Econ micro exam

The Rational Rule for Society is that society should produce another unit of a good if:

the marginal social benefit exceeds the marginal social cost.

Chin purchases five protein bars at a price of $3 each. The marginal benefit he receives from each bar is $5 for the first bar, $4.50 for the second bar, $4 for the third bar, $3.50 for the fourth bar, and $3 for the fifth bar. The marginal cost of producing the bars is $2 each. What is Chin's consumer surplus on the fifth bar?

$0

Which of the following statements is based on normative analysis?

We should protect the environment.

People gain consumer surplus when they purchase an item:

at a price below the value of the benefit they receive from the item.

Which principle helps buyers and sellers make decisions about whether to trade?

the cost-benefit principle

By contrast with a market that produces the socially optimal output, a market with negative externalities will:

overproduce.

Chapter

10

A quantity regulation is a:

minimum or maximum quantity that can be sold.

Chapter

7

When people focus on their comparative advantage and then trade for other things, they:

improve their standard of living or increase their leisure time.

The producer surplus on a unit sold equals:

price minus marginal cost.

A tariff is a:

tax on imported products.

The tragedy of the commons is the:

tendency to overconsume common resources.

Which of the following is NOT a trade cost?

the cost of producing a good

Which of the following is an example of a trade cost associated with a U.S. citizen importing a sweater produced in India?

the cost of the tariff on imported sweaters from India

A price ceiling is:

the maximum price that a seller can charge in a market.

Externalities tend to occur because decision makers consider _____ and do NOT consider _____.

their own costs and benefits; the effects of their actions on others

Chin purchases five protein bars at a price of $3 each. The marginal benefit he receives from each bar is $5 for the first bar, $4.50 for the second bar, $4 for the third bar, $3.50 for the fourth bar, and $3 for the fifth bar. The marginal cost of producing the bars is $2.50 each. What is Chin's total consumer surplus from the five bars that he purchased?

$5

Portia produces and sells headbands. Her marginal cost for one headband is $6, and her average cost is $4. She gains producer surplus only when she sells headbands at a price above:

$6.

A tax on buyers causes which of the following?(i) a leftward shift of the demand curve(ii) a decrease in quantity sold(iii) an increase in the price buyers pay

(i), (ii), and (iii)

A tax on sellers causes which of the following?(i) a leftward shift of the supply curve(ii) a decrease in quantity sold(iii) an increase in the price buyers pay

(i), (ii), and (iii)

Chapter

8

Chapter

9

Which of the following is an example of a quantity quota?

A city enforces zoning laws that restrict the number of housing units.

When the economic surplus in a market is less than it would be if the market were efficient, the market is experiencing:

deadweight loss.

What conditions must be met for private bargaining to be effective in resolving an externality?

Bargaining costs must be low, and property rights must be clear.

Which of the following statements describes the Coase Theorem?

If bargaining is costless, and property rights are clearly established and enforced, then externality problems can be solved through private bargaining.

In 2018, the unemployment rate in the United States went as low as 3.7%, as measured by the Bureau of Labor Statistics. This historically low level of unemployment occurred simultaneously with a large trade deficit. This provides evidence against which of the following arguments against international trade?

International trade may lead to job loss.

Suppose that one hour of labor in Singapore can produce 20 computers or 40 cellphones. Further, suppose that one hour of labor in Ireland can produce 10 computers or 15 cellphones. _____ has a comparative advantage in the production of computers. _____ has a comparative advantage in the production of cellphones.

Ireland; Singapore

Analysis that describes what would happen if various actions were taken is _____ analysis.

Positive

A tax on sellers shifts the:

Supply curve to the left

A binding price floor in a market is removed. Which of the following is likely to occur as a result?

The market price will fall.

Which of the following illustrates a positive externality?

The value of Maria's house rises when the city builds a park nearby, enhancing her view.

Why would a company set up internal markets?

To solve the knowledge problem.

A subsidy is a:

a government payment designed to encourage particular purchases or productive activities.

An externality is defined as:

a side-effect of an activity that affects bystanders whose interests are not taken into account.

Which of the following would be both nonrival and nonexcludable?

a siren tornado warning system

In a market graph, consumer surplus is the area:

above the price and below the demand curve.

As prices _____, they provide useful business intelligence.

aggregate information

A binding price floor is:

always above the equilibrium price.

Marjean walks to work every day along a busy road. As she does so, she breathes in the fumes of many cars, often arriving at work coughing. The economic term for the impact of the cars on Marjean is:

an externality.

Managers can harness market forces by setting up internal markets, which:

are organized within a company to buy and sell scarce resources.

You have a comparative advantage if you can complete a task:

at a lower opportunity cost than anyone else.

Argentina and Chile both produce copper and timber. If Chile produces copper much more efficiently than Argentina and timber slightly more efficiently than Argentina, _____ can benefit from trading copper and timber with each other.

both countries

Russia and Kazakhstan both produce horses and oil. If Kazakhstan is much more efficient than Russia in the production of horses and slightly more efficient than Russia in the production of oil, _____ can benefit from trading horses and oil with each other.

both countries

The economic burden of a tax is the:

burden created by the change in after-tax prices faced by buyers and sellers.

To get maximum output, you should allocate each task to the person who:

can do the task with the lowest opportunity cost.

Specialization will increase output when it is based on:

comparative advantage.

In 2016, Amazon began charging a 5.75% sales tax on products it sells in the District of Columbia. Holding all else constant, the effect of this tax would be to _____ in the District of Columbia.

decrease Amazon sales

A subsidy for buyers of a product shifts the:

demand curve to the right.

Buyers bear a smaller incidence of the tax when:

demand is more elastic than supply.

If Bishan wants to capitalize on comparative advantage in his life, then he should:

do more of what he is relatively good at and then trade for other things.

The marginal private benefit is the:

extra benefit enjoyed by the buyer of one extra unit of a good or service.

All of the solutions to externality problems involve:

getting buyers and sellers to consider marginal external costs and benefits.

The statutory burden of a tax is the:

government-designated burden of a tax payment.

Countries benefit from trade by exporting goods in which their opportunity costs are relatively _____ and importing goods in which their opportunity costs are relatively _____.

low; high

A good is characterized as _____ when one person's use of the good does not reduce another person's ability to use the same unit of the good.

nonrival

Statements about what option should be chosen are _____ statements.

normative

A government leader determines that the 5% unemployment rate is too high. She asks her staff to research policy options to reduce the rate and a few weeks later is given four options. Each option would reduce the rate by a different amount and at a different cost. The leader studies the options and chooses the one she feels is best for the country. In order, what types of analysis were used in this three-stage chain of events?

normative; positive; normative

A prediction market is a market where:

payoffs are linked to whether an uncertain event occurs

An import is a good or service:

purchased from a foreign seller.

In 2017, eBay started charging a 20% value-added tax on fees charged to small businesses in the United Kingdom. Holding all else constant, this would _____ in the United Kingdom.

raise the prices that eBay sellers charge their customers

The main role of markets is:

reallocating resources to better uses.

Internal markets, which are markets that managers set up within their organization, are:

set up to allocate resources of a company more efficiently, often not using real money.

The outcome that is most efficient for society as a whole — including the interests of buyers, sellers, and bystanders — is the _____ outcome.

socially optimal

An export is a good or service:

sold to a foreign buyer.

A good has a free-rider problem when:

someone can enjoy the benefits of the good without bearing the costs.

Which of the following is LEAST likely to be traded internationally?

sports arenas