Microeconomics-Chapter 4 Review

In the personal computer industry, the reason for the fall in prices and the increase in quantity after 1980 was:

primarily due to technological change and an increase in the number of sellers.

Consider the demand and supply for movie tickets in a small town. When the government imposes a $5 tax on the sale of movie tickets, the quantity traded in the marketplace:

falls from 130 to 80.

Rent Controls

government control and regulation of the amounts charged for rented housing.

Price controls:

government-imposed limits on the prices that producers may charge in the market

When the government imposes a tax on a product, buyers will be most negatively impacted if:

the burden does not depend on who the government collects the tax from.

The relationship between the value and price of a stock suggests that:

the equilibrium price of a stock strikes a balance between those who think the stock is worth more and those who think it's worth less at the current price AND it is the market's best guess regarding the expected value of the company's future profits.

Paternalism

the interference with the liberty or autonomy of another person, with the intent of promoting good or preventing harm to that person.

Consider the demand and supply for movie tickets in a small town. When the government imposes a $5 tax on the sale of movie tickets, the (net) price ultimately paid by buyers will be:

$13

Consider the demand and supply for movie tickets in a small town. When the government imposes a $5 tax on the sale of movie tickets, the (net) price ultimately received by sellers will be:

$8

The bulk of the nation's output is produced by:

Corporations

Governments often impose taxes because they want to discourage behaviors that officials believe is undesirable. This rationale for the tax is called:

Paternalism

If a price floor at P4 is set to help farmers in terms of income and government wants to assure farmers that their output will be purchased, the government would have to purchase an amount of output equal to:

Q3-Q0

Suppose an oil producer wants to ensure her business by lobbying her government to tax electric cars. This rationale for the tax—handicapping the business of one's competitors—is called:

Rent Seeking

If rent controls are imposed, they will most likely be set at either _______ or _______.

Rent0; Rent1

Without rent controls, the equilibrium rent is _______ and the equilibrium quantity is _______.

Rent2; Q2

Governments often impose taxes because they need money to fund their operations. This rationale for the tax is called:

Revenue argument

Most firms in the United States today are:

Sole proprietorships and partnerships

Tax

a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.

To help Farmers

a price floor would be set at P4, causing a surplus of Q3 - Q0.

The Law of Supply

an increase in the price of a good or a service results in an increase in the quantity supplied of that good or service.

Sole Proprietorship

business owned and operated by one person

corporations

businesses that are owned by many investors who buy shares of stock

Rent control

often help high-income families.

The Law of Demand

says that, for virtually all goods and services, a higher price leads to a decrease in quantity demanded, and a lower price leads to an increase in quantity demanded.

If rent controls are set at Rent0:

some renters would be willing to pay a price as high as Rent4 for Q0 units.

rent seeking

using political influence to increase one's economic profits at the expense of others