Micro Econ Exam 2 (ch. 6-10)

The rational rule for society is that society should produce another unit of good if

the marginal social benefit exceeds the marginal social cost

A price ceiling is

the maximum price that a seller can charge in a market

A subsidy is a

a government payment designed to encourage particular purchase or productive activities

People gain consumer surplus when they purchase an item

at a price below the value of the benefit they receive from the item

An export is a good or service

sold to a foreign buyer

A tariff is a

tax on imported products

Which of the following statements describes the Coase Theorem

if bargaining is costless, and property rights are clearly established and enforced, then externality problems can be solved through private bargaining

When people focus on their comparative advantage and then trade for other things, they

improve their standard of living or increase their leisure time

Analysis that describes what would happen if various actions were taken is _____ analysis

positive

The producer surplus on a unit sold equals

price minus marginal marginal cost

A tax on sellers shifts the

supply curve to the left

Which of the following is NOT a trade cost

the cost of producing a good

Which of the following is an example of a trade cost associated with a U.S citizen importing a sweater produced in India

the cost of the tariff on imported sweaters from India

Which principle helps buyers and sellers make decisions about whether to trade

the cost-benefit principle

The marginal benefit minus the marginal cost equals

the economic surplus

A market's deadweight loss is calculates as

the economic surplus at the efficient quantity minus the economic surplus at the actual quantity

Which of the following illustrates a positive externality

the value of Maria's house rises when the city builds a park nearby, enhancing her view

Externalities tend to occur because decision makers consider _____ and do NOT consider ______

their own costs and benefits; the effects of their actions on others

Why would a company set up internal markets

to solve the knowledge problem

Which of the following statements is based on normative analysis

we should protect the environment

Portia produces and sells headbands. Her marginal cost for one headband is $6, and her average cost is $4. She gains producer surplus only when she sells headbands at a price above

$6

Which of the following is an example of quantity quota

A city enforces zoning laws that restrict the number of housing units

An externality is defined as

A side effect of an activity that affects bystanders whose interests are not taken into account

A binding price floor is

Always above the equilibrium price

All of the solutions to externality problems involve

Getting buyers and sellers to consider marginal external costs and benefits

Which of the following is a positive economic statement

If the government raises taxes, people will have less income available for purchases and saving

A binding price floor in a market is removed. Which of the following is likely to occur as a result

The market price will fall

A tax on buyers cause which of the following

a leftward shift of the demand curve, a decrease in quantity sold, an increase in the price buyers pay

A tax on sellers causes with of the following

a leftward shift of the supply curve, a decrease in quantity sold, an increase in the price buyers pay

A quantity regulation is a

a minimum or maximum quantity that can be sold

In a market graph, consumer surplus is the area

above the price and below the demand curve

A prices _____, they provide useful business intelligence

aggregate information

Manager can harness market forces by setting up internal markets, which

are organized within a company to buy and sell scarce resources,

You have a comparative advantage if you can complete a task

at a lower opportunity cost than anyone else

What conditions must be met for private bargaining to be effective in resolving an externality

bargaining costs must be low, and property rights must be clear

Which of the following benefits could a company gain from using internal markets

better allocation of its resources and more accurate predictions

The economic burden of a tax is the

burden created by the change in after-tax prices face by buyers and seller.

To get maximum output, you should allocate each task to the person who

can do the task with the lowest opportunity cost

You have an absolute advantage in producing a product if you

can produce the product using the fewest inputs

Specialization will increase output when it is based on

comparative advantage

When the economic surplus in a market is less than it would be if the market were efficient, the market is experiencing

deadweight loss

A subsidy for buyers of a product shifts the

demand curve to the right

Buyers bear a smaller incidence of the tax when

demand is more elastic than supply

If Bishan wants to capitalize on comparative advantage in his life, then he should

do more of what he is relatively good at and then trade for other things

The marginal private benefit is the

extra benefit enjoyed by the buyer of one extra unit of a good or service.

The statutory burden of a tax is the

government-designated burden of a tax payment

If you need to make a decision and all the information needed to make a good decision is not available, then you

have a knowledge problem

Statements about what option should be chosen are _______ statements

normative

By contrast with a market that produces the socially optimal output, a market with negative externalities will

overproduce

A prediction market is a market where

payoffs are linked to whether an uncertain event occurs

An import is a good or service

purchased from a foreign seller

The main role of markets is

reallocating resources to better uses

Internal markets, which are markets that managers set up within their organization, are

set up to allocate resources of a company more efficiently, often not using real money

The outcome that is most efficient for society as a whole ---- including the interest of buyers, sellers, and bystanders ---- is the ____ outcome

socially optimal

Which of the following is LEAST likely to be traded internationally

sports arenas