Econ Test 2

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

the marginal product from the last dollar spent on each input is equalized.

In​ equilibrium, an optimal mix of production factors is achieved​ when:

Not​ necessarily, since the burden of the tax depends on price elasticity.

Is the entire burden of the tax always borne by those on whom it is​ imposed?

who bears the burden of a tax.

Tax incidence refers to​ ____________.

private bargaining will result in an efficient allocation of resources.

The Coase Theorem states that​ ____________.

1. when property rights are not clearly defined. 2. there are a large number of agents. 3. transaction costs become high

The Coase Theorem will will breakdown when​ ____________.

the marginal benefit to a group is different than to that of the individual.

The​ free-rider dilemma occurs because

does not pay for a good because nonpayment does not prevent consumption.

The​ free-rider problem arises when an individual​ ____________.

MPK x P.

VMPK equals​ _________.

To induce producers of a negative externality to reduce production to the socially optimal level.

What is the intent of a Pigouvian​ tax?

A. The high average salary means that the opportunity cost of leisure has​ risen, giving players a strong incentive to play another year.

Why might ballplayers in 2012 be more likely to choose to play an extra​ year? A. The high average salary means that the opportunity cost of leisure has​ risen, giving players a strong incentive to play another year. B. Because the salary from playing is the price of a year of​ leisure, an increase in its price causes players to substitute away from​ leisure, which means playing another year. C. For many​ players, the high average salary exceeds the value of an extra year of​ leisure, inducing them to play another year. D. All of the above.

atleast, 150

You accept a new job for a wage of​ $30,000 at a newspaper. You join the sales​ team, which consists of 10 people who try to sell online subscriptions. Each subscription sells for​ $200. When you talk to your​ boss, she says that you are the 11th​ worker, and that if you had not joined the​ team, she would have done okay with just 10 people -- but ​"great to have​ you, we are more productive with you on​ board!" Assuming that the wage is determined by market​ forces, your boss must believe that your marginal product of labor is _______ equal to ____

1. marginal private cost plus marginal external cost. 2. marginal private cost plus marginal cost of externality.

Which of the following is the correct definition of marginal social​ cost?

1. A negative externality occurs when an economic activity has a spillover cost to a bystander. 2. Deadweight loss can be either a foregone benefit or the total cost of the externality to society.

Which of the following statements are true regarding​ externalities?

A. At all times an increase in wage increases labor supply.

Which of the following statements is not​ correct? A. At all times an increase in wage increases labor supply. B. An increase in the price of a product increases demand for labor. C. The work preference of labor affects the supply curve. D. Equilibrium is obtained at the intersection of the demand and supply curves.

The policy should ensure that if any pollution is created it is overall worth it.

Which of the following statements is true regarding the goal of any policy on pollution​ abatement?

D. All of the above

Why are there two different views on the effect of taxation on labor supply in the United​ States? A. The effect of a tax on labor supply depends on the amount of deadweight loss created by the tax. B. It depends on normative questions such as how much to tax or how much government intervention is necessary. C. The effect of a tax on labor supply depends on the elasticity of labor supply. D. All of the above

is not explicitly recognized by the buyers and sellers in the market.

Negative externalities impose an additional cost​ that:

at any point on or below the curve.

On the Production Possibilities​ Curve, possible production levels are​ represented:

Do not, raises, lowers

One reason economists in general _____ favor protectionism is because it ______ social surplus.

For those plumbers who choose to work​ more, the substitution effect​ (on leisure) of the wage increase is stronger than the income effect. For those who decided to work​ less, the reverse is true.

Suppose wages in the market for plumbers increase. Some plumbers start taking on extra plumbing jobs while others cut back on the number of hours they work. What could explain​ this?

No, an identical tax would yield similar effects but not the same​ effects, since it is rather unlikely that the relative demand and supply elasticities would be the same in each market.

suppose an identical tax is levied on​ capital, labor, and land. Would the tax have the same effect in each of these​ markets? Explain your answer.

A. skilled workers have B. skilled workers have C. unskilled workers have

A country has two types of​ workers, skilled and unskilled. Workers can produce either chairs or sofas. Output per worker is as​ follows: A. According to the​ data, ___________ an absolute advantage in making either type of good. Based on comparative​ advantage, who should make chairs and who should make sofas​? B. ________ a comparative advantage in making chairs. C. ________ a comparative advantage in making sofas.

Eliminating all pollution will eliminate all the benefits associated with the activities that create pollution.

A friend in your environmental economics study group suggests that taxes on pollution are ineffective because they do not eliminate all pollution. Based on your understanding of environmental​ economics, you argue against your​ friend's suggestion saying that taxes on pollution are effective. Which of the following reasons will strengthen your​ argument?

D. it is not affected by retail price

All of the following are true of the demand for labor​ except A. It follows the law of demand. B. It is derived from the marginal product of labor. C. It is the same as the value of the marginal product of labor. D. It is not affected by the retail price.

Yes, as long as the market equilibrium still​ holds, the outcome is still Pareto efficient.

Assume that some of the buyers in this market are now willing to pay more for a drill than they did earlier. Does this mean that the market for drills is Pareto​ efficient? Explain your answer.

No, market size has no bearing on the attainment of Pareto efficiency.

Compared to the market for electric​ drills, the market for vintage buttons has fewer buyers and sellers. Social surplus is likely to be higher in the market for drills than in the vintage button market. Is it then correct to assume that the outcome in the drills market is Pareto efficient while in the vintage button market it is​ not? Explain.

No, price gouging is actually an equilibrium​ outcome, while the setting of prices above equilibrium is not.

Does price gouging have the same effect as setting prices above equilibrium​ level?

1. Firms are sellers in the market for goods and​ services, while individuals are sellers in the market for inputs. 2. Firms are buyers in the market for​ inputs, while individuals are buyers in the market for goods and services. 3. The demand for inputs is derived from the demand for final goods and services.

How does the market for inputs like labor differ from the market for goods and​ services?

no individual can be made better off without making someone else worse off.

In a competitive market​ equilibrium, the allocation of the social surplus is such that​ ____________.

each plant produces where marginal revenue equals marginal cost.

In a perfectly competitive​ market, a firm with multiple production plants will minimize total costs of production when

D. All of the above

In assessing the performance of a perfectly competitive​ market, we can say that​ ____________. A. any departure from the equilibrium necessarily reduces social surplus. B. no individual can be made better off without making someone else worse off. C. price efficiently allocates goods and services to buyers and sellers. D. All of the above

the marginal benefit of leisure is equal to the marginal cost.

John will continue to consume leisure up to the point at which​ _______

tax revenue exceeds its spending.

The government runs a budget surplus when​ ____________.

​Yes, with the market in​ equilibrium, no one participant can be made better off without someone else being harmed.

The market for electric drills in a certain country is characterized by a large number of buyers. The market for drills is in equilibrium. Does this also mean that it is Pareto​ efficient? Explain your answer.

Consumers pay a price that is higher than the world​ price, reducing consumer surplus

The mercantilist economic doctrine was widely followed from the sixteenth to the eighteenth centuries in Europe. Mercantilists advocated the use of tariffs to restrict​ trade, as they believed that countries that export more than they import will increase wealth. What could be the problem with such an economic​ policy?

a positive, an inverse

The substitution effect implies there is _______ relationship between the wage rate and the quantity of labor supplied. While the income effect implies there is _______ relationship between wage rate and the quantity of labor supplied.

contribution that each additional unit of physical capital adds to a​ firm's revenues, all else equal

The value of marginal product of capital ​(VMPK​) is the​ ____________.

C. If leisure is a normal​ good, the higher incomes that players enjoy will cause them to increase their consumption of​ leisure, and this implies choosing not to play an extra year.

Why might ballplayers in 2012 be less likely to choose to play an extra​ year? A. Some players may choose to not play an extra year since the higher salary requires them to be more productive and work harder. B. Since players are becoming more costly to​ employ, team owners may seek to employ a smaller​ number, thereby inducing some players to choose to retire. C. If leisure is a normal​ good, the higher incomes that players enjoy will cause them to increase their consumption of​ leisure, and this implies choosing not to play an extra year. D. All of the above.

general equilibrium

attempts to explain the behavior of supply, demand, and prices in a whole economy with several or many interacting markets