Economics 1430

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When the federal government crafts environmental policies that make it less expensive for firms to follow green​ initiatives,

the policies are consistent with economic incentives.

What is economic​ efficiency?

Economic efficiency is where consumer surplus and producer surplus are maximized.

What do economists mean by​ scarcity?

Economists mean that unlimited wants exceed limited resources.

Can these two countries gain from trading oil and fish​ oil?

These countries cannot gain from trade because neither has a comparative advantage producing either good.

Which country has an absolute advantage in producing​ tacos?

United States

When is market failure likely to​ arise?

When it is difficult to enforce property rights and when property rights are incomplete

Productive efficiency means that

a good or service is produced at the lowest possible cost.

A hypothesis in an economic model is

all of the above

The parties involved in an externality have an incentive to reach an efficient solution because

both parties become better off when an efficient solution is reached

Economic data is used

test models

Opportunity cost is

the highest valued alternative that must be given up to engage in an activity.

Does the decrease in the total number of hours of house work long dash from 36 to 25.4 long dash mean that families are willing to live in messier​ homes?

​​No, because there are more labor saving devices so less time is required.

Suppose the United States is currently producing 40 tons of hamburgers and 12 tons of tacos and Mexico is currently producing 8 tons of hamburgers and 10 tons of tacos. If the United States and Mexico each specialize in producing only one good​ (the good for which each has a comparative​ advantage), then a total of nothing

12,8

Refer to the graph to the right. What is the opportunity cost of moving from point B to point​ C?

20 sedans

The government seeks to protect intellectual property rights by granting

A and B only.

What is an​ externality?

A benefit of cost that affects someone who is not directly involved in the production or consumption of a good or service

How can a country gain from specialization and​ trade?

A country can specialize in producing that for which it has a comparative advantage and then trade for other needed goods and services.A

What is a free​ market?

A free market is one where the government does not control the production of goods and services.

What is a market​ failure?

A market failure is when the market fails to produce the efficient level of output.

How do property rights affect externalities and market​ failure?

Externalities and market failure will result from incomplete property rights.

Writing in the New York Times​, Michael Lewis argued that ​"...a market economy is premised on a system of incentives designed to encourage an ignoble human​ trait: self-interest." ​Source: Michael​ Lewis, "In Defense of the​ Boom." New York​ Times, October​ 27, 2002. What incentives does a market system provide to encourage​ self-interest?

Financial reward.

What are the two main categories of participants in​ markets?

Firms and households.

What is a good example of a good or service having the effects of a positive externality?

Medical Research and Education

Which country has a comparative advantage in producing​ tacos?

Mexico

Who has the comparative advantage LOADING... in producing​ oil?

Neither country has a comparative advantage producing oil because their opportunity costs of producing oil are equal.

Which of the following is not scarce according to the economic​ definition?

None of the above.

What type of economic analysis is concerned with the way things ought to​ be?

Normative Analysis

Whether carried out by an individual or a​ country, production beyond the production possibilities frontier

Not physically possible

Ford assembles some cars in Mexico because the lower wages the company pays to Mexican workers and the lower prices it pays for auto parts in Mexico reduces​ Ford's costs. This is an example of Ford reacting to which of the three key economic​ ideas?

People respond to economic incentives.

is concerned with what is​, and positive analysis neutral analysis normative analysis is concerned with what ought to be. Economics is about positive analysis neutral analysis normative analysis ​, which measures the costs and benefits of different courses of action.

Positive analysis, normative analysis, positive analysis

occurs when a good or service is produced at the lowest possible cost. Allocative efficiency Voluntary exchange Productive efficiency occurs when production is in accordance with consumer preferences.

Productive efficiency, Allocative efficiency

Externalities affect the economic efficiency of a market equilibrium by causing a difference between

The private cost of production and the private benefit of consumption

In what ways does a free market economy differ from a centrally planned​ economy? Unlike a free market​ economy,

centrally planned economies have extensive government controls.

What is comparative​ advantage?

the ability to produce a good or service at a lower opportunity cost than other producers

The private benefit is​ ________, while the social benefit is​ ________.

the benefit received by the consumer of a good or​ service; the total benefits from consuming the good or service

Macroeconomics is the study of

the economy as a​ whole, including topics such as​ inflation, unemployment, and economic growth.

Economists believe that an activity should be continued up to the point where

the marginal benefit from the activity is equal to the marginal cost.

In a free​ market, the actions people take are largely determined by

the motivation of financial reward

How do externalities LOADING... affect​ markets? If a positive externality in consumption is present in a​ market, then

the private benefit from consumption will be different than the social benefit from consumption.

Property rights are

the rights individuals or firms have to the exclusive use of their​ property, including the right to buy or sell it.

A positive externality causes

the social benefit from consuming the good to be greater than the private benefit.

Macroeconomics is

the study of the economy as a​ whole, including topics such as​ inflation, unemployment, and economic growth.

Economists assume that people are rational in the sense that

they use all available information as they take actions intended to achieve their goals.

Economists use models

to answer questions and analyze issues

Is it possible for a country to have a comparative advantage in producing a good without also having an absolute​ advantage? A country without an absolute advantage in producing a good

will have a comparative advantage if it has a lower opportunity cost of producing that good.

With respect to​ consumption, individuals and countries

​​can, through​ trade, consume beyond their production possibilities frontiers.

Centrally planned economies allocate resources based on decisions by ▼ households and firms government ​, while market economies answer these questions through decisions made by ▼ households and firms government

government, households and firms

If a country has a comparative advantage in the production of a​ good, then that country

has a lower opportunity cost in the production of that good.ha

When we graph the relationship between two​ variables, we often want to draw conclusions about whether changes in one variable are causing changes in the other variable. Doing​ so, however, can lead to incorrect conclusions. Reasons for drawing incorrect conclusions about cause and effect include

reverse causality, an omitted variable, both a and b

Firms are likely to produce more of a good or service when its price ▼ rises falls and less of a good or service when its price ▼ rises falls

rises, falls

Which of the following events would create economic​ growth, that​ is, shift the production possibilities frontier​ outward?

All of the above

Which of the following steps should you follow when using a​ formula?

All of the above are steps you should follow when using a formula.Al

What is an example of a good or service having the effects of a negative externality?

Cigarette smoking

The basis for trade is ▼ absolute comparative advantage.

Comparative advantage

decide(s) what goods and services will be produced.

Consumers, firms, and government

Which participants are of greatest importance in determining what goods and services are​ produced?

Households.

The Coase Theorem states that

If transaction costs are low, private bargaining will result in an efficient solution to the problem of externalities

Which of the following covers the study of topics such as inflation or​ unemployment?

Macroeconomics

Which of the following are examples of intellectual​ property?

SoftwareSo Your answer is correct.B. Ideas for new products or new production techniques Your answer is correct.C. Books and films

The basis for trade is comparative​ advantage, not absolute advantage.

T

What is absolute​ advantage?

The ability to produce more of a good or service than competitors using the same amount of resources.

What happens if a country produces a combination of goods that efficiently uses all of the resources available in the​ economy?

The country is operating on its production possibilities frontier.Th

What do economists mean by​ "an economically efficient level of​ pollution"? The economically efficient level of pollution is that amount where

The marginal cost of pollution reduction equals the marginal benefit of pollution reduction

During the 1928 presidential election​ campaign, Herbert​ Hoover, the Republican​ candidate, argued that the United States should only import those products that could not be produced here. Do you believe that this would be a good​ policy? Explain.

This is not a good policy because it does not necessarily result in countries producing those goods for which they have a comparative advantage.

Which of the following best describes​ scarcity?

Unlimited wants exceed the limited resources available.

The three economic questions that every society must answer are

What goods will be ​ produced, how will they be​ produced, and who will receive the​ goods?

Economics is a social science because

all of the above

Societies organize their economies in two main ways to answer the three questions of​ what, how, and who. A society can have a ▼ centrally planned mixed market economy in which the government decides how economic resources will be allocated. Or a society can have a ▼ centrally planned mixed market economy in which the decisions of households and firms interacting in markets allocate economic resources.

centrally planned, market

What is the basis for​ trade?

comparative advantage

The British historian Thomas Macaulay once remarked that copyrights are​ "a tax on​ readers." Copyrights are a​ 'tax' on readers in the sense that

copyrights limit of the supply of related creative work which results in higher prices.

If copyrights are a​ 'tax' on​ readers, governments provide a legal framework to enforce them because

copyrights provide needed protection for authors and creators of movies or other artistic works

​A(n) ▼ politician manager entrepreneur is someone who operates a​ business, bringing together the factors of production long dash​labor, ​capital, and natural resources long dash to produce goods and services.

entrepreneur

Scarcity is central to the study of economics because it implies that

every choice involves an opportunity cost.

Allocative efficiency means that

every good or service is produced up to the point where marginal benefit is equal to marginal cost.

What do economists mean by the word​ "marginal"?

extra or additional

In economic​ terminology, the inputs used to produce output are referred to as

factors of production.

Microeconomics is the study of

how households and firms make​ choices, how they interact in​ markets, and how the government attempts to influence their choices.

In the United​ States, who receives the goods and services produced depends largely on

how income is distributed

Scarcity implies that every society and every individual face​ trade-offs because scarcity means that

human wants are greater than what available resources can produce.

The level of total investment by firms in new machinery and equipment helps to determine how rapidly the economy grows. This is a macroeconomic microeconomic issue. ​ However, to understand how much new machinery and equipment firms decide to​ purchase, one must analyze the incentives individual firms​ face, which is a macroeconomic microeconomic issue.

macroeconomic, microeconomic

Which one of the following factors helps determine the marginal cost of reducing​ crime?

resources devoted to courts.

Efficiency means that goods are distributed in a way that ​, while equity means that goods are distributed in a way that .

maximizes benefits to society, is fair

The relationship between two variables is positive when​ ________, and the relationship between two variables is negative when​ ________.

one variable increases and the other​ increases; one variable increases and the other decreases

Which one of the following factors helps determine the marginal benefit of reducing​ crime?

personal injury from crime.

The Scottish philosopher Adam Smith argued in 1776 that

prices would do a better job of coordinating the activities of buyers and sellers than guilds could.

Absolute advantage is the ability of an​ individual, a​ firm, or a country to

produce more of a good or service than competitors using the same amount of resources.pr


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