Econ exam 1

Table 4-5 shows the demand and supply schedules for the labor market in the city of Pixley. 24) Refer to Table 4-5. If a minimum wage of $11.50 an hour is mandated, what is the quantity of labor demanded?

570,000

Frieda is at her local florist to buy a dozen roses. She is willing to pay $75 for the roses, and buys them for $75. Frieda's consumer surplus from the purchase is

$0.

Refer to Figure 4-1. If the market price is $1.00, what is the consumer surplus on the third burrito?

$0.50

Refer to Figure 4-1. Arnold's marginal benefit from consuming the third burrito is

$1.50.

Refer to Figure 3-4. If the current market price is $10, the market will achieve equilibrium through

a price increase, increasing the quantity supplied and decreasing the quantity demanded.

Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for almonds. Which panel best describes what happens in this market when there is an increase in the productivity of almond harvesters?

panel (a)

Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for bicycle helmets. Which panel best describes what happens in this market if there is a substantial increase in the price of bicycles?

panel (d)

complements

goods and services that are used together

substitutes

goods and services that can be used for the same purpose

inferior good

goods for which the demand increases as income falls and decreases as income rises

normal good

goods for which the demand increases as income rises and decreases as income falls

Table 3-4 represents the supply schedule for surfboards. Assume that the market for surfboards has an upward-sloping supply curve. 22) Refer to Table 3-4. At a quantity supplied of 340 per week, the price of surfboards must be

greater than $600

Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18. 20) Refer to Figure 4-3. What is the value of the deadweight loss at a price of $18?

$100

Figure 4-8 shows the market for beer. The government plans to impose a per-unit tax in this market. 5) Refer to Figure 4-8. For each unit sold, the price sellers receive after the tax (net of tax) is

$20.

Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18. 19) Refer to Figure 4-3. What is the value of producer surplus at a price of $18?

$240

Figure 4-8 shows the market for beer. The government plans to impose a per-unit tax in this market. 4) Refer to Figure 4-8. The price buyers pay after the tax is

$27

Refer to Figure 4-1. If the market price is $1.00, what is Arnold's consumer surplus?

$3.00

Refer to Table 4-7. The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick. Under market equilibrium, what is the value of economic surplus in this market?

$300 thousand

Refer to Figure 4-1. What is the total amount that Arnold is willing to pay for 2 burritos?

$4.50

Figure 4-8 shows the market for beer. The government plans to impose a per-unit tax in this market. 3) Refer to Figure 4-8. How much of the tax is paid by buyers?

$5

Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18. 18) Refer to Figure 4-3. What is the value of consumer surplus at a price of $18?

$60

Refer to Table 4-7. The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick. What are the equilibrium price and quantity (in thousands) for Chef Ernie's sushi?

$60 and 20 thousand (Qd=Qs)

Figure 4-8 shows the market for beer. The government plans to impose a per-unit tax in this market. 2) Refer to Figure 4-8. What is the size of the per-unit tax?

$7

Refer to Table 4-4. The table above lists the marginal cost of tap shoes by Tippi, a firm that specializes in producing dance shoes. If the market price for a pair of tap shoes is $50, how many pairs will be produced?

1

Refer to Figure 3-4. At a price of $10, how many units will be sold?

200

Refer to Table 3-1. The table above shows the demand schedules for loose-leaf tea of two individuals (Sunil and Mia) and the rest of the market. At a price of $5, the quantity demanded in the market would be

63 lbs

Refer to Figure 3-1. A decrease in the price of the product would be represented by a movement from

A to B

What is the difference between an "increase in demand" and an "increase in quantity demanded"?

An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.

Figure 4-6 shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf. 29) Refer to Figure 4-6. What area represents the portion of consumer surplus that has been transferred to producer surplus as a result of the price floor?

B

Figure 4-6 shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf. 28) Refer to Figure 4-6. What is the area that represents producer surplus after the imposition of the price floor?

B + E

In recent years, the cost of producing organic produce in the United States has decreased largely due technological advancement. At the same time, more and more Americans prefer organic produce over conventional produce. Which of the following best explains the effect of these events in the organic produce market?

Both the supply and demand curves have shifted to the right. As a result, there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.

Figure 4-6 shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf. 30) Refer to Figure 4-6. What area represents the deadweight loss after the imposition of the price floor?

C + D

Which of the following statements is true?

Consumer surplus measures the net benefit from participating in a market.

Rent control is an example of

a price ceiling.

Let D = demand, S = supply, P = equilibrium price, and Q = equilibrium quantity. What happens in the market for walnuts if the Centers for Disease Control and Prevention announces that consuming a half cup of walnuts each week helps to lower levels of bad cholesterol?

D increases, S no change, P and Q increase.

Refer to Figure 3-1. An increase in population would be represented by a movement from

D1 to D2.

a decrease in the price of a substitute good would be represented by a movement from

D2 to D1

________ is maximized in a competitive market when marginal benefit equals marginal cost.

Economic surplus

Refer to Figure 3-3. The figure above shows the supply and demand curves for two markets: the market for an original Picasso painting and the market for designer jeans. Which graph most likely represents which market?

Graph B represents the market for an original Picasso painting and Graph A represents the market for designer jeans.

Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18. 21) Refer to Figure 4-3. At a price of $18 consumers are willing to buy 40 pounds of tiger shrimp. Is this an economically efficient quantity?

No, the marginal benefit of the 40th unit exceeds the marginal cost of that 40th unit.

Assume there is a shortage in the market for digital music players. Which of the following statements correctly describes this situation?

Some consumers will be unable to obtain digital music players at the market price and will have an incentive to offer to buy the product at a higher price.

Danielle Ocean pays for monthly pool maintenance for her home swimming pool. Last week, the owner of the pool service informed Danielle that he will have to raise his monthly service fee because of increases in the price of pool chemicals. How is the market for pool maintenance services affected by this?

There is a decrease in the supply of pool maintenance services.

Refer to Figure 3-6. The figure above represents the market for canvas tote bags. Assume that the market price is $35. Which of the following statements is true?

There is a surplus that will cause the price to decrease; quantity demanded will then increase and quantity supplied will decrease until the price equals $25.

Refer to Table 4-1. 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 receive $12 of consumer surplus from buying one shirt.

Table 4-5 shows the demand and supply schedules for the labor market in the city of Pixley. 23) Refer to Table 4-5. What is the equilibrium hourly wage (W*) and the equilibrium quantity of labor (Q*)?

W* = $10.50; Q* = 590,000

Figure 4-8 shows the market for beer. The government plans to impose a per-unit tax in this market. 6) Refer to Figure 4-8. As a result of the tax, is there a loss in consumer surplus?

Yes, because consumers pay a price above the economically efficient price

Last year, the Pottery Palace supplied 8,000 ceramic pots at $40 each. This year, the company supplied the same quantity of ceramic pots at $55 each. Based on this evidence, The Pottery Palace has experienced

a decrease in supply

A decrease in the demand for soft drinks due to changes in consumer tastes, accompanied by an increase in the supply of soft drinks as a result of reductions in input prices, will result in

a decrease in the equilibrium price of soft drinks; the equilibrium quantity may increase or decrease.

Which of the following will shift the demand curve for a good?

a decrease in the price of a complementary good

If the price of grapefruit rises, the substitution effect due to the price change will cause

a decrease in the quantity of grapefruit demanded.

comparative advantage

ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost

economic growth

ability of the economy to increase the production of goods and services

The area ________ the market supply curve and ________ the market price is equal to the total amount of producer surplus in a market.

above; below

mixed economy

an economy in which most economic decisions result from the interaction buyers and sellers in markets but in which the government plays a significant role

market economy

an economy in which the decisions of households and firms interacting in markets allocate economic resources

Assume that potatoes are an inferior good. Which of the following would cause both the equilibrium price and equilibrium quantity of potatoes to decrease?

an increase in consumer income

Which of the following would cause an increase in the supply of peanut butter?

an increase in the number of firms that produce peanut butter

Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D2 and S1(point C). Which of the following changes would cause the equilibrium to change to point B?

an increase in the wages of apple workers and an increase in the price of oranges, a substitute for apples

If an increase in income leads to a decrease in the demand for popcorn, then popcorn is

an inferior good.

Which of the following is the correct way to describe equilibrium in a market?

at equilibrium, quantity demanded equals quantity supplied

Suppose the demand curve for a product is vertical and the supply curve is upward sloping. If a per-unit tax is imposed in the market for this product

buyers bear the entire burden of the tax

substitution effect

change in qty demanded of a good that results from a change in price, making the good more or less expensive relative to other goods that are substitues

income effect

change in qty demanded of a good that results from the effect of a change in the goods price on a consumers purchasing power price of (a shoes) rises, qty demanded falls and vice versa

households

consist of individuals who provide the factors of production

Refer to Table 4-1. 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 the shirts falls from $28 to $20,

consumer surplus increases from $14 to $35

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.

Refer to Table 3-1. The table above shows the demand schedules for loose-leaf tea of two individuals (Sunil and Mia) and the rest of the market. If the price of loose-leaf tea rises from $3 to $4, the market quantity demanded would

decrease by 32 lbs.

If a demand curve shifts to the left, then

demand has decreased.

producer surplus

difference between the lowest price a firm would be willing to accept for a good/service and price actually received

Table 3-4 represents the supply schedule for surfboards. Assume that the market for surfboards has an upward-sloping supply curve. 21) Refer to Table 3-4. At a price of $600, the quantity of surfboards supplied per week will be

greater than 175 per week

opportunity cost

highest valued alternative that must be given up to engage in an activity

A supply schedule

is a table that shows the relationship between the price of a product and the quantity of the product supplied.

Four factors of production

labor, capital, natural resources, and entrepreneurship

In a perfectly competitive market, there are ________ buyers and ________ sellers.

many; many

The demand by all the consumers of a given good or service is the ________ for the good or service.

market demand

To affect the market outcome, a price ceiling

must be set below the equilibrium price

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

Refer to Table 4-4. The table above lists the marginal cost of tap shoes by Tippi, a firm that specializes in producing dance shoes. If the market price for a pair of Tippi's tap shoes is $70,

producer surplus will equal $50.

Refer to Table 4-4. The table above lists the marginal cost of tap shoes by Tippi, a firm that specializes in producing dance shoes. If the price for a pair of tap shoes increases from $85 to $110,

producer surplus will rise from $85 to $165.

sources of economic efficiencies

productive efficiency: comes about because of competition allocative efficiency: rises due to voluntary exchange voluntary exchange: a situation that occurs in markets when both the buyer and seller of a product are made better off by the transaction

surplus

results from prices above equilibrium

shortage

results from prices below equilibrium

law of supply

rule that holding everything else constant, increases in price cause increases in the quantity supplied, and decreases in price cause decreases in qty supplied

law of demand

rule that states, holding everything else constant, that when price of a product falls, qty demanded of the product will increase, and when price rises qty demanded will fall

Suppose the demand curve for a product is horizontal and the supply curve is upward sloping. If a per-unit tax is imposed in the market for this product

sellers bear the entire burden of the tax

Refer to Figure 3-4. If the price is $10,

there would be a shortage of 600 units

Suppose that when the price of strawberries decreases, Simone increases her purchase of whipped cream. To Simone

strawberries and whipped cream are complements

The athletic shoe industry is highly competitive. In recent years, companies like Allbirds and Skechers began offering shoes made of different materials or in different styles to better compete with industry giants Nike and Adidas. These new styles of athletic shoes that are being marketed to compete with shoes by Nike and Adidas would be considered

substitutes for shoes by Nike and Adidas

When the price of a normal good falls, consumers buy a larger quantity because of the ________ effect and the ________ effect.

substitution; income

firms

supply goods and services to product markets; households buy these products form the firms

Table 4-5 shows the demand and supply schedules for the labor market in the city of Pixley. 25) Refer to Table 4-5. If a minimum wage of $11.50 is mandated, there will be a

surplus of 40,000 units of labor.

The actual division of the burden of a tax between buyers and sellers in a market is called

tax incidence.

marginal benefit

the additional benefit to a consumer from consuming one more unit of a good/service

Marginal cost is

the additional cost to a firm of producing one more unit of a good or service

consumer surplus

the difference between the highest price a consumer is willing to pay for a good/service (6.99 and 3.99 =$3)

Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1(point A). If the price of oranges, a substitute for apples, decreases and the wages of apple workers increase, how will the equilibrium point change?

the equilibrium point will move from A to E

Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for sugar at the intersection of D1 and S2 (point B). If there is an decrease in the price of fertilizer used on sugar cane and there is a decrease in tastes for sugar-sweetened soft drinks, how will the equilibrium point change?

the equilibrium point will move from B to C.

If a firm expects that the price of its product will be higher in the future than it is today, then

the firm has an incentive to decrease supply now and increase supply in the future

Economic efficiency in a competitive market is achieved when

the marginal benefit equals the marginal cost from the last unit sold.

Consumers are willing to purchase a product up to the point where

the marginal benefit of consuming a product is equal to its price.

Willingness to pay measures

the maximum price that a buyer is willing to pay for a good or service.

The income effect of a price change refers to the impact of a change in

the price of a good on a consumer's purchasing power.

Which of the following is evidence of a surplus of bananas?

the price of bananas is lowered in order to increase sales

A change in all of the following variables will change the market demand for a product except

the price of the product.

The law of demand implies, holding everything else constant, that as the price of bagels increases

the quantity of bagels demanded will decrease.

Refer to Figure 3-6. The figure above represents the market for canvas tote bags. Assume that the price of tote bags is $15. At this price

there is a shortage, equal to 55 tote bags, that will be eliminated when the price rises to $25