Econ Exam 2
which is an example of a quantity quota
a city enforces zoning laws that restrict the number of housing units.
a subsidy is
a government payment designed to encourage particular purchases or productive activities
a tax on buyers causes which of the following
a leftward shift of the demand curve a decrease in quantity sold a increase in the price buyers pay
a tax on sellers causes which of the following
a leftward shift of the supply curve a decrease in quantity sold a increase in the price buyers pay
A market with a large number of sellers and a high level of product differentiation is known as
a monopolistically competitive market
walmart has a large aisle that displays many different kinds of toothpastes. This observation indicates that the toothpaste market is
a monopolistically competitive market
in a market graph, consumers surplus is the area:
above the price and below the demand curve
what is collusion
agreements between sellers to increase their market power
people gain consumer surplus when they purchase an item:
at a price below the value of the benefit they receive from the item.
price ceilings tend to create shortages when used to
bring down price in a competitive market
the economic burden of a tax is the
burden created by the change in after tax prices faced by buyers and sellers
what principle helps buyers and sellers make decisions about whether to trade
cost benefit principle
when the economic surplus in a market is less than it would be if the market were efficient, the market is experiencing
dead weight loss
In 2016, Amazon began charging a 5.75% sales tax on products it sells in the District of Columbia. Holding all else constant, the effects of the tax would be to_______
decrease amazon sales
a subsidy for buyers of a product shifts the
demand curve to the right
buyers bear a smaller incidence of the tax when:
demand is more elastic than supply
profit margin
divide gross profit by the revenue.
dead weight loss is calculated by:
economic surplus at efficient quantity minus economic surplus at actual quantity
because economic profit is calculated based on total costs, it allows firm owners to make better decisions about ____________
entering and exiting a market
the formula for calculating accounting profit is total revenue minus ___________ costs
explicit financial
as output rises, average fixed costs
fall
2 main types of implicit opportunity costs are:
forgone wages and forgone interest
the statutory burden of a tax is the:
government-designated burden of a tax payment
when market leaders produce on a mass scale, new entrants
have a hard time competing
when new sellers enter a market, exiting sellers will
have less market power
demand curves for market power
horizontal is the most market power
which is a positive economic statement
if the government raises taxes, people will have less income available for purchases and saving
a binding floor price
is always above the equilibrium price
if sellers can create switching costs for its product then
it is difficult or costly for customers to switch to another seller of the product
the higher the level of market power among the sellers in a market, the ____________ when the rational rule for sellers is applied
lower the market output
when government regulations are influenced by lobbyists for the producers in a market, the regulations often
make it more difficult for new producers to enter the market
consumer surplus
marginal benefit - purchase price
according to the rational rule for sellers, a seller should choose the output level where ________ and the price is level_________
marginal cost = marginal revenue: that is on the seller's demand curve at the output level
a quantity regulation is a
minimum or maximum quantity that can be sold
using specific business practices that increase a sellers market power and excludes other seller is illegal under the US
monopolizing
the strong incentive of sellers to deter the entry of new sellers is a major reason that:
most markets are imperfectly competitive
when the typical sellers in a market has economic profits, then:
new sellers will enter the market
statements about what option should be chosen are ______ statements
normative
When a company has market power, it is ____ in its market
not a price-taker
In which market structure do the actions of a rival have a significant impact on your operations?
oligopoly
analysis that describes what would happen if various actions were taken is ___________ analysis
positive
what type of relationship exists between the level of a companies market product and price that its owner is able to charge for its product.
positive
what is not a strategy used by a company to lock in customers
pressuring the government to require a license for entry into the market
the producer surplus on a unit sold equal:
price minus marginal cost
when a buyers in a market have market power, then the
product price is lower
In 2017, e bay started charging 20% value -added tax on fees charged to small businesses in the united kingdom all else constant this would ___________ in the united kingdom
raise the prices that e bay sellers charge their customers
sellers try to avoid the entry of new rivals through the use of demand-side strategies. these do NOT include
raising the market demand for the product
which market is an example of a perfectly competitive market?
shares of McDonald's stock
the government wants to encourage buyers to buy such furniture and impose a price ceiling of $250. what occurs as a result of the price ceiling?
shortage of 400,000 pieces of furniture
when firms in a market with free entry, and exit experience economic losses, then:
some sellers will exit the market, reducing average seller losses
a tax on sellers shifts the_______
supply curve to the left
patents on drugs to treat aids were removed in South Africa. how would the market for these drugs have been difficult if there had never been patents on drugs
the drugs would not have developed
the marginal benefit minus the marginal cost equals
the economic surplus
a binding price floor in a market is removed. which of the following is likely to occur as a result
the market price will fall
price ceiling is
the maximum price that sellers can charge in a market
dead weight loss
the reduction in economic surplus resulting from a market not being in competitive equilibrium
which of the following is a characteristic of monopoly that is not present in other market structures
there is only one seller
one of the market failures caused by market power is
underproduction
which statement is based on normative analysis
we should protect the environment
to avoid harm to society, the government often becomes the supplier of a good or service when the respective market
would be a natural monopoly, and the good or service is considered essential