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A tax equal to the external cost on firms that emit pollutants would

provide firms with the incentive to decrease the level of activity creating the pollution

An example of an implicit cost of production is

the income an entrepreneur could have earned working for someone else

Productive efficiency occurs in perfect competition because the firm produces at the minimum of the:

average total cost curve

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Which of the following is true of perfectly competitive firms?

It is difficult for entrepreneurs to become suppliers of a product in a perfectly competitive market structure, a perfectly competitive firm has a perfectly elastic supply curve, In a perfectly competitive market, an individual seller can change his price and it will not alter the output he sells > NONE OF THE ABOVE

If after she buys a car with air bags, Maria Andretti starts to drive recklessly, that would be an illustration of:

the moral hazard problem

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Which of the following is most likely a fixed cost?

Property insurance premiums

If the government wanted a tax to reduce the quantity exchanged a large amount but not raise much in tax revenue, it would want to tax an industry with

elastic supply and demand curves

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If teh government imposes a pollution tax on gasoline refineries

the supply of gasoline will shift to the left

Which one of the following is not a characteristic of a perfectly competitive market?

Firms advertise in order to distinguish their products and increase market share

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Which of the following is potentially an option to save Social Security?

Increasing the payroll tax rate, increasing the age required for full time benefits, implementing means testing > ALL OF THE ABOVE

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Which of the following is true for a monopolist but not for a perfectly competitive firm?

Marginal revenue is less than price, economic profits could be earned in the long run - Both are true

As a result of the imposition of a tax on a product (assuming neither curves are perfectly elastic or inelastic):

some consumer and producer surplus is transferred from buyers and sellers to the government

Because of the problem of second-hand smoke, if unregulated, the market for cigarettes would produce a quantity that is too _____ at a price that is too _____ when compared to the socially optimal results.

High, low

A profit maximizing perfectly competitive firm would never operate at an output level where

it would not cover all of its variable costs

When marginal cost exceeds the average variable cost, average variable cost must be increasing.

False

When negative externalities are present, it leads to an underallocation of resources.

False

IN the long run, a perfectly competitive firm is expected to generate either an economic profit or an economic loss.

False

Whenever marginal revenue is greater than marginal cost, a profit-maximizing firm should reduce its output.

False

The more elastic the demand curve, the smaller is the deadweight loss resulting from the imposition of a tax.

False

Taxes for the most part are efficient because they retain incentives and align the values that buyers and sellers place on goods and services.

False

A monopolist restricts output and charges a higher price relative to what would occur if a market were perfectly competitive.

True

An economic profit of zero indicates a satisfactory situation for a firm.

True

A natural monopoly exists when one large firm can produce a product at a lower per unit cost than can smaller firms.

True

Monopolists, unlike perfectly competitive firms, can continue to earn positive economic profits over time.

True

A welfare loss occurs when a monopolist chooses not to produce units of output that are of greater marginal value to consumers than the marginal cost of producing them.

True

Producer surplus is the total area below the price and above the supply curve.

True

A profit- maximizing monopolist will choose to operate along the inelastic portion of its demand curve.

True

When decisions are made by majority rule, the individual consumption-payment link is broken.

True

One way to overcome an adverse selection problem when buying a used car is to hire an independent mechanic to inspect the car before making a purchase.

True

A price-discriminating monopoly firm will tend to charge a higher price to customers with a greater willingness to pay then it does to customers with a lower willingness to pay.

True

IN a perfectly competitive market, marginal revenue is the same as the market price.

True

The median voter model predicts a strong tendency for both candidates to choose a position away from the middle of distribution.

False

Firms should shut down in the short run whenever price is less than the average total cost.

False

Consumer surplus increases whenever the price of a good increases due to a leftward shift of the supply curve.

False

Vertical equity is the concept that people with similar levels of income should be treated similarly.

False

The period of time that is too short for the firm to change the quantity of certain resources used in production, known as fixed inputs, is called the short run.

True

A firm that is earning zero economic profits has a strong incentive to exit the industry.

False

A public good is non-rivalrous and excludable.

False- it is non-rivalrous and nonexcludable

IN the long-run, the firm can only expand output by adding more variable inputs (workers and raw-materials)

False

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