Econ-MICRO 101

5. Based on the following graph, calculate Consumer Surplus: a) $525.00 b) $530.00 c) $315.00 d) $840.00

a) $525.00

17. A shift in the supply curve can be caused by a) A change in one of the determinants of supply (but not price) b) A change in buyers' incomes c) A change in the price of a good d) A shift in demand curve

a) A change in one of the determinants of supply (but not price)

12. The table presents information about the productivity of digital cameras and personal computers in the United States and Japan. The data are presented in units of output per hour of work. Use this information to answer the question. Japan has a(n) _________ advantage in producing ________. Digital cameras Personal computers Japan 6 3 United States 8 2 a) Absolute, personal computers b) Comparative, digital cameras c) Absolute, digital cameras d) Comparative, digital cameras and personal computers

a) Absolute, personal computers

1. Opportunity cost of a decision is a) Benefits from the best foregone alternative. b) Actual financial cost of a decision. c) The sum of all benefits from all forgone alternatives. d) The difference between the benefits of the first and second best choices.

a) Benefits from the best foregone alternative.

9. Use the figure below of the pork market and assume beef and pork are substitute goods. If the price of beef increases, then a change in the equilibrium point could be? a) C to D b) B to A c) B to C d) D to C

a) C to D

2. Assume that Peru and Chile produce only two goods, Fish and Copper. The maximum amounts that each country can produce in one year using the resources and technology available to them are given in the table below. Table: Production Opportunities Fish Copper Peru 100,000 10,000 Chile 50,000 10,000 Chile has a comparative advantage in producing which good? a) Copper only. b) Fish only. c) Both Fish and Copper. d) Neither Fish nor Copper.

a) Copper only.

27. A point inside the PPF curve indicates a) Inefficiency b) Efficiency c) Equity d) Equilibrium

a) Inefficiency

4. Budweiser is brand name that many people recognize. During the Super Bowl each year, this beer company has many of the most successful ads. Which of the following is true about advertising for Budweiser? a) It is designed to increase demand for Budweiser, but not to increase total beer consumption. b) It decreases the costs of supply Budweiser. c) It guarantees costumers that Budweiser tastes better than other beers. d) It is designed to increase excess capacity.

a) It is designed to increase demand for Budweiser, but not to increase total beer consumption.

21. Define "surplus" a) Quantity supplied > quantity demanded b) Quantity supplied < quantity demanded c) Supply price > demand d) Demand price > Supply

a) Quantity supplied > quantity demanded

7. Scarcity of resource occurs when? a) The quantity of goods and services people want is greater than what available resource can supply. b) There are no opportunity costs of producing goods and services. c) The goods and services available are not wanted by consumers. d) The quantity of goods and services people want is available in unlimited supply.

a) The quantity of goods and services people want is greater than what available resource can supply.

28. How do Economist explain the fact that some people choose to go to college and some people do not? a) College is expensive b) College degrees do not ensure jobs c) Individuals have different opportunity costs d) Education is neither necessary nor sufficient for human capital development

c) Individuals have different opportunity costs

29. Suppose you are able to calculate the accounting cost and opportunity cost of the following investment decisions. Each generates the same return in 5 years. Which investment is the best? a) Invest in stock: Accounting cost $320, opportunity cost $80 b) Invest in bonds: Accounting cost $450, opportunity cost $50 c) Invest in land: Accounting cost $200, opportunity cost $100 d) Invest in dollars: Accounting cost $250, opportunity cost $60

c) Invest in land: Accounting cost $200, opportunity cost $100

3. Consumer Surplus in a Competitive market is: a) The area below the equilibrium price and above the supply curve. b) The difference between what consumers pays for a good and what it costs to produce it. c) The difference between a consumers' willingness to pay for a good and the price they have to pay for the good. d) The discrepancy between the quantity supplied and the quantity demanded at a given price.

c) The difference between a consumers' willingness to pay for a good and the price they have to pay for the good.

30. If government increases the price of a good, a) Consumer surplus rises, producer surplus rises b) Consumer surplus falls, producer surplus falls c) Consumer surplus rises, producer surplus falls d) Consumer surplus falls, producer surplus rises

d) Consumer surplus falls, producer surplus rises

13. If Mary can bake more cakes in one day than Sarah can bake in one day, then a) Sarah should not bake cakes b) Mary has a comparative advantage in baking cakes c) Sarah has a comparative advantage in baking cakes d) Mary has an absolute advantage in baking cakes

d) Mary has an absolute advantage in baking cakes

14. One day, a local theme park charges $40 per person for admission, and 10,000 people visit the park. On another day, the park charges $60 per person, and 20,000 people pay to enter the park. Which explanation best describes why the park sees an increase in attendance when the price is higher? a) Theme-park tickets are part of a rare class of goods which do not follow the Law of Demand. b) The higher price gives the park an incentive to expand capacity and permit more visitors. c) High prices signal a high quality park experience. d) The low-attendance day falls on an autumn Wednesday, while the high-attendance day falls on a summer Saturday.

d) The low-attendance day falls on an autumn Wednesday, while the high-attendance day falls on a summer Saturday.

11. Why is the shape of the production possibilities frontier (PPF) often curved instead of straight? a) Typically, some resources are better suited for producing one good than another, which means that there are diminishing returns when moving such resources away from producing what they are best suited for. b) The productive efficiency of an economy decreases as it moves from left to right along the PPF. c) Because the production possibilities frontier is based on the productive capabilities, and of a nation overall, rather than the productive capacity of an individual. d) To take a potential sunk cost into account, the PPF is curved to distribute the burden of the sunk cost based on allocative efficiency.

a) Typically, some resources are better suited for producing one good than another, which means that there are diminishing returns when moving such resources away from producing what they are best suited for.

20. Which is the best definition of efficiency? a) When nobody can be made better off without making someone worse off b) When the only way somebody can be made better off is by making another better off c) When everybody is as well off as possible d) When somebody can be made better off without making someone worse off

a) When nobody can be made better off without making someone worse off

19. A demand curve touches the vertical axis (price) where price is $9. The equilibrium market price is $4.5. The equilibrium market quantity is 5. What is the value of consumer surplus? a) $4.5 b) $11.25 c) $22.5 d) $45

b) $11.25

8. If an economy currently produces 2 tractors, the opportunity cost of increasing production to 3 tractors is ____ trailers (see table below). Production Possibilities Schedule Tractors 0 1 2 3 4 Trailers 20 18 14 8 0

b) 6

15. Andrew, a college student, loves drinking coffee late at night to study for exams. Having a small income, he is used to buying cheap, bad tasting coffee that he needs to grind and brew himself. The coffee tastes putrid but, with enough cream and sugar, Andrew is able to tolerate it. Occasionally, he does go out to Starbucks when he has spare money. After graduation, Andrew gets a job with big salary. He ends up buying coffee daily from Starbucks even though it costs significantly more. Andrew's demand for Starbucks coffee changed as a result of a) A change in a related good or service b) A change in income c) A change in expectations d) A change in technology

b) A change in income

24. Which statement describes the equity-efficiency trade-off? a) Government intervention can increase efficiency in a market. b) Actions intended to make economic outcomes fairer may cause efficiency to decrease. c) There is always a more equitable outcome that is also more efficient. d) The least efficient economic outcome is the fairest outcome.

b) Actions intended to make economic outcomes fairer may cause efficiency to decrease.

22. For a normal good, if consumer's income increases a) Quantity demanded increases b) Demand increases c) Demand decreases d) Quantity demanded decreases

b) Demand increases

6. In a Perfectly Competitive market for Chocolate Bars, two separate events take place. First, sugar prices increase for producers. Second, consumers become increasingly concerned that junk food consumption is harmful to their health. These two events will result in which of the following? a) There will be an increase in both the equilibrium price and quantity. b) Equilibrium quantity will decrease, but equilibrium price may decrease, increase, or stay the same. c) There will be a decrease in both equilibrium price and quantity. d) Equilibrium quantity will increase, but equilibrium price may decrease, increase, or stay the same.

b) Equilibrium quantity will decrease, but equilibrium price may decrease, increase, or stay the same.

26. The market price of WSU shirts is $25. For the first shirt, Dave is willing to pay $30. For the second shirt, Dave is willing to pay $20. How many shirts will Dave buy at the equilibrium? a) None b) One c) Two d) Cannot be calculated from the information given.

b) One

16. If the price of a kayak increases, a) The supply of kayaks increases b) Sellers offer more kayaks for sale c) Sellers offer fewer kayaks for sale d) The supply of kayaks decreases

b) Sellers offer more kayaks for sale

25. Which of the following is true regarding equity and efficiency in competitive markets? a) Competitive markets ensure equity and efficiency b) There is often trade-off between equity and efficiency c) Competitive markets lead to neither equity nor efficiency d) There is generally agreement about the level of equity and efficiency in a market.

b) There is often trade-off between equity and efficiency

18. Suppose that Michelle buys a cappuccino from Pullman Bakery for $4.75. Michelle was willing to pay up to $6.75 for the cappuccino and Pullman Bakery was willing to accept $1.25 for the cappuccino. Then the total surplus generated from this transaction is, a) $1 b) $4.5 c) $5.5 d) $3.5

c) $5.5

10. A farmer produces both beans and corn on her farm. If she must give up 16 bushels of corn to be able to get 6 bushels of beans, then her opportunity cost of 1 bushel of beans is a) 0.38 bushels of corn b) 16 bushels of corn c) 2.67 bushels of corn d) 2.99 bushels of corn

c) 2.67 bushels of corn

23. For an inferior good, if consumer's income increases a) Quantity demanded increases b) Demand increases c) Demand decreases d) Quantity demanded decreases

c) Demand decreases