ECON EXAM 3

the benefit enjoyed by a third party that is not directly involved in the production or consumption of a good or service is called:

a positive externality

the fixed cost per unit is equal to

average fixed cost

total cost divided by the amount of output produced is equal to:

average total cost

when goods and services are nonrivalrous, the __________ of a good or service by one person does not change the quantity available for the consumption by others

consumption

private supply is the supply of a good service that reflects only the private _______ of its production

costs

business operating decisions should be based on _____ profit

economic

monetary payments made by individuals, firms, and governments for the use of other's land, labor, capital, and entrepreneurial ability are _______ costs

explicit

total revenue minus the total _______ costs of production is accounting profit

explicit

excludable goods

firms use prices to determine who can consume this type of good

economies of scale can result from a variety of factors, including

higher prices, resulting in higher profits -correct-lower costs of inputs as firms purchase larger quantities -correct-productivity gains from more specialized labor better located markets

rival goods

if I consume this good, another person cannot consume it at the same time

the opportunity costs of using owned resources are ______ costs

implicit

total revenue minus the Total ______ and total______ costs of production is economic profit

implicit; explicit

nonrival goods

one's person's consumption of this good does not affect another person's consumption of it.

when a _______ externality exists, the socially optimal level of output will be greater than that resulting from a ______ market.

positive, private

the private marginal cost is the cost to the

producer of producing an additional unit of a good or service

when the marginal _____ increases, the marginal cost of production declines

product

governments can provide _____ goods, because they have the ability to force people to _______ for a good or service by collecting taxes.

public, pay

________ marginal cost is the cost to society of producing an additional unit of a good or service

social

Private companies often find it difficult to earn a profit by providing a good that is non excludable due to

the amount of competition the nature of private goods -correct-consumers who consume the good without paying for it -correct-the free rider problem

marginal cost

the cost of producing one more unit of a good

in making a decision about how much output it should produce to maximize its profits, which two pieces of information does a firm need?

the fixed cost of the product -correct-the marginal revenue the cost per unit of the output the marginal product of the inputs -correct-the marginal cost

Education benefits both students and the community. Suppose that those students who purchase education consider only their own benefits when determining how much education to obtain while schools consider only the cost of producing education when determining how much education to supply. In this situation, the social benefit will be __________(Less than/Greater than) the private benefit and the amount of education produced will be ____________(above/below) the socially efficient amount.

Greater than below

The production of paper often creates a waste product that pollutes waterways. Assume the producer of paper does not directly pay to dispose of the waste in the water. in this case, the price of paper will be ___________(above/below) the socially efficient price and the amount of paper produced will be __________(above/below) the socially efficient amount.

below above

nonexcludable good

consumers cannot be prevented from consuming these goods