MircoEcon Final Exam
Economics 2106 with Frost at Georgia State University
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Scarcity in economics means
not having sufficient resources to produce all the goods and services we want
Macroeconomics deals with
the working of the entire economy or large sectors of it
When moving along a production possibility frontier, the opportunity cost to society of getting more of one good:
is measured by the amount of the other good that must be given up
Opportunity cost is:
the value of the best alternative forgone in making any choice. 100%
If the production possibility frontier were a straight line sloping down from left to right, this would suggest that
the opportunity costs of the products are constant
Which are the two markets represented in the circular-flow diagram?
The market for goods and services and the market for factors. 100%
What is one thing that economists generally agree on?
the relative merits of rent controls and housing subsidies
An increase in supply is caused by
a decrease in prices of goods that are substitutes in production. 100%
If the market for corn is in equilibrium:
the price is at a level where the quantity of corn can acquire corn produced is equal to the quantity of corn
Market failure refers to a situation in which
markets fail to reach an efficient outcome
Producer surplus for an individual seller is equal to
the price of the good, minus the marginal cost of producing the good.
Total surplus is
the sum of consumer and producer surplus
A price ceiling is not effective if
it is set above the equilibrium price
If the government imposes rent control
it may result in some landlords leaving the business because they cannot cover costs
An effective price floor will lead to
a resulting excess supply or surplus
If a good is a necessity with few substitutes, then the price elasticity of demand will tend to be
more price-elastic. 100%
The elasticity of demand for Gala apples is relatively elastic, so if a tax is levied on the consumers of Gala apples, the tax incidence
typically on the producer more than the consumer
The problem of determining what goods and services society should produce
exists because there are not enough resources to provide all the goods and services that people want to purchase
Opportunity cost is
the value of the best alternative forgone in making any choice.
National defense and clean air are similar in that both are ________, but they differ in that a national defense is ________ while clean air is not.
nonexcludable; nonrival in consumption
Jacquelyn is a student at a major state university. Which of the following is not an example of an explicit cost of her attending college?
the salary she could have worked from working full time
If goods A and B are substitutes, a decrease in the price of good B will
decrease the demand for good A
The Coase theorem states that in the presence of externalities, a market economy will
reach an efficient solution if transaction costs are sufficiently low
It is certain that the equilibrium price will rise when
supply decreases and demand increases
By law, FICA (the Federal Insurance Contributions Act), a payroll tax, is collected equally from the employers and the employees. In reality
the employees bear almost all the burden of the tax.
Marginal Benefit
is the addition to total benefit due to the undertaking one more unit of an activity
When the absolute value of the percentage change in the Q demanded is less than the absolute value of percentage change in price, demand is:
inelastic
the net present value (NPV) of an activity or project is equal to the _____ values of all rev minus the ____ values of all the costs associated w/ it
present; present
Activities of consumers and firms:
have both costs and benefits
The principle of diminishing marginal utility mean thats when Sarah eat pizza, her satisfaction from the second slice is probably:
less than that from her first
utility
economists identify the satisfaction a person derives from the consumption of goods and services
If the D curve is downward-sloping & S is perfectly elastic, then the burden of an excise tax is:
borne entirely by consumers
A tax that takes a _____ percentage of income as income rises is a ______.
higher; progressive tax
incidence of a tax:
refers to who in reality pays the tax to the government
The income elasticity of D os an inferior good:
is les than 0
Someone who has 2 make a choice involvin whether 2 receive $100 now or $100 1 year from now will probably choose _ bc there is a _in waitin 2 use money
now; opportunity cost
A good is likely to have an inelastic D curve if:
the good has few available subs
the gov imposes a $10 per unit X If the D curve for X is perfectly inelastic & the S curve is up-sloping, the P that consumer pay goes up by
$10
when moving along the possibility frontier, the opportunity cost to society of getting more of one good:
is measured by the amount of the other good that must be given up
a decrease in supply means:
a shift to the left of the entire supply curve
A price floor in the market for wheat:
increases the price paid by consumers
If the P of a good rises, then producer surplus:
will increase
The market for salmon is in equil. Price ceiling, price floor, and quota limit in this market would all have outcome in common
deadweight loss created by a Q exchanged that is less than the equilibrium quantity
The law of demand states that, other things equal:
as the P increases, the Q demanded will decrease
along the D curve, a decrease in the P of a good:
will increase the consumer surplus
Resources are being used efficiently when:
every opportunity to make people better off has been utilized.
ability to pay principle
principle of tax fairness by which those with greater ability to pay a tax should pay more tax
Coase Theorem
the proposition that even in the presence of externalities an economy can always reach an efficient solution as long as transaction costs are sufficiently low
externalities
external costs and benefits
competitive market
market in which there are many buyers and sellers of the same g or s if the opp cost of producing more the good or service is lower for that individual or nation than for other producers
constant returns to scale
long-run ATC is constant as output increases
benefits principle
principle of tax fairness by which those who benefit from public spending should bear the burden of the tax that pays for that spending
game theory
the study of behavior in situations of interdependence. used to explain the behavior of oligopoly.
elastic demand
when the price elasticity of demand is greater than 1
price ceiling
the max price that can be charged for a g or s
price floor
minimum buyers are required to pay for g or s
total surplus
total net gain to consumers and producers from trading in a market
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