Econ II Final
If the demand for a good falls when income falls, then the good is called a(n) a. normal good. b. regular good. c. luxury good. d. inferior good.
A
If the government allowed a free market for transplant organs such as kidneys to exist, the a. shortage of organs would be eliminated, and there would be no surplus of organs. b. shortage of organs would be eliminated, but a surplus of organs would develop. c. shortage of organs would persist. d. overall well-being of society would remain unchanged.
A
Suppose the market demand curve for a good passes through the point (quantity demanded = 100, price = $25). If there are five buyers in the market, then a. the marginal buyer's willingness to pay for the 100th unit of the good is $25. b. the sum of the five buyers' willingness to pay for the 100th unit of the good is $25. c. the average of the five buyers' willingness to pay for the 100th unit of the good is $25. d. all of the five buyers are willing to pay at least $25 for the 100th unit of the good.
A
Table 7-10The following table represents the costs of five possible sellers. SellerCostAbby$1,600Bobby$1,300Dianne$1,100Evaline$900Carlos$800 Refer to Table 7-10. If the market price is $1,100, the combined total cost of all participating sellers is a. $2,800. b. $2,900. c. $1,700. d. $4,000.
A
To increase living standards, public policy should a. ensure that workers are well educated and have the necessary tools and technology. b. make unemployment benefits more generous. c. move workers into jobs directly from high school. d. ensure a greater degree of equality, taking all income-earners into account.
A
When a tax on a good is enacted, a. buyers and sellers share the burden of the tax regardless of whether the tax is levied on buyers or on sellers. b. buyers always bear the full burden of the tax. c. sellers always bear the full burden of the tax. d. sellers bear the full burden of the tax if the tax is levied on them; buyers bear the full burden of the tax if the tax is levied on them.
A
The price received by sellers in a market will decrease if the government a. imposes a binding price floor in that market. b. decreases a binding price ceiling in that market. c. decreases a tax on the good sold in that market. d. increases a binding price floor in that market.
B
When a single person (or small group) has the ability to influence market prices, there is a. competition. b. market power. c. an externality. d. a lack of property rights.
B
Celine buys a new MP3 player for $90. She receives consumer surplus of $15 on her purchase if her willingness to pay is a. $15. b. $90. c. $105. d. $75.
C
Figure 8-6 The vertical distance between points A and B represents a tax in the market. Refer to Figure 8-6. When the tax is placed on this good, the quantity sold a. is 600, and buyers effectively pay $10. b. is 300, and buyers effectively pay $10. c. is 600, and buyers effectively pay $16. d. is 300, and buyers effectively pay $16.
D
"Trade raises the economic well-being of a nation in the sense that the gains of the winners exceed the losses of the losers." This statement is correct for a nation that exports manufactured goods, but it is not correct for a nation that imports manufactured goods.
False
A decrease in the price of baseball bats will decrease the demand for baseballs.
False
A linear, downward-sloping demand curve has a constant elasticity but a changing slope.
False
An advantage of using the midpoint method to calculate the price elasticity of demand is that it uses the metric system.
False
Baseballs and baseball bats are substitute goods.
False
Corrective taxes enhance efficiency, but the cost to administer them exceeds the revenue they raise for the government.
False
A tax on a good causes the size of the market to shrink.
True
A tax on buyers decreases demand.
True
Figure 8-12 Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The loss of consumer surplus resulting from this tax is a. $35. b. $45. c. $70. d. $80.
A
Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. Refer to Figure 8-8. The tax causes producer surplus to decrease by the area a. D+F. b. D+F+G. c. D+F+J. d. D+F+G+H.
A
For which of the following problems can well-designed public policy enhance economic efficiency? a. both externalities and market power b. externalities, but not market power c. market power, but not externalities d. neither externalities nor market power
A
Sophia sits behind Gabriel on an airplane. Gabriel owns the right to recline his seat and values this right at $10. Sophia values a non-reclined seat in front of her at $40. Assuming no transaction costs, which of the following represents an efficient solution? a. Sophia offers Gabriel between $10 and $40 to not recline his seat. Gabriel accepts, and both parties are better off. b. Sophia offers Gabriel between $0 and $10 to not recline his seat. Gabriel accepts, and Sophia is better off. c. Sophia offers Gabriel between $10 and $40 to not recline his seat. Gabriel declines because he has the right to recline his seat. d. Gabriel offers Sophia between $10 and $40 to recline his seat. Sophia accepts, and both parties are better off.
A
Table 5-3Consider the following demand schedule. Price Quantity Demanded $0 1,000 $3 800 $6 600 $9 400 $12 200 $15 0 Refer to Table 5-3. Using the midpoint method, what is the price elasticity of demand between $0 and $3? a. 0.11 b. 0.22 c. 0.40 d. 2.00
A
There are very few, if any, good substitutes for motor oil. Therefore, the a. demand for motor oil would tend to be inelastic. b. demand for motor oil would tend to be elastic. c. demand for motor oil would tend to respond strongly to changes in prices of other goods. d. supply of motor oil would tend to respond strongly to changes in people's tastes for large cars relative to their tastes for small cars.
A
Warrensburg is a small college town in Missouri. At the end of August each year, the market demand for fast food in Warrensburg a. increases. b. decreases. c. remains constant, but we observe a movement downward and to the right along the demand curve. d. remains constant, but we observe a movement upward and to the left along the demand curve.
A
While in college, Marty and Laura each buy 15 bus tickets per month. After they graduate and have full-time jobs, Marty buys 0 bus tickets per month and Laura buys 28 bus tickets per month. Comparing income elasticity of demand for bus tickets, Marty's a. is negative, and Laura's is positive. b. is positive, and Laura's is negative. c. is zero, and Laura's is positive. d. is zero, and Laura's is negative.
A
Figure 6-4 Refer to Figure 6-4. Which of the following statements is not correct? a. When the price is $10, quantity supplied equals quantity demanded. b. When the price is $6, there is a surplus of 8 units. c. When the price is $12, there is a surplus of 4 units. d. When the price is $16, quantity supplied exceeds quantity demanded by 12 units.
B
Figure 7-15 Refer to Figure 7-15. When the price falls from P2 to P1, producer surplus a. decreases by an amount equal to C. b. decreases by an amount equal to A+B. c. decreases by an amount equal to A+C. d. increases by an amount equal to A+B.
B
Figure 9-1 The figure illustrates the market for coffee in Guatemala. Refer to Figure 9-1. In the absence of trade, the equilibrium price of coffee in Guatemala is a. $30. b. $90. c. $110. d. $140.
B
Figure 9-1 The figure illustrates the market for coffee in Guatemala. Refer to Figure 9-1. In the absence of trade, total surplus in Guatemala is represented by the area a. A + B + C. b. A + B + C + D + F. c. A + B + C + D + F + G. d. A + B + C + D + F + G + H. Check
B
Figure 9-7. The figure applies to the nation of Wales and the good is cheese. Refer to Figure 9-7. With trade, Wales a. imports Q2 - Q1 units of cheese. b. exports Q2 - Q1 units of cheese. c. imports Q2 - Q0 units of cheese. d. exports Q2 - Q0 units of cheese.
B
If a nonbinding price floor is imposed on a market, then the a. quantity sold in the market will decrease. b. quantity sold in the market will stay the same. c. price in the market will increase.
B
In a given market, how are the equilibrium price and the market-clearing price related? a. There is no relationship. b. They are the same price. c. The market-clearing price exceeds the equilibrium price. d. The equilibrium price exceeds the market-clearing price.
B
Figure 4-3 Consumer 1 Consumer 2 Refer to Figure 4-3. If these are the only two consumers in the market, then the market quantity demanded at a price of $10 is a. 0 units. b. 5 units. c. 8.33 units. d. 25 units.
C
In the market for widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. The equilibrium quantity in the market for widgets is 250 per month when there is no tax. Then a tax of $6 per widget is imposed. As a result, the government is able to raise $750 per month in tax revenue. We can conclude that the after-tax quantity of widgets is a. 75 per month. b. 100 per month. c. 125 per month. d. 150 per month.
C
Suppose your own demand curve for tomatoes slopes downward. Suppose also that, for the last tomato you bought this week, you paid a price exactly equal to your willingness to pay. Then a. you should buy more tomatoes before the end of the week. b. you already have bought too many tomatoes this week. c. your consumer surplus on the last tomato you bought is zero. d. your consumer surplus on all of the tomatoes you have bought this week is zero.
C
Tax incidence a. depends on the legislated burden. b. is entirely random. c. depends on the elasticities of supply and demand. d. falls entirely on buyers or entirely on sellers.
C
The highest form of competition is called a. absolute competition. b. cutthroat competition. c. perfect competition. d. market competition.
C
Figure 6-31 Refer to Figure 6-31. Suppose that a price ceiling is imposed in this market at a price of $30 and market demand for the good subsequently increases. This would a. decrease the size of the surplus. b. decrease the size of the shortage. c. increase the size of the surplus. d. increase the size of the shortage.
D
Rent control policies tend to cause a. relatively smaller shortages in the short run than in the long run because supply and demand tends to be more elastic in the short run than in the long run. b. relatively larger shortages in the short run than in the long run because supply and demand tends to be more elastic in the short run than in the long run. c. relatively larger shortages in the short run than in the long run because supply and demand tends to be more inelastic in the short run than in the long run. d. relatively smaller shortages in the short run than in the long run because supply and demand tends to be more inelastic in the short run than in the long run.
D
Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay a. more than $40, as the average benefit will exceed the marginal cost. b. more than $40, as the marginal benefit will exceed the marginal cost. c. more than $80, as the average benefit will exceed the marginal cost. d. more than $80, as the marginal benefit will exceed the marginal cost.
D
The Tragedy of the Commons for sheep grazing on common land can be eliminated by the government doing each of the following except a. assigning land property rights. b. auctioning off sheep-grazing permits. c. taxing sheep flocks. d. subsidizing sheep flocks.
D
The highest form of competition is called a. arbitrage. b. monopolistic competition. c. equilibrium. d. perfect competition.
D
Which of the following is a subject that economists study? a. the growth in average income b. the fraction of the population that cannot find work c. the rate at which prices are rising d. All of the above are correct.
D
he principle that "trade can make everyone better off" applies to interactions and trade between a. families. b. states within the United States. c. nations. d. All of the above are correct.
D
The distribution of the burden of a tax depends strictly on the elasticity of supply.
False
Regardless of whether a tax is levied on sellers or buyers, taxes discourage market activity.
True
Figure 4-27 Panel (a) Panel (b) Panel (c) Panel (d) Refer to Figure 4-27. Panel (a) shows which of the following? a. an increase in demand and an increase in quantity supplied b. an increase in demand and an increase in supply c. an increase in quantity demanded and an increase in quantity supplied d. an increase in quantity demanded and an increase in supply
A
An overcrowded beach is an example of a. a positive externality. b. a Tragedy of the Commons. c. an environmentally inefficient allocation of resources. d. an economically unfair allocation of resources.
B
If macaroni and cheese is an inferior good, what would happen to the equilibrium price and quantity of macaroni and cheese if consumers' incomes rise? a. Both the equilibrium price and quantity would increase. b. Both the equilibrium price and quantity would decrease. c. The equilibrium price would increase, and the equilibrium quantity would decrease. d. The equilibrium price would decrease, and the equilibrium quantity would increase.
B
If the demand for bananas is elastic, then an increase in the price of bananas will a. increase total revenue of banana sellers. b. decrease total revenue of banana sellers. c. not change total revenue of banana sellers. d. There is not enough information to answer this question.
B
If the number of buyers in a market decreases, then a. demand will increase. b. demand will decrease. c. supply will increase. d. supply will decrease.
B
Senator Bright, who understands economic principles, is trying to convince workers in her district that trade with other countries is beneficial. Senator Bright should argue that trade can be beneficial a. only if it allows us to obtain things that we couldn't make for ourselves. b. because it allows specialization, which increases total output. c. to us if we can gain and the others involved in the trade lose. d. in only a limited number of circumstances because others are typically self-interested.
B
Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by a. 30%. b. 40%. c. 80%. d. 250%.
B
Table 7-5For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges, and only three oranges can be supplied per day. First Orange Second Orange Third Orange Allison $2.00 $1.50 $0.75 Bob $1.50 $1.00 $0.60 Charisse $0.75 $0.25 $0 Refer to Table 7-5. If the market price of an orange increases from $0.80 to $1.05, then consumer surplus a. increases by $0.75. b. decreases by $0.95. c. decreases by $0.75. d. decreases by $1.00.
B
The minimum wage is an example of a a. price ceiling. b. price floor. c. wage subsidy. d. tax.
B
When calculating the cost of college, which of the following should you probably include? a. The cost of your meal plan for the cafeteria. b. The cost of books required for college classes c. The income you earn at your part-time job. d. The cost of living in the dormitory.
B
Which of the following is the most accurate statement? a. Protection is necessary in order for young industries to grow up and be successful. b. Protection is not necessary for an industry to grow. c. Protection is necessary because if young industries are not protected, they may suffer losses. d. Protection may not always be necessary for infant industries, but it has proven to be useful in most cases.
B
Which of the following statements about trade is false? a. Trade increases competition. b. With trade, one country wins and one country loses. c. Bulgaria can benefit, potentially, from trade with any other country. d. Trade allows people to buy a greater variety of goods and services at lower cost.
B
Chile is an importer of computer chips, taking the world price of $12 per chip as given. Suppose Chile imposes a $7 tariff on chips. Which of the following outcomes is possible? a. The price of chips in Chile increases to $19; the quantity of Chilean-produced chips decreases; and the quantity of chips imported by Chile decreases. b. The price of chips in Chile increases to $16; the quantity of Chilean-produced chips increases; and the quantity of chips imported by Chile decreases. c. The price of chips in Chile increases to $19; the quantity of Chilean-produced chips increases; and the quantity of chips imported by Chile decreases. d. The price of chips in Chile increases to $16; the quantity of Chilean-produced chips increases; and the quantity of chips imported by Chile does not change.
C
Figure 10-9 Refer to Figure 10-9, Panel (b) and Panel (c). The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack. Therefore, a government policy that internalized the externality would move the quantity of smokestack scrubbers installed from point a. Q2 to point Q3. b. Q3 to point Q2. c. Q4 to point Q5. d. Q5 to point Q4.
C
Figure 6-24 Refer to Figure 6-24. In the after-tax equilibrium, government collects a. $1,440 in tax revenue; of this amount, $960 represents a burden on buyers and $480 represents a burden on sellers. b. $1,440 in tax revenue; of this amount, $720 represents a burden on buyers and $720 represents a burden on sellers. c. $1,680 in tax revenue; of this amount, $1,260 represents a burden on buyers and $420 represents a burden on sellers. d. $1,680 in tax revenue; of this amount, $840 represents a burden on buyers and $840 represents a burden on sellers.
C
Figure 7-14 Refer to Figure 7-14. If the government imposes a price ceiling of $50 in this market, then producer surplus will decrease by a. $325. b. $100. c. $300. d. $200.
C
Figure 8-7 The vertical distance between points A and B represents a tax in the market. Refer to Figure 8-7. Which of the following statements is correct? a. Total surplus before the tax is imposed is $180. b. After the tax is imposed, consumer surplus is 25 percent of its pre-tax value. c. After the tax is imposed, producer surplus is 36 percent of its pre-tax value. d. All of the above are correct.
C
Figure 9-22 The following diagram shows the domestic demand and domestic supply in a market. In addition, assume that the world price in this market is $40 per unit. Refer to Figure 9-22. Suppose the government imposes a tariff of $20 per unit. Relative to the free-trade outcome, the imposition of the tariff a. decreases imports of the good by 300 units and increases domestic production of the good by 300 units. b. decreases imports of the good by 300 units and increases domestic production of the good by 600 units. c. decreases imports of the good by 600 units and increases domestic production of the good by 300 units. d. decreases imports of the good by 600 units and increases domestic production of the good by 600 units.
C
Figure 9-22 The following diagram shows the domestic demand and domestic supply in a market. In addition, assume that the world price in this market is $40 per unit. Refer to Figure 9-22. With free trade, consumer surplus is a. $48,000 and producer surplus is $48,000. b. $18,000 and producer surplus is $12,000. c. $108,000 and producer surplus is $12,000. d. $18,000 and producer surplus is $48,000.
C
For a particular good, a 5 percent increase in price causes a 2 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good? a. There are many close substitutes for this good. b. The good is a luxury. c. The market for the good is broadly defined. d. The relevant time horizon is long.
C
If textbooks and study guides are complements, then an increase in the price of textbooks will result in a. more textbooks being sold. b. more study guides being sold. c. fewer study guides being sold. d. no difference in the quantity sold of either good.
C
Over the past century, the average income in the United States has risen about a. twofold. b. fivefold. c. eightfold. d. tenfold.
C
Which of the following is true of markets characterized by positive externalities? a. Social value exceeds private value, and market quantity exceeds the socially optimal quantity. b. Social value is less than private value, and market quantity exceeds the socially optimal quantity. c. Social value exceeds private value, and market quantity is less than the socially optimal quantity. d. Social value seldom exceeds private value; therefore, social quantity is less than private quantity.
C
A tax on gasoline encourages people to drive smaller, more fuel-efficient cars. Which principle of economics does this illustrate? a. People face tradeoffs. b. The cost of something is what you give up to get it. c. Rational people think at the margin. d. People respond to incentives.
D
Countries that restrict foreign trade are likely to a. forgo the additional surplus that trade allows, but will probably enjoy economies of scale. b. forgo the additional surplus that trade allows, but will be compensated by a higher rate of technological change. c. forgo the additional surplus that trade allows, but will have a lower rate of unemployment. d. have more firms with domestic market power.
D
Figure 11-1 Rival in Consumption? Yes No Excludable? Yes A B No C D Refer to Figure 11-1. Which of the following items is not a clear-cut example of the type of good represented by Box D? a. a fireworks display in a town with many residents b. national defense c. general knowledge d. a lighthouse
D
Figure 8-5 Suppose that the government imposes a tax of P3 - P1. Refer to Figure 8-5. The total surplus with the tax is represented by area a. C+H. b. A+B+C. c. D+H+F. d. A+B+D+F.
D
Figure 9-2 The figure illustrates the market for calculators in a country. Refer to Figure 9-2. With free trade, this country will a. import 50 calculators. b. import 100 calculators. c. export 50 calculators. d. export 100 calculators.
D
Figure 9-22 The following diagram shows the domestic demand and domestic supply in a market. In addition, assume that the world price in this market is $40 per unit. Refer to Figure 9-22. With free trade, total surplus is a. $30,000. b. $66,000. c. $96,000. d. $120,000.
D
Five hundred units of good x are currently bought and sold. The marginal buyer is willing to pay $40 for the 500th unit, and the cost to the marginal seller is $35 for the 500th unit. We know that a. the equilibrium price of good x is somewhere between $35 and $40. b. the equilibrium quantity of good x exceeds 500 units. c. 500 units is not an efficient quantity of good x. d. All of the above are correct.
D
If the government removes a $1 tax on sellers of gasoline and imposes the same $1 tax on buyers of gasoline, then the price paid by buyers will a. increase, and the price received by sellers will increase. b. increase, and the price received by sellers will not change. c. not change, and the price received by sellers will increase. d. not change, and the price received by sellers will not change.
D
In a certain city, the government is considering acquiring some land and turning it into a park (without any fences or gates). In an attempt to determine the extent to which residents of the city would value the park, residents are asked to fill out a questionnaire. Which of the following is correct? a. On the questionnaire, some residents are likely to exaggerate the value they associate with the park. b. On the questionnaire, some residents are likely to exaggerate the costs they associate with the park. c. The use of such a questionnaire in cost-benefit analysis is likely to produce only rough approximations of residents' perceptions of the costs and benefits of a park. d. All of the above are correct.
D
What would happen to the equilibrium price and quantity of lattés if coffee shops began using a machine that reduced the amount of labor necessary to produce them? a. Both the equilibrium price and quantity would increase. b. Both the equilibrium price and quantity would decrease. c. The equilibrium price would increase, and the equilibrium quantity would decrease. d. The equilibrium price would decrease, and the equilibrium quantity would increase.
D
When a country allows trade and becomes an exporter of a good, a. consumer surplus and producer surplus both increase. b. consumer surplus and producer surplus both decrease. c. consumer surplus increases and producer surplus decreases. d. consumer surplus decreases and producer surplus increases.
D
If the demand for a good falls when income falls, then the good is called an inferior good.
False
In general, demand curves for necessities tend to be price elastic.
False
Joel has a 1966 Mustang, which he sells to Susie, an avid car collector. Susie is pleased since she paid $8,000 for the car but would have been willing to pay $11,000 for the car. Susie's consumer surplus is $2,000. a. True b. False
False
Opportunity cost refers to how many inputs a producer requires to produce a good.
False
Table 11-6 Consider the city of Widgetapolis with only four residents, John, James, Mary, and Lydia. The four residents are trying to determine how many hours to spend in cleaning up the public lake. The table below shows each resident's willingness to pay for each hour of cleaning. Hours John James Mary Lydia 1 $30 $50 $40 $10 2 25 40 37 9 3 20 30 34 8 4 15 20 30 7 5 9 10 25 6 6 3 0 15 5 7 0 0 5 4 Refer to Table 11-6. Suppose the cost to clean the lake is $32 per hour and that the residents have agreed to split the cost of cleaning the lake equally. It would maximize Lydia's surplus if 6 hours of cleaning is done. a. True b. False
False
The production possibilities frontier (PPF) illustrates the combinations of goods that society can consume when trading with other producers.
False
Trade can make everyone better off except in the case where one person is better at doing everything.
False
Figure 8-11 Refer to Figure 8-11. The price labeled as P3 on the vertical axis represents the price a. received by sellers before the tax is imposed. b. received by sellers after the tax is imposed. c. paid by buyers before the tax is imposed. d. paid by buyers after the tax is imposed.
Not C
An increase in the price of maple syrup will decrease both the equilibrium price and quantity in the market for pancakes.
True
If we observe that when a consumer's income rises by 10%, the quantity demanded of chocolate candy bars increases by 15%, then chocolate candy bars are are a normal good for that consumer.
True
In the Tragedy of the Commons, joint action among the individual citizens would be necessary to solve their common resource problem unless the government intervenes.
True
Price floors are typically imposed to benefit sellers.
True
Specialization and trade can make everyone better off if a person can obtain goods at prices that are less than that person's opportunity cost.
True
Taxes on labor tend to encourage the elderly to retire early.
True
The rules established under the General Agreement on Tariffs and Trade (GATT) are enforced by an international body called the World Trade Organization (WTO).
True
The sum of consumer and producer surplus measures the total benefits that buyers and sellers receive from participating in a market.
True
When externalities are present, reaching an efficient outcome is especially difficult when the number of interested parties is large.
True
If we know that Canada exports maple syrup, we can conclude that maple syrup consumers in Canada are worse off than they would be in the absence of trade.
True