Econ 201 exam 1 and 2

The assumption that if a professor can manage a small class room and enforce the mask mandate than every professor (no matter class size) can do it as well, this violates the

Fallacy of composition

When the price of corn is $4, the quantity demanded of corn is 500. If an increase in supply causes the price of corn to drop to $3, Total Consumers' Surplus

increases by more than $500.

Suppose that the value of Price Elasticity of Supply for pens is 2.5. This value would suggest that a 10% increase in the price of pens would result in quantity supplied

increasing by approximately 25%.

Ticket prices were raised in hopes to increase total revenue, the hope is that the price elasticity of demand is

inelastic

The route from Dallas to Mexico City is served by more than one airline. The demand for tickets from American Airlines for that route is probably

inelastic and less elastic than the demand for all tickets for that route

Consider demand for "DVD's of the movie Farce of the Penguins" (directed by the comedic genius Bob Saget) and demand for "DVD's (in general)." If the price elasticity of demand for "DVD's (in general)" is -1.374, then it would be reasonable to expect that the price elasticity of demand for "DVD's of the movie Farce of the Penguins" is:

less than (i.e., "more negative than") -1.374. The more specific a good, the more elastic the demand is because there are more substitutes.

The amount you pay for insurance on your car is an example of

marginal private cost

Keeneland wants to increase the total revenue generated by the horse racing in order to more easily cover operating expenses. The CEO suggests that they should decrease the price of concessions (food and drinks). This should increase the number of attendees to Keeneland. CEO believes the cross price elasticity between the concessions and attending Keeneland to be

negative

Firms in perfectly competitive markets face

perfectly elastic demand curve

"No matter the price I will always buy 20 tacos a week" this statement a price elasticity of demand that is

perfectly inelastic

A arena has max capacity of 20,000 people, the price elasticity of supply is

perfectly inelastic

example of positive externality

planting trees along a sidewalks which adds beauty and shade

If the price of leather decrease we expect equilibrium quantity of footballs to

rise, and price would fall since cost of production is less

Asymmetric information occurs when:

Buyers and sellers have access to different information

In what case would Coase theorem solve this externality

Ed is allergic to his roommate's cat

If the demand and supply curve for computers is: D = 100 - 6P, S = 28 + 3P.Where P is the price of computers, what is the quantity of computers bought and sold at equilibrium?

$8; 52 by setting 100-6P=28+3P, solving for P.

At a price of $5/hour, Crank N Boom wants to hire 3 workers. When the price rises to $7/hour, Crank N Boom wants to hire only 2workers. Crank N Boom's price elasticity of demand for workers is:

((2-3)/(2+3)) / ((7-5)/(7+5)) = (-1/5) / (1/6) = -1.20

When the price of tortilla chips rose by 10 percent, the quantity of tortilla chips sold fell 4 percent, and the sale of dips (like salsa and bean dip) fell 8 percent. This set of facts indicates that the cross- price elasticity between tortilla chips and dips is ________, so the two are ________.

-0.08 / 0.10 = -0.8, compliment

The price of erasers increases, but the quantity demanded of pencils is unchanged, cross price elasticity between the two is

0 and products are unrelated

Fred's income has just risen from $940 per week to $1,060 per week. As a result, his consumption of steak increased from 5 to 6 steaks per week. The income elasticity of Fred's demand for steak is

1.5

Dr. Patel asked students in our class how much they would have to be paid to be willing to lead the class in the chicken dance. Nora was willing for $5, Lucas was willing for $20, and Reginald was willing for $50. Based on these three students, if Dr. Patel paid $30 to students to do the chicken dance, then the total amount of PRODUCER SURPLUS would be

35

opportunity cost of 12 to 14 apple pies is

4 blueberry pies

What good is likely to have an income elasticity of demand equal to 8

5 star hotel (positive is luxury good, negative is inferior good)

Which is an example of a capital resource in economic terms

A new 3-D printer used at local engineering firm

Dave makes 25K and is taxed 10% Charles makes 75K and is taxed 15% Lou makes 400,000 and is taxed 25% this is best described as

A progressive tax

If the U.S. government places a quota on wheat, it is to c. restrict the quantity of wheat that can be imported

A quota is a measure used by governments to limit imports.

Laffer curve

A relationship between the tax rates and tax revenues that illustrates that high tax rates could lead to lower tax revenues if economic activity is severely discouraged.

Demand for what good/service is most inelastic in a minnesota winter

A sweatshirt (more specific more elastic, more general less elastic)

Negative externalities are created when

A) a driver drives recklessly on a busy highway.

The slope of the average fixed cost curve is

Always sloping downward

Paying the government X amount of dollars based on the amount of pollution emitted is what type of approach

An emission charge

According to the Law of Comparative Advantage, if Brazil and British Columbia were to specialize and trade with each other

Brazil should produce Coffee and British Columbia should produce Salmon. Brazil specializes in coffee and British Columbia specializes in Salmon because they both have a comparative over each other in the respective industries. (Brazil can produce more coffee per salmon that British Columbia and British can produce more Salmon per coffee than Brazil.)

Which good would have the most inelastic demand

Bread

Who benefits from voluntary trade

Buyers and sellers

Price ceilings on Canadian prescription drugs have resulted in lower prices for drugs produced by United States pharmaceutical companies causing

Canadian citizens to buy drugs at low prices in Canada, then smuggle them across the border to resell them at the higher U.S. prices

If more oranges are grown in one state rather than another because of the climate, the climate is considered to be what?

Competitive advantage

In the long run, supply and demand tend to become more elastic, this suggests:

Deadweight loss from a tax will be greater than it is in the short run

What would happen to equilibrium quantity of cheese if price of wine increases and all is held constant?

Decrease because a demand shifts left

Which is an example of a "How Much" question

Diner is open for breakfast and lunch, owner is tryin to determine if they should open for dinner

Chuck drives past the same gas station every day. He realizes that the gas station always changes its prices on Tuesdays but keeps the price steady the rest of the week. On Saturday, Chuck turns on the news and hears a report projecting that the price of gasoline is going to increase. Holding all else constant, what do you think would happen to Chuck's demand for gasoline on Monday

His demand would shift to the right. His demand shifts to the right because it is increasing.

Explain why customers may purchase more of a product at a lower price compared to a higher price

I will explain to her that there are some omitted variables that have contributed to a decrease in her sales such as changes in income. If income has gone down over time faster than her prices, then even if she decreases her prices her sales may still be decreasing.

The price elasticity of demand for Gatorade is -1.6. This implies

If price decreases by 10%, quantity demanded will increase by 16%

Under the proposed laws in Indonesia, unmarried couples who "live together as a husband and wife" could be jailed for six months or face a maximum fine of 10 million rupiah ($710). As a result, fewer couples will choose to live together. This is an example of:

Invisible Foot. This is a case of the invisible foot rather than the invisible hand because people's actions are being influenced by government.

Correct statement on minimum wage law

It causes prices to rise as producers pay more for labor

If government wanted to give people a negative incentive not to save money, what would be the policy?

Imposing a tax on individuals for saving their money

Reducing price of in app purchades thrugh Iphone will lead to______ for iphones causing the price of iPhones to___ and quantity demanded for iPhones to____

Increase in demand, increase, rise

What is an example of spending on goods and services in the circular flow model?

Javier buys 800 square feet of wood flooring for his vacation home. This is a personal purchase for personal use.

Market for cheese burgers consists of three people

Jerry demands 4, George, demands 7, and Elaine demands 2, and the sum of their demands is 13.

The unfair competition argument states that

LACK OF REGULATIONS IN OTHER COUNTRIES CAUSE GOODS tO BE SOLD AT LOWER PRICE

income falls 20%, quantity demanded of baked good falls 50%, baked goods are a

Luxury item

Which of the following markets is most likely to be perfectly competitive

Market for carrots

Suppose you live in a community with no price controls. What do you expect to happen if your town borders a community where there is a binding price floor on most products?

More consumers would purchase the product in the community without a price floor.

Your professor's income doubled and but his consumption for bud light beer went down. The income elasticity of demand for this beer is

Negative income elasticities of demand imply that as income increases demand for the good decreases. When demand of a good decreases with income, the good is an an inferior good.

When pollution is created by firms which is NOT a way for government to restore social optimum?

Offer a subsidy to firms to reduce production cost

One reason few pro athletes have masters is

Opportunity cost of going to graduate school is too high

professor is more likely to use delivery robots for food compared to students because

Opportunity costs of waiting in line for food is higher for professors than students

.The following table shows Patel's marginal benefit for playing Bingo at a charity event. The price of each bingo card is $1

Patel should play 4 bingo cards because an addition bingo card will cause his marginal cost to outweigh his marginal benefit.

which of the following represents an ineffective point

Point A

Which of the following is a point unobtainable with current technology and resources

Point E

states have laws that limit the maximum amount of interest a lender can charge a borrower, such a law is an example of

Price ceiling

Which in NOT a unintended consequence that U.S. might experience as a result of the trade war

Prices that domestic consumers pay for most products will decrease

All of the following are potential "unintended consequences" of the current trade war EXCEPT:

Prices that domestic consumers pay for most products will decrease. Prices that domestic consumers pay for most products typically increase during trade wars instead of decreasing.

For which of the following goods would demand be most elastic (i.e., have a value of price elasticity furthest from zero)?

R.C. Cola.

I pay $30 per month in membership fees. In a typical month I spend about $50 on bourbon at the Club. Every month I also have the option of attending a meeting of a whiskey club (open only to Bourbon Club members), at a cost per meeting of $15, payable at the beginning of each meeting. Given this, what do my monthly SUNK COSTS equal?

Since the membership cost is non-refundable and cannot be sold to recoup any costs, it is a sunk cost.

Which of the following is motivated by equality concern

Some states have transferred funds to food bank programs to increase benefits to lower income families

Because Cell phones and land lines are ________ a decrease in the price of cell phones would cause the demand for land lines to ________

Substitute and decrease

Cost of producing steel reduces, what happens to the supply of steel

Supply of steel increases

What correctly describes the equilibrium effects of a per-unit tax, in a market with no externalities

consumer surplus, producer surplus, and social surplus all decrease

What is a trade war

Tariffs and retaliation

Tax money owed is called

Tax liability

Below you will find Donald Trump's most recent tweets (slightly tweaked). Which of the following is a normative statement?

The Greatest Witch Hunt in the history of our Country! This is a statement that cannot be empirically tested.

If the marginal rate of tax is 40% and consumers' income increases from $10,000 to $12,000:

The amount of tax paid will increase by $800

Two shocks to market: 1) Peoples income increased through the stimulus checks 2)There is a massive chip shortage, this chips are used throughout many vehicles for many different appliances (Camera, power steering etc.)

The equilibrium price will go up and the equilibrium quantity will be indeterminate

Two shocks to the market for white claws

The equilibrium price will go up and the equilibrium quantity will be indeterminate. The price will increase due to the added tax, but the equilibrium quantity is indeterminate since price rises and demand also shifts right.

In a centrally planed economy, who decides what goods and services should be produced?

The government

Which of the following statements is false regarding market economies

The government organizes economic activity in a way that promotes well-being for the country

What states that the opportunity cost of producing a good always rises when you produce more of it

The law of increasing opportunity cost

oppratunity cost

The next best choice that you could have picked

Based on this information from these 6 people, which of the following tables shows the demand schedule for the Krogers delivery service?

The numbers in the right column show how many customers are willing to pay for the pick-up service given the price in the left column.

TRUE statement

The opportunity cost of producing Blueberry pies is higher at high levels of Blueberry pies than it is at low levels of Blueberry pies. Give up a lot of apple pies to gain few blueberry pies at high levels of blueberry pies, example of diminishing marginal returns.

What statement about sunk cost is False

The presence of sunk cost can affect future decision making if they are large enough

What will happen is a binding price ceiling is set on rent for student apartments

The price ceiling will cause students to sleep in their cars because they won't be able to find a place to live

If a drought in Ecuador reduces the amount of bananas grown, then C the supply curve of Ecuador bananas shifts to the left, why?

The supply curve shifts to the left because it is decreasing

Which of the following scenarios is consistent with the Laffer curve?

The tax rate is 1 percent, and tax revenue is very low.

Suppose that farmers decide individually whether or not to get their own cattle vaccinated against anthrax. Which of the following results?

There is market failure because the equilibrium quantity of vaccine is too low.

The need to study economics would cease if

There were enough goods and resources to produce all goods and services people want

Which is NOT generally regarded as a reason the government should intervene with a market

To enforce property rights

If the cross-price elasticity of demand between breeze detergent and faber detergent is a large positive number, it indicates

Two brands of detergents are close substitutes

When the price increases 30% and quantity demanded drops 30% price elasticity of demand is

Unitary elastic

Dwight is buying a car, if he choses a camry what are his opportunity costs?

Whatever vehicle was his second choice

According to the theory of comparative advantage, countries gain from trade because

World output can rise when each country specializes in what its does relatively best. If every country specializes then they are able to achieve their maximum output of goods and then can trade with each other for goods they couldn't produce at an efficient rate compared to other countries.

"Rent Controls" are an example of ______; a "Minimum Wage" is an example of ________ . a price curtain; a price wall.

a price ceiling; a price floor.

In the long run

all costs are variable

Airbnb is an online marketplace that connects people who want to rent out their homes with people who are looking for accommodations in that locale. AirBnb guests are having issues with hosts cancelling the reservation hours before check in and transferring them to a subpar substitute. AirBnb does not take any action on this. When market fails such where one party (Hosts) has more information than the others (guests), we refer the situation as _______________ and due to its presence the actual market output level will be____________

asymmetric information; higher than the true socially optimal output level.

Due to the recent success of UK athletic teams, Wildcats T-Shirts become more popular. We would expect:

both the equilibrium price and quantity to increase. Since demand is shifting to the right, supply will shift to meet it.

Factor of production at West sixth brewing company

brewer hired by West Sixth. A brewer is someone who works directly with producing the beer and the only one who does this.

when trade is voluntary, who wins?

buyer and seller

All of the following are problems associated with rent ceilings except

chronic excess supply of rental units

(Price Elasticity of Demand for American Cheese) = (0.94)(Price Elasticity of Demand for Roast Beef) = (-0.72)(Income Elasticity of Demand for American Cheese) = (0.15)(Income Elasticity of Demand for Havarti Cheese) = (0.52)(Income Elasticity of Demand for Roast Beef) = (0.44)(Cross Price Elasticity of Demand for American Cheese with respect to the price of Havarti Cheese) = (0.26) (Cross Price Elasticity of Demand for American Cheese with respect to the price of Roast Beef) = (-0.18) Based upon the values reported above, we know that American Cheese is a

complement to for Roast Beef, since the Cross Price Elasticity of Demand for American Cheese with respect to the price of Roast Beef (-0.18) is negative.

If smartwatches are considered substitutes for smartphones, then the decline in the price of smartwatches would, all else equal,

decrease the price of smartphones. Since they are products which are in "competition" with each other as they are substitutes, then when one's price decreases the other's price must decrease as well.

(Price Elasticity of Demand for American Cheese) = (0.94)(Price Elasticity of Demand for Roast Beef) = (-0.72)(Income Elasticity of Demand for American Cheese) = (0.15)(Income Elasticity of Demand for Havarti Cheese) = (0.52)(Income Elasticity of Demand for Roast Beef) = (0.44)(Cross Price Elasticity of Demand for American Cheese with respect to the price of Havarti Cheese) = (0.26) (Cross Price Elasticity of Demand for American Cheese with respect to the price of Roast Beef) = (-0.18) 21) If the price of Roast Beef were to decrease slightly, then Total Consumer Expenditures on Roast Beef would

decrease, since demand for Roast Beef is inelastic.

The price of avocados should

decrease, since the market is not clearing and their are an excess amount left

(Price Elasticity of Demand for American Cheese) = (0.94)(Price Elasticity of Demand for Roast Beef) = (-0.72)(Income Elasticity of Demand for American Cheese) = (0.15)(Income Elasticity of Demand for Havarti Cheese) = (0.52)(Income Elasticity of Demand for Roast Beef) = (0.44)(Cross Price Elasticity of Demand for American Cheese with respect to the price of Havarti Cheese) = (0.26) (Cross Price Elasticity of Demand for American Cheese with respect to the price of Roast Beef) = (-0.18) If consumer income were to increase, then

demand for Havarti Cheese would increase.

Keeneland wants to increase the total revenue generated by the horse racing in order to more easily cover operating expenses. The CEO suggests that decreasing the price of general admission ticket could increase total revenue. The student intern believes that increasing the price of general admission ticket could increase total revenue. Based upon this information it appears as if the CEO believes that demand is ________ while the student intern believes demand is .

elastic; inelastic.

Suzie and Jameson are considering the "dress well, test well" theory because it works for their friend Carla. It argues that Carla performs better on exams when she dresses nicely rather than when she wears sweatpants. What potential pitfall are they violating?

fallacy of composition, because Carla performs well under these circumstances does not necessarily mean that they will apply for Suzie and Jameson as well.

Which of the following would be the most likely result of a binding price ceiling imposed on the market for rental cars?

slow replacement of old rental cars with newer ones

which of the following is a positive incentive

students who come to 90% of classes receive a 3% bonus on final

The infant-industries argument is used to

support the protection of newly established industries from foreign competition E The infant-industries argument says that newly established industries don't have the economies of scale like industries in other, more established countries. Therefore, this argument supposes the industry needs trade protection until they can be internationally competitive.

an item that is a substitute means

that it is served in place of the other

an item that is a compliment means

that it is served together

Recently, there has a been a nationwide shortage of White Claws and Popeyes Chicken Sandwich. This implies

the current market price is below the market equilibrium for both products. Demand has outpaced supply below the market equilibrium

Select the normative statement

the tax rate on top earners should be 85%

All of the following are examples of "Command and Control" solutions to externalities except

trading in pollution rights between electrical utility companies

Which is NOT an example of command and control

trading in pollution rights between electrical utility companies

Price controls are usually enacted

when policy makers believe that market price of a good or service is unfair to buyers or sellers

Consider a market in which the unique efficient level of trade is 12,000 units. If 9,400 units are traded, then Deadweight Loss

will be positive.

Positive externalities are created when

your neighbor plants beautiful trees and flowers in her yard