ECON 1B03 Lecture Notes - Lecture 2: Externality, Market Failure, Market Power

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24 Jun 2013

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ECON 1B03 Full Course Notes

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Microeconomics focuses on the individual parts of the economy (households and firms). A market economy is one that allocates resources through the decentralized decisions of firms and households. Firms and households get to make decisions without any interference (government, etc). A command or centrally planned economy is one where all production and distribution decisions are made by a central authority (government). Canada is a mixed economy, with a little bit of both. A resource is anything that can be used to produce something else. Opportunity cost is the cost of everything you have to give up to get something else. Marginal changes are small adjustments to an existing plan of action. People make decisions by comparing marginal benefits to marginal costs. Adam smith (late 1700"s) the father of economics. We specialize in tasks we do best and trade with others for the things we need that they can provide.

Related Questions

According to neuroeconomics,

Select one:

a. logical decisions take place in the limbic system or amygdale, and emotional decisions take place in the prefrontal cortex.

b. both logical decisions and emotional decisions take place in the limbic system or amygdala.

c. both logical decisions and emotional decisions take place in the prefrontal cortex.

d. logical decisions take place in the prefrontal cortex, and emotional decisions take place in the limbic system or amygdala.

e. None of the above.

In comparing perfect competition and monopoly, which of the following is true?

Select one:

a. Monopolies automatically earn profits; perfectly competitive firms do not.

b. In perfect competition, profits will disappear in the long run as new firms enter the market; in a monopoly, profits may exist in the long run.

c. In the short run, both monopoly and perfect competition attempt to minimize total costs.

d. In the long run, both monopoly and perfect competition produce at the minimum of the average-total-cost curve.

e. Neither monopoly nor perfect competition can sustain positive economic profits in the long run

The quantity supplied is

Select one:

a. the amount sellers are willing and able to offer at a given price, during a particular time period, everything else held constant.

b. the amount sellers are willing and able to offer for sale at all possible prices.

c. a set of price and quantity-supplied combinations, everything else held constant.

d. a list of prices and the corresponding quantities supplied.

e. a downward-sloping line that relates expenditures to different levels of output.

Efficiency implies that goods and services are allocated

Select one:

a. to those with the ability to pay.

b. to those with the greatest need for the good or service.

c. equally throughout society.

d. in the most cost-effective manner.

e. by government in such a way that the marginal social benefit equals the marginal social cost for each good and service.

Assume a reserve requirement of 25 percent. If a bank has zero excess reserves and $100,000 in total cash reserves, then its deposits must equal

Select one:

a. $100,000.

b. $250,000.

c. $400,000.

d. $25,000.

e. $750,000.

When economists describe the process of consumer choice, they

Select one:

a. portray people as simple, methodical, and robot-like consumers who always behave in perfectly predictable ways.

b. are asserting the simple fact that consumers do have to decide which goods and services to purchase with their limited incomes and people do select the options that give them the greatest utility.

c. point out that consumers rarely consider utility in their purchase decisions.

d. are asserting that price is the only variable consumers consider in making their purchasing decisions.

e. admit that there is no credible economic theory to explain the phenomenon.

Unemployment will decrease if

Select one:

a. actual GDP increases faster than potential GDP.

b. actual GDP increases at the same rate as potential GDP.

c. the GDP gap widens.

d. actual GDP increases less than potential GDP.

e. actual GDP decreases and potential GDP remains the same.

Microeconomics

A	B	Answer
As a student of economics, when you speak of scarcity, you are referring to the ability of society to.	A. Extra benefit
What is the economic meaning of the expression that "There is no such thing as a free lunch?"	B. Entrepreneur.
Which expression is another way of saying "marginal benefit"?	C. Very limited government role in the economy
A tradeoff exists between two economic goals, X and Y. This tradeoff means that.	D. Price ceilings and the resulting product shortages.
The individual who brings together economic resources and assumes the risk of business ventures in a capitalist economy is called the	E. Explicit costs.
The Soviet Union economy of the 1980s would best be classified as	F. Easy entry, many firms, and differentiated products
The simple circular-flow model shows that workers, entrepreneurs, and the owners of land and capital offer their services through	G. Product markets
Laissez-faire capitalism is characterized by	H. Satisfy economic wants given limited resources.
Black markets are associated with	I. Oligopoly
Cash expenditures a firm makes to pay for resources are called	J. The Resource Markets
Which set of characteristics below best describes the basic features of monopolistic competition	K. A command System
Mutual interdependence would tend to limit control over price in which market model	L. Getting more of X requires getting less of Y
Markets in which firms sell their output of goods and services are called	M. It means that there is an opportunity cost when resources are used to provide "free" products

chocolatemuskrat416

1/ All the problems studied in economics arise from

a. the unequal distribution of income

b. the scarcity of resources

c. inappropriate government action

d. overpopulation

e. war

2/ The overall performance of the economic system as a whole is the focus of

a. macroeconomics

b. public economics

c. international finance

d. labor economics

e. microeconomics

3/ After graduating from high school, Steve had the following three choices for his immediate future, listed in order of preference: (1) attend our campus, (2) work in a printed circuit board factory, or (3) attend a rival college. His opportunity cost of going to college here includes which of the following?

a. The income he could have earned at the printed circuit board factory plus the direct cost of attending college here (tuition, textbooks, etc.)

b. The benefits he could have received from going to the rival college.

c. Only the tuition and fees paid for taking classes here.

d. Cannot be determined from the information given.

e. The cost of books and supplies at the rival college.

4/ The question of scarce resources and unlimited wants are addressed in

a. psychology

b. history

c. anthropology

d. political science

e. economics

5/ Consider an economic model designed to analyze the purchasing decisions of households. An assumption that a household chooses between only two goods would be an example of an

a. positive assumption

b. simplifying assumption

c. macroeconomic assumption

d. financial assumption

e. critical assumption

6/ Which of the following explains why economists may disagree over normative issues?

a. They have different beliefs and values.

b. They often employ different statistical techniques when examining data.

c. Some work only on microeconomic issues, while others focus exclusively on macroeconomic issues.

d. They examine the same data to draw their conclusions.

e. They need to disagree to publish their research findings.

7/ Suppose your friends take you out for dinner on your birthday, and you have a much better time than you would have had to do anything else. There is still an opportunity cost, even though they will not let you pay for anything. True/False

8/ Microeconomics

a. addresses scarcity from a global perspective

b. is purely theoretical and has little value in explaining real-world phenomena

c. focuses on what is happening in the economy as a whole

d. examines how individuals, households, and firms make economic decisions

e. answers the fundamental economic questions of how, when, where, and why.

9/ People and organizations have to make choices about how to allocate time and money because

a. religious values conflict with economics

b. time and money are both scarce

c. government require it

d. there are unlimited resources

e. corporations control our lives

10/ The objective of an economic model is to

a. yield a better understanding of important relationships

b. use simplifying assumptions to make positive economic statements

c. be an accurate description of reality

d. predict real-world occurrences with complete accuracy

e. use basic principles of economics to derive fundamental assumptions about human behavior.

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ECON 1B03 Lecture Notes - Lecture 2: Externality, Market Failure, Market Power

ECON 1B03 Full Course Notes

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