29 Questions
What is the term used to represent the price-quantity pair at which both buyers and sellers are satisfied?
QP
In a perfectly competitive market, what happens if the price-quantity pair is not at equilibrium (QP)?
Both buyers and sellers are less satisfied
What does the equilibrium of supply and demand in a market economy maximize?
Consumer surplus
Combining supply and demand curves allows us to describe what in an economy?
Equilibrium price and quantity
In a competitive market, what happens if the price-quantity pair is not at the equilibrium point?
Producers experience losses
What determines the elasticity of a commodity’s demand function?
Consumer tastes and substitutability of the commodity
How is the short run defined in terms of price adjustments?
A length of adjustments to the new price situation
When is demand considered to be elastic?
When a 1% change in price leads to more than a 1% change in demand
What characterizes a perfectly inelastic demand curve?
A vertical demand curve
How do long-run elasticities typically compare to short-run elasticities?
Long-run elasticities are smaller
What defines unitary elastic demand?
When a 1% change in price leads to an equal 1% change in demand
What is defined as economic growth?
Continuing increases in per capita national income
Which of the following is considered a potential source of economic growth?
Accumulation of capital through net investment
Why is growth considered important according to the text?
To reduce poverty and close the gap in per capita incomes between countries
What does the theory of convergence suggest should happen?
Poorer countries should grow faster than rich ones
What is the expected result of the 'trickle down' effect within countries?
'Rising tide' lifting all boats
Why do people tend to be happier with higher levels of income according to the text?
It is a universally established fact
What is the main characteristic of market goods?
Excludable and rival
How can the free-rider problem be defined?
Someone who consumes a resource without paying for it
What is an example of a negative externality mentioned in the text?
Impacts of BP spill
How can the problem of externalities be addressed in economics?
By promoting Coasian bargaining or Pigouvian taxes
What was the main issue with the temporary switch to the Flint River mentioned in the text?
The Flint River had a corrosive nature
Why are market goods often best left to the market to allocate?
To allow market forces to determine distribution efficiently
What may happen if badly-designed regulations are in place according to the text?
Government intervention may hinder technological innovation.
How might voter concerns influence government actions based on the text?
Government intervention may or may not be influenced by voter pressures.
Under what circumstances might certain economic agents lobby in favor of intervention?
Certain economic agents may lobby for intervention when it benefits them.
What governmental approach relies on standards and quotas for regulation?
Command and Control approach
What is a characteristic of a wise government intervention according to the text?
Wise intervention can be extremely beneficial when implemented correctly.
How can a less far-sighted government still be prompted to act according to the text?
By responding to voters' pressures.
Test your knowledge on market goods and the free-rider problem classification. Explore concepts such as excludability, rivalry, monopolies, externalities, Coasian bargaining, and Pigouvian taxes.
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