ECON Exam Questions
The latest model car in the dealer's showroom has a sticker price of $35,000. Fred, the shopper, has decided that he would pay no more than $32,000 for the car. After two hours of bargaining with the sales woman, Fred actually purchased the car for $31,000. Fred, therefore has obtained a consumer surplus of ___.
$1,000
You decide to take a vacation and the trip costs you $1000. While you are on vacation, you do not report to work where you could have earned $500. The opportunity cost of the vacation is ___.
$1500
Describe equilibrium in a market.
At equilibrium, the quantity supplied equals the quantity demanded.
What is always true about MC, W, and MPL?
MC = W/MPL
The supply of oil is more elastic than the demand for oil. If oil is taxed $10 per barrel, how will the tax be divided between the buyers and the sellers?
The buyers will pay more of the tax than the sellers.
If a market is NOT in equilibrium, then what will most likely happen?
The price will adjust to bring the market to equilibrium.
What will shift the supply curve rightward?
a decrease in the price of a factor of production used to produce the good
What could lead to a movement along the demand curve for spinach but does not shift the demand curve for spinach?
a rise in the price of spinach
An example of a variable factor of production in the short run is ___.
an employee
The relative price of a good is ___.
an opportunity cost
The range of output over which a firm's average variable cost is decreasing is the same as the range over which its ___.
average product is increasing
The fact of increasing opportunity costs means that a production possibilities with ___. (related to the graph)
bow outward
Example of a pair of goods that are substitutes.
cola and lemon lime soda
If a decrease in the price of gasoline increases the demand for large cars, then gasoline and large cars are ___ in consumption.
complements
A severe drought has damaged this year's lettuce crop. The initial effect on the lettuce market is a ___.
decrease in the supply of lettuce
If a firm's marginal product of labor is less than its average product of labor, then an increase in the quantity of labor it employs definitely will ___.
decrease its average product of labor
Ham and eggs are complements. If the price of ham rises, the demand for eggs will ___ and the demand curve for eggs will shift ___.
decrease; leftward
Sweatshirts and tee-shirts are complements in consumption and the price of a sweatshirt increases. As a result, the demand for tee-shirts will ___ that is, the demand curve will shift ___.
decrease; leftward
An increase in the number of consumers will shift the ___ curve ____.
demand; rightward
Between 2000 and 2015, advances in PC production technology increased the supply of PCs sharply. The demand for PCs also increased, but not nearly as much as the supply did. As a result, the price of a PC ___ and the quantity of PCs sold ___.
fell; increased
In the short run, a ___ is fixed.
firm's plant
When the demand for a good is inelastic and its price increases, the total revenue from the sale will ___.
increase
Increasing marginal returns to labor might occur at low levels of labor input because of ___.
increasing specialization of tasks
Dan sells newspapers. Dan says that a 4 percent increase in the price of a newspaper will decrease the quantity of newspapers demanded by 8 percent. According to Dan, the demand for newspapers is ___.
inelastic
If OPEC, a group of producing nations, cuts oil production to increase the total revenue, OPEC presumes that the demand for oil is ___.
inelastic
If the price elasticity is between 0 and 1, demand is ___.
inelastic
The price of a bus ride decreases, and the total revenue of the bus company decreases. The demand for bus rides is ___.
inelastic
The buyers pay the entire sales tax levied on a good when demand is perfectly ___ or supply is perfectly ___.
inelastic; elastic
If the price of aluminum used to make bicycles increases, the price of a bicycle rises because of a ___ shift of the ___ curve of bicycles.
leftward; supply
The more elastic the demand for a good, the ___.
less a sales tax raises the price paid by buyers
Diseconomies of scale definitely means that as the firm increases its output, its ___.
long run average total cost increases
Today, Julie attended her 12:30 class. If she hadn't gone to class, Julie would have gone out to lunch with her friends. She had other options; she could have worked or slept in. Julie's opportunity cost of going to class is the ___.
lunch she gave up
The amount of a tax paid by the buyers will be smaller, the ___.
more elastic the demand and the more inelastic the supply
Suppose the local government places a sales tax on hotel rooms and that the demand for these rooms is elastic while the supply is perfectly inelastic. The tax incidence is such that the tax will be paid by ___.
only the producers
The incidence of sales tax is determined by the ___.
price elasticities of supply and demand.
The price elasticity of demand for furniture is estimated at 1.3. This value means a one percent increase in the ___.
price of furniture will decrease the quantity of furniture demanded by 1.3 percent
The price elasticity of demand for oil is estimated at 0.05. This value means a 10 percent increase in the ___.
price of oil will decrease the quantity of oil demanded by 0.5 percent
A shortage causes ___.
price to rise
When supply and demand both increase, the ___ definitely ____.
quantity; increases
Suppose the equilibrium price of bottled water has risen from $1.00 per bottle to $2.00 per bottle and the equilibrium quantity has increased. These changes are a result of a ___ shift of the ___ curve for bottled water.
rightward; demand
Suppose the United States discovers a way to produce clean nuclear fuel. The effect of this discovery would be to ___. (related to graph)
shift the U.S. PPF outward
Demand is perfectly inelastic when ___.
shifts of the supply curve result in no change in quantity demanded
The law of diminishing returns makes it clear that as more a variable input is employed, in the ___ the marginal product of the variable input eventually will ___.
short run; fall
If the price is above the equilibrium price, then there is a ___, and the market forces will operate to ___ price.
surplus; lower
We observe that the equilibrium price of digital cameras has fallen and the equilibrium quantity of digital cameras has increased. What event could be responsible for this?
technological advances in the digital camera production
A firm's short run cost curve shifts when there is a change in ___.
technology & the prices of input factors of production
The price of the steel used to produce car engines increases. How does this price hike affect the demand curve for cars?
the demand curve does not shift
Each point on the demand curve reflects ___.
the highest price consumers are willing and able to pay for that particular unit of a good
Each point on a supply curve represents ___.
the lowest price for which a supplier can profitably sell another unit
The long run is distinguished from the short run because only in the long run ___.
the quantities of all factors of production can be varied
Over the past decade, technological improvements that have lowered the cost of producing an automobile have increased ___.
the supply but not the demand for automobiles
