Economics Final

Refer to Figure 1. What is the value of the deadweight loss at the equilibrium price of $15?

$0

Refer to Figure 1. What is the value of the deadweight loss at a price of $18?

$100

Refer to Figure 1. What is the value of producer surplus at the equilibrium price of $15

$160

Refer to Figure 1. What is the value of consumer surplus at the equilibrium price of $15?

$240

Refer to Figure 1. What is the value of producer surplus at a price of $18?

$240

Refer to Figure 1. What is the value of consumer surplus at a price of $18?

$60

Refer to Figure 1. Consider the following events: (a) a decrease in the unemployment rate (b) general technological advancement (c) an increase in consumer wealth. Which of the events listed above could cause a movement from V to W?

(a) only

Calculate the income elasticity if an 8 percent increase in income leads to a 4 percent increase in quantity demanded for organic produce.

0.5

Suppose a 4 percent increase in price results in a 2 percent increase in the quantity supplied of a good. Calculate the price elasticity of supply and characterize the product.

0.5; The product is inelastic.

Refer to Table 1. What is Haley's opportunity cost of making a bracelet?

1 1/3 necklaces

Suppose the value of the price elasticity of demand is -3. What does this mean?

1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent.

Refer to Table 1. What is Serena's opportunity cost of making a necklace?

1/2 of a bracelet

Refer to Table 2. What is Barney's opportunity cost of making a pogo stick?

1/2 of a unicycle

Refer to Table 2. What is Fred's opportunity cost of making a pogo stick?

1/3 of a unicycle

Refer to Figure 9-2. With the tariff in place, the United States produces

15 million pounds of rice.

Refer to Table 1. What is Serena's opportunity cost of making a bracelet?

2 necklaces

Refer to Table 2. What is Barney's opportunity cost of making a unicycle?

2 pogo sticks

Refer to Table 2. What is Fred's opportunity cost of making a unicycle?

3 pogo sticks

Refer to Table 1. What is Haley's opportunity cost of making a necklace?

3/4 of a bracelet

Refer to Figure 9-2. With the tariff in place, the United States consumes

31 million pounds of rice.

Refer to Figure 9-2. Without the tariff in place, the United States consumes

42 million pounds of rice.

Refer to Figure 2. If the economy is currently producing at point W, what is the opportunity cost of moving to point X?

5 million tons of paper

Refer to Figure 9-2. Without the tariff in place, the United States produces

9 million pounds of rice.

According to the law of supply,

A and C only.

Which of the following is the correct way to describe equilibrium in a market?

At equilibrium, quantity demanded equals quantity supplied.

Refer to Table 2. Which of the following statements is true?

Barney has a comparative advantage in making unicycles and Fred in making pogo sticks.

Refer to Table 2. Which of the following statements is true?

Barney has an absolute advantage in making both products.

________ is the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors.

Comparative advantage

Refer to Figure 9-2. The tariff revenue collected by the government equals the area

E.

Which of the following statements is true?

Each country as a whole is made better off as a result of international trade, but individuals within each country may be made worse off.

Refer to Table 1. Which of the following statements is true?

Haley has a comparative advantage in making bracelets and Serena in making necklaces.

Refer to Table 1. Which of the following statements is true?

Haley has an absolute advantage in making bracelets and Serena in making necklaces.

What is moral hazard?

It refers to the actions people take after they have entered into a transaction that makes the other party to the transaction worse off.

What is a market failure?

It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost.

Which of the following covers the study of topics such as inflation or unemployment?

Macroeconomics

Refer to Figure 1. At a price of $18 consumers are willing to buy 40 pounds of tiger shrimp. Is this an economically efficient quantity?

No, the marginal benefit of the 40th unit exceeds the marginal cost of that 40th unit.

Trade-offs force society to make choices, particularly when answering the following three fundamental questions:

One, what goods and services will be produced? Two, how will the goods and services be produced? Three, who will receive the goods and services produced?

Refer to Figure 5-3. S1 represents the supply curve that reflects the private cost of production and S2 represents the supply curve that reflects the social cost of production. One way to internalize the external cost generated by utilities is to impose a Pigovian tax on the production of electricity. What is the size of the Pigovian tax that will internalize the cost of the externality?

P2 - P0

________ is concerned with what is, and ________ is concerned with what ought to be. Economics is about ________, which measures the costs and benefits of different courses of action.

Positive, normative, positive

Which of the following statements about scarcity is true?

Scarcity refers to the situation in which unlimited wants exceed limited resources.

Assume there is a shortage in the market for digital music players. Which of the following statements correctly describes this situation?

Some consumers will be unable to obtain digital music players at the market price and will have an incentive to offer to buy the product at a higher price.

Which of the following is evidence of a surplus of bananas?

The price of bananas is lowered in order to increase sales.

The popularity of digital cameras has enticed large discount stores like Wal-Mart and Costco to offer digital photo printing services. How does this affect the digital photo printing market?

The supply curve for digital photo printing services shifts to the right.

Refer to Figure 1. At the equilibrium price of $15 consumers are willing to buy 80 pounds of tiger shrimp. Is this an economically efficient quantity?

Yes, because $15 is the price where the marginal benefit is equal to the marginal cost.

Refer to Figure 1. A movement from ________ is the result of negative technological change in plastic production.

Z to Y

An externality is

a benefit or cost experienced by someone who is not a producer or consumer of a good or service.

Countries that engage in trade will tend to specialize in the production of goods and services in which they have ________ and will ________ these goods and services.

a comparative advantage; export

If, in response to an increase in the price of chocolate the quantity of chocolate demanded decreases, economists would describe this as

a decrease in quantity demanded.

Which of the following would cause the equilibrium price of white bread to decrease and the equilibrium quantity of white bread to increase?

a decrease in the price of flour

Orange juice drinkers want to consume more orange juice at a lower price. Which of the following events would have this effect?

a decrease in the price of orange juice processing

Economic efficiency is

a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.

Economists refer to the conflict between the interests of shareholders and the interests of top management as

a principal-agent problem.

In 2004, hurricanes damaged a large portion of Florida's orange crop. As a result of this, many orange growers were not able to supply fruit to the market. If, following the hurricane, the price remained at its pre-hurricane level, we would expect to see

a shortage of oranges.

The area ________ the market supply curve and ________ the market price is equal to the total amount of producer surplus in a market.

above; below

The primary difference between absolute and comparative advantage is

absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost.

In general, the term "ceteris paribus" means

all else equal.

Economists estimated that the price elasticity of beer is -0.30 and the income elasticity of beer is 0.09. This means that

an increase in the price of beer will lead to an increase in revenue for beer sellers and beer is a normal good.

Private costs

are borne by producers of a good while social costs are borne by society at large.

Economists assume that individuals

are rational and respond to incentives.

The term that is used to refer to a situation in which one party to an economic transaction has less information than the other party is

asymmetric information.

A situation in which a country does not trade with other countries is called

autarky.

Policies that mandate the installation of specific pollution control devices are called

command-and-control policies.

When the federal government orders firms to use particular methods to reduce pollution, it is said to be using

command-and-control policies.

The concept of ________ explains how trade between two countries can make each better off.

comparative advantage

The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called

consumer surplus.

Refer to Figure 1. A movement from X to Y

could occur because of an influx of immigrant labor.

Suppose Wendy's hamburgers have many close substitutes available. If so, then an increase in the price of Wendy's hamburgers will likely

decrease the quantity of Wendy's hamburgers demanded by a relatively large amount.

If a demand curve shifts to the right, then

demand has increased.

A service station owner in Staten Island, New York, was worried that raising the price of gasoline would cause the quantity demanded to fall by so much that he would be in a worse situation than if he did not raise the price. If raising the price of gasoline would cause the owner to receive less total revenue from the sale of gasoline, the demand for gasoline is

elastic.

Consider the following statement: "An increase in supply decreases the equilibrium price. The decrease in price increases demand." The statement is

false: decreases in price affect the quantity demanded, not demand.

What does the phrase "internalizing an external cost" mean?

forcing producers to factor into their production costs the cost of the externalities created in the production of their output

The production possibilities frontier model shows that

if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.

Refer to Figure 9-2. With the tariff in place, the United States

imports 16 million pounds of rice.

Which of the following is a source of market failure?

incomplete property rights or inability to enforce property rights

Which of the following activities create a negative externality?

keeping a junked car parked on your front lawn

In a city with rent-controlled apartments, all of the following are true except

landlords have an incentive to rent more apartments than they would without rent control.

In economics, the term ________ means "additional" or "extra."

marginal

Economists reason that the optimal decision is to continue any activity up to the point where the

marginal benefit equals the marginal cost.

The production possibilities frontier shows the ________ combinations of two products that can be produced in a particular time period with available resources.

maximum attainable

Automobile insurance companies have a problem with people who buy insurance and then drive recklessly or take less care to avoid losses after being insured. In other words, the automobile insurance market is subject to

moral hazard.

Private producers have no incentive to provide public goods because

once produced, it will not be possible to exclude those who do not pay for the good.

The "tragedy of the commons" refers to the phenomenon where`

people overuse a common resource.

Which of the following is an example of a positive externality?

planting trees along a sidewalk which add beauty and create shade

Economic models do all of the following except

portray reality in all its minute details.

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls

scarcity.

One reason why adverse selection problems arise in health insurance markets is that

sick people are more likely to want health insurance than healthy people.

Absolute advantage is

the ability to produce more of a good or service than competitors when using the same amount of resources.

Tax incidence is

the actual division of the burden of a tax between buyers and sellers in a market.

By definition, economics is the study of

the choices people make to attain their goals, given their scarce resources.

If a firm expects that the price of its product will be higher in the future than it is today, then

the firm has an incentive to decrease supply now and increase supply in the future.

Opportunity cost is

the highest valued alternative that must be give up to engage in an activity.

When demand is elastic, a fall in price causes total revenue to rise because

the increase in quantity sold is large enough to offset the lower price.

A positive externality causes

the marginal social benefit to exceed the marginal private cost of the last unit produced.

A negative externality exists if

the marginal social cost of producing a good or service exceeds the private cost.

The price elasticity of supply is equal to

the percentage change in quantity supplied divided by the percentage change in price.

The law of demand implies, holding everything else constant, that as the price of bagels increases,

the quantity of bagels demanded will decrease.

What is a "social cost" of production?

the sum of all costs to individuals in society, regardless of whether the costs are borne by those who produce the products or consume the product

In 2004, hurricanes destroyed a large portion of Florida's orange and grapefruit crops. In the market for citrus fruit in 2004

the supply curve shifted to the left resulting in an increase in the equilibrium price.

Perfectly inelastic demand is represented by a demand curve, which is ________, and relatively inelastic demand is represented by a demand curve, which is ________.

vertical; downward sloping

Refer to Figure 2. If the economy is currently producing at point Y, what is the opportunity cost of moving to point W?

zero