Eco Exam #4 (Chap. 10, 11, 12, 13, and 14)
economic
...profit is total revenue minus total cost including both explicit and implicit cost
accounting
...profit is total revenue minus total explicit cost
a public good
a tornado siren...
u shape
the tug of war between average fixed cost and average variable cost generates the.... in average total cost
opportunity cost
the value of a business owners time is an example of...
fixed
... costs do not vary with the quantity of output produced
variable
... costs do vary with the quantity of output produced
explicit
.... are input cost that do require an outlay of money by the firm
implicit
.... are input costs that do not require an outlay of money by the firm
diminishing marginal product
.... is the property whereby the marginal product of an input declines as the quantity of input increases
average total cost
.... is the total cost divided by the quantity of output
average variable cost
.... is the variable cost divided by the quantity of output
rival in consumption
.... means that one person's use of the good reduces another person's ability to use it
constant returns
.... of scale - long run average total cost stays the same as the quantity of output changes
diseconomies
.... of scale- long run average total cost rises as the quantity of output increases
total
.... revenue is the amount that the firm receives for the sale of its output
price
..... are the signals that guide the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources
marginal
....cost is the increase in total cost that arises from an extra unit of production
average fixed cost
....is the fixed cost divided by the quantity of output
Coase Theorem
....is the proposition that if the private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own
economies
....of scare often arises because higher production levels allow specialization among workers
marginal product
...of any input in the production process is the increase in quantity of output obtained from one additional unit of that input
negative
Dee loves to landscape her yard, but her neighbor Marvin places a low value on his landscaping. When Marvin's grass is neglected and get long, Dee will mow it for Marvin, this is an example of a private solution to a .... externality problem
Mary pays Cathy $16 so that Mary can smoke
Mary and Cathy are roommate. Mary assigns a $30 value to smoking cigarettes. Cathy values smoke-free air at $15. Which of the following scenarios is a successful example of the Coase Theorem?
when the number of interested parties is large and bargaining cost are high
The Coase Theorem suggests that private markets may not be able to solve the problem of externalities...
risk
a better way to look at the value of human life is to look at the.... that people are voluntarily willing to take and how much they must be paid for taking them
private good, because it is excludable and rival in consumption
a cheeseburger is a....
government regulation
a command-and-control policy is another term for a...
not excludable and rival in consumption
a congested side street in your neighborhood is...
fixed cost
a firms total cost is the sum of..... and variable cost
yes
a market is competitive if each buyer and seller is small compared to the size of the market and has little ability to influence market prices (yes or no)
private good
a mobile phone is a...
excludable and rival in consumption
a pizza is...
public good
a streetlight is a...
free rider
a... is a person who receives the benefit of a good but does not pay for it
transaction
according to the Coase Theorem, private markets will solve externality problems and allocate resources efficiency as long as private parties can bargain with sufficiently low... costs
externality
an.... arises when a person engages in an activity that influences the well-being of a bystander, but the bystander neither pays not receives compensation for that effect
what decisions lie behind the market supply curve
analyzing the behavior of the firm enhances our understanding of...
private goods
are most goods in the economy (private goods or public goods)?
declines
average fixed cost always (declines or increases) as output increases because of diminishing marginal product
increases
average variable cost typically (declines or increases) as output increases because of diminishing marginal product
not excludable, people have an incentive to be free riders
because public goods are...
club good
cable TV is a .... it is excludable but not rival in consumption
maximizing profits
economists assume that the typical person who starts her own business does so with the intention of...
maximize
economists normally believe that the goal of a firm is to .... profit
elephants are a common resource, while cows are private goods
elephants are endangered, but cows are not because...
command-and-control policy to increase social efficiency
emission controls on automobiles are an example of a...
transaction cost
employing a lawyer to draft and enforce a private contract between parties wishing to solve an external problem is an example of a...
negative
exhaust from an automobile is a (positive or negative) externality?
private cose
external costs is the difference between social cost and....
yes
government action can sometimes improve upon market outcomes (yes and no)
positive externality associated with the production of the good and the market equilibrium quantity of the good is less than the socially optimal quantity
if the social value of producing a good is always high than the private value of producing it, then there is a...
excludability of the good
in deciding whether a good is a public good, one must determine the...
increase entrance fees
it is common knowledge that many U.S. national parks have become overused, one possible solution to this problem is to...
club
knowing that goods are excludable and/or rival, they can be grouped into four categories: private goods, public goods, common resources, or ....goods
free riders make it difficult for private markets to supply the socially optimal quantity
national defense is provided by the government because...
more
negative externalities cause the market to produce (more or less) quantity than is socially desirable
tragedy of the commons
on holiday weekends thousands of people picnic in state parks, some picnic areas become so overcrowded the benefit of value of picnicking diminishes to zero, an overcrowded area is an example of...
the ocean
one of the least regulated common resources today is...
a public good or a common resource
people cannot be prevented from using a good if the good is...
less
positive externalities cause the market to produce (more and less) quantity than is socially desirable
they will produce a specific product for which they receive a patent
private companies will invest in medial research if....
there is a free rider problem
producers have little incentive to produce a public good because...
positive
research into new technologies provides a .... externality because it creates knowledge the other people can use
society has to weigh the cost and benefits when deciding how much pollution to allow
since almost all forms of transportation produce some type of pollution...
common
some important... resources are clean air and water; congested roads; and fish, whales, and other wildlife
yes
sometimes the government provides public goods because the private market on its own will not produce an efficient quantity (yes or no)
the equilibrium quantity is greater than the socially optimal quantity
suppose that coal producers create a negative externality equal to $5 per ton of coal. what is the relationship between the equilibrium quantity of coal and the socially optimal quantity of coal?
corrective
taxes that are enacted to deal with the negative externalities called.... taxes
selling fishing licenses and regulating fish legths
the U.S. government protects fish, a common resources by...
total cost
the amount of money that a firm pays to buy inputs is called...
total
the amount that the firm pays to buy inputs is called.... cost
efficient
the bottom of the u shape occurs at the quantity that minimizes average total cost, this quantity is sometimes called the.... of the firm
implicit
the difference between accounting profit and economic profit is... cost
specific knowledge is excludable, while general knowledge is not excludable
the difference between specific knowledge and general knowledge is that...
yes
the government can correct a negative externality by taxing goods (yes or no)
yes
the government can correct a positive externality by subsidizing the goods (yes or no)
the value or benefit of the project
the greatest difficulty with cost benefit analysis of a public project is determining...
social optimum
the intersection between the social cost and demand is the....
supply
the law of.... states that firms are willing to produce and sell a greater quantity of a good when the price of the good is higher
property rights
the market fails to allocate resources efficiently because.... are not well established. That is, some item of value does not have an owner with the legal authority to control it
production
the relationship between the quantity of inputs used to make a good and the quantity of output of that good is called the .... function
opportunity cost
the things that must be forgone to acquire a good are called...
public goods
the three most important.... are basic research, fighting poverty, and national defense
price x quantity
total revenue =
corrective tax
using a toll to reduce traffic when congestion is greatest is an example of a...
common resources are being used too much
what does Tragedy of the Commons mean?
$10 million
what is the dollar value of human life?
economic
what kind of profit is an important concept in what motivated a firm to stay in business (economic or accounting)
internalize the exernality
when a policy succeeds in giving buyers and sellers in a market an incentive to take into account the external effects of their actions, the policy is said to
internalizing the externality
when buyers and sellers in a market take into account the external effects of their actions, they are....
long run
when do firms have more flexibility? in the (long run or short run)?
minimum
when does the marginal cost curve cross the average total cost curve? at its (minimum or maximum)?
yes
when output is very low the typical average total cost is high (yes or no)
give sellers the incentive to account for the external effects of their action
when producers operate in a market characterized by negative externalities, a tax that forces them to internalize the externality will...
public
when speaking of excludable and/or rival in consumption, ... goods are not excludable and not rival in consumption
depends on the business
when speaking of the long run how long does it take a firm to get to the long run?
it is possible for a retired or disabled person to have no value to society
when the value of a human life is calculated according to the economic contribution a person makes society the troubling implication is that...
toll charge on congested roads
which is an example of a government intervention to solve a tragedy of the commons problem?
accountants
which profit is usually larger (accountants or economists)