces 100 units of output(car washes). The firm's total variable cost is A. $100. B. $200. C. $300. D. $500. |
b |
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how do you find profit |
total revenue- total cost |
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how do you find marginal product |
change in quantity over change in ____ (ex. labor) |
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how do you find marginal cost |
change in total cost / change in quantity |
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how do you find total cost |
fixed cost + variable cost |
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how do you find variable cost |
average variable cost x quantity |
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why is marginal product important |
Rational people think at themargin |
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explicit vs. implicit principle |
The cost of something is what you give up to get it. |
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how do you find average variable cost |
variable cost over quantity |
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how do you find average fixed cost |
fixed cost over quantity |
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when the quantity equals 0 then the variable cost equals what |
0 |
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how do you find total revenue |
price x quantity |
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what is the output |
quantity |
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what are the 4 factors of production |
land, labor, capital, entrepreneurship |
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what is excludable and rival |
private goods |
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what is excludable and not rival |
club good |
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what is not excludable but rival |
common resource |
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what is not excludable or rival |
public good |
