econ exam 1

When you are willing to pay $5 for a hamburger but you pay $4 for it, your consumer surplus for the hamburger is:

$1

(Figure: Quantity of Good X) Refer to the figure. At a price of $200, consumer surplus is:

$10,000.

(Figure: Gains from Trade) Refer to the figure. What are the total gains from trade at the free market equilibrium?

$1000

Refer to the figure. When the supply curve shifts from S 0 to S 1, the equilibrium price rises to:

$12 and the equilibrium quantity falls to 70.

Suppose that Saudi Arabia can produce oil at $4 per barrel, Iran at $10 per barrel, and Canada at $25 per barrel. If the price of oil is $90 per barrel, what is total producer surplus per barrel for world suppliers?

$231

Refer to the figure. Calculate the dollar amount of consumer surplus being earned in this market when the price is $30 and there are 300 units consumed.

$4500

In the figure, a $10 tax is imposed on the market for lobsters. What is the market price that lobster producers would need to receive to induce them to produce 5,000 bushels of lobster per day?

$60

Refer to the figure. The market price of the product is $20 per unit. Calculate the dollar amount of consumer surplus being earned in this market.

$60,000

Nigeria receives $53 of producer surplus from each barrel of oil sold at $60. At that level of production, Nigeria's cost to produce a barrel of oil is:

$7

Figure: Price and Quantity 1) In the diagram, at which price is there a surplus?

$80

Figure: Price and Quantity 2) At a cost of $20 per unit in the diagram, the value of the unexploited gains from trade is:

$900

Figure: Price and Quantity 3) The value of wasted resources at a quantity of 80 units in the diagram is:

$900

Refer to the figure. If the price of the product is $14, there is a:

. shortage of 50 units of the product, and the price will rise to $16.

Iceland produces two goods: Viking hats (Y) and fish (X). Its production possibilities frontier is characterized as: Y = 50 - 2X. What is the opportunity cost of producing a tenth Viking hat (i.e., going from a production level of nine Viking hats to a production level of 10 Viking hats)?

.5 units of fish

celand produces two goods: Viking hats (Y) and fish (X). Its production possibilities frontier is characterized as: Y = 50 - 2X. What is the opportunity cost of producing a tenth unit of fish (i.e., going from nine units of fish production to 10)?

2 viking hats

(Table: Production in the United States and Germany) According to the table, the opportunity cost of producing one clock in the United States is _________, and the opportunity cost of producing one clock in Germany is _______.

2.5 sofas, 3 sofas

Conan O'Brien hosts the Conan show and Andy Richter, his sidekick, writes for it. Conan needs 4 hours to rehearse and host a good show. It takes Andy 10 hours to do the same. Conan writes one usable joke in an hour, but Andy needs 2 hours to do the same. Conan's opportunity cost of rehearsing and hosting a show is:

4 usuable jokes

Conan O'Brien hosts the Conan show and Andy Richter, his sidekick, writes for it. Conan needs 4 hours to rehearse and host a good show. It takes Andy 10 hours to do the same. Conan writes one usable joke in an hour, but Andy needs 2 hours to do the same. Andy's opportunity cost of rehearsing and hosting a show is:

5 usable jokes

(Figure: Price and Quantity 1) In the diagram, at a price of $40, the quantity demanded is ______, the quantity supplied is ______, and there is a ______.

60; 40; shortage of 20 units

Which of the following choices correctly illustrates how changes in opportunity costs affect supply?

A farmer produces corn and wheat. The price of wheat rises, so he shifts his resources toward wheat and the supply of wheat rises.

Each of 100 people receives a random item from a grocery store and assigns it a value between 1 (low) and 10 (high). They trade those items among themselves for items they prefer rather than those they randomly received and then assign a second value (again, 1 to 10) to the item that they end up with after the trading concludes. How would the sum of those values before trading compare with the sum after trading?

After trading, value would be higher because preferences are diverse.

Figure: Demand and Supply) Refer to the figure. Which statement is TRUE?

Buyers are willing to pay $20 for the 16th unit of output and it costs sellers $60 to produce that unit.

Which of the following could explain the figure?

Consumer income increases in the market for a normal good

(Figure: Demand, Supply Shifts) In the figure, the initial demand curve is D 1 and the initial supply curve is S 1. If this depicts the equilibrium in the market for computer printers, what will happen when the price of computers increases?

D 1 will shift to D 2

David sells his car, which he considers worthless, to Cameron for $200. Which of the following statements is true?

David and Cameron must have different preferences for the car.

The United States and the European Union are groups of semi-independent states that have come together under an agreement whereby resources can travel freely across borders and a common currency is in use. Which of the following statements best explains how this allows for the achievement of economies of scale?

Each state or country can adopt large-scale production techniques that allow lower per-unit costs of production.

Suppose it is widely believed that the price of flat-screen, high-definition televisions will be lower next year. What will happen as a result of such beliefs?

The demand for flat-screen TVs will decrease now.

Jesse is good at math and excellent at making friends and Addae is equally good at both. Mathematically and socially challenged Jordan wants to hire tutors to help in each area. Who should tutor Jordan in which area to maximize Jordan's college experience?

Jesse should teach how to make friends and Addae should teach math

Two persons each produce two identical goods. Which of the following is true about their absolute and comparative advantages in the production of these two goods?

One person can have an absolute advantage in both goods but not a comparative advantage in both goods.

Which of the four panels shows an increase in income on an inferior good?

Panel A

(Figure: Demand, Supply Shifts) In the figure, the initial demand curve is D 1 and the initial supply curve is S 1. If technological innovations lower the costs of production, what will happen?

S 1 will shift to S 3 and equilibrium price will decrease but equilibrium quantity will increase.

In 2011, the United States Senate voted to end ethanol subsidies. What will be the effect of this bill in the market for ethanol?

Supply will decrease

Suppose a country without any international trade opens its borders to international trade. After specialization how will its location on its production possibility frontier change?

The country moves from on the PPF to beyond the PPF.

The U.S. government limits the importation of Chinese-made bras. What effect does this trade restriction have on the market for bras?

The equilibrium price will increase and the equilibrium quantity will decrease.

A firm produces volleyballs and soccer balls. What happens to the supply of soccer balls if the market price of volleyballs increases?

The opportunity cost of producing soccer balls rises, so the supply curve of soccer balls decreases.

What will happen in the market for cotton as a result of a severe drought?

The supply of cotton will decrease, causing the equilibrium price to rise and equilibrium quantity to fall.

Which of the following statements is TRUE?

When the price of oil rises, consumers tend to use oil for uses in which there are few substitutes for it.

Zoey receives a big raise at work and decides to buy additional porcelain figurines. Which of the following statements is TRUE?

Zoey considers porcelain figurines to be a normal good.

Which of the following would cause the demand for hot dog buns to increase?

a fall in the price of hot dogs

Imagine a free market in equilibrium. After a sudden increase in demand (but before the price can adjust), the market experiences:

a shortage

in the market for fertilizer, an:

advance in technology will increase the supply of fertilizer

What happens as a result of the change in demand in the diagram?

an increase in both the equilibrium price and the equilibrium quantity

In the diagram, which of the following factors would cause the demand curve to shift from D 1 to D 2?

an increase in income if this is an inferior good

After a hurricane in Florida destroys half of the orange crop, economists predict:

an increase in orange prices and a decrease in orange sales.

The current demand for parking in a city's downtown district is such that all the parking garages are full. If there is an increase in the city's population, there will be:

an increase in the willingness to pay for parking.

The development of shipping containers enabled companies to move freight quickly between ships, trucks, and trains by loading a single large container with many different goods and then moving the container. Before the container, freight had to be loaded and unloaded one palette, barrel, or box at a time. What impact did the shipping container have on globalization? Why?

an increase, because it decreased transportation costs

Table: Production Possibilities for the United States and Mexico) According to the table on production possibilities for the United States and Mexico, the United States has an absolute advantage in ________ and a comparative advantage in _________.

both goods, potatoes

Gains from trade will be maximized at the free market equilibrium price and quantity because the supply of goods is:

bought by the buyers who have the highest willingness to pay

If the price of swimming pools decreases, we would expect the demand for:

chlorine, a complement good, to increase

Iceland produces two goods: Viking hats (Y) and fish (X). Its production possibilities frontier is characterized as: Y = 50 - 2X and tells us that the opportunity cost of catching (producing) an additional unit of fish in Iceland is:

constant in fish production.

(Figure: Computers and Books) According to the figure, both countries can increase consumption if:

country A produces only computers and buys books from country B.

Imagine that millions of refugees move out of country A and into country X. This would cause the demand for housing in country A to _____ and the demand for housing in country X to _____.

decrease; increase

Specialization and trade can _____ the per-unit cost of production because ____

decrease; it creates economies of scale associated with large-scale production

Charcoal bricks are considered a normal good in India's economy. As income rises, the demand for charcoal bricks that are used for heating will

increase

Suppose that Country X is a high-cost producer of oil and Country Y is a low-cost producer of oil. The citizens of Country X use both oil produced in their own country as well as oil produced in Country Y. If the market price of oil decreases, oil production in Country X will _______, and the citizens of Country X will _________________.

decrease; purchase a larger fraction of their oil from Country Y

When Asian countries went into a recession in 1997, the demand for oil _______ and the price of oil ________.

decreased; decreased

In the figure, the demand curve shifted from D 0 to D 1. To describe this movement, we would say that:

demand increased, which caused an increase in quantity supplied.

If market demand decreases:

equilibrium price and quantity will both decrease.

If market supply increases:

equilibrium price will decrease but equilibrium quantity will increase.

In a free market setting where quantity supplied is 50 units and quantity demanded is 40 units, price will:

fall

In a free market setting where quantity supplied is 40 units and quantity demanded is 50 units, price will:

rise

(Figure: Market Changes) Refer to the figures. If these figures represent the market for blue jeans, which figure shows the effect of an increase in the price of denim, a raw material used to make jeans?

figure a

(Table: Production Possibilities for the United States and Mexico) Using the table on production possibilities for the United States and Mexico, assume each country specializes in the good for which it has a comparative advantage. Which of the following answers identifies a trade price that both countries would find acceptable? (Units are in tons.)

five corns for one potato < Trade price < eight corns for one potato

As the population of elderly in the United States increases, which service will likely see the biggest increase in demand?

home medical care

After adjusting for inflation, a comparison of the price of leg warmers reveals that the price of leg warmers was significantly higher in the 1980s than it is today. Which of the following can explain this?

ince the 1980s jeans have become preferable to leg warmers, decreasing the demand for leg warmers.

Cell phone data plans are most useful when used with a smartphone, and smartphones are most useful when used with a data plan. As the price of data plans falls, the demand for smartphones will:

increase, because smartphones and data plans are complements.

As world coal prices rise due to increasing scarcity and coal-based energy costs rise, the demand for wind energy will:

increase.

In 1980 when Iraq attacked Iran, the price of oil _______ because of a(n) ______.

increased; disruption in the supply of oil

If the price of computers ______, the demand for printers will ______.

increases; decrease

If the price of shotguns ______, the demand for shotgun shells will _______.

increases; decrease

Facilitators of trade (such as Pierre Omidyar, the developer of eBay):

may become very rich since they are creating value for many individuals.

A decrease in the opportunity cost of steel production will:

make suppliers more likely to produce steel, thus shifting the supply curve down and to the right.

In his prime, Michael Jordan played both professional basketball and professional baseball. Compared with most people, Jordan would have an absolute advantage in:

playing both basketball and baseball since he was better at both than the average person.

Which of the following would cause the current supply of iPods to increase?

producers expecting that the future price of iPods will decrease

The price of strawberries decreases (goes down), the ____________ of strawberries __________.

quantity demanded, increases.

In a free market setting where quantity supplied is 50 units and quantity demanded is 50 units, price will:

remain the same.

Imagine a free market in equilibrium. After a sudden decrease in supply (but before the price can adjust), the market experiences a:

shortage

(Table: Equilibrium Adjustment) Refer to the table. If the price in the free market is $2, then a:

shortage of 50 units would exist, and price would rise.

(Figure: Supply Shifts) In the figure, the initial supply curve is S 1. Producers engage in market speculation with the belief that the price of the good will increase in the near future. This would be represented in the figure by shifting the:

supply curve to S2, resulting in a lower quantity supplied at each price.

A technological innovation in the production of golf balls increases ______, causing the price to ______ and the ______.

supply; fall; quantity demanded to increase

(Table: Equilibrium Price, Quantity) Refer to the table. If the price in the market was $16, there would be a:

surplus of 10 units

Table: Equilibrium Adjustment) Refer to the table. If the price in the free market is $8, then a:

surplus of 25 units would exist, and price would tend to fall.

In 2011, revolutions and uprisings spread across North Africa and the Middle East, where a lot of oil is pumped. How did this affect the oil market?

the supply curve for oil shifted to the left

Tim values treats for his dog at $10 per box, and John values them at $6 per box. If the price of dog treats is $3 per box but only one box is available between these two buyers, then gains from trade will be maximized when:

tim buys the treats

If instead of specialized doctors (neurologists, cardiologists, gastroenterologists, etc.) we had doctors who each knew the same things about all aspects of medicine, it would be:

worse because total medical knowledge in society would decrease.