Econ Test 3

rises

At all levels of production beyond the point where the marginal cost curve crosses the average variable cost curve, average variable cost

industrial policy.

Government intervention that aims to promote technology-enhancing industries is called

building more roads.

According to economist Lester Thurow, no city has ever been able to solve its congestion problems by

(iii) only

Accounting profit is equal to (i)total revenue - implicit costs. (ii)total revenue - opportunity costs. (iii)economic profit + implicit costs.

a person engages in an activity that influences the well-being of a bystander and yet neither pays nor receives payment for that effect.

An externality exists when

nevertheless the ability to achieve desirable economic well-being for society as a whole.

Because decisions in a market economy are guided by individual self-interest, there is

the government contributes to its production.

Because general knowledge is not excludable

Louis says her profit is $34,100 and Greg says she lost $6,500.

Dolores used to work as a high school teacher for $40,000 per year but quit in order to start her own catering business. To buy the necessary equipment, she withdrew $20,000 from her savings, (which paid 3 percent interest) and borrowed $30,000 from her uncle, whom she pays 3 percent interest per year. Last year she paid $25,000 for ingredients and had revenue of $60,000. She asked Louis the accountant and Greg the economist to calculate her profit for her.

parks.

Each of the following are provided by nature EXCEPT

a transaction cost.

Employing a lawyer to draft and enforce a private contract between parties wishing to solve an externality problem is an example of

always best resolved by direct regulation.

Environmental degradation is NOT

prices.

For most goods in an economy, the signal that guides the decisions of buyers and sellers is

each dish would be both excludable and rival.

Four friends decide to meet at a Chinese restaurant for dinner. They decide that each person will order an item off the menu and they will share all dishes. When the final bill for the meal comes they decide they will split the cost evenly among each of the people at the table. In this particular case, a tragedy of the commons problem is likely because of each of the following EXCEPT

private goods.

Goods that are both excludable and rival would be considered

variable cost

If a firm produces nothing, which of the following costs will be zero?

assigning limited tasks to their employees, so they can master those tasks.

If a firm wants to capitalize on economies of scale, it may be able to do so by

the government can raise economic well-being through noise-control regulations.

If a sawmill creates too much noise for local residents

gasoline

In many countries, one of the most heavily taxed goods is

(i) and (ii)

Johnny is a sophomore in college and has a 1.5 cumulative grade point average (GPA). Johnny's cumulative GPA will fall even further next semester if he performs worse than (i)his cumulative GPA. (ii)he ever performed before. (iii)he did last semester

because of increasing specialization of workers at low levels of production and increasing coordination problems at high levels of production.

Long-run average total cost curves are often U-shaped

are more efficient

One advantage market economies have over other types of economies is that market economies

protect the rights of inventors for their lifetime.

Patents do NOT

transaction costs

Private solutions often are not possible due to the costs of negotiating and enforcing these solutions. Such costs are called

increase at a decreasing rate.

Refer to Scenario 13-6. Use the following information to answer the following questions. Scenario 13-6 Farmer Jack is a watermelon farmer. If Jack plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 30 watermelons. If he plants 2 bags of seeds, he gets 50 watermelons. If he plants 3 bags of seeds he gets 60 watermelons. A bag of seeds costs $100, and the costs of seeds are his only costs.

will always allocate resources efficiently if private parties can bargain without cost.

The Coase theorem suggests that private solutions to the externality problem

is eliminated when property rights are assigned to individuals.

The Tragedy of the Commons

town could auction off a limited number of sheep-grazing permits.

The Tragedy of the Commons will be evident when a growing number of sheep grazing on the town commons leads to a destruction of the grazing resource. To correct for this problem, the

selling fishing licenses and regulating fish lengths.

The U.S. government protects fish by

minimizes average total cost.

The efficient scale of the firm is the quantity of output that

The private market is the best way to supply education.

The privately-owned school system in Smalltown has a virtually unlimited capacity. It accepts all applicants and operates on both tuition and private donations. Although every resident places value on having an educated community, the school's revenues have suffered lately due to a large decline in private donations from the elderly population. Since the benefit each citizen receives from having an educated community is a public good, which would NOT be true?

a situation in which the market, on its own, fails to allocate resources efficiently.

The term market failure refers to

Curly, Larry and Moe could all be better off if they acted collectively.

The town of Sointenly does not have any public snow-plows. Anyone who wants their street cleared of snow must hire a private snow-plow company to do it for $75. Curly, Larry and Moe all live on a dead-end street, with Curly living at the very end of it. Each one values snow removal at $50. At present, the snow is never cleared from the street. We can conclude that

auctions off the right to license new cars.

To ameliorate the pollution problem outside the central city of Singapore, the Singapore government

tend to free-ride on the knowledge that others have developed.

Too few resources are devoted to the creation of knowledge because profit-seeking firms

Firm B will no longer pollute and Firm A will not reduce its pollution at all.

Two firms, A and B, each currently dump 20 tons of chemicals into the local river. The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution dumped into the river. The government gives each firm 10 pollution permits, which it can either use or sell to the other firm. It costs Firm A $100 for each ton of pollution that it eliminates before it reaches the river and it costs Firm B $50 for each ton of pollution that it eliminates before it reaches the river. After the two firms buy or sell pollution permits from each other, we would expect that

10 fewer tons of pollution into the river and Firm B will dump 50 fewer tons of pollution into the river.

Two firms, A and B, each currently dump 50 tons of chemicals into the local river. The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution dumped into the river. The government gives each firm 20 pollution permits, which it can either use or sell to the other firm. It costs Firm A $100 for each ton of pollution that it eliminates before it reaches the river and it costs Firm B $50 for each ton of pollution that it eliminates before it reaches the river. After the two firms buy or sell pollution permits from each other, we would expect that Firm A will dump

charities and the Golden Rule.

Two types of private solutions to the problem of externalities are

None of the above are correct.

Variable cost divided by quantity produced is

by clearly defining property rights. through regulation. by supplying the good itself.

When the absence of property rights causes a market failure, the government can potentially solve the problem

protect interests of bystanders.

When the government intervenes in markets with externalities it does so to

the Coase theorem

Which of the following choices suggests that the private market can be effective in dealing with externalities?

accounting profit = economic profit + implicit costs

Which of the following expressions is correct?

average total cost = total cost/quantity of output.

Which of the following expressions is correct?

People value goods differently if they are publicly, as opposed to privately, provided.

Which of the following is NOT a reason that the findings of cost-benefit analysis on public goods are only rough approximations?

Interested parties can reach an outcome in which everyone is better off.

Which of the following is true of the Coase theorem?

The firm can vary the number of workers it employs, but not the size of its factory.

Which of these assumptions is often realistic for a firm in the short run?