Econ 2100 Final
If Shawn can produce donuts at a lower opportunity cost than sue, then
Shawn has a comparative advantage in the production of donuts
if Shawn can produce donuts at a lower opportunity cost than Sue, then
Shawn has a comparative advantage in the production of donuts
if Shawn can produce more donuts in one day than Sue can produce in on day, then
Shawn has an absolute advantage in the production of donuts
when a free-rider problem exists,
The market will devote too few resources to the production of the good.
who among the following is a free-rider
Wilma watches many public television programs, but she has never sent in a contribution to the station
an increase in the price of oranges would lead to
a movement up and to the right along the supply curve for oranges
If a binding price floor is imposed on the video game market, then
a surplus of video games will develop
which of the following statements is not correct?
absolute advantage is the driving force of specialization
taxes cause deadweight losses because taxes
all of the above are correct reduce the sum of the producer and consumer surpluses by more than the amount of a tax revenue prevent buyers and sellers from realizing some of the gains from trade cause marginal buyers and marginal sellers to lease the market causing the quantity sold to fall
the incidence of a tax falls more heavily on
all of the above: consumer than producers is demand is more inelastic the supply producers than consumers is supply is more inelastic than demand consumers than producers is supply is more elastic than demand
Assume that Greece has a comparative advantage in fish and Germany has a comparative advantage in cars. Also assume that Germany has an absolute advantage in both fish and cars. If these two countries specialize and trade so as to maximize the benefits of specialization and trade, then
all of the above: the two countries' combined output of both goods will be higher than it would be in the absence of trade greece will produce more fish than it would produce in the absence of trade germany will produce more cars than it would produce in the absence of trade
the price elasticity of demand for bread
all of the above: is computed as the percentage change in quantity demanded of bread divided by the percentage change in price of bread depends in part on the availability of close substitutes for bread reflects the many economic, social, and psychological forces that influence consumers' tastes for bread
when a binding price floor is imposed on a market
all of the above: price no longer serves as a rationing device the quantity supplied at the price floor exceeds the quantity that would have been supplied without the price floor only some sellers benefit
the opportunity cost of obtaining more of one good is shown on the production possibilities frontier as the
amount of the other good that must be given up
if the price elasticity of demand for a good is 6, then a 3 percent decrease in price results in
an 18 percent increase in the quantity demanded
which of the following would shift the demand curve for gasoline to the right
an increase in consumer income, assuming gasoline is a normal good
when a tax is places on the buyers of cell phones, the size of the cell phone market
and the effective price received by seller both decrease
each of the following is likely to be successful way for the government to solve the problem of overuse of a common resource except
asking individuals to voluntarily to reduce their use of the resource
for a competitive firm
average revenue equals marginal revenue
on a graph, consumer surplus is represented by the area
below the demand curve and above price
if a price ceiling will be binding is it is set
below the equilibrium price
a surplus results when a
binding price floor is imposed on a market
if consumers often purchase muffins to eat while they drink their lattés at local coffee shops, what would happen to the equilibrium price and quantity of lattés if the price of muffins rises
both the equilibrium price and quantity would decrease
if macaroni and cheese is an inferior good, what would happen to the equilibrium price and quantity of macaroni and cheese if consumers income rise
both the equilibrium price and quantity would decrease
if a tax is levied on the seller of flour, then
buyers and seller will share the burden of the tax
the price elasticity of demand measures
buyers responsiveness to a change in the price of a good
which of the following would not be considered a private good?
cable tv service
price controls
can generate inequalities of their own
the Mansfield public library has a large number of books that anyone with a library card may borrow. anyone can obtain a card for free. because the number of copies of each book is limited, not everyone can have the same book at the same time. what type of good would the library books be classified as in this case?
common resources
if a consumer places a value of $15 on a particular good and if the price of the good is $17, then the
consumer does not purchase the good
if a consumer places a value of $20 on a particular good and if the price of the good is $25, then the
consumer does not purchase the good
three business people meet for lunch at an Indian restaurant. they decide that each person will order an item off the menu, and they will share all dishes. they will spilt the cost of the final bill evenly among each of the people at the table. when the food is delivered to the table each person faces incentives similar to the
consumption of a common resource good
mrs.SMith operates a business in a competitive market. the current market price is $8.50. At her profit maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25 mrs.smith should
continue to operate in both short run and long run
many species of animals are common resources, and many must be protected by law to keep them from extinction. why is the cow not one of these endangered species even though there is such a high demand for beef?
cows are privately owned, whereas many endangered species are owned by no one
lead is an important input in the production of crystal. If the price of lead decreases, then we would expect the supply of
crystal to increase
the decrease in total surplus that results from a market distortion, such as a tax, is called a
deadweight loss
a leftward shift of a demand curve is called
decrease in demand
a decrease in input costs to firms in a market will result in a
decrease in equilibrium price and an increase in equilibrium quantity
a tax on the buyers of cereal will increase the price of cereal paid by buyers,
decrease the effective price of cereal received by sellers, and decrease the equilibrium quantity if cereal
if the government removes a binding price floor from a market, then the price paid by buyers will
decrease, and the quantity sold in the market will increase
equilibrium price must decrease when demand
decreases and supply does not change, when demand does not change and supply increases, and when demand decreases and supply increases simultaneously
a drought in California destroys many red grapes. As a result of the drought, the consumer surplus in the market for red grapes
decreases, and the consumers surplus in the market for red wine decreases
if a competitive firm is currently producing a level of output at which marginal costs exceeds marginal revenue then
decreasing output would increase the firms profit
which of the following events must cause equilibrium price to rise?
demand and supply both increase
a tax levied on the buyers of a goof shifts the
demand curve downward (to the left)
which of the following events must cause equilibrium price to fall?
demand decreases and supply increases
when are fries have an incentive to enter a competitive market, their entry will
drive down profits of existing firms in the market
in a perfectly competitive market, the process if entry and exit will end when
economic profits are zero
when the price of used cds is $4, Daphne buys five per month. when the price is $3, she buys nine per month. Daphnes demand for used cds is
elastic, and her demand curve would be relatively flat
Suppose planting flowering shrubs creates a positive externality equal to $7 per shrub. Further suppose that the local government offers a $7 per-shrub subsidy to planters. The number of shrubs that are planted is then
equal to the socially optimal quantity
suppose the income of buyers in a market for a particular normal good decrease and there is also reduction in input prices. what would we expect to occur in this market?
equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous
suppose the government has imposed a price floor on the market for soybeans. which of the following events could transform the price floor from one that is not binding to one that is binding
farmers use improved, draught-resistant seeds, which lowers the cost of growing soybeans
elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the
flatter the demand curve will be
which of the following statements regarding a competitive firm is correct
for all firms average revenue equals the price of the good
the government provides public goods such as a anti-poverty programs because
free riders make it difficult for private markets to supply the socially optimal quantity
a tax on a good
gives seller an incentive to produce less of the good than they otherwise would produce
if an externality is present in a market, economic efficiency may be enhanced by
government intervention
demand is elastic if the price elasticity of demand is
greater than 1
negative externalities lead markets to produce
greater than efficient output levels and positive externalities lead markets to produce smaller than efficient output levels
a good will have a more elastic demand, the
greater the availability of close substitutes
the greater the price elasticity of demand, the
greater the responsiveness of quantity demanded to a change in price
the producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers to produce the same amount of that good
has an absolute advantage in the production of that good
which of the following sets of events must cause an increase in the price of a new house?
higher wages for carpenters, higher wood prices, increases in consumer incomes, higher apartment rents, increase in population, and expectations of higher house prices in the future
deadweight loss measures the loss
in a market to buyers and seller that is not offset by an increase in government revenue
the entry of new firms into a competitive market will
increase market supply and decrease market price
When an externality is present, the market equilibrium is
inefficient, and the equilibrium does not maximize the total benefit to society as a whole
Winona's Fudge Shoppe is maximizing profits by producing 1,000 pounds of fudge per day. If Winona's fixed costs unexpectedly increase and the market price remains constant, then the short run profit-maximizing level of output
is still 1,000 pounds
in many cases selling pollution permits is a better method for reducing pollution than imposing corrective tax because
it is hard to estimate the market demand curve and thus charge the "right" corrective tax
if the use of a common resource is not regulated,
it will be overused
profit maximizing forms in a competitive market produce an output level where
marginal cost equals marginal revenue
Max sells maps. The map industry is competitive. Max hires a business consultant to analyze his company's financial records. The consultant recommends that Max increase his production. The consultant must have concluded that Max's
marginal revenue exceeds his marginal cost
when property rights are not well established,
markets fail to allocate resources efficiently
when a tax is placed on the buyers of a product, buyers pay
more and seller receive less than they did before the tax
in the housing market, supply and demand are
more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the long run than in the short run
if a tax is levied on the seller of a product, then there will be an
movement upon and to the left along the demand curves
if the price of natural gas rises, when is the price elasticity of demand likely to be the highest
one year after the price increases
what you give up to obtain an item is called your
opportunity cost
When a good is excludable,
people can be prevented from using the good
Research into new technologies provides a
positive externality, and too few resources are devoted to research as a result
in a free, competitive market, what is the rationing mechanism
price
in a competitive market free of government regulation,
price adjusts until quantity demanded equals quantity supplied
suppose that when the price of wheat is $2 per bushel, farmers can sell 10 million bushels. when the price of wheat is $3 per bushel, farmers can sell 8 million bushels. which of the following statements is true? the demand for wheat is
price inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers
in the long run, all of a firms costs are variable. in this case the exit criterion for a profit maximizing firm is to shut down is
price is less than average total cost
goods that are excludable include both
private goods and club goods
because of the free-rider problem
private markets tend to undersupply public goods
when firms have an incentive to exit a competitive market, their exit will
raise the profits of the firms that remain in the market
A tax on a good
raises the price that buyers effectively pay and lowers the price that sellers effectively receive
Suppose the American Medical Association announces that men who shave their heads are less likely to die of heart failure. We could expect the current demand for
razors to increase
when a tax is levied on a good, the buyers and seller of the goof share the burden,
regardless of how the tax is levied
the tragedy of the commons results when a good is
rival in consumption and not excludable
when price is blow average variable cost, a firm in a competitive market will
shut down and incur fixed costs
suppose that a decrease in the price of a good X results in fewer units of good Y being demanded. This implies that X and Y are
substitute goods
suppose that when the price of ginger ale is $2 per bottle, firms can sell 4 million bottles. when the price of gingerly is $3 per bottle, firms can sell 2 million bottles. which of the following statements is true?
the demand for ginger ale is price elastic, so an increase in the price of ginger ale will decrease the total revenue of ginger ale producers
suppose that cookies producers create a positive externality equal to $2 per dozen. what is the relationship between the equilibrium quantity and the socially optimal quantity of cookies to be produced
the equilibrium quantity is less than the socially optimal quantity
Suppose that smoking creates a negative externality. If the government does not interfere in the cigarette market, then
the equilibrium quantity of cigarette smoked will be greater than the socially optimal quantity of cigarettes smoked
suppose that a steel factory emits a certain amount of air pollution, which constitutes a negative externality. if the market does not internalize the externality,
the market equilibrium quantity will not be the socially optimal quantity
a firm in a competitive market currently produces and sells 500 door knobs for a price of $10 per doorknob. which of the following events would decrease the firms average revenue
the market price of doorknobs falls below $10
suppose the government had imposed a price ceiling on laptop computers. which of the following events could transform the price ceiling from one that is not binding into one that is binding?
the number of firms selling laptop computers decreases
the gaffer curve relates
the tax rate to tax revenue raised by the tax
What happens to the total surplus in a market when the government imposes a tax?
total surplus decreases
We can say that the allocation of resources is efficient if
total surplus is maximized
a $2.00 tax levied on the sellers of birdhouses will shift the supply curve
upward by exactly $2.00
which of the following demonstrates the law of supply
when ketchup prices rose, ketchup sellers increased their quantity supplied of ketchup
which of the following statements best represents the law of demand?
when the price of a good decreases, buyers purchase more of the good
Kelly is willing to pay $68 for a pair of shoes for a wedding. She finds a pair at her favorite outlet shoe store for $58. Kellys consumer surplus is
$10
chuck would be willing to pay $20 to attend a dog show, but he buys a ticket for $15. Chuck values the dog show at
$20
If a consumer is willing and able to pay $20 for a particular good and if he pays $16 for the good, then for that consumer, consumer surplus amounts to
$4
Brock is willing to pay $400 for a new suit, but he is able to buy the suit for $350. His consumer surplus is
$50
If Gina sells a shirt for $40, and her producer surplus from the sale is $32, her cost must have been
$8
a seller in a competitive market
- can sell all he wants at the going price, so he has little reason to charge less. - will lose all his customers to other sellers if he raises his price. - considers the market price to be a "take it or leave it" price.
when the local used bookstore prices economies books at $15 each, it generally sells 70 books per month. if it lowers the price to $7, sales increase to 90 books per month. given this information, we know that the price elasticity of demand for economies books is about
0.34, and an increase in price from $7 to $15 results in an increase in total revenue
suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. price elasticity of demand for X is
1
if a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is
1.33
consider luxury weekend hotel packages in Las Vegas. when the price is $250, the quantity demanded is 2,000 packages per week. When the price is $280, the quantity demanded is 1,700 packages per week. Using the midpoint method, the price elasticity of demand is about
1.43, and an increase in the price will cause hotels' total revenue to decrease
if the price elasticity of demand for a good is 4.0 then a 10 percent increase in price results in a
40 percent decrease in the quantity demanded
Belarus has a comparative advantage in the production of linen, but Russia has an absolute advantage in the production of linen. If these two countries decide to trade,
Belarus should export linen to Russia