Econ Midterm

Suppose the incomes of buyers in a market for a particular normal good decrease and there is also a reduction in input prices. What would we expect to occur in this market? a. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. b. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous. c. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. d. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

a. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.

If a tax is imposed on a market with inelastic demand and elastic supply, then a. buyers will bear most of the burden of the tax. b. sellers will bear most of the burden of the tax. c. the burden of the tax will be shared equally between buyers and sellers. d. it is impossible to determine how the burden of the tax will be shared.

a. buyers will bear most of the burden of the tax.

The terms equality and efficiency are similar in that they both refer to benefits to society. However, they are different in that a. equality refers to even distribution of those benefits and efficiency refers to maximizing benefits from scarce resources. b. equality refers to maximizing benefits from scarce resources and efficiency refers to even distribution of those benefits. c. equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the benefits. d. equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical tradeoffs.

a. equality refers to even distribution of those benefits and efficiency refers to maximizing benefits from scarce resources.

For any country, if the world price of zinc is higher than the domestic price of zinc without trade, that country should a. export zinc, since that country has a comparative advantage in zinc. b. import zinc, since that country has a comparative advantage in zinc. c. neither export nor import zinc, since that country cannot gain from trade. d. neither export nor import zinc, since that country already produces zinc at a low cost compared to other countries.

a. export zinc, since that country has a comparative advantage in zinc.

. Suppose that when income rises, the demand for good A rises and the demand for good Z falls. In this case, we know that a. good A is a normal good and good Z is an inferior good. b. good A is an inferior good and good Z is a normal good. c. both goods are normal. d. both goods are inferior

a. good A is a normal good and good Z is an inferior good.

A cold front drives consumers to desire winter-type clothing. Other things the same, this would likely result in a(n) a. increased equilibrium price and quantity. b. increased equilibrium price and decreased equilibrium quantity. c. decreased equilibrium price and quantity. d. decreased equilibrium price and increased equilibrium quantity.

a. increased equilibrium price and quantity.

Elasticity of demand is closely related to the slope of the demand curve. The less responsive buyers are to a change in price, the a. steeper the demand curve will be. b. flatter the demand curve will be. c. further to the right the demand curve will sit. d. closer to the vertical axis the demand curve will sit.

a. steeper the demand curve will be.

A cold front drives consumers to desire winter-type clothing. Simultaneously, the price for wool (an input for scarves) increases. Other things the same, this would likely result in a(n) a. Decrease in equilibrium price, but the impact on equilibrium quantity would be ambiguous. b. Increase in equilibrium price, but the impact on equilibrium quantity would be ambiguous. c. Decrease in equilibrium quantity, but the impact on equilibrium price would be ambiguous. d. Increase in equilibrium quantity, but the impact on equilibrium price would be ambiguous.

b. Increase in equilibrium price, but the impact on equilibrium quantity would be ambiguous.

A tax on a good a. gives buyers an incentive to buy more of the good than they otherwise would buy. b. gives sellers an incentive to produce less of the good than they otherwise would produce. c. creates a benefit to the government, the size of which exceeds the loss in surplus to buyers and sellers. d. All of the above are correct

b. gives sellers an incentive to produce less of the good than they otherwise would produce.

. Suppose that when income rises, the demand for computers increases. In this case, we know computers are a. inferior goods b. normal goods c. perfectly competitive goods d. durable goods

b. normal goods

11 . The production possibility frontier for California is bowed out from the origin because: a. resources are scarce. b. orange farmers and apple farmers are not equally suited for the production of both goods. c. economic growth leads to inefficiency. d. none of the above. The production possibility frontier is a straight line.

b. orange farmers and apple farmers are not equally suited for the production of both goods.

If the world price for a good exceeds the before-trade domestic price for a good, then that country must have a. an absolute advantage in the production of the good. b. an absolute disadvantage in the production of the good. c. a comparative advantage in the production of the good. d. a comparative disadvantage in the production of the good.

c. a comparative advantage in the production of the good.

Prices usually reflect a. only the value of a good to society. b. only the cost to society of making a good. c. both the value of a good to society and the cost to society of making the good. d. neither the value of a good to society nor the cost to society of making the good.

c. both the value of a good to society and the cost to society of making the good.

. Hot dogs and hot dog buns are complements because a decrease in the price of hot dogs a. decreases the demand for hot dog buns. b. decreases the quantity demanded for hot dog buns. c. increases the demand for hot dog buns. d. increases the quantity demanded for hot dog buns.

c. increases the demand for hot dog buns.

A supply curve can be used to measure producer surplus because it reflects a. the actions of sellers. b. quantity supplied. c. sellers' costs. d. the amount that will be purchased by consumers in the market.

c. sellers' costs.

We can say that the allocation of resources is efficient if a. producer surplus is maximized. b. consumer surplus is maximized. c. total surplus is maximized. d. sellers' costs are minimized.

c. total surplus is maximized.

Suppose the price of potato chips decreases from $1.45 to $1.25 and, as a result, the quantity of potato chips demanded increases from 2,000 to 2,200. Using the midpoint method, the price elasticity of demand for potato chips in the given price range is a. 2.00. b. 1.55. c. 1.00. d. 0.64.

d. 0.64.

If the price elasticity of demand for a good is 4.0, then a 10 percent increase in price results in a a. 0.4 percent decrease in the quantity demanded. b. 2.5 percent decrease in the quantity demanded. c. 4 percent decrease in the quantity demanded. d. 40 percent decrease in the quantity demanded.

d. 40 percent decrease in the quantity demanded.

. Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Given this, the opportunity cost of 1 table is a. 1/5 chair for Mike and 1/3 chair for Sandy. b. 1/5 chair for Mike and 3 chairs for Sandy. c. 5 chairs for Mike and 1/3 chair for Sandy. d. 5 chairs for Mike and 3 chairs for Sandy.

d. 5 chairs for Mike and 3 chairs for Sandy.

A binding minimum wage tends to a. cause a labor surplus. b. cause unemployment. c. have the greatest impact in the market for teenage labor. d. All of the above are correct.

d. All of the above are correct.

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies a. enhance equality. b. reduce efficiency. c. reduce the reward for working. d. All of the above are correct.

d. All of the above are correct.

In the Circular Flow Diagram, a. households own the factors of production. b. households buy all the goods and services that firms produce. c. land, labor, and capital flow from households to firms. d. All of the above are correct.

d. All of the above are correct.

Elasticity is a measure of a. the extent to which advances in technology are adopted by producers. b. the extent to which a market is competitive. c. how firms' profits respond to changes in market prices. d. how much buyers and sellers respond to changes in market conditions.

d. how much buyers and sellers respond to changes in market conditions.

The law of demand states that, other things equal, a. when the price of a good falls, the demand for the good rises. b. when the price of a good rises, the quantity demanded of the good rises. c. when the price of a good rises, the demand for the good falls. d. when the price of a good falls, the quantity demanded of the good rises.

d. when the price of a good falls, the quantity demanded of the good rises.

The concept of scarcity stems from the fact that a. most economies' production methods are not very good. b. in most economies, wealthy people consume disproportionate quantities of goods and services. c. governments restrict production of too many goods and services. d. resources are limited.

x d. resources are limited.