macro 3 & 4 – Flashcards
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According to the law of demand, a demand curve
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is downward sloping
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The market demand for a particular good indicates
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the total quantities buyers are willing and able to purchase at alternative prices, ceteris paribus
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Which of the following will not cause a shift in the demand curve for a good?
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the price of the good itself
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The doctrine of laissez-faire
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supports nonintervention by government in the market mechanism
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The market supply of a particular good
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is the sum of the quantities of the good that all producers are willing and able to sell
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A price ceiling is
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an upper limit on the price of a good
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A market shortage is
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caused by a price ceiling
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The goal of the principal participants in the economy are to maximize
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happiness for consumers, profits for businesses, and general welfare for the government
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In a market, the equilibrium price is determined by
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the interaction of both demand and supply
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The invisible hand is most consistent with
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the market mechanism without government interference
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In real terms, the cost of government spending is measured by
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only the private sector output sacrificed when the government employs scarce resources
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Market power may result from
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control of resources
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If production in the economy is efficient, then changes in market price
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move us along the perimeter of the production possibilities curve
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The term market mechanism refers to
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the use of market prices and sales to signal desired output
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The term market power refers to
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a firm's ability to alter the market price or quantity of a good or service
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In the cost-benefit analysis of public goods, the benefits
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can be only roughly estimated using highly subjective techniques
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Market failure leads to
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public goods being underproduced
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A proportional tax is one that
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collects the same rate on every dollar of income
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The primary function of taxes is to
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transfer command over resources from the private sector to the public sector
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A tax is regressive if it takes a
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smaller fraction of dollars as income rises
