Melendez Micro Economics

11. Refer to Table 3-25. The opportunity cost of 1 toaster for Miguel is a. 1/2 mixer. b. 2 hours of labor. c. 2 mixers. d. 20 hours of labor.

A

21. Suppose there is a decrease in the price of corn. If corn is an input into the production of ethanol, we would expect the supply curve for ethanol to a. shift rightward. b. shift leftward. c. become flatter. d. remain unchanged.

A

23. If consumers often purchase muffins to eat while they drink their lattés at local coffee shops, what would happen to the equilibrium price and quantity of lattés if the price of muffins falls? a. Both the equilibrium price and quantity would increase. b. Both the equilibrium price and quantity would decrease. c. The equilibrium price would increase, and the equilibrium quantity would decrease. d. The equilibrium price would decrease, and the equilibrium quantity would increase.

A

24. Suppose the incomes of buyers in a market for a particular normal good decrease and there is also a reduction in input prices. What would we expect to occur in this market? a. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. b. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous. c. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. d. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

A

29. The price elasticity of demand measures how much a. quantity demanded responds to a change in price. b. quantity demanded responds to a change in income. c. price responds to a change in demand. d. demand responds to a change in supply.

A

31. Goods with many close substitutes tend to have a. more elastic demands. b. less elastic demands. c. price elasticities of demand that are unit elastic. d. income elasticities of demand that are negative.

A

34. For which pairs of goods is the cross-price elasticity most likely to be positive? a. canoes and kayaks b. pizza and college textbooks c. Halloween candy and rain coats d. cats and cat food

A

37. Refer to Figure 5-17. Using the midpoint method, what is the price elasticity of supply between point B and point C? a. 1.44 b. 1.29 c. 0.96 d. 0.69

A

4. Refer to Figure 2-5. The opportunity cost of obtaining 20 additional dryers by moving from point D to point A is a. 0 washers. b. 20 washers. c. 40 washers. d. None of the above; the economy cannot move from point D to point A.

A

6. Refer to Figure 2-10, Panel (a). Production at point U is a. impossible with current resources. b. impossible even with technological progress. c. possible but inefficient. d. possible and efficient.

A

7. Refer to Figure 2-10, Panel (a). Which of the following is true? a. the opportunity cost of tractors is higher in Panel A. b. the opportunity cost of tractors is higher in Panel B. c. panel A and Panel B illustrate the same opportunity cost of tractors. d. the opportunity cost of sofas is higher in Panel A.

A

12. Refer to Table 3-25. Miguel has a comparative advantage in the production of a. mixers. b. toasters. c. neither good. d. both goods.

B

15. Refer to 15. Refer to Figure 3-16. Hosne's opportunity cost of one purse is a. 4/5 wallet and Merve's opportunity cost of one purse is 2/3 wallet. b. 4/5 wallet and Merve's opportunity cost of one purse is 3/2 wallets. c. 5/4 wallets and Merve's opportunity cost of one purse is 2/3 wallet. d. 5/4 wallets and Merve's opportunity cost of one purse is 3/2 wallets.

B

2. Katie is planning to sell her house, and she is considering making two upgrades to the house before listing it for sale. Replacing the carpeting will cost her $2,500 and replacing the roof will cost her $9,000. Katie expects the new carpeting to increase the value of her house by $3,000 and the new roof to increase the value of her house by $7,000. a. She should make both improvements to her house. b. She should replace the carpeting but not replace the roof. c. She should replace the roof but not replace the carpeting. d. She should not make either improvement to her house.

B

20. A leftward shift of a demand curve is called a(n) a. increase in demand. b. decrease in demand. c. decrease in quantity demanded. d. increase in quantity demanded.

B

27. When a shortage exists in a market, sellers a. raise price, which increases quantity demanded and decreases quantity supplied, until the shortage is eliminated. b. raise price, which decreases quantity demanded and increases quantity supplied, until the shortage is eliminated. c. lower price, which increases quantity demanded and decreases quantity supplied, until the shortage is eliminated. d. lower price, which decreases quantity demanded and increases quantity supplied, until the shortage is eliminated.

B

3. The opportunity cost of an item is a. the number of hours needed to earn money to buy the item. b. what you give up to get that item. c. usually less than the dollar value of the item. d. the dollar value of the item.

B

30. When quantity demanded responds strongly to changes in price, demand is said to be a. fluid. b. elastic. c. dynamic. d. highly variable.

B

35. Frequently, in the short run, the quantity supplied of a good is a. impossible, or nearly impossible, to measure. b. not very responsive to price changes. c. determined by the quantity demanded of the good. d. determined by psychological forces and other non-economic forces.

B

40. When demand is inelastic, a decrease in price will cause a. an increase in total revenue. b. a decrease in total revenue. c. no change in total revenue but an increase in quantity demanded. d. no change in total revenue but a decrease in quantity demanded.

B

1. While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. This statement illustrates the principle that a. trade can make everyone better off. b. rational people think at the margin. c. people face tradeoffs. d. people respond to incentives.

C

13. The principle of comparative advantage does not provide answers to certain questions. One of those questions is a. Do specialization and trade benefit more than one party to a trade? b. Is it absolute advantage or comparative advantage that really matters? c. How are the gains from trade shared among the parties to a trade? d. Is it possible for specialization and trade to increase total output of traded goods?

C

14. Suppose the U.S. and Japan can both produce airplanes and televisions and the U.S. has a comparative advantage in the production of airplanes while Japan has a comparative advantage in the production of televisions. Also suppose the U.S. has an absolute advantage in the production of both airplanes and televisions. The U.S. should a. not trade airplanes or televisions with Japan. b. import airplanes from Japan and export televisions to Japan. c. export airplanes to Japan and import televisions from Japan. d. export both airplanes and televisions to Japan.

C

16. Assume the market for pork is perfectly competitive. When one pork buyer exits the market, a. the price of pork increases. b. the price of pork decreases. c. the price of pork does not change. d. there is no longer a market for pork.

C

18. Refer to Figure 4-3. If these are the only two consumers in the market, then the market quantity demanded at a price of $10 is a. 0 units. b. 5 units. c. 8.33 units. d. 25 units.

C

22. If a shortage exists in a market, then we know that the actual price is a. above the equilibrium price, and quantity supplied is greater than quantity demanded. b. above the equilibrium price, and quantity demanded is greater than quantity supplied. c. below the equilibrium price, and quantity demanded is greater than quantity supplied. d. below the equilibrium price, and quantity supplied is greater than quantity demanded.

C

25. Which of the following events would unambiguously cause an increase in the equilibrium price of cotton shirts? a. an increase in the price of wool shirts and a decrease in the price of raw cotton b. a decrease in the price of wool shirts and a decrease in the price of raw cotton c. an increase in the price of wool shirts and an increase in the price of raw cotton d. a decrease in the price of wool shirts and an increase in the price of raw cotton

C

28. What will happen to the equilibrium price and quantity of new cars if the price of gasoline rises, the price of steel rises, public transportation becomes cheaper and more comfortable, and auto-workers negotiate higher wages? a. Price will fall, and the effect on quantity is ambiguous. b. Price will rise, and the effect on quantity is ambiguous. c. Quantity will fall, and the effect on price is ambiguous. d. Quantity will rise, and the effect on price is ambiguous.

C

33. If the price elasticity of supply is 1.5, and a price increase led to a 3% increase in quantity supplied, then the price increase is about a. 0.2%. b. 0.5%. c. 2.0%. d. 4.5%.

C

36. When a supply curve is relatively flat, a. sellers are not very responsive to changes in price. b. supply is relatively inelastic. c. supply is relatively elastic. d. Both a and b are correct.

C

38. Which of the following statements is not valid when the market supply curve is vertical? a. Market quantity supplied does not change when the price changes. b. Supply is perfectly inelastic. c. An increase in market demand will increase the equilibrium quantity. d. An increase in market demand will increase the equilibrium price.

C

39. Last year, Joan bought 50 pounds of hamburger when her household's income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. All else constant, Joan's income elasticity of demand for hamburger is a. positive, so Joan considers hamburger to be an inferior good. b. positive, so Joan considers hamburger to be a normal good and a necessity. c. negative, so Joan considers hamburger to be an inferior good. d. negative, so Joan considers hamburger to be a normal good but not a necessity.

C

5. Refer to Figure 2-10, Panel (a). Production at point Y is a. impossible and inefficient. b. impossible but efficient. c. possible but inefficient. d. possible and efficient.

C

10. Refer to Table 3-25. Maya has an absolute advantage in the production of a. mixers. b. toasters. c. neither good. d. both goods.

D

17. Which of the following is not a characteristic of a perfectly competitive market? a. Different sellers sell identical products. b. There are many sellers. c. Sellers must accept the price the market determines. d. All of the above are characteristics of a perfectly competitive market.

D

19. The market demand curve a. is found by vertically adding the individual demand curves. b. slopes upward. c. represents the sum of the prices that all the buyers are willing to pay for a given quantity of the good. d. represents the sum of the quantities demanded by all the buyers at each price of the good.

D

26. Refer to Figure 4-19. If price in this market is currently $14, then there would be a(n) a. surplus of 20 units. The law of supply and demand predicts that the price will rise from $14 to a higher price. b. excess supply of 20 units. The law of supply and demand predicts that the price will fall from $14 to a lower price. c. surplus of 40 units. The law of supply and demand predicts that the price will rise from $14 to a higher price. d. excess supply of 40 units. The law of supply and demand predicts that the price will fall from $14 to a lower price.

D

32. Which of the following statements about the consumers' responses to rising gasoline prices is correct? a. Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run. b. Consumers react to a 10% increase in price with about a 10% decrease in quantity demanded in both the short run and long run. c. Consumers decrease their quantity demanded more in the short run than in the long run. d. Consumers decrease their quantity demanded more in the long run than in the short run.

D

8. Trade makes costs a. higher and reduces the variety of goods and services available. b. higher but raises the variety of goods and services available. c. lower but reduces the variety of goods and services available. d. lower and raises the variety of goods and services available.

D

9. The principle that trade can make everyone better off applies to a. individuals. b. families. c. countries. d. All of the above

D