Exam 1 Assignments/Quizzes (Chapters 1 - 5)

An increase in the price of sugar (an ingredient for soft drinks) and an increased concern about tooth decay caused by the consumption of soft drinks will result in which of the following in the soft drink market?

Equilibrium quantity will decrease, but equilibrium price may decrease, increase, or stay the same.

Select the correct definition of the term "comparative advantage."

The ability to produce a good or service at a lower opportunity cost than another

Suppose the following represents the Canadian production possibilities frontier for two of its most important exports: maple syrup (in millions of bottles) and tree logs (in millions). Please choose the best answer for each question. Point Y is...

Unobtainable through production, but it may be possible for Canada to consume at point Y if international trade occurs.

Which of the following is TRUE of an inferior good?

When income increases, demand decreases.

The demand schedule for chicken feet, a dim sum delicacy served at some Chinese restaurants, is shown in the table. Although some people find the texture strange, others have developed a taste for it. a. How many more chicken feet were demanded in 2018, at a price of $2.50 a pound, than in 2008? b. Based on the demand schedule, you conclude

a. 6.7 million pounds (9.9 - 3.2 = 6.7) b. The demand curve shifted to the right.

Which decision is least likely to be well explained by marginal analysis?

Deciding which college to attend

If goods A and B are substitutes, a decrease in the price of good B will:

Decrease the demand for good A.

The figure shows the supply and demand for online music. Suppose that an economic downturn decreases household wealth and erodes consumer confidence. Move the supply and/or demand curves to reflect the primary effect this would have on the market for online music. You can assume that online music is a normal good. Also select the end result of equilibrium price and quantity. a. Equilibrium price b. Equilibrium quantity

a. Decreases b. Decreases

Stone and brick are substitutes in home construction. Consider the market for bricks depicted below. Suppose the price of stone increases due to new regulations for the stone quarrying industry. Illustrate the impact this will have on the market for bricks. a. Equilibrium price b. Equilibrium quantity

a. Increase b. Increases

The table contains information on the price per month and the monthly demand and supply of online music streaming subscriptions. What are the equilibrium price and quantity?

Equilibrium price: $10,20 Equilibrium quantity: 220 thousand subscriptions

Suppose the accompanying graph depicts a market for one pound bags of candy. Place the line labeled Excess Demand at a price that would generate an excess demand (shortage). Then, determine the size of the excess demand.

Excess demand = 4

Suppose the accompanying graph depicts a market for one pound bags of candy. Place the point labeled Excess Supply to show a price that would generate an excess supply (surplus). Then, determine the size of the excess supply.

Excess supply = 6

(Table: Comparative Advantage I) Look at the table Comparative Advantage I. Sweden has an absolute advantage in producing:

Herring only

The law of demand states that other things equal, as the price:

Increases, the quantity demanded will decrease.

(Figure: Guns and Butter) Look at the figure Guns and Butter. On this figure, points A, B, E, and F:

Indicate combinations of guns and butter that society can produce using all of its factors efficiently.

The demand curve

Is a graphical representation of the relationship between price and quantity demanded.

If a country specializes according to its own comparative advantage and then trades with other nations:

It can consume at a higher level than the domestic production possibilities frontier.

When trading with more developed countries,

Less developed countries have a comparative advantage in the production of some goods or services.

(Kate's Graph) These figures illustrate the production possibilities available to Kate and Sarah with eight hours of labor in their bakery. Answer the questions according to these figures. Kate has an absolute advantage in Kate has a comparative advantage in

Neither good Cake

(Figure: Shifts in Demand and Supply II) Look at the figure Shifts in Demand and Supply II. The figure shows how supply and demand might shift in response to specific events. Suppose the birthrate decreases. Which panel BEST describes how this will affect the market for diapers?

Panel B

Suppose the following represents the Canadian production possibilities frontier for two of its most important exports: maple syrup (in millions of bottles) and tree logs (in millions). Please choose the best answer for each question. Point M is...

Possible and efficient.

Classify each scenario according to whether the change in quantity is caused by a shift in the supply curve or movement along the supply curve.

Shift of the supply curve - After discovering that flash-steaming tuna before using mechanical processes to extract meat removes more tuna flesh, more cans of tuna arrive on the shelves at all major grocers. - Amplitude decides to join the smartphone market. Movement along the supply curve - A national consumer products company produces less of its premium quality soap as a result of lower soap prices. - Americans sell their gold and silver jewelry as a result of rising prices.

The accompanying table contains the willingness to pay for 5 students in the market for a new tablet. Identify which portion of the demand curve below represents each individual. a. Francisco is b. Amanda is c. Anthony is d. Lily is e. Julio is f. Which students will purchase a tablet if the price of a tablet is $450?

a. D b. B c. A d. C e. E f. Anthony

Suppose the cost of lithium-ion batteries, an input into the production of electric vehicles, has dropped more steeply than expected. The accompanying graph depicts a market for electric vehicles. Demonstrate the effect of a reduction in the price of lithium-ion batteries by adjusting the accompanying diagram. a. Equilibrium price b. Equilibrium quantity

a. Decreases b. Increases

The U.S. government has subsidized ethanol production since 1978. With the advent of affordable electric cars, policymakers are considering whether to allow the subsidy to expire. The accompanying graph represents the market for ethanol. Move the supply and/or demand curves to show how reducing the subsidy will affect the ethanol market. a. Equilibrium price b. Equilibrium quantity

a. Increases b. Decreases

Suppose that there has been a sudden influx of refugees in the small town of Dallon, leading to a doubling of the local population. The accompanying graph depicts Dallon's market for food. Adjust the graph to show the immediate impact that this rise in population has on the food market. Then determine what happens to equilibrium price and quantity. a. Equilibrium price b. Equilibrium quantity

a. Increases b. Increases

Andrew, a college student, loves drinking coffee late at night to study for exams. Having no income, he is used to buying cheap, bad-tasting coffee, such as Beanlightened, that he needs to grind and brew himself. The coffee tastes putrid but, with enough cream and sugar, Andrew is able to tolerate it. Occasionally, he does go out to Starbucks when he has spare money. After graduation, Andrew gets a job working at a database firm as a programmer. His income is now a healthy $75,000 a year, and he decides he has had enough bad-tasting coffee. He ends up buying coffee daily from Starbucks, even though it costs significantly more than Beanlightened. a. In economic terms, Starbucks coffee is for Andrew a(n) b. Beanlightened coffee is for Andrew a(n) c. Andrew's demand for Starbucks coffee changed as a result of

a. Normal good b. Inferior good c. A change in income.

The table contains information on the price per month and the monthly demand and supply of online music streaming subscriptions. a. What is the quantity demanded at $11.10? b. What is the quantity supplied at $11.10? c. At what price is the quantity supplied equal to 220,000?

a. Quantity demanded is 200 thousand subscriptions b. Quantity supplied is 320 thousand subscriptions c. $10.70

If farmer Sam MacDonald can produce 200 pounds of cabbages and no potatoes or no cabbages and 100 pounds of potatoes and if he faces a linear production possibility frontier, the opportunity cost of producing an additional pound of cabbage is _____ pound(s) of potatoes.

0.5 (100 / 200 = 0.5)

According to this graph of the production possibilities frontier (PPF), what is the opportunity cost of producing the fourth gizmo?

1 widget

(Figure: Shifts in Demand and Supply) Look at the 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?

Panel B

Suppose the following represents the Canadian production possibilities frontier for two of its most important exports: maple syrup (in millions of bottles) and tree logs (in millions). Please choose the best answer for each question. Point H is...

Possible, but not efficient.

Suppose you are a freshman in college and you have not declared a major. One reason you enrolled at your respective college was the school's vibrant social life. At the same time, you want to balance your academic life because you know that your grades will matter for graduate school or job applications. You decide to forgo partying for two hours to study for an upcoming economics exam. a. To make that decision you weighed your

Opportunity Cost

A farmer produces both beans and corn on her farm. If she must give up 16 bushels of corn to be able to get 6 bushels of beans, then her opportunity cost of 11 bushel of beans is

2.67 bushels of corn

The accompanying graph contains the production possibilities frontier (PPF) for Rubberland. Rubberland only makes two products, rubber band balls and rubber hoses, and on a given day can produce according to the PPF in the graph. Point A on the PPF represents the combination of the two goods Rubberland currently produces. When a new method of rubber processing is discovered, the productivity of all Rubberland's inputs increases. Please shift the PPF to show this change. Assume that Rubberland does not make more rubber band balls than they originally made at point A but still maximize their productive capabilities. Move point A to their new production point. How many more rubber hoses do they now produce per day than before?

20 more hoses per day (The amount of A moving right)

(Table: Supply of Lemonade) Look at the table Supply of Lemonade. When the price of lemonade is $1 per cup, the quantity of lemonade supplied by Eli will be:

40 cups

(Figure: Sugar and Freight Trains) Look at the figure Sugar and Freight Trains. Suppose the economy is operating at point B. The opportunity cost of producing the third freight train would be _____ tons of sugar.

45 (225 - 180 = 45)

Supply: Q = P Inverse Supply: P = Q If price is set at $5; What is quantity supplied at this price?

5

When the supply curve increases and the demand curve remains the same

Price decreases, quantity increases.

(Table: Supply of Lemonade) Look at the table Supply of Lemonade. If the price of lemonade is $1 per cup, the total quantity of lemonade supplied will be:

90 cups

According to the law of demand,

A decrease in price increases quantity demanded.

Producer surplus is shown graphically as the area

Above the supply curve and below the market price.

The table presents information about the productivity of digital cameras and personal computers in the United States and Japan. The data are presented in units of output per hour of work. Use this information to answer the question. Japan has a(n) ___________________ advantage in producing ______________________ .

Absolute, personal computers

Which statement describes the equity-efficiency trade‑off?

Actions intended to make economic outcomes fairer may cause efficiency to decrease.

Which demonstrates a scenario with no opportunity cost? It's Friday night and you stay up late talking and hanging out with your friends. The chemistry club is giving out free pizza for lunch to all who come to their table to get it. Naomi, age 8, is at a bookstore and chooses to buy a book about a young wizard instead of buying a math textbook that she would probably never open. Chez Moi and Chez Nous, two premiere French restaurants with three Michelin stars, both offer you a full time sous chef job at the same salary. You are ecstatic because you know it is a win-win scenario and choose to work for Chez Nous. All of these scenarios have an opportunity cost.

All of these scenarios have an opportunity cost.

(Figure: The DVD Rental Market) Look at the figure The DVD Rental Market. At a rental price of $3, there will be:

An excess demand of 40 DVD rentals.

Which of the following would shift the demand curve for new textbooks to the right?

An increase in college enrollment

When the demand curve increases more than the supply curve increases

Price increases, quantity increases.

The production possibility frontier will shift outward because of:

Better technology that improves worker productivity.

(Sarah's Graph) These figures illustrate the production possibilities available to Kate and Sarah with eight hours of labor in their bakery. Answer the questions according to these figures. Sarah has an absolute advantage in Sarah has a comparative advantage in

Both goods Bread

(Table: Comparative Advantage I) Look at the table Comparative Advantage I. Finland has a comparative advantage in producing:

Cell phones only.

Your economics professor is attempting to recruit more students to major in economics. She presents data showing that economics majors develop skills valuable in private industry, government, and research. She also argues that they earn a relatively higher income than other majors. Your professor is presenting you with to major in economics. c. Your professor is presenting you with _____ to major in economics.

Incentives

In most cases, economic efficiency is achieved through:

Incentives built into a market economy.

Assume France and Libya can both produce grain and dates, and that the only limited resource is the farming labor force, meaning that land, water, and all other resources are plentiful in both countries. Each farmer in France can produce 10 t of grain or 5 t of dates in a season. Each farmer in Libya can also produce 10 t of grain or 25 t of dates. Please answer the four questions. Which country has the absolute advantage in producing dates? Which country has the absolute advantage in producing grain? Which country has the comparative advantage in producing dates? Which country has the comparative advantage in producing grain?

Libya Neither Libya France

Microeconomics:

Looks at specific economic units.

The accompanying graph contains individual supply curves for the only two firms in a hypothetical market for stuffed animals. Place the market supply curve at the correct location on the graph. What happens to the market if a third supplier enters the market, holding all else constant?

Market supply increases.

You and other college students are deciding whether to major in music or engineering. You learn that there is a shortage of engineers, making it easy for engineering graduates to find employment, while there is a glut of musicians for whom finding a job is difficult. As a result, you and many other college students decide to major in engineering. Which economic principle does this illustrate?

Markets tend to move towards equilibrium as individuals respond to incentives.

A simplified representation that is used to study a real situation is called a:

Model

Suppose the market for gasoline is in equilibrium. You have heard that the price of crude oil is falling because of new oil discoveries. You are also aware that the number of car and truck drivers is steadily rising. Knowing this, you predict that the price of gasoline will _____ and the quantity of gasoline bought and sold will _____.

Rise or fall; rise

In a single day, Sarah can produce 10 hamburgers, and Abe can produce 5 hamburgers. Therefore, _____ has a _____ advantage in making hamburgers.

Sarah; absolute

There are limited resources to satisfy all of society's wants.

Scarcity

We are forced to make choices because of:

Scarcity.

Categorize each scenario as describing a movement along a demand curve or a shift of the demand curve.

Shift of the demand curve - College students purchase many more energy drinks during finals week than during the rest of the semester. - Students eat out more often as the federal government increases how much grant money it provides students. Movement along the demand curve - College students reduce how much detergent they use for each load of laundry in response to higher detergent prices. - College students rush and buy discount furniture to take advantage of an unexpected price drop.

For which of the following decisions would marginal analysis be most relevant?

Should I eat another doughnut?

You are assigned a final group project for your economics course. One member of your group is really good at finding resources for the project, one is really good at proofreading and editing, and you are really good at making a presentation. d. Based on this, you know that via _____ you can complete the project more efficiently than if you all did each part together.

Specialization

Why is the shape of the production possibilities frontier (PPF) often curved instead of straight?

Typically, some resources are better suited for producing one good than another, which means that there are diminishing returns when moving such resources away from producing what they are best suited for.

Specialization and trade usually lead to:

The exchange of goods and services in markets.

Producer surplus is the difference between

The market price and the minimum price a seller is willing to accept.

Consumer surplus is equal to the difference between

The maximum price a buyer is willing to pay and the market price.

Which of the following is a normative statement?

The minimum wage is an important tool in fighting poverty and should be increased.

If the market for corn is in equilibrium:

The price is set so that the quantity of corn produced is equal to the quantity of corn consumed.

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

The price of thin-crust pizza.

Lena and Jess are roommates. Lena hates to clean the bathroom. Jess will agree to clean the bathroom only if Lena vacuums the living room. This statement best represents this economic concept:

There are gains from trade.

The basic concern of microeconomics is:

To study the choices people make.

You can spend $100 on either a new economics textbook or a new CD player. If you choose to buy the new economics textbook, the opportunity cost is:

Your enjoyment of the new CD player.

Amazon has a "Lightning Deal" where it slashes the price of one item. At 3:15 p.m. today, they announced that the item was a new tablet with a sales price of $150 which is less than half the original price. The table contains the maximum willingness to pay of five college students wanting to buy a tablet on Amazon. a. What is total consumer surplus for the five students? b. If the price increases from $150 to $350, what is the change in total consumer surplus?

a. $800 b. $-600

For each example listed, decide if the good is a normal good or an inferior good. Make sure you answer from the perspective of the individual or individuals doing the buying or consuming. a. Billy's mom increases his weekly allowance by $5. As a result, Billy increases the number of apps he downloads on his smartphone. Smartphone apps are... b. Susan gets a 15 percent performance bonus at work. She can finally stop eating so many frozen pizzas and eat something more tasty. Frozen pizzas are... c. Mike is an appliance salesman. Refrigerator sales in his store have fallen and so has his commission. Mike decided to switch from name brand cereal to generic cereal. Generic cereal is... d. Hair stylist Molly loses a few of her clients. Molly cuts back on the number of smoothies she buys during the week. Smoothies are...

a. A normal good b. An inferior good c. An inferior good d. A normal good

During the Obama administration, the development of low-cost batteries for electric cars received large amounts of federal funding in terms of subsidies. Meanwhile, American households gave a higher priority towards minimizing their environmental impact. Consider the market for zero-emissions electric vehicles where there is an upward-sloping supply curve and a downward-sloping demand curve. a. Which direction will demand and supply shift? b. What will happen to the equilibrium price? c. What will happen to the equilibrium quantity?

a. Both curves will shift right. b. Change is ambiguous. c. Quantity increases.

Suppose that Paulie and Vinny each can produce ice cream or t-shirts. The table shows the quantity of each good that Paulie and Vinny each can produce in 1 hour, respectively, if they devote all of their time and effort into making the good. Round all answers to two decimal places. a. What is Paulie's opportunity cost of producing a cup of ice cream? b. What is Vinny's opportunity cost of producing a t-shirt? c. Paulie has a comparative advantage in _____ and Vinny has a comparative advantage in _____

a. Paulie's opportunity cost: 4.75 t-shirts (19 / 4 = 4.75) b. Vinny's opportunity cost: 0.62 cups of ice cream (8 / 13 = 0.62) c. T-shirts; ice cream

Comparing the benefits and costs of engaging in an activity.

Trade-off

A beneficial technological change is developed in the production of cranberries. At the same time, scientists discover that cranberries have significant health benefits. This will result in:

An increase in the equilibrium quantity and an uncertain effect on the equilibrium price of cranberries.

A decrease in the price of a good will result in:

An increase in the quantity demanded.

If the price of mozzarella cheese (an ingredient in pizza) declines, there will be:

An increase in the supply of pizza.

The accompanying table contains the individual demand schedules of dark chocolate for Vanessa and Angela. Assuming they are the only people in the market for dark chocolate, place each of their individual demand curves and the market demand curve at the correct locations on the accompanying graph. After a while, Angela gets sick of eating the bitter chocolate and decides to cut back on dark chocolate and enjoy white chocolate more. What happens as a result of Angela's decision? Select all of the correct answers.

Angela's individual demand for dark chocolate decreases. The market demand for dark chocolate will decrease. Angela's individual demand for white chocolate increases.

Assume the economy can produce either sports utility vehicles (SUVs) or minivans. The graph below depicts the current production possibilities frontier (PPF). Suppose several new factories are built. Move the end points of the PPF below to show how the PPF changes. Assume that the factory construction affects the economy's ability to produce both minivans and SUVs. This is an example of...

Economic growth.

You start a part-time job as a package handler at a large delivery company. After training, you start your first shift and your supervisor tells you to unload packages from a single truck. Unfortunately, he tells 5 other people to do the same which causes most of you to stand around and wait for your co-workers to get out of the way. There are several other trucks already on the dock waiting to be unloaded. b. Which of the following terms best describes what your supervisor has failed at?

Efficiency

If Texia specializes in food, it can produce 1,000 units of food and 0 units of clothing this year. If it specializes in clothing, it can produce 500 units of clothing and 0 units of food. This year Urbania can produce either 500 units of food and 0 units of clothing or 200 units of clothing and 0 units of food. (assume linear production possibility frontiers) _______ has the absolute advantage in the production of clothing and ________ has the absolute advantage in the production of food.

Texia; Texia

If Texia specializes in food, it can produce 1,000 units of food and 0 units of clothing this year. If it specializes in clothing, it can produce 500 units of clothing and 0 units of food. This year Urbania can produce either 500 units of food and 0 units of clothing or 200 units of clothing and 0 units of food. (assume linear production possibility frontiers) _______ has the comparative advantage in the production of clothing and ________ has the comparative advantage in the production of food.

Texia; Urbania

The five-dollar Burger Joint gift card that your friend gave you for your birthday expires today. You can either use the gift card to buy yourself dinner at Burger Joint, or you can stay home and eat a delicious home-cooked meal. What is the opportunity cost of eating the home-cooked meal?

The value of the ingredients that go into the home-cooked meal, and the value of a five-dollar dinner at Burger Joint.

Which of the following is a positive economic statement?

There has been an increase in the rate of inflation.

(Figure: Guns and Butter) Look at the figure Guns and Butter. Suppose the economy produced 8 guns and 12 pounds of butter per period.

This is a possible choice but is inefficient.

Kate and Sarah own a bakery together. The two figures illustrate the production possibilities available to them if they work at their bakery for 8 h a day. Answer the question using these figures. If Kate and Sarah both specialize in the good in which they have a comparative advantage, the

Total production of bread will be 12 loaves, and the total production of cake will be 8 units.

Classify each statement as true or false by dragging it into the corresponding category.

True - When two countries choose to partake in international trade, it is a mutually beneficial activity for both countries - Through specialization and trade, it is possible for a country to consume a combination of goods that is beyond its original production possibilities frontier False - Wealthier countries always benefit more from international trade than poorer countries - Countries trade for goods in which they do not have a comparative advantage, and therefore, would never trade with nations that have similar resource endowments

Consumer surplus is shown graphically as the area

Under the demand curve and above the market price.