Macro 231

When you are willing to pay $5 for a hamburger but you pay $4 for it, your consumer surplus for the hamburger is: A. $9 B. -$9 C. -$1 D. $1

$1

(Figure: Price Ceilings and Consumer Surplus) Refer to the figure. There is a price ceiling of $20. What is the value of consumer surplus if all the goods are allocated randomly? A. None of the answers are correct. B. $80 C. $180 D. $120

$120

(Figure: Price Ceilings and Consumer Valuation) Refer to the figure. Suppose a price ceiling of $3 goes into effect. If the goods sold are allocated only to the highest-value users, the total consumer surplus in the market would be: A. $120. B. $150. C. $30. D. $180.

$150

(Figure: A Tariff on Imports) Refer to the figure. Suppose the government intervenes with a $2 tariff; the total value of deadweight loss as a result of the tariff is: A. $550 million. B. $400 million. C. $150 million. D. $200 million.

$150 million

(Figure: Costs of Price Ceilings) Refer to the figure. What is the dollar amount of the value of wasted time if a price ceiling of $4 is implemented? A. $160 B. $320 C. $180 D. $220

$160

(Figure: Foreign Trade Market) Refer to the figure. What is the dollar value of the deadweight loss created by the loss of foreign trade? A. $10,000 B. $36,000 C. $6,000 D. $4,000

$4,000

The market price of a good is $10 and 40 units of the good sell at this price. Its demand curve intersects the vertical axis at a price of $12 and has a constant slope. What is the approximate value of consumer surplus in this market? A. $20 B. $30 C. $40 D. $50

$40

(Figure: Supply and Demand 4) Refer to the figure. If the good is purchased by those with the highest willingness to pay, what is the value of consumer surplus in the figure at the price ceiling of $8? A. $136 B. $36 C. $45 D. $54

$54

In the figure, a $10 tax is imposed on the market for lobsters. What is the market price that lobster producers would need to receive to induce them to produce 5,000 bushels of lobster per day? A. $10 B. $60 C. $50 D. $40

$60

(Figure: Price and Quantity 1) In the diagram, at which price is there a surplus? A. $0 B. $50 C. $80 D. $40

$80

Figure: PPF Mexico & United States (Figure: PPF Mexico & United States) Use the figure in which both Mexico and the United States each have 24 units of labor. The opportunity costs of producing one shirt are: A. 1/6 of computer for both Mexico and the United States. B. 1/6 of a computer for Mexico and one computer for United States. C. one computer for Mexico and 1/6 of a computer for the United States. D. one computer for both Mexico and the United States.

1/6 of a computer for Mexico and one computer for United States.

(Figure: International Trade 2) Refer to the figure. At the tariff equilibrium in this figure, the quantity of imports is ______, which is ______ than at the free trade equilibrium. A. 10; 2 units fewer B. 10; 2 units more C. 2; 10 units fewer D. 2; 6 units fewer

2; 10 units fewer

Because of government price controls, a business must now sell soft-serve ice cream at half its original price. This business might respond by: A. offering smaller servings of ice cream. B. reducing hours of operation. C. All of the answers are correct. D. skimping on toppings of nuts, fudge sauce, and cherries.

All of the answers are correct

Which of the following is TRUE about the economic policy of "protectionism"? A. It raises the prices of foreign goods in domestic markets. B. It restricts competitive forces in domestic markets. C. All of the statements are correct. D. It can be achieved through quotas and tariffs.

All of the statements are correct

Brazil can produce one unit of sugar cane for one unit of labor and one iPod for eight units of labor, and China can produce one unit of sugar cane for two units of labor and one iPod for four units of labor. What are each country's opportunity costs of producing iPods? A. Brazil: 1/8 unit of sugar cane; China: 1/2 unit of sugar cane B. Brazil: 1/2 unit of sugar cane; China: 1/2 unit of sugar cane C. Brazil: 4 units of sugar cane; China: 2 units of sugar cane D. Brazil: 8 units of sugar cane; China: 2 units of sugar cane

Brazil: 8 units of sugar cane; China: 2 units of sugar cane

(Figure: Demand and Supply) Refer to the figure. Which statement is TRUE? A. A free market is likely to produce less than 12 units of output. B. Buyers are willing to pay $20 for the 16th unit of output and it costs sellers $60 to produce that unit. C. The gains from trade are maximized at 20 units of output. D. At 16 units of output, there are unexploited gains from trade.

Buyers are willing to pay $20 for the 16th unit of output and it costs sellers $60 to produce that unit.

Which of the following could explain the figure? A. Consumer income remains the same and the price of the good falls. B. Consumer income increases in the market for a normal good. C. Consumer income falls in the market for a normal good. D. Consumer income rises in the market for an inferior good.

Consumer income increases in the market for a normal good.

At a price ceiling of $1 per loaf of bread, quantity supplied is 99 loaves, which is less than quantity demanded. What must be true for the 100th loaf of bread? A. Consumers value the 100th loaf of bread more than it costs producers to make it. B. The cost of producing the 100th loaf of bread is less than $1.00. C. Consumers do not value the 100th loaf of bread. D. Consumers value the 100th loaf of bread at less than $1.00.

Consumers value the 100th loaf of bread more than it costs producers to make it

Which scenario would cause a speculator in chicken and beef futures to use a "buy low and sell high" strategy for chicken? A. Households begin eating more meals at restaurants. B. Chickens are found to spread the Avian Flu disease among humans. C. A report emerges from the Surgeon General that eating red meat in moderate amounts allows for increased brain power. D. Cows are found to be infected with "Mad Cow Disease" and must be destroyed.

Cows are found to be infected with "Mad Cow Disease" and must be destroyed

An increase in import trade tends to ______ domestic prices. A. have an indeterminate effect on B. increase C. hold constant D. Decrease

Decrease

Futures contracts reduce future uncertainty. Which statement(s) show how this is achieved? I. Futures contracts allow the parties involved to mitigate possible shortages in quantities of the good. II. Futures contracts allow the parties involved to mitigate unexpected changes in price that could hurt earnings. III. Futures contracts always allow the seller to receive a price that is higher than the market price for the product. A. I only B. I, II, and III C. I and III only D. I and II only

I and II only I. Futures contracts allow the parties involved to mitigate possible shortages in quantities of the good. II. Futures contracts allow the parties involved to mitigate unexpected changes in price that could hurt earnings.

John and Tom enter into a futures contract in which John agrees to deliver 500 crates of coffee to Tom one year from now. Tom agrees to pay a price of $200 per crate. A year from now, John and Tom find that the market price of coffee is $210 per crate. How might they make a cash settlement on the contract? A. John will offer $5,000 to Tom and deliver the 500 crates of coffee. B. Tom will offer $5,000 to John and deliver the 500 crates of coffee. C. Tom will offer $5,000 to John and not deliver any crates of coffee. D. John will offer $5,000 to Tom and not deliver any crates of coffee.

John will offer $5,000 to Tom and not deliver any crates of coffee

The locovore movement encourages eating locally produced food to reduce the greenhouse gases emitted from transporting food long distances, placing upward pressure on local land prices as farmland becomes more valuable. Which statement reflects what will likely occur as a result? A. Hunting animals becomes more common. B. Local forests become less common. C. In the short term, the price of lumber rises. D. The price of beef falls as more people eat beef.

Local forests become less common

During World War II, natural rubber (from rubber trees) became incredibly scarce. Some even feared its complete exhaustion. The development of synthetic rubber staved off this doomsday scenario. Explain why, just when the Allies needed it most, this turn in good fortune was likely not a coincidence? A. They lacked the incentive to create higher-producing natural rubber trees. B. The opportunity cost of planting more rubber trees was high. C. Scarcity raised the price of natural rubber, creating the incentive to invent a substitute. D. Natural rubber went out of fashion because of the superior quality of synthetic rubber.

Scarcity raised the price of natural rubber, creating the incentive to invent a substitute

After adjusting for inflation, a comparison of the price of leg warmers reveals that the price of leg warmers was significantly higher in the 1980s than it is today. Which of the following can explain this? A. An increase in the price of cotton used to make leg warmers has led to a decrease in the price of leg warmers today. B. New regulation on the importing of leg warmers made abroad decreased the supply of leg warmers to the United States. C. Since the 1980s jeans have become preferable to leg warmers, decreasing the demand for leg warmers. D. The expected increase in the price of yarn has led to a decrease in the price of leg warmers today.

Since the 1980s jeans have become preferable to leg warmers, decreasing the demand for leg warmers

Table: Movies and Oil) According to the table, which state has the comparative advantage in oil? A. Texas, because it can produce more oil than anyone else B. Texas, because its opportunity cost for a barrel of oil is 1.5 movies per year C. New York, because its opportunity cost for a barrel of oil is 4 movies per year D. California, because its opportunity cost for a barrel of oil is 2 movies per year

Texas, because its opportunity cost for a barrel of oil is 1.5 movies per year

Suppose a country without any international trade opens its borders to international trade. After specialization how will its location on its production possibility frontier change? A. The country moves along the PPF toward its comparative advantage. B. The country moves from inside the PPF to on the PPF. C. The country moves from on the PPF to beyond the PPF. D. The country moves along the PPF away from its comparative advantage.

The country moves from on the PPF to beyond the PPF

Suppose it is widely believed that the price of flat-screen, high-definition televisions will be lower next year. What will happen as a result of such beliefs? A. The demand for flat-screen TVs will increase now. B. The demand for flat-screen TVs will decrease now. C. The demand for flat-screen TVs will not change now. D. The demand for flat-screen TVs will decrease next year.

The demand for flat-screen TVs will decrease now

The U.S. government limits the importation of Chinese-made bras. What effect does this trade restriction have on the market for bras? A. The equilibrium price will increase and the equilibrium quantity will increase. B. The demand for bras will increase, leading to a lower equilibrium price. C. The equilibrium price will increase and the equilibrium quantity will decrease. D. The equilibrium price will decrease, leading to a higher equilibrium quantity.

The equilibrium price will increase and the equilibrium quantity will decrease.

A firm produces volleyballs and soccer balls. What happens to the supply of soccer balls if the market price of volleyballs increases? A. The opportunity cost of producing soccer balls falls, so the supply curve of soccer balls decreases. B. The opportunity cost of producing soccer balls rises, so the supply curve of soccer balls increases. C. The opportunity cost of producing soccer balls falls, so the supply curve of soccer balls increases. D. The opportunity cost of producing soccer balls rises, so the supply curve of soccer balls decreases.

The opportunity cost of producing soccer balls rises, so the supply curve of soccer balls decreases.

A decrease in expected future supply of a good will lead to: A. no change in the demand for the good. B. a change in the demand for the good, but not until the supply actually goes down. C. a change in the demand for the good even before the supply actually decreases. D. a change in the price of the good, but not until the supply actually goes down.

a change in the demand for the good even before the supply actually decreases

(Figure: Trade) Refer to the figure. If the world price for the good in this figure were higher than the domestic price, a move to free international trade means that the domestic economy would become: A. neither a net importer nor a net exporter of the good. B. a net importer of the good. C. either a net importer or a net exporter of the good but it is impossible to say which. D. a net exporter of the good.

a net exporter of the good

Imagine a free market in equilibrium. After a sudden increase in demand (but before the price can adjust), the market experiences: A. a new equilibrium. B. a shortage. C. no change. D. a surplus.

a shortage

In the market for fertilizer, an: A. increase in the cost of equipment will increase the supply of fertilizer. B. advance in technology will increase the supply of fertilizer. C. increase in the wage rate will increase the demand for fertilizer. D. increase in the wage rate will increase the supply of fertilizer.

advance in technology will increase the supply of fertilizer

Supply and Demand 2: What happens as a result of the change in demand in the diagram? A. a decrease in both the equilibrium price and the equilibrium quantity B. an increase in both the equilibrium price and the equilibrium quantity C. an increase in the equilibrium price and a decrease in the equilibrium quantity D. a decrease in the equilibrium price and an increase in the equilibrium quantity

an increase in both the equilibrium price and the equilibrium quantity

The development of shipping containers enabled companies to move freight quickly between ships, trucks, and trains by loading a single large container with many different goods and then moving the container. Before the container, freight had to be loaded and unloaded one palette, barrel, or box at a time. What impact did the shipping container have on globalization? Why? A. an increase, because it decreased transportation costs B. an increase, because it allowed faster spread of communication C. a decrease, because it caused many dock workers to lose their job D. a decrease, because it caused the amount of human cooperation to fall

an increase, because it decreased transportation costs

1. (Table: The HP Stock Exchange) The HP Stock Exchange lets members of HP's sales team buy and sell shares that pay off when sales fall within a certain range. A typical security would pay out $1, if and only if future sales fell within the specific range of that share. Accordingly, the trading prices given in the table suggest that the probability of selling: A. less than 5,000 is 10%. B. between 15,000 and 25,000 units is 60%. C. between 10,000 and 15,000 units is at least 20%. D. more than 15,000 is 40%.

between 15,000 and 25,000 units is 60%

(Figure: Computers and Books) According to the figure, if country A produces only the good for which it has a comparative advantage and then consumes the other good by exchanging computers for books, then: A. both countries will consume inside their own PPFs. B. both countries will consume outside their own PPFs. C. country A will consume inside its PPF but country B will consume outside its PPF. D. country A will consume outside its PPF but country B will consume inside its PPF.

both countries will consume outside their own PPFs.

(Table: Production Possibilities for the United States and Mexico) According to the table on production possibilities for the United States and Mexico, the United States has an absolute advantage in ________ and a comparative advantage in _________. A. potatoes; corn B. nothing; potatoes C. both goods; potatoes D. both goods; corn

both goods; potatoes

Gains from trade will be maximized at the free market equilibrium price and quantity because the supply of goods is: A. bought by the buyers who have the highest willingness to pay. B. sold by the sellers with the highest opportunity cost. C. sold by the sellers that minimize producer surplus. D. bought by the buyers who have the lowest willingness to pay.

bought by the buyers who have the highest willingness to pay

Refer to figure. If, in this figure, the government enacts a price ______ by setting the good's price at $6, it will create a ______. A. ceiling; shortage of 10 units B. floor; surplus of 10 units C. floor; surplus of 4 units D. ceiling; shortage of 4 units

ceiling; shortage of 10 units

Speculation tends to ______ volatility in prices over time. A. decrease B. not affect C. increase D. eliminate

decrease

If a seller facing excess demand is unable to raise the price of the good due to a price ceiling, the seller might: A. decrease the level of service for that product. B. decrease the price of the product. C. increase the quantity supplied of the product. D. increase the quality of the product.

decrease the level of service for that product

Specialization and trade can _____ the per-unit cost of production because _____ . A. decrease; it allows for more small-scale production. B. decrease; it creates economies of scale associated with large-scale production C. increase; it requires more expensive, specialized equipment D. increase; more expensive labor is needed.

decrease; it creates economies of scale associated with large-scale production

If market demand decreases: A. equilibrium price and quantity will both decrease. B. equilibrium price will increase but equilibrium quantity will decrease. C. equilibrium price will decrease but equilibrium quantity will increase. D. equilibrium price and quantity will both increase.

equilibrium price and quantity will both decrease

Suppose speculators expect that the supply of oil will decrease next year and as a result, buy up oil today and put it into storage. This should cause the value of that oil to: A. either increase or decrease. B. increase. C. remain unchanged. D. decrease.

increase

If there are 100 tickets to a concert and 200 fans who would like to go to the concert, each placing a slightly different value on the tickets, is it more efficient to hold an auction for the tickets or to hold a random drawing for the tickets? A. hold a random drawing B. hold an auction C. Both are equally efficient. D. It is impossible to say which is more efficient.

hold an auction

Cell phone data plans are most useful when used with a smartphone, and smartphones are most useful when used with a data plan. As the price of data plans falls, the demand for smartphones will: A. decrease, because smartphones and data plans are substitutes. B. decrease, because smartphones and data plans are complements. C. increase, because smartphones and data plans are complements. D. increase, because smartphones and data plans are substitutes.

increase, because smartphones and data plans are complements

If the price of computers ______, the demand for printers will ______. A. decreases; not change B. decreases; decrease C. increases; decrease D. increases; increase

increases; decrease

Trade restrictions: A. help to save jobs in the protected industry, which causes these workers to spend more money in other industries, netting increased output and job opportunities throughout the economy. B. are a very inexpensive way of saving jobs, cheaper than job retraining programs. C. may save jobs in one industry but at a cost of less job growth in other industries. D. often have little support by politicians, media, and the public.

may save jobs in one industry but at a cost of less job growth in other industries

Governments can use tariffs to help domestic firms act like a cartel when selling to international buyers: A. if it's unlikely that other governments would impose retaliatory tariffs. B. only if international buyers have few substitutes for the domestic good. C. but there are no actual examples of governments trying to do this. D. and if all governments do this, greater gains are realized by all countries.

only if international buyers have few substitutes for the domestic good

When the price of pizza increases, consumers have an incentive to: A. increase their consumption of pizza since it is now more valuable. B. decrease their demand for pizza. C. purchase substitute goods, such as Chinese food. D. open another pizza restaurant in order to increase supply and drive prices down.

purchase substitute goods, such as Chinese food

(Table: Equilibrium Adjustment) Refer to the table. If the price in the free market is $2, then a: A. shortage of 50 units would exist, and price would fall. B. surplus of 50 units would exist, and price would rise. C. shortage of 50 units would exist, and price would rise. D. surplus of 50 units would exist, and price would fall.

shortage of 50 units would exist, and price would rise

Labor unions are composed of high-skilled workers, but generally support minimum wage laws that typically affect only low-skilled workers. Their support makes more sense by considering that low-skilled labor is a ______ for high-skilled labor, and minimum wages ______ the quantity demanded of low-skilled labor. A. substitute; increase B. substitute; decrease C. complement; decrease D. complement; increase

substitute; decrease

.A technological innovation in the production of golf balls increases ______, causing the price to ______ and the ______. A. the quantity supplied; fall; quantity demanded to increase B. supply; rise; demand to decrease C. supply; fall; demand to increase D. supply; fall; quantity demanded to increase

supply; fall; quantity demanded to increase

If the United States bans the importation of Japanese automobiles: A. there will likely be more U.S. auto workers but fewer Americans working in other industries. B. U.S. consumers of cars will be better off because their consumer surplus increases. C. everyone in the United States will be much better off. D. U.S. producers of cars will be worse off because their producer surplus shrinks.

there will likely be more U.S. auto workers but fewer Americans working in other industries

The paradox of trade restrictions on countries with child labor is that: A. restrictions on trade cause losses in consumer surplus. B. these restrictions aim to reduce child labor, but because they make the countries poorer, they actually cause more child labor. C. children from those countries are actually more efficient than the adults. D. children can be hired at lower wages than adults.

these restrictions aim to reduce child labor, but because they make the countries poorer, they actually cause more child labor

After a hurricane knocks out power to thousands of households, the price of electric generators increases threefold. According to economists: A. the rising price will give an incentive for firms to ship fewer electric generators to the disaster area. B. the increase in demand for electric generators should technically cause the price to fall after a hurricane. C. this discourages the use of electric generators in low-value uses, making them more readily available for high-value uses. D. this is a vivid example of market and class exploitation by capitalists.

this discourages the use of electric generators in low-value uses, making them more readily available for high-value uses

(Table: Production in France and Italy) According to the table, France should specialize in producing ________, and Italy should specialize in producing _______. A. truffles; truffles B. truffles; wool socks C. wool socks; wool socks D. wool socks; truffles

wool socks; truffles

If instead of specialized doctors (neurologists, cardiologists, gastroenterologists, etc.) we had doctors who each knew the same things about all aspects of medicine, it would be: A. worse because the human brain is limited. B. worse because total medical knowledge in society would decrease. C. better because total medical knowledge in society would increase. D. better because then we could just go to one doctor with no loss of quality in medical care.

worse because total medical knowledge in society would decrease.