Econ 231 final review

Consider an economy that is producing inside its production possibilities curve. This economy could move closer toward its production possibilities curve by

Employing more of its available resources

The domestic opportunity cost of producing a television in the United States is 20 bushels of wheat. In Korea, the domestic opportunity cost of producing a television is 10 bushels of wheat. In this case:

Germany has a comparative advantage in the production of chemicals

Which of the following statements is not correct?

In the range of prices in which demand is elastic, total revenue will diminish as price decreases.

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the:

Income effect

Chuck Grim has a price elasticity of demand for beer of 1.2. Suppose that the price of beer is increased by 10 percent. What will happen to the total amount Chuck spends on beer?

It will decrease

Suppose that the price of product X rises by 20 percent and the quantity supplied of X increases by 15 percent. The coefficient of price elasticity of supply for good x is:

Less than 1 and therefore supply is inelastic

Suppose that a 20% increase in the price of normal good Y causes a 10 percent decline in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is:

Negative and therefore these goods are complements

You are the newly appointed sales manager of the Rock Computer Tablets Company and have been charged with the task of increasing revenues. Your economics consultants have informed you that at present price and output levels, price elasticity of demand for your product is less than one. You should:

increase prices

Indy currently earns $50,000 in taxable income and pays $8000 in taxes. Suppose that Indy faces a marginal tax rate of 25 percent and his boss offers him a raise of $2000 per year. Indy should:

reject the raise because his after-tax income will fall by $6000

A tax structure is called progressive when:

the average tax rate decreases if income decreases

Alex, Kara, and Susie are the only three people in a community and Alex is willing to pay $20 for the fifth unit of a public good; Kara, $15; and Susie, $25. Government should produce the fifth unit of the public good if the marginal cost is less than or equal to:

$60

Which of the following is another way of saying "marginal benefits of an action"?

Additional benefits resulting from the action

A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from $5 to $4. it was also found that total revenue decreased when the price was raised from $5 to $6. Thus,

The demand for pizza is elastic above $5 and inelastic below $5

In a market where negative externalities are associated with consumption and/or production, the equilibrium will not be efficient because

Too many resources will be allocated towards producing the good

In which of the following statements are the terms "demand" and Quantity demanded" used correctly?

When the price of ice cream rose, the quantity demanded of ice cream fell, and the demand for ice cream toppings fell

Suppose the income elasticity of demand for toys is +2.00. This means that:

a 10 percent increase in income will increase the purchase of toys by 20 percent

The basic purpose of the other-things-equal assumption is to

allow one to reason about the relationship between variables X and Y without the intrusion of variable z

The larger the positive cross elasticity coefficient of demand between products x and Y the:

greater their sustainability

The primary gain from International trade is

more goods than would be attainable through domestic production alone.

If one person's consumption of a good does not preclude another's consumption, the good is said to be:

nonrival in consumption