Econ Exam 1

If D2 and S2 represent the demand and supply schedules in a particular market, then the equilibrium price and quantity are ____________ and _____________, respectively

$10; 12

Refer to the figure below (remember to use the formula for a triangle to find the amount of surplus). What is the producer surplus?

$180

Refer to the figure below. Consumer surplus is:

$30

If the total surplus in a market with no government intervention is $500 and consumer surplus is $200, producer surplus is ________.

$300

If D2 and S1 represent the demand and supply schedules in a particular market, then the equilibrium price and quantity are __________ and __________, respectively.

$8; 15

In 2010, Americans had about __________ outstanding in credit card debts not paid on time.

$90 billion

Consider the Production Possibility Frontier for country X producing 2 groups of goods, MP3 players and watches. The opportunity cost of moving from the combination of MP3 players and watches B to C is

2 watches.

Refer to Figure 5-1. With reference to Graph A, at a price of $10, total revenue equals:

400

Refer to Figure 2-1. Which arrow represents the flow of spending by households?

A

On April 1, 2009, in the middle of a recession, the government of the province of Ontario, Canada increased the provincial minimum wage from $8.75 to $9.50. What will the likely effect of this policy be?

Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in the unemployment rate.

Refer to Figure 2-1. Which arrow represents the flow of land, labor, and capital?

C

Identify the positive statement among the following statements.

College tuition is higher for out-of-state students than it is for in-state students.

Refer to Figure 2-1. Which arrow represents the flow of income payments?

D

Consider the graph of the production possibility frontier for country Z below. A combination of clothing and cell phones that would meet the productive efficiency would be:

E

Consider the Production Possibility Frontier for country X producing 2 groups of goods, MP3 players and watches. The opportunity cost of one additional watch is

Greater at B than at C

Which is a true statement about marginal cost?

It is the difference (or change) in cost of a different choice.

Are markets always in equilibrium?

No, but if there is no outside interference, they tend to move toward equilibrium.

The movement from __________ to __________ is consistent with a decrease in the price of cotton (a substitute).

Point A; Point H

__________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling.

Price floors

Which of the following statements is positive?

Social security benefits are not taxed.

Consider the market for purple potatoes below and assume that a price ceiling of $30 is imposed by the government. Calculate the deadweight loss:

The deadweight loss is $5000.

Identify the normative statement(s) among the following statement(s).

The federal government spends too much.

A free market is described by which of the following statements?

The government does not intervene in any way.

How does a production possibilities model differ from a budget constraint model?

The production possibilities model demonstrates diminishing returns.

Steel mill wage costs increase by 18 percent over a year. What is the likely economic effect on the market for steel?

There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel.

Juan has a monthly budget of $100 to spend on entertainment. A concert ticket costs $20 while a movie ticket costs $10. This month Juan has attended one concert and 5 movies so far. If Juan decides to only go to movies for the rest of the month. How many movie tickets can he afford to purchase and stay within his budget?

Three tickets.

Suppose that D1 and S2 are the demand and supply schedules for Product A. If the government imposes a price ceiling of $4, then:

a 10 unit shortage will result.

Two countries are trying to decide which product should have an increased production. Both Canada and Costa Rica produce coffee and corn, but it is easier for Canada to raise corn than grow coffee. Costa Rica easily grows coffee, but has a more difficult time growing corn. In comparison with Canada, Costa Rica has

a comparative advantage with coffee.

Two countries are trying to decide which product should have an increased production. Both Canada and Costa Rica produce coffee and corn, but it is easier for Canada to raise corn than grow coffee. Costa Rica easily grows coffee, but has a more difficult time growing corn. In comparison with Costa Rica, Canada has

a comparative advantage with corn.

The supply curve of textbooks (which are produced using paper made from trees) will shift to the left in response to:

a sharp increase in the demand for and construction of wood-frame homes.

After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is:

a shift of the demand curve for beef to the left.

The imposition of a price ceiling on a market often results in

a shortage

Dawnell is a skilled dancer. She is currently teaching modern dance full time for three high schools and makes $44,000 a year. She is now giving up her work and joining a touring dance company for the next two years. She will make $24,000 a year dancing, but gain much more in experience and connections. Dawnell's decision will result in

a two year opportunity cost of $40,000 after leaving her teaching position.

Which of the following will not result in a leftward shift of the market demand curve for labor?

an increase in the wage rate

Kayden decided to attend college and gain a degree in accounting. He is now starting his degree. The yearly cost of tuition is $10,000 and he left his auto mechanic shop management job giving up a $32,000 a year to attend college. Kayden's decision resulted in

an opportunity cost to attend college of $42,000 per year

In order to satisfy as many wants as possible, it is necessary to achieve productive efficiency

because otherwise resources are idle.

Many cooks view butter and margarine to be substitutes. If the price of butter rises, then in the market for margarine:

both the equilibrium price and quantity will rise

Because of our limited money, time, and effort, we are best off when we allocate things

by constantly assessing the opportunity costs of our choices.

Due to limits on our time, money, and effort, we are best off when we allocate things

by constantly assessing the opportunity costs of our choices.

When tasks involved with producing a good or service are divided, workers and businesses

can produce a greater quantity of those goods or services

Land, or natural resources, include(s) the fertility of the land, minerals below it, and

climate.

Supply is said to be __________ when the quantity supplied is very responsive to changes in __________ price.

elastic

Assuming there are only two types of outputs in a country: consumer goods and nuclear missiles. All else being constant, as the nation produces more missiles,

every additional missile will reduce consumer goods production by more and more.

Macroeconomic policies that focus on government spending and taxes are considered

fiscal policies.

If Stan's Shoemaker Shop practices the division of labor and employees concentrate on one step of the shoe-making process, this will likely result in

greater production output.

Refer to Figure 3-3. A change from Point A to Point B represents a(n):

increase in quantity supplied.

If the demand for software engineers engineers will __________ slower than does supply, then wages of software engineers will __________.

increases; fall

The demand schedule for a good:

indicates the quantities that will be purchased at alternative markets

What are the factors of production?

land, economic capital, labor, entrepreneurship

Other things being equal, a __________ supply of workers tends to __________ real wages.

larger; decrease

The additional benefit that one more unit of something will provide is known as

marginal benefit.

To make an economically rational decision, marginal cost should be compared to

marginal benefit.

Economic capital is productive, so it does NOT include

money.

If trade between nations is prohibited,

nations will be unable to specialize in what they are good at and therefore end up consuming less.

Many economists believe that the trend toward greater wage inequality across the U.S. economy was primarily caused by ___________

new technologies

When income increases and the demand for a good increases, the good is considered a

normal good.

If Kendrick decides to watch t.v. instead of go to the gym, the ________ is a missed workout.

opportunity cost

The "law of supply" functions in labor markets; that is, a higher __________ for labor leads to a higher quantity of labor supplied.

price

In contrast to goods and services markets, __________ are rare in labor markets, because rules that prevent people from earning income are not politically popular.

price ceilings

The distinguishing feature of economic capital (as opposed to financial capital, like money) is that it is

productive.

A straight forward example of a __________, often used for simplicity, is the interest rate.

rate of return

An Uber driver faces costs for driving that include sunk costs like insurance that contribute to the average cost per mile of $.50. Yet when a rider offers to pay less than that for a ride, the driver agrees because

sunk costs like auto insurance (in this case) do not increase as driving increases.

Marginal cost is

the cost of obtaining or producing one more unit of something.

A budget constraint model differs from production possibilities model in that, typically

the production possibilities model demonstrates diminishing returns.

Whenever there is a surplus at a particular price, the quantity sold at that price will equal:

the quantity demanded at that price.

Whenever there is a shortage at a particular price, the quantity sold at that price will equal:

the quantity supplied at that price.

A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of:

the supply curve.

Darian and Ivan have been friends since college. They started a limousine rental business from scratch. They are now contemplating opening their business in Baltimore a new city for their business. They have crunched the numbers and discover it would mean adding $2 million more in expenses, and their profit would increase by $250,000 each year for the next 5 years (all other things equal). Darian and Ivan decide

to not open in a new city because the marginal costs prove to be too high.

Willa and Westley are siblings who built a hair salon business from the ground up. They are now contemplating opening an additional salon location. The estimate to open an additional salon would mean adding $1 million in expenses with their profit increasing by $400,000 each year for the next 5 years (all other things equal). Willa and Westley decide

to take on the new salon because the expected marginal benefit ($2 million over 5 years) is greater than the estimated marginal cost ($1 million).

When decisions need to be made, economists assume a decision will be influenced by its

trade-offs.

But nearly all supply curves share a basic similarity: they slope .

up from left to right

Many states do have __________, which impose an upper limit on the interest rate that lenders can charge

usury laws

Julie's entertainment budget for the next six months is $150 per month. She enjoys watching the latest movies and loves the ballet. A movie ticket costs $15 while a ballet ticket costs $35. This month Julie already attended one ballet show and three movies. If Julie decides she would rather see ballet shows for the remainder of this month, how many ballet shows can she attend and stay within her budget?

Two ballet shows.

The construction estimator told the storage unit owner that building another section of storage units will likely add 100 more storage space renters to the bottom line. The rational storage business owner considered the rental prices of an additional 100 units, but he would decide to add more units if and only if

the marginal benefit is greater than the marginal cost of additional units.

The agricultural extension agent told the farmer that one more crop-dusting will likely add a ton of additional wheat to the harvest. The rational farmer then calculated the selling price of a ton of wheat, since he would decide to crop-dust again if and only if

the marginal benefit is greater than the marginal cost of an additional crop-dusting.

When picking up a rental car at an airport car rental agency, some travelers stand in line waiting to sign paperwork and pick up car keys at the rental desk while other travelers can go right to their rental car by using their rental car loyalty club card. In this example, the travelers who move quickly through to the parking lot pick up their car are probably

travelers who value convenience more than those waiting in line and are willing to pay additional club fees for the option of avoiding them.