Microeconomics Exam 1

​Tom's lawn service specializes in mowing lawns and trimming bushes. Tom has 4 hours to devote to lawn services. In 1​ hour, he can mow 4 lawns or trim 9 bushes. Use the line drawing tool to graph​ Tom's production possibilities frontier given he has 4 hours to devote to lawn services. Properly label this line. Tom's opportunity cost of mowing lawns in terms of trimming bushes is ______ trimmed bushes per mowed lawn. ​(Enter your response rounded to two decimal​places.)

2.25

The government seeks to protect intellectual property rights by granting

A and B only. (patents, copyrights)

A hypothesis in an economic model is

All of the above; A. tested before it can be accepted​ (or not​ rejected). B. usually about a causal relationship. C. a statement that may be either correct or incorrect about an economic variable.

Suppose the economy whose PPF is shown on the right experiences economic growth. ​1.) Use the​ 3-point curved line drawing tool to show how growth affects the​ trade-offs the country faces between producing ships and food. ​2.) Use the point drawing tool to draw and label a point on the new PPF that shows the economy producing more of both goods. Label this point​ 'B'. Which of the following may have caused the shift you have​ drawn? ​(Check all that​ apply.)

An increase in the capital stock, A larger labor force, Advances in technology.

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​ Hewlett-Packard (HP)​ printers, depicted in the figure to the​ right, where the supply of HP printers has increased from S1 to S2. What would cause the supply curve for HP printers to shift to the​ right?

Both a and b. (A decrease in the price of a substitute in production, A decrease in the price of an input.)

In a simple​ circular-flow model, there are flows of​ _________ and flows of​ _________.

Both​ (a) and​ (b) are correct. (funds received from the sale of factors of​ production; spending on final goods and services, factors of​ production; goods and services)

What is the basis for​ trade?

Comparative advantage.

The graph to the right shows the effect of a tax imposed on soft drinks. Use this graph to answer the following questions. Which areas in the graph represent the excess burden​(deadweight loss) of the​ tax? Which areas represent the revenues collected by the government from the​ tax? Would this tax on soft drinks be considered​ efficient?

D​ + G, B​ + C​ + E​ + F, Yes, because it imposes a small excess burden​(deadweight loss) relative to the tax revenue it raises.

If you and your neighbor both grow oranges and grapefruits and you are better than your neighbor at picking both oranges and​ grapefruits, there can be no advantage to you in specializing in growing only one type of fruit and trading with your neighbor for the other.

False

Which participants are of greatest importance in determining what goods and services are​ produced?

Households.

Which of the following are examples of intellectual​ property? ​(Check all that​ apply.)

Ideas for new products or new production techniques Books and films

The economy of East Paragon has been experiencing deflation for the last few​ months, with prices of goods and services declining. Because firms are charging lower​ prices, they expected higher sales.​ However, consumption spending did not increase​ much, resulting in substantial losses for these firms. Which of the​ following, if​ true, explains why consumers did not increase consumption in spite of falling​ prices?

Most people were expecting prices to decline further.

The accompanying table gives the relationship between the price of custard pies and the number of pies Jacob buys per week. Is the relationship between the price of pies and the number of pies Jacob buys a positive relationship or a negative​ relationship?

Negative relationship

​Trade-offs force society to make​ choices, particularly when answering the following three fundamental​ questions:

One, what goods and services will be​ produced? Two, how will the goods and services be​ produced? Three, who will receive the goods and services​ produced?

__________ is concerned with what is​, and _______________ is concerned with what ought to be. Economics is about ____________ which measures the costs and benefits of different courses of action.

Positive analysis, normative analysis, positive analysis

________ surplus is the difference between the lowest price a firm would be willing to accept and the price it actually receives. This component of economic surplus is illustrated in the diagram to the right by area ___ .

Producer, B

In the diagram to the​ right, marginal benefit is greater than marginal cost at output level ____. This output level is considered economically ________

Q1, inefficient

Calculate the slope of the total cost curve at point A and at point B in the figure on the right. ​(Round both answers to one decimal place​.) Slope at point A​ = Slope at point B​ =

Slope at point A​ = 62.5 Slope at point B​ = 100

What is comparative​ advantage?

The ability to produce a good or service at a lower opportunity cost than other producers.

Refer to the graph to the right. How would you describe the value of the slope of this​ curve?

The value of the slope is greater between points g and h than between points i and j.

Which of the following best describes scarcity?

Unlimited wants exceed the limited resources available.

Imagine that the next time the New England Patriots play the Miami Dolphins at Gillette Stadium in​ Foxborough, Massachusetts, Patriots star quarterback Tom Brady has a temporary lack of judgment and plans to sell Patriots memorabilia during the game because he realizes that he can sell five times more Patriots products than anyone in the stadium sports gear store.​ Likewise, imagine that you are a creative and effective manager at work and that you tell your employees that during the next six​ months, you plan to clean the offices because you can clean five times better than the cleaning staff. Both you and Tom are making an error in judgment by assuming that specialization should be based upon ____________________. You​ shouldn't necessarily do what you are better than anyone else at doing

absolute advantage, unless your advantage in that activity is greater than advantages you possess in other activities.

The basis for trade is ___________ advantage.

comparative

Consider the market for eggs illustrated in the figure to the right. Suppose the market is perfectly competitive and initially in equilibrium at a price of 5 cents and a quantity of 50​ (thousand). If the price were 7 cents instead of 5​ cents, then consumer surplus would In​ turn, producer surplus would ​Consequently, at a price of 7 ​cents, deadweight loss would equal

decrease by areas B and E, increase by areas B and decrease by area F, areas E and F.

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 hospital facilities​? As the first baby boomers become older than​ 65, the

demand curve for hospital facilities will shift to the right.

______________ is the study of the choices people make to attain their goals, given their scarce resources.

economics.

A(n) __________ is someone who operates a​ business, bringing together the factors of production—​labor, capital, and natural resources—to produce goods and services.

entrepreneur

Scarcity is central to the study of economics because it implies that

every choice involves an opportunity cost.

Allocative efficiency means that

every good or service is produced up to the point where marginal benefit is equal to marginal cost.

In economic​ terminology, the inputs used to produce output are referred to as

factors of production.

In​ economics, the term capital refers to

goods used to produce other goods.

If country ABC can produce a unit of good 1 with fewer resources than can country​ XYZ, it is correct to say that country ABC

has an absolute advantage in producing good 1.

Which of the following are the two key groups of participants in the circular flow of​ income?

households and firms

Microeconomics is the study of

how households and firms make​ choices, how they interact in​ markets, and how the government attempts to influence their choices.

In the United​ States, who receives the goods and services produced depends largely on _________________

how income is distributed

Scarcity implies that every society and every individual face​ trade-offs because scarcity means that

human wants are greater than what available resources can produce.

Using the same amount of​ resources, suppose that Nicaragua can produce twice as much wheat as Colombia.​Nevertheless, Colombia could still have the comparative advantage in producing wheat if

it is even less efficient than Nicaragua in the production of goods other than wheat.

Examining why some economies have grown much faster than others is most likely an issue in ____________

macroeconomics

In the diagram to the​ right, the curve labeled​ "S" is apparently​ _____, while the curve labeled​ "D" is apparently​ _____.

nonlinear; linear

Consider the graph at right. When the number of dating websites​ increases, the number of marriages also increases. From the graph we can conclude

nothing, since there is likely to be an omitted variable.

When economists develop models designed to explain the choices people​ make, they generally assume that

people are rational.

Suppose an analyst estimates the gains to workers from minimum wage laws. This is an example of

positive analysis

Do producers tend to favor price floors or price​ ceilings? ​ Why? Producers favor

price floors​ because, when​ binding, price floors increase price above the equilibrium and may increase producer surplus.

The Scottish philosopher Adam Smith argued in 1776 that

prices would do a better job of coordinating the activities of buyers and sellers than guilds could.

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls

scarcity

Consider the market for LCD​ TVs, illustrated in the figure to the right. Use the point drawing tool to identify the market equilibrium. Properly label this point. Suppose instead that the price of LCD TVs is ​$800.00. This will result in a ________​, which will place ________ pressure on the price.

shortage, upward

The people of a previously quiet and peaceful country have come to recognize the need to expand and improve their security forces after a wave of terroristic threats and acts. Considering their resource​ limitations, the extent to which security is enhanced will most likely be determined by

society's willingness to forego other goods and​ services, both public and private.

The distinction between substitutes and complements is

substitute goods are used for the same purposes while complementary goods are used together.

Consider the market for LCD TVs. The market equilibrium is where In this​ example, the equilibrium price is ​_____ and the equilibrium quantity is ______ LCD TVs. ​(Enter your responses as whole​ numbers.) Suppose instead that the price of LCD TVs is ​$800. This will result in a ______​, which will place ________ pressure on the price.

supply equals demand, $1400, 5000, shortage, upward

Consider the market for wheat​, depicted in the figure to the right. Suppose a price floor of p3 is imposed by the government. As a result of the price floor​, there is a _____ of wheat. Compared with the​ market-clearing equilibrium, is the price floor ​efficient? ____. What area represents the loss in efficiency in terms of consumer and producer surplus resulting from the price floor​? Use the triangle drawing tool to shade in deadweight loss. Label this shaded area​ 'Deadweight Loss'.

surplus, No,

The production possibilities frontiers depicted in the diagram to the right illustrate

technological advances in the tank industry.

One of the great benefits of trade is

that it makes it possible for society to become better off by increasing its consumption.

Refer to the graph to the right. A tax is imposed in the market for cigarettes that shifts the supply curve from S1 to S2. What area corresponds to the revenue collected by the government from the​ tax? A tax is efficient if it imposes a large excess burden relative to the tax revenue it raises.

the dark gray area, False

Macroeconomics is the study of

the economy as a​ whole, including topics such as​ inflation, unemployment, and economic growth.

Equity is

the fair distribution of economic benefits

In a free​ market, the actions people take are largely determined by

the motivation of financial reward.

Macroeconomics is

the study of the economy as a​ whole, including topics such as​ inflation, unemployment, and economic growth.

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.

A free market exists

when the government places few restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed.

Is it possible for a country to have a comparative advantage in producing a good without also having an absolute​advantage? A country without an absolute advantage in producing a good

will have a comparative advantage if it has a lower opportunity cost of producing that good.

The slope of a curve is defined as the _____ divided by the _____. ​(Assume the Y values are on the vertical axis and the X values are on the horizontal​ axis) Suppose your business operates a machine at a cost of ​$100 per day whether it is used or not plus ​$25 for each hour it is used. Use the line drawing tool to draw the daily cost curve for this machine assuming an 8 hour day. Label the curve​'cost'. The slope of the cost curve is ______ per hour

ΔY, ΔX, $25

Suppose the demand for football tickets at a local college is QD=100,000−500P and the supply of tickets is QS=40,000. The market equilibrium price is _____ and the equilibrium quantity is _______ tickets. ​(Enter your responses as whole​ numbers.) Total economic surplus in this market is ​_________. ​(Enter your response as a whole​ number.)

​$120, 40000, $6400000

Suppose an inverse demand curve has the following​equation: P=4−0.0025Q. Use the line drawing tool to graph the demand curve in the figure. Make sure to extend the line from the vertical axis to the horizontal axis. Attach the provided label. The demand​ curve's slope is _________ ​(Enter your response rounded to four decimal​ places.)

−.0025

The diagram to the right shows a hypothetical demand curve for apples. The slope of this curve is _________. ​(Enter your response rounded to two decimal places. Include a minus sign if​ appropriate.)

−1.75

The market supply and market demand curves for a magazine highlighting events and happenings for a metropolitan area are illustrated in the figure to the right. If the magazine publisher charges a weekly subscription price of ​$3.00​, what will be the resulting deadweight​ loss, if​ any? Deadweight loss will be ​____ thousand. ​(Enter your response rounded to two decimal​ places.)

$.50

Suppose the government imposes a payroll tax of $1 per hour of work and collects the tax from employers. Use the line drawing tool in the figure to the right to draw and label a curve that reflects the​ payment, by​employers, of the $1 per hour tax. According to your​ graph, the new equilibrium wage that employers pay workers falls by ​___. ​(Enter your response as an​ integer.)

$1

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 $1.50 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 ​_____ of the ​$1.50 tax ​(enter a numeric response using a real number rounded to two decimal​places) and producers pay ​_____ of the tax.

$1.00, $.50

Suppose the market demand for ethanol is QD=60−10P and market supply of ethanol is QS=20+10P. If the government institutes a price ceiling of ​$1.60​, what is the effect on economic​ efficiency? The price ceiling will create deadweight loss of ​______. ​(Enter your response rounded to two decimal​ places.)

$1.60

If QD= 0​ = 2,500−​20P, then P=

$125

The diagram to the right shows a market in which a price floor has been imposed. Identify the following ​(enter all values as integers​). a. The deadweight loss is ​__________. b. The transfer of consumer surplus to producers is ​_______. c. Producer surplus with this price floor is ​________. d. Consumer surplus with this price floor is ​________.

$15000, $15000, $37500, $7500

Use the information on the kumquat market in the following table to answer the questions.​ (Quantities are given in millions of crates per​ year.) The equilibrium price is ​____ and the equilibrium quantity is ____ million crates. ​(Enter your responses as​integers.) How much revenue do kumquat producers receive when the market is in​ equilibrium? Kumquat producers receive ​______ billion in revenue. ​(Enter your response rounded to one decimal​ place.) Suppose the federal government decides to impose a price floor of ​$25 per crate. Assume that the government does not purchase any surplus kumquats. Now how many crates of kumquats will consumers​ purchase? Consumers will purchase ____ million crates of kumquats. ​(Enter your response as an​ integer.) How much revenue will kumquat producers​ receive? Kumquat producers will receive ​______ billion in revenue. ​(Enter your response rounded to one decimal​ place.)

$20, 100, $2.0, 90, $2.3

The equilibrium price is ​____ and the equilibrium quantity is ____ million crates. ​(Enter your responses as​ integers.) Suppose the federal government imposes a price floor of ​$25 per crate and purchases any surplus kumquats from producers. Now how much revenue will kumquat producers​ receive? Kumquat producers will receive ​_____ billion in revenue. ​(Enter your response rounded to one decimal​ place.) Revenue received by kumquat producers before the price floor can be represented by Revenue received by kumquat producers after the price floor can be represented by The amount the government spends to purchase surplus kumquats can be represented by

$20, 100, $3.5, the area of a rectangle with a height equal to the equilibrium price and a base equal to the quantity sold., the area of a rectangle with a height equal to the price floor and a base equal to the quantity sold., the area of a rectangle with a height equal to the price floor and a base equal to the quantity bought by the government.

Tim mows neighborhood lawns for extra money. Suppose that he would be willing to mow one lawn for ​$14​, a second lawn for ​$15​, and a third lawn for ​$25. Also suppose that three neighbors are interested in having their lawns mowed. Mrs. Jones would be willing to pay ​$33 to have her lawn​ mowed, Mr. Wilson would be willing to pay ​$28​, and Ms. Smith would be willing to pay ​$25. If Tim offers to mow lawns for ​$25 ​each, what will be his producer​ surplus? ​_____. ​(Enter a numeric response using an​ integer.) Considering Mrs.​ Jones, Mr.​ Wilson, and Ms. Smith​ together, what will be their consumer​ surplus? ​____.

$21, $11

Suppose that you are the vice president of operations of a manufacturing firm that sells an industrial lubricant in a competitive market. Further suppose that your economist gives you the following supply and demand​ functions: ​Demand: QD ​= 50−2P ​Supply: QS ​= −10+P. What is the consumer surplus in this​ market? Consumer surplus is ​_______. ​ (Enter your response rounded to two decimal​ places.) What is the producer​ surplus? Producer surplus is ​______. ​ (Enter your response rounded to two decimal​ places.)

$25.00, $50.00

In the diagram to the​ right, illustrating a binding price ceiling at P3​, the amount of producer surplus transferred to consumers is represented by area __ and the deadweight loss is equal to areas ______ .

C, B and D

In​ Allentown, Pennsylvania, in the summer of​ 2014, the average price of a gallon of gasoline was ​$3.68—a ​22-cent increase from the year before. Many consumers were upset by the increase. One was quoted in a local newspaper as​ saying, "It's crazy. The government should step​ in." ​Source: Sam​ Kennedy, "Valley Feeling Pain at the​Pump," (Allentown,​ PA) Morning Call​, June​ 21, 2014. Suppose the government had stepped in and imposed a price ceiling equal to old price of​ $3.46 per gallon. a. Using the line drawing​ tool, draw and label the price ceiling. a-i. Before the price ceiling is​ imposed, the equilbrium price is ​_____​, and the equilbrium quantity is ____ thousand gallons. After the price ceiling is​ imposed, the equilbrium price is _______. The quantity demanded is ___ thousand gallons and the quantity supplied is _____ thousand gallons. ​(Enter your responses for price to two decimal places and for quantity as whole​ numbers.) a.-iii. Remembering that the quantity is measured in​thousands, the deadweight loss after the price ceiling is imposed is ________. (Enter your response as a whole​number.) b. Will the consumer who was complaining about the increase in the price of gasoline definitely be made better off by the price​ ceiling?

$3.68, 10, $3.46, 20, 4, $1080, Maybe, if the consumer can get gasoline.

What is the area of the blue triangle shown in the figure to the​ right? The area of the triangle=​

$31,250

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 $1.00 to be paid for by producers. Show how the tax affects the market for gasoline. Use the line drawing tool to add either a new supply or demand curve. Properly label this line. How much government revenue does the gasoline tax​generate? ​____. ​(Enter a numeric response using a real number rounded to two decimal​ places.) The gasoline tax​ is:

$40, efficient in that the tax revenue is greater than the excess burden.

Use the information in the following table on the market for apartments in Bay City to answer the following questions. In the absence of rent​ control, what is the equilibrium rent and the equilibrium quantity of apartments​ rented? Equilibrium rent is ​______ and the equilibrium quantity is ____ thousand apartments. ​(Enter your responses as​integers.) In​ equilibrium, will there be any renters who are unable to find an apartment to rent or any landlords who are unable to find a renter for an​ apartment? Suppose the government sets a ceiling on rents of ​$200 per month. What is the quantity of apartments​ demanded, and what is the quantity of apartments​ supplied? With the price​ ceiling, the quantity demanded is _____ thousand apartments and the quantity supplied is _____ thousand apartments. ​(Enter your responses as​ integers.) Assume that all landlords abide by the law. Compare the economic surplus in this market when there is no price ceiling to when there is a price ceiling. With the rent​ controls, the change in economic surplus is Furthermore, economic surplus represented by the area Assume that the quantity of apartments supplied is the same as you determined above. But now assume that landlords ignore the law and rent this quantity of apartments for the highest rent they can get. Briefly explain what this rent will be. If landlords supply only 175 thousand apartments and ignore the price​ ceiling, then they can charge rent of ​$_____ ​

$400, 225, No, 275, 175, deadweight loss equal to the area under the demand curve and above the supply curve for units between the quantity with the rent controls and market equilibrium quantity., between the equilibrium price and the price ceiling for apartments provided with the price ceiling is transferred from producers to consumers., 600.

Suppose market demand is QD=80−5P and market supply is QS=30+5P. The market equilibrium price is ​____ and the equilibrium quantity is _____ units. ​(Enter your responses rounded to two decimal​ places.) Suppose the government institutes a price floor of ​$6.50. The price floor will results in a _____ of ____ units. ​(Enter your response as a whole​ number.)

$5, 55, surplus, 15

Suppose that you have been hired to analyze the impact on employment from the imposition of a minimum wage in the labor market. Further suppose that you estimate the supply and demand functions for​ labor, where L stands for the quantity of labor​ (measured in thousands of​ workers) and W stands for the wage rate​ (measured in dollars per​hour): ​Demand: LD=90−3W ​Supply: LS=7W ​First, calculate the​ free-market equilibrium wage and quantity of labor. The competitive market equilibrium wage is ​___ per hour. ​(Enter your response as an​ integer.) The competitive market equilibrium quantity of labor is ____ thousand workers. ​(Enter your response as an​ integer.) Now suppose the proposed minimum wage is $11. How large will the surplus of labor in this market​ be? With a minimum wage of $11 per​ hour, the surplus will be _____ thousand workers. ​(Enter your response as an​integer.)

$9, 63, 20

Refer to the graph to the right. If a city imposes a rent ceiling of​ $1,000, then compared with its value in competitive​ equilibrium, producer surplus will be reduced by

$975 million.

According to the law of​ supply,

A and C only (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 )

How can a country gain from specialization and​ trade?

A country can specialize in producing that for which it has a comparative advantage and then trade for other needed goods and services.

An article about record high avocado prices discussed how avocado crops had suffered from hot​ weather, droughts, and an invasive beetle that kills avocado trees. Use a demand and supply graph of the avocado market to illustrate the effect of the hot​ weather, droughts, and invasive beetle. How are producer surplus and consumer surplus​ affected? ​Source: Rafi​ Letzter, "Avocado Prices Just Hit a Record​High, and Show No Signs of Coming Down.​ Here's Why,"​businessinsider.com, November​ 3, 2016. Refer to the graph at​ right, and the shaded areas designated by letters A through N. a. The impact of the hot​ weather, drought, and an invasive beetle results in a consumer surplus in the market for avocados represented by​ area(s) The impact of the hot​ weather, drought, and an invasive beetle results in a loss of producer surplus equal to areas There is a gain of producer surplus equal to​ area(s)

A., ​J, F, G., B.

Which of the following events would cause the supply curve to decrease from S1 to S2​?

An increase in the price of inputs.

______ surplus is the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. This component of economic surplus is illustrated in the diagram to the right by area ____.

Consumer, A

Deadweight loss is the reduction in economic surplus resulting from a market not being in competitive equilibrium. In the diagram to the​ right, deadweight loss is equal to the​ area(s):

C​ & E.

In the diagram to the​ right, illustrating a​ per-unit tax equal to P2 minus P3​, tax revenue is represented by the areas ______ and the excess burden of the tax is represented by areas _______ .

D and F, E and G

What are the two main categories of participants in​ markets?

Firms and households.

Which of the following statements about microeconomics and macroeconomics is​ correct?

Microeconomics involves the study of how households and firms make choices.

The graph to the right shows the market demand and supply for oranges. Assume that the market for oranges is perfectly competitive. Suppose the orange producers organize themselves and establish a system of quotas. Each​ farmer's output is restricted by an amount indicated in the graph. Compared with the​ market-clearing equilibrium, is the quota system​ efficient? ___. Illustrate the loss of efficiency that results from the quota system. Use the triangle drawing tool to shade in the deadweight loss. Label the shaded area​ 'Deadweight Loss'.

No

Suppose the United States and Mexico both produce hamburgers and tacos. The combinations of the two goods that each country can produce in one day are presented in the table below. Which country has an absolute advantage in producing​ tacos? . Which country has a comparative advantage in producing​ tacos? Suppose the United States is currently producing 140 tons of hamburgers and 42tons of tacos and Mexico is currently producing 28 tons of hamburgers and 35 tons of tacos. If the United States and Mexico each specialize in producing only one good​ (the good for which each has a comparative​ advantage), then a total of _____ additional ​ton(s) of hamburgers can be produced for the two countries combined ​(enter a numeric response using an​ integer) and a total of __ additional​ ton(s) of tacos can be produced.

The United States, Mexico., 42, 28

According to the law of demand there is an inverse relationship between price and quantity demanded. That​ is, the demand curve for goods and services slopes downward.​ Why?

When the price of a good​ increases, consumers' purchasing power​ decreases, and they cannot buy as much of the good as they did prior to the price change.

In the diagram to the​ right, point A provides the​ _____, point B the​ _____, and point C the​ _____.

equilibrium​ price; market​ equilibrium; equilibrium quantity

Economic efficiency is

a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.

Consider the market for electricity illustrated in the figure to the right. Suppose the market is perfectly competitive and initially in equilibrium at a price of p2 and a quantity of Q2. Now suppose the government applies a price ceiling of p1. Compared with the​ market-clearing equilibrium, consumer surplus would In​ turn, producer surplus would Consequently, with the price ceiling​, deadweight loss would equal

increase by area C and decrease by area E, decrease by areas C and F, areas E and F.

Consider the market for the Nissan Xterra. Suppose the price of​ metal, which is an input in automobile​ production, decreases. Use the line drawing tool to show how this affects the supply of Nissan Xterras by drawing a new supply curve. Properly label this line. 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

A price ceiling is a legally determined ________ price that sellers may charge. A price floor is a legally determined _______ price that sellers may receive.

maximum, minimum

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." ​Source: William​ Neuman, "With Venezuelan Cupboards​Bare, Some Blame Price​ Controls," New York Times​, April​20, 2012. Imposing price controls on goods would make them hard to find because One of the goods subject to price controls was toothpaste. On the graph at​ right: ​1.) Use the line drawing tool to draw and label a price control of​ $3. ​2.) Use the triangle drawing tool to draw and label the producer surplus after the price control of​ $3 is established. ​3.) Use the rectangle drawing tool to draw and label the added consumer surplus after the price control of​ $3 is established. ​4.) Use the triangle drawing tool to draw the deadweight loss after the price control of​ $3 is established.

producers would not want to supply as much as they did before the price controls.

Years​ ago, an apple producer argued that the United States should enact a​ tariff, or a​ tax, on imports of bananas. His reasoning was​ that: ​"the enormous imports of cheap bananas into the United States tend to curtail the domestic consumption of fresh fruits produced in the United​States." ​Source: Quoted in Douglas A.​ Irwin, Peddling​Protectionism: Smoot-Hawley and the Great​ Depression, Princeton,​ NJ: Princeton University​ Press, 2011, p. 22. This producer apparently assumed apples and bananas to be ______________. In a graph​ (not shown) of the banana market in the United​ States, the imposition of a tariff on banana imports would In the graph to the right do the​ following: ​1.) Use the line drawing tool to draw and label the apple demand and supply curves before the tariff is imposed on bananas. ​2.) Use the point drawing tool to identify and label the initial equilibrium in the apple market. ​3.) Use the line drawing tool to draw and label the new curve or curves in the apple market to reflect the impact on the apple market. ​4.) Use the point drawing tool to identify and label the new equilibrium point in the apple market.

substitutes, shift supply​ leftward, increasing equilibrium price and decreasing equilibrium quantity.,

The figure to the right illustrates the U.S. market for rugs made in a particular foreign country. Suppose the market price of rugs is ​$2,250. At a price of ​$2,250​, there will be a _______ of rugs. To reach an​ equilibrium, the price of rugs in this market must ____.

surplus, fall

Suppose that many cities begin to pass taxes on carbonated​ sodas, while at the same time scientists discover a cure for citrus​ greening, which is reducing orange crops in Florida and Brazil. a. Can we use this information to be certain whether the equilibrium price of orange juice will increase or​decrease? b. Can we use this information to be certain whether the equilibrium quantity of orange juice will increase or​decrease? Use a demand and supply graph to illustrate your answers to the questions above. ​1.) Using the line drawing​ tool, graph the effect of a tax on carbonated sodas in the market for orange juice by drawing a new demand curve. Label your line ​'D2​.' ​2.) Using the line drawing​ tool, graph the effect of a cure for citrus greening in the market for orange juice by drawing a new supply curve. Label your line ​'S2​.' ​3.) Using the point drawing​ tool, indicate the new market equilibrium. Label your point ​'e2​.' The equilibrium quantity of orange juice _________ and the equilibrium price of orange juice ____________.

will increase, may increase or decrease

Use the information in the following table​ (and in the graph to the​ right) on the market for apartments in Bay City to answer the following questions. In the absence of rent​ control, what is the equilibrium rent and the equilibrium quantity of apartments​ rented? Equilibrium rent is _____ and the equilibrium quantity is ____ thousand apartments. ​(Enter your responses as​integers.) In​ equilibrium, will there be any renters who are unable to find an apartment to rent or any landlords who are unable to find a renter for an​ apartment? With the price​ ceiling, the quantity demanded is ____ thousand apartments and the quantity supplied is ____ thousand apartments. ​(Enter your responses as​integers.) Assume that all landlords abide by the law. Compare the economic surplus in this market when there is no price ceiling to when there is a price ceiling. ​1.) Use the triangle drawing tool to shade in the change in economic surplus as a result of the price ceiling. Properly label this shaded area indicating whether surplus has increased​ (new economic surplus) or decreased (deadweight loss​). ​2.) Use the rectangle drawing tool to shade in transferred surplus as a result of the price ceiling. Properly label this shaded area indicating whether this surplus is transferred from producers to consumers​ (transfer to​consumer) or from consumers to producers​ (transfer to producer). Assume that the quantity of apartments supplied is the same as you determined above. But now assume that landlords ignore the law and rent this quantity of apartments for the highest rent they can get. Briefly explain what this rent will be. If landlords supply only 125 thousand apartments and ignore the price​ ceiling, then they can charge rent of ​______. ​(Enter your response as an​ integer.)

​$600, 175, No, 225, 125, $800

Suppose five construction companies have the ability to build a factory overseas to produce a manufactured good. The marginal cost of building a factory for each construction company is shown in the table​ below: If the market price of an overseas factory is ​$1,430,000​, what is the surplus for these five​ companies? Producer surplus is __________. ​(Enter your response as a whole​ number.)

​$820000

These falling costs result in a consumer surplus in the market for tires represented by areas These falling costs result in a loss of producer surplus equal to areas There is a gain of producer surplus equal to areas The actual net change in producer surplus

​A, B,​ C, D,​ E, F,​ G, H, I. D, F, G. K, L, M. depends on the actual size of the loss and gain.

The diagram to the right illustrates a hypothetical demand curve representing the relationship between price​ (in dollars per​ unit) and quantity ​(in ​1,000s of units per unit of time​). Total revenue is ​__________. ​(Enter your response as an​integer.)

$2000000

Consider the demand curve illustrated in the figure to the right. Suppose at a price of ​$7 per​ unit, a​ firm's corresponding revenue is represented by the green shaded area. What is the​ firm's revenue? The​ firm's revenue equals __________ ​(Enter your response as an​ integer.)

$2100

The diagram to the right illustrates a hypothetical demand curve representing the relationship between price​ (in dollars per​ unit) and quantity​ (in 1,000s of units per unit of​time). The area of the triangle shown on the diagram is ​__________. ​(Enter your response as an​ integer.)

$722000

You have exams in economics and chemistry coming up and 5 hours available for studying. The following table shows the​ trade-offs you face in allocating the time you will spend in studying each subject. Use the multipoint curve drawing tool to plot a production possibilities frontiershowing the​ trade-off between your economics grade and chemistry grade. Plot all choices A through F. Properly label this curve. Carefully follow the instructions​ above, and only draw the required objects. If you are at point​ C, what is the opportunity cost of increasing your chemistry score by studying one additional hour for the chemistry​ exam? fewer points on your economics exam.

4 fewer points on your economics exam.

The production possibilities frontiers in the figure to the right show how many bananas and coconuts you​ (Y) and your neighbor​ (N) can consume without trade. Suppose you are initially consuming 4 bananas and 8 coconuts and your neighbor is initially consuming 6 bananas and 8 coconuts. ​Now, suppose you and your neighbor specialize by each only producing the good for which you have a comparative advantage. You give your neighbor half of your production for half of what he produces. ​(Enter all responses as​ integers.) If you trade with your​ neighbor, then you will have ___ additional​ coconut(s) after the trade and __ additional​banana(s). At the same​ time, your neighbor will be able to consume 99 additional​ banana(s) and will be ________ as a result of trade.

4, 11, better off

In your economics​ class, you scored a 67 on the first​ quiz, a 86 on the second​ quiz, and an 72 on the third quiz. Your average quiz grade is ________. ​(Enter your response rounded to one decimal​ place.) On the fourth​ quiz, you scored an 80. Did the fourth quiz raise your​ average?

75, Yes

Which of the following statements is​ correct?

An innovation is the practical application of an invention.

From the PPFs shown above it can be determined that the opportunity cost of oil is higher in country ____ Given the comparative opportunity costs as revealed by the PPFs shown​ above, the comparative advantage for country A lies in _____. After these two countries specialize and trade with each​ other, country B will be importing ____.

B, oil, oil

Using the same amount of​ resources, the United States and Canada can both produce lumberjack shirts and lumberjack​ boots, as shown in the production possibilities frontiers in the figure to the right. _____________ has a comparative advantage in producing lumberjack boots. ___________ has a comparative advantage in producing lumberjack shirts. Does either country have an absolute advantage in producing both​ goods? Suppose initially that the United States is consuming 2 boots and 12 shirts and Canada is consuming 8 boots and 4 ​shirts, as indicated in the figure. ​ Then, suppose the United States and Canada specialize by each only producing the good for which they have a comparative advantage and then trade. In​ particular, suppose the United States trades Canada half of its production for half of what Canada produces. The United States will have _____ additional​ shirt(s) after the trade ​(enter a numeric response using an​ integer) and __ additional​ boot(s). At the same​ time, Canada will be able to consume ____ additional​ shirt(s) as a result of the trade and __ additional​ boot(s).

Canada, The United States, Neither country has an absolute advantage in both goods because Canada can produce more boots but the United States can produce more shirts, 0, 10, 8, 4

____________ decide(s) what goods and services will be produced.

Consumers, firms, and government

Two​ neighbors, countries A and​ B, produce books and​ blankets, among other goods and services.​ However, Country A produces more of both goods than country B. A student of​ economics, Maya, also notes that in both​ countries, these industries individually employ 30 percent of the population. She concludes that country A has an absolute advantage in the production of books and blankets over country B. Which of the​ following, if​ true, would weaken​ Maya's conclusion?

Country A employs more capital per unit of labor in all industries than country B.

Which of the following statements is​ correct?

Economists use the terms​ firm, company, and business interchangeably.

Suppose that France and Germany both produce wine and schnitzel. The table below shows combinations of the goods that each country can produce in a day. Who has the comparative advantage in producing wine and who has the comparative advantage in producing​schnitzel? Suppose that France is currently producing 1 bottle of wine and 9 pounds of schnitzel and Germany is currently producing 3 bottles of wine and 10 pounds of schnitzel. ​ Then, assume instead that France and Germany specialize by producing only the good for which they have a comparative advantage and then trade 3 bottles of wine for 13 pounds of schnitzel. After specialization and​ trade, France gains by consuming the same amount of wine and ___ additional​ pound(s) of schnitzel ​(enter a numeric response using an​ integer) and Germany gains by consuming the same amount of wine and ___ additional​ pound(s) of schnitzel.

France has a comparative advantage producing wine and Germany has a comparative advantage producing schnitzel., 4, 2

XYZ​ firm, the leading producer of leather goods in its country is planning to expand its business. Industry experts identify Asia as a potential target market. They report that substitute​ products, particularly in​ India, are highly priced.​Darren, the operational​ head, feels that exporting their product to India is a good idea. According to​ him, their price advantage alone will ensure good sales.​ However, his​ colleague, Mark, who is also the head of product​development, feels that Darren is too​ optimistic, and that this venture may not turn out to be as profitable as Darren expects it to be. Which of the​ following, if​ true, would support​ Mark's point of​ view?

India has high import tariffs.

Suppose we can divide all the goods produced by an economy into two​ types: consumption goods and capital goods. Capital​ goods, such as​ machinery, equipment, and​ computers, are goods used to produce other goods. Suppose that Lichtenstein and Luxembourg currently have identical production possibilities frontiers but that Lichtenstein devotes only 5 percent of its resources to producing capital goods over each of the next 10​ years, whereas Luxembourg devotes 30 percent. Which country is likely to experience more rapid economic growth in the​ future? _____________ ​1.) Use the​ three-point curved drawing tool to illustrate​ Lichtenstein's PPF 10 years in the future. Label the PPF​ 'A future'. ​2.) Use the​ three-point curved drawing tool to illustrate​ Luxembourg's PPF 10 years in the future. Label the PPF​ 'B future'.

Luxembourg.

Which of the following covers the study of topics such as inflation or​ unemployment?

Macroeconomics

Which of the following statements about microeconomics and macroeconomics is​ correct?

Macroeconomics is the study of the economy as a whole.

Which of the following is not a step economists follow when developing an economic​ model?

Make value judgments to be proven or disproven.

Suppose the United Kingdom and Norway both produce oil and fish​ oil, which are sold for the same prices in both countries. The following table shows combinations of both goods that each country can produce in a​ day, measured in thousands of​ barrels, using the same amounts of capital and​ labor: Who has the comparative advantage in producing​ oil? Can these two countries gain from trading oil and fish​ oil?

Neither country has a comparative advantage producing oil because their opportunity costs of producing oil are equal., These countries cannot gain from trade because neither has a comparative advantage producing either good

Suppose that your local police department recovers 100 tickets to a big NASCAR race in a drug raid. It decides to distribute these to residents and announces that tickets will be given away at 10 A.M. Monday morning at City Hall. Productive efficiency occurs when a good or service​ (such as the distribution of​ tickets) is produced at the lowest possible cost. Is this an efficient way to distribute the​ tickets? This is:

No; not an equitable way to distribute the tickets because some students who really want them may be unable to go and get them.

_____________ occurs when a good or service is produced at the lowest possible cost. __________ occurs when production is in accordance with consumer preferences.

Productive efficiency; allocative efficiency

Assume the demand curve for Pepsi passes through the following two points. Price per bottle of Pepsi/Number of bottles of Pepsi sold ​$2.75 50,000 ​$1.50 275,000 ​1.) Use the line drawing tool to draw a linear demand curve that includes these two points. Label this line​'Demand.' ​2.) Use the rectangle drawing tool to show on the graph the area that represents total revenue at a price of ​$2.75. Label the rectangle​ 'Revenue.' Calculate the total revenue at this price of ​$2.75.

Revenue=​$137,500

The accompanying table gives the relationship between the price of custard pies and the number of pies Jacob buys per week. Plot the data. Calculate the slope of the line.

Slope= −1

What is absolute​ advantage?

The ability to produce more of a good or service than competitors using the same amount of resources.

What is the​ circular-flow diagram and what does it​ illustrate?

The​ circular-flow diagram shows how households and firms are linked through product and factor markets.

Microsoft charges a price of​ $599 for a copy of Windows 7. Is this pricing decision​ rational?

When we assume the managers at Microsoft have used all available information and have weighed all known benefits and​ costs, we are assuming rationality.

Productive efficiency means that

a good or service is produced at the lowest possible cost.

Indicate whether each of the following is primarily a microeconomic issue or a macroeconomic issue. a. The effect of higher cigarette taxes on the quantity of cigarettes sold. This is a ____________ issue. b. The effect of higher income taxes on the total amount of consumer spending. This is a __________ issue. c. The reasons for the economies of East Asian countries growing faster than the economies of​ sub-Saharan African countries. This is a ___________ issue. d. The reasons for low rates of profit in the airline industry. This is a _________ issue.

a. microeconomic b. macroeconomic c. macroeconomic d. microeconomic

The primary difference between absolute and comparative advantage is

absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost.

Suppose that your local police department recovers 100 tickets to a big NASCAR race in a drug raid. It decides to distribute these to residents and announces that tickets will be given away at 10 A.M. Monday morning at City Hall. What is the actual cost and also the opportunity cost of distributing the tickets this​ way?

all of the above; A. The cost of people blocking traffic in and around the​ department's office building. B. The activities that cannot be done​ (such as earning money at​ work) when one is standing in line. C. The cost of travel to the​ department's office.

Suppose that your local police department recovers 100 tickets to a big NASCAR race in a drug raid. It decides to distribute these to residents and announces that tickets will be given away at 10 A.M. Monday morning at City Hall. The groups of people that are most likely to get the tickets will be those for whom the expected marginal _____________ of going to the​ department's office on Monday morning are greater than the expected marginal _____________. .

benefits, costs

Any model is based on making assumptions because

both a and b. (A) models have to be simplified to be useful (B) we cannot analyze an economic issue unless we reduce its complexity

A market is a group of _____ of a good or service and the institution or arrangement by which they come together to trade.

buyers and sellers.

Your neighbor's consumption point after trade is illustrated by point ____. ​(Enter your response as a​ letter.)

d

Suppose an increasing number of school districts across the country find themselves with too few teachers at a time of rising enrollments and calls for improved outcomes in terms of student performance. A​ market-based remedy for this emerging mismatch between the availability of teachers and school​ districts' needs would likely emphasize

higher compensation to elicit both a larger quantity of teacher services and a greater reliance by districts on​non-traditional instruction methods.

Microeconomics is most likely to include the study of

household choices

The level of total investment by firms in new machinery and equipment helps to determine how rapidly the economy grows. This is a __________ issue. ​ However, to understand how much new machinery and equipment firms decide to​ purchase, one must analyze the incentives individual firms​ face, which is a __________ issue.

macroeconomic, microeconomic

The primary difference between product markets and factor markets is that

product markets are markets for​ goods, while factor markets are markets for factors of production—​labor, capital, natural​ resources, and entrepreneurial ability.