Unit 3 Exam Review Game

1. Unit 3 Exam Review Game Candy is on the line!

2. Question #1 • Exports • Consumer surplus before trade is represented by which letter(s)?

3. Question #2 • Exports • Producer surplus changes by which letter(s) after trade?

4. Question #3 • Exports • Which letter represents a country’s gains from exporting goods?

5. Question #4 • Imports • Is the world price set above or below the domestic price when a country imports a good?

6. Question #5 • Imports • Who loses when a country imports a good?

7. Question #6 • Taxes on imported goods are called _______?

8. Question #7 • Will imports increase or decrease after a tariff is imposed?

9. Question #8 • Government revenue from a tariff is represented by which letter?

10. Question #9 • Deadweight loss from a tariff is represented by which letters?

11. Question #10 • What are two other benefits from international trade?

12. Question #11 • What are two arguments for restricting trade?

13. Question #12 • What are the demand and supply curves called when we talk about externalities?

14. Question #13 • What does the Marginal Social Benefit equal? • What does the Marginal Social Cost equal?

15. Question #14 • Is the social cost or the private cost of a good greater in the presence of a negative externality?

16. Question #15 • Where is the optimal allocation of resources for a positive externality?

17. Question #16 • Which letter represents the deadweight loss from this negative externality?

18. Question #17 • What is it called when an effective tax makes people take into account the external effects of their actions?

19. Question #18 • What is the difference between command and control policies and market based policies?

20. Question #19 • What market based policies could the government implement to correct a market failure due to a negative externality?

21. Question #20 • What market based policy could the government implement to correct a market failure due to a positive externality?

22. Question #21 • The market __________(underproduces/overproduces) a good or service with a positive externality. • The market ___________(underproduces/overproduces) a good or service with a positive externality.

23. Question #22 • What does the Coase Theorem argue?

24. Question #23 • What characterizes a public good/bad

25. Question #24 • Economically speaking, what kind of good would wi-fi be at a crowded, pay-for-access internet café?

26. Question #25 • Public goods and common resources suffer from an externality (external cost) because of what characteristic?

27. Key 21. Under-produce, over-produce 22. Even when externalities exist the private market can reach efficient outcome, regardless of initial distribution of rights 23. Non-excludable, non-rival 24. Private good 25. Rival good – reduces others’ use 1. A+B 2. B+D 3. D 4. below 5. producers 6. tariffs 7. Decrease 8. E 9. D+F 10. Inc. competition, flow of ideas, lower costs (economies of scale), variety of goods 11. Jobs, Nat Security, Infant Industry, Unfair Comp, Protection 12. Answers will vary with externality 13. MSB = MSC + externality MSC = MPC + externality 14. Social Cost 15. Where MSB = MPC 16. e 17. Internalizing the externality 18. Economic incentives 19. Permits, Pigouvian tax 20. Subsidy