Econ final

When a driver enters a crowed highway, he increases the travel times of all other drivers on the highway. This is an example of a negative externality.

True

When a tax is imposed on buyers, consumers surplus increases and producers surplus decreases

True

When goods are available free of charge, the market forces that normally allocate resources in our economy are absent

True

A price floor is...

A legal minimum on the price at which a good can be sold

Consider Mary's decision to go to college. If she goes to college, she will spend $24,000 on tuition, $12,000 on room and board, and $19,000 on books. If she does not go to college, she will earn $16,000 working in a store while staying at her parents house. Mary's costs of going to college is

$53,000

T/F: trade allows a country to consume outside its produced possibilities frontier

True

Suppose that a firm in a competitive market faces the following revenue and costs Refer to the table above. If the firm is currently producing 14 units what would you advise the owners (at 14 units the MC and MR are both 7)

Continue to operate at 14 units

Because there are many sellers in a competitive market, individuals firms are unable to max profits

False

T/F: Efficiency means everyone in the economy should receive an equal share of the goods and services produced

False

The two characteristics of a company in a competitive market are 1. Many buyers and sellers in the market and 2. The goods offered by the various sellers are highly differentiated

False

If china decides to trade with France, we know that...

France and china will both benefit

if the demand for donuts is elastic, then a decrease in the price of donuts will...

Increase total revenue of donut sellers

Prices direct economic activity in a market economy by...

Influencing the actions of buyers and sellers

Total cost is the

Market value of the inputs a firm uses in production

An externality is the uncompensated impact of...

One persons actions on the well being of a bystander

Minimum wage laws dictate...

Only a minimum wage that firms mist pay for workers

Goods that are excludable include both

Private goods and club goods

A tax on a good...

Raises the price that buyers pay and lowers the price that sellers receive

In a market economy, economic activity is guided by...

Self interest and prices

Efficiency means that...

Society is getting the most it can from its scarce resources

Which of the following is NOT correct

The government cannot improve upon the outcomes of private markets

A firm is currently producing 100 units of output per day. The manager reports to the owner that producing the 100th unit costs the firm $5. The firm can sell the 100 for $5. The firm should continue to produce 100 units in order to max its profits (or min its loses)

True

A good that is excludable but it rival is known as a club good

True

Accounting profit is greater than or equal to economic profit

True

F/F: when a free market for a good reaches equilibrium, anyone who is willing and able to pay the market price can buy the good

True

Firms in a competitive market are said o be price takers because there are many sellers in the market, and the goods offered by the firs are very similar if not identical

True

T/F: Good assumptions simplify a problem without substantially affecting the answer

True

T/F: Scarcity means that there is less of a good or resource available then people with to have

True

T/F: equality refers to how the pie is divided, and efficiency refers to the size of the economic pie

True

T/F: in a perfectly competitive market, the goods offered for sale are all exactly the same

True

T/F: the cost of an action is measured in terms of foregone opportunities

True

T/F: the law of demand states that, other things equal when the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises

True

T/F: the scientific method is the dispassionate development and testing of theories about how the world works

True

Walter used to work as a high school teacher for 40,000 per year but quit in order to start his own painting business. To invest in his painting bus, he withdrew 20,000 from saving it, which paid 3% interest, and borrowed 30,000 from his uncle, who he pays 3% interest per year. Last year Walter paid 25,000 for supplies and has a revenue of 60,000 Walter asked Tyler the accountant and Greg the economist to calculate his painting business costs.

Tyler says his costs are 25,900 and Greg says his costs are 66,500

Economics is the study of how society manages its...

Unlimited wants and limited resources

The opportunity cost of an item is...

What you gave up to get that item

A state owned bridge is...

a common resource when it is congested, but it is a public good when it is not congested

Which of the following statements about well maintained yard best converts the general nature of the externality

a well maintained yard conveys a positive externality becasue it increases the value of adjacent properties in the neighborhood

The provision of a public good generates a...

positive externality and the use of a common resource generates a negative externality