EC8 Test 2

A weather pattern that produces a bumper corn crop. This will _______________ corn prices by shifting the supply curve ____________ for corn

decrease, rightward

The labor demand curve will shift leftward​ when: A. a​ labor-saving technology is introduced. B. the demand for the​ firm's product increases. C. the price of the​ firm's product increases. D. the value of the marginal product of labor​ (VMPL) increases.

A

What is the problem with the argument that infant industries need to be protected from foreign​ competition? A. Since the stock of deadweight losses builds up over​ time, the total lost surplus will never be made up. B. Because the world price will continue to​ drop, the domestic industry will never catch up in any case. C. Starting a company in isolation may deprive it of​ "technological spillovers" that its​ competitors, all located near one​ another, may enjoy. D. Foreign companies may do a better job of providing the good or service. E. Changing a comparative advantage is nearly impossible and so the domestic industry will not likely survive anyway.

C

Kentucky has a production possibilities curve for the production of wine and cotton as shown in the graph. If Kentucky moves its resources increasingly into the production of​ cotton, the opportunity cost of doing so ____________ at an _____________ rate .

increases, increasing

In the case of the negative​ externality, the socially efficient output will be ________ relative to the market quantity.

low

Positive externalities result in a _______________ shift of the _______________ curve. There _____ a deadweight loss with a positive externality.

rightward, demand, is

Compared to the market for​ cars, the market for vintage buttons has fewer buyers and sellers. Social surplus is likely to be higher in the market for cars than in the vintage button market. Using the concept of Pareto​ efficiency, which of the following statements is likely to be​ true? A. The outcome in the market for vintage buttons is Pareto efficient because it is not a perfectly competitive market. B. The outcome in the market for vintage buttons is not Pareto efficient because it is a perfectly competitive market. C. The outcome in the market for cars is not Pareto efficient because it is not a perfectly competitive market. D. The outcome in the market for cars is Pareto efficient because it is a perfectly competitive market.

D

All of the following statements about Pigouvian taxes are​ true, except: A. They are designed to increase quantity toward optimal quantity. B. The​ per-unit tax should equal the marginal external cost. C. They use a market based approach. D. They cause the market supply curve to shift left.

A

Does price gouging have the same effect as setting prices above equilibrium​ level? A. ​No, price gouging is actually an equilibrium​ outcome, while the setting of prices above equilibrium is not. B. ​No, price gouging harms​ buyers, while prices set above equilibrium damages sellers. C. ​Yes, both result in unjustifiably high prices given underlying supply and demand conditions. D. ​Yes, both produce an excess of quantity supplied over quantity demanded.

A

A linear PPC would show _______________ opportunity costs ​, and a PPC that is curved away from the origin would show ________________ opportunity costs .

constant, increasing

If there are no​ "losers" in free​ trade, does it matter if wages and employment fall when a country engages in free​ trade? A. ​Yes, because free trade is not​ "fair trade." B. ​No, because the winners are not responsible for the effects of their comparative advantage. C. ​No, because the losers can immediately go out and get new jobs. D. ​Yes, it is diffcult to pinpoint who the losers are and how much each lost.

D

Firm A uses production technology that affects the environment. Which of the following are​ command-and-control policies used by the government to regulate firm​ A? ​(Check all that apply.​) A. The government makes it compulsory for firm A to use environment friendly technology. B. Firm A has to pay a penalty to the government for not using​ environment-friendly technology. C. Firm A is not allowed by the government to produce more than 100 units if it does not use​ environment-friendly technology. D. Firm A receives a reward from the government for using​ environment-friendly technology.

A + C

Examples of direct regulation include​ ____________. ​(Check all that apply​.) A. antismoking laws. B. price ceilings. C. fishing quotas. D. subsidies. E. taxes.

A, B, + C

Which of the following economic tools can be used to solve the tragedy of the​ commons? ​(Check all that apply.​) A. Incentives to​ self-regulate the use of resources. B. Pigouvian tax. C. Pigouvian subsidy. D. Privatization of the resource.

A, B, + D

Why do public goods suffer from a​ free-rider problem? ​(Check all that apply.​) A. Because nonpayment does not prevent consumption. B. Because the consumer consumes more than their fair share. C. Because the consumer has the incentive to pay for this good. D. Because the consumer pays less than their fair share of its cost.

A, B, + D

Social surplus is the​ ____________. A. excess of aggregate demand over aggregate supply. B. difference between the amount that buyers actually pay and what they wish to pay. C. difference between consumer surplus and producer surplus. D. total value from trade in a market.

D

Which of the following is not an example of when the free market fails to generate maximum social​ surplus? A. Public goods. B. Private goods. C. Common pool resources. D. Externalities.

B

Which of the following is the correct definition of marginal social​ cost? ​(Check all that apply​.) A. marginal cost plus marginal benefit. B. marginal private cost plus marginal cost of externality. C. marginal cost of the externality plus marginal external cost. D. marginal private cost plus marginal external cost.

B + D

Which of the following statements explains the concept of the tragedy of the​ commons? ​(Check all that apply.​) A. It occurs due to excludability and​ non-rivalry. B. It results when the free market equilibrium quantity is higher than the optimal equilibrium quantity. C. It is an example of a positive externality. D. The open access to common resources results in their depletion through overuse.

B + D

How does the market for inputs like labor differ from the market for goods and​ services? ​(Check all that apply​.) A. The market for inputs resolves shortages and surpluses through​ government-supervised negotiations. B. Firms are sellers in the market for goods and​ services, while individuals are sellers in the market for inputs. C. Firms are buyers in the market for​ inputs, while individuals are buyers in the market for goods and services. D. The demand for inputs is derived from the demand for final goods and services.

B, C, + D

One reason a country might seek to implement protectionist policies could be​ to: A. increase imports to satisfy domestic demand. B. participate in foreign trade and investment. C. maintain its​ culture's uniqueness. D. increase exports.

C

__________ goods are goods that are highly excludable but​ non-rival in​ consumption, e.g., Movie theaters. ___________ goods are goods that are highly excludable and highly rival in​ consumption, e.g.,​ ice-cream cones. ___________ goods are goods that are​ non-rival in consumption and​ non-excludable, e.g., uncongested no toll roads. ____________ resource goods are a class of goods that are rival and​ non-excludable, e.g., mines.

Club, ordinary private, public, common pool