Study for Econ 1000

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Chapter 9
GDP is the market value of all the final goods and services produced by all firms located in the United States in a given time period Marginal external cost
The cost of producing an additional unit of a good or service that falls on people other than the producer.

Efficiency
Efficiency is achieved when the marginal social benefit equals the marginal social cost.

Which of the following best describes an externality? An effect of a transaction felt by someone other than the consumer or producer

Pollution is an example of a ____ externality? Negative production

Which of the following creates an external cost? Second-hand smoke sulfur emitted from smoke stack garbage on the roadside The cost of producing one more unit of a good or service that falls on the producer of that good or service --is the marginal private cost.

The cost of producing an additional unit of a good or service that falls on people other than the producer is the marginal external cost.

The marginal cost of production that is borne by the entire society is the marginal social cost.

When the production of a good has a marginal external cost, which of the following will occur in an unregulated market? Overproduction relative to the efficient level will occur ii. The market price will be less than the marginal social cost at the equilibrium quantity iii. A deadweight loss will occur

If a polluting producer is forced to pay a tax on its output, what is the effect on the supply and demand curves for the product? Both the supply curve and the demand curve shift leftward.

Marginal social cost equals marginal private cost ____ (minus; plus) marginal external cost. A pollution externality creates____ (efficient; inefficient) equilibrium. According to the Couse theorem, if property rights exist, then private transactions are efficient and the outcome ____ (is; is not) affected by who is assigned the property right. By setting the tax rate equal to the marginal __ __ (external; private; social) cost, firms can be made to behave in the same way as they would if they bore the cost of the externality directly.

Marginal ____ (social; external) benefit is the benefit enjoyed by society from one more unit of a good or service. If the government leaves education to the private market, ____ (overproduction; underproduction) occurs. A payment that the government makes to private producers that depends on the level of output is ____ (a subsidy; public provision). The property rights of the creators of knowledge and other discoveries are ____ (intellectual property; patent property) rights.

The benefit the consumer of a good or service receives is the private benefit.

An external benefit is a benefit from a good or service that someone other than the ____ receives. Consumer

Marginal social benefit equals marginal private benefit plus marginal external benefit

If an external benefit is present, then the marginal social benefit curve lies above the marginal private benefit curve.

In an unregulated market with an external benefit, the quantity produced is less than the efficient quantity. If all education in the United States were provided by private, tuition-charging schools, too little education would be consumed.

. Public universities are a service that is an example of public provision.

Which of the following is an example of a voucher? Food stamps

To provide the efficient amount of health care, the government could issue vouchers.

Chapter 14

The abbreviation “GDP” stands for Gross Domestic Product.

GDP is equal to the _market ___ value of all the final goods and services produced within a country in a given period of time.

The following are all final goods except flour used by the baker to make cupcakes.

Investment is defined as the purchase of new capital goods by firms.

In one year, a firm increases its production by $9 million and increases sales by $8 million. All other...
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