Econ 201 Unit 3 – Flashcards

question
In a market economy, government intervention
answer
may improve market outcomes in the presence of externalities
question
Market failure can be caused by
answer
externalities
question
A negative externality arises when a person engages in an activity that has
answer
an adverse effect on a bystander who is not compensated by the person who causes the effect
question
Which of the following represents a way that a government can help the private market to internalize an externality?
answer
taxing goods that have negative externalities subsidizing goods that have positive externalities
question
Markets are often inefficient when negative externalities are present because
answer
social costs exceed private costs at the private market solution
question
A positive externality occurs when
answer
Jack receives a benefit from John's consumption of a certain good
question
Which of the following best defines the situation where one firm's research yields knowledge that is used by society as a whole?
answer
technology spillover
question
In many cases selling pollution permits is a better method for reducing pollution than imposing a corrective tax because
answer
it is hard to estimate the market demand curve and thus charge the "right" corrective tax
question
Employing a lawyer to draft and enforce a private contract between parties wishing to solve an externality problem is an example of
answer
a transaction cost
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The proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own, is called
answer
the Coase theorem
question
For private goods allocated in markets,
answer
prices guide the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources
question
When a good is excludable,
answer
people can be prevented from using the good.
question
Goods that are rival in consumption and excludable would be considered
answer
private goods.
question
As with many public goods, determining the appropriate level of government support for the production of general knowledge is difficult because
answer
benefits are hard to measure.
question
Which parable describes the problem of wild animals that are hunted to the point of extinction?
answer
The Tragedy of the Commons
question
A free-rider problem exists for any good that is not
answer
excludable.
question
Economists normally assume that the goal of a firm is to (i) sell as much of its product as possible. (ii) set the price of the product as high as possible. (iii) maximize profit.
answer
(iii) only
question
The amount of money that a firm receives from the sale of its output is called
answer
total revenue.
question
Total revenue equals
answer
Price times quantity.
question
The Carolina Christmas Tree Corporation grows and sells 500 Christmas trees. The average cost of production per tree is $50. Each tree sells for a price of $65. The Carolina Christmas Tree Corporation's total revenues are
answer
$32,500
question
Total cost is the
answer
market value of the inputs a firm uses in production.
question
Profit is defined as total revenue
answer
minus total cost.
question
Marcus sells 300 candy bars at $0.50 each. His total costs are $125. His profits are
answer
$25
question
A difference between explicit and implicit costs is that
answer
implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.
question
Pete owns a shoe-shine business. Which of the following costs would be implicit costs? (i) shoe polish (ii) rent on the shoe stand (iii) wages Pete could earn delivering newspapers (iv) interest that Pete's money was earning before he spent his savings to set up the shoeshine business
answer
(iii) and (iv) only
question
When calculating a firm's profit, an economist will subtract only
answer
the opportunity costs from total revenue because these include both the implicit and explicit costs of the firm.
question
Which of these assumptions is often realistic for a firm in the short run?
answer
The firm can vary the number of workers it employs but not the size of its factory.
question
Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers
answer
labor to be variable and capital to be fixed.
question
A production function describes
answer
how a firm turns inputs into output.
question
Bubba is a shrimp fisherman who can catch 4,000 pounds of shrimp per year. Bubba is considering hiring his cousin Bobby to work for him. Bobby can catch 3,000 pounds of shrimp per year. If Bubba hires Bobby, what will be the total output of his shrimp business?
answer
7,000 pounds
question
The marginal product of labor is equal to the
answer
increase in output obtained from a one unit increase in labor.
question
Suppose a firm currently produces 325 units of output per day with 15 workers. The firm is able to produce 340 units of output with a 16th worker. What is the marginal product of the 16th worker?
answer
15 units of output
question
A total-cost curve shows the relationship between the
answer
quantity of output produced and the total cost of production.
question
One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run,
answer
the size of the factory is fixed.
question
The length of the short run
answer
is different for different types of firms.
question
The total cost to the firm of producing zero units of output is
answer
its fixed cost in the short run and zero in the long run.
question
In the long run,
answer
inputs that were fixed in the short run become variable.
question
Which of the following explains why long-run average cost at first decreases as output increases?
answer
gains from specialization of inputs (economies of scale)
question
Economies of scale occur when
answer
long-run average total costs fall as output increases.
question
At low levels of production, the firm
answer
benefits from increased size because it can take advantage of greater specialization. has the potential for economies of scale. is unlikely to experiences acute problems with coordination.
question
Firms may experience diseconomies of scale when
answer
large management structures are bureaucratic and inefficient.
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question
In a market economy, government intervention
answer
may improve market outcomes in the presence of externalities
question
Market failure can be caused by
answer
externalities
question
A negative externality arises when a person engages in an activity that has
answer
an adverse effect on a bystander who is not compensated by the person who causes the effect
question
Which of the following represents a way that a government can help the private market to internalize an externality?
answer
taxing goods that have negative externalities subsidizing goods that have positive externalities
question
Markets are often inefficient when negative externalities are present because
answer
social costs exceed private costs at the private market solution
question
A positive externality occurs when
answer
Jack receives a benefit from John's consumption of a certain good
question
Which of the following best defines the situation where one firm's research yields knowledge that is used by society as a whole?
answer
technology spillover
question
In many cases selling pollution permits is a better method for reducing pollution than imposing a corrective tax because
answer
it is hard to estimate the market demand curve and thus charge the "right" corrective tax
question
Employing a lawyer to draft and enforce a private contract between parties wishing to solve an externality problem is an example of
answer
a transaction cost
question
The proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own, is called
answer
the Coase theorem
question
For private goods allocated in markets,
answer
prices guide the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources
question
When a good is excludable,
answer
people can be prevented from using the good.
question
Goods that are rival in consumption and excludable would be considered
answer
private goods.
question
As with many public goods, determining the appropriate level of government support for the production of general knowledge is difficult because
answer
benefits are hard to measure.
question
Which parable describes the problem of wild animals that are hunted to the point of extinction?
answer
The Tragedy of the Commons
question
A free-rider problem exists for any good that is not
answer
excludable.
question
Economists normally assume that the goal of a firm is to (i) sell as much of its product as possible. (ii) set the price of the product as high as possible. (iii) maximize profit.
answer
(iii) only
question
The amount of money that a firm receives from the sale of its output is called
answer
total revenue.
question
Total revenue equals
answer
Price times quantity.
question
The Carolina Christmas Tree Corporation grows and sells 500 Christmas trees. The average cost of production per tree is $50. Each tree sells for a price of $65. The Carolina Christmas Tree Corporation's total revenues are
answer
$32,500
question
Total cost is the
answer
market value of the inputs a firm uses in production.
question
Profit is defined as total revenue
answer
minus total cost.
question
Marcus sells 300 candy bars at $0.50 each. His total costs are $125. His profits are
answer
$25
question
A difference between explicit and implicit costs is that
answer
implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.
question
Pete owns a shoe-shine business. Which of the following costs would be implicit costs? (i) shoe polish (ii) rent on the shoe stand (iii) wages Pete could earn delivering newspapers (iv) interest that Pete's money was earning before he spent his savings to set up the shoeshine business
answer
(iii) and (iv) only
question
When calculating a firm's profit, an economist will subtract only
answer
the opportunity costs from total revenue because these include both the implicit and explicit costs of the firm.
question
Which of these assumptions is often realistic for a firm in the short run?
answer
The firm can vary the number of workers it employs but not the size of its factory.
question
Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers
answer
labor to be variable and capital to be fixed.
question
A production function describes
answer
how a firm turns inputs into output.
question
Bubba is a shrimp fisherman who can catch 4,000 pounds of shrimp per year. Bubba is considering hiring his cousin Bobby to work for him. Bobby can catch 3,000 pounds of shrimp per year. If Bubba hires Bobby, what will be the total output of his shrimp business?
answer
7,000 pounds
question
The marginal product of labor is equal to the
answer
increase in output obtained from a one unit increase in labor.
question
Suppose a firm currently produces 325 units of output per day with 15 workers. The firm is able to produce 340 units of output with a 16th worker. What is the marginal product of the 16th worker?
answer
15 units of output
question
A total-cost curve shows the relationship between the
answer
quantity of output produced and the total cost of production.
question
One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run,
answer
the size of the factory is fixed.
question
The length of the short run
answer
is different for different types of firms.
question
The total cost to the firm of producing zero units of output is
answer
its fixed cost in the short run and zero in the long run.
question
In the long run,
answer
inputs that were fixed in the short run become variable.
question
Which of the following explains why long-run average cost at first decreases as output increases?
answer
gains from specialization of inputs (economies of scale)
question
Economies of scale occur when
answer
long-run average total costs fall as output increases.
question
At low levels of production, the firm
answer
benefits from increased size because it can take advantage of greater specialization. has the potential for economies of scale. is unlikely to experiences acute problems with coordination.
question
Firms may experience diseconomies of scale when
answer
large management structures are bureaucratic and inefficient.