C718 – MicroEconomics WGU EXAM
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VERIFIED ANSWERS ACCURATE
QUESTIONS BEST STUDYING
MATERIAL 2024.
Command system
- ANSWER A system that allocates resources by the order of someone in authority.
Majority rule –
ANSWER Allocates resources in the way that a majority of voters choose.
Contest
- ANSWER Allocates resources to the winner, in sport and business.
First come, first-served –
ANSWER Allocates resources to the first in line.
Sharing equally
- ANSWER Allocates resources by mutual agreement.
Lottery –
ANSWER Allocates resources to the one who draws the winning number.
Personal characteristics –
ANSWER Allocate resources based on whom we like
Force
- ANSWER Protects the rule of law and facilitates economic activity.
Allocative efficiency
- ANSWER A situation in which the quantities of goods and services produced are those
that people value most highly - it is not possible to produce more of a good or service
without giving up some of another good that people value more highly.
Production possibilities frontier
- ANSWER The boundary between the combinations of goods and services that can be
produced and the combinations that cannot be produced, given the available factors of
production and the state of technology.
Marginal cost –
,ANSWER The opportunity cost of producing one more unit of a good or service.
Measured by the slope of the production possibilities frontier. The marginal cost of a
good increases as the quantity produced of that good increases.
Marginal benefit
- ANSWER The benefit that people receive from consuming one more unit of a good or
service.
Efficient allocation - ANSWER Occurs when the marginal cost and the marginal benefit
of a good are equal.
Consumer surplus –
ANSWER The marginal benefit from a good or service in excess of the price paid for it,
summed over the quantity consumed.
Producer surplus
- ANSWER The price of a good in excess of the marginal cost of producing it, summed
over the quantity produced.
Total surplus - ANSWER The sum of producer surplus and consumer surplus.
Market failure
- ANSWER A situation in which the market delivers an inefficient outcome.
Deadweight Loss
- ANSWER The decrease in total surplus that results from an inefficient underproduction
or overproduction.
Sources of market failure –
ANSWER • Price and quantity regulations
• Taxes and subsidies
• Externalities
• Public goods and common resources
• Monopoly
• High transactions costs
Price ceiling or price cap
- ANSWER A government regulation that places an upper limit on the price at which a
particular good, service, or factor of production may be traded.
Transactions costs
- ANSWER The opportunity costs of making trades in a market.
Rent ceiling - ANSWER A regulation that makes it illegal to charge more than a
specified rent for housing.
, Black market - ANSWER An illegal market that operates alongside a government-
regulated market.
Search activity
- ANSWER The time spent looking for someone with whom to do business.
Price floor - ANSWER A government regulation that places a lower limit on the price at
which a particular good, service, or factor of production may be traded.
Minimum wage law –
ANSWER A government regulation that makes hiring labor services for less than a
specified wage illegal.
Price support - ANSWER A price floor in an agricultural market maintained by a
government guarantee to buy any surplus output at that price.
Subsidy
- ANSWER A payment by the government to a producer to cover part of the cost of
production.
Excludable
- ANSWER A good, service, or resource is excludable if it is possible to prevent
someone from enjoying its benefits.
Nonexcludable - ANSWER A good, service, or resource is nonexcludable if it is
impossible (or extremely costly) to prevent someone from enjoying its benefits.
Rival
- ANSWER A good, service, or resource is rival if its use by one person decreases the
quantity available for someone else.
Nonrival
- ANSWER A good, service, or resource is nonrival if its use by one person does not
decrease the quantity available for someone else.
Private good - ANSWER A good or service that can be consumed by only one person at
a time and only by the person who has bought it or owns it.
Public good
- ANSWER A good or service that can be consumed simultaneously by everyone and
from which no one can be excluded.
Common resource - ANSWER A resource that can be used only once, but no one can
be prevented from using what is available.
Free rider
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