Microeconomics Chapters 3, 4, & 5

from an economists perspective, when is the government too big?

When the marginal costs from additional government spending exceed marginal benefits.

an increase in the price of a product will reduce the amount of it purchased because

consumers will substitute other products for the one whose price has risen.

The law of demand states that, other things equal:

price and quantity demanded are inversely related

Market failure is said to occur whenever:

private markets do not allocate resources in the most economically desirable way.

which of the following is an example of market failure?

public goods, positive & negative externalities

The pursuit through government of a "transfer of wealth" at someone else's expense refers to:

rent-seeking behavior

When the price of a product rises, consumers shift their purchases to other products whose prices are now relatively lower. This statement describes:

substitution effect

Refer to the diagram. A decrease in demand is depicted by a:

shift from D2 to D1.

the U.S. federal government's largest unfunded liability is

social security

When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of the product. This statement describes:

income effect

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the:

income effect

a demand curve:

indicates the quantity demanded at each price in a series of prices.

Refer to the diagram. The equilibrium price and quantity in this market will be:

$1.00 and $2.00

a surplus of 160 units would be encountered if the price was

$1.60

Refer to the diagram. The highest price that buyers will be willing and able to pay for 100 units of this product is:

$60

consumer surplus

The difference between the maximum amount a person is willing to pay for a good and its current market price.

If two goods are complements:

a decrease in the price of one will increase the demand for the other.

Refer to the diagram. A price of $60 in this market will result in:

a surplus of 100 units.

which of the following is an example of a public good?

a weather warning system

"Earmarks" refer to:

authorized expenditures benefiting a narrow, specifically designated group that are included in more comprehensive spending legislation.

And economist for a bicycle company predicts that, other things equal, a rise and consumer incomes will increase the demand for bicycles. This prediction assumes that:

bicycles are a normal good

Blu-ray players and Blu-ray discs are:

complementary goods

When congressional representatives vote on an appropriations bill, they must vote yea or nay, taking the bad with the good. This statement best reflects the:

concept of limited and bundled choices.

the marginal benefit to society of reducing pollution the clowns with increases in pollution abatement because of the law of:

diminishing marginal utility

the relationship between quantity supplied & it's price is ____ and the relationship between quantity demanded in the price is _____

direct, inverse

The income and substitution effects account for:

downward sloping demand curve

The demand curve shows the relationship between:

price and quantity demanded

college students living off-campus frequently consume large amounts of ramen noodles and boxed mac & cheese. when they finish school and start careers, their consumption of both goods frequently declines. this suggests that ramen noodles and boxed mac & cheese are:

inferior goods

"vote for my special local project and i will vote for yours." this political technique:

logrolling

Refer to the diagram. A decrease in quantity demanded is depicted by a:

move from point y to point x.

Refer to the diagram. An increase in quantity supplied is depicted by a:

move from point y to point x.

refer to the diagrams for two separate product markets. assume that society's optimal level of output in each market is Q0 and that government purposely purposely she has the market supply curve from S to S1 and diagram (a) on the left and from S to S2 and diagram (B) on the right. We can conclude that the government is correcting for:

negative externalities in diagram A and positive externalities in diagram B

The two main characteristics of a public good are:

nonrivalry and nonexcludability

The unlawful misdirection of governmental resources for personal gain is known as:

political corruption

monetary stimulus is only helpful to an economy if

that is in recession

a positive externality or spillover benefit occurs when:

the benefits associated with a product exceed those accruing to people who consume it.

Allocative efficiency occurs only at the output where:

the combined amounts of consumer surplus and producer surplus are maximized.

producer surplus

the difference between the minimum prices that producers are willing to accept for a product and the market price of the product

a negative externality or spillover cost occurs when

the total cost of producing a good exceeds the cost borne by the producer

which of the following is most likely to be an inferior good?

used clothing