EC 201 Online Quiz's

when the government places few restrictions on how a good or a service can be produced orsold or on how a factor of production can be employed.

A free market exists

a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology.

A production possibilities frontier (PPF) is

C and D.

As illustrated in the diagram to the right, when a nation moves from autarky to free trade, economic surplus increases by the areas represented by________ (pic)

-world production of both goods increases after trade. -shifting production to the more efficient country—the one with the comparative advantage—increases total production. -inefficiencies in resource allocation are reduced

By trading, countries are able to consume more than they could without trade. This outcome is possible because

is the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors.

Comparative advantage

more inelastic because sugar tends to represent a smaller fraction of a consumer's budget.

Compare the demand for sugar with demand for food. The demand for sugar is likely

relatively more elastic because wine is a luxury.

Compare the demand for water with the demand for wine. The demand for wine is likely

Demand is elastic at all prices above $10.00 and inelastic at all prices below $10.00.

Consider the demand curve illustrated in the figure to the right. Is demand elastic or inelastic? (pic)

D1

Consider the two demand curves illustrated in the figure to the right. Which of the two is relatively more elastic? (pic)

The sum of the QUANTITY demanded at a certain level of PRICE.

Demand Market

is selling a product for a price below its cost of production.

Dumping

a market outcome in which the marginal benefit to consumers of the last unit producedis equal to its marginal cost of production and in which the sum of consumer surplusand producer surplus is at a maximum.

Economic efficiency is

the fair distribution of economic benefits.

Equity is

the private benefit from consumption will be different than the social benefit from consumption.

How do externalities affect markets? If a positive externality in consumption is present in a market, then

provide too much electricity.

How do externalities in the production of electricity result in market failure? Because of externalities, the market for electricity will

D and F E and G

In the diagram to the right, illustrating a per-unit tax equal to P2 minus P3,tax revenue is represented by the areas__________ and the excess burden of the tax is represented by areas_______

equilibrium price; market equilibrium; equilibrium quantity

In the diagram to the right, point A provides the _____, point B the _____, and point C the _____.

unattainable result

In the diagram to the right, point G indicates an ______

how households and firms make choices, how they interact in markets, and how thegovernment attempts to influence their choices.

Microeconomics is the study of

When we assume the managers at Microsoft have used all available information andhave weighed all known benefits and costs, we are assuming rationality.

Microsoft charges a price of $599 for a copy of Windows 7. Is this pricing decision rational?

change in demand.

On the diagram to the right, a movement from A to C represents a____

the community could establish norms where social pressure limits deforestation.

Suppose a common resource—wood in a public forest—is being overused because residents consider the benefits of gaining firewood or wood for building but do not account for the cost of deforestation when chopping down trees. What could be done to prevent wood in the forest from being overused? To prevent overuse of the common resource,

the supply of parking will be more elastic and the price of parking will increase by a relatively small amount the night of the game.

Suppose a professional basketball game is to be played at a suburban arena, which increases demand for parking on the night of the game. If the suburban area has the ability to create additional parking during periods of peak demand, then

limit sulfur dioxide pollution to a particular quantity per year.

Suppose the figure to the right illustrates the marginal cost and marginal benefit from reducing sulfur dioxide pollution. How could the government use a command-and-control approach to reduce pollution to the optimal level for society?

is not efficient because firms can have different costs of reducing pollution.

Suppose the government requires each firm to reduce sulfur dioxide emissions by an equal amount such that total emissions are reduced by 10.0 million tons per year. Is this approach necessarily economically efficient? This command-and-control approach_______

not change the amount of pollution reduction because the marginal benefit and marginal cost of pollution reduction will not change.

Suppose the production of electricity by a utility generates pollution that harms others. Suppose also that Coase bargaining can occur between the utility and the victims of pollution but that the utility has not been legally liable for the damages from its pollution. How would making the utility legally liable for the damages from its pollution affect pollution reduction?

-one of the largest exporters -less important

The United States is__________ in the world. International trade remains________ to the United States than it is to most other countries.

1.A + B + C + D 2.A 3.C+B

The diagram below shows the actual statistics for the U.S. sugar market in 2016, reflecting a quota of 6.7 billion pounds placed on U.S. imports. Complete the table below illustrating the welfare effects of this quota.

20k 20k 50k 10k

The diagram to the right shows a market in which a price floor has been imposed. Identify the following: -deadweight loss? -The transfer of consumer surplus to producers? -Producer surplus with this price floor? -Consumer surplus with this price floor? (PICTURE)

when income increases, demand for a normal good increases while demand for an inferior good falls.

The distinction between a normal and an inferior good is

0

The price elasticity of supply when supply is perfectly inelastic is

1.what goods and services will be produced? 2.how will the goods and servicesbe produced? 3.who will receive the goods and services produced?

Trade-offs force society to make choices, particularly when answering the following three fundamental questions:

false: decreases in price affect the quantity demanded, not demand.

True or False and why? An increase in supply decreases the equilibrium price.

not all goods and services are traded internationally, production of most goods involves increasing opportunity costs, and tastes for products differ.

We do not see complete specialization in the real world because

all parties to an agreement must have full information about the costs and benefits of the external

What must be true for the Coarse Theorem to hold

the policies are consistent with economic incentives.

When the federal government crafts environmental policies that make it less expensive for firms to follow green initiatives,

some people win, some people lose, and there is a loss of economic efficiency.

When the government imposes price floors or price ceilings,

reverse causality and an omitted variable

When we graph the relationship between two variables, we often want to draw conclusions about whether changes in one variable are causing changes in the other variable. Doing so, however, can lead to incorrect conclusions. Reasons for drawing incorrectconclusions about cause and effect include

An increase in the price of inputs.

Which of the following events would cause the supply curve to decrease from S1 to S2?

Autarky, terms of trade

_____ is a situation in which a country does not trade with other countries. The _____ is the ratio at which a country can trade its exports for imports from other countries.

Consumer and A

________ surplus is the difference between the highest price a consumer is willing to pay and the price the consumeractually pays. This component of economic surplus is illustrated in the diagram to the right by area_______

-When the quantity demanded is completely unresponsive to price and the price elasticity of demand equals zero. -Straight up vertical line.

perfectly inelastic demand

c

your consumption point after trade is illustrated by point____