econ exam 2

After a certain nation changed its policy from one that banned international trade in wheat to one that allowed international trade in wheat, the nation began importing wheat. As a result, total surplus in the wheat market increased by $10 million. Which of the following changes could have occurred as well? a. Consumer surplus in the wheat market increased by $15 million and producer surplus in the wheat market decreased by $5 million. b. The price of wheat in that nation increased with the adoption of the new policy. c. Consumer surplus in the wheat market increased by $7 million and producer surplus in the wheat market increased by $3 million. d. The domestic quantity of wheat supplied increased with the adoption of the new policy.

A

Andre walks Julia's dog once a day for $50 per week. Julia values this service at $60 per week, while the opportunity cost of Andre's time is $30 per week. The government places a tax of $35 per week on dog walkers. Before the tax, what is the total surplus? a. $30 b. $50 c. $25 d. $60

A

As a rationing mechanism, discrimination according to seller bias is a. inefficient and potentially unfair. b. efficient and fair. c. efficient, but potentially unfair. d. inefficient, but fair.

A

For any given year, the CPI is the price of the basket of goods and services in the a. given year divided by the price of the basket in the base year, then multiplied by 100. b. previous year divided by the price of the basket in the given year, then multiplied by 100. c. base year divided by the price of the basket in the given year, then multiplied by 100. d. given year divided by the price of the basket in the previous year, then multiplied by 100.

A

If an economy's GDP falls, then it must be the case that the economy's a. income and expenditure both fall. b. income falls and saving rises. c. income falls and expenditure rises. d. income and saving both fall.

A

In analyzing the gains and losses from international trade, to say that Moldova is a small country is to say that a. Moldova is a price taker. b. Moldova's choice of which goods to export and which goods to import is not based on the principle of comparative advantage. c. only the domestic price of a good is relevant for Moldova; the world price of a good is irrelevant. d. Moldova can only import goods; it cannot export goods.

A

In the national income accounts, depreciation is called a. "consumption of fixed capital." b. "loss due to wear." c. "diminished value." d. "negative investment."

A

National income differs from net national because a. of a statistical discrepancy. b. it excludes depreciation. c. it includes transfer payments. d. it includes profits of corporations.

A

One result of a tax, regardless of whether the tax is placed on the buyers or the sellers, is that the a. tax reduces the welfare of both buyers and sellers. b. size of the market is unchanged. c. supply curve for the good shifts upward by the amount of the tax. d. price the seller effectively receives is higher.

A

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it a. minimizes the expenditure of buyers. Correctb. maximizes the combined welfare of buyers and sellers. c. maximizes costs of the seller. d. maximizes tax revenue for the government.

A

A tariff on a product a. is a direct quantitative restriction on the amount of a good that can be imported. b. increases the domestic quantity supplied. c. increases domestic consumer surplus. d. All of the above are correct.

B

If the tax on a good is increased from $0.15 per unit to $0.60 per unit, the deadweight loss from the tax a. remains constant. b. increases by a factor of 16. c. increases by a factor of 4. d. increases by a factor of 9.

B

Producer surplus is the area a. under the demand curve and above the price. b. below the price and above the supply curve. c. under the supply curve. d. between the supply and demand curves.

B

Ray buys a new tractor for $118,000. He receives consumer surplus of $13,000 on his purchase. Ray's willingness to pay is a. $13,000. b. $131,000. c. $118,000. d. $105,000.

B

The market for corn in Wheatland consists solely of domestic buyers of corn and domestic sellers of corn if a. total surplus exceeds consumer surplus in the Wheatland corn market. b. Wheatland forbids international trade in corn. c. Wheatland permits international trade in corn. d. consumer surplus equals producer surplus in the Wheatland corn market.

B

The nation of Aquilonia has decided to end its policy of not trading with the rest of the world. When it ends its trade restrictions, it discovers that it is importing incense, exporting steel, and neither importing nor exporting rugs. We can conclude that Aquilonia's new free-trade policy has a. increased consumer surplus in the steel market and left producer surplus in the rug market unchanged. b. decreased consumer surplus in the steel market and increased total surplus in the incense market. c. decreased consumer surplus in both the steel and rug markets. d. increased consumer surplus and producer surplus in the incense market.

B

Between October 2001 and October 2002, the CPI in Canada rose from 116.5 to 119.8 and the CPI in Mexico rose from 93.2 to 102.3. What were the inflation rates for Canada and Mexico over this one-year period? a. 2.8 percent for Canada and 9.1 percent for Mexico b. 3.3 percent for Canada and 9.8 percent for Mexico c. 2.8 percent for Canada and 9.8 percent for Mexico d. 3.3 percent for Canada and 9.1 percent for Mexico

C

If a price ceiling is a binding constraint on a market, then a. the quantity supplied must exceed the quantity demanded. b. the equilibrium price must be below the price ceiling. c. buyers cannot buy all they want to buy at the price ceiling. d. sellers cannot sell all they want to sell at the price ceiling.

C

If nominal GDP is $8 trillion and real GDP is $10 trillion, then the GDP deflator is a. 125, and this indicates that the price level has increased by 25 percent since the base year. b. 125, and this indicates that the price level has increased by 125 percent since the base year. c. 80, and this indicates that the price level has decreased by 20 percent since the base year. d. 80, and this indicates that the price level has increased by 80 percent since the base year.

C

In the economy of Ukzten in 2010, consumption was $2000, exports were $800, GDP was $4800, government purchases were $840, and investment was $1400. What were Ukzten's imports in 2010? a. -$560 b. -$240 c. $240 d. $560

C

Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6, a. the resulting increase in consumer surplus would be smaller than any possible loss of producer surplus. b. any possible increase in producer surplus would be larger than the loss of consumer surplus. c. any possible increase in producer surplus would be smaller than the loss of consumer surplus. d. the resulting increase in consumer surplus would be larger than any possible loss of producer surplus.

C

Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor, the a. supply curve for toothpaste shifts to the right. b. demand curve for toothpaste shifts to the left. c. quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases. d. quantity supplied of toothpaste stays the same.

C

Which of the following statements is not correct about a market in equilibrium? a. The price determines which buyers and which sellers participate in the market. b. Those sellers whose costs are less than the price choose to produce and sell the good. c. Consumer surplus will be equal to producer surplus. d. Those buyers who value the good more than the price choose to buy the good.

C

Consider the market for watermelons. Buyers a. would lobby for a price floor, whereas sellers would lobby for a price ceiling. b. and sellers would lobby for a price ceiling. c. and sellers would lobby for a price floor. d. would lobby for a price ceiling, whereas sellers would lobby for a price floor.

D

If the tax on a good is doubled, the deadweight loss of the tax a. triples. b. doubles. c. increases by 50 percent. d. quadruples.

D

Suppose France subsidizes French wheat farmers, while Germany offers no subsidy to German wheat farmers. As a result of the French subsidy, sales of French wheat to Germany a. may prompt German farmers to invoke the unfair-competition argument. b. increase the consumer surplus of German buyers of wheat. c. increase the total surplus of the German people. d. All of the above are correct.

D

Taxes are costly to market participants because they a. transfer resources from market participants to the government. b. alter incentives. c. distort market outcomes. d. All of the above are correct.

D

When a nation first begins to trade with other countries and the nation becomes an exporter of soybeans, a. this is an indication that the world price of soybeans exceeds the nation's domestic price of soybeans in the absence of trade. b. this is an indication that the nation has a comparative advantage in producing soybeans. c. the nation's consumers of soybeans become worse off and the nation's producers of soybeans become better off. d. All of the above are correct.

D

Which of the following values would be included in U.S. GDP for 2009? a. the rent that Sean, an American citizen, would have paid on his home in New York in 2009 had he not owned that home b. the rent that John, an American citizen, paid on his apartment in San Francisco in 2009 c. the value of the legal services provided by Juan, an attorney and a Mexican citizen, who lived in Houston and practiced law there in 2009 d. All of the above would be included in U.S. GDP for 2009.

D