Microeconomics test 1

An increase in demand is represented by

a rightward shift of the demand curve

If the government imposes an excise tax in a market in which the demand curve is perfectly inelastic, the burden of the tax will fall completely on the ______ and the deadweight loss will equal ________.

consumers; zero

If the government imposes a $5 excise tax on the sale of leather shoes collected from the supplier and the price of leather shoes does not change:

producers are paying all of the tax.

If an excise tax is imposed on beer and collected from the producers, the _____ curve will shift ____ by the amount of the tax.

supply, upward

What is economics?

the study of how people make decisions with limited resources

If labor in Mexico is less productive than labor in the United States in all areas of production

then both Mexico and the United States still can benefit from trade.

If your purchases of shoes remain constant at 9 pairs per year when the price of shirts increases from $8 to $12, then, for you, shoes and shirts are considered:

unrelated goods

Tax incidence refers to

who really pays the tax

pair of items that is most likely to have a negative cross-price elasticity of demand

Hot dogs and mustard

Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Given this, we know that the opportunity cost of 1 chair is

1/5 table for Mike and 1/3 table for Sandy

Suppose a gardener produces both green beans and corn in her garden. If she must give up 14 bushels of corn to get 5 bushels of green beans, then her opportunity cost of 1 bushel of green beans is

2.8 bushels of corn

Suppose a gardener produces both green beans and corn in her garden. If the opportunity cost of one bushel of corn is 3/5 bushel of green beans, then the opportunity cost of 1 bushel of green beans is

5/3 bushels of corn

The income elasticity of demand for eggs has been estimated to be 0.57. If income grows by 5 percent in a period, how will that affect demand for eggs in that period, all other things unchanged?

B) Demand will increase by about 2.9 percent.

Belarus has a comparative advantage in the production of linen, but Russia has an absolute advantage in the production of linen. If these two countries decide to trade,

Belarus should export linen to Russia

The price elasticity of demand for fresh tomatoes has been estimated to be 2.22. If a new insecticide and fertilizer treatment yields a 20 percent increase in the nation's fresh tomato crop, how will that affect total revenue from fresh tomatoes, all other things unchanged?

C) Total revenue will rise

If the government imposes a $5 excise tax on the sale of leather shoes collected from the supplier and the price of leather shoes increases by $2:

C) producers are paying more of the tax than are the consumers.

The price elasticity of demand for gasoline in the short run has been estimated to be 0.4. If a war in the Middle East causes the price of oil (from which gasoline is made) to increase, how will that affect total revenue from gasoline in the short run, all other things unchanged?

Quantity demanded will decrease; total revenue will rise.

Suppose Susan can wash three windows per hour or she can iron six shirts per hour. Paul can wash two windows per hour or he can iron five shirts per hour.

Susan has an absolute advantage over Paul in washing windows. Susan has a comparative advantage over Paul in washing windows. Paul has a comparative advantage over Susan in ironing shirts. ALL ARE CORRECT

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

Total revenue Will fall

Suppose the price elasticity of demand for oranges is 1.8. If a fall frost destroys one- third of the nation's orange crop, how will that affect total revenue from oranges, all other things unchanged?

Total revenue will fall.

Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of wheat per year, and a worker in Sylvania can produce either 2 units of corn or 6 units of wheat per year. Each nation has 10 workers. Without trade, Freedonia produces and consumes 30 units of corn and 10 units of wheat per year. Sylvania produces and consumes 10 units of corn and 30 units of wheat. Suppose that trade is then initiated between the two countries, and Freedonia sends 30 units of corn to Sylvania in exchange for 30 units of wheat. Freedonia will now be able to consume a maximum of

a. 30 units of corn and 30 units of wheat.

If a surplus exists in a market, then we know that the actual price is

above equilibrium price and quantity supplied is greater than quantity demanded.

The quantity demanded of a good is the amount that buyers

are willing and able to purchase.

If a shortage exists in a market, then we know that the actual price is

below the equilibrium price, and quantity demanded is greater than quantity supplied.

Kelly and David are both capable of repairing cars and cooking meals. Which of the following scenarios is not possible

c. Kelly has a comparative advantage in repairing cars and in cooking meals.

The producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers to produce the same amount of that good,

c. has an absolute advantage in the production of that good.

The pair of items that is likely to have the highest cross-price elasticity of demand is:

coffee / tea

The market demand curve

d. represents the sum of the quantities demanded by all the buyers at each price of the good

Ceteris Paribus, an increase in the price of a good will

decrease in quantity demanded

If an excise tax is imposed on wine and collected from the consumers, the _____ curve will shift ____ by the amount of the tax.

demand; downward

The supply curve for coffee

does not shift when the price of coffee changes because the price of coffee is measured on the vertical axis of the graph

The demand curve for hot dogs

does not shift when the price of hot dogs changes, because the price of hot dogs is measured on the vertical axis of the graph

Two goods are complements when a decrease in the price of one good

increases the demand for the other good

State governments place excise taxes on alcohol because:

it discourages drinking alcohol while raising revenue for the government.

cross-price elasticity of demand of complementary goods is:

less than 0

When a public transit system (such as a subway or bus line) raises its fares, it may experience an increase in total revenue. This suggests that demand is:

price inelastic

If the government imposes an excise tax in a market in which the supply curve is perfectly inelastic, the burden of the tax will fall completely on the ______ and the deadweight loss will equal ________.

producers; zero

An increase in quantity demanded

results in a movement downward and to the right along a demand curve

If an increase in the price of a good leads to an increase in total revenue, then:

the demand curve must be price inelastic.

price elasticity of a good will tend to be greater:

the longer the relevant time period.

deadweight loss from an excise tax comes about because:

the number of transactions in the market is reduced and some mutually beneficial transactions do not take place