ECON 201 Final

In a perfectly competitive market, in the short run a firm should shut down if

price is less than average variable cost when marginal revenue equals marginal cost.

Terms of trade refers to

relative amounts of the goods that will be exchanged for each other in trade (aka relative price of imports versus exports)

In the short run ______ factors are fixed

some factors are fixed

A tariff is a:

tax on an imported good.

Negative cross elasticity likely means

that the goods are complements

Public choice economics provides four theories of government behavior:

1. That the government takes actions to promote efficiency; 2. That the voters tell the government what to do and thus government actions reflect the will of the voters; 3. That government officials pursue their own self-interest; 4. and that special-interest groups manipulate the government.

Import bans, import quotas, voluntary export restraints, and tariffs on goods all:

increase imports and reduce prices for consumers.

The "terms of trade" refers to the: A) slope of the production possibilities curve. B) relative amounts of the goods that will be exchanged for each other in trade. C) opportunity cost of producing each good in each country. D) all of the above

B) relative amounts of the goods that will be exchanged for each other in trade.

The opportunity cost of something is: A) a measure of the scarcity of the good. B) what you sacrifice to get the good. C) the price you pay for the good. D) what you are willing to pay for the good.

B) what you sacrifice to get the good.

________ collect additional revenues from a quota, and ________ collect additional revenues from tariffs. A) Importers; importers B) Governments; importers C) Importers; governments D) Governments; governments

C) Importers; governments (tariffs generate public revenue and are thus preferred to quotas)

For a nation to have a comparative advantage in a good it must have: A) more resources. B) better resources. C) a lower opportunity cost of producing that good. D) a straight-line production possibilities curve.

C) a lower opportunity cost of producing that good.

9) Autarky refers to: A) a situation in which nations trade goods and services. B) a nation in the Middle East. C) a situation in which there is no trade. D) the equilibrium a nation reaches after trade begins.

C) a situation in which there is no trade.

If France can produce grapes at a higher opportunity cost than any other nation, France is said to have a(n) ________ in the production of grapes. A) autarky B) absolute advantage C) comparative disadvantage D) comparative advantage

C) comparative disadvantage

The consumption possibilities curve shows the combinations of goods that can be:

Consumed by a nation after trade begins.

If France can produce grapes at a lower opportunity cost than any other nation, France is said to have a(n) ________ in the production of grapes. A) autarky B) absolute advantage C) comparative disadvantage D) comparative advantage

D) comparative advantage

The more specific the good is, the _______ elastic demand for it will be

more elastic

in the long-run _______ factors are fixed

no factors are fixed

Public goods have _______ benefits

non excludable benefits

Less elastic means that the consumers are _________ sensitive to price changes

Less elastic means that the costumers are less sensitive to price changes

An import quota ________ the amount of a good that can be imported, thus _________ prices.

Limits the amount of a good that can be imported, thus increasing prices.

When price exceeds average cost when a single firm is in the market, but is less than average cost when more than one firm is in the market.

Natural monopoly

In the long run, total fixed costs are _________

Nonexistent

What does the production possibilities curve show?

The combinations of goods that can be produced by a nation before trade begins and the combinations of goods that can be produced by a nation after trade and specialization begin.

An example of a good that is a non-rival in consumption is:

a radio broadcast of a song.

What will arise in the domestic market following the imposition of a tariff?

decrease in imports but an increase in domestic production and domestic prices increase

The short-run average total cost curve is U-shaped because average fixed costs ________ and average variable costs _________ eventually as quantity produced increases.

decrease; increase

A voluntary export restraint is a trade policy by which a nation agrees to limit its ________ of a good, in order to _______

exports of a good in order to avoid more restrictive trade policies.

The supply curve will be more elastic when

firms have more time in which to respond to the price change.