ECO111 Exam 1

Which expression is an informal description of consumer surplus? "money well spent" "the greatest good for the greatest number" "price gouging" "a seller's market"

"money well spent"

In the previous question, what is the cost of producing a potato in Albania? ½ of an onion ⅔ of an onion ¾ of an onion 1 ⅓ onions 1 ½ onions 2 onions

1 ½ onions

When gasoline costs $2.50/gallon, I purchase 50 gallons per month. When the price drops to $2.00/gallon, I purchase 70 gallons. My elasticity of demand for gasoline is ____?

1.5

Markets might not be a good way to organize economic activity when: A transaction impacts people who were not part of the transaction. There is an opportunity cost from consuming the good. Profits are excessively high. The good is in scarce supply.

A transaction impacts people who were not part of the transaction.

How would consumers be impacted by a maximum price that pharmaceutical companies can charge for the drugs they produce? (Compared to the market equilibrium.) Consumption increases if drugs are a normal good and decreases if they are an inferior good. Consumption increases, because the drugs are more affordable. Consumption increases if demand is elastic and decreases if demand is inelastic. Consumption decreases, because producers supply a lower quantity.

Consumption decreases, because producers supply a lower quantity.

In the circular flow diagram, what happens to the money a firm receives from selling its goods and services? The firm uses all the money to purchase factors of production and goods and services. All of the money goes to households to pay for the use of factors of production. The firm pays households for labor, materials, and capital; then the firm keeps the leftover money as profit. The firm pays households for labor and materials; then the firm keeps the leftover money as profit.

All of the money goes to households to pay for the use of factors of production.

Albania has 1000 farms; each Albanian farm can produce 4 tons of potatoes or 6 tons of onions in a year. Bulgaria has 2000 farms; each Bulgarian farm can produce 3 tons of potatoes or 6 tons of onions in a year. If one country exports onions, which country should it be? Albania would export onions. It makes no difference which country exports onions. Neither country would export onions. Bulgaria would export onions.

Bulgaria would export onions

Which of the following is an externality? Using a neighbor's WiFi network when the neighbor is not. Buying hand sanitizer from the store and reselling at a profit. Being physically inactive, which causes health problems. Cleaning up litter to beautify a neighborhood.

Cleaning up litter to beautify a neighborhood.

Under what circumstances can workers benefit from an increase in the minimum wage? Demand for labor is inelastic. Supply of labor is elastic. Demand for labor is elastic. Supply of labor is inelastic.

Demand for labor is inelastic.

Which of the following statements about the elasticity of demand is true? Demand is more elastic when consumers have more income. Demand for inferior goods is more elastic than demand for normal goods. Demand is more elastic for complements than for substitutes. Demand is more elastic in the long run than in the short run.

Demand is more elastic in the long run than in the short run.

Which group or groups will definitely have an increase in surplus after new immigrants arrive in a country? (all that apply) Employers of immigrants Immigrant workers who were already in the country Native workers Consumers of the goods and services produced by immigrants

Employers of immigrants Consumers of the goods and services produced by immigrants

If a country has the absolute advantage in producing a particular good, then it also has the comparative advantage. Select one: True False

False

If demand for a good is elastic, then an increase in the price of the good will result in more revenue to sellers. Select one: True False

False

Trade will hurt a country that does not have the comparative advantage in producing the good that it consumes the most of. Select one: True False Feedback

False

How can native workers benefit from the arrival of immigrants? If immigrant labor is an inferior good, the reduction in the wage paid to immigrants increases demand for native labor. If immigrants labor is a complement to native labor, the reduction in the price of immigrant labor increases demand for native workers. When immigrants take low-skill jobs, native workers are able to move up into jobs that pay higher wages. The increase in income of immigrant workers increases demand for the goods and services produced by native workers.

If immigrants labor is a complement to native labor, the reduction in the price of immigrant labor increases demand for native workers.

Which of the following is an example of an opportunity cost? One person owns what another person wants. Each additional hour of studying for a test has less and less impact on your grade. If you volunteer to work for a charity, you give up money that you could have earned in a paying job. In order for a firm to produce a good, it must be paid more than the cost of production.

If you volunteer to work for a charity, you give up money that you could have earned in a paying job.

Question 27 and 28

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Question 32

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What is a reason why the minimum wage is not an ideal policy for reducing poverty? Many states have their own minimum wages, which are different from the Federal minimum wage. Low-wage workers are not necessarily in low-income households. Raising workers' wages reduces their eligibility for other social assistance (like food stamps). Incomes taxes and payroll taxes eliminate much of the benefit of higher wages.

Low-wage workers are not necessarily in low-income households.

If the economy goes into a recession and incomes decline, what happens in the market for inferior goods? Prices rise and quantities fall. Prices and quantities both fall. Prices fall and quantities rise. Prices and quantities both rise.

Prices and quantities both rise.

The factories of a country can be used to produce cars or medical equipment. When a pandemic increases demand for medical equipment, what happens to the production possibilities frontier? The production possibilities frontier rotates around the point where it meets the axis. The production possibilities frontier shifts inward. The country selects a different point outside the production possibilities frontier. The country selects a different point on the same production possibilities frontier. The production possibilities frontier shifts outward.

The country selects a different point on the same production possibilities frontier.

What will happen to the equilibrium price and quantity sold of a good, when the number of sellers in the market goes down? Both the equilibrium price and quantity decrease. The equilibrium price decreases, and the equilibrium quantity increases. The equilibrium price increases, and the equilibrium quantity decreases. Both the equilibrium price and quantity increase.

The equilibrium price increases, and the equilibrium quantity decreases.

What happens to the price in a market, when output is restricted to a quantity less than the market equilibrium? The price remains at the equilibrium price. The price increases, if supply is elastic. The price decreases, if demand is elastic. The price increases to the value on the demand curve for that quantity.

The price increases to the value on the demand curve for that quantity.

How does raising the minimum wage change the price and quantity of the good produced using minimum wage labor? The price decreases, and the quantity sold increases. The price decreases, and the quantity sold decreases. One of these changes could go in either direction. The price increases, and the quantity sold increases. The price increases, and the quantity sold decreases.

The price increases, and the quantity sold decreases.

What happens to the market when the supply curve shifts left, and prices are not allowed to adjust? There is a shortage of the good. A price ceiling sets the maximum price of the good. There is excess supply of the good. A price floor sets the minimum price of the good.

There is a shortage of the good.

What is the difference between the value to buyers and the cost to sellers? Consumer surplus Equilibrium price Total surplus Net price

Total Surplus

What is maximized in the equilibrium of a free, competitive market? Total surplus Profits Quantity produced Price Feedback

Total surplus

Why isn't trade between countries like a game, with some winners and some losers? Trade allows countries to specialize in what they do best. Trade increases the number of goods and services available to consumers. Countries negotiate trade deals that suit the needs of their citizens. Trade maximizes the profits of both industries in both countries.

Trade allows countries to specialize in what they do best.

A price ceiling creates deadweight loss. Select one: True False

True

The demand curve shows the quantity that consumers would purchase at each price (as long as there is no change in other factors, like income). Select one: True False

True

The income elasticity of demand can tell us whether a good is a normal or inferior good. Select one: True False Feedback

True

Which of the following is a normative statement? Workers should be allowed to form unions to bargain for better working conditions. The opportunity cost of attending university is the money that a person would have earned by working. Employers respond to higher wages by reducing the number of workers they employ. Monopolists profit by creating artificial scarcity.

Workers should be allowed to form unions to bargain for better working conditions.

What could cause the blue curve to shift to the right, as illustrated in this graph? a decrease in the market price an increase in consumers' wealth (assuming that it is a normal good) an increase in the price of a complement good a reduction in the price of inputs into production

a reduction in the price of inputs into production

When the government imposes a binding price floor, a surplus (excess supply) of the good develops. the supply curve shifts to the left. a shortage (excess demand) of the good develops. the demand curve shifts to the right.

a surplus (excess supply) of the good develops.

Which of the following might lead to an increase in the equilibrium price of jelly and a decrease in the equilibrium quantity of jelly sold? an increase in the price of mayonnaise, a substitute for jelly. an increase in consumers' incomes, as long as jelly is a normal good. an increase in the price of grapes, an input into jelly. an increase in the price of peanut butter, a complement to jelly.

an increase in the price of grapes, an input into jelly.

When goods are allocated across society in a way that any trades would reduce someone's happiness, the allocation is: Inside the PPF Utopian Rational Efficient

efficient

Match each statement with the best description of the elasticity of demand. When the price of pasta is $0.50, I buy 15 boxes. When the price is $0.40, I buy 25 boxes. I spend $10 on pears each week, regardless of the price. I purchase 5 cucumbers each week, regardless of the price. When the price of coffee rises by 25%, I reduce my coffee consumption by 10%. Options: inelastic, elastic, unit elastic, perfectly inelastic

elastic unit elastic perfectly inelastic inelastic

A point inside the production possibilities frontier is...? efficient but not feasible. both feasible and efficient. neither feasible nor efficient. feasible but not efficient.

feasible but not efficient

Question 30

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A business that would lose all its sales if it raises its price is called: price ceiling perfectly inelastic price taker equilibrium

price taker

When the price of gadgets increases by 20%, demand for widgets increases by 10%. What type of goods are these? substitutes luxuries necessities inferior goods complements

substitues

The discovery of a large new reserve of gold ore will shift the ____ curve for gold, leading to a _____ equilibrium price. demand, lower demand, higher supply, higher supply, lower

supply, lower

The idea that the market is guided toward desirable outcomes by people acting in their own self interest is called: the rational principle the marginal principle the invisible hand collectivism

the invisible hand

What is a market equilibrium? the price causes quantity demanded to equal quantity supplied the price and quantity that maximize consumer surplus the price and quantity that maximize profits to producers the quantity that causes the price ceiling to equal the price floor Feedback

the price causes quantity demanded to equal quantity supplied