Ag Econ 1041
Quiz 10, 30 points
December 2, 2010
Name _______KEY_____________________________
8 a.m. Section
True/False – one point each
T
F
1. If property rights exist and transaction costs are low private transactions are efficient.
T
F
2. The use of emission charges (taxes) force firms to internalize some external costs
impacting the firms’ production decisions.
T
F
3. A large firm may offer goods at lower prices if it has economies of scale in production.
T
F
4. Prices are signals that suggest a value for the good.
T
F
5. An individual will always choose the alternative that provides the greatest utility
regardless of cost.
T
F
6. An external cost is the one that the firm must pay to another firm in a different state.
T
F
7. An increase in output per person is the same as an increase in productivity.
T
F
8. Decisions are best when the decision maker focuses on average benefits and average
costs.
T
F
9. Property rights of citizens must be protected for free markets and capitalism to be
effective at creating wealth.
T
F
10. One must have both utility and purchasing power to have demand for a good.
Five points each
11. What are the price and quantity results from instituting an excise tax? Can an excise tax be
efficient?
P ↑ Q ↓. Yes
12. If the additional output declines as we use more of the input, then we have reached
_____diminishing_________________________ ____returns______________________.
THERE ARE QUESTIONS ON THE OTHER SIDE
13. What do we call market operation costs or benefits that accrue to people not involved in the
particular market?
externalities
14. Diagram (graph) what happens in the market for bicycles as gas prices rise and more bike paths
are created.
S
$/Q
P1
P0
D
0
Q0 Q1
D1
Q