Econ 2020 final practice questions

The price elasticity of supply along a typical supply curve is

higher at low levels of quantity supplied and lower at high levels of quantity supplied

When the price of a good or service changes,

there is a movement along a given demand curve

A production possibilities frontier can shift outward if

there is a technological improvement

Taxes cause deadweight losses because they

All of the above

An increase in quantity demanded

results in a movement downward and to the right along a demand curve

To fully understand how taxes affect economic well-being, we must compare the

reduced welfare of buyers and sellers to the revenue raised by the government

Total revenue

remains unchanged as price increases when demand is unit elastic

The market demand curve

represents the sum of the quantities demanded by all the buyers at each price of the good

The market supply curve

represents the sum of the quantities supplied by all the sellers at each price of the good

A supply curve can be used to measure producer surplus because it reflects

sellers' costs

Rent control

serves as an example of a price ceiling

Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10 percent of their land, then

wheat farmers would experience an increase in their total revenue

Price controls are usually enacted

when policymakers believe that the market price of a good or service is unfair to buyers or sellers

A decrease in supply will cause the largest increase in price when

both supply and demand are inelastic

The forces that make market economies work are

supply and demand

A tax on an imported good is called a

tariff

Suppose the United States has a comparative advantage over Mexico in producing pork. The principle of comparative advantage asserts that

the United States should produce more pork than what it requires and export some of it to Mexico

Producer surplus is

the amount a seller is paid minus the cost of production

The term tax incidence refers to

the distribution of the tax burden between buyers and sellers

Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is

the enjoyment she would have received had she gone to the park

If a price ceiling is not binding, then

the equilibrium price is below the price ceiling

A binding price ceiling (i)causes a surplus.(ii)causes a shortage.(iii)is set at a price above the equilibrium price.(iv)is set at a price below the equilibrium price.

(ii) and (iv) only

When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about

0.67

A price floor is

All of the above

Suppose Susan can wash three windows per hour or she can iron six shirts per hour. Paul can wash two windows per hour or he can iron five shirts per hour.

All of the above

The incidence of a tax falls more heavily on

All of the above

Total surplus

All of the above

Which of the following statements about the price elasticity of demand is correct?

All of the above

Which of the following tools and concepts is useful in the analysis of international trade

All of the above

Which of the following steps does an economist take when studying the economy?

All of the above (devise theories, collect data, analyze data)

Producer surplus equals

Amount received by sellers - Costs of sellers

In the circular-flow diagram, firms produce

Both (a) and (b) are correct

A rightward shift of a supply curve is called a(n)

increase in supply

Assume Leo buys coffee beans in a competitive market. It follows that

Leo cannot influence the price of coffee beans even if he buys a large quantity of them

Which of the Ten Principles of Economics does welfare economics explain more fully?

Markets are usually a good way to organize economic activity

President Truman once said he wanted to find a one-armed economist because when he asked his economists for advice, they always answered, "On the one hand, ... On the other hand, ..." Truman's observation that economists' advice is not always straightforward

More than one of the above is correct

In a competitive market, the price of a product

None of the above

An increase in the size of a tax is most likely to increase tax revenue in a market with

inelastic demand and inelastic supply

Which of the following is not one of the four principles of individual decision making?

Trade can make everyone better off

When can two countries gain from trading two goods?

Two countries could gain from trading two goods under all of the above conditions

Absolute advantage is found by comparing different producers'

input requirements per unit of output

An outcome that can result from either a price ceiling or a price floor is

a nonbinding price control

A demand curve reflects each of the following except the

ability of buyers to obtain the quantity they desire

When studying how some event or policy affects a market, elasticity provides information on the

magnitude of the effect on the market

A binding minimum wage

alters both the quantity demanded and quantity supplied of labor

Which of the following would shift the demand curve for gasoline to the right?

an increase in consumer income, assuming gasoline is a normal good

Economic models

are simplifications of reality, and in this respect economic models are no different from other scientific models

The price elasticities of supply and demand affect

both the size of the deadweight loss from a tax and the tax incidence

Consumer surplus

measures the benefit buyers receive from participating in a market

Economic models

can be useful, even if they are not particularly realistic

The most obvious benefit of specialization and trade is that they allow us to

consume more goods than we otherwise would be able to consume

A movement upward and to the left along a demand curve is called a(n)

decrease in quantity demanded

An increase in the price of a good will

decrease quantity demanded

If the government removes a tax on a good, then the price paid by buyers will

decrease, and the price received by sellers will increase

When the supply of a good decreases and the demand for the good remains unchanged, consumer surplus

decreases

Which of the following events must cause equilibrium quantity to fall?

demand and supply both decrease

A tax levied on the buyers of a good shifts the

demand curve downward (or to the left)

The production possibilities frontier provides an illustration of the principle that

people face trade-offs

The adage, "There is no such thing as a free lunch," is used to illustrate the principle that

people face tradeoffs

The term price takers refers to buyers and sellers in

perfectly competitive markets

Normative statements are

prescriptive, whereas positive statements are descriptive

The minimum wage is an example of a

price floor

Which of the following will cause no change in producer surplus?

the imposition of a nonbinding price ceiling in the market

The bowed shape of the production possibilities frontier can be explained by the fact that

the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing

A production possibilities frontier is a straight line when

the rate of tradeoff between the two goods being produced is constant

When a tax is imposed on the buyers of a good, the demand curve shifts

downward by the amount of the tax

The unique point at which the supply and demand curves intersect is called

equilibrium

When a tax is imposed on a good, the

equilibrium quantity of the good always decreases

The law of demand states that, other things equal, when the price of a good

falls, the quantity demanded of the good rises