Econ 200 Exam 2

Allocative efficiency means that:
Resources are being devoted to the production of products most desired by society
Paper mills located alongside the Lazy River to discharge waste products into the river. Which of the following policies would be most appropriate for dealing with this problem?
Levy a tax on the producers of paper products and use the tax revenues to clean up the river
When external or spillover benefits occur in the production of a particular product, the private market tends to provide?
Too little of the product
From the economist's perspective, "market failures" basically arise when:
Demand and supply do not accurately reflect all the benefits and all the costs of production
For which of the following goods would you most likely observe the characteristics of excludability?
A professional baseball game
If an economy is being "productively efficient" that means the economy is:
Using the least costly production techniques
Once a government has provided a public good, everyone
Can obtain the benefit
Which is an example of a negative externality?
Decreased property values in a neighborhood where several houses are burglarized
Supposed people want bike paths, but no individual or business is willing to build it. This is a:
Market failure
A purely competitive firm's output is currently such that its marginal cost is $4 and marginal revenue is $5. Assuming profit maximization, the firm should:
Leave price unchanged and raise output
Many people believe that monopolies charge any price they want to without affecting sales. Instead, the output level for a profit-maximizing monopoly is determined by
Marginal cost = marginal revenue
In a purely competitive industry, each firm:
Can easily enter or exit the industry
The classic example of a private, unregulated monopoly is:
De Beers
There would be a unique product which there few close substitutes under which market model?
Pure monopoly
To the economist, total cost includes:
Explicit and implicit costs, including a normal profit
To the economist, total cost includes:
Explicit and implicit costs, including a normal profit
Which is true under conditions of pure competition?
No single firm can influence market price by changing its output
An explicit cost is:
A money payment made for resources not owned by the firm itself
What do economies of scale, ownership of essential raw materials, and patents have in common?
They are all barriers to entry
Mutual interdependence means that each firm in oligopolistic industry:
Considers the reactions of its rivals when it determines its price policy
Which is not a form of product differentiation for the monopolistically competitive firm?
Standard hours and procedures
Which is an example of a differentiated oligopoly?
The beer industry
The greater relative scarcity of heart surgeons as compared with clerical workers could be partly accounted for by all the following except:
A heart surgeon derives a greater level of job satisfaction
The reason that the supply curve for labor in a purely competitive market rises is because:
Higher wages must be paid to bid workers away from other opportunities
demand-increasing factors in the health care market
rising incomes
the aging of the population
asymmetric information
Which is an example of a change in productivity that increases labor demand?
A technological change increases output per worker in the computer industry, thus increasing the demand for computer workers
Which of the following persons is most likely to be insured for health care?
A minimum-wage teenager working for a fast-food restaurant.
hat would happen in the market for health care if there were more Public Service Announcements explaining the dangers and negative aspects of smoking?
Equilibrium price would increase and quantity would decrease
An example of derived demand is the demand for:
Labor used to produce automobiles
Which of the following statements is correct?
Rising health care costs are major cause of limited access to the health care system.
A major implication of asymmetric information is that:
health care suppliers may increase the demand for health care
Collusion agree with each other to set prices and output
Refers to a situation where rival firms
Game theory view of oligopoly behavior suggests that oligopolists will benefit from collusion:
Which idea is inconsistent with pure competition?
Product differentiation
The steel and automobile industries would be examples of which market model?
If a purely competitive firm is in short-run equilibrium and its marginal cost exceeds its average total cost, then we conclude that:
Firm will enter the industry in the long run