Microeconomics Final Exam

Bryce and Tina are artisans who produce homemade candles and soap. Table 9-3 lists the number of candles and bars of soap Bryce and Tina can each produce in one month.

Tina has a comparative advantage in making candles.

Table 4-1. The table above lists the highest price three consumers. Tom, Dick, and Harriet are willing to pay for a short-sleeved polo shirt. If the price of one of the shirts is $28 dollars.. Tom: $40 Dick: $30 Harriet: $25

Tom will buy two shirts. Dick will buy one shirt and Harriet will buy no shirts.

Consumer Willingness to Pay Tom $40 Dick $30 Harriet $25 The table above lists the highest prices three consumers, Tom, Dick and Harriet, are willing to pay for a short-sleeved polo shirt. If the price of one of the shirts is $28 dollars

Tom will get $12 surplus

Which of the following statements is true?

Total cost = fixed cost + variable cost

Which of the following statements is true?

When a market is in equilibrium, consumer surplus equals producer surplus.

China has developed a comparative advantage in the production of clothing. The source of this comparative advantage is

a large supply of unskilled workers and relatively little capital.

The selling of a product for a price below its cost of production is called

dumping

Assume you and your cousin Vinny set up a partnership and your lawyer tells you that as the owners you will each face unlimited liability. What does that mean?

each of you could stand to lose your personal wealth if business goes bankrupt

________ refers to the reduction in economic surplus resulting from not being in competitive equilibrium.

economic shortage

Trade between countries that is without restrictions is called

free trade

A tariff is a tax imposed by a government on

imports

Goods and services bought domestically but produced in other countries are referred to as

imports

A _____ is represented by a rightward shift of the demand curve while an ------- is represented by a movement along a given demand curve

increase in demand; increase in quantity demanded

An increase in income leads to a decrease in demand of popcorn, then popcorn is ________ good

inferior good

Protectionism

is the use of trade barriers to protect domestic firms from foreign competition.

A firm has successfully adopted a positive technological change when

it can produce more output using the same inputs

A --------- demand curve for shampoo would be caused by a change in the price of shampoo.

leftward shift of the

A tariff

makes both domestic producers and consumers worse off. makes domestic consumers worse off. makes domestic producers worse off. makes everyone better off.

Limited personal liability is an advantage for

partnerships & corporations

A firm increased its production and sales because the firms manager rearranged the layout of his factory floor. This is an example of

positive technological change

Exports are domestically produced goods and services

sold to other countries.

Absolute advantage is

the ability to produce a good using fewer inputs than another producer

Economic Surplus

the sum of consumer surplus and producer surplus

A decrease in the expected future price of the product would be represented by a movement from

the top of the line to the bottom.

A network externality occurs when

the usefulness of a good is affected by how many other people use the good

a significant downside to network externalities is that

there may be large switching costs to consumers of changing products so that consumers end up using products with inferior technologies

Apple's decision in 2002 to focus on developing a smartphone rather than a tablet computer exemplifies that

trade-off that firms face out to limited resources

A normal good is a good for which the demand increases as income decreases, holding everything else constant.

true

Deadweight loss refers to the reduction in economic surplus resulting from a market not being in competitive equilibrium.

true

Many people assume that if child workers in developing countries weren't working in factories, they would be in school. In fact, children in developing countries

usually have few good alternatives to work.

If you start a partnership with your friend, and the lawyer tells you that you each face unlimited liability, what's that mean?

you could both lose all personal wealth

Which of the following describes the infant industry argument for protectionism? Domestic producers require time to gain experience and lower their unit costs; this will allow these producers to compete successfully in international markets. An industry must be protected in its early stages of development so that firms can compete with government-subsidized foreign competition. Domestic producers in high-wage countries must be protected from foreign producers in low-wage countries to produce a level playing field. Some strategic industries must be protected to ensure adequate supplies of resources needed for national defense in emergencies.

Domestic producers require time to gain experience and lower their unit costs; this will allow these producers to compete successfully in international markets.

Which of the following statements is true? All individuals in both countries are made better off as a result of international trade. 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. Within each country, some individuals are made better off as a result of international trade, but one of the countries will be worse off overall. Although some individuals are made better off as a result of international trade, both countries may be made worse off overall.

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.

Protection in the form of tariffs create winners and losers. Winners include ________ and losers include ________.

Firms sheltered from foreign competition; U.S. consumers and taxpayers

When Roxanne, a U.S. citizen, purchases a designer dress from Barneys of New York that was made in Milan, the purchase is

Italy export; us import

Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 9-1 lists the number of dogs Linda and Sandy can each bathe and groom in one week.

Linda has a comparative advantage in dog bathing

Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 9-1 lists the number of dogs Linda and Sandy can each bathe and groom in one week. Refer to Table 9-1. Select the statement that accurately interprets the data in the table.

Linda has a comparative advantage in dog grooming.

Electric car enthusiasts want to buy more electric cars at a lower price. All of the following events would have this effect except

an increase in the price of gasoline.

If the price of pork rinds falls, the substitution effect due to the price change will cause

an increase in the quantity demanded

Workers in industries protected by tariffs and quotas are likely to support these trade restrictions because

believe restrictions will protect their jobs

NAFTA refers to a 1994 agreement that eliminated most tariffs among which countries?

canda, us , mexico

Supply Schedule

chart or table that tells how many "units" of something producers will make based on the current market price of a unit

________ 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

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.

comparative; export

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

The possible double taxation of income is a disadvantage for

corporations

The difference between the ____ and the ______ from the sale of a product is called producer surplus

cost to produce a product; profit received

Refer to Figure 3-1. An increase in the expected future price of the product would be represented by a movement from

d2 to d1

Refer to Figure 3-1. A decrease in taste or preference would be represented by a movement from

d2 to d1, the whole line would move to the left

Disagreements about whether the U.S. government should regulate international trade

dates back to beginning of century

By drawing a demand curve with ________ on the vertical axis and ________ on the horizontal axis, economists assume that the most important determinant of the demand for a good is the ________ of the good.

price, quantity, price

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

principal-agent problem

A numerical limit imposed by a government on the quantity of a good that can be imported into the country is called a

quota

The main purpose of most tariffs and quotas is to

reduce the foreign competition that domestic firms face

Trade restrictions tend to preserve ________ in the protected industries and lead to ________ in other industries.

relatively few jobs; job losses

If the price of propane-fueled gas grills was to decrease, then

the demand for propane would increase

A decrease in taste or preference would be represented by a movement from

the left line moving toward the left.