ECON EXAM 1

If 20 units of the good in the diagram are produced and they are rationed competitively, the demanders whose wants are satisfied are represented by the section of the demand curve between a price of:

$100 and $80

In the diagram, for a market price of $4 total consumer surplus equals:

$30

Fourteenth-century potters in the Chinese city of Jingdezhen developed the technology to heat a kiln at 1,300 degrees Celsius and produce porcelain, or "china", which was particularly popular in Persia where the Koran forbade serving food on gold or silver and wealthy families were anxious for a legal way to impress their dinner guests. The potters also imported Persian cobalt to create the blue dye for the porcelain (local cobalt was not as bold in color). Which advantages from trade is illustrated in this passage?

-differences in preferences -specialization -comparative advantage The passage illustrates all of these advantages

Refer to the figure regarding countries A and B. If both countries fully allocate all of their labor toward the good in which they have a comparative advantage, the combined production for the two countries would be_______units of Good X, and _______ units of Good Y

100; 80

Jack and Jill work at a bakery. In one hour, Jack can decorate either 5 ice-cream cakes or 2 wedding cakes. In one hour, Jill can decorate either 4 ice-cream cakes or 1 wedding cake. Thus, the opportunity cost of decorating an ice cream cake is_______for Jack and ________for Jill

2/5 wedding cake; 1/4 wedding cake

In the diagram, at a price of $80, the quantity demanded is______, the quantity supplied is _______, and there is_________

20;80;a surplus of 60 units

Use the figure in which both Mexico and the United States each have 24 units of labor. The opportunity costs of producing one computer are:

6 shirts for Mexico and 1 shirt for the United States

According to the table on the production possibilities for the United States and Mexico, Mexicos opportunity cost of producing each ton of potatoes is _______, while the United States opportunity cost of producing each ton of potatoes is_______

8 tons of corn; 5 tons of corn

Suppose there is an increase in demand in a market and no change in the supply. What will happen to the market equilibrium price and quantity?

Equilibrium price will rise; equilibrium quantity will rise

Refer to the figures. If these figures represent the market for asparagus, which figure shows the effect of a new disease-resistant asparagus seed?

Figure B

Jesse is good at math and excellent at making friends and Addae is equally good at both. Mathematically and socially challenged Jordan wants to hire tutors to help in each era. Who should tutor Jordan in which area to maximize Jordans college experience?

Jesse should teach how to make friends and Addae should teach math

Anita can bake 10 cakes in a day, but has no time left to make cookies. If she bakes only cookies, she can make 200 cookies in a day. John makes equally delicious cakes and cookies but can only make 7 cakes or 100 cookies in a day. Based on this information, which of the following statements is TRUE?

John has a comparative advantage in the production of cakes

Suppose a famous baseball player, Giancarlo Stanton, hires a high school student to paint his house. Which of the following is most likely TRUE?

The opportunity cost of painting a house is higher for Giancarlo Stanton than for the high school student

Tim values treats for his dog at $10 per box, and John values them at $6 per box. If the price of dog treats is $3 per box but only one box is available between these two buyers, then gains from trade will be maximized when:

Tim buys the treats

A decrease in expected future supply of a good will lead to:

a change in the demand for the good even before the supply actually decreases

Refer to the figure. Which factor would cause the change in the figure?

a decrease in the price of a complement good

When using a production possaibites frontier (PPF), a trade-off in an efficient economy is demonstrated by:

a movement along the PPF

Which of the following choices contains only factors that cause the supply curve to shift to the right

a rise in technology, a fall in the costs of production, a fall in taxes on output

Weather forecasters predict that a major winter storm will strike your town within the next few days. Which would occur today based upon the expected storm?

an increase in peoples willingness to pay for electric generators

A country has a comparative advantage in producing a good when it produces that good:

at a lower opportunity cost than another country

New Zelands workers are more productive than Madagascars at producing all goods and services, but the margin by which they are more productive is larger in some industries than others. In this situation:

both countries would benefit from trading with each other

In a competitive market, the output and allocation are determined by:

buyers competing with other buyers, and sellers competing with other sellers

Recall the discussion about the demand for oil in your textbook. Which of the following correctly explains why the demand curve for oil is negatively sloped? As the price of oil rises:

consumers increasingly use oil only for those purposes without good substitutes

When the price of wood is high:

consumers will be more likely to use wood in its most valuable uses

A shorter growing season in the vineyards of Napa Valley would cause a(n):

decrease in the supply of wine, increasing price

If demand increases, ceteris paribus, market price will be________ at the new equilibrium point

higher

When there is a shortage, sellers have an incentive to_______ their price and buyers have an incentive to offer a _______ price

increase; higher

Over the last 25 years, due to advances in medical technology, the average age of the United States population has been______, causing the demand for prescription drugs to_______

increasing, increase

Joe runs a landscape company and uses one of his home's bedrooms as a home office. This office could be used to earn rental income from college students. If average rental income in Joe's neighborhood were to rise:

joes opportunity cost of using a bedroom as a home office would increase

Consider the (world) market supply curve of oil. Saudi (Arabian) oil production inhabits the _______ part of the curve, and sub-Oceanic oil production inhabits the ______ part of the curve

lower; upper

Holding constant the quantities of available goods, trade creates value because:

people exchange things they want less for things they want more

In the figure, the initial supply curve is S1. If producers form exceptions that the price will be lower in the near future, S1 will:

shift to S3 now (down to the right)

If producers form expectations that copper prices will be higher in the future, then this will shift the:

supply curve of copper to the left

Which of the following is NOT true regarding the production possibilities frontier (PPF)?

the PPF shows us that gains from trade are maximized when countries produce goods for which they have an absolute advantage in production

If sellers want to sell more products than buyers are willing to purchase, we know that:

the current price is greater than the equilibrium price

The equilibrium quantity is the quantity at which:

the marginal consumers willingness to pay equals the marginal producers reservation price

The fundamental idea behind the production possibilities frontier is:

the trade-offs that exist in production

When the price of a good equals the equilibrium price:

there are no unexploited gains from trade

Which of the following explains why someone with an absolute advantage in painting houses may NOT spend their time painting houses

they may be relatively better at something else than painting houses

According to then table, France should specialize in producing________, and Italy should specialize in producing

wool socks, truffles