Econ Final

An inward shift of a nation's production possibilities frontier can occur due to

A natural disaster like a hurricane or bad earthquake.

When the government taxes a good or service, it

Affects the market equilibrium for that good or service.

What is the difference between an "increase in supply" and an "increase in quantity supplied"

An "increase in supply" means the supply curve has shifted to the right while an "increase in quantity supplied" refers to a movement along a given supply curve in response to an increase in price.

Refer to Figure 2-4. Consider the following events: Consider the following events: Which of the events listed above could cause a movement from Y to W ?

C only

Some policymakers have argue that products like cigarettes, alcohol, and sweetened soda generate negative externalities in consumption. If the government decided to impose a tax on soda, the government will cause

Consumers to internalize the externality

Economists assume that rational behavior is useful in explaining choices people make:

Even though people may not behave rationally at the time

refers to reductions in a firm's costs that result from an increase in the size of an industry.

External economies

Sergio Vignetto raises cattle and llamas on his land. A portion of his land is more suitable for raising cattle, and the other portion is better suited for raising llamas. Which of the graphs in Figure 2-3 represent his production possibilities frontier?

Graph A

The figure above shows the supply and demand curves for two markets: the market for original Picasso paintings and the market for designer jeans. Which graph most likely represents which market?

Graph B Represents the market for original Picasso paintings and Graph A represents the market for designer jean

Which of the following is an example of an efficiency-equity trade-off faced by economic agents?

Instead of allocating resources to states in proportion to reported AIDS​ cases, resources should flow first to those activities that prevent more infections per dollar and then to less and less effective combinations of programs and populations until funds are​ exhausted, even if it means that some populations would be left without any prevention services.

Which two arrows in the diagram depict the following transaction: LaDonna sells 20 pairs of sunglasses at the Oakley store.

K and G

The figure above represents the market for pecans. Assume that this is a competitive market. If 8,000 pounds of pecans are sold

Marginal benefit is equal to marginal cost.

Recent changes occurring within the U.S. health care system, including lower insurance reimbursement rates, have resulted in

More medical practices being owned by hospitals than by individual doctors

All of the following countries come close to the free market benchmark except

North Korea

In October 2005, the U.S. Fish and Wildlife Service banned the importation of beluga caviar, the most prized of caviars, from the Caspian Sea. What happened in the market for caviar in the U.S.?

Supply curve shifted to the left

Which of the following is one reason why the income of small family farms has decreased over time?

The demand for farm products is price elastic

Which of the following is expected to occur as the baby-boom generation ages?

The demand for medical services should increase.

Refer to Figure 6-4. Which of the following statements is true about the price elasticity of demand?

The elastic portion of a straight-line, downward-sloping demand curve corresponds to the segment above the midpoint

How are the fundamental economic decisions determined in North Korea?

The government decides because North Korea is a centrally planned economy.

Suppose an excise tax of $1 is imposed on every case of beer sold and sellers are responsible for paying this tax. How would the imposition of the tax be illustrated in a graph?

The supply curve for cases of beer would shift to the left by $1.

What is the rationale behind a marketable emission allowance scheme?

To provide firms with the incentive to consider less costly alternatives to pollution reduction by making firms pay for the right to pollute beyond their specified allowance

When Roxanne, a U.S. citizen, purchases a designer dress from Barneys of New York that was made in Milan, the purchase is

U.S. import and an Italian export

Which of the following is a microeconomics question?

What factors determine the price of carrots?

The distribution of income primarily determines which of the fundamental economic questions?

Who will receive the goods and services produced?

Political candidates often hold fund raisers by charging "per plate" for dinner. Wendy purchased four tickets to a $1,000 per plate dinner for a local city council candidate. Is this transaction economically efficient?

Yes, it was a voluntary exchange that benefited both parties.

Which of the following would shift the supply curve for MP3 players to the right?

a decrease in the price of an input used to produce MP3 players

The basic cause of deadweight losses from the existence of common resources and externalities is

a lack of clearly defined and enforceable property rights.

Which of the following would shift a nation's production possibilities frontier outward?

a law requiring workers to retire at age 50

Consider the following items: Which of the items listed is an example of intellectual property?

all

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.

Which of the following generates productive efficiency?

competition amongst sellers

If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -3, then quantity demanded

decrease by 5%

In the city of Alvarez, with the exception of guide dogs for blind people, all dogs are banned from its three public parks, regardless of whether the animals are leashed. Many residents are pushing for a change in policy. Canine lover Sara Northridge observed, "There are 800 or more homes here. There are three parks within 10 minutes, and almost everyone has a dog, but we can't take our dogs there." Others fear that allowing dogs would detract from their enjoyment of the parks. Tim Cortis retorted, "We're not preventing dog lovers from enjoying the park, just come without your dog." Which of the following is a way of dealing with the problem by assigning property rights to a particular group?

dedicate some parks, or at least one park, exclusively for the use of visitors bringing dogs to the park

When deciding on which new products to develop, a firm must devote people, time, and money to designing a new product. Because any firm has only limited resources, it

faces a trade-off, because resources used to develop one product will not be available to develop another product.

Income elasticity measures

how a good's quantity demanded responds to change in the price of another good.

The ________ effect refers to the change in quantity demanded for a good that results from the effect of a change in the good's price on consumer's purchasing power.

income

Imposing tariffs in cases of dumping

is allowed under the WTO agreement.

Which of the following activities create a negative externality?

keeping a junked car parked on your front lawn

Coarse Theorem

low transactional costs and clear assignment of property rights

The difference between the ________ and the ________ from the sale of a product is called producer surplus.

lowest price a firm would have been willing to accept; price it actually receives

In economics, the term ________ means "additional" or "extra."

marginal

When a negative externality exists, the private market produces

more than the economically efficient output level.

Last year, Sefton purchased 60 pounds of potatoes to feed his family of five when his household income was $30,000. This year, his household income fell to $20,000 and Sefton purchased 80 pounds of potatoes. All else constant, Sefton's income elasticity of demand for potatoes is

negative, so Sefton considers potatoes to be an inferior good.

If an increase in income leads to in an increase in the demand for peanut butter, then peanut butter is

normal good

By drawing a demand curve with ________ on the vertical axis and ________ on the horizontal axis, economists assume that the most important determinant of the demand for a good is the ________ of the good.

price, quantity, price

Because producers do not bear the external cost of pollution

private production exceeds the economically efficient level.

Suppose that when the price of raspberries increases, Lonnie increases his purchases of papayas. To Lonnie,

raspberries and papayas are substitutes

The term "property rights" refers to

the ability to excdrcise control over one's own resources within the confines of the law

In economics, choices must be made because we live in a world of

scarcity

Exports are domestically produced goods and services

sold to other countries

Consumer surplus in a market for a product would be equal to ________ if the market price was zero.

the area under the demand curve

Suppose a decrease in the supply of bottled water results in a decrease in revenue. This indicates that

the demand for bottled water is price elastic in the price range considered.

Suppose a frost destroys the tomato crop in California but farmers see an increase in their revenues. Which of the following best explains this?

the demand for tomatoes is price inelastic

Which of the following is a flow in the circular flow model?

the flow of goods and services from households to firms

In June, buyers of titanium expect that the price of titanium will fall in July. What happens in the titanium market in June, holding everything else constant?

the quantity demanded increases

If, in a competitive market, marginal benefit is less than marginal cost,

the quantity sold is less than the equilibrium quantity

Which of the following represents the true economic cost of production when firms produce goods that cause negative externalities?

the social cost of production

In a report made to the U.S. Congress in 2001, the National Academy of Sciences cautioned that if fuel economy encourages the production of smaller and lighter cars, "Some additional traffic fatalities would be expected." This statement suggests that

there is a tradeoff between safety and fuel economy.

Which of the following is not a factor of production?

$1,000 in cash

Lydia runs a small nail salon in the town of New Hope. She is debating whether she should extend her hours of operation. Lydia figures that her sales revenue will depend on the number of hours the nail salon is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $10 per hour. Refer to Table 1-1. Using marginal analysis, determine how many hours should Lydia extend her nail salon's hours of operations?

$5

How much of the tax is paid by producers?

$5 look at difference between supply and supply with tax

The machines workers have to work with are considered

physical capital

Suppose your expenses for this term are as follows: tuition: $12,000, room and board: $6,500, books and other educational supplies: $1,500. Further, during the term, you can only work part-time and earn $3,500 instead of your full-time salary of $14,000. What is the opportunity cost of going to college this term, assuming that your room and board expenses would be the same even if you did not go to college?

24,000

At a recent faculty meeting, Lorraine Waverly, president of Skywalker College, announced that enrollment is up by 12 percent over the previous semester. If enrollment the previous semester was 3,250 students, what is the student enrollment this semester?

3,640

Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6. What does this mean?

A 6 percent increase in the price of grapefruit juice leads to a 1 percent increase in orange juice consumption.

Government imposed quantitative limits on the amount of pollution firms are allowed to produce is an example of

A command-and-control approach to pollution reduction.

Suppose a negative externality exists in a market. If transactions costs are low and parties are willing to bargain, then, according to the Coase theorem,

An efficient solution can be reached regardless of the initial assignment of property rights

If more insurance companies decide to cover part of the price of voluntary laser eye surgery and more doctors decide to enter the field of laser eye surgery, what will happen in the market for laser eye surgery as a result of these two factors?

Demand and supply will both increase.

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

Table 2-3 shows the output per week of two jewelers, Serena and Haley. They can either devote their time to making bracelets or making necklaces. Refer to Table 2-3. Which of the following statements is true?

Haley has a comparative advantage in making bracelets and Serena in making necklaces.

At a price of $18 consumers are willing to buy 40 pounds of tiger shrimp. Is this an economically efficient quantity?

No, the marginal benefit of the 40th unit exceeds the marginal cost of that 80th unit.

If you expect the economy is going to boom and average income in the economy will rise in the foreseeable future, the type of firm that would be able to increase its sales if your expectations are met is

One that sells a Luxury or Necessity good

Which of the following statements about the economic decisions consumers, firms, and the government have to make is false?

Only individuals face scarcity; firms and the government do not.

Which of the following is not a consequence of minimum wage laws?

Producers have an incentive to offer workers non-wage benefits such as health care benefits and convenient working hours rather than a higher wage

The income effect of a price change refers to the impact of a change in

The price of a good on a consumers purchasing power

Allocative efficiency best explains ________, and productive efficiency best explains

What will be produced; how something will be produced.

Table 2-4 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 2-4. South Korea has a comparative advantage in the production of

Wheat

A decrease in the equilibrium price for a product will result

When there is an increase in supply and a decrease in demand for the product

Which of the following is the best example of a quota?

a limit on the quantity of tires that can be imported from a foreign country

If the current market price is $10, the market will achieve equilibrium by

a price increase, increasing the quantity supplied and decreasing the quantity demanded.

In recent years the cost of producing organic produce in the U.S. has decreased largely due technological advancement. At the same time, more and more Americans prefer organic produce over conventional produce. Which of the following best explains the effect of these events in the organic produce market?

both supply and demand curves have shifted to the right. as a result there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.

Suppose the demand curve for a product is horizontal and the supply curve is upward sloping. If a unit tax is imposed in the market for this product,

buyers bear the entire burden of the tax.

Suppose the demand curve for a product is vertical and the supply curve is upward sloping. If a unit tax is imposed in the market for this product,

buyers bear the entire burden of the tax.

The table above lists the highest prices three consumers, Tom, Dick and Harriet, are willing to pay for a short-sleeved polo shirt. If the price of the shirts falls from $28 to $20

consumer surplus increases from $14 to $35

Suppose a price floor on sparkling wine is proposed by the Health Minister of the country of Vinyardia. What will be the likely effect on the market for sparkling wine in Vinyardia?

deadweight loss

The government proposes a tax on imported champagne. Buyers will bear the entire burden of the tax if the

demand curve for imported champagne is vertical.

If, for a given percentage increase in price, quantity supplied increases by a proportionately larger percentage, then supply is

elastic

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.

A production possibilities frontier with a bowed outward shape indicates

increasing opportunity costs as more and more of one good is produced.

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

The demand for gasoline in the short run is

inelastic because there are no good substitutes for gasoline.

If an increase in income leads to a decrease in the demand for popcorn, then popcorn is

inferior good

During the recession of 2007-2009, despite falling income levels, the fast-food chain Subway experienced increased sales. The increase in demand for Subway sandwiches despite the decline in income indicates that Subway sandwiches are considered

inferior goods

In a production possibilities frontier model, a point ________ the frontier is productively inefficient.

inside

In a competitive market the demand curve shows the ________ received by consumers and the supply curve shows the ________.

marginal benefit ;marginal cost

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. Should DeShawn continue to offer the engine detailing service?

no, his marginal benefit is less than his marginal cost

Assume Tomaso's Trattoria only produces pizzas and calzones. A combination of 36 pizzas and 30 calzones would appear

outside Tomaso's production possibilities frontier.

Suppose the U.S. government encouraged new medical school graduates to take over existing practices from doctors wishing to retire by paying both the new and retiring doctors $100,000. These doctors would be exemplifying the economic idea that

people respond to economic incentives.

A major factor contributing to the slow growth rate of less developed economies is

the lack of well-defined and enforceable property rights

Adam Smith's invisible hand refers to

the laws of nature that influence economics decisions.

Consider the stock of ocean tuna which is massively overfished. It is rational for an individual to exploit the resource rather than to conserve the stock because

the marginal private cost of harvesting the fish is lower than the marginal social cost.

The U.S. Health Resources and Services Administration (HRSA) forecasts that in 2020

there will be a shortage of doctors in the United States.

Who receives the most of what is produced in a market economy?

those who are willing and able to buy them

If the paint on your house was eaten away by the fumes from a factory nearby and you hired a lawyer to sue the polluting firm, your legal fees would be considered

transaction costs

Many people assume that if child workers in developing countries weren't working in factories, they would be in school. In fact, children in developing countries

usually have few good alternatives to work.