COMP 5

A buyer's willingness to pay is a. that buyer's consumer surplus. b. that buyer's producer surplus. c. that buyer's maximum amount he is willing to pay for a good. d. that buyer's minimum amount he is willing to pay for a good. e. none of the above.

c. that buyer's maximum amount he is willing to pay for a good.

If your grandparents buy a new retirement home, this transaction would affect a. consumption. b. investment. c. government purchases. d. net exports. e. none of the above.

b. investment.

The value of plant and equipment worn out in the process of manufacturing goods and services is measured by a. investment. b. Net national product. c. consumption. d. depreciation. e. intermediate production.

d. depreciation.

If a buyer's willingness to pay for a new Honda is $30,000 and she is able to actually buy it for $28,000, her consumer surplus is a. $2,000. b. $28,000. c. $30,000. d. $0. e. $58,000.

2,000

How is your purchase of a $40,000 BMW automobile that was produced entirely in Germany recorded in the U.S. GDP accounts? a. Consumption increases by $40,000 and net exports decrease by $40,000. b. Net exports decrease by $40,000. c. Investment increases by $40,000 and net exports increase by $40,000. d. There is no impact because this transaction does not involve domestic production. e. Net exports increase by $40,000.

a. Consumption increases by $40,000 and net exports decrease by $40,000.

Consumer surplus is the area a. below the demand curve and above the price. b. below the supply curve and above the price. c. above the supply curve and below the price. d. below the demand curve and above the supply curve. e. above the demand curve and below the price.

a. below the demand curve and above the price.

GDP would include which of the following? a. illegal drug sales b. consulting services c. housework d. intermediate sales e. the value of taking a day off from work

b. consulting services

Because producers are better able to organize than consumers are, we would expect there to be political pressure to create a. free trade. b. import restrictions. c. export restrictions. d. none of the above

b. import restrictions.

Which of the following statements about a tariff is true? a. A tariff increases consumer surplus, decreases producer surplus, increases revenue to the government, and increases total surplus. b. A tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and increases total surplus. c. A tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and reduces total surplus. d. A tariff increases consumer surplus, decreases producer surplus, increases revenue to the government, and reduces total surplus.

c. A tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and reduces total surplus.

If a market generates a side effect or externality, then free market solutions a. generate equality. b. maximize producer surplus. c. are inefficient. d. are efficient.

c. are inefficient.

If the world price for a good exceeds the before-trade domestic price for a good, then that country must have a. an absolute disadvantage in the production of the good. b. an absolute advantage in the production of the good. c. a comparative disadvantage in the production of the good. d. a comparative advantage in the production of the good.

d. a comparative advantage in the production of the good.

Which of the following would be excluded from 2019 GDP? The sale of a. a 2019 Honda made in Tennessee. b. a haircut. c. a realtor's services. d. a home built in 2018 and first sold in 2019. e. All of the above should be counted in 2019 GDP.

d. a home built in 2018 and first sold in 2019.

Real GDP is measured in ______ prices while nominal GDP is measured in ______ prices. a. current year; base year b. foreign; domestic c. intermediate; final d. base year; current year e. domestic; foreign

d. base year; current year

Gross domestic product is the sum of the market value of the a. intermediate goods. b. manufactured goods. c. normal goods and services. d. final goods and services. e. inferior goods and services

d. final goods and services.

The seller's cost of production is a. the seller's consumer surplus. b. the seller's producer surplus. c. the maximum amount the seller is willing to accept for a good. d. the minimum amount the seller is willing to accept for a good. e. none of the above

d. the minimum amount the seller is willing to accept for a good.

Suppose that the price of a new bicycle is $300. Sue values a new bicycle at $400. It costs $200 for the seller to produce the new bicycle. What is the value of total surplus if Sue buys a new bike? a. $400 b. $100 c. $500 d. $300 e. $200

e. $200

If a cobbler buys leather for $100 and thread for $50 and uses them to produce and sell $500 worth of shoes to consumers, the contribution to GDP is a. $50. b. $650. c. $500. d. $100. e. $600.

500

Which of the following is not employed as an argument in support of trade restrictions? a. Free trade harms both domestic producers and domestic consumers and therefore reduces total surplus. b. Free trade harms infant industries in an importing country. c. Free trade harms the national security if vital products are imported. d. Free trade is harmful to importing countries if foreign countries subsidize their exporting industries. e. Free trade destroys domestic jobs.

a. Free trade harms both domestic producers and domestic consumers and therefore reduces total surplus.

Producer surplus is the area a. above the supply curve and below the price. b. above the demand curve and below the price. c. below the demand curve and above the price. d. below the supply curve and above the price. e. below the demand curve and above the supply curve.

a. above the supply curve and below the price.

In general, if a benevolent social planner wanted to maximize the total benefits received by buyers and sellers in a market, the planner should a. allow the market to seek equilibrium on its own. b. choose a price above the market equilibrium price. c. choose a price below the market equilibrium price. d. choose any price the planner wants because the losses to the sellers (buyers) from any change in price are exactly offset by the gains to the buyers (sellers).

a. allow the market to seek equilibrium on its own.

Suppose the world price is below the before-trade domestic price for a good. If a country allows free trade in this good, a. consumers will gain and producers will lose. b. producers will gain and consumers will lose. c. both producers and consumers will gain. d. both producers and consumers will lose.

a. consumers will gain and producers will lose.

An increase in the price of a good along a stationary demand curve a. decreases consumer surplus. b. improves the material welfare of the buyers. c. increases consumer surplus. d. improves market efficiency.

a. decreases consumer surplus.

Joe has ten baseball gloves and Sue has none. A baseball glove costs $50 to produce. If Joe values an additional baseball glove at $100 and Sue values a baseball glove at $40, then to maximize a. efficiency, Joe should receive the glove. b. equality, Joe should receive the glove. c. efficiency, Sue should receive the glove. d. consumer surplus, both should receive a glove.

a. efficiency, Joe should receive the glove.

An increase in the price of a good along a stationary supply curve a. increases producer surplus. b. decreases producer surplus. c. improves market equity. d. does all of the above.

a. increases producer surplus.

If nominal GDP in 2019 exceeds nominal GDP in 2018, then the production of output must have a. risen or fallen because there is not enough information to determine what happened to real output. b. stayed the same. c. risen. d. fallen

a. risen or fallen because there is not enough information to determine what happened to real output.

Which of the following statements about import quotas is true? a. Import quotas are preferred to tariffs because they raise more revenue for the imposing government. b. For every tariff, there is an import quota that could have generated a similar result. c. An import quota reduces the price to the domestic consumers. d. Voluntary quotas established by the exporting country generate no deadweight loss for the importing country.

b. For every tariff, there is an import quota that could have generated a similar result.

If free trade is allowed, a country will export a good if the world price is a. below the before-trade domestic price of the good. b. above the before-trade domestic price of the good. c. equal to the before-trade domestic price of the good. d. none of the above.

b. above the before-trade domestic price of the good.

If a producer has market power (can influence the price of the product in the market) then free market solutions a. are efficient. b. are inefficient. c. maximize consumer surplus. d. generate equality.

b. are inefficient.

Adam Smith's "invisible hand" concept suggests that a competitive market outcome a. minimizes total surplus. b. maximizes total surplus. c. generates equality among the members of society. d. does both b and c.

b. maximizes total surplus.

U.S. gross domestic product (in contrast to gross national product) measures the production and income of a. Americans and their factories no matter where they are located in the world. b. people and factories located within the borders of the United States. c. the domestic service sector only. d. the domestic manufacturing sector only. e. none of the above.

b. people and factories located within the borders of the United States.

When a country allows trade and exports a good, a. domestic producers are better off, domestic consumers are worse off, and the nation is worse off because the losses of the losers exceed the gains of the winners. b. domestic consumers are better off, domestic producers are worse off, and the nation is better off because the gains of the winners exceed the losses of the losers. c. domestic producers are better off, domestic consumers are worse off, and the nation is better off because the gains of the winners exceed the losses of the losers. d. domestic consumers are better off, domestic producers are worse off, and the nation is worse off because the losses of the losers exceed the gains of the winners.

c. domestic producers are better off, domestic consumers are worse off, and the nation is better off because the gains of the winners exceed the losses of the losers.

Medical care clearly enhances people's lives. Therefore, we should consume medical care until a. buyers receive no benefit from another unit of medical care. b. we must cut back on the consumption of other goods. c. the benefit buyers place on medical care is equal to the cost of producing it. d. everyone has as much as they would like.

c. the benefit buyers place on medical care is equal to the cost of producing it.

An example of a transfer payment is a. profit. b. government purchases. c. unemployment benefits. d. rent. e. wages.

c. unemployment benefits.

If a market is efficient, then a. the market allocates output to the buyers who value it the most. b. the market allocates buyers to the sellers who can produce the good at least cost. c. the quantity produced in the market maximizes the sum of consumer and producer surplus. d. all of the above are true. e. none of the above is true.

d. all of the above are true.

Total surplus is the area a. below the demand curve and above the price. b. below the supply curve and above the price. c. above the supply curve and below the price. d. below the demand curve and above the supply curve. e. above the demand curve and below the price.

d. below the demand curve and above the supply curve.

When politicians argue that outsourcing or offshoring of technical support to India by Dell Computer Corporation is harmful to the U.S. economy, they are employing which of the following arguments for restricting trade? a. the infant-industry argument b. the national-security argument c. the deadweight-loss argument d. the jobs argument

d. the jobs argument

Suppose there are three identical vases available to be purchased. Buyer 1 is willing to pay $30 for one, buyer 2 is willing to pay $25 for one, and buyer 3 is willing to pay $20 for one. If the price is $25, how many vases will be sold and what is the value of consumer surplus in this market? a. Three vases will be sold, and consumer surplus is $0. b. Three vases will be sold, and consumer surplus is $80. c. One vase will be sold, and consumer surplus is $30. d. One vase will be sold, and consumer surplus is $5. e. Two vases will be sold, and consumer surplus is $5

e. Two vases will be sold, and consumer surplus is $5.

If buyers are rational and there is no market failure, a. free market solutions are efficient. b. free market solutions generate equality. c. free market solutions maximize total surplus. d. all of the above are true. e. a and c are correct

e. a and c are correct.

Gross domestic product can be measured as the sum of a. consumption, transfer payments, wages, and profits. b. investment, wages, profits, and intermediate production. c. net national product, gross national product, and disposable personal income. d. final goods and services, intermediate goods, transfer payments, and rent. e. consumption, investment, government purchases, and net exports.

e. consumption, investment, government purchases, and net exports.

U.S. GDP would exclude which of the following? a. lawn care services purchased by a homeowner b. a new bridge purchased by the state of Texas c. lawyer services purchased by a home buyer d. the purchase of a new Mazda produced in Illinois e. cotton purchased by Lee Jeans

e. cotton purchased by Lee Jeans

If U.S. GDP exceeds U.S. GNP, then a. real GDP exceeds nominal GDP. b. Americans are producing more in foreign countries than foreigners are producing in the United States. c. real GNP exceeds nominal GNP. d. intermediate production exceeds final production. e. foreigners are producing more in the United States than Americans are producing in foreign countries.

e. foreigners are producing more in the United States than Americans are producing in foreign countries.

If a benevolent social planner chooses to produce more than the equilibrium quantity of a good, then a. producer surplus is maximized. b. total surplus is maximized. c. the value placed on the last unit of production by buyers exceeds the cost of production. d. consumer surplus is maximized. e. the cost of production on the last unit produced exceeds the value placed on it by buyers.

e. the cost of production on the last unit produced exceeds the value placed on it by buyers.

If a benevolent social planner chooses to produce less than the equilibrium quantity of a good, then a. the cost of production on the last unit produced exceeds the value placed on it by buyers. b. consumer surplus is maximized. c. total surplus is maximized. d. producer surplus is maximized. e. the value placed on the last unit of production by buyers exceeds the cost of production.

e. the value placed on the last unit of production by buyers exceeds the cost of production.