Comp 5 - Quiz Questions - Chapters 9, 7, and 23 (Mankiw)

The supply curve for a product is QS = 2P, and the market price is $10. What is producer surplus? (Hint: Graph the supply curve and recall the formula for the area of a triangle.)

$100

Sam bakes a cake and sells it to Carla for $10. Woody pays Diane $30 to tutor him. In this economy, GDP is

$40

If the price of an ice-cream cone falls to $3, the consumer surplus of Alexis, Bruno, and Camila increases by (Alexis, Bruno, and Camila each want an ice-cream cone. Alexis is willing to pay $12, Bruno is willing to pay $8, and Camila is willing to pay $4. The market price is $6. Consumer surplus equals)

$7

Alexis, Bruno, and Camila each want an ice-cream cone. Alexis is willing to pay $12, Bruno is willing to pay $8, and Camila is willing to pay $4. The market price is $6. Consumer surplus equals

$8

Bob purchases a book for $6, and his consumer surplus is $2. How much is Bob willing to pay for the book?

$8

Angus the sheep farmer sells wool to Barnaby the knitter for $20. Barnaby makes two sweaters, each of which has a market price of $40. Collette buys one of them, while the other remains on the shelf of Barnaby's store to be sold later. What is GDP here?

$80

An economy produces 10 cookies in year 1 at a price of $2 per cookie and 12 cookies in year 2 at a price of $3 per cookie. From year 1 to year 2, real GDP increases by

20 percent

Which of the following is not an advantage of a multilateral approach to free trade over a unilateral approach?

A multilateral approach requires the agreement of two or more nations.

What is the fundamental basis for trade among nations?

Comparative advantage

An American buys a pair of shoes made in Italy. How do the U.S. national income accounts treat the transaction?

Net exports fall, while GDP does not change.

If all quantities produced rise by 5 percent and all prices fall by 5 percent, which of the following best describes what occurs?

Real GDP rises by 5 percent, while nominal GDP is unchanged

Which of the following is not a commonly-advanced argument for trade restrictions?

The efficiency argument

Which of the following does NOT add to U.S. GDP?

The federal government sends a Social Security check to your grandmother.

When a country allows trade and becomes an exporter of a good, which of the following is not a consequence?

The losses of domestic consumers of the good exceed the gains of domestic producers of the good.

In a simple circular-flow diagram, total income and total expenditure are

always equal because every transaction has a buyer and a seller.

On a graph, consumer surplus is represented by the area

below the demand curve and above price

Dawn's bridal boutique is having a sale on evening dresses. The increase in consumer surplus comes from the benefit of the lower prices to

both existing customers who now get lower prices on the gowns they were already planning to purchase and new customers who enter the market because of the lower prices.

For the purpose of calculating GDP, investment is spending on

capital equipment, inventories, and structures, including household purchases of new housing.

If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the

consumer does not purchase the good.

An efficient allocation of resources maximizes

consumer surplus plus producer surplus

A drought in California destroys many red grapes causing the prices of both red grapes and red wine to rise . As a result, the consumer surplus in the market for red grapes

decreases, and the consumer surplus in the market for red wine decreases

According to the circular-flow diagram GDP, can be computed as

either the revenue firms receive from the sales of goods and services or the payments they make to factors of production.

Jackie, a Canadian citizen, works only in the United States. The value of the output she produces is

included in U.S. GDP, but it is not included in U.S. GNP

A farmer produces oranges and sells them to Fresh Juice, which makes orange juice. The oranges produced by the farmer are called

intermediate goods

The value of goods added to a firm's inventory in a certain year is treated as

investment, since GDP aims to measure the value of the economy's production that year.

The nation of Openia allows free trade and exports steel. If steel exports were prohibited, the price of steel in Openia would be ________, benefiting steel ________.

lower, consumers

In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily,

market prices

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it

maximizes the combined welfare of buyers and sellers

After graduation, an American college student moves to Japan to teach English. Her salary is included

only in Japan's GDP

Producing a quantity larger than the equilibrium of supply and demand is inefficient because the marginal buyer's willingness to pay is

positive but less than the marginal seller's cost.

When a nation opens itself to trade in a good and becomes an importer,

producer surplus decreases, but consumer surplus and total surplus both increase.

A demand curve reflects each of the following except the

quantity that each buyer will ultimately purchase

The goal of multilateral trade agreements is usually to

reduce tariffs in various nations simultaneously to blunt political pressure for protectionism.

Which of the following trade policies would benefit producers, hurt consumers, and increase the amount of trade?

starting to allow trade when the world price is greater than the domestic price

A tax on an imported good is called a

tariff.

If a nation that imports a good imposes a tariff, it will increase

the domestic quantity supplied.

An economy's gross domestic product is

total income and total spending

GDP is defined as the

value of all final goods and services produced within a country in a given period of time

If the United States threatens to impose a tariff on Colombian coffee if Colombia does not remove agricultural subsidies, the United States will be

worse off if Colombia doesn't remove the subsidies in response to the threat.

To encourage formation of small businesses, the government could provide subsidies; these subsidies

would not be included in GDP because they are transfer payments

Diego, Emi, and Finn are available to work as tutors for the semester. The opportunity cost of tutoring is $100 for Diego, $200 for Emi, and $400 for Finn. The university is hiring tutors at a price of $300. Producer surplus equals

$300

If the price of a hot dog is $2 and the price of a hamburger is $4, then 30 hot dogs contribute as much to GDP as _____ hamburgers.

15

The country Autarka does not allow international trade. In Autarka, you can buy a wool suit for 3 ounces of gold. Meanwhile, in neighboring countries, you can buy the same suit for 2 ounces of gold. This suggests that

Autarka does not have a comparative advantage in producing suits and would become a suit importer if it opened up trade.

Which of the following is included in GDP?

Both the market value of rental housing services and the market value of owner-occupied housing services

Suppose there is an early freeze in California that reduces the size of the lemon crop. As the price of lemons rises, what happens to consumer surplus in the market for lemons?

Consumer surplus decreases

When the nation of Ectenia opens itself to world trade in coffee beans, the domestic price of coffee beans falls. Which of the following describes the situation?

Domestic production of coffee falls, and Ectenia becomes a coffee importer.

Import quotas and tariffs produce some common results. Which of the following is not one of those common results?

Equal revenue is always raised for the domestic government.

The demand curve for cookies is downward-sloping. When the price of cookies is $3, the quantity demanded is 100. If the price falls to $2, what happens to consumer surplus?

It rises by more than $100

Which of the following items is the one type of household expenditure that is categorized as investment rather than consumption?

The purchase of a new house

Which of the following is included in the calculation of GDP?

The purchase of tutoring services from a tutor who holds citizenship outside the country but resides within the country.

Gavin has been working full-time as a gardener for $300 a week. When the market price of gardeners rises to $400, Hector becomes a gardener as well. How much does producer surplus rise as a result of this price increase?

between $100 and $200

Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound,

both Janine and Henry experience an increase in consumer surplus.

When a country that imports a particular good imposes a tariff on that good,

consumer surplus decreases and total surplus decreases in the market for that good

When a country that imports a particular good imposes an import quota on that good,

consumer surplus decreases and total surplus decreases in the market for that good.

Isabelle values her time at $60 an hour. She spends 2 hours giving Jayla a massage. Jayla was willing to pay as much at $300 for the massage, but they negotiated a price of $200. In this transaction,

consumer surplus is $20 larger than producer surplus

Which is the largest component of GDP?

consumption

If Mr. Keating quits his job as a teacher to home school his own children, GDP

falls because his market income decreases

When a market is in equilibrium, the buyers are those with the ________ willingness to pay and the sellers are those with the ________ costs.

highest, lowest

An example of positive analysis is studying

how market forces produce equilibrium.

The nation of Wheatland forbids international trade. In Wheatland, you can buy 1 pound of corn for 3 pounds of fish. In other countries, you can buy 1 pound of corn for 2 pounds of fish. These facts indicate that

if Wheatland were to allow trade, it would import corn.

GDP is an imperfect measure of well-being because it

ignores the environmental degradation from economic activity