Microeconomics Exam Review

Refer to Figure 2-6. Inefficient production is represented by which point(s)?

C, F, G

Refer to Figure 2-6. This economy cannot produce at which point(s)?

D

Refer to Figure 3-2. Suppose Peru decides to increase its production of rubies by 30. What is the opportunity cost of this decision?

1 emerald

Refer to Table 2-5. Table 2-5 shows one set of production possibilities. What is the opportunity cost of an increase in the production of coffee from 350 pounds to 650 pounds?

200 dozen cookies

Tom Brady should pay someone else to mow his lawn instead of mowing it himself, unless

Brady has a comparative advantage over everyone else in mowing his lawn.

Refer to Table 2-5. Table 2-5 shows one set of production possibilities. Which of the following statements is correct?

The opportunity cost of a dozen cookies increases as more cookies are produced.

Which of the following would shift the demand curve for gasoline to the right?

an increase in consumer income, assuming gasoline is a normal good

Refer to Figure 3-2. Suppose Madagascar is willing to trade 40 rubies to Peru for each emerald that Peru produces and sends to Madagascar. Which of the following combinations of emeralds and rubies could Peru then consume, assuming Peru specializes in emerald production?

2 emeralds and 240 rubies

Refer to Table 2-5. Table 2-5 shows one set of production possibilities. What is the opportunity cost of increasing the production of cookies from 200 dozen to 400 dozen?

200 pounds of coffee

Refer to Figure 4-17. At a price of $20, which of the following statements is not correct?

Equilibrium price is equal to equilibrium quantity.

Kelly and David are both capable of repairing cars and cooking meals. Which of the following scenarios is not possible?

Kelly has a comparative advantage in repairing cars and in cooking meals.

Refer to Figure 2-7. In order to reach point L, the economy would have to

acquire more resources or experience a technological advance.

When we move along a given demand curve,

all nonprice determinants of demand are held constant.

Trade between countries

allows each country to consume at a point outside its production possibilities frontier.

The opportunity cost of obtaining more of one good is shown on the production possibilities frontier as the

amount of the other good that must be given up.

Suppose buyers of computers and printers regard the two goods as complements. Then an increase in the price of computers will cause a(n)

decrease in the demand for printers and a decrease in the quantity supplied of printers.

When a tax is placed on the sellers of cell phones, the size of the cell phone market

decreases, but the price paid by buyers increases.

Refer to Table 3-6. Miguel has an absolute advantage in the production of

neither good and a comparative advantage in the production of toasters.

If the cross-price elasticity of demand for two goods is 1.25, then

the two goods are substitutes.

If labor in Mexico is less productive than labor in the United States in all areas of production,

then both Mexico and the United States still can benefit from trade.

If a price floor is not binding, then

there will be no effect on the market price or quantity sold.

A key lesson from the payroll tax is that the

true burden of a tax cannot be legislated.

Refer to Table 5-2. Using the midpoint method, if the price falls from $60 to $40, the price elasticity of demand is

unit elastic.

The demand curve for textbooks shifts

when a determinant of the demand for textbooks other than the price of textbooks changes.

Refer to Figure 6-17. The price that buyers pay after the tax is imposed is

$12.00.

Refer to Figure 4-17. In this market, equilibrium price and quantity, respectively, are

$20 and 600 units.

Refer to Table 6-1. Which of the following price floors would be binding in this market?

$4

Refer to Figure 6-17. Acme, Inc. is a seller of the good. Acme sells a unit of the good to a buyer and then pays the tax on that unit to the government. Acme is left with how much money?

$8.00

A binding price floor (i)causes a surplus. (ii)causes a shortage. (iii)is set at a price above the equilibrium price. (iv)is set at a price below the equilibrium price.

(i) and (iii) only

Refer to Figure 5-1. Between point A and point B, the slope is equal to

-1/4, and the price elasticity of demand is equal to 3/2.

Melvin's Magnets earned $200 in total revenue last month when it sold 100 souvenir magnets. This month it earned $300 in total revenue when it sold 60 souvenir magnets. The price elasticity of demand for Marvin's Magnets is

0.58.

Last year, Carolyn bought 6 pairs of earrings when her income was $40,000. This year, her income is $52,000, and she purchased 7 pairs of earrings. Holding other factors constant, it follows that Carolyn's income elasticity of demand is about

0.59, and Carolyn regards earrings as a normal good.

Fiona's Fish Emporium increased its total monthly revenue from $1,500 to $1,800 when it raised the price of tropical fish from $5 to $9. The price elasticity of demand for Fiona's Fish Emporium is

0.70.

Refer to Table 2-1. If the production possibilities frontier is bowed outward, then "?" could be

250

If the price elasticity of demand for tuna is 0.7, then a 1.5% increase in the price of tuna will decrease the quantity demanded of tuna by

1.05%, and tuna sellers' total revenue will increase as a result.

Refer to Table 3-6. The opportunity cost of 1 mixer for Maya is

1.6 toasters.

Refer to Figure 2-6. What is the opportunity cost of moving from point A to point B?

15 candles

Refer to Figure 3-3. Arturo's opportunity cost of one burrito is

4/3 tacos and Dina's opportunity cost of one burrito is 2 tacos.

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by

40%.

Refer to Table 3-2. Which of the following combinations of coolers and radios could Aruba produce in one 40-hour week?

5 coolers and 6 radios

Refer to Table 3-2. Assume that Aruba and Iceland each has 80 labor hours available. If each country divides its time equally between the production of coolers and radios, then total production is

60 coolers and 18 radios.

Refer to Figure 2-6. Efficient production is represented by which point(s)?

A, B

Refer to Figure 3-10. Which of the following statements is correct regarding comparative advantage?

Alice has a comparative advantage in the production of lemonade while Betty has a comparative advantage in the production of pizzas.

Opponents of the minimum wage point out that the minimum wage

All of the above are correct.

Suppose Susan can wash three windows per hour or she can iron six shirts per hour. Paul can wash two windows per hour or he can iron five shirts per hour.

All of the above are correct.

The production possibilities frontier is used to illustrate some basic economic ideas, including

All of the above are correct.

Which of the following would increase in response to a decrease in the price of ironing boards?

All of the above are correct.

Refer to Figure 3-10. Which of the following statements is correct regarding absolute advantage?

Betty has an absolute advantage in the production of both lemonade and pizzas.

During the last few decades in the United States, health officials have argued that eating too much beef might be harmful to human health. As a result, there has been a significant decrease in the amount of beef produced. Which of the following best explains the decrease in production?

Individual consumers, concerned about their own health, decreased their demand for beef, which lowered the equilibrium price of beef, making it less attractive to produce.

Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this observation?

New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy.

In a competitive market, the price of a product

None of the above is correct.

Refer to Figure 4-22. Which of the four panels represents the market for pizza delivery in a college town as we go from summer to the beginning of the fall semester?

Panel (a)

Refer to Figure 4-22. Which of the four panels represents the market for cars as a result of the adoption of new technology on assembly lines?

Panel (c)

Refer to Figure 6-16. Suppose a tax of $5 per unit is imposed on this market. Which of the following is correct?

Sellers will bear more of the burden of the tax than buyers will.

Which of the following is not correct?

Taxes levied on sellers and taxes levied on buyers are not equivalent.

A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues. The city manager suggests that the city lower the price of admission to raise revenues. Who is correct?

The answer depends on the price elasticity of demand.

Refer to Figure 2-10. Which of the following events would explain the shift of the production possibilities frontier from A to B?

The economy experienced a technological advance in the production of books.

In a certain economy, jam and bread are produced, and the economy currently operates on its production possibilities frontier. Which of the following events would allow the economy to produce more jam and more bread, relative to the quantities of those goods that are being produced now?

The economy experiences economic growth.

For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

The good is a luxury.

Refer to Figure 4-10. Which of the following would cause the supply curve to shift from Supply A to Supply C in the market for tennis racquets?

a decrease in the price of tennis racquet strings

Economists generally believe that rent control is

a highly inefficient way to help the poor raise their standard of living.

A price ceiling is

a legal maximum on the price at which a good can be sold.

Demand is inelastic if the price elasticity of demand is

less than 1.

When a tax is levied on sellers of tea,

both sellers and buyers of tea are made worse off.

Refer to Table 2-5. Table 2-5 shows one set of production possibilities. Based on the values in the table, the production possibilities frontier is

bowed outward indicating increasing opportunity costs.

Refer to Figure 3-3. Arturo should specialize in the production of

burritos and Dina should specialize in the production of tacos.

Refer to Figure 3-3. Arturo has an absolute advantage in the production of

burritos and a comparative advantage in the production of burritos.

Price ceilings and price floors that are binding

cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price.

Refer to Table 3-5. England should export

cheese and import bread.

Lead is an important input in the production of crystal. If the price of lead decreases, then we would expect the supply of

crystal to increase.

You have been asked by your economics professor to graph the market for lumber and then to analyze the change that would occur in equilibrium price as a result of recent forest fires in the west. Your first step would be to

decide whether the fires affected demand or supply.

The price paid by buyers in a market will decrease if the government

decreases a tax on the good sold in that market.

Refer to Figure 2-10. The shift of the production possibilities frontier from A to B illustrates

economic growth.

Refer to Figure 2-11. The shift of the production possibilities frontier from A to B can best be described as

economic growth.

Macroeconomics is the study of

economy-wide phenomena

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly

elastic, and the demand curve will be horizontal.

Refer to Figure 5-1. Between point A and point B on the graph, demand is

elastic, but not perfectly elastic.

Which of the following concepts cannot be illustrated by the production possibilities frontier?

equality

Suppose the US and Mexico both produce semiconductors and auto parts and the US has a comparative advantage in semiconductors while Mexico has a comparative advantage in auto parts. Also suppose the US has an absolute advantage in the production of both semiconductors and auto parts. The US should

export semiconductors to Mexico and import auto parts from Mexico.

Refer to Scenario 5-3. The change in equilibrium price will be

greater in the milk market than in the beef market.

The flatter the demand curve through a given point, the

greater the price elasticity of demand at that point.

For a market for a good or service to exist, there must be a

group of buyers and sellers.

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

income elasticity of demand is negative.

If muffins and bagels are substitutes, a higher price for bagels would result in a(n)

increase in the demand for muffins.

If the government removes a binding price ceiling from a market, then the price paid by buyers will

increase, and the quantity sold in the market will increase.

It is possible for an economy to increase its production of both goods if the economy

moves from a situation of inefficient production to a situation of efficient production.

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

negative, and the good is an inferior good.

Refer to Figure 3-3. Dina has an absolute advantage in the production of

neither good and a comparative advantage in the production of tacos.

Economists believe that production possibilities frontiers

often have a bowed shape.

Refer to Figure 6-3. A binding price floor is shown in

panel (b) only.

In a competitive market free of government regulation,

price adjusts until quantity demanded equals quantity supplied.

In the case of perfectly inelastic demand,

quantity demanded stays the same whenever price changes.

When a binding price ceiling is imposed on a market to benefit buyers,

some buyers will not be able to buy any amount of the good.

Suppose that a decrease in the price of good X results in fewer units of good Y being demanded. This implies that X and Y are

substitute goods.

If the price elasticity of supply for a good is equal to infinity, then the

supply curve is horizontal.

Wheat is the main input in the production of flour. If the price of wheat decreases, then we would expect the

supply of flour to increase.

A movement along the demand curve might be caused by a change in

the price of the good or service that is being demanded.

Income elasticity of demand measures how

the quantity demanded changes as consumer income changes.

Refer to Figure 6-17. How is the burden of the tax shared between buyers and sellers? Buyers bear

three-fourths of the burden, and sellers bear one-fourth of the burden.

Which of the following is not a reason people choose to depend on others for goods and services?

to allow people to consume outside the production possibilities frontiers