EC201 final
For any country, if the world price of zinc is higher than the domestic price of zinc without trade, that country should a. export zinc, since that country has a comparative advantage in zinc. b. import zinc, since that country has a comparative advantage in zinc. c. neither export nor import zinc, since that country cannot gain from trade. d. neither export nor import zinc, since that country already produces zinc at a low cost compared to other countries.
Answer A
Mike and Sandy are two woodworkers who both make tables and chairs. 20 chairs, where Sandy can make 6 tables or 18 chairs. a. 1/5 table for Mike and 1/3 table for Sandy. b. 1/5 table for Mike and 3 tables for Sandy. c. 5 tables for Mike and 1/3 table for Sandy. d. 5 tables for Mike and 3 tables for Sandy.
Answer A
The amount of deadweight loss as a result of the tax is a. $2.50. b. $5. c. $7.50. d. $10.
Answer A
The difference between a corrective tax and a tradable pollution permit is that a. a corrective tax sets the price of pollution and a permit sets the quantity of pollution. b. a corrective tax creates a more efficient outcome than a permit. c. a corrective tax sets the quantity of pollution and a permit sets the price of pollution. d. a permit creates a more efficient outcome than a corrective tax.
Answer A
The overriding reason why households and societies face many decisions is that a. resources are scarce. b. goods and services are not scarce. c. incomes fluctuate with business cycles. d. people, by nature, tend to disagree.
Answer A
In the long run, a. inputs that were fixed in the short run remain fixed. b. inputs that were fixed in the short run become variable. c. inputs that were variable in the short run become fixed. d. variable inputs are rarely used.
Answer B
Suppose that electricity producers create a negative externality equal to $5 per unit. What is the relationship between the equilibrium quantity and the socially optimal quantity of electricity to be produced? a. They are equal. b. The equilibrium quantity is greater than the socially optimal quantity. c. The equilibrium quantity is less than the socially optimal quantity. d. There is not enough information to answer the question.
Answer B
Tariffs and quotas are different in the sense that a. tariffs cause deadweight losses, while quotas do not cause deadweight losses. b. tariffs raise revenue for the government, while quotas do not raise revenue for the government. c. tariffs enhance the well-being of domestic consumers, while quotas diminish the well-being of domestic consumers. d. tariffs enhance the well-being of domestic producers, while quotas diminish the well-being of domestic producers.
Answer B
The deadweight loss from a tax of $5 per unit will be smallest in a market with a. inelastic supply and elastic demand. b. inelastic supply and inelastic demand. c. elastic supply and elastic demand. d. elastic supply and inelastic demand.
Answer B
The opportunity cost of an item is a. the number of hours needed to earn money to buy the item. b. what you give up to get that item. c. usually less than the dollar value of the item. d. the dollar value of the item.
Answer B
Which of the following statements is an example of a positive, as opposed to normative, statement? a. Americans deserve a cleaner environment. b. Reducing emissions reduces days missed from school due to asthma. c. All Americans are entitled to quality health care. d. Economic policies should focus on improving equality.
Answer B
Which of the following statements is correct? a. Assuming that explicit costs are positive, economic profit is greater than accounting profit. b. Assuming that implicit costs are positive, accounting profit is greater than economic profit. c. Assuming that explicit costs are positive, accounting profit is equal to economic profit. d. Assuming that implicit costs are positive, economic profit is positive.
Answer B
An example of an opportunity cost that is also an implicit cost is a. a lease payment. b. the cost of raw materials. c. the value of the business owner's time. d. All of the above are correct.
Answer C
Buyers of a product will bear the larger part of the tax burden, and sellers will bear a smaller part of the tax burden, when the a. tax is placed on the sellers of the product. b. tax is placed on the buyers of the product. c. supply of the product is more elastic than the demand for the product. d. demand for the product is more elastic than the supply of the product.
Answer C
In many cases the Coase theorem does not work well because A. there are too few parties at the negotiation table. B. the government does not know about the Coase theorem. C. transaction costs are too high. D. transaction costs are too low.
Answer C
Since almost all forms of transportation produce some type of pollution, a. the government should ban all transportation. b. the government should ban all pollution. c. society has to weigh the cost and benefits when deciding how much pollution to allow. d. refrain from intervening because the market can best solve this problem.
Answer C
The amount of tax revenue received by the government is a. $2.50. b. $4. c. $5. d. $9.
Answer C
If the United States imports televisions and the U.S. government imposes a tariff on televisions, then a. total surplus in the American television market decreases. b.producer surplus in the American television market increases. c. U.S. imports of foreign televisions decrease. d. All of the above are correct.
Answer D
In the long run, a profit-maximizing firm will choose to exit a market when A. average fixed cost is falling. b. variable costs exceed sunk costs. c. marginal cost exceeds marginal revenue at the current level of production. d. total revenue is less than total cost
Answer D
The nation of Aquilonia has decided to end its policy of not trading with the rest of the world. When it ends its trade restrictions, it discovers that it is importing incense, exporting steel, and neither importing nor exporting rugs. We can conclude that Aquilonia's new free-trade policy has a. increased consumer surplus and producer surplus in the incense market. b. increased consumer surplus in the steel market and left producer surplus in the rug market unchanged. c. decreased consumer surplus in both the steel and rug markets. d. decreased consumer surplus in the steel market and increased total surplus in the incense market.
Answer D
The short-run supply curve for a firm in a perfectly competitive market is a. horizontal. b. likely to slope downward. c. determined by forces external to the firm. d. the portion of its marginal cost curve that lies above its average variable cost.
Answer D
Which of the following is a way to address an externality problem? a. command and control solution b. corrective tax c. corrective subsidy d. all of the above.
Answer D
Travis can mow a lawn in two hours or he can trim a tree in one hour. can trim a tree in two hours. a. Travis has an absolute advantage over Ricardo in trimming trees. b. Travis has a comparative advantage over Ricardo in mowing lawns. c. Ricardo has a comparative advantage over Travis in trimming trees. d. All of the above are correct.
Answer a
The "invisible hand" refers to a. the marketplace guiding the self-interests of market participants into promoting general economic well-being. b. the fact that social planners sometimes have to intervene, even in perfectly competitive markets, to make those markets more efficient. c. the equality that results from market forces allocating the goods produced in the market. d. the automatic maximization of consumer surplus in free markets.
answer A
Which of the following events must result in a higher price in the market for Snickers? a. Demand for Snickers increases, and supply of Snickers decreases. b. Demand for Snickers and supply of Snickers both decrease. c. Demand for Snickers decreases, and supply of Snickers increases. d. Demand for Snickers and supply of Snickers both increase
answer A
"Other things equal, when the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises." This relationship between price and quantity demanded is referred to as a. equilibrium. b. the law of demand. c. the relationship between supply and demand. d. the definition of an inferior good.
answer B
A legal minimum on the price at which a good can be sold is called a price a. subsidy. b. floor. c. support. d. ceiling.
answer B
A manufacturer produces 1,000 units, regardless of the market price. For this firm, the price elasticity of supply is a. infinity b. zero c. one d. negative one
answer B
Economies of scale occur when a. long-run average total costs rise as output increases. b. long-run average total costs fall as output increases. c. average fixed costs are falling. d. average fixed costs are constant.
answer B
In the circular-flow diagram, a. firms own the factors of production. b. the factors of production are labor, land, and capital. c. the factors of production are also called "output." d. All of the above are correct.
answer B
Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will a. raise both price and total revenues. b. lower both price and total revenues. c. raise price and lower total revenues. d. lower price and raise total revenues.
answer B
Suppose the government imposes a 20-cent tax on the sellers of iced tea. The tax would a. shift the supply curve upward by 20 cents. b. raise the equilibrium price by 20 cents. c. reduce the equilibrium quantity. d. discourage market activity.
answer B
You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. You still enjoy Ramen noodles very much and buy even more, but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more. When looking at income elasticity of demand for Ramen noodles, yours would a. be negative, and your roommate's would be positive. b. be positive, and your roommate's would be negative. c. be zero, and your roommate's would approach infinity. d. approach infinity, and your roommate's would be zero.
answer B
A certain cowboy spends 10 hours per day mending fences and herding cattle. For the cowboy, a graph that shows his various possible mixes of output (fences mended per day and cattle herded per day) is called his a. line of tastes. b. trade-off curve. c. production possibilities frontier. d. consumption possibilities frontier.
answer C
Private markets fail to reach a socially optimal equilibrium when positive externalities are present because the a. private benefit equals the social benefit at the private market solution. b. private cost exceeds the private benefit at the private market solution. c. social value exceeds the private value at the private market solution. d. private cost exceeds the social benefit at the private market solution.
answer C
Suppose you bought a ticket to a football game for $30 and that you place a $35 value on seeing the game. If you lose the ticket, then what is the maximum price you should pay for another ticket? Assume that losing the ticket does not alter how you value it. a. $5 b. $30 c. $35 d. $65
answer C
In competitive markets, a. firms produce identical products. b. no individual buyer can influence the market price. c. no individual seller can influence the market price. d. All of the above are correct.
answer D
Coffee and tea are substitutes. Good weather that sharply increases the coffee bean harvest would a. increase consumer surplus in the market for coffee and decrease producer surplus in the market for tea. b. increase consumer surplus in the market for coffee and increase producer surplus in the market for tea. c. decrease consumer surplus in the market for coffee and increase producer surplus in the market for tea. d. decrease consumer surplus in the market for coffee and decrease producer surplus in the market for tea.
answer a
The price elasticity of demand measures a. buyers' responsiveness to a change in the price of a good. b. the extent to which demand increases as additional buyers enter the market. c. how much more of a good consumers will demand when incomes rise. d. the movement along a supply curve when there is a change in demand.
answer a
Trade between countries a. allows each country to consume at a point outside its production possibilities frontier. b. limits a country's ability to produce goods and services on its own. c. must benefit both countries equally; otherwise, trade is not mutually beneficial. d. can best be understood by examining the countries' absolute advantages.
answer a
When consumers face rising gasoline prices, they typically a. reduce their quantity demanded more in the long run than in the short run. b. reduce their quantity demanded more in the short run than in the long run. c. do not reduce their quantity demanded in the short run or the long run. d. increase their quantity demanded in the short run but reduce their quantity demanded in the long run.
answer a
Which of the following is correct? A tax burden a. falls more heavily on the side of the market that is more elastic. b. falls more heavily on the side of the market that is less elastic. c. falls more heavily on the side of the market that is closest to unit elastic. d. is distributed independently of the relative elasticities of supply and demand.
answer b
When a country has a comparative advantage in producing a certain good, a. the country should import that good. b. the country should produce just enough of that good for its own consumption. c. the country's opportunity cost of that good is high relative to other countries' opportunity costs of that same good. d. None of the above is correct.
answer d
