Micro exam 1

Indicate whether each scenario involves a shift in the supply curve or movement along the supply curve. - Americans sell their gold and silver jewelry as a result of rising prices - A national consumer products company produces less of its premium quality soap as a result of lower soap prices. - Amplitude decides to join the smartphone market - After discovering that flash-steaming tuna before using mechanical processes to extract meat removes more tuna flesh, more cans of tuna arrive on the shelves at all major grocers

- movement - movement - shift - shift

Producer surplus is shown graphically as the area

above the supply curve and below the market price.

Suppose the city council in a large city decides to pass a law which forces landlords to charge a maximum rent of $750/month for a one-bedroom apartment. Prior to the rent control, the average rent for a one-bedroom apartment was $1,750/month. - which is likely to occur as a result of the price ceiling - the answer above is an example of

- Landlords will begin decreasing the quality of one-bedroom apartments by not making repairs or paying for upkeep. - inefficiently low quality

Suppose that Paulie and Vinny each can produce ice cream or t-shirts. The table shows the quantity of each good that Paulie and Vinny each can produce in 11 hour, respectively, if they devote all of their time and effort into making the good. Round all answers to two decimal places. Paulie: 2 ice cream cups; 17 t-shirts Vinny: 10 ice cream cups; 12 t shirts - What is Paulie's opportunity cost of producing a cup of ice cream? - What is Vinny's opportunity cost of producing a t-shirt? - Paulie has a comparative advantage in _____________ and Vinny has a comparative advantage in _____________

- Paulie's opportunity cost: 8.5 t-shirts - Vinny's opp cost: 1.2 cups of ice cream - t-shirts; ice cream

Suppose a state passes a minimum wage law that increases the minimum wage from $5/hour to $20/hour. The equilibrium wage prior to the minimum wage hike was $10/hour. - Which is likely to result from increasing the minimum wage? - This result of increasing the minimum wage is an example of a

- Some employers and workers will agree on a wage of less than $20/hour and not report the wages to the government. - black market

During the Obama administration, the development of low-cost batteries for electric cars received large amounts of federal funding in terms of subsidies. Meanwhile, American households gave a higher priority towards minimizing their environmental impact. Consider the market for zero-emissions electric vehicles where there is an upward-sloping supply curve and a downward-sloping demand curve. - which direction will demand and supply shift - what will happen to the equilibrium price - what will happen to the equilibrium quantity

- both curves will shift right - the change is ambiguous - the quantity increases

Assume Italy and Chad can both produce grain and dates, and that the only limited resource is the farming labor force, meaning that land, water, and all other resources are plentiful in both countries. Each farmer in Italy can produce 10 t of grain or 5 t of dates in a season. Each farmer in Chad can also produce 10 t of grain or 25 t of dates. - which country has abs adv in producing dates - which country has abs adv in producing grain - which country has comp adv in producing dates - which country has comp adv in producing grain

- chad -neither -chad - italy

Suppose the cost of lithium-ion batteries, an input into the production of electric vehicles, has dropped more steeply than expected. The accompanying graph depicts a market for electric vehicles. Demonstrate the effect of a reduction in the price of lithium-ion batteries by adjusting the accompanying diagram. - equilibrium price... - equilibrium quantity....

- decreases - increases

The figure shows the supply and demand for online music. Suppose that an economic downturn decreases household wealth and erodes consumer confidence. Move the supply and/or demand curves to reflect the primary effect this would have on the market for online music. You can assume that online music is a normal good. - equilibrium price.... - equilibrium quantity....

- decreases -decreases

Suppose that there has been a sudden influx of refugees in the small town of Dallon, leading to a doubling of the local population. The accompanying graph depicts Dallon's market for food. Adjust the graph to show the immediate impact that this rise in population has on the food market. - equilibrium price... - equilibrium quantity....

- increases - increases

Stone and brick are substitutes in home construction. Consider the market for bricks depicted in the graph. Suppose the price of stone increases due to new regulations for the stone quarrying industry. - equilibrium price.... - equilibrium quantity.....

- increases - increases

Vincent and Jean are two cooks who work in a village. Each of them can either bake cakes or make pizzas. Every ingredient is readily available to them, and the only scarce resource is the cooks' time. Vincent can bake 1010 cakes or make 55 pizzas in an hour. Jean can bake 1212 cakes or make 88 pizzas in an hour. - who has abs adv in baking cakes - who has abs adv in making pizzas - who has comp adv in baking cakes - who has comp adv in making pizzas

- jean -jean -vincent -jean

Categorize each scenario as describing a movement along a demand curve or a shift of the demand curve. - College students reduce how much detergent they use for each load of laundry in response to higher detergent prices - College students rush and buy discount furniture to take advantage of an unexpected price drop. - College students purchase many more energy drinks during finals week than during the rest of the semester. - Students eat out more often as the federal government increases how much grant money it provides students.

- movement along the demand curve - movement along the demand curve - shift in the demand curve - shift in the demand curve

Determine if the items represent an example of positive economics or normative economics. - The richest 1% of Americans should pay more taxes than the rest of the 99%. - A decrease in the supply of coconut will increase the price of German chocolate cake, a good which requires coconut shavings as a key ingredient. - As minimum wage increases, the prices of all goods and services also tends to increase. - Social welfare spending in Sweden occupies too large a portion of the national budget.

- normative - positive - positive - normative

Suppose that policy makers are concerned that the price of beef may get too high. - What type of price control would policy makers use to keep the price of beef from getting too high? - Suppose that the government implements the price control that you have selected. Which of these prices would be binding?

- price ceiling - $5

Rent controls are a typical example of a price ceiling. What are likely consequences of rent controls when the price ceiling is binding.

- reductions in apartment quality - black markets - more subletting of apartments - inefficient allocation of apartments

A farmer produces both beans and corn on her farm. If she must give up 16 bushels of corn to be able to get 6 bushels of beans, then her opportunity cost of 1 bushel of beans is

2.67 bushels of corn

Christine and Paul are deciding how to split their time between writing music and lyrics for their new album. Their PPFs for 72 h of work are shown. Christine and Paul have to write music for 8 songs and lyrics for 12 songs (4 songs already have music). When they are done, they can go to a private island and relax from all their hard work. It is possible that they will use more than 72 h. Once they start writing lyrics and music, assuming their hired help packs for them and their plane is waiting outside their door, in how many hours can they board the plane to their relaxing island getaway?

96 hours Christine will write music for 0 songs Paul will write music for 8 songs Christine will write lyrics for 12 songs Paul will write lyrics for 0 songs

True or False: Countries trade for goods in which they do not have a comparative advantage, and therefore, would never trade with nations that have similar resource endowments

False

True or False: Through specialization and trade, it is possible for a country to consume a combination of goods that is beyond its original production possibilities frontier.

True

True or False: when two countries choose to partake in international trade, it is a mutually beneficial activity for both countries

True

According to the law of demand

a decrease in price increases quantity demanded

when trading with more developed countries.....

less developed countries have a comparative advantage in the production of some goods or services.

True or False: wealthier countries always benefit more from international trade than poorer countries

false

The table presents information about the productivity of digital cameras and personal computers in the United States and Japan. The data are presented in units of output per hour of work - Japan: 6 cameras; 3 computers - US: 8 cameras; 2 computers -Japan has __________ advantage in producing __________

absolute; computers

Ivan, a Russian fisherman, needs a permit to fish and sell a certain type of fish, the yellow perch. - Select the term that best fits the scenario. license price ceiling black market price floor quota

license

The graph contains individual supply curves for the only two firms in a hypothetical market for stuffed animals. Place the market supply curve at the correct location on the graph. Then, consider what would happen to the market if a third supplier enters the market, holding all else constant. - A third firm would mean

market supply increases

Steve decides not to rent out his second home since he is not allowed to set the rate above $1000$1000 per month even though he knows he could find renters willing to pay much more. - Select the term that best fits the scenario. price floor black market quota price ceiling license

price ceiling

Garret is an undergraduate looking for a job to pay for college. As Garret seeks employment, he is glad to know that he will be paid at least $7.25$7.25 per hour. - Select the term that best fits the scenario. quota license price floor black market price ceiling

price floor

The U.S. government limits the amount of sugar that can be purchased from foreign sugar producers. - Select the term that best fits the scenario. black market license price ceiling price floor quota

quota

why is the shape of the PPF often curved instead of straight?

some resources are better suited for producing one good than another, which means that there are diminishing returns when moving such resources away from producing what they are best suited for

comparative advantage

the ability to produce a good or service at a lower opportunity cost than another

Producer surplus is the difference between

the market price and the minimum price a seller is willing to accept.

Consumer surplus is equal to the difference between

the maximum price a buyer is willing to pay and the market price.

Consumer surplus is shown graphically as the area

under the demand curve and above the market price.