Eco 1302 Final Review
Suppose the market price for a cup of coffee is $1.25. If Coffee Express's marginal cost of making that cup of coffee is $0.75, its producer surplus from that cup of coffee is: A) $0.50 B) $1.50 C) $0.75 D) $1.25
A) $0.50
Refer to table 8.5. If Sherry produces two pair of earrings, her marginal cost is: A) $30 B) $40 C) $240 D) $45
A) $30
Refer to table 2-1. If the production possibilities frontier is bowed outward, then which of the following could be the maximum number of tennis balls produced when 300 tennis rackets are produced? A) 4,500 B) 6,000 C) 5,000 D) 5,500
A) 4,500
Flu shots provide a positive externality. Suppose that the market for vaccination is perfectly competitive. Without government intervention in the vaccination market, which of the following statements is correct? A) At the current output level, the marginal social benefit exceeds the marginal private benefit B) The current output level is inefficiently high. C) A per-shot tax could turn an inefficient situation into an efficient one D) at the current output level, the marginal cost exceeds the marginal private cost
A) At the current output level, the marginal social benefit exceeds the marginal private benefit
If a person expects the price of pumpkins to increase next month, then the person's current demand for pumpkins will increase. A) True B) False
A) True
When a supply curve or a demand curve shifts, the equilibrium price and equilibrium quantity change. A) True B) False
A) True
A price floor is A) a legal minimum on the price at which a good can be sold B) a legal maximum on the price at which a good can be sold C) ofter imposed when buyers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price floor D) a source of efficiency in a market
A) a legal minimum on the price at which a good can be sold
On a graph, consumer surplus is represented by the area A) below the demand curve and above price B) between the demand and supply curves C) below the demand curves and to the right of equilibrium price D) below the price and above the supply curve
A) below the demand curve and above price
A surplus results when a A) binding price floor is imposed on a market B) binding price floor is removed from a market C) nonbinding price floor is imposed on a market D) nonbinding price floor is removed from a market
A) binding price floor is imposed on a market
If a seller in a competitive market chooses to charge more than the going price, then A) buyers will make purchases from other sellers B) other sellers would also raise their prices C) the owner of the raw materials used in production would raise the prices for the raw materials D) the sellers' profits must increase
A) buyers will make purchases from other sellers
Dan is consuming coffee and bagels so that marginal benefits to costs is 15 and 9, respectively. Base on the principle of people are rational, Dan should: A) consume more coffee and less bagels B) continue to consume the same amount of coffee and bagels, as he is already maximizing utility C) consume less coffee and more bagels D) consume less of both coffee and bagels
A) consume more coffee and less bagels
Figure 4.3 illustrates the supply and demand for blue jeans. If the actual price of blue jeans is $30 there is: A) excess demand of 40 pairs of blue jeans B) excess supply of 40 pairs of blue jeans C) excess supply of 50 pairs of blue jeans D) excess demand of 50 pairs of blue jeans
A) excess demand of 40 pairs of blue jeans
In the circular flow diagram, households demand _______ and supply __________. A) goods and services; inputs B) goods and services; goods and services C) inputs; inputs D) inputs; goods and services
A) goods and services; inputs
If the demand for water is inelastic, then as the price of water falls, quantity demanded of water will ________ and total revenue will ________. A) increase; decrease B) increase; increase C) decrease; increase D) decrease; decrease
A) increase; decrease
A firm with a fixed production facility short-run costs, a diminishing marginal returns implies that A) marginal costs are increasing B) marginal costs may be increasing or decreasing C) marginal costs are constant D) marginal costs are decreasing
A) marginal costs are increasing
Figure 4.2 depicts three market situations. Which of the panels depicts a market in which the price is likely to fall? A) panel C B) panel A C) none of the panels depicts a market in which the price is likely to fall D) panel B
A) panel C
If a nonbinding price floor is imposed on a market, then the A) quantity sold in the market will stay the same B) price in the market will increase C) quantity sold in the market will decrease D) price in the market will decrease
A) quantity sold in the market will stay the same
Which of the following is an example of a positive externality? A) the mayor of a small town plants flowers in the city park B) an avid fisherman buys new fishing gear for his next fishing trip C) local high school teachers have pizza delivery every Friday for lunch D) a college student buys a new car when she graduates
A) the mayor of a small town plants flowers in the city park
Suppose that the price of a donut is $1 each. Lorena is willing to pay $2 for the first donut, Ricky is willing to pay $1.80 for the second donut, Jennifer is willing to pay $1.50 for the third donut, and Betty is willing to pay $1.20 for the fourth donut. In equilibrium, what is the total consumer surplus from the consumption of donuts? A) $3.50 B) $2.50 C) $2.40 D) $3.60
B) $2.50
In figure 6.2, the producer surplus is: A) $100 B) $200 C) $400 D) $300
B) $200
Bob purchases a book for $6, and his consumer surplus is $2. How much is Bob willing to pay for the book? A) $6 B) $8 C) $4 D) $2
B) $8
Refer to table 11-1. At which number of workers does diminishing marginal product begin? A) 4 B) 2 C) 1 D) 3
B) 2
Refer to table 16-1. What is the total output when 1 worker is hired? A) 45 B) 30 C) 10 D) 75
B) 30
Refer to table 3-4. Which of the following combinations of toothbrushes and hairbrushes could Zimbabwe not produce in 120 minutes? A) 20 toothbrushes and 6 hairbrushes B) 5 toothbrushes and 11 hairbrushes C) 30 toothbrushes and 3 hairbrushes D) 10 toothbrushes and 9 hairbrushes
B) 5 toothbrushes and 11 hairbrushes
Refer to table 3-5. Which of the following combinations of cheese and bread could Spain produce in 24 hours? A) 4 units of cheese and 3 units of bread B) 6 units of cheese and 1 unit of bread C) 7 units of cheese and 1.5 units of bread D) 3 units of cheese and 3 units of bread
B) 6 units of cheese and 1 unit of bread
A college education generates: A) Only external benefits B) Both private and external benefits C) No benefits D) Only private benefits
B) Both private and external benefits
Refer to table 7-1. If the price of the product is $110, then who would be willing to purchase the product? A) Calvin, Sam, Andrew, and Lori B) Calvin, Sam, and Andrew C) Calvin and Sam D) Calvin
B) Calvin, Sam, and Andrew
A decrease in the price of baseball bats will decrease the demand for baseballs. A) True B) False
B) False
Surpluses drive prices up, while shortages drive prices down. A) True B) False
B) False
When an externality is present, the market equilibrium is A) Efficient, but the equilibrium does not maximize the total benefit to society as a whole B) Inefficient, and the equilibrium does not maximize the total benefit to society as a whole C) Inefficient, but the equilibrium maximizes the total benefit to society as a whole. D) Efficient, and the equilibrium maximizes the total benefit to society as a whole
B) Inefficient, and the equilibrium does not maximize the total benefit to society as a whole
Which of the following changes would not shift the supply curve for a good or service? A) a change in expectations about the future price of the good or service B) a change in the price of the good or service C) a change in input prices D) a change in production technology
B) a change in the price of the good or service
A change in the quantity demanded of a product cannot be the result of a change in: A) the buyer's preference B) all of these are correct C) consumer income D) the price of related goods
B) all of these are correct
Which segment of the LAC in figure 8.9 represents constant returns to scale? A) de B) cd C) ab D) all of these
B) cd
In figure 6.1, the price of the good is $20 and the shaded area represents: A) producer surplus B) consumer surplus C) market equilibrium D) a price ceiling
B) consumer surplus
Good X and Good Y are substitutes if the: A) income elasticity of each is positive B) cross-price elasticity is positive C) income elasticity of each is negative D) cross-price elasticity is negative
B) cross-price elasticity is positive
Consider the market for Chinese food in a large city like Philadelphia. If the number of Chinese restaurants increases and the price elasticity of demand for Chinese food is 2.0, then the equilibrium price of Chinese food will ________, the equilibrium quantity demanded of Chinese food will ________, and total Chinese food revenue will ___________. A) increase; decrease; increase B) decrease; increase; increase C) decrease; increase; decrease D) increase; decrease; decrease
B) decrease; increase; increase
As consumers prefer smaller and more fuel-efficient cars, the: A) demand for SUVs will increase B) demand for SUVs will decrease C) quantity demanded for SUVs will rise D) quantity demanded for SUVs will fall
B) demand for SUVs will decrease
Suppose the income of buyers in a market for an inferior good decreases and a technological advancement occurs also. What would we expect to happen in the market? A) equilibrium quantity and price would increase B) equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous C) equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous D) equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous
B) equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous
The goal of rent control is to A) help landlords by assuring them a low vacancy rate for their apartments B) help the poor by making housing more affordable C) help the poor by assuring them an adequate supply of apartments D) facilitate controlled economic experiments in urban areas
B) help the poor by making housing more affordable
Absolute advantage is found by comparing different producers' A) opportunity costs B) inout requirements per unit of output C) locational and logistical circumstances D) payments to land, labor, and capital
B) inout requirements per unit of output
In the circular flow model, which of the following is on the selling side of the factor markets? A) firms and households B) only households C) federal, state, and local governments D) only financial institutions such as banks E) only firms
B) only households
Diminishing marginal returns occurs A) both the short-run and the long-run B) only in the short-run C) only in the long-run D) only in time periods that are neither long-run or short-run
B) only in the short-run
When can an economy not produce? A) inside its production possibilities frontier B) outside its production possibilities frontier C) at the endpoints of its production possibilities frontier D) on its production possibilities frontier
B) outside its production possibilities frontier
In Figure 4.2, which of the panels depicts a market in which there is an excess demand for a product? A) panel C B) panel B C) none of the panels depict a market in which there is an excess demand for a product D) panel A
B) panel B
In the product market of the circular flow diagram, households: A) pay for goods and services demanded from these markets B) pay for goods and services demanded from these markets C) earn income for goods and services supplied to these markets D) earn income for goods and services demanded from these markets
B) pay for goods and services demanded from these markets
The difference between the price a producer receives for a product and the minimum amount a producer is willing to accept for that product is: A) consumer surplus B) producer surplus C) perfect competition surplus D) the market demand for a product
B) producer surplus
Factors of production are the A) goods that are ought by businesses to produce productive resources B) productive resources used to produce goods and services C) goods and services produced by the economy D) productive resources used by government to increase the productivity of consumption E) goods that are brought by individuals and used to provide personal enjoyment
B) productive resources used to produce goods and services
Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor, the A) demand curve for toothpaste shifts to the left B) quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases C) supply curve for toothpaste shifts to the right D) quantity supplied of toothpaste stays the same
B) quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases
Refer to figure 8.2. The marginal product of the third worker is _________. A) thirty-two B) ten C) forty-two D) twelve
B) ten
Which of the following is not a characteristic of a perfectly competitive market? A) there are many sellers B) there is no free entry or exit C) sellers must accept the price the market determines D) different sellers sell identical products
B) there is no free entry or exit
If a price floor is not binding, then A) there will be a shortage in the market B) there will be no effect on the market price or quantity sold C) there will be a surplus in the market D) the market will be less efficient than it would be without the price floor
B) there will be no effect on the market price or quantity sold
When the firm increases output and the costs rise disproportionately faster, then the long-run average cost curve is _______ and the firm is experiencing ________. A) downward sloping; economies of scale B) upward sloping; diseconomies of scale C) downward sloping; constant returns to scale D) horizontal; constant returns to scale
B) upward sloping; diseconomies of scale
In the simple-circular flow diagram, the flow of money from the firms to the markets for factors of production is called A) revenue B) wages, rent, and profit C) income D) spending
B) wages, rent, and profit
When do consumers bear the larger share of a tax? A) when demand is elastic B) when demand is inelastic C) not enough information D) when supply is inelastic E) when supply is elastic
B) when demand is inelastic
Refer to figure 4.1 that shows Mary and Tom's individual demand curves for meals per week at Fratelli's Italian restaurant. Assuming Mary and Tom are the only consumers in the market, what is the market quantity demanded at a price of $15? A) 1 B) 2 C) 3 D) 9
C) 3
Refer to Table 3-8. If the production possibilities frontier is bowed outward, then which of the following could represent the number of coats produced when 12 blankets are produced? A) 300 B) 400 C) 500 D) 200
C) 500
If Korea is capable of producing either shoes or soccer balls or some combination of the two, then: A) Korea should specialize in the product in which it has an absolute advantage B) it would be difficult for Korea to benefit from trade with another country if Korea is efficient in the production of both goods C) Korea's opportunity cost of shoes is the inverse of its opportunity cost of soccer balls D) it would be impossible for Korea to have an absolute advantage over another country in both products
C) Korea's opportunity cost of shoes is the inverse of its opportunity cost of soccer balls
If Shawn can produce more donuts in one day than Sue can produce in one day, then A) Sue has an absolute advantage in the production of donuts B) Sue has a comparative advantage in the production of donuts C) Shawn has an absolute advantage in the production of donuts D) Shawn has a comparative advantage in the production of donuts
C) Shawn has an absolute advantage in the production of donuts
Because pollution taxes raise production costs, the _______ curve ________ A) Supply, does not change B) Demand, shifts to the right C) Supply, shifts to the left D) Supply, shifts to the right
C) Supply, shifts to the left
Which of the following statements is not correct? A) Government policies may improve the market's allocation of resources when positive externalities are present. B) Government policies may improve the market's allocation of resources when negative externalities are present C) Without government intervention, the market will tend to undersupply products that produce negative externalities D) A postive externality is an example of market failure
C) Without government intervention, the market will tend to undersupply products that produce negative externalities
Which of the following changes would not shift the demand curve for a good or service? A) a change in expectations about the future price of the good or service B) a change in income C) a change in the price of the good or service D) a change in the price of a related good or service
C) a change in the price of the good or service
If a decrease in income increases the demand for a good, then the good is A) a substitute good B) a normal good C) an inferior good D) a complementary good
C) an inferior good
A pollution tax will A) always be paid entirely by producers B) not change the price buyers pay for a good C) be shared between buyers and sellers D) always be paid entirely by buyers in the form of a price increase equal to the amount of the tax
C) be shared between buyers and sellers
A shortage results when a A) nonbinding price ceiling is imposed on a market B) binding price ceiling is removed from a market C) binding price ceiling is imposed on a market D) nonbinding price ceiling is removed from a market
C) binding price ceiling is imposed on a market
Price ceilings and price floors that are binding A) are imposed because they can make the poor in the economy better off without causing adverse effects B) can have the effect of restoring a market to equilibrium C) cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price D) are desirable because they make markets more efficient and more fair
C) cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price
The diagram that shows the flow of income, spending, goods and services between markets is called the: A) income-production diagram B) aggregate demand-aggregate supply diagram C) circular flow chart D) income flow diagram
C) circular flow chart
Two goods are compliments if the: A) income elasticity of each is negative B) price elasticity fo each is greater than one C) cross-price elasticity is negative D) cross-price elasticity is positive
C) cross-price elasticity is negative
Based on the above family of average cost curves (figure 8.1), the average total cost curve is ______, the average variable cost curve is ______ and the average fixed cost curve is ______. A) curve 2, curve 1, curve 3 B) curve 3, curve 1, curve 2 C) curve 1, curve 2, curve 3 D) curve 2, curve 1, curve 3
C) curve 1, curve 2, curve 3
if the government removes a binding price floor from a market, then the price paid by buyers will A) decrease, and the quantity sold in the market will decrease B) increase, and the quantity sold in the market will decrease C) decrease, and the quantity sold in the market will increase D) increase, and the quantity sold in the market will increase
C) decrease, and the quantity sold in the market will increase
Figure 4.3 illustrates the supply and demand for blue jeans. If the actual price of blue jeans is $50, there is: A) excess demand of 50 pairs of blue jeans B) excess supply of 40 pairs of blue jeans C) excess supply of 50 pairs of blue jeans D) excess demand of 40 pairs of blue jeans
C) excess supply of 50 pairs of blue jeans
In figure 6.2, the price is $20 and the shaded area represents: A) market equilibrium B) a price ceiling C) producer surplus D) consumer surplus
C) producer surplus
The imposition of a binding price ceiling on a market causes A) quantity demanded to be equal to quantity supplied B) quantity demanded to be less than the quantity supplied C) quantity demanded to be greater than quantity supplied D) the price of the good to be greater than its equilibrium price
C) quantity demanded to be greater than quantity supplied
The price elasticity of demand for coffee is 2.2 and the price elasticity of supply for coffee is 1.8. If demand increases by 20%, the percentage change in the equilibrium price of coffee will: A) fall by 5% B) rise by 0.2% C) rise by 5% D) fall by 0.2%
C) rise by 5%
Dioxin emission that results from the production of paper is a good example of a negative externality because A) self-interested paper firms are generally unaware of environmental regulations B) toxic emissions cause firms to produce less than the socially optimal amount of paper C) self-interested paper producers will not consider the full cost of the dioxin pollution they create D) there are fines for producing too much dioxin
C) self-interested paper producers will not consider the full cost of the dioxin pollution they create
Which of the following statements exemplifies a principle of individual decision making? A) prices rise when the government prints too much money B) trade can make everyone better off C) the cost of something is what you give up to get it D) governments can sometimes improve market outcomes
C) the cost of something is what you give up to get it
Lenny buys less oatmeal for breakfast when his income rises. This means that, for Lenny: A) the income elasticity of demand for oatmeal is positive B) oatmeal is a normal good and the income elasticity of demand for oatmeal is negative are correct C) the income elasticity of demand for oatmeal is negative D) oatmeal is a normal good
C) the income elasticity of demand for oatmeal is negative
Refer to table 7-7. If the market price is $1,000, the producer surplus in the market is A) $700 B) $1,700 C) $1,000 D) $300
D) $300
Figure 8.2 represents a firms average variable cost, average total cost and marginal cost curves. The firm faces fixed costs of: A) $125 B) $130 C) $110 D) $4,000
D) $4,000
The figure 8.3 above represents a firm's marginal cost, average total cost and average variable cost curves. At Q=50, the average fixed cost is: A) $50 B) $30 C) $40 D) $60
D) $60
Refer to table 4-3. If the law of supply applies to this good, then Q1 could be A) 0 B) 50 C) 100 D) 150
D) 150
Refer to table 13-1. The marginal product of the second worker is A) 20 units B) 85 units C) 90 units D) 80 units
D) 80 units
Negative externalities lead markets to produce A) Efficient output levels and positive externalities lead market's to produce greater than efficient output levels. B) Greater than efficient output levels and positive externalities lead markets to produce efficient output levels C) Smaller than efficient output levels and positive externalities lead markets to produce greater than efficient output levels D) Greater than efficient output levels and positive externalities lead markets to produce smaller than efficient output levels
D) Greater than efficient output levels and positive externalities lead markets to produce smaller than efficient output levels
Considering Figure 3, which depicts the supply and demand for coal. Assume coal production creates external costs. If PE and QE are the equilibrium price and quantity for coal without government regulation, a pollution tax on the production of coal would ________ the price of coal relative to PE and _______ the quantity of coal relative to QE. A) Increase, not change B) Decrease, decrease C) Decrease, not change D) Increase, decrease
D) Increase, decrease
An example of an explicit cost of production would be the A) cost of forgone labor earnings for an entrepreneur B) value of the time the business could've spent producing something else C) lost opportunity to invest in capital markets when the money is invested in one's business D) Lease payments for the land on which a firm's factory stands
D) Lease payments for the land on which a firm's factory stands
In the circular flow diagram, the different payments made by firms to households are: A) rent on office and factory buildings B) wages and salaries C) interest on borrowed money D) all of these
D) all of these
Which of the following costs of publishing a book is a fixed cost? A) shipping and postage expenses B) the costs of paper and binding C) author royalties of 5 percent per book D) composition, typesetting, and jacket design for the book
D) composition, typesetting, and jacket design for the book
The most obvious benefit of specialization and trade is that they allow us to A) consume more goods by forcing people in other countries to consume fewer goods B) spend more money on goods that are beneficial to society, and less money on goods that are harmful to society C) work more hours per week than we otherwise would be able to work D) consume more goods than we otherwise would be able to consume
D) consume more goods than we otherwise would be able to consume
Central planning refers to A) markets guiding economic activity. Today many countries that had this system have abandoned it B) government guiding economic activity. Today many countries that did not have this system have implemented it C) markets guiding economic activity. Today many countries that did not have this system have implemented it D) government guiding economic activity. Today many countries that gad this system have abandoned it.
D) government guiding economic activity. Today many countries that gad this system have abandoned it.
The basic principles of economics suggests that A) governments should become more involved in markets when trade between countries is involved B) markets are seldom, if ever, a good way to organize economic activity C) government should never become involved in markets D) government should become involved in markets when those markets fail to produce efficient or fair outcomes
D) government should become involved in markets when those markets fail to produce efficient or fair outcomes
In the simple-circular flow diagram, the participants in the economy are A) households and government B) households, firms, and government C) firms and government D) households and firms
D) households and firms
A difference between explicit and implicit costs is that A) implicit costs must be greater than explicit costs B) explicit costs do not require a direct monetary outlay by the firm, whereas implicit costs do C) explicit costs must be greater than implicit costs D) implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do
D) implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do
Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this observation? A) consumers have experienced an increase in income, and beef-production technology has improved B) The price of chicken had risen, and the price of steak sauce has fallen C) the demand curve for beef must be positively sloped D) new medical evidence has been release that indicates a negative correlation between a person's beef consumption and life expectancy
D) new medical evidence has been release that indicates a negative correlation between a person's beef consumption and life expectancy
Producer surplus is A) the opportunity cost of production minus the cost of producing goods that go unsold B) measured using the demand curve for a good C) always a negative number for sellers in a competitive market D) the amount a seller is paid minus the cost of production
D) the amount a seller is paid minus the cost of production
Consumer surplus is equal to: A) the are under the demand curve below the good's price B) the area under the demand curve C) the good's price times the quantity purchased D) the area under the demand curve above the good's price
D) the area under the demand curve above the good's price
Which of the following events could cause an increase in the supply of ceiling fans? A) the average temperature rises over time B) there is an increase in the price of air conditioners, and consumers regard air conditioners and ceiling fans as substitutes C) there is an increase in the price of the motor that powers ceiling fans D) the number of sellers of ceiling fans increases
D) the number of sellers of ceiling fans increases