Econ Midterm

the price of the good falls

All of the following conditions would cause the demand curve for a good to be more elastic EXCEPT:

$60,000

(Figure: Earned Consumer Surplus) Refer to the figure. The market price of the product is $20 per unit. Calculate the dollar amount of the consumer surplus being earned in this market.

up by $120; elastic

(Figure: Elasticity and Total Revenue) Refer to the figure. If price falls from $60 to $40, total revenue goes ________ so demand is __________.

S4

(Figure: Elasticity of Supply) Refer to the figure. Which supply curve is the most elastic?

8

(Figure: Equilibrium) Refer to the figure. The equilibrium price (in $) is:

$1,000

(Figure: Gains from Trade) Refer to the figure. What are the gains from trade at the free market equilibrium?

$500

(Figure: Gains from Trade) Refer to the figure. What are the unexploited gains from trade at the free market equilibrium? (check answer)

At a price of $6 per unit, consumers are willing and able to purchase 26 units of good X.

(Figure: Good X) From the figure, which statement is TRUE?

excess demand of 4 units.

(Figure: Market Equilibrium) Refer to the figure. At a price of $1, the market is characterized by a(n):

60,000

(Figure: Potatoes) Refer to the figure. According to the demand curve, if the price of potatoes is $8 a pound, how many pounds are demanded?

$240,000

(Figure: Potatoes) Refer to the figure. If the price of potatoes is $8 a pound, what is the consumer surplus received?

A

(Figure: Price Elasticity of Demand) Refer to the figure. Which of the four demand curves has the greatest responsiveness to price changes?

$80

(Figure: Price and Quantity 1) In the diagram, at which price is there a surplus?

$900

(Figure: Price and Quantity 3) The value of wasted resources at a quantity of 80 units in the diagram is:

$12,500

(Figure: Quantity of Good X) Refer to the figure. As the price falls from $200 to $100, consumer surplus changes by:

$10,000

(Figure: Quantity of Good X) Refer to the figure. At a price of $200, consumer surplus is:

Z; Y

(Table: Elasticity Characteristics) The table lists the characteristics of three goods. Good ______ is the most inelastic, and Good _______ is the most elastic.

250

(Table: Equilibrium Quantity) Based on the table, the equilibrium quantity is:

surplus of 10 units

(Table: Equilibrium, Price, Quantity) Refer to the table. If the price in the market was $16, there would be a:

$16

(Table: Equilibrium, Price, Quantity) Refer to the table. If the supply curve for the product shifted to the right such that 10 more units of the good are supplied at every price, what is the new equilibrium price? (check answer)

Supply curve C

(Table: Supply Curve) In the table, which supply curve is most price elastic over the range of prices considered?

increases; increases

A good is considered normal if the demand for it _______ when income ________.

inelastic

A 4 percent increase in the price of beer will cause a 1 percent decline in the quantity of beer demanded. The demand for beer is:

a leftward shift of the demand curve

A decrease in demand refers to:

the combined actions of buyers and sellers

A free market achieves an equilibrium price and quantity due to:

greater than $3

A grocery store is running a "buy-one-get-one-half-off" promotion on a dozen doughnuts. So, the first dozen is $6 and the second would be $3. A person would buy the second dozen if their marginal benefit from the second dozen doughnuts is:

an increase in the demand for rental housing.

A local university decides to double its enrollment over the next five years in order to increase tuition revenue. Which of the following would most likely occur in the market for rental housing in the surrounding community?

horizontal

A perfectly elastic supply curve is:

needs to know the causes of inflation, for example, the government's printing of too much money.

A policymaker wants to reduce inflation. In order to make an intelligent decision about how to do so, the policymaker:

the quantity supplied is less than the quantity demanded

A shortage of a good occurs when:

the lowest cost of production.

Absolute advantage derives from which of the following?

a metaphorical hand that leads individuals to promote social interest by pursuing self-interest

Adam Smith coined the term "invisible hand" to mean

an increase in orange prices and a decrease in orange sales

After a hurricane in Florida destroys half of the orange crop, economists predict:

$21

Alex and Tyler enjoy the food at a restaurant named China Star. Alex values a meal there at $15 and Tyler values it at $26. If the restaurant charges only $10 a meal, what is Alex and Tyler's joint consume surplus from a meal at China Star?

increase

As world coal prices rise due to increasing scarcity and coal-based energy costs rise, the demand for wind energy will:

decrease, shifting the demand curve to the left

Assume that spaghetti is an inferior good for most people. As their incomes increase, all other things held constant, the demand for spaghetti will:

total revenue rises by $1,000

Assume that the supply curve for a good is fixed at 100 units. Now suppose that the demand curve for the good increases such that the equilibrium price rises from $20 to $30. How does total revenue for the sale of this product change?

opportunity cost

Comparative advantage is determined by which of the following?

not out of benevolence that; from their regard for their own self-interest

Based on the ideas of Adam Smith, it is _________ dentists clean and repair teeth, but _______.

it would become more elastic

Because of aging requirements it takes many years to make good Scotch. If a technology were invented that made it possible to create good Scotch literally overnight, how would the short-run supply of good Scotch change?

fluctuations in economic activity over time.

Booms and busts refer to the:

the price of Coke decreases

Coke and Pepsi are substitute soft drinks. Which of the following would cause the demand curve for Pepsi to shift to the left?

David and Cameron must have different preferences for the car.

David sells his car, which he considers worthless, to Cameron for $200. Which of the following statements is true?

"good institutions can eliminate economic trade-offs"

Each of the following ideas is central to economics, EXCEPT:

the extent to which markets facilitate specialization through trade.

Economies can grow due to:

may become very rich since they are creating value for many individuals.

Facilitators of trade (such as Pierre Omidyar, the developer of eBay):

1,100; 100

Figure: Slave Redemption) Refer to the figure: Assume the graph illustrates slave trade. When slave redeemers enter the market, the total number of freed slaves is _______ and the net number of freed slaves is ________.

both the price and the quantity of the good

For each good produced in a free market economy, demand and supply determine:

The passage illustrates all of these advantages.

Fourteenth-century potters in the Chinese city of Jingdezhen developed the technology to heat a kiln at 1,300 degrees Celsius and produce porcelain or "china', which was particularly popular in Persia where the Koran forbade serving food on gold or silver and wealthy families were anxious for a legal way to impress their dinner guests. The potters also imported Persian cobalt to create the blue dye for the porcelain (local cobalt was not as bold in color), which advantage(s) from trade is(are) illustrated in this passage?

sold by the sellers with the highest opportunity cost

Gains from trade will be maximized at the free market equilibrium price and quantity because the supply of goods is: (check answer)

3

Good X and Good Y are related goods. When the price of Good X rides by 5 percent, the quantity demanded for Good Y rises by 15 percent. Calculate the cross-price elasticity.

supply of guns is more elastic

Gun buyback programs will be less effective if the:

the supply of the types of guns exchanged is highly elastic

Gun buyback programs, such as the one instituted in Washington D.C. tend to not be far effective because:

-1/3

If Major League Baseball ticket prices rise by 15 percent, the number of tickets sold falls by 5 percent. The elasticity of demand is:

decrease; an increases

If demand is elastic, a price ______ causes _____ in total revenue.

decrease; a decrease

If emend is inelastic, a price _______ causes _______ in total revenue.

inflation; slowdown

If the central bank creates too much money, ________ is the result. If the central bank doesn't create enough money, an economics ________ is the result.

complements

If the cross-price elasticity of demand of two goods is negative, we can conclude that the two goods are:

14 percent

If the elasticity of supply is 2.0, what happens to quantity supplied following a 7 percent increase in price? Quantity supplied increases:

an inferior good

If the income elasticity of demand of a good is negative, we can conclude that the good is:

the quantity demanded of it falls by 50 percent

If the price elasticity of demand is 2 in absolute value, then when the price of Good X rises by 25 percent:

rise by 20 percent

If the price elasticity of supply is 4, an increase in the price of Good X by 5 percent causes the quantity supplied of it to:

falls by 7.5 percent

If the price elasticity supply is 0.75, then when the price of Good Y falls by 10 percent, the quantity supplied of Good Y:

0.47

If the price for Good X rises from $4 to $5, and the quantity demanded of it falls from 200 units to 180 units, the absolute value of the price elasticity of demand is:

competition will eventually push the price up

If the price of Nike Air Force 1 sneakers is below the equilibrium price:

0.25

If the price of aluminum increases 4 percent, and the quantity supplied increases by 1 percent, what is the price elasticity of supply?

the elasticity of demand will not change since gasoline is a necessary good

If the price of gasoline in this country were expected to rise due to a permanent increase in the tax on gasoline, which of the following would you expect to happen?

2.5, so demand is elastic

If the price of ice cream changes by 30 percent and the quantity demanded changes by 75 percent, what is the absolute value of elasticity?

0.41

If the price of oil increases from $80 to $90 per barrel, the quantity supplied increases from 100 to 105 million barrels per day. What is the price elasticity of supply using the midpoint method?

very small impact on the price of the good

If the supply of a good is very elastic, then any increase in demand for the good will have a:

only bring about a small increase in quantity supplied

If the supply of a product is inelastic, a large price increase will:

demand has increased

If, for any given amount of a good or service, willingness to pay increases, then:

is less than $10

Imagine a free market in which at a price of $10, quantity supplied is 50 units and quantity demanded is 40 units. Equilibrium in this market:

the demand for flat-screen TVs will decrease now

Suppose it is widely believed that the price of flat-screen, high-definition televisions will be lower next year. What will happen as a result of such beliefs?

an equilibrium price and quantity have been reached

In a free market when there are unexploited gains from trade: (check answer)

lower prices

In free markets, shortages lead to: (check answer)

the value of studying economics

In the 2 hours between classes, a student can do one of three things, ranking them from most to least desirable as: (1) chat with friends, (2) study economics, or (3) eat lunch. This student's opportunity cost of chatting with friends is:

an increase in demand.

In the week before Hurricane Katrina, the price of flashlights rose in New Orleans because of:

provide incentives for entrepreneurs to take risks and innovate.

Institutions that support economic growth are the ones that:

Jesse should teach how to make friend and Addae should teach math.

Jesse is good at math and excellent at making friends and Addae is equally good at both. Mathematically and socially challenged Jordan wants to hire tutors to help in each area. Who should tutor Jordan in which area to maximize Jordan's college experience?

productivity; increases

Knowledge increases ________ and specialization ________ total output.

Allows for increased specialization and mass-production techniques that lower per unit costs of production

One benefit of trade is that it:

Division of Knowledge

Only a very small portion of people who use microwaves know how they work. This is an example of:

Casting directors see Owen Wilson as relatively better at action comedy roles and Tom Cruise as relatively better at series action roles and cast them accordingly.

Owen Wilson is an actor who has acted in many action comedy films. In contrast, Tom Cruise has acted in many serious action films. How might the theory of specialization be applied to them?

is the amount that buyers are willing and able to buy at a particular price.

Quantity demanded:

consumers increasingly use oil for those purposes without good substitutes.

Recall the discussion about the demand for oil in your textbook. Which of the following correctly explains why the demand curve for oil is negatively sloped? As the price of oil rises:

markets coordinate the specialization and trade necessary for the flower industries to function.

Roses grown in Kenya travel to Amsterdam and ultimately to your local flower shop because:

France should specialize in producing phones and import computers from Sweden.

Suppose France can produce four phones or three computers with one unit of labor, and Sweden can produce one phone or two computers with one unit of labor. If France can trade with Sweden, then the theory of comparative advantage suggests that:

The country moves from on the PPF to beyond the PPF.

Suppose a country without any international trade opens its borders to international trade. After specialization how will its location on its production possibility frontier change? (check answer)

the additional benefit from the dessert with the additional cost of the dessert.

Suppose a customer at a restaurant is deciding whether or not to order dessert. Marginal thinking means that the customer should compare:

The opportunity cost of painting a house is higher for Alex Rodriguez than for the high school student.

Suppose a famous baseball player, Alex Rodriguez, hires a high school student to paint his house. Which one of the following is most likely TRUE?

$48,900

Susan quits her administrative job, which pays $40,000 per year, to finish her four-year college degree. Her annual college expenses are $8,000 for tuition, $900 for books, and $2,500 for food. The opportunity cost of attending college for the year is:

Each state or country can adopt large-scale production techniques that allow lower per-unit costs of production.

The United States and the European Union are groups of semi-independent states that have come together under and agreement whereby resources can travel freely across borders and a common currency is in use. Which of the following statements best explains how this allows for the achievement of economics of scale?

Zimbabwe experienced inflation at a rate of billions of percent per month.

The Zimbabwean government printed money as fast as it could for years. As a result:

chemical and nuclear engineering majors

The average starting salary of economics majors is just behind that of:

the higher opportunity cost of ironing her own shirts.

The better Martha Stewart is at running her business:

too much money or too little money might induce inflation or unemployment due to bad timing of decisions.

The decisions made by the Federal Reserve Bank sometimes will result in negative effects on the economy because:

there are many good substitutes for Froot Loops

The demand curve for Froot Loops breakfast cereal is very elastic because:

a large increase in price causes quantity demanded to decrease by very little

The demand curve for physician office visits is quite inelastic; therefore:

less than 1

The demand curve is inelastic if the absolute value of the elasticity is:

few substitutes for oil in its major use

The demand for oil is inelastic because there are:

how sensitive the quantity demanded is to a change in price

The elasticity of demand measures:

tells us how responsive consumer purchases are to price changes

The elasticity of demand:

how responsive the quantity supplied is to a change in the price of a good or service

The elasticity of supply measures:

specialization and trade

The enormous variety of goods and services that we consume each day can be attributed mainly to:

stable because at this price the quantity demanded equals the quantity supplied

The equilibrium price is:

how quickly the per-unit cost of production increases with an increase in production

The fundamental determinant of the elasticity of supply is:

the rise in American productivity

The historical rise in living standards of American workers is primarily a result of:

Profit

The main incentive for business activity is

idea of equilibrium

The most important concepts in economics, according to the textbook, are supply, demand, and the:

change in tastes

The movie trilogy, The Lord of the Rings, was hugely successful, and, as a result, the demand for fantasy novels, action figures, and online role-playing games surged. The increase in demand can be explained be a(n):

the value of the next best opportunity foregone

The opportunity cost of a choice is:

A Vietnamese farmer grows rice; an exporter ships it to the United States, and a grocer in New York sells it to a customer.

Which of the following choices best illustrates the concept of Adam Smith's "invisible hand"?

supply of Tic Tac candy is elastic

The per-unit cost of producing Tic Tac candy does not change with increases in production, which means the:

the responsiveness of quantity demanded to changes in the price of the product

The price elasticity of demand is:

1.22

The price of cigars is $10, with a quantity demanded of 1,000 per day. If the price increases to $12, the quantity demanded declines to 800 per day. What is the absolute value of elasticity of demand?

the price of bread is a small portion of the budget, and thus the demand for bread is inelastic

The price of wheat increases, but few people cut back on their consumption of bread because:

the dollar cost of inputs used the make the item.

The real cost of producing a good is: (check answer)

specialize and increase production

The real power of trade lies people's ability to:

her opportunity cost of ironing exceeds the person's wages providing the ironing service.

The reason why Martha Stewart does not iron her own clothes is that:

Trade increases specialization, which in turn increases the demand for trade.

The relationship between trade and specialization is best characterized as follows:

the quantity of oil supplied at different prices of oil

The supply curve for oil shows:

production can be expanded without causing a big increase in the price of its inputs

The supply of a good tends to be more elastic if:

below the equilibrium price

The yearly shortage of Super Bowl tickets implies that the price of Super Bowl tickets is:

people exchange things they do not want for things they do.

Trade creates value because:

price of raw materials

Which variable is NOT a demand shifter?

a world-renowned chef hiring someone to cook meals for his family.

Utilizing comparative advantage can be exemplified as:

a dependable legal system, property rights, and competitive and open markets.

What are the institutions that help foster the appropriate incentives for economic growth?

There is a positive relationship between price and quantity supplied

What does the law of supply state?

Making choices by comparing the additional benefits and additional costs from doing a little bit more of some activity.

What is thinking on the margin?

buyers compete with other buyers, raising prices; and sellers compete with other sellers, lowering prices

When a market is competitive:

above equilibrium price, and quantity supplied is greater than quantity demanded

When a surplus exists in a market, we know that the actual price is:

are the lowest-opportunity-cost producer of the good.

When economists say that an individual or country has the comparative advantage in the production of a good, it means that they:

resources are wasted producing goods at a higher cost than consumers are willing to pay

When producers produce more than the equilibrium quantity:

increase; higher

When there is a shortage, sellers have an incentive to ________ their price and buyers have an incentive to offer a ________ price.

salt

Which good below might be expected to have the most inelastic demand curve?

Gains from trade are fueled by differences in preferences and differences in opportunity costs of production.

Which of the following best characterizes the relationship between the parties to a trade and the gains from trade?

a rise in technology, a fall in the costs of production, a fall in taxes on output

Which of the following choices contains only factors that cause the supply curve to shift to the right?

the economy is always being struck by unavoidable shocks.

Which of the following explains why economic booms and busts cannot be avoided?

prehistoric cave paintings

Which of the following most likely has a perfectly inelastic supply curve?

A world where everyone grows his or her own food and there is no trade.

Which of the following situations would lead to more starvation?

when the supply curve is perfectly inelastic, every slave bought by the redeemers is one fewer slave held in captivity

Which of the following statements about the price elasticity of supply in the Sudanese slave trade is correct?

As the price of a good rises, it becomes profitable to sell the higher-cost good

Which of the following statements about the supply curve is TRUE?

Absolute advantage refers to the ability to produce a larger amount of goods with the same number of inputs, whereas comparative advantage refers to the ability to have the lowest opportunity cost of production.

Which of the following statements shows how absolute advantage can be distinguished from comparative advantage?

crude oil

Which one of the following products would tend to have inelastic demand?

sellers have time to adjust and increase production

Why do supply curves tend to be more elastic over time?

because resources are used without making society better off

Why is consuming a quantity above equilibrium wasteful?

there are few widely available good substitutes for oil

Why is the demand curve for oil rather inelastic?

to increase the production of oil would require a very significant outlay in terms of cost of exploration and drilling

Why is the supply curve for oil rather inelastic?