Econ 1B final

A forced rider is someone who:

pays a share of the costs of a public good but who does not enjoy the benefits

According to Adam Smith

people buy goods for which they have higher opportunity costs than others

If the market is competitive what will the price and quantity be

price will be lower quantity will be higher

What is the main difference between a perfectly competitive industry and a monopolistically competitive firm?

product differentiation

Coke and Pepsi are substitute soft drinks. What would cause the demand for Pepsi to shift to the left?

the price of coke decreases

The prisoners dilemma refers to the situation in which:

the pursuit of individual interests leads to an outcome that is in the best interest of no one.

Price discrimination is defined as selling:

the same product at different prices to different customers

Many people who own dogs do not pick up after them. This is an example of:

the tragedy of the commons

If speculators expect that the future price of corn will be higher, they will cause today's price of corn to _________ and the future price of corn to be ____________ than it would have been without speculation.

increase; lower

If a tax imposed on a market with inelastic demand and elastic supply:

buyers will bear most of the burden of the tax

Which of the following arguments is valid in the economics of international trade

Trade can result in a net job gain in the whole country

A monopolistically competitive firm operates where

MR=MC

Firms that produce goods that are dominant standard goods in the market typically sell these goods at:

A higher price than in a competitive market

What explains why cartel agreements are hard to maintain

Each firm in the cartel has the incentive to increase production and earn larger profits

A grocery store is running a "buy-one-get-another-at-one-half-off" promotion on a dozen doughnuts. So the first dozen is $6 and second would be $3. A person would buy the second dozen if their marginal benefit from the second dozen doughnuts is:

Greater than $3

Why might the benefits of monopolistic competition outweigh the inefficiencies?

If we had perfect competition instead of monopolistic competition, we would not have all the variety and innovation that we have today.

A person has a comparative advantage in activity X when that person's:

Opportunity cost is lower for him than for other trading partners

If women conspired together and demanded that any man wishing to take them on a date must take them to a nice restaurant , why would this be unsustainable

Some women will secretly allow guys to take them to cheaper restaurants

On a graph of a demand curve, total consumer surplus equals:

The area beneath the demand curve and above the market price

The production possibility frontier shows:

The combinations of output than an economy can produce given its productivity and supply of inputs

What explains how cartel members cheat?

They produce more output than they promised

In group projects for class there is often one member who does noticeably less work than others. What is the most accurate position of that person?

a free rider

After a hurricane in Florida destroys half of the orange crop, economists predict.

an increase in orange prices and a decrease in orange sales

Whenever marginal cost is greater than the average total cost

average cost is rising

In general, central planning has:

been a large failure

If quantity supplied equals 80 units and quantity demanded equals 85 units under a price control, then it is a:

binding price ceiling

With price matching plus 10% of the difference the equilibrium will occur when

both firms set the price at a high price

The market solves the information problem when allocating resources by:

collapsing all the relevant information about uses of the good into its price

Operating systems have network-good characteristics because of______ issues

compatibility

What results in a tariff on imported goods:

domestic production increases, government revenues increase

Perfectly competitive firms produce at the quantity where marginal revenue _________ marginal cost

equals

What true regarding monopolistic competition?

few sellers, free entry

There are ______ substitutes for oil, so the elasticity of demand for oil is _______ elastic

few; not very

In free markets, shortages lead to:

higher prices

Price floors make it illegal to compete for more customers by lowering prices, so firms compete by offering customers:

higher quality

Airlines try to differentiate their customers by willingness to pay based on:

how long in advance a person books their flight

The elasticity of demand measures:

how responsive quantity demanded is to a change in price.

Informative advertising:

improves the competitive process by educating the consumer about prices and new products

What is an example of why it is difficult to determine the optimal quantity of public goods that the government should produce?

it is difficult to assess exactly how much each individual values a public good

Major league basketball, the NBA, is cartelized to:

keep down players' salaries

Frequent flyer programs are often designed to:

limit contestability

Persuasive ads:

make people feel good about a product, and this is potentially valuable

What external costs are present in the market:

market prices send incorrect signals

What do economists normally assume to be true about the goals of firms

maximize profit

Network goods are usually produced by:

monopolies and oligopolies

A network good is a good the people benefit______ from as _______ people use it

more; more

Suppose that a firm plans to provide asteroids striking earth. What is true about this situation?

most people will not pay a firm for asteroid defense

Entrepreneurs have the incentive to:

move resources out of low-value industries and into high-value industries

What equation correctly identifies social cost

mp+external cost=social cost

Are public roads public goods.

no

Common resources are goods that are:

nonexcludable but rival

Perfectly competitive firms advertise:

not at all

Game theory is the study of:

strategic decision making

A___________creates a situation in which the price received by sellers ___________the price paid by buyers.

subsidy; exceeds

Economies of scale are:

the advantages of large-scale production that reduce average cost as quantity increases

A central planner can only allocate production across firms in a way that minimizes total costs if:

the central planner has perfect information on firms' costs.

An example of a common resource would be:

the environment

What firm's market is the most contestable?

the only Chinese restaurant in town

Antitrust authorities have a difficult time with network goods, because:

they know that with network goods, only a few firms will always dominate the market

For monopolist, MR is always less that P because:

when a monopolist lowers the price to sell more units, it must lower the prices of all units sold.