Test 1 - Macroeconomics

If you pay $12 to see a movie at a multiscreen cinema, then sneak into a second movie without paying, the marginal cost of the second movie is:

$0

(Figure: Determining Surplus and Loss) In the graph, producer surplus is _____ in equilibrium and _____ at a price of $5.

$120; $30

Which example represents thinking at the margin?

- deciding whether a second burger is worth the extra $2 - deciding whether the overtime pay is worth working on your day off - deciding whether to pay a fine for polluting the local harbor or installing antipollution machinery - all of these examples represent thinking at the margin

Based on the figure, what is the value of deadweight loss when a government sets a price ceiling at $5 per unit?

70

Which of the following was not a contributing factor to the shortage of toilet paper during to the COVID-19 pandemic?

Businesses were pricing toilet paper much higher than the equilibrium price

KN95 masks are a substitute for N95 masks. If the price of N95 masks increases, what happens to the demand and equilibrium price of KN95 masks?

Demand for KN95 masks increases, pushing equilibrium price higher

In the graph, if the government sets a price of $5, this is an example of an effective price floor.

False

The choice to attend a free college lecture involves no opportunity cost.

False

The choice to attend a free concert involves no opportunity cost.

False

To be useful, an economic model must include every detail possible and not be an abstraction.

False

Willingness-to-pay is always equal to the price actually paid for an item.

False

Which of the following will shift the supply of orange juice?

Level of government subsidies to orange farmers rises

As used by economists, the term "Labor" includes the human talent one is born with.

True

Generally speaking, private markets are the most efficient institutions for providing goods and services.

True

Microeconomics studies the outcomes of individual markets in the national economy.

True

Suppose that a customer's willingness-to-pay for a product is $5, and the seller's willingness-to-sell is $2. If the negotiated price is $3, producer surplus is $1.

True

When many state and local governments implemented travel restrictions, demand for airline tickets fell, causing both the equilibrium price and quantity of airline tickets to decrease

True

Which is one of the four major reasons markets fail?

a mismatch of information

Imposing a price floor can cause

a surplus

Marginal analysis would put an emphasis on _____ costs and benefits.

additional

An increases in population will lead to ___________ in the market.

an increase in demand

Markets works as if they are:

guided as if by an invisible hand, according to Adam Smith

If a producer has a comparative advantage, then she has selected the activity that

has the lowest opportunity cost.

An increase in the price of oranges would NOT lead to a(n)

increased supply of oranges

Which is NOT an example of an improvement to human capital?

increasing the number of machines available to workers

9 Land as a production factor does Not include

machine

An increase in the price of oranges would lead to a(n)

movement up the supply curve for oranges

Rent control policy is an example of _______, and minimum wage is an example of _________

price ceiling; price floor

As airlines increase the number of premium seats for sale (all else equal), what happened to the equilibrium price and quantity of premium seat tickets?

price decreases but quantity increases

The law of demand states that as the price of a good increases, _______ decreases, ceteris paribus.

quantity demanded

The law of supply states that as the price of a good increases, _______________, ceteris paribus.

quantity supplied increases

Economic models must

rely on the ceteris paribus assumption.

When the supply of coffee increases:

the supply curve shifts to the right

Based on the figure, a valid price ceiling is ____, and there will be a shortage of ____ units. Alternatively, a valid price floor is at ____, and there will be surplus of ____ units.

$5; 40 units; $12; 40 units

What does ceteris paribus mean?

All else is held constant

Based on the table, ________ has an absolute advantage in producing steel and airplanes. ________ has a comparative advantage in producing steel (1 ton of steel=0.8 airplane) and _______ has a comparative advantage in producing airplanes ( 1 airplane=1 ton of steel)

Canada; Canada; Mexico

(Figure: Determining Surplus 2) In the graph, producer surplus is $15.

False

(Figure: Determining Surplus 3) In the graph, consumer surplus is $120.

False

As used by economists, the term "capital" includes the human talent one is born with.

False

In economics, capital refers to money.

False - manufactured buildings and equipment used in the production process

What is the effect of a price floor that is set below the market equilibrium?

No change to the equilibrium

Which of the following is NOT a positive question?

Should drinking be banned on campus?

Memory Chips, a key component in portable hard drives, have risen in price. What happens to the supply of portable hard drives?

Supply shifts to the left

How will a recession affect a country's PPF?

The country will produce at a point below an unchanged PPF

Suppose in the market for iPhones, the following two changes take place: (1) the cost of making iPhones rises, and (2) the price of smartphone data plans falls. What happens to the equilibrium price and the equilibrium quantity?

The equilibrium price rises, but the equilibrium quantity is indeterminate

The payment toward labor is called

Wages

Because people make decisions at the margin, when deciding whether to purchase a second TV, they would compare the

additional benefit expected from a second TV with the additional costs of the second TV

Imposing a price ceiling can cause

an excess demand

Based on the above figure, what is the value of deadweight loss when a government sets the price floor at $12 per unit?

deadweight loss = 1/2x(12-5)x(40-20)= 70

Based on the above PPF, point ____ is unattainable, and point _____ is attainable but inefficient. When we move from point b to point c, the opportunity cost of producing more corn is _____ than the opportunity cost of moving from point d to point e

g; h; less

What is the effect of a price ceiling that is ABOVE the market equilibrium?

no change to the equilibrium

Q14 When a society is producing the mix of goods that the society wants to consume, it is said to have:

obtained allocative efficiency

When a society is producing the mix of goods at the lowest costs, it is said to have:

obtained production efficiency

The graph describes a situation in which

only industry 2 has had a technological improvement

Smoking exhibits external costs (second hand smoke to non-smokers) is a ____________ statement, so smoking should be banned on campus is a _________statement.

positive; normative

When most people stayed home and cooked more, demand for retail groceries increased significantly. What happened to the market price and quantity of groceries, all else equal?

price and quantity both increased

(Figure: Determining Surplus and Loss) In the graph, if the government sets a maximum price of $5, there is a

shortage of 40 units

To gain from trade, a country should

specialize in the commodity for which it has a comparative advantage

If a market is NOT at equilibrium

the price will change and, in response, market participants will move along the existing supply and demand curves until the market reaches equilibrium