Econ201 questions quizzes/hw 1-4

When the quantity demanded and quantity supplied in a market are equal, the market is said to be in

equilibrium

The more elastic the supply of a product, the more likely it is that the burden of the tax will

fall on buyers. .

The more elastic the demand of a product, the more likely it is that the burden of the tax will

fall on sellers

If the demand for a good is relatively elastic, this means that consumer purchases of the good are

highly sensitive to the price of the good.

Which one of the following will increase the demand for ice cream?

an increase in the price of frozen yogurt, a substitute for ice cream

If the resources of an economy are being used inefficiently, it would be

possible to increase production of all goods simultaneously.

a shortage occurs when

price is less than equilibrium price.

When economists say the quantity supplied of a product has decreased, they mean the

price of the product has fallen, and consequently, suppliers are producing less of it.

Suppose a country attempts to be self-sufficient and doesn't trade with any other countries. From an economic perspective, citizens of this nation can be expected to

produce less total value than they could if they specialized and engaged in trade with other nations.

Economics is primarily the study of

the choices we must make among alternatives because of scarcity.

The forces of supply and demand assure that

the price of a good will eventually rise in response to an excess demand for that good.

Suppose that the government had decided to place the tax on soda sellers rather than soda buyers. Which of the following would be true regarding the tax incidence compared to the situation above?

the statutory incidence would change, but the actual incidence would not change

When a supply and demand model is used to analyze the market for labor,

the wage rate is used on the vertical axis as the market price. & employment is used on the horizontal axis as the market quantity.

If Mia can either wash 10 cars or wax 2 cars during a day, and Daniel can either wash 17 cars or wax 2 cars during a day, then according to the law of comparative advantage,

their total output can be expanded if Mia specializes in waxing and Daniel in washing.

The price of a good will tend to rise when

there is excess demand for the good.

Which of the following is a transaction cost for attending a concert?

time spent standing in line to buy the concert ticket

In economics, transaction costs refer to the

time, effort, and other resources needed to search out and negotiate an exchange.

Profits and losses play an important role in helping

to allocate scarce resources in a manner that maximizes the value created to society.

Say you are in the mood for the third-best Cincinnati-style chili, so you go to Skyline. You usually get a 4-way bean, which costs $6.69. Today you're thinking about getting a 3-way, which is $6.49. (If you are unfamiliar, a "3-way" is a dish with spaghetti, chili, and cheese. A "4-way bean" has spaghetti, chili, cheese, and beans.) What is the marginal benefit of choosing the 3-way instead of the 4-way?

$0.20

If Maeby bought nine gallons of gasoline at $1.50 per gallon, a car wash costs $1. If she bought ten gallons of gasoline, a car wash is free. Given that Maeby is going to get the car wash, the marginal cost of the tenth gallon of gasoline is...

$0.50

Sebastian drinks Mountain Dew. He can buy as many cans of Mountain Dew as he wishes at a price of $0.50 per can. On a particular day, he is willing to pay $0.95 for the first can, $0.80 for the second can, $0.60 for the third can, and $0.40 for the fourth can. Assume Sebastian is rational in deciding how many cans to buy. His consumer surplus is

$0.85

Which of the following are examples of people responding to incentives according to their rational self-interest? (There may be more than one correct answer, so select all that apply.)

-Daenerys, tired of being made fun of because her parents gave her a fashionable name that very quickly became dated, has her name legally changed. She pays $40 in legal fees. -Anna has been playing a lot of League of Legends in her spare time, and has become so good at it that she has been offered $70,000 a year to play for a professional team. She takes the job, dropping out of college.

which of the following are true?

-Economists use the criterion of economic efficiency to judge the merit of alternative outcomes. -Undertaking an economic action will be efficient if it produces more benefits than costs for the individuals of the economy. -Undertaking an economic action will be inefficient if it produces more costs than benefits to the individuals. (all of the above)

Which of the following statements are positive statements? You must select all correct answers in order to receive full credit.

-The Detroit Lions have won more football playoff games since 1957 than any other NFL team. -The rising price of crude oil on world markets will lead to an increase in cycling to work. -A rise in average temperatures will increase the demand for sun screen products.

if scarcity were eliminated

-all goods would be free. -no one would have to make any choices. -everyone could have all they want at no cost.

Trade creates value by

-moving goods from people who value the goods less to people who value the goods more. -permitting trading partners to expand output through specialization in areas where they each have a comparative advantage. -permitting trading partners to expand output through the adoption of mass production methods. (all of the above)

increase, and both the demand for and prices of the resources used to produce the product to increase

-the quality of these drugs has increased. -the sellers of illegal drugs earn less money. -there is less violence in these markets than if they were legal. NONE OF THE ABOVE

Which of the following could be considered to be a secondary effect caused by making drugs such as marijuana illegal?

All of the above would be considered secondary effects of making drugs illegal.

Are the following statements true or false? (A) If the demand for housing increased, the demand for resources used to producing housing (such as lumber) would fall. (B) If a landlord is faced with a government-imposed price ceiling set below the equilibrium level, a common response would be to improve the quality of housing in order to attract new tenants

A is false; B is false

Are the following statements true or false? (A) The minimum wage increases unemployment among unskilled workers according to economic theory. (B) If the government imposed a price ceiling of $1 on webcams, there would be a surplus of webcams.

A is true, B is false

Are the following statements true or false? (A) The actual burden of a tax does not depend on the original legal (or statutory) assignment of the tax, but it does depend on the elasticities of demand and supply. (B) Because taxes reduce the number of mutually beneficial trades in a market, they create an excess burden (or deadweight loss) in addition to the direct revenue burden of the tax.

A is true, B is true

Michael takes 10 minutes to iron a shirt and 20 minutes to type a paper. Aiden takes 10 minutes to iron a shirt and 30 minutes to type a paper. Which of the following statements is correct?

Aiden has a comparative advantage in ironing.

Which of the following would decrease the demand for movie tickets?

An decrease in income and movie tickets are a normal good

Andrew buys yogurt, and he would be willing to pay more than he now pays. Suppose that Andrew has a change in his tastes such that he values yogurt more than before. If the market price is the same as before, then

Andrew's consumer surplus would increase.

People are more likely to purchase a consumer ratings magazine that reviews new automobiles before buying a new car than they are to purchase a consumer ratings magazine that reviews pens and pencils before buying a new pen or pencil. Which of the following best explains this behavior?

Because the value of the information, in terms of avoiding a mistake on the purchase, is much higher for an automobile than for a pen or pencil, it is more worthwhile to gather this information.

Consider the following statements: (I) When individuals engage in a voluntary exchange, both parties expect to be made better off. (II) By channeling goods and resources to those who value them most, trade creates value and increases the wealth created by a society's resources.

Both I and II are true

Isabella decides to buy a dress that Olivia has for sale; they agree on a price of $20. Which of the following best describes who gains and who loses from the transaction?

Both parties expect to gain from this transaction.

In which of the following ways does a middleman reduce transaction costs?

By providing buyers and sellers with information at a lower cost and arranging trades between them

Which of the following is true?

Changes in personal costs and benefits will exert a predictable impact on the choices of human decision makers.

Consider the following scenario: Ana is training for a triathlon, a timed race that combines swimming, biking, and running. While Ana usually practices swimming for two hours per day, she decides to continue for an additional hour because the pool is less crowded than usual today, allowing her practice time to be more productive. Which basic principle of individual choice does Ana's plan best illustrate?

Decisions are made at the margin

Private school graduates earn 14% more than public school graduates on average. If you wanted to determine whether it is private school that causes higher earnings, what sorts of control variables are likely to get you closer to a ceteris paribus comparison?

Differences in ambition between the two groups. Differences in test scores between the two groups. Differences in family background. (all of the above)

Josephine teaches economics, and makes about $110,000 per year doing so. If she couldn't teach economics, she would be doing economic consulting for a major bank for $150,000 per year. If she couldn't work as an economic consultant, she would go back to school and study history. If she couldn't do that, she would stay at home and take care of the kids (her husband currently does this, but could go back to work if she couldn't find a job she liked). Which of the following is Josephine's opportunity cost of teaching economics?

Doing economic consulting

Assume that supply increases greatly and demand increases slightly. Which of the following will happen?

Equilibrium price will fall and equilibrium quantity will rise.

Which of the following is true of exchange?

Exchange permits trading partners to expand their total output of goods and services as the result of greater specialization in areas where each has a comparative advantage.

Legislation to protect red-cockaded woodpeckers created incentives that resulted in premature harvesting of trees the woodpeckers like to nest in. This is an example of which of the following?

Good intentions do not always lead to desirable outcomes.

A member of Congress is feeling pressure to get re-elected, so they're deciding between two programs. Option A: Airport Security: it costs $50 million and saves 10 lives Option B: Lead Cleanup: it costs $70 million and saves 12 lives What is the marginal benefit (MB) and marginal cost (MC) of the lead cleanup, compared to the airport security?

MB=2 more lives saved; MC=$20 million

Mateo values his camper at $4,000, and Nicole values it at $9,000. If Nicole buys it from Mateo for $7,000, which of the following is true?

Mateo gains $3,000 of value, and Nicole gains $2,000 of value

If Mateo is paid $25,000 to sell his crop of tomatoes even though he would have been willing to have sold the crop for as little as $20,000, this indicates that

Mateo received $5,000 of producer surplus from the transaction

Which of the following most accurately states the function of middlemen?

Middlemen create value by arranging trades and providing information to buyers and sellers.

Groupon has a coupon for $6 off the price of laser tag. What happens to the quantity of laser tag demanded while the coupon is valid?

Quantity demanded rises.

Rob Crusoe is stranded on an island and has no hopes of rescue. Since he is unlikely to be rescued he must find fish or coconuts to consume in order to survive. Since Rob may choose to fish all day, collect coconuts all day, or do some combination of the two, the graph below represents the different combinations of fish and coconuts that he is able to gather on a given day.

Rob is able to gather 6 coconuts and catch 1 fish.

Which of the following events would increase producer surplus?

Sellers' costs stay the same and the price of the good increases.

Suppose both the equilibrium price and quantity rise for a particular product. Which of the following best explains this situation?

Supply and demand simultaneously increased and the shift in supply was less than the shift in demand.

If there is a decrease in both the supply and demand for a good, which of the following will definitely occur?

The equilibrium quantity will decrease.

How will an increase in lumber prices influence the home construction market?

The supply of newly constructed homes will decrease.

Consider the supply curve for basketballs. Other things held constant, if the price of basketballs goes up from $7.99 to $14.99, what can we expect from suppliers of basketballs as a result?

There will be an increase in quantity supplied.

True or False: Suppose that the hypothetical country of Andesland has a chronic scarcity of quinoa, its staple grain. This implies that if Andesland has a market economy, quinoa will be available only for a price.

True

Which is true regarding the economic impact of a subsidy?

When supply is elastic, the benefits will mainly accrue to buyers.

Which of the following is true regarding private ownership?

With private ownership, owners are held accountable for using their resources in a manner that harms the resources of others.

Which of the following would lead to an increase in the demand for rental apartments in your area?

a sharp increase in the number of out-of-town students attending the local college

If an increase in the government-imposed minimum wage pushes the price (wage) of unskilled labor above market equilibrium, which of the following will most likely occur in the unskilled labor market?

a surplus of unskilled labor

Which of the following would most likely cause the supply of wheat to increase?

a technological advance that lowers the cost of producing wheat

When economists say that market equilibrium is consistent with economic efficiency, they mean

all units creating more benefit than cost have been produced.

Because the height of the demand curve measures the marginal value of the good to consumers, the fact that a demand curve slopes downward to the right illustrates that

as more of a product is consumed, consumers will value additional units less.

In an informed and voluntary exchange,

both parties receive something they value more than what they gave up.

According to the invisible hand principle, competitive markets generally

bring the self-interest of individuals into harmony with the efficient allocation of resources, even though centralized planning of economic activities is absent.

Retired persons travel by bus and automobile more frequently than do business executives, who more commonly use air travel. An economic explanation for this would be that

business executives value their time more highly

Consider the market for soda in Philadelphia. The equilibrium price is $1.10 and the equilibrium quantity is 1.4 million bottles. The city government implements a sales tax of $0.30 (in other words, buyers pay the tax). Where is the statutory incidence?

buyers

If an increase in the price of peaches reduces the demand for cream, this indicates that peaches and cream are

complements

Suppose there is an increase in the excise tax imposed on cigarettes, a good for which the demand is relatively inelastic. The short-run burden of the tax increase will be borne primarily by

consumers, because the increase in market price will be large relative to the increase in the excise tax.

Corn and soybeans are alternatives that could be grown by most farmers. If government subsidies for ethanol lead to higher corn prices, this will

decrease the supply of soybeans

If consumer purchases of a good are highly sensitive to the price of the good, this is illustrated by a

demand curve that is relatively flat (more horizontal).

If the price of cars falls, are carmakers likely to make ___________

fewer cars

Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he

has mistakenly inferred causation from observed correlation

An increase in the demand for a product will cause output to

increase, and both the demand for and prices of the resources used to produce the product to increase

What is NOT a reason the demand curve slopes downward?

increasing marginal benefits

the demand schedule for a good

indicates the quantities of the good that people will buy at various prices.

The size of a country's "economic pie" is thought of as the total dollar value of all goods and services produced during some period of time. The economic pie

is variable, not fixed, across time periods

While in Covid-19 quarantine, many people started to bake, which increased the demand for flour. How did this change in preferences effect demand for flour?

it caused the demand curve to shift right

Suppose the demand for tacos decreases. What will happen to producer surplus in the market for tacos?

it decreases

If price rises, what happens to supply of a product?

it does not change

If an economy operates at a point within (underneath) its production possibilities curve,

it is not efficiently using all of its resources.

Along a supply curve, if the price of oil falls, what will happen to the quantity of oil supplied?

it will decrease

When economists say an individual has made a rational choice, they mean the individual has...

made the choice by weighing their own subjective costs and benefits.

the invisible hand principle suggests that

market forces tend to channel the actions of self-interested individuals into activities that promote the general betterment of society.

The height of the demand curve for a product indicates the

maximum price consumers are willing to pay for an additional unit of it

Suppose an economist and trade advisor to a politician says the following: "My function, really, as an economist is to try to provide the underlying analytics that confirm his intuition. And his intuition is always right in these matters." Is this consistent with the economic approach described in Chapter 1?

no

The highest-valued alternative that must be given up in order to choose an action is called its...

opportunity cost

If a small percentage increase in the price of a good results in a rather large percentage reduction in the quantity demanded of the good, demand is said to be

relatively elastic.

Consider the market for soda in Philadelphia. The equilibrium price is $1.10 and the equilibrium quantity is 1.4 million bottles. The city government implements a sales tax of $0.30 (in other words, buyers pay the tax). Suppose that sellers have a large number of alternative uses for their resources, and suppose buyers do not have good alternatives for soda. Where will the actual tax incidence be?

split between buyers and sellers, but more heavily on buyers

The student government associations at several universities have experimented with purchasing bicycles to leave around campus for everyone's use. Anyone who needs the bike can use it, and they are not allowed to lock the bike up or take it home, but rather must leave it on campus for someone else to use. Economic theory would predict that

students will not take as good of care of these commonly owned bicycles as they do their own bicycles.

If the cost of rubber increases, what happens in the market for bicycles?

supply decreases

A decrease in the price of leather used to make shoes would cause the

supply of shoes to increase

Between 1994 and 2004, the monthly charge for cellular phone service decreased from $120 per month to $30 per month. At the same time, the number of subscribers increased from less than 10 million to more than 75 million. Which of the following provides the best explanation for these changes?

technological improvements that reduced the cost of supplying cellular phone service

What should happen to the "demand for speed" (measured by the average speed on highways) once airbags are included on cars?

the demand for speed increases

If everyone thinks that the price of tomatoes will go up next week, what is likely to happen to demand for tomatoes today?

the demand for tomatoes increases

If there is an increase in both the supply and demand for a good, which of the following will definitely occur?

the equilibrium quantity will increase

The opportunity cost of an action is

the highest valued alternative forgone as the result of choosing an option.

Your professor loves his work, teaching economics. He has been offered other positions in the corporate world that would increase his income by 25 percent, but he has decided to continue working as a professor. His decision would not change unless...

the marginal cost of teaching increased.