Econ review quiz 2

Absolute advantage is
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Terms in this set (26)
Absolute advantage is
The ability to produce more of a good or service than the competitors when using the same amount of resources
...... is the ability of a a individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors
Comparative advantage
The ratio at which a country can trade its exports for imports from other countries is called
terms of trade
Countries that engage in trade will tend to specialize in the production of goods and services in which they have....lol.and will......these goods and services
Comparative advantage; export
The difference between the highest price a consumer is willing to pay for a good and then the price the consumer actually pays is called
Consumer surplus
The difference between...... and the .....from the sale of a product is called producer surplus
The lowest price a firm would have been willing to except; the price it actually receives
Economic surplus
the sum of consumer surplus and producer surplus
Economic efficiency in a competitive market is achieved when
the marginal benefit equals the marginal cost from the last unit sold.
An externality is
a benefit or cost experienced by someone who is not a producer or consumer of a good or service
Which of the following is an example of a positive extranality
People who do not consume college educations can still benefit from them
A positive externality causesThe marginal private benefit to exceed the marginal social cost at the market equalibriumWhen a negative externality exists, the private market producesmore than the economically efficient output levelWhich of the following is a source of market failureincomplete property rights or inability to enforce property rightsWhat is market failureA market failure is when the market fails to produce the efficient level of output.A negative externality exists ifthe marginal social cost of producing a good or service exceeds the private cost.Which of the following represents the true economic cost of production when firms produce goods that cause negative externalitiesthe social cost of productionWhat is a "social cost" of productionthe sum of all costs to individuals in society, regardless of whether the costs are borne by those who produce the products or consume the productA key difficulty facing insurance companies is that people know more about their health than do insurance companies. What is this phenomenon called?asymmetric informationWhat is moral hazard?It refers to the actions people take after they have entered into a transaction that makes the other party to the transaction worse off.An insurance company is likely to attract Customers like Clancy who want to purchase insurance because he knows better that the company that he is more likely to make a claim on a policy. What is the term used to describe the situation aboveadverse selectionIn markets with asymmetric informationasymmetric information causes adverse selection and then it causes moral hazard.Consider a used car market in which half the cars are good and half or bad (lemons) suppose the average price of a good car is $9,000 and the average price of a lemon is $3,000. If factional buyers are willing to pay $6,000 for a used car, then sellers will agree to sell mostly lemons at this price. What is the term used to describe this situationSuppose that in a market for used cars there are good used cars and bad used car (lemons). Consumers are willing to pay as much as $6,000 for a good used car but only $1,000 for a lemon. Sellers of a good used cars value their cars at $5,000 each and sellers of lemons value their cars at $800 each. Buyers cannot tell if a used car is reliable or is a lemon. Based on this information, what is likely the outcome in the market for used cars?market priceThe price where it can be soldquantity demandedthe amount of a good or service that a consumer is willing and able to purchase at a given pricethe domestic quantity supplied.If a nation that imports a good imposes a tariff, it will increase