Econ 202 Ole Miss FINAL

A decrease in the number of sellers in the market causes a. the supply curve to shift to the left. b. a movement up and to the right along a stationary supply curve. c. the supply curve to shift to the right. d. a movement downward and to the left along a stationary supply curve.

A

A likely example of substitute goods for most people would be a. pencils and pens. b. televisions and subscriptions to cable television services. c. peanut butter and jelly. d. tennis balls and tennis rackets.

A

A normative economic statement such as "The minimum wage should be abolished" a. would require values and data to be evaluated. b. would likely be made by an economist acting as a scientist. c. could not be evaluated by economists acting as policy advisers. d. would require data but not values to be evaluated.

A

A tax imposed on the sellers of a good will raise the a. price paid by buyers and lower the equilibrium quantity. b. price paid by buyers and raise the equilibrium quantity. c. effective price received by sellers and raise the equilibrium quantity. d. effective price received by sellers and lower the equilibrium quantity.

A

Abraham drinks Mountain Dew. He can buy as many cans of Mountain Dew as he wishes at a price of $0.55 per can. On a particular day, he is willing to pay $0.95 for the first can, $0.80 for the second can, $0.60 for the third can, and $0.40 for the fourth can. Assume Abraham is rational in deciding how many cans to buy. His consumer surplus is a. $0.70. b. $1.00. c. $0.50. d. $0.60.

A

Absolute advantage is found by comparing different producers' a. input requirements per unit of output. b. locational and logistical circumstances. c. payments to land, labor, and capital. d. opportunity costs.

A

Coal is considered to be a non-renewable energy source. Which of the following statements is correct? a. Coal is a scarce resource. b. Coal is not a resource. c. Coal is an unlimited resource. d. Coal is a non-productive resource.

A

Congress relies on economists at the Congressional Budget Office to a. provide independent evaluations of policy proposals. b. provide evidence that incumbent members of Congress are performing well in their jobs. c. set the nation's monetary policy. d. enforce the nation's antitrust laws.

A

Duties of the Council of Economic Advisers include a. advising the president and writing the annual Economic Report of the President. b. implementing the president's tax policies. c. tracking the behavior of the nation's money supply. d. All of the above are correct.

A

Economics deals primarily with the concept of a. scarcity. b. poverty. c. money. d. banking.

A

Economics is the study of a. how society manages its scarce resources. b. how households decide who performs which tasks. c. production methods. d. the interaction of business and government.

A

For which of the following goods is the income elasticity of demand likely highest? a. boats b. doctor's visits c. natural gas d. hamburgers

A

If a market is allowed to move freely to its equilibrium price and quantity, then an increase in supply will a. increase consumer surplus. b. reduce consumer surplus. c. not affect consumer surplus. d. Any of the above are possible.

A

In most societies, resources are allocated by a. the combined actions of millions of households and firms. b. a single central planner. c. a small number of central planners. d. those firms that use resources to provide goods and services.

A

One should be especially wary of the national-security argument for restricting trade when that argument is made by a. representatives of industry. b. foreign government officials. c. representatives of the defense establishment. d. members of households.

A

The most obvious benefit of specialization and trade is that they allow us to a. consume more goods than we otherwise would be able to consume. b. spend more money on goods that are beneficial to society, and less money on goods that are harmful to society. c. consume more goods by forcing people in other countries to consume fewer goods. d. work more hours per week than we otherwise would be able to work.

A

When a buyer's willingness to pay for a good is equal to the price of the good, the a. buyer is indifferent between buying the good and not buying it. b. price of the good exceeds the value that the buyer places on the good. c. buyer will buy as much of the good as the buyer's budget allows. d. buyer's consumer surplus for that good is maximized.

A

A competitive market is one in which there a. is only one seller, but there are many buyers. b. are so many buyers and so many sellers that each has a negligible impact on the price of the product. c. are many sellers, and each seller has the ability to set the price of his product. d. are many sellers, and they compete with one another in such a way that some sellers are always being forced out of the market.

B

A cost imposed on someone who is neither the consumer nor the producer is called a a. corrective tax. b. negative externality. c. positive externality. d. command and control policy.

B

A demand curve shows the relationship a. between income and quantity demanded. b. between price and quantity demanded. c. between price and income. d. among income, price, and quantity demanded.

B

A leftward shift of a demand curve is called a(n) a. decrease in quantity demanded. b. decrease in demand. c. increase in demand. d. increase in quantity demanded.

B

A legal maximum on the price at which a good can be sold is called a price a. subsidy. b. ceiling. c. support. d. floor.

B

A surplus results when a a. binding price floor is removed from a market. b. binding price floor is imposed on a market. c. nonbinding price floor is imposed on a market. d. nonbinding price floor is removed from a market.

B

A tax levied on the buyers of a good shifts the a. demand curve upward (or to the right). b. demand curve downward (or to the left). c. supply curve downward (or to the right). d. supply curve upward (or to the left).

B

According to the Coase theorem, private markets will solve externality problems and allocate resources efficiently as long as a. businesses determine an appropriate level of production. b. private parties can bargain with sufficiently low transaction costs. c. the externalities that are present are positive, not negative. d. government assigns property rights to the harmed party.

B

Almost all economists agree that tariffs and import quotas a. stimulate a less than fully employed economy. b. reduces general economic welfare. c. increases general economic welfare. d. have no effect on general economic welfare.

B

An increase in price causes an increase in total revenue when demand is a. elastic. b. inelastic. c. unit elastic. d. All of the above are possible.

B

Analysis of data on workers and those looking for work is conducted by economists at the a. Office of Management and Budget. b. Department of Labor. c. Congressional Budget Office. d. Department of the Treasury.

B

Comparative advantage is related most closely to which of the following? a. efficiency b. opportunity cost c. output per hour d. bargaining strength in international trade

B

Dog owners do not bear the full cost of the noise their barking dogs create and often take too few precautions to prevent their dogs from barking. Local governments address this problem by a. encouraging people to adopt cats. b. making it illegal to "disturb the peace." c. subsidizing local animal shelters. d. having a well-funded animal control department.

B

Equilibrium price must decrease when demand a. increases and supply does not change, when demand does not change and supply decreases, and when demand increases and supply decreases simultaneously. b. decreases and supply does not change, when demand does not change and supply increases, and when demand decreases and supply increases simultaneously. c. increases and supply does not change, when demand does not change and supply decreases, and when demand decreases and supply increases simultaneously. d. decreases and supply does not change, when demand does not change and supply increases, and when demand increases and supply decreases simultaneously.

B

If the current allocation of resources in the market for wallpaper is efficient, a. producer surplus equals consumer surplus in the market for wallpaper. b. the market for wallpaper is in equilibrium. c. on the last unit of wallpaper that was produced and sold, the value to buyers exceeded the cost to sellers. d. All of the above are correct.

B

In analyzing international trade, we often focus on a country whose economy is small relative to the rest of the world. We do so a. because it is impossible to analyze the gains and losses from international trade without making this assumption. b. because then we can assume that world prices of goods are unaffected by that country's participation in international trade. c. in order to rule out the possibility of tariffs or quotas. d. All of the above are correct.

B

Inefficiency exists in an economy when a good is a. not produced because buyers do not value it very highly. b. not being consumed by buyers who value it most highly. c. being produced with less than all available resources. d. not distributed fairly among buyers.

B

Opponents of free trade often want the United States to prohibit the import of goods made in overseas factories that pay wages below the U.S. minimum wage. Prohibiting such goods is likely to a. cause these factories to pay the U.S. minimum wage. b. increase poverty in poor countries and benefit U.S. firms which compete with these imports. c. harm U.S. firms which compete with these imports. d. increase the rate of technological advance in poor countries so that they can afford to pay higher wages.

B

Other things equal, the deadweight loss of a tax a. decreases as the size of the tax increases. b. increases as the size of the tax increases, and the increase in the deadweight loss is more rapid than the increase in the size of the tax. c. increases as the size of the tax increases, but the increase in the deadweight loss is less rapid than the increase in the size of the tax. d. increases as the price elasticities of demand and/or supply increase, but the deadweight loss does not change as the size of the tax increases.

B

Sellers of a product will bear the larger part of the tax burden, and buyers will bear a smaller part of the tax burden, when the a. supply of the product is more elastic than the demand for the product. b. demand for the product is more elastic than the supply of the product. c. tax is placed on the sellers of the product. d. tax is placed on the buyers of the product.

B

Spain allows trade with the rest of the world. We know that Spain has a comparative advantage in producing olive oil if we know that a. Spain imports olive oil. b. the world price of olive oil is higher than the price of olive oil that would prevail in Spain if trade with other countries were not allowed. c. consumer surplus in Spain would exceed producer surplus in Spain if trade with other countries were not allowed. d. All of the above are correct.

B

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will a. raise both price and total revenues. b. lower both price and total revenues. c. raise price and lower total revenues. d. lower price and raise total revenues.

B

Suppose that smoking creates a negative externality. If the government does not interfere in the cigarette market, then a. the equilibrium quantity of cigarettes smoked will equal the socially optimal quantity of cigarettes smoked. b. the equilibrium quantity of cigarettes smoked will be greater than the socially optimal quantity of cigarettes smoked. c. the equilibrium quantity of cigarettes smoked will be less than the socially optimal quantity of cigarettes smoked. d. There is not enough information to answer the question.

B

The higher a country's tax rates, the more likely that country will be a. experiencing small deadweight losses. b. on the negatively sloped part of the Laffer curve. c. at the top of the Laffer curve. d. on the positively sloped part of the Laffer curve.

B

The price elasticity of supply measures how responsive a. equilibrium price is to equilibrium quantity. b. sellers are to a change in price. c. sellers are to a change in buyers' income. d. consumers are to the number of substitutes.

B

Two types of private solutions to the problem of externalities are a. the Golden Rule and taxes. b. charities and the Golden Rule. c. charities and subsidies. d. taxes and subsidies.

B

A country that currently does not trade with other countries could benefit by a. restricting imports and promoting exports. b. promoting imports and restricting exports. c. not restricting trade. d. restricting both imports and exports.

C

A demand curve reflects each of the following except the a. highest price buyers are willing to pay for each quantity. b. willingness to pay of all buyers in the market. c. ability of buyers to obtain the quantity they desire. d. value each buyer in the market places on the good.

C

A good will have a more inelastic demand, the a. more it is regarded as a luxury. b. greater the availability of close substitutes. c. broader the definition of the market. d. longer the period of time.

C

A person can benefit from specialization and trade by obtaining a good at a price that is a. the same as his or her opportunity cost of that good. b. higher than his or her opportunity cost of that good. c. lower than his or her opportunity cost of that good. d. different than his or her opportunity cost of that good.

C

A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is a. elastic. b. unit elastic. c. inelastic. d. highly responsive to changes in income.

C

A positive economic statement such as "Pollution taxes decrease the quantity of pollution generated by firms" a. would require data but not values to be evaluated. b. would require values and data to be evaluated. c. could not be evaluated by economists acting as scientists. d. would likely be made by an economist acting as a policy advisor.

C

A price ceiling is binding when it is set a. above the equilibrium price, causing a shortage. b. below the equilibrium price, causing a surplus. c. below the equilibrium price, causing a shortage. d. above the equilibrium price, causing a surplus.

C

A price floor is binding when it is set a. below the equilibrium price, causing a shortage. b. above the equilibrium price, causing a shortage. c. above the equilibrium price, causing a surplus. d. below the equilibrium price, causing a surplus.

C

A tax levied on the sellers of a good shifts the a. supply curve downward (or to the right). b. demand curve downward (or to the left). c. supply curve upward (or to the left). d. demand curve upward (or to the right).

C

A tax on buyers will shift the a. supply curve upward by the amount of the tax. b. demand curve upward by the amount of the tax. c. demand curve downward by the amount of the tax. d. supply curve downward by the amount of the tax.

C

Abe owns a dog; the dog's barking annoys Abe's neighbor, Jenny. Suppose that the benefit of owning the dog is worth $200 to Abe and that Jenny bears a cost of $400 from the barking. Assuming Abe has the legal right to keep the dog, a possible private solution to this problem is that a. Jenny pays Abe $150 to give the dog to his parents who live on an isolated farm. b. Abe pays Jenny $350 for her inconvenience. c. Jenny pays Abe $300 to give the dog to his parents who live on an isolated farm. d. There is no private transaction that would improve this situation.

C

An example of a perfectly competitive market would be the market for a. coffee shops. b. electricity. c. soybeans. d. restaurants.

C

Domestic producers of a good become better off, and domestic consumers of a good become worse off, when a country begins allowing international trade in that good and a. other countries have a comparative advantage, relative to the country in question, in producing the good. b. the country becomes an importer of the good as a result. c. the world price exceeds the domestic price of the good that prevailed before international trade was allowed. d. total surplus does not change as a result.

C

Economists view the fact that Florida grows oranges, Texas pumps oil, and California makes wine as a. confirmation of the infant-industry argument. b. confirmation that free trade agreements are not necessary. c. confirmation of the virtues of free trade. d. confirmation that specialization in absolute advantage works.

C

For any country that allows free trade, a. both producers and consumers in that country gain when domestic products are exported, but both groups lose when foreign products are imported. b. domestic quantity demanded is greater than domestic quantity supplied at the world price. c. the domestic price is equal to the world price. d. domestic quantity demanded is equal to domestic quantity supplied at the world price.

C

If a shortage exists in a market, then we know that the actual price is a. above the equilibrium price, and quantity demanded is greater than quantity supplied. b. above the equilibrium price, and quantity supplied is greater than quantity demanded. c. below the equilibrium price, and quantity demanded is greater than quantity supplied. d. below the equilibrium price, and quantity supplied is greater than quantity demanded.

C

If the labor supply curve is very elastic, a tax on labor a. results in a large tax burden on the firms that hire labor. b. raises enough tax revenue to offset the loss in welfare. c. has a large deadweight loss. d. has a relatively small impact on the number of hours that workers choose to work.

C

In a market economy, supply and demand determine a. the price at which each good is sold but not the quantity of each good produced. b. the quantity of each good produced but not the price at which it is sold. c. both the quantity of each good produced and the price at which it is sold. d. neither the quantity of each good produced nor the price at which it is sold.

C

It does not matter whether a tax is levied on the buyers or the sellers of a good because a. sellers always bear the full burden of the tax. b. buyers always bear the full burden of the tax. c. buyers and sellers will share the burden of the tax. d. None of the above is correct; the incidence of the tax does depend on whether the buyers or the sellers are required to pay the tax.

C

Market power refers to the a. government regulations imposed on the sellers in a market. b. forces of supply and demand in determining equilibrium price. c. ability of market participants to influence price. d. side effects that may occur in a market.

C

Producer surplus directly measures a. the well-being of society as a whole. b. sellers' willingness to sell. c. the well-being of sellers. d. the well-being of buyers and sellers.

C

Suppose Brazil has an absolute advantage over other countries in producing almonds, but other countries have a comparative advantage over Brazil in producing almonds. If trade in almonds is allowed, Brazil a. would have nothing to gain either from exporting or importing almonds. b. will export almonds. c. will import almonds. d. will either import almonds or export almonds, but it is not clear from the given information.

C

Suppose Russia exports sunflower seeds to Ireland and imports coffee from Brazil. This situation suggests a. Russia has an absolute advantage over Brazil in producing coffee, and Ireland has an absolute advantage over Russia in producing sunflower seeds. b. Russia has an absolute advantage over Ireland in producing sunflower seeds, and Brazil has an absolute advantage over Russia in producing coffee. c. Russia has a comparative advantage over Ireland in producing sunflower seeds, and Brazil has a comparative advantage over Russia in producing coffee. d. Russia has a comparative advantage over Brazil in producing coffee, and Ireland has a comparative advantage over Russia in producing sunflower seeds.

C

The Laffer curve illustrates that a. deadweight loss rises by the square of the increase in a tax. b. deadweight loss rises exponentially as a tax increases. c. tax revenue first rises, then falls as a tax increases. d. Both a) and b) are correct.

C

The overriding reason why households and societies face many decisions is that a. goods and services are not scarce. b. people, by nature, tend to disagree. c. resources are scarce. d. incomes fluctuate with business cycles.

C

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it a. minimizes the expenditure of buyers. b. maximizes costs of the seller. c. maximizes the combined welfare of buyers and sellers. d. maximizes tax revenue for the government.

C

The production possibilities frontier illustrates a. the combinations of output that an economy should produce. b. the combinations of output that an economy should consume. c. the combinations of output that an economy can produce. d. All of the above are correct.

C

Tom Brady should probably not mow his own lawn because a. he has an absolute advantage in mowing his lawn relative to a landscaping service. b. he has a comparative advantage in mowing his lawn relative to a landscaping service. c. his opportunity cost of mowing his lawn is higher than the cost of paying someone to mow it for him. d. he might sprain his ankle.

C

When a society cannot produce all the goods and services people wish to have, it is said that the economy is experiencing a. surpluses. b. inequalities. c. scarcity. d. inefficiencies.

C

When the government imposes taxes on buyers or sellers of a good, society a. is better off because the government's tax revenues exceed the deadweight loss. b. moves from an elastic supply curve to an inelastic supply curve. c. loses some of the benefits of market efficiency. d. gains efficiency but loses equality.

C

When two countries trade with one another, it is most likely because a. the opportunity costs of producing various goods are identical for the two countries. b. some people involved in the trade do not understand that one of the two countries will become worse-off because of the trade. c. the two countries wish to take advantage of the principle of comparative advantage. d. the wealthy people in each of the two countries are able to benefit, through trade, by taking advantage of other people who are poor.

C

With pollution permits, the supply curve for pollution rights is a. downward sloping. b. upward sloping. c. perfectly inelastic. d. perfectly elastic.

C

f sellers do not adjust their quantity supplied at all in response to a change in price, the price elasticity of supply is a. infinity, and the supply curve is vertical. b. infinity, and the supply curve is horizontal. c. zero, and the supply curve is vertical. d. zero, and the supply curve is horizontal.

C

A binding minimum wage tends to a. cause a labor surplus. b. cause unemployment. c. have the greatest impact in the market for teenage labor. d. All of the above are correct.

D

A circular-flow diagram is a model that a. helps to explain how participants in the economy interact with one another. b. helps to explain how the economy is organized. c. incorporates all aspects of the real economy. d. Both (a) and (b) are correct.

D

A good will have a more elastic demand, the a. more it is regarded as a necessity. b. more broad the definition of the market. c. shorter the period of time. d. greater the availability of close substitutes.

D

A leftward shift of a supply curve is called a(n) a. increase in supply. b. decrease in quantity supplied. c. increase in quantity supplied. d. decrease in supply.

D

A minimum wage that is set above a market's equilibrium wage will result in an excess a. demand for labor, that is, a shortage of workers. b. supply of labor, that is, a shortage of workers. c. demand for labor, that is, unemployment. d. supply of labor, that is, unemployment.

D

A price ceiling will be binding only if it is set a. above the equilibrium price. b. equal to the equilibrium price. c. either above or below the equilibrium price. d. below the equilibrium price.

D

A society allocates its scarce resources to various jobs. These scarce resources include a. land. b. people. c. machines. d. All of the above are correct.

D

A tax affects a. buyers only. b. buyers and sellers only. c. sellers only. d. buyers, sellers, and the government.

D

A tax burden falls more heavily on the side of the market that a. is closer to unit elastic. b. has a fewer number of participants. c. is less inelastic. d. is more inelastic.

D

After a country goes from disallowing trade in coffee with other countries to allowing trade in coffee with other countries, a. The world price of coffee does not matter; the domestic price of coffee prevails. b. the domestic price of coffee will be lower than the world price of coffee. c. the domestic price of coffee will be greater than the world price of coffee. d. the domestic price of coffee will equal the world price of coffee.

D

Almost all economists agree that rent control a. is a very inexpensive way to help the most needy members of society. b. has no effect on the rental income of landlords. c. allows the market for housing to work more efficiently. d. adversely affects the availability and quality of housing.

D

Externalities tend to cause markets to be a. unequal. b. unnecessary. c. overwhelmed. d. inefficient.

D

For a good that is a necessity, demand a. cannot be represented by a demand curve in the usual way. b. tends to be elastic. c. has unit elasticity. d. tends to be inelastic.

D

For which pairs of goods is the cross-price elasticity most likely to be negative? a. automobile tires and coffee b. pens and pencils c. paperback novels and electronic books for e-readers d. peanut butter and jelly

D

If the United States changed its laws to allow for the legal sale of a kidney, which of the following is likely to occur? a. The price of kidneys would rise to balance supply and demand. b. The gains from trade would make both buyers and sellers better off. c. Thousands of lives would be saved. d. All of the above are correct

D

Microeconomics is the study of a. how money affects the economy. b. how the economy as a whole works. c. how government affects the economy. d. how individual households and firms make decisions.

D

Olivia bakes cakes and Andrew grows corn. Olivia and Andrew both like to eat cake and eat corn. In which of the following cases is it impossible for both Olivia and Andrew to benefit from trade? a. Olivia cannot grow corn and Andrew cannot bake cakes. b. Olivia is better than Andrew at baking cakes and Andrew is better than Olivia at growing corn. c. Olivia is better than Andrew at baking cakes and at growing corn. d. Both Olivia and Andrew can benefit from trade in all of the above cases.

D

Reaching an efficient bargain is difficult when the a. externality is negative. b. externality is large. c. government becomes involved. d. number of interested parties is large.

D

The supply of a good or service is determined by a. both those who buy and those who sell the good or service. b. the government. c. those who buy the good or service. d. those who sell the good or service.

D

When an economist points out that you and millions of other people are interdependent, he or she is referring to the fact that we all a. have similar tastes and abilities. b. are concerned about one another's well-being. c. rely upon the government to provide us with the basic necessities of life. d. rely upon one another for the goods and services we consume.

D

Which of the following is a subject that economists study? a. the growth in average income b. the fraction of the population that cannot find work c. the rate at which prices are rising d. All of the above are correct.

D

Which of the following is not an example of scarcity? a. Each member of a household cannot get everything he or she wants. b. Every individual in society cannot attain the highest standard of living to which he or she might aspire. c. Only some people can afford to buy a BMW automobile. d. Miranda has an unlimited supply of oranges in her orchard.

D

Which of the following products would be considered scarce? a. bread b. baseballs autographed by Babe Ruth c. motorcycles d. All of the above are correct.

D

With a corrective tax, the supply curve for pollution is a. upward-sloping. b. vertical. c. downward-sloping. d. horizontal.

D