ECON 2106 Test 1
Which of the following events will definitely cause equilibrium quantity to rise?
demand and supply both increase
For a good that is a necessity,
demand tends to be inelastic.
Normative statements are not
descriptive
A $1.50 tax levied on the buyers of pomegranate juice will shift the demand curve
downward by exactly $1.50.
Laws that restrict the smoking of cigarettes in public places are examples of government intervention that is intended to reduce
externalities.
To improve living standards, policymakers should
formulate policies designed to increase productivity.
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10 percent. The change in equilibrium quantity will be
greater in the bread market than in the aged cheddar cheese market.
Economists at the Department of Justice
help enforce the nation's antitrust laws.
In the simple circular-flow diagram, the participants in the economy are
households and firms.
Suppose the United States has a comparative advantage over Mexico in producing pork. The principle of comparative advantage asserts that
in order to consume beyond its PPF, the United States should produce more pork than what it requires and export some of it to Mexico.
An increase in the number of college scholarships issued by private foundations would
increase the demand for education
If the demand for donuts is elastic, then a decrease in the price of donuts will
increase total revenue of donut sellers.
If the price elasticity of supply for wheat is less than 1, then the supply of wheat is
inelastic
You can increase your revenue by raising the price of your product only if the demand for your product is
inelastic
The business cycle is the
irregular fluctuations in economic activity.
If, at the current price, there is a surplus of a good, then
sellers are producing more than buyers wish to buy.
Suppose that a tax is placed on books. If the sellers bear most of the burden of the tax, then we know that the
supply is more inelastic than the demand.
Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If the federal government increases the minimum wage by $1.00 per hour, then it is likely that the
supply of bicycles will shift to the left
Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If the federal government increases the minimum wage by $1.00 per hour, then it is likely that the
supply of bicycles will shift to the left.
Wheat is the main input in the production of flour. If the price of wheat decreases, then we would expect the
supply of flour to increase.
If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of
the availability of close substitutes in determining the price elasticity of demand.
A baker recently has come to expect higher prices for bread in the near future. We would expect
the baker to supply less bread now than she was supplying previously.
In most societies, resources are allocated by
the combined actions of millions of households and firms
Pizza is a normal good if
the demand for pizza rises when income rises.
The term tax incidence refers to
the distribution of the tax burden between buyers and sellers.
Assume the market for pork is perfectly competitive. When one pork buyer exits the market,
the price of pork does not change
Income elasticity of demand measures how
the quantity demanded changes as consumer income changes.
If something happens to alter the quantity supplied at any given price, then
the supply curve shifts.
Buyers of a good bear the larger share of the tax burden when a tax is placed on a product for which
the supply is more elastic than the demand.
If an economy is producing efficiently, then
there is no way to produce more of one good without producing less of another good.
The minimum wage, if it is binding, lowers the incomes of
those workers who cannot find jobs
Suppose there is an increase in the price of steel. We would expect the supply curve for steel beams
to shift leftward.
The law of demand states that, other things equal,
when the price of a good falls, the quantity demanded of the good rises.
The law of supply states that, other things equal,
when the price of a good rises, the quantity supplied of the good rises
Kelly and David are both capable of repairing cars and cooking meals. Which of the following scenarios is not possible?
Kelly has a comparative advantage in repairing cars and in cooking meals.
In a market economy, supply and demand are important because they
- play a critical role in the allocation of the economy's scarce resources - determine how much of each good gets produced - can be used to predict the impact on the economy of various events and policies
Which of the following statements is correct?
- The demand for flat-screen computer monitors is more elastic than the demand for monitors in general. - The demand for grandfather clocks is more elastic than the demand for clocks in general. - The demand for cardboard is more elastic over a long period of time than over a short period of time.
If a 15% increase in price for a good results in a 20 percent decrease in quantity demanded, the price elasticity of demand is
1.33.
A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 bagels. Using the midpoint method, the price elasticity of supply for bagels is
1.63
A manufacturer produces 400 units when the market price is $10 per unit and produces 600 units when the market price is $12 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about
2.2.
Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 5 bushels of corn or 50 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. If the two countries do not trade, Cornland will produce and consume 400 bushels of corn and 100 bushels of oats, while Oatland will produce and consume 60 bushels of corn and400 bushels of oats. If each country made the decision to specialize in producing the good in which it has a comparative advantage, then the combined yearly output of the two countries would increase by
340 bushels of corn and 500 bushels of oats
For which of the following individuals would the opportunity cost of going to college be highest?
A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree
Which of the following is a correct statement about production possibilities frontiers?
An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier
Suppose there is a flood in St. Louis, Missouri, that destroys several beer bottling facilities. Which of the following would not be a direct result of this event?
Buyers would not be willing to buy as much as before at each relevant price.
When the government implements programs such as progressive income tax rates, which of the following is likely to occur?
Equality is increased and efficiency is decreased.
Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market?
Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
The principle of comparative advantage does not provide answers to certain questions. One of those questions is
How are the gains from trade shared among the parties to a trade?
Which of the following statements is correct about the roles of economists?
In trying to explain the world, economists are scientists; in trying to improve the world, they are policy advisers.
Which of the following statements about models is correct?
Models assume away irrelevant details.
What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell?
Price would fall and the effect on quantity would be ambiguous.
Consider the U.S. market for chocolate, a market in which the government has imposed a nonbinding price ceiling. Which of the following events could convert the price ceiling from a nonbinding to a binding price ceiling?
South American cocoa bean producers refuse to ship to chocolate producers in the United States.
Some, but not all, government economists are employed within the administrative branch of government. Which of the following government agencies employ economists outside of the administrative branch?
The Congressional Budget Office
Which of the following would shift the supply of Green Bay Packers football jerseys to the left?
The cost of the fabric used to make the jerseys increases.
What will happen in the market for shotgun-shell ammunition now if buyers expect higher shotgun-shell prices in the near future?
The demand for shotgun-shell ammunition will increase.
Which of the following statements is valid when supply is perfectly elastic at a price of $4?
The elasticity of supply approaches infinity.
What would happen to the equilibrium price and quantity of lattés if the cost of producing steamed milk, which is used to make lattés, rises?
The equilibrium price would increase, and the equilibrium quantity would decrease.
For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?
The good is a luxury.
Which of the following is not held constant in a supply schedule?
The price of the good
When constructing a production possibilities frontier, which of the following assumptions is not made?
The quantities of the factors of production that are available are increasing over the relevant time period.
Which of the following statements about the effects of rent control is correct?
The short-run effect of rent control is a relatively small shortage of apartments, and the long-run effect of rent control is a larger shortage of apartments.
Which of the following is not an example of a group responding to an incentive?
Universities offer fewer online classes when they generate more revenue at the same cost than traditional classes.
A price ceiling is
a legal maximum on the price at which a good can be sold.
Which of the following observations would be consistent with the imposition of a binding price ceiling on a market? After the price ceiling is established,
a smaller quantity of the good is bought and sold.
Which of the following would not shift the supply curve for mp3 players?
an increase in the price of mp3 players
When the "invisible hand" guides economic activity, prices of products reflect
both the values that society places on those products and the costs to society of producing those products.
When a tax is placed on the buyers of lemonade, the
burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal.
Demand is said to be price elastic if
buyers respond substantially to changes in the price of the good.
To say that a price floor is binding is to say that the price floor
causes quantity supplied to exceed quantity demanded
Suppose that the demand for picture frames is inelastic and the supply of picture frames is elastic. A tax of$1 per frame levied on picture frames will decrease the effective price received by sellers of picture frames by
less than $0.50.
Suppose there are six bait and tackle shops that sell worms in a lakeside resort town in Minnesota. If we add the respective quantities that each shop would produce and sell at each of the six bait and tackle shops when the price of worms is $2 per bucket, $2.50 per bucket, and $3 per bucket, and so forth, we have found the
market supply curve.
All market participants are price takers that have no influence over prices in markets that feature
numerous buyers and numerous sellers.
The demand for Neapolitan ice cream is likely quite elastic because
other flavors of ice cream are good substitutes for this particular flavor.
The use of theory and observation is more difficult in economics than in sciences such as physics due to the difficulty in
performing an experiment in an economic system.
When a shortage exists in a market, sellers
raise price, which decreases quantity demanded and increases quantity supplied, until the shortage is eliminated.
