Exam 1 [Ch 1,2,3,4]

For each scenario, decide whether it results in a producer or consumer surplus. Then calculate the resulting surplus. a. Alice is willing to spend $30 on a pair of jeans and has a coupon for $10 off. She purchases a pair of jeans that costs $35 pre-discount.

a. Alice receives a consumer surplus Alice's surplus: $5.00

Which demonstrates a scenario with no opportunity cost?

All of these scenarios have an opportunity cost.

Vincent and Jean are two cooks who work in a village. Each of them can either bake cakes or make pizzas. Every ingredient is readily available to them, and the only scarce resource is the cooks' time. Vincent can bake 1010 cakes or make 5 pizzas in an hour. Jean can bake 12 cakes or make 8 pizzas in an hour. Please answer the four questions. 1. Which cook has the absolute advantage in baking cakes?NeitherVincentJean 2. Which cook has the absolute advantage in making pizzas?NeitherVincentJean 3. Which cook has the comparative advantage in baking cakes?NeitherJeanVincent 4. Which cook has the comparative advantage in making pizzas?NeitherVincentJean

1. Jean 2. Jean 3. Vincent 4. Jean

Which statement describes the equity-efficiency trade‑off?

Actions intended to make economic outcomes fairer may cause efficiency to decrease.

Britney, Jewel, Les, and Regine are trying to form a band. They each have some basic skills on most instruments, so their current plan is for each of them to rotate among vocals, guitar, bass, and drums. After a year of practice and rehearsals the band still sounds awful. Britney cannot keep a steady beat when on bass or drums, Les sounds terrible on everything except the bass, nobody except Jewel can remember all the chords on guitar, and even Regine's own mother thinks her singing sounds like a dying cow. At their current rate, they expect it will be several years before they are good enough to land their first paid performance. None of them have enough money saved up to last that long. They all know you are taking economics and ask your advice. What would you say to them?

Have each member specialize in the role that they are best in to take advantage of benefits from specialization.

Which scenario would least likely change an individual's behavior?

In an effort to make people eat healthier, the city of Bakersville tells its residents to eat wheat bread instead of white bread.

b. Jeff finds steak in the supermarket priced at $16 but that he would have been willing to pay $20 for. The butcher notices the meat is near the expiration date and gives him an extra 75% off.

Jeff receives a consumer surplus. Jeff's surplus: $16.00

Rank each of the four statements with regards to whether the economic organizations in each statement are more market-oriented or part of a planned economy.

Market Buyers and Sellers make all production/consumption decisions The government attempts to induce certain production/consumption decisions using monetary incentives The government regulates some production/consumption decisions The government regulates makes all the production/consumption decisions

Suppose that Michelle buys a cappuccino from Paul's Cafe and Bakery for $6.25$6.25. Michelle was willing to pay up to $7.25$7.25 for the cappuccino, and Paul's Cafe and Bakery was willing to accept $2.75$2.75 for the cappuccino. Based on this information, answer the following questions.

Michelle's consumer surplus: $1.00 Paul's Cafe and Bakery's producer surplus: $3.50

Nicole has a hockey puck from the 2018 Winter Olympic Games and puts it up for sale on eBay. She will only sell the puck if the winning bid is greater than or equal to $500. After the bidding closes, the last bid stands at $501.

Nicole receives a producer surplus. Nicole's surplus: $1.00

Which is NOT an example of a behavior exhibited in a market economy?

The president of the European country of Semolina decrees that pasta must be consumed at all meals in an effort to help domestic pasta makers.

Determine whether each statement is true or false. a. Price ceilings result in resources being allocated to activities with the highest possible value. b. Price ceilings result in a reduction in mutually beneficial exchanges. c. Though they may face higher prices, consumers usually see an increase in product quality when price ceilings are imposed. d. A problem with price ceilings is that they lead to surpluses. e. When price ceilings are imposed, consumers pay lower explicit prices but often face higher costs in terms of waiting in line for goods and services.

a. F b. T c. T d. F e. T

Indicate whether each statement is true or false. a. Market failure can occur only in the presence of external costs. b. The government sometimes intervenes when market failure occurs. c. Market failure occurs when a free market provides a suboptimal quantity of goods and services. d. Market failure occurs when external costs or benefits are present. e. Market failure occurs when external benefits but not when external costs are present. f. Market failure occurs when external costs but not when external benefits are present.

a. F b. T c. T d. T e. F f. F

Classify each resource used in production as land, labor, capital, or entrepeneurs. a. Ore b. Kendon, a server at Sonic Drive-In c. Farmer Elise's tractor d. Aunt Sandy's Jammin' Jellies (the business) e. The Rio Grande f. Your coworkers g. Cari Anne's Taco Truck (the idea) h. Cari Anne's Taco Truck (the truck itself) i. Lake Oswego j. Your favorite bartender k. Which resource earns profits?

a. Land b. Labor c. Capital d. Entrepreneurs e. Land f. Labor g. Entrepreneurs h. Capital i. Land j. Labor k. Entrepreneurs

Indicate whether each event described falls mainly in the field of microeconomics or that of macroeconomics. a. A tax on tires increases the price of tires paid by car owners. b. As a result of a severe recession, the total output, or gross domestic product, of a nation falls by 4 percent. c. Increased consumer spending causes the national unemployment rate to fall d. Increased consumer spending causes the rate of inflation to rise.

a. Micro b. Macro c. Macro d. Macro

Suppose that the video game company Ultravision releases a new game called "Call of Obligation: Modern Combat 3." This game can be analyzed using the tools of both microeconomics and macroeconomics. Classify each item below according to whether it represents an application of microeconomics or macroeconomics. a. Is Ultravision able to sell all of the "Call of Obligation" games it produces or does it need to produce more? b. How does Ultravision choose to market "Call of Obligation." c. How much will Ultravision pay the developers of the game?

a. Microeconomics b. Microeconomics c. Microeconomics

Assume Ireland and Morocco can both produce grain and dates, and that the only limited resource is the farming labor force, meaning that land, water, and all other resources are plentiful in both countries. Each farmer in Ireland can produce 10 t of grain or 5 t of dates in a season. Each farmer in Morocco can also produce 10 t of grain or 25 t of dates. Please answer the four questions. a. Which country has the absolute advantage in producing dates? b. Which country has the absolute advantage in producing grain? c. Which country has the comparative advantage in producing dates? d. Which country has the comparative advantage in producing grain?

a. Morocco b. Neither c. Morocco d. Ireland

Determine if the items represent an example of positive economics or normative economics. a. The richest 11% of Americans should pay more taxes than the rest of the 99%. b. A decrease in the supply of coconut will increase the price of Geran chocolate cake, a good which requires coconut shavings as a key ingredient. c. As minimum wage increases, the prices of all goods and services also tends to increase. d. Social welfare spending in Sweden occupies too large a portion of the national budgets

a. Normative b. Positive c. Positive d. Normative

Indicate whether each item describes a primary goal of macroeconomic policy. a. Low unemployment b. Eliminating political conflict c. To set the optimal price for a pound of peaches d. Low inflation

a. Primary b. Not c. Not d. Primary

Please select the economic term that is best described by each statement. a. People have limited b. Everything you do requires giving up something (time, money, etc.).

a. Scarcity b. Tradeoffs

a. Consider the maximum amount of a product that sellers are willing and able to provide for sale over a relevant range of prices, holding all other factors constant. Economists call this b. When the market price of goods increases, the amount that sellers are willing to offer for sale increases. Economists call this.

a. Supply b. the law of supply

Economists classify resources, or factors of production, into four general categories. Determine whether each statement about resources is true or false. a. The resource category land refers to all natural resources, including fertile land, forests, mineral deposits, solar and wind energy, and water. b. The resource category labor refers to the productive activities of workers. c. The resource category capital refers to financial assets, such as bank accounts, bonds, certificates of deposits, and stocks. d. The resource category entrepreneurial ability refers to business skills such as the management of resources, the drive to innovate, and the willingness to bear risk.

a. T b. T c. F d. T

The day-to-day living conditions of modern Americans are very different from what they were in the 20th century. While doing research for an economics project, Charlie discovers that more households today, as compared to households 100 years ago, have electricity, air conditioning, and a car. a. Which of the following explains why modern Americans enjoy a higher standard of living than Americans 100 years ago? b. In which field do researchers focus on investigating the phenomena described?

a. There has been economic growth in our society. b. Economics

a. An economic institution that facilitates interaction between buyers and sellers is called a b. A market exists when c. A market will

a. a market b. people exchange money for goods and services c. always tends toward equilibrium

Categorize each scenario as describing a movement along a demand curve or a shift of the demand curve. a. College students reduce how much detergent they use for each load of laundry in response to higher detergent prices. b. College students rush and buy discount furniture to take advantage of an unexpected price drop. c. College students purchase many more energy drinks during finals week than during the rest of the semester. d. Students eat out more often as the federal government increases how much grant money it provides students.

a. movement along the demand curve b. movement along the demand curve c. shift in the demand curve d. shift in the demand curve

For each example listed, decide if the good is a normal good or an inferior good. Make sure you answer from the perspective of the individual or individuals doing the buying or consuming. a. Billy's mom increases his weekly allowance by $55. As a result, Billy increases the number of apps he downloads on his smartphone. Smartphone apps are b. Susan gets a 1515 percent performance bonus at work. She can finally stop eating so many frozen pizzas and eat something more tasty. Frozen pizzas are c. Mike is an appliance salesman. Refrigerator sales in his store have fallen and so has his commission. Mike decides to switch from name brand cereal to generic cereal. Generic cereal is. d. Hair stylist Molly loses a few of her clients. Molly cuts back on the number of smoothies she buys during the week. Smoothies are

a. a normal good. b. an inferior good. c. an inferior good. d. a normal good.

a. Flour, which can be used to make many products, is used to make waffles and muffins because of the high demand for each product. b. To produce one more bagel, the output of donuts must fall. c. Herb Farmer decides to use his flour and sugar to make three cakes and three loaves of bread, which his customers have demanded. d. Herb Farmer makes two cakes and two loaves of bread but uses enough flour to make three cakes and four loaves of bread. e. If Herb Farmer wants to produce one more cake, he needs to give up two loaves of bread. f. Herb Farmer decides to use his ingredients to make cakes, but his customers prefer donuts.

a. allocative b. productive c. allocative d. not efficient e. productive f. not efficient

Match each definition to the appropriate term. a. The difference between what a person is willing to pay for a good and what the person actually pays b. A measure of the reduction in social welfare (total surplus) associated with an inefficient outcome c. When the government makes it illegal to charge a price above a certain threshold d. When the price of a good is forced above the equilibrium price e. The difference between the price a firm receives for a good and the actual cost of that good

a. consumer surplus b. deadweight loss c. price ceiling d. price floor e. producer surplus

Classify each scenario based on whether it will lead to upward or downward pressure on the equilibrium price of the good marked in bold. a. An outbreak of mad cow disease causes Americans to abstain from eating beef. b. An impending nuclear holocaust causes people to stock up on twonkies, a popular snack cake provided by many companies. c. The Nile River floods this year adding an exceptional amount of silt to the soil, resulting in increased crops of cotton. d. Extreme weather in New York, where the Super Bowl is scheduled to be played, makes people disinterested in purchasing Super Bowl tickets.

a. downward pressure on price b. upward pressure on price c. downward pressure on price d. downward pressure on price

The lease on Allison's apartment will expire next month, and she wants to move closer to campus. There are two apartments that she likes. Both are close to campus and in her price range. The first one is next door to a garage where local bands often practice late at night. The second one is next door to a donut shop that opens at 5 a.m. a. If she likes to stay up late and loves listening to all kinds of music, she will view the bands practicing as a(n) b. If she is a morning person and loves the smell of donuts, she will view the donut shop as a(n) c. If her roommate hates loud music, and the smell of donuts makes her sick, she will reject both apartments due to what she sees as

a. external benefit. b. an external benefit. c. an external cost.

During the summer, the largest computer game retailer has a massive sale. As prices for computer games fall, consumers purchase more games, ceteris paribus. a. What does the term ceteris paribus mean in this context? b. Why, if at all, is the ceteris paribus condition important in economic analysis?

a. holding all else equal (unchanged) b.It allows the analysis of how a single change affects an economic environment.

Each scenario illustrates a principle of economics. Classify each scenario according to the principle that best fits it. a. An educational software company wants to expand the number of economics questions that it offers and is considering hiring another economist. The company compares how much adding another worker will improve the product to the additional cost. b. Ava finds that there is not enough time after work to have dinner, exercise, and watch TV, and she must make choices about how to use her limited time. c. On Black Friday, there are huge sales for electronics at many retail stores. David must decide between buying a camera at one store or a flat screen TV at another store, and buying one means losing out on the ability to purchase the other.

a. marginal decisions b. resource scarcity. c. opportunity cost

Determine which economic principle is illustrated by each scenario. a. The owner of a snow cone trailer realizes that the demand for snow cones is low during the winter, and closes shop until the temperature warms back up near summertime. b. The local river has so much pollution that three-eyed fish are forming. The government responds by regulating the amount of chemicals that can be dumped into the river. c. At a high-end restaurant, the restaurant owner has one chef at a meat station, one chef at a vegetable station, and one chef, who has an artistic eye, plate the food she is given. The result is increased service speed, and the kitchen is able to serve more customers in an evening. d. During the summer, a bumper crop of oranges in Florida causes a surplus in the supply of oranges nationwide. As a result, prices fall to compensate for the surplus and consumers enjoy the fruits of the farmers' labor.

a. market efficiency b. government intervention c. specialization d. equilibrium

Determine which of the statements are examples of market transactions and which are not. Identify statements describing market transactions as "market"; otherwise label the statement "not market." a. Frank takes care of his elderly aunt while she recovers from knee replacement surgery. b. Jack and Diane buy tickets to the sold out Pirates game from a ticket scalper. c. Jess gets a soda from the vending machine on her afternoon break. d. The citizens of Marble Cliff, Vermont, get financial relief from the government after a flood destroyed all of their homes. e. Suzanne gets a used textbook on eBay for much less than its list price at her university's bookstore. f. Norm paints the fence in his front yard on his day off work. g. Mitchell buys 50 shares of General Motors stock at the going price per share.

a. not market b. market c. market d. not market e. market f. not market g. market

Answer the two questions relating to demand and the law of demand. a. Which can cause a shift in the demand curve? A change in b. Which of the choices illustrates the law of demand? Pat

a. one of the determinants of demand b. wants to buy more candy bars at $1 than at $2.

Answer the two questions relating to supply and the law of supply. a. Which would cause a shift in the supply curve? This would happen if b. What would happen if the price of kayaks increased? If the price increased,

a. one of the determinants of supply changed. b. sellers would offer more kayaks for sale.

Which of the following situations could be considered examples of price gouging? a. A deadly tornado strikes Oklahoma City, destroying the homes of 50% of its population. Immediately afterward the price of sleeping bags increases by 150%. b. The exchange rate between U.S. dollars and the Papua New Guinea kina increases sharply as the Summer Olympics in Paris, France, approach. c. A new model of sunglasses become the hottest overnight fashion trend after several movie stars wear them to the Academy Awards. As a result, producers increase their price by 300%. d. At what level would you expect prices to settle during a period of price gouging? The price would settle_____ the pre-gouging market price.

a. price gouging b. not price gouging c. not price gouging d. above

Classify each scenario according to whether it represents a change in quantity supplied or a change in supply. Each classification matches two of the scenarios. a. If the price of apples decreases to $5 per bushel, Farmer Jack will supply 5 bushels of apples instead of 10 bushels of apples. b. As the price of apples increases, Farmer Jack increases the number of apples he offers for sale. c. Johnny, the jeweler, increases his inventory because he expects the price of jewelry to increase at the end of the year. d. Since Johnny is a successful jeweler, Jimmy also becomes a jeweler.

a. quantity supplied b. quantity supplied c. supply d. supply

Classify each of the foods goods according to whether it is rivalrous, nonrivalrous, excludable, or nonexcludable. Rivalrous is also referred to as rival in consumption. a. A sports team t-shirt b. The air we breathe c. Atlantic bluefin tuna in the Mediterranean Sea d. A toll road in normal traffic

a. rivalrous and excludable b. nonrivalrous and nonexcludable c. rivalrous and nonexcludable d. nonrivalrous and excludable

a. Select the correct definition of the term "comparative advantage." b. When trading with more developed countries

a. the ability to produce a good or service at a higher opportunity cost than another b. less developed countries have a comparative advantage in the production of some goods or services.

a. Producer surplus is the difference between b. Producer surplus is shown graphically as the area

a. the market price and the minimum price a seller is willing to accept. b. above the supply curve and below the market price.

a. Consumer surplus is equal to the difference between b. Consumer surplus is shown graphically as the area

a. the maximum price a buyer is willing to pay and the market price. b. under the demand curve and above the market price.

a. Demand is best described as b. The law of demand says that c. In a market economy, there is ----relationship between the price of a good and the amount of a good that buyers are willing and able to purchase.

a. the quantity of a good or a service that people are willing and able to purchase at different possible prices. b. as the price of a good increases, buyers are willing and able to purchase less. c. an inverse or negative

Suppose the University Health Center receives flu vaccinations at the beginning of each flu season, and that they offer these vaccines for the market price of $20.00 each. Assume that college students have varying budgets. Some have some money to spare, some are on a very tight budget. Keep in mind that some students have pre‑existing conditions, such as asthma and diabetes, that place them at high risk for the flu. a. Who will receive the vaccines if the University Health Center sells them for the $20.00 market price? b. Suppose the school sells all of its vaccines at the market price of $20.00. What has it managed to maximize? c. Suppose now that the school wishes to make sure no students with diabetes or asthma go without the drug because they cannot afford it. Because it does not know the budget of each student, the Health Center decides to offer vaccines free to students who can provide a doctor's note stating they have a pre‑existing condition. The school is now seeking a greater degree

a. the students who will pay $20.00 for them b. effciency c. fairness

The table presents information about the productivity of digital cameras and personal computers in the United States and Japan. The data are presented in units of output per hour of work. Use this information to answer the question. Digital cameras/Personal computers Japan 6/3 United States 8/2 Japan has a(n) ___________________ advantage in producing ______________________ .

absolute, digital cameras

Teri takes her new puppy to the veterinarian. After he examines the puppy, the vet tells Teri that her puppy needs a series of shots. Teri agrees to the shots since the veterinarian knows way more about animal health than she does. This is an example of

asymmetric information.

Megan has a 11 hr gap in her course load for the fall semester. There are two courses available for her to take at that time: reading piano sheet music and beginning rock climbing. She does not have any experience with piano or rock climbing. In the end, she decides to enroll in the rock climbing course, despite her fear of heights. Identify which activity exhibits a potential trade-off with enrolling in rock climbing.

learning to read piano sheet music