ECON 2000- exam 3

Sally's super salon earned 3750 in total revenues last month when it sold 125 haircuts. This month it earned 3600 in total revenue when it sold 90 haircuts. The price of elasticity of demand for sally's super salon is? a. .33 b. .88 c. 1.14 d. 7.98

(Q2-Q1)/(Q2+Q1)/2 (P2-P1)/(P2+P1)/2 C. 1.14

A key determinant of the price elasticity of supply is the a. time horizon b. income of consumers c. price elasticity of demand d. Importance of the good in the consumers budget

A

Assume that Zimbabwe and Portugal can switch between producing toothbrushes and producing hairbrushes at a constant rate. Assume that Zimbabwe and Portugal each has 60 machine minutes available. Originally, each country divided its time equally between the production of toothbrushes and hairbrushes. Now, each country spends all its time producing the good in which it has a comparative advantage. As a result, the total output increased by Select one: a.4 toothbrushes and 2 hairbrushes. b.10 toothbrushes and 5 hairbrushes. c.16 toothbrushes and 8 hairbrushes. d.20 toothbrushes and 10 hairbrushes.

A

Both Dave and Caroline produce sweaters and socks. If Dave's opportunity cost of 1 sweater is 3 socks and Caroline's opportunity cost of 1 sweater is 5 socks, then Select one: a.Dave has a comparative advantage in the production of sweaters. b.Caroline has a comparative advantage in the production of sweaters. c.Dave has a comparative advantage in the production of socks. d.Dave has a comparative advantage in the production of both sweaters and socks.

A

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the Select one: a.smaller is the price elasticity of supply. b.larger is the price elasticity of demand. c.All of the above are correct. d.larger is the amount of the tax.

A

Consider the market for fans in the equilibrium. A summer of unseasonably cool weather would cause A. both equilibrium price and quantity to decrease b. bother equilibrium price and quantity to increase c. the equilibrium price to increase and the equilibrium quantity to decrease d. the equilibrium price to decrease and the equilibrium quantity to increase

A

For a particular good a 5 % increase in price causes a 15% decrease in quantity demanded. Which of the following statements is most likely applicable to this good? A. there are many substitutes for this good B. the good is a necessity C. The market for the good is broadly defined D. the time horizon is short

A

For a particular good, a 12 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good? A.The good is a necessity B. there are many substitutes for this good C. the market for the good is broadly defined D. the relevant time horizon is short

A

Gretchen is a writer who works from her home. Gretchen lives next door to Randall, the trumpet player for a local band. Randall needs lots of practice to earn his share of the band's profit, which will amount to $350. Gretchen gets distracted by Randall's trumpet playing but she needs to get her writing done to earn $570 for her current article. If Randall owns the right to play his music and Gretchen needs to hire a lawyer to help her reach an agreement with Randall, then what price is Gretchen willing to pay the lawyer? Select one: a.less than $220 b.less than $350 c.less than $570 d.less than $920

A

Monopolies are inefficient because they (i) eliminate barriers to entry. (ii) price their product at a level where marginal revenue exceeds marginal cost. (iii) restrict output below the socially efficient level of production. Select one: a.(iii) only b.(i) and (ii) only c.(ii) and (iii) only d.(i), (ii), and (iii)

A

On a graph we draw consumers budget constraint, measuring the # of apples on the horizontal axis and the # of light bulbs on the verticle axis. If the slope of the budget constraint is -2, then a. an apple cost twice as much as a light bulb b. an opportunity cost of a light bulb is 2 apples c. the opportunity cost of an apple is one-half of a light bulb c. all of the answers are correct

A

Suppose that a market is allowed to adjust freely to its equilibrium price and quantity, then an increase in demand will a. increase producer surplus b. not affect producer surplus c. reduce producer surplus d. any of the above are possible

A

The figure illustrates the market for coffee in Guatemala. With trade, Guatemala will Select one: a.export 22 units of coffee. b.export 10 units of coffee. c.import 30 units of coffee. d.import 12 units of coffee.

A

The only 4 consumers in a market have the following willingness to pay for a good: Buyer Willingness to Pay Paul $15 Quilana $25 Wilbur $35 Ming-la $45 If the price is $20, then consumer surplus in the market is Select one: a.$45, and Quilana, Wilbur, and Ming-la purchase the good. b.$55, and Carlos, Wilbur, and Ming-la purchase the good. c.$45, and Carlos and Quilana purchase the good. d.$20, and Wilbur and Ming-la purchase the good.

A

Which of the following events would cause an increase in the supply for ceiling fans? A. the number of ceiling gans increase B. There is an increase in the price of air conditioners, and consumers regard air conditioners and ceiling fans as substitutes C. there is an increase in the price of the motor that powers ceiling fans D. all of the above

A

if the cross-price elasticity for two goods is positive, then the two goods are a. Substitutes b. complements c. normal goods d. inferior goods

A

#47 Suppose the government places a $5 per-unit tax on this good. The amount of tax revenue collected by the government is Select one: a.$50. b.$80. c.$120. d.$30.

A count the lines till 5 then multiply by the quantity number 5x10

#36 This graph shows the market demand and market supply curves for good crawfish po-boys. Which of the following statements is NOT correct? Select one: a.A price ceiling set at $3.50 would result in a surplus. b.A price floor set at $7 would be binding, but a price floor set at $4 would not be binding. c.A price floor set at $6.50 would result in a surplus. d.A price ceiling set at $4 would be binding, but a price ceiling set at $6 would not be binding. Clear my choice

A price ceiling- maximum price that can legally be charged for a good price floor: legal minimum at which a good can be sold

Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day. Assume that Jamaica and Norway each has 4 days available for production. Originally, each country divided its time equally between the production of coolers and radios. Now, each country spends all its time producing the good in which it has a comparative advantage. As a result, the total output of radios increased by Select one: a.3. b.6. c.9. d.12.

B

Bintu has a comparative advantage in the production of Select one: a.bowls and Juba has a comparative advantage in the production of cups. b.cups and Juba has a comparative advantage in the production of bowls. c.both goods and Juba has a comparative advantage in the production of neither good. d.neither good and Juba has a comparative advantage in the production of both goods.

B

Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are available only in limited quantities. In this market, an increase in demand will Select one: a.increase price in the short run but not in the long run. b.increase price in the long run but not in the short run. c.not affect price in either the short or the long run. d.increase price both in the short and the long run. Clear my choice

B

Graph on paper Suppose Phil and miss k are the only consumers in the market. If the price is $6, then the market quantity demand is: A. 4 units B. 6 units C. 8 units D. 12 units

B

If max experiences a decrease in his income, then we would expect maxs demand for A. each good he purchases to remain unchanged B. normal goods to decrease C. luxury goods to increase D. inferior goods to decrease

B

Maxine's Production Possibilities FrontierDaisy's Production Possibilities Frontier (charts on looseleaf) Suppose Daisy is willing to trade 3/4 tart to Maxine for each pie that Maxine makes and sends to Daisy. Which of the following combinations of pies and tarts could Maxine not then consume, assuming Maxine specializes in making pies and Daisy specializes in making tarts? Select one: a.4 pies and 6 tarts b.6 pies and 5 tarts c.8 pies and 3 tarts d.10 pies and 1.5 tarts

B

On the diagram below, Q represents the quantity of crude oil and P represents the price of crude oil. When the country for which the figure is drawn allows international trade in crude oil, Select one: a.consumer surplus changes from the area A + B + D to the area A. b.producer surplus changes from the area C to the area B + C + D. c.total surplus decreases by the area D. d.All of the above are correct.

B

Suppose the government imposes a tax on cheese. The deadweight loss from this tax will likely be greater in the Select one: a.first year after it is imposed than in the eighth year after it is imposed because demand and supply will be less elastic in the first year than in the eighth year. b.eighth year after it is imposed than in the first year after it is imposed because demand and supply will be less elastic in the first year than in the eighth year. c.eighth year after it is imposed than in the first year after it is imposed because demand and supply will be more elastic in the first year than in the eighth year. d.first year after it is imposed than in the eighth year after it is imposed because demand and supply will be more elastic in the first year than in the eighth year.

B

Suppose you. make jewelry. If the price of gold falls, then we would expect you to A. be willing to produce less jewelry than b4 at each possible price. B. be willing and able to produce more jewelry than before at each possible price c. face a greater demand for your jewelry d. face a weaker demand for your jewelry

B

The vertical distance between points A and B represents a tax in the market. When the tax is imposed in this market, buyers effectively pay what amount of the $10 tax? Select one: a.$4 b.$6 c.$0 d.$10

B

When goods do not have a price, which of the following primarily ensures that the good is produced? Select one: a.sellers b.government c.buyers d.the market

B

A surplus of a good would result when a Select one: a.nonbinding price floor is imposed on a market. b.binding price floor is imposed on a market. c.binding price floor is removed from a market. d.nonbinding price floor is removed from a market.

B binding: when a gov sets a required price on a good/s at a price above equilibrium

Suppose the government puts a tax on a market with inelastic supply and elastic demand, then Select one: a.buyers will bear most of the burden of the tax. b.sellers will bear most of the burden of the tax. c.the burden of the tax will be shared equally between buyers and sellers. d.it is impossible to determine how the burden of the tax will be shared.

B inelastic: people will buy no matter wat elastic: people are sensitive to price

Gwen has decided to start her own photography studio. To purchase the necessary equipment, Gwen withdrew $2,000 from her savings account, which was earning 3% interest, and borrowed an additional $4,000 from the bank at an interest rate of 7%. What is Gwen's annual opportunity cost of the financial capital that has been invested in the business? Select one: a.$60 b.$340 c.$280 d.$660

B just multiply numbers then add together

#17 Which of the following would cause the supply curve to shift from supply B to supply A in the market for butter A.a decrease in the price of butter B. an increase in the price of margin C. an increase in the price of milk D. an improvement in technology that allows firms to use less labor in the production of butter

C

#42 When the price is P1, consumer surplus is Select one: a.A. b.A+B+D. c.A+B+C. d.A+B.

C

A ex of complementray goods for most people would be a. butter and margine b. lawnmowers and automobiles c. cerel and milk d cola and lemonade

C

A view of a spectacular sunset along a private beach is an example of a Select one: a.public good. b.private good. c.nonrival but excludable good. d.rival but nonexcludable good.

C

An improvement in production technology will A. increase a firms cost and increase its supply B. Increase a firms cost and decrease its supply C. decrease a firms costs and increase its supply D. decrease a firms cost and decrease its supply

C

If muffins and bagels are substitutes, a higher price for bagels would result in a A. increase in the demand for bagels B. decrease in the demand for bagels C. increase in the demand for muffins D. decrease in demand for muffins

C

If the distribution of water is a natural monopoly, then (i) multiple firms would likely each have to pay large fixed costs to develop their own network of pipes. (ii) allowing for competition among different firms in the water-distribution industry is efficient. (iii) a single firm can serve the market at the lowest possible average total cost. Select one: a.(i) and (ii) only b.(ii) and (iii) only c.(i) and (iii) only d.(iii) only

C

If the price elasticity of demand for a good is .3, then a 20% decrease in price results in a a. .015% increase in quantity demand b. .6% percent increase in quantity demanded c. 6% increase in quantity demanded d. 66 percent increase in the quantity demanded

C

If the supply of a product increases, then we would expect equilibrium price A. to increase and the equilibrium quantity to decrease c. to decrease and the equilibrium quantity to increase d. and equilibrium quantity to both increase b. and equilibrium quantity to both decrease

C

The majority of economists prefer corrective taxes to regulation as a way to correct the problem of pollution because Select one: a.the market-based solution can result in a greater reduction in pollution. b.the market-based solution raises revenue for the government. c.All of the above are correct. d.the market-based solution is less costly to society.

C

The two taxes that together provide the U.S. federal government with almost 80 percent of its revenue are Select one: a.sales taxes and payroll taxes. b.individual income taxes and corporate income taxes. c.individual income taxes and payroll taxes. d.individual income taxes and property taxes.

C

Tyler is willing to pay $400 for a new laptop, but he is able to buy the laptop for $250. His consumer surplus is Select one: a.$250. b.$650. c.$150. d.$400.

C

When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an importer of a particular good, Select one: a.producer surplus increases and total surplus increases in the market for that good. b.producer surplus increases and total surplus decreases in the market for that good. c.producer surplus decreases and total surplus increases in the market for that good. d.producer surplus decreases and total surplus decreases in the market for that good.

C

Will created a new software program he is willing to sell for $200. He sells his first copy and enjoys a producer surplus of $150. What is the price paid for the software? Select one: a.$200. b.$150. c.$350. d.$50.

C

#45 Consider the market shown in the graph above. If the equilibrium price rises from $60 to $120, what is the additional producer surplus to initial producers in the market? Select one: a.$2,400 b.$1,200 c.$4,800 d.$3,600

C 60x80

Suppose a tax of $4 per unit is imposed on a vaping liquid, and the tax causes the equilibrium quantity of vaping liquid to decrease from 2,000 units to 1,700 units. The tax decreases consumer surplus by $3,000 and decreases producer surplus by $4,400. The deadweight loss of the tax is Select one: a.$200. b.$1,200. c.$600. d.$400.

C DWL=1/2(tax)(change in quantity)

#13 Which of the following would cause the demand curve to shift from demand C to Demand A in the market for tennis balls in the Us? A. an increase in the price of tennis balls B. a decrease in the price of tennis rackets C. an expectation by buyers that their incomes will increase in the very near future D. a decrease in the number of people in the US under the age of 70

D

#22 The diagram below pertains to the demand for turkey in the US. All else equal, a decrease in the price of the grain fed to turkeys would cause a move from A. DA toDB B. DB to DA C. x to y D, y to x

D

#26 Using the midpoint method between price of 70 and 80, the price elasticity of demand is A. .33 b. .4 c. 1.33 d. 3

D

#38 The dashed vertical line between points A and B shows the amount of a tax in the market. The price that buyers pay after the tax is imposed is Select one: a.$10. b.$8. c.$16. d.$24.

D

A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggest that the city raise the price of admission to current municipal pools this year to rasie revenues. The city manager suggests that the city lower the price admission to raise revenues. Who is correct ? A. both the mayor and city manager would be correct if demand were price elastic b. both the mayor and city manager would be correct if demand were inelastic c. the mayor would be correct if demand were price elastic. the city manager would be correct if demand were inelastic d. the mayor would be correct if demand were price inelastic. the city manager would be correct if the demand were price elastic

D

A competitive market is a market in which A. an auctioneer helps set prices and arrange sales B there are only a few sellers C. the forces of supply and demand do not apply D. no in dividual buyer or seller has any significant impact on the market

D

Consider the market for new DVDs. If the DVD players became cheaper, buyers expected DVD prices to fall next year, used DVDS became more expensive, and DVD production technology improved, then the equilibrium price of the new DVD would? A. rise B. fall C. stay the same D. could rise fall or remain unchanged

D

In the long run a company that produces and sells candy bars incurs total costs of $1,200 when output is 2,400 candy bars and $1,400 when output is 2,900 candy bars. The candy bar company exhibits Select one: a.economies of scale because total cost is rising as output rises. b.diseconomies of scale because average total cost is rising as output rises. c.diseconomies of scale because total cost is rising as output rises. d.economies of scale because average total cost is falling as output rises. Clear my choice

D

Suppose Jim and Tom can both produce baseball bats. If Jim's opportunity cost of producing baseball bats is lower than Tom's opportunity cost of producing baseball bats, then Select one: a.Tom must have an absolute advantage in the production of baseball bats. b.Jim must have an absolute advantage in the production of baseball bats. c.Tom has a comparative advantage in the production of baseball bats. d.Jim has a comparative advantage in the production of baseball bats.

D

Suppose a tax is imposed that the buyers of a good must pay to the government. This will raise the Select one: a.price paid by buyers and raise the equilibrium quantity. b.effective price received by sellers and raise the equilibrium quantity. c.effective price received by sellers and lower the equilibrium quantity. d.price paid by buyers and lower the equilibrium quantity.

D

When the absence of property rights causes a market failure, the government can potentially solve the problem Select one: a.by clearly defining property rights. b.through regulation. c.by supplying the good itself. d.All of the above are correct.

D

When the government places a new tax on a good, Select one: a.a wedge is placed between the price buyers pay and the price sellers effectively receive. b.there is a decrease in the quantity of the good bought and sold in the market. c.government collects revenues which might justify the loss in total welfare. d.All of the above are correct.

D

Which of the following statements is true? (i) When a competitive firm sells an additional unit of output, its revenue increases by an amount less than the price. (ii) When a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price. (iii) Average revenue is the same as price for both competitive and monopoly firms. Select one: a.(ii) only b.(iii) only c.(i) and (ii) only d.(ii) and (iii) only

D

what will happen to the equilibrium price of new textbooks if more students attend college, paper becomes cheaper, textbook authors accept lower royalties, and fewer textbooks are sold? a. price will rise b. price will fall c. price will stay the same d. the price change will be ambiguous

D

Alanna is an organic lettuce farmer, but she also spends part of her day as a professional organizing consultant. As a consultant, Alanna helps people organize their houses. Due to the popularity of her home-organization services, Farmer Alanna has more clients requesting her services than she has time to help if she maintains her farming business. Farmer Alanna charges $25 an hour for her home-organization services. One spring day, Alanna spends 10 hours in her fields planting $130 worth of seeds on her farm. She expects that the seeds she planted will yield $300 worth of lettuce. Alanna's economic profit from farming equals Select one: a.$130. b.$-80. c.$170. d.$-130.

D Opp cost 25x10=250 total explicit cost=130 total revenue= 300 totalrevenue-(opp. cost+ totalrevenue)=

#39 Use the graph above to analyze the effect of a $6 tax. How much will sellers receive per unit after the tax is imposed? Select one: a.between $4 and $7 b.$10 c.between $7 and $10 d.$4

D count the lines in between that add up to 6

#48 The vertical distance between points A and B represents a tax in the market. What is the amount of deadweight loss caused by this tax? Select one: a.$45.25. b.$35.00. c.$105.00. d.$52.50.

D DWL: 1/2(P2-P1)(Q1-Q2)

Which of the following is the best example of a perfectly competitive market? A. cable Tv market B. soybean market C. breakfest cerel market D. shampoo market

D. soybean

FOr which of the following good is the income elasticity of demand likely highest? a. natural gas b. doctos vists c. hamburgers d. boats

d

Refer to Table above. What is the marginal cost of producing the fifth unit of output? Select one: a.$40 b.$70 c.$50 d.$4

marginal cost- cost of producing last unit of output B