Micro Unit 3

Which of the following would be classified as a situation where a third party benefits from a market transaction by others? a. City buying 10,000 trees for green space renewal projects. b. Increased levels of air pollution in neighborhoods near a football stadium. c. Allowing a mining company to use a natural lake to discharge waste. d. Two firms trading pollution credits to avoid cutting their toxic emissions.

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

_________ arises when firms act together to reduce output and keep prices high. a. Collusion b. A cartel c. A monopoly d. An oligopoly

a. Collusion

____________________ describes a situation where a third party, outside the transaction, suffers from a market transaction by others. a. Negative externality b. Positive externality c. A spillover d. A market failure

a. Negative externality

_______________ include both the private costs incurred by firms and also costs incurred by third parties outside the production process. a. Social costs b. Private costs c. Market costs d. External costs

a. Social costs

Using the term "spillover" is a less formal means of describing a. an externality. b. social costs. c. private costs. d. market failure.

a. an externality

The term "basic research" applies specifically to research pertaining to fundamental scientific breakthroughs that may offer commercial applications in the ______________. a. distant future b. near future c. immediate future d. short run

a. distant future

In the competitive market for figure skate blades, manufacturers offer an array of products that are a. distinctly different in a particular way. b. distinctly similar in a particular way. c. virtually identical on the competition spectrum. d. at opposite ends of the competition spectrum.

a. distinctly different in a particular way

In the U.S., comparisons of high and low incomes raise issues of economic ______________________. a. inequality and poverty b. equality and wealth distribution c. wealth distribution and poverty d. equality and inequality

a. inequality and poverty

If some of the products developed by software company must face market competition that can very quickly produce either an identical product or a close substitute for it, then a. it may decide against R&D projects of this sort. b. it will have to figure out innovative ways to prevent adaptation and copying of its products. c. the other firms will all save on their R&D costs. d. it must charge more for its products to quickly compensate for the research and development costs.

a. it may decide against R&D projects of this sort

In order for a good to be classified as ______________ , when one person uses the good, others are also able to use it. a. non-rivalrous b. rivalrous c. excludable d. nonexcludable

a. non-rivalrous

Perfect competition and monopoly stand at _____________ of the spectrum of competition. a. opposite ends b. the high end c. the low end d. the mid-way point

a. opposite ends

Government has a variety of policies that allow inventors to _____________________ , such as the granting patents and __________________ . a. receive an increased rate of return; subsidization of research and development b. protect their inventions; limited copyrights during the inventor's lifetime c. register their inventions; unlimited copyrights during the inventor's lifetime d. receive a reasonable rate of return; lifetime intellectual property rights.

a. receive an increased rate of return; subsidization of research and development

A pollution charge is a form of tax imposed on a. the quantity of pollution that a firm emits. b. pollution control technologies. c. every economy in the world. d. low-income market-orientated industries.

a. the quantity of pollution that a firm emits.

If a rise in incomes for both low-income and high-income workers is higher for the high-income workers, a. then poverty will fall and inequality will rise. b. then poverty will rise and inequality will rise. c. then poverty will fall and inequality will fall. d. then poverty will rise and inequality will rise.

a. then poverty will fall and inequality will rise.

Market competition may sometimes encourage a firm to innovate out of fear because of the perception that a. they will inevitably fall behind other competitors seeking out innovations. b. the firm will only have a very temporary edge over its competitors. c. the ability to earn above-normal profits is also available to its competition. d. higher profits can only be earned by finding less expensive ways to produce.

a. they will inevitably fall behind other competitors seeking out innovations.

One common way of measuring income inequality is to rank all households by income, from lowest to highest, and then a. to divide all households into quintiles. b. comparing the groups. c. to divide all households by size. d. comparing the share of the population.

a. to divide all households into quintiles.

How does the cost of financial capital influence innovative research and development activities in a competitive market? a. at a high cost, firms demand a large quantity, as R&D projects return high rates. b. at a low cost, firms demand a large quantity, as R&D projects will likely return a higher rate. c. financial capital at a high cost means more projects are likely to pay a much higher return rate. d. at a low cost, the firm receives only small private benefits from investing in R&D.

b. at a low cost, firms demand a large quantity, as R&D projects will likely return a higher rate.

Which of the following will need to strike some balance between economic output and environmental quality as a prominent climate change priority? a. countries with high-incomes b. every country c. market-oriented countries d. command-oriented countries

b. every country

Which of the following is the most appropriate response of public policy to a negative externality like pollution? a. modernize, update, and restore homes in run down neighborhoods to decrease littering b. find ways to account for the social costs of the negative externality in economic decisions c. encourage high standards of public education to increase innovation capability of youth d. assist the private party creating the negative externality to receive more social benefits

b. find ways to account for the social costs of the negative externality in economic decisions

A situation of __________ arises when one group receives a higher share of total income or wealth than others. a. poverty b. inequality c. poverty entrapment d. quintiles

b. inequality

As the name monopolistic competition implies, a firm�s decisions in this setting will in certain ways resemble ______________ and in other ways resemble________________ . a. monopoly; imperfect competition b. monopoly; perfect competition c. imperfect competition; perfect competition d. imperfect competition; oligopoly

b. monopoly; perfect competition

Which of the following would be classified as a differentiated product produced by a monopolistic competitor? a. natural gas b. news channel 5 c. electricity d. tap water

b. news channel 5

A public good is a good that is ____________________ , and thus is difficult for market producers to sell to individual consumers. a. excludable or rivalrous b. nonexcludable and non-rivalrous c. excludable and rivalrous d. excludable or non-rivalrous

b. nonexcludable and non-rivalrous

A method often used by economists to look at distribution of income in a society's economy involves a. programs for wealth redistribution. b. quintiles, or dividing a whole group into fifths. c. imposing taxes to redistribute wealth. d. quads, or dividing a whole group into fourths.

b. quintiles, or diving a whole group into fifths.

Traditionally, policies for environmental protection in the U.S. have focused on __________________ pollutant could be emitted. a. eliminating the risk that any b. setting limits for how much of each c. avoiding the risk that any air d. eliminating the risk that a toxic

b. setting limits for how much of each

What role can advertising play with respect to differentiated products? a. allows a firm to sell any quantity it wishes b. shapes consumers intangible preferences c. shapes perceived demand for a price taker d. allows a firm to raise the prevailing market price

b. shapes consumers intangible preferences

If a perfectly competitive firm raises its price, the quantity demanded of its product _____________. a. diminishes temporarily in the short run b. should fall to zero c. stays the same d. falls below marginal cost

b. should fall to zero

The term ____________ refers to a market exchange that affects a third party who is outside or external to the exchange. a. social costs b. spillover c. market failure d. private costs

b. spillover

If the firm is producing at a quantity of output where marginal revenue exceeds marginal cost, then, a. the firm's perceived demand will shift to the left. b. the firm should keep expanding production. c. each marginal unit adds profit by bringing in less revenue than its cost. d. the firm is now earning zero for profit.

b. the firm should keep expanding production

Market competition can provide _______________ for _________________ , a. unsustained profits; firms with marketable patents b. the needed incentive; discovering new technologies c. time; competitors to catch up with other's inventions d. an opportunity; competitors seeking out innovations

b. the needed incentive; discovering new technologies

If the level of incomes rises for high-income workers but doesn�t change for low-income workers, a. then poverty will not change and inequality will fall. b. then poverty will not change and inequality will rise. c. then poverty will rise and inequality will fall. d. then poverty will fall and inequality will rise.

b. then poverty will not change and inequality will rise.

The term "applied research" refers to research that is focused on a particular product that promises a. to offer commercial applications in the short-term. b. to offer commercial applications in the long-term. c. an economic payoff in the short or medium-term. d. an economic payoff in the medium or long-term.

c. an economic payoff in the short or medium-term

A positive externality arises in a situation where a third party, outside the transaction, a. fails to allocate resources efficiently. b. suffers from a market transaction by others. c. benefits from a market transaction by others. d. pays a pollution tax to balance social costs.

c. benefits from a market transaction by others

A Lorenz curve graphs the _________________ received by everyone up to a certain quintile. a. unequal distribution over time b. normative shares of income c. cumulative shares of income d. total share of income

c. cumulative shares of income

Market failure describes a situation in which the market itself ______________________ in a way that balances social costs and benefits. a. remains outside the transaction b. incurs the costs outside the production process c. fails to allocate resources efficiently d. avoids externalities

c. fails to allocate resources efficiently

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 ______________ . a. tax evader b. excludable c. free rider d. nonexcludable

c. free rider

The branch of mathematics that analyzes situations in which players must make decisions and then receive payoffs most often used by economists is a. oligopoly collusion. b. prisoner's dilemma. c. game theory. d. collusion theory

c. game theory

If the poverty trap were made even more difficult to overcome because a working mother will have extra expenses like transportation and child care that a nonworking mother will not face, then a. she will get a large amount of joy from having to work two jobs. b. the family better off than if she did not work at all. c. her economic gains from working will be even smaller. d. working now and in the future is even more attractive.

c. her economic gains from working will be even smaller.

A Lorenz curve refers to a graphic illustration of the share of population on the _______________ and the cumulative percentage of total income received on the __________________ . a. left quintile; right quintile b. right quintile; left quintile c. horizontal axis; vertical axis d. vertical axis; horizontal axis

c. horizontal axis; vertical axis

Shopping malls typically lease retail space to a large number of clothing stores. When this group of retailers competes to sell similar but not identical products, they engage in what economists call ________________________. a. a cartel b. collusion c. monopolistic competition d. perfect competition

c. monopolistic competition

Once it's patent application has been accepted, a firm is able to earn ________ on its product, which ___________________________________ . a. an increased rate of return for investors; raises doubts further R&D activities b. more profit; will allow it to recover the biggest slice of the social value created c. monopoly profits; offers an incentive for research and development to take place d. competitive profits; creates incentive for continuing innovative R&D projects

c. monopoly profits; offers an incentive for research and development to take place

_____________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry. a. Collusion b. A monopoly c. An oligopoly d. A cartel

c. oligopoly

If a monopoly or a monopolistic competitor raises their prices, the quantity demanded ____________. a. will expand b. stays the same c. will decline d. will decline in the short run only

c. will decline

If you are highly asthmatic, then having high levels of industrial air pollutants waft over your house every day a. is a voluntary exchange. b. is positively a voluntary exchange. b. would be a negative externality. d. would be an external voluntary exchange.

c. would be a negative externality

In a monopolistic competitive industry, firms can try to differentiate their products by a. creating optimal perceptions of the product. b. choosing optimal locations from which the product is sold. c. enhancing the intangible aspects of the product. d. all of the above.

d. all of the above

Poverty is measured by the number of people who fall below a certain level of income. a. the income needed for a basic d. standard of living. c. the nation's economic poverty line. d. all the above are correct.

d. all the above are correct.

Property rights are the legal rights of ownership on which others are a. allowed to infringe by paying the property owner's pollution tax. b. able to enforce use of pollution-control technologies. c. able to specify allowable quantities of pollution. d. not allowed to infringe without paying compensation.

d. not allowed to infringe without paying compensation

Which of the following mechanisms will increase the rate of return that can be earned by inventors of new technology? a. intellectual property rights b. government research and development grants c. cooperative research ventures between companies d. patents, copyrights, and each of the above

d. patents, copyrights, and each of the above

In economic terms, when a company invests in new technology innovations, a. competitive externalities arise. b. potential externalities arise. c. negative externalities arise. d. positive externalities arise.

d. positive externalities arise

When reference is made to the ____________, it means the specific amount of income needed for a basic standard of living. a. poverty trap b. income line c. income gap d. poverty line

d. poverty line

In circumstances dealing with poverty, the term ______________ means taking income from those with higher incomes and providing income to those with lower incomes. a. safety net b. estate tax c. minimum wage d. redistribution

d. redistribution

If incomes rise for both low-income and high-income workers, but rise less for the high-income workers, a. then poverty will rise and inequality will fall b. then poverty will fall and inequality will rise. c. then poverty will rise and inequality will rise. d. then poverty will fall and inequality will fall.

d. then poverty will fall and inequality will fall.

If monopolistic competitors must expect a process of entry and exit like perfectly competitive firms, a. they will be unable to earn higher-than-normal profits in the short run. b. they will wish to cooperate to make decisions about what price to charge. c. they will wish to cooperate to make decisions about what quantity to produce. d. they will be unable to earn higher-than-normal profits in the long run.

d. they will be unable to earn higher-than-normal profits in the long run

Which of the following would most likely be identified as being the ultimate goal of public policies that pertain to technology? a. to help inventors earn higher rates of return b. to help inventors earn reasonable returns c. to encourage a stream of inventions that monetarily benefit the inventor. d. to encourage a stream of invention that benefits the whole of society.

d. to encourage a stream of invention that benefits the whole of society.

Would raising the price for a product create a larger decline in quantity demanded for a monopolistic competitor's than it would for a monopoly? a. no; a monopolistic competitor perceives demand as a price maker b. no; conditions of imperfect competition means demand is constant c. yes; but temporarily because price increases only create a short-run decline d. yes; consumers will buy from competitors offering lower priced substitutes

d. yes; consumers will buy from competitors offering lower priced substitutes