Econ 210 Test #2

Refer to figure 8-1 Under autarky, the equilibrium price is _____, the consumer price surplus is___ and the producer surplus is _____ a) $30; consumer surplus= area R; producer surplus=area S+V b)$30; consumer surplus= area R+S; producer surplus=area V c)$30; consumer surplus= area R; producer surplus= area S+T+U+V d) $24; consumer surplus= area R+S+T+U; producer surplus=area V

a) $30; consumer surplus= area R; producer surplus=area S+V

Calculate the income elasticity if a 4 percent increase in income leads to an 8 percent increase in quantity demanded for organic produce and a 6 percent increase in price a) 2 b) -0.66 c) 1.5 d) 0.5

a) 2

Refer to figure 4-7 What area represents consumer surplus after the imposition of the price floor a) A b) A+B c) A+B+E d) A+B+E+F

a) A

Refer to figure 6-1 The section of the demand curve labeled "C" represents a) The inelastic section of the demand curve b) the unit elastic section of the demand curve c)the perfectly elastic section of the demand curve d) the elastic section of the demand curve

a) The inelastic section of the demand curve

Refer to figure 8-1 Suppose the government allows imports of leather footwear into the US. The market price moves to ____. What areas represent consumer surplus and domestic producer surplus a) a price of $24. Consumer surplus=R+S+T+U; producer surplus=V b) a price of $24. Consumer surplus=R+S+T+U; producer surplus=V+W+X+Y c) a price less than $24. Consumer surplus= R+S+T; producer surplus=W+X+Y d) a price of $30. Consumer surplus=R+S; producer surplus=V

a) a price of $24. Consumer surplus=R+S+T+U; producer surplus=V

In order to prove that Goody's Headache Powder and BC Pain Reliever are substitutes, one should measure the ____ and get a ____. a) cross price elasticity; positive number b) price elasticity of demand; number less than 1 (in absolute value) c) price elasticity of demand; number greater than 1 (in absolute value) d) cross price elasticity; negative number

a) cross price elasticity; positive number

Refer to figure 8-3 If there was no quota, under free trade, how many pounds of peanuts would domestic producers produce, and what quantity would be purchased by consumers a) domestic production- 10 million pounds quantity purchased by consumers- 28 million pounds b) domestic production- 40 million pounds quantity purchased by consumers- 10 million pounds c) domestic production- 28 million pounds quantity purchased by consumers- 28 million pounds d) domestic production- 10 million pounds quantity purchased by consumers- 30 million pounds

a) domestic production- 10 million pounds quantity purchased by consumers- 28 million pounds

The larger the share of a good in a consumer's budget, holding everything else constant, the a) more price elastic is a consumer's demand b) more vertical is a consumer's demand curve c) more price inelastic is a consumer's demand d) more unit elastic is a consumer's demand

a) more price elastic is a consumer's demand

Consumer surplus in a market for a product would be equal to the area under the demand curve if a) the market price was zero b)the product was produced in a perfectly competitive world c) producer surplus was equal to zero d) marginal cost was equal to the market price

a) the market price was zero

If the demand for textbooks is unit elastic, then a) the percentage change in quantity demanded is equal to the percentage change in the price b) the percentage change in quantity demanded is 1 percent greater than the percentage change in price c) quantity demanded does not respond to changes in price d) the percentage change in quantity demanded is 100 percent greater than the percentage change in price (absolute value)

a) the percentage change in quantity demanded is equal to the percentage change in the price

Deadweight loss refers to a) the reduction in economic surplus resulting from not being in competitive equilibrium b) the surplus that is transferred from the consumer to the producer (and vice versa) c) the opportunity cost to firms from producing the equilibrium quantity in a competitive market d) the loss of economic surplus when the marginal benefit equals the marginal cost of the last unit produced

a) the reduction in economic surplus resulting from not being in competitive equilibrium

In Germany, the government places a $3,000 tax on buyers of new automobiles. After the purchases of a new car, the buyer must pay the government $3,000. How would the imposition of the tax on buyers be illustrated in a graph? a) the tax will shift the demand curve to the left such that the vertical distance between the two demand curves is $3,000 b) the tax will shift the supply curve to the left such that the vertical distance between the two supply curves is $3,000 c) the tax will shift the supply curve to the left such that the horizontal distance between the two supply curves is $3,000 d) the tax will shift the demand curve to the right such that the vertical distance between the two demand curves is $3,o00

a) the tax will shift the demand curve to the left such that the vertical distance between the two demand curves is $3,000

The price elasticity of supply of hot dog buns is estimated to be 1.5. Holding everything else constant, this means that a 10 percent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by a) 1.5 percent b) 15 percent c) approximately 25 percent d) approximately 5 percent

b) 15 percent

Refer to figure 4-7 What area represents producer surplus after the imposition of the price floor a) B b) B+E c) B+C+D+E d) B+D+E

b) B+E

Refer to figure 4-6 What is the area that represents the REDUCTION in producer surplus that results because of the imposition of the ceiling a) D+E+J b)D+E c) D d) F

b) D+E

Refer to figure 4-6 Suppose apartment owners ignore the rent control law and rent at a Black Market rate. This rate is: a) R0 b) R1 c) R* d) more than 1

b) R1

In order to prove that inexpensive cuts of beef is an inferior good, one should measure the ____ and get a ___. a) Cross price elasticity of demand; a negative number b) income elasticity of demand; a negative number c) income elasticity of demand; a number greater than 1 d) income elasticity of demand; positive number

b) income elasticity of demand; a negative number

Suppose that when the price of online music rose by 10 percent, the quantity of online music sold fell 6 percent. This indicates that the demand is a) perfectly inelastic b) inelastic c) unit elastic d) elastic

b) inelastic

Compared to a necessity such as toothpaste, the price elasticity of demand for a boat is a) smaller in absolute value b) larger in absolute value c) at least twice as large in absolute value d) equal

b) larger in absolute value

Refer to figure 4-4 The figure above represents the market for iced tea. Assume that this is a competitive market. At an output of 10,000 units a)the marginal cost of iced tea is greater than the marginal benefit; therefore, output in inefficiently high b) the marginal benefit of iced tea is greater than the marginal cost; therefore, output is inefficiently low c)the marginal cost of iced tea is greater than the marginal benefit; therefore, output is inefficiently low d) producers should lower the price to $1 in order to sell the quantity supplied of 10,000

b) the marginal benefit of iced tea is greater than the marginal cost; therefore, output is inefficiently low

Refer to figure 8-2 Without the tariff in place, under free trade the United States consumes a) 9 million pounds of rice b) 15 million pounds of rice c) 42 million pounds of rice d) 31 million pounds of rice

c) 42 million pounds of rice

Suppose the value of the price elasticity of demand for a newly designed cell phone is -2.5. What does this mean? a) A 2.5 percent increase in the price of the cell phone causes quantity demanded to decrease by 1 percent b) A 2.5 percent increase in the price of the cell phone causes demand to decrease by 1 percent c) A 1 percent increase in the price of the cell phone causes quantity demanded to decrease by 2.5 percent d) A 1 percent increase in the price of the cell phone causes quantity demanded to increase by 2.5 percent

c) A 1 percent increase in the price of the cell phone causes quantity demanded to decrease by 2.5 percent

Refer to figure 4-6 What is the area that represents consumer surplus before the imposition of the ceiling a) A+B+C+D+E+J b) A+B+C+D c) A+B+C d) A+B+D

c) A+B+C

Assume that Bulgaria has a comparative advantage in producing sandals and Finland imports sandals from Bulgaria. We can conclude that a) Labor costs are higher for sandal producers in Finland than in Bulgaria b) Finland has an absolute disadvantage in producing sandals relative to Bulgaria c)Bulgaria has a lower opportunity cost of producing sandals relative to Finland d) Bulgaria also has an absolute advantage in producing sandals relative to Finland

c) Bulgaria has a lower opportunity cost of producing sandals relative to Finland

Refer to figure 4-6 What area represents the deadweight loss AFTER the imposition of the ceiling a) G+H b) J+H c) C+E d) C+E+J+H

c) C+E

Refer to figure 8-2 The tariff revenue collected by the government equals the area a) C+D+E+F b) B+D+E+F c) E d) D+E+F

c) E

If Canada imports fishing poles from Mexico and Mexico imports bacon from Canada, which of the following would explain this pattern of trade a) Mexico must have an absolute advantage in producing fishing poles and Canada must have an absolute advantage in bacon b) Mexico has a lower opportunity cost of producing bacon than Mexico and Mexico has a comparative advantage in producing fishing poles c) The opportunity cost of producing fishing poles in Canada is higher then the opportunity costive producing bacon in Mexico d) Mexico has a higher opportunity cost of producing fishing poles than Canada, and Canada has a higher opportunity cost of producing bacon

c) The opportunity cost of producing fishing poles in Canada is higher then the opportunity costive producing bacon in Mexico

An article in the Wall Street Journal noted the following: Instead of relying on a full coach, round trip unrestricted fare of about $2,000 between Cleveland and Los Angeles... Continental [Airlines] since June has offered a $716 unrestricted fare in that market... Through October, the test resulted in about the same revenue that Continental thinks it would have collected with its higher fare. What is the absolute value of the price elasticity of demand on this airline route? a) 0 b) greater than 1 c) approximately 1 d) less than 1

c) approximately 1

Refer to figure 8-3 What is the change in consumer and producer surplus with the quota, relative to a position of free trade a) consumer surplus increases by G+H; producer surplus increases by B b) Consumer surplus decreases by B+E+I+J+M; producer surplus increases by B+E c) consumer surplus decreases by B+E+I+J+M; producer surplus increases by B d) consumer surplus decreases by B+E+I+J+M+G+H; producer surplus increases by B

c) consumer surplus decreases by B+E+I+J+M; producer surplus increases by B

Once an industry becomes established in a certain area firms that locate in that area gain advantages over firms located elsewhere, leading to lower costs of production. Economists refer to the lower costs that result from increases in the size of an industry in certain area as a) strategic advantages b) technological change c) external economies d) positive externalities

c) external economies

Quail Hollow Academy is considering increasing its tuition to raise revenue. If the school believes that raising tuition will increase revenue a) it is assuming that the demand for attending the school is unit elastic b) it is assuming that the demand for attending the school is elastic c) it is assuming that the demand for attending the school is inelastic d) it is assuming that the demand for attending the school is perfectly elastic

c) it is assuming that the demand for attending the school is inelastic

A rightward shift of the demand curve will result in a ____ change in quantity and a ____ change in price the more elastic the supply curve a) smaller; smaller b) larger; larger c) larger; smaller d) smaller; larger

c) larger; smaller

Which of the following pairs of goods is likely to have a negative cross price elasticity of demand a) hot dogs and hamburgers b) orange juice and grapefruit juice c) pancakes and syrup d) peanuts and cat food

c) pancakes and syrup

An economically efficient output level is achieved when a) the marginal benefit of the last unit produced is greater than the marginal cost of producing that unit b) the marginal benefit of the last unit produced is less than the marginal cost of producing that unit c) the marginal benefit of the last unit produced equals the marginal cost of producing that unit d)total benefits must exceed total cost

c) the marginal benefit of the last unit produced equals the marginal cost of producing that unit

Refer to Figure 4-8 In this market, tax revenue for the government amounts to a) $100,000 b) $250,000 c) $630,000 d) $350,000

d) $350,000

Refer to figure 4-8 How much of the tax is paid by buyers a) $2 b)$12 c) $7 d) $5

d) $5

Refer to figure 4-8 How much of the "tax burden" is paid by producers a) 71.4% b) 100% c) 7.4% d) 28.6%

d) 28.6%

Refer to figure 8-2 Compared to free trade, the increase in domestic producer surplus as a result of the tariff is equal to to the area a) D+E+F b) G+C c) C+D+E+F d) C

d) C

Refer to Table 4-1 The table above lists the highest prices three consumers, Tom, Dick, and Harriet, are willing to pay for a short sleeved polo shirt. If the price of the shirts falls from $28 to $20 a) Tom will buy two shirts; Dick and Harriet will each buy one shirt b) consumer surplus will increase from $70 to $95 c) Harriet will receive more consumer surplus than Tom or Dick d) consumer surplus increases from $14 to $35

d) consumer surplus increases from $14 to $35

Refer to figure 8-3 With a quota, which statement is true? a) Domestic production = 18 million pounds, imports=10 million pounds, and the quantity purchased by consumers =28 million pounds b) domestic production=10 million pounds, imports=18 million pounds, and the quantity purchased by consumers=28 million pounds c) domestic production=28 million pounds, imports =12 million pounds, and the quantity purchased by consumers=40 million pounds d) domestic production=18 million pounds, imports= 16 million pounds, and the quantity purchased by consumers=34 million pounds

d) domestic production=18 million pounds, imports= 16 million pounds, and the quantity purchased by consumers=34 million pounds

In the real world we don't observe countries completely specializing in the production of goods for which they have a comparative advantage. One reasons for this is a) some countries have more resources than other countries b) tastes for many traded goods are similar in many countries because of globalization c) comparative advantage works better in theory than in practice d) production of most goods involves increasing opportunity costs

d) production of most goods involves increasing opportunity costs

The world trade organization (WTO) promotes foreign trade and investment, or globalization. In recent years opposition to globalization has led to violent protests at meetings of the WTO. One reason for these anti globalization protests is a)international trade and investment cover up child labor problems b)protestors believe that globalization will result in a return to free trade in developing countries c) protestors object to the loss of intellectual property (such as software programs and movies) that results from foreign trade and investment d) protestors believe that free trade destroys the distinctive cultures of many countries

d) protestors believe that free trade destroys the distinctive cultures of many countries

Many economists criticize protectionism because it causes losses to consumers and eliminates jobs in domestic industries that use protected products. Why, then, do some people support protectionism a) supporters of protectionism believe that free trade will lead to inflation b) the criticisms of economists are based on theory. In fact, protectionism increases consumer and producer surplus as well as employment c) supporters of protectionism believe that free trade will cause their countries to lose their comparative advantage d) supporters of protectionism in high income countries believe that wages will fall as a result of competition with firms from developing countries.

d) supporters of protectionism in high income countries believe that wages will fall as a result of competition with firms from developing countries.

If the market for a product is broadly defined, then a) there are many substitutes for the product and the demand for the product is relatively elastic b) the expenditure on the good is likely to make up a large share of one's budget c) the good has many complements d) the are few substitutes for the product and the demand for the product is relatively inelastic

d) there are few substitutes for the product and the demand for the product is relatively inelastic

Refer to figure 8-2 The tariff causes domestic production of rice a) to rise by 16 million pounds b) to fall by 27 million pounds c) to fall by 11 million pounds d) to rise by 6 millions pounds

d) to rise by 6 million pounds