econ midterm #2

Marginal utility theory assumes that when Sally consume less of a good that she was previously consuming more than one unit of, her ________. A) total utility increases B) marginal utility increases C) income increases D) total utility is maximized

B

A person's consumption possibilities is defined by the budget line because A) it marks the boundary between what is affordable and unaffordable. B) it represents the individual's preference for different combinations of goods. C) it marks the boundary between what can be produced and what is unattainable given the current state of technology and resources. D) all consumers must consume on their budget line.

A

A price ceiling ________. A) makes it illegal to charge a higher price than the specified price B) is more effective when it is higher C) is necessary to maintain market equilibrium D) occurs in housing markets only

A

Based on the table, what is the marginal social benefit from the 45th slice of pizza? A) $3.50 B) $3.25 C) $0.50 D) $9

A

Economists using marginal utility theory assume that consumers' objectives are to A) maximize their total utility. B) maximize their marginal utility. C) maximize their income. D) none of the above

A

Given the data in the above table, income of $13, a price of $1 for a bottle of water and $2 for a hamburger, what is the quantity of water and the quantity of hamburgers that will maximize the consumer's total utility? A) 5 bottles of water and 4 hamburgers B) 4 bottles of water and 4 hamburgers C) 1 bottle of water and 6 hamburgers D) 6 bottles of water and 6 hamburgers

A

In the United States, resources are most often allocated by A) market price. B) command system. C) lottery. D) contest.

A

In the figure above, what is the marginal social benefit of the 3,000,000th CD per month? A) $11.00 per CD B) $8.00 per CD C) $6.00 per CD D) None of the above answers is correct.

A

In the figure, A) marginal social cost equals marginal social benefit when 300,000 purses are produced. B) 500,000 purses should be sold for $50 each for an efficient outcome. C) it is impossible to determine the efficient quantity of purses. D) None of the above answers is correct.

A

Robinson spends all his income on mangos and bananas. Mangos cost $3 per pound and bananas cost $1 per pound. The marginal utility is 30 for the last pound of mangos purchased and 8 for the last pound of bananas. To maximize his utility, Robinson should buy A) more mangos and fewer bananas. B) more bananas and fewer mangos. C) the present combination of goods. D) only bananas.

A

Suppose the world price of a good is $4. Based on the table below, the country would Price Q Demanded Q Supplied 2 100 70 4 95 75 6 90 80 8 85 85 10 80 90 12 75 95 A) import 20 units. B) export 20 units. C) import 10 units. D) export 10 units.

A

Suppose that the country of Pacifica imposes a quota on bananas. The reason that the government imposed this trade restriction could be A) that the government of Pacifica needs to increase its revenue. B) lobbying from banana farmers in Pacifica. C) comparative advantage. D) Both answers A and B are correct.

B

The United States has a comparative advantage and specialize in the production of airplanes. Compared to the situation with no trade, which of the following will occur? A) More airplanes will be produced in the United States. B) There will be no change in the price of airplanes in the United States. C) The world price of airplanes will increase. D) The quantity of airplanes demanded in the United States will increase.

A

The United States has a comparative advantage in producing cotton if the U.S. price of cotton before international trade is ________ the world price A) less than B) equal to C) greater than D) not comparable to

A

The figure illustrates the market for haircuts. Curve A is the ________ curve, and curve B is the ________ curve. A) marginal social cost; marginal social benefit B) total social cost; total social benefit C) opportunity cost; opportunity benefit D) marginal social benefit; marginal social cost

A

The figure shows the market for shirts in the United States, where D is the U.S demand curve and S is the U.S. supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt. In the figure above, the U.S. government's revenue from the tariff is ________. A) $64 million B) $32 million C) $128 million D) $48 million

A

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. In the figure above, with international trade the United States ________ million shirts per year. A) imports 32 B) imports 48 C) exports 16 D) exports 32

A

The government imposes a sales tax on hot dogs. The tax would be paid entirely by the hot dog buyers if the A) supply is perfectly elastic. B) supply is perfectly inelastic. C) demand is perfectly elastic. D) None of the above answers is correct.

A

The market demand curve is constructed by adding the A) quantities demanded by each individual at each price. B) prices that each individual is willing to pay at each quantity. C) Neither answer A nor answer B is correct. D) Both answer A and answer B are correct.

A

The market for unskilled labor is illustrated in the figure above. The market is in equilibrium and then a minimum wage of $3 per hour is imposed. Employment will decrease by A) 0 hours. B) 10 million hours per year. C) 20 million hours per year. D) 30 million hours per year.

A

The minimum supply-price is the same as A) marginal cost. B) market price. C) producer surplus. D) profit.

A

The table gives the total utility that Homer obtains from consuming various quantities of chocolate chip cookies. The marginal utility from the fifth pound of cookies is A) 1. B) 2. C) 3. D) 15.

A

Using the table, Fred's marginal cost of the 200th slice of pizza is A) $2.50. B) $6. C) $0.50. D) $20.

A

When scarce resources can serve only one user at a time in sequence, which method works well for allocating the scarce resources? A) first come, first served B) lottery C) contest D) command system

A

"I really enjoy watching movies. The first one is best. After that I still enjoy movies but the last one is not as much fun to watch as the one before it." This statement reflects the A) principle of diminishing total utility. B) principle of diminishing marginal utility. C) principle of increasing marginal utility. D) law of supply.

B

If a government imposes a quota on imports of a popular doll, the price of the doll in the country will ________ and the quantity purchased in the country will ________. A) rise; increase B) rise; decrease C) fall; increase D) fall; decrease

B

If the United States imposes a tariff on imported cars, the A) U.S. demand curve shifts rightward. B) the price in the United States rises but neither the U.S. demand curve nor the U.S. supply curve shift. C) U.S. supply curve shifts rightward. D) U.S. demand curve shifts leftward.

B

In the above figure, the price paid by the buyer before the tax is ________ per compact disc, and the price paid by the buyer after the tax is ________ per compact disc. A) $20; $20 B) $20; $30 C) $30; $20 D) $30; $30

B

In the figure above, when production is 3 units with a price of $3, the producer surplus in this market equals A) b + g. B) f + g. C) a + b + f + g. D) a + b + f + g + h + i.

B

In the recent years, prices of basic food commodities such as corn, rice, and wheat have increased sharply. A recent article in the Wall Street Journal states that Chinese authorities are concerned that escalating prices will cause inflation and be followed by civil unrest. (Source: Wall Street Journal, February 20, 2011) Suppose the Chinese government regulates the price of food and forbids firms from setting a higher price. In this case the government is setting a A) price floor. B) price ceiling. C) quota. D) tax.

B

In the table above, the market is in equilibrium. Then a minimum wage is set at $11 per hour. The number of unemployed workers will be A) 0. B) 2 million. C) 4 million. D) 6 million.

B

Jill and Jed have individual demand curves for tennis rackets given in the table above and are the only two demanders in the market. What is the market quantity demanded at the price of $30? A) 2 B) 5 C) 11 D) 18

B

Joshua consumes only apples and bread and is in consumer equilibrium. Joshua reads that eating bread is healthy, so his total utility from each loaf of bread increases. At his new consumer equilibrium Joshua would consume A) more apples and less bread. B) fewer apples and more bread. C) some combination of apples and bread corresponding to a lower ratio of the marginal utility of bread to the marginal utility of apples. D) the same quantity of apples and the same quantity of bread.

B

Lisa spends all her income on pizzas and DVDs. The above table shows Lisa's marginal utility for pizza and marginal utility for DVDs. If the price of a pizza is $10, the price of a DVD is $5, and Lisa has $40 to spend on the two goods, what combination of pizza and DVDs will maximize her utility? A) 6 DVDs and 1 pizza B) 4 DVDs and 2 pizzas C) 2 DVDs and 3 pizzas D) 5 DVDs and 4 pizzas

B

The above figure shows the labor market in an undeveloped nation. If the minimum wage is set at $5.00 per hour, what effect will it have on the market for low-skilled labor? A) The minimum wage will have no effect when set above the equilibrium wage rate. B) The minimum wage will create a surplus of low-skilled labor. C) The minimum wage will create a shortage of low-skilled labor. D) The minimum wage will attract more labor to the low-skilled labor market and cause the wage rate to fall.

B

The above table gives some of Tammy's total and marginal utilities from comedy videos. Which of the following statements is true? A) Tammy's marginal utility from the third comedy video is equal to 580/3. B) Tammy's total utility from five comedy videos is 800. C) Tammy's marginal utility from the first comedy video is less than her marginal utility from the third comedy video. D) None of the above answers are correct.

B

The figure above shows the demand for and supply of labor of students in Smallville. If the minimum wage is set at $6 per hour, how many hours do students work? A) 12,000 hours B) 9,000 hours C) 6,000 hours D) None of the above answers is correct.

B

The figure above shows the market for milk in Cowland. If a subsidy paid to producers of $1 per gallon of milk is introduced, what is the price that consumers pay? A) $3.00 a gallon B) between $3.00 and $4.00 per gallon C) $4.00 a gallon D) between $4.00 and $5.00 per gallon

B

The figure tells us about the market for red roses. The consumer surplus is ________ a day. A) $800 B) $200 C) $1,000 D) $20

B

The schedules in the table give the marginal social benefit and marginal social cost of a DVD. If there are no external benefits or external costs, the efficient number of DVDs to produce is ________ a week. A) 1 B) 3 C) 5 D) any number less than 3

B

Underproduction of good ________ create a deadweight loss and overproduction of a good ________ create a deadweight loss. A) will; will not B) will; will C) will not; will D) will not; will not

B

Which of the statements about the gains from international trade is correct? A) Everyone gains from international trade. B) Some people gain from international trade and some lose, though overall the gains exceed the losses. C) Some people gain from international trade and some lose; overall the gains exceed the losses. D) Everyone loses from international trade.

B

A key difference between tariffs and quotas is that A) consumers are hurt with quotas but not with tariffs. B) consumers are hurt with tariffs but not with quotas. C) the government receives revenue with tariffs, but the importer receives added profit with quotas. D) the government receives revenue with quotas, but the importer receives added profit with tariffs.

C

A measure of all the satisfaction you receive from all the coffee that you consume is your A) marginal utility of coffee. B) marginal utility per dollar spent on coffee. C) total utility from coffee. D) marginal utility per dollar spent on coffee when you are in your consumer equilibrium.

C

A rent ceiling results in a shortage. As a result, which of the following do you expect? A) A shortage of applicants for the apartments available. B) Discrimination as tenants choose their landlords, possibly based on race, age, or gender. C) A black market for apartments whereby higher rents are obtained through various other charges. D) In the long-run, more and more people will want to become landlords.

C

A tariff is A) a licensing regulation that limits imports. B) a quantitative restriction of imports. C) a tax on an imported good. D) an agreement to restrict the volume of exports.

C

Considering all costs of production, the marginal cost of producing a hot dog is $1.00. The price of a hot dog is $1.50. Thus, the producer surplus from this hot dog is A) $1.50. B) $1.00. C) $.50. D) Zero, because $1.50 is the most anyone would pay for a hot dog.

C

How a sales tax is divided between buyers and sellers is determined by A) the government's choice of whom to tax. B) who the law says must pay the tax. C) the elasticities of supply and demand. D) the revenue needs of government.

C

In the figure above, diminishing marginal utility is shown by A) total utility curve A. B) total utility curve B. C) total utility curve C. D) all three curves.

C

In the figure, the demand curve shifts rightward from D0 to D1 so that D1 is the relevant demand curve. Suppose the government imposes a rent ceiling of $300 per month. In the short run there will be A) a shortage of 500,000 apartments. B) a shortage of 400,000 apartments. C) a shortage of 200,000 apartments. D) no shortage nor a surplus of apartments.

C

Let MUa and MUb stand for the marginal utilities of apples and bagels. Let Pa and Pb stand for their prices. The general necessary condition for consumer equilibrium is A) MUa = MUb. B) MUa = MUb and Pa = Pb. C) MUa/Pa = MUb/Pb. D) MUa/MUb = Pb/Pa.

C

Marginal cost is the A) extra benefit that people receive from producing one more unit of a good or service. B) maximum amount consumers are willing to pay for one more unit of a good or service. C) opportunity cost of producing one more unit of a good or service. D) None of the above answers is correct.

C

Reducing a tariff will ________ the domestic production of the good and ________ the total domestic consumption of the good. A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease

C

Sal likes to eat pizza. The ________ is the maximum amount that Sal is willing to pay for one more piece of pizza. A) efficient price B) efficient amount C) marginal benefit D) marginal cost

C

Some observers opposing free trade argue that when we buy shoes from Brazil, U.S. workers lose their jobs. The fact of the matter is that A) no U.S. worker has actually lost a job because of free trade. B) most jobs lost because of free trade pay less than the poverty level. C) free trade creates jobs in export industries. D) the jobs lost are really in Brazil.

C

The above figure shows the demand and supply curves for housing As a result of a rent ceiling at $500, the deadweight loss is represented by the area A) rectangle feag. B) triangle gfe. C) triangle eca. D) triangle acb.

C

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt. In the figure above, U.S. producers' ________ from the tariff is ________. A) loss; $32 million B) loss; $64 million C) gain; $80 million D) gain; $128 million

C

The producer surplus on a unit of a good is the A) difference between the marginal social benefit and the marginal social cost. B) number of dollars' worth of other goods and services forgone to produce this unit of the good. C) difference between the price of the good and the marginal cost of producing the good. D) difference between the total cost of the good and the marginal cost.

C

The table above gives Jane's total utility from magazines and CDs. What is the marginal utility of the sixth CD? A) 150 units B) 100 units C) 50 units D) 5 units

C

When a sales tax is imposed on sellers, the supply curve shifts so that the vertical distance between the old and the new supply curve equals the A) sales tax multiplied by the price elasticity of demand. B) sales tax multiplied by the price elasticity of supply. C) amount of the sales tax. D) sales tax divided by the price elasticity of demand.

C

When the United States exports a good, U.S. consumer surplus ________ and U.S. total surplus ________. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases

C

When you chose to buy the second cup of coffee instead of the third bagel, which of the following is necessarily correct? A) The second coffee will give you higher marginal utility. B) The second coffee is cheaper than the third bagel. C) The marginal utility per dollar from the third bagel is less than the marginal utility per dollar from the second coffee. D) Both answers A and C are correct.

C

Who benefits from an import quota on a good? A) Domestic consumers of the good B) Foreign governments C) Domestic producers of the good D) Foreign producers of the good

C

A minimum wage ________. A) is a price ceiling in the labor market B) changes the demand for labor. C) is an effective way of increasing employment D) is a price floor in the labor market

D

An import quota is a A) tariff imposed on goods that are dumped in the country. B) law that prevents ecologically damaging goods from being imported into a country. C) market-imposed balancing factor that keeps prices of imports and exports in equilibrium. D) government-imposed restriction on the quantity of a specific good that can be imported.

D

Asian women lag far behind the West in their representation in management level positions. A recent report by the consulting company McKinsey suggests that there is an opportunity for companies to recruit under-utilized female talent and do well financially as a result. (Source: The Economist, July 7, 2012) The fact that Asian women are currently less likely to be hired as managers is a result of the allocation system using which of the following methods for hiring? A) Lottery B) Auction C) First-Come, First-Served D) Personal Characteristics

D

Bianca consumes apples and bananas and is in consumer equilibrium. The marginal utility of the last apple is 10 and the marginal utility of the last banana is 20. If the price of an apple is $0.50, then what is the price of a banana? A) $0.10 B) $0.25 C) $0.50 D) $1.00

D

Dumping occurs when a foreign firm ________. A) pollutes international waters B) disposes of waste materials in other countries C) sells inferior output to foreigners D) sells its exports at a lower price than its cost of production

D

If buyers of illegal goods are punished but sellers are not, then the price ________ and the equilibrium quantity ________. A) rises; increases B) rises; decreases C) falls; increases D) falls; decreases

D

In the above figure, the amount of the tax per unit imposed on the sellers is A) $0.50. B) $1.00. C) $1.50. D) $2.00.

D

Lily has $10 to spend each week on fish and chicken. Fish costs $2 a serving and chicken costs $3 a serving. The table shows Lily's marginal utilities of fish and chicken. Lily will consume ________ servings of chicken and ________ of fish each week. A) 4; 0 B) 1; 3 C) 0; 5 D) 2; 2

D

Making the buying and selling of a good illegal shifts the demand curve ________ and shifts the supply curve ________. A) rightward; rightward B) rightward; leftward C) leftward; rightward D) leftward; leftward

D

Marginal social cost A) is the additional cost to the consumer of consuming another unit of a good. B) is equal to price times quantity sold. C) decreases as more of a good is produced and, hence, is depicted by a downward sloping curve. D) is the opportunity cost of producing one more unit of a good and, hence, is the same as the supply curve.

D

Pam buys only thread and fabric, and she buys the quantities that maximize her utility. Her marginal utility from a spool of thread is 30 units and her marginal utility from a yard of fabric is 60 units. If the price of a spool of thread is $4, then you are sure that the price of a yard of fabric is ________. A) $4 B) $2 C) $12 D) $8

D

Teddy buys only chocolate chip cookies and hot chocolate and spends all of his income on the two items. Suppose the price of a cookie rises. According to marginal utility theory, Teddy will buy A) more cookies and less hot chocolate, which decreases his marginal utility from cookies and increases his marginal utility from hot chocolate. B) more cookies and less hot chocolate, which increases his marginal utility from cookies and decrease his marginal utility from hot chocolate. C) fewer cookies and more hot chocolate, which decreases his marginal utility from cookies and increases his marginal utility from hot chocolate. D) fewer cookies and more hot chocolate, which increases his marginal utility from cookies and decreases his marginal utility from hot chocolate.

D

The above figure shows the apartment rental market in Bigtown. If the Bigtown Housing Authority imposes a rent ceiling of $1,000 per month, the ceiling will A) help all renters. B) help some renters and hurt other renters. C) help all landlords. D) have no effect at all on the Bigtown rental market.

D

The figure illustrates the market for hot dogs on Big Foot Island. The producer surplus is ________. A) $240 an hour B) $180 an hour C) $1.20 a hot dog D) $60 an hour

D

The figure shows the market for books before and after a sales tax is introduced. The tax on books is ________ a book, buyers pay ________ of tax per book, and the government's tax revenue is ________ a week. A) $1.20; $0.80; $128 B) $0.80; $1.20; $12 C) $0.40; $0.40; $4 D) $1.20; $0.80; $12

D

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt. In the figure above, with the tariff the United States imports ________ million shirts per year. A) 24 B) 8 C) 32 D) 16

D

The fundamental force that drives international trade is A) absolute advantage. B) importation duties and tariffs. C) export licenses. D) comparative advantage.

D

The table above gives Jane's total utility from magazines and CDs. The price of a magazine is $4 and the price of a CD is $10. What is the marginal utility per dollar from CDs when the sixth CD is purchased? A) 40 units B) 30 units C) 15 units D) 5 units

D