Econ Chapters 6-11 Concepts

The United States has a comparative advantage in _____-skilled labor. This explains why the U.S. is a net _____ of manufactured goods.

high; importer

which is considered a nonexcludable good?

public beaches

Canada produces lettuce but can also export it. If Canada exports some lettuce

the world price is higher than the domestic price

Saudi Arabia has a tremendous comparative advantage in oil production. Which factor is a source of this comparative advantage?

large reserves of crude oil

The person with the LOWEST opportunity cost of producing a particular good is said to have a(n)

comparative advantage

which of the following is most likely to be traded internationally?

hair gel

If Italy levies tariffs on American goods entering Italy, this will tend to

harm american producers and benefit italian producers

The free-rider problem is most common when a good is

nonexcludable

How do rice farmers in rural Indonesian villages figure out that they need to produce more rice when the demand for it has risen in other parts of the world?

An increase in the price of rice gives them a signal that rice is more valuable.

Which statement is a positive externality?

Edwin buys a run-down house, renovates it, and increases the property values of all the houses in the neighborhood.

When a good is nonrival and nonexcludable, the good is referred to as

a public good

Which of the following would be both nonrival and nonexcludable?

a siren tornado warning system

On a market graph, producer surplus is the area that is

above the supply curve and below the price.

Consumer surplus is represented by the area _____ the demand curve and _____ the price that the consumer pays.

below; above

the economic burden of a tax is the

burden created by the change in after-tax prices faced by buyers and sellers

You have an absolute advantage in producing a product if you

can produce the product using the fewest inputs

If the government imposes a $15 tax on cheap wine, and the price of cheap wine increases by $12

consumers are paying more of the tax than producers are.

Since the United Kingdom imports a large quantity of textiles from Sri Lanka, the overall wages of English textile workers have _____, while the price of textiles in the United Kingdom has _____.

decreased; decreased

a tax on buyers shifts the

demand curve to the left

If Bishan wants to capitalize on comparative advantage in his life, then he should

do more of what he is relatively good at and then trade for other things.

Countries benefit from trade by exporting goods in which their opportunity costs are relatively _____ and importing goods in which their opportunity costs are relatively _____.

low; high

a minimum price that the guarantees farmers will receive for a particular crop is a(n)

price floor (or price support)

The benefit enjoyed by a buyer as a result of purchasing one additional unit of a good is the marginal _____ benefit.

private

A tax that the government collects from the consumers of a good

shifts the demand curve downward

An export is a good or service

sold to a foreign buyer

When a quota is used to control an externality, the government must determine both _____ and _____.

the socially optimal quantity; how to distribute that quantity across suppliers

If you pay a price exactly equal to your marginal benefit, then your consumer surplus is

$0

uppose the government imposes a $15 per month tax on internet service. If the demand curve for internet service is perfectly inelastic, and the supply curve is upward-sloping, the monthly price for internet service will increase by

$15

a subsidy is

1) a negative tax, 2) a payment made by the government to those who make a specific choice

People have different abilities for performing the same two tasks, and you want to identify who has a comparative advantage in one of the tasks. Which of the following is NOT one of the three steps for identifying, who has a comparative advantage in performing the selected task?

Identify which person can perform the selected task most quickly.

Which of the following statements is TRUE regarding comparative advantage and absolute advantage?

People can have a comparative advantage without having an absolute advantage in a task.

Which of the following is a TRUE statement about work assignments based on comparative advantage?

The person with the lowest opportunity cost at a task should perform it.

An external cost is

a cost imposed on bystanders

which of the following is an example of a quota?

a government limits the amount of a product that can be sold in a market

In 2004, Kenya became the first country to abolish the sales tax on menstrual products. The effect of this tax repeal would be

an increase in sales of menstrual products

People gain consumer surplus when they purchase an item

at a price below the value of the benefit they receive from the item

Mario is willing to sell an extra unit of his product as long as price is

at least as high as the marginal private cost

The world demand curve slopes downward because, as the world price of a product falls

consumers want to buy a larger quantity

The marginal external cost is the

external cost imposed on bystanders by one additional unit of output.

Roommates Samara and Zendaya are hosting a Christmas party and have to make snacks for their guests and ornaments for themselves. Samara and Zendaya know that to finish both tasks as quickly as possible, each should focus on just one task, but they don't know who should do what. Samara and Zendaya should determine which roommate

has the comparative advantage in preparing snacks

The Coase theorem states that the externality problem can be solved by private bargaining

if bargaining is costless and property rights are clearly established.

The United States has a comparative disadvantage in _____-skilled labor. This explains why the U.S. is a net _____ of high-skilled services.

low; exporter

Suppose the absolute value of the price elasticity of demand for Harley Davidson motorcycles is 4.04, while the price elasticity of supply for Harley Davidson motorcycles is 0.22. If Congress reinstates a luxury tax on high-end motorcycles, who will pay more of the tax?

motorcycle builders will pay more

Municipal law enforcement and iTunes downloads are similar in that both are _____, but they differ in that municipal law enforcement is _____, while iTunes downloads are _____.

nonrival in consumption; nonexcludable; excludable

If the United States removed all tariffs and quotas on lumber imports into the United States

producer surplus would decrease

Suppose that in the market for new furniture, sales are allocated to the sellers who are willing and able to produce the good at the lowest cost. The market would thereby maximize

producer surplus.

In the importing country, the MOST likely effect of a tariff is to

raise the price and decrease the quantity demanded

If Italy imposes a tariff on imported shoes, we should expect the domestic price of shoes in Italy to _____, the domestic consumption of shoes to _____, and the domestic production of shoes to _____.

rise; fall; rise

On hot summer days, parking lots at Disneyland are usually full by early morning, even though one must pay to park there. Parking at such lots is _____ in consumption and _____.

rival; nonexcludable

India exports shirts, which are labor-intensive, to the United States. The likely source of India's comparative advantage in shirts is

that, in comparison with the United States, India is a labor-abundant country.

Traffic congestion is a common example of a negative externality. In principle, it should be possible for drivers to negotiate the right to drive at particular times, thereby compensating those who would prefer not to drive at peak times and solving the externality. The most likely reason these negotiations do NOT occur is that

the bargaining costs of such negotiations would be prohibitive, as there are (in large cities) many interested parties.

Which of the following is an example of a trade cost associated with a U.S. citizen importing a sweater produced in India?

the cost of the tariff on imported sweaters from india

marginal private cost is the

the cost paid by the seller in producing one additional unit of output.

The highest price that Dara would be willing to pay for a particular vase is

the marginal benefit she would receive from the vase

One problem with assuming that people's willingness to pay is a measure of the marginal benefit they would receive from the product is that

willingness to pay reflects ability to pay as well as marginal benefit.