Final Exam Review ARE 201

Which of the following will not shift the demand curve for good Y? a. An increase in the price of good Y b. A decrease in the expected future price of good Y c. An increase in the income of consumers of good Y d. All of the above will shift the demand for good Y

a

In the presence of externalities, equilibrium in a competitive market does not maximize the sum of consumers and producers surplus. a. True b. False

b

Tax on imported goods is called a... a. Quota b. Tariff c. Supply tax d. Trade tax

b

The supply of apartments in a city is likely to be less elastic over a longer period of time. a. True b. False

b

When a good price rises, its demand will decrease. a. True b. False

b

Which of the following would cause the demand for an inferior good to decrease? a. A decrease in income b. An increase in its price c. An increase in the price of a complement d. None of the above

c

Both public goods and common resources are a. Rival in consumption b. Non-rival in competition c. Excludable d. Nonexcludable

d

A decrease in demand decreases producer surplus. a. true b. false c. uncertain

a

If a price floor is not binding, then... a. The equilibrium price is above the price floor b. The equilibrium price is below the price floor c. There will be a surplus in the market d. There will be a shortage in the market

a

If the government removes a binding price ceiling from a market, then the price paid by buyers will... a. Increase, and the quantity sold in the market will increase b. Increase, and the quantity sold in the market will decrease c. Decrease, and the quantity sold in the market will increase d. Decrease, and the quantity sold in the market will decrease

a

Kat and Kim sell lemonade on the corner for $0.75 per cup. It cost them $0.25 to make each cup. On a certain day, their producer surplus is $10. How many cups did Kat and Kim sell? a. 20 b. 10 c. 5 d. 50

a

Peanut butter and jelly are compliments. The price of jelly rises... a. Demand for peanut butter falls b. Supply of peanut butter falls c. Demand for peanut butter rises d. The fact depends on whether peanut butter is a normal or inferior good

a

Someone buys a good priced at $16. They are willing and able to pay $20. Their consumer surplus is a. $4 b. $16 c. $20 d. $36

a

Suppose Brazil has an absolute advantage over other countries and producing almonds, but other countries have a comparative advantage over Brazil and producing almonds. If trade and almonds is allowed... a. Brazil will import almonds b. Brazil will export almonds c. Brazil will import almonds or export almonds; it is not clear from the information given d. Brazil would have nothing to gain from either importing or exporting almonds

a

Suppose the cross price elasticity of demand between goods X and Y is 0.3. What can we say about the relationship between goods X and Y? a. They are substitute goods b. They are complementary goods c. They are inferior goods d. They are normal goods

a

The original equilibrium price of gasoline is $2 per gallon. After a $1 per gallon tax is imposed, the price received by sellers of gasoline falls to $1.80 per gallon. What is the price paid by buyers for gasoline after the imposition of the tax? a. $2.80 b. $2.20 c. $1.80 d. It depends on whom the government collects the tax from.

a

Two goods are substitutes when a decrease in the price of one good.... a. Decreases demand for the other good b. Decreases quantity demanded for the other good c. Increased demand for the other good d. Increases quantity demanded for the other good

a

When the price of a loaf of bread is $1, the quantity demanded is 500 Per day. When the price falls to $0.80, The quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for bread is a. Inelastic b. Elastic c. Unit elastic d. Perfectly inelastic

a

Which of the following events would cause a movement upward and to the left along the demand curve for olives? a. The price of olives rises b. The number of people who purchase olives decreases c. The price of pickles decreases, and pickles are substitutes for olives d. Consumer income decreases and olives are a normal good

a

Which of the following is likely to have the most price inelastic demand? a. Chocolate b. Godiva chocolate c. Hersheys chocolate d. All three would have the same elasticity of demand

a

Which of the following is not a characteristic of a perfectly competitive market? a. Seller set the price of the product b. There are many sellers c. Buyers must except the price the market determines d. All of the above are characteristics of a perfectly competitive market

a

Which of the following most accurately describes effects of price controls? a. Price ceilings pause shortages and price floors cause surpluses b. Price ceiling causes surpluses and price floors cause shortages c. Both price ceilings and price floors cause shortages d. Both price ceilings and price floors cause surpluses

a

A producer has absolute advantage producing a good A. Then they must also have comparative advantage producing good A. a. True b. False

b

Each of the following is a determinant of demand except... a. Buyers taste b. Production technology c. Expectations d. Prices of related goods

b

Goods with few close substitutes tend to have... a. More elastic demand b. Less elastic demand c. Price elasticity of demand that are unit last d. Income elasticity of demand that are negative

b

If US workers can produce things in less than a minute then Mexican workers, it is not possible for the US to gain from trade with Mexico. a. True b. False

b

If an input into the production of a good is difficult to get, then the supply of that good will be very elastic. a. True b. False

b

If people can be prevented from using a certain good, then the good is called a. Rival in competition b. Excludable c. A common resource d. A public good

b

If the demand for renewable water bottles increases at the same time that the producers of reusable water bottles adopt labor saving technology, the price equilibrium will increase but the effects on the equilibrium quantity sold is ambiguous. a. True b. False

b

In equilibrium: a. Supply must equal demand b. Quantity supplied must equal quantity demanded c. Quanity supplied must equal demand d. Quantity supplied may or may not equal quantity demanded

b

Markets tend to provide too little of public goods because the supply of public goods create negative externalities. a. True b. False

b

Negative externalities lead markets to produce a smaller quantity of a good then is socially desirable, while positive externalities lead markets to produce a larger quantity of a good and a socially desirable. a. True b. False

b

Peanut butter and almond butter are substitutes. If the price of almond butter falls... a. Demand for peanut butter rises b. Demand for peanut butter falls c. Demand for almond butter rises d. Supply for almond butter falls

b

Suppose the government auctions off 500 units of pollution permits. They sell a $50 per unit at auction, raising $25000 in revenue. This policy is equivalent to a tax of what size? a. $500 b. $50 c. $25000 d. More information is needed to answer the question

b

The income elasticity of a certain brand of cereal is negative. Which of the following is true? a. When a consumers income increases, demand for the cereal shifts right b. When a consumers income increases, demand for the cereal shifts left c. It is a normal good d. Both A and C are true

b

The law of demand says a. As price rises, demand falls, and vice versa b. As price rises, quantity demanded falls, and vice versa c. As price rises, quantity demanded rises, and vice versa d. As income rises, demand rises, and vice versa

b

What are the two defining characteristics of a public good? a. It is rival in competition and excludable b. It is non-rival in competition and non-excludable c. It is non-rival in competition and creates positive externalities d. It is rival and competition and nonexcludable

b

When a tax is placed on a market, under normal circumstances the government revenue collected is exactly equal to the fall and consumer and producer surplus resulting from the tax. a. True b. False

b

When a tax is placed on the buyers of a product, buyers pay a. more and sellers receive more than they did before the tax b. more and sellers receive less than they did before the tax c. less and sellers receive more than they did before the tax d. less and sellers receive less than they did before the tax

b

Which of the following statements is correct? a. Buyers determine supply and sellers determine demand b. Bowers determine demand, and sellers determine supply c. Buyers determine both demand and supply d. Suppliers determine both demand and supply

b

Which of the following will cause an increase of producer surplus? a. An increase in the price of complementary good b. An increase in the price of a substitute good c. A decrease in the price of a substitute good d. All of the above

b

Wolfie spends $5 per day on tuna no matter its price. What is Wolfies price elasticity of demand for tuna? a. 0 b. 1 c. 2 d. infinite

b

A change in which of the following will shift the demand curve? a. Price b. Number of sellers in a market c. Prices of substitute goods d. Input process

c

A surplus exists in a market if... a. There is excess demand for the good b. Quantity demanded exceeds quantity supplied c. The current price for a good is above the equilibrium price d. All of the above are correct

c

An increase in which of the following would shift the market supply curve for gasoline to the right? a. Demand for gasoline b. The price of gasoline c. The number of producers of gasoline d. The price of oil, an imput for the production of gasoline

c

At the local park there is a playground for children to use. Well everyone is allowed to use the playground, it is often very busy, which reduces the enjoyment of some children who use it. The playground is an example of a. Private good b. Club good c. Common resource d. Public good

c

Every time my neighbor walks her large, fluffy Bernie's Mountain dog, I get very jealous and becomes sad since I don't have one of my very own. The story gives an example of a a. Public good b. Common resource c. Negative externality d. Positive externality

c

If a country is an exporter of a good, it must be the case that a. The world price is less than its domestic price b. Consumer surplus is higher than in a no trade simulation c. The world price is greater than its domestic price d. Producer surplus is lower than a no trade simulation

c

Peanut butter and jelly are complements. What can we say about the cross price elasticity of demand between peanut butter and jelly? a. Nothing b. It's positive c. It's negative d. It's less than 1

c

Penelope's price elasticity of demand for wine is 2. What would happen to the amount of wine she purchases if the price wine were to fall by 2%? a. It would fall by 2% b. It would rise by 2% c. It would rise by 4% d. It would fall by 4%

c

Ramen noodles are inferior goods. What can we say about the income elasticity of demand for Ramen noodles? a. Nothing b. It's positive c. It's negative d. It's less than 1

c

Trade enhances the economic well-being in a country in the sense that... a. Both domestic producers and domestic consumers of a good become better off with trade regardless of whether the nation imports or exports the good in questions b. The gains of domestic producers of a good exceed the losses of domestic consumers of a good, regardless of whether the nation imports or exports the good in question c. Trade results in an increase in total surplus d. Trade puts downward pressure on the prices of all goods

c

Welfare economics is the study of a. The well-being of impoverished people b. Welfare programs in the United States c. How the allocation of resources affects economic well-being d. The effect of incoming redistribution on work effort

c

When will a Price floor be non-binding? a. Never; price floors are always binding. b. When it is placed above the equilibrium price c. When it is placed below the equilibrium price d. Price floors are always non-binding

c

Which of the following events, occurring simultaneously, must cause equilibrium price to fall? a. Demand increases and supply decreases b. Demand and supply both decrease c. Demand decreases and supply increases d. Demand and supply both increase

c

Which of the following will shift the supply curve for good X to the right? a. An increase in the price of input to production of good X b. An increase in the price of good X c. An improvement in technology for producing good X d. An increase in demand for good X

c

A cost imposed on someone who is neither the consumer nor producer of a product is called a... a. corrective tax b. command and control policy c. positive externality d. negative externality

d

A legal maximum on the Price at which a good can be sold is called a price... a. Floor b. Subsidy c. Support d. Ceiling

d

Amy doesn't change her banana buying behaviors very much when the price of bananas goes up. What is a likely value of her price elasticity of demand for bananas? a. 1.2 b. 5 c. 1 d. .2

d

Consider the market for rental apartments in Raleigh. Suppose the supply of apartments is completely inelastic well the demand for apartments is in elastic but downwards - sloping. Is a $100 tax is imposed on the market, how is the tax burden divided between the renters and landlords? a. They share the burden, but renters bear most of the tax b. They share the burden, but buyers bear most of the tax c. Renters pay the whole tax d. Landlords pay the whole tax

d

Price of sugar that prevails in international markets is called the... a. Export price of sugar b. Import price of sugar c. Comparative advantage price of sugar d. World price of sugar

d

Roses are currently selling for $40 per dozen, but the market clearing price of roses is $30 per dozen. we would expect a... a. Shortage to exist and the market price of roses to increase b. Shortage to exist and the market price of roses to decrease c. Surplus to exist and the market price of roses to increase d. Surplus to exist and the market price of roses to decrease

d

Suppose emma sells bread in a competitive market. She is able to sell as much as she wants, as long as she sells it for the market price of $3 per loaf. The price elasticity of demand for emma's bread is... a. 0 b. 1 c. 2 d. Infinite

d

Suppose that when a price of Gingerale is $2 per bottle, firms can sell 4 million bottles. When the price of Ginger ale is $3 per bottle, firms can sell 2 million bottles. Which of the following statement is true? a. The demand for Ginger ale is income inelastic, so an increase in the price of Ginger ale will increase the total revenue of Ginger ale producers b. The demand for Ginger ale is income elastic, so an increase in the price of Ginger ale will increase the total revenue of Ginger ale producers c. The demand for Ginger ale is price in elastic, so that an increase in the price of Ginger ale will increase the total revenue of Ginger ale producers d. 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

d

Suppose there are many close substitutes for a good. We would expect the demand for the good to be... a. Inelastic b. Inferior c. Unit elastic d. Elastic

d

When an externality is presented in a market, the market equilibrium is a. Efficient, and the equilibrium maximizes the total benefit to society as a whole b. Efficient, but the equilibrium does not maximizes the total benefit to society as a whole c. Inefficient, but the equilibrium maximizes the total benefit to society as a whole d. Inefficient, and the equilibrium does not maximizes the total benefit to society as a whole

d

Which of the following pairs of goods are most likely to be seen as substitutes? a. Peanut butter and jelly b. Tennis balls and tennis rackets c. Television and subscriptions to cable TV d. Pencils and pens

d

Which of the following will cause a decrease in consumer surplus? a. an increase in the number of sellers of the good b. a decrease in the production cost of the good c. sellers expect the price of the good to be lower next month d. the imposition of a binding price floor in the market

d