questions from exams

A legal maximum on the price at which a good can be sold is called a price _________.

ceiling

The Whitefish Bay Public Library has a large number of books that anyone with a library card may borrow. Anyone can obtain a card for free. Because the number of copies of each book is limited, not everyone can have the same book at the same time. What type of good would the library books be classified as in this case?

common resource

Goods that are rival in consumption but not excludable would be considered _______________________.

common resources

Lois is a self-employed pet sitter. She can make 20 "housecalls" per day. She is considering hiring her sister Dora to work for her. Both she and Dora can visit 35 houses per day. What is Dora's marginal product?

15 houses

From the time of Benjamin Franklin to the present, the percentage of the average American's income that goes to pay taxes has risen from less than ___ percent to about _____ percent

5 33.3

A firm's long-run condition for exiting a market is to exit if P ___ ATC

<

The size of the deadweight loss generated from a tax is affected by the a. elasticities of both supply and demand. b. elasticity of demand only. c. elasticity of supply only. d. total revenue collected by the government

a. elasticities of both supply and demand.

When a perfectly competitive firm decides to shut down, it is most likely that marginal cost is _________ average variable cost.

above

The term market failure refers to a market that fails to ____________ resources efficiently.

allocate

Profit maximizing firms in competitive industries with free entry and exit face a price equal to the lowest possible ______________________ of production.

average total cost

Suppose the government increases the size of a tax by 25 percent. The deadweight loss from that tax a. increases by 25 percent. b. increases by more than 25 percent. c. increases but by less than 25 percent. d. decreases by 25 percent.

b. increases by more than 25 percent

A positive externality arises when a person engages in an activity that has a ____________ effect on a bystander who (pays/does not pay) the person who causes the effect.

beneficial does not pay

A _________________ occurs when government receipts are less than spending.

budget deficit

Which of the following scenarios is not consistent with the Laffer curve? a. The tax rate is very low, and tax revenue is very low. b. The tax rate is very high, and tax revenue is very low. c. The tax rate is very high, and tax revenue is very high. d. The tax rate is moderate (between very high and very low), and tax revenue is relatively high.

d. The tax rate is moderate (between very high and very low), and tax revenue is relatively high

Perfect price discrimination eliminates _____________________.

deadweight loss

The average fixed cost curve always __________ with increased levels of output.

declines

The fundamental reason that marginal cost eventually rises as output increases is because of....

diminishing marginal product

In choosing the form of a tax, there is often a tradeoff between ____________ and __________.

efficiency fairness

A decrease in supply will cause the smallest increase in price when demand is _________ and supply is _________.

elastic elastic

In the market for oil in the short run, demand is __________ and supply is ___________

elastic elastic

A free-rider problem exists for any good that is not ___________.

excludable

When market conditions in a competitive industry are such that firms cannot cover their total production costs, then some firms will ________ the market, causing prices to _________ until the remaining firms can cover their total production costs.

exit rise

The difference between social cost and private cost is a measure of the cost of an _____________.

externality

Economies of scale occur when long-run average total costs _____ as output increases.

fall

"Monopolists do not worry about efficient production and minimizing costs since they can just pass along any increase in costs to their consumers." This statement is (true/false) -- price increases will mean ________ sales, which may ________ profits.

false fewer lower

Total cost can be divided into two types of costs: _______ costs and ________ costs

fixed variable

If average total cost is rising, then marginal cost is _________ than average total cost.

greater

Deadweight losses occur in markets in which the government...

imposes a tax

Excessive fishing occurs because each individual fisherman has little ____________ to maintain the species for the next year.

incentive

Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10 percent of their land, then wheat farmers would experience a(n) ____________ in their total revenue.

increase

When a country is on the downward-sloping side of the Laffer curves, a cut in the tax rate will ____________ tax revenue and ____________ the deadweight loss.

increase decrease

When a firm experiences diseconomies of scale, long-run average total cost ___________ as output increases.

increases

The simplest way for a monopoly to arise is for a single firm to own a _________________.

key resource

Because the goods offered for sale in a competitive market are largely the same, sellers will have little reason to charge _______ than the going market price.

less

A monopoly's marginal cost will be _______ than the _______ per unit of its product.

less price

The U.S. tax code gives preferential treatment to investors in municipal bonds. This is an example of a tax ____________.

loophole

A monopoly chooses to supply the market with a quantity of a product that is determined by the intersection of the _______________ curve and the ________________ curve

marginal revenue marginal cost

If a profit-maximizing monopolist faces a downward-sloping market demand curve, its __________________ is less than the _______ of the product.

marginal revenue price

An externality is an example of a ____________________.

market failure

If a road is congested, then use of that road by an additional person would lead to a _____________ externality.

negative

The degradation of the environment from litter is a ____________ externality and an example of the _________________________.

negative Tragedy of the Commons

If the government regulates the price that a natural monopolist can charge to be equal to the firm's marginal cost, the firm will earn ____________ profits, causing the firm to _______ the industry

negative exit

Goods that are rival in consumption and excludable would be considered _________________.

private goods

The Laffer curve relates the tax ______ to the tax ________ raised by the tax

rate revenue

The Tragedy of the Commons results when a good is...

rival in consumption and not excludable

When price is below average variable cost, a firm in a competitive market will ___________ and incur _______ costs.

shut down fixed

One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run, the ______ of the factory is fixed.

size

When fixed costs are ignored because they are irrelevant to a business's production decision, they are called ________ costs.

sunk

Profit is defined as ______________ minus _______________

total revenue total cost

Suppose an excise tax is imposed on luxury boats and yachts. Economists argue that such a tax may burden __________ in the luxury-boat-and-yacht industry more than it burdens the _________ of luxury boats and yachts.

workers buyers