Econ Final

How do property rights affect externalities and market failure?

Externalities and market failure will result from incomplete property rights.

Which of the following is a positive economic statement?

If the price of iPhones falls, a larger quantity of iPhones will be purchased.

For each bottle of wine that Italy produces, it gives up the opportunity to make 10 pounds of cheese. France can produce 1 bottle of wine for every 25 pounds of cheese it produces. Which of the following is true about the comparative advantage between the two countries?

Italy has the comparative advantage in wine.

The U.S. government has frequently used a "command-and-control" approach in dealing with pollution. Which of the following describes this approach?

The government imposes quantitative limits on the amount of pollution firms are allowed to generate.

Who is harmed when individual nations move from autarky to free trade?

The owners of the firms that went out of business.

suppose that in October, market analysts predict that the price of platinum will fall in November. What happens in the platinum market in October, holding everything else constant?

The supply curve shifts to the right.

Which of the following is correct?

Trade allows for specialization. Trade is good for nations. Trade allows individuals to consume outside of their individual production possibilities curve.

The distribution of income primarily determines which of the fundamental economic questions?

Who will receive the goods and services produced?

in general, the term "ceteris paribus" means

all else equal.

The principal-agent problem occurs when

an agent pursues his own interests rather than the interests of the principal who hired him.

Which of the following always raises the equilibrium price?

an increase in demand combined with a decrease in supply.

Economists assume that individuals

are rational and respond to incentives.

If the price of muffins, a normal good you enjoy, rises, then

both the income and substitution effects lead you to buy fewer muffins.

Suppose the demand curve for a product is vertical and the supply curve is upward sloping. If a per-unit tax is imposed in the market for this product

buyers bear the entire burden of the tax.

You have a comparative advantage whenever you

can produce something at a lower opportunity cost than others

The economic model of consumer behavior predicts that

consumers will choose to buy the combination of goods and services that make them as well off as possible from those combinations that their budgets allow them to buy.

Suppose Wendy's hamburgers have many close substitutes available. If so, then an increase in the price of Wendy's hamburgers will likely

decrease the quantity of Wendy's hamburgers demanded by a relatively large amount.

"An increase in supply decreases the equilibrium price. The decrease in price increases demand." The statement is

false: decreases in price affect the quantity demanded, not demand.

Microeconomics is the study of

how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices.

Nobel University is considering increasing its tuition to raise revenue. If the school believes that raising tuition will increase revenue it is assuming that the demand for attending the school is

inelastic.

Dumping

is selling a product for a price below its cost of production.

comparative advantage

is the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors.

An advantage of imposing a tax on the producer that generates pollution is that

it forces the polluting producer to internalize the external cost of the pollution.

The production possibilities frontier shows the ________ combinations of two products that can be produced in a particular time period with available resources.

maximum attainable

Compare the demand for pencils with demand for gasoline. The demand for pencils is likely

more inelastic because pencils tend to represent a smaller fraction of a consumer's budget.

If a free-rider problem exists for a good such that people can consume the good without paying for it,

private markets will produce less than the efficient amount of the good.

How do externalities in the production of electricity result in market failure? Because of externalities, the market for electricity will

provide too much electricity.

What role does utility play in the economic model of consumer behavior? When modeling consumer behavior, utility

reflects the satisfaction a consumer receives from consuming a particular set of goods and services

If a 35 percent increase in price of golf balls led to a 42 percent decrease in quantity demanded, then the demand for golf balls is

relatively elastic

What can health insurance companies do to minimize problems associated with asymmetric information such as adverse selection or moral hazard?

require policyholders to pay coinsurance.

In economics, choices must be made because we live in a world of

scarcity.

Asymmetric information is a situation in which one party to an economic transaction has less information than the other party. Two types of problems associated with asymmetric information are adverse selection and moral hazard. Which of the following is an example of adverse selection?

sick people being more likely to purchase health insurance than healthy people.

When the government imposes price floors or price ceilings,

some people win, some people lose, and there is a loss of economic efficiency.

A(n) _____ is a financial security that represents partial ownership of a firm, while a _____ is a financial security that represents a promise to repay a fixed amount of funds.

stock, bond

By definition, economics is the study

the choices people make to attain their goals, given their scarce resources.

If the price of music downloads was to decrease, then

the demand for MP3 players would increase.

Opportunity cost is

the highest valued alternative that must be give up to engage in an activity.

The price elasticity of supply is equal to

the percentage change in quantity supplied divided by the percentage change in price.

In order to derive an individual's demand curve for salmon, we would observe what happens to the utility-maximizing bundle when we change

the price of the product and hold everything else constant

How do externalities

the private benefit from consumption will be different than the social benefit from consumption.

According to the law of demand, holding everything else constant, that as the price of bagels increases,

the quantity of bagels demanded will decrease.

Marginal analysis involves undertaking an activity

until its marginal benefits equal marginal costs.

If demand is perfectly inelastic, the absolute value of the price elasticity of demand is

zero