econ final

Which of the following is an example of an in-kind transfer?

Martin receives housing from the government due to his low income.

When people focus their efforts, on the tasks they have a comparative advantage in, what will happen to output?

More of all goods will be produced than if everyone produced everything for themselves.

(Figure: Shifts in Demand and Supply) The figure shows how supply and demand might shift in response to specific events. Suppose a fall frost destroys one-third of the nation's orange crop. Which panel BEST describes how this will affect the market for oranges? ("1" is before "2" is after)

Panel B

Suppose supply shifts out and demand shifts back. What happens to the equilibrium price and quantity?

Price falls. The effect on quantity is uncertain.

Marie Johnston is a manager at an electronics store and has to decide how many workers to hire. If she hires one worker, her revenue is $800 per day. If she hires another worker, she can make another $600 per day. The marginal benefit of hiring another worker decreases by $200 with each additional hire. Assuming that workers are paid $20 per hour and work eight hours, how many employees should Marie hire, and what will be her total cost for labor?

She will hire four workers at a total cost of $640.

Amul Food Factory in India makes ice cream and produces processed and condensed milk. In the factory, the firm's employees use raw milk and sugar. The firm runs on electricity and purchases raw milk every day. Large robotic assembly lines fill and package the ice cream containers. Large industrial freezers store the ice cream. Based on this scenario, can you identify the fixed costs for Amul Food Factory?

The cost of building the factory, purchasing the robotic assembly lines and industrial freezers.

Which of the following claims reflects normative analysis?

The minimum wage should be higher so that workers earn a living wage.

Asphalt is a byproduct of gasoline production. What would happen to the supply curve for asphalt if the demand for gasoline increases?

The supply curve would shift to the right

Paper producers can manufacture both printing and drawing paper. What effect would rising prices for printing paper have on the market for drawing paper?

The supply of drawing paper will decrease.

The price elasticity of demand for lettuce has been estimated to be 2.58. If an insect infestation destroys 10% of the nation's lettuce crop, how will that affect total revenue from lettuce, all other things unchanged?

Total revenue will fall.

When my cat was a kitten, she used to poop in the bathtub. We started closing the bathroom door so she couldn't do that but instead she pooped on the rug outside of the bathroom which was way worse. This is a good example of what?

Unintended consequences

When discussing the "supply and demand" model that we've been working with, what important assumption are we making about competition? (choose all that apply)

We are assuming no individual sellers or buyers can influence the market We are assuming that all sellers make the same product

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

When Fazio parks his big truck at the grocery store, people in the cars on each side of his parking space have a hard time opening their car doors.

Which of the following is NOT a correct rationale about why income redistribution programs do not always reduce efficiency?

When incomes are more equal, work incentive grows.

(Figure: The Market for Hybrid Cars) Use Figure: The Market for Hybrid Cars. What area represents consumer surplus if there is a binding price floor at P1?

a

(Figure: Graph) Refer to the graph to answer the question. In the graph, the movement from point P to point Q represents

a decrease in quantity demanded.

(Figure: Market for Pants) The world price of a pair of pants is $30. According to the figure, opening up to international trade will lead to _____ in the domestic producer surplus and _____ in the domestic consumer surplus.

a decrease; an increase

Survey data for Americans are illustrated in a graph with the average level of well-being reported (on the vertical axis) at each level of income (on the horizontal axis). The slope of this curve indicates the relationship between well-being and income is consistent with _____ marginal benefit for additional income.

a diminishing

(Figure: Kenyan Labor Market) The government of Kenya implements a minimum wage of 15,000 Kenyan shillings per month. What occurs in this labor market after the implementation of the minimum wage?

a surplus of 15,000 workers.

For normal goods

a tax cut on consumer income will lead to a rise in their demand.

Joachim produces and sells baskets. His marginal cost for one basket is $10, and his average cost is $7. He gains producer surplus every time that he sells a basket at a price:

above $10.

(Figure: Market 5) The graph shows the market for teddy bears.When the market produces and sells nine teddy bears, the deadweight loss is represented by the:

area between the demand and supply curves between quantities of 5 and 9.

For an individual, what is the main reason that demand slopes down?

as quantity rises, marginal utility and willingness to pay fall.

An important determinant of the price elasticity of demand is the:

availability of substitutes.

Kathleen Alvarado is binge-watching her favorite show on Netflix. She is trying to decide how many more episodes to watch. Kathleen should continue watching episodes unless the marginal

benefit of watching another episode is less than the marginal cost

Jessica's income increased by 10% this year. In the same year, Jessica's quantity demanded of milk increased by 10% and her quantity demanded for bread increased by 5%. Assuming all else equal, this means that, for Jessica:

both milk and bread are normal goods.

To get maximum output, you should allocate each task to the person who:

can do the task with the lowest opportunity cost.

What type of good is nonrival and excludable?

club goods

This weekend in Madison, the price of gas rose and people bought more gas than normal. What must have happened?

demand shifted out

If demand is _____, a higher price yields _____ total revenue.

elastic; lower

According to the interdependence principle, when faced with a decision, you should ask what

else might my decision affect and what else might affect my decision?

The marginal private benefit is the:

extra benefit enjoyed by the buyer of one extra unit of a good or service.

A key difference between equity and efficiency is that equity deals with _____ and efficiency focuses on _____.

fairness; maximizing economic surplus

Suppose the local real estate market is in equilibrium. A recession causes local household incomes to decline. At the same time, construction of a large subdivision of new homes has just been completed. Given these two changes and assuming that real estate is a normal good, we can predict that the price of real estate will _____ and the quantity of real estate bought and sold will _____.

fall; rise or fall

Good M has an income elasticity of demand of -0.7. Which of the following items might good M be?

generic-brand toothpaste

A rational buyer will:

keep buying a product until marginal benefit equals price.

Nerida Kyle could either commute to work via Uber or purchase a new car. The average cost of her one-way Uber trip is $15. Nerida works five days a week for 50 weeks a year. Based solely on avoiding the cost of an Uber, Nerida should purchase a car if the cost of the car is _____ than _____ per week.

less; $150

Frank is a barley farmer in a perfectly competitive market. The market price of barley is $250 per ton. If Frank charges $245 per ton, he will

lower his profitability by $5 per ton.

The distribution of wealth is _____ the distribution of income.

more unequal than

Holding all else constant, if people eat out more at expensive restaurants when they earn more, then expensive restaurant meals are

normal goods

For a firm, marginal cost is determined by...

only variable costs

By contrast with a market that produces the socially optimal output, a market with negative externalities will:

overproduce.

Buyers bear all the economic burden of a tax if the demand curve is _____, given an upward sloping supply curve.

perfectly inelastic

The price elasticity of demand for a good with a vertical demand curve is:

perfectly inelastic

The percent of the population whose household income falls below the poverty line is known as the:

poverty rate.

In a well-functioning market, a shortage will cause...

price to rise

Common resources have:

private gains but shared costs.

An import is a good or service:

purchased from a foreign seller.

A shortage occurs when:

quantity demanded exceeds quantity supplied.

Cocoa Pebbles and Cocoa Krispies are substitutes (both cereal). If the price of Cocoa Pebbles falls, the [ Select ] ["demand", "quantity demanded"] of Cocoa Pebbles [ Select ] ["decreases", "shifts out", "increases", "shifts back"] , while the [ Select ] ["demand", "quantity demanded"] of Cocoa Krispies

quantity demanded, increases, demand, decreases

Sunk costs are costs that are incurred

regardless of which decision is made.

Diminishing marginal product leads to

rising marginal costs for a seller.

The supply curve is upward-sloping because

sellers can make more profit per unit if the market prices rise.

A fall in the expected future price of a product will shift demand back , while a fall in today's price will increase quantity demanded .

shift demand back increase quantity demanded

When making a decision, you should ignore [ Select ] ["opportunity", "sunk costs", "monetary costs", "marginal costs"] and focus on

sunk cost, marginal cost

Sellers bear a smaller incidence of a tax when:

supply is more elastic relative to demand.

(Figure: The Demand and Supply of Wheat) A price of $7 in this market would result in a _____ of _____ bushels per period.

surplus; 2,000

The university recently inherited a large mansion from a wealthy alumnus. The university plans to use the mansion for faculty parties and to house distinguished guests. The opportunity cost of the mansion to the university is best represented by:

the amount the university would receive if it sold the mansion.

(Figure: Market for Pesticides) In the market for pesticides shown here, the original equilibrium price is $25. In an effort to reduce the usage of pesticides, a tax is then placed on the buyers in this market. Who bears the statutory burden of this tax?

the buyer

(Figure: Strawberries and Submarines) Above is the PPF (Production Possibilities Frontier) for Strawberries and Submarines. Suppose the economy is operating at point G. This implies that:

the economy has unemployment and/or inefficiently allocates resources.

If supply shifts out (increases) and demand shifts out (increases), what happens to equilibrium price and quantity?

the effect on price is unclear, quantity rises

A shift of the demand curve for thin-crust pizza would NOT be caused by a change in:

the price of thin-crust pizza.

Alan Patel is a college student living alone in a campus apartment. He finished cooking dinner when his friends text him to join them at the dining hall on campus for dinner. He now has to decide whether to eat the dinner he prepared or walk to campus to meet his friends at the dining hall. Alan should consider all the following costs when making this decision EXCEPT the

time he spent cooking the dinner.

If two products have a cross-price elasticity of 0.1, then they can be described as...

weak substitutes

The price of turkey meat in the US is higher this year because millions of turkeys are dying from bird flu. If many consumers who like turkey also like beef, the price of beef:

will rise because demand for beef will rise

The local news in Madison announces that this winter will be extremely snowy. At the same time, the price of plastic (which is used to make snow shovels) rises. As a result, the equilibrium price of snow shovels in Madison [ Select ] ["will fall", "will rise", "could either rise or fall"] and equilibrium quantity [ Select ] ["will fall", "will rise", "could either rise or fall"] .

will rise, could either rise or fall

Use the table to answer the question.At what price does this market experience a surplus of 70 units?

$11

(Figure: MSB and Demand Curves) Use the graph to answer the question.The graph shows the marginal social benefit and demand curves in the shampoo market. What is the marginal external benefit?

$2

(Figure: Market for Engines) According to the figure, if there is international trade in this market, and the world price of engines is $800, the value of the domestic producer surplus is:

$320,000.

Suppose that the world price of TVs is $400, and the government imposes a $100 tariff. The new price domestic consumers pay for a TV is:

$500

(Figure: The Demand and Supply of Wheat) Use Figure: The Demand and Supply of Wheat. If there is an increase in demand of 2,000 bushels per period at each price, the equilibrium price and quantity will be _____ and _____ bushels per period, respectively.

$7; 7,000

(Figure: Market for Engines) According to the figure, if there is international trade in this market, and the world price of engines is $800, buyers and sellers will make exchanges at a price of _____ because sellers will refuse to sell for _____ than the world price.

$800; less

If the price of a good falls by 9%, quantity demanded rises by 6%. What is the price elasticity of demand? (put the absolute value - so NO negative sign) Round to two decimal points.

.67

At a price of 8, consumers buy 117 pumpkins per day at Costco. When the price dropped to 4, consumers bought 242 pumpkins per day. What is the price elasticity of demand for pumpkins? (use absolute value (no negatives) - use 2 decimal places)

1.04

(Table: Cooking time). The table provides data on how long it takes Marla and Jason to cook lasagna and cook chicken curry.Marla's opportunity cost of making lasagna is _____, and Jason's opportunity cost is _____.

1.33 chicken curries; three chicken curries

(Figure: Market for Printed Houses) Consider the market for environmentally friendly three-dimensional printed houses that is shown in the figure. The government wants to encourage buyers to buy such houses and places a price ceiling on the market at $200,000 per house. The market quantity sold after the implementation of the price ceiling is _____ houses.

100,000

The table shows the monthly individual demand schedules of four students for soda. What is the total monthly market demand for soda at $2 per can?

125

The price of a car wash falls by 10%. In response to this price change, the quantity demanded for car washes increases by 20%. What is the absolute value of the price elasticity of demand for car washes?

2

Lyft cuts the price of a ride in New York City by 10%. Thereafter, the quantity of rides demanded rises by 25%. What is the absolute value of the price elasticity of demand for Lyft rides?

2.5

The price of a dozen eggs falls from $3 to $2.70. In response to this price change, the quantity supplied of eggs falls from 100,000 dozen eggs to 75,000 dozen eggs. What is the price elasticity of supply for eggs? (use the midpoint formula)

2.7

Consider the data in the table. The price of gasoline is $3.99 per gallon at the gas station. If Rexhall Fuel Supplies is a rational seller, how many gallons of gasoline should this seller be willing to sell?

20 million gallons per week

(Figure: Market for Child Care) Refer to the market for child care that is shown in the figure. The original equilibrium price is $10,000. A subsidy is now introduced for parents who pay for child care to increase demand (to "new demand"). The amount of the subsidy is:

2000

The price of product C rises by 10%. As a result, the quantity demanded of product D rises by 20%. The cross-price elasticity of demand between product C and product D is _____, and they are _____.

2; substitutes

The graph shows the marginal social benefit, marginal private benefit, and marginal private curves in the taco market. If market forces prevail, output will be , and the price will be .

4, 6

If the price elasticity of demand is 2.6 and the price rises by 21 percent, then by what percent does quantity fall by? Round to one decimal place.

54.6

(Figure: Market) In the market shown, the original equilibrium price is 60 cents. A tax is then implemented on the buyer. After the implementation of the tax, the seller receives _____ cents per unit of the product.

58

The graph shows the marginal social benefit, marginal private benefit, and marginal private curves in the taco market. In this market, the socially optimal output would be , whereas the market-determined output would be .

6, 4

Which of the following is an example of a quota?

A government limits the amount of a product that can be sold in a market.

(Figure: Shift in Demand 2) Use the figure to answer the question.Which of the following market changes would lead to a shift of the demand curve from Old demand to New demand?

A report is published noting that the product has adverse health effects.

(Figure: Shift in Supply 1) Use the figure to answer the question. ​ Which of the following market changes would lead to a shift of the supply curve from Old supply to New supply?

A rise in the price of a product that is a complement-in-production.

(Figure: Supply of Coconuts) Use Figure: Supply of Coconuts. An improvement in the technology used to harvest coconuts (e.g., a faster, less expensive coconut picker) would be represented in the figure as a movement from:

A to C

According to diminishing marginal utility, which of the following people would gain the lowest marginal benefit from an extra $100 of income?

Ariana, an actress with an annual household income of $1,500,000

What conditions must be met for private bargaining to be effective in resolving an externality?

Bargaining costs must be low, and property rights must be clear.

A hurricane is expected to hit the Carolinas. Why might the prices of batteries, candles, and bottled water rise?

Buyers will flock to purchase these items, and the excess demand will cause prices to rise.

(Figure: Market for New Housing) Which of the graphs shows the effect on the housing market today, if the realtor association predicts new housing prices to fall in a few months?

Graph A

In 2017, Kenya banned the use of disposable plastic shopping bags due to concern over plastics pollution. Which graph depicts what happened in the country's market for reusable cloth bags?

Graph A

(Figure: Market for Stevia) Stevia is a natural sweetener that is used as a sugar substitute. Which of the following graphs illustrates the impact of a rise in the price of Stevia on the demand for sugar?

Graph D

The fidget spinner toy fad is over, and children are not buying them with the same enthusiasm as they did earlier. Which graph depicts the situation in the market for fidget spinners?

Graph D

(Figure: Shift in Supply 1) Use the figure to answer the question.Which of the following market changes would lead to a shift of the supply curve from Old supply to New supply?

Lower costs of transportation for the producers.

From the following statements, choose the correct one:

Marginal cost increases when marginal product decreases.