Econ test 2

Taxes on emissions have come to be called

"licenses to pollute."

From which of the following goods is it most difficult to exclude free riders?

A radio simulcast of the Newport Jazz Festival

A price support on milk is not in the interest of milk drinkers, so why do elected public officials successfully implement milk price supports?

A small number of households (dairy farmers) gain a great deal, while the costs of the support program is spread among millions of other (milk drinking) households.

Which confers a set of property rights?

All of the above.

_________________ give government the power to block certain mergers, and in some cases, to break up large firms into smaller ones.

Antitrust laws

Which of the following would be classified as a situation where a third party benefits from a market transaction by others?

City buying 10,000 trees for green space renewal projects.

If a steel manufacturer considers the costs of labor and materials, as well as the broader costs of environmental injuries resulting from its manufacturing processes,

Command-and-control regulation is a body of law that

How is a politician similar to an entrepreneur?

Each advances a project only if the expected marginal benefits exceed the expected marginal costs.

Economist's can justify supporting education through taxation on which of the following grounds?

Education generates spillover benefits.

Which of the following is an important difference between government and privately-owned enterprises?

Government can more easily use negative incentives to obtain resources.

From the economic point of view, why will an avid downhill skier devote many hours to reading, comparing, and testing a new pair of ski boots but only a few hours to deciding who to vote for in the state senator race?

In his estimation, being highly informed about ski boots is a better use of his time compared to being highly informed about potential state senators.

Who is likely to complain to state regulatory authorities about unlicensed movers defrauding customers?

Licensed movers

____________ describes a situation where a third party, outside the transaction, suffers from a market transaction by others.

Negative externality

Government passed the to limit the power of large, consolidated firms that were run by trustees as if they were a single firm.

Sherman Act in 1890

The _______________include both the private costs incurred by firms and also costs incurred by third parties outside the production process.

Social costs

What is required for a negative externality to occur?

The full costs of an action aren't taken into account

In chapter 1 your authors marveled at the way highway traffic is orderly and self-regulating. In chapter 6, however, they discuss a growing problem on urban roadways—congestion. What's the cause of roadway congestion?

Typically, road use is a scarce good with a zero price tag.

The term oligopoly is highly ambiguous in the absence of

a clear and defensible definition of the product.

The refundable charge of 5 or 10 cents for returning recyclable cans and bottles works like

a pollution tax incentive to avoid littering.

A business __________occurs when, for practical purposes, one firm purchases another.

acquisition

A reduction in the price charged for luncheon specials by a downtown cafeteria will

affect the demand (curve) for that cafeteria's luncheons if its competitors react.

Using the term "spillover" is a less formal means of describing

an externality.

A cartel is

an organization of sellers or buyers aiming to control competition.

Agreements among competing sellers to maintain prices and share markets

are usually unenforceable in court and illegal under many state laws and under federal law where applicable.

When competing firms set prices with attention to the prices set by their competitors, the demand curve faced by each firm

becomes indeterminate.

Reducing prices below cost in order to eliminate competitors (with the intention of later raising prices to recoup all losses) is

called predatory price cutting.

Mergers between companies producing widely divergent goods is called a

conglomerate merger.

Economists use the term externalities to refer to

consequences people ignore in their decision making.

A cartel arrangement is likely to be successful for its members only if it can

do all of the above.

The word oligopoly means

few sellers.

An individual who wants others to pay for public goods, but plans to use those goods for their own purposes, is often referred to as a _________.

free rider

If a firm's efforts to be technologically innovative will create a positive externality, then that firm will likely ______________

have less incentive to innovate to the extent that the whole of society desires.

Which of the following has become the least willing to sacrifice their environmental quality for some additional economic output?

he European Union

The merger of two daily New York City newspapers would be an example of a

horizontal merger

A merger between two commercial airlines is a

horizontal merger.

Economic theory assumes citizens vote

in their own interest.

Congestion pricing

is an attempt to internalize the external costs of driving.

If no beautification projects were undertaken in a city except by private individuals or firms, the city would almost surely be less beautiful than otherwise comparable cities because

it is extremely difficult to induce people to pay on a voluntary basis for the pleasure they receive from urban beautification projects.

According to the text, because people in an urban-industrial society will always disagree to some extent about who ought to have which rights,

it is unreasonable to expect negative externalities to be completely eliminated.

Government certification of the weights and measures used in business can be justified because

it reduces total transaction costs below what they would be if all individual buyers or sellers had to check for themselves.

Cartels rarely succeed for long because they find it difficult to

keep members from offering discounts and new firms from entering.

According to the economic way of thinking, it is efficient to support a system of law and order through taxation because

law and order create significant spillover benefits.

According to the authors of your text, a politician's interest in getting reelected

leads the politician to concentrate on policies capable of generating short-run benefits.

Which of the following is a valid criticism of the reduction of competition that results from corporate mergers?

merged firms can increase price and maintain permanently higher profits

Negative externalities might be reduced by letting people "work it out themselves," which might also be described as ________.

negotiation

The economic way of thinking assumes a politician ignores

none of the above.

A public good is a good that is ________, and thus is difficult for market producers to sell to individual consumers

nonexcludable and nonrivalrous

A public good is a good that is ________, and thus is difficult for market producers to sell to individual consumers.

nonexcludable and nonrivalrous

In order for a good to be classified as___________, when one person uses the good, others are also able to use it.

nonrivalrous

Property rights are the legal rights of ownership on which others are

not allowed to infringe without paying compensation

What role does the US government play with respect to market competition?

policing anticompetitive behavior and prohibiting contracts that restrict competition

In economics, the main difference between market and government stems from differences in

prevailing property rights.

Raven Farms raises a substantial number of bees and uses the honey to produce its own skin healing cream. Raven Farms is situated next to the Oakcreek Apple Orchard. The bees from Raven Farms pollinate Oakcreek's apple trees. In this instance, Raven Farms

provides more social benefits than it derives in private benefits.

Which of the following is an example of economic output that can injure the environment?

radio-active waste leaking into a river, and all of the above

People will tend to "internalize externalities" when

responsibility for the consequences of actions is more clearly assigned to the actors.

Practices that reduce competition without actual documented agreements between firms to raise price are commonly referred to as ___________.

restrictive practices

Cathy can take either of two separate roads to drive to work. The first is a lightly used new toll road that is rarely congested. The second road is a local road with no tolls, but it is often congested and has many potholes. In this instance, the toll road is

rivalrous and nonexcludable

There is a skating rink in your city that is open to anybody to use at any time. They even provide skates for people who don't own any. This is an example of a good that is

rivalrous and nonexcludable

Cartels tend to break down unless they can obtain government assistance because cartel members will typically try to

sell more than their quotas.

Traditionally, policies for environmental protection in the U.S. have focused on ____________ pollutant could be emitted.

setting limits for how much of each

If a government chooses a system of marketable permits as its environmental managing tool, the reduction in pollution will

take place in the firms where it is least expensive to do so

Even if the City Council fixed high minimum taxi fares and gave licenses to operate to only a few cab owners, license holders would not earn large profits from operating taxis in the city because

the cost of owning a license would eat up the potential profits from operating a taxi.

If price changes by one firm induce rival firms selling close substitutes to alter their prices,

the demand curve will shift in response to a change in price.

Which of the following would most likely be recognized as a defining characteristic of a public good?

the good is both a and b above

Which of the following is viewed as a fundamental building block of the U.S. economic way of thinking?

the principle that a system of voluntary exchange benefits both parties

OPEC was able to function as an extremely successful cartel in the last half of the 1970s because

the widespread expectation of much higher future prices discouraged current production.

When laws and regulations prohibit firms from selling at "prices less than cost,"

they must define "cost" arbitrarily since no firm has an incentive to sell below cost.

A merger between a firm extracting petroleum and a firm refining petroleum is a

vertical merger.

Mergers between companies that previously existed in a supplier-buyer relationship are called

vertical mergers.

As applied to voter behavior, the "rational ignorance" hypothesis claims

voters will stop gathering information once the marginal costs exceed the marginal benefits.

If you are highly asthmatic, then having high levels of industrial air pollutants waft over your house every day

would be a negative externality.