ECON final

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 D 1 and S 1 (point A). If there is an increase 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?

4

Refer to Figure 4-1. If the market price is $1.00, what is the maximum number of burritos that Arnold will buy?

$240

Refer to Figure 4-3. What is the value of consumer surplus at the equilibrium price of $15?

Both 4,000 pounds and 12,000 pounds are economically inefficient rates of output.

Refer to Figure 4-4. The figure above represents the market for pecans. Assume that this is a competitive market. Which of the following is true?

msn

Refer to Figure 5-3. The deadweight loss due to the externality is represented by the area

Panel C.

Refer to Figure 6-1. The demand curve on which elasticity changes at every point is given in

D 1

Refer to Figure 7-1. Marginal private benefit is represented by which curve?

500.

Refer to Figure 7-2. If consumers paid the full price of medical services, the equilibrium quantity would be

Sandy's opportunity cost for dog grooming is less than Linda's.

Refer to Table 9-1. Select the statement that accurately interprets the data in the table.

Sarita has an absolute advantage in baking pies and cakes.

Refer to Table 9-2. Select the statement that accurately interprets the data in the table.

Bryce has a comparative advantage in making soap.

Refer to Table 9-3. Select the statement that accurately interprets the data in the table.

Soo Jin figures that the additional benefit of having her own place (as opposed to sharing) is at least $250.

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

2.43

Suppose that when the price per ream of recycled printer paper rises from $4 to $4.50, the quantity demanded falls from 800 to 600 reams per day. Using the midpoint formula, what is the price elasticity of demand (in absolute value) over this range?

A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent.

Suppose the value of the price elasticity of demand is -3. What does this mean?

$56,500

Suppose your expenses for this term are as follows: tuition: $28,000, room and board: $9,000, books and other educational supplies: $2,500. Further, during the term, you can only work part-time and earn $16,000 instead of your full-time salary of $42,000. What is the opportunity cost of going to college this term, assuming that your room and board expenses would be the same even if you did not go to college?

less than 1 percent

The Congressional Budget Office estimates that the payments to settle malpractice lawsuits and the premiums doctors pay for malpractice insurance account for ________ of health care costs in the United States.

increase; increase

The aging of the U.S. population has tended to ________ spending on health care, and the development of new drugs and medical equipment has tended to ________ spending on health care.

to use inputs to produce outputs of goods and services.

The basic activity of a firm is

Farm revenues decrease.

The demand for most farm products is relatively inelastic. All else constant, what is the effect on farm revenues as a result of the introduction of new and better farm equipment which increases productivity?

consumers will choose to buy the combination of goods and services that make them as well off as possible from those combinations that their budgets allow them to buy.

The economic model of consumer behavior predicts that

the availability of substitutes for the good.

The most important determinant of the price elasticity of demand for a good is

grow to 74 million

The number of people receiving Medicare coverage is expected to ________ by the year 2025.

decrease by 12 percent.

The price elasticity of demand for beef is estimated to be 0.60 (in absolute value). This means that a 20 percent increase in the price of beef, holding every thing else constant, will cause the quantity of beef demanded to

the percentage change in quantity demanded divided by the percentage change in price.

The price elasticity of demand is equal to

the study of situations in which people act in ways that are not economically rational

What is behavioral economics?

It is a problem caused by agents pursuing their own interests rather than the interests of the principals who hired them.

What is the principal-agent problem?

decrease the size of its physical plant

Which of the following can a firm do in the long run but not in the short run?

elephants in the wild

Which of the following is an example of a common resource?

Each firm must react to actions of other firms.

Which of the following is not a characteristic of a monopolistically competitive market structure?

Average revenue is greater than marginal revenue.

Which of the following is not true for a firm in perfect competition?

Marginal cost equals average total cost.

Which of the following is true at the output level where average total cost is at its minimum?

When marginal cost equals average total cost, average total cost is at its highest value.

Which of the following statements is false?

In the long run, price equals the lowest possible average cost of production. In this sense, consumers receive the new technology "free of charge."

Writing in the New York Times on the technology boom of the late 1990s, Michael Lewis argues, "The sad truth, for investors, seems to be that most of the benefits of new technologies are passed right through to consumers free of charge." What does Lewis means by the benefits of new technology being "passed right through to consumers free of charge"?

a promise to repay a fixed amount of funds.

A bond is a financial security that represents

the income effect and the substitution effect

A change in the price of a good has two effects on the quantity consumed. What are these effects?

elastic.

A convenience store owner in Philadelphia was worried that the implementation of the 1.5 cents per ounce tax on sweetened beverages would cause the quantity demanded to fall by so much that he would be in a worse situation if he passed the tax on to customers by raising prices than if he did not raise prices. If raising the price of sweetened beverages would cause the owner to receive less total revenue from the sale of sweetened beverages, the demand for sweetened beverages is

a decrease in the equilibrium quantity of incandescent light bulbs; the equilibrium price may increase or decrease.

A decrease in the demand for incandescent light bulbs due to changes in consumer tastes, accompanied by a decrease in the supply of incandescent light bulbs as a result of government restrictions, will result in

when there is a decrease in supply and a decrease in demand for the product.

A decrease in the equilibrium quantity for a product will result

has a large number of substitutes.

A demand curve that is horizontal indicates that the commodity

the fraction of each additional dollar of income that must be paid in taxes.

A marginal tax rate is

marginal private costs of producing a good or service.

A market supply curve reflects the

the lowest wage that firms may pay for labor.

A minimum wage law dictates

an efficient tax.

A tax that imposes a small excess burden relative to the tax revenue that it raises is

the ability to produce more of a good or service than competitors when using the same amount of resources.

Absolute advantage is

it is fair to expect a greater share of the tax burden to be borne by people who have a greater ability to pay.

According to the ability-to-pay principle of taxation

the average fixed cost curve.

All of the following cost curves are U-shaped except

an increase in the equilibrium price of lobster; the equilibrium quantity may increase or decrease.

An increase in the demand for lobster due to changes in consumer tastes, accompanied by a decrease in the supply of lobster as a result bad weather reducing the number of fishermen trapping lobster, will result in

the relationship between wages and the quantity of labor that she is willing to supply.

An individual's labor supply curve shows

a natural disaster like a hurricane or bad earthquake.

An inward shift of a nation's production possibilities frontier can occur due to

generates enjoyment or satisfaction.

An item has utility for a consumer if it

total cost divided by the level of output.

Average total cost is equal to

double over the next 40 years.

Based on its current rate of growth, health care spending as a percentage of GDP through Medicare, Medicaid, and other U.S. government programs is expected to

doctors have less incentive to control their costs.

Because consumers who have insurance provided by their employers usually only pay a deductible for a visit to the doctor's office,

an increase in the quantity of labor supplied because of the substitution effect and a decrease in the quantity of labor supplied because of the income effect.

Because leisure is a normal good, an increase in the wage rate will result in

bargaining between the firm and the victims of the air pollution caused by the firm would lead to an equal reduction in pollution in situation (A) and situation (B).

Compare two situations. (A) A firm is not legally responsible for damages that result from air pollution caused by its production of steel. (B) A firm is legally responsible for damages that result from its production of steel. Ronald Coase argued that if the property rights are assigned and transactions costs are low,

logrolling

Congressman Flack votes for a program that will benefit the constituents of Congressman Walpole. The public choice model suggests that Flack's vote is best explained by which of the following?

logrolling.

Congressman Gallstone seeks support from his colleagues for a bill he sponsors that will establish a new national park in his district. He offers to support Congresswoman Disrail's proposal to build a new library in her district in exchange for her vote for his national park bill. This is an example of

The marginal cost of the last unit of pollution eliminated would exceed the marginal benefit.

Congressman Murphy made the following proposal: "We should establish policies that completely eliminate air pollution. This is the only way to ensure that none of our citizens suffer the negative effects of air pollution." If Congressman Murphy's proposal was adopted and all forms of air pollution were eliminated, which of the following would be true?

Correct offer to pay a price somewhere between the price she would pay for a good car and the price she would pay for a lemon.

Consider a used car market in which half the cars are good and half are bad (lemons). A rational buyer in this market should

all of the items listed

Consider the following items: a. the novel "A Gentleman in Moscow" by Amor Towles b. the "The Spirited Shipper," an innovative wine shipping box c. a Swiss chef's award-winning recipe d. an original fabric design, for example, the fabric used for "Coach" bags and luggage Which of the items listed is an example of intellectual property?

The equilibrium wage and the equilibrium quantity of opticians fall.

Consider the market for opticians. What is likely to happen to the equilibrium wage and quantity of opticians if more and more people turn to laser eye surgery instead of wearing glasses or contact lens?

The equilibrium wage rises and the equilibrium quantity of pilots falls.

Consider the market for pilots. What is likely to happen to the equilibrium wage and quantity of pilots if the government enforces a lower mandatory retirement age, say from age 65 to age 62?

the area under the demand curve

Consumer surplus in a market for a product would be equal to ________ if the market price was zero.

payments by a corporation to its shareholders

Dividends are

the sum of consumer surplus and producer surplus is at a maximum.

Economic efficiency is defined as a market outcome in which the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production, and in which

the price of a factor of production that is fixed in supply.

Economic rent is defined as

a firm's long-run average total costs fall as it increases the quantity of output it produces.

Economies of scale occur when

decrease; increase

Economists who support market-based reforms for health care believe that increased competition among providers of health care would ________ costs and ________ economic efficiency.

by taxpayers to reduce the amount of income subject to tax.

Exemptions and deductions are used

doubts about the benefits of ingredients such as electrolytes which are not found in regular bottled water.

Factors that will tend to lead to higher demand for premium bottled water include all of the following except

wants to consume more ankle socks and fewer bandanas

If Valerie purchases ankle socks at $5 and gets 25 units of marginal utility from the last unit, and bandanas at $3 and gets 12 units of marginal utility from the last bandana purchased, she

an inferior good.

If a 5 percent increase in income leads to a 10 percent decrease in quantity demanded for a product, this product is

0.67.

If a 6 percent increase in income leads to a 4 percent increase in quantity demanded for audio books, the income elasticity of demand is

factor market.

If a brewery wants to raise funds to purchase a new fermenting vat, it does so in the

57 utils

If a consumer receives 22 units of marginal utility for consuming the first can of soda, 20 units from consuming the second, and 15 from the third, the total utility of consuming the three units is

$2,520

Refer to Figure 12-4. What is the amount of its total fixed cost?

is earning a profit.

If a perfectly competitive firm's price is above its average total cost, the firm

should stop production by shutting down temporarily.

If a perfectly competitive firm's total revenue is less than its total variable cost, the firm

economies of scale.

If, when a firm doubles all its inputs, its average cost of production decreases, then production displays

is Pc - Pd if the supply curve is S0 and Pc - Pe if the supply curve is S1.

Refer to Figure 18-2. If the government imposes an excise tax of $1.00 on every unit sold, the producer's burden of the tax

1 3/5 bolts of cotton

Refer to Figure 2-9. What is the opportunity cost of producing 1 pound of cashews in Pakistan?

Denmark

Refer to Table 9-6. Which country has an absolute advantage in producing hats?

imports.

Goods and services bought domestically but produced in other countries are referred to as

inferior.

If a good has a negative income elasticity of demand, this indicates that the good is

is Pa - Pc if the supply curve is S0 and Pb - Pc if the supply curve is S1.

Refer to Figure 18-2. If the government imposes an excise tax of $1.00 on every unit sold, the consumer's burden of the tax

is larger if the supply curve is S 1.

Refer to Figure 18-2. If the government imposes an excise tax of $1.00 on every unit sold, the government's revenue from the tax

earn 24 percent of the society's total income.

Refer to Figure 18-7. The second highest 20 percent of households

unattainable with current resources.

Refer to Figure 2-1. Point C is

D 2 to D 1.

Refer to Figure 3-1. A decrease in taste or preference would be represented by a movement from

S2 to S1.

Refer to Figure 3-2. An increase in the price of substitutes in production would be represented by a movement from

is 4 units.

Refer to Figure 3-5. At a price of $10, the quantity sold

Panel (d)

Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for Fruitopia, a soft drink. Which panel describes what happens in the market for Fruitopia when the price of Snapple, a substitute product, decreases?

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 apples at the intersection of D 1 and S 1 (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?

positive if subscribers consider the services substitutes for each other.

The cross-price elasticity of demand between an unlimited texting option and an unlimited call minutes option offered from a cell phone provider would be

percentage change in the quantity demanded of one good divided by the percentage change in the price of another good.

The cross-price elasticity of demand measures the

economic costs add the opportunity costs of a firm using its own resources while accounting costs do not.

Economic costs of production differ from accounting costs in that

periodic filings to the federal government; annual reports to shareholders

Firms disclose financial statements in ________ and in ________.

enacted large increases in tariffs on U.S. imports.

In reaction to the passage of the Smoot-Hawley Tariff, Canada as well as many other U.S. trading partners

C.

Refer to Figure 9-2. The increase in domestic producer surplus as a result of the tariff is equal to the area

to fall by 11 million pounds.

Refer to Figure 9-2. The tariff causes domestic consumption of rice

30 million

Refer to Figure 9-3. If there was no quota, how many pounds of peanuts would be imported?

marginal revenue

Refer to Scenario 1-1. Using marginal analysis terminology, what is another economic term for the incremental revenue received from the sale of the last 3,000 cell phones?

Its profit will be $100 higher.

Refer to Scenario 1-2. Had the firm not produced and sold the last 300 hats, would its profit be higher or lower, and by how much?

more price elastic is a consumer's demand.

The larger the share of a good in a consumer's budget, holding everything else constant, the

utility cannot be measured objectively.

The word "util" has been used by economists in the past as an objective measure of utility. Today economists believe that

Total spending on all goods and services must equal the amount available to be spent.

There are two conditions necessary for a consumer to maximize her utility. One is that the marginal utilities per dollar spent on each good and service consumed are equal. What is the other condition?

the percentage change in quantity demanded by the percentage change in price.

To calculate the price elasticity of demand, we divide

should produce the quantity of output that results in the greatest difference between total revenue and total cost.

To maximize profit, a perfectly competitive firm

the price of a product multiplied by the number of units of the product sold.

Total revenue is equal to

relatively unimportant factors in explaining the choices consumers make.

Traditionally, economists have considered culture, customs, and religion as

normal good.

Typically, the higher the level of income per person in a country, the higher the level of spending per person on health care. This relationship between income and spending indicates that health care is a

ended up being higher than the sale prices under the previous pricing policy.

Under J.C. Penney's everyday low pricing policy, the everyday low prices

subjective and difficult to measure.

Utility is

It refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction.

What is adverse selection?

will break even and produce a quantity of Q2.

Refer to Figure 12-7. If the market price is P 2, the firm

will make a profit.

Refer to Figure 12-7. If the market price is P 3, the firm

is the result of advancements in plastic production technology.

Refer to Figure 2-4. A movement from Y to Z

over-the-counter market.

Securities dealers that trade stocks and bonds outside exchanges comprise the

the problem of adverse selection is reduced.

The cost of group health insurance is lower than if an individual buys a policy on his own because

people overuse a common resource.

The "tragedy of the commons" refers to the phenomenon where

As the number of workers increases, eventually the gains from the division of labor and specialization are used up.

In the short run, why does a production function eventually display diminishing returns to labor?

outside directors.

Included on the board of directors of Microsoft are John W. Stanton, the chairman of Trilogy Equity Partners, the executive president and chief financial officer of Gap, Inc. Teri L. List-Stoll, and the former vice chairman of Bank of America Charles H. Noski. These three board members do not have a direct management role with Microsoft and are therefore referred to as

rapid technological change and expanding international trade.

Income inequality in the United States has increased somewhat over the past 25 years. Two factors that appear to have contributed to this are

along Tomaso's production possibilities frontier.

Refer to Table 2-1. Assume that Tomaso's Trattoria only produces pizzas and calzones. A combination of 24 pizzas and 30 calzones would appear

half a bathed cat

Refer to Table 2-10. What is Tammi's opportunity cost of grooming a dog?

Horace has a comparative advantage in bathing cats and Tammi in grooming dogs.

Refer to Table 2-10. Which of the following statements is true?

guitars.

Refer to Table 2-11. Ireland has a comparative advantage in the production of

5 guitars

Refer to Table 2-11. What is Ireland's opportunity cost of producing one motorcycle?

4 guitars

Refer to Table 2-11. What is Scotland's opportunity cost of producing one motorcycle?

The demand for the John Grisham book is inelastic. Revenue will fall if the price is lowered.

Refer to Table 6-1. Suppose you own a bookstore. You believe that you can sell 40 copies per day of the latest John Grisham novel when the price is $35. You consider lowering the price to $25 and believe this will increase the quantity sold to 50 books per day. Compute the price elasticity of demand using the midpoint formula and these data. Select the correct implication from your work.

Denmark

Refer to Table 9-6. Which country has an absolute advantage in producing clocks?

the wages of these workers will not be high enough to compensate them fully for the risk they have assumed.

If workers in nuclear power plants underestimate the true risk of their jobs,

equal to the marginal product of labor multiplied by the output price.

Marginal revenue product of labor for a competitive seller is

the change in total utility a person receives from consuming an additional unit of a good or service.

Marginal utility is

extra satisfaction received from consuming one more unit of a product.

Marginal utility is the

population

A change in which variable will change the market demand for a product?

comparing the marginal revenue product of capital with the rental price of capital.

A firm chooses its profit-maximizing quantity of capital by

positive technological change.

A firm increased its production and sales because the firm's manager rearranged the layout of his factory floor. This is an example of

the amount of corporate taxes it must pay on its profit.

A firm's cost of production is determined by all of the following except

accounting profit.

A firm's net income is also its

increase; decreasing

A goal of market-based reforms of the health care system is to give patients an incentive to pay more attention to the prices of medical services. This would tend to ________ economic efficiency by ________ the costs of medical services

0.75 (in absolute value)

A newspaper story on the effect of higher milk prices on the market for ice cream contained the following: "As a result [of the increase in milk prices], retail prices for ice cream are up 4 percent from last year. . . . And ice cream consumption is down 3 percent." Source: John Curran, "Ice Cream, They Scream: Milk Fat Costs Drive Up Ice Cream Prices," Associated Press, July 23, 2001. Based on the information given, what is the price elasticity of demand for ice cream?

the least common

A partnership is ________ type of business.

above minimum average total cost.

A perfectly competitive firm earns a profit when price is

pay the same percentage of their incomes in tax as do people with higher incomes.

A proportional tax is a tax for which people with lower incomes

autarky.

A situation in which a country does not trade with other countries is called

the income received by an individual who supplies labor services equals the incremental benefit generated to the firm by that individual's labor.

According to the marginal productivity theory of income distribution,

Fewer goods will be produced for consumption today.

According to the production possibilities model, if more resources are allocated to the production of physical and human capital, then which of the following is likely to happen?

Cognitive dissonance might cause workers to underestimate the true risks of their jobs.

According to two economists, George Ackerlof and William Dickens, how can cognitive dissonance affect workers' perceptions of their jobs?

the tendency of people to be unwilling to sell a good they already own even if they are offered a price that is greater than the price they would be willing to pay if they did not already own it.

Alan Krueger conducted a survey of fans at the 2001 Super Bowl who purchased tickets to the game for $325 or $400. Krueger found that (a) 94 percent of those surveyed would not have paid $3,000 for their tickets, and (b) 92 percent of those surveyed would not have sold their tickets for $3,000. These results are an example of

Alan Krueger

All but one of the following people were awarded a Nobel prize for their contributions to experimental economics and their explorations of the influence fairness has on consumer decision-making. Which person did not receive a Nobel Prize for this work?

the rental value of the warehouse space the company owns and uses for itself.

All of the following are examples of explicit cost a firm might incur except

Amir buys a new humidor for his cigar shop.

All of the following are examples of spending on goods and services in the circular flow model except

limits on the size of deductibles and on waiting periods before coverage takes effect have been eliminated

All of the following are part of the "regulation of health insurance" provision of the Patient Protection and Affordable Care Act (ACA) except

small businesses with fewer than 50 employees are exempt from being required to participate in the program.

All of the following are part of the "state health insurance marketplaces" provision of the Patient Protection and Affordable Care Act (ACA) except

$95

Allison's Auto Art is a company that applies pinstripes to vehicles. Allison's cost for a basic 1-color pinstriping job is $35, and she charges $95 for this service. For a total price of $175, Allison will apply a fancier 3-color pinstripe application to an automobile, a service that adds an additional $40 to the total cost of the package. What is Allison's marginal benefit if she sells a basic 1-color job?

carbon taxes and tradable emission allowances.

Alternative approaches for reducing carbon dioxide emissions are

taxes paid ÷ total taxable income.

An average tax rate is calculated as

the Social Security tax.

An example of a payroll tax in the United States is

a cost that involves spending money

An explicit cost is

The price rises.

Anyone can purchase sulfur dioxide emission allowances on the Chicago Mercantile Exchange. Several environmental groups have raised money to buy allowances (which they subsequently destroy). As part of their fund-raising, these groups have urged contributors to buy the allowances as gifts. As one newspaper story put it, "For the environmentalist in your life, here's a gift that is sold by the ton, fits in an envelope and will last forever." Source for quote: Randall Edwards, "Dear Santa: Please Bring Me Sulfur Dioxide for Christmas," Columbus Dispatch, December 19, 1999. What would be the impact on the price of the emission allowances in the market if more people buy sulfur emission allowances and destroy them?

greater; greater

Article Summary An Organisation for Economic Co-operation and Development (OECD) report states that administration costs for health care in the United States are the highest in the developed world, accounting for over 8 percent of spending in the health care sector, compared to a global average of about 3 percent. According to the report, expensive surgeries, high pharmaceutical costs, and corrupt practices increased global health care costs, and poor coordination between health care providers, duplication of tasks, and excessive time spent on paperwork all contributed to higher administrative costs. The report also noted that administrative costs are generally lower under government-managed health care systems than with private insurance, but governments could still significantly cut spending and improve patients' health. Source: Alanna Petroff, "U.S. health care admin costs are double the average," money.cnn.com, January 11 2017. Refer to the Article Summary. The article discusses the high administrative costs of health care in the United States. Even if private insurance companies were more efficient and brought administrative costs down, consumers would still pay less than the full cost of medical treatment. This would result in the market equilibrium price of medical services being ________ than the efficient equilibrium price, and the market equilibrium quantity of medical services being ________ than the efficient equilibrium quantity.

direct finance

Article Summary Despite a shaky start, online used car seller Carvana sold all 15 million stock shares in its IPO and raised about $225 million. Initially priced at $15 per share, the stock closed at $11.10 per share at the end of the first trading day. The Phoenix-based company, known for its automated car vending machines, offers free next-day delivery to residents in 24 markets across the United States. Carvana, founded in 2012, has seen large revenue growth but has never reported a profit., losing about $93 million in 2016. The company also said in its S-1 IPO filing that it expects losses to continue in the near future. Source: Kirsten Korosec, "Used Car Vending Machine IPO Sputters In First Day of Trading," Fortune, April 28, 2017. When Carvana sold stock to the public in its IPO, it did so through the New York Stock Exchange. This is an example of Carvana using ________ to raise funds.

they believed that the tax cuts would enhance economic efficiency.

Both Presidents Kennedy and Reagan proposed significant cuts in income taxes because

Yes, there is often a trade-off between efficiency and equity.

Article Summary In a January, 2017 report, the World Economic Forum stated that the growing income gap has become one of the biggest threats to the global economy and cannot be remedied solely by higher economic growth. Although income inequality has fallen over the past 30 years on a global level, in high-income countries like the United States and the United Kingdom, the top 1% of income earners have benefitted disproportionately from economic growth. This has led a growing belief that the traditional model for economic growth does not result in a population-wide increase in income. According to the report, "The growing mood of anti-establishment populism suggests we may have passed the stage where [reviving economic growth] alone would remedy fractures in society: reforming market capitalism must also be added to the agenda." Source: Lauren Gensler, "Rising Income Inequality Is Throwing The Future Of Capitalism Into Question, Says World Economic Forum," Forbes, January 11, 2017. Refer to the Article Summary. The article discusses income inequality and how economic growth alone is no longer resulting in a more equitable distribution of income. If governments increased equity by reducing the incomes of high-income people and increasing the incomes of the poor, would it be possible that fewer goods and services would be produced and less saving would take place?

an increase in human capital.

Article Summary In the past three years, four states and the city of San Francisco have enacted measures to offer free college tuition, and similar programs are under consideration in several additional areas across the country. In most states that have enacted a plan, scholarships are granted to pay the additional costs not covered by basic-needs grants, with some states setting an income cap and others limiting the free tuition to recent high-school graduates. In most states, taxpayers are paying for the programs, but in Tennessee the program is funded by the state lottery. In addition to Tennessee, free tuition programs have been implemented in Rhode Island, New York, Oregon, Arkansas, Minnesota, South Dakota, and Louisiana. These states have been promoting the programs as a way to create a strong workforce. Source: Katie Lobosco, " Tuition-free college is getting bigger. Here's where it's offered," money.cnn.com, August 4, 2017. Refer to the Article Summary. The article addresses free tuition programs now being offered in several states. If these programs lead to a more skilled and better trained workforce, the economy would experience

cause the market demand curve for labor to shift to the right.

Article Summary In the past three years, four states and the city of San Francisco have enacted measures to offer free college tuition, and similar programs are under consideration in several additional areas across the country. In most states that have enacted a plan, scholarships are granted to pay the additional costs not covered by basic-needs grants, with some states setting an income cap and others limiting the free tuition to recent high-school graduates. In most states, taxpayers are paying for the programs, but in Tennessee the program is funded by the state lottery. In addition to Tennessee, free tuition programs have been implemented in Rhode Island, New York, Oregon, Arkansas, Minnesota, South Dakota, and Louisiana. These states have been promoting the programs as a way to create a strong workforce. Source: Katie Lobosco, " Tuition-free college is getting bigger. Here's where it's offered," money.cnn.com, August 4, 2017. Refer to the Article Summary. The article addresses free tuition programs now being offered in several states. The programs could lead to a more skilled and better trained workforce. A more skilled and better trained workforce would

No, the burden of the tax will depend on the elasticity of demand and supply.

Article Summary State tax revenue from marijuana sales in Colorado has surpassed $500 million since its legalization in January 2014. Colorado has imposed three types of state taxes on marijuana: a 2.9% sales tax on medical marijuana, a 15% special sales tax for recreational use, and a 15% excise tax on wholesale marijuana transfers. About half of the accumulated tax revenue has gone to K-12 education, with over $100 million used to fund school construction projects. Twenty-five percent of the tax is being spent on substance abuse prevention and treatment programs. Source: Katelyn Newman, "Milestoned: Colorado Pot Tax Revenue Surpasses $500 M," usnews.com, July 20, 2017. Refer to the Article Summary. Colorado taxes marijuana with a 15% sales tax on recreational-use buyers and a 15% wholesale excise tax on producers, which equates to 50 percent of the total taxes paid by retail buyers and 50 percent paid by producers. Does this necessarily mean that buyers and producers will each bear 50 percent of the burden of the tax?

more utility

Article Summary The use of celebrity endorsements can be a good way to promote a brand, as long as the brand fits the celebrity. The article discusses three reasons why a company should use celebrity endorsements: 1. Celebrities have a large range of followers, giving them the ability to build brand equity which created product differentiation to consumers. 2. Companies can reach a global audience since celebrities have worldwide fan bases, and an endorsement can link the product to a celebrity's skills, making fans feel closer to and more like the celebrity. 3. Celebrity endorsements increase consumers' awareness of a product, since consumers are more likely to remember an ad linked to a celebrity. However, not all celebrities are the right fit for all products. Endorsements can backfire if the celebrities are promoting something they would never use, giving the impression of nothing more than a sponsored advertisement. Source: Erika Warne, "Why Brands Should Use Celebrity Endorsements," weareanthology.com, April 20, 2017. Refer to the Article Summary. One explanation for the increase in product sales because of celebrity endorsements is that people seem to receive ________ from goods they believe are popular.

Deadweight loss will increase.

Article Summary Voters in California approved a $2 per pack tax increase on cigarettes, which went into effect on April 1, 2017. Cigarette taxes are now $2.87 per pack in California, the ninth highest cigarette tax in the country. Approximately one-in-nine adults in California are smokers, and the tax increase is estimated to generate almost $1.4 billion in revenue during the first year, with the revenue designated for the state-run health care plan as well as various state-wide anti-smoking campaigns. Source: Andrew Blake, "Cigarette tax hike takes effect in California, costs surge by $2 per pack," Washington Times, April 1, 2017. Refer to the Article Summary. The additional tax of $2 per pack of cigarettes will have which of the following effects on the market for cigarettes in California?

earn the majority of profits

As a business type, corporations ________ in the United States.

cannot issue stock.

As a form of business, a partnership

income distribution becomes more unequal.

As the value of the Gini coefficient approaches one,

Bulgaria has a lower opportunity cost of producing sandals relative to Finland

Assume that Bulgaria has a comparative advantage in producing sandals and Finland imports sandals from Bulgaria. We can conclude that

the equilibrium price of MP3 players will decrease; the equilibrium quantity will increase.

Assume that both the demand curve and the supply curve for MP3 players shift to the right but the supply curve shifts more than the demand curve. As a result

The slope is constant, but the price elasticity of demand is not constant at all points along the demand curve for sunblock.

Assume that the demand curve for sunblock is linear and downward sloping. Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock are true?

the supply of swimming pool maintenance services has decreased.

Assume that the price for swimming pool maintenance services has risen and sales of these services have fallen. One can conclude that

perfectly inelastic.

At a price of $8 per dozen, Chuy sells 40 dozen homemade tamales per week. When he raised his price to $12 per dozen, he still sold 40 dozen per week. Based on this information, the demand for his tamales is

as wages increase the opportunity cost of leisure increases.

At low wages, the labor supply curve for most people slopes upward because

There are more letters available for collectors to buy that were written by Lincoln than there are letters that were written by Booth.

Auctions in recent years have resulted in higher prices paid for letters written by John Wilkes Booth than those written by Abraham Lincoln. What is a reason for this difference in price?

moral hazard.

Automobile insurance companies have a problem with people who buy insurance and then drive recklessly or take less care to avoid losses after being insured. In other words, the automobile insurance market is subject to

What to produce?

Automobile manufacturers produce a range of automobiles such as sports utility vehicles, luxury sedans, pickup trucks, and compact cars. What fundamental economic question are they addressing by making this range of products?

Δ( TC - FC)/Δ Q

Average variable cost can be calculated using any of the formulas below except

Correct they demand a larger quantity of health care services than they would if they paid a price that better represented the true cost of providing the service.

Because consumers who have insurance provided by their employers usually only pay a deductible for a visit to the doctor's office,

private production exceeds the economically efficient level.

Because producers do not bear the external cost of pollution

run by its founder, Mark Zuckerberg.

Before its IPO, Facebook was an example of a private firm. As a private firm, Facebook was

East Asia experienced higher economic growth than sub-Saharan Africa.

Between 1970 and 2010, the poverty rate in East Asia declined dramatically from about 60 percent to less than 1 percent, while the poverty rate in sub-Saharan Africa decreased from 40 percent to only 24 percent. The main reason for this is that

decreased by more than 25 percent.

Between 1981 and 2015, the overall mortality rate in the United States

increased

Billie's Billiard Barn has seen its business slow down ever since Patti's Ping Pong Parlour opened up across the street. Since the opening of Patti's Ping Pong Parlour, the opportunity cost of shooting pool at Billie's Billiard Barn has ________ for Billie's customers who also like to play ping pong.

was nearly $300 billion.

By 2016, the U.S. trade deficit with China

the public choice model.

Economists James Buchanan and Gordon Tullock are well-known for developing

reduce spending by people enrolled in these programs by 33 percent.

Economists John Cogan, Glenn Hubbard, and Daniel Kessler have estimated that repealing the tax preference for employer-provided health insurance would

whether the gains from the winners exceed the losses from the losers is not strictly an economic question.

Economists are reluctant to state that price controls are desirable or undesirable because

even though people may not behave rationally all the time.

Economists assume that rational behavior is useful in explaining choices people make

undertake activities that benefit others and hurt themselves.

Economists assume that rational people do all of the following except

rent seeking.

Economists often analyze the interaction of individuals and firms in markets. Economists also examine the actions of individuals and firms as they attempt to use government to make themselves better off at the expense of others, a process that is referred to as

elasticity

Economists use the concept of ________ to measure how one economic variable, such as quantity, responds to a change in another economic variable, such as price.

consumers make choices that will leave them as satisfied as possible given their incomes, tastes, and the prices of goods and services available to them

Economists usually assume that people act in a rational, self-interested way. In explaining how consumers make choices this means that economists believe

Market price is greater than marginal cost.

For a perfectly competitive firm, which of the following is not true at profit maximization?

Italy has the comparative advantage in wine.

For each bottle of wine that Italy produces, it gives up the opportunity to make 10 pounds of cheese. France gives up the opportunity to produce of 1 bottle of wine for every 25 pounds of cheese it produces. Which of the following is true about the comparative advantage between the two countries?

subsidizing the production of the product so that the supply is increased and market price is reduced.

Governments can increase the consumption of a product that creates positive externalities by

more than one-sixth

Health care makes up ________ of the U.S. economy.

Japan.

Health insurance typically pays for most preventive care procedures in all of the following countries except

people with health insurance are more likely to be overweight than people without health insurance.

Holding all other personal characteristics-such as age, gender, and income-constant, economists would expect that

Earnings are taxed first as corporate profits then as personal income after dividends are paid.

How are corporate profits taxed in the United States?

All of these are differences between the two types of businesses.

How do a sole proprietorship and a corporation differ?

The demand for labor will increase and the equilibrium wage and quantity of labor will increase.

How will an increase in labor productivity affect equilibrium in the labor market?

5 units.

If 11 workers can produce a total of 54 units of a product and a 12th worker has a marginal product of 6 units, then the average product of 12 workers is

is more valuable than

If a dollar a year from now will likely have less purchasing power because of inflation, then a dollar today ________ a dollar a year from now.

the moral hazard problem.

If a fire insurance company requires firms buying fire insurance to install automatic sprinkler systems, the insurance company is trying to reduce

change price a little bit and observe what happens to total revenue.

If a firm wanted to know whether the demand for its product was elastic, unit elastic, or inelastic, then the firm could

economies of scale

If an airport decides to expand by building an additional passenger terminal, and in doing so it lowers its average cost per airplane landing, then the expansion would provide ________ to the airlines.

an inferior good.

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

a normal good.

If an increase in income leads to in an increase in the demand for peanut butter, then peanut butter is

elastic.

If at a price of $24, Octavia sells 36 home-grown orchids and at $30 she sells 24 home-grown orchids, the demand for her orchids is

elastic or perfectly elastic.

If at a price of $50, Ghani sells 20 hand-made leather cell-phone covers but at a price of $60, zero units are sold. Based on this information, the demand for his cell-phone covers is

infinity.

If demand is perfectly elastic, the absolute value of the price elasticity coefficient is

a consumer's total utility to increase.

If marginal utility of apples is diminishing and is a positive amount, consuming one more apple will cause

Demand and supply will both increase.

If more insurance companies decide to cover part of the price of voluntary laser eye surgery and more doctors decide to enter the field of laser eye surgery, what will happen in the market for laser eye surgery as a result of these two factors?

a negatively sloped straight line.

If opportunity costs are constant, the production possibilities frontier would be graphed as

upward sloping.

If production displays diseconomies of scale, the long-run average cost curve is

greater than 0.8 in absolute value.

If the absolute value of the price elasticity of demand for DVD movies is 0.8 then the elasticity of demand of the DVD for the movie The Hangover should be

increase the demand for premium water, because premium water and carbonated sodas are considered substitutes.

If the amount of carbonated sodas consumed continues to decline as consumers continue to choose to buy healthier products, this will likely

the percentage change in quantity demanded is less than the percentage change in price (in absolute value).

If the demand for cell phone service is inelastic, then

increase the equilibrium wage and increase the number of workers employed.

If the labor supply is unchanged, an increase in the demand for labor will

further reductions will make society better off.

If the marginal benefit of reducing emissions of some air pollutant is greater than the marginal cost,

regressive.

If the marginal tax rate is less than the average tax rate as taxable income increases, the tax structure is

the price elasticity of demand for teapots is greater than 1 in absolute value.

If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots, then

vertical.

If the price elasticity of demand for insulin is equal to zero then the demand curve for insulin is

a decrease in the quantity of grapefruit demanded.

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

we don't know whether the demand is elastic or inelastic.

If the slope of a demand curve is equal to -0.1 then

economic efficiency is achieved.

If there is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and consumer surplus plus producer surplus is maximized, then

one that sells a luxury good.

If you expect the economy is going to experience a boom and average income in the economy will rise in the foreseeable future, the type of firm that would be able to increase its sales if your expectations are met is

proportional.

If you pay $2,000 in taxes on an income of $20,000, and a tax of $3,000 on an income of $30,000, then over this range of income the tax is

Present value equals $10,000 divided by 1.04

If you want to know the present value of $10,000 received a year from today, and the interest rate is 4 percent, what formula can you use?

Present value equals future payment divided by one plus the rate of interest.

If you want to know the present value of a future payment received in one year, what formula can you use?

"Increases in my productivity have resulted in greater revenue and profits for your business."

If you were to ask your employer for a raise, which of the following would be your most effective argument?

regressive

If, as your taxable income decreases, you pay a larger percentage of your taxable income in taxes, then the tax is

quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.

If, for a product, the quantity supplied exceeds the quantity demanded, the market price will fall until

added more to total revenue than it added to total cost.

If, for the last bushel of apples produced and sold by an apple farm, marginal revenue exceeds marginal cost, then in producing that bushel, the farm

added more to total revenue than it added to total cost.

If, for the last unit of a good produced by a perfectly competitive firm, MR > MC, then in producing it, the firm

an increase in quantity demanded.

If, in response to a decrease in the price of grapes, the quantity of grapes demanded increases, then economists would describe this as

increasing Enron's net worth on the balance sheet.

In 2002, the Enron Corporation was accused of falsifying information regarding liabilities on Enron's balance sheets, thereby

a shortage of oranges.

In 2004, hurricanes damaged a large portion of Florida's orange crop. As a result of this, many orange growers were not able to supply fruit to the market. If, following the hurricane, the price remained at its pre-hurricane level, we would expect to see

the supply curve shifted to the left resulting in an increase in the equilibrium price.

In 2004, hurricanes destroyed a large portion of Florida's orange and grapefruit crops. In the market for citrus fruit in 2004

decreased.

In 2016, Philadelphia imposed a tax of 1.5 cents per ounce on sweetened beverages, and PepsiCo indicated that its sales in Philadelphia fell by 40 percent after the tax took effect. If the price of PepsiCo's sweetened beverages in Philadelphia increased by 32 percent following the implementation of the tax, then based on these figures total revenue

The demand curve shifts to the right.

In January, buyers of gold expect that the price of gold will rise in February. What happens in the gold market in January, holding all else constant?

only about one-third

In a given year, ________ of smartphone or tablet owners will pay for any apps.

a ray from the origin

In a graph with output on the horizontal axis and total revenue on the vertical axis, what is the shape of the total revenue curve for a perfectly competitive seller?

producers, consumers, and government

In a modern mixed economy, who decides what goods and services will be produced?

the division of labor

In his book The Wealth of Nations, Adam Smith employed the example of a pin factory in order to explain what economic concept?

allocate her limited income among all the products she wishes to buy so that she receives the highest total utility.

In making decisions about what to consume, a person's goal is to

The managers of the corporation run the corporation, although the shareholders own the corporation.

In many corporations, there is "separation of ownership from control." What does this mean?

the Sarbanes-Oxley Act

In response to accounting scandals in 2002, the federal government passed legislation requiring that corporate directors have a certain level of expertise with financial information and mandating that chief executive officers personally certify the accuracy of financial statements. What is the name of this legislation?

kidney disease.

In the United States from 1981 to 2015, deaths from all of the following declined substantially except

7%

In the United States in 2016, the percentage of people that directly purchased an individual or family health insurance policy from an insurance company was about

7%.

In the United States in 2016, the percentage of people that directly purchased an individual or family health insurance policy from an insurance company was about

36%

In the United States in 2016, the percentage of people who received health insurance through a government program was about

36%.

In the United States in 2016, the percentage of people who received health insurance through a government program was about

significantly higher than

In the United States, health care spending per person is ________ the average for most other countries, even taking into account the effects of higher income per person.

10

In the United States, out-of-pocket spending on health care is about ________ percent of all health care spending.

rising; falling

In the United States, total health care spending per person has been ________, and out-of-pocket spending on health care per person has been ________.

hire resources sold by households in the factor market.

In the circular flow model, producers

$32,000

Jake sells Star Wars memorabilia on eBay. His annual revenue is $42,000 per year, and the explicit costs of his business are $10,000. What is his accounting profit?

As a sole proprietor, Jeremy would have both ownership and control over the business.

Jeremy is thinking of starting up a small business selling NASCAR memorabilia. He is considering setting up his business as a sole proprietorship. What is one advantage to Jeremy of setting up his business as a sole proprietorship?

As a sole proprietor, Jeremy would face unlimited liability.

Jeremy is thinking of starting up a small business selling NASCAR memorabilia. He is considering setting up his business as a sole proprietorship. What is one disadvantage to Jeremy of setting up his business as a sole proprietorship?

What to produce?

Jewelry manufacturers produce a range of products such as rings, necklaces, bracelets, and brooches. What fundamental economic question are they addressing by offering this range of items?

She is correct.

Jill Borts believes that the price elasticity of demand for her economics textbook is relatively inelastic. She argues "I was told I had to purchase a book written by Hubbard and O'Brien that is required by my instructor. If I wanted to buy a mystery novel I would have many authors to choose from. Therefore, the demand for mystery novels is more elastic than the demand for my textbook." Is Jill correct?

$500,000

Laura's Pizza Place incurs $800,000 per year in explicit costs and $100,000 in implicit costs. The restaurant earns $1.3 million in revenues. Based on this information, what is the accounting profit for Laura's Pizza Place?

a normal good.

Leisure is

Correct P × MP < W.

Let MP = marginal product of labor, P = output price, and W = wage, then the equation that represents a situation where a competitive firm should lay off some workers to maximize profits is

Blu-ray discs are normal goods and DVDs are inferior goods.

Linesha, a college student working part-time received a wage increase. An avid movie buff, she increased her purchases of Blu-ray discs and reduced her purchases of DVDs. Based on this information

the ballparks where the games are played.

Major League Baseball teams are similar to other firms in that they use factors of production to produce a product (baseball games). An example of capital used by teams to produce their products is

only if output price is constant.

Marginal revenue product can be calculated using the formula marginal product × output price

the marginal product of labor falls as a result of the law of diminishing returns.

Marginal revenue product falls as more labor is hired because

horizontally summing the relevant part of each individual producer's marginal cost curve.

Market supply is found by

First, these measures do not take into account income mobility over time. Second, these measures ignore the effects of government programs meant to reduce poverty.

Measures of poverty (for example, the poverty line) and the distribution of income (for example, the Lorenz curve and the Gini coefficient) are misleading for which of the following two reasons?

all economies of scale are exhausted.

Minimum efficient scale is defined as the level of output at which

subprime

Mortgages issued to borrowers whose credit histories include failures to make payments on bills are known as ________ mortgages.

the demand for salt is relatively inelastic.

Most people buy salt infrequently and in small quantities. Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded. Therefore

the United States, Canada, and Mexico

NAFTA refers to a 1994 agreement that eliminated most tariffs among which countries?

Harry Truman

Of the following U.S. presidents, which was the first to propose a national health insurance program to Congress?

the United States

Of the following high-income countries, which has the highest infant mortality rate?

Japan

Of the following high-income countries, which has the highest number of CT scanners per 1 million population?

slow growth in labor productivity in health care

Of the following, which has most likely contributed the most to the rapid rise in health care costs in the United States?

a diabetic's demand for insulin

Of the following, which is the best example of good with a perfectly inelastic demand?

a Coasian solution to an externality situation.

Offering to pay the passenger in front of you to keep her from reclining her airplane seat is an example of

higher; more efficient

Once a country has lost its comparative advantage in producing a good, its income will be ________ and its economy will be ________ if it switches from producing the good to importing it.

with a private good, each consumer chooses the quantity she wants to consume but with a public good, everyone consumes the same quantity.

One difference between the demand for a private good and that for a public good is that

the stock prices of 30 large U.S. corporations.

One of the most widely followed stock indexes in the United States is the Dow Jones Industrial Average. This index represents

some insurance companies leaving the ACA-established insurance marketplaces.

One of the provisions of the Patient Protection and Affordable Care Act (ACA) is that in 2017, someone without health insurance was fined $695 or 2.5 percent of their income, whichever amount was higher. A growing number of younger and healthier people chose to pay the fine and not purchase health insurance, which resulted in

People respond to economic incentives.

One reason some manufacturing companies have moved production from overseas locations back to the United States is an increasing preference by U.S. consumers for products made in the United States. If buyers have increased their preference for domestically produced goods and manufacturers believe they can increase revenues by supplying more of these goods, firms are following which key economic idea when they return production to the United States?

sick people are more likely to want health insurance than healthy people.

One reason why adverse selection problems arise in health insurance markets is that

more difficult

Organizing a successful firm in a market economy has become ________ over the last century.

has more than doubled.

Over the past 165 years in the United States, life expectancy

vertical; downward sloping

Perfectly inelastic demand is represented by a demand curve which is ________, and relatively inelastic demand is represented by a demand curve which is ________.

15 bow ties

Pierre can produce either a combination of 20 bow ties and 30 neckties or a combination of 35 bow ties and 15 neckties. If he now produces 35 bow ties and 15 neckties, what is the opportunity cost of producing an additional 15 neckties?

Yes, it was a voluntary exchange that benefited both parties.

Political candidates often hold fundraisers by charging "per plate" for dinner. Wendy purchased four tickets to a $1,000 per plate dinner for a local city council candidate. Does this transaction benefit both parties?

nonrivalry and nonexcludability

Public goods are distinguished by two primary characteristics. What are they?

his opportunity cost of pursuing another career is very low.

Rayburn Reed is a highly talented photographer. He has chosen to specialize in photography because of all of the following except

Q b

Refer to Figure 11-10. Identify the minimum efficient scale of production.

the marginal product of labor is below the average product of labor.

Refer to Figure 11-2. The average product of labor declines after L 2 because

it should maintain its output to maximize profit.

Refer to Figure 12-1. If the firm is producing 500 units,

There is insufficient information to answer the question.

Refer to Figure 12-1. If the firm is producing 500 units, what is the amount of its profit or loss?

it should cut back its output to maximize profit.

Refer to Figure 12-1. If the firm is producing 700 units,

It is equal to the vertical distance c to g.

Refer to Figure 12-2. What is the amount of profit if the firm produces Q 2 units?

Only the average total cost curve shifts upward; the marginal cost and average variable cost curves are not affected.

Refer to Figure 12-5. If the firm's fixed cost increases by $1,000 due to a new environmental regulation, what happens in the diagram above?

$6,750

Refer to Figure 12-5. If the market price is $20, what is the amount of the firm's profit?

Q = 1,100 units, average profit = $6

Refer to Figure 12-5. The firm's manager suggests that the firm's goal should be to maximize average profit. In that case, what is the output level and what is the average profit that will achieve the manager's goal?

increase production to the output level indicated by point d

Refer to Figure 12-6. Jason is currently producing 20 thousand pounds of apples. To maximize his profit Jason should

The curve shifts to the left.

Refer to Figure 17-2. Suppose the market price of bracelets falls to $2. What happens to the curve given in the diagram?

the substitution effect outweighs the income effect.

Refer to Figure 17-3. In Panel A, at low wages (segment i)

the excess burden of the sales tax.

Refer to Figure 18-1. Area E + H represents

the portion of sales tax revenue borne by producers.

Refer to Figure 18-1. Area F + G represents

Tahiti

Refer to Figure 2-10. If the two countries have the same amount of resources and the same technological knowledge, which country has an absolute advantage in the production of milk?

Tahiti

Refer to Figure 2-10. Which country has a comparative advantage in the production of milk?

J and M

Refer to Figure 2-14. Identify the two arrows in the diagram that depict the following transaction: Barney earns $250 for selling scissors and razors to Floyd's Barber Shop.

J and M

Refer to Figure 2-14. Identify the two arrows in the diagram that depict the following transaction: Myrna earns $450 for working at HempHill's Drug Store.

0 pounds of vegetables

Refer to Figure 2-2. If Mendonca chooses to produce 120 pounds of meat, how much vegetables can it produce to maximize production?

0 pounds of meat

Refer to Figure 2-2. If Mendonca chooses to produce 160 pounds of vegetables, how much meat can it produce to maximize production?

c only

Refer to Figure 2-4. Consider the following events: a. an increase in the unemployment rate b. a decrease in a nation's money supply c. a war that kills a significant portion of a nation's population Which of the events listed above could cause a movement from Y to W?

0 hammers

Refer to Figure 2-6. If the economy is currently producing at point D, what is the opportunity cost of moving to point B?

13 thousand hammers 8 thousand wrenches 10 thousand hammers

Refer to Figure 2-6. If the economy is currently producing at point E, what is the gain in production if the economy moves to point D?

movement from H to J in Graph B.

Refer to Figure 2-7. Assume that in response to changing consumer demands, Tesla cuts back on the production of Powerwall batteries and increases its production of automobile batteries. This strategy is best represented by the

Indonesia

Refer to Figure 2-9. If the two countries have the same amount of resources and the same technological knowledge, which country has an absolute advantage in the production of cotton?

Indonesia

Refer to Figure 2-9. Which country has a comparative advantage in the production of cotton?

none of the points shown

Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D 1 and S 1 (point A). If there is an increase in the wages of apple workers and an increase in the price of oranges, a substitute for apples, the equilibrium could move to which point?

a positive change in the technology used to produce apples and decrease in the price of oranges, a substitute for apples

Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D 1 and S 2 (point B). Which of the following changes would cause the equilibrium to change to point C?

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

Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D 2 and S 1 (point C). Which of the following changes would cause the equilibrium to change to point B?

$0.50

Refer to Figure 4-1. If the market price is $2.00, what is Arnold's consumer surplus?

$6.00

Refer to Figure 4-1. What is the total amount that Arnold is willing to pay for 3 burritos?

A + B + C

Refer to Figure 4-2. What area represents producer surplus at a price of P2?

$100,000

Refer to Figure 4-5. What is the value of the portion of producer surplus transferred to consumers as a result of the rent ceiling?

$2,000

Refer to Figure 4-5. With rent control, the quantity supplied is 200 apartments. Suppose apartment owners ignore the law and rent this quantity for the highest rent they can get. What is the highest rent they can get per month?

B + E

Refer to Figure 4-6. What is the area that represents producer surplus after the imposition of the price floor?

$7

Refer to Figure 4-8. What is the size of the per-unit tax?

the producer bears a greater share of the tax burden if the supply curve is S 2.

Refer to Figure 4-9. Suppose the market is initially in equilibrium at price P 1 and now the government imposes a tax on every unit sold. Which of the following statements best describes the impact of the tax? For demand curve D 1

the market supply curve reflecting marginal private cost

Refer to Figure 5-1. If, because of an externality, the economically efficient output is Q 2 and not the current equilibrium output of Q 1, what does S 1 represent?

$1,800

Refer to Figure 5-16. How much is Bree willing to pay per street light to have 4 street lights installed?

E + C

Refer to Figure 5-6. What is the deadweight loss resulting from producing at the market equilibrium?

unit-elastic.

Refer to Figure 6-7. Using the total revenue test to verify the price elasticity between points a and b on the demand curve, demand is

luxury goods.

Refer to Figure 6-9. The data in the diagram indicates that DVDs are

the marginal social benefit is greater than the marginal cost.

Refer to Figure 7-1. At the market equilibrium,

700.

Refer to Figure 7-2. With insurance and a third-party payer system, the equilibrium quantity of medical services is

$3,000

Refer to Figure 7-2. With insurance and a third-party payer system, what is the amount of the deadweight loss?

10 units

Refer to Figure 9-1. Suppose the government allows imports of leather footwear into the United States. What will be the domestic quantity supplied?

4 hours

Refer to Table 1-2. Using marginal analysis, by how many hours should Thuy Anh extend her flower shop's hours of operations?

2 burgers and 3 cans of Pepsi

Refer to Table 10-6. What is Jay's optimal consumption bundle?

5 pounds

Refer to Table 11-1. What is the marginal product of the 4th worker?

$5.44

Refer to Table 11-7. What is the average variable cost per unit of production when the firm produces 90 lanterns?

economies of scale at an output of 300 or less and diseconomies of scale at an output level above 400.

Refer to Table 11-8. Elegant Settings experiences

$3,200

Refer to Table 12-1. If the market price of each camera case is $8, what is the firm's total revenue when the profit-maximizing quantity is found at the output where MR = MC?

marginal revenue

Scenario 1-2 Suppose a hat manufacturer currently sells 2,000 hats per week and makes a profit of $5,000 per week. The plant owner observes, "Although the last 300 hats we produced and sold increased our revenue by $1,000 and our costs by $1,100, we are still making an overall profit of $5,000 per week so I think we're on the right track. We are producing the optimal number of hats." Refer to Scenario 1-2. Using marginal analysis terminology, another economic term for the incremental revenue received from the sale of the last 300 hats is

It is perfectly inelastic.

Seth is a competitive body builder. He says he has to have his 12-oz package of protein powder to "feed his muscles" every day. On the basis of this information, what can you conclude about his price elasticity of demand for protein powder?

The absolute value of the price elasticity of demand for wheat is less than 1 and the income elasticity of demand for wheat is low.

Since 1950, there has been a substantial increase in wheat production. The increase in production has led to a decrease in the price of wheat because of which of the following factors?

increase the principal-agent problem.

Some corporate governance experts believe that serving on a company's board of directors for an extended length of time diminishes that member's independence from the company's CEO. If this is true, it would tend to

wine and spirits are luxury goods.

Studies show that the income elasticity of demand for wine is 5.03 and the income elasticity of demand for spirits is 1.21. This indicates that

A 1 percent increase in income leads to a 5 percent increase in wine consumption.

Studies show that the income elasticity of demand for wine is approximately five. What does this mean?

The endowment effect explains Adam's actions. People like Adam seem to value things that they have more than the things they do not have.

Suppose Adam Einberg pays $100 for a ticket to a new Broadway play and $100 was the maximum price he was willing to pay. On the day of the performance of the play Adam refuses to sell the ticket for $150. How would behavioral economists explain Adam's refusal to sell his ticket?

Plan II because it is likely to draw participants who expect high medical costs. Healthy individuals who do not expect to consume much health care services will not be willing to pay the high premiums.

Suppose a large firm allows its employees to choose whether to participate in its health insurance plan. The firm is trying to decide between two plans: Plan I has a low monthly premium but a high deductible, and Plan II has a high monthly premium but a low deductible. Under which plan is adverse selection likely to be a bigger problem?

Sellers of good used cars will drop out of the market.

Suppose that in a market for used cars, there are good used cars and bad used cars (lemons). Consumers are willing to pay as much as $6,000 for a good used car but only $1,000 for a lemon. Sellers of good used cars value their cars at $5,000 each and sellers of lemons value their cars at $800 each. Buyers cannot tell if a used car is reliable or is a lemon. Based on this information, what is the likely outcome in the market for used cars?

income and substitution effects

The French Bakery ran a special which decreased the price of its croissants from $1.50 to $1.00. Although her money income had not changed, Toni decided to buy 2 croissants instead of her usual 1 bagel and 1 croissant. Toni's actions are explained by which of the following?

The government imposes quantitative limits on the amount of pollution firms are allowed to generate.

The U.S. government has frequently used a "command-and-control" approach in dealing with pollution. Which of the following describes this approach?

transactions costs.

The costs in time and other resources that parties incur in the process of facilitating an exchange of goods and services are called

marginal private benefit from consuming paper is equal to the marginal social cost of production.

The efficient level of paper production will occur where the

The NFL is concerned that raising ticket prices would be considered unfair.

The quantity of tickets demanded to the Super Bowl is always greater than the quantity supplied. Which of the following in the best explanation why the National Football League does not raise the price of tickets to the level where the quantity demanded equals the quantity supplied?

$2.40

Vipsana's Gyros House sells gyros. The cost of ingredients (pita, meat, spices, etc.) to make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a fixed cost of $120 per day. Calculate Vipsana's average fixed cost per day when she produces 50 gyros using two workers?

The consumption of these goods takes place publicly.

What is the common feature displayed by the following items? a. eating at a newly opened "fusion" cuisine restaurant b. attending a Red Sox game in Fenway Park c. wearing Lucky Brand designer jeans

moral hazard.

When people who buy insurance change their behavior after the purchase because they are protected from loss by the insurance, the insurance market is said to face the problem of

the income effect.

When the price of audio books, a normal good, falls, causing your purchasing power to rise, you buy more of them due to

is less than

When there is a negative externality, the marginal private cost of production ________ the marginal social cost of production.

This statement is not true. Revenue will increase as the price of the product increases only if demand is inelastic.

Which of the following correctly comments on the following statement? "The only way to increase the revenue from selling a product is to increase the product's price."

People who do not attend college still benefit from others who receive a college education.

Which of the following describes a positive externality?

The price elasticity of demand allows the firm to calculate how changes in the price of the good will affect the firm's total revenue.

Which of the following explains why a firm would be interested in knowing the price elasticity of demand for a good it sells?

a factory building

Which of the following is a factor of production that generally is fixed in the short run?

a tax imposed on a utility that internalizes the cost of externalities caused by the utility

Which of the following is an example of a Pigovian tax?

sea otters in the coastal waters of the Pacific Ocean

Which of the following is an example of a common resource?

Individuals who are insured and therefore do not have to pay the full cost of health care services may be inclined to over-use those services.

Which of the following is not an advantage of risk pooling?

Each firm produces a similar but not identical product.

Which of the following is not an assumption of perfectly competitive markets?

positive externality

rticle Summary According to the online real estate database company Zillow, homes located near a Whole Foods or Trader Joe's location have appreciated in value at double the rate of homes in other areas. From 1997 to 2014, the median U.S. home had appreciated 71 percent, while a median home near a Whole Foods or Trader Joe's appreciated 140 percent and 148 percent, respectively. Although some analysts believe this is due to these retailers often opening stores in high-income neighborhoods, Zillow researchers found that before a Whole Foods or Trader Joe's opened, homes near where the stores would eventually be appreciated at the same pace of comparable homes across the city, but after the stores opened the appreciation rate of homes in close proximity increased at a faster rate. Source: Marian McPherson, "Living near these 2 stores boosts a home's value," inman.com, June 19, 2017. Refer to the Article Summary. Assuming the findings are correct and all else equal, higher increases in home values which result from close proximity to a Whole Foods or Trader Joe's are an example of a ________ due to the location of these stores.