Micro Test 3

Refer to Table 1-2. The price that Chad paid for a latte on the first day is a. $3.75. b. $6.25. c. $5.00. d. $5.50.

a. $3.75.

Refer to Figure 2-1. Which area represents producer surplus when the price is P1? a. BCG b. ACH c. ABGD d. DGH

a. BCG

Assume, for England, that the domestic price of wine without international trade is lower than the world price of wine. Thissuggests that, in the production of wine, a. England has a comparative advantage over other countries and England will export wine. b. England has a comparative advantage over other countries and England will import wine. c. other countries have a comparative advantage over England and England will export wine. d. other countries have a comparative advantage over England and England will import wine.

a. England has a comparative advantage over other countries and England will export wine.

Consumer surplus is equal to the a. Value to buyers - Amount paid by buyers. b. Amount paid by buyers - Costs of sellers. c. Value to buyers - Costs of sellers. d. Value to buyers - Willingness to pay of buyers.

a. Value to buyers - Amount paid by buyers.

Consumer surplus in a market can be represented by the a. area below the demand curve and above the price. b. distance from the demand curve to the horizontal axis. c. distance from the demand curve to the vertical axis. d. area below the demand curve and above the horizontal axis.

a. area below the demand curve and above the price.

For any country, if the world price of copper is higher than the domestic price of copper without trade, that country should a. export copper, since that country has a comparative advantage in copper. b. import copper, since that country has a comparative advantage in copper. c. neither export nor import copper, since that country cannot gain from trade. d. neither export nor import copper, since that country already produces copper at a low cost compared to other countries.

a. export copper, since that country has a comparative advantage in copper.

One of the basic principles of economics is that markets are usually a good way to organize economic activity. This principle isexplained by the study of a. factor markets. b. energy markets. c. welfare economics. d. labor economics.

a. factor markets.

Welfare economics is the study of how a. the allocation of resources affects economic well-being. b. a price ceiling compares to a price floor. c. the government helps poor people. d. a consumer's optimal choice affects her demand curve.

a. the allocation of resources affects economic well-being.

Suppose Brazil has an absolute advantage over other countries in producing almonds, but other countries have a comparativeadvantage over Brazil in producing almonds. If trade in almonds is allowed, Brazil a. will import almonds. b. will export almonds. c. will either import almonds or export almonds, but it is not clear from the given information. d. would have nothing to gain either from exporting or importing almonds.

a. will import almonds.

Refer to Table 7-1. If the price of the product is $122, then the total consumer surplus is a. $28. b. $41. c. $43. d. $405.

b. $41.

Refer to Table 1-1. If the price of the product is $130, then who would be willing to purchase the product? a. Calvin b. Calvin and Sam c. Calvin, Sam, and Andrew d. Calvin, Sam, Andrew, and Lori

b. Calvin and Sam

Suppose Ireland exports beer to China and imports pineapples from the United States. This situation suggests that a. Ireland has a comparative advantage relative to the United States in producing pineapples, and China has a comparativeadvantage relative to Ireland in producing beer. b. Ireland has a comparative advantage relative to China in producing beer, and the United States has a comparative advantagerelative to Ireland in producing pineapples. c. Ireland has an absolute advantage relative to the United States in producing pineapples, and China has an absoluteadvantage relative to Ireland in producing beer. d. Ireland has an absolute advantage relative to China in producing beer, and the United States has an absolute advantagerelative to Ireland in producing pineapples.

b. Ireland has a comparative advantage relative to China in producing beer, and the United States has a comparative advantagerelative to Ireland in producing pineapples.

Suppose Russia exports sunflower seeds to Ireland and imports coffee from Brazil. This situation suggests a. Russia has a comparative advantage over Brazil in producing coffee, and Ireland has a comparative advantage over Russiain producing sunflower seeds. b. Russia has a comparative advantage over Ireland in producing sunflower seeds, and Brazil has a comparative advantageover Russia in producing coffee. c. Russia has an absolute advantage over Ireland in producing sunflower seeds, and Brazil has an absolute advantage overRussia in producing coffee. d. Russia has an absolute advantage over Brazil in producing coffee, and Ireland has an absolute advantage over Russia inproducing sunflower seeds.

b. Russia has a comparative advantage over Ireland in producing sunflower seeds, and Brazil has a comparative advantageover Russia in producing coffee.

On a graph, consumer surplus is represented by the area a. between the demand and supply curves. b. below the demand curve and above price. c. below the price and above the supply curve. d. below the demand curve and to the right of equilibrium price.

b. below the demand curve and above price.

On a graph, the area below a demand curve and above the price measures a. producer surplus. b. consumer surplus. c. deadweight loss. d. willingness to pay.

b. consumer surplus.

Consumer surplus a. is the amount of a good that a consumer can buy at a price below equilibrium price. b. is the amount a consumer is willing to pay minus the amount the consumer actually pays. c. is the number of consumers who are excluded from a market because of scarcity. d. measures how much a seller values a good.

b. is the amount a consumer is willing to pay minus the amount the consumer actually pays.

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it a. maximizes both the total revenue for firms and the quantity supplied of the product. b. maximizes the combined welfare of buyers and sellers. c. minimizes costs and maximizes output. d. minimizes the level of welfare payments.

b. maximizes the combined welfare of buyers and sellers.

A tax on an imported good is called a a. quota. b. tariff. c. supply tax. d. trade tax.

b. tariff.

Refer to Table 1-1. If the price of the product is $110, then who would be willing to purchase the product? a. Calvin b. Calvin and Sam c. Calvin, Sam, and Andrew d. Calvin, Sam, Andrew, and Lori

c. Calvin, Sam, and Andrew

Which of the Ten Principles of Economics does welfare economics explain more fully? a. The cost of something is what you give up to get it. b. Rational people think at the margin. c. Markets are usually a good way to organize economic activity. d. People respond to incentives.

c. Markets are usually a good way to organize economic activity.

Welfare economics explains which of the following in the market for televisions? a. The government sets the price of televisions; firms respond to the price by producing a specific level of output. b. The government sets the quantity of televisions; firms respond to the quantity by charging a specific price. c. The market equilibrium price for televisions maximizes the total welfare of television buyers and sellers. d. The market equilibrium price for televisions maximizes consumer welfare and minimizes producer profit.

c. The market equilibrium price for televisions maximizes the total welfare of television buyers and sellers.

A consumer's willingness to pay directly measures. a. the extent to which advertising and other external forces have influenced the consumer's preferences. b. the cost of a good to the buyer. c. how much a buyer values a good. d. consumer surplus.

c. how much a buyer values a good.

Assume, for Vietnam, that the domestic price of textiles without international trade is higher than the world price of textiles.This suggests that, in the production of textiles, a. Vietnam has a comparative advantage over other countries and Vietnam will import textiles. b. Vietnam has a comparative advantage over other countries and Vietnam will export textiles. c. other countries have a comparative advantage over Vietnam and Vietnam will import textiles. d. other countries have a comparative advantage over Vietnam and Vietnam will export textiles.

c. other countries have a comparative advantage over Vietnam and Vietnam will import textiles.

Producer surplus is a. measured using the demand curve for a good. b. always a negative number for sellers in a competitive market. c. the amount a seller is paid minus the cost of production. d. the opportunity cost of production minus the cost of producing goods that go unsold.

c. the amount a seller is paid minus the cost of production.

Refer to Figure 1-1. If the price of the good is $100, then consumer surplus amounts to a. $50. b. $75. c. $100. d. $125.

d. $125.

Refer to Figure 2-1. Which area represents the increase in producer surplus when the price rises from P1 to P2? a. BCG b. ACH c. ABGD d. AHGB

d. AHGB

Costa Rica allows trade with the rest of the world. We can determine whether Costa Rica has a comparative advantage inproducing pharmaceuticals if we a. know whether Costa Rica imports or exports pharmaceuticals. b. compare the world price of pharmaceuticals to the price of pharmaceuticals that would prevail in Costa Rica if trade withthe rest of the world were not allowed. c. compare the quantity of pharmaceuticals consumed in Costa Rica with the quantity of pharmaceuticals that would beconsumed in Costa Rica if trade with the rest of the world were not allowed. d. All of the above are correct.

d. All of the above are correct.

Refer to Table 1-1. If the price of the product is $90, then who would be willing to purchase the product? a. Calvin b. Calvin and Sam c. Calvin, Sam, and Andrew d. Calvin, Sam, Andrew, and Lori

d. Calvin, Sam, Andrew, and Lori

The market for soybeans in Canada consists solely of domestic buyers of soybeans and domestic sellers of soybeans if a. consumer surplus equals producer surplus in the Canadian soybean market. b. total surplus exceeds consumer surplus in the Canadian soybean market. c. Canada permits international trade in soybeans. d. Canada forbids international trade in soybeans.

d. Canada forbids international trade in soybeans.

When a buyer's willingness to pay for a good is equal to the price of the good, the a. buyer's consumer surplus for that good is maximized. b. buyer will buy as much of the good as the buyer's budget allows. c. price of the good exceeds the value that the buyer places on the good. d. buyer is indifferent between buying the good and not buying it.

d. buyer is indifferent between buying the good and not buying it.

What is the fundamental basis for trade among nations? a. shortages or surpluses in nations that do not trade b. misguided economic policies c. absolute advantage d. comparative advantage

d. comparative advantage

The principle of comparative advantage asserts that a. not all countries can benefit from trade with other countries. b. the world price of a good will prevail in all countries, regardless of whether those countries allow international trade in thatgood. c. countries can become better off by exporting goods, but they cannot become better off by importing goods. d. countries can become better off by specializing in what they do best.

d. countries can become better off by specializing in what they do best.

A logical starting point from which the study of international trade begins is a. the recognition that not all markets are competitive. b. the recognition that government intervention in markets sometimes enhances the economic welfare of the society. c. the principle of absolute advantage. d. the principle of comparative advantage.

d. the principle of comparative advantage.

In a market, the marginal buyer is the buyer. a. whose willingness to pay is higher than that of all other buyers and potential buyers. b. whose willingness to pay is lower than that of all other buyers and potential buyers. c. who is willing to buy exactly one unit of the good. d. who would be the first to leave the market if the price were any higher.

d. who would be the first to leave the market if the price were any higher.

Suppose the nation of Canada forbids international trade. In Canada, you can obtain a hockey stick by trading 5 baseball bats.In other countries, you can obtain a hockey stick by trading 8 baseball bats. These facts indicate that a. if Canada were to allow trade, it would export hockey sticks. b. Canada has an absolute advantage, relative to other countries, in producing hockey sticks. c. Canada has a comparative advantage, relative to other countries, in producing baseball bats. d. All of the above are correct.

a. if Canada were to allow trade, it would export hockey sticks.

If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price, a. the country will be an exporter of the good. b. the country will be an importer of the good. c. the country will be neither an exporter nor an importer of the good. d. Additional information is needed about demand to determine whether the country will be an exporter of the good, animporter of the good, or neither.

b. the country will be an importer of the good.

Suppose Raymond and Victoria attend a charity benefit and participate in a silent auction. Each has in mind a maximum amountthat he or she will bid for an oil painting by a locally famous artist. This maximum is called a. deadweight loss. b. willingness to pay. c. consumer surplus. d. producer surplus.

b. willingness to pay.

The maximum price that a buyer will pay for a good is called a. consumer surplus. b. willingness to pay. c. equilibrium. d. efficiency.

b. willingness to pay.

The price of a good that prevails in a world market is called the a. absolute price. b. relative price. c. comparative price. d. world price.

d. world price.