ECON 2302 EXAM #2

In the United States, decisions regarding taxation, regulation of business, and government intervention in private markets are made via a process that relies heavily on which of the following?

Majority voting

The formula for the marginal utility per-dollar-spent of a product is which of the following?

Marginal utility of the product divided by the price of the product

Which voting system is associated with the paradox of voting?

Paired-choice majority voting

Which best describes economic costs?

Payments that must be made to obtain a resource

______________-agent (one word) problems are conflicts that arise when tasks are delegated by one group of people to another group of people.

Principal

When consumers seek to maximize their total utility, they are engaging in which of the following?

Rational behavior

Which of the following diverts purchasing power from private spenders to government, thereby removing resources from private use?

Taxation

Utility is defined as:

the satisfaction or pleasure obtained by consumers from consuming a good or service

Which of the following does total utility refer to?

Amount of satisfaction a person gets from a good or service

When comparing different public project plans, which guideline should be followed?

An activity should be increased as long as marginal benefit exceeds marginal cost.

What is meant by the phrase "spreading the overhead"?

As production increases, average fixed cost declines.

What is marginal utility if total utility is falling?

rises; falls

How do interest groups generally attempt to influence the outcome of majority voting?

By convincing voters of the merits of a public good

Which aspect of pork-barrel politics refers to expenditures specifically designated to benefit a politician's local district or constituency?

Earmarks

True or false: Utility is objective and easy to quantify.

False

Which of the following explains why every good has a price?

Goods are scarce relative to the demand for them.

With economies of scale, a 10% increase in all resources that causes a 20% increase in output results in which of the following?

A decline in average total cost (ATC)

In which of the following ways does the law of diminishing marginal utility support and exemplify consumer behavior?

A downward-sloping demand curve

What type of opportunity cost does a firm incur when it uses resources that it already possesses instead of selling them for cash?

Implicit

What happens to average product as additional units of labor are added to a fixed plant?

It increases, reaches a maximum, and then decreases.

True or false: The marginal utility of successive units of a good or service should always be compared against the added cost or price of the good or service.

True

In which of the following circumstances would a principal-agent problem occur?

When the person who completes a task has incentives to act against the interests of shareholders

Average total cost goes up when marginal cost is greater than ______.

average total cost

Less coordinated decision making by executives and supervisors leads to _____________________ of scale.

diseconomies

The ______ cost of any resource used to produce a good is the value or worth the resource would have in its best alternative use.

economic

Government failure refers to ______

economically inefficient outcomes caused by shortcomings in the public sector

If marginal utility becomes negative, then total utility ______ as an extra unit of a good is consumed.

falls

The marginal-product curve is a mirror image of the ______ curve.

marginal-cost

A ______ is a relatively rare market situation in which average total cost is minimized when only one firm produces the good.

natural monopoly

What is marginal utility if total utility is falling?

negative