Economics Test 1 HW Cards
Which of the following has been stated to reduce society's cost by allowing pollution rights to be bought and sold
A Cap-and-trade- program; market-based approaches to pollution abatement
the effect of subsidies on consumers in correcting from positive externalities are
An increase in demand illustrated as a shift outward of the demand curve; the quantity of the product purchased would rise to the economically optimal output eliminating the under-allocation of resources; the subsidy reduces the price of purchasing the good.
_____ is calculated as the difference between the maximum price a consumer is willing to pay for a product and the actual price paid
Consumer surplus
Market failures in competitive markets can be classified into
Demand-side and supply-side
Characteristics of a private good include
Excludability; rivalry
A______ causes some of the benefits or costs of a market transaction to be passed on to a third party
Externality
_____ intervention may be needed to achieve economic efficiency when positive or negative_____ affect large numbers of people or when community interests are at stake
Government externalities
what is the difference between the actual price a seller receives and the minimum acceptable price?
Producer surplus
If a third party to a market transaction is experiencing an uncompensated cost, then the transaction results in a market failure known as a ______ or ________.
Spillover cost; negative externality
The effect of subsidies to producers in correcting
The subsidy reduces the marginal cost of producing the good; the quantity of the product would rise to the economically optimal quantity eliminating the under-allocation of resources.; the supply curve would shift out to the right because of an increase in supply
A positive externality is an uncompensated spillover
benefit
Free and____ markets produce equilibrium prices and quantities that maximize the combined consumer and producer surplus
competitive
which of the following not only makes private goods available to consumers but also allocates society's resources efficiently to the particular product.
competitive market
A comparison of margin changes is known as:
cost-benefit analysis
A statements about economic behavior or the economy that enables prediction of the probable effects of certain actions is known as an
economic principle, economic theory
a deadweight loss is also known as
efficiency loss
___means that buyers who are willing and able to pay the market price for the product obtain its benefits, but those unable or unwilling to pay the price do not.
excludability
the____characteristic of a private good is the ability of a seller to prevent people who did not pay for a product from obtaining its benefits
excludability
An____ is a cost or a benefit accruing to an individual or group, a third party, that is external to a market transactions
externality
a positive externality (or spill over benefit) resulting in under allocation or resources to the market is a type of market:
failure
As a result of negative externalities that are imposed by producers, costs are transferred to society thus:
firms incur lower production costs and have marginal cost o supply curves that are lower than the full- cost associated with producing their goods
The situation when people can receive the benefits from a good without having to pay for it is called the _____-rider problem
free
Market failures can be used to justify
government intervention in the economy
Consumer surplus is the difference between the____ price a consumer is willing to play for a product and the price paid
highest
Arable land, water, machinery and a professional baseball player are al considered scarce economic _____ to production
input
Consumer surplus and price are related
inversely
Which of the following explains how the government provides the optimal quantity of a public good?
it compares the marginal benefit of an added unit of the good against the government's marginal cost of providing it.
The supply curve for any good, private or public is
its marginal cost curve
A producer surplus is calculated as the difference between the actual price a producer receives and the ____ acceptable price.
lowest
When there is no effective way of keeping individuals from the benefit of a good once is comes into existence, the characteristic of the good comes distinguished by
non-excludability
the market demand curve for positive externalities reflects
only the direct, private benefits to those who demand and use the product
The law of increasing_____ states that as production of a particular good increases, the cost of producing an additional unit rises.
opportunity costs
Two examples of government corrections for an under-allocation of resources in a market(a positive externality) are:
providing education budgets financial aid
If a good is nontrivial and non excludable then it is known as a
public
when the government subsidies producers of a product the supply curve for that particular product will shift to the
right
A private good that displays_____characteristics means that when someone buys and consumes that good, it is not available for someone else to buy and consume
rival
All natural, human, and manufactures goods that go into the production of goods and services are considered society's
scarce
In order to correct for positive externalities, government may choose to____ buyers and or producers, as well as to provide____goods
subsidize; public
A ___ to the producer is a payment from the government to decrease the producers' cost in order to encourage more output beneficial to society
subsidy
a_____ side market failure occurs when a market does not reflect the full cost of producing a good or service
supply
Government can finance the demand for public goods through
taxes
T of F: Since the total profit from the sale of 5 bottles of water is $1.00, representing a %20 profit margin, this is a reason "to tap the market"
true
True or False: efficiency or deadweight losses are reductions of combined consumer and producer surplus associated with underproduction or overproduction of a product
true
The pleasure, satisfaction, or happiness obtained from consuming a good or service is know as
utility
Which of the following does the figure help to explain:
when marginal benefit exceeds marginal cost, additional abatement moves society toward economic efficiency ; when marginal cost exceeds marginal benefit, additional abatement reduces economic efficiency