ECON101 Lecture Notes - Lecture 5: Avoidance Speech, Overproduction, Deadweight Loss

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OC2146671

10 Oct 2017

School

University of Waterloo

Department

Economics

Course

ECON101

Professor

wokiakumase

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ECON101 Full Course Notes

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Sharing equally: not efficient because needs of individuals are different from each other, decreases incentive because everyone gets the same result anyway, people who put in work get the same as people who don"t contribute. Firms receive a profit when price exceeds the cost. It is also the minimum price producers must receive to induce them to offer one additional unit for sale: a supply curve is a marginal cost curve. Individual supply and market supply: market supply relationship between price of a good and quantity supplied by all producers. It is costly to operate any market but some are so costly to operate they simply don"t: products with high transaction costs include time slot on tennis court, first-come first-served, these products are underproduced by the market. First-come first served: people may trade places at a market price, someone has to ensure the trades are honoured.

Related Questions

Question 1

During a crisis such as Hurricane Katrina, governments often make it illegal to raise the price of emergency items like flashlights and bottled water. In practice, this means that these items get sold on a first-come, first-served basis. If a person has a flashlight that she values at $5, but its price on the black market is $40, what gains from trade are lost if the government shuts down the black market?

		$30
		$35
		$40
		Indeterminant with the given information.

2 points

Question 2

Which of the following is an example of a price floor?

		A sale price with a limit on the quantity you can purchase.
		Rent-controlled apartments
		Predatory pricing designed to put a competitor out of business.
		The minimum wage

2 points

Question 3

Airline regulation of the 1970s produced a similar result to which of the following government interventions?

		The Affordable Care Act
		Minimum wage laws
		Rent control laws
		Communism

2 points

Question 4

Which of the following is a possible effect of a price ceiling?

		A surplus of the good.
		Increases in product quality.
		Increased gains from trade.
		People will waste time in lines waiting to purchase the good.

2 points

Question 5

What is a price ceiling?

		A minimum price consumers are willing to pay.
		A minimum price allowed by law.
		A maximum price allowed by law.
		A maximum price consumers are willing to pay.

2 points

Question 6

Why are the long lines generated by a shortage worse than paying a higher price in money?

		It is not better or worse. Paying in time and paying in money are essentially the same in a market economy.
		Paying with time reduces the value of money, and prevents valuable trades from occurring.
		Waiting in line is a waste of a valuable resource: time. Paying a price in money transfers the value of resources from one person to another, and maximizes the value of resources.
		Paying with time gives those who do not work an advantage over those who do.

2 points

Question 7

Which of the following is a possible effect of a price floor?

		The quantity supplied exceeds the quantity demanded.
		Increased gains from trade.
		Decreases in product quality.
		A shortage of the good.

1. In recent years China market reforms have turned toward:

	A.	more free trade, allowing foreign-owned enterprises to import, export, and establish production in China.
	B.	establishing more urban collectives.
	C.	transforming state-owned enterprises into shareholder-owned corporations.
	D.	reestablishing central planning.

2. In pure capitalism, the role of government is best described as:

	A.	nonexistent
	B.	limited
	C.	significant
	D.	extensive

3. In pre-reform Russia and pre-reform China:

	A.	both consumer and capital goods outputs were determined by central planning.
	B.	both consumer and capital goods outputs were determined by the market.
	C.	capital goods output was determined by planning, but consumer goods output was determined by the market.
	D.	consumer goods output was determined by planning, but capital goods output was determined by the market.

4. In college, you practically existed on Spam, but now that you have an $80,000 a year job, you never want to see Spam again. We can safely conclude that you consider Spam to be

	A.	a normal good.
	B.	a complementary good.
	C.	an inferior good.
	D.	a luxury good.

5. In a free market, the price system determines how society's output will be distributed by:

	A.	ensuring that low-income people can buy all of the necessities for living.
	B.	providing goods for those willing and able to pay the equilibrium price.
	C.	ensuring that each commodity is produced by the most efficient technique.
	D.	allowing all those who desire a commodity to buy it.

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ECON101 Lecture Notes - Lecture 5: Avoidance Speech, Overproduction, Deadweight Loss

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