Review test econ 202 meer tamu – Flashcards
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If in the market for peaches the supply curve has shifted to the left,
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the supply of peaches has decreased.
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What does the phrase "internalizing an external cost" mean?
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forcing producers to factor into their production costs the cost of the externalities created in the production of their output
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Which of the following statements about rent seeking is false?
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Because rent seeking redistributes society's resources, anyone engaging in such behavior is violating the law.
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A firm's primary interest when it hires an additional worker is
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the extra revenue the firm realizes from hiring that worker.
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Some superstar athletes in the sports industry earn very high levels of income relative to other occupations, and over time the wage differential has been increasing. What could have caused this?
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Technological advances such as cable television has increased the demand for sports entertainment.
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The restriction that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as
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the budget constraint.
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The highest valued alternative that must be given up to engage in an activity is the definition of
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opportunity cost.
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A monopoly is characterized by all of the following except
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there are only a few sellers, each selling a unique product.
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The incidence of a tax depends on whether the government collects the tax from buyers or sellers.
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False
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A profit maximizing monopoly's price is
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greater than the price that would prevail if the industry was perfectly competitive.
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What is the principal-agent problem?
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It is a problem caused by agents pursuing their own interests rather than the interests of the principals who hired them.
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Which branch of economics considers that economic agents do not always act rationally?
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Behavioral economics
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Price elasticity of demand measures
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how responsive quantity demanded is to a change in price.
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The demand for labor is described as a derived demand because
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it is derived from the demand for products that use labor in the production process.
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An externality is
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a benefit or cost experienced by someone who is not a producer or consumer of a good or service.
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When people who buy insurance change their behavior after the purchase because they are protected from loss by the insurance, the insurance market is said to face the problem of
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moral hazard.
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If, for a product, the quantity supplied exceeds the quantity demanded, the market price will fall until
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quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.
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Which of the following is true of a simultaneous move game?
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All relevant benefits and costs of each action are taken into account.
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When there few close substitutes available for a good, demand tends to be
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relatively inelastic.
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The extra cost associated with undertaking an activity is called
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marginal cost.
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The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called
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consumer surplus.
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A best response is ________.
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one player's optimal action choice taking the other player's action as given
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Which of the following is not a result of government price controls?
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Price controls benefit poor consumers but harm producers and wealthy consumers.
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The demand curve for a monopoly's product is
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the market demand for the product.
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Which of the following displays these two characteristics: nonrivalry and nonexcludability in consumption?
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public goods
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All else equal, as the price of a product falls, the quantity supplied increases.
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False
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In a game, a Nash equilibrium is reached only if the players:
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understand the game and the payoffs associated with each strategy.
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Which of the following is a positive economic statement?
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If the price of beef falls, a larger quantity of it will be bought
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Assume that the hourly price for the services of tarot card readers has risen and sales of these services have also risen. One can conclude that
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the demand for tarot card readers has increased.
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Which of the following is a source of market failure?
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incomplete property rights or inability to enforce property rights
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The public choice model
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applies economic analysis to government decision making.
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In cities with rent controls, the actual rents paid can be higher than the legal maximum. One explanation for this is
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because there is a shortage of apartments, tenants often are willing to pay rents higher than the law allows.
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Economic efficiency in a free market occurs when
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the sum of consumer surplus and producer surplus is maximized.
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Ranchers can raise either cattle or sheep on their land. Which of the following would cause the supply of sheep to increase?
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a decrease in the price of cattle
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An insurance company is likely to attract customers like Clancy who want to purchase insurance because he knows better that the company that he is more likely to make a claim on a policy. What is the term used to describe the situation above?
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adverse selection
