micro test 2

a tax on the buyers creates which of the following

(i) a leftward shift of the demand curve(ii) a decrease in quantity sold(iii) an increase in the price buyers pay

a tax on the sellers creates the following

(i) a leftward shift of the supply curve(ii) a decrease in quantity sold(iii) an increase in the price buyers pay

Chin purchases five protein bars at a price of $3 each. The marginal benefit he receives from each bar is $5 for the first bar, $4.50 for the second bar, $4 for the third bar, $3.50 for the fourth bar, and $3 for the fifth bar. The marginal cost of producing the bars is $2 each. What is Chin's consumer surplus on the fifth bar?

0

Chin purchases five protein bars at a price of $3 each. The marginal benefit he receives from each bar is $5 for the first bar, $4.50 for the second bar, $4 for the third bar, $3.50 for the fourth bar, and $3 for the fifth bar. The marginal cost of producing the bars is $2.50 each. What is Chin's total consumer surplus from the five bars that he purchased?

5

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

a price ceiling

A legal maximum on the price at which a good can be sold

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 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.

which of the following is a positive economic analysis

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

which of the following is an example of a quantity quota

a city enforces zoning laws to restrict the number of houses

an externality is defined

a side-effect of an activity that affects bystanders whose interests are not taken into account.

in a market graph, consumer surplus is the area

above the price and below the demand curve

as prices---- they provide useful business intelligence

aggregate information

a binding price floor is

always above the equilibrium price

Marjean walks to work every day along a busy road. As she does so, she breathes in the fumes of many cars, often arriving at work coughing. The economic term for the impact of the cars on Marjean is:

an externality

Managers 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

at a lower opportunity cost than anyone else

people gain consumer surplus when they purchase an item

at a price below the value of the benefit they receive

which of the following benefits could a company receive from using internal markets

better allocation of its resources and more accurate predictions

the economic burden of a tax is

burden created by the change in after tax prices faced by buyers and sellers

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 if you

can produce the product using the fewest inputs

specialization will increase output when its based on

comparative advantage

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

cost-benefit principle

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

deadweight loss

In 2016, Amazon began charging a 5.75% sales tax on products it sells in the District of Columbia. Holding all else constant, the effect of this tax would be to _____ in the District of Columbia.

decrease sales

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 trade for other things

marginal benefit- minus marginal cost

economic surplus

a market deadweight is calculated as

economic surplus at efficient quantity minus economic surplus at actual quantity

The marginal private benefit is the:

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

All of the solutions to externality problems involve:

getting buyers and sellers to consider marginal external costs and benefits.

the statutory burden of a tax is

government designated burden of a tax payment

a subsidy is a

government payment designed to encourage particular purchases or productive activities

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

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

improve their standard of living or increase their leisure time

The Rational Rule for Society is that society should produce another unit of a good if:

marginal socially benefit exceeds the marginal social cost

a binding price floor is removed. what is likely to occur as a result?

market price will fall

a quantity regulation is a

min or max quantity that can be sold

A good is characterized as _____ when one person's use of the good does not reduce another person's ability to use the same unit of the good.

nonrival

statements about what option should be chosen are

normative

A government leader determines that the 5% unemployment rate is too high. She asks her staff to research policy options to reduce the rate and a few weeks later is given four options. Each option would reduce the rate by a different amount and at a different cost. The leader studies the options and chooses the one she feels is best for the country. In order, what types of analysis were used in this three-stage chain of events?

normative, positive, normative

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

overproduce

a prediction market is where

payoffs are linked to whether an uncertain event occurs

analysis that describes what would happen if various actions were taken are

positive

producer surplus on a unit equals

price minus marginal cost

In 2017, eBay started charging a 20% value-added tax on fees charged to small businesses in the United Kingdom. Holding all else constant, this would _____ in the United Kingdom.

raise the prices sellers charge their customers

the main role of a market is

reallocating resources to better use

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

which of the following would be non-rival and non- excludable

siren tornado warning system

The outcome that is most efficient for society as a whole — including the interests of buyers, sellers, and bystanders — is the _____ outcome.

socially optimal

A good has a free-rider problem when:

someone can enjoy the benefits of the good without bearing the cost

a tax on the seller shifts the

supply curve to the left

a tragedy of the commons is

tendency to over-consume resources

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 scenarios is based on normative analysis

we should protect the environment