Marginalism, Profit and Loss, Socialism, Externalities, Government and Market Failure

Question 11 pts
The market system may be described as an evolutionary system.  The theory of evolution proposes that particular genes will be selected as they promote the survival of the species.  So pigeons in cities become grayer with greater pollution–camouflage. The pigeons who do not camouflage as well are picked out by predators and their genes are not selected for in procreation.  What is the mechanism in the market system that reward or signals productive or unproductive business, production, or service?  What signal rewards (selects for) productive and punishes unproductive ventures?
Group of answer choices

the marginal productivity of labor

diminishing marginal returns

profit and loss

labor theory of value

maximization of revenue

Flag question: Question 2

Question 21 pts
Economic calculation depends on what factors?
Group of answer choices

no price controls

perfect knowledge

the existence of money

private property

ability to freely exchange

Flag question: Question 3

Question 31 pts
Economic calculation, the ability to do accounting and calculate profit and loss, is impossible in the pure socialist economy (hint: what is the definition of socialism).  Why is economic calculation impossible?
Group of answer choices

The government over-regulates the economy

All property is held in common or by the state

The government over-taxes the economy

Price controls don’t allow for supply and demand to determine prices

There is private property but the state controls the use of private property

Flag question: Question 4

Question 41 pts
Without prices to coordinate supply to demand, technocrats and central planners must use statistics.  What problems plague statistics?
Group of answer choices

Statistics give past information and do not tell us about the future

Statistics capture micro changes instantaneously

Statistics do not capture tacit information

Statistics do not capture qualitative information

Flag question: Question 5

Question 51 pts
Prices
Group of answer choices

capture information perfectly

do not capture future expectations

chaotically fluctuate

are surrogates of knowledge

Flag question: Question 6

Question 61 pts
Perfect competition requires
Group of answer choices

Entrepreneurship to capture excess profit

large number of buyers and sellers (no market power to determine prices)

costless mobility of resources

a homogenous product (perfect substitutes)

full knowledge and complete information

Flag question: Question 7

Question 71 pts
In perfect competition
Group of answer choices

innovation is widespread by entrepreneurship

there is no profit for the entrepreneur to capture

there are an unlimited amount of arbitrage opportunities

the market is constantly in disequilibrium

Flag question: Question 8

Question 81 pts
Entrepreneurial profit is said to be the residual, that is:
Group of answer choices

the revenue attributed to the entrepreneur bearing uncertainty

the revenue left once costs are taken into account

what the owner of the company pays himself in salary

the revenue left once all costs, including opportunity costs, are taken into account

Flag question: Question 9

Question 91 pts
In order for a cartel to operate like a monopoly (charging prices above marginal cost), it needs to be able to:
Group of answer choices

restrict free entry of other firms

be more competitive and productive than non-cartel firms

make products below marginal cost

get all companies to agree to be in the cartel

enforce high prices among all cartel members

Flag question: Question 10

Question 101 pts
Why do cartels often fail and look to lobby government to pass laws that enforce a cartel?
Group of answer choices

they are too incompetent at creating a cartel

there is an incentive to cheat by any cartel member, since if they charge a slightly lower price more buyers will buy their good

high prices attract new competition

the price fixing schemes of the cartel create shortages and surpluses

Flag question: Question 11

Question 111 pts
What is regulatory capture?
Group of answer choices

When the companies are driven out of business by too many regulations

When the companies being regulated control the regulatory agency

When the regulation agency uses its power to make some companies do better than others

When the regulation agency control the market

Flag question: Question 12

Question 121 pts
Mark-up pricing is often explained as a simple cost+mark-up=price–businesses say they do this automatically. What’s another interpretation?
Group of answer choices

Many sellers do not know the demand for the goods they sell, so they engage in price searching: setting prices to discover the demand curve for their good.

Mark up pricing only occurs when there are few sellers and many buyers

Mark up pricing is evidence of monopoly pricing power

Mark up pricing is how firms make sure they have a profit

Flag question: Question 13

Question 131 pts
What is price discrimination?
Group of answer choices

When consumers discriminate between goods based only on price

Charging different customers different prices

When firms set the price equal to marginal cost

When firms set marginal cost equal to marginal revenue

Flag question: Question 14

Question 141 pts

Price     Quantity     TR

3                10           30$

4                 9            36$

5                 8            40$

6                 6            36$

7                 3            21$

8                 1            8$

At what price is marginal revenue highest?

Group of answer choices

When the prices moves from 4 to 5

When the price moves from 3 to 4

When the price moves from 6 to 7

When the prices moves from 7 to 8

When the price moves from 5 to 6

Flag question: Question 15

Question 151 pts
In order to price discriminate the seller needs to be able to:
Group of answer choices

control for the resentment customers may feel when other customers are charged cheaper prices

enforce a cartel

distinguish buyers with different elasticities of demand

prevent low-price buyers from reselling to a high-price buyer

Flag question: Question 16

Question 161 pts

What kind of price discrimination is the following:

Several people come into a car dealership to buy a car and each one negotiates a different price with the dealership.

Group of answer choices

No answer text provided.

First degree

Third degree

Second degree

Flag question: Question 17

Question 171 pts

What kind of price discrimination is the following:

Buying a single banana costs a dollar, but buying 10 bananas at once costs 5 dollars.

Group of answer choices

Second degree

No answer text provided.

Third degree

First degree

Flag question: Question 18

Question 181 pts

What kind of price discrimination is the following:

 

At the movie theaters students and seniors get discounted tickets.

Group of answer choices

First degree

No answer text provided.

Second degree

Third degree

Flag question: Question 19

Question 191 pts

What kind of price discrimination is the following:

Field trips for elementary students are given steep discounts at museums.

Group of answer choices

First and second degree

Second degree

First and third degree

Third degree

First degree

Second and third degree

Flag question: Question 20

Question 201 pts
There are two ways an economy may be run: either prices are free to move or goods are be rationed.
Group of answer choices

True

False

Flag question: Question 21

Question 211 pts
An positive externality is when
Group of answer choices

is the result of a tragedy of the commons

a cost not taken into account in a decision or a cost not taken into account in the price

a benefit not taken into account in a decision or a cost not taken into account in the price

transaction costs are so high that people cannot trade

Flag question: Question 22

Question 221 pts
A negative externality is when
Group of answer choices

a cost not taken into account in a decision or a cost not taken into account in the price

there exists free riders

transaction costs are so high that people cannot trade

a benefit not taken into account in a decision or a cost not taken into account in the price

Flag question: Question 23

Question 231 pts
The tragedy of the commons is when
Group of answer choices

everyone owns the property and we all take care of it

when something is held in common, but the transaction costs are too high to take care of it

there exists a positive externality

everyone may use the property, but no one owns it and the property is overused

Flag question: Question 24

Question 241 pts
A positive externality means that
Group of answer choices

Too much of the good or service will be provided

the social marginal cost is greater than the private marginal cost

No quantity of the good or service will be provided

Not enough of the good or service will be provided

Flag question: Question 25

Question 251 pts
A negative externality means that
Group of answer choices

too little of a good or service is being provided

no good or service is being provided

the social marginal benefit is greater than the private marginal benefit

too much of a good or service is being provided

Flag question: Question 26

Question 261 pts
Why is pollution said be a negative externality of electric production?
Group of answer choices

No answer text provided.

the benefits of pollution are borne by folks outside of the people who consume and produce electricity

the costs of pollution are borne by folks outside of the people who consume and produce electricity

No answer text provided.

Flag question: Question 27

Question 271 pts
How may the government fix a negative externality?
Group of answer choices

Tax credits to engage in the activity more

Taxing the activity

Banning or limiting the activity

Regulating the activity (requiring scrubbers in a coal burning plant)

Offering tax incentives to stop doing it

Flag question: Question 28

Question 281 pts
How may the government fix a positive externality?
Group of answer choices

Taxing people who are engaged in the activity

Not allowing free riders to benefit from the activity (exclude non payers)

Giving tax credit for people to engage in the activity

Forcing free riders to pay for the service (taxes)

Flag question: Question 29

Question 291 pts
When a positive or negative externality exists it is said that property rights are either not defined or enforcing the property right is too costly.  If property rights were well defined and enforcing the property right was less costly, then the externality would be internalized into the pricing system.  How many the government internalize the externality?
Group of answer choices

Make the government responsible for the externalities created by the activity

Reform the legal system to make it less costly to enforce property rights

Make clear who is liable for any activity

Allow affected parties to negotiate changes to property rights–old systems of law and property rights may be inefficient

Flag question: Question 30

Question 301 pts
Positive externalities are said to be market failures. Typical examples are: public parks, police, the military, and education.  The market…
Group of answer choices

provides too many of these goods and services

provides too few of these goods and services

does not provide these goods and services

never fails

Flag question: Question 31

Question 315 pts
Whenever there exists an externality there is a profit opportunity for an entrepreneur to internalize the externality into the price system: a lawyer may profit by suing a polluter on behalf of those being polluted (negative externality), or a seaport may charge a lighthouse fee to docked boats (positive externality). From the videos we watched in class or from personal experience, briefly describe how externalities were internalized.

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