ECON TEST 2

Pataasin ang iyong marka sa homework at exams ngayon gamit ang Quizwiz!

It is possible for the price of water to be much lower than the price of diamonds if which of the following is​ true?

-The supply of water is greater than the supply of diamonds.

From 1979 to​ 2015, China had a policy that allowed couples to have only one child.​ (Since 2016, couples have been allowed to have two​ children.) The​ one-child policy caused a change in the demographics of China. Between 1980 and​ 2017, the share of the population aged 14 and under decreased from 36 percent to 18 percent.​ And, as parents attempted to ensure that the lone child was a​ son, the number of male children relative to female children increased. How has the​ one-child policy changed the relative demand for goods and services in​ China?

It has undoubtedly shifted away from goods and services appealing to youthful​ buyers, particularly youthful female buyers.

i. An article in the Wall Street Journal noted that an​ "increase in the price of oil quickly reduces demand for​ oil." ii. A different article in the Wall Street Journal​ noted: "Electric cars are poised to reduce U.S. gasoline demand by​ 5% over the next two​ decades...." Do you agree with how the first Wall Street Journal article uses the word​ "demand"? Do you agree with how the second Wall Street Journal article uses the word​ "demand"?

​-No, a change in the price of oil affects the quantity of oil​ demanded, not the demand for oil. -​Yes, the article is correct in its use of the word​ "demand."

The graph to the right shows the supply and demand for beef in the United​ States, under the assumption that the United States can import as much as it wants at the world price of beef without causing the world price of beef to increase. How much beef does the United States import at the world​ price(WP)? Now suppose that the United States imposes a tariff on beef of​ $0.50 a pound. How much beef is now​ imported? Do domestic producers of beef gain or lose when the United States imposes a tariff on​ beef? Does the government gain or lose when the United States imposes a tariff on​ beef? Do domestic consumers of beef gain or lose when the United States imposes a tariff on​ beef?

- 500 million (1000-500) -200 million (900-700) -Gain -Gain -Lose

Imagine that the curves shown in the accompanying figure represent two demand curves for traditional wings​ (basket of​ six) at Buffalo Wild Wings. The movement from point A to B on D1 is caused by Indicate which of the following could cause a movement from point A to C.

- a decrease in the price of traditional wings -A rise in the number of buyers A decline in vegetarianism

Suppose the government imposes a payroll tax of $2 per hour of work and collects the tax from employers.

-According to your​ graph, the new equilibrium wage that employers pay workers falls by ​$2. (supply curve is vertical)

The figure illustrates the market for apples in which the government has imposed a price floor of ​$14 per crate. Will apple producers benefit from the price​ floor?

-Apple producers who are able to sell their apples at the ​$14 price per crate will benefit. Apple producers who are not able to sell their apples will not benefit. Total revenue for apple producers as a group will decrease from ​$198 million to ​$168 million. (all of the above)

The graph shows the effect on consumer​ surplus, producer​ surplus, government tariff​ revenue, and economic surplus of a tariff of​ $1 per unit on imports of plastic combs into the United States. Use the areas denoted in the graph to answer the following questions. Which​ area(s) shows the total loss to U.S. consumers as a result of the tariff on​ combs? Which​ area(s) shows the amount of surplus transferred from consumers to producers as a result of the tariff on​ combs? Which​ area(s) show the deadweight loss to the U.S. economy as a result of the tariff on​ combs?

-A​ + B​ + C​ + D. -A -B​ + D

Using the graph to the​ right, determine the effect on consumer surplus and producer surplus of a shift in the supply curve from S1 to S2. Consumer surplus increases by areas Producer surplus changes from areas Economic surplus changes from areas

-BCD -BE to areas EFG. -ABE to areas ABCDEFG.

Consider the market for gasoline illustrated in the figure to the right. Suppose the market is perfectly competitive and initially in equilibrium. Now suppose the government imposes a gasoline tax of ​$0.75 to be paid for by producers. The effect of this tax is illustrated in the figure to the right. Who bears the burden of the​ tax?

-Consumers pay ​$0.50 of the ​$0.75 tax and producers pay ​$ 0.25 of the tax.

Ekaterina​ Jardim, Jacob​ Vigdor, and colleagues at the University of Washington concluded that when Seattle raised its minimum​ wage, the effect was to lower​ "the amount paid to workers in​ low-wage jobs by an average of​ $74 per month per job in​ 2016." Shouldn't an increase in the minimum wage​ raise, rather than​ lower, the amount paid to​ low-wage workers? Does this result mean that no​ low-wage workers in Seattle benefited from the increase in the minimum​ wage? Which of the following statements regarding​ normative/positive analysis of the minimum wage is​ true?

-No. The decrease in the quantity of hours worked as a result of the wage increase had to have been relatively large to reduce the total amount workers in​ low-wage jobs received. -No. Workers who continued to work the same or slightly fewer hours than they worked before the increase in the minimum wage are better off because their total income increased. -All of the above are true.

According to an article in the Wall Street Journal in early​ 2019, the price of oil produced in the United States had increased by 25 percent since the beginning of the year. At the same​ time, U.S. oil production was at a record high. Are these two facts​ alone, holding everything else​ constant, consistent with a movement along the supply curve for​ oil? Is it possible that the supply curve for oil also​ shifted? Suppose you were told that managers at oil firms were convinced that oil prices in the future were going to be significantly lower than they are today. Would this fact help you answer the​ question? Given that managers at oil firms were convinced that oil prices in the future were going to be significantly lower than they are​ today,

-Yes. A higher price of oil causes an increase in the quantity of oil​ supplied, which we show by a movement upwards along the supply curve for oil. -it is likely that the supply curve for oil shifted to the right because firms will be more likely to increase the supply of oil today when prices are higher.

On a shopping​ trip, Sofia decided to buy a light blue coat that had a price tag of​ $79.95. When she brought the coat to the​ store's sales​ clerk, Sofia was told that the coat was on​ sale, and she would pay 20 percent less than the price on the tag. After the discount was​ applied, Sofia paid​ $63.96, $15.99 less than the original price. The value of​ Sofia's consumer surplus from this purchase is

-at least​ $15.99 since this is the difference between the price Sofia is willing to pay for the coat and the actual price she​ pays, but she could have be willing to pay more than​ $79.95 for the coat.

On the diagram to the​ right, a movement from A to C represents a

-change in demand.

On the diagram to the​ right, a movement from A to B represents a

-change in quantity supplied.

Economic surplus in a market is the sum of​ _____ surplus and​ _____ surplus. In a competitive​ market, with many buyers and sellers and no government​ restrictions, economic surplus is at a​ _____ when the market is in​ _____.

-consumer; producer;​ maximum; equilibrium

After World War II in​ 1945, the United States experienced a​ "baby boom" as birthrates rose and remained high through the early 1960s. In​ 2011, the first members of the baby boom generation became older than 65. What effect will this have on the market for doctors​? As the first baby boomers become older than​ 65, the

-demand curve for doctors will shift to the right.

If many book readers consider print books and digital books to be​ substitutes, then an increase in the price of digital books will The findings of Nagaraj and Reimer show that digital and print copies of books are Briefly discuss what might account for this result and why it differs from the answer you gave to part​ (a). ​(​Hint: Why was the finding of increased sales of physical books particularly strong for less popular​ books?)

-increase the demand for print​ books, shifting the demand curve for print books to the right. -complements because the decrease in the price of digital books to zero is causing an increase in the quantity demanded for print copies of the same book. -As more books become available as free​ downloads, readers of these books recommend them to other​ readers, causing an increase in the demand for both the print and the digital versions of the​ book, particularly among readers who prefer to read a physical book.

Consider the market for the Nissan Xterra. Suppose the price of​ metal, which is an input in automobile​ production, decreases. According to the​ graph, when the price of metal​ decreases, the quantity of Nissan Xterras supplied at any particular Xterra price __________ Instead, consider the future price of Xterras. If Nissan believes the future price of Xterras will be higher​, then Nissan may __________ supply today.

-increases -reduce

Economic efficiency Economists define economic efficiency in this way

-is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production. is a market outcome in which the sum of consumer surplus and producer surplus is at a maximum. (both a and b) -all of the above

In​ 2018, according to the U.S. Department of​ Agriculture, Arizona,​ Colorado, New​ Mexico, and Utah were suffering from extreme drought. The lack of rainfall greatly reduced the grass that ranchers use to feed cattle. The result was a reduction in the number of cattle raised in these states. How are producer surplus and consumer surplus​ affected?

-place supply curve inward -Consumer surplus​ decreases, but the overall effect on producer surplus depends on the size of the shift of the supply curve.

According to an article in the New York Times​, the Venezuelan government​ "imposes strict price controls that are intended to make a range of foods and other goods more affordable for the poor. They are often the very products that are the hardest to​ find." Imposing price controls on goods would make them hard to find because

-producers would not want to supply as much as they did before the price controls.

Explain how the price of baseballs signed by Mantle could be higher than the price of baseballs signed by Ford. The supply curve for baseballs signed by Mantle should be an​ upward-sloping line that is to the _______ of the supply curve for baseballs signed by Ford. In order for the price of baseballs signed by Mantle to be higher than the price of baseballs signed by​ Ford, the demand curve for baseballs signed by Mantle must be a​ downward-sloping line that is

-right -significantly to the right of the demand curve for baseballs signed by Ford.

Consumer surplus is As the price of a good​ rises, consumer surplus decreases and as the price of a good​ falls, consumer surplus increases .

-the difference between the highest price a consumer is willing to pay and the price the consumer actually pays.

Producer surplus is As the price of a good​ rises, producer surplus increases, and as the price of a good​ falls, producer surplus decreases

-the difference between the lowest price a firm would be willing to accept and the price it actually receives.

The law of demand is the assertion that An increase in the price of a product causes a decrease in quantity demanded because of the income and substitution effects. More​ specifically,

-the quantity demanded of a product is inversely related to its price. -the substitution effect is the decrease in quantity demanded because the product is more expensive relative to other goods and the income effect is the decrease in quantity demanded owing to the decline in​ consumers' purchasing power.

Economic surplus is Deadweight loss is Because economic surplus is the sum of the benefit to firms and the benefit to​ consumers, it is the best measure we have of the benefit to society from the production of a particular good or service. For this​ reason, it is appropriate to label economic surplus as social surplus.

-the sum of consumer surplus and producer surplus. -he reduction in economic surplus resulting from a market not being in competitive equilibrium.

According to the law of​ supply,

-there is a positive relationship between price and quantity supplied. -as the price of a product​ increases, firms will supply more of it to the market. (A and C only)

According to the law of​ demand,

-there is an inverse relationship between price and quantity demanded.

The distinction between a normal and an inferior good is

-when income​ increases, demand for a normal good increases while demand for an inferior good falls.

According to an article on​ crainsnewyork.com, in​ 2018, the Metropolitan Museum of Art​ (the Met) in New York City had record attendance of 7.36​ million, an increase of 5 percent over the previous year. During​ 2018, the Met had also increased the price of attendance. Can we conclude from this information that the demand curve for visiting the Met is upward​ sloping? The article also explained that New York City experienced an increase in the number of tourists during 2018 and that during the​ year, the Met offered several exhibitions that received good reviews. Does this additional information help you answer the question in part ​(a​)?

​-No, it is much more likely that during 2018 there was an increase in demand for visits to the Met. -Yes, this additional information reinforces the increase in demand for visits to the Met in part​ (a).


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