Eco Exam #4 (Chap. 10, 11, 12, 13, and 14)

economic

...profit is total revenue minus total cost including both explicit and implicit cost

accounting

...profit is total revenue minus total explicit cost

a public good

a tornado siren...

u shape

the tug of war between average fixed cost and average variable cost generates the.... in average total cost

opportunity cost

the value of a business owners time is an example of...

fixed

... costs do not vary with the quantity of output produced

variable

... costs do vary with the quantity of output produced

explicit

.... are input cost that do require an outlay of money by the firm

implicit

.... are input costs that do not require an outlay of money by the firm

diminishing marginal product

.... is the property whereby the marginal product of an input declines as the quantity of input increases

average total cost

.... is the total cost divided by the quantity of output

average variable cost

.... is the variable cost divided by the quantity of output

rival in consumption

.... means that one person's use of the good reduces another person's ability to use it

constant returns

.... of scale - long run average total cost stays the same as the quantity of output changes

diseconomies

.... of scale- long run average total cost rises as the quantity of output increases

total

.... revenue is the amount that the firm receives for the sale of its output

price

..... are the signals that guide the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources

marginal

....cost is the increase in total cost that arises from an extra unit of production

average fixed cost

....is the fixed cost divided by the quantity of output

Coase Theorem

....is the proposition that if the private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own

economies

....of scare often arises because higher production levels allow specialization among workers

marginal product

...of any input in the production process is the increase in quantity of output obtained from one additional unit of that input

negative

Dee loves to landscape her yard, but her neighbor Marvin places a low value on his landscaping. When Marvin's grass is neglected and get long, Dee will mow it for Marvin, this is an example of a private solution to a .... externality problem

Mary pays Cathy $16 so that Mary can smoke

Mary and Cathy are roommate. Mary assigns a $30 value to smoking cigarettes. Cathy values smoke-free air at $15. Which of the following scenarios is a successful example of the Coase Theorem?

when the number of interested parties is large and bargaining cost are high

The Coase Theorem suggests that private markets may not be able to solve the problem of externalities...

risk

a better way to look at the value of human life is to look at the.... that people are voluntarily willing to take and how much they must be paid for taking them

private good, because it is excludable and rival in consumption

a cheeseburger is a....

government regulation

a command-and-control policy is another term for a...

not excludable and rival in consumption

a congested side street in your neighborhood is...

fixed cost

a firms total cost is the sum of..... and variable cost

yes

a market is competitive if each buyer and seller is small compared to the size of the market and has little ability to influence market prices (yes or no)

private good

a mobile phone is a...

excludable and rival in consumption

a pizza is...

public good

a streetlight is a...

free rider

a... is a person who receives the benefit of a good but does not pay for it

transaction

according to the Coase Theorem, private markets will solve externality problems and allocate resources efficiency as long as private parties can bargain with sufficiently low... costs

externality

an.... arises when a person engages in an activity that influences the well-being of a bystander, but the bystander neither pays not receives compensation for that effect

what decisions lie behind the market supply curve

analyzing the behavior of the firm enhances our understanding of...

private goods

are most goods in the economy (private goods or public goods)?

declines

average fixed cost always (declines or increases) as output increases because of diminishing marginal product

increases

average variable cost typically (declines or increases) as output increases because of diminishing marginal product

not excludable, people have an incentive to be free riders

because public goods are...

club good

cable TV is a .... it is excludable but not rival in consumption

maximizing profits

economists assume that the typical person who starts her own business does so with the intention of...

maximize

economists normally believe that the goal of a firm is to .... profit

elephants are a common resource, while cows are private goods

elephants are endangered, but cows are not because...

command-and-control policy to increase social efficiency

emission controls on automobiles are an example of a...

transaction cost

employing a lawyer to draft and enforce a private contract between parties wishing to solve an external problem is an example of a...

negative

exhaust from an automobile is a (positive or negative) externality?

private cose

external costs is the difference between social cost and....

yes

government action can sometimes improve upon market outcomes (yes and no)

positive externality associated with the production of the good and the market equilibrium quantity of the good is less than the socially optimal quantity

if the social value of producing a good is always high than the private value of producing it, then there is a...

excludability of the good

in deciding whether a good is a public good, one must determine the...

increase entrance fees

it is common knowledge that many U.S. national parks have become overused, one possible solution to this problem is to...

club

knowing that goods are excludable and/or rival, they can be grouped into four categories: private goods, public goods, common resources, or ....goods

free riders make it difficult for private markets to supply the socially optimal quantity

national defense is provided by the government because...

more

negative externalities cause the market to produce (more or less) quantity than is socially desirable

tragedy of the commons

on holiday weekends thousands of people picnic in state parks, some picnic areas become so overcrowded the benefit of value of picnicking diminishes to zero, an overcrowded area is an example of...

the ocean

one of the least regulated common resources today is...

a public good or a common resource

people cannot be prevented from using a good if the good is...

less

positive externalities cause the market to produce (more and less) quantity than is socially desirable

they will produce a specific product for which they receive a patent

private companies will invest in medial research if....

there is a free rider problem

producers have little incentive to produce a public good because...

positive

research into new technologies provides a .... externality because it creates knowledge the other people can use

society has to weigh the cost and benefits when deciding how much pollution to allow

since almost all forms of transportation produce some type of pollution...

common

some important... resources are clean air and water; congested roads; and fish, whales, and other wildlife

yes

sometimes the government provides public goods because the private market on its own will not produce an efficient quantity (yes or no)

the equilibrium quantity is greater than the socially optimal quantity

suppose that coal producers create a negative externality equal to $5 per ton of coal. what is the relationship between the equilibrium quantity of coal and the socially optimal quantity of coal?

corrective

taxes that are enacted to deal with the negative externalities called.... taxes

selling fishing licenses and regulating fish legths

the U.S. government protects fish, a common resources by...

total cost

the amount of money that a firm pays to buy inputs is called...

total

the amount that the firm pays to buy inputs is called.... cost

efficient

the bottom of the u shape occurs at the quantity that minimizes average total cost, this quantity is sometimes called the.... of the firm

implicit

the difference between accounting profit and economic profit is... cost

specific knowledge is excludable, while general knowledge is not excludable

the difference between specific knowledge and general knowledge is that...

yes

the government can correct a negative externality by taxing goods (yes or no)

yes

the government can correct a positive externality by subsidizing the goods (yes or no)

the value or benefit of the project

the greatest difficulty with cost benefit analysis of a public project is determining...

social optimum

the intersection between the social cost and demand is the....

supply

the law of.... states that firms are willing to produce and sell a greater quantity of a good when the price of the good is higher

property rights

the market fails to allocate resources efficiently because.... are not well established. That is, some item of value does not have an owner with the legal authority to control it

production

the relationship between the quantity of inputs used to make a good and the quantity of output of that good is called the .... function

opportunity cost

the things that must be forgone to acquire a good are called...

public goods

the three most important.... are basic research, fighting poverty, and national defense

price x quantity

total revenue =

corrective tax

using a toll to reduce traffic when congestion is greatest is an example of a...

common resources are being used too much

what does Tragedy of the Commons mean?

$10 million

what is the dollar value of human life?

economic

what kind of profit is an important concept in what motivated a firm to stay in business (economic or accounting)

internalize the exernality

when a policy succeeds in giving buyers and sellers in a market an incentive to take into account the external effects of their actions, the policy is said to

internalizing the externality

when buyers and sellers in a market take into account the external effects of their actions, they are....

long run

when do firms have more flexibility? in the (long run or short run)?

minimum

when does the marginal cost curve cross the average total cost curve? at its (minimum or maximum)?

yes

when output is very low the typical average total cost is high (yes or no)

give sellers the incentive to account for the external effects of their action

when producers operate in a market characterized by negative externalities, a tax that forces them to internalize the externality will...

public

when speaking of excludable and/or rival in consumption, ... goods are not excludable and not rival in consumption

depends on the business

when speaking of the long run how long does it take a firm to get to the long run?

it is possible for a retired or disabled person to have no value to society

when the value of a human life is calculated according to the economic contribution a person makes society the troubling implication is that...

toll charge on congested roads

which is an example of a government intervention to solve a tragedy of the commons problem?

accountants

which profit is usually larger (accountants or economists)