ECON 153 Final Exam

Refer to Figure 4-3. What is the value of the deadweight loss at the equilibrium price of $15?

A) $0

Refer to Figure 4-5. What is the value of the producer surplus after the imposition of the ceiling?

A) $40,000

Refer to Figure 4-5. What is the value of the deadweight loss after the imposition of the ceiling?

A) $50,000

Refer to Figure 4-3. What is the value of consumer surplus at the price of $18?

A) $60

Refer to Figure 5-10. One way to obtain the economically efficient amount of chicken pox vaccinations is for governments to subsidize these vaccinations. What is the size of the per-vaccination Pigovian subsidy that the government must provide to internalize the external benefits?

A) (Pe-Pg)

Refer to Figure 2-2. If Mendonca chooses to produce 160 pounds of vegetables, hoe much meat can it produce to maximize production?

A) 0 pounds of meat

Suppose that the price of a money clip increases from $0.75 to $0.90 and the quantity supplies rides from 8,000 units to 10,000 units. Use the midpoint formula to calculate the price elasticity of supply.

A) 1.22

Refer to Figure 9-3. Without the quota, the domestic price of peanuts equals the world price which is $2.00 per pound. What is the quantity of peanuts supplied by domestic producers in the absence of a quota?

A) 10 million pounds

Refer to Table 9-6. If the actual terms of trade are 1 hat for 1.8 clocks and 150 hats are trades, how many hats will Denmark consume?

A) 150

Refer to Figure 3-5. At a price of $5, the quantity sold

A) 2 units

Table 10-1 Keegan has $30 to spend on Pita Wraps and Bubble Tea. The price of a Pita Wrap is $6 and the price of a glass of Bubble Tea is $3. Table 10-1 shows his total utility from different quantities of the two items. -What is Keegan's optimal consumption bundle?

A) 3 pita wraps and 4 bubble teas

Refer to Table 2-7. Which of the following statements is TRUE?

A) Barney has a comparative advantage in making unicycles and Fred in making pogo sticks

Refer to Table 9-6. Which country has a comparative advantage in producing hats?

A) Belize

The cost of producing cigarettes in the U.S. has increased and at the same time, more and more Americans are choosing to not smoke cigarettes. Which of the following best explains the effect of these events in the cigarette market?

A) Both the supply and demand curves have shifted left. As a result, there has been a decrease in the equilibrium quantity and an uncertain effect on the equilibrium price

Jonah lives in a small town where there is only one Mexican restaurant. Which of the following is likely to be true about the price elasticity of demand for meals at the Mexican restaurant?

A) Demand is likely to be relatively inelastic

Refer to Table 9-3. What is the area that represents the deadweight loss as a result of the quota?

A) E+M

Refer to Figure 3-3. The figure above shows the supply and demand curves for two markets: the market for original Picasso paintings and the market for designer jeans. Which graph most likely represents which market?

A) Graph B represents the market for original Picasso paintings and Graph A represents the market for designer jeans

Refer to Figure 2-9. If the two countries have the same amount of resources and the same technological knowledge, which country has an absolute advantage int he production of cotton?

A) Indonesia

Refer to Figure 10-6. A change in the price of popcorn only is shown in

A) Panel A

Suppose the absolute value of the price elasticity of demand for meals at Fortune Buffet House is infinity. What happens to sales revenue if the restaurant increases its price by 5 percent?

A) Sales revenue falls by 100 percent

Many economists criticize protectionism because it causes losses to consumers and eliminated jobs in domestic industries that use protected products. Why, then, do some people support protectionism?

A) Supporters of protectionism in high-income countries believe that wages will fall as a result of competition with firms from developing countries

The quantity demanded of tickets to the Super Bowl is always greater than the quantity supplied. Which of the following is the best explanation for why the national football league does not raise the price of tickets to the level where the quantity demanded equals the quantity supplied?

A) The NFL is concerned that raising ticket prices would be considered unfair

Assume that the hourly price for the services of tarot card readers has risen and sales of these services have also risen. One can conclude that:

A) The demand for tarot card readers has increased

If the price of steel increases drastically, the quantity of steel demanded by the building industry will fall significantly over the long run because

A) buyers of steel are more sensitive to a price change if they have more time to adjust to the price change

Firms pay famous individuals to endorse their products because

A) demand is affected not just by the number of people who use a product but also by the type of person that uses the product

A service station owner in Staten Island, New York, was worried that tasing the price of gasoline would cause the quantity demanded to fall by so much that he would be in a worse situation than if he did not raise the price. If raising the price of gasoline would cause the owner to receive less total revenue from the sale of gasoline, the demand for gasoline is

A) elastic

All of the following are critical functions of the government in facilitating the operation of a market economy EXCEPT

A) ensuring an equal distribution of income to all citizens

Refer to the Article Summary. People who do not use public transportation can still benefit for it, as is shown by the higher home values. As a result, the marginal social benefit from public transportation is __________________ the marginal private benefit to those who use public transportation.

A) greater than

Grace Makutsi finally bought a pair of blue shoes that she had been coveting for a long time. In less than a week she discovered that the shoes were uncomfortable. Grace went back to wearing her old pair and stashed away the new pair. When asked by her boss, Mme. Ramotswe why does she not simply give away the new pair, she said: "But I paid so much for them." Grace's behavior:

A) ignores the fact that the purchase price is now a sunk cost and has no bearing on whether she should give them away or not

Which of the following is NOT a flow in the circular flow model?

A) the flow of profit and the flow of revenue

Avner is maximizing total utility by buying sports magazines and protein supplements. For him to buy more sports magazines

A) the price elasticity of sports magazines has to fall

Suppliers will be willing to supply a product only if

A) the price received is at least equal to the additional cost of producing the product

Refer to Figure 2-2. What is the opportunity cost of one pound of meat

B) 1 1/3 pounds of vegetables

Refer to Table 4-3. The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear. If the market price of cowboy hats is $35, the Waco Kid will produce

B) 2 hats

Refer to Figure 18-1. The sales tax revenue collected by the government is represented by the area

B) B+C+F+G

Refer to Figure 2-9. Which country has a comparative advantage in the production of cotton?

B) Indonesia

Refer to Table 4-2. The table above lists the highest prices five consumers are willing to pay for a theater ticket. If the price of one of the tickets is $25

B) No one will buy a ticket

Suppose a price floor on sparkling wine is proposed by the Health Minister of the country of Vinyardia. What will be the likely effect on the market for sparkling wine in Vinyardia?

B) Quantity demanded will decrease, quantity supplied will increase, and a surplus will result.

Suppose the demand curve for a product is vertical and the supply curve is upward sloping. If a unit tax is imposed in the market for this product

B) buyers bear the entire burden of the tax

Which of the following could explain why the demand for table salt is inelastic?

B) households devote a very small portion of their income to salt purchases

"For a given supply cure, the excess burden of a tax will be greater when the demand for a product is less elastic than when the demand is more elastic." This statement is

B) incorrect. When demand is less elastic, the burden of the tax is smaller than when the demand is more elastic.

Which of the following activities create a negative externality?

B) keeping a junked car parked on your front lawn

Suppose the U.S. government encouraged consumers to trade in their old automobiles for more efficient, new models by paying up to $5,000 for the old automobiles. These consumers who did trade in their old automobiles to take advantage of the government offer would be exemplifying the economic idea that

B) people respond to economic incentives

Which of the following is an example of a common resource?

B) sea otters in the coastal waters of the Pacific Ocean

Governments can increase the consumption of a product that creates positive externalities by

B) subsidizing the production of the product so that the supply is increased and the market price is reduced

Refer to Figure 4-4. The figure above represents the market for pecans. Assume that this is a competitive market. At a price of $3

B) the marginal cost of pecans is greater than the marginal benefit; therefore, output is inefficiently low.

Suppose that in Canada the government places a $1,500 tax on the buyers of new snowmobiles. After the purchase of a new snowmobile, a buyer must pay the government $1,500. How would the imposition of the tax on buyers be illustrated in a graph?

B) the tax will shift the demand curve to the left by $1,500

If a consumer receives 20 units of utility from consuming two candy bars, and 25 units of utility from consuming three candy bars, the marginal utility of the third candy bar is

C) 5 utility units

Refer to Figure 9-3. What is the area that represents the consumer surplus after the imposition of the quota?

C) A+G+H

Refer to Table 9-3. Select the statement that accurately interprets the data in the table.

C) Bryce has a greater opportunity cost than Tina for making candles

Let D= demand, S = supply, P = equilibrium price, Q= equilibrium quantity. What happens in the market for walnuts if the Centers for Disease Control and Prevention announces that consuming a half cup of walnuts each week helps to lower bad levels of cholesterol?

C) D increases, S no change, P and Q increase

Refer to figure 3-2. A decrease in the expected future price of the product would be represented by a movement from

C) S1 to S2

In September 2006, the Food and Drug Administration recommmended that Americans avoid eating bagged raw spinach in the wake of an outbreak of E. Coli bacteria. Following this remommendation, a Chicago distributor claimed that "the sale of arugula has gone through the roof". Based on this information we can infer that:

C) The cross price elasticity between arugula and spinach is positive

For a given supply curve, how does the elasticity of demand affect the burden of the tax imposed on a product?

C) The excess burden of the tax will be greater when the demand is more elastic than when it is less elastic

Which of the following correctly describes the result of a price increase for an inferior good?

C) The substitution effect causes the consumer to buy less of the good and the income effect causes the consumer to buy more of the good.

Which of the following is a problem inherent in centrally planned economies?

C) There is too little production of low-cost. high-quality goods and services

Refer to Table 10-4. For steak and cheese and grilled chicken sandwiches, the table contains the values of the marginal utility (MU) and marginal utility per dollar (MU/P) for Mabel Jarvis. Mabel has $14 dollars to spend on steak and cheese and grilled chicken sandwiches. Which of the following statements is FALSE?

C) We do not have enough information to determine how many sandwiches Mabel will buy to maximize her utility.

Suppose the value of the price elasticity of demand is -3. What does this mean?

C) a 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent

Which of the following would shift the supply curve for MP3 players to the right?

C) a decrease in the price of an input used to produce MP3 players

Which of the following items is likely to have the highest income elasticity if demand?

C) a luxury cruise to several European countries

Which of the following would cause an increase in the equilibrium price and an increase in the equilibrium quantity of watermelons?

C) an increase in supply and an increase in demand greater than the increase in supply.

Economists estimated that the price elasticity of beer is -0.30 and the income elasticity of beer is 0.09. This means that

C) an increase in the price of beer will lead to an increase in revenue for beer sellers and beer is a normal good

The law of demand implies, holding everything else constant, that (bagels)

C) as the price of bagels increases, the quantity of bagels demanded will decrease

A movement along the demand curve for toothpaste would be caused by

C) change in the price of toothpaste

If policymakers use a pollution tax to control pollution, the tax per unit of pollution should be set

C) equal to the marginal external cost at the economically efficient level of pollution

Suppose that American firms claim that protectionism in Canada is on the ride as the Canadian government attempts to protect its infant industries with a "Buy Canadian" provision. This policy, similar to the original "Buy American" provision in the 2009 U.S. stimulus bill, is likely to cause

C) exporting countries to retaliate by placing trade barriers on Canadian imports

The United States has developed a comparative advantage in film production due to the film industry being long-established in Southern California, and lower cost results from the size of the industry in the area. This source of comparative advantage is referred to as

C) external economies

When the demand for a product is more elastic than the supply

C) firms pay the majority of the tax on the product

When there is an externality in a market

C) government intervention may increase economic efficiency

At a price of $8 per dozen, Chuy sells 40 dozen homemade tamales per week. When he raised her price to $12 per dozen, he still sold 40 dozen per week. Based on this information, the demand for his tamales is

C) perfectly inelastic

Which of the following is an example of a positive externality?

C) planting trees along a sidewalk which add beauty and creates shade

Economists argue that the level of pollution should be

C) reduced to the point where the marginal benefit of pollution reduction is equal to the marginal cost of pollution reduction to society

The Internet has created a new category in the book selling market, namely, the "barely used" book. How does the availability of barely used books affect the market for new books?

C) the demand curve for new books shifts to the left

If the quantity supplied of walkie-talkies increase by 5 percent when prices increase by 12 percent, then

C) the supply of walkie-talkies is inelastic

Workers in industries protected by tariffs and quotas are likely to support these trade restrictions because

C) they believe the restrictions will protect their jobs

Refer to Figure 5-3. In the absences of any government intervention, the private market

C) under produces by Qo-Qm units

Common resources differ from public goods in that

C) unlike public goods, common resources rarer rivalrous in consumption

Lucinda buys a new GPS system for $250. She receives consumer surplus of $75 from the purchase. How much does Lucinda value her GPS system?

D) $325

Refer to Table 2-7. What is Barney's opportunity cost of making a unicycle?

D) 2 pogo sticks

Refer to Figure 9-2. Without the tariff in place, the United States consumes

D) 42 million pounds of rice

Refer to Table 9-3. Select the statement that accurately interprets the data in table.

D) Bryce has a comparative advantage in making soap

Assume that Bulgaria has a comparative advantage in producing sandals and Finland imports sandals from Bulgaria. We can conclude that

D) Bulgaria has a lower opportunity cost of producing sandals relative to Finland

Refer to figure 18-1. The excess burden of the tax is represented by the area

D) E+H

Which of the following describes how a positive externality affects a competitive market?

D) The externality causes a difference between the private benefit from consumption and the social benefit

Which of the following must be present to reach a private solution to an externality problem?

D) The transaction costs to negotiate a solution must eb relatively low

In cities with rent controls, the actual rents paid can be higher than the legal maximum. One explanation for this is

D) because there is a shortage of apartments, tenants often are willing to pay rents higher than the law allows

Assume that you had a ticket for a basketball playoff game that you bought for $50, the maximum price you were willing to pay. If a friend of yours offers to buy the ticket for $100 but you decide not to sell it, how can your decision be explained?

D) by the endowment effect

If at a price of $24, Octavia sells 36 home-grown orchids and at $30 she sells 24 home-grown orchids, the demand for her orchids is

D) elastic

Refer to Figure 9-2. With the tariff in place, the United States

D) imports 16 million pounds of rice

In a production possibilities frontier model, a point _________ the frontier is productively inefficient.

D) inside

Opera Estate Girls' School is considering increasing its tuition to raise revenue. If the school believes that raising tuition will increase revenue

D) it is assuming that the demand for attuning the school is inelastic

Which of the following is the best example of a quote?

D) limit imposed on the number of sport utility vehicles that the United States can import from Japan

Specializing in the production of a good or service in which one has a comparative advantage enables a country to do all of the following EXCEPT

D) produce a combination of goods that lies outside its own production possibilities frontier

Refer to Figure 5-1. If, because of an externality, the economically efficient output is Q2 and not the current equilibrium output of Q1, what does S2 represent?

D) the market supply curve reflecting social cost

If Canada has a comparative advantage relative to Mexico in the production of timber, then

D) the opportunity cost of production for timber is lower in Canada than in Mexico

Refer to Figure 10-9. The change in the budget constraint from BC1 to BC2 implies

D) the price of DVDs has increased and the price of CDs has decreased

Refer to Figure 9-2. The tariff causes domestic consumption of rice

D) to fall by 11 million pounds