Econ practice exam

The basic economic problem of ________ has always existed and will continue to exist

scarcity

Refer to Figure 4-8. For each unit sold, the price sellers receive after the tax (net of tax) is

$20.

Arthur buys a new cell phone for $150. He receives consumer surplus of $150 from the purchase. What value does Arthur place on his cell phone?

$300

Figure 4-8 shows the market for beer. The government plans to impose a per-unit tax in this market. 35) Refer to Figure 4-8. What is the size of the per-unit tax?

$7

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?

15 bow ties

Refer to Table 4-3. The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear. If the market price of cowboy hats is $35, The Waco Kid will produce

2 hats.

Refer to Table 2-8. What is Fred's opportunity cost of making a unicycle?

3 pogo sticks

Figure 2-9 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton and cashews. 16) Refer to Figure 2-9. What is the opportunity cost of producing 1 bolt of cotton in Indonesia?

3/8 of a pound of cashews

Refer to Table 4-5. If a minimum wage of $11.50 an hour is mandated, what is the quantity of labor supplied?

610,000

Which of the following statements is true?

An increase in supply causes a change in equilibrium price; the change in price does not cause a further change in demand or supply.

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

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

Table 2-8 shows the output per month of two people, Fred and Barney. They can either devote their time to making pogo sticks or making unicycles. 14) Refer to Table 2-8. Which of the following statements is true?

Barney has an absolute advantage in making both products.

Which of the following statements is true?

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

Which of the following generates productive efficiency?

competition among sellers

Markets promote

competition and voluntary exchange.

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

Indonesia

Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for used clothing, an inferior good. Which panel describes what happens in this market as a result of a decrease in income?

Panel (c)

Refer to Figure 3-2. A decrease in productivity would be represented by a movement from

S2 to S1.

Which of the following is not a result of imposing a rent ceiling?

Some consumer surplus is converted to producer surplus.

During the Covid-19 pandemic, most cities implemented bans on indoor dining. What happened in the indoor dining market once this ban was lifted and people were anxious to switch from dining at home to dining in restaurants?

The demand curve shifted to the right.

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

The price of bananas is lowered in order to increase sales.

Refer to Figure 2-4. A movement from ________ could occur because of an influx of immigrant labor.

W to Z

Table 4-5 shows the demand and supply schedules for the labor market in the city of Pixley. 38) Refer to Table 4-5. What is the equilibrium hourly wage (W*) and the equilibrium quantity of labor (Q*)?

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

Making "how much" decisions involves

determining the additional benefits and the additional costs of that activity.

In economics, the term "equity" means

economic benefits are distributed fairly.

Studies have shown that drinking one glass of red wine per day may help prevent heart disease. Assume this is true, and favorable weather has increased the grape harvest of California vineyards. In the market for red wine, these two developments would

increase demand and increase supply, resulting in an increase in the equilibrium quantity and an uncertain effect on the equilibrium price of red wine.

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

is the result of advancements in plastic production technology.

If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced.

linear

To affect the market outcome, a price ceiling

must be set below the equilibrium price

Table 2-1 Production choices for Tomaso's Trattoria Choice Quantity of Pizzas Produced Quantity of Calzones Produced A 48 0 B 36 15 C 24 30 D 12 45 E 0 60 10) 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

on Tomaso's production possibilities frontier.

Refer to Table 2-1. Assume that Tomaso's Trattoria only produces pizzas and calzones. A combination of 36 pizzas and 30 calzones would appear

outside Tomaso's production possibilities frontier.

Suppose the U.S. government encouraged consumers to trade in their old automobiles for more efficient, new models by paying up to $5,000 for the old automobiles. These consumers who did trade in their old automobiles to take advantage of the government offer would be exemplifying the economic idea that

people respond to economic incentives

Refer to Table 4-3. The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear. If the market price of The Waco Kid's cowboy hats is $40,

producer surplus will equal $28.

Refer to Table 4-3. The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear. If the price of cowboy hats increases from $38 to $46,

producer surplus will rise from $22 to $46.

Households

sell resources in the factor market

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

sellers bear the entire burden of the tax.

Tomas increased his consumption of potato chips when the price of pistachios increased. For Tomas, potato chips and pistachios are

substitutes.

Refer to Table 4-5. If a minimum wage of $12.50 is mandated, there will be a

surplus of 80,000 units of labor.

Which of the following is a flow in the circular flow model?

the flow of revenue received by firms and the flow of payments to resource owners

The attainable production points on a production possibilities frontier are

the points on and inside the production possibility frontier.