Econ 2023 Exam 1 Review

Refer to Figure 4-4. What is the value of the deadweight loss at the equilibrium price of $15? A) $0 B) $40 C) $60 D) $100

$0

Refer to Figure 4-3. If the market price is $2.50, what is Kendra's consumer surplus? A) $9.00 B) $7.50 C) $1.50 D) $0

$1.50

Refer to Figure 4-4. What is the value of producer surplus at the equilibrium price of $15? A) $80 B) $160 C) $240 D) $400

$160

Refer to Figure 4-15. How much of the tax is paid by sellers? A) $2 B) $5 C) $7 D) $12

$2

Refer to Figure 4-4. What is the value of consumer surplus at the equilibrium price of $15? A) $60 B) $120 C) $180 D) $240

$240

Refer to Figure 4-15. How much of the tax is paid by buyers? A) $2 B) $5 C) $7 D) $12

$5

Refer to Table 4-6. The table above lists the marginal cost of polo shirts by Marko's, a firm that specializes in producing men's clothing. If the market price of Marko's polo shirts is $30, producer surplus is A) $0 B) $16 C) $52 D) $68.

$68.

Refer to Figure 2-14. What is the opportunity cost of producing 1 popsicle in Iceland? A) 1 1/2 snow cones B) 3/4 of a snow cone C) 2/3 of a snow cone D) 270 snow cones

1 1/2 snow cones

Refer to Figure 2-14. What is the opportunity cost of producing 1 popsicle in Greenland? A) 2/3 of a snow cone B) 5/6 of a snow cone C) 1 1/5 snow cones D) 240 snow cones

1 1/5 snow cones

Refer to Table 3-4. The table above shows the demand schedules for cashews of two individuals (Jordy and Amy) and the rest of the market. At a price of $6, the quantity demanded in the market would be A) 87 lbs B) 95 lbs C) 103 lbs D) 215 lbs.

103 lbs

Refer to Figure 2-14. What is the opportunity cost of producing 1 snow cone in Iceland? A) 2/3 of a popsicle B) 3/4 of a popsicle C) 1 1/2 popsicles D) 180 popsicles

2/3 of a popsicle

Refer to Figure 2-14. What is the opportunity cost of producing 1 snow cone in Greenland? A) 2/3 of a popsicle B) 5/6 of a popsicle C) 1 1/5 popsicles D) 200 popsicles

5/6 of a popsicle

Allison's Auto Art is a company that applies pinstripes to vehicles. Allison's cost for a basic 1-color pinstriping job is $35, and she charges $95 for this service. For a total price of $175, Allison will apply a fancier 3-color pinstripe application to an automobile, a service that adds an additional $40 to the total cost of the package. What is Allison's marginal benefit if she sells a basic 1-color job? A) 35 B) 60 C) 95 D) The marginal benefit cannot be determined.

95

Refer to Figure 4-10. What is the area that represents consumer surplus after the imposition of the ceiling? A) A + B + D B) A + B + D + F C) A + B + D + F + G D) A + B + C

A + B + D

(Refer to Table 2-5) Assume Nadia's Neckware only produces ascots and bowties. A combination of 8 ascots and 18 bowties would appear A) Along Nadia's production possibilities frontier B) Inside Nadia's production possibilities frontier C) Outside Nadia's production possibilities frontier D) At the horizontal intercept of Nadia's production possibilities frontier

Along Nadia's production possibilities frontier

Refer to Figure 4-10. What area represents the deadweight loss after the imposition of the ceiling? A) C + E + J + H B) G + H C) C + E D) J + H

C + E

(Refer to Table 2-5) Assume Nadia's Neckties only produces ascots and bowties. Nadia faces ________ opportunity costs in the production of ascots and bowties. A) Negative B) Constant C) Decreasing D) Increasing

Constant

What would happen in the market for knee replacement surgery if insurance companies started to cover a smaller portion of the cost of the surgery, and fewer doctors decide to enter the field of joint replacement surgery? A) Demand will decrease, but this will not shift the supply curve. B) Demand will decrease and supply will increase. C) Supply will decrease, but this will not shift the demand curve. D) Demand and supply will both decrease.

Demand and supply will both decrease.

Which of the following would shift a nation's production possibilities frontier outward? A) an increase in the minimum wage B) more restrictive immigration policies C) a decrease in the unemployment rate D) Discovering a more efficient process to desalinate water

Discovering a more efficient process to desalinate water

The opportunity cost of taking an on-line history class is A) The cost of tuition and fees only B) equal to the highest value of an alternative use of the time and money spent on the class. C) the knowledge and enjoyment you receive from taking the class. D) the value of the time spent on line. E) zero because there is no classroom time involved if you are enrolled in the course.

Equal to the highest value of an alternative use of the time and money spent on the class

Refer to Figure 2-14. Which country has a comparative advantage in the production of popsicles? A) Greenland B) They have equal productive abilities. C) Iceland D) neither country

Greenland

Refer to Figure 4-17. Suppose the market is initially in equilibrium at price P1 and then the government imposes a tax on every unit sold. Which of the following statements best describes the impact of the tax? A) The consumer will bear the entire burden of the tax if the demand curve is D2 and the producer will bear the entire burden of the tax if the demand curve is D1. B) The consumer's share of the tax burden is the same whether the demand curve is D1 or D2. C) The consumer will bear a smaller share of the tax burden if the demand curve is D1. D) The consumer will bear a smaller share of the tax burden if the demand curve is D2

The consumer will bear a smaller share of the tax burden if the demand curve is D1.

Which of the following is evidence of a shortage of chocolate? A) The quantity of chocolate demanded is greater than the quantity supplied. B) Firms lower the price of chocolate. C) The equilibrium price of chocolate falls due to a decrease in demand. D) The price of chocolate is raised in order to increase sales.

The quantity of chocolate demanded is greater than the quantity supplied.

Refer to Figure 4-15. As a result of the tax, is there a loss in consumer surplus? A) No, because the producer pays the tax. B) No, because consumers are charged a lower price to cover their tax burden. C) No, because the market reaches a new equilibrium D) Yes, because consumers pay a price above the economically efficient price.

Yes, because consumers pay a price above the economically efficient price.

Farmers can raise either goats or ostriches on their land. Which of the following would cause the supply of goats to decrease? A) an increase in the price of ostrich feed B) a decrease in the price of goats C) an increase in the price of ostriches D) an increase in the demand for goats

an increase in the price of ostriches

Suppose that when the price of oranges decreases, Sarita decreases her purchases of peaches. To Sarita A) oranges and peaches are substitutes. B) oranges and peaches are normal goods. C) oranges and peaches are complements. D) oranges and peaches are inferior goods

oranges and peaches are substitutes.

Suppose that when the price of pickles decreases, Teddy increases his purchase of ketchup. To Teddy A) pickles and ketchup are complements. B) pickles and ketchup are normal goods. C) pickles are a normal good and ketchup is an inferior good. D) pickles and ketchup and substitutes.

pickles and ketchup are complements.

If the quantity demanded for a product exceeds the quantity supplied, the market price will rise until A) the quantity demanded equals the quantity supplied. The product will then no longer be scarce. B) only wealthy consumers will be able to afford the product. C) quantity demanded equals quantity supplied. The equilibrium price will then be greater than the market price. D) quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.

quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.

According to the production possibilities model, if more resources are allocated to the production of physical and human capital, then all of the following are likely to happen except A) the country's total production will fall. B) fewer goods will be produced for consumption today. C) future economic growth is enhanced. D) the production possibilities frontier will be shift outward in the future.

the country's total production will fall.

Select the phrase that correctly completes the following statement. "A decrease in the expected future price caused an increase in the supply of smartphones. As a result A) the price of smartphones decreased. The lower price caused the supply of smartphones to decrease." B) the price of smartphones decreased and the quantity of smartphones demanded increased." C) the price of smartphones decreased and the demand for smartphones increased." D) the equilibrium quantity of smartphones decreased."

the price of smartphones decreased and the quantity of smartphones demanded increased."

Suppose a drought resulted in a major reduction in the California lettuce crop. In the market for lettuce A) the supply curve shifted to the left resulting in a decrease in the equilibrium price. B) the demand curve shifted to the left resulting in a decrease in the equilibrium price. C) the demand curve shifted to the right resulting in an increase in the equilibrium price. D) the supply curve shifted to the left resulting in an increase in the equilibrium price.

the supply curve shifted to the left resulting in an increase in the equilibrium price.

Allison's Auto Art is a company that applies pinstripes to vehicles. Allison's cost for a basic 1-color pinstriping job is $35, and she charges $95 for this service. For a total price of $175, Allison will apply a fancier 3-color pinstripe application to an automobile, a service that adds an additional $40 to the total cost of the package. What is the marginal cost of moving up from the 1-color application to the 3-color application? A) 35 B) 40 C) 80 D) 175

40

Refer to Figure 2-14. If the two countries have the same amount of resources and the same technological knowledge, which country has an absolute advantage in the production of popsicles? A) Greenland B) They have the same advantage. C) Iceland D) cannot be determined

Greenland

Zane's Vanes is a service that restores old weather vanes. Zane has just spent $125 purchasing a 1920s-era weather vane which he expects to restore and sell for $500 once the work is completed. After having spent $125, Zane realizes that he will need to spend an additional $200 on materials to complete the restoration. Alternatively, he can sell the weather vane without restoring it for $200. What should he do? A) He should finish the restoration and then sell the weather vane B) He should sell the weather vane now to make the most profit C) He should sell the weather vane back to the party he purchased it from and cut his losses D) It does not matter what he does; he is going to take a loss on the project

He should finish the restoration and then sell the weather vane

Refer to Figure 2-14. Which country has a comparative advantage in the production of snow cones? A) Greenland B) They have equal productive abilities. C) Iceland D) neither country

Iceland

Refer to Figure 4-10. What is the area that represents the producer surplus after the imposition of the ceiling? A) F + G B) D + F + G C) F D) A + B + D + F + G

F

(Refer to Table 2-5) Assume Nadia's Neckware only produces ascots and bowties. A combination of 16 ascots and 6 bowties would appear A) Along Nadia's production possibilities frontier B) Inside Nadia's production possibilities frontier C) Outside Nadia's production possibilities frontier D) At the horizontal intercept of Nadia's production possibilities frontier

Inside Nadia's production possibilities frontier

Suppose there is some unemployment in the economy and society decides that it wants more of one good. Which of the following statements is true? A) It will have to increase resource supplies. B) It is not possible to achieve this unless technology advances. C) It can increase output without giving up another good by employing more resources. D) It will have to give up production and consumption of some other good

It can increase output without giving up another good by employing more resources.

Suppose a cell phone manufacturer currently sells 20,000 cell phones per week and makes a profit of $5,000 per week. A manager at the plant observes, "Although the last 3,000 cell phones we produced and sold increased our revenue by $6,000 and our costs by $6,700, we are still making an overall profit of $5,000 per week so I think we're on the right track. We are producing the optimal number of cell phones." Had the firm not produced and sold the last 3,000 cell phones, would its profit be higher or lower, and by how much? A) Its profit will be $700 higher B) Its profit will be $700 lower C) Its profit will be $6,000 lower D) Its profit will be $6,700

Its profit will be $700 higher

(Refer to Table 2-5) Assume Nadia's Neckware only produces ascots and bowties. A combination of 24 ascots and 12 bowties would appear A) Along Nadia's production possibilities frontier B) Inside Nadia's production possibilities frontier C) Outside Nadia's production possibilities frontier D) At the horizontal intercept of Nadia's production possibilities frontier

Outside Nadia's production possibilities frontier

Assume there is a surplus in the market for hybrid automobiles. Which of the following statements correctly describes this situation? A) The price of hybrid automobiles will fall in response to the surplus; as the price falls the quantity demanded will increase and the quantity supplied will decrease. B) The surplus will cause an increase in the equilibrium price of hybrid automobiles. C) The supply of hybrid automobiles is greater than the demand for hybrid automobiles. D) Some consumers will be unable to obtain hybrid automobiles at the market price and will have an incentive to offer to

The price of hybrid automobiles will fall in response to the surplus; as the price falls the quantity demanded will increase and the quantity supplied will decrease.

Buyers scrambled to secure stocks of Australian wool following a forecast of an 11 percent decline in wool production. What happens in the Australian wool market as a result of this announcement? A) The quantity of Australian wool demanded increases in anticipation of higher prices in the future. B) The demand curve for Australian wool shifts to the left in anticipation of higher prices in the future. C) The quantity of Australian wool demanded decreases in anticipation of lower quantities in the future. D) The demand curve for Australian wool shifts to the right in anticipation of higher prices in the future.

The demand curve for Australian wool shifts to the right in anticipation of higher prices in the future.

How does the decreasing use of DVD players affect the market for prerecorded DVDs? A) The demand curve for prerecorded DVDs shifts to the right. B) The quantity of prerecorded DVDs demanded increases. C) The quantity of prerecorded DVDs demanded decreases. D) The demand curve for prerecorded DVDs shifts to the left.

The demand curve for prerecorded DVDs shifts to the left.

Suppose a positive technological change in the production of disease-resistant corn caused the price of corn to fall. Holding everything else constant, how would this affect the market for wheat (a substitute for corn)? A) The demand for wheat would increase because consumers could afford to buy more wheat and corn. B) The demand for wheat would decrease and the equilibrium price of wheat would decrease. C) The supply of wheat would increase and the equilibrium price of wheat would decrease. D) The demand for wheat would decrease and the equilibrium price of wheat would increase.

The demand for wheat would decrease and the equilibrium price of wheat would decrease.

Several studies have shown promising links between green tea consumption and cancer prevention. How does this affect the market for green tea? A) The quantity of green tea demanded increases because of a change in tastes in favor of green tea. B) The green tea demand curve shifts to the left because this new information will increase the price of green tea. C) The quantity of green tea demanded decreases because this new information will increase the price of green tea. D) The green tea demand curve shifts to the right because of a change in tastes in favor of green tea.

The green tea demand curve shifts to the right because of a change in tastes in favor of green tea.

Which of the following is evidence of a shortage of walnuts? A) The quantity of walnuts demanded is greater than the quantity supplied. B) Firms lower the price of walnuts. C) The equilibrium price of walnuts falls due to a decrease in demand. D) The price of cashews is lowered in order to make up for the walnut shortage.

The quantity of walnuts demanded is greater than the quantity supplied.

The popularity of digital cameras has enticed large discount stores like Wal-Mart and Costco to offer digital photo printing services. How does this affect the digital photo printing market? A) The demand curve for digital photo printing services shifts to the left. B) The supply curve for digital photo printing services shifts to the left. C) The supply curve for digital photo printing services shifts to the right. D) The demand curve for digital photo printing services shifts to the right.

The supply curve for digital photo printing services shifts to the right.

In April, market analysts predict that the price of titanium will fall in May. What happens in the titanium market in April, holding everything else constant? A) The quantity demanded and the quantity supplied increase. B) The supply curve shifts to the right. C) The supply curve shifts to the left. D) The demand curve shifts to the right.

The supply curve shifts to the right.

If the United States lifts the embargo on Cuban products, what will happen in the U.S. market for Cuban cigars? A) The demand curve will shift to the left. B) The supply curve will shift to the left. C) The demand curve will shift to the right. D) The supply curve will shift to the right.

The supply curve will shift to the right.

Refer to Figure 3-6. The figure above represents the market for coffee grinders. Assume that the market price is $21. Which of the following statement is true? A) There is a shortage that will cause the price to increase; quantity demanded will then decrease and quantity supplied will increase until the price equals $25. B) There is a shortage that will cause the price to decrease; quantity demanded will then increase and quantity supplied will decrease until the price equals $25. C) There is a shortage that will cause the price to increase; quantity supplied will then decrease and quantity demanded will increase until the price equals $25. D) There will be a shortage that will cause the price to increase; demand will then decrease and supply will increase until the price equals $25.

There is a shortage that will cause the price to increase; quantity demanded will then decrease and quantity supplied will increase until the price equals $25.

Refer to Figure 3-6. The figure above represents the market for Italian leather purses. Assume that the market price is $35. Which of the following statements is true? A) There is a surplus that will cause the price to increase; quantity demanded will then decrease and quantity supplied will increase until the price equals $25. B) There will be a surplus that will cause the price to decrease; demand will then increase and supply will decrease until the price equals $25. C) There is a surplus that will cause the price to decrease; quantity demanded will then increase and quantity supplied will decrease until the price equals $25. D) There is a surplus that will cause the price to decrease; quantity supplied will then increase and quantity demanded will decrease until the price equals $25.

There is a surplus that will cause the price to decrease; quantity demanded will then increase and quantity supplied will decrease until the price equals $25.

Which of the following would cause a decrease in the supply of peanut butter? A) a decrease in the price of jelly (assuming that peanut butter and jelly are complements) B) a decrease in the price of peanut butter C) an increase in the technology used to produce peanut butter D) an increase the price of peanuts

an increase the price of peanuts

Refer to Table 3-4. The table above shows the demand schedules for cashews of two individuals (Jordy and Amy) and the rest of the market. If the price of cashews rises from $4 to $6, the market quantity demanded would A) increase by 33 lbs B) decrease by 33 lbs. C) decrease by 39 lbs D) increase by 39 lbs.

decrease by 39 lbs

Because new plastic and recycled plastic are substitutes, as the price of newly produced plastic increases, A) the demand curve for recycled plastic shifts to the right. B) there is a movement down along the demand curve for recycled plastic. C) the demand curve for recycled plastic shifts to the left. D) there is a movement up along the demand curve for recycled plastic.

the demand curve for recycled plastic shifts to the right.

Refer to Figure 4-7. The figure above represents the market for iced tea. Assume that this is a competitive market. At an output of 10,000 units A) the marginal benefit of iced tea is greater than the marginal cost; therefore, output is inefficiently low. B) the marginal cost of iced tea is greater than the marginal benefit; therefore, output is inefficiently low. C) the marginal benefit of iced tea is greater than the marginal cost; therefore, output is inefficiently high. D) producers should lower the price to $1 in order to sell the quantity demanded of 10,000.

the marginal benefit of iced tea is greater than the marginal cost; therefore, output is inefficiently low.