Econ midterm 1

If a 15% change in price results in a 20% change in quantity supplied, then the price elasticity of supply is about

1.33 and supply is elastic

Suppose that a worker in Caninia can produce either 2 blankets or 8 meals per day, and a worker in Felinia can produce either 5 blankets or 1 meal per day. Each nation has 10 workers. For many years, the two countries traded, each completely specializing according to their respective comparative advantages. Now war has broken out between them and all trade has stopped. Without trade, Caninia produces and consumes 10 blankets and 40 meals per day and Felinia produces and consumes 25 blankets and 5 meals per day. The war has caused the combined daily output of the two countries to decline by

15 blankets and 35 meals

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 consume a maximum of

30 units of corn and 30 units of wheat

Suppose that a worker in Agland can produce either 10 units of organic grain or 2 units of incense per year, and a worker in Zenland can produce either 5 units of organic grain or 15 units of incense per year. There are 20 workers in Agland and 10 workers in Zenland. Currently the two countries do not trade. Agland produces and consumes 100 units of grain and 20 units of incense per year. Zenland produces and consumes 50 units of grain and no incense per year. If each country made the decision to specialize in producing the good in which it has a comparative advantage, then the combined yearly output of the two countries would increase by

50 units of grain and 130 unit of incense

Belarus has a comparative advantage in the production of linen, but Russia has an absolute advantage in the production of linen. If these two countries decide to trade,

Belarus should export linen to Russia.

Ashley eats two bananas during a particular day. The marginal benefit she enjoys from eating the second banana

Can be thought of as a total benefit Ashley enjoys by eating two bananas minus the total benefit she would have enjoyed by eating the first bananas

Bill is restoring a car and has already spent $4000 on the restoration. He expects to be able to sell the car for $6200. Bill discovers that he needs to do an additional $2400 of work to make the car worth $6200 to potential buyers. He could also sell the car now, without completing the additional work, for $3800. What should he do?

It does not matter if Bill sells the car now or completes the work and sells it at the higher price because the outcome will be the same either way.

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

Jim has a comparative advantage in the production of baseball bats.

A bagel shop sells fresh baked bagels from 5 a.m. until 7 p.m. every day. The shop does not sell day-old bagels, so all unsold bagels are thrown away at 7 p.m. each day. The cost of making and selling a dozen bagels is $1.00; there are no costs associated with throwing bagels away. If the manager has 8 dozen bagels left at 6:30 p.m. on a particular day, what should the seller do with the remaining bagels before the end of the day?

Lower the price of the remaining bagels, even if the price goes below $1.00

Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 20 bushels of corn or 5 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. Which of the following statements is true?

Neither country could gain from trade with eachother because neither country has a comparative advantage.

Which of the following examples does not illustrate the principle represented by the adage, "There is no such thing as a free lunch"?

Paying for rent and your electric bill whereas choosing between two costs is an example

What transaction takes place in the markets for the factors of production in the circular-flow diagram?

Receiving a salary for your work at a firm

What is a normative as oppose to a positive statement?

Saying your opinion on what should or should not be happening compared to stating facts.

Suppose Susan can wash three windows per hour or she can iron six shirts per hour. Paul can wash two windows per hour or he can iron five shirts per hour.

Susan has a comparative and absolute advantage over Paul

Travis can mow a lawn in two hours or he can trim a tree in one hour. Ricardo can mow a lawn in three hours or he can trim a tree in two hours.

Travis has an absolute advantage over Ricardo in trimming trees.

A technological advance in the production of the first good increases the opportunity cost of the first good in terms of the second good.

True

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.75. Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

a 13.33 percent increase in the price of a good

A price floor is ...

a legal minimum on the price at which the good is being sold

When society requires that firms reduce pollution, there is

a trade off because of reduced incomes to the firms' owners and workers

Trade between countries...

allows each country to consume at a point outside of its production possibilities frontier

Which of the following might cause the demand curve for an inferior good to shift to the left?

an increase in the price of a complement

Equilibrium quantity must decrease when demand

decreases and supply does not change, when supply decreases and supply does not change, or when both decrease

Equilibrium price must decrease when demand

decreases and supply stays the same or when supply increases and demand stays the same, or when both happen simultaneously

The slow growth of US incomes during the 1970s and 1980s can best be explained by..

increased competition from abroad

Equilibrium quantity must increase when demand

increases and supply does not change, supply increases and demand doesn't change, or when both increase

Equilibrium price must increase when demand

increases and supply remains the same or when sully decreases and demand stays the same, or when both happen simultaneously

Kara receives a promotion at work, which increases her income. We would expect Kara's demand for

inferior goods to decrease

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay

more than $40, as the marginal benefit will exceed the marginal cost

Production possibilities frontiers are usually bowed outward. This is because

resources are specialized; that is, some are better at producing certain goods than others

As we move downward and to the right along a linear, downward-sloping demand curve,

slope remains constant but elasticity changes

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 2. Which of the following events is consistent with a 0.1 percent increase in the price of the good?

the Quantity of a good decreased by 0.2 percent

You go to the movieplex where movies ordinarily cost $9. You are intending to see a movie for which you have a $3 off coupon good for only that movie at that time. However, when you get there you see a friend who asks if you would rather see a new release. Both movies start and end at the same time. If you decide to see the new release with your friend, what is your opportunity cost?

the amount you value the movie+$3

Which of the following would shift the supply of Green Bay Packers football jerseys to the left?

the cost of the fabric used to make jerseys increases

Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is

the enjoyment she would have received had she gone to the park

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?

the good is a necessity

For a particular good, an 8 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

the relevant time horizon is long

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 experienced a technological advance 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?

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

Ramona decides to spend two hours taking a nap rather than attending her classes. Her opportunity cost of napping is

the value of knowledge she would have received had she attended class

A circular-flow model and production possibilities frontier are similar in that

they both make use of assumptions

When a country has a comparative advantage in producing a certain good,

they should export that good