ECO 201 - Exam 3

500; 0

(Figure: Market for Engines) According to the figure, if there is international trade in this market, and the world price of an engine is $800, domestic consumers will purchase _____ units from domestic producers and _____ units from foreign producers.

$20,000

(Figure: Market for Logs) A quota of 10,000 logs forest wood per month is placed in the market that is shown in the figure. How much are buyers willing to pay after the implementation of the quota?

100,000

(Figure: Market for Printed Houses) Consider the market for environmentally friendly three-dimensional printed houses that is shown in the figure. The government wants to encourage buyers to buy such houses and places a price ceiling on the market at $200,000 per house. The market quantity sold after the implementation of the price ceiling is _____ houses.

$600.

(Figure: Market for TVs 2) Suppose that the world price of TVs is $500, and the government imposes a $100 tariff. According to the figure, the new price domestic consumers pay for a TV is:

b ; surplus; f and e

(Figure: Price Controls in the Market for Strawberries) Use Figure: Price Controls in the Market for Strawberries. An effective price floor would be at price _____, and a _____ would result from the difference between quantities _____.

$1,200 for 1.8 million units.

(Figure: Rent Controls in the Market for Apartments in New York City) Use Figure: Rent Controls in the Market for Apartments in New York City. If a rent ceiling were set at $800, renters would be willing to pay a price at least as high as:

decrease; increase

(Figure: The Domestic Supply and Demand for Recreational Vehicles (RVs) in the United States) Use Figure: The Domestic Supply and Demand for Recreational Vehicles (RVs) in the United States. Suppose the world price equals $50,000, and there is free trade. In the United States, consumer surplus would _____, and producer surplus would _____.

export 6 million

(Figure: The Domestic Supply and Demand for Recreational Vehicles (RVs) in the United States) Use Figure: The Domestic Supply and Demand for Recreational Vehicles (RVs) in the United States. Suppose the world price equals $50,000, and there is free trade. The United States would _____ Recreational Vehicles.

P 1 ; Q 1 ; Q 3

(Figure: The Market for Milk) Use Figure: The Market for Milk. With a binding price floor, the price could be equal to _____, consumers would demand _____, and producers would supply _____.

I.

(Figure: The Market for Tea in India) Use Figure: The Market for Tea in India. Without trade, the price is P A . When the economy is opened to trade, the price rises to P W , and the change in total surplus is:

two tax returns; 1.25 tax returns

(Table: Fazio and Gabriella's opportunity cost) The table provides data on how long it takes Fazio and Gabriella to learn to play a particular new song on the piano and to complete a given person's tax return. Use the data to answer the question. Fazio's opportunity cost of learning the song is _____, and Gabriella's opportunity cost is _____.

Zane because he has a lower opportunity cost.

(Table: Joachim and Zane's opportunity cost) The table shows data on how long it takes Joachim and Zane to clean the bathrooms and wash the windows at a home. Who has a comparative advantage in washing windows?

where one person's use of the good does not reduce another person's ability to use the same unit of the good.

A nonrival good is a good:

it is set above the equilibrium price.

A price ceiling will have NO immediate effect if:

additional income earned is taxed at lower rates as additional income is earned.

A regressive tax is a tax where:

purchased from a foreign seller.

An import is a good or service:

D, H

Education creates a positive benefit for bystanders, a positive externality. If the market provides this good without any correction, there is a deadweight loss (DWL). What is the size of this deadweight loss? Select all areas that are part of the DWL.

12

Education creates a positive benefit for bystanders, a positive externality. What would the social planner pick as the socially optimal quantity? (If your answer is 5 million, put in 5).

an in-kind transfer.

Food stamps (now called the Supplemental Nutrition Assistance Program) is an example of:

a decrease

Given that the definition of poverty has not been adjusted to reflect the long-term rise in average incomes, one would expect _____ in the percentage of the population living below the poverty line.

an incentive.

Harvey pays $8 to skate at the indoor ice rink once a month. The price rises to $10, and Harvey starts skating once every six weeks. This is an example of price functioning as

export lumber.

If a country's domestic price of lumber is below the world price of lumber, the country will likely:

Leticia; poems

If they spend all night writing poems, Leticia can write 10 poems, and Isabella can write five. If they spend all night making necklaces, Leticia can make six, and Isabella can make four. We know that _____ has a comparative advantage in _____.

be underproduced.

In a market system, public goods would:

D, B

In the graph below, P2 is a price ceiling. Select all letters corresponding to areas on the graph that are part of the deadweight loss from the price ceiling.

the quality of the good supplied will likely decrease

Suppose that a binding price floor is in place in a particular market. If the market is deregulated, and the price floor is removed:

decrease; increase; increase

The United States can produce whiskey domestically, but it can also export whiskey if the world price is higher than the domestic price. If the United States exports whiskey, consumer surplus will _____, producer surplus will _____, and total surplus will _____.

relative opportunity costs between trading partners.

The concept of comparative advantage is based on:

overproduction

The market outcome will lead to _________ in the presence of negative externalities.

underproduction

The market outcome will lead to ______________ in the presence of positive externalities.

an income level determined by the government, below which a family is defined to be in poverty.

The poverty line is:

10

The production of denim (blue jeans) uses toxic chemicals which are often released into watersheds, creating a negative externality. Suppose the government wants to solve the externality problem using a corrective tax. What should the amount of the per unit tax be (in dollars?

Bruno, Bruno

The table provides data on the number of minutes it takes for Bruno and Sasha to each change a tire and iron a dress shirt. Use the data to answer the question. _______ has the absolute advantage in changing a car's tire, and __________ has the absolute advantage in ironing a dress shirt.

G

The use of gasoline creates a negative externality through air pollution. What is the size of the deadweight loss (DWL) caused by the externality? Select ALL letters that are part of the DWL.

900

The use of gasoline creates a negative externality through air pollution. What would the quantity of gasoline be in equilibrium in the market? (Leave answer in units of millions - If you want to answer 50 million, put in 50).

5

The use of vaccines create a positive benefit on bystanders, a positive externality. Suppose the government wants to solve the externality problem by using a corrective subsidy. What should be the amount of the per unit subsidy to get the market to provide the socially optimal quantity? (in dollars)

150

The use of vaccines create a positive benefit on bystanders. What would the quantity be in the market equilibrium, in the presence of the positive externality?

1000

Trans-Atlantic flights create air pollution, and thus impose a negative externality. What would a Social Planner choose to be the quantity of trans-atlantic flights for the socially optimal quantity?

falls; rises; gains

When an economy moves from a scenario without trade to free international trade, for industries in the export sector, consumer surplus _____, producer surplus _____, and the economy as a whole _____.

a means-tested

When eligibility for a government program is based on income and sometimes on wealth, the program is classified as _____ program.

innovation in the computer chip industry

Which is a good or market activity associated with a positive externality?

When Fazio parks his big truck at the grocery store, people in the cars on each side of his parking space have a hard time opening their car doors.

Which of the following is an example of a negative externality?

a 5%

Which tax is regressive? Arturo pays an 8% tax on the first $9,000 he earns plus _____ tax on any additional income.