Microeconomics Study Set
Zane's Vanes is a service that restores old weather vanes. Zane has just spent $125 purchasing a 1920s-era weather vane which he expects to restore and sell for $500 once the work is completed. After having spent $125, Zane realizes that he will need to spend an additional $200 on materials to complete the restoration. Alternatively, he can sell the weather vane without restoring it for $200. What is his marginal cost to complete the restoration?
$200
Figure 2-8 shows the production possibilities frontiers for Costa Rica and Guatemala. Each country produces two goods, pineapples and coconuts. What is the opportunity cost of producing 1 ton of coconuts in Guatemala?
2 tons of pineapples
If the price of pineapple juice was $4.50 a gallon and it is now $5.75 a gallon, what is the percentage change in price?
27.7 percent
autarky
A situation in which a country does not trade with other countries is called
makes domestic consumers worse off
A tariff
the ability to produce more of a good or service than competitors when using the same amount of resources.
Absolute advantage is
declined; decreased
Between 1950 and 2015, the number of acres devoted to wheat production in the United States ______________ and the price of wheat _________________.
a large supply of unskilled workers and relatively little capital.
China has developed a comparative advantage in the production of clothing. The source of this comparative advantage is
that anyone who does not pay for the good cannot consume it.
Classifying a good as excludable means
a comparative advantage; export
Countries that engage in trade will tend to specialize in the production of goods and services in which they have _____________ and will ___________________ these goods and services.
150
Denmark and Belize can produce both clocks and hats. Each country has a total of 200 available labor hours for the production of clocks and hats. Table 9-6 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade. If the actual terms of trade are 1 hat for 1.8 clocks and 150 hats are traded, how many hats will Denmark consume?
Which of the following is a positive economic statement?
Due to a decrease in state funding, university tuition has risen.
the effect of a negative externality in the production of a good.
Figure 5-1 shows a market with an externality. The current market equilibrium output of Q1 is not the economically efficient output. The economically efficient output is Q2. Suppose the current market equilibrium output of Q1 is not the economically efficient output because of an externality. The economically efficient output is Q2. In that case, the diagram shows
the effect of a positive externality in the consumption of a good.
Figure 5-5 shows a market with an externality. The current market equilibrium of Q1 is not the economically efficient output. The economically efficient output is Q2. Suppose the current market equilibrium output of Q1 is not the economically efficient output because of an externality. The economically efficient output is Q2. In that case, diagram shows
Which of the following is a normative economic statement?
Global warming should be at the top of every economic agenda.
You explain to your friend Haslina, who runs a catering service called "Meals in a Zip," about an economic theory which asserts that consumers will purchase less of a product at higher prices than they will at lower prices. She contends that the theory is incorrect because over the past two years she has raised the price of her catered meals and yet has seen a brisk increase in sales. How would you respond to Haslina?
I will explain to her that there are some omitted variables that have contributed to an increase in her sales such as changes in income.
relatively elastic
If a firm raised its price and discovered that its total revenue fell, then the demand for its product is
It falls.
If the price elasticity of demand for canned soup is estimated at -1.62. What happens to sales revenue if the price of canned soup rises?
lowers domestic prices.
Imposing trade barriers does all of the following except
Linda has a comparative advantage in dog bathing.
Linda and Sandy own The Preppy Puppy, a dog grooming business. Tabe 9-1 lists the number of dogs Linda and Sandy can each bathe and groom in one week. Select the statement that accurately interprets the data in the table.
Supporters of protectionism in high-income countries believe that wages will fall as a result of competition with firms from developing countries.
Many economists criticize protectionism because it causes losses to consumers and eliminates jobs in domestic industries that use protected products. Why, then, do some people support protectionism?
_______________ is (are) inefficient in that not all resources are being used.
Point C
Which of the following is a problem inherent in centrally planned economies?
Production managers are more concerned with satisfying government's orders than with satisfying consumer wants.
In economics, the difference between a firm's revenues and its costs is referred to as
Profit
Sarita has an absolute advantage in baking pies and cakes
Sarita and Gabriel own S&G Bakery. Table 9-2 lists the number of pies and cakes Sarita and Gabriel can each bake in one day.
Cassie's Quilts alters, reconstructs, and restores heirloom quilts. Cassie has just spent $800 purchasing, cleaning, and reconstructing an antique quilt which she expects to sell for $1,500 once she is finished. After having spent $800, Cassie discovers that she would need some special period fabric that would cost her $200 in material and time in order to complete the task. Alternatively, she can sell the quilt "as is" now for $900. What should she do?
She should purchase the period fabric, complete the task and then sell the quilt.
0.5; The product is inelastic.
Suppose a 4 percent increase in price results in a 2 percent increase in the quantity supplied of a good. Calculate the price elasticity of supply and characterize the product.
9 million pounds of rice
Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. Without the tariff in place, the United States produces
increase; decrease
The "Buy American" provision in the 2009 stimulus package required that stimulus money be spent only on U.S.-made goods, effectively acting as a quota of zero imports when stimulus money was being spent. In the market of steel, the "Buy American" provision would ______________ the price of steel in the United States and __________________ the quantity of steel demanded in the United States.
external economies
The United States has developed a comparative advantage in film production due to the film industry being long-established in southern California, and lower costs result from the size of the industry in the area. This source of comparative advantage is referred to as
a lack of clearly defined and enforceable property rights.
The basic cause of deadweight losses from the existence of common resources and externalities is
In September, buyers of silver expect that the price of silver will rise in October. What happens in the silver market in September, holding all else constant?
The demand curve shifts to the right.
lies below the midpoint of the curve
The inelastic segment of the demand curve
more price elastic is a consumer's demand.
The larger the share of a good in a consumer's budget, holding everything else constant, the
the demand for pollution reduction curve.
The marginal benefit of reducing pollution curve is the same curve as
quantity supplied increases in response to price increases
The price elasticity of supply is usually a positive number because
One would speak of a movement along a supply curve for a good, rather than a change in supply, if
The price of the good changes.
the terms of trade
The ratio at which a country can trade its exports for imports from other countries is called
Which of the following describes a characteristic of a perfectly competitive market?
There are many buyers and sellers.
the percentage change in quantity supplied by the percentage change in price.
To calculate the price elasticity of supply, we divide
Which of the following is a normative economic statement?
Tobacco products should be banned in all public spaces?
free trade
Trade between countries that is without restrictions is called
above the supply curve and below the equilibrium price.
Under autarky, domestic producer surplus is represented by the area
more than the economically efficient output level.
Wen a negative externality exists, the private market produces
A German import and a Canadian export.
When BMW, an German company, purchases a welding machine that was made in Toronto, the purchase is
private goods
Which of the following displays rivalry and excludability in consumption?
a common resource
Which of the following displays these two characteristics: rivalry and nonexcludability?
access to the commons can be restricted through community norms and laws
Which of the following is a possible solution when a scarce resource is subject to the tragedy of the commons?
a strong foreign currency exchange rate
Which of the following is not a source of comparative advantage?
a limit on the quantity of tires that can be imported from a foreign country
Which of the following is the best example of a quota?
a luxury cruise to several European countries
Which of the following items is likely to have the highest income elasticity of demand?
Most of the leading exporting countries are large, high-income countries
Which of the following statements is true?
If you can produce more of something than others with the same resources, you have
an absolute advantage
If you can produce more of something than others, with the same resources, you have
an absolute advantage
Dr. Goldfinger decides to invest in companies which he believes can "improve the productivity and efficiency" of health care services. What would Dr. Goldfinger need to do to try to achieve allocative efficiency?
invest in companies that produce goods and services based on consumer preferences
When the price of a good rises, consumers buy a smaller quantity because of the ______________ effect and the ______________ effect.
substitution; income
Human capital refers to
the accumulated skills and training workers have.
Which of the following is counted as "capital" in economics?
the machines workers have to work with
Increasing marginal opportunity cost implies that
the more resources already devoted to any activity, the payoff from allocating yet more resources to that activity increases by progressively smaller amounts.
A demand curve shows the relationship between
the price of a product and the quantity of the product demanded.
