ECON 1201 Johnson HW and Quizzes

Suppose the figure to the right represents the market for cotton. To help reduce​ debt, the government decides to levy a tax on cotton of ​$1.20 per pound to be paid by cotton farmers. What is the incidence of this​ tax? Producers pay ​$___ of the ​$1.20 tax and consumers pay ​$___. ​(Enter your responses rounded to two decimal​ places.)

$0.40 $0.80

Consider the market for gasoline illustrated in the figure to the right. Suppose the market is perfectly competitive and initially in equilibrium. Now suppose the government imposes a gasoline tax of ​$1.50 to be paid for by producers. The effect of this tax is illustrated in the figure to the right. Who bears the burden of the​ tax? Consumers pay ​$___ of the ​$1.50 tax ​(enter a numeric response using a real number rounded to two decimal​ places) and producers pay ​$___ of the tax.

$1 $0.50

Consider the market for a new​ CD, where the price is initially ​$7.00 and 32 thousand copies are​ sold, as indicated in the figure at point A. The music company is considering lowering the price to ​$6.00​, at which price 36 thousand copies would be sold. What is total revenue at the initial price​ (at point​ A)? Revenue is initially $​___ thousand. What would total revenue be at the lower price​ (at point​ B)? Revenue would be ​$___ thousand. Given this change in total​ revenue, is demand between these prices elastic or​ inelastic? Demand​ (in this range of​ prices) is ___

$224 $216 inelastic

Use the graph of the market for cigarettes to answer the following questions. According to the​ graph, how much is the government tax on​ cigarettes? $___ per pack. ​(Enter your response rounded to two decimal​ places.) What price do producers receive after paying the​ tax? ​$___ per pack. ​(Enter your response rounded to two decimal​ places.) How much tax revenue does the government​ collect? ​$___ billion dollars per year. ​(Enter your response rounded to two decimal​ places.) If the tax were collected from the buyers of​ cigarettes, the graph would differ from the one shown here by having A. demand shift down simultaneously​ with, and by the same amount​ as, the upward shift in supply. B. demand shift down by the tax per pack instead of supply shifting up by the tax per pack. C. no shifts at all. D. demand shift up by the tax per pack instead of supply shifting up by the tax per pack. With the tax being collected from the buyers instead of the​ producers, the new equilibrium price that they would pay the producers will ____.

$3 $4.00 $36 B. demand shift down by the tax per pack instead of supply shifting up by the tax per pack. decrease

In the diagram to the​ right, when the price is $71 per​ player, the amount of the ____ is ____ million players per month.

$71 56 million

Suppose the figure to the right represents the production of a manufactured good. Production of this good generates volatile organic​ compounds, which are a type of air pollution. As a​ result, the cost of production to society is greater than the private cost of production. The marginal private cost of production is represented by MC1 and the marginal social cost is represented by MC2. Suppose the government decides to impose a Pigovian tax to bring about an efficient level of output. What size should the tax​ be? The government should levy a tax of ​$____ per ton produced. ​(Enter your response as a whole​ number.)

$75

Every society faces​ trade-offs because we live in a world of scarcity. Suppose a​ student-athlete has the opportunity to earn ​$800,000 next year playing for a minor league baseball​ team, ​$300,000 next year playing for a European professional football​ team, or​ $0 returning to college for another year. The opportunity cost of the​ student-athlete returning to college next year is ​$_____. ​(Enter your response as an​ integer.)

$800,000

Suppose the United States has two​ utilities, Commonweath Utilities and Consolidated Electric. Both produce 20 million tons of sulfur dioxide pollution per year.​ However, the marginal cost of reducing a ton of pollution for Consolidated Electric is ​$400 per ton and the marginal cost of reducing a ton of pollution for Commonwealth Utilities is ​$450 per ton. The​ government's goal is to cut sulfur dioxide pollution in half​ (by 20 million tons per​ year). If the government issues 10 million tradable pollution permits to each​ utility, what will be the cost of eliminating half of the pollution to​ society? Using a cap-and-trade system of tradable emission allowances will eliminate half of the sulfur dioxide pollution at a cost of ​$____ million per year. If the permits are not​ tradable, what will be the cost of eliminating half of the​ pollution? If permits cannot be​ traded, then the cost of the pollution reduction will be ​$____ million per year.

$8000 $8500

Suppose income increases by 10 percent​ and, as a​ result, the quantity of a particular brand of automobile demanded​ (holding the price for this particular automobile​ constant) decreases by 2 percent. The income elasticity of demand for this brand of car is negative ___. ​(Enter your response rounded to two decimal places and include a minus sign if​ appropriate.) This particular brand of automobile is​ a(n) ___ good. In another​ example, suppose market research shows that a particular brand of truck is a normal good and a necessity. If​ so, then the income elasticity of demand for this truck is A. greater than 1. B. zero. C. negative. D. less than 1 but greater than 0. E. positive.

-0.2 inferior D. less than 1 but greater than 0.

Suppose that after hurricane​ Irene, the average income in Cape​ Charles, Virginia decreased by 16 percent. In response to this change in​ income, suppose the quantity of steak demanded in Cape Charles​ (holding the price of steak​ constant) decreased by 6 percent. What is the income elasticity of demand for steak in Cape​ Charles? The income elasticity of demand for steak in Cape Charles is ____. ​(Enter your response rounded to two decimal​ places.) In this​ instance, steak in Cape Charles is _____.

0.38 normal and a necessity

Consider the market for a new DVD​ movie, where the price is initially ​$12 and 36 copies are sold per day at a​ superstore, as indicated in the figure to the right. The superstore is considering lowering the price to ​$8. What is the price elasticity of demand between these two prices ​(use the Midpoint Formula​)? The price elasticity of demand is ___. ​(Enter your response as a real number rounded to two decimal​ places.)

0.5

Suppose the figure to the right illustrates the marginal cost and marginal benefit from reducing sulfur dioxide pollution. Suppose also that the United States is currently generating 12.5 million tons of pollution per year. What is the optimal level of pollution​ reduction? The optimal level of pollution reduction is ____ million tons per year. ​(Enter your response rounded to one decimal​ place.)

10

The figure illustrates the market for apples in which the government has imposed a price floor of ​$10 per crate. How many crates of apples will be sold after the price floor has been​ imposed? ___ million crates of apples per year. ​(Enter your response as an​ integer.) Will there be a shortage or​ surplus? If there is a shortage or​ surplus, how large will it​ be? There will be a ___ of ___ million crates of apples per year. ​(Enter your response as an​ integer.) Part 5 Will apple producers benefit from the price​ floor? Part 6 A. Apple producers who are able to sell their apples at the ​$10 price per crate will benefit. B. Apple producers who are not able to sell their apples will not benefit. C. Total revenue for apple producers as a group will decrease from ​$162 million to ​$160 million. D. Both a and b. E. All of the above.

16 surplus 6 E. All of the above

The figure shows the market for beer. The government plans to impose a unit tax in this market. How much of the tax is paid by​ sellers? A. ​$2 B. ​$5 C. ​$7 D. ​$12

A. $2

What is the impact of an increase in worker productivity when demand is relatively more​ elastic? A. An increase in sales revenue received by the firm. B. A decline in sales revenue received by the firm. C. A small increase in the price received by the firm. D. A large increase in the price received by the firm.

A. An increase in sales revenue received by the firm.

Which of the following events would cause the supply curve to decrease from S1 to S2​? A. An increase in the price of inputs. B. An increase in the number of firms in the market. C. Lower expected future prices. D. A decrease in the price of inputs.

A. An increase in the price of inputs.

Deadweight loss is the reduction in economic surplus resulting from a market not being in competitive equilibrium. In the​ diagram, deadweight loss is equal to the​ area(s): A. C​ & E. B. B​ & D. C. A. D. ​A, B,​ & C.

A. C​ & E.

Which of the following statements about the price elasticity of demand is ​correct? A. Demand is more elastic in the long run than it is in the short run. B. Demand is more elastic the smaller percentage of the​ consumer's budget the item takes up. C. The elasticity of demand for a good in general is equal to the elasticity of demand for a specific brand of the good. D. The absolute value of the elasticity of demand ranges from zero to one.

A. Demand is more elastic in the long run than it is in the short run.

The graph shows the effect of a tax imposed on soft drinks. Use this graph to answer the following questions. Which areas in the graph represent the excess burden​ (deadweight loss) of the​ tax? A. D​ + G B. C​ + D​ + G C. B​ + C​ + D​ + G D. A​ + B​ + D​ + G Which areas represent the revenues collected by the government from the​ tax? A. A​ + B​ + C​ + D B. B​ + C​ + E​ + F C. E​ + F​ + G​ + H​ + I D. E​ + F​ + G Would this tax on soft drinks be considered​ efficient? A. ​Yes, because it imposes a large excess burden​ (deadweight loss) relative to the tax revenue it raises. B. ​Yes, because it imposes a small excess burden​ (deadweight loss) relative to the tax revenue it raises. C. ​No, because it imposes a large excess burden​ (deadweight loss) relative to the tax revenue it raises. D. ​No, because it imposes a small excess burden​ (deadweight loss) relative to the tax revenue it raises.

A. D​ + G B. B​ + C​ + E​ + F B. Yes, because it imposes a small excess burden​ (deadweight loss) relative to the tax revenue it raises.

As you move up a linear demand​ curve, the price elasticity of demand in absolute value A. increases. B. decreases. C. stays the same. D. None of the above. On the lower part of a linear demand curve below the​ midpoint, the demand is​ ________ and raising the price causes total revenue to​ _________. A. ​elastic; increase B. ​inelastic; increase C. ​inelastic; decrease D. ​elastic; decrease

A. Increases B. inelastic; increase

A country that imports a substantial amount of gasoline every year imposed a​ $1.2 per gallon excise tax on​ gasoline, to be paid by sellers. The equilibrium price of gasoline prior to the tax was​ $4 per gallon. Gasoline being a necessary​ good, its demand curve is steep and the consumers had to bear the bulk of the tax burden. The​ post-tax price of gasoline went up to​ $5 per​ gallon, causing the​ country's media to claim that it was unfair that people should have to pay so high a price for such an important consumption item. They further believed that such a high tax was inefficient and could not be justified. Which of the​ following, if​ true, could support the imposition of the tax even if it is​ inefficient? A. The revenue generated from this tax is being used to develop alternative sources of energy. B. The country imposes high tariffs on imports. C. In the​ past, the government has not made good use of its revenues. D. The government has recently reduced transfer payments. E. The government goals in taxes on gasoline were higher than the taxes on real estate.

A. The revenue generated from this tax is being used to develop alternative sources of energy.

The diagram in panel b is an example of A. a supply curve. B. the substitution effect. C. a supply schedule. D. the income effect.

A. a supply curve.

The idea that because of​ scarcity, producing more of one good or service means producing less of another good or service refers to the economic concept of A. a​ trade-off. B. efficiency. C. optimization. D. equity.

A. a trade-off

However, this type of bargaining will tend to be limited​ when: A. all parties are not willing to accept a reasonable solution. B. the number of parties involved is small. C. the parties know the complete extent to which they are affected by the externality. D. both a and b. E. all of the above.

A. all parties are not willing to accept a reasonable solution.

What must be true for the Coase Theorem to​ hold? For the Coase Theorem to​ hold, A. all parties to an agreement must be willing to accept a reasonable agreement. B. the externality must be positive. C. the parties to an agreement cannot know the full cost of the externality. D. transaction costs to obtain an agreement must be high. E. the government must monitor the negotiations to obtain an agreement.

A. all parties to an agreement must be willing to accept a reasonable agreement.

The author of a newspaper article remarks that many economists​ "support Pigovian taxes​ because, in some​ sense, we are already paying​ them." ​Source: Adam​ Davidson, "Should We Tax People for Being​ Annoying?" New York Times​, January​ 8, 2013. A Pigovian tax is a government tax intended to A. bring about an efficient level of output in the presence of externalities. B. reduce the national debt. C. bring in revenue. D. reduce producer surplus. Part 3 In a​ sense, consumers in a market might be​ "paying" a Pigovian tax even if the government​ hasn't imposed an explicit tax if there are A. negative externalities in that market so that consumers are experiencing an external benefit. B. positive externalities in that market so that consumers are experiencing an external benefit. C. positive externalities in that market so that consumers are experiencing an external cost. D. negative externalities in that market so that consumers are experiencing an external cost.

A. bring about an efficient level of output in the presence of externalities. D. negative externalities in that market so that consumers are experiencing an external cost.

Suppose that the​ cross-price elasticity between marijuana and alcohol is equal to .6​ (that is, a positive​ .6) and the U.S.​ (in a major policy​ "turn around") criminalizes all marijuana​ (that is, it is illegal in all U.S.​ states). As a​ result, the cost to produce marijuana increases​ (because producers now have to incur costs associated with evading U.S. criminal​ laws). What would you expect to happen to the equilibrium quantity and price of alcohol in the​ U.S.? A. equilibrium quantity will rise and equilibrium price will rise. B. equilibrium quantity will fall and equilibrium price will rise C. equilibrium quantity will fall and equilibrium price will fall D. equilibrium quantity will rise and equilibrium price will remain the same.

A. equilibrium quantity will rise and equilibrium price will rise.

Consider firms that introduce new​ products, such as DVDs in 2001. When firms introduce new​ products, how do they typically determine the price elasticity of demand for those​ products? Firms with new products often A. estimate price elasticity of demand by experimenting with different prices. B. guess price elasticity of demand based on market competition. C. identify price elasticity of demand by asking for government assistance. D. approximate price elasticity of demand with market signals such as shortages. E. identify price elasticity of demand by using price controls to set price floors.

A. estimate price elasticity of demand by experimenting with different prices.

Refer to the diagram to the right which shows a demand curve two supply​ curves, one more elastic than the other. If the government imposes an excise tax of​ $1.00 on every unit​ sold, the​ consumer's burden of the tax A. is greater under the more elastic supply curve S0. B. is the same under either supply curve because there is a single demand curve that captures​ buyers' market behavior. C. is greater under the less elastic supply curve S0. D. is greater under the less elastic supply curve S1.

A. is greater under the more elastic supply curve S0.

Porsche is developing​ all-electric and hybrid electric​ vehicles, and has announced that by​ 2025, they expect more than 50 percent of their worldwide sales will be​ all-electric or hybrid models. The figure shows changes to​ Porsche's production possibilities frontier at its manufacturing facilities in response to new developments and different strategic production decisions. Assume a technological advancement greatly reduces the cost to produce batteries for its Taycan sports car. This is best represented by the A. movement from E to F in Graph A. B. movement from H to J in Graph B. C. movement from G to H in Graph B. D. movement from K to L in Graph C.

A. movement from E to F in Graph A.

​"Rent controls, government farm​ programs, and other price ceilings and price floors are​ bad." This is an example of a A. normative statement. The statement is concerned with what should be. B. positive statement. The statement is concerned with what should be. C. positive statement. The statement is concerned with what is. D. normative statement. The statement is concerned with what is.

A. normative statement. The statement is concerned with what should be.

Suppose the production of electricity by a utility generates pollution that harms others. Suppose also that Coase bargaining can occur between the utility and the victims of pollution but that the utility has not been legally liable for the damages from its pollution. How would making the utility legally liable for the damages from its pollution affect pollution​ reduction? If the electric utility and the people suffering the effects of the​ utility's pollution can​ bargain, then making the utility legally liable for the damages from its pollution will A. not change the amount of pollution reduction because the marginal benefit and marginal cost of pollution reduction will not change. B. increase the amount of pollution reduction by increasing the marginal cost and increasing the marginal benefit of pollution reduction to the utility. C. increase the amount of pollution reduction by decreasing the marginal cost of pollution reduction to the utility. D. increase the amount of pollution reduction by increasing the marginal benefit of pollution reduction to the utility. E. increase the amount of pollution reduction by increasing the marginal benefit of pollution reduction to the victims of pollution.

A. not change the amount of pollution reduction because the marginal benefit and marginal cost of pollution reduction will not change.

If a firm has an incentive to increase supply now and decrease supply in the​ future, the firm expects that the A. price of its product will be lower in the future than it is today. B. demand for the product will be lower in the future than it is today. C. price of its product will be higher in the future than it is today. D. price of inputs will be lower in the future than they are today.

A. price of its product will be lower in the future than it is today.

How do externalities in the production of electricity result in market failure? Because of​ externalities, the market for electricity will A. provide too much electricity. B. provide insufficient electricity. C. generate too much economic surplus. D. result in a surplus of electricity. E. result in a price for electricity that is inefficiently high.

A. provide too much electricity.

When there few close substitutes available for a​ good, demand tends to be A. relatively inelastic. B. perfectly elastic. C. relatively elastic. D. perfectly inelastic.

A. relatively inelastic.

When the government imposes price floors or price​ ceilings, A. some people​ win, some people​ lose, and there is a loss of economic efficiency. B. everyone​ wins, goods and services distribution is more​ just, and there is a loss of economic efficiency. C. everyone​ wins, goods and services distribution is more​ just, and there is an increase in economic efficiency. D. some people​ win, some people​ lose, and there is an increase in economic efficiency.

A. some people​ win, some people​ lose, and there is a loss of economic efficiency.

What information must economists have to estimate the price elasticity of​ demand? To estimate the price elasticity of​ demand, economists need to know A. the demand curve for a product. B. the market price and quantity sold. C. the change in quantity demanded. D. total revenue. E. the supply curve for a product.

A. the demand curve for a product.

What do economists mean by​ "an economically efficient level of​ pollution"? The economically efficient level of pollution is that amount where A. the marginal cost of pollution reduction equals the marginal benefit of pollution reduction. B. pollution is eliminated. C. the marginal cost of pollution reduction is zero and the marginal benefit of pollution reduction is very high. D. the total benefit of pollution reduction is maximized. E. the marginal cost of pollution reduction and the marginal benefit of pollution reduction equal zero.

A. the marginal cost of pollution reduction equals the marginal benefit of pollution reduction.

What do economists mean by​ "an economically efficient level of​ pollution"? The economically efficient level of pollution is that amount where A. the marginal cost of pollution reduction equals the marginal benefit of pollution reduction. B. the marginal cost of pollution reduction and the marginal benefit of pollution reduction equal zero. C. the marginal cost of pollution reduction is zero and the marginal benefit of pollution reduction is very high. D. the total benefit of pollution reduction is maximized. E. pollution is eliminated.

A. the marginal cost of pollution reduction equals the marginal benefit of pollution reduction.

Refer to the diagram to the right which shows the production possibilities frontier for​ Mendonca, an agrarian nation that produces two​ goods, meat and vegetables. The linear production possibilities frontier in the figure indicates that A. the tradeoff between meat and vegetables is constant. B. Mendonca has a comparative disadvantage in the production of meat. C. it is progressively more expensive to produce meat. D. Mendonca has a comparative advantage in the production of vegetables

A. the tradeoff between meat and vegetables is constant.

The private cost of producing a good will differ from the social cost A. when there is an​ externality, such as acid rain generated by the production of electricity. B. when there is an​ externality, such as lower crime rates generated by the consumption of education. C. when there are property​ rights, where individuals or businesses have exclusive use of their property. D. when there is no​ externality, such as in the production of ice cream. E. both a and b. When will the private benefit from consuming a good differ from the social​ benefit? A. when there is an​ externality, such as​ second-hand smoke generated by the consumption of cigarettes. B. when there is an​ externality, such as fewer diseases generated by the consumption of vaccines. C. when there is an​ externality, such as sulfur dioxide generated by the production of paper products. D. when there is no​ externality, such as in the consumption of apples. E. both a and b.

A. when there is an​ externality, such as acid rain generated by the production of electricity. E. both a and b.

Refer to the diagram to the right which shows the production possibilities frontier for​ Mendonca, an agrarian nation that produces two​ goods, meat and vegetables. What is the opportunity cost of one pound of​ vegetables? A. 3/4 pounds of meat B. 12 pounds of meat C. 1 1/3pounds of meat D. 1.2 pounds of meat

A.3/4 pounds of meat

Complete the following​ statement: ​"When there is a shortage of a good A. consumers compete against one another by bidding the price upward. B. decreasing prices lead to a change in demand. C. as prices​ increase, consumer demand more of a particular good. D. as prices​ increase, producers are driven to produce less. E. producers react to shortages by lowering prices. The process continues until the market is finally in​ equilibrium."

A.consumers compete a gainst one another by bidding the price upward.

In the diagram to the​ right, illustrating a binding price floor at P1​, the amount of consumer surplus transferred to producers is represented by area ___ and the deadweight loss is equal to areas ___.

B C and E

Ranchers can raise either cattle or sheep on their land. Which of the following would cause the supply of sheep to​ increase? A. an increase in the demand for cattle B. a decrease in the price of cattle C. an increase in the price of sheep feed D. an increase in the price of sheep

B a decrease in the price of cattle

Refer to the diagram to the right. Of the tax revenue collected by the​ government, the portion borne by consumers is represented by the area A. E+H. B. B+C. C. F+G. D. B+C+F+G.

B. B+C.

Refer to the diagram to the right which shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf. What area represents the deadweight loss after the imposition of the price​ floor? A. C​ + D​ + F​ + G B. C​ + D C. F​ + G D. C​ + D​ + G

B. C​ + D

Consider the demand curve illustrated in the figure to the right. Is demand elastic or​ inelastic? A. Demand is elastic​ (at all​ prices). B. Demand is elastic at all prices above ​$9.00 and inelastic at all prices below ​$9.00. C. Demand is elastic at all prices above ​$11.00 and inelastic at all prices below ​$11.00. D. Demand is inelastic​ (at all​ prices). E. Demand is inelastic at all prices above ​$9.00 and elastic at all prices below ​$9.00. At what price is total revenue​ maximized? Total revenue is maximized when price equals ​$___. ​(Enter your response as a real number rounded to two decimal​ places.)

B. Demand is elastic at all prices above ​$9.00 and inelastic at all prices below ​$9.00. $9

Which of the following statements is​ true? A. ​Trade-offs do not apply when the consumers purchase a product for which there is excess​ supply, such as with a stock clearance sale. B. Every​ individual, no matter how rich or​ poor, is faced with making​ trade-offs. C. Any time you have to decide which action to take you are experiencing economic equity. D. Economics is a social science that studies the​ trade-offs we are forced to make because resources are unlimited.

B. Every​ individual, no matter how rich or​ poor, is faced with making​ trade-offs

Suppose that France and Germany both produce wine and cheese. The table below shows combinations of the goods that each country can produce in a day. Who has the comparative advantage in producing wine and who has the comparative advantage in producing​ cheese? A. Neither has a comparative advantage producing wine or cheese. B. France has a comparative advantage producing wine and Germany has a comparative advantage producing cheese. C. France has a comparative advantage producing cheese and Germany has a comparative advantage producing wine. D. France has a comparative advantage producing wine and cheese. E. Germany has a comparative advantage producing wine and cheese. Suppose that France is currently producing 1 bottle of wine and 6 pounds of cheese and Germany is currently producing 3 bottles of wine and 8 pounds of cheese. ​ Then, assume instead that France and Germany specialize by producing only the good for which they have a comparative advantage and then trade 3 bottles of wine for 11 pounds of cheese. After specialization and​ trade, France gains by consuming the same amount of wine and ___ additional​ pound(s) of cheese ​(enter a numeric response using an​ integer) and Germany gains by consuming the same amount of wine and ___ additional​ pound(s) of cheese.

B. France has a comparative advantage producing wine and Germany has a comparative advantage producing cheese. 5, 1

In England during the Middle​ Ages, each village had an area of​ pasture, known as a​ commons, on which any family in the village was allowed to graze its cows or sheep without charge. Was the common land used​ optimally? A. The commons was overused because the commons was a nonrival good. B. Grazing created a negative​ externality, resulting in the commons being overused. C. The commons was underused because the commons was a nonexcludable good. D. The commons was underused due to free riding. E. Grazing created no​ externality, resulting in the commons being used optimally.

B. Grazing created a negative​ externality, resulting in the commons being overused.

If the price elasticity of demand for canned soup is estimated at −1.62. What happens to sales revenue if the price of canned soup​ rises? A. It falls by 162 percent. B. It falls. C. It rises. D. It rises by 1.62 percent.

B. It falls

Consider the figure to the right and assume that it is the market for​ health-care services. When the​ "baby boomer" generation​ retires, the number of people who require health care increases by​ 30%, and, as a​ result, the number of​ health-care providers also​ increases, but by only​ 25%. What is the effect on the price of​ health-care services over​ time? A. It increases because demand increased by less than supply. B. It increases because demand increased by more than supply. C. It decreases because demand increased by less than supply. D. It decreases because demand increased by more than supply.

B. It increases because demand increased by more than supply.

The Trump administration promoted the tariffs on Chinese imports as a reason for firms to return manufacturing jobs to the United States from China. The​ administration's desire to get firms to return manufacturing to the United States through the implementation of tariffs was an attempt to get firms to follow which key economic​ idea? A. Optimal decisions are made at the margin. B. People respond to economic incentives. C. People are rational. D. The market system relies on the principle of voluntary exchange.

B. People respond to economic incentives.

According to an article in the Economist​ magazine: ​"In all rich​ countries, property rights are secure...Legally recognising land ownership has boosted​ farmers' income and productivity in Latin America and Asia...More than​ two-thirds of​ Africa's land is still under customary​ tenure, with rights to land rooted in communities and typically neither written down nor legally​ recognized." ​Source: "Title to​ Come: Property Rights Are Still Wretchedly Insecure in​ Africa," Economist​, July​ 16, 2016. a. Which of the following statements regarding secure property rights is​ true? A. It is solely the responsibility of the individuals who own the property to ensure that their rights are protected. B. Property rights provide incentives for people to maintain and increase the value of the property they own. C. Property rights—which include only physical property​ (not intellectual rights to new products or the processes used to produce goods and ​services)—refer to the rights of firms and individuals to have exclusive use of their property. D. All of the above. b. Which of the following statements is​ true? A. It is easy for a country to become rich even without having secure property rights. B. Only rich countries have recognized governments that would even be capable of securing property rights. C. Protecting property rights has no impact on a​ country's standard of living. D. By protecting private property​ rights, governments make it more likely that investments will be made in businesses that provide jobs and income for workers. c. What problems might African farmers have because they lack secure property​ rights? A. Without secure property​ rights, it is harder for farmers to borrow because they cannot use their land as collateral. B. Without secure property​ rights, farmers in Africa may be reluctant to make the investments in their farms that would raise the​ farms' productivity. C. Without secure property​ rights, farmers are not able to obtain funds by selling some of their land. D. All of the above.

B. Property rights provide incentives for people to maintain and increase the value of the property they own. D.By protecting private property​ rights, governments make it more likely that investments will be made in businesses that provide jobs and income for workers. D. All of the above

Based on the articles​ entitled, "Thailand has no Easy Options to Pay for Rice​ Subsidy" and​ "Asia's Rice Glut Expected to​ Worsen," what best describes the reason for the expansion of rice production in​ Thailand: A. Thailand has set a nonbinding price ceiling. B. Thailand has set a binding price floor. C. Thailand has set a binding price ceiling. D. Thailand has set a nonbinding price floor.

B. Thailand has set a binding price floor.

Suppose the government imposes an 8 percent sales tax on clothing items and the tax is levied on sellers. Who pays for the tax in this​ situation? (Assume that the demand curve is downward sloping and that the supply curve is upward ​sloping.) A. The tax is borne entirely by the sellers. B. The tax will be borne by partly by consumers and partly by sellers. C. It is not possible to answer the question without information on price elasticities. D. The sellers will pass on the entire sales tax to the consumer and therefore the consumers bear the tax.

B. The tax will be borne by partly by consumers and partly by sellers.

The three fundamental questions that any economy must address are A. How much will be​ saved; what will be​ produced; and how can these goods and services be fairly​ distributed? B. What goods and services to​ produce; how will these goods and services be​ produced; and who receives​ them? C. What will be the prices of goods and​ services; how will these goods and services be​ produced; and who will receive​ them? D. Who gets​ jobs; what wages do workers​ earn; and who owns what​ property?

B. What goods and services to​ produce; how will these goods and services be​ produced; and who receives​ them?

Which of the following would shift the supply curve for MP3 players to the​ right? A. an increase in the price of a substitute in production B. a decrease in the price of an input used to produce MP3 players C. an increase in consumer income​ (assuming that all MP3 players are normal​ goods) D. a decrease in the number of firms that produce MP3 players

B. a decrease in the price of an input used to produce MP3 players

The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called A. producer surplus. B. consumer surplus. C. the substitution effect. D. the income effect.

B. consumer surplus.

Consider the following​ statement: ​"An increase in supply decreases the equilibrium price. The decrease in price increases​ demand." The statement is A. ​false: increases in supply decrease price. B. ​false: decreases in price affect the quantity​ demanded, not demand. C. ​true: increases in supply decrease price. Decreases in price increase demand. D. ​false: increases in supply increase price. Decreases in price increase demand.

B. false: decreases in price affect the quantity​ demanded, not demand.

The Coase Theorem suggests​ that: A. without government​ intervention, private markets will create externalities and result in inefficient outcomes. B. if transaction costs are​ low, private bargaining will result in an efficient solution to the problem of externalities. C. if transaction costs are low, private deals will create externalities and result in inefficient outcomes. D. if transaction costs are​ low, the government will regulate an efficient solution to the problem of externalities. E. none of the above.

B. if transaction costs are​ low, private bargaining will result in an efficient solution to the problem of externalities.

The Coase Theorem states that A. if transaction costs are​ low, private deals will create externalities and result in inefficient outcomes. B. if transaction costs are​ low, private bargaining will result in an efficient solution to the problem of externalities. C. if transaction costs are​ low, private markets will create externalities and result in efficient outcomes. D. if transaction costs are​ low, the government will regulate an efficient solution to the problem of externalities. E. if imposed on free​ markets, government regulations will result in inefficient outcomes and create deadweight loss. The parties involved in an externality have an incentive to reach an efficient solution because A. the party that causes negative externality does not have any legal right to do so. B. government regulations compel private parties. C. it is morally the right thing to do. D. both parties become better off when an efficient solution is reached.

B. if transaction costs are​ low, private bargaining will result in an efficient solution to the problem of externalities. D. both parties become better off when an efficient solution is reached.

Consider an organization dedicated to helping​ low-income people. The members of the organization are discussing alternative methods of aiding the​ poor, when a proponent of one particular method​ asserts: ​"If even one poor person is helped with this​ method, then all our time and money would have been worth​ it." If you were a member of the​ organization, what reply best represents clear economic​ thinking? This attitude A. acknowledges the importance of considering all the alternatives. B. ignores the fact that the cost of helping that one person has an opportunity cost of what those funds could have been used for to help other people. C. recognizes the fact that since the organization is a​ charity, there is an opportunity cost based on the square root of other​ peoples' needs. D. is the most logical because it is focussed on helping even one person.

B. ignores the fact that the cost of helping that one person has an opportunity cost of what those funds could have been used for to help other people.

Refer to the diagram to the right which shows a demand curve two supply​ curves, one more elastic than the other. If the government imposes an excise tax of​ $1.00 on every unit​ sold, the​ consumer's burden of the tax A. is Pa−Pc under either supply curve. B. is Pb−Pc if the supply curve is S0 and Pa−Pc if the supply curve is S1. C. is Pa−Pd if the supply curve is S0 and Pb−Pe if the supply curve is S1. D. is Pb−Pc under either supply curve.

B. is Pb−Pc if the supply curve is S0 and Pa−Pc if the supply curve is S1.

The table above shows the number of labor hours required to produce a motorcycle and a guitar in Ireland and Scotland. Scotland has a comparative advantage in the production of A. both products. B. motorcycles. C. neither product. D. guitars.

B. motorcycles

Suppose the U.S. government encouraged consumers to trade in their old automobiles for more​ efficient, new models by paying up to​ $5,000 for the old automobiles. These consumers who did trade in their old automobiles to take advantage of the government offer would be exemplifying the economic idea that A. people are rational. B. people respond to economic incentives. C. optimal decisions are made at the margin. D. equity is more important than efficiency.

B. people respond to economic incentives.

How might society solve problems associated with externalities and market failure? If an externality is​ present, resulting in market​ failure, then A. it is not possible to increase economic efficiency. B. private solutions may reduce or correct market failure. C. government intervention will further decrease economic efficiency. D. additional competition will reduce problems associated with market failure. E. only government intervention can enhance the well−being of society.

B. private solutions may reduce or correct market failure.

Japan has a market economy. As​ such, Japan​'s economy​ (relative to centrally planned​ economies) tends to result in Part 2 A. allocative efficiency and equity but not necessarily productive efficiency. B. productive efficiency and allocative efficiency but not necessarily equity. C. allocative efficiency but not necessarily productive efficiency or equity. D. productive efficiency but not necessarily allocative efficiency or equity. E. equity but not necessarily productive efficiency or allocative efficiency.

B. productive efficiency and allocative efficiency but not necessarily equity.

The actual division of the burden of a tax between buyers and sellers in a market is called A. tax liability. B. tax incidence. C. tax bearer. D. tax parity.

B. tax incidence.

Tax incidence is A. the potential division of the burden of a tax between buyers and government in a market. B. the actual division of the burden of a tax between buyers and sellers in a market. C. the actual division of the burden of a tax between buyers and government in a market. D. the potential division of the burden of a tax between buyers and sellers in a market.

B. the actual division of the burden of a tax between buyers and sellers in a market.

Suppose the market is initially in equilibrium at price P1 and now the government imposes a tax on every unit sold. Which of the following statements best describes the impact of the​ tax? For demand curve D1 A. the producer bears the entire burden of the tax if the supply curve is S1 and the consumer bears the entire burden of the tax if the supply curve is S2. B. the producer bears a greater share of the tax burden if the supply curve is S2. C. the​ producer's share of the tax burden is the same whether the supply curve is S1 or S2. D. the producer bears a greater share of the tax burden if the supply curve is S1.

B. the producer bears a greater share of the tax burden if the supply curve is S2.

Property rights are A. the rights government has to the exclusive use of all​ property, including the right to buy or sell it. B. the rights individuals or firms have to the exclusive use of their​ property, including the right to buy or sell it. C. the rights individuals or firms have to the exclusive use of their property within individual culturally defined norms which are inconsistent in each area of the United States. D. the rights individuals or firms have to the exclusive use of their​ property, excluding the right to buy or sell it.

B. the rights individuals or firms have to the exclusive use of their​ property, including the right to buy or sell it.

If the urban area has limited ability to create additional parking during periods of peak​ demand, then A. the supply of parking will be more inelastic and the price of parking will increase by a relatively small amount the night of the game. B. the supply of parking will be more inelastic and the price of parking will increase by a relatively large amount the night of the game. C. the supply of parking will be perfectly inelastic and the price of parking will increase by a relatively small amount the night of the game. D. the supply of parking will be more elastic and the price of parking will not change the night of the game. E. the supply of parking will be more elastic and the price of parking will increase by a relatively large amount the night of the game.

B. the supply of parking will be more inelastic and the price of parking will increase by a relatively large amount the night of the game.

Examples of transaction costs include ​(check all that​ apply): A. the difference between the private costs and social costs of production. B. the time required to negotiate an agreement. C. the cost of monitoring an agreement. D. the cost of drafting a contract or agreement. E. the cost of the externality. When are we likely to see private solutions to the problem of​ externalities? A. When the parties involved have information about the externality. B. When transaction costs are low. C. When the number of parties involved is small. D. both a and b. E. all of the above.

B. the time required to negotiate an agreement. C. the cost of monitoring an agreement. D. the cost of drafting a contract or agreement. E. all of the above.

The table above shows the number of labor hours required to produce a digital camera and a pound of wheat in China and South Korea. China has a comparative advantage in A. both products. B. wheat production. C. digital camera production. D. neither product.

B. wheat production

The distinction between a normal and an inferior good is A. normal goods are used for the same purposes while inferior goods are used together. B. when income​ increases, demand for a normal good increases while demand for an inferior good falls. C. normal goods are used together while inferior goods are used for the same purposes. D. when income​ increases, demand for a normal good decreases while demand for an inferior good increases.

B. when income​ increases, demand for a normal good increases while demand for an inferior good falls.

Society faces a tradeoff in all of the following situations except A. when deciding how goods and services will be produced. B. when some previously unemployed workers find jobs. C. when deciding who will receive the goods and services produced. D. when deciding what goods and services will be produced.

B. when some previously unemployed workers find jobs.

The figure shows the market for apartments in Springfield.​ Recently, the government imposed a rent ceiling of​ $1,000 per month. What is the value of the portion of producer surplus transferred to consumers as a result of the rent​ ceiling? A. ​$50,000 B. ​$100,000 C. ​$150,000 D. ​$200,000

B. ​$100,000

The production possibilities frontiers depicted in the diagram to the right illustrate A. the likely result of a ground war. B. both the labor force and capital stock increasing. C. both the labor force and capital stock decreasing. D. technological advances in the tank industry.

B.both the labor force and capital stock increasing.

In the diagram to the​ right, illustrating a binding price ceiling at P3​, the amount of producer surplus transferred to consumers is represented by area ____ and the deadweight loss is equal to areas ___.

C B and D

In the diagram to the​ right, illustrating a binding price ceiling at P3​, the amount of producer surplus transferred to consumers is represented by area ___ and the deadweight loss is equal to areas ___.

C B and D

The figure shows the market for beer. The government plans to impose a unit tax in this market. What is the size of the unit​ tax? A. ​$2 B. ​$5 C. ​$7 D. ​$12

C. $7

Thuy Anh runs a small flower shop in the town of Florabunda. She is debating whether she should extend her hours of operation. Thuy Anh figures that her sales revenue will depend on the number of extra hours the flower shop is open as shown in the table to the right. She would have to hire a worker for those extra hours at a wage rate of​ $16 per hour. Using marginal​ analysis, by how many hours should Thuy Anh extend her flower​ shop's hours of​ operations? A. 2 hours B. 3 hours C. 4 hours D. 5 hours

C. 4 hours

Which graph above best represents what happens in the market for hotel rooms at a ski resort during the​ winter? A. ​A, because fewer people would need​ accomodations, thereby shifting demand to the right. B. ​B, because more hotels would offer​ rooms, thereby shifting supply to the left. C. ​A, because more people would need​ accomodations, thereby shifting demand to the right. D. ​B, because fewer hotels would offer​ rooms, thereby shifting supply to the left. From the graph that you​ picked, if hotel rates stayed at their summer​ level, the result would be ____ of hotel rooms.

C. A, because more people would need​ accomodations, thereby shifting demand to the right. a shortage

How do property rights affect externalities and market​ failure? A. Externalities will be positive and market failure will not occur when property rights are enforced. B. Externalities and market failure will result from producers having all the property rights. C. Externalities and market failure will result from incomplete property rights. D. Externalities and market failure will not occur when property rights are difficult to enforce. E. Externalities will be positive and market failure will not occur when property rights are divided equally among market participants.

C. Externalities and market failure will result from incomplete property rights.

A black market is A. a market in which all transactions involve activities​ (such illicit​ drugs, prostitution,​ etc.) many in the population find morally offensive. B. very similar to a​ "gray" market except that the goods and services exchanged are imported. C. a market in which buying and selling take place at prices that violate government price regulations. D. a market in which buying and selling take place at prices consistent with government price regulations.

C. a market in which buying and selling take place at prices that violate government price regulations.

Suppose the price of a complement to LCD televisions rises. What effect will this have on the market equilibrium for LCD​ TVs? The equilibrium price of LCD TVs will A. increase and the equilibrium quantity will decrease. B. increase and the equilibrium quantity will increase. C. decrease and the equilibrium quantity will decrease. D. not change and the equilibrium quantity will not change. E. decrease and the equilibrium quantity will increase.

C. decrease and the equilibrium quantity will decrease.

Suppose gasoline has few close substitutes available. If​ so, then an increase in the price of gasoline will likely A. decrease the quantity of gasoline demanded by a relatively large amount. B. increase the quantity of gasoline demanded by a relatively large amount. C. decrease the quantity of gasoline demanded by a relatively small amount. D. not change the quantity of gasoline demanded. E. increase the quantity of gasoline demanded by a relatively small amount.

C. decrease the quantity of gasoline demanded by a relatively small amount.

The table above shows the number of labor hours required to produce a digital camera and a pound of wheat in China and South Korea. South Korea has a comparative advantage in A. both products. B. wheat production. C. digital camera production. D. neither product.

C. digital camera production.

In the​ diagram, point A provides the​ _____, point B the​ _____, and point C the​ _____. A. market clearing​ price; equilibrium​ point; shortage B. equilibrium​ price; market​ equilibrium; surplus C. equilibrium​ price; market​ equilibrium; equilibrium quantity D. equilibrium​ price; surplus or​ shortage; equilibrium quantity

C. equilibrium​ price; market​ equilibrium; equilibrium quantity

Billie's Billiard Barn has seen its business slow down ever since​ Patti's Ping Pong Parlour opened up across the street. Since the opening of​ Patti's Ping Pong​ Palace, the opportunity cost of shooting pool at​ Billie's Billiard Barn has A. not changed. B. fallen to zero. C. increased. D. decreased.

C. increased

Consider the demand for cigarettes. Suppose the government decreases the price of cigarettes by lowering cigarette taxes. How will this affect the demand for cigarettes over​ time? If the price of cigarettes decreases​, then the quantity of cigarettes demanded will A. increase​, but this effect will likely become smaller​ (in absolute​ value) over time. B. increase​, and this effect will likely remain constant over time. C. increase​, and this effect will likely become larger​ (in absolute​ value) over time. D. likely never change either initially or over time. E. decrease​, and this effect will likely become larger​ (in absolute​ value) over time.

C. increase​, and this effect will likely become larger​ (in absolute​ value) over time.

Economists reason that the optimal decision is to continue any activity up to the point where the A. marginal benefit is greater than the marginal cost. B. marginal benefit is zero. C. marginal benefit equals the marginal cost. D. marginal cost is zero.

C. marginal benefit equals the marginal cost.

Compare the demand for pencils with demand for gasoline. The demand for pencils is likely A. more elastic because pencils tend to be purchased in larger quantities. B. more elastic because pencils tend to represent a larger fraction of a​ consumer's budget. C. more inelastic because pencils tend to represent a smaller fraction of a​ consumer's budget. D. more elastic because pencils tend to represent a smaller fraction of a​ consumer's budget. E. more inelastic because pencils tend to be purchased more frequently.

C. more inelastic because pencils tend to represent a smaller fraction of a​ consumer's budget.

The​ highest-valued alternative that must be given up to engage in an activity is the definition of A. economic equity. B. marginal benefit. C. opportunity cost. D. marginal cost.

C. opportunity cost

Suppose the U.S. government encouraged new medical school graduates to take over existing practices from doctors wishing to retire by paying both the new and retiring doctors​ $100,000. These doctors would be exemplifying the economic idea that A. optimal decisions are made at the margin. B. people are rational. C. people respond to economic incentives. Your answer is correct. D. equity is more important than efficiency.

C. people respond to economic incentives. Your answer is correct.

Consider a Lacoste shirt. Is the consumption of Lacoste shirts rival and excludable? The consumption of Lacoste shirts is A. rival and nonexcludable. B. ​quasi-rival and​ quasi-excludable. C. rival and excludable. D. nonrival and excludable. E. nonrival and nonexcludable.

C. rival and excludable.

As discussed in the article entitled​ "Dealers and Buyers Are Both Worried Cars Are Too​ Expensive," one reason why the price of sedans did not fall from​ 2020-2022 was because A. the wages paid to employees of U.S. automobile manufactorers fell. B. U.S. automobile manufactorers expected the price of sedans to rise in 2023 so they withheld production in 2022 causing prices to rise​ or, at​ least, not fall. C. sedans and SUVs are substitutes in production and the profitability of producing SUVs rose. D. sedans and SUVs are substitutes in production and the profitability of producing SUVs fell. E. sedans and SUVs are substitutes in production and the prices of SUVs fell.

C. sedans and SUVs are substitutes in production and the profitability of producing SUVs rose.

The distinction between substitutes and complements is A. when income​ increases, demand for a complementary good decreases while demand for a substitute good increases. B. when income​ increases, demand for a substitute good increases while demand for a complementary good falls. C. substitute goods are used for the same purposes while complementary goods are used together. D. substitute goods are used together while complementary goods are used for the same purposes.

C. substitute goods are used for the same purposes while complementary goods are used together.

The production possibilities frontiers depicted in the diagram to the right illustrate A. increases in both the labor force and capital stock. B. technological advances in the automobile industry. C. technological advances in the tank industry. D. technological advances in both the tank and automobile industries.

C. technological advances in the tank industry.

Suppose the current equilibrium price of cheese pizzas is ​$10.00​, and 10 million pizzas are sold per month. After the federal government imposes a ​$3.00 per pizza​ tax, the equilibrium price of pizzas rises to ​$12.00​, and the equilibrium quantity falls to 8 million. Compare the economic surplus in this market when there is no tax to when there is a tax on pizza. With the​ tax, the change in economic surplus is A. the deadweight loss equal to the area under the demand curve and above the supply curve for the quantity with the tax. B. the new surplus equal to the area under the demand curve and above the supply curve for units between the quantity with the tax and market equilibrium quantity. C. the deadweight loss equal to the area under the demand curve and above the supply curve for units between the quantity with the tax and market equilibrium quantity. D. the new surplus equal to the area under the demand curve and above the supply curve for the market equilibrium quantity. New government revenue with the tax can be represented by A. the area of a rectangle with a height equal to the difference in the equilibrium price and the tax and a base equal to the quantity sold. B. the area of the triangle above the supply curve and below the equilibrium price. C. the area of a rectangle with a height equal to the tax and a base equal to the quantity sold. D. the area of a rectangle with a height equal to the equilibrium price and a base equal to the quantity sold.

C. the deadweight loss equal to the area under the demand curve and above the supply curve for units between the quantity with the tax and market equilibrium quantity. C. the area of a rectangle with a height equal to the tax and a base equal to the quantity sold.

Which of the following is a primary determinant of the price elasticity of supply​? The price elasticity of supply is affected by A. the definition of the market. B. whether the good produced is a luxury or a necessity. C. the passage of time. D. the share of the good in consumer budgets. E. whether the good produced has close substitutes available. In​ particular, the supply curve for a particular product will be increasingly more inelastic over a ___ period of time.

C. the passage of time. shorter

Over the past 30​ years, the price of oil has been relatively​ unstable, fluctuating between​ $11.00 and well over​ $100 per barrel. Which of the following potentially contributes to​ oil-price instability? Oil prices are relatively unstable because A. the income elasticity of demand for oil is negative. B. the demand for oil is elastic. C. the supply of oil is inelastic. D. the market for oil is relatively competitive. E. OPEC has been successful in controlling the quantity of oil its members supply.

C. the supply of oil is inelastic.

Economic surplus in a market is the sum of​ _____ surplus and​ _____ surplus. In a competitive​ market, with many buyers and sellers and no government​ restrictions, economic surplus is at a​ _____ when the market is in​ _____. A. ​consumer; producer;​ maximum; disequilibrium B. ​consumer; government;​ maximum; equilibrium C. ​consumer; producer;​ maximum; equilibrium D. ​consumer; producer;​ minimum; equilibrium

C. ​consumer; producer;​ maximum; equilibrium

Consumer and producer surplus measure the​ _____ benefit rather than the​ _____ benefit. A. ​subjective; objective B. ​total; net C. ​net; total D. ​marginal; additional

C. ​net; total

The supply of organic food increases due to a fall in production costs. This will shift the supply curve for organic foods to the​ _______. After this​ shift, the amount by which the price of organic food​ _______ will be larger the more​ _______ the demand for organic food. A. ​ left; falls, inelastic B. ​right; rises, elastic C. ​right; falls, inelastic D. ​left; falls, elastic

C. ​right; falls, inelastic

____ surplus is the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. This component of economic surplus is illustrated in the diagram by area ___

Consumer A

From the PPFs shown above it can be determined that the opportunity cost of oil is lower in ____. Given the comparative opportunity costs as revealed by the PPFs shown​ above, the comparative advantage for country B lies in ____. After these two countries specialize and trade with each​ other, country A will be importing ____

Country A corn corn

In the diagram to the​ right, illustrating a​ per-unit tax equal to P2 minus P3​, tax revenue is represented by the areas ___ and the excess burden of the tax is represented by areas ___

D and F E and G

In the diagram to the​ right, illustrating a​ per-unit tax equal to P2 minus P3​, tax revenue is represented by the areas ___ and the excess burden of the tax is represented by areas ___.

D and F E and G

Refer to the diagram to the right. The sales tax revenue collected by the government is represented by the area A. E+H. B. F+G. C. B+C. D. B+C+F+G.

D. B+C+F+G.

How is the price elasticity of demand​ measured? The price elasticity of demand is measured as A. the slope of the demand curve. B. the quantity demanded divided by price. C. the change in price divided by the change in the quantity demanded. D. the percentage change in the quantity demanded divided by the percentage change in price. E. the percentage change in the quantity demanded divided by the percentage change in the quantity supplied.

D. the percentage change in the quantity demanded divided by the percentage change in price.

The Coffee​ Nook, a small cafe near​ campus, sells cappuccinos for​ $2.50 and Russian tea cakes for​ $1.00 each. What is the opportunity cost of buying a​ cappuccino? A. [2/5]th of a Russian tea cake B. ​$2.50 C. ​$1.00 D. 2 1/2 Russian tea cakes

D. 2 1/2 Russian tea cakes

The figure to the right shows the production possibilities frontier for​ Vidalia, a nation that produces two​ goods, roses and orchids. What is the opportunity cost of 80 dozen​ orchids? A. 0 roses B. 2.5 dozen roses C. 40 dozen roses D. 200 dozen roses

D. 200 dozen roses

Suppose a​ consumer's income increased from​ $27,500 to​ $32,500 and their demand increase from 100 units to 200​ units; using the​ mid-point formula, the income elasticity is equal​ to: A. 4.00 and this good is an inferior good B. 0.25 and this good is a normal good C. 0.25 and this good is an inferior good D. 4.00 and this good is a normal good

D. 4.00 and this good is a normal good

According to the law of​ supply, A. there is a positive relationship between price and quantity supplied. B. as the price of a product​ increases, firms will supply less of it to the market. C. as the price of a product​ increases, firms will supply more of it to the market. D. A and C only

D. A and C only

Which of the following would cause a shift in the demand curve from point A to point​ B? A. An increase in income​ (normal good). B. An increase in the price of a substitute good. C. A decrease in income​ (inferior good). D. All of the above.

D. All of the above

Refer to the graph. When​ 15,000 cups of tea are produced and consumed per​ month, which of the following is​ true? A. The sum of consumer and producer surplus is maximized. B. The level of output is economically efficient. C. The marginal benefit to buyers of the last cup of tea is equal to the marginal cost of producing the last cup of tea. D. All of the above are true.

D. All of the above are true.

Alzania produces and consumes​ 500,000 tons of cotton during a year. Reports indicate that​ Alzania's neighbor, which also employs the same number of people in the cotton​ industry, consumed​ 400,000 tons of cotton. This led industry experts to believe that Alzania had an absolute advantage in the production of cotton over its neighbor. Which of the​ following, if​ true, could weaken this​ view? A. Workers in Alzania have higher productivity due to better education and training. B. Alzania is a closed economy. C. The cotton industry in Alzania is heavily regulated by the government. D. ​Alzania's neighbor exported half its production of cotton that year. E. ​Alzania's neighbor has been producing cotton longer than Alzania.

D. Alzania's neighbor exported half its production of cotton that year.

An editorial in the New York Times argued that​ "the single best way to slow global warming is to put a price on greenhouse gas emissions from fossil​ fuels." ​Source: Editorial​ Board, "Best Way to Fight Climate​ Change? Put an Honest Price on​ Carbon," New York Times​, October​ 29, 2018. a. How would it be possible to put a price on greenhouse gas​ emissions? Don't utilities and other firms that emit greenhouse gases automatically pay a​ price, without the government​ intervening? Briefly explain. A. Firms automatically pay a price when they emit greenhouse gases because the external cost of the emissions upsets the​ firms' customers who react by reducing their demand for the​ firms' products. The resulting fall in product prices is the price of greenhouse gas emissions. B. Firms do not automatically pay a price when they emit greenhouse gases because they have the property right to pollute.​ Consequently, it is not possible to charge the firms for the external cost of these gases. C. Firms automatically pay a price when they emit greenhouse gases because they are harmed by the emissions in the same way that society is harmed. The external cost of these gases is therefore the price of greenhouse gas emissions. D. Firms do not automatically pay a price when they emit greenhouse gases because those harmed do not have a property right that would enable them to charge the firms for the external cost of these gases. A carbon tax is one way to put a price on greenhouse gas emissions. b. How would putting a price on greenhouse gas emissions slow global​ warming? A. By increasing the price of fossil​ fuels, the use of which generates emissions of greenhouse​ gases, a carbon tax would reduce their consumption and slow global warming. B. Putting a price on greenhouse gas emissions would reduce the use of products that cause​ pollution, but would not affect the concentration of greenhouse gases in the atmosphere and so have no effect on global warming. C. Putting a price on greenhouse gas emissions would raise the costs of production for all​ products, push the economy into​ recession, lower​ emissions, and slow global warming. D. Since there is no evidence that greenhouse gas emissions are linked to global​ warming, putting a price on them would be unnecessary and ineffective.

D. Firms do not automatically pay a price when they emit greenhouse gases because those harmed do not have a property right that would enable them to charge the firms for the external cost of these gases. A carbon tax is one way to put a price on greenhouse gas emissions. B. By increasing the price of fossil​ fuels, the use of which generates emissions of greenhouse​ gases, a carbon tax would reduce their consumption and slow global warming.

Suppose that France and Germany both produce wine and cheese. The table below shows combinations of the goods that each country can produce in a day. Who has the comparative advantage in producing wine and who has the comparative advantage in producing​ cheese? A. France has a comparative advantage producing wine and cheese. B. Germany has a comparative advantage producing wine and cheese. C. France has a comparative advantage producing cheese and Germany has a comparative advantage producing wine. D. France has a comparative advantage producing wine and Germany has a comparative advantage producing cheese. E. Neither has a comparative advantage producing wine or cheese. Suppose that France is currently producing 1 bottle of wine and 12 pounds of cheese and Germany is currently producing 3 bottles of wine and 10 pounds of cheese. ​ Then, assume instead that France and Germany specialize by producing only the good for which they have a comparative advantage and then trade 3 bottles of wine for 14 pounds of cheese. After specialization and​ trade, France gains by consuming the same amount of wine and ___ additional​ pound(s) of cheese ​(enter a numeric response using an​ integer) and Germany gains by consuming the same amount of wine and ___ additional​ pound(s) of cheese.

D. France has a comparative advantage producing wine and Germany has a comparative advantage producing cheese. 2, 1

The table above shows the number of labor hours required to produce a motorcycle and a guitar in Ireland and Scotland. If the two countries specialize and​ trade, who should export​ guitars? A. Scotland B. There is no basis for trade between the two countries. C. They should both be exporting guitars. D. Ireland

D. Ireland

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls A. economics. B. rationality. C. the market. D. scarcity.

D. Scarcity

The three economic questions that every society must answer are A. What economic system will be​ used, how will it be​ implemented, and who will make market​ decisions? B. What kind of government will the society​ have, how will it be​ run, and who will run​ it? C. What are the prices of​ goods, how are they​ determined, and who will pay for​ them? D. What goods will be​ produced, how will they be​ produced, and who will receive the​ goods? Centrally planned economies allocate resources based on decisions by ____​, while market economies answer these questions through decisions made by ____.

D. What goods will be​ produced, how will they be​ produced, and who will receive the​ goods? govenment households and firms

The diagram in panel a is an example of A. the substitution effect. B. a demand curve. C. the income effect. D. a demand schedule.

D. a demand schedule

Economic efficiency is A. a market outcome in which the marginal benefit to consumers of the last unit produced is greater than its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum. B. a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is not at a maximum. C. a government outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum. D. a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.

D. a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.

Consider the consumption of national defense. What type of good is national defense​? National defense is A. an externality. B. a quasi−public good. C. a private good. D. a public good. E. a common resource.

D. a public good

Consider the following​ statements: a. Car owners purchase more gasoline from a gas station that sells gasoline at a lower price than other rival gas stations in the area. b. Banks do not take steps to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring equipment. c. Firms produce more of a particular DVD when its selling price rises. Which of the above statements demonstrates that economic agents respond to​ incentives? A. a only B. b only C. c only D. ​a, b,and c

D. a, b, and c

The revenue received from the sale of​ ________ of a product is a marginal benefit to the firm. A. the total number of units B. only profitable units C. no units D. an additional unit

D. an additional unit

Increasing opportunity cost is represented by a​ ________ production possibilities frontier. A. vertical B. linear C. bowed in D. bowed out

D. bowed out

The government proposes a tax on imported champagne. Buyers will bear the entire burden of the tax if the A. demand curve for imported champagne is horizontal. B. supply curve for imported champagne is vertical. C. demand curve is downward sloping and the supply curve is upward sloping. D. demand curve for imported champagne is vertical.

D. demand curve for imported champagne is vertical.

Suppose the figure to the right illustrates the marginal cost and marginal benefit from reducing sulfur dioxide pollution. How could the government use a command-and-control approach to reduce pollution to the optimal level for​ society? The government could A. reduce transaction costs to encourage private solutions to the problems associated with sulfur dioxide pollution. B. tax each ton of sulfur dioxide pollution. C. subsidize each ton of sulfur dioxide pollution. D. limit sulfur dioxide pollution to a particular quantity per year. E. prohibit sulfur dioxide pollution entirely. Suppose the government requires each firm to reduce sulfur dioxide emissions by an equal amount such that total emissions are reduced by 10.0 million tons per year. Is this approach necessarily economically​ efficient? This​ command-and-control approach A. is efficient because each firm is reducing pollution by the same amount. B. is efficient because it does not require the government to know the​ firms' cost of reducing pollution. C. is efficient because reducing sulfur dioxide pollution by 10.0 million tons per year is where the marginal cost and marginal benefit of pollution reduction are equal. D. is not efficient because some firms may still be generating pollution. E. is not efficient because firms can have different costs of reducing pollution.

D. limit sulfur dioxide pollution to a particular quantity per year. E. is not efficient because firms can have different costs of reducing pollution.

The slope of a production possibilities frontier A. is always varying. B. is always constant. C. has no economic relevance or meaning. D. measures the opportunity cost of producing one more unit of a good.

D. measures the opportunity cost of producing one more unit of a good.

Compared to a command and control government approach to reducing​ pollution, a​ market-based system of tradable pollution allowances​ is: A. more efficient because polluters have the same cost of reducing pollution. B. more efficient because the bulk of the pollution reduction is carried out by those who pollute the most. C. less efficient because every polluter must reduce pollution by the same amount. D. more efficient because polluters that can only reduce pollution at high cost do not and instead buy allowances. E. less efficient because pollution allowances are​ "licenses to​ pollute."

D. more efficient because polluters that can only reduce pollution at high cost do not and instead buy allowances.

In order to be​ binding, a price ceiling A. must lie above the free market equilibrium price. B. must be high enough for firms to earn a profit. C. must coincide with the free market equilibrium price. D. must lie below the free market equilibrium price.

D. must lie below the free market equilibrium price.

Compare the demand for water with the demand for wine. The demand for wine is likely A. relatively more inelastic because wine is a necessity. B. equally elastic as the demand for water. C. relatively more elastic because wine is a necessity. D. relatively more elastic because wine is a luxury. E. relatively more inelastic because wine is a luxury.

D. relatively more elastic because wine is a luxury.

Tax incidence is A. the actual division of the burden of a tax between buyers and government in a market. B. the potential division of the burden of a tax between buyers and government in a market. C. the potential division of the burden of a tax between buyers and sellers in a market. D. the actual division of the burden of a tax between buyers and sellers in a market.

D. the actual division of the burden of a tax between buyers and sellers in a market.

Suppose a common resource—wood in a public forest—is being overused because residents consider the benefits of gaining firewood or wood for building but do not account for the cost of deforestation when chopping down trees. What could be done to prevent wood in the forest from being​ overused? To prevent overuse of the common​ resource, A. the government could subsidize chopping down trees. B. the government could make a binding commitment to keep the forest lands public. C. the community could create transaction costs to private bargaining. D. the government could impose restrictions on access to wood in the forest. E. the community could establish social customs prohibiting the use of permits required to chop down trees.

D. the government could impose restrictions on access to wood in the forest.

Prepping for a​ next-day exam over the course of an evening​ (and possibly into the wee hours of test​ day) poses increasing costs since A. studying productivity declines sharply as the effort extends through the evening. B. evenings are a less productive time to study compared to daylight hours. C. tutors charge higher rates after 7 p.m. D. the longer you choose to study will result in an increase in the number and value of foregone activities.

D. the longer you choose to study will result in an increase in the number and value of foregone activities.

When the federal government crafts environmental policies that make it less expensive for firms to follow green​ initiatives, A. pollution is likely to increase. B. the policies are likely to be more successful than policies that cost firms​ more, but they do not recognize economic incentives. C. the policies are futile because where the environment is​ concerned, it has been repeatedly shown that firms do not respond to economic incentives. D. the policies are consistent with economic incentives.

D. the policies are consistent with economic incentives.

How do externalities affect​ markets? If a positive externality in consumption is present in a​ market, then A. the private cost of production will be equal to the private benefit from consumption. B. the private cost of production will be different than the social cost of production. C. consumer and producer surplus will be maximized. D. the private benefit from consumption will be different than the social benefit from consumption. E. the social cost of production will be equal to the social benefit from consumption.

D. the private benefit from consumption will be different than the social benefit from consumption.

Based on the articles​ entitled, "Thailand has no Easy Options to Pay for Rice​ Subsidy" and​ "Asia's Rice Glut Expected to​ Worsen," what would best explain the reason for the ballooning​ (or increasing) expense of​ Thailand's costly rice​ program: A. the cost to produce rice is falling. B. the demand curve for rice is expanding. C. the demand curve of rice becomes more elastic with time. D. the supply curve of rice becomes more elastic with time

D. the supply curve of rice becomes more elastic with time

​DeShawn's Detailing is a service that details cars at the​ customers' homes or places of work.​ DeShawn's cost for a basic detailing package is​ $40, and he charges​ $75 for this service. For a total price of​ $90, DeShawn will also detail the​ car's engine, a service that adds an additional​ $20 to the total cost of the package. Should DeShawn continue to offer the engine detailing​ service? A. ​yes, but only if he raises the price of the basic detailing package B. More information is needed for DeShawn to make this decision. C. ​yes, he still makes a profit by selling the engine detailing service with the basic detailing package D. ​no, his marginal benefit is less than his marginal cost

D. ​no, his marginal benefit is less than his marginal cost

Consider the two demand curves illustrated in the figure. Which of the two is relatively more elastic​? ___ is more elastic.

D1

How can a country gain from specialization and​ trade? A. A country can specialize in producing that for which it has an absolute advantage and then trade for other needed goods and services. B. A country can specialize in producing that which is most scarce and then trade for other needed goods and services. C. A country can specialize by using all available resources to invest in capital goods to promote economic growth. D. A country can specialize by using all available resources to produce goods and services to avoid trading with other countries. E. A country can specialize in producing that for which it has a comparative advantage and then trade for other needed goods and services.

E. A country can specialize in producing that for which it has a comparative advantage and then trade for other needed goods and services.

Suppose a study shows that the demand for Nike shoes is more elastic than the demand for all shoes. What could be a likely explanation for​ this? The demand for Nike shoes could be more elastic than the demand for all shoes because A. Nike shoes are less costly. B. Nike shoes are more broadly defined. C. Nike shoes are consumed over a shorter period of time. D. Nike shoes are more of a necessity. E. Nike shoes have more close substitutes.

E. Nike shoes have more close substitutes.

As described in the article entitled​ "What Happened When the U.S. Got Rid of Guest​ Workers? Farms Used Less​ Labor," in 1964 the Johnson administration terminated the​ "bracero" program that previously allowed nearly one half million seasonal farm workers per year in the United States. This termination of the program had the economic effect of A. increasing the overall output in California​ (and other states with the heaviest concentration of​ braceros) as the supply of goods increased​ (as costs were​ falling) B. decreasing the wage rates for unskilled labor in California​ (and other states with the heaviest concentration of ​braceros). C. decreasing the total income paid to unskilled U.S. workers in California​ (and other states with the heaviest concentration of​ braceros) reflecting an inelastic demand for unskilled labor. D. altering production processes as employers hired more workers and used less​ capital/equipment. E. decreasing the total income paid to unskilled U.S. workers in California​ (and other states with the heaviest concentration of​ braceros) reflecting an elastic demand for unskilled labor.

E. decreasing the total income paid to unskilled U.S. workers in California​ (and other states with the heaviest concentration of​ braceros) reflecting an elastic demand for unskilled labor.

The incidence of a tax depends on whether the government collects the tax from buyers or sellers. True False

False

A small town provides a fireworks​ display, which is a public​ good, every fourth of July. For​ simplicity, assume the town only has two​ residents: Hayden and Madison. Their demands for the fireworks display are illustrated in the figure to the right. Construct the market demand curve for this public good. Use the line drawing tool to draw the market demand curve ​(DMarket​) for the fireworks display. Properly label this line. Carefully follow the instructions​ above, and only draw the required objects.

Line goes from (2, 8.00) to (14, 3.50)

_____ surplus is the difference between the lowest price a firm would be willing to accept and the price it actually receives. This component of economic surplus is illustrated in the diagram by area ___.

Producer B

Using the same amount of​ resources, the United States and Canada can both produce lumberjack shirts and lumberjack​ boots, as shown in the production possibilities frontiers in the figure to the right. ____ has a comparative advantage in producing lumberjack boots. ____ has a comparative advantage in producing lumberjack shirts. Does either country have an absolute advantage in producing both​ goods? A. Neither country has an absolute advantage in both goods because the United States can produce more boots but Canada can produce more shirts. B. Canada has an absolute advantage in both goods because it can produce more boots and more shirts. C. The United States has an absolute advantage in both goods because it can produce more boots and more shirts. D. Both countries have an absolute advantage in both goods because they both produce boots and shirts. E. Neither country has an absolute advantage in both goods because Canada can produce more boots but the United States can produce more shirts. Suppose initially that the United States is consuming 12 boots and 4 shirts and Canada is consuming 2 boots and 12 ​shirts, as indicated in the figure. ​ Then, suppose the United States and Canada specialize by each only producing the good for which they have a comparative advantage and then trade. In​ particular, suppose the United States trades Canada half of its production for half of what Canada produces. The United States will have ___ additional​ shirt(s) after the trade ​(enter a numeric response using an​ integer) and ___ additional​ boot(s). At the same​ time, Canada will be able to consume ___ additional​ shirt(s) as a result of the trade and ___ additional​ boot(s).

The United States Canada A. Neither country has an absolute advantage in both goods because the United States can produce more boots but Canada can produce more shirts. 8, 6 0, 16

Suppose the United States and Mexico both produce hamburgers and tacos. The combinations of the two goods that each country can produce in one day are presented in the table below. Which country has an absolute advantage in producing​ tacos? Which country has a comparative advantage in producing​ tacos? Suppose the United States is currently producing 100 tons of hamburgers and 30 tons of tacos and Mexico is currently producing 20 tons of hamburgers and 25 tons of tacos. If the United States and Mexico each specialize in producing only one good​ (the good for which each has a comparative​ advantage), then a total of ____ additional​ ton(s) of hamburgers can be produced for the two countries combined ​(enter a numeric response using an​ integer) and a total of ____ additional​ ton(s) of tacos can be produced..

The United States Mexico 30, 20

If it costs Sinclair​ $300 to produce 3 suede jackets and​ $420 to produce 4 suede​ jackets, then the difference of​ $120 is the marginal cost of producing the 4th suede jacket. True False

True

Using the same amount of​ resources, the United States and Canada can both produce lumberjack shirts and lumberjack​ boots, as shown in the production possibilities frontiers in the figure to the right. _____ has a comparative advantage in producing lumberjack boots. _____ has a comparative advantage in producing lumberjack shirts. Does either country have an absolute advantage in producing both​ goods? A. Both countries have an absolute advantage in both goods because they both produce boots and shirts. B. Neither country has an absolute advantage in both goods because Canada can produce more boots but the United States can produce more shirts. C. The United States has an absolute advantage in both goods because it can produce more boots and more shirts. D. Neither country has an absolute advantage in both goods because the United States can produce more boots but Canada can produce more shirts. Suppose initially that the United States is consuming 12 boots and 2 shirts and Canada is consuming 2 boots and 12 ​shirts, as indicated in the figure. ​ Then, suppose the United States and Canada specialize by each only producing the good for which they have a comparative advantage and then trade. In​ particular, suppose the United States trades Canada half of its production for half of what Canada produces. The United States will have ___ additional​ shirt(s) after the trade ​(enter a numeric response using an​ integer) and ___additional​ boot(s). Part 8 At the same​ time, Canada will be able to consume ____ additional​ shirt(s) as a result of the trade and ____ additional​ boot(s).

United States Canada D. Neither country has an absolute advantage in both goods because the United States can produce more boots but Canada can produce more shirts. 10, 0 0, 10

In the​ diagram, when supply decreases​, ____ develops at the original price. Equilibrium price will ____ and equilibrium quantity will ____ as a new equilibrium is established.

a shortage rise fall

The figure to the right illustrates the U.S. market for rugs made in a particular foreign country. Suppose the market price of rugs is ​$1,750. At a price of ​$1,750​, there will be ____ of rugs. To reach an​ equilibrium, the price of rugs in this market must ____.

a surplus fall

In the diagram to the​ right, when demand decreases​, ____ develops at the original price. Equilibrium price will ____ and equilibrium quantity will ____as a new equilibrium is established.

a surplus fall fall

in the diagram to the right, when demand decreases, ____ develops at the original price. Equilibrium price will ____ and equilibrium quantity will ____ as a new equilibrium is established.

a surplus fall fall

Following below are four graphs and four market​ scenarios, each of which would cause either a movement along the supply curve for premium bottled water or a shift of the supply curve. Match each scenario with the appropriate diagram. a. A decrease in the supply of sports​ drinks: ____ b. A drop in the average household income in the United States from​ $56,000 to​ $52,000: ____ c. An improvement in the bottling technology for premium bottled​ water:____ d. An increase in the prices of electrolytes used in premium bottled​ water:____

a. 4 b. 3 c. 2 d. 1

Suppose that your local police department recovers 100 tickets to a big NASCAR race in a drug raid. It decides to distribute these to residents and announces that tickets will be given away at 10 A.M. Monday morning at City Hall. Suppose that your college decides to give away​ 1,000 tickets to the football game against your​ school's biggest rival. The athletic department elects to distribute the tickets by giving them away to the first​ 1,000 students who show up at the​ department's office at 10 a.m. the following Monday. a. The groups of people that are most likely to get the tickets will be those for whom the expected marginal ____ of going to the​ department's office on Monday morning are greater than the expected marginal ____. b. What is the actual cost and also the opportunity cost of distributing the tickets this​ way? A. The activities that cannot be done​ (such as earning money at​ work) when one is standing in line. B. The cost of travel to the​ department's office. C. The cost of people blocking traffic in and around the​ department's office building. D. All of the above. E. A and B only. c. Productive efficiency occurs when a good or service​ (such as the distribution of​ tickets) is produced at the lowest possible cost. Is this an efficient way to distribute the​ tickets? d. This is A. not an equitable way to distribute the tickets because some students who really want them may be unable to go and get them. B. an equitable way to distribute the tickets because everyone has an equal chance of getting a ticket. C. not an equitable way to distribute the tickets because there may be enough tickets for faculty and staff. D. an equitable way to distribute the tickets because the students who really want them will be able to go and get them.

a. benefits, costs b. D - all of the above c. No d. A - not an equitable way to distribute the tickets because some students who really want them may be unable to go and get them.

A student makes the following​ argument: A price floor reduces the amount of a product that consumers buy because it keeps the price above the competitive market equilibrium. A price​ ceiling, on the other​ hand, increases the amount of the product that consumers buy because it keeps the price below the competitive market equilibrium. Do you agree with the​ student's reasoning? To address​ this, first, determine a binding price floor and a binding price ceiling. A binding price floor will be ___ the equilibrium price. A binding price ceiling will be ___ the equilibrium price. A price ceiling A. increases the amount of the product that consumers buy because it lowers the price. B. increases the amount of the product that consumers buy because it creates a surplus. C. does not increase the amount of the product that consumers buy because it creates a surplus. D. does not increase the amount of the product that consumers buy because it creates a shortage. E. both a and b.

above below D. does not increase the amount of the product that consumers buy because it creates a shortage.

Suppose a new recreational neighborhood park would cost​ $20,000, including opportunity​ costs, to construct and maintain. If​ built, the park would be a public good. For​ simplicity, assume the neighborhood park would be used by three​ families, each of whom would derive a marginal benefit equivalent to​ $8,000 from the park. Should the neighborhood park be​ built? It would ____ for the park to be built. If left to the private​ market, without private bargaining or government​ intervention, would the park be​ built? Without private bargaining or government​ intervention, the park ____ be built.

be optimal would not

A market is a group of _____ of a good or service and the institution or arrangement by which they come together to trade.

buyers and sellers

Societies organize their economies in two main ways to answer the three questions of​ what, how, and who. A society can have a ____ economy in which the government decides how economic resources will be allocated. Or a society can have a ____ economy in which the decisions of households and firms interacting in markets allocate economic resources.

centrally planned, market

MIT economist Jerry Hausman has estimated the price elasticity of demand for Post Raisin Bran cereal to be −2.5 and the price elasticity of demand for all types of breakfast cereals to be −0.9. The demand for Post Raisin Bran cereal is ___​, and the demand for all types of breakfast cereals is ___. Why might the demand for Post Raisin Bran cereal be more elastic than the demand for all types of breakfast​ cereals? Post Raisin Bran cereal A. is defined more narrowly. B. is a smaller share of a​ consumer's budget. C. is consumed over a shorter period of time. D. is more of a necessity. E. has fewer substitutes available.

elastic inelastic A. is defined more narrowly.

MIT economist Jerry Hausman has estimated the price elasticity of demand for Post Raisin Bran cereal to be −2.5 and the price elasticity of demand for all types of breakfast cereals to be −0.9. The demand for Post Raisin Bran cereal is ___​, and the demand for all types of breakfast cereals is ___. Why might the demand for Post Raisin Bran cereal be more elastic than the demand for all types of breakfast​ cereals? Post Raisin Bran cereal A. is more of a necessity. B. is consumed over a shorter period of time. C. is defined more broadly. D. is a smaller share of a​ consumer's budget. E. has more substitutes available.

elastic inelastic E. has more substitutes available.

Optimal decisions are made at the point where marginal cost equals zero. True False

false

Using the graph to the​ right, explain why economic surplus would be smaller if Q1 or Q3 were the quantity produced than if Q2 is the quantity produced. Economic surplus at Q1 would be smaller than at Q2 because if Q1 units of output were​ produced, then some units for which marginal benefit is ____ marginal cost would ___ produced. Economic surplus at Q3 would be smaller than at Q2 because if Q3 units were​ produced, then some units for which marginal cost is ____ marginal benefit would ___ produced.

greater than, not be greater than, be

Between 1950 and​ 2017, the price of wheat fell dramatically from​ $19.23 per bushel to​ $3.85 per bushel. Suppose between 1950 and​ 2017, the supply of wheat increased substantially due to increases in​ productivity, shifting the wheat supply curve to the right. With this supply​ shift, the amount by which the price of wheat falls will be larger the more ____ the demand for wheat. In​ addition, assume that between 1950 and 2017 the income of the average American increased substantially and that wheat is a normal good. With this increase in​ income, A. the amount by which the price of wheat rises will be smaller the lower the income elasticity of wheat. B. the amount by which the price of wheat falls will be smaller the higher the income elasticity of wheat. C. the amount by which the price of wheat falls will be larger the higher the income elasticity of wheat. D. the price of wheat will be unaffected. E. the amount by which the price of wheat rises will be smaller the higher the income elasticity of wheat.

inelastic A. the amount by which the price of wheat rises will be smaller the lower the income elasticity of wheat.

In the​ diagram, marginal benefit ____ marginal cost at output level Q2. This output level is considered economically ____.

is equal to efficient

A price ceiling is a legally determined ____ price that sellers may charge. A price floor is a legally determined ____ price that sellers may receive.

maximum minimum

Consider the market for dams along a river​, illustrated in the figure to the​ right, where S1 is marginal private cost and D1 is marginal private benefit. Dams are an example of a ____. Suppose that the consumption of dams along a river generates a positive externality of ​$100 per unit. If​ so, then according to the​ figure, the optimal quantity of dams along a river for society is ___ units. ​(Enter your response as an​ integer.)

public good 7

A large corporation that runs nursing homes estimates that changes to Medicare will result in lower payments by Medicare to nursing homes for​ short-term stays by patients that require therapy or care upon leaving hospitals. Assume the corporation is considering expanding the number of​ "beds" it offers at its nursing homes. Given the changes to​ Medicare, if the marginal benefit of offering an additional bed is ​$3,000 and the marginal cost is ​$5,000 per​ bed, then the corporation _____ offer additional beds.

should not

Suppose the price of pepper increases by 10 percent​ and, as a​ result, the quantity of salt demanded​ (holding the price of salt ​constant) increases by 1 percent. The​ cross-price elasticity of demand between pepper and salt is . 1.1. ​(Enter your response rounded to two decimal places and include a minus sign if​ appropriate.) In this​ example, pepper and salt are ___ ​Instead, suppose pepper and salt were complements. If​ so, then the​ cross-price elasticity of demand between pepper and salt would be A. negative. B. positive. C. greater than −1. D. greater than 1. E. zero.

substitutes A. negative.

Economist X. M. Gao and two colleagues have estimated that the​ cross-price elasticity of demand between beer and spirits is 0.15. If​ so, then beer and spirits are ___. Gao and colleagues have estimated that the​ cross-price elasticity of demand between beer and wine is 0.31. If the price of wine increases by 10​ percent, then the quantity of beer demanded will ____ by ___ percent. ​(Enter your response rounded to one decimal​ place.) In​ addition, Gao and colleagues have estimated the income elasticity of demand for beer to be −0.09. If​ so, then beer is A. a normal good that is a necessity. B. an inferior good. C. a normal good that may be a luxury or a necessity. D. a luxury that may be a normal good or an inferior good. E. a normal good that is a luxury.

substitutes increase 3.1 B. an inferior good

Suppose the figure to the right illustrates the market for toilet​ paper, where S1 represents the marginal private cost of production and D1 represents the marginal private benefit from consumption. Companies that produce toilet paper bleach the paper to make it white. Some paper plants discharge the bleach into rivers and​ lakes, causing substantial environmental damage. Assume that S2 represents the marginal social cost of producing toilet paper​ (incorporating the​ externality). What could the government do to internalize the​ externality? In the presence of a negative​ externality, the government could ___ toilet paper production. In​ particular, the government should set a Pigovian tax of ​$____ per ton of toilet paper produced.

tax $225

Suppose the figure to the right illustrates the market for toilet​ paper, where S1 represents the marginal private cost of production and D1 represents the marginal private benefit from consumption. Companies that produce toilet paper bleach the paper to make it white. Some paper plants discharge the bleach into rivers and​ lakes, causing substantial environmental damage. Assume that S2 represents the marginal social cost of producing toilet paper​ (incorporating the​ externality). What could the government do to internalize the​ externality? In the presence of a negative​ externality, the government could ___ toilet paper production. In​ particular, the government should set a Pigovian tax. of ​$____ per ton of toilet paper produced.

tax $225