FInal Econ Exam

Suppose that demand increased. What happens to the equilibrium price and equilibrium quantity? (only one curve changes)

Price increases and quantity increases

Suppose demand decreases and supply decreases, then what happens to the equilibrium price and quantity when comparing the new equilibrium to the old equilibrium?

Quantity decreases, and the Price change is unknown

If a consumer has more time to search for a low-cost alternative for an item, the demand curve for that item will be:

Relatively more elastic

Suppose demand increases and supply decreases, then what happens to the equilibrium price and quantity when comparing the new equilibrium to the old equilibrium?

The Quantity change is unknown, and the Price increases

A binding price floor in a market is removed. Which of the following is likely to occur as a result?

The market price will fall.

Chin purchases five protein bars at a price of $3 each. The marginal benefit he receives from each bar is $5 for the first bar, $4.50 for the second bar, $4 for the third bar, $3.50 for the fourth bar, and $3 for the fifth bar. The marginal cost of producing the bars is $2 each. What is Chin's consumer surplus on the fifth bar?

$0

Jorge sells a hammock for $85. His marginal cost for one hammock is $40. What is Jorge's producer surplus on the sale of one hammock?

$45

The price of product A is cut by 30%. As a result, the quantity demanded of product B rises by 40%. The cross-price elasticity of demand between product A and product B is _____, and they are _____.

-1.33; complements

Which of the following lead to an increase in demand? (Check all that apply)

1) Tastes change such that the marginal benefit of each unit increases 2) Future prices are expected to increase 3) Decrease in the price of a complement 4)Income decreases for an inferior good 5) Increases in the price of a substitute

Bill goes to buy a car at the used car lot. He finds a 2 year old Toyota Camry that he likes. He is willing to pay up to $10,000 for this car. The dealer is willing to sell the car for as low as $6000. The agree upon price for the sale was $7,000. What is the economic surplus of the car dealer?

1,000

Bill goes to buy a car at the used car lot. He finds a 2 year old Toyota Camry that he likes. He is willing to pay up to $12,000 for this car. The dealer is willing to sell the car for as low as $9000. The agreed upon price for the sale was $11,000. What is the economic surplus of Bill?

1,000

A Smoothie King manager has estimated that the price elasticity of demand for exotic fruit smoothies is 2. If the store increases menu prices by 5%, she can expect the quantity of exotic fruit smoothies sold to decrease by _____ and total revenue to _____.

10%; fall

Bill goes to buy a car at the used car lot. He finds a 2 year old Toyota Camry that he likes. He is willing to pay up to $20,000 for this car. The dealer is willing to sell the car for as low as $15,000. The agree upon price for the sale was $17,000. What is the economic surplus of the entire market (both buyer and seller)?

5,000

Milk producers know that the price elasticity of demand for whole milk is 0.1. If they want to increase sales by 5%, they will have to lower price by:

50%

It is very easy for Evelyn to find inexpensive inputs for her business. Evelyn's supply is therefore likely to be:

Elastic

Which of the following describes a situation with a negative externality?

After a commercial poultry farm opens, neighbors on all sides complain of its smell.

Which of the following is a positive externality?

After measles vaccinations increase by 20%, the number of cases of measles falls by 35%.

Suppose that either supply or demand shifted (only one curve changed), and that the equilibrium price increased and equilibrium quantity increased. It must be the case that...

Demand Increased

Charles McCoy is a manager at a coffee shop and is making hiring decisions. With one worker, he can make 15 drinks that sell for $3 on average in a single hour. With a second worker, he can make an additional 12 drinks in a single hour. The marginal benefit of each additional worker decreases by three drinks with each additional hire. Assuming that workers are paid $12 per hour and work eight hours, how many employees should Charles hire for each hour?

Four

Marius and Jennifer are going to sell cupcakes and muffins at their third annual fundraiser bake sale. In one day, Marius can make 40 cupcakes or 20 muffins, and Jennifer can make 15 cupcakes or 15 muffins. Based on this information, _____ has the comparative advantage in cupcakes, and _____ has the comparative advantage in muffins.

Marius; Jennifer

Which of the following is an example of an in-kind transfer?

Martin receives housing from the government due to his low income.

Suppose that supply increased. What happens to the equilibrium price and equilibrium quantity? (only one curve changes)

Price decreases and quantity increases

Which of the following illustrates a positive externality?

The value of Maria's house rises when the city builds a park nearby, enhancing her view.

A perfectly inelastic demand curve is:

Vertical

Which of the following tax systems is progressive? Corinne pays a 10% tax on the first $10,000 she earns plus _____ tax on any additional income.

a 25%

When eligibility for a government program is based on income and sometimes on wealth, the program is classified as _____ program.

a means-tested

To be binding, a price floor must set the price:

above the equilibrium price.

Harvey pays $8 to skate at the indoor ice rink once a month. The price rises to $10, and Harvey starts skating once every six weeks. This is an example of price functioning as

an incentive.

The poverty line is:

an income level determined by the government, below which a family is defined to be in poverty.

Amanda Mendez goes to a local café and orders a sandwich. Her willingness to pay for that sandwich is $10. The price of the sandwich is $4. The cost to the cafe to produce that sandwich is $1. Amanda should...

buy the sandwich because the marginal benefit is greater than the marginal cost.

You have an absolute advantage in producing a product if you:

can produce the product using the fewest inputs.

If the cross elasticity of demand between cheese and yogurt is positive, then:

cheese and yogurt are substitutes.

If resources are allocated efficiently,

consumer and producer surplus are maximized.

If the market for oranges is in equilibrium then at the equilibrium price:

consumer and producer surplus are maximized.

Consumer surplus for an individual buyer is equal to the:

consumer's willingness to pay for the good, or the marginal benefit from the good, minus the price paid for the good.

When an economy moves from a scenario without trade to free international trade, for industries in the export sector, consumer surplus _____, producer surplus _____, and the economy as a whole _____.

falls; rises; gains

For a good to be considered normal, the _____ elasticity of demand must be _____.

income; positive

An increase in income will be reflected in the market for passionfruit as a(n):

increase the demand for passionfruit if passionfruit is a normal good.

Along a given supply curve, an increase in the price of a good will:

increase the producer surplus.

The wages that firms must pay autoworkers increase. The equilibrium price of cars __________, and the equilibrium quantity of cars produced _________.

increases; decreases

If rice is an inferior good and income decreases, then the equilibrium price of rice __________, and the equilibrium quantity of rice produced _________.

increases; increases

Suppose that cheese and crackers are complements-in-consumption, and that the price of cheese decreased. The equilibrium price of crackers __________, and the equilibrium quantity of crackers produced _________.

increases; increases

When Coca Cola consumption recently decreased, the Coca Cola Company hired a survey firm to determine what was going on. The firm interviewed consumers, who said that rising Coke prices were discouraging them from purchasing Coke. This implies a:

movement up along the demand curve for Coca Cola. (quantity demanded decreased)

The free-rider problem is most common when a good is:

nonexcludable.

The market outcome will lead to _________ in the presence of negative externalities.

overproduction

A pair of jeans that you purchase from American Eagle is a _____ that is excludable and rival in consumption.

private good

An import is a good or service:

purchased from a foreign seller.

If ratatouille and Hungarian goulash are substitutes in consumption, an increase in the price of Hungarian goulash will cause the demand for:

ratatouille to increase.

Suppose the United States places a tariff on imported Brazilian ipe (a type of wood). As a result of the tariff, the domestic price of lumber will _____, consumer surplus will _____, and producer surplus will _____.

rise; fall; rise

An export is a good or service:

sold to a foreign buyer.

It is a rainy day, and you are considering taking an Uber one mile to meet some friends. You have decided you are willing to pay $50 to avoid getting wet from the rain. The trip would normally cost you $8, but due to the weather the surcharge is triple the regular cost. You should _____ because the benefit to you of taking the Uber is _____ than the cost.

take an Uber; more

The Public Health Department of the State of Ohio wants to decrease the harm to the public from low-quality unsafe producers of vaping products (e-cigarettes). The Health Department proposes a policy that all producers will be required to have their products inspected for the safety of the ingredients, and that producers will be required to pay for the cost of inspections. The policy will work through increasing the marginal cost of producing vaping products. For a given fixed increase in marginal costs, the policy will be more effective (i.e. larger reductions in the quantity of vaping product use) if

the demand for vaping products is more price elastic

How will the demand for cars this year change, if the market expects the price of cars next year to increase?

the demand will shift to the right

Economic surplus is:

the difference between the marginal benefit to the buyer and the marginal cost to the seller for all units sold.

A market's deadweight loss is calculated as:

the economic surplus at the efficient quantity minus the economic surplus at the actual quantity.

The official poverty line depends on _____ and is adjusted every year to reflect changes in the cost of living.

the size and composition of a family

Alan Patel is a college student living alone in a campus apartment. He finished cooking dinner when his friends text him to join them at the dining hall on campus for dinner. He now has to decide whether to eat the dinner he prepared or walk to campus to meet his friends at the dining hall. Alan should consider all the following costs when making this decision EXCEPT the

time he spent cooking the dinner.

Ralph is offered a free ticket to a Yankees game—a ticket he cannot resell. His opportunity cost of going to the baseball game is:

whatever Ralph would have done had he not gone to the game

Juan McDonald is willing to pay $800 for a new iPad. Apple (the producer of iPads) is selling a new iPad for $700. It costs Apple $400 to produce this iPad. A voluntary economic transaction between Juan and Apple _____ occur because ____ would be better off due to the transaction.

will; both Juan and Apple

Suppose that either supply or demand shifted (only one curve changed), and that the equilibrium price decreased and equilibrium quantity decreased. It must be the case that...

Demand decreased

If a good is a necessity with few substitutes, demand will tend to be:

Inelastic

What is a progressive tax system?

It is a system where those with more income pay a higher share of their income in taxes than those with lower incomes.

If the market for concert tickets is in equilibrium and the fire marshal tries to reduce the number of tickets sold, all other things equal, economic surplus will:

decrease.

The United States can produce whiskey domestically, but it can also export whiskey if the world price is higher than the domestic price. If the United States exports whiskey, consumer surplus will _____, producer surplus will _____, and total surplus will _____.

decrease; increase; increase

Suppose that plywood and wood pulp are complements-in-production, and that the price of wood pulp increased. The equilibrium price of plywood __________, and the equilibrium quantity of plywood produced _________.

decreases; increases

If the price of herring increases by 8%, and the quantity demanded falls by 20%, demand is _____. This decrease in price will therefore lead to a(n) _____ in total revenue.

elastic; decrease