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Micro Flashcards

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1
Q
A
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2
Q

What is the definition of microeconomics?

A

Microeconomics is the branch of economics that studies individual consumers and businesses, focusing on the allocation of resources and the interactions between them.

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3
Q

True or False: Microeconomics examines the economy as a whole.

A

False

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4
Q

What is demand?

A

Demand is the quantity of a good or service that consumers are willing and able to purchase at different prices.

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5
Q

What is the law of demand?

A

The law of demand states that, all else being equal, as the price of a good decreases, the quantity demanded increases, and vice versa.

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6
Q

Fill in the blank: The demand curve typically slopes _______.

A

downward

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7
Q

What factors can cause a shift in the demand curve?

A

Factors include changes in consumer income, preferences, prices of related goods, and expectations.

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8
Q

What is supply?

A

Supply is the quantity of a good or service that producers are willing and able to sell at different prices.

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9
Q

What is the law of supply?

A

The law of supply states that, all else being equal, as the price of a good increases, the quantity supplied increases, and vice versa.

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10
Q

Fill in the blank: The supply curve typically slopes _______.

A

upward

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11
Q

What causes a shift in the supply curve?

A

Factors include changes in production costs, technology, number of suppliers, and government policies.

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12
Q

What is market equilibrium?

A

Market equilibrium is the point where the quantity demanded equals the quantity supplied.

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13
Q

True or False: At equilibrium, there is a surplus of goods.

A

False

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14
Q

What happens to equilibrium price when demand increases?

A

Equilibrium price typically rises when demand increases.

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15
Q

What is price elasticity of demand?

A

Price elasticity of demand measures how much the quantity demanded of a good responds to a change in its price.

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16
Q

What is the formula for calculating price elasticity of demand?

A

Price elasticity of demand = (% change in quantity demanded) / (% change in price)

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17
Q

What does it mean if demand is elastic?

A

If demand is elastic, a small change in price leads to a large change in quantity demanded.

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18
Q

What is consumer surplus?

A

Consumer surplus is the difference between what consumers are willing to pay for a good and what they actually pay.

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19
Q

What is producer surplus?

A

Producer surplus is the difference between what producers are willing to accept for a good and the price they actually receive.

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20
Q

Fill in the blank: A _______ good is one whose demand increases as consumer income rises.

A

normal

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21
Q

What is a substitute good?

A

A substitute good is a product that can be used in place of another, where an increase in the price of one leads to an increase in demand for the other.

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22
Q

What is a complementary good?

A

A complementary good is a product that is used together with another, where an increase in the price of one leads to a decrease in demand for the other.

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23
Q

What does the term ‘market failure’ refer to?

A

Market failure refers to a situation where the allocation of goods and services is not efficient, leading to a loss of economic welfare.

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24
Q

True or False: Externalities are a type of market failure.

A

True

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25
What is a public good?
A public good is a good that is non-excludable and non-rivalrous, meaning individuals cannot be effectively excluded from use and one person's use does not diminish another's.
26
What is meant by 'monopoly'?
A monopoly is a market structure where a single seller dominates the market for a product or service, with no close substitutes.
27
What is government failure?
Government failure occurs when government intervention in the economy leads to inefficiencies or a misallocation of resources.
28
True or False: Government failure can occur even when there is a clear market failure.
True
29
Fill in the blank: Government failure can be caused by ________ in decision-making processes.
inefficiencies
30
What are the main causes of government failure?
The main causes include bureaucratic inefficiencies, lack of information, misaligned incentives, and regulatory capture.
31
Multiple Choice: Which of the following is a potential consequence of government failure? A) Increased efficiency B) Resource misallocation C) Improved public welfare D) None of the above
B) Resource misallocation
32
What is regulatory capture?
Regulatory capture is a situation where regulatory agencies become dominated by the industries they are supposed to regulate, leading to policies that benefit the industry rather than the public.
33
True or False: Government failure is always more detrimental than market failure.
False
34
Short Answer: Name one example of government failure.
One example is the misallocation of resources in agricultural subsidies.
35
Fill in the blank: ________ refers to the situation where the government provides goods or services that are not demanded by the public.
Overproduction
36
What is the role of information asymmetry in government failure?
Information asymmetry can lead to poor decision-making by the government, resulting in policies that do not address the needs of the public effectively.
37
Multiple Choice: Which of the following can exacerbate government failure? A) Transparency B) Accountability C) Political pressure D) Public participation
C) Political pressure
38
True or False: Government intervention always leads to improved market outcomes.
False
39
What is the relationship between government failure and public choice theory?
Public choice theory suggests that government officials act in their own self-interest, which can contribute to government failure.
40
Fill in the blank: Government policies that lead to ________ can result in government failure.
unintended consequences
41
Short Answer: How can bureaucratic inefficiencies lead to government failure?
Bureaucratic inefficiencies can slow down decision-making processes and lead to wasteful spending of resources.
42
Multiple Choice: Which of the following is NOT a type of government failure? A) Overregulation B) Underregulation C) Effective regulation D) Misallocation
C) Effective regulation
43
True or False: Government failure can result in a loss of public trust in government institutions.
True
44
What is the impact of government failure on economic efficiency?
Government failure can lead to a decrease in economic efficiency by distorting market signals and leading to resource wastage.
45
Fill in the blank: A lack of ________ can prevent the government from effectively addressing market failures.
expertise
46
Short Answer: Why might politicians prioritize short-term gains over long-term solutions?
Politicians may prioritize short-term gains due to electoral pressures and the desire to secure votes.
47
What is an indirect tax?
An indirect tax is a tax imposed on goods and services rather than on income or profits.
48
True or False: Indirect taxes are paid directly by consumers to the government.
False
49
Fill in the blank: Indirect taxes are often included in the ______ of goods and services.
price
50
What are two common examples of indirect taxes?
Value Added Tax (VAT) and excise duties.
51
How do indirect taxes affect consumer behavior?
They typically increase the price of goods and services, which can reduce consumption.
52
What is the primary purpose of imposing indirect taxes?
To generate revenue for the government.
53
Multiple choice: Which of the following is NOT an indirect tax? A) VAT B) Income Tax C) Excise Duty
B) Income Tax
54
What is the impact of an indirect tax on supply?
It typically decreases supply as the cost of production increases.
55
True or False: Indirect taxes can lead to market distortions.
True
56
What is the economic term for the burden of an indirect tax?
Tax incidence
57
Fill in the blank: The government can use indirect taxes to discourage ______ behavior.
negative externality
58
What is the effect of an indirect tax on consumer surplus?
It typically decreases consumer surplus.
59
Multiple choice: Which type of indirect tax is levied on specific goods like alcohol and tobacco? A) VAT B) Excise Duty C) Sales Tax
B) Excise Duty
60
What is 'tax shifting' in the context of indirect taxes?
When producers pass on the cost of the tax to consumers through higher prices.
61
Define 'ad valorem tax'.
A tax based on the value of the good or service.
62
How do indirect taxes influence inflation?
They can contribute to inflation by increasing the overall price level of goods and services.
63
What is information failure?
A situation where buyers or sellers do not have adequate information to make informed decisions.
64
True or False: Information failure can lead to market failure.
True
65
Fill in the blank: Asymmetric information occurs when one party has more ______ than the other.
information
66
What is an example of information failure in the market?
A buyer not knowing the true quality of a used car.
67
Multiple choice: Which of the following is a consequence of information failure? A) Efficient markets B) Adverse selection C) Perfect competition
B) Adverse selection
68
What is 'moral hazard'?
A situation where one party takes risks because they do not bear the full consequences of their actions.
69
How can the government address information failure?
By providing information, enforcing regulations, or implementing labeling requirements.
70
True or False: Information failure only affects consumers.
False
71
Define 'signaling' in the context of information asymmetry.
Actions taken by informed parties to reveal information to uninformed parties.
72
What role does advertising play in reducing information failure?
It can provide consumers with information about products, reducing uncertainty.
73
What is a minimum price?
A minimum price is a legally established lowest price that can be charged for a good or service.
74
True or False: A maximum price is set above the equilibrium price.
False
75
Fill in the blank: A minimum price is often used to protect _______ producers.
low-income
76
What is a consequence of setting a minimum price above the equilibrium price?
It can lead to a surplus of the good or service.
77
Define maximum price.
A maximum price is a legally established highest price that can be charged for a good or service.
78
Multiple Choice: Which of the following is an effect of a maximum price set below the equilibrium price? A) Surplus B) Shortage C) No effect
B) Shortage
79
What is one reason governments implement maximum prices?
To make essential goods more affordable for consumers.
80
True or False: Price controls can lead to black markets.
True
81
Fill in the blank: The minimum price for alcohol is an example of a _______ price control.
minimum
82
What happens to consumer surplus when a maximum price is imposed?
Consumer surplus may increase as consumers pay lower prices.
83
What is a merit good?
A merit good is a product that is deemed to be beneficial for individuals and society, often under-consumed due to lack of information or awareness.
84
What is a demerit good?
A demerit good is a product that is considered harmful or undesirable, often over-consumed due to misinformation or lack of awareness.
85
True or False: Merit goods are typically subsidized by the government.
True
86
Give an example of a merit good.
Education is an example of a merit good.
87
Give an example of a demerit good.
Cigarettes are an example of a demerit good.
88
What is the main reason for the under-consumption of merit goods?
Lack of information or awareness about their benefits.
89
What is the main reason for the over-consumption of demerit goods?
Misinformation or lack of awareness about their harms.
90
What role does the government play concerning merit goods?
The government may provide subsidies or public services to encourage consumption of merit goods.
91
What is a common policy response to demerit goods?
Imposing taxes or regulations to reduce their consumption.
92
Fill in the blank: Merit goods are often associated with ________ externalities.
positive
93
Fill in the blank: Demerit goods are often associated with ________ externalities.
negative
94
True or False: Both merit and demerit goods can lead to market failure.
True
95
What is one effect of under-consumption of merit goods on society?
It can lead to a less educated and less healthy population.
96
What is one effect of over-consumption of demerit goods on society?
It can lead to increased healthcare costs and social issues.
97
What is the 'information failure' in the context of merit goods?
Consumers may not fully understand the benefits of merit goods, leading to under-consumption.
98
What is the 'information failure' in the context of demerit goods?
Consumers may underestimate the risks or harms associated with demerit goods, leading to over-consumption.
99
What is a public good?
A public good is a type of good that is non-excludable and non-rivalrous, often provided by the government.
100
How do merit goods differ from public goods?
Merit goods are beneficial and often subsidized, while public goods are available to all without exclusion.
101
What is the concept of 'social welfare' in relation to merit goods?
Social welfare increases when merit goods are consumed more as they provide benefits to society.
102
What is the concept of 'social cost' in relation to demerit goods?
Social cost increases with the over-consumption of demerit goods due to negative externalities.
103
What is an example of government intervention for merit goods?
Providing free vaccinations to encourage public health.
104
What is an example of government intervention for demerit goods?
Implementing a smoking ban in public places.
105
True or False: Merit goods can sometimes be provided by private enterprises.
True
106
What is a potential downside of subsidizing merit goods?
It can lead to government budget constraints and inefficiencies.
107
True or False: Demerit goods are usually more heavily taxed than merit goods.
True
108
How can education be classified in economic terms?
Education is classified as a merit good.
109
What is the impact of merit goods on economic productivity?
Merit goods can enhance economic productivity by improving skills and health.
110
What is the impact of demerit goods on economic productivity?
Demerit goods can reduce economic productivity due to health issues and social problems.
111
What type of good is healthcare considered?
Healthcare is considered a merit good.
112
What is the relationship between merit goods and equity?
Merit goods promote equity by providing access to essential services for all individuals.
113
What is the relationship between demerit goods and equity?
Demerit goods can exacerbate inequality by disproportionately affecting lower-income individuals.
114
True or False: The consumption of merit goods is always beneficial for the individual.
False

ECONOMICS (4 decks)

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