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Why does a price floor set above an equilibrium price tend to cause persistent imbalances in the market? Because quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus.Chapter 4 TERM 2 Why does a price ceiling set below an equilibrium price tend to cause persistent imbalances in the market? DEFINITION 2 Because quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage.Chapter 4 TERM 3 The marginal tax rate is defined as DEFINITION 3 the change in tax liability divided by the change in taxable income.Chapter 4 TERM 4 What will happen when a price ceiling is imposed below the equilibrium price of a product? DEFINITION 4 A shortage of the good will develop.Chapter 4 TERM 5 The term "deadweight loss" or "excess burden" is used to describe which of the following? DEFINITION 5 The loss from the elimination of mutually beneficial exchanges that results from the imposition of a tax in a market.Chapter 4
A market that operates outside the legal system, either by selling illegal goods or by selling goods at illegal prices is referred to in economics as a black market.Chapter 4 TERM 7 The deadweight loss (or excess burden) resulting from levying a tax on an economic activity is the DEFINITION 7 loss of potential gains from trade from activities forgone because of the taxChapter 4 TERM 8 A law establishing a minimum legal price for a good or service (the minimum wage for example) is known as DEFINITION 8 a price floor.Chapter 4 TERM 9 A subsidy is defined as DEFINITION 9 a payment to either the buyer or seller of a good or service, usually on a per-unit basis, when a good or service is purchasedChapter 4. TERM 10 People who receive the benefit of a good without contributing to its costs of production are called DEFINITION 10 free ridersChapter 5
If the consumption of a good by one individual does not change the amount of the good available to others, the good is considered to be nonrival-in-consumption.Chapter 5 TERM 17 When is a good considered to be a public good? DEFINITION 17 If it is both nonrival-in-consumption and nonexcludable.Chapter 5 TERM 18 A good for which it is impossible or at least very costly to exclude nonpaying customers from receiving the good and for which many individuals can share in the consumption of the same unit of the good is called a DEFINITION 18 public goodChapter 5 TERM 19 For a firm that wants to remain in business, which of the following costs could be avoided if it halted current production? DEFINITION 19 variable costsChapter 8 TERM 20 Why are accounting costs often unsatisfactory from the economist's point of view? DEFINITION 20 They often exclude the opportunity costs of the firm's equity capital.Chapter 8
If doubling the quantity of inputs more than doubles the quantity of outputs, the firm is experiencing increasing returns to scale.Chapter 8 TERM 22 If fixed cost is $130 when the firm produces 100 units, which of the following statements about fixed cost is true? DEFINITION 22 Fixed cost is $130 when the firm produces 200 units.Chapter 8 TERM 23 Which of the following is ture about average fixed costs? DEFINITION 23 They will always decrease as output expands.Chapter 8 TERM 24 The law of diminishing marginal returns explains the general shape of the firm's DEFINITION 24 short-run cost curves.Chapter 8 TERM 25 Which of the following is most likely to be true of economic and accounting profits? DEFINITION 25 Economic profits are less than accounting profits.Chapter 8
Which of the following characterizations about rent control is correct? Rent control is an example of a price ceiling and the minimum wage is an example of a price floorChapter 4 TERM 32 Suppose the federal government placed a 50 cent per pack excise tax on cigarette manufacturers, and as a result, the price to consumers of a pack of cigarettes went up by 40 cents. Which of the following will most likely happen? DEFINITION 32 The actual burden of this tax will fall mostly on consumersChapter 4 TERM 33 Under rent control, tenants can expect DEFINITION 33 lower rent and lower quality housing.Chapter 4 TERM 34 When will a subsidy on a product generate more actual benefit for consumers (and less for producers)? DEFINITION 34 When the supply of the product is relatively elastic.Chapter 4 TERM 35 The Laffer curve indicates that DEFINITION 35 when tax rates are high, an increase in tax rates is likely to a decrease in tax revenues.Chapter 4
The actual burden of a tax is determined primarily by the elasticities of demand and supply.Chapter 4 TERM 37 An increase in the demand for a product will cause which of the following to occur? DEFINITION 37 The demand for and prices of the resources used to produce the product will increase.Chapter 4 TERM 38 The actual benefit of a government subsidy is determined primarily by DEFINITION 38 the elasticities of demand and supply.Chapter 4 TERM 39 Which of the following is true when externalities are present? DEFINITION 39 Competitive market outcomes may be inconsistent with ideal economic efficiency.Chapter 5 TERM 40 Which of the following about public goods is true? DEFINITION 40 It is extremely difficult to limit the benefits of a public good to only the people who pay for it.Chapter 5
Which of the following is true because of the free-rider problem? Competitive markets will tend to undersupply public goods.Chapter 5 TERM 47 Suppose external costs are present in a market which results in the actual market price of $50 and market output of 800 units. How does this outcome compare to the efficient, ideal equilibrium? DEFINITION 47 The efficient outcome would be less than 800 units.Chapter 5 TERM 48 Because the benefits derived from an activity decline as more of it is done, which of the following is the best course of action to take? DEFINITION 48 It is efficient to stop well before perfection is achieved.Chapter 5
