ECON Final (Sample Test 2)

A cost borne not by the producer but by other people is called ________ cost. A) an external B) an unregulated C) a consumer D) a non-production

A

A supply curve that is horizontal reflects a supply that A) is elastic. B) has a zero elasticity. C) is unit elastic. D) is inelastic.

A

As Mary's income increases by 20 percent, her demand for tickets to National Hockey League games increases by 10 percent. Mary's demand for tickets is income ________; for Mary, hockey tickets are ________ good. A) inelastic; a normal B) elastic; an inferior C) inelastic; an inferior D) elastic; a normal

A

Nick can purchase each milkshake for $2. For the first milkshake purchased Nick is willing to pay $4, for the second milkshake $3, for the third milkshake $2 and for the fourth milkshake $1. What is the value of Nick's consumer surplus for the milkshakes he buys? A) $3 B) $10 C) $9 D) $2

A

The demand for ________ is more elastic than the demand for ________. A) Pepsi; all soft beverages B) food; exotic vacations C) all personal computers; Dell computers D) chewing gum; cars

A

The elasticity of supply does NOT depend on A) the fraction of income spent on the product. B) the time elapsed since the price change. C) resource substitution possibilities. D) none of the above because all of the factors listed affect the elasticity of supply.

A

The elasticity of supply measures the sensitivity of A) quantity supplied to a change in price. B) supply to changes in costs. C) price to changes in supply. D) quantity supplied to quantity demanded.

A

The marginal social benefit curve for a product can be the same as the good's A) demand curve. B) consumer surplus curve. C) supply curve. D) marginal cost curve.

A

A $10 per-unit tax on cell phones raises the equilibrium price paid by consumers by $5. Before the tax, 5,000 cell phones were sold per year. The revenue from the tax is A) more than $50,000 per year. B) positive but less than $50,000 per year. C) zero. D) $50,000 per year.

B

A 10 percent increase in income increases the quantity of orange juice demanded from 19,200 to 20,800 gallons. The income elasticity of demand for orange juice is A) 1.0. B) 0.8. C) 1.2. D) 0.5.

B

According to Utilitarian principles first discussed in the nineteenth century, fairness implies A) winner takes all. B) equality of income. C) equality of opportunity. D) maximizing consumption.

B

Demand is perfectly inelastic when A) shifts in the supply curve results in no change in price. B) shifts of the supply curve result in no change in quantity demanded. C) shifts of the supply curve result in no change in the total revenue from the quantity sold. D) the good in question has perfect substitutes.

B

Duke increased his spending on steak from $7 to $11 per week because of a 12 percent salary increase, so his A) income elasticity of demand for steak is 1.37. B) income elasticity of demand for steak is 3.7. C) price elasticity of demand for steak is 3.7. D) price elasticity of demand for steak is 1.37.

B

If a 10 percent increase in income results in an 8 percent increase in the quantity demanded of a good, the income elasticity of demand equals ________ and the good is ________ good. A) 1.2; a normal B) 0.80; a normal C) -1.2; an inferior D) 0.80; an inferior

B

Often people trying to withdraw money from their bank must wait in line, which reflects a ________ allocation method. A) contest B) first-come, first-served C) command D) market price

B

Stefano has just completed an original oil painting. After considering the costs for brushes, paint, canvas, and the value of Stefano's labor time, the marginal cost of the painting is $1,000. Lucky Stefano. One art lover paid him $1,500. How much producer surplus did Stefano obtain? A) The amount of producer surplus cannot be determined from the information given. B) $500 C) $1,500 D) $1,000

B

The night before enrollment was to open for the University of Johannesburg a line of people more than a mile long formed outside the gates. When the gates opened, a stampede started, and a woman lost her life in her attempt to secure her son a spot at the university and a chance for a better life. A) market price. B) first-come, first-served. C) auction. D) lottery.

B

The supply of oil is more elastic than the demand for oil. If oil is taxed $10 per barrel, how will the tax be divided between the buyers and sellers? A) The sellers and buyers will split the tax evenly. B) The buyers will pay more of the tax than the sellers. C) The sellers will pay the entire tax. D) The sellers will pay more of the tax than the buyers.

B

To try to help farmers, governments I. set production quotas. II. set price floors. A) only II B) I and II C) only I D) neither I nor II

B

Unit elastic demand means that the A) ratio of a change in the quantity demanded to a change in the price equals 1. B) ratio of a percentage change in the quantity demanded to a percentage change in the price equals 1. C) demand curve is horizontal. D) demand curve is vertical.

B

Utilitarianism is the idea that only A) competition brings efficiency. B) income equality is fair. C) efficiency is fair. D) efficiency brings equality.

B

When a government fines and/or imprisons persons convicted of using illegal drugs, the government is attempting to decrease the illegal drug trade by shifting the ________ curve for illegal drugs ________. A) supply; rightward B) demand; leftward C) demand; rightward D) supply; leftward

B

Which of the following is a result of a rent ceiling set below the equilibrium rent? I. equity in the housing market II. efficient allocation of resources III. a shortage of housing units A) I and II only B) III only C) II only D) I and III only

B

A 10 percent decrease in the price of a Pepsi decreases the demand for a Coca-Cola by 50 percent. The cross elasticity of demand between a Pepsi and Coca-Cola is A) 0.20. B) 10. C) 5. D) 50.

C

Adam makes $25,000 per year and Bob makes $45,000 a year, and they both have the same marginal benefit curve. According to the utilitarian view, if a dollar is transferred from Bob to Adam, then A) the change in Adam's marginal benefit plus the change in Bob's marginal benefit is negative. B) Adam's marginal benefit decreases by more than Bob's marginal benefit increases. C) Adam's marginal benefit increases by more than Bob's marginal benefit decreases. D) the change in Adam's marginal benefit plus the change in Bob's marginal benefit equals zero.

C

Currently tire producers must receive a price of $50 per tire to produce 5000 tires. If the supply curve of tires is upward sloping, then to produce one additional tire, tire producers will need to receive a price of A) $0. B) $50. C) more than $50. D) less than $50.

C

Demand is price elastic if a A) price increase leads to an increase in the quantity demanded. B) relatively large price increase leads to a relatively small decrease in the quantity demanded. C) relatively small price increase leads to a relatively large decrease in the quantity demanded. D) price increase leads to a decrease in the quantity demanded.

C

Goods and services that can be produced by using commonly available resources that could be allocated to a wide variety of alternative tasks have a supply that is A) unit elastic. B) perfectly inelastic. C) elastic. D) inelastic.

C

If a fall in the price of good A increases the quantity demanded of good B A) A and B are substitutes. B) B is a substitute for A, but A is a complement to B. C) A and B are complements. D) A is a substitute for B, but B is a complement to A.

C

If a person will rent an apartment only to married couples over 30 years old, that person is allocating resources using a ________ allocation method. A) command B) market price C) personal characteristics D) first-come, first-served

C

If demand is perfectly elastic, a sales tax is paid by A) only the buyers. B) both the buyers and sellers. C) only the sellers. D) None of the above answers is correct.

C

Marginal cost is A) the total opportunity cost of producing all the units of the good. B) the same as the marginal benefit because producers benefit from the money they receive when they sell the good. C) the opportunity cost of producing one more unit. D) zero at the efficient level of production.

C

Of the following, demand is likely to be the least elastic for A) pink grapefruit. B) diamonds. C) insulin for diabetics D) iceberg lettuce

C

The income elasticity of demand is the percentage change in ________ divided by the percentage change in ________. A) the price; income B) income; the price C) the quantity demanded; income D) income; the quantity demanded

C

The price elasticity of demand for corn is 0.4. A new hybrid of corn is discovered and all farmers start to use it, which increases the quantity of corn they can produce from each acre. What happens to the farmers' total revenue? A) The total revenue will not change. B) The total revenue will increase. C) The total revenue will decrease. D) There is not enough information to determine what happens to the total revenue.

C

When consumers' incomes increased 10 percent, the quantity of milk bought increased 5 percent. This result means A) milk is a luxury. B) milk is an inferior good. C) milk is a necessity. D) the demand for milk is income elastic.

C

A contest is a good way to allocate scarce resources when A) there is no effective way to distinguish among potential users. B) the decision being made affects a large number of people. C) the lines of responsibility are clear. D) the efforts of the players are hard to monitor directly.

D

A minimum wage ________. A) is an effective way of increasing employment B) is a price ceiling in the labor market C) changes the demand for labor. D) is a price floor in the labor market

D

As time passes after a change in the price, the supply of a good or service A) becomes less elastic. B) initially becomes less elastic and then becomes more elastic. C) initially becomes more elastic and then becomes less elastic. D) becomes more elastic.

D

Compared to the situation in which a good is legal, making the good illegal and imposing ________ results in less being sold. A) any fine on either the buyer or the seller B) a much higher fine on sellers than on buyers C) a much higher fine on buyers than on sellers D) all of the above

D

Governments often intervene in agricultural markets by A) setting price floors that reduce prices for buyers. B) setting production quotas that will increase production. C) imposing heavy taxes on farm products. D) granting subsidies.

D

If a production quota is set below the equilibrium quantity, at the quota quantity, marginal benefit is ________ marginal cost and the level of production is ________. A) less than; inefficient B) greater than; efficient C) equal to; efficient D) greater than; inefficient

D

Suppose penalties are imposed on both buyers and sellers of marijuana, but the cost of breaking the law to sellers is greater than that to buyers. This measure will ________ the equilibrium price of marijuana and ________ the equilibrium quantity of marijuana sold. A) lower; increase B) raise; increase C) not change; will decrease D) raise; decrease

D

The elasticity of the momentary supply curve for any good always equals A) zero. B) positive infinity. C) one. D) None of the above answers is correct.

D

The market supply curve shows the A) maximum price suppliers must receive in order to produce another unit of the good. B) profit that suppliers receive from producing another unit of the good. C) amount of producer surplus suppliers receive. D) minimum price suppliers must receive in order to produce another unit of the good.

D

Utilitarianism argues that A) There is a tradeoff between equality and efficiency. B) The competitive market is fair. C) The result is fair if the rules are fair. D) Only equality brings efficiency.

D

When the Smiths were shopping for their present home, the asking price from the previous owner was $250,000.00. The Smiths had decided they would pay no more than $245,000.00 for the house. After negotiations, the Smiths actually purchased the house for $239,000.00. Therefore, the previous owner earned a producer surplus of A) $250,000.00. B) $5,000.00. C) $11,000.00. D) an amount unknown given the information in the question.

D

Which of the following arguments support the proposition that society should accept at least some income inequality? A) Administrative costs associated with income redistribution imply that low-income people receive less than $1 for each dollar taken from high-income people. B) Income redistribution will require taxation, causing inefficiently low levels of labor supply and saving, thus decreasing the size of the economic pie. C) Income redistribution programs divert skilled labor and capital to tax compliance activities and away from production of goods and services that people value. D) All of the above answers are correct because all support the proposition that society should accept some income inequality.

D

Which of the following is TRUE? A) When a market price allocates resources, everyone who is able to pay the price gets the resource. B) When the government decides how to allocate tax dollars among competing uses, resources are allocated by command. C) When a manager offers everyone in the company the opportunity to win a prize, resources are allocated by a market price. D) A command system works well when the lines of authority and responsibility are clear.

D

Which of the following leads a good to have a high elasticity of supply? I. The good must be produced using unique resources. II. The good is produced using commonly available resources. A) I only B) I and II C) neither I nor II D) II only

D

You are the new vice president in charge of advertising at Taco Bell. In your upcoming advertising campaign, you plan to degrade the fast food competitor whose product is the closest substitute for Taco Bell's tacos. That would be the fast food chain whose cross elasticity of demand with your tacos is equal to A) negative 2.11. B) negative 1.75 C) positive 1.00 D) positive 1.55

D

The government sets a price floor for corn which is above the equilibrium price of corn. As a result, ________. A) a shortage of corn will be created B) a deadweight loss will be created C) the corn market will be efficient D) none of the above answers is correct

b