ch 3 smart book

______ is the difference between the value to consumers and the amount they pay to producers.

Consumer surplus

A purely private good exhibits ______.

both exclusivity and rivalry

The difference between how much consumers value a good and how much they pay for it is called ______.

consumer surplus

If the net benefit to society is not maximized, then there is ______.

deadweight loss

A purely public good exhibits ______.

neither exclusivity nor rivalry

Exclusivity occurs when ______.

people who do not pay for a good, do not get to consume it

The mathematical formula for price elasticity of demand is (______ change in quantity demanded)/(______ change in price).

percentage; percentage

The mathematical formula for price elasticity of supply is (______ change in quantity supplied)/(______ change in price).

percentage; percentage

Suppose an industry has considerable spare capacity in the short run and, with typical facilities, has the ability to ramp up production quickly. Supply in that industry would likely be

perfectly (or near perfectly) elastic.

Suppose an industry has no spare capacity in the short run and all production takes place in facilities producing 24 hours a day, 7 days a week, 365 days per year. Supply in that industry would likely be

perfectly (or near perfectly) inelastic.

The difference between how much consumers pay for a good and the variable cost associated with making it is called ______.

producer surplus

A good that exhibits both exclusivity and rivalry is a(n) ______.

purely private good

A good/service where both exclusivity and rivalry hold is called a ______.

purely private good

A good that exhibits neither exclusivity and rivalry is a(n) ______.

purely public good

A good where neither exclusivity nor rivalry hold is called a ______.

purely public good

A network good is one that ______.

requires that other people consume it to have any use

Elasticity is a measure of ______?

responsiveness

When a good is consumed and the result is that others may not enjoy the good (or enjoy it as much) then the good exhibits ______.

rivalry

A congestible public good exhibits ______.

rivalry but not exclusivity

Rivalry occurs when ______.

the consumption of a good makes that good unavailable to others

______ is the difference between the money the firm gets that is in excess of its marginal costs.

Producer surplus

The mathematical formula for price elasticity of demand is ______.

(percentage change in quantity demanded)/(percentage change in price)

The mathematical formula for price elasticity of supply is ______.

(percentage change in quantity supplied)/(percentage change in price)

Place the following demand curves in the order of their elasticity (from most elastic to least elastic) at the P*, Q* point.

-D1 -D2 -D3 -D4

Suppose you are looking at a price-quantity combination of P = 5, Q = 10. The reason a relatively flat demand curve is more elastic than a relatively steep one going through that same point is that (Select all that apply.)

-the steeper one shows a lower degree of responsiveness of quantity to changes in price. -the flatter one shows a greater degree of responsiveness of quantity to changes in price.

Which of the following are considered determinants of elasticity of supply?

Availability of relevant resources Agility of production and inventories Time (to develop production alternatives)

Provide the letters that are the boundary of the area which represents producer surplus.

BP*C

The price elasticity of BLANK is the responsiveness of quantity demanded to a change in price, whereas the price elasticity of BLANK is the responsiveness of quantity supply to a change in price.

Blank 1: demand Blank 2: supply

The price elasticity of demand is the responsiveness of quantity Blank to a change in price, whereas the price elasticity of supply is the responsiveness of quantity Blank to a change in price. Listen to the complete question

Blank 1: demanded Blank 2: supplied

The demand for a particular farmer's corn is likely to be perfectly BLANK because that farmer has no influence over the price regardless of how much that farmer can produce.

Blank 1: elastic

When the demand for a good is inelastic, the percentage change in quantity is BLANK (less/greater) than the percentage change in price.

Blank 1: less or smaller

Of the demand curves listed, which one (at P*, Q*) is the most elastic without being perfectly elastic?

D2

______ is the loss in societal welfare associated with production being too little or too great.

Deadweight loss

______ is measure of responsiveness of quantity to a change in another variable.

Elasticity

True or false: Markets always produce the best possible outcome.

False

Which of the following goods/services are likely to have perfectly inelastic demand (at realistic prices)? (Select all that apply.)

Insulin to a diabetic The services to set a broken leg

Provide the letters that are the boundary of the area which represents the money consumers pay producers.

OP*CQ*

Provide the letters that are the boundary of the area which represents consumer surplus.

P*AC

Which of the following are examples of network goods? (Select all that apply.)

Telephones Social media apps

Which of the following will result in market failure?

The buyer may not be able to make a well-informed choice given the complexity of the decision. A good may not be one for which a company can profit from selling even though society profits from its existence. A buyer or seller may have too much power over the price. A buyer or a seller may have radically different information about a good or service. An innocent third party may be harmed by the production or consumption of a good.

If the percentage change in price is less than the percentage change in quantity demanded, then the good is ______.

elastic

If the price of a good rises, the amount purchased falls, and the amount of money spent on the good also falls, that good has ______ demand.

elastic

Suppose you were contemplating whether to indulge in your favorite luxury (and it was something you don't need). Demand for this is likely to be highly

elastic.

A good that exhibits exclusivity but not rivalry is a(n) ______.

excludable public good

A good where exclusivity holds but rivalry does not is called a ______.

excludable public good

If you do not pay for a good and as a result you do not get to consume the good, it exhibits ______.

exclusivity

A excludable public good exhibits ______.

exclusivity but not rivalry

If a good exhibits elastic demand, then the percentage change in the quantity demanded is ______ the percentage change in the price.

greater than

A good (such as a medication that is necessary to live) is likely to have perfectly BLANK demand

inelastic

If the price of a good rises, the amount purchased falls, and the amount of money spent on the good also rises, that good has ______ demand.

inelastic

Suppose you are looking at a price-quantity combination of P = 5, Q = 10. The reason a relatively steep demand curve is less elastic than a relatively flat one going through that same point is that ______.

the steeper one shows a lower degree of responsiveness of quantity to changes in price

If the price of a good rises, the amount purchased falls, and the amount of money spent on the good stays exactly the same, that good has ______ demand.

unit elastic