Final Econ exam
0.5.
A 10 percent increase in the quantity of spinach demanded results from a 20 percent decline in its price. The price elasticity of demand for spinach is
not all resources are equally productive in all activities
A PPF bows outward because
the tastes and preferences of consumers
A change in which of the following shifts the demand curve?
increase; decrease; increase
A country opens up to trade and becomes an importer of a sugar. In the sugar market, consumer surplus will ________, producer surplus will ________, and total surplus will ________.
the law of supply.
A fall in the price of a good causes producers to reduce the quantity of the good they are willing to produce. This fact illustrates
can produce it at lower opportunity cost than anyone else can.
A person has a comparative advantage in producing a particular good if that person
marginal benefit is at least as great as price.
A person will choose to buy a good as long as
it marks the boundary between what is affordable and unaffordable.
A person's consumption possibilities is defined by the budget line because
makes it illegal to charge a higher price than the specified price
A price ceiling ________.
a loss of both consumer and producer surplus.
A rent ceiling results in a shortage of apartments. As a result, there is
importing; imported
A tariff is a tax that is imposed by the ________ country when an ________ good crosses its international boundary.
decreases; increases
A tariff on imported peanuts ________ the quantity of peanuts imported and ________ the domestic price of peanuts.
income inelastic.
About six months ago, Pat lost the job as vice president of a local bank. Since losing the job, Pat still has the Sunday newspaper delivered every week. For Pat, the Sunday newspaper is
increases.
According to the principle of diminishing marginal utility, as the quantity of a good or service consumed increases, total utility
Mary has a comparative advantage over Bill in the production of shelter.
An economy produces only food and shelter. There are two individuals in the economy: Bill and Mary. Mary's opportunity cost of producing 1 unit of shelter is 2 units of food. Bill's opportunity cost of producing 1 unit of shelter is 4 units of food.
called economic growth.
An expansion of the production possibilities frontier is
rightward shift in the supply curve.
An increase in the number of suppliers in a market results in a
inelastic; a normal
As Mary's income increases by 20 percent, her demand for tickets to National Hockey League games increases by 10 percent. Mary's demand for tickets is income ________; for Mary, hockey tickets are ________ good
increases; falls
As a result of an increase in the supply of a good, the equilibrium quantity ________ and the equilibrium price ________.
more than the efficient quantity of tennis balls is being produced.
At the current level of output, the marginal social cost of tennis balls is greater than the marginal social benefit. Then
It decreases the supply.
Auto workers negotiate a wage increase. How does this wage hike affect the supply of cars?
elastic.
Because there are numerous choices for fast food purchases, the price elasticity of demand for Taco Bell food is likely
buy more chocolate ice cream and less vanilla ice cream.
Bobby consumes only chocolate ice cream and vanilla ice cream. He is spending all of his income. His marginal utility of chocolate is 200 and his marginal utility of vanilla is 200, and the price of chocolate is $1.00 per scoop and the price of vanilla is $2.00 per scoop. To maximize his utility, Bobby should
decreases.
Bobby moves along an indifference curve for shirts and pants by increasing consumption of shirts and decreasing consumption of pants. As Bobby has more and more pants, the number of shirts he is willing to trade for yet another pair of pants
export those goods in which the country has a comparative advantage.
Comparative advantage implies that a country will
increases; decreases
Compared to the situation before international trade, after the United States exports a good production in the United States ________ and consumption in the United States ________.
The lost consumer surplus equals the gain in producer surplus plus the government revenue plus the deadweight loss.
Consider a market in which there is an import tariff. Which of the following is true?
imports will increase, price will fall, and quantity supplied will fall
Consider a market that is initially in equilibrium with quantity demanded equal to quantity supplied at a price of $20. If the world price of the good is $10 and the country opens up to international trade then in this market then
.42 books
Consider the budget line in the above figure. If the consumer has income of $240, what is the relative price of movies?
14
Ernie has an income of $40 which he plans to spend on cookies and milk. The price of milk is $1 per gallon, and the price of cookies is $2 per dozen. If Ernie buys 12 gallons of milk, how many dozens of cookies will he buy if he spends all of his income?
supply curve of good B leftward.
Good A and good B are substitutes in production. The demand for good A increases so that the price of good A rises. The increase in the price of good A shifts the
producing on
Harry produces 2 balloon rides and 4 boat rides an hour. Harry could produce more balloon rides but to do so he must produce fewer boat rides. Harry is ________ his production possibilities frontier
demand for soda in October will increase.
If consumers but not producers expect that the price of soda will rise in November, the
rises; increases
If good A is a normal good and income increases, the equilibrium price of A ________ and the equilibrium quantity of A ________.
substitutes; complements
If the cross elasticity of demand between goods X and Y is positive and between goods X and Z is negative, then X and Y are ________ and X and Z are ________.
the demand curve for Xbox games shifts rightward.
If the price of an Xbox player falls, then in the market for Xbox games,
inelastic.
If the quantity demanded changes by a relatively small amount for a given change in price, then demand is
a surplus and the price is above the equilibrium price.
If the quantity supplied exceeds the quantity demanded, then there is
y-intercept and the slope of the budget line will decrease.
If units of pizza are plotted on the horizontal axis, and units of hot dogs plotted on the vertical axis, and the price of a hot dog increases the
below the equilibrium price
In order to have an effect, a price ceiling must be set ________.
W1; L2
In the above figure, a minimum wage of ________ would result in employment of ________.
ice cream is free.
In the above figure, the individual's consumer surplus will be highest if
$20; $30
In the above figure, the price paid by the buyer before the tax is ________ per compact disc, and the price paid by the buyer after the tax is ________ per compact disc.
$20
In the above figure, what is the amount of the tax per compact disc?
increases; $320 million
In the figure above, international trade ________ consumer surplus in the United States by ________.
increases; $128 million
In the figure above, international trade ________ total surplus in the United States by ________.
shortage of 2000 apartments.
In the figure above, originally the apartment rental market is in short-run and long-run equilibrium with a rent of $600 per month. Then the government imposes a rent ceiling of $500 per month. The rent ceiling leads to a
a deadweight loss created.
In the figure above, the demand curve shifts rightward from D0 to D1 so that D1 is the relevant demand curve. Suppose the government imposes a rent ceiling of $300 per month. In the short run there will be
a shortage and an increase in search costs.
In the figure above, the demand curve shifts rightward from D0 to D1 so that D1 is the relevant demand curve. Suppose the government imposes a rent ceiling of $300 per month. In the short run there will be
higher rents and an increase in the equilibrium quantity.
In the figure above, the demand curve shifts rightward from D0 to D1. There are no rent controls. In the short run, the increase in demand results in
$300 per month.
In the figure above, the initial demand curve is D0. There are no rent ceilings nor rent floors. The equilibrium monthly rent is
decreases; 16
In the figure above, the tariff ________ U.S. imports of shirts by ________ million shirts per year.
a + b.
In the figure above, when production is 3 units with a price of $3, the consumer surplus equals
imports 32
In the figure above, with international trade the United States ________ million shirts per year.
40
In the figure above, with the tariff American consumers buy ________ million shirts per year.
0
In the table above, what is the level of unemployment (in millions of workers) if the minimum wage is set at $8 per hour?
quantity of one good on the vertical axis and the quantity of another good on the horizontal axis
Indifference curves are drawn on a diagram with the
$50
Jane is willing to pay $50 for a pair of shoes. The actual price of the shoes is $30. Her marginal benefit is
attending a movie
John has two hours of free time this evening. He ranked his alternatives, first go to a concert, second go to a movie, third study for an economics exam, and fourth answer his e-mail. What is the opportunity cost of attending the concert for John?
$5
Jordan has two goods that he consumes this week. He can choose to go to the arcade and play video games or he can purchase baseball cards. The price of each video game is $.50 and each pack of baseball cards is $1. Jordan will spend all his allowance this week on these two goods. Jordan's consumption possibilities are listed in the table above. What is the amount of Jordan's allowance?
255
Kelly's marginal utilities for magazines and packages of gummy bears are listed in the table above. For Kelly, what is the total utility received from consuming 5 magazines?
4 DVDs and 2 pizzas
Lisa spends all her income on pizzas and DVDs. The above table shows Lisa's marginal utility for pizza and marginal utility for DVDs. If the price of a pizza is $10, the price of a DVD is $5, and Lisa has $40 to spend on the two goods, what combination of pizza and DVDs will maximize her utility?
change in his total utility; one additional book
Mark's marginal utility from reading books is the ________ when he reads ________.
-0.5
Microsoft raises the price of its Office software by 10 percent. As a result, the quantity of personal computers demanded at the current price decreases by 5 percent. What is the cross elasticity of demand for personal computers with respect to the price of Microsoft Office software?
1/2
Movies are $10 a ticket, and DVD rentals are $5 a DVD. With movies on the vertical axis, the magnitude of the slope of the budget line is
$3
Nick can purchase each milkshake for $2. For the first milkshake purchased Nick is willing to pay $4, for the second milkshake $3, for the third milkshake $2 and for the fourth milkshake $1. What is the value of Nick's consumer surplus for the milkshakes he buys?
$8
Pam buys only thread and fabric, and she buys the quantities that maximize her utility. Her marginal utility from a spool of thread is 30 units and her marginal utility from a yard of fabric is 60 units. If the price of a spool of thread is $4, then you are sure that the price of a yard of fabric is ________.
substitutes.
People buy more of good 1 when the price of good 2 rises. These goods are
the maximum amount of goods and services that a household can afford
Real income is ________.
$60 = 12QCD + 5Qm
Shaniq consumes only magazine and CDs. Her income equals $60 per month. CDs are $12 each and magazines are $5 each. What is the equation for her budget line?
250
Steve has two goods he can spend his income on, skiing and skating, and his marginal utilities from each are in the table above. The price of each unit of skiing is $10 and the price of each unit of skating is $5. Steve has $40 to spend. If Steve consumes the quantities of skiing and skating to maximize his utility, what is his total utility?
decreases by 20 percent.
Suppose Clyde always eats ice cream and chocolate syrup together. If the price of syrup increases by 10 percent, and the cross elasticity of demand is -2, the demand for ice cream
0.5.
Suppose a rise in the price of peaches from $5.50 to $6.50 per bushel decreases the quantity demanded from 12,500 to 11,500 bushels. The price elasticity of demand is
domestic consumers
Suppose sugar is exported from a nation. In the sugar market who does NOT benefit from the exports?
rises; increases
Suppose that people find out that eating more fish improves their health, leading them to increase their demand for fish. As a result, the equilibrium price of fish ________ and the equilibrium quantity ________.
by 20 percent
Suppose the price elasticity of teenagers' demand for cigarettes is 2.0. If the government imposes a tax on cigarettes that raises the price by 10 percent, by how much will it reduce teenaged smoking?
price elasticity of demand.
Suppose the price of burgers increases from $2 to $3 each. The degree to which quantity demanded responds to this price increase depends on the
lower levels of imports.
Tariffs and import quotas both result in
U.S. consumers lose and U.S. producers gain.
The United States imports cars from Japan. If the United States imposes a tariff on cars imported from Japan,
$3
The above figure shows Dana's marginal benefit curve for ice cream. If the price of ice cream is $2 per gallon, then the maximum that Dana is willing to pay for the 8th gallon of ice cream is
demand curve does not shift, and the supply curve shifts from S1 to S2.
The above figure shows the market for oil. Because of the development of a new deep sea drilling technology, the
there would be a shortage of apartments.
The above table gives the demand schedule and the supply schedule for housing in Anytown, U.S.A. If a rent ceiling of $300 is imposed in the housing market, then
the market would reach equilibrium at the quantity of 60 housing units.
The above table gives the demand schedule and the supply schedule for housing in Anytown, U.S.A. If a rent ceiling of $600 was imposed in the housing market, then
3 cans of cola per chocolate bar
The above table shows production points on Sweet-Tooth Land's production possibilities frontier. What is the opportunity cost of one chocolate bar if Sweet-tooth Land moves from point C to point D?
38 chocolate bars and 0 cans of cola
The above table shows production points on Sweet-Tooth Land's production possibilities frontier. Which of the following is an example of a point that is inefficient?
Producing 0 chocolate bars and 100 cans of cola is both attainable and efficient.
The above table shows production points on Sweet-Tooth Land's production possibilities frontier. Which of the following statements is TRUE?
5 pounds, $6.00 per pound
The above table shows the demand schedule and supply schedule for chocolate chip cookies. An increase in income results in an increase in the demand for chocolate cookies by an amount of 3 pounds at every price. What are the new equilibrium quantity and equilibrium price?
shortage of 3 pounds of chocolate chip cookies.
The above table shows the demand schedule and supply schedule for chocolate chip cookies. If the price is $4.00 per pound, there is a
4 pounds, $5.00 per pound
The above table shows the demand schedule and supply schedule for chocolate chip cookies. What is the equilibrium quantity and equilibrium price for chocolate chip cookies?
macroeconomics.
The branch of economics that deals with the analysis of the whole economy is called
decreases; falls
The demand curve for a normal good shifts leftward if income ________ or the expected future price ________.
always decreases consumer surplus.
The drought in the Midwest over the summer has decreased the supply of corn and, as a result, brought a sharp increase in the price of corn.
$5; $20
The figure above shows Tanya's consumption possibilities. Tanya spends $100 per month on movies and restaurant meals. The price of a movie ticket is ________ and the price of a restaurant meal is ________.
10 movie tickets and 3 restaurant meals.
The figure above shows Tanya's consumption possibilities. Which of the following combinations of goods is not affordable?
demand curve shifts from D2 to D1 and the supply curve does not shift.
The figure above shows the market for candy. People become more concerned that eating candy causes them to gain weight, which they do not like. As a result, the
$7.50 an hour
The figure illustrates the market for bagels. Initially the market is in equilibrium, Then the number of bagels produced is cut from 20 to 10 an hour and the price rises to $2.00 per bagel. Consumer surplus decreases by ________.
a deadweight loss will be created
The government sets a price floor for corn which is above the equilibrium price of corn. As a result, ________.
the quantity demanded; income
The income elasticity of demand is the percentage change in ________ divided by the percentage change in ________.
48; 12
The indifference curves in the figure above (I1, I2, and I3) reflect Peter's consumption preferences. If Peter consumes 24 slices of pizza and 24 chocolate bars per month, he as satisfied as he would be consuming ________ slices of pizza and ________ chocolate bars per month
slope down.
The law of demand implies that demand curves
quantities demanded by each individual at each price.
The market demand curve is constructed by adding the
decrease by 4 percent
The price elasticity of demand for DVDs is 2. If the price of a DVD increased by 2 percent, the quantity demanded will ________.
the responsiveness of the quantity demanded to changes in price.
The price elasticity of demand measures
the maximum levels of production that can be attained.
The production possibilities frontier itself shows
elastic; inelastic
The sellers pay the entire sales tax levied on a good when demand is perfectly ________ or supply is perfectly ________.
microeconomics.
The study of the decisions of individual units in the economy is known as
the marginal utility of the third CD is less than the marginal utility of second CD.
The table above gives Jane's total utility from magazines and CDs. The price of a magazine is $4 and the price of a CD is $10. Which of the following correctly illustrates the principle of diminishing marginal utility? The fact that
decrease because demand is inelastic in this range.
The table above gives the demand schedule for snow peas. If the price of snow peas falls from $4.00 to $3.00 a bushel, total revenue will
40
The table shows Elaine's utility from pizza and Pepsi. If Elaine consumes 2 slices of pizza and 3 Pepsis, her marginal utility from the fourth Pepsi is ________ units.
is negative.
To say that turnips are inferior goods means that the income elasticity
his income and the prices of the goods that he consumes.
Tom's consumption possibilities is defined by
slopes.
Tonya, who is rich, and Jerome, who is poorer, both buy orange juice and croissants for lunch at the student cafeteria. Their budget constraints on a diagram with orange juice on the vertical axis and croissants on the horizontal have the same
$2.50.
Using the table, Fred's marginal cost of the 200th slice of pizza is
inelastic; decreases
When demand is ________, a decrease in price ________ total revenue.
increases in terms of the amount foregone of the other good.
When the production possibilities frontier is bowed outwards, the opportunity cost of producing more of one good
Waiters get a pay raise.
Which of the following decreases the supply of restaurant meals?
a rise in the price of spinach
Which of the following leads to a movement along the demand curve for spinach but does not shift the demand curve for spinach?
II and III
Which of the following occur when a person maximizes utility? I. The marginal utility of each good bought is equal. II. The highest level of utility is attained. III. All of a person's budget is spent.
How will a lower price of digital cameras affect the quantity of cameras sold?
Which of the following questions is a topic that would be studied by microeconomics?
an increase in the price of a hot dog bun
Which of the following shifts the demand curve for hot dogs leftward?