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