ECO-2023 Lecture Notes - Lecture 2: Creative Destruction, Comparative Advantage

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14 Sep 2016

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Trade creates value: when individuals engage n a voluntary exchange, both parties are made better off, by channeling goods and resources to those who value them most, trade creates value and increases the wealth created by society"s resources. Transaction- costs: the time, effort, and other resources needed to search out, negotiate, and complete an exchange. Middlemen: people who buy and sell goods or services or arrange trades (reduces transaction costs) Property right: the rights to use, control, and obtain the benefits from a good or resource. Investment - the purchase, construction, or development of resources, including physical assets. Technology - the technological knowledge available in an economy at any given time. The level of technology determines the amount of output we can generate w/ our limited resources. Invention - the creation of a new product or process, often facilitated by the knowledge of engineering and science.

Related Questions

TRUE OR FALSE

1. _____ Under the feudal system of land ownership, the responsibility for providing services, determining land use, etc., was held by the king.

2. _____ Government rights limit private rights in real property by the use of appropriation.

3. _____ When real property is taken by means of eminent domain, the government has to pay the landowner fair market value.

4. _____ Railroads have the right to condemn private property for public use.

5. _____ A family had a lion as a pet at their home outside the city. When the area became incorporated, the city made him get rid of the lion by their use of police power.

6. _____ A government may acquire ownership of privately held land by patent.

7. _____ If title to real property is said to be fee simple, it can NOT be alienated.

8. _____ A fee simple estate in real property may not be transferred with a bill of sale.

9. _____ The greatest estate in real property is a fee simple estate.

10. _____ The bundle of rights includes the right of escheat.

11. _____ An encumbrance affects the loan to value ratio.

12. _____ An easement may be created by a written document granting the right to another.

13. _____ An easement may be removed from county records by a quit claim deed signed by the owner of the easement.

14. _____ When a parcel of real property is sold in foreclosure, the easement rights transfer with title.

15. _____ An easement appurtenant passes with the title to the dominant estate.

16. _____ A private road on Donâs property has often been used by fishermen as a walkway to the lake. If Don wishes to break the fishermenâs claim to an easement by prescription, while still allowing the use, he must give notice of his consent to their use of the property.

17. _____ The legal right of a utility company to maintain power lines along the back of a lot is called adverse possession.

18. _____ The best way to determine whether a property has an encroachment is to search the title.

19. _____ A property owner lived in an area newly zoned for business but his deed contains a restriction against commercial usage. In this case the zoning laws would prevail.

20. _____ The type of lien used by someone who does work or supplies materials for a home and has not been paid is called a mechanicâs lien.

Question 1

An externality

		enhances market efficiency.
		is a private cost or benefit that results from the production or consumption of a good or service that is external to a market.
		is a benefit or cost that affects someone who is not directly involved in the production or consumption of a good or service.
		refers to production or consumption that occurs outdoors.

5 points

Question 2

Externalities can be produced by:

		the high price of goods and services
		individuals; firms
		market prices; market incomes
		oceans; streams

5 points

Question 3

When an external cost exists that is NOT taken into account in the production of a product,

		the level of output is too high, and the supply curve should shift to the left to account for the externality.
		the price of the product is too high, and production should be expanded to lower the price.
		the level of output is optimal, and there should be no change in the supply curve.
		the level of output is too low, and the supply curve should shift to the right to account for the externality.

5 points

Question 4

Which of the following is correct?

		MSC = MPC - MD
		MPC = MSC + MD
		MSC = MPC + MD
		MD = MSC + MPC

5 points

Question 5

If external costs (costs of cleaning up) are included and added to a firm's private costs, then

		the demand curve will shift to the left.
		the supply curve will shift to the right.
		the demand curve will shift to the right
		the supply curve will shift to the left.

5 points

Question 6

The Coase Theorem states that

		government intervention is always needed if externalities are present.
		assigning property rights is the only thing the government should do in a market economy.
		if transaction costs are low, private bargaining will result in an efficient solution to the problem of externalities.
		a free-market equilibrium is the best solution to address externalities.

5 points

Question 7

Buffalo in the United States almost became extinct while cattle, an animal that provides similar products, never have been close to extinction. The difference is due to

		the use of private property rights on cattle and common property rights on buffalo.
		the greater marginal value of a head of cattle relative to buffalo, leading to over-hunting of buffalo.
		cattle existing in Europe also while buffalo were specific to North America.
		the greater marginal value of a buffalo relative to a steer, leading to the overharvesting of buffalo.

5 points

Question 8

In theory, the Emissions Fee would

		cause firms to generate less pollution than their allowed limits.
		raise the production costs of all firms.
		cause firms to generate more pollution than their allowed limits.
		lower the production costs of all firms.

5 points

Question 9

A cap-and-trade policy

		has a set number of permits.
		allows polluters to trade permits.
		caps the total level of pollution allowed.
		all of the above.

Question 10

A Pigouvian tax corrects for

		market congestion.
		market losses.
		inefficient sales.
		low market prices.

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ECO-2023 Lecture Notes - Lecture 2: Creative Destruction, Comparative Advantage

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