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Terms in this set (26)
Economics may be best defined as the
the social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity
The assertion that "there is no free lunch" means that
all production involves the use of scarce resources and thus the sacrifice of alternative good.
The economizing problem is one of deciding how to make the best use of
limited resources to satisfy virtually unlimited wants
Which of the following is a distinguishing feature of laissez-faire capitalism?
minimal government intervention
"Consumer Sovereignty refers to the
idea that the decisions of producers must ultimately conform to consumer demands.
Markets, viewed from the perspective of the supply and demand model,
assume many buyers and many sellers of a standardized products
A shift to the right in the demand curve for product A can be most reasonably explained by saying that
consumer preferences have changed in favor of A so they now want to buy more at each possible price.
If an economy produces its most wanted goods but uses outdated production methods, it is
not achieving productive efficiency
A positive externality or spillover benefit occurs when
the benefits associated with a product exceed those accruing to people who consume it.
The market system does not produce public goods because
private firms cannot stop consumers who are unwilling to pay for such goods from benefitting from them.
Which of the following would be the best example of regulatory capture?
Executives from the Ford, General Motors, and Chrysler companies write the rules regulating automobile safety and fuel requirements.
The price elasticity of demand coefficient measures
buyer responsiveness to price changes.
A perfectly inelastic demand schedule
can be represented by a line parallel to the vertical axis.
Suppose MU x/ Px exceeds MU y/ Py. To maximize utility, the consumer who is spending all her money income should buy
More of X and/or less of Y.
An explicit cost is
a money payment made for resources not owned by the firm itself.
Diseconomies of scale occur mainly because
of the inherent difficulties involved in managing and coordinating a large business enterprise.
Which of the following. industries most closely approximate pure competition?
Which of the following is characteristic of a purely competition seller's demand curve?
Price and marginal revenue are equal at all levels of output.
A competitive firm in the short run can determine the profit-maximizing ( or loss minimizing) output by equating
marginal revenue and marginal cost.
In the short run, a purely competitive seller will shut down if product price
is less than AVC.
When a purely competitive firm is in long-run equilibrium
price equals marginal cost.
The term productive efficiency refers to
the production of a good at the lowest average total cost.
The "invisible hand" in a competitive market pushes the firms in the market to
use resources produce output that maximize consumer and producer surplus.
Pure monopolists may obtain economic profits in the long run because
of barriers to entry
The higher prices charged by monopolists
are like a private tax that redistributes income from consumers to monopoly sellers.
If a regulatory commission wants to provide a natural monopoly with a fair return, it should establish a price that is equal to
average total cost.
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