ECON final

When economists make normative statements, they are: a.) speaking as scientists b.) speaking as policy advisers c.) making claims about how the world is d.) making claims that can be either confirmed or refuted

b

Consider the market for Coca-Cola. Which of the following events will increase the equilibrium quantity of Coca-Cola produced? a.) wages rise for workers at Coca-Cola b.) buyers expect that the price of Coca-Cola will fall in the near future c.) the price of Pepsi increases, and Pepsi is a substitute for Coca-Cola d.) incomes rise, and Coca-Cola is an inferior good

c

If the price elasticity of supply is 1.5, what price increase would lead to a 10% increase in quantity supplied? a.) 15% price increase b.) 10% price increase c.) 5% price increase d.) 6.67% price increase

d

As the demand curve gets steeper (more vertical), a.) demand becomes more price inelastic and the price elasticity of demand approaches zero b.) demand becomes more price elastic and the price elasticity of demand approaches zero c.) demand becomes more price inelastic and the price elasticity of demand approaches negative infinity d.) demand becomes more price elastic and the price elasticity of demand approaches negative infinity

a

Assume that your roommate is very messy. According to campus policy, you have the right to a clutter-free apartment, which means your roommate does not have a right to be messy. Suppose your roommate gets a $500 benefit from being messy and a messy apartment imposes a $300 cost on you. In this situation, the Coase theorem would suggest that an efficient solution would be for: a.) your roommate to pay you $400, and in exchange you allow him/her to be messy b.) your roommate to be messy without any payment c.) your roommate to pay you $200 and in exchange you allow him/her to be messy d.) you to pay your roommate $200 to clean up after him/herself e.) you to pay your roommate $400 to clean up after him/herself

a

In the circular-flow diagram, a.) firms are buyers in the markets for factors of production and sellers in the markets for goods and services b.) households receive money in the market for goods and services c.) dollars that are spent in the market for factors of production flow from households to firms d.) firms buy goods and services from households

a

In the long run, when increasing output increases a firm's average total costs, the firm faces: a.) diseconomies of scale b.) constant returns to scale c.) economies of scale

a

Suppose that demand for cars is inelastic at the current price. If a car company decides to raise it's price, a.) this would increase total revenue for the car company b.) this would not change total revenue at all for the car company c.) this would decrease total revenue for the car company

a

Total surplus in a market is equal to: a.) consumer surplus + producer surplus b.) willingness to pay - price c.) value to buyers - amount paid by buyers d.) amount received by sellers - costs of sellers

a

What does it mean to say an allocation of resources is Pareto efficient? a.) It must be impossible to make at least one person better off by reallocating resources without making someone else worse off b.) it must be possible to make at least one person better off by reallocating resources without making someone else worse off c.) it means everyone must be satisfied with the distribution of resources d.) it means resources are equally distributed

a

Which of the following is not a characteristic of a perfectly competitive market? a.) firms have market power b.) all sellers produce identical goods c.) firms have free entry and exit in the market in the long run d.) there are many sellers in the market

a

Which of the following might cause the supply curve for a good to shift to the left? a.) an increase in input prices b.) a decrease in consumer income c.) an improvement I production technology that makes production of the good cheaper d.) an increase in the number of sellers in the market

a

With a positive externality, a.) the total benefit to society (social benefit) is greater than the private benefit b.) the private cost is greater than the total cost to society (social cost) c.) the total cost to society (social cost) is greater than the private cost d.) the private benefit is greater than the total benefit to society (social benefit)

a

A monopolist produces: a.) a less than the socially efficient quantity of output and at a lower price than in a competitive market b.) less than the socially efficient quantity of output and at a higher price than in a competitive market c.) more than the socially efficient quantity of output and at a higher price than in a competitive market d.) the socially efficient quantity of output and at a higher price than in a competitive market

b

Consider a production possibilities frontier where the two goods are swords and ankle bracelets. The PPF is bowed outward when: a.) the more resources the economy uses to produce swords, the fewer resources it has available to produce ankle bracelets b.) the opportunity cost of increasing the production of swords changes based on how many swords are being produced c.) an economy is self-sufficient does not trade with other economies d.) the opportunity cost of increasing the production of swords is constantC

b

Consider the market for Ramen noodles, which are an inferior good. A general increase in incomes will: a.) increase the quantity of Ramen noodles demanded b.) decrease demand for Ramen noodles c.) decrease the quantity of Ramen noodles demanded d.) increase demand for Ramen noodles

b

Consider the market for oranges. If the number of orange sellers increases and the price of apples falls (assuming apples and oranges are substitutes), what will be the change in equilibrium price and quantity? a.) equilibrium price will increase. It is not clear whether equilibrium quantity will increase or decrease b.) equilibrium price will decrease. it is not clear whether equilibrium quantity will increase or decrease c.) equilibrium quantity will increase. it is not clear whether equilibrium price will increase or decrease d.) equilibrium quantity will decrease. it is not clear whether equilibrium price will increase or decrease

b

Public goods are ________ and common resources are __________. a.) excludable and nonrival in consumption; not excludable and nonrival in consumption b.) no excludable and nonrival in consumption; not excludable and rival in consumption c.) not excludable and rival in consumption; excludable and nonrival in consumption d.) not excludable and rival in consumption; not excludable and nonrival in consumption

b

The Tragedy of the Commons for sheep grazing on common land can be eliminated by the gov. doing each of the following except: a.) auctioning off sheep-grazing permits b.) subsidizing sheep flocks c.) assigning land property rights d.) taxing sheep flocks

b

Which of the following is an example of a market-based policy? a.) establishing a minimum drinking age of 21 b.) levying a tax on mercury emissions c..) requiring all cars to have catalytic converters d.) setting a minimum pollution limit for each electric utility

b

Which of the following is an example of a normative, as opposed to positive, statement? a.) college graduates, on average, make $2000 more per year than individuals without a college degree b.) more money should be spent on primary education in NC c.) it is currently raining outside d.) improving air quality reduces days missed from school due to asthma

b

Which of the following statements is false? a.) firms are more likely to avoid the Prisoner's Dilemma and successfully collude if they are able to use the threat of punishment for parties that cheat b.) Oligopoly markets must have large barriers to entry and differentiated products c.) the Price Leadership model applies to markets with one large firm and several smaller firms d.) collusion is difficult to maintain because firms have an incentive to cheat on their deal, but if everyone cheats the collusion cfalls apart

b

A decrease in the price of high-powered staple guns will: a.) decrease the quantity of high-powered staple guns demanded b.) increase demand for high-powered staple guns c.) increase the quantity of high-powered staple guns demanded d.) decrease demand for high-powered staple guns

c

For which of the following goods is the income elasticity of demand likely negative? a.) fresh fruit b.) sapphire pendant necklaces c.) thrift store clothing d.) water

c

Paul has the opportunity to buy traditional wind damage insurance and wind damage index insurance. Traditional wind damage insurance pays Paul if Paul's house is damaged by winds. Wind damage index insurance pays Paul if wind speeds exceed 100 mph, regardless of whether his house is damaged. Which of the following statements is true? a.) traditional insurance suffers from moral hazard and index insurance suffers from adverse selection b.) both types of insurance suffer from moral hazard, but only traditional insurance suffers from adverse selection c.) index insurance suffer from moral hazard, but only traditional insurance suffers from adverse selection d.) any time traditional insurance would pay Paul, index insurance would also pay Paul

c

Which of the following events would cause an increase in the supply of ceiling fans? a.) the number of sellers of ceiling fans decrease b.) there is an increase in the price of air conditioners, and consumers regard air conditioners and ceiling fans as substitutes c.) there is a decrease in the price of the motor that powers ceiling fans d.) all of the above will cause an increase in the supply of ceiling fans

c

Which of the following is an example of adverse selection? a.) once Paul buys car insurance, he begins taking more risks driving b.) an owner of a Toyota Prius would rather sell his car for a higher price than a lower price c.) a farer with a low quality apple orchard is more likely to sell his land for a given price than a farmer with a productive apple orchard d.) universities are more likely to admit students when their family members make large contributions

c

Which of the following will not shift the supply curve for cat food? a.) input prices rise b.) the number of sellers in the car food market increases c.) the price of cat food rises d.) all of the above will shift the supply curve for cat food

c

Which of these statements best represents the law of demand? a.) when buyers' tastes for a good increase, they purchase more of the good b.) when income levels increase, buyers purchase more of most goods c.) when the price of a good increases, buyers purchase less of the good d.) when the price of a good increases, buyers purchase more of the good

c

A good is excludable if: a.) the gov. can regulate it's availability b.) people cannot be prevented from using it c) one person's use of the good diminishes or eliminates another person's ability to use it d.) people can be prevented from using it

d

Paula loves economics and hates engineering. Stanley loves engineering and hates economics. Consider the following allocations: i. Paula gets a book on economics, Stanley gets a book on engineering ii. Paula gets a book on engineering, Stanley gets a book on economics iii. Paula gets both books, Stanley gets neither book iv. Paula gets neither book, Stanley gets both books How many of the above allocation are Pareto efficient? a.) 0 b.) 1 c.) 2 d.) 3 e.) 4

d

When a negative externality is internalized, what will happen to the market price and quantity? a.) the equilibrium price will decrease and the equilibrium quantity will decrease b.) the equilibrium price will increase and the equilibrium quantity will increase c.) the equilibrium price will decrease and the equilibrium quantity will increase d.) the equilibrium price will increase and the equilibrium quantity will decrease

d

Which of the following steps does not lessen or eliminate the problem of moral hazard? a.) the use of copays and deductibles in insurance plans b.) using index insurance instead of traditional insurance c.) with car insurance, developing a plan that does not pay out if the insured was engaging in risky behaviors (ex.texting while driving) d.) with health insurance, collecting more information on the insured (ex.blood pressure and medical history) so that plan premiums can vary by person

d

A monopolistically competitive market and an oligopoly market both have a.) many producers b.) a small number of producers c.) no barriers to entry d.) large barriers to entry e.) firms with market power, meaning they are not price takers f.) firms without market power, meaning they are price takers

e

Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L=47, Q=297) and (L=48, Q=303). Then the marginal product of the 48th worker is: a.) 297 units output b.) 54 units output c.) 8 units output d.) 303 units output e.) 6 units output

e

Which of the following statements is true? a.) if there is excess demand at the current price, the price will fall as it moves to equilibrium b.) if there is excess supply at the current price, the price will fall as it moves to equilibrium c.) when the price is set above equilibrium, there will be excess supply in the market d.) excess supply is the same thing as a shortage, and excess demand is the same thing as a surplus e.) a & c f.) b & c g.) b & d h.) b, c, & d i.) a, c, & d

f