calhoun econ exam
When you are willing to pay $5 for a hamburger but you pay $4 for it, your consumer surplus for the hamburger is:
$1.
The market price of a good is $5 and 40 units of the good sell at this price. Its demand curve intersects the vertical axis at a price of $10 and has a constant slope. What is the approximate value of consumer surplus in this market?
$100
Suppose that Saudi Arabia can produce oil at $4 per barrel, Iran at $10 per barrel, and Canada at $25 per barrel. If the price of oil is $90 per barrel, what is total producer surplus per barrel for world suppliers?
$231
There are 100 consumers, each of whom values a concert ticket at a unique whole number dollar amount between $1 and $100. One customer is willing to pay $1, a second is willing to pay $2, a third is willing to pay $3, and so on. An unlimited number of concert tickets are on sale for $15 each. What is the total consumer surplus in this market?
$3,612.50
The market price of a good is $10 and 40 units of the good sell at this price. Its demand curve intersects the vertical axis at a price of $12 and has a constant slope. What is the approximate value of consumer surplus in this market?
$40
Nigeria receives $53 of producer surplus from each barrel of oil sold at $60. At that level of production, Nigeria's cost to produce a barrel of oil is:
$7.
Iceland produces two goods: Viking hats (Y) and fish (X). Its production possibilities frontier is characterized as: Y = 50 - 2X. What is the opportunity cost of producing a tenth Viking hat (i.e., going from a production level of nine Viking hats to a production level of 10 Viking hats)?
0.5 units of fish
Iceland produces two goods: Viking hats (Y) and fish (X). Its production possibilities frontier is characterized as: Y = 50 - 2X. What is the opportunity cost of producing a tenth unit of fish (i.e., going from nine units of fish production to 10)?
2 Viking hats
Jack and Jill work at a bakery. In one hour, Jack can decorate either 5 ice-cream cakes or 2 wedding cakes. In one hour, Jill can decorate either 4 ice-cream cakes or 1 wedding cake. Thus, the opportunity cost of decorating an ice-cream cake is _____ for Jack and _____ for Jill.
2/5 wedding cake; 1/4 wedding cake
Conan O'Brien hosts the Conan show and Andy Richter, his sidekick, writes for it. Conan needs 4 hours to rehearse and host a good show. It takes Andy 10 hours to do the same. Conan writes one usable joke in an hour, but Andy needs 2 hours to do the same. Conan's opportunity cost of rehearsing and hosting a show is:
4 usable jokes.
Conan O'Brien hosts the Conan show and Andy Richter, his sidekick, writes for it. Conan needs 4 hours to rehearse and host a good show. It takes Andy 10 hours to do the same. Conan writes one usable joke in an hour, but Andy needs 2 hours to do the same. Andy's opportunity cost of rehearsing and hosting a show is:
5 usable jokes.
Uni-Trax Publishers allows its sales team to buy and sell shares that pay out $1 only if the sales in the future fall within a certain range. Suppose that, currently, shares for sales between 1,000 textbooks and 2,000 textbooks are selling for 10 cents each. Shares for sales between 2,000 and 3,000 textbooks are selling for 30 cents each. Shares for sales between 3,000 and 4,000 textbooks are selling for 40 cents each. Based on this information, what is the probability of Uni-Trax Publishers selling between 2,000 and 4,000 textbooks?
70%
Which of the following choices correctly illustrates how changes in opportunity costs affect supply?
A farmer produces corn and wheat. The price of wheat rises, so he shifts his resources toward wheat and the supply of wheat rises.
A retail outlet sells bottled water. Which scenario would cause them to use a "buy low and sell high" strategy with bottled water?
A hurricane is expected to arrive within one week.
Each of 100 people receives a random item from a grocery store and assigns it a value between 1 (low) and 10 (high). They trade those items among themselves for items they prefer rather than those they randomly received and then assign a second value (again, 1 to 10) to the item that they end up with after the trading concludes. How would the sum of those values before trading compare with the sum after trading?
After trading, value would be higher because preferences are diverse.
In 2011, the United States Senate voted to end ethanol subsidies. What will be the effect of this bill in the market for ethanol?
Supply will decrease
How are oil prices and sugar prices related?
As oil prices increase, producers divert sugar cane from sugar production to ethanol production.
Why is the world unlikely to ever literally run out of oil?
As the cheap-to-produce oil gets used up, the price of oil will rise, encouraging conservation and production using more expensive techniques.
Brazil can produce one unit of sugar cane for one unit of labor and one iPod for eight units of labor, and China can produce one unit of sugar cane for two units of labor and one iPod for four units of labor. What are each country's opportunity costs of producing iPods?
Brazil: 8 units of sugar cane; China: 2 units of sugar cane
Which scenario would cause a speculator in chicken and beef futures to use a "buy low and sell high" strategy for chicken?
Cows are found to be infected with "Mad Cow Disease" and must be destroyed.
David sells his car, which he considers worthless, to Cameron for $200. Which of the following statements is true?
David and Cameron must have different preferences for the car.
The United Nations estimates that Earth's population growth rate will slow down by the year 2050 at which time population may start to decrease. If technological change allows the supply of oil to increase at a constant rate, and nothing else changes, what effect will a slowdown in population growth have on the price of oil?
Demand will increase more slowly during this period but since supply is growing at a constant rate, the rate of price increase will fall, and ultimately the price of oil may begin to fall.
The United States and the European Union are groups of semi-independent states that have come together under an agreement whereby resources can travel freely across borders and a common currency is in use. Which of the following statements best explains how this allows for the achievement of economies of scale?
Each state or country can adopt large-scale production techniques that allow lower per-unit costs of production.
From the chapter discussion, why did increased ethanol production and consumption in Brazil result in higher sugar prices?
Farmers reallocated sugar cane to ethanol production, decreasing the production of sugar, and leading to higher sugar prices.
Suppose France can produce four phones or three computers with one unit of labor, and Sweden can produce one phone or two computers with one unit of labor. If France can trade only with Sweden, then the theory of comparative advantage suggests that:
France should specialize in producing phones and import computers from Sweden.
Futures contracts reduce future uncertainty. Which statement(s) show how this is achieved? I. Futures contracts allow the parties involved to mitigate possible shortages in quantities of the good. II. Futures contracts allow the parties involved to mitigate unexpected changes in price that could hurt earnings. III. Futures contracts always allow the seller to receive a price that is higher than the market price for the product.
I and II only
How is a class in which students are graded on a curve like a competitive market?
In a competitive market, demanders compete against one another for goods, the same way students compete for grades.
What will happen to the supply of workers 18 to 21 years after a baby boom?
It will increase because of the influx of new adults into the labor market.
Jesse is good at math and excellent at making friends and Addae is equally good at both. Mathematically and socially challenged Jordan wants to hire tutors to help in each area. Who should tutor Jordan in which area to maximize Jordan's college experience?
Jesse should teach how to make friends and Addae should teach math.
Jack and Jill work at a bakery. In one hour, Jack can decorate either 5 ice-cream cakes or 2 wedding cakes. In one hour, Jill can decorate either 4 ice-cream cakes or 1 wedding cake. According to this scenario, which of the following outcomes will benefit both Jack and Jill the most?
Jill specializes in decorating ice-cream cakes and Jack specializes in decorating wedding cakes.
John and Tom enter into a futures contract in which John agrees to deliver 500 crates of coffee to Tom one year from now. Tom agrees to pay a price of $200 per crate. A year from now, John and Tom find that the market price of coffee is $210 per crate. How might they make a cash settlement on the contract?
John and Tom enter into a futures contract in which John agrees to deliver 500 crates of coffee to Tom one year from now. Tom agrees to pay a price of $200 per crate. A year from now, John and Tom find that the market price of coffee is $210 per crate. How might they make a cash settlement on the contract?
The locovore movement encourages eating locally produced food to reduce the greenhouse gases emitted from transporting food long distances, placing upward pressure on local land prices as farmland becomes more valuable. Which statement reflects what will likely occur as a result?
Local forests become less common.
Two centrally planned economies in 2011 were:
North Korea and Cuba.
Two persons each produce two identical goods. Which of the following is true about their absolute and comparative advantages in the production of these two goods?
One person can have an absolute advantage in both goods but not a comparative advantage in both goods.
In a competitive market, what does it mean when a company goes out of business?
Resources are freed up to go to some other higher-valued use.
During World War II, natural rubber (from rubber trees) became incredibly scarce. Some even feared its complete exhaustion. The development of synthetic rubber staved off this doomsday scenario. Explain why, just when the Allies needed it most, this turn in good fortune was likely not a coincidence?
Scarcity raised the price of natural rubber, creating the incentive to invent a substitute.
After adjusting for inflation, a comparison of the price of leg warmers reveals that the price of leg warmers was significantly higher in the 1980s than it is today. Which of the following can explain this?
Since the 1980s jeans have become preferable to leg warmers, decreasing the demand for leg warmers.
Suppose a country without any international trade opens its borders to international trade. After specialization how will its location on its production possibility frontier change?
The country moves from on the PPF to beyond the PPF.
Suppose it is widely believed that the price of flat-screen, high-definition televisions will be lower next year. What will happen as a result of such beliefs?
The demand for flat-screen TVs will decrease now.
The U.S. government limits the importation of Chinese-made bras. What effect does this trade restriction have on the market for bras?
The equilibrium price will increase and the equilibrium quantity will decrease.
A firm produces volleyballs and soccer balls. What happens to the supply of soccer balls if the market price of volleyballs increases?
The opportunity cost of producing soccer balls rises, so the supply curve of soccer balls decreases.
Land used to grow corn can also grow soybeans. As the demand for corn used in ethanol began to increase the price of corn, what happened to the price of soybeans?
The price of soybeans rose since farmers began planting corn instead of soybeans, thus decreasing the supply of soybeans
What will happen in the market for cotton as a result of a severe drought?
The supply of cotton will decrease, causing the equilibrium price to rise and equilibrium quantity to fall.
Peoples' expectation of the price of gasoline going up tomorrow may increase the demand for gasoline today. If so, what does this imply about the relationship between gasoline tomorrow and gasoline today?
They are substitutes.
Which statement is an example of speculation?
selling stocks in Microsoft after hearing a rumor about a promising new Google product
Tim values treats for his dog at $10 per box, and John values them at $6 per box. If the price of dog treats is $3 per box but only one box is available between these two buyers, then gains from trade will be maximized when:
Tim buys the treats.
Which of the following statements is TRUE?
When the price of oil rises, consumers tend to use oil for uses in which there are few substitutes for it.
Brazil can produce one unit of sugar cane for one unit of labor and one iPod for eight units of labor, and China can produce one unit of sugar cane for two units of labor and one iPod for four units of labor. Which of the following is true?
With trade, Brazil should specialize in sugar cane and China in iPods.
Zoey receives a big raise at work and decides to buy additional porcelain figurines. Which of the following statements is TRUE?
Zoey considers porcelain figurines to be a normal good.
A decrease in expected future supply of a good will lead to:
a change in the demand for the good even before the supply actually decreases.
Which of the following might explain why the price of DVD players has been falling?
a decrease in the price of high-definition Blu-ray players
Which of the following would cause the demand for hot dog buns to increase?
a fall in the price of hot dogs
Imagine a free market in equilibrium. After a sudden increase in demand (but before the price can adjust), the market experiences:
a shortage.
Like a tango, it takes two to make a futures contract. But unlike the tango, the participants in a futures contract:
disagree about the future.
The development of shipping containers enabled companies to move freight quickly between ships, trucks, and trains by loading a single large container with many different goods and then moving the container. Before the container, freight had to be loaded and unloaded one palette, barrel, or box at a time. What impact did the shipping container have on globalization? Why?
an increase, because it decreased transportation costs
In the market for fertilizer, an:
advance in technology will increase the supply of fertilizer.
After a hurricane in Florida destroys half of the orange crop, economists predict:
an increase in orange prices and a decrease in orange sales.
The current demand for parking in a city's downtown district is such that all the parking garages are full. If there is an increase in the city's population, there will be:
an increase in the willingness to pay for parking.
If supply decreases and its slope remains the same, consumer surplus:
decreases.
In 1980 when Iraq attacked Iran, the price of oil _______ because of a(n) ______.
increased; disruption in the supply of oil
If the value of a heap of asphalt to be used on one's driveway is greater than the opportunity cost of using the heap elsewhere, then the asphalt will:
be used on the driveway.
With speculation, prices:
become less volatile than they otherwise would be.
Gains from trade will be maximized at the free market equilibrium price and quantity because the supply of goods is:
bought by the buyers who have the highest willingness to pay.
A United States. manufacturer arranges to purchase parts from a German supplier for 500,000 euros in six months. The United States manufacturer is concerned that the dollar will depreciate against the euro, meaning the dollar cost of the 500,000 euros will rise. The United States manufacturer should:
buy a futures contract that fixes the dollar cost of 500,000 euros in six months.
After the September 11th attacks, one division of the Pentagon began to set up a Policy Analysis Market (PAM), a prediction market for political events in the Middle East. United States senators cancelled the program after discovering that it would allow futures contracts for assassinations and terrorist attacks. Had the PAM survived, how might it have helped the United States government?
by aggregating dispersed information about political events into a single, readable signal
If the price of swimming pools decreases, we would expect the demand for:
chlorine, a complement good, to increase.
Iceland produces two goods: Viking hats (Y) and fish (X). Its production possibilities frontier is characterized as: Y = 50 - 2X and tells us that the opportunity cost of catching (producing) an additional unit of fish in Iceland is:
constant in fish production.
Speculation tends to ______ volatility in prices over time.
decrease
Imagine that millions of refugees move out of country A and into country X. This would cause the demand for housing in country A to _____ and the demand for housing in country X to _____.
decrease; increase
Specialization and trade can _____ the per-unit cost of production because _____ .
decrease; it creates economies of scale associated with large-scale production
Suppose that Country X is a high-cost producer of oil and Country Y is a low-cost producer of oil. The citizens of Country X use both oil produced in their own country as well as oil produced in Country Y. If the market price of oil decreases, oil production in Country X will _______, and the citizens of Country X will _________________.
decrease; purchase a larger fraction of their oil from Country Y
When Asian countries went into a recession in 1997, the demand for oil _______ and the price of oil ________.
decreased; decreased
If market demand decreases:
equilibrium price and quantity will both decrease.
If market supply increases:
equilibrium price will decrease but equilibrium quantity will increase.
In a free market setting where quantity supplied is 50 units and quantity demanded is 40 units, price will:
fall.
If a central planner had the power to solve the great economic problem:
his incentive would be to use that power to enrich himself, not to solve the problem.
As the population of elderly in the United States increases, which service will likely see the biggest increase in demand?
home medical care
Cell phone data plans are most useful when used with a smartphone, and smartphones are most useful when used with a data plan. As the price of data plans falls, the demand for smartphones will:
increase, because smartphones and data plans are complements.
As world coal prices rise due to increasing scarcity and coal-based energy costs rise, the demand for wind energy will:
increase.
When gasoline prices are high, oil refiners have an incentive to pull every last drop of gasoline out of a barrel of crude. This implies that an increase in the demand for gasoline will cause a(n) ______ quantity supplied of gasoline and ______ the supply of the remaining crude oil products.
increased; reduce
A barrel of oil can be used to produce both gasoline and asphalt. If the price of gasoline falls, the supply of asphalt ________ and asphalt prices ________.
increases; decrease
If the price of computers ______, the demand for printers will ______.
increases; decrease
If the price of shotguns ______, the demand for shotgun shells will _______.
increases; decrease
Both ethanol and sugar are made from sugar cane and ethanol can be used as a substitute for oil. As the price of oil increases, Brazilians shift sugar cane from sugar production to ethanol production, thereby:
increasing the price of sugar.
A decrease in the opportunity cost of steel production will:
make suppliers more likely to produce steel, thus shifting the supply curve down and to the right.
Facilitators of trade (such as Pierre Omidyar, the developer of eBay):
may become very rich since they are creating value for many individuals.
When they guess correctly about price movements, speculators:
move goods from periods of low-use value to periods of high-use value, making society better off.
In his prime, Michael Jordan played both professional basketball and professional baseball. Compared with most people, Jordan would have an absolute advantage in:
playing both basketball and baseball since he was better at both than the average person.
Which of the following would cause the current supply of iPods to increase?
producers expecting that the future price of iPods will decrease
When the price of pizza increases, consumers have an incentive to:
purchase substitute goods, such as Chinese food.
Technological advances have increased the supply of digital cameras. As a result the:
quantity demanded for digital cameras will increase.
In a free market setting where quantity supplied is 50 units and quantity demanded is 50 units, price will:
remain the same.
Markets have the advantage over central planning as the method of resource allocation because:
resources travel to their highest-value uses.
In a free market setting where quantity supplied is 40 units and quantity demanded is 50 units, price will:
rise.
Imagine a free market in equilibrium. After a sudden decrease in supply (but before the price can adjust), the market experiences a:
shortage.
A technological innovation in the production of golf balls increases ______, causing the price to ______ and the ______.
supply; fall; quantity demanded to increase
In a free market, the price of a good is equal to:
the good's value if employed in its next highest-valued use.
In 2011, revolutions and uprisings spread across North Africa and the Middle East, where a lot of oil is pumped. How did this affect the oil market?
the supply curve for oil shifted to the left
After a hurricane knocks out power to thousands of households, the price of electric generators increases threefold. According to economists:
this discourages the use of electric generators in low-value uses, making them more readily available for high-value uses.
If instead of specialized doctors (neurologists, cardiologists, gastroenterologists, etc.) we had doctors who each knew the same things about all aspects of medicine, it would be:
worse because total medical knowledge in society would decrease.