ECON – 2020 – Chapter: 4-5 – Flashcards
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Graphically, if the supply and demand curves are linear, consumer surplus is measured as the triangle:
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under the demand curve and above the actual price.
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An efficiency loss (or deadweight loss) declines in size when a unit of output is produced for which:
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maximum willingness to pay exceeds minimum acceptable price.
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Which of the following is an example of a public good?
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A weather warning system.
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Public goods are those for which there:
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are nonrivalry and nonexcludability.
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Economists consider governments to be "wasteful":
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whenever they over- or underallocate resources to a project.
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If a good that generates positive externalities were produced and priced to take into account these spillover benefits, then its:
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price and output would increase.
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The socially optimal amount of pollution abatement occurs where society's marginal:
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benefit of abatement equals its marginal cost of abatement.
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Sellers will opt out of markets in which:
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information about buyers is inadequate, and some buyers can impose high costs on the sellers.
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Suppose a firm offers its workers a cafeteria plan in which it allows workers to allocate a set amount of fringe benefit money toward specific insurance. Mary, who has five kids needing braces, selects the family dental coverage. This is an example of the:
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adverse selection problem.
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Which of the following is a key difference between the economic activities of government and those of private firms?
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Government has the legal right to force people to do things; private firms do not.
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Which of the following is an activity of government that is not an activity of private firms?
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Enforcing involuntary transactions.
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The government of Southland wants to improve resource allocation in the country. Which of the following actions by the Southland government is most likely to accomplish this?
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Taxing polluters and subsidizing firms that are creating significant positive externalities.
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In what way, if any, does the invisible hand affect government resource allocation?
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It does not help resource allocation, as there are no competitive forces within government that automatically direct resources to their best uses.
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In representative democracy, voters are ____________ and politicians are ______________.
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principals; agents
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A special-interest issue is one whose passage yields:
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Large economic gains to a small number of people and small economic losses to a large number of people.
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(Consider This) From an economist's perspective, when is government too big?
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When the marginal costs from additional government spending exceed marginal benefits.
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(Consider This) Government passes a law requiring all domestic clothing factories to pay workers at least $20 per hour. As a result, domestic clothing companies move their operations overseas, leaving domestic workers unemployed. This situation illustrates the problem of:
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unintended consequences.
