226 terms

Economics Exam 1 Material

STUDY
PLAY

Terms in this set (...)

If the price of hot dogs increase (the frankfurter), the demand for hot dog buns will ________.
Decrease
When the price of a product falls, demand for its substitute will:
decrease
A change in demand occurs due to a change in a consumer's state of mind about purchasing a product that is based on something other than the ______ of the product.
Price
A change in demand is represented by a ______ the demand curve while a charge in quantity demanded is represented by a ______ the demand curve.
Shift of; movement along
Which of the following causes an increase in the quantity of a good purchased?
An increase in the number of buyers
When the price of Coke rises, the demand of Pepsi will likely:
Increase
When the price of one product rises, the demand for its substitute will ________.
Increase
A change in quantity demanded (Q10) is caused by an increase of decrease in the __________ of the product under consideration and nothing else.
price
A change in demand comes from a change in consumers' minds because of :
a change in a determinant of demand other than price
A change in ______ refers to a movement along the demand curve in response to changes in the price of a good service, whereas a change in ______ refers to a shift of the demand curve leftward or rightward in response to anything other than changes in the price of a good or service.
quantity demanded; demand
An increase in the price of Coke will change the ______ for Coke while an increase in the price of Pepsi will change the ____ for Coke.
quantity demanded; demand
Which of the following decrease demand for any good or service?
Falling incomes and the product is a normal good
An unfavorable change in consumer tastes.
A decrease in the price of a substitute good.
_______ causes a decrease in demand.
A decrease in the number of buyers in a market
Other things equal, if consumers believe that gas prices will rise in a week, the demand for gas today will _______.
Increase
A ________ good is one that is used together with another good.
Complementary
What are the characteristics of a competitive market?
A large number of buyers and sellers acting independently.
Buying and selling standardized products.
All of the following illustrate a market, except:
A farmer sharing his surplus wheat with neighbors
Which of the following consists of a large number of independently acting buyers and sellers?
Highly competitive markets
Which of the following are examples of a market?
A local gas station
The new york Stock exchange
eBay
From an economic perspective, which of the following are true of a market?
In a market, buyers and sellers interact in their desire to buy and sell a good or service.

A market is a virtual and/or physical institution or space.
Supply refers to the _____ of the product and demand refers to the _____ of the product.
Producers, buyers
Under what circumstances would government intervene and prevent prices from rising or falling to their equilibrium levels?
Prices are too high for consumers
Prices are too low for firms
Which of the following refers to a particular apportionment or mix of goods and services most highly valued by society?
Allocative efficiency
The number of sellers or competitors in a market is a determinant or shifter of the _______ curve.
Supply
Which of the following types of good affect the demand for another product due to a change in their price?
Substitute goods
Complementary goods
The added cost of producing one more unit of output is called ______ cost.
Marginal
An increase in business taxes causes ____ in supply and will _____ production costs.
A decrease; increase
The _____________, or supply shifters, of a good are any factors other than the product's price that cause the supply curve of the good to shift.
determinants of supply
The ____ incurred by firms when producing a good or service arise from the prices of the inputs that are used to produce said good or service.
costs of production
One of the determinants of demand is ____ expectations.
consumer
The law of demand describes a(n) ______ relationship between the price of a good or service and the quantity demanded of that good or service.
Inverse
Which of the following describes the law of demand?
All other things being equal, as price decreases, quantity demand increase.

All other things being equal, as price increases, quantity demanded decreases
Which of the following are determinants of supply?
Expected prices
Prices of other goods
Taxes and subsides
The vast majority of goods that are not related to one another are called _____ goods.
independent
The interaction between buyers and sellers determines equilibrium price and equilibrium ___________.
quantity
Market ______ is a schedule or curve showing the various amounts of a product that producers are willing and ale to make available for sale at each possible price during a specific period.
Supply
Which of the following specifically refers to demand?
The buyer side of any market.
Which of the following are determinants of demand?
Number of buyers
Consumer expectations
Changes in income
Prices of isolated goods
Consumer interest
________ in supply while holding demand constant results in an increase in equilibrium price, but a decrease in equilibrium quantity.
A decrease

A leftward shift
An increase in supply while holding a demand constant in a(n) ___________ in equilibrium price, but a(n) ___________________ in equilibrium quantity.
decrease; increase
Which of the following scenarios describe the appropriate effects on equilibrium price and quantity due to a decrease in supply while holding everything else constant?
An oil spill causes several fisherman to leave the shrimp business and the equilibrium price of shrimp increases while quantity decreases.

A fishing tax is placed on all shrimp and the equilibrium price of shrimp increase while quantity decreases.
A decrease in equilibrium price and indeterminate result on equilibrium quantity is a result of which of the following?
An increase in supply and a simultaneous proportional decrease in demand
Th effects on equilibrium price and quantity due to an increase in supply and a simultaneous decrease in demand are shown by:
A decrease in price and an indeterminate change in quantity
If an increase in supply is larger than a decrease in demand, the equilibrium will ____________
Rise
An increase in equilibrium price and indeterminate effect on equilibrium quantity is a result of which of the following?
A decrease in supply and a proportional and simultaneous increase in demand
________ in supply while holding demand constant _________ equilibrium price and _____________ equilibrium quantity.
An increase; lowers; raises
Which of the following shows the effects on equilibrium price and quantity due to an increase in supply and a simultaneous decrease in demand?
Equilibrium price falls and the change in quantity in indeterminate.
An increase in the equilibrium price of a good and an indeterminate change in the equilibrium quantity is the result of:
An increase in demand and decrease in supply.
All of the following are the determinants of demand, except:
price of substitutes in production
Producer expectations of future prices are a determinant of ___________.
supply
The income effect indicates that a ________ price increases the purchasing power of income, enabling consumers to purchase _____________ of a product and vice versa.
lower; more
When the government provides financial assistance for the production of a good which lowers producers' costs and increases supply, it is called a ___________.
subsidy
If costs of production rise, the producer has an incentive to produce ___________ output.
Less
In general, a firm will ___________ output of a good or service if the price of the good is higher.
increase
Which of the following would result in a change in supply?
An increase in the excise tax on cigarettes
An increase in the number of shoe stores at a local mall
An increase or decrease in wages
A price ________ is the maximum legal price a seller may charge for a product or service.
ceiling
The supply curve measures quantity ________ on the horizontal axis and ________ on the vertical axis.
supplied; price
An inverse relationship between two variable is a(n) ________ relationship.
Negative
Which of the following correctly state the effects on equilibrium price and quantity due to an increase in demand, while holding everything else constant?
Consumers expect the price of shrimp to increase in the future, therefore the equilibrium price and quantity increase now.

3-D televisions become popular, therefore the equilibrium price and quantity increase.

The price of Coke increases, therefore the equilibrium price and quantity of Pepsi increase.
Which of the following is a determinant of demand?
Income
A shortage results from an excess of quantity _________.
Demanded
Consumers experience __________ marginal utility the more they consume of a particular good or service.
Diminishing
The determinant of supply dealing with alternative products that can be produced by firms is called:
Price of substitutes in production
A(n) _______________ in demand while holding supply constant results in both equilibrium price and quantity.
Increase
Equilibrium price and quantity in a market changes when there is a change in:
Supply
Demand
Consumer tastes
A price ___________ is a minimum price fixed by the government, generally imposed above the price, which is otherwise known as the equilibrium price.
Floor
A buyers intentions or plans in regard to the purchase of a product is known as:
Demand
The law of supply states that as price ______, the quantity supplied (Q10) rises, as price ____________, the quantity supplied falls.
rises; falls
Choose all of the following that will cause a change in supply, not quantity supplied.
Technology
Number of sellers
Producer expectations
With a price ceiling, quantity ________ will exceed quantity _______, resulting in a persistent shortage of product.
demanded; supplied
Improvement with technology are a determinant of:
Supply
Government-set prices cause:
Cause shortages or surpluses
Distort resource allocation
Produce negative side effects
The demand by a consumer for a good or service essentially reflects the ______ benefit of the good or service, based on the utility received.
Marginal
_______ resource prices raise production costs and, assuming a fixed product price, _____ profits.
Higher, reduce
Products that have decreased demand when consumer incomes rise and increased demand when consumer incomes fall are called _______ goods.
Inferior
_________ _________ is the quantity at which the intentions of buyers and sellers match, so that quantity demanded and the quantity supplied are equal.
Equilibrium quantity
A normal good is an item for which _______ varies directly with money income.
Demand
Equilibrium price is otherwise known as market-_____ price.
Clearing
In the circular flow model, households _____ resources and ____ products.
sell; buy
Competition among ____ and ______ diffuses economic power within the economic units that make up the economy.
Producers
Consumers
In the market system, competition, freedom of choice, self-interest, and personal _____ provide the opportunity and motivation for technological advance.
reward
Which of these countries or areas have transformed from a pure command economy to a market-oriented economy?
The former Soviet Union
China
In the market system, consumer exercise _______. That is, consumers are in command and spend their income on the goods and services they are most willing and able to buy.
Consumer sovereignty
Division of labor that works on a regional or international basis is known as _______ specialization.
geographic
The ______ describes a situation faced in command economies in which producers have no reason to adjust production in response to shortages and surpluses in the economy.
incentive problem
Which of the following were economic problems faced by the former Soviet Union, Eastern Europe, and China prior to its market reforms?
incentive problem
Coordination problem
Which of the following does competition require?
Freedom of sellers and buyers to enter or leave markets

Two or more buyers and two or more sellers acting independently in a particular market
In the circular flow model, the market economy creates
continuous, repetitive flows of goods and services, resources and money.
Freedom of ___________ ensures that entrepreneurs and private businesses are free to obtain and use economic resources to produce their choice of goods and services.
enterprise
Over the years, many people have benefited from technological innovations and advancements such as the personal computer and medical discoveries. This illustrates which of the following concepts?
Invisible hand
The "invisible hand" refers to firms and resource suppliers, in seeking to further their own interests, promote:
the public or social interest
Human specialization or division of labor contributes to a society's output in which of the following ways?
Specializations makes use of differences in ability
Specialization fosters learning by doing
Saves time
What characteristics are true for a partnership?
law offices are often organized as a partnership
sharing of profits and losses
pooling financial resources
In a market system, private property refers to the right of private firms and individuals, not the ________, to own most property resources such as land and capital.
government
Which type of business structure is considered an independent legal entity?
corporation
Three virtues of the market system include _____, ______, and _______.
efficiency
freedom
incentives
When every economic unit in a society such as individuals, firms or government attempts to achieve their own particular goal usually requiring delivering something of value to others, this is referred to as:
self-interest
A ______________ is an institution or mechanism that brings buyers and sellers into contact.
market
Which of the following summarize he product market?
Consumer spending on goods and services yields sales revenues for businesses.

God and services produced are bought and sold.
Households use income received from the sale of resources to buy goods and services.

Businesses determine whether a good or service should continue to be produced based on revenues received from sales.
The three main categories into which businesses fall are:
corporation
parnership
sole partnership
monies that flow out of businesses to pay for resources are costs to businesses, but they represent which of the following types of flows to households?
profit income
interest
wages
rent
Households obtain income the ____ market in order to buy the goods and services that businesses produce in the ___ market.
resource; product
According to the circular flow model, households buy goods and services that businesses make available in the _____ market.
product
In the circular flow model, households and resources to, and buy products from _______.
firms
The economies of the former Soviet Union, eastern Europe, and China prior to market reforms faced problems caused by a lack of coordination and a lack of ______.
incentive
Which of the following best describe how goods and services will be produced?
By utilizing the right mix of labor and capital

By locating production facilities optimally to hold down production and transportation expenses.
In the market system, consumers excercise _______. That is, consumers are in command and spend their income on the goods ad services they are most willing and able to buy
Consumer sovereignty
A market system decided on what to produce based on:
Continued economic profit from producing a good or service.

total revenue exceeding total costs in the production of a good or service

the movement of resources toward an industry that exhibits continued profits from producing good or service
The five questions that every society must address reflect the reality of ____ resources in a world of ________ wants.
limited; unlimited
_________ is the use of resources by an individual, firm region or nation to produce one or a few goods or services rather than the entire range of goods and services.
Specialization
Money performs several functions, but first and foremost it is a:
Medium of exchange
True or false: Money complicate exchange or trade.
False
An active but limited government is characteristic of which market system in modern advanced industrial economies?
Free market system
The use of ______ in market systems facilitates the exchange of goods and services that specialization requires.
money
In order to serve as money, an item must be generally acceptable to ______ in exchange for their goods and services.
Sellers
Which of the following have historically been used as mediums of exchange?
cattle
cigarettes
stones
metals
shells
Which of the following best illustrates a coincidence of wants?
Nebraska has excess wheat to trade and wants oranges. Florida has excess oranges and wants wheat. Therefore, an exchange occurs.
The __________ system requires coincidence of wants between the buyer and seller.
Barter
Technological improvements or advancements also include new and improved methods that ____________ distribution or production costs.
Reduce
Which of the following describes how the market system will promote progress?
Competitive markets create incentives for technological advance and capital accumulation, both of which contribute to promoting progress.
A person's income depends on the quantities of property and human resources that the person supplies to the market. t/F
True
Entrepreneurs and owners of business use part of their _______ in order to accumulate more capital goods.
Profits
The creation of new products and production methods that completely destroys the market positions of firms that are wedded to existing products and older ways of doing business is called __________.
Creative destruction
An economic system will promote progress by advancing ____ and accumulating ________.
technology; capital
Which of the following describes a technological advancement?
The ability to produce better products and processes to replace inferior ones.

New and improved methods that reduce production and/or distribution costs.

The ability of a firm or entrepreneur to gain revenue and economic profit at the expense of rivals by introducing a popular new product.
Which of the following factors are the determinants of a person's income?
The prices commanded by the skills of the person in the resource market.

The quantities of the property and human resources acquired by the person.
In a market economy, goods and services are distributed:
to consumers on the basis of their ability and willingness to pay their existing market price
The least-cost production technique depends on:
the available technology.

the cost of the needed resources
Which of the following describe the role of government in the United States' form of capitalism?
Provides the rules for economis activity

Modifies the distribution of income

Provides certain goods and services that would otherwise be under-produced or not produced at all.

Promotes economic stability and growth
In a market system, ______ create powerful incentives for firms to innovate and entrepreneurs to pioneer new products and processes.
Monetary rewards
In a market system, private property refers to the right of private firms and individuals, not the _____________, to own most property resources as land and capital.
Government
In which of the following do private individuals and firms own most of the property resources such as land and capital?
Market system
Which of the countries or areas have transformed from a pure command economy to a market-oriented economy?
The former Soviet Union

China
Choose those characteristics that best describe a command system.
A central planning board makes all economic decisions concerning resources.

Government owns resources.
Describe the role of a central planning board appointed by a command system government.
Makes all decisions concerning the use of resources.

Organize production

Makes decisions on the composition and distribution or output.
Which of the following best describes the concept of laissez-faire capitalism?
The role of government is limited to protecting private property.

The role of government is limited to ensuring the appropriate operation of the market system.
Which of the following best describes how goods and services will be produced?
By utilizing the right nix of labor and capital

By locating production facilities optimally to hold down production and transportation expenses.
Pure capitalism is also known as ______ capitalism.
Laissez-faire
Economics is primarily the study of:
the problem of scarce resources relative to human wants
Suppose you have a $20 iTunes gift card with which you can buy (download) songs or videos. Songs cost $1.00 each and videos cost $2.00 each. The opportunity cost of one video:
is constant and equal to 2 songs
You should decide to study an extra hour tonight:
if the marginal benefit of studying an extra hour exceeds its marginal cost
Answer the next question on the basis of the data given in the following production possibilities table:

Production possibilities (alternatives)
A B C D E F
Capital Goods 5| 4| 3| 2| 1 | 0
Consumer goods 0| 5| 9| 12| 14| 15

The data in the table indicate that increasing production of capital goods requires:
A) increasing sacrifices of consumer goods.
Consider the problem Marsha faces of how to allocate her weekly allowance between books and videos. An increase in Marsha's allowance will:
shift her budget line to the right.
The negative slope of the production possibilities curve illustrates that:
when resources are fully employed, an economy can produce more of one thing only by producing less of something else.
A micro-economist would most likely study:
how consumers respond to a change in gasoline prices
The fundamental problem of economics implies that:
individuals and communities must make choices among competing alternatives
Margaret decides to stay home and study for her exam rather than going out to a movie with her friends. Her dilemma is an example of:
B) opportunity cost
For a laissez-faire system, which of the following best answers the question, "What goods and services will be produced?"
A) Only those goods whose long-term profits are greater than average
B) Any good for which consumers are willing to pay a positive price
C) Any good whose production is characterized by the least-cost technology
D) Any good that returns its producers sufficient revenue to cover its total costs
D) Any good that returns its producers sufficient revenue to cover its total costs
In the diagram, consumer expenditures are represented by:
A) Flow 1
B) Flow 2
C) Flow 3
D) Flow 4
D
The command systems of the Soviet Union and Eastern Europe failed in part because:
A) previously abundant economic resources became scarce
B) central planners found it increasingly difficult to coordinate the economic decisions of consumers, resource suppliers, and businesses
C) firms manufactured more output than consumers could afford to buy, resulting in a general glut
D) prices were set too low in all markets
B) central planners found it increasingly difficult to coordinate the economic decisions of consumers, resource suppliers, and businesses
The competitive market system encourages innovation and technological advance, primarily through:
A) the government's tax code
B) the process of "dollar voting"
C) the guiding function of consumer needs and preferences
D) profitable returns to innovative firms
D) profitable returns to innovative firms
Human specialization, or the division of labor:
A) reduces output by dehumanizing workers
B) reduces output by discouraging workers from learning a wide variety of tasks
C) increases output by enabling workers to take advantage of differences in their skills
D) increases output by allowing workers to each perform a wide variety of tasks
C) increases output by enabling workers to take advantage of differences in their skills
Economic profits and losses:
A) answer the question "Who will get the output?"
B) answer the question "How will the goods and services be produced?"
C) help determine which industries survive or fail
D) are the expected outcomes of a decrease in dollar votes and an increase in dollar votes, respectively
B) answer the question "How will the goods and services be produced?
If a change in consumer preferences results in many more consumers registering their "dollar votes" in favor of peaches, which of the following will most likely follow?
A) Profits of peach growers will rise and peach production will rise
B) Profits of peach growers will rise and peach production will fall
C) Profits of peach growers will fall and peach production will rise
D) Profits of peach growers will fall and peach production will fall
A) Profits of peach growers will rise and peach production will rise
The laissez-faire system is characterized by:
A) widespread use of government price controls
B) centralized decision-making
C) limited use of capital goods
D) private property rights
D) private property rights
A firm will earn a positive economic profit if:
A) its total sales revenue equals the total cost of labor, capital, raw materials, and entrepreneurship
B) it produces its output utilizing the least-cost production method
C) it is regulated by government
D) its total sales revenue exceeds the sum of all its costs
B) it produces its output utilizing the least-cost production method
A firm can produce a single unit of output by combining labor and capital in any of the combinations shown in the following table. Labor costs $2 per unit and capital costs $4 per unit.

Technique
A B C D
Lab 10 8 6 9
Capital 6 8 10 7

Refer to the table. Which is the most efficient technique for producing the output?
A) A
B) B
C) C
D) D
C
Which of the following justifies government intervention in the economy?
Market failures
___________ is defined as the difference between the maximum price a consumer is willing to pay for a product and the actual price.
Consumer surplus
True or false: Consumer surplus is the difference between the minimum price a consumer is willing to pay for a product and the actual price paid.
False
Consumer surplus can be illustrated as the area _________ the demand curve and ________________ the market price.
below; above
How are consumer surplus and price related?
Inversely
What is the difference between the actual price a seller receives an the minumum acceptable price?
Producer surplus
Which curve shows the seller's minimum acceptable price for each unit of the product?
Supply Curve
What kind of relationship exists between equilibrium price and the amount of producer surplus?
Positive
Which of the following reduces producer surplus?
Lower prices
All markets that have downward-sloping demand curves and upward-sloping supply curves yield ________ and ___________ surplus.
Consumer; producer
What is achieved at equilibrium quantity?
Productive efficiency
Allocative efficiency
True or false: At the equilibrium output, where the demand and supply curves intersect, marginal benefit equals marginal cost.
True
What do points on the demand curve represent?
Marginal benefit
Free and ________ markets produce equilibrium prices and quantities that maximize the combined consumer and producer surplus.
Competitive
Which of the following refers to reductions of combined consumer and producer surplus associated with underproduction or overproduction of a product?
Deadweight loss
The size of the deadweight loss will get smaller, when output is increased and
the maximum willingness to pay exceeds acceptable prices.
Quantity levels less or greater than the efficient quantity create efficiency or deadweight
loss
Market failures can be used to justify:
government intervention in the economy
Consumer surplus is the difference between the _______ price a consumer is willing to pay for a product and the price paid.
Maximum
______ is calculated as the difference between the maximum price a consumer is willing to pay for a product and the actual price paid.
Consumer surplus
True or false: Competitive markets produce equilibrium prices and quantities that minimize the sum of consumer and producer surplus.
False
Which of the following are the three options available to government to correct spillover benefits or the underallocation of resources?
Government provision of public goods

Subsidies to buyers

Subsidies to producers
______________ in consumption means that one person's consumption of a good does not preclude consumption of the good by others.
Nonrivalry
The market demand curve for positive externalities reflects:
Only the direct, private benefits to those demand and use the product
The _______ curve for positive externalities reflects only the direct private benefit to the individuals who consume the product.
Market Demand
Market failures in competitive markets can be classified into:
Demand-side
Supply-side
Characteristics of a pure private good include:
Excludability
Rivalry
Which of the following goods would be considered a rivalrous private good?
Tickets to a movie
Private goods exhibit two consumption characteristics, ________ and ________________.
Excludability
Rivalry
If a third party to a market transaction is experiencing an uncompensated cost, then the transaction results in a market failure know as a ____ or _____.
Negative externality
Spillover cost
A positive externality is an uncompensated:
Spillover benefit
The supply curve for any good, private or public, is its marginal ____________ curve.
Cost
"Marginal Cost Curve"
Which of the following goods could be classified as nonexcludable?
Enivornmental Protection Agency
Country Roads
A cost- ________________ analysis involves an assessment of marginal changes.
benefit
Public goods are distinguished by:
Nonrivalry
Nonexcludability
Everyone can benefit from ______ goods and there is no effective way of excluding individuals from the benefits derived from them once they exist.
Public
_____________ intervention may be needed to achieve economic efficiency when positive or negative ___________ affect large numbers of people or when community interests are at stake.
...
If a good is nonrival and nonexcludable, then it is known as a :
Public good
The situation when people can receive the benefits from a good without having to pay for it is called the ___________-rider problem.
Free
Government intervention may be needed to achieve _________.
economic efficiency when externalities affect large numbers of people or when community interests are at stake
_______ means that sellers can keep people who do not pay for a product from obtaining its benefits.
Excludability
A cost or a benefit accruing to an individual or group, a third party, that is external to a market transaction is know as:
An externality
A _____ to a producer is a payment from the government to decrease a producer's cost in order to encourage more output of a product deemed beneficial to society.
Subsidy
Which of the following are examples of markets that are more likely to experience positive externalities?
Immunizations
Health care
Education
Education funding by government is an example of a _______ externality.
Positive
An externality causes some of the benefits or costs of a market transaction to be passed on to a:
Third party
Examples of quasi-public goods include:
Libraries
Police
Fire Departments
Which of the the following are the three options available to government to correct spillover benefits or the underallocation of resources?
Subsidies to buyers
Government provision of public goods
Subsidies to producers
Which of the following has been stated to reduce society's cost by allowing pollution rights to be bought and sold?
Market-based approaches to pollution abatement
A cap-and-trade program
It has been stated that a cap-and-trade program _______ society's costs by allowing pollution to be bought and sold.
Reduces
Which of the following describes the effect on the demand curve when the government encourages more consumption of a beneficial product by subsidizing consumers?
The demand curve shifts to the right causing price to rise and quantity to rise to its optimal output
When there is no effective way of keeping individuals from the benefit of a good once it comes into existence, the characteristic of the good becomes distinguished by ______.
Nonexcludability
According to the law of diminishing marginal utility, consumption of successive units of a public good:
yield less and less added benefit
Because the economy's resources are _______, decisions to use more resources in the public sector will mean fewer resources for the _______ sector.
limited; private
According to the figure illustrated, which of the following are the effects of a subsidy to producers to correct the externality?
Supply curve shifts to the right because of an increase in supply

The quantity of the product increases to the economically optimal quantity, eliminating the under-allocation of resources.

The subsidy reduces the marginal cost of producing the good.
Another policy approach to _________ externalities is for government to levy a _____ or a change specifically on the related good.
Negative; tax
If society wants a public good
society will have to direct government to provide it
Government can use:
direct controls and taxes to counter negative externalities and it may provide subsidies or public goods to deal with positive externalities
Which of the following scenarios represents a reason for firms to "tap the market"?
The production of vinyl records has not been able to keep up with demand.

The average industry profit margin is 40% for providing cell phone service
True or false: Since the total profit from the sale of five bottles of water is $1.00, representing a 20% profit margin, this is the reason to "tap the market".
True
Suppose that the technology for pollution-control equipment improves noticeably. One would expect:
society's marginal cost curve (MC) to shift rightward
the cost of pollution abatment to fall
the optimal quantity level of abatement to rise
Two examples of government corrections for an under-allocation of resources in a market (a positive externality) are:
Educational grants
Financial aid
Reducing a ____ externality has a cost and society must decide how much of a reduction in the externality it wants to pay for.
Negative
The direct way to reduce negative externalities from a certain activity is to pass ____ limiting the activity.
Legislation
Negative externalities such as pollution _____ the utility of people and the communities they live and work in, rather than ____ it.
reduce; increase
The marginal cost to firms and hence to society ____as more and more pollution is reduced.
Rises
As pollution continues to be reduced:
The marginal cost to firms and society rises
Which of the following are true statements about competitive markets?
Makes private goods available to consumers
Allocates society's resources efficiently to particular product
A negative externality occurs when:
An overproduction of a product occurs and there is an over-allocation of resources to this product