question
Consumers have the greatest incentive to lobby for price controls in the short run when supply is:
answer
inelastic and demand increases
question
As a result of advances in productivity, farmers can produce more at a lower cost. The effect of these changes has been to:
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reduce total revenue for farmers as a group.
question
Total consumer surplus is measured as the area:
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between the vertical axis, the demand curve, and a horizontal line through the market price.
question
Rent-seeking activities:
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require resources, and the net result is to reduce total welfare to society.
question
The price of gasoline is generally higher in Hawaii than in the continental United States. Therefore, the Hawaiian legislature passed a law forbidding gas stations from charging a price higher than the average price of gas on the West Coast of the United States. This is an example of:
answer
a price ceiling.
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A good that if supplied to one person is supplied to all and whose consumption by one individual does not prevent its consumption by another individual is known as:
answer
a public good.
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A policy in which the marginal costs of undertaking the policy equal the marginal benefits of that policy is best called an:
answer
optimal policy.
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A market incentive plan:
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makes the price of a resource reflect not only the marginal private costs but also the marginal social costs of consuming that resource.
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A policy is considered optimal if it:
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equates marginal costs with marginal benefits.
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A per-unit tax designed to internalize the costs of production imposed on third parties is called:
answer
an effluent fee.
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If markets are perfectly competitive and production of a good results in water pollution, the imposition of a tax on the good will:
answer
reduce the number of firms producing that good in the long run.
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A life insurance company is likely to require a health examination of a person applying for insurance. This helps reduce the informational problem through the process of:
answer
screening.
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Public television periodically runs pledge drives to raise money. Only a small percentage of the people who benefit from public television are willing to pay. This low percentage of people willing to contribute illustrates a difficulty with:
answer
voluntary programs.
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A person buying a used car could ask the seller for permission to take the car to a mechanic for an inspection. If the seller says no, the prospective buyer has gained information about the car. This process is known as:
answer
screening.
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Suppose Mary finds it easier to conserve than Jim does. The difference between a tax incentive program and a marketable certificate plan in this case is that:
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Mary takes on most of the conservation in both cases but is paid by Jim in the marketable certificate program.
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A new fertilizer has been discovered that significantly increases the corn crop yield per acre. As a result, the farmers':
answer
average total cost curve shifts downward.
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A perfectly competitive firm's marginal revenue is:
answer
equal to the selling price.
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A perfectly competitive firm in the long run earns:
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positive normal profits but zero economic profits.
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In a perfectly competitive constant-cost industry:
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factor prices do not change as industry output increases.
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The demand curve for a firm in perfect competition is equal to its:
answer
marginal revenue curve.
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Total profit is maximized at the output level at which the:
answer
vertical distance between the total revenue curve and the total cost curve is maximized.
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The long-run industry supply curve will be upward-sloping if:
answer
input prices increase with the level of output.
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If there were no barriers to entry:
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firms would compete away monopoly profits.
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If MR > MC, a monopolist should:
answer
increase production
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A natural monopoly occurs when a monopoly:
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exists because significant economies of scale are present
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A natural monopoly:
answer
occurs when a single firm can supply the entire market demand for a product at a lower average total cost than would be possible if two or more firms supplied the market.
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A price-discriminating monopolist will produce an output:
answer
above that of a normal monopolist.
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the price a monopolist sets is equal to:
answer
average revenue
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Charging different prices to different individuals or groups for the same product is called:
answer
price discrimination.
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Under monopolistic competition:
answer
firms face a downward sloping demand curve
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