Econ Final Homeworks
Bella can produce either a combination of 60 silk roses and 80 silk leaves or a combination of 70 silk roses and 55 silk leaves. If she now produces 60 silk roses and 80 silk leaves, what is the opportunity cost of producing an additional 10 silk roses?
25 silk leaves
Thuy Anh runs a small flower shop in the town of Florabunda. She is debating whether she should extend her hours of operation. Thuy Anh figures that her sales revenue will depend on the number of hours the flower shop is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $16 per hour. Refer to Table above. Using marginal analysis, how many hours should Thuy Anh extend her flower shop's hours of operations?
4
What is Honduras's opportunity cost of producing one sailboat?
5 canoes
DeShawn's Detailing is a service that details cars at the customers' homes or places of work. DeShawn's cost for a basic detailing package is $40, and he charges $75 for this service. For a total price of $90, DeShawn will also detail the car's engine, a service that adds an additional $20 to the total cost of the package. What is DeShawn's marginal benefit if he sells a basic detailing package?
75
According to ________, in a market with an externality, private parties would voluntarily negotiate an efficient outcome without government intervention.
Ronald Coase
The town of Bloomfield is well known for its basketball team. The price of basketball game tickets is determined by market forces. Table 6-7 above shows the demand and supply schedules for basketball games tickets. Refer to Table . What is the most distinctive feature of the supply curve?
The supply curve is perfectly inelastic
The three fundamental questions that any economy must address are
What goods and services to produce; how will these goods and services be produced; and who receives them?
If you burn your trash in the back yard in spite of regulations against it, then you are
avoiding the private costs associated with disposing your trash some other way and creating a social cost
Economists estimated that the cross-price elasticity of demand for beer and wine is -0.83 and the income elasticity of wine is 5.03. This means that
beer and wine are complements and wine is a luxury good.
Which of the following goods would have the most inelastic demand?
bread
Government imposed quantitative limits on the amount of pollution firms are allowed to produce is an example of
command and control approach to pollution reduction.
Figure above shows various points on three different production possibilities frontiers for a nation. Refer to Figure above. A movement from X to Y
could occur because of an influx of immigrant labor
If a demand curve shifts to the right, then
demand has increased
All of the following are critical functions of the government in facilitating the operation of a market economy except
ensuring an equal distribution of income to all citizens
If policymakers use a pollution tax to control pollution, the tax per unit of pollution should be set
equal to the marginal external cost at the economically efficient level of pollution.
If a commercial dairy farm wants to raise funds to purchase feeding troughs, it does so in the
factor market
An increase in the number of firms in a market will cause the quantity of a good supplied to increase.
false
An inferior good is a good for which the quantity demanded decreases as the price increases, holding everything else constant.
false
If Sanjaya can shuck more oysters in one hour than Tatiana, then Sanjaya has a comparative advantage in shucking oysters.
false
If a country produces only two goods, it is possible to have a comparative advantage in the production of both those goods.
false
If additional units of a good could be produced at a constant opportunity cost, the production possibility frontier would be bowed outward (concave).
false
In the alcohol industry, both wine and spirits are considered to be substitutes for beer.
false
Positive analysis is concerned with "what ought to be," while normative analysis is concerned with "what is."
false
Scarcity is a problem that will eventually disappear as technology advances.
false
The price elasticity of supply is calculated as the change in supply divided by the change in price.
false
Since 1994, obesity rates in the United States
have increased in all 50 states
Price elasticity of supply is used to gauge
how responsive suppliers are to price changes
In economics, the accumulated skills and training that workers have is known as
human capital
Which of the following is a source of market failure?
incomplete property rights or inability to enforce property rights
________ marginal opportunity cost implies that the more resources already devoted to any activity, the payoff from allocating yet more resources to that activity increases by progressively smaller amounts.
increasing
It is difficult for a private market to provide the economically efficient quantity of a public good because
individual preferences are not revealed in the market for the good.
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 i
perfectly inelastic.
Economic models do all of the following except
portray reality in all its minute details
Households ________ final goods and services in the ________ market.
purchase product
Companies producing toilet paper bleach the paper to make it white. The bleach is discharged into rivers and lakes and causes substantial environmental damage. Figure 5-9 illustrates the situation in the toilet paper market. Refer to Figure above. The efficient output is
q2
Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave ________, meaning they make the best decisions given their knowledge of the costs and benefits.
rationally
Which of the following statements about an entrepreneur is false?
sells his entrepreneurial services in the output market
Assume there is a shortage in the market for digital music players. Which of the following statements correctly describes this situation?
some consumers will be unable to obtain digital music players at the market price and will have an incentive to offer to buy the product at a higher price
The market for smart phones has grown rapidly over the past few years, due in part to the overwhelming success of the Apple iPhone. Following the successful launch of the iPhone in 2007, companies such as Samsung, HTC, and LG have all introduced products to compete with the iPhone. The smart phones introduced to compete with the iPhone would be considered
substitutes for the iphone
If the price of music downloads was to decrease, then
the demand for MP3 players would increase
Figure above shows a market with an externality. The current market equilibrium output of Q1 is not the economically efficient output. The economically efficient output is Q2. Refer to Figure above. Suppose the current market equilibrium output of Q1 is not the economically efficient output because of an externality. The economically efficient output is Q2. In that case, diagram shows
the effect of a positive externality in the consumption of agood
Refer to Figure above. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1 (point A). If the price of oranges, a substitute for apples, decreases and the wages of apple workers increase, how will the equilibrium point change?
the equilibrium point will move from A to E
If a firm expects that the price of its product will be higher in the future than it is today
the firm has an incentive to decrease supply now and increase supply in the future
A positive externality causes
the marginal social benefit to exceed the marginal private cost of the last unit produced.
The attainable production points on a production possibility curve are
the points along and inside the production possibility frontier
The income effect of a price change refers to the impact of a change in
the price of a good on a consumers's purchasing power
At a product's equilibrium price
the product's demand curve crosses the product's supply curve
In 2004, hurricanes destroyed a large portion of Florida's orange and grapefruit crops. In the market for citrus fruit
the supply curve shifted to the left resulting in an increase in the equilibrium price.
If in the market for peaches, the supply curve has shifted to the left
the supply of peaches has decreased
Refer to Figure above. The marginal cost of reducing pollution curve is the same curve as
the supply of pollution reduction surve
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
thee demand for tarot card readers has increased
Danielle Ocean pays for monthly pool maintenance for her home swimming pool. Last week the owner of the pool service informed Danielle that he will have to raise his monthly service fee because of increases in the price of pool chemicals. How is the market for pool maintenance services affected by this?
there is a decrease in the supply of pool maintenance services
Refer to Figure above. If the price is $10,
there would be a shortage of 600 units
In the past the federal government often employed what is called a "command and control" approach to the reduction of pollution emissions. Many economists are critical of this approach because
they believe a market-based approach will reduce pollution more efficiently
Workers in industries protected by tariffs and quotas are likely to support these trade restrictions because
they believe the restrictions will protect their jobs
A quasi-public good differs from a public good in that unlike a public good, it is possible to keep out those who do not pay for the quasi-public good from enjoying the benefits of the good.
true
If consumers believe the price of iPads will decrease in the future, this will cause the demand for iPads to decrease now.
true
One example of human capital is the amount of skills that you have.
true
The decisions Apple makes in determining production levels for its iPhone is an example of a microeconomics topic.
true
The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases.
true
When negative externalities exist, the competitive market supply curve does not include all of the costs borne by members of society.
true
Which of the following statements is true about scarcity?
Scarcity refers to the situation in which unlimited wants exceed limited resources.
Refer to Figure. Identify the two goods which are substitutes.
Good X and Good Z
All of the following are examples of spending on factors of production in the circular flow model except
Iris buys a dozen roses for her mother's birthday
Refer to Figure. The supply curve on which price elasticity changes at every point is shown in
PANEL D
Suppose the price of gasoline is $3.50 per gallon, the quantity of gasoline demanded is 150 billion gallons per year, the price elasticity of demand for gasoline is -0.06, and the federal government decides to increase the excise tax on gasoline by $1.00 per gallon, which increases the price of gasoline by $0.75 per gallon. How much revenue does the federal government receive from the tax?
$148.27 billion
The Coffee Nook, a small cafe near campus, sells cappuccinos for $2.50 and Russian tea cakes for $1.00 each. What is the opportunity cost of buying a cappuccino?
2 1/2 Russian tea cakes
Suppose the value of the price elasticity of demand is -3. What does this mean?
A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent
If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots, then
A) the price elasticity of demand for teapots is greater than 1 in absolute value.
Which of the following best illustrates the free rider problem?
All three homeowners in a quiet cul-de-sac have expressed the desirability of security lighting in the common parking area. One of the homeowners installs the lighting and asks you to contribute toward the cost. You choose not to contribute.
Linesha, a college student working part-time receives a wage increase. An avid movie buff, she increased her purchases of Blu-ray discs and reduced her purchases of DVDs. Based on this information
Blu-ray discs are normal goods and DVDs are inferior goods.
Refer to Table above. If the two countries specialize and trade, who should export wheat?
China
________ is the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors.
Comparative advantage
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?
Demand is likely to be relatively inelastic.
Economists generally favor the use of tradable emissions allowances to reduce pollution. However, the use of these allowances has been criticized by some environmentalists. Which of the following describes this criticism?
Some environmentalists believe the allowances give firms a license to pollute.
Table above shows the number of labor hours required to produce a digital camera and a pound of wheat in China and South Korea. Refer to Table Above. Does either China or South Korea have an absolute advantage and if so, in what product?
South Korea has an absolute advantage in both products.
Assume that the demand curve for sunblock is linear and downward sloping. Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock are true?
The slope is constant, but the price elasticity of demand is not constant at all points along the demand curve for sunblock
Which of the following must be present to reach a private solution to an externality problem?
The transaction costs to negotiate a solution must be relatively low.
Consider the following statements: a. Consumers buy more MP3 players from an electronics store that sells MP3 players at a lower price than other rival electronics stores in the area. b. Schools take steps to increase security since they believe it is more costly to allow vandalism than to hire additional security guards. c. Citrus growers produce more oranges when the selling price of oranges falls. Which of the above statements demonstrates that economic agents respond to incentives?
a and b
Consider the following statements: a. Consumers buy more MP3 players from an electronics store that sells MP3 players at a lower price than other rival electronics stores in the area. b. Schools take steps to increase security since they believe it is more costly to allow vandalism than to hire additional security guards. c. Citrus growers produce more oranges when the selling price of oranges falls. Which of the above statements demonstrates that economic agents respond to incentives?
a and b
An externality is
a benefit or cost experienced by someone who is not a producer or a consumer of a good or service
If, in response to an increase in the price of chocolate the quantity of chocolate demanded decreases, economists would describe this as
a decrease in quantity demanded
An inward shift of a nation's production possibilities frontier can occur due to
a natural disaster like a hurricane or bad earthquake.
Which of the following statements is false?
a straight line has a slope of zero
When production reflects consumer preferences, ________ occurs.
allocative efficiency
The law of demand implies, holding everything else constant, that
as the price of bagels increases the quantity of bagels demanded will decrease
Comparative advantage means the ability to produce a good or service
at a lower opportunity cost than any other producer.
Cross-price elasticity of demand is calculated as the
percentage change in quantity demanded of one good divided by percentage change in price of a different good.
According to an article in the Wall Street Journal, unlike airlines, even elite hotels don't have sophisticated systems that can react quickly to changes in demand. Even if they could, many hoteliers say people don't respond that much to lower rates. "We've tested this, cutting our rates by $50 [per night], and we didn't see an appreciable response in occupancy," says Jim Schultenover, a vice president for Ritz-Carlton. Source: Jesse Drucker, "In Times of Belt-Tightening, We Seek Reasonable Rates," Wall Street Journal, April 6, 2001. Based on the information above, the demand for hotel rooms is
inelastic
If there is pollution in producing a product, then the market equilibrium price
is too low and equilibrium quantity is too high
Which of the following activities create a negative externality?
keeping a junked car parked on your front lawn
If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced.
linear
The term ________ in economics refers to a group of buyers and sellers of a product and the arrangement by which they come together to trade.
market
The demand by all the consumers of a given good or service is the ________ for the good or service.
market demand
The production possibilities frontier shows the ________ combinations of two products that may be produced in a particular time period with available resources.
maximum attainable
All of the following is counted as "capital" in economics except
money
The larger the share of a good in a consumer's budget, holding everything else constant, the
more price elastic is a consumer's demand
Refer to Figure. The demand curve on which elasticity changes at every point is given in
panel c
Refer to Figure above. Assume that the graphs in this figure represent the demand and supply curves for bicycle helmets. Which panel best describes what happens in this market if there is a substantial increase in the price of bicycles?
panel d
The primary purpose of ________ is to encourage the expenditure of funds on research and development to create new products.
patents and copyrights
