Econ Final: 1-9

Use the exhibit to answer the questions 1-10. If a tax is placed on the product in this market, consumer surplus is the area _______.

A

Use the exhibit to answer the questions 1-10. If there is no tax placed on the product in this market, consumer surplus is the area _______.

A + B + E

Which of the following shifts the supply curve for pizza to the right?

A decrease in the price of cheese, an input to pizza

Use the exhibit to answer the questions 1-10. If there is no tax placed on the product in this market, producer surplus is the area _______.

C + D + F

Use the exhibit to answer the questions 1-10. If a tax is placed on the product in this market, producer surplus is the area _______.

D

Which of the following statements is true about a market economy?

Market participants act as if guided by an "invisible hand" to produce outcomes that promote general economic well-being.

Shahina is a tax accountant. She receives $100 per hour doing tax returns. She can type 10,000 characters per hour into spreadsheets. She can hire an assistant who types 2,500 characters per hour into spreadsheets. Which of the following statements is true?

Shahina should hire the assistant as long as she pays the assistant less than $25 per hour.

Which of the following would cause a demand curve for a good to be price inelastic?

The good is a necessity.

The demand for which of the following is likely to be the most price inelastic?

Transportation

When the government imposes a binding price floor, it causes _________.

a surplus of the good to develop

Consumer surplus is the area ________.

below the demand curve and above the price

For a price ceiling to be a binding constraint on the market, the government must set it ________.

below the equilibrium price

When a tax distorts incentives to buyers and sellers so that fewer goods are produced and sold, the tax has _______.

caused a deadweight loss

The law of demand states that an increase in the price of a good ________.

decreases the quantity demanded for that good

A decrease in the demand for Uber rides _______.

decreases the value of the marginal product of Uber drivers, reduces their wage, and reduces employment in the ride-sharing industry

An increase in the supply of labor _______.

decreases the value of the marginal product of labor and decreases the wage

Points on the production possibilities frontier are ________.

efficient

The most important factors of production are _______.

labor, land, and capital

The discovery of a large new reserve of crude oil will shift the ________ curve for gasoline, leading to a ________ equilibrium price.

supply; lower

A rational person does not act unless ________.

the action produces marginal benefits that exceed marginal costs

Suppose you find $20. If you choose to use the $20 to go to the baseball game, your opportunity cost of going to the game is ________.

$20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game

The following table shows the units of output a worker can produce per month in Germany and Poland. Use this table to answer the question. The opportunity cost of 1 unit of wheat in Poland is ________.

1/2 of a unit of computers

The following table shows the units of output a worker can produce per month in Germany and Poland. Use this table to answer the question. The opportunity cost of 1 unit of computers in Germany is ________.

4 units of wheat

Which of the following shifts the demand for pizza to the right?

A decrease in the price of soda if soda and pizza are complements

Which of the following will not shift a country's production possibilities frontier outward?

A reduction in unemployment

Which of the following involve a trade-off?

All of the answer choices involve trade-offs.

Which of the following might lead to an increase in the equilibrium price of jelly and a decrease in the equilibrium quantity of jelly sold?

An increase in the price of grapes, an input into jelly

Which of the following will shift the demand curve for pizza to the right?

An increase in the price of hamburgers, a substitute for pizza

The following table shows the units of output a worker can produce per month in Germany and Poland. Use this table to answer the question. Which of the following statements about comparative advantage is true?

Germany has a comparative advantage in the production of wheat, while Poland has a comparative advantage in the production of computers.

Suppose the world consists of two countries— Canada and Mexico. Furthermore, suppose there are only two goods—food and clothing. Which of the following statements is true?

If Canada has a comparative advantage in the production of food, then Mexico must have a comparative advantage in the production of clothing.

Suppose a frost destroys much of the Washington apple crop. At the same time, suppose consumer tastes shift toward apple juice. What would we expect to happen to the equilibrium price and quantity in the market for apple juice?

Price will increase; quantity is ambiguous.

Suppose both buyers and sellers of corn expect the price of corn to rise in the near future. What would we expect to happen to the equilibrium price and quantity in the market for corn today?

Price will increase; quantity is ambiguous.

Suppose the equilibrium price for apartments is $1,500 per month and the government imposes rent controls of $900 per month. Which of the following is unlikely to occur as a result of the rent controls?

The quality of apartments will improve.

Which side of the market is more likely to lobby government for a price floor?

The sellers

Use the exhibit to answer the questions 1-10. Which of the following is true with regard to the burden of the tax in the exhibit?

The sellers pay a larger portion of the tax because supply is more inelastic than demand

Suppose consumer tastes shift toward the consumption of coffee. Which of the following statements is an accurate description of the impact of this event on the market for coffee?

There is an increase in the demand for coffee and an increase in the quantity supplied of coffee.

Suppose there are three identical mugs available to be purchased. Buyer 1 is willing to pay $30 for one, buyer 2 is willing to pay $25 for one, and buyer 3 is willing to pay $20 for one. If the price is $25, how many mugs will be sold and what is the value of consumer surplus in this market?

Two mugs will be sold, and consumer surplus is $5.

Producer surplus is the area ________.

above the supply curve and below the price

Because people respond to incentives, _______.

all of the answer choices are correct

A decrease (leftward shift) in the supply for a good will tend to cause ________.

an increase in the equilibrium price and a decrease in the equilibrium quantity

An increase (rightward shift) in the demand for a good will tend to cause ________.

an increase in the equilibrium price and quantity

All of the following shift the supply of smartphones to the right except ________.

an increase in the price of smartphones

If consumers think that there are very few substitutes for a good, then ________.

demand would tend to be price inelastic

A technological advance that increases the marginal product of labor shifts the labor- ________ curve to the ________.

demand; right

Suppose there is an increase in both the supply and demand for laptop computers. In the market for laptops, we would expect the ________.

equilibrium quantity to rise and the change in the equilibrium price to be ambiguous

Suppose there is an increase in both the supply and demand for laptop computers. Furthermore, suppose the supply of laptops increases more than demand for laptops. In the market for laptops, we would expect the ________.

equilibrium quantity to rise and the equilibrium price to fall

When a market is in equilibrium, the buyers are those with the ________ willingness to pay and the sellers are those with the ________ costs.

highest; lowest

Raising taxes and increasing welfare payments ________.

improves equality at the expense of efficiency

An increase in the demand for a firm's output _______.

increases the prosperity of both the firm and the factors hired by the firm

The law of supply states that an increase in the price of a good ________.

increases the quantity supplied of that good

An increase in the price of beef provides ________.

information that tells producers to produce more beef

If a nation has a comparative advantage in the production of a good, ________.

it can produce that good at a lower opportunity cost than its trading partner

If a nation has an absolute advantage in the production of a good, ________.

it can produce that good using fewer resources than its trading partner

Rent control causes larger shortages in the ________ run because over that time horizon, supply and demand are ________ elastic.

long; more

Adam Smith's "invisible hand" concept suggests that a competitive market outcome ________.

maximizes total surplus

Because the demand curve for oil is ________ elastic in the long run, OPEC's reduction in the supply of oil had a ________ impact on the price in the long run than it did in the short run.

more; smaller

If a small percentage increase in the price of a good greatly reduces the quantity demanded for that good, the demand for that good is ________.

price elastic

In general, a flatter demand curve is more likely to be ________.

price elastic

In general, a steeper supply curve is more likely to be ________.

price inelastic

Trade-offs are required because wants are unlimited and resources are _______.

scarce

A price floor ________.

sets a legal minimum on the price at which a good can be sold

A binding price ceiling creates a(n) ________.

shortage

Suppose the demand for grape jelly is perfectly elastic (because strawberry jelly is a good substitute), while the supply is unit elastic. A tax on grape jelly would have ________ deadweight losses, and the burden of the tax would fall entirely on the ________ of grape jelly.

sizable; producers

Economics is the study of how ________.

society manages its scarce resources

Because people respond to incentives, we would expect that if the average salary of engineers increases by 50 percent while the average salary of teachers increases by 20 percent, ________.

students will shift majors from education to engineering

If an increase in the price of chicken leads to an increase in the demand for fish, then chicken and fish are ________.

substitutes

When a good is taxed, the burden of the tax falls mainly on consumers if _______.

supply is elastic and demand is inelastic

If a benevolent social planner chooses to produce more than the equilibrium quantity of a good, then ________.

the cost of production on the last unit produced exceeds the value placed on it by buyers

An increase in the supply of grain will reduce the total revenue grain producers receive if _______.

the demand curve is inelastic

Suppose a country's workers can produce 4 pens per hour or 12 pencils per hour. If there is no trade, ________.

the domestic price of 1 pencil is 1/3 of a pen

The price elasticity of demand is defined as ________.

the percentage change in the quantity demanded of a good divided by the percentage change in the price of that good

If a supply curve for a good is price elastic, then ________.

the quantity supplied is sensitive to changes in the price of that good

If the price of a good is below the equilibrium price, ________.

there is a shortage and the price will rise