ECON Exam 1

Refer to Figure 2-10. Which country has a comparative advantage in the production of honey?

Bora Bora

The "tragedy of the commons" refers to the phenomenon where

people overuse a common resource.

Refer to Figure 9-1. Under autarky, the consumer surplus is

$195.

Refer to Table 4-6. The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick. The equilibrium price and quantity for Chef Ernie's sushi are $60 and 20 thousand units. What is the value of consumer surplus?

$200 thousand

Refer to Figure 4-5. What is the value of consumer surplus after the imposition of the ceiling?

$230,000

Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18. Refer to Figure 4-3. What is the value of consumer surplus at the equilibrium price of $15?

$240

Refer to Figure 4-3. What is the value of producer surplus at a price of $18?

$240

Refer to Figure 4-8. The price buyers pay after the tax is

$27.

Refer to Table 4-6. The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick. The equilibrium price and quantity for Chef Ernie's sushi are $60 and 20 thousand units. What is the value of economic surplus in this market?

$300 thousand

Refer to Figure 9-1. Suppose the government allows imports of leather footwear into the United States. The market price falls to $18. What is the value of consumer surplus?

$320.

Refer to Figure 4-5. What is the value of producer surplus after the imposition of the ceiling?

$40,000

Refer to Figure 9-1. Suppose the government allows imports of leather footwear into the United States. The market price falls to $18. What is the value of domestic producer surplus?

$40.

Refer to Figure 4-5. What is the value of the deadweight loss after the imposition of the ceiling?

$50,000

Refer to Figure 4-3. What is the value of consumer surplus at a price of $18?

$60

Refer to Table 4-6. The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick. What are the equilibrium price and quantity (in thousands) for Chef Ernie's sushi?

$60 and 20 thousand

Refer to Figure 4-8. What is the size of the unit tax?

$7

Which of the following statements best describes the concept of consumer surplus?

"I was all ready to pay $300 for a new leather jacket that I had seen in Macy's but I ended up paying only $180 for the same jacket."

Refer to Figure 4-8. How much of the tax is paid by buyers?

$5

Refer to Figure 2-1. Point C is

unattainable with current resources.

Refer to Figure 5-3. In the absence of any government intervention, the private market

underproduces by Qn - Qm units.

Common resources differ from public goods in that

unlike public goods, common resources are rivalrous in consumption.

A product is considered to be nonexcludable if

you cannot keep those who did not pay for the item from enjoying its benefits.

A product is considered to be rivalrous if

your consumption of the product reduces the quantity available for others to consume.

If demand is perfectly inelastic, the absolute value of the price elasticity of demand is

zero

Refer to Figure 4-3. What is the value of the deadweight loss at the equilibrium price of $15?

$0

Refer to Figure 4-3. What is the value of the deadweight loss at a price of $18?

$100

Refer to Table 4-6. The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick. The equilibrium price and quantity for Chef Ernie's sushi are $60 and 20 thousand units. What is the value of producer surplus?

$100 thousand

Refer to Figure 4-5. What is the value of the portion of producer surplus transferred to consumers as a result of the rent ceiling?

$100,000

Refer to Figure 9-1. Under autarky, the producer surplus is

$105.

Refer to Figure 4-3. What is the value of producer surplus at the equilibrium price of $15?

$160

Refer to Figure 9-1. Suppose the government allows imports of leather footwear into the United States. What will the market price be?

$18

Refer to Figure 2-10. What is the opportunity cost of producing one gallon of milk in Tahiti?

1.2 gallons of honey

Refer to Figure 2-10. What is the opportunity cost of producing one gallon of milk in Bora Bora?

1.5 gallons of honey

Refer to Figure 9-1. Suppose the government allows imports of leather footwear into the United States. What will be the quantity of imports?

10 units

Refer to Figure 3-4. At a price of $10, how many units will be sold?

200

Refer to Figure 6-3. Using the midpoint formula, calculate the absolute value of the price elasticity of demand between e and f.

3.125

Refer to Figure 4-2. What area represents producer surplus at a price of P2?

A + B + C

Refer to Figure 3-1. A decrease in the price of the product would be represented by a movement from

A to B

Refer to Figure 4-2. What area represents the increase in producer surplus when the market price rises from P1 to P2?

A+B

What is the difference between an "increase in demand" and an "increase in quantity demanded"?

An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.

What is the difference between an "increase in supply" and an "increase in quantity supplied"?

An "increase in supply" means the supply curve has shifted to the right while an "increase in quantity supplied" refers to a movement along a given supply curve in response to an increase in price.

Which of the following is the correct way to describe equilibrium in a market?

At equilibrium, quantity demanded equals quantity supplied.

Refer to Figure 3-1. An increase in population would be represented by a movement from

D1 to D2.

Refer to Figure 5-3. The size of marginal external benefits can be determined by

D2 - D1 at each output level.

Refer to Figure 3-1. A decrease in taste or preference would be represented by a movement from

D2 to D1.

Which of the following statements about the price elasticity of demand is correct?

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

Refer to Figure 3-3. The figure above shows the supply and demand curves for two markets: the market for an original Picasso painting and the market for designer jeans. Which graph most likely represents which market?

Graph B represents the market for an original Picasso painting and Graph A represents the market for designer jeans.

Which of the following statements about the price elasticity of demand along a downward-sloping linear demand curve is true?

It is elastic at high prices and inelastic at low prices.

What is a market failure?

It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost.

The following equations represent the demand and supply for silver pendants.QD = 50 - 2PQS = -10 + 2PWhat is the equilibrium price (P) and quantity (Q - in thousands) of pendants?

P = $15; Q = 20 thousand

Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for women's clothing. Which panel best describes what happens in this market when the wages of seamstresses rise?

Panel (b)

Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for used clothing, an inferior good. Which panel describes what happens in this market as a result of a decrease in income?

Panel (c)

Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for bicycle helmets. Which panel best describes what happens in this market if there is a substantial increase in the price of bicycles?

Panel (d)

Refer to Figure 5-2. The efficient output level is

Qa.

Refer to Figure 5-2. The private profit-maximizing quantity for the firm is

Qb.

Refer to Figure 5-3. The private profit-maximizing output level is

Qm.

Refer to Figure 5-3. The efficient output level is

Qn.

Refer to Figure 3-2. An increase in the number of firms in the market would be represented by a movement from

S1 to S2.

Refer to Figure 3-2. An increase in price of inputs would be represented by a movement from

S2 to S1.

Refer to Figure 2-10. If the two countries have the same amount of resources and the same technological knowledge, which country has an absolute advantage in the production of milk?

Tahiti

Refer to Figure 2-10. Which country has a comparative advantage in the production of milk?

Tahiti

According to a study of the price elasticities of products sold in supermarkets, the price elasticity of demand for toothpaste is estimated at -0.45. Which of the following could explain why the price elasticity of demand for toothpaste is so low?

There are few close substitutes for toothpaste.

In economics, the term "free rider" refers to

one who waits for others to produce a good and then enjoys its benefits without paying for it.

Consider the following pairs of items: a. shampoo and conditioner b. iPhones and earbuds c. a laptop computer and a desktop computer d. beef and porke. air-travel and weed killer Which of the pairs listed will have a negative cross-price elasticity?

a and b only

An externality is

a benefit or cost experienced by someone who is not a producer or consumer of a good or service.

Refer to Figure 3-4. If the current market price is $10, the market will achieve equilibrium by

a price increase, increasing the quantity supplied and decreasing the quantity demanded.

Which of the following items is likely to have the highest income elasticity of demand?

a vacation home in the Swiss Alps

Refer to Figure 5-2. The deadweight loss due to the externality is represented by the area

abf.

Economists estimated that the price elasticity of beer is -0.30 and the income elasticity of beer is 0.09. This means that

an increase in the price of beer will lead to an increase in revenue for beer sellers and beer is a normal good.

Refer to Table 6-3. Over what range of prices is the demand elastic?

between $14 and $16

Refer to Figure 2-4. Consider the following events: a. an increase in the unemployment rate b. a decrease in a nation's money supply c. a war that kills a significant portion of a nation's population Which of the events listed above could cause a movement from Y to W?

c only

Income elasticity measures how a good's quantity demanded responds to

change in buyers' incomes.

Which of the following products comes closest to having a perfectly inelastic demand?

cholesterol medication in general

If the cross-price elasticity of demand for computers and software is negative, this means the two goods are

complements

Refer to Figure 2-4. A movement from X to Y

could occur because of an influx of immigrant labor.

if a demand curve shifts to the right, then

demand has increased

Consider the following pairs of items: a. shampoo and conditioner b. iPhones and earbuds c. a laptop computer and a desktop computer d. beef and porke. air-travel and weed killer Which of the pairs listed will have cross-price elasticity of zero?

e only

Price elasticity of demand measures

how responsive quantity demanded is to a change in price.

The production possibilities frontier model shows that

if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.

Which of the following is a source of market failure?

incomplete property rights or inability to enforce property rights

Refer to Figure 2-1. Point A is

inefficient in that not all resources are being used.

Refer to Figure 2-4. A movement from Y to Z

is the result of advancements in plastic production technology.

Which of the following activities create a negative externality?

keeping a junked car parked on your front lawn

The demand for all carbonated beverages is likely to be ________ the demand for Dr. Pepper.

less elastic than

If demand is inelastic, the absolute value of the price elasticity of demand is

less than one

The production possibilities frontier shows the ________ combinations of two products that can be produced in a particular time period with available resources.

maximum attainable

When a negative externality exists, the private market produces

more than the economically efficient output level.

Cross-price elasticity of demand is calculated as the

percentage change in quantity demanded of one good divided by percentage change in price of a different good.

Which of the following is an example of a positive externality?

planting trees along a sidewalk which add beauty and create shade

Refer to Figure 2-1. Point B is

technically efficient.

If a firm is in an antitrust court case being accused of monopolizing a product, the firm would hire an economist to show

the cross-price elasticity of demand between the firm's good and another is positive.

The principle of opportunity cost is that

the economic cost of using a factor of production is the alternative use of that factor that is given up.

When demand is elastic, a fall in price causes total revenue to rise because

the increase in quantity sold is large enough to offset the lower price.

A positive externality causes

the marginal social benefit to exceed the marginal private cost of the last unit produced.

When demand is unit elastic, a change in price causes total revenue to stay the same because

the percentage change in quantity demanded exactly offsets the percentage change in price.

The law of demand implies, holding everything else constant, that as the price of bagels increases,

the quantity of bagels demanded will decrease.

What are property rights?

the rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it

If in the market for peaches the supply curve has shifted to the left,

the supply of peaches has decreased.

Refer to Figure 3-4. If the price is $10,

there would be a shortage of 600 units.