question
Public choice theory indicates the behavior of people in government
answer
is best understood by applying the same framework we use to predict the behavior of people in the private sector.
question
By establishing a chain which made food of consistent quality at every location, Ray Krok (founder of McDonalds)
helped address what market problem?
helped address what market problem?
answer
asymmetrical (poor/imperfect) information
question
What is philosophical materialism?
answer
It is the assumption that the universe is only matter. This means there is no God, no moral law, people are only matter, do not have a soul. Therefore, like a dog, their behavior must be due purely to physical forces.
question
When asked about running a hypothetical currier service between the Mount and Frederick, Jake stated that he would probably act as the "law of supply" describes.
answer
By this he means that people would have to pay him ever higher prices if they wanted him to supply more and more trips per period because those trips would come at greater and greater personal cost of the time involved.
question
Market failure refers to the idea that
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if certain basic conditions are not present, then the market will not produce an efficient outcome
question
The implication of non-excludability of a good is that
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Firms would be unlikely to provide such a good because they would not be paid for it.
question
Which of the following most accurately explains why public goods are difficult to allocate efficiently through markets?
answer
Because nonpaying consumers cannot be excluded, people become free riders and, as a result, it will be
difficult for private firms to cover the cost of supplying public goods.
difficult for private firms to cover the cost of supplying public goods.
question
The article "Monetizing the Effects of Carbon" never uses the term but is essentially all about the problem of
answer
externalities
question
In the absence of government intervention, goods with external costs tend to be
answer
overproduced
question
The book provides an overview of the economic assumptions regarding how people behave. One of these assumptions is that "people are rational, i.e. they act purposefully to maximize utility; and increased consumption raises utility." Give 2-3 of the limitations regarding this that we discussed in class
answer
a. That people are always rational: in many cases their actions do not maximize utility.
b. Second, people are not simply utility maximizers, doing whatever will maximize their pleasure (that is the life of rats and roaches). Instead, people often do things (e.g. follow moral codes, love others, sacrifice for children) that do not raise their utility, and thus people are motivated by more than mere utility maximization.
c. Consumption raises utility in the short run, but doesn't appear to raise it much in the long run.
d. Finally, this doesn't address where preferences come from or how they can change.
b. Second, people are not simply utility maximizers, doing whatever will maximize their pleasure (that is the life of rats and roaches). Instead, people often do things (e.g. follow moral codes, love others, sacrifice for children) that do not raise their utility, and thus people are motivated by more than mere utility maximization.
c. Consumption raises utility in the short run, but doesn't appear to raise it much in the long run.
d. Finally, this doesn't address where preferences come from or how they can change.
question
"If beer were taxed, the price of beer would rise. Consequently, the demand for beer would fall. The fall in demand for beer would in turn cause the price of it to fall back down again to its original level."
answer
The statement is incorrect-demand and quantity demanded are confused. The price increase would reduce quantity demanded, not demand.
question
Over the years that she has run Carrie Beaner's Outdoor Equipment Emporium, Carrie has noticed the people need both climbing ropes and carabiners and that they tend to buy them together. This would seem to indicate that the ? of ropes and carabiners is ?
answer
cross price elasticity of demand; negative.
question
Wanda Bett is a bookie in the city. When she arranges bets, she must determine how much to pay out.
This depends on how much risk people want to take. We discussed this as wanting to know how __ they are.
This depends on how much risk people want to take. We discussed this as wanting to know how __ they are.
answer
risk averse
question
Assume you have the following demand and supply conditions: Qd = 9 - P Qs = -1+P
If the government sets a price of $6, what will happen?
If the government sets a price of $6, what will happen?
answer
a surplus of 2 units
question
List 3 things that shift a supply curve.
answer
Technology, input costs, taxes, number of suppliers
question
What term most likely goes in the blank in the article "Too Big to Maintain" by George Will?
answer
Moral hazard
question
If multiple people can simultaneously consume the same good, it is known as what?
answer
non-rival (joint in consumption)
question
Trash collection is often provided by cities and towns. However, if the truck is at Matt's house, it cannot be at Nicole's at the same time. Thus trash collection paid for by the city or town would be considered a what?
answer
publicly provided private good
question
If the demand curve is Q=10 -2P, what is the marginal benefit of the 4th unit?
answer
3
question
If a good is _______ a company will not be able to charge for it, and thus not recover its costs:
answer
non-excludable
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