Micro Economics Practice Final Exam

Refer to Figure 9-1. Under autarky, the producer surplus is A) $40 B) $105 C) $195 D) $285

A

Consider a used car market in which half the cars are good and half are bad (lemons). Suppose the average price of a good car is $9,000 and the average price of a lemon is $3,000. If rational buyers are willing to pay $6,000 for a used car, then sellers will agree to sell mostly the lemons at this price. What is the term used to describe this situation? A) moral hazard B) adverse selection C) an efficient market D) economic irrationality

A

Consumer surplus in a market for a product would be equal to ________ if the market price was zero. A) zero B) the area between the supply curve and the demand curve C) the area above the supply curve D) the area under the demand curve

A

If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots, then A) the price elasticity of demand for teapots is greater than 1 in absolute value. B) the demand for teapots is unit-elastic. C) the price elasticity of demand for teapots is equal to zero. D) the price elasticity of demand for teapots is less than 1 in absolute value.

A

Refer to Figure 2-6. If the economy is currently producing at point C, what is the opportunity cost of moving to point B? A) 10 thousand wrenches B) 13 thousand hammers C) 30 thousand wrenches D) 23 thousand hammers

A

Refer to Figure 4-5. What is the value of producer surplus after the imposition of the ceiling? A) $40,000 B) $100,000 C) $300,000 D) $430,000

A

Refer to Figure 4-5. What is the value of the deadweight loss after the imposition of the ceiling? A) $50,000 B) $125,000 C) $175,000 D) $260,000

A

The cost of group health insurance is lower than if an individual buys a policy on his own because A) the problem of adverse selection is reduced. B) moral hazard costs of a group tend to move to a low average. C) it is easier for the company to deny claims from a large group. D) insuring a group eliminates the problem of buyers having more information than the seller.

A

Vineyards can grow either red wine grapes or white wine grapes on their land. Which of the following would cause the supply of red wine grapes to decrease? A) an increase in the price of white wine grapes B) a decrease in the price of white wine grapes C) an increase in the demand for red wine grapes D) an increase in the price of red wine

A

Refer to Figure 7-2. If consumers paid the full price of medical services, the equilibrium quantity would be A) 200. B) 500. C) 700. D) >700.

B

In order to avoid the imposition of other types of trade barriers, foreign producers will sometimes agree to voluntary export restraints. With voluntary export restraints, foreign producers A) agree to meet specific quality standards required by the importing country. B) limit their exports to a country. C) pay a tax on all products they export. D) must agree to import an equal quantity of products that they export.

B

Refer to Figure 2-4. A movement from X to Y A) could be due to a change in consumers' tastes and preferences. B) could occur because of an influx of immigrant labor. C) is the result of advancements in food production technology only, with no change in the technology for plastic production. D) is the result of advancements in plastic production technology only, with no change in food production technology.

B

Refer to Figure 2-6. If the economy is currently producing at point A, what is the opportunity cost of moving to point B? A) 8 thousand wrenches B) 6 thousand hammers C) 30 thousand wrenches D) 23 thousand hammers

B

Refer to Figure 4-5. What is the value of consumer surplus after the imposition of the ceiling? A) $120,000 B) $230,000 C) $270,000 D) $430,000

B

Refer to Figure 4-5. What is the value of the portion of producer surplus transferred to consumers as a result of the rent ceiling? A) $40,000 B) $100,000 C) $125,000 D) $140,000

B

Refer to Figure 5-2. The private profit maximizing quantity for the firm is A) Qa. B) Qb. C) Qb - Qd. D) Qd.

B

Refer to Figure 7-2. If consumers paid the full price of medical services, the price they would pay is A) $25. B) $40. C) $55. D) >$55.

B

Refer to Figure 9-1. Under autarky, the consumer surplus is A) $195. B) $260. C) $300. D) $555

B

Refer to Figure 9-1. Under autarky, the deadweight loss is A) $0. B) $15. C) $30. D) $40.

B

Refer to Figure 9-2. The tariff revenue collected by the government equals the area A) D + E + F. B) E. C) B + D + E + F. D) C + D + E + F.

B

The health care system in Canada is referred to as ________, and is a system in which the government provides national health insurance to all Canadian residents. A) an out-of-pocket system B) a single-payer health care system C) a universal health insurance system D) socialized medicine

B

The total amount of producer surplus in a market is equal to A) the difference between quantity supplied and quantity demanded. B) the area above the market supply curve and below the market price. C) the area above the market supply curve. D) the area between the demand curve and the supply curve below the market price.

B

Which of the following is a positive economic statement? A) The standard of living in the United States should be higher. B) If the price of iPhones falls, a larger quantity of iPhones will be purchased. C) The government should revamp the health care system. D) The U.S. government should not have bailed out U.S. auto manufacturers.

B

Which of the following would cause a decrease in the equilibrium price and an increase in the equilibrium quantity of salmon? A) a decrease in demand and an increase in supply B) an increase in supply C) an increase in supply and an increase in demand greater than the increase in supply D) a decrease in demand and a decrease in supply

B

A positive externality causes A) the marginal social benefit to be equal to the marginal private cost of the last unit produced. B) the marginal social benefit to be less than the marginal private cost of the last unit produced. C) the marginal social benefit to exceed the marginal private cost of the last unit produced. D) the marginal private benefit to exceed the marginal social cost of the last unit produced.

C

Countries that engage in trade will tend to specialize in the production of goods and services in which they have ________ and will ________ these goods and services. A) a comparative advantage; import B) an absolute advantage; export C) a comparative advantage; export D) an absolute advantage; import

C

If society decides it wants more of one good and all resources are fully utilized, then A) it is unable to do this unless technology advances. B) additional resource supplies will have to be found. C) it has to give up some of another good and incur some opportunity costs. D) more unemployment will occur

C

Refer to Figure 3-1. An increase in population would be represented by a movement from A) A to B. B) B to A. C) D1 to D2. D) D2 to D1.

C

Refer to Figure 4-5. With rent control, the quantity supplied is 200 apartments. Suppose apartment owners ignore the law and rent this quantity for the highest rent they can get. What is the highest rent they can get per month? A) $1,000 B) $1,500 C) $2,000 D) $2,300

C

Refer to Figure 5-2. The efficient output level is A) Qd. B) Qb. C) Qa. D) Qb - Qd.

C

Refer to Figure 5-3. The size of marginal external benefits can be determined by A) the demand curve D2. B) D2 + D1 at each output level C) D2 - D1 at each output level. D) the demand curve D1.

C

Refer to Figure 6-6. As price falls from PA to PB, the quantity demanded increases most along D1; therefore, A) D1 is unit elastic. B) D1 is more inelastic than D2 or D3. C) D1 is more elastic than D2 or D3 D) D1 is elastic at PA but inelastic at PB.

C

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 A) The Waco Kid will produce four hats. B) producer surplus from the first hat is $40. C) producer surplus will equal $28. D) there will be a surplus; as a result, the price will fall to $24.

C

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 A) consumers will buy no cowboy hats. B) the marginal cost of producing the third cowboy hat will increase to $46. C) producer surplus will rise from $22 to $46. D) there will be a surplus of cowboy hats.

C

What is a "social cost" of production? A) the cost of the natural resources used up in production B) the total costs of producing a product, both implicit and explicit costs C) the sum of all costs to individuals in society, regardless of whether the costs are borne by those who produce the products or consume the product D) the cost of the environmental damage created by production

C

When he raised his price to $12 per dozen, he still sold 40 dozen per week. Based on this information, the demand for his tamales is A) perfectly elastic. B) inelastic. C) perfectly inelastic. D) unit-elastic.

C

Which of the following statements is true? A) If the price of a good is lowered and total revenue decreases, demand is elastic. B) If the price of a good is raised and total revenue does not change, demand is perfectly elastic. C) If the price of a good is raised and total revenue increases, demand is inelastic. D) If the price of a good is lowered and total revenue increases, demand is inelastic. At a price of $8 per dozen, Chuy sells 40 dozen homemade tamales per week.

C

Which of the following would cause a decrease in the supply of milk? A) an increase in the price of cookies (assuming that milk and cookies are complements) B) a decrease in the price of milk C) an increase the price of a product that producers sell instead of milk D) an increase in the number of firms that produce milk

C

29) When there is a negative externality, the private cost of production ________ the social cost of production. A) is greater than B) is equal to C) eliminates D) is less than

D

Consumers are willing to purchase a product up to the point where A) the marginal benefit of consuming the product is equal to the marginal cost of consuming it. B) the consumer surplus is equal to the producer surplus. C) the marginal benefit of consuming the product equals the area below the supply curve and above the market price. D) the marginal benefit of consuming a product is equal to its price.

D

In a modern mixed economy, who decides what goods and services will be produced? A) only the producers B) only consumers C) only the government D) all of the above

D

In economics, the term "equity" means A) everyone has an equal standard of living. B) the hardest working individuals consume all they want. C) only elected officials have high standards of living. D) economic benefits are distributed fairly.

D

Suppose that when the price of raspberries increases, Lonnie increases his purchases of papayas. To Lonnie, A) raspberries and papayas are complements. B) raspberries and papayas are inferior goods. C) raspberries and papayas are normal goods. D) raspberries and papayas are substitutes.

D

The attainable production points on a production possibility curve are A) the horizontal and vertical intercepts. B) the points along the production possibilities frontier. C) the points outside the area enclosed by the production possibilities frontier. D) the points along and inside the production possibility frontier.

D

The demand for gasoline in the short run is A) elastic because people can easily switch to public transportation. B) perfectly inelastic because people have no choice but to buy gasoline. C) unit-elastic because people tend to consume a stable amount of gasoline per period. D) inelastic because there are no good substitutes for gasoline.

D

The graph in this figure illustrates an initial competitive equilibrium in the market for sugar at the intersection of D1 and S1 (point A). If there is an increase in the price of fertilizer used on sugar cane and there is a decrease in tastes for sugar-sweetened soft drinks, how will the equilibrium point change? A) The equilibrium point will move from A to B. B) The equilibrium point will move from A to C. C) There will be no change in the equilibrium point. D) The equilibrium point will move from A to E.

D