ECO Exam 1A
Italy: 4 linen, 10 pasta Belgium: 20 linen, 10 pasta The opportunity cost of 1 linen for Belgium is:
0.25 pastas
Italy: 4 linen, 10 pasta Belgium: 20 linen, 10 pasta The opportunity cost of 1 pasta for Italy is:
0.4 linens
Italy: 4 linen, 10 pasta Belgium: 20 linen, 10 pasta What is a possible rate of trade between Italy and Belgium?
0.4 linens < 1 pasta < 4 linens
Demand slopes down because:
consumers will choose to use goods only in their most valuable uses when prices are high.
What are the unexploited gains from trade at the free market equilibrium?
$0
What are the total gains from trade at the free market equilibrium?
$1,000
The market price of a good is $10 and 40 units of the good sell at this price. Its supply curve intersects the vertical axis at a price of $8 and has a constant slope. What is the approximate value of producer surplus in this market?
$40
Nigeria receives $53 of producer surplus from each barrel of oil sold at $60. At that level of production, Nigeria's cost to produce a barrel of oil is:
$7
At a quantity of 80 units in the figure, it cost sellers __________ to produce the last unit, but buyers value this last unit at __________.
$80; $20
The value of wasted resources at a quantity of 80 units in the diagram is:
$900
in Colombia, it takes three workers to produce two pounds of coffee. In Mexico, it take four workers to produce one pound of coffee. Therefore:
Colombia has an absolute advantage in the production of coffee
Two persons each produce two identical goods. Which of the following is true about their absolute and comparative advantages in the production of these two good?
One person can have an absolute advantage in both goods but not a comparative advantage in both goods
The September 11 terrorist attacks turned many people away from flying. The demand and supply model would predict which of the following events in the airline travel market?
The demand for airline travel would decrease, resulting in a lower equilibrium price and lower equilibrium quantity.
Which statement most accurately explains the upward trend in the market price of oil in the 2000's?
The demand for oil increased faster than the supply of oil increased.
An increase in supply and a decrease in demand occur in a market. What happens to the equilibrium price and quantity?
The equilibrium price decreases; the change in the equilibrium quantity is uncertain.
Which explains how the OPEC crisis of 1973 affected oil prices?
The supply of oil was reduced, leading to a rise in oil prices.
A decrease in demand refers to:
a leftward shift of the demand curve.
When the price of a good increases, demand for the good will:
be unaffected.
The yearly shortage of Super Bowl tickets implies that the price of Super Bowl tickets is:
below the equilibrium price.
if labor in China is less productive than labor in the United States in all areas of production, then:
both the United States and China can benefit from trade
Suppose that the equilibrium price in the market is $10. If the current market price is $7.50:
competition among buyers will increase the current price.
What can cause both equilibrium price and quantity to increase?
consumer tastes becoming more favorable toward the good
What would lead to a decrease in supply?
costs of producing output have increased.
Imagine that millions of refugees move out of country A and into country X. This would cause the demand for housing in country A to __________ and the demand for housing in country X to __________.
decrease; increase
The law of demand suggests a __________ relationship between price and __________.
negative; quantity demanded
Italy: 4 linen, 10 pasta Belgium: 20 linen, 10 pasta Italy has a comparative advantage in:
pasta, while Belgium has a comparative advantage in linen.
Trade creates value because:
people exchange things hey do not want for things they do
Which variable is NOT a demand shifter?
price of raw materials
The key condition for equilibrium to occur in a market is:
quantity demanded equals quantity supplied.
The quantity supplied is the quantity that:
sellers are willing and able to sell at a given price.
the enormous variety of goods and services that we consume each day can be attributed mainly to:
specialization and trade
Traders should specialize in the good that:
that they can produce with the lowest opportunity cost
The production possibility frontier shows:
the combinations of output that an economy can produce given its productivity and supply of inputs
If sellers want to sell more products than buyers are willing to purchase, we know that:
the current price is greater than the equilibrium price.