Economics Test 1 HW Cards

Which of the following has been stated to reduce society's cost by allowing pollution rights to be bought and sold

A Cap-and-trade- program; market-based approaches to pollution abatement

the effect of subsidies on consumers in correcting from positive externalities are

An increase in demand illustrated as a shift outward of the demand curve; the quantity of the product purchased would rise to the economically optimal output eliminating the under-allocation of resources; the subsidy reduces the price of purchasing the good.

_____ is calculated as the difference between the maximum price a consumer is willing to pay for a product and the actual price paid

Consumer surplus

Market failures in competitive markets can be classified into

Demand-side and supply-side

Characteristics of a private good include

Excludability; rivalry

A______ causes some of the benefits or costs of a market transaction to be passed on to a third party

Externality

_____ intervention may be needed to achieve economic efficiency when positive or negative_____ affect large numbers of people or when community interests are at stake

Government externalities

what is the difference between the actual price a seller receives and the minimum acceptable price?

Producer surplus

If a third party to a market transaction is experiencing an uncompensated cost, then the transaction results in a market failure known as a ______ or ________.

Spillover cost; negative externality

The effect of subsidies to producers in correcting

The subsidy reduces the marginal cost of producing the good; the quantity of the product would rise to the economically optimal quantity eliminating the under-allocation of resources.; the supply curve would shift out to the right because of an increase in supply

A positive externality is an uncompensated spillover

benefit

Free and____ markets produce equilibrium prices and quantities that maximize the combined consumer and producer surplus

competitive

which of the following not only makes private goods available to consumers but also allocates society's resources efficiently to the particular product.

competitive market

A comparison of margin changes is known as:

cost-benefit analysis

A statements about economic behavior or the economy that enables prediction of the probable effects of certain actions is known as an

economic principle, economic theory

a deadweight loss is also known as

efficiency loss

___means that buyers who are willing and able to pay the market price for the product obtain its benefits, but those unable or unwilling to pay the price do not.

excludability

the____characteristic of a private good is the ability of a seller to prevent people who did not pay for a product from obtaining its benefits

excludability

An____ is a cost or a benefit accruing to an individual or group, a third party, that is external to a market transactions

externality

a positive externality (or spill over benefit) resulting in under allocation or resources to the market is a type of market:

failure

As a result of negative externalities that are imposed by producers, costs are transferred to society thus:

firms incur lower production costs and have marginal cost o supply curves that are lower than the full- cost associated with producing their goods

The situation when people can receive the benefits from a good without having to pay for it is called the _____-rider problem

free

Market failures can be used to justify

government intervention in the economy

Consumer surplus is the difference between the____ price a consumer is willing to play for a product and the price paid

highest

Arable land, water, machinery and a professional baseball player are al considered scarce economic _____ to production

input

Consumer surplus and price are related

inversely

Which of the following explains how the government provides the optimal quantity of a public good?

it compares the marginal benefit of an added unit of the good against the government's marginal cost of providing it.

The supply curve for any good, private or public is

its marginal cost curve

A producer surplus is calculated as the difference between the actual price a producer receives and the ____ acceptable price.

lowest

When there is no effective way of keeping individuals from the benefit of a good once is comes into existence, the characteristic of the good comes distinguished by

non-excludability

the market demand curve for positive externalities reflects

only the direct, private benefits to those who demand and use the product

The law of increasing_____ states that as production of a particular good increases, the cost of producing an additional unit rises.

opportunity costs

Two examples of government corrections for an under-allocation of resources in a market(a positive externality) are:

providing education budgets financial aid

If a good is nontrivial and non excludable then it is known as a

public

when the government subsidies producers of a product the supply curve for that particular product will shift to the

right

A private good that displays_____characteristics means that when someone buys and consumes that good, it is not available for someone else to buy and consume

rival

All natural, human, and manufactures goods that go into the production of goods and services are considered society's

scarce

In order to correct for positive externalities, government may choose to____ buyers and or producers, as well as to provide____goods

subsidize; public

A ___ to the producer is a payment from the government to decrease the producers' cost in order to encourage more output beneficial to society

subsidy

a_____ side market failure occurs when a market does not reflect the full cost of producing a good or service

supply

Government can finance the demand for public goods through

taxes

T of F: Since the total profit from the sale of 5 bottles of water is $1.00, representing a %20 profit margin, this is a reason "to tap the market"

true

True or False: efficiency or deadweight losses are reductions of combined consumer and producer surplus associated with underproduction or overproduction of a product

true

The pleasure, satisfaction, or happiness obtained from consuming a good or service is know as

utility

Which of the following does the figure help to explain:

when marginal benefit exceeds marginal cost, additional abatement moves society toward economic efficiency ; when marginal cost exceeds marginal benefit, additional abatement reduces economic efficiency