Econ Exam 1

Refer to the figure above. An increase in supply is represented by shifting from:

a curve A to curve B

if the consumers can easily switch to a close substitute when the price of a good increases, demand for that good is likely to be:

a elastic.

Refer to the figure above. At point D, demand is:

a price inelastic.

. In the market for coffee, for many consumers:

a tea is a substitute.

When the price of a good is below its equilibrium value:

aconsumers will bid the price up

Refer to the table above. Coreys opputinoty cost of the production of an extra pizza is the deleivery of

1/2 pizzas

If Leslie can produce two pairs of pants in an hour while Eva can make one pair an hour, then it must be the case that:

Leslie has an absolute advantage

Which of the following would cause an increase in quantity supplied of wheat?

a The price farmers receive for their wheat rises.

Suppose that both the equilibrium price and quantity of ketchup fall. The most consistent explanation for these observations is:

a a decrease in demand for ketchup with no change in supply.

In Cuba, a bureaucratic committee makes the production decisions for the country's firms and factories. Therefore, Cuba is an example of a:

a centralized economy.

Which of the following directly follows from the No Cash on the Table Principle?

b . For a transaction to occur, the buyer's reservation price must be greater than the seller's reservation price

Refer to the figure above. At point A, demand is:

b . price elastic

Refer to the figure above. If this economy were currently operating at Point D, in order to make more movies:

b B. the first cattle herders to switch to movie making would be the cattle herders with the highest opportunity cost of cattle herding

Refer to the figure above. If the price changes from $10 to $4, what happens to the elasticity?

b It will decline.

. In the market for office workers:

b comp are compliments

Elvis loves to eat peanut butter with bananas. Martha thinks the combination of peanut butter and bananas is repulsive. Therefore, economists would classify peanut butter and bananas as:

b complements only if their cross-price elasticity is negative.

If the consumers cannot switch to a close substitute when the price of a good increases, the demand for that good is likely to be:

b inelastic

Refer to the figure above. Increasing the quantity of medical care provided from 100 units to 300 units costs ______ increasing the quantity of medical care provided from 400 units to 600 units

b less than

Small budget items such as soap have ______ price elasticity of demand compared to big-ticket items such as flat-screen TVs.

b lower

Refer to the figure above. Relative to point x, at point y:

b more sandals and fewer clogs are produced.

The cross-price elasticity for bread and potatoes is estimated to be 0.5. This implies bread and potatoes are:

b substitutes.

Suppose the price of gasoline increases and that sport utility vehicles get poor gas mileage compared to other available cars. One would expect:

b the demand for sport utility vehicles to decrease.

You read online that, at current rates of production, the yearly world supply of food is sufficient to feed the projected 2010 population of the earth, and that after 2010 there will be massive starvation. One assumption behind this prediction is that:

b the long run elasticity of supply of food is inelastic

3. Suppose that a further increase in specialization allows a country to increase total output by 10%, but afterward it was discovered that work absenteeism increased by 30%. This is likely an example of:

b too much specialization.

Supply curves are generally _______ sloping because _______________.

b upward; of the principle of increasing opportunity costs.

Minimum wage laws are an example of

c . a regulated price

Point A on a linear production possibilities curve represents a combination of 12 coffees and 3 cappuccinos, and point B represents 3 coffees and 6 cappuccinos. Suppose coffees are on the vertical axis and cappuccinos are on the horizontal axis

c 1/3 of a cappuccino

Which of the following factors would not contribute to increasing an existing comparative advantage?

c Import restrictions.

NAFTA helped ______ to exploit a comparative advantage in the production of goods made by unskilled labor.

c Mexico

Suppose you bought a concert ticket from Ticketmaster for $50, but when you got to the concert scalpers (individuals who resell tickets at the event) were selling tickets in the same seating area as yours for $25. What is probably true?

c There is an excess supply of tickets for this concert at the Ticketmaster price.

production possibilities curve is

c boundary that divides all production combinations into attainable ones and unattainable ones.

One reason for the ________ slope of the demand curve is that as prices fall ______

c downward; more people find that the price is less than their reservation price.

Refer to the figure above. The diagram shows Sven's Production Possibilities for one day. For Sven, the opportunity cost of spending one more hour studying

c is exactly one hour of paid work.

The production possibilities curve shows:

c maximum production of one good for every possible production level of the other good

A shortage occurs when:

c quantity demanded exceeds quantity supplied

. If consumers respond to a 10% price reduction by buying twice as much of a particular good, we would conclude that:

c the absolute value of price elasticity at the original price was greater than one.

If the price elasticity of demand for a good equals one, then the demand for that good with respect to price, is:

c unitary elastic

Which of the following is true?

cLou has a comparative advantage over Alex in cleaning

Refer to the figure above. The slope of the demand curve (if you ignore the negative sign) is:

d . 0.5.

9. When the demand for a good is inelastic, that good is likely to have:

d . few close substitutes.

Suppose one knows two facts: first, the market for prescription drugs experiences chronic shortages and second, government sets the price for prescription drugs. One can conclude that the:

d . government has set the price below the equilibrium price

Refer to the figure above. At P = 8 and Q = 4, D1 is ______ elastic than D2, which is shown graphically as D1 being _____ D2

d . less; flatter than

. According to the equilibrium principl

d . market equilibrium exploits all opportunities for individual gain, but may not exploit gains possible through collective action.

The equilibrium price and quantity of any good or service is established by:

d D. both demanders and suppliers

Refer to the figure above. Which of the following is true given the production possibilities shown?

d Points B, C, and E are equally efficient.

The tendency of markets to automatically gravitate toward equilibrium is an application of which core principle?

d The Incentive Principle

Refer to the table above. Relative to column C, it appears that column D represents ____

d a decrease in supply.

As one moves down along a linear demand curve (i.e., from high price, low quantity pairs to low price, high quantity pairs), the demand:

d becomes less price elastic.

Which of the following is NOT a determinant of demand for gasoline?

dThe quantity of gasoline supplied

Refer to the figure above. As soon as you see the other island's PPC, you realize:

dyour island will have to specialize in coconuts if it wants to gain from trade