ECON 200 Exam 1
Wanda owns a lemonade stand. She produces lemonade using five inputs: water, sugar, lemons, paper cups, and labor. Her costs per glass are as follows: $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor. She can sell 300 glasses for $0.50 each.
$0.10
Which of the following illustrates the concept of a negative externality
A college student plays loud music on his new stereo system at 2:00 a.m.
Which of the following statements about trade is false?
With trade, one country wins and one country loses.
The sign on a church in your neighborhood reads "All are welcome at Sunday Service." Because the church has limited seating and is usually full, the Sunday Service is
a common resource.
Elasticity is
a measure of how much buyers and sellers respond to changes in market conditions.
Economic models
are simplifications of reality, and in this respect economic models are no different from other scientific models.
Knowledge that is patented is a
club good, whereas knowledge that is not patented is a public good.
Holding all other things constant, a higher price for ski lift tickets would
decrease the number of skis sold
Both private goods and club goods are
excludable
For a market for a good or service to exist, there must be a
group of buyers and sellers.
The principle that "people face tradeoffs" applies to
individuals, families, and societies
Economies of scale occur when a firm's
long-run average total costs are decreasing as output increases.
The field of economics is traditionally divided into two broad subfields,
microeconomics and macroeconomics.
Billie Jean has $120 to spend and wants to buy either a new amplifier for her guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $120, so she can only buy one. This illustrates the basic concept that
people face trade-offs.
The value and cost of goods are easiest to determine when the goods are
private goods
In Singapore, littering fines are strictly enforced. This is an example of a policy that
relies on incentives to reduce the pollution externality.
If, at the current price, there is a surplus of a good, then
sellers are producing more than buyers wish to buy
The Tragedy of the Commons for sheep grazing on common land can be eliminated by the government doing each of the following except
subsidizing sheep flocks
Wheat is the main input in the production of flour. If the price of wheat decreases, then we would expect the
supply of flour to increase.
Which of the following is a determinant of the market supply curve but not a determinant of an individual seller's supply?
the number of sellers
Max and Maddy charge people to park on their lawn while attending a nearby craft fair. At the current price of $10, seven people park on their lawn. If they raise the price to $15, they know that only five people will want to park on their lawn. Whether they have seven or five cars parked on their lawn does not affect their costs. From this information it follows that
they would do better charging $15 than $10.
Which of the following is not a way for the government to solve the problem of excessive use of common resources?
turning the common resource into a public good
Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market?
Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
A variable toll on a road in Washington reached a high during the evening rush hour of $5.75. This toll bought the drivers who paid it a 27 minute time savings. Which of the following is correct?
For some consumers, the toll was less than the opportunity cost of the time they would have spent in traffic. For some consumers, the toll was more than the opportunity cost of the time they would have spent in traffic.
A construction company has built 30 houses so far this year at a total cost to the company of $7.5 million. If the company builds a 31st house, its total cost will increase to $7.76 million. Which of the following statements is correct?
For the first 30 houses, the average cost per house was $250,000. b. The marginal cost of the 31st house, if it is built, will be $260,000. c. If the company can experience a marginal benefit of $275,000 by building the 31st house, then the company should build it
Mary and Cathy are roommates. Mary assigns a $30 value to smoking cigarettes. Cathy values smoke-free air at $15. Which of the following scenarios is a successful example of the Coase theorem?
Mary pays Cathy $16 so that Mary can smoke.
A tax on gasoline encourages people to drive smaller, more fuel-efficient cars. Which principle of economics does this illustrate?
People respond to incentives.
On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?
The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers. The farmer is able to produce 5,400 bushels of wheat when he hires 4 workers. The farmer is able to produce 5,200 bushels of wheat when he hires 4 workers.
