Econ 2020 final practice questions
The price elasticity of supply along a typical supply curve is
higher at low levels of quantity supplied and lower at high levels of quantity supplied
When the price of a good or service changes,
there is a movement along a given demand curve
A production possibilities frontier can shift outward if
there is a technological improvement
Taxes cause deadweight losses because they
All of the above
An increase in quantity demanded
results in a movement downward and to the right along a demand curve
To fully understand how taxes affect economic well-being, we must compare the
reduced welfare of buyers and sellers to the revenue raised by the government
Total revenue
remains unchanged as price increases when demand is unit elastic
The market demand curve
represents the sum of the quantities demanded by all the buyers at each price of the good
The market supply curve
represents the sum of the quantities supplied by all the sellers at each price of the good
A supply curve can be used to measure producer surplus because it reflects
sellers' costs
Rent control
serves as an example of a price ceiling
Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10 percent of their land, then
wheat farmers would experience an increase in their total revenue
Price controls are usually enacted
when policymakers believe that the market price of a good or service is unfair to buyers or sellers
A decrease in supply will cause the largest increase in price when
both supply and demand are inelastic
The forces that make market economies work are
supply and demand
A tax on an imported good is called a
tariff
Suppose the United States has a comparative advantage over Mexico in producing pork. The principle of comparative advantage asserts that
the United States should produce more pork than what it requires and export some of it to Mexico
Producer surplus is
the amount a seller is paid minus the cost of production
The term tax incidence refers to
the distribution of the tax burden between buyers and sellers
Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is
the enjoyment she would have received had she gone to the park
If a price ceiling is not binding, then
the equilibrium price is below the price ceiling
A binding price ceiling (i)causes a surplus.(ii)causes a shortage.(iii)is set at a price above the equilibrium price.(iv)is set at a price below the equilibrium price.
(ii) and (iv) only
When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about
0.67
A price floor is
All of the above
Suppose Susan can wash three windows per hour or she can iron six shirts per hour. Paul can wash two windows per hour or he can iron five shirts per hour.
All of the above
The incidence of a tax falls more heavily on
All of the above
Total surplus
All of the above
Which of the following statements about the price elasticity of demand is correct?
All of the above
Which of the following tools and concepts is useful in the analysis of international trade
All of the above
Which of the following steps does an economist take when studying the economy?
All of the above (devise theories, collect data, analyze data)
Producer surplus equals
Amount received by sellers - Costs of sellers
In the circular-flow diagram, firms produce
Both (a) and (b) are correct
A rightward shift of a supply curve is called a(n)
increase in supply
Assume Leo buys coffee beans in a competitive market. It follows that
Leo cannot influence the price of coffee beans even if he buys a large quantity of them
Which of the Ten Principles of Economics does welfare economics explain more fully?
Markets are usually a good way to organize economic activity
President Truman once said he wanted to find a one-armed economist because when he asked his economists for advice, they always answered, "On the one hand, ... On the other hand, ..." Truman's observation that economists' advice is not always straightforward
More than one of the above is correct
In a competitive market, the price of a product
None of the above
An increase in the size of a tax is most likely to increase tax revenue in a market with
inelastic demand and inelastic supply
Which of the following is not one of the four principles of individual decision making?
Trade can make everyone better off
When can two countries gain from trading two goods?
Two countries could gain from trading two goods under all of the above conditions
Absolute advantage is found by comparing different producers'
input requirements per unit of output
An outcome that can result from either a price ceiling or a price floor is
a nonbinding price control
A demand curve reflects each of the following except the
ability of buyers to obtain the quantity they desire
When studying how some event or policy affects a market, elasticity provides information on the
magnitude of the effect on the market
A binding minimum wage
alters both the quantity demanded and quantity supplied of labor
Which of the following would shift the demand curve for gasoline to the right?
an increase in consumer income, assuming gasoline is a normal good
Economic models
are simplifications of reality, and in this respect economic models are no different from other scientific models
The price elasticities of supply and demand affect
both the size of the deadweight loss from a tax and the tax incidence
Consumer surplus
measures the benefit buyers receive from participating in a market
Economic models
can be useful, even if they are not particularly realistic
The most obvious benefit of specialization and trade is that they allow us to
consume more goods than we otherwise would be able to consume
A movement upward and to the left along a demand curve is called a(n)
decrease in quantity demanded
An increase in the price of a good will
decrease quantity demanded
If the government removes a tax on a good, then the price paid by buyers will
decrease, and the price received by sellers will increase
When the supply of a good decreases and the demand for the good remains unchanged, consumer surplus
decreases
Which of the following events must cause equilibrium quantity to fall?
demand and supply both decrease
A tax levied on the buyers of a good shifts the
demand curve downward (or to the left)
The production possibilities frontier provides an illustration of the principle that
people face trade-offs
The adage, "There is no such thing as a free lunch," is used to illustrate the principle that
people face tradeoffs
The term price takers refers to buyers and sellers in
perfectly competitive markets
Normative statements are
prescriptive, whereas positive statements are descriptive
The minimum wage is an example of a
price floor
Which of the following will cause no change in producer surplus?
the imposition of a nonbinding price ceiling in the market
The bowed shape of the production possibilities frontier can be explained by the fact that
the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing
A production possibilities frontier is a straight line when
the rate of tradeoff between the two goods being produced is constant
When a tax is imposed on the buyers of a good, the demand curve shifts
downward by the amount of the tax
The unique point at which the supply and demand curves intersect is called
equilibrium
When a tax is imposed on a good, the
equilibrium quantity of the good always decreases
The law of demand states that, other things equal, when the price of a good
falls, the quantity demanded of the good rises