Econ Exam 1

A bakery can produce either cakes or cookies. If the price of cookies rises, then A) the supply curve of cake shifts leftward. B) there is a movement downward along the supply curve of cakes. C) the supply curve of cake shifts rightward. D) there is a movement upward along the supply curve of cakes.

A

Assume that an individual spends his income on sweaters and shirts. If the price of a sweater increases: A) the opportunity cost of buying sweaters increases. B) the opportunity cost of buying shirts increases. C) the opportunity cost of buying sweaters decreases. D) There is no change in the opportunity cost of consuming either good.

A

Refer to Figure 4. Let the price of brownies be $3.00, then the price P3 (where the third person starts supplying cookies) is A) $6.00 B) $4.00 C) $2.00 D) $1.00 E) None of the above.

A

Refer to Figure 4. Which producer has an absolute advantage in producing brownies? A) Anthony B) Carlos C) Briana D) None of the above. + E) All of the above.

A

Refer to the figure above. What is the absolute value of the arc (midpoint formula) elasticity of demand when the price falls from $8 to $4? A) 2 B) 4 C) 10 D) 8

A

Scenario: Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours, and the required amount of gasoline costs $250. Her opportunity cost of time is $15 per hour. Refer to the scenario above. Maria should choose to: A) drive, as it will save her $120. B) drive, as it will give her a real saving of $150. C) travel by train, because it is quicker. D) travel by train, as it will save her $30 in travel time.

A

Soo Jin shares a one-bedroom apartment with her classmate. Her share of the rent is $700 per month. She is considering moving to a studio apartment which she will not have to share with anyone. The studio apartment rents for $950 per month. Recently, you ran into Soo Jin on campus and she tells you that she has moved into the studio apartment. Soo Jin is as rational as any other person. As an economics student, you rightly conclude that A) Soo Jin figures that the additional benefit of having her own place (as opposed to sharing) is at least $250. B) Soo Jin figures that the additional benefit of having her own place (as opposed to sharing) is at least $950. C) the cost of having one's own space outweighs the benefits. D) Soo Jin did not have a choice; her roommate was a slob.

A

Suppose that you are spending two hours a day studying economics, and your grade is 85 percent. You want a higher grade and decide to study for an extra hour a day. As a result, your grade rises to 90 percent. Your marginal benefit is the A) 5 point increase in your grade. B) 5 point increase in your grade minus the opportunity cost to you of spending the hour studying. C) extra hour per day you spend on studying. D) three hours per day you spend on studying.

A

Which of the following statements is true? A) Rational economic agents maximize more than just monetary income. B) It is not necessary to consider the risks of a particular alternative while making an optimal decision. C) An individual does not require information to make optimal decisions. D) The principle of optimization is only accurate when it comes to making monetary decisions.

A

If demand for Farmer John's maple syrup is inelastic, then when Farmer John raises the price of maple syrup, his total revenue will A) decrease. B) increase. C) stay the same. D) probably change, but more information is needed to determine if the total revenue increases, decreases, or stays the same.

B

If quantity of tea is measured on the horizontal axis and quantity of coffee is measured on the vertical axis, an increase in the price of coffee will cause the budget constraint to: A) pivot leftward (inwards) along the horizontal axis. B) pivot leftward (inwards) along the vertical axis. C) pivot rightward (outwards) along the horizontal axis. D) pivot rightward (outwards) along the vertical axis.

B

In the summer 2012 the lobster catch in Maine was especially large, but instead of celebrating the fisherman were suffering from a lower total revenue. (Source: New York Times, July 28, 2012) Despite the larger quantity of lobster caught, the total revenue of the fisherman decreased. This fact means that the demand for lobster is A) elastic. B) inelastic. C) perfectly elastic. D) unit elastic

B

Oatmeal is a normal good and cold cereal is a substitute for oatmeal. Raisins are a complement for oatmeal. Which of the following increases the demand for oatmeal? A) an increase in the price of raisins B) an increase in the price of cold cereal C) a decrease in population D) a decrease in income

B

Which of the following is NOT an example of an opportunity cost? A) Because David used all of his vacation time to paint his house, he was unable to visit the Caribbean last year. B) Because Mary is now being paid a higher wage, she can afford to buy a new car even though she is moving into a bigger apartment. C) By choosing to attend college, Jean was not able to continue working as an electrician; as a result, she gave up more than $85,000 in earnings while she was in college. D) By spending Thursday night studying for an economics exam, a student was unable to complete a homework assignment for calculus class.

B

Which of the following is TRUE? A) If consumers expect the price of a good will rise in the future, the demand curve shifts leftward. B) For an inferior good, when income increases, the demand curve shifts leftward. C) An increase in population shifts the demand curve for most goods leftward. D) The demand curve for a good shifts leftward when the price of a substitute rises.

B

Which of the following statements best describes a normal good? A) A normal good is a good that is readily available in the market. B) A normal good is a good whose demand increases with an increase in consumers' income. C) A normal good is a good that is rationed by the government. D) A normal good is a good whose supply increases as its price decreases.

B

Which of the following statements is true? A) Optimizers with the lowest opportunity cost of time push up the rental price of apartments with the lowest commute time. B) As the rental prices of downtown apartments rise, only workers with the highest opportunity cost of time will be willing to rent them. C) As the rental prices of downtown apartments rise, only workers with the lowest opportunity cost of time will be willing to rent them. D) Optimizers with the highest opportunity cost of time push up the rental price of apartments with the highest commute time.

B

A politician argues that a tornado that destroyed several houses (but caused no injuries) has some positive impacts, because rebuilding the homes will increase employment and income for construction workers. The politician is: A) Correct, because the demand for housing construction has increased. B) Incorrect, because the supply of housing has decreased. C) Incorrect, because the opportunity cost of the resources used in rebuilding mean that other, more desirable goods can't be purchased. D) Correct, because the rebuilt homes will be more energy-efficient and have more modern appliances. E) Correct, because the construction workers will spend their additional income on other goods.

C

A student is studying for an exam 2 hours a day and is debating whether to study an extra hour. The student's marginal benefit A) is greater than the student's marginal cost. B) depends on the grade the student earns on the exam. C) is the benefit the student receives from studying the extra hour. D) is the benefit the student receives from studying all 3 hours.

C

At a local ice cream parlor, when the price of half-gallons of chocolate ice cream was lowered by fifty cents per half-gallon, total revenue from the sale of chocolate ice cream decreased. This result indicates that A) there are more people who like vanilla ice cream than there are people who like chocolate ice cream. B) the demand for chocolate ice cream is elastic. C) the demand for chocolate ice cream is inelastic. D) None of the above answers is correct.

C

Homer changes jobs and his new job pays him a higher income. Before he changed jobs, Homer purchased 3 pounds of tuna and 2 pounds of chicken. After he changed jobs, Homer now purchases 2 pounds of tuna and 3 pounds of chicken. For Homer A) tuna is a normal good and chicken is an inferior good. B) both tuna and chicken are inferior goods. C) tuna is an inferior good and chicken is a normal good. D) both tuna and chicken are normal goods.

C

If good growing conditions increase the supply of strawberries and hot weather increases the demand for strawberries, the quantity of strawberries bought A) doesn't change and the price falls. B) doesn't change and the price rises. C) increases and the price might rise, fall or not change. D) increases and the price rises.

C

One year, the government boosted regulated taxi fares in New York City by 15 percent with the expectation that the total revenue from taxi rides would also increase by 15 percent. The taxi commission that authorized this fare increase must have believed that the demand for taxi service was A) elastic, but not perfectly elastic. B) inelastic, but not perfectly inelastic. C) perfectly inelastic. D) unit elastic.

C

Refer to Figure 4. Moving along segment F on the supply curve graph corresponds to moving along which part of the PPF? A) Segment A B) Segment B C) Segment C D) None of the above.

C

Refer to Figure 4. Who is producing some cookies and some brownies at point D on the PPF graph on the left. A) Anthony B) Carlos C) Briana D) None of the above. E) All of the above.

C

Which of the following best describes a good with perfectly elastic demand? A) The quantity demanded of the good is completely unaffected by a price change. B) For a given price change, the percentage change in quantity demanded will be less than the percentage change in its price. C) Even the smallest increase in the price of the good will cause consumers to stop consuming it completely. D) The demand curve for the good initially slopes upward, reaches its maximum, and then slopes downward.

C

Which of the following correctly identifies the trade-off that a budget constraint represents? A) The optimum combination of goods that a consumer with a given income should purchase B) The maximum amount of two goods that a consumer can purchase given his income C) The amount of one good that has to be given up to purchase an additional unit of the other good D) The amount of income that must be given up to obtain an additional unit of a good

C

Which of the following decreases the supply of restaurant meals? A) Consumers' incomes decrease and restaurant meals are a normal good. B) The price of movies, a complement to restaurant meals, falls. C) Waiters get a pay raise. D) Consumers' incomes increase and restaurant meals are a normal good.

C

Which of the following is a normative statement? A) Studying more hours leads to an increase in your GPA. B) An increase in tax rates means people work fewer hours. C) States should require all motorcycle riders to wear helmets to reduce the number of riders killed. D) Taking extra vitamin C prevents catching a cold.

C

You have the choice of going on vacation to Florida for one week, staying at work for the week, or spending the week doing fix-up projects around your house. If you decide to go to Florida, the opportunity cost of the trip is A) working and doing fix-up projects. B) working, because you would be giving up income. C) working or doing fix-up projects, depending on which you would have done otherwise. D) nothing because you will enjoy the trip to Florida

C

An omitted variable is a variable that: A) does not cause other variables in a study to change when it changes. B) is removed from a study as it can lead to the problem of reverse causality. C) is purposely left out as it does not aid an economic analysis. D) has been left out, and if included, would explain why the variables considered in a study are correlated.

D

Gary consumes 10,000 units of electricity when his income is $500. When his income increases to $1,000, his consumption of electricity increases to 18,000 units. What is Gary's income elasticity of demand for electricity? A) 2 B) 1.8 C) 0.5 D) 0.8

D

Greenaqua Corp. is the only supplier of bottled drinking water in the country Lithasia. Due to the profits the firm enjoys, new corporations are interested in entering the market. If a few more companies producing their own line of bottled drinking water enter the market, which of the following statements will be true about Greenaqua Corp.? A) The elasticity of demand of Greenaqua Corp.'s product is likely to remain the same. B) The elasticity of demand of Greenaqua Corp.'s product is likely to decrease. C) The profit Greenaqua Corp. earns on their line of bottled drinking water is likely to increase. D) The elasticity of demand of Greenaqua Corp.'s product is likely to increase.

D

In March, the quantity of orange juice sold in the town of Jackson was 3000 cartons and the price $3. In May, the quantity of orange juice sold in the town of Jackson was 3500 cartons and the price was $3.20. This change in the price and quantity sold could have been the result of A) the after effects of a cold winter in Florida that killed half of the orange crop. B) a reduction in the number of orange juice coupons provided by local markets. C) the after effects of a warm winter in Florida that increased the orange crop yield by 50 percent. D) the release of a medical study suggesting that consuming orange juice helps prevent cancer

D

In Module 5, Dr. Meer described the impact of local gun buyback programs in economic terms. Which of the following best describes the effects of these programs? A) The demand for guns is very inelastic, so gun buyback programs are unsuccessful at providing incentives to turn in guns. B) Because the demand for guns increases due to the buyback and the supply of guns increases due to the incentives to turn them for a fee, the price of guns goes up but the impact on the equlibrium quantity is unclear. C) The supply of guns in a city is inelastic, so increases in demand from buyback programs lead to a large number of guns removed from circulation. D) The supply of guns in a city is very elastic, so increases in demand from buyback programs lead to a large increase in the equilibrium quantity of guns in the city but small or no changes in the number of guns on the street.

D

Suppose a medical study reveals new benefits to consuming beef and at the same time a bumper corn crop reduces the cost of feeding steers. The equilibrium price of beef will A) fall. B) stay the same. C) rise. D) perhaps rise, fall, or stay the same, but more information is needed to determine which it does.

D

Taco Bell's economists determine that the price elasticity of demand for their tacos is 2.0. So, if Taco Bell raises the price of its tacos by 6.0 percent, the quantity demanded will decrease by ________ percent. A) 6.0 B) 2.0 C) 3.0 D) 12.0

D

The price of cereal rises. As a result, people have cereal for breakfast on fewer days and eat eggs instead. This behavior is an example of A) an increase in the quantity demanded of eggs because of the income effect. B) an increase in the quantity supplied of eggs because of the income effect. C) a decrease in the quantity supplied of cereal because of the substitution effect. D) a decrease in the quantity demanded of cereal because of the substitution effect.

D

Which of the following factors is likely to lead to an increase in the quantity demanded of pens? A) A fall in the incomes of all consumers B) A fall in the price of paper C) A rise in the incomes of all consumers D) A fall in the price of pens

D

Which of the following leads to a movement along the demand curve for spinach but does NOT shift the demand curve for spinach? A) an increase in income for all spinach lovers B) an increase in the price of broccoli, a substitute for spinach C) a newly discovered health benefit from eating spinach D) a rise in the price of spinach

D

Which of the following statements is true? A) Correlation can only arise when causation is not present. B) Causation arises when there is correlation between two variables, and can also arise even when there is no correlation. C) Causation can only arise when correlation is not present. D) Correlation arises when there is causation and can also arise even when there is no causation.

D

Refer to Figure 4 (on the previous page). What is the opportunity cost in terms of brownies for producing an extra cookie at point D on the left-hand graph? A) 3 B) 2 C) 1 D) 0.5 E) 0.333

E

Reger to Figure 4. Which producers are supplying their maximum output of brownies at point H on the graph? A) Carlos and Anthony B) Briana and Anthony C) Anthony D) All of the above. E) None of the above

E