Econ Midterm 1
Common resources are
overused in the absence of government
Dr. Wexler displays her medical degrees in her office waiting room. This is an example of
signaling
Public goods are ___________
under-provided in the absence of government
Which of the following statements is true? -higher indifference curves are preferred to lower ones -lower indifference curves are preferred to higher ones -indifference curves cannot cross -A and C
A and C
At the consumer optimum, which of the following is true? -the slope of the indifference curve equals the slope of the budget constraint -the marginal rate of substitution equals the relative price -the indifference curve is tangent to the budget constraint -all the above
All the above
Give an example of a positive externality
Myra's newly cut lawn makes her neighborhood more attractive
Private companies are most likely to invest in medical research if
They have the ability to receive a patent for their discoveries
If the government imposes a binding price ceiling, it causes:
a shortage of the good
If the production of a good yields a negative externality, then the social-cost curve lies ________ the supply curve, and the socially optimal quantity is ________ than the equilibrium quantity.
above; less
Because Elaine has a family history of significant medical problems, she buys health insurance, while her friend Jerry, who has a healthier family, goes without. This is an example of
adverse selection
One documented deviation from rationality is that many people
end to be excessively confident in their own abilities
Give an example of a common resource
fish in the ocean
When the gov levies a tax on a good equal to the eternal cost associated with the good's production, it ________ the price paid by consumers and makes the market outcome ________ efficient
increses; more
Which of the following does NOT describe a firm in a monopolistically competitive market? -it sells a product different from its competitors -it takes its price as given by market conditions -it maximizes profit both in the short run and long run -it has freedom to enter or exit in the long run
it takes its price as given by the market conditions
If an oligopolistic industry organizes itself as a cooperative cartel, it will produce a quantity of output that is ________ the competitive level and ________ the monopoly level.
less than; equal to
When the price of wine rises, the substitution effect induces Ned to buy _____ wine and ______ bread
less; more
Maggie buys peanut butter and jelly, which are normal goods. When the price of PB rises, the income effect induces Maggie to buy _________ PB and _______ jelly
less;less
George has a life insurance policy that pays his family $1 million if he dies. As a result, he does not hesitate to enjoy his favorite hobby of bungee jumping. This is an example of
moral hazard
Give an example of a public good
national defense
What is true of a monopolistically competitive market in long-run equilibrium? -price is greater than marginal cost -price is equal to marginal revenue -firms make positive economic profits -firms produce at the minimum of the ATC curve
price is greater than marginal cost
Which categories of goods are excludable?
private and club good
Which categories of goods are rival in consumption?
private goods and common resources
Before selling anyone a health insurance policy, the Kramer Insurance Company requires that applicants undergo a medical examination. Those with significant preexisting medical problems are charged more. This is an example of
screening
The budget constraint measures:
the consumption bundles that the consumer can afford
Command-and-control regulation may be better than a corrective tax if:
the negative externality is so large that the optimal quantity is zero
Diminishing marginal product explains why, as a firm's output increases ______
the production function gets flatter, while the total-cost curve gets steeper
What demonstrates the concept of a negative externality?
your sleep being disrupted by your neighbor's loud music
