EC Midterm
I paid $53 for a jersey sweater last week. This week, the same store is selling sweaters for $43.
neither producer or consumer surplus
You work as an assistant coach on the university basketball team and earn $15 per hour. One day, you decide to skip the hour-long practice and go to the county fair instead, which has an admission fee of $9. The total cost (valued in dollars) of skipping practice and going to the fair (including the opportunity cost of time) is
$24
Suppose that the U.S. government decides to charge cola consumers a tax. Before the tax, 40 billion cases of cola were sold every year at a price of $7 per case. After the tax, 34 billion cases of cola are sold every year; consumers pay $8 per case (including the tax), and producers receive $4 per case. The amount of the tax on a case of cola is --- per case. Of this amount, the burden that falls on consumers is ---- per case, and the burden that falls on producers is ---- per case.
$4, $1, $3
Darnell is training for a triathlon, a timed race that combines swimming, biking, and running. Consider the following sentence: Because his pool sessions are helping him swim more quickly, Darnell plans to reduce by 1 hour per week the time he spends training on the bike and increase by 1 hour the time he spends in the swimming pool; however, his wife says that he should stop doing any biking and running and spend all 20 hours per week in the pool. Which basic principle of individual choice does Darnell's plan illustrate that his wife's advice does not? A. Resources are scarce. B. All costs are opportunity costs. C. People usually exploit opportunities to make themselves better off. D. Many decisions are made on the margin.
C. People usually exploit opportunities to make themselves better off.
True or False: The effect of the tax on the quantity sold would have been larger if the tax had been levied on producers.
False
True or False: The market for wheat does not exhibit the two primary characteristics that define perfectly competitive markets.
False
True or False: When a country is too small to affect the world price, allowing free trade will sometimes decrease total surplus in that country, regardless of whether it imports or exports as a result of international trade.
False
True or False: When both the demand and supply curves shift, the curve that shifts by the smaller magnitude determines the effect on the undetermined equilibrium object.
False
Suppose that both of the events you have just analyzed are partly responsible for the decrease in the price of hamburgers. Based on your analysis of the explanations offered by the two groups of students, how would you figure out which of the possible causes was the dominant cause of the decrease in the price of hamburgers?
If the equilibrium quantity of hamburgers increases, then the supply shift in the market for hamburgers must have been larger than the demand shift.
The price elasticity of demand for a good also depends on how you define the good. Organize the goods found in the following table by indicating which is likely to have the most elastic demand, which is likely to have the least elastic demand, and which will have demand that falls in between. Clothing
Least Elastic
The price elasticity of demand for a good also depends on how you define the good. Organize the goods found in the following table by indicating which is likely to have the most elastic demand, which is likely to have the least elastic demand, and which will have demand that falls in between. Boot-cut Jeans
Most Elastic
Which of the following government policies is least likely to increase the standard of living in the United States? A. Raising the minimum wage paid to workers B. Investment in education and skills training for workers C. Investment in tools and capital for workers D. Investment in technology
Raising the minimum wage paid to workers
Rent controls force landlords to price apartments below the equilibrium price level. An immediate effect is a shortage (excess demand) of apartments, because the quantity of apartments demanded is greater than the quantity supplied at the regulated price. When cities prevent landlords from charging market rents, which of the following are common long-run outcomes? Check all that apply.
The quality of rental housing units falls. The quantity of available rental housing units falls.
Given current economic conditions in Meekertown, complete the following table by indicating whether each of the statements is true or Meekertownian producers were better off without free trade than they are with it.
True
Suppose Paolo is willing to pay a total of $90,000 for a yacht. True or False: Keeping his maximum willingness to pay for a yacht in mind, Paolo will not buy the yacht because it would be worth less to him than its market price of $135,000.
True
Simone has opened a new startup company in web design. Within the first month of business, the startup agrees to maintain an accounting firm's website in exchange for someone doing their tax returns. Which of the following principles of economic interaction best describes this scenario? A.When markets do not achieve efficiency, government intervention can improve overall welfare. B. Trade can make everyone better off. C. Markets allocate goods effectively. D. All costs are opportunity costs.
When markets do not achieve efficiency, government intervention can improve overall welfare.
Suppose a firm that produces for this market is able to dump toxic chemicals into a river next to its factory, which poisons wildlife and harms the health of nearby residents, who have no business with the company. This scenario is characterized by ----, which is an example of ------.
an externality, market failure
Even though I was willing to pay up to $73 for a watch, I bought a watch for only $65.
consumer surplus
Because of the violent nature of the sport, professional American football players are at risk of suffering concussions (or brain injuries) during the violent collisions that occur between players during the game. Violent collisions involving hits to the head are particularly risky. Suppose the commissioner of the National Football League (NFL) institutes a rule requiring players to wear a new, lighter helmet that is designed to reduce head trauma during collisions between players on the field. While the new helmets ------- the probability of a concussion resulting from each individual collision, at the same time the new helmets could also give football players an incentive to play more ------- , which could potentially ------- the amount of violent collisions and thus the number of concussions suffered by NFL players, all else equal.
decrease, recklessly, increase
A graphical object showing the relationship between the price of a good and the amount of the good that buyers are willing and able to purchase at various prices
demand curve
Your coworker Tim is really concerned about a project that he has just been assigned. He is in charge of analyzing and determining conditions in the market for televisions from an extensive sales report. If Tim's boss is interested in a graphical representation of the relationship between the price and quantity of televisions demanded, you would advise your coworker to construct a ---- using the data provided. However, if Tim's boss is more interested in the detailed numbers used to construct this visual representation, you would instead advise your coworker that a ------ would be more appropriate.
demand curve, demand schedule
The claim that, with other things being equal, the quantity demanded of a good falls when the price of that good rises
demand law
The amount of a good that buyers are willing and able to purchase at a given price
demand quality
A table showing the relationship between the price of a good and the amount that buyers are willing and able to purchase at various prices
demand schedule
When a society gets the most it can from its scarce resources
efficiency
Bob is a retired teacher who lives in San Diego and provides math tutoring for extra cash. At a wage of $20 per hour, he is willing to tutor 2 hours per week. At $35 per hour, he is willing to tutor 11 hours per week. Using the midpoint method, the elasticity of Bob's labor supply between the wages of $20 and $35 per hour is approximately2.54 Correct , which means that Bob's supply of labor over this wage range is ------
elastic
Consider some determinants of the price elasticity of demand: • The availability of close substitutes • Whether the good is a necessity or a luxury • How broadly you define the market • The time horizon being considered A good with many close substitutes is likely to have relatively ----- demand, since consumers can easily choose to purchase one of the close substitutes if the price of the good rises.
elastic
When economic benefits are distributed uniformly across society
equallity
A person smoking in a restaurant emits second-hand smoke that harms other restaurant patrons.
externality
Suppose the market for cars is unregulated. That is, car prices are free to adjust based on the forces of supply and demand. If a surplus exists in the car market, then the current price must be ------ than the equilibrium price. For the market to reach equilibrium, you would expect ------.
higher, sellers to offer lower prices
Consider the market for meekers in the imaginary economy of Meekertown. In the absence of international trade, the domestic price of meekers is $39. Suppose that the world price of meekers is $20. Assume that Meekertown is too small to influence the world price of meekers once it enters the international market. If Meekertown allows free trade, then it will ----- meekers.
import
The price elasticity of demand for a good also depends on how you define the good. Organize the goods found in the following table by indicating which is likely to have the most elastic demand, which is likely to have the least elastic demand, and which will have demand that falls in between. Pants
in between
The following graph shows the market for hot dogs in Chicago, where there are over 1,000 hot dog stands at any given moment. Suppose the Surgeon General issues a public statement saying that consuming hot dogs is bad for your health. Now suppose Congress passes a tax cut that increases the income of Chicago residents. If hot dogs are a normal good, this will cause the demand for hot dogs to -----.
increase
If the United States government lowers the income taxes on the wealthiest Americans, while decreasing welfare payments to the poorest Americans, the result will likely bean ----- in efficiency and ------ in equality in the United States.
increase, a decrease
The following graph shows the market for roses in 2007. Between 2007 and 2008, the equilibrium price of roses remained constant, but the equilibrium quantity of roses increased. From this, you can conclude that between 2007 and 2008, the supply of roses----- and the demand for roses -----
increase, increased
In addition to the positive welfare effects that free trade has on an economy, there are a variety of other benefits of international trade. Consider the following scenario: Without free trade, Rooby has market power as a local producer. Once free trade is implemented in the local economy, Rooby is no longer able to raise its prices above competitive levels. The previous scenario represents which of the following benefits of free trade?
increased competition
This monetary policy ------ the economy's demand for goods and services, leading to ---- product prices. In the short run, the change in prices induces firms to produce ---- goods and services. This, in turn, leads to a ---- level of unemployment.
increases, higher, more, lower
Suppose there is a policy debate regarding the United States' imposing trade restrictions on imported tires. Read the following scenario and answer the question that follows. A political pundit explains that it is necessary to impose trade restrictions, such as a tariff, on the tire industry to protect workers in the domestic tire industry. The pundit claims that without trade protection, there will be layoffs, causing many U.S. workers in the tire industry to become unemployed. Which of the following justifications is the pundit using to argue for the trade restriction on tires?
jobs argument
Loggers are much ---- likely to supply wood to the market if property rights are not enforced.
less
The price elasticity of demand is also affected by the given time horizon. If the price of gasoline is relatively high for a long time, consumers are more likely to buy more fuel-efficient cars or switch to alternatives like public transportation. Therefore, the demand for gasoline is ---- elastic in the short run than in the long run.
less
In other words, the economy faces a trade-off between inflation and unemployment: Higher inflation leads to ---- unemployment.
lower
A single public utilities company is responsible for supplying electricity for an entire state. As a result, the utilities company can set the price of electricity.
market power
An increase in the price of hot dogs
movement along
an increase in the price of cereal
movement along
Identical products, as well as a large number of buyers and sellers, are characteristics of a ------ market. In such markets, sellers of goods ----- influence the prevailing market price, giving them the role of ----- in the market.
perfectly competitive, cannot, price takers
Due to new regulations, donut shops that would like to pay better wages in order to hire more workers are prohibited from doing so.
price ceiling, binding
The government prohibits donut shops from selling donuts for more than $1.00 each.
price ceiling, binding
The government has instituted a legal minimum price of $2.00 each for donuts.
price floor, binding
I sold a used textbook for $45, even though I was willing to go as low as $36 in order to sell it.
producer surplus
Suppose Germany produces only smartphones and tablets. The resources that are used in the production of these two goods are not specialized—that is, the same set of resources is equally useful in producing both tablets and smartphones. The shape of Germany's production possibilities frontier (PPF) should reflect the fact that as Germany produces more tablets and fewer smartphones, the opportunity cost of producing each additional tablet ------.
remains constant
A decrease in the number of consumers
shift
A decrease in the price of oats (used in the production of cereal)
shift
A decrease in the price of soda (a complement for hot dogs)
shift
An increase in the number of producers
shift
Fortunately, you recognize that the line on this graph isa ----- . When your friend asks you which value represents the quantity of toothbrushes supplied at a price of $8 per toothbrush, you tell him the value represented by the letter ----- .
supply curve, x
Given current economic conditions in Meekertown, complete the following table by indicating whether each of the statements is true or Meekertownian consumers were worse off without free trade than they are with it.
true