MACRO FINAL

Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15 percent, then the quantity supplied of cheese will increase by

9 percent in the short run and 21 percent in the long run.

A tax on the buyers of cameras encourages

buyers to demand a smaller quantity at every price.

Ryan produces hair clips and earrings. Celia also produces hair clips and earrings, but Ryan is better at producing both goods. In this case, trade could

benefit both Celia and Ryan.

When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is

inelastic

A farmer has the ability to grow either corn or cotton or some combination of the two. Given no other information, it follows that the farmer's opportunity cost of a bushel of corn multiplied by his opportunity cost of a bushel of cotton

is equal to 1.

To say that a price ceiling is nonbinding is to say that the price ceiling

is set above the equilibrium price.

What must be given up to obtain an item is called

opportunity cost.

While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. This statement illustrates the principle that

people face tradeoffs

Resources are

scarce for households and scarce for economies.

Fundamentally, economics deals with

scarcity

In a market economy, economic activity is guided by

self-interest and prices.

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should

sell the ticket because the marginal benefit exceeds the marginal cost.

What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell?

Price would fall, and the effect on quantity would be ambiguous.

Suppose that when the price of a 16 oz. to-go cup of gourmet coffee is $4.25, students purchase 750 cups per day. If the price decreases to $3.75 per cup, which of the following is the most likely outcome?

Students would purchase more than 750 cups per day.

Some, but not all, government economists are employed within the administrative branch of government. Which of the following government agencies employ economists outside of the administrative branch?

The Congressional Budget Office

Which of the following areas of study typifies macroeconomics as opposed to microeconomics?

The effect on the economy of changes in the nation's unemployment rate

Which of the following statements does not apply to a market economy?

Government policies are the primary forces that guide the decisions of firms and households.

In the circular-flow diagram, which of the following is not a factor of production?

Money

If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?

One year after the price increase

Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The marginal cost of flying a passenger is

This cannot be determined from the information given.

Suppose buyers of fountain drinks are required to send $0.50 to the government for every fountain drink they buy. Further, suppose this tax causes the effective price received by sellers of fountain drinks to fall by $0.20 per drink. Which of the following statements is correct?

This tax causes the demand curve for fountain drinks to shift downward by $0.50 at each quantity.

The term market failure refers to

a situation in which the market on its own fails to allocate resources efficiently.

When we move along a given demand curve,

all nonprice determinants of demand are held constant.

If the demand for a product increases, then we would expect equilibrium price

and equilibrium quantity both to decrease

Eva wants to create a graph containing the prices of concert tickets and the corresponding quantities of concert tickets demanded by customers. She should use a

coordinate system

A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. However, redistributing income from rich to poor reduces the reward for working hard. Therefore, society faces a tradeoff between

efficiency and equality.

Yvette buys and sells real estate. Two weeks ago, she paid $300,000 for a house on Pine Street, intending to spend $50,000 on repairs and then sell the house for $400,000. Last week, the city government announced a plan to build a new landfill on Pine Street just down the street from the house Yvette purchased. As a result of the city's announced plan, Yvette is weighing two alternatives: She can go ahead with the $50,000 in repairs and then sell the house for $290,000, or she can forgo the repairs and sell the house as it is for $250,000. She should

forgo the repairs and sell the house as it is for $250,000.

If an externality is present in a market, economic efficiency may be enhanced by

government intervention.

The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10 percent. The change in equilibrium will be

greater in the aged cheddar cheese market than in the bread market.

The "invisible hand" refers to

how the decisions of households and firms lead to desirable market outcomes.

When the government redistributes income from the wealthy to the poor,

people work less and produce fewer goods and services.

A legal minimum on the price at which a good can be sold is called a

price floor

The imposition of a binding price ceiling on a market causes

quantity demanded to be greater than quantity supplied.

When computing the opportunity cost of attending a concert you should include

the price you pay for the ticket and the value of your time.

If something happens to alter the quantity supplied at any given price, then

the supply curve shifts.

Elena's aunt gave her $100 for her birthday with the condition that Elena buys herself something. In deciding how to spend the money, Elena narrows her options down to four choices: Option A, Option B, Option C, and Option D. Each option costs $100. Finally, she decides on Option B. The opportunity cost of this decision is

the value to Elena of the option she would have chosen had Option B not been available.

When a country has a comparative advantage in producing a certain good,

then specializing in the production of that good and trading for other goods could allow that country to consume at a point beyond its production possibilities frontier .