Micro Econ Midterm II

The long-run price elasticity of supply of automobiles is _____ the short-run price elasticity of supply of automobiles. less than greater than equal to not comparable to

greater than

When the marginal benefit of an activity is equal to the marginal cost of the activity, the decision maker should do _____ of the activity. less that exact amount more none

that exact amount

Which model states that nations that are abundant in a factor will have a comparative advantage in a good whose production is intensive in that factor? the pauper labor fallacy model the Ricardian model the Heckscher-Ohlin model the oligopoly model

the Heckscher-Ohlin model

Restrictions on free international trade in lumber, designed to insulate domestic lumber producers from competitive market forces, are _____ policies. competitive protectionist free-trade antitrust

protectionist

The price elasticity of demand is measured as the percentage change in _____ divided by the percentage change in _____. quantity demanded; price the slope of the demand curve; quantity demanded quantity demanded; the slope of the demand curve price; quantity demanded

quantity demanded; price

The amount of tax levied per unit of a good or service is called the tax: incidence. rate. revenue. surplus.

rate

Prior to any taxes, the equilibrium price of bottled water is $5 per gallon. Then a $1-per-gallon tax is levied. As a result, the price of bottled water rises to $5.75 per gallon. The incidence of the $1 tax is _____ paid by consumers and _____ paid by producers. $0.25; $0.75 $0.50; $0.50 $0; $1.00 $0.75; $0.25

$0.75; $0.25

Gwen sells lawnmowers. She can sell five per week at a price of $2,000 per machine. If she charges $2,100 per machine, she will sell only four per week. The marginal benefit of selling the fifth lawnmower is: $2,000. $2,100. $8,000. $1,600.

$1,600

Gennaro is a blogger living in Italy who could work for la Repubblica (a newspaper in Rome) as a food critic for $50,000 a year but instead runs the blogging business online through advertising, making revenues of $80,000 a year. His only business expenses are $2,000 for supplies and $18,000 in rent for his office space. What is Gennaro's economic profit from working as a freelance writer? $20,000 $68,000 $10,000 $30,000

$10,000

You decide to quit your $70,000-per-year job as a hotel concierge to be an online hotel review blogger. At the end of the first year of blogging, you have earned $90,000. You also spent $10,000 for a high-end computer and wireless network. Your economic profit in the first year as an illustrator is: $80,000. $90,000. $20,000. $10,000.

$10,000.

Until recently, Davina worked as an insurance claims adjuster, earning $30,000 annually. Then she inherited a piece of commercial real estate that had rented for $12,000 annually. Davina decided to leave her job and operate an Italian restaurant in the space she inherited. At the end of the first year, her books showed total revenues of $260,000 and total costs of $230,000 for food, utilities, cooks, and other supplies. Her economic profit at the end of one year is: $230,000. $30,000. $0. -$12,000.

-$12,000.

Janelle loves sashimi. Her first piece of sashimi normally gives her a marginal benefit of $5. Each additional piece yields a marginal benefit that declines by $0.25 per piece. If her favorite sushi bar charges $2.75 per piece of sashimi, how many pieces should she eat? 8 10 5 11

10

Total profit is maximized when marginal benefit _____ marginal cost. is more than is less than is equal to approaches

is equal to

_____ is the mistaken belief that an unrecoverable cost represents an opportunity cost . Status quo bias Framing bias Loss aversion The sunk cost fallacy

The sunk cost fallacy

In making an "either-or" decision, it is generally recommended to: choose the activity that results in the greater economic profit. choose the activity that results in the greater accounting profit. continue in an activity as long as the marginal cost exceeds the marginal benefit. continue in an activity as long as the marginal cost is less than the marginal benefit.

choose the activity that results in the greater economic profit.

Learning effects often result in _____ marginal costs. decreasing increasing constant random

decreasing

Accounting profit differs from economic profit because: of the way in which revenue is calculated. economic costs include only explicit costs, while accounting costs do not. accounting costs are generally higher than economic costs. economic costs are generally higher than accounting costs.

economic costs are generally higher than accounting costs.

If an economic agent employs the "good enough" method of decision making, he or she is: maximizing utility. maximizing profit. exhibiting bounded rationality. behaving irrationally.

exhibiting bounded rationality

A perfectly elastic supply curve is: horizontal. downward sloping. upward sloping. vertical.

horizontal

In southern California, the demand for real estate has been increasing rapidly for years. Therefore, the _____ cost of capital is _____ in southern California's vineyards. explicit; decreasing implicit; increasing implicit; decreasing explicit; increasing

implicit; increasing

An upward sloping marginal cost curve indicates that marginal costs are: decreasing. increasing. constant. equal to marginal benefit.

increasing

If the accounting profit of a firm is positive: its economic profit must be positive. its economic profit must be negative. its economic profit could be positive or negative. the opportunity cost will be negative.

its economic profit could be positive or negative.

Economic profit is: less than accounting profit if there are implicit costs. always equal to accounting profit. greater than accounting profit if there are implicit costs. less than accounting profit if implicit costs are zero.

less than accounting profit if there are implicit costs.

A person who is oversensitive to loss, unwilling to recognize a loss and move on, is: loss averse. risk averse. exhibiting status quo bias. engaged in mental accounting.

loss averse

The _____ of a good or service is the additional benefit derived from producing one more unit of that good or service. net benefit marginal benefit marginal cost utility

marginal benefit

The optimal solution to a "how much" decision is usually found where the _____ of an action is equal to the _____ of that action. explicit cost; implicit cost accounting profit; economic profit marginal benefit; marginal cost present value; net present value

marginal benefit; marginal cost

The purpose of behavioral economics is to determine why: people maximize utility. firms maximize profit and minimize costs. people make decisions that appear to be irrational. markets usually behave in an efficient manner.

people make decisions that appear to be irrational

People purchase insurance because they are: risk averse. exhibiting status quo bias. miscalculating their opportunity costs. exhibiting bounded rationality.

risk averse.

The tendency to avoid making a decision is: status quo bias. framing bias. loss aversion. mental accounting.

status quo bias.

Suppose you own a small café that sells sandwiches, salads, and fancy coffees. Which factor is an implicit cost of the business? the salaries paid to part-time employees the job offer you did not accept at a hotel restaurant bread, meat, vegetables, and supplies used to produce the items on your menu your monthly electricity bill

the job offer you did not accept at a hotel restaurant

The implicit cost of capital is: the cost of capital the firm might have used but didn't need to. depreciation. the opportunity cost of the capital used by a business. lost output due to lost time from inefficient workers.

the opportunity cost of the capital used by a business.

The profit-maximizing principle of marginal analysis refers to: subdividing larger problems into smaller, more manageable ones. the notion that a group's problems can be effectively analyzed by focusing on only a small subsample of the group. the result that the optimal quantity of a good or activity is the largest quantity at which the marginal benefit is greater than or equal to the marginal cost. the result that the optimal quantity is such that the net benefit to an individual is maximized.

the result that the optimal quantity of a good or activity is the largest quantity at which the marginal benefit is greater than or equal to the marginal cost.

Policies that limit imports, usually to insulate domestic producers from foreign competition, are known as: import-competing clauses. import reduction acts. trade protection. competition protection.

trade protection.

If your purchases of toothpaste remain constant at 9 units per year when the price of shampoo increases from $8 to $12, all other things equal, for you, toothpaste and shampoo are _____ goods. inferior unrelated substitute complementary

unrelated

A perfectly inelastic supply curve is: horizontal. downward sloping. upward sloping. vertical.

vertical

The number of seats at Century Link Field (home of the Seattle Seahawks) football stadium is fixed at 70,000. The city of Seattle imposes a tax of $10 per ticket. In response, the team management raises the ticket price from $30 to $40 and still sells all 70,000 tickets. The tax causes a change in consumer surplus of _____, a change in producer surplus of _____, and a deadweight loss of _____. -$10; $0; $10 -$700,000; $0; $700,000 -$10; $0; $0 -$700,000; $0; $0

-$700,000; $0; $0

Suppose you manage a Seven Eleven and are in charge of ordering products, while the home office sets the prices. In your area, the income elasticity of demand for beef jerky is -0.5. Because of local factory closings, you expect local incomes to decrease by 20% on average in the next month. As a result, you should stock _____ beef jerky. 20% less 5% more 10% more 10% less

10% more

France must give up the production of 75 ties to produce 25 additional dress shirts. The opportunity cost of producing 4 dress shirts is _____ ties. 4 12 71 79

12

The price elasticity of supply for a good is 2 if a _____ in price leads to a 4% decrease in the quantity supplied. 2% increase 2% decrease 4% decrease 4% increase

2% decrease

For which goods is the cross-price elasticity of demand MOST likely a large positive number? baseballs and baseball bats movie downloads and orange juice French fries and onion rings all of these because the cross-price elasticity is a positive number

French fries and onion rings

Canada can produce 30 tablets for every car it produces, and Malaysia can produce 15 tablets for every car it produces. Based on this information, which statement is INCORRECT? Canada should specialize in tablet production. Malaysia has the comparative advantage in car production. There will be gains from trade if Canada exports tablets to Malaysia. Malaysia has a comparative advantage in tablet production.

Malaysia has a comparative advantage in tablet production.

The elasticity of demand measures the responsiveness of quantity demanded to changes in: price. supply. income. demand.

Price

There are several close substitutes for Tylenol, but relatively few substitutes for a complete medical examination. Therefore, all other things equal, you would expect the demand for: medical examinations to be more elastic than the demand for Tylenol. Tylenol to be more elastic than the demand for medical examinations. Tylenol to be perfectly inelastic. the two to be equally elastic.

Tylenol to be more elastic than the demand for medical examinations.

If demand for a round of golf at the Pine Valley Golf Club is elastic, and course officials increase the greens fees, you would expect: a decrease in total revenue for the course. an increase in total revenue for the course. an increase in the amount of golf played on the course. no change in the amount of golf played on the course.

a decrease in total revenue for the course.

If the demand for luxury cars is very elastic, then a luxury car tax would lead to: a large deadweight loss. no deadweight loss. a small deadweight loss. a large amount of tax revenue but no deadweight loss.

a large deadweight loss.

The main difference between a tariff and an import quota is that: an import quota allows for a greater amount of the good to be imported than a tariff. a tariff will lead to higher prices than an import quota. a tariff generates tax revenue, whereas an import quota generates rents to license holders. a tariff will lead to lower prices than an import quota.

a tariff generates tax revenue, whereas an import quota generates rents to license holders.

Assume that a tariff is imposed on Canadian imports into the United States. This tariff is likely to _____ American producers and _____ Canadian producers. penalize; penalize benefit; benefit benefit; penalize penalize; benefit

benefit; penalize

If quota rents do not accrue to the government, then the net loss to the government from an import quota is _____ the deadweight loss from an equivalent tariff. less than greater than equal to in the case of demand and supply both being elastic, less than

greater than

When the government imposes an excise tax in a market with a downward-sloping demand curve and an upward-sloping supply curve: consumer surplus falls. producer surplus falls. a deadweight loss occurs. consumer surplus falls, producer surplus falls, and a deadweight loss occurs.

consumer surplus falls, producer surplus falls, and a deadweight loss occurs.

If the government levies an excise tax in a market whose supply curve is perfectly elastic, the burden of the tax will fall completely on the _____, and the deadweight loss will equal _____. consumers; zero producers; zero consumers; the tax revenue producers; the tax revenue

consumers; zero

Suppose the price of Cheerios rises by 10%, and the quantity of milk sold decreases by 20%. We know that the: cross-price elasticity of demand between Cheerios and milk is -2. cross-price elasticity between Cheerios and milk is -0.5. price elasticity of demand for milk is 2. cross-price elasticity of demand between Cheerios and milk is 2.

cross-price elasticity of demand between Cheerios and milk is -2.

The United States can produce whiskey domestically, but it can also export whiskey if the world price is higher than the domestic price. If the United States exports whiskey, consumer surplus will _____, producer surplus will _____, and total surplus will ________. increase; decrease; decrease increase; decrease; stay constant decrease; increase; increase decrease; decrease; increase

decrease; increase; increase

If an excise tax is imposed on new SUVs and collected from consumers, the: demand curve will shift downward by the amount of the tax. supply curve will shift downward by the amount of the tax. equilibrium quantity supplied will increase relative to the pretax level. supply curve will shift upward by the amount of the tax.

demand curve will shift downward by the amount of the tax.

Assume the demand curve for office furniture is downward sloping. If the government imposes an excise tax on office furniture, the more elastic is the supply curve, the _____ equilibrium output will fall and the _____ the deadweight loss of the tax will be. more; smaller more; larger less; smaller less; larger

more; larger

Eliza has annual earnings of $100,000, and Isabella has annual earnings of $50,000. Each consumer goes to the mall and purchases a sculpture for $100, and each pays an additional 12%, or $12, in sales tax. This tax is: regressive. a wealth tax. progressive. a property tax.

regressive.

Payroll taxes (FICA taxes) are considered: proportional. progressive. flat. regressive.

regressive.

A progressive tax: requires higher income earners to pay higher taxes. requires higher income earners to pay lower taxes. requires lower income earners to pay no taxes. has no deadweight loss.

requires higher income earners to pay higher taxes.

Sri Lanka, which is labor-abundant, has a comparative advantage in t-shirt production, which is labor-intensive. Which model explains this pattern of comparative advantage? the Ricardian model the pauper labor model the Heckscher-Ohlin model a model of autarky

the Heckscher-Ohlin model

A lump-sum tax, such as the fee for a driver's license, does not take into consideration: the efficiency principle. the benefits principle. the ability-to-pay principle. the elective consumer principle.

the ability-to-pay principle.

The two principles of tax fairness are: the minimize-distortions principle and the maximize-revenue principle. the benefits principle and the ability-to-pay principle. the proportional-tax principle and the ability-to-pay principle. the equity principle and the efficiency principle.

the benefits principle and the ability-to-pay principle.

Gino's Pizza has a special offer: one slice for $2, two slices for $3.50, three slices for $4.50, and four slices for $5.00. The marginal cost of the second slice is: $4.50. $10. $1.50. $2.

$1.50

The price elasticity of demand for a particular life-saving drug is zero, and the price elasticity of supply is 0.50. If a $10 excise tax is levied on producers, how much of this tax will eventually be paid by consumers? $0 $7.50 $5.00 $10.00

$10.00

The Bowery Hotel is located on Third Street in Manhattan. Suppose the hotel has explicit costs of $200,000 per year and implicit costs of $50,000 per year. If the hotel earned an economic profit of $50,000 last year, the hotel's accounting profit equaled: $10,000. $50,000. $100,000. $200,000.

$100,000.

You have just purchased your first car, and the purchase agreement commits you to pay $500 per month for 12 months. You have an opportunity to go to California for the entire month of October, and you will spend $2,000 traveling. You will be leaving your car behind, but because of your purchase agreement, you must still make the loan payment. The cost of the trip to California is: $2,000, because your $500 loan payment for October is a sunk cost. $2,500, because this will be your total spending during the month of October. $1,500, because the October loan payment is an opportunity cost of traveling that must be deducted from the explicit cost of the trip. $2,500, because the October loan payment is an opportunity cost of traveling and must be added to the explicit cost of the trip.

$2,000, because your $500 loan payment for October is a sunk cost

Regina is trying to determine how much she will have to pay in this year's tax return. Suppose income tax is levied on 0% of the first $1,000 in income, 10% of the next $9,000, and 20% of remaining earnings. If Regina earned $20,000, how much tax would she have to pay? $2,900 $5,000 $4,900 $3,000

$2,900

Suppose your local Walmart has explicit costs of $5 million per year and implicit costs of $174,000 per year. If the store earned an economic profit of $202,000 last year, the store's accounting profit was: $5.202 million. $28,000. $376,000. $5.174 million.

$376,000.

Rebecca pays $8,000 per month in rent to operate a restaurant in Charlotte. She also pays $17,000 per month in wages, $3,000 per month in food and supplies, and $1,000 per month in insurance. All of her costs of production, except her insurance and rent, can change if she makes different decisions about her restaurant production. Rebecca's monthly sunk costs equal: $20,000. $11,000. $29,000. $9,000.

$9,000.

Katz's Delicatessen is having a special on pastrami sandwiches: one sandwich for $12, two sandwiches for $21, three sandwiches for $29, and four sandwiches for $35. The marginal cost of the second sandwich is: $21. $9. $17 $7.

$9.

Suppose your local Lowe's home improvement store has explicit costs of $3 million per year and implicit costs of $74,000 per year. If the store earned an economic profit of $22,000 last year, the store's accounting profit was: $96,000. -$52,000. $3.022 million. $3.074 million

$96,000.

If the price of burritos increases from $1 to $2, and customers decrease their consumption from 10 burritos to 8 burritos, what is the price elasticity of demand, obtained using the midpoint method? 1.5 1 0.33 0.5

0.33

If the price of strawberries increases by 20%, and the quantity of strawberries demanded decreases by 15%, then the price elasticity of demand is equal to: 0.75. approximately 0.33. approximately 1.33. 1.

0.75.

Janelle recently received a promotion at her job, increasing her income from $940 per week to $1,060 per week. As a result, she decides to purchase 9 percent more sushi per week. Computed using the midpoint method, the income elasticity of Janelle's demand for sushi is: 0.75. 1.33. 0.90. 1.00.

0.75.

If the price of profiteroles decreases from $1.10 to $0.90, and the quantity demanded of profiteroles increases from 180 pastries to 220 pastries, then the price elasticity of demand, obtained using the midpoint method, is: 0. 0.5. 1. 2.

1.

In the market for cashews, when the price of cashews is $10, the quantity of cashews demanded is 100. When the price falls to $8, the quantity of cashews demanded increases to 130. The price elasticity of demand, calculated using the midpoint method, between $10 and $8 is approximately: 1.17. 1.50. 0.85. 1.00.

1.17.

If the price of a good increases by 10%, and the quantity demanded changes by 15%, then the price elasticity of demand is equal to: 1.5. approximately 0.66. approximately 1.33. 1.

1.5

Jacques Torres Chocolate in New York City is the only producer of golden Easter bunnies in the world. Jacques recently expanded his production capacity from 1,000 to 2,000 bunnies per Easter season. If the price elasticity of demand for golden Easter bunnies is 3.33, by how much will the company have to reduce its price to sell the additional 1,000 bunnies (by the midpoint method)? 2.5% 25% 125% 20%

20%

Butter producers know that the price elasticity of demand for butter is 0.2. If they want to increase sales by 4%, they will have to lower price by: 0.1%. 1%. 4%. 20%.

20%.

Which statement describes an "either-or" decision? Alexa must decide how many courses to take this semester. Sasha must decide how much time to spend studying for each of the courses that she is taking this semester. Mark must decide how many hours to work at his part-time job. Amy must decide whether to major in actuarial mathematics or finance.

Amy must decide whether to major in actuarial mathematics or finance.

In a single year, Germany can raise 100 tons of wheat or produce 1,000 boxes of daisies. In the same growing season, France can raise 50 tons of wheat or produce 750 boxes of daisies. From this information, we know that: Germany has a comparative advantage in raising wheat. Germany has a comparative advantage in raising daisies. France has a comparative advantage in raising wheat. France has an absolute advantage in raising wheat.

Germany has a comparative advantage in raising wheat.

Which statement does NOT describe a source of comparative advantage? In general, France has an absolute advantage over Italy in the production of goods and services. The United States' airplane design technology is more advanced than India's. Hawaii has a more favorable climate for the cultivation of tropical fruit than England has. Canada has many more trees that can be used to produce lumber than Italy has.

In general, France has an absolute advantage over Italy in the production of goods and services.

Penelope is a student at Fresno State University. Which of the following statements is NOT true about Penelope attending university? The opportunity cost may be greater than the monetary cost. The opportunity cost includes both explicit and implicit costs. The opportunity cost of something is what you must give up to get it. Opportunity cost is synonymous with explicit cost.

Opportunity cost is synonymous with explicit cost.

Which statement describes a "how much" decision? Marissa is trying to decide whether to go to work or go to college after graduation Andrew is trying to decide whether to go to law school or medical school. Tawny is trying to decide how much money she needs to save to buy a car next month. Analucia is trying to decide whether to take a practice test for the LSATs (Law School Admissions Test).

Tawny is trying to decide how much money she needs to save to buy a car next month.

When economists discuss profit, they mean economic profit. Economic profit is obtained by subtracting which measure of cost from total revenue? accounting costs only dollar costs only, not opportunity costs only implicit costs accounting costs and the best opportunity foregone

accounting costs and the best opportunity foregone

Sunk costs: are not considered in marginal analysis. help determine the optimal quantity of an activity. can dramatically increase marginal costs. are the same as variable costs.

are not considered in marginal analysis.

The field of study that seeks to explain why people make decisions that appear to be irrational is called _____ economics international irrational rational behavioral

behavioral

The term autarky refers to a situation when a country: only trades goods in which it has a comparative advantage. only trades goods in which it has an absolute advantage. has constant opportunity costs of production. does not trade with other countries.

does not trade with other countries.

A rancher in Texas decides to raise the price of her cattle by 19% over the prevailing market price. If the demand for beef is perfectly elastic, this rancher's quantity demanded will: fall to 0. not change. fall slightly. increase slightly.

fall to 0.

opens to trade, the price of labor will _____ and the price of capital will _____. rise; rise fall; fall rise; fall fall; rise

fall; rise

When an economy moves from autarky to free international trade, for industries in the export sector, consumer surplus _____, producer surplus _____, and the economy as a whole _____. rises; rises; gains rises; falls; gains falls; rises; gains falls; rises; loses

falls; rises; gains

If a country's domestic price of a good is below the world price of the good, then with trade, the domestic quantity supplied of the good will be _____ the domestic quantity demanded. greater than less than equal to not comparable to

greater than

Suppose the governor of New Hampshire decides to implement a state income tax. The first $50,000 of household income is tax-free, while any income above $50,000 is taxed at 10%. The marginal tax rate for a household earning $75,000 is: greater than its average tax rate. less than its average tax rate. equal to its average tax rate. 3.3%.

greater than its average tax rate.

If France levies tariffs on American goods entering France, in the short run, this will tend to _____ American producers and _____ French producers. benefit; benefit harm; benefit benefit; harm harm; harm

harm; benefit

Higher wages in the United States reflect _____ labor productivity in the United States than in Mexico. This means that if the United States moved the automotive industry to Mexico, the overall cost of production would be _____ in Mexico than in the United States. lower; higher lower; lower higher; higher higher; lower

higher; lower

If the United States imposes an import quota on Portuguese port, the result in the short run is likely to be _____ profits for American wine producers and _____ profits for Portuguese port producers. lower; lower lower; higher higher; lower higher; higher

higher; lower

If a country's domestic price of lumber in the absence of trade exceeds the price with trade, the country will likely: import lumber. export lumber. have an absolute advantage in lumber production. have a shortage of lumber.

import lumber.

The price elasticity of supply of foods low in saturated fats is lower in the short run than in the long run because: in the short run, inputs are more readily available to produce these foods than in the long run. in the short run, food producers have a limited time to respond to changes in demand. in the short run, prices tend to stay constant. in the long run, supply is perfectly inelastic.

in the short run, food producers have a limited time to respond to changes in demand.

Assuming a normal upward-sloping supply curve and downward-sloping demand curve, if the government imposes a $25 excise tax on expensive handbags and collects the tax from the consumers, the price of expensive handbags will: increase by $25. increase by more than $25. increase by less than $25. increase, but we cannot determine by how much.

increase by less than $25.

Assume that the United States imposes an import quota on Brazilian coffee. Relative to the equilibrium world price that would prevail in the absence of import quotas, it is likely that the equilibrium price of coffee in the United States will _____, and the equilibrium price of coffee in Brazil will _____. decrease; remain the same remain the same; increase increase; increase increase; decrease

increase; decrease

The price elasticity of demand along a linear demand curve: is equal to the rate of change of the slope. is greater than the absolute value of the slope. is less than the absolute value of the slope. increases in absolute value as the price rises.

increases in absolute value as the price rises.

If a good is a necessity with few substitutes, demand will tend to be: elastic. inelastic. perfectly inelastic. the same as that of an inferior good.

inelastic

When the price of profiteroles decreases from $1.10 to $0.95, the quantity demanded of profiteroles increases from 190 pastries to 215 pastries. In this price range, the demand for profiteroles is _____, and total revenue will _____ when price decreases. elastic; increase elastic; decrease inelastic; increase inelastic; decrease

inelastic; decrease

As part of a get-fit program, the government levies an excise tax on high-fat fast foods. We expect consumers to pay almost all of this tax if demand is _____ and supply is _____. inelastic; inelastic inelastic; elastic elastic; elastic elastic; inelastic

inelastic; elastic

You manage a restaurant, and lately revenues have been rather poor. One of your waiters suggests that raising food prices will increase revenues, but your chef suggests that decreasing food prices will increase revenues. You aren't sure who is right, but you know that your waiter believes that the demand for your food is _____, and your chef believes that the demand for your food is _____. elastic; inelastic inelastic; elastic elastic; elastic inelastic; inelastic

inelastic; elastic

The demand for organic vegetables at the local farmer's market is steady, but supply has fallen drastically because of a lack of rainfall. This is good news for farmers if demand is _____, so that the _____ effect outweighs the _____ effect. inelastic; price; quantity elastic; price; quantity inelastic; output; price elastic; output; price

inelastic; price; quantity

If your purchases of yoga pants decrease from 11 pairs per year to 9 pairs per year when your income increases from $39,000 to $44,000 a year, for you, yoga pants are a(n) _____ good. normal inferior complementary substitute

inferior

According to the Heckscher-Ohlin model, Chile will have a comparative advantage in lemons if lemons are _____ in the factors in which Chile is _____. intensive; abundant intensive; imported scarce; imported intensive; inexpensive

intensive; abundant

Saudi Arabia has a tremendous comparative advantage in oil production. Which factor is a source of this comparative advantage? mild temperatures large reserves of crude oil no opportunity cost associated with oil production high tariffs on oil from other nations

large reserves of crude oil

In general, the long-run price elasticity of demand for a good tends to be _____ the short-run price elasticity of demand for it. less than larger than equal to not comparable to

larger than

If a country has the comparative advantage in producing wine, the autarky price of wine in the country would be _____ the world price, and the country would _____ wine. less than; export greater than; export less than; import the same as; export

less than; export

Lucille bought some stock 10 years ago that has hovered at half its purchase price over the last 5 years. However, Lucille refuses to sell the stock, thinking that if she waits long enough, she will recover her investment. What type of behavior does this represent? mental accounting bounded rationality risk aversion loss aversion

loss aversion

The amount by which an additional unit of an activity increases total cost is the: net benefit. marginal benefit. negative benefit. marginal cost.

marginal cost.

The habit of mentally assigning dollars to different accounts so that some dollars are worth more than others is: status quo bias. bounded rationality. loss aversion. mental accounting.

mental accounting.

If the income elasticity of demand for a good is ______, the good is said to be _____. negative; inferior negative; a complement positive; inferior positive; a substitute

negative; inferior

According to the infant industry argument: small, traditional industries should be protected from foreign competition to maintain the viability of these industries. new industries should be protected from foreign competition until they become established. industries that provide non-monetary benefits to their employees should be compensated. a viable infant production sector should be protected, since such products are essential to the health of future generations.

new industries should be protected from foreign competition until they become established.

A particular good is said to be ______, if the income elasticity of demand for the good is positive. inferior a substitute normal positive

normal

If two goods are substitutes, their cross-price elasticity of demand is: negative. negative but almost equal to 0. equal to 0. positive.

positive.

Suppose the price of cupcakes decreases by 3%, and the quantity of cupcakes demanded increases by 1% per day. Demand for cupcakes is: price elastic. price inelastic. price unit-elastic. perfectly price inelastic.

price inelastic.

The burden of a tax on a good is said to fall completely on the consumers if the: price paid by consumers for the good declines by the amount of the tax. price paid by consumers for the good increases by the amount of the tax. price received by producers for the good declines by the amount of the tax. price received by producers for the good increases by the amount of the tax.

price paid by consumers for the good declines by the amount of the tax.

If quantity demanded does not respond significantly to a relatively large change in price, demand is: price-elastic. price-inelastic. positively sloped. insensitive to changes in price.

price-inelastic.

If the United States reduced tariffs on all softwood lumber, domestic _____ surplus would _____. producer; increase consumer; decrease total; decrease producer; decrease

producer; decrease

If the demand for economics textbooks is perfectly elastic, and a tax is levied on the producers of each unit: consumers will pay the entire tax, and there will be a deadweight loss, since the equilibrium quantity of economics textbooks will fall. consumers will pay the entire tax, and there will be no deadweight loss, since the equilibrium quantity of economics textbooks will remain constant. consumers and producers will share the burden of the tax, and there be no deadweight loss, since the equilibrium quantity of economics textbooks will remain constant. producers will pay the entire tax, and there will be a deadweight loss, since the equilibrium quantity of economics textbooks will fall.

producers will pay the entire tax, and there will be a deadweight loss, since the equilibrium quantity of economics textbooks will fall.

The supply curve for a good will be more elastic if: spending on the good accounts for a large share of a consumer's income. the good is a luxury item. production inputs are readily available at a relatively low cost. there is very little time for producers to respond to a price change.

production inputs are readily available at a relatively low cost.

Suppose an income tax is levied on 0% of the first $10,000 in income, 10% of the next $20,000, and 20% of remaining earnings. This type of tax can be defined as: progressive. proportional. regressive. equitable.

progressive

The incidence of a tax: is a measure of the revenue the government receives from it. refers to who writes the check to the government. refers to who really bears the burden of the tax. is a measure of the deadweight loss generated by the tax.

refers to who writes the check to the government.

Which situation demonstrates the benefits principle? FICA taxes used to fund employee training programs revenue from the federal tax on gasoline used to maintain and improve the interstate highway system most of the revenue from property taxes (paid by homeowners) used to fund public schools taxes on tobacco and alcohol used to pay state employees' salaries

revenue from the federal tax on gasoline used to maintain and improve the interstate highway system

If labor is abundant in India, but capital is scarce, when India opens to trade, the price of labor will _____, and the price of capital will _____. rise; rise fall; fall rise; fall fall; rise

rise; fall

An excise tax that the government collects from the consumers of a good: shifts the supply curve upward. decreases tax revenue for the government. shifts the demand curve downward. shifts the demand curve upward.

shifts the demand curve downward.

Suppose the cross-price elasticity of demand for apple sauce and avocados is 0.96, but the cross-price elasticity for soda and oranges is -0.13. This means that apple sauce and avocados are _____, while soda and oranges are _____. complements; substitutes substitutes; complements inelastic goods; elastic goods elastic goods; complements

substitutes; complements

If an excise tax is imposed on whiskey and collected from producers, the _____ curve will shift _____ by the amount of the tax. demand; upward demand; downward supply; upward supply; downward

supply; upward

A regressive tax: takes a lower percentage of income as income falls. takes a lower percentage of income as income rises. takes a fixed percentage of income regardless of the taxpayer's level of income. takes a larger share of the income of high-income taxpayers than of low-income taxpayers.

takes a lower percentage of income as income rises.

South Korea's comparative advantage in cellular technology can be attributed to: climate. factor endowments. technology. exchange rates.

technology.

The job creation argument for protection against free trade is: that restricting imports allows for greater domestic production. an aspect of the pauper labor fallacy. that full employment without trade yields greater national security. that restricting imports will stabilize the exchange rate and bring the economy to full employment.

that restricting imports allows for greater domestic production.

Which of the following is a common argument for trade protection? the infant industry argument the economic efficiency argument the diversification and profitability argument the economies of scale and productive capacity argument

the infant industry argument

Which of the following is a common argument for trade protection? the national security argument the economic efficiency argument the diversification and profitability argument the economies of scale and productive capacity argument

the national security argument

Sweden and Denmark both produce salted cod and automobiles with constant opportunity costs. Sweden will have a comparative advantage in salted cod if: it can produce more salted cod than Denmark. its labor productivity in salted cod production is greater than Denmark's. the absolute cost of producing salted cod is lower in Sweden than in Denmark. the opportunity cost of salted cod production is lower in Sweden than in Denmark.

the opportunity cost of salted cod production is lower in Sweden than in Denmark.

Constant marginal costs occur when the production of each additional unit costs: less than the previous one. more than the previous one. the same as the previous one. more than the next one.

the same as the previous one.

The benefits principle says that: the amount of tax paid should depend on your ability to pay. those who benefit from public spending should bear the burden of the tax that pays for that spending. those with a greater ability to pay should pay more tax. those who benefit from the tax should pay the same percentage of the tax base as those who do not benefit.

those who benefit from public spending should bear the burden of the tax that pays for that spending.

The ability-to-pay principle says that: the amount of tax paid depends on the measure of value. those who benefit the most from public spending should pay the tax. those with a greater ability to pay should pay more tax. the benefit you obtain depends on your ability to pay.

those with a greater ability to pay should pay more tax.

In a single year, Argentina can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Venezuela can raise 50 tons of beef or produce 750 boxes of tulips. When the two countries begin trading beef for tulips, we expect the price of beef in Argentina: to fall. to rise. to remain at the autarky price. to be 10 boxes of tulips.

to rise.

A perfectly inelastic demand curve is: horizontal. downward sloping. upward sloping. vertical.

vertical.

Tax incidence refers to: who writes the check to the government. who really pays the tax. the deadweight loss from the tax. the total revenue that the government collects from the tax.

who really pays the tax.

Demand for Bartlett pears is relatively elastic compared to the supply of Bartlett pears, so if a tax is imposed on consumers of Bartlett pears, the tax incidence: will fall on consumers more than producers. will fall on producers more than consumers. will fall equally on consumers and producers. cannot be determined without more information.

will fall on producers more than consumers.