Micro Final Exam

If the price of good increases by 10% and the quantity demanded falls by 5% what is the elasticity of demand? Answer in absolute terms. 0.5 2 5 10

0.5

Suppose that Mimi plays golf 5 times per month when the price is $40 and 4 times per month when the price is $50. What is the price elasticity of Mimi�s demand curve? 0.1 0.8 1 10

1

1__The demand curve shifts to the left 4__There is a movement down the demand curve 3__There is a movement up the demand curve 2__The demand curve shifts to the right

1.Demand goes down 2.Demand goes up 3.Quantity demanded goes down 4.Quantity demanded goes up

Please list these in the order they go in

1__A frost freezes fruit 2__The supply of fruit goes down

What is a chart that shows all possible combinations a country can produce of two different goods. It shows the trade off of producing more of one good over another one. A Productions Possibility Frontier Scarcity Incentives Opportunity Cost

A Productions Possibility Frontier

_____________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry. Collusion A monopoly An olgopoly A cartel

An olgopoly

Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect: Andy's demand for pizza to increase. Andy's demand for pizza to decrease. Andy's quantity of pizza demanded to decrease. Andy's demand for beer to increase.

Andy's demand for beer to increase.

__________ is something valuable that a lender would have a right to________________ if the loan is not repaid. Collateral; sue for A guarantee; seize and retain A guarantee; sell Collateral; seize and sell

Collateral; seize and sell

In the circular flow model looking at just firms and households. Do physical goods and money flow in the same direction? True False

False

Is the product market(goods market) and the factor market(AKA resource market) the same thing? True False

False

A checking account typically pays __________________, but gives easy access to your money, either by writing a check or by using ______________. no interest; a credit card between 3% and 5% interest; a credit card little or no interest; a debit card between 2% and 4% interest; a debit card

Little or no interest; a debit card

______________ include all of the costs of production that increase with the quantity produced. Fixed costs Variable costs Average costs Average variable costs

Variable costs

A firm that holds a monopoly position in the market place is a price maker a price taker monopolistically competitive subject to infinite market forces

a price maker

What does a budget constraint show? Various combinations of goods or services an individual can purchase with their income. The items a person wants, but cannot afford Government Spending Budget Wish List The ups and down of the stock market

Various combinations of goods or services an individual can purchase with their income.

What is the definition of a shortage When market price is greater than equilibrium price When supply is greater than demand When demand is greater than supply When quantity supplied is greater than quantity demanded When quantity demanded is greater than quantity supplied

When quantity demanded is greater than quantity supplied

Poverty is measured by the number of people who fall below a certain level of income. the income needed for a basic standard of living. the nation's economic poverty line. all the above are correct.

all the above are correct.

In economics, the term "shutdown point" refers to the point where the marginal cost curve crosses the total revenue curve. average variable cost curve crosses the total revenue curve. average variable cost curve crosses the marginal cost curve. marginal cost curve crosses the fixed cost curve.

average variable cost curve crosses the marginal cost curve.

A positive externality arises in a situation where a third party, outside the transaction, fails to allocate resources efficiently. suffers from a market transaction by others. benefits from a market transaction by others. pays a pollution tax to balance social costs.

benefits from a market transaction by others.

Which of the following would legally qualify you to be registered as a shareholder of publicly traded firm? buying the stock on the New York Stock Exchange investing in bonds issued by the firm ownership of debt issued by the firm a firm employee given options to buy the firm's shares

buying the stock on the New York Stock Exchange

A Lorenz curve graphs the _________________ received by everyone up to a certain quintile. unequal distribution over time normative shares of income cumulative shares of income total share of income

cumulative shares of income

The slope of the demand curve for a monopoly firm is horizontal, parallel to the x-axis vertical, parallel to the y-axis upward sloping downward sloping

downward sloping

If a perfectly competitive market involves many firms selling identical products, then, in the face of such competition, each of these firms must act as a price-maker. each of these firms must act as a price-taker. collusion amongst them will most often result. demand curves can become kinked in appearance.

each of these firms must act as a price-taker.

The term __________________ describes a situation where the quantity of output rises, but the average cost of production falls. diminishing marginal returns marginal cost output economies of scale diseconomies of scale

economies of scale

Which of the following is generally accepted as a valid criticism of the production of useful goods and services? government involvement the black market environmental pollution economic freedom

environmental pollution

A problem may arise when politicians are elected by the votes of 60% or less of the population, because these politicians may not enact legislation that is focused on numerically small special interest groups. eonomic policy in the best interests of 100% of the population. public policies that fail to benefit social surplus. pork-barrel legislation using logrolling.

eonomic policy in the best interests of 100% of the population.

Which of the following will need to strike some balance between economic output and environmental quality as a prominent climate change priority? countries with high-incomes every country market-oriented countries command-oriented countries

every country

The term "constant returns to scale" describes a situation where expanding all inputs does not change the average cost of production. a larger-scale firm can produce at a lower cost than a smaller-scale firm. expanding all inputs changes the average cost of production. the quantity of output rises and the average cost of production falls.

expanding all inputs does not change the average cost of production.

Guarantees, warranties, and service contracts are all examples of how seller's provide information to would-be buyers. forms of reassurance used in the labor market. how seller's are able to charge high prices. forms of explicit reassurance provided by sellers.

forms of explicit reassurance provided by sellers.

An individual who wants others to pay for public goods, but plans to use those goods for their own purposes, is often referred to as a ______________ . tax evader excludable free rider nonexcludable

free rider

Economists readily admit that in settings that involve a monopoly or negative externalities, a potential role exists for _______________________. scare resources economically wise programs government intervention economically wise projects

government intervention

If the poverty trap were made even more difficult to overcome because a working mother will have extra expenses like transportation and child care that a nonworking mother will not face, then she will get a large amount of joy from having to work two jobs. the family better off than if she did not work at all. her economic gains from working will be even smaller. working now and in the future is even more attractive.

her economic gains from working will be even smaller.

If monopolists are able to produce fewer goods and sell them at a higher price than they could under perfect competition, the result will be elimination of barriers to entry irregularly high unsustainable profits. government deregulation. high sustained profits.

high sustained profits.

A Lorenz curve refers to a graphic illustration of the share of population on the _______________ and the cumulative percentage of total income received on the __________________ . left quintile; right quintile right quintile; left quintile horizontal axis; vertical axis vertical axis; horizontal axis

horizontal axis; vertical axis

In microeconomics, the term _____________________ is synonymous with economies of scale. diminishing marginal returns increasing returns to scale decreasing returns to scale constant returns to scale

increasing returns to scale

Demand is said to be _____________ when the quantity demanded is not very responsive to changes in price. independent inelastic unit elastic elastic

inelastic

In the U.S., comparisons of high and low incomes raise issues of economic ______________________. inequality and poverty equality and wealth distribution wealth distribution and poverty equality and inequality

inequality and poverty

Venture capitalists typically create wealth by investing in a start up firm when its stock is less valuable, and then subsequently selling that stock for a higher price during the firm's _____________________ , initial bond issue initial liquidity offering initial public offering initial private offering

initial public offering

Specialization leads to greater self-sufficiency. can lead to an increase in overall production. allows workers to develop skills by working on a large number of tasks is always the result of an inefficient use of resources

can lead to an increase in overall production.

A financial gain earned by purchasing stock in a publically traded company and subsequently selling the investment at higher price is commonly referred to as a _____________ . dividend capital gain interest payment rate of return

capital gain

The absence of which of the following best explains why government agencies are slower to correct mistakes than private firms. imperfect information discrimination in wealth distribution monopoly over the economy competition or a threat of new entry

competition or a threat of new entry

Another person or firm who legally pledges to repay some or all of the money loaned if the original borrower fails to do so is called a __________________________ . warrantor cosigner guaranty codebtor

cosigner

In economic terms, when a company invests in new technology innovations, competitive externalities arise. potential externalities arise. negative externalities arise. positive externalities arise.

positive externalities arise.

Payments made to an insurance company in return for a policy of insurance are called _________________ . risk expenses premiums risk expenditures deductibles

premiums

When a business adopts a strategy of reducing and/or discontinuing production in response to a sustained pattern of losses, it is considering opportunity costs. preparing to exit operations. preparing to reach its shutdown point. considering capital investments.

preparing to exit operations.

If a perfectly competitive firm is a price taker, then pressure from competing firms will force acceptance of the prevailing market price. it must be a relatively small player compared to its competitors in the overall market. it can increase or decrease its output without affecting overall quantity supplied in the market. quality differences will be very perceptible and will play a major role in purchasers' decisions.

pressure from competing firms will force acceptance of the prevailing market price.

The �law of supply� functions in labor markets; that is, a higher __________ for labor leads to a higher quantity of labor supplied. price demand supply quantity

price

The largest cattle rancher in a given region will be unable to have a __________ when sufficient numbers of smaller cattle ranchers provide sources of competition. oligopoly patent monopoly monopolistic competition

monopoly

Once it's patent application has been accepted, a firm is able to earn ________ on its product, which ___________________________________ . an increased rate of return for investors; raises doubts further R&D activities more profit; will allow it to recover the biggest slice of the social value created monopoly profits; offers an incentive for research and development to take place competitive profits; creates incentive for continuing innovative R&D projects

monopoly profits; offers an incentive for research and development to take place

When people have insurance against a certain event, the notion that those people are less likely to guard against that event occurring is called a _____________________ . risk hazard risk moral hazard moral risk

moral hazard

The major problems caused by imperfect information in insurance markets are moral hazard and adverse selection. deceptive applicants and fraudulent claims. ability to attract repeat customers and risk groups. major additional costs and separating insurance buyers.

moral hazard and adverse selection.

In order to be classified as a _______________, a firm must be owned by the people who run it on a day-to-day basis. business firm public company private company corporation

private company

Why would labor be treated as a variable cost? they are costs incurred in the act of producing that will decrease with quantity produced they are made before production starts and vary according to the specific line of business labor costs are an input cost that firms are unable to change in the short run producing larger quantities of a good or service generally requires more workers

producing larger quantities of a good or service generally requires more workers

What do service contracts, occupational licenses and cosigners all share in common? reduced risk of adverse selection reduced the risk of imperfect information eliminate the risk of adverse selection eliminate the risk of imperfect information

reduced the risk of imperfect information

The problem of special interests in politics can be related to an economic policy problem called ________________________. pork-barrel spending regulatory capture logrolling imperfect competition

regulatory capture

If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to: rise and the equilibrium quantity to fall. rise and the equilibrium quantity to stay the same. rise and the equilibrium quantity to rise. stay the same and the equilibrium quantity to fall.

rise and the equilibrium quantity to stay the same.

Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is: nothing, because he enjoys playing basketball more than studying. the increase in skill he obtains from playing basketball for that hour. the benefit to his grades from studying for an hour nothing, because he had a free pass into the sports complex to play basketball.

the benefit to his grades from studying for an hour

If incomes rise for both low-income and high-income workers, but rise less for the high-income workers, then poverty will rise and inequality will fall then poverty will fall and inequality will rise. then poverty will rise and inequality will rise. then poverty will fall and inequality will fall.

then poverty will fall and inequality will fall.

If incomes rise for low-income workers but don�t change for high-income workers, then poverty will fall and inequality will fall. then poverty will rise and inequality will fall. then poverty will rise and inequality will rise. then poverty will fall and inequality will rise.

then poverty will fall and inequality will fall.

If a rise in incomes is the same proportion for both low-income and high-income workers, then poverty will rise and inequality will remain unchanged. then poverty will rise and inequality will rise. then poverty will fall and inequality will remain unchanged. then poverty will fall and inequality will fall.

then poverty will fall and inequality will remain unchanged.

If the level of incomes rises for high-income workers but doesn�t change for low-income workers, then poverty will not change and inequality will fall. then poverty will not change and inequality will rise. then poverty will rise and inequality will fall. then poverty will fall and inequality will rise.

then poverty will not change and inequality will rise.

A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result total revenue will decrease. total revenue will increase. total revenue will remain constant. the elasticity of demand will increase.

total revenue will decrease.

Economist usually refer to elasticity of demand in absolute terms. True False

true

If elasticity of demand is greater than one economist say that the demand is elastic True False

true

If a paper mill shuts down its operations for three months so that it produces nothing, its __________________ will be reduced to zero? variable costs fixed costs opportunity costs total cost

variable costs

A ______________ is a promise to fix or replace the good, at least for a certain period of time. service contract insurance policy money-back guarantee warranty

warranty

In a free market economy, firms operating in a perfectly competitive industry are said to have only one major choice to make. Which of the following correctly sets out that choice? what quantity to produce what price to charge what quantity of labor is needed what quality to produce

what quantity to produce

In the market for labor. What happens to real wages when there is an increase in the demand curve? will stay the same will decrease will increase may increase, decrease or stay the same depending on the relative slopes.

will increase

In the U.S., individuals often pay a small portion of their earnings into a state _________________ pooled fund that will compensate them if they are injured on the job. medicare social Security workman's compensation insurance unemployment insurance

workman's compensation insurance

If you are highly asthmatic, then having high levels of industrial air pollutants waft over your house every day is a voluntary exchange. is positively a voluntary exchange. would be a negative externality. would be an external voluntary exchange.

would be a negative externality.

Would raising the price for a product create a larger decline in quantity demanded for a monopolistic competitor's than it would for a monopoly? no; a monopolistic competitor perceives demand as a price maker no; conditions of imperfect competition means demand is constant yes; but temporarily because price increases only create a short-run decline yes; consumers will buy from competitors offering lower priced substitutes

yes; consumers will buy from competitors offering lower priced substitutes

Most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers. Market-oriented economy Macroeconomy Microeconomy Command economy

Market-oriented economy

A natural monopoly occurs when the quantity demanded is ________ the minimum quantity it takes to be at the bottom of the long-run average cost curve. greater than less than equal to a or c above

less than

The _________ of an investment is determined by how easy it is to sell an asset at any given time. profitability expected profitability liquidity sustainable outcome

liquidity

As the __________ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left. technology high-skill labor lower wage market

technology

If it was possible for one company to gain ownership control all of the uranium processing plants in the US, then they will strive to reach efficiencies only they know how to make. that firm could set up barriers to entry to discourage competition. government will deregulate to ensure the company's monopoly. the factors of market demand and supply will set the price.

that firm could set up barriers to entry to discourage competition.

Market competition can provide _______________ for _________________ , unsustained profits; firms with marketable patents the needed incentive; discovering new technologies time; competitors to catch up with other's inventions an opportunity; competitors seeking out innovations

the needed incentive; discovering new technologies

As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good. the production possibilities frontier allocative efficiency scarcity utility

the production possibilities frontier

Macroeconomic topics do not usually include: the profit maximizing decisions of an individual manufacturer. the rate of inflation the rate of unemployment economic growth

the profit maximizing decisions of an individual manufacturer.

When consumers and businesses have greater confidence that they will be able to repay in the future, _______________________. the quantity demanded of financial capital at any given interest rate will remain unchanged. the quantity demanded of financial capital at any given interest rate will shift to the left. the quantity demanded of financial capital at any given interest rate will shift to the right. the quantity demanded of financial capital at any given interest rate will achieve equilibrium.

the quantity demanded of financial capital at any given interest rate will shift to the right.

________________________ arises where many firms are competing in a market to sell similar but differentiated products. Oligopolistic competition Perfect competition Monopolistic competition Monogopolised competition

Monopolistic competition

_____________________ that are issued by government agencies are a form of validation that a worker has completed a certain type of education or passed a certain test. Occupational licenses Industrial licenses Service contract licenses Occupational insurance licenses

Occupational licenses

Choose the correct statement concerning natural disasters. They create jobs at the expense of other jobs, and they destroy wealth They create jobs, and create wealth They destroy jobs, but create wealth They destroy jobs, and destroy wealth

They create jobs at the expense of other jobs, and they destroy wealth

If measuring opportunity cost on a budget constraint line. Can the opportunity cost be less than one? Can it be one-half a good? True False

True

Is the budget constraint a visual of the opportunity cost between two goods? True False

True

The demand curve has a negative slope True False

True

Treasury bonds are issued by the federal government through the _____________________ . Federal Reserve Central Bank U.S. Department of the Treasury U.S. Office of the Comptroller of Currency

U.S. Department of the Treasury

Which of the following will not result in a leftward shift of the market demand curve for labor? a decrease in labor productivity a decrease in demand for the firm's product an increase in the wage rate a decrease in the firm's product price

an increase in the wage rate

Improvements in the productivity of labor will tend to: decrease wages decrease the supply of labor increase wages increase the supply of labor

increase wages

Under perfect competition, any profit-maximizing producer faces a market price equal to its average costs marginal costs total costs variable costs

marginal costs

Which of the following will provide an investor with a legally valid claim of partial ownership of a firm? entitlement to bond interest ownership of a treasury bond entitlement to dividends ownership of stock

ownership of stock

Which of the following mechanisms will increase the rate of return that can be earned by inventors of new technology? intellectual property rights government research and development grants cooperative research ventures between companies patents, copyrights, and each of the above

patents, copyrights, and each of the above

Is Elasticity of Demand calculated by absolute changes or percentage changes? Percentage changes Absolute changes Either one works

percentage changes

Firms operating in a market situation that creates ___________________, sell their product in a market with other firms who produce identical or extremely similar products. a perfect monopoly perfect competition an oligopoly a free-market

perfect competition

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is: $0 $4 $40 $44

$44

The government is imposing an industrial pollution tax in an attempt to reduce carbon emissions. The cost of the tax to five major companies in the oil refining industry will be $50 million annually. In terms of reduced emissions, the annual benefits of the tax are valued at $10 per person. There are 125 million people directly affected by emissions from oil refineries owned by these companies. The total annual cost of this tax is ___________ while the total annual benefit to society is ___________. $250 million; $1.25 billion $500 million; 1.5 billion $250 million; $1.5 billion $500 million; $1.25 billion

$250 million; $1.25 billion

Suppose that Bobo purchases 1 pizza per month when the price is $19 and 3 pizzas per month when the price is $15. What is the price elasticity of Bobo�s demand curve? 0.235 2 4.25 6.33

4.25

Who wrote: "The Wealth of the Nations"? Adam Smith Karl Marx John Maynard Keynes Milton Friedman

Adam Smith

When a business wants to increase it's revenue should it raise it's price? It depends on the elasticity of demand. Yes No

It depends on the elasticity of demand.

Which one looks at the big picture Macroeconomics Microeconomics

Macroeconomics

____________________ describes a situation where a third party, outside the transaction, suffers from a market transaction by others. Negative externality Positive externality A spillover A market failure

Negative externality

____________________ is a particular type of spending that mainly benefits a single political district. Logrolling Special interest spending Pork-barrel spending An appropriate spending program

Pork-barrel spending

Who of the following is credited with having once written: "No one pretends that democracy is perfect or all-wise"? Abraham Lincoln Adam Smith F. Scott Fitzgerald Sir Winston Churchill

Sir Winston Churchill

_______________________ are numerically small, but well organized groups that are able to exert a disproportionate effect on political outcomes. Bipartisan reform organizations Special interest groups Social scientists organizations Bipartisan campaign reformers

Special interest groups

In a market for a good, if there is a shift in supply (supply goes up). What happens to demand? Demand goes down Demand goes up There is a movement down along the demand curve. There is a movement up along the demand curve None of the above

There is a movement down along the demand curve.

Steel mill wage costs increase by 18 percent over a year. What is the likely economic effect on the market for steel? There is an increase in the cost of producing steel, which shifts the supply curve of steel to the right, thereby increasing the price of steel. There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel. There is a decrease in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel. The increase in wage costs will shift the demand curve for steel to the left, increasing the cost of steel.

There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel.

After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is: no change; only the supply curve for beef is likely to be affected. a shift of the demand curve for beef to the left. a movement down along the demand curve for beef to the right. a shift of the demand curve for beef to the right.

a shift of the demand curve for beef to the left.

In the labor market, a stipulation that the first three months of employment is a trial period is a standard precaution against hiring a lemon. a precondition to certification in labor. waived when school transcripts are submitted with a resume. a way of classifying potential employees.

a standard precaution against hiring a lemon.

A manufacturer would likely make an entry in a market following the long-run process of beginning and expanding production in response to ________________ . a strategy to grow profits an incentive for profit a sustained pattern of profits an incentive to add to profits

a sustained pattern of profits

In the highly competitive setting in which oligopoly firms operate, which of the following are considered to be typical temptations each may face? to cooperate to generate and then divide up monopoly-like profits to cooperate to mutually decide what price to charge to cooperate to make decisions about what quantity to produce all of the above

all of the above

In a monopolistic competitive industry, firms can try to differentiate their products by creating optimal perceptions of the product. choosing optimal locations from which the product is sold. enhancing the intangible aspects of the product. all of the above.

all of the above.

The term "ceteris paribus" means that: everything is variable. all variables except those specified are constant. no one knows which variables will change and which will remain constant. what is true for the individual is not necessarily true for the whole.

all variables except those specified are constant.

The marginal revenue curve for a monopolist ____________________ the market demand curve. always rises above always lies beneath always runs parallel always is the same

always lies beneath

The term "applied research" refers to research that is focused on a particular product that promises to offer commercial applications in the short-term. to offer commercial applications in the long-term. an economic payoff in the short or medium-term. an economic payoff in the medium or long-term.

an economic payoff in the short or medium-term.

Using the term "spillover" is a less formal means of describing an externality. social costs. private costs. market failure.

an externality.

Which of the following results in a rightward shift of the market demand curve for labor? a decrease in labor productivity a decrease in the firm's product price an increase in the wage rate an increase in demand for the firm's product

an increase in demand for the firm's product

Which of the following will not result in a rightward shift of the market supply curve for labor? a decrease in non-wage income an increase in the working-age population an increase in labor productivity an increase in immigration

an increase in labor productivity

If the price that a firm charges is lower than its ____________ of production, the firm will suffer losses. average cost marginal cost fixed cost variable cost

average cost

In order to determine ____________, the firm's total costs must be divided by the quantity of its output. diminishing marginal returns fixed costs variable cost average cost

average cost

In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of: all consumers buyers and sellers producers and input suppliers producers and government planning committees

buyers and sellers

A situation known as _____________________ occurs when all production inputs are allowed to expand, but that expansion does not result in much of a change in the average cost of production. returns to scale economies of scale constant returns to scale diminishing marginal returns

constant returns to scale

Which of the following is most unlikely to present a barrier to entry into a market? market forces patent laws technological advantages deregulation

deregulation

If a monopoly or a monopolistic competitor raises their prices, then decline in quantity demanded will be larger for the monopoly. decline in quantity demanded will be larger for the monopolistic competitor. the quantity demanded for the monopoly product falls to zero. the quantity demanded for the monopolistic competitor will fall to zero.

decline in quantity demanded will be larger for the monopolistic competitor.

In the investment industry, the principle of _______________ supports investing in a wide range of companies to reduce the level of risk. subprime loans diversification fundamentals trading buying low and selling high

diversification

A ________ is a direct payment from a firm to its shareholders. dividend bond capital gain share

dividend

In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers. division of labor interconnected economy task economy modern economy

division of labor

When the U.S. Congress begins to draft laws and regulations that attempt to reduce the harmful effects of environmental pollution, industry lobbyists will study every word and comma. suggest alternate wording. often contribute to campaigns of legislators on key committees. do all of the above in order to influence legislation in their favour.

do all of the above in order to influence legislation in their favour.

Why do U.S. economists commonly refer to externalities as an example of market failure? firms that are required to pay social costs of externalities produce more externalities present a case where markets consider all social costs externalities present a case where markets only consider some social costs firms avoid having to pay social costs of externalities by lowering prices

externalities present a case where markets only consider some social costs

Market failure describes a situation in which the market itself ______________________ in a way that balances social costs and benefits. remains outside the transaction incurs the costs outside the production process fails to allocate resources efficiently avoids externalities

fails to allocate resources efficiently

A ___________________ arrangement exists when medical care providers are paid according to the services they provide. fee-for-service service contract coinsurance insurance

fee-for-service

A bond is a form of ___________ through which a corporation agrees to repay the amount that was borrowed together with ___________ over a period of time in the future. financial contract; a rate of interest financial instrument; a rate of return initial public offering; a rate of interest financial investment; guarantees the investment

financial contract; a rate of interest

Which of the following is the most appropriate response of public policy to a negative externality like pollution? modernize, update, and restore homes in run down neighborhoods to decrease littering find ways to account for the social costs of the negative externality in economic decisions encourage high standards of public education to increase innovation capability of youth assist the private party creating the negative externality to receive more social benefits

find ways to account for the social costs of the negative externality in economic decisions

Most buyers face a situation of _____________________ when they invest in the stock market. adverse information imperfect information imperfect selection adverse selection

imperfect information

Economic profit can be derived from calculating total revenues minus all of the firm�s costs, excluding its opportunity costs. including its opportunity costs. including its marginal revenue. excluding its marginal revenue.

including its opportunity costs.

When a natural monopoly exists in a given industry, the per-unit costs of production will be lowest when there are a large number of producers in the industry. lower for the smaller firms than for larger firms. minimized at the output that maximizes the industry's profitability. lowest when a single firm generates the entire output of the industry.

lowest when a single firm generates the entire output of the industry.

In some instances where voters have more than two choices in a democratic election, the principle that the __________________ will decide the outcome may no longer make logical sense. majority of voters under-educated voters economically challenged eligible voters

majority of voters

Which of the following is an oversimplified term that is sometimes used to describe the meaning of democracy? voting cycles majority opinion majority rule majority vote

majority rule

When it is costly or impossible to exclude someone who hasn't paid to use a particular good from using it, then that good is classified as being excludable free rider public good nonexcludable

nonexcludable

A public good is a good that is ____________________ , and thus is difficult for market producers to sell to individual consumers. excludable or rivalrous nonexcludable and nonrivalrous excludable and rivalrous excludable or nonrivalrous

nonexcludable and nonrivalrous

Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be. normative statement budget constraint trade-off opportunity cost

normative statement

Perfect competition and monopoly stand at _____________ of the spectrum of competition. opposite ends the high end the low end the mid-way point

opposite ends

In the U.S., why is figuring out a way of strengthening people�s feeling of connectedness to society still an issue of importance? it will make it easier for people to register to vote keeping the polls open longer will create more jobs other proposals offered have failed to substantially increase voter turnout those who vote tend to be more supportive of quality public education

other proposals offered have failed to substantially increase voter turnout

Following the assumption that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency? output will be too small and its price too high. output will be too large and its price too high. output will be too small and its price too low. output will be too large and its price too low.

output will be too small and its price too high.

Jeremy is an 18 year old college student with no prior credit history, who still lives at home. He will have a part-time job while he is attending college and has applied for a car loan. In these circumstances, the bank's loan officer will most likely approve the loan if Jeremy can sign over his parent's car as collateral. provide a cosigner on the loan. increase his student loan. maintain a "B" grade average.

provide a cosigner on the loan.

Idaho farmers can sell as large a quantity of their potato crop as they wish, if they set their own price in the short run, but in the long run, the market sets the price. provided each is willing to accept the prevailing market price. if they set their own price in the long run, but in the short run, the market sets the price. provided quality is perceptible and determines the market price.

provided each is willing to accept the prevailing market price.

When economists talk about supply, they are referring to a relationship between price received for each unit sold and the _________________. demand schedule market price quantity supplied demand curve

quantity supplied

Which of the following is an example of economic output that can injure the environment? gold mine discharging arsenic into a natural lake it�s using for a tailings pond paper mill discharging raw chemical waste into a river excessive clear cutting of wood resources by logging companies radio-active waste leaking into a river, and all of the above

radio-active waste leaking into a river, and all of the above

The group of government programs that provide assistance to the poor and the near-poor is synonymous with which of the following? safety net safety quintiles poverty net antipoverty net

safety net

Traditionally, policies for environmental protection in the U.S. have focused on __________________ pollutant could be emitted. eliminating the risk that any setting limits for how much of each avoiding the risk that any air eliminating the risk that a toxic

setting limits for how much of each

What role can advertising play with respect to differentiated products? allows a firm to sell any quantity it wishes shapes consumers intangible preferences shapes perceived demand for a price taker allows a firm to raise the prevailing market price

shapes consumers intangible preferences

A more efficient means of processing algae to produce an anticancer drug is discovered. As a result, the supply curve for the drug will: shift to the right, increasing the price of the drug. shift to the left, increasing the price of the drug. shift to the right, decreasing the price of the drug shift to the left, decreasing the price of the drug.

shift to the right, decreasing the price of the drug

If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ___________________ surplus or excess supply shortage or excess demand ceteris paribus a price ceiling

shortage or excess demand

Legislators who focus on local spending projects for their own district typically show a lack of sufficient concern for meeting the demands of special interest groups. spending in the interest of the nation as a whole. law and non-market based economics. the prevalence of voting cycles.

spending in the interest of the nation as a whole.

The term ____________ refers to a market exchange that affects a third party who is outside or external to the exchange. social costs spillover market failure private costs

spillover

If the firm is producing at a quantity of output where marginal revenue exceeds marginal cost, then, the firm's perceived demand will shift to the left. the firm should keep expanding production. each marginal unit adds profit by bringing in less revenue than its cost. the firm is now earning zero for profit.

the firm should keep expanding production.

What do stocks, bonds, securitized mortgage assets and other financial investments all have in common? they are all forms of investments bought by demanders of capital they all guarantee rates of return they can only be purchased in financial markets their values are tracked by the Dow Jones Industrial Average

they can only be purchased in financial markets

If monopolistic competitors must expect a process of entry and exit like perfectly competitive firms, they will be unable to earn higher-than-normal profits in the short run. they will wish to cooperate to make decisions about what price to charge. they will wish to cooperate to make decisions about what quantity to produce. they will be unable to earn higher-than-normal profits in the long run.

they will be unable to earn higher-than-normal profits in the long run.

Market competition may sometimes encourage a firm to innovate out of fear because of the perception that they will inevitably fall behind other competitors seeking out innovations. the firm will only have a very temporary edge over its competitors. the ability to earn above-normal profits is also available to its competition. higher profits can only be earned by finding less expensive ways to produce.

they will inevitably fall behind other competitors seeking out innovations.

Why do business firms need financial capital? to lend to other businesses to make real physical capital investments to provide an alternate source of revenue for households to make diversified capital investments

to make real physical capital investments

___________ include all spending on labor, machinery, tools, and supplies purchased from other firms. Total profits Total revenues Total costs Total profit margins

total costs

Scarcity exists because of: the market mechanism. specialization and division of labor. the allocation of goods by prices unlimited wants and limited resources.

unlimited wants and limited resources.