Macroeconomics Exam 1

How much does the government earn from this tariff? a) $1 billion b) $200 million c) $900 million d) None of the above

b) $200 million

Suppose Ford is currently building 6 thousand cars per day. To build an additional 1 thousand cars, how many fewer trucks can be built? a) 100 b) 500 c) 1,000 d) 5,000 e) None of the above

b) 500

Consider the market for pizzas illustrated in the graph. Suppose the market is perfectly competitive and initially in equilibrium. Now suppose the government imposes a tax of $1.50 to be paid by producers per pizza sold. The effect of the tax is shown on the graph. Consumers pay ... out of the $1.50 tax for each pizza sold: a) $0.50 b) $1.00 c) $0.25 d) None of the above

a) $0.50

What is the total deadweight loss that results from the rent control? a) $150 million b) $300 million c) $75 million d) None of the above

a) $150 million

Use the above scenario to answer the following. After specialization and trade, France and Germany continue consuming the same amount of wine. Germany increases their consumption of schnitzel by how many pounds? a) 1 additional pound b) 5 additional pounds c) 7 additional pounds d) 8 additional pounds e) None of the above

a) 1 additional pound

Do domestic producers of beef gain or lose when the United States imposes a tariff on beef? a) Gain b) Lose c) None of the above

a) Gain

Olive oil producers want to sell more olive oil at a higher price. Which of the following events would have this effect? a) Research finds that consumption of olive oil reduces the risk of heart disease. b) A decrease in the cost of transporting olive oil to markets. c) An increase in the price of olive oil presses. d) An increase in the price of land used to plant olives. e) None of the above

a) Research finds that consumption of olive oil reduces the risk of heart disease.

Can a country achieve consumption at a point outside of its PPF if it specializes and trades with another country? a. Yes, because there are gains from trade b. No, because by definition the PPF is the maximum that can be produced when all resources are used efficiently

a. Yes, because there are gains from trade

How much revenue is collected by the government through the tax in this case? a) $60 million b) $105 million c) $90 million d) None of the above

b) $105 million

The following questions are based on the below figure that illustrates the market for rental apartments: What is the producer surplus under the competitive equilibrium? a) $900 million b) $300 million c) $500 million d) None of the above

b) $300 million

What is the consumer surplus after rent control? a) $1.2 billion b) $375 million c) $900 million d) None of the above

b) $375 million

Now assume that a rent ceiling is enforced as shown by the previous figure. What is the producer surplus after rent control? a) $350 million b) $75 million c) $900 million d) None of the above

b) $75 million

Now suppose that the United States imposes a tariff on beef of $1.00 a pound. How much beef is now imported? a) 600 million lbs b) 200 million lbs c) 800 million lbs d) None of the above

b) 200 million

The United States produces beef and also imports beef from other countries. 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. First assume a situation with no trade barriers. How much beef does the United States import at the world price (WP)? a) 1500 million lbs b) 900 million lbs c) 600 million lbs d) None of the above

b) 900 million lbs

Do domestic consumers gain or lose when the government imposes such a tariff? a) Gain b) Lose c) None of the above

b) Lose

Suppose that France is currently (before trade) producing and consuming 1 bottle of wine and 6 pounds of schnitzel and Germany is currently producing 3 bottles of wine and 10 pounds of schnitzel. Then, assume that France and Germany specialize producing only the good for which they have a comparative advantage and then trade 3 bottles of wine for 14 pounds of schnitzel. 6) The opportunity cost of wine is measured in ... a) Bottles of wine per pound of schnitzel b) Pounds of schnitzel per bottle of wine

b) Pounds of schnitzel per bottle of wine

According to the above graph, building 3,000 cars per day and 4,000 trucks per day is... a) Technically efficient b) Technically inefficient c) Unattainable d) None of the above

b) Technically inefficient

The demand for VHS video players has declined dramatically, yet the price has increased. What must have happened to the supply of VHS players for the price to increase a) The supply increased more than the demand increased b)The supply decreased more than the demand decreased c) The supply increased, but less than the demand increased d) The supply did not change

b)The supply decreased more than the demand decreased

Jack Bauer can prevent one of three terrorist plots in 24 hours. Plot A would result in $15 million dollars loss and cost lives of 15 sheep, Plot B would result in $20 million dollar loss and cost lives of 20 sheep, Plot C would results in $50 million dollar loss and lives of 50 sheep. Jack Bauer chooses to prevent plot C. What is the opportunity cost of preventing plot C? a. $10 million and 15 sheep b. $20 million and 20 sheep c. $30 million and 35 sheep d. $50 million and 50 sheep e. $80 mission and 95 sheep

b. $20 million and 20 sheep

Below is a graph of the production possibilities frontier (PPF) for a country that produces and consumes only butter and milk. Which production point in the below graph is attainable but not efficient? a. A b. B c. C d. D e. Both A and C

b. B

Producers pay ... out of the $1.50 per-pizza tax: a) $0.50 b) $0.25 c) $1.00 d) None of the above

c) $1.00

What is the consumer surplus under competitive equilibrium? a) $150 million b) $900 million c) $300 million d) None of the above

c) $300 million

Look at Graph. Truck & Car Production. According to the above graph, if Ford uses all its resources to produce trucks, how many can it produce? a) 12,000 b) 6,000 c) 9,000 d) 5,000 e) None of the above

c) 9,000

Based on the above PPF, how is the marginal opportunity cost of building the 4000th car different from the marginal opportunity cost of building the 8000th car? a) They are the same b) The marginal opportunity cost of building the 4000th car is greater than the marginal opportunity cost of building the 8000th car c) The marginal opportunity cost of building the 4000th car is lower than the marginal opportunity cost of building the 8000th car

c) The marginal opportunity cost of building the 4000th car is lower than the marginal opportunity cost of building the 8000th car

Assume that the hourly price for the services of tarot card readers has declined and sales of these services have risen. Which of the following could have caused these changes in the quantity and price? a) The law of demand has been violated b) The demand for tarot card readers has increased c) The number of tarot card readers has increased d) Tarot card readers are deliberately charging high prices because they provide services for superstitious clients. e) None of the above could have caused the above change

c) The number of tarot card readers has increased

The government could have, instead of imposing a tariff, chosen to impose a quota on the imports of beef from overseas. In general, what is the difference between the effects of a tariff and a quota? a) Under tariffs, prices go up, but not under a quota b) Under a quota, imports decrease but not under a tariff c) With a tariff, the gains accrue to the domestic producers and government, while, with a quota, rents are collected by foreign players d) None of the above.

c) With a tariff, the gains accrue to the domestic producers and government, while, with a quota, rents are collected by foreign players

Which of the following would cause both the equilibrium price and equilibrium quantity of cotton to increase (assume that cotton is a normal good)? a) A drought that sharply reduces cotton output b) A decrease in consumer income c) An increase in consumer income d) Unusually good weather that results in a bumper crop of cotton e) None of the above

c)An increase in consumer income

Prices of California Merlot wine (assume that this is a normal good) have risen steadily in recent years. Over this same period, prices for French oak barrels used for wine storage have dropped and consumer incomes have risen. Which of the following best explains the rising prices of California merlots? a) The supply curve for Merlot has shifted to the right faster than the demand curve has shifted to the right. b) The supply curve for Merlot has shifted to the right while the demand curve for Merlot has shifted to the left. c) The demand curve and the supply curve for Merlot have both shifted to the left. d) #The demand curve for Merlot has shifted to the right faster than the supply curve has shifted to the right. e) None of the above

d) #The demand curve for Merlot has shifted to the right faster than the supply curve has shifted to the right.

Use the above scenario to answer. What is the opportunity cost of wine in Germany (in pounds of schnitzel)? a) 1/25 b) 25 c) 3 d) 5 e) None of the above

d) 5

Look at chart. France & Germany Who has the comparative advantage in producing wine and who has the comparative advantage in producing schnitzel? a) France has a comparative advantage producing wine and schnitzel. b) France has a comparative advantage producing schnitzel and Germany has a comparative advantage producing wine. c) Germany has a comparative advantage producing wine and schnitzel. d) Neither has a comparative advantage producing wine or schnitzel. e) France has a comparative advantage producing wine and Germany has a comparative advantage producing schnitzel

e) France has a comparative advantage producing wine and Germany has a comparative advantage producing schnitzel