Macro Exam 3
Refer to the diagram. With MB1 and MC1, society's optimal amount of pollution abatement is:
Q1.
The trains of the Transcontinental Railway Company, when shipping goods, sometimes emit sparks that start fires along the tracks and damage the property of others. If Transcontinental does not pay for the damage it causes, what has occurred?
Supply-side market failure.
Which of the following is not held constant, when the point is moving along a demand curve?
The price of the product for which the demand curve is relevant
Which of the following is not held constant, when the point moves along a supply curve?
The price of the product for which the supply curve is relevant.
When the price of Nike soccer balls decreased, Jack purchased more Nike soccer balls and fewer Adidas soccer balls. Which of the following explains Jack's decision?
The substitution effect
Which of the following statements uses the terms "demand" and "quantity demanded" correctly?
When the price of ice cream rose, the quantity demanded of ice cream fell, and the demand for ice cream toppings fell.
When the market price is above the equilibrium level, competition among sellers will:
push down the price, increase quantity demanded, decrease quantity supplied, and thus reduce market surplus.
On a hot day, both the demand for lemonade and the supply of lemonade increase. We can expect, on a hot day in the lemonade market, the equilibrium:
quantity must increase but equilibrium price may rise, fall, or remain unchanged.
Refer to the diagram. Assuming equilibrium price P1, producer surplus is represented by areas:
c + d
The market equilibrium price and quantity creates allocative efficiency in that:
marginal benefit equals marginal cost at market equilibrium.
The market system does not produce public goods because:
private firms cannot stop consumers who are unwilling to pay for such goods from benefiting from them.
The graph above shows different market situations for software, which panel shows the effect of lower price of personal computers on the market for software?
B Only.
Which of the following is likely to increase the gasoline demand today?
Consumers expect that gasoline will be more expensive in the near future
The graph above shows different market situation for corns, which panel shows the effect of a lower price of irrigation equipment on the market for corn?
D Only.
The diagram above is a market for coffee. What are the equilibrium price and quantity in the coffee market?
$1.00 and 200
In the diagram above, a surplus of 160 units of coffee will exist in the market when the price is:
$1.60
Refer to the diagrams in which figures (a) and (b) show demand curves reflecting the prices Alvin and Elmer are willing to pay for a public good, rather than do without it. The collective willingness to pay for the first unit of this public good is:
$18.
12. Answer the question on the basis of the following information for a public good. Pa and Pb are the prices that individuals A and B are willing to pay for the last unit of a public good, rather than do without it. These people are the only two members of society. Refer to the data. The collective willingness of this society to pay for the second unit of this public good is:
$6.
Refer to the table below for a market for corns, the equilibrium price is
$6. At price $4, there is a shortage of 30 bushels of corn
When the price of product A gets lower, the demand curve for product B shifts to the right, then:
A and B are complementary goods
Jennifer buys a piece of costume jewelry for $33 for which she was willing to pay $42.
A consumer surplus of $9 and Nathan experiences a producer surplus of $3.
When the price of product A declines, the demand curve for product B shifts to the left, then:
A is an inferior good and B is a superior good
Which of the following is an example of a public good?
A weather warning system.
. At market equilibrium, it:
All of the above
Because of unfavorably cold weather, the production of apples has substantially declined. This indicates the:
Amount of apples that will be supplied to the market at various prices has declined
The graph above shows different market situation for cars, which panel shows the effect of higher wage for auto workers on the market for cars?
C Only
Marginal Utility of consumption is:
Decreasing and explains why the demand curve is downward sloping
In the gasoline market, demand sometimes exceeds supply and supply sometimes exceeds demand. The price of gasoline, rises and falls when supply and demand change. In which of these two statements are the terms demand and supply used correctly?
In the second statement
The demand curve of Iphone 7:
Indicates the quantity demanded of iphone7 at each price
Engineers in Ford improve the efficiency of assembly lines used in the production of Ford Escape (SUV). This improvement will:
Shift the supply curve of Escape to the right
In order to provide better financial support for the state highway system, RI state legislature plans to raise the excise tax on gasoline, we should expect the supply curve of gasoline:
Shifts to the left
Mississippi is one of the home states for farming catfish in the U.S. A severe flooding damages plenty of catfish farms. We can expect the supply curve of catfish in Mississippi
Shifts to the left
South America as a major producer of coffee beans is experiencing a drought. Weather forecast states that the drought situation is getting worse in the next 3 months, we can expect the demand curve for coffee beans today
Shifts to the right
If the demand curve reflects consumers' full willingness to pay, and the supply curve reflects all costs of production, then which of the following is true?
The benefit surpluses shared between consumers and producers will be maximized.
In crude oil production, the increasing marginal cost explains:
Why the supply curve is upward sloping
Refer to the diagram. Assuming equilibrium price P1, consumer surplus is represented by areas:
a + b
Refer to the diagram above. If actual production and consumption occur at Q1:
an efficiency loss (or deadweight loss) of b + d occurs.
Refer to the diagram in which S is the market supply curve and S1 is a supply curve comprising all costs of production, including external costs. Assume that the number of people affected by these external costs is large. Without government interference, this market will reach:
an overallocation of resources to this product.
People enjoy outdoor holiday lighting displays and would be willing to pay to see these displays but can't be made to pay. Because those who put up lights are unable to charge others to view them, they don't put up as many lights as people would like. This is an example of a:
demand-side market failure.
A government-mandated increase in the price of smart phones will:
increase the quantity supplied of smart phones and decrease the quantity demanded of them.
In a competitive market, when the market price is initially below the equilibrium level, the price will:
increase, quantity supplied will increase, and quantity demanded will decrease.
If one person's consumption of a good does not preclude another's consumption, the good is said to be:
non rival in consumption.
The graph above is a market for shirt. The government regulation sets the price of $20 in this market and it will result in a:
price ceiling and a shortage of 100 shirts.
The graph above is a market for shirts. At a price of $20, this market will experience a:
price floor and a surplus of 100 shirts.
In a hot area of Arizona where they generate a lot of their electricity with wind turbines, the demand for electricity falls on windy days as people switch off their air conditioners and enjoy the breeze. But at the same time, the amount of electricity supplied increases as the wind turbines spin faster. We can expect that, on a windy day in this electricity market, the equilibrium:
price must fall and equilibrium quantity may rise, fall, or remain unchanged.
If the supply of a product increases and the demand for that product simultaneously decreases, then equilibrium:
price must fall, but equilibrium quantity may rise, fall, or remain unchanged.
When Hawaii's Mt. Kiluea erupts violently, the demand on the part of tourists for sightseeing lights increases but the supply of pilots willing to provide these dangerous flights decreases. We can expect that, in this tourism market, the equilibrium
price must rise and equilibrium quantity may rise, fall, or remain unchanged.
Assume a drought in Florida reduces the supply of oranges. Oranges are used making orange juice and apple juice is substitute for orange juice. It can be expected the price of orange to:
rise, the supply of orange juice to decrease, and the demand for apple juice to increase.
Refer to the diagrams for two separate product markets. Assume that society's optimal level of output in each market is Q0 and that government purposely shifts the market supply curve from S to S1 in diagram (a) on the left and from S to S2 in diagram (b) on the right. The shift of the supply curve from S to S2 in diagram (b) might be caused by a per-unit:
subsidy paid to the producers of this product.
Other things equal, if the price of electronic circuit board, a key resource used to produce digital cameras, falls, the:
supply curve of digital camera will shift to the right.
Refer to the diagram, which shows demand and supply conditions in the competitive market for HP laptops. Given D0, if the supply curve mood from S0 to S1, then:
supply has decreased and equilibrium quantity has decreased.
Refer to the diagrams for two separate product markets. Assume that society's optimal level of output in each market is Q0 and that government purposely shifts the market supply curve from S to S1 in diagram (a) on the left and from S to S2 in diagram (b) on the right. The shift of the supply curve from S to S1 in diagram (a) might be caused by a per-unit:
tax on the producers of this product.
Refer to the diagram in which S is the market supply curve and S1 is a supply curve comprising all costs of production, including external costs. Assume that the number of people affected by these external costs is large. If the government wishes to establish an optimal allocation of resources in this market, it should:
tax producers so that the market supply curve shifts leftward (upward).
Which of the following would not shift the demand curve for beef?
the cost of raising cattle is lower
Refer to the diagram for a shirt market, initially market supply and demand are S0 and D0. Now they both shift to the new positions as S1 and D1. In this market:
the demand increased and the equilibrium price decreased.
On his visit to Six Flags, John planned to spend $10 on a bag of popcorn for $8 and a bottled drink for $2. Later on he noticed the popcorns were on sale for $4 a bag, so John bought to bags of popcorns and a bottled drink. John's response to the lower price of popcorn can be best explained by:
the income effect
A market is in equilibrium when:
the quantity supplied equals the quantity demanded.
Suppose that Mick and Cher are the only two members of society and are willing to pay $10 and $8, respectively, for the third unit of a public good. Also, assume that the marginal cost of the third unit is $17. We can conclude that:
the third unit should be produced.
A negative externality or spillover cost occurs when:
the total cost of producing a good exceeds the costs borne by the producer.
Nonexcludability describes a condition where:
there is no effective way to keep people from using a good once it comes into being.