midterm

If an increase in the government-imposed minimum wage pushes the price (wage) of unskilled labor above market equilibrium, which of the following will most likely occur in the unskilled labor market? An increase in quantity of unskilled labor demanded. A shortage of unskilled labor. A decrease in the quantity of unskilled labor supplied. A surplus of unskilled labor (unemployment).

A surplus of unskilled labor (unemployment).

Which of the following best explains why making air travel completely safe is not efficient? Because one can't put a price on human life, airplane safety generally doesn't matter economically. The question is misleading--making airplanes safer is always efficient. After some level of safety is reached, making airplanes even safer is not worth the opportunity cost that would be incurred. The benefit from additional airplane safety will generally rise as airplanes are made safer, more than offsetting the opportunity cost involved.

After some level of safety is reached, making airplanes even safer is not worth the opportunity cost that would be incurred.

Which of the following would tend to increase the wage of coal miners? A decrease in the demand for coal. An increase in the supply of coal miners. New environmental laws that make it more costly for firms to use coal in their production process. An increase in the price of oil, a substitute for coal.

An increase in the price of oil, a substitute for coal.

Which of the following reflects diseconomies of scale? You Answered Marginal product decreases as output increases. Long-run marginal cost increases as output increases. Short-run average cost increases as output increases. As output doubles, long-run total cost more than doubles. Short-run marginal cost increases as output increases.

As output doubles, long-run total cost more than doubles.

Which of the following about economic decision making is true? Secondary effects are seldom of importance in economics. If a good is provided free to an individual, its production will not consume valuable scarce resources. Only direct monetary costs matter in making decisions. Changes in personal costs and benefits will exert a predictable impact on the choices of human decision makers.

Changes in personal costs and benefits will exert a predictable impact on the choices of human decision makers.

Suppose demand decreases and supply decreases. Which of the following will happen? Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase. Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase. Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease. Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease. The change in equilibrium price and quantity cannot be determined.

Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease.

Which of the following is an implication of the law of diminishing returns? A doubling of all inputs will lead to more than a doubling of output. In the short run, expansion of output will eventually lead to increases in marginal cost and average total cost. Total output will decline as more workers are hired. In the long run, average total cost will eventually decline as output is expanded.

In the short run, expansion of output will eventually lead to increases in marginal cost and average total cost.

If the supply of a good decreased, what would be the effect on the equilibrium price and quantity? Price would decrease, and quantity would decrease. Price would increase, and quantity would increase. Price would decrease, and quantity would increase. Price would increase, and quantity would decrease.

Price would increase, and quantity would decrease.

Which of the following is a valid reason for government provision rather than market provision of certain economic goods and services? When the government provides economic goods, they are free; costs are only incurred when such goods are provided by private firms. Voters tend to be better informed than market consumers. Decision makers in the market are motivated by self-interest, whereas, political decision makers are primarily motivated by the desire to help others. Public goods tend to be undersupplied through the market since it is difficult for potential suppliers to withhold such goods from nonpaying consumers, while the government can use taxes to overcome this problem.

Public goods tend to be undersupplied through the market since it is difficult for potential suppliers to withhold such goods from nonpaying consumers, while the government can use taxes to overcome this problem.

Suppose external costs are present in a market which results in the actual market price of $70 and market output of 150 units. How does this outcome compare to the efficient, ideal equilibrium? The efficient output would be greater than 150 units. The efficient price would also be $70. The efficient price would be higher than $70. The efficient price would be lower than $70.

The efficient price would be higher than $70.

Suppose the market equilibrium price of okra is $5 per bushel, and the government sets a price ceiling of $4 per bushel. What is the most likely result of this action? There will be an increase in the quantity of okra supplied as the result of the price ceiling. There will be a decrease in the quantity of okra demanded as the result of the price ceiling. There will be a surplus of okra. There will be a shortage of okra.

There will be a shortage of okra.

Suppose the market equilibrium price of corn is $5 per bushel, and the government sets a price floor of $7 per bushel to aid growers. What is the most likely result of this action? There will be a shortage of corn. There will be an increase in the quantity of corn demanded as the result of the price floor. There will be a decrease in the quantity of corn supplied as the result of the price floor. There will be a surplus of corn.

There will be a surplus of corn.

Because private owners are held responsible for damages their property causes to the property of others, private owners have a strong incentive to use their property now rather than conserving it for the future. little incentive to consider the harm their property may do to the property of others. little incentive to take good care of the property. a strong incentive to take steps to reduce the chance that they will harm the property of others.

a strong incentive to take steps to reduce the chance that they will harm the property of others.

If education creates external benefits, actual market outcomes provide a higher price than the efficient price of education. actual market outcomes provide less than the efficient quantity of education. actual market outcomes provide more than the efficient quantity of education. the government should impose a depletion tax.

actual market outcomes provide less than the efficient quantity of education.

When a good is nonexcludable, individuals will have an incentive to become free riders. it will be difficult for a private firm producing the good to generate revenue sufficient to cover the cost of production. all of the above are true. it is impossible or very costly to exclude nonpaying customers from receiving the good.

all of the above are true.

Two goods are considered substitutes if an increase in the price of one leads to an increase in the demand for the other. a decrease in the price of one leads to an increase in the demand for the other. a decrease in the supply of one leads producers to switch to production of the other. an increase in the demand for one leads to a decrease in the supply of the other. a decrease in the demand for one leads to a decrease in the supply of the other.

an increase in the price of one leads to an increase in the demand for the other.

The economic way of thinking stresses that an objective value can be attached to physical goods. greed is the primary motivation for human action. as the cost of an option decreases, people will be less likely to choose that option. as the benefits of an option increase, people will be more likely to choose that option.

as the benefits of an option increase, people will be more likely to choose that option.

The price elasticity of demand for a commodity is determined primarily by the attractiveness of the substitutes for the good. availability of complementary goods. incomes of consumers. size of the consumer surplus.

attractiveness of the substitutes for the good.

If government taxes a firm which pollutes this will increase the equilibrium quantity of the good produced in the market. decrease the equilibrium price of the good produced in the market. all of the above. increase the demand for the good produced. decrease the supply of the good produced.

decrease the supply of the good produced.

The burden of a tax will fall primarily on sellers when the tax is legally (statutorily) imposed on the seller of the product. demand for the product is highly inelastic and the supply is relatively elastic. tax is legally (statutorily) imposed on the buyer of the product. demand for the product is highly elastic and the supply is relatively inelastic.

demand for the product is highly elastic and the supply is relatively inelastic.

If a Subway restaurant near campus reduces its sandwich prices by 15 percent, and as a result, its total revenue from sandwich sales increases, this indicates that the price elasticity of demand was inelastic. of unitary elasticity. elastic. equal to 0.15.

elastic.

The actual burden of a tax falls most heavily on the side of the market that is more inelastic. falls most heavily on the side of the market that is closest to unitary elasticity. is distributed independently of relative elasticities of supply and demand. falls most heavily on the side of the market that is more elastic.

falls most heavily on the side of the market that is more inelastic.

The government sometimes provides public goods because markets are always better off with some government oversight. free-riders make it difficult for private markets to supply the efficient quantity. external benefits will accrue to private producers. private markets are incapable of producing public goods.

free-riders make it difficult for private markets to supply the efficient quantity.

Specialization in production is beneficial because it eliminates the need for the division of labor. it allows everyone to have a job that they like. it permits people to expand production and achieve rates of output that would otherwise be unattainable. it allows everyone to be self-sufficient.

it permits people to expand production and achieve rates of output that would otherwise be unattainable.

When external benefits are present in a market, more of the good will be produced than the amount consistent with economic efficiency. the amount of the good produced will be equal to the amount consistent with economic efficiency. corresponding external costs are always generated. less of the good will be produced than the amount consistent with economic efficiency.

less of the good will be produced than the amount consistent with economic efficiency.

If production of a good creates external benefits, a competitive market will likely produce more output than is efficient. less output than would maximize profit. less output than is efficient. more output than would maximize profit.

less output than is efficient.

When external costs are present in a market, corresponding external benefits are always generated. more of the good will be produced than the amount consistent with economic efficiency. less of the good will be produced than the amount consistent with economic efficiency. the amount of the good produced will be equal to the amount consistent with economic efficiency.

more of the good will be produced than the amount consistent with economic efficiency.

If the demand for a good is very price elastic, the imposition of a tax on that good places the largest portion of the tax on consumers. places the burden of the tax equally on buyers and sellers. will make demand more elastic than it was before the tax. will make demand more inelastic than it was before the tax. places the largest portion of the burden on the sellers of that product.

places the largest portion of the burden on the sellers of that product.

When demand is price inelastic, price and total revenue move in the opposite direction. price and total revenue move in the same direction. total revenue decreases whether price goes up or down. total revenue increases whether price goes up or down.

price and total revenue move in the same direction.

The government sometimes provides public goods because private markets would charge too high a price for the goods. private markets would not produce any of the goods. the government produces public goods more efficiently than private markets can. private markets would not produce the efficient quantity of the goods.

private markets would not produce the efficient quantity of the goods.

If the demand for coffee makers increases, equilibrium price will decrease and equilibrium quantity will increase. the quantity demanded will decrease. equilibrium price will increase and equilibrium quantity will decrease. quantity supplied will decrease. quantity supplied will increase.

quantity supplied will increase.

A tax imposed on the sellers of a good will raise the price paid by buyers and lower the equilibrium quantity. raise the price paid by buyers and raise the equilibrium quantity. raise the net price received by sellers and raise the equilibrium quantity. raise the net price received by sellers and lower the equilibrium quantity.

raise the price paid by buyers and lower the equilibrium quantity.

High transaction costs will tend to increase the number of mutually beneficial exchanges that occur. reduce the number of mutually beneficial exchanges that occur. allow easier specialization according to the law of comparative advantage. increase the value created by exchanges in an economy.

reduce the number of mutually beneficial exchanges that occur.

Many economists believe a general sales tax (particularly on items such as food) takes a larger proportion of income from low-income households than from high-income households. If this is true, a general sales tax is a regressive tax. proportional tax. neutral tax. progressive tax.

regressive tax.

Consider two goods - one that generates external benefits and another that generates external costs. The actual market outcome would result in a price that is higher than the efficient price for the good with an external benefit and a price that is lower than the efficient price for the good with an external cost. result in a price that is lower than the efficient price for the good with an external benefit and a price that is higher than the efficient price for the good with an external cost. result in a price that is higher than the efficient price for both goods. result in a price that is lower than the efficient price for both goods.

result in a price that is lower than the efficient price for both goods.

A decrease in the price of leather used to make shoes would cause the demand for shoes to decrease. supply of shoes to increase. demand for shoes to increase. supply of shoes to decrease.

supply of shoes to increase.

The relationship between average and marginal variables can be stated as follows: if the marginal is greater than the average, the marginal is increasing. the marginal is decreasing. the average is increasing. the total is decreasing. the average is decreasing.

the average is increasing.

When a government subsidy is granted to the buyers of a product, sellers can end up capturing some of the benefit because the market price of the product will not change in response to the subsidy. buyers will reduce their demand for the product. the market price of the product will fall in response to the subsidy. the market price of the product will rise in response to the subsidy.

the market price of the product will rise in response to the subsidy.

Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling, the number of physicals performed will increase. the supply curve for physicals shifts to the left. the quantity demanded of physicals increases and the quantity supplied of physicals decreases. the demand curve for physicals shifts to the right.

the quantity demanded of physicals increases and the quantity supplied of physicals decreases.

If production of a good creates pollution costs that impose an externality, firms will produce an optimal amount of the good. too much of the good. too little of the good. cannot be determined without additional information.

too much of the good.