Microeconomics 2

Who discovered the law of comparative advantage? a) David Ricardo b) David Autor c) Robert Torrens d) Robert Lucas

Robert Torrens

Suppose that a consumer has $200 to spend on two goods: beer and pretzels. The price of beer is $6.00 and the price of pretzels is $3.00. What is the relative price of pretzels? a) 1/2 b) 2 c) $3 d) $6

a) 1/2

Suppose that Bob still had 10 hours and can produce 10 hamburgers in 1 hour or 8 plates of pasta in one hour. Kimmy also has 10 hours. He can produce 5 hamburgers in 1 hour or 2 plates of pasta in one hour. If Bob an Jimmy were to trade and mutually benefit, then a) Bob should specialize in making pasta b) Jimmy should specialize in making pasta c) The terms of trade would have to be 1/4 plate of pasta per hamburger d) It is impossible for Bob and Jimmy to mutually benefit from trade

a) Bob should specialize in making pasta

As the slope of the supply curve increases, the price elasticity of supply ____________ . A horizontal supply curve is perfectly ___________ a) decreases, elastic b) decreases, inelastic c) increases, elastic d) increases, inelastic

a) decreases, elastic

Suppose that you measure the income elasticity of demand for ice cream and find that it is equal to 0.5. Which of the following could you conclude from this number? a) ice cream is a normal good b) ice cream is an inferior good c) demand for ice cream is elastic d) demand for ice cream is inelastic

a) ice cream is a normal good

Which of the following would be part of the opportunity cost of driving to work instead of bicycling but not part of the financial cost? a) increased environmental damage from green house gas emissions b) the cost of gasoline c) the cost of car repairs d) the cost of a car

a) increased environmental damage from green house gas emissions

The slope of the PPF is equal to the opportunity cost of which good? a) the good on the x-axis b) the good on the y-axis

a) the good on the x-axis

Suppose that a demand curve passes through the points (4, $4) and (8, $2). What is the price elasticity of demand measured between these two points? a) -1 b) 1 c) -1/2 d) 1/2

b) 1

Which of the following does NOT happen if the gov't offers a subsidy to producers in a market that is open to free trade? a) producer surplus increases b) consumer surplus decreases c) there is a positive deadweight loss d) none of the above

b) Consumer surplus decreases

Which of the following curves does NOT satisfy the law of demand? a) P=16-Q b) P=3+Q/5 c) P= 100,000 - 163Q d) all of these demand curves satisfy the law of demand

b) P= 3+Q/5

Rent controls are price ceilings on apartment rents. Demand and supply of rental units are both more elastic in the long run that in the short run. Because of this difference in elasticities, the shortages caused by rent controls a) are more severe in the short run that in the long run b) are more severe in the long run than in the short run c) are equally severe in the short run and the long run

b) are more severe in the long run that in the short run

Suppose that a consumer has $200 to spend on two goods: beer and pretzels. The price of beer is $6.00 and the price of pretzels is $3.00. The price of beer decreases to $3.00. Because beer is now cheaper relative to pretzels, the consumer will want to consumer more beer and fewer pretzels. This is an example of which of the following? a) income effect b) substitution effect c) a giffen good d) bowed indifference curve

b) substitution effect

Which of the following is TRUE in a market that is subject to a negative externality? a) Private and societal marginal benefits do not coincide. b) the equilibrium quantity in the market is inefficiently high in the absence of gov't intervention c) the gov't can achieve a socially optimal outcome if it offers producers a subsidy equal to the value of the externality d) all of the above

b) the equilibrium quantity in the market is inefficiently high in the absence of gov't intervention

Suppose that Jacques, Julia, Cat, and Guy are potential suppliers of catering services for weddings. Each can cater at most one wedding. Jacques' cost of catering a wedding is $50k, Julia's cost is $40k, Cat's cost is $30k, and Guy's cost is $20k. If two weddings are catered, who will be the marginal producer? a) Jacques b) Julia c) Cat d) Guy

c) Cat

Suppose that Ty, George, Joe, and Ted are potential buyers of a rare Honus Wagner baseball card. Each will buy either one card or zero cards. Ty's benefit from owning the card is $500k, George's benefit is $400k, Joe's benefit is $300k, and Ted's benefit is $200k. Who is the marginal consumer if 3 Honus Wagner cards are sold? a) Ty b) George c) Joe d) Ted

c) Joe

By requiring that solar panels be wired through the electrical grid rather than directly into customers' houses, the Florida Power and light company is attempting to make the sun ________ a) rival b) non-rival c) excludable d) non-excludable

c) excludable

Suppose that Bob can produce hamburgers and pasta and has 10 hours of time. Bob can make 10 hamburgers in 1 hour and 8 plates of pasta in one hour. What is Bob's opportunity cost of producing hamburgers? a) 1/5 b) 2/5 c) 3/5 d) 4/5

d) 4/5

Consider a simple economy with a single good: bread. There are 5 loaves of bread and two potential consumers of bread: Moose and Squirrel. Moose likes consuming as much bread as possible, and Squirrel likes consuming as little bread as possible. Which of the following allocations is Pareto efficient? a) 0 loaves for Moose, 5 loaves for Squirrel b) 2 loaves for Moose, 2 loaves for Squirrel c) 0 loaves for Moose, 0 loaves for Squirrel d) 5 loaves for Moose, 0 loaves for Squirrel

d) 5 loaves for Moose, 0 loaves for Squirrel

Suppose that Bob still had 10 hours and can produce 10 hamburgers in 1 hour or 8 plates of pasta in one hour. Kimmy also has 10 hours. He can produce 5 hamburgers in 1 hour or 2 plates of pasta in one hour. Which of the following is TRUE? a) Bob has absolute advantage in production of pasta b) Bob has absolute advantage in production of hamburgers c) Bob has comparative advantage in production of pasta d) All of the above

d) All of the above

have already had three cups of coffee. The cost of a fourth cup of coffee from Panera would be $2.09. The benefit to me of drinking a fourth cup of coffee would $2.00. Because the benefit of a fourth cup of coffee is less than the cost, I will not drink four cups of coffee. What principle of economics is this an example of? a) making decisions on the margin b) opportunity cost c) beneficial trade d) markets are good

d) markets are good

Which of the following statements is normative? a) Increasing the length of patents will lead to the development of more new pharmaceuticals b) If TCNJ lowers its tuition, applications will increase c) a higher minimum wage would cause unemployment d) none of the above

d) none of the above

When choosing whether to attend college, I considered that not only would I explicitly have to pay for tuition and books to attend, but I would also be giving up the ability to work full time and earn labor income. I compared these costs to the benefits of a college education to arrive at a decision." This is an example of what principle of economics? a) making decisions on the margin b) everyone can benefit from trade c) markets achieve good outcomes d) the relevant cost for making decisions is opportunity cost

d) the relevant cost for making decisions is opportunity cost

In the flow of funds model, households make cash payments in the ________ market and receive cash payments in the ________ market

product, factor