Econ

Price of cocoa rises by 20%, quantity supplied of cocoa rises by 4%; what is elasticity of supply?

.04/.20 = .2

Statement that describes concept of diminishing marginal utility:

Gladys is hungry and the first piece of pizza she eats tastes wonderful. The fifth piece of pizza she eats makes her sick.

Advantage to using command and control to solve an externality problem is that:

It can be implemented quickly

Which of the following is always true for monopolies?

MR < P

Why do supply curves tend to be more elastic over time?

Sellers have time to adjust and increase production

An increase in supply and a decrease in demand occur in a market. What happens to the equilibrium price and quantity?

The equilibrium price decreases; the change in the equilibrium quantity is ambiguous

Which of the following factors DOES NOT result in a shift of the supply curve?

a change in the demand for a product a change in production technology, number of sellers in the market, costs of production do result in a shift of the supply curve

If the income elasticity of demand of a good is positive, we can conclude that the good is:

a normal good

An increase in supply refers to:

a rightward shift of the supply curve

In a graph showing a straight-line market demand curve the marginal revenue curve is:

a straight line that begins at the same point as the demand curve on the y axis but with twice the slope

The marginal cost curve intersects the average cost curve

at its minimum point

Profit is positive whenever price is greater than:

average cost

If the demand curve is inelastic a price __________ causes a _________ in revenues.

decrease; decrease

Over time, housing shortages caused by rent control:

increase, because the demand for, and the supply of, housing are more elastic in the long run.

Not a source of monopoly power:

inelastic demand for the product economies of scale, laws preventing entry of competitors, and innovation are sources of monopoly power

Under monopoly, the portion of the outgoing consumer surplus that is not transferred to the monopoly firm or still considered consumer surplus is:

known as deadweight loss

The lower the price ceiling is relative to the market equilibrium price, the:

larger the shortage

When external benefits are significant:

market output is too low

The tragedy of the commons is often result of:

nonexcludability and rivalry

Both public goods and common resources are:

nonexcludable

Public goods are:

nonexcludable and nonrival

Toilet paper is a rival good because:

one person's use of toilet paper reduces the ability of another person to use the same sheets

An external cost is a cost incurred by:

people other than the consumer or the producer trading in the market

A free rider is a person who:

receives the benefits of a good but avoids paying for it

The quantity supplied is the quantity that:

sellers are willing and able to sell at a given price

If a tax is imposed on a market with elastic demand and inelastic supply:

sellers will bear most of the burden of the tax

If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase profit by:

selling more units at a lower price per unit

Price ceiling creates a _________ when it is set ___________:

shortage; below the equilibrium price

Which of the following is not an effect of a price ceiling?

surpluses loss of gains from trade, wasteful lineups, and misallocation of resources is an effect from price ceiling

The elasticity of demand:

tells us how responsive consumer purchases are to price changes

The law of demand states that:

the lower the price, the greater the quantity demanded

When the price of a good decreases:

the quantity demanded increases

If the price elasticity of demand is 2 in absolute value, then when the price of Good X rises by 25%:

the quantity demanded of Good X falls by 50%

The opportunity cost of a choice is:

the value of the next best alternative not chosen

Price floors encourage firms to provide ______ quality

too much

Total profit for a given quantity of output can be calculated as:

total revenue - total costs

In consumer choice, one maximizes _______ subject to a budget constraint

utility

Private solutions to externalities are more likely to occur when there are:

well-defined property rights and low transaction costs