Economics Competency 5

d. inflation.

The term economists use to describe a situation in which the economy's overall price level is rising is a. growth. b. expansion. c. recession. d. inflation.

b. Dallas's consumer surplus would increase.

Dallas buys strawberries, and he would be willing to pay more than he now pays. Suppose that Dallas has a change in his tastes such that he values strawberries more than before. If the market price is the same as before, then a. Dallas's consumer surplus would decrease. b. Dallas's consumer surplus would increase. c. Dallas would be wise to buy fewer strawberries than before. d. Dallas's consumer surplus would be unaffected.

a. benefits Boxlandian consumers by $721 and harms Boxlandian producers by $598.50.

For a small country called Boxland, the equation of the domestic demand curve for cardboard is Q D = 200 − 2P , where Q D represents the domestic quantity of cardboard demanded, in tons, and P represents the price of a ton of cardboard. For Boxland, the equation of the domestic supply curve for cardboard is Q S = -60 + 3P , where Q S represents the domestic quantity of cardboard supplied, in tons, and P again represents the price of a ton of cardboard. Suppose the world price of cardboard is $45. Then, relative to the no-trade situation, international trade in cardboard, a. benefits Boxlandian consumers by $721 and harms Boxlandian producers by $598.50. b. benefits Boxlandian consumers by $672 and harms Boxlandian producers by $598.50. c. benefits Boxlandian consumers by $721 and harms Boxlandian producers by $525.00. d. harms Boxlandian consumers by $336 and harms Boxlandian producers by $525.00.

d. $40 billion

If in some year nominal GDP was $20 billion and the GDP deflator was 50, what was real GDP? a. $10 billion b. $100 billion c. $2.5 billion d. $40 billion

a. harm done to U.S. steel producers is less than the benefit that accrues to U.S. consumers of steel.

If the Korean steel industry subsidizes the steel that it sells to the United States, the a. harm done to U.S. steel producers is less than the benefit that accrues to U.S. consumers of steel. b. United States should subsidize the products it sells to Korea. c. United States should protect its domestic steel industry from this unfair competition. d. harm done to U.S. steel producers from this unfair competition exceeds the gain to U.S. consumers of cheap Korean steel.

d. zero.

If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is a. positive, and the consumer would purchase the product. b. negative, and the consumer would not purchase the product. c. There is not enough information given to answer this question. d. zero.

d. Calvin, Sam, and Andrew

If the price of the product is $110, then who would be willing to purchase the product? Willingness to pay Calvin - $150 Sam - $135 Andrew - $120 Lori - $ 100 a. Calvin b. Calvin and Sam c. Calvin, Sam, Andrew, and Lori d. Calvin, Sam, and Andrew

d. either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both.

If total spending rises from one year to the next, then a. goods and services must be selling at higher prices. b. the economy must be producing a larger output of goods and services. c. employment or productivity must be rising. d. either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both.

c. Moldova is a price taker.

In analyzing the gains and losses from international trade, to say that Moldova is a small country is to say that a. Moldova's choice of which goods to export and which goods to import is not based on the principle of comparative advantage. b. Moldova can only import goods; it cannot export goods. c. Moldova is a price taker. d. only the domestic price of a good is relevant for Moldova; the world price of a good is irrelevant.

a. cost of building fences.

Justin builds fences for a living. Justin's out-of-pocket expenses (for wood, paint, etc.) plus the value that he places on his own time amount to his a. cost of building fences. b. producer deficit. c. producer surplus. d. profit.

c. Mexican GDP, but it is not included in U.S. GDP.

Martin, a U.S. citizen, travels to Mexico and buys a newly manufactured motorcycle made there. His purchase is included in a. both Mexican GDP and U.S. GDP. b. neither Mexican GDP nor U.S. GDP. c. Mexican GDP, but it is not included in U.S. GDP. d. U.S. GDP, but it is not included in Mexican GDP.

b. the French government's subsidies to French farmers justify restrictions on American imports of French agricultural products.

The "unfair-competition" argument might be cited by an American who believes that a. young industries should be protected against foreign competition until they become profitable. b. the French government's subsidies to French farmers justify restrictions on American imports of French agricultural products. c. almost every country has a comparative advantage, relative to the United States, in producing almost all goods. d. the American automobile industry should be protected against Japanese firms that are able to produce automobiles at relatively low cost.

a. nominal GDP to real GDP multiplied by 100.

The GDP deflator is the ratio of a. nominal GDP to real GDP multiplied by 100. b. real GDP to nominal GDP multiplied by 100. c. nominal GDP to the inflation rate multiplied by 100. d. real GDP to the inflation rate multiplied by 100.

d. central to macroeconomic analysis as well as to microeconomic analysis.

The basic tools of supply and demand are a. useful in analyzing the overall economy, but not in analyzing individual markets. b. central to microeconomic analysis, but seldom used in macroeconomic analysis. c. useful only in the analysis of economic behavior in individual markets. d. central to macroeconomic analysis as well as to microeconomic analysis.

d. is based on the belief that protecting industries when they are young will pay off later.

The infant-industry argument a. is based on the belief that protecting industries producing goods and services for infants is necessary if a country is to have healthy children. b. is an argument that is advanced by advocates of free trade. c. has the support of most economists. d. is based on the belief that protecting industries when they are young will pay off later.

a. exporting almonds and the price per pound in Uruguay increased to $4.50.

The world price of a pound of almonds is $4.50. Before Uruguay allowed trade in almonds, the price of a pound of almonds there was $3.00. Once Uruguay began allowing trade in almonds with other countries, Uruguay began a. exporting almonds and the price per pound in Uruguay increased to $4.50. b. importing almonds and the price per pound in Uruguay remained at $3.00. c. importing almonds and the price per pound in Uruguay increased to $4.50. d. exporting almonds and the price per pound in Uruguay remained at $3.00.

c. consumer surplus decreases and total surplus decreases in the market for that good.

When a country that imports a particular good imposes an import quota on that good, a. consumer surplus increases and total surplus decreases in the market for that good. b. consumer surplus increases and total surplus increases in the market for that good. c. consumer surplus decreases and total surplus decreases in the market for that good. d. consumer surplus decreases and total surplus increases in the market for that good.

d. $10

You are offered a free ticket to see the Chicago Cubs play the Chicago White Sox at Wrigley Field. Assume the ticket has no resale value. Willie Nelson is performing on the same night, and his concert is your next-best alternative activity. Tickets to see Willie Nelson cost $40. On any given day, you would be willing to pay up to $50 to see and hear Willie Nelson perform. Assume there are no other costs of seeing either event. Based on this information, at a minimum, how much would you have to value seeing the Cubs play the White Sox to accept the ticket and go to the game? a. $50 b. $0 c. $40 d. $10