markets and basis + market structures
In the gasoline market, how is the price and quantity sold determined?
a. identifying the various supply shocks that inevitably happen in the marketplace
b. cooperation between oil producers, oil refiners, and gasoline distributors
c. the combined actions of all the buyers and sellers in the market
d. weighing the costs of production with the costs of marketing and distribution
e. collusion between oil suppliers and gasoline distributors
c. the combined actions of all the buyers and sellers in the market
A beekeeper whose bees fly to a nearby cherry farm and pollinate the trees has created a(n) __________ benefitting the cherry farm.
a. externality
b. market failure
c. price ceiling
d. price elasticity
e. supply-side surplus
a. externality
Logrolling is often paired with _____.
a. the tragedy of the commons
b. negative externalities
c. stagflation
d. monetary policy
e. pork barrel political agreements
e. pork barrel political agreements
Answer the following question using the table below showing a firm’s cost schedule:
Quantity; Fixed Cost; Variable Cost
1; 300; 130
2; 300; 200
3; 300; 300
4; 300; 420
5; 300; 590
6; 300; 840
What is the marginal cost of producing 4 units?
a. 120
b. 170
c. 300
d. 420
e. 590
a. 120
So long as trading partners differ in their comparative advantage, they can improve their overall well-being through
which of the following?
a. merging
b. monopolization
c. generalization
d. specializing
e. creating tariffs
d. specializing
a. a cost-benefit analysis to help a consumer make an informed purchase
b. a measure of the total benefits that market participants receive from their transactions
c. a total amount that represents the summation of consumer demand for a particular good
d. a more realistic and accurate approach that represents the supply/demand dynamic structure
e. a specific value of valuing the opportunity costs versus the cost of aggregate supply shocks
b. a measure of the total benefits that market participants receive from their transactions
8. Goods for which the quantity demanded falls as income rises are called ___________ goods.
a. superior
b. inferior
c. positive
d. negative
e. normal
b. inferior
Which of the following is an example of deadweight loss?
a. government taxation reducing social welfare
b. resource inputs rendered obsolete by new technology
c. the difference between producer surplus and consumer surplus
d. the difference between the elasticity of supply and the elasticity of demand
e. sales lost from opening a country to international trade
a. government taxation reducing social welfare
Quantity; Variable Cost; Total Cost; Total Revenue
5; 21; 41; 50
6; 28; 48; 60
7; 37; 57; 70
8; 49; 69; 80
9; 68; 88; 90
Based on the data provided in the table above, how many units should the firm produce to maximize profits?
a. 5
b. 6
c. 7
d. 8
e. 9
c. 7
A closed economy produces a pair of shoes at an equilibrium price of $40. The world price for the same pair of
shoes is $25.00. If this economy opens up to trade, what will happen to domestic quantity demanded and quantity
supplied at the world price?
a. The domestic quantity demanded is greater than the domestic quantity supplied.
b. The domestic quantity demanded is less than the domestic quantity supplied.
c. The domestic quantity demanded is the same as the domestic quantity supplied.
d. The domestic quantity demanded and the domestic quantity supplied are more elastic.
e. The domestic quantity demanded and domestic quantity supplied are more inelastic.
b. The domestic quantity demanded is less than the domestic quantity supplied.
Which of the following would NOT cause a shift in the supply curve?
a. technology
b. expectations
c. input prices
d. equilibrium
e. CPI output
e. CPI output
Why might bus rides be an example of an inferior good?
a. Bus rides cost less relative to automobile transportation.
b. Electric vehicles are not a viable alternative in the marketplace at this time.
c. Bus transportation represents a dependence on public infrastructure, which increases the cost of living.
d. As income increases, consumers will be more likely to buy a car and drive instead of taking the bus.
e. CPI as it relates to bus transportation costs will reflect the rising amount of inflation in public ridesharing.
d. As income increases, consumers will be more likely to buy a car and drive instead of taking the bus.
Give an example of pork barrel politics
Which of the following is the BEST example of diminishing returns to scale?
a. The immediate layoff of workers produces less and less additional output.
b. The slow attrition of workers produces less and less additional output.
c. The addition of more workers produces less and less additional output.
d. The firing of more workers produces less and less additional output.
e. None of the examples above illustrate diminishing returns to scale.
c. The addition of more workers produces less and less additional output.
Draw graphs of absolute advantage!
...
We say that a market is perfectly competitive if the good or service being bought and sold is highly ___________, the number of buyers and sellers is large, and all of the participants are well informed about the market price.
a. sought after
b. supplied
c. demanded
d. standardized
e. competitive
d. standardized
Define coase theorum
As long as the parties involved can negotiate with each other, the private market should be able to resolve the inefficiencies created by externalities.
Give an example of logrolling
answers can vary
Explain what market power is.
Firms facing a downward sloping demand curve are said to possess market power, meaning that instead of taking prices as given, they have the ability to choose market prices. Of course, they are not entirely free to choose any price since they are constrained by the combinations of price and quantity determined by the market demand.
What is PPP vs PPF
PPP (Purchasing Power Parity) is about money value across countries
PPF (Purchasing Power Frontier) is about production trade-offs within one economy
A profit-maximizing firm in a perfectly competitive market will set the quantity so that
a. marginal revenue equals average cost
b. marginal cost equals average cost
c. marginal cost equals marginal revenue
d. average cost equals marginal cost
e. marginal cost equals average revenue
c. marginal cost equals marginal revenue
List, compare, and define the fives types of goods
Rival good (A good is rival if one person’s use of it reduces the amount available for others)
Private good (excludable + rival)
Common resource (rival but not excludable)
Public good (nonrival and nonexcludable)
Collective good (nonrival but excudible)
Give an example of rent seeking
answers can vary
Define marginal revenue, marginal costs, fixed costs, and diminishing returns to scale
Marginal Revenue: Extra money from selling 1 more unit
Marginal Cost: Extra cost of making 1 more unit
Fixed Costs: Costs that don’t change with output
Diminishing Returns: Each added input adds less output eventually
If free trade increases a nation’s overall welfare, why do some groups within the country still resist international trade agreements
Groups resist free trade agreements not because trade reduces national welfare, but because it redistributes welfare in ways that create "losers". These groups often mobilize politically to oppose trade, even though society overall becomes richer