Econ 202 Exam 1

Kevin spends $250 to purchase legal service from Rowan and Martin Associates. This is an example of?

product market

Maria spends $9 to have breakfast. This is an example of?

product market

If the United States government raises the income taxes on the wealthiest Americans, while increasing welfare payments to the poorest Americans, the result will likely be ___________ in efficiency and _____________ in equality in the United States.

a decrease, an increase

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 consumer a maximum of a. 30 units of corn and 30 units of wheat b. 40 units of corn and 30 units of wheat c. 40 units of corn and 20 units of wheat d. 10 units of corn and 40 units of wheat

a. 30 units of corn and 30 units of wheat

(Refer to Figure 3-21). If Uzbekistan and Azerbaijan switch from each country dividing its time equally between the production of bolts and nails to each country spending all of its time producing the good in which it has a comparative advantage, then total production will increase by a. 5 bolts and 10 nails b. 15 bolts and 40 nails c. 20 bolts and 50 nails d. 30 bolts and 80 nails

a. 5 bolts and 10 nails

(Refer to Figure 2-2). If Box A of this circular-flow diagram represents firms, then which box represents households? a. Box B b. Box C c. Box D d. any one of the other boxes (B, C, or D) could represent households

a. Box B

(Refer to Table 7-10). If the price is $1,000, a. Bobby is an eager supplier b. Dianna is an eager supplier c. Evaline's producer surplus is $100 d. all of the above are correct

a. Evaline's producer surplus is $100

When Ukraine trades with Italy, a. both countries are likely made better off b. only Italy benefits since Ukraine can produce all goods at a higher level of quality than Italy c. only Ukraine benefits since Italy's low wages guarantee that Italian farms will be profitable regardless of trade d. neither country will benefit since Ukraine is more efficient than Italy in the production of all goods

a. both countries are likely made better off

(Refer to Table 2-5). Table 2-5 shows one set of production possibilities. Based on the values in the table, the production possibilities frontier is a. bowed outward indicating increasing opportunity costs b. bowed outward indicating decreasing opportunity costs c. a straight line indicating constant opportunity costs d. bowed inward indicating increasing opportunity costs

a. bowed outward indicating increasing opportunity costs

An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 boxes per minute. Using the midpoint method, supply is a. elastic, and the price elasticity of supply is 1.74. b. elastic, and the price elasticity of supply is 0.57. c. inelastic, and the price elasticity of supply is 1.74. d. inelastic, and the price elasticity of supply is 0.57.

a. elastic, and the price elasticity of supply is 1.74.

If an externality is present in a market, economic efficiency may be enhanced by a. government intervention b. a decrease in foreign competition c. fewer market participants d. weaker property rights

a. government intervention

When there is a technological advance in the pork industry, consumer surplus in that market will a. increase b. decrease c. not change, since technology affects producers and not consumers d. not change, since consumers' willingness to pay is unaffected by the technological advance

a. increase

(Refer to Figure 2-20). According to the graph, the correlation between years of education and annual income is a. positive b. negative c. inverse d. normative

a. positive

Unemployment would cause and economy to a. produce inside its production possibility frontier b. produce on its production possibilities frontier c. produce outside its production possibilities frontier d. experience an inward shift of its production possibilities frontier

a. produce inside its production possibilities frontier

The price elasticity of demand measures how much a. quantity demanded responds to a change in price. b. quantity demanded responds to a change in income. c. price responds to a change in demand. d. demand responds to a change in supply.

a. quantity demanded responds to a change in price.

Although lawmakers legislated a 50-50 division of the payment of the FICA tax, a. the actual tax incidence is unaffected by the legislated tax incidence b. the employer now is required by law to pay more than 50% of the tax c. the employee now is required by law to pay more than 50% of the tax d. employers are no longer required by law to pay any portion of the tax

a. the actual tax incidence is unaffected by the legislated tax incidence

Tim decides to spend 4 hours playing video games rather than attending his classes. His opportunity cost of playing games is a. the value of the knowledge he would have received had he attended his class b. the $50 he could have earned if he had worked at his job for those 4 hours c. the value of his time playing video games mine the value of attending classes d. nothing, since he valued playing video games more than attending classes

a. the value of the knowledge he would have received had he attended his class

(Refer to Table 3-36). Antigua has an absolute advantage in the production of a. towels and Barbuda has an absolute advantage in the production of umbrellas b. umbrellas and Barbuda has an absolute advantage in the production of towels c. both goods and Barbuda has an absolute advantage in the production of neither good d. neither good and Barbuda has an absolute advantage in the production of both goods

a. towels and Barbuda has an absolute advantage in the production of umbrellas

Suppose that Firms A and B each produce high-resolution computer monitors, but Firm A can do so at a lower cost. Cassie and David each want to purchase a high-resolution computer monitor, but David is willing to pay more than Cassie. If Firm A produces a monitor that Cassie buys but David does not, then the market outcome illustrates which of the following principles? (i) Free markets allocate the supply of goods to the buyers who value them most highly, as measured by their willingness to pay. (ii) Free markets allocate the demands for goods to the sellers who can produce them at the least cost. a. (i) only b. (ii) only c. both (i) and (ii) d. neither (i) nor (ii)

b. (ii) only

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by a. 30% b. 40% c. 80% d. 250%

b. 40%

On a graph, consumer surplus is represented by the area a. between the demand and supply curves b. below the demand curve and above price c. below the price and above the supply curve d. below the demand curve and to the right of equilibrium price

b. below the demand curve and above price

A good will have a more inelastic demand, the a. greater the availability of close substitutes. b. broader the definition of the market. c. longer the period of time. d. more it is regarded as a luxury.

b. broader the definition of the market

(Refer to Figure 5-8). An increase in price from $15 to $20 would a. increase total revenue by $500 b. decrease total revenue by $500 c. increase total revenue by $1000 d. decrease total revenue by $1000

b. decrease total revenue by $500

For which of the following goods is the income elasticity of demand likely higher? a. water b. diamonds c. hamburgers d. housing

b. diamonds

(Refer to Figure 5-4). Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00. Then, between prices of $4.99 and $5.01, the price elasticity of demand is a. less than 1 but greater than 0 b. equal to 1 c. greater than 1 d. equal to 0

b. equal to 1

Suppose the government imposes a 30-cent tax on the sellers of soft drinks. Which of the following is not correct? The tax would a. shift the supply curve upward by 30 cents b. raise the equilibrium price by 30 cents c. reduce the equilibrium quantity d. discourage market activity

b. raise the equilibrium price by 30 cents

If Miguel expects to earn a higher income next month, he may choose to a. save more now and spend less of his current income on goods and services b. save less now and spend more of his current income on goods and services c. decrease his current demand for goods and services d. move along his current demand curves for goods and services

b. save less now and spend more of his current income on goods and services

(Refer to Figure 7-1). The value of the good to consumers minus the cost of the good to consumers amounts to $325 if the price of the good is a. $200 b. $150 c. $125 d. $100

c. $125

(Refer to Table 4-2). Whose demand does not obey the law of demand? a. Abby's b. Brandi's c. Carrie's d. Deedee's

c. Carrie's

(Refer to Figure 5-2). As price falls from Pa to Pb, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity? a. D1 b. D2 c. D3 d. all of the above are equally elastic

c. D3

Which of the following events 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. demand decreases and supply increases

Which of the following is not something that John Maynard Keynes used to describe an economist? a. he must be a mathematician, historian, statesman, and philosopher in some degree b. he must understand symbols and speak in words c. he must only contemplate in abstract and general terms d. he must study the present in light of the past for purposes of the future

c. he must only contemplate in abstract and general terms

If he devotes all of his available resources to cantaloupe production, a farmer can produce 120 cantaloupes. If he sacrifices 1.5 watermelons for each cantaloupe that he produces, it follows that a. if he devotes all of his available resources to watermelon production, then he can produce 80 watermelons b. he cannot have a comparative advantage over other farmers in producing cantaloupes c. his opportunity cost of one watermelon is 2/3 of a cantaloupe d. his production possibilities frontier is bowed-out

c. his opportunity cost of one watermelon is 2/3 of a cantaloupe

Which of the following statements exemplifies a principle of individual decision making? a. trade can make everyone better off b. governments can sometimes improve market outcomes c. the cost of something is what you give up to get it d. all of the above are correct

c. the cost of something is what you give up to get it

Jane decides to spend four hours working overtime rather than going to a family gathering. She earns $12.50 per hour for overtime work. Her opportunity cost of working is a. the $50 she earns working b. the $50 minus the enjoyment should would have received from going to the family gathering c. the enjoyment she would have received had she gone to the family gathering d. nothing, since she wanted to work more than she wanted to attend the family gathering

c. the enjoyment she would have received had she gone to the family gathering

A rational decision maker takes an action if and only if a. the average benefit of the action exceeds the average cost b. the average cost of the actions exceeds the average benefit c. the marginal benefit of the action exceeds the marginal cost d. the marginal cost of the action exceeds the marginal benefit

c. the marginal benefit of the action exceeds the marginal cost

Which of the following is correct? a. consumer surplus refers to a situation in which there are more buyers than sellers in a market b. producer surplus refers to a situation in which there are more sellers than buyers in a market c. total surplus is measured as the area below the demand curve and above the supply curve, up to the equilibrium quantity d. all of the above are correct

c. total surplus is measured as the area below the demand curve and above the supply curve, up to the equilibrium quantity

(Refer to Figure 3-23). In the nation of Croatia, the opportunity cost of a pound of ham is 0.3 pounds of cheese. Bonovia and Croatia both can gain from trading with one another if one pound of ham trades for a. 0.40 pounds of cheese b. 0.55 pounds of cheese c. 0.75 pounds of cheese d. all of the above are correct

d. all of the above are correct

If the price elasticity of demand is 1.5, regardless of which two points on the demand curve are used to compute the elasticity, then demand is a. perfectly inelastic, and the demand curve is vertical b. elastic, and the demand curve is a straight, downward-sloping line c. perfectly elastic, and the demand curve is horizontal d. elastic, and the demand curve is something other than a straight, downward-sloping line

d. elastic, and the demand curve is something other than a straight, downward-sloping line

The supply of oil is likely to be a. inelastic in both the short run and long run b. elastic in both the short run and long run c. elastic in the short run and inelastic in the long run d. inelastic in the short run and elastic in the long run

d. inelastic in the short run and elastic in the long run

Kara receives a promotion at work, which increases her income. We would expect Kara's demand for a. each good she purchases to remain unchanged b. normal goods to decrease c. substitute goods to increase d. inferior goods to decrease

d. inferior goods to decrease

The belief that tobacco is a "gateway drug" is consistent with a. the idea that tobacco and marijuana are substitutes b. the idea that an increase in income causes a decrease in the demand for tobacco and an increase in the demand for marijuana c. the idea that lower cigarette prices are associated with less use of marijuana d. most of the available evidence

d. most of the available evidence

Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 1000 units of food and 47 machines. This year it experiences a technological advantage in its machine-making industry. As a result, this year the society wants to produce 1050 units of food and 47 machines. Which of the following statements is correct? a. because the technological advance occurred in the machine-making industry, it will not be possible to increase food production without reducing machine production below 47. b. because the technological advance occurred in the machine-making industry, increases in output can only occur in the machine industry c. in order to increase food production in these circumstances without reducing machine production, the economy must reduce inefficiencies d. the technological advance reduced the amount of resources needed to produce 47 machines, so these resources could be used to produce more food

d. the technological advance reduced the amount of resources needed to product 47 machines, so these resources could be used to produce more food

Kevin earns $300 per week working for Dinah's Diner. This is an example of?

factor market