ECON TEST 2
It is possible for the price of water to be much lower than the price of diamonds if which of the following is true?
-The supply of water is greater than the supply of diamonds.
From 1979 to 2015, China had a policy that allowed couples to have only one child. (Since 2016, couples have been allowed to have two children.) The one-child policy caused a change in the demographics of China. Between 1980 and 2017, the share of the population aged 14 and under decreased from 36 percent to 18 percent. And, as parents attempted to ensure that the lone child was a son, the number of male children relative to female children increased. How has the one-child policy changed the relative demand for goods and services in China?
It has undoubtedly shifted away from goods and services appealing to youthful buyers, particularly youthful female buyers.
i. An article in the Wall Street Journal noted that an "increase in the price of oil quickly reduces demand for oil." ii. A different article in the Wall Street Journal noted: "Electric cars are poised to reduce U.S. gasoline demand by 5% over the next two decades...." Do you agree with how the first Wall Street Journal article uses the word "demand"? Do you agree with how the second Wall Street Journal article uses the word "demand"?
-No, a change in the price of oil affects the quantity of oil demanded, not the demand for oil. -Yes, the article is correct in its use of the word "demand."
The graph to the right shows the supply and demand for beef in the United States, under the assumption that the United States can import as much as it wants at the world price of beef without causing the world price of beef to increase. How much beef does the United States import at the world price(WP)? Now suppose that the United States imposes a tariff on beef of $0.50 a pound. How much beef is now imported? Do domestic producers of beef gain or lose when the United States imposes a tariff on beef? Does the government gain or lose when the United States imposes a tariff on beef? Do domestic consumers of beef gain or lose when the United States imposes a tariff on beef?
- 500 million (1000-500) -200 million (900-700) -Gain -Gain -Lose
Imagine that the curves shown in the accompanying figure represent two demand curves for traditional wings (basket of six) at Buffalo Wild Wings. The movement from point A to B on D1 is caused by Indicate which of the following could cause a movement from point A to C.
- a decrease in the price of traditional wings -A rise in the number of buyers A decline in vegetarianism
Suppose the government imposes a payroll tax of $2 per hour of work and collects the tax from employers.
-According to your graph, the new equilibrium wage that employers pay workers falls by $2. (supply curve is vertical)
The figure illustrates the market for apples in which the government has imposed a price floor of $14 per crate. Will apple producers benefit from the price floor?
-Apple producers who are able to sell their apples at the $14 price per crate will benefit. Apple producers who are not able to sell their apples will not benefit. Total revenue for apple producers as a group will decrease from $198 million to $168 million. (all of the above)
The graph shows the effect on consumer surplus, producer surplus, government tariff revenue, and economic surplus of a tariff of $1 per unit on imports of plastic combs into the United States. Use the areas denoted in the graph to answer the following questions. Which area(s) shows the total loss to U.S. consumers as a result of the tariff on combs? Which area(s) shows the amount of surplus transferred from consumers to producers as a result of the tariff on combs? Which area(s) show the deadweight loss to the U.S. economy as a result of the tariff on combs?
-A + B + C + D. -A -B + D
Using the graph to the right, determine the effect on consumer surplus and producer surplus of a shift in the supply curve from S1 to S2. Consumer surplus increases by areas Producer surplus changes from areas Economic surplus changes from areas
-BCD -BE to areas EFG. -ABE to areas ABCDEFG.
Consider the market for gasoline illustrated in the figure to the right. Suppose the market is perfectly competitive and initially in equilibrium. Now suppose the government imposes a gasoline tax of $0.75 to be paid for by producers. The effect of this tax is illustrated in the figure to the right. Who bears the burden of the tax?
-Consumers pay $0.50 of the $0.75 tax and producers pay $ 0.25 of the tax.
Ekaterina Jardim, Jacob Vigdor, and colleagues at the University of Washington concluded that when Seattle raised its minimum wage, the effect was to lower "the amount paid to workers in low-wage jobs by an average of $74 per month per job in 2016." Shouldn't an increase in the minimum wage raise, rather than lower, the amount paid to low-wage workers? Does this result mean that no low-wage workers in Seattle benefited from the increase in the minimum wage? Which of the following statements regarding normative/positive analysis of the minimum wage is true?
-No. The decrease in the quantity of hours worked as a result of the wage increase had to have been relatively large to reduce the total amount workers in low-wage jobs received. -No. Workers who continued to work the same or slightly fewer hours than they worked before the increase in the minimum wage are better off because their total income increased. -All of the above are true.
According to an article in the Wall Street Journal in early 2019, the price of oil produced in the United States had increased by 25 percent since the beginning of the year. At the same time, U.S. oil production was at a record high. Are these two facts alone, holding everything else constant, consistent with a movement along the supply curve for oil? Is it possible that the supply curve for oil also shifted? Suppose you were told that managers at oil firms were convinced that oil prices in the future were going to be significantly lower than they are today. Would this fact help you answer the question? Given that managers at oil firms were convinced that oil prices in the future were going to be significantly lower than they are today,
-Yes. A higher price of oil causes an increase in the quantity of oil supplied, which we show by a movement upwards along the supply curve for oil. -it is likely that the supply curve for oil shifted to the right because firms will be more likely to increase the supply of oil today when prices are higher.
On a shopping trip, Sofia decided to buy a light blue coat that had a price tag of $79.95. When she brought the coat to the store's sales clerk, Sofia was told that the coat was on sale, and she would pay 20 percent less than the price on the tag. After the discount was applied, Sofia paid $63.96, $15.99 less than the original price. The value of Sofia's consumer surplus from this purchase is
-at least $15.99 since this is the difference between the price Sofia is willing to pay for the coat and the actual price she pays, but she could have be willing to pay more than $79.95 for the coat.
On the diagram to the right, a movement from A to C represents a
-change in demand.
On the diagram to the right, a movement from A to B represents a
-change in quantity supplied.
Economic surplus in a market is the sum of _____ surplus and _____ surplus. In a competitive market, with many buyers and sellers and no government restrictions, economic surplus is at a _____ when the market is in _____.
-consumer; producer; maximum; equilibrium
After World War II in 1945, the United States experienced a "baby boom" as birthrates rose and remained high through the early 1960s. In 2011, the first members of the baby boom generation became older than 65. What effect will this have on the market for doctors? As the first baby boomers become older than 65, the
-demand curve for doctors will shift to the right.
If many book readers consider print books and digital books to be substitutes, then an increase in the price of digital books will The findings of Nagaraj and Reimer show that digital and print copies of books are Briefly discuss what might account for this result and why it differs from the answer you gave to part (a). (Hint: Why was the finding of increased sales of physical books particularly strong for less popular books?)
-increase the demand for print books, shifting the demand curve for print books to the right. -complements because the decrease in the price of digital books to zero is causing an increase in the quantity demanded for print copies of the same book. -As more books become available as free downloads, readers of these books recommend them to other readers, causing an increase in the demand for both the print and the digital versions of the book, particularly among readers who prefer to read a physical book.
Consider the market for the Nissan Xterra. Suppose the price of metal, which is an input in automobile production, decreases. According to the graph, when the price of metal decreases, the quantity of Nissan Xterras supplied at any particular Xterra price __________ Instead, consider the future price of Xterras. If Nissan believes the future price of Xterras will be higher, then Nissan may __________ supply today.
-increases -reduce
Economic efficiency Economists define economic efficiency in this way
-is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production. is a market outcome in which the sum of consumer surplus and producer surplus is at a maximum. (both a and b) -all of the above
In 2018, according to the U.S. Department of Agriculture, Arizona, Colorado, New Mexico, and Utah were suffering from extreme drought. The lack of rainfall greatly reduced the grass that ranchers use to feed cattle. The result was a reduction in the number of cattle raised in these states. How are producer surplus and consumer surplus affected?
-place supply curve inward -Consumer surplus decreases, but the overall effect on producer surplus depends on the size of the shift of the supply curve.
According to an article in the New York Times, the Venezuelan government "imposes strict price controls that are intended to make a range of foods and other goods more affordable for the poor. They are often the very products that are the hardest to find." Imposing price controls on goods would make them hard to find because
-producers would not want to supply as much as they did before the price controls.
Explain how the price of baseballs signed by Mantle could be higher than the price of baseballs signed by Ford. The supply curve for baseballs signed by Mantle should be an upward-sloping line that is to the _______ of the supply curve for baseballs signed by Ford. In order for the price of baseballs signed by Mantle to be higher than the price of baseballs signed by Ford, the demand curve for baseballs signed by Mantle must be a downward-sloping line that is
-right -significantly to the right of the demand curve for baseballs signed by Ford.
Consumer surplus is As the price of a good rises, consumer surplus decreases and as the price of a good falls, consumer surplus increases .
-the difference between the highest price a consumer is willing to pay and the price the consumer actually pays.
Producer surplus is As the price of a good rises, producer surplus increases, and as the price of a good falls, producer surplus decreases
-the difference between the lowest price a firm would be willing to accept and the price it actually receives.
The law of demand is the assertion that An increase in the price of a product causes a decrease in quantity demanded because of the income and substitution effects. More specifically,
-the quantity demanded of a product is inversely related to its price. -the substitution effect is the decrease in quantity demanded because the product is more expensive relative to other goods and the income effect is the decrease in quantity demanded owing to the decline in consumers' purchasing power.
Economic surplus is Deadweight loss is Because economic surplus is the sum of the benefit to firms and the benefit to consumers, it is the best measure we have of the benefit to society from the production of a particular good or service. For this reason, it is appropriate to label economic surplus as social surplus.
-the sum of consumer surplus and producer surplus. -he reduction in economic surplus resulting from a market not being in competitive equilibrium.
According to the law of supply,
-there is a positive relationship between price and quantity supplied. -as the price of a product increases, firms will supply more of it to the market. (A and C only)
According to the law of demand,
-there is an inverse relationship between price and quantity demanded.
The distinction between a normal and an inferior good is
-when income increases, demand for a normal good increases while demand for an inferior good falls.
According to an article on crainsnewyork.com, in 2018, the Metropolitan Museum of Art (the Met) in New York City had record attendance of 7.36 million, an increase of 5 percent over the previous year. During 2018, the Met had also increased the price of attendance. Can we conclude from this information that the demand curve for visiting the Met is upward sloping? The article also explained that New York City experienced an increase in the number of tourists during 2018 and that during the year, the Met offered several exhibitions that received good reviews. Does this additional information help you answer the question in part (a)?
-No, it is much more likely that during 2018 there was an increase in demand for visits to the Met. -Yes, this additional information reinforces the increase in demand for visits to the Met in part (a).