Micro 2 Terms

Social surplus is the ____

Total value from trade in the market.

If you produce at a point on your Production Possibility Curve, then you are producingat a point that is

attainable and efficient.

Negative externalities impose an additional cost that:

-Is reflected in the consumers demand curve. -Is not explicitly recognized by the buyers and sellers in the market. -Needs to be subtracted from the producers marginal cost to determine true market price. -Is reflected in the producers supply curve. (B)

Assume that the market for chocolates is perfectly competitive. Which of the following statements would be true in this case?

-Jessica, a chocolate seller, sometimes sets her price lower or higher than the price at which other sellers sell their chocolates -Pam wants to produce chocolates but she is unable to as Roy controls all the cocoa farms in the region. -Jill starts to produce chocolates today, but the addition of her supply into the market does not decrease the market price. -Terry uses soy milk for producing his chocolates, while Donna uses almond milk for producing hers. (C)

Market inefficiencies result from all of the following, except:

-Positive externalities. -Social benefits or costs. -Pecuniary externalities. -Negative externalities. (B)

In assessing the performance of a perfectly competitive market, we can say that ____

-Price efficiently allocates goods and services to buyers and sellers. -No individual can be made better off without making someone else worse off. -Any departure from the equilibrium necessarily reduces social surplus. (All of the above)

Positive externalities result in a ___ shift of the ___ curve. There ____ a deadweight loss with a positive externality.

-Rightward; demand; will be. -Leftward; demand; will not be. -Rightward; demand; will not be. -Leftward; supply; will be. (A)

Negative externalities cause a ____ shift of the supply curve and ___ in market quantity. Recognizing this deadweight loss ___ result in elimination of the externality.

-Rightward; demand; will be. -Leftward; demand; will not be. -Rightward; demand; will not be. -Leftward; supply; will be. (D)

When bargaining to deal with negative externalities

-The cost falls on the party with the most to gain. -The cost falls on the party with the least to lose. -The cost will only be paid if it is greater than the benefit of fixing it. -The economically efficient outcome can never be achieved. (A)

Which of the following would be an example of the Coase Theorem?

-The homeowners association agrees to report anyone setting off fireworks after 10p.m. to the local authorities. -The homeowners association provides a fireworks show that ends at 10 p.m. -The county commission approves a steep fine to be placed on anyone setting off fireworks after 10 p.m. -The county commission agrees to a town meeting to hear concerns from citizens about setting off fireworks after 10 p.m. (B)

The long-run average total cost curve (ATC) lies ___ the short-run ATC. The long-run supply curve is the portion of the marginal cost (MC) curve that lies above the ___ curve

Below; Average Total Cost.

If the market price of pizza in this competitive market is below the ATC curve and the price of calzones is above the ATC curve, ___. The price of pizza will ____

Firms currently making pizza will switch to making calzones; increase.

If firms in a perfectly competitive market are earning profits or incurring losses in the short run, then in the long run these profits or losses will either cause new firms to enter or existing firms to leave the market. This will result in a shift in the ____until profits are ____.

Industry supply curve; zero.

If resources prices fall, what happens to the Production Possibility Curve?

It does not change.

Unless shutdown or exit is optimal, every firm expands production until

Marginal revenue, marginal cost, and price are all equal (MR = MC = P).

When economists speak of a deadweight loss, they are referring to ___ in ____caused by a market distortion.

decrease; social surplus.

A non-market price imposition is called a price control. A price control set above the equilibrium price will result in a _____. price control set below the equilibrium price will result in a _____.

surplus; shortage.