Econ exam 1
A rise in the price of sushi of from 98 cents to $1.02 a piece decreases the quantity of soy sauce demanded form 101 units to 99 units an hour and decreases the quantity of sushi demanded by 1 percent an hour. Calculate the price elasticity of demand for sushi and the cross elasticity of demand for soy sauce with respect to the price of sushi.
0.25
Which of the following statements describes cross price elasticity of demand?
As a result of a rise in the price of spinach with all else remaining constant, Ralph buys more broccoli, a substitute for spinach.
Which of the following activity is an example of dumping?
Dell exports PCs to India at a price 20 percent lower than the cost of producing them.
Which of the following statements describe an inelastic demand?
Megan did not buy too many hockey tickets even though their price dropped by 10 percent.
What is the relationship between the marginal cost, minimum supply-price, and supply?
The marginal cost is the cost of producing an additional unit of a good. The marginal cost is the minimum supply-price, so the supply curve is the same as the marginal cost curve
What is the relationship between the marginal benefit, value, and demand?
The value of one more unit of a good is its marginal benefit. The demand curve is the same as the marginal benefit curve.
Which of the following is an example of price elasticity of demand?
When the price of bananas increased by 5 percent and nothing else changed, the quantity of bananas demanded decreased by 2 percent.
A good with an income elasticity that is positive and less than 1 is ______.
a normal good that is income inelastic
A good with an income elasticity greater than one is _____
a normal good that is income elastic
A good with an income elasticity that is negative is _______.
an inferior good
The equilibrium quantity _______.
and equilibrium price are determined at the intersection of the supply curve and the demand curve
An example of an income elastic good is ______ and an example of an income inelastic good is ______.
a haircut; food
We need methods of allocating scarce resources _______.
because resources are scarce and it is not possible to fulfill everyone's wants
Tax incidence is the division of the burden of tax between ___
buyers and sellers
Offshore outsourcing is _____ goods, components, or services _____ that brings gains from trade identical to those of any other type of trade.
buying; from firms in other countries
economic growth comes from
capital accumulation and technological advance
The total revenue test is a method of estimating the price elasticity of demand by observing the ______ that results from ______, when all other influences on the quantity sold remain the same.
change in total revenue; a change in the price
Low-fat milk and cream are _______.
complements in production for a dairy and substititues for consumers
Demand is elastic if a price_____ increases total revenue.
cut
Demand is unit elastic if a price _______ leaves total revenue unchanged.
cut or rise
When a country opens up to free international trade, the producer surplus received by domestic producers of the imported good _______.
decreases
An inferior good is a good for which demand:
decreases when income increases
When an effective production quota is applied in the market for rice, the quantity produced ______ and the price ____
decreases; rises
Market failure is a situation in which the market _____ .
delivers an inefficient outcome
When an effective production quota is applied in the market for rice, the marginal social benefit _______ marginal social cost.
exceeds
U.S. imports are _____ produced in _____ and sold in _____.
goods and services; any other country; the United States
U.S. exports are _____ produced in _____ and sold in _____.
goods and services; the United States; any other country
The greater the amount of time available after a price change, the ______ is the elasticity of supply.
greater
The law of supply states that other things remaining the same, the higher the price of a good, the _______; and the lower the price of a good, the _______.
greater is the quantity supplied; smaller is the quantity supplied
Utilitarianism is a principle that states that we should strive to achieve "the _____ for the _____"
greatest happiness; greatest number
capital accumulation is the ______, including ______ capital
growth of capital resources; human
The level of income a _______ big effect on income elasticities of demand because _______.
has; what is a necessity and what is a luxury depends on the level of income
The market supply curve is the ______ sum of the individual supply curves. It is formed by adding the ______.
horizontal; quantities supplied by all the producers at each price
The market supply curve is the ______ sum of the individual supply curves. It is formed by adding ______.
horizontal; the quantities supplied by all the producers at each price
a normal good is one for which demand:
increases as income increases
failure to specialize and reap the games from trade is _____ because _____
inefficient; production is at a point inside the economy's PPF
The smaller the proportion of income spent on a good, the more ______ is the demand for it.
inelastic
The shorter the time that has elapsed since a price change, the more _______
inelastic is demand
The demand for a necessity is income ______, and the demand for a luxury is income ______.
inelastic; elastic
What is rent seeking? Rent seeking _____.
is lobbying and other political activity that aims to capture the gains from trade
The two big approaches to thinking about fairness are _______.
it's not fair if the result isn't fair and it's not fair if the rules aren't fair
Which of the following is an example of an import quota? The United States _____ .
limits the quantity of auto parts the U.S. car makers may buy from China
Goods and services that use rare resources in their production have a ______ elasticity of supply.
low
When a country opens up to free international trade, domestic producers of the imported good receive a ______ price and sell a ______ quantity of it.
lower; smaller
Which of the following statements describes the big tradeoff? Sharing the pie more equally _____ .
makes it smaller.
marginal benefit curve is a curve that shows the relationship between the:
marginal benefit from a good and the quantity consumed of that good
At the competitive equilibrium, _______.
marginal social cost equals marginal social benefit
Consumer surplus is the _____ from a good or service, in excess of the _____, summed over the quantity consumed.
marginal benefit; price paid for it
Consumer surplus is the _____ from a good or service, in excess of the _____, summed over the quantity consumed.
marginal benefit; price paid for it This is the correct answer.
Consumer surplus is the ______ of a good in excess of ______, summed over the quantity bought.
marginal benefit; the price paid for it
monday island produces only tomatoes and papayas. the marginal cost of a tomato is the number of papayas that______ to get one more_________
must be forgone; tomato
National comparative advantage arises from the differences in _______ across countries.
opportunity cost
the law of demand states that ______ , the _______ the price of a good, the smaller is the quantity demanded
other things remaining the same; higher
Symmetry principle is the requirement that _____.
people in similar situations be treated similarly
The price elasticity of demand is calculated by dividing the _______ by the _______.
percentage change in the quantity demanded; percentage change in the price
Rice and noodles are substitutes. The cross elasticity of demand for rice with respect to the price of noodles is _______.
positive
The demand curve shows the relationship between:
price and quantity demanded
When a _____ is applied to a labor market, it is called a minimum wage.
price floor
Producer surplus is the _____ a good or service, in excess of the _____ of producing it, summed over the quantity produced.
price of; marginal cost
A substitute in production is a good that is _____ another good, and a complement in production is a good that is _____ another good.
produced in place of; produced together with
a supply curve shows the relationship between the _______ and _______ when all other influences on selling plans remain the same.
quantity supplied of a good; its price
Demand is inelastic if a price ______ increases total revenue.
rise
Which of the following statements illustrates income elasticity of demand?
salary cut and no other changes has resulted in Mary buying less fast food.
Diet coke and regular coke are _______.
substitutes for consumers and substitutes in production for producers
Tariff is a _____ imposed on a good when it is _____.
tax; imported
comparitive advantage
the ability to produce a good at a lower opportunity cost than another producer
absolute advantage
the ability to produce a good using fewer inputs than another producer
the marginal benefit of a good or service
the benefit received from consuming one more unit of it
technological change is _______ new goods and of _______ of producing goods and services
the development of; better ways
The net gain from international trade is positive because in the import market ______ and in the export market ______.
the increase in consumer surplus is greater than the loss in producer surplus; the increase in producer surplus is greater than the loss in consumer surplus
The deadweight loss is _______.
the loss of total surplus that results from an inefficient level of production
The marginal cost of a good or service is the
the opportunity cost of producing one more unit of it
The elasticity of supply is calculated by dividing ______ by ______.
the percentage change in the quantity supplied; the percentage change in the price
Elasticity of supply measures the responsiveness of the quantity supplied to a change in ______, when all other influences on selling plans remain the same.
the price of a good
The opportunity cost of a good is equal to _______.
the price of the good plus the value of the search time spent finding the good
Firms are institutions that organise _____ of goods and services.
the production
The price elasticity of demand is a units-free measure of the responsiveness of ______.
the quantity demanded of a good to a change in its price when all other influences on buying plans remain the same
demand is______ , when all other influences on buying plans remains the same
the relationship between the quantity demanded of a good and the price of the good
supply is______ , when all other influences on buying plans remains the same
the relationship between the quantity supplied of a good and the price of a good
economic growth is defined as the
the sustained expansion of production possibilities
A fact that argues in favor of taxes on illegal drugs and against prohibition is that _______.
the tax revenue can be used to make law enforcement more effective
Deadweight loss is the decrease in _____ that results from an inefficient _____ or _____.
total surplus; underproduction; overproduction
Taxes lead to ______ and subsidies lead to ______.
underproduction; overproduction
Price regulations that put a cap on the rent a landlord is permitted to charge lead to ______. A monopoly leads to ______.
underproduction; underproduction
When a minimum wage is set above the equilibrium wage rate, _______.
unemployment increases
Because elasticity is a units-free measure of the responsiveness of the quantity demanded of a good or service to a change in its price, _______.
we can compare the responsiveness of the same good when quantity is measured in different units, or we can compare across different goods
why do people specialize in trade?
with specialization and trade, people can consume at a point outside their PPF
The fewer the substitutes for a good or service, the more ______ is the demand for it.
inelastic
In the labor market, the supply curve measures the marginal social cost of labor to _______, and the demand curve measures the _______.
workers; marginal social benefit from labor