Econ Final

Which of the following is NOT a feature of the perfect competition model?

Individual firms have considerable influence on market price and quantity

In the long-run

what is a decision a perfectly competitive firm like Mario must make?

In the short-run

when does a perfectly competitive firm shut down?

What is a differentiated product?

A product that is perceived by consumers as distinctive in some way

What are barriers to entry?

Legal

What is a natural monopoly?

A market where high initial fixed costs give a large cost advantage to the first producer

What is a patent?

A government rule giving an inventor exclusive legal rights to make

What is monopolistic competition?

A market structure with many firms selling differentiated products with freedom of entry and exit

What is a monopoly?

A situation where one firm produces all the output in a market

What happens to monopolistically competitive firms earning negative economic profits in the long run?

Firms will exit the market

What is monopoly power?

The ability of a firm to influence market price through choice of quantity

Which of the following is NOT a characteristic of monopolistic competition?

Barriers to entry

What is consumer surplus?

Difference between total private benefit and amount paid

What is producer surplus?

Difference between the amount received by sellers and total private cost

What is total surplus?

The sum of consumer surplus and producer surplus

What causes deadweight loss?

When marginal social benefit is different from marginal social cost

What is an example of a market with a consumption tax?

A market where the price paid by consumers differs from the price received by producers

What is an inefficient outcome?

When marginal social benefit does not equal marginal social cost

What part of the price paid for protected goods can be considered deadweight loss?

Lost income efficiency

What is Tobias’s elasticity of supply if price rises from $1.00 to $1.50 and quantity supplied rises from 800 to 1200?

1

Which of the following would NOT prohibit entry into a market?

High prices

What is an example of a barrier to entry?

A very large fixed cost required to enter a market

Which of the following is a trait of perfect competition?

Firms are small relative to the market

What is a price ceiling?

A legal maximum price

What is a price floor?

A legal minimum price

What is a shortage?

When quantity demanded exceeds quantity supplied

What happens when an effective price ceiling is implemented?

Shortages occur

What is a positive externality?

A benefit to a third party from a market transaction

What is a negative externality?

A cost to a third party from a market transaction

What is a subsidy?

Government support to encourage production or consumption of a good

What is the free rider problem?

People benefit from a public good without paying for it

What is a public good?

A good that is nonexcludable and nonrivalrous

What is a common resource?

A rival but nonexcludable good

What is the tragedy of the commons?

Overuse of a common resource due to lack of ownership

What is an example of a public good?

National defense

What is an example of a common resource?

Fish in the ocean

What is excludability?

The ability to prevent someone from using a good

What is nonrivalry?

One person's use does not reduce availability for others

What is a cost-benefit analysis?

A study comparing the advantages and drawbacks of a public good

How could a city fund highway repairs without raising taxes?

Implement a toll system

What attribute must a toll system have?

Excludability

What is congestion?

Reduced usefulness of a public good due to overuse

How can a congested park be restored to usability?

Limit the number of visitors daily

What is a positive production externality?

A third party benefits from a firm's production (e.g.

What is a negative production externality?

A third party is harmed by a firm’s production (e.g.

What does the free rider problem lead to?

Underproduction of public goods

What can governments do to protect whale populations from overuse?

Increase enforcement of anti-poaching laws