ECON Exam 1 Sample Test 2

The opportunity cost of winning four free tickets to the Boston College vs Clemson Homecoming game is worth $320 (on Stub-Hub) and choosing to attend the game is:

at least $320, the lost market value of selling the

What are the total gains from trade at the free market equilibrium?

$1,000

*graph At a price of $200, consumer surplus is:

$10,000

*graph What is the change in producer surplus if the price rises from $2 to $3 per unit?

$15

If Clemson University President Jim Clements valued a parking space close to the Sikes Hall at $1500 and paid $900 for a parking permit, he would receive consumer surplus equal to:

$600

Which of the following statements is true?

Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good or service and its market price.

* (graph) The production possibility frontiers above show what Mexico and the U.S. can produce using 24 units of labor. The opportunity costs of producing 1 computer are:

6 shirts for Mexico and 1 shirt for the US

A growing number of utility companies are using drones for site inspections. What is the effect of these changes on the equilibrium price and quantity, in the market for drones?

Both the equilibrium price and the equilibrium quantity will rise.

Consider your decision to attend class each day or skip it. Which of the four core principles of economics applies to the notion that attending class will most likely help you understand the material better and perform well on future exams?

Cost-benefit principle

How did the spread of the Internet affect the market for newspapers?

Demand decreased, causing the price to fall.

If hipsters decide that Bush Light Apple has become the beverage that all the cool people are drinking, what will happen in the market for Natural Light's Naturdays?

Demand will decrease, quantity supplied will decrease, and price will decrease.

If the price of Netflix decreases, what will happen in the market for Hulu?

Demand will decrease, quantity supplied will decrease, and price will decrease.

* Suppose France can produce 4 phones or 3 computers with 1 unit of labor, and Sweden can produce 1 phone or 2 computers with 1 unit of labor. If France can trade only with Sweden, then the theory of comparative advantage suggests that:

France should specialize in producing phones and import computers from Sweden

Vincent Pearson makes dining tables, and he is trying to decide how many tables to produce. He can sell each dining table for $1,000. The cost of the first table is $500, for the second it's $700. For each additional table he produces, the marginal cost of each table increases by $200. How many dining tables should Vincent produce, and what is the total cost of his production?

He will produce three tables at a cost of $2,100

Joe runs a landscape company and uses one of the bedrooms in his home as a home office. This office could be used to earn rental income from college students. If average rental income in Joe's neighborhood were to rise:

Joe's opportunity cost of using a bedroom as a home office would increase.

After adjusting for inflation, a comparison of the price of leg warmers reveals that the price was significantly higher in the 1980s than it is today. Which of the following can explain this?

Since the 1980s jeans, leggings, and jeggings have become preferable to leg warmers, decreasing the demand for leg warmers.

* Which of the following best describes the principle of comparative advantage?

Someone has the ability to produce the same good for the lowest opportunity cost

The COVID-19 pandemic caused many consumers to be quarantined in their homes. The supply and demand model would predict which of the following events in the market for craft supplies sold by online craft stores?

The demand for craft supplies sold by online retailers would increase, resulting in a higher equilibrium price and a higher equilibrium quantity.

If Tesla cars become less expensive, what will happen in the market for other electric care?

The demand for other electric cars will fall

Which of the following is NOT a factor that can shift supply?

The market price of a product

Fluctuations in graduate school enrollment correlate positively with fluctuations in unemployment. What is the most likely reason why?

The opportunity cost of going to graduate school is low when jobs are hard to find

Which of the following explains why a seller might charge a high price when a new video game console is first released and then lower the price as time goes by?

The seller can charge a high price to consumers who want to be the first ones to own a newly released product.

The COVID-19 pandemic caused many gyms to close down for good. The supply and demand model would predict which of the following events in the gym membership market?

The supply of gym memberships would decrease, resulting in a higher equilibrium price and a lower equilibrium quantity

The Bangtan Boys (BTS) sold out their first US concert, almost as soon as the tickets became available. Moreover, tickets for the BTS tour were, on average, twice as expensive as tickets for Taylor Swift's 2018 Reputation tour. How can you explain this difference in ticket prices?

There is a shortage of BTS tickets compared to Taylor Swift tickets.

Mario buys 8 units of good X when his income is $2,000 a month. When his income increases to $2,700 per month, he buys only 6 units of good X. For Mario, good X is:

an inferior good

Suppose Clemson University decides to increase its enrollment by 50 percent over the next five years in order to increase tuition revenue. Which of the following would most likely occur in the market for rental housing in the surrounding community?

an increase in the demand for rental housing

Which of the following are likely to be complements?

books and book-lights

The basic postulate of economics indicates that change in incentives influence the:

choices of individuals with regard to a wide range of activities, including those generally perceived as social or political.

The marginal principle breaks quantity decisions into iterative decisions that use the

cost-benefit principle

During the Great Recession of 2007-2009, unemployment shot up and a lot of people lost their jobs. All over the United States, people worried about job security. Which of the following do you think happened as a result of the Great Recession? (i) Consumers ate out less often. (ii) Consumers purchased fewer higher-end vehicles.(iii) Purchases of new housing went down. (iv) Consumers took fewer vacations outside

d. (i), (ii), (iii) and (iv) are all correct

Recently, China announced that it would attempt to crack-down on the use of bitcoin and other cryptocurrencies for buying and selling goods. We would expect this to

decrease the demand for bitcoin and crypto currencies

In 2014, California institute a ban on single-use disposable plastic shopping bags due to concern over plastics pollution. Which graph depicts what happened in the market for reusable cloth bags in California?

graph A

In 2011, Japan suffered a major earthquake and tsunami. Honda parts that were sourced from Japan could no longer be produced, which caused Honda to cut its production of cars. Which graph shows the effect of this shortfall?

graph C

A coffee shop opens next to an existing coffee shop. Which of the following graphs shows the effect of this new coffee shop on the market supply curve for coffee in this area?

graph a

Tropicana produces both orange juice and tropical juice blends. What will happen to the supply of Tropicana orange juice when the opportunity cost of producing tropical juice blends rises, and the opportunity cost of producing orange juice stays the same? (Hint: Opportunity costs are part of a producer's marginal cost.)

graph a

Fossil has started an aggressive advertising campaign for its wallets. Which graph shows how the demand in the market might change if the advertising campaign is successful?

graph d

In competitive markets, shortages lead to:

higher prices

Cell phone data plans are most useful when used with a smartphone, and smartphones are most useful when used with a data plan. As the price of data plans falls, the demand for smartphones will:

increase because smartphones and data plans are complements

When there is a shortage, sellers have an incentive to _____ their price and buyers have an incentive to offer a _____ price

increase; higher

Paul is a wheat farmer in a perfectly competitive market. The market price of wheat is $250 per ton. If Paul charges $245 per ton, he will

lower his profitability by $5 per ton

Based on the ideas of Adam Smith, it is _____ barbers wash, cut, and style hair, but------.

not out of benevolence that; from their regard for their own self interest

Asking "Or what?" allows the _____ principle to be analyzed as a simple question

opportunity cost

Which variable is NOT a demand shifter?

price of raw materials

The production possibility frontiers above show what Mexico and the U.S. can produce using 24 units of labor. Mexico has a comparative advantage in _____, and the United States has a comparative advantage in -------.

shirts; computers

*graph If the price of the product is $14, there is a:

shortage of 50 units of the product, and the price will rise to $16

During the Great Recession, many people could not afford to pay their mortgage on their house and had to move into an apartment or move in with family. This resulted in an increase in the _________ of used homes and a ____ in price. The interdependence principle tells us that the ______ in price of used homes caused a _______ in demand for new home.

supply, fall, fall, decrease

* Absolute advantage refers to:

the ability to make a good with fewer inputs than another producer.

Producer surplus is:

the difference between the market price and the minimum price at which producers are wiling to sell a good

In the early 1980s, movie rentals averaged $5 a night; by the early 1990s, that average was $1 per night. This is an example of a supply curve shifter based on:

the entry of new suppliers into the market

The law of demand states that:

the lower the price, the greater the quantity demanded

Gains from trade are maximized when:

the market price is equal to the equilibrium price

Cedar Point amusement park reduces its entry fees. As a result of this price fall,

the quantity demanded will be higher.

If a store runs a sale on a product to clear out its stock, we can conclude that:

there was a surplus of the product in there store

In a competitive market in which an equilibrium price and quantity prevail:

total surplus are maximized

It is a rainy day, and you are considering taking an Uber one mile to meet some friends. You have decided you are willing to pay $20 to avoid getting wet from the rain. The trip would normally cost you $8, but due to the weather the surcharge is triple the regular cost. You should _____ because the benefit to you of taking the Uber is ------ than the cost.

walk; more