Econ 2110 Final Review

Japan can make 4 widgets or 12 gadgets in an hour. Britain can make 3 widgets or 6 gadgets in an hour. The cost of one of Japan's widgets is a. 4/3 of one British widgets. b. 12 gadgets. c. 3 gadgets. d. There is not enough information.

c. 3 gadgets.

A firm with market power faces the following demand curve: P: 5, 4, 3, 2, 1 Q: 1, 2, 3, 4, 5 The marginal revenue the firm receives from selling the 4th unit is a. -1 b. 1 c. 2 d. 8 e. 9

a. -1

Which of the following are likely outcomes of a government-mandated (and binding) price floor? a. An increase in price. b. An excess of willing buyers over willing sellers. c. An increase in total surplus d. A fairer distribution of goods e. All of the above

a. An increase in price.

If you raise price from $1.00 to $1.50 and quantity demanded falls from 20 to 15, you know demand for your product is a. Inelastic b. elastic c. unit elastic d. downward sloping, but there is not enough information to calculate elasticity

a. Inelastic

Many conservationists contend that the world is running out of oil. If we are truly depleting our oil supplies, what should be happening to the price of oil? a. The price of oil should be increasing. b. The price of oil should be decreasing, as consumers switch to substitutes. c. The price of oil would not be affected; price depends on demand. d. The effect on price cannot be determined without information on opportunity cost.

a. The price of oil should be increasing.

If a blight kills off three-quarters of the turkey population before Thanksgiving, we would see a. a higher price for turkeys. b. a turkey shortage. c. the quantity of turkeys demanded to exceed the quantity supplied. d. turkeys to become a scarce good. e. All of the above.

a. a higher price for turkeys.

According to MBN, countries differ today in how wealthy they are primarily because a. their natural resources differ. b. their institutions to protect property rights differ. c. their fiscal and monetary policies differ. d. their deficits differ. e. their inflation rates differ.

b. their institutions to protect property rights differ.

If equilibrium price has fallen from $5.50 to $4.75 while equilibrium quantity has also fallen from 100 to 90, we would know that a. demand has decreased. b. supply has increased. c. demand has increased. d. either demand has increased or supply has decreased. e. either supply has increased or demand has decreased.

a. demand has decreased.

Someone who, when confronted by a choice, says "It's simple: do both!" a. doesn't understand opportunity cost. b. is a go-getter. c. is a high demander. d. is an inefficient supplier.

a. doesn't understand opportunity cost.

A 10% increase in the price of coal leads to a 15% decrease in the quantity demanded of coal. Therefore the demand for coal is a. elastic. b. inelastic. c. unit elastic. d. all of the above. e. There is not enough information to determine.

a. elastic.

The costs that influence decisions to supply are always a. marginal costs. b. average costs. c. sunk costs. d. total costs.

a. marginal costs.

A firm with market power faces the following demand curve: P: 5, 4, 3, 2, 1 Q: 1, 2, 3, 4, 5 If the marginal cost of each unit equals 2 (i.e., each unit costs 2 to make), the firm will choose to sell how many units? a. 1 b. 2 c. 3 d. 4 e. 5

b. 2

What kind of line represents the lowest elasticity? a. Horizontal. b. Vertical. c. Increasing Diagonal. d. Decreasing Diagonal.

b. Vertical.

If a new technology lowers the cost of growing wheat, we would expect a. both consumer and producer surplus to decrease. b. both consumer and producer surplus to increase. c. consumer surplus to decrease and producer surplus to increase. d. price to fall, but consumer and producer surplus to be unchanged.

b. both consumer and producer surplus to increase.

A company that brings many patents together under one roof is a. a patent aggregator b. a patent troll c. attempting to increase its market power d. All of the above e. None of the above

d. All of the above

Which of the following is true in the presence of externalities? a. The market price does not reflect the true cost or benefit of the product. b. The market price sends the wrong signal to potential suppliers. c. Inefficiently too much or too little of the good will be produced. d. All of the above. e. None of the above

d. All of the above.

If the supply of turkey increases, what would we expect to happen in the market for chicken (a substitute)? a. The price to rise and quantity to fall. b. The price to fall and quantity to rise. c. Both price and quantity to rise. d. Both price and quantity to fall. e. Price to fall, but the effect on quantity to be uncertain.

d. Both price and quantity to fall.

A major oil spill wipes out a substantial portion of ocean herring at the same time that news reports show that most herring has high mercury content (mercury is harmful to humans). What happens to the equilibrium price and quantity of herring? a. Equilibrium price would increase and quantity would decrease. b. Equilibrium price would decrease and quantity would increase. c. Equilibrium price would decrease but the effect on quantity would be uncertain. d. Equilibrium quantity would decrease but the effect on price would be uncertain. e. Equilibrium quantity would increase but the effect on price would be uncertain.

d. Equilibrium quantity would decrease but the effect on price would be uncertain.

What happens in the market for residential housing when the price of land rises? a. Demand increases. b. Demand decreases. c. Supply increases. d. Supply decreases. e. None of the above.

d. Supply decreases.

Which of the following will increase the quantity of almond butter demanded? a. A rise in the supply of almonds. b. A fall in the price of almonds. c. A fall in the price of almond butter. d. The discovery that almond butter promotes luxuriant hair growth. e. All of the above.

e. All of the above.

A new type of netting increases the productivity of herring fisherman at the same time household income increases (herring is a normal good). What happens to the equilibrium price and quantity of herring? a. Equilibrium price would increase and quantity would decrease. b. Equilibrium price would decrease and quantity would increase. c. Equilibrium price would decrease but the effect on quantity would be uncertain. d. Equilibrium quantity would decrease but the effect on price would be uncertain. e. Equilibrium quantity would increase but the effect on price would be uncertain.

e. Equilibrium quantity would increase but the effect on price would be uncertain.

I notice that the price of one orange is double the price of one apple. In the absence of market failure, I can conclude that a. the marginal orange is valued twice as highly as the marginal apple b. the marginal apple costs half as much to supply as the marginal orange. c. consumers value oranges twice as much as they value apples. d. All of the above. e. Just a and b.

e. Just a and b.

If demand for a product is elastic, then a. supply must be elastic as well. b. supply must be inelastic. c. demand must have increased. d. demand must have decreased. e. None of the above.

e. None of the above.

Movie-goers who are willing to put up with long lines at a cinema to get a lower price a. haven't evaluated the marginal cost of the time they give up b. are not rational c. would give up any amount of time to save a little money d. All of the above. e. None of the above.

e. None of the above.

When both the supply and demand for a good increase, a. equilibrium price may increase, decrease, or remain unchanged. b. equilibrium price will increase if we are dealing with a normal good. c. equilibrium price will increase. d. equilibrium price will decrease.

a. equilibrium price may increase, decrease, or remain unchanged.

Price Quantity Demanded Quantity Supplied $1 10 2 $2 9 3 $3 8 4 $4 7 5 $5 6 6 $6 5 7 The table above provides demand and supply schedules for unicorns. If a unicorn rancher sets price equal to $6, there will be a. excess supply. b. excess demand. c. equilibrium. d. a shortage.

a. excess supply.

I tell the class that I guarantee a B on the final exam no matter what a student scores. Current student John immediately decides to study less, while future student (and well known deadbeat) Al says he will be sure to take my class next year. John's reaction is an example of _______ and Al's reaction is an example of _______. a. moral hazard, adverse selection b. adverse selection, moral hazard c. decreased demand, increased supply d. increased marginal benefits, decreased marginal costs

a. moral hazard, adverse selection

The amount of market power a firm has depends on a. the closeness of substitutes for its product. b. how high it raises its price. c. whether there is asymmetric information. d. whether externalities are positive or negative. e. All of the above.

a. the closeness of substitutes for its product.

Jon needs 200 cases of Cristal champagne to cater a wedding. First, Jon visits all the wine shops located within ten miles, but can't get enough cases. Then Jon visits all wine shops located between 10 and 50 miles, but still is short a few cases. Finally Jon visits all wine shops located within 50 and 100 miles, and gets the last few cases he needs. Jon's struggles illustrate a. the law of supply. b. the law of demand. c. the principal of absolute advantage d. that sometimes the gains from trade aren't worth it

a. the law of supply.

In countries with __________ , the judiciary is a significant check on other branches of government. a. civil law systems b. common law systems c. resource allocation systems d. contract law systems e. property law systems

b. common law systems

Traveling by bicycle from Clemson to New York could be more efficient than flying in an airplane a. if airline ticket prices fall enough. b. if someone enjoys riding a bicycle enough. c. if time off from work is very hard to get. d. under no conceivable circumstances.

b. if someone enjoys riding a bicycle enough.

If a good is a "necessity", demand for that good would tend to be a. elastic b. inelastic c. elastic when price falls; inelastic when it rises d. unit elastic e. horizontal

b. inelastic

Suppose you sell jewelry boxes, and a business consultant you have hired determines that demand for your product is elastic. If you want to increase your total revenue, you should therefore a. raise the price of your jewelry boxes. b. lower the price of your jewelry boxes. c. increase the supply of your jewelry boxes. d. lower your production costs.

b. lower the price of your jewelry boxes.

Japan can make 4 widgets or 12 gadgets in an hour. Britain can make 3 widgets or 6 gadgets in an hour. Both countries could be made better of if Japan a. specializes in widgets. b. specializes in gadgets. c. produces everything itself. d. lets Britain produce everything itself.

b. specializes in gadgets.

Suppose you order lunch at a local restaurant, and the waiter offers to provide you with dinner-sized portions for a small additional charge. To make your decision, you should compare a. the total costs of the larger meal versus the total benefits. b. the additional cost of the larger meal versus the additional benefits. c. the total benefits of the larger meal versus the total benefits of the smaller meal. d. the total costs of the larger meal versus the total costs of the smaller meal.

b. the additional cost of the larger meal versus the additional benefits.

If peanut butter and jelly are complements, as the price of jelly goes up, a. the demand for peanut butter goes up. b. the demand for peanut butter goes down. c. the supply of peanut butter goes up. d. the supply of peanut butter goes down.

b. the demand for peanut butter goes down.

The supply of sisal serapes is less elastic than the supply of jute wraps. As a result, we can conclude that a. the opportunity cost of supplying sisal serapes is greater than the opportunity cost of supplying jute wraps b. the opportunity cost of supplying sisal serapes increases faster than the opportunity cost of supplying jute wraps c. there are closer substitutes for sisal serapes than for jute wraps d. All of the above

b. the opportunity cost of supplying sisal serapes increases faster than the opportunity cost of supplying jute wraps

The price of tin is lower today than fifty years ago, and mining revenues from tin are lower, too. The fact that revenues are lower tell us that a. the fall in tin prices was inefficient b. tin has few close substitutes c. tin supply has decreased d. All of the above

b. tin has few close substitutes

What would happen in the market for orange juice if the prices of both grape juice (a substitute) and oranges fall? a. Equilibrium price would increase and quantity would decrease. b. Equilibrium price would decrease and quantity would increase. c. Equilibrium price would decrease but the effect on quantity would be uncertain. d. Equilibrium quantity would decrease but the effect on price would be uncertain. e. Equilibrium quantity would increase but the effect on price would be uncertain.

c. Equilibrium price would decrease but the effect on quantity would be uncertain.

Cartels were first made illegal in the U.S. under the a. Interstate Commerce Act of 1887 b. Federal Trade Commission Act of 1914 c. Sherman Antitrust Act of 1890 d. Securities Act of 1933 e. Cartels have always been illegal

c. Sherman Antitrust Act of 1890

A political economy explanation for why natural gas companies get tax breaks is a. tax breaks inspire the efficient level of investment. b. there are externalities in natural gas production. c. gas companies care a lot about the tax breaks, and most voters aren't aware of them. d. consumers benefit from natural gas as much as producers do e. at the equilibrium price, surplus is maximized.

c. gas companies care a lot about the tax breaks, and most voters aren't aware of them.

If the short run gasoline supply is more elastic than the short run demand for gasoline, we would expect a 50 cent cut in the gasoline tax to a. reduce the price to consumer by less than 25 cents. b. reduce the price to consumers by exactly 25 cents. c. reduce the price to consumers by more than 25 cents. d. reduce the price to consumers by exactly 50 cents. e. not reduce the price to consumers at all.

c. reduce the price to consumers by more than 25 cents.

Coal-fired steam locomotives become more efficient compared to oil-burning diesel locomotives as a. coal-fired steam locomotives become larger. b. railroad freight rates increase. c. the price of oil increases. d. the price of coal increases

c. the price of oil increases.

Which of the following will increase the demand for almond butter? a. A rise in the supply of almonds. b. A fall in the price of almonds. c. A fall in the price of almond butter. d. The discovery that almond butter promotes luxuriant hair growth. e. All of the above.

d. The discovery that almond butter promotes luxuriant hair growth.

Some welfare programs offer assistance to families only if there is no father present in the home. What effect would you expect such programs to have on the number of two parent, low-income families? a. It is impossible to form any expectation about this situation b. No effect, since family decisions are based primarily on factors much more important than welfare eligibility. c. The number of two-parent, low-income families is likely to rise. d. The number of two-parent, low-income families is likely to fall.

d. The number of two-parent, low-income families is likely to fall.

A decrease in the supply of aluminum bikes (i.e., a shift in the supply curve) could result from a. an increase in the supply of aluminum. b. a decrease in income (aluminum bikes are a normal good). c. a fall in the price of aluminum. d. a rise in the price of aluminum.

d. a rise in the price of aluminum.

Marginal costs are those that a. your activity imposes on someone else. b. are less than the benefits. c. arise from how much an activity is valued. d. arise from a small increase in an activity

d. arise from a small increase in an activity

If equilibrium price has fallen from $5.50 to $4.75, we would know that a. demand has decreased. b. supply has increased. c. demand has increased. d. either supply has increased or demand has decreased. e. either supply has decreased or demand has increased.

d. either supply has increased or demand has decreased.