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Econ 203 Test 1 || All Questions Answered Correctly.
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  • Econ 203
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  • Econ 203

Society's Goal correct answers To produce an optimal mix of output Optimal mix of output correct answers the most desirable combination of output attainable using existing resources, technology, and social values. Market Failure correct answers an imperfection in the market mechanism that pre...

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  • August 16, 2024
  • 5
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • societys goal

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  • Econ 203
  • Econ 203

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Econ 203 Test 1 || All Questions Answered Correctly.
Society's Goal correct answers To produce an optimal mix of output

Optimal mix of output correct answers the most desirable combination of output attainable using
existing resources, technology, and social values.

Market Failure correct answers an imperfection in the market mechanism that prevents optimal
outcomes.

Public goods.
Externalities.
Market power.
Inequity. correct answers Specific sources of market failure are:

Private good correct answers a good or service whose consumption by one person excludes
consumption by others.

Public good correct answers a good or service whose consumption by one person does not
exclude consumption by others

The free-rider dilemma correct answers the communal nature of public goods may cause some
consumers to try for a free ride.

Free rider correct answers an individual who reaps direct benefits from someone else's purchase
(consumption) of a public good

Government's Role correct answers Step in and become the buyer.
The producer then produces the public good.
Finance the purchase with taxes or user fees.

Externalities correct answers A two-party (buyer and seller) transaction occurs, but there are
costs (or benefits) borne by a third party.
The difference between the social and private costs (benefits) of a market activity.

Positive externality correct answers Third parties benefit because of a market transaction:
Society's benefit > market benefit.
The market underproduces.
The government subsidizes to shift demand right.

Negative externality correct answers Third parties are hurt (suffer a cost) because of a market
transaction:
Society's cost > market cost.
The market overproduces.
The government restricts production to shift supply left.

, Market Power correct answers the ability of a firm to manipulate the price of a good in the
market.

Income redistribution: correct answers Reduces the inequity in incomes.
Provides a minimum amount of merit goods.

Merit good correct answers a good society believes everyone is entitled to some minimal
quantity of.

macro intervention correct answers Move out of inefficiency and up on the PPC.
Reduce unemployment.
Avoid inflation.
Stable prices.
Increase our capacity to produce.
Economic growth.

Progressive tax system correct answers As income rises, the tax rate also rises.

Proportional tax system correct answers As income rises, the tax rate remains the same

regressive tax system correct answers As income rises, the tax rate falls

Government failure correct answers government intervention fails to improve economic
outcomes and may worsen outcomes

Public choice correct answers a theory of public-sector behavior emphasizing rational self-
interest of decision-makers and voters.

Private-sector correct answers Benefits and costs usually accrue to the same person.
Makes it easy to compare the two and make a decision.

Government correct answers Benefits and costs usually accrue to different groups.
Makes it more difficult for the decision maker.
Politics enter into the decision.
The decision maker may have no stake in the outcome.

Consumers correct answers maximize the utility (satisfaction of unmet wants) they can get from
available incomes.

Businesses correct answers maximize profits by selling goods that satisfy while keeping costs
low.

Government correct answers maximize the general welfare of society

Supply correct answers the ability and willingness to sell specific quantities of a good at
alternative prices in a given time period, ceteris paribus.

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