Economic Terminolgy Quiz

Definition	Term	Extra Hint
Exists when there is one primary seller in a market that faces very little competition exists		Also a popular board game
A group of sellers that cooperate with each other to maintain the market price above the competive market price by limiting production		Ever heard of OPEC?
A good or service that exhibits a positive externality for society and, therefore, will be underproduced under a pure free market system		ie. the beautiful people of this world
A tax on a negative externality		Related to pollution, many economists favor this over a cap and trade program
A person that does not pay for a good or service, but neverthless enjoys it because he or she cannot be excluded from enjoying it		But not for you Richie...You'll shoot your eye out!
A situation where a pure free market system fails to produce the efficient amount of a good or service		There are at least a few ways that the government could efficiently intervene in the economy
A proponent of the government using fiscal stimulus as a means of pushing a recessionary economy to produce at the natural rate of output		Not citizenship of an African country
Two simultaneous quarters of contraction in a country's GDP		Could also happen to your hair line if you have too much DHT in your shampoo
A legal upper limit on the price of a good or service by the federal government that is meant to promote affordability of the good or service to consumers		Careful not to hit your head...
A good or service where people can be excluded from enjoying it, but one person's enjoyment of the good or service does not diminish that of another		May also be defined as a good or service for which the average total cost is still declining with output at the level of output where an individual firm's marginal revenue = marginal cost

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Economic Terminolgy Quiz

by thedeaconomist

Created Jan 6, 2011 in Miscellaneous
Game Plays 68

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	AudiBMW:	Jan 6th, 2011 at 05:48 GMT	1 point
	good quiz lol i just finished microecon i knew all of these except pigovian tax and natural monopoly (i knew what a public good was, i just couldn't get that from the hint). oh, and i'm confused as to how the last hint is a natural monopoly.

	thedeaconomist:	Jan 7th, 2011 at 00:36 GMT	0 points
	Thanks! I noticed there werne't really a lot of economics quizes on sporcle. I've seen a natural monopoly defined in two ways. The first in the definition column is kind of the general definition. If you think about the most obvious natural monopolies such as cable/internet/phone service and fire protection, which have high fixed costs and low variable costs, they are all goods and services that are excludable (the cable/internet/phone provider can disconnect your service; the firemen decide not come when you call). On the other hand, one's use of the good does not meaningfully diminish another's use of the good, mostly due to the fact that the high fixed cost has been paid and now the variable cost is very low for each additional user of the product. To a certain point, the fire station protecting me will probably not impact your utility of the fire protection as long as our houses don't catch on fire at the same time. My watching cable doesn't diminish the utility that you get by watching cable. The second definition under extra hint is the more technical definition. If you were to plot out the scenario on a quantity/price-cost graph, you would see that, at the firm's profit-maximizing production point (MR=MC), the ATC is still declining. This is the case for natural monopolies because the effect of spreading the high fixed cost across many units by increasing quantity outweighs the increasing marginal costs with quantiy because the variable costs are so low. Essentially, the total cost of production would be lower if all the goods sold in the market were produced by one firm rather than many due to economies of scale. An unbiased observer would ask, "why doesn't just one firm produce all of the goods at a lower total price?" As you can see, it is more profitable for an individual firm in a natural monopoly industry to sell a limited amount (in order to keep the price high); so typically the government will grant natural monopolies to a few companies in an industry, but will regulate them heavily to make sure t